SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended October 2, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-12745
THERMEDICS DETECTION INC.
(Exact name of Registrant as specified in its charter)
Massachusetts 04-3106698
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
220 Mill Road
Chelmsford, Massachusetts 01824-4178
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
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 October 29, 1999
ommon Stock, $.10 par value 19,316,684
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMEDICS DETECTION INC.
Consolidated Balance Sheet
(Unaudited)
Assets
<TABLE>
<CAPTION>
October 2, January 2,
(In thousands) 1999 1999
- ------------------------------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents (includes $24,682 under repurchase $ 10,052 $ 32,906
agreement with affiliated company in 1998)
Advance to affiliate (Note 6) 30,684 -
Accounts receivable, less allowances of $1,684 and $1,149 14,775 15,949
Unbilled contract costs and fees 1,684 1,705
Inventories:
Raw materials and supplies 5,968 9,763
Work in process 1,758 1,362
Finished goods 5,402 6,042
Prepaid and refundable income taxes 3,115 2,884
Prepaid expenses 1,140 1,496
-------- --------
74,578 72,107
-------- --------
Property, Plant, and Equipment, at Cost 12,784 12,505
Less: Accumulated depreciation and amortization 8,221 7,567
-------- --------
4,563 4,938
-------- --------
Other Assets 766 804
-------- --------
Cost in Excess of Net Assets of Acquired Companies 53,114 54,657
-------- --------
$133,021 $132,506
======== ========
2
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THERMEDICS DETECTION INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
October 2, January 2,
(In thousands except share amounts) 1999 1999
- ------------------------------------------------------------------------------------ ---------- ----------
Current Liabilities:
Accounts payable $ 2,291 $ 3,719
Accrued payroll and employee benefits 2,810 3,412
Accrued commissions 1,120 787
Accrued installation and warranty expenses 1,027 1,075
Deferred revenue 928 972
Other accrued expenses 4,009 4,185
Due to parent company and affiliated companies 226 336
-------- --------
12,411 14,486
-------- --------
Long-term Obligation 103 127
-------- --------
Shareholders' Investment:
Common stock, $.10 par value, 50,000,000 shares authorized; 1,932 1,932
19,316,684 shares issued and outstanding
Capital in excess of par value 95,022 95,022
Retained earnings 25,205 21,877
Accumulated other comprehensive items (Note 2) (1,652) (938)
-------- --------
120,507 117,893
-------- --------
$133,021 $132,506
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
THERMEDICS DETECTION INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
October 2, October 3,
(In thousands except per share amounts) 1999 1998
- ------------------------------------------------------------------------------------ ---------- ----------
Revenues:
Product revenues $14,479 $18,575
Service revenues 3,079 4,994
------- -------
17,558 23,569
------- -------
Costs and Operating Expenses:
Cost of product revenues 8,757 8,268
Cost of service revenues 1,859 2,240
Selling, general, and administrative expenses 6,294 6,615
Research and development expenses 1,939 2,360
------- -------
18,849 19,483
------- -------
Operating Income (Loss) (1,291) 4,086
Interest Income 410 328
Other Expense (4) (6)
------- -------
Income (Loss) Before Income Taxes (885) 4,408
Income Tax (Provision) Benefit 914 (1,741)
------- -------
Net Income $ 29 $ 2,667
======= =======
Basic and Diluted Earnings per Share (Note 3) $ - $ .14
======= =======
Weighted Average Shares (Note 3):
Basic 19,317 19,317
======= =======
Diluted 19,368 19,325
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THERMEDICS DETECTION INC.
Consolidated Statement of Income
(Unaudited)
Nine Months Ended
October 2, October 3,
(In thousands except per share amounts) 1999 1998
- ------------------------------------------------------------------------------------ ---------- ----------
Revenues:
Product revenues $45,740 $57,942
Service revenues 10,417 13,292
------- -------
56,157 71,234
------- -------
Costs and Operating Expenses:
Cost of product revenues 21,507 25,881
Cost of service revenues 5,930 6,366
Selling, general, and administrative expenses 18,910 20,972
Research and development expenses 6,355 7,426
------- -------
52,702 60,645
------- -------
Operating Income 3,455 10,589
Interest Income 1,090 1,206
Interest Expense, Related Party - (303)
Other Expense (22) (1)
------- -------
Income Before Income Taxes 4,523 11,491
Income Tax Provision 1,195 4,539
------- -------
Net Income $ 3,328 $ 6,952
======= =======
Basic and Diluted Earnings per Share (Note 3) $ .17 $ .36
======= =======
Weighted Average Shares (Note 3):
Basic 19,317 19,317
======= =======
Diluted 19,356 19,323
======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
THERMEDICS DETECTION INC.
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended
October 2, October 3,
(In thousands) 1999 1998
- ------------------------------------------------------------------------------------ ---------- ----------
Operating Activities:
Net income $ 3,328 $ 6,952
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 2,442 2,477
Provision for losses on accounts receivable 613 201
Other noncash expenses 2,479 967
Changes in current accounts:
Accounts receivable 374 2,112
Unbilled contract costs and fees 37 (528)
Inventories 1,447 (709)
Other current assets 47 63
Accounts payable (1,408) (248)
Other current liabilities (759) (2,288)
-------- --------
Net cash provided by operating activities 8,600 8,999
-------- --------
Investing Activities:
Advances to affiliate, net (Note 6) (30,684) -
Purchases of property, plant, and equipment (1,123) (1,771)
Proceeds from sale of property, plant, and equipment 356 117
Other (26) 51
-------- --------
Net cash used in investing activities (31,477) (1,603)
-------- --------
Financing Activities:
Payment of promissory note to parent company - (21,200)
Orion Research transfers from Thermedics - 1,026
-------- --------
Net cash used in financing activities - (20,174)
-------- --------
Exchange Rate Effect on Cash 23 240
-------- --------
Decrease in Cash and Cash Equivalents (22,854) (12,538)
Cash and Cash Equivalents at Beginning of Period 32,906 46,352
-------- --------
Cash and Cash Equivalents at End of Period $10,052 $ 33,814
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
6
<PAGE>
THERMEDICS DETECTION INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been prepared
by Thermedics Detection Inc. (the Company) without audit and, in the opinion of
management, reflect all adjustments of a normal recurring nature necessary for a
fair statement of the financial position at October 2, 1999, the results of
operations for the three- and nine-month periods ended October 2, 1999, and
October 3, 1998, and the cash flows for the nine-month periods ended October 2,
1999, and October 3, 1998. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of January 2, 1999, has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. The consolidated financial statements
and notes are presented as permitted by Form 10-Q and do not contain certain
information included in the annual financial statements and notes of the
Company. The consolidated financial statements and notes included herein should
be read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 2, 1999,
filed with the Securities and Exchange Commission.
2. Comprehensive Income
Comprehensive income combines net income and "other comprehensive items,"
which represents foreign currency translation adjustments, reported as a
component of shareholders' investment in the accompanying balance sheet. During
the third quarter of 1999 and 1998, the Company's comprehensive income totaled
$626,000 and $3,351,000, respectively. During the first nine months of 1999 and
1998, the Company's comprehensive income totaled $2,614,000 and $7,636,000,
respectively.
3. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 2, October 3, October 2, October 3,
(In thousands except per share amounts) 1999 1998 1999 1998
- ------------------------------------------------------------ ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Basic
Net Income $ 29 $ 2,667 $ 3,328 $ 6,952
------- ------- ------- -------
Weighted Average Shares 19,317 19,317 19,317 19,317
------- ------- ------- -------
Basic Earnings per Share $ - $ .14 $ .17 $ .36
======= ======= ======= =======
Diluted
Net Income $ 29 $ 2,667 $ 3,328 $ 6,952
------- ------- ------- -------
Weighted Average Shares 19,317 19,317 19,317 19,317
Effect of Stock Options 51 8 39 6
------- ------- ------- -------
Weighted Average Shares, as Adjusted 19,368 19,325 19,356 19,323
------- ------- ------- -------
Diluted Earnings per Share $ - $ .14 $ .17 $ .36
======= ======= ======= =======
7
<PAGE>
3. Earnings per Share (continued)
The computation of diluted earnings per share for each period presented
excludes the effect of assuming the exercise of certain outstanding stock
options because the effect would be antidilutive. As of October 2, 1999, there
were 604,000 of such options outstanding, with exercise prices ranging from
$9.75 to $11.99 per share.
