SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
MARCH 31, 2000 0-22906
- --------------------------- ------------------------
For the Quarterly Period Commission File Number
ABC-NACO INC.
(Exact name of registrant as specified in its charter)
Delaware 36-3498749
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2001 Butterfield Road, Suite 502, Downers Grove, IL 60515
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code (630) 852-1300
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 2000
- ----------------------------- -----------------------------
COMMON STOCK, $.01 PAR VALUE 19,061,132 SHARES
<PAGE>
ABC-NACO INC.
INDEX
Page
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Part I Financial Statements
Item 1 Unaudited Consolidated Financial Statements
Unaudited Consolidated Balance Sheets 3
Unaudited Consolidated Statements of Operations 4
Unaudited Consolidated Statements of Changes
in Stockholders'Equity 5
Unaudited Consolidated Statements of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements 7 - 14
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 15 - 21
Item 3 Quantitative and Qualitative Disclosures About Market Risk 21
Part II Other Information
Item 4 Submission of Matters to a Vote of Security Holders 21
Item 6 Exhibits and Reports on Form 8-K 22
<PAGE>
<TABLE>
<CAPTION>
ABC-NACO INC.
CONSOLIDATED BALANCE SHEETS
As of March 31, 2000 and December 31, 1999
(Unaudited)
(In thousands, except share data)
March 31, December 31,
ASSETS 2000 1999
- ---------------------------------------------------------------------------- ----------- --------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . $ - $ 351
Accounts receivable, less allowances of $2,202 and $1,804, respectively. 102,260 79,617
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98,672 94,132
Prepaid expenses and other current assets. . . . . . . . . . . . . . . . 12,861 12,401
Prepaid income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 8,657 8,680
----------- --------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 222,450 195,181
----------- --------------
PROPERTY, PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,630 7,644
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . 42,027 42,268
Machinery and equipment. . . . . . . . . . . . . . . . . . . . . . . . . 274,619 267,189
Patterns, tools, gauges and dies . . . . . . . . . . . . . . . . . . . . 13,730 14,610
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . 27,605 28,302
----------- --------------
365,611 360,013
Less - Accumulated depreciation. . . . . . . . . . . . . . . . . . . . . (121,990) (115,003)
----------- --------------
Net property, plant and equipment. . . . . . . . . . . . . . . . . . 243,621 245,010
----------- --------------
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES . . . . . . . . . . . . . . . . 14,338 13,886
----------- --------------
OTHER ASSETS - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,372 38,394
----------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 519,781 $ 492,471
=========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------
CURRENT LIABILITIES:
Cash overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,138 $ -
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . 7,092 6,207
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,097 89,678
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,306 42,983
----------- --------------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . 137,633 138,868
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LONG-TERM DEBT, less current maturities. . . . . . . . . . . . . . . . . . . 247,116 246,247
----------- --------------
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,695 6,699
----------- --------------
OTHER LONG-TERM LIABILITIES. . . . . . . . . . . . . . . . . . . . . . . . . 14,237 13,978
----------- --------------
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized;
300,000 shares issued and outstanding . . . . . . . . . . . . . . . . 28,425 -
Common stock, $.01 par value; 25,000,000 shares authorized;
19,372,242 shares issued and outstanding, . . . . . . . . . . . . . 194 194
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 91,270 79,240
Retained earnings (deficit). . . . . . . . . . . . . . . . . . . . . . . (4,580) 7,954
Cumulative translation adjustment. . . . . . . . . . . . . . . . . . . . (1,209) (709)
----------- --------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . 114,100 86,679
----------- --------------
Total liabilities and stockholders' equity . . . . . . . . . . . . . $ 519,781 $ 492,471
=========== ==============
The accompanying notes to the unaudited consolidated financial statements are an integral part of these consolidated statements.
</TABLE>
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<TABLE>
<CAPTION>
ABC-NACO INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
(In thousands, except per share data)
Three Months Ended
March 31,
--------------------
2000 1999
--------- ---------
<S> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . . . . . . . $156,978 $166,715
COST OF SALES . . . . . . . . . . . . . . . . . . . . . . 136,135 147,088
--------- ---------
Gross profit. . . . . . . . . . . . . . . . . . . 20,843 19,627
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. . . . . . . 13,751 15,666
MERGER AND OTHER RESTRUCTURING CHARGES. . . . . . . . . . 1,589 16,096
--------- ---------
Operating income (loss) . . . . . . . . . . . . . 5,503 (12,135)
EQUITY INCOME OF UNCONSOLIDATED JOINT VENTURES. . . . . . (453) (397)
INTEREST EXPENSE. . . . . . . . . . . . . . . . . . . . . 6,172 4,253
AMORTIZATION OF DEFERRED FINANCING COSTS. . . . . . . . . 245 187
--------- ---------
Loss before income taxes and extraordinary item. (461) (16,178)
PROVISION (BENEFIT) FOR INCOME TAXES. . . . . . . . . . . 43 (3,813)
--------- ---------
Loss before extraordinary item . . . . . . . . . (504) (12,365)
EXTRAORDINARY ITEM, net of income tax of $2,062 . . . . . - (3,158)
--------- ---------
Net loss. . . . . . . . . . . . . . . . . . . . . $ (504) $(15,523)
========= =========
EARNINGS PER SHARE DATA:
Loss before extraordinary item . . . . . . . . . . $ (504) $(12,365)
Adjustment related to preferred stock. . . . . . . (12,030) -
--------- ---------
Adjusted loss before extraordinary item. . . . . . (12,534) (12,365)
Extraordinary item . . . . . . . . . . . . . . . . - (3,158)
--------- ---------
Net loss available to common stockholders. . . $(12,534) $(15,523)
========= =========
BASIC AND DILUTED EARNINGS PER SHARE:
Adjusted loss before extraordinary item . . . . . $ (0.65) $ (0.68)
Extraordinary item. . . . . . . . . . . . . . . . - (0.17)
--------- ---------
Net loss available to common stockholders. . $ (0.65) $ (0.85)
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING . . . . . . . . . . . 19,372 18,239
========= =========
The accompanying notes to the unaudited consolidated financial statements are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABC-NACO INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
(In thousands)
Additional Retained Cumulative
Preferred Common Paid-in Earnings Translation
Stock Stock Capital (Deficit) Adjustment Total
----------- --------- ----------- ---------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCE December 31, 1998. . . . $ - $ 184 $ 67,981 $ 28,888 $ (676) $ 96,377
Comprehensive loss. . . . . . . . - - - (15,523) 163 (15,360)
----------- --------- ----------- ---------- ------------- ---------
BALANCE March 31, 1999 . . . . . $ - $ 184 $ 67,981 $ 13,365 $ (513) $ 81,017
=========== ========= =========== ========== ============= =========
BALANCE December 31, 1999. . . . $ - $ 194 $ 79,240 $ 7,954 $ (709) $ 86,679
Comprehensive loss . . . . . . . - - - (504) (500) (1,004)
Preferred stock issued . . . . . 28,425 - 11,877 (11,877) - 28,425
Preferred stock dividends earned - - 153 (153) - -
----------- --------- ----------- ---------- ------------- ---------
BALANCE March 31, 2000 . . . . . $ 28,425 $ 194 $ 91,270 $ (4,580) $ (1,209) $114,100
=========== ========= =========== ========== ============= =========
The accompanying notes to the unaudited consolidated financial statements are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ABC-NACO INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999
(Unaudited)
(In thousands)
Three Months Ended
March 31,
----------------------------
2000 1999
----------------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (504) $(15,523)
Adjustments to reconcile net loss to net cash used in
operating activities:
Extraordinary item . . . . . . . . . . . . . . . . . . . . . - 3,158
Merger and other restructuring charges . . . . . . . . . . . 1,589 16,096
Equity income of unconsolidated joint ventures . . . . . . . (453) (397)
Depreciation and amortization . . . . . . . . . . . . . . . 8,374 7,627
Deferred income taxes. . . . . . . . . . . . . . . . . . . . 19 643
Changes in certain assets and liabilities
Accounts receivable - net . . . . . . . . . . . . . . (22,643) (7,820)
Inventories . . . . . . . . . . . . . . . . . . . . . (4,540) 3,092
Prepaid expenses and other current assets . . . . . . (460) (15,240)
Other noncurrent assets . . . . . . . . . . . . . . . (1,083) (149)
Accounts payable and accrued expenses . . . . . . . . (5,560) (7,347)
Other noncurrent liabilities. . . . . . . . . . . . . (240) 1,159
----------- ---------
Net cash used in operating activities . . . . . . . . (25,501) (14,701)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . (6,476) (10,277)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving lines of credit. . . . . . . . 2,757 45,527
Change in cash overdrafts . . . . . . . . . . . . . . . . . . 2,138 836
Payment of term debt. . . . . . . . . . . . . . . . . . . . . (1,003) (23,983)
Borrowings of term debt . . . . . . . . . . . . . . . . . . . - 3,000
Payment of deferred financing costs . . . . . . . . . . . . . (691) (6)
Issuance of convertible preferred stock . . . . . . . . . . . 28,425 -
----------- ---------
Net cash provided by financing activities 31,626 25,374
----------- ---------
Net change in cash. . . . . . . . . . . . (351) 396
CASH AND CASH EQUIVALENTS, beginning of period. . . . . . . . . . . . 351 164
----------- ---------
CASH AND CASH EQUIVALENTS, end of period. . . . . . . . . . . . . . . $ - $ 560
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest. . . . . . . . . . . . . . . . . . . . $ 6,547 $ 3,661
Cash paid (received) for income taxes, net. . . . . . . . . . (1,498) 607
The accompanying notes to the unaudited consolidated financial statements are an integral part of these consolidated statements.
