-----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, D5OLrTbeo9GSQZ1oFuREbQmp2Rh/7265QG24ASjeIQIYiiY/EpKLORXfxijjz4dx 5kdK8aY9ixJ0w7UY3L1hAA== 0000950172-99-000583.txt : 19990518 0000950172-99-000583.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950172-99-000583 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCK OF AGES CORP CENTRAL INDEX KEY: 0000084581 STANDARD INDUSTRIAL CLASSIFICATION: CUT STONE & STONE PRODUCTS [3281] IRS NUMBER: 030153200 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-29464 FILM NUMBER: 99628634 BUSINESS ADDRESS: STREET 1: 369 NORTH STATE STREET CITY: CONCORD STATE: NH ZIP: 03301 BUSINESS PHONE: 6032258397 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 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: 0-29464 ROCK OF AGES CORPORATION (Exact name of Registrant as Specified in its Charter) Delaware 03015320 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 772 Graniteville Road Graniteville, Vermont 05654 (Address of principal executive offices) (Zip Code) (802) 476-3121 (Registrant's telephone number, including area code) 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 than 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 April 30, 1999, 4,255,193 shares of Class A Common Stock, par value $0.01 per share, and 3,425,087 shares of Class B Common Stock, par value $0.01 per share, of Rock of Ages Corporation were outstanding. ------------------------------ ROCK OF AGES CORPORATION INDEX Form 10-Q for the Quarterly Period Ended March 31, 1999 PART I FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 1999 and December 31, 1998 Condensed Consolidated Statements of Operations - Three Months Ended March 31, 1999 and 1998 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 1999 and 1998 Notes to Condensed Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Signature PART I: FINANCIAL INFORMATION Item I: Financial Statements ROCK OF AGES CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS ($ in thousands) (Unaudited) March 31, December 31, 1999 1998 ---------------------- ASSETS Current assets: Cash and cash equivalents $ 3,621 4,701 Trade receivables, net 16,156 14,004 Inventories 25,685 24,075 Prepaid & refundable income taxes 1,406 586 Deferred tax assets 352 352 Other current assets 2,675 1,549 ---------------------- Total current assets 49,895 45,267 Property, plant and equipment, net 45,613 44,475 Cash surrender value of life insurance, net 1,426 1,426 Intangibles, net 31,993 29,487 Deferred tax assets 111 110 Investments in and advances to affiliated 131 131 company Intangible pension asset 219 219 Other investments 343 343 Other 483 436 ---------------------- Total assets $ 130,214 121,894 ====================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Borrowings under lines of credit $ 13,634 6,687 Current installments of long-term debt 413 803 Trade payables 2,984 2,674 Accrued expenses 2,902 3,478 Due to related parties 4 Customer deposits 7,869 5,100 ---------------------- Total current liabilities 27,802 18,746 Long-term debt, excluding current 12,879 12,880 installments Deferred compensation 3,740 3,692 Accrued pension cost 34 34 Accrued postretirement benefit cost 570 570 Other 135 135 ---------------------- Total liabilities 45,160 36,057 Commitments Stockholders' equity: Preferred stock - $.01 par value; 2,500,000 shares authorized No shares issued or outstanding Common stock - Class A, $.01 par value; 30,000,000 shares authorized 4,253,575 and 3,896,178 shares issued and outstanding 43 39 Common stock - Class B, $.01 par value; 15,000,000 shares authorized 3,426,705 and 3,484,957 shares issued and outstanding 34 35 Additional paid-in capital 70,463 69,350 Retained earnings 14,886 16,898 Accumulated other comprehensive loss (372) (485) ---------------------- Total stockholders' equity 85,054 85,837 ---------------------- Total liabilities and stockholders' equity $ 130,214 121,894 ====================== **SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. ROCK OF AGES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ in thousands except per share amounts) (Unaudited) Three Months Ended March 31, ------------------ 1999 1998 ------------------ Net Revenues: Quarrying $ 3,574 3,345 Manufacturing 9,920 10,586 Retailing 4,024 1,240 ------------------ Total net revenues 17,518 15,171 Gross profit: Quarrying 626 859 Manufacturing 1,560 1,930 Retailing 2,104 749 ------------------ Total gross profit 4,290 3,538 Selling, general and administrative expenses 6,386 4,049 ------------------ Loss from operations (2,096) (511) Interest expense 483 58 ------------------ Loss before benefit for income taxes (2,579) (569) and cummulative effect of change in accounting principles Income tax benefit (717) (138) ------------------ Net Loss before cumulative effect of (1,862) (431) change in accounting principles Cumulative effect in prior years of change in accounting principles net of taxes of $39 (150) - ------------------ Net Loss $ (2012) (431) ================== Per share information: Net loss per share - basic Net Loss before cumulative effect of change in accounting principles $ (0.25) (0.06) Cumulative effect in prior years of change in accounting principles (0.02) - ------------------ Net Loss $ (0.27) (0.06) Net loss per share - diluted Net Loss before cumulative effect of change in accounting principles $ (0.25) (0.06) Cumulative effect in prior years of change in accounting principles (0.02) - ------------------ Net Loss $ (0.27) (0.06) Weighted average number of common shares Outstanding - basic 7,553 7,289 Weighted average number of common shares outstanding - diluted 7,553 7,289 **SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ROCK OF AGES CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in thousands) (Unaudited) Three Months Ended March 31, -------------------- 1999 1998 -------------------- Cash flows from operating activities: Net loss $ (2,012) (431) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation, depletion and amortization 1,071 801 Loss on sale of property, plant and equipment 36 Cummulative effect of change in accounting (150) - principles Deferred taxes (1) (105) Changes in assets and liabilities: Increase in trade receivables (1,960) (1,219) Increase in due from related parties (4) Increase in inventories (475) (804) Increase in other assets (1,204) (336) Increase (decrease) in trade payables, accrued expenses and income taxes payable (1,203) 438 Decrease in due to related parties (40) Increase in customer deposits 2,573 277 Increase in deferred compensation 48 45 Decrease in deferred income (100) -------------------- Net cash used in operating activities (3,281) (1,474) Cash flows from investing activities: Purchases of property, plant and equipment (1,361) (1,148) Increase in intangibles (105) Acquisitions, net of cash acquired (1) (3,644) -------------------- Net cash used in investing activities (5,110) (1,148) Cash flows from financing activities: Net borrowings under lines of credit 6,948 675 Net stock option transactions 691 Principal payments on long-term debt (441) (56) -------------------- Net cash provided by financing activities 7,198 619 Effect of exchange rate changes on cash 113 (32) -------------------- Net decrease in cash and cash equivalents (1,080) (2,035) Cash and cash equivalents, beginning of period 4,701 8,637 Cash and cash equivalents, end of period $ 3,621 6,602 ==================== **SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. (1) Acquisitions: Assets acquired $ 4,608 Liabilities assumed and issued (411) Common stock issued (425) ---------- Cash paid 3,771 Less cash acquired (127) ---------- Net cash paid for acquisitions $ 3,644 ========== ROCK OF AGES CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles for complete financial statements are not included herein. