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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-4184
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MATEC Corporation
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(Exact name of registrant as specified in its charter)
Maryland 06-0737363
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(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification Number)
75 South St., Hopkinton, Massachusetts 01748
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(Address of principal executive offices) (Zip Code)
(508) 435-9039
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of May 2, 2000, the number of shares outstanding of Registrant's
Common Stock, par value $.05 was 2,739,148.
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MATEC Corporation
Index
Page
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PART I. FINANCIAL INFORMATION
Consolidated Condensed Balance Sheets -
April 2, 2000 and December 31, 1999 ..................... 3
Consolidated Statements of Operations -
Three Months Ended April 2, 2000 and April 4, 1999 ...... 4
Consolidated Condensed Statements of Cash Flows -
Three Months Ended April 2, 2000 and April 4, 1999 ...... 5
Consolidated Statements of Comprehensive Income -
Three Months Ended April 2, 2000 and April 4, 1999 ...... 6
Notes to Consolidated Condensed Financial Statements ..... 7-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................... 10-12
Quantitative and Qualitative Disclosures about
Market Risk ............................................. 12
PART II. OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds ....... 13
Item 6 - Exhibits and Reports on Form 8-K ................ 13
Signatures ..................................................... 14
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MATEC Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(In thousands, except share data) (Unaudited)
4/2/00 12/31/99
-------- --------
ASSETS
Current assets:
Cash and cash equivalents ............................ $ 3,158 $ 3,118
Receivables, net ..................................... 3,417 3,097
Inventories .......................................... 3,581 3,330
Deferred income taxes and other current assets ....... 994 811
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Total current assets ............................... 11,150 10,356
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Property, plant and equipment, at cost ................. 8,790 8,619
Less accumulated depreciation ........................ 5,974 5,819
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2,816 2,800
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Marketable equity securities ........................... 2,943 3,073
Other assets ........................................... 175 303
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$17,084 $16,532
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .................... $ - $ 998
Accounts payable ..................................... 1,548 1,317
Accrued liabilities .................................. 1,416 1,064
Income taxes ......................................... 894 547
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Total current liabilities .......................... 3,858 3,926
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Deferred income taxes .................................. 1,363 1,429
Stockholders' equity:
Preferred stock, $1.00 par value-
Authorized 1,000,000 shares; issued none ............ - -
Common stock, $.05 par value-
Authorized 10,000,000 shares; Issued and outstanding:
2,739,148 and 2,650,148 shares ..................... 137 132
Capital surplus ...................................... 4,794 4,527
Retained earnings .................................... 5,265 4,774
Accumulated other comprehensive income ............... 1,667 1,744
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Total stockholders' equity ...................... 11,863 11,177
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$17,084 $16,532
======= =======
See notes to consolidated condensed financial statements.
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MATEC Corporation and Subsidiaries
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
4/2/00 4/4/99
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Net sales ................................ $ 5,426 $ 2,400
Cost of sales ............................ 3,802 2,039
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Gross profit ........................... 1,624 361
Operating expenses:
Selling and advertising ................ 622 521
General and administrative ............. 411 265
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1,033 786
Operating profit (loss) .................. 591 (425)
Other income (expense):
Interest income ......................... 45 93
Interest expense ........................ (9) (51)
Gain on sale of investment .............. 1,226 -
Other, net .............................. 28 18
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1,290 60
Earnings (loss) from continuing
operations before income taxes .......... 1,881 (365)
Income tax (expense) benefit ............. (752) 120
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Earnings (loss) from continuing operations 1,129 (245)
Earnings (loss) from discontinued operations (90) 30
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Net earnings (loss) ...................... $ 1,039 $ (215)
======= =======
Basic earnings (loss) per share:
Continuing operations ................... $ .41 $ (.09)
Discontinued operations ................. (.03) .01
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$ .38 $ (.08)
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Diluted earnings (loss) per share:
Continuing operations ................... $ .40 $ (.09)
Discontinued operations ................. (.03) .01
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$ .37 $ (.08)
====== ======
Weighted average shares, basic ........... 2,714 2,716
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Weighted average shares, diluted ......... 2,835 2,716
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Cash dividends per share ................ $ .20 $ -
===== =====
See notes to consolidated condensed financial statements.
