<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended MARCH 31, 1997
COMMISSION FILE NUMBER 0-11309
GALILEO CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2526583
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
GALILEO PARK, P.O. BOX 550, STURBRIDGE, MASSACHUSETTS 01566
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (508) 347-9191
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AT MARCH 31, 1997
- ----------------------------- -------------------------------
COMMON STOCK, PAR VALUE $.01 6,847,422 SHARES
PAGE 1 OF 32
<PAGE> 2
GALILEO CORPORATION
INDEX
Page No.
--------
PART I. Financial Information:
Item 1. Financial Statements (unaudited)
Consolidated Condensed Balance Sheets at
March 31, 1997, and September 30, 1996.............................. 3
Consolidated Condensed Statements of Income for the three and six
months ended March 31, 1997, and March 31, 1996..................... 4
Consolidated Condensed Statements of Cash Flows for the
six months ended March 31, 1997, and March 31, 1996................. 5
Notes to Consolidated Condensed Financial Statements................ 6
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations................................. 8
PART II. Other Information:
Item 6.
Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE> 3
GALILEO CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Mar. 31, 1997 Sept. 30, 1996
--------------------------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $12,885 $18,652
Accounts receivable, net 4,112 5,710
Inventories, net (Note 6) 6,203 6,218
Other current assets 426 598
--------------------------------
Total current assets 23,626 31,178
Property, plant and equipment, net 14,640 19,228
Excess of cost over the fair value of assets acquired, net 3,939 --
Other assets, net 1,552 2,658
--------------------------------
Total assets $43,757 $53,064
================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 3,983 $ 4,174
Other current liabilities -- 542
--------------------------------
Total current liabilities 3,983 4,716
Other liabilities 1,191 1,320
Shareholders' equity:
Common stock 68 68
Additional paid-in capital 42,796 42,694
(Accumulated deficit) / retained earnings (4,281) 4,266
--------------------------------
Total shareholders' equity 38,583 47,028
--------------------------------
Total liabilities and shareholders' equity $43,757 $53,064
================================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
3
<PAGE> 4
GALILEO CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
March 31, March 31,
1997 1996 1997 1996
------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales (Note 2) $ 8,721 $10,632 $18,432 $20,604
Cost of sales 5,798 6,501 11,234 12,606
------------------------------------------------------
Gross profit 2,923 4,131 7,198 7,998
Engineering expenses 1,379 1,002 2,562 1,827
Selling and administrative expenses 2,273 2,485 4,434 4,383
Reduction in carrying value of certain
long-lived assets (Note 3) -- -- 2,226 --
Reorganization costs (Note 2) 6,872 -- 6,872 --
------------------------------------------------------
10,524 3,487 16,094 6,210
------------------------------------------------------
Operating profit (loss) (7,601) 644 (8,896) 1,788
Other income 243 208 493 323
------------------------------------------------------
Income (loss) before income taxes and
extraordinary gain (7,358) 852 (8,403) 2,111
Provision (benefit) for income taxes 20 25 141 (82)
------------------------------------------------------
Income (loss) before extraordinary gain (7,378) 827 (8,544) 2,193
Extraordinary gain on receipt and sale of
stock, net of taxes -- -- -- 158
======================================================
Net income (loss) (Note 2) $ (7,378) $ 827 $(8,544) $ 2,351
======================================================
Net income (loss) per common and common
equivalent share outstanding
Before extraordinary gain $ (1.08) $ 0.12 $ (1.25) $ 0.32
Effect of extraordinary gain -- -- -- 0.02
======================================================
Net income (loss) $ (1.08) $ 0.12 $ (1.25) $ 0.34
======================================================
Weighted average common and common equivalent
shares outstanding 6,847 6,934 6,842 7,007
</TABLE>
See Notes to Consolidated Condensed Financial Statements
4
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GALILEO CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
For the six months
ended March 31,
1997 1996
---------------------
<S> <C> <C>
Net income (loss) $(8,544) $ 2,351
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Extraordinary gain on receipt and sale of stock -- (319)
Depreciation and amortization 1,685 1,770
Reduction in carrying value of certain long-lived assets 2,226 --
Reorganization provisions 6,451 --
Increase (decrease) in cash from changes in operating
assets and liabilities:
Accounts receivable 1,741 1,411
Inventories (802) 53
Accounts payable and accrued liabilities (190) (1,548)
Other changes, net (243) (213)
-------------------
Total adjustments 10,868 1,154
-------------------
Net cash provided by operating activities 2,324 3,505
Cash flows from investing activities:
- -------------------------------------
Proceeds from receipt and sale of stock -- 2,409
Proceeds from sale of assets -- 403
Capital expenditures (2,130) (1,474)
Acquisitions (5,500) --
-------------------
Net cash used in investing activities (7,630) 1,338
Cash flows from financing activities:
- -------------------------------------
Payments on notes payable (542) (34)
Proceeds from issuance of common stock 102 244
Other financing activities (21) (18)
-------------------
Net cash provided (used) by financing activities (461) 192
Net increase in cash and cash equivalents (5,767) 5,035
Cash and cash equivalents at beginning of period 18,652 8,580
===================
Cash and cash equivalents at end of period $12,885 $13,615
===================
</TABLE>
See Notes to Consolidated Condensed Financial Statements
5
<PAGE> 6
GALILEO CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring adjustments, except for the items discussed in Notes 2 and
3 below) necessary to present fairly Galileo Corporation's (the Company)
financial position as of March 31, 1997, the results of operations for the
three and six month periods ended March 31, 1997, and cash flows for the
six months ended March 31, 1997, in conformity with generally accepted
accounting principles for interim financial information applied on a
consistent basis. The results of operations for the three and six months
ended March 31, 1997, are not necessarily indicative of the results to be
expected for the full year. These financial statements should be read in
conjunction with the Company's 1996 Annual Report to Shareholders and Form
10-K for the fiscal year ended September 30, 1996.
