UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 period ended June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to ___________________________
Commission File Number
0-2545
----------------------
Allied Research Corporation
--------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 04-2281015
- ------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer Number)
incorporation or organization)
8000 Towers Crescent Drive, Suite 750
Vienna, Virginia 22182
- ------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 847-5268
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 June 30, 1999:
4,831,080.
<PAGE>
Allied Research Corporation
INDEX
- ------------------------------------------------------------------------------
PAGE
PART I. FINANCIAL INFORMATION - UNAUDITED NUMBER
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1999 and December 31, 1998............... 2,3
Condensed Consolidated Statements of (Loss) Earnings
Three months and six months ended June 30, 1999
and 1998.......................................... 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1999 and 1998........... 5,6
Notes to Condensed Consolidated Financial Statements..... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................ 10
PART II. OTHER INFORMATION........................................ 16
<PAGE>
Allied Research Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
ASSETS
(Unaudited)
- ------------------------------------------------------------------------------
June 30, 1999 December 31, 1998
------------- -----------------
CURRENT ASSETS
Cash and equivalents $15,348 $10,235
Restricted cash (notes 3 and 6) 14,093 14,014
Accounts receivable 26,019 29,446
Costs and accrued earnings on
uncompleted contracts 6,425 20,887
Inventories 5,237 3,422
Prepaid expenses and deposits 1,450 10,094
----- ------
Total current assets 68,572 88,098
PROPERTY, PLANT AND EQUIPMENT - AT COST
Buildings and improvements 11,252 12,440
Machinery and equipment 29,014 31,776
Leasehold improvements 118 118
----- ------
40,384 44,334
Less accumulated depreciation 30,522 33,103
------ ------
9,862 11,231
Land 1,149 1,298
----- -----
11,011 12,529
OTHER ASSETS
Restricted deposits (notes 3 and 6) - 6,670
Intangibles, net of amortization 4,627 4,961
Other 732 818
----- ------
5,359 12,449
$84,942 $113,076
======= ========
The accompanying notes are an integral part of these statements.
2
<PAGE>
Allied Research Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
(Thousands of Dollars)
LIABILITIES
(Unaudited)
- ------------------------------------------------------------------------------
June 30, 1999 December 31, 1998
------------- -----------------
CURRENT LIABILITIES
Notes payable $5,224 $ 3,415
Current maturities of long-term debt 1,117 1,324
Accounts and trade notes payable 18,318 25,379
Accrued liabilities 5,380 5,043
Accrued losses on contracts 818 786
Customer deposits 7,202 16,137
Income taxes 1,258 748
------ ------
Total current liabilities 39,317 52,832
LONG-TERM DEBT, less current maturities 3,021 4,431
ADVANCE PAYMENTS ON CONTRACTS - 5,850
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized,
10,000 shares; none issued - -
Common stock, par value, $.10 per share;
authorized 10,000,000 shares; issued and
outstanding, 4,831,080 in 1999 and
4,757,174 in 1998 483 475
Capital in excess of par value 13,877 13,391
Retained earnings 31,951 35,111
Accumulated other comprehensive income (3,707) 986
------- ----------
42,604 49,963
------- ----------
$84,942 $113,076
======== ==========
3
<PAGE>
Allied Research Corporation
CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) EARNINGS
(Thousands of Dollars)
(Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
-------------------------- ------------------------
1999 1998 1999 1998
------- -------- -------- -------
<S> <C> <C> <C> <C>
Revenue $ 10,097 $ 32,154 $ 37,579 $ 67,907
Cost and expenses
Cost of sales 10,614 24,774 33,307 53,897
Selling and administrative 3,275 3,514 5,939 6,785
Research and development 443 273 840 730
------ ------ ------ ------
14,332 28,561 40,086 61,412
------ ------ ------ ------
Operating (loss) income (4,235) 3,593 (2,507) 6,495
Other income (deductions)
Interest expense (388) (470) (723) (877)
Interest income 281 318 574 554
Other - net 69 (372) 445 (384)
------ ------ ------ ------
(38) (524) 296 (707)
------ ------ ------ ------
(Loss) earnings before
income taxes (4,273) 3,069 (2,211) 5,788
Income taxes 152 523 948 985
------ ------ ------ ------
NET (LOSS) EARNINGS $(4,425) $2,546 $(3,159) $4,803
====== ====== ======== ======
Net (loss) income per common
share
Basic $ (.93) $ .53 $ (.66) $ 1.02
====== ====== ======== ======
Diluted $ (.93) $ .53 $ (.66) $ .99
====== ====== ======== ======
Weighted average number
of shares
Basic 4,757,214 4,781,038 4,805,114 4,687,482
Diluted 4,763,653 4,835,367 4,811,670 4,833,441
</TABLE>
4
<PAGE>
Allied Research Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
- ------------------------------------------------------------------------------
Six months ended June 30
-------------------------
Increase (decrease) in cash and equivalents 1999 1998
---- ----
Cash flows from operating activities
Net (loss) earnings $(3,159) $ 4,803
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities
Depreciation and amortization 1,493 2,061
Changes in assets and liabilities
Accounts receivable 1,130 22,040
Costs and accrued earnings on uncompleted
contracts 12,507 (7,635)
Inventories (2,312) 1,401
Prepaid expenses and other assets 7,934 8,591
Accounts payable, accrued liabilities and
customer deposits (17,018) (21,952)
Income taxes 870 (429)
------- ------
Net cash provided by operating activities 1,446 8,880
Cash flows (used in) investing activities
Capital expenditures (1,512) (1,840)
Restricted cash and deposits 4,872 (10,220)
------- -------
Net cash provided by (used in) investing
activities 3,360 (12,060)
5
<PAGE>
Allied Research Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Thousands of Dollars)
(Unaudited)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended June 30
-------------------------
1999 1998
------- -------
<S> <C> <C>
Cash flows from financing activities
Principal payments of long-term debt (378) (1,065)
Increase in long-term debt 350 -
Net (decrease) increase in short-term borrowings 788 1,775
Stock grant/stock plan 551 685
Options exercised 16 459
Retirement - common stock (73) -
------- -------
Net cash provided by financing activities 1,254 1,854
Effects of exchange rate changes on cash (947) (337)
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 5,113 (1,663)
Cash and equivalents at beginning of year 10,235 7,694
------- -------
Cash and equivalents at end of period $15,348 $ 6,031
======= =======
Supplemental Disclosures of Cash Flow Information
- -------------------------------------------------
Cash paid during the period for
Interest $ 479 $ 893
Taxes 1,191 1,682
</TABLE>
6
<PAGE>
Allied Research Corporation
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(Thousands of Dollars)
(Unaudited)
- ------------------------------------------------------------------------------
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheets as of June 30, 1999 and December
31, 1998, the condensed consolidated statements of earnings and the condensed
consolidated statements of cash flows for the six months ended June 30, 1999
and 1998, have been prepared by the Company without audit. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position, results of operations and
changes in cash flow at June 30, 1999 and 1998 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December 31,
1998 Form 10-K filed with the Securities and Exchange Commission, Washington,
D.C. 20549. The results of operations for the period ended June 30, 1999 and
1998 are not necessarily indicative of the operating results for the full
year.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of
Allied Research Corporation (a Delaware Corporation) and the Company's
wholly-owned subsidiaries, Mecar, S.A. (a Belgian Company), Allied Research
Corporation Limited (a United Kingdom Company) and Barnes & Reinecke, Inc. (a
Delaware Corporation).
