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UNITED STATES WASHINGTON, D.C. 20549 FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 29, 2002
[ ] 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 0-13365 OshKosh B'Gosh, Inc.
SECURITIES AND EXCHANGE
COMMISSION
Delaware |
39-0519915 | |
112 Otter Avenue Oshkosh, Wisconsin 54901 |
(920) 231-8800
(Registrant's telephone
number, including area code)
NOT APPLICABLE
(Former name, former address and former
fiscal year, if changed since last report)
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 July 15, 2002, there were outstanding 10,456,121 shares of Class A Common Stock and 2,205,699 shares of Class B Common Stock.
FORM 10-Q
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
INDEX
Page | ||||
PART I |
FINANCIAL INFORMATION |
3 | ||
Item 1. |
Financial Statements |
3 | ||
Condensed Consolidated Balance Sheets - |
3 | |||
Unaudited Condensed Consolidated Statements of Income - Three Month and Six Month Periods Ended June 29, 2002 and June 30, 2001 |
4 | |||
Unaudited Condensed Consolidated Statements of Cash Flows - |
5 | |||
Notes to Condensed Consolidated Financial Statements |
6 | |||
Item 2. |
Management's Discussion and Analysis of Results of Operations and Financial Condition |
8 | ||
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
13 | ||
PART II |
OTHER INFORMATION |
14 | ||
Item 6. |
Exhibits and Reports on Form 8-K |
15 | ||
Signatures |
||||
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated
Balance Sheets
(In thousands)
June 29, 2002 |
December 29, 2001* |
||||||||||
(unaudited) |
|||||||||||
ASSETS |
|||||||||||
Current assets |
|||||||||||
Cash and cash equivalents |
$ |
26,415 |
$ |
29,322 |
|||||||
Accounts receivable |
18,299 |
25,697 |
|||||||||
Inventories |
61,999 |
55,429 |
|||||||||
Prepaid expenses and other current assets |
1,428 |
1,607 |
|||||||||
Deferred income taxes |
11,000 |
13,000 |
|||||||||
Total current assets |
119,141 |
125,055 |
|||||||||
Property, plant and equipment |
73,211 |
72,709 |
|||||||||
Less accumulated depreciation and amortization |
44,377 |
42,708 |
|||||||||
Net property, plant and equipment |
28,834 |
30,001 |
|||||||||
Non-current deferred income taxes |
3,800 |
4,300 |
|||||||||
Other assets |
1,685 |
1,984 |
|||||||||
Total assets |
$ |
153,460 |
$ |
161,340 |
|||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||||||
Current liabilities |
|||||||||||
Accounts payable |
$ |
7,953 |
$ |
11,229 |
|||||||
Accrued liabilities |
33,903 |
38,403 |
|||||||||
Total current liabilities |
41,856 |
49,632 |
|||||||||
Long-term debt |
8,000 |
24,000 |
|||||||||
Employee benefit plan liabilities |
13,476 |
14,008 |
|||||||||
Shareholders' equity |
|||||||||||
Preferred stock |
-- |
-- |
|||||||||
Common stock: |
|||||||||||
Class A |
105 |
100 |
|||||||||
Class B |
22 |
22 |
|||||||||
Additional paid-in capital |
16,038 |
5,339 |
|||||||||
Retained earnings |
74,086 |
68,551 |
|||||||||
Unearned compensation under restricted stock plan |
(123 |
) |
(312 |
) |
|||||||
Total shareholders' equity |
90,128 |
73,700 |
|||||||||
Total liabilities and shareholders' equity |
$ |
153,460 |
$ |
161,340 |
|||||||
*Condensed from audited financial statements. |
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Income
(In thousands, except per share
amounts)
(Unaudited)
Three Month Period Ended |
Six Month Period Ended | |||||||||||||||||||
June 29, 2002 |
June 30, 2001 |
June 29, 2002 |
June 30, 2001 | |||||||||||||||||
Net Sales |
$ |
84,124 |
$ |
90,945 |
$ |
184,905 |
$ |
190,390 |
||||||||||||
Cost of products sold |
48,096 |
52,707 |
104,618 |
111,159 |
||||||||||||||||
Gross profit |
36,028 |
38,238 |
80,287 |
79,231 |
||||||||||||||||
Selling, general and administrative expenses |
35,963 |
35,496 |
73,356 |
71,206 |
||||||||||||||||
Royalty income, net |
(2,267 |
) |
(1,719 |
) |
(4,883 |
) |
(4,183 |
) |
||||||||||||
Operating income |
2,332 |
4,461 |
11,814 |
12,208 |
||||||||||||||||
Other income (expense): |
||||||||||||||||||||
Interest expense |
(391 |
) |
(663 |
) |
(820 |
) |
(1,394 |
) |
||||||||||||
Interest income |
183 |
256 |
309 |
472 |
||||||||||||||||
Miscellaneous |
24 |
3 |
(15 |
) |
34 |
|||||||||||||||
Other income (expense) -- net |
(184 |
) |
(404 |
) |
(526 |
) |
(888 |
) |
||||||||||||
Income before income taxes |
2,148 |
4,057 |
11,288 |
11,320 |
||||||||||||||||
Income taxes |
816 |
1,558 |
4,289 |
4,347 |
||||||||||||||||
Net income |
$ |
1,332 |
$ |
2,499 |
$ |
6,999 |
6,973 |
|||||||||||||
Net income per common share |
||||||||||||||||||||
Basic |
$ |
0.11 |
$ |
0.20 |
$ |
0.56 |
$ |
0.57 |
||||||||||||
Diluted |
$ |
0.10 |
$ |
0.20 |
$ |
0.55 |
$ |
0.55 |
||||||||||||
Weighted average common shares outstanding |
||||||||||||||||||||
Basic |
12,633 |
