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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JULY 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file Number 1-8929
ABM INDUSTRIES INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 94-1369354
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
160 PACIFIC AVENUE SUITE 222, SAN FRANCISCO, CALIFORNIA 94111
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 415/733-4000
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 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 [ ]
Number of shares of Common Stock outstanding as of
September 1, 1999: 22,341,226
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ABM INDUSTRIES INCORPORATED
FORM 10-Q
FOR THE THREE MONTHS AND NINE MONTHS ENDED JULY 31, 1999
TABLE OF CONTENTS
<TABLE>
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PART I PAGE
<S> <C> <C>
Item 1 Condensed Consolidated Financial Statements........................2
Notes to the Condensed Consolidated
Financial Statements.............................................7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................9
Item 3 Qualitative and Quantitative Disclosures
About Market Risk................................................20
PART II
Item 6 Exhibits and Reports on Form 8-K..................................21
</TABLE>
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
<TABLE>
<CAPTION>
- ---------------------------------------------------- ------------------ - ------------------
OCTOBER 31, 1998 JULY 31, 1999
ASSETS:
- ---------------------------------------------------- ------------------ - ------------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,844 $ 2,048
Accounts receivable, net 260,549 283,718
Inventories 22,965 22,383
Deferred income taxes 10,505 14,480
Prepaid expenses and other current assets 28,445 30,565
- ---------------------------------------------------- ---------------- ---- -----------------
Total current assets 324,308 353,194
- ---------------------------------------------------- ---------------- ---- -----------------
INVESTMENTS AND LONG-TERM RECEIVABLES 12,405 14,031
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land and buildings 4,802 4,517
Transportation equipment 11,633 13,545
Machinery and other equipment 51,528 60,818
Leasehold improvements 13,096 14,934
- ---------------------------------------------------- ---------------- ---- -----------------
81,059 93,814
Less accumulated depreciation and amortization 53,752 61,078
- ---------------------------------------------------- ---------------- ---- -----------------
Property, plant and equipment, net 27,307 32,736
- ---------------------------------------------------- ---------------- ---- -----------------
INTANGIBLE ASSETS - NET 102,776 105,818
DEFERRED INCOME TAXES 27,509 29,569
OTHER ASSETS 7,058 9,017
- ---------------------------------------------------- ---------------- ---- -----------------
$ 501,363 $ 544,365
==================================================== ================ ==== =================
</TABLE>
(Continued)
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ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
<TABLE>
<CAPTION>
- --------------------------------------------------- ----------------- -- ------------------
OCTOBER 31, 1998 JULY 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY:
- --------------------------------------------------- ----------------- -- ------------------
CURRENT LIABILITIES:
<S> <C> <C>
Current portion of long-term debt $ 865 $ 891
Bank overdraft 2,475 12,252
Trade accounts payable 34,992 35,462
Income taxes payable 5,527 8,402
Accrued Liabilities:
Compensation 40,914 41,545
Taxes - other than income 15,887 16,850
Insurance claims 29,254 29,605
Other 27,910 31,304
- --------------------------------------------------- ----------------- -- ------------------
Total current liabilities 157,824 176,311
Long-Term Debt (less current portion) 33,720 24,929
Retirement plans 15,974 18,545
Insurance claims 49,911 50,752
- --------------------------------------------------- ----------------- -- ------------------
Total Liabilities 257,429 270,537
- --------------------------------------------------- ----------------- -- ------------------
SERIES B 8% SENIOR REDEEMABLE CUMULATIVE
PREFERRED STOCK 6,400 6,400
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 500,000 _ _
shares authorized; none issued
Common stock, $.01 par value,
100,000,000 shares authorized;
21,601,000 and 22,265,000 shares
issued and outstanding at October 31, 1998 216 223
and July 31, 1999, respectively
Additional capital 79,904 93,047
Retained earnings 157,414 174,158
- --------------------------------------------------- ----------------- -- ------------------
Total stockholders' equity 237,534 267,428
- --------------------------------------------------- ----------------- -- ------------------
$ 501,363 $ 544,365
=================================================== ================= == ==================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
<TABLE>
<CAPTION>
- ---------------------------------------------------- ------------------------------------ ----------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31 JULY 31
1998 1999 1998 1999
- ---------------------------------------------------- ---------------- -- ---------------- --------------- -- ---------------
<S> <C> <C> <C> <C>
REVENUES AND OTHER INCOME $ 381,036 $ 412,689 $1,108,817 $1,202,811
EXPENSES:
Operating Expenses and Cost of Goods Sold 328,744 356,105 961,766 1,045,844
Selling, General and Administrative 35,198 37,214 106,169 110,585
Interest 811 507 2,650 1,527
- ---------------------------------------------------- ---------------- -- ---------------- --------------- -- ---------------
Total Expenses 364,753 393,826 1,070,585 1,157,956
- ---------------------------------------------------- ---------------- -- ---------------- --------------- -- ---------------
INCOME BEFORE INCOME TAXES 16,283 18,863 38,232 44,855
INCOME TAXES 6,757 7,734 15,866 18,391
- ---------------------------------------------------- ---------------- -- ---------------- --------------- -- ---------------
NET INCOME $ 9,526 $ 11,129 $ 22,366 $ 26,464
==================================================== ================ == ================ =============== == ===============
NET INCOME PER COMMON SHARE
Basic $ 0.44 $ 0.50 $ 1.05 $ 1.19
Diluted $ 0.40 $ 0.46 $ 0.95 $ 1.10
AVERAGE NUMBER OF SHARES OUTSTANDING
Basic 21,304 22,183 20,980 21,954
Diluted 23,237 23,866 23,116 23,767
DIVIDENDS PER COMMON SHARE $ 0.12 $ 0.14 $ 0.36 $ 0.42
</TABLE>
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ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1998 AND 1999
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------ ------------------- - -----------------
1998 1999
- ------------------------------------------------------ ----------------- -- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Cash received from customers $1,082,151 $1,177,450
Other operating cash receipts 971 1,434
Interest received 484 679
Cash paid to suppliers and employees (1,053,787) (1,135,197)
Interest paid (2,559) (1,695)
Income taxes paid (16,022) (21,551)
- ------------------------------------------------------ ----------------- -- ------------------
Net cash provided by operating activities 11,238 21,120
- ------------------------------------------------------ ----------------- -- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (8,235) (14,184)
Proceeds from sale of assets 395 776
Decrease (increase) in investments and
long-term receivable 10 (1,626)
Intangible assets acquired (7,050) (8,860)
- ------------------------------------------------------ ----------------- -- ------------------
Net cash used in investing activities (14,880) (23,894)
- ------------------------------------------------------ ----------------- -- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued 10,314 11,686
Dividends paid (7,988) (9,720)
Increase in cash overdraft 1,895 9,777
Increase in notes payable 145 25
Long-term borrowings 80,172 39,037
Repayments of long-term borrowings (80,864) (47,827)
- ------------------------------------------------------ ----------------- -- ------------------
Net cash provided by financing
activities 3,674 2,978
- ------------------------------------------------------ ----------------- -- ------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 32 204
CASH AND CASH EQUIVALENTS BEGINNING OF PERIOD 1,783 1,844
====================================================== ================= == ==================
CASH AND CASH EQUIVALENTS END OF PERIOD $ 1,815 $ 2,048
====================================================== ================= == ==================
</TABLE>
(Continued)
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ABM INDUSTRIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1998 AND 1999
(In thousands)
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------- ------------------
1998 1999
- ------------------------------------------------------- ----------------- ------------------
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 22,366 $ 26,464
Adjustments:
Depreciation and amortization 14,395 15,321
Provision for bad debts 2,177 1,772
Gain on sale of assets (155) (60)
Deferred income taxes (1,279) (6,035)
Increase in accounts receivable (23,436) (24,941)
Decrease (increase) in inventories (1,123) 582
Increase in prepaid expenses and other
current assets (3,615) (2,120)
Decrease (increase) in other assets 524 (1,959)
Increase in income taxes payable 1,123 2,875
Increase in retirement plans accrual 2,124 2,571
Increase (decrease) in insurance claims
liability (436) 1,192
Increase(decrease)in accounts payable
and other accrued liabilities (1,427) 5,458
- ------------------------------------------------------- ----------------- ------------------
Total adjustments to net income (11,128) (5,344)
- ------------------------------------------------------- ----------------- ------------------
Net Cash Provided by Operating Activities $ 11,238 $ 21,120
======================================================= ================= ==================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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ABM INDUSTRIES INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all material adjustments which are
necessary to present fairly the Company's financial position as of July 31,
1999, and the results of operations and cash flows for the nine months then
ended. These adjustments are of a normal, recurring nature.
These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Form 10-K filed for the fiscal year ended October 31,
1998 with the Securities and Exchange Commission.
2. NET INCOME PER COMMON SHARE
The Company has reported its earnings in accordance with Statement of
Financial Accounting Standards No. 128, Earnings per Share. Basic net income per
common share, after the reduction for preferred stock dividends, is based on the
weighted average number of shares actually outstanding during the period.
Diluted net income per common share, after the reduction for preferred stock
dividends, is based on the weighted average number of shares outstanding during
the period, including common stock equivalents.
