<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 1, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
COMMISSION FILE NUMBER 1-7685
AVERY DENNISON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-1492269
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
150 NORTH ORANGE GROVE BOULEVARD, PASADENA, CALIFORNIA 91103
(Address of principal executive offices) (Zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (626) 304-2000
Indicate by a check X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days Yes X No
--- ---
Number of shares of $1 par value common stock outstanding as of April 28,
2000: 112,146,354
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information (Unaudited):
Financial Statements:
Condensed Consolidated Balance Sheet
April 1, 2000 and January 1, 2000 3
Consolidated Statement of Income
Quarters Ended April 1, 2000 and April 3, 1999 4
Condensed Consolidated Statement of Cash Flows
Quarters Ended April 1, 2000 and April 3, 1999 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Results of Operations
and Financial Condition 11
Quantitative and Qualitative Disclosures About Market Risk 16
Part II. Other Information:
Submission of Matters to a Vote of Security Holders,
Exhibits and Reports on Form 8-K 17
Signatures 18
</TABLE>
2
<PAGE>
PART I. ITEM 1. FINANCIAL INFORMATION
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in millions)
(Unaudited)
<TABLE>
<CAPTION>
April 1, 2000 January 1, 2000
------------------------ ------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9.8 $ 6.9
Trade accounts receivable, net 577.8 542.4
Inventories, net 294.2 279.8
Prepaid expenses 24.9 23.7
Deferred tax assets 79.1 79.4
Other current assets 26.3 23.8
------------------------ ------------------------
Total current assets 1,012.1 956.0
Property, plant and equipment, at cost 1,952.7 1,934.7
Accumulated depreciation 901.5 891.2
------------------------ ------------------------
1,051.2 1,043.5
Intangibles resulting from business acquisitions, net 434.8 397.0
Other assets 200.0 196.0
------------------------ ------------------------
$ 2,698.1 $ 2,592.5
======================== ========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt $ 70.1 $ 68.2
Accounts payable 339.6 316.8
Other current liabilities 414.9 465.4
------------------------ ------------------------
Total current liabilities 824.6 850.4
Long-term debt 726.6 617.5
Deferred taxes and other long-term liabilities 239.8 231.4
Long-term obligation 80.2 83.3
Shareholders' equity:
Common stock - $1 par value, authorized - 400,000,000
shares; issued - 124,126,624 shares at April 1, 2000 and
January 1, 2000 124.1 124.1
Capital in excess of par value 783.5 962.3
Retained earnings 1,328.3 1,288.5
Cost of unallocated ESOP shares (16.8) (16.8)
Employee stock benefit trusts, 13,442,167 shares
at April 1, 2000 and 13,914,515 shares at
January 1, 2000 (820.8) (1,014.0)
Treasury stock at cost, 11,905,913 shares at April 1,
2000 and 11,453,728 shares at January 1, 2000 (510.4) (481.3)
Accumulated other comprehensive loss (61.0) (52.9)
------------------------ ------------------------
Total shareholders' equity 826.9 809.9
------------------------ ------------------------
$ 2,698.1 $ 2,592.5
======================== ========================
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In millions, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------
April 1, 2000 April 3, 1999
-------------------- ---------------------
<S> <C> <C>
Net sales $ 965.3 $ 933.9
Cost of products sold 631.2 622.0
-------------------- ---------------------
Gross profit 334.1 311.9
Marketing, general and
administrative expense 214.2 208.3
Restructuring charge -- 65.0
Interest expense 12.3 10.4
-------------------- ---------------------
Income before taxes 107.6 28.2
Taxes on income 37.4 9.8
-------------------- ---------------------
Net income $ 70.2 $ 18.4
==================== =====================
PER SHARE AMOUNTS:
Net income per common share $ .71 $ .19
Net income per common share, assuming dilution .70 .18
Dividends .27 .24
AVERAGE SHARES OUTSTANDING:
Common shares 98.8 99.4
Common shares, assuming dilution 100.8 101.5
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In millions)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------
April 1, 2000 April 3, 1999
----------------------- -----------------------
<S> <C> <C>
OPERATING ACTIVITIES:
- ---------------------
Net income $ 70.2 $ 18.4
Adjustments to reconcile net income to net cash provided
by operating activities:
Restructuring charge -- 65.0
Depreciation 31.9 31.7
Amortization 7.5 4.8
Deferred taxes (.2) (22.2)
Changes in assets and liabilities, net of the effect of
foreign currency translation, business divestitures,
acquisitions and restructuring charge (52.0) (30.8)
----------------------- -----------------------
Net cash provided by operating activities 57.4 66.9
----------------------- -----------------------
INVESTING ACTIVITIES:
- ---------------------
Purchase of property, plant and equipment (32.8) (23.9)
Payments for acquisitions (73.1) (35.1)
Other (3.9) (5.8)
----------------------- -----------------------
Net cash used in investing activities (109.8) (64.8)
----------------------- -----------------------
FINANCING ACTIVITIES:
- ---------------------
Net increase in short-term debt 112.2 57.2
Net decrease in long-term debt (.4) (.2)
Dividends paid (30.4) (27.3)
Purchase of treasury stock (29.1) (56.4)
Proceeds from exercise of stock options 6.8 7.9
Other (3.7) 9.3
----------------------- -----------------------
Net cash used in financing activities 55.4 (9.5)
----------------------- -----------------------
Effect of foreign currency translation on cash balances (.1) (.6)
----------------------- -----------------------
Increase (decrease) in cash and cash equivalents 2.9 (8.0)
----------------------- -----------------------
Cash and cash equivalents, beginning of period 6.9 18.5
----------------------- -----------------------
Cash and cash equivalents, end of period $ 9.8 $ 10.5
======================= =======================
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
The accompanying unaudited consolidated financial statements include normal
recurring adjustments necessary for a fair presentation of the Company's
interim results. Certain prior year amounts have been reclassified to
conform with current year presentation. The condensed financial statements
and notes in this Form 10-Q are presented as permitted by Regulation S-X,
and as such, they do not contain certain information included in the
Company's 1999 annual financial statements and notes.
The first quarters of 2000 and 1999 consisted of thirteen-week periods
ending April 1, 2000 and April 3, 1999, respectively. The interim results
of operations are not necessarily indicative of future financial results.
2. RESTRUCTURING
In the first quarter of 1999, the Company announced a major realignment of
its cost structure designed to increase operating efficiencies and improve
profitability. The realignment resulted in a pretax restructuring charge of
$65 million, or $.42 per diluted share on an after-tax basis.
The restructuring involves the consolidation of manufacturing and
distribution capacity in both of the Company's operating segments. The $65
million charge reflects the costs to close manufacturing and distribution
facilities, the elimination of approximately 1,500 positions (principally
in manufacturing), and other initiatives to exit activities.
The significant components of the restructuring charge and the remaining
balance as of April 1, 2000 (included within "Other current liabilities")
were as follows:
<TABLE>
<CAPTION>
(In millions) Charge Amounts Utilized Liability Balance
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Severance and related costs $ 35.1 $ 25.6 $ 9.5
Asset write-downs 29.9 25.2 4.7
---------------------- ---------------------- ----------------------
$ 65.0 $ 50.8 $ 14.2
====================== ====================== ======================
</TABLE>
Severance and related costs represent cash paid or to be paid to employees
being terminated under the program. Asset write-downs identified as part of
the restructuring program, principally related to equipment, represent
non-cash charges required to reduce the carrying value of the assets to be
disposed of to net realizable value as of the planned date of disposal.
Six plant closures had been initiated, five of which had been completed,
by the end of the first quarter 2000 and approximately 1,030 employees
had left the Company. The Company expects to complete the restructuring
program in 2000.
