SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended May 31, 1996 Commission File Number 0-748
McCORMICK & COMPANY, INCORPORATED
(Exact name of registrant as specified in its charter)
MARYLAND 52-0408290
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
18 Loveton Circle, P. O. Box 6000, Sparks, MD 21152-6000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (410) 771-7301
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to filing requirements for
the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Shares Outstanding
June 30, 1996
Common Stock 11,779,473
Common Stock Non-Voting 69,359,717
10Q.mz
McCORMICK & COMPANY, INCORPORATED
INDEX - FORM 10-Q
May 31, 1996
Page No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statement of Income 2
Condensed Consolidated Balance Sheet 3
Condensed Consolidated Statement of Cash Flows 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. OTHER INFORMATION
Item 4. Submission of matters to a vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
McCORMICK & COMPANY, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In Thousands Except Per Share Amounts)
Three Months Ended Six Months Ended
May 31, May 31,
1996 1995 1996 1995
Net sales $435,664 $444,983 $867,486 $870,416
Cost of goods sold 301,786 293,672 590,574 577,289
Gross profit 133,878 151,311 276,912 293,127
Selling, general and
administrative expense 105,607 111,570 223,501 209,443
Profit from operations 28,271 39,741 53,411 83,684
Other inc. (expense)-net (633) (1,268) 608 581
Interest expense 12,042 14,137 24,394 27,787
Income before income taxes 15,596 24,336 29,625 56,478
Income taxes 5,530 8,760 10,505 20,760
Income from consolidated
operations 10,066 15,576 19,120 35,718
Income (loss) from uncon-
solidated operations 929 466 1,225 (330)
Net income $ 10,995 $ 16,042 $ 20,345 $ 35,388
Earnings per common share $0.14 $0.20 $0.25 $0.44
Cash dividends declared per
common share $0.14 $0.13 $0.28 $0.26
Weighted average common
shares outstanding 81,305 81,161 81,275 81,170
See notes to condensed consolidated financial statements.
(2)
McCORMICK & COMPANY, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands)
May 31, May 31, Nov. 30,
1996 1995 1995
ASSETS
Current Assets
Cash and cash equivalents $ 20,787 $ 18,607 $ 12,465
Accounts receivable - net 185,330 201,106 223,958
Inventories
Raw materials and supplies 139,261 136,681 132,357
Finished products and work-in
process 214,005 252,749 250,865
353,266 389,430 383,222
Other current assets 51,590 61,524 51,073
Total current assets 610,973 670,667 670,718
Property - net 528,434 512,770 524,807
Goodwill - net 175,500 186,265 180,751
Prepaid allowances 167,618 207,672 183,357
Other assets 68,688 57,374 54,708
Total assets $1,551,213 $1,634,748 $1,614,341
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $294,348 $335,940 $297,313
Accounts payable, trade 134,082 152,983 146,674
Accrued liabilities 165,025 190,183 202,880
Total current liabilities 593,455 679,106 646,867
Long-term debt 337,805 362,952 349,111
Deferred income taxes 19,428 23,120 25,436
Employee benefit liabilities 89,824 75,253 72,088
Other liabilities 2,326 16,488 1,586
Total liabilities 1,042,838 1,156,919 1,095,088
Shareholders' Equity
Common Stock 49,843 49,180 48,133
Common Stock Non-Voting 116,302 107,689 112,522
Retained earnings 378,354 346,802 387,657
Foreign currency translation adj. (36,124) (25,842) (29,059)
Total shareholders' equity 508,375 477,829 519,253
Total liabilities and
shareholders' equity $1,551,213 $1,634,748 $1,614,341
See notes to condensed consolidated financial statements.
(3)
McCORMICK & COMPANY, INCORPORATED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In Thousands)
Six Months Ended
May 31, May 31,
1996 1995
Operating Activities
Net income $ 20,345 $ 35,388
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Non cash charges and credits
Depreciation and amortization 33,007 31,680
Restructuring credits 0 (3,904)
(Income) loss from unconsolidated operations (1,225) 330
Other (1,362) 1,192
Changes in selected working capital items
Accounts receivable 36,020 5,173
Inventories 24,075 (16,829)
Prepaid allowances 5,243 (64,479)
Accounts payable, trade (11,053) 8,022
Other assets and liabilities (29,616) (41,231)
Net cash provided by (used in) operating activities 75,434 (44,658)
Investing Activities
Capital expenditures (40,144) (35,445)
Proceeds from sale of assets 15,074 383
Other investments (1,089) (3,879)
Proceeds from forward exchange contract 0 4,361
Net cash used in investing activities (26,159) (34,580)
Financing Activities
Short-term borrowings, net (3,615) 126,257
Long-term debt
Borrowings 2,242 1,021
Repayments (13,176) (17,028)
Common stock
Issued 7,904 5,326
Acquired by purchase (9,586) (12,554)
Dividends paid (22,768) (21,096)
Net cash (used in) provided by financing activities (38,999) 81,926
Effect of exchange rate changes on cash and
cash equivalents (1,954) 353
Increase in cash and cash equivalents 8,322 3,041
Cash and cash equivalents at beginning of period 12,465 15,566
Cash and cash equivalents at end of period $ 20,787 $ 18,607
See notes to condensed consolidated financial statements.
(4)
McCORMICK & COMPANY, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions
to Form 10-Q and do not include all the information and notes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, the
accompanying condensed consolidated financial statements contain
all adjustments, consisting of only normal recurring accruals,
necessary to present fairly the financial position and the results
of operations for the interim periods. Certain reclassifications
have been made to the 1995 financial statements to conform with the
1996 presentation.