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MATEC Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
4/2/00 4/4/99
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Cash flows from operating activities:
Earnings (loss) from continuing operations ....... $ 1,129 $ (245)
Adjustments to reconcile earnings (loss) from
continuing operations to net cash provided (used)
by operating activities:
Depreciation and amortization .................. 155 156
Changes in deferred income taxes ............... (113) 40
Gain on sale of investment ..................... (1,226) -
Changes in operating assets and liabilities .... 276 (644)
Other .......................................... 8 1
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Net cash provided (used) by operating activities 229 (692)
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Cash flows from investing activities:
Proceeds from sale of investment ................. 1,319 -
Capital expenditures ............................. (171) (121)
Collection of note receivables ................... 43 35
Other, net........................................ (8) (8)
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Net cash provided (used) by investing activities 1,183 (94)
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Cash flows from financing activities:
Payment on long-term debt ........................ (745) -
Dividend paid .................................... (548) -
Stock options exercised .......................... 11 -
Purchases of common stock ........................ - (23)
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Net cash (used) by financing activities (1,282) (23)
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Net cash provided (used) by discontinued operations (90) 50
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Net increase (decrease) in cash and cash equivalents 40 (759)
Cash and cash equivalents:
Beginning of period .............................. 3,118 4,516
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End of period .................................... $ 3,158 $ 3,757
======= =======
Noncash investing and financing activities:
During 2000, the Company issued 85,000 common shares upon the
conversion of the lender's warrant as payment for $255,000 of debt.
See notes to consolidated condensed financial statements.
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MATEC Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(Unaudited)
Three Months Ended
4/2/00 4/4/99
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Net earnings (loss) ...................... $ 1,039 $ (215)
Other comprehensive income, net of tax:
Unrealized (loss) on marketable equity
securities, net of tax benefit of $52
in 2000 and $65 in 1999 ................ (77) (97)
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Comprehensive income (loss) .............. $ 962 $ (312)
======= =======
See notes to consolidated condensed financial statements.
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MATEC Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
1. Financial Presentation:
The interim financial statements are unaudited but, in the opinion
of management, reflect all adjustments necessary for fair presentation
of results for such periods. The results of operations for any
interim period are not necessarily indicative of results for the full
year.
These interim financial statements should be read in conjunction
with the financial statements and related notes thereto included in
the Company's 1999 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission.
2. Receivables, net:
Receivables, net of allowances, consist of the following:
4/2/00 12/31/99
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(in thousands)
Accounts receivable, less allowance for doubtful
accounts of $105 and $93 ....................... $ 3,140 $ 2,820
Refundable income taxes ......................... 154 154
Amounts due from the sale of discontinued
operations .................................... 123 123
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$ 3,417 $ 3,097
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3. Inventories:
Inventories consist of the following:
4/2/00 12/31/99
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(in thousands)
Raw materials ....................... $ 1,890 $ 1,797
Work in process ..................... 1,187 1,179
Finished goods ...................... 504 354
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$ 3,581 $ 3,330
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4. Long-Term Debt:
In January 2000, the Company paid $745,000 in cash and issued
85,000 shares of common stock as payment in full for the $1 million
term debt note due on June 30, 2000. The common shares were issued
upon conversion of the lender's warrant.
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4. Discontinued Operations:
During 1998, the Company sold the assets of its Bergen Cable
Technologies, Inc. ("BCT") subsidiary. As a result of the sale, the
Company is performing environmental clean-up at that site. During
2000, the Company expensed $150,000 to increase the environmental
expense accrual to reflect the current available estimate to complete
the remediation. As of April 2, 2000, $800,000 has been expensed for
the clean-up and $305,000 is accrued for future payments.
In March 1999, the Company received a $50,000 note payment and
recorded a $50,000 pre-tax gain on disposal of discontinued
operations. Since the entity acquiring the assets of BCT had
significant third-party debt compared to its equity and the Company's
note receivable was subordinated to the third party debt, the Company
had deferred any gain on the note until cash payments were received by
the Company.
5. Gain on Sale of Investment:
In January 2000, the Company sold its common stock in Bergen Cable
Technology, Inc. The Company acquired these shares as part of the
purchase price for the sale of BCT. The Company received $1,319,000
in cash after estimated expenses and recorded a gain of $1,226,000 in
the first quarter of 2000. In addition, the Company's share of the
escrow balance amounts to approximately $170,000. This escrow
balance, less any claims for indemnity thereon, will be distributed to
the Company on or before January 4, 2002. The Company will record a
gain on this escrow balance when the cash is received.
