SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended April 1, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number 1-9786
THERMO INSTRUMENT SYSTEMS INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-2925809
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
81 Wyman Street, P.O. Box 9046
Waltham, Massachusetts 02454-9046
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 622-1000
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, 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 April 28, 2000
Common Stock, $.10 par value 129,407,639
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
THERMO INSTRUMENT SYSTEMS INC.
Consolidated Balance Sheet
(Unaudited)
Assets
<TABLE>
<CAPTION>
April 1, January 1,
<S> <C> <C>
(In thousands) 2000 2000
- ----------------------------------------------------------------------------------- ----------- ----------
Current Assets:
Cash and cash equivalents $ 188,588 $ 185,492
Advance to affiliate 274,335 256,522
Accounts receivable, less allowances of $29,315 and $29,837 458,063 489,264
Inventories:
Raw materials and supplies 154,068 152,865
Work in process 66,067 60,227
Finished goods 125,789 114,809
Deferred tax asset and refundable income taxes 66,343 67,627
Other current assets 46,621 45,280
---------- ----------
1,379,874 1,372,086
---------- ----------
Property, Plant, and Equipment, at Cost 443,154 441,577
Less: Accumulated depreciation and amortization 160,742 154,170
---------- ----------
282,412 287,407
---------- ----------
Other Assets 147,841 159,574
---------- ----------
Cost in Excess of Net Assets of Acquired Companies 1,041,155 1,066,291
---------- ----------
$2,851,282 $2,885,358
========== ==========
2
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
April 1, January 1,
(In thousands except share amounts) 2000 2000
- ----------------------------------------------------------------------------------- ----------- ----------
Current Liabilities:
Short-term obligations and current maturities of long-term $ 268,196 $ 292,702
obligations (includes advance from affiliate of $72,359 and
$54,855 and related-party debt of $8,755)
Short-term obligations and current maturities of long-term 153,800 153,800
obligations, due to parent company
Accounts payable 118,273 119,956
Accrued payroll and employee benefits 66,205 73,077
Accrued income taxes 100,433 90,734
Accrued installation and warranty expenses 41,040 41,796
Deferred revenue 55,052 46,592
Other accrued expenses (Notes 5 and 6) 156,700 175,436
Due to parent company and affiliated companies 10,023 9,193
---------- ----------
969,722 1,003,286
---------- ----------
Deferred Income Taxes 18,015 22,034
---------- ----------
Other Deferred Items 36,465 35,433
---------- ----------
Long-term Obligations:
Senior convertible obligations (includes $140,000 due to parent 172,500 312,500
company in 1999; Note 9)
Subordinated convertible obligations (includes $3,000 of related-party debt) 250,000 250,000
Other 32,061 33,994
---------- ----------
454,561 596,494
---------- ----------
Minority Interest 242,621 243,545
---------- ----------
Shareholders' Investment (Note 9):
Common stock, $.10 par value, 250,000,000 shares authorized; 13,400 12,359
133,996,730 and 123,591,238 shares issued
Capital in excess of par value 488,392 343,891
Retained earnings 783,114 763,782
Treasury stock at cost, 4,635,300 and 4,824,335 shares (73,940) (75,914)
Deferred compensation (331) (373)
Accumulated other comprehensive items (Note 2) (80,737) (59,179)
---------- ----------
1,129,898 984,566
---------- ----------
$2,851,282 $2,885,358
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Consolidated Statement of Income
(Unaudited)
Three Months Ended
April 1, April 3,
(In thousands except per share amounts) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Revenues $521,086 $463,579
-------- --------
Costs and Operating Expenses:
Cost of revenues 276,202 252,123
Selling, general, and administrative expenses 150,737 130,444
Research and development expenses 44,842 34,193
Restructuring and other unusual costs (income), net (Note 6) (12,477) 1,243
-------- --------
459,304 418,003
-------- --------
Operating Income 61,782 45,576
Interest Income 5,906 6,326
Interest Expense (includes $3,055 and $2,986 to parent company) (12,583) (12,185)
Equity in Losses of Unconsolidated Subsidiaries (13,402) -
Other Income (Expense), Net 1,567 (570)
-------- --------
Income Before Provision for Income Taxes and Minority Interest 43,270 39,147
Provision for Income Taxes 19,482 16,008
Minority Interest Expense 4,456 4,254
-------- --------
Net Income $ 19,332 $ 18,885
======== ========
Earnings per Share (Note 3):
Basic $ .16 $ .16
======== ========
Diluted $ .15 $ .15
======== ========
Weighted Average Shares (Note 3):
Basic 124,462 119,302
======== ========
Diluted 130,225 131,088
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended
April 1, April 3,
(In thousands) 2000 1999
- ----------------------------------------------------------------------------------- ----------- ----------
Operating Activities:
Net income $ 19,332 $ 18,885
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 20,729 17,405
Provision for losses on accounts receivable 1,304 943
Gain on sale of businesses (Note 6) (12,393) -
Equity in losses of unconsolidated subsidiaries (Note 6) 13,402 -
Minority interest expense 4,456 4,254
Increase (decrease) in deferred income taxes (1,528) 29
Other noncash items (1,044) 5,839
Changes in current accounts, excluding the effects of acquisitions and
dispositions:
Accounts receivable 12,732 13,200
Inventories (32,386) (9,093)
Other current assets (1,720) (707)
Accounts payable (4,071) (5,111)
Other current liabilities (1,640) (12,604)
Other (60) (1,971)
---------- ---------
Net cash provided by operating activities 17,113 31,069
---------- ---------
Investing Activities:
Acquisitions, net of cash acquired (4,744) (322,996)
Acquisition of minority interest of subsidiaries (Note 7) (11,520) -
Proceeds from sale of businesses, net of cash divested (Note 6) 38,484 -
Advances to affiliate, net (19,875) -
Purchases of property, plant, and equipment (12,578) (9,204)
Proceeds from sale of property, plant, and equipment 1,317 4,802
Other, net 2,018 1,541
---------- ---------
Net cash used in investing activities $ (6,898) $(325,857)
---------- ---------
5
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Three Months Ended
April 1, April 3,
(In thousands) 2000 1999
- ------------------------------------------------------------------------- --------- ----------- ----------
Financing Activities:
Net proceeds from issuance of Company and subsidiary common stock $ 5,615 $ 442
Purchases of Company and subsidiary common stock and subordinated - (12,042)
convertible debentures
Net proceeds from issuance of short-term obligation to parent company - 200,000
Repayment of long-term obligations to parent company - (10,000)
Increase (decrease) in short-term obligations, net (18,589) 309
Proceeds from issuance of long-term obligations 3,019 14,484
Repayment of long-term obligations (3,519) (3,118)
---------- ---------
Net cash provided by (used in) financing activities (13,474) 190,075
---------- ---------
Exchange Rate Effect on Cash 6,355 (6,043)
---------- ---------
Increase (Decrease) in Cash and Cash Equivalents 3,096 (110,756)
Cash and Cash Equivalents at Beginning of Period 185,492 553,825
---------- ---------
Cash and Cash Equivalents at End of Period $ 188,588 $ 443,069
========== =========
Noncash Activities:
Fair value of assets of acquired companies $ 7,479 $ 560,910
Cash paid for acquired companies (5,000) (363,498)
Cash to be paid for remaining outstanding shares of tender offer - (2,452)
---------- ---------
Liabilities assumed of acquired companies $ 2,479 $ 194,960
========== =========
Conversions of Company convertible obligations by parent company $ 140,000 $ -
========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been prepared
by Thermo Instrument Systems Inc. (the Company) without audit and, in the
opinion of management, reflect all adjustments of a normal recurring nature
necessary for a fair statement of the financial position at April 1, 2000, and
the results of operations and cash flows for the three-month periods ended April
1, 2000, and April 3, 1999. Interim results are not necessarily indicative of
results for a full year.
The consolidated balance sheet presented as of January 1, 2000, has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. The consolidated financial statements
and notes are presented as permitted by Form 10-Q and do not contain certain
information included in the annual financial statements and notes of the
Company. The consolidated financial statements and notes included herein should
be read in conjunction with the financial statements and notes included in the
Company's Annual Report on Form 10-K for the fiscal year ended January 1, 2000,
filed with the Securities and Exchange Commission.
2. Comprehensive Income
Comprehensive income combines net income and "other comprehensive items,"
which represents certain amounts that are reported as components of
shareholders' investment in the accompanying balance sheet, including foreign
currency translation adjustments and unrealized net of tax gains and losses on
available-for-sale investments. During the first quarter of 2000 and 1999, the
Company had comprehensive income of $0.8 million and a comprehensive loss of
$8.3 million, respectively.
