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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- ----------------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-11250
DIONEX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-2647429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1228 Titan Way, Sunnyvale, California 94086
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 737-0700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.001 per share
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 by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the Registrant's Common Stock held
by nonaffiliates on September 23, 1998 (based upon the closing
price of such stock as of such date) was $522,351,716.
As of September 23, 1998, 22,210,656 shares of the Registrant's
Common Stock were outstanding.
Portions of the Registrant's 1998 Annual Report to Stockholders
are incorporated by reference in Parts I, II and IV of this
Report. Portions of the Registrant's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held on October 22,
1998 are incorporated by reference in Part III of this Report.
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PART I
Item 1. BUSINESS
Dionex Corporation* designs, manufactures, markets and
services analytical instrumentation and related accessories and
chemicals. The Company's products are used to analyze chemical
substances in the environment and in a broad range of industrial
and scientific applications. Since July 1, 1997, there have been
no material changes in the mode of conducting the business of the
Company.
Industry Segment Information
The Company operates in a single industry segment
consisting of analytical instruments and related services.
Products
Dionex develops, manufactures, markets and services a
range of chromatography systems, sample preparation devices and
related products that are used by chemists to separate and
quantify the individual components of complex chemical mixtures in
many major industrial, research and laboratory markets.
Typically, the Company's chromatography systems consist of several
components including a specially designed liquid pumping and flow
system, a sample injection system, a separator column, a
suppressor or other post-column device, a detector and a data
collection and analysis system. These components are designed to
be modular so that systems can be configured to meet the
particular analytical requirements of individual customers.
Moreover, individual components may be sold separately to existing
customers that wish to expand their systems.
The Company's chromatography systems are currently focused
in several product areas: ion chromatography (IC), high
performance liquid chromatography (HPLC) and sample extraction.
In addition to these product areas, the Company develops and
manufactures columns, detectors, data analysis systems and other
products. Each of these product areas is described below.
Ion Chromatography and HPLC - Ion Chromatography is a form of
chromatography that separates ionic (charged) molecules, usually
found in water-based solutions, and typically separates and
detects them based on their electrical conductivity. The sale of
Dionex IC systems and related columns, suppressors, detectors,
automation and other products accounts for a majority of the
Company's revenues.
_________________________
* Unless the context otherwise requires, the terms
"Dionex" and "the Company" as used herein include
Dionex Corporation, a Delaware corporation, and its
subsidiaries. Dionex was initially incorporated
in California in 1980. In 1986, the Company
reincorporated in Delaware.
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Dionex IC products are used in a wide range of
applications, including environmental monitoring, corrosion
monitoring, evaluation of raw materials, quality control of
industrial processes, quality control of pharmaceutical and
industrial products, research and development, and regulation of
the chemical composition of food, beverage and cosmetic products.
Major customers include environmental testing laboratories, life
science and food companies, chemical and petrochemical firms,
power generating facilities, electronics manufacturers, government
agencies and academic institutions.
HPLC is a form of chromatography that separates molecules such as
proteins, carbohydrates, amino acids, pharmaceuticals and
chemicals and identifies them by measuring the amount of light
that the molecules absorb or emit when exposed to a light source.
The Company's customers include biological research and
biotechnology groups, pharmaceutical and other industrial
companies.
In fiscal 1994, the Company introduced the DX-500 Series of
chromatography systems for IC and HPLC in the North American and
European markets. In fiscal 1995, the DX-500 line was introduced
in Japan and is now marketed worldwide. The modular, high
performance system offers various configurations designed to meet
the needs of numerous IC and HPLC applications. The DX-500 Series
offers both quaternary gradient and isocratic pump capabilities,
in either PEEK (polyetheretherketone) or stainless steel and
several detection modes based on conductivity, electrochemistry
and optical absorbance. This versatility of detection and pumping
capabilities allows customers to perform a wide range of IC and
HPLC applications. In March 1997, the Company introduced the LC25
oven, an oven that features both conductive and convective heating
to facilitate temperature control of columns, cells and
suppressors. In April 1998,the Company enhanced the DX-500
product line by introducing the GP50 and IP25 pumps. These pumps
are the second generation of pumps in the DX-500 product line and
are designed to provide more reliable flow and gradient accuracy
and precision. In March 1998, the Company introduced the EG40
Eluent Generator, a module for use with the DX-500 system. The
EG40 generates high-purity eluents on-line using only deionized
water as the carrier. The benefits of the on-line eluent
generation is improved results by eliminating interferences,
enhancing sensitivity and providing greater flexibility.
In fiscal 1996, the Company introduced the DX-120, a
cost-effective IC system for customers that need simple, dedicated
instrumentation for routine ion analysis. The DX-120 was designed
for improved reliability and automation, allowing for quick
set-up, simple operation and high quality isocratic performance.
The DX-120 is marketed worldwide.
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In fiscal 1998, the Company began shipping the DX-800, the
next generation continuous on-line monitoring system. The DX-800
uses industry standard PC-based automation, similar to that used
in laboratory chromatography. Major applications for the
Company's DX-800 are in the power industry for the continuous
monitoring of corrosive contaminants in boiler water, the
semiconductor industry for continuous monitoring of contaminants
in high purity water and continuous monitoring of biological and
chemical synthesis processes. The DX-800 is marketed worldwide.
Sample Extraction - The Company offers the ASETM 200 system for
automated sample extraction. In fiscal 1995, the Company
introduced this new extraction technology called Accelerated
Solvent Extraction or ASE. The ASE 200 system extracts solid
samples using common solvents at elevated temperatures and
pressures. The ASE 200 system extracts solid samples in an
automated fashion using the same solvents used in traditional
soxhlet techniques. Competitive techniques include soxhlet,
sonication, microwave extraction and supercritical fluid
extraction. The ASE 200 system offers several advantages over
other solvent based extraction techniques including lower solvent
consumption, reduced extraction time, higher throughput through
automation and ease of use. ASE 200 systems are used worldwide
for a number of environmental, industrial and food and beverage
applications. In March 1997, the Company enhanced its ASE 200
system by introducing the ASE 200 Solvent Controller Module, which
automates the delivery of multiple solvents to the ASE 200 system,
and Auto ASE, an add-on software feature which allows control of
up to eight ASE 200 systems from one location, as well as methods
storage and documentation.
Automation Products - As part of its efforts to make chemical
analyses simpler, faster and more reliable, Dionex offers a family
of products that automate sample handling, system operation and
data analysis for chromatography systems. These products include
the PeakNet and PeakNet PA for Process Analysis. In addition,
automated sample injectors are available.
In fiscal 1994, the PeakNet PC-based Chromatography
Workstation was introduced. PeakNet is the Company's latest
release of Windows-based applications for chromatography. PeakNet
Workstations are multi-featured, high performance computer systems
that automate control, data acquisition, analysis and reporting
for the DX-120, DX-500 and DX-800 systems. In fiscal 1996, the
Company introduced PeakNet 4.3, which offered new capabilities
including data smoothing options to reduce noise and enhanced
reporting formats to meet the changing documentation requirements
of our customers. In fiscal 1997, the Company introduced its
latest version of the software, PeakNet 5.0, a new generation 32-
bit automation product designed for use with Windows 95 and
Windows NT. In March 1998, the Company enhanced its PeakNet
chromatography software by introducing PeakNet 5.1. This release
added new capabilities to the PeakNet software, including full
control and support of the EG40 and enhanced reporting
capabilities.
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In fiscal 1994, the universal interface (UI20) module was
added to PeakNet. It allows PeakNet workstations to accept data
from other Dionex instruments, as well as instruments manufactured
by other vendors. A revision of the PeakNet software was also
introduced at that time to support the new interfacing
capabilities.
Also in fiscal 1994, a new Automated Sample Injection
module (AS40) was introduced. The AS40 can be used with the DX-
120 and DX-500 series.
Columns and Suppressors - A chromatography column generally
consists of a hollow cylinder packed under high pressure with a
chemical resin. The column's function is to separate various
chemical components in a sample. The Company develops and
manufactures its own resins using proprietary processes. Dionex
currently manufactures and markets a broad range of column types
designed for particular applications in the liquid chromatography
market.
Several consumable products were introduced in fiscal 1998,
including the IonPac AS11-HC for determination of organic and
inorganic acid anions in diverse matrices and the IonPac AS15 for
determination of trace level concentrations of a wide variety of
inorganic anions and low molecular weight organic acids in the
power and semiconductor markets. In addition, the Company
introduced the IonPac ICE-Borate and Trace Borate Concentrator
columns for determination of borate at low parts-per-trillion
concentrations in ultra high-purity water samples.
These products follow a steady stream of columns and
chemistries introduced in the previous two years, including the
IonPac AS9-HC, IonPac CS15, IonPac AS14, IonPac CS5A and CarboPac
PA10. These products cover a range of applications.
In addition to columns, Dionex manufactures suppressors that
are used to enhance detection in ion chromatography. The Company
has proprietary positions in the technology of suppression used in
ion chromatography as well as in the application of suppression
techniques. The Company's suppressors lower background
conductivity while allowing separations using higher capacity
columns and more concentrated eluents (liquids used to carry a
sample through a liquid chromatography system). In fiscal 1993,
Dionex enhanced its suppression technology with the introduction
of a new AutoSuppression product. The product, called the Self-
Regenerating Suppressor (SRSTM), enhances IC performance while
operating with low maintenance requirements. In fiscal 1997, the
Company introduced the SRS-II, designed to allow use with a wide
range of solvents at various temperatures.
In March 1998, the Company introduced the SRS-Ultra, the next
generation in the SRS line of suppressors. The SRS-Ultra provides
superior performance for trace level ion chromatography.
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Detectors - Detectors are used to measure the quantity of various
sample components after they have been separated in a
chromatography column. Dionex currently offers several detector
products based on conductivity, electrochemistry and absorbance,
including a photodiode array detector introduced in 1995. This
range of detectors is designed to meet customer requirements for
analysis of organics, inorganics, metals, amino acids, biological
compounds and pharmaceuticals.
Service and Other - The Company also generates revenue from its
Customer Service organization through service contracts, spare
part sales, customer training and sales of other products and
services. (See Technical Support, Installation and Service
below.)
Marketing and Customers
The Company's market strategy is twofold. First, in those
applications where Dionex technology is well established, the
Company works to increase demand for its chromatography systems
through direct mailings, advertising in trade publications,
seminars and workshops, conferences and expositions, and direct
sales calls. Growth in these markets results from identifying new
customers in existing sales regions, extending geographic
penetration and increasing demand for the Company's products and
technical support capabilities among existing customers.
The second component of the Company's marketing strategy is
to work closely with existing and potential customers to develop
new applications. Technical support staff assist such customers
in problem definition, development of new applications needed to
solve problems and providing user training and ongoing user
support. By combining this support function with direct sales
efforts, the Company works to increase the range of applications
and the potential market for its products.
The Company currently markets and distributes its products
and services through its own sales force in the United Kingdom,
Germany, Italy, France, the Netherlands, Belgium, Switzerland,
Austria, Japan, Canada and the United States. In each of these
countries, the Company maintains one or more local sales offices
in order to service customers in regional markets. In other
international locations where it does not have a direct sales
force, the Company has developed a network of distributors and
sales agents.
The Company's products are used extensively in environmental
analysis and by the pharmaceutical, life science, biotechnology,
chemical, petrochemical, power generation, food and beverage and
electronics industries. Its customers include a number of the
largest industrial companies worldwide, as well as government
agencies, research institutions and universities. Geographically,
sales to customers outside of North America accounted for 57% of
consolidated sales in fiscal 1998 and 61% of consolidated sales in
both fiscal 1997 and fiscal 1996. No single customer accounted
for 10% or more of the Company's sales in fiscal 1998, 1997 or
1996.
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Demand for the Company's products is dependent upon the size
of the markets for its chromatography systems, the level of
capital expenditures of the Company's customers, the rate of
economic growth in the Company's major markets and competitive
considerations. There can be no assurances that the Company's
results of operations will not be adversely impacted by a change
in any of the factors listed above. The Company believes that
demand for its products does not exhibit any significant seasonal
pattern.
Dionex manufactures its products based upon its forecast of
customer demand and maintains inventories of completed modules in
advance of receipt of firm orders from its customers. Orders are
generally placed by the customer on an as-needed basis, and
products are usually shipped within four to six weeks after
receipt of an order. Dionex does not maintain a substantial
backlog, and backlog as of any particular date may not be
indicative of the Company's actual sales in any succeeding period.
The level of backlog at June 30, 1998 was $18.4 million and at
June 30, 1997 was $19.0 million.
Competition
Competition in the Company's business segment is based upon
the performance capabilities of the analytical instrument,
technical support and after-market service, the manufacturer's
reputation as a technological leader and the selling price.
Management believes that performance capabilities are the most
important of these criteria. Customers measure system performance
in terms of sensitivity (the ability to discern minute quantities
of a particular sample component), selectivity (the ability to
distinguish between similar components), speed of analysis and the
breadth of samples that the system can effectively analyze.
Management believes that Dionex enjoys a favorable reputation in
terms of performance capabilities, technical support and service.
Companies competing with Dionex in the analytical instruments
market include Hewlett-Packard Company, Perkin-Elmer Company,
Varian Associates, Inc., Shimadzu Corporation, Thermo Instruments
and Waters Corporation. The Company believes no single competitor
has a dominant position in the analytical instruments market. The
Company believes it has a major position in IC, one of many
different analytical techniques. Competitors of the Company in IC
include HPLC vendors such as Hewlett-Packard Company, Waters
Corporation, Alltech Associates, Lachat and other smaller
companies.
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Dionex IC systems generally compete with a number of
analytical techniques used in identifying and quantifying ionic
and polar compounds. The two primary sources of competition for
ion chromatography are conventional manual and automated wet
chemistry procedures and certain modified liquid chromatography
systems. Some suppliers of liquid chromatography systems have
developed a single column ion chromatography (SCIC) method that
does not use a suppressor device. SCIC methods compete favorably
with Dionex ion chromatography for the analysis of a limited
number of ions and in situations when chemical composition of the
sample is not complex or when high sensitivity is not required.
The introduction in 1993 by the Company of AutoSuppression
technology considerably improves the ease of use of chemical
suppression. In addition to SCIC products, the Company's
competitors also offer other products to compete in ion analysis
and chromatography products using technology similar to that
offered by the Company in earlier generation modules during the
1980's.
The Company's DX-500 Series competes directly with other
manufacturers' HPLC systems in certain traditional HPLC
applications. Dionex is a relatively new entrant in the highly
competitive HPLC and biological separations markets. Nonetheless,
management believes that the DX-500 Series has certain benefits
over competing systems, including a non-metallic flow path and the
capability of performing gradient ion chromatography, as well as
HPLC, on a single analytical system.
The Company's ASE 200 competes directly with standard
soxhlet, sonication, supercritical fluid extraction and microwave
extraction techniques provided by other companies. Management
believes that the ASE 200, has certain benefits compared to
competing techniques, including faster extraction time, reduced
solvent usage and built-in automation.