2. On February 11, 1997, the Company received written notification from its
then largest customer, Xerox Corporation, that Xerox had developed internal
production capabilities for dicorotron assemblies and will no longer
purchase these assemblies from the Company. Revenues related to Xerox were
approximately $2,700 and $5,200 for the three months ended March 31, 1997
and 1996, respectively. Reduced revenues from this product will likely
result in losses for the remainder of the fiscal year. On March 12, 1997,
the Company announced a reorganization plan in response to this lost
business. In connection with this plan, the Company recorded a nonrecurring
charge of $6,872 in the three months ended March 31, 1997. The charge
includes a noncash $6,451 provision for related long-lived assets, other
assets and inventory, and a $421 provision for related severance and other
obligations. Excluding the impact of this charge, net income for the three
months ended March 31, 1997, was a loss of $506, or $0.07 per share.
3. In the first quarter of fiscal 1997, the Company adopted Statement of
Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
statement requires impairment losses be recognized for long-lived assets,
when indicators of impairment are present and the fair market values of
assets are estimated to be less than carrying amounts. The adoption of this
Standard resulted in a $2,226, or $0.32 per share, nonrecurring, pretax,
noncash charge which reduced certain robotic assembly equipment for the
Company's Medical Products Group to its estimated fair market value.
Excluding the impact of this charge and the charge discussed in Note 2
above, net income for the six months ended March 31, 1997, was $554, or
$0.08 per share.
6
<PAGE> 7
4. On February 28, 1997, the Company acquired the Sani-Spec(TM) business from
C.R. Bard, Inc., for $5,500. The acquisition was accounted for using the
purchase method of accounting and accordingly, results of Sani-Spec's
operations are included in the accompanying statement of operations from
the date of acquisition. Assuming that the acquisition had been made as of
the beginning of fiscal 1996, results for the Company on a pro forma basis,
would have been as follows:
<TABLE>
<CAPTION>
For the Three For the Six
Months Ended Months Ended
March 31, March 31,
1997 1996 1997 1996
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $ 9,646 $11,557 $20,282 $22,454
Net income (loss) (7,250) 955 (8,288) 2,607
Net income (loss) per share $ (1.06) $ 0.14 $ (1.21) $ 0.37
</TABLE>
5. Results for the three and six months ended March 31, 1996, have been
restated to reflect the acquisition of Leisegang Medical, Inc., in fiscal
year 1996, which was accounted for on a pooling of interests basis. For the
three months ended March 31, 1996, Leisegang Medical, Inc.'s, net income
was a loss of $434, or $0.06 per share. Leisegang Medical, Inc.'s, results
for the six months ended March 31, 1996, were substantially break-even.
6. Classification of inventories is:
<TABLE>
<CAPTION>
March 31, 1997 September 30, 1996
--------------- ------------------
<S> <C> <C>
Finished goods $2,822 $1,402
Work-in-progress 710 635
Raw materials 2,671 4,181
------ ------
$6,203 $6,218
</TABLE>
7. In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which is required to be adopted by December
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The Company
anticipates adopting this Statement for September 1997, and the impact on
the calculation of primary and fully diluted earnings per share is not
expected to be material.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
- --------
Galileo Corporation (the "Company") develops, manufactures and markets
fiberoptic and electro-optic components which transmit, sense or intensify light
or images. The Company's products are currently sold primarily to original
equipment manufacturers (OEMs) for use in scientific, analytical, medical,
electronic imaging and office product applications. The Company's experience in
fiberoptic and electro-optic technology are fundamental to developing and
manufacturing its products.
On February 11, 1997, the Company received written notification from its then
largest customer, Xerox Corporation, that Xerox had developed internal
production capabilities for dicorotron assemblies and will no longer purchase
these assemblies from the Company. These assemblies accounted for approximately
$20.4 million, or 48% of the Company's fiscal 1996 revenues and approximately
$3.8 million, or 39%, and $2.7 million, or 31%, of revenues for the Company's
first and second fiscal quarters of 1997, respectively. Reduced revenues from
this product will materially adversely affect the Company's financial
performance for at least the remainder of fiscal 1997 and likely will result in
a loss for the fiscal year. In connection with this loss of business, the
Company adopted a reorganization plan more fully discussed in the "Results of
Operations" section below.
The Company's Scientific Detector Products include detectors and sensors which
are used in various instruments in a wide range of markets including
semiconductor processing, life sciences, food processing, bulk and specialty
chemicals, petroleum refining, biotechnology, failure analysis and quality and
process control.
The Company's Medical Products consist of a variety of scopes in support of
minimally invasive medical procedures. Scopes are valuable in any medical
procedure where video imaging can provide accurate diagnosis, improve surgical
performance and reduce patient discomfort. In addition, the acquisitions of
Leisegang Medical, Inc. and the Sani-Spec(TM) business from C.R. Bard, Inc.,
more fully discussed below, position the Company as a supplier of certain
medical instrument equipment, principally to the obstetric and gynecological
markets. The Company believes that these products offer significant future
growth opportunities.