3. Earnings per Share
Basic and diluted earnings per share were calculated as follows:
Three Months Ended
April 1, April 3,
(In thousands except per share amounts) 2000 1999
- ------------------------------------------------------------- ---------- ----------- ---------- ----------
Basic
Net Income $19,332 $ 18,885
------- --------
Weighted Average Shares 124,462 119,302
------- --------
Basic Earnings per Share $ .16 $ .16
======= ========
Diluted
Net Income $19,332 $ 18,885
Effect of:
Convertible obligations 357 855
Majority-owned subsidiaries' dilutive securities (781) (503)
------- --------
Income Available to Common Shareholders, as Adjusted $18,908 $ 19,237
------- --------
Weighted Average Shares 124,462 119,302
Effect of:
Convertible obligations 4,771 11,409
Stock options 992 377
------- --------
Weighted Average Shares, as Adjusted 130,225 131,088
------- --------
Diluted Earnings per Share $ .15 $ .15
======= ========
7
<PAGE>
3. Earnings per Share (continued)
The computation of diluted earnings per share for the first quarter of
2000 and 1999 excludes the effect of assuming the conversion of the Company's
$250.0 million principal amount 4% subordinated convertible debentures,
convertible at $35.65 per share, and $172.5 million principal amount 4 1/2%
senior convertible debentures, convertible at $34.46 per share, because the
effect would be antidilutive. In addition, options to purchase 355,000 and
449,000 shares of common stock were not included in the computation of diluted
earnings per share for the first quarter of 2000 and 1999, respectively, because
their effect would have been antidilutive due to the options' exercise prices
exceeding the average market price for the common stock.
4. Business Segment Information
Three Months Ended
April 1, April 3,
(In thousands) 2000 1999
- -------------------------------------------------------------- --- ------------- ------------ ------------
Revenues:
Life Sciences $178,076 $169,236
Optical Technologies 198,011 178,478
Measurement and Control 147,673 118,673
Intersegment sales eliminations (a) (2,674) (2,808)
-------- --------
$521,086 $463,579
======== ========
Income Before Provision for Income Taxes and Minority Interest:
Life Sciences $25,970 $ 24,529
Optical Technologies (b) 29,634 15,118
Measurement and Control (c) 7,517 6,891
Corporate (d) (1,339) (962)
------- --------
Total operating income 61,782 45,576
Interest and other expense, net (e) (18,512) (6,429)
------- --------
$43,270 $ 39,147
======= ========
(a) Intersegment sales are accounted for at prices that are representative of
transactions with unaffiliated parties.
(b) Includes restructuring and other unusual income of $12.5 million in the
first quarter of 2000 and restructuring costs of $1.2 million in the first
quarter of 1999. Also includes charges of $1.4 million in the first quarter
of 1999 for the sale of inventories revalued in connection with the
acquisition of Spectra-Physics AB.
(c) Includes charges of $3.2 million in the first quarter of 1999 for the sale
of inventories revalued in connection with the acquisition of
Spectra-Physics AB.
(d) Primarily corporate general and administrative expenses.
(e) Includes equity in losses of unconsolidated subsidiaries of $13.4 million in
the first quarter of 2000 (Note 6).
8
<PAGE>
5. Accrued Acquisition Expenses
The Company has undertaken restructuring activities at certain acquired
businesses. The Company's restructuring activities, which were accounted for in
accordance with Emerging Issues Task Force Pronouncement (EITF) 95-3, primarily
have included reductions in staffing levels and the abandonment of excess
facilities. In connection with these restructuring activities, as part of the
cost of the acquisitions, the Company established reserves, primarily for
severance and excess facilities. In accordance with EITF 95-3, the Company
finalizes its restructuring plans no later than one year from the respective
dates of the acquisitions. Accrued acquisition expenses are included in other
accrued expenses in the accompanying balance sheet.
A summary of the changes in accrued acquisition expenses for acquisitions
completed before and during 1997 is as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1997 Acquisitions
--------------------------------------
Abandonment Other
of Excess Pre-1997
(In thousands) Severance Facilities Acquisitions Total
- -------------------------------- -------------- -------------- -------------- -------------- -------------
Balance at January 1, 2000 $ 23 $1,420 $ 248 $7,437 $9,128
Usage - (14) - (318) (332)
Currency translation (5) (27) (15) (164) (211)
------ ------ ------ ------ ------
Balance at April 1, 2000 $ 18 $1,379 $ 233 $6,955 $8,585
====== ====== ====== ====== ======
The remaining accrued acquisition expenses for pre-1997 acquisitions
primarily represent lease obligations for a building in Uxbridge, England, and
an operating facility in Hayworth, England, with obligations through 2007.
The remaining accrued acquisition expenses for 1997 acquisitions primarily
represent lease obligations for an operating location in Runcorn, England, with
an obligation through 2014. The amounts captioned as "other" in 1997 primarily
represent costs to exit certain joint venture arrangements.
A summary of the changes in accrued acquisition expenses for acquisitions
completed during 1998 is as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Abandonment
of Excess
(In thousands) Severance Facilities Other Total
- ----------------------------------------------- -------------- -------------- -------------- -------------
Balance at January 1, 2000 $ 281 $ 117 $ 43 $ 441
Usage (52) (5) (10) (67)
Decrease recorded to cost in excess of net (1) (94) - (95)
assets of acquired companies
Currency translation (9) - - (9)
----- ----- ----- -----
Balance at April 1, 2000 $ 219 $ 18 $ 33 $ 270
===== ===== ===== =====
The remaining accrued acquisition expenses for abandonment of excess
facilities for 1998 acquisitions primarily represent a lease obligation for a
facility in Maryland. The amounts captioned as "other" in 1998 primarily
represent relocation costs.
9
<PAGE>
5. Accrued Acquisition Expenses (continued)
A summary of the changes in accrued acquisition expenses for acquisitions
completed during 1999 is as follows:
Abandonment
of Excess
(In thousands) Severance Facilities Other Total
- ----------------------------------------------- -------------- -------------- -------------- -------------
Balance at January 1, 2000 $4,984 $2,065 $2,611 $9,660
Reserves established 101 55 - 156
Usage (1,013) (52) (226) (1,291)
Decrease due to finalization of (127) - - (127)
restructuring plans, recorded as a
decrease to cost in excess of net assets
of acquired companies
Currency translation (84) (63) (41) (188)
------ ------ ------ ------
Balance at April 1, 2000 $3,861 $2,005 $2,344 $8,210
====== ====== ====== ======
The principal accrued acquisition expenses for 1999 acquisitions are
severance for approximately 175 employees across all functions and for abandoned
facilities, primarily at Spectra-Physics AB. The abandoned facilities at
Spectra-Physics include operating facilities in Sweden, Germany, and France with
obligations through 2000. The amounts captioned as "other" primarily represent
relocation, contract termination, and other exit costs. The Company expects to
pay amounts accrued for severance and other primarily in 2000 and amounts
accrued for abandoned facilities over the respective lease terms. The Company
finalized its restructuring plans for Spectra-Physics in 1999. Unresolved
matters at April 1, 2000, included completion of planned severances and
abandonment of excess facilities for other acquisitions completed in 1999. Such
matters will be resolved no later than one year from the respective acquisition
dates.
6. Restructuring Costs and Other Unusual Income
During the first quarter of 2000, the Optical Technologies segment
recorded $12.4 million of unusual income resulting from the sale of its Nicolet
Imaging Systems (NIS) and Sierra Research and Technology, Inc. (SRT)
subsidiaries. The businesses manufacture products that include imaging systems
used in assembling complex printed circuit boards and in airbag manufacturing.
NIS and SRT were sold for aggregate proceeds of $40.0 million and had aggregate
revenues and operating income of $28.3 million and $2.2 million, respectively,
in 1999. These units were sold due to a consolidation trend among manufacturers
of test equipment in the markets these businesses serve. The Company has decided
to focus on growth in other sectors of the instruments market. During the first
quarter of 2000, this segment also recorded a noncash charge of $13.4 million
associated with its equity method investment in FLIR Systems, Inc., acquired as
part of the February 1999 acquisition of Spectra-Physics. FLIR recorded
significant charges in its fourth quarter of 1999 and the segment has recorded
its pro rata share of FLIR's loss. The segment records FLIR's results on a one
quarter lag. This charge was recorded to equity in losses of unconsolidated
subsidiaries in the accompanying statement of income. In addition, the Optical
Technologies segment recorded other noncash income of $1.7 million related to
hedging transactions of its majority-owned Spectra-Physics Lasers, Inc. (SPLI)
subsidiary, which elected early adoption of Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities."
