UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 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 0-14787
WATTS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-2916536
(State of incorporation) (I.R.S. Employer Identification No.)
815 Chestnut Street, North Andover, MA 01845
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 688-
1811
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at
April 30, 1999
Class A Common, $.10 par value 16,158,807
Class B Common, $.10 par value 10,285,247
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Part I. Financial Information
Page #
Item 1. Financial Statements
Consolidated Balance Sheets at
March 31, 1999 and June 30, 1998 3
Consolidated Statements of Income for
the Three Months Ended March 31, 1999 and
March 31, 1998 4
Consolidated Statements of Income for
the Nine Months Ended March 31, 1999 and
March 31, 1998 5
Consolidated Statements of Cash Flows
for the Nine Months Ended March 31, 1999 and
March 31, 1998 6
Notes to Consolidated Financial Statements 7-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-17
Part II. Other Information
Item 1. Legal Proceedings 17-19
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
Exhibit Index 22
Exhibit 3.2 - Amended and Restated By-Laws, as amended 23-41
May 11, 1999
Exhibit 27 - Financial Data Schedule - March 31, 1999 42
Exhibit 27.1 - Restated Financial Data Schedule - March 31, 1998 43
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
----------------------
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share information)
(Unaudited)
Mar. 31, June 30,
1998 1998
--------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 14,293 $ 10,177
Short-term investments 2,718 590
Trade accounts receivable, less allowance for doubtful
accounts of $6,942 at March 31, 1999 and $6,821
at June 30, 1998 92,059 77,325
Inventories, net:
Raw materials 39,354 34,057
Work in process 3,107 6,128
Finished goods 59,249 64,013
--------- ---------
Total Inventories 101,710 104,198
Prepaid expenses and other assets 9,552 7,811
Deferred income taxes 24,454 22,974
Net assets held for sale - 2,046
Net current assets of discontinued operations 113,701 94,217
--------- ---------
Total Current Assets 358,487 319,338
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment, at cost 230,364 193,458
Accumulated depreciation (111,684) (87,971)
--------- ---------
Property, plant and equipment, net 118,680 105,487
--------- ---------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $13,399 at
March 31, 1999 and $11,708 at June 30, 1998 103,336 79,837
Other 9,804 9,765
Net noncurrent assets of discontinued operations 48,408 41,864
--------- ---------
TOTAL ASSETS $ 638,715 $ 556,291
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 36,741 $ 28,327
Accrued expenses and other liabilities 44,596 37,209
Accrued compensation and benefits 12,462 11,150
Income taxes payable 3,512 268
Current portion of long-term debt 9,733 5,011
--------- ---------
Total Current Liabilities 107,044 81,965
--------- ---------
LONG-TERM DEBT, NET OF CURRENT PORTION 111,814 71,647
DEFERRED INCOME TAXES 16,850 14,220
OTHER NONCURRENT LIABILITIES 7,524 6,798
MINORITY INTEREST 8,035 7,646
STOCKHOLDERS' EQUITY:
Preferred Stock, $.10 par value; 5,000,000 shares
authorized; no shares issued or outstanding - -
Class A Common Stock, $.10 par value; 80,000,000 shares
authorized; 1 vote per share; issued and outstanding:
16,568,807 shares at March 31, 1999 and 16,859,027
shares at June 30, 1998 1,657 1,686
Class B Common Stock, $.10 par value; 25,000,000 shares
authorized; 10 votes per share; issued and outstanding:
10,285,247 at March 31, 1999 and 10,296,827
shares at June 30, 1998 1,029 1,030
Additional paid-in capital 41,661 47,647
Retained earnings 361,029 337,565
Treasury stock, at cost, 410,000 shares at
March 31, 1999 and 100,000 shares at June 30, 1998 (5,723) (2,583)
Accumulated other comprehensive income (12,205) (11,330)
--------- ---------
Total Stockholders' Equity 387,448 374,015
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 638,715 $ 556,291
========= =========
See accompanying notes to consolidated financial statements.
3
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share information)
(Unaudited)
Three Months Ended
--------------------
Mar. 31, Mar. 31,
1999 1998
--------- ---------
Net sales $ 116,972 $ 108,166
Cost of goods sold 75,084 69,138
--------- ---------
GROSS PROFIT 41,888 39,028
Selling, general & administrative expenses 30,035 27,297
--------- ---------
OPERATING INCOME 11,853 11,731
--------- ---------
Other (income) expense:
Interest income (169) (540)
Interest expense 1,409 1,544
Other, net 180 (296)
--------- ---------
1,420 708
--------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 10,433 11,023
Provision for income taxes 3,528 3,764
--------- ---------
INCOME FROM CONTINUING OPERATIONS 6,905 7,259
Income from discontinued operations, net of taxes - 6,782
--------- ---------
NET INCOME $ 6,905 $ 14,041
========= =========
Basic earnings per share :
Continuing operations $ .26 $ .27
Discontinued operations - .25
--------- ---------
NET INCOME $ .26 $ .52
========= =========
Weighted average number of shares (thousands) 26,649 27,163
========= =========
Diluted earnings per share :
Continuing operations $ .26 $ .26
Discontinued operations - .25
--------- ---------
NET INCOME $ .26 $ .51
========= =========
Weighted average number of shares (thousands) 26,671 27,587
========= =========
Dividends per common share $ .0875 $ .0875
========= =========
See accompanying notes to consolidated financial statements.
4
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share information)
(Unaudited)
Nine Months Ended
--------------------
Mar. 31, Mar. 31,
1999 1998
--------- ---------
Net sales $ 344,551 $ 331,849
Cost of goods sold 220,744 211,162
--------- ---------
GROSS PROFIT 123,807 120,687
Selling, general & administrative expenses 86,833 82,837
--------- ---------
OPERATING INCOME 36,974 37,850
--------- ---------
Other (income) expense:
Interest income (582) (940)
Interest expense 4,082 4,818
Other, net 614 831
--------- ---------
4,114 4,709
--------- ---------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 32,860 33,141
Provision for income taxes 10,730 10,943
--------- ---------
INCOME FROM CONTINUING OPERATIONS 22,130 22,198
Income from discontinued operations, net of taxes 8,419 19,072
--------- ---------
NET INCOME $ 30,549 $ 41,270
========= =========
Basic earnings per share :
Continuing operations $ .82 $ .82
Discontinued operations .32 .70
--------- ---------
NET INCOME $ 1.14 $ 1.52
========= =========
Weighted average number of shares (thousands) 26,840 27,082
========= =========
Diluted earnings per share :
Continuing operations $ .82 $ .81
Discontinued operations .31 .70
--------- ---------
NET INCOME $ 1.13 $ 1.51
========= =========
Weighted average number of shares (thousands) 26,913 27,420
========= =========
Dividends per common share $ .2625 $ .2425
========= =========
See accompanying notes to consolidated financial statements.
5
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended
--------------------
Mar. 31, Mar. 31,
1999 1998
--------- ---------
OPERATING ACTIVITIES
Net income from continuing operations $ 22,130 $ 22,198
Adjustments to reconcile net income from continuing
operations to net cash provided by continuing
operating activities:
Depreciation 10,731 9,680
Amortization 2,003 1,823
Deferred income taxes (77) 384
Gain on disposal of assets (17) (1,179)
Equity in undistributed earnings of affiliates (125) (77)
Changes in operating assets and liabilities, net of
effects from acquisitions and dispositions:
Accounts receivable (1,250) (6,270)
Inventories 9,899 (5,798)
Prepaid expenses and other assets (1,151) (2,766)
Accounts payable, accrued expenses and
other liabilities 8,812 (904)
--------- ---------
Net cash provided by continuing operations 50,955 17,091
Net cash provided by discontinued operations 6,535 14,278
--------- ---------
Net cash provided by operating activities 57,490 31,369
--------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment (13,670) (16,713)
Proceeds from sale of assets 2,119 7,227
Business acquisitions, net of cash acquired (28,975) (790)
Increase in other assets (693) (566)
Net changes in short-term investments (1,621) 261
Discontinued operations:
Business acquisitions, net of cash acquired (68,625) (26,846)
--------- ---------
Net cash used in investing activities (111,465) (37,427)
--------- ---------
FINANCING ACTIVITIES
Proceeds from long-term borrowings 56,936 52,051
Payments of long-term debt (25,249) (59,027)
Proceeds from exercise of stock options 61 2,699
Dividends (7,027) (6,569)
Purchase of treasury stock (9,415) -
Discontinued operations:
Proceeds from long-term borrowings 68,977 24,549
Payments of long-term debt (24,800) (12,364)
--------- ---------
Net cash provided by financing activities 59,483 1,339
--------- ---------
Effect of exchange rate changes on cash and
cash equivalents (1,392) (122)
--------- ---------
CHANGE IN CASH AND CASH EQUIVALENTS 4,116 (4,841)
Cash and cash equivalents at beginning of period 10,177 18,139
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,293 $ 13,298
========= =========
See accompanying notes to consolidated financial statements.
6
WATTS INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
1. In the opinion of management, the accompanying unaudited,
consolidated financial statements contain all necessary
adjustments, consisting only of adjustments of a normal recurring
nature, to present fairly Watts Industries, Inc.'s Consolidated
Balance Sheet as of March 31, 1999, its Consolidated Statements of
Income for the three and nine months ended March 31, 1999 and 1998,
and its Consolidated Statements of Cash Flows for the nine months
ended March 31, 1999 and 1998.
The balance sheet at June 30, 1998 has been derived from the
audited financial statements at that date. Certain amounts have
been reclassified to conform with the fiscal 1999 presentation.
The accounting policies followed by the Company are described in
the June 30, 1998 financial statements which are contained in the
Company's 1998 Annual Report. It is suggested that these financial
statements be read in conjunction with the financial statements and
notes included in the 1998 Annual Report to Stockholders.
2. On December 15, 1998 the Company announced that it plans to
separate its industrial, oil and gas business from its plumbing and
heating and water quality business. To accomplish this separation,
the Company will continue its existing plumbing and heating and
water quality business and will transfer the industrial, oil and
gas business to a new subsidiary. The Company will then spin off
the new subsidiary to the Watts' stockholders in the form of a pro-
rata stock dividend. Completion of the spin-off will be subject to
certain conditions, including receipt from the Internal Revenue
Service of a Private Letter Ruling ("PLR") as to the tax-free
treatment of the spin-off, necessary governmental approvals, and
any required consents of third parties. Subject to such
conditions, the spin-off will be completed following receipt of the
PLR, which the Company currently expects to receive in the third
calendar quarter of 1999.
