-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J35J6IQPmGyv6v9fWT7cZ25612isgXgSl2W4DgKroCIpBho55e6cl4Q6rGq3qsbP VZ9hyle3mHU5Ks3Dr2P63A== 0000950135-97-002218.txt : 19970509 0000950135-97-002218.hdr.sgml : 19970509 ACCESSION NUMBER: 0000950135-97-002218 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GALILEO ELECTRO OPTICS CORP CENTRAL INDEX KEY: 0000711425 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 042526583 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11309 FILM NUMBER: 97597877 BUSINESS ADDRESS: STREET 1: GALILEO PARK STREET 2: PO BOX 550 CITY: STURBRIDGE STATE: MA ZIP: 01566 BUSINESS PHONE: 5083479191 MAIL ADDRESS: STREET 1: GALILEO PARK STREET 2: PO BOX 550 CITY: STURBRIDGE STATE: MA ZIP: 01566 10-Q 1 GALILEO CORPORATION 1 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 the quarterly period ended MARCH 31, 1997 COMMISSION FILE NUMBER 0-11309 GALILEO CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 04-2526583 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) GALILEO PARK, P.O. BOX 550, STURBRIDGE, MASSACHUSETTS 01566 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code (508) 347-9191 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 latest practicable date. CLASS OUTSTANDING AT MARCH 31, 1997 - ----------------------------- ------------------------------- COMMON STOCK, PAR VALUE $.01 6,847,422 SHARES PAGE 1 OF 32 2 GALILEO CORPORATION INDEX Page No. -------- PART I. Financial Information: Item 1. Financial Statements (unaudited) Consolidated Condensed Balance Sheets at March 31, 1997, and September 30, 1996.............................. 3 Consolidated Condensed Statements of Income for the three and six months ended March 31, 1997, and March 31, 1996..................... 4 Consolidated Condensed Statements of Cash Flows for the six months ended March 31, 1997, and March 31, 1996................. 5 Notes to Consolidated Condensed Financial Statements................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................. 8 PART II. Other Information: Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 3 GALILEO CORPORATION CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) (Dollars in thousands)
Mar. 31, 1997 Sept. 30, 1996 -------------------------------- ASSETS - ------ Current assets: Cash and cash equivalents $12,885 $18,652 Accounts receivable, net 4,112 5,710 Inventories, net (Note 6) 6,203 6,218 Other current assets 426 598 -------------------------------- Total current assets 23,626 31,178 Property, plant and equipment, net 14,640 19,228 Excess of cost over the fair value of assets acquired, net 3,939 -- Other assets, net 1,552 2,658 -------------------------------- Total assets $43,757 $53,064 ================================ LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable and accrued liabilities $ 3,983 $ 4,174 Other current liabilities -- 542 -------------------------------- Total current liabilities 3,983 4,716 Other liabilities 1,191 1,320 Shareholders' equity: Common stock 68 68 Additional paid-in capital 42,796 42,694 (Accumulated deficit) / retained earnings (4,281) 4,266 -------------------------------- Total shareholders' equity 38,583 47,028 -------------------------------- Total liabilities and shareholders' equity $43,757 $53,064 ================================
See Notes to Consolidated Condensed Financial Statements 3 4 GALILEO CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED) (Amounts in thousands except per share data)
For the Three Months Ended For the Six Months Ended March 31, March 31, 1997 1996 1997 1996 ------------------------------------------------------ Net sales (Note 2) $ 8,721 $10,632 $18,432 $20,604 Cost of sales 5,798 6,501 11,234 12,606 ------------------------------------------------------ Gross profit 2,923 4,131 7,198 7,998 Engineering expenses 1,379 1,002 2,562 1,827 Selling and administrative expenses 2,273 2,485 4,434 4,383 Reduction in carrying value of certain long-lived assets (Note 3) -- -- 2,226 -- Reorganization costs (Note 2) 6,872 -- 6,872 -- ------------------------------------------------------ 10,524 3,487 16,094 6,210 ------------------------------------------------------ Operating profit (loss) (7,601) 644 (8,896) 1,788 Other income 243 208 493 323 ------------------------------------------------------ Income (loss) before income taxes and extraordinary gain (7,358) 852 (8,403) 2,111 Provision (benefit) for income taxes 20 25 141 (82) ------------------------------------------------------ Income (loss) before extraordinary gain (7,378) 827 (8,544) 2,193 Extraordinary gain on receipt and sale of stock, net of taxes -- -- -- 158 ====================================================== Net income (loss) (Note 2) $ (7,378) $ 827 $(8,544) $ 2,351 ====================================================== Net income (loss) per common and common equivalent share outstanding Before extraordinary gain $ (1.08) $ 0.12 $ (1.25) $ 0.32 Effect of extraordinary gain -- -- -- 0.02 ====================================================== Net income (loss) $ (1.08) $ 0.12 $ (1.25) $ 0.34 ====================================================== Weighted average common and common equivalent shares outstanding 6,847 6,934 6,842 7,007
See Notes to Consolidated Condensed Financial Statements 4 5 GALILEO CORPORATION CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands)
For the six months ended March 31, 1997 1996 --------------------- Net income (loss) $(8,544) $ 2,351 Adjustments to reconcile net income to net cash provided (used) by operating activities: Extraordinary gain on receipt and sale of stock -- (319) Depreciation and amortization 1,685 1,770 Reduction in carrying value of certain long-lived assets 2,226 -- Reorganization provisions 6,451 -- Increase (decrease) in cash from changes in operating assets and liabilities: Accounts receivable 1,741 1,411 Inventories (802) 53 Accounts payable and accrued liabilities (190) (1,548) Other changes, net (243) (213) ------------------- Total adjustments 10,868 1,154 ------------------- Net cash provided by operating activities 2,324 3,505 Cash flows from investing activities: - ------------------------------------- Proceeds from receipt and sale of stock -- 2,409 Proceeds from sale of assets -- 403 Capital expenditures (2,130) (1,474) Acquisitions (5,500) -- ------------------- Net cash used in investing activities (7,630) 1,338 Cash flows from financing activities: - ------------------------------------- Payments on notes payable (542) (34) Proceeds from issuance of common stock 102 244 Other financing activities (21) (18) ------------------- Net cash provided (used) by financing activities (461) 192 Net increase in cash and cash equivalents (5,767) 5,035 Cash and cash equivalents at beginning of period 18,652 8,580 =================== Cash and cash equivalents at end of period $12,885 $13,615 ===================
