UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 2, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-6187
BANTA CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-0148550
(State or other jurisdiction (IRS Employer
of incorporation or organization) I.D. Number)
225 Main Street, Menasha, Wisconsin 54952
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (920) 751-7777
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
------------------- ---------------------
Common Stock, $.10 par value New York Stock Exchange
Rights to Purchase Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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. (|X|)Yes ( )No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (|X|)
Aggregate market value of voting stock held by non-affiliates of the
registrant as of March 5, 1999: $614,585,000
Number of shares of common stock outstanding as of March 5, 1999:
27,777,309.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report to Shareholders for the year ended January 2, 1999
(incorporated into Parts I and II).
(2) Definitive Proxy Statement for annual meeting of shareholders to be held
on April 27, 1999 (incorporated into Part III).
<PAGE>
PART I
Item 1. Business.
General.
Banta Corporation (the "Corporation" or "Banta"), together with its
subsidiaries, is one of the larger printing organizations in the United States,
providing a broad range of printing and graphic arts services. The Corporation
was incorporated in Wisconsin in 1901. Its principal executive offices are
located at 225 Main Street, Menasha, Wisconsin, 54952. The Corporation had a
total of approximately 7,000 employees at the end of fiscal 1998.
The Corporation operates in one primary business segment, print, with
other business operations in turnkey services and healthcare products. The print
segment provides comprehensive single source print and print-related services to
publishers of educational and general books, direct marketing materials,
consumer and business catalogs and special interest magazines. The turnkey
services operation provides project management, product assembly, fulfillment
and product localization services primarily to technology companies in the U.S.
and Europe. Healthcare products is primarily engaged in the production of
disposable products used in outpatient clinics, dental offices and hospitals.
The healthcare operation also has product lines with related applications for
the food service industry and film sales. At the end of fiscal 1998, the
Corporation's operations were conducted at 36 production facilities in the
United States located in Wisconsin, Minnesota, Connecticut, Florida, Georgia
Illinois, Massachusetts, Michigan, Missouri, North Carolina, Ohio, Texas, Utah,
Virginia and Washington and at five European production facilities located in
Ireland, Scotland and The Netherlands.
The following table sets forth the approximate percentage of printing
segment net sales contributed by each class of similar products and services
which accounted for ten percent or more of printing segment net sales for any of
the last three fiscal years.
1998 1997 1996
---- ---- ----
Books 29% 30% 29%
Direct Marketing 25 25 25
Catalogs 24 23 24
Magazines 16 14 14
Other 6 8 8
---- ---- ----
TOTAL 100% 100% 100%
==== ==== ====
During 1998, the Corporation acquired all the outstanding capital stock of Type
Designs, Inc., which provides a full range of design and graphic production
services. The Corporation also acquired the assets and assumed certain
liabilities of Meadows Information Systems, Inc., which develops page layout and
design software products. The Corporation also acquired a 30 percent equity
interest in Morgan Impresores S.A., a Santiago, Chile - based company, which
provides a wide variety of print materials and specialty product labels.
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Certain matters discussed in this Annual Report on Form 10-K are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of 1995.
In addition, management of the Corporation may from time to time make
forward-looking statements intended to qualify for such safe harbors. These
forward-looking statements can generally be identified as such because the
context of the statement will include words such as the Corporation "believes,"
"anticipates" or "expects," or words of similar imports. Similarly, statements
that describe the Corporation's future plans, objectives or goals are also
forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those currently anticipated. Factors that could affect results
include, among others, changes in customers' demand for the Corporation's
products, changes in raw material costs and availability, pricing actions by
competitors, success in implementing the Corporation's plan to enhance revenues
and margins, unanticipated events relating to achieving Year 2000 compliance,
and general changes in economic conditions. Shareholders, potential investors
and other readers are urged to consider these factors carefully in evaluating
the forward-looking statements and are cautioned not to place undue reliance on
such forward-looking statements.
Customers.
The Corporation sells its products and services to a large number of
customers and generally does not have long-term production contracts with its
customers. Production agreements covering one to three years are, however, more
frequent for turnkey services, magazine and catalog production. Substantially
all sales are made to customers through employees of the Corporation and its
subsidiaries based on customer specifications. The fifteen largest customers
accounted for approximately 29%, 27% and 28% of net sales during 1998, 1997 and
1996, respectively. No customer accounted for more than 10% of the Corporation's
net sales in 1998, 1997 or 1996. In the opinion of management, the loss of any
single customer would not have a material long-term adverse effect on the
Corporation.
Backlog.
The Corporation is primarily a manufacturing services company and
provides its customers with printing, converting and other services. Lead time
for services varies, depending upon the type of customer, the industry being
serviced and seasonal factors. Backlogs would be expressed in terms of time
scheduled on equipment and not dollar value. Consequently, the dollar value of
backlog is not readily available.
Markets Served.
Set forth below is a description of the primary markets the Corporation
serves:
o Books
The Corporation prints consumable elementary and high school workbooks
and other products for publishers of educational and general book markets
including textbooks (primarily soft cover), testing materials and paperbound
books. Print opportunities in the consumable educational workbook market have
decreased during the last several years as publisher consolidations have
resulted in fewer companies offering educational products. Additionally, the
effort to improve the nation's educational system has prompted schools to invest
portions of their curriculum budget in alternate teaching methods. Some of these
efforts have replaced consumable workbooks with other instructional materials. A
strong textbook adoption period is projected for years 2000 and 2001, with some
potential benefit for late 1999.
The Corporation has three facilities serving the computer equipment and
software industry's print manuals, all of which use offset printing and high
speed photocopying. During the last several years print documentation for
computer software and hardware has been increasingly replaced by CD-ROM and
online documentation. Banta's operations serving the software and documentation
markets have been successful in reinforcing their sales efforts toward other
publishers who utilize formats that fit the Corporation's existing equipment,
including self-help instructional books and other softcover products.
The Corporation's book units also produce multimedia products for
educational and other publishers.
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o Direct Marketing
Printed materials for direct marketing customers are provided primarily
by three plants. These products vary in format and size and include magazine and
catalog inserts, bill stuffers, brochures, booklets, cards and target market
products designed to sell a product or solicit a response. Over the past several
years, the Corporation has invested in imaging equipment which personalizes
direct mail pieces at press speeds. Banta believes that this capability is
important to its customers. The Corporation also performs limited mailing and
fulfillment services for its direct marketing customers.
o Catalogs
The Corporation produces catalogs primarily for the consumer, industrial
and retail catalog markets. Bindery services provide ink-jet labeling and
demographic binding (which allows several different versions of the same catalog
to be bound simultaneously). Distribution services provided by various operating
units of the Corporation, including computerized mail distribution planning
systems which assist the Corporation's customers in minimizing postage costs,
are an integral part of catalog printing services.
o Magazines
The Corporation's three plants serving the magazine market print, sort
and mail magazines representing more than 700 different titles. These magazines
include primarily short-to-medium run publications (usually less than 350,000
copies) which are generally distributed to subscribers by mail. The
Corporation's magazine customers are primarily publishers of specialty
magazines, including religious, business and professional journals and hobby,
craft and sporting publications. The Corporation provides its customers with
computerized mailing list and distribution services. During 1998, the
Corporation completed a significant expansion of its Kansas City, Mo. facility
to provide needed capacity to service its magazine customers.
o Turnkey
The Corporation's product offerings in its turnkey market classification
include project management, manufacturing, procurement, packaging, assembly and
worldwide distribution services for computer software publishers, as well as
manufacturers of computer hardware and consumer electronics primarily in the
United States and Europe. These facilities also perform computer disk
replication, product packaging and distribution.
o Healthcare Products
One of the Corporation's operating units, Banta Healthcare Products, Inc.
(BHP), converts poly film and paper into single-use products for the healthcare
and food service industries. In addition, BHP extrudes films, using both cast
and blown extruders, for use in its manufacturing processes and for sale to
external customers. Its products include plastic garment covers, examination
gowns, stretcher sheets, examination table paper and pillow covers.
o Other
Prepress services are provided by four of the Corporation's facilities to
publishers, printers and advertising agencies. Such services include the
conversion of full-color photographs, art and text into color separated film and
digital files for use in the production of printing plates. These units also
provide electronic graphic design, digital photography and on-demand print
services. During the last several years, these units have diversified their
customer base to include packaging customers and increased their ability to
maximize plant utilization by connecting their facilities through an extensive
network of high-speed telecommunication lines. The acquisitions of Type Designs,
Inc. and Meadows Information Systems, Inc. further position Banta as a
single-source provider of multiple graphic communications solutions.
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The Corporation's Digital Content Management Solutions Center in
Cambridge Massachusetts provides sophisticated database systems for archiving,
managing, retrieving and enabling multiple uses of customer digital information.
The Corporation's service offerings also include CD-ROM production, CD
Interactive programming and the development of interactive online products for
the World Wide Web including web site hosting and maintenance and electronic
commerce solutions. During 1998, resources were devoted to developing the
Corporation's B media digital content management system to automate customers'
production process by streamlining information storage and retrieval for print
and electronic distribution. Initial software programs were developed in 1998
and additional enhancements are expected to be available by mid-year 1999.
Competitive Conditions.
The Corporation is subject to competition from a large number of
companies, some of which have greater resources and capacity than the
Corporation. The graphic arts industry continues to experience consolidation
over the last few years. This trend has resulted in the emergence of several
additional competitors which are larger than the Corporation in size and product
offerings. The major competitive factors in the Corporation's business are
quality of finished products, distribution capabilities, ongoing customer
service, price and availability of time on equipment which is appropriate in
size and function for a given project. The consolidation of customers within
certain of the Corporation's markets provides both greater competitive pricing
pressures and opportunities for increased volume solicitation. In recent years,
excess capacity in the printing industry has resulted in lower unit prices.
Despite the unit price reductions, the Corporation has been able to remain
competitive in part because it is financially able to invest in modern
technologically advanced equipment, which helps reduce unit costs, and because
of productivity gains resulting from Continuous Improvement programs.
There are seasonal fluctuations in the usage of printing equipment which
in times of low demand and excess capacity can give rise to price discounting.
In the educational book market, for instance, activity is greater in the first
half of the year, and in the other markets, activity is greater in the second
half of the year. Computer software and hardware products are also typically in
greater demand during the second half of the year, although the release of a new
product by a major customer can increase activity on an "event" basis at any
time during the year.
Raw Materials.
The principal raw material used by the Corporation is paper. Most of the
Corporation's production facilities are located in heavily concentrated
papermaking areas, and the Corporation can generally obtain quality paper at
competitive prices. The Corporation is not dependent upon any one source for its
paper or other raw materials.
During 1996, the price of paper fell dramatically such that by the end of
1996 paper prices for the grades used most by the Corporation stabilized at
prices similar to those available at the beginning of 1994. It is customary for
printers to adjust sales prices to reflect market fluctuations in paper prices.
In 1998 and 1997 the price of paper grades used most frequently by the
Corporation remained stable.
The Corporation uses a number of other raw materials including ink,
resins, packaging materials and subcontracted components. The cost of these
materials remained relatively stable in 1998 and 1997.
Development.
The graphic arts industry, made up primarily of firms much smaller in size than
the Corporation, tends to rely upon equipment and material suppliers for
research and development. The Corporation is engaged in long-range research and
development relating to technology and system enhancements, and has spent
significant amounts of money for such purposes. Research and development
investments by the Corporation are above the industry average. One of the
objectives of the Corporation's technical research and development effort is to
establish a competitive advantage in existing markets by focusing on improving
operating procedures, increasing machine speeds and improving monitoring of
paper usage, as well as working on the development of proprietary inks,
coatings, adhesives and machine modifications.
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To help fulfill its research and development objectives, the Corporation
maintains labs staffed with full-time personnel whose task is to enhance current
technologies for market-specific applications. The effort is guided by the
Corporation's Research and Development Council, which is made up of
representatives from seven different Groups. The Corporation also has increased
its emphasis on the development of new products and services in many areas,
including the development of digital technologies that encompass software
solutions for digital content management and electronic commerce. During the
last several years, 60 professional and technical employees have worked
primarily on research and development activities. Additionally, approximately 10
persons from quality control and engineering devoted a portion of their time to
research and development.
The Corporation has environmental compliance programs primarily for
control of internal and external air quality, groundwater quality, disposal of
waste material and all aspects of the work environment concerning employee
health. Capital expenditures for air quality equipment have approximated 1% to
3% of total capital expenditures in each of the last three years. Planned
capital expenditures for environmental control equipment are expected to be in
the same range for 1999. The Corporation also incurs ongoing costs in monitoring
compliance with environmental laws, in connection with disposal of waste
materials and in connection with laws governing the remediation of sites at
which the Corporation has previously disposed of waste materials. Requirements
of the U.S. Environmental Protection Agency and state officials nationwide,
relating to disposal of wastes in landfill sites, are increasing and resulting
in higher costs for the Corporation and its competitors. Costs for environmental
compliance and waste disposal have not been material to the Corporation in the
past, but the Corporation presently believes that expenditures for these
purposes will have a negative impact on its earnings and those of its
competition in the future. These increased costs should not have a material
impact on the Corporation's competitive position, assuming similar expenditures
are required to be made by competitors. The Corporation does not believe at the
present time that any costs, claims or penalties that may be incurred or
assessed under environmental laws, in connection with known environmental
assessment and remediation matters, beyond any reserves already provided, will
have a material adverse effect upon the operations or consolidated financial
position of the Corporation.
Foreign Operations.
Footnote 12 to the Corporation's Consolidated Financial Statements in the
Corporation's Annual Report to Shareholders for the fiscal year ended January 2,
1999 includes information on the Corporation's foreign operations. The
disclosures contained in such footnote are hereby incorporated herein by
reference.
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EXECUTIVE OFFICERS OF THE CORPORATION
-------------------------------------
Name, Age, Position Business Experience During Last Five Years
- ------------------- ------------------------------------------
Donald D. Belcher; 60. . . . . . Chairman of the Board of the Corporation
Chairman, President and Chief since May 1995; President and Chief
Executive Officer Executive Officer of the Corporation since
January 1995; President and Chief Operating
Officer of the Corporation from September
1994 to January 1995; Senior Group Vice
President of Avery Dennison Corporation
(diversified manufacturing company) from
1990 until joining the Corporation.
Gerald A. Henseler; 58 . . . . Executive Vice President and Chief Financial
Executive Vice President and Officer of the Corporation
Chief Financial Officer
Ronald D. Kneezel; 42 . . . . Vice President, General Counsel and
Vice President, General Counsel Secretary of the Corporation.
and Secretary
Dennis J. Meyer; 43 . . . . . . Vice President Marketing of the Corporation.
Vice President Marketing
John E. Tiffany; 59 . . . . . . Vice President Manufacturing of the
Vice President Manufacturing Corporation.
Henry M. Wells, III; 54 . . . . Vice President Human Resources of the
Vice President Human Resources Corporation since April 1996; Senior Vice
President of EJ Brach Corporation (a
confectioner) from 1988 until joining the
Corporation.
There are no family relationships between the executive officers of the
Corporation.
All of the executive officers are elected or appointed annually by the
Corporation's Board of Directors. Each officer holds office until his successor
has been elected or appointed or until his death, resignation or removal.
7
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Item 2. Properties.
The Corporation and its subsidiaries own operating plants located in
Wisconsin, Connecticut, Ohio, Minnesota, Missouri, North Carolina, Utah and
Virginia, as well as several warehouse facilities for storage of materials. As
of the end of fiscal 1998, these owned facilities included approximately
3,443,000 square feet of space utilized as follows: office space 327,000,
manufacturing 1,847,000 and warehouse 1,269,000. The Corporation leases its
headquarters office located in Menasha, Wisconsin. The Corporation also leases
production facilities in Wisconsin, California, Florida, Georgia, Illinois,
Massachusetts, Michigan, Minnesota, Texas, Utah and Washington, as well as
warehouse space in numerous locations. European production facilities located in
Ireland, Scotland and The Netherlands are also leased. The total of all leased
facilities contain approximately 2,859,000 square feet of space. The buildings
owned and leased by the Corporation are primarily of steel and brick
construction.
One plant owned by the Corporation and certain equipment are pledged to
secure issues of industrial revenue bonds in the principal amount of $1,790,000
as of January 2, 1999.
Item 3. Legal Proceedings.
The Corporation is not involved in any material pending legal
proceedings, as defined by this Item.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Under long-term debt agreements to which the Corporation is a party, the
payment of cash dividends by the Corporation is subject to certain limitations.
As of January 2, 1999, approximately $127,162,000 of retained earnings was not
restricted under these agreements.
The information set forth under the caption "Dividend Record and Market
Prices" (but excluding the graphs related thereto) in the Corporation's Annual
Report to Shareholders for the fiscal year ended January 2, 1999 is hereby
incorporated herein by reference in response to this Item.
Item 6. Selected Financial Data.
The information set forth under the caption "Five-Year Summary of
Selected Financial Data" (but excluding the graphs related thereto) in the
Corporation's Annual Report to Shareholders for the fiscal year ended January 2,
1999 is hereby incorporated herein by reference in response to this Item.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The information set forth under the caption "Management's Discussion and
Analysis of Financial Position and Operations" in the Corporation's Annual
Report to Shareholders for the fiscal year ended January 2, 1999 is hereby
incorporated herein by reference in response to this Item.
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Item 7A. Quantitative and Qualitative Discussion about Market Risk.
The information set forth under the caption "Management's Discussion and
Analysis of Financial Position and Operations" in the Corporation's Annual
Report to Shareholders for the fiscal year ended January 2, 1999 is hereby
incorporated herein by reference in response to this Item.
Item 8. Financial Statements and Supplementary Data.
The Consolidated Balance Sheets of the Corporation and subsidiaries as of
January 2, 1999 and January 3, 1998, and the related Consolidated Statements of
Earnings, Cash Flows and Shareholders' Investment for the fiscal years ended
January 2, 1999, January 3, 1998 and December 28, 1996, together with the
related notes thereto and the Report of Independent Public Accountants thereon
set forth in the Corporation's Annual Report to Shareholders for the fiscal year
ended January 2, 1999, are hereby incorporated herein by reference in response
to a portion of this Item.
The information set forth under the caption "Unaudited Quarterly
Financial Information" in the Corporation's Annual Report to Shareholders for
the fiscal year ended January 2, 1999 is hereby incorporated herein by reference
in response to a portion of this item.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information under the captions "Election of Directors" and "Other
Matters-Section 16(a) Beneficial Ownership Reporting Compliance" contained in
the Corporation's definitive proxy statement for the annual meeting of
shareholders to be held on April 27, 1999, as filed with the Securities Exchange
Commission, is hereby incorporated herein by reference in response to a portion
of this item. Reference is also made to the information under the heading
"Executive Officers of the Corporation" included under Item 1 of Part I of this
report.
Item 11. Executive Compensation.