12,268 |
12,485 |
12,226 |
||||||||||||||||
Diluted |
12,894 |
12,711 |
12,804 |
12,574 |
||||||||||||||||
Cash dividends per common share |
||||||||||||||||||||
Class A |
$ |
0.0600 |
$ |
0.0500 |
$ |
0.1200 |
$ |
0.1000 |
||||||||||||
Class B |
$ |
0.0525 |
$ |
0.0425 |
$ |
0.1050 |
$ |
0.0850 |
||||||||||||
See notes to condensed consolidated financial statements. |
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Six Month Period Ended |
|||||||||||
June 29, 2002 |
June 30, 2001 |
||||||||||
Cash flows from operating activities |
|||||||||||
Net income |
$ |
6,999 |
$ |
6,973 |
|||||||
Depreciation and amortization |
4,199 |
4,008 |
|||||||||
Deferred income taxes |
2,500 |
1,950 |
|||||||||
Income tax benefit from stock options exercised |
4,144 |
827 |
|||||||||
Items in net income not affecting cash and cash equivalents |
(295 |
) |
(3 |
) |
|||||||
Changes in current assets |
1,007 |
(15,672 |
) |
||||||||
Changes in current liabilities |
(7,776 |
) |
(6,050 |
) |
|||||||
Net cash provided by (used in) operating activities |
10,778 |
(7,967 |
) |
||||||||
Cash flows from investing activities |
|||||||||||
Additions to property, plant and equipment |
(2,898 |
) |
(2,368 |
) |
|||||||
Proceeds from disposal of assets |
387 |
49 |
|||||||||
Sale of short-term investments |
-- |
511 |
|||||||||
Changes in other assets |
(270 |
) |
(959 |
) |
|||||||
Net cash used in investing activities |
(2,781 |
) |
(2,767 |
) |
|||||||
Cash flows from financing activities |
|||||||||||
Payment on long-term debt |
(16,000 |
) |
(7,000 |
) |
|||||||
Dividends paid |
(1,464 |
) |
(1,190 |
) |
|||||||
Net proceeds from issuance of common shares |
6,560 |
2,176 |
|||||||||
Repurchase of common shares |
-- |
(514 |
) |
||||||||
Net cash used in financing activities |
(10,904 |
) |
(6,528 |
) |
|||||||
Net decrease in cash and cash equivalents |
(2,907 |
) |
(17,262 |
) |
|||||||
Cash and cash equivalents at beginning of period |
29,322 |
19,839 |
|||||||||
Cash and cash equivalents at end of period |
$ |
26,415 |
$ |
2,577 |
|||||||
See notes to condensed consolidated financial statements. |
OSHKOSH B'GOSH, INC. AND SUBSIDIARIES
Notes to Condensed
Consolidated Financial Statements
(In
thousands)
(Unaudited)
NOTE 1. BASIS OF PREPARATION
The condensed consolidated financial statements included herein have been prepared by the Company without audit. However, the foregoing statements contain all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of Company management, necessary to present fairly the financial position as of June 29, 2002, the results of operations for the three-month and six-month periods ended June 29, 2002 and June 30, 2001, and cash flows for the six-month periods ended June 29, 2002 and June 30, 2001.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 2001 Annual Report.
NOTE 2. INVENTORIES
A summary of inventories follows:
June 29, 2002 |
December 29, 2001 |
|||||||||
Finished goods |
$ |
55,368 |
$ |
49,069 |
||||||
Work in process |
5,627 |
5,832 |
||||||||
Raw materials |
1,004 |
528 |
||||||||
Total |
$ |
61,999 |
$ |
55,429 |
||||||
The replacement cost of inventory exceeds the above LIFO costs by $12,138 at June 29, 2002 and December 29, 2001.
NOTE 3. SEGMENT REPORTING
The Company designs, sources, and markets apparel products using primarily the OshKosh B'Gosh brand. The apparel products are primarily marketed in two distinct distribution channels: domestic wholesale and through Company-owned retail stores. The Company designs and sources product to meet the needs of these distribution channels through a single procurement business unit.
Certain operations have been segregated into segments as defined by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." The Company manages its business operations by periodic analysis of business unit operating results. For this purpose, domestic wholesale, retail, and procurement are separately identified for management reporting and are considered segments as defined by SFAS No. 131.
Management evaluates the operating performance of each of its business units based on income from operations as well as return on net assets. For this purpose, product is transferred from procurement to the domestic wholesale and retail business units at cost. However, procurement receives a markup on product sold by the Company's wholesale and retail business units. Accounting policies used for segment reporting are consistent with the Company's overall accounting policies, except that inventories are valued on a FIFO basis. In addition, interest income, interest expense, certain corporate office expenses, and the effects of the LIFO inventory valuation method are not allocated to individual business units, and are included in the All Other/Corporate column below.