The results of consolidated operations for the three and six month
periods ended May 31, 1996 are not necessarily indicative of the
results to be expected for the full year. Historically, the
Company's consolidated sales and profits are lower in the first two
quarters of the fiscal year, and increase in the third and fourth
quarters.
For further information, refer to the consolidated financial
statements and notes included in the Company's Annual Report on
Form 10-K for the year ended November 30, 1995.
Restructuring - 1994
In the fourth quarter of 1994, the Company recorded a $70.4 million
charge for restructuring its business operations.
The components of the restructuring charge and remaining liability,
in thousands of dollars, are as follows:
5/31/96 11/30/95
Remaining Remaining Restructuring
Liability Liability Charge
Work force reduction $ 681 $ 977 $24,375
Plant consolidations
and closings 16,563 17,563 33,477
Other restructuring
projects 143 378 12,593
$17,387 $18,918 $70,445
(5)
McCORMICK & COMPANY, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Thousands Except per Share Amounts)
Subsequent Event
In June 1996, the Company's Board of Directors approved and the
Company announced a restructuring plan designed to position the
organization for the future. In connection with this plan the
Company will record a charge of approximately $57 million in the
third quarter of 1996. This charge will reduce net income by
$39 million or $.48 per share. In addition there are approximately
$3 million of additional charges ($.02 per share) directly related
to the restructuring plan which could not be accrued in the third
quarter but will be expensed as the plan is implemented.
Specific actions under this plan include the divestiture of certain
small non-core businesses; the divestiture of Giza National
Dehydration Company of Cairo, Egypt (Giza), which is consistent with
the Company's decision to sell Gilroy Foods, Giza's parent company;
closing the Brooklyn, NY packaging plant; the exit from certain
minor, non-core product lines; the rationalization of certain
overseas manufacturing facilities; and in our consumer business the
conversion from a direct sales force to a broker sales force for
certain regions in the U.S.
Major components of the restructuring charge include: severance and
personnel costs of $10 million; a $45 million writedown of assets
and businesses identified for disposal to net realizable value; and
other exit costs of $2 million. The $3 million of additional
charges which will be expensed during the implementation are
principally costs to move equipment and personnel.
These actions are expected to be completed within one year and will
require net cash outflows of approximately $12 million. Net sales
related to these actions, principally the divestiture of certain
small non-core businesses and Giza, were approximately 5% of
consolidated net sales.
(6)
McCORMICK & COMPANY, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
For the second quarter ended May 31, 1996 the Company reported net
income of $11.0 million or $.14 per common share compared to $16.0
million or $.20 per common share for the comparable period last
year. For the six months ended May 31, 1996 net income was $20.3
million or $.25 per common share compared to $35.4 million or $.44
per common share for the same period last year. The decrease in
net income for the second quarter is mainly due to the effect of
decreased sales volumes in domestic consumer products and a
writeoff of obsolete product in the Company's Tubed Products
packaging business. Net income for the six months decreased mainly
due to the second quarter issues noted above and significant
planned spending increases in the first quarter of 1996 on consumer
advertising and promotion. Earnings for 1995 included net income
of $1.4 million for a change in accounting cycle for certain
foreign operations and $2.3 million net income for a reversal of
restructuring liability.
In the second quarter the Company announced the signing of letters
of intent to sell the Gilroy Foods and Gilroy Energy businesses.
Gilroy Foods is the Company's garlic and onion dehydration business
and the letter of intent was signed with ConAgra, Inc. Gilroy
Energy is a 120 megawatt cogeneration unit and the letter of intent
was signed with Calpine Corporation. Both transactions are subject
to Board approval by both companies and completion of definitive
agreements. Combined 1995 sales of both businesses were $233
million, including sales to McCormick.
Business Restructuring
Over the past several years the Company has experienced a
significantly increased global competitive environment and expects
this to continue into the foreseeable future. Additionally, there
have been several changes in management of the Company. These two
factors have been the primary drivers in a reassessment of the
global strategic direction and focus of the Company. As a result
the Company has been conducting a portfolio review of its
businesses with the intent of increasing focus on core businesses.
Additionally, the Company is continually evaluating methods of
improving its cost structure as it responds to the competitive
environment.
As a result of both the portfolio review and the cost structure
improvement process the Company's Board of Directors approved and
the Company announced a business restructuring plan in June 1996.
In connection with this plan the Company will record a charge of
approximately $57 million in the third quarter of 1996. This
charge will reduce net income by approximately $39 million or $.48
per share. In addition there are approximately $3 million of
additional charges ($.02 per share) directly related to the
restructuring plan which could not be accrued in the third quarter
but will be expensed as the plan is implemented.
(7)
Specific actions under this plan include the divestiture of certain
small non-core businesses; the divestiture of Giza National
Dehydration Company of Cairo, Egypt (Giza), which is consistent
with the Company's decision to sell Gilroy Foods, Giza's parent
company; closing the Brooklyn, NY packaging plant; the exit from
certain minor, non-core product lines; the rationalization of
certain overseas manufacturing facilities; and in our consumer
business the conversion from a direct sales force to a broker sales
force for certain regions in the U.S.
Major components of the restructuring charge include: severance and
personnel costs of $10 million; a $45 million writedown of assets
and businesses identified for disposal, to net realizable value;
and other exit costs of $2 million. The $3 million of additional
charges which will be expensed during the implementation are
principally costs to move equipment and personnel.
These actions are expected to be completed within one year and will
require net cash outflows of approximately $12 million. Net Sales
related to these actions, principally the divestiture of certain
small non-core businesses and Giza, were approximately 5% of
consolidated net sales.