<TABLE>
<CAPTION>
Nine months Ended Nine months Ended
July 31, 1998 July 31, 1999
------------- -------------
<S> <C> <C>
Net Income $ 22,366,000 $ 26,464,000
Preferred Stock Dividends (384,000) (384,000)
----------- -----------
$ 21,982,000 $ 26,080,000
========== ============
Common shares outstanding - basic 20,980,000 21,954,000
Effect of dilutive securities:
Stock options 1,937,000 1,718,000
Other 199,000 95,000
-------- ---------
Common shares outstanding - diluted 23,116,000 23,767,000
========== ==========
</TABLE>
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<TABLE>
<CAPTION>
Three months Ended Three months Ended
July 31, 1998 July 31, 1999
------------------ ------------------
<S> <C> <C>
Net Income $ 9,526,000 $ 11,129,000
Preferred Stock Dividends (128,000) (128,000)
--------- ----------
$ 9,398,000 $ 11,001,000
========= ==========
Common shares outstanding - basic 21,304,000 22,183,000
Effect of dilutive securities:
Stock options 1,734,000 1,546,000
Other 199,000 137,000
-------- --------
Common shares outstanding - diluted 23,237,000 23,866,000
========== ==========
</TABLE>
For purposes of computing diluted net income per common share, weighted
average common share equivalents do not include stock options with an exercise
price that exceeds the average fair market value of the Company's common stock
for the period. On July 31, 1999, options to purchase approximately 1,100,000
shares of common stock at a weighted average exercise price of $31.80 were
outstanding, but were excluded from the computation because the options'
exercise price was greater than the average market price of the common shares.
At July 31, 1998, 671,750 shares of common stock at a weighted average exercise
price of $29.80 were outstanding, but were excluded from the computation because
the options' exercise price was greater than the average market price of the
common shares.
3. ACQUISITIONS
During the nine months ended July 31, 1999 the Company completed five
business combinations that were accounted for under the purchase method of
accounting. The consolidated financial statements include the results of these
acquired entities from their respective dates of acquisition. The aggregate
consideration paid for these acquisitions consisted of $6,469,000 cash. The
aggregate purchase price does not include payments of contingent consideration
based upon the results of operations of the businesses acquired.
The total purchase price was allocated to the fair value of the net assets
acquired resulting in goodwill of approximately $4,163,000, which is being
amortized over ten years.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
Funds provided from operations and bank borrowings have historically
been the sources for meeting working capital requirements, financing capital
expenditures, acquisitions and paying cash dividends. Management believes that
funds from these sources will remain available and adequately serve the
Company's liquidity needs. The Company has an unsecured revolving credit
agreement with a syndicate of U.S. banks, expiring July 1, 2002. Effective
November 1, 1997, the agreement was amended to increase the amount available to
$150 million. At the Company's option, the credit facility provides interest at
the prime rate or IBOR+.35%. As of July 31, 1999, the total amount outstanding
was approximately $86 million, which was comprised of loans in the amount of $22
million and standby letters of credit of $64 million. This agreement requires
the Company to meet certain financial ratios, places some limitations on outside
borrowing and prohibits declaring or paying cash dividends exceeding 50% of the
Company's net income for any fiscal year. In February 1996, the Company entered
into a loan agreement with a major U.S. bank that provides a seven-year term
loan of $5 million. This loan bears interest at a fixed rate of 6.78% with
annual payments of principal, in varying amounts, and interest due each February
15 through 2003. The Company's effective interest rate for all long-term debt
borrowings for the nine months ended July 31, 1999 was 6.58%.
At July 31, 1999, working capital was $176.9 million, as compared to
$166.5 million at October 31, 1998.
ENVIRONMENTAL MATTERS
The nature of the Company's operations, primarily services, would not
ordinarily involve it in environmental contamination. However, the Company's
operations are subject to various federal, state and/or local laws regulating
the discharge of materials into the environment or otherwise relating to the
protection of the environment, such as discharge into soil, water and air, and
the generation, handling, storage, transportation and disposal of waste and
hazardous substances. These laws generally have the effect of increasing costs
and potential liabilities associated with the conduct of the Company's
operations, although historically they have not had a material adverse effect on
the Company's financial position or its results of operations.
The Company is currently involved in four proceedings relating to
environmental matters: one involving alleged potential soil and groundwater
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contamination at a Company facility in Florida; one involving alleged potential
soil contamination at a former Company facility in Arizona; one involving
alleged potential soil and groundwater contamination of a parking garage
previously operated by the Company in Washington; and, one involving alleged
potential soil and groundwater contamination at a former dry-cleaning facility
leased by the Company in Nevada. While it is difficult to predict the ultimate
outcome of these matters, based on information currently available, management
believes that none of these matters, individually or in the aggregate, are
reasonably likely to have a material adverse effect on the Company's financial
position or its results of operations.
YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written and
embedded chips being designed that use two digits rather than four digits to
define the applicable year. As a result, there is a potential that existing
computer programs and hardware will be unable to accurately process dates beyond
the year 1999. This could result in system errors or failures that could impact
both administration and operations. In mid-1997, the Company established a
dedicated Project Team that has initiated a Company-wide effort to mitigate the
Year 2000 issue. The Project Team has developed a detailed plan for becoming
Year 2000 compliant that consists of the following eight phases: awareness,
inventory, risk assessment, remediation, testing, implementation, certification,
and contingency planning. The Year 2000 issue encompasses both information
technology ("IT") related systems, such as the Company's accounting software,
and non-IT related systems such as the impact to the Company due to the
non-compliance of major vendors or customers.
The Company continues to inform all levels of management within the Company
of Year 2000 issues by producing and distributing quarterly newsletters. In
turn, the Company's management is able to effectively communicate with third
parties with regard to Year 2000 issues. Additionally, the Project Team
maintains a discussion database that is available to managers within the Company
for their review and input. This database is updated weekly; managers are
notified of the updates via e-mail.
The Project Team has completed a Company-wide inventory of all office
equipment, software, hardware, and any product, equipment, service or system
that could be impacted by the Year 2000 issue. This inventory has provided a
basis for identifying and prioritizing risk associated with the equipment,
hardware, software, and services that the Company utilizes. The inventory and
risk assessment process was completed in April 1999. Non-PC
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related hardware has been remediated and is considered Year 2000 compliant. A
company-wide replacement of PC and related hardware is currently in progress and
will be completed in November 1999. The Project Team has attempted to assess all
relevant issues and has developed a process to assess all new products and
services introduced subsequent to the initial inventory and assessment.
Six Divisions use the Company's proprietary accounting software, which is
internally maintained. Year 2000 compliant versions of this software have been
implemented for these divisions as of August 1999. The Elevator, Lighting,
Supply, and Mechanical Divisions use software purchased from outside vendors.
The financial software used by the Elevator Division has been made Year 2000
compliant. The Supply Division's inventory control system and the Lighting
Division's financial applications were made Year 2000 compliant in August 1999.
The Mechanical Division replaced its accounting and dispatching software with a
Year 2000 compliant system in July 1999.
The Project Team has identified vendors that represent 80 percent of the
Company's total purchases, and in October 1998, began surveying these vendors to
identify their plans to address the Year 2000 issue. This process was completed
in March 1999. Based upon the results of these surveys, alternate suppliers have
been identified for all vendors who were found either to be non-compliant,
pending compliance, or who did not respond. Surveys were sent to all lessors to
ensure that facilities, where the Company's employees work, will not be impacted
by Year 2000 issues.
The Company has established contingency plans for all its field office
locations, which includes business continuity plans customized for each
division, employee safety and a disaster recovery plan for the Company's data.
As part of this plan, the Company produced process manuals that document the
necessary procedures in the event of a Year 2000 related failure. These manuals
will be distributed to all offices of the Company for its coordinated
preparation for Year 2000 in October 1999. The anticipated date of final
roll-out of the contingency plans to all offices is November 1999.
The Company believes that appropriate steps are being taken to minimize
potential risk to its customers; however, there is a concern that customer-owned
equipment may not be Year 2000 compliant, which could adversely impact the
Company's operational performance. Additionally, there may be a possible
misconception among some customers that the Company is responsible for all Year
2000 issues. The Company sent an informational letter to all major customers
informing them of potential issues that could arise from the Year 2000 issue.
There can be no assurance that the systems of other
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companies on which the Company relies will be Year 2000 compliant, or that the
failure of such systems to be Year 2000 compliant will not have a material
adverse effect on the Company's business, financial condition and results of
operations.
Based upon assumptions and forecasts of management at this time, the
Company estimates the cost, including internal costs, of becoming Year 2000
compliant to be approximately $3.0 million, funded by operating cash flows. The
Company believes it is making the necessary modifications and changes to
mitigate the Year 2000 issue. However, there can be no assurance that all the
Company's systems will be Year 2000 compliant, that the costs to be Year 2000
compliant will not exceed management's current expectations, or that the failure
of such systems to be Year 2000 compliant will not have a material adverse
effect on the Company's business, financial condition and results of operations.
ACQUISITIONS
The operating results of businesses acquired have been included in the
accompanying condensed consolidated financial statements from their respective
dates of acquisition.
