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 June 29, 1999
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
3001 E. PRESIDENT GEORGE BUSH HIGHWAY, SUITE 200, RICHARDSON, TX 75082
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 808-2923
- -------------------------------------------------------------------------------
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 August 5, 1999 there were 48,789,544 shares of Common Stock
outstanding.
Page 1 of 20
Exhibit Index Located on Page 19
<PAGE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
June 29, 1999(Unaudited) and December 29, 1998 3
Unaudited Condensed Consolidated Statements
Of Operations - For the thirteen weeks
ended June 29, 1999 and June 30, 1998 5
Unaudited Condensed Consolidated Statements
of Operations - For the twenty-six weeks
ended June 29, 1999 and June 30, 1998 6
Unaudited Condensed Consolidated Statement of
Stockholders' Deficit - For the twenty-six weeks
ended June 29, 1999 7
Unaudited Condensed Consolidated Statements
of Cash Flows - For the twenty-six weeks
ended June 29, 1999 and June 30, 1998 8
Notes to Unaudited Condensed Consolidated
Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION 17
SIGNATURES
Page 2
<PAGE>
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value amounts)
<CAPTION>
June 29, December 29,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 9,509 $ 11,571
Accounts and notes receivable, net 1,017 715
Inventories 6,680 7,014
Prepaid expenses and other 1,115 441
----------- -----------
Total current assets 18,321 19,741
Property, plant and equipment, net 49,237 48,320
Other assets 785 448
----------- -----------
$ 68,343 $ 68,509
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
(Continued on following page)
Page 3
<PAGE>
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(dollars in thousands, except par value amounts)
<CAPTION>
June 29, December 29,
1999 1998
----------- -----------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Deficit
Current liabilities:
Current maturities of long-term debt $ 5,493 $ 5,493
Trade accounts payable 4,482 3,990
Other payables and accrued expenses 17,085 17,303
Reserve for store closings - current 1,193 1,316
----------- -----------
Total current liabilities 28,253 28,102
Reserve for store closings, net of current portion 2,868 3,280
Long-term debt, net of current portion 57,966 60,712
Other long-term liabilities 16,144 15,697
Excess of future lease payments over fair value,
net of amortization 2,128 2,330
Stockholders' deficit:
Preferred stock, $.01 par value; 5,000,000
shares authorized, none issued
Common stock, $.01 par value; 65,000,000
shares authorized, 48,789,544 and
48,736,606 issued and outstanding
in 1999 and 1998, respectively 488 487
Additional paid-in capital 55,996 55,938
Accumulated other comprehensive loss (2,857) (2,857)
Accumulated deficit (92,643) (95,180)
----------- -----------
Total stockholders' deficit (39,016) (41,612)
----------- -----------
$ 68,343 $ 68,509
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
Page 4
<PAGE>
<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
-------------------------
June 29, June 30,
1999 1998
----------- -----------
<S> <C> <C>
Sales $ 47,196 $ 48,032
Costs and expenses:
Cost of sales (excluding depreciation) 13,953 14,218
Selling, general and administrative 29,493 29,101
Depreciation and amortization 2,444 2,514
Net special charges - 610
----------- -----------
45,890 46,443
----------- -----------
Operating income 1,306 1,589
Interest expense 75 70
----------- -----------
Net income $ 1,231 $ 1,519
=========== ===========
Weighted average number of shares
of common stock outstanding:
Basic 48,789,405 48,675,601
=========== ===========
Diluted 48,897,282 48,675,601
=========== ===========
Net income per share:
Basic $ 0.03 $ 0.03
=========== ===========
Diluted $ 0.03 $ 0.03
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
Page 5
<PAGE>
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
<CAPTION>
Twenty-six weeks ended
-------------------------
June 29, June 30,
1999 1998
----------- -----------
<S> <C> <C>
Sales $ 93,199 $ 94,244
Costs and expenses:
Cost of sales (excluding depreciation) 27,612 27,766
Selling, general and administrative 57,466 57,184
Depreciation and amortization 4,871 5,027
Net special charges 566 610
----------- -----------
90,515 90,587
----------- -----------
Operating income 2,684 3,657
Interest expense 147 114
----------- -----------
Net income $ 2,537 $ 3,543
=========== ===========
Weighted average number of shares
of common stock outstanding:
Basic 48,781,921 48,675,384
=========== ===========
Diluted 48,975,477 48,675,384