The information under the captions "Board of Directors" and "Executive
Compensation" (other than the information under the subheading "Committee Report
on Executive Compensation") contained in the Corporation's definitive proxy
statement for the annual meeting of shareholders to be held on April 27, 1999,
as filed with the Securities and Exchange Commission, is hereby incorporated
herein by reference in response to this Item.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information under the caption "Stock Ownership" contained in the
Corporation's definitive proxy statement for the annual meeting of shareholders
to be held on April 27, 1999, as filed with the Securities and Exchange
Commission, is hereby incorporated herein by reference in response to this Item.
Item 13. Certain Relationships and Related Transactions.
The information under the subheading "Board of Directors-Certain
Transactions" and under the subheading "Executive Compensation - Compensation
Committee Interlocks and Insider Participation" contained in the Corporation's
definitive proxy statement for the annual meeting of shareholders to be held on
April 27, 1999, as filed with the Securities and Exchange Commission, is hereby
incorporated herein by reference in response to this Item.
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PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
PAGE REFERENCE
ANNUAL REPORT
FORM 10-K TO SHAREHOLDERS
1. Financial Statements:
Report of Independent Public Accountants 19
Consolidated Balance Sheets
January 2, 1999 and January 3, 1998 20
For the fiscal years ended January 2, 1999,
January 3, 1998 and December 28, 1996:
Consolidated Statements of Earnings 21
Consolidated Statements of Cash Flows 22
Consolidated Statements of
Shareholders' Investment 23
Notes to Consolidated Financial Statements 24-32
2. Financial Statement Schedule:
Report of Independent Public Accountants 14
Schedule II - Valuation and Qualifying
Accounts 15
All other schedules have been omitted since the required information
is included in the consolidated financial statements or notes thereto,
or because the information is not required or applicable.
3. Exhibits:
3.(a) Articles of Incorporation, as amended (1)
(b) Amendment to Bylaws
(c) Bylaws, as amended
4.(a) Note Purchase Agreement dated June 24, 1988(2)
(b) Promissory Note Agreement dated July 17, 1990(3)
(c) Rights Agreement dated October 29, 1991(4)
(d) Note Purchase and Private Shelf Agreement dated May 12, 1994(5)
(e) Amendment to Promissory Note Agreement dated July 17, 1990(6)
(f) Note Purchase and Medium-term Note Agreement Dated November 2,
1995(7)
[Note: The registrant has outstanding certain issues of industrial
revenue bonds, none of which authorize the issuance of securities in
an amount exceeding 10% of the registrant's consolidated assets The
registrant hereby agrees to furnish to the Commission upon request a
copy of any instrument with respect to long-term debt under which the
total amount of securities authorized does not exceed 10% of the
registrant's consolidated assets.]
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*10. (a) Amended and Restated Supplemental Retirement Plan for Key
Employees(8)
(b) Amendment to Amended and Restated Supplemental Retirement
Plan for Key Employees(9)
(c) Form of Agreement with Gerald A. Henseler(10)
(d) Form of Agreement with Ronald D. Kneezel(11)
(e) Form of Agreements with Dennis J. Meyer and John E.
Tiffany(12)
(f) Agreement with Donald D. Belcher(13)
(g) 1985 Deferred Compensation Plan for Key Employees, as
amended and restated(14)
(h) 1988 Deferred Compensation Plan for Key Employees, as
amended and restated(15)
(i) Basic Form of Deferred Compensation Agreements
under(pre-January 1994) 1985 and 1988 Deferred Compensation
Plans for Key Employees(16)
(j) Basic Form of Deferred Compensation under (post-December
1993) 1988 Deferred Compensation plan for Key Employees(17)
(k) Deferred Compensation Plan for Directors, as amended(18)
(l) Revised Form of Indemnity Agreements with Directors and
Certain Officers(19)
(m) Executive Trust Agreement(20)
(n) Amendment to Executive Trust Agreement(21)
(o) 1991 Stock Option Plan, as amended(22)
(p) Description of Supplemental Long-term Disability Plan(23)
(q) Letter Agreement with Donald D. Belcher(24)
(r) Agreement with Gerald A. Henseler(25)
(s) Banta Corporation 1995 Equity Incentive Plan, as
amended(26)
(t) Banta Corporation Director Stock Grant Plan(27)
(u) Economic Profit Incentive Compensation Plan (28)
(v) Economic Profit Long-term Incentive Compensation Plan (29)
13. Portions of Annual Report to Shareholders for fiscal year
ended January 2, 1999 that are incorporated by reference
herein.
21. List of Subsidiaries.
23. Consent of Arthur Andersen LLP.
27. Financial Data Schedule for the twelve month period ended
January 2, 1999.
* Exhibits 10(a) through 10(v) are management contracts or compensatory
plans or arrangements. All documents incorporated herein by reference are
filed with the Commission under File No. 0-6187
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(1) Exhibit No. 19(b) to Form 10-Q for the quarter ended April 3, 1993 is
hereby incorporated herein by reference.
(2) Exhibit No. 4(a) to Form 10-Q for the quarter ended July 2, 1988 is
hereby incorporated herein by reference.
(3) Exhibit No. 4 to Form 10-Q for the quarter ended September 29, 1990
is hereby incorporated herein by reference.
(4) Exhibit No. 4.1 to the Form 8-K dated October 29, 1991 is hereby
incorporated herein by reference.
(5) Exhibit No. 4(a) to Form 10-Q for the quarter ended July 2, 1994 is
hereby incorporated herein by reference.
(6) Exhibit No. 4(c) to Form 10-Q for the quarter ended July 2, 1994 is
hereby incorporated herein by reference.
(7) Exhibit No. 4(a) to Form 10-Q for the quarter ended September 30,
1995 is hereby incorporated herein by reference.
(8) Exhibit No. 10(a) to Form 10-K for the year ended December 30, 1995
is hereby incorporated herein by reference.
(9) Exhibit No. 10(b) to Form 10-K for the year ended December 28, 1996
is hereby incorporated herein by reference.
(10) Exhibit No. 10 to Form 10-K for the year ended January 1, 1983 is
hereby incorporated herein by reference.
(11) Exhibit No. 10(k) to Form 10-K for the year ended December 31, 1988
is hereby incorporated herein by reference.
(12) Exhibit No. 10(g) to Form 10-K for the year ended December 28, 1991
is hereby incorporated herein by reference.
(13) Exhibit No. 10(b) to Form 10-Q for the quarter ended October 1, 1994
is hereby incorporated herein by reference.
(14) Exhibit No. 10(j) to Form 10-K for the year ended December 30, 1989
is hereby incorporated herein by reference.
(15) Exhibit No. 10(a) to Form 10-Q for the quarter ended April 2, 1994 is
hereby incorporated herein by reference.
(16) Exhibit No. 10(l) to Form 10-K for the year ended December 30, 1989
is hereby incorporated herein by reference.
All documents incorporated herein by reference are filed with the Commission
under File No. 0-6187
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(17) Exhibit No. 10(b) to Form 10-Q for the quarter ended April 2, 1994 is
hereby incorporated herein by reference.
(18) Exhibit No. 10(m) to Form 10-K for the year ended December 28, 1996
is hereby incorporated by reference.
(19) Exhibit No. 10(a) to Form 10-Q for the quarter ended March 28, 1992
is hereby incorporated herein by reference.
(20) Exhibit No. 10(r) to Form 10-K for the year ended December 30, 1989
is hereby incorporated herein by reference.
(21) Exhibit No. 10(s) to Form 10-K for the year ended January 1, 1994 is
hereby incorporated herein by reference.
(22) Exhibit No. 10(t) to Form 10-K for the year ended December 28, 1996
is hereby incorporated herein by reference.
(23) Exhibit No. 10(a) to Form 10-Q for the quarter ended October 2, 1993
is hereby incorporated herein by reference.
(24) Exhibit No. 10(a) to Form 10-Q for the quarter ended October 1, 1994
is hereby incorporated herein by reference.
(25) Exhibit No. 10(dd) to Form 10-K for the year ended December 31, 1994
is hereby incorporated herein by reference.
(26) Exhibit No.10(y) to Form 10-K for the year ended December 28, 1996 is
hereby incorporated herein by reference.
(27) Exhibit No. 10(z) to Form 10-K for the year ended December 28, 1996
is hereby incorporated herein by reference.
(28) Exhibit No. 10(x) to Form 10-K for the year ended January 3, 1998
is hereby incorporated herein by reference.
(29) Exhibit No. 10(y) to Form 10-K for the year ended January 3, 1998
is hereby incorporated herein by reference.
All documents incorporated herein by reference are filed with the Commission
under File No. 0-6187
(b) Reports on Form 8-K. No Current Reports on Form 8-K were filed by the
Corporation during the quarter ended January 2, 1999
13
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in the Banta Corporation annual
report to shareholders and incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 1, 1999. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed in the index in item 14(a) (2) is the responsibility of the Corporation's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
The schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 1, 1999.
14
<PAGE>
BANTA CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED January 2, 1999, January 3, 1998 and December 28, 1996
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS
----------------------------------------
BALANCE, ADDITIONS CHARGES
BEGINNING OF CHARGED TO TO BALANCE,
YEAR EARNINGS RESERVE, NET OTHER END OF YEAR
-------------- ------------ ------------- ------------ ---------------
Reserve for
Doubtful
Receivables
<S> <C> <C> <C> <C> <C>
1998 3,708 1,728 1,757 156 (1) 3,835
=========== ============ =========== ============ ============
1997 3,486 1,408 1,436 250(1) 3,708
=========== ============ =========== ============ ============
1996 3,414 889 817 0 3,486
=========== ============ ============ ============ ============
(1) Consists of additions to the reserve related to acquisitions.
</TABLE>
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BANTA CORPORATION
DATE: March 31, 1999 BY: /s/ DONALD D. BELCHER
--------------------- ------------------------
Donald D. Belcher, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ DONALD D. BELCHER March 31, 1999
- --------------------- ------------------
Donald D. Belcher, Chairman, President and
Chief Executive Officer
/s/ GERALD A. HENSELER March 31, 1999
- ---------------------- ------------------
Gerald A. Henseler, Executive Vice
President, Chief Financial Officer,
and Director
/s/ BERNARD S. KUBALE March 31, 1999
- --------------------- -----------------
Bernard S. Kubale, Director
/s/ JAMESON A. BAXTER March 31, 1999
- --------------------- ------------------
Jameson A. Baxter, Director
/s/ RICHARD L. GUNDERSON March 31, 1999
- ------------------------ ------------------
Richard L. Gunderson, Director
/s/ JOHN F. BERGSTROM March 31, 1999
-------------------- ------------------
John F. Bergstrom, Director
16
<PAGE>
BANTA CORPORATION File No. 0-6187
Form 10-K, Year Ended January 2, 1999
- -/** EXHIBIT INDEX
---------------------
Exhibit Number
- --------------
3(b) Amendment to Bylaws
3(c) Bylaws, as amended
13. Annual Report to Shareholders for the fiscal year ended January 2, 1999
21. List of Subsidiaries
23. Consent of Arthur Andersen LLP
27. Financial Data Schedule [EDGAR version only].
BY-LAW AMENDMENT
----------------
RESOLVED, that effective December 8, 1998, Article III, Section 3.01 of
the By-Laws of the Corporation is hereby amended to reduce the number of
authorized directors to ten (10).
12/08/98
BY-LAWS
OF
BANTA CORPORATION
(a Wisconsin corporation)
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may have such
principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02. Registered Office. The registered office of the corporation
required by the Wisconsin Business Corporation Law to be maintained in the State
of Wisconsin may be, but need not be, identical with the principal office in the
State of Wisconsin, and the address of the registered office may be changed from
time to time by the Board of Directors. The business office of the registered
agent of the corporation shall be identical to such registered office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the shareholders of the
corporation (the "Annual Meeting") shall be held on the second Tuesday in the
month of April of each year, at the hour of two (2) o'clock p.m. (local time),
or at such other time and date as may be fixed by or under the authority of the
Board of Directors, for the purpose of electing directors and for the
transaction of such other business as may properly come before the Annual
Meeting in accordance with Section 2.13 of these by-laws. If the day fixed for
the Annual Meeting shall be a legal holiday in the State of Wisconsin, such
meeting shall be held on the next succeeding business day. If the election of
directors shall not be held on the day designated herein, or fixed as herein
provided, for any Annual Meeting, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
shareholders (a "Special Meeting") as soon thereafter as conveniently may be. In
fixing a meeting date for any Annual Meeting, the Board of Directors may
consider such factors as it deems relevant within the good faith exercise of its
business judgment.
2.02. Special Meetings.
(a) A Special Meeting may be called only by (i) the Chairman of the
Board, (ii) the President or (iii) the Board of Directors and shall be called by
the Chairman of the Board or the President upon the demand, in accordance with
this Section 2.02, of the holders of record of shares representing at least 10%
of all the votes entitled to be cast on any issue proposed to be considered at
the Special Meeting.
(b) In order that the corporation may determine the shareholders entitled
to demand a Special Meeting, the Board of Directors may fix a record date to
determine the shareholders entitled to make such a demand (the "Demand Record
Date"). The Demand Record Date shall not precede the
<PAGE>
date upon which the resolution fixing the Demand Record Date is adopted by the
Board of Directors and shall not be more than 10 days after the date upon which
the resolution fixing the Demand Record Date is adopted by the Board of
Directors. Any shareholder of record seeking to have shareholders demand a
Special Meeting shall, by sending written notice to the Secretary of the
corporation by hand or by certified or registered mail, return receipt
requested, request the Board of Directors to fix a Demand Record Date. The Board
of Directors shall promptly, but in all events within 10 days after the date on
which a valid request to fix a Demand Record Date is received, adopt a
resolution fixing the Demand Record Date and shall make a public announcement of
such Demand Record Date. If no Demand Record Date has been fixed by the Board of
Directors within 10 days after the date on which such request is received by the
Secretary, the Demand Record Date shall be the 10th day after the first day on
which a valid written request to set a Demand Record Date is received by the
Secretary. To be valid, such written request shall set forth the purpose or
purposes for which the Special Meeting is to be held, shall be signed by one or
more shareholders of record (or their duly authorized proxies or other
representatives), shall bear the date of signature of each such shareholder (or
proxy or other representative) and shall set forth all information about each
such shareholder and about the beneficial owner or owners, if any, on whose
behalf the request is made that would be required to be set forth in a
shareholder's notice described in paragraph (a)(ii) of Section 2.13 of these
by-laws.
(c) In order for a shareholder or shareholders to demand a Special
Meeting, a written demand or demands for a Special Meeting by the holders of
record as of the Demand Record Date of shares representing at least 10% of all
the votes entitled to be cast on any issue proposed to be considered at the
Special Meeting must be delivered to the corporation. To be valid, each written
demand by a shareholder for a Special Meeting shall set forth the specific
purpose or purposes for which the Special Meeting is to be held (which purpose
or purposes shall be limited to the purpose or purposes set forth in the written
request to set a Demand Record Date received by the corporation pursuant to
paragraph (b) of this Section 2.02, shall be signed by one or more persons who
as of the Demand Record Date are shareholders of record (or their duly
authorized proxies or other representatives), shall bear the date of signature
of each such shareholder (or proxy or other representative), and shall set forth
the name and address, as they appear in the corporation's books, of each
shareholder signing such demand and the class or series and number of shares of
the corporation which are owned of record and beneficially by each such
shareholder, shall be sent to the Secretary by hand or by certified or
registered mail, return receipt requested, and shall be received by the
Secretary within 70 days after the Demand Record Date.
(d) The corporation shall not be required to call a Special Meeting upon
shareholder demand unless, in addition to the documents required by paragraph
(c) of this Section 2.02, the Secretary receives a written agreement signed by
each Soliciting Shareholder (as defined herein), pursuant to which each
Soliciting Shareholder, jointly and severally, agrees to pay the corporation's
costs of holding the Special Meeting, including the costs of preparing and
mailing proxy materials for the corporation's own solicitation, provided that if
each of the resolutions introduced by any Soliciting Shareholder at such meeting
is adopted, and each of the individuals nominated by or on behalf of any
Soliciting Shareholder for election as director at such meeting is elected, then
the Soliciting Shareholders shall not be required to pay such costs. For
purposes of this paragraph (d), the following terms shall have the meanings set
forth below:
B-2
<PAGE>
(i) "Affiliate" of any Person shall mean any Person controlling,
controlled by or under common control with such first Person.
(ii) "Participant" shall have the meaning assigned to such term in
Rule 14a-11 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(iii) "Person" shall mean any individual, firm, corporation,
partnership, joint venture, association, trust, unincorporated
organization or other entity.
(iv) "Proxy" shall have the meaning assigned to such term in Rule
14a-1 promulgated under the Exchange Act.
(v) "Solicitation" shall have the meaning assigned to such term in
Rule 14a-11 promulgated under the Exchange Act.
(vi) "Soliciting Shareholder" shall mean, with respect to any
Special Meeting demanded by a shareholder or shareholders, any of the
following Persons:
(A) if the number of shareholders signing the demand or
demands for a meeting delivered to the corporation pursuant to
paragraph (c) of this Section 2.02 is 10 or fewer, each
shareholder signing any such demand;
(B) if the number of shareholders signing the demand or
demands for a meeting delivered to the corporation pursuant to
paragraph (c) of this Section 2.02 is more than 10, each Person
who either (I) was a Participant in any Solicitation of such
demand or demands or (II) at the time of the delivery to the
corporation of the documents described in paragraph (c) of this
Section 2.02, had engaged or intended to engage in any
Solicitation of Proxies for use at such Special Meeting (other
than a Solicitation of Proxies on behalf of the corporation); or
(C) any Affiliate of a Soliciting Shareholder, if a
majority of the directors then in office determine, reasonably and
in good faith, that such Affiliate should be required to sign the
written notice described in paragraph (c) of this Section 2.02
and/or the written agreement described in this paragraph (d) in
order to prevent the purposes of this Section 2.02 from being
evaded.
(e) Except as provided in the following sentence, any Special Meeting
shall be held at such hour and day as may be designated by whichever of the
Chairman of the Board, the President or the Board of Directors shall have called
such meeting. In the case of any Special Meeting called by the Chairman of the
Board or the President upon the demand of shareholders (a "Demand Special
Meeting"), such meeting shall be held at such hour and day as may be designated
by the Board of Directors; provided, however, that the date of any Demand
Special Meeting shall be not more than 70 days after the Meeting Record Date (as
defined in Section 2.05 of these by-laws); and provided further that in the
event that the directors then in office fail to designate an hour and date for a
Demand Special
B-3
<PAGE>
Meeting within 10 days after the date that valid written demands for such
meeting by the holders of record as of the Demand Record Date of shares
representing at least 10% of all the votes entitled to be cast on any issue
proposed to be considered at the Special Meeting are delivered to the
corporation (the "Delivery Date"), then such meeting shall be held at 2:00 p.m.
