10-Q

FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934

For Quarter Ended: March 31, 2002

Commission File Number: 1-7283

REGAL-BELOIT CORPORATION

(Exact name of registrant as specified in its charter)

Wisconsin                                                        39-0875718

(State or other jurisdiction of                              (IRS Employer Identification Number)

incorporation or organization)

200 State Street, Beloit, Wisconsin 53511-6254

(Address of principal executive offices)

(608) 364-8800

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 

YES X NO

Indicate the number of shares outstanding of each of the issuers' classes of common stock as of the latest practicable date.

25,001,185 Shares, Common Stock, $.01 Par Value

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REGAL-BELOIT CORPORATION

FORM 10-Q

For Quarter Ended March 31, 2002

INDEX
	Page No.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Balance Sheets	3
Statements of Income	4
Condensed Statements of Cash Flows	5
Notes to Financial Statements	6 - 7
Item 2 - Management's Discussion and Analysis of Financial	7 - 9
Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K	9 - 10
Signature	10

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PART I
FINANCIAL INFORMATION
REGAL-BELOIT CORPORATION
CONDENSED BALANCE SHEETS
(In Thousands of Dollars)

Item I. Financial Statements  ASSETS	(Unaudited)  March 31, 2002		(From Audited Statements) Dec. 31, 2001
Current Assets:
Cash and Cash Equivalents	$5,675		$6,629
Receivables, less reserves of $1,883 in 2002 and $2,233 in 2001	87,588		80,595
Inventories	124,477		132,272
Other Current Assets	13,201		12,003
Total Current Assets	230,941		231,499
Property, Plant and Equipment at Cost	338,975		337,481
Less - Accumulated Depreciation	(157,620	)	(152,608	)
Net Property, Plant and Equipment	181,355		184,873
Goodwill	312,735		312,735
Other Noncurrent Assets	18,730		17,492
Total Assets	$743,761		$746,599
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Accounts Payable	$ 28,722		$ 28,429
Federal and State Income Taxes	3,549		1,848
Other Current Liabilities	38,202		40,178
Total Current Liabilities	70,473		70,455
Long-Term Debt	249,637		345,667
Deferred Income Taxes	43,016		43,022
Other Noncurrent Liabilities	5,354		5,304
Minority Interest in Consolidated Subsidiary	2,058		2,001
Shareholders' Investment:
Common Stock, $.01 par value, 50,000,000 shares authorized,
25,001,185 issued in 2002 and 20,877,249 issued in 2001	250		210
Additional Paid-In Capital	131,994		41,967
Less-Treasury Stock, at cost, 159,900 Shares in 2002 and in 2001	(2,727	)	(2,727	)
Retained Earnings	247,845		244,564
Accumulated Other Comprehensive Loss	(4,139	)	(3,864	)
Total Shareholders' Investment	373,223		280,150
Total Liabilities and Shareholders' Investment	$743,761		$746,599

See accompanying notes. 3

REGAL-BELOIT CORPORATION
STATEMENTS OF INCOME
(In Thousands of Dollars, Except Per Share Data)

	(Unaudited) Three Months Ended March 31,
		2002	2001
Net Sales		$ 150,380	$ 177,122
Cost of Sales		114,054	131,971
Gross Profit		36,326	45,151
Operating Expenses		23,765	27,991
Income From Operations		12,561	17,160
Interest Expense		3,469	7,124
Interest Income		20	51
Income Before Taxes		9,112	10,087
Provision For Income Taxes		3,324	4,245
Net Income		$ 5,788	$ 5,842
Per Share of Common Stock:
Earnings Per Share		$ .27	$ .28
Earnings Per Share - Assuming Dilution		$ .27	$ .28
Cash Dividends Declared		$ .12	$ .12
Average Number of Shares Outstanding		21,663,170	20,862,631
Average Number of Shares-Assuming Dilution		21,758,905	21,110,000

See accompanying notes.

4

REGAL-BELOIT CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)

	(Unaudited) Three Months Ended March 31,
	2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 5,788			$ 5,842
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation, amortization and deferred income taxes	5,706			8,035
Change in assets and liabilities:
Current assets, other than cash	(1,550		)	111
Current liabilities, other than notes payable	78			467
Net cash provided from operating activities	$ 10,022			$ 14,455
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment	(2,081		)	(3,781	)
Business acquisitions	-0-			(2,979	)
Sale of property, plant and equipment	139			55
Other, net	(549		)	3,486
Net cash used in investing activities	(2,491		)	(3,219	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock offering	89,943			-0-
Repayment of long-term debt	(96,029		)	(7,522	)
Repurchase of common stock	-0-			(1,042	)
Dividends paid to shareholders	(2,505		)	(2,509	)
Other, net	124			98
Net cash used in financing activities	(8,467		)	(10,975	)
EFFECT OF EXCHANGE RATE ON CASH	(18		)	(45	)
Net increase in cash and cash equivalents	(954		)	216
Cash and cash equivalents at beginning of period	6,629			2,612
Cash and cash equivalents at end of period	$ 5,675			$ 2,828
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during year for:
Interest		$ 3,620		$ 7,356
Income taxes		$ 913		$ 505

See accompanying notes.

