-----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, QcAmKFphhijf26XrzrCD7YOakdP5iD1cQfsyc1qlJEKFF7YTiLAE+GHUNNFahlCo 98e+y7NDjtDKt1EZhuuGjw== 0000085608-00-000005.txt : 20000503 0000085608-00-000005.hdr.sgml : 20000503 ACCESSION NUMBER: 0000085608-00-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000402 FILED AS OF DATE: 20000502 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATEC CORP/DE/ CENTRAL INDEX KEY: 0000085608 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES & ROLLING & FINISHING MILLS [3310] IRS NUMBER: 060737363 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04184 FILM NUMBER: 617305 BUSINESS ADDRESS: STREET 1: 75 SOUTH ST CITY: HOPKINTON STATE: MA ZIP: 01748 BUSINESS PHONE: 5084359039 MAIL ADDRESS: STREET 1: 75 SOUTH STREET CITY: HOPKINTON STATE: MA ZIP: 01748 FORMER COMPANY: FORMER CONFORMED NAME: RSC INDUSTRIES INC DATE OF NAME CHANGE: 19840515 FORMER COMPANY: FORMER CONFORMED NAME: REEVES INDUSTRIES INC DATE OF NAME CHANGE: 19710520 10-Q 1 FORM 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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 April 2, 2000 ----------------------------------------- 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 1-4184 -------------------------------------------------- MATEC Corporation - ------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 06-0737363 - ------------------------------- ------------------------- (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification Number) 75 South St., Hopkinton, Massachusetts 01748 - ---------------------------------------- ------------- (Address of principal executive offices) (Zip Code) (508) 435-9039 - ------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period 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 --- --- As of May 2, 2000, the number of shares outstanding of Registrant's Common Stock, par value $.05 was 2,739,148. -1- MATEC Corporation Index Page ---- PART I. FINANCIAL INFORMATION Consolidated Condensed Balance Sheets - April 2, 2000 and December 31, 1999 ..................... 3 Consolidated Statements of Operations - Three Months Ended April 2, 2000 and April 4, 1999 ...... 4 Consolidated Condensed Statements of Cash Flows - Three Months Ended April 2, 2000 and April 4, 1999 ...... 5 Consolidated Statements of Comprehensive Income - Three Months Ended April 2, 2000 and April 4, 1999 ...... 6 Notes to Consolidated Condensed Financial Statements ..... 7-9 Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 10-12 Quantitative and Qualitative Disclosures about Market Risk ............................................. 12 PART II. OTHER INFORMATION Item 2 - Changes in Securities and Use of Proceeds ....... 13 Item 6 - Exhibits and Reports on Form 8-K ................ 13 Signatures ..................................................... 14 -2- PART I - FINANCIAL INFORMATION Item 1. Financial Statements MATEC Corporation and Subsidiaries Consolidated Condensed Balance Sheets (In thousands, except share data) (Unaudited) 4/2/00 12/31/99 -------- -------- ASSETS Current assets: Cash and cash equivalents ............................ $ 3,158 $ 3,118 Receivables, net ..................................... 3,417 3,097 Inventories .......................................... 3,581 3,330 Deferred income taxes and other current assets ....... 994 811 ------- ------- Total current assets ............................... 11,150 10,356 ------- ------- Property, plant and equipment, at cost ................. 8,790 8,619 Less accumulated depreciation ........................ 5,974 5,819 ------- ------- 2,816 2,800 ------- ------- Marketable equity securities ........................... 2,943 3,073 Other assets ........................................... 175 303 ------- ------- $17,084 $16,532 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt .................... $ - $ 998 Accounts payable ..................................... 1,548 1,317 Accrued liabilities .................................. 1,416 1,064 Income taxes ......................................... 894 547 ------- ------- Total current liabilities .......................... 3,858 3,926 ------- ------- Deferred income taxes .................................. 1,363 1,429 Stockholders' equity: Preferred stock, $1.00 par value- Authorized 1,000,000 shares; issued none ............ - - Common stock, $.05 par value- Authorized 10,000,000 shares; Issued and outstanding: 2,739,148 and 2,650,148 shares ..................... 137 132 Capital surplus ...................................... 4,794 4,527 Retained earnings .................................... 5,265 4,774 Accumulated other comprehensive income ............... 1,667 1,744 ------- ------- Total stockholders' equity ...................... 11,863 11,177 ------- ------- $17,084 $16,532 ======= ======= See notes to consolidated condensed financial statements. -3- MATEC Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended 4/2/00 4/4/99 ------- ------- Net sales ................................ $ 5,426 $ 2,400 Cost of sales ............................ 3,802 2,039 ------- ------- Gross profit ........................... 1,624 361 Operating expenses: Selling and advertising ................ 622 521 General and administrative ............. 411 265 ------- ------- 1,033 786 Operating profit (loss) .................. 591 (425) Other income (expense): Interest income ......................... 45 93 Interest expense ........................ (9) (51) Gain on sale of investment .............. 1,226 - Other, net .............................. 