================================================================================
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
- --------------------------------------------------------------------------------
[X] Quarterly Report Pursuant To Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED 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 1-5581
I.R.S. Employer Identification Number 59-0778222
WATSCO, INC.
(a Florida Corporation)
2665 South Bayshore Drive, Suite 901
Coconut Grove, Florida 33133
Telephone: (305) 714-4100
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO __
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date: 25,485,078 shares of the
Company's Common Stock ($.50 par value) and 3,193,726 shares of the Company's
Class B Common Stock ($.50 par value) were outstanding as of May 11, 1999.
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PART I. FINANCIAL INFORMATION
WATSCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 1999 and December 31, 1998
(In thousands, except per share data)
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,133 $ 6,689
Accounts receivable, net 148,433 137,745
Inventories 236,661 202,592
Other current assets 18,840 11,984
Net assets of discontinued operations 11,730 11,966
--------- ---------
Total current assets 421,797 370,976
Property, plant and equipment, net 30,806 30,496
Intangible assets, net 117,359 106,309
Other assets 23,913 24,237
--------- ---------
$ 593,875 $ 532,018
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 1,002 $ 1,007
Accounts payable 69,029 60,742
Accrued liabilities 18,156 19,488
--------- ---------
Total current liabilities 88,187 81,237
--------- ---------
Long-term obligations:
Borrowings under revolving credit agreement 215,900 168,000
Bank and other debt 4,536 4,301
--------- ---------
Total long-term obligations 220,436 172,301
--------- ---------
Deferred income taxes and credits 2,536 3,912
--------- ---------
Shareholders' equity:
Common Stock, $.50 par value 12,725 12,420
Class B Common Stock, $.50 par value 1,605 1,596
Paid-in capital 196,823 189,225
Unearned compensation related to
outstanding restricted stock (5,941) (5,051)
Unrealized loss on investments, net of tax (3,569) (2,962)
Retained earnings 81,073 79,340
--------- ---------
Total shareholders' equity 282,716 274,568
--------- ---------
$ 593,875 $ 532,018
========= =========
See accompanying notes to condensed consolidated financial statements.
2 of 11
WATSCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Three Months Ended March 31, 1999 and 1998
(In thousands, except per share data)
(Unaudited)
1999 1998
-------- --------
Revenue $247,377 $172,716
Cost of sales 189,190 132,315
-------- --------
Gross profit 58,187 40,401
Selling, general and administrative expenses 51,276 35,860
-------- --------
Operating income 6,911 4,541
Interest expense, net 3,179 1,722
-------- --------
Income from continuing operations
before income taxes 3,732 2,819
Income taxes 1,389 1,043
-------- --------
Income from continuing operations 2,343 1,776
Income from discontinued operations,
net of income taxes 104 149
-------- --------
Net income 2,447 1,925
Retained earnings at beginning of period 79,340 56,724
Common stock cash dividends 714 609
-------- --------
Retained earnings at end of period $ 81,073 $ 58,040
======== ========
Basic earnings per share:
Income from continuing operations $ 0.08 $ 0.07
Income from discontinued operations -- --
-------- --------
Net income $ 0.08 $ 0.07
======== ========
Diluted earnings per share:
Income from continuing operations $ 0.08 $ 0.06
Income from discontinued operations -- --
-------- --------
Net income $ 0.08 $ 0.06
======== ========
Weighted average shares and
equivalent shares used to calculate
earnings per share:
Basic 27,651 26,218
======== ========
Diluted 28,871 27,797
======== ========
See accompanying notes to condensed consolidated financial statements.
3 of 11
WATSCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1999 and 1998
(In thousands)
(Unaudited)
1999 1998
-------- --------
Cash flows from operating activities:
Income from continuing operations $ 2,343 $ 1,776
Adjustments to reconcile income from
continuing operations to net cash used
in operating activities of continuing operations:
Depreciation and amortization 2,507 1,693
Provision for doubtful accounts 911 395
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable (1,984) (2,364)
Inventories (26,656) (13,550)
Accounts payable and accrued liabilities 1,331 (2,033)
Other, net (7,492) (1,550)
-------- --------
Net cash used in operating activities
of continuing operations (29,040) (15,633)
-------- --------
Cash flows from investing activities:
Business acquisitions, net of cash acquired (17,544) (3,179)
Capital expenditures, net (1,123) (1,827)
Purchases of marketable securities (823) --
-------- --------
Net cash used in investing activities
of continuing operations (19,490) (5,006)
-------- --------
Cash flows from financing activities:
Net borrowings under revolving credit agreement 47,900 17,600
Borrowings (repayments) of bank and other debt 230 (494)
Net proceeds from issuances of common stock 218 591
Common stock dividends (714) (609)
-------- --------
Net cash provided by financing activities
of continuing operations 47,634 17,088
-------- --------
Net cash provided by (used in) discontinued operations 340 (584)
-------- --------
Net decrease in cash and cash equivalents (556) (4,135)
Cash and cash equivalents at beginning of period 6,689 7,880
-------- --------
Cash and cash equivalents at end of period $ 6,133 $ 3,745
======== ========
See accompanying notes to condensed consolidated financial statements.