</TABLE>
<PAGE>
ABC-NACO INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
ABC-NACO Inc. ("the Company") is a supplier of technologically advanced products
and services to the freight railroad and flow control industries. The Company
operates in three business segments: Rail Products, Rail Services and Systems,
and Flow and Specialty Products, and has four technology centers around the
world supporting its three business segments. The Company holds market positions
in the design, engineering, and manufacture of high performance freight railcar,
locomotive and passenger rail suspension and coupler systems, wheels and mounted
wheel sets, and specialty track products. The Company also supplies freight,
railroad and transit signaling systems and services, as well as highly
engineered valve bodies and components for industrial flow control systems
worldwide.
The accompanying unaudited consolidated financial statements include, in the
opinion of management, all adjustments (consisting of only normal recurring
adjustments) necessary for a fair presentation of the results of operations and
financial condition of the Company for and as of the interim dates. Results for
the interim period are not necessarily indicative of results for the entire
year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the SEC.
The Company believes that the disclosures contained herein are adequate to make
the information presented not misleading. These unaudited consolidated
financial statements should be read in conjunction with the information and the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the fiscal year ended July 31, 1999 and the
Company's Transition Report on Form 10-K for the five months ended December 31,
1999.
The Company is a result of a merger (the "Merger") on February 19, 1999, between
ABC Rail Products Corporation ("ABC") and NACO, Inc. ("NACO"). As a result of
the Merger, each outstanding share of NACO common stock was converted into 8.7
shares of the Company's common stock, resulting in the issuance of approximately
9.4 million shares. The Merger was treated as a tax-free reorganization for
federal income tax purposes and has been accounted for as a pooling-of-interests
transaction. The accompanying consolidated financial statements reflect the
combined results of ABC and NACO as if the Merger occurred on the first day of
the earliest period presented.
Unaudited results of operations for ABC and NACO prior to the Merger from
January 1, 1999, to February 19, 1999 (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
ABC NACO
-------- --------
Revenue. $52,659 $60,552
Net loss (669) (51)
</TABLE>
On September 23, 1999, the Company's Board of Directors adopted a resolution to
change the Company's year-end to December 31 from July 31. The principal reason
for the change was to align the Company's fiscal year-end with the fiscal
year-end of its major customers. The Company filed a Form 10-K transition
report for the five-month transition period from August 1, 1999 to December 31,
1999 (the "Transition Period").
2. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method for substantially all inventories. Inventory
costs include material, labor and manufacturing overhead. Inventories at March
31, 2000, and December 31, 1999, consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- -------------
<S> <C> <C>
Raw materials. . . . . . . . . . . $ 47,441 $ 44,148
Supplies and spare parts . . . . . 4,095 5,258
Work in process and finished goods 47,136 44,726
---------- -------------
$ 98,672 $ 94,132
========== =============
</TABLE>
3. DEBT
Immediately after the consummation of the Merger, the Company entered into a new
revolving credit facility (the "Credit Facility") with a syndicate of financial
institutions, in which Bank of America National Trust & Savings Association
acted as the Agent and Letter of Credit Issuing Lender and Bank of America
Canada acted as the Canadian Revolving Lender. The Credit Facility provides the
Company with a revolving line of credit of up to $200.0 million. The Credit
Facility's covenants include ratio restrictions on total leverage, senior
leverage, interest coverage, minimum net worth restriction and restrictions on
capital expenditures.
The initial net proceeds of the Credit Facility were used to (i) refinance
existing bank debt and certain other indebtedness of the Company, (ii) refinance
substantially all of NACO's outstanding debt, (iii) provide initial financing
for the Company's on-going working capital needs, and (iv) pay fees and expenses
relating to the Merger and the Credit Facility. The early retirement of the
refinanced debt resulted in a $5.2 million extraordinary charge ($3.2 million
after-tax) representing the non-cash write-off of related unamortized deferred
financing costs and prepayment penalties of $4.5 million. The Credit Facility
employs an IBOR-based variable interest rate index and assesses a spread over
the IBOR base which is determined by a Consolidated Leverage pricing grid. The
weighted average interest rate at March 31, 2000 was 9.2%. Availability at
March 31, 2000 was $31.2 million.
On October 12, 1999, the Company entered into an Amendment, Waiver and Release
Agreement to the Credit Agreement to release certain collateral related to its
Mexican subsidiary and to reflect the change in the Company's fiscal year and
reporting periods for covenant measurement purposes. The Company then entered
into two subsequent modifications to the Credit Agreement that were effective as
of October 29, 1999 to modify certain of the financial leverage covenants in the
Credit Agreement which the Company otherwise would not have been in compliance
with as of October 31, 1999.
On March 8, 2000, the Company entered into a Second Amendment and Restatement of
the Credit Agreement that was effective as of December 30, 1999 to modify
certain of the financial covenants in the Credit Agreement, which the Company
otherwise would have not been in compliance with as of December 31, 1999. The
amended covenants included the Maximum Consolidated Leverage Ratio, Maximum
Senior Leverage Ratio and the Minimum Interest Coverage Ratio. In addition, a
minimum pro-forma EDITDA covenant was added to the Credit Agreement. The
Company and its Lenders also modified other terms and conditions within the
Credit Agreement including the pricing grid, which is based upon the Company's
Consolidated Leverage Ratio. The currently applied margin of 300 basis points
over IBOR is the maximum IBOR margin provided for by the Amendment. The
revolving line of credit now has scheduled commitment reductions as follows:
January 1, 2001-$10 million, June 30, 2001-$5.0 million, January 1, 2002-$10.0
million, June 30, 2002-$5.0 million and January 1, 2003-$15.0 million. The
total commitment reductions aggregate to $45.0 million and will reduce the
revolving credit commitment to a total of $155.0 million as of January 1, 2003.
With the Amendment, the Company was in compliance with the Credit Agreement as
of December 31, 1999 and March 31, 2000. Based upon management's forecasts for
the next twelve months, the Company anticipates being in compliance with its
Credit Agreement covenants at each quarterly measurement point during such
period. The Company anticipates being able to operate within the reduced Credit
Agreement commitment levels through use of its free cash flow generated from
operations, the potential disposal of certain non-core operating assets, the
$30.0 million proceeds from the March 8, 2000 convertible preferred stock
investment by private equity funds managed by ING Furman Selz investments and
the realignment of the Company's capitalization components through a universal
shelf registration.
On February 1, 1997, the Company completed an offering (the ''Offering'') of $50
million of 9 1/8% Senior Subordinated Notes (the ''9 1/8% Notes''). The Company
used the $47.9 million of net proceeds of the Offering to repay certain
outstanding indebtedness under its primary and other credit facilities. The 9
1/8% Notes are general unsecured obligations of the Company and are subordinated
in right of payment to all existing and future senior indebtedness of the
Company and other liabilities of the Company's subsidiaries. The 9 1/8% Notes
will mature in 2004, unless repurchased earlier at the option of the Company at
100% of face value. The 9 1/8% Notes are subject to mandatory repurchase or
redemption prior to maturity upon a Change of Control (as defined). The
indenture under which the 9 1/8% Notes were issued limits the Company's ability
to (i) incur additional indebtedness, (ii) complete certain mergers,
consolidations and sales of assets, and (iii) pay dividends or other
distributions. On December 23, 1997, the Company completed a second offering of
$25.0 million of 8 3/4% Senior Subordinated Notes, Series B (the ''8 3/4%
Notes'') due in 2004 with similar provisions as the 9 1/8% Notes.