The Company believes that the benefits from these actions will be
twofold. First, the Company will be strategically aligned to
concentrate on its core businesses. Secondly, the Company
anticipates savings as a result of these actions. These savings
will be used to invest in the Company's brands through product
development and consumer promotional activity, maintain low-cost
producer status in our core businesses, and support our global
expansion strategy.
The Company believes that this restructuring will significantly
enhance its ability to achieve its financial objectives.
Realization of the savings from these actions, however, is
dependent on the timing and effectiveness of the execution of these
actions and the response of our competitors and customers.
Results of Operations
Consolidated net sales for the quarter ended May 31, 1996 decreased
2% and were flat for the six month period ended May 31, 1996 as
compared to the corresponding periods of 1995. Net sales in 1995
included the effect of an accounting cycle change for certain
foreign operations and sales of certain divested businesses.
Excluding these factors, net sales were flat for the quarter and
increased 5% for the six month period. For the second quarter unit
volume increased 1% as compared to last year but was offset by the
negative effects of translating sales of foreign operations. The
combined effects of price changes and changes in mix of products
had no effect on sales. U.S. sales of consumer products decreased
significantly for the quarter as compared to last year. The two
principal reasons for this decrease compared to last year were: the
timing of price increases which caused 1996 sales to be higher in
(8)
the first quarter while 1995 sales were affected in the second
quarter, and a general trade movement to reduce inventories. The
decrease in U.S. consumer product sales was offset by increases in
most other businesses and geographic areas. For the six months the
5% increase over last year was all driven by unit volume increases.
A 1% decrease due to foreign exchange effects was offset by a
corresponding increase due to price and mix of product.
Profit from operations as a percentage of sales decreased from 8.9%
to 6.5% for the quarter and from 9.6% to 6.2% for the six months as
compared to last year.
Gross profit as a percentage of sales decreased from 34.0% to 30.7%
and from 33.7% to 31.9% for the quarter ended and six months ended,
respectively as compared to last year. The decrease in the gross
margin percentage in the second quarter is due to the effect of
sales volume decreases in U.S. consumer products, a writeoff of
inventory for products that have been discontinued in the Tubed
Product packaging business, and continued competitive pressure.
For the six months the gross profit percentage decreased due to the
second quarter inventory writeoff and continued competitive
pressure.
Selling, general and administrative expenses for the second quarter
were lower than last year on both a dollar basis and as a
percentage of sales. The principal reason for the decrease as a
percentage of sales was the effect of changes in sales mix between
retail and industrial businesses on advertising and promotion.
While advertising and promotion as a percentage of sales for the
U.S. retail business was up slightly, on a decreased sales base,
this was more than offset by the change in mix to more industrial
business sales in the second quarter which require less advertising
and promotion. For the six months, selling, general and
administrative expenses have increased in both dollar terms and as
a percentage of sales as compared to last year. This increase is
due to increased advertising and promotion in the first quarter of
1996 and the reversal of restructuring reserves in the first
quarter of 1995.
Interest expense decreased $2.1 million and $3.4 million for the
second quarter and six months ended May 31, 1996, respectively.
This decrease is due to both declines in borrowing levels and lower
borrowing rates.
The Company's effective tax rate for the six months ended May 1996
was 35.5% as compared to 36.8% for the same period last year. The
decrease in the effective tax rate reflects the Company's emphasis
on increased tax planning.
Income from unconsolidated operations improved in the second
quarter and six months ended May 1996 mainly due to improved
results of our Mexican joint venture.
(9)
In the first quarter of fiscal 1995, the Company changed the end of
the reporting period for foreign subsidiaries from October 31 to
November 30 to provide uniform reporting on a worldwide basis.
Accordingly, an additional month of operating results for those
subsidiaries is included in the first quarter 1995 results, which
increased net income by $1.4 million.
Return on equity (ROE) increased to 17% at May 31, 1996, from 12%
at May 31, 1995.
Restructuring - 1994
In the fourth quarter of 1994, the Company recorded a charge of
$70.4 million for restructuring its business operations. As of
May 31, 1996, $17.4 million remains to be spent against the
restructuring liability. The Company has reduced its workforce by
approximately 540 positions, an industrial products plant has been
closed, a frozen food business has been sold and a number of
administrative activities have been consolidated. A foodservice
products plant was closed in the second quarter of 1996, and
production was transferred to another facility. A consolidated
distribution facility was also completed in the second quarter of
1996. A realignment of some of our operations in the United
Kingdom will occur over the balance of 1996 and be completed in
1997.
Financial Condition
In the Condensed Consolidated Statement of Cash Flows, cash flow
from operating activities increased from a cash outflow of
$44.7 million for the six months ended May 31, 1995 to a cash
inflow of $75.4 million for the six months ended May 31, 1996. The
reduction in 1996 net income was more than offset by reduced
spending on restructuring and reductions in prepaid allowances and
inventory as opposed to those balances increasing in 1995.
Cash outflow from investing activities are less than last year.
Capital expenditures are slightly higher in the first six months of
1996 as compared to last year, however, they are expected to be
slightly below last year on a full year basis. The proceeds from
sale of assets include the sale of certain assets to a joint
venture which is now operating the Cake Mate business and the sale
of property no longer used in the business.
The Company's ratio of interest-bearing debt to total capital was
55.4% as of May 31, 1996, comparable to 55.5% at November 30, 1995,
but down significantly from 59.4% at May 31, 1995. The improvement
in the debt to capital ratio from the prior year is the result of
working capital improvement programs. Total debt decreased $14.3
million during the first six months of 1996 and $66.7 million since
May 31, 1995.