6. Earnings (Loss) Per Share:
The computation of basic and diluted earnings (loss) per share
from continuing operations is as follows:
Three Months Ended
In thousands, except per share amounts 4/2/00 4/4/99
- -------------------------------------- -------- --------
Basic
-------
Earnings (loss) from continuing operations $ 1,129 $ (245)
======= =======
Weighted average shares outstanding 2,714 2,716
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Basic earnings (loss) per share from
continuing operations $ .41 $(.09)
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Three Months Ended
In thousands, except per share amounts 4/2/00 4/4/99
- -------------------------------------- -------- --------
Diluted
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Earnings (loss) from continuing operations $ 1,129 $ (245)
Plus: interest impact, net of taxes from
the assumed reduction of debt from
the conversion of warrants 4 -
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Adjusted earnings (loss) from continuing
operations $ 1,133 $ (245)
======= =======
Weighted average shares outstanding 2,714 2,716
Increase from the assumed:
exercise of stock options 96 -
conversion of warrants 25 -
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Diluted weighted average shares outstanding 2,835 2,716
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Diluted earnings (loss) per share from
continuing operations $ .40 $(.09)
===== =====
In 1999, options to purchase 46,664 shares of common stock and
warrants to purchase 85,000 shares of common stock were not considered
in the computation of diluted earnings per share since the Company
reported a loss from continuing operations.
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Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Liquidity and Capital Resources
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Cash and cash equivalents increased $40,000 during the three months
ended April 2, 2000. During this period, the Company's continuing
operations and investing activities generated cash of $229,000 and
$1,183,000, respectively, while financing activities used cash of
$1,282,000. Discontinued operations used $90,000 in cash.
Trade receivables, net increased $320,000 mainly as a result of the
higher sales volume in the quarter versus the prior quarter. Inventory
increased $251,000 mainly to support the current sales backlog and
customer delivery requirements. The $231,000 increase in accounts
payable is mainly attributable to the timing of inventory and machinery
and equipment purchases. Income tax payments during the three months
ended April 2, 2000 amounted to $484,000.
During the three months ended April 2, 2000, the Company sold its
common stock in Bergen Cable Technologies, Inc. and received $1,319,000
in cash after estimated expenses of the sale. During this period,
capital expenditures amounted to $171,000 as the Company added new and
upgraded existing production capabilities and processes.
In January 2000, the Company paid $745,000 in cash and issued 85,000
shares of common stock as payment in full for the $1 million term debt
note due on June 30, 2000. The common stock was issued upon conversion
of the lender's warrant. In February 2000, the Company paid a special
cash dividend amounting to $548,000 or $.20 per common share.
Management believes that based on its current working capital, the
expected cash flows from operations and its $1,850,000 lines of credit
availability, the Company's resources are sufficient to meet its
financial needs in 2000 including a remaining capital expenditures budget
of approximately $679,000.
Results of Operations
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Net sales from continuing operations for the quarter ended April 2,
2000 increased $3,026,000 (126%) over the comparable period in 1999. The
main reason for the sales increase was the positive impact of the higher
backlog at the beginning of 2000 ($6.4 million) compared to that at the
beginning of 1999 ($2.3 million). During the 1Q of 2000, the Company has
continued to experience strong bookings. The backlog at April 2, 2000 is
$8.3 million. The increases in backlog and bookings are mainly due to
the strong market demand from the telecommunications industry. The
Company continues to experience some late shipping deliveries with some
of its products. The Company is working with its supplier base and is
increasing its manufacturing capacity to improve delivery performance.
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The gross profit percentage increased to 30% in 2000 from 15% in
1999 mainly due to the favorable effect of allocating the fixed overhead
expenses over the increased sales volume. Overall direct labor and
material costs decreased slightly as a percentage of sales mainly due to
changes in the sales mix.
Operating expenses for the quarter ended April 2, 2000 were
$1,033,000 or 19% of net sales compared to $786,000 or 33% of net sales
in 1999. Selling and advertising expenses increased $101,000 (19%) over
1999 mainly as a result of higher commission expenses to the Company's
outside manufacturers' representatives. General and administrative
expenses increased $146,000 over 1999 mainly due to increased personnel
expenses and the provision for the management incentive bonus.
During the quarter ended April 2, 2000, interest income decreased
$48,000 from 1999 mainly as a result of the lower interest income
received on the notes receivable generated by the sales of the
discontinued operations. The decrease in interest expense is due to the
lower levels of outstanding debt. During the quarter ended April 2,
2000, the Company sold its common stock in Bergen Cable Technology, Inc.
and realized a $1,226,000 pre-tax gain on the sale.
The estimated effective income tax rate for 2000 is 40% compared to
33% in 1999. The difference in rates is mainly due to the limited state
tax benefit of operating losses within a state.