During 1998 and 1999, the Company and its subsidiaries recorded
restructuring costs, which were accounted for in accordance with EITF 94-3,
primarily for severance for 723 employees and abandoned-facility payments. As of
January 1, 2000, the Company had terminated 711 employees and during the first
quarter of 2000, the Company terminated 7 additional employees. As of January 1,
2000, the Company had $1.7 million accrued for severance and facility-closing
costs relating to these activities. During the first quarter of 2000, the
Optical Technologies segment reversed $0.1 million of previously established
restructuring reserves. The Company expects to incur additional restructuring
costs totaling $0.2 million in the remainder of 2000, which are not permitted as
charges until incurred pursuant to the requirements of EITF 94-3.
10
<PAGE>
6. Restructuring Costs and Other Unusual Income (continued)
A summary of the changes in accrued restructuring costs, which are
included in other accrued expenses in the accompanying balance sheet, is as
follows:
Abandonment
of Excess
(In thousands) Severance Facilities Other Total
- ----------------------------------------------- -------------- -------------- -------------- -------------
Balance at January 1, 2000 $ 893 $ 224 $ 565 $1,682
Reversal of reserves - (84) - (84)
Usage (357) - - (357)
Currency translation (24) (2) (9) (35)
------ ------ ------ ------
Balance at April 1, 2000 $ 512 $ 138 $ 556 $1,206
====== ====== ====== ======
7. Acquisition of Thermo Vision Minority Interest
In July 1999, the Company's Thermo Vision Corporation subsidiary announced
that it had entered into a definitive agreement and plan of merger with the
Company pursuant to which the Company would acquire all of the outstanding
shares of common stock of Thermo Vision held by the public shareholders in
exchange for $7.00 per share in cash. The merger of Thermo Vision was completed
in January 2000 and its common stock has ceased to be publicly traded.
8. Proposed Reorganization
In January 2000, the Company announced plans to take private Thermo Optek
Corporation, ThermoQuest Corporation, Thermo BioAnalysis Corporation, Metrika
Systems Corporation, and ONIX Systems Inc. In addition, the Company announced
that Thermo Electron Corporation plans to take the Company private. These
actions are part of a major reorganization plan under which Thermo Electron will
spin in, spin off, and sell various businesses to focus solely on its core
measurement and detection instruments business. Because the Company owned more
than 90% of the outstanding shares of Thermo Optek and ThermoQuest common stock,
these two companies were spun in for cash through a "short-form" merger, at
$15.00 and $17.00 per share, respectively, during the second quarter of 2000 and
their common stock has ceased to be publicly traded. Also during the second
quarter of 2000, the Company successfully completed cash tender offers of $28.00
per share for Thermo BioAnalysis, $9.00 per share for Metrika Systems, and $9.00
per share for ONIX Systems, in order to bring its own equity ownership,
collective with Thermo Electron, in each of these companies to at least 90%. The
Company subsequently completed the acquisition of the outstanding minority
interest in each of these companies through short-form mergers at the same cash
prices as the tender offers and their common stock has ceased to be publicly
traded. As a result, the Company currently owns approximately 79.2%, 91.5%, and
97.9% of the outstanding shares of Thermo BioAnalysis, Metrika Systems, and ONIX
Systems common stock, respectively, and Thermo Electron currently owns
approximately 20.8%, 8.5%, and 2.1% of the outstanding shares of Thermo
BioAnalysis, Metrika Systems, and ONIX Systems common stock, respectively.
During the second quarter of 2000, Thermo Electron commenced an exchange
offer for any and all of the outstanding shares of the Company's common stock
held by minority shareholders. The Company's shareholders would receive 0.85
shares of Thermo Electron common stock for each share of Company common stock
held. Thermo Electron, which currently owns approximately 88.6% of the
outstanding shares of the Company's common stock, has conditioned the exchange
offer on receiving acceptances from holders of enough shares so that, when
combined with its current share ownership, Thermo Electron's ownership reaches
at least 90%. If Thermo Electron achieves this 90%-ownership threshold, it will
acquire all remaining outstanding shares of the Company's common stock through a
short-form merger. In the short-form merger, minority shareholders who do not
participate in the exchange offer would also receive shares of Thermo Electron
common stock in exchange for their shares of the Company's common stock at the
same ratio.
11
<PAGE>
8. Proposed Reorganization (continued)
The exchange offer will require Securities and Exchange Commission (SEC)
clearance of necessary filings. The exchange offer and subsequent short-form
merger of the Company with Thermo Electron would not require approval by the
Company's Board of Directors or shareholders.
If Thermo Electron successfully obtains ownership of at least 90% of the
outstanding shares of the Company's common stock, it expects to complete the
spin-in of the Company by the end of the third quarter of 2000.
Obligations under the Company's 4% subordinated convertible debentures due
January 15, 2005, and its 4 1/2% senior convertible debentures due October 15,
2003, would be assumed by Thermo Electron in the short-form merger, and the
debentures would be convertible into Thermo Electron common stock.
SPLI, acquired indirectly by the Company as part of its February 1999
acquisition of Spectra-Physics, will remain a public subsidiary while the
Company and Thermo Electron continue to evaluate the SPLI business. The Company
owns approximately 78.5% of the outstanding shares of SPLI common stock.
9. Conversion of Senior Convertible Note Due to Parent Company
On February 15, 2000, the Company's $140.0 million principal amount 3 3/4%
senior convertible note, convertible at $13.55 per share, was converted by
Thermo Electron into 10,334,620 shares of Company common stock. Accordingly, the
note was classified as noncurrent in the accompanying 1999 balance sheet.
10. Recent Accounting Pronouncement
In December 1999, the SEC issued Staff Accounting Bulletin (SAB) 101,
"Revenue Recognition in Financial Statements." SAB 101 includes requirements for
when shipments may be recorded as revenue when the terms of the sale include
customer acceptance provisions or an obligation of the seller to install the
product. In such instances, SAB 101 generally requires that revenue recognition
occur upon customer acceptance and/or at completion of installation. SAB 101
requires that companies conform their revenue recognition practices to the
requirements therein no later than the second quarter of calendar 2000 through
recording a cumulative net of tax effect of the change in accounting as of
January 2, 2000. The Company has not yet completed the analysis to determine the
effect that SAB 101 will have on its financial statements.
11. Subsequent Event
On May 11, 2000, the Company announced that it had entered into an
agreement to sell its wholly owned Spectra Precision, Inc. businesses to Trimble
Navigation Limited for approximately $200 million in cash and $80 million in
seller debt financing. Spectra Precision, part of the Measurement and Control
segment, was acquired in February 1999 as part of Spectra-Physics and provides
the construction, surveying, and heavy machine industries with precision
positioning equipment. These businesses are being sold as they are outside the
Company's renewed focus on measurement and detection instrumentation. Closing of
the transaction, expected at the end of the second quarter of 2000, is subject
to regulatory approval, financing, and other customary conditions.
12
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects," "seeks,"
"estimates," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of the Company to differ materially from those indicated by such forward-looking
statements, including those detailed under the heading "Forward-looking
Statements" in Exhibit 13 to the Company's Annual Report on Form 10-K for the
fiscal year ended January 1, 2000, filed with the Securities and Exchange
Commission.
Overview
The Company is a worldwide leader in the development, manufacture, and
sale of measurement and detection instruments used in virtually every industry
to monitor, collect, and analyze data that provide knowledge for the user. For
example, the Company's powerful analysis technologies help researchers sift
through data to make the discoveries that will fight disease or prolong life;
allow manufacturers to fabricate ever-smaller components required to increase
the speed and quality of communications; or monitor and control industrial
processes on-line to ensure that critical quality standards are met efficiently
and safely.
The Company's businesses operate in three instrumentation segments: Life
Sciences, Optical Technologies, and Measurement and Control. The Life Sciences
segment includes the Company's Thermo BioAnalysis Corporation and ThermoQuest
Corporation subsidiaries, as well as certain wholly owned subsidiaries. This
segment develops and manufactures systems for drug discovery and medical
diagnosis and for chemical analysis at ultratrace levels. The Optical
Technologies segment consists of Thermo Optek Corporation, ThermoSpectra
Corporation, Thermo Vision Corporation, Spectra-Physics Lasers, Inc. (SPLI), and
certain other wholly owned businesses. This segment develops and manufactures
optical and energy-based analytical systems; high-power laser systems; and
industrial imaging, inspection, and measurement instruments. The Measurement and
Control segment includes the Company's ONIX Systems Inc. and Metrika Systems
Corporation subsidiaries, as well as certain wholly owned subsidiaries,
including businesses of Spectra-Physics AB, acquired in February 1999. This
segment develops and manufactures on-line systems for industrial processes and
quality control, field-measurement instruments, and real-time sensors.
International sales account for a significant portion of the Company's
total revenues. Although the Company seeks to charge its customers in the same
currency as its operating costs, the Company's financial performance and
competitive position can be affected by currency exchange rate fluctuations.
Where appropriate, the Company uses short-term forward foreign exchange
contracts to reduce its exposure to currency fluctuations.
