SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 1-10725
FURR'S/BISHOP'S, INCORPORATED
INCORPORATED IN DELAWARE I.R.S. EMPLOYER IDENTIFICATION
NO.75-2350724
6901 QUAKER AVENUE, LUBBOCK, TX 79413
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (806)792-7151
- -------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
- -------------------------------------------------------------------------------
As of November 12, 1996, there were 48,670,986 shares of Common Stock
outstanding.
Page 1 of 22
Exhibit Index Located on Page 20
<PAGE> 2
FURR'S/BISHOP'S, INCORPORATED
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Unaudited Financial Statements
Condensed Consolidated Balance Sheets
October 1, 1996 (Unaudited) and January 2, 1996 3
Unaudited Condensed Consolidated Statements
of Operations - For the thirteen weeks
ended October 1, 1996 and October 3, 1995 5
Unaudited Condensed Consolidated Statements
of Operations - For the thirty-nine weeks
ended October 1, 1996 and October 3, 1995 6
Unaudited Condensed Consolidated Statement
of Stockholders' Deficit - For the
thirty-nine weeks ended October 1, 1996 7
Unaudited Condensed Consolidated Statements
of Cash Flows - For the thirty-nine weeks
ended October 1, 1996 and October 3, 1995 8
Notes to Unaudited Condensed Consolidated
Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
PART II. OTHER INFORMATION
SIGNATURES
Page 2
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<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<CAPTION>
October 1, January 2,
1996 1996
---------- ----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents ($800
restricted at January 2, 1996) $ 2,153 $ 986
Accounts and notes receivable, net 1,872 746
Inventories 6,265 5,831
Prepaid expenses and other 941 1,355
---------- ----------
Total current assets 11,231 8,918
Property, plant and equipment, net 64,642 66,127
Other assets 3,013 2,993
---------- ----------
$ 78,886 $ 78,038
========== ==========
See notes to unaudited condensed consolidated financial statements.
(Continued on following page)
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</TABLE>
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<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(dollars in thousands, except per share amounts)
<CAPTION>
October 1, January 2,
1996 1996
---------- ----------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Deficit
Current liabilities:
Trade accounts payable $ 6,131 $ 5,074
Other payables and accrued expenses 15,640 18,279
Reserve for store closings - current portion 1,696 2,396
Current maturities of long-term debt 5,493 3,841
---------- ----------
Total current liabilities 28,960 29,590
Reserve for store closings 2,788 3,443
Long-term debt, less current maturities 71,646 77,110
Excess of future lease payments over fair value,
net of amortization 3,674 4,130
Other payables, including accrued pension costs 10,147 9,639
Stockholders' deficit:
Preferred stock, $.01 par value; 5,000,000
shares authorized, none issued
Common stock, $.01 par value; 65,000,000
shares authorized, 48,670,672 and
48,648,955 issued and outstanding 487 486
Additional paid-in capital 55,865 55,841
Pension liability adjustment (5,283) (5,283)
Accumulated deficit (89,398) (96,918)
---------- ----------
Total stockholders' deficit (38,329) (45,874)
---------- ----------
$ 78,886 $ 78,038
========== ==========
See notes to unaudited condensed consolidated financial statements.
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<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
<CAPTION>
Thirteen weeks ended
--------------------------
October 1, October 3,
1996 1995
---------- ----------
<S> <C> <C>
Sales $ 50,002 $ 53,944
Expenses:
Cost of sales (excluding depreciation) 15,871 17,243
Selling, general and administrative 29,895 32,869
Depreciation and amortization 2,517 3,715
Special credits, net (535) 0
---------- ----------
47,748 53,827
---------- ----------
Operating income 2,254 117
Interest expense 60 7,061
---------- ----------
Net income (loss) $ 2,194 $ (6,944)
========== ==========
Weighted average number of shares
of common stock outstanding:
Primary 48,670,459 48,648,955
========== ==========
Fully diluted 51,350,817 51,350,817
========== ==========
Net income (loss) per share:
Primary $ 0.04 $ (0.14)
========== ==========
Fully diluted $ 0.04 $ N/A
========== ==========
See notes to unaudited condensed consolidated financial statements.
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<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
<CAPTION>
Thirty-nine weeks ended
--------------------------
October 1, October 3,
1966 1955
---------- ----------
<S> <C> <C>
Sales $ 149,497 $ 160,914
Expenses:
Cost of sales (excluding depreciation) 46,823 51,859
Selling, general and administrative 88,969 97,221
Depreciation and amortization 7,136 10,662
Special credits, net (1,138) 0
---------- ----------
141,790 159,742
---------- ----------
Operating income 7,707 1,172
Interest expense 187 20,513
---------- ----------
Net income (loss) $ 7,520 $ (19,341)
========== ==========
Weighted average number of shares
of common stock outstanding:
Primary 48,662,543 48,648,955
========== ==========
Fully diluted 51,350,817 51,350,817
========== ==========
Net income (loss) per share:
Primary $ 0.15 $ (0.40)
========== ==========
Fully diluted $ 0.15 $ N/A
========== ==========
See notes to unaudited condensed consolidated financial statements.
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<PAGE> 7
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 1, 1996
(Dollars in Thousands)
<CAPTION>
Total
Additional Pension Accum- Stock-
Common Paid-In Liability umulated holders'
Stock Capital Adjustment Deficit Deficit
------ ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balance, January 2, 1996 $ 486 $ 55,841 $ (5,283) $ (96,918) $ (45,874)
Warrants exercised 1 24 - - 25
Net income - - - 7,520 7,520
------ -------- -------- --------- ---------
Balance, October 1, 1996 $ 487 $ 55,865 $ (5,283) $ (89,398) $ (38,329)
====== ======== ======== ========= =========
See notes to unaudited condensed consolidated financial statements.