Net income (loss) per share:
Basic $ 0.05 $ 0.07
=========== ===========
Diluted $ 0.05 $ 0.07
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
Page 6
<PAGE>
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE TWENTY-SIX WEEKS ENDED June 29, 1999
(dollars in thousands)
<CAPTION>
Additional
Additional Other Total
Common Paid-In Comprehensive Accumulated Stockholders'
Stock Capital Loss Deficit Deficit
------ ---------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance at
December 29, 1998 $ 487 $ 55,938 $ (2,857) $ (95,180) $ (41,612)
Warrants exercised 1 58 59
Net income 2,537 2,537
------ ---------- ------------- ----------- ------------
Balance at
June 29, 1999 $ 488 $ 55,996 $ (2,857) $ (92,643) $ (39,016)
====== ========== ============= =========== ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
Page 7
<PAGE>
<TABLE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION>
Twenty-six weeks ended
-------------------------
June 29, June 30,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,537 $ 3,543
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,871 5,027
Gain on disposition of assets (208) (42)
Other, net 358 237
Changes in operating assets and liabilities:
Accounts and notes receivable (177) (4)
Inventories 334 74
Prepaid expenses and other (674) (505)
Trade accounts payable, other payables,
accrued expenses and other liabilities 274 1,715
----------- -----------
Net cash provided by operating activities 7,315 10,045
----------- -----------
Cash flows used in investing activities:
Purchases of property, plant and equipment (8,124) (4,155)
Expenditures charged to reserve for store closings (649) (669)
Proceeds from the sale of property, plant and
equipment 2,215 1,100
Other, net (15) 14
----------- -----------
Net cash used in investing activities (6,573) (3,710)
----------- -----------
Cash flows used in financing activities:
Payment of indebtedness (2,746) (2,746)
Other, net (58) (55)
----------- -----------
Net cash used in financing activities (2,804) (2,801)
----------- -----------
Increase(decrease) in cash and cash equivalents (2,062) 3,534
Cash and cash equivalents at beginning of period 11,571 4,516
----------- -----------
Cash and cash equivalents at end of period $ 9,509 $ 8,050
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid, including $2,746 of interest in 1999
and 1998 classified as payment of indebtedness $ 2,887 $ 2,748
=========== ===========
Non-cash investing activity:
Note receivable for sale of asset $ 125 $ -
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial
statements.
Page 8
<PAGE>
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A: Summary of Significant Accounting Policies
Furr's/Bishop's, Incorporated, a Delaware corporation (the "Company"),
operates cafeterias and a buffet 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 the Company 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 December 29, 1998. In
the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation.
The results of operations for the twenty-six weeks ended June 29, 1999 may
not be indicative of the results that may be expected for the fiscal year
ending December 28, 1999.
The following table reconciles the denominators of basic and diluted
earnings per share for the periods ended June 29, 1999 and June 30, 1998.
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
---------------------- ----------------------
June 29, June 30, June 29, June 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding-basic 48,789,405 48,675,601 48,781,921 48,675,384
Options 107,877 193,556
---------- ---------- ---------- ----------
Weighted average common
shares outstanding-diluted 48,897,282 48,675,601 48,975,477 48,675,384
========== ========== ========== ==========
</TABLE>
Warrants and options outstanding for the thirteen weeks ended June 30,
1998 and the twenty-six weeks ended June 30, 1998 were not considered in the
computation of net income per common share because their effect is
antidilutive.
NOTE B: Income Tax
During the twenty-six week period ended June 29, 1999, the Company had a
net loss for income tax purposes. The resulting tax benefit from the net
operating loss has been offset by an increase in the tax valuation allowance.
Page 10
<PAGE>
NOTE C: Special Charges
For the twenty-six weeks ended June 29, 1999, the Company recognized a
special charge of $566,000 for the costs associated with the move of the
Company's support center from Lubbock, Texas to Richardson, Texas. For the
thirteen weeks ended June 30, 1998, the Company recognized a special charge of
$610,000 related to the proxy contest for the election of the Board of
Directors.