Accordingly, the Company is treating its industrial, oil and
gas business as a discontinued operation.
The following table summarizes the results of operations of the
industrial, oil and gas group:
Three Months Ended March 31
1999 1998
Sales, Net $78,893 $75,449
Costs and Expenses 76,106 64,908
Income Before Income Taxes 2,787 10,541
Income Taxes 2,787 3,759
Income from Discontinued Operations $ - $ 6,782
Nine Months Ended March 31,
1999 1998
Sales, Net $244,296 $210,424
Costs and Expenses 227,214 180,479
Income Before Income Taxes 17,082 29,945
Income Taxes 8,663 10,873
Income from Discontinued Operations $ 8,419 $ 19,072
Net assets of the industrial, oil, and gas group reported in the
accompanying consolidated balance sheets consist of the following:
March 31, June 30,
1999 1998
Accounts Receivable $ 54,160 $ 53,565
Inventories 105,445 89,788
Other Current Assets 13,821 9,482
Accounts Payable (20,050) (28,345)
Other Current Liabilities (39,675) (30,273)
Net Current Assets $113,701 $ 94,217
Property, Plant and Equipment $68,315 $55,982
Goodwill 101,027 39,173
Other Noncurrent Assets 7,132 3,912
Long-Term Debt, Net of Current Portion (108,713) (43,735)
Other Noncurrent Liabilities (19,353) (13,468)
Net Noncurrent Assets $ 48,408 $ 41,864
The Company presently expects to incur approximately
$5,200,000 of direct costs on an after-tax basis from the spin-off
transaction and has accrued such a liability at December 31, 1998.
As required by APB Opinion No. 30, the Company has also accrued the
amount of future operating income from its industrial, oil and gas
business necessary to fully offset these costs. The accrual of
future income is required because the Company expects income from
this business during the period between January 1, 1999 and
completion of the spin-off will exceed the direct costs of the
spin-off transaction. Excluding the costs of this transaction, net
earnings from discontinued operations would have been $3,282,000
for the three months ended March 31, 1999 and $11,701,000 for the
nine months ended March 31, 1999.
3. The following tables set forth the reconciliation of the
calculation of earnings per share per SFAS 128:
For the Three Months Ended March 31, 1999
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS
Income from Continuing Operations $ 6,905,000 26,648,827 $ .26
Income from Discontinued Operations - -
Net Income $ 6,905,000 $ .26
Effect of Dilutive Securities
Common Stock Equivalents - 22,160
Diluted EPS $ 6,905,000 26,670,987 $ .26
For the Nine Months Ended March 31, 1999
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS
Income from Continuing Operations $22,130,000 26,839,769 $ .82
Income from Discontinued Operations 8,419,000 .32
Net Income $30,549,000 $ 1.14
Effect of Dilutive Securities
Common Stock Equivalents - 73,010
Diluted EPS $30,549,000 26,912,779 $ 1.13
Options to purchase 1,581,553 shares and 1,125,153 shares of common
stock at prices ranging from $18.00 to $25.38 were outstanding
during the three-month and nine-month periods ended March 31, 1999,
respectively. These options were not included in the related
computations of diluted EPS since the exercise price of the options
was greater than the average market price of the common shares
during those respective periods.
For the Three Months Ended March 31, 1998
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS
Income from Continuing Operations $ 7,259,000 27,162,904 $ .27
Income from Discontinued Operations 6,782,000 .25
Net Income $14,041,000 $ .52
Effect of Dilutive Securities
Common Stock Equivalents - 424,539
Diluted EPS $14,041,000 27,587,443 $ .51
For the Nine Months Ended March 31, 1998
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS
Income from Continuing Operations $22,198,000 27,082,038 $ .82
Income from Discontinued Operations 19,072,000 .70
Net Income $41,270,000 $ 1.52
Effect of Dilutive Securities
Common Stock Equivalents - 337,762
Diluted EPS $41,270,000 27,419,800 $ 1.51
At March 31, 1998, there were no outstanding options to purchase
shares of common stock with exercise prices greater than the
average market price of the common shares during the three and nine
month periods then ended.
4. During December 1997, the Company sold a small Italian valve
manufacturing division which was not part of the Company's core
business. The division's sales for the six-month period ended
December 31, 1997 was $3,386,000.
5. The Company uses foreign currency forward exchange contracts
to reduce the impact of currency fluctuations on certain
anticipated purchase transactions that are expected to occur within
the fiscal year and other known currency exposures. The notional
amount of such contracts and the related realized and unrealized
gains and losses as of March 31, 1999 are not material.
6. Effective July 1, 1998, the Company was required to adopt
Statement of Financial Accounting Standards ("SFAS") No. 130,
Reporting Comprehensive Income. This statement establishes
standards for reporting and presentation of comprehensive income
and its components in financial statements. Accumulated other
comprehensive income in the consolidated balance sheets as of March
31, 1999 and June 30, 1998 consists of cumulative translation
adjustments. The Company's total comprehensive income was as
follows:
Three Months Ended March 31,
1999 1998
Income from Continuing Operations $6,905 $ 7,259
Income from Discontinued Operations - 6,782
Foreign Currency Translation Adjustments (4,389) (1,601)
Total Comprehensive Income $2,516 $12,440
Nine Months Ended March 31,
1999 1998
Income from Continuing Operations $ 22,130 $ 22,198
Income from Discontinued Operations 8,419 19,072
Foreign Currency Translation Adjustments ( 875) ( 3,691)
Total Comprehensive Income $ 29,674 $ 37,579
7. On March 9, 1999 a wholly owned subsidiary of the Company
acquired Cazzaniga S.p.A. located in Biassono, Italy near Milan.
Cazzaniga, whose last twelve (12) months sales were approximately
$35 million, is an integrated manufacturer of plumbing and heating
products including water distribution manifolds, zone valves,
radiator air purge valves, and their principle line of thermostatic
radiator valves. The manufacturing plant features a yellow brass
forging foundry, high speed chucking machines with robotics, German
automatic screw machines, and extensive automated assembly
contained within a 236,000 square foot facility.
8. Contingencies and Environmental Remediation
Contingencies
In April 1998, the Company became aware of a complaint that
was filed under seal in the State of California alleging violations
of the California False Claims Act. The complaint alleges that a
former subsidiary of the Company sold products utilized in
municipal water systems which failed to meet contractually
specified standards and falsely certified that such standards had
been met. The complaint further alleges that the municipal
entities have suffered tens of millions of dollars in damages as a
result of defective products and seeks treble damages,
reimbursement of legal costs and penalties. The complaint was
amended on November 4, 1998 to include additional municipal
entities, consisting of the East Bay Municipal Utility District,
the San Gabriel Valley Municipal Water District, and 31 cities in
the State of California. The amended complaint alleges that the
additional municipal entities have also suffered damages and also
seeks treble damages, legal costs, attorneys' fees and civil
penalties. On December 9, 1998, the Los Angeles Department of
Water and Power ("LADWP") filed a Complaint in Intervention which
incorporated the amended complaint and added claims for breach of
contract, fraud and deceit-negligent misrepresentation and unjust
enrichment. On April 20, 1999, the Company and other defendants
filed answers to the First Amended Complaint and the Complaint-in-
Intervention. The East Bay Municipal Utility District and the City
of Long Beach have elected not to intervene in this action, and, to
date, no other entity has indicated that it intends to intervene in
this case. The Company intends to vigorously contest this matter
but cannot presently determine whether any loss will result from
it. Other lawsuits and proceedings or claims, arising from the
ordinary course of operations, are also pending or threatened
against the Company and its subsidiaries. With respect to these
other litigation matters, the Company has established reserves
which it presently believes are adequate in light of probable and
estimable exposure to pending and threatened litigation of which it
has knowledge. Also see Part II, Item 1.
Environmental Remediation
The Company has been named a potentially responsible party
with respect to identified contaminated sites. The level of
contamination varies significantly from site to site as do the
related levels of remediation efforts. Environmental liabilities
are recorded based on the most probable cost, if known, or on the
estimated minimum cost of remediation. The Company's accrued
estimated environmental liabilities are based on assumptions which
are subject to a number of factors and uncertainties.
Circumstances which can affect the reliability and precision of
these estimates include identification of additional sites,
environmental regulations, level of cleanup required, technologies
available, number and financial condition of other contributors to
remediation and the time period over which remediation may occur.
The Company recognizes changes in estimates as new remediation
requirements are defined or as new information becomes available.
The Company estimates that its accrued environmental remediation
liabilities will likely be paid over the next five to ten years.
Also see Part II, Item 1.
Item 2. WATTS INDUSTRIES, INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial Condition
and Results of Operations
On December 15, 1998 the company announced its plan to spin
off its industrial, oil and gas business through a pro-rata stock
dividend. Accordingly, the Company is now required to treat this
industrial, oil and gas business as a discontinued operation for
accounting purposes. Please see Note 2 to the Notes to the
Consolidated Financial Statements for a discussion of the spin-off.
Results of Operations
Three Months Ended March 31, 1999 Compared to
Three Months Ended March 31, 1998
Net sales for continuing operations increased $8,806,000
(8.1%) to $116,972,000. This increase in net sales is primarily
attributable to increased unit shipments of domestic plumbing and
heating valves and the inclusion of the sales of Cazzaniga which
was acquired March 9, 1999. Excluding Cazzaniga, shipments of
European plumbing and heating valves were consistent with last
year.
Gross profit increased $2,860,000 (7.3%), but decreased as a
percentage of net sales from 36.1 percent to 35.8 percent. This
percentage reduction is primarily attributable to reduced gross
margins for European plumbing and heating valves associated with
increased unit price competition in the European market.
Selling, general and administrative expenses increased
$2,738,000 (10%) to $30,035,000. This increase is primarily
attributable to inclusion of the selling general and administrative
expenses of Cazzaniga, increased variable selling expenses
including commissions and freight, increased advertising expense,
and increased cost associated with the Company's new information
systems.
