FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
For Quarter Ended June 30, 1998
Commission File Number 0-16572
AVONDALE INDUSTRIES, INC.
Louisiana 39-1097012
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 50280, New Orleans, Louisiana 70150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 504/436-2121
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 file 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 June 30, 1998
- --------------------------------------------------------------------------------
Common stock, par value $1.00 per share 13,249,228 shares
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1.Financial Statements
Independent Accountants' Report 1
Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 2
Consolidated Statements of Operations -
Quarters and Six Months Ended June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information 15
Item 4.Submission of Matters to a Vote of Security Holders
Item 6.Exhibits and Reports on Form 8-K
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Avondale Industries, Inc.
We have reviewed the condensed consolidated financial statements of Avondale
Industries, Inc. and subsidiaries, as listed in the accompanying index, as of
June 30, 1998 and for the three-month and six-month periods ended June 30, 1998
and 1997. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Avondale Industries, Inc. and
subsidiaries as of December 31, 1997, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated February 20, 1998, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet as of
December 31, 1997 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
August 3, 1998
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1998 1997
------------ ------------
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ASSETS
Current Assets:
Cash and cash equivalents.......................................... $ 67,439 $ 81,752
Receivables (Note 2):
Accounts receivable.................................................. 16,068 13,162
Contracts in progress................................................ 87,925 88,584
Inventories:
Goods held for sale.................................................. 13,022 14,915
Materials and supplies............................................... 8,964 8,311
Deferred tax assets ................................................... 17,903 23,253
Prepaid expenses and other current assets.............................. 3,054 2,891
------------ ------------
Total current assets................................................. 214,375 232,868
------------ ------------
Property, Plant and Equipment:
Land................................................................... 7,986 7,843
Buildings and improvements............................................. 60,578 55,917
Machinery and equipment................................................ 205,747 200,777
------------ ------------
Total................................................................ 274,311 264,537
Less accumulated depreciation.......................................... (137,001) (134,481)
------------ ------------
Property, plant and equipment - net.................................. 137,310 130,056
------------ ------------
Goodwill - net........................................................... 5,159 5,357
Other assets............................................................. 7,205 7,334
------------ ------------
Total assets......................................................... $ 364,049 $ 375,615
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------
June 30, December 31,
1998 1997
------------ ------------
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt...................................... $ 3,137 $ 3,047
Accounts payable....................................................... 67,853 59,548
Accrued employee compensation.......................................... 16,330 13,198
Other.................................................................. 11,726 11,851
------------ ------------
Total current liabilities............................................ 99,046 87,644
Long-term debt........................................................... 49,663 51,819
Deferred income taxes.................................................... 12,900 13,400
Other liabilities and deferred credits................................... 14,604 13,775
------------ ------------
Total liabilities...................................................... 176,213 166,638
------------ ------------
Commitments and contingencies (Note 6)
Shareholders' Equity:
Common stock, $1.00 par value, authorized -
30,000,000 shares; issued - 15,962,244 shares in 1998
and 15,956,227 shares in 1997........................................ 15,962 15,956
Additional paid-in capital............................................. 374,301 374,173
Accumulated deficit.................................................... (154,265) (169,296)
------------ ------------
Total................................................................ 235,998 220,833
Treasury stock (common: 2,713,016 shares in 1998
and 1,463,016 shares in 1997) at cost (Note 4)....................... (48,162) (11,856)
------------ ------------
Total shareholders' equity............................................. 187,836 208,977
------------ ------------
Total liabilities and shareholders' equity............................. $ 364,049 $ 375,615
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------
Quarters Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
---------- ---------- ---------- ----------
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Sales............................................ $ 178,463 $ 145,792 $ 363,088 $ 285,305
Cost of sales.................................... 157,118 126,291 321,615 247,171
---------- ---------- ---------- ----------
Gross profit..................................... 21,345 19,501 41,473 38,134
Selling, general and
administrative expenses........................ 9,409 8,635 17,722 16,969
---------- ---------- ---------- ----------
Income from operations........................... 11,936 10,866 23,751 21,165
Interest expense................................. (983) (1,195) (2,120) (2,412)
Other-net, principally interest
income ........................................ 1,376 709 2,600 1,318
---------- ---------- ---------- ----------
Income before income taxes....................... 12,329 10,380 24,231 20,071
Income taxes .................................... 4,675 4,000 9,200 7,400
---------- ---------- ---------- ----------
Net income....................................... $ 7,654 $ 6,380 $ 15,031 $ 12,671
========== ========== ========== ==========
Income per share of common stock (Notes 4 and 5):
Net income per share of
common stock - basic........................... $ 0.54 $ 0.44 $ 1.05 $ 0.87
========== ========== ========== ==========
Weighted average number
of shares outstanding -
basic......................................... 14,125 14,493 14,308 14,488
========== ========== ========== ==========
Net income per share of
common stock - diluted......................... $ 0.54 $ 0.44 $ 1.04 $ 0.87
========== ========== ========== ==========
Weighted average number
of shares outstanding -
diluted........................................ 14,198 14,497 14,385 14,498
========== ========== ========== ==========
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(In thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------------------------------------------
1998 1997
------------ ------------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................. $ 15,031 $ 12,671
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization........................................ 4,392 5,716
Deferred income taxes................................................ 4,850 7,400
Loss on sale of assets ............................................. 41 -
Changes in operating assets and liabilities:
Receivables........................................................ (2,247) 10,643
Inventories........................................................ 1,240 (2,270)
Prepaid expenses and other assets.................................. (34) 302
Accounts payable................................................... 8,305 (26,600)
Accrued employee compensation and other liabilities................ 3,836 5,565
Other - net........................................................ 134 303
------------ ------------
Net Cash Provided by Operating Activities............................... 35,548 13,730
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................... (11,507) (3,306)
Proceeds from sale of assets .......................................... 18 -
------------ ------------
Net Cash Used for Investing Activities................................. (11,489) (3,306)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term borrowings........................................ (2,066) (3,976)
Purchase of treasury stock (Note 4)................................... (36,306) -
------------ ------------
Net Cash Used for Financing Activities................................. (38,372) (3,976)
------------ ------------
Net (decrease) increase in cash and cash equivalents..................... (14,313) 6,448
Cash and cash equivalents at beginning of period......................... 81,752 48,944
------------ ------------
Cash and cash equivalents at end of period............................... $ 67,439 $ 55,392
============ ============
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest................................................................. $ 2,353 $ 2,666
============ ============
Income taxes ............................................................ $ 5,650 $ 700
============ ============
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
AVONDALE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Avondale Industries, Inc. and its wholly-owned subsidiaries
("Avondale" or the "Company"). In the opinion of the management of the Company,
all adjustments (such adjustments consisting only of a normal recurring nature)
necessary for a fair presentation of the operating results for the interim
periods presented have been included in the interim financial statements. These
interim financial statements should be read in conjunction with the December 31,
1997 audited financial statements and related notes filed on Form 10-K for the
year ended December 31, 1997 (the "1997 Form 10-K").
The financial statements required by Rule 10-01 of Regulation S-X have been
reviewed by independent public accountants as stated in their report included
herein.
2. RECEIVABLES
The following information presents the elements of receivables at June 30, 1998
and December 31, 1997 (in thousands):
<TABLE>
<CAPTION>
1998 1997
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Long-term contracts:
U.S. Government:
Amounts billed.......................................... $ 767 $ 967
Unbilled costs, including retentions, and
estimated profits on contracts in
progress............................................ 76,299 80,041
------------ ------------
Total ................................................... 77,066 81,008
Commercial:
Amounts billed.......................................... 5,774 4,180
Unbilled costs, including retentions, and
estimated profits on contracts in
progress............................................ 11,626 8,543
------------ ------------
Total from long-term contracts............................. 94,466 93,731
Trade and other current receivables............................... 9,527 8,015
------------ ------------
Total ........................................................... $ 103,993 $ 101,746
============ ============
</TABLE>
Unbilled costs and estimated profits on contracts in progress were not billable
to customers at the balance sheet dates under terms of the respective contracts.
<PAGE>
3. FINANCING ARRANGEMENTS
The Company's $65 million revolving credit agreement ("the agreement") provides
liquidity for working capital purposes, capital expenditures and letters of
credit. At June 30, 1998, there were approximately $11.3 million of letters of
credit issued against the agreement leaving approximately $53.7 million of
liquidity available to Avondale for operations and other purposes. There have
been no borrowings under the agreement since its inception in 1994. Continuing
access to the agreement is conditioned upon the Company remaining in compliance
with the covenants contained therein. At June 30, 1998, the Company was in
compliance with such covenants.
4. TENDER OFFER
In June 1998, the Company completed a tender offer purchasing 1.25 million
shares of its common stock at $28 7/8 per share. Under the terms of the offer,
the Company had invited its shareholders to tender their shares at prices
ranging from $26 1/2 to $29 per share as specified by each shareholder. The
total cost to the Company of completing the tender was approximately $36.3
million, including legal, consulting and other professional fees. The total
shares repurchased represented approximately 8.6% of the outstanding shares at
that date, and following the tender, the Company had approximately 13.2 million
shares of its common stock outstanding. The transaction was funded using
existing cash balances.
5. EARNINGS PER SHARE
The number of weighted average shares outstanding for "basic" EPS was 14,124,885
and 14,493,211 for the three months ended June 30, 1998 and 1997, respectively
and 14,308,031 and 14,488,034 for the six months ended June 30, 1998 and 1997,
respectively. The number of weighted average shares outstanding for "diluted"
EPS was 14,197,661 and 14,496,853 for the three months ended June 30, 1998 and
1997, respectively, and 14,385,443 and 14,498,211 for the six months ended June
30, 1998 and 1997, respectively. The difference in weighted average shares
outstanding of 72,776 and 3,642 for the three months ended June 30, 1998 and
1997, respectively, and 77,412 and 10,177 for the six months ended June 30, 1998
and 1997, respectively, relate to stock appreciation rights and options.
As discussed in Note 4 of the Notes to Consolidated Financial Statements herein,
the Company completed a tender offer purchasing 1.25 million shares of its
common stock in June 1998. Had the repurchase taken place as of January 1, 1997,
the Company's diluted earnings per share for the three and six months ended June
30, 1997, would have been $0.45 and $0.90, respectively. For the three and six
months ended June 30, 1998, the Company's diluted earnings per share would have
been $0.55 and $1.08, respectively.
<PAGE>
6. COMMITMENTS AND CONTINGENCIES
Litigation
As discussed in Note 9 of the Notes to Consolidated Financial Statements
included in the 1997 Form 10-K, the Company was advised in 1986 that it was a
potentially responsible party ("PRP") with respect to an oil reclamation site
operated by an unaffiliated company in Walker, Louisiana. To date, the Company
and certain of the other PRPs (the "Funding Group") for the site have funded the
site's remediation expenses, PRP identification expenses and related costs for
the participating parties. As of June 30, 1998 such costs totaled approximately
$19.0 million, of which the Company has funded approximately $4.0 million. Since
1988, the Funding Group filed petitions to add a number of companies as
third-party defendants with regard to the remedial action. The Funding Group has
agreed to settle with the majority of these companies. All funds collected are
placed in escrow to fund future expenses. At June 30, 1998, the balance of the
escrow was $8.5 million, which is to be used to fund any ongoing remediation
expenses. The Company will not be required to fund any future assessments until
the balance in escrow is depleted. There are additional settlements being
negotiated which could add to the balance in escrow.