The Company believes that competition in the ion analysis
market will continue to increase in the future. Moreover, the
Company's entrance into the HPLC and sample extraction markets has
resulted in increased competition. Many of the companies whose
products compete with those of the Company have substantially
greater financial resources and larger technical staffs and sales
forces at their disposal. There can be no assurances that the
Company's marketing and sales efforts will compete successfully
against such other companies in the future.
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Patents and Licenses
The Company has an extensive patent portfolio, including
exclusive licenses to patents from the Dow Chemical Company
("Dow") (except for rights retained by Dow and its subsidiaries)
covering certain of the Company's products. The primary benefits
of patents are presently limited to the United States and certain
other foreign countries where patents have been issued. With
regard to the Dow licenses,Dow and its subsidiaries reserve the
right to practice the patents, and Dow has made products covered
by the patent rights for its own use. The Company believes that
Dow has not made products covered by the patent rights for sale to
third parties.
As a matter of Company policy, the Company vigorously
protects its intellectual property rights and seeks patent
coverage on all developments that it regards as material and
patentable. However, there can be no assurances that any patents
held by the Company will not be challenged, invalidated or
circumvented or that the rights granted thereunder will provide
competitive advantages to the Company. The Company's patents,
including those licensed from others, expire on various dates
through 2011. The Company believes that, while its patent
portfolio has value, no single patent or patent application is in
itself essential and that the invalidity or expiration of any
single patent would not have a material adverse effect on its
business.
The Company regards its PeakNet software as proprietary and
relies on a combination of copyrights, trademarks, trade secret
laws and other proprietary rights, laws, license agreements and
other restrictions on disclosure, copying and transferring title
to protect its rights to its software products. The Company has
no patents covering its software, and existing copyright laws
afford only limited practical protection. In addition, the laws
of some foreign countries do not protect the Company's proprietary
rights to the same extent as do the laws of the United States.
International Operations
Financial information about foreign and domestic operations
and export sales required by Item 1 of Form 10-K is incorporated
by reference to Note 11 of the Notes to Consolidated Financial
Statements at page 37 of the Registrant's 1998 Annual Report to
Stockholders. A copy of the applicable page is included as
Exhibit 13.1.
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The Company has subsidiaries in the United Kingdom, Germany,
Italy, France, the Netherlands, Belgium, Switzerland, Austria,
Japan and Canada. The Company's foreign sales are affected by
fluctuations in currency exchange rates and by regulations adopted
by foreign governments. Export sales are subject to certain
controls and restrictions, but the Company has not experienced any
material difficulties related to these limitations. There can be
no assurances that the Company's results of operation will not be
adversely impacted by fluctuations in currency exchange rates in
the future.
Manufacturing and Suppliers
The Company produces chemicals and resins and assembles
systems and components in its California manufacturing facilities.
Dionex has developed proprietary processes for the manufacture of
polystyrene-based resins and for packing columns with these
resins. The Company believes that its resins, columns and
suppressor manufacturing know-how are critical to the performance
and reliability of its chromatography systems. The Company
requires each employee to sign a nondisclosure agreement to
protect its proprietary processes. However, there can be no
assurances that these agreements will provide meaningful
protection or adequate remedies for the Company's proprietary
processes in the event of unauthorized use or disclosure.
The Company has emphasized a modular design for the principal
subsystems of its pumping flow systems, sample injection systems,
chromatography modules, detectors, and control and data analysis
systems. The Company believes that this modular approach has
enabled it to meet the wide range of system configurations
required by its customers while effectively managing inventory
levels.
Many components used in the Company's products, including
proprietary analog and digital circuitry, are manufactured by
Dionex. Other components, including packaging materials,
integrated circuits, microprocessors, microcomputers and certain
detector and data analysis modules, are acquired from other
manufacturers. Most of the raw materials, components and supplies
purchased by the Company are available from a number of different
suppliers; however, a number of items are purchased from limited
or single sources of supply, and disruption of these sources could
have a temporary adverse effect on shipments and the financial
results of the Company. The Company believes alternative sources
could ordinarily be obtained to supply these materials, but a
prolonged inability to obtain certain materials or components
could have an adverse effect on the Company's financial condition
or results of operations and could result in damage to its
relationship with its customers.
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Technical Support, Installation and Service
Users of the Company's chromatography systems require
substantial technical support before and after the system sale to
ensure that analysis problems are resolved. As part of its
support services, the Company's technical support staff provides,
typically at no additional cost, individual assistance in solving
chemical analysis problems. The Company offers training courses
and periodically sends its customers information on applications
development. Chromatography systems sold by the Company generally
include a one-year warranty, installation and certain user
training, all at no additional cost. Service contracts may be
purchased by customers to cover equipment no longer under
warranty. Service work not performed under warranty or service
contracts is performed on a time and materials basis. The Company
installs and services its products through its own field service
organization in the United Kingdom, Germany, Italy, France, the
Netherlands, Belgium, Switzerland, Austria, Japan, Canada and the
United States. Installation and service in other foreign
countries are typically provided by the Company's distributors or
agents.
Research and Development
The Company's research and development efforts are focused on
increasing the performance of its chromatography and other
products and expanding the number of chemical compounds that can
be analyzed efficiently with its products. Research and product
development expenditures were $13.3 million, $12.5 million and
$11.5 million in fiscal 1998, 1997 and 1996, respectively. The
Company pursues active development programs in the areas of system
hardware, applications, computer software, suppressors, resin and
column technologies. There can be no assurances that the
Company's product development efforts will be successful or that
the products developed will be accepted by the marketplace.
Environmental Laws and Regulations
Compliance by the Company with federal, state and local
environmental laws during fiscal 1998 had no material effect upon
capital expenditures, earnings or its competitive position.
Employees
Dionex had 715 employees at June 30, 1998, compared with 685
employees at June 30, 1997. The Company believes that its future
success depends in large part upon its continued ability to
attract and retain highly skilled employees.
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Item 2. PROPERTIES
As of September 23, 1998 the Company owned nine
buildings in Sunnyvale, California, providing 252,000
square feet of space utilized for Administration,
Marketing, Sales, Service, Research and Product
Development and Manufacturing. The Company also owns
a building utilized for Sales, Service and
Administration in Idstein, Germany.
The Company leases sales and service offices in:
Atlanta, Georgia; Houston, Texas; Westmont, Illinois;
Marlton, New Jersey; Sunnyvale, California; and in the
United Kingdom, Germany, France, Italy, the
Netherlands, Belgium, Switzerland, Austria, Japan and
Canada. In addition, the Company leases marketing and
research and development offices in Salt Lake City,
Utah.
The Company's facilities are well maintained, adequate
to conduct the Company's current business and
substantially utilized by the Company.
Several of the Company's properties are located in an
area under investigation by the California Regional
Water Quality Control Board (the "Water Board".) The
Water Board's investigation addresses the presence of
certain volatile organic compounds in portions of the
local groundwater system and focuses principally on the
activities of several other companies located near the
Company. The Water Board review has encompassed the
property acquired by the Company in July 1986. The
Company believes that any remedial work affecting
the subject property will be performed by or at the
expense of other parties responsible for any release of
chemicals onto the property, or at the expense of the
previous owner of the property. As a result,
management believes that any action required by the
Water Board's investigation will not have a material
adverse effect on the Company's financial position or
results of operations.
Item 3. LEGAL PROCEEDINGS
None.
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the quarter ended June 30, 1998.
Executive Officers of the Registrant
The following table lists the names and positions of all
current executive officers of the Company, and their ages as of
September 18, 1998. Except as noted below, there are no other
family relationships between any director or executive officer and
any other director or executive officer of the Registrant.
Executive officers serve at the discretion of the Board of
Directors.
Name Age Positions
A. Blaine Bowman(1) 52 President, Chief Executive
Officer and Director
Barton Evans, Jr. 50 Senior Vice President
Nebojsa Avdalovic 63 Vice President
Bruce L. Barton 39 Vice President
Brent J. Middleton(1) 41 Vice President
Christopher Pohl 47 Vice President
Michael W. Pope 32 Vice President
(1) Mr. Bowman and Mr. Middleton are cousins.
Mr. Bowman has served as the Registrant's President and Chief
Executive Officer and as a director since the Registrant began
operations in 1980. Mr. Bowman is also a director of Molecular
Devices Corporation.
Mr. Evans has served as Senior Vice President, Operations for
the Registrant since September 1993. Prior to that, he served as
Vice President, Operations and in various other capacities for the
Registrant since it began operations in 1980.
Dr. Avdalovic has served as Vice President, Research and
Development for the Registrant since August 1990. Prior to
joining the Registrant, Dr. Avdalovic served as Research Manager
and Manager of Technology Assessment for Beckman Instruments
Spinco Division in Palo Alto, California.
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Mr. Barton has served as Vice President, International
Operations for the Registrant since July 1996. Prior to that, he
served as Director of International Operations and in various
other capacities since joining the Company in 1987.
Mr. Middleton has served as Vice President, North American
Sales and Service since July 1997. Prior to that, he served as
Director of North American Sales and Service and in various other
capacities since joining the Company in 1985.
Mr. Pohl has served as Vice President, Consumables for the
Registrant since September 1996. Prior to that, he served as
Technical Director and in various other capacities for the
Registrant since the Company began operations in 1980.
Mr. Pope has served as Vice President, Finance and
Administration for the Registrant since April 1995. Prior to
that, he served as Director of Finance and Senior Financial
Analyst with the Company. Mr. Pope has been with the Company
since June 1992.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The information required by Item 5 of Form 10-K is
incorporated by reference to the information contained
in the section captioned "Supplemental Information" at
page 40 of the Registrant's 1998 Annual Report to
Stockholders. A copy of the applicable page is attached
hereto as Exhibit 13.1.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The information required by Item 6 of Form 10-K is
incorporated by reference to the information contained
in the section captioned "Selected Financial
Information" at page 24 of the Registrant's 1998 Annual
Report to Stockholders. A copy of the applicable page
is attached hereto as Exhibit 13.1.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table summarizes the consolidated income statement
items as a percentage of sales.
PERCENTAGE OF NET SALES
Years ended June 30 1998 1997 1996
Net sales 100.0% 100.0% 100.0%
Cost of sales 31.5 30.6 31.1
Gross profit 68.5 69.4 68.9
Selling, general and administrative 31.7 33.3 34.8
Research and product development 8.8 8.8 8.7
Operating income 28.0 27.3 25.4
Other income - - 0.8
Interest income, net .8 .9 1.4
Income before taxes 28.8 28.2 27.6
Taxes on income 9.8 9.7 9.6
Net income 19.0% 18.5% 18.0%
NET SALES AND GROSS PROFIT. In fiscal 1998, Dionex reported
record sales and earnings for the 18th consecutive year. The
Company's consolidated sales in fiscal 1998 were $150.5 million,
an increase of 6% compared with $142.1 million in fiscal 1997.
Sales in fiscal 1996 were $133.0 million. The Company is subject
to the effects of foreign currency fluctuations, which can have an
impact on reported sales and gross profits. Currency fluctuations
reduced reported sales by 4% in both fiscal 1998 and fiscal 1997.
Sales growth in fiscal 1998 was fueled by strong growth in North
America and Europe in local currencies. However, a strengthening
U.S. dollar reduced the results in Europe. Sales in the Far East
declined slightly due to the Asian financial crisis and a stronger
U.S. dollar. Sales growth in fiscal 1997 was split evenly between
our North American and international markets, with solid growth in
the Far East offset by some weakness in certain of our European
markets. The Company anticipates that the financial crisis in Asia
will continue to have an unfavorable impact on sales growth for
the near future.
Sales outside of North America accounted for 57% of consolidated
sales in fiscal 1998 and 61% of consolidated sales in fiscal 1997
and fiscal 1996. The Company sells directly through its sales
forces in the United Kingdom, Germany, Italy, France, the
Netherlands, Belgium, Switzerland, Austria, Japan, Canada and the
United States. Direct sales accounted for 90% of consolidated
sales in fiscal 1998, compared to 88% in fiscal 1997 and 89% in
fiscal 1996. International distributors and representatives in
Europe, the Far East and other international markets accounted for
the balance of consolidated sales. There were no significant price
changes during the three-year period.
16
<PAGE>
Gross profit as a percentage of consolidated sales was 68.5% in
fiscal 1998, compared with 69.4% in fiscal 1997 and 68.9% in
fiscal 1996. The decrease in gross profit in fiscal 1998 was
attributable to a stronger U.S. dollar. The increase in gross
profit in fiscal 1997 was attributable to increased sales of
higher-margin products and lower manufacturing costs, partially
offset by the negative effect of currency fluctuations.
OPERATING EXPENSES. Selling, general and administrative ("SG&A")
expenses as a percentage of net sales decreased to 31.7% in fiscal
1998, compared with 33.3% in fiscal 1997 and 34.8% in fiscal 1996.
SG&A expenses increased 1% in fiscal 1998 to $47.7 million
compared with $47.3 million in fiscal 1997, due to higher
personnel and related costs, partially offset by the effect of
currency fluctuations.
Fiscal 1997 SG&A expenses increased 2% to $47.3 million compared
with $46.3 million in fiscal 1996. The increase was due to the
establishment of a new direct sales subsidiary in Austria in
January 1997, increased selling costs and higher personnel-related
costs, partially offset by the effect of currency fluctuations.
The Company anticipates that SG&A expenses will be in the range of
31% to 34% of sales in the near term. Research and product
development expenses were 8.8% of consolidated sales in fiscal
1998, unchanged from fiscal 1997, and slightly higher than the
8.7% reported in fiscal 1996. Research and product development
expenses in fiscal 1998 were $13.3 million, an increase of 6%
compared with $12.5 million in fiscal 1997. The increase was due
to higher personnel and related costs and higher project material
costs associated with various product development projects.
Research and product development expenses in fiscal 1997 increased
9% from the $11.5 million reported in fiscal 1996. Research and
product development spending depends on both the breadth of the
Company's research and product development efforts and the stage
of specific product development projects. The Company expects the
level of research and product development expense to remain in the
range of 8% to 10% of sales in the near term.
OTHER INCOME. Other income in fiscal 1996 included a gain of $1.0
million on the sale of undeveloped property. Proceeds (net of
selling expenses) from the sale of the property were $3.9 million.
The proceeds consisted of cash and the assumption by the buyer of
an industrial revenue bond associated with the property.
17
<PAGE>
INTEREST INCOME. Interest income in fiscal 1998 of $1.4 million
was essentially unchanged from fiscal 1997. Fiscal 1997 interest
income was 31% lower than the $2.0 million reported in fiscal
1996. Lower average invested cash balances in 1998 were offset by
higher yields on investments. Fiscal 1997 was lower than fiscal
1996 due to lower average cash balances. Lower average cash
balances in fiscal 1998 and 1997 resulted from the purchase of the
Company's stock under its stock repurchase program.
INCOME TAXES. The Company's effective tax rate for fiscal 1998
was 34.0%, compared with 34.5% in fiscal 1997 and 34.8% in fiscal
1996. The Company's effective tax rate is affected by the mix of
taxable income among the various tax jurisdictions in which the
Company does business. The Company anticipates that its effective
tax rate will be in the 33% to 35% range in the near term.