6
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. NET INCOME PER SHARE
Net income per common share amounts were computed as follows:
(In millions, except per share amounts)
<TABLE>
<CAPTION>
April 1, 2000 April 3, 1999
------------------------ ------------------------
<S> <C> <C>
(A) Net income available to common
shareholders $ 70.2 $ 18.4
======================== ========================
(B) Weighted average number of common
shares outstanding 98.8 99.4
Additional common shares issuable under
employee stock options using the treasury
stock method 2.0 2.1
------------------------ ------------------------
(C) Weighted average number of common
shares outstanding assuming the exercise of
stock options 100.8 101.5
======================== ========================
Net income per common share (A) / (B) $ .71 $ .19
======================== ========================
Net income per common share, $ .70 $ .18
assuming dilution (A) / (C) ======================== ========================
</TABLE>
4. COMPREHENSIVE INCOME
Comprehensive income includes net income and foreign currency translation
adjustments that are currently presented as a component of shareholders'
equity. The Company's total comprehensive income (loss) for the three
months ended April 1, 2000 and April 3, 1999 was $62.1 million and $(6.4)
million, respectively.
5. FOREIGN CURRENCY TRANSLATION
Transactions in foreign currencies and translation of financial statements
of subsidiaries operating in hyperinflationary economies resulted in a loss
of $.1 million for the first quarter of 2000 and had no impact on net
income for the first quarter of 1999. Operations in hyperinflationary
economies consist of the Company's operations in Turkey for 2000 and 1999.
7
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. FINANCIAL INSTRUMENTS
The Company enters into foreign exchange forward, option and swap contracts
and interest rate contracts to manage exposure to fluctuations in foreign
currency exchange and interest rates. The Company does not hold or purchase
any foreign currency or interest rate contracts for trading purposes.
Foreign exchange forward, option and swap contracts that hedge existing
assets, liabilities or firm commitments are measured at fair value and the
related gains and losses on these contracts are recognized in net income
currently. Foreign exchange forward and option contracts that hedge
forecasted transactions are measured at fair value, and the related gains
and losses on these contracts are deferred and subsequently recognized in
net income in the period in which the underlying transaction is
consummated. In the event that an anticipated transaction is no longer
likely to occur, the Company recognizes the change in fair value of the
instrument in net income currently.
Gains and losses resulting from foreign exchange forward, option and swap
contracts are recorded in the same category as the related item being
hedged. Cash flows from the use of financial instruments are reported in
the same category as the hedged item in the Condensed Consolidated
Statement of Cash Flows. Gains and losses on contracts used to hedge the
value of investments in certain foreign subsidiaries are included in a
component of other comprehensive income.
The net amounts paid or received on interest rate agreements are recognized
as adjustments to interest expense over the terms of the agreements.
Contract premiums paid, if any, are amortized to interest expense over the
terms of the underlying instruments.
7. INVENTORIES
Inventories consisted of (in millions):
<TABLE>
<CAPTION>
April 1, 2000 January 1, 2000
------------------------- -------------------------
<S> <C> <C>
Raw materials $ 84.5 $ 86.2
Work-in-progress 79.5 77.0
Finished goods 155.6 144.0
LIFO adjustment (25.4) (27.4)
------------------------- -------------------------
$ 294.2 $ 279.8
========================= =========================
</TABLE>
8. INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS
Accumulated amortization of intangible assets at April 1, 2000 and January
1, 2000 was $71.2 million and $67 million, respectively.
9. RESEARCH AND DEVELOPMENT
Research and development expense for the first quarters of 2000 and 1999
was $16.5 million and $15.6 million, respectively.
8
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. CONTINGENCIES
The Company has been designated by the U.S. Environmental Protection Agency
(EPA) and/or other responsible state agencies as a potentially responsible
party (PRP) at 11 waste disposal or waste recycling sites which are the
subject of separate investigations or proceedings concerning alleged soil
and/or groundwater contamination and for which no settlement of the
Company's liability has been agreed upon. Litigation has been initiated by
a governmental authority with respect to two of these sites, but the
Company does not believe that any such proceedings will result in the
imposition of monetary sanctions. The Company is participating with other
PRPs at all such sites, and anticipates that its share of cleanup costs
will be determined pursuant to remedial agreements entered into in the
normal course of negotiations with the EPA or other governmental
authorities.
The Company has accrued liabilities for all sites, including sites in which
governmental agencies have designated the Company as a PRP, where it is
probable that a loss will be incurred and the minimum cost or amount of
loss can be reasonably estimated. However, because of the uncertainties
associated with environmental assessment and remediation activities, future
expense to remediate the currently identified sites, and sites which could
be identified in the future for cleanup, could be higher than the liability
currently accrued. Based on current site assessments, management believes
that the potential liability over the amounts currently accrued would not
materially affect the Company.
The Company and its subsidiaries are involved in various other lawsuits,
claims and inquiries, most of which are routine to the nature of the
business. In the opinion of management, the resolution of these matters
will not materially affect the Company.
9
<PAGE>
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. SEGMENT INFORMATION
Financial information by reportable operating segment is set forth below:
<TABLE>
<CAPTION>
(In millions) April 1, 2000 April 3, 1999
- ------------------------------------------------------------------------------- ------------------------ ------------------------
<S> <C> <C>
NET SALES:
Pressure-sensitive Adhesives and Materials $ 537.3 $ 500.9
Consumer and Converted Products 460.6 465.1
Intersegment (32.6) (34.0)
Divested operations -- 1.9
- ------------------------------------------------------------------------------- ------------------------ ------------------------
Net sales $ 965.3 $ 933.9
=============================================================================== ======================== ========================
INCOME (LOSS) FROM OPERATIONS BEFORE INTEREST AND TAXES:
Pressure-sensitive Adhesives and Materials $ 61.0 $ 27.1
Consumer and Converted Products 65.5 23.1
Corporate administrative and research and
development expenses (6.6) (11.1)
Divested operations -- (.5)
- ------------------------------------------------------------------------------- ------------------------ -----------------------
$ 119.9 $ 38.6
Interest expense (12.3) (10.4)
- ------------------------------------------------------------------------------- ------------------------ ------------------------
Income before taxes $ 107.6 $ 28.2
=============================================================================== ======================== ========================
</TABLE>
First quarter 1999 results include a pretax restructuring charge of $65
million. The charge was allocated as follows: $25.1 million to the
Pressure-sensitive Adhesives and Materials segment, $37.6 million to the
Consumer and Converted Products segment, and $2.3 million to Corporate. See
Note 2 for additional information regarding the Company's first quarter
1999 restructuring charge.
12. FUTURE ACCOUNTING REQUIREMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement requires that all
derivative instruments be recorded on the balance sheet at their fair
value. Changes in the fair value of derivatives will be recorded each
period in current earnings or other comprehensive income. The new rules
will be effective the first quarter of 2001. The Company is in the process
of determining the impact of this new standard and, based on current market
conditions, anticipates that the new rules will not have a material impact
on the Company's financial results when effective.
10
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS: FOR THE QUARTER
Quarterly sales increased to $965.3 million, a 3.4 percent increase over first
quarter 1999 sales of $933.9 million. Excluding the impact of currency, sales
grew 7 percent. Acquisitions contributed 1.8 percentage points of sales
growth.
Gross profit margin increased to 34.6 percent for the quarter compared to 33.4
percent for the first quarter of 1999. The improvement was primarily due to
manufacturing cost reductions and improved productivity.
Marketing, general and administrative expense, as a percent of sales, improved
to 22.2 percent from 22.3 percent for the first quarter of 1999.
In the first quarter of 1999, the Company announced a major realignment of
its cost structure designed to increase operating efficiencies and improve
profitability. The realignment resulted in a pretax restructuring charge of
$65 million, or $.42 per diluted share on an after-tax basis, in the first
quarter of 1999. The restructuring involves the consolidation of
manufacturing and distribution capacity in both of the Company's operating
segments. The $65 million charge reflects the costs to close manufacturing
and distribution facilities, the elimination of approximately 1,500 positions
(principally in manufacturing), and other initiatives to exit activities. The
restructuring charge includes severance and related costs for approximately
1,500 positions ($35.1 million), and asset write-downs ($29.9 million).