Additional remedial work scheduled for the site includes completion of studies
and if required by the results of these studies, subsequent remediation.
Following completion of any such required additional remediation, it will be
necessary to obtain Environmental Protection Agency approval to close the site,
which consent may require subsequent post-closure activities such as groundwater
monitoring and site maintenance for many years. The Company is not able to
estimate the final costs for any such additional remedial work or post-closure
costs that may be required; however, the Company believes that its proportionate
share of expenditures for any additional work will not have a material impact on
the Company's financial statements. In addition, the Company and other members
of the Funding Group have entered into a final cost sharing agreement under
which all parties have agreed that there would be no re-allocation of previous
remediation costs, but that future remediation costs would be established by a
formula. Under this agreement, the Company's share of future costs will not
exceed 17.5%.
Furthermore, the Company has initiated litigation against its insurer for a
declaration of coverage of the liability, if any, that may arise in connection
with the remediation of the site referred to above. The court has ruled that the
insurer has the duty to defend the Company, but has not yet ruled on whether the
carrier has a duty to indemnify the Company if any liability is ultimately
assessed against it. After consultation with counsel, the Company is unable to
predict the eventual outcome of this litigation or the degree to which such
potential liability would be indemnified by its insurance carrier.
In addition to the above, the Company is also named as a defendant in numerous
other lawsuits and proceedings arising in the ordinary course of business, some
of which involve substantial claims.
The Company has established accruals as appropriate for certain of the matters
discussed above. While the ultimate outcome of lawsuits and proceedings against
the Company cannot be predicted with certainty, management believes, based on
current facts and circumstances and after review with counsel, that the eventual
resolution of these matters will not have a material adverse effect on the
Company's consolidated financial statements.
<PAGE>
Guarantee
Pursuant to agreements related to the University of New Orleans ("UNO")/Avondale
Maritime Technology Center of Excellence (the "Center"), the Company has agreed
to guarantee indebtedness with a principal amount not to exceed $40 million for
expenditures incurred by the UNO Research and Technology Foundation, Inc. (the
"Foundation") for the construction of the facility and the acquisition of
technology. Under the terms of a Cooperative Endeavor Agreement, the State of
Louisiana made a non-binding commitment to appropriate $40 million, plus
interest, in installments over a period from 1997 through 2007 for donation to
the Foundation for purposes of servicing the debt incurred in connection with
construction of the Center. Avondale and the Foundation anticipate that
appropriations by the State will be sufficient for the Foundation to service its
debt. However, if the State's appropriations are insufficient, Avondale will
ultimately be required to repay the debt. The Company's guarantee is unsecured.
As of June 30, 1998, the Foundation had incurred $29.2 million of cost to
construct and equip the Center. In connection with its non-binding commitment,
the State appropriated and paid $3.8 million during 1997, representing the first
installment to the Foundation. The second installment in the amount of $6.5
million was included in the Governor's executive budget for the fiscal year
beginning July 1, 1998. The budget has been approved and the Foundation expects
to receive the second installment during the third quarter of 1998.
Letters of Credit and Bonds
In the normal course of its business activities, the Company is required to
provide letters of credit and bonds to secure the payment of workers'
compensation obligations, other insurance obligations and to provide a debt
service reserve fund related to $34.4 million of Series 1994 industrial revenue
bonds. Additionally, under certain contracts the Company may be required to
provide letters of credit to secure certain performance obligations of the
Company thereunder. Outstanding letters of credit and bonds relating to these
business activities amounted to approximately $32.3 million at June 30, 1998 and
December 31, 1997.
7. RECENT ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Number 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards
for disclosure of operating segments, products, services, geographic areas and
major customers. The Company is required to adopt this standard for fiscal 1998.
Management believes that the implementation of SFAS 131 will not have a material
impact on the presentation of the Company's financial statements but may require
additional disclosure.
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Number 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" ("SFAS 132"). SFAS 132 revises the
standards for disclosure of pension and other postretirement benefit plans by
standardizing the disclosure requirements, requiring additional information on
changes in the benefit obligations and fair values of plan assets and
eliminating certain disclosure requirements no longer considered to be useful.
These new disclosure requirements are designed to improve the understandability
of benefit disclosures for financial analysis. The Company is required to adopt
this standard for fiscal 1998. Management believes that the implementation of
SFAS 132 will not have a material impact on the presentation of the Company's
financial statements but will require additional disclosure.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the Company's
unaudited consolidated financial statements for the periods ended June 30, 1998
and 1997 and Management's Discussion and Analysis of Financial Condition and
Results of Operations included under Item 7 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 (the "1997 Form 10-K").
Overview
The Company continued its trend of improvement in its operating results compared
to the same periods in the prior year. Income from operations increased 10% for
the second quarter of 1998 and 12% for the first six months of 1998 compared to
the same periods in the prior year. Further, net income increased 20% for the
second quarter and 19% for the first six months of 1998 over the same periods in
1997.
The Company's firm backlog at June 30, 1998 was approximately $1.5 billion
(including estimated contract escalation) exclusive of unexercised options
aggregating approximately $1.1 billion held by the U.S. Navy (the "Navy")
(including estimated contract escalation) and approximately $500 million held by
a commercial customer for additional ship orders. During 1998, the Navy
exercised a portion of its option for a seventh Strategic Sealift vessel
relating to approximately $50 million for long lead time materials. The balance
of approximately $200 million for this option is exercisable by the Navy during
the first quarter of 1999. Also, in July 1998, the Navy exercised a contract
modification, relating to approximately $78 million, authorizing the procurement
of long lead time materials for construction of a second vessel in the LPD-17
program. The Navy's option on the remainder of the second LPD vessel is
exercisable before the end of 1998. During the first quarter of 1998, the
Company delivered the LSD-CV 52 to the Navy representing the fourth and final
ship of this class constructed by the Company under two contracts. In addition,
the Company expects to complete the first of a contract to construct six
Strategic Sealift ships during 1998.
As previously disclosed, in December 1996 the Navy awarded, and in April 1997
the General Accounting Office affirmed, a $641 million contract to a Company-led
alliance, which includes Bath Iron Works ("Bath") and Raytheon Company
("Raytheon"), to design and construct the first of an anticipated 12 ships under
the Navy's LPD-17 program. The contract award provides for options exercisable
by the Navy for two additional LPD-17 class ships to be built by the alliance.
Under the terms of an agreement between the alliance members, the Company will
build the ship covered under the December 1996 contract, and, if the Navy
exercises the two options, the Company would construct the second while Bath
would construct the third of the three LPD-17 class ships to be built under the
initial contract. Raytheon is responsible for total ship integration. The
alliance is using an advanced three-dimensional ship design and product modeling
technology for the design and manufacture of the ships. As the prime contractor
under the LPD-17 contract, the Company is required to report in its financial
statements as sales and cost of sales the entire contract amount for each vessel
in the LPD-17 program constructed by the alliance. Under the subcontracting
agreements entered into between the Company and each of Bath and Raytheon, the
award fees that can be earned under the LPD-17 contract are to be allocated
among the alliance members in proportion to each member's performance and
participation in the construction of the vessel for which the award was granted.
To the extent that the Company's revenues include costs incurred and award fees
paid to the other alliance members, such revenues will be recorded with no gross
profit margin.
<PAGE>
Results of Operations
The Company recorded net income of $7.7 million, or $0.54 per share, for the
second quarter of 1998 compared to $6.4 million, or $0.44 per share, for the
second quarter of 1997. For the first six months of 1998, the Company recorded
net income of $15.0 million, or $1.04 per share, compared to $12.7 million, or
$0.87 per share, for the same period in 1997. Per share amounts are on a diluted
basis.
Income from operations for the quarter and six months ended June 30, 1998,
increased $1.1 million, or 10%, and $2.6 million, or 12%, respectively, compared
to the prior year periods. The improvement in the Company's operating results
for the second quarter and first six months of 1998 compared to the same periods
of the prior year primarily reflect operating profits recognized on the
contracts to construct the six Strategic Sealift ships, the Icebreaker and the
LSD-CV 52. Also contributing to the 1998 operating results were profits recorded
by the Company's wholesale steel, modular construction and marine repair
operations.
Sales for the second quarter of 1998 increased $32.7 million, or 22%, to $178.5
million compared to $145.8 million for the second quarter of 1997 while sales
for the first six months of 1998 reflected an increase of $77.8 million, or 27%,
compared to the same period in the prior year. The increase in sales in the
current periods is primarily a result of increased costs associated with
contracts in the initial stages of construction. In the second quarter and six
months ended June 30, 1998, the Company recorded increased sales on the
contracts to construct the six Strategic Sealift ships (the last of which is
expected to be delivered in 2001), the two 125,000 DWT double-hulled crude oil
carriers (both of which are scheduled for delivery in 2000) and the LPD-17
(expected to be delivered in 2002). The oil carrier and LPD contracts are in the
initial stages of construction resulting in significant engineering design and
material acquisition costs. The increases noted above were partially offset by
decreased sales recorded on contracts that are at or near completion. The
Company recorded decreased sales on the contract to retrofit four single-hulled
commercial tankers with new double hulls (the last of which was delivered in
September 1997) and the contracts to construct the Icebreaker (expected to be
delivered in the first quarter of 1999), the LSD-CV 52 (delivered in February
1998), the 100 river hopper barges (the last of which was delivered in November
1997) and the four coastal MHCs (the last of which was delivered in January
1997).
Gross profit for the second quarter and first six months of 1998 increased $1.8
million, or 9%, and $3.3 million, or 9%, respectively, compared to the same
periods in 1997. However, the gross profit margin percentage decreased
approximately 1.4% and 2.0%, respectively, for the three and six months ended
June 30, 1998 compared with the same periods in the prior year. The decreases in
gross profit margin percentages are primarily attributable to the fact that the
LPD-17 and the two double-hulled crude oil carriers are in the initial stages of
contract performance which result in significant engineering design and material
acquisition costs recorded as net sales with little or no corresponding gross
profit. The Company does not begin profit recognition until final results can be
estimated with reasonable accuracy. Refer to the 1997 Form 10-K for a discussion
of the Company's policies and procedures for revenue recognition. In addition,
the Company includes costs incurred and award fees paid to other members of the
alliance in the LPD-17 program as sales and cost of sales with no gross profit
margin.
<PAGE>
Selling, general and administrative ("SG&A") expenses increased $774,000, or 9%,
in the second quarter of 1998 and $753,000, or 4%, for the first six months of
1998 compared to the same periods in 1997. The increase in SG&A expenses was due
primarily to an increase in proposal preparation and related costs in 1998 in
connection with upcoming U.S. Government and commercial shipbuilding
opportunities.
Other income increased $667,000, or 94%, and $1.3 million, or 97%, for the
second quarter and first six months of 1998, respectively, compared to the same
periods in the prior year. This increase is primarily attributable to an
increase in interest income resulting from significantly higher cash and cash
equivalents available for investment during the period preceding the stock
repurchase.
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Number 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS 131"). SFAS 131 establishes standards
for disclosure of operating segments, products, services, geographic areas and
major customers. The Company is required to adopt this standard for fiscal 1998.