EARNINGS PER SHARE. Diluted earnings per share in fiscal 1998
increased 15%, to $1.18 per share, compared with $1.03 in fiscal
1997 and $.87 in fiscal 1996. Fiscal 1996 includes $.02 per share
resulting from a gain on the sale of property. Basic earnings per
share in fiscal 1998 increased to $1.25, compared with $1.09 in
fiscal 1997 and $.91 in fiscal 1996. The number of shares used in
computing diluted and basic earnings per share declined each year
due to the Company's stock repurchase program. On December 29,
1995 and June 5, 1998, the Company effected two-for-one splits of
its common stock. All per-share and share amounts have been
restated to reflect the stock splits.
LIQUIDITY AND CAPITAL RESOURCES.
In fiscal 1998, the Company maintained its strong liquidity and
financial condition. The Company's working capital was $35.7
million at June 30, 1998. Working capital decreased in fiscal
1998, because the Company repurchased 1,851,460 shares of its
common stock for $46.2 million under its stock repurchase program.
The Company repurchased 1,583,478 shares for $31.0 million in
fiscal 1997 and 3,202,000 shares for $49.1 million in fiscal 1996.
Cash generated by operating activities was $27.9 million, compared
with $27.0 million in fiscal 1997 and $27.7 million in fiscal
1996. The increase in operating cash flows was due to higher net
income, partially offset by higher accounts receivable. Capital
expenditures in fiscal 1998 decreased to $2.5 million, compared
with $2.6 million in fiscal 1997 and $3.0 million in fiscal 1996.
The higher level in fiscal 1996 was due to the renovation of a
manufacturing building. At June 30, 1998, the Company had no
borrowings outstanding under any of its $14.1 million bank lines
of credit, which are used to meet working capital requirements and
reduce exposure to foreign currency fluctuations. The Company
believes that its cash flow from operations, its current cash and
cash investments and its bank lines of credit are sufficient to
meet its cash requirements for the foreseeable future. The impact
of inflation on the Company's financial position and results of
operations was not significant during any of the periods
presented.
18
<PAGE>
New accounting pronouncements. In June, 1997, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income," and Statement of Financial Accounting Standards (SFAS)
No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The adoption of both standards is required for
fiscal years beginning after December 15, 1997. Under SFAS 130,
the Company is required to report comprehensive income in the
financial statements, in addition to net income. For the Company,
the primary differences between net income and comprehensive
income will be from foreign currency translation adjustments and
net unrealized gains or losses on securities available for sale.
SFAS 131 requires that the Company report separately, in the
financial statements, certain financial and descriptive
information about operating segments. It also establishes
standards for related disclosures about products and services,
geographic areas and major customers. Adoption of SFAS 130 and 131
will not impact the Company's consolidated financial position,
results of operations or cash flows.
Year 2000 compliance. Many older computer software programs refer
to years in terms of their final two digits only. Such programs
may interpret the year 2000 to mean the year 1900 instead. If not
corrected, those programs could cause date-related transaction
failures. Beginning in fiscal 1997, the Company started a process
to review its internal systems for year 2000 compliance. Testing
of the internal systems was substantially completed during fiscal
1998 and the Company believes its current internal systems are
compliant. Dionex believes the products it is currently shipping
are year 2000 compliant as well. The Company has no obligation to
upgrade previously shipped products which are not year 2000
compliant but may make available for sale to customers fixes for
certain products. Additionally, the Company has contacted
numerous vendors and customers to assess their progress in
addressing the year 2000 issue. Based upon our assessments,
testing and the plans in progress, the Company does not believe
that the year 2000 issue will have a material adverse effect on
the Company's financial position, results of operation or cash
flows. However, the Company does not have control over whether its
vendors or customers will make any appropriate modifications on a
timely basis. If such modifications are not made in a timely
manner, the financial position and results of operations could be
materially adversely affected. To date, the Company has not
incurred any significant costs related to this issue, and does not
expect significant costs directly related to year 2000 compliance
issues in the future. However, should the need arise, the Company
has adequate resources and would use them to resolve significant
year 2000 issues in a timely manner.
19
<PAGE>
Forward-looking statements. Except for historical information
contained herein, the above discussion and the letter to
shareholders contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
Section 21E of the Securities and Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995,
and are made under the safe harbor provisions thereof. Such
statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those
discussed here. Such risks and uncertainties include: general
economic conditions, foreign currency fluctuations, new product
development, including market receptiveness, competition from
other products, existing product obsolescence, fluctuation in
worldwide demand for analytical instrumentation, the ability to
manufacture products on an efficient and timely basis and at a
reasonable cost and in sufficient volume, year 2000 compliance
issues, the ability to attract and retain talented employees and
other risks as described in more detail in the Company's Form 10-
K. Readers are cautioned not to place undue reliance on these
forward-looking statements which reflect management's analysis
only as of the date hereof. The Company undertakes no obligation
to publicly release the results of any revision to these forward-
looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence
of unanticipated events.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
The Company is exposed to financial market risks, including
changes in foreign currency exchange rates, interest rates and
marketable equity security prices. To mitigate its foreign
currency exchange risks, the Company utilizes derivative financial
instruments. The Company does not use derivative financial
instruments for speculative or trading purposes.
The Company hedges foreign currency exchange risk on its
intercompany receivable balances utilizing foreign exchange
forward contracts with high quality financial institutions. The
Company's foreign exchange forward hedging activities do not
subject the company to significant risk due to exchange rate
movements because gains and losses on these contract generally
offset losses and gains on the underlying items being hedged. A
10% change in foreign currency exchange rates would not have a
material impact on the Company's results of operations.
The Company has investments in marketable debt securities that are
subject to interest rate risk. However, due to the short-term
nature of the Company's debt investments and the Company's
intention is to hold these investments until maturity, the impact
of interest rate changes would not have a material impact on the
Company's results of operations.
20
<PAGE>
The Company is exposed to equity price risk on its investment in
Molecular Devices Corporation. This investment is classified as
"available for sale" and is included in other noncurrent assets.
The Company does not attempt to reduce or eliminate its market
exposure on this investment. A 10% change in the market price of
the Company's investment would result in an approximately $600,000
decrease in the fair value of the Company's "available for sale"
securities. Although changes in equity prices may affect the fair
value of "available for sale" securities and cause unrealized
gains or losses, such gains or losses would not be realized unless
the investment was sold.
All of the potential changes noted above are based upon
sensitivity analyses performed on the Company's financial
positions at June 30, 1998. Actual results may differ materially.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Financial
Statement Schedules appearing on page 28 of this
Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
21
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of Directors
The information required by Item 10 of Form 10-K with
respect to identification of directors is incorporated
by reference to the information contained in the
section captioned "Nominees" at pages 2 and 3 of the
Registrant's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held October 22, 1998,
which has been previously filed.
Identification of Officers
See Page 14 of this Report.
Item 11. EXECUTIVE COMPENSATION
The information required by Item 11 of Form 10-K is
incorporated by reference to the information contained
in the section captioned "Executive Compensation," at
pages 6 through 9 of the Registrant's definitive
Proxy Statement for the Annual Meeting of Stockholders
to be held October 22, 1998, which has been previously
filed.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by Item 12 of Form 10-K is
incorporated by reference to the information contained
in the sections captioned "Security Ownership of
Certain Beneficial Owners and Management" at pages 4
and 5 of the Registrant's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held
October 22, 1998, which has been previously filed.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
22
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) Financial Statements - See Index to Financial
Statements and Financial Statement Schedules at
page 28 of this Report.
(2) Financial Statement Schedules - See Index to
Financial Statements and Financial Statement
Schedules at page 28 of this Report.
(3) Exhibits - See Exhibit Index at page 24 through
26 of this Report.
(b) Reports on Form 8-K - The Company did not file any
reports on Form 8-K during the quarter ended
June 30, 1998.
23
<PAGE>
DIONEX CORPORATION
EXHIBIT INDEX
Exhibit
Number Description Reference
3.1 Restated Certificate of Incorporation,
filed November 6, 1996....................... (8)
3.2 Bylaws, as amended on March 10, 1998...........
4.1 Shareholder Rights Agreement dated June 27, 1989,
between the Registrant and The First National
Bank of Boston .............................. (4)
4.2 Amendment No. 1 to the Rights Agreement dated
November 17, 1995............................ (7)
10.1 Agreement, effective as of January 1, 1975,
between The Dow Chemical Company and
International Plasma Corporation............. (1)
10.2 Memorandum agreement, dated March 14, 1975,
between The Dow Chemical Company and
International Plasma Corporation............. (1)
10.3 Agreement, dated March 6, 1975, between
International Plasma Corporation and the
former Dionex Corporation.................... (1)
10.4 Consent to Assignment executed as of March 26,
1980, between the Dow Chemical Company and the
former Dionex Corporation.................... (1)
10.5 Amendatory Agreement, effective as of November 1,
1981,between The Dow Chemical Company and the
Registrant (with certain confidential information
deleted)........................................ (1)
10.6 Amendatory Agreement, effective as of July 1, 1982,
between The Dow Chemical Company and the
Registrant (with certain confidential information
deleted)........................................ (1)
10.7 Registrant's Supplemental Stock Option Plan
(Exhibit 28.4).................................. (2)
10.8 Registrant's Medical Care Reimbursement Plan
(Exhibit 10.17)............................... (1)
10.9 Registrant's Employee Stock Participation Plan
(Exhibit 28.3)................................ (5)
24
<PAGE>
Exhibit
Number Description Reference
10.10 Credit Agreement dated February 26, 1996
between Bank of America and the Registrant (7)
10.11 First amendment to Credit Agreement dated
February 29, 1996 between Bank of America
and the Registrant..........................
10.12 Second amendment to Credit Agreement dated
February 29, 1996 between Bank of America
and the Registrant..........................
10.13 1988 Directors' Stock Option Plan (and related
stock option grant form) (Exhibit 10.20)..... (3)
10.14 Dionex Corporation Stock Option Plan, as
amended and restated (formerly, the 1990 Stock
Option Plan).................................. (6)
13.1 Portions of the Registrant's 1998 Annual
Report to Stockholders that are incorporated
by reference in this Annual Report on
Form 10-K.................................
21.1 Subsidiaries of Registrant..................
23.1 Independent Auditors' Consent...............
27.1 Financial Data Schedule.....................
(1) Incorporated by reference to the indicated exhibit in
Amendment No. 1 of the Registrant's Registration
Statement on Form S-1 filed December 7, 1982.
(2) Incorporated by reference to the indicated exhibit in the
Registrant's Registration Statement on Form S-8 filed
March 3, 1987.
(3) Incorporated by reference to the indicated exhibit in the
Registrant's Annual Report on Form 10-K filed September
27, 1988.
(4) Incorporated by reference to the corresponding exhibit in
the Registrant's Current Report on Form 8-K filed June 29,
1989.
25
<PAGE>
(5) Incorporated by reference to the indicated exhibit in the
Registrant's Statement on Form S-8 filed May 6, 1994.
(6) Incorporated by reference to the indicated exhibit in the
Registrant's Annual Report on Form 10-K filed September 26,
1995.
(7) Incorporated by reference to the indicated exhibit in the
Registrant's Annual Report on Form 10-K filed September 26,
1996.
(8) Incorporated by reference to the indicated exhibit in the
Registrant's Quarterly Report on Form 10-Q filed February 13,
1997.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DIONEX CORPORATION
(Registrant)
Date September 25, 1998 By /s/ A. Blaine Bowman
A. Blaine Bowman
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the dates
indicated.
Signature Title Date
/s/ A. Blaine Bowman President,Chief Executive September 25, 1998
A. Blaine Bowman Officer, and Director
(Principal Executive Officer)
/s/ Michael W. Pope Vice President of Finance September 25, 1998
Michael W. Pope and Administration
(Principal Financial and
Accounting Officer)
/s/ David L. Anderson Director September 25, 1998
David L. Anderson
/s/ James F. Battey Director September 25, 1998
James F. Battey
/s/ B.J. Moore Director September 25, 1998
B.J. Moore
/s/ Riccardo Pigliucci Director September 25, 1998
Riccardo Pigliucci
27
<PAGE>
DIONEX CORPORATION
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page
FINANCIAL STATEMENTS
Consolidated Balance Sheets at June 30, 1998 and 1997 *
Consolidated Statements of Income for the years
ended June 30, 1998, 1997 and 1996 *
Consolidated Statements of Stockholders' Equity for
the years ended June 30, 1998, 1997 and 1996 *
Consolidated Statements of Cash Flows for the years
ended June 30, 1998, 1997 and 1996 *
Notes to Consolidated Financial Statements *
Independent Auditors' Report *
*Incorporated by reference to information contained on
pages 25 through 39 of the Registrant's 1998 Annual
Report to Stockholders. A copy of the applicable pages
is attached hereto as Exhibit 13.1
FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report 29
Schedule II - Valuation and Qualifying Accounts
and Reserves 30
All other schedules are omitted because they are not required, are
not applicable or the information is included in the consolidated
financial statements or notes thereto.
28
<PAGE>
INDEPENDENT AUDITORS' REPORT
Dionex Corporation
We have audited the consolidated financial statements of Dionex
Corporation and its subsidiaries as of June 30, 1998 and 1997, and
for each of the three years in the period ended June 30, 1998, and
have issued our report thereon dated July 20, 1998; such financial
statements and report are included in your 1998 Annual Report to
Stockholders and are included in and incorporated by reference
herein. Our audits also included the consolidated financial
statement schedule of Dionex Corporation and its subsidiaries,
listed in the accompanying Index to Financial Statements and
Financial Statement Schedules. This financial statement schedule
is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information
set forth therein.
DELOITTE & TOUCHE LLP
San Jose, California
July 20, 1998
29
<PAGE>
SUBSIDIARIES OF DIONEX CORPORATION
The following table sets forth the names of the subsidiaries
of the Registrant, the state or other jurisdiction of
incorporation or organization of each, and the names under which
subsidiaries do business as of June 30, 1997.
State or other
jurisdiction of Name under which
incorporation or subsidiary does
Name of Subsidiary organization business
Dionex (U.K.) Limited England Dionex (U.K.)
Limited
Dionex GmbH Federal Republic Dionex GmbH
of Germany
Dionex S.r.l. Italy Dionex S.r.l.
Dionex S.A. France Dionex S.A.
Dionex Export Corporation U.S. Virgin Islands Dionex Export
Corporation
Dionex Canada Ltd./Ltee. Canada Dionex Canada
Ltd./Ltee.
Dionex B.V. The Netherlands Dionex B.V.
Nippon Dionex K.K. Japan Nippon Dionex K.K.
Dionex N.V. Belgium Dionex N.V.