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<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
Thirty-nine weeks ended
-----------------------
October 1, October 3,
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,520 $ (19,341)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 7,136 10,662
Loss on disposition of assets 259 147
Other, net 138 (82)
Changes in assets and liabilities:
Decrease in restricted cash 800
Decrease (increase) in accounts
and notes receivable (1,126) 178
Increase in inventories (434) (697)
Decrease (increase) in prepaid
expenses and other 415 (2,394)
Increase (decrease) in trade accounts
payable and other payables, accrued
expenses and other liabilities (1,619) 19,161
---------- ----------
Net cash provided by operating activities 13,089 7,634
Cash flows provided by (used in) investing activities:
Capital expenditures (7,250) (6,369)
Expenditures charged to reserve for store closings (1,633) (1,198)
Proceeds from the disposition of fixed assets 1,619 21
Other, net 61 (14)
---------- ----------
Net cash used in investing activities (7,203) (7,560)
Cash flows used in financing activities:
Payment of indebtedness (3,812) (112)
Other, net (107) (39)
---------- ----------
Net cash used in financing activities (3,919) (151)
Increase (decrease) in unrestricted cash and
cash equivalents 1,967 (77)
Unrestricted cash and cash equivalents at
beginning of period 186 692
---------- ----------
Unrestricted cash and cash equivalents at
end of period $ 2,153 $ 615
========== ==========
Supplemental information:
Interest paid, including $3,753 of SFAS 15
interest classified as payment of indebtedness
during the period ended October 1, 1996 $ 3,771 $ 30
========== =========
See notes to unaudited condensed consolidated financial statements.
Page 8
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<PAGE> 9
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
NOTE A: Summary of Significant Accounting Policies
Furr's/Bishop's, Incorporated (the "Company"), a Delaware corporation,
operates cafeterias and specialty restaurants through its subsidiary Cafeteria
Operators, L.P., a Delaware limited partnership (together with its
subsidiaries, the "Partnership"). The financial statements presented herein
are the unaudited condensed consolidated financial statements of
Furr's/Bishop's, Incorporated and its majority owned subsidiaries.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and note disclosures required by generally
accepted accounting principles. These statements should be read in conjunction
with the consolidated financial statements, and notes thereto, which are
included in the Company's Form 10-K for the year ended January 2, 1996. The
accompanying consolidated financial statements reflect the accounts of the
Company after elimination of all material intercompany and interpartnership
accounts and transactions, and in the opinion of management include all
adjustments, of a normal recurring nature, necessary for a fair presentation.
Certain expenditures benefiting more than one period are charged to operations
on a percentage of sales or on a pro rata basis over the 52-53 week fiscal
year. Certain amounts have been reclassified in the consolidated statements of
operations for the thirty-nine weeks ended October 3, 1995 to conform to the
classifications used in the consolidated financial statements for the period
ended October 1, 1996.
The results of operations for the thirty-nine weeks ended October 1, 1996
may not be indicative of the results that may be expected for the fiscal year
ending December 31, 1996.
NOTE B: Earnings Per Common Share
The weighted average number of shares used in the primary net income per
share computation was 48,662,543 for the thirty-nine weeks ended October 1,
1996, and for the fully diluted computation was 51,350,817, including stock
warrants as common stock equivalents, in each case following the reverse stock
split.
For the period ended October 3, 1995, net income per share is restated
using 48,648,955 shares, which reflects the financial restructuring and the
reverse stock split and is the weighted average shares of common stock and
common stock equivalents (stock options and warrants, when dilutive)
outstanding at January 2, 1996. The earnings per common share in the thirty-
nine weeks of 1995 excludes any consideration of the preferred stock dividend
requirements, which were not paid and were canceled as a part of the series of
financial restructuring transactions.
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NOTE C: Long-term Debt
In 1992, the Partnership consummated a restructuring with all of the
holders of the then outstanding indebtedness and issued $187,422 of 11% Senior
Secured Notes, due June 30, 1998 (the "11% Notes"), to replace its entire
indebtedness, including all interest accrued thereon. Additional 11% Notes
were issued in June 1992 for the $5,432 interest payment then due. The 11%
Notes were amended at various times in 1993 and 1994 to modify or waive
covenants that were not being met, including to allow the Company to receive a
going concern opinion, and to defer the due date of interest payments. The
last payment of interest by the Partnership on the 11% Notes was June 30, 1993
and at January 2, 1996, before the series of financial restructuring
transactions, a total of $56,493 of interest was accrued and outstanding, and
the Partnership was in default on the 11% Notes since October 1994 due to,
among other things, missed payments of interest.
In 1992, Cavalcade Foods, Inc., an indirect subsidiary of the Company
("Foods"), issued a 9% note for $9,435, due June 30, 1998 (the "9% Note") to
replace its entire indebtedness, including all interest accrued thereon. An
additional 9% Note was issued in September 1992 for the $444 interest payment
then due. On April 1, 1993, a principal payment of $280 was made on the 9%
Note. The 9% Note was amended in 1994 to allow for the deferral of certain
interest payments. The last payment of interest by Foods on the 9% Note was
September 30, 1993 and at January 2, 1996, before the series of financial
restructuring transactions, a total of $2,138 of interest was accrued and
outstanding, and Foods was in default on the 9% Note since October 1994 due to,
among other things, missed payments of interest.
As part of a series of financial restructuring transactions, the
Partnership issued $41,700 of 12% Senior Secured Notes, due December 31, 2001
(the "12% Notes"), to replace $40,000 of 11% Notes and the interest accrued
thereon and to terminate a $5,408 judgement and the interest accrued thereon.
On January 24, 1996, the Partnership also issued $4,073 of 12% Notes as payment
in kind for all interest accrued as of such date. All of the assets of the
Partnership are pledged as collateral security on behalf of the holders of the
12% Notes. The Partnership also issued limited partner interests equal to 95%
of the outstanding partnership interests in exchange for and in full
satisfaction of the remaining $152,854 of 11% Notes, together with all interest
accrued thereon.
The Partnership paid $2,746 and $1,007 of interest accrued and due as of
September 30, 1996 and March 31, 1996, respectively. Payments of interest on
the 12% Notes are due each March 31 and September 30. While payments of
interest will be due during the life of the 12% Notes, there will not be any
interest expense recorded under SFAS 15, as described below, as all of the
interest through maturity has been recorded as a liability.