Other income and expense decreased from $296,000 of income in
fiscal 1998 to $180,000 of expense in fiscal 1999 primarily due to
decreased foreign exchange income.
Net income from continuing operations decreased $354,000
(4.9%) to $6,905,000.
Income from discontinued operations net of taxes decreased
$6,782,000. The Company has recognized $3,282,000 in the current
quarter of the estimated $5,200,000 net after-tax costs to execute
the spin-off transaction. These costs include taxes, certain
relocation costs, and professional fees. Excluding the cost of
this transaction, net earnings would have declined $3,500,000 and
diluted earnings per share would have decreased from 25 cents to 12
cents. Total sales from discontinued operations increased $3,444,000
(4.6%) to $78,893,000. The increase is entirely due to the inclusion
of sales from acquired companies.
Domestic oil and gas valves experienced a decline of 33
percent in net sales. The competition for the remaining business
caused abnormally low pricing realization and the reduced
manufacturing levels caused a loss of overhead absorption of fixed
expenses. Sales of international oil and gas valves decreased 43
percent, as new project awards have significantly slowed due to
market conditions. Please see Note 2 of the Notes to the
Consolidated Financial Statements for a discussion of the Company's
intention to spin-off its industrial, oil and gas business.
The changes in foreign exchange rates had an immaterial affect
on net income for the quarter-to-date ended March 31, 1999.
Results of Operations
Nine Months Ended March 31, 1999 Compared to
Nine Months Ended March 31, 1998
Net sales increased $12,702,000 (3.8%) to $344,551,000. This
increase is primarily attributable to increased unit shipments of
domestic plumbing and heating valves and the inclusion of the sales
of Cazzaniga acquired March 9, 1999. Excluding Cazzaniga, sales of
European plumbing and heating valves were consistent with last
year. Last year's sales included approximately $3,400,000 for
product lines which the Company subsequently divested. The change
in foreign exchange rate had an immaterial effect on the year-to-
date sales.
Gross profit increased $3,120,000 (2.6%) to $123,807,000 but
decreased as a percentage of net sales from 36.4% to 35.9%. This
decrease is primarily attributable to decreased absorption of fixed
manufacturing expenses due to the Company's domestic inventory
reduction program. This decrease was partially offset by reduced
material costs. The Company experienced an inventory increase in
the previous fiscal year.
Selling, general and administrative expenses increased
$3,996,000 (4.8%) to $86,833,000. This increase is primarily
attributable to the inclusion of the expenses of Cazzaniga,
increased variable selling expenses, increased costs associated
with the company's new information technology systems, and
increased advertising expenses.
Interest expense decreased $736,000 (15.3%) to $4,082,000.
This decrease is primarily due to decreased levels of long term
debt.
Net income from continuing operations decreased $68,000 (0.3%)
to $22,130,000.
Income from discontinued operations net of taxes decreased
$10,653,000 (55.9%) to $8,419,000. The company has recognized
$3,282,000 of its cost in the current quarter to execute the spin-
off transaction. These costs include taxes, certain relocation
costs, and professional fees. Excluding the cost of this
transaction, net earnings from discontinued operations decreased
from $19,072,000 to $11,701,000 and diluted earnings per share
decreased from 70 cents to 44 cents. This decrease is primarily
attributable to decreased sales and decreased unit pricing in the
company's oil and gas subsidiaries. Total sales from discontinued
operations increased $33,872,000 (16.1%). The increase is entirely
due to the inclusion of sales from acquired companies. The subsidiaries were
adversely impacted by low energy prices which significantly
decreased demand for the company's oil and gas products. Domestic
oil and gas valves experienced a decline of 33 percent. The
competition for the remaining business caused abnormally low
pricing realization and the reduced manufacturing levels caused a
loss of overhead absorption of fixed expenses.
The changes in foreign exchange rates had an immaterial affect
on net income for the period ended March 31, 1999.
Liquidity and Capital Resources
During the nine-month period ended March 31, 1999, the Company
generated $50,955,000 in cash flow, from continuing operations,
which was principally used to fund the Company's acquisition
program and purchase capital equipment, as well as purchase the
Company's stock on the open market. These capital expenditures
were primarily for manufacturing machinery and equipment as part of
the Company's commitment to continuously improve its manufacturing
capabilities. The Company's capital expenditure budget for
continuing operations for fiscal 1999 is approximately
$21,000,000.
During the nine months ended March 31, 1999, the Company
purchased 615,500 shares of its Class A Common Stock in open market
purchases, as part of its previously announced stock buy-back
program. Total funds used to purchase these shares were
$9,415,000. Under the current board authorization, the Company can
purchase an additional 384,500 shares of common stock under its stock
repurchase program.
On March 9, 1999, a wholly owned subsidiary of the Company
acquired the stock of Cazzaniga S.p.A. Cazzaniga, whose last
twelve (12) months sales were approximately $35 million, is an
integrated manufacturer of plumbing and heating products including
water distribution manifolds, zone valves, radiator air purge
valves, and their principle line of thermostatic radiator valves.
The manufacturing plant features a yellow brass forging foundry,
high speed chucking machines with robotics, German automatic screw
machines, and extensive automated assembly contained within a
236,000 square foot facility.
During the quarter ended March 31, 1999, the Company entered
into a syndicated credit facility with a group of European banks in
the amount of 40 million Euros. This credit facility has several
tranches which provide credit to the Company for a period up to
five (5) years. The purpose of this credit facility is to fund
acquisitions in Europe, support the working capital requirements of
acquired companies, and for general corporate purposes. As of
March 31, 1999 23,000,000 Euro's was borrowed under this line of
credit.
The Company has available an unsecured $125,000,000 line
of credit which expires on March 27, 2003. The Company's intent is
to utilize this credit facility to support the Company's
acquisition program, working capital requirements of acquired
companies and for general corporate purposes. As of June 30, 1998,
$19,000,000 was borrowed under this line of credit. As of March
31, 1999, $79,000,000 was borrowed under this line of credit. The
change in the outstanding borrowing is primarily attributable to
the Company's acquisition program.
The ratio of current assets to current liabilities was 3.3 to
1 at March 31, 1999 and 3.9 to 1 at June 30, 1998. Cash and short-
term investments were $17,011,000 at March 31, 1999 compared to
$10,767,000 at June 30, 1998. Debt as a percentage of total
capital employed was 23.9% at March 31, 1999 compared to 17.0% at
June 30, 1998. At March 31, 1999, the Company was in compliance
with all covenants related to its existing debt.
The Company anticipates that available funds and those funds
provided from current operations will be sufficient to meet current
operating requirements and anticipated capital expenditures for at
least the next 24 months.
The Company from time to time is involved with product
liability, environmental proceedings and other litigation
proceedings and incurs costs on an ongoing basis related to these
matters. The Company has not incurred material expenditures in
fiscal 1999 in connection with any of these matters. See Part II,
Item 1, Legal Proceedings.
The Company has developed a comprehensive global plan to
assess and address in a timely manner its information systems
including customer service, production, distribution and financial
systems in conjunction with the year 2000. A significant portion
of the Company's year 2000 issues are being addressed as part of
its program to upgrade its information systems which the Company
had committed to regardless of the year 2000 issue. This program
commenced in fiscal 1997 and should be substantially complete by
the end of fiscal 1999. The Company has spent approximately
$9,000,000 on computer hardware and software for this information
systems upgrade program and expects to spend approximately
$1,000,000 on additional similar costs to complete the upgrade. If
it becomes necessary to dedicate additional financial and other
resources to complete the Company's information systems upgrade
program by the end of fiscal year 1999, or shortly thereafter, the
Company will do so.
The Company is also communicating with its suppliers,
distributors and others with whom it conducts business to
coordinate year 2000 compliance and to identify alternative sources
of supply for its materials. The implementation of these plans is
not expected to have a material adverse effect on the results of
operations or the financial condition of the Company. The Company
presently believes alternative sources of supply will be available
in the event of unforeseen year 2000 compliance issues that affect
suppliers' abilities to fulfill requirements. If production and
other plans need to be modified because of unforeseen year 2000
issues at distributors and others with whom the Company conducts
business, the Company will do so when the need for such
modification becomes apparent.
If the Company or its suppliers, distributors or others with
whom it conducts business are unable to identify and address the
system issues related to year 2000 risk on a timely basis, there
could be a material adverse effect on its results of operations and
financial condition.
The Company will continue to update its disclosures regarding
Year 2000 Compliance issues in all future filings.
On January 1, 1999, 11 of the 15 member countries of the
European Union adopted the Euro as their common legal currency and
established fixed conversion rates between their existing sovereign
currencies and the Euro. The Euro trades on currency exchanges and
is available for non-cash transactions. The introduction of the
Euro will affect the Company as the Company has manufacturing and
distribution facilities in several of the member countries and
trades extensively across Europe. The long-term competitive
implications of the conversion are currently being assessed by the
Company, however, the Company will experience an immediate
reduction in the risks associated with foreign exchange. At this
time, the Company is not anticipating that any significant costs
will be incurred due to the introduction and conversion to the
Euro.
The Company uses foreign currency forward exchange contracts
to reduce the impact of currency fluctuations on certain
intercompany purchase transactions that will occur within the
fiscal year and other known foreign currency exposures. The
notional amount of such contracts and the related realized and
unrealized gains and losses as of March 31, 1999 are not material.
Certain statements contained herein are forward looking. Many
factors could cause actual results to differ from these statements,
including loss of market share through competition; introduction of
competing products by other companies; pressure on prices from
competitors, suppliers, and/or customers; regulatory obstacles;
lack of acceptance of new products; changes in the plumbing and
heating and oil and gas markets; changes in global demand for the
Company's products; changes in distribution of the Company's
products; interest rates; foreign exchange fluctuations;
cyclicality of industries in which the Company markets certain of
its products and general and economic factors in markets where the
Company's products are sold, manufactured or marketed; and other
factors discussed in the Company's reports filed with the
Securities and Exchange Commission.
