-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ir1MffB3dVB+5THqx2LG22WYMYB7b5mHBh8s9HObxHA00LmzpbDwk2MDitebo6h1 uUiDvvW95LY8+7wLvlwwIQ== 0000040934-99-000005.txt : 19990914 0000040934-99-000005.hdr.sgml : 19990914 ACCESSION NUMBER: 0000040934-99-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENESEE CORP CENTRAL INDEX KEY: 0000040934 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 160445920 STATE OF INCORPORATION: NY FISCAL YEAR END: 0503 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-01653 FILM NUMBER: 99710539 BUSINESS ADDRESS: STREET 1: 445 ST PAUL ST CITY: ROCHESTER STATE: NY ZIP: 14605 BUSINESS PHONE: 7162639440 MAIL ADDRESS: STREET 1: 445 ST PAUL STREET CITY: ROCHESTER STATE: NY ZIP: 14605 FORMER COMPANY: FORMER CONFORMED NAME: GENESEE BREWING CO INC DATE OF NAME CHANGE: 19880322 10-Q 1 FORM 10-Q FOR PERIOD ENDING 7/31/99 1 Index to Exhibits at Page 21 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 0 - 1653 GENESEE CORPORATION (Exact name of registrant as specified in its charter) STATE OF NEW YORK 16-0445920 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 445 St. Paul Street, Rochester, New York 14605 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (716) 546-1030 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 As of the date of this report, the Registrant had the following shares of common stock outstanding: Number of Shares Class Outstanding Class A Common Stock (voting), 209,885 par value $.50 per share Class B Common Stock (non-voting), 1,410,312 par value $.50 per share 2 GENESEE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS July 31, 1999 and May 1, 1999 UNAUDITED AUDITED (Dollars in Thousands) July 31, 1999 May 1, 1999 ASSETS Current assets: Cash and cash equivalents $ 3,550 $ 5,836 Marketable securities available for sale 7,905 7,964 Trade accounts receivable, less allowance for doubtful receivables of $492 at July 31, 1999 and $478 at May 1, 1999 11,128 10,222 Inventories, at lower of cost (first-in, first-out) or market 16,657 16,414 Deferred income tax assets 397 397 Other current assets 784 751 --------- -------- Total current assets 40,421 41,584 Net property, plant and equipment 37,678 37,040 Investment in and notes receivable from unconsolidated real estate partnerships 5,351 5,343 Investments in direct financing and leveraged leases 28,121 28,285 Goodwill and other intangibles net of accumulated amortization of $2,085 at 27,972 28,280 July 31, 1999 and $1,747 at May 1, 1999 Other assets 3,430 3,421 ========= ======== Total assets 142,973 143,953 ========= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Line of credit 3,000 3,000 Notes payable, current portion 82 82 Accounts payable 7,119 8,421 Income taxes payable 1,211 1,215 Federal and state beer taxes payable 1,520 1,354 Accrued compensation 2,625 3,505 Accrued postretirement benefits, current portion 731 731 Accrued expenses and other 4,897 5,374 --------- -------- Total current liabilities 21,185 23,682 Notes payable, noncurrent portion 6,205 4,679 Deferred income tax liabilities 8,176 8,251 Accrued postretirement benefits, noncurrent portion 15,332 15,332 Other liabilities 591 493 --------- -------- Total liabilities 51,489 52,437 Minority interests in consolidated subsidiaries 2,582 2,479 Shareholders' equity: Class A common stock 105 105 Class B common stock 753 753 Additional paid-in capital 5,847 5,856 Retained earnings 85,651 85,692 Accumulated other comprehensive (loss)/income (53) 77 Less: Class B treasury stock, at cost 3,401 3,446 --------- -------- --------- -------- Total shareholders' equity 88,902 89,037 --------- -------- Total liabilities and shareholders' equity $ 142,973 $ 143,953 ========= ========
See accompanying notes to consolidated financial statements. 3 GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME Thirteen Weeks Ended July 31, 1999 and August 1, 1998 (Dollars in Thousands, Except Per Share Data) UNAUDITED 1999 1998 Revenues $ 46,935 $ 48,595 Federal and state beer taxes 7,833 9,204 ----------- ----------- Net revenues 39,102 39,391 Cost of goods sold 29,725 29,709 ----------- ----------- Gross profit 9,377 9,682 Selling, general and administrative expenses 8,381 9,088 ----------- ----------- Operating income 996 594 Investment income 272 1,199 Other income 83 166 Interest expense (142) - Interest of minority partners in earnings of subsidiaries (235) (197) ----------- ----------- Earnings before income taxes 974 1,762 Income taxes 448 630 ----------- ----------- Net earnings 526 1,132 Other comprehensive income, net of income taxes: Unrealized holding losses arising during the period (130) (562) ----------- ----------- Comprehensive income 396 570 =========== =========== Basic and Diluted earnings per share 0.32 0.70 Weighted average common shares outstanding 1,619,461 1,618,444 Weighted average and common equivalent shares 1,619,461 1,619,350 See accompanying notes to consolidated financial statements. Weighted average shares outstanding for the quarter 1,619,461 1,618,444 Net earnings per weighted average shares $ 0.325 $ 0.699
4 GENESEE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Thirteen Weeks Ended July 31, 1999 and August 1, 1998 UNAUDITED (Dollars in thousands) 1999 1998 Cash flows from operating activities: Net earnings $ 526 $ 1,132 Adjustments to reconcile net earnings to net cash (used in)/provided by operating activities: Depreciation and amortization 1,660 1,590 Other 394 251 Changes in non-cash assets and liabilities: Trade accounts receivable (920) (1,461) Inventories (243) (663) Other assets (42) (417) Accounts payable (1,302) (556) Accrued expenses and other (1,357) 411 Income taxes payable (4) 456 Federal and state beer taxes 166 (31) Other liabilities 98 (59) ------------------------------------------------------------------------------ Net cash (used in)/provided by operating activities (1,024) 653 ------------------------------------------------------------------------------ Cash flows from investing activities: Capital expenditures (2,097) (1,006) Proceeds from sale of marketable securities 1,313 9,304 Purchases of marketable securities and other investments (1,461) (447) Investments in and advances to unconsolidated real estate investments, net of distributions (8) 40 Net investment in direct financing and leveraged leases 164 522 Withdrawals by minority interest (132) (214) ------------------------------------------------------------------------------ Net cash (used in)/provided by investing activities (2,221) 8,199 ------------------------------------------------------------------------------ Cash flows from financing activities: Proceeds from acquisition of debt 1,546 - Principal payments on debt (20) - Payment of dividends (567) (567) ------------------------------------------------------------------------------ Net cash provided by/(used in) financing activities 959 (567) ------------------------------------------------------------------------------ Net (decrease)/increase in cash and cash equivalents (2,286) 8,285 Cash and cash equivalents at beginning of the period 5,836 2,692 ==================================================================================== Cash and cash equivalents at end of the period $ 3,550 $ 10,977 ====================================================================================
5 GENESEE CORPORATION Notes to Consolidated Financial Statements NOTE (A) The Corporation's consolidated financial statements enclosed herein are unaudited with the exception of the Consolidated Balance Sheet at May 1, 1999 and, because of the seasonal nature of the business and the varying schedule of its special sales efforts, these results are not necessarily indicative of the results to be expected for the entire year. In the opinion of management, the interim financial statements reflect all adjustments, consisting of only normal recurring items, which are necessary for a fair presentation of the results for the periods presented. The accompanying financial statements have been prepared in accordance with GAAP and SEC guidelines applicable to interim financial information. These statements should be reviewed in conjunction with the annual report to shareholders for the year ended May 1, 1999. NOTE (B) Inventories are summarized as follows: Dollars in thousands July 31, 1999 May 1, 1999 Finished goods $ 5,841 $ 6,292 Goods in process 1,678 1,445 Raw materials, containers and packaging supplies 9,138 8,677 Total inventories $ 16,657 $ 16,414
