SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark one)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended June 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from __________ to __________
Commission file number 0-18643
Lunar Corporation
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(Exact name of registrant as specified in its charter)
Wisconsin 39-1200501
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
313 West Beltline Highway
Madison, Wisconsin 53713
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (including area code): (608) 274-2663
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
As of September 23, 1999, there were issued and outstanding 8,598,580 shares of
Common Stock. The aggregate market value of the voting and non-voting common
equity held by non-affiliates of the registrant was $39,985,452 as of September
23, 1999 assuming solely for purposes of this calculation that all directors
and executive officers of the Registrant are "affiliates." This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Lunar Corporation Proxy Statement for its 1999 Shareholders
Meeting to be held on November 19, 1999 (Part III)
LUNAR CORPORATION
INDEX TO
ANNUAL REPORT ON FORM 10-K
For Year Ended June 30, 1999
Page
PART I ----
Item 1 Business . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2 Properties . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 3 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 9
Item 4 Submission of Matters to a Vote of Security Holders. . . . 9
PART II
Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters. . . . . . . . . . . . . . . . 10
Item 6 Selected Financial Data. . . . . . . . . . . . . . . . . . 10
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . 12
Item 7A Quantitative and Qualitative Disclosures about Market Risk 16
Item 8 Financial Statements and Supplementary Data. . . . . . . . 17
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. . . . . . . . . . . . 33
Part III
Item 10 Directors and Executive Officers
of the Registrant. . . . . . . . . . . . . . . . . . . . . 33
Item 11 Executive Compensation . . . . . . . . . . . . . . . . . . 35
Item 12 Security Ownership of Certain
Beneficial Owners and Management . . . . . . . . . . . . . 35
Item 13 Certain Relationships and Related Transactions . . . . . . 35
Part IV
Item 14 Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 35
Index to Consolidated Financial Statements and
Financial Statement Schedule . . . . . . . . . . . . . . . . . . . . . . 36
Report of Independent Public Accountants
on Financial Statement Schedule
Arthur Andersen LLP . . . . . . . . . . . . . . . . . . . . . . . . . 31
KPMG LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Schedule II - Valuation and Qualifying Accounts
for each of the years ended June 30, 1999,
1998, and 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Index to Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
PART I
ITEM 1. BUSINESS
INTRODUCTION
Lunar Corporation develops and sells x-ray and ultrasound bone
densitometers for the diagnosis and monitoring of osteoporosis and other
metabolic bone diseases. Lunar also develops and sells medical imaging
equipment used by orthopedists and radiologists for imaging extremities. Except
as the context otherwise requires, as used herein the terms "Lunar" And the
"Company" mean Lunar Corporation, its wholly owned subsidiaries Lunar GmbH,
Lunar Europe, N.V., Lunar France, Lunar FSC, Inc., Lunar Finance Corporation,
Lunar Funding Corporation, and Lunar Capital Corporation.
BACKGROUND ON OSTEOPOROSIS
Osteoporosis is a disease generally associated with aging and
characterized by excessive loss of bone mineral, resulting in decreased bone
density over time. Demineralization weakens bone so that minor physical stress
can cause debilitating fractures, usually in the wrists, hips, and spine.
These fractures can result in disfigurement, decreased mobility, and, in some
cases, extensive hospitalization and chronic nursing home care.
Osteoporosis is a major and growing public health problem in the United
States and worldwide. In the United States, 25% of women over age 60 develop
vertebral fractures related to osteoporosis, and as many as 50% of women will
develop vertebral fractures by age 75. According to the National Institutes of
Health, there are currently more than 10 million adults affected by
osteoporosis in the United States. Factors contributing to bone loss include
age- and sex-related hormonal changes, low calcium intake, excessive alcohol
consumption, and certain drug therapies.
An estimated 1.3 million osteoporosis-related fractures occur each year in
the United States. A Mayo Clinic study estimated the annual direct costs of
osteoporosis-related fractures in the United States in 1995 to be $13.8
billion. Without effective diagnosis and treatment, the medical and social
consequences of such fractures will worsen as the population ages.
Osteoporosis related fractures are reduced if individuals at the greatest risk
are diagnosed and treated in the early stages.
DIAGNOSIS AND MONITORING. Most people are not diagnosed in time for
effective therapy since there are no obvious symptoms of osteoporosis in the
early stages. Often the first symptom is a debilitating fracture. Studies show
that bone mineral density is correlated highly with bone strength. Since bone
strength is a determinant of an individual's susceptibility to fracture (along
with the likelihood of sustaining sufficient trauma), bone mineral density
indicates fracture risk. Bone mineral density can be measured with accuracy
(referring to how well the scanners measure the actual bone density) and
precision (referring to whether the scanners yield the same result upon
multiple scans of the same bone) using dual-photon absorptiometry ("DPA") or
dual-energy x-ray absorptiometry ("DEXA") techniques. DPA scanners employ a
radioactive source; DEXA scanners generate radiation using a conventional x-ray
tube. DEXA scanners are accurate, have a low precision error, are safe because
they emit low radiation, have scanning times of approximately 5 minutes, and
have a low operating cost.
Ultrasound technology has also been developed to measure the bone density
of certain peripheral sites such as the heel. Ultrasound bone densitometers
are less expensive than DEXA bone densitometers, and since they use nonionizing
radiation, ultrasound bone densitometers encounter fewer regulatory and
licensing requirements as compared to DEXA bone densitometers.
REIMBURSEMENT. To achieve broad acceptance and qualify for third-party
reimbursement, diagnostic products not only must be safe and efficacious, but
also must be deemed cost-effective by public and private health care payors.
Sales of bone densitometers are also dependent upon the level of reimbursement
provided by public and private health care payors. Reimbursement for DEXA and
ultrasound scans has been approved in several countries.
In the United States, Medicare pays an average of $131 for axial DEXA
tests, and approximately $40 for peripheral DEXA or ultrasound tests. While
many private insurance carriers currently provide reimbursement for bone mass
measurement, a significant number do not.
THERAPIES. The demand for bone densitometers sold by the Company is
dependent on the availability of therapies for the treatment of postmenopausal
osteoporosis. The Company does not sell any of the therapies discussed in this
subsection.
Estrogen replacement therapies ("ERT") are approved for marketing and sale
in the United States for the treatment of postmenopausal osteoporosis. ERT is
currently believed to be an effective means to prevent bone loss and related
fractures, but does not stimulate bone formation. In the United States, ERT
most often is used to relieve symptoms related to menopause; however, usage for
osteoporosis is steadily increasing. The Food and Drug Administration ("FDA")
approval of a combined estrogen-progestin pill (Prempro by Wyeth Ayerst) has
increased interest in long-term and potential compliance therapy of
osteoporosis.
Calcitonins are approved for marketing and sale in the United States for
the treatment of osteoporosis. Calcitonins seem to prevent further bone loss,
but do not stimulate bone formation. Miacalcin nasal spray, by Novartis, is a
nasal delivery formulation which was approved for sale by the FDA in the United
States in 1995.
A bisphosphonate (Fosamax, developed by Merck & Co.) was approved in
October 1995 for marketing and sale in the United States for the treatment of
osteoporosis. Studies have shown that bisphosphonates appear to inhibit bone
resorption without interrupting normal bone formation, thereby increasing bone
mass and reducing vertebral fractures. Several other pharmaceutical companies
are developing bisphosphonates to treat osteoporosis and expect to market these
products within the next few years.
Calcium supplements have not been approved for marketing and sale in the
United States for the treatment of osteoporosis. Calcium supplements are often
recommended for postmenopausal women, but evidence of their efficacy in
treatment and prevention of osteoporosis is controversial. Calcium supplements
are also recommended for use with bisphosphonates and ERT.
Fluoride preparations have not been approved for marketing and sale in the
United States for the treatment of osteoporosis. Fluoride preparations are
known to increase bone density in the spine (the most common site of
osteoporosis fractures), but have little effect on bone density in the hip (the
most debilitating site of osteoporosis fractures).
A new class of compounds, selective estrogen receptor modulators, have
been shown to prevent bone loss. In December 1997, Raloxifene (Evista by Eli
Lilly) was approved for treatment of osteoporosis.
In Japan and Europe, there is an active market for osteoporosis therapies.
In Japan, available therapies include vitamin D-3 compounds, calcitonin, and
ipriflavone. In Europe, available therapies include estrogens, calcitonins,
vitamin D-3 compounds, ipriflavone, and sodium fluoride. Vitamin D-3
compounds, primarily 1-alpha-D-3, which are available in Japan and Europe, are
activated by the body into hormones which help regulate blood levels of calcium
required for essential body functions, including normal bone growth. Studies
have shown that low dosages of 1-alpha-D-3 have little efficacy as an
osteoporosis therapy, but at higher dosages, bone mineral content increased and
bone fracture rates decreased.
THE COMPANY'S PRODUCTS
X-RAY DENSITOMETRY SYSTEMS. Lunar introduced its first x-ray system, the
DPX, in 1988. Since that time, the Company has developed numerous enhancements
and instrument sizes available within this product line. Some of the more
popular models are described below.
Lunar introduced the PRODIGY, a fan-beam densitometer, in December 1998.
The PRODIGY uses a highly efficient detector to provide rapid throughput,
superb image quality, excellent precision and signifiacantly lower radiation
dose than competitive fan beam systems. The PRODIGY is priced between the DPX-
IQ and the EXPERT, and is targeted to radiologists, gynecologists,
rheumatologists, endocrinologists and orthopedists.
Lunar introduced the DPX-IQ in 1996. The DPX-IQ includes a broad range of
clinical applications, including software for the analysis of the spine, femur,
hand, and total body bone density and soft-tissue composition. The DPX-IQ is
available in a full-size model for complete clinical utility, and a compact
model, which requires less space, but cannot perform total body measurements.
Primary customers include radiologists, gynecologists, rheumatologists,
endocrinologists and orthopedists.
The EXPERT is a high-end imaging fan-beam bone densitometer. The imaging
capability of the EXPERT allows determinations of the entire lateral spine to
be achieved in less than a minute. Morphometry of individual vertebra can be
readily done with standardized, semiautomated algorithms. EXPERT morphometry,
compared to conventional radiographs, provides uniformity in geometry; there is
no distortion along the axis of the spine, leading to exact values for
vertebral height. The EXPERT is sold primarily to research institutions and
high-end imaging centers.
Lunar introduced the PIXI in 1997. The PIXI is a peripheral x-ray bone
densitometer, which utilizes cone-beam geometry to produce high resolution
imaging of both the heel and forearm in 5 seconds. While the forearm is an
adequate site to assess bone loss due to hyperparathyroidism, it is only a
modest predictor of future fractures and a poor site to monitor therapeutic
response. In contrast, the heel, as a weight-bearing site with metabolically
active bone, has been shown to be both: (1) a good predictor of hip fractures,
and (2) responsive to anti-resorptive therapies, much like the spine. Lunar
sells the PIXI to medical specialists such as gynecologists, and other primary
care physicians.
ULTRASOUND DENSITOMETRY SYSTEMS. Lunar introduced the first Achilles
ultrasound densitometer in 1991. The Achilles series of products were the
first to measure bone using both speed of sound and broadband ultrasound
attenuation. Lunar introduced the Achilles+ in 1995, featuring increased ease
of operation and reduced patient measurement time. In September 1997, Lunar
introduced the Achilles+ Solo, with further improved scan times (40 seconds per
measurement) and an internal computer. Lunar introduced the Achilles Express
in April 1999. The Achilles Express also operates with an internal computer,
but differs from previous models in that the heated water bath is replaced by
heated water contained within two compliant membranes. These modifications
allow for a smaller, more portable and more user friendly ultrasonometer. The
Achilles products are sold to endocrinologists, obstetricians, gynecologists,
and family practitioners.
ORTHOPEDIC IMAGING SYSTEMS - MAGNETIC RESONANCE IMAGING SYSTEM. In
September 1993, the Company signed an exclusive distributor agreement with
ESAOTE Biomedica Spa, a medical device manufacturer based in Italy, to
distribute the Artoscan dedicated MRI system in the United States. In June
1999, the Company signed a non-exclusive distributor agreement with ESAOTE
Biomedica Spa to distribute the E-Scan dedicated MRI system in the United
States. These specialized MRI systems are suitable for imaging extremities
such as knees, wrists, ankles, and, in the case of the E-Scan, shoulders. The
Company sells these devices for less than $450,000, which is significantly
below competitive whole body MRI systems. This lower price, coupled with lower
installation and siting costs, makes these MRI systems attractive to
radiologists, orthopedists, sports medicine specialists, and other MRI users.
Under the agreement with ESAOTE Biomedica, Lunar is required to meet certain
minimum annual purchase commitments. The distribution agreements with ESAOTE
expire on December 31, 2003. There can be no assurance that the agreement will
be renewed on terms satisfactory to the Company.
FLUOROSCOPIC C-ARM. The Company introduced ORCA, a fluoroscopic C-arm for
extremity imaging, in 1996. ORCA utilizes digital imaging capabilities coupled
with proprietary processing techniques to produce distortion-free images,
particularly of bone. ORCA is designed for the orthopedic surgery market.
CUSTOMERS, SALES, AND MARKETING
Lunar's products are sold to hospitals, clinics and pharmaceutical
companies active in the field of bone mineral metabolism. Specialists such as
radiologists, rheumatologists, endocrinologists and orthopedic surgeons
typically make the purchase decisions. Recently demand from primary care
physicians such as gynecologists and family practitioners has increased.
Lunar markets and sells its products in the United States through a 30-
person direct sales force and two independent distribution companies. The
Company entered into distribution agreements in 1998 with Caligor (a division
of Henry Schein Medical) and McKesson HBOC. Both companies have a presence in
the primary care and gynecology markets with a combined sales force of over 700
representatives.
Lunar markets and sells its products outside of the United States
primarily through independent distributors, all of whom offer sales and
technical support. Employees of these distributors have undergone product and
technical training related to the Company's systems. The Company's wholly
owned German, French, and Belgian subsidiaries provide direct sales and service
support to German, French, and Belgian customers. The Company also maintains
offices in Brussels, Belgium, and Sydney, Australia, to support its
distributors with marketing, sales support, and service.
Lunar markets and sells the MRI scanners through a 6-person direct sales
force and the fluoroscopic C-arm is sold through various radiological and
orthopedic surgery equipment dealers.
Lunar markets its products by advertising in medical journals, direct
mailings of brochures, attendance at medical seminars and trade shows, and
personal visits by sales representatives with customers. Lunar products carry a
one-year warranty. Extended service contracts are also available.
For the years ended June 30, 1999, 1998, and 1997, approximately 30%, 36%,
and 37% of sales, respectively, were to customers located in foreign countries.
No individual end user accounted for more than 2% of Lunar's sales for the
fiscal year ended June 30, 1999, 1998 and 1997.
Substantially all of the Company's June 30, 1999 backlog was deliverable
within 120 days. Orders included in backlog may generally be canceled or
rescheduled by customers, without significant penalty, and therefore cannot be
considered firm. Also, the Company's revenues tend to be somewhat seasonal,
generally being lower in the first fiscal quarter due primarily to lower
activity in Europe and North America.
MANUFACTURING
Lunar's manufacturing operations consist primarily of assembly, testing,
and quality control. Lunar purchases a majority of the parts and peripheral
components for its systems and manufactures certain subsystems, such as the x-
ray tube head, from basic components. Parts and materials are generally
readily available from several supply sources.
PATENTS AND PROPRIETARY RIGHTS
Lunar relies in part upon know-how, trade secrets, trademarks and
copyrights, and patents to protect technology which it considers important to
the development of its business.
Although the Company believes patents are not critical in protecting its
competitive advantage in bone densitometry, it has obtained a number of United
States patents relating to its technology. The Company owns a number of issued
United States and foreign patents and patent applications related to various
aspects of x-ray and ultrasound bone densitometry. The Company continues to
file United States and foreign patent applications covering its developments in
the bone densitometry and imaging technologies. In addition to patents and
patent applications concerning technology developed by the Company, the Company
has licensed patented technology developed at various universities.
The Company has obtained United States and foreign trademark registrations
for "LUNAR," "DPX," "Achilles," "EXPERT," "LUNAR Expert," "PIXI," "DPX-IQ," and
"ORCA." Applications for various trademark registrations continue to be
pursued worldwide.
The Company claims international copyright in its software, user's
manuals, customer brochures, and advertising materials.