4 of 11
WATSCO, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Amounts in thousands, except share data)
(Unaudited)
1. The condensed consolidated balance sheet as of December 31, 1998, which has
been derived from the Company's audited financial statements, and the
unaudited interim condensed consolidated financial statements, have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally
included in the annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations, although the Company believes the
disclosures made are adequate to make the information presented not
misleading. In the opinion of management, all adjustments necessary for a
fair presentation have been included in the condensed consolidated
financial statements herein.
2. The results of operations for the quarter ended March 31, 1999 are not
necessarily indicative of the results for the year ending December 31,
1999. The sale of the Company's products and services is seasonal with
revenue generally increasing during the months of May through August.
3. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
4. Basic earnings per share is computed by dividing net income by the total
weighted average shares outstanding. Diluted earnings per share
additionally assumes, if dilutive, any added dilution from common stock
equivalents. Shares used to calculate earnings per share for the three
months ended March 31, 1999 and 1998 are as follows:
1999 1998
---------- ----------
Weighted average shares outstanding 27,650,741 26,218,482
Dilutive stock options 1,220,183 1,578,387
---------- ----------
Shares for diluted earnings per share 28,870,924 27,796,869
========== ==========
Options outstanding which are not
included in the calculation of diluted
earnings per share because their
impact is antidilutive 1,737,000 146,813
========== ==========
Shares used to calculate earnings per share for the three months ended
March 31, 1998 have been restated to include the effect of a 3-for-2 stock
split paid on August 14, 1998.
5. In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for the reporting and display of comprehensive income
and its components in the financial statements. The components of the
Company's comprehensive income are as follows for the three months ended
March 31, 1999 and 1998:
1999 1998
---------- ----------
Net income $ 2,447 $ 1,925
Unrealized loss on investments, net of tax (607) --
---------- ----------
Comprehensive income $ 1,840 $ 1,925
========== ==========
6. Discontinued operations include a personnel staffing business, Dunhill
Staffing Systems, Inc. and until May 1998, a manufacturing operation,
Watsco Components, Inc. ("Components"). In May 1998, the Company sold
substantially all of the operating assets of Components. Summarized results
for the discontinued operations are as follows for the three months ended
March 31, 1999 and 1998:
5 of 11
1999 1998
------- -------
Revenue $13,006 $16,418
======= =======
Income before income taxes $ 165 $ 236
Income tax expense 61 87
------- -------
Income from discontinued operations $ 104 $ 149
======= =======
7. During January 1999, the Company completed the acquisitions of two
wholesale distributors of air conditioning and heating products. The
acquisitions were made either in the form of the purchase of the
outstanding common stock or the purchase of the net assets and business of
the respective sellers. Aggregate consideration for these acquisitions
consisted of cash payments of approximately $17,544 including the
repayment of debt totaling $4,592 and the issuance of 507,224 shares of
Common Stock having a fair value of $6,433 and is subject to adjustment
upon the completion of audits of the assets purchased and the liabilities
assumed.
Acquisitions have been accounted for under the purchase method of
accounting and, accordingly, their results of operations have been included
in the unaudited condensed consolidated statement of income and retained
earnings beginning on their respective dates of acquisition. The excess of
the aggregate purchase prices over the net assets acquired of approximately
$11,356 is being amortized on a straight-line basis over 40 years.
The Company's unaudited pro forma consolidated results of operations
assuming all significant acquisitions occurred on January 1, 1998 is as
follows for the three months ended March 31, 1998:
Revenue $217,975
Income from continuing operations $1,430
Diluted earnings per share from continuing operations $0.05
The unaudited pro forma consolidated results of operations is not
necessarily indicative of either the results of operations that would have
occurred had the above companies been acquired on January 1, 1998 for the
periods presented or of future results of operations.
8. In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants ("AcSEC") issued Statement of
Position ("SOP") 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 establishes criteria for
determining which costs of developing or obtaining internal-use computer
software should be charged to expense and which should be capitalized. The
Company adopted SOP 98-1 on January 1, 1999. The adoption of SOP 98-1 was
not material to the Company's consolidated financial position or results of
operations.
