<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 1999
================================================================================
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-3998
LITTON INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-1775499
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
21240 BURBANK BOULEVARD, 91367-6675
WOODLAND HILLS, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 598-5000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
On February 26, 1999 there were 45,389,392 shares of Common Stock
outstanding.
Page 1 of 14
Exhibit Index appears on Page 13.
================================================================================
<PAGE> 2
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
INDEX
REPORT ON FORM 10-Q
FOR QUARTER ENDED JANUARY 31, 1999
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations
Six months ended January 31, 1999 and 1998................ 3
Consolidated Statements of Operations
Three months ended January 31, 1999 and 1998.............. 4
Consolidated Balance Sheets
January 31, 1999 and July 31, 1998........................ 5
Consolidated Statements of Cash Flows
Six months ended January 31, 1999 and 1998................ 6
Notes to Consolidated Financial Statements.................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 12
Item 4. Submission of Matters to a Vote of Security Holders......... 13
Item 6. Exhibits and Reports on Form 8-K............................ 13
Signature.............................................................. 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Sales and Service Revenues.................................. $2,338,460 $2,012,850
---------- ----------
Costs and Expenses
Cost of sales............................................. 1,829,583 1,541,224
Selling, general and administrative....................... 244,426 240,659
Depreciation and amortization............................. 79,934 69,559
Interest -- net........................................... 32,509 21,299
---------- ----------
Total............................................. 2,186,452 1,872,741
---------- ----------
Earnings before Taxes on Income............................. 152,008 140,109
Taxes on Income............................................. (60,803) (56,044)
---------- ----------
Net Earnings................................................ $ 91,205 $ 84,065
========== ==========
Earnings per Share:
Basic..................................................... $ 2.00 $ 1.82
========== ==========
Diluted................................................... $ 1.95 $ 1.77
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
----------------------
1999 1998
---------- --------
<S> <C> <C>
Sales and Service Revenues.................................. $1,130,922 $973,815
---------- --------
Costs and Expenses
Cost of sales............................................. 884,374 741,207
Selling, general and administrative....................... 116,900 118,668
Depreciation and amortization............................. 40,096 35,171
Interest -- net.......................................... 16,259 11,068
---------- --------
Total............................................. 1,057,629 906,114
---------- --------
Earnings before Taxes on Income............................. 73,293 67,701
Taxes on Income............................................. (29,317) (27,081)
---------- --------
Net Earnings................................................ $ 43,976 $ 40,620
========== ========
Earnings per Share:
Basic..................................................... $ 0.96 $ 0.88
========== ========
Diluted................................................... $ 0.94 $ 0.86
========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JANUARY 31, JULY 31,
1999 1998
----------- ----------
<S> <C> <C>
ASSETS
Current Assets
Cash and marketable securities............................ $ 96,811 $ 31,925
Accounts receivable, net.................................. 867,089 820,624
Inventories less progress billings........................ 629,793 635,942
Deferred tax assets....................................... 410,886 417,719
Prepaid expenses.......................................... 27,611 27,770
---------- ----------
Total Current Assets.............................. 2,032,190 1,933,980
---------- ----------
Property, Plant and Equipment -- at cost.................... 1,551,739 1,543,041
Less accumulated depreciation............................. (944,928) (929,527)
---------- ----------
Property, Plant and Equipment, Net.......................... 606,811 613,514
---------- ----------
Goodwill and Other Intangibles, Net......................... 1,050,638 1,075,299
---------- ----------
Other Assets and Long-term Investments...................... 458,888 427,022
---------- ----------
Total Assets...................................... $4,148,527 $4,049,815
========== ==========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable.......................................... $ 786,146 $ 876,850
Payrolls and related expenses............................. 193,665 200,059
Taxes on income........................................... 71,597 74,040
Short-term debt........................................... 380,511 274,178
Contract liabilities and customer deposits................ 356,937 346,270
---------- ----------
Total Current Liabilities......................... 1,788,856 1,771,397
---------- ----------
Long-term Obligations....................................... 775,410 771,321
---------- ----------
Postretirement Benefit Obligations Other than Pensions...... 206,556 206,397
---------- ----------
Deferred Tax and Other Long-term Liabilities................ 118,811 113,461
---------- ----------
Shareholders' Investment
Capital stock
Voting preferred stock -- Series B..................... 2,053 2,053
Common stock........................................... 45,429 45,783
Additional paid-in capital................................ 319,040 316,628
Retained earnings......................................... 934,822 869,359
Accumulated other comprehensive loss --
Cumulative currency translation adjustment............. (42,450) (46,584)
---------- ----------
Total Shareholders' Investment.................... 1,258,894 1,187,239
---------- ----------
Total Liabilities and Shareholders' Investment.... $4,148,527 $4,049,815
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JANUARY 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Cash and cash equivalents at beginning of period............ $ 16,175 $ 4,144
-------- --------
Operating activities
Net earnings.............................................. 91,205 84,065
Adjustments to reconcile net earnings to net cash provided
by (used for) operating activities
Depreciation and amortization.......................... 79,934 69,559
Changes in assets and liabilities
Accounts receivable.................................. (49,359) (40,061)
Inventories.......................................... (9,789) 25,239
Prepaid expenses..................................... 25 2,860
Accounts payable..................................... (89,876) (65,749)
Payrolls and related expenses........................ (15,280) (2,346)
Deferred and current taxes on income................. 10,070 (95,588)
Contract liabilities and customer deposits........... 10,667 (14,076)
Other operating activities............................. (24,454) (12,324)
-------- --------
Cash provided by (used for) operating activities............ 3,143 (48,421)
-------- --------
Investing activities
Proceeds from sale of business............................ 45,990 --
Purchase of capital assets................................ (55,262) (42,799)
Other investing activities................................ (10,448) (15,654)
-------- --------
Cash used for investing activities.......................... (19,720) (58,453)
-------- --------
Financing activities
Change in short-term debt, net............................ 104,977 112,544
Purchase of Common stock.................................. (29,485) (5,084)
Other financing activities................................ 2,381 3,832
-------- --------
Cash provided by financing activities....................... 77,873 111,292
-------- --------
Resulting in increase in cash and cash equivalents.......... 61,296 4,418
-------- --------
Cash and cash equivalents at end of period.................. $ 77,471 $ 8,562
======== ========
Supplemental disclosure of cash flow information
Interest paid............................................. $ 35,016 $ 22,934
Income taxes paid, net.................................... $ 48,954 $142,013
Reconciliation to Consolidated Balance Sheets:
Cash and cash equivalents................................. $ 77,471 $ 8,562
Marketable securities..................................... 19,340 15,750
-------- --------
Total cash and marketable securities.............. $ 96,811 $ 24,312
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JANUARY 31, 1999
1. The amounts included in this report are unaudited; however, in the
opinion of management, all adjustments necessary for a fair statement of
results for the stated periods have been included. These adjustments are
of a normal recurring nature. Certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. Certain reclassifications of prior period
information were made for comparative purposes. These interim
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report to Shareholders for the fiscal year ended July 31, 1998. The
results of operations for the six months ended January 31, 1999 are not
necessarily indicative of operating results for the entire year.