As a result of the increased sales level and gross margin in 2000,
offset in part by higher operating expenses, the Company reported an
operating profit of $591,000 during the quarter ended April 2, 2000
compared to an operating loss of $425,000 during the comparable period in
1999. Nonoperating income amounted to $1,290,000 in 2000 compared to
$60,000 of income in 1999. As a result, the Company reported pre-tax
earnings from continuing operations of $1,881,000 during the quarter
ended April 2, 2000 versus a pre-tax loss of $365,000 in 1999.
Continuing operations reported net earnings of $1,129,000 for the quarter
ended April 2, 2000 compared to a net loss of $245,000 in 1999.
Discontinued operations reported a loss of $90,000 in 2000, compared to
earnings of $30,000 in 1999. In total, the Company reported net earnings
of $1,039,000 for the quarter ended April 2, 2000 compared to a net loss
of $215,000 in the comparable period of 1999.
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Forward-Looking Statements
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Certain statements made herein contain forward-looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Words such as
"expects", "believes", "estimates", "plans" or similar expressions are
intended to identify such forward-looking statements. Factors that could
cause such differences include, but are not limited to those discussed in
this section and those discussed in the Company's Form 10-K for the year
ended December 31, 1999 under the section "Forward Looking Statements"
included under the caption "Management's Discussion and Analysis", is
herein incorporated by reference.
Recent Accounting Pronouncements
- --------------------------------
In June 1999, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 137 ("SFAS 137"),
"Accounting for Derivative Instruments and Hedging Activities - Deferral
of the Effective Date of FASB Statement No. 133." SFAS 137 amends
Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," to defer
its effective date to fiscal years beginning after June 15, 2000.
Accordingly, the Company will adopt this statement in fiscal year 2001 as
required. SFAS 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in
other contracts, and for hedging activities. The Company is currently
evaluating the impact of SFAS 133 and has not yet determined its effect
on the Company's consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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There have been no material changes in the Company's market risk during
the three months ended April 2, 2000.
The information set forth on page 5 of the 1999 Annual Report to
Stockholders under the section "Quantitative and Qualitative Disclosures
about Market Risk" included under the caption "Management's Discussion
and Analysis" is incorporated by reference.
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PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(c) On January 27, 2000, Massachusetts Capital Resources
Company ("MCRC") exercised its warrant to purchase 85,000 shares of
Common Stock of the Company at an exercise price of $3.00 per share.
The aggregate exercise price was paid by surrender of $255,000 principal
amount of the Note dated April 12, 1995 issued by the Company to MCRC.
The 85,000 shares of Common Stock were not registered under the
Securities Act of 1933, as amended, ("Act") because the shares were
issued in a transaction not involving a public offering within the
meaning of Section 4(2) of the Act. The certificate evidencing the
shares bears a legend as follows:
"The securities represented hereby have not been registered
under the Securities Act of 1933, as amended. These securities
have been acquired for investment and not with a view to
distribution or resale, and may not be transferred or disposed
of unless (1) a registration statement under the Securities Act
of 1933, as amended, is then in effect with respect thereto and
such sale is made pursuant to such registration statement or
(2) a written opinion from counsel reasonably satisfactory to
the Company is obtained to the effect that such transfer or
disposition will not violate the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder."
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Amendment to Article III, Section 1 of the By-Laws
effective May 18, 2000. Filed herein.
3.2 By-Laws effective May 18, 2000. Filed herein.
13. Page 5 of the 1999 Annual Report to Stockholders.
Filed for electronic purposes only.
27. Financial Data Schedule. Filed for electronic
purposes only.
(b) Reports on Form 8-K:
On January 13, 2000, the Registrant filed a Form 8-K
dated January 4, 2000 reporting under Item 5. Other
Events.
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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.
MATEC Corporation
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Date: May 2, 2000 By /s/ Ted Valpey, Jr.
---------------------------------
Ted Valpey, Jr.
Chairman of the Board and
President
Date: May 2, 2000 By /s/ Michael J. Kroll
---------------------------------
Michael J. Kroll,
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
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Exhibit 3.1
Amendment to By-Laws - effective May 18, 2000
ARTICLE III
DIRECTORS
Section 1. Number, Qualification and Term. The property and
business of the Corporation shall be managed by its Board of Directors
consisting of not less than Five (5) nor more than Thirteen (13)
persons. The number of directors constituting the entire Board shall
be Nine (9); provided, however, that from time to time, such number may
be decreased to not less than Five (5) or increased to not more than
Thirteen (13) persons by amendment of this section of the By-laws by a
majority of the entire Board of Directors. Directors need not be
stockholders. They shall be elected at the Annual Meeting of
Stockholders and each director shall be elected to serve until his
successor shall be elected and shall qualify.
