UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 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 September 26, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
Commission file number 1-367
THE L. S. STARRETT COMPANY
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1866480
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
121 CRESCENT STREET, ATHOL, MASSACHUSETTS 01331-1915
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 978-249-3551
Former name, address and fiscal year, if changed since last report.
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 filings requirements for the past 90 days.
YES X NO
Common Shares outstanding as of September 26, 1998 :
Class A Common Shares 5,220,090
Class B Common Shares 1,678,805
Page 1 of 10
THE L. S. STARRETT COMPANY
CONTENTS
Page No.
Part I. Financial Information:
Item 1. Financial Statements
Consolidated Statements of Earnings and
Cash Flows - thirteen weeks ended
September 26, 1998 and September 27, 1997
(unaudited) 3
Consolidated Balance Sheets - September 26,
1998 (unaudited) and June 27, 1998 4
Consolidated Statements of Stockholders'
Equity - thirteen weeks ended September 26,
1998 and September 27, 1997 (unaudited) 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
Part II. Other information:
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other information 9-10
Item 6. Exhibits and reports on Form 8-K 10
Page 2 of 10
THE L. S. STARRETT COMPANY
Consolidated Statements of Earnings and Cash Flows
(in thousands of dollars except per share data)(unaudited)
13 Weeks Ended
EARNINGS 9/26/98 9/27/97
Net sales 58,364 65,213
Cost of goods sold (41,221) (44,479)
Selling and general (11,891) (12,794)
Other income and expense 509 460
Earnings before income taxes 5,761 8,400
Provision for federal, foreign and
state income taxes 1,845 2,987
Net earnings 3,916 5,413
Basic earnings per share .57 .78
Average outstanding shares used 6,896 6,924
Diluted earnings per share .57 .78
Average outstanding shares used 6,908 6,940
Dividends per share .20 .19
CASH FLOWS
Cash flows from operating activities:
Net earnings 3,916 5,413
Noncash expenses:
Depreciation and amortization 2,954 2,745
Deferred taxes 207 46
Unrealized translation losses(gains) 83
Working capital changes:
Receivables 1,210 (7,405)
Inventories 1,031 2,155
Other assets and liabilities (1,485) 3,634
Prepaid pension cost and other (763) (419)
Net cash from operations 7,070 6,252
Cash flows from investing activities:
Additions to plant and equipment (5,335) (3,820)
Increase in short-term investments (3,217) (1,310)
Net cash used in investing (8,552) (5,130)
Cash flows from financing activities:
Short-term borrowings, net (401)
Common stock issued 840 886
Treasury shares purchased (861) (3,685)
Dividends (1,378) (1,317)
Net cash used in financing (1,800) (4,116)
Effect of translation rate changes
on cash 38 1
Net decrease in cash (3,244) (2,993)
Cash, beginning of period 3,705 3,053
Cash, end of period 461 60
See notes to consolidated financial statements
Page 3 of 10
THE L. S. STARRETT COMPANY
Consolidated Balance Sheets
(in thousands of dollars)
Sep. 26 June 27
1998 1998
ASSETS (unaudited)
Current assets:
Cash 461 3,705
Investments 30,554 27,115
Accounts receivable (less allowance for doubtful
accounts of $2,503,000 and $2,450,000) 39,741 40,764
Inventories:
Finished goods 32,103 30,199
Goods in process and finished parts 25,252 25,825
Raw materials and supplies 15,477 17,753
72,832 73,777
Prepaid expenses and other current assets 2,460 5,335
Total current assets 146,048 150,696
Property, plant and equipment, at cost (less
accumulated depreciation of $68,825,000
and $66,233,000) 71,285 68,818
Cost in excess of net assets acquired (less
accumulated amortization of $4,016,000
and $3,896,000) 7,396 7,484
Prepaid pension cost 22,968 22,035
Other assets 1,084 1,230
248,781 250,263
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current maturities 600 1,001
Accounts payable and accrued expenses 11,652 14,371
Accrued salaries and wages 5,248 8,059
Taxes payable 2,670 1,475
Employee deposits for stock purchase plan 645 528
Total current liabilities 20,815 25,434
Deferred income taxes 9,496 9,367
Long-term debt 3,900 3,900
Accumulated postretirement medical benefit obligation 16,403 16,268
Stockholders' equity:
Class A Common $1 par (20,000,000 shrs. auth.;
5,220,090 outstanding in 9/98, excluding
1,039,852 held in treasury; 5,193,904 outstanding
in 6/98, excluding 1,045,731 held in treasury) 5,220 5,194
Class B Common $1 par (10,000,000 shrs. auth.;
1,678,805 outstanding in 9/98, excluding
278,605 held in treasury; 1,703,434 outstanding
in 6/98, excluding 274,283 held in treasury) 1,679 1,703
Additional paid-in capital 41,933 41,263
Retained earnings reinvested and employed in
the business 153,162 151,317
Foreign currency translation adjustment (4,226) (4,479)
Other equity adjustments 399 296
Total stockholders' equity 198,167 195,294
248,781 250,263
See Notes to Consolidated Financial Statements
Page 4 of 10
THE L. S. STARRETT COMPANY
Consolidated Statements of Stockholders' equity
For the Thirteen Weeks Ended September 26, 1998 and September 27, 1997