2. The components of inventory balances are summarized below:
<TABLE>
<CAPTION>
JANUARY 31, 1999 JULY 31, 1998
---------------- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and work in progress............... $ 996,785 $1,036,492
Finished goods................................... 50,964 42,746
---------- ----------
1,047,749 1,079,238
Less progress billings........................... (417,956) (443,296)
---------- ----------
Net inventories.................................. $ 629,793 $ 635,942
========== ==========
</TABLE>
3. Interest (expense) income is shown below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Interest expense................ $(18,364) $(12,737) $(36,405) $(24,755)
Interest income................. 2,105 1,669 3,896 3,456
-------- -------- -------- --------
Net interest expense............ $(16,259) $(11,068) $(32,509) $(21,299)
======== ======== ======== ========
</TABLE>
4. The Company computes basic and diluted earnings per share ("EPS") in
accordance with the Statement of Financial Accounting Standards No. 128,
"Earnings per Share" ("SFAS 128") which the Company adopted in the
second quarter of fiscal year 1998. Basic EPS is calculated based on the
weighted average number of shares outstanding and diluted EPS includes
the effects of dilutive potential common shares.
7
<PAGE> 8
LITTON INDUSTRIES, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SIX MONTHS ENDED JANUARY 31, 1999
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net earnings................ $ 43,976 $ 40,620 $ 91,205 $ 84,065
Preferred stock dividends... (205) (205) (410) (410)
----------- ----------- ----------- -----------
Net earnings used for basic
and diluted earnings per
share calculations........ $ 43,771 $ 40,415 $ 90,795 $ 83,655
=========== =========== =========== ===========
Weighted average common
shares outstanding -- used
for basic earnings per
share..................... 45,465,074 46,087,621 45,506,917 46,059,790
Dilutive effect of stock
options................... 1,056,304 1,180,035 995,586 1,178,416
----------- ----------- ----------- -----------
Number of shares used for
diluted earnings per
share..................... 46,521,378 47,267,656 46,502,503 47,238,206
=========== =========== =========== ===========
Basic earnings per share.... $ 0.96 $ 0.88 $ 2.00 $ 1.82
=========== =========== =========== ===========
Diluted earnings per
share..................... $ 0.94 $ 0.86 $ 1.95 $ 1.77
=========== =========== =========== ===========
</TABLE>
5. Effective in the first quarter of fiscal year 1999, the Company adopted
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and
display of comprehensive income and its components. Comprehensive income
includes "all changes in equity during a period except those resulting
from investments by owners and distributions to owners".
Comprehensive income and its components are summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31, JANUARY 31,
------------------ ------------------
1999 1998 1999 1998
------- ------- ------- -------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Net earnings.......................... $43,976 $40,620 $91,205 $84,065
Currency translation adjustments...... (2,291) (3,579) 4,134 (2,041)
------- ------- ------- -------
Total....................... $41,685 $37,041 $95,339 $82,024
======= ======= ======= =======
</TABLE>
8
<PAGE> 9
PART I. FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company reported sales of $1.13 billion and $2.34 billion for the
second quarter and six months ended January 31, 1999 compared with $973.8
million and $2.01 billion for the prior year's periods, respectively. Operating
profit improved to $104.9 million and $215.0 million for the second quarter and
six months ended January 31, 1999 compared with $92.2 million and $188.2 million
for the corresponding periods of the prior fiscal year. Net earnings rose 8.3%
to $44.0 million for the quarter and 8.5% to $91.2 million for the six months
ended January 31, 1999. Corresponding amounts for the fiscal year 1998 periods
were $40.6 million and $84.1 million, respectively.
Sales and operating profit for the Advanced Electronics segment were $361.3
million and $26.9 million for the second quarter of fiscal year 1999, compared
with $365.0 million and $25.0 million for the second quarter of the prior year.
Sales and operating profit for the six months of the current fiscal year were
$764.5 million and $56.3 million compared with $778.3 million and $52.1 million
for the six months of fiscal year 1998. Although sales decreased slightly due to
the sale of a division in the first quarter, operating margins and profit
benefited from improved results on programs related to inertial navigation
components and products, the shift into the production phase on certain defense
electronics programs and ongoing cost containment efforts. Backlog for the
Advanced Electronics segment was $1.32 billion at January 31, 1999 compared with
$1.46 billion at July 31, 1998.
The Information Systems segment reported sales and operating profit of
$396.0 million and $19.8 million for the second quarter of fiscal year 1999,
compared with $261.8 million and $15.1 million for the second quarter of the
prior year. For the first six months of the current fiscal year, sales and
operating profit were $792.8 million and $40.4 million compared with $514.8
million and $32.5 million for the same period of fiscal year 1998. These
improvements were primarily due to the acquisition of TASC, Inc. ("TASC") in
April 1998 and higher volume on various contracts at the Company's PRC Inc.
subsidiary which supplies information technology, services, systems integration
and technical support to federal, state and other customers. Profit margins for
this segment, however, continued to be impacted by investments in new programs
and costs incurred for the development of commercial information technology
services. Firm backlog for the Information Systems segment was $954.1 million at
January 31, 1999 compared with $877.7 million at July 31, 1998. In addition,
TASC and PRC have non-firm, unfunded backlog with potential contract values of
$2.0 billion at January 31, 1999 compared with $1.8 billion at July 31, 1998.
The Marine Engineering and Production segment reported sales and operating
profit of $241.6 million and $34.1 million for the current quarter, compared
with $222.8 million and $29.1 million for the prior year's second quarter. The
respective amounts for the six months of fiscal year 1999 were $509.8 million
and $69.2 million compared with $461.4 million and $59.3 million for the six
months of fiscal year 1998. These increases reflect a higher level of
construction activities on long-term contracts, partially offset by the effects
of the completion and delivery of an Aegis destroyer and a sixth LHD class
amphibious assault ship during the second half of fiscal year 1998. During the
current quarter, the Company completed and delivered another Aegis destroyer to
the Navy. Operating margins benefited from increased earnings rates on programs
maturing in the production process and continued production efficiencies.