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. Results of operations for the interim periods are not necessarily indicative of the results that may be expected for a full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Form 10-K 405 (SEC File No. 000-29464, filed March 31, 1999). (2) Inventories ($ in thousands) Inventories consist of the following (Unaudited) at March 31, 1999 and December 31, 1998: March 31, December 31, 1999 1998 ------------------------- Raw materials $ 10,511 9,815 Work-in-process 4,172 5,724 Finished goods and supplies 11,002 8,536 ------------------------- $ 25,685 24,075 ========================= (3) Pro Forma Information During the three months ended March 31, 1999, the Company acquired three retail monument companies. The Company paid a total of $3,771,104 in cash and issued 32,065 shares of Class A Common Stock with a value of $424,997 for the acquired companies. In addition, various employment, noncompetition and lease agreements were entered into or assumed. The acquisitions have been accounted for under the purchase method. The purchase price has been allocated to the assets acquired and liabilities assumed based upon their respective fair market values, resulting in approximately $2,637,860 of cost in excess of net assets acquired which has been allocated to intangible assets, primarily names and reputations. The following unaudited pro forma information has been prepared assuming that the acquisitions during 1998 (refer to specifics in the footnotes of Form 10-K 405 mentioned above) and 1999 occurred at the beginning of the periods presented. The pro forma information is presented for information purposes only and is not necessarily indicative of what would have occurred if the acquisitions had been made as of those dates. ($ in thousands except per share data) (Unaudited) Three Months Ended March 31, --------------------------- 1999 1998 --------------------------- Net revenues $ 17,574 18,515 Net loss $ (2,107) (1,211) Net loss per share - basic $ (0.28) (0.17) Net loss per share - diluted $ (0.28) (0.17) (4) Earnings Per Share The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share (EPS) computations for net loss for the three months ended March 31, 1999 and 1998: ($ in thousands except per share data) (Unaudited) Three Months Ended March 31, ---------------------------- 1999 1998 ---------------------------- Numerator: Loss available to common shareholders used in basic and diluted earnings per share $ (1,862) (431) ============================ Denominator: Denominator for basic earnings per share: Weighted average shares 7,553 7,289 Effect of dilutive securities: Stock options - - Denominator for diluted earnings per share: ---------------------------- Adjusted weighted average shares $ 7,553 7,289 ============================ Basic earnings per share $ (0.25) (0.06) Diluted earnings per share $ (0.25) (0.06) Options to purchase 553,252 shares of Class A common stock ranging from $12.50 to $18.50 per share were outstanding in 1999, but were not included in the computation of diluted EPS because the options' exercise price was greater than the average market price of the common shares. (5) Segment Information On December 31, 1998 the Company adopted SFAS No. 131, Disclosures about Segments of Enterprise Related Information. SFAS No. 131 established standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. It also established standards for related disclosures about products and services and geographic areas. The Company is organized based on the products and services that it offers. Under this organizational structure, the Company operates in three segments: quarrying, manufacturing, and retailing. The quarrying segment extracts granite from the ground and sells it to both the manufacturing segment and to outside manufacturers, as well as to distributors in Europe and Japan. The manufacturing segment's principal product is granite memorials used primarily in cemeteries, although it also manufactures some specialized granite products for industrial applications. The retailing segment engraves and sells memorials and other granite products at various locations throughout the United States. Inter-segment revenues are accounted for as if the sales were to third parties. The following is the unaudited segment information for the periods ended March 31, 1999 and 1998 (in thousands):
1999 Quarrying Manufacturing Retailing Total ---------------------------------------------------- Total net revenues $ 4,983 11,264 4,024 20,271 Inter-segment net revenues 1,409 1,344 2,753 ---------------------------------------------------- Net revenues 3,574 9,920 4,024 17,518 Total gross profit 824 1,362 2,104 4,290 Inter-segment gross profit 198 (198) ---------------------------------------------------- Gross profit 626 1,560 2,104 4,290 Selling, general and administrative 1,174 1,640 3,844 6,658 expenses ---------------------------------------------------- Loss from operations (548) (80) (1,740) (2,368) Interest expense 28 455 483 ---------------------------------------------------- Loss before benefit for income taxes $ (548) (108) (2,195) (2,851) ==================================================== 1998 Quarrying Manufacturing Retailing Total ---------------------------------------------------- Total net revenues $ 5,061 11,756 1,240 18,057 Inter-segment net revenues 1,716 1,170 2,886 ---------------------------------------------------- Net revenues 3,345 10,586 1,240 15,171 Total gross profit 1,038 1,751 749 3,538 Inter-segment gross profit 179 (179) - ---------------------------------------------------- Gross profit 859 1,930 749 3,538 Selling, general and administrative 1,379 1,791 879 4,049 expenses ---------------------------------------------------- Income (loss) from operations (520) 139 (130) (511) Interest expense 12 46 58 ---------------------------------------------------- Income (loss) before provision (benefit) $ (532) 93 (130) (569) for income tax ====================================================