Segment assets include all assets used in the operation of each business unit, including accounts receivable, inventories, and property, plant and equipment. Certain other corporate assets that cannot be specifically identified with the operation of a business unit are not allocated. Financial information for the Company's reportable segments follows:
Domestic |
Retail |
Procurement |
All Other/ |
Total |
|||||||||||||||||
For the three months |
|||||||||||||||||||||
Net sales |
$ |
30,328 |
$ |
53,103 |
$ |
61 |
$ |
632 |
$ |
84,124 |
|||||||||||
Income (loss) before |
|||||||||||||||||||||
income taxes |
(1,232 |
) |
1,110 |
1,821 |
449 |
2,148 |
|||||||||||||||
Assets |
44,685 |
60,133 |
13,261 |
35,381 |
153,460 |
||||||||||||||||
Depreciation expense |
361 |
1,017 |
139 |
179 |
1,696 |
||||||||||||||||
Property, plant and equipment |
|||||||||||||||||||||
additions |
6 |
1,290 |
50 |
2 |
1,348 |
||||||||||||||||
For the three months |
|||||||||||||||||||||
Net sales |
$ |
38,228 |
$ |
52,051 |
$ |
-- |
$ |
666 |
$ |
90,945 |
|||||||||||
Income before income taxes |
935 |
2,757 |
198 |
167 |
4,057 |
||||||||||||||||
Assets |
69,995 |
47,838 |
22,234 |
13,395 |
153,462 |
||||||||||||||||
Depreciation expense |
426 |
925 |
271 |
218 |
1,840 |
||||||||||||||||
Property, plant and equipment |
|||||||||||||||||||||
additions |
62 |
1,123 |
91 |
8 |
1,284 |
||||||||||||||||
For the six months |
|||||||||||||||||||||
Net sales |
$ |
82,233 |
$ |
100,456 |
$ |
75 |
$ |
2,141 |
$ |
184,905 |
|||||||||||
Income before income taxes |
4,934 |
2,041 |
3,676 |
637 |
11,288 |
||||||||||||||||
Assets |
44,685 |
60,133 |
13,261 |
35,381 |
153,460 |
||||||||||||||||
Depreciation expense |
929 |
1,981 |
352 |
368 |
3,630 |
||||||||||||||||
Property, plant and equipment |
|||||||||||||||||||||
additions |
26 |
2,779 |
87 |
6 |
2,898 |
||||||||||||||||
For the six months |
|||||||||||||||||||||
Net sales |
$ |
92,993 |
$ |
94,905 |
$ |
-- |
$ |
2,492 |
$ |
190,390 |
|||||||||||
Income before income taxes |
6,277 |
3,542 |
124 |
1,377 |
11,320 |
||||||||||||||||
Assets |
69,995 |
47,838 |
22,234 |
13,395 |
153,462 |
||||||||||||||||
Depreciation expense |
853 |
1,826 |
561 |
430 |
3,670 |
||||||||||||||||
Property, plant and equipment |
|||||||||||||||||||||
additions |
107 |
1,632 |
616 |
13 |
2,368 |
||||||||||||||||
For the year ended |
|||||||||||||||||||||
Net sales |
$ |
213,588 |
$ |
245,112 |
$ |
5 |
$ |
4,364 |
$ |
463,069 |
|||||||||||
Income before income taxes |
18,671 |
27,732 |
4,931 |
1,929 |
53,263 |
||||||||||||||||
Assets |
57,831 |
46,207 |
13,753 |
43,549 |
161,340 |
||||||||||||||||
Depreciation expense |
1,651 |
3,662 |
1,073 |
824 |
7,210 |
||||||||||||||||
Property, plant and equipment |
|||||||||||||||||||||
additions |
248 |
4,166 |
669 |
23 |
5,106 |
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected Company income statement data expressed as a percentage of net sales.
As a Percentage of Net Sales for the | |||||||||||||||||||
Three Month Period Ended |
Six Month Period Ended | ||||||||||||||||||
June 29, 2002 |
June 30, 2001 |
June 29, 2002 |
June 30, 2001 | ||||||||||||||||
Net Sales |
100.0 |
% |
100.0 |
% |
100.0 |
% |
100.0 |
% | |||||||||||
Cost of products sold |
57.2 |
% |
58.0 |
% |
56.6 |
% |
58.4 |
% | |||||||||||
Gross profit |
42.8 |
% |
42.0 |
% |
43.4 |
% |
41.6 |
% | |||||||||||
Selling, general and administrative expenses |
42.7 |
% |
39.0 |
% |
39.7 |
% |
37.4 |
% | |||||||||||
Royalty income, net |
(2.7 |
%) |
(1.9 |
%) |
(2.7 |
%) |
(2.2 |
%) | |||||||||||
Operating income |
2.8 |
% |
4.9 |
% |
6.4 |
% |
6.4 |
% | |||||||||||
Other income (expense) -- net |
(.2 |
%) |
(0.5 |
%) |
(.3 |
%) |
(0.4 |
%) | |||||||||||
Income before income taxes |
2.6 |
% |
4.4 |
% |
6.1 |
% |
6.0 |
% | |||||||||||
Income taxes |
1.0 |
% |
1.7 |
% |
2.3 |
% |
2.3 |
% | |||||||||||
Net income |
1.6 |
% |
2.7 |
% |
3.8 |
% |
3.7 |
% | |||||||||||
Net Sales
Consolidated net sales for the three month period ended June 29, 2002 were $84.1 million, a $6.8 million decrease (7.5%) from 2001 second quarter net sales of $90.9 million. Consolidated net sales for the six month period ended June 29, 2002 were $184.9 million, a $5.5 million decrease (2.9%) from net sales of $190.4 million for the first six months of 2001. The Company's net sales for the three month and six month periods ended June 29, 2002 and June 30, 2001 are summarized as follows:
Net Sales | ||||||||||||||||||||||
Domestic |
||||||||||||||||||||||
Wholesale |
Retail |
Other |
Total |
|||||||||||||||||||
Three months ended: |
||||||||||||||||||||||
June 29, 2002 |
$ |
30.3 |
$ |
53.1 |
$ |
0.7 |
$ |
84.1 |
||||||||||||||
June 30, 2001 |
38.2 |
52.0 |
0.7 |
90.9 |
||||||||||||||||||
Increase (decrease) |
$ |
(7.9 |
) |
$ |
1.1 |
$ |
-- |
$ |
(6.8 |
) | ||||||||||||
Percent increase (decrease) |
(20.7 |
%) |
2.1 |
% |
-- |
% |
(7.5 |
%) | ||||||||||||||
Six months ended: |
||||||||||||||||||||||
June 29, 2002 |
$ |
82.2 |
$ |
100.5 |
$ |
2.2 |
$ |
184.9 |
||||||||||||||
June 30, 2001 |
93.0 |
94.9 |
2.5 |
190.4 |
||||||||||||||||||
Increase (decrease) |
$ |
(10.8 |
) |
$ |
5.6 |
$ |
(.3 |
) |
$ |
(5.5 |
) | |||||||||||
Percent increase (decrease) |
(11.6 |
%) |
5.9 |
% |
(12.0 |
%) |
(2.9 |
%) |
The Company licensed its footwear and outerwear products effective May 1, 2001. The Company's wholesale sales of footwear and outerwear for the three month and six month periods ending June 30, 2001 were approximately $.2 million and $1.8 million, respectively.