NOTE D: Business Segments
Following is a summary of segment information of the Company for the
thirteen weeks ended June 29, 1999 and June 30, 1998:
<TABLE>
<CAPTION>
Cafeterias Dynamic Foods Total
---------- ------------- ----------
<S> <C> <C> <C>
1999:
External revenues $ 46,933 $ 263 $ 47,196
Intersegment revenues - 15,083 15,083
Depreciation and amortization 2,209 235 2,444
Segment profit 865 366 1,231
1998:
External revenues 47,761 271 48,032
Intersegment revenues - 14,572 14,572
Depreciation and amortization 2,306 208 2,514
Segment profit 1,157 362 1,519
</TABLE>
Following is a summary of segment information of the Company for the twenty-six
weeks ended June 29, 1999 and June 30, 1998:
<TABLE>
<CAPTION>
Cafeterias Dynamic Foods Total
---------- ------------- ----------
<S> <C> <C> <C>
1999:
External revenues $ 92,696 $ 503 $ 93,199
Intersegment revenues - 29,678 29,678
Depreciation and amortization 4,395 476 4,871
Segment profit 1,947 590 2,537
1998:
External revenues 93,723 521 94,244
Intersegment revenues - 28,691 28,691
Depreciation and amortization 4,616 411 5,027
Segment profit 2,853 690 3,543
</TABLE>
Page 10
<PAGE>
Following is a reconciliation of reportable segments to the Company's
consolidated totals for the thirteen and twenty-six weeks ended June 29, 1999
and June 30, 1998:
Thirteen Weeks Ended Twenty-six Weeks Ended
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-six Weeks Ended
---------------------- ----------------------
June 29, June 30, June 29, June 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Total revenues of
reportable segments $ 62,279 $ 62,604 $ 122,877 $ 122,935
Elimination of
inter-segment revenue (15,083) (14,572) (29,678) (28,691)
---------- ---------- ---------- ----------
Total consolidated
revenues $ 47,196 $ 48,032 $ 93,199 $ 94,244
========== ========== ========== ==========
</TABLE>
NOTE E: New Accounting Pronouncements
On January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants Statement of Position (SOP) 98-1, "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use". SOP
98-1 requires companies to capitalize certain internal-use software costs once
certain criteria are met. Adoption of this statement did not have a material
impact on the Company's consolidated financial position, results of operations
or cash flows.
On January 1, 1999, the Company adopted the American Institute of
Certified Public Accountants SOP 98-5, "Reporting on the Costs of Start-up
Activities". SOP 98-5 requires costs of start-up activities to be expensed
when incurred. Adoption of this statement did not have a material impact on
the Company's consolidated financial position, results or operations or cash
flows.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Thirteen Weeks Ended June 29, 1999 Compared to Thirteen Weeks Ended June 30,
1998
Results of operations. Sales for the second fiscal quarter of 1999 were
$47.2 million, a decrease of $836 thousand from the same quarter of 1998.
Operating income for the second quarter of 1999 was $1.3 million compared to
operating income of $1.6 million in the comparable period in the prior year.
The operating income of the second quarter of 1998 included a special charge of
$610 thousand. The net income for the second quarter of 1999 was $1.2 million
compared to net income of $1.5 million in the second quarter of 1998.
Page 11
<PAGE>
Sales. Restaurant sales in comparable units were 0.93% higher in the
second quarter of 1999 than the same quarter of 1998. Sales for the second
fiscal quarter were $828 thousand lower than the same period of the prior year
due to there being a net of three fewer units included in the operating
results. Sales by Dynamic Foods to third parties were $8 thousand lower in
the second quarter of 1999 than the second quarter of the prior year.
Cost of sales. Excluding depreciation, cost of sales was 29.6% of sales
for both the second quarter of 1999 and the same quarter of 1998.
Selling, general and administrative. Selling, general and administrative
("SG&A") expense was higher in the aggregate by $392 thousand in the second
quarter of 1999 as compared to 1998. Changes in SG&A expense included
increases of $254 thousand in professional services and $303 thousand in labor
and related expense. Other changes in SG&A expense included a decrease of $148
thousand in utility expenses. Included in 1999 professional services are $100
thousand of contract employment created by the move of the Company's support
center.
Depreciation and amortization. Depreciation and amortization expense was
lower by $70 thousand in the second quarter of 1999 due primarily to lower
depreciation on property, plant and equipment previously written down in
accordance with Statement of Financial Accounting Standards ("SFAS")No. 121.
Special charges. Operating income for the quarter ended June 30, 1998
included a special charge of $610 thousand to reflect the cost of the proxy
contest for the election of the Board of Directors.
Interest expense. Interest expense was $75 thousand in the second quarter
of 1999, which was slightly higher than the comparable period in the prior
year. In accordance with SFAS No. 15, the Company's debt that was restructured
at January 2, 1996 was recorded at the sum of all future principal and interest
payments and there is no recognition of interest expense thereon.