(in thousands of dollars)
(unaudited)
Common Addi-
Stock Out- tional Equity
standing Paid-in Retained Adjust-
($1 Par) Capital Earnings ments Total
Balance June 28, 1997 6,944 38,730 137,788 (2,997) 180,465
Net earnings 5,413 5,413
Dividends ($.19) (1,317) (1,317)
Treasury shares:
Purchased (110) (693) (2,882) (3,685)
Issued 26 860 886
Translation loss, net (418) (418)
Investment valuation 0 0
Balance September 27, 1997 6,860 38,897 139,002 (3,415) 181,344
Balance June 27, 1998 6,897 41,263 151,317 (4,183) 195,294
Net earnings 3,916 3,916
Dividends ($.20) (1,378) (1,378)
Treasury shares:
Purchased (23) (145) (693) (861)
Issued 25 815 840
Translation gain, net 253 253
Investment valuation 103 103
Balance September 26, 1998 6,899 41,933 153,162 (3,827) 198,167
See Notes to Consolidated Financial Statements
Page 5 of 10
THE L. S. STARRETT COMPANY
Notes to Consolidated Financial Statements
In the opinion of management, the accompanying financial statements contain
all adjustments, consisting only of normal recurring adjustments, necessary
to present fairly the financial position of the Company as of September 26,
1998 and June 27, 1998; the results of operations and cash flows for the
thirteen weeks ended September 26, 1998 and September 27, 1997; and changes in
stockholders' equity for the thirteen weeks ended September 26, 1998 and
September 27, 1997.
The Company follows the same accounting policies in the preparation of interim
statements as described in the Company's annual report filed on form 10-K for
the year ended June 27, 1998, and these financial statements should be read
in conjunction with said annual report.
Other income (expense) is comprised of the following (in thousands):
Thirteen Weeks
Ended September
1998 1997
Interest income 499 642
Interest expense and commitment fees (77) (205)
Realized and unrealized exchange losses (31) (97)
Other 118 120
509 460
Approximately 70% of all inventories are valued on the LIFO method. At
September 26, 1998 and June 27, 1998, total inventories are $24,426,000 and
$23,998,000 less, respectively, than if determined on a FIFO basis.
Long-term debt is comprised of the following (in thousands):
September June
1998 1997
Industrial revenue bond 1,500 1,500
Revolving credit agreement 3,000 3,000
4,500 4,500
Less current portion 600 600
3,900 3,900
Effective with the quarter ended September 26, 1998, the Company adopted
Statement of Financial Accounting Standards No.130, "Reporting Comprehensive
Income." Following is the reconciliation of net earnings to comprehensive
income:
Thirteen Weeks
Ended September
1998 1997
Net earnings 3,916 5,413
Unrealized gains on investments 103
Accumulated translation adjustments 253 (418)
Comprehensive income 4,272 4,995
Page 6 of 10
THE L. S. STARRETT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales
Sales for the September quarter are 11% below the corresponding quarter of a
year ago. The decrease comes from most all locations, particularly foreign,
reflecting the negative effects of the strong pound in the U.K. and general
economic conditions in Brazil. In addition, the current quarter is being
compared to a record 1998 first quarter that experienced a 12% sales increase,
significantly higher than the 6% sales increase for the full year.
Earnings Before Taxes
Pretax earnings are down 31% from the September 1997 quarter. This is consis-
tent with the decrease in sales volume mentioned above, the international
pricing pressures resulting from the strong pound, and lower overhead
absorption resulting from lower production activity.
Income Taxes
The effective income tax rate was 32.0% in the September quarter of 1998 and
35.6% in the prior year. The decrease results from favorable tax law changes in
Brazil as well as sales mix changes favoring Puerto Rico, where the effective
tax rate is low.
Year 2000
The Company does not currently anticipate any material disruption of its
operations as a result of any failure by the Company to be year 2000 compliant.
If, however, the Company, its customers or its suppliers are unable to achieve
year 2000 compliance, the potential exists for the Company's business and
results of operations to be adversely affected.
Worldwide, the Company has four major computer systems that are used in the
areas of manufacturing, sales and accounting. Two use third party packages that
the Company believes are or, through vendor upgrades, will be year 2000
compliant. The other two systems are in the process of being converted to third
party packages that the Company believes are already compliant. The Company
expects to complete the reasonably necessary remediation of its significant
systems by the end of fiscal 1999 and has not incurred, and does not expect to
incur, significant additional separately identifiable costs in order to make
its computer systems year 2000 compliant. In the event the Company's planned
upgrades and modifications fail to bring any of these major systems into Year
2000 compliance or fail to do so in a timely manner, the Company will have to
adopt contingency plans to deal with any resulting disruptions in its business.