Statement of Financial Accounting Standards ("SFAS") No. 131,
Disclosures about Segments of an Enterprise and Related
Information, and SFAS No. 132, Employers Disclosures About Pensions
and Other Post-Retirement Benefits, become effective during fiscal
year 1999 and will be adopted accordingly. Since these new
standards require only additional disclosure, adoption will have no
effect on the Company's results of operation or financial
condition.
SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, becomes effective in fiscal year 2000. This
new standard will require the Company to recognize all derivative
instruments as either assets or liabilities at fair value in its
consolidated balance sheet. The Company is currently evaluating
the effect of this new standard.
Part II. Other Information
Item 1. Legal Proceedings
The Company, like other worldwide manufacturing companies, is
subject to a variety of potential liabilities connected with its
business operations, including potential liabilities and expenses
associated with possible product defects or failures and compliance
with environmental laws and other litigation matters.
James Jones Litigation
On June 25, 1997, Nora Armenta, as a relator for the State of
California, filed a civil action in the Superior Court of
California for the County of Los Angeles against the Company and
three other defendants. The complaint, which was filed under seal,
was brought pursuant to the qui tam provision of the California
False Claims Act, Cal. Govt. Code S. 12650 et seq ("False Claims
Act"). The Company became aware of the complaint in April 1998,
after the seal was lifted. The relator is a former employee of a
former subsidiary of the Company.
The complaint alleged that a former subsidiary of the Company
sold products utilized in municipal water systems which failed to
meet contractually specified standards and falsely certified that
such standards had been met. The only municipal water system
specifically identified in the original complaint was the Los
Angeles Department of Water and Power ("LADWP"). The relator
alleged that municipal entities have suffered tens of millions of
dollars in damages as a result of their purchase of these products.
The relator also sought treble damages, legal costs, attorneys'
fees, and civil penalties. In May 1998, the Company and the other
defendants filed a demurrer to the complaint. On July 21, 1998,
the Court sustained the demurrer and gave the relator forty five
(45) days to file an amended complaint. This deadline was
subsequently extended to November 4, 1998.
On November 4, 1998, the relator filed an amended complaint
("First Amended Complaint") under the False Claims Act. In the
First Amended Complaint, the relator brought her action on behalf
of the LADWP as well as additional municipal entities, consisting
of the East Bay Municipal Utility District, the San Gabriel Valley
Municipal Water District, and 31 cities in the State of California.
The relator alleges that the Company's former subsidiary sold
products which did not meet contractually specified standards used
by each of these entities in their water systems and falsely
certified such standards had been met. In addition to the damages
alleged to have been suffered by the LADWP, the relator claims that
the additional municipal entities have also suffered damages as a
result of their purchase of these products. The relator also seeks
treble damages, legal costs, attorneys' fees, and civil penalties
under the False Claims Act.
On December 9, 1998, the LADWP filed a Complaint-in-
Intervention which incorporated the relator's First Amended
Complaint and added claims for breach of contract, fraud and
deceit--negligent misrepresentation and unjust enrichment. The
Complaint-in-Intervention seeks past and future reimbursement
costs, punitive damages, contract difference in value damages,
treble damages and civil penalties under the False Claims Act and
costs of suit. On April 20, 1999, the Company and other defendants
filed answers to the First Amended Complaint and the Complaint-in-
Intervention. The East Bay Municipal Utility District and the City
of Long Beach have elected not to intervene in this action, and, to
date, no other entity has indicated that it intends to intervene
in this case. The Company intends to contest this matter
vigorously, and discovery is currently under way. Presently, the
Company cannot determine whether any loss will result from this
action. See Note 8 of the Notes to the Consolidated Financial
Statements.
Product Liability
Leslie Controls, Inc. and Spence Engineering Company, both
subsidiaries of the Company, are involved as third-party defendants
in various civil product liability actions pending in the U.S.
District Court, Northern District of Ohio. The underlying claims
have been filed by present or former employees of various shipping
companies for personal injuries allegedly received as a result of
exposure to asbestos. The shipping companies contend that they
installed in their vessels certain valves manufactured by Leslie
Controls and/or Spence Engineering which contained asbestos. Leslie
Controls is also a defendant in two similar matters pending in
Superior Court of California, San Francisco County. The Company
maintains product liability and other insurance coverage which it
believes to be generally in accordance with industry practices.
Nonetheless, such insurance coverage may not be adequate to protect
the Company fully against substantial damage claims which may arise
from product defects and failures. Coverage with respect to these
matters has been disputed by certain of the carriers and,
therefore, recovery is questionable, a factor which the Company has
considered in its evaluation of these matters. Based on facts
presently known to it, the Company does not believe the outcome of
these proceedings will have a material adverse effect on its
financial condition or results of operations.
Environmental
Certain of the Company's operations generate solid and
hazardous wastes, which are disposed of elsewhere by arrangement
with the owners or operators of disposal sites or with transporters
of such waste. The Company's foundry and other operations are
subject to various federal, state and local laws and regulations
relating to environmental quality. Compliance with these laws and
regulations requires the Company to incur expenses and monitor its
operations on an ongoing basis. The Company cannot predict the
effect of future requirements on its capital expenditures, earnings
or competitive position due to any changes in federal, state or
local environmental laws, regulations or ordinances.
The Company is currently a party to or otherwise involved with
various administrative or legal proceedings under federal, state or
local environmental laws or regulations involving a number of
sites, in some cases as a participant in a group of potentially
responsible parties ("PRPs"). Three of these sites, the Sharkey
and Combe Landfills in New Jersey, and the San Gabriel Valley/El
Monte, California water basin site, are listed on the National
Priorities List. With respect to the Sharkey Landfill, the Company
has been allocated .75% of the remediation costs, an amount which
is not material to the Company. No allocations have been made to
date with respect to the Combe Landfill or San Gabriel Valley
sites. The EPA has formally notified several entities that they
have been identified as being potentially responsible parties with
respect to the San Gabriel Valley site. As the Company was not
included in this group, its potential involvement in this matter is
uncertain at this point given that either the PRPs named to date or
the EPA could seek to expand the list of potentially responsible
parties. In addition to the foregoing, the Solvent Recovery
Service of New England site and the Old Southington landfill site,
both in Connecticut, are on the National Priorities List, but, with
respect thereto, the Company has resort to indemnification from
third parties and based on currently available information, the
Company believes it will be entitled to participate in a de minimis
capacity.
With respect to the Combe Landfill, the Company is one of
approximately 30 potentially responsible parties. The Company and
all other PRPs received a Supplemental Directive from the New
Jersey Department of Environmental Protection & Energy in 1994
seeking to recover approximately $9 million in the aggregate for
the operation, maintenance, and monitoring of the implemented
remedial action taken up to that time in connection with the Combe
Landfill North site. Certain of the PRPs, including the Company,
are currently negotiating with the state. The Company and certain
of the remaining PRPs have recently entered into a Consent Order
with the U.S. Environmental Protection Agency to settle the federal
exposure for this site in return for a non-material payment.
During the quarter ending March 31, 1998, the Company received
an administrative order from the New Hampshire Department of
Environmental Services (the "NH DES") with respect to certain
regulatory issues concerning its Franklin, New Hampshire operation.
The Company has recently entered into an amended administrative
order with the NH DES and has withdrawn its appeal of this matter.
The state agency has not as of yet issued any fines or penalties in
connection with this matter.
Based on facts presently known to it, the Company does not
believe that the outcome of these environmental proceedings will
have a material adverse effect on its financial condition or
results of operations. Given the nature and scope of the Company's
manufacturing operations, there can be no assurance that the
Company will not become subject to other environmental proceedings
and liabilities in the future which may be material to the Company.
See Note 8 of the Notes to the Consolidated Financial Statements.
Other Litigation
Other lawsuits and proceedings or claims, arising from the
ordinary course of operations, are also pending or threatened
against the Company and its subsidiaries. Based on the facts
currently known to it, the Company does not believe that the
ultimate outcome of these other litigation matters will have a
material adverse effect on its financial condition or results of
operation. See Note 8 of the Notes to the Consolidated Financial
Statements.
Item 5. Other Information
On May 11, 1999 the Company's Board of Directors voted to
amend the Company's By-Laws to change the Company's fiscal year
from June 30 of each year to December 31 of each year. The Company
will file a report on Form 10-K covering the transition period of
July 1, 1999 to December 31, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits are furnished elsewhere in this report.
(b) There were no reports filed on Form 8-K during the quarter
ended March 31, 1999.
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.
WATTS INDUSTRIES, INC.
Date: May 12, 1999 By: /s/ Timothy P. Horne
Timothy P. Horne
Chairman and Chief
Executive Officer
Date: May 12, 1999 By: /s/ Kenneth J. McAvoy
Kenneth J. McAvoy
Chief Financial Officer
and Treasurer
EXHIBIT INDEX
Listed and indexed below are all Exhibits filed as part of this
report.
Exhibit No. Description
3.1 Restated Certificate of Incorporation, as amended. (1)
3.2 Amended and Restated By-Laws, as amended May 11,
1999*
11 Computation of Earnings per Share (2)
27 Financial Data Schedule - March 31, 1999*
27.1 Restated Financial Data Schedule - March 31, 1998*
(1) Incorporated by reference to the relevant exhibit to the
Registrant's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on September 28, 1995.
(2) Incorporated by reference to the Notes to Consolidated
Financial Statements, Note 3, of this Report.
*Filed herewith.
BY-LAWS
of
WATTS INDUSTRIES, INC.
Amended and Restated as of April 21, 1992, amended May 11, 1999
ARTICLE I
Stockholders
Section 1. Annual Meeting. The annual meeting of
stockholders shall be held at the hour, date and place
within or without the United States which is fixed by the
Board of Directors or the Chairman of the Board, which hour,
date and place may subsequently be changed at any time by
vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the
Corporation's last annual meeting of stockholders, a special
meeting in lieu thereof may be held, and such special
meeting shall have, for the purposes of these By-laws or
otherwise, all the force and effect of an annual meeting.
Any and all references hereafter in these By-laws to an
annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
Section 2. Matters to be Considered at Annual Meeting.