As part of a series of financial restructuring transactions, Foods issued
a 10% Non-recourse Note in the amount of $2,000, due December 31, 2001 (the
"Non-recourse Note"), a $6,100 note payable (the "Option Note") and a $1,500
note payable (the "Remaining Note") to Wells Fargo Bank in exchange for and in
full satisfaction of the $9,599 of 9% Notes outstanding, together with all
interest accrued thereon. Certain land was pledged as collateral on the Non-
recourse Note and an option to purchase 2.5% of the Common Stock of the Company
was pledged as collateral on the Option Note.
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<PAGE> 11
was pledged as collateral on the Option Note. Wells Fargo foreclosed on the
Option Note and exercised its option to purchase 2.5% of the Common Stock of
the Company by transferring the Remaining Note to the Company as payment. On
October 2, 1996, the collateral on the Non-recourse Note was sold and the net
proceeds of $1,359 was transferred to Wells Fargo Bank in full satisfaction of
such note. The results of this asset sale and debt extinguishment will include
an insignificant gain and will be recognized in the fourth fiscal quarter.
NOTE D: Restructuring
On January 2, 1996, at the Company's 1995 annual meeting, stockholders
approved a reclassification of the Company's outstanding shares of Class A
Common Stock, par value $.01 per share ("Old Class A Common Stock"), Class B
Common Stock, par value $.01 per share ("Old Class B Common Stock"), and Series
A $9.00 Convertible Preferred Stock, par value $.01 per share ("Old Convertible
Preferred Stock"), into the right to receive shares of a new class of common
stock, par value $.01 per share ("Common Stock"), and five year warrants to
purchase Common Stock at a price of $.074 per share ("Warrants"). Stockholders
also approved a restructuring of the Company's and certain of its subsidiaries'
financial obligations, including, among other things, the exchange of (i) an
aggregate of approximately $209,347 of indebtedness, including interest, of the
Partnership held by certain creditors for the issuance of approximately 95% of
the limited partnership interests of the Partnership, (ii) approximately $8,237
of indebtedness, including interest, of Foods held by Wells Fargo Bank,
National Association ("Wells Fargo"), for an option to acquire 2.5% of the
Common Stock (the "Wells Fargo Option"), (iii) warrants to purchase 1.7 million
shares of the Old Class A Common Stock held by Kmart Corporation ("Kmart") for
Warrants to purchase 1% of the Common Stock, (iv) a judgement in the amount of
$6,100, including interest, against a subsidiary of the Company owed to the
Trustees of General Electric Pension Trust ("GEPT") for a $1,700 principal
amount 12% Note and (v) warrants to purchase 1.4 million shares of Old Class B
Common Stock held by the Noteholders for the right to put their aggregate 95%
limited partnership interests in the Partnership to the Company in exchange for
95% of the Common Stock (the "Put Option") (collectively, the "Restructuring").
The Restructuring has been accounted for in accordance with Statement of
Financial Accounting Standards No. 15 "Accounting by Debtors and Creditors for
Troubled Debt Restructurings" ("SFAS 15"), under which the transactions include
both a partial settlement and modification of terms. The fair value of the
Common Stock and warrants issued in connection with the Restructuring was
estimated based upon discounted cash flows anticipated from the reorganized
business and was recorded as partial settlement of the indebtedness. The
remaining indebtedness was recorded at the sum of all future principal and
interest payments and there will be no recognition of interest expense on such
indebtedness in future periods. The amounts of indebtedness subject to
modification in excess of the amount recorded in accordance with SFAS 15 was
recorded as an extraordinary credit, net of all expenses associated with the
Restructuring.
As of the consummation of the Restructuring, the Company owned less than
50% of the limited partnership interests of the Partnership at January 2, 1996,
and as a result, the Partnership would not be included in the Company's
consolidated financial statements for the period January 2, 1996 through March
28, 1996. However, during the first quarter, the holders of the limited
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<PAGE> 12
partnership interests exercised their put option and, on March 28, 1996,
exchanged their limited partnership interests for Common Stock of the Company.
On March 22, 1996, the Company effected a 15-to-1 reverse stock split. As a
result of the materiality of this series of financial restructuring
transactions, the Partnership is included in the consolidated financial
statements through the period ended October 1, 1996.
NOTE E: Income Tax
The Company had income from operations in the thirteen and thirty-nine
week periods ended October 1, 1996. In accordance with Statement of Financial
Accounting Standards No. 109, "Accounting For Income Taxes" ("SFAS 109"), the
resulting income tax provision has been offset through the reduction of a
previously established deferred tax valuation allowance.
Following is a summary of the income tax provision (benefit) for the
thirteen and thirty-nine week periods ended October 1, 1996 and October 3,
1995:
Thirteen Weeks Thirty-nine Weeks
-------------------- ---------------------
October 1, October 3, October 1, October 3,
1996 1995 1996 1995
---------- --------- ---------- ---------
Federal
Current $ 3 $ - $ 46 $ -
Deferred 291 (2,405) 921 (6,763)
Deferred - Valuation allowance (294) 2,405 (967) 6,763
State - - - -
--------- --------- --------- ---------
Total $ - $ - $ - $ -
========= ========= ========= =========
Following is a reconciliation of the expected tax (benefit) at the
statutory tax rate to the effective tax (benefit) for the thirteen and thirty-
nine week periods ended October 1, 1996 and October 3, 1995:
Thirteen Weeks Thirty-nine Weeks
-------------------- ---------------------
October 1, October 3, October 1, October 3,
1996 1995 1996 1995
--------- --------- --------- ---------
Expected tax (benefit) at the
statutory tax rate $ 768 $ (2,406) $ 2,632 $ (6,769)
Income allocable to non
affiliated partners - - (671) -
Interest expense recorded as
debt reduction per SFAS 15 (480) - (998) -
Other 6 1 4 6
Increase (decrease) in deferred
tax asset valuation allowance $ (294) $ 2,405 $ (967) $ 6,763
--------- --------- --------- ---------
Total $ - $ - $ - $ -
========= ========= ========= =========
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As of October 1, 1996, the Company had consolidated net operating loss
carryforwards of approximately $96,000 for income tax reporting purposes that
expire from 2000 through 2009. Approximately $3,700 and $8,600 of the
operating loss carryforwards for income tax reporting purposes, which are
subject to limited use, relate to the subsidiary operations of Cavalcade
Holdings, Inc., and its subsidiary, Foods, respectively, for periods prior to
their inclusion in the Company-affiliated group. On March 28, 1996, the
holders of the limited partnership interests exchanged their limited
partnership interests for Common Stock of the Company resulting in a change of
ownership for purposes of computing the annual net operating loss limitation.
