SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED 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 1-13154
AMERICAN MEDICAL SECURITY GROUP, INC.
(Exact name of Registrant as specified in its charter)
WISCONSIN 39-1431799
(State of Incorporation) (I.R.S. Employer Identification No.)
3100 AMS BOULEVARD
GREEN BAY, WISCONSIN 54313
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (920) 661-3075
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No _____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, no par value, outstanding as of July 31, 1999: 16,653,359 shares
<PAGE>
AMERICAN MEDICAL SECURITY GROUP, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets--June 30, 1999 and
December 31, 1998.............................................3
Condensed Consolidated Statements of Income--
Three months ended June 30, 1999 and 1998;
Six months ended June 30, 1999 and 1998.......................5
Condensed Consolidated Statements of Cash Flows--
Six months ended June 30, 1999 and 1998.......................6
Notes to Condensed Consolidated Financial Statements--
June 30, 1999.................................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.....16
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............17
Item 5. Other Information..............................................18
Item 6. Exhibits and Reports on Form 8-K...............................18
Signatures........................................................19
Exhibit Index...................................................EX-1
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
AMERICAN MEDICAL SECURITY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
<S> <C> <C>
June 30, December 31,
1999 1998
-----------------------------------
(000'S OMITTED)
ASSETS
Investments:
Securities available for sale, at fair value:
Fixed maturities $ 303,100 $ 293,096
Equity securities-preferred 2,198 2,457
Fixed maturity securities held to maturity, at amortized cost 3,795 3,361
----------------------------------
Total Investments 309,093 298,914
Cash and Cash Equivalents (1,951) 10,648
Other Assets:
Property and equipment, net 34,470 35,356
Goodwill and other intangibles, net 114,035 116,093
Other assets 43,913 37,711
----------------------------------
Total Other Assets 192,418 189,160
----------------------------------
Total Assets $ 499,560 $ 498,722
==================================
See Notes to Condensed Consolidated Financial Statements
</TABLE>
3
<PAGE>
<TABLE>
AMERICAN MEDICAL SECURITY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
<S> <C> <C>
June 30, December 31,
1999 1998
-----------------------------------
(000'S OMITTED)
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Medical and other benefits payable $ 119,364 $ 113,133
Advance premiums 19,300 18,157
Payables and accrued expenses 25,749 23,439
Notes payable 53,463 55,064
Other liabilities 24,007 22,478
----------------------------------
Total Liabilities 241,883 232,271
Redeemable preferred stock - Series A adjustable rate nonconvertible,
$1,000 stated value, 25,000 shares authorized - -
Shareholders' Equity:
Preferred stock (no par value, 475,000 shares authorized) - -
Common stock (no par value, $1 stated value, 50,000,000 shares
authorized, 16,653,303 and 16,653,179 issued and outstanding
at June 30, 1999 and December 31, 1998, respectively) 16,653 16,653
Paid-in capital 187,950 188,981
Retained earnings 59,037 59,572
Accumulated other comprehensive income (loss), net of taxes of $3,211,000
and $642,000 at June 30, 1999 and December 31, 1998, respectively (5,963) 1,245
--------------- ---------------
Total Shareholders' Equity 257,677 266,451
--------------- ---------------
Total Liabilities and Shareholders' Equity $ 499,560 $ 498,722
==================================
See Notes to Condensed Consolidated Financial Statements
</TABLE>
4
<PAGE>
<TABLE>
AMERICAN MEDICAL SECURITY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
1999 1998 1999 1998
--------------------------------- ---------------------------------
(000'S OMITTED, EXCEPT PER SHARE DATA)
Revenues:
Insurance premiums $ 264,198 $ 226,956 $ 527,090 $ 461,915
Net investment income 4,700 5,723 9,675 11,804
Other revenue 5,498 4,675 11,684 9,475
--------------------------------- ---------------------------------
Total Revenues 274,396 237,354 548,449 483,194
Expenses:
Medical and other benefits 210,758 174,325 409,165 353,610
Selling, general and administrative 67,109 57,693 135,790 116,735
Interest expense 872 2,336 1,766 4,707
Amortization of goodwill and intangibles 1,010 2,195 2,058 4,435
--------------------------------- ---------------------------------
Total Expenses 279,749 236,549 548,779 479,487
--------------------------------- ---------------------------------
Income (Loss) From Continuing Operations,
Before Income Taxes (5,353) 805 (330) 3,707
Income Tax Expense (Benefit) (1,823) 413 205 1,764
--------------------------------- ---------------------------------
Income (Loss) From Continuing Operations (3,530) 392 (535) 1,943
Income From Discontinued Operations,
Less Applicable Income Taxes - 874 - 5,714
--------------- --------------- --------------- ---------------
Net Income (Loss) $ (3,530) $ 1,266 $ (535) $ 7,657
================================= =================================
Earnings (Loss) Per Common Share - Basic
Income (loss) from continuing operations $ (0.21) $ 0.03 $ (0.03) $ 0.12
Income from discontinued operations - 0.05 - 0.34
--------------- --------------- --------------- ---------------
Net Income (Loss) Per Common Share $ (0.21) $ 0.08 $ (0.03) $ 0.46
================================= =================================
Earnings (Loss) Per Common Share - Diluted
Income (loss) from continuing operations $ (0.21) $ 0.03 $ (0.03) $ 0.12
Income from discontinued operations - 0.05 - 0.34
--------------- --------------- --------------- ---------------
Net Income (Loss) Per Common Share $ (0.21) $ 0.08 $ (0.03) $ 0.46
================================= =================================
See Notes to Condensed Consolidated Financial Statements
</TABLE>
5
<PAGE>
<TABLE>
AMERICAN MEDICAL SECURITY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
<S> <C> <C>
Six Months Ended
June 30,
----------------------------------
1999 1998
----------------------------------
(000'S OMITTED)
OPERATING ACTIVITIES:
Income (loss) from continuing operations $ (535) $ 1,943
Adjustments to reconcile income (loss) from continuing
operations to net cash provided by (used in) operating activities:
Depreciation and amortization 5,299 7,740
Net realized investment (gains) losses 282 (1,465)
Deferred income tax (benefit) expense (320) 185
Changes in operating accounts:
Other assets (6,202) 589
Medical and other benefits payable 6,231 (20,521)
Advance premiums 1,143 354
Payables and accrued expenses 2,310 (9,167)
Other liabilities 4,697 9,884
----------------------------------
Net Cash Provided by (Used in) Operating Activities 12,905 (10,458)
INVESTING ACTIVITIES:
Acquisition of subsidiaries (net of cash and cash equivalents
acquired of $2,773,000) - 2,623
Purchases of available for sale securities (183,689) (176,093)
Proceeds from sale of available for sale securities 143,046 140,948
Proceeds from maturity of available for sale securities 18,496 8,700
Purchases of held to maturity securities (200) -
Purchases of property and equipment (1,589) (2,070)
Proceeds from sale of property and equipment 31 54
----------------------------------
Net Cash Used in Investing Activities (23,905) (25,838)
FINANCING ACTIVITIES:
Cash dividends paid - (3,967)
Issuance of common stock 2 1,718
Borrowings under line of credit agreement 5,000 -
Repayment on line of credit agreement (5,000) -
Repayment of notes payable (1,601) (837)
----------------------------------
Net Cash Used in Financing Activities (1,599) (3,086)
Net Cash Provided by Discontinued Operations - 1,169
----------------------------------
Cash and Cash Equivalents:
Net decrease (12,599) (38,213)
Balance at beginning of year 10,648 45,291
----------------------------------
Balance at End of Period $ (1,951) $ 7,078
==================================
See Notes to Condensed Consolidated Financial Statements
</TABLE>
6
<PAGE>
AMERICAN MEDICAL SECURITY GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1999
NOTE A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of only normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three and six month
periods ended June 30, 1999 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999. These condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and footnotes thereto included in the American
Medical Security Group, Inc. ("AMSG" or the "Company") annual report on Form
10-K for the year ended December 31, 1998.
NOTE B. DISCONTINUED OPERATIONS
On May 27, 1998, the Board of Directors of the Company, then known as
United Wisconsin Services, Inc. ("UWS"), approved a plan to spin off its managed
care companies and specialty management business to its shareholders (the
"Spin-off"). In connection with the Spin-off, UWS changed its name to "American
Medical Security Group, Inc." On September 25, 1998, the distribution date,
shareholders of AMSG received one share of common stock of a newly formed
company, Newco/UWS, Inc. ("Newco/UWS"), for every share of AMSG owned as of
September 11, 1998, the record date. The net assets of Newco/UWS consisted of
assets and liabilities of the managed care and specialty business along with
$70.0 million in debt that was assumed by Newco/UWS in conjunction with the
Spin-off. Newco/UWS was renamed United Wisconsin Services, Inc. AMSG has
obtained a private ruling from the Internal Revenue Service to the effect that
the Spin-off qualifies as tax free to AMSG, Newco/UWS and to AMSG shareholders.
The operations of Newco/UWS are reflected in discontinued operations through
September 25, 1998. All prior periods of the Company's financial statements have
been restated to reflect Newco/UWS operations as discontinued operations.
Interest expense on the $70.0 million in debt assumed by Newco/UWS is reflected
in continuing operations through September 11, 1998.
7
<PAGE>
NOTE C. EARNINGS PER SHARE
Basic earnings per common share are computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
common share are computed by dividing net income by the weighted average number
of common shares outstanding, adjusted for the effect of dilutive employee stock
options.
The following table provides a reconciliation of the number of weighted
average basic and diluted shares outstanding:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------
1999 1998 1999 1998
----------------------------- -----------------------------
Weighted average common shares
outstanding - Basic 16,653,282 16,546,176 16,653,254 16,531,108
Effect of dilutive stock options - 175,925 - 173,671
----------------------------- -----------------------------
Weighted average common shares
outstanding - Diluted 16,653,282 16,722,101 16,653,254 16,704,779
============================= =============================
</TABLE>
The effect of dilutive securities is excluded from the diluted earnings per
common share computation for the three and six months ended June 30, 1999
because employee stock options are antidilutive during such periods. Certain
options to purchase shares were not included in the computation of diluted
earnings per common share because the options' exercise prices were greater than
the average market price of the outstanding common shares for the three and six
month periods ended June 30, 1998.