NOTE (C) The Corporation's consolidated balance sheet includes a mortgage payable with a remaining principal amount due of $4.7 million, collateralized by certain land, buildings and equipment. The mortgage payable bears interest at a fixed rate of 6.49% per annum and requires payments of principal and interest through 2008. The maturities of the mortgage payable for each fiscal year through the year ending May 1, 2004 are, respectively, $82,000, $88,000, $93,000, $100,000 and $106,000. In addition, the Corporation has a $10 million line of credit, which bears interest at LIBOR plus 70 basis points for an effective rate of 5.95% in effect through September 27, 1999. This line of credit expires in April 2000. At July 31, 1999, $7 million was available for use under this instrument. In addition, the Corporation has a $1.7 million term note payable, which bears interest at LIBOR plus 100 basis points for an effective rate of 6.25%. Maturity of this note is eight years from draw down of funds. At July 31, 1999, $154,000 was available for use under this instrument. 6 GENESEE CORPORATION Notes to Consolidated Financial Statements NOTE (D) On August 31, 1999 the Corporation announced employment reductions at its Genesee Brewing Company subsidiary. Approximately fifty positions from its total workforce of 520 employees will be eliminated. These reductions, plus twenty-seven positions already eliminated through attrition since the beginning of fiscal 2000, are expected to reduce payroll expense by approximately $5 million annually. The Corporation expects to record a restructuring charge of approximately $1.7 million in its second fiscal quarter ending October 30, 1999 to cover estimated expenses associated with the workforce reduction. NOTE (E) Segment Reporting The Corporation has four reportable segments: brewing, food processing, leasing and real estate, and corporate. The brewing segment produces beers and ales for wholesale and retail distribution throughout the United States, primarily in the northeast region of the country. The food processing segment produces dry side dish, bouillon, soup, drink mix and instant iced tea products under private label for many of the country's largest supermarket chains. The leasing and real estate segment leases construction, transportation, and other high-value equipment and machinery, and partners with experienced real estate developers to invest in certain properties. The corporate segment retains the Corporation's investments in marketable securities generating investment income as well as supporting corporate costs. The Corporation evaluates performance based on operating income or loss and earnings before income taxes. Intersegment sales and transfers are not material and are eliminated in consolidation. No single customer accounted for more than 10% of revenues and the Corporation's international revenues are not significant. The Corporation's reportable segments, other than corporate, are strategic business units that offer different products and services. They are managed separately because each business requires different technology and marketing strategies. 7 GENESEE CORPORATION Notes to Consolidated Financial Statements NOTE (E) Segment Reporting (continued) Financial information for the Corporation's reportable segments is as follows: ---------------------------------------------------------------------------------------------------------------------------- Leasing Food And For the thirteen Brewing Processing Real Estate Corporate Eliminations Consolidated week period Ended July 31, 1999 ---------------------------------------------------------------------------------------------------------------------------- Net revenues from external customers $ 28,420 $ 9,918 $ 764 $ - $ - $ 39,102 Depreciation and amortization 961 699 - - - 1,660 Operating income/(loss) 746 (325) 751 (176) - 996 Investment income 35 - 76 577 (416) 272 Earnings/(loss) before income taxes 800 (783) 778 974 (795) 974 Identifiable assets 50,198 55,139 36,022 1,614 - 142,973 Capital expenditures 36 2,061 - - - 2,097 --------------------------------------------------------------------------------------------------------------------------- For the thirteen week period Ended August 1, 1998 --------------------------------------------------------------------------------------------------------------------------- Net revenues from external customers $ 32,382 $ 6,207 $ 802 $ - $ - $ 39,391 Depreciation and amortization 1,305 285 - - - 1,590 Operating income/(loss) 473 (265) 787 (401) - 594 Investment income 23 - 83 1,578 (485) 1,199 Earnings/(loss) before income taxes 620 (328) 503 1,762 (795) 1,762 Identifiable assets 56,249 24,998 43,331 10,928 - 135,506 Capital expenditures 913 93 - - - 1,006 -------------------------------------------------------------------------------------------------------------------------- (Dollars in thousands)
NOTE (F) Supplemental Cash Flow Information Cash paid for taxes was $451,000 and $174,000 for the thirteen week period ended July 31, 1999 and August 31, 1998, respectively; cash paid for interest was $142,000 and $0 for the thirteen week period ended July 31, 1999 and August 1, 1998, respectively. 8 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Comparison of 13 weeks ended July 31, 1999 to 13 weeks ended August 1, 1998 Consolidated net revenues for the thirteen weeks ended July 31, 1999 were $39.1 million, a decrease of $289,000 from consolidated net revenues reported for the same period last year. The lower revenues were due to lower sales volume at Genesee Brewing Company, which were partially offset by increased sales by the Corporation's Foods Division. On a consolidated basis, the Corporation reported an operating profit of $996,000, which was a $402,000 improvement from the same period last year. The improvement in operating performance was primarily due to reduced selling, general and administrative expenses at Genesee Brewing Company. Earnings before income taxes were $974,000, which was $788,000 less than the same period last year. The lower earnings were the result of $883,000 of capital gains that were recorded in the first quarter of fiscal 1999 when the corporation sold marketable securities in order to finance the acquisitions of TKI Foods, Inc. and Spectrum Foods, Inc. On a consolidated basis, the Corporation reported net earnings of $526,000, or $.32 basic and diluted earnings per share, in the first quarter this year, compared to a net earnings of $1.1 million, or $.70 basic and diluted earnings per share, for the same period last year. Genesee Brewing Company Genesee Brewing Company's net sales in the first quarter were $28.4 million, a decrease of $4.0 million from last year's first quarter net sales of $32.4 million. Barrel sales for the first quarter this year were down 8.8% from the prior year period due to an 8.9% decrease in Genesee Brewing Company's core brands and a 25.5% decrease in the HighFalls brands. The decline in core and HighFalls brand volume was partially offset by a 33.1% increase in volume under the production contract with Boston Beer Company. Within the Genesee core brands, higher-margin returnable glass packages, draft packages and 24-can packages showed the largest volume declines. These declines were partially offset by higher unit sales of lower margin, value-priced 30 and 36 can "Multipaks". The decline in HighFalls volume, which represents 21% of total barrel volume, was primarily the result of decreased Honey Brown Lager sales. The Company believes that the decline in Honey Brown Lager sales is the result of the overall slowdown of the specialty category, due in part to the growing popularity of imported beers, and the volatility of specialty brand loyalty. Specialty brand consumers have shown a tendency to switch brand loyalty more readily. Genesee Brewing Company recently extended its High Falls specialty brand line with the introduction in July 1999 of Dundee's Classic Lager. The increase in contract brewing volume in the first quarter was due to the production of a new package configuration for Boston Beer Company that commenced in December 1998. 