1 Index to Exhibits on page 14 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 1, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-1088 KELLY SERVICES, INC. --------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) DELAWARE 38-1510762 ---------------------------------- -------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 999 WEST BIG BEAVER ROAD, TROY, MICHIGAN 48084 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (248) 362-4444 ---------------------------------------------------------------------- (Registrant's telephone number, including area code) No Change ----------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- At August 3, 2001, 32,345,486 shares of Class A and 3,494,209 shares of Class B common stock of the Registrant were outstanding.
2 KELLY SERVICES, INC. AND SUBSIDIARIES Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Statements of Earnings 3 Balance Sheets 4 Statements of Stockholders' Equity 5 Statements of Cash Flows 6 Notes to Financial Statements 7 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9 PART II. OTHER INFORMATION AND SIGNATURE Item 4. Submission of Matters to a Vote of Security Holders 12 Item 6. Exhibits and Reports on Form 8-K 12 Signature 13 Index to Exhibits Required by Item 601, Regulation S-K 14
3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements. KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF EARNINGS (UNAUDITED) (In thousands of dollars except per share data) <TABLE> <CAPTION> 13 Weeks Ended 26 Weeks Ended ----------------------------------- ----------------------------------- July 1, 2001 July 2, 2000 July 1, 2001 July 2, 2000 ---------------- --------------- --------------- ---------------- <S> <C> <C> <C> <C> Sales of services $ 1,066,255 $ 1,106,740 $ 2,153,453 $ 2,186,809 Cost of services 887,936 909,731 1,793,760 1,801,826 ---------------- --------------- --------------- ---------------- Gross profit 178,319 197,009 359,693 384,983 Selling, general and administrative expenses 167,448 160,342 340,647 321,748 ---------------- --------------- --------------- ---------------- Earnings from operations 10,871 36,667 19,046 63,235 Interest (expense) income, net (101) (167) (276) 120 ---------------- --------------- --------------- ---------------- Earnings before income taxes 10,770 36,500 18,770 63,355 Income taxes 4,310 14,675 7,510 25,470 ---------------- --------------- --------------- ---------------- Net earnings $ 6,460 $ 21,825 $ 11,260 $ 37,885 ================ =============== =============== ================ Earnings per share: Basic $ .18 $ .61 $ .31 $ 1.06 Diluted .18 .61 .31 1.06 Average shares outstanding (thousands): Basic 35,834 35,714 35,799 35,709 Diluted 35,919 35,779 35,908 35,777 Dividends per share $ .25 $ .25 $ .50 $ .49 </TABLE> See accompanying Notes to Financial Statements.
4 KELLY SERVICES, INC. AND SUBSIDIARIES BALANCE SHEETS AS OF JULY 1, 2001 AND DECEMBER 31, 2000 (In thousands of dollars) <TABLE> <CAPTION> ASSETS 2001 2000 - ------ ----------------- ----------------- (UNAUDITED) <S> <C> <C> CURRENT ASSETS: Cash and equivalents $ 67,252 $ 43,318 Short-term investments 1,314 2,394 Accounts receivable, less allowances of $13,166 and $13,614, respectively 581,898 631,771 Prepaid expenses and other current assets 25,371 24,903 Deferred taxes 51,532 52,209 ----------------- ----------------- Total current assets 727,367 754,595 PROPERTY AND EQUIPMENT: Land and buildings 57,217 44,971 Equipment, furniture and leasehold improvements 273,359 253,666 Accumulated depreciation (114,577) (97,552) ----------------- ----------------- Total property and equipment 215,999 201,085 INTANGIBLES AND OTHER ASSETS 123,944 133,896 ----------------- ----------------- TOTAL ASSETS $ 1,067,310 $ 1,089,576 ================= ================= LIABILITIES & STOCKHOLDERS' EQUITY - ---------------------------------- CURRENT LIABILITIES: Short-term borrowings $ 45,138 $ 57,839 Accounts payable 68,249 69,375 Payroll and related taxes 241,567 234,807 Accrued insurance 59,427 55,272 Income and other taxes 42,458 48,814 ----------------- ----------------- Total current liabilities 456,839 466,107 STOCKHOLDERS' EQUITY: Capital stock, $1.00 par value Class A common stock, shares issued 36,608,540 at 2001 and 36,609,040 at 2000 36,609 36,609 Class B common stock, shares issued 3,507,326 at 2001 and 3,506,826 at 2000 3,507 3,507 Treasury stock, at cost Class A common stock, 4,263,275 shares at 2001 and 4,363,578 shares at 2000 (82,315) (84,251) Class B common stock, 13,017 shares at 2001 and 12,817 shares at 2000 (376) (371) Paid-in capital 16,871 16,371 Earnings invested in the business 668,747 675,388 Accumulated foreign currency adjustments (32,572) (23,784) ----------------- ----------------- Total stockholders' equity 610,471 623,469 ----------------- ----------------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 1,067,310 $ 1,089,576 ================= ================= </TABLE> See accompanying Notes to Financial Statements.