The Company is required to meet a number of financial covenants on its 9 1/8%
Notes and 8 3/4% Notes including minimum interest coverage, minimum consolidated
net worth and maximum funded debt to capitalization. The interest coverage
ratio at March 31, 2000 was 2.44 with the minimum requirement under the Note
agreements being 2.40. The funded debt to capitalization ratio at March 31,
2000 was 69.5% with the maximum allowable under the Note agreements being 75.0%.
These same leverage covenants need to be met at each quarter-end through the
maturity dates for these notes. Failure to meet these covenant tests would give
the noteholders the unilateral right to accelerate the maturity of the related
debt after a requisite cure period. In addition, cross-default provisions under
the Credit Agreement would be triggered upon a default under the Notes. If the
Company does not have adequate cash or is unable to remain compliant with such
financial covenants, it may be required to further refinance its existing
indebtedness, seek additional financing, or issue common stock or other
securities to raise cash to assist in financing its operations. The Company has
no current commitments or arrangements for such financing alternatives, and
there can be no assurances that such financing alternatives will be available on
acceptable terms, or at all. The Company's inability to make any payments when
due or to satisfy its financial covenants under its existing borrowing
facilities could have a material adverse effect on the Company.
A universal shelf registration was declared effective by the Securities and
Exchange Commission on October 29, 1999, for issuances up to $300 million of
debt or equity securities. As of March 31, 2000, no securities were issued
under the new universal shelf registration.
4. CONVERTIBLE PREFERRED STOCK
On March 8, 2000, the Company issued 300,000 shares of Series B cumulative
convertible preferred stock ($1 par value) to private equity funds managed by
ING Furman Selz Investments for $30 million. The preferred stock has certain
voting rights and will pay dividends at the rate of 8% per annum accrued
semi-annually and paid in the form of common stock or cash, at the discretion of
the Company. The preferred stock is convertible into common stock at the
average closing price of the Company's common stock for the thirty trading days
ending February 17, 2000, which was $9.00 per share. The preferred stock can be
converted into common shares at the Company's option under certain conditions at
any time three years after issuance. The net proceeds received from the sale of
preferred stock ($28.4 million after offering costs) were applied to reduce the
outstanding indebtedness under the Company's Revolving Credit Facility.
While the conversion price may change under specific conditions, the $9.00 per
share price on the date that the Company and the preferred stock holders were
committed to completing the transaction represented a discount from the market
value of the underlying common stock on that date by an aggregate of $11.9
million. This discount represents the value of the beneficial conversion
feature of the preferred stock. Accordingly, the Company initially recorded the
value of the preferred stock as $18.1 million offset by $1.6 million of
transaction costs, with the $11.9 million credited to additional paid-in
capital. Since the preferred stock is convertible at any time at the holders'
option, this discount also represents an immediate deemed dividend to those
holders at the date of issuance. Accordingly, upon issuance, the Company also
recorded a $11.9 million dividend to these holders. Additionally, the preferred
stock earned actual dividends of $0.2 million during the quarter ended March 31,
2000. Both the actual and deemed dividends are deducted from the net loss for
the quarter ended March 31, 2000 to arrive at loss available to common
stockholders in the earnings per share calculations for that period.
In such calculations, other common stock equivalents, which would have increased
diluted shares by 3,333,000 and 188,000 shares for the three months ended March
31, 2000 and 1999, respectively, were not included in the computation of
diluted earnings per share because the assumed exercise of such equivalents
would be antidilutive.
5. MERGER AND OTHER RESTRUCTURING COSTS
During the three months ended March 31, 2000, the Company recorded $1.6 million
of Merger and other restructuring charges. This charge included cash employee
severance costs for 35 salaried employees and 30 hourly plant employees and was
part of the Company's year-long effort to eliminate duplicate functions and to
improve operating efficiencies as a result of the Merger. As of March 31, 2000,
95% of these employees have been terminated and $0.4 million of related costs
were paid.
During the third and fourth quarters of the fiscal year ended July 31, 1999, the
Company recorded $16.1 million and $5.8 million, respectively, of Merger and
other restructuring charges. During the Transition Period, the Company recorded
additional charges of $1.2 million, including adjustments of previously-recorded
charges based on actual expenses incurred on the related initiatives. The
primary components of the aggregate $23.1 million of calendar 1999 charges
include: (a) $9.5 million of costs incurred as a direct result of the Merger for
advisory and other professional fees, (b) the consolidation of the corporate
activities of the merged companies into one facility, and (c) the consolidation
of several manufacturing and assembly operations into fewer facilities to
eliminate duplicative functions and to improve operating efficiencies. The
charges were computed based on actual cash payouts, management's estimate of
realizable value of the affected tangible and intangible assets and estimated
exit costs including severance and other employee benefits based on existing
severance policies. The Company expects that these restructuring efforts will
result in reduced operating costs, including lower salary and hourly payroll
costs and depreciation/amortization.
Employee severance costs included in the aggregate charge, totaling $7.9
million, were for 33 corporate employees, 109 salaried plant employees and 581
hourly plant employees. As of December 31, 1999, all of these employees had
been terminated.
Certain of the restructuring initiatives within the Rail Services and Systems
segment were prompted by the excess capacity resulting from the operation of the
Company's new state-of-the-art rail mill facility in Chicago Heights, Illinois.
With this new capacity on line, the Company closed its Cincinnati, Ohio facility
and discontinued manufacturing at its Newton, Kansas facility (which also has a
distribution operation) by July 31, 1999. The Company also closed its foundry
operation in Anderson, Indiana by October 31, 1999. The Manganese castings used
in specialty track products that were produced at Andersen are now produced at
the Company's manufacturing facility in Richmond, Texas. The duplicative leased
corporate facility and another administrative facility was closed in September
1999. In addition to these closures, the Company has decided to close an
assembly facility in Verona, Wisconsin. This Rail Services and Systems facility
is expected to be closed by the end of 2000 with all operations being
transferred to another Company location.
Costs associated with these facility closures, excluding severance, are $2.2
million of non-cash provisions for the write down of obsolete assets and
leasehold improvements and $1.4 million in cash provisions for idle facility and
property disposal costs. In addition to these costs, the Company incurred $2.1
million of cash costs related to the transfer of Manganese castings and other
operations into the Richmond facility and the relocation of previous Richmond
operations into another Company facility. These costs primarily represent the
relocation of equipment and employees and the installation of the new operations
at Richmond.
The following table is a summary roll forward of the Merger and other
restructuring reserves recorded in 1999 through March 31, 2000 (in thousands):
<TABLE>
<CAPTION>
Aggregate Charge Deductions Balance
----------------- ------------ --------
<S> <C> <C> <C>
Cash provisions:
Merger advisory and other fees. . . . . . $ 9.5 $ (9.5) $ -
Employee severance. . . . . . . . . . . . 7.9 (5.4) 2.5
Idle facility and property disposal costs 1.4 (1.3) 0.1
Relocation of operations. . . . . . . . . 2.1 (2.1) -
----------------- ------------ --------
Total cash costs . . . . . . . . . . . 20.9 $ (18.3) $ 2.6
============ ========
Non-cash asset writedowns. . . . . . . . . . 2.2
-----------------
Total. . . . . . . . . . . . . . . . . $ 23.1
=================
</TABLE>
The remaining cash costs are expected to be expended during the next nine to
twelve months.
6. BUSINESS SEGMENT INFORMATION
The Company manages its operations through three reporting segments: Rail
Products, Rail Services and Systems, and Flow and Specialty Products. These
distinct business units generally serve separate markets. They are managed
separately since each business requires different technology, servicing and
marketing strategies. The following describes the types of products and services
from which each segment derives its revenues:
<TABLE>
<CAPTION>
<S> <C>
Rail Products. . . . . . Freight car and locomotive castings
Rail Services and Systems . Specialty trackwork, wheel assembly and signal systems
Flow and Specialty Products Valve housing and related castings
</TABLE>
The Company realigned its segments during the Transition Period to better
reflect the organizational and marketing changes that were enacted within the
Company. The Company's trackwork product line which previously had been
reported as part of the Rail Products segment is now included as part of the
Rail Services and Systems segment. The Company now markets its services for
signaling and trackwork products to the railroads through one organization
headed by one division president. In addition, the Company for strategic
reasons, placed its metal brake shoe foundry into the Flow and Specialty
Products segment. The current and historical segment financial information has
been restated to reflect these changes.
To evaluate the performance of these segments, the Chief Executive Officer
examines operating income or loss before interest and income taxes, as well as
operating cash flow. Operating cash flow is defined as operating income or loss
plus depreciation and amortization. The accounting policies for the operating
segments are the same as those for the consolidated company. Intersegment sales
and transfers are accounted for on a cost plus stipulated mark-up which the
Company believes approximates arm's length prices.