Effective February 1, 1999, the Company acquired the operations and
selected assets of VIP Valet Parking, with customers located in Austin and
Houston, Texas. The terms for the purchase of this acquisition were a cash
downpayment made at closing plus annual contingent payments based on operating
profits to be made over five years.
Effective April 1, 1999, the Company acquired the operations and
selected assets of Commercial Landscaping Services, with operations located in
the Carolinas and Tennessee. The terms for the purchase of this acquisition were
a cash downpayment made at closing plus annual contingent payments based on
operating profits to be made over five years.
Effective April 1, 1999, the Company acquired the operations and
selected assets of Integra Services Corporation, with customers located in Des
Moines, Iowa. The terms for the purchase of this acquisition were a cash
downpayment made at closing plus annual contingent payments based on operating
profits to be made over five years.
Effective May 1, 1999, the Company acquired the operations and stock of
Masterclean Systems, Inc., with customers located in Louisville, Kentucky, and
Master-Klean, Inc. with customers in Indianapolis, Indiana. The terms for the
purchase of these acquisitions were a cash downpayment made at closing plus
annual contingent payments based on operating profits to be made over five
years.
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Effective July 1, 1999, the Company acquired the operations and selected
assets of Suburban Lighting Company, with customers located in Minnesota and
other parts of the upper Midwest. The terms for the purchase of this acquisition
were a cash downpayment made at closing plus annual contingent payments based on
operating profits to be made over five years.
These five business combinations were accounted for under the purchase
method of accounting. The aggregate consideration paid for these acquisitions
consisted of $6,469,000. The aggregate purchase price does not include payments
of contingent consideration based upon the results of operations of the
businesses acquired.
Effective August 1, 1999, the Company acquired the operations and
selected assets of FaciliTech, with customers located in the Minneapolis/St.
Paul metropolitan area of Minnesota. The terms for the purchase of this
acquisition were a cash downpayment made at closing plus annual contingent
payments based on operating profits to be made over five years.
INTERNAL INVESTIGATION
The Audit Committee of the Board of Directors, comprised of three
outside directors, has been investigating allegations of questionable payments
and related accounting practices in connection with several janitorial service
contracts awarded to one of its building maintenance subsidiaries. These
contracts total less than 5% of the Company's consolidated revenues. Having now
concluded this investigation, the Company does not believe that there have been
any material misstatements in its financial statements for past periods, or that
the matter investigated will have any material impact on its financial condition
or results of operations. However, in an abundance of caution, the Company's
Board of Directors will refer this matter to appropriate government agencies,
with which the Company will fully cooperate.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
condensed consolidated financial statements of the Company. All information in
the discussion and references to the years and quarters are based on the
Company's fiscal year and third quarter which end on October 31 and July 31,
respectively.
THREE MONTHS ENDED JULY 31, 1999 VS. THREE MONTHS ENDED JULY 31, 1998
Revenues and other income (hereafter called revenues) for the third
quarter of 1999 were $412.7 million compared to $381.0 million in 1998, an 8.3%
increase over the same quarter of the prior year. Much of this growth was
attributable to new business and price increases, particularly by the Janitorial
and Engineering Divisions, as well as acquisitions made during 1998. For the
quarter ended July 31, 1999, the increase in revenues relating to acquisitions
made during 1998 was $3.7 million, 11.7% of the total revenue increase of $31.7
million.
As a percentage of revenues, operating expenses and cost of goods sold
were 86.3% for the third quarter of both 1999 and 1998. Consequently, as a
percentage of revenues, the Company's gross profit (revenue minus operating
expenses and cost of goods sold) also remained the same at 13.7% for the third
quarter of 1999 and 1998. Slight increases in labor and related costs were
offset by a number of other expenses.
Selling, general and administrative expenses for the third quarter of
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1999 were $37.2 million compared to $35.2 million for the corresponding three
months of 1998. As a percentage of revenues, selling, general and administrative
expenses decreased to 9.0% for the three months ended July 31, 1999, from 9.2%
for the same period in 1998, primarily as a result of certain fixed and variable
costs that do not increase at the same rate as revenues, and a reduction in
legal costs. The $2.0 million increase in selling, general and administrative
expenses for the three months ended July 31, 1999, compared to the same period
in 1998, is primarily due to expenses related to growth, including the
amortization of goodwill, and data processing expenses associated with the
installation of a new enterprise resource plan.
Interest expense was $0.5 million for the third quarter of 1999 compared
to $0.8 million for the same period in 1998, a decrease of $0.3 million. This
decrease was due to lower weighted average borrowings during the third quarter
of 1999.
The pre-tax income for the third quarter of 1999 was $18.9 million
compared to $16.3 million, an increase of 15.8% over the same quarter of 1998.
The growth in pretax earnings outpaced the 8.3% increase in revenue, as a result
of the lower increase in selling, general and administrative expenses. Five of
the Company's nine Divisions reported profit percentage increases and are
discussed in more detail below.
The estimated effective income tax rate for the third quarter of 1999
was 41.0%, compared to 41.5% in the third quarter of 1998. The lower tax rate
was, for the most part, attributable to an increase in various federal and state
estimated tax credits.
Net income for the third quarter of 1999 was $11.1 million, an increase
of 16.8% compared to the net income of $9.5 million for the third quarter of
1998. Diluted net income per common share rose 15.0% to 46 cents for the third
quarter of 1999 compared to 40 cents for the same period in 1998. The increase
in diluted net income per share was slightly disproportional to the increase in
net income due to a 2.7% increase in diluted shares outstanding.
The results of operations from the Company's three industry segments and
its nine operating divisions for the three months ended July 31, 1999, as
compared to the three months ended July 31, 1998, are more fully described
below:
The Janitorial Divisions segment, which includes American Building
Maintenance (also known as ABM Janitorial Services) and Easterday Janitorial
Supply, reported revenues for the third quarter of 1999 of $242.1 million, an
increase of $16.2 million, or 7.2%, over the third quarter of 1998. This
segment's operating profits (revenues minus
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expenses, excluding interest and corporate allocations) increased by 14.9% over
the comparable quarter of 1998. This is the Company's largest segment and
accounted for 59% of the Company's total revenues for the current quarter.
American Building Maintenance revenues increased by 7.1% during the third
quarter of 1999 as compared to the same quarter of 1998 as a result of increased
business nationwide but particularly in the Mid-Atlantic, Southeast, Southwest
and Texas regions. This Division's operating profits increased 16.9% when
compared to the same period last year. Operating profits increased at a higher
rate than revenues due primarily to a slight reduction in labor and related
costs partly as a reduction of accruals in excess of amounts required. In
addition, there was a small decline in selling and administrative expenses as a
percent of sales. Easterday Janitorial Supply's third quarter revenues for 1999
increased by 10.9% compared to the same quarter in 1998. The increase was
generally due to increased business in its Houston, Texas and Sacramento,
California branches, offset by continued weak sales in its Portland, Oregon and
San Francisco, California markets. Operating profits decreased 28.1% in the
third quarter of 1999, compared to the same quarter of 1998 due primarily to
higher costs of inventory sold reflecting lower margins necessary for
competitive pricing.
Revenues of the Public Service Divisions segment, which includes
American Commercial Security Services (also known as "ACSS" and "ABM Security
Services"), Ampco System Parking (also known as "Ampco System Airport Parking"
and "Ampco Express Airport Parking"), and ABM Facility Services, for the third
quarter of 1999 were $69.3 million, a 9.9% increase over the same quarter of
1998. Public Service Divisions accounted for 17% of the Company's revenues for
the third quarter of 1999. The operating profits of this segment decreased 11.4%
in the third quarter of 1999, due to the lower margins of the Security Division.
American Commercial Security Services reported an 8.1% increase in revenues, but
its operating profits were down by 30.7% in the third quarter of 1999 compared
to the same period of 1998. The revenue increase was largely due to new business
in Houston, Phoenix, New Orleans and Southern California. The decrease in
operating profits was primarily due to higher labor and related costs as a
result of a shortage of qualified employees available to work at competitive pay
rates and having to bid new jobs at lower margins as a result of increased
competition. Ampco System Parking's revenues increased by 10.5%, while its
operating profits increased 1.9% during the third quarter of 1999 compared to
the third quarter of 1998. The increase in revenues was primarily due to
continued growth in its California and Texas operations. The operating profits
increase was due to slightly higher margins on its management contracts, offset
by proportionally higher selling, general and administrative expenses. ABM
Facility Services was established in November of 1997 as a result of customer
requests to provide services from two or more of its Divisions (the ABM Family
of Services) under one management. Because this Division is relatively new and
depends primarily on management fees for its income, start up costs exceeded
revenues during the current
15
<PAGE> 17
quarter. Management does not expect this Division to be profitable during the
current year. Revenues generated by this Division are generally reported by the
respective Divisions providing services and contribute to the operating profits
of those Divisions.