Net revenues by geographic area is as follows: ($ in thousands) (Unaudited) Three Months Ended March 31, --------------------------- Net revenues (1): 1999 1998 --------------------------- United States $ 15,759 13,254 Canada 1,759 1,917 --------------------------- Total net revenues $ 17,518 15,171 =========================== (1) Net revenues are attributed to countries based on where product is produced. Long-lived assets by geographic area is as follows: ($ in thousands) (Unaudited) March 31, December 31, Long-lived assets: 1999 1998 --------------------------- United States $ 43,791 42,811 Canada 1,818 1,660 Japan 4 4 --------------------------- $ 45,613 44,475 =========================== (6) Accounting Change The Company adopted "SOP 98-5, Reporting on the Costs of Start-Up Activities", as of January 1, 1999. The SOP requires the costs of start-up activities, including organization costs, to be expensed as incurred. As a result, acquisition costs of $197,340 (net of taxes of $47,559), were expensed in the period ending March 31, 1999 as the cumulative effect of a change in accounting principle. The following table summarizes the pro forma net loss and per share amounts assuming a change in application of accounting principles applied retroactively: ($ in thousands) (Unaudited) Three Months Ended March 31, ---------------- 1999 ---------------- Net loss $ (1,862) Net loss per share - basic (0.25) Net loss per share - diluted (0.25) Pro forma information for March 31, 1998 is not readily available. (7) Comprehensive Loss Comprehensive Loss is as follows: ($ in thousands) (unaudited) Three Months Ended March 31, 1999 1998 ---------- ----------- Net Loss $ (2,012) (431) Cumulative translation adjustment (113) (55) Minimum liability adjustment - - ---------- ----------- Comprehensive loss $ (1,899) (486) ========== =========== ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Rock of Ages Corporation (the "Company") is an integrated quarrier, manufacturer, distributor and retailer of granite and products manufactured from granite. The quarry division sells granite blocks both to the manufacturing division and to outside manufacturers, as well as to distributors in Europe and Japan. The manufacturing division's principal product is granite memorials used primarily in cemeteries, although it also manufactures some specialized granite products for industrial applications. The retail division primarily sells granite memorials to the general public. In June 1997, the Company acquired the successor to Keystone Memorials, Inc. ("Keystone") and in October 1997, acquired Childs & Childs Granite Company Inc. ("C&C"), granite memorial manufacturers in Elberton, Georgia. In connection with the Keystone and C&C acquisitions, the Company acquired Southern Mausoleums, Inc. ("SMI" and, together with C&C and Keystone, the "Elberton Manufacturing Operations"). Also in connection with the Keystone and C&C acquisitions, the Company acquired three granite quarrying companies operating quarries located in Georgia, Pennsylvania, North Carolina, South Carolina and Oklahoma (the "Quarry Companies"). In November 1998, the Company acquired another quarry company in North Carolina which produces a white granite that will be a companion stone for the Company's Bethel White Quarry ("Gardenia" and, together with the Quarry Companies, the "Acquired Quarry Operations"). In October 1997, the Company acquired the Keith Monument Company and related companies which are engaged in the retailing of granite memorials to consumers in the State of Kentucky ("Keith"). In 1998, the Company made acquisitions of thirteen additional retail monument companies (the "1998 Retail Acquisitions"), thereby expanding its retail presence to locations in Georgia, Iowa, Illinois, Minnesota, Nebraska, Ohio, South Dakota, Wisconsin, Pennsylvania and New Jersey. In the three months ended March 31, 1999, the Company acquired an additional three monument retailers (the "1999 Retail Acquisitions"). The Company records revenues from quarrying, manufacturing and retailing. The granite quarried by the Company is sold both to outside customers and used by the Company's manufacturing division. The Company records revenue and gross profit related to the sale of granite sold to an outside customer either when the granite is shipped or when the customer selects and identifies the blocks at the quarry site. The Company does not record a sale, nor does the Company record gross profit, at the time granite is transferred to the Company's manufacturing division. The Company records revenue and gross profit related to internally transferred granite only after the granite is manufactured into a finished product and sold to an outside customer. Manufacturing revenues related to outside customers are recorded when the finished product is shipped from Company facilities. Manufacturing revenues related to internally transferred finished products are recorded when ultimately sold at retail to an outside customer. Retailing revenues are recorded when the finished monument is placed in the cemetery. The following table sets forth certain operations data as a percentage of net revenues with the exception of quarrying, manufacturing and retailing gross profit, which are shown as a percentage of their respective revenues. Three Months Ended March 31, 1999 1998 ----------- ----------- Statement of Operations Data: Net Revenues: Quarrying 20.4% 22.0% Manufacturing 56.6% 69.8% Retailing 23.0% 8.2% Total net revenues 100.0% 100.0% Gross Profit: Quarrying 17.5% 25.7% Manufacturing 15.7% 18.2% Retailing 52.3% 60.4% Total gross profit 24.5% 23.3% Selling, general & administrative expenses 36.5% 26.7% Loss from operations (12.0%) (3.4%) Interest expense 2.8% 0.4% Loss before income tax benefit and cumulative change in accounting principle (14.8%) (3.8%) Income tax benefit 4.1% 0.9% Loss before cumulative effect of change in accounting principle (10.7%) (2.8%) Cumulative effect in prior years of change in accounting principle 0.8% - Net Loss (11.5%) (2.8%) THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998 Revenues for the three months ended March 31,1999 increased $2.3 million, or 15.5%, to $17.5 million from $15.2 million for the three months ended March 31, 1998. This increase was primarily attributable to revenues from the 1998 Retail Acquisitions and 1999 Retail Acquisitions, none of which the Company owned during the 1998 period. The Company's retailing net revenues increased to 23.0% of total net revenues in the 1999 period from 8.2% in the 1998 period as a result of these acquisitions. Gross profit for the three months ended March 31, 1999 increased $800,000, or 21.3%, to $4.3 million from $3.5 million for the three months ended March 31, 1998. The gross profit percentage increased to 24.5% for the 1999 period from 23.3% for the 1998 period. These increases were attributable to the increase in retailing net