Net operating losses of approximately $45,000 incurred during the period June
25, 1993 to March 28, 1996 will be limited to approximately $4,900 annually.
Additionally, as a result of the change of control transaction on June 24,
1993, the utilization of the Company consolidated net operating loss and
general business credit carryforwards incurred during the period March 28, 1991
through June 24, 1993 will be limited to approximately $1,200 annually.
As of October 1, 1996, the Company had general business credit
carryforwards of approximately $1,413 which have expiration dates through 2010.
Approximately $74 of the general business credit carryforwards relate to Foods,
for periods prior to its inclusion in the Company-affiliated group. These
credits are subject to limited use.
While the Restructuring transactions were intended to result in no income
tax expense to the Company, the transactions are likely to result in a
substantial restriction on the ability of the Company to utilize certain net
operating loss carryforwards. In addition, no assurance can be given that the
Internal Revenue Service will not successfully assert that the Recapitalization
results in a substantial reduction of certain tax attributes (such as the net
operating losses and tax basis of property) of the Company and the other
partners of the Partnership.
NOTE F: Special credits, net
For the thirteen weeks ended October 1, 1996, the Company recognized a
special credit of $709 for the proceeds received from the sale of certain
trademarks and the termination of a trademark royalty agreement and the
modification and extension of a lease related to the Company's former El Paso
Bar-B-Que Company restaurants.
For the thirteen weeks ended July 2, 1996, the Company recognized a
special credit of $699 for the insurance proceeds received related to a fire
loss incurred in February, 1994.
On June 7, 1996, the Company, the Partnership and Kevin E. Lewis entered
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into the Consulting and Indemnity Agreement and General Release (the
"Consulting Agreement") pursuant to which, among other things, Mr. Lewis would
resign as President and Chief Executive Officer effective September 30, 1996
and will resign his position as Chairman of the Board on December 31, 1996,
unless requested by the Board of Directors to continue until December 31, 1997.
On September 17, 1996, at the request of the Board of Directors, Mr. Lewis
agreed to remain President and Chief Executive Officer beyond September 30,
1996 with no change to the terms of the Consulting Agreement. After his
resignation as President and Chief Executive Officer, Mr. Lewis will serve as a
consultant to the Company until December 31, 1997. Pursuant to the Consulting
Agreement, Mr. Lewis will receive an annual base salary of $350 pro-rated
through the end of 1996 and $250 through the end of 1997. Mr. Lewis received
$75 upon the execution of the Consulting Agreement, $75 on September 30, 1996
and will receive $100 on December 31, 1997. In addition, Mr. Lewis is entitled
to receive $100 if requested to assist in certain negotiations on behalf of the
Company and additional compensation based upon the success of such
negotiations. Furthermore, the Company agreed to pay, among other things,
certain legal expenses of Mr. Lewis incurred in connection with the negotiation
of the Consulting Agreement and certain travel and moving related expenses.
The Board of Directors has begun a search for an individual to serve as
President and Chief Executive Officer of the Company. The Company recognized
$174 of charges related to the Consulting Agreement and the search for a new
President and Chief Executive Officer for the thirteen weeks ended October 1,
1996 and $96 for the thirteen weeks ended July 2, 1996.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thirteen Weeks Ended October 1, 1996
RESULTS OF OPERATIONS. Sales for the third fiscal quarter of 1996 were
$50.0 million, a decrease of $3.9 million from the same quarter of 1995.
Operating income for the third quarter of 1996 was $2.3 million compared to
$117 thousand in the prior year. Net income for the third quarter of 1996 was
$2.2 million compared to a net loss of $6.9 million in the third quarter of
1995. Operating results for the third quarter of 1996 include net special
credits aggregating $535 thousand. During the third quarter of 1996, sales
were negatively impacted primarily by including fewer units in the operating
results.
SALES. Restaurant sales in comparable units were 1.4% lower in the third
quarter of 1996 than the same quarter of 1995, due in part to the impact of the
Summer Olympics. Sales for the third fiscal quarter were $3.1 million lower
than the prior year due to there being 12 fewer units included in operating
results. Sales in the third quarter of 1996 included $816 thousand of Dynamic
Foods sales to third parties.
COST OF SALES. Excluding depreciation, cost of sales was 31.7% of sales
for the third quarter of 1996 as compared to 32.0% for the same quarter of
1995. The decrease in the percentage of sales was principally a result of
lower product costs.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
("SG&A") expense was lower in the aggregate by $3.0 million in the third
quarter of 1996 of which $2.3 million was due to there being 12 fewer units
included in the operating results. The change in SG&A expense included a
decrease of $584 thousand in marketing expense.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
lower by $1.2 million in the third quarter of 1996 due to the reduction of
certain depreciable assets in 1995 in accordance with Statement of Financial
Accounting Standards No. 121 ("SFAS 121") and the reduction in the useful lives
of certain depreciable assets in the prior year.
SPECIAL CREDITS. The operating results include special credits
aggregating $535 thousand. Included in the total is a credit of $709 thousand
for the net proceeds related to the termination of a trademark royalty
agreement and the modification and extension of a lease related to the
Company's former El Paso Bar-B-Que Company restaurants and a charge of $174
thousand related to the search for a new Chief Executive Officer and a
consulting agreement with Kevin E. Lewis, Chairman of the Board. (See Note F
to the Unaudited Condensed Consolidated Financial Statements.)