Dionex (Switzerland) AG Switzerland Dionex
(Switzerland) AG
Dionex Austria GmbH Austria Dionex Austria GmbH
Selected Financial Information
<TABLE>
Years ended June 30 1998 1997 1996 1995 1994
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating information
Net sales $150,513 $142,053 $133,004 $120,024 $109,526
Cost of sales 47,390 43,458 41,406 38,428 35,152
Gross profit 103,123 98,595 91,598 81,596 74,374
Operating expenses:
Selling, general
and administrative 47,689 47,344 46,290 43,401 39,570
Research and product
Development 13,284 12,521 11,527 10,500 9,902
Write-off of goodwill - - - 2,168 -
Total operating
Expenses 60,973 59,865 57,817 56,069 49,472
Operating income 42,150 38,730 33,781 25,527 24,902
Other income - - 1,003 4,130 -
Interest income 1,374 1,396 2,034 2,202 1,465
Interest expense (115) (85) (93) (153) (249)
Income before taxes
on income 43,409 40,041 36,725 31,706 26,118
Taxes on income 14,759 13,814 12,762 11,932 9,076
Net income $ 28,650 $ 26,227 $ 23,963 $ 19,774 $ 17,042
Basic earnings per
Share $ 1.25 $ 1.09 $ .91 $ .69 $ .56
Diluted earnings per
Share $ 1.18 $ 1.03 $ .87 $ .67 $ .55
Shares used in computing
per share amounts:
Basic 22,978 24,103 26,224 28,723 30,252
Diluted 24,316 25,440 27,439 29,456 30,882
All share and per share amounts have been restated to reflect the two-for-
one splits of the Company's common stock effective December 29, 1995 and
June 8, 1998. The Company has paid no cash dividends.
At June 30 1998 1997 1996 1995 1994
(In thousands)
balance sheet information
Working capital $ 35,745 $ 48,215 $ 47,888 $ 67,249 $ 71,414
Total assets 107,259 118,163 113,186 131,780 133,278
Long-term debt - - - 86 104
Stockholders' equity 70,689 84,163 82,204 103,871 111,139
</TABLE>
24
<PAGE>
Consolidated Balance Sheets
<TABLE>
At June 30 1998 1997
(In thousands, except share and per share amounts)
Assets
<S> <C> <C>
Current assets:
Cash and equivalents (including
invested cash of $5,364
in 1998 and $16,586 in 1997) $ 13,184 $ 24,624
Temporary cash investments 5,850 8,252
Accounts receivable (net of
allowance for doubtful accounts of
$606 in 1998 and $533 in 1997) 31,350 29,226
Inventories 9,921 9,479
Deferred taxes 7,965 7,136
Prepaid expenses and other 1,089 1,076
Total current assets 69,359 79,793
Property, plant and equipment, net 30,070 30,225
Other assets 7,830 8,145
$107,259 $118,163
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 5,681 $ 4,442
Accrued liabilities 17,394 18,639
Income taxes payable 6,526 4,905
Accrued product warranty 4,013 3,592
Total current liabilities 33,614 31,578
Deferred taxes and other 2,956 2,422
Commitments (Note 10)
Stockholders' equity:
Preferred stock (par value $.001
per share; 1,000,000 shares
authorized; none outstanding) - -
Common stock (par value $.001 per
share; 40,000,000 shares authorized;
shares outstanding: 22,315,910 in
1998 and 23,694,060 in 1997) 38,926 36,323
Retained earnings 32,106 46,622
Accumulated translation adjustments (2,242) (996)
Net unrealized gain on equity
securities available for sale 1,899 2,214
Total stockholders' equity 70,689 84,163
$107,259 $118,163
</TABLE>
See notes to consolidated financial statements
25
<PAGE>
Consolidated Statements of Income
<TABLE>
Years ended June 30 1998 1997 1996
(In thousands, except per share amounts)
<S> <C> <C> <C>
Net sales $150,513 $142,053 $133,004
Cost of sales 47,390 43,458 41,406
Gross profit 103,123 98,595 91,598
Operating expenses:
Selling, general and
Administrative 47,689 47,344 46,290
Research and product
Development 13,284 12,521 11,527
Total operating expenses 60,973 59,865 57,817
Operating income 42,150 38,730 33,781
Other income - - 1,003
Interest income 1,374 1,396 2,034
Interest expense (115) (85) (93)
Income before taxes on
Income 43,409 40,041 36,725
Taxes on income 14,759 13,814 12,762
Net income $ 28,650 $ 26,227 $ 23,963
Basic earnings per share $ 1.25 $ 1.09 $ .91
Diluted earnings per share $ 1.18 $ 1.03 $ .87
Shares used in computing
earnings per share:
Basic 22,978 24,103 26,224
Diluted 24,316 25,440 27,439
See notes to consolidated financial statements.
</TABLE>
26
<PAGE>
Consolidated Statements of Stockholders' Equity
<TABLE>
equity adjustments
net
accumulated unrealized
common stock retained translation gain on
shares amount earnings adjustments securities total
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1995 27,427,924 $32,398 $ 70,426 $ 1,047 $ - $103,871
Common stock issued 513,830 4,255 4,255
Repurchase of common stock (3,202,000) (3,970) (45,138) (49,108)
Equity adjustments (1,013) 236 (777)
Net income 23,963 23,963
Balance at June 30, 1996 24,739,754 32,683 49,251 34 236 82,204
Common stock issued 537,784 5,810 5,810
Repurchase of common stock (1,583,478) (2,170) (28,856) (31,026)
Equity adjustments (1,030) 1,978 948
Net income 26,227 26,227
Balance at June 30, 1997 23,694,060 36,323 46,622 (996) 2,214 84,163
Common stock issued 473,310 5,590 5,590
Repurchase of common stock (1,851,460) (2,987) (43,166) (46,153)
Equity adjustments (1,246) (315) (1,561)
Net income 28,650 28,650
Balance at June 30, 1998 22,315,910 $38,926 $ 32,106 $ (2,242) $ 1,899 $ 70,689
</TABLE>
See notes to consolidated financial statements.
27
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
Years ended June 30 1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Cash and equivalents provided by (used for):
Cash flows from operating activities:
Net income $ 28,650 $ 26,227 $ 23,963
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 2,543 2,584 2,866
Deferred taxes (811) (492) (1,160)
Gain on sale of property - - (1,003)
Changes in assets and liabilities:
Accounts receivable (4,062) (2,417) (2,937)
Inventories (841) (1,567) 272
Prepaid expenses and
other assets (56) 201 (60)
Accounts payable 1,313 132 763
Accrued liabilities (1,100) 467 4,155
Income taxes payable 1,790 1,413 308
Accrued product warranty 456 438 492
Net cash provided by operating
Activities 27,882 26,986 27,659
Cash flows from investing activities:
Purchase of temporary cash
Investments (13,500) (18,852) (33,601)
Proceeds from maturities of
temporary cash investments 15,902 27,151 30,432
Purchase of property, plant
and equipment (2,502) (2,622) (3,008)
Proceeds from sale of property - - 3,812
Other 99 (96) 191
Net cash provided by (used for)
investing activities (1) 5,581 (2,174)
Cash flows from financing activities:
Net change in notes payable
to banks - (258) (1,489)
Sale of common stock 5,590 5,810 4,255
Repurchase of common stock (46,153) (31,026) (49,108)
Other 291 35 (229)
Net cash used for financing
Activities (40,272) (25,439) (46,571)
Effect of exchange rate changes
on cash 951 510 1,907
Net increase (decrease) in cash
and equivalents (11,440) 7,638 (19,179)
Cash and equivalents, beginning
of year 24,624 16,986 36,165
Cash and equivalents, end of
year $ 13,184 $ 24,624 $ 16,986
See notes to consolidated financial statements.
</TABLE>
Notes to Consolidated Financial Statements
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: SIGNIFICANT ACCOUNTING POLICIES
Organization. Dionex Corporation (the "Company") is a leading
manufacturer and marketer of chromatography systems for chemical
analysis. The Company's systems are used in environmental
analysis and by the pharmaceutical, life sciences, chemical,
petrochemical, power generation and electronics industries in a
variety of applications.
Principles of Consolidation. The consolidated financial
statements include the Company and its subsidiaries.
All significant intercompany transactions and accounts are
eliminated in consolidation.
Cash Equivalents. Cash equivalents are highly liquid debt
instruments with a maturity at date of purchase of three months
or less.
Investments. The Company classifies its debt and equity
securities as "held to maturity" or "available for sale."
Securities classified as "held to maturity" are reported at
amortized cost and "available for sale" securities are reported
at fair market value, with a corresponding recognition of the
unrealized gains and losses (net of tax effect) as a separate
component of stockholders' equity. Temporary cash investments
consist of short-term debt investments which are classified as
"held-to-maturity" securities. The Company's investments in
marketable equity securities have been classified as "available
for sale" and are included with other noncurrent assets.
Inventories. Inventories are stated at the lower of standard cost
(which approximates cost on a first-in, first-out basis) or
market.
Property, Plant and Equipment. Property, plant and equipment are
stated at cost. Depreciation is computed using the straight-line
method based on estimated useful lives of 3 to 30 years.
Leasehold improvements are amortized over the lesser of the
useful life or the remaining term of the lease.
Revenue Recognition. Revenue related to systems is recognized
upon shipment. Service contract revenue is deferred and
recognized on a pro rata basis over the contractual period.
Installation and product warranty costs are accrued at the time
revenue is recognized.
Taxes on Income. The Company accounts for income taxes using the
asset and liability approach to account for deferred income
taxes.
Stock-based Compensation Plans. The Company applies Accounting
Principles Board Opinion (APB) No. 25, "Accounting for Stock
Issued to Employees" and related interpretations in accounting
for its stock-based compensation plans (Note 7). Accordingly, no
accounting recognition is given to stock options granted at fair
market value until they are exercised. Upon exercise, net
proceeds, including tax benefits realized, are credited to
equity.
Stock Split. In June 1998 and December 1995, the Company effected
two-for-one splits of its common stock. All share and per share
amounts have been restated to reflect the stock splits for all
periods presented.
Net Income per Share. In February 1997, the Financial Accounting
Standards Board issued SFAS No. 128, "Earnings Per Share." The
Company adopted SFAS No. 128 in the second quarter of fiscal 1998
and restated earnings per share (EPS) data for prior periods to
conform with SFAS No. 128.
29
<PAGE>
Basic earnings per share excludes dilution and is computed by
dividing net income by the weighted average of common shares
outstanding for the period. Diluted earnings per share reflects
the potential dilution from securities and other contracts which
are exercisable or convertible into common stock. Diluted
earnings per share is computed by dividing net income by the
weighted average number of common shares that would have been
outstanding during the period assuming the issuance of common
shares for all dilutive potential common shares outstanding. The
difference between the number of shares outstanding for basic and
diluted earnings per share is due to stock options outstanding
during the period.
Common Stock Repurchases. The Company repurchases shares in the
open market under its ongoing stock repurchase program. For each
share repurchased, the Company reduces the common stock account
by the average value per share reflected in the account prior to
the repurchase with the excess allocated to retained earnings.
The Company currently retires all shares repurchased.
Translation of Foreign Currency. The Company's foreign operations
are measured using local currencies as the functional currency.
Assets and liabilities are translated into U.S. dollars at year-
end rates of exchange, and results of operations are translated
at average rates for the year.
The Company enters into foreign exchange forward contracts with
high quality financial institutions to manage its exposure to the
impact of fluctuations in foreign currency exchange rates on its
intercompany receivable balances. Gains and losses on these
contracts are recorded in net income currently. These contracts
generally have maturities of approximately 30 days and require
the Company to exchange foreign currencies for U.S. dollars at
maturity. The Company does not engage in foreign currency
speculation. The Company's foreign exchange forward hedging
activities do not subject the Company to significant risk due to
exchange rate movements because gains and losses on these
contracts generally offset losses and gains on the underlying
items being hedged.
At June 30, 1998, the Company had forward exchange contracts to
sell foreign currencies totaling $9.9 million dollars, including
approximately $5.0 million of Japanese yen, $960,000 of Italian
lire, $780,000 of French francs and the remainder in German
deutschemarks, Swiss francs, Dutch gilders, British pounds,
Belgian francs, Austrian shillings and Canadian dollars. At June
30, 1998 and 1997, the aggregate unrealized gains or losses on
the forward exchange contracts were not material.
New Accounting Pronouncements. In June, 1997, the Financial
Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The adoption of both
standards is required for fiscal years beginning after December
15, 1997. Under SFAS 130, the Company is required to report
comprehensive income in the financial statements, in addition to
net income. For the Company, the primary differences between net
income and comprehensive income will be from foreign currency
translation adjustments and net unrealized gains or losses on
securities available for sale. SFAS 131 requires that the Company
report separately, in the financial statements, certain financial
and descriptive information about operating segments. It also
establishes standards for related disclosures about products and
services, geographic areas and major customers. Adoption of SFAS
130 and 131 will not impact the Company's consolidated financial
position, results of operations or cash flows.
Certain Risks and Uncertainties. The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
30
<PAGE>
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of investments
and trade receivables. The Company invests in high-grade
instruments which it places for safekeeping with high quality
financial institutions. The Company sells its products primarily
to large organizations in diversified industries worldwide.
Credit risk is further mitigated by the Company's credit
evaluation process and the reasonably short collection terms. The
Company does not require collateral or other security to support
accounts receivable. While the Company does maintain allowances
for potential credit losses, actual bad debt losses have not been
significant.
The Company is subject to certain risks and uncertainties and
believes that changes in any of the following areas could have a
material adverse affect on the Company's future financial
position or results of operations: general economic conditions;
foreign currency fluctuations; new product development, including
market receptiveness; competition from other products; worldwide
demand for analytical instrumentation; existing product
obsolescence; the ability to manufacture products on an efficient
and timely basis and at reasonable cost and in sufficient volume;
the ability to attract and retain talented employees and other
risks as detailed from time to time in the Company's filings with
the Securities and Exchange Commission.
Note 2: INVESTMENTS
The carrying value and fair market value of temporary cash
investments at June 30 classified as "held to maturity" are
as follows:
gross
unrealized fair
amortized gains market
cost (losses) value
(In thousands)
1998:
U.S. corporate debt securities $1,000 $ - $1,000
Obligations of state and
political subdivisions 4,850 - 4,850
$5,850 $ - $5,850
1997:
U.S. corporate debt securities $7,000 $ - $7,000
Municipal auction rate
preferred stock 1,252 2 1,254
$8,252 $ 2 $8,254
All maturities during fiscal 1998 were held-to-maturity
investments. There were no sales of securities for the years
ended June 30, 1998, 1997 and 1996. All temporary cash
investments at June 30, 1998 mature within one year.
In December 1989, the Company invested $3.0 million in the stock
of Molecular Devices Corporation (MDC).The Company's President
and a director serve on the Board of Directors of MDC. The
Company's ownership interest in MDC is approximately 4% has been
classified as "available for sale" and is included with other
noncurrent assets. At June 30, 1998 and 1997, the fair value of
this investment was $6,162,000 and $6,688,000, respectively.
31
<PAGE>
Note 3: INVENTORIES
Inventories at June 30 consist of:
1998 1997
(In thousands)
Finished goods $3,459 $3,720
Work in process 3,548 2,584
Raw materials and subassemblies 2,914 3,175
$9,921 $9,479
Note 4: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30 consist of:
1998 1997
(In thousands)
Land $ 13,337 $ 13,352
Buildings and improvements 16,581 16,652
Machinery, equipment and tooling 12,123 10,843
Furniture and fixtures 4,719 4,661
46,760 45,508
Accumulated depreciation and
Amortization (16,690) (15,283)
Property, plant and equipment, net $ 30,070 $ 30,225
Note 5: FINANCING ARRANGEMENTS
The Company has unsecured lines of credit with various domestic
and foreign banks totaling approximately $14.1 million which have
been used primarily to minimize the Company's exposure to foreign
currency fluctuations. These lines of credit expire between
December 31, 1998 and January 31, 2000. Borrowings in each
country bear interest at the local reference rates which ranged
from 1.5% to 9.25% at June 30, 1998. At June 30, 1998, the
Company had no borrowings outstanding on these lines.