Management believes that the implementation of SFAS 131 will not have a material
impact on the presentation of the Company's financial statements but may require
additional disclosure.
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Number 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" ("SFAS 132"). SFAS 132 revises the
standards for disclosure of pension and other postretirement benefit plans by
standardizing the disclosure requirements, requiring additional information on
changes in the benefit obligations and fair values of plan assets and
eliminating certain disclosure requirements no longer considered to be useful.
These new disclosure requirements are designed to improve the understandability
of benefit disclosures for financial analysis. The Company is required to adopt
this standard for fiscal 1998. Management believes that the implementation of
SFAS 132 will not have a material impact on the presentation of the Company's
financial statements but will require additional disclosure.
In accordance with the U. S. Securities and Exchange Commission's Staff Legal
Bulletin No. 5, the Company has assessed both the cost of addressing and the
cost or the consequences of incomplete or untimely resolution of the Year 2000
issue. This assessment included a comprehensive review to identify the systems
that could be affected by the Year 2000 issue and the development of an
implementation plan. The implementation plan includes both replacement and
upgrades of certain systems or equipment. The Company is incurring both internal
staff costs as well as consulting and other expenses related to these issues.
Maintenance and modification costs related to the Year 2000 issue will be
expensed as incurred and new software will be capitalized and amortized over its
useful life.
The Company has established a three-phased approach for its solution of the Year
2000 issue which includes: identification of all systems, assessment of each
system's compliance with the Year 2000 issue, and the testing and
modification/replacement of non-compliant systems. The Company is presently in
the final phase of this program and expects to incur a total of $5.0 to $7.0
million in remediating the Year 2000 issue. The Company expects to complete its
solution to the Year 2000 issue during the first six months of 1999.
<PAGE>
In addition, the Company is in the process of initiating communications with its
significant suppliers and large customers (including the U. S. Navy) to
determine the extent to which the Company is vulnerable to those third parties'
failure to remediate their own Year 2000 issues. The Company can give no
assurance that the systems of suppliers or customers on which the Company relies
will be converted on time or that failure to convert by another company would
not have a material adverse effect on the Company.
Liquidity and Capital Resources
The Company's cash and cash equivalents totaled $67.4 million at June 30, 1998
as compared to $81.8 million at December 31, 1997. The Company's primary use of
cash during the first six months of 1998 was the repurchase of 1.25 million
shares of the Company's common stock for $36.3 million. Other uses of cash in
the current six month period consisted of capital expenditures of $11.5 million
and payments on long-term borrowings of $2.1 million.
As discussed above, during the second quarter of 1998, the Company completed a
tender offer purchasing 1.25 million shares of its common stock at $28 7/8 per
share. Under the terms of the offer, the Company had invited its shareholders to
tender their shares at prices ranging from $26 1/2 to $29 per share as specified
by each shareholder. The total cost to the Company of completing the tender was
approximately $36.3 million, including legal, consulting and other professional
fees. The total shares repurchased represent approximately 8.6% of the
outstanding shares at that date, and following the tender, the Company had
approximately 13.2 million shares of its common stock outstanding. The
transaction was funded using existing cash balances.
Capital expenditures for the first six months of 1998 increased $8.2 million to
$11.5 million compared to $3.3 million for the same period in 1997. This
increase is primarily attributable to plant improvements and equipment additions
which are designed to improve the Company's operating efficiency. The Company
continues to evaluate investment opportunities, particularly productivity and
technology-focused capital expenditures, in order to enhance the Company's
overall efficiency and provide for future growth. As a result, the Company
expects to increase capital spending during the next several years above the
levels of 1996 and 1997. Included in this increased spending is approximately
$5.0 million in connection with the acquisition and implementation of new
integrated business systems software.
The Company's $65 million revolving credit agreement (the "agreement") provides
liquidity for working capital purposes, capital expenditures and letters of
credit. At June 30, 1998, there were approximately $11.3 million of letters of
credit issued against the agreement leaving approximately $53.7 million of
liquidity available to Avondale for operations and other purposes. There have
been no borrowings under the agreement since its inception in 1994. Continuing
access to the agreement is conditioned upon the Company remaining in compliance
with the covenants contained therein. At June 30, 1998, the Company was in
compliance with such covenants. The Company believes that its capital resources
will be sufficient to finance current and projected operations, existing debt
service requirements and planned capital expenditures.
<PAGE>
In order to comply with the terms of the LPD-17 contract, the Company was
required to make significant capital improvements, including enhancing its
computer-aided design and product modeling capabilities. As a result, the
Company teamed with the University of New Orleans (the "University" or "UNO"),
the University of New Orleans Research and Technology Foundation, Inc. (the
"Foundation") and the State of Louisiana in a cooperative effort. Pursuant to
terms of various agreements, the Foundation is purchasing hardware and software
required to implement the extensive three-dimensional ship design and Integrated
Product Data Environment teaming technology and constructed a 200,000 square
foot building on property donated to the University by the Company and located
adjacent to the Company's main shipyard. This facility was completed during the
second quarter of 1998. The initial $40 million investment in this new
technology and facility, which is known as the "UNO/Avondale Maritime Technology
Center of Excellence" (the "Center"), is being financed by the Foundation using
third-party debt and lease financing, both of which are guaranteed by the
Company. The Company has entered into a long-term lease for the Center requiring
a nominal annual lease payment. The Company provides access to the technology
and a portion of the Center to the University for its use in research and the
development of educational curricula related to naval architecture and marine
engineering. During the remainder of 1998, additional amounts are expected to be
incurred in order to complete the customization of the design software to comply
with the LPD-17 requirements.
The Foundation is the borrower on all indebtedness incurred to construct and
equip the Center. Under the terms of a Cooperative Endeavor Agreement, the State
of Louisiana made a non-binding commitment to appropriate $40 million, plus
interest, in installments over a period from 1997 through 2007 for donation to
the Foundation for purposes of funding the Center. Avondale and the Foundation
anticipate that appropriations by the State will be sufficient for the
Foundation to service its debt. However, if the State's appropriations are
insufficient, Avondale will ultimately be required to repay the debt. The
Company's guarantee is unsecured. As of June 30, 1998, the Foundation had
incurred $29.2 million of cost to construct and equip the Center. In connection
with its non-binding commitment, the State appropriated and paid $3.8 million
during 1997, representing the first installment to the Foundation. The second
installment in the amount of $6.5 million was included in the Governor's
executive budget for the fiscal year beginning July 1, 1998. The budget has been
approved and the Foundation expects to receive the second installment during the
third quarter of 1998.
<PAGE>
Cautionary Statement for Purposes of "Safe Harbor" Provisions of the Private
Securities Litigation Reform Act of 1995
Certain statements, other than statements of historical fact, contained in this
Quarterly Report on Form 10-Q are forward-looking statements. These
forward-looking statements are generally accompanied by such terms and phrases
as "anticipates," "estimates," "expects," "believes," "should," "projects,"
"scheduled," or similar statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause the Company's results to differ materially
from the results discussed in such forward-looking statements include the
Company's reliance on U.S. Navy contracts, including its ability to replenish
its backlog by securing additional contracts from the U.S. Navy, profit
recognition on government contracts, the outcome of the Company's litigation
involving efforts to unionize the Company's production workers and the
competitive impact of a resolution in favor of the union, the importance of
obtaining commercial contracts, the Company's ability to complete its contracts
within its cost estimates, intense competition for government and commercial
contracts, labor, regulatory and other risks in the shipbuilding and marine
construction industries and other unanticipated events affecting the Company's
efforts and the efforts of its suppliers, subcontractors, and customers
(including the U. S. Navy) to timely correct Year 2000 problems inherent in
essential computer systems, which could impair the Company's operations or the
ability of its customers to timely pay for products and services provided. All
forward-looking statements in this Form 10-Q are expressly qualified in their
entirety by the cautionary statements in this paragraph.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of the shareholders of Avondale
Industries, Inc. held on June 12, 1998, 11,821,207 shares of the
14,493,211 shares outstanding were present in person or by proxy
at the meeting. The voting tabulation follows:
(a) The election of the following to the Board of Directors:
Francis R. Donovan, 11,088,704 votes for, 732,503 votes
withheld and Thomas M. Kitchen, 11,036,798 votes for,
784,409 votes withheld. The directors were elected by
plurality vote.
The following is a list of each other director whose
term of office as a director continued after the
meeting:
Albert L. Bossier, Jr., Anthony J. Correro, III, Kenneth
B. Dupont, and Hugh A. Thompson.
(b) A proposal to urge the Board of Directors to redeem the
rights issued under the Shareholder Protection Rights
Plan: 6,964,264 for, 3,707,745 against, 68,272 abstained
and 1,080,926 broker nonvotes. Proposal (b), which
required the approval of a majority of the shares of
Common Stock present or represented at the Annual
Meeting, is a precatory, non-binding resolution.
(c) A proposal to urge the Board of Directors to implement
confidential voting by Shareholders: 6,434,097 for,
4,238,999 against, 67,185 abstained and 1,080,926 broker
nonvotes.
(d) A proposal related to declassification of the Board of
Directors: 7,019,512 for, 3,645,396 against, 75,373
abstained and 1,080,926 broker nonvotes.
Proposals (c) and (d) required the affirmative vote of 80% of
the total outstanding Common Stock. Each of these proposals has
failed to pass at five consecutive annual meetings and, at each
of these meetings, received the affirmative vote of less than a
majority of the outstanding shares.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Company(1).
3.2 Bylaws of the Company.
10.3 Employee Benefit Plans
(c) The Company's Amended and Restated
Employee Stock Ownership Plan(2) as
further amended by: Amendment No. 1
adopted April 5, 1995(3) , Amendment
No. 2 adopted June 16, 1995(4) ,
Amendment No. 3 adopted February 5,
1996(5) , Amendment No. 4 adopted
December 31, 1996(6) , Amendment No. 5
adopted December 30, 1997(7) , and
Amendment No. 6 adopted May 5, 1998
and the related Amended and Restated
Trust Agreement(5) as further amended
by Amendment No. 1 adopted May 5,
1998.
(e) The Company's Amended and Restated
Supplemental Pension Plan(8), as
amended by Amendment Nos. 1 and 2
thereto adopted December 29, 1989(9),
and Amendment No.
3 adopted May 5, 1998.
(f) The Company's Executive Excess
Retirement Plan(9) as amended by
Amendment No.1 adopted February 2,
1998 and Amendment No. 2 adopted May
5, 1998.
15 Letter re: unaudited interim financial
information.
27 Financial Data Schedule
(b) Reports on Form 8-K:
Not applicable.
- ---------------
(1) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1993.
(2) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
(3) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1995.
<PAGE>
(4) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1995.
(5) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1996.
(6) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996.
(7) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1997.
(8) Incorporated by reference from the Company's Registration
Statement on Form S-1 (Registration No. 33-20145) filed with the
Commission on February 16, 1988.
(9) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, as amended
by Form 10-K/A.
<PAGE>
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.
AVONDALE INDUSTRIES, INC.
Date: August 14, 1998 By:/s/ ALBERT L. BOSSIER, JR.
--------------- ---------------------------
Albert L. Bossier, Jr.