Excluding its footwear and outerwear products, the Company's domestic wholesale business unit shipments for the three month period ended June 29, 2002 decreased approximately 9.8% as compared to the corresponding three month period of 2001. The Company's domestic wholesale unit shipments for the six month period ending June 29, 2002 decreased approximately 7.3% as compared to 2001. The three month and six month period decreases in unit shipments resulted from a combination of slightly lower booked orders and a decrease in the number of "close-out" units sold. Net sales dollars for the three month and six month periods ended June 29, 2002 were impacted by lower unit volume, lower average unit selling prices and higher customer trade discounts and allowances to our retail customers to assist in more effective flow of Company products through the retail channels. Beginning with the Spring 2002 season, the Company added Kohls Department Stores as a customer. Sales to Kohls for the three month and six month periods ending June 29, 2002 were approximately $6.6 million and $15.8 million, respectively.
The Company's second quarter 2002 retail sales increase resulted from sales volume from stores opened subsequent to June 30, 2001, offset in part by a comparable store sales decrease of 5.2%. The second quarter 2002 comparable store sales decrease is in part attributable to an earlier Easter sales period along with the more aggressive discounting environment necessary to flow product. The Company's increase in retail sales for the first six months of 2002 resulted from sales volume from newly opened stores offset in part by a comparable store sales decline of .9%. The year-to-date comparable sales decrease is primarily attributable to more aggressive promotional pricing.
At June 29, 2002, the Company operated 151 domestic OshKosh retail stores, including 144 factory outlet stores, two showcase stores, and five strip mall stores. During the second quarter of 2002, the Company opened three factory outlet stores. At June 30, 2001 the Company operated a total of 135 domestic OshKosh retail stores.
Gross Profit
The Company's gross profit margin as a percent of net sales was 42.8% in the second quarter of 2002, compared to 42.0% in the second quarter of 2001. For the six month period ended June 29, 2002 gross profit margin as a percent of net sales was 43.4%, compared to 41.6% for the first six months of 2001. The Company's gross profit margin increased over 2001 levels due to a combination of an increased proportion of sales from the Company's retail stores, more favorable product costs realized from offshore production, and the favorable impact of lower "close-out" sales.
The gross margin improvement resulting from these factors was offset in part by increased customer sales allowances and more aggressive promotional pricing at the Company's retail stores.
Selling, General, and Administrative Expenses (SG&A)
SG&A expenses for the three month and six month periods ended June 29, 2002 increased $.5 million and $2.1 million over the three and six month periods ended June 30, 2001, respectively. As a percentage of net sales, SG&A expenses were 42.7% and 39.7% for the three month and six month periods ended June 29, 2002 on lower sales, as compared to 39.0% and 37.4% in the comparable periods of 2001. SG&A expenses in dollars increased primarily due to continued expansion of the Company's retail operations.
Royalty Income
The Company licenses the use of its trade name to selected licensees in the U.S. and in foreign countries. Royalty income for the three month period ended June 29, 2002 was $2.3 million compared to $1.7 million in the second quarter of 2001. Royalty income for the six month period ended June 29, 2002 was $4.9 million compared with $4.2 million in the second quarter of 2001.
Royalty income from domestic licensees was approximately $.8 million and $1.8 million in the three and six month periods ending June 29, 2002, as compared with $.4 million and $1.2 million for the same periods in 2001. The increase is primarily attributable to the Company's decision to license its outerwear and footwear businesses. Royalty income from international licensees was approximately $1.5 million and $3.1 million for the three and six month periods ending June 29, 2002 as compared with $1.3 million and $3.0 million for the same periods in 2001. Growth in the Company's Japanese licensees was partially offset by economic weakness in other areas of the world.
Operating Income
As a result of the factors described above, the Company's operating income for the three month and six month periods ended June 29, 2002 amounted to $2.3 million and $11.8 million as compared to $4.5 million and $12.2 million for the comparable periods in 2001.
Other Income (Expense) -- Net
The Company's second quarter 2002 net other income (expense) was a $.2 million expense compared to $.4 million expense in 2001. For the six month period ended June 29, 2002 net other income (expense) was a $.5 million expense compared to $.9 million expense for the first six months of 2001. Interest expense was lower for the second quarter and six month period ending June 29, 2002 compared to 2001 due to lower interest rates and prepayments of the Company's long-term debt.
Income Taxes
The Company's effective tax rate for the three month and six month periods ended June 29, 2002, was approximately 38.0% compared to 38.4% in 2001.
Net Income
Net income for the three months ended June 29, 2002 of $1.3 was a $1.2 million decrease compared to net income for the three months ended June 30, 2001 of $2.5 million. Net income for the six months ended June 29, 2002 of $7.0 million was comparable with net income for the six months ended June 30, 2001. Diluted earnings per share for the quarter ended June 29, 2002 were $.10, a $.10 (50%) reduction over the comparable period in 2001.
SEASONALITY OF BUSINESS
The Company's business is seasonal, with highest sales and income in the third quarter, which is the Company's peak wholesale shipping period and a major retail selling season at its retail stores. The Company's second quarter sales and income are the lowest both because of relatively low domestic wholesale unit shipments and relatively modest retail store sales during this period. The Company anticipates this seasonality trend to continue to impact 2002 quarterly sales and income.
Financial Position, Capital Resources and Liquidity
At June 29, 2002, the Company's cash and cash equivalents were $26.4 million, compared to $29.3 million at the end of 2001 and $2.6 million at June 30, 2001. Seasonal working capital needs for the timely production of inventory to support the Fall back-to-school 2002 seasonal product offering have been provided by operations and through proceeds from the issuances of common shares through stock option exercises. Net working capital at June 29, 2002 was $77.3 million compared to $75.4 million at December 29, 2001 and $63.7 million at June 30, 2001.