Leisegang Medical, headquartered in Boca Raton, FL, was a privately-held
distributor and manufacturer of OB/GYN diagnostic and surgical equipment.
Included in its product line are colposcopes produced by Leisegang GmbH, a
related company based in Berlin, Germany, that is the world's largest and oldest
manufacturer of colposcopes and accessories. The products are sold to OB/GYN
doctors' offices and hospitals through an internal sales force and by
manufacturers' representatives.
8
<PAGE> 9
Leisegang Medical is well known and highly respected in the gynecological
equipment market, estimated to be $200 million annually, and is a leader in
sales to doctors' offices. In addition to colposcopes, its products include
biopsy instruments, ultrasound, video equipment, laser and electro-surgical
systems and accessories, cryosurgery equipment, surgical instruments, rigid and
flexible hysteroscopes, bone densitometers and fetal heart monitors. This
acquisition enables Galileo to participate immediately in a market that is
growing at 15 to 20 percent per year, and is expected to benefit significantly
from the trend toward minimally invasive surgery and office-based procedures. It
also provides Galileo with new distribution channels that enhance the brand name
recognition and market penetration of the Company's medical imaging and sensing
products.
On February 28, 1997, the Company acquired the Sani-Spec(TM) business from C.R.
Bard, Inc. The Sani-Spec product line includes a comprehensive suite of women's
health-related products used by OB/GYN physicians, clinics and hospitals
including Sani-Spec single-use vaginal speculums, Sani-Scope(TM) anoscopes, Spec
Light(TM) speculum lights and Pap Smear kits. The product line is marketed
through a nationwide network of approximately 80 dealers and has been a market
leader for over 20 years. Last year's revenues were in excess of $4.0 million,
representing approximately 40% of the domestic market.
The Company's Fluorolase(R) fiberoptic-based optical amplifier product is used
in applications for telecommunications as well as high speed data and video
transmission. Currently, this product is being tested in these markets and the
Company believes that the Fluorolase product offers significant future growth
opportunities.
In addition to investing in research and development activities for all of its
products, the Company is exploring other acquisition opportunities to enhance
its product offerings to all its customers.
This Report on Form 10-Q contains certain forward-looking statements concerning,
among other things, the Company's plans and objectives for future operations,
planned products and services, expansion into new markets and anticipated
customer demand for its existing and future products and services. Certain
factors that could cause the Company's actual results to differ from those
projected in these forward-looking statements are set forth in Exhibit 99.1 to
the Company's December 31, 1996, SEC Form 10-Q and incorporated herein.
9
<PAGE> 10
RESULTS OF OPERATIONS
- ---------------------
Sales for the three and six months ended March 31, 1997, of $8.7 million and
$18.4 million decreased 18.0% and 10.5%, respectively, from the comparable
prior-year periods. Reduced revenues resulted primarily from the loss of the
Company's largest customer more fully discussed in the "Overview" section above.
The Company completed final shipments to this customer during its second
quarter. Excluding activity for this customer, revenues for the three months
ended March 31, 1997, of $6.0 million increased from $5.4 million for the
comparable prior year period.
Gross profit (as a percentage of revenues) of 33.5% for the three months ended
March 31, 1997, decreased from 38.9% from the comparable prior year period
primarily due to reduced revenues. Gross profit of 39.1% for the six months
ended March 31, 1997, was relatively stable with the comparable prior year
period.
Engineering expenses increased to $1.4 million and $2.6 million from $1.0
million and $1.8 million for the three and six months ended March 31, 1997,
respectively, primarily due to increased spending to support the development of
the medical and Fluorolase products.
Selling and administrative expenses remained relatively stable for the three and
six months ended March 31, 1997, from comparable prior-year periods.
Following the loss of its largest customer, the Company adopted a reorganization
plan. In connection with the plan, the Company recorded a charge of $6.9 million
in the three months ended March 31, 1997. The charge includes a noncash $6.5
million provision for related long-lived assets, other assets and inventory, and
a $0.4 provision for related severance and other obligations. Excluding the
impact of this charge, the loss for the three months ended March 31, 1997, was
$0.5 million or $0.07 per share.
For the first quarter of fiscal 1997, the Company adopted Statement of Financial
Accounting Standard No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of." This statement requires impairment
losses be recognized on long-lived assets when indicators of impairment are
present and the fair market values of assets are estimated to be less than
carrying amounts. The adoption of this statement resulted in a $2.2 million, or
$0.32 per share, nonrecurring, pretax, noncash charge in the quarter, which
reduced certain robotic assembly equipment for the Company's Medical Products
Group to its estimated fair market value. Excluding the impact of this charge
and the charge described in the preceding paragraph, net income for the six
months ended March 31, 1997, was $0.6 million, or $0.08 per share.
Other income principally relates to interest earned on investments. For both the
current and comparable prior year periods, the Company's effective tax rate
differs from the statutory
10
<PAGE> 11
rate primarily due to available tax loss carryforwards. The current year
provision relates principally to state and franchise taxes.