Backlog for this segment increased to $3.73 billion at January 31, 1999 from
$3.47 billion at July 31, 1998 mainly due to the exercise of an option by the
U.S. Navy during the second quarter to build two additional destroyers worth
over $600 million. Subsequent to the end of the quarter, the Company signed a
contract with American Classic Voyages Co. to build two passenger cruise ships
with an option for a third vessel with an aggregate potential value of $1.4
billion. The Company is also undertaking an effort to update facilities and
improve production capabilities and expects to spend approximately $130 million
over the next two years.
The Electronic Components and Materials segment reported sales and
operating profit of $144.0 million and $24.6 million for the second quarter of
the current fiscal year compared with $139.7 million and $23.7 million for the
same period of the prior year. Sales and operating profit for the six months of
the current fiscal year were $296.2 million and $50.4 million compared with
$286.9 million and $45.8 million for the six
9
<PAGE> 10
PART I. FINANCIAL INFORMATION (CONTINUED)
months of fiscal year 1998. In response to demand for its commercial electronic
products by original equipment manufacturers in the telecommunications and
computer industries, this segment has continued to invest in product development
and expand production capacity. Profit margins benefited from management's
ongoing program to improve process and cost efficiencies.
Net interest expense for the second quarter and six months ended January
31, 1999 amounted to $16.3 million and $32.5 million compared with $11.1 million
and $21.3 million for the prior year's periods, respectively. Interest expense
was higher in the current year primarily as a result of the $300 million in
certain long-term notes and debentures along with short-term borrowings issued
in connection with the acquisition of TASC and a payment of prior years' taxes
during fiscal year 1998.
Cash and marketable securities amounted to $96.8 million at January 31,
1999 compared with $31.9 million at July 31, 1998. During the current six month
period, cash flow from operations, short-term borrowings and proceeds from the
sale of a division provided the funds to meet operating needs, make capital
expenditures and repurchase 537,100 shares of Common stock for approximately
$29.5 million in cash, leaving approximately 1.6 million shares to be
repurchased under the Company's stock buyback program as of January 31, 1999. At
January 31, 1999, the Company had credit commitments totaling $400 million of
which approximately $200 million was available for its general use and the
remainder for replacement of existing debt. The Company also has another
revolving credit agreement totaling $400 million which serves as a back-up
facility for its commercial paper program under which $342.5 million was
outstanding at January 31, 1999. The aforementioned credit commitments, along
with available cash, provided the funds for the previously announced
acquisitions of Denro, Inc. from Firan Corporation and Retconn, Inc. from SEMX
Corporation, both of which were completed subsequent to the end of the current
quarter. Management believes that cash flow from operations, along with
available borrowing capacity, will be sufficient to meet operating requirements.
EURO CONVERSION
On January 1, 1999, a majority of the European Union member countries
converted to a common currency, the "Euro". The existing national currencies of
the participating countries will continue to be acceptable until January 1, 2002
after which the Euro will be the sole legal tender for the participating
countries. The Company is currently evaluating the economic and operational
impact, including competition, pricing, contracts, taxation and foreign currency
exchange rate risk, of the Euro conversion but does not expect it to have a
material effect on its financial condition or results of operations.
YEAR 2000 READINESS DISCLOSURES
The Company has developed plans and a program to address the potential
impact of the Year 2000 on its business systems, facilities and products which
may include imbedded software. Each of these areas has been inventoried for
potential Year 2000 impact. Detailed implementation plans are in place for the
required modifications or replacements and such plans are being reviewed and
tested. The process and progress is monitored on a regular basis by a special
corporate task group of management, internal audit and legal personnel and
reported to management and the Audit and Compliance Committee of the Board of
Directors. Implementation of the required changes to critical systems,
facilities and products is expected to be completed during fiscal year 1999. The
Company is in contact with major suppliers and customers and is developing
backup and contingency plans both in relation to internal systems, facilities
and products and third parties. Incremental costs to address and achieve Year
2000 compliance are expensed as incurred. Such costs are approximately $14
million through January 31, 1999 and expected to total approximately $24
million. In addition, the Company has continued its process of replacing
manufacturing and business systems with more efficient and technologically up to
date systems that are also Year 2000 compliant. The Company believes it is
taking reasonable steps to prevent a material adverse operational or financial
impact from a non-compliant situation. The effect, if any, on the Company's
results of operations if the Company or any of its customers or suppliers is not
Year 2000 compliant is not reasonably estimable.
10
<PAGE> 11
PART I. FINANCIAL INFORMATION (CONTINUED)
SAFE HARBOR CAUTIONARY STATEMENT
Certain statements contained in this document are "forward-looking
statements" within the meaning of The Private Securities Reform Act of 1995. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
themselves to the foregoing, the words "believes", "anticipates", "estimates",
"expects", and similar expressions are intended to identify forward-looking
statements. Such forward-looking statements involve known and unknown risks and
uncertainties that could cause the Company's actual actions or results to differ
materially from those discussed in the forward-looking statements. Specific
factors that might cause such a difference include, but are not limited to,
changing priorities or reductions in the U.S. government defense budget; the
Company's reliance on U.S. Navy contracts; and profit recognition on government
and commercial contracts. The Company does not undertake any obligation to
publicly release any revisions to forward-looking statements to reflect events
or circumstances or changes in expectations after the date of this document or
to reflect the occurrence of unanticipated events.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Part II, Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations", of the Company's Annual Report on Form
10-K for the fiscal year ended July 31, 1998 for a discussion of its exposure to
market risks. There has been no significant change during the six months ended
January 31, 1999.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Litton brought suit against Honeywell, Inc. ("Honeywell") for patent
infringement relating to the manufacture of ring laser gyro navigation systems
used in commercial aircraft. In August 1993, the jury rendered a verdict in
favor of Litton which the District Court rejected in January 1995. In July 1996,
the Federal Circuit Court of Appeals reversed the District Court's decision and
reinstated parts of the jury's verdict related to liability in favor of Litton
and ordered a new trial on the amount of damages. In March 1997, the U.S.
Supreme Court vacated the Court of Appeals' ruling and remanded the case to the
Court of Appeals for further consideration. On April 7, 1998, the Court of
Appeals reinstated its finding that the patent was valid, reversed in part, and
ordered a new trial on both liability and damages. A new trial date has not been
set.