Mecar, S.A.'s wholly-owned Belgian subsidiaries include, Sedachim, S.I., Tele
Technique Generale, and VSK Electronics, N.V., its wholly-owned subsidiaries
Belgian Automation Units, N.V. and I.D.C.S., N.V., (collectively "The VSK
Group").
Significant intercompany transactions have been eliminated in consolidation.
NOTE 3 - RESTRICTED CASH
Mecar is generally required under the terms of its contracts with foreign
governments to provide performance bonds, advance payment guarantees and
letters of credit. The credit facility agreements used to provide these
financial guarantees generally place restrictions on cash deposits and other
liens on Mecar's assets. Cash deposits received from a customer of BRI are
also restricted by its credit facility agreement. VSK also has pledged
certain term deposits to secure outstanding bank guarantees. Cash of $14,093
at June 30, 1999 ($14,014 and long-term deposits of $6,670 at December 31,
1998) are restricted or pledged as collateral for these bank agreements.
NOTE 4 - INVENTORIES
Inventories are composed of raw materials and supplies.
7
<PAGE>
NOTE 5 - NOTES PAYABLE
BRI has a $6,000 revolving line-of-credit agreement which had an outstanding
balance at June 30, 1999 of $5,224 and $3,415 at December 31, 1998. The
current line-of-credit bears interest at the prime rate and expires February
2000. Borrowings under the line-of-credit are secured by eligible accounts
receivable, as defined in the agreement, and are guaranteed by the Company.
The agreement contains covenants requiring the maintenance of certain
financial ratios and other matters.
NOTE 6 - CREDIT FACILITY
The Company is obligated under various credit agreements (the Agreements)
with its foreign banking pool and its domestic bank that provided credit
facilities primarily for letters of credit, bank guarantees, performance
bonds and similar instruments required for specific sales contracts. The
Agreements provide for certain bank charges and fees as the facility is used,
plus fees of 2% of guarantees issued and annual fees of 1.25% - 1.35% of
letters of credit and guarantees outstanding. These fees are treated as
interest. As of June 30, 1999, guarantees and performance bonds of $19.9
million ($34.1 million at December 31, 1998) remain outstanding.
Advances under the Agreements are secured by cash of $14,093. Amounts
outstanding are also collateralized by the letters of credit received under
the contracts financed, and a pledge of approximately $30 million on Mecar's
assets. Certain Agreements provide for restrictions on payments or transfers
to Allied and ARCL for management fees, intercompany loans, loan payments,
the maintenance of certain net worth levels and other provisions.
NOTE 7 - LONG-TERM FINANCING
Mecar is obligated on an approximately $2,700 mortgage on its manufacturing
and administration facilities. As amended, the balance of the loan is payable
in annual principal installments of approximately $550 (except for the annual
principal installment in the year 2000 of $810) and matures in 2004. The
Company is also obligated on several mortgages on The VSK Group's buildings
which has a balance of approximately $900 at June 30, 1999. The mortgages are
payable in annual installments of approximately $250 plus interest.
Barnes & Reinecke is obligated on a notes payable to its bank which has an
outstanding balance due of $223 at June 30, 1999 and $346 at December 31,
1998.
8
<PAGE>
NOTE 7 - LONG-TERM FINANCING - Continued
Scheduled annual maturities of long-term obligations as of June 30, 1999 are
approximately as follows:
Year Amount
---- ------
2000 $1,117
2001 706
2002 736
2003 697
2004 400
Thereafter 482
NOTE 8 - INCOME TAXES
The Company's provision for income taxes differs from the anticipated
combined federal and state statutory rates due to operating loss carryovers
and earnings from foreign subsidiaries.
As of June 30, 1999, the Company had unused foreign tax credit carryforwards
of approximately $764 which expire through 2009.
Deferred tax liabilities have not been recognized for bases differences
related to investments in the Company's Belgian and United Kingdom
subsidiaries. These differences, which consist primarily of unremitted
earnings intended to be indefinitely reinvested, aggregated approximately
$30,000 at June 30, 1999. Determination of the amount of unrecognized
deferred tax liabilities is not practicable.
NOTE 9 - EARNINGS (LOSS) PER SHARE
Stock options outstanding have been included in the diluted per share
computation on a weighted average basis.
9
<PAGE>
Allied Research Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1999
(Thousands of Dollars)
(Unaudited)
- ------------------------------------------------------------------------------
The Company conducts its business through its wholly-owned subsidiaries: Mecar,
S.A., ("Mecar"), a Belgian corporation and Barnes & Reinecke, Inc. ("Barnes"), a
Delaware corporation, headquartered in Illinois; as well as a group of Belgian
corporations acquired in 1994 and 1995 led by VSK Electronics, N.V.,
Teletechnique General, S.A. and I.D.C.S., S.A. (collectively, the "VSK Group").
This discussion refers to the financial condition and results of operations of
the Company on a consolidated basis.
Forward-Looking Statements
- --------------------------
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that are based on current
expectations, estimates and projections about the Company and the industries in
which it operates. In addition, other written or oral statements which
constitute forward-looking statements may be made by or on behalf of the
Company. Words such as "expects", "anticipates", "intends", "plans" "believes",
"seeks", "estimates", or variations of such words or similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and involve certain risks, uncertainties and
assumptions ("Future Factors") which are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecast in
such forward-looking statements. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
Future Factors include increasing competition by foreign and domestic
competitors, including new entrants; substantial reliance on Mecar's principal
customers to continue to acquire Mecar's products on a regular basis; the
cyclical nature of the Company's military business; rapid technological
developments and changes and the Company's ability to continue to introduce
competitive new products and services on a timely, cost effective basis; the
ability of the Company to successfully continue its transition from a pure
defense firm to a firm with a substantial commercial component; the mix of
products/services; the achievement of lower costs and expenses; domestic and
foreign governmental and public policy changes which may affect the level of
purchases made by customers; changes in environmental and other domestic and
foreign governmental regulations; continued availability for financing,
financial instruments and financial resources in the amounts, at the times and
on the terms required to support the Company's future business. These are
representative of the Future Factors that could affect the outcome of the
forward-looking statements. In addition, such statements could be affected by
general industry and market conditions and growth rates, general domestic and
international economic conditions including interest rate and currency exchange
rate fluctuations and other Future Factors.