In April 1998, the AcSEC issued SOP 98-5, "Reporting on the Costs of
Start-Up Activities." SOP 98-5 establishes standards for the reporting and
disclosure of start-up costs, including organization costs. The Company
adopted SOP 98-5 on January 1, 1999. Adoption of SOP 98-5 was not material
to the Company's consolidated financial position or results of operations.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
which is effective for fiscal years beginning after June 15, 1999. SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 also requires that
changes in derivatives' fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The impact of SFAS No.
133 on the Company's consolidated financial statements will depend on a
variety of factors, including future interpretive guidance from the FASB,
the extent of the Company's hedging activities, the type of hedging
instruments used and the effectiveness of such instruments. The Company has
not quantified the impact of adopting SFAS No. 133.
6 of 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1999 VS. QUARTER ENDED MARCH 31, 1998
RESULTS OF OPERATIONS
The following table presents the Company's consolidated financial results
from continuing operations for the three months ended March 31, 1999 and 1998,
expressed as a percent of revenue:
1999 1998
-------- --------
Revenue 100.0% 100.0%
Cost of sales (76.5) (76.6)
------- -------
Gross profit 23.5 23.4
Selling, general and administrative expenses (20.7) (20.8)
------- -------
Operating income 2.8 2.6
Interest expense, net (1.3) (1.0)
Income taxes (.6) (.6)
------- -------
Income from continuing operations .9% 1.0%
======= =======
The above table and following narrative includes the results of operations of
wholesale distributors of air conditioning, heating and refrigeration equipment
and related parts and supplies acquired during 1999 and 1998. These acquisitions
were accounted for under the purchase method of accounting and, accordingly,
their results of operations have been included in the consolidated results of
the Company beginning on their respective dates of acquisition. Data presented
in the following narratives referring to "same store basis" excludes the effects
of operations acquired or locations opened during the prior twelve months.
Revenue for the three months ended March 31, 1999 increased $74.7 million, or
43%, compared to the same period in 1998. Excluding the effect of acquisitions,
revenue increased $16.5 million, or 10%. Such increase was primarily due to
additional sales generated from market share gains and increased sales generated
by expanded product lines of parts and supplies.
Gross profit for the three months ended March 31, 1999 increased $17.8
million, or 44%, as compared to the same period in 1998, primarily as a result
of the aforementioned revenue increases. Excluding the effect of acquisitions,
gross profit increased $4.0 million, or 10%. Gross profit margin in the first
quarter increased to 23.5% in 1999 from 23.4% in 1998. Excluding the effect of
acquisitions, gross profit margin also increased to 23.5% in 1999 from 23.4% in
1998.
Selling, general and administrative expenses for the three months ended
March 31, 1999 increased $15.4 million, or 43%, compared to the same period in
1998, primarily due to selling and delivery costs related to increased sales.
Excluding the effect of acquisitions, selling, general and administrative
expenses increased $3.2 million, or 9%, primarily due to revenue increases.
Selling, general and administrative expenses as a percent of revenue decreased
to 20.7% in 1999 from 20.8% in 1998. Excluding the effect of acquisitions,
selling, general and administrative expenses as a percent of revenue decreased
to 20.6% in 1999 from 20.8% in 1998, reflecting leverage of the Company's
operating cost structure on increased sales.
Interest expense, net for the first quarter in 1999 increased approximately
$1.5 million, or 85%, compared to the same period in 1998, primarily due to
higher average borrowings.
The effective tax rate for the three months ended March 31, 1999 was 37.2%
compared to 37.0% for the same period in 1998. This increase was primarily due
to higher state income taxes resulting from acquisitions.
7 of 11
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a bank-syndicated revolving credit agreement that
provides for borrowings of up to $260 million, expiring on August 8, 2002.
Borrowings under the unsecured agreement are used to fund seasonal working
capital needs and for other general corporate purposes, including acquisitions.
Borrowings under the agreement, which totaled $215.9 million at March 31, 1999,
bear interest at primarily LIBOR-based rates plus a spread that is dependent
upon the Company's financial performance (LIBOR plus .7% at March 31, 1999). The
agreement contains financial covenants with respect to the Company's
consolidated net worth, interest and debt coverage ratios and limits capital
expenditures and dividends in addition to other restrictions.
Working capital increased to $333.6 million at March 31, 1999 from $289.7
million at December 31, 1998. This increase was funded primarily by borrowings
under the Company's revolving credit agreement.