Twenty-six Weeks Ended June 29, 1999 Compared to Twenty-six Weeks Ended June
30, 1998
Results of operations. Sales for the first twenty-six weeks of 1999 were
$93.2 million, a decrease of $1.0 million from the same period of 1998.
Operating income for the first twenty-six weeks of 1999 was $2.7 million
compared to $3.7 million in the comparable period in the prior year. The
operating income for the twenty-six weeks of 1999 included a special charge of
$566 thousand, while the prior year period included a special charge of $610
thousand. The net income for the first twenty-six weeks of 1999 was $2.5
million compared to $3.5 million in the same period of 1998.
Sales. Restaurant sales in comparable units were 1.94% higher in the first
twenty-six weeks of 1999 than the same period of 1998. Sales for the first
twenty-six weeks were $1.0 million lower than the same period of the prior year
due to there being a net of four fewer units included in operating results.
Sales by Dynamic Foods to third parties were $19 thousand lower in the first
twenty-six weeks of 1999 than the same period of the prior year.
Cost of sales. Excluding depreciation, cost of sales was 29.6% of sales
for the first twenty-six weeks of 1999 as compared to 29.5% for the same period
of 1998.
Page 12
<PAGE>
Selling, general and administrative. Selling, general and administrative
("SG&A") expense was higher in the aggregate by $282 thousand in the first
twenty-six weeks of 1999 as compared to 1998. Changes in SG&A expense included
increases in 1999 of $574 thousand of labor and related expense, $146 thousand
in marketing expense and $55 thousand in rent expense. Other changes in SG&A
expense included a decrease of $379 thousand in utility expenses.
Depreciation and amortization. Depreciation and amortization expense was
lower by $156 thousand in the first twenty-six weeks of 1999 due primarily to
lower depreciation on property, plant and equipment previously written down in
accordance with SFAS 121.
Special charges. Operating income for the quarter ended March 30, 1999
included a special charge of $566 thousand to reflect the cost of the move of
the Company's support center from Lubbock, Texas to Richardson, Texas.
Operating income for the quarter ended June 30, 1998 included a special charge
of $610 thousand to reflect the cost of the proxy contest for the election of
the Board of Directors.
Interest expense. Interest expense was $147 thousand in the first
twenty-six weeks of 1999, which was higher than the $114 thousand in the
comparable period in the prior year. In accordance with SFAS No. 15, the
Company's debt that was restructured at January 2, 1996 was recorded at the sum
of all future principal and interest payments and there is no recognition of
interest expense thereon.
LIQUIDITY AND CAPITAL RESOURCES OF
FURR'S/BISHOP'S, INCORPORATED AND SUBSIDIARIES
During the twenty-six weeks ended June 29, 1999, cash provided by operating
activities of the Company was $7.3 million compared to $10.0 million in the
same period of 1998. The Company made capital expenditures of $8.1 million
during the first twenty-six weeks of 1999 compared to $4.2 million during the
same period of 1998. Cash and cash equivalents were $9.5 million at June 29,
1999 compared to $8.1 million at June 30, 1998. The current ratio of the
Company was .65:1 at June 29, 1999 compared to .60:1 at June 30, 1998 and .70:1
at December 29, 1998. The Company's total assets at June 29, 1999 aggregated
$68.3 million, compared to $67.6 million at June 30, 1998 and $68.5 million at
December 29, 1998.
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 consistent with similar restaurant companies.
Total scheduled maturities of long-term debt and interest classified as
long-term debt of the Company and its subsidiaries over the next three calendar
years are: $2.7 million in the remainder of 1999, $5.5 million in 2000 and
$55.3 million in 2001.
Page 13
<PAGE>
The Company has outstanding $61.0 million of 12% Notes due December 31,
2001, which includes $15.1 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 Company under the 12% Notes are secured by a security
interest in and a lien on all of the personal property of the Partnership and
mortgages on all fee and leasehold properties of the Partnership (to the extent
such properties are mortgageable).
The Company has outstanding $2.5 million of 10.5% Notes due December 31,
2001. A semi-annual cash interest payment of approximately $134 thousand is
due on each June 30 and December 31.
The Company is pursuing a program of remodeling existing cafeterias and
opening new restaurants. The Company anticipates expending approximately $15
to $20 million in fiscal year 1999 to remodel existing cafeterias and open new
restaurants 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 fully implement the anticipated
capital expenditures.