Because the Company and Orion Research, Inc., acquired by the Company from
Thermedics Inc. in May 1998, were deemed for accounting purposes to be under
control of their common majority owner, Thermedics, the acquisition of Orion
Research was accounted for at historical cost in a manner similar to a pooling
of interests. Accordingly, all historical financial information was restated to
include the acquisition of Orion Research. On January 11, 1999, the shareholders
of the Company approved the issuance of the 5,961,225 shares of Company common
stock issuable in connection with the acquisition and the shares were
subsequently issued to Thermedics. The shares have been treated as outstanding
for all periods presented for purposes of computing earnings per share.
4. Business Segment Information
Three Months Ended Nine Months Ended
October 2, October 3, October 2, October 3,
(In thousands) 1999 1998 1999 1998
- ------------------------------------------------------------- ---------- ----------- ---------- ----------
Revenues:
Detection Instruments $ 6,196 $11,141 $20,333 $32,039
Laboratory Products 11,362 12,428 35,824 39,195
------- ------- ------- -------
$17,558 $23,569 $56,157 $71,234
======= ======= ======= =======
Income (Loss) Before Income Taxes:
Detection Instruments (a) $(3,561) $ 1,702 $(3,291) $ 2,584
Laboratory Products 2,428 2,630 7,339 8,614
Corporate (b) (158) (246) (593) (609)
------- ------- ------- -------
Total operating income (loss) (1,291) 4,086 3,455 10,589
Interest and other income, net 406 322 1,068 902
------- ------- ------- -------
$ (885) $ 4,408 $ 4,523 $11,491
======= ======= ======= =======
(a) Includes inventory provisions of $1.9 million in the third quarter and first
nine months of 1999.
(b) Primarily general and administrative expenses.
5. Proposed Reorganization
During 1998, Thermo Electron Corporation announced a proposed
reorganization involving certain of Thermo Electron's subsidiaries, including
the Company. As part of this reorganization, Thermo Electron announced that
Thermedics' equity interest in the Company may be transferred to Thermo Electron
in exchange for shares of Thermedics common stock. The Company would be taken
private and become a wholly owned subsidiary of Thermo Electron. Shareholders of
the Company would receive cash in exchange for their shares of the Company's
common stock. The completion of these transactions is subject to numerous
conditions, including the establishment of prices and exchange ratios;
confirmation of anticipated tax consequences; the approval of the Board of
Directors of the Company, Thermedics, and Thermo Electron, including the
independent directors of the Company and Thermedics; the negotiation and
execution of definitive agreements; the receipt of fairness opinions from
investment banking firms on certain financial aspects of the transactions; and
clearance by the Securities and Exchange Commission of any necessary documents
regarding the proposed transactions.
</TABLE>
8
<PAGE>
6. Cash Management Arrangements
Effective June 1, 1999, the Company and Thermo Electron commenced use of a
new domestic cash management arrangement. Under the new arrangement, amounts
advanced to Thermo Electron by the Company for domestic cash management purposes
bear interest at the 30-day Dealer Commercial Paper Rate plus 50 basis points,
set at the beginning of each month. Thermo Electron is contractually required to
maintain cash, cash equivalents, and/or immediately available bank lines of
credit equal to at least 50% of all funds invested under this cash management
arrangement by all Thermo Electron subsidiaries other than wholly owned
subsidiaries. The Company has the contractual right to withdraw its funds
invested in the cash management arrangement upon 30 days' prior notice.
Effective August 1999, the Company's Germany-based subsidiary commenced
use of a new cash management arrangement with a wholly owned subsidiary of
Thermo Electron. Under the new arrangement, amounts advanced to the subsidiary
of Thermo Electron by the Company's subsidiary bear interest at prevailing
German market rates, set at the beginning of each month. Thermo Electron's
subsidiary maintains cash, cash equivalents, and/or immediately available bank
lines of credit equal to at least 100% of all funds invested under this cash
management arrangement by all Thermo Electron subsidiaries. The Company's
subsidiary can withdraw its funds invested in this arrangement with no prior
notice. Amounts invested in these arrangements are included in "advance to
affiliate" in the accompanying balance sheet.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,"
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of the Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the heading "Forward-looking
Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 2, 1999, filed with the Securities and Exchange
Commission.
Overview
The Company is composed of businesses that operate in two segments:
Detection Instruments and Laboratory Products. The Company's Detection
Instruments segment designs, manufactures, and markets ultratrace chemical
detectors, X-ray imaging, near-infrared spectroscopy, high-speed gas
chromatography, and other technologies for quality assurance of in-process or
finished products, primarily in the food, beverage, pharmaceutical, forest
products, chemical, and other consumer-products industries. The Company's
ALEXUS(R) systems detect trace amounts of substances that would affect product
quality in refillable plastic beverage containers. The Company's InScan(R)
systems use high-speed X-ray imaging to determine accurate fill volume, net
volume, package integrity, and other quality measures for a variety of products
in cans, bottles, boxes, and other containers. The Company's Flash-GC(TM) and EZ
Flash(TM) systems are designed to help customers conduct chemical analyses
substantially faster than if they used conventional gas chromatography
equipment. In addition, the Company's near-infrared analyzers measure moisture
and other product constituents, such as fats, proteins, oils, flavorings,
solvents, adhesives, and coatings, in a broad range of products as they move
along manufacturing lines.
The Company's Detection Instruments segment also makes
explosives-detection equipment that uses simultaneous trace particle- and
vapor-detection techniques based on its proprietary chemiluminescence and
high-speed gas chromatography technologies. Customers use these
explosives-detection systems to detect plastic and other explosives at airports
and border crossings, for other high-security screening applications, and for
forensic and search applications. The Company's Detection Instruments segment
also performs contract research and development services for government and
industry customers and earns service revenues through long-term contracts.
9
<PAGE>
Overview (continued)
The Company's Laboratory Products segment designs, manufactures, and
markets electrochemistry and other technologies for quality assurance and
regulatory compliance, primarily in the environmental, food, beverage, chemical,
pharmaceutical, and biomedical-research industries. Through the Company's Orion
Research, Inc. subsidiary, the Laboratory Products segment is a worldwide
leading manufacturer of electrochemistry products that determine the quality of
various substances, from food and pharmaceuticals to water and wastewater, by
measuring their pH, specific ion concentration, dissolved oxygen, and
conductivity.
Results of Operations
Third Quarter 1999 Compared With Third Quarter 1998
Revenues decreased to $17.6 million in the third quarter of 1999 from
$23.6 million in the third quarter of 1998, primarily due to a decrease in
revenues in the Detection Instruments segment. Revenues in the Detection
Instruments segment decreased to $6.2 million in 1999 from $11.1 million in
1998, due in part to a $3.5 million decline in revenues from industrial process
instruments, primarily due to lower revenues from ALEXUS and near-infrared
analyzers and related contract revenues. Detection Instruments segment revenues
also decreased due to a $1.4 million decline in revenues from EGIS
explosives-detection systems and related services, primarily due to lower
shipments of security systems.
Revenues from the Laboratory Products segment decreased to $11.4 million
in the third quarter of 1999 from $12.4 million in the third quarter of 1998,
primarily due to lower worldwide demand for the Company's titration and
electrochemistry products and the expiration of two private label agreements.
The Company's total backlog decreased to $4.5 million at October 2, 1999,
from $6.1 million at January 2, 1999, primarily due to lower demand.
The gross profit margin decreased to 40% in the third quarter of 1999 from
55% in the third quarter of 1998, primarily due to provisions of $1.9 million
for inventories deemed excess based on recent demand in the Detection
Instruments segment. In addition, the Detection Instruments segment incurred a
contract loss of $0.3 million in the third quarter of 1999 on the manufacture of
certain security equipment.
Selling, general, and administrative expenses as a percentage of revenues
increased to 36% in the third quarter of 1999 from 28% in the third quarter of
1998, primarily due to lower revenues at both of the Company's segments.
Selling, general, and administrative expenses decreased to $6.3 million in 1999
from $6.6 million in 1998, primarily due to a reduction in selling expenses in
an effort to reduce costs.
Research and development expenses decreased to $1.9 million in the third
quarter of 1999 from $2.4 million in the third quarter of 1998, primarily as a
result of efforts to reduce costs and focus on the development of near-term
commercially viable products.
The Detection Instruments segment incurred an operating loss in the third
quarter of 1999 compared with profitable operations in the third quarter of
1998, principally due to the decrease in revenues and the inventory provisions
described above.