FINANCIAL CONDITION
- -------------------
The Company's working capital at March 31, 1997 of $19.6 million, decreased $6.9
million from the balance at September 30, 1996, of $26.5 million. The change in
working capital was primarily due to the February 28, 1997, acquisition of the
Sani-Spec business from C.R. Bard, Inc. for a cash payment of $5.5 million.
The Company considers its working capital position to be adequate to support its
currently planned operations.
Capital spending for the six months ended March 31, 1997, amounted to $2.1
million. This compares with $1.5 million of capital expenditures for the
comparable prior-year period. Capital spending for fiscal 1997 primarily relates
to building improvements and machinery and equipment to support the development
of new medical scopes and the Company's Fluorolase products. The Company does
not have any significant commitments for capital expenditures.
11
<PAGE> 12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
3 Restated Certificate of Incorporation of the Registrant, as
Amended
10 1991 Stock Option Plan of the Registrant, as Amended
11 Calculation of Earnings per Share
27 Financial Data Schedule (EDGAR filing only)
b. Reports on Form 8-K:
1. On January 21, 1997, the Registrant filed a Form 8-K for a
Press Release dated January 16, 1997, regarding the
Registrant's first quarter results.
2. On March 12, 1997, the Registrant filed a Form 8-K regarding
the Asset Purchase Agreement between the Registrant and C.R.
Bard, Inc., dated February 28, 1997.
3. On March 14, 1997, the Registrant filed a Form 8-K for a
Press Release dated March 12, 1997, regarding the
Registrant's reorganization plan.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GALILEO CORPORATION
Dated: May 5, 1997 /s/ William T. Hanley
--------------------------------------
William T. Hanley, President and
Chief Executive Officer (Principal
Executive Officer)
/s/ Gregory Riedel
--------------------------------------
Gregory Riedel, Vice President,
Finance and Chief Financial Officer
(Principal Financial and Accounting
Officer)
13
<PAGE> 14
GALILEO CORPORATION
INDEX TO EXHIBITS
Exhibit No. Page No.
----------- --------
3.1 Restated Certificate of Incorporation of the
Registrant, as Amended 15
10 1991 Stock Option Plan of the Registrant, as Amended 26
11 Calculation of Earnings Per Share 32
27 Financial Data Schedule EDGAR
Filing
Only
14
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
GALILEO ELECTRO-OPTICS CORPORATION
Galileo Electro-Optics Corporation, a corporation originally incorporated
under the General Corporation Laws of the State of Delaware on September 24,
1973 (the "Corporation"), does hereby certify:
FIRST: That the Board of Directors of the Corporation by unanimous written
consent adopted the following vote proposing and declaring advisable the
following Amendment and Restatement of the Certificate of Incorporation of the
Corporation and directing that said amendment be submitted to the stockholders
of the Corporation for approval without a meeting in accordance with Section
228(a) of the General Corporation Laws of the State of Delaware:
Voted: That the Certificate of Incorporation of the Corporation be amended
and restated in its entirety so as to supersede the original Certificate of
Incorporation and all amendments thereto so that, as amended and restated, the
Certificate shall read as follows:
RESTATED CERTIFICATE OF INCORPORATION
OF
GALILEO ELECTRO-OPTICS CORPORATION
FIRST: The name of the Corporation is Galileo Electro-Optics
Corporation.
SECOND: The registered office of the Corporation in the State of
Delaware is located at No. 100 West 10th Street in the City of Wilmington,
County of New Castle. The name and address of its registered agent is The
Corporation Trust
15
<PAGE> 2
Company, No. 100 West 10th Street, Wilmington, Delaware.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is three million (3,000,000) shares of Common
Stock of the par value of One Cent ($.01) each, amounting in the aggregate
to Thirty Thousand Dollars ($30,0000).
FIFTH: The affirmative vote or consent of two-thirds (66 2/3%) of the
outstanding Common Stock of the Corporation shall be necessary to approve
(a) any merger, consolidation, dissolution or liquidation of the
Corporation, (b) the sale of substantially all of its assets, or (c) any
amendment to this Certificate of Incorporation.
SIXTH: The name and place of residence of the Incorporator is as
follows:
Name Place of Residence
---- ------------------
Richard M. C. Glenn, III 29 Rumstick Road
Barrington, RI 02806
SEVENTH: The Corporation is to have perpetual existence.
EIGHTH: In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors of the
Corporation is authorized and empowered to make, alter, amend and repeal
the Bylaws of the Corporation in any manner not inconsistent with the laws
of the State of Delaware. The election of directors may but need not be by
ballot unless the Bylaws so require.
NINTH: The Corporation shall indemnify its officers, directors,
employees and agents to the extent permitted by the General Corporation Law
of Delaware.
16
<PAGE> 3
SECOND: That the written consent to said Amendment and Restatement was
given by the stockholders of the Corporation in accordance with Section 228(a)
of the General Corporation Laws of the State of Delaware.
THIRD: That the said Amendment and Restatement of Certificate of
Incorporation of Galileo Electro-Optics Corporation was duly adopted in
accordance with Sections 242 and 245 of the General Corporation Laws of the
State of Delaware by the written consent of the holders of greater than 66 2/3
percent of the issued and outstanding Common Stock of the Corporation.
IN WITNESS WHEREOF, Galileo Electro-Optics Corporation has caused this
Certificate to be signed by John D. White, President of the Corporation, and
attested by Richard M. C. Glenn III, its Secretary as of the 24th day of
November, 1982.