Page 14
<PAGE>
Year 2000 Readiness Disclosure
Some computers, software, and other equipment include computer code in
which calendar year data is abbreviated to only two digits. As a result, some
of these systems will not operate correctly after 1999 because they may
interpret "00" to mean 1900, rather than 2000. These problems are widely
expected to increase in frequency and severity as the year 2000 approaches, and
are commonly referred to as the "Year 2000 Problem."
The Company believes that it has identified all significant digital systems
and applications that will require modification to ensure Year 2000 compliance.
The Company has substantially completed the modification, upgrading, and
replacing of the digital systems that have been identified as adversely
affected by Y2K. The balance of these efforts will be completed by September
30, 1999. The Company is awaiting the release of the most current software
from its accounting software vendor in August 1999 to finalize systems testing.
The Company estimates that the total costs of this effort during the 1998 and
1999 fiscal years will be less than $500 thousand, which is being funded
through operating cash flows. These estimates are based on management's
assumptions regarding future events, including the continued availability of
necessary resources and the effectiveness of hardware and software solutions
provided by third parties and by the Company's information technology staff.
The Year 2000 Problem may also affect parties who provide critical goods
and services to the Company, for example banks, credit card companies, utility
providers and suppliers of raw and processed foodstuffs to the Company's
restaurants and its Dynamic Foods operation. The Company is evaluating the
extent to which the Company's operations are vulnerable to Year 2000 problems
of its material vendors and is seeking assurance of their Year 2000 compliance
status. Management believes that the Company's reliance upon large volumes of
independent consumer transactions at 100 restaurant locations, operation of its
own trucking fleet and utilization of the Dynamic Foods division to provide the
majority of its food products limit some aspects of the Company's Year 2000
exposure. However, the Company's ability to assure Year 2000 compliance by
many critical vendors is very limited.
The Company is in the process of completing contingency plans to address
the possibility of significant performance failures by its material vendors.
The material vendors have been identified and contingency plans developed for
the products they provide. Final documentation of a detailed contingency plan
for these vendors will be completed by August 31, 1999. There is no assurance
that the Company can adequately plan for contingencies that may be associated
with Year 2000 failures by these third parties, or that alternative suppliers
will be available and themselves unaffected by Year 2000 Problems. In
particular, management is not able to predict with any assurance the effect of
Year 2000 Problems in the food product industry or among the suppliers of
utilities such as electricity, water and telecommunications to the Company, and
specifically to its Dynamic Foods operation. An interruption of the operation
of Dynamic Foods could require the Company to close its restaurants until
service can be resumed.
Page 15
<PAGE>
Quantitative and Qualitative Disclosure about Market Risk
The Company is exposed to market risk from changes in commodity prices.
The Company purchases certain commodities used in food preparation. These
commodities are generally purchased based upon market prices established with
vendors. These purchase arrangements may contain contractual features that
limit the price paid by establishing certain price floors or caps. The Company
does not use financial instruments to hedge commodity prices because these
purchase arrangements help control the ultimate cost paid and any commodity
price aberrations are generally short term in nature.
The Company's long term debt does not expose it to market risk as all
interest accrues at fixed rates. The Company does not use derivative financial
instruments to manage overall borrowing costs.
The discussion in "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" of the Company's plans, and management's
expectations, relating to the Company's business, including Year 2000
compliance, as well as other portions of this report, includes certain
statements that may constitute "forward-looking" information (as defined in the
Private Securities Litigation Reform Act of 1995). Words such as "anticipate,"
"estimate," "project" and similar expressions are intended to identify such
forward-looking statements. Such forward-looking statements are subject to
certain risks, uncertainties and assumptions, including without limitation
those discussed in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this report. Should one
or more of these risks materialize, or should any of the underlying assumptions
prove incorrect, actual results of current and future operations may vary
materially from those anticipated, estimated or projected. Prospective
investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of their dates. The Company assumes no
obligation to update any such forward-looking statements.
Page 16
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
(a) The Company and certain of its subsidiaries, the Cavalcade Pension
Plan, the Cavalcade Pension Plan Committee, Kmart Corporation and its
pension plan and Michael Levenson have since 1996 been defendants in a
lawsuit brought against them in U.S. District Court in Denver,
Colorado by Robert H. Aull ("Plaintiff"), a former employee of the
Company and a participant in the Cavalcade Pension Plan. The
Plaintiff requested that the Court certify a class of other plaintiffs
who are similarly situated and sought unspecified damages.