The Company employs certain manufacturing processes that utilize computer
controlled manufacturing equipment. The Company believes such equipment is year
2000 compliant to the extent reasonably necessary but has not completed its
testing of such equipment. In the event the Company determines that such
equipment cannot readily be made year 2OOO compliant, it believes it can revert
to the manual processes previously employed or outsource such work. The Company
is also in the process of investigating the status of other systems with
respect to year 2000 compliance such as phone, fax, heating/air conditioning,
and electricity and believes they will be year 2000 compliant to the extent
reasonably necessary before the end of 1999. The Company is utilizing internal
resources for this purpose and does not expect to incur significant separately
identifiable costs.
In addition to reviewing its own systems, the Company has polled or is in the
process of polling its significant customers and vendors to get assurance that
Page 7 of 10
they are year 2000 compliant and to attempt to identify potential issues. To
the extent such assurance is not received, appropriate contingency plans will
be developed and implemented. At this time, the Company is not aware of
significant problems. If the Company's customers and vendors do not achieve
year 2000 compliance before the end of 1999, the Company could experience a
variety of problems that might have a material adverse effect on the Company's
business and results of operations. For example, customers might lose EDI
capability or vendors might fail to deliver, but most foreseeable problems can
be overcome by reverting to phone, fax, mail and other manual procedures. It
should be noted that the Company outsources very little other than raw steel
and is not dependent on single source suppliers. In addition it has no customer
accounting for more than ten percent of sales.
LIQUIDITY AND CAPITAL RESOURCES
13 Weeks Ended
9/26/98 9/27/97
Cash provided by operations 7,070 6,252
Cash used in investing activities (8,552) (5,130)
Cash used in financing activities (1,800) (4,116)
Cash effect of translation rate changes 38 1
Net decrease in cash (3,244) (2,993)
Despite a decrease in net earnings, cash flow provided by operations increased
slightly compared to the prior year because the prior year's quarter
experienced a large but temporary increase in accounts receivable. A reduction
in treasury share purchases in the current year's quarter allowed for an
increase in investments.
The Company maintains sufficient liquidity and has adequate resources,
including lines of credit, to fund its operations under current business
conditions. The Company continues to maintain a strong financial position with
a working capital ratio of 7.0 to 1 as of September 26, 1998 and 5.9 to 1 as of
June 27, 1998.
SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This quarterly report, as well as the 1998 Annual Report, including the
Chairman's letter to stockholders, include forward-looking statements about the
Company's business, sales, expenditures, Year 2000 compliance, environmental
regulatory compliance, foreign operations, debt service, liquidity and capital
resources, and other operating and capital requirements. In addition, forward-
looking statements may be included in future Company documents and in oral
statements by Company representatives to security analysts and investors. The
Company is subject to risks that could cause actual events to vary materially
from such forward-looking statements, including the following risk factors:
Risks Related to Year 2000 Issues: The Company continues to explore whether and
to what extent its computer and other systems will be disrupted at the turn of
the century as a result of the widely-publicized dating system flaw inherent in
many computer systems. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Year 2000."
Risks Related to Technology: Although the Company's strategy includes
significant investment in research and development of new and innovative
products to meet technology advances, there can be no assurance that the
Company will be successful in competing against new technologies developed by
competitors.
Page 8 of 10
Risks Related to Adoption of the Euro: The new European currency (the Euro)
will begin being used by the eleven participating European countries January 1,
1999. Although the United Kingdom is not currently a Euro country, the
Company's Scottish subsidiary does a significant amount of business with Euro
countries. Management believes it has the necessary systems and business
processes to deal with what is, in effect, one more foreign currency, but there
can be no assurance that there will not be unforeseen economic effects of this
change that might affect the Company's sales or margins on business done with
Euro countries.
Risks Related to Foreign Operations: Foreign operations are subject to special
risks that can materially affect the sales, profits, cash flows, and financial
position of the Company, including taxes and other restrictions on
distributions and payments, currency exchange rate fluctuations, political and
economic instability in emerging markets, inflation, minimum capital
requirements, and exchange controls. In particular, the Company's Brazilian
operations, which constitute over half of the Company's revenues from foreign
operations, can be very volatile, changing from year to year due to the
political situation and economy. As a result, the future performance of the
Brazilian operations is inherently unpredictable.
Risks Related to Cyclical Nature of the Industry: The market for the Company's
products is subject to general economic conditions, including the level of
capital spending by industrial companies. As such, recessionary forces
decrease demand for the Company's products and adversely affect performance.
Risks Related to Competition: The Company's business is subject to direct and
indirect competition from both domestic and foreign firms. In particular, low-
wage foreign sources have created severe competitive pricing pressures. Under
certain circumstances, including significant changes in U.S. and foreign
currency relationships, such pricing pressures might reduce unit sales and/or
adversely affect the Company's margins.
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders.
(a) A regular meeting of shareholders was held on September 16, 1998.
(c) The following directors were elected:
Abstentions
Votes Votes and Broker
For Withheld Non-votes
A shares voting as separate class:
Richard B. Kennedy 4,520,306 63,697 N/A
A and B shares voting together:
George B. Webber 19,504,980 94,593 N/A
ITEM 5. Other Information.