See Notes to Consolidated Condensed Financial Statements 5 6 GALILEO CORPORATION NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Dollars in thousands except per share data) 1. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting of only normal recurring adjustments, except for the items discussed in Notes 2 and 3 below) necessary to present fairly Galileo Corporation's (the Company) financial position as of March 31, 1997, the results of operations for the three and six month periods ended March 31, 1997, and cash flows for the six months ended March 31, 1997, in conformity with generally accepted accounting principles for interim financial information applied on a consistent basis. The results of operations for the three and six months ended March 31, 1997, are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company's 1996 Annual Report to Shareholders and Form 10-K for the fiscal year ended September 30, 1996. 2. On February 11, 1997, the Company received written notification from its then largest customer, Xerox Corporation, that Xerox had developed internal production capabilities for dicorotron assemblies and will no longer purchase these assemblies from the Company. Revenues related to Xerox were approximately $2,700 and $5,200 for the three months ended March 31, 1997 and 1996, respectively. Reduced revenues from this product will likely result in losses for the remainder of the fiscal year. On March 12, 1997, the Company announced a reorganization plan in response to this lost business. In connection with this plan, the Company recorded a nonrecurring charge of $6,872 in the three months ended March 31, 1997. The charge includes a noncash $6,451 provision for related long-lived assets, other assets and inventory, and a $421 provision for related severance and other obligations. Excluding the impact of this charge, net income for the three months ended March 31, 1997, was a loss of $506, or $0.07 per share. 3. In the first quarter of fiscal 1997, the Company adopted Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement requires impairment losses be recognized for long-lived assets, when indicators of impairment are present and the fair market values of assets are estimated to be less than carrying amounts. The adoption of this Standard resulted in a $2,226, or $0.32 per share, nonrecurring, pretax, noncash charge which reduced certain robotic assembly equipment for the Company's Medical Products Group to its estimated fair market value. Excluding the impact of this charge and the charge discussed in Note 2 above, net income for the six months ended March 31, 1997, was $554, or $0.08 per share. 6 7 4. On February 28, 1997, the Company acquired the Sani-Spec(TM) business from C.R. Bard, Inc., for $5,500. The acquisition was accounted for using the purchase method of accounting and accordingly, results of Sani-Spec's operations are included in the accompanying statement of operations from the date of acquisition. Assuming that the acquisition had been made as of the beginning of fiscal 1996, results for the Company on a pro forma basis, would have been as follows:
For the Three For the Six Months Ended Months Ended March 31, March 31, 1997 1996 1997 1996 -------- ------- -------- ------- Net sales $ 9,646 $11,557 $20,282 $22,454 Net income (loss) (7,250) 955 (8,288) 2,607 Net income (loss) per share $ (1.06) $ 0.14 $ (1.21) $ 0.37
5. Results for the three and six months ended March 31, 1996, have been restated to reflect the acquisition of Leisegang Medical, Inc., in fiscal year 1996, which was accounted for on a pooling of interests basis. For the three months ended March 31, 1996, Leisegang Medical, Inc.'s, net income was a loss of $434, or $0.06 per share. Leisegang Medical, Inc.'s, results for the six months ended March 31, 1996, were substantially break-even. 6. Classification of inventories is:
March 31, 1997 September 30, 1996 --------------- ------------------ Finished goods $2,822 $1,402 Work-in-progress 710 635 Raw materials 2,671 4,181 ------ ------ $6,203 $6,218
7. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted by December 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The Company anticipates adopting this Statement for September 1997, and the impact on the calculation of primary and fully diluted earnings per share is not expected to be material. 7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW - -------- Galileo Corporation (the "Company") develops, manufactures and markets fiberoptic and electro-optic components which transmit, sense or intensify light or images. The Company's products are currently sold primarily to original equipment manufacturers (OEMs) for use in scientific, analytical, medical, electronic imaging and office product applications. The Company's experience in fiberoptic and electro-optic technology are fundamental to developing and manufacturing its products. On February 11, 1997, the Company received written notification from its then largest customer, Xerox Corporation, that Xerox had developed internal production capabilities for dicorotron assemblies and will no longer purchase these assemblies from the Company. These assemblies accounted for approximately $20.4 million, or 48% of the Company's fiscal 1996 revenues and approximately $3.8 million, or 39%, and $2.7 million, or 31%, of revenues for the Company's first and second fiscal quarters of 1997, respectively. Reduced revenues from this product will materially