Such line of credit agreements impose certain financial
restrictions relating to cash dividends, working capital and
tangible net worth. At June 30, 1998, the Company was in
compliance with such covenants.
One of the Company's foreign subsidiaries discounts trade notes
receivable with a bank. Total notes receivable discounted were
approximately $6,400,000 in fiscal 1998 and $6,700,000 in fiscal
1997. The uncollected balances of notes receivable due the
discounting bank at June 30, 1998 and 1997 were approximately
$1,800,000 and $2,500,000, respectively. The Company is
contingently liable for these unpaid balances.
Total interest paid was $115,000 in 1998, $86,000 in 1997 and
$95,000 in 1996.
32
<PAGE>
Note 6: ACCRUED LIABILITIES
Accrued liabilities at June 30 consist of:
1998 1997
(In thousands)
Accrued payroll and related expenses $ 7,923 $ 7,520
Deferred revenues 3,377 3,264
Accrued stock repurchases - 1,945
Other accrued liabilities 6,094 5,910
$17,394 $18,639
Note 7: STOCK OPTION AND PURCHASE PLANS
Stock Option Plans. The Company has two stock option plans (the
"Option Plans") under which incentive and nonqualified options
may be granted. Options are granted at the stock's fair market
value at the grant date. Options generally become exercisable in
25% increments each year beginning one year from the date of
grant and expire five or ten years from the grant date.
Activity under the Option Plans for the three-year period ended
June 30, 1998 is summarized below.
<TABLE>
1998 1997 1996
wtd. avg. wtd. avg. wtd. avg.
exercise exercise exercise
shares price shares price shares price
<S> <C> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year 3,050,176 $ 9.60 2,893,288 $ 7.42 3,382,868 $ 7.29
Granted 605,100 24.28 728,400 16.37 37,000 13.57
Exercised (418,072) 5.91 (477,112) 6.38 (429,230) 6.51
Canceled (34,504) 13.17 (94,400) 11.46 (97,350) 9.23
Options outstanding,
end of year 3,202,700 $12.82 3,050,176 $ 9.60 2,893,288 $ 7.42
Options exercisable
at year-end 1,899,100 $ 8.41 1,781,676 $ 6.87 1,860,288 $ 6.24
Weighted average fair
value of options granted
during the year $ 9.37 $ 8.19 $ 6.60
</TABLE>
33
<PAGE>
Additional information regarding options outstanding as of June
30, 1998 is as follows:
<TABLE>
options outstanding options exercisable
weighted
average weighted
remaining average weighted
range of number contractual exercise number average
exercise prices outstanding life (yrs) price exercisable exercise price
<C> <C> <C> <C> <C> <C>
$ 4.38- 8.19 1,262,174 4.01 $ 6.65 1,262,174 $ 6.65
8.34-16.31 1,324,426 7.60 13.40 634,926 11.88
19.75-28.50 616,100 9.54 24.20 2,000 19.75
$ 4.38-28.50 3,202,700 6.56 $12.82 1,899,100 $ 8.41
</TABLE>
At June 30, 1998, 1,796,758 shares were available for future
grants under the Option Plans.
Employee Stock Purchase Plan. Under the Company's Employee Stock
Purchase Plan, (the Purchase Plan), eligible employees are
permitted to have salary withholdings to purchase shares of
common stock at a price equal to 85% of the lower of the market
value of the stock at the beginning or end of each six-month
offer period, subject to an annual limitation. Stock issued under
the plan was 55,238, 60,672 and 84,600 shares in 1998, 1997 and
1996 at weighted average prices of $18.42, $14.77 and $9.31,
respectively. The weighted average fair value of the 1998, 1997
and 1996 awards was $5.41, $5.78 and $5.34, respectively. At June
30, 1998, 1,297,754 shares were reserved for future issuances
under the Purchase Plan.
Pro Forma Stock-based Compensation Expense. SFAS No. 123 sets
forth a fair-value based method of recognizing stock-based
compensation expense. As permitted by SFAS No. 123, the Company
has elected to continue to apply APB No. 25 to account for its
stock-based compensation plans. Had compensation costs for awards
in 1998, 1997 and 1996 under the Company's stock-based
compensation plans been determined based on the fair value at the
grant dates consistent with the method set forth under SFAS No.
123, the effect on the Company's net income and earnings per
share would have been as follows:
1998 1997 1996
(In thousands, except per share amounts)
Net income:
As reported $28,650 $26,227 $23,963
Pro forma 26,860 24,945 23,676
Basic earnings per share:
As reported $ 1.25 $ 1.09 $ .91
Pro forma 1.18 1.04 .90
Diluted earnings per share
As reported $ 1.18 $ 1.03 $ .87
Pro forma 1.11 .99 .86
Because the method prescribed by SFAS No. 123 has not been
applied to options granted prior to July 1, 1995,
the resulting pro forma compensation expense may not be
representative of the amount to be expected in future years. Pro
forma compensation expense for options granted is reflected over
the vesting period; therefore, future pro forma compensation
expense may be greater as additional options are granted.
34
<PAGE>
The fair value of each option grant was estimated on the grant
date using the Black-Scholes option-pricing model with the
following weighted-average assumptions:
1998 1997 1996
Volatility 30% 45% 45%
Risk-free interest rate 5.67% 6.02% 5.36%
Expected life of options 5.5 years 5.5 years 5.5 years
The Black-Scholes option-pricing model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option-
pricing models require the input of highly subjective
assumptions, including expected stock price volatility. Because
the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
Note 8: EMPLOYEE BENEFIT PLANS
The Company has an employee profit sharing plan covering most
North American employees. Cash distributions are determined by
the Board of Directors and were $2,757,000 for 1998, $2,609,000
for 1997 and $2,534,000 for 1996.
The Company has a 401(k) tax deferred savings plan covering most
U.S. employees. Participants may contribute up to 10% of their
compensation and the Company makes matching contributions
($988,000 in 1998, $918,000 in 1997 and $874,000 in 1996) limited
to 5% of each participant's compensation. Matching contributions
vest in 25% increments each year beginning two years after the
participant's date of employment.
Note 9: TAXES ON INCOME
The provision for taxes on income consists of:
Years ended June 30 1998 1997 1996
(In thousands)
Current:
Federal $10,747 $ 9,477 $ 9,286
State 1,925 2,034 2,030
Foreign 2,898 2,795 2,606
Total current 15,570 14,306 13,922
Deferred:
Federal (836) (407) (971)
State (52) (23) (130)
Foreign 77 (62) (59)
Total deferred (811) (492) (1,160)
$14,759 $13,814 $12,762
35
<PAGE>
Domestic and foreign income before taxes on income is as follows:
Years ended June 30 1998 1997 1996
(In thousands)
Domestic $36,407 $34,006 $30,871
Foreign 7,002 6,035 5,854
$43,409 $40,041 $36,725
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. The components of the current and
noncurrent deferred tax assets and liabilities are as follows:
Yyears ended June 30 1998 1997
(In thousands)
Current deferred tax assets:
Accounting accruals deductible
in different periods for tax
purposes $7,407 $6,520
State income tax 413 468
Other 145 148
Total deferred tax assets 7,965 7,136
Noncurrent deferred tax liabilities:
Accelerated depreciation 890 872
Net unrealized gain on available
for sale securities 1,267 1,477
Other 73 73
Total deferred tax liabilities 2,230 2,422
Net deferred tax assets $5,735 $4,714
Total income tax expense differs from the amount computed by
applying the statutory Federal income tax rate to income before
taxes as follows:
Years ended June 30 1998 1997 1996
Statutory Federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of Federal
income tax effect 2.9 3.3 3.6
FSC income not taxed (3.1) (3.5) (3.7)
Foreign taxes at differing rates 1.1 1.5 1.2
Other (1.9) (1.8) (1.3)
34.0% 34.5% 34.8%
Income taxes paid were $11,706,000 in 1998, $11,003,000 in 1997
and $13,380,000 in 1996.
The Company has not provided for Federal income taxes on
approximately $20.0 million of undistributed earnings of foreign
subsidiaries, which have been permanently reinvested in
subsidiary operations. If these earnings were distributed to the
parent company, foreign tax credits available under current law
would substantially eliminate the resulting Federal income tax
liability.
36
<PAGE>
Note 10: COMMITMENTS
Certain facilities and equipment are leased under noncancelable
operating leases. The Company generally pays taxes, insurance and
maintenance costs on leased facilities and equipment. Minimum
annual rental commitments under these noncancelable operating
leases are $1,818,000 for 1999, $1,211,000 for 2000, $992,000 for
2001, $602,000 for 2002, $395,000 for 2003 and $1,241,000
thereafter.
Total rental expense for all operating leases was $2,940,000 in
1998, $2,855,000 in 1997 and $2,763,000 in 1996.
Note 11: BUSINESS SEGMENT INFORMATION
The Company develops, manufactures, markets and services
analytical instrumentation and related accessories in its one
industry segment.
The Company's products are manufactured in the United States and
are sold worldwide. The Company markets and
distributes internationally through both exports and foreign-
based sales operations.
The following table presents a summary of operations by
geographic region. Research and development and general
corporate expenses are reflected in operating income from North
American operations.
1998 1997 1996
(In thousands)
Net sales to unaffiliated customers:
North America $ 80,145 $ 73,456 $ 67,033
Europe 46,907 45,165 44,332
Far East 23,461 23,432 21,639
Consolidated net sales to
unaffiliated customers $150,513 $142,053 $133,004
Operating income:
North America $ 35,687 $ 33,010 $ 28,873
Europe 4,222 3,993 4,111
Far East 2,401 2,126 1,617
Eliminations (160) (399) (820)
Consolidated operating income$ 42,150 $ 38,730 $ 33,781
Identifiable assets:
North America $ 71,837 $ 70,542 $ 62,543
Europe 20,237 19,160 20,088
Far East 12,244 12,100 12,169
General corporate assets
(cash investments) 11,214 24,838 26,795
Eliminations (8,273) (8,477) (8,409)
Consolidated assets $107,259 $118,163 $113,186
37
<PAGE>
Interarea transfers, which have been eliminated in consolidation
and are not included in the above table, represent transfers from
domestic operations to international subsidiaries and are based
on prices that approximate selling prices to foreign
distributors. Interarea transfers from the United States to
international subsidiaries were $41,846,000, $40,075,000 and
$38,457,000 in 1998, 1997 and 1996, respectively. North American
sales to unaffiliated customers include export sales of
$15,679,000, $17,459,000 and $14,753,000, respectively, for 1998,
1997 and 1996.
Note 12: OTHER INCOME
During the third quarter of fiscal 1996, the Company sold a
parcel of undeveloped land. The Company received proceeds of $3.9
million, net of selling expenses, from the sale. The proceeds
consisted of cash and the assumption by the buyer of an
industrial revenue bond associated with the property. The Company
recorded a pretax gain of $1.0 million on the sale of the
property.
Note 13: QUARTERLY RESULTS OF OPERATIONS (unaudited)
The following is a summary of the unaudited quarterly results of
operations for the years ended June 30, 1998 and 1997.
Quarter
First Second Third Fourth
(In thousands, except per share amounts)
Fiscal 1998:
Net sales $33,933 $39,420 $38,404 $38,756
Gross profit 23,166 27,067 26,270 26,620
Net income 5,809 7,776 7,518 7,547
Basic earnings per
Share $ .25 $ .34 $ .33 $ .33
Diluted earnings per
Share $ .23 $ .32 $ .31 $ .32
Fiscal 1997:
Net sales $31,508 $36,600 $36,646 $37,299
Gross profit 21,854 25,516 25,602 25,623
Net income 5,201 6,848 7,016 7,162
Basic earnings per
Share $ .21 $ .28 $ .30 $ .30
Diluted earnings per
Share $ .20 $ .27 $ .28 $ .28
38
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders, Dionex Corporation:
We have audited the accompanying consolidated balance sheets of
Dionex Corporation and its subsidiaries as of June 30, 1998 and
1997, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years
in the period ended June 30, 1998. These financial statements are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of
Dionex Corporation and its subsidiaries at June 30, 1998 and
1997, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1998 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
San Jose, California
July 20, 1998
39
<PAGE>
Supplemental Stockholder Information
Market Price of Common Stock
The Company's common stock is traded in the over-the-counter
market through the Nasdaq national market system under the symbol
DNEX. The following table sets forth, for the periods indicated,
the high and low sales prices as reported by Nasdaq.
Fiscal 1998 Fiscal 1997
Quarter high low high low
First $27 1/4 $22 5/16 $19 1/2 $15 5/8
Second 27 1/2 22 1/4 20 3/16 15 3/4
Third 30 23 7/8 23 3/4 17 3/8
Fourth 28 5/16 23 3/8 27 3/8 22 1/4
As of June 30, 1998 there were 1,577 holders of record of the
Company's common stock as shown on the records
of its transfer agent.
Dividends
The Company has paid no cash dividends on its common stock and
anticipates that for the foreseeable future it will continue to
retain its earnings for use in its business.
Transfer Agent and Registrar
Boston EquiServe
P.O. Box 644
Boston, Massachusetts 02102-0644
Annual Meeting
The Annual Meeting of Stockholders of Dionex Corporation will be
held at 501 Mercury Drive, Sunnyvale, California on Thursday,
October 22, 1998 at 9 a.m.
Form 10-K
The Company's annual report to the Securities and Exchange
Commission on Form 10-K may be obtained without charge by writing
to:
Investor Relations
Dionex Corporation
1228 Titan Way
P.O. Box 3603
Sunnyvale, California 94088-3603
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
Nos. 33-12399, 33-40796, 33-78584, 33-65081 and 333-39319 of Dionex
Corporation on Form S-8 of our reports dated July 20, 1998, appearing
in and incorporated by reference in this Annual Report on Form 10-K
of Dionex Corporation for the year ended June 30, 1998.
DELOITTE & TOUCHE
San Jose, California
September 23, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME OF DIONEX
CORPORATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1997 JUN-30-1996
<PERIOD-END> JUN-30-1998 JUN-30-1997 JUN-30-1996
<CASH> 13184 24624 16986
<SECURITIES> 5850 8252 16551
<RECEIVABLES> 31956 29759 28566
<ALLOWANCES> 606 533 488
<INVENTORY> 9921 9479 8258
<CURRENT-ASSETS> 69359 79793 77799
<PP&E> 46760 45508 44479
<DEPRECIATION> 16690 15283 14070
<TOTAL-ASSETS> 107259 118163 113186
<CURRENT-LIABILITIES> 33614 31578 29911
<BONDS> 0 0 0
0 0 0
0 0 0
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<OTHER-SE> 31763 47840 49521
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BYLAWS
OF
DIONEX CORPORATION
(as amended through March 10, 1998)
BYLAWS
OF
DIONEX CORPORATION
(A Delaware Corporation)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
(Del. Code Ann., tit. 8, 131)Section 2. Other Offices. The corporation
shall also have and maintain an office or principal place of business in
Sunnyvale, California, at such place as may be fixed by the Board of
Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require.