(local time) on the 100th day after the Delivery Date or, if such 100th day is
not a Business Day (as defined below), on the first preceding Business Day. In
fixing a meeting date for any Special Meeting, the Chairman of the Board, the
President or the Board of Directors may consider such factors as he or it deems
relevant within the good faith exercise of his or its business judgment,
including, without limitation, the nature of the action proposed to be taken,
the facts and circumstances surrounding any demand for such meeting, and any
plan of the Board of Directors to call an Annual Meeting or a Special Meeting
for the conduct of related business.
(f) The corporation may engage nationally or regionally recognized
independent inspectors of elections to act as an agent of the corporation for
the purpose of promptly performing a ministerial review of the validity of any
purported written demand or demands for a Special Meeting received by the
Secretary. For the purpose of permitting the inspectors to perform such review,
no purported demand shall be deemed to have been delivered to the corporation
until the earlier of (i) 5 Business Days following receipt by the Secretary of
such purported demand and (ii) such date as the independent inspectors certify
to the corporation that the valid demands received by the Secretary represent at
least 10% of all the votes entitled to be cast on each issue proposed to be
considered at the Special Meeting. Nothing contained in this paragraph shall in
any way be construed to suggest or imply that the Board of Directors or any
shareholder shall not be entitled to contest the validity of any demand, whether
during or after such 5 Business Day period, or to take any other action
(including, without limitation, the commencement, prosecution or defense of any
litigation with respect thereto).
(g) For purposes of these by-laws, "Business Day" shall mean any day
other than a Saturday, a Sunday or a day on which banking institutions in the
State of Wisconsin are authorized or obligated by law or executive order to
close.
2.03. Place of Meeting. The Board of Directors, the Chairman of the Board
or the President may designate any place, either within or without the State of
Wisconsin, as the place of meeting for any Annual Meeting or for any Special
Meeting, or for any postponement thereof. If no designation is made, the place
of meeting shall be the principal business office of the corporation in the
State of Wisconsin. Any meeting may be adjourned to reconvene at any place
designated by vote of the Board of Directors or by the Chairman of the Board or
the President.
2.04. Notice of Meeting. Written notice stating the place, day and hour
of any Annual Meeting or Special Meeting shall be delivered not less than 10
(unless a longer period is required by the Wisconsin Business Corporation Law)
nor more than 70 days before the date of such meeting, either personally or by
mail, by or at the direction of the Secretary, to each shareholder of record
entitled to vote at such meeting and to other shareholders as may be required by
the Wisconsin Business Corporation Law. In the event of any Demand Special
Meeting, such notice of meeting shall be sent not more than 30 days after the
Delivery Date. If mailed, notice pursuant to this Section 2.04 shall be deemed
to be effective when deposited in the United States mail, addressed to each
shareholder at his or her address as it appears on the stock record books of the
corporation, with postage thereon
B-4
<PAGE>
prepaid. Unless otherwise required by the Wisconsin Business Corporation Law, a
notice of an Annual Meeting need not include a description of the purpose for
which the meeting is called. In the case of any Special Meeting, (a) the notice
of meeting shall describe any business that the Board of Directors shall have
theretofore determined to bring before the meeting and (b) in the case of a
Demand Special Meeting, the notice of meeting (i) shall describe any business
set forth in the statement of purpose of the demands received by the corporation
in accordance with Section 2.02 of these by-laws and (ii) shall contain all of
the information required in the notice received by the corporation in accordance
with Section 2.13(b) of these by-laws. If an Annual Meeting or Special Meeting
is adjourned to a different date, time or place, the corporation shall not be
required to give notice of the new date, time or place if the new date, time or
place is announced at the meeting before adjournment; provided, however, that if
a new Meeting Record Date for an adjourned meeting is or must be fixed, the
corporation shall give notice of the adjourned meeting to persons who are
shareholders as of the new Meeting Record Date.
2.05. Fixing of Record Date. The Board of Directors may fix in advance a
date not less than 10 days and not more than 70 days prior to the date of any
Annual Meeting or Special Meeting as the record date for the determination of
shareholders entitled to notice of, or to vote at, such meeting (the "Meeting
Record Date"). In the case of any Demand Special Meeting, (i) the Meeting Record
Date shall be not later than the 30th day after the Delivery Date and (ii) if
the Board of Directors fails to fix the Meeting Record Date within 30 days after
the Delivery Date, then the close of business on such 30th day shall be the
Meeting Record Date. The shareholders of record on the Meeting Record Date shall
be the shareholders entitled to notice of and to vote at the meeting. Except as
provided by the Wisconsin Business Corporation Law for a court-ordered
adjournment, a determination of shareholders entitled to notice of and to vote
at any Annual Meeting or Special Meeting is effective for any adjournment of
such meeting unless the Board of Directors fixes a new Meeting Record Date,
which it shall do if the meeting is adjourned to a date more than 120 days after
the date fixed for the original meeting. The Board of Directors may also fix in
advance a date as the record date for the purpose of determining shareholders
entitled to take any other action or determining shareholders for any other
purpose. Such record date shall be not more than 70 days prior to the date on
which the particular action, requiring such determination of shareholders, is to
be taken. The record date for determining shareholders entitled to a
distribution (other than a distribution involving a purchase, redemption or
other acquisition of the corporation's shares) or a share dividend is the date
on which the Board of Directors authorizes the distribution or share dividend,
as the case may be, unless the Board of Directors fixes a different record date.
2.06. Shareholder Lists. After a Meeting Record Date has been fixed, the
corporation shall prepare a list of the names of all of the shareholders
entitled to notice of the meeting. The list shall be arranged by class or series
of shares, if any, and show the address of and number of shares held by each
shareholder. Such list shall be available for inspection by any shareholder,
beginning two business days after notice of the meeting is given for which the
list was prepared and continuing to the date of the meeting, at the
corporation's principal office or at a place identified in the meeting notice in
the city where the meeting will be held. A shareholder or his or her agent may,
on written demand, inspect and, subject to the limitations imposed by the
Wisconsin Business Corporation Law, copy the list, during regular business hours
and at his or her expense, during the period that it is available for inspection
pursuant to this Section 2.06. The corporation shall make the shareholders' list
available at the meeting and any shareholder or his or her agent or attorney may
inspect the list at
B-5
<PAGE>
any time during the meeting or any adjournment thereof. Refusal or failure to
prepare or make available the shareholders' list shall not affect the validity
of any action taken at a meeting of shareholders.
2.07. Quorum and Voting Requirements; Postponements; Adjournments.
(a) Shares entitled to vote as a separate voting group may take action on
a matter at any Annual Meeting or Special Meeting only if a quorum of those
shares exists with respect to that matter. If the corporation has only one class
of stock outstanding, such class shall constitute a separate voting group for
purposes of this Section 2.07. Except as otherwise provided in the Articles of
Incorporation, any by-law adopted under authority granted in the Articles of
Incorporation, or the Wisconsin Business Corporation Law, a majority of the
votes entitled to be cast on the matter shall constitute a quorum of the voting
group for action on that matter. Once a share is represented for any purpose at
any Annual Meeting or Special 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 Meeting Record
Date is or must be set for the adjourned meeting. If a quorum exists, except in
the case of the election of directors, action on a matter shall be approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the Articles of Incorporation, any by-law adopted
under authority granted in the Articles of Incorporation, or the Wisconsin
Business Corporation Law requires a greater number of affirmative votes. Unless
otherwise provided in the Articles of Incorporation, directors shall be elected
by a plurality of the votes cast by the shares entitled to vote in the election
of directors at any Annual Meeting or Special Meeting at which a quorum is
present. For purposes of this Section 2.07(a), "plurality" means that the
individuals with the largest number of votes are elected as directors up to the
maximum number of directors to be chosen at the Annual Meeting or Special
Meeting.
(b) The Board of Directors acting by resolution may postpone and
reschedule any previously scheduled Annual Meeting or Special Meeting; provided,
however, that a Demand Special Meeting shall not be postponed beyond the 100th
day following the Delivery Date. Any Annual Meeting or Special Meeting may be
adjourned from time to time, whether or not there is a quorum, (i) at any time,
upon a resolution of shareholders if the votes cast in favor of such resolution
by the holders of shares of each voting group entitled to vote on any matter
theretofore properly brought before the meeting exceed the number of votes cast
against such resolution by the holders of shares of each such voting group or
(ii) at any time prior to the transaction of any business at such meeting, by
the Chairman of the Board or pursuant to resolution of the Board of Directors.
No notice of the time and place of adjourned meetings need be given except as
required by the Wisconsin Business Corporation Law. At any adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified.
2.08. Conduct of Meetings. The Chairman of the Board, and in his absence
the President, shall call any Annual Meeting or Special Meeting to order and
shall act as chairman of such meeting. In the absence of the Chairman of the
Board and the President, such duties shall be performed by a Vice-President in
the order provided under Section 4.07, or in their absence, by any person chosen
by the shareholders present. The Secretary of the corporation shall act as
secretary of
B-6
<PAGE>
all Annual Meetings and Special Meetings, but, in the absence of the Secretary,
the presiding officer may appoint any other person to act as secretary of the
meeting.
2.09. Proxies. At any Annual Meeting or Special Meeting, 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 or by his or her attorney-in-fact. An appointment of a
proxy is effective when received by the Secretary or other officer or agent of
the corporation authorized to tabulate votes. An appointment is valid for eleven
months from the date of its signing unless a different period is expressly
provided in the appointment form. The Board of Directors shall have the power
and authority to make rules establishing presumptions as to the validity and
sufficiency of proxies.
2.10. Voting of Shares. Each outstanding share shall be entitled to one
vote upon each matter submitted to a vote at any Annual Meeting or Special
Meeting except to the extent that the voting rights of the shares of any class
or classes are enlarged, limited or denied by the Articles of Incorporation or
the Wisconsin Business Corporation Law.
2.11. Acceptance of Instruments Showing Shareholder Action. If the name
signed on a vote, consent, waiver or proxy appointment corresponds to the name
of a shareholder, the corporation, if acting in good faith, may accept the vote,
consent, waiver or proxy appointment and give it effect as the act of a
shareholder. If the name signed on a vote, consent, waiver or proxy appointment
does not correspond to the name of a shareholder, the corporation, if acting in
good faith, may accept the vote, consent, waiver or proxy appointment and give
it effect as the act of the shareholder if any of the following apply:
(a) The shareholder is an entity and the name signed purports to be that
of an officer or agent of the entity.
(b) The name purports to be that of a personal representative,
administrator, executor, guardian or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to the
corporation is presented with respect to the vote, consent, waiver or proxy
appointment.
(c) The name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of this
status acceptable to the corporation is presented with respect to the vote,
consent, waiver or proxy appointment.
(d) The name signed purports to be that of a pledgee, beneficial owner,
or attorney-in-fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign for
the shareholder is presented with respect to the vote, consent, waiver or proxy
appointment.
(e) Two or more persons are the shareholders as co-tenants or fiduciaries
and the name signed purports to be the name of at least one of the co-owners and
the person signing appears to be acting on behalf of all co-owners.
B-7
<PAGE>
The corporation 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 basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
2.12. Waiver of Notice by Shareholders. A shareholder may waive any
notice required by the Wisconsin Business Corporation Law, the Articles of
Incorporation or these by-laws 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 applicable provisions of 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 at the beginning of the meeting or
promptly upon arrival objects to holding the meeting 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.
2.13. Notice of Shareholder Business and Nomination of Directors.
(a) Annual Meetings.
(i) 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 an Annual Meeting (A) pursuant to the
corporation's notice of meeting, (B) by or at the direction of the Board
of Directors or (C) by any shareholder of the corporation who is a
shareholder of record at the time of giving of notice provided for in
this by-law and who is entitled to vote at the meeting and complies with
the notice procedures set forth in this Section 2.13.
(ii) For nominations or other business to be properly brought
before an Annual Meeting by a shareholder pursuant to clause (C) of
paragraph (a)(i) of this Section 2.13, the shareholder must have given
timely notice thereof in writing to the Secretary of the corporation. To
be timely, a shareholder's notice shall be received by the Secretary of
the corporation at the principal executive offices of the corporation not
less than 60 days nor more than 90 days prior to the second Tuesday in
the month of April; provided, however, that in the event that the date of
the Annual Meeting is advanced by more than 30 days or delayed by more
than 60 days from the second Tuesday in the month of April, notice by the
shareholder to be timely must be so received not earlier than the 90th
day prior to the date of such Annual Meeting and not later than the close
of business on the later of (x) the 60th day prior to such Annual Meeting
and (y) the 10th day following the day on which public announcement of
the date of such 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
B-8
<PAGE>
business (or his duly authorized proxy or other representative), shall
bear the date of signature of such shareholder (or proxy or other
representative) and shall set forth: (A) the name and address, as they
appear on this corporation's books, of such shareholder and the
beneficial owner or owners, if any, on whose behalf the nomination or
proposal is made; (B) the class and number of shares of the corporation
which are beneficially owned by such shareholder or beneficial owner or
owners; (C) 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 or
introduce the other business specified in the notice; (D) in the case of
any proposed nomination for election or re-election as a director, (I)
the name and residence address of the person or persons to be nominated,
(II) a description of all arrangements or understandings between such
shareholder or beneficial owner or owners and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination is to be made by such shareholder, (III) 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 Exchange Act, 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 (IV) 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 (E) in the case of any other business that such
shareholder proposes to bring before the meeting, (I) a brief description
of the business desired to be brought before the meeting and, if such
business includes a proposal to amend these by-laws, the language of the
proposed amendment, (II) such shareholder's and beneficial owner's or
owners' reasons for conducting such business at the meeting and (III) any
material interest in such business of such shareholder and beneficial
owner or owners.
(iii) Notwithstanding anything in the second sentence of paragraph
(a)(ii) of this Section 2.13 to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the
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 70 days prior to the
second Tuesday in the month of April, a shareholder's notice required by
this Section 2.13 shall also be considered timely, but only with respect
to nominees for any new positions created by such increase, if it shall
be received by the Secretary at the principal executive offices of the
corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
corporation.
(b) Special Meetings. Only such business shall be conducted at a Special
Meeting as shall have been described in the notice of meeting sent to
shareholders pursuant to Section 2.04 of these by-laws. 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 (i) by or at the
direction of the Board of Directors or (ii) by any shareholder of the
corporation who (A) is a shareholder of
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record at the time of giving of such notice of meeting, (B) is entitled to vote
at the meeting and (C) complies with the notice procedures set forth in this
Section 2.13. Any shareholder desiring to nominate persons for election to the
Board of Directors at such a Special Meeting shall cause a written notice to be
received by the Secretary of the corporation at the principal executive offices
of the corporation not earlier than 90 days prior to such Special Meeting and
not later than the close of business on the later of (x) the 60th day prior to
such Special Meeting and (y) the 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 duly authorized proxy or other representative), shall
bear the date of signature of such shareholder (or proxy or other
representative) and shall set forth: (A) the name and address, as they appear on
the corporation's books, of such shareholder and the beneficial owner or owners,
if any, on whose behalf the nomination is made; (B) the class and number of
shares of the corporation which are beneficially owned by such shareholder or
beneficial owner or owners; (C) 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; (D) the name and residence address of the
person or persons to be nominated; (E) a description of all arrangements or
understandings between such shareholder or beneficial owner or owners and each
nominee and any other person or persons (naming such person or persons) pursuant
to which the nomination is to be made by such shareholder; (F) 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 Exchange Act, 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 (G) 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.
(c) General.
(i) Only persons who are nominated in accordance with the
procedures set forth in this Section 2.13 shall be eligible to serve as
directors. Only such business shall be conducted at an Annual Meeting or
Special Meeting as shall have been brought before such meeting in
accordance with the procedures set forth in this Section 2.13. The
chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in this
Section 2.13 and, if any proposed nomination or business is not in
compliance with this Section 2.13, to declare that such defective
proposal shall be disregarded.
(ii) For purposes of this Section 2.13, "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 Exchange
Act.
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(iii) Notwithstanding the foregoing provisions of this Section
2.13, a shareholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 2.13. Nothing in this Section 2.13
shall be deemed to limit the corporation's obligation to include
shareholder proposals in its proxy statement if such inclusion is
required by Rule 14a-8 under the Exchange Act.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. 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, its Board of Directors. The number of
directors of the corporation shall be ten (10).
3.02. Tenure and Qualifications. Each director shall hold office until
the next annual meeting of shareholders and until his successor shall have been
elected and qualified, or until there is a decrease in the number of directors
which takes effect after the expiration of his term, or until his prior death,
resignation or removal. A director may be removed by the shareholders only at a
meeting called for the purpose of removing the director, and the meeting notice
shall state that the purpose, or one of the purposes, of the meeting is removal
of the director. A director may be removed from office but only for cause (as
defined herein) if the number of votes cast to remove the director exceeds the
number of votes cast not to remove him; provided, however, that, if the Board of
Directors, by resolution, shall have recommended removal of a director, then the
shareholders may remove such director without cause by the vote referred to
above. As used herein, "cause" shall exist only if the director whose removal is
proposed has been convicted of a felony by a court of competent jurisdiction,
where such conviction is no longer subject to direct appeal, or has been
adjudged liable for actions or omissions in the performance of his duty to the
corporation in a matter which has had a materially adverse effect on the
business of the corporation, where such adjudication is no longer subject to
appeal. A director may resign at any time by delivering written notice which
complies with the Wisconsin Business Corporation Law to the Chairman of the
Board or to the corporation. A director's resignation is effective when the
notice is delivered unless the notice specifies a later effective date.
Directors need not be residents of the State of Wisconsin but must be
shareholders of the corporation. Except as otherwise provided by the Board of
Directors, a director shall retire no later than the end of the term in which
occurs the earlier of the director's attainment of age seventy (70) or the
completion of fifteen (15) years of service as a non-employee director;
provided, however, that the fifteen (15) year limitation shall be inapplicable
to any director who had completed at least fifteen (15) years as a non-employee
director as of January 1, 1995. As used herein, a "non-employee director" shall
mean a director who is not an employee of the corporation or any of its
subsidiaries.
3.03. Regular Meetings. A regular meeting of the Board of Directors shall
be held without other notice than this by-law immediately after the Annual
Meeting, and each adjourned session thereof. The place of such regular meeting
shall be the same as the place of the Annual Meeting which precedes it, or such
other suitable place as may be announced at such Annual Meeting. The Board of
Directors may provide, by resolution, the time and place, either within or
without the State of Wisconsin, for the holding of additional regular meetings
without other notice than such resolution.
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3.04. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the President or any
three directors. The Chairman of the Board or the President may fix any place,
either within or without the State of Wisconsin, as the place for holding any
special meeting of the Board of Directors, and if no other place is fixed the
place of meeting shall be the principal business office of the corporation in
the State of Wisconsin.