Interest income increased to $0.4 million in the third quarter of 1999
from $0.3 million in the third quarter of 1998 as a result of higher average
invested cash balances.
The Company recorded a tax benefit of $0.9 million on a pretax loss of
$0.9 million, primarily due to a change in the Company's estimated effective
rate for 1999 as a result of the favorable resolution of a Company claim for
prior year research and development tax credits. The effect of the tax credits
increased the tax benefit recorded in the third quarter of 1999 by $0.6 million.
The effective tax rate was 39% in the third quarter of 1998. The effective tax
rate exceeded the statutory federal income tax rate in 1998 primarily due to the
impact of state income taxes and nondeductible amortization of cost in excess of
net assets of acquired companies.
10
<PAGE>
First Nine Months 1999 Compared With First Nine Months 1998
Revenues decreased to $56.2 million in the first nine months of 1999 from
$71.2 million in the first nine months of 1998, primarily due to a decrease in
revenues in the Detection Instruments segment. Revenues in the Detection
Instruments segment decreased to $20.3 million in 1999 from $32.0 million in
1998, due in part to a $7.7 million decline in revenues from industrial process
instruments, primarily due to lower revenues from ALEXUS and near-infrared
analyzers, offset in part by an increase in EZ Flash product sales. To a lesser
extent, revenues decreased due to a $4.0 million decline in revenues from EGIS
explosives-detection systems and related services, primarily due to lower
shipments of security systems. During the first quarter of 1998, the Company
completed shipments under a contract to provide security systems to the Federal
Aviation Administration. Revenues under the contract totaled $1.1 million during
the first nine months of 1998.
Revenues from the Laboratory Products segment decreased to $35.8 million
in the first nine months of 1999 from $39.2 million in the first nine months of
1998, primarily due to the reasons discussed in the results of operations for
the third quarter.
The gross profit margin decreased to 51% in the first nine months of 1999
from 55% in the first nine months of 1998, primarily due to the reasons
discussed in the results of operations for the third quarter.
Selling, general, and administrative expenses as a percentage of revenues
increased to 34% in the first nine months of 1999 from 29% in the first nine
months of 1998, primarily due to the reason discussed in the results of
operations for the third quarter. Selling, general, and administrative expenses
decreased to $18.9 million in 1999 from $21.0 million in 1998, primarily due to
the reason discussed in the results of operations for the third quarter.
Research and development expenses decreased to $6.4 million in the first
nine months of 1999 from $7.4 million in the first nine months of 1998,
primarily due to the reasons discussed in the results of operations for the
third quarter.
Interest income decreased to $1.1 million in the first nine months of 1999
from $1.2 million in the first nine months of 1998, primarily due to lower
average invested balances as a result of the repayment of a $21.2 million
promissory note to Thermedics in March 1998. Interest expense, related party, of
$0.3 million in 1998 relates to the promissory note to Thermedics.
The effective tax rate was 26% and 40% in the first nine months of 1999
and 1998, respectively. The effective tax rate was below the statutory federal
income tax rate in 1999 primarily due to the reason discussed in the results of
operations of the third quarter, offset in part by the impact of state income
taxes and nondeductible amortization of cost in excess of net assets of acquired
companies. The effective tax rate exceeded the statutory federal income tax rate
in 1998 primarily due to the impact of state income taxes and nondeductible
amortization of cost in excess of net assets of acquired companies.
Liquidity and Capital Resources
Consolidated working capital was $62.2 million at October 2, 1999,
compared with $57.6 million at January 2, 1999. Included in working capital are
cash and cash equivalents of $10.1 million at October 2, 1999, compared with
$32.9 million at January 2, 1999. In addition, at October 2, 1999, the Company
had $30.7 million invested in advance to affiliate. Prior to the use of new cash
management arrangements between the Company and Thermo Electron Corporation
(Note 6), which became effective in 1999, such amounts were included in cash and
cash equivalents.
During the first nine months of 1999, $8.6 million of cash was provided by
operating activities. Cash provided by the Company's operations and a $1.4
million decrease in inventories, primarily in response to decreased demand, was
offset in part by $1.4 million of cash used to reduce accounts payable,
primarily due to the timing of payments.
11
<PAGE>
Liquidity and Capital Resources (continued)
Excluding advance to affiliate activity (Note 6), the Company's primary
investing activity was the expenditure of $1.1 million for purchases of
property, plant, and equipment. The Company expects to spend $0.4 million on
capital additions in the remainder of 1999.
Although the Company does not presently intend to actively seek to acquire
additional businesses in the near future, it may acquire one or more
complementary businesses if they are presented to the Company on terms the
Company believes to be attractive. Such acquisitions may require significant
amounts of cash. The Company expects that it will finance any such acquisitions
through a combination of internal funds and/or short-term borrowings from Thermo
Electron, although it has no agreement with Thermo Electron to ensure that funds
will be available on acceptable terms or at all. The Company believes that its
existing resources are sufficient to meet the capital requirements of its
existing businesses for the foreseeable future.
Year 2000
The following constitutes a "Year 2000 Readiness Disclosure" under the
Year 2000 Information and Readiness Disclosure Act. The Company continues to
assess the potential impact of the year 2000 date recognition issue on the
Company's internal business systems, products, and operations. The Company's
year 2000 initiatives include (i) testing and upgrading significant information
technology systems and facilities; (ii) testing and developing upgrades, if
necessary, for the Company's current products and certain discontinued products;
(iii) assessing the year 2000 readiness of its key suppliers and vendors; and
(iv) developing a contingency plan.
The Company's State of Readiness
The Company has implemented a compliance program to ensure that its
critical information technology systems and noninformation technology systems
will be ready for the year 2000. The first phase of the program, testing and
evaluating the Company's critical information technology systems and
noninformation technology systems for year 2000 compliance, has largely been
completed. During phase one, the Company tested and evaluated its significant
computer systems, software applications, and related equipment for year 2000
compliance. The Company also evaluated the potential year 2000 impact on its
critical noninformation technology systems, which efforts included testing the
year 2000 readiness of its manufacturing, utility, and telecommunications
systems at its critical facilities. The Company is currently in phase two of its
program, during which any material noncompliant systems or noninformation
technology systems that were identified during phase one are prioritized and
remediated. The Company is currently upgrading or replacing its noncompliant
information technology systems, and this process was approximately 95% complete
as of October 2, 1999. In many cases, such upgrades or replacements are being
made in the ordinary course of business, without accelerating previously
scheduled upgrades or replacements. The Company expects that all of its material
information technology systems and critical noninformation technology systems
will be year 2000 compliant by the end of November 1999.
The Company has also implemented a compliance program to test and evaluate
the year 2000 readiness of the material products that it currently manufactures
and sells. The Company believes that all of such material products are year 2000
compliant. However, as many of the Company's products are complex, interact with
or incorporate third-party products, and operate on computer systems that are
not under the Company's control, there can be no assurance that the Company has
identified all of the year 2000 problems with its current products. The Company
has tested its older products for year 2000 compliance, and believes that all of
its material older products are year 2000 compliant.
The Company is in the process of identifying and assessing the year 2000
readiness of key suppliers and vendors that are believed to be significant to
the Company's business operations. As part of this effort, the Company has
developed and distributed questionnaires relating to year 2000 compliance to its
significant suppliers and vendors. To date, no significant supplier or vendor
has indicated that it believes its business operations will be materially
disrupted by the year 2000 issue. The Company has substantially completed its
assessment of third-party risk, and has determined the impact on the Company of
any third-party risk on the part of its suppliers and vendors to be minimal.
12
<PAGE>
Year 2000 (continued)
Contingency Plan
The Company is developing a contingency plan that will allow its primary
business operations to continue despite disruptions due to year 2000 problems.
This plan may include identifying and securing other suppliers, increasing
inventories, and modifying production facilities and schedules. As the Company
continues to evaluate the year 2000 readiness of its business systems and
facilities, products, and significant suppliers and vendors, it will modify and
adjust its contingency plan as may be required. The Company expects to complete
its contingency plan by the end of November 1999.