9 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Genesee Brewing Company's gross profit decreased $791,000 to $7.6 million in the first quarter of fiscal 2000, compared to $8.4 million in the first quarter of fiscal 1999. The negative volume trends for both the Genesee core brands and the HighFalls specialty brands, the shift in product mix towards lower margin Multipak can packages and the shift in mix towards lower margin contract business contributed to the decline in gross profit in the first quarter this year. Selling, general and administrative expenses were down $1.1 million in the first quarter of fiscal 2000 compared to the same period last year. This decrease is primarily the result of planned reductions in sales and promotional budgets. Genesee Brewing Company's first quarter operating profit was $746,000, a $273,000 increase over the first quarter of the prior year. This improvement was primarily due to lower selling, general and administrative spending this fiscal year versus last. The beer industry in the United States continues to be highly competitive. The industry is dominated by Anheuser Busch, Inc., Miller Brewing Company and Coors Brewing Company, which together account for more than 80% of domestic production. In comparison, malt beverages produced by Genesee Brewing Company represent less than 1% of annual domestic production. In recent years, per capita consumption of malt beverages in the United States has declined and total consumption has grown very little. However, consumption of domestically produced malt beverages has remained basically flat during this period, with the increase in overall consumption coming largely from the increasing popularity of imported malt beverages. During the past ten years, demand for many established domestic brands has declined as consumers have increasingly turned to certain nationally advertised light beer brands, imported malt beverages and domestic specialty beers. However, growth of the domestic specialty beer segment of the industry began to slow down in 1997 and the segment has seen little or no growth during the past eighteen months. As a result of these trends and the excess capacity that exists in the industry, brewers are attempting to gain market share through reduced pricing, intensive marketing and promotional programs and innovative packaging. The industry has seen increased levels of price discounting and price promotions and a growth in popularity of value priced 30 and 36 can Multipaks. This intensely competitive environment has prevented Genesee Brewing Company from implementing any meaningful price increases during the past several years, which has had an adverse impact on Genesee Brewing Company's overall profitability. 10 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The competitive position of smaller brewers like Genesee Brewing Company has also been adversely affected by the consolidation that is occurring within the distribution tier of the brewing industry. The effects of this consolidation have been aggravated by the aggressive efforts of the large national brewers to ensure that an increasing share of the distributor's time and attention is devoted to their brands. During the past several years, the large national brewers have utilized a variety of inducements, incentives and contractual terms to cause their distributors to make a greater commitment to their brands, largely at the expense of the brands of smaller brewers, like Genesee, that are also sold by these distributors. These developments have made it increasingly difficult for Genesee Brewing Company to effectively promote and sell its brands in its core markets and to expand sales of its products in new or lower share markets. The competitive conditions in the brewing industry that are impacting the performance of Genesee Brewing Company are not expected to abate materially in the near term. In response to these conditions, Genesee Brewing Company reduced its Fiscal 2000 sales and marketing budgets and on August 31, 1999 announced a work force reduction of fifty positions which, coupled with the twenty-seven positions already eliminated through attrition during fiscal 2000, is expected to reduce annual payroll expense by approximately $5.0 million. In addition, Genesee Brewing Company has postponed plans to expand distribution into additional states and is proceeding more slowly with plans to add new brands to its product line. Genesee Brewing Company is focusing its resources on stabilizing sales and improving trends for its current brand portfolio in existing markets. The challenges facing Genesee Brewing Company have caused the Corporation to consider strategic alternatives to maximize the value of the Corporation's brewing business. Management is exploring further opportunities to reduce costs, improve efficiencies and rationalize the Corporation's brewing business. Genesee Brewing Company is also seeking to attract additional contract brewing volume. The Corporation is also exploring long-term strategic alternatives for its brewing business, including the possible divestiture of the business, acknowledging that the brewing industry has undergone fundamental change during the past ten years and is now dominated by large, global players whose resources dwarf those of regional brewers like Genesee Brewing Company. Foods Division Net sales for the Foods Division were $9.9 million in the first quarter of fiscal 2000, compared to $6.2 million for the first quarter last year. The increase in net sales was primarily attributable to $4.2 million in first quarter sales of artificial sweeteners and other private label food products of TKI Foods, Inc. and Spectrum Foods, Inc., which were acquired by the Corporation during the second quarter of fiscal 1999. 11 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Partially offsetting the increase in net sales was lower than expected sales of iced tea mix and side dishes. Although summer is typically a slow time of the year for side dishes, sales continue to be adversely affected by heavy promotional activity by the major branded side dish producer. This promotional pricing has reduced the price spread between the branded side dish line and the Foods Division's private label side dishes, making the private label product less attractive to consumers. In addition, another major branded food producer recently introduced a new line of side dish products that will compete with both the existing brand leader and the Foods Division's private label side dish line. This new side dish brand is being introduced with heavy promotional support and is expected to increase the competitive pressure on the Foods Division's private label business. Revenues and profit margins from iced tea mix sales declined, largely as a result of previously reported efforts by a large Canadian sugar refiner to displace the Foods Division's private label iced tea mix in key chain accounts. Although the Foods Division has not lost any key accounts, it had to reduce iced tea pricing to retain them. In addition, the overall decline of this mature category resulted in lower unit sales in the first quarter. The challenges facing the Foods Division's iced tea and side dish business are normal competitive pressures that affect products in the mature stage of their life cycle. The addition of bouillon and artificial sweeteners to the Foods Division's product line has helped to offset lower iced tea mix and side dish sales. However, the Foods Division's sweetener business faces a potential competitive threat from the decision by the major producer of branded artificial sweeteners to introduce a line of private label artificial sweeteners, targeting many of the Foods Division's key chain accounts. The Foods Division reduced its sweetener prices to counter this potential threat, which is expected to reduce revenues and profit margins from the sweetener business. It is not clear what long term impact this new private label sweetener line will have on the Foods Division's sweetener business because the producer recently announced that it is seeking buyers for its sweetener business, which could interfere with efforts to displace the Foods Division from key accounts. Gross profit for the Foods Division increased $526,000 to $1.0 million in the first quarter of fiscal 2000, compared to $491,000 for the first quarter last year. The increase in gross profit was attributable to the acquisition of TKI Foods and Spectrum Foods. Partially offsetting the increase in gross profit from TKI Foods and Spectrum Foods was $250,000 of expenses incurred by the Foods Division in transitioning production to the Medina, New York facility that the Foods Division acquired in October 1998. The consolidation of all operations at a single location, which is scheduled to be completed during fiscal 2000, is expected