The Company's Technical Divisions segment includes ABM Engineering
Services, Amtech Elevator Services, Amtech Lighting Services and CommAir
Mechanical Services. This segment reported revenues of $101.1 million, which
represents 24% of the Company's revenues for the third quarter of 1999. Revenues
increased 10.0% over the same quarter of last year due to increases in revenues
reported by all its Divisions. Operating profits of this segment increased 4.4%
compared to the third quarter of 1998 due to increases in operating profits in
its Amtech Lighting and Amtech Elevator Divisions. ABM Engineering Services'
revenues increased by 8.1% but its operating profits decreased 1.7% for the
third quarter of 1999 compared to the same period in 1998. The revenue increase
was due primarily to new business in all its operations, with particularly
strong sales growth in its newer offices in Chicago and Arizona, as well as
Southern California. The small decrease in operating profits was due to low
margins on contracts in its New York and Philadelphia operations and slightly
higher selling, general and administrative expenses. Revenues for Amtech
Elevator Services increased by 12.5% compared to the same period in 1998
primarily due to an increase in maintenance contract and modernization sales,
particularly in the Northern California operation. As a result, the Division
posted a 6.9% increase in operating profit for the third quarter compared to the
corresponding quarter of 1998. Profits were disproportional to the sales
increase due to a slight increase in selling, general and administrative
expenses. Amtech Lighting Services reported an 11.9% revenue increase, and
operating profits increased by 16.4% during the third quarter of 1999 compared
to the same quarter of the prior year. The increase in operating profits was
primarily due to slightly lower labor costs. CommAir Mechanical Services' (also
known as "CommAir Preferred Mechanical Services") revenues increased by 7.3%,
resulting primarily from increased business throughout most of its branches in
California. Operating profits for the third quarter of 1999 decreased by 7.8%
compared to the same quarter of the prior year as a result of losses related to
a construction project in Southern California.
NINE MONTHS ENDED JULY 31, 1999 VS. NINE MONTHS ENDED JULY 31, 1998
Revenues and other income for the first nine months of 1999 were
$1,202.8 million compared to $1,108.8 million in 1998, an 8.5% increase over the
same period of the prior year. Much of this growth was attributable to new
business and price increases, as well as acquisitions made during 1998. For the
nine months ended July 31, 1999, the increase in revenues relating to
acquisitions made during 1998 was $10.6 million or 11.3% of the total revenue
increase of $94.0 million. As a percentage of
16
<PAGE> 18
revenues, operating expenses and cost of goods sold were 86.9% for the first
nine months of 1999, compared to 86.7% in 1998. Consequently, as a percentage of
revenues, the Company's gross profit of 13.1% in the first nine months of 1999
was lower than the gross profit of 13.3% for the first nine months of 1998. The
gross profit percentage declined mostly due to higher labor and related costs.
The Company anticipates these costs to be gradually recovered through price
increases.
Selling, general and administrative expenses for the first nine months
of 1999 were $110.6 million compared to $106.2 million for the corresponding
nine months of 1998. As a percentage of revenues, selling, general and
administrative expenses decreased, from 9.6% for the nine months ended July 31,
1998, to 9.2% for the same period in 1999, primarily as a result of certain
fixed and variable costs that do not increase at the same rate as sales, and a
reduction of legal costs. The increase in the dollar amount, of selling, general
and administrative expenses, $4.4 million, for the nine months ended July 31,
1999, compared to the same period in 1998, is primarily due to expenses related
to growth and to a somewhat lesser extent expenses associated with the
installation of a new enterprise resource plan.
Interest expense was $1.5 million for the first nine months of 1999
compared to $2.6 million for the same period in 1998, a decrease of $1.1
million. This decrease was primarily due to lower weighted average borrowings
during the first nine months of 1999.
The pre-tax income for the first nine months of 1999 was $44.9 million
compared to $38.2 million, an increase of 17.3% over the same period in 1998.
The growth in pre-tax income outpaced revenue growth for the first three
quarters of 1999 as a result of lower interest costs and a lower increase in
selling, general and administrative expenses.
The estimated effective income tax rate for the first nine months of
1999 was 41%, compared to 41.5% in the first nine months of 1998. The lower tax
rate was due, for the most part, to an increase in various federal and state tax
credits.
As a result, net income for the first nine months of 1999 was $26.5
million an increase of 18.3%, compared to the net income of $22.4 million for
the same period of 1998. Diluted net income per common share rose 15.8% to $1.10
for the first nine months of 1999 compared to $0.95 for the same period in 1998.
The increase in diluted net income per share was not proportional to the
increase in net income due to a 2.8% increase in the average number of common
and common equivalent shares outstanding.
The results of operations from the Company's three industry segments and
its nine operating Divisions for the nine months ended July 31, 1999,
17
<PAGE> 19
as compared to the nine months ended July 31, 1998, are more fully described
below:
The Janitorial Divisions segment, which includes the operating Divisions
of American Building Maintenance (also known as ABM Janitorial Services) and
Easterday Janitorial Supply, reported revenues for the first nine months of 1999
of $711.5 million, an increase of $55.0 million, or 8.4% over the same period of
1998. This segment's operating profits increased by 12.2% over the comparable
period of 1998. This is the Company's largest segment and accounted for 59% of
the Company's total revenues for the current nine months. American Building
Maintenance's revenues increased by 8.6% during the first nine months of 1999,
as compared to the same period of 1998, as a result of increased business
nationwide, but particularly in the Mid-Atlantic, Southeast, Southwest and Texas
regions. This Division's operating profits increased 13.2% when compared to the
same period last year. Operating profits increased at a higher rate than
revenues due to lower labor and related costs, and slightly lower selling,
general and administrative expenses. Easterday Janitorial Supply's revenue for
the first nine months of 1999 increased by 1.3% compared to the same period in
1998. This small increase is generally due to weak sales in the Portland, Oregon
and San Francisco, California markets. Operating profits decreased by 12.7%
compared to the comparable period of 1998, as a result of increases in the cost
of inventory sold and additional labor costs, which were not passed on to
customers through price increases.
Revenues of the Public Service Divisions segment, which includes
American Commercial Security Services (also known as "ACSS" and "ABM Security
Services"), Ampco System Parking, and ABM Facility Services, for the first nine
months of 1999 were $201.5 million, a 6.3% increase over the same period of
1998. Public Service Divisions accounted for 17% of the Company's revenues. The
operating profits of this segment decreased 1.8% in the first nine months of
1999 due to American Commercial Security Services and ABM Facility Services.
American Commercial Security Services reported an increase in revenues of 6.7%,
but its operating profits were down by 23.7% in the first nine months of 1999
compared to the same period of 1998. The revenue increase was largely due to new
business in Houston, Phoenix, New Orleans, and Southern California. The decrease
in operating profit was primarily due to higher labor and related costs as a
result of a shortage of qualified employees available to work at competitive pay
rates and having to bid new jobs at lower margins as a result of increased
competition. Ampco System Parking Division's revenues increased by 4.8%, while
its profits increased 10.5% during the first nine months of 1999 compared to the
first nine months of 1998. The increase in revenues was mostly due to new
business in its California regions. The proportionally higher operating profit
increase was due to increased sales of higher
18
<PAGE> 20
margin management contracts. ABM Facility Services was established in November
of 1997 as a result of customer requests to provide services from two or more of
its Divisions (the ABM Family of Services) under one management. Because this
Division is relatively new and depends primarily on management fees for its
income, start up costs exceeded revenues during the current quarter. Management
does not expect this Division to be profitable during the current year. Revenues
generated by this Division are generally reported by the respective Divisions
providing services and contribute to the operating profits of those Divisions.
The Company's Technical Divisions segment includes ABM Engineering
Services (also known as Amtech Engineering Services), Amtech Elevator Services,
Amtech Lighting Services and CommAir Mechanical Services. This segment reported
revenues of $289.1 million, which represents 24% of the Company's revenues for
the first nine months of 1999. This represents an increase of 10.3% over the
same period of last year due to increases in revenues reported by all its
Divisions. Operating profit of this segment increased 4.3% compared to the first
nine months of 1998 due to increases in operating profits of its CommAir
Mechanical, Elevator and Engineering Divisions, offset by decreases in its
Lighting Division. ABM Engineering Services' revenues increased by 14.6% and its
operating profits increased 5.5% for the first nine months of 1999 compared to
the same period in 1998. The revenue increase was due primarily to new business
in all its operations, with particularly strong sales growth in its newer
offices in Chicago and Arizona, as well as Southern California. The increase in
operating profits is due to increased business offset by declining margins in
its New York and Philadelphia operations. Revenues for Amtech Elevator Services
were up by 5.5% for the first nine months of 1999 over the same period of 1998.
The Division posted a 1.3% increase in operating profit for the first nine
months of 1999 compared to the corresponding period of 1998. This increase in
profits can be attributed to higher sales at lower margins. Amtech Lighting
Services reported a 9.2% revenue increase due to increased business, primarily
in Atlanta, Chicago, New Orleans, New York and Oakland. Operating profits
decreased by 1.8% during the first nine months of 1999 compared to the same
period of the prior year primarily due to lower margins resulting from higher
labor and material costs. CommAir Mechanical Services' revenues increased by
8.7%, resulting from increased business throughout most of its branches in
California. California. Operating profits for the first nine months of 1999
increased by 33.4% compared to the prior year period as a result of increased
sales and keeping the selling, general and administrative expenses relatively
flat compared to the prior nine months.