Estimated Costs to Address the Company's Year 2000 Issues
The Company had incurred expenses to third parties (external costs)
related to year 2000 issues of approximately $585,000 as of October 2, 1999, and
the total external costs of year 2000 remediation are expected to be
approximately $700,000. All of the external costs incurred as of October 2,
1999, were spent on testing and upgrading information technology systems. The
Company's year 2000 costs have been funded from working capital. All internal
costs and related external costs other than capital additions related to year
2000 remediation have been and will continue to be expensed as incurred. The
Company does not track the internal costs incurred for its year 2000 compliance
project. Such costs are principally the related payroll costs for its
information systems group.
Reasonably Likely Worst Case Scenario
The Company is not currently able to determine the most reasonably likely
worst case scenario to result from the year 2000 issue. One possible worst case
scenario would be that certain of the Company's material suppliers or vendors
experience business disruptions due to the year 2000 issue and are unable to
provide materials and services to the Company on time. The Company's operations
could be delayed or temporarily shut down, and it could be unable to meet its
obligations to customers in a timely fashion. The Company's business,
operations, and financial condition could be adversely affected in amounts that
cannot be reasonably estimated at this time. If the Company believes that any of
its key vendors or suppliers may not be year 2000 compliant, it will seek to
identify and secure other suppliers or vendors.
Risks of the Company's Year 2000 Issues
While the Company is attempting to minimize any negative consequences
arising from the year 2000 issue, there can be no assurance that year 2000
problems will not have a material adverse impact on the Company's business,
operations, or financial condition. While the Company expects that upgrades to
its internal business systems will be completed in a timely fashion, there can
be no assurance that the Company will not encounter unexpected costs or delays.
Despite its efforts to ensure that its material current products are year 2000
compliant, the Company may see an increase in warranty and other claims,
especially those related to Company products that incorporate, or operate using,
third-party software or hardware. As discussed above, if any of the Company's
material suppliers or vendors experience business disruptions due to year 2000
issues, the Company might also be materially adversely affected. If any
countries in which the Company operates experience significant year 2000
disruption, the Company could also be materially adversely affected. There is
expected to be a significant amount of litigation relating to the year 2000
issue and there can be no assurance that the Company will not incur material
costs in defending or bringing lawsuits. In addition, if any year 2000 issues
are identified, there can be no assurance that the Company will be able to
retain qualified personnel to remedy such issues. Any unexpected costs or delays
arising from the year 2000 issue could have a material adverse impact on the
Company's business, operations, and financial condition in amounts that cannot
be reasonably estimated at this time.
13
<PAGE>
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk from changes in foreign currency
exchange rates has not changed materially from its exposure at year-end 1998.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
None.
14
<PAGE>
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 as of the 5th day of November 1999.
THERMEDICS DETECTION INC.
/s/ Paul F. Kelleher
Paul F. Kelleher
Chief Accounting Officer
/s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- -----------------------------------------------------------------------------
3.1 Amended and Restated By-laws of the Registrant.
27 Financial Data Schedule.
Amended and Restated as of 9/16/99
THERMEDICS DETECTION INC.
BY-LAWS
TABLE OF CONTENTS
Title Page
Article I - Stockholders............................................ 1
Section1.1. Place of Meeting ............................... 1
Section 1.2. Annual Meetings....................... ........ 1
Section 1.3. Special Meetings................................ 1
Section 1.4. Notice of Meetings................................ 1
Section 1.5. Quorum.......................................... 2
Section 1.6. Voting; Proxies................................ 2
Section 1.7. Inspectors of Election............................... 3
Section 1.8. Action Without Meeting.............................. 3
Article II - Directors.....................................................3
Section2.1. Powers........................................... 3
Section2.2. Number, Election and Term of Office.... ........... 4
Section2.3. Place of Meetings............................... 4
Section2.4. Annual Meetings................................ 4
Section2.5. Regular Meetings........................ ...... 4
Section2.6. Special Meetings................................ 4
Section2.7. Notice of Meetings................................ 5
Section2.8. Quorum.......................................... 5
Section2.9. Voting............................................ 5
Section2.10. Action Without Meeting.............................. 5
Section2.11. Meetings by Telephone Conference Calls... ........6
Section2.12. Resignations........................................ 6
Section2.13. Removal........................................... 6
Section2.14. Vacancies......................................... 6
Section2.15. Compensation of Directors............................ 6
Section2.16. Committees.................................... .... 6
Section2.17. Executive Committee............................... 7
Section2.18. Issuance of Stock............................... 8
Article III - Officers
Section3.1. Officers........................................... 8
Section3.2. Election and Term of Office..................... 8
Section3.3. Chairman of the Board.............................. 9
Section3.4. President........................................... 9
Section3.5. Vice President........................................9
Section3.6 Chief Financial Officer............................. 10
Section3.7. Treasurer and Assistant Treasurer.................. 10
TABLE OF CONTENTS
(Continued)
Title Page
Section3.8. Clerk and Assistant Clerk................... 10
Section3.9. Secretary and Assistant Secretary.......... 11
Section3.10. Resignation.................................... 11
Section3.11. Removal........................................ 11
Section3 12. Vacancies....................................... 11
Section3.13. Subordinate Officers.......................... 12
Section3.14. Compensation................................. 12
Article IV - Stock
Section 4.1. Stock Certificates.............................. 12
Section 4.2. Transfer of Stock.............................. 13
Section 4.3. Fixing Date for Determination
of stockholders' Rights........................ 13
Section 4.4. Lost, Mutilated or Destroyed
Certificates...............................14
Article V - General Provisions
Section 5.1. Offices............................................ 14
Section5.2. Seal................................................. 14
Section5.3. Fiscal Year.................................... 14
Section5.4. Execution of Instruments..................... 14
Section5.5. Corporate Records............................. 15
Section5.6. Voting of Securities owned by this Corporation 15
Section 5.7. Conflict of Interest................................16
Section 5.8. Indemnification.................................... 17
Article VI - Amendments................................................... 20
Section 6.1. General.............................................20
Section 6.2. Date of Annual Meeting of Stockholders....... 20
Aticle VII - Miscellaneous
Section 7.1 Massachusetts Control Share Acquisition Act ...21
<PAGE>
BY-LAWS
of
THERMEDICS DETECTION INC.
Article I - Stockholders
Section 1.1 Place of Meeting Meetings of stockholders shall be held at the
principal office of the corporation or, to the extent permitted by the Articles
of Organization, at such other place within the United States as the Board of
Directors may from time to time designate.
Section 1.2. Annual Meetings. The annual meetings of stockholders shall be held
at such hour as may from time to time be designated by the Board of Directors,
on the third Wednesday in May of each year or on such other date within six
months after the end of the Corporation's fiscal year as may be fixed by the
Board of Directors, for the purpose of electing a Board of Directors and
transacting such other business as may properly be brought before such meeting.
At the annual meeting any business may be transacted whether or not the notice
of such meeting shall have contained a reference thereto, except where such a
reference is required by law, the Articles of Organization or these By-Laws. If
the annual meeting is not held on the date determined in accordance with this
Section, a special meeting in lieu of the annual meeting may be held with all
the force and effect of an annual meeting.
Section 1.3.Special Meetings. Special meetings of stockholders may be called by
the Chairman of the Board (if any), the President or the Board of Directors, and
shall be called by the Clerk or, in case of death, absence, incapacity or
refusal of the Clerk, by any other officer, upon written application of one or
more stockholders who hold at least one tenth part in interest of the capital
stock entitled to vote at the meeting. At any special meeting only business to
which a reference shall have been contained in the notice of such meeting may be
transacted.
Section 1.4. Notice of Meetings. Written or printed notice of each meeting of
stockholders, stating the place, date and hour and the purposes of the meeting
shall be given by the Clerk or other officer calling the meeting at least ten
days before the meeting to each stockholder entitled to vote at the meeting or
entitled to such notice by leaving such notice with him at his residence or
usual place of business or by mailing it, postage prepaid, and addressed to the
stockholder at his address as it appears in the records of the corporation. A
written waiver of notice executed before or after a meeting by a stockholder or
his attorney thereunto authorized and filed with the records of the meeting,
shall be deemed equivalent to such notice to such stockholder. Any person
authorized to give notice of any such meeting may make affidavit of such notice,
which, as to the facts therein stated, shall be conclusive. It shall be the duty
of every stockholder to furnish to the Clerk of the corporation or to the
transfer agent, if any, of the class of stock owned by him, his current post
office address.