28 18 ------- ------- 1,290 60 Earnings (loss) from continuing operations before income taxes .......... 1,881 (365) Income tax (expense) benefit ............. (752) 120 ------- ------- Earnings (loss) from continuing operations 1,129 (245) Earnings (loss) from discontinued operations (90) 30 ------- ------- Net earnings (loss) ...................... $ 1,039 $ (215) ======= ======= Basic earnings (loss) per share: Continuing operations ................... $ .41 $ (.09) Discontinued operations ................. (.03) .01 ------ ------ $ .38 $ (.08) ====== ====== Diluted earnings (loss) per share: Continuing operations ................... $ .40 $ (.09) Discontinued operations ................. (.03) .01 ------ ------ $ .37 $ (.08) ====== ====== Weighted average shares, basic ........... 2,714 2,716 ===== ===== Weighted average shares, diluted ......... 2,835 2,716 ===== ===== Cash dividends per share ................ $ .20 $ - ===== ===== See notes to consolidated condensed financial statements. -4- MATEC Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) Three Months Ended 4/2/00 4/4/99 -------- -------- Cash flows from operating activities: Earnings (loss) from continuing operations ....... $ 1,129 $ (245) Adjustments to reconcile earnings (loss) from continuing operations to net cash provided (used) by operating activities: Depreciation and amortization .................. 155 156 Changes in deferred income taxes ............... (113) 40 Gain on sale of investment ..................... (1,226) - Changes in operating assets and liabilities .... 276 (644) Other .......................................... 8 1 ------- ------- Net cash provided (used) by operating activities 229 (692) - ----------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sale of investment ................. 1,319 - Capital expenditures ............................. (171) (121) Collection of note receivables ................... 43 35 Other, net........................................ (8) (8) ------- ------- Net cash provided (used) by investing activities 1,183 (94) - ---------------------------------------------------------------------- Cash flows from financing activities: Payment on long-term debt ........................ (745) - Dividend paid .................................... (548) - Stock options exercised .......................... 11 - Purchases of common stock ........................ - (23) ------- ------- Net cash (used) by financing activities (1,282) (23) - ---------------------------------------------------------------------- Net cash provided (used) by discontinued operations (90) 50 - ---------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 40 (759) Cash and cash equivalents: Beginning of period .............................. 3,118 4,516 ------- ------- End of period .................................... $ 3,158 $ 3,757 ======= ======= Noncash investing and financing activities: During 2000, the Company issued 85,000 common shares upon the conversion of the lender's warrant as payment for $255,000 of debt. See notes to consolidated condensed financial statements. -5- MATEC Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) (In thousands) (Unaudited) Three Months Ended 4/2/00 4/4/99 ------- ------- Net earnings (loss) ...................... $ 1,039 $ (215) Other comprehensive income, net of tax: Unrealized (loss) on marketable equity securities, net of tax benefit of $52 in 2000 and $65 in 1999 ................ (77) (97) ------- ------- Comprehensive income (loss) .............. $ 962 $ (312) ======= ======= See notes to consolidated condensed financial statements. -6- MATEC Corporation and Subsidiaries Notes to Consolidated Condensed Financial Statements 1. Financial Presentation: The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. These interim financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's 1999 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 2. Receivables, net: Receivables, net of allowances, consist of the following: 4/2/00 12/31/99 ------- -------- (in thousands) Accounts receivable, less allowance for doubtful accounts of $105 and $93 ....................... $ 3,140 $ 2,820 Refundable income taxes ......................... 154 154 Amounts due from the sale of discontinued operations .................................... 123 123 ------- ------- $ 3,417 $ 3,097 ======= ======= 3. Inventories: Inventories consist of the following: 4/2/00 12/31/99 ------- -------- (in thousands) Raw materials ....................... $ 1,890 $ 1,797 Work in process ..................... 1,187 1,179 Finished goods ...................... 504 354 ------- ------- $ 3,581 $ 3,330 ======= ======= 4. Long-Term Debt: In January 2000, the Company paid $745,000 in cash and issued 85,000 shares of common stock as payment in full for the $1 million term debt note due on June 30, 2000. The common shares were issued upon conversion of the lender's warrant. -7- 4. Discontinued Operations: During 1998, the Company sold the assets of its Bergen Cable Technologies, Inc. ("BCT") subsidiary. As a result of the sale, the Company is performing environmental clean-up at that site. During 2000, the Company expensed $150,000 to increase the environmental expense accrual to reflect the current available estimate to complete the remediation. As of April 2, 2000, $800,000 has been expensed for the clean-up and $305,000 is accrued for future payments. In March 1999, the Company received a $50,000 note payment and recorded a $50,000 pre-tax gain on disposal of discontinued operations. Since the entity acquiring the assets of BCT had significant third-party debt compared to its equity and the Company's note receivable was subordinated to the third party debt, the Company had deferred any gain on the note until cash payments were received by the Company. 