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INTEREST EXPENSE. Interest expense was lower than the prior year by $7.0
million as a result of the Restructuring. In accordance with Statement of
Financial Accounting Standards No. 15 ("SFAS 15"), the restructured debt was
recorded at the sum of all future principal and interest payments and there is
no recognition of interest expense thereon.
Thirty-nine Weeks Ended October 1, 1996
RESULTS OF OPERATIONS. Sales for the thirty-nine weeks ended October 1,
1996 were $149.5 million, a decrease of $11.4 million from the same period of
1995. Operating income for the thirty-nine weeks ended October 1, 1996 was
$7.7 million compared to $1.2 million in the prior year. Net income for the
thirty-nine weeks was $7.5 million compared to a net loss of $19.3 million in
the thirty-nine weeks ended October 3, 1995. Operating results for the thirty-
nine weeks of 1996 include net special credits aggregating $1.1 million.
During the thirty-nine weeks ended October 1, 1996, sales were negatively
impacted primarily by including fewer units in the operating results.
SALES. Restaurant sales in comparable units were 0.3% lower in the
thirty-nine weeks ended October 1, 1996 than the same period of 1995. Sales
for the thirty-nine weeks ended October 1, 1996 were $9.8 million lower than
the prior year due to there being 13 fewer units included in operating results.
Sales in the thirty-nine weeks ended October 1, 1996 included $2.5 million of
Dynamic Foods sales to third parties.
COST OF SALES. Excluding depreciation, cost of sales was 31.3% of sales
for the thirty-nine weeks ended October 1, 1996 as compared to 32.2% for the
same period of 1995. The decrease in the percentage of sales was principally a
result of lower product costs partially offset by changes in the menu mix.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expense was lower in the aggregate by $8.3 million in the thirty-nine weeks
ended October 1, 1996. SG&A expense was $7.1 million lower than the prior year
due to there being 13 fewer units included in operating results. The change in
SG&A expense included increases of $388 thousand in salaries and wages and $213
in professional fees and a decrease of $1.9 million in marketing expense.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
lower by $3.5 million in the thirty-nine weeks ended October 1, 1996 due to the
reduction of certain depreciable assets in 1995 in accordance with SFAS 121 and
the reduction in the useful lives of certain depreciable assets in the prior
year.
SPECIAL CREDITS. The operating results include special credits
aggregating $1.1 million. Included in the total are credits of $699 thousand
for the insurance proceeds related to a fire loss, $709 thousand for the
Page 16
<PAGE> 17
termination of a trademark royalty agreement and the modification and extension
of a lease related to the Company's former El Paso Bar-B-Que Company
restaurants and a charge of $270 thousand related to the search for a new Chief
Executive Officer and a consulting agreement with Kevin E. Lewis, Chairman of
the Board. (See Note F to the Unaudited Condensed Consolidated Financial
Statements.)
INTEREST EXPENSE. Interest expense was lower than the prior year by $20.3
million as a result of the Restructuring. In accordance with SFAS 15, the
restructured debt was recorded at the sum of all future principal and interest
payments and there is no recognition of interest expense thereon.
Page 17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES OF
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
During the thirty-nine weeks ended October 1, 1996, cash provided from
operating activities of the Company was $13.1 million compared to $7.6 million
in the same period of 1995. The Company made capital expenditures of $7.2
million during the first thirty-nine weeks of 1996 compared to $6.4 million
during the same period of 1995. Cash, temporary investments and marketable
securities were $2.2 million at October 1, 1996 compared to $986 thousand at
October 3, 1995. The cash balance at October 3, 1995 included $800 thousand
which was restricted pursuant to collateral requirements in a letter of credit
agreement. The current ratio of the Company was 0.38:1 at October 1, 1996
compared to 0.054:1 at October 3, 1995. The Company's total assets at October
1, 1996 aggregated $78.9 million compared to $94.2 million at October 3, 1995.
The Company's restaurants are a cash business. Funds available from cash
sales are not needed to finance receivables and are not generally needed
immediately to pay for food, supplies and certain other expenses of the
restaurants. Therefore, the business and operations of the Company have not
historically required proportionately large amounts of working capital, which
is generally common among similar restaurant companies. If Dynamic Foods
expands its sales to third parties, the accounts receivable and inventory
related to such sales could require the Company to maintain additional working
capital.
Total scheduled maturities of long-term debt of the Company and its
subsidiaries over the next five fiscal years are: $0 in 1996, $5.5 million in
1997, $5.5 million in 1998, $5.5 million in 1999 and $5.5 million in 2000.
The Partnership has outstanding $74.6 million of 12% Notes due December
31, 2000, which includes $28.9 million of interest to maturity. Under the
terms of the Indenture covering the 12% Notes, a semi-annual cash interest
payment of approximately $2.7 million is due on each March 31 and September 30.
The obligations of the Partnership under the 12% Notes are secured by a
security interest in and a lien on substantially all of the personal property
of the Partnership and mortgages on all fee (but not leasehold) real properties
of the Partnership (to the extent such properties are mortgageable).
Additionally, Cavalcade Foods has outstanding the Non-recourse Note in the
principal amount of $2.0 million. The Non-recourse Note is secured by certain
real estate in Lubbock, Texas. On October 2, 1996, the real estate was sold
and the net proceeds of approximately $1.4 million were transferred to Wells
Fargo Bank in full satisfaction of such note. The results of this asset sale
and debt extinguishment will include a small gain and will be recognized in the
fourth fiscal quarter.
Page 18
<PAGE> 19
The Company intends to pursue a program of remodeling existing cafeterias,
opening new restaurants, and possibly acquiring existing restaurants or food
service companies. The Company anticipates expending approximately $9 million
in fiscal 1996 to remodel existing cafeterias, open a new restaurant and to
make other capital expenditures. No assurance can be given that the Company
will generate sufficient funds from operations or obtain alternative financing
sources to enable it to make the anticipated capital expenditures.
The Company, from time to time, considers whether disposition of certain
of its assets, including its food processing and distribution operations, real
estate owned in fee simple and leasehold interests, or potential acquisitions
of assets would be beneficial or appropriate for the long-term goals of the
Company and in order to increase stockholder value.