The Plaintiff's allegations (all of which are disputed by the
defendants in the case) included: (i) that accrued benefits under the
Cavalcade Pension Plan were improperly reduced during the period from
1988 to 1993, (ii) the "freeze" of the Plan on June 30, 1989 was
improper, (iii) an insufficient amount of assets was transferred from
the Kmart Corporation pension plan to the Cavalcade Pension Plan in
connection with the acquisition of the Company from Kmart effected by
Mr. Levenson and his affiliates in 1988 and (iv) rent concessions
allowed to the Company by Kmart commencing in 1993 constituted
prohibited transactions that bestowed illegal benefits upon the
Company and Mr. Kevin Lewis, former Chairman of the Board of the
Company.
The Company, the Cavalcade Pension Plan, the members of the Cavalcade
Pension Plan Committee, Kmart Corporation and its pension plan have
entered into definitive settlement agreement (the "Agreement") with
the plaintiff and his counsel that would resolve all outstanding
claims among them. The Agreement is subject to (1) confirmation by an
independent actuary of the calculations that support the proposed
settlement and (2) approval of the settlement as "fair" to all members
of the plaintiff class by the court after notice to all purported
class members and a hearing. The Agreement has been filed with the
court. The Company expected the required hearing would be completed by
the end of the second quarter of 1999. Delays in obtaining
confirmation by the independent actuary have delayed the likely date
of the fairness hearing to the fourth quarter of 1999. The Company is
not able to provide assurance that the conditions to the proposed
settlement will be satisfied or that the proposed settlement will be
implemented as described herein.
As a result of the settlement of the Aull litigation and the
concurrent resolution of an IRS audit of the Plan that focused on
substantially identical issues, the Company has recognized a special
charge of $5.8 million in the fourth quarter of 1998, of which
approximately $2.2 million relates to resolution of the IRS audit and
is not contingent upon actuarial review or the fairness hearing in
the Aull litigation.
The anticipated cash impact of the settlement on the Company includes
payment in 1999 of approximately $1.5 million of expenses for legal
and professional fees, with the remainder of the settlement to be paid
to the Plan in future years to fund increased benefit payments to
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former and current employees. The settlement will not require any
funding payments to the Plan by the Company in 1999 but is expected to
require payments by the Company to the Plan of approximately $1.7
million in 2000 and approximately $850 thousand in 2001, with
additional funding payments required in subsequent years in amounts
that are expected to decline over time, subject to the overall funding
status of the Plan. The Agreement provides for Kmart Corporation's
pension plan to transfer $700 thousand to the Cavalcade Pension Plan
to fund a portion of the additional benefits required by the
Agreement. Management does not believe that payment of these amounts
in 1999 and subsequent years will have a material adverse effect on
the Company's planned operations.
The Company filed a declaratory judgement lawsuit in the State
District Court in Lubbock, Texas, in which it asks the Court to find
that the Company is not obligated to make severance payments that have
been demanded by Theodore Papit, the former President and CEO of the
Company. Mr. Papit submitted his resignation on May 28, 1998,
following the election at the Company's annual meeting of shareholders
of a slate of directors proposed by Teacher's Insurance
and Annuity Association of American ("TIAA"), the Company's largest
shareholder at that time. He subsequently demanded payment of more
than $500 thousand of severance and other amounts that he claimed were
owing to him under a "President and Chief Executive Officer Agreement"
dated March 23, 1998. This Agreement was approved by a split vote of
the Board of Directors after TIAA had publicly announced that it might
take action affecting the control of the Company. The Company has
requested a jury trial and believes that there are a number of
grounds that will support the Court in granting the requested relief,
among them being that the Agreement is void as an interested party
transaction that did not receive the necessary approval of
independent, disinterested directors, the terms of the Agreement are
not fair to the Company and the Agreement was entered into by the
Company without the benefit of full disclosure by Mr. Papit and
consideration by the Board of Directors of material information
regarding his management of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The 1999 Annual Meeting of Stockholders was held on May 20, 1999. At
the meeting, stockholders voted to elect ten directors to serve
one-year terms; to increase the aggregate number of shares of common
stock of the Company authorized for issuance under the 1995 Stock
Option Plan by 1,200,000; to amend the Company's Certificate of
Incorporation to effect a one-for-ten reverse stock split; and to
amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 65 million to 150
million.