Cash provided by operations amounted to approximately $10.8 million in the first six months of 2002, compared to a use of cash of $8.0 million in the first six months of 2001. Accounts receivable at June 29, 2002 were $18.3 million compared to $25.7 million at December 29, 2001, and $24.7 million at June 30, 2001. The reduction in accounts receivable is attributable to lower wholesale sales during the second quarter of 2002. Inventories at June 29, 2002, were $62.0 million, compared to $55.4 million at December 29, 2001, and $74.3 million at June 30, 2001. Management believes that June 29, 2002, inventory levels are generally appropriate to support customer demand for its Fall back-to-school product offering.
Investing activities used $2.8 million in both the first six months of 2002 and 2001. Capital expenditures were $2.9 million in the first six months of 2002, compared with $2.4 million in 2001. Capital expenditures in both years relate primarily to expansions and upgrades of the Company's retail stores.
Cash used in financing activities totaled $10.9 million in the first six months of 2002, compared to $6.5 million in the first six months of 2001. In 2002, cash generated by the Company was sufficient to finance all working capital needs and to prepay $16.0 million of the Company's long-term debt. The remaining $8.0 million of long-term debt was prepaid in early July 2002.
On December 6, 1999, the Company's Board of Directors authorized a repurchase program for up to 1.5 million shares of its Class A common stock. On December 11, 2000, the Company's Board of Directors authorized an addition of 1.0 million shares to this repurchase program. During the first half of 2002, the Company did not repurchase any shares of its Class A common stock under these programs. The Company has repurchased a total of 1,236,400 shares of its Class A common stock under its current repurchase program.
The Company's unsecured credit agreement, as amended, with a number of banks provided a term loan for the repurchase of shares of its common stock, and includes a $75 million revolving credit facility available for general corporate purposes, including cash borrowings and issuances of letters of credit. The revolving credit facility expires November 3, 2002. The Company currently intends to extend this revolving credit facility before its expiration.
There were no outstanding borrowings on the revolving credit facility at June 29, 2002, December 29, 2001 or June 30, 2001.
The Company believes that these credit facilities, along with cash generated from operations, will be sufficient to finance the Company's seasonal working capital needs as well as its capital expenditures and business development needs.
FORWARD OUTLOOK
The retail climate, particularly in many of the channels in which the Company's products are sold, remains challenging. Further clouding prospects for the remainder of 2002 is our previously announced decision to lower price points on a significant portion of our Fall and Holiday 2002 product offerings. However, we remain cautiously optimistic about our prospects. More specifically, we currently plan the remainder of 2002 as follows:
Third Quarter |
Fourth Quarter | ||||
Net sales |
$ |
135-140 million |
$ |
135-140 million | |
Earnings per share |
$ |
1.16-1.24 |
$ |
.95-1.05 | |
We are currently planning comparable store sales decreases in our retail business unit in the low single digit range, due primarily as a result of lower retail selling prices to our consumers. We are also planning three new retail store openings during the second half of 2002.
We currently anticipate our wholesale business to be favorably impacted in the fourth quarter of 2002 by a combination of planned shipments of Spring 2003 product as well as initial shipments to our most recently announced new customer, Mervyn's (estimated fourth quarter 2002 net sales to be $2-3 million).
For the entire year 2002, we are planning capital expenditures of $6.0 million. We are currently budgeting depreciation and amortization for 2002 of $8.0 million.
FORWARD-LOOKING STATEMENTS
Statements contained herein and in future filings by the Company with the Securities and Exchange Commission (the "SEC"), in Company press releases and in oral statements made by, or with the approval of, authorized personnel that relate to the Company's future performance, including, without limitation, statements with respect to the Company's anticipated financial position, results of operations and level of business for 2002 or any other future period, are forward-looking statements within the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such statements, which are generally indicated by words or phrases such as "plan", "estimate", "project", "anticipate", "the Company believes", "management expects", "currently anticipates", "remains optimistic" and similar phrases are based on current expectations only and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, projected, or estimated.
Among the factors that could cause actual results to materially differ include the level of consumer spending for apparel, particularly in the children's wear segment; risks associated with competition in the market place, including the financial condition of and consolidations, restructurings and other ownership changes in, the apparel and related products industry and the retail industry, the introduction of new products or pricing changes by the Company's competitors, and the Company's ability to remain competitive with respect to product, service and value; risks associated with the Company's dependence on sales to a limited number of large department and specialty store customers, including risks related to customer requirements for vendor margin support, as well as risks related to extending credit to large customers; risks associated with possible deterioration in the strength of the retail industry, including, but not limited to, business conditions and the economy, natural disasters, and the unanticipated loss of a major customer; risks related to the failure of Company suppliers to timely deliver needed raw materials, risks associated with importing its products using a global transportation matrix, and the Company's ability to correctly balance the level of its commitments with actual orders; risks associated with terrorist activities as well as risks associated with foreign operations; risks related to the Company's ability to defend and protect its trademarks and other proprietary rights and other risks relating to managing intellectual property issues. In addition, the inability to ship Company products within agreed time frames due to unanticipated manufacturing, distribution system or freight carrier delays or the failure of Company contractors to deliver products within scheduled time frames are risk factors in ongoing business. As a part of the Company's product sourcing strategy, it routinely contracts for apparel products produced by contractors in Asia, Mexico and Central America. If financial, political or other related difficulties were to adversely impact the Company's contractors in these regions, it could disrupt the supply of product contracted for by the Company.
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
The credit agreement entered into by the Company in November, 1999, as amended, provided a term loan to finance the repurchase of the Company's common stock (of which $8.0 million is outstanding at June 29, 2002) and includes a $75 million revolving credit facility available for general corporate purposes. Borrowings under this agreement bear interest at a variable rate, based on the London Interbank Offered Rates. Accordingly, the Company has been affected by interest rate changes on its long-term debt. Management monitored this risk by carefully analyzing the short-term rates on its long-term debt portfolio and comparable long-term interest rates. The Company does not presently hedge its interest rate risk. Due to prepayment of this long-term debt, a change in interest rates would not have a material impact on the Company's interest expense for fiscal 2002.