Revenue
- -------
Revenue for the first six (6) months of 1999 was $37,579, a decrease of 45% from
the comparable period in 1998, principally due to decreased revenue from Mecar.
10
<PAGE>
Allied Research Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1999
(Thousands of Dollars)
(Unaudited)
- ------------------------------------------------------------------------------
Revenue - Continued
- -------------------
Revenues by Segment - Six Months Ended
--------------------------------------
June 30, 1999 June 30, 1998
-------------------- -------------------
Percentage Percentage
of of
Amount total Amount total
Mecar $20,626 55% $53,350 79%
VSK $10,610 28% $9,665 14%
BRI $6,343 17% $4,892 7%
Revenue for the quarter ended June 30, 1999 was $10,097, a $22,057 decrease from
the quarter ended June 30, 1998. Mecar recognized revenue of $1,805 for the
second quarter of 1999, a 93% decrease from the second quarter of 1998; the
revenue of VSK Group of $5,631 for the quarter ended June 30, 1999 constitutes
an increase of 15% over the comparable period in 1998; Barnes' revenue of $2,661
for the second quarter ended June 30, 1999 constitutes a 5% increase over the
quarter ended June 30, 1998.
Mecar's lack of revenues resulted from a decrease in orders received from its
principal customers. The orders received by Mecar in June, 1999 ($42,500 from
the U.S. Government for the benefit of one of its principal customers and $3,900
from other customers) were received too late to contribute any substantial
revenue to the second quarter of 1999. Some of such revenue will be recognized
in the second half of 1999; the balance will be recognized next year.
The VSK Group has been advised that it may recommence the installation of
security systems in the branches of its principal bank customer in September,
1999. In addition, the VSK Group secured an unexpected $1 million add-on award
to the foreign hotel project which contributed to the extraordinary results
experienced by the VSK Group in calendar year 1998. Notwithstanding these
positive developments, it is unlikely that VSK will achieve in 1999 the record
results it reported in 1998. In the second half of 1998, VSK recorded record
revenues and profits from the foreign hotel project which are not expected to be
replicated in 1999.
Backlog
- -------
As of June 30, 1999, the Company's backlog was $72,000 compared with $48,000 at
December 31, 1998 and $26,000 at March 31, 1999.
At June 30, 1999 and June 30, 1998, respectively, the backlog of each of the
Company's operating units was as follows:
June 30,
------------------
1999 1998
---- ----
Mecar $52,000 $78,600
Barnes 7,000 9,300
VSK Group 13,000 17,200
11
<PAGE>
Allied Research Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1999
(Thousands of Dollars)
(Unaudited)
- ------------------------------------------------------------------------------
Backlog - Continued
- -------
Mecar's backlog at June 30, 1999 includes the $42,500 Foreign Military Sale
("FMS") contract for ammunition received from the U.S. Government for the
benefit of one of Mecar's principal customers. Mecar is also pursuing an
additional FMS contract for another caliber ammunition for the benefit of the
same customer which is currently scheduled for award in the fourth quarter of
1999. Both of these products have been developed by Mecar for new weapon
systems. It is anticipated that Mear's principal customers will purchase
substantial quantities of each caliber of ammunition over a several year period
to establish a reserve for such ammunition. Mecar has sold relatively small
quantities of the newly developed ammunition to new customers which have
purchased new weapon systems compatible with such ammunition. It is anticipated
that these customers will also purchase additional quantities of this ammunition
over the next several years to establish a comparable reserve.
It is further anticipated that Mecar will receive at least one additional
contract this year from its principal customer for ammunition which has been
traditionally manufactured by Mecar and purchased by these customers. Mecar
anticipates an award of this contract in the third quarter of 1999, however
there can be no assurance as to receipt of this or any other award.
Operating Costs and Expenses
- ----------------------------
Cost of sales for the first six months of 1999 was approximately $33,307 or 89%
of sales as compared to $53,897 or 79% for the first six months of 1998.
Cost of sales for the second three months of 1999 was approximately $10,614 or
105% of sales as compared to $24,774 or 77% of sales for the second quarter of
1998.
These additional unexpected costs were due to costs associated with performing
rework of products for customers of Mecar and Barnes. The rework is continuing
on these two contracts. While the costs reported in the second quarter of 1999
include estimated costs to complete such rework, there can be no assurance that
additional costs will not be necessary to complete the work.
Selling and administrative expenses were approximately $5,939 of revenues or 16%
of sales for the six months ended June 30, 1999, as compared to $6,785 or 10% of
sales for the six months ended June 30, 1998.
Selling and administrative expenses were approximately $3,275 or 32% of revenue
for the three months ended June 30, 1999 as compared to $3,514 or 11% for the
three months ended June 30, 1998.
The percentage increases were due to reduced volume of revenue and additional
costs associated with the proxy solicitation efforts.
12
<PAGE>
Allied Research Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1999
(Thousands of Dollars)
(Unaudited)
- ------------------------------------------------------------------------------
Research and Development
- ------------------------
Research and development expenses were 2% and 4% as a ratio of sales for each of
the six months and three months periods ended June 30, 1999 and 1998,
respectively. For the same six months and three months periods last year,
research and development expenses were 1% as a ratio of sales. These increases
are due to reduced revenues and work performed on potential contracts.
Interest Expense
- ----------------
Interest expense for the six months ending June 30, 1999 was $723, (which
included bank fees of $314) compared to $877 (which included bank fees of $204),
for the comparable period in 1998. The decrease is principally due to reduced
levels of borrowing.
Interest Income
- ---------------
Interest income for each of the three and six months ended June 30, 1999
decreased over the comparable periods of 1998, principally as a result of
decreased amounts of cash invested.
Other - Net
- -----------
Other - Net represents primarily net currency gains, net of currency losses
resulting from foreign currency transactions.
Pre-Tax (Loss) Profit
- ---------------------
Pre-Tax (Loss) Profit by Segment -
Six Months Ended
June 30, 1999 June 30, 1998
------------- -------------
Mecar $(3,800) $3,700
VSK $ 2,200 $1,900
BRI $ (600) $ 200
For the second quarter of 1999, Mecar reported a pre-tax loss of $4,537, VSK
reported a pre-tax profit of $880, and Barnes reported a pre-tax loss of $605.
Income Taxes
- ------------
The effective tax rate in the first six (6) and three (3) months of 1999 differs
from the anticipated rate as a result of foreign taxes and net operating losses
in certain jurisdictions.