Following is a summary of the votes cast for each director nominee:
Jacob C. Baum 30,110,843
Ben Evans 30,113,142
Margaret B. Hampton 24,635,105
Suzanne Hopgood 30,111,018
Damien Kovary 30,110,871
William J. Nightingale 30,111,105
Gilbert C. Osnos 30,113,002
Max Pine 30,113,150
Phillip Ratner 30,112,625
Barry W. Ridings 30,109,466
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Following is a summary of the tabulation of the vote for increasing
the aggregate number of common stock shares issued under the 1995
Stock Option Plan:
For Against
---------- ---------
28,961,540 1,342,853
Following is a summary of the tabulation of the vote for a one-for-ten
reverse stock split:
For Against
---------- ---------
29,413,150 898,595
Following is a summary of the tabulation of the vote for increasing
the number of authorized shares of Common Stock:
For Against
---------- ---------
28,942,893 1,366,039
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Bylaws of Furr's/Bishop's, Incorporated
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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/ Phillip Ratner /s/ Paul G. Hargett
----------------------------- -----------------------------
Phillip Ratner Paul G. Hargett
President and Chief Executive Officer Chief Financial Officer
DATE: August 5, 1999
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Exhibit 3.1
RESTATED BY-LAWS
OF
Furr's/Bishop's, Incorporated
(hereinafter called the "Corporation")
(February 23, 1999)
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, and shall be called by such person or the Secretary of
the Corporation 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.
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
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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, the Chairman of the Board of Directors,
in his 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
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.
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ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of Directors
shall consist of such number of members between six and ten as may be
determined by the Board of Directors from time to time. 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. Chairman of the Board of Directors. The Board of Directors
at its first meeting held after each Annual Meeting of Stockholders or from
time to time may elect a Chairman of the Board of Directors, who must be a
director. 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 and
shall 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.
The Chairman of the Board of Directors may be removed at any time by the
affirmative vote of a majority of the Board of Directors, and shall serve as
Chairman of the Board of Directors until his successor is chosen and qualifies
or until his earlier resignation or removal. Notwithstanding the foregoing,
the Chairman of the Board of Directors shall not be deemed an officer of the
Corporation solely because of his position as Chairman of the Board of
Directors. If the Chairman of the Board of Directors is not also an officer or
otherwise an employee of the Corporation, he shall have no duties to the
Corporation other than his duties as a member of the Board of Directors and as
Chairman of the Board of Directors.
Section 3. 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 4. 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 5. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
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 that 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.
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Section 6. 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 7. 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 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 8. 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 9. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
standing or ad hoc committees, in addition to the standing committees described
herein, 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, she or they
constitute 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.
The following shall be standing committees of the Board of Directors:
a. Compensation Committee: The Compensation Committee shall consist of
not less than three members of the Board of Directors, none of whom may be
employees of the Corporation. The chairman of the committee shall also be
named by the directors. The Compensation Committee shall prescribe the
compensation of the President and Chief Executive Officer, the Chief Financial
Officer, the Chief Operating Officer and such other officers as the committee
shall from time to time determine. The compensation of all other officers
shall be determined by the Chief Executive Officer. The Compensation Committee
shall have special charge and control of any bonus or other performance-based
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compensation policies or plans of the Company, and other employee benefit plans
as the Compensation Committee determines to be in the best interest of the
Company from time to time, including any plans conferring any stock option,
stock purchase, stock appreciation, phantom stock or other rights relating to
the securities of the Company, and any 401(k), pension or other retirement or
savings plans.
b. Audit Committee: The Audit Committee shall consist of not less than
three members of the Board of Directors, none of whom may be employees of the
Corporation. The chairman of the committee shall also be selected by the Board
of Directors. The Audit Committee shall recommend to the Board the firm to be
employed by the Corporation as its external auditor; shall consult with the
persons chosen to be the external auditors with regard to the plan of audit;
shall review the fees of the external auditors for audit and non-audit
services; shall review, in consultation with the external auditors, their
report of audit, or proposed report of audit, and the accompanying management
letter, if any; shall review with management and the external auditor before
publication or issuance, the annual financial statements, and any annual
reports to be filed with the Securities and Exchange Commission; shall consult
with the external auditors (periodically, as appropriate, out of the presence
of management) with regard to the adequacy of the internal auditing and general
accounting functions of the Corporation; shall consult with the internal
auditors (periodically, as appropriate, out of the presence of management) with
regard to cooperation of corporate divisions with the internal auditing and
accounting departments and the adequacy of corporate systems of accounting and
controls; shall serve as a communications liaison between the Board of
Directors, the external auditors, and the internal auditors; and shall perform
such other duties not inconsistent with the spirit and purpose of the committee
as are delegated to it by the Board of Directors.
c. Nominating Committee: The Nominating Committee shall consist of not
less than three members of the Board of Directors. The Chairman of the Board
of Directors shall be a member of and Chairman of the Nominating Committee.