Section 1.5 Quorum At any meeting of stockholders the holders of a majority in
interest of all capital stock entitled to vote at such meeting or, if two or
more classes of stock are issued, outstanding and entitled to vote as separate
classes, a majority in interest of each class, present in person or represented
by proxy, shall constitute a quorum. The announcement of a quorum by the officer
presiding at the meeting shall constitute a conclusive determination that a
quorum is present. The absence of such an announcement shall have no
significance. Shares of its own stock held by the corporation or held for its
use and benefit shall not be counted in determining the total number of shares
outstanding at any particular time. If a quorum is not present or represented,
the stockholders present or represented and entitled to vote at such meeting, by
a majority vote, may adjourn the meeting from time to time, and the meeting may
be held as adjourned without further notice. At any adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted if the meeting had been held as originally called.
The stockholders present at a duly organized meeting may continue to transact
business until adjournment notwithstanding the withdrawal of one or more
stockholders so as to leave less than a quorum.
Section 1.6.Voting; Proxies. Except as otherwise provided by law or the Articles
of organization, at any meeting of stockholders each stockholder shall have one
vote for each share of stock entitled to vote and registered in his name and a
proportionate vote for a fractional share. Any stockholder may vote in person or
by written proxy dated not more than six months prior to the meeting named
therein and filed with the Clerk of the meeting, or of any adjournment thereof,
before being voted. A proxy with respect to stock held in the name of two or
more persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the corporation receives a specific written notice to the
contrary from any one of them, except as otherwise limited therein, a proxy
shall entitle the person authorized thereby to vote at any adjournment of the
meeting named therein but shall not be valid after final adjournment of such
meeting. Voting on all matters, including the election of directors, shall be by
voice vote unless voting by ballot is requested by any stockholder. Except as
otherwise provided by law, the Articles of Organization, or these By-laws, at
all meetings of stockholders all questions shall be determined by a vote of a
majority of the shares voting, or, if two or more classes of stock are entitled
to vote as separate classes, a vote of a majority of the shares voting of each
class voting, present in person or represented by proxy. The corporation shall
not, directly or indirectly, vote shares of its own stock.
Section 1.7 Inspectors of Election. Two inspectors may be appointed by the Board
of Directors before or at each meeting of stockholders, or, if no such
appointment shall have been made, the presiding officer may make such
appointment at the meeting. At the meeting for which they are appointed, such
inspectors shall open and close the polls, receive and take charge of the
proxies and ballots, and decide all questions touching on the qualifications of
voters, the validity of proxies and the acceptance and rejection of votes. If
any inspector previously appointed shall fail to attend or refuse or be un3ble
to serve, the presiding officer shall appoint an inspector in his place.
Section 1.8. Action Without Meeting. Any action which may be taken at any
meeting of the stockholders may be taken without a meeting if all stockholders
entitled to vote on the matter consent to the action in writing and the written
consents are filed with the records of the meetings of stockholders. Such
consents shall be treated for all purposes as a vote at a meeting.
Article II - Directors
Section 2.1. Powers. Except as otherwise provided by law, the Articles 0':
organization or these By-laws, the business of the corporation shall be managed
by a Board of Directors who may exercise all the powers of the corporation.
Section 2.2. Number, Election and Term of Office. The Board of Directors shall
consist of not fewer than three (or not fewer than the number of stockholders,
if fewer than three) nor more than seven directors. Within the limits specified,
the number of directors shall be determined (a) by a vote of the stockholders at
the annual meeting, or (b) by a vote of the stockholders at a special meeting
called for the purpose by the Board of Directors, or (c) by vote of the Board of
Directors. Except for the initial directors and except as provided in Section
2.14, the directors shall be elected at the annual meeting of the stockholders
or at a special meeting. All directors shall hold office until the following
annual meeting or special meeting in lieu of the annual meeting and until their
successors are chosen and qualified.
Section 2.3. Place A Meeting Meetings of the Board Qt Directors may be held at
any place within or without the Commonwealth of Massachusetts.
Section 2.4. Annual Meetings. A meeting of the Board of Directors for the
election of officers and the transaction of general business shall be held each
year beginning in 1984, at the place of and immediately after the final
adjournment of the annual meeting of stockholders or the special meeting in lieu
of the annual meeting. No notice of such annual meeting need be given.
Section 2.5. Regular Meetings. Regular meetings of the Board of Directors may be
held, without notice, at such time and place as the Board of Directors may
determine. Any director not present at the time of the determination shall be
advised, in writing, of any such determination.
Section 2.6 Special Meetings. special meetings of the Board of Directors,
including meetings in lieu of the annual or regular meetings, may be held upon
notice at any time upon the call of the Chairman of the Board (if any) or
president and shall be called by the Chairman of the Board, president or the
Clerk or, in case of the death, absence, incapacity or refusal of the Clerk, by
any other officer, upon written application, signed by any two directors,
stating the purpose of the meeting.
Section 2.7. Notice of Meetings. Wherever notice of any meetings of the Board of
Directors is required by these By-laws or by vote of the Board of Directors,
such notice shall state the place, date and hour of the meeting and shall be
given to each director by the Chairman of the Board (if any), President, Clerk
or other officer calling the meeting at least two days prior to such meeting if
given in person by telephone or by telegram or at least four days prior to such
meeting if given by mail. Notice shall be deemed to have been duly given, if by
mail, by depositing the notice in the post office as a first class letter,
postage prepaid, or, if by telegram, by completing and filing and notice on a
telegraph blank and paying the requisite fee at any telegraph office, the letter
or telegram being addressed to the director at his last known mailing address as
it appears on the books of the corporation. No notice need be given to any
director who waives such notice by a writing executed before or after the
meeting and filed with the records of the meeting or by his attendance at the
meeting without protesting at or before the commencement of the meeting the lack
of notice to him. No notice of adjourned meetings of the Board of Directors need
be given.
Section 2.8. Quorum. At all meetings of the Board of Directors, a majority of
the directors then in office shall constitute a quorum. If a quorum is not
present, those present may adjourn the meeting from time to time until a quorum
is obtained. At any adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted if the meeting had
been held as originally called.
Section 2.9 Voting. At any meeting of the Board of Directors, the vote of a
majority of those present shall decide any matter except as otherwise provided
by law, the Articles of Organization or these By-laws.
Section 2.10 Action Without Meeting. Any action which may be taken at
any meeting of the Board of Directors may be taken without a meeting if all the
directors consent to the action in writing and the written consents are filed
with the records of the meetings of the Board of Directors. Such consents shall
be treated for all purposes as a vote at a meeting.
Section 2.11 Meetings by Telephone Conference Calls . Directors or members of
any committee designated by the Board of Directors may participate in a meeting
of the Board of Directors or such committee by means of a conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other at the same time and participation by such
means shall constitute presence in person at a meeting.
Section 2.12. Resignations. Any director may resign by giving written notice to
the Clerk. Such resignation shall take effect at the time or upon the event
specified therein, or, if none is specified, upon receipt. Unless otherwise
specified in the resignation, its acceptance shall not be necessary to make it
effective.
Section 2.13. Removal. A director may be removed from office with or without
cause by vote of the holders of a majority in interest of the stock entitled to
vote in the election of such director and may be removed from office with cause
by vote of a majority of the directors then in office. A director may be removed
for cause only after reasonable notice and opportunity to be heard before the
body proposing to remove him.
Section 2.14 Vacancies. In the event of a vacancy in the Board of Directors, by
reason of an enlargement of the Board of Directors or otherwise, the remaining
directors, by majority vote, may elect a director to fill such vacancy and may
exercise the powers of the full Board of Directors until the vacancy is filled.
Section 2.15. Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
Section 2.16. Committees. The Board of Directors may, from time to time, by vote
passed by a majority of the entire Board, constitute such standing committees
(in addition to the Executive Committee) or special committees as it deems
desirable and may dissolve any such committee (other than the Executive
Committee) by like vote at its pleasure. The Executive Committee and each other
committee of the directors duly constituted shall have such authority and powers
of the Board of Directors as may be delegated to such committee by these By-laws
or by the vote of the Board constituting such committee, except to the extent
otherwise provided by law, the Articles of Organization or these By-laws and
except that no committee shall not have the power (i) to change the principal
office of the corporation, (ii) to amend these By-laws, (iii) to issue stock of
the corporation, (iv) to establish and designate series of stock and fix and
determine the relative rights and preferences of any series of stock, (v) to
elect officers required by law or these By-laws to be elected by the
stockholders or the entire Board and to fill vacancies in any such offices, (vi)
to change the number of the Board of Directors and to fill vacancies in the
Board of Directors, (vii) to remove officers or directors from office, (viii) to
authorize the payment of any dividend or distribution to stockholders, (ix) to
authorize the reacquisition for value of stock of the corporation, or (x) to
authorize a merger of the corporation. Except as may be otherwise determined by
law, these By-laws or action by the Board of Directors, any such committee shall
be governed in the conduct of its business by the rules governing the conduct of
the business of the Board of Directors contained in these By-laws and may, by
majority vote of the entire committee, make other rules for the conduct of its
business. The Board of Directors shall have power at any time to fill vacancies
in any such committee, and (except as otherwise provided in Section 2.17 of
these By-laws) to change the membership of or to discharge any committee.