3.05. Notice; Waiver. Notice of each meeting of the Board of Directors
(unless otherwise provided in or pursuant to Section 3.03) shall be given by
written notice delivered or communicated in person, by telegram, facsimile or
other form of wire or wireless communication, or by mail or private carrier, to
each director at his business address or at such other address as such director
shall have designated in writing filed with the Secretary, in each case not less
than 48 hours prior to the time of the meeting. If mailed, such notice shall be
deemed to be effective when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed to be effective when the telegram is delivered to the telegraph
company. If notice is given by private carrier, such notice shall be deemed to
be effective when the notice is delivered to the private carrier. Whenever any
notice whatever is required to be given to any director of the corporation under
the Articles of Incorporation or these by-laws or any provision of the Wisconsin
Business Corporation Law, a waiver thereof in writing, signed at any time,
whether before or after the time of meeting, by the director entitled to such
notice, shall be deemed equivalent to the giving of such notice. The corporation
shall retain any such waiver as part of the permanent corporate records. A
director's attendance at or participation in a meeting waives any required
notice to him of the meeting unless the director at the beginning of the meeting
or promptly upon his arrival objects to holding the meeting or transacting
business at 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.
3.06. Quorum. Except as otherwise provided by the Wisconsin Business
Corporation Law or by the Articles of Incorporation or these by-laws, a majority
of the number of directors set forth in Section 3.01 shall constitute a quorum
for the transaction of business at any meeting of the Board of Directors, but a
majority of the directors present (though less than such quorum) may adjourn the
meeting from time to time without further notice.
3.07. Manner of Acting. The act of the majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by the Wisconsin
Business Corporation Law or by the Articles of Incorporation or these by-laws.
3.08. Conduct of Meetings. The Chairman of the Board, and in his absence,
the President, or a Vice-President in the order provided under Section 4.07, and
in their absence, any director chosen by the directors present, shall call
meetings of the Board of Directors to order and shall act as chairman of the
meeting. The Secretary of the corporation shall act as secretary of all meetings
of the Board of Directors, but in the absence of the Secretary, the presiding
officer may appoint any Assistant Secretary or any director or other person
present to act as secretary of the meeting. Minutes
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of any regular or special meeting of the Board of Directors shall be prepared
and distributed to each director.
3.09. Vacancies. Except as provided below, any vacancy occurring in the
Board of Directors, including a vacancy resulting from an increase in the number
of directors, may be filled by any of the following: (a) the shareholders; (b)
the Board of Directors; or (c) if the directors remaining in office constitute
fewer than a quorum of the Board of Directors, the directors, by the affirmative
vote of a majority of all directors remaining in office. If the vacant office
was held by a director elected by a voting group of shareholders, only the
holders of shares of that voting group may vote to fill the vacancy if it is
filled by the shareholders, and only the remaining directors elected by that
voting group may vote to fill the vacancy if it is filled by the directors. A
vacancy that will occur at a specific later date, because of a resignation
effective at a later date or otherwise, may be filled before the vacancy occurs,
but the new director may not take office until the vacancy occurs.
3.10. Compensation. The Board of Directors, by affirmative vote of a
majority of the directors then in office, and irrespective of any personal
interest of any of its members, may establish reasonable compensation of all
directors for services to the corporation as directors, officers or otherwise,
or may delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or to delegate authority to
an appropriate committee to provide for reasonable pensions, disability or death
benefits, and other benefits or payments, to directors, officers and employees
to the corporation.
3.11. Presumption of Assent. A director of the corporation who is present
at a meeting of the Board of Directors or a committee thereof of which he is a
member at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless any of the following occurs: (a) the
director objects at the beginning of the meeting or promptly upon his arrival to
holding the meeting or transacting business at the meeting; (b) the director
dissents or abstains from an action taken and minutes of the meeting are
prepared that show the director's dissent or abstention from the action taken;
(c) the director delivers written notice that complies with the Wisconsin
Business Corporation Law of his dissent or abstention to the presiding officer
of the meeting before its adjournment or to the corporation immediately after
adjournment of the meeting; or (d) the director dissents or abstains from an
action taken, minutes of the meeting are prepared that fail to show the
director's dissent or abstention from the action taken, and the director
delivers to the corporation a written notice of that failure that complies with
the Wisconsin Business Corporation Law promptly after receiving the minutes.
Such right to dissent or abstain shall not apply to a director who voted in
favor of such action.
3.12. Committees. The Board of Directors by resolution adopted by the
affirmative vote of a majority of the number of directors set forth in Section
3.01 may create one or more committees, appoint members of the Board of
Directors to serve on the committees and designate other members of the Board of
Directors to serve as alternates. Each committee shall have two or more members
who shall, unless otherwise provided by the Board of Directors, serve at the
pleasure of the Board of Directors. A committee may be authorized to exercise
the authority of the Board of Directors, except that a committee may not do any
of the following: (a) authorize distributions; (b) approve or propose to
shareholders action that the Wisconsin Business Corporation Law requires to
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be approved by shareholders; (c) fill vacancies on the Board of Directors or,
unless the Board of Directors provides by resolution that vacancies on a
committee shall be filled by the affirmative vote of the remaining committee
members, on any Board committee; (d) amend the corporation's Articles of
Incorporation; (e) adopt, amend or repeal by-laws; (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 Board of
Directors; and (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 to do so within limits prescribed by the
Board of Directors. Unless otherwise provided by the Board of Directors in
creating the committee, a committee may employ counsel, accountants and other
consultants to assist it in the exercise of its authority.
3.13. Telephonic Meetings. Except as herein provided and notwithstanding
any place set forth in the notice of the meeting or these by-laws, members of
the Board of Directors (and any committee thereof) may participate in regular or
special meetings by, or through the use of, any means of communication by which
all participants may simultaneously hear each other, such as by conference
telephone. If a meeting is conducted by such means, then at the commencement of
such meeting the presiding officer shall inform the participating directors that
a meeting is taking place at which official business may be transacted. Any
participant in a meeting by such means shall be deemed present in person at such
meeting. Notwithstanding the foregoing, no action may be taken at any meeting
held by such means on any particular matter which the presiding officer
determines, in his sole discretion, to be inappropriate under the circumstances
for action at a meeting held by such means. Such determination shall be made and
announced in advance of such meeting.
3.14. Unanimous Consent without Meeting. Any action required or permitted
by the Articles of Incorporation or these by-laws or any provision of the
Wisconsin Business Corporation Law to be taken by the Board of Directors (or a
committee thereof) at a meeting may be taken without a meeting if a consent in
writing, setting forth the action so taken, shall be signed by all members of
the Board or of the committee, as the case may be, then in office. Such action
shall be effective when the last director or committee member signs the consent,
unless the consent specifies a different effective date.
ARTICLE IV. OFFICERS
4.01. Number. The principal officers of the corporation shall be a
Chairman of the Board, a President, one or more Vice-Presidents, not to exceed
six (6) at any given time, a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. Such other officers and assistant officers as
may be deemed necessary may be elected or appointed by the Board of Directors.
The Board of Directors may also authorize any duly appointed officer to appoint
one or more officers or assistant officers. Any two or more offices may be held
by the same person.
4.02. Election and Term of Office. The officers of the corporation to be
elected by the Board of Directors shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after the Annual
Meeting. If the election of officers shall not be held at such
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meeting, such election shall be held as soon thereafter as conveniently may be.
Each officer shall hold office until his successor shall have been duly elected
or until his prior death, resignation or removal.
4.03. Removal and Resignation. The Board of Directors may remove any
officer and, unless restricted by the Board of Directors or these by-laws, an
officer may remove any officer or assistant officer appointed by that officer,
at any time, with or without cause and notwithstanding the contract rights, if
any, of the officer removed. Election or appointment shall not of itself create
contract rights. An officer may resign at any time by delivering notice to the
corporation that complies with the Wisconsin Business Corporation Law. The
resignation shall be effective when the notice is delivered, unless the notice
specifies a later effective date and the corporation accepts the later effective
date.
4.04. Vacancies. A vacancy in any principal office because of death,
resignation, removal, disqualification or otherwise, shall be filled by the
Board of Directors for the unexpired portion of the term. If a resignation of an
officer is effective at a later date as contemplated by Section 4.03 hereof, the
Board of Directors may fill the pending vacancy before the effective date if the
Board provides that the successor may not take office until the effective date.
4.05. Chairman of the Board. The Chairman of the Board shall, when
present, preside at all Annual Meetings and Special Meetings and at all meetings
of the Board of Directors. He shall perform such other duties and functions as
shall be assigned to him from time to time by the Board of Directors or in these
by-laws. Except where by law the signature of the President of the corporation
is required, the Chairman of the Board shall possess the same power and
authority as the President to sign, execute and acknowledge, on behalf of the
corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases,
reports and all other documents or instruments and shall have such additional
power to sign, execute and acknowledge, on behalf of the corporation, as may be
authorized by resolution of the Board of Directors.
4.06. President. The President shall be the chief executive officer of
the corporation and, subject to the control of the Board of Directors, shall in
general supervise and control all of the business and affairs of the
corporation. He shall have authority, subject to such rules as may be prescribed
by the Board of Directors, to appoint such agents and employees of the
corporation as he shall deem necessary, to prescribe their powers, duties and
compensation, and to delegate authority to them. Such agents and employees shall
hold office at the discretion of the President. He shall have authority to sign,
execute and acknowledge, on behalf of the corporation, all deeds, mortgages,
bonds, stock certificates, contracts, leases, reports and all other documents or
instruments necessary or proper to be executed in the course of the
corporation's regular business, or which shall be authorized by resolution of
the Board of Directors; and, except as otherwise provided by law or the Board of
Directors, he may authorize any Vice President or other officer or agent of the
corporation to sign, execute and acknowledge such documents or instruments in
his place and stead. In general he shall perform all duties incident to the
office of President and such other duties as may be prescribed by the Board of
Directors from time to time.
4.07. The Vice-Presidents. In the absence of the President or in the
event of his death, inability or refusal to act, or in the event for any reason
it shall be impracticable for the
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President to act personally, the Vice-President (or in the event there be more
than one Vice-President, the Vice-Presidents in the order designated by the
Board of Directors, or in the absence of any designation, then in the order of
their election) shall perform the duties of the President, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
President. Any Vice-President may sign, with the Secretary or Assistant
Secretary, certificates for shares of the corporation and shall perform such
other duties and have such authority as from time to time may be delegated or
assigned to him by the President or by the Board of Directors. The execution of
any instrument of the corporation by any Vice-President shall be conclusive
evidence, as to third parties, of his authority to act in the stead of the
President.
4.08 The Secretary. The Secretary shall: (a) keep the minutes of all
Annual Meetings and Special Meetings and of all meetings of the Board of
Directors in one or more books provided for that purpose (including records of
actions taken without a meeting); (b) see that all notices are duly given in
accordance with the provisions of these by-laws or as required by the Wisconsin
Business Corporation Law; (c) be custodian of the corporate records and of the
seal of the corporation and see that the seal of the corporation is affixed to
all documents the execution of which on behalf of the corporation under its seal
is duly authorized; (d) maintain a record of the shareholders of the
corporation, in a form that permits preparation of a list of the names and
addresses of all shareholders, by class or series of shares and showing the
number and class or series of shares held by each shareholder; (e) sign with the
Chairman of the Board, the President, or a Vice-President, certificates for
shares of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and have such other duties and exercise such
authority as from time to time may be delegated or assigned to him by the
President or by the Board of Directors.
4.09. The Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) maintain
appropriate accounting records; (c) receive and give receipts for moneys due and
payable to the corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with the provisions of Section
5.04; and (d) in general perform all of the duties incident to the office of
Treasurer and have such other duties and exercise such other authority as from
time to time may be delegated or assigned to him by the President or by the
Board of Directors. If required by the Board of Directors, the Treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board of Directors shall determine.
4.10. Assistant Secretaries and Assistant Treasurers. There shall be such
number of Assistant Secretaries and Assistant Treasurers as the Board of
Directors may from time to time authorize. The Assistant Secretaries may sign
with the Chairman of the Board, the President or a Vice-President certificates
for shares of the corporation the issuance of which shall have been authorized
by a resolution of the Board of Directors. The Assistant Treasurers shall
respectively, if required by the Board of Directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the Board of
Directors shall determine. The Assistant Secretaries and Assistant Treasurers,
in general, shall perform such duties and have such authority as shall from time
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to time be delegated or assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
4.11 Other Assistants and Acting Officers. The Board of Directors shall
have the power to appoint, or to authorize any duly appointed officer of the
corporation to appoint, any person to act as assistant to any officer, or as
agent for the corporation in his stead, or to perform the duties of such officer
whenever for any reason it is impracticable for such officer to act personally,
and such assistant or acting officer or other agent so appointed by the Board of
Directors or the appointing officer shall have the power to perform all the
duties of the office to which he is so appointed to be assistant, or as to which
he is so appointed to act, except as such power may be otherwise defined or
restricted by the Board of Directors or the appointing officer.
4.12 Salaries. The salaries of the principal officers shall be fixed from
time to time by the Board of Directors or by a duly authorized committee
thereof, and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS; SPECIAL
CORPORATE ACTS
5.01. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute or deliver any
instrument in the name of and on behalf of the corporation, and such
authorization may be general or confined to specific instances. 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, an Assistant Secretary, the Treasurer or an Assistant Treasurer;
the Secretary or an Assistant 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.
5.02. Loans. No indebtedness for borrowed money shall be contracted on
behalf of the corporation and no evidences of such indebtedness shall be issued
in its name unless authorized by or under the authority of a resolution of the
Board of Directors. Such authorization may be general or confined to specific
instances.
5.03. Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer or officers, agent or agents of
the corporation and in such manner as shall from time to time be determined by
or under the authority of a resolution of the Board of Directors.
5.04. Deposits. All funds of the corporation not otherwise employed shall
be deposited from time to time to the credit of the corporation in such banks,
trust companies or other depositories as may be selected by or under the
authority of a resolution of the Board of Directors.
5.05 Voting of Securities Owned by this Corporation. Subject always to
the specific directions of the Board of Directors, (a) any shares or other
securities issued by any other
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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 of this corporation if he be present, or in his absence by the President
of this corporation if he be present, or in his absence by any Vice-President of
this corporation who may be present, and (b) whenever, in the judgment of the
Chairman of the Board, or in his absence, of the President, or in his absence,
of any Vice-President, it is desirable for this corporation to execute a proxy
or written consent in respect to any shares or other securities issued by any
other corporation and owned by this corporation, such proxy or consent shall be
executed in the name of this corporation by the Chairman of the Board, the
President or one of the Vice-Presidents of this corporation, 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.
5.06. No Nominee Procedures. The corporation has not established, and
nothing in these by-laws shall be deemed to establish, any procedure by which a
beneficial owner of the corporation's shares that are registered in the name of
a nominee is recognized by the corporation as the shareholder under Section
180.0723 of the Wisconsin Business Corporation Law.
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 the Wisconsin Business
Corporation 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 by the Secretary or an Assistant Secretary. All certificates
for shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered on the stock transfer
books of the corporation. All certificates surrendered to the corporation for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancelled, 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 signatures of the Chairman of
the Board, the President or any Vice-President and the Secretary or Assistant
Secretary upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent, or registered by a registrar, other than the
corporation itself or an employee of the corporation.
6.03. Signature by Former Officers. In case any officer, who has signed
or whose facsimile signature has been placed upon any certificate for shares,
shall have ceased to be such officer before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer at
the date of its issue.
6.04. Transfer of Shares. Prior to due presentment of a certificate for
shares for registration of transfer the corporation may treat the registered
owner of such shares as the person
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<PAGE>
exclusively entitled to vote, to receive notifications and otherwise to 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 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 certificate for shares has been lost, destroyed or wrongfully taken, a new
certificate shall be issued in place thereof if the owner (a) so requests before
the corporation has notice that such shares have been acquired by a bona fide
purchaser, and (b) files with the corporation a sufficient indemnity bond, and
(c) satisfies such other reasonable requirements as the Board of Directors may
prescribe.
6.07. Consideration for Shares. The Board of Directors may authorize
shares to be issued for consideration consisting 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. Before the corporation issues shares, the Board of Directors
shall determine that the consideration received or to be received for the shares
to be issued is adequate. In the absence of a resolution adopted by the Board of
Directors expressly determining that the consideration received or to be
received is adequate, Board approval of the issuance of the shares shall be
deemed to constitute such a determination. The determination of the Board of
Directors is conclusive insofar as the adequacy of consideration for the
issuance of shares relates to whether the shares are validly issued, fully paid
and nonassessable. The corporation may place in escrow shares issued in whole or
in part for a contract for future services or benefits, a promissory note, or
other property to be issued in the future, 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 or property are received or the promissory note is paid. If the
services are not performed, the benefits or property are not received or the
promissory note is not paid, the corporation may cancel, in whole or in part,
the shares escrowed or restricted and the distributions credited.
6.08. Stock Regulation. The Board of Directors shall have the power and
authority to make all such further rules and regulations not inconsistent with
the statutes of the State of Wisconsin as it may deem expedient concerning the
issue, transfer and registration of certificates representing shares of the
corporation.
B-19
<PAGE>
ARTICLE VII. SEAL
7.01. The Board of Directors shall provide a corporate seal which shall
be circular in form and shall have inscribed thereon the name of the corporation
and the state of incorporation and the words, "Corporate Seal".
ARTICLE VIII. INDEMNIFICATION
8.01. Certain Definitions. All capitalized terms used in this Article
VIII and not otherwise hereinafter defined in this Section 8.01 shall have the
meaning set forth in Section 180.0850 of the Statute. The following capitalized
terms (including any plural forms thereof) used in this Article VIII shall be
defined as follows:
(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) "Authority" shall mean the entity selected by the Director or Officer
to determine his or her right to indemnification pursuant to Section 8.04.
(c) "Board" shall mean the entire then elected and serving Board of
Directors of the Corporation, including all members thereof who are Parties to
the subject Proceeding or any related Proceeding.
(d) "Breach of Duty" shall mean the Director or Officer breached or
failed to perform his or her duties to the Corporation and his or her breach of
or failure to perform those duties is determined, in accordance with Section
8.04, to constitute misconduct under Section 180.0851 (2) (a) 1, 2, 3 or 4 of
the Statute.
(e) "Corporation," as used herein and as defined in the Statute and
incorporated by reference into the definitions of certain other capitalized
terms used herein, shall mean this Corporation, including, without limitation,
any successor corporation or entity to this Corporation by way of merger,
consolidation or acquisition of all or substantially all of the capital stock or
assets of this Corporation.
(f) "Director or Officer" shall have the meaning set forth in the
Statute; provided, that, for purposes of Article VIII, 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.
(g) "Disinterested Quorum" shall mean a quorum of the Board who are not
Parties to the subject Proceeding or any related Proceeding.
(h) "Party" shall have the meaning set forth in the Statute; provided,
that, for purposes of this Article VIII, the term "Party" shall also include any
Director or Officer or employee
B-20
<PAGE>
who is or was a witness in a Proceeding at a time when he or she has not
otherwise been formally named a Party thereto.