Results of Operations
First Quarter 2000 Compared With First Quarter 1999
Revenues increased $57.5 million to $521.1 million in the first quarter of
2000 from $463.6 million in the first quarter of 1999. Revenues increased $53.6
million due to the inclusion of revenues from 1999 acquisitions for the full
period and an acquisition made in 2000, net of dispositions that reduced
revenues by $3.6 million. This increase in revenues was offset in part by a
decrease in revenues of $14.9 million due to the unfavorable effects of currency
translation as a result of the strengthening of the U.S. dollar relative to
foreign currencies in countries in which the Company operates. Excluding the
impact of acquisitions, dispositions, and currency translation, revenues
increased $18.8 million.
13
<PAGE>
First Quarter 2000 Compared With First Quarter 1999 (continued)
Life Sciences segment revenues increased to $178.1 million in the first
quarter of 2000 from $169.2 million in the first quarter of 1999. Revenues
increased $7.5 million due to acquisitions. The unfavorable effects of currency
translation decreased revenues in this segment by $7.4 million. Excluding the
effect of acquisitions and currency translation, revenues increased $8.8
million. Revenues from pharmaceutical and biochemical research products
increased $3.9 million due to higher demand for the segment's immunoassay
testing and newly introduced Multiblock deoxyribonucleic acid (DNA)
amplification products. Revenues from analytical instruments increased $3.2
million due to higher sales of mass spectrometers in Europe and Asia. Revenues
from scientific equipment increased $2.2 million due to higher demand for
controlled-environment laboratory equipment. These increases in revenues were
offset in part by lower revenues from information management systems due to
lower demand in the U.S.
Optical Technologies segment revenues increased to $198.0 million in the
first quarter of 2000 from $178.5 million in the first quarter of 1999. Revenues
increased $13.8 million due to acquisitions, net of dispositions, primarily the
acquisition of SPLI, in which the Company acquired a majority interest on
February 22, 1999. The dispositions primarily included the segment's Nicolet
Imaging Systems (NIS) and Sierra Research and Technology, Inc. (SRT) businesses
that were sold in March 2000 (Note 6). These units were sold due to a
consolidation trend among manufacturers of test equipment in the markets these
businesses serve. The Company has decided to focus on growth in other sectors of
the instruments market. The unfavorable effects of currency translation
decreased revenues in this segment by $5.4 million in 2000. Excluding the effect
of acquisitions, dispositions, and currency translation, revenues increased
$11.1 million. The increase in revenues was due in part to $4.6 million of
increased demand for products sold to the semiconductor industry by the
segment's physical properties business. The semiconductor sector is experiencing
renewed growth after a downturn in the first half of 1999. Revenues from
elemental analysis instruments increased $3.2 million in 2000, primarily due to
new product introductions, and revenues from photonics products increased $2.8
million, primarily due to strong demand for gratings used in systems for
semiconductor manufacturers and in telecommunications.
Measurement and Control segment revenues increased to $147.7 million in
the first quarter of 2000 from $118.7 million in the first quarter of 1999.
Revenues increased $32.3 million due to acquisitions, primarily that of
Spectra-Physics AB's wholly owned businesses, acquired on February 22, 1999. The
unfavorable effects of currency translation decreased revenues in this segment
by $2.1 million. Excluding the effect of acquisitions and currency translation,
revenues decreased $1.2 million. Revenues from process control products
decreased $1.5 million, primarily as a result of reduced discretionary capital
spending by companies in the process control industry and by the oil and gas
production sector. Revenues from process-optimization systems decreased $1.2
million, primarily due to a reduction in spending in the metals industry due to
depressed pricing. These decreases in revenues were offset in part by higher
revenues from the sale of environmental-monitoring instruments.
The gross profit margin increased to 47% in the first quarter of 2000 from
46% the first quarter of 1999. The 1999 period included lower-margin revenues
from Spectra-Physics, which recorded a charge of $4.6 million relating to the
sale of inventories revalued at the date of acquisition, of which $3.2 million
was recorded by the Measurement and Control segment and $1.4 million by the
Optical Technologies segment. Excluding the charge for the sale of revalued
inventories in 1999, the gross profit margin remained unchanged at 47% in 2000
and 1999.
Selling, general, and administrative expenses as a percentage of revenues
increased to 29% in the first quarter of 2000 from 28% in the first quarter of
1999, principally due to the inclusion of higher selling, general, and
administrative expenses as a percentage of revenues at the wholly owned
businesses of Spectra-Physics.
Research and development expenses increased to $44.8 million in the first
quarter of 2000 from $34.2 million in the first quarter of 1999, primarily due
to the inclusion of expenses at Spectra-Physics and, to a lesser extent, other
acquired businesses. In addition, research and development expenses increased
due to spending on new product development, including the V150 molecular beam
epitaxy system. Research and development expenses as a percentage of revenues
were 8.6% in 2000, compared with 7.4% in 1999. Excluding the expenses at
acquired businesses, research and development expenses as a percentage of
revenues were 7.7% in 2000.
14
<PAGE>
First Quarter 2000 Compared With First Quarter 1999 (continued)
The Optical Technologies segment recorded unusual income of $12.4 million
in the first quarter of 2000 resulting from the sale of NIS and SRT (Note 6). In
connection with the restructuring actions undertaken by the Company in 1998,
this segment reversed previously established restructuring reserves of $0.1
million in the first quarter of 2000. In connection with the closing of certain
facilities, the Company expects to incur approximately $0.2 million of
additional costs in 2000.
Interest income decreased to $5.9 million in the first quarter of 2000
from $6.3 million in the first quarter of 1999, primarily due to a reduction in
invested balances as a result of acquisitions, including the acquisition of
Spectra-Physics in February 1999.
Interest expense increased to $12.6 million in the first quarter of 2000
from $12.2 million in the first quarter of 1999, primarily due to borrowings
from Thermo Electron Corporation in connection with the acquisition of
Spectra-Physics. This increase was offset in part by a decrease in interest
expense as a result of the repayment of certain promissory notes to Thermo
Electron that were issued in connection with acquisitions and the conversion by
Thermo Electron of the Company's $140.0 million principal amount 3 3/4% senior
convertible note in February 2000 (Note 9).
Equity in losses of unconsolidated subsidiaries of $13.4 million in the
first quarter of 2000 primarily relates to charges associated with
Spectra-Physics' minority investment in FLIR Systems, Inc., which recorded
significant charges in its fourth quarter of 1999. The Company reports its pro
rata share of FLIR's results on a one quarter lag (Note 6).
Other income (expense), net, in the first quarter of 2000 and 1999
primarily represents currency gains and losses resulting from hedging activities
at SPLI, which elected early adoption of Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (Note 6).
The effective tax rate was 45% in the first quarter of 2000, compared with
41% in the first quarter of 1999. The effective tax rate exceeded the statutory
federal income tax rate in both periods due to foreign tax rate and tax law
differences, nondeductible amortization of cost in excess of net assets of
acquired companies, and the impact of state income taxes. The effective tax rate
increased in 2000 primarily due to the tax benefit for the loss at FLIR being
recorded at 28%, the tax rate of the Swedish subsidiary that holds the
investment in FLIR.
Minority interest expense remained relatively unchanged at $4.5 million in
the first quarter of 2000 and $4.3 million in the first quarter of 1999.
Liquidity and Capital Resources
Consolidated working capital was $410.2 million at April 1, 2000, compared
with $368.8 million at January 1, 2000. Included in working capital are cash and
cash equivalents of $188.6 million at April 1, 2000, compared with $185.5
million at January 1, 2000. Of the cash and cash equivalents balance at April 1,
2000, $149.1 million was held by the Company's majority-owned subsidiaries and
the balance was held by the Company and its wholly owned subsidiaries. In
addition, as of April 1, 2000, the Company had $274.3 million invested in an
advance to affiliate. Of the advance to affiliate at April 1, 2000, $270.7
million was held by the Company's majority-owned subsidiaries and the balance
was advanced by the Company and its wholly owned subsidiaries. At April 1, 2000,
$149.6 million of the Company's cash and cash equivalents was held by its
foreign subsidiaries. While this cash can be used outside of the United States,
for activities including acquisitions, repatriation of this cash into the United
States would be subject to foreign withholding taxes and could also be subject
to a United States tax. Also reflected in working capital are $153.8 million of
short-term obligations and current maturities of long-term obligations due to
Thermo Electron in 2000 and an aggregate $130.0 million principal amount of
ThermoQuest and Thermo Optek 5% subordinated convertible debentures due August
and October 2000, respectively. Of the $153.8 million due to Thermo Electron,
$150.0 million represents a promissory note due August 2000.