Stockholder Proposals - On September 16, 1998, the Company's Board of
Directors voted to amend the Company's bylaws requiring, in general, that
stockholders provide the Company with notice at least 120 days prior to a
stockholders' meeting of any nominations for the Board of Directors or any
proposal to be voted upon at a meeting of the stockholders. Under the Company's
recently amended bylaws, stockholders who wish to make a proposal at the 1999
annual meeting scheduled for September 15, 1999, other than one that will be
included in the Company's proxy materials, must notify the Company no earlier
than April 19, 1999 and no later than May 19, 1999. Under recent changes to the
federal proxy rules, if a stockholder who wishes to present such a proposal
fails to notify the Company by May 19, 1999, then the proxies that management
Page 9 of 10
solicits for the 1999 annual meeting will include discretionary authority to
vote on the stockholder's proposal in the event it is properly brought before
the meeting notwithstanding the Company's bylaws. Stockholder proposals for
inclusion in the Company's proxy statement for its 1999 annual meeting must be
received by the Company no later than April 14, 1999.
ITEM 6. Exhibits and Reports on Form 8-K.
6(a) Exhibit 3. Bylaws as amended 9/16/98 filed herewith electronically
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.
THE L. S. STARRETT COMPANY
(Registrant)
Date November 6, 1998 S/R.U.WELLINGTON, JR.
R. U. Wellington, Jr. (Treasurer
and Chief Financial Officer)
Date November 6, 1998 S/S.G.THOMSON
S. G. Thomson (Chief Accounting Officer)
Page 10 of 10
As amended
through 9/16/98
BY-LAWS
OF
THE L. S. STARRETT COMPANY
SECTION 1.
ARTICLES OF ORGANIZATION
The name and purposes of the corporation shall be as set forth in the
articles of organization. These by-laws, the powers of the corporation and of
its directors and stockholders, or of any class of stockholders if there shall
be more than one class of stock, and all matters concerning the conduct and
regulation of the business and affairs of the corporation shall be subject to
such provisions in regards thereto, if any, as are set forth in the articles of
organization as from time to time in effect.
SECTION 2.
STOCKHOLDERS
2.1 Annual Meeting. The annual meeting of the stockholders shall be held
at two o'clock in the afternoon on the third Wednesday of September in each
year, unless a different hour is fixed by the president or the directors. If
that day be a legal holiday at the place where the meeting is to be held, the
meeting shall be held on the next succeeding day not a legal holiday at such
place. Purposes for which an annual meeting is to be held, additional to those
prescribed by law, by the articles of organization or by these by-laws, may be
specified by the president or by the directors.
2.2 Special Meeting in Place of Annual Meeting. If no annual meeting has
been held in accordance with the foregoing provisions, a special meeting of the
stockholders may be held in place thereof, and any action taken at such special
meeting shall have the same force and effect as if taken at the annual meeting,
and in such case all references in these by-laws to the annual meeting of the
stockholders shall be deemed to refer to such special meeting. Any such
special meeting shall be called as provided in Section 2.3.
2.3 Special Meeting. A special meeting of the stockholders may be called
at any time by the president or by the directors. Each call of a meeting shall
state the place, date, hour and purposes of the meeting.
2.4 Place of Meeting. All meetings of the stockholders shall be held at
the principal office of the corporation in Massachusetts or at such other place
within Massachusetts as shall be fixed by the president or the directors. Any
adjourned session of any meeting of the stockholders shall be held at the same
city or town as the initial session, or within Massachusetts, in either case at
the place designated in the vote of adjournment.
2.5 Notice of Meetings. A written notice of each meeting of stockholders,
stating the place, date and hour and the purposes of the meeting, shall be
given at least seven days before the meeting to each stockholder entitled to
vote thereat and to each stockholder who, by law, by the articles of
organization or by these by-laws, is entitled to notice, by leaving such notice
with him or at his residence or usual place of business, or by mailing it,
postage prepaid, addressed to such stockholder at his address as it appears in
the records of the corporation. Such notice shall be given by the clerk or an
assistant clerk or by an officer designated by the directors. No notice of any
meeting of stockholders need be given to a stockholder if a written waiver of
notice, executed before or after the meeting by such stockholder or his
attorney thereunto duly authorized, is filed with the records of the meeting.
2.6 Quorum of Stockholders. At any meeting of the stockholders, a quorum
as to any matter shall consist of a majority of the votes entitled to be cast
on the matter, except that if two or more classes or series of stock are
entitled to vote as separate classes or series, then in the case of each such
class or series a quorum as to any matter shall consist of a majority of the
votes of that class or series entitled to be cast on the matter, and except
where a larger quorum is required by law, by the articles of organization or by
these by-laws.
2.7 Action by Vote. When a quorum is present at any meeting, a plurality
of the votes properly cast for election to any office shall elect to such
office, and a majority of the votes properly cast upon any question other than
an election to an office shall decide the question, except when a larger vote
is required by law, by the articles of organization or by these by-laws. No
ballot shall be required for any election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
2.8 Voting. Stockholders entitled to vote shall have one vote for each
share of stock entitled to vote held by them of record according to the records
of the corporation, unless otherwise provided by the articles of organization.