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Exhibit 3.2
MATEC Corporation
By-Laws - effective May 18, 2000
ARTICLE I
OFFICES
Section 1. Offices. The Corporation shall maintain a registered
office in Maryland. The Corporation may maintain such other offices
and keep its books, documents and records at such other places both
within and without the State of Maryland as the Board of Directors may
from time to time determine or the business of the Corporation may
require.
ARTICLE II
STOCKHOLDERS
Section 2. Annual Meetings. Annual meetings of stockholders shall
be held on the last Wednesday in April, in each year, if not a legal
holiday, and if a legal holiday, then on the next secular day
following, or on such other day as shall be fixed by the Board of
Directors and stated in the notice of the meeting, when stockholders
shall elect by a plurality vote a Board of Directors, and transact such
other business as may properly be brought before the meeting. The
annual meeting shall be held at a time determined by the Board of
Directors and stated in the notice of the meeting.
Section 3. Notice of Annual Meeting. Written or printed notice of
the annual meeting stating the place, date and hour of the meeting
shall be delivered not less than ten nor more than ninety days before
the date of the meeting, by mail, by or at the direction of the chief
executive officer, the Secretary, or the officer or persons calling the
meeting, to each stockholder of record entitled to vote at such
meeting.
Section 4. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed
by statute or by the Articles of Incorporation, may be called by the
chief executive officer or the Board of Directors. The business
transacted at any special meeting of stockholders shall be limited to
the purposes stated in the notice of the meeting.
Section 5. Notice of Special Meetings. Written or printed notice
of a special meeting stating the place, date and hour of the meeting
and the purpose or purposes for which the meeting is called, shall be
delivered not less than ten nor more than ninety days before the date
of the meeting, by mail, by or at the direction of the chief executive
officer, the Secretary, or the officer or persons calling the meeting,
to each stockholder of record entitled to vote at such meeting. The
notice shall also indicate that it is being issued by, or at the
direction of, the person calling the meeting.
Section 6. Quorum. The holders of a majority of the shares issued
and outstanding and entitled to vote, represented in person or by
proxy, shall constitute a quorum at all meetings of the stockholders
for the transaction of business except as otherwise provided by statute
or by the Articles of Incorporation. If, however, such quorum shall
not be present or represented at any meeting of the stockholders, the
stockholders present in person or represented by proxy shall have power
to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have
been transacted at the meeting as originally noticed.
Section 7. Voting. At any meeting of stockholders each
outstanding share having voting power shall be entitled to one vote on
each matter submitted to a vote. A stockholder may vote either in
person or by proxy executed in writing by the stockholder or by his
duly authorized attorney-in-fact. All elections shall be determined by
plurality vote, and except as otherwise provided by statute or in the
Articles of Incorporation, all other matters shall be determined by
vote of a majority of the shares present or represented at such meeting
and voting on such matters.
Section 8. Inspectors of Election. The Board of Directors in
advance of any meeting of stockholders may appoint one or more
inspectors to act at the meeting or any adjournment thereof. If
inspectors are not so appointed, the person presiding at a meeting of
stockholders may, and, on the request of any stockholder entitled to
vote thereat, shall appoint one or more inspectors. In case any person
appointed as inspector fails to appear or act, the vacancy may be
filled by the Board of Directors in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector, before
entering upon the discharge of his duties shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability.
Section 9. List of Stockholders. A list of stockholders as of the
record date, certified by the officer of the Corporation responsible
for its preparation or by the transfer agent, shall be produced at any
meeting of stockholders upon the request thereat or prior thereto of
any stockholder. If the right to vote at any meeting is challenged,
the inspectors of election, or person presiding thereat shall require
such list of stockholders to be produced as evidence of the right of
the persons challenged to vote at such meeting, and all persons who
appear from such list to be stockholders entitled to vote thereat may
vote at such meeting.
ARTICLE III
DIRECTORS
Section 1. Number, Qualification and Term. The property and
business of the Corporation shall be managed by its Board of Directors
consisting of not less than Five (5) nor more than Thirteen (13)
persons. The number of directors constituting the entire Board shall
be Nine (9); provided, however, that from time to time, such number may
be decreased to not less than Five (5) or increased to not more than
Thirteen (13) persons by amendment of this section of the By-laws by a
majority of the entire Board of Directors. Directors need not be
stockholders. They shall be elected at the Annual Meeting of
Stockholders and each director shall be elected to serve until his
successor shall be elected and shall qualify.
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Section 2. Removal. Any or all of the directors may be removed
for cause at any time by the vote of the stockholders.