5

REGAL-BELOIT CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2002

1. BASIS OF PRESENTATION

The condensed financial statements include the accounts of REGAL-BELOIT Corporation and its wholly owned subsidiaries and have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. All adjustments which management believes are necessary for a fair statement of the results for the interim periods presented have been reflected and are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested these statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K.

2. INVENTORIES

Cost for approximately 86% of the Company's inventory is determined using the last-in, first-out (LIFO) inventory valuation method. The approximate percentage distribution between major classes of inventories is as follows:
 

	March 31, 2002	December 31, 2001
Raw Material	11%	11%
Work-in Process	18%	19%
Finished Goods	71%	70%

3. COMPREHENSIVE INCOME

The Company's comprehensive income is impacted by the amount of the cumulative translation adjustment recorded to shareholders' equity. For the quarter ended March 31, 2002, the impact was $277,000 of expense resulting in net comprehensive income of $5,511,000 for the quarter. The impact in the first quarter of 2001 was $1,069,000 of expense resulting in net comprehensive income of $4,773,000.

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4. BUSINESS SEGMENTS

The Company operates two strategic businesses that are reportable segments: the Mechanical Group and the Electrical Group.

		(In Thousands of Dollars)
		Mechanical Group First Quarter		Electrical Group First Quarter
		2002	2001	2002	2001
Net Sales	$46,274		$55,130	$104,106	$121,992
Income from Operations	$ 3,806		$ 6,009	$ 8,755	$ 11,151
Income from Operations as a % of Net Sales	8.2%		10.9%	8.4%	9.1%

 

Item 2. Management's Discussion and Analysis of Financial

            Condition and Results of Operations

Unless the context requires otherwise, references in this Item 2 to "we", "us" or "our" refer collectively to REGAL-BELOIT Corporation and its subsidiaries.

RESULTS OF OPERATIONS

Our net sales were $150,380,000 in the first quarter of 2002, 15.1% below net sales of $177,122,000 in the first quarter of 2001. Net sales of our Electrical Group and Mechanical Group were 14.7% below and 16.1% below, respectively, net sales in the first quarter of 2001. Our decrease in sales was due primarily to the impact of the U.S. economic recession, which led to weak product demand across most of our markets. (See Note 4 to the accompanying financial statements for our business segment data.)

Gross profit decreased 19.5% in the first quarter of 2002 to $36,326,000 from $45,151,000 in the first quarter of 2001. The decrease was due primarily to our lower net sales in 2002. Our gross profit margin decreased to 24.2% of net sales in the first quarter of 2002 from 25.5% in comparable 2001. We lowered our production levels in both the Electrical Group and Mechanical Group to reduce inventories as 2001 progressed. The lower production levels in the first quarter of 2002 were the primary reason for the decrease in gross profit margin from the 2001 first quarter.

Operating expenses in the first quarter of 2002 decreased $4,226,000 (15.1%) from last year's first quarter. Approximately one half of this reduction was due to our January 1, 2002, adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", which eliminated amortization of goodwill, all of such goodwill amortization having been in the Electrical Group. The other half of the reduction was due to lower spending in the areas of selling, general and administrative expenses in both the Electrical and Mechanical Groups.

Income from operations in 2002's first quarter of $12,561,000 was 26.8% lower than $17,160,000 in the first quarter of 2001. As a percent of net sales income from operations declined from 9.7% in the first quarter of 2001 to 8.4% this year, due to our lower gross profit margin.

7

Our interest expense declined 51.3% to $3,469,000 in 2002 from $7,124,000 in last year's first quarter. Lower interest rates in the United States and reductions we made in our outstanding debt accounted for the large decrease in interest. Our effective tax rate is also much lower this year versus last, at 36.5% in the first quarter this year as compared to 42.1% in 2001's first quarter. The elimination of goodwill amortization, nearly half of which was not tax deductible, accounted for the majority of the lower tax rate this year.

Our net income earned in the first quarter of 2002 was $5,788,000, or $.27 per diluted share, as compared to $5,842,000, or $.28 per diluted share, in the first quarter of 2001. Our first quarter 2002 earnings per share benefited by approximately $.08 due to the elimination of goodwill amortization.