The corporation shall not, directly or indirectly, vote any share of its own
stock. The provisions of Chapter 110D of the Massachusetts General Laws shall
not apply to control share acquisitions of the Company. The provisions of
Chapter 110F of the Massachusetts General Laws shall not apply to the Company.
2.9 Proxies. Stockholders entitled to vote may vote either in person or
by proxy in writing dated not more than six months before the meeting named
therein, which proxies shall be filed with the clerk or other person
responsible to record the proceedings of the meeting before being voted. Unless
otherwise specifically limited by their terms, such proxies shall entitle the
holders thereof to vote at any adjournment of such meeting but shall not be
valid after the final adjournment of such meeting.
2.10 Notice of Business. At any meeting of the stockholders, only such
business shall be conducted as shall have been brought before the meeting (a)
by or at the direction of the Board of Directors or (b) by any stockholder of
the corporation who is a stockholder of record at the time of giving of the
notice provided for in this Section, who shall be entitled to vote at such
meeting and who complies with the notice procedures set forth in this Section.
For business to be properly brought before a stockholder meeting by a
stockholder, the stockholder must have given timely notice thereof in writing
to the Clerk of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not less than 120 days nor more than 150 days prior to the
meeting; provided, however, that in the event that less than 130 days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be received no later
than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was
made. A stockholder's notice to the Clerk shall set forth as to each matter
the stockholder proposes to bring before the meeting (a) a brief description
of the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting, (b) the name and address, as they
appear on the corporation's books, of the stockholder proposing such business,
(c) the class and number of shares of the corporation which are beneficially
owned by the stockholder, and (d) any material interest of the stockholder in
such business. Notwithstanding anything in the by-laws to the contrary, no
business shall be conducted at a stockholder meeting except in accordance with
the procedures set forth in this Section. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that business was
not properly brought before the meeting and in accordance with the provisions
of the by-laws, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall
not be transacted. Notwithstanding the foregoing provisions of this Section,
a stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this Section.
SECTION 3.
BOARD OF DIRECTORS
3.1 Number. The number of directors which shall constitute the whole
board shall be determined from time to time by vote of a majority of the
directors then in office, provided that the number thereof may not be less than
three nor more than eleven. No director need be a stockholder.
3.2 Election and Tenure. The directors shall be classified, with respect
to the time for which they severally hold office, into three classes, as nearly
equal in number as possible, with one class to be elected at each annual
meeting of stockholders. Each class shall hold office until its successors are
elected and qualified. If the number of directors is changed by the directors,
any newly created directorships or any decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal as
possible; provided, however, that no decrease in the number of directors shall
shorten the term of any incumbent director. At each annual meeting of
stockholders, the successors of the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.
3.3 Powers. Except as reserved to the stockholders by law, by the articles
of organization or by these by-laws, the business of the corporation
shall be managed by the directors who shall have and may exercise all the
powers of the corporation. In particular, and without limiting the
generality of the foregoing, the directors may at any time issue all or
from time to time any part of the unissued capital stock of the
corporation from time to time authorized under the articles of
organization and may determine, subject to any requirements of law, the
consideration for which stock is to be issued and the manner of
allocating such consideration between capital and surplus.
3.4 Committees. The directors may, by vote of a majority of the directors
then in office, elect from their number an executive committee and other
committees and may by vote delegate to any such committee or committees some or
all of the powers of the directors except those which by law, by the articles
of organization or by these by-laws they are prohibited from delegating. Except
as the directors may otherwise determine, any such committee may make rules for
the conduct of its business, but unless otherwise provided by the directors or
such rules, its business shall be conducted as nearly as may be in the same
manner as is provided by these by-laws for the conduct of business by the
directors.
3.5 Regular Meetings. Regular meetings of the directors may be held
without call or notice at such places and at such times as the directors may
from time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent directors. A regular
meeting of the directors may be held without call or notice immediately after
and at the same place as the annual meeting of the stockholders.
3.6 Special Meetings. Special meetings of the directors may be held at
any time and at any place designated in the call of the meeting, when called by
the president or the treasurer or by two or more directors, reasonable notice
thereof being given to each director by the secretary or an assistant
secretary, or, if there be none, by the clerk or an assistant clerk, or by the
officer or one of the directors calling the meeting.
3.7 Notice. It shall be sufficient notice to a director to send notice by
mail at least forty-eight hours or by telegram at least twenty-four hours
before the meeting addressed to him at his usual or last known business or
residence address or to give notice to him in person or by telephone at least
twenty-four hours before the meeting. Notice of a meeting need not be given to
any director if a written waiver of notice, executed by him before or after the
meeting, is filed with the records of the meeting, or to any director who
attends the meeting without protesting prior thereto or at its commencement the
lack of notice to him. Neither notice of a meeting nor a waiver of a notice
need specify the purposes of the meeting.
3.8 Quorum. At any meeting of the directors a majority of the directors
then in office shall constitute a quorum. Any meeting may be adjourned from
time to time by a majority of the votes cast upon the question, whether or not
a quorum is present, and the meeting may be held as adjourned without further
notice.