to generate significant cost savings for the Foods Division going forward. Selling, general and administrative expenses increased $586,000 in the first quarter of fiscal 2000 compared to the same period last year. This increase is primarily the result of additional costs incurred in connection with to the acquisition of TKI Foods and Spectrum Foods. The Foods Division recorded an operating loss of $325,000 in the first quarter of fiscal 2000, which was $60,000 more than the operating loss reported in the first quarter last year. 12 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Genesee Ventures Genesee Ventures, Inc., the Corporation's equipment leasing and real estate investment subsidiary, reported operating income of $751,000 for the first quarter of fiscal 2000, compared to $787,000 for the first quarter of fiscal 1999. The lower operating income was primarily due to a decrease in equipment lease revenue. In August 1999, the Corporation approved a plan to wind down its equipment leasing business in light of changes in many of the factors that influenced the Corporation's decision to invest in equipment leasing, including changes in the Corporation's capital requirements, changes in the competitive conditions in the equipment leasing business, a reduction in the tax advantages generated by Cheyenne Leasing Company as a result of lower operating income from the Corporation's brewing business, and a decision by the Corporation's co-venturer in Cheyenne Leasing Company to phase out its involvement in the equipment leasing business. Under the wind down plan, Cheyenne Leasing Company will not fund any new leases after December 31, 1999 and will then manage its existing lease portfolio to maximize lease revenues and residual income. Based on current projections, Cheyenne Leasing Company's operating income is expected to remain fairly steady in the current fiscal year, but will then decline as the remaining leases in Cheyenne's portfolio mature. Genesee Ventures, Inc. earnings before taxes increased $275,000 to $778,000 as compared to $503,000 for the same period last year. The increase in earnings was primarily due to $195,000 held in escrow that was earned and received in the first quarter of fiscal 2000 associated with the sale in the third quarter of fiscal 1999 of Genesee Ventures' investment in Lloyd's Food Products, Inc. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents totaled $3.6 million at July 31, 1999 and $5.8 million at May 1, 1999. The decline in cash and cash equivalents was primarily the result of a $1.3 million decrease in accounts payable and a $880,000 decrease in accrued compensation. The decrease in accounts payable was due to timing of payments and the decrease in accrued compensation was due to severance payments made to employees at the Foods Division's Springfield, Illinois facility. Trade accounts receivable balances were $906,000 higher than the balances reported at May 1, 1999. The increase in accounts receivable is a result of the seasonality of the brewing business with increased customer transactions occurring during the summer months. Net property, plant and equipment balances were $638,000 higher at July 31, 1999 than May 1, 1999. The increase in net property, plant and equipment is primarily related to the significant capital 13 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) expenditures made by the Foods Division for improvements at its Medina, New York facility. These significant capital expenditures are offset by a decrease in net property, plant and equipment of the Genesee Brewing Company. Current liabilities were $2.5 million lower at July 31, 1999 compared to May 1, 1999. This decrease is made up of $1.3 million less in accounts payable due to timing and $880,000 less in accrued compensation. The Foods Division had $877,000 in accrued compensation at fiscal 1999 year end pertaining to the closing of the plant in Springfield, Illinois which was paid out in the first quarter of fiscal 2000. Notes payable increased $1.5 million due to the draw down of funds on a multiple disbursement term note, which is being used for renovation of the Corporations new production facility in Medina, NY. The Corporation has had a strategy to search for and develop acquisition opportunities that will contribute to the future growth of its Foods Division. The Corporation is re-evaluating its capital resources relative to its brewing, foods and equipment leasing businesses. The Corporation expects that it will fund its future capital needs and any future acquisitions by its Foods Division with a combination of debt and internally generated funds. Genesee Brewing Company is working on changes to operating procedures, changes in chemicals and modifications or upgrades of equipment used to store and handle chemicals used to clean and sanitize brewing equipment, kegs and refillable bottles (the "System") to achieve compliance with New York chemical bulk storage regulations that will take effect in December 1999 (the "Regulations"). The cost to achieve compliance with the Regulations by modifying and upgrading the existing System was originally estimated to be up to $1.9 million. In January 1999, Genesee Brewing Company received regulatory approval of a new operating procedure that will exempt a portion of the System from the Regulations. This exemption should eliminate approximately $500,000 of the estimated cost to achieve compliance with the Regulations. Genesee Brewing Company is exploring further changes to the System, its operating procedures and the chemicals used within the System to further reduce the cost to achieve compliance with, or to exempt the System from coverage under, the Regulations. It is anticipated that the cost of any System upgrades and modifications will be funded internally and depreciated over their useful life. In connection with the decision to review strategic alternatives for the Corporation's brewing business and the wind down of its equipment leasing business the Corporation is evaluating its projected cash flows, capital resources and liquidity requirements. As part of this assessment, the Corporation's Board of Directors is reviewing the Corporation's dividend policy to determine whether shareholder value would be enhanced by a change in the Corporation's current policy of regular and special dividend payments. 14 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Year 2000 General The Corporation has formed a task force made up of senior managers that is directing a project to address potential problems that could affect the business operations and financial condition of the Corporation and its subsidiaries as a result of the year 2000 issue. The year 2000 issue is the result of computer hardware and software systems and other equipment with embedded chips or processors that use only two digits to represent the year. As the year 2000 approaches, time-sensitive software may recognize a date using '00 ' as the year 1900 rather than 2000. These systems may fail to operate or be unable to process data accurately as a result of this flaw. The year 2000 issue could arise at any point in the supply chain, manufacturing process, distribution channels or information systems of the Corporation, its subsidiaries and third parties with which it does business. The actions that are included in the Corporation 's Year 2000 project include identification of critical and non-critical systems, determining appropriate remediation measures, assigning responsibility and scheduling of planned remediation, documentation and certification of task completion, assessing third party relationships for compliance, cost estimation and monitoring, and contingency planning for the Corporation and each of its subsidiaries. State of Readiness The task force has identified critical and non-critical information and other technology systems at its Genesee Brewing Company subsidiary, its Foods Division and its equipment leasing and real estate investment businesses. In November 1998, the Corporation implemented a major hardware and software upgrade to bring the software and hardware for its primary manufacturing, information and financial consolidation system (the "MIS System") into year 2000 compliance. Each component of the MIS System is warranted by the applicable vendor to be year 2000 compliant. Programming to resolve minor issues relating to the operation of this new system has been completed and all functional components of the system are fully