NOTE D. COMPREHENSIVE INCOME
Comprehensive income (loss) for the Company is defined as net income (loss)
plus or minus unrealized gains or losses, net of income tax effects, on certain
investments in debt and equity securities. Comprehensive income (loss) totaled
$(7.2) million and $(1.5) million for the three months ended June 30, 1999 and
1998, respectively, and $(7.7) million and $5.1 million for the six months ended
June 30, 1999 and 1998, respectively.
NOTE E. SEGMENT INFORMATION
The Company has two reportable segments: 1) health insurance products and
2) life insurance products. The Company's health insurance products consist of
the following coverages related to small group preferred provider organization
products: fully insured medical, self funded medical, dental and short-term
disability. Life products consist primarily of group term-life insurance.
Operations not directly related to the business segments (i.e., corporate
investment income, interest expense on corporate debt, amortization of goodwill
and intangibles, unallocated overhead expenses and health maintenance
organization ("HMO") operations) are included in "All Other". The segments are
reported separately because they differ in the nature of the products offered
and in profit margins.
The Company evaluates segment performance based on profit or loss from
operations before income taxes, not including gains and losses on the Company's
investment portfolio. The accounting policies of the reportable segments are the
same as those used to report the Company's consolidated financial statements.
Intercompany transactions have been eliminated prior to reporting reportable
segment information.
8
<PAGE>
A reconciliation of segment income (loss) before income taxes to
consolidated income (loss) from continuing operations before income taxes is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- ------------------------------
1999 1998 1999 1998
--------------- --------------- -------------- ---------------
(000'S OMITTED)
Health $ (7,426) $ 421 $ (3,945) $ 28
Life 2,700 3,061 4,576 5,487
All other (627) (2,677) (961) (1,808)
--------------- --------------- -------------- ---------------
$ (5,353) $ 805 $ (330) $ 3,707
=============== =============== ============== ===============
</TABLE>
Operating results and statistics for each of the Company's segments are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
(000'S OMITTED, EXCEPT FINANCIAL STATISTICS)
HEALTH SEGMENT
OPERATING RESULTS
Revenues:
Insurance premiums $ 246,752 $ 215,649 $ 493,404 $ 438,521
Net investment income 2,297 2,151 4,565 4,288
Other revenue 4,696 3,400 9,908 6,907
------------- ------------- ------------- -------------
Total Revenues 253,745 221,200 507,877 449,716
Expenses:
Medical and other benefits 199,474 167,887 386,894 342,032
Selling, general and administrative 61,697 52,892 124,928 107,656
------------- ------------- ------------- -------------
Total Expenses 261,171 220,779 511,822 449,688
------------- ------------- ------------- -------------
Income (Loss) Before Income Taxes $ (7,426) $ 421 $ (3,945) $ 28
============= ============= ============= =============
FINANCIAL STATISTICS
Loss ratio 80.8% 77.9% 78.4% 78.0%
Expense ratio 23.1% 22.9% 23.3% 23.0%
------------- ------------- ------------- -------------
Combined ratio 103.9% 100.8% 101.7% 101.0%
============= ============= ============= =============
Membership at End of Period:
Medical:
Fully insured 615,729 518,584
Self funded 49,964 58,936
------------- -------------
Total medical* 665,693 577,520
Dental 350,806 411,364
*Total medical membership of the Company includes HMO membership of 29,182 and
16,404 at June 30, 1999 and 1998, respectively. HMO operations are not included
in health segment operating results.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
(000'S OMITTED, EXCEPT FINANCIAL STATISTICS)
LIFE SEGMENT
OPERATING RESULTS
Revenues:
Insurance premiums $ 6,450 $ 6,082 $ 13,110 $ 12,552
Net investment income 48 59 99 114
Other revenue 66 38 138 78
------------- ------------- ------------- -------------
Total Revenues 6,564 6,179 13,347 12,744
Expenses:
Medical and other benefits 2,078 1,250 4,851 3,385
Selling, general and administrative 1,786 1,868 3,920 3,872
------------- ------------- ------------- -------------
Total Expenses 3,864 3,118 8,771 7,257
------------- ------------- ------------- -------------
Income Before Income Taxes $ 2,700 $ 3,061 $ 4,576 $ 5,487
============= ============= ============= =============
FINANCIAL STATISTICS
Loss ratio 32.2% 20.6% 37.0% 27.0%
Expense ratio 26.7% 30.1% 28.8% 30.2%
------------- ------------- ------------- -------------
Combined ratio 58.9% 50.7% 65.8% 57.2%
============= ============= ============= =============
Membership at end of period 309,173 228,832
</TABLE>
NOTE F. RECLASSIFICATIONS
Certain reclassifications have been made to the consolidated financial
statements for 1998 to conform with the 1999 presentation.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
American Medical Security Group, Inc. ("AMSG" or the "Company"), formerly
known as United Wisconsin Services, Inc., together with its subsidiary companies
is a provider of health and life insurance products for individuals and employer
groups. The Company's principal product offering is small group health
insurance. It also sells individual and large group health insurance and group
life, dental, prescription drug, disability and accidental death insurance. The
Company's products are actively marketed in 33 states and the District of
Columbia through independent agents. The Company's products generally provide
discounts to insureds that utilize preferred provider organizations. The average
group size is six lives.
HISTORY
Prior to and for most of the year 1998, the business of the Company, then
known as "United Wisconsin Services, Inc.", consisted of two main components:
the small group business and the managed care and specialty business. On
September 11, 1998, the Company contributed all of its subsidiaries comprising
the managed care and specialty business to a newly created subsidiary named
"Newco/UWS, Inc.", a Wisconsin corporation ("Newco/UWS"). On September 25, 1998,
the Company spun off the managed care and specialty business through a
distribution of 100% of the issued and outstanding shares of common stock of
Newco/UWS to the Company's shareholders of record as of September 11, 1998. The
Company thereupon adopted its current name of "American Medical Security Group,
Inc." and Newco/UWS changed its name to "United Wisconsin Services, Inc." The
net assets of Newco/UWS consisted of assets and liabilities of the managed care
and specialty management business along with $70.0 million in debt that was
assumed by Newco/UWS in conjunction with the distribution. The operations of
Newco/UWS are reflected in discontinued operations through September 25, 1998.
Interest expense on the $70.0 million in debt assumed by Newco/UWS is reflected
in continuing operations through September 11, 1998. After the Spin-off, the
business of the Company consisted solely of the Company's small group insurance
business. The continuing operations of the Company reflect the historical small
group insurance portion of the Company's business.
RESULTS OF CONTINUING OPERATIONS
RESERVE STRENGTHENING CHARGE
During the second quarter of 1999, the Company recorded an after-tax charge
to earnings of $5.8 million or $0.35 per share to strengthen its medical claims
reserves. The reserve strengthening is the result of an adverse medical loss
ratio trend identified by management in the second quarter. The adverse medical
loss ratio trend relates primarily to three principle areas of its health
segment: 1) continued adverse trends in its one and two life business,
particularly in Florida where the corrective action plan initiated late in 1998
has developed more slowly than expected; 2) adverse trends on certain older
blocks of business; and 3) increased utilization claim cost trends particularly
in pharmacy benefits.
In response, management has developed and implemented a series of strategic
action plans directed at improving the profitability of these identified
under-performing segments. Specifically, in Florida, the Company's actions
include a redesigned product line, the conversion of older benefit plans to new
plans with higher deductibles, and widespread repricing.
11
<PAGE>
Other plans designed to improve the Company's health loss ratio include
raising its average rate increases on renewals during the last half of this
year, accelerated repricing in certain targeted business segments, introduction
of redesigned products, and the conversion of older group health plans into new
benefit designs. In August 1999, the Company is also introducing a two-tier
copay plan to help reverse the unfavorable pharmacy cost trend. While management
is confident in the success of these actions, the financial impact of these
actions will not be significant during the remainder of 1999. However, it is
anticipated that the financial impact will be significant early in the year
2000. Management anticipates that the Company's financial performance for the
second half of 1999 will be break even to a small profit. In addition,
management anticipates that earnings per share for the year 2000 will be $0.70
or greater. These performance and earnings forecasts are subject to certain
risks, uncertainties and assumptions. Factors that could cause actual results to
differ materially include, but are not limited to, claim cost trends,
utilization persistency, new sales, regulatory approvals of rate increases and
other factors discussed in "Forward Looking Statements" below.
INSURANCE PREMIUMS
Insurance premiums for the three months ended June 30, 1999 increased 16.4%
to $264.2 million from $227.0 million for the same period in 1998. Insurance
premiums for the six months ended June 30, 1999 increased 14.1% to $527.1
million from $461.9 million for the same period in 1998. The premium increase
reflects both internal growth and growth from business acquired from other
insurance carriers. The Company acquired the majority of the fully insured group
health business of Continental Assurance Company ("CNA") effective January 1,
1999. The results for the three and six months ended June 30, 1999 included
$23.7 and $52.3 million, respectively, of premium related to the CNA acquired
business.
Average fully insured medical premium per member per month during the six
month period ended June 30, 1999 increased 2.4% to $126 compared to $123 during
the same period in 1998. Medical membership at June 30, 1999 increased 15.3% to
665,693 from 577,520 at June 30, 1998, primarily due to new sales growth and the
addition of the CNA business.
NET INVESTMENT INCOME
Net investment income includes investment income and realized gains and
losses on investments. Net investment income for the three months ended June 30,
1999 declined 17.9% to $4.7 million from $5.7 million for the three months ended
June 30, 1998. The decline is due to lower average annual investments yields and
a decrease in realized gains of $0.8 million. Net investment income for the six
months ended June 30, 1999 decreased 18.0% to $9.7 million from $11.8 million
for the same period one year ago. Average annual investment yields, excluding
realized gains and losses were 6.4% and 6.5% for the three months and six months
ended June 30, 1999, respectively, compared to 7.1% and 7.4% for the same
respective periods in the prior year. Investment gains and losses are realized
in the normal investment process in response to market opportunities. Average
invested assets at cost for the three months ended June 30, 1999 were $309.8
million compared to $290.0 million for the three months ended June 30, 1998.