13
<PAGE>
Allied Research Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1999
(Thousands of Dollars)
(Unaudited)
- ------------------------------------------------------------------------------
Net Earnings
- ------------
The Company had a $3,159 net loss ($0.66 per share basic and $0.66 per share
diluted) for the first six months of 1999 compared with a $4,803 net profit
($1.02 per share basic and $.99 per share diluted) for the comparable period in
1998. The Company had a $4,425 loss ($0.93 per share basic and $0.93 diluted) in
the second quarter of 1999 compared with a $2,546 profit ($0.53 per share basic
and diluted) in the second three months of 1998.
Liquidity and Capital Resources
- -------------------------------
During the first six months of 1999 and throughout 1998, Allied funded its
operations principally with internally generated cash and back-up credit
facilities required for foreign government contracts.
Mecar continues to provide financial guarantees for contracts via credit
facilities supplied by a foreign bank pool. Mecar is limited by its bank pool
agreement in the amounts it may transfer to Allied or other affiliates.
The VSK Group continues to reduce its bank and other long-term indebtedness.
In the second quarter of 1999, Allied made additional advances to BRI to support
BRI's cash flow pending completion of, and receipt of financial payment for, a
dynamometer to a foreign customer. As a result of rework of components of the
dynamometer, there will be a delay in shipment and a corresponding delay in
receipt of payment for this product.
In the first half of 1999, Allied repurchased 11.3 shares of its common stock in
market transactions.
At June 30, 1999, the Company had unrestricted cash (i.e., cash not required by
the terms of the bank pool agreement to collateralize contracts) of
approximately $15,348 compared with approximately $6,031 and $10,235 at June 30,
1998 and at December 31, 1998, respectively.
Accounts receivable at June 30, 1999 decreased from the December 31, 1998 levels
by $3,427 due to substantial collections in the first half of 1999. Costs and
accrued earnings on uncompleted contracts decreased by $14,462 from December 31,
1998 levels due to substantial deliveries and reduced work-in-process.
Inventories increased from year-end levels by $1,815 due to increases in raw
materials in connection with recently received orders. Prepaid expenses and
deposits decreased by $8,644 primarily due to shipments during the first half of
1999. Current liabilities decreased by $13,515 from December 31, 1998 levels
principally as a result of reductions in accounts and notes payable and customer
deposits.
In summary, working capital was approximately $29,255 at June 30, 1999, which is
a decrease of $6,011 from working capital at December 31, 1998.
Year 2000 Issues
- ----------------
During 1999, the Company continued its program to prepare its systems for Year
2000 compliance. The Year 2000 issues relates to computer systems that use two
digits rather than four to defined the applicable year and whether such systems
will properly process information when the year changes to 2000.
14
<PAGE>
Allied Research Corporation
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1999
(Thousands of Dollars)
(Unaudited)
- ------------------------------------------------------------------------------
Year 2000 Issues - Continued
- ----------------
The Company has completed an assessment of the impact of the Year 2000 on its
purchased and internally development systems. The current purchased and
internally developed software is Year 2000 compliant. The Company is continuing
its program of formal communications with significant suppliers and customers to
determine the extent to which the Company's activities would be impacted by
those third parties' failure to remediate their own Year 2000 issues.
The estimated costs related to testing and modifying existing systems for Year
2000 compliance are approximately $250, of which 80% has been spent or committed
to date.
Year 2000 compliance is expected to be achieved no later than October, 1999. The
Company believes that with the planned modifications, Year 2000 issues will not
have a material impact on operations. However, if these modifications are not
made, or are not completed on a timely basis, Year 2000 issues could result in
the temporary inability to process orders, send invoices, or engage in similar
business activities, which would have a material impact on the Company's
operations. Failure by significant suppliers and customers to be Year 2000
compliant could also have a material impact on the Company. The amounts of
potential liability and lost revenue from the failure to be Year 2000 compliant
cannot be reasonably estimated at this time.
The Company's contingency plans are being prepared and refined and are expected
to be completed by September, 1999. These plans include the manual processes
required to perform critical business functions that could be affected by Year
2000 issues.
15
<PAGE>
Allied Research Corporation
June 30, 1999
- ------------------------------------------------------------------------------
PART II. OTHER INFORMATION
16
<PAGE>
Allied Research Corporation
June 30, 1999
- ------------------------------------------------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
On June 9, 1999, the Company held its annual meeting of shareholders.
The Company's shareholders re-elected J. R. Sculley, Clifford C. Christ, Earl P.
Smith, Harry H. Warner and Robert W. Hebel as members of the Board of Directors
of the Company.
The following votes were cast in connection with the election of directors:
Nominees In favor Withheld
-------- -------- --------
J. R. Sculley 1,986,261 23,740
Clifford C. Christ 1,719,828 290,173
Robert W. Hebel 1,964,625 45,376
Harry H. Warner 1,971,563 38,438
Earl P. Smith 1,983,936 26,065
Lt. Gen. William M. Keyes 1,358,781 5,916
John P. Rigas 1,358,681 6,016
Jean-Claude Roch 1,358,781 5,916
John R. Torell, III 1,358,781 5,916
Donald Zilkha 1,356,681 8,016
The Company's shareholders ratified the appointment of Grant Thornton LLP as the
Company's independent auditors for 1999. The following votes were cast in
connection with such ratification:
For Against Abstain
--- ------- -------
3,246,697 32,842 95,159
No reports on Form 8-K were filed by the Company in the second quarter of 1999.
The following Exhibits are including in this Form 10-Q filing:
3.1 Restated By-Laws (July, 1999)
Exhibit 1
17
<PAGE>
Allied Research Corporation
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLIED RESEARCH CORPORATION
/s/ J. R. Sculley
-------------------------------
Date: August 12, 1999 J. R. Sculley
Chairman of the Board,
Chief Executive Officer and
Chief Financial Officer
18
Exhibit 1
Amended and Restated
as of July 27, 1999
RESTATED BY-LAWS
OF
ALLIED RESEARCH CORPORATION
ARTICLE I
Offices
SECTION 1. Registered Office and Registered Agent.
---------------------------------------
The registered office of Allied Research Corporation (the "Corporation")
shall be located in the City of Dover, County of Kent, State of Delaware and the
name and address of the resident agent of the Corporation shall be United States
Corporation Company, 306 South State Street, Dover, Delaware 19901, unless
otherwise provided by the Board of Directors of the Corporation (the "Board of
Directors" or the "Board") .
SECTION 2. Other Offices.
--------------
The Corporation may also have offices at such other places, within or
without the State of Delaware, as the Board of Directors may from time to time
designate.
ARTICLE II
Seal
The corporate seal shall be circular in form and shall contain the name of
the Corporation, the year of its organization and the words "Corporate Seal,
Delaware."
ARTICLE III
Meetings of Stockholders
SECTION 1. Place of Meeting.