ATTEST: GALILEO ELECTRO-OPTICS CORPORATION
/s/ Richard M.C. Glenn III By: /s/ John D. White
-------------------------- ----------------------
Secretary President
17
<PAGE> 4
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
GALILEO ELECTRO-OPTICS CORPORATION
Galileo Electro-Optics Corporation, a corporation organized and existing
under the General Corporation Laws of the State of Delaware, (the "Corporation")
does hereby certify:
FIRST: That the Board of Directors of the Corporation, at a meeting duly
held, adopted the following vote proposing and declaring advisable the following
amendment to the Restated Certificate of Incorporation of the Corporation and
directed that said amendment be submitted to the stockholders of the Corporation
for approval without a meeting in accordance with Section 228(a) of the General
Corporation Laws of the State of Delaware.
Voted: That Article FIFTH of the Restated Certificate of Incorporation of
the Corporation be amended in its entirety to provide as follows:
FIFTH: The affirmative vote or consent of two-thirds (66
2/3%) of the outstanding Common Stock of the Corporation shall be
necessary to approve (a) any merger, consolidation, dissolution
or liquidation of the Corporation, (b) the sale of substantially
all of its assets, or (c) any amendment to this Certificate of
Incorporation which would modify this Article FIFTH.
SECOND: That the written consent to said amendment and restatement was
given by the stockholders of the Corporation in accordance with Section 228(a)
of the General Corporation Laws of the State of Delaware.
18
<PAGE> 5
THIRD: That the said Amendment to the Restated Certificate of Incorporation
of Galileo Electro-Optics Corporation was duly adopted in accordance with
Section 242 of the General Corporation Laws of the State of Delaware by the
written consent of the holders of greater than 66 2/3% of the issued and
outstanding Common Stock of the Corporation.
IN WITNESS WHEREOF, Galileo Electro-Optics Corporation has caused this
Certificate to be signed by John B. White, President of the Corporation, and
attested by Richard M.C. Glenn, III, its Secretary as of the 3rd day of
February, 1983.
ATTEST: GALILEO ELECTRO-OPTICS CORPORATION
/s/ Richard M.C. Glenn, III By: /s/ John D. White
- --------------------------- ----------------------------------
Secretary President
19
<PAGE> 6
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CERTIFICATE OF INCORPORATION
Galileo Electro-Optics Corporation, a corporation organized under the laws
of Delaware, The Certificate of Incorporation of which was filed in the office
of the Secretary of State on the 24th day of September, 1973, the Certificate of
Incorporation of which was voided for non-payment of taxes, now desires to
procure a restoration, renewal and revival of its Certificate of Incorporation,
and hereby certifies as follows:
1. The name of this corporation is Galileo Electro-Optics Corporation.
2. Its registered office in the State of Delaware is located at Corporation
Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle and
the name of its registered agent at such address is The Corporation Trust
Company.
3. The date when the restoration, renewal, and revival of the Certificate of
Incorporation of this company is to commence is the 29th day of February A.D.
1984, same being prior to the date of the expiration of the Certificate of
Incorporation. This renewal and revival of the Certificate of Incorporation of
this corporation is to be perpetual.
4. This corporation was duly organized under the Laws of the State of Delaware
and carried on the business authorized by its Certificate of Incorporation until
the 1st day of March A.D. 1984, at which time its Certificate of Incorporation
becomes inoperative and void for non-payment of taxes and this certificate for
renewal and revival is filed by authority of the duly elected directors of the
corporation in accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, said Galileo Electro-Optics Corporation in compliance
with Section 312 of Title 8 of the Delaware Code has caused this certificate to
be signed by Christopher H. Tosswill its last and acting Vice President and
attested by Richard M.C.
20
<PAGE> 7
Glenn, III, its last and acting Secretary, this 29th day of January, 1985.
GALILEO ELECTRO-OPTICS CORPORATION
By: /s/ Christopher H. Tosswill
----------------------------------
Last and Acting Vice President
ATTEST:
By: /s/ Richard M.C. Glenn III
------------------------------
Last and Acting Secretary
21
<PAGE> 8
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
GALILEO ELECTRO-OPTICS CORPORATION
Galileo Electro-Optics Corporation, a corporation organized and existing
under the General Corporation Laws of the State of Delaware, (the "Corporation")
does hereby certify:
First: That the Board of Directors of the Corporation, at a meeting duly
held, adopted the following votes proposing and declaring advisable the
following amendments to the Restated Certificate of Incorporation of the
Corporation and directed that said amendments be submitted to the stockholders
of the Corporation for approval at the Annual Meeting called in accordance with
Section 222 of the General Corporation Laws of the State of Delaware.
VOTED: That Article FOURTH of the Corporation's Restated Certificate
----- of Incorporation be amended to increase the number of
authorized shares of common stock from 3,000,000 to 18,000,000
so that Article FOURTH would read in its entirety as follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is eighteen
million (18,000,000) shares of common stock of the
par value of One Cent ($.01) each, amounting in the
aggregate to One Hundred Eighty Thousand Dollars
($180,000.00)."
VOTED: That Article NINTH of the Corporation's Certificate of
----- Incorporation be amended by adding a second sentence thereto
so that Article NINTH would read in its entirety as follows:
"NINTH: The Corporation shall indemnify its officers,
directors, employees and agents to the extent
permitted by law. No director of the Corporation
shall be liable to the Corporation or its
stockholders for monetary damages for breach of
fiduciary duty as a director, except for
22
<PAGE> 9
liability (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware
General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal
benefit."