Chairman, President &
Chief Executive Officer
Date: August 14, 1998 By:/s/ THOMAS M. KITCHEN
--------------- ---------------------
Thomas M. Kitchen
Corporate Vice President &
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Number Description
- ------ ----------------------------------------------------------------------
3.1 Articles of Incorporation of the Company(1).
3.2 Bylaws of the Company.
10.3 Employee Benefit Plans
(c) The Company's Amended and Restated Employee Stock Ownership
Plan(2) as further amended by: Amendment No. 1 adopted April 5,
1995(3) , Amendment No. 2 adopted June 16, 1995(4), Amendment
No. 3 adopted February 5, 1996(5), Amendment No. 4 adopted
December 31, 1996(6), Amendment No. 5 adopted December 30,
1997(7), and Amendment No. 6 adopted May 5, 1998 and the related
Amended and Restated Trust Agreement (5) as further amended by
Amendment No. 1 adopted May 5, 1998.
(e) The Company's Amended and Restated Supplemental Pension Plan(8),
as amended by Amendment Nos. 1 and 2 thereto adopted December
29, 1989(9), and Amendment No. 3 adopted May 5, 1998.
(f) The Company's Executive Excess Retirement Plan(9) as amended by
Amendment No.1 adopted February 2, 1998 and Amendment No. 2
adopted May 5, 1998.
15 Letter re: unaudited interim financial information.
27 Financial Data Schedule
- ---------------
(1) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1993.
(2) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.
(3) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1995.
<PAGE>
(4) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 1995.
(5) Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 31, 1996.
(6) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996.
(7) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1997.
(8) Incorporated by reference from the Company's Registration
Statement on Form S-1 (Registration No. 33-20145) filed with the
Commission on February 16, 1988.
(9) Incorporated by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1991, as amended
by Form 10-K/A.
BY-LAWS
OF
AVONDALE INDUSTRIES, INC.
(as adopted on March 20, 1990)
(Section 3.1 of which was amended on June 13, 1994,
Section 5.2 of which was amended and Section 5.4
of which was deleted on December 5, 1994,
Section 2.14 of which was added on July 17, 1995,
Section 12 of which was amended on August 4,
1997, Section 5.2 of which was amended on November
3, 1997, and
Section 3.1 of which was amended on March 23, 1998)
SECTION I
OFFICES
1.1 Principal Office. The principal office of the Corporation shall be
located at 5100 River Road, Avondale, Louisiana 70094.
1.2 Additional offices. The Corporation may have such offices at such
other places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
SECTION 2
SHAREHOLDERS MEETINGS
2.1 Place of Meetings. Unless otherwise required by law or these
By-laws, all meetings of the shareholders shall be held at the principal office
of the Corporation or at such other place, within or without the State of
Louisiana, as may be designated by the Board of Directors.
2.2 Annual Meetings; Notice Thereof. An annual meeting of the
shareholders shall be held on the fourth Monday of April in each year, at 10:00
a.m., or at such other date or at such other time specified as the Board of
Directors shall designate, for the purpose of electing directors and for the
transaction of such other business as may be properly brought before the
meeting. If no annual shareholders' meeting is held for a period of eighteen
months, any shareholder may call such meeting to be held at the registered
office of the Corporation as shown on the records of the Secretary of State of
Louisiana.
<PAGE>
2.3 Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, may be called by the Chairman of the Board, Chief Executive
Officer and President or the Board of Directors. At any time, upon the written
request of any shareholder or group of shareholders holding in the aggregate at
least 80% of the Total Voting Power (such term to have the same meaning in these
By-laws as is assigned in Article III of the Articles of Incorporation), the
Secretary shall call a special meeting of shareholders to be held at the
registered office of the Corporation at such time as the Secretary may fix, not
less than fifteen nor more than sixty days after the receipt of said request,
and if the Secretary shall neglect or refuse to fix such time or to give notice
of the meeting, the shareholder or shareholders making the request may do so.
Such request must state the specific purpose or purposes of the proposed special
meeting and the business to be conducted thereat shall be limited to such
purpose or purposes.
2.4 Notice of Meetings. Except as otherwise provided by law, the
authorized person or persons calling a shareholders' meeting shall cause written
notice of the time, place and purpose of the meeting to be given to all
shareholders entitled to vote at such meeting, at least ten days and not more
than sixty days prior to the day fixed for the meeting. Notice of the annual
meeting need not state the purpose or purposes thereof, unless action is to be
taken at the meeting as to which notice is required by law or the By-laws.
Notice of a special meeting shall state the purpose or purposes thereof, and the
business conducted at any special meeting shall be limited to the purpose or
purposes stated in the notice.
2.5 List of Shareholders. At every meeting of shareholders, a list of
shareholders entitled to vote, arranged alphabetically and certified by the
Secretary or by the agent of the Corporation having charge of transfers of
shares, showing the number and class of shares held by each such shareholder on
the record date for the meeting, shall be produced on the request of any
shareholder.
2.6 Quorum. At all meetings of shareholders, the holders of a majority
of the Total Voting Power shall constitute a quorum provided that this
subsection shall not have the effect of reducing the vote required to approve or
affirm any matter that may be established by law, the Articles of Incorporation
or these By-laws.
2.7 Voting. When a quorum is present at any meeting, the vote of the
holders of a majority of the Voting Power (as defined in Article III of the
Articles of Incorporation) present in person or represented by proxy shall
decide each question brought before such meeting, unless the question is one
upon which, by express provision of law or the Articles of Incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question. Directors shall be elected by
plurality vote.
2.8 Proxies. At any meeting of the shareholders, every shareholder
having the right to vote shall be entitled to vote in person or by proxy
appointed by an instrument in writing subscribed by such shareholder and bearing
a date not more than eleven months prior to the meeting, unless the instrument
provides for a long period, but in no case will an outstanding proxy be valid
for longer than three years from the date of its execution, provided that in no
event may a proxy be voted at a meeting called pursuant to La. R.S. 12:138
unless it is executed and dated by the shareholder within 30 days of the date of
such meeting. The person appointed as proxy need not be a shareholder of the
Corporation.
<PAGE>
2.9 Adjournments. Adjournments of any annual or special meeting of
shareholders may be taken without new notice being given unless a new record
date is fixed for the adjourned meeting, but any meeting at which directors are
to be elected shall be adjourned only from day to day until such directors shall
have been elected.
2.10 Withdrawal. If a quorum is present or represented at a duly
organized meeting, such meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum as fixed in Section 2.6 of these By-laws, or the refusal of any
shareholders present to vote.
2.11 Lack of Quorum. If a meeting cannot be organized because a quorum
has not attended, those present may adjourn the meeting to such time and place
as they may determine, subject, however, to the provisions of Section 2.9
hereof. In the case of any meeting called for the election of directors, those
who attend the second of such adjourned meetings, although less than a quorum as
fixed in Section 2.6 hereof, shall nevertheless constitute a quorum for the
purpose of electing directors.
2.12 Presiding officer. The Chairman of the Board, Chief Executive
Officer and President or in his absence, a chairman designated by the Board of
Directors, shall preside at all shareholders' meetings.
2.13 Definition of Shareholder. As used in these By-laws, and unless
the context otherwise requires, the term shareholder shall mean a person who is
(i) the record holder of shares of the Corporation's voting stock or (ii) a
registered holder of any bonds, debentures or similar obligations granted voting
rights by the Corporation pursuant to La. R.S. 12:75A.
2.14 Shareholder Proposals. No shareholder proposal shall be considered
by the shareholders at any annual or special meeting unless such proposal has
been properly brought before such meeting. No shareholder proposal shall be
deemed to have been properly brought before a special meeting of shareholders
unless (i) the proposal is submitted by the person or persons calling the
special meeting and (ii) the proposal is contained in the notice of the meeting.
No shareholder proposal shall be deemed to have been properly brought before an
annual meeting unless each of the following conditions is satisfied:
<PAGE>
(a) Sufficient notice of the proposal must be received by the
Secretary of the Corporation not less than 120 days in advance of the
date in the current year that corresponds to the date on which proxy
materials were first mailed by the Corporation in connection with the
previous year's annual meeting. In the event of the change of the date
of the annual meeting to a date that is 30 days earlier or later than
the date in the current year that corresponds to the date on which the
annual meeting was held in the previous year, or if no annual meeting
was held in the previous year, sufficient notice of the proposal must
be received by the Secretary of the Corporation no later than the date
set by the Corporation in a public announcement to shareholders, which
date shall be no earlier than a reasonable time before the
Corporation's proxy solicitation is first made in connection with the
meeting. Notice of the proposal will be sufficient only if it contains
(i) a complete and accurate description of the proposal; (ii) a
statement that the shareholder intends to attend the meeting and
present the proposal and to hold of record securities of the
Corporation entitled to vote at the meeting through the meeting date;
and (iii) the shareholder's name and address and the number of shares
of the Corporation's voting securities that the shareholder holds of
record or beneficially as of the notice date. The shareholder shall
continue to hold of record securities of the Corporation entitled to
vote at the meeting through the meeting date.
(b) The Board of Directors shall have the power to limit the
shareholder proposals to be considered at a meeting to the first ten
shareholder proposals of which the Secretary of the Corporation
receives sufficient notice.
(c) If the Secretary of the Corporation has received
sufficient notice of a shareholder proposal that may properly be
brought before the meeting, a shareholder proposal sufficient notice of
which is subsequently received by the Secretary and that is
substantially duplicative of the first proposal shall not be properly
brought before the meeting. If a shareholder proposal deals with
substantially the same subject matter as a prior proposal submitted to
shareholders at a meeting held within the preceding five calendar
years, it shall not be properly brought before any meeting held within
three calendar years after the latest such previous submission,
provided that:
(i) if the proposal was submitted at only one
meeting during such preceding period, it
received less than 3% of the total number of
votes cast in regard thereto; or
(ii) if the proposal was submitted at only two
meetings during such preceding period, it
received at the time of its second
submission less than 6% of the total number
of votes cast in regard thereto; or
(iii) if the proposal was submitted at three or
more meetings during such preceding period,
it received at the time of its latest
submission less than 10% of the total number
of votes cast in regard thereto.
<PAGE>
(d) Notwithstanding compliance with Sections 2.14(a), (b), and
(c), no shareholder proposal shall be deemed to be properly brought
before a shareholders' meeting if it is not a proper subject for action
by shareholders under Louisiana law or the Articles of Incorporation.
(e) Any proposal failing to comply with Sections 2.14(a), (b),
(c), or (d) shall not be considered at the meeting and, if introduced
at the meeting, shall be ruled out of order. If a shareholder presents
a proposal at a meeting but does not continue to hold of record
securities of the Corporation entitled to vote at the meeting through
the meeting date, as required by Section 2.14(a), no proposal by that
shareholder shall be considered at any shareholders' meeting held in
the following two calendar years.
(f) Nothing in this Section 2.14 is intended to confer any
rights to have any proposal included in the notice of any meeting or in
proxy materials related to such meeting.