5. Gain on Sale of Investment: In January 2000, the Company sold its common stock in Bergen Cable Technology, Inc. The Company acquired these shares as part of the purchase price for the sale of BCT. The Company received $1,319,000 in cash after estimated expenses and recorded a gain of $1,226,000 in the first quarter of 2000. In addition, the Company's share of the escrow balance amounts to approximately $170,000. This escrow balance, less any claims for indemnity thereon, will be distributed to the Company on or before January 4, 2002. The Company will record a gain on this escrow balance when the cash is received. 6. Earnings (Loss) Per Share: The computation of basic and diluted earnings (loss) per share from continuing operations is as follows: Three Months Ended In thousands, except per share amounts 4/2/00 4/4/99 - -------------------------------------- -------- -------- Basic ------- Earnings (loss) from continuing operations $ 1,129 $ (245) ======= ======= Weighted average shares outstanding 2,714 2,716 ===== ===== Basic earnings (loss) per share from continuing operations $ .41 $(.09) ===== ===== -8- Three Months Ended In thousands, except per share amounts 4/2/00 4/4/99 - -------------------------------------- -------- -------- Diluted --------- Earnings (loss) from continuing operations $ 1,129 $ (245) Plus: interest impact, net of taxes from the assumed reduction of debt from the conversion of warrants 4 - ------- ------- Adjusted earnings (loss) from continuing operations $ 1,133 $ (245) ======= ======= Weighted average shares outstanding 2,714 2,716 Increase from the assumed: exercise of stock options 96 - conversion of warrants 25 - ----- ----- Diluted weighted average shares outstanding 2,835 2,716 ===== ===== Diluted earnings (loss) per share from continuing operations $ .40 $(.09) ===== ===== In 1999, options to purchase 46,664 shares of common stock and warrants to purchase 85,000 shares of common stock were not considered in the computation of diluted earnings per share since the Company reported a loss from continuing operations. -9- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents increased $40,000 during the three months ended April 2, 2000. During this period, the Company's continuing operations and investing activities generated cash of $229,000 and $1,183,000, respectively, while financing activities used cash of $1,282,000. Discontinued operations used $90,000 in cash. Trade receivables, net increased $320,000 mainly as a result of the higher sales volume in the quarter versus the prior quarter. Inventory increased $251,000 mainly to support the current sales backlog and customer delivery requirements. The $231,000 increase in accounts payable is mainly attributable to the timing of inventory and machinery and equipment purchases. Income tax payments during the three months ended April 2, 2000 amounted to $484,000. During the three months ended April 2, 2000, the Company sold its common stock in Bergen Cable Technologies, Inc. and received $1,319,000 in cash after estimated expenses of the sale. During this period, capital expenditures amounted to $171,000 as the Company added new and upgraded existing production capabilities and processes. In January 2000, the Company paid $745,000 in cash and issued 85,000 shares of common stock as payment in full for the $1 million term debt note due on June 30, 2000. The common stock was issued upon conversion of the lender's warrant. In February 2000, the Company paid a special cash dividend amounting to $548,000 or $.20 per common share. Management believes that based on its current working capital, the expected cash flows from operations and its $1,850,000 lines of credit availability, the Company's resources are sufficient to meet its financial needs in 2000 including a remaining capital expenditures budget of approximately $679,000. Results of Operations - --------------------- Net sales from continuing operations for the quarter ended April 2, 2000 increased $3,026,000 (126%) over the comparable period in 1999. The main reason for the sales increase was the positive impact of the higher backlog at the beginning of 2000 ($6.4 million) compared to that at the beginning of 1999 ($2.3 million). During the 1Q of 2000, the Company has continued to experience strong bookings. The backlog at April 2, 2000 is $8.3 million. The increases in backlog and bookings are mainly due to the strong market demand from the telecommunications industry. The Company continues to experience some late shipping deliveries with some of its products. The Company is working with its supplier base and is increasing its manufacturing capacity to improve delivery performance. -10- The gross profit percentage increased to 30% in 2000 from 15% in 1999 mainly due to the favorable effect of allocating the fixed overhead expenses over the increased sales volume. Overall direct labor and material costs decreased slightly as a percentage of sales mainly due to changes in the sales mix. Operating expenses for the quarter ended April 2, 2000 were $1,033,000 or 19% of net sales compared to $786,000 or 33% of net sales in 1999. Selling and advertising expenses increased $101,000 (19%) over 1999 mainly as a result of higher commission expenses to the Company's outside manufacturers' representatives. General and administrative expenses increased $146,000 