-----------------
All meetings of the stockholders for the election of directors shall be
held at such place, within or without the State of Delaware, as shall be
designated by the Board of Directors and stated in the notice of the meeting.
Meetings of the stockholders for any other purpose may be held at such place,
within or without the State of Delaware, as shall be designated by the person
calling such meeting and stated in the notice of the meeting.
SECTION 2. Annual Meetings.
----------------
The annual meeting of stockholders shall be held on a date and at a time
set by the Board of Directors, at which meeting the stockholders shall elect
directors by plurality vote and shall transact such other business as may
properly be brought before the meeting.
EX 1] 1
<PAGE>
SECTION 3. Special Meetings.
-----------------
Special meetings of the stockholders for any purpose or purposes may be
called by the President, or by the directors (either by written instrument
signed by a majority or by resolution adopted by a vote of the majority), and
special meetings shall be called by the President or the Secretary whenever
stockholders owning a majority of the capital stock issued, outstanding and
entitled to vote so request in writing. Such request shall state the purpose or
purposes of the proposed meeting.
SECTION 4. Notice.
-------
Written or printed notice of every meeting of stockholders, annual or
special, stating the time and place thereof, and if a special meeting, the
purpose or purposes in general terms for which the meeting is called, shall not
less than ten (10) nor more than sixty (60) days before such meeting, be served
upon or mailed to each stockholder entitled to vote thereat, at his address as
it appears upon the stock records of the Corporation or, if such stockholder
shall have filed with the Secretary of the Corporation a written request that
notices intended for him be mailed to some other address, then the address
designated in such request.
Notice of the time, place and/or purpose of any meeting of stockholders
may be dispensed with if every stockholder entitled to vote thereat shall attend
either in person or by proxy, or if every absent stockholder entitled to such
notice shall in writing filed with the records of the meeting, either before or
after the holding thereof, waive such notice.
SECTION 5. Stock List.
-----------
At least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at said meeting, arranged in
alphabetical order, with the residence of each and the number of voting shares
held by each, shall be prepared by the Secretary. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 6. Quorum.
-------
Except as otherwise provided by law or by the Certificate of
Incorporation, as amended, the presence in person or by proxy at any meeting of
stockholders of the holders of a majority of the shares of the capital stock of
the Corporation issued and outstanding and entitled to vote thereat, shall be
requisite and shall constitute a quorum. If, however, such majority shall not be
represented at any meeting of the stockholders regularly called, the holders of
a majority of the shares present or represented and entitled to vote thereat
shall have power to adjourn the meeting to another time, or to another time and
place, without notice other than announcement of adjournment at the meeting, and
there may be successive adjournments for like cause and in like manner until the
requisite amount of shares entitled to vote at such meeting shall be
represented. At such adjourned meeting at which the requisite amount of shares
entitled to vote thereat shall be represented, any business may be transacted
which might have been transacted at the meeting as originally notified.
SECTION 7. Votes, Proxies.
---------------
Except as otherwise provided by the Certificate of Incorporation, as
amended, or by law, each stockholder as of the date set by the Board of
Directors for the determination of stockholders entitled to vote at such
meeting, shall be entitled to one vote on each matter for each share of the
capital stock having voting power held by such stockholder. At each such meeting
every stockholder shall be entitled to vote in person, or by proxy appointed
either (i) by an instrument in writing executed by such stockholder or (ii) by a
telegram, or other means of electronic transmission setting forth or submitted
with information from which it can be determined that the telegram, cablegram or
other electronic transmission was authorized by the stockholder and, in either
case, bearing a date not
EX 1] 2
<PAGE>
more than three (3) years prior to the meeting in question, unless said
instrument or transmission provides for a longer period during which it is to
remain in force.
All elections of directors shall be held by written ballot. If the
presiding officer of the meeting shall so determine, a vote may be taken upon
any other matter by ballot and shall be so taken upon the request of any
stockholder entitled to vote on such matter.
At elections of directors, the presiding officer of the meeting shall
appoint an odd number of inspectors of election, who shall first take and sign
an oath or affirmation faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of their ability and
who shall take charge of the polls and, after the balloting, shall certify their
determination of the number of shares represented at the meeting and their count
of all votes and ballots. No director or candidate for the office of director
shall be appointed as such inspector.
SECTION 8. Organization.
-------------
The Chairman of the Board, if there be one, or in his absence the
President, or in the absence of both the Chairman of the Board and the
President, a Vice-President shall call meetings of the stockholders to order and
shall act as chairman thereof. The Secretary of the Corporation, if present,
shall act as secretary of all meetings of stockholders and, in his absence, the
presiding officer may appoint an acting secretary.
SECTION 9. Record Date for Action by Written Consent.
------------------------------------------
In order that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. Any
stockholder of record seeking to have the stockholders authorize or take
corporate action by written consent shall, by written notice to the Secretary,
request the Board of Directors to fix a record date. The Board of Directors
shall promptly, but in all events within ten (10) days after the date on which
such a request is received, adopt a resolution fixing the record date (unless a
record date has previously been fixed by the Board of Directors pursuant to the
first sentence of this Section 9). If no record date has been fixed by the Board
of Directors pursuant to the first sentence of this Section 9 or otherwise
within ten (10) days of the date on which such a request is received, the record
date for determining stockholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the Board of Directors is
required by applicable law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in Delaware, its principal
place of business, or to any officer or agent of the Corporation having custody
of the book in which proceedings of meetings of stockholders are recorded.
Delivery shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by applicable law, the record date
for determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the date on which the
Board of Directors adopts the resolution taking such prior action.
SECTION 10. Inspectors of Written Consent.
------------------------------
In the event of the delivery, in the manner provided by Section 9, to the
Corporation of the requisite written consent or consents to take corporate
action and/or any related revocation or revocations, the Corporation shall
engage independent inspectors of elections for the purpose of performing
promptly a ministerial review of the validity of the consents and revocations.
For the purpose of permitting the inspectors to perform such review, no action
by written consent without a meeting shall be effective until such date as the
independent inspectors certify to the Corporation that the consents delivered to
the Corporation in accordance with Section 9 represent at least the minimum
number of votes that would be necessary to take the corporate action. Nothing
contained in this Section 10 shall in any way be construed to suggest or imply
that the Board of Directors or any stockholder shall not be entitled to contest
the validity of any consent or revocation thereof, whether before or after such
certification by the
EX 1] 3
<PAGE>
independent inspectors, or to take any other action (including, without
limitation, the commencement, prosecution, or defense of any litigation with
respect thereto, and the seeking of injunctive relief in such litigation).
SECTION 11. Effectiveness of Written Consent.