15
<PAGE>
Liquidity and Capital Resources (continued)
Cash provided by operating activities was $17.1 million in the first three
months of 2000. A decrease in accounts receivable provided cash of $12.7
million, primarily in the Optical Technologies and Life Sciences segments due to
lower sales volume in the first quarter of 2000, compared with the fourth
quarter of 1999. Cash of $32.4 million was used to fund an increase in
inventories, primarily in the Optical Technologies and Life Sciences segments
due to a build-up of inventory in preparation of new product releases and the
replenishment of year-end inventory levels. Cash of $5.7 million was used to
fund a decrease in accounts payable and other current liabilities, primarily due
to the timing of payments, offset in part by an increase in deferred revenue,
primarily in the Optical Technologies and Life Sciences segments due to annual
service contract billings in the first quarter of 2000. As of April 1, 2000, the
Company had $1.2 million of accrued restructuring costs, primarily all of which
it expects to pay in 2000. As of April 1, 2000, the Company had accrued $17.0
million for acquisition expenses. Accrued acquisition expenses includes $4.1
million of severance obligations, which the Company expects to pay primarily in
2000. The balance, which primarily represents abandoned-facility payments, will
be paid over the remaining terms of the leases through 2014.
During the first three months of 2000, the Company's primary investing
activities, excluding advance to affiliate activity, included the acquisition of
the minority interest of Thermo Vision, dispositions, and the purchase of
property, plant, and equipment. During the first three months of 2000, the
Company expended $11.2 million to acquire the minority interest of Thermo Vision
(Note 7) and expended an additional $0.3 million related to the acquisition of
the minority interest of ThermoSpectra, which was completed in December 1999.
The Company will expend additional cash of approximately $260 million, primarily
in the second quarter of 2000, for the repurchases of the public shares that it
does not already own of its majority-owned subsidiaries, excluding SPLI (Note
8). The Company received aggregate net proceeds of $38.5 million, net of cash
divested, from the sale of NIS and SRT in March 2000 (Note 6). The Company
expended $12.6 million for purchases of property, plant, and equipment and $4.7
million, net of cash acquired, for an acquisition. During the remainder of 2000,
the Company plans to make expenditures of approximately $53 million for
property, plant, and equipment.
The Company's financing activities used $13.5 million of cash in the first
three months of 2000, primarily as a result of the repayment of $22.1 million of
short- and long-term obligations.
On May 11, 2000, the Company announced that it had entered into an
agreement to sell its wholly owned Spectra Precision, Inc. businesses to Trimble
Navigation Limited for approximately $200 million in cash and $80 million in
seller debt financing (Note 11).
The Company has short-term obligations and current maturities of long-term
obligations due to Thermo Electron primarily in August 2000, totaling $153.8
million at April 1, 2000. In addition, ThermoQuest's $61.0 million and Thermo
Optek's $69.0 million principal amount 5% subordinated convertible debentures
are due in August and October 2000, respectively, although earlier repayment is
expected upon completion of the transactions discussed in Note 8. The Company
has an agreement with Thermo Electron under which the Company may borrow up to
$400 million on a short-term basis in connection with the acquisition of the
minority interest of its publicly held subsidiaries, excluding SPLI, and the
redemption of the subsidiary debentures. As of May 12, 2000, the Company has
borrowed $231 million under this agreement. Thermo Electron has indicated that
it will seek repayment from the Company of such borrowings, in addition to the
Company's $150.0 million promissory note, only to the extent the Company's cash
flow permits such repayments. Excluding such debt and the 5% subordinated
convertible debentures of ThermoQuest and Thermo Optek, the Company believes
that its existing resources are sufficient to meet the capital requirements of
its existing operations for the foreseeable future. The Company has historically
complemented internal development with acquisitions of businesses or
technologies that extend the Company's presence in current markets or provide
opportunities to enter and compete effectively in new markets. The Company will
consider making acquisitions of such businesses or technologies that are
consistent with its plans for strategic growth. The Company expects that it will
finance these acquisitions through a combination of internal funds, and/or
short-term borrowings from Thermo Electron although there is no agreement with
Thermo Electron to ensure that funds will be available on acceptable terms or at
all.
16
<PAGE>
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
The Company's exposure to market risk from changes in foreign currency
exchange rates, interest rates, and equity prices has not changed materially
from its exposure at year-end 1999.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index on the page immediately preceding exhibits.
(b) Reports on Form 8-K
On February 1, 2000, the Company filed a Current Report on Form 8-K dated
January 31, 2000, with respect to certain corporate transactions affecting
it and its majority-owned public subsidiaries.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized as of the 12th day of May 2000.
THERMO INSTRUMENT SYSTEMS INC.
/s/ Theo Melas-Kyriazi
Theo Melas-Kyriazi
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
18
<PAGE>
</TABLE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
3 Amended By-Laws of the Registrant.
27 Financial Data Schedule.
Exhibit 3
As Amended through
March 29, 2000
THERMO INSTRUMENT SYSTEMS INC.
BY-LAWS
TABLE OF CONTENTS
Title Page
Article I - General 1
Section 1.1. Offices 1
Section 1.2. Seal 1
Section 1.3. Fiscal Year 1
Article II - Stockholders 1
Section 2.1. Place of Meeting 1
Section 2.2. Annual Meeting 1
Section 2.3. Quorum 1
Section 2.4. Right to Vote; Proxies 2
Section 2.5. Record Date 2
Section 2.6. Voting 2
Section 2.7. Notice of Annual Meetings 2
Section 2.8. Stockholders' List 2
Section 2.9. Special Meetings 2
Section 2.10. Notice of Special Meetings 2
Section 2.11. Stockholders' Action by Consent 3
Article III - Directors 3
Section 3.1. Number of Directors 3
Section 3.2. Change in Number of Directors; Vacancies 3
Section 3.3. Resignation 4
Section 3.4. Removal 4
Section 3.5. Place of Meetings and Books 4
Section 3.6. General Powers 4
Section 3.7. Executive Committee 4
Section 3.8. Other Committees 4
Section 3.9. Power Denied to Committees 4
Section 3.10. Substitute Committee Member 5
<PAGE>
Title Page
Section 3.11. Compensation of Directors 5
Section 3.12. Notice of Meetings 5
Section 3.13. Regular Meetings 5
Section 3.14. Special Meetings 5
Section 3.15. Quorum 5
Section 3.16. Telephonic Participation in Meetings 6
Section 3.17. Action by Consent 6
Article IV - Officers 6
Section 4.1. Selection; Statutory Officers 6
Section 4.2. Time of Election 6
Section 4.3. Additional Officers 6
Section 4.4. Terms of Office 6
Section 4.5. Compensation of Officers 6
Section 4.6. Chairman of the Board 6
Section 4.7. President 7
Section 4.8. Vice-Presidents 7
Section 4.9. Treasurer 7
Section 4.10. Secretary 7
Section 4.11. Assistant Secretary 8
Section 4.12. Assistant Treasurer 8
Section 4.13. Subordinate Officers 8
Article V - Stock 8
Section 5.1 Stock 8
Section 5.2. Transfers of Stock 8
Section 5.3. Record Date 9
Section 5.4. Transfer Agent and Registrar 9
Section 5.5. Dividends 9
1. Power to Declare 9
2.Reserves 9
Section 5.6. Lost, Stolen or Destroyed Certificates 9
Section 5.7. Inspection of Books 9
Article VI - Miscellaneous Management Provisions 10
Section 6.1. Checks, Drafts and Notes 10
Section 6.2. Notices 10
Section 6.3. Conflict of Interest 10
Section 6.4. Voting of Securities Owned by this Corporation 11
<PAGE>
Title Page
Article VII - Indemnification 11
Section 7.1. Power to Indemnify in Actions, Suits
or Proceedings other than those by or
in the Right of the Corporation 11
Section 7.2. Power to Indemnify in Actions, Suits o
or Proceedings by or in the Right of the
Corporation 11
Section 7.3. Authorization of Indemnification 12
Section 7.4. Good Faith Defined 12
Section 7.5. Indemnification by a Court 13
Section 7.6. Expenses Payable in Advance 13
Section 7.7. Non-Exclusivity of Indemnification
and Advancement of Expenses 13
Section 7.8. Insurance 13
Section 7.9. Meaning of "Corporation" for Purposes
of Article VII 13
Section 7.10. Survival of Indemnification and
Advancement of Expenses 14
Section 7.11. Severability 14
Section 7.12. Intent of Article 14
Article VIII - Amendments 14
Section 8.1. Amendments 14
<PAGE>
THERMO INSTRUMENT SYSTEMS INC.
BY-LAWS
ARTICLE I - GENERAL
Section 1.1. Offices. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware. The Corporation 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.
Section 1.2. Seal. The seal of the corporation shall, upon issuance, be in
the form of a circle and shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware" and may reside at the corporate offices.
Section 1.3. Fiscal Year. The fiscal year of the corporation shall be
the 52 or 53 weeks ending on the Saturday nearest December 31 in each year.