3.9 Action by Vote. When a quorum is present at any meeting, a majority
of the directors present may take any action, except when a larger vote is
required by law, by the articles of organization or by these by-laws.
3.10 Action by Writing. Any action required or permitted to be taken at
any meeting of the directors may be taken without a meeting if a written
consent thereto is signed by all the directors and such written consent is
filed with the records of the meetings of the directors. Such consent shall be
treated for all purposes as a vote at a meeting.
3.11 Nomination of Directors. Only persons who are nominated in
accordance with the procedures set forth in these by-laws shall be eligible to
serve as directors. Nominations of persons for election to the Board of
Directors of the corporation may be made at a meeting of stockholders (a) by
or at the direction of the Board of Directors or (b) by any stockholder of the
corporation who is a stockholder of record at the time of giving of notice
provided for in this Section, who shall be entitled to vote for the election
of Directors at the meeting and who complies with the notice procedures set
forth in this Section. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Clerk of the corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the corporation not less than 120 days nor more than 150 days prior
to the meeting; provided, however, that in the event that less than 130 days'
notice or prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the 10th day following the day on
which such notice of the date of the meeting or such public disclosure was
made. Such stockholder's notice shall set forth (a) as to each person whom
the stockholder proposes to nominate for election or reelection as a Director,
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is other wise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including such person's written consent to being named in
the proxy statement as a nominee and to serving as a Director if elected), and
(b) as to the stockholder given the notice (i) the name and address, as they
appear on the corporation's books, of such stockholder and (ii) the class and
number of shares of the corporation which are beneficially owned by such
stockholder. At the request of the Board of Directors, any person nominated
by the Board of Directors for election as a Director shall furnish to the
Clerk of the corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible to serve as a Director of the corporation unless nominated
in accordance with the procedures set forth in this by-law. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the by-laws, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded. Notwithstanding the
foregoing provisions of this Section, a stockholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder with respect to the matters set forth
in this Section.
SECTION 4.
OFFICERS AND AGENTS
4.1 Enumeration: Qualification. The officers of the corporation shall be
a president, a treasurer, a clerk, and such other officers, if any, as the
incorporators at their initial meeting, or the directors from time to time, may
in their discretion elect or appoint. The corporation may also have such
agents, if any, as the incorporators at their initial meeting or the directors
from time to time may in their discretion appoint. Any officer may be but none
need be a director or stockholder. The clerk shall be a resident of
Massachusetts unless the corporation has a resident agent appointed for the
purpose of service of process. Any two or more offices may be held by the same
person. Any officer may be required by the directors to give bond for the
faithful performance of his duties to the corporation in such amount and with
such sureties as the directors may determine.
4.2 Powers. Subject to law, to the articles of organization and to the
other provisions of these by-laws, each officer shall have, in addition to the
duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such duties and powers as the directors may from
time to time designate.
4.3 Election. The president, the treasurer and the clerk shall be elected
annually by the directors at their first meeting following the annual meeting
of the stockholders. Other officers, if any, may be elected or appointed by
the board of directors at said meeting or at any other time.
4.4 Tenure. Except as otherwise provided by law or by the articles of
organization or by these by-laws, the president, the treasurer and the clerk
shall hold office until the first meeting of the directors following the next
annual meeting of the stockholders and until their respective successors are
chosen and qualified, and each other officer shall hold office until the first
meeting of the directors following the next annual meeting of the stockholders
unless a shorter period shall have been specified by the terms of his election
or appointment, or in each case until he sooner dies, resigns, is removed or
becomes disqualified. Each agent shall retain his authority at the pleasure of
the directors.
4.5(a) Chief Executive Officer. The chief executive officer of the
corporation shall be the chairman of the board, if any, the president or such
other officer as is designated by the directors and shall, subject to the
control of the directors, have general charge and supervision of the business
of the corporation. If no such designation is made, the president shall be the
chief executive officer. Unless the board of directors otherwise specifies, if
there is no chairman of the board, the chief executive officer shall preside,
or designate the person who shall preside, at all meetings of the stockholders
and of the board of directors.
4.5(b) Chairman of the Board. If a chairman of the board of directors is
elected, he shall have the duties and powers specified in these by-laws and
shall have such other duties and powers as may be determined by the directors.
Unless the board of directors otherwise specifies, the chairman of the board
shall preside, or designate the person who shall preside, at all meetings of
the stockholders and of the board of directors.
4.5(c) President and Vice Presidents. The president shall have the duties
and powers specified in these by-laws and shall have such other duties and
powers as may be determined by the directors.
Any vice president shall have such duties and powers as shall be designated
from time to time by the directors.
4.6 Treasurer and Assistant Treasurers. The treasurer shall be the chief
financial and accounting officer of the corporation and shall be in charge of
its funds and valuable papers, books of account and accounting records, and
shall have such other duties and powers as may be designated from time to time
by the directors or by the president.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the directors.