(Del. Code Ann., tit. 8, 122(8))
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
(Del. Code Ann., tit. 8, 122(3))
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the
State of Delaware, as may be designated from time to time by the Board of
Directors, or, if not so designated, then at the office of the corporation
required to be maintained pursuant to Section 2 hereof. (Del. Code Ann.,
tit. 8, 211(a))
Section 5. Annual Meeting. The annual meeting of the stockholders of the
corporation for the purpose of electing Directors and for such other
business as may lawfully come before it shall be held on such date and at
such time as may be designated from time to time by the Board of Directors.
(Del. Code Ann., tit. 8, 211(b))
Section 6. Special Meetings. Special meetings of the stockholders of the
corporation may be called, for any purpose or purposes, by the President,
the Chairman of the Board, or the Board of Directors at any time. Upon
written request of any stockholder or stockholders holding in the aggregate
ten percent (10%) of the voting power of all stockholders delivered
in person or sent by registered mail to the President or Secretary, the
Secretary shall call a special meeting of stockholders to be held at the
office of the corporation required to be maintained pursuant to Section 2
hereof at such time as the Secretary may fix, such meeting to be held not
less than ten (10) nor more than sixty (60) days after the receipt of such
request, and if the Secretary shall neglect or refuse to call such meeting,
within seven (7) days after the receipt of such request, the stockholder
making such request may do so. (Del. Code Ann., tit. 8, 211(d))
Section 7. Notice of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before
the date of the meeting to each stockholder entitled to vote at such meeting,
such notice to specify the place, date and hour and purpose or purposes of
the meeting. Notice of the time, place and purpose of any meeting of
stockholders may be waived in writing, signed by the person entitled to
notice thereof, either before or after such meeting, and will be waived by
any stockholder by his attendance thereat in person or by proxy, except
when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Any
stockholder so waiving notice of such meeting shall be bound by the
proceedings of any such meeting in all respects as if due notice thereof
had been given. (Del. Code Ann., tit. 8, 222, 229)
Section 8. Quorum. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these
Bylaws, the presence, in person or by proxy duly authorized, of the holders
of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. Any shares, the
voting of which at said meeting has been enjoined, or which for any reason
cannot be lawfully voted at such meeting, shall not be counted to determine
a quorum at such meeting. In the absence of a quorum any meeting of
stockholders may be adjourned, from time to time, by vote of the holders
of a majority of the shares represented thereat, but no other business
shall be transacted at such meeting. The stockholders present at a duly
called or convened meeting, at which a quorum is present, may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by
law, the Certificate of Incorporation or these Bylaws, all action taken by
the holders of a majority of the voting power represented at any meeting at
which a quorum is present shall be valid and binding upon the corporation.
(Del. Code Ann., tit. 8, 216)
Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
by the vote of a majority of the shares, the holders of which are present
either in person or by proxy. When a meeting is adjourned to another time or
place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
(Del. Code Ann., tit. 8, 222(c))
Section 10. Voting Rights. For the purpose of determining those stockholders
entitled to vote at any meeting of the stockholders, except as otherwise
provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders.
Every person entitled to vote or execute consents shall have the right to do
so either in person or by an agent or agents authorized by a written proxy
executed by such person or his duly authorized agent, which proxy shall be
filed with the Secretary at or before the meeting at which it is to be used.
An agent so appointed need not be a stockholder. No proxy shall be voted
on after eleven (11) months from its date of creation unless the proxy
provides for a longer period. All elections of Directors shall be by
written ballot, unless otherwise provided in the Certificate of Incorporation.
(Del. Code Ann., tit. 8, 211(e), 212(b))
Section 11. Joint Owners of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in
common, tenants by the entirety, or otherwise, or if two (2) or more
persons have the same fiduciary relationship respecting the same shares,
unless the Secretary is given written notice to the contrary and is furnished
with a copy of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to voting shall
have the following effect: (a) if only one (1) votes, his act binds all;
(b) if more than one (1) votes, the act of the majority so voting binds all;
(c) if more than one (1) votes, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionally, or may apply to the Delaware Court of Chancery for relief
as provided in the General Corporation Law of Delaware, Section 217(b). If
the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of this
subsection (c) shall be a majority or even-split in interest.
(Del. Code Ann., tit. 8, 217(b))
Section 12. List of Stockholders. The Secretary shall prepare and make, 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, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. 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 specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
(Del. Code Ann., tit. 8, 219(a))
Section 13. No Action without Meeting. Any action required or permitted to
be taken by the stockholders of the corporation must be effected at a duly
called annual meeting or special meeting of such holders and may not be
effected by any consent in writing by such holders.
(Del. Code Ann., tit. 8, 228(a), (c))
Section 14. Organization. At every meeting of stockholders, the Chairman of
the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or, if the President is absent, the most senior
Vice President present, or in the absence of any such officer, a chairman
of the meeting chosen by a majority in interest of the stockholders
entitled to vote, present in person or by proxy, shall act as chairman.
Section 15. Notifications of Nominations and Proposed Business. Subject
to the rights of holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation,(a) nominations
for the election of directors, and(b) business proposed to be brought before
any stockholder meetingmay be made by the Board of Directors or proxy
committee appointed by the Board of Directors or by any stockholder entitled
to vote in the election of directors generally. However, any such stockholder
may nominate one or more persons for election as directors at a meeting or
propose business to be brought before a meeting, or both, only if such
stockholder has given timely notice in proper written form of his intent
to make such nomination or nominations or to propose such business. To be
timely, a stockholder's notice must be delivered to or mailed and received
by the Secretary of the corporation not later than sixty (60) days prior
to such meeting. To be in proper written form, a stockholder's notice to
the Secretary shall set forth:(i) the name and address of the stockholder
who intends to make the nominations or propose the business and, as the
case may be, of the person or persons to be nominated or of the business to
be proposed;(ii) a representation that the stockholder is a holder of record
of stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice;(iii) if applicable, a
description of all arrangements or understandings between 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;(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to be
proposed by the Board of Directors; and(v) if applicable, the consent of
each nominee to serve as director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the
foregoing procedure.
ARTICLE IV
DIRECTORS
Section 16. Number and Term of Office. The number of Directors constituting
the whole of the Board of Directors shall be five (5). Except as provided
in Section 18, the Directors shall be elected by the stockholders at their
annual meeting in each year and shall hold office until the next annual meeting
and until their successors shall be duly elected and qualified, or until
their death, resignation or removal. Directors need not be stockholders
unless so required by the Certificate of Incorporation. If for any cause,
the Directors shall not have been elected at an annual meeting, they may be
elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these Bylaws.
(Del. Code Ann., tit. 8, 141(b), 211(b), (c))
Section 17. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation (Del. Code Ann., tit. 8, 141(a))
Section 18. Vacancies. Unless otherwise provided in the Certificate of
Incorporation, vacancies and newly created directorships resulting from
any increase in the authorized number of Directors may be filled by a
majority of the Directors then in office, although less than a quorum, or
by a sole remaining Director, and each Director so elected shall hold office
for the unexpired portion of the term of the Director whose place shall be
vacant and until his successor shall have been duly elected and qualified.
A vacancy in the Board of Directors shall be deemed to exist under this
Section 18 in the case of the death, removal or resignation of any Director,
or if the stockholders fail at any meeting of stockholders at which Directors
are to be elected (including any meeting referred to in Section 20 below) to
elect the number of Directors then constituting the whole Board of Directors.
(Del. Code Ann., tit. 8, 223(a), (b))
Section 19. Resignation. Any Director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the
Secretary or at the pleasure of the Board of Directors. If no such
specification is made, it shall be deemed effective at the pleasure of the
Board of Directors. When one or more Directors shall resign from the Board
of Directors, effective at a future date, a majority of the Directors then
in office, including those who have so resigned, shall have power to fill
such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each Director so
chosen shall hold office for the unexpired portion of the term of the
Director whose place shall be vacated and until his successor shall have
been duly elected and qualified. (Del. Code Ann., tit. 8, 141(b), 223(d))
Section 20. Removal. At a special meeting of stockholders called for the
purpose in the manner hereinabove provided, the Board of Directors, or any
individual Director, may be removed from office, with or without cause,
and a new Director or Directors elected by a vote of stockholders holding a
majority of the outstanding shares entitled to vote at an election of
Directors; provided, however, that if less than the entire Board of Directors
is to be removed, no Director may be removed without cause if the votes cast
against his removal would be sufficient to elect him if then voted at an
election of the entire Board of Directors. (Del. Code Ann., tit. 8, 141(k))
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors shall be
held immediately after the annual meeting of stockholders and at the place
where such meeting is held. No notice of an annual meeting of the Board of
Directors shall be necessary and such meeting shall be held for the purpose
of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Except as hereinafter otherwise provided, regular
meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the
State of Delaware which has been designated by resolution of the Board of
Directors or the written consent of all Directors.
(Del. Code Ann., tit. 8, 141(g))
(c) Special Meetings. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at
any time and place within or without the State of Delaware whenever called
by the President or a majority of the Directors.
(Del. Code Ann., tit. 8, 141(g))
(d) Telephone Meetings. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation
in a meeting by such means shall constitute presence in person at such
meeting. (Del. Code Ann., tit. 8, 141(i))
(e) Notice of Meetings. Notice of the date, time and place of all meetings
of the Board of Directors, other than regular meetings held pursuant to
Section 21(a) or (b) above shall be delivered personally, orally or in
writing, or by telephone or telegraph to each director, at least forty-eight
(48) hours before the meeting, or sent in writing to each director by
first-class mail, charges prepaid, at least four (4) days before the meeting.
Such notice may be given by the Secretary of the corporation or by the
person or persons who called a meeting. Such notice need not specify the
purpose of the meeting. Notice of any Notice of any meeting may be waived
in writing at any time before or after the meeting and will be waived by
any Director by attendance thereat, except when the Director attends the
meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not
lawfully called or convened. (Del. Code Ann., tit. 8, 229)
(f) Waiver of Notice. The transaction of all business at any meeting of the
Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held
after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the Directors not present shall sign a written
waiver of notice, or a consent to holding such meeting, or an approval of the
minutes thereof. All such waivers, consents or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
(Del. Code Ann., tit. 8, 229)
Section 22. Quorum and Voting.
(a) Quorum. Unless the Certificate of Incorporation requires a greater number,
a quorum of the Board of Directors shall consist of a majority of the exact
number of Directors fixed from time to time in accordance with Section 16 of
these Bylaws, but not less than one (1); provided, however, at any meeting
whether a quorum be present or otherwise, a majority of the Directors
present may adjourn from time to time until the time fixed for the next
regular meeting of the Board of Directors, without notice other than by
announcement at the meeting. (Del. Code Ann., tit. 8, 141(b))
(b) Majority Vote. At each meeting of the Board of Directors at which a
quorum is present all questions and business shall be determined by a vote
of a majority of the Directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
(Del. Code Ann., tit. 8, 141(b))
Section 23. Action without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and such writing or writings are filed with the minutes of proceedings
of the Board of Directors or committee. (Del. Code Ann., tit. 8, 141(f))
Section 24. Fees and Compensation. Directors shall not receive any stated
salary for their services as Directors, but by resolution of the Board of
Directors a fixed fee may be allowed for attendance at each meeting and at
each meeting of any committee of the Board of Directors. Directors shall
be reimbursed in full for all expenses incurred in serving the corporation,
unless otherwise determined by the Board of Directors. Nothing herein
contained shall be construed to preclude any Director from serving the
corporation in any other capacity as an officer, agent, employee, or
otherwise and receiving compensation therefor.
(Del. Code Ann., tit. 8, 141(h))
Section 25. Committees.
(a) Executive Committee. The Board of Directors may by resolution passed by
a majority of the whole Board of Directors, appoint an Executive Committee
to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and specifically granted
by the Board of Directors, shall have and may exercise when the Board of
Directors is not in session all powers of the Board of Directors in the
management of the business and affairs of the corporation, including,
without limitation, the power and authority to declare a dividend or to
authorize the issuance of stock, except such committee shall not have the
power or authority to amend the Certificate of Incorporation, to adopt an
agreement of merger or consolidation, to recommend to the stockholders the
sale, lease or exchange of all or substantially all of the corporation's
property and assets, to recommend to the stockholders of the corporation a
dissolution of the corporation or a revocation of a dissolution or to amend
these Bylaws. (Del. Code Ann., tit. 8, 141(c))
(b) Other Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, from time to time appoint such
other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members
of the Board of Directors, and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall such committee have the powers denied to
the Executive Committee in these Bylaws. (Del. Code Ann., tit. 8, 141(c))
(c) Term. The members of all committees of the Board of Directors shall
serve a term coexistent with that of the Board of Directors which shall
have appointed such committee. The Board of Directors, subject to the
provisions of subsections (a) or (b) of this Section 25, may at any time
increase or decrease the number of members of a committee or terminate the
existence of a committee. The membership of a committee member shall
terminate on the date of his death or voluntary resignation. The Board of
Directors may at any time for any reason remove any individual committee
member and the Board of Directors may fill any committee vacancy created by
death, resignation, removal or increase in the number of members of the
committee. The Board of Directors may designate one or more Directors as
alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee, and, in addition, in the
absence or disqualification of any member of a committee, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any
such absent or disqualified member. (Del. Code Ann., tit. 8, 141(c))
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings
of any such committee may be held at the principal office of the corporation
required to be maintained pursuant to Section 2 hereof, or at any place
which has been designated from time to time by resolution of such committee
or by written consent of all members thereof, and may be called by any
Director who is a member of such committee, upon written notice to the members
of such committee of the time and place of such special meeting given in the
manner provided for the giving of written notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors.
Notice of any special meeting of any committee may be waived in writing at
any time before or after the meeting and will be waived by any Director by
attendance thereat, except when the Director attends such special meeting
for the express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not lawfully called
or convened. A majority of the authorized number of members of any such
committee shall constitute a quorum for the transaction of business, and
the act of a majority of those present at any meeting at which a quorum is
present shall be the act of such committee.
(Del. Code Ann., tit. 8, 141(c), 229)
Section 26. Organization. At every meeting of the Directors, the Chairman of
the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the Directors present, shall preside over the
meeting. The Secretary, or in his absence, an Assistant Secretary directed
to do so by the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the corporation shall be
the Chairman of the Board of Directors, the President, one or more Vice
Presidents, the Secretary, and the Chief Financial Officer, all of whom
shall be elected at the annual meeting of the Board of Directors. The order
of the seniority of the Vice Presidents shall be in the order of their
nomination, unless otherwise determined by the Board of Directors. The Board
of Directors may also appoint such other officers and agents with such
powers and duties as it shall deem necessary. The Board of Directors may
assign such additional titles to one or more of the officers as it shall
deem appropriate. Any one person may hold any number of offices of the
corporation at any one time unless specifically prohibited therefrom by law.
The salaries and other compensation of the officers of the corporation shall
be fixed by or in the manner designated by the Board of Directors.
(Del. Code Ann., tit. 8, 122(5), 142(a), (b))
Section 28. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of the Board of
Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors.