Litton also brought suit against Honeywell for illegal monopolization of
the market for inertial reference systems for large commercial air transport,
commuter and business aircraft. In February 1996, a jury rendered a verdict in
favor of Litton. The District Court upheld the jury's verdict on liability, but
declined to enter the jury's damage award on the basis that Litton's damage
study did not disaggregate damages among legal and illegal conduct. A new trial
limited to the issue of the amount of damages resulted in a jury verdict on
December 9, 1998, in the amount of $250 million in favor of Litton. On January
27, 1999, U.S. District Court Judge Mariana R. Pfaelzer entered a final judgment
against Honeywell in the amount of $750 million plus post judgment interest from
the date of entry of the final judgment and costs and attorneys fees. The court
will review post trial motions of the parties and hold a hearing as soon after
May 3, 1999 as is consistent with the Court's calendar. Honeywell has stated
that it intends to appeal the judgment.
At meetings and discussions in February 1999, the United States Attorney's
Office for the Central District of California ("the Government") advised the
Company that it intended to bring criminal charges against the Company and
potentially against some present and former officers and employees as a result
of a lengthy investigation of the Company's payments to foreign consultants and
the reporting of those payments to the United States Government in connection
with sales to Taiwan, Greece and possibly South Korea. While the Company
believes it has good and meritorious defenses to the potential charges, the
verdict in any trial cannot be predicted with certainty. The potential
administrative action also must be considered by the Company. As a result the
Company cannot at this time project the outcome and anticipates further
discussions with the Government.
12
<PAGE> 13
PART II. OTHER INFORMATION (CONTINUED)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant's 1998 Annual Meeting of Shareholders was held on December
3, 1998 in Beverly Hills, California.
Proxies for the meeting were solicited on behalf of the Board of Directors
of the Company. There was no solicitation in opposition to the Board of
Directors' nominees for election of directors as listed in the Company's
definitive Proxy Statement dated October 30, 1998. All of the nominees were
elected as follows:
<TABLE>
<CAPTION>
NOMINEE FOR WITHHELD
------- ---------- --------
<S> <C> <C>
Alton J. Brann................................ 40,639,580 207,471
Michael R. Brown.............................. 40,644,423 202,628
Joseph T. Casey............................... 40,626,047 221,004
Carol B. Hallett.............................. 40,720,021 127,030
Orion L. Hoch................................. 40,623,862 223,189
David E. Jeremiah............................. 40,724,010 123,041
John M. Leonis................................ 40,641,663 205,388
William P. Sommers............................ 40,723,571 123,480
C. B. Thornton, Jr. .......................... 40,728,667 118,384
</TABLE>
In addition to electing directors, the shareholders voted to ratify the
appointment of Deloitte & Touche LLP as independent auditors by the following
votes: 40,761,987 shares "for", 49,269 shares "against", and 35,795 shares
"abstained"; and approve the Litton Industries, Inc. Non-Employee Director Stock
Plan by the following votes: 38,269,292 shares "for", 2,446,745 shares
"against", 130,514 shares "abstained" and 500 shares of "broker non-votes".
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<S> <C>
Exhibit 3.2: Amendment to Restated and Amended By-laws of the Company, as
adopted by the Board of Directors on January 14, 1999.
Exhibit 27: Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K: There were no reports on Form 8-K filed during the
second quarter ended January 31, 1999.
13
<PAGE> 14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LITTON INDUSTRIES, INC.
(Registrant)
By /s/ CAROL A. WIESNER
------------------------------------
Carol A. Wiesner
Vice President and Controller
(Chief Accounting Officer)
March 17, 1999
14
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
OF
LITTON INDUSTRIES, INC.
(A DELAWARE CORPORATION)
COMPOSITE
<PAGE> 2
BY-LAWS
OF
LITTON INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. OFFICES..................................................... 1
Section 1. Registered Office........................................... 1
Section 2. Other Offices............................................... 1
ARTICLE II. MEETINGS OF STOCKHOLDERS.................................... 1
Section 1. Place and Date of Meetings.................................. 1
Section 2. Purpose of Annual Meeting................................... 1
Section 3. Notice of Stockholder Business and Nominations.............. 1
Section 4. Voting...................................................... 2
Section 5. Quorum and Adjournment...................................... 2
Section 6. Stockholders' List.......................................... 2
Section 7. Special Meetings............................................ 2
ARTICLE III. DIRECTORS................................................... 3
Section 1. Powers...................................................... 3
Section 2. Number and Term............................................. 3
Section 3. Meetings.................................................... 3
Section 4. Chairman of the Board of Directors.......................... 3
Section 5. Executive Committee......................................... 3
Section 6. Audit and Compliance Committee.............................. 4
Section 7. Compensation and Selection Committee........................ 4
Section 8. Nominating Committee........................................ 4
Section 9. Other Committees............................................ 4
Section 10. Action By Telephonic Conference............................. 5
Section 11. Action By Consent Without Meeting........................... 5
Section 12. Quorum...................................................... 5
Section 13. Resignation................................................. 5
Section 14. Vacancies................................................... 5
Section 15. Removal..................................................... 5
Section 16. Compensation................................................ 5
Section 17. Advisory Directors.......................................... 5
ARTICLE IV. OFFICERS.................................................... 6
Section 1. Officers.................................................... 6
Section 2. Staff Vice Presidents....................................... 6
Section 3. Other Officers and Agents................................... 6
Section 4. Duties...................................................... 6
ARTICLE V. CAPITAL STOCK............................................... 8
Section 1. Shares...................................................... 8
Section 2. Certificates of Stock....................................... 8
Section 3. Lost, Stolen, Destroyed Certificates........................ 8
Section 4. Transfer of Shares.......................................... 8
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VI. MISCELLANEOUS............................................... 8
Section 1. Seal........................................................ 8
Section 2. Fiscal Year................................................. 8
Section 3. Signatories................................................. 8
Section 4. Notice and Waiver of Notice................................. 8
Section 5. Dividends................................................... 9
Section 6. Record Date................................................. 9
Section 7. Amendments.................................................. 9
</TABLE>
<PAGE> 4
BY-LAWS
OF
LITTON INDUSTRIES, INC.
------------------------
ARTICLE I
OFFICES
SECTION 1. Registered Office -- The registered office shall be established
and maintained at the office of CSC The United States Corporation Company, in
the City of Dover, in the County of Kent, in the State of Delaware, and said
corporation shall be the resident agent of this Corporation in charge thereof.