OTHER REVENUE
Other revenue increased to $5.5 million for the three months ended June 30,
1999 from $4.7 million for the same period in 1998. The increase is primarily
due to an increase in fee revenue associated with the Pan American Life
Insurance Company business acquired July 1998 and CNA business acquired January
1999. Other revenue for the six month period increased to $11.7 million in 1999
from $9.5 million in 1998. Management expects that other revenue will decline
slightly during the remainder of 1999 as the acquired blocks of business run
off.
12
<PAGE>
LOSS RATIO
The health segment loss ratio for the three months ended June 30, 1999 was
80.8% compared with 77.9% for the three months ended June 30, 1998. The
unfavorable health loss ratio for the quarter reflects the reserve strengthening
in the second quarter as discussed above. The health segment loss ratio for the
six months ended June 30, 1999 was 78.4% compared with 78.0% for the six months
ended June 30, 1998. As discussed previously, management is aggressively
pursuing strategic action plans designed to improve the Company's health loss
ratio. Management anticipates the health loss ratio will be approximately 78.5%
to 79.0% for the last half of 1999. However, the Company's actual health loss
ratio for the remainder of 1999 is dependent upon future events including claim
cost trends, utilization persistency, new sales, regulatory approvals of rate
increases and other factors. Consequently, there can be no assurance that the
Company's action plans will have the desired effect on the health loss ratio in
future periods.
The life segment loss ratio for the three months ended June 30, 1999 was
32.2% compared to 20.6% for the three months ended June 30, 1998. The life
segment loss ratio for the six months ended June 30, 1999 was 37.0% compared
with 27.0% for the six months ended June 30, 1998. The results in the life
segment for the second quarter of 1999 are consistent with historical trends and
management's expectations on an on-going basis. The fluctuation from the second
quarter of 1998 is due to unusually low claims utilization during that period.
Management expects the life segment loss ratio to remain relatively stable
during the remainder of 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE RATIO
The selling, general and administrative ("SGA") expense ratio for health
segment products for the three months ended June 30, 1999 was 23.1% compared
with 22.9% for the three months ended June 30, 1998. For the six months ended
June 30, 1999 and 1998, the SGA expense ratio for health segment products was
23.3% and 23.0%, respectively. The slight increase in the SGA expense ratio is
the result of higher commissions on new policy sales offset by a lower
administrative expense ratio caused by a leveraging of the Company's operations
over increased revenues.
OTHER EXPENSES
Interest expense decreased to $0.9 million for the three months ended June
30, 1999 from $1.1 million for the same period in the prior year. For the six
months ended June 30, 1999, interest expense decreased to $1.8 million from $2.3
million for the six months ended June 30, 1998. The decrease in interest expense
for the quarter and six month period reflects the assumption of $70.0 million in
debt by Newco/UWS on September 11, 1998, as part of the Spin-off transaction, as
described in Note B of the Notes to Condensed Consolidated Financial Statements.
Amortization of goodwill and other intangibles totaled $1.0 million for the
second quarter of 1999, compared with $2.2 million of amortization expense for
the second quarter of 1998. On a year to date basis, amortization of goodwill
and intangibles decreased to $2.1 million from $4.4 million for the six months
ended June 30, 1998. The decline in amortization is principally due to the
write-off of the Company's distribution system intangible asset at December 31,
1998, as described in the Company's annual report on Form 10-K for the year
ended December 31, 1998. Management believes that no other material impairment
of goodwill and other intangible assets exists at June 30, 1999.
The effective tax rate was 34.1% for the three months ended June 30, 1999
compared with 51.3% for the three months ended June 30, 1998. The effective tax
rate for the six months ended June 30, 1999 was (62.1%) compared with 47.6% for
the six months ended June 30, 1998. The effective tax rate is impacted primarily
by level amortization of non-deductible goodwill in relation to varying pre-tax
income.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of cash flow consist primarily of insurance premiums,
administrative fee revenue and investment income. The primary uses of cash
include medical and other benefits and operating expense payments. Positive cash
flows are invested pending future payments of medical and other benefits and
other operating expenses. The Company's investment policies are designed to
maximize yield, preserve principal and provide liquidity to meet anticipated
payment obligations.
The Company's cash flow from operations was positive at $12.9 million for
the six months ended June 30, 1999. This compares to negative cash flow from
operations of $10.5 million for the six months ended June 30, 1998. The positive
results are due to growth in membership and lower debt costs as a result of the
assumption of $70.0 million in debt by Newco/UWS in September 1998.
The Company's investment portfolio from continuing operations consists
primarily of investment grade bonds and has limited exposure to equity
securities. At June 30, 1999, $306.9 or 99.3% of the Company's investment
portfolio was invested in bonds. At December 31, 1998, $296.5 or 99.2% of the
Company's investment portfolio was invested in bonds. The bond portfolio had an
average quality rating of Aa3 at June 30, 1999, and A1 at December 31, 1998, as
measured by Moody's Investor Service. The majority of the bond portfolio was
classified as available for sale. The Company has no investment in mortgage
loans, non-publicly traded securities (except for principal only strips of U.S.
Government securities), real estate held for investment or financial
derivatives.
The Company's insurance subsidiaries operate in states that require certain
levels of regulatory capital and surplus and may restrict dividends to their
parent companies. The National Association of Insurance Commissioners has
adopted risk-based capital ("RBC") standards for health and life insurers
designed to evaluate the adequacy of statutory capital and surplus in relation
to various business risks faced by such insurers. The RBC formula is used by
state insurance regulators as an early warning tool to identify insurance
companies that potentially are inadequately capitalized. At December 31, 1998,
the Company's principal insurance company subsidiaries had an RBC ratio that was
substantially above the levels which would require regulatory action.
The Company has a five year revolving line of credit with a maximum
commitment of $70.0 million, and a $10.0 million sublimit for swingline loans.
The outstanding line of credit balance at June 30, 1999 was $45.2 million, which
is included in notes payable.
In addition to internally generated funds and periodic borrowings on its
bank line of credit, the Company believes that additional financing to
facilitate long-term growth could be obtained through equity offerings, debt
offerings, or bank borrowings, as market conditions may permit or dictate.
YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Computer equipment
and software devices with embedded technology that are time-sensitive may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions or engage in similar normal business activities.
The Company has divided the Year 2000 issues facing the organization into
three major sections: 1) software applications developed in-house ("In-house
Applications"); 2) software applications acquired from a third party that have
been customized by the Company ("Customized Applications"); and 3) software
applications acquired from a third party that have not been customized by the
Company and those products and services provided to the Company by third parties
("Third Party Products").
14
<PAGE>
In-house Applications represent the primary operating software of the
Company and include premium billing and cash posting, claims adjudication and
commission payment processing applications. The project to make all in-house
Applications Year 2000 compliant was completed in November 1998. The deletion of
temporary bridges and workfiles used to facilitate communication between
compliant and non-compliant computer codes during the course of the
implementation was completed in early March 1999.
Customized Applications software products include electronic data
interchange applications, publishing systems, fax capabilities, accounting
packages and other special application software as well as utility software
packages that serve as links between different packages. Each of these software
packages is currently being upgraded or replaced. It is anticipated that all
Customized Applications will be compliant prior to the end of the third quarter
of 1999.
With respect to Third Party Products, the Company has reviewed its business
processes that may have Year 2000 concerns performed by, with or through
external business associates. This includes computer hardware, telephone
systems, security systems and other numerous products as well as third party
applications that have not been customized by the Company. The Company has
evaluated various third parties that provide products or services, such as
printing companies, power and utility companies and other vendors. Where
appropriate, agreements with third party vendors have been amended and Year 2000
compliance certifications have been obtained. Significant business partners and
vendors will be required to provide the Company with Year 2000 certified
products or services. Such products and services are being tested by the Company
to validate the compliance certification. This portion of the plan is 93%
complete, is on schedule and is planned for completion in September 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
YEAR 2000 PLAN PERCENT COMPLETE COMPLETION DATE
In-house Applications 100% March 1999
Customized Applications 91% September 1999
Third Party Products 93% September 1999
</TABLE>
The cost of the Year 2000 project is being funded through operating cash
flows and is not expected to be material to the Company's financial position.
For the six months ended June 30, 1999, the Company has incurred costs of $2.8
million ($0.3 million in the second quarter of 1999) relating to the Year 2000
project. For the remainder of 1999, the Company anticipates an additional cost
of $0.3 million which will be expensed as incurred. The company has made capital
expenditures of $4.4 million for the six months ended June 30, 1999, and expects
to make an additional $0.5 million in capital expenditures to complete the
project.
During the second quarter of 1999, the Company has completed a
comprehensive analysis of the operational problems and costs (including loss of
revenues) that could result from the unlikely failure by the Company and certain
third parties to complete efforts necessary to achieve Year 2000 compliance on a
timely basis. While the Company currently believes that the timely completion of
its Year 2000 project will limit exposure so that the Year 2000 issue will not
pose material operational problems, the Company cannot control third party
systems. Contingency plans have been developed and documented for dealing with
the worst case scenarios with the highest chance of occurring.
15
<PAGE>
The costs of the project and the date on which the Company plans to
complete the necessary Year 2000 modifications are based on management's best
estimates, which were derived using numerous assumptions of future events
including the continued availability of certain resources, third party
remediation plans and other factors. There can be no guarantee that these
timelines or estimates will be achieved. Actual results could differ materially
from those planned. Specific factors that might cause such material differences
to occur include, but are not limited to, the availability and cost of personnel
trained in this area; the ability to locate and correct all relevant computer
codes; and the ability of the Company's significant suppliers, customers and
others with which it conducts business, including federal, state and local
governmental agencies, to identify and resolve their own Year 2000 issues and
similar uncertainties. Due to these uncertainties, the Company may face certain
claims, the impact of which is not currently estimable. No assurance can be
given that the cost of defending and resolving such claims, if any, will not
significantly affect the Company's results of operations. Although the Company
has some agreements with third party vendors and suppliers that contain
indemnification provisions that protect the Company under certain circumstances
relating to Year 2000 issues, there can be no assurances that such
indemnification provisions will cover all of the Company's liabilities and costs
related to Year 2000 claims by third parties.