The Company also relies on unpatented trade secrets. The Company requires
its employees, consultants, and advisors to execute confidentiality agreements
upon the commencement of an employment or a consulting relationship with the
Company. The agreements provide that all confidential information developed or
made known to the individual during the course of the relationship shall be
kept confidential and not disclosed to third parties except in specified
circumstances. The agreements also provide that all inventions conceived by
the individual during his employment and relating to the business of the
Company shall be the exclusive property of the Company. There can be no
assurance, however, that these agreements will provide meaningful protection
for the Company's trade secrets in the event of unauthorized use or disclosure
of such information. Additionally, others may independently develop
substantially equivalent proprietary information and techniques, or otherwise
gain access to the Company's trade secrets or disclose such technology.
For information regarding patent litigation, see Item 3 below.
COMPETITION
Lunar product sales are dependent on competition, reimbursement levels,
and availability of therapies on a country-by-country basis. The medical
instrumentation industry is highly competitive and characterized by continual
change and improvement in technology. Many of the companies in the medical
instrumentation industry have significantly greater research, manufacturing,
marketing, and financial resources than the Company.
To date, the market for bone densitometer systems has been characterized
by companies such as Lunar which specialize in instruments for bone density
measurement. Hologic, Inc., based in Massachusetts, and Norland Medical
Systems, Inc., based in White Plains, New York, sell bone densitometer scanners
which compete directly with the Prodigy, DPX series and the EXPERT. In 1997,
Schick Technologies, Inc., based in Long Island City, New York, introduced a
low-cost x-ray based peripheral bone densitometer which competes with the
Company's peripheral bone densitometers. Two Japanese companies, an Italian
company and a French company are developing or have introduced x-ray bone
densitometers in their respective countries. Lunar expects additional
competitors to enter the bone densitometry market, both in the United States
and foreign countries. Competition has intensified as new models have been
introduced by competitors.
The Company believes it is the world's largest seller of ultrasound bone
densitometry instruments. Hologic and at least five other companies have
commercially introduced devices which compete with the Achilles ultrasound
product line. Lunar is aware of several other companies developing ultrasound
bone densitometers.
In addition to competition from other medical equipment manufacturers and
devices, biochemical markers have gained increased interest among researchers
for the detection of high bone turnover which can lead to osteoporosis. Such
markers could be used as an adjunct to bone densitometry.
The primary competitors to the ORCA C-arm include OEC Medical Systems,
Inc., Fluoroscan (a subsidiary of Hologic), and Xitec. Siemens sells an
extremity MRI device competitive to the E-Scan.
REGULATION
The Company's products and manufacturing systems are subject to regulation
by the FDA and by many foreign governments. Under the United States Food,
Drug, and Cosmetic Act ("FDA Act"), manufacturers of medical devices must
comply with certain regulations governing the manufacturing, testing,
packaging, and marketing of medical devices. The Company's x-ray bone
densitometry products are also subject to the Radiation Control for Health and
Safety Act, administered by the FDA, which imposes performance standards and
record keeping, reporting, product testing, and product labeling requirements
for devices using radiation, such as x-rays. Lunar believes it is in
compliance in all material respects with these various laws and regulations.
The FDA generally must authorize the commercial sale of new medical
devices. Commercial sales of the Company's bone densitometry devices within
the United States must be preceded by either a premarket notification filing
pursuant to Section 510(k) of the FDA Act or the granting of premarket approval
for a particular medical device. The Section 510(k) notification filing must
contain information which establishes that the device is substantially
equivalent to a legally marketed device or to a device which was marketed prior
to May 28, 1976. The FDA may either deny the Section 510(k) submission or
require further information within 90 days of submission. Commercial marketing
of the device cannot begin until the 510(k) submission is cleared by the FDA.
The premarket approval (PMA) procedure involves a more complex and lengthy
review process by the FDA than the Section 510(k) premarket notification
procedure.
The following table summarizes FDA Section 510(k) clearances and Pre-
Market Approvals received by Lunar during the last 10 years:
510(k)Clearances
DPX Bone Densitometer June 1988
DPX Total Body Software June 1989
DPX Population Reference Data April 1990
DPX-L/DPX-alpha Bone Densitometers December 1990
Lateral Spine Software August 1991
DPX Forearm Software February 1992
DPX Orthopedics Software February 1992
EXPERT Bone Densitometer April 1995
EXPERT Morphometry Software April 1995
Morphometry Software May 1995
DPX Tissue Quantitation Software October 1995
DPX Hand Software October 1995
ORCA Orthopedic C-arm May 1996
EXPERT Morphometry Reference Value Software July 1996
EXPERT Forearm and Hand Software November 1996
EXPERT Total Body Software April 1997
DPX Expanded Reference Value Software April 1997
PIXI Densitometer April 1997
PIXI Reference Data August 1997
Prodigy Bone Densitometer August 1998
Prodigy Total Body Software December 1998
Pre-Market Approvals
Achilles+ Ultrasonometer June 1998
Achiles Express Ultrasonometer April 1999
LUNAR believes new products being developed in the x-ray densitometry and
imaging product lines will be eligible for a Section 510(k) marketing
clearance.
As a manufacturer of medical devices, Lunar is subject to certain FDA
regulations which relate to its processes for product design, development,
manufacturing, selling and service as well as its facilities. These process
and facility requirements are subject to continuing review by the FDA, and as
such, the Company's quality management system has been established to meet
these FDA requirements. Lunar has had several FDA on-site inspections and has
complied with FDA regulations.
The Company's quality management system is also certified as meeting the
internationally recognized ISO 9001 standard as well as the specific
requirements of the European Medical Devices Directive. The Company is subject
to routine follow-up inspections by independent quality system auditors. Lunar
has complied with these quality system requirements.
Export clearance for the Company's products varies by country. Generally
if FDA 510(k) or premarket approval is received in the United States, there are
no other export clearances required. However, the Company's product line may
be subject to approval by certain foreign regulatory and safety agencies as
well. An increasing number of countries are implementing regulations requiring
their own pre-market review of new medical devices prior to the Company
exporting newly introduced devices to that country. Other countries require
only that the Company comply with product safety and ISO 9001 quality system
standards. Lunar believes it is currently in compliance with all regulations
in foreign countries applicable to its business.
Most states and certain foreign countries monitor and require licensing of
x-ray devices such as bone densitometers and fluoroscopic devices either by the
user or by the manufacturer. Lunar believes that it is currently in compliance
with relevant registration and/or licensing requirements for x-ray devices.
Federal, state, and foreign regulations regarding the manufacture and sale
of medical devices are subject to future change. Lunar cannot predict what
impact, if any, such changes might have on its business.
Lunar is also subject to regulation by the Nuclear Regulatory Commission
("NRC") as a result of its storage and handling of radioactive materials used
in the design and development of its medical devices. Lunar holds a license
from the NRC which regulates the type, amount, form, storage, use, disposal,
and handling of such radioactive materials. Licenses from the NRC must be
renewed every five years. Lunar has in place a Radiation Safety Program, and
it has recently been inspected by the NRC and complies with the relevant
regulations.
The Company is subject to various federal, state, and local laws and
regulations relating to the protection of the environment. Lunar believes its
current operations comply with all currently applicable environmental laws and
regulations. Lunar's expenditures for environmental compliance have not had,
nor are they expected to have, a material adverse effect on the results of
operations or financial condition of the Company.
RESEARCH AND DEVELOPMENT
As of June 30, 1999, the Company had 52 employees engaged in research and
development. During fiscal 1999, 1998, and 1997, Lunar's research and
development expenses were $7.1 million, $7.6 million, and $5.9 million,
respectively.
PRODUCT LIABILITY INSURANCE
The Company maintains product liability insurance and considers its
current level of product liability insurance coverage to be adequate. While
the Company has not experienced any material product liability claims to date,
if such claims arise in the future, they could have a material adverse effect
on the results of operations or financial condition of the Company.
EMPLOYEES
As of June 30, 1999, Lunar had 317 full-time employees, including 63 in
manufacturing operations; 52 in research and development; 171 in marketing,
sales support, and service; and 31 in finance and administration. None of the
Company's employees is represented by a union. The Company considers its
employee relations to be good.
GLOSSARY OF DEFINED TERMS
DEXA - dual-energy x-ray absorptiometry
DPA - dual-photon absorptiometry
ERT - estrogen replacement therapies
FDA - Food and Drug Administration
FDA Act - United States Food, Drug, and Cosmetic Act
HCFA - Health Care Finance Administration
Hologic - Hologic, Inc.
MRI - magnetic resonance imaging
NRC - Nuclear Regulatory Commission
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In addition to the historical information presented in this annual report,
the Company has made and will make certain forward-looking statements in this
report, other reports filed by the Company with the Securities and Exchange
Commission, reports to stockholders and in certain other contexts relating to
future net sales, costs of sales, other expenses, profitability, financial
resources, or products and production schedules. Statements relating to the
foregoing or that predict or indicate future events and trends and which do not
relate solely to historical matters identify forward-looking statements.
Forward-looking statements are made pursuant to the safe harbor provisions of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and are based on management's beliefs as well as
assumptions made by and information currently available to management.
Accordingly, the Company's actual results may differ materially from those
expressed or implied in such forward-looking statements due to known and
unknown risks and uncertainties that exist in the Company's operations and
business environment, including, among other factors, technical risks
associated with the development of new products, regulatory policies in the
United States and other countries, reimbursement policies of public and private
health care payors, introduction and acceptance of new drug therapies,
competition from existing products and from new products or technologies, the
failure by the Company to produce anticipated cost savings or improve
productivity, the timing and magnitude of capital expenditures and
acquisitions, currency exchange risks, economic and market conditions in the
United States, Europe and the rest of the world, changes in customer spending
levels, the cost and availability of raw materials, and other risks associated
with the Company's operations. Although the Company believes that its forward-
looking statements are based on reasonable assumptions, there can be no
assurance that actual results, performance or achievements will not differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements. Readers are cautioned not to place
undue reliance on forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce any revisions to
any of the forward-looking statements contained herein to reflect future events
or developments.
ITEM 2. PROPERTIES
The Company owns and occupies a building of approximately 70,000 square
feet on approximately 3 acres in Madison, Wisconsin. The Company's facilities
were originally acquired in 1986 and expanded by approximately 30,000 square
feet in 1994. The Company also leases a warehouse in Madison, Wisconsin of
approximately 10,000 square feet, and office facilities in Germany, Belgium,
and France.
The Company purchased a 25-acre parcel of land in January 1998 for
$1,949,000 and began construction of an assembly, warehouse and office building
in October 1998. The Company projects total construction costs will be
approximately $10,750,000 of which $6,787,950 had been paid as of June 30,
1999. The Company moved its assembly operations and warehouse to the new
building in July 1999. The Company will move its office personnel to the new
building in October 1999.
ITEM 3. LEGAL PROCEEDINGS
PATENT LITIGATION: On May 21, 1998 the Company filed suit against
International Medical Research Ottawa (IMRO) for infringement of the Company's
Canadian Patent 1,323,090 (the '090 Patent). IMRO manufactures and sells
ultrasound bone densitometers in Canada and has manufactured ultrasound
densitometers for Norland Medical Systems, Inc. for distribution and sale
throughout the world. This suit is pending in the Federal Court of Canada-Trial
Division. On September 10, 1999, the parties reached an agreement in principle
to resolve this litigation. Under the terms of the agreement, IMRO will
terminate its operations in Canada within three months and pay the Company a
royalty for each system manufactured or sold during that period.
On November 24, 1998 the Company was issued U.S. patent number 5,841,832
(the `832 patent). On January 20, 1999 the Company brought suit against EG&G
Astrophysics Research Corporation and its parent company EG&G, Inc.
(collectively referred to as "EG&G") in the United States District Court for
the Western District of Wisconsin for infringement of the `832 patent by EG&G's
dual-energy baggage scanners. The parties have reached an agreement in
principle to resolve this litigation. Under the terms of the agreement, EG&G
will pay a future royalty to the Company for all sales of products that utilize
the technology claimed in the `832 patent.
OTHER MATTERS: The Company is a defendant from time to time in actions
arising out of its ordinary business operations. There are no other legal
proceedings known to the Company at this time which it believes would likely
have a material adverse impact on the results of operations, financial
condition or cash flows of the Company. To the Company's knowledge, there are
no material legal proceedings to which any director, officer, affiliate or more
than 5% shareholder of the Company (or any associate of the foregoing persons)
is a party adverse to the Company or any of its subsidiaries or has a material
interest adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The following table sets forth high and low sales prices as reported on
the National Market System of The Nasdaq Stock Market for fiscal years 1999 and
1998.
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
1999
----
High $18.00 $11.81 $10.75 $ 8.44
Low $10.69 $ 9.25 $ 6.38 $ 5.38
1998
----
High $24.50 $22.88 $24.50 $20.00
Low $19.00 $18.50 $19.75 $16.25
On September 23, 1999, the Company's common stock was held by
approximately 3,500 stockholders of record or through nominee or street name
accounts with brokers.
The Company has not paid any cash dividends on its shares of common stock
since its initial public offering on August 14, 1990, and does not expect to
pay any cash dividends in the foreseeable future. Lunar intends to reinvest its
earnings on the continued development and operation of its business. Any
payment of dividends would depend upon Lunar's pattern of growth,
profitability, financial condition, and such other factors as the Board of
Directors may deem relevant.
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data for each of the five
years in the period ended June 30, 1999 have been derived from the audited
consolidated financial statements of LUNAR. The consolidated financial
statements for the fiscal years ended June 30, 1995 through 1998 have been
audited by KPMG LLP, independent auditors. The financial statements for fiscal
year ended June 30, 1999 have been audited by Arthur Anderson LLP, independent
auditors. References to a year are to Lunar's fiscal year ended June 30, unless
otherwise designated.
The following data should be read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Annual Report
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
STATEMENTS OF INCOME DATA
(in thousands, except per-share data)
Year Ended June 30,
1999 1998 1997 1996 1995
------------------------------------------
REVENUES
Equipment sales and other revenue $88,062 $79,177 $80,891 $66,426 $44,349
OPERATING EXPENSES
Cost of sales 50,562 38,020 35,242 29,739 18,583
Research and development 7,100 7,577 5,922 5,812 4,495
Sales and marketing 24,394 19,995 17,697 14,729 10,057
General and administrative 4,655 4,097 4,051 4,311 4,002
- -----------------------------------------------------------------------------
86,711 69,689 62,912 54,591 37,137
- -----------------------------------------------------------------------------
Income from operations 1,351 9,488 17,979 11,835 7,212
OTHER INCOME (EXPENSE)
Interest income 1,600 1,813 1,533 1,549 1,312
Settlement of lawsuit (580) - 1,829 - -
Other 660 (1,115) 186 (238) 328
- -----------------------------------------------------------------------------
1,680 698 3,548 1,311 1,640
- -----------------------------------------------------------------------------
Income before income taxes 3,031 10,186 21,527 13,146 8,852
Income tax expense 676 3,324 7,241 3,910 2,151
- -----------------------------------------------------------------------------
NET INCOME $2,355 $6,862 $14,286 $9,236 $6,701
=============================================================================
Basic Earnings Per Share $.27 $0.78 $1.66 $1.13 $0.85
=============================================================================
Diluted Earnings Per Share $.27 $0.75 $1.57 $1.04 $0.76
=============================================================================
Weighted average number of
common shares 8,617 8,774 8,615 8,195 7,905
=============================================================================
Weighted average number of common and
dilutive potential common shares 8,779 9,112 9,106 8,908 8,824
=============================================================================
BALANCE SHEET DATA
(in thousands)
As of June 30,
1999 1998 1997 1996 1995
--------------------------------------------------
Working capital $44,810 $40,606 $45,535 $38,987 $33,140
Total assets $96,164 $90,060 $83,269 $62,860 $56,700
Long-term liabilities - - - - -
Shareholders' equity $76,345 $75,557 $70,229 $52,393 $48,096
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
STATEMENTS OF INCOME (percent of sales)
Year Ended June 30,
1999 1998 1997
---- ---- ----
REVENUES 100% 100% 100%
OPERATING EXPENSES
Cost of sales 57 48 44
Research and development 8 10 7
Sales and marketing 28 25 22
General and administrative 5 5 5
- -----------------------------------------------------------------------------
98 88 78
- -----------------------------------------------------------------------------
Income from operations 2 12 22
OTHER INCOME (EXPENSE)
Interest income 2 2 2
Other, net - (1) 3
- -----------------------------------------------------------------------------
2 1 5
- -----------------------------------------------------------------------------
Income before income taxes 4 13 27
Income tax expense 1 4 9
- -----------------------------------------------------------------------------
NET INCOME 3% 9% 18%
=============================================================================
YEAR ENDED JUNE 30, 1999 VERSUS 1998 - Equipment sales and other
revenue increased 11% to $88,062,000 in fiscal 1999, from $79,177,000 in fiscal
1998. Sales by product line are summarized as follows:
Revenues by Product
(in thousands)
Fiscal Year Fiscal Year
1999 1998
----------- -----------
X-ray densitometry $55,533 $56,611
Ultrasound densitometry 8,551 4,118
Orthopedic imaging 15,543 12,223
Service 6,790 5,193
Other 1,645 1,032
----------- -----------
$88,062 $79,177
=========== ===========
X-ray densitometry sales in fiscal year 1999 were relatively flat compared
to the prior year in spite of an increase in the number of units sold. Average
selling prices were lower due to competitive pricing pressures and an increased
mix of sales to distributors in the United States at lower average selling
prices than direct sales to end users. The increase in ultrasound densitometry
revenue is primarily due to increased unit sales in the United States. The
increase in Orthopedic Imaging sales for the current fiscal year is primarily
due to the introduction of the E-SCAN and increased unit sales of the ORCA mini
C-arm. The increase in service revenue is attributable to a growing installed
base of densitometers in the United States.