adversely affect the Company's financial performance for at least the remainder of fiscal 1997 and likely will result in a loss for the fiscal year. In connection with this loss of business, the Company adopted a reorganization plan more fully discussed in the "Results of Operations" section below. The Company's Scientific Detector Products include detectors and sensors which are used in various instruments in a wide range of markets including semiconductor processing, life sciences, food processing, bulk and specialty chemicals, petroleum refining, biotechnology, failure analysis and quality and process control. The Company's Medical Products consist of a variety of scopes in support of minimally invasive medical procedures. Scopes are valuable in any medical procedure where video imaging can provide accurate diagnosis, improve surgical performance and reduce patient discomfort. In addition, the acquisitions of Leisegang Medical, Inc. and the Sani-Spec(TM) business from C.R. Bard, Inc., more fully discussed below, position the Company as a supplier of certain medical instrument equipment, principally to the obstetric and gynecological markets. The Company believes that these products offer significant future growth opportunities. Leisegang Medical, headquartered in Boca Raton, FL, was a privately-held distributor and manufacturer of OB/GYN diagnostic and surgical equipment. Included in its product line are colposcopes produced by Leisegang GmbH, a related company based in Berlin, Germany, that is the world's largest and oldest manufacturer of colposcopes and accessories. The products are sold to OB/GYN doctors' offices and hospitals through an internal sales force and by manufacturers' representatives. 8 9 Leisegang Medical is well known and highly respected in the gynecological equipment market, estimated to be $200 million annually, and is a leader in sales to doctors' offices. In addition to colposcopes, its products include biopsy instruments, ultrasound, video equipment, laser and electro-surgical systems and accessories, cryosurgery equipment, surgical instruments, rigid and flexible hysteroscopes, bone densitometers and fetal heart monitors. This acquisition enables Galileo to participate immediately in a market that is growing at 15 to 20 percent per year, and is expected to benefit significantly from the trend toward minimally invasive surgery and office-based procedures. It also provides Galileo with new distribution channels that enhance the brand name recognition and market penetration of the Company's medical imaging and sensing products. On February 28, 1997, the Company acquired the Sani-Spec(TM) business from C.R. Bard, Inc. The Sani-Spec product line includes a comprehensive suite of women's health-related products used by OB/GYN physicians, clinics and hospitals including Sani-Spec single-use vaginal speculums, Sani-Scope(TM) anoscopes, Spec Light(TM) speculum lights and Pap Smear kits. The product line is marketed through a nationwide network of approximately 80 dealers and has been a market leader for over 20 years. Last year's revenues were in excess of $4.0 million, representing approximately 40% of the domestic market. The Company's Fluorolase(R) fiberoptic-based optical amplifier product is used in applications for telecommunications as well as high speed data and video transmission. Currently, this product is being tested in these markets and the Company believes that the Fluorolase product offers significant future growth opportunities. In addition to investing in research and development activities for all of its products, the Company is exploring other acquisition opportunities to enhance its product offerings to all its customers. This Report on Form 10-Q contains certain forward-looking statements concerning, among other things, the Company's plans and objectives for future operations, planned products and services, expansion into new markets and anticipated customer demand for its existing and future products and services. Certain factors that could cause the Company's actual results to differ from those projected in these forward-looking statements are set forth in Exhibit 99.1 to the Company's December 31, 1996, SEC Form 10-Q and incorporated herein. 9 10 RESULTS OF OPERATIONS - --------------------- Sales for the three and six months ended March 31, 1997, of $8.7 million and $18.4 million decreased 18.0% and 10.5%, respectively, from the comparable prior-year periods. Reduced revenues resulted primarily from the loss of the Company's largest customer more fully discussed in the "Overview" section above. The Company completed final shipments to this customer during its second quarter. Excluding activity for this customer, revenues for the three months ended March 31, 1997, of $6.0 million increased from $5.4 million for the comparable prior year period. Gross profit (as a percentage of revenues) of 33.5% for the three months ended March 31, 1997, decreased from 38.9% from the comparable prior year period primarily due to reduced revenues. Gross profit of 39.1% for the six months ended March 31, 1997, was relatively stable with the comparable prior year period. Engineering expenses increased to $1.4 million and $2.6 million from $1.0 million and $1.8 million for the three and six months ended March 31, 1997, respectively, primarily due to increased spending to support the development of the medical and Fluorolase products. Selling and administrative expenses remained relatively stable for the three and six months ended March 31, 1997, from comparable prior-year periods. Following the loss of its largest customer, the Company adopted a reorganization plan. In connection with the plan, the Company recorded a charge of $6.9 million in the three months ended March 31, 1997. The charge includes a noncash $6.5 million provision for related long-lived assets, other assets and inventory, and a $0.4 provision for related severance and other obligations. Excluding the impact of this charge, the loss for the three months ended March 31, 1997, was $0.5 million or $0.07 per share. For the first quarter of fiscal 1997, the Company adopted Statement of