ARTICLE II- STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of the stockholders shall be
held at such place or places within or without the State of Delaware as may be
fixed from time to time by the Board of Directors.
Section 2.2. Annual Meeting. The annual meeting of the stockholders shall
be held each year on such date and at such time as the Board of Directors may
determine. At each annual meeting the stockholders entitled to vote shall elect
a Board of Directors by plurality vote by ballot, and they may transact such
other corporate business as may properly be brought before the meeting. At the
annual meeting any business may be transacted, irrespective of whether the
notice calling such meeting shall have contained a reference thereto, except
where notice is required by law, the certificate of incorporation, or these
by-laws.
Section 2.3. Quorum. At all meetings of the stockholders the holders of a
majority of the stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum requisite
for the transaction of business except as otherwise provided by law, by the
certificate of incorporation or by these by-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or by proxy, by a
majority vote, shall have power to adjourn the meeting from time to time without
notice other than announcement at the meeting until the requisite amount of
voting stock shall be present. If the adjournment is for more than 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. At such adjourned meeting, at which the
requisite amount of voting stock shall be represented, any business may be
transacted which might have been transacted if the meeting had been held as
originally called.
<PAGE>
Section 2.4. Right to Vote, Proxies. Each stockholder having the right to
vote at any meeting shall be entitled to one vote for each share of stock held
by him. Any stockholder entitled to vote at any meeting of stockholders may vote
either in person or by proxy, but no proxy which is dated more than three years
prior to the meeting at which it is offered shall confer the right to vote
thereat unless the proxy provides that it shall be effective for a longer
period. Every proxy shall be in writing, subscribed by a stockholder or his duly
authorized attorney in fact, and dated, but need not be sealed, witnessed, or
acknowledged.
Section 2.5. Record Date. Except where the transfer books of the
corporation shall have been closed, or a date shall have been fixed as the
record date for the determination of its stockholders entitled to vote as
provided in Section 5.3 of these by-laws, no share of stock shall be voted at
any election for directors which shall have been transferred on the books of the
corporation within twenty (20) days next preceding said election of directors.
Section 2.6. Voting. At all meetings of stockholders all questions, except
as otherwise expressly provided for by statute, the certificate of incorporation
or these by-laws, shall be determined by a majority vote of the stockholders
present in person or represented by proxy. All elections shall be decided by a
majority of the shares voting thereon.
Section 2.7. Notice of Annual Meetings, Written notice of the annual
meeting of the stockholders shall be mailed to each stockholder entitled to vote
thereat at such address as appears on the stock books of the corporation at
least ten (10) days (and not more than sixty (60) days) prior to the meeting. It
shall be the duty of every stockholder to furnish to the Secretary of the
corporation or to the transfer agent, if any, of the class of stock owned by
him, his post-office address and to notify said Secretary or transfer agent of
any change therein.
Section 2.8. Stockholders' List. A complete list of the stockholders
entitled to vote at any meeting of stockholders, arranged in alphabetical order
and showing the address of each stockholder, and the number of shares registered
in the name of each stockholder, shall be prepared by the Secretary and filed
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held, at least ten days before such meeting,
and shall at all times during the usual hours for business, and during the whole
time of said election, be open to the examination of any stockholder for a
purpose germane to the meeting.
Section 2.9. Special Meetings. Special meetings of the stockholders for
any purpose or purposes, unless otherwise provided by statute, may be called by
the Board of Directors, the Chairman of the Board, if any, the President or any
Vice President.
Section 2.10. Notice of Special Meetings. Written notice of a special
meeting of stockholders, stating the time and place and object thereof shall be
mailed, postage prepaid, not less than ten (10) nor more than sixty (60) days
before such meeting, to each stockholder entitled to vote thereat, at such
address as appears on the books of the corporation. No business may be
transacted at such meeting except that referred to in said notice, or in a
supplemental notice given also in compliance with the provisions hereof, or such
other business as may be germane or supplementary to that stated in said notice
or notices.
<PAGE>
Section 2.11. Stockholders' Action by Consent. Whenever the vote of
stockholders at a meeting thereof is required or permitted to be taken in
connection with any corporate action by any provisions of the statutes, the
certificate of incorporation, or these by-laws, the meeting and vote of
stockholders may be dispensed with, and any corporate action upon which a vote
of stockholders is required or permitted may be taken with the written consent
of stockholders having not less than 50% of all of the stock entitled to vote
upon the action if a meeting were held; provided that in no case shall the
written consent be by holders having less than the minimum percentage of the
total vote required by statute for the proposed corporate action and provided
that prompt notice be given to all stockholders of the taking of such corporate
action without a meeting and by less than unanimous consent.
ARTICLE III- DIRECTORS
Section 3.1. Number of Directors. Except as otherwise provided by law, the
certificate of incorporation or these by-laws, the property and business of the
corporation shall be managed by or under the direction of a board of not less
than two nor more than thirteen directors. Within the limits specified, the
number of directors shall be determined by resolution of the Board of Directors
or by the stockholders at the annual meeting. Directors need not be
stockholders. The directors shall be elected by ballot at the annual meeting of
the stockholders and each director shall be elected to serve until his successor
shall be elected and shall qualify or until his earlier resignation or removal;
provided that in the event of failure to hold such meeting or to hold such
election at such meeting, such election may be held at any special meeting of
the stockholders called for that purpose. If the office of any director becomes
vacant by reason of death, resignation, disqualification, removal, failure to
elect, or otherwise, the remaining directors, although less than a quorum, by a
majority vote of such remaining directors may elect a successor or successors
who shall hold office for the unexpired term or until their earlier resignation
or removal. 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 the directors so chosen shall hold office until the next
annual election and until their successors are elected and qualified or until
their earlier resignation or removal.
Section 3.2. Change in Number of Directors; Vacancies. The maximum number
of directors may be increased by an amendment to these by-laws adopted by a
majority vote of the Board of Directors or by a majority vote of the capital
stock having voting power, and if the number of directors is so increased by
action of the Board of Directors or of the stockholders or otherwise, then the
additional directors may be elected in the manner provided in Section 3.1 of
these by-laws for the filling of vacancies in the Board of Directors or at the
annual meeting of stockholders or at a special meeting called for that purpose.
In the event of a vacancy in the Board of Directors, the remaining directors,
except as otherwise provided by law or these bylaws, may exercise the powers of
the full board until the vacancy is filled.
<PAGE>
Section 3.3 Resignation. Any director of this corporation may resign at
any time by giving written notice to the Chairman of the Board, if any, the
President or the Secretary of the corporation. Such resignation shall take
effect at the time specified therein, at the time of receipt if no time is
specified therein and at the time of acceptance if the effectiveness of such
resignation is conditioned upon its acceptance. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 3.4. Removal. Any director or the entire Board of Directors may
be removed with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors.
Section 3.5. Place of Meetings and Books. The Board of Directors may hold
their meetings and keep the books of the corporation outside the State of
Delaware, at such places as they may from time to time determine.
Section 3.6. General Powers. In addition to the powers and authority
expressly conferred upon them by these by-laws, the board may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the certificate of incorporation or by these by-laws directed or
required to be exercised or done by the stockholders.
Section 3.7. Executive Committee. There may be an executive committee of
one or more directors designated by resolution passed by a majority of the whole
board. The act of a majority of the members of such committee shall be the act
of the committee. Said committee may meet at stated times or on notice to all by
any of their own number, and shall have and may exercise those powers of the
Board of Directors in the management of the business affairs of the Company as
are provided by law and may authorize the seal of the corporation to be affixed
to all papers which may require it. Vacancies in the membership of the committee
shall be filled by the Board of Directors at a regular meeting or at a special
meeting called for that purpose.
Section 3.8. Other Committees. The Board of Directors may also designate
one or more committees in addition to the executive committee, by resolution or
resolutions passed by a majority of the whole board; such committee or
committees shall consist of one or more directors of the corporation, and to the
extent provided in the resolution or resolutions designating them, shall have
and may exercise specific powers of the Board of Directors in the management of
the business and affairs of the corporation to the extent permitted by statute
and shall have power to authorize the seal of the corporation to be affixed to
all papers which may require it. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 3.9. Powers Denied to Committees. Committees of the Board of
Directors shall not, in any event, have any power or authority to amend the
certificate of incorporation, adopt an agreement of merger or consolidation,
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommend to the
stockholders a dissolution of the corporation or a revocation or a dissolution
or to amend the bylaws of the corporation. Further, committees of the Board of
Directors shall not have any power or authority to declare a dividend or to
authorize the issuance of stock.
<PAGE>
Section 3.10. Substitute Committee Member. In the absence or on the
disqualification of a 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 such absent or disqualified
member. Any committee shall keep regular minutes of its proceedings and report
the same to the board as may be required by the board.