Cost of sales as a percentage of equipment sales averaged 57% in fiscal
1999 compared to 48% in fiscal 1998. These lower margins primarily result from
a decrease in average selling prices. Gross profit margins were also lower in
fiscal year 1999 due to a higher mix of orthopedic imaging equipment which have
lower gross profit margins.
Research and development expenditures decreased to $7,100,000 in fiscal
1999 compared to $7,577,000 in fiscal 1998. These expenses were lower in fiscal
year 1999 due to the completion of development work associated with the Prodigy
and Achilles Express bone densitometers. The Company expects this trend to
continue and plans to spend less on research and development in the next fiscal
year.
Sales and marketing expenses increased 22% to $24,394,000 (28% of product
sales) in fiscal 1999 from $19,995,000 (25% of product sales) in fiscal 1998.
Four key factors account for this increase. First, the Company increased the
allowance for doubtful accounts by $1,000,000 in the quarter ended March 31,
1999 in anticipation of possible losses on it's portfolio of Brazilian
receivables. Second, the Company increased sales and marketing efforts
targeted to primary care physicians to address the expanding market for
densitometry in the United States. Third, the Company incurred substantially
higher expenses to translate product software and user documentation in order
to comply with the new European Medical Device Directive regulations. Fourth,
the Company started a direct sales and service subsidiary in France in March,
1998, which resulted in both increased revenues and expenses in that country.
General and administrative expenses increased to $4,655,000 in fiscal 1999
from $4,097,000 in fiscal 1998. The increase is primarily attributable to an
increase in the number of employees and an increase in property taxes related
to the Company's assembly, warehouse and office building under construction.
Interest income of $1,600,000 in fiscal 1999 compared to interest income
of $1,813,000 in fiscal 1998. This decrease is primarily the result of
decreases in the amount of investments partially offset by an increase in the
amount of interest from financed receivables.
The Company settled a lawsuit with Osteometer Meditech A/S and Rapiscan
Security Systems Inc. during the quarter ended September 30, 1998. As a result
of the settlement, the Company incurred expenses of approximately $580,000 in
that quarter comprised of legal expenses, a settlement payment, and a patent
write-off related to this settlement. Other income included royalty income,
income from the sale of Bona Fide Ltd., and foreign currency gains.
The effective tax rate averaged 22% in fiscal 1999 and 33% in fiscal 1998.
The Company's effective rate is lower in fiscal year 1999 than in fiscal year
1998 due to an increased proportion of tax-exempt interest income and a higher
benefit from the foreign sales corporation. The rate for both years is below
the 34% federal statutory rate as a result of tax-exempt interest income and
the benefit from the foreign sales corporation offset by the provision for
state income taxes.
YEAR ENDED JUNE 30, 1998 VERSUS 1997 - Equipment sales and other revenue
decreased 2% to $79,177,000 in fiscal year 1998, from $80,891,000 in fiscal
year 1997. Sales by product line are summarized as follows:
Revenues by Product
(in thousands)
Fiscal Year Fiscal Year
1998 1997
----------- -----------
X-ray densitometry $56,611 $61,827
Ultrasound densitometry 4,118 5,528
Orthopedic Imaging 12,223 9,121
Service 5,193 3,546
Other 1,032 869
----------- -----------
$79,177 $80,891
=========== ===========
The Company's sales of bone densitometers in the United States have been
negatively impacted by a shift away from traditional hospital buyers
toward physician clinical practices, which tend to favor the lowest priced
densitometers. In fiscal year 1998, the Company announced two new distributor
agreements to better address this market segment. Bone densitometry sales were
also negatively affected by the economic problems in Asian markets. The
increase in Orthopedic Imaging sales for fiscal year 1998 is primarily due to
increased unit sales of the Artoscan dedicated MRI system. The increase in
service revenue is primarily due to the growing installed base of densitometers
in the United States.
Cost of sales as a percentage of equipment sales averaged 48% in the year
ended June 30, 1998 compared to 44% in the year ended June 30, 1997. The
increase is primarily the result of lower gross profit margins on sales of
densitometry equipment as a result of competitive pricing pressures and a
higher mix of orthopedic imaging equipment which have lower gross profit
margins.
Research and development expenditures increased to $7,577,000 in fiscal
year 1998 compared to $5,922,000 in fiscal year 1997. The Company increased
research and development expenditures for ultrasound and x-ray densitometry
products during fiscal year 1998.
Sales and marketing expenses increased 14% to $19,995,000 (25% of product
sales) in fiscal year 1998 from $17,697,000 (22% of product sales) in fiscal
year 1997. This increase is primarily the result of increased sales and
marketing efforts to address the expanding primary care market for
densitometry.
General and administrative expenses increased to $4,097,000 in fiscal year
1998 from $4,051,000 in fiscal year 1997.
Interest income of $1,813,000 in fiscal year 1998 compared to interest
income of $1,533,000 in fiscal year 1997. This increase is primarily the
result of increased investments in marketable securities partially offset by
decreases in the amount of financed receivables.
The effective tax rate averaged 33% in fiscal year 1998 and 34% in fiscal
year 1997. The Company's effective rate has been below the 34% federal
statutory rate as a result of the tax benefit from the Company's foreign sales
corporation, Lunar FSC, Inc., and tax-exempt interest income offset by the
effect of state income taxes.
LIQUIDITY AND CAPITAL RESOURCES - Cash and cash equivalents increased
$9,058,000 to $13,666,000 at June 30, 1999 from $4,608,000 at June 30, 1998.
Marketable securities decreased $15,356,000 to $15,545,000 at June 30, 1999
from $30,901,000 at June 30, 1998. Marketable securities consist of a laddered
portfolio of readily marketable high-grade municipal bonds with various
maturities not exceeding 48 months.
The Company's accounts receivable increased $3,658,000 to $35,060,000 at
June 30, 1999 from $31,402,000 at June 30, 1998. The increase is primarily
attributable to higher accounts receivable from MRI customers which generally
have longer payment terms, higher accounts receivable from financed Brazilian
customers and payment delays by Brazilian customers related to the recent
currency devaluation.
The Company has approximately $8,091,000 in financed accounts receivable
from Brazilian customers as of June 30, 1999. Two finance companies also have
recourse against the Company for a maximum of approximately $1,395,000 for
financed Brazilian accounts receivable that have been sold. All the Brazilian
accounts receivable are denominated in U.S. dollars. In January 1999 the
Brazilian government allowed its currency, the real, to freely trade against
the U.S. dollar. As of September 1999, this policy change resulted in
approximately a 56% devaluation of the real as compared to the U.S. dollar.
The Company has incurred some payment delays from Brazilian customers and lower
sales in Brazil as a result of this devaluation. The Company has renegotiated
longer payment terms for these Brazilian accounts receivable.
Inventories increased 4% to $13,656,000 on June 30, 1999 from $13,163,000
on June 30, 1998. The increase in finished goods is primarily attributable to
increases in Artoscan MRI and densitometry units. The decrease in materials
and purchased parts is primarily attributable to decreased service inventories.
The Company purchased a 25-acre parcel of land in January 1998 for
$1,949,000 and began construction of an assembly, warehouse and office building
in October 1998. The Company projects total construction costs will be
approximately $10,750,000 of which $6,787,950 had been paid as of June 30,
1999. The Company moved its assembly operations and warehouse to the new
building in July 1999. The Company will move its office personnel to the new
building in October 1999. The Company does not have any other pending material
commitments for capital expenditures. The Company has received a commitment
from the State of Wisconsin Investment Board to provide a 20 year term loan for
up to $10,000,000 of the final building cost. The interest rate will be fixed
at the time the loan proceeds are paid.
On April 22, 1998, the Company approved a stock repurchase program
pursuant to which it may repurchase up to 1,000,000 shares of its common stock
from time to time based upon market conditions and other factors. The Company
has repurchased 314,400 shares under this program as of September 23, 1999.
Management believes the current level of cash and short-term marketable
securities is adequate to finance the Company's operations for the foreseeable
future.
NEW ACCOUNTING PRONOUNCEMENTS - SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" is effective for financial statements for
periods beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments and hedging activities. The
Company is evaluating the new Statement's provisions and does not expect this
Statement to have a material effect on its financial statements.
YEAR 2000 COMPLIANCE - Many currently installed computer systems and
software products are coded to accept only two-digit entries in the date code
field. To distinguish 21st century from 20th century dates, these date code
fields must be able to accept four-digit entries.
The Company has reviewed its existing financial and other business
information systems and believes that its computer systems will be able to
manage and manipulate all material data involving the transition from 1999 to
2000 without functional or data abnormality and without inaccurate results
related to such data. During fiscal 1998, the Company replaced its
manufacturing and financial accounting software package at a cost of
approximately $230,000. This new software package is year 2000 compliant. The
Company does not expect to incur significant additional costs to complete its
year 2000 compliance program.
It is possible that third parties, such as suppliers and distributors, may
have noncompliant computer systems or programs which may not interface properly
with the Company's computer systems or may otherwise result in a disruption of
the Company's operations. The Company is requesting assurances from third
parties with which it has a material relationship that their computers,
systems, and programs be year 2000 compliant.
The Company currently anticipates that the expenses and capital
expenditures associated with its year 2000 compliance program will not have a
material effect on its financial position, results of operations or cash flows.
Because the Company's software programs are year 2000 compliant, and the
Company does not believe any material problems will arise if a third party is
not year 2000 compliant, the Company has not developed any contingency plan.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's investment portfolio. The Company does not
use derivative financial instruments in its investment portfolio. The Company
places its investments with high credit quality issuers and, by policy, limits
the amount of credit exposure to any one issuer. As stated in its policy, the
Company is adverse to principal loss and ensures the safety and preservation of
its invested funds by limiting default risk, market risk, and reinvestment
risk. The Company mitigates default risk by investing in only high credit
quality securities. The portfolio includes only marketable securities with
active secondary or resale markets to ensure portfolio liquidity. All
investments mature, by policy, in 48 months or less.
The Company uses forward currency contracts in its management of foreign
currency exposures. The contracts are in German Deutsche Marks, French Francs,
and Belgian Francs and generally have maturities which do not exceed three
months. Realized gains and losses on such contracts are included in other
income at the time the hedged transaction occurs. There were no deferred gains
or losses at June 30, 1999. These contracts are entered into with major
financial institutions thereby minimizing the risk of credit loss.
The table below provides information about the Company's market sensitive
financial instruments and constitutes a "forward-looking statement." All items
described below are non-trading and are stated in U.S. dollars.
During fiscal year ended June 30,
-----------------------------------------------
Maturity dates 2000 2001 2002 2003
- -----------------------------------------------------------------------------
ASSETS
Cash equivalents
Variable taxable rate $7,614,682
Average taxable interest rate 4.15%
Variable tax-exempt rate $6,051,481
Average tax-exempt rate 3.1%
Marketable securities
Fixed tax-exempt rate $4,241,900 $7,663,600 $3,245,000
Average tax-exempt rate 4.24% 4.23% 4.19%
Forward contract
German DM denominated $ 691,048
Contracted exchange rate 1.8812:1
(DM to US$)
French Franc denominated $1,742,988
Contracted exchange rate 6.311:1
(FF to US$)
Belgian Franc denominated $ 514,668
Contracted exchange rate 38.86:1
(BF to US$)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Income
Years ended June 30, 1999, 1998, and 1997
- -----------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Revenues $ 88,062,189 $ 79,177,098 $ 80,890,757
Operating expenses:
Cost of sales 50,562,087 38,020,371 35,241,705
Research and development 7,100,078 7,576,796 5,922,409
Sales and marketing 24,394,129 19,994,408 17,697,195
General and administrative 4,655,190 4,097,413 4,050,713
- -----------------------------------------------------------------------------
86,711,484 69,688,988 62,912,022
- -----------------------------------------------------------------------------
Income from operations 1,350,705 9,488,110 17,978,735
- -----------------------------------------------------------------------------
Other income (expense):
Interest income 1,599,972 1,813,153 1,533,127
Settlement of lawsuit (579,555) - 1,828,905
Other 659,579 (1,115,121) 186,058
- -----------------------------------------------------------------------------
1,679,996 698,032 3,548,090
- -----------------------------------------------------------------------------
Income before income taxes 3,030,701 10,186,142 21,526,825
- -----------------------------------------------------------------------------
Income tax expense 676,000 3,324,000 7,241,000
- -----------------------------------------------------------------------------
Net income $ 2,354,701 $ 6,862,142 $ 14,285,825
=============================================================================
Basic earnings per share $ .27 $ 0.78 $ 1.66
=============================================================================
Diluted earnings per share $ .27 $ 0.75 $ 1.57
=============================================================================
See accompanying notes to consolidated financial statements.
Consolidated Balance Sheets
June 30, 1999 and 1998
- -----------------------------------------------------------------------------
Assets 1999 1998
- -----------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 13,666,163 $ 4,608,427
Marketable securities 4,311,834 8,117,655
Receivables:
Trade, less allowance for doubtful
accounts of $3,524,000 in 1999
and $3,272,000 in 1998 25,316,044 24,285,511
Short-term financed 4,848,186 2,092,164
Other 407,056 929,179
- -----------------------------------------------------------------------------
30,571,286 27,306,854
- -----------------------------------------------------------------------------
Inventories:
Finished goods and work in process 7,125,027 4,557,400
Materials and purchased parts 6,530,752 8,605,801
- -----------------------------------------------------------------------------
13,655,779 13,163,201
- -----------------------------------------------------------------------------
Other current assets 431,931 350,360
Deferred income taxes 1,992,000 1,563,000
- -----------------------------------------------------------------------------
Total current assets 64,628,993 55,109,497
- -----------------------------------------------------------------------------
Property, plant, and equipment - at cost:
Land 2,088,118 2,088,118
Buildings and improvements 2,287,356 2,287,356
Furniture and fixtures 1,055,780 876,813
Machinery and other equipment 9,368,111 6,755,441
Construction in progress 6,787,950 132,702
- -----------------------------------------------------------------------------
21,587,315 12,140,430
Less accumulated depreciation and
amortization 6,354,858 5,086,141
- -----------------------------------------------------------------------------
15,232,457 7,054,289
Long-term trade accounts receivable 4,488,753 4,095,565
Long-term marketable securities 11,233,298 22,783,003
Patents and other intangibles, net of
accumulated amortization of $764,000
in 1999 and $1,513,000 in 1998 463,270 809,468
Other 117,390 208,136
- -----------------------------------------------------------------------------
$ 96,164,161 $ 90,059,958
=============================================================================
See accompanying notes to consolidated financial statements.