Section 2.17. Executive Committee . There shall be an Executive Committee of not
fewer than two nor more than five members, composed of the Chairman of the Board
and such other directors as the Board of Directors may appoint from time to time
by vote passed by a majority of the entire Board. The Board of Directors may
also, from time to time, by similar vote, appoint one or more alternate members
of the Executive Committee who may attend and act in the place of any absent or
disqualified member or members of the Executive Committee at any meeting
thereof. The term of office of any member or alternate member of the Executive
Committee shall expire on the date specified in the resolution of appointment or
any earlier date on which such member ceases to be a director. During the
intervals between meetings of the Board of Directors, the Executive Committee
shall have and may exercise all the powers of the Board of Directors, subject to
the limitations upon the powers of any committee set forth in Section 2.16. The
action taken by the Executive Committee at any meeting thereof shall be reported
to the entire Board and shall be subject to modification or repeal by the Board
of Directors; provided that no modification or repeal by the Board of Directors
of action taken by the Executive Committee shall prejudice the rights or acts of
any third person. The Executive Committee shall hold meetings at such times and
places and upon such notice as it may from time to time determine. A meeting of
the Executive Committee may be called at any time by the Chairman of the Board
or by any other member of the Executive Committee. Any action taken by a
majority of the members of the Executive Committee shall constitute the action
of the committee.
Section 2.18. Issuance of Stock. The Board of Directors shall have power to
issue and sell or otherwise dispose of such shares of the corporation's
authorized but unissued capital stock to such persons and at such time and for
such consideration, cash, property, services, expenses, or otherwise, and upon
such terms as it shall determine from time to time.
Article III - Officers
Section 3.1. Officers. The officers of the corporation shall consist of a
President, a Treasurer, a Clerk, and such other officers with such other titles
as the Board of Directors may determine including but without limitation to a
Chairman of the Board, a President, a Chief Financial Officer, a Secretary, one
or more Vice Presidents, Assistant Treasurers, Assistant Clerks, and Assistant
Secretaries. Any two or more offices may be held by the same person. Any officer
may be required to give a bond for the faithful performance of his duties in
such form and with such sureties as the Board of Directors may determine.
Section 3.2.. Election and Terms of Office. Except for the initial officers and
except as provided in Section 3.12, the President, Treasurer and Clerk shall be
elected by the Board of Directors at its annual meeting or at the special
meeting held in lieu of the annual meeting and shall hold office until the
following annual meeting of the Board of Directors or the special meeting in
lieu of said annual meeting and until their successors are chosen and qualified.
other officers may be chosen by the Board of Directors at the annual meeting or
any other meeting and shall hold office for such period as the Board of
Directors may prescribe. Section 3.3. Chairman of the Board. The Chairman of the
Board, if one is elected, shall have general supervision over the implementation
of policies adopted or approved by the Board of Directors. When incumbent, the
Chairman of the Board shall preside at all meetings of the stockholders and all
meetings of the Board of Directors, shall be ax a member of all standing
committees, including the Executive Committee, of the Board of Directors, and
shall exercise and perform such other powers and duties as may be required by
law, the Articles of organization or these By-laws or as may be assigned by the
Board of Directors or the Executive Committee.
Section 3.4. President. Subject to the direction of the Board of Directors and
the Executive Committee, the President shall be the chief executive officer of
the corporation and shall have the general control and management of the
business and affairs of the corporation. The President need not be a director.
The president shall perform such duties as may be required of him by law, the
Articles of organization and the By-laws or as may be assigned to him by the
Board of Directors or the Executive Committee. During any period when there is
no Chairman of the Board, the president shall perform all the duties vested in
that office, and when so acting shall have all of the powers of, and be subject
to all the restrictions upon, the Chairman of the Board. In the absence of the
Chairman of the Board, the President shall preside at any meeting of the
stockholders or the Board of Directors.
Section 3.5. Vice Presidents. The Vice president, or if there be more than one,
the Vice Presidents, shall perform such of the duties of the president on behalf
of the corporation as may be respectively assigned to him or them from time to
time by the Board of Directors, the Chairman of the Board or the president. The
Board of Directors may designate a Vice President as the Executive Vice
president, and in the absence or inability of the president to act, such
Executive Vice president shall have and possess all of the powers and discharge
all of the duties of the president, subject to the control of the Board of
Directors and the supervision of the Chairman of the Board.
Section 3.6. Chief Financial Officer. The Board of Directors shall appoint an
officer to serve as the Chief Financial Officer of the Corporation. The Chief
Financial Officer shall be responsible for the Corporation's public financial
reporting obligations and shall have such further powers and duties as are
incident to the position of Chief Financial Officer, subject to the direction of
the President and the Board of Directors.
Section 3.7 Treasurer and Assistant Treasurer. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to the
Treasurer by the Board of Directors or the President. In addition, subject to
the direction of the Board of Directors, the Treasurer shall perform such duties
and have such powers as are incident to the office of treasurer, including,
without limitation, the duty and power to keep and be responsible for all funds
and securities of the Corporation, to deposit funds of the Corporation in
depositories, to disburse such funds, to make proper accounts of such funds, and
to render statements of all such transactions and of the financial condition of
the Corporation. The Treasurer shall report directly to the President. He may be
required by the Board of Directors to give a bond for the faithful discharge of
his duties in such sum and with such surety as the Board may require. Any
Assistant Treasurer shall perform such of the duties of the Treasurer and such
other duties as the Board of Directors, the Chairman of the Board, the President
or the Treasurer may designate. The Treasurer shall have authority, in
connection with the normal business of the corporation, to sign contracts, bids,
bonds, powers of attorney and other documents when required.
Section 3.8. Clerk and Assistant Clerk. The Clerk shall be the principal
recording officer of the corporation. He shall record all proceedings of the
stockholders and discharge all duties incident to the office of Clerk. Unless a
Secretary is appointed by the Board of Directors to perform such duties, the
Clerk shall record all proceedings of the Board of Directors and of any
committees appointed by the Board of Directors. Any Assistant Clerk shall
perform such of the duties of the Clerk and such other duties as the Board of
Directors, the Chairman of the Board, the President or the Clerk may designate.
In the absence of the Clerk or any Assistant Clerk from any meeting of
stockholders, the Board of Directors or any committee appointed by the Board of
Directors, a Temporary Clerk designated by the person presiding at the meeting
shall perform the duties of the Clerk. The Clerk shall be a resident of the
Commonwealth of Massachusetts unless a resident agent has been appointed by the
corporation pursuant to law to accept service of process.
Section 3.9 Secretary and Assistant Secretary. If appointed by the Board of
Directors, the Secretary shall record all proceedings of the Board of Directors
and discharge all duties incident to the office of Secretary. Any Assistant
Secretary shall perform such of the duties of the Secretary and such other
duties as the Board of Directors, Chairman of the Board, president or Secretary
may designate. The Board of Directors and any committee appointed by the Board
of Directors may appoint a Secretary and one or more Assistant Secretaries to
perform the functions of the Secretary and Assistant Secretary for such
committee.
Section 3.10. Resignation. Any officer may resign by giving written notice to
the president or the Clerk. Such resignation shall take effect at the time or
upon the event specified therein, or, if none is specified. upon receipt. Unless
otherwise specified in the resignation, its acceptance shall not be necessary to
make it effective.
Section 3.11. Removal. An officer may be removed from office with cause, after
reasonable notice and opportunity to be heard, or without cause, in either case,
by vote of a majority of the directors then in office.
Section 3.12. Vacancies. The Board of Directors may fill any vacancy occurring
in any office far any reason and may, in its discretion, leave unfilled far such
period as it may determine any offices other than those of president, Chief
Financial Officer, Treasurer and clerk.