Second: That said Amendments to the Restated Certificate of Incorporation
of Galileo Electro-Optics Corporation were duly adopted in accordance with
Section 242 of the General Corporation Laws of the State of Delaware by the
favorable vote of the majority of the holders of the issued and outstanding
common stock of the Corporation voting at the Annual Meeting.
IN WITNESS WHEREOF, Galileo Electro-Optics Corporation has caused this
Certificate to be signed by William T. Hanley, President of the Corporation, and
attested by Richard M. C. Glenn, III, its Secretary as of the 10th day of
December, 1986.
ATTEST: Galileo Electro-Optics Corporation
/s/ Richard M.C. Glenn, III By /s/ William T. Hanley
--------------------------- -------------------------------
Secretary President
23
<PAGE> 10
CERTIFICATE OF OWNERSHIP AND MERGER
of
GALILEO CORPORATION
(a Delaware corporation)
into
GALILEO ELECTRO-OPTICS CORPORATION
(a Delaware corporation)
UNDER SECTION 253 OF
THE DELAWARE GENERAL CORPORATION LAW
Galileo Electro-Optics Corporation (the "Corporation"), a Delaware corporation,
hereby certifies that:
1. The Corporation is incorporated under the Delaware General Corporation
Law.
2. The Corporation owns all of the outstanding shares of capital stock of
Galileo Corporation, a Delaware corporation.
3. The Corporation by the following resolutions of its board of directors
duly adopted on September 17, 1996 determined to merge Galileo
Corporation into itself on the terms set forth in such resolutions:
RESOLVED: To merge Galileo Corporation, a Delaware corporation all of
the outstanding stock of which is owned by this Corporation,
with and into this Corporation pursuant to Section 253 of
the Delaware General Corporation Law.
RESOLVED: To change the name of this Corporation to Galileo
Corporation.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by its authorized officer on September 17, 1996.
GALILEO ELECTRO-OPTICS CORPORATION
By: /s/ William T. Hanley
William T. Hanley, President
and Chief Executive Officer
24
<PAGE> 11
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GALILEO CORPORATION
Galileo Corporation (the "Corporation"), a corporation organized and
existing under the Delaware General Corporation Law, does hereby certify as
follows:
FIRST: A resolution was duly adopted at a meeting of the Board of Directors
of the Corporation setting forth a proposed amendment of the Certificate of
Incorporation of the Corporation, declaring such amendment to be advisable and
directing that it be considered at the next annual meeting of the stockholders
of the Corporation. The resolution setting forth the proposed amendment is as
follows:
RESOLVED: that the Corporation's Certificate of Incorporation be
amended by changing Article FOURTH to read as follows:
The total number of shares of stock which the Corporation shall
have authority to issue is thirty-six million (36,000,000) shares of
common stock, one cent ($.01) par value.
SECOND: Thereafter, pursuant to resolution of its Board of Directors, the
annual meeting of the stockholders of the Corporation was duly called and held
upon notice in accordance with Section 222 of the Delaware General Corporation
Law, at which meeting the necessary number of shares as required by statute were
voted in favor of the amendment.
THIRD: Such amendment was duly adopted in accordance with the provisions of
Section 242 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, Galileo Corporation has caused this certificate to be
signed by William T. Hanley, its President, on January 14, 1997.
/s/ William T. Hanley
-------------------------------
William T. Hanley
President
25
<PAGE> 1
EXHIBIT 10
GALILEO CORPORATION
1991 STOCK OPTION PLAN
SECTION 1. Purpose
The purpose of the Galileo Corporation 1991 Stock Option Plan (the "Plan")
is to attract and retain key employees and consultants, to provide an incentive
for them to assist the Company to achieve long-range performance goals and to
enable them to participate in the long-term growth of the Company.
SECTION 2. Definitions
"Affiliate" means any business entity in which the company owns directly or
indirectly 50% or more of the total combined voting power or has a significant
financial interest as determined by the Committee.
"Award" means any Option or Stock Appreciation Right awarded under the
Plan.
"Company" means Galileo Corporation.
"Board" means the Board of Directors of the Company.
"Code" means Internal Revenue Code of 1986, as amended from time to time.
"Committee" means a committee of not fewer than three members of the Board
appointed by the Board to administer the Plan, each of whom is a "disinterested
person" as defined in Rule 16b-3 under Section 16(b).
"Common Stock" or "Stock" means the Common Stock of the Company.
"Designated Beneficiary" means the beneficiary designated by a Participant,
in a manner determined by the Committee, to receive amounts due or exercise
rights of the Participant in the event of the Participant's death. In the
absence of an effective designation by a Participant, Designated Beneficiary
shall mean the Participant's estate.
"Fair Market Value" means, with respect to Common Stock or any other
property, the fair market value of such property as determined by the Committee
in good faith or in the manner established by the Committee from time to time.
26
<PAGE> 2
"Incentive Stock Option" means an option to purchase shares of Common Stock
awarded to a Participant under Section 6 that is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Non-qualified Stock Option" means an option to purchase shares of Common
Stock under Section 6 that is not intended to be an Incentive Stock Option.
"Option" means an Incentive Stock Option or a Non-qualified Stock Option.