Consolidated Balance Sheets
June 30, 1999 and 1998
- -----------------------------------------------------------------------------
Liabilities and Shareholders' Equity 1999 1998
- -----------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 9,133,277 $ 4,881,399
Customer advances and deferred income 1,573,523 1,027,872
Income taxes payable 2,682,104 3,494,822
Accrued liabilities:
Commissions payable 2,009,340 2,186,040
Compensation payable 658,821 413,084
Property, payroll, and other taxes 250,150 155,683
Accrued warranty and installation expenses 3,118,000 2,145,000
Other 393,537 199,324
- -----------------------------------------------------------------------------
Total current liabilities 19,818,752 14,503,224
- -----------------------------------------------------------------------------
Shareholders' equity:
Common stock - authorized 25,000,000 shares
of $.01 par value; issued and outstanding,
8,598,580 shares in 1999 and 8,701,210
shares in 1998 85,986 87,012
Capital in excess of par value 23,454,316 24,936,811
Retained earnings 52,922,982 50,568,281
Accumulated other comprehensive loss (117,875) (35,370)
-----------------------------------------------------------------------------
76,345,409 75,556,734
- -----------------------------------------------------------------------------
$ 96,164,161 $ 90,059,958
=============================================================================
<TABLE>
<CAPTION>
Consolidated Statements of Shareholders' Equity
Years ended June 30, 1999, 1998, and 1997
- --------------------------------------------------------------------------------
- --------------------
Accumulated
Number Capital in
Other
of Common excess of Retained
Comprehensive
shares stock par value earnings
Income (Loss) Total
- --------------------------------------------------------------------------------
- --------------------
<S> <C> <C> <C> <C>
<C>
<C>
Balance at June 30, 1996 8,486,250 $84,863 $22,802,103 $29,420,314 $
86,123 $52,393,403
Comprehensive income:
Net income - - - 14,285,825
- - 14,285,825
Unrealized appreciation in
marketable securities - net
of tax expense of $ 2,000 - - - -
3,098 3,098
Translation adjustment - - - -
(154,124) (154,124)
- ----------
Total comprehensive income
14,134,799
Issuance of shares under
stock option plans 233,200 2,332 1,121,254 -
- - 1,123,586
Tax benefit from issuance of
shares under stock option
plans - - 2,504,036 -
- - 2,504,036
Issuance of stock awards 1,975 19 73,549 -
- - 73,568
- --------------------------------------------------------------------------------
- --------------------
Balance at June 30, 1997 8,721,425 87,214 26,500,942 43,706,139
(64,903) 70,229,392
- --------------------------------------------------------------------------------
- --------------------
Comprehensive income:
Net income - - - 6,862,142
- - 6,862,142
Unrealized appreciation in
marketable securities - net
of tax expense of $ 41,000 - - - -
61,712 61,712
Translation adjustment - - - -
(32,179) (32,179)
- ---------
Total comprehensive income
6,891,675
Issuance of shares under
stock option plans 174,210 1,742 885,963 -
- - 887,705
Tax benefit from issuance of
shares under stock option
plans - - 947,521 -
- - 947,521
Issuance of stock awards 575 6 13,435 -
- - 13,441
Repurchase of common stock (195,000) (1,950) (3,411,050) -
- - (3,413,000)
- --------------------------------------------------------------------------------
- --------------------
Balance at June 30, 1998 8,701,210 87,012 24,936,811 50,568,281
(35,370) 75,556,734
- --------------------------------------------------------------------------------
- --------------------
Comprehensive income:
Net income - - - 2,354,701
- - 2,354,701
Unrealized depreciation in
marketable securities - net
of tax credit of $ 18,000 - - - -
(26,277) (26,277)
Translation adjustment - - - -
(56,228) (56,228)
- ---------
Total comprehensive income
2,272,196
Issuance of shares under
stock option plans 15,770 158 54,908 -
- - 55,066
Tax benefit from issuance of
shares under stock option
plans - - 28,513 -
- - 28,513
Issuance of stock awards 1,000 10 9,490 -
- - 9,500
Repurchase of common stock (119,400) (1,194) (1,575,406) -
- - (1,576,600)
- --------------------------------------------------------------------------------
- --------------------
Balance at June 30, 1999 8,598,580 $85,986 $23,454,316 $52,922,982
$(117,875) $76,345,409
================================================================================
====================
See accompanying notes to consolidated financial statements.
</TABLE>
Consolidated Statements of Cash Flows
Years ended June 30, 1999, 1998, and 1997
- -------------------------------------------------------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 2,354,701 $ 6,862,142 $14,285,825
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,118,248 2,025,514 1,444,929
Deferred income taxes (429,000) 714,000 (305,000)
Changes in assets and liabilities:
Receivables (3,566,874) (2,411,140) 6,895,502
Inventories (492,578) (3,789,711) (698,003)
Other current assets (81,571) (265,570) 77,039
Accounts payable 4,195,650 639,735 546,557
Customer advances and
deferred income 545,651 388,165 74,343
Accrued liabilities 1,330,717 (714,913) (26,463)
Income taxes payable (812,718) 1,118,867 1,824,103
- -------------------------------------------------------------------------------
Net cash provided by
operating activities 5,162,226 4,567,089 24,118,832
- -------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of marketable securities - (14,512,714) (20,885,936)
Sales and maturities of marketable
securities 14,974,230 5,717,000 1,601,600
Additions to property, plant, and
equipment (9,446,885) (3,668,129) (1,906,588)
Patents and other intangibles (148,314) (347,641) (213,525)
- -------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 5,379,031 (12,811,484) (21,404,449)
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from exercise of
stock options 64,566 901,146 1,197,154
Income tax benefit from stock
option exercises 28,513 947,521 2,504,036
Repurchase of common stock (1,576,600) (3,413,000) -
- -------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (1,483,521) (1,564,333) 3,701,190
- -------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 9,057,736 (9,808,728) 6,415,573
Cash and cash equivalents at beginning
of year 4,608,427 14,417,155 8,001,582
- -------------------------------------------------------------------------------
Cash and cash equivalents at
end of year $13,666,163 $ 4,608,427 $14,417,155
===============================================================================
Supplemental disclosure of cash flow information-
income taxes paid net of refunds $ 2,185,872 $ 337,531 $ 3,237,541
===============================================================================
See accompanying notes to consolidated financial statements.
(1) SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Lunar
Corporation (the Company) and its wholly owned subsidiaries, Lunar Finance
Corporation, Lunar Funding Corporation, Lunar Capital Corporation, Lunar FSC,
Inc., Lunar GmbH, Lunar Europe, N.V., and Lunar France. In May 1999 the
Company sold the assets of Bona Fide Ltd. a former 100% owned subsidiary. The
accompanying consolidated financial statements reflect the results of
operations of Bona Fide Ltd. prior to the date of the sale. The gain on the
sale was not material. All significant intercompany accounts and transactions
have been eliminated in consolidation.
DESCRIPTION OF BUSINESS
The Company develops, manufactures, and sells x-ray and ultrasound bone
densitometers for the diagnosis and monitoring of osteoporosis and other
metabolic bone diseases. The Company also develops and sells medical imaging
equipment used by orthopedists and radiologists for imaging extremities. The
Company operates as a single segment. Lunar GmbH supports customers and sells
Lunar's products in Germany. Lunar Europe, N.V. supports customers and sells
Lunar's products in Belgium and supports customers in other European countries.
Lunar France supports customers and sells Lunar's products in France. Lunar
FSC, Inc. is a foreign sales corporation responsible for the sale of Lunar's
products outside of the United States. Lunar Finance Corporation, Lunar
Funding Corporation, and Lunar Capital Corporation manage and sell Latin
American receivables to third-party finance companies.
REVENUE RECOGNITION
Revenue is recognized from sales when a product is shipped. Amounts
billed for service contracts are recognized as revenue when earned.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid debt instruments purchased with original maturities
of three months or less to be cash equivalents.
MARKETABLE SECURITIES
Marketable securities generally consist of state and municipal bonds with
original maturities generally ranging from less than one year to four years.
The Company classifies its investment securities as available-for-sale.
Available-for-sale securities are reported at fair value, with unrealized gains
and losses excluded from earnings and reported in a separate component of
accumulated other comprehensive income. Realized gains and losses are included
in other income. Interest income is recognized when earned.
INVENTORIES
Inventories are stated at the lower of cost or market; cost is determined
by the first-in, first-out method.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization are provided for in amounts sufficient to
recognize the cost of depreciable assets to operations over their estimated
service lives. A combination of straight-line and accelerated methods of
depreciation are used for financial and income tax reporting purposes.
The cost of property and equipment are depreciated over the following
estimated useful lives:
Asset classification Estimated useful life
- -----------------------------------------------------------------------------
Machinery, furniture, and fixtures 5-7 years
Buildings and improvements 19-39 years
- -----------------------------------------------------------------------------
Legal costs incurred to register patents are amortized over periods not
exceeding ten years.
RESEARCH AND DEVELOPMENT COSTS
Materials, labor, and overhead expenses related to research and
development projects are charged to operations as incurred.
PROVISION FOR WARRANTIES
The Company makes certain initial warranties as to material and
workmanship. The estimated costs associated with these warranties are accrued
at the time of sale.
STOCK-BASED COMPENSATION
Stock-based compensation related to employees is recognized using the
intrinsic value method and thus recognizes no compensation expense for options
granted with exercise prices equal to the fair value of the Company's common
stock on the date of the grant.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts. Deferred tax assets and liabilities
are measured using enacted rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
FOREIGN CURRENCY TRANSLATION
For each of the Company's foreign subsidiaries, the functional currency is
its local currency. Accordingly, assets and liabilities are translated into
U.S. dollars using current exchange rates. Revenue and expense accounts are
translated at average exchange rates prevailing during the year. The resulting
translation gains and losses are included as a separate component of
accumulated other comprehensive income.
The Company uses forward currency contracts in its management of foreign
currency exposures. Realized gains and losses on such contracts are included
in other income at the time the hedged transaction occurs and are not material.
Unrealized gains and losses, which were not significant at June 30, 1999 and
1998, are not recognized.
USE OF ESTIMATES
In preparing the consolidated financial statements, the Company's
management makes estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of financial instruments, which consisted of cash and cash
equivalents, marketable securities, receivables, accounts payable, customer
advances, and accrued liabilities, approximated their carrying values at June
30, 1999 and 1998.
ACCUMULATED OTHER COMPREHENSIVE INCOME
Tax Effect
Unrealized of Unrealized Accumulated
Cumulative Gain/(Loss) on (Gain)/Loss on Other
Translation Marketable Marketable Comprehensive
Adjustments Securities Securities Income (Loss)
----------- ---------- ---------- -------------
Beginning
balance $ (117,302) $ 136,932 $ (55,000) $ (35,370)
Current
period change (56,228) (44,277) 18,000 (82,505)
----------- ---------- ---------- ----------
Ending
balance $ (173,530) $ 92,655 $ (37,000) $(117,875)
=========== ========== ========== ===========
NEW ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" is effective for financial statements for periods beginning after
June 15, 2000. SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and hedging activities. The Company is evaluating the
new Statement's provisions and does not expect this Statement to have a
material effect on its financial statements.
RECLASSIFICATION
The Company has reclassified the presentation of certain prior year
information to conform with the current presentation.
(2) MARKETABLE SECURITIES
The Company's marketable securities are all classified as available-for-
sale and consist of investments in state and municipal bonds. As of June 30,
1999 and 1998 there were no gross unrealized holding losses for any of the
Company's marketable securities. The amortized cost, gross unrealized holding
gains, and fair value for marketable securities at June 30, 1999 and 1998 were
as follows:
- -----------------------------------------------------------------------------
Gross
unrealized
Amortized holding
1999 cost gains Fair value
- -----------------------------------------------------------------------------
Current $ 4,284,488 $ 27,346 $ 4,311,834
Due after one year 11,167,989 65,309 11,233,298
- -----------------------------------------------------------------------------
$ 15,452,477 $ 92,655 $15,545,132
=============================================================================
1998
- -----------------------------------------------------------------------------
Current $ 8,102,063 $ 15,592 $ 8,117,655
Due after one year 22,661,663 121,340 22,783,003
- -----------------------------------------------------------------------------
$ 30,763,726 $136,932 $30,900,658
=============================================================================
The gross realized gains and losses on the sale of available-for-sale
marketable securities for the year ended June 30, 1999 were not material.
(3) INCENTIVE COMPENSATION PROGRAMS
Lunar Corporation grants options to key employees, directors, and
consultants under two separate programs.
Under a September 1, 1984 agreement with an employee/officer, options to
purchase 138,000 shares at $0.16 per share are outstanding and exercisable and
will expire in the event of termination of employment. Under the second option
program, titled the Non-Qualified Stock Option program, a total of 3,000,000
shares of common stock were made available, of which 223,340 remain available.
Options granted under this program vest over a three-year or five-year period.
The options will expire ten years from the granting date, or upon termination
of employment.
The option price under both option programs was based on 100% of estimated
fair market value of the Company's stock on the dates the options were granted.
A summary of the Company's stock option activity, and related information
are summarized as follows:
=============================================================================
Year ending June 30,
1999 1998 1997
---------------- ---------------- ----------------
Weighted Weighted Weighted
average average average
exercise exercise exercise
Options price Options price Options price
- ------------------------------------------------------------------------------
Outstanding -
beginning
of year 1,139,995 $11.79 1,071,615 $ 9.20 1,131,115 $ 8.21
Granted 959,930 8.09 286,150 17.91 531,480 20.31
Exercised (15,770) 3.50 (174,210) 5.10 (233,200) 4.82
Expired/canceled (638,670) 16.70 (43,560) 15.11 (357,780) 25.43
- ------------------------------------------------------------------------------
Outstanding -
end of year 1,445,485 $ 7.25 1,139,995 $11.79 1,071,615 $ 9.20
==============================================================================
Exercisable at
end of year 483,875 $ 5.49 521,531 $ 6.66 486,290 $ 4.38
==============================================================================
Weighted average
fair value of
options granted
during year $ 3.98 $10.11 $ 7.74
==============================================================================
The options outstanding at June 30, 1999 have been segregated into five
ranges for additional disclosure as follows:
Options Outstanding Options Exercisable
------------------------------------ ---------------------
Weighted Weighted Options Weighted
Range of Options average average currently average
exercise outstanding remaining exercise exercisable exercise
prices at June 30, contractual price at June 30, price
1999 life 1999
- -----------------------------------------------------------------------------
$ 0.16 138,000 - $ .16 138,000 $ 0.16
5.37 - 7.83 613,165 6.8 6.22 305,415 6.96
9.25 - 14.33 681,520 9.1 9.39 35,040 11.60
16.50 - 25.50 12,800 6.7 18.70 5,420 19.07
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
Interpretations in accounting for its employee stock options.
Pro forma information regarding net income and net income per share is
required by FASB Statement No. 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to June 30, 1995 under the fair market value method of that
statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1999, 1998, and 1997; risk free interest rate of 5.75% for
1999, 5.5% for 1998, and 6.0% for 1997, volatility factors of the expected
market price of the Company's common stock of .52 for 1999 and 1998, and .53
for 1997, and no expected dividends. Based on an analysis of historical
optionee exercise behavior, the option grants exercised have aggregated
weighted average lives of five years for 1999, six years for 1998, and four
years for 1997.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information follows:
- -------------------------------------------------------------------------------
1999 1998 1997
- -------------------------------------------------------------------------------
Pro forma net income $2,618,830 $6,278,188 $14,327,467
Pro forma diluted net
income per share $ 0.30 $ 0.69 $ 1.57
- -------------------------------------------------------------------------------
Since Statement 123 is applicable only to options granted subsequent to
June 30, 1995, its pro forma effect will not be fully reflective until 2000.
The Company has a longevity stock award program whereby 25 shares of
common stock are issued to employees with five years of service, and 100 shares
are issued for ten years of service. The Company issued 1,000, 575, and 1,975
shares under this program in the years ended June 30, 1999, 1998, and 1997,
respectively.
The Company has a program which provides for bonuses to all employees
contingent upon achieving certain financial goals. Total expense under the
program was $74,360, $206,273, and $315,165 for the years ended June 30, 1999,
1998, and 1997, respectively.
(4) PROFIT-SHARING PLAN
The Company has established a 401(k) profit-sharing plan covering
substantially all employees. Employer contributions to the plan are at the
discretion of the Board of Directors. The Company's policy is to fund profit-
sharing plan contributions as they accrue. Profit-sharing expense amounted to
$429,806, $298,273, and $199,322, for the years ended June 30, 1999, 1998, and
1997 respectively.
(5) SETTLEMENT OF LAWSUIT
Expenses were incurred in the quarter ended September 30, 1998 associated
with the settlement of a lawsuit between the Company and Osteometer MeditechA/S
and Rapiscan Security Systems Inc. During that quarter, the Company incurred
expenses of $579,555 related to legal expenses, a settlement payment, and a
patent write-off as a result of the settlement of this lawsuit.
In December 1996, a court awarded the Company and the University of
Alabama-Birmingham (the co-plaintiffs) $4,200,000 in a patent infringement case
against EG&G Astrophysics (EG&G). The co-plaintiffs split the award after
deducting legal expenses. The Company's resulting $1,828,905 share of the
award is reflected in other income and represents $0.12 per share after tax.
The co-plaintiffs entered into a Settlement and License Agreement with EG&G
providing for future royalty payments based on the volume of EG&G equipment
sales utilizing the technology subject to the license.