At an annual meeting of stockholders, only such business
shall be conducted, and only such proposals shall be acted
upon, as shall have been properly brought before the annual
meeting (a) by, or at the direction of, the Board of
Directors or a designated committee thereof or (b) by any
holder of record (both as of the time notice of such
proposal is given by the stockholder as set forth below and
as of the record date for the annual meeting in question) of
any shares of capital stock of the Corporation entitled to
vote at such annual meeting who complies with the procedures
set forth in this Section 2 (or, with respect to nominations
of candidates for election as Directors, as set forth in
Section 3 of Article II hereof). In addition to any other
applicable requirements, for business to be properly brought
before an annual meeting by a holder of record of any shares
of capital stock entitled to vote at such annual meeting,
the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation as set forth in
this Section 2 and such stockholder or his representative
must be present at the annual meeting. To be timely, a
stockholder's notice must be delivered to, or mailed to and
received at, the principal executive offices of the
Corporation (a) not less than 75 days nor more than 120 days
prior to the anniversary date of the immediately preceding
annual meeting of stockholders (the "Anniversary Date") or
(b) in the event that the annual meeting of stockholders is
called for a date more than 10 days prior to the Anniversary
Date, not later than the close of business on (i) the 20th
day (or if that day is not a business day of the
Corporation, on the next succeeding business day) following
the first date on which the date of such meeting was
publicly disclosed or (ii) if such date of public disclosure
occurs more than 75 days prior to such scheduled date of
such meeting, then the later of (1) the 20th day (or if that
day is not a business day for the Corporation, on the next
succeeding business day) following the first date of public
disclosure or (2) the 75th day prior to such scheduled date
of such meeting (or if that day is not a business day for
the Corporation, on the next succeeding business day). Any
public disclosure of the scheduled date of the meeting made
by the Corporation by means of a press release, a report or
other document filed with the Securities and Exchange
Commission, or a letter or report sent to stockholders of
record of the Corporation, shall be deemed to be sufficient
public disclosure of the date of such meeting for purposes
of these By-laws.
A stockholder's notice to the Secretary shall set forth
as to each matter the stockholder proposes to bring before
the annual meeting (a) a brief description of the proposal
desired to be brought before the annual meeting and the
reasons for conducting such business at the annual meeting,
(b) the name and address, as they appear on the
Corporation's stock transfer books, of the stockholder
proposing such business and of the beneficial owners (if
any) of the stock registered in such stockholder's name and
the name and address of other stockholders known by such
stockholder to be supporting such proposal on the date of
such stockholder's notice, (c) the class and number of
shares of the Corporation's capital stock which are held of
record, beneficially owned or represented by proxy by the
stockholder and by any other stockholders known by such
stockholder to be supporting such proposal on the record
date for the annual meeting in question (if such date shall
then have been made publicly available) and on the date of
such stockholder's notice, and (d) any material interest of
the stockholder in such proposal.
If the Board of Directors, or a designated committee
thereof, determines that any stockholder proposal was not
timely made in accordance with the provisions of this
Section 2, or that the information provided in a
stockholder's notice does not satisfy the informational
requirements of this Section 2 in any material respect, then
such proposal shall not be presented for action at the
annual meeting in question. If neither the Board of
Directors nor such committee makes a determination as to the
validity of any stockholder proposal, the presiding officer
of the annual meeting shall determine and declare at the
annual meeting whether the stockholder proposal was made in
accordance with the terms of this Section 2. If the
presiding officer determines that a stockholder proposal was
made in accordance with the terms of this Section 2, he
shall so declare at the annual meeting and ballots shall be
provided for use at the meeting with respect to any such
proposal. If the presiding officer determines that a
stockholder proposal was not made in accordance with the
terms of this Section 2, he shall so declare at the annual
meeting and any such proposal shall not be acted upon at the
annual meeting.
The provisions of this By-law shall not prevent the
consideration and approval or disapproval at the annual
meeting of reports of officers, Directors and committees of
the Board of Directors, but in connection with such reports,
no new business shall be acted upon at such annual meeting
unless stated, filed and received as herein provided.
Notwithstanding the foregoing provisions of this By-law,
a stockholder shall also comply with all applicable
requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this By-
law. Nothing in this By-law 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 3. Special Meetings. Except as otherwise
required by law, special meetings of the stockholders of the
Corporation may be called only by the Board of Directors
pursuant to a resolution approved by the affirmative vote of
a majority of the Directors then in office or the Chairman
of the Board.
Section 4. Matters to be Considered at Special
Meetings. Only those matters set forth in the notice of the
special meeting may be considered or acted upon at a special
meeting of stockholders of the Corporation, unless otherwise
provided by law.
Section 5. Notice of Meetings; Adjournments. A written
notice of each annual meeting of stockholders stating the
place, date and hour of such annual meeting shall be given
by the Secretary (or other person authorized by these By-
laws or by law) not less than 10 days nor more than 60 days
before the meeting, to each stockholder entitled to vote
thereat and to each stockholder who, by law or under the
Restated Certificate of Incorporation or under these By-
laws, is entitled to such notice, by delivering such notice
to him or by mailing it, postage prepaid, and addressed to
such stockholder at the address of such stockholder as it
appears in the records of the Corporation. Such notice
shall be deemed to be delivered when hand delivered to such
address or deposited in the mail so addressed, with postage
prepaid.
Notice of all special meetings of stockholders shall be
given in the same manner as provided for annual meetings of
the stockholders, except that the written notice of all
special meetings shall state the purpose or purposes for
which the meeting has been called.
Notice of an annual or special meeting of stockholders
need not be given to a stockholder if a written waiver of
notice is executed before or after such meeting by such
stockholder or such stockholder's authorized attorney, if
communication with such stockholder is unlawful, or if such
stockholder attends such meeting, unless such attendance was
for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the
meeting was not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be
specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any
previously scheduled annual or special meeting of
stockholders and any record date with respect thereto,
regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant
to Section 2 of this Article I or Section 3 of Article II
hereof or otherwise. When any meeting is convened, the
presiding officer may adjourn the meeting if (a) no quorum
is present for the transaction of business, (b) the Board of
Directors determines that adjournment is necessary or
appropriate to enable the stockholders to consider fully
information which the Board of Directors determines has not
been made sufficiently or timely available to stockholders,
or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation. When
any annual or special meeting of stockholders is adjourned
to another hour, date or place, notice need not be given of
the adjourned meeting other than an announcement at the
meeting at which the adjournment is taken of the hour, date
and place to which the meeting is adjourned; provided,
however, that if the adjournment is for more than 30 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 and each stockholder who, by law or under the
Restated Certificate of Incorporation or these By-laws, is
entitled to such notice.
Section 6. Quorum. At any annual or special meeting of
stockholders, the holders of a majority of the voting power
of all classes of stock issued, outstanding and entitled to
vote at such meeting, represented in person or by proxy,
shall constitute a quorum at such meeting; but if less than
a quorum is present at such meeting, the holders of a
majority of the voting power of all classes of stock issued,
outstanding and entitled to vote at such meeting that are
present in person or by proxy at such meeting or the
presiding officer may adjourn the meeting from time to time,
and the meeting may be held as adjourned without further
notice, except as provided in Section 5 of this Article I.
At such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted
at the meeting as originally noticed. The stockholders
present at a duly constituted meeting may continue to
transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a
quorum.
Section 7. Voting and Proxies. The voting power of
each share of capital stock of the Corporation shall be as
set forth in the Restated Certificate of Incorporation, with
a proportionate vote for each fraction of any share.
Stockholders may vote either in person or by written proxy,
but no proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer
period. Proxies shall be filed with the Secretary of the
meeting before being voted. Except as otherwise limited
therein or as otherwise provided by law, proxies shall
entitle the persons authorized thereby to vote at any
adjournment of such meeting, but they shall not be valid
after final adjournment of such meeting. A proxy with
respect to stock held in the name of two or more persons
shall be valid if executed by or on behalf of any one of
them unless at or prior to the exercise of such proxy the
Corporation receives a specific written notice to the
contrary from any one of them. A proxy purporting to be
executed by or on behalf of a stockholder shall be deemed
valid, and the burden of proving invalidity shall rest on
the challenger.
Section 8. Action at Meeting. When a quorum is
present, any matter before any annual or special meeting of
stockholders shall be decided by vote of the holders of all
classes of stock present in person or by proxy representing
a majority of the votes of all classes of stock entitled to
be cast at the meeting, except where a larger vote is
required by law, by the Restated Certificate of
Incorporation or by these By-laws. Any election by
stockholders shall be determined by a plurality of the votes
of all classes of stock cast, except where a larger vote is
expressly required by law, by the Restated Certificate of
Incorporation or by these By-laws. The Corporation shall
not directly or indirectly vote any shares of its own stock;
provided, however, that the Corporation may vote shares
which it holds in a fiduciary capacity to the extent
permitted by law.
Section 9. Action by Consent. Any action required or
permitted by law to be taken at any annual or special
meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed
by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt
notice of the corporate action without a meeting by less
than unanimous written consent shall be given to those
stockholders who have not consented in writing.
Section 10. Stockholder Lists. The Secretary (or the
Corporation's transfer agent or other person authorized by
these By-laws or by law) shall prepare and make, at least 10
days before every annual or special meeting of stockholders,
a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares of each
class of stock 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 10 days
prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be
specified in the notice of the meeting, 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 hour, date
and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
Section 11. Presiding Officer. The Chairman of the
Board, or in his absence, the President, shall preside at
all annual or special meetings of stockholders and shall
have the power, among other things, to adjourn such meeting
at any time and from time to time, subject to Sections 5 and
6 of this Article I. The order of business and all other
matters of procedure at any meeting of the stockholders
shall be determined by the presiding officer.
Section 12. Voting Procedures and Inspectors of
Elections. The Corporation shall, in advance of any meeting
of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate
inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at a meeting of
stockholders, the presiding officer shall appoint one or
more inspectors to act at the meeting. Any inspector may,
but need not, be an officer, employee or agent of the
Corporation. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector
with strict impartiality and according to the best of his
ability. The inspectors shall perform such duties as are
required by the Delaware General Corporation Law, as amended
from time to time, including the counting of all votes and
ballots. The inspectors may, with the approval of the
presiding officer, appoint or retain other persons or
entities to assist the inspectors in the performance of the
duties of the inspectors. The presiding officer may review
all determinations made by the inspector(s), and in so doing
the presiding officer shall be entitled to exercise his sole
judgment and discretion and he shall not be bound by any
determinations made by the inspector(s). All determinations
by the inspector(s) and, if applicable, the presiding
officer shall be subject to further review by any court of
competent jurisdiction.