over 1999 mainly due to increased personnel expenses and the provision for the management incentive bonus. During the quarter ended April 2, 2000, interest income decreased $48,000 from 1999 mainly as a result of the lower interest income received on the notes receivable generated by the sales of the discontinued operations. The decrease in interest expense is due to the lower levels of outstanding debt. During the quarter ended April 2, 2000, the Company sold its common stock in Bergen Cable Technology, Inc. and realized a $1,226,000 pre-tax gain on the sale. The estimated effective income tax rate for 2000 is 40% compared to 33% in 1999. The difference in rates is mainly due to the limited state tax benefit of operating losses within a state. As a result of the increased sales level and gross margin in 2000, offset in part by higher operating expenses, the Company reported an operating profit of $591,000 during the quarter ended April 2, 2000 compared to an operating loss of $425,000 during the comparable period in 1999. Nonoperating income amounted to $1,290,000 in 2000 compared to $60,000 of income in 1999. As a result, the Company reported pre-tax earnings from continuing operations of $1,881,000 during the quarter ended April 2, 2000 versus a pre-tax loss of $365,000 in 1999. Continuing operations reported net earnings of $1,129,000 for the quarter ended April 2, 2000 compared to a net loss of $245,000 in 1999. Discontinued operations reported a loss of $90,000 in 2000, compared to earnings of $30,000 in 1999. In total, the Company reported net earnings of $1,039,000 for the quarter ended April 2, 2000 compared to a net loss of $215,000 in the comparable period of 1999. -11- Forward-Looking Statements - -------------------------- Certain statements made herein contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Words such as "expects", "believes", "estimates", "plans" or similar expressions are intended to identify such forward-looking statements. Factors that could cause such differences include, but are not limited to those discussed in this section and those discussed in the Company's Form 10-K for the year ended December 31, 1999 under the section "Forward Looking Statements" included under the caption "Management's Discussion and Analysis", is herein incorporated by reference. Recent Accounting Pronouncements - -------------------------------- In June 1999, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 137 ("SFAS 137"), "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133." SFAS 137 amends Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," to defer its effective date to fiscal years beginning after June 15, 2000. Accordingly, the Company will adopt this statement in fiscal year 2001 as required. SFAS 133 establishes accounting and reporting standards for derivative instruments, including derivative instruments embedded in other contracts, and for hedging activities. The Company is currently evaluating the impact of SFAS 133 and has not yet determined its effect on the Company's consolidated financial statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------ There have been no material changes in the Company's market risk during the three months ended April 2, 2000. The information set forth on page 5 of the 1999 Annual Report to Stockholders under the section "Quantitative and Qualitative Disclosures about Market Risk" included under the caption "Management's Discussion and Analysis" is incorporated by reference. -12- PART II - OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds (c) On January 27, 2000, Massachusetts Capital Resources Company ("MCRC") exercised its warrant to purchase 85,000 shares of Common Stock of the Company at an exercise price of $3.00 per share. The aggregate exercise price was paid by surrender of $255,000 principal amount of the Note dated April 12, 1995 issued by the Company to MCRC. The 85,000 shares of Common Stock were not registered under the Securities Act of 1933, as amended, ("Act") because the shares were issued in a transaction not involving a public offering within the meaning of Section 4(2) of the Act. The certificate evidencing the shares bears a legend as follows: "The securities represented hereby have not been registered under the Securities Act of 1933, as amended. These securities have been acquired for investment and not with a view to distribution or resale, and may not be transferred or disposed of unless (1) a registration statement under the Securities Act of 1933, as amended, is then in effect with respect thereto and such sale is made pursuant to such registration statement or (2) a written opinion from counsel reasonably satisfactory to the Company is obtained to the effect that such transfer or disposition will not violate the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder." Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 3.1 Amendment to Article III, Section 1 of the By-Laws effective May 18, 2000. Filed herein. 3.2 By-Laws effective May 18, 2000. Filed herein. 