5 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) (In thousands of dollars) <TABLE> <CAPTION> 13 Weeks Ended 26 Weeks Ended -------------------------------- ------------------------------- July 1, 2001 July 2, 2000 July 1, 2001 July 2, 2000 ------------- -------------- ------------- ------------- <S> <C> <C> <C> <C> Capital Stock Class A common stock Balance at beginning of period $ 36,609 $ 36,606 $ 36,609 $ 36,602 Conversions from Class B - 3 - 7 ------------- -------------- ------------- -------------- Balance at end of period 36,609 36,609 36,609 36,609 Class B common stock Balance at beginning of period 3,507 3,510 3,507 3,514 Conversions to Class A - (3) - (7) ------------- -------------- ------------- -------------- Balance at end of period 3,507 3,507 3,507 3,507 Treasury Stock Class A common stock Balance at beginning of period (82,498) (84,888) (84,251) (80,538) Exercise of stock options, restricted stock awards and other 139 96 1,485 1,196 Treasury stock issued for acquisitions 44 - 451 164 Purchase of treasury stock - - - (5,614) ------------- -------------- ------------- -------------- Balance at end of period (82,315) (84,792) (82,315) (84,792) Class B common stock Balance at beginning of period (376) (248) (371) (248) Purchase of treasury stock - (36) (5) (36) ------------- -------------- ------------- -------------- Balance at end of period (376) (284) (376) (284) Paid-in Capital Balance at beginning of period 16,808 16,167 16,371 15,761 Exercise of stock options, restricted stock awards and other 54 45 398 412 Treasury stock issued for acquisitions 9 - 102 39 ------------- -------------- ------------- -------------- Balance at end of period 16,871 16,212 16,871 16,212 Earnings Invested in the Business Balance at beginning of period 671,247 631,067 675,388 623,564 Net earnings 6,460 21,825 11,260 37,885 Dividends (8,960) (8,927) (17,901) (17,484) ------------- -------------- ------------- -------------- Balance at end of period 668,747 643,965 668,747 643,965 Accumulated Foreign Currency Adjustments Balance at beginning of period (31,687) (20,850) (23,784) (16,282) Equity adjustment for foreign currency (885) (2,282) (8,788) (6,850) ------------- -------------- ------------- -------------- Balance at end of period (32,572) (23,132) (32,572) (23,132) ------------- -------------- ------------- -------------- Stockholders' Equity at end of period $ 610,471 $ 592,085 $ 610,471 $ 592,085 ============= ============== ============= ============== Comprehensive Income Net earnings $ 6,460 $ 21,825 $ 11,260 $ 37,885 Other comprehensive income - Foreign currency adjustments (885) (2,282) (8,788) (6,850) ------------- -------------- ------------- -------------- Comprehensive Income $ 5,575 $ 19,543 $ 2,472 $ 31,035 ============= ============== ============= ============== </TABLE> See accompanying Notes to Financial Statements.