ARTICLE II
Directors
Section 1. Powers. All the power of the Corporation
shall be exercised by or under the direction of the Board of
Directors except as otherwise provided by the Restated
Certificate of Incorporation or as required by law. In the
event of a vacancy in the Board of Directors, the remaining
Directors, except as otherwise provided by law, may exercise
the powers of the full Board until the vacancy is filled.
Section 2. Number; Election; Qualification. The Board
of Directors shall consist of not more than fifteen (15) nor
less than three (3) members. The exact number of Directors
within the maximum and minimum limitations specified herein
may be fixed from time to time by resolution of a majority
of the Board of Directors then in office or by the
stockholders at the annual meeting of stockholders. The
Directors shall be elected by the stockholders at each
annual meeting, except as provided in Section 5 of this
Article II. No Director need be a stockholder.
Section 3. Director Nominations. Nominations of
candidates for election as Directors of the Corporation at
any annual meeting of stockholders may be made (a) by, or at
the direction of, a majority of the Board of Directors or a
designated committee thereof, or (b) by any holder of record
(both as of the time notice of such nomination is given by
the stockholder as set forth below and as of the record date
for the annual meeting in question) of any shares of the
capital stock of the Corporation entitled to vote at such
annual meeting who complies with the procedures set forth in
this Section 3. Any stockholder who seeks to make such a
nomination, or his representative, must be present in person
at the annual meeting. Only persons nominated in accordance
with the procedures set forth in this Section 3 shall be
eligible for election as Directors at an annual meeting of
stockholders.
Nominations, other than those made by, or at the
direction of, the Board of Directors or a designated
committee thereof, shall be made pursuant to timely notice
in writing to the Secretary of the Corporation as set forth
in this Section 3. To be timely, a stockholder's notice
shall be delivered to, or mailed and received, at the
principal executive offices of the Corporation (a) not less
than 75 days nor more than 120 days prior to the Anniversary
Date or (b) in the event that the annual meeting of
stockholders is called for a date more than seven days prior
to the Anniversary Date, not later than the close of
business on (i) the 20th day (or if that day is not a
business day for the Corporation, on the next succeeding
business day) following the first date on which the date of
such meeting was publicly disclosed or (ii) if such date of
public disclosure occurs more than 75 days prior to such
scheduled date of such meeting, then the later of (1) the
20th day (or if that day is not a business day for the
Corporation, on the next succeeding business day) following
the first date of public disclosure of the date of such
meeting or (2) the 75th day prior to such scheduled date of
such meeting (or if that day is not a business day for the
Corporation, on the next succeeding business day). Any
public disclosure of the scheduled date of the meeting made
by the Corporation by means of a press release, a report or
other document filed with the Securities and Exchange
Commission, or a letter or report sent to stockholders of
record of the Corporation, shall be deemed to be sufficient
public disclosure of the date of such meeting for purposes
of these By-laws.
Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for
election or re-election as a director (i) the name, age,
business address and residential address of such person,
(ii) the principal occupation or employment of such person
during the past five years, (iii) the class and number of
shares of the Corporation's capital stock which are
beneficially owned by such person on the date of such
stockholder notice, (iv) a description of any of the
following events that has occurred within the last five
years and that is material to the evaluation of the ability
or integrity of such proposed nominee: (1) a petition under
federal bankruptcy laws or any state insolvency laws was
filed by or against such person, (2) a conviction of such
person in a criminal proceeding or the naming of such person
as a subject of a criminal proceeding (excluding traffic
violations and other minor offenses), (3) a finding by any
court of competent jurisdiction that such person has
violated any federal or state securities law or federal
commodities law, which judgment or finding has not been
subsequently reversed, suspended or vacated, or (4) the
entry of any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction or of any federal or state governmental or
quasi-governmental agency, authority or commission enjoining
such person or otherwise limiting him from engaging in any
type of business practice or in any activity in connection
with the purchase or sale of any security or commodity, and
(v) the consent of each nominee to serve as a Director if so
elected and (b) as to the stockholder giving the notice (i)
the name and address, as they appear on the Corporation's
stock transfer books, of such stockholder and of the
beneficial owners (if any) of the stock registered in such
stockholder's name and the name and address of other
stockholders known by such stockholder to be supporting such
nominee or nominees, (ii) the class and number of shares of
the Corporation's capital stock which are beneficially owned
by such stockholder and such beneficial owners (if any) on
the date of such stockholder's notice and by any other
stockholders known by such stockholder to be supporting such
nominee or nominees on the date of such stockholder's
notice, (iii) a representation that the stockholder or his
representative intends to appear in person at the meeting to
nominate the person or persons specified in the notice, (iv)
a description of all arrangements or understandings between
such 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 such
stockholders; provided, that nothing in this Section 3 shall
require the stockholder giving such notice to provide to the
Corporation copies of such stockholder's preliminary or
definitive proxy, proxy statement, or other soliciting
material filed with the Securities and Exchange Commission.
At the request of the Board of Directors, any person
nominated by, or at the direction of, the Board of Directors
for election as a Director at an annual meeting shall
furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of
nomination which pertains to such nominee.
No person shall be elected by the stockholders as a
Director of the Corporation unless nominated in accordance
with the procedures set forth in this Section 3. Election
of Directors at the annual meeting need not be by written
ballot, unless otherwise provided by the Board of Directors
or presiding officer at such annual meeting. If written
ballots are to be used, ballots bearing the names of all the
persons who have been nominated for election as Directors at
the annual meeting in accordance with the procedures set
forth in this Section 3 shall be provided for use at the
annual meeting.
If the Board of Directors, or a designated committee
thereof, determines that any stockholder nomination was not
timely made in accordance with the terms of this Section 3
or that the information provided in a stockholder's notice
does not satisfy the informational requirements of this
Section 3 in any material respect, then such nomination
shall not be considered at the annual meeting in question.
If neither the Board of Directors nor such committee makes a
determination as to the validity of any nominations by a
stockholder as set forth above, the presiding officer of the
annual meeting shall determine and declare at the annual
meeting whether a nomination was made in accordance with the
terms of this Section 3. If the presiding officer
determines that a nomination was made in accordance with the
terms of this Section 3, he shall so declare at the annual
meeting and ballots shall be provided for use at the meeting
with respect to such nomination. If the presiding officer
determines that a nomination was not made in accordance with
the terms of this Section 3, he shall so declare at the
annual meeting and such nomination shall be disregarded.
Section 4. Tenure. Except as otherwise provided by
law, by the Restated Certificate of Incorporation or by
these By-laws, Directors shall hold office until the next
annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation
or removal.
Section 5. Vacancies. Any vacancy occurring on the
Board of Directors, including any vacancy resulting from
death, resignation, retirement, disqualification, removal or
other cause or created by reason of an increase in the
authorized number of Directors shall be filled by the
affirmative vote of a majority of the remaining Directors
then in office, even if such majority is less than a quorum
of the Board of Directors. Any Director appointed in
accordance with the preceding sentence shall hold office
subject to the provisions of these By-laws until the next
annual meeting of stockholders and until such Director's
successor is elected and qualified or until such Director
resigns or is removed. In the event of a vacancy in the
Board of Directors, the remaining Directors, except as
otherwise provided by law, may exercise the powers of the
full Board of Directors until the vacancy is filled.
Section 6. Removal. Any Director (including persons
elected by Directors to fill vacancies in the Board of
Directors) or the entire Board of Directors may be removed
with or without cause by the affirmative vote of the holders
of at least a majority of the voting power of the shares of
the Corporation then entitled to vote at an election of
Directors, voting together as a single class. Any Director
may be removed for cause by vote of a majority of the
Directors then in office. A Director may be removed for
cause only after reasonable notice and opportunity to be
heard before the body proposing to remove him.
Section 7. Resignation. A Director may resign at any
time by giving written notice to the Chairman of the Board,
the President or the Secretary. A resignation shall be
effective upon receipt, unless the resignation otherwise
provides.
Section 8. Regular Meetings. The regular annual
meeting of the Board of Directors shall be held, without
other notice than this By-law, on the same date and at the
same place as the annual meeting of stockholders following
the close of such meeting of stockholders. Other regular
meetings of the Board of Directors may be held without call
or notice at such hour, date and place as the Board of
Directors may from time to time determine.
Section 9. Special Meetings. Special meetings of the
Board of Directors may be called, orally or in writing, by
or at the request of the Chairman of the Board, the
Treasurer, or two or more Directors designating the hour,
date and place thereof.
Section 10. Notice of Special Meetings. Notice of the
hour, date and place of all special meetings of the Board of
Directors shall be given to each Director by the Secretary
or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the President.
Notice of any special meeting of the Board of Directors
shall be given to each Director in person or by telephone,
telex, telecopy or other written form of electronic
communication, or by telegram sent to his business or home
address at least 24 hours in advance of the meeting, or by
written notice mailed to his business or home address at
least 48 hours in advance of the meeting. Such notice shall
be deemed to be delivered when hand delivered to such
address, read to such Director by telephone, deposited in
the mail so addressed, with postage thereon prepaid if
mailed, dispatched or transmitted if telexed or telecopied,
or when delivered to the telegraph company if sent by
telegram.
When any Board of Directors meeting, either regular or
special, is adjourned for 30 days or more, notice of the
adjourned meeting shall be given as in the case of an
original meeting. It shall not be necessary to give any
notice of the hour, date or place of any meeting adjourned
for less than 30 days or of the business to be transacted
thereat, other than an announcement at the meeting at which
such adjournment is taken of the hour, date and place to
which the meeting is adjourned.
A written waiver of notice executed before or after a
meeting by a Director and filed with the records of the
meeting shall be deemed to be equivalent to notice of the
meeting. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where
a Director attends a meeting for the express purpose of
objecting to the transaction of any business because such
meeting is not lawfully called or convened. Except as
otherwise required by law, by the Restated Certificate of
Incorporation or by these By-laws, neither the business to
be transacted at, nor the purpose of, any meeting of the
Board of Directors need be specified in the notice or waiver
of notice of such meeting.