13. Page 5 of the 1999 Annual Report to Stockholders. Filed for electronic purposes only. 27. Financial Data Schedule. Filed for electronic purposes only. (b) Reports on Form 8-K: On January 13, 2000, the Registrant filed a Form 8-K dated January 4, 2000 reporting under Item 5. Other Events. -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. MATEC Corporation ------------------------------------ Date: May 2, 2000 By /s/ Ted Valpey, Jr. --------------------------------- Ted Valpey, Jr. Chairman of the Board and President Date: May 2, 2000 By /s/ Michael J. Kroll --------------------------------- Michael J. Kroll, Vice President and Treasurer (Principal Financial and Accounting Officer) -14- EX-3.1 2 BY-LAW AMENDMENT Exhibit 3.1 Amendment to By-Laws - effective May 18, 2000 ARTICLE III DIRECTORS Section 1. Number, Qualification and Term. The property and business of the Corporation shall be managed by its Board of Directors consisting of not less than Five (5) nor more than Thirteen (13) persons. The number of directors constituting the entire Board shall be Nine (9); provided, however, that from time to time, such number may be decreased to not less than Five (5) or increased to not more than Thirteen (13) persons by amendment of this section of the By-laws by a majority of the entire Board of Directors. Directors need not be stockholders. They shall be elected at the Annual Meeting of Stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify. EX-3.2 3 BY-LAWS Exhibit 3.2 MATEC Corporation By-Laws - effective May 18, 2000 ARTICLE I OFFICES Section 1. Offices. The Corporation shall maintain a registered office in Maryland. The Corporation may maintain such other offices and keep its books, documents and records at such other places both within and without the State of Maryland as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II STOCKHOLDERS Section 2. Annual Meetings. Annual meetings of stockholders shall be held on the last Wednesday in April, in each year, if not a legal holiday, and if a legal holiday, then on the next secular day following, or on such other day as shall be fixed by the Board of Directors and stated in the notice of the meeting, when stockholders shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting. The annual meeting shall be held at a time determined by the Board of Directors and stated in the notice of the meeting. Section 3. Notice of Annual Meeting. Written or printed notice of the annual meeting stating the place, date and hour of the meeting shall be delivered not less than ten nor more than ninety days before the date of the meeting, by mail, by or at the direction of the chief executive officer, the Secretary, or the officer or persons calling the meeting, to each stockholder of record entitled to vote at such meeting. Section 4. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Articles of Incorporation, may be called by the chief executive officer or the Board of Directors. The business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice of the meeting. Section 5. Notice of Special Meetings. Written or printed notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than ninety days before the date of the meeting, by mail, by or at the direction of the chief executive officer, the Secretary, or the officer or persons calling the meeting, to each stockholder of record entitled to vote at such meeting. The notice shall also indicate that it is being issued by, or at the direction of, the person calling the meeting. Section 6. Quorum. The holders of a majority of the shares issued and outstanding and entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Articles of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally noticed. Section 7. Voting. At any meeting of stockholders each outstanding share having voting power shall be entitled to one vote on each matter submitted to a vote. A stockholder may vote either in person or by proxy executed in writing by the stockholder or by his duly authorized attorney-in-fact. All elections shall be determined by plurality vote, and except as otherwise provided by statute or in the Articles of Incorporation, all other matters shall be determined by vote of a majority of the shares present or represented at such meeting and voting on such matters. Section 8. Inspectors of Election. The Board of Directors in advance of any meeting of stockholders may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at a meeting of stockholders may, and, on the request of any stockholder entitled to vote thereat, shall appoint one or more inspectors. In case any person appointed as inspector fails to appear or act, the vacancy may be filled by the Board of Directors in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. Section 9. List of Stockholders. A list of stockholders as of the record date, certified by the officer of the Corporation responsible for its preparation or by the transfer agent, shall be produced at any meeting of stockholders upon the request thereat or prior thereto of any stockholder. If the right to vote at any meeting is challenged, the inspectors of election, or person presiding thereat shall require such list of stockholders to be produced as evidence of the right of the persons challenged to vote at such meeting, and all persons who appear from such list to be stockholders entitled to vote thereat may vote at such meeting. ARTICLE III DIRECTORS Section 1. Number, Qualification and Term. The property and business of the Corporation shall be managed by its Board of Directors consisting of not less than Five (5) nor more than Thirteen (13) persons. The number of directors constituting the entire Board shall be Nine (9); provided, however, that from time to time, such number may be decreased to not less than Five (5) or increased to not more than Thirteen (13) persons by amendment of this section of the By-laws by a majority of the entire Board of Directors. Directors need not be stockholders. They shall be elected at the Annual Meeting of Stockholders and each director shall be elected to serve until his successor shall be elected and