6 KELLY SERVICES, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE 26 WEEKS ENDED JULY 1, 2001 AND JULY 2, 2000 (In thousands of dollars) <TABLE> <CAPTION> 2001 2000 ------------- -------------- <S> <C> <C> Cash flows from operating activities: Net earnings $ 11,260 $ 37,885 Noncash adjustments: Depreciation and amortization 21,447 19,308 Decrease (increase) in accounts receivable, net 37,105 (40,837) Changes in certain working capital components 14,124 26,345 ------------- -------------- Net cash from operating activities 83,936 42,701 ------------- -------------- Cash flows from investing activities: Capital expenditures (23,751) (24,007) Acquisition of building (11,783) - Proceeds from sales and maturities of short-term investments 381,416 532,384 Purchases of short-term investments (380,336) (532,834) Decrease (increase) in other assets 5,089 (8,951) Acquisition of companies, net of cash received (180) (1,534) ------------- -------------- Net cash from investing activities (29,545) (34,942) ------------- -------------- Cash flows from financing activities: Decrease in short-term borrowings (12,701) (2,583) Dividend payments (17,874) (17,460) Purchase of treasury stock (5) (5,650) Stock options and other 123 57 ------------- -------------- Net cash from financing activities (30,457) (25,636) ------------- -------------- Net change in cash and equivalents 23,934 (17,877) Cash and equivalents at beginning of period 43,318 54,032 ------------- -------------- Cash and equivalents at end of period $ 67,252 $ 36,155 ============= ============== </TABLE> See accompanying Notes to Financial Statements.
7 KELLY SERVICES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (In thousands of dollars) 1. Basis of Presentation The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with Rule 10-01 of Regulation S-X and do not include all the information and notes required by generally accepted accounting principles for complete financial statements. All adjustments, consisting only of normal recurring adjustments, have been made which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. The unaudited consolidated financial statements should be read in conjunction with the Company's consolidated financial statements and notes thereto for the fiscal year ended December 31, 2000 (the 2000 consolidated financial statements). 2. Segment Disclosures The Company's reportable segments, which are based on the Company's method of internal reporting, are: (1) U.S. Commercial Staffing, (2) Professional, Technical and Staffing Alternatives (PTSA) and (3) International. The following table presents information about the reported sales and earnings from operations of the Company for the 13-week and 26-week periods ended July 1, 2001 and July 2, 2000. Segment data presented is net of intersegment revenues. Asset information by reportable segment is not presented, since the Company does not produce such information internally. <TABLE> <CAPTION> 13 Weeks Ended 26 Weeks Ended 2001 2000 2001 2000 -------------- -------------- ------------- ------------- <S> <C> <C> <C> <C> Sales: U.S. Commercial Staffing $ 529,660 $ 574,338 $ 1,078,878 $ 1,123,438 PTSA 270,680 260,745 537,170 518,857 International 265,915 271,657 537,405 544,514 -------------- -------------- ------------- ------------- Consolidated Total $ 1,066,255 $ 1,106,740 $ 2,153,453 $ 2,186,809 ============== ============== ============= ============= Earnings from Operations: U.S. Commercial Staffing $ 31,014 $ 45,671 $ 63,040 $ 85,933 PTSA 13,568 16,466 25,952 32,212 International 1,994 7,264 3,571 12,128 Corporate (35,705) (32,734) (73,517) (67,038) -------------- -------------- ------------- ------------- Consolidated Total $ 10,871 $ 36,667 $ 19,046 $ 63,235 ============== ============== ============= ============= </TABLE> 3. Contingencies The Company is subject to various legal proceedings, claims and liabilities which arise in the ordinary course of its business. Litigation is subject to many uncertainties, the outcome of individual litigated matters is not predictable with assurance and it is reasonably possible that some of the foregoing matters could be decided unfavorably to the Company. Although the amount of the liability at July 1, 2001 with respect to these matters cannot be ascertained, the Company believes that any resulting liability will not be material to the financial statements of the Company at July 1, 2001.