revenues during the 1999 period as described above. Quarrying gross profit decreased $233,000, or 27.1%, to $626,000 for the 1999 period from $859,000 for the 1998 period. The quarrying gross profit percentage decreased to 17.5% for the 1999 period from 25.7% for the 1998 period. These decreases were primarily attributable to the Company's Barre quarries being closed for a longer time during the 1999 period than during the 1998 period. These quarries are usually closed during the winter months; however, during the 1999 period the Company reopened them approximately three weeks later than it did during the 1998 period. Manufacturing gross profit decreased $370,000, or 19.2%, to $1.6 million for the 1999 period from $1.9 million for the 1998 period. The manufacturing gross profit percentage decreased to 15.7% for the 1999 period from 18.2% for the 1998 period. These decreases were primarily attributable to poor results at the Elberton Manufacturing Operations. Retailing gross profit increased $1.4 million, or 181.0%, to $2.1 million for the 1999 period from $750,000 for the 1998 period. This increase was attributable to the 1998 Retail Acquisitions and 1999 Retail Acquisitions, none of which the Company owned during the 1998 period. The retailing gross profit percentage decreased to 52.3% for the 1999 period from 60.4% for the 1998 period. This decrease was caused primarily by the seasonality of the business of the 1998 Retail Acquisitions and the 1999 Retail Acquisitions, which are mostly located in the Midwestern United States where monuments cannot generally be set in cemeteries during the first three months of the year. Selling, general and administrative expenses ("SGA expenses") increased $2.3 million, or 57.7%, to $6.4 million for the 1999 period from $4.0 million for the 1998 period. As a percentage of net revenues, SGA expenses increased to 36.5% for the 1999 period from 26.7% for the 1998 period. These increases were primarily attributable to SGA expenses of the 1998 Retail Acquisitions and the 1999 Retail Acquisitions and to the Company's continuing investment in people and infrastructure to support its retailing growth. Interest expense increased $425,000, or 732.8%, to $483,000 for the 1999 period from $58,000 for the 1998 period. This increase was caused by increased borrowings under the Company's credit facilities to support its retail acquisition strategy. LIQUIDITY AND CAPITAL RESOURCES The Company considers liquidity to be its ability to meet its long and short-term cash requirements. Historically the Company has met these requirements primarily from cash generated by operating activities and periodic borrowings under commercial credit facilities. The Company's recent and pending acquisitions have increased its requirements for external sources of liquidity, and the Company anticipates that this trend will continue as it further implements its growth strategy. For the three months ended March 31, 1999, net cash used in operating activities was $3.1 million. This was the result of the operating loss in the quarter, a decrease in accounts payable and an increase in accounts receivable, all of which were partially offset by an increase in customer deposits. Net cash used in investing activities was $5.3 million. This was mostly due to acquisitions of monument retailers during the quarter. Net cash provided by financing activities was $7.2 million, most of which was provided by borrowings under the company's credit facilities. The Company has credit facilities pursuant to a financing agreement with the CIT Group/Business Credit ("CIT"). The agreement provides for an acquisition term loan line of credit of $25 million and a revolving credit facility of another $25 million. As of March 31, 1999 the revolving credit facility had $12.5 million outstanding and the term loan facility had $12 million outstanding. The interest rate on the revolving facility as of such date was 7.25% based on a formula of prime less .50%. The interest rate on the term loan as of such date was 6.97% based on a formula of LIBOR plus 1.75%. As of March 31, 1999, the Company also had $1.1 million outstanding and $1.2 available under a demand revolving line of credit with the Royal Bank of Canada. The interest rate on this facility as of such date was 7.25% based on a formula of Canadian prime plus .75%. The Company is in the process of negotiating a revised and expanded credit facility with a group of lenders; it expects to have this facility in place during the second or third quarter of 1999. The Company's primary need for capital will be to finance acquisitions of monument retailers as part of its growth strategy and to maintain and improve its existing manufacturing, quarrying and retailing facilities. The Company has $3.0 million budgeted for capital expenditures in 1999. The Company believes that the combination of cash flow from operations, its existing credit facilities, and cash on hand will be sufficient to fund its operations for at least the next twelve months. SEASONALITY Historically, the Company's operations have experienced certain seasonal patterns. Generally the Company's net sales have been highest in the third quarter and lowest in the first quarter of each year due primarily to weather. Cemeteries in northern areas generally do not accept granite memorials during winter months when the ground is frozen because they cannot be properly set. In addition, the Company typically closes certain of its Vermont and Canadian quarries during these months because of increased operating costs attributable to adverse weather conditions. As a result, the Company has historically incurred a net loss during the first three months of each calendar year. INFLATION The Company believes that the relatively moderate rates of inflation experienced in recent years have not had a significant effect on its results of operations. YEAR 2000 The Company has developed a plan to address the Year 2000 issue and is currently in the process of implementing that plan. Scope of Readiness. A large part of the Company's legacy IT systems would require substantial resources to become Year 2000 compliant. Instead of remediating those core systems, the Company decided to replace those systems with a purchased package that is Year 2000 compliant in addition to software written in house that is also Year 2000 compliant. This decision was based on Year 2000 compliance requirements as well as the need to upgrade the software to meet current and future business requirements. Installation of the purchased software was complete in 1998 and implementation of those systems is expected to be complete by mid- 1999. In house programming and the installation and implementation of purchased software packages is being performed by three information technology employees as well as two external programmer/analysts. Other IT infrastructure equipment is generally Year 2000 compliant, however, some