---------------------------------
Every written consent shall bear the signature of each stockholder who
signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty (60) days of the
earliest dated written consent received in accordance with Section 9, a written
consent or consents signed by a sufficient number of holders to take such action
are delivered to the Corporation in the manner prescribed in Section 9. Any
stockholder of record seeking to have the stockholders authorize or take
corporate action by written consent shall deliver the initial written consent
received by it to the Corporation in the manner prescribed by Section 9 as soon
as received by such stockholder.
ARTICLE IV
Directors
SECTION 1. Qualification of Directors.
---------------------------
(a) Directors need not be stockholders of the Corporation.
(b) Nominations for election of directors may be made by any stockholder
entitled to vote for the election of directors if written notice (the "Notice")
of the stockholder's intent to nominate a director at the meeting is given by
the stockholder and received by the Secretary of the Corporation in the manner
and within the time specified in this Section 1. The Notice shall be delivered
to the Secretary of the Corporation not less than fourteen (14) days nor more
than fifty (50) days prior to any meeting of the stockholders called for the
election of directors; except that if less than twenty-one (21) days' notice of
the meeting is given to stockholders, the Notice shall be delivered to the
Secretary of the Corporation not later than the earlier of the seventh day
following the day on which notice of the meeting was first mailed to
stockholders or the fourth day prior to the meeting. In lieu of delivery to the
Secretary, the Notice may be mailed to the Secretary by certified mail, return
receipt requested, but shall be deemed to have been given only upon actual
receipt by the Secretary. The requirements of this Section shall not apply to a
nomination for directors made to the stockholders by the Board of Directors.
(c) The Notice shall be in writing and shall contain or be accompanied by:
(1) the name and residence address of the nominating stockholder;
(2) a representation that the stockholder is a holder of record of
voting stock of the Corporation and intends to appear in person or by proxy at
the meeting to nominate the person or persons specified in the Notice;
(3) such information regarding each nominee as would have been
required to be included in a proxy statement filed pursuant to Regulation 14A of
the rules and regulations established by the Securities and Exchange Commission
under the Securities Exchange Act of 1934 (or pursuant to any successor act or
regulation) had proxies been solicited with respect to such nominee by the
management or Board of Directors of the Corporation;
(4) a description of all arrangements or understandings among the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder;
(5) the consent of each nominee to serve as a director of the
Corporation if so elected.
EX 1] 4
<PAGE>
SECTION 2. Number.
-------
The business and affairs of the Corporation shall be conducted and managed
by a Board of Directors, none of whom need be a stockholder. The number of
directors of the Corporation shall not be less than three (3) nor more than
fifteen (15), the exact number of directors to be determined from time to time
by resolution of the Board of Directors. Vacancies resulting from any increase
in the number of directors shall be filled as provided in Section 4 of this
Article IV.
SECTION 3. Term of Office.
---------------
Each director shall hold office until the next annual meeting of
stockholders and until his successor is duly elected and qualified or until his
earlier death or resignation, subject to the right of the stockholders at any
time to remove any director as provided in Section 5 of this Article.
SECTION 4. Vacancies.
----------
If any vacancy shall occur among the directors, or if the number of
directors shall at any time be increased, the directors in office, although less
than a quorum, may fill by a majority vote the vacancies or newly created
directorships, or any such vacancies or newly created directorships may be
filled by the stockholders at any meeting.
SECTION 5. Removal by Stockholders.
------------------------
The stockholders of the Corporation entitled to vote for the election of
directors may in their discretion, at any meeting duly called for the purpose,
by a majority vote, remove any director or directors, with or without cause, and
elect a new director or directors in place thereof.
SECTION 6. Meetings.
---------
Meetings of the Board of Directors shall be held at such place, within or
without the State of Delaware, as may from time to time be fixed by resolution
of the Board of Directors or by the President, and as shall be specified in the
notice or waiver of notice or any meeting. Meetings may be held at any time upon
the call of the President or of the Secretary or any two (2) of the directors in
office by telegraphic or written notice, duly delivered by hand or mailed to
each director at his usual place of business not less than two (2) days before
such meeting. Meetings may be held at any time and place without notice if all
the directors are present or if those not present shall, in writing or by
telegram, before or after the meeting, waive notice thereof. A regular meeting
of the Board may be held without notice immediately following the annual meeting
of stockholders at the place where such annual meeting is held. Regular meetings
of the Board may also be held without notice at such time and place as shall
from time to time be determined by resolution of the Board.
SECTION 7. Quorum.
-------
A majority, but not less than two (2) of the directors, shall constitute a
quorum for the transaction of business. If at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those present
may adjourn the meeting from time to time without notice other than announcement
of the adjournment at the meeting, and at such adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 8. Compensation.
-------------
Directors, as such, shall be entitled to receive such stated compensation
for their services as may be established from time to time by resolution of the
Board of Directors, and expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting thereof. Nothing in this Section
shall be construed to preclude a director from serving the Corporation in any
other capacity and receiving compensation therefor.
EX 1] 5
<PAGE>
ARTICLE V
Executive Committee
SECTION 1. Executive Committee.
--------------------
The Board of Directors may appoint an Executive Committee of two (2) or
more members, to serve during the pleasure of the Board, to consist of such
directors as the Board may from time to time designate. The Chairman of the
Executive Committee shall be designated by the Board of Directors.
SECTION 2. Procedure.
----------
The Executive Committee, by a vote of a majority of its members, shall fix
its own times and places of meetings, shall determine the number of its members
constituting a quorum for the transaction of business, and shall prescribe its
own rules of procedure.
SECTION 3. Powers.
-------
During the intervals between the meetings of the Board of Directors, the
Executive Committee shall posses and may exercise all the powers of the Board in
the management and direction of the business and affairs of the Corporation,
subject to such restrictions as are imposed by the laws of the State of
Delaware.
SECTION 4. Reports.
--------
The Executive Committee shall keep regular minutes of its proceedings and
all action by the Executive Committee shall be reported promptly to the Board of
Directors. Such action shall be subject to review by the Board, provided that no
rights of third parties shall be affected by such review.
SECTION 5. Compensation of Members of Executive Committee.
-----------------------------------------------
The Board of Directors by resolution may fix the compensation of the
Executive Committee for their services as such, but unless so fixed the members
of the Executive Committee shall not be entitled to any compensation for their
services as such.
SECTION 6. Additional Committees.
----------------------
The Board of Directors may appoint such other committee or committees of
two (2) or more members, to serve during the pleasure of the Board, to consist
of such directors as the Board may from time to time designate, and to possess
and exercise such powers and to perform such duties as the Board time designate.
The Chairman of any such committee shall be designated by the Board of
Directors.
ARTICLE VI
Officers
SECTION 1. Officers.