SECTION 3
DIRECTORS
3.1 Number. All of the corporate powers shall be vested in, and the
business and affairs of the Corporation shall be managed by, a Board of
Directors. Except as otherwise fixed by or pursuant to Article III of the
Articles of Incorporation (as it may be duly amended from time to time) relating
to the rights of the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation to elect, by class
vote, additional directors under particular circumstances, the Board of
Directors shall consist of not less than six and not more than nine natural
persons, as established from time to time by a resolution of the Board of
Directors provided that, if after proxy materials for any meeting of
shareholders at which directors are to be elected are mailed to shareholders any
person or persons named therein to be nominated at the direction of the Board of
Directors becomes unable or unwilling to serve, the foregoing number of
authorized directors as provided by the Board resolution then in effect shall be
automatically reduced by a number equal to the number of such persons unless the
Board of Directors, by a majority vote of the entire Board, selects an
additional nominee. The Board of Directors may, by a two-thirds vote, amend this
Section 3.1 to increase or decrease the number of directors, provided that no
amendment to this Section to decrease the number of directors shall shorten the
term of any incumbent director. No director need be a shareholder. The Secretary
shall have the power to certify at any time as to the number of directors
authorized and as to the class to which each director has been elected or
assigned.
3.2 Powers. The Board may exercise all such powers of the Corporation
and do all such lawful acts and things which are not by law, the Articles of
Incorporation or these By-laws directed or required to be done by the
shareholders.
<PAGE>
3.3 Classes. The Board of Directors, other than those directors who may
be elected by the holders of any class or series of stock having preference over
the Common Stock as to dividends or upon liquidation, shall be divided into
three classes as nearly equal in number as may be, with the initial term of
office of Class I expiring at the first annual meeting of shareholders occurring
more than nine months after the incorporation of the Corporation, of Class II
expiring at the first succeeding annual meeting of shareholders and of Class III
expiring at the second succeeding annual meeting of shareholders. Any increase
or decrease in the number of directors shall be apportioned by the Board of
Directors so that all classes of directors shall be as nearly equal in number as
can be.
3.4 General Election. At each annual meeting of shareholders, directors
shall be elected to succeed those directors whose terms then expire. Such newly
elected directors shall serve until the third succeeding annual meeting of
shareholders after their election and until their successors are elected and
qualified. A director elected to fill a vacancy shall hold office for a term
expiring at the annual meeting at which the term of the class to which he shall
have been elected expires. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director.
3.5 Vacancies. Except as otherwise provided in the Articles of
Incorporation or these By-laws (a) the office of a director shall become vacant
if he dies, resigns or is removed from office and (b) the Board of Directors may
declare vacant the office of a director if he (i) is interdicted or adjudicated
an incompetent, (ii) is adjudicated a bankrupt, (iii) in the sole opinion of the
Board of Directors becomes incapacitated by illness or other infirmity so that
he is unable to perform his duties for a period of six months or longer, or (iv)
ceases at any time to have the qualifications required by law, the Articles of
Incorporation or these By-laws.
3.6 Filling Vacancies. In the event of a vacancy (including any vacancy
resulting from an increase in the authorized number of directors, or from
failure of the shareholders to elect the full number of authorized directors)
the remaining directors, even though not constituting a quorum, may fill any
vacancy on the Board for the unexpired term by a vote of at least two-thirds of
the directors remaining in office at any time that there is no Related Person
(as such term is defined in Article V.A.2 of the Articles of Incorporation) and
a two-thirds vote of all Continuing Directors who remain in office at any time
there is a Related Person, provided that the shareholders shall have the right,
at any special meeting called for the purpose prior to such action by the Board,
to fill the vacancy.
3.7 Directors Elected by Preferred Shareholders. Notwithstanding
anything in the foregoing to the contrary, whenever the holders of any one or
more series of preferred stock of the Corporation shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
provisions of Article III of the Articles of Incorporation (as it may be duly
amended from time to time) fixing the rights and preferences of such preferred
stock shall govern with respect to the election, removal, vacancies or other
related matters with respect to such directors.
<PAGE>
3.8 Notice of Shareholder Nominees. Only persons who are nominated in
accordance with the procedures set forth in this Section 3.8 shall be eligible
for election as directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of shareholders by or at
the direction of the Board of Directors or by a shareholder of the Corporation
entitled to vote for the election of directors at the meeting who complies with
the notice procedures set forth in this Section 3.8. Such nominations, other
than those made by or at the direction of the Board of Directors, shall be made
pursuant to timely notice in writing to the Secretary of the Corporation. To be
timely, a shareholder's notice must be delivered or mailed and received at the
principal executive offices of the Corporation not less than 45 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 55 days notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder to be timely must be
received no later than the close of business on the 10th day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such shareholder's notice shall set forth the following:
a. as to each person whom the shareholder proposes to nominate
for election or re-election as a director (i) the name, age, business
address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of
shares of the capital stock of the Corporation of which such person is
the beneficial owner (determined in accordance with Article V.A.2 of
the Articles of Incorporation) and (iv) any other information relating
to such person that would be required to be disclosed in solicitations
of proxies for election of directors, or would be otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including without limitation such person's
written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); and
b. as to the shareholder giving the notice (i) the name and
address of such shareholder and (b) the class and number of shares of
the capital stock of the Corporation of which such shareholder is the
beneficial owner (determined in accordance with Article V.A.2 of the
Articles of Incorporation) . If requested in writing by the Secretary
the Corporation at least 15 days in advance of the meeting, such
shareholder shall disclose to the Secretary, within 10 days of such
request, whether such person is the sole beneficial owner of the shares
held of record by him; and, if not, the name and address of each other
person known by the shareholder of record to claim a beneficial
interest in such shares.
<PAGE>
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 shall furnish to
the Secretary of the Corporation that information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee. If a
shareholder seeks to nominate one or more persons as directors, the Secretary
shall appoint two Inspectors, who shall not be affiliated with the Corporation,
to determine whether a shareholder has complied with this Section 3.8. If the
Inspectors shall determine that a shareholder has not complied with this Section
3.8, the Inspectors shall direct the Chairman of the meeting to declare to the
meeting that a nomination was not made in accordance with the procedures
prescribed by the Articles of Incorporation or these By-laws; and the Chairman
shall so declare to the meeting and the defective nomination shall be
disregarded.
The provisions of this Section 3.8 shall not apply to the election of
any directors which the holders of preferred stock of the Corporation, voting
separately as a class, may be entitled to elect.
3.9 Compensation of Directors. Directors as such, shall receive such
compensation for their services as may be fixed by resolution of the Board of
Directors and shall receive their actual expenses of attendance, if any, for
each regular or special meeting of the Board; provided that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
<PAGE>
SECTION 4
MEETINGS OF THE BOARD
4.1 Place of Meetings. The meetings of the Board of Directors may be
held at such place within or without the State of Louisiana as a majority of the
directors may from time to time appoint.
4.2 Initial Meetings. The first meeting of each newly elected Board
shall be held immediately following the shareholders' meeting at which the Board
is elected and at the same place as such meeting, and no notice of such first
meeting shall be necessary for the newly elected directors in order legally to
constitute the meeting.
4.3 Regular Meetings; Notice. Regular meetings of the Board may be held
at such times as the Board may from time to time determine. Notice of regular
meetings of the Board of Directors shall be required, but no special form of
notice or time of notice shall be necessary.
4.4 Special Meetings; Notice. Special meetings of the Board may be
called by the Chairman of the Board, Chief Executive Officer and President on
reasonable notice given to each director, either personally or by telephone,
mail or by telegram. Special meetings shall be called by the Chairman of the
Board, Chief Executive Officer and President, or the Secretary in like manner
and on like notice on the written request of a majority of the directors and if
such officers fail or refuse, or are unable within 24 hours to call a meeting
when requested, then the directors making the request may call the meeting on
two days' written notice given to each director. The notice of a special meeting
of directors need not state its purpose or purposes, but if the notice states a
purpose or purposes and does not state a further purpose to consider such other
business as may properly come before the meeting, the business to be conducted
at the special meeting shall be limited to the purposes stated in the notice.
4.5 Waiver of Notice. Directors present at any regular or special
meeting shall be deemed to have received due, or to have waived, notice thereof,
provided that a director who participates in a meeting by telephone (as
permitted by Section 4.9 hereof) shall not be deemed to have received or waived
due notice if, at the beginning of the meeting, he objects to the transaction of
any business because the meeting is not lawfully called.
4.6 Quorum. A majority of the Board shall be necessary to constitute a
quorum for the transaction of business, and except as otherwise provided by law
or the Articles of Incorporation or these By-laws, the acts of a majority of the
entire Board of Directors at a meeting at which a quorum is present shall be the
acts of the Board. If a quorum is not present at any meeting of the Board of
Directors, the directors present may adjourn the meeting from time to time
without notice other than announcement at the meeting, until a quorum is
present.
<PAGE>
4.7 Withdrawal. If a quorum is present when the meeting convened, the
directors present may continue to do business, taking action by vote of a
majority of a quorum as fixed in Section 4.6 hereof, until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum
as fixed in Section 4.6 hereof or the refusal of any director present to vote.
4.8 Action by Consent. Any action which may be taken at a meeting of
the Board or any committee thereof, may be taken by a consent in writing signed
by all of the directors or by all members of the committee, as the case may be,
and filed with the records of proceedings of the Board or Committee.
4.9 Meetings by Telephone or Similar Communication. Members of the
Board may participate at and be present at any meeting of the Board or any
committee thereof by means of conference telephone or similar communications
equipment if all persons participating in such meeting can hear and communicate
with each other.
SECTION 5
COMMITTEES OF THE BOARD
5.1 General. The Board may designate one or more committees, each
committee to consist of two or more of the directors of the Corporation (and one
or more directors may be named as alternate members to replace any absent or
disqualified regular members), which, to the extent provided by resolution of
the Board or the By-laws, shall have and may exercise the powers of the Board in
the management of the business and affairs of the Corporation, and may have
power to authorize the seal of the Corporation to be affixed to documents, but
no such committee shall have power or authority in reference to amending the
Articles of Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of dissolution,
removing or indemnifying directors or amending the By-laws; and unless the
resolution expressly so provides, no such committee shall have the power or
authority to declare a dividend or authorize issuance of stock. Such committee
or committees shall have such name or names as may be stated in the By-laws, or
as may be determined, from time to time, by the Board. Any vacancy occurring in
any such committee shall be filled by the Board, but the President may designate
another director to serve on the committee pending action by the Board. Each
such member of a committee shall hold office during the term of the Board
constituting it, unless otherwise ordered by the Board.
<PAGE>
5.2 Compensation Committee. The Board shall establish a Compensation
Committee consisting of at least two directors. The Compensation Committee shall
administer the Performance Share Plan, the Stock Appreciation Plan, any
incentive compensation plans involving securities of the Corporation adopted by
the Corporation in the future and employment contracts with any employee, and
shall have plenary authority with respect to all compensation related matters.
Each of the members of the Compensation Committee shall be a "disinterested
person" as defined in Rule 16b-3 promulgated under the Securities Exchange Act
of 1934 and an "outside director" as defined in the regulations promulgated
under 162(m) of the Internal Revenue Code. The Compensation Committee shall
determine the general compensation policies of the Corporation and the
compensation to be paid to executive officers of the Corporation. If the
Compensation Committee is composed of an even number of persons, in the event of
a disagreement, which cannot in good faith be resolved, it will be resolved by
the affirmative vote of a majority of the entire Board.
5.3 Audit Committee. The Board shall establish an Audit Committee
consisting of at least three directors who are not officers or employees of the
Corporation or any of its affiliates. The Audit Committee shall (i) serve as a
focal point for communication between noncommittee directors, the independent
accountants, internal audit and management, as their duties relate to financial
accounting, reporting and controls, (ii) assist the Board of Directors in
fulfilling its fiduciary responsibilities as to accounting policies and
reporting practices of the Corporation and all subsidiaries and the sufficiency
of auditing relative thereto and (iii) operate as the Board's principal agent in
ensuring the independence of the Corporation's independent accountants, the
integrity of management and the adequacy of disclosure to shareholders.