Foreign Currency Risk
The Company contracts for the manufacture of apparel with contractors in Asia, Central America, and Mexico. While these contracts are stated in terms of U.S. dollars, there can be no assurance that the cost for the production of the Company's products will not be affected by exchange fluctuations between the United States and the local currencies of these contractors. Due to the number of currencies involved, the Company cannot quantify the potential impact of future currency fluctuations on net income in future years. The Company does not hedge its exchange rate risk.
The Company manages its inflation risks by ongoing review of product selling prices and production costs. Management does not believe that inflation risks are material to the Company's business, its consolidated financial position, results of operations, or cash flows.
Investment Risk
The Company does not believe it has material exposure to market risk with respect to any of its investments; the Company does not utilize market rate sensitive instruments for trading or other purposes.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant's annual meeting of stockholders was held on May 3, 2002 (the "2002 Annual Meeting"). A majority of the shares of each class of the registrant's Common Stock, represented in person or by proxy, was required to constitute a quorum for action to be taken by such class. A total of 9,148,605 shares of Class A Common Stock and 1,897,211 shares of Class B Common Stock were represented, in person or by proxy, at the 2002 Annual Meeting, constituting a quorum of each class.
With respect to the election of Class A Directors, the following votes were cast in favor of and withheld with respect to the following management nominees:
Nominee |
Votes in favor |
Votes withheld |
Broker non-votes |
Shirley A. Dawe |
8,844,149 |
304,456 |
0 |
Stig A. Kry |
8,814,446 |
334,159 |
0 |
With respect to the election of Class B Directors, the following votes were cast in favor of and withheld with respect to the following management nominees:
Nominee |
Votes in favor |
Votes withheld |
Broker non-votes |
Douglas W. Hyde |
1,602,535 |
294,676 |
0 |
Michael D. Wachtel |
1,894,711 |
2,500 |
0 |
David L. Omachinski |
1,895,211 |
2,000 |
0 |
Steve R. Duback |
1,895,211 |
2,000 |
0 |
Robert C. Siegel |
1,895,211 |
2,000 |
0 |
William F. Wyman |
1,665,591 |
231,620 |
0 |
Phoebe A. Wood |
1,895,211 |
2,000 |
0 |
Directors are elected by a plurality of the votes of the shares of the class entitled to elect such directors, present in person or represented by proxy at the meeting. "Plurality" means that the individuals who receive the largest number of votes are elected as directors up to the maximum number of directors to be chosen at the meeting. There were no nominees for director other than management's nominees identified above. Accordingly, each such nominee received a plurality of the votes cast by shares of the class indicated and, therefore, was elected.
With respect to the proposed increase in authorized Class B Common Stock to amend the Restated Certificate of Incorporation to increase the number of authorized shares of Class B Common Stock from 3,750,000 shares to 4,425,000 shares the following votes were cast:
Votes in favor |
Votes against |
Abstentions |
Broker non-votes | |
Class B Common Stock |
1,888,224 |
8,987 |
0 |
0 |
Subsequent to his election to the Board of Directors, Michael D. Wachtel, Executive Vice President and Chief Operating Officer, passed away following a battle with cancer. Mr. Wachtel's vacancy on the Board was filled by Paul Lowry, Vice President-Corporate Retail.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
On May 15, 2002, the Company Restated its Certificate of Incorporation as filed with the Delaware Secretary of State, to incorporate an increase in the number of authorized Class B Common Stock shares. The Restated Certificate of Incorporation of OshKosh B'Gosh, Inc. is attached as Exhibit 6 (a).
On June 5, 2002, the Company filed an 8-K to disclose a change in the Company's Certifying Accountant.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
OSHKOSH B'GOSH, INC. | |||
Date: July 22, 2002 |
By: |
/S/ DOUGLAS W. HYDE | |
Douglas W. Hyde | |||
Chairman of the Board, President | |||
Chief Executive Officer and Director | |||
Date: July 22, 2002 |
By: |
/S/DAVID L. OMACHINSKI | |
David L. Omachinski | |||
Executive Vice President, Chief Operating and | |||
Financial Officer, Treasurer and Director | |||
EXHIBIT 6(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
OSHKOSH B'GOSH,
INC.
a Delaware corporation
The undersigned officer of Oshkosh B'Gosh, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, which was incorporated upon filing of its Certificate of Incorporation with the Delaware Secretary of State on March 1, 1929 under the name OSHKOSH OVERALL COMPANY, hereby certifies as follows:
1. Pursuant to action taken by the Board of Directors of the Corporation, resolutions were duly adopted pursuant to Section 245 of the Delaware General Corporation Law approving the restatement of the current Restated Certificate of Incorporation of Oshkosh B'Gosh, Inc., as amended. The restatement only restates and integrates and does not further amend the provisions of the Corporation's current Restated Certificate of Incorporation as heretofore amended or supplemented, and there is no discrepancy between those provisions and the provisions of the Corporation's Restated Certificate of Incorporation as restated hereby, which are as follows:
FIRST: The name of the Corporation is OSHKOSH B'GOSH, INC.
SECOND: The address of the Corporation's registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, and County of New Castle, Delaware 19801. The name of the Corporation's registered agent at such address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH: A. STOCK. The total number of shares of stock which the Corporation shall have the authority to issue is Thirty-Five Million Four Hundred Twenty-Five Thousand (35,425,000) Shares itemized by classes as follows:
1. Thirty-four Million Four Hundred Twenty-Five Thousand (34,425,000) Shares of Common Stock, one cent ($.01) par value, divided into the following classes: (a) Thirty Million (30,000,000) Shares of Class A Common Stock (the "Class A Common Stock"); and (b) Four Million Four Hundred Twenty-Five Thousand (4,425,000) Shares of Class B Common Stock (the "Class B Common Stock") (The Class A Common Stock and the Class B Common Stock are hereinafter collectively referred to as the "Common Stock").