shall qualify. -2- Section 2. Removal. Any or all of the directors may be removed for cause at any time by the vote of the stockholders. Section 3. Any vacancy occurring in the Board of Directors for any cause other than by reason of an increase in the number of directors may be filled by a majority of the remaining members of the Board of Directors, although such majority is less than a quorum. Any vacancy occurring by reason of an increase in the number of directors may be filled by action of a majority of the entire Board of Directors. A director elected by the Board of Directors to fill a vacancy shall be elected to hold office until the next annual meeting of stockholders or until his successor is elected and qualifies. Section 4. Additional Powers. In addition to the powers and authorities by these By-Laws expressly conferred upon it, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders. ARTICLE IV MEETINGS OF THE BOARD OF DIRECTORS Section 1. Place. Meetings of the Board of Directors, regular or special, may be held either within or without the State of Maryland. Section 2. First Meeting. The first meeting of each newly elected Board of Directors shall be held immediately after the annual meeting of stockholders at the same place as such meeting is held and no notice of such meeting to the newly elected directors shall be necessary in order legally to constitute the meeting provided a quorum shall be present, or it may convene at such place and time as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a duly executed waiver of notice thereof. Section 3. Regular Meetings. Regular meetings of the Board of Directors may be held upon such notice, or without notice, and at such time and at such place as shall from time to time be determined by the Board. Section 4. Special Meetings. Special meetings of the Board of Directors may be called by the chief executive officer on written notice to each director, deposited in the United States mail no later than the third calendar day preceding the meeting date or delivered by hand or to the telegraph company no later than the first calendar day preceding the meeting date; special meetings shall be called by the chief executive officer or Secretary in like manner and on like notice on the written request of two directors. Section 5. Quorum. A majority of the entire Board of Directors shall constitute a quorum for the transaction of business unless a greater or lesser number is required by law or by the Articles of Incorporation. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of -3- Directors, unless the vote of a greater number is required by law or by the Articles of Incorporation. If a quorum shall not be present at any meeting of directors, the directors present may adjourn the meeting from time to time. Notice of any such adjournment shall be given to any director who was not present at the time of such adjournment and unless announced at the meeting to the other directors. Section 6. Consent in Lieu of Meeting. Any action required or permitted to be taken by the Board of Directors or any committee thereof may be taken without a meeting if all members of the Board or the committee consent in writing to the adoption of a resolution authorizing the action. The resolution and the written consents thereto by the members of the Board or committee shall be filed with the minutes of the proceedings of the Board or committee. Section 7. Telephone Participation at Meetings. Any one or more of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or of such committee by means of conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation in a meeting by such means shall constitute presence in person at a meeting. ARTICLE V COMMITTEES Section 1. Committees. The Board of Directors, by resolution adopted by a majority of the entire board, may designate, from among its members, an executive committee and other committees consisting of three or more directors, which, to the extent provided in the resolution, shall have all the authority of the Board, except as otherwise required by law. Vacancies in the membership of such committees shall be filled by the Board of Directors at a regular or special meeting. Such committees shall keep regular minutes of its proceedings and report the same to the Board when required. Subject to the provisions of these By-Laws, the executive committee and each other committee shall fix its own rules of procedure and shall meet as provided by such rules or by resolution of the Board of Directors and it shall also meet at the call of the Chairman of the Board or President of the Corporation or any two members of such committee. A majority of the executive committee and of each other committee shall constitute a quorum for the transaction of business and the vote of a majority of the members of such committee present at any meeting at which there is a quorum shall be the act of such committee. ARTICLE VI NOTICES Section 1. Form; Delivery. Whenever, under the provisions of the statutes or of the Articles of Incorporation or of these By-Laws, notice is required to be given to any director or stockholder, such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be -4- deemed to be given at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by hand delivery, effective upon such delivery, or by telegram which notice shall be deemed to have been given when delivered to the telegraph company. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 2. Waiver of Notice. Whenever any notice is required to be given under the provisions of any statute or under the provisions of the Articles of Incorporation or these By-Laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. In addition, any stockholder attending a meeting of stockholders in person or by proxy without protesting prior to the conclusion of the meeting, the lack of notice thereof to him, and any director attending a meeting of the Board of Directors without protesting prior to the meeting or at its commencement such lack of notice shall be conclusively deemed to have waived notice of such meeting. ARTICLE VII OFFICERS AND AGENTS Section 1. Officers. The officers of the Corporation shall be chosen by the Board of Directors and shall be a Chairman of the Board, a President, a Vice-President, a Secretary and a Treasurer. The Board of Directors may also choose additional Vice-Presidents, and one or more Assistant Secretaries and Assistant Treasurers. Section 2. Election. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose a Chairman of the Board, a President, one or more Vice-Presidents, a Secretary and a Treasurer. Any two or more offices may be held by the same person. Section 3. Additional Officers and Agents. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Section 4. Compensation. The salaries of all officers of the Corporation shall be fixed by the Board of Directors and the compensation of employees and agents shall be so fixed or shall be fixed by officers thereunto duly authorized. Section 5. Term of Office; Removal. The officers of the Corporation shall hold office until their successors are chosen and qualify. Any officer or agent elected or appointed by the Board of Directors may be removed at any time with or without cause by the Board. Any vacancy occurring in any office of the Corporation may be filled by the Board of Directors. -5- Section 6. Powers and Duties of the Chairman of the Board. The Chairman of the Board of Directors shall preside at all meetings of the Board and all meetings of the stockholders at which he shall be present and shall have such other powers and duties as may from time to time be assigned to him by the Board of Directors. Section 7. Powers and Duties of the President. The President shall be the Chief Executive Officer of the Corporation, and shall have the general management and superintendence of the affairs of the Corporation, subject, however, to the control of the Board of Directors; and in all cases where, and to the extent that, the duties of the other officers of the Corporation are not specifically prescribed by By-Laws or rules or regulations of the Board of Directors, the President may prescribe such duties. He shall have general and active supervision over the property, business and affairs of the Corporation and may sign, execute, and deliver in the name of the Corporation deeds, mortgages, bonds, contracts, powers of attorney, and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or these By-Laws to some other officer or agent of the Corporation or shall be required by law or otherwise to be signed or executed, and may exercise any and all powers and perform any and all duties relating to such supervision, or which are imposed upon him by the By-Laws, or by the Board of Directors. Subject to such limitations as the Board of Directors may from time to time prescribe, the Chief Executive Officer shall have power to appoint and to dismiss all such agents and employees of the Corporation who are not officers thereof (including any appointed by the Board) as he may deem proper, and to prescribe their duties, and subject to like limitations, delegate to other officers of the Corporation any other of the powers and duties conferred upon him by the By-Laws or by the Board of Directors. Section 8. Powers and Duties of the Vice President. The Vice-President shall perform the duties as may be prescribed by the Board of Directors and subject to the chief executive officer. Section 9. Powers and Duties of the Secretary. The Secretary shall attend all sessions of the Board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall perform like duties for any committee of the Board when required. He shall cause to be given notice of all meetings of stockholders and directors and shall perform such other duties as pertain to his office. He shall keep in safe custody the seal of the Corporation and when authorized by the Board of Directors, affix it when required to any instrument. Section 10. Powers and Duties of the Treasurer. The Treasurer shall have the custody of all the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the -6- Board, taking proper vouchers for such disbursements, and shall render to the chief executive officer and directors at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as treasurer and of the financial condition of the Corporation. Section 11. Powers and Duties of Other Officers. All other officers shall have such duties and exercise such powers as generally pertain to their respective offices and all officers shall have such other duties and exercise such other powers as from time to time may be prescribed by the chief executive officer or the Board of Directors. ARTICLE VIII SHARES Section 1. Form; Signature. The shares of the Corporation shall be represented by certificates signed by the President or a Vice-President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Corporation and may be sealed with the seal of the Corporation or a facsimile thereof. The signatures of the officers of the Corporation upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar other than the Corporation itself or an employee of the Corporation. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of issue. Section 2. Lost Certificates. The Board of Directors may authorize the officers or agents of the Corporation to issue a new certificate in place of any certificate theretofore issued by the Corporation alleged to have been lost or destroyed and as a condition precedent to the issuance thereof, may prescribe such terms and conditions as it deems expedient, and may require such indemnities as it deems adequate to protect the Corporation from any claim that may be made against it with respect to any such certificate alleged to have been lost or destroyed. Section 3. Transfer of Shares. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, a new certificate shall be issued to the person entitled thereto, and the old certificate cancelled and the transaction recorded upon the books of the Corporation. Section 4. Fixing Record Date. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to or dissent from any proposal without a meeting, or for the purpose of determining stockholders entitled to receive payment of any dividend or the allotment of any rights, or for the purpose of any other action, the Board of Directors may fix, in advance, a date at the record date for any such determination of stockholders. Such date shall not be more than sixty nor less than ten days before the date of any meeting nor more than sixty days prior to any other action. When a -7- determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, unless the Board fixes a new record date for the adjourned meeting. Section 5. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Maryland. ARTICLE IX GENERAL PROVISIONS Section 1. Dividends. Subject to the provisions of law and of the Articles of Incorporation relating thereto, dividends may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, the Corporations bonds or its property, including the shares or bonds of other corporations, subject to any provisions of law and of the Articles of Incorporation. Section 2. Reserves. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purposes as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. Section 3. Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Section 4. Fiscal Year. The fiscal year of the Corporation shall begin on January 1st and end on December 31st of each year, unless otherwise provided by the Board of Directors. Section 5. Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words CORPORATE SEAL, MARYLAND. This seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE X AMENDMENTS Section 1. Amendments. The Board of Directors shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws. -8- EX-13 4 Exhibit 13 1999 Annual Report Management's Discussion and Analysis - ------------------------------------ Forward-Looking Statements - -------------------------- This Annual Report, including Management's Discussion and Analysis, the Letter to Stockholders and Operations, contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Words such as "expects", "believes", "estimates", "plans" or similar expressions are intended to identify such forward-looking statements. The forward-looking statements are based on the Company's current views and assumptions and involve risks and uncertainties that include, but not limited to: the ability to develop, market and manufacture new innovative products competitively, the ability of the Company's suppliers to produce and deliver materials competitively, and the ability to limit the amount of the negative effect on operating results caused by pricing pressures. Quantitative and Qualitative Disclosures about Market Risk - ---------------------------------------------------------- The Company's cash balances in excess of operating requirements are currently invested in money market accounts. These money market accounts are subject to interest rate risk and interest income will fluctuate in relation to general money market rates. Based on the cash and cash equivalent balance at December 31, 1999, and assuming the balance was totally invested in money market instruments for the full year, a hypothetical 1% decline in interest rates would result in an approximate $31,000 decrease in interest income. The Company's investment in marketable equity securities, which are classified as available-for-sale, represents 517,527 shares of MetroWest Bank common stock and are subject to equity price risk. These securities are recorded on the balance sheet at fair market value with unrealized gains (losses) reported as a separate component of stockholders' equity under the caption "accumulated other comprehensive income". Accordingly, while a hypothetical 10% decline in the market value of these securities would reduce total assets by approximately $307,000, this decrease would not have an effect on the statement of operations unless the securities were actually sold. The Company purchases certain inventory from and sells product to foreign countries. As these activities are currently transacted in U.S. dollars, they are not subject to foreign currency exchange risk. However, significant fluctuation in the currencies where the Company purchases inventory or sell product could make the U.S. dollar equivalent of such transactions more or less favorable to the Company and the other involved parties. EX-27 5
5 1,000 3-MOS DEC-31-2000 APR-02-2000 3,158 0 3,522 105 3,581 11,150 8,790 5,974 17,084 3,858 0 0 0 137 11,726 17,084 5,426 5,426 3,802 3,802 0 11 9 1,881 752 1,129 (90) 0 0 1,039 .38 .37
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