Management believes that internally generated funds and its
existing sources of liquidity are sufficient to meet current and
anticipated financing requirements over the next 12 months.
(10)
PART II - OTHER INFORMATION
Item 4 Submission of matters to a vote of Security Holders
(a) The Company held its annual meeting of stockholders on
March 20, 1996.
(b) No response required.
(c) 1. The following individuals were nominees for The Board of
Directors. The number of votes for or withheld for each
nominee is as follows: James J. Albrecht - for 11,384,114,
withheld 57,414; James S. Cook - for 11,381,267, withheld
60,261; Robert G. Davey - for 11,377,753, withheld 63,775;
George W. Koch - for 11,381,337, withheld 60,191; Robert J.
Lawless - for 11,390,235, withheld 51,293; Charles P.
McCormick, Jr. - for 11,372,568, withheld 68,960; George V.
McGowan - for 11,381,337, withheld 60,191; Carroll D.
Nordhoff - for 11,385,739, withheld 55,789; Richard W.
Single, Sr. - for 11,383,477, withheld 58,051; William E.
Stevens - for 11,388,127, withheld 53,401; Karen D.
Weatherholtz - for 11,392,567, withheld 48,961.
2. The ratification of the appointment of Ernst & Young as
independent auditors. The number of votes for, against or
abstaining is as follows: For 11,341,965; Against 32,995;
Abstain 66,568.
(d) No response required.
Item 6 Exhibits and Reports on Form 8-K
(a) Item 601 Exhibit No.:
(3) Articles of Incorporation
and By-Laws
Restatement of Charter of Incorporated by reference
McCormick & Company, from Registrant's Form S-8
Incorporated dated Registration Statement
April 16, 1990. No. 33-39582 as filed with
the Securities and Exchange
Commission on March 25, 1991.
Articles of Amendment to Incorporated by reference
Charter of McCormick & from Registration Form S-8
Company, Incorporated Registration Statement
dated April 1, 1992. No. 33-59842 as filed with
the SEC on March 19, 1993.
By-Laws of McCormick & Attached.
Company, Incorporated -
Restated and Amended as
of June 17, 1996.
(b) Report on Form 8-K. On June 13, 1996, the Company filed a
report on Form 8-K, in response to Item 5 Other Events of
Form 8-K, which incorporated by reference a Press Release
dated June 7, 1996 announcing a major restructuring program.
(11)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
McCORMICK & COMPANY, INCORPORATED
Date: July 12, 1996 By: /s/ Robert G. Davey
Robert G. Davey
Vice President &
Chief Financial Officer
Date: July 12, 1996 By: /s/ J. Allan Anderson
J. Allan Anderson
Vice President & Controller
10Q-2.mz (12)
EXHIBIT (3)
BY-LAWS
of
McCORMICK & COMPANY, INCORPORATED
RESTATED AND AMENDED
AS OF JUNE 17, 1996
---------------------------------
ARTICLE I.
Office
1. (1)Principal Office. The principal office shall be at
18 Loveton Circle, Sparks, Maryland 21152-6000.
The Corporation may also have offices at such other
places as the Board of Directors may from time to time appoint, or the
business of the Corporation may require.
2. (2)Seal. The seal of the Corporation shall be in
circular form with the words:
McCormick & Company, Incorporated
Maryland 1915
encircling a large Mc.
ARTICLE II.
Stockholders' Meetings.
3. (3)Place of Meeting. All meetings of the stockholders
shall be held at the time and place determined by the Board of
Directors of the Corporation.
4. (4)Annual Meeting. An annual meeting for the election of
Directors and for the transaction of such other business as may be
properly brought before the meeting shall be held on the third
Wednesday in March of every year beginning with the year 1972.
5. (5)Notice of Annual Meetings; Waiver of Notice. Not less
than ten nor more than 90 days before each stockholders' meeting, the
Secretary shall give written notice of the meeting to each stockholder
entitled to vote at the meeting and each other stockholder entitled to
notice of the meeting. The notice shall state the time and place of
the meeting and, if the meeting is a special meeting or notice of the
purpose is required by statute, the purpose of the meeting. Notice is
given to a stockholder when it is personally delivered to him or her,
left at his or her residence or usual place of business, or mailed to
him or her at his or her address as it appears on the records of the
Corporation. Notwithstanding the foregoing provisions, each person
who is entitled to notice waives notice if he or she before or after
the meeting signs a waiver of the notice which is filed with the
records of stockholders' meetings, or is present at the meeting in
person or by proxy.
6. (6)Quorum; Voting; Adjournments. Unless statute or the
Charter provides otherwise, at a meeting of stockholders the presence
in person or by proxy of stockholders entitled to cast a majority of
all the votes entitled to be cast at the meeting constitutes a quorum,
and a majority of all the votes cast at a meeting at which a quorum is
present is sufficient to approve any matter which properly comes
before the meeting, except that a plurality of all the votes cast at a
meeting at which a quorum is present is sufficient to elect a
director. Whether or not a quorum is present, a meeting of
stockholders convened on the date for which it was called may be
adjourned from time to time without further notice by a majority vote
of the stockholders present in person or by proxy to a date not more
than 120 days after the original record date. Any business which
might have been transacted at the meeting as originally notified may
be deferred and transacted at any such adjourned meeting at which a
quorum shall be present.