"Participant" means a person selected by the Committee to receive an Award
under the Plan.
"Reporting Person" means a person subject to Section 16 of the Securities
Exchange Act of 1934 or any successor provision.
"Section 16(b)" means Section 16(b) of the Securities Exchange Act of 1934,
or any successor provision.
"Stock Appreciation Right" or "SAR" means a right to receive any excess in
value of shares of Common Stock over the exercise price awarded to a Participant
under Section 7.
SECTION 3. Administration
The Plan shall be administered by the Committee. The Committee shall have
authority to adopt, alter and repeal such administrative rules, guidelines and
practices governing the operation of the Plan as it shall from time to time
consider advisable, and to interpret the provisions of the Plan. The Committee's
decisions shall be final and binding. To the extent permitted by applicable law,
the Committee may delegate to one or more executive officers of the Company the
power to make Awards to Participants who are not Reporting Persons and all
determinations under the Plan with respect thereto, provided that the Committee
shall fix the maximum amount of such Awards for the group and a maximum for any
one Participant.
Subject to any disinterested administration requirements for exemptive
relief under Section 16(b) with respect to Awards to Reporting Persons, the
Board may also make Awards and exercise administrative authority under the Plan
to the same extent as the Committee.
SECTION 4. Eligibility
All employees, and in the case of Awards other than Incentive Stock
Options, consultants of the Company or any Affiliate capable of contributing
significantly to the
27
<PAGE> 3
successful performance of the Company, other than any person who has irrevocably
elected not to be eligible, are eligible to be Participants in the Plan.
SECTION 5. Stock Available for Awards
(a) Subject to adjustment under subsection (b), Awards may be made under
the Plan for up to 550,000 shares of Common Stock. If any Award in respect to
shares of Common Stock expires or is terminated unexercised or is forfeited for
any reason, the shares subject to such Award, to the extent of such expiration,
termination or forfeiture, shall again be available for award under the Plan,
subject, however, in the case of Incentive Stock Options, to any limitation
required under the Code. Shares issued under the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
(b) In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below market value, or other similar transaction
affects the Common Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be made available under
the Plan, then the Committee, subject, in the case of Incentive Stock Options,
to any limitation required under the Code, shall equitably adjust any or all of
(i) the number and kind of shares in respect of which Awards may be made under
the Plan, (ii) the number and kind of shares subject to outstanding Awards, and
(iii) the exercise price with respect to any of the foregoing, and if considered
appropriate, the Committee may make provision for a cash payment with respect to
an outstanding Award, provided that the number of shares subject to any Award
shall always be a whole number.
(c) The maximum number of shares of Common Stock subject to Options and
Stock Appreciation Rights that may be granted to any Participant in the
aggregate in any fiscal year of the Company shall not exceed 100,000, subject to
adjustment under subsection (b).
SECTION 6. Stock Options
(a) Subject to the provision of the Plan, the Committee may award Incentive
Stock Options and Non-qualified Stock Options and determine the number of shares
to be covered by each Option, the option price therefor and the conditions and
limitations applicable to the exercise of the Option. The terms and conditions
of Incentive Stock Options shall be subject to and comply with Section 422 of
the Code, or any successor provision, and any regulations thereunder.
28
<PAGE> 4
(b) The Committee shall establish the option price at the time each Option
is awarded, which price shall be not less than 100% of the Fair Market Value of
the Common Stock on the date of award.
(c) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may specify in the applicable Award or
thereafter. The Committee may impose such conditions with respect to the
exercise of Options including conditions relating to applicable federal or state
securities laws, as it considers necessary or advisable.
(d) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be in whole or part in cash or, to the extent permitted by the
Committee at or after the award of an Option upon the delivery of shares of
Common Stock owned by the optionee valued at their Fair Market Value on the date
of delivery, or such other lawful consideration as the Committee may determine.
(e) The Committee may provide for the automatic award of an Option upon the
delivery of shares to the Company in payment of an Option for up to the number
of shares so delivered.
SECTION 7. Stock Appreciation Rights
(a) Subject to the provisions of the Plan, the Committee may award SARs in
tandem with an Option (at or after the award of the Option), or alone and
unrelated to an Option. SARs in tandem with an Option shall terminate to the
extent that the related Option is exercised, and the related Option shall
terminate to the extent that the tandem SARs are exercised. SARs shall have an
exercise price of not less than 100% of the Fair Market Value of the Common
Stock on the date of award, or in the case of SARs in tandem with Options, the
exercise price of the related Option.
(b) An SAR related to an Option that can only be exercised during limited
periods following a change in control of the Company may entitle the Participant
to receive an amount based upon the highest price paid or offered for Common
Stock in any transaction relating to the change in control or paid during the
thirty-day period immediately preceding the occurrence of the change control in
any transaction reported in the stock market in which the Common Stock is
normally traded.
SECTION 8. General Provisions Applicable to Awards
(a) Reporting Person Limitations. Notwithstanding any other provision of
the Plan, to the extent required to qualify for the exemption provided by Rule
16b-3 under Section 16(b), any Option or SAR issued under the Plan to a
Reporting Person shall not be
29
<PAGE> 5
transferable other than by will or the laws of descent and distribution and
shall be exercisable during the Participant's lifetime only by the Participant
or the Participant's guardian or legal representative.