Severance and related costs represent cash paid or to be paid to employees
being terminated under the program. Asset write-downs identified as part of
the restructuring program, principally related to equipment, represent
non-cash charges required to reduce the carrying value of the assets to be
disposed of to net realizable value as of the planned date of disposal. Six
plant closures had been initiated, five of which had been completed, by the
end of the first quarter 2000 and approximately 1,030 employees had left the
Company. In addition, $25.6 million had been paid for severance and related
costs and $25.2 million had been utilized in asset write-downs. The Company
expects to complete the restructuring program in 2000. The Company expects
cumulative 2000 pretax savings in the range of $38 million to $40 million.
When fully implemented, the Company estimates cumulative annual savings of
approximately $58 million to $62 million.
Interest expense increased to $12.3 million for the quarter compared to $10.4
million a year ago, primarily reflecting increased debt to fund acquisitions,
capital expenditures and share repurchases.
Income before taxes, as a percent of sales, was 11.1 percent compared to 3
percent a year ago, reflecting the $65 million restructuring charge. Excluding
the restructuring charge, income before taxes, as a percent of sales, was 10
percent in the first quarter of 1999. The increase reflects the benefits of
manufacturing cost reductions and improved profitability in the international
operations. The effective tax rate was comparable to the first quarter of 1999
at 34.8 percent.
11
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS: FOR THE QUARTER (CONTINUED)
Net income totaled $70.2 million compared to $18.4 million in the first quarter
of 1999. Excluding the restructuring charge in the first quarter of 1999, net
income increased 15.3 percent from $60.9 million. Net income, as a percent of
sales, was 7.3 percent for the first quarter of 2000 and 2 percent for the same
period last year. Excluding the restructuring charge, net income, as a percent
of sales, was 6.5 percent in the first quarter of 1999.
Net income per common share for the quarter was $.71 compared to $.19 in the
first quarter of 1999. Excluding the restructuring charge, net income per common
share increased 16.4 percent from $.61 for the first quarter of 1999. Net income
per common share, assuming dilution, was $.70 for the first quarter of 2000 and
$.18 for the first quarter of 1999. Excluding the restructuring charge, net
income per common share, assuming dilution, increased 16.7 percent from $.60 for
the first quarter of 1999.
RESULTS OF OPERATIONS BY REPORTABLE OPERATING SEGMENT
<TABLE>
<CAPTION>
Pressure-sensitive Adhesives and Materials:
(In millions) April 1, 2000 April 3, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $ 537.3 $ 500.9
Income from operations before interest and taxes 61.0 27.1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Pressure-sensitive Adhesives and Materials segment reported increased sales
and income for the first quarter of 2000 compared to the same period last year.
The segment's income results for the first quarter of 1999 include a pretax
restructuring charge of $25.1 million ($15.4 million in the U.S. operations and
$9.7 million in the international operations). Sales increased in the U.S.
operations driven by the Stimsonite acquisition and solid unit volume growth in
the graphics and core U.S. roll materials business. Income from the U.S.
operations increased compared to the first quarter of 1999, excluding the
restructuring charge. Income was negatively impacted by the seasonality of the
Stimsonite business. Total international operations in the segment reported
increased sales and income. Increased sales were due to strong volume growth in
the Asian and Latin American businesses. Strong volume growth in Europe was
offset by changes in foreign currency rates. Income from international
operations increased due to improved profitability in the Asian and Latin
American businesses.
12
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS: FOR THE QUARTER (CONTINUED)
Consumer and Converted Products:
<TABLE>
<CAPTION>
(In millions) April 1, 2000 April 3, 1999
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $ 460.6 $ 465.1
Income from operations before interest and taxes 65.5 23.1
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Consumer and Converted Products segment reported a slight decrease in
sales, but the segment had an increase in sales excluding the impact of
currency. Income increased for the first quarter of 2000 compared to the same
period last year. The segment's income results for the first quarter of 1999
include a pretax restructuring charge of $37.6 million ($24.3 million in the
U.S. operations and $13.3 million in the international operations). Sales in
the U.S. operations were impacted by decreased sales in the consumer
packaging business, which includes battery labels, and a shift of sales from
the first quarter of 2000 to the fourth quarter of 1999 due to customer
prebuying. In the prior year, a key customer in the battery labels business
made a product mix change in its battery lines, resulting in a partial shift
from higher-priced tester labels to standard battery labels. Income in the
U.S. operations was negatively impacted by the battery label business, but
was partially offset by the benefits gained from prior year's restructuring.
Sales in the international operations decreased due to changes in foreign
currency rates. The impact of currency on European operations offset the
strong sales volume growth in the Asian and Latin American businesses. Income
from international operations increased primarily due to improved
profitability in the European office products business.
FINANCIAL CONDITION
Average working capital, excluding short-term debt, as a percentage of sales,
increased to 6.7 percent from 5.1 percent a year ago. The average number of days
sales outstanding in accounts receivable increased to 55 days compared to 49
days a year ago. Average inventory turnover for the first quarter of 2000 was
8.6 inventory turns compared to 9.8 inventory turns a year ago.
Net cash flows provided by operating activities totaled $57.4 million for the
first quarter of 2000 compared to $66.9 million for the first quarter of
1999. The decrease in net cash flows provided by operating activities was
primarily due to an increase in working capital. In addition to cash flows
from operations, the Company has more than adequate financing arrangements,
at competitive rates, to conduct its operations.
Capital spending for the quarter was $32.8 million compared to $23.9 million for
the first quarter of 1999. This increase was due to investment in capacity to
support volume growth. Total capital spending for 2000 is expected to be in the
range of $180 million to $200 million.
During the first quarter of 2000, total debt increased $111 million to $796.7
million from year end 1999. The increase in debt was primarily due to the
debt issuance to fund acquisitions, capital expenditures and share
repurchases. Total debt to total capital was 49.1 percent as of the end of
the first quarter of 2000 and 45.8 percent at year end 1999. The Company
previously registered with the Securities and Exchange Commission $150
million in principal amount of uncollaterized medium-term notes, of which
$110 million in notes had been issued as of year end 1999. No notes were
issued in the first quarter of 2000. Proceeds from the medium-term notes have
been used to refinance short-term debt and for other general corporate
purposes.
13
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
FINANCIAL CONDITION (CONTINUED)
On March 31, 2000, the Company acquired the Adespan pressure-sensitive
materials operation of Panini S.p.A., a European printing and publishing
company based in Italy. Adespan had sales of approximately $75 million in
1999. The excess of the cost basis over the fair value of net tangible assets
acquired was approximately $35 million. The Adespan business will operate as
a division within the Company's Fasson roll materials business in Europe.
On January 12, 1999, the Company completed a transaction with Steinbeis
Holding GmbH to combine substantially all of the Company's office products
businesses in Europe with Zweckform Buro-Produkte GmbH (Zweckform), a German
office products supplier. The Company's aggregate cost basis in this venture
was financed through available cash resources and the assumption of an
obligation as reported in the "Long-term obligation" line on the Condensed
Consolidated Balance Sheet. The entire obligation is scheduled to be paid in
2004.
Shareholders' equity increased to $826.9 million from $809.9 million at year
end 1999. During the first quarter of 2000, the Company purchased 450,000
shares of common stock at a cost of $29.1 million. The market value of shares
held in the employee stock benefit trust, after the issuance of shares under
the Company's stock and incentive plans, decreased during the quarter by
$193.2 million to $820.8 million from year end 1999.
FUTURE ACCOUNTING REQUIREMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This
Statement requires that all derivative instruments be recorded on the balance
sheet at their fair value. Changes in the fair value of derivatives will be
recorded each period in current earnings or other comprehensive income. The
new rules will be effective the first quarter of 2001. The Company is in the
process of determining the impact of this new standard and, based on current
market conditions, anticipates that the new rules will not have a material
impact on the Company's financial results when effective.