(6) INCOME TAXES
Income taxes consist of the following:
- -----------------------------------------------------------------------------
1999 1998 1997
- -----------------------------------------------------------------------------
Current:
Federal $ 1,477,000 $ 3,054,000 $ 7,048,000
State 120,000 172,000 500,000
- -----------------------------------------------------------------------------
1,597,000 3,226,000 7,548,000
- -----------------------------------------------------------------------------
Deferred:
Federal (783,000) 83,000 (287,000)
State (138,000) 15,000 (20,000)
- -----------------------------------------------------------------------------
(921,000) 98,000 (307,000)
- -----------------------------------------------------------------------------
$ 676,000 $ 3,324,000 $ 7,241,000
=============================================================================
A reconciliation of the provision for income taxes with the applicable
Federal income tax rate is presented below:
- -------------------------------------------------------------------------------
1999 1998 1997
---------------- ---------------- ----------------
Percent Percent Percent
of pretax of pretax of pretax
Amount income Amount income Amount income
- -------------------------------------------------------------------------------
Provision computed
at normal rate $1,046,278 34% $3,463,288 34% $7,319,121 34%
Increases (reductions)
in taxes resulting from:
State income taxes,
net of federal benefit 79,200 3 113,520 1 330,000 2
Tax benefit of exempt
foreign trade income (329,778)(11) (510,193) (5) (596,010) (3)
Tax exempt interest (313,346)(10) (442,434 (4) (216,661) (1)
Other 193,646 6 699,819 7 404,550 2
- -------------------------------------------------------------------------------
Provision for
income taxes $ 676,000 22% $3,324,000 33% $7,241,000 34%
===============================================================================
The tax effect of temporary differences that give rise to deferred tax
assets at June 30, 1999 and 1998 are as follows:
- -----------------------------------------------------------------------------
1999 1998
- -----------------------------------------------------------------------------
Accrued warranty $ 952,000 $ 747,000
Inventory valuation 271,000 86,000
Allowance for doubtful accounts 696,000 680,000
Other 73,000 50,000
- -----------------------------------------------------------------------------
$1,992,000 $1,563,000
=============================================================================
(7) EARNINGS PER SHARE
Reconciliations of the numerators and denominators of the basic and
diluted earnings per share computations for the years ended June 30, 1999,
1998, and 1997 are as follows:
- ------------------------------------------------------------------------------
1999
-------------------------------
Per Share
Income Shares Amount
- ------------------------------------------------------------------------------
Basic earnings per share $ 2,354,701 8,616,764 $ 0.27
======
Effect of dilutive stock options - 161,979
---------- ---------
Dilutive earnings per share $ 2,354,701 8,778,743 $ 0.27
========== ========= ======
==============================================================================
1998
-------------------------------
Per Share
Income Shares Amount
- ------------------------------------------------------------------------------
Basic earnings per share $ 6,862,142 8,773,516 $ 0.78
======
Effect of dilutive stock options - 338,979
---------- ---------
Dilutive earnings per share $ 6,862,142 9,112,495 $ 0.75
========== ========= ======
==============================================================================
1997
-------------------------------
Per Share
Income Shares Amount
- ------------------------------------------------------------------------------
Basic earnings per share $14,285,825 8,614,567 $ 1.66
======
Effect of dilutive stock options - 491,481
---------- ---------
Dilutive earnings per share $14,285,825 9,106,048 $ 1.57
========== ========= ======
==============================================================================
The number of anti-dilutive options were 74,756, 90, and 111 in fiscal year
1999, 1998, and 1997, respectively.
(8) SUPPLEMENTAL SALES AND CUSTOMER INFORMATION
The Company's approximate revenues by geographic regions are as follows
(in thousands):
- -----------------------------------------------------------------------------
June 30, June 30, June 30,
1999 1998 1997
- -----------------------------------------------------------------------------
United States and Canada $ 61,716 $ 50,852 $ 50,696
Europe 15,635 13,241 13,353
Asia 4,174 3,838 6,215
Latin America 6,537 11,246 10,627
- -----------------------------------------------------------------------------
$ 88,062 $ 79,177 $ 80,891
=============================================================================
The Company sells its products to end-user customers or its distributors
in Latin America on financed terms. Generally, the financing is over a two- or
three-year time period and denominated in U.S. dollars. As of June 30, 1999,
1998, and 1997, the Company had approximately $9,337,000, $6,188,000, and
$4,614,000, respectively, of financed trade accounts receivable from Latin
American customers. The collateral for these receivables is generally the
equipment sold.
During fiscal 1998 and 1997, the Company sold approximately $4,200,000 and
$10,800,000, respectively of accounts receivable from selected customers in
Latin America. The income statement effect of these transactions was not
material. The Company continues to have recourse of 7.5% or approximately
$315,000 to one finance company and 10% or approximately $1,080,000 to a second
finance company.
(9) FEE PER PATIENT PROGRAM
The Company has entered into an agreement with a finance company whereby
the Company sells its systems to the finance company, which, in turn, leases
the systems to third parties on a fee-per-patient basis. Under the terms of
the agreement, the Company is contingently liable to three finance companies
for approximately $840,000 as of June 30, 1999 and approximately $378,000 as of
June 30, 1998.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Lunar Corporation:
We have audited the accompanying consolidated balance sheet of Lunar
Corporation and subsidiaries (a Wisconsin Corporation) as of June 30, 1999 and
the related consolidated statements of income, shareholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit. The
consolidated financial statements of Lunar Corporation and subsidiaries as of
June 30, 1998, and for each of the years in the two-year period ended June 30,
1998, were audited by other auditors' whose report dated July 24, 1998,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lunar Corporation
and subsidiaries as of June 30, 1999, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The supplemental schedule listed in the
index to Item 14 is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a required part of the basic financial
statements. This information for the year ended June 30, 1999, has been
subjected to the auditing procedures applied in our audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
July 30, 1999
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
LUNAR CORPORATION:
We have audited the accompanying consolidated balance sheet of Lunar
Corporation and subsidiaries as of June 30, 1998, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the
years in the two-year period ended June 30, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lunar Corporation
and subsidiaries as of June 30, 1998, and the results of their operations and
their cash flows for each of the years in the two-year period ended June 30,
1998, in conformity with generally accepted accounting principles.
KPMG LLP
Chicago, Illinois
July 24, 1998
QUARTERLY FINANCIAL INFORMATION (unaudited)
The following table sets forth unaudited selected quarterly financial
information for each of the two most recent fiscal years.
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
(in thousands except per-share data)
1999
- ----
Revenues $22,825 $23,410 $19,749 $22,078
Income from operations 1,769 356 (1,575) 801
Net income 1,155 736 (825) 1,289
Net income per share .13 .08 (.10) .15
1998
- ----
Revenues $18,663 $21,436 $17,953 $21,125
Income from operations 2,747 4,174 870 1,697
Net income 2,013 2,729 692 1,428
Net income per share 0.22 0.30 0.08 0.16
Lunar is unable to predict the timing of purchase orders and the related
product shipments and is unable to predict demand for Lunar's products in
specific foreign markets. Therefore, quarterly sales and earnings fluctuations
can be expected.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 16, 1998, the Company engaged the accounting firm of Arthur
Andersen LLP as Company's independent accountants. The Company, on that same
date, also informed KPMG LLP (formerly KPMG Peat Marwick LLP) of their
dismissal effective December 16, 1998. The decision to change independent
accountants was made upon the recommendation of the Audit Committee of the
Company's Board of Directors.
During the two most recent fiscal years ended June 30, 1998 and 1997 and
interim periods subsequent to June 30, 1998, there were no disagreements with
KPMG LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
KPMG LLP's report on the Company's financial statements for the past two
fiscal years did not contain an adverse opinion or a disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope or accounting
principles.
During the two most recent fiscal years and interim periods subsequent to
June 30, 1998 there were no reportable events [as defined in Regulation S-K
Item 304(a)(1)(v)].
The Company has requested that KPMG LLP furnish it with a letter addressed
to the SEC stating whether it agrees with the above statements. A copy of the
letter dated December 21, 1998 is filed.
During the two most recent fiscal years and interim periods subsequent to
June 30, 1998 and prior to employing Arthur Andersen LLP, neither the Company
nor anyone on its behalf consulted Arthur Andersen LLP regarding the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements or any matter that was either the subject of
a disagreement [as defined in Regulation S-K Item 304(a)(1)(14)] or a
reportable event.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company incorporates by reference the information included in the
Company's definitive Proxy Statement for its 1999 Shareholders Meeting to be
held on November 20, 1999 ("Proxy Statement") under the captions "Purposes of
the Meeting - Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance," which will be filed with the Securities and Exchange
Commission separately pursuant to Rule 14a-6 under the Securities Exchange Act
of 1934 and in accordance with General Instruction G(3) to Form 10-K, not later
than 120 days after the end of the Company's fiscal year.
EXECUTIVE OFFICERS OF THE REGISTRANT
As of September 23, 1999, the executive officers of the Registrant are as
follows:
Name Age Title
- -----------------------------------------------------------------------------
Richard B. Mazess, Ph.D. 60 President
James A. Hanson, Ph.D. 49 Vice President - Marketing
Robert A. Beckman 45 Vice President - Finance
John A. Comerford, J.D. 37 Corporate General Counsel
and Secretary
James V. Pietropaolo 45 Vice President - Domestic
Sales
Peter Peemans 40 Vice President - International
Sales
Dr. Richard B. Mazess, the founder of the Company, has been President and
a director of the Company since its inception. Dr. Mazess became Professor
Emeritus of Medical Physics at the University of Wisconsin - Madison in 1985,
and has been on the faculty of the Department of Medical Physics since 1968.
Dr. Mazess has authored over 100 scientific publications on bone, bone
measurement, and body composition; he also has edited several books and has
served on the editorial boards of several medical journals. Dr. Mazess has
organized various international scientific meetings on bone measurement and
osteoporosis.
Dr. James A. Hanson, Vice President of Marketing, joined the Company in
September 1984. From July 1980 to August 1984, Dr. Hanson was on the faculty
of the Department of Radiology at the University of Washington, Seattle,
Washington, and from 1979 to 1980, he was a Researcher at the University of
Wisconsin - Madison, Department of Medical Physics.
Robert A. Beckman joined the Company in 1986 as Controller and has been
Vice President of Finance since 1987. Mr. Beckman is a Certified Public
Accountant.
John A. Comerford, J.D., joined the Company in January 1998 as Corporate
General Counsel and Secretary. From 1990 through 1997, Mr. Comerford was
Associate Resident Counsel with National Presto Industries, Inc., in Eau
Claire, Wisconsin. From 1988 until 1990, Mr. Comerford was a Staff Attorney
with Fort Howard Corporation in Green Bay, Wisconsin. He received his J.D.
degree in 1988 from Marquette University Law School and his B.A. degree in
Business Administration from St. Norbert College in 1985.
James V. Pietropaolo joined the Company in September 1996 as Vice
President of Domestic Sales. From March 1990 to September 1996, Mr.
Pietropaolo was Vice President of Sales and Marketing for Aloka Co., Ltd's
United States operations.
Peter Peemans joined the Company in January 1994 as a Director of European
Sales. Mr. Peemans became Director of European Operations in June 1996 and was
appointed Vice President of European Operations in January 1998. In July 1999,
Mr. Peemans was appointed Vice President of International Sales. From January
1990 until December 1993, Mr. Peemans served as European Sales and Marketing
Manager for Ferno Washington.
ITEM 11. EXECUTIVE COMPENSATION
The Company incorporates by reference the information included in the
Proxy Statement under the caption "Executive Compensation," other than the
information included in the Proxy Statement under the sub-captions "Board of
Directors Report on Executive Compensation" and "Performance Graph."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company incorporates by reference the information included in the Proxy
Statement under the caption "Securities Beneficially Owned by Principal
Shareholders, Directors, and Executive Officers."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company incorporates by reference the information included in the Proxy
Statement under the caption "Executive Compensation - Compensation Committee
Interlocks and Insider Participation."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1 and 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Reference is made to the separate index to the Company's consolidated
financial statements and schedule contained on page 36 hereof.
3. Exhibits
Reference is made to the separate exhibit index contained on page 40
hereof.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the fourth
quarter ended June 30, 1999.
LUNAR CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND
FINANCIAL STATEMENT SCHEDULE
The following documents are filed Page(s) in
as part of this report: Form 10-K
----------
(1) Financial Statements:
Report of Independent Public
Accountants and Report of
Independent Public Accountants
on Financial Statement Schedule
Arthur Andersen LLP . . . . . . . . . . . . . . . . . . . 31
Independent Auditors' Report
KPMG LLP . . . . . . . . . . . . . . . . . . . . . . . . 32
Consolidated Balance Sheets at
June 30, 1999 and 1998 . . . . . . . . . . . . . . . . . . .18-19
Consolidated Statements of Income
for the years ended June 30, 1999,
1998, and 1997 . . . . . . . . . . . . . . . . . . . . . . . . 17
Consolidated Statements of
Shareholders' Equity for the
years ended June 30, 1999,
1998, and 1997 . . . . . . . . . . . . . . . . . . . . . . . . 20
Consolidated Statements of Cash Flows
for the years ended June 30, 1999,
1998, and 1997 . . . . . . . . . . . . . . . . . . . . . . . . 21
Notes to Consolidated Financial Statements . . . . . . . . 22-30
Page(s) in
(2) Financial Statement Schedule: Form 10-K
----------
Report of Independent Public
Accountants on Financial
Statement Schedule
Arthur Andersen LLP . . . . . . . . . . . . . . . . . . . 31
KPMG LLP . . . . . . . . . . . . . . . . . . . . . . . . 37
Schedule II - Valuation and Qualifying
Accounts for each of the years ended
June 30, 1999, 1998, and 1997. . . . . . . . . . . . . . . . . 38
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Lunar Corporation:
Under date of July 24, 1998, we reported on the consolidated balance sheet of
Lunar Corporation and subsidiaries as of June 30, 1998, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the years in the two-year period ended June 30, 1998, which are
included herein. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related financial
statement schedule as listed in the accompanying index. The financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, the financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
Chicago, Illinois
July 24, 1998
Schedule II
LUNAR CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
- -------------------------------------------------------------------------------
Additions
--------------------
Balance Charged Other
at to Charged Charges Balance
Beginning Costs and to Other Add at End
Description of Year Expenses Account (Deduct) of Year
- -------------------------------------------------------------------------------
For the year ended June 30, 1999:
Allowance for
Doubtful accounts $3,272,000 $1,292,000 - $(1,040,000) $3,524,000
For the year ended June 30, 1998:
Allowance for
doubtful accounts $2,602,000 $ 949,000 - $ (279,000) $3,272,000
For the year ended June 30, 1997:
Allowance for
doubtful accounts $2,235,000 $ 650,000 - $ (283,000) $2,602,000
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
LUNAR CORPORATION
Date: September 23, 1999 By: /s/ Richard B. Mazess
---------------------------
Richard B. Mazess, Ph.D.
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name
- ----
/s/ Richard B. Mazess President and September 23, 1999
- --------------------------- Director (Principal
Richard B. Mazess, Ph.D. Executive Officer)
/s/ Robert A. Beckman Vice President of September 23, 1999
- --------------------------- Finance (Principal
Robert A. Beckman Financial and
Accounting Officer)
/s/ Samuel E. Bradt Director September 23, 1999
- ---------------------------
Samuel E. Bradt
/s/ John W. Brown Director September 23, 1999
- ---------------------------
John W. Brown
/s/ Reed Coleman Director September 23, 1999
- ---------------------------
Reed Coleman
/s/ James W. Nellen II Director September 23, 1999
- ---------------------------
James W. Nellen II
/s/ Malcolm R. Powell Director September 23, 1999
- ---------------------------
Malcolm R. Powell, M.D.
LUNAR CORPORATION
INDEX TO EXHIBITS
Exhibit
Number Document Description
- ------- --------------------
3.1 Articles of Amendment and Restated Articles of
Incorporation of Registrant(1) (Exhibit 3.1)
3.2 By-Laws of Registrant
10.1* Lunar Corporation Amended and Restated Stock Option Plan(2)
(Exhibit 99.1) and Forms of Stock Option Agreements
10.2* Forms of Stock Option Agreements(2) (Exhibit 99.2)
16 Letter from KPMG LLP dated December 21, 1998(3)
21 List of Subsidiaries of Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of KPMG LLP
27.1 Financial Data Schedule, June 30, 1999
27.2 Financial Data Schedule, June 30, 1998
(1) Incorporated by reference to exhibits filed with Registrant's Annual Report
on Form 10-K for the year ended June 30, 1996 (File No. 0-18643).
Parenthetical references to exhibit numbers are to the exhibit numbers on the
Form 10-K.
(2) Incorporated by reference to exhibits filed with Registrant's Registration
Statement on Form S-3 (File No. 333-40469). Parenthetical references to
exhibit numbers are to the exhibit numbers on the Form S-3.
(3) Incorporated by reference to exhibit 16 filed with Registrant's Current
Report on Form 8-K dated December 16, 1998 (File No. 0-18643).
*Indicates a management contract or compensatory plan or arrangement required
to be filed as an exhibit to this Form 10-K.