Section 3.13. Subordinate Officers. The Board of Directors may, from time to
time, authorize any officer to appoint and remove subordinate officers and to
prescribe their powers and duties. The term "subordinate officers" shall in no
event include the Chairman of the Board, President, Chief Financial Officer and
Clerk.
Section 3.14. Compensation. The Board of Directors may fix the compensation of
all officers of the corporation and may authorize any officer upon whom the
power of appointing subordinate officers may have been conferred to fix the
compensation of such subordinate officers.
Article IV - Stock
Section 4.1. Stock Certificates. Each stockholder shall be entitled to a
certificate or certificates of stock of the corporation in such form as the
Board of Directors may from time to time prescribe. Each certificate shall be
duly numbered and entered in the books of the corporation as it is issued, shall
state the holder's name and the number and the class and the designation of the
series, if any, of his shares, shall be signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer and may, but need not,
be sealed with the seal of the corporation. If any stock certificate is signed
by a transfer agent, or by a registrar, other than a director, officer or
employee of the corporation, the signatures thereon of the officers may be
facsimiles. In case any officer who has signed or whose facsimile signature has
been placed on any certificate shall have ceased to be such officer before such
certificate is issued, it may nevertheless be issued by the corporation and
delivered with the same effect as if he were such officer at the time of its
issue. Every certificate of stock which is subject to any restriction on
transfer pursuant to the Articles of Organization, the By-laws or any agreement
to which the corporation is a party, shall have the restrictions noted
conspicuously on the certificate and shall also set forth on the face or back of
the certificate either (i) the full text of the restriction, or (ii) a statement
of the existence of such restriction and a statement that the corporation will
furnish a copy thereof to the holder of such certificate upon written request
and without charge. Every certificate issued at a time when the corporation is
authorized to issue more than one class or series of stock shall set forth upon
the face or back of the certificate either (i) the full text of the preferences,
voting powers, qualifications and special and relative rights of the shares of
each class and series, if any, authorized to be issued, as set forth in the
Articles of Organization or (ii) a statement of the existence of such
preferences, powers, qualifications and rights, and a statement that the
corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge.
Section 4.2. Transfer of Stock. Subject to any transfer restrictions then in
force, the shares of stock of the corporation shall be transferable only upon
its books by the holders thereof in person or by their duly authorized attorneys
or legal representatives. Such transfer shall be effected by delivery of the old
certificate, together with a duly executed assignment and power to transfer
endorsed thereon or attached thereto and with such proof of the authenticity of
the signature and such proof of authority to make the transfer as the
corporation or its agents may reasonably require, to the person in charge of the
stock and transfer books and ledgers or to such other person as the Board of
Directors may designate, who shall thereupon cancel the old certificate and
issue a new certificate. The corporation may treat the holder of record of any
share or shares of stock as the owner of such stock, and shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have notice thereof, express or
otherwise.
Section 4.3. Fixing Date for Determination of Stockholders' Rights. The Board of
Directors may fix in advance a time, not exceeding sixty days preceding the date
of any meeting of stockholders, or the date for the payment of any dividend or
the making of any distribution to stockholders, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital stock
shall go into effect, or the last date on which the consent or dissent of
stockholders may be effectively expressed for any purpose, as the record date
for determining the stockholders entitled to notice of, and to vote at, such
meeting and any adjournment thereof, to receive such dividend or distribution,
to receive such allotment of rights, or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, or to express such consent
or dissent. In such case only stockholders of record on the date so fixed shall
have such right, notwithstanding any transfer of stock on the books of the
corporation after the record date. In any case in which the Board of Directors
does not fix a record date, the record date shall be the thirtieth day next
preceding the date of such meeting, the dividend payment or distribution date,
the date for allotment of rights, the date for exercising of rights in respect
of any such change, conversion or exchange of capital stock, or the date for
expressing such consent or dissent, as the case may be.
Section 4.4. Lost, Mutilated or Destroyed Certificates. No certificates for
shares of stock of the corporation shall be issued in place of any certificate
alleged to have been lost, mutilated or destroyed, except upon production of
such evidence of the loss, mutilation or destruction and upon indemnification of
the corporation and its agents to such extent and in such manner as the Board of
Directors may prescribe and as required by law.
Article V - General Provisions
Section 5.1. Offices. The principal office of the corporation shall be in
Woburn, Massachusetts. The corporation may also have offices at such other place
or places within or without Massachusetts as the Board of Directors may from
time to time determine or the business of the corporation may require.
Section 5.2. Seal. The seal of the corporation shall be in the form of a circle
inscribed with the name of the corporation, the year of its incorporation and
the word "Massachusetts". When authorized by the Board of Directors and to the
extent not prohibited by law, a facsimile of the corporate seal may be affixed
or reproduced.
Section 5.3. Fiscal Year. Except as otherwise determined by the Board of
Directors, the fiscal year of the corporation shall be the fifty-two or
fifty-three weeks ending on the Saturday nearest December 31 in each year.
Section 5.4. Execution A Instruments. Except as otherwise provided in these
By-laws or as the Board of Directors may generally or in particular cases
authorize the execution thereof in some other manner, all instruments,
documents, deeds, leases, transfers, contracts, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the corporation shall be signed
by the Chairman of the Board, President or a Vice President, or by the Treasurer
or an Assistant Treasurer, or by the Clerk. Facsimile signatures may be used in
the manner and to the extent authorized generally or in particular cases by the
Board of Directors.
Section 5.5. Corporate Records. The original, or attested copies, of the
Articles of Organization, By-laws, and records of all meetings of incorporators
and stockholders, and the stock and transfer records, which shall contain the
names of all stockholders and the record address and the amount of stock held by
each, shall be kept in the Commonwealth of Massachusetts at the principal office
of the corporation, or at an office of its Clerk, its resident agent or its
transfer agent. The copies and records need not all be kept in the same office.
They shall be available at all reasonable times for inspection by any
stockholder for any proper purpose. They shall not be available for inspection
to secure a list of stockholders or other information for the purpose of selling
such list or information or copies thereof or of using the same for a purpose
other than in the interest of the applicant, as a stockholder, relative to the
affairs of the corporation.
Section 5.6. Voting of Securities owned by this Corporation. Subject always to
the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this
corporation may be voted in person at any meeting of security holders of such
other corporation by the Chairman of the Board of this corporation if he is
present at such meeting, or in his absence by the President or Treasurer of this
corporation if he is present at such meeting, and (b) whenever, in the judgment
of the Chairman of the Board, it is desirable for this corporation to execute a
proxy or written consent in respect to any shares or other securities issued by
any other corporation and owned by this corporation, such proxy or consent shall
be executed in the name of this corporation by the Chairman of the Board,
without the necessity of any authorization by the Board of Directors, affixation
of corporate seal or countersignature or attestation by another officer,
provided that if the Chairman of the Board is unable to execute such proxy or
consent by reason of sickness, absence from the United States or other similar
cause, the President or Treasurer may execute such proxy or consent. Any person
or persons designated in the manner above stated as the proxy or proxies of this
corporation shall have full right, power and authority to vote the shares or
other securities issued by such other corporation and owned by this corporation
the same as such shares or other securities might be voted by this corporation.
Section 5.7. Conflict of Interest.
(a) The corporation may enter into contracts and otherwise transact
business as vendor, purchaser, partner, joint venturer or otherwise with any
director, officer, or stockholder of the corporation, and with any corporation,
joint stock company, business trust, partnership or other entity in which any
director, officer or stockholder of the corporation is or may be or become a
director, officer, stockholder, joint venturer, partner, trustee or beneficiary,
or in which he mar otherwise be or become a party or may have an interest,
pecuniary or otherwise, as freely as though such director's, officer's or
stockholder's interest did not exist, even though the vote, action or presence
of such director, officer or stockholder may be necessary to obligate the
corporation in connection with such contract or transaction. No such contract or
transaction shall, in the absence of fraud, be affected, invalidated or avoided,
and no such director, officer or stockholder shall be held liable to account to
the corporation or to any creditor or stockholder of the corporation for any
profit or benefit realized by such person through any such contract or
transaction, by reason of such adverse interest or by reason of any fiduciary
relationship of such director, officer or stockholder to the corporation arising
out of such office or stock ownership.