FORWARD LOOKING STATEMENTS
Statements contained in this report that are not historical facts are
forward looking statements subject to inherent risks and uncertainties that may
cause actual results or events to differ materially from those contemplated by
such forward looking statements. The terms "anticipate", "believe", "estimate",
"expect", "objective", "plan", "project" and similar expressions are intended to
identify forward looking statements. In addition to the assumptions and other
factors referred to specifically in connection with such statements, factors
that may cause actual results or events to differ materially from those
contemplated by such forward looking statements, include, among others, (1) the
Company's ability to successfully implement the action plans to improve loss
ratios; (2) the effects of either federal or state health care reform or other
legislation; (3) rising health care costs, including the Company's ability to
predict such costs and adequately price its products; (4) changes in membership
utilization and risk; (5) government regulations, including changes in
insurance, health care and other regulatory conditions; (6) delays in regulatory
approvals, and regulatory action resulting from market conduct activity and
general administrative compliance with state and federal laws; (7) general
business conditions, including competitive practices and demand for the
Company's products; (8) development of and changes in claims reserves; (9)
rating agency policies and practices; (10) general economic conditions,
including changes in interest rates and the effect of such changes on the
Company's investment portfolio; (11) the Company's ability to integrate
acquisitions; (12) unforeseen costs or consequences of Year 2000 issues; (13)
the retention of key management and technical employees, and (14) other factors
that may be referred to in the Company's reports filed with the Securities and
Exchange Commission from time to time.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's market risk has not substantially changed from the year ended
December 31, 1998.
16
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of shareholders of the Company was held on May 27, 1999
for the purpose of (1) electing three directors for terms expiring at the 2002
Annual Meeting of Shareholders, (2) amending the Company's Equity Incentive Plan
(the "Equity Incentive Plan") to allow non-employee directors to participate in
the Equity Incentive Plan and to make other amendments to the Equity Incentive
Plan, and (3) approving the Company's Executive Annual Incentive Plan.
All three of the Company's nominees were elected, the amendment of the
Equity Incentive Plan was approved, and the Executive Annual Incentive Plan was
approved. The voting results for the proposals were as follows:
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS FOR TERMS EXPIRING IN 2002:
<S> <C> <C> <C>
Roger H. Ballou: W. Francis Brennan:
For 15,646,802 shares For 15,649,815 shares
Withheld 806,547 shares Withheld 803,534 shares
Abstained 0 Abstained 0
Broker Non-Votes 0 Broker Non-Votes 0
J. Gus Swoboda:
For 15,649,425 shares
Withheld 803,924 shares
Abstained 0
Broker Non-Votes 0
AMENDMENT OF EQUITY INCENTIVE PLAN:
For 12,878,509 shares
Against 3,567,765 shares
Abstained 7,075 shares
Broker Non-Votes 0 shares
APPROVAL OF EXECUTIVE ANNUAL INCENTIVE PLAN:
For 16,162,427 shares
Against 276,568 shares
Abstained 14,354 shares
Broker Non-Votes 0 shares
</TABLE>
Further information concerning these matters, including the names of the
directors whose terms continued after the meeting, is contained in the Company's
Proxy Statement dated April 14, 1999 with respect to the 1999 Annual Meeting of
Shareholders.
17
<PAGE>
ITEM 5. OTHER INFORMATION
On August 3, 1999, the Company announced that its Board of Directors has
authorized the Company to repurchase up to $10 million of the Company's
outstanding common stock. The plan to repurchase its common stock will allow the
Company to buy back its shares, from time to time, in open market or privately
negotiated transactions, subject to price and market conditions. Any purchases
will be made in a manner to comply with the provisions of Rule 10b-18 under the
Securities Exchange Act of 1934. In determining when and whether to purchase
shares, management will also consider, among other factors, market price, the
number of shares actively traded in the market, indications of seller interest,
the number of shares held by large shareholders, and the effect of purchases on
shareholder value. Because of the unpredictability of these factors, no
assurance can be given as to how many shares may be repurchased.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
See the Exhibit Index following the Signature page of this report, which is
incorporated herein by reference.
(b) REPORTS ON FORM 8-K
A Form 8-K Current Report dated May 24, 1999 was filed by the Company to
report (under Item 5) the announcement by the Company of its plans to take a
charge in the second quarter of 1999 to strengthen its medical claims reserves.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: August 12, 1999
-----------------
AMERICAN MEDICAL SECURITY GROUP, INC.
/s/ Gary D. Guengerich
----------------------------------------------------------
Gary D. Guengerich
Executive Vice President and Chief Financial Officer
(Principal Financial Officer and Chief Accounting Officer
and duly authorized to sign on behalf of the Registrant)
19
<PAGE>
<TABLE>
AMERICAN MEDICAL SECURITY GROUP, INC.
(COMMISSION FILE NO. 1-13154)
EXHIBIT INDEX
TO
FORM 10-Q QUARTERLY REPORT
for quarter ended June 30, 1999
<CAPTION>
<S> <C> <C> <C>
INCORPORATED HEREIN FILED
EXHIBIT NO. DESCRIPTION BY REFERENCE TO HEREWITH
3.2 Bylaws of the Company as amended and X
restated May 27, 1999
27.1 Financial Data Schedule X
27.2 Restated Financial Data Schedule X
(six months ended June 30, 1998)
</TABLE>
EX-1
EXHIBIT 3.2
BYLAWS OF
AMERICAN MEDICAL SECURITY GROUP, INC.
(AS AMENDED AND RESTATED MAY 27, 1999)
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 to the principal office in the
state of Wisconsin; and the address of the registered office may be changed from
time to time by any officer or by the registered agent. The business office of
the registered agent of the Corporation shall be identical to the registered
office.
ARTICLE II. SHAREHOLDERS
2.01. ANNUAL MEETING. The Annual Meeting of the Shareholders shall be held
at the principal office of the Corporation in the City of Green Bay, Brown
County, Wisconsin, unless the Board of Directors shall designate another
location either within or without the State of Wisconsin. The Annual Meeting
shall take place on the last Thursday of May each year or at such other time and
date as may be fixed by or under the authority of the Board of Directors. 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. At
such meeting the Shareholders shall elect directors and transact such other
business as shall lawfully come before them.
A. ELECTIONS AND OTHER BUSINESS. Nominations of persons for election
to the Board of Directors of the Corporation and the proposal of business
to be considered by the Shareholders may be made at the Annual Meeting:
1. Pursuant to the Corporation's notice of meeting;
2. By or at the direction of the Board of Directors; or
3. By any Shareholder of the Corporation who is a Shareholder of
record at the time of the giving of the notice provided for in these
Bylaws and who is entitled to vote at the meeting and complies with
the notice procedures set forth below.
B. NOMINATIONS AND SUBMISSION OF BUSINESS MATTERS. For nominations or
other business to be properly brought before an Annual Meeting by a
Shareholder, the Shareholder must have given timely notice thereof in
writing to the Secretary of the Corporation. Timely notice is that notice
which is received by the Secretary at the Corporation's principal office
not less than sixty (60) days nor more than ninety (90) days prior to the
date on which the Corporation first mailed its proxy materials for the
prior year's Annual Meeting, provided, however, that in the event the date
of the Annual Meeting is advanced by more than thirty (30) days or delayed
by more than sixty (60) days from the last Thursday in May, notice by the
Shareholder, to be timely, must be received, as provided above, not earlier
than the ninetieth (90th) day prior to the date of such Annual Meeting and
not later than the close of business on the later of (x) the sixtieth (60)
day prior to such Annual Meeting, or (y) the tenth (10th) day on which
public announcement of the date of such a meeting is first made. Such
Shareholder's notice shall be signed by the Shareholder of record who
intends to make the nomination or introduce the other business (or his or
her duly authorized proxy or other representative), shall bear the date of
signature of such Shareholder or representative, and shall set forth:
1. The name and address, as they appear on the Corporation's
books, of such Shareholder and the beneficial owner(s), if any, on
whose behalf the nomination or proposal is made;
2. The class and number of shares of the Corporation which are
beneficially owned by such Shareholder or beneficial owner(s);
3. A representation that such Shareholder is a holder of record
of shares entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to make the nomination or introduce
the other business specified in the notice;
4. In the case of any proposed nomination for election or
reelection as a director:
(a) The name and residence address of the nominee;
(b) A description of all arrangements or understandings
between such Shareholder or beneficial owner(s) and each nominee
and any other person(s) (naming such person(s)) pursuant to which
the nomination is to be made by the Shareholder;
(c) Such other information regarding each nominee proposed
by such Shareholder as would be required to be disclosed in
solicitations of proxies for elections of directors, or would be
otherwise required to be disclosed, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended, including any information that would be required to be
included in a proxy statement filed pursuant to Regulation 14A
had the nominee been nominated by the Board of Directors; and
(d) The written consent of each nominee to be named in a
proxy statement and to serve as a director of the Corporation if
so elected; and
5. In the case of any other business that such Shareholder
proposes to bring before the meeting,
(a) A brief description of the business desired to be
brought before the meeting, and, if the business includes a
proposal to amend these Bylaws, the language of the proposed
amendment;
(b) Such Shareholder's and beneficial owner's(s') reasons
for conducting such business at such time; and
(c) Any material interest in such business of such
Shareholder or beneficial owners(s).
Notwithstanding anything in the above paragraph to the
contrary, in the event that the number of directors to be elected
to the Board of Directors of this Corporation is increased and
there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of
Directors made by the Corporation at least seventy (70) days
prior to the last Thursday in May, a Shareholder's notice
required by this Section shall also be considered timely, but
only with respect to nominees for new positions created by such
increase, if it is received by the Secretary at the Corporation's
principal office not later than the close of business on the
tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
2.02. SPECIAL MEETINGS. Special meetings of the Shareholders may be called
by the Chairman of the Board, and shall be called by the Secretary on written
request of a majority of members of the Board of Directors, or on written
request of the holders of at least ten (10%) percent of the Corporation's shares
entitled to vote on a matter. The request shall be signed, dated and delivered
to the Secretary describing one (1) or more purposes for which the meeting is to
be held. The Board of Directors shall set the place of the meeting. If no such
designation is made, the place of the meeting shall be the principal business
office of the Corporation in the State of Wisconsin, but any meeting may be
adjourned to reconvene at any place designated by a vote of a majority of the
shares represented thereat.