Corporate headquarters and ABC-NACO Technologies primarily provide support
services to the operating segments. The costs associated with these services
include interest expense, income tax expense (benefit), Merger and other
restructuring charges, research and development expense, and goodwill
amortization, among other costs. These costs are not allocated to the segments
and are included within ''other'' below.
The following tables present a summary of operating results by segment and a
reconciliation to the Company's consolidated totals (in thousands):
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
REVENUES 2000 1999
- ------------------------------------------------- --------- ---------
<S> <C> <C>
Rail Products. . . . . . . . . . . . . . . . . . $ 79,155 $ 99,281
Rail Services and Systems. . . . . . . . . . . . 65,220 61,858
Flow and Specialty Products. . . . . . . . . . . 23,156 16,978
--------- ---------
Total Reportable Segments. . . . . . . . . . 167,531 178,117
Elimination and Other. . . . . . . . . . . . . . (10,553) (11,402)
--------- ---------
Total. . . . . . . . . . . . . . . . . . $156,978 $166,715
========= =========
OPERATING INCOME . . . . . . . . . . . . . . . . 2000 1999
- ------------------------------------------------- --------- ---------
Rail Products. . . . . . . . . . . . . . . . . . $ 5,616 $ 8,058
Rail Services and Systems. . . . . . . . . . . . 4,655 2,164
Flow and Specialty Products. . . . . . . . . . . 3,273 1,374
--------- ---------
Total Reportable Segments. . . . . . . . . . 13,544 11,596
Elimination and Other. . . . . . . . . . . . . . (8,041) (23,731)
--------- ---------
Total. . . . . . . . . . . . . . . . . . $ 5,503 $ 12,135
========= =========
</TABLE>
7. BUSINESS ACQUISITIONS
On October 29, 1999, the Company acquired all outstanding common stock of
COMETNA - Companhia Metalurgica Nacional, S.A. (Cometna) located in Lisbon,
Portugal for $8.3 million of the Company's common stock. Cometna manufactures
and machines products for the freight and passenger rail industries in Europe
and is part of the Company's Rail Products segment. The acquisition was
accounted for under the purchase method of accounting. Accordingly, certain
recorded assets and liabilities of the acquired businesses were revalued to
estimated fair values of the acquisition dates. Management used its best
judgment and available information in estimating the fair value of those assets
and liabilities. Any changes to those estimates are not expected to be
material. The operating results of the acquired business are included in the
consolidated statements of operations from its date of acquisition.
8. UNCONSOLIDATED JOINT VENTURES
The Company owns 50% of Anchor Brake Shoe, L.L.C. (''Anchor''). Anchor designs,
manufactures, markets and sells railcar composite brake shoes. The Company's
investment in Anchor was $7.4 million as of March 31, 2000. Each partner's share
of the joint venture can be purchased by the other partner, at market value, if
the other partner is involved in a future change in control situation.
Additionally, the other partner has an option which it can exercise as of April
1, 2001, to purchase the Company's interest in Anchor.
Summarized financial information for Anchor as of March 31, 2000, and December
31, 1999 and for the three months ended March 31, 2000, and 1999 is as follows
(in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -------------
<S> <C> <C>
Current assets . . . . . . $ 8,543 $ 7,764
Noncurrent assets. . . . . 7,442 7,724
Current liabilities. . . . 1,258 1,491
Noncurrent liabilities . . - -
Three Months Ended
March 31,
-------------------------
2000 1999
---------- -------------
Net sales. . . . . . . . . $ 5,090 $ 5,133
Gross profit . . . . . . . 1,424 1,673
Net income . . . . . . . . 772 1,071
</TABLE>
In addition, the Company has other joint venture arrangements which are not
significant to the Company's results of operations.
<PAGE>
ITEM 2
ABC-NACO INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and results of
operations during the interim periods included in the accompanying unaudited
Consolidated Financial Statements.
ABC-NACO Inc. (''the Company'') is a supplier of technologically advanced
products and services to the freight railroad and flow control industries
through its three business segments or groups: Rail Products, Rail Services and
Systems, and Flow and Specialty Products. With four technology centers around
the world supporting its three business segments, the Company holds market
positions in the design, engineering, and manufacture of high performance
freight railcar, locomotive and passenger rail suspension and coupler systems,
wheels and mounted wheel sets, and specialty track products. The Company also
supplies freight, railroad and transit signaling systems and services, as well
as highly engineered valve bodies and components for industrial flow control
systems worldwide.
In the aggregate, the Company operates 19 U.S manufacturing plants in 12 states;
plants in Sahagun, Mexico, Lisbon, Portugal, Leven, Scotland and Dominion,
Canada; has unconsolidated joint ventures with plants in Illinois, China and
Mexico; and has other facilities (administrative, engineering, etc.) in 4
states.
The current composition of the Company was achieved by the consummation of a
merger (the ''Merger'') on February 19, 1999, between a wholly owned subsidiary
of the Company (formerly ABC Rail Products Corporation (''ABC'')) and NACO, Inc.
(''NACO''). As a result of the Merger, each outstanding share of NACO common
stock was converted into 8.7 shares of ABC common stock, resulting in the
issuance of approximately 9.4 million shares. The Merger was treated as a
tax-free reorganization for federal income tax purposes and is accounted for as
a pooling-of-interests transaction. The accompanying consolidated financial
statements reflect the combined results of ABC and NACO as if the Merger
occurred on the first day of the earliest period presented.
The Company manages its operations through three reporting segments or groups:
Rail Products, Rail Services and Systems, and Flow and Specialty Products. These
distinct business units generally serve separate markets. They are managed
separately since each business requires different technology, servicing and
marketing strategies. The following describes the types of products and services
from which each segment derives its revenues:
<TABLE>
<CAPTION>
<S> <C>
Rail Products. . . . . . Freight car and locomotive castings
Rail Services and Systems . Specialty trackwork, wheel assembly and signal systems
Flow and Specialty Products Valve housing and related castings
</TABLE>
<PAGE>
RESULTS OF OPERATIONS
- -----------------------
Three Months Ended March 31, 2000 Compared To Three Months Ended March 31, 1999
Net Sales. Consolidated net sales decreased 5.8% from $166.7 million in 1999
to $157.0 million in 2000. Sales within the Rail Products Segment decreased
20.2% from $99.3 million in 1999 to $79.2 million in 2000. This decrease was
driven primarily by the overall industry decline in new railcar deliveries
which decreased 21.7% to 16,867 in the first quarter of 2000 from 21,560 in the
first quarter of 1999. Sales within the Rail Services and Systems Segment
increased 5.4% to $65.2 million in 2000 from $61.8 million in 1999. The major
reason behind the increase was the Company's recently announced long-term supply
agreement with the Union Pacific Railroad to supply and service wheelsets for
its North American operations. Sales within the Flow and Specialty Products
Segment increased 36.5% to $23.2 million in 2000 from $17.0 million in 1999.
The recent surge in oil prices has generated additional demand for exploration
which in turn has increased demand for valve bodies sold by this segment.
Gross Profit. Consolidated gross profit increased 6.2% to $20.8 million in
2000 from $19.6 million in 1999. The Company's overall improvement in gross
profit and gross profit percentage during the 2000 period in a declining sales
market is a direct result of improved operating efficiencies since the date of
the merger. Gross profit within the Rail Products Segment decreased 22% from
$12.0 million in 1999 to $9.3 million in 2000. Gross profit within the Rail
Services and Systems group increased by 21.2% to $6.7 million in 2000 from $5.5
million in 1999. Gross profit within the Flow and Specialty Products Segment
increased by 88% to $4.4 million in 2000 from $2.4 million in 1999. The gross
profit changes within these groups were also impacted by the same reasons as
described above.
Selling, General and Administrative Expenses. Consolidated selling, general
and administrative expenses decreased by 12.2% to $13.8 million in 2000 from
$15.7 million in 1999. The decrease in expenses between periods primarily
reflects the improved operating efficiencies subsequent to the date of the
Merger.
Merger and Other Restructuring Costs. During the three months ended March 31,
2000, the Company recorded $1.6 million of Merger and other restructuring
charges. This charge included cash employee severance costs for 35 salaried
employees and 30 hourly plant employees and was part of the Company's year-long
effort to eliminate duplicate functions and to improve operating efficiencies as
a result of the Merger. As of March 31, 2000, 95% of these employees have been
terminated and $0.4 million of related costs were paid. The Company incurred a
pre-tax charge of $16.1 million in the prior year quarter relative to the direct
costs associated with the February 19, 1999, merger between ABC Rail Products
and NACO as well as costs associated with the restructuring of the Track
Products Group. The merger related charge totaled $12.6 million on a pre-tax
basis and included advisory fees, employee severance obligations and other
general expenses. The Track Products Group's restructuring charge totaled $3.5
million on a pre-tax basis and included costs for shutting down facilities,
employee severance obligations and other general expenses.