EXHIBIT 3.2
LUNAR CORPORATION AND SUBSIDIARIES
BY-LAWS
OF
LUNAR CORPORATION
(A Wisconsin Corporation)
BY-LAWS
OF
LUNAR CORPORATION
(A Wisconsin Corporation)
Introduction - Variable References
0.01. Date of annual shareholders' meeting (See Section 2.01):
1:00 p.m. Third Friday November 1997
(HOUR) (WEEK) (DAY) (MONTH) (FIRST YEAR)
0.02. Required notice of shareholders' meeting (See Section 2.04): not less
than 10 days.
0.03. Authorized number of Directors (see Section 3.01): 6.
0.04. Required notice of Directors' meeting (see Section 3.05):
(a) Not less than 72 hours if by mail, and
(b) Not less than 36 hours if by telegram or personal delivery.
0.05. Authorized number of Vice Presidents (see Section 4.01): 5.
TABLE OF CONTENTS
ARTICLE I. OFFICES
1.01 Principal and Business Offices 1
1.02 Registered Office 1
ARTICLE II. SHAREHOLDERS
2.01 Annual Meeting 1
2.02 Special Meeting 1
2.03 Place of Meeting 1
2.04 Notice of Meeting 2
2.05 Closing of Transfer Books or Fixing of Record Date 2
2.06 Voting Records 2
2.07 Quorum 3
2.08 Conduct of Meetings 3
2.09 Proxies 3
2.10 Voting of Shares 3
2.11 Voting of Shares by Certain Holders 4
(a) Other Corporations 4
(b) Legal Representatives and Fiduciaries 4
(c) Pledgees 4
(d) Treasury Stock and Subsidiaries 4
(e) Minors 4
(f) Incompetents and Spendthrifts 4
(g) Joint Tenants 5
2.12 Waiver of Notice by Shareholders 5
2.13 Unanimous Consent Without Meeting 5
2.14 Shareholder Proposals and Board Nominations 5
ARTICLE III. BOARD OF DIRECTORS
3.01 General Powers and Number 7
3.02 Tenure and Qualifications 7
3.03 Regular Meetings 7
3.04 Special Meetings 7
3.05 Notice; Waiver 8
3.06 Quorum 8
3.07 Manner of Acting 8
3.08 Conduct of Meetings 8
3.09 Vacancies 8
3.10 Compensation 9
3.11 Presumption of Assent 9
3.12 Committees 9
3.13 Unanimous Consent Without Meeting 9
3.14 Meetings by Telephone or by Other Communication Technology 9
ARTICLE IV. OFFICERS
4.01 Number 10
4.02 Election and Term of Office 10
4.03 Removal 10
4.04 Vacancies 10
4.05 Chairman of the Board 10
4.06 President 10
4.07 The Executive Vice President 11
4.08 The Vice Presidents 11
4.09 The Secretary 11
4.10 The Treasurer 11
4.11 Assistant Secretaries and Assistant Treasurers 12
4.12 Other Assistants and Acting Officers 12
4.13 Salaries 12
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS
5.01 Contracts 12
5.02 Loans 13
5.03 Checks, Drafts, etc. 13
5.04 Deposits 13
5.05 Voting of Securities Owned by this Corporation 13
ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER
6.01 Certificates for Shares 13
6.02 Facsimile Signatures and Seal 14
6.03 Signature by Former Officers 14
6.04 Transfer of Shares 14
6.05 Restrictions on Transfer 14
6.06 Lost, Destroyed or Stolen Certificates 14
6.07 Consideration for Shares 14
6.08 Stock Regulations 15
ARTICLE VII. WAIVER OF NOTICE
ARTICLE VIII. UNANIMOUS CONSENT WITHOUT A MEETING
ARTICLE IX. INDEMNIFICATION
9.01 Indemnification for Successful Defense 15
9.02 Other Indemnification 15
9.03 Written Request 16
9.04 Nonduplication 16
9.05 Determination of Right to Indemnification 16
9.06 Advance Expenses 17
9.07 Nonexclusivity 18
9.08 Court-Ordered Indemnification 18
9.09 Insurance 19
9.10 Securities Law Claim 19
9.11 Liberal Construction 19
9.12 Definitions Applicable to This Article 19
ARTICLE X. SEAL
ARTICLE XI. AMENDMENTS
11.01 By Shareholders 22
11.02 By Directors 22
11.03 Implied Amendments 22
ARTICLE I. OFFICES
1.01 Principal and Business Offices. The Corporation may have such
principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
Corporation may require from time to time.
1.02 Registered Office. The registered office of the Corporation
required by the Wisconsin Business Corporation Law to be maintained in the
State of Wisconsin may be, but need not be, identical with the principal office
in the State of Wisconsin, and the address of the registered office may be
changed from time to time by the Board of Directors or by the registered agent.
The business office of the registered agent of the Corporation shall be
identical to such registered office.
ARTICLE II. SHAREHOLDERS
2.01 Annual Meeting. The annual meeting of the shareholders shall be
held at the date and hour in each year set forth in Section 0.01, or at such
other time and date within thirty days before or after said date as may be
fixed by or under the authority of the Board of Directors, for the purpose of
electing Directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a legal
holiday in the State of Wisconsin, such meeting shall be held on the next
succeeding business day. If the election of Directors shall not be held on the
day designated herein, or fixed as herein provided, for any annual meeting of
the shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders as soon
thereafter as conveniently may be.
2.02 Special Meeting. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the Chairman of the Board (if one be designated), or the President or the Board
of Directors or by the person designated in the written request of the holders
of not less than one-tenth of all shares of the Corporation entitled to vote at
the meeting. Upon request in writing sent by registered mail to the Secretary
of the Corporation by any shareholder or shareholders entitled to call a
special meeting of shareholders pursuant to this Section 2.02, the Board of
Directors shall determine (i) a place and time for such meeting, which time
shall be not less than 90 nor more than 120 days after the receipt and
determination of the validity of such request, and (ii) a record date for the
determination of shareholders entitled to vote at such meeting in the manner
set forth in Section 2.05 hereof. Following such receipt and determination, it
shall be the duty of the Secretary to cause notice to be given to the
shareholders entitled to vote at such meeting, in the manner set forth in
Section 2.04 hereof, that a meeting will be held at the time and place so
determined.
2.03 Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Wisconsin, as the place of meeting for
any annual meeting or for any special meeting called by the Board of Directors.
A waiver of notice signed by all shareholders entitled to vote at a meeting may
designate any place, either within or without the State of Wisconsin, as the
place for the holding of such meeting. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the
principal business office of the Corporation in the State of Wisconsin or such
other suitable place in the county of such principal office as may be
designated by the person calling such meeting, but any meeting may be adjourned
to reconvene at any place designated by vote of a majority of the shares
represented thereat.
2.04 Notice of Meeting. Written notice stating the place, day and hour
of the meeting and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than the number of
days set forth in Section 0.02 (unless a longer period is required by law or
the articles of incorporation) nor more than fifty days before the date of the
meeting, either personally or by mail, by or at the direction of the Chairman
of the Board (if one be designated), or the President, or the Secretary, or
other Officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the
shareholder at his address as it appears on the stock record books of the
Corporation, with postage thereon prepaid.
2.05 Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors may provide that the stock transfer books shall be closed for a
stated period but not to exceed, in any case seventy days. If the stock
transfer books shall be closed for the purpose of determining shareholders
entitled to notice of or to vote at a meeting of shareholders, such books shall
be closed for at least ten days immediately preceding such meeting. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such determination of shareholders, such date
in any case to be not more than seventy days and, in case of a meeting of
shareholders, not less than ten days prior to the date on which the particular
action requiring such determination of shareholders, is to be taken. If the
stock transfer books are not closed and no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
close of business on the date on which notice of the meeting is mailed or on
the date on which the resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled
to vote at any meeting of shareholders has been made as provided in this
section, such determination shall be applied to any adjournment thereof except
where the determination has been made through the closing of the stock transfer
books and the stated period of closing has expired.
2.06 Voting Record. The Officer or agent having charge of the stock
transfer books for shares of the Corporation shall, before each meeting of
shareholders, make a complete list of the shareholders entitled to vote at such
meeting, or any adjournment thereof, with the address of and the number of
shares held by each. Such record shall be produced and kept open at the time
and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting for the purposes of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such record or transfer books or
to vote at any meeting of shareholders. Failure to comply with the
requirements of this section shall not affect the validity of any action taken
at such meeting.
2.07 Quorum and Voting Requirements. Except as otherwise provided in
the articles of incorporation or the Wisconsin Business Corporation Law, a
majority of the votes entitled to be cast on a matter, represented in person or
by proxy, shall constitute a quorum for action on that matter. Once a share is
represented for any purpose at a meeting, other than for the purpose of
objecting to holding the meeting or transacting business at the meeting, it is
considered present for purposes of determining whether a quorum exists for the
remainder of the meeting and for any adjournment of that meeting unless a new
record date is or must be set for that adjourned meeting. If a quorum is
present, action on a matter, other than the election of directors, is approved
if the votes cast favoring the action exceed the votes cast opposing the
action. Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present. In
the preceding sentence, ?plurality? means that the individuals with the largest
number of votes are elected as directors up to the maximum number of directors
to be chosen at the election. Though less than a quorum of the outstanding
shares are represented at a meeting, a majority of the shares so represented
may adjourn the meeting from time to time without further notice. 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 notified.
2.08 Conduct of Meetings. The Chairman of the Board (if one be
designated), or in the Chairman's absence, the President, or in the President's
absence, the Executive Vice President (if one be designated), or in the
Executive Vice President's absence, a Vice President in the order provided
under Section 4.08, and in their absence, any person chosen by the shareholders
present shall call the meeting of the shareholders to order and shall act as
chairman of the meeting, and the Secretary of the Corporation shall act as
Secretary of all meetings of the shareholders, but, in the absence of the
Secretary, the presiding Officer may appoint any other person to act as
Secretary of the meeting.
2.09 Proxies. At all meetings of shareholders, a shareholder entitled
to vote may vote in person or by proxy appointed in writing by the shareholder
or by his or her duly authorized attorney-in-fact. Such proxy shall be filed
with the Secretary of the Corporation before or at the time of the meeting.
Unless otherwise provided in the proxy, a proxy may be revoked at any time
before it is voted, either by written notice filed with the Secretary or the
acting Secretary of the meeting or by oral notice given by the shareholder to
the presiding officer during the meeting. The presence of a shareholder who
has filed his or her proxy shall not of itself constitute a revocation. No
proxy shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy. The Board of Directors shall have the power
and authority to make rules establishing presumptions as to the validity and
sufficiency of proxies.
2.10 Voting of Shares. Each outstanding share shall be entitled to one
vote upon each matter submitted to a vote at a meeting of shareholders, except
to the extent that the voting rights of the shares of any class or classes are
enlarged, limited or denied by the articles of incorporation.
2.11 Voting of Shares by Certain Holders.
(a) Other Corporations. Shares standing in the name of another
corporation may be voted either in person or by proxy, by the president of such
corporation or any other officer appointed by such president. A proxy executed
by any principal officer of such other corporation or assistant thereto shall
be conclusive evidence of the signer's authority to act, in the absence of
express notice to this Corporation, given in writing to the Secretary of this
Corporation, or the designation of some other person by the Board of Directors
or by the by-laws of such other corporation.
(b) Legal Representatives and Fiduciaries. Shares held by an
administrator, executor, guardian, conservator, trustee in bankruptcy, receiver
or assignee for creditors may be voted by him, either in person or by proxy,
without a transfer of such shares into his or her name, provided that there is
filed with the Secretary before or at the time of meeting proper evidence of
his or her incumbency and the number of shares held or her. Shares standing in
the name of a fiduciary may be voted by him, either in person or by proxy. A
proxy executed by a fiduciary shall be conclusive evidence of the signer's
authority to act, in the absence of express notice to this Corporation, given
in writing to the Secretary of this Corporation, that such manner of voting is
expressly prohibited or otherwise directed by the document creating the
fiduciary relationship.
(c) Pledgees. A shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
(d) Treasury Stock and Subsidiaries. Neither treasury shares, nor
shares held by another corporation if a majority of the shares entitled to vote
for the election of Directors of such other corporation is held by this
Corporation, shall be voted at any meeting or counted in determining the total
number of outstanding shares entitled to vote, but shares of its own issue held
by this Corporation in a fiduciary capacity, or held by such other corporation
in a fiduciary capacity, may be voted and shall be counted in determining the
total number of outstanding shares entitled to vote.
(e) Minors. Shares held by a minor may be voted by such minor in
person or by proxy and no such vote shall be subject to disaffirmance or
avoidance, unless prior to such vote the Secretary of the Corporation has
received written notice or has actual knowledge that such shareholder is a
minor.
(f) Incompetents and Spendthrifts. Shares held by an incompetent
or spendthrift may be voted by such incompetent or spendthrift in person or by
proxy and no such vote shall be subject to disaffirmance or avoidance, unless
prior to such vote the Secretary of the Corporation has actual knowledge that
such shareholder has been adjudicated an incompetent or spendthrift or actual
knowledge of filing of judicial proceedings for appointment of a guardian.
(g) Joint Tenants. Shares registered in the names of two or more
individuals who are named in the registration as joint tenants may be voted in
person or by proxy signed by any one or more of such individuals if either (I)
no other such individual or his or her legal representative is present and
claims the right to participate in the voting of such shares or prior to the
vote files with the Secretary of the Corporation a contrary written voting
authorization or direction or written denial or authority of the individual
present or signing the proxy proposed to be voted or (ii) all such other
individuals are deceased and the Secretary of the Corporation has no actual
knowledge that the survivor has been adjudicated not to be the successor to the
interests of those deceased.
2.12 Waiver of Notice by Shareholders. Whenever any notice whatever is
required to be given to any shareholder of the Corporation under the articles
of incorporation or by-laws or any provision of law, a waiver thereof in
writing, signed at any time, whether before or after the time of meeting, by
the shareholder entitled to such notice, shall be deemed equivalent to the
giving of such notice; provided that such waiver in respect to any matter of
which notice is required under any provision of the Wisconsin Business
Corporation Law, shall contain the same information as would have been required
to be included in such notice, except the time and place of meeting.
2.13 Unanimous Consent Without Meeting. Any action required or
permitted by the articles of incorporation or by-laws or any provision of law
to be taken at a meeting of the shareholders, may be taken without a meeting if
a consent in writing, setting forth the action so taken, shall be signed by all
of the shareholders entitled to vote with respect to the subject matter
thereof.
2.14 Shareholder Proposals and Board Nominations.
(a) At any annual meeting of the Corporation's shareholders, only
such business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual meeting, business must be: (i)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors; (ii) otherwise properly brought before
the meeting by or at the direction of the Board of Directors; or (iii)
otherwise properly brought before the meeting by a shareholder of record
entitled to vote at such meeting who has complied with the provisions of this
Section 2.14. Business may be properly brought before an annual meeting by a
shareholder only if written notice of the shareholder's intent to propose such
business has been delivered to the Secretary of the Corporation not less than
90 nor more than 120 calendar days in advance of the anniversary date of the
preceding year's annual meeting of shareholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has
been changed by more than 30 calendar days from the anniversary of the
preceding year's annual meeting date, written notice of a shareholder proposal
shall be delivered to the Secretary of the Corporation not later than the close
of business on the 10th day following the first public announcement of the date
of such annual meeting. Delivery shall be by hand or by certified or registered
mail, return receipt requested. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of
shareholder's notice as described above.
(b) Each notice of new business must set forth: (i) the name and
address of the shareholder who intends to raise the new business; (ii) the
business desired to be brought forth at the meeting and the reasons for
conducting such business at the meeting; (iii) a representation that the
shareholder is a holder of record of stock of the Corporation, entitled to vote
with respect to such business, and intends to appear in person or by proxy at
the meeting to move the consideration of such business; (iv) such shareholder's
total beneficial ownership of the Corporation's voting stock; and (v) such
shareholder's interest in such business. The Chairman of the meeting may refuse
to acknowledge a motion to consider any business that he determines was not
made in compliance with the foregoing procedures.
(c) For purposes of these by-laws, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service, or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15 (d) of the Securities Exchange Act of 1934, as amended.