LIQUIDITY AND CAPITAL RESOURCES

Our working capital of $160,468,000 at March 31, 2002, was approximately the same as at year-end 2001. Current ratio, however, improved from 3.1:1 at December 31, 2001 to 3.3:1 at the end of the first quarter of 2002.

We generated $10,022,000 of cash flow from operations during 2002's first quarter, as compared to $14,455,000 in comparable 2001. We reduced inventories $7,795,000 during the first quarter this year, which was the largest factor in the positive operating cash flow. However, a $6,993,000 increase in accounts receivable in the first quarter 2002, due to increasing sales from the fourth quarter of 2001, offset much of the cash from the inventory reduction. The result was that the first quarter's net income and depreciation accounted for the operating cash flow. Our capital expenditures in the first quarter this year were $2,081,000, though we still expect capital spending for all of 2002 to approach the upper teens to $20,000,000. Outstanding commitments for future capital expenditures at March 31, 2002 were approximately $1,100,000.

On March 12, 2002, we completed a secondary public offering of 4,109,985 shares of our common stock including the sale of 536,085 shares from the exercise of the underwriters' over-allotment option. The net proceeds of the shares were approximately $90,000,000, which was used to repay a like amount of our outstanding debt. During the first quarter of 2002, we also repaid an additional $6,030,000 of outstanding debt. As of March 31, 2002, our outstanding debt was $249,637,000, a decrease of $96,030,000 from $345,667,000 at year-end 2001. Our shareholders' investment rose from $280,150,000 at December 31, 2001 to $373,223,000 at March 31, 2002, after paying $2,505,000 in dividends to our shareholders during the quarter.

Our primary financing source is our $350,000,000 long-term revolving credit facility that expires on December 31, 2005. Our credit facility requires us to maintain specified financial ratios and to satisfy certain financial condition tests, with which we were in compliance as of March 31, 2002. At March 31, 2002, we had $246,000,000 outstanding under this credit facility. After deductions for outstanding letters of credit and financial covenant limits, we had approximately $76,000,000 of available borrowing capacity at March 31, 2002. We believe we will be able to satisfy the financial ratios and tests specified in our credit facility for the foreseeable future. We also believe that the combination of borrowing availability under our credit facility and operating cash flow will provide sufficient cash availability to finance our existing operations for the foreseeable future.

8

CAUTIONARY STATEMENT

The following is a cautionary statement made under the Private Securities Litigation Reform Act of 1995: With the exception of historical facts, the statements contained in Item 2. of this Form 10-Q may be forward looking statements. Actual results may differ materially from those contemplated. Forward looking statements involve risks and uncertainties, including but not limited to, the following risks: 1) cyclical downturns affecting the markets for capital goods, 2) substantial increases in interest rates that impact the cost of our outstanding debt, 3) the success of Management in increasing sales and maintaining or improving the operating margins of its businesses, 4) the availability of or material increases in the costs of select raw materials or parts, and 5) actions taken by competitors. Investors are directed to our documents, such as our Annual Report on Form 10-K and Form 10-Q's filed with the Securities and Exchange Commission.

PART II

OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K
 

a) Exhibits
	Exhibit Number	Exhibit Description
3.1		Amendment to Bylaws of Registrant: Section 3.02 of Bylaws was amended on January 25, 2002, to read as follows: "The term of office of any person serving as a Director shall terminate on the day and hour of the Annual Shareholders Meeting next following the attainment of age 70, except for those Directors elected prior to April 23, 1993. The term of office for Directors elected prior to 1993 shall terminate on the day and hour of the Annual Shareholders Meeting next following the attainment of age 72. The vacancy created as a result of a sitting Director being disqualified by age shall be filled in accordance with Article V (c) of the Articles of Incorporation."
	3.2	Bylaws of the Registrant, as amended.
b) Reports on Form 8-K
	On January 29, 2002, the Company filed a current report on Form 8-K, attaching as an exhibit a Company press release disclosing, among other things, the Company's fourth quarter and year-end financial results for the reporting periods ended December 31, 2001.
	On February 1, 2002, the Company filed a current report on Form 8-K, attaching as exhibits Management's Discussion and Analysis of Financial Statements, Selected Financial Information and the audited Consolidated Financial Statements of the Company relating to the year ended December 31, 2001. Also filed was the form of Second Amendment and Waiver, dated as of January 31, 2002, among the Company, the financial institutions listed on the signature pages thereof, Bank of America, N.A., as Documentation and Syndication Agent, and M&I Marshall & Ilsley Bank, as Administrative Agent.