(b) In the case of a director or officer, but not in the case of any
stockholder as such, having any such interest in a contract or transaction, the
nature of the interest of such director or officer (though not necessarily the
details or the extent thereof) shall be disclosed to or known by the entire
Board of Directors before acting on such contract or transaction. Ownership or
beneficial interest representing less than 10% of the stock or other equity
interest in another corporation, joint stock company, business trust,
partnership or other entity shall be deemed not to constitute an interest
adverse to this corporation and such interest in another corporation, joint
stock company, business trust, partnership or other entity need not be disclosed
pursuant to the preceding sentence of this Section 5.7. A general notice that a
director or officer of the corporation has an interest in any other corporation,
joint stock company, business trust, partnership or other entity shall be
sufficient disclosure as to such director or officer with respect to any
contract or transaction of this corporation with such other corporation6 joint
stock company, business trust, partnership or other entity.
(c) Any director of this corporation who is also a director or officer
of, or has interest requiring disclosure pursuant to this Section 5.7 to the
Board of Directors in, any other corporation, business trust, partnership or
other entity (other than any such entity controlling, controlled by or under
common control with this corporation) with which this corporation proposes to
contract or transact any business, or who has an interest in his or her own
right, pecuniary or otherwise, in any such contract or transaction, shall not
participate in any vote to authorize any such contract or transaction. Any such
contract or transaction may be authorized or approved by a majority of the
directors then in office and not disqualified by this Section 5.7 to vote on
such matters, even though the disinterested directors do not constitute a
quorum. In any event, the authorization or a ratification of a majority of the
capital stock of this corporation outstanding and entitled to vote for the
election of directors, adopted at a meeting duly called and held for the
purpose, shall validate any such contract or transaction as against any
stockholders of the corporation, whether of record or not at the time of such
vote, and as against any creditor or other claimant under the corporation; and
no contract or transaction shall be avoided or invalidated by reason of any
provision of this Section 5.7 which would be valid but for the provisions of
this Section 5.7.
Section 5.8. Indemnification.
(a) For purposes of this Section 5.8, the following terms shall have the
meanings ascribed to them below: "Agent" means any person who is or was a
director, officer, employee or other agent of this corporation, or is or was
serving at the request of this corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, business trust, or
other enterprise in which this corporation has an interest, as a stockholder,
creditor or otherwise, and shall include, wherever appropriate, such agent's
executors, administrators or personal representatives. "Liabilities and
expenses" includes, without limitation thereto, amounts of judgments, fines and
penalties against, and amounts paid in settlement by or on behalf of, any agent
of this corporation, attorneys' fees and disbursements and any expenses of
establishing a right to indemnification under this Section 5.8. "Proceeding"
means any pending, completed or terminated action, suit or proceeding, whether
brought in the right of this corporation or otherwise and whether of a civil,
criminal, administrative or investigative nature.
(b) This corpor3tion shall, to the extent legally permissible and in
accordance with the provisions of this Section 5.8, indemnify any person who was
or is a party to, is threatened to be made a party to, or is otherwise involved
in any proceeding by reason of the fact that such person is or was an agent of
this corporation, against all liabilities and expenses actually and reasonably
incurred by such person in connection with the defense or settlement of such
proceeding, except with respect to any matter as to which such person shall have
been adjudicated in such proceeding not to have acted in good faith in the
reasonable belief that his or her action was in the best interests of the
corporation, or, with respect to any criminal proceeding, had reasonable cause
to believe his or her conduct was unlawful; provided, however, that in the case
of any proceeding by or in the right of this corporation to procure a judgment
in its favor, no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duties to the
corporation, unless (and only to the extent that) the court in which such
proceeding was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as such
court shall deem proper. The termination of any such proceeding by judgment,
order of court, settlement, conviction or upon a plea of guilty or nola
contender, or its equivalent, shall not, of itself, create a presumption that
the person involved did not act in good faith for a purpose which he or she
reasonably believed to be in the best interests of the corporation, or, with
respect to any criminal proceeding, that such person had reasonable cause to
believe that his or her conduct was unlawful.
(c) To the extent that any agent of this corporation has been successful
(as hereinafter defined) in the defense of any proceeding referred to in the
proceeding paragraph (b) of this Section 5.8, or of any claim or issue therein,
such agent shall be indemnified against expenses actually and reasonably
incurred by him or her in connection therewith, but only to the extent permitted
by paragraph (b). "Successful", when used with reference to the defense or
disposition of any proceeding involving a particular person, or of any issue or
claim therein, means that the proceeding, issue or claim has been finally
terminated without a finding of liability or guilt against such person and the
time for taking an appeal or other court or administrative action therein has
expired or, in the case of a threatened proceeding, a reasonable period of time
(which may, but need not, be shorter than the period which, under the applicable
statute of limitations, would bar the threatened proceeding) has elapsed since
the threat was made without the proceeding having been instituted in court or
before a governmental agency and, in either case, without any payment or promise
having been made to induce a settlement.
(d) Indemnification under this Section 5.8 for liabilities and expenses,
other than those to which the preceding paragraph (c) applies or those ordered
by a court, shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the agent is proper in the
circumstances because the agent conformed to the applicable standards of conduct
set forth in paragraph (b) of this Section 5.8. Such determination shall be made
(i) by the Board of Directors by a majority vote of a quorum of disinterested
directors (as hereinafter defined), (ii) if such a quorum is not obtainable, or
even if obtainable and a quorum of disinterested directors so directs, by
independent legal counsel or by one or more independent persons, in either case
chosen by the Board of Directors, in a written finding delivered to the
corporation, or (iii) by vote of a majority of each class of stock of the
corporation then outstanding and entitled to vote on the election of directors.
"Disinterested director" means, with respect to action by the Board of Directors
upon any claim for indemnification of an agent of the corporation, any director
other than a director who is or was involved in the same proceeding or
threatened with the same claim of liability as that for which indemnification by
the corporation is sought by such agent or who is involved in any other
proceeding or threatened with any other claim of liability which might entitle
him or her to indemnification by the corporation under this Section 5.8 or
otherwise.
(e) Expenses incurred in defending any proceeding may be paid by the
corporation in advance of the final disposition of such proceeding as authorized
by the Board of Directors in the specific case upon receipt of an undertaking in
writing by or on behalf of the agent to repay such amount unless it shall be
determined ultimately that the agent is entitled to be indemnified by the
corporation as provided in this Section 5.8.
(f) No indemnification for expenses or advances in respect of expenses
incurred in defending any proceeding shall be made under this Section 5.8 in any
circumstance where it appears (i) that it would be inconsistent with a provision
of the Articles of Organization, these By-laws, a vote of the stockholders, or a
contract in effect at the time of the accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred, which prohibits
or limits indemnification, or (ii) that it would be inconsistent with any
condition expressly imposed by a court in approving a settlement.
(g) The right of indemnification provided by this Section 5.8 shall not
be exclusive of or affect any other right to which any agent of the corporation
may be entitled.
(h) The Board of Directors may authorize the corporation to purchase and
maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by such agent in such capacity or arising
out of his or her status as such, whether or not the corporation would have the
power to indemnify the agent against such liability under the provisions of this
Section 5.8.
Article VI - Amendments
Section 6.1. General. These By-laws may be amended, added to or repealed, in
whole or in part, (a) by vote of the stockholders at a meeting, where the
substance of the proposed amendment is stated in the notice of the meeting, or
(b) by vote of a majority of the directors then in office, except that no
amendment may be made by the Board of Directors on matters reserved to the
stockholders by law or the Articles of Organization or which changes the
provisions of these By-laws relating to meetings of stockholders, to the removal
of directors or to the requirements for amendment of these By-laws. Notice of
any amendment, addition or repeal of any By-law by the Board of Directors
stating the substance of such action shall be given to all stockholders not
later than the time when notice is given of the meeting of stockholders next
following such action by the Board of Directors. Any By-law adopted by the Board
of Directors may be amended or repealed by the stockholders.
Section 6.2. Date of Annual Meeting A Stockholders . No amendment of these
By-laws changing the date of the annual meeting of stockholders may be made
within sixty days before the date fixed in these By-laws for such meeting.
Notice of such change shall be given to all stockholders at least twenty days
before the new date fixed for the meeting.
Article VII - Miscellaneous
Section 7.1. Massachusetts Control Share Acquisition A~. Pursuant to Section
2(c) of Chapter 110D of the Massachusetts General Laws, the Corporation has
elected that the provisions of said Chapter 110D shall not apply to "control
share acquisitions" (as defined in said Chapter 110D) of this Corporation.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THERMEDICS
DETECTION INC.'S QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED OCTOBER 2,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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