14
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SAFE HARBOR STATEMENT
Except for historical information contained herein, the matters discussed in
the Management's Discussion and Analysis of Results of Operations and
Financial Condition and other sections of this Form 10-Q contain
"forward-looking statements" within the meaning of the Private Securities
Reform Act of 1995. These statements, which are not statements of historical
fact, may contain estimates, assumptions, projections and/or expectations
regarding future events. Such forward-looking statements, and financial or
other business targets, are subject to certain risks and uncertainties which
could cause actual results to differ materially from future results,
performance or achievements of the Company expressed or implied by such
forward-looking statements. Certain of such risks and uncertainties are
discussed in more detail in the Company's Annual Report on Form 10-K for the
year ended January 1, 2000 and include, but are not limited to, risks and
uncertainties relating to investment in new production facilities, timely
development and successful marketing of new products, impact of competitive
products and pricing, customer and supplier and manufacturing concentrations,
changes in customer order patterns and inventory levels, increased
competition, loss of significant contract(s) or customer(s), impact of Year
2000 issues and the euro conversion, legal proceedings, fluctuations in
foreign exchange rates or other risks associated with foreign operations,
changes in economic or political conditions, and other factors.
Any forward looking statements should be considered in light of the factors
detailed in Exhibit 99 in the Company's Annual Report on Form 10-K for the
year ended January 1, 2000.
The Company's forward-looking statements represent its judgment only on the
dates such statements were made. By making any forward-looking statements,
the Company assumes no duty to update them to reflect new, changed or
unanticipated events or circumstances.
15
<PAGE>
AVERY DENNISON CORPORATION AND SUBSIDIARIES
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There are no material changes in the information provided in Item 7A of the
Company's Form 10-K for the fiscal year ended January 1, 2000.
16
<PAGE>
PART II. OTHER INFORMATION
AVERY DENNISON CORPORATION
AND SUBSIDIARIES
ITEMS 1, 2 AND 3. Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant held its annual stockholders' meeting on April 27, 2000. The
stockholders voted to reelect three directors to the Board of Directors as
follows:
<TABLE>
<CAPTION>
Number of Shares Votes(1)
----------------------------------------------
For Withheld
----------------- -----------------
<S> <C> <C>
Sidney R. Petersen 99,330,520 1,112,288
John C. Argue 99,303,212 1,139,596
David E.I. Pyott 98,967,150 1,475,658
</TABLE>
(1) There were no abstentions or shares otherwise not voted by brokers.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits: 3(ii) Bylaws of Avery Dennison Corporation -
amended and restated April 27, 2000
12 Computation of Ratio of Earnings to
Fixed Charges
b. Reports on Form 8-K: There were no reports on Form 8-K filed for the three
months ended April 1, 2000.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AVERY DENNISON CORPORATION
--------------------------
(Registrant)
/s/ Robert M. Calderoni
-----------------------------------------
Robert M. Calderoni
Senior Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer)
/s/ Thomas E. Miller
-----------------------------------------
Thomas E. Miller
Vice President and Controller
(Chief Accounting Officer)
May 12, 2000
18
<PAGE>
BYLAWS
OF
AVERY DENNISON CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE.
The registered office of Avery Dennison Corporation (hereinafter called the
"corporation") in the State of Delaware shall be at 1013 Centre Road, City of
Wilmington, County of New Castle, and the name of the registered agent at that
address shall be United States Corporation Company.
SECTION 2. PRINCIPAL OFFICE.
The principal executive office for the transaction of the business of the
corporation is hereby fixed and located in Los Angeles County, California. The
board of directors is hereby granted full power and authority to change said
principal executive office from one location to another within or without the
State of California.
SECTION 3. OTHER OFFICES.
The corporation may also have offices at such other places within or
without the State of Delaware as the board of directors may from time to time
determine, or the business of the corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS.
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
SECTION 2. ANNUAL MEETINGS OF STOCKHOLDERS.
The annual meeting of stockholders shall be held on the last Thursday in
April of each year at 1:30 p.m. of said day, or on such other day, which shall
not be a legal holiday, as shall be determined by the board of directors. Any
previously scheduled annual meeting of stockholders may be postponed by
resolution of the board of directors upon public notice given prior to the date
previously scheduled for such annual meeting of stockholders.
SECTION 3. SPECIAL MEETINGS.
A special meeting of the stockholders may be called at any time by the
board of directors, or by a majority of the directors or by a committee
authorized by the board to do so. Any previously scheduled special meeting of
the stockholders may be postponed by resolution of the board of directors upon
public notice given prior to the date previously scheduled for such special
meeting of the stockholders.
SECTION 4. NOTICE OF STOCKHOLDERS' MEETINGS.
All notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 5 of this Article II not less than ten (10) nor more
than sixty (60) days before the date of the meeting being noticed. The notice
shall specify the place, date and hour of the meeting and (i) in case of a
special meeting, the general nature of the
Exhibit 3(ii)
Page 1 of 15
<PAGE>
business to be transacted, or (ii) in the case of the annual meeting, those
matters which the board of directors, at the time of giving the notice, intends
to present for action by the stockholders. The notice of any meeting at which
directors are to be elected shall include the name of any nominee or nominees
who, at the time of the notice, management intends to present for election.
SECTION 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Notice of any meeting of stockholders shall be given either personally or
by mail or telegraphic or other written communication, charges prepaid,
addressed to the stockholder at the address of such stockholder appearing on the
books of the corporation or given by the stockholder to the corporation for the
purpose of notice. If no such address appears on the corporation's books or has
been so given, notice shall be deemed to have been given if sent by mail or
telegraphic or other written communication to the corporation's principal
executive office, or if published at least once in a newspaper of general
circulation in the county where such office is located. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting shall be executed by the secretary, assistant secretary or
any transfer agent of the corporation giving such notice, and shall be filed and
maintained in the minute book of the corporation.
SECTION 6. QUORUM.
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote at any meeting of stockholders shall constitute a quorum
for the transaction of business. The stockholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.
SECTION 7. ADJOURNED MEETING AND NOTICE THEREOF.
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the Chairman of the meeting, but
in the absence of a quorum, no other business may be transacted at such meeting,
except as provided in Section 6 of this Article II.
When any meeting of stockholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place thereof are announced at a meeting at which the adjournment is
taken, unless a new record date for the adjourned meeting is fixed, or unless
the adjournment is for more than thirty (30) days from the date set for the
original meeting. Notice of any such adjourned meeting, if required, shall be
given to each stockholder of record entitled to vote at the adjourned meeting in
accordance with the provisions of Sections 4 and 5 of this Article II. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
SECTION 8. VOTING.
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 11 of this Article II.
Such vote may be by voice vote or by ballot, at the discretion of the Chairman
of the meeting. Any stockholder entitled to vote on any matter (other than the
election of directors) may vote part of the shares in favor of the proposal and
refrain from voting the remaining shares or vote them against the proposal; but,
if the stockholder fails to specify the number of shares such stockholder is
voting affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares such stockholder is entitled to
vote. If a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on any matter shall be the act
of the stockholders, unless the vote of a greater number or voting by classes is
required by the Delaware General Corporation Law or the certificate of
incorporation or the certificate of determination of preferences as to any
preferred stock.
At a stockholders' meeting involving the election of directors, no
stockholder shall be entitled to cumulate (i.e., cast for any one or more
candidates a number of votes greater than the number of the stockholder's
shares). The candidates receiving the highest number of votes, up to the number
of directors to be elected, shall be elected.
Exhibit 3(ii)
Page 2 of 15
<PAGE>
SECTION 9. WAIVER OF NOTICE OR CONSENT BY ABSENT STOCKHOLDERS.
The transactions of any meeting of stockholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though had
at a meeting duly held after regular call and notice, if a quorum be present
either in person or by proxy, and if, either before or after the meeting, each
person entitled to vote, not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of the meeting, or an approval of
the minutes thereof. The waiver of notice or consent need not specify either the
business to be transacted or the purpose of any annual or special meeting of
stockholders. All such waivers, consents or approvals shall be filed with the
corporate records or made part of the minutes of the meeting.
Attendance of a person at a meeting shall also constitute a waiver of
notice of such meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if such objection is expressly made at the meeting.
SECTION 10. NO STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.
Stockholders may take action only at a regular or special meeting of
stockholders.
SECTION 11. RECORD DATE FOR STOCKHOLDER NOTICE AND VOTING.
For purposes of determining the holders entitled to notice of any meeting
or to vote, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days prior to the
date of any such meeting, and in such case only stockholders of record on the
date so fixed are entitled to notice and to vote, notwithstanding any transfer
of any shares on the books of the corporation after the record date fixed as
aforesaid, except as otherwise provided in the Delaware General Corporation Law.