Equity Income of Unconsolidated Joint Ventures. The Company's income from its
equity investments in joint ventures improved to $0.5 million in 2000 from $0.4
million in 1999. This was primarily a result of improved operating results at
its wheel foundry in China.
Interest Expense. Interest expense, excluding the effect of capitalizing $0.2
million of interest in 1999 increased $1.7 million to $6.2 million in 2000 from
$4.4 million in 1999. This increase was attributable to higher borrowing levels
and increased borrowing rates.
Income Taxes. The Company's effective tax rates for the three months ending
March 31, 2000 and 1999 were 9.3% and 23.6%, respectively. The lower effective
tax rate for the period ending March 31, 2000, is primarily due to losses at the
Glencast operation for which the Company has not recorded a tax benefit. The
lower effective tax rate for the three months ending March 31, 1999 is due to
nondeductible merger costs and losses at the Glencast operation for which the
Company has not recorded a tax benefit.
Extraordinary Item. On February 19, 1999, the Company, in conjunction with the
Merger, entered into a new credit facility with a syndicate of financial
institutions. This triggered the write-off of unamortized deferred financing
balances, make whole payments and early termination fees that resulted from the
extinguishment of the old debt. The after-tax charge recorded to account for
these items was $3.2 million.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- ----------------------------------
For the three months ended March 31, 2000 and 1999, net cash used in operating
activities totaled $25.5 million and $14.7 million, respectively. The decrease
in operating cash flow is due primarily to increases in the Company's receivable
and inventory levels. The inventory increase was primarily related to the
Company's new service agreement with Union Pacific Railroad Company. The
increase in receivables was driven by the Company's strong sales during the last
few weeks of the quarter, along with the weak sales level at the end of the
prior period end (December 31, 1999).
On October 29, 1999, the Company acquired all outstanding common stock of
COMETNA-Companhia Metalurgical Nacional, S.A. ("Cometna") located in Lisbon,
Portugal for $8.3 million of the Company's common stock. Cometna manufactures
and machines products for the freight and passenger rail industries in Europe
and is part of the Company's Rail Products segment. The acquisition was
accounted for under the purchase method of accounting.
Capital expenditures during the three months ended March 31, 2000 and 1999 were
$6.5 million and $10.3 million, respectively. Spending during the three months
ended March 31, 2000, is related to precision casting technology equipment at
its Hamilton, Ontario and Cicero, Illinois facilities, completion of the
construction of the Company's new wheel shop in Mexico City and final spending
on the Company's conversion of the Richmond, Texas, facility to a specialty
casting producer. Remaining capital expenditures for Fiscal 2000 are expected
to total approximately $18.0 million.
For the three months ended March 31, 2000 and 1999, net cash provided by
financing activities totaled $31.6 million and $25.4 million, respectively. The
net increase in 2000 was primarily funded through the Company's issuance of its
Series B cumulative convertible preferred stock and in 1999 the increase was
funded through the Company's existing line of credit.
On March 8, 2000, the Company issued 300,000 shares of Series B cumulative
convertible preferred stock ($1 par value) to private equity funds managed by
ING Furman Selz Investments for $30 million. The preferred stock has certain
voting rights and will pay dividends at the rate of 8% per annum accrued
semi-annually and paid in the form of common stock or cash, at the discretion of
the Company. The preferred stock is convertible into common stock at the
average closing price of the Company's common stock for the thirty trading days
ending February 17, 2000, which was $9.00 per share. The preferred stock can be
converted into common shares at the Company's option under certain conditions at
any time three years after issuance. The net proceeds received from the sale of
preferred stock ($28.4 million after offering costs) were applied to reduce the
outstanding indebtedness under the Company's Revolving Credit Facility.
While the conversion price may change under specific conditions, the $9.00 per
share price on the date that the Company and the preferred stock holders were
committed to completing the transaction represented a discount from the market
value of the underlying common stock on that date by an aggregate of $11.9
million. This discount represents the value of the beneficial conversion
feature of the preferred stock. Accordingly, the Company initially recorded the
value of the preferred stock as $18.1 million offset by $1.6 million of
transaction costs, with the $11.9 million credited to additional paid-in
capital. Since the preferred stock is convertible at any time at the holders'
option, this discount also represents an immediate deemed dividend to those
holders at the date of issuance. Accordingly, upon issuance, the Company also
recorded a $11.9 million dividend to these holders. Additionally, the preferred
stock earned actual dividends of $0.2 million during the period March 31, 2000.
Immediately after the consummation of the Merger, the Company entered into a new
revolving credit facility (the "Credit Facility") with a syndicate of financial
institutions, in which Bank of America National Trust & Savings Association
acted as the Agent and Letter of Credit Issuing Lender and Bank of America
Canada acted as the Canadian Revolving Lender. The Credit Facility provides the
Company with a revolving line of credit of up to $200.0 million. The Credit
Facility's covenants include ratio restrictions on total leverage, senior
leverage, interest coverage, minimum net worth restriction and restrictions on
capital expenditures.
The initial net proceeds of the Credit Facility were used to (i) refinance
existing bank debt and certain other indebtedness of the Company, (ii) refinance
substantially all of NACO's outstanding debt, (iii) provide initial financing
for the Company's on-going working capital needs, and (iv) pay fees and expenses
relating to the Merger and the Credit Facility. The early retirement of the
refinanced debt resulted in a $5.2 million extraordinary charge ($3.2 million
after-tax) representing the non-cash write-off of related unamortized deferred
financing costs and prepayment penalties of $4.5 million. The Credit Facility
employs an IBOR-based variable interest rate index and assesses a spread over
the IBOR base which is determined by a Consolidated Leverage pricing grid. The
weighted average interest rate at March 31, 2000 was 9.2%. Availability at
March 31, 2000 was $31.2 million.
On October 12, 1999, the Company entered into an Amendment, Waiver and Release
Agreement to the Credit Agreement to release certain collateral related to its
Mexican subsidiary and to reflect the change in the Company's fiscal year and
reporting periods for covenant measurement purposes. The Company then entered
into two subsequent modifications to the Credit Agreement that were effective as
of October 29, 1999 to modify certain of the financial leverage covenants in the
Credit Agreement which the Company otherwise would not have been in compliance
with as of October 31, 1999.
On March 8, 2000, the Company entered into a Second Amendment and Restatement of
the Credit Agreement that was effective as of December 30, 1999 to modify
certain of the financial covenants in the Credit Agreement, which the Company
otherwise would have not been in compliance with as of December 31, 1999. The
amended covenants included the Maximum Consolidated Leverage Ratio, Maximum
Senior Leverage Ratio and the Minimum Interest Coverage Ratio. In addition, a
minimum pro-forma EDITDA covenant was added to the Credit Agreement. The
Company and its Lenders also modified other terms and conditions within the
Credit Agreement including the pricing grid, which is based upon the Company's
Consolidated Leverage Ratio. The currently applied margin of 300 basis points
over IBOR is the maximum IBOR margin provided for by the Amendment. The
revolving line of credit now has scheduled commitment reductions as follows:
January 1, 2001-$10 million, June 30, 2001-$5.0 million, January 1, 2002-$10.0
million, June 30, 2002-$5.0 million and January 1, 2003-$15.0 million. The
total commitment reductions aggregate to $45.0 million and will reduce the
revolving credit commitment to a total of $155.0 million as of January 1, 2003.
With the Amendment, the Company was in compliance with the Credit Agreement as
of December 31, 1999 and March 31, 2000. Based upon management's forecasts for
the next twelve months, the Company anticipates being in compliance with its
Credit Agreement covenants at each quarterly measurement point during such
period. The Company anticipates being able to operate within the reduced Credit
Agreement commitment levels through use of its free cash flow generated from
operations, the potential disposal of certain non-core operating assets, the
$30.0 million proceeds from the March 8, 2000 convertible preferred stock
investment by private equity funds managed by ING Furman Selz investments and
the realignment of the Company's capitalization components through a universal
shelf registration.