8 KELLY SERVICES, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (continued) (UNAUDITED) (In thousands of dollars) 4. Earnings Per Share The reconciliations of earnings per share computations for the 13-week and 26-week periods ended July 1, 2001 and July 2, 2000 were as follows: <TABLE> <CAPTION> 13 Weeks Ended 26 Weeks Ended 2001 2000 2001 2000 ----------- ----------- ----------- ----------- <S> <C> <C> <C> <C> Net earnings $ 6,460 $ 21,825 $ 11,260 $ 37,885 =========== =========== =========== =========== Determination of shares (thousands): Weighted average common shares outstanding 35,834 35,714 35,799 35,709 Effect of dilutive securities: Stock options - - 13 - Restricted and performance awards and other 85 65 96 68 ----------- ----------- ----------- ----------- Weighted average common shares outstanding - assuming dilution 35,919 35,779 35,908 35,777 =========== =========== =========== =========== Earnings per share - basic $ .18 $ .61 $ .31 $ 1.06 Earnings per share - assuming dilution $ .18 $ .61 $ .31 $ 1.06 </TABLE>
9 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. Results of Operations: Second Quarter Sales of services in the second quarter of 2001 were $1.066 billion, a decrease of 3.7% from the same period in 2000. Sales declined in the U.S. Commercial Staffing segment by 7.8% in the second quarter as compared to last year. Sales declined 6% in April, 8% in May and 9% in June. The trend worsened over the course of the quarter, leading the Company to expect continued negative U.S. Commercial sales comparisons for the third quarter. Professional, Technical and Staffing Alternatives (PTSA) sales grew collectively by 3.8% compared to last year. Although this is a slight increase over the first quarter PTSA growth rate of 3.1%, individual business unit performance was mixed. Kelly Staff Leasing (KSL) sales grew over 10% in the second quarter, reflecting a new management team and operational changes in the business. Without this improvement in KSL growth, the overall PTSA growth rate would have been only 2%. In the remainder of PTSA, the slowdown was not uniform across all business units. Kelly Healthcare Resources and Kelly Finance and Accounting Resources had strong sales growth, while the Automotive Services Group and the Kelly Law Registry had lower year-over-year sales in the second quarter. The impact of unfavorable foreign currency translation on international revenue continues to be significant. Translated U.S. dollar sales in the International segment decreased by 2.1% as compared to the second quarter of 2000. However, on a constant currency basis, international revenue growth was approximately 4%, which reflected slowing from the 7% growth rate in the first quarter. Cost of services, consisting of payroll and related tax and benefit costs of employees assigned to customers, decreased 2.4% in the second quarter as compared to the same period in 2000. Gross profit of $178.3 million was 9.5% lower than the second quarter of 2000, and gross profit as a percentage of sales was 16.7% in 2001, which was down from the 17.8% rate in 2000. However, the 16.7% gross profit rate was consistent with the first quarter rate. The gross profit rates of all three of the Company's business segments showed decreases, as compared to last year, primarily due to an ongoing shift in mix of sales to larger customers, combined with decreases in recruitment fee income. Selling, general and administrative expenses were $167.4 million in the second quarter, an increase of 4.4% over the same period in 2000. Expenses averaged 15.7% of sales in the second quarter of 2001, a 1.2% increase versus the 14.5% rate in 2000. That is an improvement over the $173.2 million or 15.9% of sales in the first quarter of this year. The Company implemented a number of expense reduction initiatives that began to show results during the second quarter. Earnings from operations of $10.9 million were 70.4% lower than the second quarter of 2000. U.S. Commercial earnings totaled $31.0 million, a decrease of 32.1% compared to earnings of $45.7 million last year. Although U.S. Commercial expenses were held virtually flat versus last year, the 7.8% sales decrease, combined with the decrease in gross profit rate, produced the significant earnings decline. PTSA earnings totaled $13.6 million, a 17.6% decrease compared to earnings of $16.5 million last year. During the last year, the Company continued to invest heavily in the professional and technical businesses, opening over twenty-five new branches, which impacted the expense rates in the first and second quarters. In addition, recruitment fee income decreased significantly in many business units, which negatively impacted the gross profit rate. International earnings totaled $2.0 million, down 72.5%, compared to earnings of $7.3 million last year. The strong U.S. dollar significantly weakened both translated sales and profit results. In addition to the currency effects, the continued slowing of staffing demand in Canada, Puerto Rico and Australia further reduced operating results. Operating earnings in the U.K., although still running below last year, showed improvement as compared to the first quarter. Net interest expense was $101 thousand, a 39.5% improvement compared to last year's net interest expense of $167 thousand. The improvement is primarily attributable to higher cash levels than last year, offset by lower interest rates.