If the board of directors does not so fix a record date, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.
SECTION 12. PROXIES.
Every person entitled to vote for directors or on any other matter shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation. A proxy shall be deemed signed if the stockholder's name is placed
on the proxy (whether by manual signature, typewriting, telegraphic transmission
or otherwise) by the stockholder or the stockholder's attorney in fact. A
validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) revoked by the person executing it,
prior to the vote pursuant thereto, by a writing delivered to the corporation
stating that the proxy is revoked or by a subsequent proxy executed by, or
attendance at the meeting and voting in person by, the person executing the
proxy, or (ii) written notice of the death or incapacity of the maker of such
proxy is received by the corporation before the vote pursuant thereto is
counted; provided, however, that no such proxy shall be valid after the
expiration of eleven (11) months from the date of such proxy, unless otherwise
provided in the proxy.
SECTION 13. INSPECTORS OF ELECTION; OPENING AND CLOSING THE POLLS.
The board of directors by resolution shall appoint one or more inspectors,
which inspector or inspectors may include individuals who serve the corporation
in other capacities, including, without limitation, as officers, employees,
agents or representatives, to act at the meetings of stockholders and make a
written report thereof. One or more persons may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or
alternate has been appointed to act or is able to act at a meeting of
stockholders, the chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspectors shall have the duties prescribed by law.
The chairman of the meeting shall fix and announce at the meeting the date
and time of the opening and the closing of the polls for each matter upon which
the stockholders will vote at a meeting.
Exhibit 3(ii)
Page 3 of 15
<PAGE>
SECTION 14. NOMINATION AND STOCKHOLDER BUSINESS BYLAW.
A. Annual Meetings of Stockholders.
1. Nominations of persons for election to the board of directors of the
corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to the
corporation's notice of meeting, (b) by or at the direction of the board of
directors or (c) by any stockholder of the corporation who was a stockholder of
record at the time of giving of notice provided for in this Bylaw, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this Bylaw.
2. For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (A) (1) of
this Bylaw, the stockholder must have given timely notice thereof in writing to
the secretary of the corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice shall
be delivered to the secretary at the principal executive offices of the
corporation not later than the close of business on the 60th day nor earlier
than the close of business on the 90th day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is more than 30 days before or more than 60 days
after such anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the 90th day prior to such
annual meeting and not later than the close of business on the later of the 60th
day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made by the
corporation. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above. Such stockholder's notice shall set forth (a) as to
each person whom the stockholder proposes to nominate for election or reelection
as a director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors in an election
contest, or is otherwise required, in each case pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule
14a-11 thereunder (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (b) as to
any other business that the stockholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and the beneficial owner, if any, on whose
behalf the proposal is made; and (c) as to the stockholder giving the notice and
the beneficial owner, if any, on whose behalf the nomination or proposal is made
(i) the name and address of such stockholder, as they appear on the
corporation's books, and of such beneficial owner and (ii) the class and number
of shares of the corporation which are owned beneficially and of record by such
stockholder and such beneficial owner.
3. Notwithstanding anything in the second sentence of paragraph (A)(2) of
this Bylaw to the contrary, in the event that the number of directors to be
elected to the board of directors of the corporation is increased and there is
no public announcement by the corporation naming all of the nominees for
director or specifying the size of the increased board of directors at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Bylaw shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the secretary at the principal executive offices of the
corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the corporation.
B. Special Meetings of Stockholders. Only such business shall be conducted at
a special meeting of stockholders as shall have been brought before the meeting
pursuant to the corporation's notice of meeting. Nominations of persons for
election to the board of directors may be made at a special meeting of
stockholders at which directors are to be elected pursuant to the corporation's
notice of meeting (a) by or at the direction of the board of directors or (b)
provided that the board of directors has determined that directors shall be
elected at such meeting, by any stockholder of the corporation who is a
stockholder of record at the time of giving of notice provided for in this
Bylaw, who shall be entitled to vote at the meeting and who complies with the
notice procedures set forth in this Bylaw. In the event the corporation calls a
special meeting of stockholders for the purpose of electing one or more
directors to the board of directors, any such stockholder may nominate a person
or persons (as the case may be), for election to such position(s) as specified
in the corporation's notice of meeting, if the stockholder's notice required by
paragraph (A) (2) of this Bylaw shall be delivered to the secretary at the
principal executive offices of the corporation not earlier than the close of
business on the 90th day prior to such special meeting and not later than the
close of business on the later of the 60th day prior to such special
Exhibit 3(ii)
Page 4 of 15
<PAGE>
meeting or the 10th day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
board of directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a stockholder's notice as described above.
C. General.
1. Only such persons who are nominated in accordance with the procedures
set forth in this Bylaw shall be eligible to serve as directors and only such
business shall be conducted at a meeting of stockholders as shall have been
brought before the meeting in accordance with the procedures set forth in this
Bylaw. Except as otherwise provided by law, the Certificate of Incorporation or
these Bylaws, the chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made or proposed, as the case may be, in accordance with the
procedures set forth in this Bylaw and, if any proposed nomination or business
is not in compliance with this Bylaw, to declare that such defective proposal or
nomination shall be disregarded.
2. For purposes of this Bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
3. Notwithstanding the foregoing provisions of this Bylaw, a stockholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
Bylaw. Nothing in this Bylaw shall be deemed to affect any rights (i) of
stockholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of Preferred Stock, if any, to elect directors under certain
circumstances.
ARTICLE III
DIRECTORS
SECTION 1. POWERS.
Subject to the provisions of the Delaware General Corporation Law and any
limitations in the certificate of incorporation and these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the directors shall have the
power and authority to:
(a) Select and remove all officers, agents and employees of the
corporation, prescribe such powers and duties for them as may not be
inconsistent with law, the certificate of incorporation or these bylaws,
fix their compensation, and require from them security for faithful
service.
(b) Change the principal executive office or the principal business
office in the State of California from one location to another; cause the
corporation to be qualified to do business in any other state, territory,
dependency, or foreign country and conduct business within or outside the
State of California; designate any place within or without the State of
California for the holding of any stockholders' meeting or meetings,
including annual meetings; adopt, make and use a corporate seal, and
prescribe the forms of certificates of stock, and alter the form of such
seal and of such certificates from time to time as in their judgment they
may deem best, provided that such forms shall at all times comply with the
provisions of law.
(c) Authorize the issuance of shares of stock of the corporation from
time to time, upon such terms as may be lawful, in consideration of money
paid, labor done or services actually rendered, debts or securities
canceled or tangible or intangible property actually received.
(d) Borrow money and incur indebtedness for the purpose of the
corporation, and cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations, or other evidences of debt and
securities therefor.
Exhibit 3(ii)
Page 5 of 15
<PAGE>
SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS.
The number of directors of the corporation shall be twelve (12) until
changed by a bylaw amending this Section 2, duly adopted by the board of
directors or by the stockholders.
SECTION 3. ELECTION AND TERM OF OFFICE OF DIRECTORS.
Subject to Section 15 below, one class of the directors shall be elected at
each annual meeting of the stockholders, but if any such annual meeting is not
held or the directors are not elected thereat, the directors may be elected at
any special meeting of stockholders held for that purpose. All directors shall
hold office until their respective successors are elected. Irrespective of the
provisions of Section 15 of this Article III and of the preceding sentence, a
director shall automatically be retired on the date of the expiration of the
first annual meeting following his 72nd birthday.
SECTION 4. VACANCIES.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, though less than a quorum, or by a sole remaining director.
Each director elected to fill a vacancy shall hold office for the remainder of
the term of the person whom he or she succeeds, unless otherwise determined by
the board of directors, and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist
in the case of the death, retirement, resignation or removal of any director, or
if the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors be increased, or if the
stockholders fail at any meeting of stockholders at which any director or
directors are elected, to elect the full authorized number of directors to be
voted for at that meeting.