On November 15, 1993, the Company entered into the Amendment to Master
Sublease Agreement, dated as of December 1, 1986, with Kmart pursuant to which,
among other things, the aggregate monthly rent for the period August 1, 1993
through and including December 31, 1996 was reduced by 25%, or approximately
$1.6 million annually, and the aggregate monthly rent for the period January 1,
1997 through and including December 31, 1999 was reduced by 20%, or
approximately $1.2 million annually; provided that, during such period, among
other things, Kevin E. Lewis remains as Chairman of the Board of the Company.
On June 7, 1996, the Company and the Partnership entered into an agreement with
Mr. Lewis pursuant to which Mr. Lewis will resign as Chairman of the Board on
December 31, 1996, unless requested by the Board of Directors to continue until
December 31, 1997. (See Note F to the Unaudited Condensed Consolidated
Financial Statements.) As a consequence of this action, the Company
anticipates entering into negotiations with Kmart to modify the amendment to
remove the provisions requiring Mr. Lewis to remain as Chairman of the Board
until the end of 1999. No assurance can be given that Kmart will agree to such
modification.
The Partnership, the sponsor of the Cavalcade Pension Plan, has agreed to
provide for funding at least two-thirds of the $4.6 million unfunded current
liability which existed at the end of fiscal 1992 by the end of 1998. If the
agreed upon funding is not satisfied by the minimum required annual
contributions, as adjusted for the deficit reduction contribution and
determined under Section 412 of the Internal Revenue Code, the Partnership will
make contributions in excess of the minimum annual requirement.
Page 19
<PAGE> 20
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.2 By-laws of Furr's/Bishop's, Incorporated (as amended
September 17, 1996).
11 Unaudited Computation of Net Income (Loss) Per Common Share
(b) Reports on Form 8-K
A report on Form 8-K was filed on September 24, 1996 with respect
to the change in the public accountants of the Company.
Page 20
<PAGE> 21
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.
FURR'S/BISHOP'S, INCORPORATED FURR'S/BISHOP'S, INCORPORATED
BY: /s/ Kevin E. Lewis /s/ Alton R. Smith
----------------------------- -----------------------------
Kevin E. Lewis Alton R. Smith
Chairman, President Principal Accounting Officer
and Chief Executive Officer
Date: November 13, 1996
Page 21
<PAGE> 22
FURR'S/BISHOP'S INCORPORATED AND SUBSIDIARIES
UNAUDITED COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
(Dollars and shares in thousands, except per share amounts)
Thirteen weeks ended Thirty-nine weeks ended
-------------------- -----------------------
October 1, October 3, October 1, October 3,
1996 1995 1996 1995
--------- --------- --------- ---------
Net Income (Loss) $ 2,194 $ (6,944) $ 7,520 $ (19,341)
========= ========= ========= =========
Primary:
Weighted average number of
common shares outstanding 48,670 48,649 48,663 48,649
========= ========= ========= =========
Primary net income (loss)
per share of common stock $ 0.04 $ (0.14) $ 0.15 $ (0.25)
========= ========= ========= =========
Fully Diluted:
Weighted average number of
common shares outstanding 48,670 48,649 48,663 48,649
Common shares issued upon
exercise of outstanding
warrants 2,681 2,702 2,688 2,702
--------- --------- --------- ---------
Fully diluted weighted
average common shares
outstanding 51,351 51,351 51,351 51,351
========= ========= ========= =========
Fully diluted net income
(loss) per share of
common stock $ 0.04 $ N/A $ 0.15 $ N/A
Page 22
EXHIBIT 3.2
BY-LAWS
OF
Furr's/Bishop's, Incorporated
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETINGS. The Annual Meetings of Stockholders shall be
held on such date and at such time as shall be designated from time to time by
the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect by a plurality vote a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Written notice of the Annual Meeting stating the place, date and hour of the
meeting shall be given to each stockholder entitled to vote at such meeting not
less than ten nor more than sixty days before the date of the meeting.
Section 3. SPECIAL MEETINGS. Unless otherwise prescribed by law or by
the Certificate of Incorporation, Special Meetings of Stockholders, for any
purpose or purposes, may be called by either (i) the Chairman, if there be one,
or (ii) the President, (iii) any Vice President, if there be one, (iv) the
Secretary or (v) any Assistant Secretary, if there be one, and shall be called
by any such officer at the request in writing of a majority of the Board of
Directors or at the request in writing of stockholders owning a majority of the
capital stock of the Corporation issued and outstanding and entitled to vote.
Such request shall state the purpose or purposes of the proposed meeting.
<PAGE>
Written notice of a Special Meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
Section 4. QUORUM. Except as otherwise provided by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present
or represented. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder entitled to vote at the meeting.
Section 5. VOTING. Unless otherwise required by law, the Certificate of
Incorporation or these By-Laws, any question brought before any meeting of
stockholders shall be decided by the vote of the holders of a majority of the
stock represented and entitled to vote thereat. Each stockholder represented
at a meeting of stockholders shall be entitled to cast one vote for each share
of the capital stock entitled to vote thereat held by such stockholder. Such
votes may be cast in person or by proxy but no proxy shall be voted on or after
three years from its date, unless such proxy provides for a longer period. The
Board of Directors, in its discretion, or the officer of the Corporation
presiding at a meeting of stockholders, in his discretion, may require that any
votes cast at such meeting shall be cast by written ballot.
Section 6. CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless otherwise
provided in the Certificate of Incorporation, any action required or permitted
to be taken at any Annual or Special Meeting of Stockholders of the
Corporation, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have
not consented in writing.
Section 7. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
<PAGE>
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
Section 8. STOCK LEDGER. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
ARTICLE III
DIRECTORS
Section 1. NUMBER AND ELECTION OF DIRECTORS. The Board of Directors
shall consist of not less than one nor more than fifteen members, the exact
number of which shall initially be fixed by the Incorporator and thereafter
from time to time by the Board of Directors. Except as provided in Section 2
of this Article, directors shall be elected by a plurality of the votes cast at
Annual Meetings of Stockholders, and each director so elected shall hold office
until the next Annual Meeting and until his successor is duly elected and
qualified, or until his earlier resignation or removal. Any director may
resign at any time upon notice to the Corporation. Directors need not be
stockholders.