(i) "Proceeding" shall have the meaning set forth in the Statute;
provided, that, for purposes of this Article VIII, the term "Proceeding" shall
also include all Proceedings (i) brought under (in whole or in part) the
Securities Act of 1933, as amended, the Exchange Act, their respective state
counterparts, and/or any rule or regulation promulgated under any of the
foregoing; (ii) brought before an Authority or otherwise to enforce rights
hereunder; (iii) any appeal from a Proceeding; and (iv) any Proceeding in which
the Director or Officer is a plaintiff or petitioner because he or she is a
Director or Officer; provided, however, that such Proceeding is authorized by a
majority vote of a Disinterested Quorum.
(j) "Statute" shall mean Sections 180.0850 through 180.0859, inclusive,
of the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin
Statutes, as the same shall then be in effect, including any amendments thereto,
but, in the case of any such amendment, only to the extent such amendment
permits or requires the Corporation to provide broader indemnification rights
than the Statute permitted or required the Corporation to provide prior to such
amendment.
8.02. Mandatory Indemnification. To the fullest extent permitted or
required by the Statute, the Corporation shall indemnify a Director or Officer
against all Liabilities incurred by or on behalf of such Director or Officer in
connection with a Proceeding in which the Director or Officer is a Party because
he or she is a Director or Officer.
8.03. Procedural Requirements.
(a) A Director or Officer who seeks indemnification under Section 8.02
shall make a written request therefor to the Corporation. Subject to Section
8.03(b), within 60 days of the Corporation's receipt of such request, the
Corporation shall pay or reimburse the Director or Officer for the entire amount
of Liabilities incurred by the Director or Officer in connection with the
subject Proceeding (net of any Expenses previously advanced pursuant to Section
8.05).
(b) No indemnification shall be required to be paid by the Corporation
pursuant to Section 8.02 if, within such 60-day period, (i) a Disinterested
Quorum, by a majority vote thereof, determines that the Director or Officer
requesting indemnification engaged in misconduct constituting a Breach of Duty
or (ii) a Disinterested Quorum cannot be obtained.
(c) In either case of nonpayment pursuant to Section 8.03(b), the Board
shall immediately authorize by resolution that an Authority, as provided in
Section 8.04, determine whether the Director's or Officer's conduct constituted
a Breach of Duty and, therefore, whether indemnification should be denied
hereunder.
(d) (i) If the Board does not authorize an Authority to determine the
Director's or Officer's right to indemnification hereunder within such 60-day
period and/or (ii) if indemnification of the requested amount of Liabilities is
paid by the Corporation, then it shall be conclusively presumed for all purposes
that a Disinterested Quorum has determined that the Director or Officer did not
engage
B-21
<PAGE>
in misconduct constituting a Breach of Duty and, in the case of subsection (i)
above (but not subsection (ii)), indemnification by the Corporation of the
requested amount of Liabilities shall be paid to the Director or Officer
immediately.
8.04. Determination of Indemnification.
(a) If the Board authorizes an Authority to determine a Director's or
Officer's right to indemnification pursuant to Section 8.03, then the Director
or Officer requesting indemnification shall have the absolute discretionary
authority to select one of the following as such Authority:
(i) An independent legal counsel; provided, that such counsel
shall be mutually selected by such Director or Officer and by a majority
vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be
obtained, then by a majority vote of the Board;
(ii) A panel of three arbitrators selected from the panels of
arbitrators of the American Arbitration Association in Milwaukee,
Wisconsin; provided, that (A) one arbitrator shall be selected by such
Director or Officer, the second arbitrator shall be selected by a
majority vote of a Disinterested Quorum or, if a Disinterested Quorum
cannot be obtained, then by a majority vote of the Board, and the third
arbitrator shall be selected by the two previously selected arbitrators,
and (B) in all other respects, such panel shall be governed by the
American Arbitration Association's then existing Commercial Arbitration
Rules; or
(iii) A court pursuant to and in accordance with Section 180.0854
of the Statute.
(b) In any such determination by the selected Authority there shall exist
a rebuttable presumption that the Director's or Officer's conduct did not
constitute a Breach of Duty and that indemnification against the requested
amount of Liabilities is required. The burden of rebutting such a presumption by
clear and convincing evidence shall be on the Corporation or such other party
asserting that such indemnification should not be allowed.
(c) The Authority shall make its determination within 60 days of being
selected and shall submit a written opinion of its conclusion simultaneously to
both the Corporation and the Director or Officer.
(d) If the Authority determines that indemnification is required
hereunder, the Corporation shall pay the entire requested amount of Liabilities
(net of any Expenses previously advanced pursuant to Section 8.05), including
interest thereon at a reasonable rate, as determined by the Authority, within 10
days of receipt of the Authority's opinion; provided, that, if it is determined
by the Authority that a Director or Officer is entitled to indemnification as to
some claims, issues or matters, but not as to other claims, issues or matters,
involved in the subject Proceeding, the Corporation shall be required to pay (as
set forth above) only the amount of such requested Liabilities as the Authority
shall deem appropriate in light of all of the circumstances of such Proceeding.
B-22
<PAGE>
(e) The determination by the Authority that indemnification is required
hereunder shall be binding upon the Corporation regardless of any prior
determination that the Director or Officer engaged in a Breach of Duty.
(f) All Expenses incurred in the determination process under this Section
8.04 by either the Corporation or the Director or Officer, including, without
limitation, all Expenses of the selected Authority, shall be paid by the
Corporation.
8.05. Mandatory Allowance of Expenses.
(a) The Corporation shall pay or reimburse, within 10 days after the
receipt of the Director's or Officer's written request therefor, the reasonable
Expenses of the Director or Officer as such Expenses are incurred; provided, the
following conditions are satisfied:
(i) The Director or Officer furnishes to the Corporation an
executed written certificate affirming his or her good faith belief that
he or she has not engaged in misconduct which constitutes a Breach of
Duty; and
(ii) The Director or Officer furnishes to the Corporation an
unsecured executed written agreement to repay any advances made under
this Section 8.05 if it is ultimately determined by an Authority that he
or she is not entitled to be indemnified by the Corporation for such
Expenses pursuant to this Section 8.04.
(b) If the Director or Officer must repay any previously advanced
Expenses pursuant to this Section 8.05, such Director or Officer shall not be
required to pay interest on such amounts.
8.06. Indemnification and Allowance of Expenses of Certain Others.
(a) The Corporation shall indemnify a director or officer of an Affiliate
(who is not otherwise serving as a Director or Officer) against all Liabilities,
and shall advance the reasonable Expenses, incurred by such director or officer
in a Proceeding to the same extent hereunder as if such director or officer
incurred such Liabilities because he or she was a Director or Officer, if such
director or officer is a Party thereto because he or she is or was a director or
officer of the Affiliate.
(b) The Corporation shall indemnify an employee who is not a Director or
Officer, 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.
(c) The Board may, in its sole and absolute discretion as it deems
appropriate, pursuant to a majority vote thereof, indemnify (to the extent not
otherwise provided in Section 8.06(b) hereof) against Liabilities incurred by,
and/or provide for the allowance of reasonable Expenses of,
B-23
<PAGE>
an employee or authorized agent of the Corporation acting within the scope of
his or her duties as such and who is not otherwise a Director or Officer.
8.07. Insurance. The Corporation may purchase and maintain insurance on
behalf of a Director or Officer or any individual who is or was an employee or
authorized agent of the Corporation against any Liability asserted against or
incurred by such individual in his or her capacity as such or arising from his
or her status as such, regardless of whether the Corporation is required or
permitted to indemnify against any such Liability under this Article VIII.
8.08. Notice to the Corporation. A Director, Officer or employee shall
promptly notify the Corporation in writing when he or she has actual knowledge
of a Proceeding which may result in a claim of indemnification against
Liabilities or allowance of Expenses hereunder, but the failure to do so shall
not relieve the Corporation of any liability to the Director, Officer or
employee hereunder unless the Corporation shall have been irreparably prejudiced
by such failure (as determined, in the case of Directors or Officers only, by an
Authority selected pursuant to Section 8.04(a)).
8.09. Severability. If any provision of this Article VIII shall be deemed
invalid or inoperative, or if a court of competent jurisdiction determines that
any of the provisions of this Article VIII contravene public policy, this
Article VIII shall be construed so that the remaining provisions shall not be
affected, but shall remain in full force and effect, and any such provisions
which are invalid or inoperative or which contravene public policy shall be
deemed, without further action or deed by or on behalf of the Corporation, to be
modified, amended and/or limited, but only to the extent necessary to render the
same valid and enforceable.
8.10. Nonexclusivity of Article VIII. The rights of a Director, Officer
or employee (or any other person) granted under this Article VIII shall not be
deemed exclusive of any other rights to indemnification against Liabilities or
advancement of Expenses which the Director, Officer or employee (or such other
person) may be entitled to under any written agreement, Board resolution, vote
of shareholders of the Corporation or otherwise, including, without limitation,
under the Statute. Nothing contained in this Article VIII shall be deemed to
limit the Corporation's obligations to indemnify against Liabilities or advance
Expenses to a Director, Officer or employee under the Statute.
8.11. Contractual Nature of Article VIII; Repeal or Limitation of Rights.
This Article VIII shall be deemed to be a contract between the Corporation and
each Director, Officer and employee of the Corporation and any repeal or other
limitation of this Article VIII or any repeal or limitation of the Statute or
any other applicable law shall not limit any rights of indemnification against
Liabilities or allowance of Expenses then existing or arising out of events,
acts or omissions occurring prior to such repeal or limitation, including,
without limitation, the right to indemnification against Liabilities or
allowance of Expenses for Proceedings commenced after such repeal or limitation
to enforce this Article VIII with regard to acts, omissions or events arising
prior to such repeal or limitation.
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<PAGE>
ARTICLE IX. AMENDMENTS
9.01. By Shareholders. These by-laws may be altered, amended or repealed
and new by-laws may be adopted by the shareholders at any Annual Meeting or
Special Meeting at which a quorum is in attendance.
9.02. By Directors. These by-laws may also be altered, amended or
repealed and new by-laws may be adopted by the Board of Directors by affirmative
vote of a majority of the number of directors present at any meeting at which a
quorum is in attendance; provided, however, that the shareholders in adopting,
amending or repealing a particular by-law may provide therein that the Board of
Directors may not amend, repeal or readopt that by-law.
9.03. Implied Amendments. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
by-laws then in effect but is taken or authorized by affirmative vote of not
less than the number of shares or the number of directors required to amend the
by-laws so that the by-laws would be consistent with such action, shall be given
the same effect as though the by-laws had been temporarily amended or suspended
so far, but only so far, as is necessary to permit the specific action so taken
or authorized.
B-25
<TABLE>
<CAPTION>
Banta Corporation
Financial Highlights
- ---------------------------------------------------------------------------------------------------------------
Dollars in thousands (except per share data) 1998 1997 Percent Change
- ---------------------------------------------------------------------------------------------------------------
Statement of Earnings
<S> <C> <C> <C>
Net sales $1,335,796 $ 1,202,483 11.1%
Net earnings before income taxes 86,090 70,823 21.6
Net earnings 1 52,940 43,323 22.2
Net earnings before restructuring charge 52,940 51,423 3.0
Return on average shareholders' investment 2 12.8% 12.3% --
Balance Sheet
Working capital $ 158,129 $ 165,308 (4.3)%
Plant and equipment at cost 758,440 718,669 5.5
Long-term debt 120,628 130,065 (7.3)
Shareholders' investment 409,931 414,103 (1.0)
Debt to total capitalization 3 22.7% 23.9% --
Per Share
Basic earnings 1 $ 1.80 $ 1.45 24.1%
Diluted earnings 1 1.80 1.44 25.0
Diluted earnings before restructuring charge 1.80 1.71 5.3
Cash dividends paid .51 .47 8.5
Book value 14.51 13.90 4.4
Stock price range 217/8-347/8 221/2-297/8 --
- ---------------------------------------------------------------------------------------------------------------
1 Results of operations for 1997 include a restructuring charge of $8.1 million,
after tax, or $.27 per common share.
2 Calculated based on earnings before 1997 restructuring charge.
3 Long-term debt to long-term debt and shareholders' investment.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Banta Corporation
Five-Year Summary of Selected Financial Data Not Covered by Report of
Independent Public Accountants
- ---------------------------------------------------------------------------------------------------------------------------------
Dollars in thousands (except per share data) 1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
Summary of Earnings1
<S> <C> <C> <C> <C> <C>
Net sales $1,335,796 $1,202,483 $1,083,763 $1,022,650 $811,330
Net earnings 2 52,940 43,323 50,907 53,550 47,228
Net earnings before restructuring charge 52,940 51,423 50,907 53,550 47,228
Net earnings per common share:
Basic 2 1.80 1.45 1.64 1.76 1.57
Diluted 2 1.80 1.44 1.63 1.75 1.56
Diluted before restructuring charge 1.80 1.71 1.63 1.75 1.56
Dividends paid per common share .51 .47 .44 .37 .35
Financial Summary
Working capital 158,129 165,308 219,630 187,956 101,422
Net plant and equipment 318,635 338,357 319,939 313,718 293,662
Total assets 769,966 781,216 719,218 678,809 577,763
Long-term debt 120,628 130,065 133,696 134,953 67,834
Interest expense 10,825 11,062 10,214 9,891 5,902
Shareholders' investment 409,931 414,103 420,592 387,112 331,587
Book value per share of common stock 3 14.51 13.90 13.58 12.55 10.98
- ---------------------------------------------------------------------------------------------------------------------------------
1 All years comprised 52 weeks, except 1997 which comprised 53 weeks.
2 Results of operations for 1997 include a restructuring charge of $8.1
million, after tax, or $.27 per common share.
3 Book values per share of common stock are based on shares outstanding at
year-end.
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Position and Operations
- --------------------------------------------------------------------------------
Highlights Results for 1998 included the following:
* Sales increase of $133 million, up 11%
* Increased net earnings and record earnings per share
* Working capital reductions and improved Economic Profit
* Cash provided from operating activities of $135 million which was used to
support investments and key initiatives, including:
- Investment in the Corporation's Bomedia(a) digital content management
system
- Investment in digital technologies
- Expansion into the South American print market
- Integration of the Corporation's late 1997 acquisitions
- 1.7 million shares of stock repurchased
- Capital expenditures including capacity expansions for the book and
magazine markets
Sales for 1998 were $1.34 billion, an 11% increase over the prior year sales
of $1.20 billion. Influencing 1998 sales were the acquisitions effected in the
third and fourth quarters of 1997, increased volume within turnkey services,
increased print volume for the book and magazine markets and a slight reduction
in paper prices. Although the reduction in 1998 paper prices was less
significant than in prior years, fluctuations impact the Corporation's sales
proportionately given the substantial amount of purchased paper in the printing
operations.
Net earnings of $52.9 million for 1998 were 3% higher than the prior year
earnings of $51.4 million, prior to the 1997 restructuring charge of $8.1
million after tax ($.27 per share). Diluted earnings per share in 1998 reached a
record high at $1.80 per share compared with $1.71 per share in 1997, prior to
the restructuring charge.
During 1998, the Corporation increased its focus on asset management with
its Economic Profit model. Economic Profit monitors the contribution of asset
investments compared to the cost of capital with the expected benefit of
reducing working capital. With this continued focus during 1998, the Corporation
lowered year-end inventories by 22% compared to the prior year. Also, with an
11% increase in sales, receivables were only slightly above the prior year. As a
result of these initiatives and cost-containment efforts, the Corporation was
able to improve its Economic Profit during the first full year it used Economic
Profit to gauge its progress.
With strong cash flow from operating activities in 1998, Banta continued to
invest in new technologies and key growth sectors along with a continued
improvement in shareholder value through an aggressive share repurchase
initiative. During 1998, resources were devoted to developing the Corporation's
Bomedia digital content management system to automate customers' production
processes by streamlining information storage and retrieval for print and
electronic distribution. Initial software programs were developed in 1998 and
additional enhancements are expected to be available by mid-year 1999. Banta
also strengthened its digital and graphic design capabilities in 1998 through
two complementary acquisitions. These acquisitions will further position Banta
as a single-source provider of multiple graphic communications solutions. During
1998, the Corporation expanded into the South American print market by acquiring
a 30% equity interest in one of Chile's leading printers.
Also in 1998, the consolidation and integration of the single-use medical
and dental products supplier acquired in late 1997 was completed. Efforts
included the consolidation of a major production facility and a distribution
facility requiring the construction of a 200,000-square-foot distribution
center. Financial and manufacturing systems were also integrated during 1998.
The consolidation efforts will benefit 1999 and future years.
Finally, Banta continued to make a substantial investment in its share
repurchase initiative. The Corporation repurchased 1.7 million shares totaling
approximately $47 million in 1998 in addition to the $36 million of shares
repurchased in 1997. The previously authorized program has a remaining balance
available in excess of $60 million for repurchase. The Corporation will continue
its efforts to actively repurchase shares in 1999 as an opportunity to create
shareholder value.
Net Sales The Corporation operates in one primary business segment, print, with
other business operations in turnkey services and healthcare products. The print
segment provides comprehensive single source print and print-related services to
publishers of educational and general books, direct marketing materials,
consumer and business catalogs and special-interest magazines. Turnkey services
provides project management, product assembly, fulfillment and product
localization services primarily to technology companies in the U.S. and Europe.
Healthcare products is primarily engaged in the production of disposable
products used in outpatient clinics, dental offices and hospitals. This business
also has product lines with related applications for the food service industry
and film sales.
<PAGE>
Printing segment net sales of $1.0 billion for 1998 were $68 million, or 7%
higher than the prior year total of $936 million. Net sales for the printing
segment market classifications, as a percent of total print segment sales, were
as follows:
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Books 29% 30% 29%
Direct Marketing 25 25 25
Catalogs 24 23 24
Magazines 16 14 14
Other 6 8 8
- --------------------------------------------------------------------------------
100% 100% 100%
================================================================================
The print operations serving the magazine market achieved strong sales
growth in 1998 with its late 1997 acquisition of the Greenfield Printing &
Publishing Company and a significant capacity expansion at the Kansas City, Mo.,
facility. Advertising page counts were consistent with the high level in 1997,
which resulted in a continued favorable capacity utilization. Improvement in
book market sales resulted from increased trade book printing activity. This
increase was partially offset by the cyclically lower number of textbook
adoption programs in 1998 and lower customer order quantities to control
inventory levels. A strong textbook adoption period is projected for years 2000
and 2001, with some potential benefit for late 1999. Sales for direct marketing
materials were above 1997 due to sales volume added from the prior year
acquisition and added volumes at existing facilities. Catalog market sales in
1998 were above the prior year primarily due to increased volume for business
catalogs, however consumer catalog sales volume was lower. Sales in the "other"
category, which primarily includes digital imaging services, were flat compared
to the prior year.
Turnkey services sales were $226 million in 1998, an increase of 22% over
1997 sales. The European segment of turnkey services achieved strong sales
growth influenced by the successful launch of Microsoft's Windows 98 and new
opportunities to serve other large software customers. 1998 sales for the U.S.
segment of turnkey services were slightly above the prior year. Sales levels
within turnkey services are subject to greater variations, as several of the
Corporation's facilities are dependent on a small number of large customers. The
Corporation's sales levels are therefore closely correlated to the success of
its customers' products in the marketplace.