operational. Testing of the MIS system to simulate operations in the year 2000 was recently completed and the system did not experience any significant year 2000 malfunctions. The task force has identified critical third party relationships for each of its businesses. The Corporation's partner in Cheyenne Leasing Company has provided assurances that its internal systems for administering the equipment leasing business are year 2000 ready. The Corporation has determined that 15 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) there are no other third parties whose failure to achieve year 2000 readiness would materially impact its equipment leasing business. The Corporation has determined that its real estate investments are not dependent on any third parties whose failure to achieve year 2000 readiness would materially impact those investments. During the second quarter of fiscal 1999, Genesee Brewing Company contacted all customers, mission critical vendors and other material third parties to assess the extent of their year 2000 readiness. All 75 critical vendors of Genesee Brewing Company have responded that they are in the process of addressing the year 2000 issue or are already in compliance. Genesee Brewing Company has a program to monitor the progress of critical vendors who responded that they are addressing the year 2000 issue but are not yet in compliance. To date, Genesee Brewing Company's Monroe County Branch distribution business and almost two hundred independent distributors, representing in the aggregate approximately 93% of barrel volume for Genesee Brewing Company, have reported that they are year 2000 ready or that they are addressing the year 2000 issue. Genesee Brewing Company has a program to monitor the progress of significant distributors who responded that they are addressing the year 2000 issue but are not yet in compliance. Boston Beer Company, whose contract brewing business represents 15% of Genesee Brewing Company's barrel volume, reported in its most recent Form 10-Q filed with the Securities Exchange Commission on August 10, 1999 that it believes that all of its internal computer systems are year 2000 compliant, with the exception of its depletions tracking system, which it now expects to be compliant by September 30, 1999. Boston Beer Company also reported that it has contacted vendors that it believes present a possible critical risk to its business; that all 37 critical vendors have reported that they are year 2000 compliant or are addressing the year 2000 problem; that it will monitor progress of critical vendors who are addressing the year 2000 problem; and that it will develop contingency plans for all services and supplies. During fourth quarter of fiscal 1999, the Corporation's Foods Division contacted all of its customers, critical vendors, and material third parties to assess the extent of their year 2000 readiness. To date, all 54 critical vendors of the Foods Division have responded that they are in the process of addressing the year 2000 issue or are already in compliance. The Foods Division has a program to monitor the progress of critical vendors who responded that they are addressing the year 2000 issue but are not yet in compliance. To date, customers representing 83% of Foods Division net sales have responded that they are in the process of addressing the year 2000 issue or are already in compliance. To date, no customers have responded that they will not be year 2000 ready. The Foods Division has a program to follow up with significant customers who have not yet responded and to monitor the progress of customers who responded that they are addressing the year 2000 issue but are not yet in compliance. 16 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Year 2000 Costs The Corporation is committed to making the investments required to ensure year 2000 readiness of the information and other technology systems of each of its business units. These investments include hardware and software upgrades and replacement. The cost to achieve year 2000 readiness for the internal information and other technology systems of the Corporation and its subsidiaries is currently estimated to be approximately $1.7 million, with $1.6 million spent to date. Year 2000 Risks The Corporation expects that it will achieve year 2000 readiness with its internal systems on a timely basis, but at this time is unable to assure year 2000 readiness by all third parties in the same time frame. The failure to achieve year 2000 readiness by any third party with which the Corporation or any of its subsidiaries has a material business relationship could result in the disruption of normal business activities. Risks inherent with the year 2000 problem could occur if there is an interruption of needed supplies and services, including energy, telecommunications and information exchange suppliers. In a worst case scenario, this could interrupt or prevent the Corporation's businesses from producing and selling their products or receiving payment from customers. Such failures could materially affect the Corporation's results of operations, liquidity and financial condition. The Corporation is currently unable to estimate the impact on its results of operations, liquidity or financial condition from the failure to achieve year 2000 readiness by the Corporation's critical venders, customers or other third parties. Year 2000 Contingency Plans Genesee Brewing Company and the Corporation's Foods Division are developing contingency plans to address the failure of any critical vendors or a significant number of customers to achieve year 2000 readiness. These contingency plans are being designed to prevent or mitigate the impact on the Corporation's brewing and foods businesses from the failure by such third parties to achieve year 2000 readiness. Due to the seasonality of the brewing industry, the winter months of December and January are two of Genesee Brewing Company's lowest sales and production volume months. Genesee Brewing Company's distributors are required to maintain inventory of packaged malt beverage products sufficient to meet projected demand in their markets for eighteen days and inventory of draft products sufficient to meet projected demand for fifteen days. Because malt beverage products have limited shelf life, Genesee Brewing Company has decided that it will not require distributors to increase inventory levels on hand at January 1, 2000. Instead, Genesee Brewing Company will carefully monitor distributor inventory levels in December 1999 to ensure that required levels are maintained for all brands and package types. In addition, Genesee Brewing Company will increase its production during December 1999 to build inventories of finished case goods, draft and bulk storage beer. Genesee Brewing Company also will build its inventories of brewing ingredients and packaging materials during December 1999 to have on hand on December 31, 1999 sufficient inventories to support production scheduled for January 2000. For certain ingredients and packaging materials that cannot be stored on site in quantities sufficient to support 17 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) January 2000 production requirements, Genesee Brewing Company has received written assurances from the suppliers of such materials that they will have inventory available to Genesee Brewing Company on December 31, 1999 sufficient to meet Genesee Brewing Company's January 2000 production requirements. The Corporation's Foods Division is developing contingency plans to address the failure of any critical vendors or a significant number of customers to achieve year 2000 readiness. These contingency plans will be designed to prevent or mitigate the impact on the Foods Division's business from the failure by such third parties to achieve year 2000 readiness. These contingency plans may include establishing alternative sources of supply; stockpiling of certain critical supplies; implementing stand-by manual order entry, delivery and billing systems. The Foods Division plans to identify specific third party relationships that may require contingency planning by September 30, 1999 and to develop an appropriate contingency plan for each such situation by October 31, 1999. Forward-Looking Statements This report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements may include statements about the operations and prospects for the Corporation and its subsidiary businesses, and statements about industry trends and conditions that may affect the performance or financial condition of the Corporation and its subsidiary businesses. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements. The most important factors that could cause actual results to differ from the expectations stated in these forward-looking statements include, among others, the inability to implement strategic alternatives which successfully address the declining sales and operating losses reported by the Genesee Brewing Company; the inability of Genesee Brewing Company and its distributors to develop and execute effective marketing and sales strategies for Genesee Brewing Company's products; the potential erosion of sales revenues and profit margins through continued price stagnation, increased discounting or a higher proportion of sales in lower margin Multipaks; the continuation of declining sales for the specialty beer category; the continuing shift in consumer preference away from Honey Brown Lager; uncertainties due to the intensely competitive, stagnant nature of the beer industry; demographic trends and social attitudes that can reduce beer sales; the continued growth in the popularity of import and nationally advertised beers; increases in the cost of aluminum, paper packaging and other raw materials; the Corporation's inability to reduce manufacturing and overhead costs of its brewing and foods businesses to more competitive levels; changes in significant laws and government regulations affecting sales, advertising and marketing of malt beverage products; significant increases in federal, state or local beer or other excise taxes; the potential impact of beer industry consolidation at both the brewer and distributor levels; a shift in consumer preferences away from store-brand, private label food products; increased competition from branded food product producers that might adversely affect sales of private label products; continued price promotion by the major side dish brand which is adversely impacting sales of the Foods Division's private label side dish products; continued price competition from low cost imported iced tea producers and the possibility that the Foods Division may not be able to source sufficient supply of low price sugar to produce a price competitive 18 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) private label iced tea product; the possibility that the Corporation's Foods Division might experience delays, difficulties or unanticipated expenses in integrating TKI Foods and Spectrum Foods; the possibility that the Foods Division might experience delays, difficulties or unanticipated expenses in the relocation of its operations to Medina, New York; the possibility that the Foods Division might not achieve the expected synergies from the integration and relocation of all operations into a single facility; interest rate fluctuations that could reduce demand for or the rate of return on new equipment lease business; the possibility that Cheyenne Leasing Company may not achieve the residual value projected for equipment coming off leases as Cheyenne's lease portfolio matures; increases in the estimated costs to achieve year 2000 readiness; and the risk that computer systems of the Corporation, its subsidiaries and their significant suppliers or customers may not be year 2000 compliant. 19 GENESEE CORPORATION PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. The following exhibit is attached to this report: Exhibit 3 - By-Laws as amended on June 17, 1999 (b) Reports on Form 8-K. The Corporation filed a report on Form 8-K on June 25, 1999 to report the election of a new President and Chief Operating Officer. The Corporation filed a report on Form 8-K on September 3, 1999 to report the election of a new Senior Vice President and Chief Financial Officer and a workforce reduction at Genesee Brewing Company. 20 GENESEE CORPORATION 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. GENESEE CORPORATION Date: 9/13/99 /s /Samuel T. Hubbard, Jr. Samuel T. Hubbard, Jr. President and Chief Operating Officer Date: 9/13/99 /s / Michael C. Atseff Michael C. Atseff Vice President and Controller 21 GENESEE CORPORATION EXHIBIT INDEX Exhibit Number Exhibit Page 3 By-Laws as amended on June 17, 1999 22 22 BY-LAWS OF GENESEE CORPORATION Approved March 12, 1968 and amended October 20, 1969, March 10, 1971, March 10, 1975, September 4, 1975, October 21, 1976, August 31, 1977, March 6, 1986, October 23, 1986, June 4, 1987, September 11, 1987, September 13, 1997 and June 17, 1999. Certified to be a true and correct copy of the By-laws in effect as of September 16, 1997. Mark W. Leunig Secretary Dated: June 17, 1999 23 GENESEE CORPORATION BY-LAWS Article I Shareholders Section 1. Annual Meeting: An annual meeting of shareholders for the election of directors and the transaction of other business shall be held on such day in the month of October in each year and at such time on such day as shall be fixed by the Board of Directors of the Corporation not later than 10 days before the meeting. Section 2. Special Meetings: Special meetings of the shareholders may be called by the Board of Directors. Such meetings shall be held at such time as may be fixed in the call and stated in the notice of meeting. Section 3. Place of Meetings: Meetings of shareholders shall be held at such place, within or without the State of New York, as may be fixed in the notice of meeting. Unless otherwise provided by action of the Board of Directors, all meetings of shareholders shall be held at the office of the Corporation in Rochester, New York. Section 4. Notice of Meetings: Notice of each meeting of shareholders shall be in writing and shall state the place, date, and hour of the meeting and the purpose or purposes for which the meeting is called. A copy of the notice of any meeting shall be given, personally, or by mail, not less than ten or more than fifty days before the date of the meeting, to each shareholder entitled to vote at such meeting. If mailed, such notice is given when deposited in the United States mail, with postage thereon prepaid, directed to the shareholder at his address as it appears on the record of shareholders, or, if he shall have filed with the Secretary of the Corporation a written request that notices to him be mailed to some other address, then directed to him at such other address. Section 5. Inspectors of Election: The Board of Directors, in advance of any shareholders' meeting, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a shareholders' meeting may, and on the request of any 24 shareholder entitled to vote thereat shall, appoint two inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting or any shareholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, question or matter determined by them and execute a certificate of any fact found by them. Any report or certificate made by them shall be prima facie evidence of the facts stated and of the vote as certified by them. Section 6. List of Shareholders at Meetings: A list of shareholders as of the record date, certified by the Secretary or any Assistant Secretary or by the transfer agent, if any, shall be produced at any meeting of shareholders upon the request therat or prior thereto of any shareholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat, shall require such list of shareholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be shareholders entitled to vote thereat may vote at such meeting. Section 7. Qualification of Voters: Every shareholder of record of Common Stock of the Corporation shall be entitled at every meeting of shareholders to one vote for every share of Class A Common Stock standing in his name on the record of shareholders. Section 8. Quorum of Shareholders: The holders of a majority of the shares entitled to vote thereat shall constitute a quorum at a meeting of shareholders for the transaction of any business. The shareholders present, in person or by proxy, and entitled to vote may, by a majority of votes cast, adjourn the meeting despite the absence of a quorum. Section 9. Vote of Shareholders: Directors shall, except as otherwise required by law, be elected by a plurality of the votes cast at a meeting of shareholders by the holders of shares entitled to vote in the election. 