---------
The Board of Directors shall elect, as executive officers, a President, a
Secretary and a Treasurer, and in its discretion a Chairman of the Board, one
(1) or more Vice-Presidents and one (1) or more Assistant Secretaries and
Assistant Treasurers. Such officers shall be elected annually by the Board of
Directors at its first meeting following the annual meeting of stockholders, and
each shall hold office until the corresponding meeting of the Board in the next
year and until his successor shall have been duly elected and qualified, or
until he shall have died or resigned or shall have been removed, in the manner
provided herein. Any two (2) offices (except those of the President and
Secretary) may be held by the same person and the powers and duties of Secretary
and Treasurer may be exercised
EX 1] 6
<PAGE>
and performed by the same person. The Board of Directors shall designate either
the Chairman of the Board or the President as the Chief Executive Officer of the
Corporation. In the event the Chairman of the Board is designated as the Chief
Executive Officer of the Corporation, the President may be designated as the
Chief Operating Officer of the Corporation, reporting directly to the Chairman
of the Board/Chief Executive Officer.
SECTION 2. Vacancies.
----------
Any vacancy in any office may be filled for the unexpired portion of the
term by the Board of Directors at any regular or special meeting.
SECTION 3. Chief Executive Officer.
------------------------
The Chief Executive Officer shall be a member of the Board of Directors of
the Corporation. Subject to the direction of the Board of Directors, the Chief
Executive Officer shall have and exercise direct charge of and general
supervision over the business and affairs of the Corporation and shall perform
all duties incident to the office of a Chief Executive Officer of a corporation,
and such other duties as from time to time may be assigned to him by the Board
of Directors.
SECTION 4. Chairman of the Board.
----------------------
The Chairman of the Board, if elected, shall be a member of the Board of
Directors and shall preside at its meetings. He shall advise and counsel with
the President, and in his absence, with other executives of the Corporation, and
shall perform such other duties as may from time to time be assigned to him by
the Board of Directors.
SECTION 5. Vice-Presidents.
----------------
Each Vice-President, if elected, shall have and exercise such powers and
shall perform such duties as from time to time may be conferred upon or assigned
to him the Board of Directors or as may be delegated to him by the President.
SECTION 6. Secretary.
----------
The Secretary: (i) shall keep the minutes of all meetings of the
stockholders and of the Board of Directors in books provided for the purpose;
(ii) shall see that all notices are duly given in accordance with the provisions
of law and these by-laws; (iii) shall be custodian of the records and of the
corporate seal or seals of the Corporation; (iv) shall see that the corporate
seal is affixed to all documents, the execution of which, on behalf of the
Corporation, under its seal, is duly authorized and when the seal is so affixed
may attest the same; (v) may sign, with the Chairman of the Board, the President
or a Vice-President, certificates of stock of the Corporation; and, (vi) in
general, shall perform all duties incident to the office of a secretary of a
corporation, and such other duties as from time to time may be assigned by the
Board of Directors.
SECTION 7. Assistant Secretaries.
----------------------
The Assistant Secretaries in order of I their seniority shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as the Board of
Directors shall prescribe.
SECTION 8. Treasurer.
----------
The Treasurer: (i) shall have charge of and be responsible for all funds,
securities, receipt and disbursements of the Corporation; (ii) shall deposit, or
cause to be deposited, in the name of the Corporation, all monies or other
valuable effects in such banks, trust companies or other depositaries as shall
from time to time, be selected by the Board of Directors; (iii) may endorse for
collection on behalf of the Corporation, checks, notes and other obligations;
(iv) may sign receipts and vouchers for payments made to the Corporation; (v)
singly or jointly
EX 1] 7
<PAGE>
with another person as the Board of Directors may authorize, may sign checks of
the Corporation and pay out and dispose of the proceeds under the direction of
the Board; (vi) shall render to the President and to the Board of Directors,
whenever requested, an account of the financial condition of the Corporation;
(vii) may sign, with the Chairman of the Board, the President or a
Vice-President, certificates of stock of the Corporation; and, (viii) in
general, shall perform all the duties incident to the office of a treasurer of a
corporation, and such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 9. Assistant Treasurers.
---------------------
The Assistant Treasurers in order of their seniority shall, in the absence
or disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties as the Board of Directors
shall prescribe.
SECTION 10. Subordinate Officers.
---------------------
The Board of Directors may appoint subordinate officers as it may deem
desirable. Each such officer shall hold office for such period, have such
authority and perform such duties as the Board of Directors may prescribe. The
Board of Directors may, from time to time, authorize any officer to appoint and
remove subordinate officers and to prescribe the powers and duties thereof.
SECTION 11. Compensation.
-------------
The Board of Directors shall have power to fix the compensation of all
officers of the Corporation. It may authorize any officer, upon whom the power
of appointing subordinate officers may have been conferred, to fix the
compensation of such subordinate officers.
SECTION 12. Removal.
--------
Any officer of the Corporation may be removed, with or without cause, by a
majority vote of the Board of Directors at a meeting called for that purpose.
SECTION 13. Bonds.
The Board of Directors may require any officer of the Corporation to give
a bond to the Corporation conditional upon the faithful performance of his
duties, with one or more sureties and in such amount as may be satisfactory to
the Board of Directors.
ARTICLE VII
Certificates of Stock
SECTION 1. Form and Execution of Certificates.
-----------------------------------
The interest of each stockholder of the Corporation shall be evidenced by
a certificate or certificates for shares of stock in such form as the Board of
Directors may from time to time prescribe. The certificates of stock of each
class and series now authorized or which may hereafter be authorized by the
Certificate of Incorporation, as amended, shall be consecutively numbered and
signed by the Chairman of the Board, the President or a Vice-President and by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer of the Corporation, and may be countersigned and registered in such
manner as the Board of Directors may by resolution prescribe, and shall bear the
corporate seal or a printed or engraved facsimile thereof. Where any such
certificate is signed by a transfer agent or transfer clerk acting on behalf of
the Corporation and by a registrar, the signatures of any such Chairman of the
Board, President, Vice President, Treasurer, Assistant Treasurer, Secretary or
Assistant Secretary may be facsimiles, engraved or printed. In case any officer
or officers, who shall have signed or whose facsimile signature or signatures
shall have been used on any such certificate or certificates, shall cease to be
such
EX 1] 8
<PAGE>
officer or officers, whether because of death, resignation or otherwise, before
such certificate or certificates shall have been delivered by the Corporation,
such certificate or certificates may nevertheless be issued and delivered by the
Corporation as though the person or persons who signed such certificate or
certificates or whose facsimile signature or signatures shall have been used
thereon had not ceased to be such officer or officers.
SECTION 2. Transfer of Shares.