Financial Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement requires impairment losses be recognized on long-lived assets when indicators of impairment are present and the fair market values of assets are estimated to be less than carrying amounts. The adoption of this statement resulted in a $2.2 million, or $0.32 per share, nonrecurring, pretax, noncash charge in the quarter, which reduced certain robotic assembly equipment for the Company's Medical Products Group to its estimated fair market value. Excluding the impact of this charge and the charge described in the preceding paragraph, net income for the six months ended March 31, 1997, was $0.6 million, or $0.08 per share. Other income principally relates to interest earned on investments. For both the current and comparable prior year periods, the Company's effective tax rate differs from the statutory 10 11 rate primarily due to available tax loss carryforwards. The current year provision relates principally to state and franchise taxes. FINANCIAL CONDITION - ------------------- The Company's working capital at March 31, 1997 of $19.6 million, decreased $6.9 million from the balance at September 30, 1996, of $26.5 million. The change in working capital was primarily due to the February 28, 1997, acquisition of the Sani-Spec business from C.R. Bard, Inc. for a cash payment of $5.5 million. The Company considers its working capital position to be adequate to support its currently planned operations. Capital spending for the six months ended March 31, 1997, amounted to $2.1 million. This compares with $1.5 million of capital expenditures for the comparable prior-year period. Capital spending for fiscal 1997 primarily relates to building improvements and machinery and equipment to support the development of new medical scopes and the Company's Fluorolase products. The Company does not have any significant commitments for capital expenditures. 11 12 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits: 3 Restated Certificate of Incorporation of the Registrant, as Amended 10 1991 Stock Option Plan of the Registrant, as Amended 11 Calculation of Earnings per Share 27 Financial Data Schedule (EDGAR filing only) b. Reports on Form 8-K: 1. On January 21, 1997, the Registrant filed a Form 8-K for a Press Release dated January 16, 1997, regarding the Registrant's first quarter results. 2. On March 12, 1997, the Registrant filed a Form 8-K regarding the Asset Purchase Agreement between the Registrant and C.R. Bard, Inc., dated February 28, 1997. 3. On March 14, 1997, the Registrant filed a Form 8-K for a Press Release dated March 12, 1997, regarding the Registrant's reorganization plan. 12 13 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. GALILEO CORPORATION Dated: May 5, 1997 /s/ William T. Hanley -------------------------------------- William T. Hanley, President and Chief Executive Officer (Principal Executive Officer) /s/ Gregory Riedel -------------------------------------- Gregory Riedel, Vice President, Finance and Chief Financial Officer (Principal Financial and Accounting Officer) 13 14 GALILEO CORPORATION INDEX TO EXHIBITS Exhibit No. Page No. ----------- -------- 3.1 Restated Certificate of Incorporation of the Registrant, as Amended 15 10 1991 Stock Option Plan of the Registrant, as Amended 26 11 Calculation of Earnings Per Share 32 27 Financial Data Schedule EDGAR Filing Only 14 EX-3.1 2 RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF GALILEO ELECTRO-OPTICS CORPORATION Galileo Electro-Optics Corporation, a corporation originally incorporated under the General Corporation Laws of the State of Delaware on September 24, 1973 (the "Corporation"), does hereby certify: FIRST: That the Board of Directors of the Corporation by unanimous written consent adopted the following vote proposing and declaring advisable the following Amendment and Restatement of the Certificate of Incorporation of the Corporation and directing that said amendment be submitted to the stockholders of the Corporation for approval without a meeting in accordance with Section 228(a) of the General Corporation Laws of the State of Delaware: Voted: That the Certificate of Incorporation of the Corporation be amended and restated in its entirety so as to supersede the original Certificate of Incorporation and all amendments thereto so that, as amended and restated, the Certificate shall read as follows: RESTATED CERTIFICATE OF INCORPORATION OF GALILEO ELECTRO-OPTICS CORPORATION FIRST: The name of the Corporation is Galileo Electro-Optics Corporation. SECOND: The registered office of the Corporation in the State of Delaware is located at No. 100 West 10th Street in the City of Wilmington, County of New Castle. The name and address of its registered agent is The Corporation Trust 15 2 Company, No. 100 West 10th Street, Wilmington, Delaware. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is three million (3,000,000) shares of Common Stock of the par value of One Cent ($.01) each, amounting in the aggregate to Thirty Thousand Dollars ($30,0000). FIFTH: The affirmative vote or consent of two-thirds (66 2/3%) of the outstanding Common Stock of the Corporation shall be necessary to approve (a) any merger, consolidation, dissolution or liquidation of the Corporation, (b) the sale of substantially all of its assets, or (c) any amendment to this Certificate of Incorporation. SIXTH: The name and place of residence of the Incorporator is as follows: Name Place of Residence ---- ------------------ Richard M. C. Glenn, III 29 Rumstick Road Barrington, RI 02806 SEVENTH: The Corporation is to have perpetual existence. EIGHTH: In furtherance and not in limitation of the powers conferred by the laws of the State of Delaware, the Board of Directors of the Corporation is authorized and empowered to make, alter, amend and repeal the Bylaws of the Corporation in any manner not inconsistent with the laws of the State of Delaware. The election of directors may but need not be by ballot unless the Bylaws so require. NINTH: The Corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of Delaware. 