(d) Nominations for the election of directors may be made by the
Board of Directors or a committee appointed by the Board of Directors or by any
shareholder entitled to vote in the election of directors generally. However,
any shareholder entitled to vote in the election of directors may nominate one
or more persons for election as director at a meeting only if written notice of
such shareholder's intent to make such nomination or nominations has been
delivered to the Secretary of the Corporation: (i) with respect to an election
to be held at an annual meeting of shareholders, not less than 90 days nor more
than 120 days in advance of the anniversary date of the preceding year's annual
meeting of shareholders, except that if no annual meeting was held in the
previous year or the date of the annual meeting has been changed by more than
30 calendar days from the anniversary of the preceding year's annual meeting
date, written notice of a nominee proposal shall be delivered to the Secretary
of the Corporation not later than the close of business on the 10th day
following the first public announcement of the date of such annual meeting and
(ii) with respect to an election to be held at a special meeting of
shareholders for the election of directors, not later than the close of
business on the 10th day following the first public announcement of the date of
such meeting. Delivery shall be by hand, or by certified or registered mail,
return receipt requested. In no event shall the public announcement of an
adjournment of any annual or special meeting commence a new time period for the
giving of a shareholder's notice as described above.
(e) Each such notice shall set forth: (i) the name and address
of the shareholder who intends to make the nomination and of the person or
persons to be nominated; (ii) such shareholder's total beneficial ownership of
the Corporation's voting stock; (iii) a representation that the shareholder is
a holder of record of stock of the Corporation, entitled to vote at such
meeting, and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (iv) a description of all
agreements, arrangements or understanding between the shareholder and each
nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (v) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (vi) the written consent of each nominee to serve as a director of the
Corporation if so elected. The Chairman of the meeting my refuse to acknowledge
a motion to consider any nomination that he determines was not made in
compliance with the foregoing procedures.
ARTICLE III. BOARD OF DIRECTORS
3.01 General Powers and Number. The business and affairs of the
Corporation shall be managed by its Board of Directors. The number of
Directors of the Corporation shall be as provided in Section 0.03, but shall
not be less than six (6), nor more than twelve (12).
The Board of Directors shall be divided into three (3) classes of not
less than two (2) nor more than four (4) Directors each. The term of office of
the first class of Directors shall expire at the first annual meeting after
their initial election and until their successors are elected and qualified,
the term of office of the second class shall expire at the second annual
meeting after their initial election and until their successors are elected and
qualified, and the term of office of the third class shall expire at the third
annual meeting after the initial election and until their successors are
elected and qualified. At each annual meeting after the initial classification
of the Board of Directors, the class of Directors whose term expires at the
time of such election shall be elected to hold office until the third
succeeding annual meeting and until their successors are elected and qualified.
3.02 Tenure and Qualifications. Each Director shall hold office until
the next annual meeting of shareholders in the year in which such Director's
term expires and until his successor shall have been elected, or until his
prior death, resignation or removal. A Director may be removed from office by
affirmative vote of 80% of the outstanding shares entitled to vote for the
election of such Director, taken at an annual meeting or a special meeting of
shareholders called for that purpose, and any vacancy so created may be filled
by the affirmative vote of 80% of such shares. A Director may resign at any
time by filing his written resignation with the Secretary of the Corporation.
Directors need not be residents of the State of Wisconsin or shareholders of
the Corporation.
3.03 Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this by-law immediately after the
annual meeting of shareholders, and each adjourned session thereof. The place
of such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be
announced at such meeting of shareholders. The Board of Directors may provide,
by resolution, the time and place, either within or without the State of
Wisconsin, for the holding of additional regular meetings without other notice
than such resolution.
3.04 Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the President, Secretary or any two
Directors. The President or Secretary calling any special meeting of the Board
of Directors may fix any place, either within or without the State of
Wisconsin, as the place for holding any special meeting of the Board of
Directors called by them, and if no other place is fixed, the place of meeting
shall be the principal business office of the Corporation in the State of
Wisconsin.
3.05 Notice; Waiver. Notice of each meeting of the Board of Directors
(unless otherwise provided in or pursuant to Section 3.03) shall be given by
written notice delivered personally or mailed or given by telegram to each
Director at his or her business address or at such other address as such
Director shall have designated in writing filed with the Secretary, in each
case not less than that number of hours prior thereto as set forth in Section
0.04. If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail so addressed, with postage thereon prepaid. If notice
be given by telegram, such notice shall be deemed to be delivered when the
telegram is delivered to the telegraph company. Whenever any notice whatever
is required to be given to any Director of the Corporation under the articles
of incorporation or by-laws or any provision of law, a waiver thereof in
writing, signed at any time, whether before or after the time of meeting, by
the Director entitled to such notice, shall be deemed equivalent to the giving
of such notice. The attendance of a Director at a meeting shall constitute a
waiver of notice of such meeting, except where a Director attends a meeting and
objects thereat to the transaction of any business because the meeting is not
lawfully called or convened. 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.
3.06 Quorum. Except as otherwise provided by law or by the articles of
incorporation or these by-laws, a majority of the number of Directors as
provided in Section 0.03 shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors, by a majority of the
Directors present (though less than such quorum) may adjourn the meeting from
time to time without further notice.
3.07 Manner of Acting. The act of the majority of the Directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by law or by the
articles of incorporation of these by-laws.
3.08 Conduct of Meetings. The Chairman of the Board (if one be
designated), or in the Chairman's absence, the President, or in the President's
absence, the Executive Vice President (if one be designated), or in the
Executive Vice President's absence, a Vice President in the order provided
under Section 4.06, and in their absence, any Director chosen by the Directors
present, shall call meetings of the Board of Directors to order and shall act
as chairman of the meeting. The Secretary of the Corporation shall act as
Secretary of all meetings of the Board of Directors, but in the absence of the
Secretary, the presiding Officer may appoint any Assistant Secretary or any
Director or other person present to act as Secretary of the meeting.
3.09 Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of Directors, may be
filled until the next succeeding annual election by the affirmative vote of a
majority of the Directors then in office, though less than a quorum of the
Board of Directors, provided that in case of a vacancy created by the removal
of a Director by vote of the shareholders, the shareholders shall have the
right to fill such vacancy at the same meeting or any adjournment thereof by
the affirmative vote of 80% of the outstanding shares entitled to vote for the
election of such Directors.
3.10 Compensation. The Board of Directors, by affirmative vote of a
majority of the Directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
Directors for services to the Corporation as Directors, Officers or otherwise,
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or to delegate authority to
an appropriate committee to provide for reasonable pensions, disability or
death benefits, and other benefits of payments, to Directors, Officers and
employees and to their estates, families, dependents or beneficiaries on
account of prior services rendered by such Directors, Officers and employees to
the Corporation.
3.11 Presumption of Assent. A Director of the Corporation who is
present at a meeting of the Board of Directors or a committee thereof of which
he or she is a member, at which action on any corporate matter is taken, shall
be presumed to have assented to the action taken unless his or her dissent
shall be entered in to the minutes of the meeting or unless he or she shall
file his or her written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a Director who voted in favor of such action.
3.12 Committees. The Board of Directors, by resolution adopted by the
affirmative vote of a majority of the number of Directors as provided in
Section 0.03, may designate one or more committees, each committee to consist
of three or more Directors elected by the Board of Directors, which to the
extent provided in said resolution as initially adopted, and as thereafter
supplemented or amended by further resolution adopted by a like vote, shall
have and may exercise, when the Board of Directors is not in session, the
powers of the Board of Directors in the management of the business and affairs
of the corporation, except action in respect to dividends to shareholders,
election of the principal officers or the filling of vacancies in the Board of
Directors or committees created pursuant to this section. The Board of
Directors may elect one or more of its members as alternate members of any such
committee who may take the place of any absent member or members at any meeting
of such committee, upon request by the President or upon request by the
chairman of such meeting. Each such committee shall fix its own rules
governing the conduct of its activities and shall make such reports to the
Board of Directors of its activities as the Board of Directors may request.
3.13 Unanimous Consent Without Meeting. Any action required or
permitted by the articles of incorporation or by-laws or any provision of law
to be taken by the Board of Directors at a meeting or by resolution may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all of the Directors then in office.
3.14 Meetings by Telephone or by Other Communication Technology.
Meetings of the Board of Directors or committees may be conducted by telephone
or by other communication technology in accordance with Section 180.0820 of the
Wisconsin Business Corporation Law. At any such meeting, all participating
directors shall be informed that a meeting is taking place at which official
business may be transacted.
ARTICLE IV. OFFICERS
4.01 Number. The principal Officers of the Corporation shall be a
President, the number of Vice Presidents as provided in Section 0.05, a
Secretary, and a Treasurer, each of whom shall be elected by the Board of
Directors. Such other Officers and Assistant Officers as may be deemed
necessary may be elected or appointed by the Board of Directors. Any two or
more offices may be held by the same person, except the offices of President
and Secretary and the offices of President and Vice President.
4.02 Election and Term of Office. The Officers of the Corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of the shareholders. If the election of Officers shall not be held at
such meeting, such election shall be held as soon thereafter as conveniently
may be. Each Officer shall hold office until his or her successor shall have
been duly elected or until his or her prior to death, resignation or removal.
4.03 Removal. Any Officer or agent may be removed by the Board of
Directors whenever in its judgment the best interests of the Corporation will
be served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment shall not of
itself create contract rights.
4.04 Vacancies. A vacancy in any principal office because of death,
resignation, removal, disqualification, or otherwise shall be filled by the
Board of Directors for the unexpired portion of the term.
4.05 Chairman of the Board. The Board of Directors may at their
discretion elect a Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and Board of Directors, and shall
carry out such other duties and have such responsibilities as may be specified
by the Board of Directors.
4.06 President. The President shall be the Chief Executive Officer of
the Corporation and, subject to the control of the Board of Directors, shall in
general supervise and control all of the business and affairs of the
Corporation. He or she shall, when present, preside at all meetings of the
shareholders and of the Board of Directors. He or she shall have authority,
subject to such rules as may be prescribed by the Board of Directors, to
appoint such agents and employees of the Corporation as he or she shall deem
necessary, to prescribe their powers, duties and compensation, and to delegate
authority to them. Such agents and employees shall hold office at the
discretion of the President. He or she shall have authority to sign, execute
and acknowledge, on behalf of the Corporation, all deeds, mortgages, bonds,
stock certificates, contracts, leases, reports and all other documents or
instruments necessary r proper to be executed in the course of the
Corporation's regular business, or which shall be authorized by resolution of
the Board of Directors; and, except as otherwise provided by law or the Board
of Directors, he or she may authorize any Vice President or other Officer or
agent of the Corporation to sign, execute and acknowledge such documents or
instruments in his or her place and stead. In general, he or she shall perform
all duties incident to the office of Chief Executive Officer and such other
duties as may be prescribed by the Board of Directors from time to time.
4.07 The Executive Vice President. The Executive Vice President, if one
be designated, shall assist the President in the discharge of supervisory,
managerial and executive duties and functions. In the absence of the President
or in the event of his or her death, inability or refusal to act, the Executive
Vice President shall perform the duties of the President, and when so acting
shall have all the powers and duties of the President. He or she shall perform
such other duties as from time to time may be assigned to him or her by the
Board of Directors or the President.
4.08 The Vice Presidents. In the absence of the President and the
Executive Vice President or in the event of their death, inability or refusal
to act, or in the event for any reason it shall be impracticable for them to
act personally, the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated by the Board of
Directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any Vice President may sign, with the Secretary or Assistant
Secretary, certificates for shares of the Corporation; and shall perform such
other duties and have such authority as from time to time may be delegated or
assigned to him or her by the President, the Executive Vice President or by the
Board of Directors. The execution of any instrument of the Corporation by any
Vice President shall be conclusive evidence, as to third parties, of his or her
authority to act in the stead of the President.
4.09 The Secretary. The Secretary shall: (a) keep the minutes of the
meetings of the shareholders and of the Board of Directors in one or more books
provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these by-laws or as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep
or arrange for the keeping of a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or a Vice President, certificates for shares of the
Corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the Corporation; and (g) in general, perform all duties incident to the office
of Secretary and have such other duties and exercise such authority as from
time to time may be delegated or assigned to him or her by the President or by
the Board of Directors.
4.10 The Treasurer. The Treasurer shall: (a) have charge and custody
of and be responsible for all funds and securities of the Corporation; (b)
receive and give receipts for moneys due and payable to the Corporation from
any source whatsoever, and deposit all such moneys in the name of the
Corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of Section 5.04; and (c) in general,
perform all of the duties incident to the office of Treasurer and have such
other duties and exercise such other authority as from time to time may be
delegated or assigned to him or her by the President or by the Board of
Directors. If required by the Board of Directors, the Treasurer shall give a
bond for the faithful discharge of his duties in such sum and with such surety
or sureties as the Board of Directors shall determine.
4.11 Assistant Secretaries and Assistant Treasurers. There shall be
such number of Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time authorize. The Assistant Secretaries may sign
with the President or a Vice President certificates for shares of the
Corporation, the issuance of which shall have been authorized by a resolution
of the Board of Directors. The Assistant Treasurers shall, respectively, if
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of Directors
shall determine. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties and have such authority as shall from time
to time be delegated or assigned to them by the Secretary of the Treasurer,
respectively, or by the President or the Board of Directors.
4.12 Other Assistants and Acting Officers. The Board of Directors shall
have the power to appoint any person to act as assistant to any Officer, or as
agent for the Corporation in his or her stead, or to perform the duties of such
Officer whenever for any reason it is impracticable for such Officer to act
personally and such assistant or acting Officer or other agent so appointed by
the Board of Directors shall have the power to perform all the duties of the
office to which he or she is so appointed to be assistant, or as to which he or
she is so appointed to act, except as such power may be otherwise defined or
restricted by the Board of Directors.
4.13 Salaries. The salaries of the principal Officers shall be fixed
from time to time by the Board of Directors or by a duly authorized committee
thereof, and no Officer shall be prevented from receiving such salary by reason
of the fact that he or she is also a Director of the Corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS:
SPECIAL CORPORATE ACTS
5.01 Contracts. The Board of Directors may authorize any Officer or
Officers, agent or agents, to enter into any contract or execute or deliver any
instrument in the name of and on behalf of the Corporation, and such
authorization may be general or confined in specific instances. No contract or
other transaction between the Corporation and one or more of its Directors of
any other corporation, firm, association, or entity in which one or more of its
Directors of Officers are financially interested, shall be either void or
voidable because of such relationship or interest or because such Director or
Directors are present at the meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction or
because his, or her, or their votes are counted for such purpose, if (a) the
fact of such relationship or interest is disclosed or known to the Board of
Directors or committee which authorizes, approves or ratifies the contract or
transaction by a vote or consent sufficient for the purpose without counting
the votes or consents of such interested Directors; or (b) the fact of such
relationship or interest is disclosed or known to the shareholders entitled to
vote and they authorize, approve or ratify such contract or transaction by vote
or written consent; or (c) the contract or transaction is fair and reasonable
to the Corporation. Common or interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
a committee thereof which authorizes, approves or ratifies such contract or
transactions.
5.02 Loans. No indebtedness for borrowed money shall be contracted on
behalf of the Corporation and no evidences of such indebtedness shall be issued
in its name unless authorized by or under the authority of a resolution of the
Board of Directors. Such authorization may be general or confined to specific
instances.
5.03 Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name
of the Corporation shall be signed by such Officer or Officers, agent or agents
of the Corporation and in such manner as shall from time to time be determined
by or under the authority of a resolution of the Board of Directors.
5.04 Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as may be selected by or under the
authority of a resolution of the Board of Directors.
5.05 Voting of Securities Owned by this Corporation. Subject always to
the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other corporation and owned or controlled by this
Corporation may be voted at any meeting of security holders of such other
corporation by the President of this Corporation if he or she be present, or in
the President's absence by the Executive Vice President (if one be designated),
or in the Executive Vice President's absence, by any Vice President of this
Corporation who may be present, and (b) whenever, in the judgment of the
President, or in his absence, of the Executive Vice President (if one be
designated), or in the Executive Vice President's absence, of any Vice
President, it is desirable for this Corporation to execute a proxy or written
consent in respect to any shares or other securities issued by any other
corporation and owned by this Corporation, such proxy or consent shall be
executed in the name of this Corporation by the President, Executive Vice
President or one of the Vice Presidents of this Corporation in the order as
provided in clause (a) of this Section, without necessity of any authorization
by the Board of Directors, affixation of corporate seal or countersignature or
attestation by another officer. Any person or persons designated in the manner
above stated as the proxy or proxies of this Corporation shall have full right,
power and authority to vote the shares or other securities issued by such other
corporation and owned by this Corporation the same as such shares or other
securities might be voted by this Corporation.
ARTICLE VI. CERTIFICATES FOR SHARES AND
THEIR TRANSFER
6.01 Certificates for Shares. Certificates representing shares of the
Corporation shall be in such form, consistent with law, as shall be determined
by the Board of Directors. Such Certificates shall be signed by the President
or a Vice President and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the Corporation. All certificates
surrendered to the Corporation for transfer shall be canceled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and canceled, except as provided in Section
6.06.