Healthcare products sales of $106 million in 1998 were significantly higher
than the prior year due to the acquisition of The Omnia Group ("Omnia") in the
third quarter of 1997.
In 1997, printing segment net sales were $936 million compared to $857
million in 1996. Book market sales in 1997 increased significantly over the
prior year as a result of higher educational volume and products for the trade
market. Catalog sales were level with the prior year while sales in direct
marketing materials increased due to added volume from both new and existing
facilities. A competitive pricing environment in catalogs and direct marketing
materials reduced both sales and margins. Sales volume grew in the magazine
market due to increased advertising pages and market share gains. The sales
increase in the "other" classification was primarily attributed to increased
digital imaging activity.
Increased 1997 sales for turnkey services resulted primarily from added
sales volume generated by new facilities opened during the year. This increase
was partially offset by the closing of three U.S. turnkey facilities in the
third quarter of 1997 that no longer met location or customer requirements.
Sales for healthcare products increased in 1997 due primarily to the inclusion
of sales from Omnia, which was acquired in the third quarter of 1997.
Cost of Goods Sold In 1998, cost of goods sold as a percent of sales was 80.1%
compared with 80.2% in 1997 and 79.8% in 1996.
Margins for the Corporation's printing segment were impacted by several
factors in 1998. Margins improved through increased utilization and efficiencies
within the magazine market. Improved productivity and utilization within the
information services division of the book market also led to increased margins.
These margin improvements were substantially offset by competitive pricing,
particularly in the markets for catalogs and direct marketing materials, and
underutilized plant capacity. Inefficiencies and underutilization negatively
impacted margins at the direct marketing mailing and fulfillment facility
acquired in late 1997. The Corporation is currently reviewing remedial actions
to eliminate this underperformance in the future.
Turnkey services margins were higher as a result of increased utilization at
both the U.S. and European operations. Successful product launches by European
customers had a positive impact on margins. In 1997, margins were negatively
impacted by losses incurred at the three facilities closed in late 1997 and
start-up costs at new facilities opened during the year. Turnkey services
expects to achieve single digit operating margins due to the substantial
material content included in sales. However, with significantly less capital
investment per facility, shareholder value can be created notwithstanding the
lower operating margins.
Operating margins for healthcare products were below the prior year as a
result of the consolidation and integration efforts related to the acquisition
of Omnia. These efforts were substantially completed at the end of 1998.
<PAGE>
The lower margins in 1997 compared to 1996 resulted from several factors.
Increasingly competitive pricing, particularly in the commercial markets,
impacted printing segment margins. This was partially offset by improved margins
in the book and magazine markets due to higher levels of utilization. Margins in
1996 were favorably impacted by changes in the LIFO valuation adjustment.
Turnkey services margins were lower in 1997 as a result of start-up costs at
three locations opened during the year, as well as losses incurred at three
other facilities prior to their shutdown. Margins for healthcare products in
1997 compared to 1996 were comparable.
Expenses Selling and administrative expenses as a percent of sales were 12.6%,
12.1% and 11.7% in 1998, 1997 and 1996, respectively. Selling and administrative
expenses increased $22.4 million (15.4%) in 1998 and $18.7 million (14.7%) in
1997. The acquisitions made late in 1997 accounted for approximately 60% of the
1998 increase. Also in 1998, Banta continued its investment in the Bomedia
digital content management system. Selling and administrative expenses as a
percent of sales were substantially higher since the initial software versions
related to this investment were released late in 1998. The remainder of the
increase was primarily a result of costs required to support 1998's increased
sales volume, including sales commissions and other support costs. The 1997
increase is attributable to the acquisitions made during the year and costs
required to support 1997's increased sales volume.
Earnings From Operations Earnings from operations as a percent of sales were
7.3%, 6.6% and 8.5% in 1998, 1997 and 1996, respectively. In 1997, earnings from
operations as a percent of sales were 7.7% before the restructuring charge. The
slight reduction in the 1998 percent was due to the aforementioned increase in
selling and administrative expenses to support the 1997 acquisitions and
investment initiatives. This decrease was partially offset by margin
improvements within the print and turnkey segments. The reduction in the percent
from 1996 to 1997 primarily resulted from margin erosion caused by competitive
pricing and increased selling and administrative expenses in 1997.
In the third quarter of 1997, the Corporation recorded a restructuring
charge of $13.5 million ($8.1 million after tax or $.27 per common share)
related to the sale, closing and discontinuation of certain businesses. At
January 3, 1998, the remaining reserve totaled $3.7 million. During 1998, the
restructuring initiatives were completed with the balance of the reserve used.
Interest Expense and Other Income (Expense) Interest expense was $10.8 million,
$11.1 million and $10.2 million in 1998, 1997 and 1996, respectively. During
1998, the Corporation incurred no significant new long-term debt. Lower interest
expense in 1998 primarily resulted from the repayment of long-term obligations
during 1997 and 1998. The impact on interest expense due to lower
weighted-average interest rates was substantially offset with higher levels of
average short-term borrowings. Interest expense rose in 1997 compared to 1996 as
a result of the short-term credit facilities used in the latter part of 1997 to
finance three acquisitions. Other expense was $0.6 million in 1998 compared to
other income of $2.3 million in 1997. The change is primarily due to reduced
interest income and other non-operating income, offset slightly by a gain of
$0.9 million on the sale of a building in 1998.
Pre-tax Earnings and Provision for Income Taxes Pretax earnings as a percent of
sales were 6.4%, 5.9% (7.0% before the restructuring charge), and 7.8% in 1998,
1997 and 1996, respectively. The reduction in 1998 pre-tax earnings as a percent
of sales compared to 1997, before restructuring, is due to increased operating
expenses offset partially by 1998 margin improvements.
Effective income tax rates were 38.5%, 38.8% and 39.5% in 1998, 1997 and
1996, respectively. The reduction in the effective tax rates in 1998 and 1997
was due to lower tax rates on earnings of the European operations and the impact
of tax exempt interest earned on short-term investments.
Liquidity and Capital Resources The Corporation has historically raised
long-term debt financing by issuing unsecured promissory notes to insurance
companies on a private placement basis. No significant long-term borrowings were
required over the last three years.
The Corporation generally raises short-term funds by selling commercial
paper. Such borrowings are primarily supported by a credit facility with a total
borrowing capacity of $70 million. Average outstanding short-term borrowings
during 1998, 1997 and 1996 were $24.5 million, $11.6 million and $0.8 million,
respectively. The 1998 increase resulted primarily from borrowings used to
repurchase shares of common stock and to finance acquisitions made late in 1997.
The 1997 increase resulted primarily from borrowings used to finance
acquisitions. Management believes the Corporation's liquidity continues to be
strong and the degree of leverage allows the Corporation to finance, at
attractive borrowing rates, its capital expenditures and share repurchase
initiatives, as well as any other investment opportunities that may arise.
During 1998, U.S. working capital decreased $36 million. This improvement
was primarily due to enhanced asset management. With an 11% increase in sales,
receivables were essentially flat with the prior year and inventories were down
$21 million. These improvements were partially offset by an increase in
short-term investments at European operations. The 1997 decrease in working
capital was due to financing acquisitions with cash and short-term borrowings.
The Corporation repurchased approximately 1.7 million shares of its common
stock at an average price of $27.67 in 1998 and approximately 1.5 million shares
at an average price of $24.89 in 1997. The share repurchase program authorized
by the Corporation's Board of Directors during 1998 has in excess of $60 million
remaining for future investment. During 1999 the Corporation expects to
<PAGE>
continue its repurchase of shares pursuant to this authorization as market
conditions warrant. Any future stock repurchases will be funded by a combination
of cash provided from operations and short-term borrowings.
The Corporation's capital investment program, which resulted in capital
spending of $55 million in 1998, reflects its commitment to maintain modern,
efficient plants and to be able to utilize new printing and digital imaging
technologies. Preliminary plans for 1999 are for capital commitments to exceed
$70 million. Cash requirements are expected to exceed that amount as the unpaid
balance of prior commitments exceeded $30 million at the end of 1998.
Other Matters During 1998, the Corporation completed an evaluation of its
computer software to determine its ability to handle dates beginning with the
year 2000. It was determined that a significant portion of the Corporation's
software was already year-2000 compliant. This evaluation also resulted in the
development of detailed plans to replace certain software and to reprogram other
software. Banta also implemented a program to confirm that business and
manufacturing system hardware, control systems and software supplied by
significant third party vendors is year-2000 ready. Although complete assurance
cannot be given, management currently believes it is devoting the necessary
resources to resolve all significant year-2000 issues, both Information
Technology ("IT") and non-IT related, by mid-1999. The Corporation is currently
conducting audits and operational readiness testing as well as pursuing
certification of year-2000 readiness from significant third party vendors.
The Corporation's contingency plan related to third party vendors is to
identify additional suppliers and alternate sources for essential materials,
primarily paper, in case one or more of its suppliers were not year-2000 ready.
The majority of the Corporation's internal IT-related systems has either been
replaced or is in the process of being replaced with year-2000 compliant
systems. Accordingly, a contingency plan has not been developed for internal
IT-related systems and is not currently considered necessary. The Corporation is
currently testing non-IT-related systems (HVAC, safety and security) and has not
determined whether a contingency plan is needed.
The risk of not being year-2000 compliant on a timely basis is that product
shipments could potentially be delayed, which could have an adverse impact on,
among other things, the Corporation's revenues and earnings. Additional
resources, which cannot be accurately estimated at this time, would be required
to process and fulfill customer orders.
During 1998, the Corporation spent approximately $3.5 million to upgrade and
replace its systems to ensure year-2000 readiness. The Corporation estimates it
will incur additional costs of $3 to $4 million in 1999. The majority of the
systems development costs will be capitalized.
Future Accounting Pronouncement In June 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities." This standard requires that
an entity recognize derivatives as either assets or liabilities on its balance
sheet and measure those instruments at fair value. The Corporation intends to
adopt this standard in 2000. The adoption of this standard is not expected to
have a material effect on the Corporation's financial statements.
Forward Looking Statements Due to the forward-looking nature of the preceding
information, the Corporation recommends readers reference the "Safe Harbor"
Statement which is reproduced on page 35 of this Annual Report to Shareholders.
Risk Management The Corporation is exposed to market risk from changes in
interest rates and foreign exchange rates. However, since essentially all
long-term debt is at fixed interest rates, exposure to interest rate
fluctuations is minimal. Exposure to adverse changes in foreign exchange rates
is also considered immaterial. Accordingly, management believes the Corporation
is not subject to market risk as defined in Item 305 of Regulation S-K.
<PAGE>
Report of Independent Public Accountants
To the Shareholders of Banta Corporation:
We have audited the accompanying consolidated balance sheets of Banta
Corporation (a Wisconsin corporation) and subsidiaries as of January 2, 1999 and
January 3, 1998, and the related consolidated statements of earnings,
comprehensive income, shareholders' investment and cash flows for each of the
fiscal years in the three-year period ended January 2, 1999. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Banta Corporation and
subsidiaries as of January 2, 1999 and January 3, 1998, and the results of their
operations and their cash flows for each of the fiscal years in the three-year
period ended January 2, 1999, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Milwaukee, Wisconsin
February 1, 1999
Responsibility for Financial Statements
The Consolidated Financial Statements and other financial references appearing
in this Annual Report were prepared by management in conformity with generally
accepted accounting principles appropriate for the circumstances. Where
acceptable alternative accounting principles exist, as described in Note 1 of
the Notes to the Consolidated Financial Statements, management uses its best
judgment in selecting those principles that reflect fairly the financial
position and results of operations of the Corporation. The accounting records
and systems of internal control are designed to reflect the transactions of the
Corporation in accordance with established policies and procedures. Financial
and operational reviews are undertaken by management to provide assurance that
the books and records properly reflect transactions authorized by the
Corporation.
The Consolidated Financial Statements appearing in this Annual Report have
been audited by Arthur Andersen LLP. Its audits were made in accordance with
generally accepted auditing standards and provide an independent review of those
management responsibilities that relate to the preparation of this Annual
Report.
The Audit Committee of the Board of Directors, comprised of directors who
are not officers or employees, reviews the financial and accounting reports of
the Corporation, including a review and discussion of the principles and
procedures used by management in preparation of the financial statements. The
independent auditors have full and free access to the Audit Committee and meet
with it to review the results of the audit engagement, the preparation of the
Annual Report and to discuss auditing and financial reporting matters.
<PAGE>
<TABLE>
<CAPTION>
Banta Corporation
CONSOLIDATED BALANCE SHEETS January 2, 1999, and January 3, 1998
- ---------------------------------------------------------------------------------------------------------------------------
Dollars in thousands 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 26,584 $ 16,432
Receivables, less reserves of $3,835 and $3,708, respectively 233,200 228,483
Inventories 74,724 95,341
Prepaid expenses 7,887 8,922
Deferred income taxes 12,225 16,498
- ---------------------------------------------------------------------------------------------------------------------------
354,620 365,676
Plant and Equipment:
Land 8,371 8,544
Buildings and improvements 111,143 107,298
Machinery and equipment 638,926 602,827
- ---------------------------------------------------------------------------------------------------------------------------
758,440 718,669
Less accumulated depreciation (439,805) (380,312)
- ---------------------------------------------------------------------------------------------------------------------------
318,635 338,357
Other Assets 20,989 14,524
Cost in Excess of Net Assets of Businesses Acquired 75,722 62,659
- ---------------------------------------------------------------------------------------------------------------------------
$ 769,966 $781,216
============================================================================================================================
Liabilities and Shareholders' Investment
Current Liabilities:
Short-term debt $ 36,140 $ 33,880
Accounts payable 107,649 106,235
Accrued salaries and wages 25,085 22,575
Other accrued liabilities 20,706 32,492
Current maturities of long-term debt 6,911 5,186
- ---------------------------------------------------------------------------------------------------------------------------
196,491 200,368
Non-current Liabilities:
Long-term debt 120,628 130,065
Deferred income taxes 22,214 19,831
Other non-current liabilities 20,702 16,849
- ---------------------------------------------------------------------------------------------------------------------------
163,544 166,745
Shareholders' Investment:
Common stock -- $.10 par value, authorized 75,000,000 shares; 28,260,957
and 29,793,279 shares issued and outstanding, respectively 2,826 2,979
Amount in excess of par value of stock -- 35,542
Accumulated other comprehensive loss (2,308) (3,498)
Retained earnings 409,413 379,080
- ---------------------------------------------------------------------------------------------------------------------------
409,931 414,103
- ---------------------------------------------------------------------------------------------------------------------------
$ 769,966 $ 781,216
============================================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Banta Corporation
CONSOLIDATED STATEMENTS OF EARNINGS For the Periods Ended January 2, 1999,
January 3, 1998, and December 28, 1996
- ---------------------------------------------------------------------------------------------------------------------------
Dollars in thousands (except earnings per share) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $1,335,796 $1,202,483 $1,083,763
Cost of goods sold 1,070,319 963,920 864,736
- ---------------------------------------------------------------------------------------------------------------------------
Gross Earnings 265,477 238,563 219,027
Selling and administrative expenses 167,932 145,519 126,855
Restructuring charge -- 13,500 ---
- ---------------------------------------------------------------------------------------------------------------------------
Earnings from Operations 97,545 79,544 92,172
Interest expense (10,825) (11,062) (10,214)
Other (expense) income, net (630) 2,341 2,249
- ---------------------------------------------------------------------------------------------------------------------------
Earnings Before Income Taxes 86,090 70,823 84,207
Provision for income taxes 33,150 27,500 33,300
- ---------------------------------------------------------------------------------------------------------------------------
Net Earnings $ 52,940 $ 43,323 $ 50,907
===========================================================================================================================
Basic Earnings per Share of Common Stock $ 1.80 $ 1.45 $ 1.64
===========================================================================================================================
Diluted Earnings per Share of Common Stock $ 1.80 $ 1.44 $ 1.63
===========================================================================================================================
The accompanying notes to consolidated financial statements are an integral part
of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Banta Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Periods Ended January 2, 1999,
January 3, 1998, and December 28, 1996
- --------------------------------------------------------------------------------------------------------------------------
Dollars in thousands 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net earnings $ 52,940 $ 43,323 $ 50,907
Adjustments to reconcile net earnings to net cash provided
by operating activities, net of acquisitions:
Depreciation and amortization 66,862 62,107 58,270
Deferred income taxes 195 (5,128) 1,326
Restructuring charge -- 13,500 --
Restructuring charges paid (3,733) (1,843) --
Change in assets and liabilities, net of effects of acquisitions:
(Increase) in receivables (4,077) (2,603) (6,562)
Decrease (increase) in inventories 20,017 (10,931) 1,831
Decrease (increase) in other current assets 1,036 (1,806) (1,179)
(Decrease) increase in accounts payable and accrued liabilities (4,625) 23,843 2,250
Decrease (increase) in other non-current assets 3,462 (832) 1,406
Other, net 3,782 (1,890) 2,574
- ---------------------------------------------------------------------------------------------------------------------------
Cash provided by operating activities 135,859 117,740 110,823
Cash Flows from Investing Activities
Capital expenditures (55,412) (63,065) (60,461)
Proceeds from sale of plant and equipment 6,634 3,571 2,376
Cash used for acquisitions, net of cash acquired (7,434) (75,598) --
Additions to long-term investments (5,741) (1,806) --
- ---------------------------------------------------------------------------------------------------------------------------
Cash used for investing activities (61,953) (136,898) (58,085)
Cash Flows from Financing Activities
Short-term debt proceeds, net 2,260 29,260 4,620
Proceeds from issuance of long-term debt -- 1,600 --
Payments on long-term debt (7,712) (5,697) (9,210)
Proceeds from exercise of stock options 3,738 3,418 2,797
Dividends paid and stock redemptions (15,018) (14,146) (13,560)
Repurchase of common stock (47,022) (36,262) (7,098)
- ---------------------------------------------------------------------------------------------------------------------------
Cash used for financing activities (63,754) (21,827) (22,451)
Net increase (decrease) in cash and cash equivalents 10,152 (40,985) 30,287
Cash and cash equivalents at beginning of year 16,432 57,417 27,130
- ---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 26,584 $ 16,432 $ 57,417
===========================================================================================================================
Cash payments for:
Interest, net of amount capitalized $ 12,101 $ 10,818 $ 10,312
Income taxes 33,481 30,583 30,292
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
<TABLE>
<CAPTION>
Banta Corporation
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT For the Periods Ended
January 2, 1999, January 3, 1998, and December 28, 1996
- ------------------------------------------------------------------------------------------------------------------------
Dollars in thousands
Common Stock
-------------------------- Amount in Accumulated
Shares Par Excess of Other Compre- Retained
Outstanding Value Par Value hensive Income Earnings Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 30, 1995 20,559,614 $2,056 $70,138 $ (118) $ 315,036 $387,112
---------
Net earnings 50,907 50,907
Other comprehensive income 1,591 1,591
---------
Comprehensive income 52,498
Cash dividends ($.44 per share) (13,553) (13,553)
Stock options exercised 183,894 18 2,779 2,797
Repurchase of common stock (303,600) (30) (7,068) (7,098)
Three-for-two stock split effected in
the form of a 50% stock dividend 10,292,824 1,029 (7) (1,029) (7)
Stock issued for acquisition 236,337 24 277 (1,458) (1,157)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, December 28, 1996 30,969,069 3,097 66,119 1,473 349,903 420,592
---------
Net earnings 43,323 43,323
Other comprehensive income (4,971) (4,971)
---------
Comprehensive income 38,352
Cash dividends ($.47 per share) (14,146) (14,146)
Stock options exercised 204,914 20 3,397 3,417
Repurchase of common stock (1,456,900) (146) (36,116) (36,262)
Stock issued for acquisition 75,715 8 2,131 2,139
Other 481 11 11
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, January 3, 1998 29,793,279 2,979 35,542 (3,498) 379,080 414,103
---------
Net earnings 52,940 52,940
Other comprehensive income 1,190 1,190
-----------
Comprehensive income 54,130
Cash dividends ($.51 per share) (15,018) (15,018)
Stock options exercised 166,578 17 3,721 3,738
Repurchase of common stock (1,698,900) (170) (39,263) (7,589) (47,022)
- ---------------------------------------------------------------------------------------------------------------------------------
Balance, January 2, 1999 28,260,957 $2,826 $ -- $ (2,308) $ 409,413 $409,931
=================================================================================================================================
</TABLE>
There are 300,000 shares of $10 par value preferred stock authorized, none of
which is issued. The accompanying notes to consolidated ?nancial statements are
an integral part of these statements.