A. ELECTIONS AND OTHER BUSINESS. Nominations of persons for election
to the Board of Directors may be made at a Special Meeting at which
directors are to be elected pursuant to such notice of meeting:
1. By or at the direction of the Board of Directors; or
2. By any Shareholder of the Corporation who:
(a) Is a Shareholder of record at the time of giving notice
of the meeting,
(b) Is entitled to vote at the meeting, and
(c) Complies with the notice procedures set forth below.
B. NOMINATIONS AND SUBMISSION OF BUSINESS MATTERS. Only such business
as shall have been described in such notice shall be conducted at the
Special Meeting. Any Shareholder desiring to nominate persons for election
to the Board of Directors at a Special Meeting shall cause written notice
to be received by the Secretary of the Corporation at its principal office
not earlier than ninety (90) days prior to such Special Meeting and not
later than the close of business on the later of (x) the sixtieth (60th)
day prior to such Special Meeting or (y) the tenth (10th) day following the
day on which public announcement is first made of the date of such Special
Meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. Such written notice shall be signed by the
Shareholder of record who intends to make the nomination (or his or her
duly authorized proxy or other representative), shall bear the date of
signature of such Shareholder or other representative, and shall set forth:
1. The name and address, as they appear on the Corporation's
books, of such Shareholder and the beneficial owner(s), if any, on
whose behalf the nomination is made;
2. The class and number of shares of the Corporation which are
beneficially owned by such Shareholder or beneficial owner(s);
3. A representation that such Shareholder is a holder of record
of shares of the Corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to make the
nomination specified in the notice;
4. The name and residence address of the person(s) to be
nominated;
5. A description of all arrangements or understandings between
such Shareholder or beneficial owner(s) and each nominee and any other
person(s) (naming such person(s)) pursuant to which the nomination is
to be made by such Shareholder;
6. Such other information regarding each nominee proposed by such
Shareholder as would be required to be disclosed in solicitations of
proxies for elections of directors, or would be otherwise required to
be disclosed, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, including any information
that would be required to be included in a proxy statement filed
pursuant to Regulation 14A had the nominee been nominated by the Board
of Directors; and
7. The written consent of each nominee to be named in a proxy
statement and to serve as a director of the Corporation if so elected.
2.03. NOTICE OF ANNUAL OR SPECIAL MEETING. Notice may be communicated by
telegraph, teletype, facsimile or other form of wire or wireless communication,
or by mail or private carrier, and, if these forms of personal notice are
impracticable, notice may be communicated by public announcement. Such notice
stating the place, day and hour of the meeting and, in case of a special
meeting, a description of each purpose for which the meeting is called, shall be
communicated or sent not less than ten days nor more than sixty (60) days before
the date of the meeting, by or at the direction of the Chairman of the Board or
the Secretary, or other officer or persons calling the meeting, to each
Shareholder of record entitled to vote at such meeting. Written notice by the
Corporation to its Shareholders is effective when mailed and may be addressed to
the Shareholder's address shown in the Corporation's current record of
Shareholders.
2.04. UNANIMOUS CONSENT WITHOUT MEETING. Any action that may 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.
2.05. FIXING OF RECORD DATE. A "Shareholder" of the Corporation shall mean
the person in whose name shares are registered in the stock transfer books of
the Corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee certificate on file with the Corporation. Such nominee
certificates, if any, shall be reflected in the stock transfer books of the
Corporation. The Board of Directors may fix, in advance, a date as the record
date for one or more voting groups for any determination of Shareholders
entitled to notice of a Shareholder's meeting, to demand a special meeting, to
vote, or to take any other action, such date in any case to be not more than
seventy (70) days prior to the meeting or action requiring such determination of
Shareholders, and may fix the record date for determining Shareholder entitled
to share a dividend or distribution. If no record date is fixed for the
determination of Shareholders entitled to demand a Shareholder meeting, to
notice of or to vote at a meeting of Shareholders, or to consent to action
without a meeting, (a) the close of business on the day before the Corporation
received the first written demand for a Shareholder meeting, (b) the close of
business on the day before the first notice of the meeting is mailed or
otherwise delivered to Shareholders, or (c) the close of business on the day
before the first written consent to Shareholder action without a meeting is
received by the Corporation, as the case may be, shall be the record date for
the determination of Shareholders. If no record date is fixed for the
determination of Shareholders entitled to receive a share dividend or
distribution (other than a distribution involving a purchase, redemption or
other acquisition of the Corporation's shares), the close of business on the day
on which the resolution of the Board of Directors is adopted declaring the
dividend or distribution shall be the record date. 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 unless the Board of Directors fixes a new record date and except as
otherwise required by law. A new record date must be set if a meeting is
adjourned to a date more than one-hundred twenty (120) days after the date fixed
for the original meeting.
2.06. VOTING RECORD. The Secretary 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. Shares entitled to vote as a separate voting group as defined
in the Wisconsin Business Corporation Law may take action on a matter at a
meeting only if a quorum of those shares exists with respect to that matter.
Unless the Articles of Incorporation or the Wisconsin Business Corporation Law
provide otherwise, a majority of the votes entitled to be cast on the matter by
a voting group constitutes a quorum of that voting group for action on that
matter.
Once a share is represented for any purposes 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 exists, action on a matter by a voting group is approved if the
votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the Articles of Incorporation or the Wisconsin
Business Corporation Law require a greater number of affirmative votes.
"Voting group" means any of the following:
A. All shares of one or more classes or series that under the Articles
of Incorporation or the Wisconsin Business Corporation Law are entitled to
vote and be counted together collectively on a matter at a meeting of
Shareholders.
B. All shares that under the Articles of Incorporation or the
Wisconsin Business Corporation Law are entitled to vote generally on a
matter.
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. PROXIES. At all meetings of Shareholders, a Shareholder entitled to
vote may vote in person or by proxy. A Shareholder may appoint a proxy to vote
or otherwise act for the Shareholder by signing an appointment form, either
personally, by his or her attorney-in-fact, or in any other manner authorized by
the Wisconsin Business Corporation Law. Such proxy appointment is effective when
received by the Secretary or other officer or agent of the Corporation
authorized to tabulate votes. Unless otherwise provided in the appointment form
of proxy, a proxy appointment may be revoked at any time before it is voted, by
written notice filed with the Secretary or the acting Secretary of the meeting,
by oral notice given by the Shareholder to the presiding officer during the
meeting, or in any other manner authorized by the Wisconsin Business Corporation
Law. The presence of a Shareholder who has filed his or her proxy appointment
shall not of itself constitute a revocation. No proxy appointment shall be valid
after eleven months from the date of its execution, unless otherwise provided in
the appointment form of proxy. The Board of Directors shall have the power and
authority to make rules establishing presumptions as to the validity and
sufficiency of proxy appointments.
2.09. 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 voting group or groups
are enlarged, limited or denied by the Articles of Incorporation.
2.10. 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. An
appointment form of 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 Bylaws
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 or her, 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 by him or her, either in person or by proxy. An appointment form of
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, 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; provided, however, a pledgee shall be entitled to
vote shares held of record by the pledgor if the Corporation receives
acceptable evidence of the pledgee's authority to sign.
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. Shares held by a minor may be voted by a personal representative,
administrator, executor, guardian or conservator representing the minor if
evidence of such fiduciary status, acceptable to the Corporation, is
presented.
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 judicial proceedings for appointment of
a guardian. Shares held by an incompetent or spendthrift may be voted by a
personal representative, administrator, executor, guardian or conservator
representing the minor if evidence of such fiduciary status, acceptable to
the Corporation, is presented.
G. JOINT TENANTS. Shares registered in the names of two (2) or more
individuals who are named in the registration as joint tenants may be voted
in person or by proxy signed by any one (1) 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 of authority of
the individual present or signing the appointment form of 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.
2.11. CONDUCT OF MEETINGS. The Chairman of the Board, or in the Chairman's
absence, the President, or, in their absence such Vice President as is
designated by the Board of Directors, shall call the meeting to order and act as
Chairman of the meeting. Only persons nominated in accordance with the
procedures set forth in Sections 2.01 and 2.02, shall be eligible to serve as
directors. Only such business as shall have been brought before a meeting in
accordance with the procedures set forth in Section 2.01 and 2.02, shall be
eligible to be conducted. The Chairman of the meeting shall have the power and
duty to determine whether any nomination or any business proposed to be brought
before the meeting was made in accordance with the procedures set forth in
Sections 2.01 and 2.02, and, if any proposed nomination or business is not in
compliance therewith, to declare that such defective proposal shall be
disregarded.
2.12. PUBLIC ANNOUNCEMENT. For purposes of Sections 2.01 and 2.02, "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.
2.13. INVALIDITY. The Chairman, upon recommendation of the Secretary, may
reject a vote, consent, waiver, or proxy appointment, if the Secretary or other
officer or agent of the Corporation who is authorized to tabulate votes, acting
in good faith, has reasonable doubt about the validity of the signature on it or
about the signatory's authority to sign for the Shareholder. The Corporation and
its officer or agent who accepts or rejects a vote, consent, waiver or proxy
appointment in good faith and in accordance with the Wisconsin Business
Corporation Law shall not be liable for damages to the Shareholders for
consequences of the acceptance or rejection.
2.14. WAIVER OF NOTICE. A Shareholder may waive any notice required by the
Wisconsin Business Corporation Law, the Articles of Incorporation, or these
Bylaws before or after the date and time stated in the notice. The waiver shall
be in writing and signed by the Shareholder entitled to the notice, contain the
same information that would have been required in the notice under the Wisconsin
Business Corporation Law (except that the time and place of meeting need not be
stated), and be delivered to the Corporation for inclusion in the corporate
records. A Shareholder's attendance at any Annual Meeting or Special Meeting, in
person or by proxy, waives objection to all of the following: (a) lack of notice
or defective notice of the meeting, unless the Shareholder promptly upon arrival
or at the beginning of the meeting objects to holding, or transacting business
at, the meeting; and (b) consideration of a particular matter at the meeting
that is not within the purpose described in the meeting notice, unless the
Shareholder objects to considering the matter when it is presented.
ARTICLE III. BOARD OF DIRECTORS
3.01. NUMBER OF DIRECTORS. Within the limits established in the Articles of
Incorporation, the number of directors of the Corporation shall be such number
as shall be determined by the Board of Directors from time to time.