7. (7)General Right to Vote; Proxies. Except where the
Charter limits or denies voting rights or provides for a greater or
lesser number of votes per share, each outstanding share of stock,
regardless of class, is entitled to one vote on each matter submitted
to a vote at a meeting of stockholders. In all elections for
directors, each share of stock may be voted for as many individuals as
there are directors to be elected and for whose election the share is
entitled to be voted. A stockholder may vote the stock the
stockholder owns of record either in person or by proxy. A
stockholder may sign a writing authorizing another person to act as
proxy. Signing may be accomplished by the stockholder or the
stockholder's authorized agent signing the writing or causing the
stockholder's signature to be affixed to the writing by any reasonable
means, including facsimile signature. A stockholder may authorize
another person to act as proxy by transmitting, or authorizing the
transmission of, a telegram, cablegram, datagram, or other means of
electronic transmission to the person authorized to act as proxy or to
a proxy solicitation firm, proxy support service organization, or
other person authorized by the person who will act as proxy to receive
the transmission. Unless a proxy provides otherwise, it is not valid
more than 11 months after its date. A proxy is revocable by a
stockholder at any time without condition or qualification unless the
proxy states that it is irrevocable and the proxy is coupled with an
interest. A proxy may be made irrevocable for so long as it is
coupled with an interest. The interest with which a proxy may be
coupled includes an interest in the stock to be voted under the proxy
or another general interest in the Corporation or its assets or
liabilities.
8. (8)List of Stockholders. A complete record of
stockholders entitled to vote at the ensuing election, arranged in
alphabetical order, with the residence of each and the number of
voting shares held by each shall be prepared by the Secretary and
filed in the office of the Secretary, at least ten days before every
election.
9. (9)Special Meetings. At any time in the interval between
annual meetings, a special meeting of the stockholders may be called
by the Chairman of the Board or the President or by a majority of the
Board of Directors by vote at a meeting or in writing (addressed to
the Secretary of the Corporation) with or without a meeting. Special
meetings of the stockholders shall be called by the Secretary at the
request of stockholders only as may be required by law and, if the
request is made on or after October 1, 1996, only if requested by
stockholders entitled to cast 50% of the votes entitled to be cast at
the meeting. A request for a special meeting shall state the purpose
of the meeting and the matters proposed to be acted on at it. The
Secretary shall inform the stockholders who make the request of the
reasonably estimated costs of preparing and mailing a notice of the
meeting and, on payment of these costs to the Corporation, notify each
stockholder entitled to notice of the meeting. Unless requested by
stockholders entitled to cast a majority of all the votes entitled to
be cast at the meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted
on at any special meeting of stockholders held in the preceding 12
months. Business transaction at all special meetings shall be
confined to the objects stated in the call.
10. (10)Conduct of Business and Voting. At all meetings of
stockholders, unless the voting is conducted by inspectors, the
proxies and ballots shall be received, and all questions touching the
qualifications of voters and the validity of proxies, the acceptance
or rejection of votes and procedures for the conduct of business not
otherwise specified by these By-Laws, the Charter or law, shall be
decided or determined by the chairman of the meeting. If demanded by
stockholders, present in person or by proxy, entitled to cast 25% in
number of votes entitled to be cast, or if ordered by the chairman,
the vote upon any election or questions shall be taken by ballot and,
upon like demand or order, the voting shall be conducted by two
inspectors, in which event the proxies and ballots shall be received,
and all questions touching the qualification of voters and the
validity of proxies and the acceptance or rejection of votes shall be
decided, by such inspectors. Unless so demanded or ordered, no vote
need be by ballot and voting need not be conducted by inspectors. The
stockholders at any meeting may choose an inspector or inspectors to
act at such meeting, and in default of such election the chairman of
the meeting may appoint an inspector or inspectors. No candidate for
election as a director at a meeting shall serve as an inspector
thereat.
11. (11)Stockholder Proposals. For any stockholder proposal
to be presented in connection with an annual meeting of stockholders
of the Corporation, including any proposal relating to the nomination
of a director to be elected to the Board of Directors of the
Corporation, the stockholders must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not less than 60 days
nor more than 90 days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced by more than 30 days or delayed
by more than 60 days from such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the
90th day prior to such annual meeting and not later than the close of
business on the later of the 60th day prior to such annual meeting or
the tenth day following the day on which public announcement of the
date of such meeting is first made. Such stockholder's notice shall
set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to being before the meeting, a
brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such stockholder and of the
beneficial owner, if any, on whose behalf the proposal is made; and
(c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made, (i) the
name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (ii) the class
and number of shares of stock of the Corporation which are owned
beneficially and of record by such stockholders and such beneficial
owner.
ARTICLE III.
Directors - Management of Company Vested in Directors.
12. (12)Management Vested in Directors. The business and
affairs of this Company shall be managed under the direction of its
Board of Directors. Directors shall be elected at the Annual Meeting
of Stockholders, and each Director shall be elected to serve until his
successor shall be elected and shall qualify, or until his death,
resignation or removal. A Director who is an employee of the
Corporation shall cease to be a Director concurrent with his
termination, resignation or retirement from active employment;
provided however, that the Chairman of the Board of Directors may
continue to serve until the next Annual Meeting of Stockholders
following his retirement from active employment. Non-employee
directors shall be ineligible for election or re-election to the Board
of Directors after reaching age 70. The Board of Directors shall keep
minutes of its meetings and a full account of its transactions. The
number of Directors may, by a vote of a majority of the entire Board
of Directors, be increased or decreased to such number (not less than
three, nor, unless this Section has been amended by the Board, more
than 20) as the Board of Directors may deem proper or expedient, but
such action shall not affect the tenure of office of any Director.
13. (13)Chairman and Vice Chairman of the Board of Directors.