Section 2. VACANCIES. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the next annual election and until their successors are duly elected and
qualified, or until their earlier resignation or removal.
Section 3. DUTIES AND POWERS. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done by the stockholders.
Section 4. MEETINGS. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
<PAGE>
Delaware. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to time be determined by
the Board of Directors. Special meetings of the Board of Directors may be
called by the Chairman, if there be one, the President, or any directors.
Notice thereof stating the place, date and hour of the meeting shall be given
to each director either by mail not less than forty-eight (48) hours before the
date of the meeting, by telephone or telegram on twenty-four (24) hours'
notice, or on such shorter notice as the person or persons calling such meeting
may deem necessary or appropriate in the circumstances.
Section 5. QUORUM. Except as may be otherwise specifically provided by
law, the Certificate of Incorporation or these By-Laws, at all meetings of the
Board of Directors, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors. If a quorum shall not be present at any meeting
of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 6. ACTIONS OF BOARD. Unless otherwise provided by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting, if all of the members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 7. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 7 shall
constitute presence in person at such meeting.
Section 8. COMMITTEES. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
<PAGE>
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any absent or disqualified member. Any
committee, to the extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 9. COMPENSATION. The directors may be paid their expenses, if
any, of attendance at each meeting of the Board of Directors and may be paid a
fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
Section 10. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts
as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or ratified, by the
Board of Directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum at
a meeting of the Board of Directors or of a committee which authorizes the
contract or transaction.
ARTICLE IV
OFFICERS
Section 1. GENERAL. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary and a Treasurer.
The Board of Directors, in its discretion, may also choose a Chairman of the
Board of Directors (who must be a director) and one or more Vice Presidents,
<PAGE>
Assistant Secretaries, Assistant Treasurers and other officers. Any number of
offices may be held by the same person, unless otherwise prohibited by law, the
Certificate of Incorporation or these By-Laws. The officers of the Corporation
need not be stockholders of the Corporation nor, except in the case of the
Chairman of the Board of Directors, need such officers be directors of the
Corporation.
Section 2. ELECTION. The Board of Directors at its first meeting held
after each Annual Meeting of Stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board of Directors; and all officers of the Corporation shall hold office until
their successors are chosen and qualified, or until their earlier resignation
or removal. Any officer elected by the Board of Directors may be removed at
any time by the affirmative vote of a majority of the Board of Directors. Any
vacancy occurring in any office of the Corporation shall be filled by the Board
of Directors. The salaries of all officers of the Corporation shall be fixed
by the Board of Directors.
Section 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the President or any Vice President and any
such officer may, in the name of and on behalf of the Corporation, take all
such action as any such officer may deem advisable to vote in person or by
proxy at any meeting of security holders of any corporation in which the
Corporation may own securities and at any such meeting shall possess and may
exercise any and all rights and power incident to the ownership of such
securities and which, as the owner thereof, the Corporation might have
exercised and possessed if present. The Board of Directors may, by resolution,
from time to time confer like powers upon any other person or persons.
Section 4. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board
of Directors, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such other
powers as from time to time may be assigned to him by these By-Laws or by the
Board of Directors.
Section 5. PRESIDENT. The President shall, subject to the control of the
Board of Directors, have general supervision of the business of the Corporation
and shall see that all orders and resolutions of the Board of Directors are
carried into effect. He shall execute all bonds, mortgages, contracts and
other instruments of the Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except that the other officers of the Corporation may sign and
execute documents when so authorized by these By-Laws, the Board of Directors
<PAGE>
or the President. In the absence or disability of the Chairman of the Board of
Directors, or if there be none, the President shall preside at all meetings of
the stockholders and the Board of Directors. Unless otherwise designated by
the Board of Directors, the President shall be the Chief Executive Officer of
the Corporation. The President shall also perform such other duties and may
exercise such other powers as from time to time may be assigned to him by these
By-Laws or by the Board of Directors.
Section 6. VICE PRESIDENTS. At the request of the President or in his
absence or in the event of his inability or refusal to act, the Vice President
or the Vice Presidents if there is more than one (in the order designated by
the Board of Directors) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions
upon the President. Each Vice President shall perform such other duties and
have such other powers as the Board of Directors from time to time may
prescribe. If there be no Vice President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the President
or in the event of the inability or refusal of the President to act, shall
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President.
Section 7. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors or President, under whose supervision he shall be. If the Secretary
shall be unable or shall refuse to cause to be given notice of all meetings of
the stockholders and special meetings of the Board of Directors, and if there
be no Assistant Secretary, then either the Board of Directors or the President
may choose another officer to cause such notice to be given. The Secretary
shall have custody of the seal of the Corporation and the Secretary or any
Assistant Secretary, if there be one, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest the affixing by his signature. The
Secretary shall see that all books, reports, statements, certificates and other
documents and records required by law to be kept or filed are properly kept or
filed, as the case may be.
Section 8. TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
<PAGE>
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 9. ASSISTANT SECRETARIES. Except as may be otherwise provided in
these By-Laws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them by the
Board of Directors, the President, any Vice President, if there be one, or the
Secretary, and in the absence of the Secretary or in the event of his
disability or refusal to act, shall perform the duties of the Secretary, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 10. ASSISTANT TREASURERS. Assistant Treasurers, if there be any,
shall perform such duties and have such powers as from time to time may be
assigned to them by the Board of Directors, the President, any Vice President,
if there be one, or the Treasurer, and in the absence of the Treasurer or in
the event of his disability or refusal to act, shall perform the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. If required by the Board of
Directors, an Assistant Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his control belonging to
the Corporation.
Section 11. OTHER OFFICERS. Such other officers as the Board of
Directors may choose shall perform such duties and have such powers as from
time to time may be assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the Corporation the power to
choose such other officers and to prescribe their respective duties and powers.
<PAGE>
ARTICLE V
STOCK
Section 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman of the Board of Directors, the President or a
Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Corporation, certifying the number
of shares owned by him in the Corporation.