-------------------
Subject to any applicable restrictions contained in the Certificate of
Incorporation, as amended, or referred to on the face of the particular stock
certificate, the shares of the stock of the Corporation shall be transferable on
the books of the Corporation by the holder thereof in person or by his attorney
lawfully constituted, upon surrender for cancellation of certificates for the
same number of shares, with an assignment and power of transfer endorsed thereon
or attached thereto, duly executed, with such proof or guaranty of the
authenticity of the signature as the Corporation or its agents may reasonably
require. The Corporation shall be entitled to treat the holder of record of any
share or shares of stock as the holder in fact thereof and accordingly 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, save as expressly provided by law or by the Certificate
of Incorporation, as amended.
SECTION 3. Closing of Transfer Books.
--------------------------
The stock transfer books of the Corporation may, if deemed expedient by
the Board of Directors, be closed for such length of time not exceeding sixty
(60) days as the Board may determine, preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date for the
allotment of rights, or the date when any issuance, change, conversion or
exchange of capital stock shall go into effect, or the date of any other lawful
action, during which time no transfer of stock on the books of the Corporation
may be made.
SECTION 4. Dates of Record.
----------------
If deemed expedient, the Board of Directors may fix in advance a date not less
than ten (10) nor more than sixty (60) days preceding the date of any meeting of
stockholders, or the date for the payment of any dividend, or the date of the
allotment of rights, or the date when any issuance, change, conversion or
exchange of capital stock shall go into effect, or the date of any other lawful
action, as a record for the determination of the stockholders entitled to notice
of, and to vote at any such meeting, or entitled to receive payment of any such
dividend or to any such allotment of rights, or to exercise the rights in
respect of any such issuance, change, conversion or exchange of capital stock,
or to take any other lawful action, as the case may be, and in such case only
such stockholders as shall be stockholders of record on the date so fixed shall
be entitled to such notice of, and to vote at such meeting, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such right or take such actions as the case may be, notwithstanding any transfer
of any stock on the books of the Corporation after any record date fixed
aforesaid.
In order that the Corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. Any
stockholder seeking to have the stockholders authorize or take corporate action
by written consent shall, by written notice to the Secretary, request the Board
of Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the receipt of the
request for a resolution fixing the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting, and no
prior action by the Board of Directors is required by applicable law, the record
date shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Secretary of the
Corporation. Delivery shall be by hand or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by applicable
law, the record date for determining stockholders entitled to
EX 1] 9
<PAGE>
consent to corporate action in writing without a meeting shall be at the close
of business on the date on which the Board of Directors adopts the resolution
taking such prior action.
SECTION 5. Lost or Destroyed Certificates.
-------------------------------
In case of the loss or destruction of any certificate of stock, a new
certificate may be issued in its place upon proof of such loss, destruction or
mutilation and, if required by the Corporation, upon the giving of a
satisfactory bond of indemnity to the Corporation, in such sum as the Board of
Directors may provide.
SECTION 6. Rights Agreement.
-----------------
Rights issued pursuant to the Rights Agreement, dated as of June 8, 1991,
between the Corporation and Security Trust Company, N.A. (the "Rights
Agreement") may be transferred by an Acquiring Person or an Associate or
Affiliate of an Acquiring Person (as such terms are defined in the Rights
Agreement) only in accordance with the terms of, and subject to the restrictions
contained in, the Rights Agreement.
ARTICLE VIII
Checks, Notes, Etc.
SECTION 1. Execution of Checks, Notes, Etc
-------------------------------
All checks and drafts on the Corporation's bank accounts and all bills of
exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such officer or
officers, agent or agents, as shall be thereunto authorized from time to time
by the Board of Directors.
SECTION 2. Execution of Contracts, Assignments, Etc.
-----------------------------------------
All contracts, agreements, endorsements, assignments, transfers, stock
powers or other instruments, authorized by the Board of Directors, shall be
signed by the President or any Vice-President or by such other officer or
officers, agent or agents, as shall be thereunto authorized by the Board of
Directors. Any authorization by the Board of Directors may be general or
confined to specific instances.
SECTION 3. Execution of Proxies.
---------------------
Unless otherwise provided by resolution of the Board of Directors, the
President or in his absence or disability a Vice-President, may authorize from
time to time the signature and issuance of proxies to vote upon shares of stock
of other companies standing in the name of the Corporation. All such proxies
shall be signed in the name of the Corporation by the President or a
Vice-President and by the Secretary or an Assistant Secretary.
ARTICLE IX
Waivers and Consents
Whenever any notice is required to be given by law, or under the
provisions of the Certificate of Incorporation, as amended, or of these by-laws,
such notice may be waived, in writing, signed by the person or persons entitled
to such notice, or by his attorney or attorneys thereunto authorized, whether
before or after the event or action to which such notice relates.
Whenever the vote of stockholders at a meeting thereof is required or
permitted to be taken in connection with any corporate action by any provision
of law or of the Certificate of Incorporation, as amended, or of these by-laws,
the meeting and vote of stockholders may be dispensed with if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that
EX 1] 10
<PAGE>
would be necessary to authorize or take such action at a meeting at which all
shares entitled to vote thereon were present and voted.
Any action required or permitted to be taken at any meeting of the Board
of Directors or of any Committee of the Board of Directors may be taken without
a meeting, if prior to such action a written consent thereto is signed by all
members of the Board of Directors or of such Committee as the case may be, and
such written consent is filed with the minutes of proceedings of the Board of
Directors or of such Committee.
ARTICLE X
Dividends
Except as otherwise provided by law or by the Certificate of
Incorporation, as amended, the Board of Directors may declare dividends out of
the surplus of the Corporation at such times and in such amounts as it may from
time to time designate.
Before crediting net profits to surplus in any year, there may be set
aside out of the net profits of the Corporation for that year such sum or sums
as the Board of Directors from time to time in its absolute discretion may deem
proper as a reserve fund or funds to meet contingencies or for equalizing
dividends or for repairing or maintaining any property of the Corporation or for
such other purpose as the Board of Directors shall deem conducive to the
interests of the Corporation.
ARTICLE XI
Indemnification
The Corporation shall indemnify all of its officers and directors to the
fullest extent permitted by applicable Delaware law as it now exists or as it
may be amended from time to time.
ARTICLE XII
Inspection of Books
The Board of Directors shall determine from time to time whether, and if
allowed, when and under what conditions and regulations, the accounts and books
of the Corporation (except such as may by statute be specifically open to
inspection) or any of them, shall be open to the inspection of the stockholders
and the stockholders' rights in this respect are and shall be restricted and
limited accordingly.
ARTICLE XIII
Fiscal Year
The fiscal year of the Corporation shall end on such date as the Board of
Directors may by resolution specify and the Board of Directors may by resolution
change such date for future fiscal years at any time or from time to time.
EX 1] 11
<PAGE>
ARTICLE XIV
Amendments
These by-laws may be altered, amended or repealed and new by-laws adopted
by the stockholders or by the Board of Directors by a majority vote at any
meeting called for that purpose.
Allied/Restated By-Laws
EX 1] 12
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