Section 3. Any vacancy occurring in the Board of Directors for any
cause other than by reason of an increase in the number of directors
may be filled by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum. Any vacancy
occurring by reason of an increase in the number of directors may be
filled by action of a majority of the entire Board of Directors. A
director elected by the Board of Directors to fill a vacancy shall be
elected to hold office until the next annual meeting of stockholders or
until his successor is elected and qualifies.
Section 4. Additional Powers. In addition to the powers and
authorities by these By-Laws expressly conferred upon it, the Board of
Directors may exercise all such powers of the Corporation and do all
such lawful acts and things as are not by statute or by the Articles of
Incorporation or by these By-Laws directed or required to be exercised
or done by the stockholders.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Place. Meetings of the Board of Directors, regular or
special, may be held either within or without the State of Maryland.
Section 2. First Meeting. The first meeting of each newly elected
Board of Directors shall be held immediately after the annual meeting
of stockholders at the same place as such meeting is held and no notice
of such meeting to the newly elected directors shall be necessary in
order legally to constitute the meeting provided a quorum shall be
present, or it may convene at such place and time as shall be specified
in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a duly executed waiver
of notice thereof.
Section 3. Regular Meetings. Regular meetings of the Board of
Directors may be held upon such notice, or without notice, and at such
time and at such place as shall from time to time be determined by the
Board.
Section 4. Special Meetings. Special meetings of the Board of
Directors may be called by the chief executive officer on written
notice to each director, deposited in the United States mail no later
than the third calendar day preceding the meeting date or delivered by
hand or to the telegraph company no later than the first calendar day
preceding the meeting date; special meetings shall be called by the
chief executive officer or Secretary in like manner and on like notice
on the written request of two directors.
Section 5. Quorum. A majority of the entire Board of Directors
shall constitute a quorum for the transaction of business unless a
greater or lesser number is required by law or by the Articles of
Incorporation. The vote of a majority of the directors present at any
meeting at which a quorum is present shall be the act of the Board of
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Directors, unless the vote of a greater number is required by law or by
the Articles of Incorporation. If a quorum shall not be present at any
meeting of directors, the directors present may adjourn the meeting
from time to time. Notice of any such adjournment shall be given to
any director who was not present at the time of such adjournment and
unless announced at the meeting to the other directors.
Section 6. Consent in Lieu of Meeting. Any action required or
permitted to be taken by the Board of Directors or any committee
thereof may be taken without a meeting if all members of the Board or
the committee consent in writing to the adoption of a resolution
authorizing the action. The resolution and the written consents
thereto by the members of the Board or committee shall be filed with
the minutes of the proceedings of the Board or committee.
Section 7. Telephone Participation at Meetings. Any one or more
of the Board of Directors or any committee thereof may participate in a
meeting of the Board of Directors or of such committee by means of
conference telephone or similar communications equipment allowing all
persons participating in the meeting to hear each other at the same
time. Participation in a meeting by such means shall constitute
presence in person at a meeting.
ARTICLE V
COMMITTEES
Section 1. Committees. The Board of Directors, by resolution
adopted by a majority of the entire board, may designate, from among
its members, an executive committee and other committees consisting of
three or more directors, which, to the extent provided in the
resolution, shall have all the authority of the Board, except as
otherwise required by law. Vacancies in the membership of such
committees shall be filled by the Board of Directors at a regular or
special meeting. Such committees shall keep regular minutes of its
proceedings and report the same to the Board when required.
Subject to the provisions of these By-Laws, the executive committee
and each other committee shall fix its own rules of procedure and shall
meet as provided by such rules or by resolution of the Board of
Directors and it shall also meet at the call of the Chairman of the
Board or President of the Corporation or any two members of such
committee. A majority of the executive committee and of each other
committee shall constitute a quorum for the transaction of business and
the vote of a majority of the members of such committee present at any
meeting at which there is a quorum shall be the act of such committee.
ARTICLE VI
NOTICES
Section 1. Form; Delivery. Whenever, under the provisions of the
statutes or of the Articles of Incorporation or of these By-Laws,
notice is required to be given to any director or stockholder, such
notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be
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deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by hand
delivery, effective upon such delivery, or by telegram which notice
shall be deemed to have been given when delivered to the telegraph
company. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 2. Waiver of Notice. Whenever any notice is required to
be given under the provisions of any statute or under the provisions of
the Articles of Incorporation or these By-Laws, a waiver thereof in
writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice. In addition, any stockholder
attending a meeting of stockholders in person or by proxy without
protesting prior to the conclusion of the meeting, the lack of notice
thereof to him, and any director attending a meeting of the Board of
Directors without protesting prior to the meeting or at its
commencement such lack of notice shall be conclusively deemed to have
waived notice of such meeting.