Section 2. SIGNATURES. Where a certificate is countersigned by (i) a
transfer agent other than the Corporation or its employee, or (ii) a registrar
other than the Corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to advertise the same in such manner
as the Board of Directors shall require and/or to give the Corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the Corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 4. TRANSFERS. Stock of the Corporation shall be transferable in
the manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the
certificate or by his attorney lawfully constituted in writing and upon the
surrender of the certificate therefor, which shall be canceled before a new
certificate shall be issued.
Section 5. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
<PAGE>
a record date, which shall not be more than sixty days nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 6. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise provided
by law.
ARTICLE VI
NOTICES
Section 1. NOTICES. Whenever written notice is required by law, the
Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, such notice may be given by mail,
addressed to such director, member of a committee or stockholder, at his
address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written notice may also be given
personally or by telegram, telex or cable.
Section 2. WAIVERS OF NOTICE. Whenever any notice is required by law,
the Certificate of Incorporation or these By-Laws, to be given to any director,
member of a committee or stockholder, 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.
ARTICLE VII
GENERAL PROVISIONS
Section 1. DIVIDENDS. Dividends upon the capital stock of the
Corporation, subject to the provisions of the Certificate of Incorporation, if
any, may be declared by the Board of Directors at any regular or special
meeting, and may be paid in cash, in property, or in shares of the capital
stock. Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the Board of
Directors from time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for any proper
purpose, and the Board of Directors may modify or abolish any such reserve.
<PAGE>
Section 2. DISBURSEMENTS. 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.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
Section 4. CORPORATE SEAL. The corporate seal shall have inscribed
thereon the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE CORPORATION. Subject to Section 3 of this
Article VIII, the Corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director or officer of the Corporation,
or is or was a director or officer of the Corporation serving at the request of
the Corporation as a director or officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN
THE RIGHT OF THE CORPORATION. Subject to Section 3 of this Article VIII, the
Corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of
the fact that he is or was a director or officer of the Corporation, or is or
was a director or officer of the Corporation serving at the request of the
<PAGE>
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 3. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under this
Article VIII (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1 or Section 2 of this
Article VIII, as the case may be. Such determination shall be made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (ii) if such a quorum
is not obtainable, or, even if obtainable a quorum of disinterested directors
so directs, by independent legal counsel in a written opinion, or (iii) by the
stockholders. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue
or matter therein, he may be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith, without
the necessity of authorization in the specific case.
Section 4. GOOD FAITH DEFINED. For purposes of any determination under
Section 3 of this Article VIII, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was
unlawful, if his action is based on the records or books of account of the
Corporation or another enterprise, or on information supplied to him by the
officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the
Corporation or another enterprise by an independent certified public accountant
or by an appraiser or other expert selected with reasonable care by the
Corporation or another enterprise. The term "another enterprise" as used in
this Section 4 shall mean any other corporation or any partnership, joint
<PAGE>
venture, trust, employee benefit plan or other enterprise of which such person
is or was serving at the request of the Corporation as a director, officer,
employee or agent. The provisions of this Section 4 shall not be deemed to be
exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth in Sections 1
or 2 of this Article VIII, as the case may be.
Section 5. INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director or
officer may apply to any court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court
shall be a determination by such court that indemnification of the director or
officer is proper in the circumstances because he has met the applicable
standards of conduct set forth in Sections 1 or 2 of this Article VIII, as the
case may be. Neither a contrary determination in the specific case under
Section 3 of this Article VIII nor the absence of any determination thereunder
shall be a defense to such application or create a presumption that the
director or officer seeking indemnification has not met any applicable standard
of conduct. Notice of any application for indemnification pursuant to this
Section 5 shall be given to the Corporation promptly upon the filing of such
application. If successful, in whole or in part, the director or officer
seeking indemnification may also be entitled to be paid the expense of
prosecuting such application.
Section 6. EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a director
or officer in defending or investigating a threatened or pending action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article VIII.
Section 7. NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
The indemnification and advancement of expenses provided by or granted pursuant
to this Article VIII shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-Law, agreement, contract, vote of stockholders or disinterested
directors or pursuant to the direction (howsoever embodied) of any court of
competent jurisdiction or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office, it being the
policy of the Corporation that indemnification of the persons specified in
Sections 1 and 2 of this Article VIII may be made to the fullest extent
permitted by law. The provisions of this Article VIII shall not be deemed to
preclude the indemnification of any person who is not specified in Sections 1
or 2 of this Article VIII but whom the Corporation has the power or obligation
<PAGE>
to indemnify under the provisions of the General Corporation Law of the State
of Delaware, or otherwise.
Section 8. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether or not
the Corporation would have the power or the obligation to indemnify him against
such liability under the provisions of this Article VIII.
Section 9. CERTAIN DEFINITIONS. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director or officer
of such constituent corporation, or is or was a director or officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article VIII with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued. For purposes
of this Article VIII, references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties
on, or involves services by, such director or officer with respect to an
employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the Corporation" as referred to in this Article VIII.
Section 10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The
indemnification and advancement of expenses provided by, or granted pursuant
to, this Article VIII may, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
Section 11. LIMITATION ON INDEMNIFICATION. Notwithstanding anything
contained in this Article VIII to the contrary, except for proceedings to
enforce rights to indemnification (which shall be governed by Section 5
<PAGE>
hereof), the Corporation shall not be obligated to indemnify any director or
officer in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
Section 12. INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amedded or repealed, in whole or
in part, or new By-Laws may be adopted by the stockholders or by the Board of
Directors, provided, however, that notice of such alteration, amendment, repeal
or adoption of new By-Laws be contained in the notice of such meeting of
stockholders or Board of Directors as the case may be. All such amendments
must be approved by either the holders of a majority of the outstanding capital
stock entitled to vote thereon or by a majority of the entire Board of
Directors then in office.
Section 2. ENTIRE BOARD OF DIRECTORS. As used in this Article IX and in
these By-Laws generally, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no
vacancies.
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