25 Whenever any corporate action, other than the election of directors, is to be taken by vote of the shareholders, it shall, except as otherwise required by law, be authorized by a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon. Section 10. Proxies: Every shareholder entitled to vote at a meeting of shareholders or to express consent or dissent without a meeting may authorize another person or persons to act for him by proxy. Section 11. Fixing Record Date: For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the Board of Directors may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than fifty nor less than ten days before the date of such meeting, nor more than fifty days prior to any other action. Article II Board of Directors Section 1. Power of Board and Qualification of Directors: The business of the Corporation shall be managed by the Board of Directors, each of whom shall be at least twenty-one years of age. Except as to any person who has at any time served as the chief executive officer or the chief operating officer of the Corporation, neither a director who has reached the age of 70 nor a director who is an employee of the Corporation and whose employment terminates for any reason, shall be eligible for re-election to the Board of Directors. (Amended by Board of Directors, 3/6/86) Section 2. Number of Directors: The number of directors constituting the entire Board of Directors shall be such number as may be fixed from time to time by vote of a majority of the entire Board of Directors, and until otherwise fixed by the Board shall be twelve. No decrease in the number of directors shall shorten the term of any incumbent director. (Amended by approval of Shareholders, 10/21/76) 26 Section 3. Election and Term of Directors: The Board of Directors shall be classified, with respect to the time for which each class shall hold office, into three classes, as nearly equal in number as possible as determined by the Board of Directors. The first class of directors shall be initially elected to hold office until the annual meeting of shareholders held in the first year following the year of their election, the second class shall be initially elected to hold office until the annual meeting of shareholders held in the second year following the year of their election, and the third class shall be elected to hold office until the annual meeting of shareholders held in the third year following the year of their election, with the members of each class to hold office until their successors are elected and qualified. Thereafter, the successors of the class of directors whose term expires at each annual meeting of shareholders shall be elected to hold office until the annual meeting of shareholders held in the third year following the year of their election and until their successors are elected and qualified. (Amended by approval of Board of Directors, 9/11/87) Section 4. Quorum of the Board; Action by the Board: A one-third of the entire Board of Directors shall constitute a quorum for the transaction of business, and the vote of the majority of the directors present at the time of such vote, if a quorum is then present, shall be the act of the Board. Section 5. Meeting of the Board: An annual meeting of the Board of Directors shall be held in each year directly after the adjournment of the annual shareholders' meeting. Regular meetings of the Board shall be held at such times as may from time to time be fixed by resolution of the Board. Special meetings of the Board may be held at any time upon the call of the President or any two directors. Meetings of the Board of Directors shall be held at such place, within or without the State of New York, as from time to time may be fixed by resolution of the Board for annual and regular meetings and in the notice of meeting for special meetings. If no place is so fixed, meetings of the Board shall be held at the office of the Corporation in Rochester, New York. No notice need be given of annual or regular meetings of the Board of Directors. Notice of each special meeting of the Board shall be given by oral, telegraphic, or written notice, duly given or sent or mailed to each director not less than one day before such meeting. Section 6. Newly Created Directorships and Vacancies: Newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board of Directors for any reason except the removal of directors by shareholders without cause may be filled by vote of a majority 27 of the directors then in office, although less than a quorum exists. A director elected to fill a vacancy shall be elected to hold office for the unexpired term of his predecessor. Section 7. Executive and Other Committees of Directors: The Board of Directors, by resolution adopted by a majority of the entire Board, may designate from among its members an Executive Committee consisting of three or more directors and may designate from among its numbers other committees each consisting of three or more directors, and each of which, to the extent provided in the resolution, shall have all the authority of the Board, except that no such committee shall have authority as to matters vested solely in the Board by law. Section 8. Compensation of Directors: The Board of Directors shall have authority to fix the compensation of directors for services in any capacity. Section 9. Indemnification of Directors and Officers: (a) Right to Indemnification. Except as prohibited by law or as provided in Paragraph (b) below, the Corporation shall indemnify any person against all reasonable expenses, including attorneys fees, and all judgments, excise taxes, fines, penalties, amounts paid in settlement and any other liability paid or incurred by such person in connection with any actual or threatened claim, action, suit or proceeding, whether civil, criminal, administrative, investigative, or other, or whether brought by or in the right of the Corporation or otherwise, in which such person may be involved as a party or otherwise, by reason of the fact that such person or such person's testator or intestate is or was a director or officer of the Corporation, or serves or served in any capacity at the request of the Corporation any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. To the maximum extent permitted by law, the Corporation shall make advances of expenses incurred by such person in connection with any such actual or threatened claim, action, suit or proceeding prior to final disposition thereof, provided that the Corporation receives an undertaking by or on behalf of such person to repay such advances to the extent such person is ultimately found not to be entitled to indemnification. (b) Exclusions. No indemnification shall be made to or on behalf of any person if a judgment or other final adjudication adverse to such person establishes that either (i) such person's acts were committed in bad faith, or were the result of active and deliberate dishonesty, and were material to the action, or (ii) such person gained in fact a financial benefit or other economic advantage to which such person was not legally entitled. 28 (c) Indemnification Not Exclusive. The right of indemnification under this Section 9 shall not be deemed exclusive of any other rights to which persons seeking indemnification hereunder may be entitled under applicable law, by agreement or otherwise, and the provisions hereof shall inure to the benefit of the heirs, beneficiaries and legal representatives of persons entitled to indemnification hereunder and shall be applicable to actions arising from acts or omissions occurring before or after the adoption hereof. Persons who are not directors or officers of the Corporation may be similarly indemnified and entitled to advancement or reimbursement of expenses to the extent authorized at any time by the Board of Directors. The Corporation is authorized to enter into agreements with any of its directors or officers extending rights to indemnification and advancement of expenses to such person to the fullest extent permitted by applicable law, but the failure to enter into any such agreement shall not affect or limit the rights of such person pursuant to this By-Law. (d) Contract Rights. The right of indemnification under this Section 9 shall be deemed to constitute a contract between the Corporation and the persons entitled to indemnification and may not, without the consent of such person, be amended or repealed with respect to any event, act or emission occurring or allegedly occurring prior to the end of the term of office such person is serving when such amendment or repeal is adopted. (Amended by approval of Board of Directors, 6/4/87) Section 10. Action Without a Meeting: Any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto shall be filed with the minutes of the proceedings of the Board or committee. (Amended by approval of Board of Directors, 3/10/75) Section 11. Participation in Board Meeting by Conference Telephone: Any one or more members of the Board of Directors or any committee thereof may participate in a meeting of such Board or committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting. (Amended by approval of Board of Directors, 9/4/75) Section 12. Director Emeritus: The Board of Directors may from time to time designate one or more persons to serve as a Director Emeritus of the Corporation, or to hold such other honorary title as the Board may determine. 