Section 3.11. Compensation of Directors. The Board of Directors shall have
the power to fix the compensation of directors and members of committees of the
Board. The directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and/or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
Section 3.12. Notice of Meetings. The newly elected board may meet at such
place and time as shall be fixed and announced by the Chairman of the Board, the
President or Secretary, for the purpose of organization or otherwise, and no
further notice of such meeting shall be necessary to the newly elected directors
in order legally to constitute the meeting, provided a quorum shall be present,
or they may meet at such place and time as shall be stated in a notice given to
such directors either personally or by telephone, telecopy, cable, commercial
delivery service, telex, telegram or similar means twenty-four (24) hours prior
to such meeting, or as shall be fixed by the consent in writing of all the
directors.
Section 3.13. Regular Meetings. Regular meetings of the board may be
held without notice at such time and place as shall from time to time be
determined by the board.
Section 3.14. Special Meetings. Special meetings of the board may be
called by the Chairman of the Board, if any, the President or Secretary, on
twenty-four (24) hours' notice to each director, either personally or by
telephone, telecopy, cable, commercial delivery service, telex, telegram, or
similar means to his business or home address; special meetings shall be called
by the Secretary in like manner and on like notice, on the written request of
two directors.
Section 3.15. Quorum. At all meetings of the Board of Directors, a
majority of the total number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the act of a majority
of the directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors, except as may be otherwise specifically permitted
or provided by statute, or by the certificate of incorporation, or by these
by-laws. If at any meeting of the board there shall be less than a quorum
present, a majority of those present may adjourn the meeting from time to time
until a quorum is obtained, and no further notice thereof need be given other
than by announcement at said meeting which shall be so adjourned.
Section 3.16. Telephonic Participation in Meetings. Members of the Board
of Directors or any committee designated by such board may participate in a
meeting of the board or committee 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 pursuant to this
section shall constitute presence in person at such meeting. Notwithstanding
anything to the contrary in these by-laws, meetings of the board or a committee
by means of conference telephone or similar communications equipment may be
called by the Chairman of the Board, if any, the President or Secretary on one
(1) hours' notice to each director delivered by telephone to his business
address.
<PAGE>
Section 3.17. Action by Consent. Unless otherwise restricted by the
certificate of incorporation or these by-laws, 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 written consent thereto is signed by all
members of the board or of such committee as the case may be and such written
consent is filed with the minutes of proceedings of the board or committee.
ARTICLE IV - OFFICERS
Section 4.1. Selection; Statutory Officers. The officers of the
corporation shall be chosen by the Board of Directors. There shall be a
President, a Secretary and a Treasurer, and there may be a Chairman of the Board
of Directors, one or more Vice Presidents, one or more Assistant Secretaries,
and one or more Assistant Treasurers, as the Board of Directors may elect. The
office of President and Secretary shall not be held by the same person.
Section 4.2. Time of Election. The officers above named shall be chosen by
the Board of Directors at its first meeting after each annual meeting of
stockholders. None of said officers need be a director.
Section 4.3. Additional Officers. The board may appoint such other
officers and agents as it shall deem necessary, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 4.4. Terms of Office. Each officer of the corporation shall hold
office until his successor is chosen and qualified, or until his earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors.
Section 4.5. Compensation of Officers. The Board of Directors shall have
power to fix the compensation of all officers of the corporation. It may
authorize any officer, upon whom the power of appointing subordinate officers
may have been conferred, to fix the compensation of such subordinate officers.
Section 4.6. Chairman of the Board. The Chairman of the Board of Directors
shall preside at all meetings of the stockholders and directors, and shall have
such other duties as may be assigned to him from time to time by the Board of
Directors.
<PAGE>
Section 4.7. President. Unless the Board of Directors otherwise
determines, the President shall be the chief executive officer and head of the
corporation. Unless there is a Chairman of the Board, the President shall
preside at all meetings of directors and stockholders. Under the supervision of
the Board of Directors and of the executive committee, the President shall have
the general control and management of its business and affairs, subject,
however, to the right of the Board of Directors and of the executive committee
to confer any specific power, except such as may be by statute exclusively
conferred on the President, upon any other officer or officers of the
corporation. The President shall perform and do all acts and things incident to
the position of President and such other duties as may be assigned to him from
time to time by the Board of Directors or the executive committee.
Section 4.8. Vice Presidents. The Vice Presidents shall perform such of
the duties of the President on behalf of the corporation as may be respectively
assigned to them from time to time by the Board of Directors or by the executive
committee or by the President. The Board of Directors or the executive committee
may designate one of the Vice Presidents as the Executive Vice President, and in
the absence or inability of the President to act, such Executive Vice President
shall have and possess all of the powers and discharge all of the duties of the
President, subject to the control of the board and of the executive committee.
Section 4.9. Treasurer. The Treasurer shall have the care and custody of
all the funds and securities of the corporation which may come into his hands as
Treasurer, and the power and authority to endorse checks, drafts and other
instruments for the payment of money for deposit or collection when necessary or
proper and to deposit the same to the credit of the corporation in such bank or
banks or depository as the Board of Directors or the executive committee, or the
officers or agents to whom the Board of Directors or the executive committee may
delegate such authority, may designate, and he may endorse all commercial
documents requiring endorsements for or on behalf of the corporation. He may
sign all receipts and vouchers for the payments made to the corporation. He
shall render an account of his transactions to the Board of Directors or to the
executive committee as often as the board or the committee shall require the
same. He shall enter regularly in the books to be kept by him for that purpose
full and adequate account of all moneys received and paid by him on account of
the corporation. He shall perform all acts incident to the position of
Treasurer, subject to the control of the Board of Directors and of the executive
committee. He shall when requested, pursuant to vote of the Board of Directors
or the executive committee, give a bond to the corporation conditioned for the
faithful performance of his duties, the expense of which bond shall be borne by
the corporation.
Section 4.10. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors and of the stockholders; he shall attend to
the giving and serving of all notices of the corporation. Except as otherwise
ordered by the Board of Directors or the executive committee, he shall attest
the seal of the corporation upon all contracts and instruments executed under
such seal and shall affix the seal of the corporation thereto and to all
certificates of shares of the Capital Stock. He shall have charge of the stock
certificate book, transfer book and stock ledger, and such other books and
papers as the Board of Directors or the executive committee may direct. He
shall, in general, perform all the duties of Secretary, subject to the control
of the Board of Directors and of the executive committee.
<PAGE>
Section 4.11. Assistant Secretary. The Board of Directors or any two of
the officers of the corporation acting jointly may appoint or remove one or more
Assistant Secretaries of the corporation. Any Assistant Secretary upon his
appointment shall perform such duties of the Secretary, and also any and all
such other duties as the executive committee or the Board of Directors or the
President or the Executive Vice President or the Treasurer or the Secretary may
designate.
Section 4,12. Assistant Treasurer. The Board of Directors or any two of
the officers of the corporation acting jointly may appoint or remove one or more
Assistant Treasurers of the corporation. Any Assistant Treasurer upon his
appointment shall perform such of the duties of the Treasurer, and also any and
all such other duties as the executive committee or the Board of Directors or
the President or the Executive Vice President or the Treasurer or the Secretary
may designate.
Section 4.13. Subordinate Officers. The Board of Directors may select such
subordinate officers as it may deem desirable. Each such officer shall hold
office for such period, have such authority, and perform such duties as the
Board of Directors may prescribe. The Board of Directors may, from time to time,
authorize any officer to appoint and remove subordinate officers and to
prescribe the powers and duties thereof.
ARTICLE V - STOCK
Section 5.1. Stock. Each stockholder shall be entitled to a certificate or
certificates of stock of the corporation in such form as the Board of Directors
may from time to time prescribe. The certificates of stock of the corporation
shall be numbered and shall be entered in the books of the corporation as they
are issued. They shall certify the holder's name and number and class of shares
and shall be signed by both of (a) either the President or a Vice President, and
(b) any one of the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, and shall be sealed with the corporate seal of the
corporation. If such certificate is countersigned (1) by a transfer agent other
than the corporation or its employee, or, (2) by a registrar other than the
corporation or its employee, the signature of the officers of the corporation
and the corporate seal may be facsimiles. In case any officer or officers who
shall have signed, or whose facsimile signature or signatures shall have been
used on, any such certificate or certificates shall cease to be such officer or
officers of the corporation, whether because of death, resignation or otherwise,
before such certificate or certificates shall have been delivered by the
corporation, such certificate or certificates may nevertheless be adopted by the
corporation and be issued and delivered as though the person or persons who
signed such certificate or certificates or whose facsimile signature shall have
been used thereon had not ceased to be such officer or officers of the
corporation.