The Nominating Committee shall meet periodically to review the qualifications
of potential Board candidates from whatever source received; shall report its
findings to the Board and propose nominations for Board membership for approval
by the Board and for submission to stockholders for approval; and shall review
and make recommendations to the Board, where appropriate, concerning the size
of the Board and the frequency of meetings. The Nominating Committee shall
have and exercise all such power as it shall deem necessary for the performance
of its duties.
d. Finance Committee: The Board of Directors may elect from its
membership a Finance Committee of not less than three members of the Board of
Directors. The Chairman of the committee shall also be selected by the Board
of Directors. The Finance Committee shall have special charge and
responsibility for oversight of all financial affairs of the Company. The
principal functions and responsibilities of the Finance Committee are to:
review and approve investment and loan policies; review and approve
asset-liability management policies; monitor corporate financial results; and
recommend corporate financial actions, including dividends and capital
financing. The Finance Committee shall make recommendations to the Board of
Directors with respect to the terms and provisions of loans and of any issue of
securities of the Company, including equity and debt securities, and shall
serve as the pricing committee in connection with any such financing and shall
authorize the execution of such underwriting agreements as may be necessary or
desirable to effectuate such issue.
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Meetings of the Finance Committee, the Nominating Committee, the
Compensation Committee, and the Audit Committee shall be held on call of the
Chairman of the Board of Directors or any committee member. Meetings may be
held informally, by telephone, or by mail, and it is not necessary that members
of the committee be physically present together in order for a meeting to be
held. Two or more members of a committee shall constitute a quorum.
Section 10. Compensation. The directors shall be paid their reasonable
expenses 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. Members of special or standing committees may be
allowed like compensation for attending committee meetings. The Board of
Directors shall have the authority to fix the compensation to be paid to
directors, and the Chairman of the Board of Directors may be paid a salary or
other compensation for serving as Chairman of the Board of Directors in excess
of the compensation paid to the other directors. No payment to any director as
provided in this Section 10 shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
Section 11. 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 one or
more Vice Presidents, 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 or 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
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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. 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 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 5. 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 6. 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
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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 7. 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
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 8. 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 9. 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.
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<PAGE>
Section 10. 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 or to the
Chairman of the Board of Directors the power to choose such other officers and
to prescribe their respective duties and powers.
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, the Chairman of the Board of
Directors, or an employee of the Corporation, or (ii) a registrar other than
the Corporation, the Chairman of the Board of Directors or an employee of the
Corporation, any other signature on the certificate may be a facsimile. In
case the Chairman of the Board of Directors or any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be the Chairman of the Board of Directors or
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 the
Chairman of the Board of Directors or 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 cancelled 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
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<PAGE>
stock, or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty 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.
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.
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<PAGE>
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
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
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<PAGE>
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
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
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<PAGE>
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 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
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<PAGE>
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
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, amended 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.
Page 34
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FURR'S/BISHOP'S, INCORPORATED FINANCIAL STATEMENTS AS OF AND FOR THE
PERIOD ENDED JUNE 29, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1999
<PERIOD-START> DEC-30-1998
<PERIOD-END> JUN-29-1999
<CASH> 9,509
<SECURITIES> 0
<RECEIVABLES> 1,034
<ALLOWANCES> 17
<INVENTORY> 6,680
<CURRENT-ASSETS> 18,321
<PP&E> 106,021
<DEPRECIATION> 56,784
<TOTAL-ASSETS> 68,343
<CURRENT-LIABILITIES> 28,253
<BONDS> 57,966
0
0
<COMMON> 488
<OTHER-SE> (39,504)
<TOTAL-LIABILITY-AND-EQUITY> 68,343
<SALES> 93,199
<TOTAL-REVENUES> 93,199
<CGS> 27,612
<TOTAL-COSTS> 27,612
<OTHER-EXPENSES> 62,903
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147
<INCOME-PRETAX> 2,537
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,537
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,537
<EPS-BASIC> .05
<EPS-DILUTED> .05
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