SAFE HARBOR STATEMENT
Cautionary Safe Harbor Disclosure for Forward Looking Statements under
the Private Securities Litigation Reform Act of 1995: Because of the factors set
forth below, as well as other variables affecting the Company's operating
results, past financial performance should not be considered a reliable
indicator of future performance and investors should not use historical trends
to anticipate results or trends in future periods. The statements contained
herein which are not historical facts are forward-looking statements that are
subject to meaningful risks and uncertainties, including but not limited to: (1)
significant decreases in commercial real estate occupancy, resulting in reduced
demand and prices for building maintenance and other facility services, in the
Company's major markets, (2) loss or bankruptcy of one or more of the Company's
major customers, which could adversely affect the Company's ability to collect
its accounts receivable or recover its deferred costs, (3) major collective
bargaining issues that may cause loss of revenues or cost increases that
nonunion companies can use to their advantage in gaining market share, (4)
failure of the Company's electronic data processing, telecommunications and
related systems, or those of its major customers or vendors, to be Year 2000
compliant, (5) significant shortfalls in adding additional customers in existing
and new territories and markets, (6) a protracted slowdown in the Company's
acquisition program, (7) legislation or other governmental action that severely
impacts one or more of the Company's lines of business, such as price controls
that could restrict price increases, or the unrecovered cost of any universal
employer-paid health insurance, as well as government investigations that
adversely affect the Company, (8) reduction or revocation of the Company's lines
of credit, which would increase interest expense or the cost of capital, (9)
cancellation or nonrenewal of the Company's primary insurance policies, as many
customers contract out services based on the contractor's ability to provide
adequate insurance coverage and limits, (10) catastrophic uninsured or
underinsured claims against the Company, or the inability of the Company's
insurance carriers to pay otherwise insured claims, (11) resignation,
termination, death or disability of one or more of the Company's key executives,
which could adversely affect customer retention and day-to-day management of the
Company, (12) inability to employ entry level personnel due to labor shortages,
and (13) other material factors that are disclosed from time to time in the
Company's public filings with the United States Securities and Exchange
Commission, such as reports on Forms 8-K, 10-K and 10-Q.
19
<PAGE> 21
Item 3. Qualitative and Quantitative Disclosures about Market Risk
The Company does not issue or invest in financial instruments or their
derivatives for trading or speculative purposes. The operations of the Company
are conducted primarily in the United States, and, as such, are not subject to
material foreign currency exchange rate risk. Although the Company has market
risk in interest rate exposure in the United States,
20
<PAGE> 22
outstanding debt and the related interest expense is currently not material.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3.2 By-laws, amended and restated as of June 15, 1999
Exhibit 3.2.1 - Resolution Amending the By-laws effective February 12, 1999
Exhibit 27.1 - Financial Data Schedule
(b) Reports on form 8-K: No reports on form 8-K were filed during the quarter
ended July 31, 1999.
21
<PAGE> 23
SIGNATURES
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.
ABM Industries Incorporated
September 13, 1999 /s/ David H. Hebble
- ------------------ -------------------
David H. Hebble
Vice President, Principal
Financial Officer
22
<PAGE> 24
SIGNATURES
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.
ABM Industries Incorporated
September 13, 1999
- ------------------ -------------------
David H. Hebble
Vice President, Principal
Financial Officer
22
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
Exhibit 3.2 By-laws, amended and restated as of June 15, 1999
Exhibit 3.2.1 Resolution Amending the By-laws effective February 12, 1999
Exhibit 27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.2
ABM INDUSTRIES INCORPORATED
BY-LAWS
As Restated Effective June 15, 1999
ARTICLE I
Offices
Section 1.1. Registered Office. The registered office shall be located
in the City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Place of Meeting. All meetings of stockholders shall be
held at the principal executive office of the Corporation or at any other place,
either within or without the State of Delaware, as may be designated by the
Board of Directors.
Section 2.2. Annual Meeting. The annual meeting of stockholders shall be
held on such date and at such time as the Board of Directors may designate.
At each annual meeting the stockholders shall elect directors to succeed
those whose terms expire in that year and to serve until their successors are
elected, and shall transact such other business as may properly be brought
before the meeting.
Section 2.3. Notice of Annual Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice shall be given either
personally or by mail or other means of written communication, addressed or
delivered to each stockholder entitled to vote at such meeting at the address of
such stockholder appearing on the books of the Corporation or given by him to
the Corporation for the purpose of such notice. If no such address appears or is
given, notice shall be given either personally or by mail or other means of
written communication addressed to the stockholder at the place where the
principal executive office of the Corporation is located. The notice shall be
deemed to have been given at the time when delivered personally or deposited in
the mail or sent by other means of written communication.
Section 2.4. Business at Annual Meetings. At an annual meeting of
stockholders, only such business shall be conducted as shall have been brought
before the meeting (i) pursuant to the Corporation's notice of the meeting, (ii)
by or at the direction of the Board of Directors or (iii) by
<PAGE> 2
any stockholder of the Corporation who is a stockholder of record at the time of
giving of the notice provided for in this Bylaw, who shall be entitled to vote
at such meeting and who shall have complied with the notice procedures set forth
in this Bylaw.
For business to be properly brought before an annual meeting by a
stockholder pursuant to Section 2.4(a) of this Bylaw, notice in writing must be
delivered or mailed, postage prepaid, to the Secretary of the Corporation and
received at the principal executive offices of the Corporation not less than 60
days prior to the first anniversary of the date on which the Corporation first
mailed its proxy materials for the preceding year's annual meeting of
stockholders; provided, however, that in the event that the date of the meeting
is advanced by more than 30 days or delayed by more than 60 days from such
meeting's anniversary date, notice by the stockholder must be received not later
than the close of business on the later of the 60th day prior to such date of
mailing of proxy materials or the 10th day following the day on which public
announcement of the date of the annual meeting is first made. Such stockholder's
notice shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business to be brought
before the annual meeting and the reasons for conducting such business at such
meeting; (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, and the name and address of the
beneficial owner, if any, on whose behalf the proposal is made; (iii) the class
and number of shares of the Corporation's stock which are beneficially owned by
the stockholder, and by the beneficial owner, if any, on whose behalf the
proposal is made; and (iv) any material interest of the stockholder, and of the
beneficial owner, if any, on whose behalf the proposal is made, in such
business. For purposes of these Bylaws, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in this Bylaw. The chairman of the meeting may, if the facts warrant,
determine that the business was not properly brought before the meeting in
accordance with the provisions of this Bylaw; and if the chairman should so
determine, the chairman shall so declare to the meeting, and any such business
not properly brought before the meeting shall not be transacted. Notwithstanding
the foregoing provisions of this Bylaw, a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Bylaw. Nothing in this
Bylaw shall be deemed to affect any rights of stockholders to request inclusion
of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under
the Exchange Act.
Section 2.5. List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of stockholders entitled to vote
at the meeting, arranged in alphabetical order, and
<PAGE> 3
showing the address of the 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, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and 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 2.6. Special Meetings. Special meetings of the stockholders,
for any purpose or purposes, may be called at any time by the Board of
Directors, or by a committee of the Board of Directors which has been duly
designated by the Board of Directors and whose power and authority, as provided
in a resolution of the Board of Directors, include the power to call such
meetings, but such special meetings may not be called by any other person or
persons.
Section 2.7. Notice of Special Meetings. Written notice of a special
meeting of stockholders stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called shall be given not less than
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting.
Section 2.8. Business at Special Meetings. The business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
Section 2.9. Adjourned Meetings and Notice Thereof. Any
stockholders' meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of a majority of the shares
represented either in person or by proxy, but in the absence of a quorum, no
other business may be transacted at such meeting, except as provided in Section
2.10 of these by-laws.
When a stockholders' meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken; except that if
the adjournment is for more than thirty days or if after the adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote thereat.
At the adjourned meeting, the Corporation may transact any business,
which might have been transacted at the original meeting.
Section 2.10. Quorum. The holders of a majority of the shares issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation.
Section 2.11. Majority Vote. If a quorum is present at any meeting,
the vote of the holders of a majority of the shares having voting power, present
in person or represented by proxy, shall decide any question brought before such
meeting, unless a different vote is required on that question by express
provision of statute or of the certificate of incorporation, in which case such
express provision shall govern and control.
The stockholders present at a duly called or held meeting at
which a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
<PAGE> 4
quorum, in any action taken (other than adjournment) is approved by at least a
majority of the shares required to constitute a quorum, unless a different vote
is required as set forth above.
Section 2.12. Voting. Except as otherwise provided in the
certificate of incorporation and subject to Section 8.4 of these by-laws, each
stockholder shall be entitled to one vote, in person or by proxy, for each share
of capital stock having voting power held by such stockholder, but no proxy
shall be voted or acted upon after three years from its date, unless the proxy
provides for a longer period. Vote may be viva voce or by ballot; provided,
however, that elections for directors must be by ballot.
Any holder of shares entitled to vote on any matter may vote part of
the shares in favor of the proposal and refrain from voting the remaining shares
or vote them against the proposal, other than elections to office but, if the
stockholder fails to specify the number of shares such stockholder is voting
affirmatively, it shall be conclusively presumed that the stockholder's
approving vote is with respect to all shares said stockholder is entitled to
vote.