SECTION 6
REMOVAL OF BOARD MEMBER
Any director or the entire Board of Directors may be removed at any
time, but only for cause (as such term is defined in Article IV.C of the
Articles of Incorporation), by the affirmative vote of not less than 80% of the
Total Voting Power, provided that the removal may only be effected at a meeting
of shareholders duly called for that purpose. The shareholders at such meeting
may proceed to elect a successor or successors for the unexpired term of the
director or directors removed. Except as provided in the Articles of
Incorporation and in this Section 6, directors shall not be subject to removal.
SECTION 7
NOTICES
7.1 Form of Delivery. Whenever under the provisions of law the Articles
of Incorporation or these By-laws notice is required to be given to any
shareholder or director, it shall not be construed to mean personal notice
unless otherwise specifically provided in the Articles of Incorporation or these
By-laws, but said notice may be given by mail, addressed to such shareholder or
director at his address as it appears on the records of the Corporation, with
postage thereon prepaid. Such notices shall be deemed to have been given at the
time they are deposited in the United States mail. Notice to a director pursuant
to Section 4.4 hereof may also be given personally or by telephone or telegram
sent to his address as it appears on the records of the Corporation.
<PAGE>
7.2 Waiver. Whenever any notice is required to be given by law, the
Articles of Incorporation or these By-laws, a waiver thereof in writing signed
by the person or persons entitled to said notice, whether before or after the
time stated therein, shall be deemed equivalent thereto. In addition, notice
shall be deemed to have been given to, or waived by, any shareholder or director
who attends a meeting of shareholders or directors in person, or is represented
at such meeting by proxy, without protesting at the commencement of the meeting
the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 8
OFFICERS
8.1 Designations. The officers of the corporation shall be chosen by
the directors and shall be the Chairman of the Board, Chief Executive officer
and President (with all such offices to be held by one person), a Secretary and
a Treasurer. The directors may elect one or more Vice Presidents. Any two
offices may be held by one person, provided that no person holding more than one
office may sign, in more than one capacity, any certificate or other instrument
required by law to be signed by two officers.
8.2 Additional Designations. The Board of Directors may appoint such
other officers as it shall deem necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board.
8.3 Term of Office. The officers of the Corporation shall hold office
at the pleasure of the Board of Directors. Except as otherwise provided in the
resolution of the Board of Directors electing any officer, each officer shall
hold office until the first meeting of the Board of Directors after the annual
meeting of shareholders next succeeding his or her election, and until his or
her successor is elected and qualified or until his or her earlier resignation
or removal. Any officer may resign at any time upon written notice to the Board,
to the Chairman, Chief Executive Officer and President, or to the Secretary of
the Corporation. Such resignation shall take effect at the time specified
therein as acceptance of such resignation shall be necessary to make it
effective. The Board may remove any officer with or without cause at any time,
except that the removal of the Chairman of the Board, Chief Executive Officer
and President shall require the vote of at least three-fourths of the entire
Board. Any such removal shall be without prejudice to the contractual rights of
such offices, if any, with the Corporation, but the election of an officer shall
not in and of itself create contractual rights. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board at any regular or
special meeting.
8.4 The Chairman, Chief Executive Officer, and President. The Chairman,
Chief Executive Officer and President shall have general and active
responsibility for the management of the business of the Corporation, shall be
responsible for implementing all orders and resolutions of the Board of
Directors, shall be the chief operating officer of the Corporation, and shall
supervise the daily operations of the business of the Corporation. The Chairman
of the Board shall preside at meetings of the Board of Directors and of the
shareholders.
<PAGE>
8.5 The Vice Presidents. The Vice Presidents (if any) in the order
specified by the Board or, if not so specified, in the order of their seniority
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President, and shall perform such other duties as the
President or the Board of Directors shall prescribe.
8.6 The Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the shareholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose. He shall give,
or cause to be given, notice of all meetings of the shareholders and special
meetings of the Board, and shall perform such other duties as may be prescribed
by the Board or President, under whose supervision he shall be. He shall keep in
safe custody the seal of the Corporation, if any, and affix the same to any
instrument requiring it.
8.7 The Treasurer. The Treasurer shall have the custody of the
corporate funds and shall keep or cause to be kept full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall keep a proper accounting of all receipts and disbursements
and shall disburse the funds of the Corporation only for proper corporate
purposes or as may be ordered by the Board and shall render to the President and
the Board at the regular meetings of the Board, or whenever they may require it,
an account of all his transactions as Treasurer and of the financial condition
of the Corporation.
SECTION 9
STOCK
9.1 Certificates. Every holder of stock in the Corporation shall be
entitled to have a certificate signed by the President or a Vice President and
the Secretary or an Assistant Secretary evidencing the number and class (and
series, if any) of shares owned by him, containing such information as required
by law and bearing the seal of the Corporation. If any stock certificate is
manually signed by a transfer agent or registrar other than the Corporation
itself or an employee of the Corporation, the signature of any such officer may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
<PAGE>
9.2 Missing Certificates. The President or any Vice President may
direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. As a condition precedent to the issuance of a new certificate or
certificates, the officers of the Corporation shall, unless dispensed with by
the President, require the owner of such lost, stolen or destroyed certificate
or certificates, or his legal representative, (i) to advertise or give the
Corporation a bond or (ii) enter into a written indemnity agreement, in each
case in an amount appropriate to indemnify the Corporation against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
9.3 Transfers. Upon surrender to the Corporation or the transfer agent
of the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
SECTION 10
DETERMINATION OF SHAREHOLDERS
10.1 Record Date. For the purpose of determining shareholders entitled
to notice of and to vote at a meeting, or to receive a dividend, or to receive
or exercise subscription or other rights, or to participate in a
reclassification of stock, or in order to make a determination of shareholders
for any other proper purpose, the Board of Directors may fix in advance a record
date for determination of shareholders for such purpose, such date to be not
more than sixty days and, if fixed for the purpose of determining shareholders
entitled to notice of and to vote at a meeting, not less than ten days, prior to
the date on which the action requiring the determination of shareholder is to be
taken.
10.2 Registered Shareholders. Except as otherwise provided by law, the
Corporation, and its directors, officers and agents may recognize and treat a
person registered on its records as the owner of shares, as the owner in fact
thereof for all purposes, and as the person exclusively entitled to have and to
exercise all rights and privileges incident to the ownership of such shares, and
rights under this Section shall not be affected by any actual constructive
notice which the Corporation, or any of its directors, officers or agents, may
have to the contrary.
<PAGE>
SECTION 11
MISCELLANEOUS
11.1 Dividends. Except as otherwise provided by law or the Articles of
Incorporation, dividends upon the stock of the Corporation may be declared by
the Board of Directors at any regular or special meeting.
Dividends may be paid in cash, property, or in shares of stock.
11.2 Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Signatures of the authorized signatories may be by facsimile.
11.3 Fiscal Year. The fiscal year of this Corporation will be a
calendar year.
11.4 Seal. The Board of Directors may adopt a corporate seal, which
seal shall have inscribed thereon the name of the Corporation. Said seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. Failure to affix the seal shall not, however, affect
the validity of any instrument.
11.5 Gender. All pronouns and variations thereof used in these By-laws
shall be deemed to refer to the masculine, feminine or neuter gender, singular
or plural, as the identity of the person, persons, entity or entities referred
to require.
<PAGE>
SECTION 12
INDEMNIFICATION
12.1 Definitions. As used in this section the following terms
shall have the meanings set forth below:
(a) "Board" - the Board of Directors of the Corporation.
(b) "Claim" - any threatened, pending or completed claim,
action, suit, or proceeding, whether civil, criminal, administrative or
investigative and whether made judicially or extra-judicially, or any separate
issue or matter therein, as the context requires.
(c) "Determining Body" - (i) those members of the Board who
are not named as parties to the Claim for which indemnification is being sought
("Impartial Directors"), if there are at least three Impartial Directors, (ii) a
committee of at least three Impartial Directors appointed by the Board
(regardless whether the members of the Board of Directors voting on such
appointment are Impartial Directors) or (iii) if there are fewer than three
Impartial Directors or if the Board of Directors or the committee appointed
pursuant to clause (ii) of this paragraph so directs (regardless whether the
members thereof are Impartial Directors), independent legal counsel, which may
be the regular outside counsel of the Corporation.
(d) "Disbursing Officer" - the Chief Executive Officer of the
Corporation or, if the Chief Executive Officer is a party to the Claim for which
indemnification is being sought, any officer not a party to such Claim who is
designated by the Chief Executive Officer to be the Disbursing Officer with
respect to indemnification requests related to the Claim, which designation
shall be made promptly after receipt of the initial request for indemnification
with respect to such Claim.
(e) "Expenses" - any expenses or costs (including, without
limitation, attorney's fees, judgments, punitive or exemplary damages, fines and
amounts paid in settlement).
(f) "Indemnitee" - each person who is or was a director or
officer of the Corporation.
<PAGE>
12.2 Indemnity and Advancement of Expenses.
(a) To the extent such Expenses exceed the amounts reimbursed
or paid pursuant to policies of liability insurance maintained by the
Corporation, the Corporation shall indemnify each Indemnitee against any
Expenses actually and reasonably incurred by him (as they are incurred) in
connection with any Claim either against him or as to which he is involved
solely as a witness or person required to give evidence, by reason of his
position (i) as a director or officer of the Corporation, (ii) as a director or
officer of any subsidiary of the Corporation, (iii) as a fiduciary with respect
to any employee benefit plan of the Corporation, or (iv) as a director, officer,
partner, employee or agent of another Corporation, partnership, joint venture,
trust or other for-profit or not-for-profit entity or enterprise, if such
position is or was held at the request of the Corporation, whether relating to
service in such position before or after the effective date of this Section, if
he (i) is successful in his defense of the Claim on the merits or otherwise or
(ii) has been found by the Determining Body (acting in good faith) to have met
the Standard of Conduct (defined below); provided that (A) the amount otherwise
payable by the Corporation may be reduced by the Determining Body to such amount
as it deems proper if it determines that the Claim involved the receipt of a
personal benefit by Indemnitee, and (B) no indemnification shall be made in
respect of any Claim as to which Indemnitee shall have been adjudged by a court
of competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable for willful or intentional misconduct in the performance of his duty to
the Corporation or to have obtained an improper personal benefit, unless, and
only to the extent that, a court shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as
the court deems proper.
(b) The Standard of Conduct is met when the conduct by an
Indemnitee with respect to which a Claim is asserted was conduct that was in
good faith and that he reasonably believed to be in, or not opposed to, the best
interest of the Corporation, and, in the case of a criminal action or
proceeding, that he had no reasonable cause to believe was unlawful. The
termination of any Claim by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not meet the Standard of Conduct.