Section 11. Quorum. At any meeting of the Board of
Directors, a majority of the Directors then in office shall
constitute a quorum for the transaction of business, but if
less than a quorum is present at a meeting, a majority of
the Directors present may adjourn the meeting from time to
time, and the meeting may be held as adjourned without
further notice, except as provided in Section 10 of this
Article II. Any business which might have been transacted
at the meeting as originally noticed may be transacted at
such adjourned meeting at which a quorum is present.
Section 12. Action at Meeting. At any meeting of the
Board of Directors at which a quorum is present, a majority
of the Directors present may take any action on behalf of
the Board of Directors, unless a larger number is required
by law, by the Restated Certificate of Incorporation or by
these By-laws.
Section 13. Action by Consent. Any action required or
permitted to be taken at any meeting of the Board of
Directors may be taken without a meeting if all members of
the Board of Directors consent thereto in writing. Such
written consent shall be filed with the records of the
meetings of the Board of Directors and shall be treated for
all purposes as a vote at a meeting of the Board of
Directors.
Section 14. Manner of Participation. Directors may
participate in meetings of the Board of Directors by means
of conference telephone or similar communications equipment
by means of which all Directors participating in the meeting
can hear each other, and participation in a meeting in
accordance herewith shall constitute presence in person at
such meeting for purposes of these By-laws.
Section 15. Committees. The Board of Directors, by
vote of a majority of the Directors then in office, may
elect from its number one or more committees, including an
Executive Committee and an Audit Committee, and may delegate
thereto some or all of its powers except those which by law,
by the Restated Certificate of Incorporation, or by these
By-laws may not be delegated. Except as the Board of
Directors may otherwise determine, any such committee may
make rules for the conduct of its business, but unless
otherwise provided by the Board of Directors or in such
rules, its business shall be conducted so far as possible in
the same manner as is provided by these By-laws for the
Board of Directors. All members of such committees shall
hold such offices at the pleasure of the Board of Directors.
The Board of Directors may abolish any such committee at any
time. Any committee to which the Board of Directors
delegates any of its powers or duties shall keep records of
its meetings and shall report its action to the Board of
Directors. The Board of Directors shall have power to
rescind any action of any committee, but no such rescission
shall have retroactive effect.
ARTICLE III
Officers
Section 1. Enumeration. The officers of the
Corporation shall consist of a Chairman of the Board, a
President, a Secretary, a Treasurer, and such other
officers, including without limitation one or more Executive
Vice Presidents, Vice Presidents, Assistant Secretaries and
Assistant Treasurers, as the Board of Directors may
determine.
Section 2. Election. At the regular annual meeting of
the Board of Directors following the annual meeting of
stockholders, the Board of Directors shall elect the
President, the Secretary, and the Treasurer. Other officers
may be elected by the Board of Directors at such regular
annual meeting or at any other regular or special meeting.
Section 3. Qualification. No officer need be a
stockholder or a Director. Any person may occupy more than
one office of the Corporation at any time. Any officer may
be required by the Board of Directors to give bond for the
faithful performance of his duties in such amount and with
such sureties as the Board of Directors may determine.
Section 4. Tenure. Except as otherwise provided by the
Restated Certificate of Incorporation or by these By-laws,
each officer of the Corporation shall hold office until the
regular annual meeting of the Board of Directors following
the next annual meeting of stockholders and until such
officer's successor is elected and qualified or until such
officer's earlier resignation or removal. Any officer may
resign by delivering a written resignation to the Board of
Directors, and such resignation shall be effective upon
receipt unless it is specified to be effective at some other
time or upon the happening of some other event.
Section 5. Removal. Except as otherwise provided by
law, the Board of Directors may remove any officer with or
without cause by the affirmative vote of a majority of the
Directors then in office.
Section 6. Vacancies. Any vacancy in any office may be
filled for the unexpired portion of the term by the Board of
Directors.
Section 7. Chairman of the Board. The Chairman of the
Board shall be the chief executive officer of the
Corporation and shall, subject to the direction of the Board
of Directors, have general supervision and control of its
business. The Chairman of the Board shall preside, when
present, at all meetings of the Board of Directors, unless
the Board of Directors shall otherwise provide, and at
meetings of the stockholders as provided in Section 11 of
Article I hereof.
Section 8. President. The President shall be the chief
operating officer of the Corporation and shall perform such
duties as the Board of Directors or the Chairman of the
Board may from time to time determine. In the absence of
the Chairman of the Board, the President shall preside, when
present, at meetings of the Board of Directors, unless the
Board of Directors shall otherwise provide, and at meetings
of the stockholders as provided in Section 11 of Article I
hereof.
Section 9. Executive Vice Presidents; Vice Presidents.
Any Executive Vice President or Vice President shall have
such powers and shall perform such duties as the Board of
Directors, the Chairman of the Board or the President may
from time to time designate.
Section 10. Treasurer and Assistant Treasurers. The
Treasurer shall, subject to the direction of the Board of
Directors, have general charge of the financial affairs of
the Corporation and shall cause to be kept accurate books of
account. He shall have custody of all funds, securities,
and valuable documents of the Corporation, except as the
Board of Directors may otherwise provide.
Any Assistant Treasurer shall have such powers and
perform such duties as the Board of Directors may from time
to time designate.
Section 11. Secretary and Assistant Secretaries. The
Secretary shall record all the proceedings of the meetings
of the stockholders and the Board of Directors (including
committees of the Board) in books kept for that purpose. In
his absence from any such meeting, a temporary secretary
chosen at the meeting shall record the proceedings thereof.
The Secretary shall have charge of the stock ledger (which
may, however, be kept by any transfer or other agent of the
Corporation). He shall have custody of the seal of the
Corporation, and he, or an Assistant Secretary, shall have
authority to affix it to any instrument requiring it, and,
when so affixed, the seal may be attested by his signature
or that of an Assistant Secretary. He shall have such other
duties and powers as may be designated from time to time by
the Board of Directors, the Chairman of the Board or the
President.
Any Assistant Secretary shall have such powers and
perform such duties as the Board of Directors may from time
to time designate.
Section 12. Other Powers and Duties. Subject to these
By-laws and to such limitations as the Board of Directors
may from time to time prescribe, the officers of the
Corporation shall each have such powers and duties as
generally pertain to their respective offices, as well as
such powers and duties as from time to time may be conferred
by the Board of Directors.
Section 13. Compensation. The compensation of the
officers of the Corporation shall be fixed from time to time
by the Board of Directors; provided, however, that the Board
of Directors may authorize any officer or committee to fix
the compensation of officers and employees. No officer
shall be prevented from receiving compensation by reason of
the fact that such officer is also a Director of the
Corporation.
ARTICLE IV
Capital Stock
Section 1. Certificates of Stock. Each stockholder
shall be entitled to a certificate of the capital stock of
the Corporation in such form as may from time to time be
prescribed by the Board of Directors. Such certificate
shall bear the Corporation seal and shall be signed by the
Chairman of the Board or the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary. The Corporation seal
and the signatures by Corporation officers may be facsimiles
if the certificate is manually countersigned by an
authorized person on behalf of a transfer agent or registrar
other than the Corporation or its employee. In case any
officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on such 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 such
officer, transfer agent or registrar were such officer,
transfer agent or registrar at the time of its issue. Every
certificate for shares of stock which are subject to any
restriction on transfer and every certificate issued when
the Corporation is authorized to issue more than one class
or series of stock shall contain such legend with respect
thereto as is required by law. The Corporation shall be
permitted to issue fractional shares.
Section 2. Transfers. Subject to any restrictions on
transfer and unless otherwise provided by the Board of
Directors, shares of stock may be transferred only on the
books of the Corporation by the surrender to the Corporation
or its
transfer agent of the certificate therefor properly endorsed
or accompanied by a written assignment or power of attorney
properly executed, with transfer stamps (if necessary)
affixed, and with such proof of the authenticity of
signature as the Corporation or its transfer agent may
reasonably require.
Section 3. Record Holders. Except as may otherwise be
required by law, by the Restated Certificate of
Incorporation or by these By-laws, the Corporation shall be
entitled to treat the record holder of stock as shown on its
books as the owner of such stock for all purposes, including
the payment of dividends and the right to vote with respect
thereto, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been
transferred on the books of the Corporation in accordance
with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the
Corporation of his, her or its post office address and any
changes thereto.
Section 4. Record Date. In order that the Corporation
may determine the stockholders entitled to receive notice of
or to vote at any meeting of stockholders or any
adjournments thereof, or to express consent to corporate
action in writing without a meeting, 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, (i) with respect
to any meeting of stockholders, shall be not more than 60
nor less than 10 days (except as otherwise required by law)
before the date of such meeting, (ii) with respect to
corporate action without a meeting, shall be not more than
10 days after the date on which the resolution fixing the
record date is adopted by the Board of Directors and (iii)
with respect to any other lawful action, shall be not more
than 60 days prior to such action. In such case, only
stockholders of record on such record date shall be so
entitled, notwithstanding any transfer of stock on the books
of the Corporation after the record date.
If no record date is fixed: (i) the record date for
determining stockholders entitled to receive notice of or to
vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice
is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is
held; (ii) the record date for determining stockholders
entitled to express consent to corporate action in writing
without a meeting, when no prior action by the Board of
Directors is necessary, shall be the day on which the first
written consent is expressed; and (iii) 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 5. Replacement of Certificates. In case of the
alleged loss, destruction or mutilation of a certificate of
stock, a duplicate certificate may be issued in place
thereof, upon such terms as the Board of Directors may
prescribe.
ARTICLE V
Indemnification of Directors, Officers and Others
Section 1. Indemnifiable Events; Extent of
Indemnification.
(a) The Corporation shall indemnify, to the fullest
extent permitted by the General Corporation Law of the State
of Delaware (as presently in effect or as hereafter
amended):
(i) 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 or suit by or in the right of the Corporation) by
reason of the fact that he is or was a Director or
officer of the Corporation, or is or was serving at the
request of the Corporation as a director or officer of
another corporation, partnership, joint venture, trust
or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in
connection with such suit, action or proceeding 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. 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 or, with respect to any criminal action or
proceeding, that the person had reasonable cause to
believe that his conduct was unlawful.