16 3 SECOND: That the written consent to said Amendment and Restatement was given by the stockholders of the Corporation in accordance with Section 228(a) of the General Corporation Laws of the State of Delaware. THIRD: That the said Amendment and Restatement of Certificate of Incorporation of Galileo Electro-Optics Corporation was duly adopted in accordance with Sections 242 and 245 of the General Corporation Laws of the State of Delaware by the written consent of the holders of greater than 66 2/3 percent of the issued and outstanding Common Stock of the Corporation. IN WITNESS WHEREOF, Galileo Electro-Optics Corporation has caused this Certificate to be signed by John D. White, President of the Corporation, and attested by Richard M. C. Glenn III, its Secretary as of the 24th day of November, 1982. ATTEST: GALILEO ELECTRO-OPTICS CORPORATION /s/ Richard M.C. Glenn III By: /s/ John D. White -------------------------- ---------------------- Secretary President 17 4 CERTIFICATE OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION OF GALILEO ELECTRO-OPTICS CORPORATION Galileo Electro-Optics Corporation, a corporation organized and existing under the General Corporation Laws of the State of Delaware, (the "Corporation") does hereby certify: FIRST: That the Board of Directors of the Corporation, at a meeting duly held, adopted the following vote proposing and declaring advisable the following amendment to the Restated Certificate of Incorporation of the Corporation and directed that said amendment be submitted to the stockholders of the Corporation for approval without a meeting in accordance with Section 228(a) of the General Corporation Laws of the State of Delaware. Voted: That Article FIFTH of the Restated Certificate of Incorporation of the Corporation be amended in its entirety to provide as follows: FIFTH: The affirmative vote or consent of two-thirds (66 2/3%) of the outstanding Common Stock of the Corporation shall be necessary to approve (a) any merger, consolidation, dissolution or liquidation of the Corporation, (b) the sale of substantially all of its assets, or (c) any amendment to this Certificate of Incorporation which would modify this Article FIFTH. SECOND: That the written consent to said amendment and restatement was given by the stockholders of the Corporation in accordance with Section 228(a) of the General Corporation Laws of the State of Delaware. 18 5 THIRD: That the said Amendment to the Restated Certificate of Incorporation of Galileo Electro-Optics Corporation was duly adopted in accordance with Section 242 of the General Corporation Laws of the State of Delaware by the written consent of the holders of greater than 66 2/3% of the issued and outstanding Common Stock of the Corporation. IN WITNESS WHEREOF, Galileo Electro-Optics Corporation has caused this Certificate to be signed by John B. White, President of the Corporation, and attested by Richard M.C. Glenn, III, its Secretary as of the 3rd day of February, 1983. ATTEST: GALILEO ELECTRO-OPTICS CORPORATION /s/ Richard M.C. Glenn, III By: /s/ John D. White - --------------------------- ---------------------------------- Secretary President 19 6 CERTIFICATE FOR RENEWAL AND REVIVAL OF CERTIFICATE OF INCORPORATION Galileo Electro-Optics Corporation, a corporation organized under the laws of Delaware, The Certificate of Incorporation of which was filed in the office of the Secretary of State on the 24th day of September, 1973, the Certificate of Incorporation of which was voided for non-payment of taxes, now desires to procure a restoration, renewal and revival of its Certificate of Incorporation, and hereby certifies as follows: 1. The name of this corporation is Galileo Electro-Optics Corporation. 2. Its registered office in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle and the name of its registered agent at such address is The Corporation Trust Company. 3. The date when the restoration, renewal, and revival of the Certificate of Incorporation of this company is to commence is the 29th day of February A.D. 1984, same being prior to the date of the expiration of the Certificate of Incorporation. This renewal and revival of the Certificate of Incorporation of this corporation is to be perpetual. 4. This corporation was duly organized under the Laws of the State of Delaware and carried on the business authorized by its Certificate of Incorporation until the 1st day of March A.D. 1984, at which time its Certificate of Incorporation becomes inoperative and void for non-payment of taxes and this certificate for renewal and revival is filed by authority of the duly elected directors of the corporation in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, said Galileo Electro-Optics Corporation in compliance with Section 312 of Title 8 of the Delaware Code has caused this certificate to be signed by Christopher H. Tosswill its last and acting Vice President and attested by Richard M.C. 20 7 Glenn, III, its last and acting Secretary, this 29th day of January, 1985. GALILEO ELECTRO-OPTICS CORPORATION By: /s/ Christopher H. Tosswill ---------------------------------- Last and Acting Vice President ATTEST: By: /s/ Richard M.C. Glenn III ------------------------------ Last and Acting Secretary 21 8 CERTIFICATE OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION OF GALILEO ELECTRO-OPTICS CORPORATION Galileo Electro-Optics Corporation, a corporation organized and existing under the General Corporation Laws of the State of Delaware, (the "Corporation") does hereby certify: First: That the Board of Directors of the Corporation, at a meeting duly held, adopted the following votes proposing and declaring advisable the following amendments to the Restated Certificate of Incorporation of the Corporation and directed that said amendments be submitted to the stockholders of the Corporation for approval at the Annual Meeting called in accordance with Section 222 of the General Corporation Laws of the State of Delaware. VOTED: That Article FOURTH of the Corporation's Restated Certificate ----- of Incorporation be amended to increase the number of authorized shares of common stock from 3,000,000 to 18,000,000 so that Article FOURTH would read in its entirety as follows: "FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is