ARTICLE VII
OFFICERS AND AGENTS
Section 1. Officers. The officers of the Corporation shall be
chosen by the Board of Directors and shall be a Chairman of the Board,
a President, a Vice-President, a Secretary and a Treasurer. The Board
of Directors may also choose additional Vice-Presidents, and one or
more Assistant Secretaries and Assistant Treasurers.
Section 2. Election. The Board of Directors at its first meeting
after each annual meeting of stockholders shall choose a Chairman of
the Board, a President, one or more Vice-Presidents, a Secretary and a
Treasurer. Any two or more offices may be held by the same person.
Section 3. Additional Officers and Agents. The Board of Directors
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 of Directors.
Section 4. Compensation. The salaries of all officers of the
Corporation shall be fixed by the Board of Directors and the
compensation of employees and agents shall be so fixed or shall be
fixed by officers thereunto duly authorized.
Section 5. Term of Office; Removal. The officers of the
Corporation shall hold office until their successors are chosen and
qualify. Any officer or agent elected or appointed by the Board of
Directors may be removed at any time with or without cause by the
Board. Any vacancy occurring in any office of the Corporation may be
filled by the Board of Directors.
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Section 6. Powers and Duties of the Chairman of the Board. The
Chairman of the Board of Directors shall preside at all meetings of the
Board and all meetings of the stockholders at which he shall be present
and shall have such other powers and duties as may from time to time be
assigned to him by the Board of Directors.
Section 7. Powers and Duties of the President. The President
shall be the Chief Executive Officer of the Corporation, and shall have
the general management and superintendence of the affairs of the
Corporation, subject, however, to the control of the Board of
Directors; and in all cases where, and to the extent that, the duties
of the other officers of the Corporation are not specifically
prescribed by By-Laws or rules or regulations of the Board of
Directors, the President may prescribe such duties. He shall have
general and active supervision over the property, business and affairs
of the Corporation and may sign, execute, and deliver in the name of
the Corporation deeds, mortgages, bonds, contracts, powers of attorney,
and other instruments, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or these
By-Laws to some other officer or agent of the Corporation or shall be
required by law or otherwise to be signed or executed, and may exercise
any and all powers and perform any and all duties relating to such
supervision, or which are imposed upon him by the By-Laws, or by the
Board of Directors.
Subject to such limitations as the Board of Directors may from time
to time prescribe, the Chief Executive Officer shall have power to
appoint and to dismiss all such agents and employees of the Corporation
who are not officers thereof (including any appointed by the Board) as
he may deem proper, and to prescribe their duties, and subject to like
limitations, delegate to other officers of the Corporation any other of
the powers and duties conferred upon him by the By-Laws or by the Board
of Directors.
Section 8. Powers and Duties of the Vice President. The
Vice-President shall perform the duties as may be prescribed by the
Board of Directors and subject to the chief executive officer.
Section 9. Powers and Duties of the Secretary. The Secretary
shall attend all sessions of the Board and all meetings of the
stockholders and record all votes and the minutes of all proceedings in
a book to be kept for that purpose, and shall perform like duties for
any committee of the Board when required. He shall cause to be given
notice of all meetings of stockholders and directors and shall perform
such other duties as pertain to his office. He shall keep in safe
custody the seal of the Corporation and when authorized by the Board of
Directors, affix it when required to any instrument.
Section 10. Powers and Duties of the Treasurer. The Treasurer
shall have the custody of all the corporate funds and securities and
shall keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation and shall deposit all moneys and
other valuable effects in the name and to the credit of the Corporation
in such depositories as may be designated by the Board of Directors.
He shall disburse the funds of the Corporation as may be ordered by the
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Board, taking proper vouchers for such disbursements, and shall render
to the chief executive officer and directors at the regular meetings of
the Board, or whenever they may require it, an account of all his
transactions as treasurer and of the financial condition of the
Corporation.
Section 11. Powers and Duties of Other Officers. All other
officers shall have such duties and exercise such powers as generally
pertain to their respective offices and all officers shall have such
other duties and exercise such other powers as from time to time may be
prescribed by the chief executive officer or the Board of Directors.
ARTICLE VIII
SHARES
Section 1. Form; Signature. The shares of the Corporation shall
be represented by certificates signed by the President or a
Vice-President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer of the Corporation and may be
sealed with the seal of the Corporation or a facsimile thereof. The
signatures of the officers of the Corporation upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or
registered by a registrar other than the Corporation itself or an
employee of the Corporation. In case any officer who has signed or
whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such
officer at the date of issue.