On February 1, 1997, the Company completed an offering (the ''Offering'') of $50
million of 9 1/8% Senior Subordinated Notes (the ''9 1/8% Notes''). The Company
used the $47.9 million of net proceeds of the Offering to repay certain
outstanding indebtedness under its primary and other credit facilities. The 9
1/8% Notes are general unsecured obligations of the Company and are subordinated
in right of payment to all existing and future senior indebtedness of the
Company and other liabilities of the Company's subsidiaries. The 9 1/8% Notes
will mature in 2004, unless repurchased earlier at the option of the Company at
100% of face value. The 9 1/8% Notes are subject to mandatory repurchase or
redemption prior to maturity upon a Change of Control (as defined). The
indenture under which the 9 1/8% Notes were issued limits the Company's ability
to (i) incur additional indebtedness, (ii) complete certain mergers,
consolidations and sales of assets, and (iii) pay dividends or other
distributions. On December 23, 1997, the Company completed a second offering of
$25.0 million of 8 3/4% Senior Subordinated Notes, Series B (the ''8 3/4%
Notes'') due in 2004 with similar provisions as the 9 1/8% Notes.
The Company is required to meet a number of financial covenants on its 9 1/8%
Notes and 8 3/4% Notes including minimum interest coverage, minimum consolidated
net worth and maximum funded debt to capitalization. The interest coverage
ratio at March 31, 2000 was 2.44 with the minimum requirement under the Note
agreements being 2.40. The funded debt to capitalization ratio at March 31,
2000 was 69.5% with the maximum allowable under the Note agreements being 75.0%.
These same leverage covenants need to be met at each quarter-end through the
maturity dates for these notes. Failure to meet these covenant tests would give
the noteholders the unilateral right to accelerate the maturity of the related
debt after a requisite cure period. In addition, cross-default provisions under
the Credit Agreement would be triggered upon a default under the Notes. If the
Company does not have adequate cash or is unable to remain compliant with such
financial covenants, it may be required to further refinance its existing
indebtedness, seek additional financing, or issue common stock or other
securities to raise cash to assist in financing its operations. The Company has
no current commitments or arrangements for such financing alternatives, and
there can be no assurances that such financing alternatives will be available on
acceptable terms, or at all. The Company's inability to make any payments when
due or to satisfy its financial covenants under its existing borrowing
facilities could have a material adverse effect on the Company.
A universal shelf registration was declared effective by the Securities and
Exchange Commission on October 29, 1999, for issuances up to $300 million of
debt or equity securities. As of March 31, 2000, no securities were issued
under the new universal shelf registration.
During the quarter ending January 31, 1999, the Company suspended its previous
plan to construct a plant in central Illinois to process used rail into reusable
heat-treated and head-hardened rail. The project is being re-evaluated in
conjunction with the Merger. The machinery and equipment which has been built
is being stored pending completion of a revised business plan. The total
investment to date for this project is $11.6 million.
REGARDING FORWARD-LOOKING STATEMENTS
- --------------------------------------
The foregoing contains forward-looking statements that are based on current
expectations and are subject to a number of risks and uncertainties. Actual
results could differ materially from current expectations due to a number of
factors, including general economic conditions; competitive factors and pricing
pressures; shifts in market demand; the performance and needs of industries
served by the Company's businesses; actual future costs of operating expenses
such as rail and scrap steel, self-insurance claims and employee wages and
benefits; actual costs of continuing investments in technology; the availability
of capital to finance possible acquisitions and to refinance debt; the ability
of management to implement the Company's long-term business strategy of
acquisitions; and the risks described from time to time in the Company's SEC
reports. Some of the uncertainties that may affect future results are discussed
in more detail in the Company's Annual Report on Form 10-K for the Transition
Period ending December 31, 1999. All forward-looking statements included in
this document are based upon information presently available, and the Company
assumes no obligation to update any forward looking statements.
ITEM 3
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The Company has experienced no material changes in its market risk exposure
since the filing of its Form 10-K report for the Transition Period ended
December 31, 1999.
<PAGE>
Part II OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 4 - Submission of Matters to a Vote of Security-Holders
On April 20, 2000, the Company held the 1999 Annual Meeting of the Shareholders
(for the Transition Period ended December 31, 1999). The following matters
were approved by shareholders:
1.) Election to the Board of Directors for a three-year term one class of
directors, consisting of George W. Peck IV and Richard A. Drexler. The vote
totals were as follows:
For Withheld Abstain
---------- -------- -------
16,669,045 0 386,761
2.) Ratification of the appointment of Arthur Andersen LLP as the Company's
independent public accountants. The votes cast for, votes cast against and
abstentions were as follows:
For Against Abstain
---------- -------- -------
17,036,156 19,650 0
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
3.2 Amended and Restated By-laws
27.1 Financial Data Schedule for period ended March 31, 2000.
(b) Reports on Form 8-K
None
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -------------------------
3.2 Amended and Restated By-laws.
27.1 Financial Data Schedule for period ended March 31, 2000.
<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.
ABC-NACO Inc.
-----------------------------
James P. Singsank
Senior Vice President
and Chief Financial Officer
-------------------------------
Brian L. Greenburg
Vice President and Corporate Controller
(Chief Accounting Officer)
Date: May 10, 2000
--------------------
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
ABC-NACO Inc.
Financial Data Schedule
For Period Ended March 31, 2000
(Unaudited)
(Dollars in Thousands)
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
PERIOD ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
Three Months Ended
and as of
March 31, 2000
---------------------
Fiscal year-end December 31, 2000
Period start January 1, 2000
Period end March 31, 2000
Cash and cash items -
Marketable securities -
Notes and accounts receivable - trade 102,260*
Allowances for doubtful accounts -
Inventory 98,672
Total current assets 222,450
Property, plant, and equipment 365,611
Accumulated depreciation 121,990
Total assets 519,781
Total current liabilities 137,633
Bonds, mortgages, and similar debt 247,116
Preferred stock - mandatory redemption -
Preferred stock - no mandatory redemption 28,425
Common stock 194
Other stockholders' equity 85,481
Total liabilities and stockholders' equity 519,781
Net sales 156,978
Total revenues 156,978
Cost of tangible products 136,135
Total costs and expenses applicable to sales and revenues 136,135
Other costs and expenses 14,887
Provision for doubtful accounts and notes -
Interest and amortization of debt discount 6,417
Income before taxes and other items (461)
Income tax expense 43
Income/loss from continuing operations (504)
Discontinued operations -
Extraordinary items -
Cumulative effect - changes in accounting principles -
Net income or loss (504)
Earnings per share - basic (0.65)
Earnings per share - diluted (0.65)
* Notes and accounts receivable - trade are reported net of allowances for
- --------------------------------------------------------------------------------
doubtful accounts in the Consolidated Balance Sheets.
- -----------------------------------------------------------
</TABLE>
ABC-NACO INC.
AMENDED AND RESTATED BY-LAWS
ARTICLE I
CORPORATE OFFICES
Section 1. Delaware Registered Office. The registered office of the
Corporation in the State of Delaware shall be in the City of Wilmington, County
of New Castle.
Section 2. Other Offices. The Corporation may also have offices at such
other places, both within and outside the State of Delaware, as the Board of
Directors may from time to time determine as the business of the Corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Time and Place of Meetings. All meetings of the stockholders
for the election of directors or for any other purpose shall be held at such
time and place, within or without the State of Delaware, as may be designated by
the Board of Directors, or by the President or the Secretary of the Corporation
in the absence of a designation by the Board of Directors, and stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. An annual meeting of stockholders shall be held
each year after the close of the immediately preceding fiscal year of the
Corporation for the purpose of electing directors and conducting such other
proper business as may come before the meeting. The date, time and place of the
annual meeting of stockholders shall be determined by the President of the
Corporation; provided, that if the President does not act, the Board of
Directors shall determine the date, time and place of such meeting.
Section 3. Special Meetings. A special meeting of the stockholders may be
called at any time by the Board of Directors, the Chairman of the Board, the
Chief Executive Officer or the President. At a special meeting of the
stockholders, only such business shall be conducted as shall be specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors.
Section 4. Notice of Meetings. Written notice of every meeting of the
stockholders, stating the place, date and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called,
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, except
as otherwise provided herein or by law. When a meeting is adjourned to another
place, date or time, written notice need not be given of the adjourned meeting
if the place, date and time thereof are announced at the meeting at which the
adjournment is taken; provided, however, that if the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, written notice of the place, date and time of the
adjourned meeting shall be given in conformity herewith. At any adjourned
meeting, any business may be transacted which might have been transacted at the
original meeting.
Section 5. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by law or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented.