Any director may resign or voluntarily retire upon giving written notice to
the chairman of the board, the president, the secretary or the board of
directors. Such retirement or resignation shall be effective upon the giving of
the notice, unless the notice specifies a later time for its effectiveness. If
such retirement or resignation is effective at a future time, the board of
directors may elect a successor to take office when the retirement or
resignation becomes effective.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office. No director
may be removed during his term except for cause.
SECTION 5. PLACE OF MEETINGS AND TELEPHONIC MEETINGS.
Regular meetings of the board of directors may be held at any place within
or without the State of Delaware that has been designated from time to time by
resolution of the board. In the absence of such designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board shall be held at any place within or without the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or there is no notice, at the principal executive office of the
corporation. Any meeting, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in such meeting can hear one another, and all such directors shall
be deemed to be present in person at such meeting.
SECTION 6. ANNUAL MEETINGS.
Immediately following each annual meeting of stockholders, the board of
directors shall hold a regular meeting for the purpose of organization, any
desired election of officers and transaction of other business. Notice of this
meeting shall not be required.
SECTION 7. OTHER REGULAR MEETINGS.
Other regular meetings of the board of directors shall be held at such time
as shall from time to time be determined by the board of directors. Such regular
meetings may be held without notice provided that notice of any change in the
determination of time of such meeting shall be sent to all of the directors.
Notice of a change in the determination of the time shall be given to each
director in the same manner as for special meetings of the board of directors.
SECTION 8. SPECIAL MEETINGS.
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman
Exhibit 3(ii)
Page 6 of 15
<PAGE>
of the board or the president or any vice president or the secretary or any two
directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at his or her address as
it is shown upon the records of the corporation. In case such notice is mailed,
it shall be deposited in the United States mail at least four (4) days prior to
the time of the holding of the meeting. In case such notice is delivered
personally, or by telephone or telegram, it shall be delivered personally, or by
telephone or to the telegraph company at least forty-eight (48) hours prior to
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated to either the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose of the meeting nor the place if the meeting is to be held at the
principal executive office of the corporation.
SECTION 9. QUORUM.
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as hereinafter provided.
Every act or decision done or made by a majority of the directors present at a
meeting duly held at which a quorum is present shall be regarded as the act of
the board of directors. A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of directors, if
any action taken is approved by at least a majority of the required quorum for
such meeting.
SECTION 10. WAIVER OF NOTICE.
The transactions of any meeting of the board of directors, however called
and noticed or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice if a quorum be present and if, either before
or after the meeting, each of the directors not present signs a written waiver
of notice, a consent to holding the meeting or an approval of the minutes
thereof. The waiver of notice or consent need not specify the purpose of the
meeting. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Notice of a
meeting shall also be deemed given to any director who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director.
SECTION 11. ADJOURNMENT.
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
SECTION 12. NOTICE OF ADJOURNMENT.
Notice of the time and place of an adjourned meeting need not be given,
unless the meeting is adjourned for more than twenty-four (24) hours, in which
case notice of such time and place shall be given prior to the time of the
adjourned meeting, in the manner specified in Section 8 of this Article III, to
the directors who were not present at the time of the adjournment.
SECTION 13. ACTION WITHOUT MEETING.
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, if all members of the board shall individually or
collectively consent in writing to such action. Such action by written consent
shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent or consents shall be filed with the minutes of
the proceedings of the board.
SECTION 14. FEES AND COMPENSATION OF DIRECTORS.
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses, as may be fixed or
determined by resolution of the board of directors. Nothing herein contained
shall be construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee, or otherwise, and receiving
compensation for such services.
SECTION 15. CLASSIFICATION OF DIRECTORS.
The board of directors shall be and is divided into three classes, Class I,
Class II and Class III. The number of directors in each class shall be the whole
number contained in the quotient arrived at by dividing the authorized number of
Exhibit 3(ii)
Page 7 of 15
<PAGE>
directors by three, and if a fraction is also contained in such quotient then if
such fraction is one-third (1/3) the extra director shall be a member of Class
III and if the fraction is two-thirds (2/3) one of the extra directors shall be
a member of Class III and the other shall be a member of Class II. Each director
shall serve for a term ending on the date of the third annual meeting following
the annual meeting at which such director was elected.
In the event of any increase or decrease in the authorized number of directors,
(a) each director then serving as such shall nevertheless continue as a director
of the class of which he is a member until the expiration of his current term,
or his prior death, resignation or removal, and (b) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the board of directors to such class or classes as shall, so far
as possible, bring the number of directors in the respective classes into
conformity with the formula in this Section 15, as applied to the new authorized
number of directors.
ARTICLE IV
COMMITTEES
SECTION 1. COMMITTEES OF DIRECTORS.
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more committees, including an
executive committee, each consisting of two or more directors, to serve at the
pleasure of the board. The board may designate one or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. Any such committee, to the extent provided in the
resolution of the board, shall have all the authority of the board, except with
respect to:
(a) the approval of any action which, under the General Corporation
Law of Delaware, also requires stockholders' approval or approval of the
outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or on any committee;
(d) the amendment or repeal of bylaws or the adoption of new bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the stockholders of the corporation, except at
a rate or in a periodic amount or within a price range determined by the
board of directors; or
(g) the appointment of any other committees of the board of directors
or the members thereof.
SECTION 2. MEETINGS AND ACTION OF COMMITTEES.
Meetings and action of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Sections 5
(place of meetings), 7 (regular meetings), 8 (special meetings and notice), 9
(quorum), 10 (waiver of notice), 11 (adjournment), 12 (notice of adjournment)
and 13 (action without meetings), with such changes in the context of those
bylaws as are necessary to substitute the committee and its members for the
board of directors and its members, except that the time of regular meetings of
committees may be determined by resolution of the board of directors as well as
the committee, special meetings of committees may also be called by resolution
of the board of directors, and notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS.
The officers of the corporation shall be the chairman of the board, the
president, a vice president, a secretary and
Exhibit 3(ii)
Page 8 of 15
<PAGE>
a treasurer. The corporation may also have, at the discretion of the board of
directors, one or more additional vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may be
appointed in accordance with the provisions of Section 3 of this Article V. Any
number of offices may be held by the same person.
SECTION 2. ELECTION OF OFFICERS.
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 3 or Section 5 of this Article V,
shall be chosen annually by the board of directors, and each shall hold his
office until he shall resign or be removed or otherwise disqualified to serve or
his successor shall be elected and qualified.
SECTION 3. SUBORDINATE OFFICERS, ETC.
The board of directors may appoint, and may empower the chairman of the
board to appoint, such other officers as the business of the corporation may
require, each of whom shall hold office for such period, have such authority and
perform such duties as are provided in the bylaws or as the board of directors
may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS.
Any officer may be removed, either with or without cause, by the board of
directors, at any regular or special meeting thereof, or, except in case of an
officer chosen by the board of directors, by any officer upon whom such power of
removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
SECTION 5. VACANCIES IN OFFICE.
A vacancy in any office because of death, resignation, removal,
disqualification, or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to such office.
SECTION 6. CHAIRMAN OF THE BOARD.
The chairman of the board shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and affairs of the
corporation.
SECTION 7. PRESIDENT.
The president shall be the chief operating officer of the corporation and
shall exercise and perform such powers and duties with respect to the
administration of the business and affairs of the corporation as may from time
to time be assigned to him by the chairman of the board or by the board of
directors, or as may be prescribed by the bylaws.
SECTION 8. VICE PRESIDENTS.
In the absence or disability of the president, a vice president designated
by the board of directors shall perform all the duties of the president, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the board of directors or the bylaws.
SECTION 9. SECRETARY.
The secretary shall keep or cause to be kept, at the principal executive
office or such other place as the board of directors may order, a book of
minutes of all meetings and actions of directors, committees of directors and
stockholders, with the time and place of holding, whether regular or special,
and, if special, how authorized, the notice thereof given, the names of those
present at directors' and committee meetings, the number of shares present or
represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent or registrar, as
determined by resolution of the board of directors, a stock register, or a
duplicate register, showing the names of all stockholders and their addresses,
the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for
Exhibit 3(ii)
Page 9 of 15
<PAGE>
cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required by the bylaws or by law
to be given, and he shall keep the seal of the corporation in safe custody, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or by the bylaws.