2. One Million (1,000,000) Shares of Preferred Stock, one cent ($.01) par value (the "Preferred Stock").
B. THE COMMON STOCK
1. Whenever any Dividend shall be paid by the Corporation on the Common Stock, such Dividend shall be paid so that the Dividend per share on the Class A Common Stock shall equal one hundred fifteen percent (115%) of the Dividend per share on the Class B Common Stock. As used herein, the term "Dividend" shall mean any dividend paid by the Corporation in cash or other assets except to the extent a dividend is payable in shares of any class of the capital stock of this Corporation or options, warrants or rights to acquire, or securities convertible into or exercisable for, such shares (a "Stock Dividend"). In calculating the amount of any Dividend payable on the Class A Common Stock, such Dividend shall be rounded to the closest one quarter of one cent ($.0025). No Stock Dividends or other distributions shall be declared or paid by the Corporation on the Common Stock in shares of Common Stock or options, warrants or rights to acquire, or securities convertible into or exchangeable for, shares of Common Stock, except Stock Dividends or other distributions payable to all of the holders of Common Stock ratably according to the number of shares of Common Stock held by them, in shares of Class A Common Stock (or options, warrants or rights to acquire, or securities convertible into or exchangeable for, shares of Class A Common Stock) to holders of that class of stock and shares of Class B Common Stock (or options, warrants or rights to acquire, or securities convertible into or exchangeable for, shares of Class B Common Stock) to holders of that class of stock. If any Stock Dividends or other distributions shall be declared or paid by the Corporation on the Common Stock in any securities other than shares of Common Stock or options, warrants or rights to acquire, or securities convertible into or exchangeable for, shares of Common Stock, such Stock Dividends or other distributions shall be payable to all holders of Common Stock ratably according to the number of shares of Common Stock held by them, without any distinction between holders of Class A Common Stock and holders of Class B Common Stock.
2. The holders of Class A Common Stock shall not be entitled to any vote on any matters except: (a) as may be required by law; and (b) that the Class A Common Stock shall have one vote for each share for the election and removal of the Class A Directors voting as a separate class. The "Class A Directors" shall be that number of Directors which constitutes twenty five percent (25%) of the authorized number of members of the Board of Directors, including, for all purposes, the Class A Directors and any Directors which are entitled to be elected by the holders of any Preferred Stock. If twenty five percent (25%) of the authorized number of Directors is not a whole number, then the number of Class A Directors shall be rounded to the closest whole number of Directors, but not less than one (1). In determining the closest whole number, any number which includes a fraction equal to .5 shall be deemed to be the next highest whole number.
3. The holders of Class B Common Stock shall be entitled to one vote for each share of Class B Common Stock on all matters except the election of Class A Directors.
4. In case of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of Class A Common Stock shall be entitled to receive out of the assets of the Corporation in money or money's worth the sum of Seven and 50/100 Dollars ($7.50) per share, (the "First Common Payment"), subject to adjustment in the event of any subdivisions, combinations, stock splits or stock dividends involving shares of the Class A Common Stock, before any of such assets shall be paid or distributed to holders of Class B Common Stock, and if the assets of the Corporation shall be insufficient to pay the holders of all of the Class A Common Stock then outstanding the entire First Common Payment, the holders of each outstanding share of the Class A Common Stock shall share ratably in such assets in proportion to the amounts which would be payable with respect to Class A Common Stock if the First Common Payment was paid in full.
5. After payment in full of the First Common Payment, the holders of Class B Common Stock shall be entitled to receive out of the remaining assets of the Corporation in money or money's worth the sum of Seven and 50/100 Dollars ($7.50) per share (the "Second Common Payment"), subject to adjustment in the event of any subdivisions, combinations, stock splits or stock dividends involving shares of the Class B Common Stock, before any of such remaining assets shall be paid or distributed to holders of the Class A Common Stock, and if the remaining assets of the Corporation shall be insufficient to pay the holders of all of the Class B Common Stock then outstanding the entire Second Common Payment, the holders of each outstanding share of the Class B Common Stock shall share ratably in such assets in proportion to the amounts which would be payable with respect to Class B Common Stock if the Second Common Payment was paid in full.
6. After payment in full of the First Common Payment and the Second Common Payment, any further payments on the liquidation, dissolution or winding up of the business of the Corporation shall be on an equal basis as to all of the shares of Common Stock then outstanding.
7. Except as to the matters expressly set forth above, the Class A Common Stock and the Class B Common Stock shall be identical in all respects.
8. Conversion.
(a) Each holder of shares of Class B Common Stock shall have the right, exercisable at any time, and from time to time, at the holder's option, to convert each share of Class B Common Stock so held into one (l) fully paid and nonassessable share of Class A Common Stock. This right shall be exercised by the surrender of the certificate(s) representing the share(s) of Class B Common Stock to be converted to the agent then maintained by the Corporation for the registration or transfer of shares of Class B Common Stock (the "Conversion Agent") (or, if no Conversion Agent has been appointed or is then acting, to the principal executive offices of the Corporation (to the attention of the Secretary of the Corporation)), at any time during normal business hours, accompanied by written notice of such holder's election to convert and (if so required by the Corporation or the Conversion Agent) by instruments of transfer, in form satisfactory to the Corporation and the Conversion Agent, duly executed by the holder or by his duly authorized attorney, and by transfer tax stamps or funds therefor if required pursuant to paragraph (e) of this subsection 8.
(b) As promptly as practicable after the surrender for conversion of a certificate(s) representing shares of Class B Common Stock in the manner provided in paragraph (a) of this subsection 8, and the payment in cash of any amount required by the provisions of paragraphs (a) and (e) of this subsection 8, the Corporation shall deliver or cause to be delivered, at the office of the Conversion Agent (or, if no Conversion Agent has been appointed or is acting, at its principal executive offices) to the holder of the surrendered certificate(s) (or upon the written order of the holder), a new certificate or certificates representing the number of shares of Class A Common Stock issuable upon such conversion, issued in such name or names as such holder may direct. Except as otherwise provided herein, a conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of the certificate representing shares of Class B Common Stock. All rights of the holder of the surrendered shares, as a holder of such shares, shall cease at the time the conversion is deemed to occur, and the person or persons in whose name or names the certificate or certificates representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock at the time the conversion is deemed to occur. If a surrender occurs on a date when the stock transfer books of the Corporation are closed, the conversion shall not be deemed to have occurred until immediately prior to the close of business on the next succeeding day on which such stock transfer books are open.