Section 6. Voting. Except as otherwise provided by law or by the
Certificate of Incorporation, each stockholder shall be entitled at every
meeting of the stockholders to one (1) vote for each share of stock having
voting power standing in the name of such stockholder on the books of the
Corporation on the record date for the meeting and such votes may be cast either
in person or by proxy, but no such proxy shall be voted or acted upon after
three (3) years from its date, unless the proxy provides for a longer period.
Without limiting the manner in which a stockholder may authorize another person
or persons to act for such stockholder as proxy pursuant to the foregoing
sentence, a stockholder may validly grant such authority by (a) executing a
writing authorizing another person or persons to act for such stockholder as
proxy, (b) authorizing another person or persons to act for such stockholder as
proxy by transmitting or authorizing the transmission of a telegram, cablegram,
or other means of electronic transmission to the person who will be the holder
of the proxy or to a proxy solicitation firm, proxy support service organization
or like agent duly authorized by the person who will be the holder of the proxy
to receive such transmission, provided that any such telegram, cablegram or
other means of electronic transmission must either set forth or be submitted
with information from which it can be determined that the telegram, cablegram or
other electronic transmission was authorized by the stockholder, or (c) any
other means permitted under the Delaware General Corporation Law.
A stockholder may revoke any proxy which is not irrevocable by attending
the meeting and voting in person or by filing an instrument in writing revoking
the proxy or another duly executed proxy bearing a later date with the Secretary
of the Corporation. The vote upon any question brought before a meeting of the
stockholders may be by voice vote, unless the holders of a majority of the
outstanding shares of all classes of stock entitled to vote thereon present in
person or by proxy at such meeting shall so determine. Every vote taken by
written ballot shall be counted by one or more inspectors of election appointed
by the Board of Directors. When a quorum is present at any meeting, the vote of
the holders of a majority of the stock which has voting power present in person
or represented by proxy shall decide any question properly brought before such
meeting, unless the question is one upon which by express provision of law, the
Certificate of Incorporation or these by-laws, a different vote is required, in
which case such express provision shall govern and control the decision of such
question.
Section 7. Nature of Business at Annual Meeting. No business may be
transacted at an annual meeting of stockholders, other than business that is
either (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before the annual meeting of
stockholders by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (c) otherwise properly brought before the
annual meeting of stockholders by any stockholder of the Corporation (i) who is
a stockholder of record on the date of the giving of the notice provided for in
this Section 7 and on the record date for the determination of stockholders
entitled to vote at such annual meeting of stockholders, and (ii) who complies
with the notice procedures set forth in this Section 7.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting of stockholders by a stockholder, such
stockholder must have given timely notice thereof in proper written form to the
Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary of the Corporation
must be delivered to or mailed and received at the principal executive offices
of the Corporation not less than ninety (90) days nor more than one-hundred
twenty (120) days prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the event that the
annual meeting of stockholders is called for a date that is not within thirty
(30) days before or after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the tenth (10th) day following the day on which such notice of the date of the
annual meeting of stockholders was mailed or such public disclosure of the date
of the annual meeting of stockholders was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary of
the Corporation must set forth as to each matter such stockholder proposes to
bring before the annual meeting of stockholders (i) a brief description of the
business desired to be brought before the annual meeting of stockholders and the
reasons for conducting such business at the annual meeting of stockholders, (ii)
the name and record address of such stockholder, (iii) the class or series and
number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting of stockholders to bring such business
before the meeting.
No business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting of stockholders in accordance with
the procedures set forth in this Section 7; provided, however, that, once
business has been properly brought before the annual meeting of stockholders in
accordance with such procedures, nothing in this Section 7 shall be deemed to
preclude discussion by any stockholder of any such business. If the Chairman of
the Board of an annual meeting of stockholders determines that business was not
properly brought before the annual meeting of stockholders in accordance with
the foregoing procedures, the Chairman of the Board shall declare to the meeting
that the business was not properly brought before the meeting and such business
shall not be transacted.
ARTICLE III
DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall be
managed by or under the direction of its Board of Directors, which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law or by the Certificate of Incorporation directed or required to be
exercised or done by the stockholders.
Section 2. Number and Term of Office. The Board of Directors shall consist
of one or more members. The number of directors shall be fixed by resolution of
the Board of Directors or by the stockholders at the annual meeting of
stockholders or a special meeting of stockholders, and in the absence of a
resolution shall be eight (8). If and when the Corporation's Board is a
Classified Board, the Board of Directors shall be divided into three (3) classes
as nearly equal in number of members as possible. Any decrease in the authorized
number of directors shall not be effective until the expiration of the term of
the directors then in office, unless, at the time of such decrease, there shall
be vacancies on the Board which are being eliminated by such decrease.
Section 3. Vacancies and New Directorships. Vacancies and newly created
directorships resulting from any increase in the authorized number of directors
which occur between annual meetings of stockholders may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so elected shall hold office until the
next election of the class for which such directors shall have been chosen and
until their successors are elected and qualified, except as required by law.
Section 4. Regular Meetings. Regular meetings of the Board of Directors
may be held without notice immediately after the annual meeting of stockholders
and at such other time and place as shall from time to time be determined by the
Board of Directors.
Section5. Special Meetings. Special meetings of the Board of Directors may
be called by the President on one (1) day's written notice to each director by
whom such notice is not waived, given either personally or by mail, telecopy or
telegram, and shall be called by the President or the Secretary of the
Corporation in like manner and on like notice on the written request of any two
(2) directors.
Section 6. Quorum. At all meetings of the Board of Directors, a majority
of the total number of directors then in office shall constitute a quorum for
the transaction of business, and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time to another place, time or date, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 7. Written Action. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes or proceedings of the Board or Committee.
Section 8. Participation in Meetings by Conference Telephone. Members of
the Board of Directors, or any committee designated by the Board of Directors,
may participate in a meeting of the Board of Directors, or any such committee,
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
Section 9. Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation and each to have
such lawfully delegable powers and duties as the Board may confer. Each such
committee shall serve at the pleasure of the Board of Directors. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
Except as otherwise provided by law, any such committee, to the extent provided
in the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and may authorize the seal of the Corporation to
be affixed to all papers which may require it. Any committee or committees so
designated by the Board shall have such name or names as may be determined from
time to time by resolution adopted by the Board of Directors. Unless otherwise
prescribed by the Board of Directors, a majority of the members of the committee
shall constitute a quorum for the transaction of business, and the act of a
majority of the members present at a meeting at which there is a quorum shall be
the act of such committee. Each committee shall prescribe its own rules for
calling and holding meetings and its method of procedure, subject to any rules
prescribed by the Board of Directors, and shall keep a written record of all
actions taken by it.
Section 10. Compensation. The Board of Directors may establish such
compensation for, and reimbursement of the expenses of, directors for attendance
at meetings of the Board of Directors or committees, or for other services by
directors to the Corporation, as the Board of Directors may determine.
Section 11. Rules. The Board of Directors may adopt such special rules and
regulations for the conduct of their meetings and the management of the affairs
of the Corporation as they may deem proper, not inconsistent with law or these
by-laws.
Section 12. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the Corporation, except as may be otherwise provided in the
Certificate of Incorporation with respect to the right of holders of preferred
stock of the Corporation to nominate and elect a specified number of directors
in certain circumstances. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of stockholders (a) by or at the
direction of the Board of Directors (or any duly authorized committee thereof),
or (b) by any stockholder of the Corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this Section 12 and on
the record date for the determination of stockholders entitled to vote at such
meeting, and (ii) who complies with the notice procedures set forth in this
Section 12.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary of the Corporation
must be delivered to or mailed and received at the principal executive offices
of the Corporation not less than ninety (90) days nor more than one-hundred
twenty (120) days prior to the anniversary date of the immediately preceding
annual meeting of stockholders; provided, however, that in the event that the
annual meeting of stockholders is called for a date that is not within thirty
(30) days before or after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the tenth (10th) day following the day on which such notice of the date of the
annual meeting of stockholders was mailed or such public disclosure of the date
of the annual meeting of stockholders was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary of
the Corporation must set forth: (a) as to each person whom the stockholder
proposes to nominate for election as a director (i) the name, age, business
address and residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of shares of
capital stock of the Corporation which are owned beneficially or of record by
the person, and (iv) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated thereunder; and (b)
as to the stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Corporation which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons (including
their names) pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to appear in
person or by proxy at the meeting to nominate the persons named in its notice,
and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section 12.
If the Chairman of the Board of the meeting determines that a nomination was not
made in accordance with the foregoing procedure, the Chairman of the Board shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.
ARTICLE IV
NOTICES
Section 1. Generally. Whenever by law or under the provisions of the
Certificate of Incorporation or these by-laws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice,
but such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telecopy, telegram or telephone, except as
otherwise provided by these by-laws.