If the office of any officer becomes vacant for any reason, the vacancy may
be filled by the Board of Directors. (Del. Code Ann., tit. 8, 141(b), (e))
(b) Duties of Chairman of the Board of Directors. The Chairman of the Board
of Directors, when present, shall preside at all meetings of the shareholders
and the Board of Directors. The Chairman of the Board of Directors shall
perform other duties commonly incident to his office and shall also perform
such other duties and have such other powers as the Board of Directors shall
designate from time to time. (Del. Code Ann., tit. 8, 142(a))
(c) Duties of President. The President shall preside at all meetings of the
shareholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. The
President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board
of Directors shall designate from time to time.
(Del. Code Ann., tit. 8, 142(a))
(d) Duties of Vice Presidents. The Vice Presidents, in the order of their
seniority, may assume and perform the duties of the President in the absence
or disability of the President or whenever the office of President is vacant.
The Vice Presidents shall perform other duties commonly incident to their
office and shall also perform such other duties and have such other powers
as the Board of Directors or the President shall designate from time to time.
(Del. Code Ann., tit. 8, 142(a))
(e) Duties of Secretary. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors, and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary
shall give notice in conformity with these Bylaws of all meetings of the
stockholders, and of all meetings of the Board of Directors and any committee
thereof requiring notice. The Secretary shall perform all other duties given
him in these Bylaws and other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board
of Directors shall designate from time to time. The President may direct any
Assistant Secretary to assume and perform the duties of the Secretary in the
absence or disability of the Secretary, and each Assistant Secretary shall
perform other duties commonly incident to his office and shall also perform
such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(Del. Code Ann., tit. 8, 142(a))
(f) Duties of Chief Financial Officer. The Chief Financial Officer shall
keep or cause to be kept the books of account of the corporation in a
thorough and proper manner, and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board
of Directors or the President. The Chief Financial Officer, subject to the
order of the Board of Directors, shall have the custody of all funds and
securities of the corporation. The Chief Financial Officer shall perform
other duties commonly incident to his office and shall also perform such
other duties and have such other powers as the Board of Directors or the
President shall designate from time to time. The President may direct any
Assistant Chief Financial Officer to assume and perform the duties of the
Chief Financial Officer in the absence or disability of the Chief Financial
Officer, and each Assistant Chief Financial Officer shall perform other
duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time. (Del. Code Ann., tit. 8, 142(a))
Section 29. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the
person or persons to whom such notice is given, unless a later time is
specified therein, in which event the resignation shall become effective at
such later time. Unless otherwise specified in such notice, the acceptance
of any such resignation shall not be necessary to make it effective.
(Del. Code Ann., tit. 8, 142(b))
Section 30. Removal. Any officer may be removed from office at any time,
either with or without cause, by the vote or written consent of a majority
of the Directors in office at the time, or by any committee or superior
officers upon whom such power of removal may have been conferred by the
Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
Section 31. Execution of Corporate Instruments. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the
corporation any corporate instrument or document, or to sign on behalf of
the corporation the corporate name without limitation, or to enter into
contracts on behalf of the corporation, except where otherwise provided by
law or these Bylaws, and such execution or signature shall be binding upon
the corporation. (Del. Code Ann., tit. 8, 103(a), 142(a), 158)
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and
other evidences of indebtedness of the corporation, and other corporate
instruments or documents requiring the corporate seal, and certificates of
shares of stock owned by the corporation, shall be executed, signed or
endorsed by the Chairman of the Board of Directors, or the President or any
Vice President, and by the Secretary or Chief Financial Officer or any
Assistant Secretary or Assistant Chief Financial Officer. All other
instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
(Del. Code Ann., tit. 8, 103(a), 142(a), 158)
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall
be signed by such person or persons as the Board of Directors shall authorize
so to do. (Del. Code Ann., tit. 8, 103(a), 142(a), 158)
Section 32. Voting of Securities Owned by the Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such
authorization, by the Chairman of the Board of Directors, the President, or
any Vice President. (Del. Code Ann., tit. 8, 123)
ARTICLE VII
SHARES OF STOCK
Section 33. Form and Execution of Certificates. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock
in the corporation shall be entitled to have a certificate signed by or in
the name of the corporation by the Chairman of the Board of Directors, or
the President or any Vice President and by the Chief Financial Officer or
Assistant Chief Financial Officer or the Secretary or Assistant Secretary,
certifying the number of shares owned by him in the corporation. Where such
certificate is countersigned by a transfer agent other than the corporation
or its employee, or by a registrar other than the corporation or its employee,
any other signature on the certificate may be a facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the
face or back thereof, in full or in summary, all of the designations,
preferences, limitations, restrictions on transfer and relative rights of
the shares authorized to be issued. (Del. Code Ann., tit. 8, 158)
Section 34. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by
the corporation alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate
of stock to be lost, stolen, or destroyed. The corporation may require, as a
condition precedent to the issuance of a new certificate or certificates, the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall
require or to give the corporation a surety bond in such form and amount as
it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost,
stolen, or destroyed. (Del. Code Ann., tit. 8, 167)
Section 35. Transfers. Transfers of record of shares of stock of the
corporation shall be made only upon its books by the holders thereof, in
person or by attorney duly authorized, and upon the surrender of a properly
endorsed certificate or certificates for a like number of shares.
(Del. Code Ann., tit. 6, 8-401(1))
Section 36. Fixing Record Dates. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If no record date is fixed:
(a) the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held; (b) the record date for determining stockholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the
day on which the first written consent is expressed; and (c) the record date
for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.
(Del. Code Ann., tit. 8, 213)
Section 37. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall
not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person whether or not it
shall have express or other notice thereof, except as otherwise provided
by the laws of Delaware. (Del. Code Ann., tit. 8, 213(a), 219)
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 38. Execution of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates, may
be signed by the Chairman of the Board of Directors, the President or any
Vice President, or such other person as may be authorized by the Board of
Directors, and the corporate seal impressed thereon or a facsimile of such
seal imprinted thereon and attested by the signature of the Secretary or an
Assistant Secretary, or the Chief Financial Officer or an Assistant Chief
Financial Officer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature of a
trustee under an indenture pursuant to which such bond, debenture or other
corporate security shall be issued, the signatures of the persons signing
and attesting the corporate seal on such bond, debenture or other corporate
security may be the imprinted facsimile of the signatures of such persons.
Interest coupons appertaining to any such bond, debenture or other corporate
security, authenticated by a trustee as aforesaid, shall be signed by
the Chief Financial Officer or an Assistant Chief Financial Officer of the
corporation or such other person as may be authorized by the Board of
Directors, or bear imprinted thereon the facsimile signature of such person.
In case any officer who shall have signed or attested any bond, debenture or
other corporate security, or whose facsimile signature shall appear thereon
or on any such interest coupon, shall have ceased to be such officer before
the bond, debenture or other corporate security so signed or attested shall
have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
Section 39. Declaration of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to
law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of
the Certificate of Incorporation. (Del. Code Ann., tit. 8, 170, 173)
Section 40. Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves 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
think conducive to the interests of the corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it
was created. (Del. Code Ann., tit. 8, 171)
ARTICLE X
FISCAL YEAR
Section 41. Fiscal Year. Unless otherwise fixed by resolution of the Board
of Directors, the fiscal year of the corporation shall end on the 30th day
of June in each calendar year.
ARTICLE XI
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
Section 42. Directors. The corporation shall indemnify its Directors to the
fullest extent permitted by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of alleged
occurrences of actions or omissions preceding any such amendment, only to
the extent that such amendment permits the corporation to provide broader
indemnification rights than said Law permitted the corporation to provide
prior to such amendment).
Section 43. Officers, Employees and Other Agents. The corporation shall have
the power to indemnify its officers, employees and other agents as set forth
in the Delaware General Corporation Law.
Section 44. Good Faith.
(1) For purposes of any determination under this By-Law, a Director shall be
deemed to have acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, to have had no reasonable cause
to believe that his conduct was unlawful, if his action is based on the
records or books of account of the corporation or another enterprise, or on
information supplied to him by the officers of the corporation or another
enterprise in the course of their duties, or on the advice of legal counsel
for the corporation or another enterprise or on information or records given
or reports made to the corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the corporation or another enterprise.
(2) The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and
in a manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal proceeding,
that he had reasonable cause to believe that his conduct was unlawful.
(3) The provisions of this Section 44 shall not be deemed to be exclusive or
to limit in any way the circumstances in which a person may be deemed to hav
met the applicable standard of conduct set forth by the Delaware General
Corporation Law.Section 45. Expenses. The corporation shall advance, prior
to the final disposition of any proceeding, promptly following request
therefor, all expenses incurred by any director or executive officer in
connection with such proceeding upon receipt of an undertaking by or on
behalf of such person to repay said amounts if it should be determined
ultimately that such person is not entitled to be indemnified under this
Bylaw or otherwise.Notwithstanding the foregoing, unless otherwise determined
pursuant to Section 46 of these Bylaws, no advance shall be made by the
corporation if a determination is reasonably and promptly made (1) by the
board of directors by a majority vote of a quorum consisting of directors
who were not parties to the proceeding, or (2) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion that, based upon
the facts known to the decision making party at the time such determination
is made, such person acted in bad faith or in a manner that such person did
not believe to be in or not opposed to the best interests of the corporation,
or, with respect to any criminal proceeding, such person believed or had
reasonable cause to believe that his conduct was unlawful.
Section 46. Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances under this Bylaw shall
be deemed to be contractual rights and be effective to the same extent and
as if provided for in a contract between the corporation and the Director
who serves in such capacity at any time while this Bylaw and other relevant
provisions of the Delaware General Corporation Law and other applicable law,
if any, are in effect. Any right to indemnification or advances granted by
this Bylaw to a Director shall be enforceable by or on behalf of the person
holding such right in any court of competent jurisdiction if (i) the claim
for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request
therefor. The claimant in such enforcement action, if successful in whole
or in part, shall be entitled to be paid also the expense of prosecuting his
claim. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any
proceeding in advance of its final disposition when the required undertaking
has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the corporation.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant
is proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct.
Section 47. Non-Exclusivity of Rights. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as
to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all
of its Directors, officers, employees or agents respecting indemnification
and advances, to the fullest extent permitted by the Delaware General
Corporation Law.
Section 48. Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a Director, officer,
employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 49. Insurance. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase insurance on behalf of any person required or
permitted to be indemnified pursuant to this Bylaw.
Section 50. Amendments. Any repeal or modification of this Bylaw shall only
be prospective and shall not affect the rights under this Bylaw in effect at
the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
Section 51. Savings Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each agent to the full extent
permitted by any applicable portion of this Bylaw that shall not have been
invalidated, or by any other applicable law.
Section 52. Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall include,
without limitation, the investigation, preparation, prosecution, defense,
settlement and appeal of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall include, without
limitation, court costs, attorneys' fees, witness fees, fines, amounts paid
in settlement or judgment and any other costs and expenses of any nature or
kind incurred in connection with any proceeding.
(3) The term "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or
was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position
under the provisions of this By-Law with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(4) References to a "director," "officer," "employee," or "agent" of the
corporation shall include, without limitation, situations where such person
is serving at the request of the corporation as a director, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests
of the corporation" as referred to in this By-Law.
ARTICLE XII
NOTICES
Section 53. Notices.
(a) Notice to Stockholders. Whenever, under any provisions of these Bylaws,
notice is required to be given to any stockholder, it shall be given in
writing, personally or timely and duly deposited in the United States mail,
postage prepaid, and addressed to his last known post office address as
shown by the stock record of the corporation or its transfer agent.
(Del. Code Ann., tit. 8, 222)
(b) Notice to Directors. Any notice required to be given to any Director may
be given by the method stated in subsection (e) of Section 21 of these
Bylaws except that such notice other than one which is delivered personally
shall be sent to such address as such Director shall have filed in writing
with the Secretary, or, in the absence of such filing, to the last known post
office address of such Director.
(c) Address Unknown. If no address of a stockholder or Director be known,
notice may be sent to the office of the corporation required to be maintained
pursuant to Section 2 hereof.
(d) Affidavit of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given,
and the time and method of giving the same, shall be conclusive evidence of
the statements therein contained. (Del. Code Ann., tit. 8, 222)
(e) Time Notices Deemed Given. All notices given by mail, as above provided,
shall be deemed to have been given as at the time of mailing and all notices
given by telegram shall be deemed to have been given as at the sending
time recorded by the telegraph company transmitting the notices.
(f) Methods of Notice. It shall not be necessary that the same method of
giving notice be employed in respect of all Directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(g) Failure to Receive Notice. The period or limitation of time within which
any stockholder may exercise any option or right, or enjoy any privilege or
benefit, or be required to act, or within which any Director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such Director to receive such notice.
(h) Notice to Person with Whom Communication Is Unlawful. Whenever notice is
required to be given, under any provision of law or of the Certificate of
Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such
person. Any action or meeting which shall be taken or held without notice
to any such person with whom communication is unlawful shall have the same
force and effect as if such notice had been duly given. In the event that
the action taken by the corporation is such as to require the filing of a
certificate under any provision of the Delaware General Corporation Law, the
certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such
persons with whom communication is unlawful. (Del. Code Ann., tit. 8, 230)
ARTICLE XIII
AMENDMENTS
Section 54. Amendments. These Bylaws may be repealed, altered or amended or
new Bylaws adopted by the stockholders. The Board of Directors shall also
have the authority, if such authority is conferred upon the Board of Directors
by the Certificate of Incorporation, to repeal, alter or amend these Bylaws or
adopt new Bylaws (including, without limitation, the amendment of any Bylaw
setting forth the number of Directors who shall constitute the whole Board
of Directors) subject to the power of the stockholders to change or repeal
such Bylaws and provided that the Board of Directors shall not make or
alter any Bylaws fixing the qualifications, classifications, term of office
or compensation of Directors. (Del. Code Ann., tit. 8, 109(a), 122(6))
ARTICLE I OFFICES 1
Section 1. Registered Office 1
Section 2. Other Offices 1
ARTICLE II CORPORATE SEAL 1
Section 3. Corporate Seal 1
ARTICLE III STOCKHOLDERS' MEETINGS 1
Section 4. Place of Meetings 1
Section 5. Annual Meeting 1
Section 6. Special Meetings 1
Section 7. Notice of Meetings 2
Section 8. Quorum 2
Section 9. Adjournment and Notice of Adjourned Meetings 2
Section 10. Voting Rights 3
Section 11. Joint Owners of Stock 3
Section 12. List of Stockholders 3
Section 13. No Action without Meeting 3
Section 14. Organization 3
Section 15. Notifications of Nominations and Proposed Business 4
ARTICLE IV DIRECTORS 5
Section 16. Number and Term of Office 5
Section 17. Powers 5
Section 18. Vacancies 5
Section 19. Resignation 5
Section 20. Removal 5
Section 21. Meetings 6
(a) Annual Meetings 6
(b) Regular Meetings 6
(c) Special Meetings 6
(d) Telephone Meetings 6
(e) Notice of Meetings 6
(f) Waiver of Notice 6
Section 22. Quorum and Voting 7
(a) Quorum 7
(b) Majority Vote 7
Section 23. Action without Meeting 7
Section 24. Fees and Compensation 7
Section 25. Committees 7
(a) Executive Committee 7
(b) Other Committees 8
(c) Term 8
(d) Meetings 8
Section 26. Organization 8
ARTICLE V OFFICERS 9
Section 27. Officers Designated 9
Section 28. Tenure and Duties of Officers 9
(a) General 9
(b) Duties of Chairman of the Board of Directors 9
(c) Duties of President 9
(d) Duties of Vice Presidents 9
(e) Duties of Secretary 10
(f) Duties of Chief Financial Officer 10
Section 29. Resignations 10
Section 30. Removal 10
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION 11
Section 31. Execution of Corporate Instruments 11
Section 32. Voting of Securities Owned by the Corporation 11
ARTICLE VII SHARES OF STOCK 11
Section 33. Form and Execution of Certificates 11
Section 34. Lost Certificates 12
Section 35. Transfers 12
Section 36. Fixing Record Dates 12
Section 37. Registered Stockholders 12
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION 13
Section 38. Execution of Other Securities 13
ARTICLE IX DIVIDENDS 13
Section 39. Declaration of Dividends 13
Section 40. Dividend Reserve 13
ARTICLE X FISCAL YEAR 14
Section 41. Fiscal Year 14
ARTICLE XI INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS 14
Section 42. Directors 14
Section 43. Officers, Employees and Other Agents 14
Section 44. Good Faith 14
Section 45. Expenses 15
Section 46. Enforcement 15
Section 47. Non-Exclusivity of Rights 15
Section 48. Survival of Rights 16
Section 49. Insurance 16
Section 50. Amendments 16
Section 51. Savings Clause 16
Section 52. Certain Definitions 16
ARTICLE XII NOTICES 17
Section 53. Notices 17
(a) Notice to Stockholders 17
(b) Notice to Directors 17
(c) Address Unknown 17
(d) Affidavit of Mailing 17
(e) Time Notices Deemed Given 17
(f) Methods of Notice 18
(g) Failure to Receive Notice 18
(h) Notice to Person with Whom Communication Is Unlawful 18
ARTICLE XIII AMENDMENTS 18
Section 54. Amendments 18
SECOND AMENDMENT TO CREDIT AGREEMENT (MULTICURRENCY)
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (MULTICURRENCY)
(the "Amendment"), dated as of January 30, 1998, is entered into by and
between DIONEX CORPORATION (the "Borrower") and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION (the "Bank").