The Board shall from time to time designate one of its members as
Chairman of the Board of Directors and may designate another of its
members as Vice Chairman of the Board of Directors. It shall be the
duty of the Chairman of the Board of Directors to preside at all
meetings of the Board and of stockholders, and of the Vice Chairman,
if any, to preside at such meetings in the absence of the Chairman.
14. Residual Power in Directors. In addition to the powers
and authorities by these By-Laws expressly conferred upon them, the
Board 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 directed or required to be
exercised or done by the stockholders.
15. (14)Compensation of Directors. The Board of Directors
shall by resolution determine what, if any, fees shall be paid to the
Directors for their services as members of the Board. Expenses of
attendance, if any, may be allowed for attendance at each or any
regular or special meeting of the Board.
16. (15)Annual Meeting of the Board of Directors. After each
meeting of stockholders at which the Board of Directors shall have
been elected, the Board of Directors shall meet for the purpose of
organization, and the transaction of other business at such time and
place as may be designated by the stockholders at said meeting or, in
the absence of such designation, shall meet as soon as practicable at
such place as may be designated by the Board of Directors. No notice
of such meeting shall be necessary to the newly elected directors in
order legally to constitute a meeting, provided a majority of the
whole Board shall be present.
17. Regular Meetings. Regular meetings of the Board may be
held without notice at such time and place as shall from time to time
be determined by the Board.
18. (16)Special Meetings. Special Meetings of the Board may
be called by the Chairman of the Board, the President, or the
Secretary by notice served personally upon each Director, or mailed,
telegraphed or telephoned to his address as shown upon the books of
the Company. Special meetings shall be called by the Chairman of the
Board, the President or Secretary in like manner and with like notice
on the written request of a majority of the Directors.
19. Quorum. At all meetings of the Board, a majority of
the Directors shall be necessary and sufficient to 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, except as may be otherwise
specifically provided by statute or by the certificate of
incorporation or by these By-Laws.
20. Removal of Directors. At any meeting of stockholders
called for the purpose, any director may by the vote of a majority of
all the shares of stock outstanding and entitled to vote be removed
from office, with or without cause, and another may be appointed in
the place of the person so removed, which other shall serve for the
remainder of the term.
21. Vacancies on Board of Directors. If any member shall
die or resign, or if the stockholders shall remove any director
without appointing another in his place, a majority of the remaining
directors (although such majority is less than a quorum) may elect a
successor to hold office for the unexpired portion of the term of the
director whose place shall have become vacant and until his successor
shall have been duly chosen and qualified. Vacancies in the Board of
Directors created by an increase in the number of directors may be
filled by the vote of a majority of the entire Board, as constituted
prior to such increase, and directors so elected by the Board to fill
such vacancies shall hold office until the next succeeding annual
meeting of the stockholders and thereafter until their successors
shall be elected and qualified.
22. (17)Committees. The Board of Directors, by resolution,
is authorized to appoint an Executive Committee from among its members
and grant to such committee any and all powers and duties authorized
by the applicable provisions of the Annotated Code of Maryland,
including specifically the authority for members of the Executive
Committee present at a meeting whether or not a quorum is present, to
appoint a member of the Board of Directors to act in the place of an
absent member of the Executive Committee.
The Board of Directors, by resolution, may provide for such
other standing or special committees from among the Directors or
employees of the Corporation, as the Board deems desirable, necessary
or expedient, and may discontinue the same at the Board's pleasure.
Each such committee shall have such power and perform such duties not
inconsistent with law or these By-Laws, as may be assigned to it by
the Board of Directors.
23. Compensation of Committees. Compensation of committee
members may be such as may be allowed by the Board of Directors.
ARTICLE IV.
Officers.
24. (18)Executive Officers. The Officers of this Corporation
shall be a Chairman of the Board of Directors, a President, one or
more Executive Vice Presidents, one or more Vice Presidents, a
Secretary, a Treasurer and other such officers as the Board of
Directors may deem necessary or expedient for the proper conduct of
the business of the Corporation. The officers of the Corporation
shall be elected annually by the Board of Directors at its first
meeting following the annual meeting of stockholders. Each such
officer shall hold office for a term of one year and thereafter until
his successor is elected and qualified, or until his death,
resignation, or removal.
25. (19)Chairman of the Board of Directors. The Chairman of
the Board of Directors shall have general direction over the policies
and affairs of the Corporation. He shall, when present, preside at
all meetings of stockholders and the Board of Directors. Except where
by law the signature of the President is required, the Chairman shall
possess the same power as the President to sign all certificates,
contracts, and other instruments of the Corporation which may be
authorized by the Board of Directors. During the absence or
disability of the President, he shall exercise all the powers and
discharge all the duties of the President. The Chairman of the Board
or the President may be the Chief Executive Officer of the
Corporation.
26. (20)President. The President shall have general and
active management of the business operations of the Corporation. The
President may also be the Chairman of the Board of Directors. He
shall report to the Chairman of the Board and shall keep the Board of
Directors informed concerning all matters within his knowledge which
the interests of the Corporation may require to be brought to their
notice. He shall have prepared annually a full and true statement of
the affairs of the Corporation which shall be submitted to the
stockholders at the Annual Meeting and he shall have additional
powers, obligations, and duties as may be assigned to him by the Board
of Directors. The President or an Executive Vice President may be the
Chief Operating Officer of the Corporation.
27. Executive Vice Presidents and Vice Presidents. The
Executive Vice Presidents and Vice Presidents shall have all such
powers and duties as may be assigned to them by the President or the
Board of Directors. In the absence of the President and Chairman of
the Board, an Executive Vice President or Vice President may be
designated to perform the duties and functions of the President.