Section 5.2. Transfers of Stock. Subject to any transfer restrictions then
in force, the shares of stock of the corporation shall be transferable only upon
its books by the holders thereof in person or by their duly authorized attorneys
or legal representatives and upon such transfer the old certificates shall be
surrendered to the corporation by the delivery thereof to the person in charge
of the stock and transfer books and ledgers or to such other person as the
directors may designate by whom they shall be canceled and new certificates
shall thereupon be issued. The corporation shall be entitled to treat the holder
of record of any share or shares of stock as the holder in fact thereof and
accordingly shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person whether or not it shall
have express or other notice thereof save as expressly provided by the laws of
Delaware.
<PAGE>
Section 5.3. Record Date. The Board of Directors shall fix in advance a
date, not exceeding sixty (60) days preceding the date of any meeting of
stockholders or the date for the payment of any dividend or the date for the
allotment of rights or the date when any change or conversion or exchange of
capital stock is to occur, and in such case only such stockholders as shall be
stockholders of record on the date so fixed shall be entitled to such notice of;
and to vote at, such meeting, or to receive payment of such dividend, or to
receive such allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the corporation
after any such record date fixed as aforesaid.
Section 5.4. Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents or transfer clerks and one or more
registrars and may require all certificates of stock to bear the signature or
signatures of any of them.
Section 5.5. Dividends.
1. Power to Declare. 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 at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the certificate of incorporation and the
laws of Delaware.
2. Reserves. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve 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 directors shall think conducive to the interest of the
corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
Section 5.6. Lost, Stolen or Destroyed Certificates. No certificates for
shares of stock of the corporation shall be issued in place of any certificate
alleged to have been lost, stolen or destroyed, except upon production of such
evidence of the loss, theft or destruction and upon indemnification of the
corporation and its agents to such extent and in such manner as the Board of
Directors may from time to time prescribe.
Section 5.7. Inspection of Books. The stockholders of the corporation, by
a majority vote at any meeting of stockholders duly called, or in case the
stockholders shall fail to act, the Board of Directors shall have power from
time to time to determine whether and to what extent and what times and places
and under what conditions and regulations and books of the corporation (other
than the stock ledger) or any of them, shall be open to inspection of
stockholders; and no stockholder shall have any right to inspect any account or
book or document of the corporation except as conferred by the statute or
authorized by the Board of Directors or by a resolution of the stockholders.
<PAGE>
ARTICLE VI- MISCELLANEOUS MANAGEMENT PROVISIONS
Section 6.1. Checks. Drafts and Notes. All checks, drafts or orders for
the payment of money, and all notes and acceptances of the corporation shall
be signed by such officer or officers, agent or agents as the Board of
Directors may designate.
Section 6.2. Notices.
1. Unless otherwise specified in these by-laws, notices to directors and
stockholders shall be in writing and delivered personally or mailed to the
directors or stockholders at their addresses appearing on the books of the
corporation. Notice by mail shall be deemed to be given at the time when the
same shall be mailed. Notice to directors may also be given by telephone,
telecopy, cable, commercial delivery service, telex, telegram or similar means.
2. Whenever any notice is required to be given under the provisions of the
statutes or of the certificate of incorporation or of these bylaws, a written
waiver of notice, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting, or, in the case of a meeting of the
Board of Directors, participation in a meeting by means of conference telephone
or similar communications equipment, shall constitute a waiver of notice of such
meeting except when the person attends, or participates in, 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.
Section 6.3. Conflict of Interest. No contract or transaction between the
corporation and one or more of its directors or officers, or between the
corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose if (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
shareholders; or (iii) the contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the shareholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
<PAGE>
Section 6.4. Voting of Securities Owned by this Corporation. Subject
always to the specific directions of the Board of Directors, (a) any shares or
other securities issued by any other corporation and owned or controlled by this
corporation may be voted in person at any meeting of security holders of such
other corporation by the President of this corporation if he is present at such
meeting, or in his absence by the Treasurer of this corporation if he is present
at such meeting, and (b) whenever, in the judgment of the President, it is
desirable for this corporation to execute a proxy or written consent in respect
to any shares or other securities issued by any other corporation and owned by
this corporation, such proxy or consent shall be executed in the name of this
corporation by the President, without the necessity of any authorization by the
Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer, provided that if the President is unable to
execute such proxy or consent by reason of sickness, absence from the United
States or other similar cause, the Treasurer may execute such proxy or consent.
Any person or persons designated in the manner above stated as the proxy or
proxies of this corporation shall have full right, power and authority to vote
the shares or other securities issued by such other corporation and owned by
this corporation the same as such shares or other securities might be voted by
this corporation.
ARTICLE VII- INDEMNIFICATION
Section 7.1. Power to Indemnify in Actions, Suits or Proceedings other
than those by or in the Right of the Corporation. Subject to Section 3 of this
Article VII, the corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he 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, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or 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 action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 7.2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article VII, the
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
<PAGE>
Section 7.3. Authorization of Indemnification. Any indemnification under
this Article VII (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VII, as the case may be. Such
determination shall be made (i) by the Board of Directors by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (iii) by the stockholders. To the extent, however, that a
director, officer, employee or agent of the corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding described
above, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith, without the necessity of authorization
in the specific case.
Section 7.4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VII, a person 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, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe 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. The term "another enterprise" as used in this Section 4 shall mean
any other corporation or any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the
corporation as a director, officer, employee or agent. The provisions of this
Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 1 or 2 of this Article VII, as the
case may be.
Section 7.5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VII. The basis of such indemnification by
a court shall be a determination by such court that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standards of conduct set forth in Sections 1 or 2 of this
Article VII, as the case may be. Notice of any application for indemnification
pursuant to this Section 5 shall be given to the corporation promptly upon the
filing of such application.
<PAGE>
Section 7.6. Expenses Payable in Advance. Expenses incurred in defending
or investigating a threatened or pending action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the corporation as authorized in this Article VII.
Section 7.7. Non-Exclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or granted
pursuant to this Article VII shall not be deemed exclusive of any other rights
to which those seeking indemnification or advancement of expenses may be
entitled under any By-Law, agreement, contract, vote of stockholders or
disinterested directors or pursuant to the direction (howsoever embodied) of any
court of competent jurisdiction or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, it
being the policy of the corporation that indemnification of the persons
specified in Sections 1 and 2 of this Article VII shall be made to the fullest
extent permitted by law. The provisions of this Article VII shall not be deemed
to preclude the indemnification of any person who is not specified in Sections 1
or 2 of this Article VII but whom the corporation has the power or obligation to
indemnify under the provisions of the General Corporation Law of the State of
Delaware, or otherwise.
Section 7.8. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VII.
Section 7.9. Meaning of "Corporation" for Purposes of Article VII. For
purposes of this Article VII, references to "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 Article VII with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
<PAGE>
Section 7.10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
Section 7.11. Severabilitv. If any word, clause or provision of this
Article VII or any award made hereunder shall for any reason be determined to be
invalid, the provisions hereof shall not otherwise be affected thereby but shall
remain in full force and effect.
Section 7.12. Intent of Article. The intent of this Article VII is to
provide for indemnification to the fullest extent permitted by applicable law,
including Section 145 of the General Corporation Law of Delaware. To the extent
that such Section or any successor Section may be amended or supplemented from
time to time, this Article VII shall be amended automatically and construed so
as to permit indemnification to the fullest extent from time to lime permitted
by law.
ARTICLE VIII- AMENDMENTS
Section 8.1. Amendments. The by-laws of the corporation may be altered,
amended or repealed at any meeting of the Board of Directors upon notice thereof
in accordance with these by-laws, or at any meeting of the stockholders by the
vote of the holders of the majority of the stock issued and outstanding and
entitled to vote at such meeting, in accordance with the provisions of the
certificate of incorporation and of the laws of Delaware.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THERMO INSTRUMENT SYSTEMS INC.'S
QUARTERLY REPORT ON FORM 10-Q FOR THE PERIOD ENDED APRIL 1,2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-01-2000
<CASH> 188,588
<SECURITIES> 0
<RECEIVABLES> 487,378
<ALLOWANCES> 29,315
<INVENTORY> 345,924
<CURRENT-ASSETS> 1,379,874
<PP&E> 443,154
<DEPRECIATION> 160,742
<TOTAL-ASSETS> 2,851,282
<CURRENT-LIABILITIES> 969,722
<BONDS> 451,561
0
0
<COMMON> 13,400
<OTHER-SE> 1,116,498
<TOTAL-LIABILITY-AND-EQUITY> 2,851,282
<SALES> 521,086
<TOTAL-REVENUES> 521,086
<CGS> 276,202
<TOTAL-COSTS> 276,202
<OTHER-EXPENSES> 32,365
<LOSS-PROVISION> 1,304
<INTEREST-EXPENSE> 12,583
<INCOME-PRETAX> 43,270
<INCOME-TAX> 19,482
<INCOME-CONTINUING> 19,332
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 19,332
<EPS-BASIC> 0.16
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