Section 2. Lost Certificates. The Board of Directors may
authorize the officers or agents of the Corporation to issue a new
certificate in place of any certificate theretofore issued by the
Corporation alleged to have been lost or destroyed and as a condition
precedent to the issuance thereof, may prescribe such terms and
conditions as it deems expedient, and may require such indemnities as
it deems adequate to protect the Corporation from any claim that may be
made against it with respect to any such certificate alleged to have
been lost or destroyed.
Section 3. Transfer of Shares. Upon surrender to the Corporation
or the transfer agent of the Corporation of a certificate representing
shares duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, a new certificate shall be issued
to the person entitled thereto, and the old certificate cancelled and
the transaction recorded upon the books of the Corporation.
Section 4. Fixing Record Date. For the purpose of determining
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to or
dissent from any proposal without a meeting, or for the purpose of
determining stockholders entitled to receive payment of any dividend or
the allotment of any rights, or for the purpose of any other action,
the Board of Directors may fix, in advance, a date at the record date
for any such determination of stockholders. Such date shall not be
more than sixty nor less than ten days before the date of any meeting
nor more than sixty days prior to any other action. When a
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<PAGE>
determination of stockholders of record entitled to notice of or to
vote at any meeting of stockholders has been made as provided in this
section, such determination shall apply to any adjournment thereof,
unless the Board fixes a new record date for the adjourned meeting.
Section 5. Registered Stockholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its
books as the owner of shares to receive dividends, and to vote as such
owner, and to hold liable for calls and assessments a person registered
on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the
laws of Maryland.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Dividends. Subject to the provisions of law and of the
Articles of Incorporation relating thereto, dividends may be declared
by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, the Corporations bonds or its
property, including the shares or bonds of other corporations, subject
to any provisions of law and of the Articles of Incorporation.
Section 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 fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property
of the Corporation, or for such other purposes 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 3. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such
other person or persons as the Board of Directors may from time to time
designate.
Section 4. Fiscal Year. The fiscal year of the Corporation shall
begin on January 1st and end on December 31st of each year, unless
otherwise provided by the Board of Directors.
Section 5. Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization and the words
CORPORATE SEAL, MARYLAND. This seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any manner
reproduced.
ARTICLE X
AMENDMENTS
Section 1. Amendments. The Board of Directors shall have the
exclusive power to adopt, alter or repeal any provision of these Bylaws
and to make new Bylaws.
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<PAGE>
Exhibit 13
1999 Annual Report
Management's Discussion and Analysis
- ------------------------------------
Forward-Looking Statements
- --------------------------
This Annual Report, including Management's Discussion and Analysis,
the Letter to Stockholders and Operations, contain forward-looking
statements that involve risks and uncertainties that could cause
actual results to differ materially from those in the forward-looking
statements. Words such as "expects", "believes", "estimates",
"plans" or similar expressions are intended to identify such
forward-looking statements. The forward-looking statements are based
on the Company's current views and assumptions and involve risks and
uncertainties that include, but not limited to: the ability to
develop, market and manufacture new innovative products
competitively, the ability of the Company's suppliers to produce and
deliver materials competitively, and the ability to limit the amount
of the negative effect on operating results caused by pricing
pressures.
Quantitative and Qualitative Disclosures about Market Risk
- ----------------------------------------------------------
The Company's cash balances in excess of operating requirements are
currently invested in money market accounts. These money market
accounts are subject to interest rate risk and interest income will
fluctuate in relation to general money market rates. Based on the
cash and cash equivalent balance at December 31, 1999, and assuming
the balance was totally invested in money market instruments for the
full year, a hypothetical 1% decline in interest rates would result
in an approximate $31,000 decrease in interest income.
The Company's investment in marketable equity securities, which are
classified as available-for-sale, represents 517,527 shares of
MetroWest Bank common stock and are subject to equity price risk.
These securities are recorded on the balance sheet at fair market
value with unrealized gains (losses) reported as a separate component
of stockholders' equity under the caption "accumulated other
comprehensive income". Accordingly, while a hypothetical 10% decline
in the market value of these securities would reduce total assets by
approximately $307,000, this decrease would not have an effect on the
statement of operations unless the securities were actually sold.
The Company purchases certain inventory from and sells product to
foreign countries. As these activities are currently transacted in
U.S. dollars, they are not subject to foreign currency exchange
risk. However, significant fluctuation in the currencies where the
Company purchases inventory or sell product could make the U.S.
dollar equivalent of such transactions more or less favorable to the
Company and the other involved parties.
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