<PAGE>
Note 1
Summary of Accounting Policies
Significant accounting policies followed by the Banta Corporation (the
"Corporation" or "Banta") in maintaining financial records and preparing
financial statements are:
Business The Corporation provides a wide variety of print and print-related
services to publishers of educational and general books, special-interest
magazines, consumer and business catalogs, and direct marketing materials. Banta
also offers global project management services, digital services and single-use
healthcare products. Customers, who are primarily located throughout the United
States and Europe, are granted credit on an unsecured basis. No single customer
accounted for more than 10% of consolidated sales during 1998, 1997 or 1996.
Year-end The Corporation's operating year ends on the Saturday closest to
December 31. Operating years 1998 and 1996 ended on January 2, 1999, and
December 28, 1996, respectively, and comprised 52 weeks each. The year 1997
ended on January 3, 1998, and comprised 53 weeks.
Principles of Consolidation The consolidated financial statements include the
accounts of the Corporation and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
Recognition of Sales In accordance with trade practices of the printing
industry, sales are recorded by the Corporation primarily upon completion of
manufacturing. Substantially all such sales are produced to customer
specifications, therefore, the Corporation has no material amounts of finished
goods inventory.
Earnings Per Share of Common Stock Basic earnings per share of common stock is
computed by dividing net earnings by the weighted average number of common
shares outstanding during the period. Diluted earnings per share of common stock
is computed by dividing net earnings by the weighted average number of common
shares and common equivalent shares, which relate entirely to the assumed
exercise of stock options. Average common shares for computation of basic
earnings per share were 29,334,298, 29,973,736 and 31,103,078 in 1998, 1997 and
1996, respectively. Average common and common equivalent shares for computation
of diluted earnings per share were 29,474,873, 30,113,098 and 31,249,169 in
1998, 1997 and 1996, respectively.
The shares outstanding used to compute diluted earnings per share for the
fourth quarter of 1998, 1997 and 1996 excluded outstanding options to purchase
1,295,246, 408,300 and 701,600 shares of common stock, respectively, with
weighted-average exercise prices of $26.67, $27.64 and $26.09, respectively. The
options were excluded because their exercise prices were greater than the
average market price of the common shares during the respective quarter and
their inclusion in the computation would have been antidilutive.
Foreign Currency Translation Financial statements of foreign subsidiaries are
translated into United States dollars in accordance with the provisions of
Statement of Financial Accounting Standards No. 52. Foreign currency transaction
gains and losses were insignificant in 1998, 1997 and 1996.
Capitalized Interest The Corporation capitalizes interest on major building and
equipment installations and depreciates the amount over the lives of the related
assets. The total interest incurred was $11,756,000 in 1998, $12,007,000 in
1997, and $12,030,000 in 1996 of which $931,000, $945,000 and $1,816,000 was
capitalized in 1998, 1997 and 1996, respectively.
Cash and Cash Equivalents Short-term investments, with maturities of less than
90 days at the date of purchase, are considered cash equivalents for purposes of
the accompanying consolidated balance sheets and statements of cash flows.
These investments are stated at cost which approximates market.
<PAGE>
Inventories Approximately 32% and 34% of total inventories in 1998 and 1997,
respectively, and the majority of the Corporation's inventories used in its
printing operations, are accounted for at cost, determined by a last-in,
first-out (LIFO) basis, which is not in excess of market. The remaining
inventories are stated at the lower of cost or market using the first-in,
first-out (FIFO) basis.
Inventories include material, labor and manufacturing overhead. Inventory
amounts at year-end are as follows:
- --------------------------------------------------------------------------------
Dollars in thousands 1998 1997
- --------------------------------------------------------------------------------
Raw materials and supplies $35,270 $55,026
Work-in-process and finished goods 43,963 44,908
- --------------------------------------------------------------------------------
FIFO value (current cost) of all inventories 79,233 99,934
Excess of current cost over carrying
value of LIFO inventories (4,509) (4,593)
- --------------------------------------------------------------------------------
Net inventories $74,724 $95,341
================================================================================
Plant and Equipment Plant and equipment (including major renewals and
betterments) are carried at cost and depreciated over the estimated useful life
of the assets. Substantially all depreciation is computed using the
straight-line method for financial reporting purposes. Accelerated depreciation
methods are used for tax purposes. Leasehold improvements are generally
amortized over the term of the leases on a straight-line basis. The general
range of useful lives for financial reporting is 15 to 25 years for buildings
and improvements and 3 to 10 years for machinery and equipment.
Product Development Costs incurred in the development of new products, prior to
establishing technological feasibility, are charged to expense as incurred.
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed," requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based upon the Corporation's product
development process, technological feasibility is established upon completion of
a detailed design. Capitalized software costs are amortized on a
product-by-product basis over a period of three to five years, depending on the
estimated useful life of the software. The unamortized balance, as included in
other assets, was $7,547,000 and $1,806,000 at January 2, 1999 and January 3,
1998, respectively.
Income Taxes Deferred tax liabilities and assets are determined based on the
difference between the book and the tax basis of assets and liabilities using
enacted tax rates in effect for the year in which the differences are expected
to reverse.
Cost in Excess of Net Assets of Businesses Acquired Cost in excess of net assets
of businesses acquired ("goodwill") is amortized and charged against operations
on a straight-line method over periods of 20 to 25 years. The realizability of
goodwill is evaluated annually based upon the undiscounted earnings of the
businesses acquired compared with the unamortized amount of goodwill.
Accumulated amortization of goodwill was $10,700,000 and $8,128,000 as of
January 2, 1999, and January 3, 1998, respectively.
Use of Estimates The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and related disclosures. Actual
results could differ from those estimates.
Comprehensive Income The Corporation adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" in 1998. Other comprehensive
income (loss) was comprised solely of foreign currency translation adjustments.
The Corporation does not record U.S. income taxes on foreign currency
translation adjustments because it does not provide for taxes on undistributed
earnings of foreign subsidiaries.
Derivative Financial Instruments In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This standard requires that an entity recognize derivatives
as either assets or liabilities on its balance sheet and measure those
instruments at fair value. The Corporation intends to adopt this standard in
2000. The Corporation occasionally utilizes interest rate swaps and foreign
currency forward exchange contracts to hedge specific interest rate and foreign
currency exposures. These derivative financial instruments are not used for
trading purposes. The Corporation was party to no material derivative financial
instrument contracts in 1998, 1997 or 1996.
<PAGE>
Internal-use Software The Corporation has elected early adoption of Statement of
Position 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," issued by the Accounting Standards Executive
Committee of the AICPA. Amortization of capitalized software is computed on an
item-by-item basis over a period of three to five years, depending on the
estimated useful life of the software.
Note 2
Acquisitions
Acquisition of Morgan Impresores S.A. In November 1998, the Corporation acquired
a 30 percent equity interest in Morgan Impresores S.A. ("Morgan") for
approximately $4.2 million in cash. Morgan, a Santiago, Chile-based company,
provides a wide variety of print materials and specialty product labels. The
equity method of accounting will be used to account for this investment
prospectively as of the acquisition date.
Acquisition of The Omnia Group In September of 1997, the Corporation acquired
The Omnia Group ("Omnia") for approximately $50.7 million in cash. Omnia is a
supplier of single-use medical and dental products. The purchase price plus the
liabilities assumed exceeded the fair value of the tangible assets and
identified intangible assets by $19.4 million. This acquisition was accounted
for as a purchase and accordingly, the accompanying financial statements of the
Corporation include the results of Omnia beginning with the acquisition date.
Acquisition of Greenfield Printing & Publishing In October of 1997, the
Corporation acquired Greenfield Printing & Publishing Company ("Greenfield") for
approximately $21.3 million in cash. Greenfield is a printer of special-interest
and trade magazines. The purchase price plus the liabilities assumed exceeded
the fair value of the tangible assets and the identified intangible assets by
$13.8 million. This acquisition was accounted for as a purchase.
Other Acquisitions During 1998, the Corporation acquired all the outstanding
capital stock of Type Designs, Inc., which provides a full range of design and
graphic production services. The Corporation also acquired the assets and
assumed certain liabilities of Meadows Information Systems, Inc., which develops
page layout and design software products. These acquisitions were accounted for
as purchases with a combined acquisition price of $4.2 million.
In September of 1997, the Corporation acquired Bock West, Inc. ("Bock West")
for 75,715 shares of the Corporation's common stock valued at $2.1 million. Bock
West provides mailing and fulfillment services. In connection with this
transaction the Corporation repaid $3.3 million of Bock West's debt which was
classified as cash used for acquisitions in the Statement of Cash Flows.
During 1996, the Corporation acquired Packaging Fulfillment Specialists,
Inc., which provides fulfillment services to publishers. This purchase price
consisted of 236,337 shares of the Corporation's common stock.
Note 3
Short-term Debt
The Corporation generally obtains short-term financing through the issuance of
commercial paper and borrowing against lines of credit with banks. At January 2,
1999, the Corporation had credit facilities totaling $78 million. Of this total,
$70 million represents a credit facility made available by three banks, which
can be used to support both commercial paper and unsecured borrowings. The
remaining $8 million is a secured credit facility denominated in Irish punts,
which is used to finance the Corporation's European operations.
At January 2, 1999, the Corporation had notes payable outstanding
aggregating $36.1 million against the credit facilities, which consisted
entirely of commercial paper with a weighted average interest rate of 5.6%. At
January 3, 1998, the Corporation had notes payable outstanding aggregating $33.9
million, which consisted entirely of commercial paper with a weighted average
interest rate of 6.0%. The maximum outstanding borrowings during 1998 and 1997
were $44.5 million and $40.1 million, respectively. The average outstanding
borrowings during 1998 and 1997 were $24.5 million and $11.6 million,
respectively. The weighted-average interest rates on such borrowings during 1998
and 1997 were 5.6% and 5.8%, respectively.
<PAGE>
Note 4
Long-term Debt
Long-term debt, including amounts payable within one year, consists of the
following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Dollars in thousands Maturities 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Promissory Notes:
6.81% 2004-2010 $35,000 $ 35,000
7.62% 1999-2009 25,000 25,000
7.98% 2000-2010 25,000 25,000
9.53% 1999-2005 12,727 14,545
7.38% 2005-2015 15,000 15,000
10.11% 1999 1,500 4,000
Notes Payable and Capital Lease Obligations,
generally fixed rates of interest, 6.0% to 9.8% 1999-2002 6,322 7,926
Industrial Revenue Bonds:
Floating rates of interest, approximating 80% of the prime rate 1999-2015 6,450 6,600
Fixed rate of interest at 5.8% to 7.5% 1999-2002 540 2,180
- -----------------------------------------------------------------------------------------------------------
127,539 135,251
Less current maturities (6,911) (5,186)
- -----------------------------------------------------------------------------------------------------------
Long-term debt $120,628 $130,065
===========================================================================================================
</TABLE>
Maturities of long-term debt during the next five years are: 1999,
$6,911,000; 2000, $7,117,000; 2001, $9,261,000; 2002, $12,489,000; and 2003,
$6,580,000. Industrial Revenue Bonds aggregating $1,790,000 are secured by
certain real estate and equipment.
The Promissory Note agreements contain various operating and financial
covenants. The more restrictive of these covenants require that working capital
be maintained at a minimum of $40,000,000, current assets be 150% of current
liabilities and consolidated tangible net worth be not less than $125,000,000.
Funded debt of up to 50% of the sum of consolidated net worth and consolidated
funded debt may be incurred without prior consent of the noteholders. The
Corporation may incur short-term debt of up to 25% of consolidated net worth at
any time and is required to be free of all such obligations in excess of 12.5%
of consolidated net worth for 60 consecutive days each year. The agreements also
contain limitations on leases and ratable security on certain types of liens.
The Corporation was in compliance with all of its significant debt covenants
throughout 1998, 1997 and 1996.
One of the Promissory Note agreements contains covenants, which restrict the
payment of dividends. As of January 2, 1999, $127,162,000 of retained earnings
was available for the payment of dividends under the most restrictive of such
covenants.
Based on the borrowing rates currently available to the Corporation for
loans with similar terms and average maturities, the fair value of long-term
debt as of January 2, 1999, including current maturities, was $145,493,000.
Note 5
Stock Option Plans for Management Employees
At January 2, 1999, the Corporation had options outstanding or available for
grant under two stock option plans - the 1995 Equity Incentive Plan and the 1991
Stock Option Plan. Under the plans, options to purchase common stock are granted
to officers and key employees at prices not less than the fair market value of
the common stock on the date of the grant. Options granted under the 1991 plan
may be exercised up to five years after the date of the grant. Options granted
under the 1995 plan may be exercised up to ten years from the date of the grant.
At January 2, 1999, 96,984 shares of the Corporation's common stock were
reserved for future option grants.
The plans permit participants to use option shares for the purpose of
offsetting income tax liabilities incurred upon the exercise of stock options
and allow for grants of either Incentive Stock Options or Nonstatutory Stock
Options. The plans include provisions that authorize options to be granted to
non-employee Directors.
<PAGE>
The following table summarizes activity under the stock option plans:
- --------------------------------------------------------------------------------
Weighted
Options Price Range Average Price
- --------------------------------------------------------------------------------
Outstanding at
December 30, 1995 1,712,030 $11 - $29 $21
Granted 442,300 21 - 29 21
Exercised (316,911) 11 - 24 14
Canceled or expired (58,188) 21 - 28 24
- --------------------------------------------------------------------------------
Outstanding at
December 28, 1996 1,779,231 15 - 29 22
Granted 402,500 25 - 26 26
Exercised (398,461) 15 - 23 18
Canceled or expired (60,003) 21 - 28 25
- --------------------------------------------------------------------------------
Outstanding at
January 3, 1998 1,723,267 18 - 29 24
Granted 575,200 24 - 31 26
Exercised (287,777) 18 - 28 23
Canceled or expired (65,320) 21 - 29 25
- --------------------------------------------------------------------------------
Outstanding at
January 2, 1999 1,945,370 $20 - $31 $25
================================================================================
Of the options outstanding at January 2, 1999, 968,534 were exercisable at
prices ranging from $20 to $31, and a weighted average of $24. The balance of
the options become exercisable at various times through 2001 at prices ranging
from $21 to $29, and a weighted average of $26.
During 1998, 1997 and 1996, 121,199, 193,547 and 133,017 shares,
respectively, were submitted to the Corporation in partial payment for stock
option exercises and to offset income tax liabilities. The Corporation canceled
these shares.
The Corporation accounts for stock options pursuant to the provisions of APB
Opinion No. 25, which requires no compensation cost to be recognized when stock
options are granted. If the Corporation had charged earnings for the
compensation cost related to its stock option grants determined consistent with
Financial Accounting Standards Board Statement No. 123, its net earnings and
earnings per share would have been reduced to the following pro forma amounts:
- --------------------------------------------------------------------------------
Dollars in thousands,
except per share amounts 1998 1997 1996
- --------------------------------------------------------------------------------
Net Earnings:
As Reported $52,940 $43,323 $50,907
Pro Forma 50,895 42,032 50,168
Earnings per share of common stock:
Basic: As Reported $ 1.80 $ 1.45 $ 1.64
Pro Forma 1.74 1.40 1.61
Diluted: As Reported 1.80 1.44 1.63
Pro Forma 1.73 1.40 1.61
Because the Statement No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1998, 1997 and 1996, respectively: risk-free
interest rates of 4.5%, 6.2% and 6.6%; expected dividend yields of 2.0%, 1.7%
and 1.9%; expected lives of 5.7, 4.9 and 4.9 years; expected volatility of 30%,
25% and 26%. The weighted average fair value of the options granted in 1998,
1997 and 1996 was $6.73, $7.65 and $5.86, respectively.
<PAGE>
Note 6
Operating Leases
The Corporation leases a variety of assets used in its operations including
manufacturing facilities, warehouses, office space, office equipment,
automobiles and trucks. Annual rentals amounted to $16,219,000, $12,748,000 and
$9,816,000 in 1998, 1997 and 1996, respectively. Minimum rental commitments for
the years 1999 through 2003 aggregate $10,234,000, $10,570,000, $9,538,000,
$8,060,000 and $8,159,000, respectively, and $34,662,000 thereafter.
Note 7
Restructuring Charge
In the third quarter of 1997, the Corporation recorded a restructuring charge of
$13.5 million ($8.1 million after tax and $.27 per common share) related to the
sale of its point-of-purchase sign and display business, the discontinuation of
the intaglio print-based security products business and the interactive video
operation, and the closing of three Banta Global Turnkey facilities. During
1998, the restructuring initiatives were completed.
The following table presents the components of the Corporation's
restructuring reserves together with the payments against the reserves from
their establishment through January 2, 1999:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Original
Restructuring Used in Used in Year-End
Dollars in thousands Charge 1997 1998 Balance
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Write down of property, plant and equipment, and other assets $ 7,924 $(7,924) $ -- $
Expenditures for closing facilities 5,576 (1,843) (3,733) --
- ---------------------------------------------------------------------------------------------------------------------------
Total $ 13,500 $(9,767) $(3,733) $ --
===========================================================================================================================
</TABLE>
Note 8
Employee Benefit Plans
The Corporation and its unions have several pension plans covering substantially
all employees. The plans are non-contributory and benefits are based on an
employee's years of service and earnings. The Corporation makes contributions to
the qualified plans each year, at least equal to the minimum required
contributions as defined by the Employee Retirement Income Security Act (ERISA)
of 1974. The Corporation also maintains a non-qualified supplemental retirement
plan, which is not funded.