28. Secretary. The Secretary shall keep a full and
accurate record of all meetings of the stockholders and directors,and
shall have the custody of all books and papers belonging to the
Company which are located in its principal office. He shall give, or
cause to be given, notice of all meetings of the stockholders and of
the Board of Directors, and all other notices required by law or by
these By-Laws. He shall be the custodian of the corporate seal or
seals; he shall see that the corporate seal is affixed to all
documents, the execution of which on behalf of the Corporation under
its seal is duly authorized, and when so affixed may attest the same;
and in general, he shall perform all duties ordinarily incident to the
office of a Secretary of a Corporation, and such other duties as from
time to time may be assigned to him by the Board of Directors.
29. Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of
the Corporation, and shall deposit, or cause to be deposited, in the
name of the Corporation all monies or other valuable effects in such
banks, trust companies, or other depositories as shall, from time to
time, be selected by the Board of Directors; he shall render to the
President and to the Board of Directors whenever requested, an account
of the financial condition of the Corporation; and in general, shall
perform all the duties ordinarily incident to the office of a
Treasurer of a corporation, and such other duties as may be assigned
to him by the Board of Directors or by the President.
30. Subordinate Officers. The Board of Directors may elect
such subordinate officers as it may deem desirable. Each such officer
shall hold office for such period, and shall have such authority and
perform such duties, as the Board of Directors may prescribe. The
Board of Directors may, from time to time, authorize any officer to
appoint subordinate officers and to prescribe the powers and duties
thereof.
31. Duties of Subordinate Officers. In addition to any
other duties prescribed by the Board of Directors, a subordinate
officer, if directed by the Board of Directors, shall perform all or
any part of the duties herein granted any officer.
32. Compensation. The Board of Directors shall have power
to fix the compensation of all officers and employees of the
Corporation. It may authorize any officer upon whom the power of
appointing subordinate officers may have been conferred to fix the
compensation of such subordinate officers, or may appoint a committee
to fix the salaries of all officers and may appoint an individual to
fix the salaries of employees.
33. Officers Holding More Than One Office. Two or more
offices (except that of President and Vice President) may be held by
the same person, but no officer shall execute, acknowledge or verify
any instrument in more than one capacity.
34. Removal. The Board of Directors shall have power at
any regular or special meeting to remove any officer with or without
cause, and such action shall be conclusive on the officer so removed.
The Board may authorize any officer to remove subordinate officers.
35. Vacancies. The Board of Directors at any regular or
special meeting shall have power to fill a vacancy occurring in any
office for the unexpired portion of the term.
ARTICLE V.
Power to Sign Papers and Instruments of Corporation
36. The Board of Directors, from time to time, shall have
full power and authority to appoint such officer or officers, agent or
agents, as it shall deem necessary, proper, or expedient, to sign all
deeds, mortgages, bonds, indentures, contracts, checks, drafts, notes,
obligations, orders for the payment of money, and other instruments,
papers, or documents which may be necessary, proper or expedient in
order to carry on the business of the Corporation.
ARTICLE VI.
Other Management Boards
37. The Board of Directors may provide for such other
management boards as they deem proper, necessary, and desirable for
efficient management of the Corporation's business, and may
discontinue or change the same at the Board's pleasure. Such boards
shall be selected from executive, administative, or professional
employees of the Corporation or its subsidiaries, or from employees
showing potential ability in these classifications as determined by
scientific rating charts. Each such management board shall have such
power and perform such duties not inconsistent with law or these
By-Laws, as may be assigned to it by the Board of Directors. Each
such management board shall be governed by their own By-Laws, not
inconsistent with law or these By-Laws.
38. Compensation of the other management boards, or members
thereof, may be such as allowed by the Board of Directors or by a duly
authorized individual or committee so authorized by the Board.
ARTICLE VII.
39. Fiscal Year. The fiscal year of the Corporation shall
commence on whatever date is determined as most practical by the Board
of Directors, and shall end twelve months thereafter.
ARTICLE VIII.
40. Dividends. Dividends upon the capital stock of the
Corporation, subject to the provisions of the certificate of
incorporation, if any, may be declared by the Board of Directors at
any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the 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
Directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing
dividends; or for repairing or maintaining any property of the
Corporation; or for such other purposes as the Directors shall think
conducive to the interests of the Corporation.
ARTICLE IX.
Stock
41. Certificates. Each stockholder shall be entitled to a
stock certificate or certificates certifying the number and kind of
shares owned by him. Said certificate shall be issued, signed and
sealed by such officers and in such manner as may be directed by the
Board of Directors.
42. Transfer of Shares. Shares of stock shall be
transferable only on the books of the Corporation by the holder
thereof in person, or by his duly authorized attorney, or by
endorsement satisfactory to the Corporation, and on surrender of the
certificate or certificates so duly endorsed.
43. (21)Closing Books of the Corporation Against Transfer of
Stock; Record Dates. The Board of Directors may fix a time not
exceeding twenty (20) days preceding the date of any meeting of
stockholders, any dividend payment date, or any date for the allotment
of rights, during which the books of the Corporation shall be closed
against the transfer of stock. In lieu of providing for the closing
of the books against transfer of stock as aforesaid, the Board of
Directors may fix in advance a time not exceeding ninety (90) days
preceding any dividend date, or any date for the allotment of rights,
as record date for the determination of the stockholders entitled to
receive such dividend or rights, as the case may be, and, in that
event, only stockholders of record on such date shall be entitled to
receive such dividend or rights, as the case may be. Except as set
forth in Paragraph 7 of these By-Laws, the Board of Directors may fix
in advance a time not exceeding ninety (90) days preceding any meeting
of stockholders as record date for the determination of stockholders
entitled to vote at a stockholders' meeting to be called by the Board
of Directors.