eighteen million (18,000,000) shares of common stock of the par value of One Cent ($.01) each, amounting in the aggregate to One Hundred Eighty Thousand Dollars ($180,000.00)." VOTED: That Article NINTH of the Corporation's Certificate of ----- Incorporation be amended by adding a second sentence thereto so that Article NINTH would read in its entirety as follows: "NINTH: The Corporation shall indemnify its officers, directors, employees and agents to the extent permitted by law. No director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for 22 9 liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit." Second: That said Amendments to the Restated Certificate of Incorporation of Galileo Electro-Optics Corporation were duly adopted in accordance with Section 242 of the General Corporation Laws of the State of Delaware by the favorable vote of the majority of the holders of the issued and outstanding common stock of the Corporation voting at the Annual Meeting. IN WITNESS WHEREOF, Galileo Electro-Optics Corporation has caused this Certificate to be signed by William T. Hanley, President of the Corporation, and attested by Richard M. C. Glenn, III, its Secretary as of the 10th day of December, 1986. ATTEST: Galileo Electro-Optics Corporation /s/ Richard M.C. Glenn, III By /s/ William T. Hanley --------------------------- ------------------------------- Secretary President 23 10 CERTIFICATE OF OWNERSHIP AND MERGER of GALILEO CORPORATION (a Delaware corporation) into GALILEO ELECTRO-OPTICS CORPORATION (a Delaware corporation) UNDER SECTION 253 OF THE DELAWARE GENERAL CORPORATION LAW Galileo Electro-Optics Corporation (the "Corporation"), a Delaware corporation, hereby certifies that: 1. The Corporation is incorporated under the Delaware General Corporation Law. 2. The Corporation owns all of the outstanding shares of capital stock of Galileo Corporation, a Delaware corporation. 3. The Corporation by the following resolutions of its board of directors duly adopted on September 17, 1996 determined to merge Galileo Corporation into itself on the terms set forth in such resolutions: RESOLVED: To merge Galileo Corporation, a Delaware corporation all of the outstanding stock of which is owned by this Corporation, with and into this Corporation pursuant to Section 253 of the Delaware General Corporation Law. RESOLVED: To change the name of this Corporation to Galileo Corporation. IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its authorized officer on September 17, 1996. GALILEO ELECTRO-OPTICS CORPORATION By: /s/ William T. Hanley William T. Hanley, President and Chief Executive Officer 24 11 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF GALILEO CORPORATION Galileo Corporation (the "Corporation"), a corporation organized and existing under the Delaware General Corporation Law, does hereby certify as follows: FIRST: A resolution was duly adopted at a meeting of the Board of Directors of the Corporation setting forth a proposed amendment of the Certificate of Incorporation of the Corporation, declaring such amendment to be advisable and directing that it be considered at the next annual meeting of the stockholders of the Corporation. The resolution setting forth the proposed amendment is as follows: RESOLVED: that the Corporation's Certificate of Incorporation be amended by changing Article FOURTH to read as follows: The total number of shares of stock which the Corporation shall have authority to issue is thirty-six million (36,000,000) shares of common stock, one cent ($.01) par value. SECOND: Thereafter, pursuant to resolution of its Board of Directors, the annual meeting of the stockholders of the Corporation was duly called and held upon notice in accordance with Section 222 of the Delaware General Corporation Law, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: Such amendment was duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, Galileo Corporation has caused this certificate to be signed by William T. Hanley, its President, on January 14, 1997. /s/ William T. Hanley ------------------------------- William T. Hanley President 25 EX-10 3 1991 STOCK OPTION PLAN, AS AMENDED 1 EXHIBIT 10 GALILEO CORPORATION 1991 STOCK OPTION PLAN SECTION 1. Purpose The purpose of the Galileo Corporation 1991 Stock Option Plan (the "Plan") is to attract and retain key employees and consultants, to provide an incentive for them to assist the Company to achieve long-range performance goals and to enable them to participate in the long-term growth of the Company. SECTION 2. Definitions "Affiliate" means any business entity in which the company owns directly or indirectly 50% or more of the total combined voting power or has a significant financial interest as determined by the Committee. "Award" means any Option or Stock Appreciation Right awarded under the Plan. "Company" means Galileo Corporation. "Board" means the Board of Directors of the Company. "Code" means Internal Revenue Code of 1986, as amended from time to time. "Committee" means a committee of not fewer than three members of the Board appointed by the Board to administer the Plan, each of whom is a "disinterested person" as defined in Rule 16b-3 under Section 16(b). "Common Stock" or "Stock" means the Common Stock of the Company. "Designated Beneficiary" means the beneficiary designated by a Participant, in a manner determined by the Committee, to receive amounts due or exercise rights of the Participant in the event of the Participant's death. In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant's estate. "Fair Market Value" means, with respect to Common Stock or any other property, the fair market value of such property as determined by the Committee in good faith or in the manner established by the Committee from time to time. 26 2 "Incentive Stock Option" means an option to purchase shares of Common Stock awarded to a Participant under Section 6 that is intended to meet the requirements of Section 422 of the Code or any successor provision. "Non-qualified Stock Option" means an option to purchase shares of Common Stock under Section 6 that is not intended to be an Incentive Stock Option. "Option" means an