SECTION 2. Other Offices -- The Corporation may have other offices, either
within or outside of the State of Delaware, at such place or places as the Board
of Directors may from time to time appoint or the business of the Corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. Place and Date of Meetings -- The annual meeting of
stockholders, and all other meetings of the stockholders, shall be held at such
place and on such date as shall be fixed by resolution of the Board of Directors
and stated in the notice of the meeting, provided that an annual meeting shall
be held within thirteen months after the Corporation's last annual meeting.
SECTION 2. Purpose of Annual Meeting -- At each annual meeting, the
stockholders shall elect the members of the Board of Directors for the
succeeding year. At any such annual meeting any further proper business may be
transacted, provided that no business other than that stated in the notice of
meeting shall be transacted at any meeting without unanimous consent of all the
stockholders entitled to vote at the meeting.
SECTION 3. Notice of Stockholder Business and Nominations
(a) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (1) pursuant to the
Corporation's notice of meeting, (2) by or at the direction of the Board of
Directors or (3) by any stockholder of the Corporation who was a stockholder of
record at the time of giving notice provided for in this Section, who is
entitled to vote at the meeting and who complied with the notice procedures set
forth in this Section.
(b) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (3) of paragraph (a) of this
Section, the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation and such other business must be a proper matter for
stockholder action. To be timely, a stockholder's notice shall be delivered to
the Secretary at the principal executive offices of the Corporation not later
than the close of business on the 90th business day nor earlier than the close
of business on the 120th business day prior to the anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is more than 30 business days before or more than 60 business
days after such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the close of business on the 120th business day
prior to such annual meeting and not later than the close of business on the
later of the 90th business day prior to such annual meeting or the 10th business
day following the day on which public announcement of the date of such meeting
is first made. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth (1) as to
each person whom the stockholder proposes to nominate for election or
re-election as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case under the Federal
securities laws and any rules,
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regulations, etc., promulgated thereunder, (2) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owners, if any, on whose behalf the proposal is
made; and (3) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(c) Only such persons who are nominated in accordance with the procedures
set forth in this Section shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Section. Except as otherwise provided by law Certificate of Incorporation of the
Corporation, or these By-laws, the Chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made, or proposed, as the case may be, in
accordance with the procedures set forth in this Section and, if any proposed
nomination or business is not in compliance with this Section, to declare that
such defective proposal or nomination shall be disregarded.
(d) For purposes of this Section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in documents filed by the
Corporation with the Securities and Exchange Commission.
SECTION 4. Voting -- Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-laws shall be entitled to one vote, in person or by
proxy, for each share of voting stock held by such stockholder. All elections
for directors shall be decided by plurality votes; all other questions shall be
decided by majority vote, except as otherwise provided by the Certificate of
Incorporation or the laws of the State of Delaware. No proxy shall be voted
after three years from its date unless such proxy provides for a longer period.
SECTION 5. Quorum and Adjournment -- Except as otherwise required by law,
by the Certificate of Incorporation or by these By-laws, the presence, in person
or by proxy, of stockholders holding a majority of the stock of the Corporation
entitled to vote shall constitute a quorum at all meetings of the stockholders.
In case a quorum shall not be present at any meeting, a majority in interest of
the stockholders entitled to vote, present in person or by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the requisite
amount of stock entitled to vote shall be represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed; but only those stockholders entitled to vote at the meeting as
originally noticed shall be entitled to vote at any adjournment or adjournments
thereof.
SECTION 6. Stockholders' List -- The Secretary shall prepare, at least ten
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder
for any purpose germane to the meeting during ordinary business hours for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of meeting, or, if not so specified, at the place where the meeting is to
be held. The list shall also be kept at the time and place of the meeting during
the whole time thereof and may be inspected by any stockholder who is present.
SECTION 7. Special Meetings -- Special meetings of the stockholders
entitled to vote may be called at the request in writing by stockholders of
record owning at least fifty-one percent of the issued and outstanding voting
shares of common stock of the Corporation. Written request must be delivered to
the Chairman of the Board, the President, or the Secretary. A special meeting of
the stockholders may also be called by resolution of the Board of Directors or
the Executive Committee of the Board of Directors.
2
<PAGE> 6
ARTICLE III
DIRECTORS
SECTION 1. Powers -- The Board of Directors shall exercise all of the
powers of the Corporation except such as are by law, or by the Certificate of
Incorporation of the Corporation, or by these By-laws conferred upon or reserved
to the stockholders.
SECTION 2. Number and Term -- The number of directors shall be fixed from
time to time by resolution of the Board of Directors but shall be not less than
five nor more than eleven. In order to assure compliance with the Shipping Act,
1916, as amended, and the Merchant Marine Act, 1936, as amended, no more than a
minority of the number of directors necessary to constitute a quorum of the
Board of Directors, as provided in Section 10 of this Article III, shall be
aliens. Each director shall hold office until the next annual meeting of
stockholders and until a successor is elected and qualified, provided that a
director may resign at any time. Directors need not be stockholders.
SECTION 3. Meetings
(a) The newly elected directors may hold their first meeting for the
purpose of organization and the transaction of business, if a quorum be present,
immediately after the annual meeting of the stockholders, or the time and place
of such meeting may be fixed by consent in writing of all the directors.
(b) Regular meetings of the directors may be held without notice at such
places and times as shall be determined from time to time by resolution of the
directors.
(c) Special meetings of the Board of Directors may be called by the
Chairman of the Board of Directors or by the Secretary on the written request of
any two directors upon notice to each director and shall be held at such place
or places as may be determined by the directors, or as shall be stated in the
call of the meeting.
SECTION 4. Chairman of the Board of Directors -- The Chairman of the Board
of Directors shall be elected by the Board of Directors. The Chairman shall
preside at the meetings of the Board of Directors and at all meetings of the
stockholders of the Corporation. The Chairman shall perform such other duties
and services as shall be assigned by the Board of Directors. The Chairman of the
Board of Directors shall be an officer or former officer of the Corporation.
During the absence or disability of the Chairman of the Board of Directors, the
CEO or President if a member of the Board, or in the absence of either, the
immediate past Chairman of the Board if a member of the Board, shall preside at
all meetings of the Board of Directors and of the stockholders of the
Corporation, and the CEO, the President, or the acting chairman shall exercise
all of the functions of the Chairman of the Board of Directors.
SECTION 5. Executive Committee
(a) The Board of Directors shall elect from among its membership an
Executive Committee to consist of not less than three members. Between the
meetings of the Board of Directors and while such Board is not in session, the
Executive Committee shall have all the powers and exercise all the duties of the
Board of Directors unless prohibited under Section 141 of the Delaware General
Corporation Law, including the powers to authorize the issuance of the stock of
the Corporation and to adopt a certificate of ownership and merger pursuant to
Section 253 of the Delaware General Corporation Law.