hardware systems will be replaced by year end 1999. Support software is being evaluated by in-house personnel and will be remediated or replaced by mid-1999. Non-IT systems (HVAC systems, machine controls, and other similar systems) have been evaluated and are not materially affected by the Year 2000 compliance issue. Suppliers to the Company have been evaluated and management believes that critical suppliers do not have any Year 2000 compliance issues. The Company believes that products sourced from a non-critical supplier facing a Year 2000 compliance issue could be sourced elsewhere. Products manufactured by the Company do not utilize programmable logic to function and are not affected by Year 2000 compliance issues. Costs to Address Year 2000 Issues. Expenditures for Year 2000 remediation are not separable from the costs of software and hardware associated with the normal course of business. Year 2000 remediation costs are not expected to be material to the Company's financial position. Risk of Year 2000 Issues. The timing of a Year 2000 related disruption would coincide with a seasonal low in the Company's business cycle and thus have less impact on the business than it otherwise would during other parts of the cycle. The Company estimates the most likely worst case Year 2000 scenarios as follows: 1. A portion of non-core IT systems experience temporary disruption. Such disruption is not expected to have a material impact on the Company's ability to function. 2. A portion of the manufacturing operations experience temporary disruption. Such disruption is not expected to have a material impact on the Company's ability to function. 3. A portion of the supplier base experiences disruption. Such disruption is not expected to have a material impact on the Company's ability to function. Contingency Plans. Although the Company has not yet developed a contingency plan for each of the scenarios above, the Company would respond to those scenarios as follows: 1. A contingency plan will be developed if the perceived risk increases. 2. It is expected that normal safety block levels would cover such a scenario. Appropriate levels will be determined by business conditions and perceived risk. 3. The Company would source materials from alternative suppliers. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company has financial instruments that are subject to interest rate risk, principally debt obligations under its credit facilities. Historically, the Company has not experienced material gains or losses due to interest rate changes. Based on the Company's current variable rate debt obligations, the Company believes its exposure to interest rate risk is not material. The Company is subject to foreign currency exchange rate risk primarily from the operations of its Canadian subsidiary. Based on the size of this subsidiary and the Company's corresponding exposure to changes in the Canadian/U.S. dollar exchange rate, the Company does not consider its market exposure relating to currency exchange to be material. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Number Exhibits 3.1 Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1 (File No. 333-33685) filed with the Securities and Exchange Commission on August 15, 1997 and declared effective on October 20, 1997) 3.2 Amended and Restated By-Laws of the Company (as amended through April 6, 1999) 11 Statement regarding computation of per share earnings 27 Financial Data Schedule (b) Reports Submitted on Form 8-K: The Registrant did not file any reports on Form 8-K during the quarter ended March 31, 1999. SIGNATURE 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 hereunto duly authorized. ROCK OF AGES CORPORATION Dated: May 17, 1999 By: /s/ John L. Forney ----------------------------- John L. Forney Vice President, Chief Financial Officer and Treasurer Exhibit Index Exhibits 3.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-1 (File No. 333- 33685) filed with the Securities and Exchange Commission on August 15, 1997 and declared effective on October 20, 1997) 3.2 Amended and Restated By-Laws of the Company (as amended through April 6, 1999) 11 Statement regarding computation of per share earnings 27 Financial Data Schedule EXHIBIT 3.2 EXHIBIT 11 Statement Regarding Computation of Net Loss Per Share (Unaudited) Net loss per share - basic, is computed by dividing losses available for common shares by the weighted average number of common shares outstanding during each year. Net loss per share - diluted, is computed by dividing losses available for common shares by the weighted average number of common shares outstanding during each year, adjusted to include the additional number of common shares that would have been outstanding if the dilutive potential common shares had been issued. Potential common shares are not included in the diluted earnings per share calculations where the effect of their inclusion would be antidilutive. EX-3 2 EXHIBIT 3.2 - BY-LAWS EXHIBIT 3.2 AMENDED AND RESTATED BY-LAWS OF ROCK OF AGES CORPORATION (hereinafter called the "Corporation") (as amended through April 6, 1999) ARTICLE I OFFICES Section 1. Registered Office. The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. Other Offices. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors of the Corporation (the "Board of Directors") may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware as shall be designated from time to time by the Board of Directors. Section 2. Annual Meetings. The Annual Meetings of Stockholders for the election of directors shall be held on such date and at such time as shall be designated from time to time by the Board of Directors. Section 3. Nature of Business at Annual Meetings. No business may be transacted at an Annual Meeting of Stockholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) otherwise properly brought before the Annual Meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (c) otherwise properly brought before the Annual Meeting by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 3 and on the record date for the determination of stockholders entitled to vote at such Annual Meeting and (ii) who complies with the notice procedures set forth in this Section 3. In addition to any other applicable requirements, for business to be properly brought before an Annual Meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding Annual Meeting of Stockholders; provided, however, that in the event that the Annual Meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the later of (i) the ninetieth (90th) day preceding the date of the Annual Meeting and (ii) the tenth (10th) day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure of the date of the Annual Meeting was made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary must set forth as to each matter such stockholder proposes to bring before the Annual Meeting (i) a brief description of the business desired