10 Earnings before income taxes were $10.8 million, a decrease of 70.5%, compared to pretax earnings of $36.5 million earned for the same period in 2000. Income taxes were 40.0% of pretax income in the second quarter of 2001 and 40.2% in the second quarter of 2000. Net earnings were $6.5 million in the second quarter of 2001, a decrease of 70.4% from the second quarter of 2000. Diluted earnings per share were $.18, a decrease of 70.5% as compared to $.61 in the same period last year. Year-to-Date Sales of services totaled $2.153 billion during the first six months of 2001, a decrease of 1.5% from 2000. Sales in the U.S. Commercial Staffing segment declined by 4.0%, while PTSA sales grew by 3.5% compared to last year. International sales declined by 1.3% as compared to the first six months of 2000. The strong U.S. dollar significantly weakened translated sales for the international segment. Gross profit of $359.7 million was 6.6% lower than the second quarter of 2000, and gross profit as a percentage of sales was 16.7% in 2001, which decreased 0.9% compared to the 17.6% rate recorded last year. This reflected modest decreases in the gross profit rates of all three business segments. Selling, general and administrative expenses of $340.6 million were 5.9% higher than last year. The expense rate was 15.8% of sales in 2001 and 14.7% in 2000. Compared to last year, increased depreciation and the opening of new professional and technical branches contributed to the increase. Earnings before taxes were $18.8 million, a decrease of 70.4% from 2000. These earnings averaged a pretax margin of 0.9% in the first six months of 2001 and 2.9% in 2000. Income taxes were 40.0% of pretax earnings in the first six months of 2001 and 40.2% in 2000. Net earnings were $11.3 million or 70.3% below the first six months of 2000. Basic and diluted earnings per share were $.31, a decrease of 70.8% as compared to $1.06 in the first six months of 2000. Financial Condition Assets totaled $1.067 billion at July 1, 2001, a decrease of 2.0% from the $1.090 billion at December 31, 2000. Working capital decreased $18.0 million during the six-month period. The current ratio was 1.6 at July 1, 2001 and December 31, 2000. During the first six months of 2001, net cash from operating activities was $83.9 million, an increase of 96.6% from the comparable period in 2000. This increase resulted principally from a decrease in the accounts receivable balance offset by a decline in net earnings. The Company's global day's sales outstanding for the second quarter were 50 days in 2001, an improvement of two days over the 52 days reported in 2000. Capital expenditures for the first six months totaled $23.8 million, consistent with the $24.0 million spent during the same period of 2000. Of the total, over 75% related to information technology investments. Annual capital expenditures are projected to total between $45 to $50 million in 2001. During the first quarter, the Company acquired a fully leased commercial office building that will be used for future expansion. This transaction was the second leg of a tax-free exchange for undeveloped land the Company initiated in the fourth quarter of 2000. The land was effectively swapped for the building, but in accordance with generally accepted accounting principles, it is shown as a cash acquisition for $11.8 million in the first six months of 2001. The quarterly dividend rate applicable to Class A and Class B shares outstanding was $.25 per share in the second quarter of 2001. The Company's financial position continues to be strong. The Company continues to carry no long-term debt and expects to meet its growth requirements principally through cash generated from operations.