6.02 Facsimile Signatures and Seals. The seal of the Corporation, if
the Corporation has elected to have a seal, on any certificates for shares may
be a facsimile. The signatures of the President or Vice President and the
Secretary or Assistant Secretary upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent, or a registrar,
other than the Corporation itself or an employee of the Corporation.
6.03 Signature by Former Officers. In case any Officer, who has signed
or whose facsimile signature has been placed upon, any certificate for shares,
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 or she were such
Officer at the date of its issue.
6.04 Transfer of Shares. Prior to due presentment of a certificate for
shares for registration of transfer, the Corporation may treat the registered
owner of such shares as the person exclusively entitled to vote, to receive
notifications and otherwise to have and exercise all the rights and powers of
an owner. Where a certificate for shares is presented to the Corporation with
a request to register for transfer, the Corporation shall not be liable to the
owner or any other person suffering loss as a result of such registration of
transfer if (a) there were on or with the certificate the necessary
endorsements, and (b) the corporation had no duty to inquire into adverse
claims or has discharged any such duty. The Corporation may require reasonable
assurance that said endorsements are genuine and effective and in compliance
with such other regulations as may be prescribed by or under the authority of
the Board of Directors.
6.05 Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of any
restriction imposed by the Corporation upon the transfer of such shares.
6.06 Lost, Destroyed or Stolen Certificates. Where the owner claims
that his or her certificate for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a) so
requests before the Corporation has notice that such shares have been acquired
by a bona fide purchaser, and (b) files with the Corporation a sufficient
indemnity bond, and (c) satisfies such other reasonable requirements as may be
prescribed by or under the authority of the Board of Directors.
6.07 Consideration for Shares. The shares of the Corporation may be
issued for such consideration as shall be fixed from time to time by the Board
of Directors, provided that any shares having a par value shall not be issued
for a consideration less than the par value thereof. The consideration to be
paid for shares may be paid in whole or in part, in money, in other property,
tangible or intangible, or in labor or services actually performed for the
Corporation. When payment of the consideration for which shares are to be
issued shall have been received by the Corporation, such shares shall be deemed
to be fully paid and nonassessable by the Corporation. No certificate shall be
issued for any share until such share is fully paid.
6.08 Stock Regulations. The Board of Directors shall have the power and
authority to make all such further rules and regulations not inconsistent with
the statutes of the State of Wisconsin as it may deem expedient concerning the
issue, transfer and registration of certificates representing shares of the
Corporation.
ARTICLE VII. WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the provisions
of the Wisconsin Business Corporation Law or under the provisions of the
articles of incorporation or by-laws a waiver thereof in writing signed at any
time, whether before or after the time of the meeting, by the person or persons
entitled to such notice shall be deemed equivalent to the giving of such
notice. Such waiver by a shareholder in respect of any matter of which notice
is required under any provision of the Wisconsin Business Corporation Law shall
contain the same information as would have been required to be included in such
notice under any applicable provisions of said Law, except that the time and
place of meeting need not be stated.
ARTICLE VIII. UNANIMOUS CONSENT WITHOUT A MEETING
Any action required by the articles of incorporation or by-laws or any
provision of the Wisconsin Business Corporation Law to be taken at a meeting or
any other action which may be taken at a meeting may be taken without a meeting
if a consent in writing setting forth the action so taken shall be signed by
all of the shareholders, Directors or members of a committee thereof entitled
to vote with respect to the subject matter thereof and such consent shall have
the same force and effect as a unanimous vote.
ARTICLE IX. INDEMNIFICATION
9.01 Indemnification for Successful Defense. Within 20 days after
receipt of a written request pursuant to Section 9.03, the Corporation shall
indemnify a Director, Officer, Employee or Agent, to the extent he or she has
been successful on the merits or otherwise in the defense of a proceeding, for
all reasonable expenses incurred in the proceeding if the Director, Officer,
Employee or Agent was a party because he or she is a Director, Officer,
Employee or Agent of the Corporation.
9.02 Other Indemnification. (a) In cases not included under Section
9.01, the Corporation shall indemnify a Director, Officer, Employee or Agent
against all liabilities and expenses incurred by the Director, Officer,
Employee or Agent in a proceeding to which the Director, Officer, Employee or
Agent was a party because he or she is a Director, Officer, Employee, or Agent
of the Corporation, unless liability was incurred because the Director,
Officer, Employee or Agent breached or failed to perform a duty he or she owes
to the Corporation and the breach or failure to perform constitutes any of the
following:
(1) A willful failure to deal fairly with the Corporation or its
shareholders in connection with a matter in which the Director, Officer,
Employee or Agent has a material conflict of interest.
(2) A violation of criminal law, unless the Director, Officer,
Employee or Agent had reasonable cause to believe his or her conduct was
lawful or no reasonable cause to believe his or her conduct was unlawful.
(3) A transaction from which the Director, Officer, Employee or
Agent derived an improper personal profit.
(4) Willful misconduct.
(b) Determination of whether indemnification is required under this
Section shall be made pursuant to Section 9.05.
(c) The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of no contest or an equivalent plea, does not, by
itself, create a presumption that indemnification of the Director, Officer,
Employee or Agent is not required under this Section.
9.03 Written Request. A Director, Officer, Employee or Agent who seeks
indemnification under Sections 9.01 or 9.02 shall make a written request to the
Corporation.
9.04 Nonduplication. The Corporation shall not indemnify a Director,
Officer, Employee or Agent under Sections 9.01 or 9.02 if the Director,
Officer, Employee or Agent has previously received indemnification or allowance
of expenses from any person, including the Corporation, in connection with the
same proceeding. However, the Director, Officer, Employee or Agent has no
affirmative duty to look to any other person for indemnification nor to first
exhaust his remedies to seek indemnification from such other person.
9.05 Determination of Right to Indemnification.
(a) Unless otherwise provided by the articles of incorporation or by
written agreement between the Director, Officer, Employee or Agent, and the
Corporation, the Director, Officer, Employee or Agent seeking indemnification
under Section 9.02 shall select one of the following means for determining his
or her right to indemnification:
(1) By a majority vote of a quorum of the Board of Directors
consisting of Directors not at the time parties to the same or related
proceedings. If a quorum of disinterested Directors cannot be obtained,
by majority vote of a committee duly appointed by the Board of Directors
and consisting solely of 2 or more Directors not at the time parties to
the same or related proceedings. Directors who are parties to the same
or related proceedings may participate in the designation of members of
the committee.
(2) By independent legal counsel selected by a quorum of the Board
of Directors or its committee in the manner prescribed in sub. (1) or, if
unable to obtain such a quorum or committee, by a majority vote of the
full Board of Directors, including Directors who are parties to the same
or related proceedings.
(3) By a panel of 3 arbitrators consisting of one arbitrator
selected by those Directors entitled under sub. (2) to select independent
legal counsel, one arbitrator selected by the Director or Officer seeking
indemnification and one arbitrator selected by the 2 arbitrators
previously selected.
(4) By an affirmative vote of the majority of shares represented
at a meeting of shareholders at which a quorum is present. Shares owned
by, or voted under the control of, persons who are at the time parties to
the same or related proceedings, whether as plaintiffs or defendants or
in any other capacity, may not be voted in making the determination.
(5) By a court under Section 9.08.
(6) By any other method provided for in any additional right to
indemnification permitted under Section 9.07.
(b) In any determination under (a), the burden of proof is on the
Corporation to prove by clear and convincing evidence that indemnification
under Section 9.02 should not be allowed.
(c) A written determination as to a Director, Officer, Employee or
Agent's indemnification under Section 9.02 shall be submitted to both the
Corporation and the Director, Officer, Employee or Agent within 60 days of the
selection made under (a).
(d) If it is determined that indemnification is required under Section
9.02, the Corporation shall pay all liabilities and expenses not prohibited by
Section 9.04 within 10 days after receipt of the written determination under
(c). The Corporation shall also pay all expenses incurred by the Director,
Officer, Employee or Agent, in the determination process under (a).
9.06 Advance Expenses. Within 10 days after receipt of a written
request by a Director, Officer, Employee or Agent who is a party to a
proceeding, the Corporation shall pay or reimburse his or her reasonable
expenses as incurred if the Director, Officer, Employee or Agent provides the
Corporation with all of the following:
(1) A written affirmation of his or her good faith belief that he
or she has not breached or failed to perform his or her duties to the
Corporation.
(2) A written undertaking, executed personally or on his or her
behalf, to repay the allowance (together with reasonable interest
thereon) to the extent that it is ultimately determined under Section
9.05 that indemnification under Section 9.02 is not required and that
indemnification is not ordered by a court under Section 9.08(b)(2). The
undertaking under this subsection shall be an unlimited general
obligation of the Director, Officer, Employee or Agent, and may be
accepted without reference to his or her ability to repay the allowance.
The undertaking may be secured or unsecured.
9.07 Nonexclusivity.
(a) Except as provided in (b), Sections 9.01, 9.02 and 9.06 do not
preclude any additional right to indemnification or allowance of expenses that
a Director, Officer, Employee or Agent may have under any of the following:
(1) The articles of incorporation.
(2) A written agreement between the Director, Officer, Employee or
Agent, and the Corporation.
(3) A resolution of the Board of Directors.
(4) A resolution, after notice, adopted by a majority vote of all
of the Corporation's voting shares then issued and outstanding.
(b) Regardless of the existence of an additional right under (a), the
Corporation shall not indemnify a Director, Officer, Employee or Agent, or
permit a Director, Officer, Employee or Agent to retain any allowance of
expenses, unless it is determined by or on behalf of the Corporation that the
Director, Officer, Employee or Agent did not breach or fail to perform a duty
he or she owes to the Corporation which constitutes conduct under Section
9.02(a)(1), (2), (3) or (4). A Director, Officer, Employee or Agent who is a
party to the same or related proceeding for which indemnification or an
allowance of expenses is sought may not participate in a determination under
this subsection.
(c) Sections 9.01 to 9.12 do not affect the Corporation's power to pay
or reimburse expenses incurred by a Director, Officer, Employee or Agent in any
of the following circumstances:
(1) As a witness in a proceeding to which he or she is not a
party.
(2) As a plaintiff or petitioner in a proceeding because he or she
is or was a Director, Officer, Employee or Agent of the Corporation.
9.08 Court-Ordered Indemnification.
(a) Except as provided otherwise by written agreement between the
Director, Officer, Employee, or Agent and the Corporation, a Director, Officer,
Employee, or Agent who is a party to a proceeding may apply for indemnification
to the court conducting the proceeding or to another court of competent
jurisdiction. Application may be made for an initial determination by the
court under Section 9.05(a)(5) or for review by the court of an adverse
determination under Section 9.05(a) (1), (2), (3), (4) or (6). After receipt
of an application, the court shall give any notice it considers necessary.
(b) The court shall order indemnification if it determines any of the
following:
(1) That the Director, Officer, Employee or Agent is entitled to
indemnification under Sections 9.01 or 9.02.
(2) That the Director, Officer, Employee or Agent is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, regardless of whether indemnification is required under
Section 9.02.
(c) If the court determines under (b) that the Director, Officer,
Employee or Agent is entitled to indemnification, the Corporation shall pay the
Director, Officer, Employee or Agent's expenses incurred to obtain the court-
ordered indemnification.
9.09 Insurance. The Corporation may purchase and maintain insurance on
behalf of an individual who is a Director, Officer, Employee or Agent of the
Corporation against liability asserted against or incurred by the individual in
his or her capacity as a Director, Officer, Employee or Agent, regardless of
whether the Corporation is required or authorized to indemnify or allow
expenses to the individual against the same liability under Sections 9.01,
9.02, or 9.06.
9.10 Securities Law Claims.
(a) Pursuant to the public policy of the State of Wisconsin, the
Corporation shall provide indemnification, allowance of expenses and insurance
for any liability incurred in connection with a proceeding involving securities
regulation described under (b) to the extent required or permitted under
Sections 9.01 to 9.09.
(b) Sections 9.01 to 9.09 apply, to the extent applicable to any other
proceeding, to any proceeding involving a federal or state statute, rule or
regulation regulating the offer, sale or purchase of securities, securities
brokers or dealers, or investment companies or investment advisers.
9.11 Liberal Construction. In order for the corporation to obtain and
retain qualified Directors, Officers, Employees, and Agents, the foregoing
provisions shall be liberally administered in order to afford maximum
indemnification of Directors, Officers, Employees, or Agents, and accordingly,
the indemnification above provided for shall be granted in all cases unless to
do so would clearly contravene applicable law, controlling precedent or public
policy.
9.12 Definitions Applicable to This Article.
(a) "Affiliate" shall include, without limitation, any corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise
that directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Corporation.
(b) "Corporation" means this Corporation and any domestic or foreign
predecessor of this Corporation where the predecessor corporation's existence
ceased upon the consummation of a merger or other transaction.
(c) "Director, Officer, Employee or Agent" means any of the following:
(1) A natural person who is or was a director, officer, employee
or agent (including attorneys) of this Corporation, provided, however,
that no attorney of the Corporation shall be considered an agent with
respect to those actions taken by such attorney solely in his capacity as
an independent contractor to the Corporation.
(2) A natural person who, while a Director, Officer, Employee or
Agent, of this Corporation, is or was serving at the Corporation's
request as a Director, Officer, Employee, Agent, Partner, trustee, member
of any governing or decision-making committee of another Corporation or
foreign corporation, partnership, joint venture, trust or other
enterprise.
(3) A natural person who, while a Director, Officer, Employee or
Agent of this Corporation, is or was serving an employee benefit plan
because his or her duties to the Corporation also impose duties on, or
otherwise involve services by, the person to the plan or to participants
or beneficiaries of the plan.
(4) Unless the context requires otherwise, the estate or personal
representative of a Director, Officer, Employee or Agent.
For purposes of this Article, it shall be conclusively presumed that any
Director, Officer, Employee or Agent serving as a Director, Officer, Employee,
Agent, partner, trustee, member of any governing or decision-making committee
of an affiliate shall be so serving at the request of the Corporation.
(d) "Expenses" include fees, costs, charges, disbursements, attorney
fees and other expenses incurred in connection with a proceeding.
(e) "Liability" includes the obligation to pay a judgment, settlement,
penalty, assessment, forfeiture or fine, including an excise tax assessed with
respect to an employee benefit plan, and reasonable expenses.
(f) "Party" includes a natural person who was or is, or who is
threatened to be made, a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending or completed civil,
criminal, administrative or investigative action, suit, arbitration or other
proceeding, whether formal or informal, which involves foreign, federal, state
or local law and which is brought by or in the right of the Corporation or by
any other person.
ARTICLE X. SEAL
There shall be no corporate seal.
ARTICLE XI. AMENDMENTS
11.01 By Shareholders. These by-laws may be altered, amended or
repealed and new by-laws may be adopted by the shareholders by affirmative vote
of not less than a majority of the shares present or represented at an annual
or special meeting of the shareholders at which a quorum is in attendance.
11.02. By Directors. These by-laws may also be altered, amended or
repealed and new by-laws may be adopted by the board of Directors by
affirmative vote of a majority of the number of Directors present at any
meeting at which a quorum is in attendance, but no by-law adopted by the
shareholders or subscribers shall be amended or repealed by the Board of
Directors if the by-law so adopted so provides.
11.03 Implied Amendments. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
by-laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of Directors required to amend the
by-laws so that the by-laws would be consistent with such action, shall be
given the same effect as though the by-laws had been temporarily amended or
suspended so far, but only so far, as is necessary to permit the specific
action so taken or authorized.
EXHIBIT 21
LUNAR CORPORATION AND SUBSIDIARIES
Name of Subsidiary Jurisdiction of Incorporation
- ------------------------- -----------------------------
Lunar FSC, Inc. U.S. Virgin Islands
Lunar Finance Corporation Delaware
Lunar Funding Corporation Delaware
Lunar Capital Corporation Delaware
Lunar GmbH Germany
Lunar Europe, N.V. Belgium
Lunar France France
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report, included in this Form 10-K, into the Company's previously filed
registration statements, File No. 33-63891 and File No. 333-40469.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
September 23, 1999
EXHIBIT 23.2
CONSENT OF KPMG LLP
The Board of Directors
Lunar Corporation:
We consent to incorporation by reference in the registration statements on Form
S-8 (File No. 33-63891) and Form S-3 (File No. 333-40469) of Lunar Corporation
of our reports dated July 24, 1998 relating to the consolidated balance sheet
of Lunar Corporation and subsidiaries as of June 30, 1998, and the related
consolidated statements of income, shareholders' equity, and cash flows and the
related financial statement schedule for each of the years in the two-year
period ended June 30, 1998, which reports appear in the June 30, 1999 annual
report on Form 10-K of Lunar Corporation.
KPMG LLP
Chicago, Illinois
September 23, 1999
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