(ii) 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 a Director or officer of
the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit 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 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 for negligence or misconduct in the performance
of his duty to the Corporation unless, and only to the
extent that, the Court of Chancery of the State of
Delaware or the court in which such action or suit was
brought shall determine upon application that, despite
the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem
proper.
(iii) To the extent that a Director or officer
of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding
referred to in paragraphs (i) and (ii), or in defense of
any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection
therewith.
(b) The Board of Directors, in its discretion, may
authorize the Corporation to indemnify:
(i) 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 an employee or agent of
the Corporation, or is or was serving at the request of
the Corporation as a Director or as an employee or agent
of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding 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. 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 tothe best interests of the
Corporation or, with respect to any criminal action or
proceeding, that the person had reasonable cause to
believe that his conduct was unlawful.
(ii) 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 an employee or agent of
the Corporation, or is or was serving at the request of
the Corporation as a employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit 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 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 for negligence or misconduct in the performance
of his duty to the Corporation unless, and only to the
extent that, the Court of Chancery of the State of
Delaware or the court in which such action or suit was
brought shall determine upon application that, despite
the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and
reasonably entitled to indemnify for such expenses which
the Court of Chancery or such other court shall deem
proper.
Section 2. Determination of Entitlement. Any
indemnification hereunder (unless required by law or ordered
by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the Director, officer, employee or agent
is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 of
this Article V. Such determination shall be made (a) by the
Board of Directors by a majority vote of a quorum consisting
of Directors who were not parties to such action, suit or
proceeding, or (b) 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 (c) by the stockholders of the Corporation.
Section 3. Advance Payments. Expenses incurred in
defending a civil or criminal action, suit or proceeding may
be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding, only as
authorized by the Board of Directors in the specific case
(including by one or more Directors who may be parties to
such action, suit or proceeding), upon receipt of an
undertaking by or on behalf of the Director, officer,
employee or agent to repay such amount unless it shall
ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this
Article V.
Section 4. Non-Exclusive Nature of Indemnification.
The indemnification provided herein shall not be deemed
exclusive of any other rights to which any person, whether
or not entitled to be indemnified hereunder, may be entitled
under any statute, by-law, agreement, vote of stockholders
or Directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding
such office, 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 heirs, executors and
administrators of such a person. Each person who is or
becomes a Director or officer as aforesaid shall be deemed
to have served or to have continued to serve in such
capacity in reliance upon the indemnity provided for in this
Article V.
Section 5. Insurance. To the extent obtainable, the
Corporation may purchase and maintain insurance with
reasonable limits on behalf of any person who is or was 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 such person and
incurred by such person in any such capacity, or arising out
of such person's status as such, whether or not the
Corporation would have the power to indemnify such person
against such liability under the provisions of the General
Corporation Law of the State of Delaware (as presently in
effect or hereafter amended), the Restated Certificate of
Incorporation of the Corporation or these By-laws.
Section 6. No Duplicate Payments. The Corporation's
indemnification under Section 1 of this Article V of any
person who is or was 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, shall be reduced by any amounts such
person receives as indemnification (i) under any policy of
insurance purchased and maintained on such person's behalf
by the Corporation, (ii) from such other Corporation,
partnership, joint venture, trust or other enterprise, or
(iii) under any other applicable indemnification provision.
Section 7. Amendment. This Article V may be amended
only so as to have a prospective effect. Any amendment to
this Article V which would result in any person having a
more limited entitlement to indemnification may be approved
only by the stockholders.
ARTICLE VI
Transactions with Related Parties
Section 1. Transactions Not Void. No contract or
transaction between the Corporation and one or more of its
Directors or officers, or between the Corporation and any
other corporation, partnership, association or other
organization in which one or more of its Directors or
officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason,
or solely because the Director or officer is present at or
participates in the meeting of the Board of Directors or
committee thereof, which authorizes the contract or
transaction, or solely because his or their votes are
counted for such purpose, if:
(a) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed
or are known to the Board of Directors, or the committee,
and the Board of Directors or committee in good faith
authorizes the contract or transaction by the affirmative
votes of a majority of the disinterested Directors, even
though the disinterested Directors be less than a quorum; or
(b) The material facts as to his relationship or
interest and as to the contract or transaction are disclosed
or are known to the stockholders entitled to vote thereon,
and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the
Corporation as of the time it is authorized, approved or
ratified, by the Board of Directors, a committee thereof, or
the stockholders.
Section 2. Quorum. Common or interested Directors may
be counted in determining the presence of a quorum at a
meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
Section 3. Limitation. Nothing herein contained shall
protect or purport to protect any Director or officer of the
Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by
reason of his willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in
the conduct of his office.
ARTICLE VII
Miscellaneous Provisions
Section 1. Fiscal Year. Except as otherwise determined
by the Board of Directors, the fiscal year of the
Corporation shall end on December 31 of each year.
Section 2. Seal. The Board of Directors shall have
power to adopt and alter the seal of the Corporation.
Section 3. Execution of Instruments. All deeds,
leases, transfers, contracts, bonds, notes and other
obligations to be entered into by the Corporation in the
ordinary course of its business without Director action may
be executed on behalf of the Corporation by the Chairman of
the Board, the President, the Treasurer or any Vice
President.
Section 4. Voting of Securities. Unless the Board of
Directors otherwise provides, the Chairman of the Board, the
President or the Treasurer may waive notice of and act on
behalf of this Corporation, or appoint another person or
persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power
of substitution, at any meeting of stockholders or
stockholders of any other corporation or organization, any
of whose securities are held by this Corporation.
Section 5. Resident Agent. The Board of Directors may
appoint a resident agent upon whom legal process may be
served in any action or proceeding against the Corporation.
Section 6. Corporate Records. The original or attested
copies of the Restated Certificate of Incorporation, By-laws
and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock and
transfer records, which shall contain the names of all
stockholders, their record addresses and the amount of stock
held by each, shall be kept at the principal office of the
Corporation, at the office of its counsel, or at an office
of its transfer agent.
Section 7. Restated Certificate of Incorporation. All
references in these By-laws to the Restated Certificate of
Incorporation shall be deemed to refer to the Restated
Certificate of Incorporation of the Corporation, as amended
and in effect from time to time.
Section 8. Amendments. These By-laws may be altered,
amended or repealed, to the extent permitted by applicable
law, the Restated Certificate of Incorporation and
agreements to which the Corporation may from time to time be
a party, by the affirmative vote of the holders of a
majority of the voting power of all classes of the stock of
the Corporation then entitled to vote, voting together as a
single class, at any regular or special meeting of the
stockholders of the Corporation, or by the vote of a
majority of the Board of Directors at any regular or special
meeting thereof, without any action on the part of the
stockholders, unless otherwise provided herein; provided,
however, that (i) the Board of Directors may not amend or
repeal this Section 8 nor may it amend or repeal any other
provision of these By-laws to the extent such amendment or
repeal requires action by the stockholders, and (ii) any
amendment or repeal of these By-laws by the Board of
Directors and any provision to these By-laws adopted by the
Board of Directors may be amended or repealed by the
stockholders.
DOCSC\141728.2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM MARCH 31, 1999 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,293
<SECURITIES> 2,718
<RECEIVABLES> 99,001
<ALLOWANCES> 6,942
<INVENTORY> 101,710
<CURRENT-ASSETS> 358,487
<PP&E> 230,364
<DEPRECIATION> 111,684
<TOTAL-ASSETS> 638,715
<CURRENT-LIABILITIES> 107,044
<BONDS> 121,547 <F1>
<COMMON> 2,686
0
0
<OTHER-SE> 384,762
<TOTAL-LIABILITY-AND-EQUITY> 638,715
<SALES> 344,551
<TOTAL-REVENUES> 344,551
<CGS> 220,744
<TOTAL-COSTS> 307,577 <F2>
<OTHER-EXPENSES> 4,114 <F3>
<LOSS-PROVISION> 1,076
<INTEREST-EXPENSE> 4,082
<INCOME-PRETAX> 32,860
<INCOME-TAX> 10,730
<INCOME-CONTINUING> 22,130
<DISCONTINUED> 8,419
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,549
<EPS-PRIMARY> $1.14
<EPS-DILUTED> $1.13
<FN>
<F1> INCLUDES LONG-TERM DEBT AND CURRENT PORTION
<F2> INCLUDES ONLY COST OF GOODS SOLD AND OPERATING EXPENSES.
<F3> INCLUDES INTEREST EXPENSE AND LOSS PROVISION SHOWN BELOW.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM MARCH 31, 1998 FINANCIAL STATEMENTS
AND IS QUALIFIED IN ITS ENTIRETY BY SUCH FINANCIAL
STATEMENTS.
THIS SCHEDULE HAS BEEN RESTATED TO REFLECT THE
ACCOUNTING CHANGES RELATED TO DISCONTINUED OPERATIONS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,298
<SECURITIES> 257
<RECEIVABLES> 87,547
<ALLOWANCES> 6,571
<INVENTORY> 101,211
<CURRENT-ASSETS> 324,800
<PP&E> 186,199
<DEPRECIATION> 83,995
<TOTAL-ASSETS> 554,949
<CURRENT-LIABILITIES> 76,165
<BONDS> 86,848 <F1>
<COMMON> 2,715
0
0
<OTHER-SE> 364,886
<TOTAL-LIABILITY-AND-EQUITY> 554,949
<SALES> 331,849
<TOTAL-REVENUES> 331,849
<CGS> 211,162
<TOTAL-COSTS> 293,999 <F2>
<OTHER-EXPENSES> 4,709 <F3>
<LOSS-PROVISION> 864
<INTEREST-EXPENSE> 4,818
<INCOME-PRETAX> 33,141
<INCOME-TAX> 10,943
<INCOME-CONTINUING> 22,198
<DISCONTINUED> 19,072
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,270
<EPS-PRIMARY> $1.52
<EPS-DILUTED> $1.51
<FN>
<F1> INCLUDES LONG-TERM DEBT AND CURRENT PORTION
<F2> INCLUDES ONLY COST OF GOODS SOLD AND OPERATING EXPENSES.
<F3> INCLUDES INTEREST EXPENSE AND LOSS PROVISION SHOWN BELOW.
</FN>
</TABLE>