3.02. TERM OF OFFICE. Elected directors shall hold office for a term of
three (3) years and until their successors are elected and qualified, except as
otherwise provided in this Section or until their death, resignation or removal.
The Board of Directors shall be divided into three (3) classes of three (3) or
more directors each, with, as nearly as possible, an equal number of directors
in each class. The term of office of the first class of directors shall expire
at the first annual meeting after their initial election and when 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 when
their successors are elected and qualified, and the terms of office of the third
class shall expire at the third annual meeting after their initial election and
when 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.
3.03. NOMINATIONS. Nominations for the election of directors shall be made
in accordance with the provisions of Sections 2.01 and 2.02 hereof, which
requirements are hereby incorporated by reference in this Section 3.03.
3.04. REGULAR MEETINGS. A regular meeting of the Board of Directors shall
be held without other notice than this Bylaw immediately after, and at the same
place as, the Annual Meeting of Shareholders, for election of corporate officers
and transaction of other business. The Board of Directors may provide by
resolution the time and place for holding additional meetings without other
notice than such resolution.
3.05. SPECIAL MEETINGS. Special Meetings of the Board of Directors shall be
held whenever called by the Chairman of the Board or the Secretary upon written
request of any three (3) directors. The Secretary shall give sufficient notice
of such meeting, to be not less than two (2) days, in person or by mail or by
telephone, telegraph, teletype, facsimile or other form of wire or wireless
communication as to enable the directors so notified to attend such meeting. The
Chairman or Secretary who calls the meeting may fix any place, within or without
the State of Wisconsin, as the place for holding any Special Meeting of the
Board of Directors.
3.06. WAIVER OF NOTICE. Whenever any notice whatsoever is required to be
given to any director of the Corporation under the Articles of Incorporation or
Bylaws or any provisions 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, and the
Corporation shall retain copies of such waivers in its corporate records. A
director's attendance at or participation in a meeting waives any required
notice to him or her of the meeting unless the director at the beginning of the
meeting or promptly upon his or her arrival objects to holding the meeting and
does not thereafter vote for or assent to action taken at the meeting. 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.
3.07. QUORUM. Except as otherwise provided by the Wisconsin Business
Corporation Law, a majority of the number of directors (determined as provided
in Section 3.01) shall constitute a quorum of the Board of Directors. Except as
otherwise provided by the Wisconsin Business Corporation Law, a majority of the
number of directors appointed to service on a committee shall constitute a
quorum of the committee.
3.08. VACANCIES. Vacancies, including those created by an increase in the
number of directors in the Board of Directors, may be filled by the remaining
directors. A director elected to fill a vacancy shall serve for the unexpired
term of his or her predecessor. In the absence of action by the remaining
directors, the Shareholders may fill such vacancy at a Special Meeting in
accordance with the Articles of Incorporation, or by unanimous consent according
to these Bylaws.
3.09. REMOVAL. The Shareholders may remove one (1) or more directors, with
or without cause, at a meeting called for that purpose, the notice of which
reflects that purpose, in accordance with the Articles of Incorporation of this
Corporation.
3.10. COMPENSATION. A director may receive such compensation for services
as is determined by resolution of the Board irrespective of any personal
interest of its members. A director also may serve the Corporation in any other
capacity and receive compensation therefore. 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 or payments, to directors, officers and employees and to their
estates, families, dependents or beneficiaries on account of prior services
rendered to the Corporation by such directors, officers and employees.
3.11. GENERAL POWERS. All corporate powers shall be exercised by or under
the authority of, and the business and affairs of the Corporation shall be
managed under the direction of, the Board of Directors, subject to any
limitation set forth in these Bylaws or the Articles of Incorporation.
3.12. CONDUCT OF MEETINGS. The Chairman of the Board, or in the Chairman's
absence the President, or in their absence such Vice President as is designated
by the Board of Directors, 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 an Assistant
Secretary or any director or other person present or participating to act as
Secretary of the meeting.
3.13. MANNER OF ACTING. If a quorum is present or participating when a vote
is taken, the affirmative vote of a majority of directors present or
participating is the act of the Board of Directors or a committee of the Board
of Directors, unless the Wisconsin Business Corporation Law or the Articles of
Incorporation or these Bylaws require the vote of a greater number of directors.
3.14. PRESUMPTION OF ASSENT. A director of the Corporation who is present
at or participates in a meeting of the Board of Directors or a committee thereof
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 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.
3.15. UNANIMOUS CONSENT WITHOUT MEETING. Any action required or permitted
by the Articles of Incorporation or Bylaws 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.
3.16. MEETING 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.
3.17. COMMITTEES.
A. REGULAR COMMITTEES.
1. GENERAL DESCRIPTION. In order to facilitate the work of the
Board of Directors of this Corporation, the following regular
committees shall be elected from the membership of the Board of
Directors at the regular meeting held in May of each year (or at such
other time as the Board of Directors may determine):
Executive Committee
Finance Committee
Compensation Committee
Audit Committee
Each committee shall consist of such number of members, not less
than three (3), as shall be determined by the Board of Directors. The
Chairman of the Board of Directors, and in the Chairman's absence the
President, and in their absence, such Vice President as is designated
by the Board of Directors, shall submit nominations for such committee
memberships. Committee members shall hold office until the next board
meeting at which committee elections are conducted in accordance with
these Bylaws, and until their successors are elected and qualified.
Each Regular Committee of the Board of Directors may exercise the
authority of the full Board within the scope of the duties and powers
delegated to it in these Bylaws, except that no committee of this
Board shall do any of the following:
(a) Authorize distributions;
(b) Approve or propose to Shareholders action that the
Wisconsin Business Corporation Law requires to be approved by
Shareholders;
(c) Fill vacancies on the Board of Directors or, except as
provided herein, on any of its committees;
(d) Amend the Articles of Incorporation;
(e) Adopt, amend or repeal the Bylaws;
(f) Approve a plan of merger not requiring Shareholder
approval;
(g) Authorize or approve reacquisition of shares, except
according to a formula or method prescribed by the full Board; or
(h) Authorize or approve the issuance or sale or contract
for sale of shares or determine the designation and relative
rights, preferences and limitations of a class or series of
shares, except that the Board of Directors may authorize a
committee or a senior executive officer of the Corporation to do
so within limits prescribed by the Board of Directors.
2. THE EXECUTIVE COMMITTEE. When the Board of Directors is not in
session, the Executive Committee shall have and may exercise all of
the powers and authority of the full Board in the management of the
business and affairs of the Corporation to the extent allowed by the
Wisconsin Business Corporation Law.
3. THE FINANCE COMMITTEE. When the Board of Directors is not in
session, the Finance Committee shall have and may exercise all of the
powers of the full Board of Directors solely with regard to those
matters which are within the scope of the Finance Committee's
designated duties, as provided herein. The Chairman of the Board of
Directors shall be a member of the Finance Committee.
The Finance Committee shall:
(a) Review and approve the Corporation's investment policies
and guidelines:
(b) Monitor performance of the Corporation's investment
portfolio;
(c) Consult with management regarding material transactions
involving real estate, accounts receivable and other assets;
(d) Monitor the amount and types of all insurance that
should be carried by this Corporation;
(e) Monitor the Corporation's relationship with its lenders
and its compliance with financing agreements including debt
covenants;
(f) Consult with management concerning the capital structure
of the Corporation;
(g) Monitor investment options and performance offered in
the Corporation's retirement plan; and
(h) Carry out such special assignments as the Board of
Directors may, from time to time, give to the Finance Committee.
4. THE COMPENSATION COMMITTEE. When the Board of Directors is not
in session, the Compensation Committee shall have and may exercise all
of the powers of the full Board solely with regard to those matters
which are within the scope of the Compensation Committee's designated
duties, as provided herein.
The Compensation Committee shall:
(a) Evaluate the performance of the Chief Executive Officer
and other executive officers against objectives;
(b) Review and approve the compensation (including salary,
bonus, stock options and other appropriate equity or long-term
incentives, and any severance benefits) of the Chairman of the
Board, the Chief Executive Officer and other executive officers;
(c) Administer compensation plans for executive officers and
directors; and
(d) Review, on a general policy level basis, the
compensation and benefits of officers, managers and employees for
appropriateness;
(e) Act as the Nominating Committee for directors and make
recommendations to the Board of Directors for types, methods and
levels of directors' compensation;
(f) Administer the Corporation's equity incentive plan or
any other equity-based plans, including the review and approval
of all grants hereunder; and
(g) Carry out such special assignments as the Board of
Directors may, from time to time, give to the Compensation
Committee.
5. THE AUDIT COMMITTEE. The Audit Committee shall have and may
exercise all of the powers of the full Board of Directors solely with
regard to those matters which are within the scope of the Audit
Committee's designated duties, as provided herein.
The Audit Committee shall:
(a) Select and engage the independent certified public
accountants to audit the financial statements of the Corporation
and its subsidiaries;
(b) Meet with the independent auditors and financial
management of the Corporation to review the scope of the proposed
audit for the current year and the audit procedures to be
utilized, and at the conclusion thereof, review such audit
including any comments or recommendations of the independent
auditors;
(c) Review the internal audit function of the Corporation
including the independence and authority of its reporting
obligations, the proposed audit plans for the coming year, the
coordination of such plans with the independent auditors, and
summaries of findings of completed audits;
(d) Review with the independent accountants and management
the financial statements to determine that the independent
auditors are satisfied with the disclosure and content of the
financial statements;
(e) Review with the independent auditors, the Corporation's
internal auditor, and financial and accounting personnel, the
adequacy and effectiveness of the accounting and financial
controls of the Corporation;
(f) Provide sufficient opportunity for the internal and
independent auditors to meet with the members of the Audit
Committee without members of management present;
(g) Review related party transactions and conflict of
interest statements for appropriateness;
(h) Carry out such special assignments as the Board of
Directors may, from time to time, give to the Audit Committee.
B. SPECIAL COMMITTEES. In addition to the foregoing Regular
Committees, the Board of Directors may, from time to time, establish
Special Committees and specify the composition, functions and authority of
any such Special Committee.