to be brought before the Annual Meeting and the reasons for conducting such business at the Annual Meeting, (ii) the name and record address of such stockholder, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the Annual Meeting to bring such business before the meeting. No business shall be conducted at the Annual Meeting of Stockholders except business brought before the Annual Meeting in accordance with the procedures set forth in this Section 3; provided, however, that, once business has been properly brought before the Annual Meeting in accordance with such procedures, nothing in this Section 3 shall be deemed to preclude discussion by any stockholder of any such business. If the Chairman of an Annual Meeting determines that business was not properly brought before the Annual Meeting in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the business was not properly brought before the Annual Meeting and such business shall not be transacted. Section 4. Special Meetings. Unless otherwise required by law or by the certificate of incorporation of the Corporation, as amended and restated from time to time (the "Certificate of Incorporation"), Special Meetings of Stockholders, for any purpose or purposes, may be called only by (i) the Chairman (if there be one), (ii) the President, (iii) any Vice President (if there be one), (iv) the Secretary or (v) any Assistant Secretary (if there be one), and shall be called by any such officer at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting. At a Special Meeting of Stockholders, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement thereto). Section 5. Nomination of Directors at Annual and Special Meetings. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation with respect to the right of holders of preferred stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any Annual Meeting of Stockholders, or at any Special Meeting of Stockholders called for the purpose of electing directors, (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder of record on the date of the giving of the notice provided for in this Section 5 and on the record date for the determination of stockholders entitled to vote at such meeting and (ii) who complies with the notice procedures set forth in this Section 5. In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder's notice to the Secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (a) in the case of an Annual Meeting, not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary date of the immediately preceding Annual Meeting of Stockholders; provided, however, that in the event that the Annual Meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the later of (i) the ninetieth (90th) day preceding the date of the Annual Meeting and (ii) the tenth (10th) day following the day on which such notice of the date of the Annual Meeting was mailed or such public disclosure of the date of the Annual Meeting was made, whichever first occurs; and (b) in the case of a Special Meeting of Stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the Special Meeting was mailed or public disclosure of the date of the Special Meeting was made, whichever first occurs. To be in proper written form, a stockholder's notice to the Secretary must set forth (a) as to each person whom the stockholder proposes to nominate for election as a director, (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder; and (b) as to the stockholder giving the notice, (i) the name and record address of such stockholder, (ii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iii) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (iv) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in such stockholder's notice and (v) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 5. If the Chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the Chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. Section 6. Notice. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise required by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. Section 7. Adjournments. Any meeting of the stockholders may be adjourned from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 8. Quorum. Unless otherwise required by law or the Certificate of Incorporation, the holders of capital stock of the Corporation representing a majority of the total votes represented by all outstanding capital stock of the Corporation, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. A quorum, once established, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, in the manner provided in Section 7, until a quorum shall be present or represented. Section 9. Voting. Unless otherwise required by law, the Certificate of Incorporation or these By-laws, any question brought before any meeting of stockholders, other than the election of directors, shall be decided by the vote of the holders of a majority of the total number of votes of the capital stock represented and entitled to vote thereat, voting as a single class. Subject to Section 5 of Article V hereof, each stockholder represented at a meeting of stockholders shall be entitled to cast the number of votes as provided in the Certificate of Incorporation. Such votes may be cast in person or by proxy but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in such officer's discretion, may require that any votes cast at such meeting shall be cast by written ballot. Section 10. Action by Consent of Stockholders in Lieu of Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken at any Annual or Special Meeting of Stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered in the manner required by this Section 10 to the Corporation, written consents signed by a sufficient number of holders to take action are delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Corporation as provided above in this section. Section 11. List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present. Section 12. Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 11 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. Section 13. Conduct of Meetings. The Board of Directors of the Corporation may adopt by resolution such rules and regulations for the conduct of the meeting of the stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of any meeting of the stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (iii) rules and procedures for maintaining order at the meeting and the safety of those present; (iv) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (v) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (vi) limitations on the time allotted to questions or comments by participants. ARTICLE III DIRECTORS Section 1. Election of Directors. Except as otherwise required by law or the Certificate of Incorporation, directors shall be elected by a plurality of the votes cast at the Annual Meetings of Stockholders and each director so elected shall hold office until the next Annual Meeting of Stockholders and until such director's successor is duly elected and qualified, or until such director's earlier death, resignation or removal. Any director may resign at any time upon written notice to the Corporation. Directors need not be stockholders. Section 2. Duties and Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws required to be exercised or done by the stockholders. Section 3. Meetings. The Board of Directors may hold meetings, both regular and special, either within or without the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman (if there be one), the Chief Executive Officer (if there be one), the President, or by any other officer of the Corporation upon the request of a majority of the directors then in office. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone or telegram on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Section 4. Quorum. Except as otherwise required by law or the Certificate of Incorporation, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the adjourned meeting, until a quorum shall be present. Section 5. Actions by Written Consent. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Section 6. Meetings by Means of Conference Telephone. Members of the Board of Directors of the Corporation, or any committee thereof, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 6 shall constitute presence in person at such meeting. Section 7. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent permitted by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each committee shall keep regular minutes and report to the Board of Directors when required. Section 8. Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid such other compensation as may be determined by the Board of Directors from time to time. Section 9. Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because the director or officer's vote is counted for such purpose if (i) the material facts as to the director or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to the director or officer's relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. ARTICLE IV OFFICERS Section 1. General. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, also may choose a Chief Executive Officer, Chairman of the Board of Directors (who must be a director) and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law or the Certificate of Incorporation. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation. Section 2. Election. The Board of Directors, at its first meeting held after each Annual Meeting of Stockholders (or action by written consent of stockholders in lieu of the Annual Meeting of Stockholders), shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier death, resignation or removal. Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. Section 3. Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chief Executive Officer (if there be one), the President or any Vice President or any other officer authorized to do so by the Board of Directors and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. Section 4. Chairman of the Board of Directors; Chief Executive Officer. The Chairman of the Board of Directors (if there be one) shall preside at all meetings of the stockholders and of the Board of Directors. Except where by law the signature of the President is required, each of the Chairman of the Board of Directors (if there be one) and the Chief Executive Officer (if there be one) shall possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors. During the absence or disability of the President, the Chairman of the Board of Directors or the Chief Executive Officer, as the Board of Directors shall determine, shall exercise all the powers and discharge all the duties of the President. The Chairman of the Board of Directors and the Chief Executive Officer shall also perform such other duties and may exercise such other powers as may from time to time be assigned by these By-Laws or by the Board of Directors. Section 5. President. The President shall, subject to the control of the Board of Directors and, if there be one, the Chief Executive Officer, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these By- Laws, the Board of Directors or the President. In the absence or disability of the Chairman of the Board of Directors, or if there be none, the President shall preside at all meetings of the stockholders and the Board of Directors. The President shall also perform such other duties and may exercise such other powers as may from time to time be assigned to such officer by these By-Laws or by the Board of Directors. Section 6. Vice Presidents. At the request of the President or in the President's absence or in the event of the President's inability or refusal to act (and if there be no Chief Executive Officer or Chairman of the Board of Directors), the Vice President, or the Vice Presidents if there is more than one (in the order designated by the Board of Directors), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice President shall perform such other duties and have such other powers as the Board of Directors from time to time may prescribe. If there be no Chairman of the Board of Directors, Chief Executive Officer or Vice President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Section 7. Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for committees of the Board of Directors when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board of Directors (if there be one), the Chief Executive Officer (if there be one) or the President, under whose supervision the Secretary shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors, the Chief Executive Officer (if there be one) or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation, and the Secretary or any Assistant Secretary (if there be one) shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest to the affixing by such officer's signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. Section 8. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Chief Executive Officer (if there be one), the President or the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Chief Executive Officer (if there be one), the President or the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer (if there be one), the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of the Treasurer and for the restoration to the Corporation, in case of the Treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the Treasurer's possession or under the Treasurer's control belonging to the Corporation. Section 9. Assistant Secretaries. Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer (if there be one), the President, any Vice President (if there be one) or the Secretary, and in the absence of the Secretary or in the event of the Secretary's disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 10. Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer (if there be one), the President, any Vice President (if there be one) or the Treasurer, and in the absence of the Treasurer or in the event of the Treasurer's disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of the office of Assistant Treasurer and for the restoration to the Corporation, in case of the Assistant Treasurer's death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in the Assistant Treasurer's possession or under the Assistant Treasurer's control belonging to the Corporation. Section 11. Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. ARTICLE V STOCK Section 1. Form of Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board of Directors, the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. Section 2. Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or the owner's legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of such new certificate. Section 4. Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these By-Laws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by such person's attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred. Section 5. Record Date. (a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. Section 6. Record Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise required by law. ARTICLE VI NOTICES Section 1. Notices. Whenever written notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, such notice may be given by mail or by a nationally recognized overnight delivery service, addressed to such director, member of a committee or stockholder, at such person's address as it appears on the records of the Corporation, with postage thereon prepaid if by mail, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail or if applicable, entrusted to such nationally recognized overnight delivery service. Written notice may also be given personally or by telegram, telex or cable. Section 2. Waivers of Notice. Whenever any notice is required by law, the Certificate of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed, by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. Attendance of a person at a meeting, present in person or represented by proxy, shall constitute a waiver of notice of such meeting, except where the person attends the meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE VII GENERAL PROVISIONS Section 1. Dividends. Dividends upon the capital stock of the Corporation, subject to the requirements of the General Corporation Law of the State of Delaware and the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting of the Board of Directors (or any action by written consent in lieu thereof in accordance with Section 5 of Article III hereof), and may be paid in cash, in property or in shares of the Corporation's capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. Section 2. Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII INDEMNIFICATION Section 1. Power to Indemnify in Actions, Suits or Proceedings other than Those by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director or officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that such person's conduct was unlawful. Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation. Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 3. Authorization of Indemnification. Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such determination shall be made (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (ii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion or (iii) by the stockholders. To the extent, however, that a director or officer of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith, without the necessity of authorization in the specific case. Section 4. Good Faith Defined. For purposes of any determination under Section 3 of this Article VIII, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person's conduct was unlawful, if such person's action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term "another enterprise" as used in this Section 4 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be. Section 5. Indemnification by a Court. Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and notwithstanding the absence of any determination thereunder, any director or officer may apply to the Court of Chancery in the State of Delaware for indemnification to the extent otherwise permissible under Sections 1 and 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because such person has met the applicable standards of conduct set forth in Section 1 or 2 of this Article VIII, as the case may be. Neither a contrary determination in the specific case under Section 3 of this Article VIII nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application. Section 6. Expenses Payable in Advance. Expenses incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation as authorized in this Article VIII. Section 7. Nonexclusivity of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by or granted pursuant to this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Certificate of Incorporation, any By- Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Section 1 or 2 of this Article VIII but whom the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise. Section 8. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power or the obligation to indemnify such person against such liability under the provisions of this Article VIII. Section 9. Certain Definitions. For purposes of this Article VIII, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VIII, references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VIII. Section 10. Survival of Indemnification and Advancement of Expenses. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 11. Limitation on Indemnification. Notwithstanding anything contained in this Article VIII to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 hereof), the Corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation. Section 12. Indemnification of Employees and Agents. The Corporation may, to the extent authorized from time to time by the Board of Directors, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VIII to directors and officers of the Corporation. ARTICLE IX AMENDMENTS Section 1. Amendments. Subject to the voting requirements set forth in the Certificate of Incorporation, these By-Laws may be altered, amended or repealed, in whole or in part, or new By-Laws may be adopted by the stockholders or by the Board of Directors. Section 2. Entire Board of Directors. As used in this Article IX and in these By-Laws generally, the term "entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies. * * * EX-27 3 ART. 5 FDS FOR 1ST QUARTER 1999
5 1,000 DEC-31-1999 JAN-01-1999 MAR-31-1999 3-MOS 3,621 0 16,156 1,796 25,685 49,895 78,120 32,507 130,214 27,802 0 77 0 0 84,977 130,214 17,518 17,518 13,228 13,228 6,658 0 483 (2,851) (717) (2,134) 0 0 122 (2,012) (.27) (.27)
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