RECITALS
A. The Borrower and the Bank are parties to a Credit Agreement
(Multicurrency), dated as of February 29, 1996, as amended by a First
Amendment to Credit Agreement (Multicurrency) dated as of December 15, 1997
(the "Credit Agreement"), pursuant to which the Bank has extended certain
credit facilities to the Borrower and certain of its Subsidiaries.
B. The Borrower has requested that the Bank agree to certain amendments of
the Credit Agreement.
C. The Bank is willing to amend the Credit Agreement, subject to the terms
and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement.
(a) Section 1.01 of the Credit Agreement shall be amended at the defined
term "Availability Period" by amending and restating such defined term as
follows:
"'Availability Period': the period commencing on the date of this Agreement
and ending on the date that is the earlier to occur of (a) January 31, 2000,
and (b) the date on which the Bank's commitment to extend credit hereunder
terminates."
(b) Section 1.01 of the Credit Agreement shall be amended at the defined
term "Final Maturity Date" by amending and restating such defined term as
follows:
"'Final Maturity Date': (a) in respect of any Advances, January 31, 2000;
(b)in respect of any commercial letters of credit, July 31, 2000; and
(c) in respect of any standby letters of credit, January 31, 2001."
(c) Section 1.01 of the Credit Agreement shall be amended at the defined
term "Offshore Rate Interest Period" by amending and restating such defined
term as follows:
"'Offshore Rate Interest Period': for each Offshore Rate Advance the period
commencing on the date the Offshore Rate Advance begins to bear interest at a
rate based on the Offshore Rate and ending one, two, three, six months, or such
other period of less than one month which meets the requirements of subsection
2.02(b)(i)(B) thereafter, as requested by the Borrower and in the case of
periods less than one month approved by the Bank; provided, however, that
the last day of each Offshore Rate Interest Period shall be determined in
accordance with the practices of the applicable offshore interbank markets
as from time to time in effect, and provided further that no such interest
period shall extend beyond the Final Maturity Date."
(d) Section 1.01 of the Credit Agreement shall be amended by adding the
following definition of "Unfriendly Acquisition" immediately after the
definition of "Subsidiary":
"'Unfriendly Acquisition': the acquisition of a corporation or similar
business entity if the acquisition has not been approved by the board of
directors of such entity."
(e) Clause (i) of subsection 2.02(b) shall be amended and restated in its
entirety to read as follows:
"(i) Each Offshore Rate Advance shall be (A) for an amount not less than
$500,000 if the related Offshore Rate Interest Period is one month or longer,
and, (B) if the related Offshore Rate Interest Period is less than one month,
shall be in an amount not less than $500,000 and which, when multiplied by the
number of days in the related Offshore Rate Interest Period, is not less than
$15,000,000."
(f) Section 2.07 of the Credit Agreement shall be amended by deleting the
amount "0.25%" and inserting the amount ".20%" in place thereof.
(g) Section 7.02 of the Credit Agreement shall be amended and restated in
its entirety to read as follows:
"7.02 Acquisitions. The Borrower and its Subsidiaries shall not acquire or
purchase control of, or the assets or business of, or merge with, any other
person, firm, or corporation not affiliated with the Borrower, unless (i) such
person, firm or corporation engages in the same general line of business as the
Borrower, (ii) the Borrower or its Subsidiary is the entity which survives the
transaction, and (iii) the transaction would not result in the breach of any
warranty or covenant hereunder; provided that, the acquisition, merger or
purchasing of control shall not be an Unfriendly Acquisition."
(h) Section 7.08 of the Credit Agreement shall be amended and restated in
its entirety as follows:
"7.08 Tangible Net Worth. The Borrower shall not permit as of the last day
of any fiscal quarter on a consolidated basis its Tangible Net Worth to be
less than $70,000,000 plus (i) 75% of net income after income taxes
(without subtracting losses) earned in each quarterly accounting period
commencing after September 30, 1997, plus (ii) the net proceeds from any
equity securities issued after September 30, 1997, less (iii) 100% of
capital stock repurchases after September 30, 1997, where:
'Tangible Net Worth' means the gross book value of the assets of the
Borrower and its Subsidiaries on a consolidated basis (exclusive of
goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred
charges, and other like intangibles) less (a) reserves applicable thereto,
and (b) all liabilities (including accrued and deferred income taxes)."
(i) Section 7.10 of the Credit Agreement shall be amended and restated in
its entirety as follows:
"7.10 Quick Ratio. The Borrower shall not permit as of the last day of any
fiscal quarter on a consolidated basis the sum of cash, short-term cash
investments, marketable securities not classified as long-term investments
and accounts receivable to be less than 1.25 times current liabilities,
including the dollar or Equivalent Amount of all outstanding Advances and
of the L/C Outstanding Amount."
3. Representations and Warranties. The Borrower hereby represents and
warrants to the Bank as follows:
(a) No Event of Default or event which, with the giving of notice or
passage of time or both, would be an Event of Default has occurred and is
continuing.
(b) The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any person (including any governmental
authority) in order to be effective and enforceable. The Credit Agreement
as amended by this Amendment constitutes the legal, valid and binding
obligations of the Borrower, enforceable against it in accordance with its
respective terms, without defense, counterclaim or offset.
(c) All representations and warranties of the Borrower contained in the
Credit Agreement are true and correct.
(d) The Borrower is entering into this Amendment on the basis of its own
investigation and for its own reasons, without reliance upon the Bank or any
other person.
4. Effective Date. This Second Amendment will become effective as of the date
first above written (the "Effective Date"), provided that each of the following
conditions precedent has been satisfied:
(a) The Bank has received from the Borrower a duly executed original (or,
if elected by the Bank, an executed facsimile copy) of this Amendment; and
(b) The Bank has received from the Borrower a copy of a resolution passed
by the board of directors of such corporation, certified by the Secretary or
an Assistant Secretary of such corporation as being in full force and effect
on the date hereof, authorizing the execution, delivery and performance of
this Amendment.
5. Reservation of Rights. The Borrower acknowledges and agrees that the
execution and delivery by the Bank of this Amendment shall not be deemed to
create a course of dealing or otherwise obligate the Bank to forbear or
execute similar amendments under the same or similar circumstances in the
future.
6. Reaffirmation of Guaranty. The Borrower, to the extent it has issued
any one or more guaranties of the obligations of any Subsidiaries pursuant
to the Credit Agreement, and in its capacity as guarantor thereunder,
reaffirms and agrees that its obligations under such guaranties are in full
force and effect, without defense, offset or counterclaim.
7. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and provisions
of the Credit Agreement are and shall remain in full force and effect and all
references therein to such Credit Agreement shall henceforth refer to the
Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of the
parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance with the
law of the State of California.
(d) This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an
executed original or an executed original sent by facsimile transmission to be
followed promptly by mailing of a hard copy original, and that receipt by the
Bank of a facsimile transmitted document purportedly bearing the signature of
the Borrower shall bind the Borrower with the same force and effect as the
delivery of a hard copy original. Any failure by the Bank to receive the
hard copy executed original of such document shall not diminish the binding
effect of receipt of the facsimile transmitted executed original of such
document which hard copy page was not received by the Bank.
(e) This Amendment, together with the Credit Agreement, contains the entire
and exclusive agreement of the parties hereto with reference to the matters
discussed herein and therein. This Amendment supersedes all prior drafts
and communications with respect thereto. This Amendment may not be amended
except in writing executed by the Borrower and the Bank.
(f) If any term or provision of this Amendment shall be deemed prohibited by
or invalid under any applicable law, such provision shall be invalidated
without affecting the remaining provisions of this Amendment or the Credit
Agreement, respectively.
(g) Borrower covenants to pay to or reimburse the Bank, upon demand, for all
costs and expenses (including allocated costs of in-house counsel) incurred in
connection with the development, preparation, negotiation, execution and
delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
DIONEX CORPORATION
By: \s\Michael Pope
Typed Name: Michael Pope
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: \s\Debra G. Staiger
Typed Name: Debra G.Staiger
Title: Vice President
129500.02 5
FIRST AMENDMENT TO CREDIT AGREEMENT (MULTICURRENCY)
THIS FIRST AMENDMENT TO CREDIT AGREEMENT (MULTICURRENCY) (the
"Amendment"), dated as of December 15, 1997, is entered into by and between
DIONEX CORPORATION (the "Borrower") and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION (the "Bank").
RECITALS
A. The Borrower and the Bank are parties to a Credit Agreement
(Multicurrency), dated as of February 29, 1996 (the "Credit Agreement"),
pursuant to which the Bank has extended certain credit facilities to the
Borrower and certain of its Subsidiaries.
B. The Borrower has requested that the Bank agree to certain amendments of
the Credit Agreement.
C. The Bank is willing to amend the Credit Agreement, subject to the terms
and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings, if any, assigned to them in the Credit
Agreement.
2. Amendments to Credit Agreement.
(a) Section 1.01 of the Credit Agreement shall be amended at the defined
term "Availability Period" by amending and restating such defined term as
follows:
"'Availability Period': the period commencing on the date of this Agreement
and ending on the date that is the earlier to occur of (a) January 30, 1998,
and(b) the date on which the Bank's commitment to extend credit hereunder
terminates."
(b) Section 1.01 of the Credit Agreement shall be amended at the defined
term "Final Maturity Date" by amending and restating such defined term as
follows:
"'Final Maturity Date': (a) in respect of any Advances, January 30, 1998;
(b) in respect of any commercial letters of credit, June 30, 1998; and (c)
in respect of any standby letters of credit, December 31, 1998."
3. Representations and Warranties. The Borrower hereby represents and
warrants to the Bank as follows:
(a) No Event of Default or event which, with the giving of notice or
passage of time or both, would be an Event of Default has occurred and is
continuing.
(b) The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate and other
action and do not and will not require any registration with, consent or
approval of, notice to or action by, any person (including any governmental
authority) in order to be effective and enforceable. The Credit Agreement
as amended by this Amendment constitutes the legal, valid and binding
obligations of the Borrower, enforceable against it in accordance with its
respective terms, without defense, counterclaim or offset.
(c) All representations and warranties of the Borrower contained in the
Credit Agreement are true and correct.
(d) The Borrower is entering into this Amendment on the basis of its own
investigation and for its own reasons, without reliance upon the Bank or any
other person.
4. Effective Date. This First Amendment will become effective as of the
date first above written (the "Effective Date"), provided that the Bank has
received from the Borrower a duly executed original (or, if elected by the
Bank, an executed facsimile copy) of this Amendment.
5. Reservation of Rights. The Borrower acknowledges and agrees that the
execution and delivery by the Bank of this Amendment shall not be deemed to
create a course of dealing or otherwise obligate the Bank to forbear or
execute similar amendments under the same or similar circumstances in the
future.
6. Reaffirmation of Guaranty. The Borrower, to the extent it has issued any
one or more guaranties of the obligations of any Subsidiaries pursuant to the
Credit Agreement, and in its capacity as guarantor thereunder, reaffirms and
agrees that its obligations under such guaranties are in full force and
effect, without defense, offset or counterclaim.
7. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and provisions
of the Credit Agreement are and shall remain in full force and effect and all
references therein to such Credit Agreement shall henceforth refer to the
Credit Agreement as amended by this Amendment. This Amendment shall be
deemed incorporated into, and a part of, the Credit Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of the
parties hereto and thereto and their respective successors and assigns. No
third party beneficiaries are intended in connection with this Amendment.
(c) This Amendment shall be governed by and construed in accordance with the
law of the State of California.
(d) This Amendment may be executed in any number of counterparts, each of
which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument. Each of the parties hereto
understands and agrees that this document (and any other document required
herein) may be delivered by any party thereto either in the form of an
executed original or an executed original sent by facsimile transmission to be
followed promptly by mailing of a hard copy original, and that receipt by the
Bank of a facsimile transmitted document purportedly bearing the signature
of the Borrower shall bind the Borrower with the same force and effect as
the delivery of a hard copy original. Any failure by the Bank to receive
the hard copy executed original of such document shall not diminish the
binding effect of receipt of the facsimile transmitted executed original of
such document which hard copy page was not received by the Bank.
(e) This Amendment, together with the Credit Agreement, contains the entire
and exclusive agreement of the parties hereto with reference to the matters
discussed herein and therein. This Amendment supersedes all prior drafts and
communications with respect thereto. This Amendment may not be amended
except in writing executed by the Borrower and the Bank.
(f) If any term or provision of this Amendment shall be deemed prohibited by
or invalid under any applicable law, such provision shall be invalidated without
affecting the remaining provisions of this Amendment or the Credit Agreement,
respectively.
(g) Borrower covenants to pay to or reimburse the Bank, upon demand, for all
costs and expenses (including allocated costs of in-house counsel) incurred in
connection with the development, preparation, negotiation, execution and
delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
DIONEX CORPORATION
By: \s\Michael Pope
Typed Name: Michael Pope
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: \s\ Debra G. Staiger
Typed Name: Debra G.Staiger
Title: Vice President
126750.01 1