(b) The Executive Committee shall report all of its actions to the Board of
Directors, and its powers herein created shall be subject to such limitation as
may be imposed by the Board of Directors, acting at any regular meeting or at
any special meeting for which notice of such action has been given. The
Committee shall keep regular minutes of its proceedings and report the same to
the Board of Directors when required.
(c) The meetings of the Executive Committee shall be called by the
Secretary of the Corporation, from time to time, at the direction and upon the
request of any member of the Executive Committee. Notice of such meeting shall
in each instance be given to each member of the Committee at the last known
business address, at least one day before the meeting, either orally or in
writing, delivered personally or by mail or telegraph.
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<PAGE> 7
(d) A quorum of the Committee shall consist of a majority of the members of
the Committee.
(e) The Chairman of the Executive Committee, unless otherwise provided by
resolution or resolutions of the Board of Directors, shall be elected by a
majority of the members of the Executive Committee, and whenever any change
shall be made in the membership of any such Committee, a new Chairman shall be
elected in the same manner.
SECTION 6. Audit and Compliance Committee
(a) The Audit and Compliance Committee shall be charged with oversight of
the Corporation's accounting and compliance functions. The Committee shall
review and recommend outside auditors to the Board of Directors; determine the
scope of the audit; review and monitor internal accounting procedures; review
the responsibilities of internal audit staff, approve compensation for outside
auditors; and review and monitor the ethics and compliance programs of the
Corporation. The specific duties of the Committee shall be determined by
resolution of the Board of Directors at its organization meeting.
(b) The Committee shall consist of at least three independent
(non-employee) directors who shall be chosen by the full Board of Directors.
Members shall serve until their resignation or removal by the Board. The
Committee shall meet at least four times each calendar year. The Committee shall
keep regular minutes of its proceedings and report the same to the Board of
Directors when required.
SECTION 7. Compensation and Selection Committee
(a) The Compensation and Selection Committee shall review and recommend
benefit programs for executive officers of the Corporation; and shall approve
and report to the full Board of Directors on the executive compensation package,
including base annual salary, annual bonus awards, long-term incentive awards,
and all other compensation or perquisites, for all members of the senior
executive staff of the Corporation. The specific duties of the Committee shall
be determined by resolution of the Board of Directors at its organization
meeting.
(b) The Committee shall consist of not less than three independent
(non-employee) directors chosen by the full Board of Directors. Members shall
serve until their resignation or removal by the Board of Directors. The
Committee shall meet at least twice each calendar year. The Committee shall keep
regular minutes of its proceedings and report the same to the Board of Directors
when required.
SECTION 8. Nominating Committee
(a) The Nominating Committee shall identify, review and recommend
candidates for election to the Board of Directors. The Committee shall review
the qualifications of all candidates and, when a vacancy occurs on the Board of
Directors, shall present to the Chairman of the Board or the full Board of
Directors, a list of qualified candidates for consideration. The specific duties
of the Committee shall be determined by resolution of the Board of Directors at
its organization meeting.
(b) The Committee shall consist of the Chairman or Chief Executive Officer
or President and not less than three independent (non-employee) directors chosen
by the full Board of Directors. Members shall serve until their resignation or
removal by the Board of Directors. The Committee shall meet as often as
necessary to fulfill its duties but in no event less than once each calendar
year. The Committee shall keep regular minutes of its proceedings and report the
same to the Board of Directors when required.
SECTION 9. Other Committees
(a) The Board of Directors may by resolution or resolutions passed by a
majority of the whole Board of Directors, designate one or more additional
committees, each committee to consist of two or more of the directors of the
Corporation which, to the extent provided in said resolution or resolutions or
in these By-laws, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation, and
may have power to authorize the seal of the Corporation to be affixed to all
papers which may require it.
4
<PAGE> 8
(b) In addition to the regular members of each committee, the Board of
Directors may designate one or more alternate members who may replace any absent
or disqualified member at any meeting of the committee. In the event of the
absence or disqualification of any member of such committee or committees at a
time when the Board of Directors is not in session, the members of the committee
present at any meeting and not disqualified from voting, regardless of whether a
quorum is present, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(c) Such committee or committees shall have such name or names as may be
stated in these By-laws or as may be determined from time to time by resolution
adopted by the Board of Directors. The Chairman of each such committee, unless
otherwise provided by the Board of Directors in such resolution or resolutions
designating such committee, shall be elected by a majority of the members of
each such committee and whenever any change shall be made in the membership of
any such committee, a new Chairman shall be elected in the same manner. The
committees shall keep regular minutes of their proceedings and report the same
to the Board of Directors when required.
SECTION 10. Action By Telephonic Conference -- Members of the Board of
Directors or any committee designated by such Board, may participate in a
meeting of such Board or committee by means of a telephone conference or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
the person at such meeting.
SECTION 11. Action By Consent Without Meeting -- Any action required or
permitted to be taken at any meeting of the Board of Directors or governing
body, or any committee thereof may be taken without a meeting if all the members
of the Board or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors, governing body, or committee.
SECTION 12. Quorum -- The vote of a majority of the Directors present at
any meeting at which a quorum is present shall be necessary to constitute the
act of the Board of Directors, unless provided otherwise by law or by the
Certificate of Incorporation or these Bylaws. A quorum of other committees,
including the Executive Committee as provided in Section 6(d) above, shall
consist of a majority of the members of the committee. If there shall be less
than a quorum at any meeting of the Board of Directors or a committee, a
majority of those present may adjourn the meeting from time to time.
SECTION 13. Resignation -- Any director, member of a committee or other
officer may resign at any time by delivering a written resignation to the
Chairman of the Board of Directors or to the Secretary. Such resignation shall
take effect at the time specified therein, and if no time is specified, at the
time of its receipt by the Chairman or the Secretary. The acceptance of a
resignation shall not be necessary to make it effective.
SECTION 14. Vacancies -- If the office of any director, member of a
committee or other officer becomes vacant, the remaining directors in office, by
a majority vote, may appoint any qualified person to fill such vacancy, who
shall hold office for the unexpired term and until a successor shall be duly
chosen.
SECTION 15. Removal -- Any director or directors may be removed, either
with or without cause, at any time by the affirmative vote of the holders of a
majority of all the shares of stock outstanding and entitled to vote at a
special meeting of the stockholders called for that purpose.
SECTION 16. Compensation -- The Board of Directors shall determine, by
resolution, the compensation of directors and advisory directors. Nothing herein
contained shall be construed to preclude any Director from serving in any other
capacity and receiving compensation therefor.