Cash and cash equivalents decreased $.6 million during the first quarter of
1999. Principal sources of cash during the quarter were borrowings under the
revolving credit agreement and profitable operations. The principal uses of cash
were to fund working capital needs and finance acquisitions and capital
expenditures.
The Company has adequate availability of capital from operations and its
revolving credit agreement to fund present operations and anticipated growth,
including expansion in its current and targeted market areas. The Company
continually evaluates potential acquisitions and has held discussions with a
number of acquisition candidates; however, the Company currently has no binding
agreement with respect to any acquisition candidates. Should suitable
acquisition opportunities or working capital needs arise that would require
additional financing, the Company believes that its financial position and
earnings history provide a solid base for obtaining additional financing
resources at competitive rates and terms.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure consists of interest rate risk.
The Company's objective in managing the exposure to interest rate changes is to
limit the impact of interest rate changes on earnings and cash flows and to
lower its overall borrowing costs. To achieve its objectives, the Company uses
interest rate swaps to manage net exposure to interest rate changes to its
borrowings. The Company continuously monitors developments in the capital
markets and has only entered into swaps with a group of financial institutions
with investment grade credit ratings, thereby minimizing the risk of credit
loss. All items described below are non-trading.
At March 31, 1999, the Company had various interest rate swap agreements with
an aggregate notional amount of $100 million to manage its net exposure to
interest rate changes related to a portion of the borrowings under the revolving
credit agreement. The interest rate swap agreements effectively convert a
portion of the Company's LIBOR-based variable rate borrowings into fixed rate
borrowings with a weighted average pay rate of 6.3%.
YEAR 2000
Many computer systems in use in the world today may be unable to correctly
process data or may not operate at all after December 31, 1999 because those
systems recognize the year within a date only by the last two digits. Some
computer programs may interpret the year "00" as 1900, instead of as 2000,
causing errors in calculations, or the value "00" may be considered invalid by
the computer program causing the system to fail. The Year 2000 issue affects:
(1) information technology utilized by the Company, (2) other systems utilized
by the Company, such as communications, facilities management and service
equipment containing embedded computer chips and (3) systems of key business
partners (primarily the Company's customers and suppliers).
Watsco, Inc. and its subsidiaries could be adversely affected if Year 2000
issues are not resolved by the Company or its significant business partners
before the Year 2000. Possible adverse consequences include, but are not limited
to: (1) the inability to obtain products or services used in the business
operations, (2) the inability to transact business with key customers or
suppliers, or (3) the inability to deliver goods or services sold to customers.
8 of 11
The Company's activities to manage the Year 2000 issue at each of its
operating subsidiaries have included (a) identification of systems that are
non-compliant, (b) formulation of strategies to remedy the problems, (c)
execution of changes necessary through purchasing new or modifying existing
systems and (d) tests of the changes. The identification and formulation stages
have been substantially completed by the Company and its subsidiaries.
Computer systems are being purchased, upgraded or corrected to make them Year
2000 compliant. Management expects that by the end of 1999, all critical systems
that are not currently Year 2000 will be corrected or replaced.
The Company has begun the testing of several systems that are believed to be
Year 2000 compliant. Significant levels of testing will continue throughout
1999. In addition, the Company has contacted a large number of its business
partners to obtain information regarding their progress on Year 2000 issues.
While such entities have not fully completed their own Year 2000 projects, the
Company is not aware of any significant business partners whose Year 2000 issues
will not be resolved in a timely manner. However, there can be no assurance that
significant Year 2000 related problems will not ultimately arise with such
business partners.
Based on the Company's assessment to date, management estimates the
implementation costs related to the identification, remediation and testing of
the Year 2000 issue to be approximately $.8 million, of which $.3 million has
been expended through March 31, 1999. However, this estimate could change as the
Company's activities to address the Year 2000 issue progress.
The Company believes that effective contingency plans can be developed given
that the Company is not reliant on a single enterprise-wide computer system. The
Company presently operates through a diverse group of 16 operating subsidiaries
that maintain independently managed computer systems, substantially all of which
have been purchased from and are supported by third parties. The Company's
contingency planning includes the identification of back-up systems among the
Company's operating subsidiaries in the event one or more operating systems fail
to operate following the Year 2000. The Company continues to evaluate
contingency plans to mitigate business risks in the event remediation efforts
are unsuccessful.
While management believes that it has undertaken reasonable steps to address
the Year 2000 issue, there can be no assurance that a failure to convert the
Company's systems or the inability of its key business partners to adequately
address the Year 2000 issue would not have a material adverse impact on the
Company.