(c) Promptly upon becoming aware of the existence of any Claim
as to which he may be indemnified hereunder, Indemnitee shall notify the Chief
Executive Officer of the Corporation of the Claim and whether he intends to seek
indemnification hereunder. If such notice indicates that Indemnitee does so
intend, the Chief Executive Officer shall promptly advise the Board thereof and
notify the Board that the establishment of the Determining Body with respect to
the Claim will be a matter presented at the next regularly scheduled meeting of
the Board. After the Determining Body has been established the Chief Executive
Officer shall inform the Indemnitee thereof and Indemnitee shall immediately
provide the Determining Body with all facts relevant to the Claim known to him.
Within 60 days of the receipt of such information, together with such additional
information as the Determining Body may request of Indemnitee, the Determining
Body shall determine, and shall advise Indemnitee of its determination, whether
Indemnitee has met the Standard of Conduct.
<PAGE>
(d) During such 60-day period, Indemnitee shall promptly
inform the Determining Body upon his becoming aware of any relevant facts not
therefore provided by him to the Determining Body, unless the Determining Body
has obtained such facts by other means.
(e) In the case of any Claim not involving a proposed,
threatened or pending criminal proceeding,
(i) if Indemnitee has, in the good faith judgment
of the Determining Body, met the Standard of Conduct, the Corporation may, in
its sole discretion after notice to Indemnitee, assume all responsibility for
the defense of the Claim, and, in any event, the Corporation and the Indemnitee
each shall keep the other informed as to the progress of the defense, including
prompt disclosure of any proposals for settlement; provided that if the
Corporation is a party to the Claim and Indemnitee reasonably determines that
there is a conflict between the positions of the Corporation and Indemnitee with
respect to the Claim, then Indemnitee shall be entitled to conduct his defense,
with counsel of his choice; and provided further that Indemnitee shall in any
event be entitled at his expense to employ counsel chosen by him to participate
in the defense of the Claim; and
(ii) the Corporation shall fairly consider any
proposals by Indemnitee for settlement of the Claim. If the Corporation (A)
proposes a settlement acceptable to the person asserting the Claim, or (B)
believes a settlement proposed by the person asserting the Claim should be
accepted, it shall inform Indemnitee of the terms thereof and shall fix a
reasonable date by which Indemnitee shall respond. If Indemnitee agrees to such
terms, he shall execute such documents as shall be necessary to effect the
settlement. If he does not agree he may proceed with the defense of the Claim in
any manner he chooses, but if he is not successful on the merits or otherwise,
the Corporation's obligation to indemnify him for any Expenses incurred
following his disagreement shall be limited to the lesser of (A) the total
Expenses incurred by him following his decision not to agree to such proposed
settlement or (B) the amount the Corporation would have paid pursuant to the
terms of the proposed settlement. If, however, the proposed settlement would
impose upon Indemnitee any requirement to act or refrain from acting that would
materially interfere with the conduct of his affairs, Indemnitee may refuse
such settlement and proceed with the defense of the Claim, if he so desires, at
the Corporation's expense without regard to the limitations imposed by the
preceding sentence. In no event, however, shall the Corporation be obligated to
indemnify Indemnitee for any amount paid in a settlement that the Corporation
has not approved.
(f) In the case of a Claim involving a proposed, threatened or
pending criminal proceeding, Indemnitee shall be entitled to conduct the defense
of the Claim, and to make all decisions with respect thereto, with counsel of
his choice, provided, however, that the Corporation shall not be obligated to
indemnify Indemnitee for an amount paid in settlement that the Corporation has
not approved.
<PAGE>
(g) After notifying the Corporation of the existence of a
Claim, Indemnitee may from time to time request the Corporation to pay the
Expenses (other than judgments, fines, penalties or amounts paid in settlement)
that he incurs in pursuing a defense of the Claim prior to the time that the
Determining Body determines whether the Standard of Conduct has been met. If the
Disbursing Officer believes the amount requested to be reasonable, he shall pay
to Indemnitee the amount requested (regardless of Indemnitee's apparent ability
to repay such amount) upon receipt of an undertaking by or on behalf of
Indemnitee to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Corporation under the circumstances. If
the Disbursing Officer does not believe such amount to be reasonable, the
Corporation shall pay the amount deemed by him to be reasonable and Indemnitee
may apply directly to the Determining Body for the remainder of the amount
requested.
(h) After the Determining Body has determined that the
Standard of Conduct was met, for so long as and to the extent that the
Corporation is required to indemnify Indemnitee under this Agreement, the
provisions of Paragraph (g) shall continue to apply with respect to Expenses
incurred after such time except that (i) no undertaking shall be required of
Indemnitee and (ii) the Disbursing Officer shall pay to Indemnitee such amount
of any fines, penalties or judgments against him which have become final as the
Corporation is obligated to indemnify him.
(i) Any determination by the Corporation with respect to
settlements of a Claim shall be made by the Determining Body.
(j) The Corporation and Indemnitee shall keep confidential, to
the extent permitted by law and their fiduciary obligations, all facts and
determinations provided or made pursuant to or arising out of the operation of
this Section, and the Corporation and Indemnitee shall instruct its or his
agents and employees to do likewise.
12.3 Enforcement.
(a) The rights provided by this Section shall be enforceable
by Indemnitee in any court of competent jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his rights
under this Section Indemnitee shall be entitled to recover from the Corporation,
and shall be indemnified by the Corporation against, any and all Expenses
actually and reasonably incurred by him in connection with such proceeding but
only if he prevails therein. If it shall be determined that Indemnitee is
entitled to receive part but not all of the relief sought, then the Indemnitee
shall be entitled to be reimbursed for all Expenses incurred by him in
connection with such judicial adjudication if the amount to which he is
determined to be entitled exceeds 50% of the amount of his claim. Otherwise, the
Expenses incurred by Indemnitee in connection with such judicial adjudication
shall be appropriately prorated.
(c) In any judicial proceeding described in this subsection,
the Corporation shall bear the burden of proving that Indemnitee is not entitled
to any Expenses sought with respect to any Claim.
<PAGE>
12.4 Saving Clause. If any provision of this Section is determined by a
court having jurisdiction over the matter to require the Corporation to do or
refrain from doing any act that is in violation of applicable law, the court
shall be empowered to modify or reform such provision so that, as modified or
reformed, such provision provides the maximum indemnification permitted by law,
and such provision, as so modified or reformed, and the balance of this Section,
shall be applied in accordance with their terms. Without limiting the generality
of the foregoing, if any portion of this Section shall be invalidated on any
ground, the Corporation shall nevertheless indemnify an Indemnitee to the full
extent permitted by any applicable portion of this Section that shall not have
been invalidated and to the full extent permitted by law with respect to that
portion that has been invalidated.
12.5 Non-Exclusivity.
(a) The indemnification and advancement of Expenses provided
by or granted pursuant to this Section shall not be deemed exclusive of any
other rights to which Indemnitee is or may become entitled under any statute,
article of incorporation, by-law, authorization of shareholders or directors,
agreement, or otherwise.
(b) It is the intent of the Corporation by this Section to
indemnify and hold harmless Indemnitee to the fullest extent permitted by law,
so that if applicable law would permit the Corporation to provide broader
indemnification rights than are currently permitted, the Corporation shall
indemnify and hold harmless Indemnitee to the fullest extent permitted by
applicable law notwithstanding that the other terms of this Section would
provide for lesser indemnification.
12.6 Successors and Assigns. This Section shall be binding upon the
Corporation, its successors and assigns, and shall inure to the benefit of the
Indemnitee's heirs, personal representatives, and assigns and to the benefit of
the Corporation, its successors and assigns.
12.7 Indemnification of Other Persons. The Corporation may indemnify
any person not covered by Sections 12.1 through 12.6 to the extent provided in a
resolution of the Board or a separate section of these By-laws.
SECTION 13
AMENDMENTS
13.1 Adoption of By-laws; Amendments Thereof. By-laws of the
Corporation may be adopted only by (i) a majority of the entire Board of
Directors at any time when there is no Related Person (as defined in Article
V.A.2 of the Articles of Incorporation) or (ii) both a majority of the entire
Board of Directors and a majority of the Continuing Directors (as defined in
Article V.A.4 of the Articles of Incorporation) at any time when there is a
Related Person Article (as defined in Article V.A.2 of the Articles of
Incorporation). By-laws may be amended or repealed only by (i) a majority of the
entire Board of Directors at any time when there is no Related Person (except
that any amendment to or repeal of Section 6 of these By-laws shall require an
affirmative vote of at least three-quarters of the entire Board of Directors),
(ii) both a majority of the entire Board and a majority of the Continuing
Directors at any time when there is a Related Person (as defined in Article
V.A.2 of the Articles of Incorporation), or (iii) the affirmative vote of the
holders of at least 80% of the Total Voting Power at any regular or special
meeting of shareholders, the notice of which expressly states that the proposed
amendment or repeal is to be considered at the meeting.
<PAGE>
13.2 Re-Amendment or Re-adoption by Board of Directors. Any provision
of these By-laws amended or repealed by the shareholders may be re-amended or
re-adopted in the manner provided in Section 13.1.
13.3 New By-laws; Amendments. Any purported amendment to these By-laws
which would add hereto a matter not covered herein prior to such purported
amendment shall be deemed to constitute the adoption of a By-law provision and
not an amendment to the By-laws.
AMENDMENT NUMBER SIX
TO
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Avondale Industries, Inc., a corporation organized and
existing under the laws of the State of Louisiana, adopted the Avondale
Industries, Inc. Employee Stock Ownership Plan (the "Plan") effective September
1, 1985, said Plan has been amended from time to time, said Plan was amended and
restated on December 28, 1994 effective January 1, 1989;
WHEREAS, Avondale Industries, Inc. reserved the right to amend the
Plan by resolution of the Board of Directors;
WHEREAS, it is desirable to amend the Plan to revise the Plan's tender
offer provisions;
NOW, THEREFORE, as authorized by Section 11.1, the Plan is hereby
amended, effective May 1, 1998, as follows:
Section 10.5 of Article X, Tender Offers, is amended and restated to
read as follows:
10.5 Tender Offer. The Trustee shall tender or exchange
Company Stock in accordance with directions received from the
Committee. The Committee shall instruct the Trustee in response to the
tender offer in accordance with ERISA's fiduciary duties to act as a
prudent person would act in a similar situation and to act solely in
the interests of the Participants and their Beneficiaries.
IN WITNESS WHEREOF, Avondale Industries, Inc. has caused this amendment
to be executed in multiple originals by its officers thereunto duly authorized
and its corporate seal to be hereunto affixed, as of the 5th day of May, 1998.
AVONDALE INDUSTRIES, INC.
BY: /s/ Thomas M. Kitchen
----------------------
Thomas M. Kitchen, Secretary
ATTEST
/s/ Jackie H. Walker
- --------------------
(Corporate Seal)
<PAGE>
ACKNOWLEDGMENT
--------------
STATE OF LOUISIANA
PARISH OF JEFFERSON
BEFORE ME, the undersigned Notary Public, personally came and appeared
Thomas M. Kitchen, who being by me sworn did depose and state that he signed the
foregoing Amendment Number Six to the Avondale Industries, Inc. Employee Stock
Ownership Plan as a free act and deed on behalf of Avondale Industries, Inc. for
the purposes therein set forth.
/s/ Thomas M. Kitchen
---------------------
Thomas M. Kitchen
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 5th DAY
OF MAY, 1998.
/s/ A. Blomkalns
- ----------------
NOTARY PUBLIC
<PAGE>
AMENDMENT NUMBER ONE
TO
AVONDALE INDUSTRIES, INC.