SECTION 17. Advisory Directors
(a) The Board of Directors may elect one or more advisory directors who
shall have such powers and shall perform such duties as the directors shall
assign to them. Advisory directors shall, upon election, serve until the next
annual meeting of stockholders.
5
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(b) Advisory directors shall receive notices of all meetings of the Board
of Directors called by the Chairman of the Board, by the President, or by the
Secretary (on written request of any two directors) in the same manner and at
the same time as the directors. They shall attend said meetings referred to in
said notices in an advisory capacity, but will not cast a vote or be counted to
determine a quorum. Any advisory directors may be removed either with or without
cause, by a majority of the directors at the time in office, at any regular or
special meeting of the Board of Directors.
(c) Nothing herein contained shall be construed to preclude any advisory
director from serving the Corporation in any other capacity as an officer, agent
or otherwise, and receiving compensation therefor.
ARTICLE IV
OFFICERS
SECTION 1. Officers
(a) The officers of the Corporation shall be a Chief Executive Officer, a
President, a Secretary, a Treasurer, a Controller, and if deemed necessary,
expedient or desirable by the Board of Directors, one or more Vice Presidents
(one or more of whom may be designated Executive or Senior Vice President), one
or more Assistant Secretaries and one or more Assistant Treasurers. The officers
shall be elected by the Board of Directors at their first meeting after the
annual meeting of stockholders. Any number of offices may be held by the same
person, except as otherwise required by applicable state law.
(b) In order to assure compliance with the Shipping Act, 1916, as amended,
and the Merchant Marine Act, 1936, as amended, the Chairman of the Board and the
President shall be citizens of the United States and no Vice President or other
individual shall be authorized to act in the absence or disability of the
Chairman of the Board and the President unless such individual is a citizen of
the United States.
(c) Unless otherwise provided for in a resolution of the Board of
Directors, each officer shall be chosen for a term that shall continue until the
organizational meeting of the Board of Directors following the next annual
meeting of stockholders and until a successor shall have been chosen and
qualified.
(d) All officers of the Corporation shall have such authority and perform
such duties in the management and operation of the Corporation as shall be
prescribed in the By-laws or in the resolutions of the Board of Directors
appointing such officers and prescribing their authority and duties, and shall
have such additional authority and duties as are incident to their office except
to the extent that such authority and duties may be inconsistent with a
resolution of the Board of Directors.
(e) Any officer may be removed, with or without cause, by the Board of
Directors. Any vacancy in any office may be filled by the Board of Directors.
SECTION 2. Staff Vice Presidents -- The Chief Executive Officer may appoint
key executives to the position of staff vice president. Such staff vice
presidents shall not be corporate officers and shall exercise such powers and
perform such duties as are assigned to them by the Chief Executive Officer, the
President, or other officer of the Corporation.
SECTION 3. Other Officers and Agents -- The Board of Directors may appoint
such other officers and agents as it may deem advisable, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
SECTION 4. Duties
(a) Chief Executive Officer ("CEO") -- The Board of Directors shall appoint
the CEO. The CEO shall have the general power to supervise, direct, manage and
control the business and affairs of the Corporation. The CEO shall have the
general power to appoint, remove or suspend all employees and agents of the
Corporation, subject to the power of the Board of Directors and the provisions
of these By-laws. Except as the Board of Directors shall, by resolution,
otherwise determine, the CEO shall exercise for, and in the name of the
Corporation, in the CEO's own and sole judgment, all of the rights, powers and
privileges of ownership,
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<PAGE> 10
including the right to vote thereon, of any and all securities of any nature
whatsoever held by or in the name of the Corporation. The CEO shall exercise all
of the powers usually appertaining to the office held by the CEO of a
corporation.
(b) President -- Except when the Board of Directors shall authorize the
execution thereof in some other manner, the President is authorized and
empowered to execute and deliver all bonds, mortgages, and other contracts,
instruments, amendments and supplements thereto, for and on behalf of the
Corporation, as the President shall deem appropriate and in the best interest of
the Corporation. The President may designate any other officer or employee to
execute and deliver such documents or to ratify and approve the execution and
delivery thereof, and such action by the President and any officer or employee
so designated shall be binding on the Corporation. The President shall cause the
corporate seal to be affixed to any instrument requiring it and attested by the
signature of the Secretary or an Assistant Secretary. The President shall
perform such other duties as may be required by the Board of Directors.
(c) Treasurer -- The Treasurer shall have custody of the corporate funds
and securities and shall cause full and accurate account of the receipts and
disbursements of the Corporation to be kept in books and records belonging to
the Corporation. The Treasurer shall establish and maintain bank accounts in the
name of the Corporation in such bank or banks, as the Treasurer, with the
approval of the Chairman of the Board or the President or the Chief Financial
Officer, may deem appropriate; deposit all moneys or other valuables in the name
and to the credit of the Corporation in such depositories; designate the person
or persons and the conditions under which such person(s) may withdraw funds
therefrom; and, revoke the authorization of such person(s). The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Chairman of the
Board or the President or Chief Financial Officer, taking proper vouchers for
such disbursement when appropriate. The Treasurer shall render to the Board of
Directors at their regular meetings, or to the Chairman of the Board, or to the
President at their request, an account of all the Treasurer's transactions. If
required by the Board of Directors, the Treasurer shall give the Corporation a
bond for the faithful discharge of the Treasurer's duties in such amount and
with such surety as the Board of Directors shall prescribe.
(d) Secretary -- The Secretary shall give, or cause to be given, notice of
all meetings of the stockholders and directors, and all other notices required
by law or by these By-laws. In case of the Secretary's absence or refusal or
neglect so to do, any such notices may be given by any person directed by the
President, or by the directors, or stockholders, upon whose requisition the
meeting is called as provided in these By-laws. The Secretary shall record all
the proceedings of the meetings of the Corporation and of the Board of Directors
in a book to be kept for that purpose, and shall perform such other duties as
may be assigned to the Secretary by the Board of Directors, the Chairman of the
Board or the President. The Secretary shall have the custody of the seal of the
Corporation and shall affix the same to all instruments requiring it, when
authorized by the Board of Directors, the Chairman of the Board, or the
President, and attest the same.