SECTION 10. TREASURER.
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall be open at all reasonable times to
inspection by any director.
The treasurer shall deposit all monies and other valuables in the name and
to the credit of the corporation with such depositories as may be designated by
the board of directors. He shall disburse the funds of the corporation as may be
ordered by the board of directors, shall render to the chairman of the board and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have
other powers and perform such other duties as may be prescribed by the board of
directors or the bylaws.
SECTION 11. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS.
Any assistant secretary may perform any act within the power of the
secretary, and any assistant treasurer may perform any act within the power of
the treasurer, subject to any limitations which may be imposed in these bylaws
or in board resolutions.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
SECTION 1. INDEMNIFICATION AND INSURANCE.
(A) Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit, or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans maintained
or sponsored by the Corporation, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee of agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the General Corporation Law of the State of Delaware as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expenses, liability and loss (including
attorneys' fees, judgements, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in paragraph (C) of this Bylaw, the Corporation
shall indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors. The right to
indemnification conferred in this Bylaw shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition, such advances
to be paid by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the claimant requesting such
advance or advances from time to time; provided, however, that if the General
Corporation Law of the State of Delaware requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service
Exhibit 3(ii)
Page 10 of 15
<PAGE>
was or is rendered by such person while a director or officer, including,
without limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Bylaw or otherwise.
(B) To obtain indemnification under this Bylaw, a claimant shall submit to
the Corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant is
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this paragraph (B), a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (1) if requested by the claimant,
by Independent Counsel (as hereinafter defined), or (2) if no request is made by
the claimant for a determination by Independent Counsel, (i) by the Board of
Directors by a majority vote of a quorum consisting of Disinterested Directors
(as hereinafter defined), or (ii) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtained or even if obtainable,
such quorum of Disinterested Directors so directs, by Independent Counsel in a
written opinion to the Board of Directors, a copy of which shall be delivered to
the claimant, or (iii) if a quorum of Disinterested Directors so directs, by the
stockholders of the Corporation. In the event the determination of entitlement
to indemnification is to be made by Independent Counsel at the request of the
claimant, the Independent Counsel shall be selected by the Board of Directors
unless there shall have occurred within two years prior to the date of the
commencement of the action, suit or proceeding for which indemnification is
claimed a "Change of Control" as defined in the 1996 Stock Incentive Plan, in
which case the Independent Counsel shall be selected by the claimant unless the
claimant shall request that such selection be made by the Board of Directors. If
it is so determined that the claimant is entitled to indemnification, payment to
the claimant shall be made within 10 days after such determination.
(C) If a claim under paragraph (A) of this Bylaw is not paid in full by
the Corporation within 30 days after a written claim pursuant to paragraph (B)
of this Bylaw has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim, including attorney's
fees. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
Independent Counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors, Independent
Counsel or stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(D) If a determination shall have been made pursuant to paragraph (B) of
this Bylaw that the claimant is entitled to indemnification, the Corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to paragraph (C) of this Bylaw.
(E) The Corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to paragraph (C) of this Bylaw that the procedures
and presumptions of this Bylaw are not valid, binding and enforceable and shall
stipulate in such proceeding that the Corporation is bound by all the provisions
of this Bylaw.
(F) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Bylaw shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or Disinterested
Directors or otherwise. No repeal or modification of this Bylaw shall in any way
diminish or adversely affect the rights of any director, officer, employee or
agent of the Corporation hereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
(G) The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense,
Exhibit 3(ii)
Page 11 of 15
<PAGE>
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware. To the extent that the Corporation
maintains any policy or policies providing such insurance, each such director or
officer, and each such agent or employee to which rights to indemnification have
been granted as provided in paragraph (H) of this Bylaw, shall be covered by
such policy or policies in accordance with its or their terms to the maximum
extent of the coverage thereunder for any such director, officer, employee or
agent.
(H) The Corporation may, to the extent authorized from time to time by the
Board of Directors or the Chief Executive Officer, grant rights to
indemnification, and rights to be paid by the Corporation the expenses incurred
in defending any proceeding in advance of its final disposition, to any employee
or agent of the Corporation to the fullest extent of the provisions of this
Bylaw with respect to the indemnification and advancement of expenses of
directors and officers of the Corporation.
(I) If any provision or provisions of this Bylaw shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (1) the validity,
legality and enforceability of the remaining provisions of this Bylaw
(including, without limitation, each portion of any paragraph of this Bylaw
containing any such provisions held to be invalid, illegal or unenforceable,
that is not itself held to be invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby; and (2) to the fullest extent possible,
the provisions of this Bylaw (including, without limitation, each such portion
of any paragraph of this Bylaw containing any such provision held to be invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
(J) For purposes of this Bylaw:
(1) "Disinterested Director" means a director of the Corporation who
is not and was not a party to the matter in respect of which indemnification is
sought by the claimant.
(2) "Independent Counsel" means a law firm, a member of a law firm,
or an independent practitioner, that is experienced in matters of corporation
law and shall include any person who, under the applicable standards of
professional conduct then prevailing, would not have a conflict of interest in
representing either the Corporation or the claimant in an action to determine
the claimant's rights under this Bylaw.
(K) Any notice, request or other communication required or permitted to be
given to the Corporation under this Bylaw shall be in writing and either
delivered in person or sent by telecopy, telex, telegram, overnight mail or
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the Corporation and shall be effective
only upon receipt by the Secretary.
SECTION 2. FIDUCIARIES OF CORPORATE EMPLOYEE BENEFIT PLAN.
This Article VI does not apply to any proceeding against any trustee,
investment manager or other fiduciary of an employee benefit plan in such
person's capacity as such, even though such person may also be an agent of the
corporation as defined in Section 1 of this Article VI. Nothing contained in
this Article VI shall limit any right to indemnification to which such a
trustee, investment manager or other fiduciary may be entitled by contract or
otherwise, which shall be enforceable to the extent permitted by Section 410 of
the Employee Retirement Income Security Act of 1974, as amended, other than this
Article VI.
ARTICLE VII
RECORDS AND REPORTS
SECTION 1. MAINTENANCE AND INSPECTION OF STOCK REGISTER.
The corporation shall keep at its principal executive office, or at the
office of its transfer agent or registrar, if either be appointed, and as
determined by resolution of the board of directors, a record of its
stockholders, giving the names and addresses of all stockholders and the number
and class of shares held by each stockholder.
A stockholder or stockholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding
Exhibit 3(ii)
Page 12 of 15
<PAGE>
voting shares of the corporation may (i) inspect and copy the records of
stockholders' names and addresses and stockholders during usual business hours
upon five days prior written demand upon the corporation, and/or (ii) obtain
from the transfer agent of the corporation, upon written demand and upon the
tender of such transfer agent's usual charges for such list, a list of the
stockholders' names and addresses, who are entitled to vote for the election of
directors, and their shareholdings as of the most recent record date for which
such list has been compiled or as of a date specified by the stockholder
subsequent to the date of demand. Such list shall be made available to such
stockholder or stockholders by the transfer agent on or before the later of five
(5) days after the demand is received or the date specified therein as the date
as of which the list is to be compiled.
The record of stockholders shall be open to inspection upon the written
demand of any stockholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to such holder's
interests as a stockholder or as the holder of a voting trust certificate. Any
inspection and copying under this Section 1 may be made in person or by an agent
or attorney of the stockholder or holder of a voting trust certificate making
such demand.
SECTION 2. MAINTENANCE AND INSPECTION OF BYLAWS.
The corporation shall keep at its principal executive office the original
or a copy of the bylaws as amended to date, which shall be open to inspection by
the stockholders at all reasonable times during office hours.
SECTION 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS.
The accounting books and records and minutes of proceedings of the
stockholders and the board of directors and any committee or committees of the
board of directors shall be kept at such place or places designated by the board
of directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. Such minutes and
accounting books and records shall be open to inspection upon the written demand
of any stockholder or holder of a voting trust certificate, at any reasonable
time during usual business hours, for a purpose reasonably related to such
holder's interests as a stockholder or as a holder of a voting trust
certificate. Such inspection may be made in person or by an agent or attorney,
and shall include the right to copy and make extracts. The foregoing rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.