EMPLOYEE STOCK OWNERSHIP TRUST AGREEMENT
WHEREAS, Avondale Industries, Inc., a corporation organized and existing
under the laws of the State of Louisiana, adopted the Avondale Industries, Inc.
Employee Stock Ownership Trust Agreement (the "Trust") effective September 1,
1985; said Trust has been amended from time to time; said Trust was amended and
restated effective January 1, 1996 and executed February 12, 1996;
WHEREAS, Avondale Industries, Inc. reserved the right to amend the
Trust by resolution of the Board of Directors;
WHEREAS, it is desirable to amend the Trust as herein provided;
NOW, THEREFORE, as authorized by Section 8.1, the Trust is hereby
amended, effective May 1, 1998, as follows:
Section 11.4 of Article XI, Tender Offers, is amended and restated to
read as follows:
11.4 Tender Offer. The Trustee shall tender or exchange
Company Stock in accordance with directions received from the Committee.
The Committee shall instruct the trustee in response to the tender offer
in accordance with ERISA's fiduciary duties to act as a prudent person
would act in a similar situation and to act solely in the interests of
the Participants and their Beneficiaries.
IN WITNESS WHEREOF, Avondale Industries, Inc. has caused this amendment
to be executed in multiple originals by its officers thereunto duly authorized
and its corporate seal to be hereunto affixed, as of the 5th day of May, 1998.
AVONDALE INDUSTRIES, INC.
BY: /s/ Eugene K. Simon, Jr.
------------------------
Eugene K. Simon, Jr.
ATTEST Assistant Secretary
(Corporate Seal)
<PAGE>
ADMINISTRATIVE COMMITTEE OF TRUSTEES OF THE AVONDALE
THE AVONDALE INDUSTRIES, INC. INDUSTRIES, INC. EMPLOYEE
EMPLOYEE STOCK OWNERSHIP PLAN STOCK OWNERSHIP PLAN TRUST
/s/ Blance S. Barlotta /s/ Blanche S. Barlotta
- ------------------------------ ----------------------------
Blanche S. Barlotta, Member Blanche S. Barlotta, Trustee
/s/ Eugene E. Blanchard /s/ R. Dean Church
- ------------------------------ ----------------------------
Eugene E. Blanchard, Member R. Dean Church, Trustee
/s/ R. Dean Church /s/ Rodney J. Duhon, Jr.
- ------------------------------ ----------------------------
R. Dean Church, Member Rodney J. Duhon, Trustee
/s/ Rodney J. Duhon, Jr.
- ------------------------------
Rodney J. Duhon, Jr., Member
/s/ Ernest F. Griffin, Jr.
- ------------------------------
Ernest F. Griffin, Jr., Member
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared
Eugene K. Simon, Jr., who being by me sworn did depose and state that he is the
duly elected Secretary of Avondale Industries, Inc. and that in such capacity he
executed the foregoing Amendment to the Amended and Restated Avondale
Industries, Inc. Employee Stock Ownership Trust, as a free act and deed on
behalf of Avondale Industries, Inc. for the purposes therein set forth.
WITNESSES:
/s/ Jan T. White /s/ Eugene K. Simon, Jr.
- ----------------- ------------------------
/s/ Kim D. Dodgen Eugene K. Simon, Jr.
- -----------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 5th DAY
OF MAY, 1998.
/s/ A. Blomkalns
- -----------------
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared
Blanche S. Barlotta, who being by me sworn did depose and state that she
executed the foregoing Amendment to the Amended and Restated Avondale
Industries, Inc. Employee Stock Ownership Trust Agreement, as the undersigned's
free act and deed for the purposes therein set forth.
WITNESSES:
/s/ Jan T. White /s/ Blanche S. Barlotta
- ----------------- -----------------------
/s/ Kim D. Dodgen Blanche S. Barlotta
- -----------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 5th DAY
OF MAY, 1998.
/s/ A. Blomkalns
- -----------------
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared
Eugene E. Blanchard, who being by me sworn did depose and state that he executed
the foregoing Amendment to the Amended and Restated Avondale Industries, Inc.
Employee Stock Ownership Trust Agreement, as the undersigned's free act and deed
for the purposes therein set forth.
WITNESSES:
/s/ Jan T. White /s/ Eugene E. Blanchard, Jr.
- ----------------- ----------------------------
/s/ Kim D. Dodgen Eugene E. Blanchard
- -----------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 5th DAY
OF MAY, 1998.
/s/ A. Blomkalns
- -----------------
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared
R. Dean Church, who being by me sworn did depose and state that he executed the
foregoing Amendment to the Amended and Restated Avondale Industries, Inc.
Employee Stock Ownership Trust Agreement, as the undersigned's free act and deed
for the purposes therein set forth.
WITNESSES:
/s/ Jan T. White /s/ R. Dean Church
- ----------------- ----------------------------
/s/ Kim D. Dodgen R. Dean Church
- -----------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 5th DAY
OF MAY, 1998.
/s/ A. Blomkalns
- -----------------
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared
Rodney J. Duhon, Jr., who being by me sworn did depose and state that he
executed the foregoing Amendment to the Amended and Restated Avondale
Industries, Inc. Employee Stock Ownership Trust Agreement, as the undersigned's
free act and deed for the purposes therein set forth.
WITNESSES:
/s/ Jan T. White /s/ Rodney J. Duhon, Jr.
- ----------------- ----------------------------
/s/ Kim D. Dodgen Rodney J. Duhon, Jr.
- -----------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 5th DAY
OF MAY, 1998.
/s/ A. Blomkalns
- -----------------
NOTARY PUBLIC
<PAGE>
ACKNOWLEDGMENT
STATE OF LOUISIANA
PARISH OF ORLEANS
BEFORE ME, the undersigned Notary Public, personally came and appeared
Ernest F. Griffin, Jr., who being by me sworn did depose and state that he
executed the foregoing Amendment to the Amended and Restated Avondale
Industries, Inc. Employee Stock Ownership Trust Agreement, as the undersigned's
free act and deed for the purposes therein set forth.
WITNESSES:
/s/ Jan T. White /s/ Ernest F. Griffin, Jr.
- ----------------- ----------------------------
/s/ Kim D. Dodgen Ernest F. Griffin, Jr.
- -----------------
SWORN TO AND SUBSCRIBED
BEFORE ME THIS 5th DAY
OF MAY, 1998.
/s/ A. Blomkalns
- -----------------
NOTARY PUBLIC
AMENDMENT NO. 3
AVONDALE INDUSTRIES, INC.
RESTATED SUPPLEMENTAL PENSION PLAN
WHEREAS, Avondale Industries, Inc., a corporation organized and
existing under the laws of the State of Louisiana, adopted the Restated
Supplemental Pension Plan (the "Plan") effective January 1, 1988 to replace the
Avondale Shipyards, Inc. Revised Supplemental Pension Plan;
WHEREAS, Avondale Industries, Inc. reserved the right to amend the Plan
by resolution of the Board of Directors;
NOW, THEREFORE, as authorized by Section 6.2, the Plan is hereby
amended as follows:
I.
The definition of Final Average Monthly Compensation contained in
Section 1.6 of the Plan is hereby amended by adding thereto the following
sentence:
For purposes of determining a Participant's Final Average Monthly
Compensation, a Participant who has deferred all or a portion of his
compensation shall have that compensation considered in the year earned
rather than in the year paid.
II.
Except as amended hereby, the Plan shall remain in full force and
effect
Executed this 5th day of May, 1998.
AVONDALE INDUSTRIES, INC.
/s/ George E. White, Jr. By: /s/ Thomas M. Kitchen
- ------------------------ -------------------------
/s/ Jackie H. Walker
- ------------------------
AMENDMENT NO. 1
AVONDALE INDUSTRIES, INC.
EXECUTIVE EXCESS RETIREMENT PLAN
WHEREAS, Avondale Industries, Inc., a corporation organized and
existing under the laws of the State of Louisiana, adopted the Executive Excess
Retirement Plan (the "Plan") effective January 1, 1989;
WHEREAS, Avondale Industries, Inc. reserved the right to amend the Plan
by resolution of the Board of Directors; and
WHEREAS, Avondale Industries, Inc. desires to amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I.
The reference to "age 65" in Section 3.3 of the Plan is hereby replaced
with the words "age 75".
II.
Except as amended hereby, the Plan shall remain in full force and
effect.
Executed this 2nd day of February, 1998.
AVONDALE INDUSTRIES, INC.
/s/ Jackie H. Walker By: /s/ Thomas M. Kitchen
- -------------------- ---------------------
/s/ Joy T. Rinaldi
- --------------------
<PAGE>
AMENDMENT NO. 2
AVONDALE INDUSTRIES, INC.
EXECUTIVE EXCESS RETIREMENT PLAN
WHEREAS, Avondale Industries, Inc., a corporation organized and
existing under the laws of the State of Louisiana, adopted the Executive Excess
Retirement Plan (the "Plan") effective January 1, 1989;
WHEREAS, Avondale Industries, Inc. reserved the right to amend the Plan
by resolution of the Board of Directors; and
WHEREAS, Avondale Industries, Inc. desires to amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I.
Section 3.1 of the Plan is hereby amended by adding thereto the
following Paragraph (c):
(c) For purposes of computing the benefits provided in this
Section 3.1, a Participant who has deferred all or a
portion of his compensation shall have that compensation
considered in the year earned rather than in the year
paid.
II.
In order to conform the cross-references to the Pension Plan as
restated effective January 1, 1997, the reference in Section 3.2 of the Plan to
Section 6.2 of the Pension Plan is hereby changed to "Section 6.5 of the Pension
Plan."
III.
Except as amended hereby, the Plan shall remain in full force and
effect.
Executed this 5th day of May, 1998.
AVONDALE INDUSTRIES, INC.
/s/ George E. White, Jr. By: /s/ Thomas M. Kitchen
- ------------------------ -------------------------
/s/ Jackie H. Walker
- ------------------------
August 12, 1998
Avondale Industries, Inc.
Post Office Box 50280
New Orleans, Louisiana 70150
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of Avondale Industries, Inc. and subsidiaries for the periods ended
June 30, 1998 and 1997, as indicated in our report dated August 3, 1998; because
we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 is
incorporated by reference in Registration Statement No. 333-32165 on Form S-8.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ DELOITTE & TOUCHE LLP
New Orleans, Louisiana
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AVONDALE
INDUSTRIES, INC.'S QUARTERLY REPORT FILED ON FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 67,439
<SECURITIES> 0
<RECEIVABLES> 103,993
<ALLOWANCES> 0
<INVENTORY> 21,986
<CURRENT-ASSETS> 214,375
<PP&E> 274,311
<DEPRECIATION> (137,001)
<TOTAL-ASSETS> 364,049
<CURRENT-LIABILITIES> 99,046
<BONDS> 49,663
0
0
<COMMON> 15,962
<OTHER-SE> 171,874
<TOTAL-LIABILITY-AND-EQUITY> 364,049
<SALES> 363,088
<TOTAL-REVENUES> 363,088
<CGS> 321,615
<TOTAL-COSTS> 321,615
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,120
<INCOME-PRETAX> 24,231
<INCOME-TAX> 9,200
<INCOME-CONTINUING> 15,031
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,031
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.04
</TABLE>