(c) No adjustments in respect of dividends, voting rights or liquidation preferences of the Class A Common Stock or the Class B Common Stock shall be made upon the conversion of any shares of the Class B Common Stock into shares of Class A Common Stock; provided, however, that if a share of Class B Common Stock shall be converted subsequent to the record date for the payment of a dividend or other distribution on shares of Common Stock but prior to such payment, the registered holder of such share of Class B Common Stock at the close of business on such record date shall be entitled, notwithstanding the conversion, to receive the dividend or other distribution payable with respect to such share of Class B Common Stock on the date set for payment of such dividend or other distribution (and the person or persons in whose name or names the certificate or certificates representing the share of Class A Common Stock are to be issued in connection with such conversion shall not be entitled to any dividend or other distribution payable with respect to the share of Class A Common Stock received in such conversion).
(d) The Corporation covenants that it will at all times reserve and keep available, solely for the purpose of issuance upon the conversion of outstanding shares of Class B Common Stock into shares of Class A Common Stock, such number of shares of Class A Common Stock as shall be issuable upon the conversion of all outstanding shares of Class B Common Stock; provided, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the shares of Class B Common Stock by delivery of purchased shares of Class A Common Stock or by delivery of shares of Class A Common Stock which are held in the treasury of the Corporation. The Corporation covenants that all shares of Class A Common Stock which shall be issued upon conversion of the shares of the Class B Common Stock, will, upon issue, be fully paid and nonassessable and not subject to any preemptive rights, except as otherwise required by applicable law.
(e) The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Class B Common Stock shall be made without charge for any stamp or similar tax in respect of such issuance. Notwithstanding the foregoing, however, if any such certificate for shares of Class A Common Stock is to be issued in a name other than that of the holder of the shares of Class B Common Stock to be converted therefor, such holder shall pay to the Corporation the amount of any tax which may be payable in respect of any transfer involved in the issuance of the shares of Class A Common Stock or shall establish to the satisfaction of the Corporation that such tax has been paid.
(f) Notwithstanding any other provision in this Article FOURTH, when the number of outstanding shares of Class B Common Stock falls below two percent (2%) of the aggregate number of shares of Class A Common Stock and Class B Common Stock then outstanding, (i) all of the outstanding shares of Class A Common Stock and Class B Common Stock shall be deemed, without further act on anyone's part, to be immediately and automatically converted into an equal number of shares of Common Stock, with all shares of such Common Stock having equal rights as to dividends, voting rights and liquidation, (ii) stock certificates formerly representing outstanding shares of Class A Common Stock and Class B Common Stock shall thereupon and thereafter be deemed to represent a like number of shares of Common Stock, and (iii) subsections 1, 2, 3, 4, 5, 6, 7 and 8(a), (b), (c), (d) and (e) of this Section B of Article FOURTH of this Restated Certificate of Incorporation shall be void and of no effect.
9. The rights of the Common Stock under this Section B of this Article Fourth of this Restated Certificate of Incorporation are subject to the provisions below concerning the Preferred Stock.
C. THE PREFERRED STOCK
The Preferred Stock may be issued in series, and authority is vested in the Board of Directors, from time to time, to establish and designate series and to fix the variations in the powers, preferences, rights, qualifications, limitations or restrictions of any series of the Preferred Stock, but only with respect to:
1. the dividend rate or rates and the preferences, if any, over any other class or series (or of any other class or series over such class or series) with respect to dividends, the terms and conditions upon which and the periods in respect of which dividends shall be payable, whether and upon what conditions such dividends shall be cumulative and, if cumulative, the date or dates from which dividends shall accumulate;
2. the price and terms and conditions on which shares may be redeemed;
3. the amount payable upon shares in the event of voluntary or involuntary liquidation;
4. sinking fund provisions for the redemption or purchase of shares;
5. the terms and conditions on which shares may be converted into shares of any other class or series of the same or any other class of stock of the Corporation, if the shares of any series are issued with the privilege of conversion; and
6. voting rights, if any
Except as to the matters expressly set forth above, all series of the Preferred Stock shall have the same preferences, limitations and relative rights and shall rank equally, share ratably and be identical in all respects as to all matters. All shares of any one series of the Preferred Stock shall be alike in every particular.
D. GENERAL
The number of authorized shares of any class of the capital stock of the Corporation may be increased or decreased (but not below the number of shares of such class then outstanding) by the affirmative vote of the holders of a majority of the outstanding Class B Common Stock.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the bylaws of the Corporation.
SEVENTH: Meetings of stockholders may be held within or without the State of Delaware, as the bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the bylaws of the Corporation. Elections of Directors need not be by written ballot unless the bylaws of the Corporation shall so provide.
EIGHTH: The holders of any stock of the Corporation, or the holders of any class or series of class thereof, shall have no preemptive rights.
NINTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.
TENTH: Any merger or consolidation of the Corporation with or into any other corporation; or any sale, lease, exchange or other disposition of all or substantially all of the assets of the Corporation to or with any other corporation, person or entity, shall require the affirmative vote of the holders of at least two-thirds of the outstanding shares of the Class B Common Stock and at least two-thirds of the outstanding shares of any other class of the capital stock of the Corporation issued and outstanding and entitled to vote thereon.
This Article TENTH may not be amended or rescinded except by the affirmative vote of the holders of at least two-thirds of the outstanding shares of Class B Common Stock and at least two-thirds of the outstanding shares of any other class of the capital stock of the Corporation issued and outstanding and entitled to vote thereon, at any regular or special meeting of the stockholders if notice of the proposed alteration or amendment be contained in the notice of the meeting.
ELEVENTH: No director of this corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of his fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith, or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit.
2. Said restatement was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Restated Certificate of Incorporation to be executed this __ day of May, 2002.
___________________________________ |
/S/Steven R. Duback, Secretary |