11 Market Risk-Sensitive Instruments And Positions The Company does not hold or invest in derivative contracts. The Company is exposed to foreign currency risk primarily due to its net investment in foreign subsidiaries. This risk is mitigated by the use of the Company's multi-currency line of credit. This credit facility is used to borrow in local currencies which mitigates the exchange rate risk resulting from foreign currency-denominated net investments fluctuating in relation to the U.S. dollar. In addition, the Company is exposed to interest rate risks through its use of the multi-currency line of credit. Overall, the Company's holdings and positions in market risk-sensitive instruments do not subject the Company to material risk. New Accounting Standards In July 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141, Business Combinations. Statement 141 requires that the purchase method be used for business combinations initiated after June 30, 2001. The Company does not expect it to have a material impact on the Company's consolidated financial statements. In July 2001, the FASB issued Statement No. 142, Goodwill and Other Intangible Assets. Statement 142 requires that goodwill no longer be amortized to earnings, but instead be reviewed for impairment. The provisions of this Statement are required to be applied starting with fiscal years beginning after December 15, 2001. This Statement is required to be applied at the beginning of an entity's fiscal year and to be applied to all goodwill and other intangible assets recognized in its financial statements at that date. Impairment losses for goodwill and indefinite-lived intangible assets that arise due to the initial application of this Statement are to be reported as resulting from a change in accounting principle. Goodwill and intangible assets acquired after June 30, 2001, will be subject immediately to the nonamortization and amortization provisions of this Statement. The Company has not completed its determination of the impact that the adoption of this new accounting standard will have on its consolidated financial statements. Forward-Looking Statements Except for the historical statements and discussions contained herein, statements contained in this report relate to future events that are subject to risks and uncertainties, such as: competition, changing market and economic conditions, currency fluctuations, changes in laws and regulations, the Company's ability to effectively implement and manage its information technology programs and other factors discussed in the report and in the Company's filings with the Securities and Exchange Commission. Actual results may differ materially from any projections contained herein.
12 PART II. OTHER INFORMATION AND SIGNATURE Item 4. Submission of Matters to a Vote of Security Holders. (a) The annual meeting of stockholders of registrant was held May 14, 2001. (b) The nominee for director, as listed in the Company's proxy statement dated April 13, 2001, was elected. The directors whose terms of office continued after the meeting are also listed in the proxy statement. (c) A brief description and the results of the matters voted upon at the meeting follow. (1) Election of T.E. Adderley as director: Shares voted "For" 3,325,343 Shares voted "Withhold" 111,498 (2) Ratification of the selection of PricewaterhouseCoopers LLP as the Company's independent auditors: Shares voted "For" 3,436,725 Shares voted "Withhold" 116 Item 6. Exhibits and Reports on Form 8-K. (a) See Index to Exhibits required by Item 601, Regulation S-K, set forth on page 14 of this filing. (b) No reports on Form 8-K were filed during the quarter for which this report is filed.
13 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, thereunto duly authorized. KELLY SERVICES, INC. Date: August 14, 2001 /s/ William K. Gerber ------------------------------------ William K. Gerber Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
14 INDEX TO EXHIBITS REQUIRED BY ITEM 601, REGULATION S-K Exhibit No. Description Document - ------- ----------- -------- 3 Composite Certificate of Incorporation. 2 4 Rights of security holders are defined in Articles Fourth, Fifth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth and Fifteenth of the Composite Certificate of Incorporation, Exhibit 3.