The Corporation and its subsidiaries also provide non-contractual limited
healthcare benefits for certain retired employees. The program provides for
defined initial contributions by the Corporation toward the cost of
postretirement healthcare coverage. The balance of the cost is borne by the
retirees. The program provides that increases in the Corporation's contribution
toward coverage will not exceed 4% per year. Due to the terms of the
Corporation's postretirement healthcare program, assumed healthcare cost rate
trends do not affect the Corporation's costs.
Net periodic pension and postretirement benefit costs for the
Corporation-sponsored plans, were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Dollars in thousands Pension Benefits Other Benefits
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Service cost-benefits earned during the year $ 5,261 $3,952 $ 4,137 $1,011 $ 572 $ 641
Interest cost on projected benefit obligation 5,930 5,310 5,029 781 657 525
Expected return on plan assets (8,001) (6,606) (5,602) -- -- --
Amortization of prior service cost 437 444 417 26 -- --
Amortization of transition obligation (asset) (395) (400) (400) 254 255 255
Amortization of net (gain) loss (25) (253) 54 18 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net pension and other benefits expense $ 3,207 $2,447 $ 3,635 $2,090 $1,484 $ 1,421
=============================================================================================================================
</TABLE>
<PAGE>
Significant assumptions used in determining net pension and postretirement
benefit expense for the Corporation's plans are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Pension Benefits Other Benefits
- ---------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate 7.00% 7.75% 7.25% 7.00% 7.75% 7.25%
Expected rate of increase in compensation 4.0 4.0 5.0 -- -- --
Expected long-term rate of return on plan assets 9.5 9.0 9.0 -- -- --
</TABLE>
All of the Corporation's pension plans, except the supplemental retirement
plan, have assets in excess of the accumulated benefit obligation. The projected
benefit obligation and accumulated benefit obligation for the supplemental
retirement plan were $8,792,000 and $6,016,000 in 1998, respectively and
$7,903,000 and $5,457,000 in 1997, respectively. Plan assets for the funded
plans include commingled funds, marketable equity securities and corporate and
government debt securities. The following table presents a reconciliation of the
funded status of the plans using an assumed discount rate of 7.00% for 1998 and
1997:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Dollars in thousands Pension Benefits Other Benefits
- ---------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
Change in benefit obligation:
<S> <C> <C> <C> <C>
Benefit obligation at beginning of year $ 86,382 $73,814 $10,957 $ 7,634
Service cost 5,261 3,952 1,011 572
Interest cost 5,930 5,310 781 657
Change in assumptions 798 8,127 (387) 2,209
Participants' contributions -- -- 279 221
Acquisitions -- -- 176 --
Plan amendments -- (1,437) 506 --
Benefits paid (4,117) (3,384) (528) (336)
- ---------------------------------------------------------------------------------------------------------------------------
94,254 86,382 12,795 10,957
- ---------------------------------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year 94,069 81,299 -- --
Actual return on plan assets 13,307 12,850 -- --
Employer contributions 2,320 3,304 249 115
Participants' contributions -- -- 279 221
Benefits paid (4,117) (3,384) (528) (336)
- ---------------------------------------------------------------------------------------------------------------------------
105,579 94,069 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Plan assets (in excess of) less than benefit obligation (11,325) (7,687) 12,795 10,957
Unrecognized net gain (loss) 18,816 14,375 (1,427) (1,833)
Unrecognized prior service cost (3,049) (3,486) (481) --
Unrecognized net asset (obligation) 1,340 1,735 (3,564) (3,818)
Adjustment required to recognize minimum liability 1,343 1,626 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Accrued pension cost $ 7,125 $ 6,563 $ 7,323 $ 5,306
-------------------------------------------------------
Intangible asset recognized in Consolidated Balance Sheets $ 1,343 $ 1,626 $ -- $ --
===========================================================================================================================
</TABLE>
Approximately 35% of the Corporation's non-salaried employees are covered by
multi-employer union-sponsored, collectively bargained defined benefit pension
plans. Pension expense includes $2,275,000, $2,284,000 and $1,996,000 in 1998,
1997 and 1996, respectively, attributable to the multi-employer plans. These
costs are determined in accordance with the provisions of negotiated labor
contacts.
<PAGE>
The Corporation has established an Incentive Savings Plan (401K) for
substantially all of its non-bargaining unit employees. Employee contributions
are partially matched by the Corporation in accordance with criteria set forth
in the plan. Matching contributions charged to earnings for 1998, 1997 and 1996
were $2,624,000, $2,408,000 and $2,341,000, respectively.
Note 9
Capital Stock
In March 1996, the Corporation distributed a three-for-two stock split effected
in the form of a 50% stock dividend. The par value of the additional shares
issued was capitalized by a transfer of $1,029,000 from retained earnings to
common stock.
Prior to 1997, the Corporation was authorized by the Board of Directors to
purchase up to 1,500,000 shares of outstanding common stock in the open market.
As of December 28, 1996, 303,600 shares of the Corporation's stock had been
repurchased under this authority for an aggregate cost of $7,098,000. During
1997 an additional 1,158,900 shares were repurchased under this authority for an
aggregate cost of $28,713,000. In 1997 the Corporation was authorized by the
Board of Directors to purchase up to an additional 1,500,000 shares of
outstanding common stock in the open market. As of January 3, 1998, 298,000
shares of the Corporation's stock had been repurchased under this authority at
an aggregate cost of $7,549,000. During 1998 an additional 125,000 shares were
repurchased under this authority for an aggregate cost of $3,232,000.
In April 1998 the Board of Directors authorized a new program for the
repurchase of $60 million of common stock. This program was expanded in October
1998 for the repurchase of an additional $50 million of common stock. As of
January 2, 1999, 1,573,900 shares of the Corporation's stock had been
repurchased under this authority at an aggregate cost of $43,790,000. All of the
repurchased shares were subsequently canceled.
Pursuant to the Corporation's Shareholder Rights Plan, one common stock
purchase right is included with each outstanding share of common stock. In the
event the rights become exercisable, each right will initially entitle its
holder to buy one-half of one share of the Corporation's common stock at a price
of $40 per share (equivalent to $20 per one-half share), subject to adjustment.
The rights will become exercisable if a person or group acquires 20% or more of
the Corporation's common stock or announces a tender offer for 20% or more of
the common stock. Upon the occurrence of certain events, including a person, or
group, acquiring 20% or more of the Corporation's common stock, each right will
entitle the holder to purchase, at the right's then-current exercise price,
common stock of the Corporation or, depending on the circumstances, common stock
of the acquiring corporation having a market value of twice such exercise price.
The rights may be redeemed by the Corporation at a price of one cent per right
at any time prior to the rights becoming exercisable or prior to their
expiration in November 2001.
<PAGE>
Note 10
Income Taxes
The provision for income taxes consists of the following:
- --------------------------------------------------------------------------------
Dollars in thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Current:
Federal $25,525 $25,531 $25,354
State 5,958 5,772 5,754
Foreign 1,472 1,325 866
- --------------------------------------------------------------------------------
32,955 32,628 31,974
Deferred 195 (5,128) 1,326
- --------------------------------------------------------------------------------
Provision for income taxes $33,150 $27,500 $33,300
================================================================================
Below is a reconciliation of the statutory federal income tax rate and the
effective income tax rate:
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Statutory federal tax rate 35.0% 35.0% 35.0%
State and local income
taxes, less applicable
federal tax benefit 4.2 3.9 4.1
Other, net (.7) (.1) .4
- --------------------------------------------------------------------------------
Effective income tax rate 38.5% 38.8% 39.5%
================================================================================
Temporary differences which give rise to the deferred tax assets and
liabilities at January 2, 1999 and January 3, 1998 are as follows:
- --------------------------------------------------------------------------------
Dollars in thousands 1998 1997
- --------------------------------------------------------------------------------
Deferred tax assets:
Vacation accrual $ 3,224 $ 2,735
Other accrued liabilities 5,331 10,202
Reserve for uncollectible accounts 1,359 1,643
Other 2,311 1,918
- --------------------------------------------------------------------------------
$ 12,225 $ 16,498
================================================================================
Deferred tax liabilities:
Accelerated depreciation $(31,639) $(33,026)
Goodwill amortization (1,143) 5,427
Accrued pension cost 2,296 2,139
Accrued postretirement benefit cost 2,958 2,109
Deferred compensation 2,290 2,159
Other 3,024 1,361
- --------------------------------------------------------------------------------
$(22,214) $(19,831)
================================================================================
<PAGE>
No United States deferred taxes have been provided on the undistributed
foreign subsidiary earnings which aggregated $7,161,000 at January 2, 1999, and
are considered permanently invested. If undistributed earnings were remitted,
tax credits would substantially offset any resulting domestic tax liability.
The non-United States component of income before income taxes was
$5,498,000, $3,886,000 and $2,444,000 in 1998, 1997 and 1996, respectively.
Note 11
Contingencies
The Corporation is involved in various claims, including those related to
environmental matters, and lawsuits arising in the normal course of business. In
the opinion of management, the ultimate liability, if any, for these claims and
lawsuits beyond any reserves already provided, will not have a material adverse
effect on the consolidated statements of earnings of the Corporation.
Note 12
Segment Information
The Corporation operates in one primary business segment, print, with other
business operations in turnkey services and healthcare products. The print
segment provides printed products and print-related services to publishers of
educational and general books, special-interest magazines, consumer and business
catalogs, and direct marketing materials. Turnkey services provides project
management, product assembly, fulfillment and product localization services
primarily to technology companies in the United States and Europe. Healthcare
products is primarily engaged in the production of disposable products used in
outpatient clinics, dental offices and hospitals. This business also has a
separate product line with related applications for the food service industry.
<PAGE>
These operations are strategic business units that service different markets
and offer different products and services. The accounting policies of the
segments are the same as those described in the Summary of Accounting Policies.
Intersegment sales are not significant. The Corporation evaluates performance
based on earnings from operations. Summarized segment data for 1998, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Dollars in thousands Printing All Other 1 Total
- --------------------------------------------------------------------------------------------------------------------------
1998
<S> <C> <C> <C>
Net sales $1,003,913 $ 331,883 $1,335,796
Intersegment sales 6,699 688 7,387
Depreciation and
amortization 59,274 5,560 64,834
Earnings from operations 92,764 22,122 114,886
Significant non-cash items -- -- --
Total assets 542,508 204,506 747,014
Capital expenditures 43,420 9,942 53,362
1997
Net sales $ 936,019 $ 266,464 $1,202,483
Intersegment sales 7,501 1,215 8,716
Depreciation and
amortization 56,241 4,640 60,881
Earnings from operations 2 91,456 15,541 106,997
Significant non-cash items:
Restructuring reserve 9,500 4,000 13,500
Total assets 568,298 191,793 760,091
Capital expenditures 54,092 7,460 61,552
1996
Net sales $ 856,863 $ 226,900 $1,083,763
Intersegment sales 10,411 889 11,300
Depreciation and
amortization 53,475 4,143 57,618
Earnings from operations 87,359 17,538 104,897
Significant non-cash items -- -- --
Total assets 571,947 145,812 717,759
Capital expenditures 53,153 6,614 59,767
1 "All Other" includes the operations within turnkey services and healthcare
products which have been aggregated.
2 Earnings from operations before restructuring charge of $13.5 million.
</TABLE>
<PAGE>
The following table presents a reconciliation of certain segment information
to the totals contained in the Consolidated Financial Statements:
- --------------------------------------------------------------------------------
Dollars in thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Earnings from operations:
Reportable segment
earnings $ 92,764 $ 91,456 $ 87,359
Other segment earnings 22,122 15,541 17,538
Unallocated corporate
expenses (17,341) (13,953) (12,725)
Restructuring charge -- (13,500) --
Interest expense (10,825) (11,062) (10,214)
Other income (expense) (630) 2,341 2,249
- --------------------------------------------------------------------------------
Earnings before
income taxes $ 86,090 $ 70,823 $ 84,207
================================================================================
Total assets:
Reportable segment
assets $ 542,508 $ 568,298 $ 571,947
Other segment assets 204,506 191,793 145,812
Intergroup receivable
elimination (1,219) (2,297) (3,071)
Advances to segments
elimination -- -- (19,990)
Other unallocated
amounts 24,171 23,422 24,520
- --------------------------------------------------------------------------------
Consolidated total
assets $ 769,966 $ 781,216 $719,218
================================================================================
Summarized geographic data for the Corporation's operations for 1998, 1997
and 1996 are as follows (net sales are attributed to countries primarily based
on location of operation):
- --------------------------------------------------------------------------------
Dollars in thousands 1998 1997 1996
- --------------------------------------------------------------------------------
Net sales
United States $1,144,741 $1,056,791 $ 945,740
Ireland 127,110 93,798 94,578
Other foreign countries 63,945 51,894 43,445
- --------------------------------------------------------------------------------
$1,335,796 $1,202,483 $1,083,763
================================================================================
Assets
United States $ 666,678 $ 703,833 $ 639,730
Ireland 79,712 47,770 55,531
Other foreign countries 23,576 29,613 23,957
- --------------------------------------------------------------------------------
$ 769,966 $ 781,216 $ 719,218
================================================================================
<PAGE>
UNAUDITED QUARTERLY FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
The following table presents financial information by quarter for the years 1998
and 1997.
<TABLE>
<CAPTION>
Dollars in thousands (except per share data)
- ---------------------------------------------------------------------------------------------------------------------------
Quarter Ended Quarter Ended Quarter Ended Quarter Ended
March June September December
1998 1997 1998 1997 1998 1997 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $330,810 $275,363 $316,000 $276,217 $343,681 $298,322 $345,305 $352,581
Gross earnings 64,814 52,722 66,125 57,646 70,739 59,707 63,799 68,488
Net earnings 11,032 10,018 13,394 12,584 16,230 5,602* 12,284 15,119
Basic earnings
per share .37 .33 .45 .42 .55 .19 .43 .51
Diluted earnings
per share .37 .33 .45 .42 .55 .19 .43 .50
* Third quarter 1997 results of operations include a restructuring charge of
$8.1 million, after tax ($.27 per common share).
</TABLE>
<TABLE>
<CAPTION>
DIVIDEND RECORD AND MARKET PRICES
- ---------------------------------------------------------------------------------------------------------------------------
Per Share of Common Stock
- ---------------------------------------------------------------------------------------------------------------------------
First Second Third Fourth Entire
Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1998 dividends paid $ .12 $ .13 $ .13 $ .13 $ .51
Price range:
High $ 32 1/4 $ 34 7/8 $ 31 5/8 $ 283/8 $ 34 7/8
Low 24 7/16 29 7/8 2511/16 217/8 21 7/8
1997 dividends paid $ .11 $ .12 $ .12 $ .12 $ .47
Price range:
High $ 26 5/8 $ 29 1/2 $29 7/8 $2811/16 $ 29 7/8
Low 22 1/2 24 7/8 26 1/8 243/4 22 1/2
</TABLE>
Prior to December 18, 1998, Banta Corporation was included in the Nasdaq
National Market List and the symbol was BNTA. On November 23, 1998, the
Corporation formally received approval for listing its common stock on the New
York Stock Exchange. Banta stock began trading on the New York Stock Exchange on
December 18, 1998, under the new symbol BN. The stock prices listed above are
the high and low trades. As of February 1, 1999, the Corporation had 2,384
shareholders of record.
EXHIBIT 21
SUBSIDIARIES OF BANTA CORPORATION
OWNERSHIP BY
BANTA CORPORATION STATE OR JURISDICTION
OR ONE OF ITS OF INCORPORATION
LIST OF SUBSIDIARIES SUBSIDIARIES OR ORGANIZATION
- -------------------- ------------------ --------------------
Banta Direct Marketing, Inc. 100% Minnesota
Banta Europe Corp. 100% Ireland
Banta Healthcare Products, Inc. 100% Wisconsin
Banta Security Printing, Inc. 100% Wisconsin
Banta Global Turnkey B.V. 100% The Netherlands
Banta Global Turnkey France 100% France
Banta Global Turnkey Limited 100% Ireland
Banta Global Turnkey Limited 100% Scotland
Banta Packaging & Fulfillment, Inc. 100% Wisconsin
Banta Software Services
International, Inc. 100% Minnesota
Banta Specialty Converting, Inc. 100% Wisconsin
Danbury Printing & Litho, Inc. 100% Minnesota
KnowledgeSet Corporation 100% California
New Frontiers Information Corporation 100% Massachusetts
One Pass Network, Inc. 100% California
United Graphics Inc. 100% Washington
Wrapper, Inc. 100% Wisconsin
Banta Publications-Greenfield, Inc. 100% Ohio
Cidex International, Inc. 100% Wisconsin
Banta Direct Marketing-Berkeley, Inc. 100% Minnesota
Omnia I, Inc. 100% Delaware
Tidi Products, Inc. 100% Delaware
Meadows Information Systems, Inc. 100% Wisconsin
Greenfield Holdings Corp. 100% Delaware
Banta Cayman Islands Corp. 100% Cayman Islands
Type Designs, Inc. 100%` Georgia
Ad Run Around, Inc. 100% Georgia
Banta Ireland Corp. 100% Wisconsin
Turnkey Services Holding Corp. 100% Wisconsin
Banta Holding Corp. 100% Wisconsin
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports, included and incorporated by reference in this Form 10-K, into Banta
Corporation's previously filed Form S-8 Registration Statement Nos. 33-40036,
33-54576, 33-61683 and 33-01289 and Form S-3 Registration Statement No.
33-55829.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF BANTA CORPORATION AS OF AND FOR THE TWELVE
MONTHS ENDED JANUARY 2, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> JAN-02-1999
<CASH> 1,846
<SECURITIES> 24,738
<RECEIVABLES> 237,035
<ALLOWANCES> 3,835
<INVENTORY> 74,724
<CURRENT-ASSETS> 354,620
<PP&E> 758,440
<DEPRECIATION> 439,805
<TOTAL-ASSETS> 769,966
<CURRENT-LIABILITIES> 196,491
<BONDS> 120,628
0
0
<COMMON> 2,826
<OTHER-SE> 407,105
<TOTAL-LIABILITY-AND-EQUITY> 769,966
<SALES> 1,335,796
<TOTAL-REVENUES> 1,335,796
<CGS> 1,070,319
<TOTAL-COSTS> 1,070,319
<OTHER-EXPENSES> 167,932
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,825
<INCOME-PRETAX> 86,090
<INCOME-TAX> 33,150
<INCOME-CONTINUING> 52,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,940
<EPS-PRIMARY> 1.80 <F1>
<EPS-DILUTED> 1.80
<FN>
<F1>THE EPS UNDER THE "EPS - PRIMARY" TAG REPRESENTS BASIC EARNINGS PER SHARE.
</FN>
</TABLE>