44. Mutilated, Lost or Destroyed Certificates. The holder
of any mutilated certificate shall immediately notify the Corporation,
and the Board of Directors may, in its discretion, cause one or more
certificates, for the same number of shares in the aggregate, to be
issued to such holder upon the surrender of the mutilated certificate.
Any person claiming a certificate of stock to be lost or destroyed
shall make an affidavit or affirmation of that fact. The Board of
Directors, in its sole discretion, and subject to such terms and
conditions as the Board of Directors may determine, may issue new
stock certificate or certificates in place of the lost, mutilated, or
destroyed certificate or certificates.
45. Registered Stockholders. The Corporation shall be
entitled to treat the holder of record of any share or shares as the
holder in fact thereof, and accordingly shall not be bound to
recognize any equitable, or other claim, or interest, in such shares
on the part of any other person, whether or not it shall have express
or other notice thereof, save as expressly provided by the laws of
Maryland.
ARTICLE X.
Sundry Provisions.
46. (22)Notices. Whenever under the provisions of these
By-Laws notice is required to be given to any director, officer or
stockholder, it shall not be construed to require personal notice, but
such notice may be given in writing, by mail, by depositing the same
in the post office or letterbox in a post paid sealed wrapper,
addressed to such director, officer or stockholder at such address as
appears on the books of the Corporation, or in default of other
address, to such director, officer, or stockholder at the General Post
Office in the City of Baltimore, Maryland, and such notice shall be
deemed to be given at the time when the same shall be thus mailed.
Any director, officer or stockholder may waive any notice required to
be given under these By-Laws.
47. Stock of Other Corporations. Shares of stock in other
corporations owned or held by the Corporation may be voted by the
Corporation by such officer, agent or proxy as the Board of Directors
may from time to time appoint and, in the absence of such appointment,
may be voted by the President or a Vice President, or by proxy or
proxies appointed by the President or a Vice President. Any and all
proxies, waivers, consents and other instruments may be executed and
any and all other action may be taken by the Corporation as owner or
holder of shares of stock in other corporation by such officer, agent
or proxy as the Board of Directors may appoint, or, in the absence of
such appointment, by the President or a Vice President.
48. (23)Indemnification.
(a) The Corporation shall indemnify (i) its directors
to the full extent provided by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses
under the procedures provided by such laws; (ii) its officers to the
same extent it shall indemnify its directors; and (iii) its officers
who are not directors to such further extent as shall be authorized by
the Board of Directors and be consistent with law. The foregoing
shall not limit the authority of the Corporation to indemnify other
employees and agents consistent with law.
(b) The provision of paragraph (a) shall apply to all
proceedings arising (i) after the time of adoption of this by-law
amendment (the "effective date") in connection with any facts and
circumstances occurring after the effective date; (ii) after the
effective date in connection with any facts or circumstances occurring
before the effective date; and (iii) prior to the effective date,
whether before or after July 1, 1981, to the extent necessary or
appropriate to make any indemnification provisions of the Corporation
consistent with applicable indemnification provisions of the General
Laws of the State of Maryland. This by-law shall not limit any rights
of any person with respect to facts and circumstances occurring or
proceedings arising prior to the effective date to the extent such
rights are consistent with law applicable to the time in question.
49. (24)Amendments.
(a) Except as hereinafter provided, these By-Laws, or
any of them, or any additional or amended By-Laws, may be altered or
repealed and any By-Laws may be adopted at any regular meeting of the
Board of Directors without notice, or at any special meeting, the
notice of which shall set forth the terms of the proposed amendments,
by the vote of a majority of the entire Board.
(b) This Section 49 of the By-Laws relating to
amendments be amended only at a regular meeting of stockholders
without notice, or at a special meeting of stockholders, the notice of
which shall set forth the terms of the proposed amendment, in either
case by the vote of a majority of the votes entitled to be cast in the
aggregate by all stockholders present in person or by proxy at such
meeting.
FOOTNOTES
(1)Amended 12/20/68 & 3/18/92
(2)Amended 3/5/58
(3)Amended 3/1/71
(4)Amended 2/3/65 & 3/1/71 & 1/24/72
(5)Amended 6/17/96
(6)Amended 6/17/96
(7)Amended 6/17/96
(8)Amended 3/5/58 & 3/17/80
(9)Amended 6/17/96
(10)Amended 6/17/96
(11)Amended 6/17/96
(12)Amended 7/19/82 & 9/2l/87
(13)Amended 7/25/69 & 11/30/70
(14)Amended 3/16/83
(15)Amended 3/1/71
(16)Amended 3/5/58
(17)Amended 9/16/68 & 11/30/70
(18)Amended 11/30/70 & 3/21/79
(19)Amended 3/21/79 & 2/16/87
(20)Amended 7/25/69 & 11/30/70 & 3/21/79
& 2/16/87
(21)Amended 3/5/58 & 1/24/72 & 2/16/87
(22)Amended 3/5/58
(23)Corrected 3/3/48 & 7/19/82 & 10/18/82
(24)Added 3/5/58
SGL1368.SAM
5
1000
6-MOS
NOV-30-1996
MAY-31-1996
20,787
0
188,439
3,109
353,266
610,973
918,509
390,075
1,551,213
593,455
337,805
0
0
166,145
342,230
1,551,213
867,486
867,486
590,574
223,501
(608)
0
24,394
29,625
10,505
20,345
0
0
0
20,345
.25
.25