4.7 Clerk and Assistant Clerks. The clerk shall record all proceedings of
the stockholders in a book or series of books to be kept therefor, which book
or books shall be kept at the principal office of the corporation or at the
office of its transfer agent or of its clerk and shall be open at all
reasonable times to the inspection of any stockholder. In the absence of the
clerk from any meeting of stockholders, an assistant clerk, or if there be none
or he is absent, a temporary clerk chosen at the meeting, shall record the
proceedings thereof in the aforesaid book. Unless a transfer agent has been
appointed the clerk shall keep or cause to be kept the stock and transfer
records of the corporation, which shall contain the names and record addresses
of all stockholders and the amount of stock held by each. If no secretary is
elected, the clerk shall keep a true record of the proceedings of all meetings
of the directors and in his absence from any such meeting an assistant clerk,
or if there be none or he is absent, a temporary clerk chosen at the meeting,
shall record the proceedings thereof.
Any assistant clerk shall have such duties and powers as shall be
designated from time to time by the directors.
4.8 Secretary and Assistant Secretaries. If a secretary is elected, he
shall keep a true record of the proceedings of all meetings of the directors
and in his absence from any such meeting an assistant secretary, or if there be
none or he is absent, a temporary secretary chosen at the meeting, shall record
the proceedings thereof.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the directors.
SECTION 5.
RESIGNATIONS AND REMOVALS
Any director or officer may resign at any time by delivering his
resignation in writing to the president, the treasurer or the clerk or to a
meeting of the directors. Such resignation shall be effective upon receipt
unless specified to be effective at some other time. A director (including
persons elected by directors to fill vacancies in the board) may be removed
from office only for cause (a) by the vote of the holders of a majority of the
total number of votes of the then outstanding shares entitled to vote generally
in the election of directors, provided that the directors of a class elected by
the holders of a particular class of stockholders may be removed only by
affirmative vote of a majority of the total number of votes of the then
outstanding shares of such class, or (b) by the vote of a majority of the
directors then in office. For the purposes of this Section 5, "cause" shall
mean (i) conviction of a felony, (ii) declaration of unsound mind by order of
court, (iii) gross dereliction of duty, (iv) commission of an action involving
moral turpitude, or (v) commission of an action which constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
corporation. The directors may remove any officer elected by them with or
without cause by the vote of the directors then in office. A director or
officer may be removed for cause only after reasonable notice and opportunity
to be heard before the body proposing to remove him. No director or officer
resigning, and (except where a right to receive compensation shall be expressly
provided in a fully authorized written agreement with the corporation) no
director or officer removed, shall have any right to any compensation as such
director or officer for any period following his resignation or removal, or any
right to damages on account of such removal, whether his compensation be by the
month or by the year or otherwise; unless in the case of a resignation, the
directors, or in the case of a removal, the body acting on the removal, shall
in their or its discretion provide for compensation.
SECTION 6.
VACANCIES
Any vacancy and newly-created directorships in the board of directors,
whether resulting from an increase in the size of the board of directors, from
the death, resignation, disqualification or removal of a director, or
otherwise, shall be filled solely by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the board
of directors, or by a sole remaining director. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified. If the office of the president or the treasurer or
the clerk becomes vacant, the directors may elect a successor by a vote of a
majority of the directors then in office. If the office of any other officer
becomes vacant, the directors may elect or appoint a successor by vote of a
majority of the directors present. Each such successor shall hold office for
the unexpired term, and in the case of the president, the treasurer and the
clerk, until his successor is chosen and qualified, or in each case until he
sooner dies, resigns, is removed or becomes disqualified. The directors shall
have and may exercise all their powers notwithstanding the existence of one or
more vacancies in their number.
SECTION 7.
CAPITAL STOCK
7.1 Number and Par Value. The total number of shares and the par value,
if any, of each class of stock which the corporation is authorized to issue
shall be as stated in the articles of organization.
7.2 Fractional Shares. The corporation shall not issue fractional shares
of stock but may issue scrip in registered or bearer form which shall entitle
the holder to receive a certificate for a full share upon surrender of such
scrip aggregating a full share, the terms and conditions and manner of issue of
such scrip to be fixed by the directors.
7.3 Stock Certificates. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such forms as shall, in conformity to
law, be prescribed from time to time by the directors. Such certificate shall
be signed by the chairman of the board, the president or a vice president and
by the treasurer or an assistant treasurer. Such signatures may be facsimiles
if the certificate is signed by a transfer agent, or by a registrar, other than
a director, officer or employee of the corporation. In case any officer who
has signed or whose facsimile signature has been placed on such 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 time of its issue.
7.4 Loss of Certificates. In the case of the alleged loss or
destruction or the mutilation of a certificate of stock, a duplicate
certificate may be issued in place thereof, upon such terms as the directors
may prescribe.
SECTION 8.
TRANSFER OF SHARES OF STOCK
8.1 Transfer on Books. Subject to the restrictions, if any, stated or
noted on the stock certificates, shares of stock may be transferred on the
books of the corporation by the surrender to the corporation or its transfer
agent of the certificate therefor properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
directors or the transfer agent of the corporation may reasonably require.