(e) Controller -- The Controller shall have custody of the financial
records of the Corporation and shall keep full and accurate books and records of
the financial transactions of the Corporation. The Controller shall determine
the methods of accounting and reporting for all entities comprising the
Corporation, and shall be responsible for assuring adequate systems of internal
control. The Controller shall render to the Chairman of the Board, the
President, and the Board of Directors at its regular meetings whenever they may
request it, a report on the financial condition of the Corporation and of the
results of its operations. If required by the Board of Directors, the Controller
shall give the Corporation a bond for the faithful discharge of his duties in
such amount and with such surety as the Board of Directors shall prescribe.
(f) Chief Financial Officer -- The Chief Financial Officer shall provide
and maintain, subject to the direction of the Board of Directors, financial and
accounting controls over the business and affairs of the Corporation. The Chief
Financial Officer shall maintain adequate records of the assets, liabilities and
financial transactions of the Corporation, and shall direct the preparation of
financial statements, reports and analyses. The Chief Financial Officer shall
perform such other duties and exercise such other powers as are incident to such
function, subject to the control of the Board of Directors.
(g) Chief Legal Officer -- The Chief Legal Officer (General Counsel) shall
be in charge of the Corporation's legal affairs. The Chief Legal Officer shall
advise the Board and/or the officers of the
7
<PAGE> 11
Corporation on such legal matters and prepare such reports as may be required by
them. The Chief Legal Officer shall perform such other duties and exercise such
other powers as are incident to such function, subject to the control of the
Board of Directors.
ARTICLE V
CAPITAL STOCK
SECTION 1. Shares -- The shares of the capital stock of the Corporation
shall be represented by certificates or shall be uncertificated. Each registered
holder of shares of capital stock, upon request to the Corporation, shall be
provided with a stock certificate, representing the number of shares owned by
such holder. Absent specific request for such a certificate by the registered
owner or transferee, all shares shall be uncertificated upon the original
issuance by the Corporation or upon the surrender for transfer of the
certificate representing such shares to the Corporation or its transfer agent.
SECTION 2. Certificates of Stock -- Certificates of stock, numbered
consecutively and containing the (seal) of the Corporation, signed by the CEO,
the President, or a Vice President, the Treasurer, or an Assistant Treasurer, or
by the Secretary, or an Assistant Secretary, shall be in such form, not
inconsistent with the Certificate of Incorporation, as shall be approved by the
Board of Directors. When such certificates are signed by either a transfer agent
(other than the Corporation), or a registrar (other than the Corporation), the
signatures of such officers may be facsimiles.
SECTION 3. Lost, Stolen, Destroyed Certificates -- No certificate for
shares of stock in the Corporation shall be issued in place of any certificate
alleged to have been lost, stolen, or destroyed, except on production of such
evidence of such loss, theft, or destruction and on delivery to the Corporation
of a bond of indemnity in such amount, upon such terms, and secured by such
surety, as the Board of Directors or the Secretary may in its discretion
require.
SECTION 4. Transfer of Shares -- Upon the surrender to the Corporation of a
certificate for shares, properly endorsed, the Corporation shall issue a new
certificate to the transferee, cancel the old certificate, and record the
transaction on its books. The person in whose name shares of stock stand on the
books of the Corporation shall be deemed by the Corporation to be the owner
thereof for all purposes, and the Corporation shall not be bound to recognize
any equitable or other claim thereto on the part of any other person.
ARTICLE VI
MISCELLANEOUS
SECTION 1. Seal -- The corporate seal shall be circular in form and shall
contain the name of the Corporation, the year of its creation and the words
"CORPORATE SEAL DELAWARE." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
SECTION 2. Fiscal Year -- The fiscal year of the Corporation shall begin
August 1st and end July 31st.
SECTION 3. Signatories -- All checks, drafts, or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation, shall be signed by such officer or officers, agent or agents of
the Corporation and in such a manner as shall be determined from time to time by
resolution of the Board of Directors.
SECTION 4. Notice and Waiver of Notice -- Whenever any notice is required
by these By-laws to be given, personal notice is not meant unless expressly so
stated, and any notice so required shall be deemed to be sufficient if given by
depositing the same in a post office box in a sealed post-paid wrapper,
addressed to the person designated at the last known post office address, and
such notice shall be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to receive notice of any
meetings except as otherwise provided by statute. Whenever any notice is
required to be given under the provisions of any law, or under the provisions of
the Certificate of Incorporation or these By-laws, a waiver in
8
<PAGE> 12
writing, signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be deemed equivalent thereto.
SECTION 5. Dividends -- Subject to the provisions of the Certificate of
Incorporation, the Board of Directors may, at any regular or special meeting,
declare dividends, out of funds legally available therefor, upon the capital
stock of the Corporation as and when they deem expedient. Before declaring any
dividend there may be set apart out of any funds of the Corporation available
for dividends, such sum or sums as the directors from time to time in their
discretion deem proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends or for such other purposes as the
directors shall deem conducive to the interests of the Corporation.
SECTION 6. Record Date
(a) In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders, the Board of Directors
shall fix a record date which shall not be more than sixty nor less than ten
days before the date of such meeting.
(b) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date which shall be not more
than sixty days prior to such action.
SECTION 7. Amendments -- These By-laws may be altered or repealed and new
By-laws may be adopted as follows: (1) at any annual or special meeting of
stockholders by the affirmative vote of a majority of the issued and outstanding
voting stock, provided, however, that notice of the proposed alteration, repeal
or adoption of the new provision(s) is contained in the notice of such special
meeting; or (2) by the affirmative vote of a majority of the members present at
any regular meeting of the Board of Directors, or at any special meeting of the
Board of Directors, if notice of the proposed alteration, repeal or new
provision(s) is contained in the notice of such special meeting.
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JANUARY 31, 1999 AND THE CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED JANUARY 31, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 77,471
<SECURITIES> 19,340
<RECEIVABLES> 867,089
<ALLOWANCES> 0
<INVENTORY> 629,793
<CURRENT-ASSETS> 2,032,190
<PP&E> 1,551,739
<DEPRECIATION> (944,928)
<TOTAL-ASSETS> 4,148,527
<CURRENT-LIABILITIES> 1,788,856
<BONDS> 775,410
0
2,053
<COMMON> 45,429
<OTHER-SE> 1,211,412
<TOTAL-LIABILITY-AND-EQUITY> 4,148,527
<SALES> 2,338,460
<TOTAL-REVENUES> 2,338,460
<CGS> 1,829,583
<TOTAL-COSTS> 1,829,583
<OTHER-EXPENSES> 79,934
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,405
<INCOME-PRETAX> 152,008
<INCOME-TAX> 60,803
<INCOME-CONTINUING> 91,205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 91,205
<EPS-PRIMARY> 2.00
<EPS-DILUTED> 1.95
</TABLE>