SECTION 4. INSPECTION BY DIRECTORS.
Every director shall have the absolute right at any reasonable time to
inspect all books, records and documents of every kind and the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by agent or attorney and the
right of inspection includes the right to copy and make extracts.
SECTION 5. ANNUAL REPORT TO STOCKHOLDERS.
The board of directors shall cause an annual report to be sent to the
stockholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days prior to the annual meeting of stockholders to be held during
the next fiscal year and in the manner specified in Section 5 of Article II of
these bylaws for giving notice to stockholders of the corporation. The annual
report shall contain a balance sheet and statement of changes in financial
position for such fiscal year, accompanied by any report thereon of independent
accountants.
SECTION 6. FINANCIAL STATEMENTS.
A copy of any annual financial statement and any income statement of the
corporation for each quarterly period of each fiscal year, and any accompanying
balance sheet for the corporation as of the end of each such period, that has
been prepared by the corporation shall be kept on file in the principal
executive office of the corporation for twelve (12) months and each such
statement shall be exhibited at all reasonable times to any stockholder
demanding an examination of any such statement or a copy shall be mailed to any
such stockholder.
If a stockholder or stockholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation make a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the current fiscal year ended
more than thirty (30) days prior to the date of the request,
Exhibit 3(ii)
Page 13 of 15
<PAGE>
and a balance sheet of the corporation as of the end of such period, the
treasurer shall cause such statement to be prepared, if not already prepared,
and shall deliver personally or mail such statement or statements to the person
making the request within thirty (30) days after the receipt of such request. If
the corporation has not sent to the stockholders its annual report for the last
fiscal year, this report shall likewise be delivered or mailed to such
stockholder or stockholders within thirty (30) days after such request.
The corporation also shall, upon the written request of any stockholder,
mail to the stockholder a copy of the last annual, semi-annual or quarterly
income statement which it has prepared and a balance sheet as of the end of such
period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report thereon, if any, of any independent
accountants engaged by the corporation, or the certificate of an authorized
officer of the corporation that such financial statements were prepared without
audit from the books and records of the corporation.
ARTICLE VIII
GENERAL CORPORATE MATTERS
SECTION 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING.
For purposes of determining the stockholders 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 other lawful action, the board of
directors may fix, in advance, a record date, which shall not be more than sixty
(60) days prior to any such action, and in such case only stockholders of record
on the date so fixed are entitled to receive the dividend, distribution or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date fixed as aforesaid, except as otherwise provided in the Delaware
General Corporation Law.
If the board of directors does not so fix a record date, the record date
for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the resolution relating thereto,
or the sixtieth (60th) day prior to the date of such action, whichever is later.
SECTION 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS.
All checks, drafts or other orders for payment of money, notes or other
evidences of indebtedness, issued in the name of or payable to the corporation
shall be signed or endorsed by such person or persons and in such manner as,
from time to time, shall be determined by resolution of the board of directors.
SECTION 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED.
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances; and, unless so
authorized or ratified by the board of directors or within the agency power of
an officer, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or to any amount.
SECTION 4. STOCK CERTIFICATES.
A certificate or certificates for shares of the capital stock of the
corporation shall be issued to each stockholder when any such shares are fully
paid. All certificates shall be signed in the name of the corporation by the
chairman of the board or the president or vice president and by the treasurer or
an assistant treasurer or the secretary or any assistant secretary, certifying
the number of shares and the class or series of shares owned by the stockholder.
Any or all of the signatures on the certificate may be 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 such person were an officer,
transfer agent or registrar at the date of issue.
SECTION 5. LOST CERTIFICATES.
Except as hereinafter in this Section 5 provided, no new stock certificate
shall be issued in lieu of an old certificate unless the latter is surrendered
to the corporation and canceled at the same time. The board of directors may in
case any
Exhibit 3(ii)
Page 14 of 15
<PAGE>
stock certificate or certificate for any other security is lost, stolen or
destroyed, authorize the issuance of a new certificate in lieu thereof, upon
such terms and conditions as the board of directors may require, including
provision for indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of such certificate or the issuance of such
new certificate.
SECTION 6. REPRESENTATION OF STOCK OF OTHER CORPORATIONS.
The chairman of the board, the president, or any vice president, or any
other person authorized by resolution of the board of directors by any of the
foregoing designated officers, is authorized to vote on behalf of the
corporation any and all stock of any other corporation or corporations, foreign
or domestic, standing in the name of the corporation. The authority herein
granted to said officers to vote or represent on behalf of the corporation any
and all stock by the corporation in any other corporation or corporations may be
exercised by any such officer in person or by any person authorized to do so by
proxy duly executed by said officer.
SECTION 7. CONSTRUCTION AND DEFINITIONS.
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of the bylaws. Without limiting the generality of the
foregoing, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
SECTION 8. FISCAL YEAR.
The fiscal year of the corporation shall commence the first day of the
calendar year.
SECTION 9. SEAL.
The seal of the corporation shall be round and shall bear the name of the
corporation and words and figures denoting its organization under the laws of
the State of Delaware and year thereof, and otherwise shall be in such form as
shall be approved from time to time by the board of directors.
ARTICLE IX
AMENDMENTS
SECTION 1. AMENDMENT BY STOCKHOLDERS.
New bylaws may be adopted or these bylaws may be amended or repealed by the
vote of not less than 80% of the total voting power of all shares of stock of
the corporation entitled to vote in the election of directors, considered for
purposes of this Section 1 as one class.
SECTION 2. AMENDMENT BY DIRECTORS.
Subject to the rights of the stockholders as provided in Section 1 of this
Article IX, to adopt, amend or repeal bylaws, bylaws may be adopted, amended or
repealed by the board of directors.
Amended 04/27/00.
Exhibit 3(ii)
Page 15 of 15
<PAGE>
AVERY DENNISON CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Millions)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------
April 1, 2000 April 3, 1999
----------------------- -----------------------
<S> <C> <C>
Earnings:
Income before taxes $ 107.6 $ 28.2
Add: Fixed Charges* 17.4 14.4
Amortization of capitalized interest .4 .4
Less: Capitalized interest (.8) (.2)
----------------------- -----------------------
$ 124.6 $ 42.8
======================= =======================
*Fixed Charges:
Interest expense $ 12.3 $ 10.4
Capitalized interest .8 .2
Amortization of debt issuance costs .1 .1
Interest portion of leases 4.2 3.7
----------------------- -----------------------
$ 17.4 $ 14.4
======================= =======================
Ratio of Earnings to Fixed Charges 7.2 3.0
======================= =======================
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, "earnings" consist of income before taxes plus
fixed charges (excluding capitalized interest), and "fixed charges" consist of
interest expense, capitalized interest, amortization of debt issuance costs and
the portion of rent expense (estimated to be 35%) on operating leases deemed
representative of interest.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> JAN-02-2000
<PERIOD-END> APR-01-2000
<CASH> 9,800
<SECURITIES> 0
<RECEIVABLES> 577,800<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 294,200
<CURRENT-ASSETS> 1,012,100
<PP&E> 1,952,700
<DEPRECIATION> 901,500
<TOTAL-ASSETS> 2,698,100
<CURRENT-LIABILITIES> 824,600
<BONDS> 726,600
0
0
<COMMON> 124,100
<OTHER-SE> 702,800
<TOTAL-LIABILITY-AND-EQUITY> 2,698,100
<SALES> 965,300
<TOTAL-REVENUES> 965,300
<CGS> 631,200
<TOTAL-COSTS> 631,200
<OTHER-EXPENSES> 214,200
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,300
<INCOME-PRETAX> 107,600
<INCOME-TAX> 37,400
<INCOME-CONTINUING> 70,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,200
<EPS-BASIC> .71
<EPS-DILUTED> .70
<FN>
<F1>ACCOUNTS RECEIVABLE ARE SHOWN NET OF ANY ALLOWANCES.
</FN>
</TABLE>