Section 2.13. Stockholder Action. Any action required or permitted
to be taken by the stockholders must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders.
Attendance of a person at a meeting shall constitute a waiver of
notice of such meeting, except when a person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened; provided, that attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by law or these
by-laws to be included in the notice but not so included if such objection is
expressly made at the meeting.
Section 2.14. Presiding Officer. The chairman of the Board of
Directors, if there be such officer, shall, if present, call the meetings of the
stockholders to order and shall act as the presiding officer thereof.
Section 2.15. Secretary. The secretary of the Corporation, if
present, shall act as secretary of all meetings of the stockholders. In the
absence of the secretary, an assistant secretary if present shall act as
secretary of the meetings of the stockholders. In the absence of the secretary
or any assistant secretary, the presiding officer may appoint a person to act as
secretary of such meeting.
ARTICLE III
DIRECTORS
Section 3.1. Number of Directors, Election and Term of Office. The
number of directors, which shall constitute the whole board, shall be eleven.
The Board of Directors shall be classified, with respect to the time for which
they severally hold office, into three classes, as nearly equal in number as
possible, as determined by the Board of Directors, one class to hold office
initially for a term expiring at the annual meeting of stockholders to be held
in 1986, another class to hold office initially for a term expiring at the
annual meeting of stockholders to be held in 1987, and another class to hold
office initially for a term expiring at the annual meeting of stockholders to be
held in 1988, with the members of each class to hold office until their
successors are elected and qualified. At each annual meeting of stockholders,
the successors of the class of
<PAGE> 5
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders held in the third year
following the year of their election.
The term "entire board" as used in these by-laws means the total
number of directors, which the Corporation would have, if there were no
vacancies.
Section 3.2. Vacancies. A vacancy in the Board of Directors shall be
deemed to exist in case of the death, resignation, or removal of any director,
or if the authorized number of directors be increased, or if the stockholders
fail at any annual or special meeting of stockholders to elect the full
authorized number of directors to be voted for at that meeting.
Unless otherwise provided in the certificate of incorporation,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director, and any
director so chosen shall hold office until the next election of the class for
which he was chosen and until his successor is fully elected and qualified,
unless sooner displaced. If at any time the Corporation should have no directors
in office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the entire board (as constituted immediately prior to any such increase), the
Court of the Chancery may upon application of any stockholder or stockholders
holding at least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships or
to replace the directors chosen by the directors then in office.
Section 3.3. Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors which may exercise all such powers of
the Corporation and do all such lawful acts and things as are not by statute or
by the certificate of incorporation or by these by-laws directed or required to
be exercised or done by the stockholders.
Section 3.4. Compensation of Directors. The Board of Directors shall
have the authority to fix the compensation of directors. No such compensation
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor.
Section 3.5. Resignation. Any director may resign effective upon
giving written notice to the chief executive officer, the secretary, or the
Board of Directors of the Corporation, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at a
future time, a successor may be elected to take office when the resignation
becomes effective.
Section 3.6. Nominations of Directors. Only persons who are
nominated in accordance with the procedures set forth in these Bylaws shall be
eligible for election as directors. Nominations of persons for election to the
Board of Directors may be made at a meeting of stockholders (i) by the Board of
Directors or a committee appointed by the Board of Directors authorized to make
such nominations or (ii) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of the notice provided for in this
Bylaw, who shall be entitled to vote for the
<PAGE> 6
election of directors at the meeting and who complies with the notice procedures
set forth in this Bylaw. Nominations by stockholders shall be made pursuant to
notice in writing, delivered or mailed, postage prepaid, to the Secretary of the
Corporation and received at the principal executive offices of the Corporation
(i) in the case of an annual meeting, not less than 60 days prior to the first
anniversary of the date on which the Corporation first mailed its proxy
materials for the preceding year's annual meeting of stockholders, provided,
however, that in the event that the date of the meeting is advanced by more than
30 days or delayed by more than 60 days from such anniversary date, notice by
the stockholder must be received not later than the close of business on the
later of the 60th day prior to such date of mailing of proxy materials or the
10th day following the day on which public announcement of the date of the
meeting is first made; or (ii) in the case of a special meeting at which
directors are to be elected, not later than the close of business on the later
of the 60th day prior to such special meeting or the 10th day following the day
on which public announcement of the date of the meeting and of the nominees
proposed by the Board of Directors to be elected at such meeting is first made.
Such stockholder's notice shall set forth (i) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the stockholder is a holder of record
of stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (iv) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated, or intended
to be nominated by the Board of Directors; and (v) the written consent of such
nominee to serve as a director of the Corporation if elected. At the request of
the Board of Directors, or any committee appointed by the Board of Directors
authorized to make such nominations, any person nominated by the Board of
Directors, or such committee, for election as a director shall furnish to the
Secretary of the Corporation that information required to be set forth in a
stockholder's notice of nomination that pertains to the nominee. Notwithstanding
anything in this Bylaw to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public statement naming all the nominees for Director
or specifying the size of the increased Board of Directors made by the
Corporation at least 70 days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Bylaw shall also
be considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.
<PAGE> 7
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in these Bylaws.
The chairman of the meeting may, if the facts warrant, determine that a
nomination was not made in accordance with the procedures prescribed in this
Bylaw; and if the chairman should so determine, the chairman shall so declare to
the meeting, and the defective nomination shall be disregarded. Notwithstanding
the foregoing provisions of this Bylaw, a stockholder shall also comply with all
applicable requirements of the Exchange Act, and the rules and regulations
thereunder with respect to the matters set forth in this Bylaw.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1. Place of Meeting. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 4.2. Organization Meeting. Immediately after each annual
meeting of stockholders, the Board of Directors shall hold a regular meeting for
the purpose of organization, electing officers and transacting other business.
No notice of such meeting need be given. In the event such meeting is not so
held, the meeting may be held at such time and place as shall be specified in a
notice given as hereafter provided for special meetings of the Board of
Directors, or as shall be specified in a written waiver signed by all of the
directors.
Section 4.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such time and at such place as shall from time to time
be determined by the Board of Directors; provided, however, that if the date so
designated falls upon a legal holiday, then the meeting shall be held at the
same time and place on the next succeeding day which is not a legal holiday.
Such regular meetings may be held without notice.
Section 4.4. Special Meetings. Special meetings of the Board of
Directors may be called by the chairman of the board of directors, chairman of
the executive committee of the Board of Directors, the chief executive officer
or the president or on the written request of the directors constituting a
majority of the entire board.
Section 4.5. Notice of Special Meetings. Notice of the time and
place of special meetings of the Board of Director shall be delivered personally
to each director, or sent to each director by mail, telephone, or telegraph. In
case such notice is sent by mail or telegraphed it shall be deposited in the
United States mail or delivered to the telegraph company in the place in which
the principal office of the Corporation is located at least 48 hours prior to
the time of the holding of the meeting. In case such notice is delivered
personally or by telephone, it shall be so delivered at least 24 hours prior to
the time of the holding of the meeting. Such notice shall not be necessary if
appropriate waivers, consents and/or approvals are filed in accordance with
Section 4.6 of these by-laws.
Section 4.6. Waiver of Notice. Notice of a meeting need not be given
to any director who signs a waiver of notice, whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director.
The transactions of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though
<PAGE> 8
had at a meeting duly held after regular call and notice if a quorum is present
and if, either before or after the meeting, each of the directors not present
signs a written waiver of notice, a consent to holding the meeting or an
approval of the minutes thereof. All such waivers, consents and approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting.
Section 4.7. Quorum. At all meetings of the board, the presence of
one-third of the entire board shall constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meetings at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting without notice
other than announcement at the meeting, until a quorum shall be present. A
meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for such meeting.
Section 4.8. Adjournment. Any meeting of the Board of Directors,
whether or not a quorum is present, may be adjourned to another time and place
by the vote of a majority of the directors present. Notice of the time and place
of the adjourned meeting need not be given to absent directors if said time and
place are fixed at the meeting adjourned.
Section 4.9. Action Without Meeting. Unless otherwise restricted by
the certificate of incorporation or these by-laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all 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 or committee.
Section 4.10. Conference Communication. Unless otherwise restricted
by the certificate of incorporation or these by-laws, members of the Board of
Directors or any committee designated by the board may participate in a meeting
of the Board of Directors or committee by means of a conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear one another. Participation in a meeting pursuant to this
action shall constitute presence in person at such meeting.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 5.1. Committees of Directors. The Board of Directors may, by
resolution passed by a majority of the entire board, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not such member or members constitute a
quorum, 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. Any such
committee, to the extent provided in the resolutions of the Board of Directors,
shall
<PAGE> 9
have and may exercise all the power and authority of the Board of Directors in
the management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to amending
the certificate of incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the by-laws of the Corporation and, unless the resolution or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Section 5.2. Committee Minutes. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors when
required.