(b) Documentation. Each Award under the Plan shall be evidenced by a
writing delivered to the Participant specifying the terms and conditions thereof
and containing such other terms and conditions not inconsistent with the
provisions of the Plan as the Committee considers necessary or advisable to
achieve the purposes of the Plan or comply with applicable tax and regulatory
laws and accounting principles.
(c) Committee Discretion. Each type of Award may be made alone or in
addition to or in relation to any other type of Award. The terms of each type of
Award need not be identical, and the Committee need not treat Participants
uniformly. Except as otherwise provided by the Plan or a particular Award, any
determination with respect to an Award may be made by the Committee at the time
of Award or at any time thereafter.
(d) Settlement. The Committee shall determine whether Awards are settled in
whole or in part in cash, Common Stock, other securities of the Company, Awards
or other property. The Committee may permit a Participant to defer all or any
portion of a payment under the Plan.
(e) Cash Awards. In the discretion of the Committee, any Award under the
Plan may provide cash payments to the Participant in lieu of or in addition to
an Award.
(f) Termination of Employment. The Committee shall determine the effect on
an Award of the disability, death, retirement or other termination of employment
of a Participant and the extent to which, and the period during which, the
Participant's legal representative, guardian, or Designated Beneficiary may
receive payment of an Award or exercise rights thereunder.
(g) Change in Control. In order to preserve a Participant's right under an
Award in the event of a change in control of the Company, the Committee in its
discretion may, at the time an Award is made or at any time thereafter, take one
or more of the following actions: (i) provide for the acceleration of any time
period relating to the exercise or realization of the Award, (ii) provide for
the purchase of the Award upon the Participant's request for an amount of cash
or other property that could have been received upon the exercise or realization
of the Award had the Award been currently exercisable or payable, (iii) adjust
the terms of the Award in a manner determined by the Committee to reflect the
change in control, (iv) cause the Award to be assumed, or new rights substituted
therefor, by another entity, or (v) make such other provision as the Committee
may consider equitable and in the best interests of the Company.
30
<PAGE> 6
(h) Withholding. The Participant shall pay to the Company, or make
provision satisfactory to the Committee for payment of, any taxes required by
law to be withheld in respect of Awards under the Plan no later than the date of
the event creating the tax liability. In the Committee's discretion, such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the Award creating the tax obligation, valued at their Fair
Market Value on the date of delivery. The Company and its Affiliates may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to the participant.
(i) Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award, including substituting therefor another Award of the same or
a different type, changing the date of exercise or realization and converting an
Incentive Stock Option to a Non-qualified Stock Option, provided that the
Participant's consent to such action shall be required unless the Committee
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
SECTION 9. Miscellaneous.
(a) No Right To Employment. No persons shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to continued employment. The Company expressly reserves
the right at any time to dismiss a Participant free from any liability or claim
under the Plan, except as expressly provided in the applicable Award.
(b) No Rights As Shareholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
shareholder with respect to any shares of Common Stock to be distributed or
acquired under the Plan until he or she becomes the holder thereof.
(c) Effective Date. Subject to the approval of the shareholders of the
Company, the Plan shall be effective on October 23, 1991. Awards may be made
before, but expressly subject to, such approval.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no amendment shall be made
without shareholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirement for
exemptive relief under Section 16(b).
(e) Governing Law. The provisions of the Plan shall be governed and
interpreted in accordance with the laws of Massachusetts.
31
<PAGE> 1
EXHIBIT 11
GALILEO CORPORATION
CALCULATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
Primary
Average shares outstanding 6,847,442 6,793,294 6,841,887 6,778,352
Net effect of dilutive stock options - based
on the treasury stock method using
average market price -- 141,026 -- 121,267
---------------------------- ----------------------------
Total 6,847,442 6,934,320 6,841,887 6,899,619
============================ ============================
Net income (loss) $(7,378,000) $ 827,000 $(8,544,000) $2,351,000
Per share amount $ (1.08) $ 0.12 $ (1.25) $ 0.34
Fully Diluted
Average shares outstanding 6,847,442 6,793,294 6,841,887 6,778,352
Net effect of dilutive stock options - based
on the treasury stock method using the
quarter-end market price, if higher than
average market price -- 158,497 -- 129,955
---------------------------- ----------------------------
Total 6,847,442 6,951,791 6,841,887 6,908,307
============================ ============================
Net income (loss) $(7,378,000) $ 827,000 $(8,544,000) $2,351,000
Per share amount $ (1.08) $ 0.12 $ (1.25) $ 0.34
</TABLE>
32
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 12,885
<SECURITIES> 0
<RECEIVABLES> 4,218
<ALLOWANCES> (106)
<INVENTORY> 6,629
<CURRENT-ASSETS> 23,626
<PP&E> 47,067
<DEPRECIATION> (26,936)
<TOTAL-ASSETS> 43,757
<CURRENT-LIABILITIES> 5,174
<BONDS> 0
0
0
<COMMON> 68
<OTHER-SE> 38,515
<TOTAL-LIABILITY-AND-EQUITY> 43,757
<SALES> 18,432
<TOTAL-REVENUES> 18,432
<CGS> 11,234
<TOTAL-COSTS> 11,234
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,403)
<INCOME-TAX> 141
<INCOME-CONTINUING> (8,544)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,544)
<EPS-PRIMARY> (1.25)
<EPS-DILUTED> (1.25)
</TABLE>