C. VACANCIES; TEMPORARY APPOINTMENTS. When, for any cause, a vacancy
occurs in any Regular Committee, the remaining committee members, by
majority vote, may fill such vacancy by a temporary appointment of a
director on the Board of Directors not on the subject committee to fill the
vacancy until the next Board Meeting at which time the full Board of
Directors shall fill the vacancy.
D. ALTERNATE COMMITTEE MEMBERS. All members of the Board of Directors
who are not members of a given committee shall be alternate members of such
committee and may take the place of any absent member or members at any
meeting of such committee, upon request by the Chairman of the Board of
Directors, if there is one, the President or upon request by the chairman
of such meeting.
E. COMMITTEE MINUTES AND REPORTS. All of the foregoing committees
shall keep minutes and records of all of their meetings and activities and
shall report the same to the Board of Directors at its next regular
meeting. Such minutes and records shall be available for inspection by the
directors at all times.
ARTICLE IV. OFFICERS
4.01. GENERALLY. The principal officers of the Corporation shall be a
Chairman of the Board (Chief Executive Officer), a President, one (1) or more
Vice Presidents designated as executive officers, a Secretary and a Treasurer.
The Board of Directors shall elect the principal officers annually at the Annual
Meeting. All such officers shall hold office for a period of one (1) year and
until their successors are duly elected and qualified, or until their prior
death, resignation or removal. Additionally, one or more Vice Presidents not
designated as executive officers may be appointed by the President to serve at
the will of the President.
4.02. REMOVAL. Any officer or agent may be removed by the Board of
Directors with or without cause whenever in its judgment the best interests of
the Corporation would 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.
4.03. VACANCIES. A vacancy in any principal office because of death,
resignation, removal, or otherwise, shall be filled by the Board of Directors
for the unexpired portion of the term. The Board of Directors may, from time to
time, omit to elect one (1) or more officers, or may omit to fill a vacancy, and
in such case, the designated duties of such officer, unless otherwise provided
in these Bylaws, shall be discharged by the Chairman of the Board or such other
officers as he or she may designate.
4.04. CHAIRMAN OF THE BOARD. The Chairman of the Board, who shall also be
the Chief Executive Officer, shall preside at all meetings of the Shareholders
and of the directors and shall do and perform such other duties as from time to
time may be assigned to that office by the Board of Directors.
4.05. PRESIDENT. The President shall have general supervision of the
business and affairs of the Corporation. The President may sign and execute all
authorized bonds, notes, checks, contracts, or other obligations in the name of
the Corporation. The President shall perform such other duties as from time to
time may be assigned to him or her by the Board of Directors.
4.06. VICE PRESIDENTS. Should the Chairman of the Board or the President be
absent or unable to act, the Board of Directors shall designate a Vice President
or other officer to discharge the duties of the vacant office with the same
power and authority as is vested in that office. The Vice Presidents shall
perform such other duties as from time to time may be assigned to them by the
President or the Board of Directors. Vice Presidents appointed by the President
shall perform such duties as may be assigned to them from time to time by the
President or these Bylaws and shall serve at the will of the President and may
be removed by the President at any time without action of the Board of
Directors.
4.07. SECRETARY. The Secretary shall keep a record of the minutes of the
meetings of the Shareholders, the Board of Directors and any committees of the
Board of Directors. He or she shall countersign all instruments and documents
executed by the Corporation; affix to instruments and documents the seal of the
Corporation; keep in books therefore the transactions of the Corporation; see
that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law; and perform such other duties as usually are
incident to such office or may be assigned by the Chairman of the Board, the
President or the Board of Directors.
4.08. TREASURER. The Treasurer, subject to the control of the Board of
Directors, shall collect, receive, and safely keep all monies, funds and
securities of the Corporation, and attend to all its pecuniary affairs. He or
she shall keep full and complete accounts and records of all its transactions,
of sums owing to or by the Corporation, and all rents and profits in its behalf.
4.09. ASSISTANTS AND ACTING OFFICERS. The Chairman of the Board, the
President and the Board of Directors shall each have the power to appoint any
person to act as assistant to any officer, or as agent for the Corporation in
the officer's stead, or to perform the duties of such officer whenever for any
reason it is impracticable for the officer to act personally, and the assistant
or acting officer or other agent so appointed by the Chairman of the Board, the
President or 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 otherwise may be
defined or restricted by the Chairman of the Board, the President or the Board
of Directors. Any person appointed to act as assistant to any officer, or as
agent for the Corporation in the officer's stead, or to perform the duties of
such officer whenever for any reason it is impracticable for the officer to act
personally, shall serve at the will of the President and may be removed at any
time by the President without action of the Board of Directors.
ARTICLE V. FUNDS OF THE CORPORATION
5.01. FUNDS. All funds of the Corporation shall be deposited or invested in
such depositories or in such securities as may be authorized from time to time
by the Board of Directors or appropriate committee under authorization of the
Board of Directors.
5.02. NAME. All investments and deposits of funds of the Corporation shall
be made and held in its corporate name, except that securities kept under a
custodial agreement or trust arrangement with a bank or banking and trust
company may be issued in the name of a nominee of such bank or banking and trust
company and except that securities may be acquired and held in bearer form.
5.03. LOANS. All loans contracted on behalf of the Corporation and all
evidences of indebtedness that are issued in the name of the Corporation shall
be under the authority of a resolution of the Board of Directors. Such
authorization may be general or specific.
5.04. CONTRACTS. The Board of Directors may authorize one (1) or more
officers, or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the Corporation. Such authorization
may be general or specific. In the absence of other designation, all deeds,
mortgages and instruments of assignment or pledge made by the Corporation shall
be executed in the name of the Corporation by the Chairman of the Board, the
President or one of the Vice Presidents and by the Secretary or Treasurer; the
Secretary, when necessary or required, shall affix the corporate seal thereto;
and when so executed no other party to such instrument or any third party shall
be required to make any inquiry into the authority of the signing officer or
officers.
5.05. DISBURSEMENTS. All monies of the Corporation shall be disbursed by
check, draft, or written order only, and all checks and orders for the payment
of money shall be signed by such officer or officers as may be designated by the
Board of Directors. The officers and employees of the Corporation handling funds
and securities of the Corporation shall give surety bonds in such sums as the
Board of Directors or appropriate committee may require.
5.06. PROHIBITED TRANSACTIONS. No directors or officer of the Corporation
shall borrow money from the Corporation, or receive any compensation for
selling, aiding in the sale, or negotiating for the sale of any property
belonging to the Corporation, or for negotiating any loan for or by the
Corporation.
5.07. 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 Chairman of the Board,
the President or in their absence any Vice President of this Corporation
who may be present and designated by the Board of Directors; and
B. Whenever, in the judgment of the Chairman of the Board, the
President, or in their absence, a designated 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 Chairman of the Board, the President,
or a designated Vice President of this Corporation in the order as provided
in Subsection A, 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 Chairman of
the Board, the President, or a Vice President, and the Secretary, or by another
officer designated by the Chairman of the Board, the President or the Board of
Directors. 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 SEAL. The seal of the Corporation on any
certificates for shares may be a facsimile. The signature of the Chairman of the
Board, the President or other authorized officer upon a certificate may be a
facsimile 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 OFFICER. 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 Shareholder
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;
B. If required by the Corporation, 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 received
for shares may consist of any tangible or intangible property or benefit to the
Corporation, including cash, promissory notes, services performed, contracts for
services to be performed or other securities of the Corporation. When the
Corporation receives the consideration for which the Board of Directors
authorized the issuance of shares, the shares issued for that consideration are
fully paid and nonassessable, except as provided by Section 180.0622 of the
Wisconsin Business Corporation Law which may require further assessment for
unpaid wages to employees under certain circumstances. The Corporation may place
in escrow shares issued for a contract for future services or benefits or a
promissory note, or make other arrangements to restrict the transfer of the
shares, and may credit distributions in respect of the shares against their
purchase price, until the services are performed, the benefits are received or
the note is paid. If the services are not performed, the benefits are not
received or the note is not paid, the Corporation may cancel, in whole or in
part, the shares escrowed or restricted and the distributions credited.
6.08. UNCERTIFICATED SHARES. In accordance with Section 180.0626 of the
Wisconsin Business Corporation Law, the Board of Directors may issue any shares
of any of its classes or series without certificates. The authorization does not
affect shares already represented by certificates until the certificates are
surrendered to the Corporation. Within a reasonable time after the issuance or
transfer of shares without certificates, the Corporation shall send the
Shareholder a written statement of the information required on share
certificates by Sections 180.0625 and 180.0627, if applicable, of the Wisconsin
Business Corporation Law, and by the Bylaws of the Corporation.
The Corporation shall maintain at its offices, or at the office of its
transfer agent, an original or duplicate stock transfer book containing the
names and addresses of all Shareholders and the number of shares held by each
Shareholder. If the shares are uncertificated, the Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as such, as
the owner of shares for all purposes, and shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of the State of Wisconsin.
6.09. TRANSFER AGENT AND REGISTRAR. The Corporation may maintain one (1) or
more transfer offices or agencies, each in charge of a transfer agent designated
by the Board of Directors, where the shares of stock of the Corporation shall be
transferable. The Corporation also may maintain one (1) or more registry
offices, each in charge of a registrar designated by the Board of Directors,
where such shares of stock shall be registered. The same person or entity may be
both a transfer agent and registrar.
6.10. STOCK REGULATIONS. The Board of Directors shall have the power and
authority to make all such further rules and regulations not inconsistent with
the laws 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. INDEMNIFICATION
7.01. INDEMNIFICATION FOR SPECIAL DEFENSE. Within twenty (20) days after
receipt of a written request pursuant to Section 7.03, the Corporation shall
indemnify a director or officer, 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 or officer was a party
because he or she is a director or officer of the Corporation.
7.02. OTHER INDEMNIFICATION.
A. In cases not included under Section 7.01, the Corporation shall
indemnify a director or officer against all liabilities and expenses
incurred by the director or officer in a proceeding to which the director
or officer was a party because he or she is a director or officer of the
Corporation, unless liability was incurred because the director or officer
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 or
officer has a material conflict of interest.
2. A violation of criminal law, unless the director or officer
had reasonable cause to believe that his or her conduct was lawful or
no reasonable cause to believe that his or her conduct was unlawful.