Section 2. Waivers. Whenever any notice is required to be given by law or
under the provisions of the Certificate of Incorporation or these by-laws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time of the event for which notice is to be
given, shall be deemed equivalent to such notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. Generally. The officers of the Corporation shall be elected by
the Board of Directors and shall consist of a Chairman, a Chief Executive
Officer, a President, a Secretary and a Treasurer. The Chairman shall be a
member of the Board of Directors. The Board of Directors may also choose any or
all of the following: one or more Vice Presidents, a Controller, and one or more
Assistant Secretaries and Assistant Treasurers. Any number of offices may be
held by the same person.
Section 2. Compensation. The compensation of all officers and agents of
the Corporation who are also directors of the Corporation shall be fixed by the
Board of Directors. The Board of Directors may delegate the power to fix the
compensation of other officers and agents of the Corporation to an officer of
the Corporation.
Section 3. Succession. The officers of the Corporation shall hold office
until their successors are elected and qualified. Any officer elected or
appointed by the Board of Directors may be removed at any time by the
affirmative vote of a majority of the directors. Any vacancy occurring in any
office of the Corporation may be filled by the Board of Directors.
Section 4. Authority and Duties. Each of the officers of the Corporation
shall have such authority and shall perform such duties as are customarily
incident to their respective offices, or as may be specified from time to time
by the Board of Directors in a resolution which is not inconsistent with these
by-laws.
Section 5. Chairman. The Chairman of the Board shall have such powers as
are vested in him or her by the Board of Directors, by law or these by-laws. The
Chairman shall preside at the meetings of the stockholders and of the Board of
Directors.
Section 6. Chief Executive Officer. The Chief Executive Officer of the
Corporation shall have, subject to the supervision and direction of the Board of
Directors, general supervision of the business, property and affairs of the
Corporation and the powers vested in him or her by the Board of Directors or by
these by-laws or which usually attach or pertain to such office. Except in those
instances in which the authority to execute is expressly delegated to another
officer or agent of the Corporation or a different mode of execution is
expressly prescribed by the Board of Directors, the Chief Executive Officer may
execute for the Corporation any contracts, deeds, mortgages, bonds or other
instruments which the Board of Directors has authorized, and the Chief Executive
Officer may (without previous authorization by the Board of Directors) execute
such contracts and other instruments as the conduct of the Corporation's
business in its ordinary course requires. Notwithstanding the above Sections 5
and 6, the Board of Directors may designate one person to be both the Chairman
and the Chief Executive Officer of the Corporation.
Section 7. President. The President (a) shall be the Chief Operating
Officer of the Corporation, reporting to the Chairman, and (b) in the absence or
disability of the Chairman, shall perform the duties of the Chairman and when so
acting shall have all the powers of and be subject to all the restrictions upon
the Chairman.
Section 8. Vice-President. In the absence of the President or in the event
of the disability of the President, the Vice-President (or if there be more than
one, the Vice-Presidents then in the order of their most recent election) shall
perform the duties of the President and when so acting shall have all the powers
of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 9. Secretary and Assistant Secretaries. The Secretary of the
Corporation shall attend all meetings of the stockholders and all meetings of
the Board of Directors and record all proceedings of the meetings of the
stockholders and of the Board of Directors and shall perform like duties for the
standing committees when requested by the Board of Directors or the President.
The Secretary of the Corporation shall give, or cause to be given, notice of all
meetings of the stockholders and meetings of the Board of Directors. The
Secretary of the Corporation shall perform such duties as may be prescribed by
the Board of Directors or the President. The Secretary of the Corporation shall
have charge of the seal of the Corporation and authority to affix the seal to
any instrument. The Secretary of the Corporation or any Assistant Secretary of
the Corporation may attest to the corporate seal by handwritten or facsimile
signature. The Secretary of the Corporation shall keep and account for all
books, documents, papers and records of the Corporation except those for which
some other officer or agent has been designated or is otherwise properly
accountable. The Secretary of the Corporation shall have authority to sign stock
certificates.
(a) Assistant Secretaries, in the order of their seniority, shall
assist the Secretary of the Corporation and, if the Secretary of the Corporation
is unavailable or fails to act, perform the duties and exercise the authorities
of the Secretary of the Corporation.
Section 10. Treasurer and Assistant Treasurers.
(a) The Treasurer shall have the custody of the funds and securities
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Treasurer with the prior approval of the Board of
Directors or the President. The Treasurer shall disburse the funds and pledge
the credit of the Corporation as may be directed by the Board of Directors and
shall render to the Board of Directors and the President, as and when required
by them, or any of them, an account of all transactions by the Treasurer.
(b) Assistant Treasurers, in the order of their seniority, shall assist
the Treasurer and, if the Treasurer is unable or fails to act, perform the
duties and exercise the powers of the Treasurer.
Section 11. Controller. The Controller shall be the chief accounting
officer of the Corporation. The Controller shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Corporation in
accordance with accepted accounting methods and procedures. The Controller shall
initiate periodic audits of the accounting records, methods and systems of the
Corporation. The Controller shall render to the Board of Directors and the
President, as and when required by them, or any of them, a statement of the
financial condition of the Corporation.
ARTICLE VI
STOCK
Section 1. Certificates. Certificates representing shares of stock of the
Corporation shall be in such form as shall be determined by the Board of
Directors, subject to applicable legal requirements. Such certificates shall be
numbered and their issuance recorded in the books of the Corporation, and such
certificate shall exhibit the holder's name and the number of shares and shall
be signed by, or in the name of the Corporation by the Chairman, the Chief
Executive Officer, the President or a Vice-President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation. Any or all of the signatures and the seal of the Corporation, if
any, upon such certificates may be facsimiles, engraved or printed.
Section 2. Transfer. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue, or to cause its
transfer agent to issue, a new certificate to the person entitled thereto,
cancel the old certificate and record the transaction upon its books.
Section 3. Lost, Stolen or Destroyed Certificates. The Secretary of the
Corporation may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Corporation alleged
to have been lost, stolen or destroyed upon the making of an affidavit of that
fact, satisfactory to the Secretary of the Corporation, by the person claiming
the certificate of stock to be lost stolen or destroyed. As a condition
precedent to the issuance of a new certificate or certificates the Secretary of
the Corporation may require the owner of such lost, stolen or destroyed
certificate or certificates to give the Corporation a bond in such sum and with
such surety or sureties as the Secretary of the Corporation may direct as
indemnity against any claims that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed or the
issuance of the new certificate.
Section 4. Record Date.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting. If
no record is fixed by the Board of Directors, 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 day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. If no record date has been fixed by the Board of Directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors is
required, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the Corporation
by delivery to its registered office in Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to
a Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Fiscal Year. The fiscal year of the Corporation shall be fixed
from time to time by the Board of Directors.
Section 2. Corporate Seal. The Board of Directors may adopt a corporate
seal and use the same by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 3. Reliance upon Books, Reports and Records. Each director, each
member of a committee designated by the Board of Directors, and each officer of
the Corporation shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the records of the Corporation and upon
such information, opinions, reports or statements presented to the Corporation
by any of the Corporation's officers or employees, or committees of the Board of
Directors, or by any other person as to matters the director, committee member
or officer believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Corporation.
Section 4. Time Periods. In applying any provision of these by-laws which
requires that an act be done or not be done a specified number of days prior to
an event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the doing of the act
shall be excluded and the day of the event shall be included.
Section 5. Dividends. The Board of Directors may from time to time declare
and the Corporation may pay dividends upon its outstanding shares of capital
stock, in the manner and upon the terms and conditions provided by law and the
Certificate of Incorporation.
Section 6. Indemnification. Each person who is or was or had agreed to
become a director or officer of the Corporation, or each such person who is or
was serving or who had agreed to serve at the request of the Board of Directors
or an officer of the Corporation as an employee or agent of the Corporation or
as a director, officer, employee or agent of another corporation, general or
limited partnership, joint venture, trust or other enterprise (including the
heirs, executors, administrators or estate of such person), shall be indemnified
by the Corporation to the full extent permitted by the Delaware General
Corporation Law or any other applicable laws as presently or hereafter in
effect. Without limiting the generality or the effect of the foregoing, the
Corporation may enter into one or more agreements with any person which provide
for indemnification greater or different than that provided in this Section 6.
Any repeal or modification of this Section 6 shall not adversely affect any
right or protection existing hereunder immediately prior to such repeal or
modification.
ARTICLE VIII
AMENDMENTS
Section 1. Amendments. These by-laws may be altered, amended or repealed,
or new by-laws may be adopted, by the stockholders or by the Board of Directors.