Except as may be otherwise required by law, by the articles of organization or
by these by-laws, the corporation shall be entitled to treat the record holder
of stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to receive notice and to vote
with respect thereto, regardless of any transfer, pledge or other disposition
of such stock until the shares have been transferred on the books of the
corporation in accordance with the requirements of these by-laws.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
8.2 Record Date and Closing Transfer Books. The directors may fix in
advance a time, which shall not be more than sixty days before the date of any
meeting of stockholders or the date for the payment of any dividend or making
of any distribution to stockholders or the last day on which the consent or
dissent of stockholders may be effectively expressed for any purpose, as the
record date for determining the stockholders having the right to notice of and
to vote at such meeting and any adjournment thereof or the right to receive
such dividend or distribution or the right to give such consent or dissent, and
in such case only stockholders of record on such record date shall have such
right, notwithstanding any transfer of stock on the books of the corporation
after the record date; or without fixing such record date the directors may for
any such purposes close the transfer books for all or any part of such period.
SECTION 9.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the extent legally permissible, indemnify each of
its directors and officers (including persons who serve at its request as
directors, officers or trustees of another organization or who serve at its
request in any capacity with respect to any employee benefit plan) against all
liabilities and expenses, including amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel fees, reasonably incurred
by him in connection with the defense or disposition of any action, suit or
other proceeding, whether civil or criminal, in which he may be involved or
with which he may be threatened, while in office or thereafter, by reason of
his being or having been such a director or officer, except with respect to any
matter as to which he shall have been adjudicated in any proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interests of the corporation or, to the extent that such matter related to
service with respect to any employee benefit plan, in the best interests of the
participants or beneficiaries of such employee benefit plan: provided, however,
that as to any matter disposed of by a compromise payment by such director or
officer, pursuant to a consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be provided unless such
compromise shall be approved as in the best interests of the corporation, after
notice that it involves such indemnification: (a) by a disinterested majority
of the directors then in office; or (b) by a majority of the disinterested
directors then in office, provided that there has been obtained an opinion in
writing of independent legal counsel to the effect that such director or
officer appears to have acted in good faith in the reasonable belief that his
action was in the best interests of the corporation; or (c) by the holders of a
majority of the outstanding stock at the time entitled to vote for directors,
voting as a single class, exclusive of any stock owned by any interested
director or officer. The right of indemnification hereby provided shall not be
exclusive of or affect any other rights to which any director or officer may be
entitled. As used in this Section, the terms "director" and "officer" include
their respective heirs, executors and administrators, and an "interested"
director or officer is one against whom in such capacity the proceedings in
question or another proceeding on the same or similar grounds is then pending.
Nothing contained in this Section shall affect any rights to indemnification to
which corporate personnel other than directors and officers may be entitled by
contract or otherwise under law.
Expenses, including but not limited to counsel fees and disbursements,
incurred by any director or officer in defending any such action, suit or other
proceeding may be paid from time to time by the corporation in advance of the
final disposition of such action, suit or other proceeding upon receipt of an
undertaking by the person indemnified to repay such payment if he shall be
adjudicated to be not entitled to indemnification under this section, which
undertaking may be accepted without reference to the financial ability of such
person to make repayments.
If in an action, suit or other proceeding brought by or in the name of the
corporation, a director of the corporation is held not liable for monetary
damages whether because that director is relieved of personal liability under
the exculpatory provisions of Article 6.8 of the Articles of Organization of
the corporation or otherwise, that director shall be deemed to have met the
standard of conduct required for, and consequently shall be entitled to,
indemnification for expenses reasonably incurred in the defense of such action,
suit or other proceeding.
SECTION 10.
CORPORATE SEAL
The seal of the corporation shall, subject to alteration by the directors,
consist of the name of the corporation and the words "Athol, Mass., U.S.A.",
arranged in circular form in the outside circle of a die, and the words
"Corporate Seal" and a representation of a square, caliper and micrometer gage
combined, in the inside of the circle.
SECTION 11.
EXECUTION OF PAPERS
Except as the directors may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers,
contracts, bonds, notes, checks, drafts and other obligations made, accepted or
endorsed by the corporation shall be signed by the president or by one of the
vice presidents or by the treasurer.
SECTION 12.
FISCAL YEAR
Except as from time to time otherwise provided by the Board of Directors,
the fiscal year of the corporation shall end on the last Saturday in June in
each year.
SECTION 13.
AMENDMENTS
These by-laws may be altered, amended or repealed at any annual or special
meeting of the stockholders called for the purpose, of which the notice shall
specify the subject matter of the proposed alteration, amendment or repeal or
the sections to be affected thereby, by vote of the stockholders, or if there
shall be two or more classes or series of stock entitled to vote on the
question, by vote of each such class or series. These by-laws may also be
altered, amended or repealed by vote of the majority of the directors then in
office, except that the directors shall not take any action which provides for
indemnification of directors or affects the powers of directors or officers to
contract with the corporation, nor any action to amend this Section 13, and
except that the directors shall not take any action unless permitted by law.
Any by-law so altered, amended or repealed by the directors may be further
altered or amended or reinstated by the stockholders in the above manner.
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