Incentive Stock Option or a Non-qualified Stock Option. "Participant" means a person selected by the Committee to receive an Award under the Plan. "Reporting Person" means a person subject to Section 16 of the Securities Exchange Act of 1934 or any successor provision. "Section 16(b)" means Section 16(b) of the Securities Exchange Act of 1934, or any successor provision. "Stock Appreciation Right" or "SAR" means a right to receive any excess in value of shares of Common Stock over the exercise price awarded to a Participant under Section 7. SECTION 3. Administration The Plan shall be administered by the Committee. The Committee shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, and to interpret the provisions of the Plan. The Committee's decisions shall be final and binding. To the extent permitted by applicable law, the Committee may delegate to one or more executive officers of the Company the power to make Awards to Participants who are not Reporting Persons and all determinations under the Plan with respect thereto, provided that the Committee shall fix the maximum amount of such Awards for the group and a maximum for any one Participant. Subject to any disinterested administration requirements for exemptive relief under Section 16(b) with respect to Awards to Reporting Persons, the Board may also make Awards and exercise administrative authority under the Plan to the same extent as the Committee. SECTION 4. Eligibility All employees, and in the case of Awards other than Incentive Stock Options, consultants of the Company or any Affiliate capable of contributing significantly to the 27 3 successful performance of the Company, other than any person who has irrevocably elected not to be eligible, are eligible to be Participants in the Plan. SECTION 5. Stock Available for Awards (a) Subject to adjustment under subsection (b), Awards may be made under the Plan for up to 550,000 shares of Common Stock. If any Award in respect to shares of Common Stock expires or is terminated unexercised or is forfeited for any reason, the shares subject to such Award, to the extent of such expiration, termination or forfeiture, shall again be available for award under the Plan, subject, however, in the case of Incentive Stock Options, to any limitation required under the Code. Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) In the event that the Committee determines that any stock dividend, extraordinary cash dividend, creation of a class of equity securities, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Common Stock at a price substantially below market value, or other similar transaction affects the Common Stock such that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under the Plan, then the Committee, subject, in the case of Incentive Stock Options, to any limitation required under the Code, shall equitably adjust any or all of (i) the number and kind of shares in respect of which Awards may be made under the Plan, (ii) the number and kind of shares subject to outstanding Awards, and (iii) the exercise price with respect to any of the foregoing, and if considered appropriate, the Committee may make provision for a cash payment with respect to an outstanding Award, provided that the number of shares subject to any Award shall always be a whole number. (c) The maximum number of shares of Common Stock subject to Options and Stock Appreciation Rights that may be granted to any Participant in the aggregate in any fiscal year of the Company shall not exceed 100,000, subject to adjustment under subsection (b). SECTION 6. Stock Options (a) Subject to the provision of the Plan, the Committee may award Incentive Stock Options and Non-qualified Stock Options and determine the number of shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. The terms and conditions of Incentive Stock Options shall be subject to and comply with Section 422 of the Code, or any successor provision, and any regulations thereunder. 28 4 (b) The Committee shall establish the option price at the time each Option is awarded, which price shall be not less than 100% of the Fair Market Value of the Common Stock on the date of award. (c) Each Option shall be exercisable at such times and subject to such terms and conditions as the Committee may specify in the applicable Award or thereafter. The Committee may impose such conditions with respect to the exercise of Options including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. (d) No shares shall be delivered pursuant to any exercise of an Option until payment in full of the option price therefor is received by the Company. Such payment may be in whole or part in cash or, to the extent permitted by the Committee at or after the award of an Option upon the delivery of shares of Common Stock owned by the optionee valued at their Fair Market Value on the date of delivery, or such other lawful consideration as the Committee may determine. (e) The Committee may provide for the automatic award of an Option upon the delivery of shares to the Company in payment of an Option for up to the number of shares so delivered. SECTION 7. Stock Appreciation Rights (a) Subject to the provisions of the Plan, the Committee may award SARs in tandem with an Option (at or after the award of the Option), or alone and unrelated to an Option. SARs in tandem with an Option shall terminate to the extent that the related Option is exercised, and the related Option shall terminate to the extent that the tandem SARs are exercised. SARs shall have an exercise price of not less than 100% of the Fair Market Value of the Common Stock on the date of award, or in the case of SARs in tandem with Options, the exercise price of the related Option. (b) An SAR related to an Option that can only be exercised during limited periods following a change in control of the Company may entitle the Participant to receive an amount based upon the highest price paid or offered for Common Stock in any transaction relating to the change in control or paid during the thirty-day period immediately preceding the occurrence of the change control in any transaction reported in the stock market in which the Common Stock is normally