29 Each such designee shall serve at the pleasure of the Board and the rights, privileges, compensation and other terms of service of each such designee shall be fixed by resolution of the Board, provided that no such designee shall be entitled to vote on any action taken by the Board or be counted for purposes of determining the presence of a quorum of the Board. References in these By-Laws to directors or to the Board of Directors shall not be deemed to include or refer to any such designee. (Added by approval of Board of Directors, 9/13/97) Article III Officers Section 1. Officers: The Board of Directors, as soon as may be practicable after the annual election of directors, shall elect a Chairman of the Board of Directors, a President, one or more Vice Presidents (one of whom may be designated Executive Vice President), a Secretary and a Treasurer, and from time to time may elect or appoint such other officers as it may determine. Any two or more offices may be held by the same person, except the offices of President and Secretary. (Amended 10/20/69) Section 2. Term of Office and Removal: Each officer shall hold office for the term for which he is elected or appointed, and until his successor has been elected or appointed and qualified. Section 3. Powers and Duties: The officers of the Corporation shall each have such powers and authority and perform such duties in the management of the property and affairs of the Corporation, as from time to time may be prescribed by the Board of Directors and, to the extent not so prescribed, they shall each have such powers and authority and perform such duties in the management of the property and affairs of the Corporation, subject to the control of the Board, as generally pertain to their respective offices. Without limitation of the foregoing: (a) Chairman of the Board of Directors: The Chairman shall be the Chief Executive Officer of the Corporation, shall preside at all meetings of the Corporation's stockholders and at all meetings of the Board of Directors and shall be a Director of the Corporation. (Amended 6/17/99) 30 (b) President: The President shall be the Chief Operating Officer of the Corporation. In the absence of the Chairman of the Board, the President shall preside at meetings of shareholders and of the Board of Directors. (Amended 6/17/99) (c) Executive Vice President: The Executive Vice President, if any, shall possess such powers and perform such duties as may be designated by the Board of Directors. (Amended 6/17/99) (d) Vice Presidents: The Board of Directors shall determine the powers and duties of the respective Vice Presidents and may, in its discretion, fix such order of seniority among the respective Vice Presidents as it may deem advisable. (e) Secretary: The Secretary shall issue notices of all meetings of shareholders and directors where notices of such meetings are required by law or these By-Laws, and shall keep the minutes of such meetings. He shall sign such instruments and attest such documents as require his signature or attestation and affix the corporate seal thereto where appropriate. (f) Treasurer: The Treasurer shall have general charge of, and be responsible for, the fiscal affairs of the Corporation and shall sign all instruments and documents as require his signature. (Amended 10/23/86) Section 4. Records: The Corporation shall keep (a) correct and complete books and records of account; (b) minutes of the proceedings of the shareholders, Board of Directors, and any committees of the Board; and (c) a current list of the directors and officers and their residence addresses. The Corporation shall also keep at its office in the State of New York or at the office of its transfer agent or registrar in the State of New York, if any, a record containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. Section 5. Checks and Similar Instruments: All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes and all acceptances, obligations, and other instruments, for the payment of money, shall be signed by facsimile or otherwise on behalf of the Corporation by such officer or officers or agent or agents as shall be thereunto authorized from time to time by the Board of Directors. 31 Section 6. Voting Shares Held by the Corporation: Either the President or the Secretary may vote shares of stock held by the Corporation in other corporations and may execute for and on behalf of the Corporation proxies for such purpose. Article IV Share Certificates and Loss Thereof - Transfer of Shares Section 1. Form of Share Certificates: The shares of the Corporation shall be represented by certificates, in such forms as the Board of Directors may from time to time prescribe, signed by the chairman of the Board if such there be, or the President or a Vice President and the Secretary or an Assistant secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the seal of the corporation or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles if the certificate is counter-signed by a transfer agent or registered by a registrar other than the Corporation or its employee. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of issue. Section 2. Lost, Stolen, or Destroyed Share Certificates: No certificate or certificates for shares of the Corporation shall be issued in place of any certificate alleged to have been lost, stolen, or destroyed, except upon production of such evidence of the loss, theft, or destruction, and upon such indemnification and payment of costs of the Corporation and its agents to such extent and in such manner as the Board of Directors may from time to time prescribe. Section 3. Transfer of Shares: Shares of the Corporation shall be transferable on the books of the Corporation by the registered holder thereof in person or by his duly authorized attorney, by delivery for cancellation of a certificate or certificates for the same number of shares, with proper endorsement consisting of either a written assignment of the certificate or a power of attorney to sell, assign, or transfer the same or the shares represented thereby, signed by the person appearing by the certificate to be the owner of the shares represented thereby, either written thereon or attached thereto, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. Such endorsement may be either in blank or 32 to a specified person, and shall have affixed thereto all stock transfer stamps required by law. Article V Other Matters Section 1. Corporate Seal: The corporate seal shall have inscribed thereon the name of the Corporation and such other appropriate legend as the Board of Directors may from time to time determine. In lieu of the corporate seal, when so authorized by the Board, a facsimile thereof may be affixed or impressed or reproduced in any other manner. Section 2. Amendments: By-Laws of the Corporation may be amended, repealed or adopted by vote of the holders of the shares at the time entitled to vote in the election of any directors. By-Laws may also be amended, repealed, or adopted by the Board of Directors, but any By-Law adopted by the Board may be amended or repealed by the shareholders entitled to vote thereon as hereinabove provided. If any By-Law regulating an impending election of directors is adopted, amended, or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of shareholders for the election of directors the By-Law so adopted, amended, or repealed, together with a concise statement of the changes made. EX-27 2 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 1,000 3-MOS APR-29-2000 JUL-31-1999 3,550 7,905 11,620 492 16,657 40,421 127,286 89,608 142,973 21,185 0 858 0 0 88,044 142,973 46,935 46,935 29,725 7,833 8,381 0 142 974 448 526 0 0 0 526 0.32 0
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