ARTICLE VI
OFFICERS
Section 6.1 Officers. The officers of the Corporation shall be a
chief executive officer, a chief administrative officer, a president, a chairman
of the Board, one or more executive vice presidents, one or more senior vice
presidents, one or more vice presidents, a secretary, a controller, and a
treasurer, each of whom shall be an executive officer of the Corporation
appointed by the Board of Directors. The Corporation may also have one or more
assistant vice presidents, one or more assistant secretaries, one or more
assistant controllers, and one or more assistant treasurers, each of whom shall
be an assistant officer of the Corporation appointed by the Executive Committee
of the Board of Directors. Any number of offices may be held by the same person,
unless the certificate of incorporation or these bylaws otherwise provide.
Section 6.2 Election. The Board of Directors at its first meeting
after each annual meeting of stockholders shall elect all principal officers for
the ensuing year and shall designate a chief executive officer and a chief
financial officer. At its first meeting after each annual meeting of
stockholders, the Executive Committee shall elect all assistant officers.
Section 6.3 Other Officers. The Board of Directors may appoint such
other officers and agents as it shall deem necessary and they 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 6.4 Term. Subject to an applicable written employment
agreement, if any, between the Corporation and any principal officer elected or
appointed by the Board of Directors or any assistant officer appointed by the
Executive Committee of the Board of Directors, said officer may be removed at
any time, either with or without cause, by the affirmative vote of a majority of
the Board of Directors or of the Executive Committee of the Board of Directors,
respectively. Any vacancy
<PAGE> 10
occurring in any office of the Corporation shall be filled by the Board of
Directors or by the Executive Committee of the Board of Directors pursuant to
the requirements of Section 6.1 of this Article VI. Compensation and other terms
and conditions of employment of any principal officer shall be subject to
approval of the Officer Compensation and Stock Option Committee and the Board of
Directors. Compensation and other terms and conditions of employment of
assistant officers shall be subject to approval of the Executive Committee of
the Board of Directors.
Section 6.5 The Chairman of the Board of Directors. The chairman of
the Board of Directors shall be responsible to the Board of Directors, shall
prepare communications to the Board, and with input from the Executive
Committee, shall prepare agenda for meetings of the Board of Directors. The
Chairman of the Board of Directors shall be a member of the Executive Committee
and shall preside over all meetings of the Board of Directors and of the
stockholders. At the request of the President and Chief Executive Officer, the
Chairman shall assist him in communications with stockholders, the press and the
investment community. The chairman shall exercise and perform such other powers
and duties as may, from time to time, be assigned to him by the Board of
Directors or prescribed by these by-laws.
Section 6.6 The President. The president shall have general and
active management over the business and affairs of the corporation, subject,
however, to the powers and authority of the chief executive officer and to the
control of the Board of Directors. In the absence or disability of the chief
executive officer, the president shall perform the duties of the chief executive
officer, and when so acting, shall have all the powers of, and be subject to all
the restrictions upon, the chief executive officer.
Section 6.7 The Chief Administrative Officer. In the absence or
disability of the chief executive officer and the president, the chief
administrative officer or any other officer of the corporation designated by the
Board of Directors, shall perform the duties of the chief executive officer, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the chief executive officer. The chief administrative officer
shall have such powers and perform such other duties as from time to time may be
prescribed by the chief executive officer.
Section 6.8 The Senior Vice Presidents. In the absence of the
chairman of the board or any executive vice presidents, the senior vice
presidents, in order of their rank as fixed by the board of directors, or, if
not ranked, the senior vice president designated by the Board of Directors shall
perform the duties of the president, and when so acting shall have all the
powers of, and be subject to all the restrictions upon the president. The senior
vice presidents shall have such other powers and perform such other duties as
from time to time may be prescribed for them respectively by the Executive
Committee of the Board of Directors.
Section 6.9 The Vice Presidents. The vice presidents shall have such
powers and perform such duties as may from time to time be prescribed by the
Executive Committee of the Board of Directors.
Section 6.10 The Secretary. The secretary shall keep, or cause to be
kept, a book of minutes in written form of the proceedings of the Board of
Directors, committees of the board, and stockholders. Such minutes shall include
all waivers of notice, consents to the holding of
<PAGE> 11
meeting, or approvals of the minutes of meetings executed pursuant to these
by-laws or statute. The secretary shall keep, or cause to be kept, at the
principal executive office or at the office of the Corporation's transfer agent
or registrar, a record of its stockholders, giving the names and addresses of
all stockholders, and the number and class of shares held by each.
The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required by these
by-laws or by law to be given, and shall keep the seal of the Corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or these by-laws.
Section 6.11 The Assistant Secretary. The assistant secretary shall
have all the powers and perform all the duties of the secretary in the absence
or inability of the secretary to act.
Section 6.12 The Controller. The Controller of the Corporation shall
be the general manager of the accounting, tax and internal audit functions of
the Corporation and its subsidiaries, subject to the control of the chief
financial officer. The controller shall have such other powers and perform such
other duties as from time to time may be prescribed by the chief financial
officer.
Section 6.13 The Treasurer. The treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Company and shall deposit
all monies and other valuables in the name and to the credit of the Company. The
treasurer shall also have such other powers and perform such other duties as may
be prescribed by the Executive Committee of the Board of Directors.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
Section 7.1. Actions, Suits or Proceedings Other Than by or in the
Right of the Corporation. The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges, expenses (including attorneys'
fees) judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; provided however, that the
foregoing indemnity shall not be applicable as to any person who is or was or
agreed to become an employee or agent of the
<PAGE> 12
Corporation (other than employees or agents who are or were also officers or
directors of the Corporation), or is or was serving or agreed to serve at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise (other than employees or
agents who are or were also officers or directors of any such other corporation,
partnership, joint venture, trust or enterprise), unless and until such
indemnity is specifically approved by the Board of Directors. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Section 7.2. Actions or Suits by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving or has
agreed to serve at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against costs, charges and expenses (including
attorneys' fees) actually and reasonably incurred by him or on his behalf in
connection with the defense or settlement of such action or suit and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of such liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnify for such costs, charges and expenses which the Court of Chancery or
such other court shall deem proper; provided, however, that the foregoing
indemnity shall not be applicable as to any person who is or was or agreed to
become an employee or agent of the Corporation (other than employees or agents
who are or were also officers or directors of the Corporation), or is or was
serving or agreed to serve at the request of the Corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise other than employees or agents who are or were also officers or
directors of any such other corporation, partnership, joint venture, trust or
enterprise), unless and until such indemnity is specifically approved by the
Board of Directors.
Section 7.3. Indemnification for Costs, Charges and Expenses of
Successful Party. Notwithstanding the other provisions of this Article, to the
extent that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Sections 7.1 and 7.2 of this Article, or in defense of
any claim, issue or matter therein, he shall be indemnified against all costs,
charges and expenses (including attorneys'
<PAGE> 13
fees) actually and reasonably incurred by him or on his behalf in connection
therewith.
Section 7.4. Determination of Right to Indemnification. Any
indemnification under Sections 7.1 and 7.2 of this Article (unless ordered by a
court) shall be paid by the Corporation unless a determination is made (1) by
the Board of Directors by a majority vote of the quorum consisting of directors
who were not parties to such action, suit or proceeding, or (2) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders, that indemnification of the director, officer, employee or agent
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Sections 7.1 and 7.2 of this Article.
Section 7.5. Advance of Costs, Charges and Expenses. Costs, charges
and expenses (including attorneys' fees incurred by a person referred to in
Sections 7.1 and 7.2 of this Article in defending a civil or criminal action,
suit or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding; providing, however, that the
payment of such costs, charges and expenses incurred by a director or officer in
his capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer) in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by or on behalf of the director or
officer to repay all amounts so advanced in the event that it shall ultimately
be determined that such director or officer is not entitled to be indemnified by
the Corporation as authorized in this Article. Such costs, charges and expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate. The Board of
Directors may, in the manner set forth above, and upon approval of such
director, officer, employee or agent of the Corporation, authorize the
Corporation's counsel to represent such person, in any action, suit or
proceeding, whether or not the Corporation is a party to such action suit or
proceeding.
Section 7.6. Procedure for Indemnification. Any indemnification
under Sections 7.1, 7.2 or 7.3, or advance of costs, charges and expenses under
Section 7.5 of this Article, shall be made promptly, and in any event within 30
days, upon the written request of the director, officer, employee or agent. The
right to indemnification or advances as granted by this Article shall be
enforceable by the director, officer, employee or agent in any court of
competent jurisdiction, if the Corporation denies such request, in whole or in
part, or if no disposition thereof is made within 30 days. Such persons, costs
and expenses incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such action shall also be
indemnified by the Corporation. It shall be a defense to any such action (other
than an action brought to enforce a claim for the advance of costs, charges and
expenses under Section 7.5 of this Article where the required undertaking, if
any, has been received by the Corporation) that the claimant has not met the
standard of conduct set forth in Sections 7.1 or 7.2 of this Article, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, its independent legal
counsel, and its stockholders) to have made a determination prior to the
commencement of such action that indemnification
<PAGE> 14
of the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 7.1 or 7.2 of this Article, nor the
fact that there has been an actual determination by the Corporation (including
its Board of Directors, its independent legal counsel, and its stockholders)
that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
Section 7.7. Other Rights; Continuation of Right to Indemnification.