3. A transaction from which the director or officer derived an
improper personal profit.
4. Willful conduct.
B. Determination of whether indemnification is required under the
Section shall be made pursuant to Section 7.05.
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 or
officer is not required under this Section.
7.03. WRITTEN REQUEST. A director or officer who seeks indemnification
under Section 7.01 or 7.02 ---------------- shall make a written request to the
Corporation.
7.04. NONDUPLICATION. The Corporation shall not indemnify a director or
officer under Sections 7.01 or 7.02 to the extent the director or officer has
previously received indemnification or allowances of expenses from any person,
including the Corporation, in connection with the same proceeding. However, the
director or officer has no duty to look to any other person for indemnification.
7.05. DETERMINATION OF RIGHT TO INDEMNIFICATION.
A. Unless otherwise provided by the Articles of Incorporation or by
written agreement between the director or officer and the Corporation, the
director or officer seeking indemnification under Section 7.02 shall select
one (1) 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 of two (2) or more directors who are 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 1 of
Subsection A, 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 three (3) arbitrators consisting of one (1)
arbitrator selected by those directors entitled under 2 of Subsection
A to select independent legal counsel, one (1) arbitrator selected by
the director or officer seeking indemnification and one (1) arbitrator
selected by two (2) arbitrators previously selected.
4. By an affirmative vote of shares represented at a meeting of
Shareholders at which a quorum of the voting group entitled to vote
thereon 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 7.08.
6. By any other method provided for in any additional right to
indemnification permitted under Section 7.07.
B. In any determination under Subsection A, the burden of proof is on
the Corporation to prove by clear and convincing evidence that
indemnification under Section 7.02 should not be allowed.
C. A written determination as to a director's or officer's
indemnification under Section 7.02 shall be submitted to both the
Corporation and the director or officer within sixty (60) days of the
selection made under Subsection A.
D. If it is determined that indemnification is required under Section
7.02, the Corporation shall pay all liabilities and expenses not prohibited
by Section 7.04 within ten (10) days after receipt of the written
determination under Subsection C. The Corporation shall also pay all
expenses incurred by the director or officer in the determination of
process under Subsection A.
7.06. ADVANCE OF EXPENSES. Within ten (10) days after receipt of a written
request by a director or officer who is a party to a proceeding, the Corporation
shall pay or reimburse his or her reasonable expenses incurred if the director
or officer provides the Corporation with all of the following:
A. 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.
B. A written undertaking, executed personally or on his or her behalf,
to repay the allowance to the extent that it is ultimately determined under
Section 7.05 that indemnification under Section 7.02 is not required and
that indemnification is not ordered by a court under Section 7.08(B)(2).
The undertaking under this subsection shall be an unlimited general
obligation of the director or officer and may be accepted without reference
to his or her ability to repay the allowance. The undertaking may be
secured or unsecured.
7.07. NONEXCLUSIVITY.
A. Except as provided in Subsection B, Sections 7.01, 7.02 and 7.06 do
not preclude any additional right to indemnification or allowance of
expenses that a director or officer may have under any of the following:
1. The Articles of Incorporation.
2. A written agreement between the director or officer 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 Subsection
A, the Corporation shall not indemnify a director or officer, or permit a
director or officer to retain any allowance of expenses unless it is
determined by or on behalf of the Corporation that the director or officer
did not breach or fail to perform a duty he or she owes to the Corporation
which constitutes conduct under Section 7.02(A)(1), (2), (3) or (4). A
director or officer 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 7.01 to 7.13 do not affect the Corporation's power to pay
or reimburse expenses incurred by a director or officer 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 an employee, agent, director or officer of the Corporation.
7.08 COURT-ORDERED INDEMNIFICATION.
A. Except as provided otherwise by written agreement between the
director or officer and the Corporation, a director or officer 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
shall be made for an initial determination by the court under Section
7.05(a)(5) or for review by the court of an adverse determination under
Section 7.05(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 or officer is entitled to indemnification
under Sections 7.01 or 7.02.
2. That the director or officer is fairly and reasonably entitled
to indemnification in view of all the relevant circumstances,
regardless of whether indemnification is required under Section 7.02.
C. If the court determines under Subsection B that the director or
officer is entitled to indemnification, the Corporation shall pay the
director's or officer's expenses incurred to obtain the court-ordered
indemnification.
7.09. INDEMNIFICATION AND ALLOWANCE OF EXPENSES OF EMPLOYEES AND AGENTS.
The Corporation shall indemnify an employee of the Corporation who is not a
director or officer of the Corporation, to the extent that he or she has been
successful on the merits or otherwise in defense of a proceeding, for all
reasonable expenses incurred in the proceeding if the employee was a party
because he or she was an employee of the Corporation. In addition, the
Corporation may indemnify and allow reasonable expenses of an employee or agent
who is not a director or officer of the Corporation to the extent provided by
(i) the Articles of Incorporation, (ii) these Bylaws, (iii) general or specific
action of the Board of Directors, or (iv) by contract; provided however, that
the Corporation may not provide such indemnification to the extent prohibited by
law.
7.10. INSURANCE. The Corporation may purchase and maintain insurance on
behalf of an individual who is an employee, agent, director or officer of the
Corporation against liability asserted against or incurred by the individual in
his or her capacity as an employee, agent, director or officer, regardless of
whether the Corporation is required or authorized to indemnify or allow expenses
to the individual against the same liability.
7.11. SECURITIES LAW CLAIMS.
A. Pursuant to the public policy of the State of Wisconsin, the
Corporation shall provide indemnification and allowance of expenses and may
insure for any liability incurred in connection with a proceeding involving
securities regulation described under Subsection B to the extent required
or permitted under Sections 7.01 to 7.10.
B. Sections 7.01 to 7.10 apply, to the extent applicable to any other
proceeding, to any proceeding involving 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.
7.12. LIBERAL CONSTRUCTION. In order for the Corporation to obtain and
retain qualified directors, officers and employees, the foregoing provisions
shall be liberally administered in order to afford maximum indemnification of
directors, officers and, where Section 7.09 of these Bylaws applies, employees.
The indemnification above provided for shall be granted in all applicable cases
unless to do so would clearly contravene law, controlling precedent or public
policy.
7.13. DEFINITIONS APPLICABLE TO THIS ARTICLE. For purposes of the 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 or Officer" means any of the following:
1. An individual who is or was a director or officer of this
Corporation.
2. An individual who, while a director or officer of this
Corporation, is or was serving at the Corporation's request as a
director, officer, partner, trustee, member of any governing or
decision-making committee, employee or agent of another corporation or
foreign corporation, partnership, joint venture, trust or other
enterprise.
3. An individual who, while a director or officer 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 service by, the person to the plan or to participants in or
beneficiaries of the plan.
4. Unless the context requires otherwise, the estate or personal
representative of a director or officer.
For purposes of this Article, it shall be conclusively presumed
that any director or officer serving as a director, officer, partner,
trustee, member of any governing or decision-making committee,
employee or agent 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 an individual who was or it, 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 VIII. CORPORATE DIVIDENDS
The Board of Directors may from time to time declare dividends on its
outstanding shares in the manner and upon the terms and conditions provided by
law and its Articles of Incorporation.
ARTICLE IX. CORPORATE SEAL
The Board of Directors may provide a corporate seal which may be circular
in form and may have inscribed thereon the name of the Corporation and the state
of incorporation and the words "Corporate Seal."
ARTICLE X. FISCAL YEAR
The fiscal year shall be set by the Board of Directors.
ARTICLE XI. AMENDMENTS
11.01. BY SHAREHOLDERS. These Bylaws may be altered, amended or repealed
and new Bylaws 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 Bylaws may also be altered, amended or repealed
and new Bylaws may be adopted by the Board of Directors by affirmative vote of a
majority of the number of directors present at or participating in any meeting
at which a quorum is in attendance; but no bylaw adopted by the Shareholders
shall be amended or repealed by the Board of Directors if the bylaw 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
Bylaws 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
Bylaws so that the Bylaws would be consistent with such action, shall be given
the same effect as though the Bylaws had been temporarily amended or suspended
so far, but only so far, as is necessary to permit the specific action so taken
or authorized.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN MEDICAL
SECURITY GROUP, INC. FOR THE SIX MONTHS ENDED JUNE 30, 1999, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<DEBT-HELD-FOR-SALE> 305,298
<DEBT-CARRYING-VALUE> 3,795
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 309,093
<CASH> (1,951)
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 499,560
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 19,300
<POLICY-OTHER> 119,364
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 53,463
0
0
<COMMON> 16,653
<OTHER-SE> 241,024
<TOTAL-LIABILITY-AND-EQUITY> 499,560
527,090
<INVESTMENT-INCOME> 9,675
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 11,684
<BENEFITS> 409,165
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 135,790
<INCOME-PRETAX> (330)
<INCOME-TAX> 205
<INCOME-CONTINUING> (535)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (535)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS RESTATED FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN
MEDICAL SECURITY GROUP, INC. (F/K/A UNITED WISCONSIN SERVICES, INC.) FOR THE SIX
MONTHS ENDED JUNE 30, 1998, AS ADJUSTED TO REFLECT THE RECLASSIFICATION OF THE
CONSOLIDATED FINANCIAL STATEMENTS FOR JUNE 30, 1998, TO CONFORM WITH THE 1999
PRESENTATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<DEBT-HELD-FOR-SALE> 294,192
<DEBT-CARRYING-VALUE> 3,928
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 298,120
<CASH> 7,078
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 633,778
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 20,515
<POLICY-OTHER> 107,523
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 126,013
0
0
<COMMON> 16,570
<OTHER-SE> 312,599
<TOTAL-LIABILITY-AND-EQUITY> 633,778
461,915
<INVESTMENT-INCOME> 11,804
<INVESTMENT-GAINS> 0
<OTHER-INCOME> 9,475
<BENEFITS> 353,610
<UNDERWRITING-AMORTIZATION> 0
<UNDERWRITING-OTHER> 116,735
<INCOME-PRETAX> 3,707
<INCOME-TAX> 1,764
<INCOME-CONTINUING> 1,943
<DISCONTINUED> 5,714
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,657
<EPS-BASIC> .46
<EPS-DILUTED> .46
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