traded. SECTION 8. General Provisions Applicable to Awards (a) Reporting Person Limitations. Notwithstanding any other provision of the Plan, to the extent required to qualify for the exemption provided by Rule 16b-3 under Section 16(b), any Option or SAR issued under the Plan to a Reporting Person shall not be 29 5 transferable other than by will or the laws of descent and distribution and shall be exercisable during the Participant's lifetime only by the Participant or the Participant's guardian or legal representative. (b) Documentation. Each Award under the Plan shall be evidenced by a writing delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or comply with applicable tax and regulatory laws and accounting principles. (c) Committee Discretion. Each type of Award may be made alone or in addition to or in relation to any other type of Award. The terms of each type of Award need not be identical, and the Committee need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Award, any determination with respect to an Award may be made by the Committee at the time of Award or at any time thereafter. (d) Settlement. The Committee shall determine whether Awards are settled in whole or in part in cash, Common Stock, other securities of the Company, Awards or other property. The Committee may permit a Participant to defer all or any portion of a payment under the Plan. (e) Cash Awards. In the discretion of the Committee, any Award under the Plan may provide cash payments to the Participant in lieu of or in addition to an Award. (f) Termination of Employment. The Committee shall determine the effect on an Award of the disability, death, retirement or other termination of employment of a Participant and the extent to which, and the period during which, the Participant's legal representative, guardian, or Designated Beneficiary may receive payment of an Award or exercise rights thereunder. (g) Change in Control. In order to preserve a Participant's right under an Award in the event of a change in control of the Company, the Committee in its discretion may, at the time an Award is made or at any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise or realization of the Award, (ii) provide for the purchase of the Award upon the Participant's request for an amount of cash or other property that could have been received upon the exercise or realization of the Award had the Award been currently exercisable or payable, (iii) adjust the terms of the Award in a manner determined by the Committee to reflect the change in control, (iv) cause the Award to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provision as the Committee may consider equitable and in the best interests of the Company. 30 6 (h) Withholding. The Participant shall pay to the Company, or make provision satisfactory to the Committee for payment of, any taxes required by law to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. In the Committee's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of delivery. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the participant. (i) Amendment of Award. The Committee may amend, modify or terminate any outstanding Award, including substituting therefor another Award of the same or a different type, changing the date of exercise or realization and converting an Incentive Stock Option to a Non-qualified Stock Option, provided that the Participant's consent to such action shall be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant. SECTION 9. Miscellaneous. (a) No Right To Employment. No persons shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment. The Company expressly reserves the right at any time to dismiss a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. (b) No Rights As Shareholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a shareholder with respect to any shares of Common Stock to be distributed or acquired under the Plan until he or she becomes the holder thereof. (c) Effective Date. Subject to the approval of the shareholders of the Company, the Plan shall be effective on October 23, 1991. Awards may be made before, but expressly subject to, such approval. (d) Amendment of Plan. The Board may amend, suspend or terminate the Plan or any portion thereof at any time, provided that no amendment shall be made without shareholder approval if such approval is necessary to comply with any applicable tax or regulatory requirement, including any requirement for exemptive relief under Section 16(b). (e) Governing Law. The provisions of the Plan shall be governed and interpreted in accordance with the laws of Massachusetts. 31 EX-11 4 CALCULATIONS OF EARNINGS PER SHARE 1 EXHIBIT 11 GALILEO CORPORATION CALCULATION OF EARNINGS PER SHARE
Three Months Ended Six Months Ended March 31, March 31, 1997 1996 1997 1996 ---------------------------- --------------------------- Primary Average shares outstanding 6,847,442 6,793,294 6,841,887 6,778,352 Net effect of dilutive stock options - based on the treasury stock method using average market price -- 141,026 -- 121,267 ---------------------------- ---------------------------- Total 6,847,442 6,934,320 6,841,887 6,899,619 ============================ ============================ Net income (loss) $(7,378,000) $ 827,000 $(8,544,000) $2,351,000 Per share amount $ (1.08) $ 0.12 $ (1.25) $ 0.34 Fully Diluted Average shares outstanding 6,847,442 6,793,294 6,841,887 6,778,352 Net effect of dilutive stock options - based on the treasury stock method using the quarter-end market price, if higher than average market price -- 158,497 -- 129,955 ---------------------------- ---------------------------- Total 6,847,442 6,951,791 6,841,887 6,908,307 ============================ ============================ Net income (loss) $(7,378,000) $ 827,000 $(8,544,000) $2,351,000 Per share amount $ (1.08) $ 0.12 $ (1.25) $ 0.34
32 EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 6-MOS SEP-30-1997 OCT-01-1996 MAR-31-1997 1 12,885 0 4,218 (106) 6,629 23,626 47,067 (26,936) 43,757 5,174 0 0 0 68 38,515 43,757 18,432 18,432 11,234 11,234 0 0 0 (8,403) 141 (8,544) 0 0 0 (8,544) (1.25) (1.25)
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