The indemnification provided by this Article shall not be deemed exclusive of
any other rights to which a person seeking indemnification may be entitled under
any law (common or statutory), agreement, vote of stockholders or disinterested
director or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office or while employed by or acting
as agent for the Corporation, and shall continue as to a person who has ceased
to be a director, officer, employee or agent, and shall inure to the benefit of
the estate, heirs, executors and administrators of such person. All rights to
indemnification under this Article shall be deemed to be a contract between the
Corporation and each director, officer, employee or agent of the Corporation who
serves or served in such capacity at any time while this Article is in effect.
Any repeal or modification of this Article or any repeal or modification of
relevant provisions of the Delaware General Corporation Law or any other
applicable laws shall not in any way diminish any rights to indemnification of
such director, officer, employee or agent or the obligations of the Corporation
arising hereunder.
Section 7.8. Insurance. The Corporation shall purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him or on his behalf
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article, provided that such insurance is available on
acceptable terms, which determination shall be made by a vote of a majority of
the entire Board of Directors.
Section 7.9. Savings Clause. If this Article or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each director, officer, employee
and agent of the Corporation as to costs, charges and expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement with respect
to any action, suit or proceeding, whether civil, criminal, administrative or
investigative, including an action by or in the right of the Corporation, to the
full extent permitted by any applicable portion of this Article that shall not
have been invalidated and to the full extent permitted by applicable law.
ARTICLE VIII
STOCKHOLDERS
Section 8.1. Certificates of Stock. Every holder of shares in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the chairman, the president or a vice president and the
secretary or an assistant secretary of the Corporation,
<PAGE> 15
or the treasurer or an assistant treasurer, certifying the number of shares
owned by him in the Corporation. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 8.2. Lost Certificates. The Board of Directors may direct a
new certificate or certificates of stock to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates the
Corporation may, in its discretion, and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond (or other adequate
security) in such sum as it may direct as indemnity against any claim that may
be made against the Corporation on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 8.3. Transfer of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 8.4. Stockholders of Record. In order that the Corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of the stockholders or any adjournment thereof, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or 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,
in advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting, unless the Board of Directors fixes a new record date for the adjourned
meeting, but the board shall fix a new record date if the meeting is adjourned
for more than forty-five days from the date set for the original meeting.
Section 8.5. No Record Date. If no record date is fixed, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business at the day next preceding the
day on which notice is given, or, if notice is waived, at the end of business of
the day next preceding the day on which the meeting is held. The record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 8.6. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its
<PAGE> 16
books as the owner of shares to receive dividends, and to vote as such owner,
and to hold liable for calls and assessments a person registered on its books as
the owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1. Fiscal Year. The fiscal year of the Corporation shall
be fixed by resolution of the Board of Directors.
Section 9.2. Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization, and the name of the
state of its incorporation. The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or otherwise.reproduced.
ARTICLE X
AMENDMENTS
Section 10.1. Amendments. Subject to the provisions of the
Certificate of Incorporation, these by-laws may be altered, amended or repealed
at any regular meeting of the stockholders (or at any special meeting thereof
duly called for that purpose) by a vote of not less than 70% of the outstanding
stock entitled to vote at such meeting; provided that in the notice of such
special meeting notice of such purpose shall be given. Subject to the laws of
the State of Delaware, the certificate of incorporation and these by-laws, the
Board of Directors may by majority vote of those present at any meeting at which
a quorum is present amend these by-laws, or enact such other by-laws as in their
judgment may be advisable for the regulation of the conduct of the affairs of
the Corporation.
<PAGE> 1
EXHIBIT 3.2.1
ABM INDUSTRIES INCORPORATED
RESOLUTION AMENDING THE BYLAWS
EFFECTIVE FEBRUARY 12, 1999
WHEREAS, it is deemed to be in the best interests of the Company to make
certain amendments to the Company's Bylaws,
NOW, THEREFORE, BE IT RESOLVED, that a new Section 2.4 of Article II be
added, which shall read in its entirety as follows:
"Section 2.4 Business at Annual Meetings
At an annual meeting of stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) pursuant to the
Corporation's notice of the meeting, (ii) by or at the direction of the Board of
Directors or (iii) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of the notice provided for in this Bylaw, who shall
be entitled to vote at such meeting and who shall have complied with the notice
procedures set forth in this Bylaw.
For business to be properly brought before an annual meeting by a
stockholder pursuant to Section 2.4(a) of this Bylaw, notice in writing must be
delivered or mailed, postage prepaid, to the Secretary of the Corporation and
received at the principal executive offices of the Corporation not less than 60
days prior to the first anniversary of the date on which the Corporation first
mailed its proxy materials for the preceding year's annual meeting of
stockholders; provided, however, that in the event that the date of the meeting
is advanced by more than 30 days or delayed by more than 60 days from such
meeting's anniversary date, notice by the stockholder must be received not later
than the close of business on the later of the 60th day prior to such date of
mailing of proxy materials or the 10th day following the day on which public
announcement of the date of the annual meeting is first made. Such stockholder's
notice shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business to be brought
before the annual meeting and the reasons for conducting such business at such
meeting; (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, and the name and address of the
beneficial owner, if any, on whose behalf the proposal is made; (iii) the class
and number of shares of the Corporation's stock which are beneficially owned by
the stockholder, and by the beneficial owner, if any, on whose behalf the
proposal is made; and (iv) any material interest of the stockholder, and of
<PAGE> 2
the beneficial owner, if any, on whose behalf the proposal is made, in such
business. For purposes of these Bylaws, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at an annual meeting except in accordance with the procedures
set forth in this Bylaw. The chairman of the meeting may, if the facts warrant,
determine that the business was not properly brought before the meeting in
accordance with the provisions of this Bylaw; and if the chairman should so
determine, the chairman shall so declare to the meeting, and any such business
not properly brought before the meeting shall not be transacted. Notwithstanding
the foregoing provisions of this Bylaw, a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this Bylaw. Nothing in this
Bylaw shall be deemed to affect any rights of stockholders to request inclusion
of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under
the Exchange Act."
FURTHER RESOLVED, that the current Sections 2.4 through 2.14 be
renumbered as Section 2.5 through Section 2.15 accordingly; and
RESOLVED FURTHER, that Section 3.6 of the Corporation's Bylaws be, and
it hereby is, amended to read in its entirety as follows:
"SECTION 3.6 NOMINATIONS OF DIRECTORS
Only persons who are nominated in accordance with the procedures set forth in
these Bylaws shall be eligible for election as directors. Nominations of persons
for election to the Board of Directors may be made at a meeting of stockholders
(i) by the Board of Directors or a committee appointed by the Board of Directors
authorized to make such nominations or (ii) by any stockholder of the
Corporation who is a stockholder of record at the time of giving of the notice
provided for in this Bylaw, who shall be entitled to vote for the election of
directors at the meeting and who complies with the notice procedures set forth
in this Bylaw. Nominations by stockholders shall be made pursuant to notice in
writing, delivered or mailed, postage prepaid, to the Secretary of the
Corporation and received at the principal executive offices of the Corporation
(i) in the case of an annual meeting, not less than 60 days prior to the first
anniversary of the date on which the Corporation first mailed its proxy
materials for the preceding year's annual meeting of stockholders, provided,
however, that in the event that the date of the meeting is advanced by more than
30 days or delayed by more than 60 days from such anniversary date, notice by
the stockholder must be received not later than the close of business on the
later of the 60th day
<PAGE> 3
prior to such date of mailing of proxy materials or the 10th day following the
day on which public announcement of the date of the meeting is first made; or
(ii) in the case of a special meeting at which directors are to be elected, not
later than the close of business on the later of the 60th day prior to such
special meeting or the 10th day following the day on which public announcement
of the date of the meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting is first made. Such stockholder's notice
shall set forth (i) the name and address of the stockholder who intends to make
the nomination and of the person or persons to be nominated; (ii) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (iii) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (iv) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated by the Board of Directors;
and (v) the written consent of such nominee to serve as a director of the
Corporation if elected. At the request of the Board of Directors, or any
committee appointed by the Board of Directors authorized to make such
nominations, any person nominated by the Board of Directors, or such committee,
for election as a director shall furnish to the Secretary of the Corporation
that information required to be set forth in a stockholder's notice of
nomination that pertains to the nominee. Notwithstanding anything in this Bylaw
to the contrary, in the event that the number of directors to be elected to the
Board of Directors of the Corporation is increased and there is no public
statement naming all the nominees for Director or specifying the size of the
increased Board of Directors made by the Corporation at least 70 days prior to
the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this Bylaw shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Corporation.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in
these Bylaws. The chairman of the meeting may, if the facts warrant, determine
that a nomination was not made in accordance with the procedures prescribed in
this Bylaw; and if the chairman should so determine, the chairman shall so
declare to the meeting, and the defective nomination shall be disregarded.
Notwith-standing the foregoing provisions of this Bylaw, a stockholder shall
also comply with all applicable requirements of the Exchange Act, and the rules
and regulations thereunder with respect to the matters set forth in this Bylaw."
BE IT FURTHER RESOLVED, that the foregoing amendments be effective February 12,
1999.
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