SAFE HARBOR STATEMENT
This quarterly report contains statements which, to the extent they are not
historical fact, constitute "forward looking statements" under the securities
laws. All forward looking statements involve risks, uncertainties and other
factors that may cause the actual results, performance or achievements of the
Company to differ materially from those contemplated or projected, forecasted,
estimated, budgeted, expressed or implied by or in such forward looking
statements. The forward looking statements in this document are intended to be
subject to the safe harbor protection provided under the securities laws.
For additional information identifying some other important factors which
may affect the Company's operations and markets and could cause actual results
to vary materially from those anticipated in the forward looking statements, see
the Company's Securities and Exchange Commission filings, including but not
limited to, the discussion included in the Business section of the Company's
Form 10-K under the heading "Other Information".
9 of 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no significant changes from the information reported
in the Annual Report on Form 10-K for the period ended December 31,
1998, filed on March 31, 1999.
Item 2. Changes in the Rights of the Company's Security Holders
As partial consideration for certain acquisitions completed during
the quarter ended March 31, 1999, the Company issued 507,224 shares
of Common Stock that were not registered under the Securities Act
of 1933, as amended (the "Act"). The shares were issued pursuant to
an exemption under Section 4(2) of the Act.
Item 3. Defaults by the Company on its Senior Securities
None
Item 4. Results of Votes of Securities Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.9 Exhibit A-1 dated March 11, 1999 to Employment Agreement and
Incentive Plan dated January 31, 1996 by and between Watsco,
Inc. and Albert H. Nahmad.
27. Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None
10 of 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.
WATSCO, INC.
----------------------------
(Registrant)
By: /s/ BARRY S. LOGAN
----------------------------
Barry S. Logan
Vice President and Secretary
(Chief Financial Officer)
May 17, 1999
11 of 11
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
10.9 Exhibit A-1 dated March 11, 1999 to Employment Agreement and Incentive
Plan dated January 31, 1996 by and between Watsco, Inc. and Albert H.
Nahmad.
27 Financial Data Schedule (for SEC use only)
EXHIBIT 10.9
EXHIBIT A-1
1999 Performance Goals and Performance Based Compensation
I. FORMULA
PERFORMANCE
BASED
COMPENSATION FORMULA
--------------------
A. EARNING PER SHARE
For each $.01 increase......................................................... $65,250
B. INCREASE IN COMMON STOCK PRICE
(i) If the price of a share of Common Stock on 12/31/99 does not
exceed $16.75.................................................................. $ 0
(ii) If the price of a share of Common Stock on 12/31/99 exceeds
$16.75 but does not equal or exceed $21.00, for each $0.0625
increase in per share price of share of Common Stock above
$16.75......................................................................... $ 7,500
(iii) If the price of a share of Common Stock on 12/31/99 equals
or exceeds $21.00, for each $.0625 increase in per share price of a
share of Common Stock above $16.75............................................. $10,000
II. METHOD OF PAYMENT
A. CASH. The Performance Based Compensation determined for 1999
under the formula set forth in Section I above shall be paid
in cash if and to the extent such Compensation does not exceed
$1,500,000.
B. RESTRICTED STOCK. If the Performance Based Compensation
determined for 1999 under the formula set forth in Section I
above exceeds $1,500,000 (such excess amount being referred to
as the "Additional Amount"), the Executive shall be granted a
number of shares of restricted Class B Common Stock of the
Company (the "Shares") equal to the amount determined by
dividing (i) two times the Additional Amount, by (ii) closing
price for the Class B Common Stock of the Company on the
American Stock Exchange as of the close of trading on December
31, 1999. The value of any fractional shares shall be paid in
cash. The restrictions on the Shares shall lapse on the first
to occur of (i) October 15, 2014, (ii) termination of the
Executive's employment with the Company by reason of
Executive's disability or death, (iii) the Executive's
termination of employment with the Company for Good Reason;
(iv) the Company's termination of Executive's employment
without Cause, or (v) the occurrence of a Change in Control of
the Company ("Good Reason", "Cause", and "Change in Control"
to be defined in a manner consistent with the most recent
grant of Restricted Stock by the Company to the Executive).
Dated: March 11, 1999 /s/ PAUL MANLEY
-------------------------
Paul Manley, Chairman
Compensation Committee
5
1,000
3-MOS
DEC-31-1999
MAR-31-1999
6,133
0
154,663
6,230
236,661
421,797
58,111
27,305
593,875
88,187
220,436
0
0
14,330
268,386
593,875
247,377
247,377
189,190
189,190
50,365
911
3,179
3,732
1,389
2,343
104
0
0
2,447
0.08
0.08