9
 

On February 11, 2002, the Company filed a current report on Form 8-K pertaining to the action filed against the Company and its Ohio Gear division in the United States District Court for the Central District of Illinois. The plaintiffs in the litigation allege that in 1998 and 1999 Ohio Gear supplied defective differential assemblies that were used in transaxles manufactured by the plaintiffs.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

REGAL-BELOIT CORPORATION

(Registrant)

/S/ Kenneth F. Kaplan 

Kenneth F. Kaplan

Vice President - Chief Financial Officer and Secretary

(Principal Accounting and Financial Officer)

DATE: May 1, 2002
 
 

10

EX-1

EXHIBIT 3.2

BYLAWS OF REGAL-BELOIT CORPORATION

ARTICLE I OFFICES

1.01 Principal and Business Office. 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. The address of the registered office may be changed from time to time by any Officer or by the registered agent. The office of the registered agent of the Corporation shall be identical to such registered office.

1.03 Corporate Records. The following documents and records shall be kept at the Corporation's principal office or at such other reasonable location as may be specified by the Corporation:

(a) Minutes of shareholders' and Board of Directors' meetings, any written notices thereof, any written waivers of such notices and written consents by shareholders or directors for actions without a meeting.   (b) Records of actions taken by the shareholders or directors without a meeting.   (c) Records of actions taken by committees of the Board of Directors in place of the Board of Directors and on behalf of the Corporation.   (d) Accounting records.   (e) A record of its shareholders.   (f) Current Bylaws.   (g) Voting trust agreements (if any).   (h) Stock transfer agreements to which the Corporation is a part or of which it has notice (if any). ARTICLE II SHAREHOLDERS

2.01 Annual Meeting. The annual meeting of the shareholders of the Corporation ("Annual Meeting") shall be held at such 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. If the election of Directors shall not be held on the day 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 shareholders ("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. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board, the President or a majority of the Board of Directors. If, and as required by the Wisconsin Business Corporation Law, a special meeting shall be called upon written demand describing one or more purposes for which it is to be held by holders of shares with at least ten percent (10%) of the votes entitled to be cast on any issue proposed to be considered at the meeting. The purpose or purposes of any special meeting shall be described in the notice required by Section 2.04 of these Bylaws.

2.03 Place of Meeting. The Board of Directors may designate any place, either within or without the State of Wisconsin, as a place of meeting for any annual meeting or any special meeting. If no designation is made, the place of meeting shall be the principal office of the Corporation, but any meeting may be adjourned to reconvene at any place designated by vote of a majority of the shares represented thereafter.

2.04 Notice to Shareholders.

(a) Required Notice. Written notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) days, not more than sixty (60) days before the date of the meeting (unless a different time is provided by law or the Articles of Incorporation), by or at the direction of the Chairman of the Board, if there is one, the President or the Secretary, to each shareholder entitled to vote at such meeting. If mailed, such notice is effective when deposited in the United States mail, and shall be addressed to the shareholder's address shown in the current record of shareholders of the Corporation, with postage thereon prepaid. At least Twenty (20) days' notice shall be provided if the purpose, or one of the purposes, of the meeting is to consider a plan of merger or share exchange for which shareholder approval is required by law, or the sale, lease, exchange or other disposition of all or substantially all of the Corporation's property, with or with out goodwill, otherwise than in the usual and regular course of business.

(b) Adjourned meetings. Except as provided in the next sentence, if any annual meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, and place, if the new date, time, and place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed, then notice must be given pursuant to the requirements of (a) of this Section 2.04, to those persons who are shareholders as of the new record date.   (c) Waver of Notice. A shareholder may waive notice in accordance with Article VI of these Bylaws.   (d) Contents of Notice. The notice of each special shareholder meeting shall include a description of the purpose or purposes for which the meeting is called. Except as otherwise provided in Section 2.02 of these Bylaws, in the Articles of Incorporation, or in the Wisconsin Business Corporation Law, the notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called,   (e) Fundamental Transactions. If a purpose of any special shareholder meeting is to consider: (1) a proposed amendment to the Articles of Incorporation (including any restated articles); (2) a plan of merger or share exchange for which shareholder approval is required by law; (3) the sale, lease, exchange or other disposition of all or substantially all of the Corporation's property, with or without goodwill, otherwise than in the usual and regular course of business; (4) the dissolution of the Corporation; or (5) the removal of a director, the notice must so state and in eases (1), (2) and (3) above must be accompanied by, respectively, a copy or summary of the: (1) proposed articles of amendment or a copy of the restated articles that identifies an amendment or other change; (2) proposed plan of merger or share exchange; or (3) proposed transaction for disposition of all or substantially all of the Corporation's property. If the proposed corporate action creates dissenters' rights, the notice must state that shareholders and beneficial shareholders are or may be entitled to assert dissenters' rights, and must be accompanied by a copy of Sections 180.1301 to 180.1331 of the Wisconsin Business Corporation Law. 2.05 Fixing of Record Date. The Board of Directors may fix in advance a date not less than ten (10) days and not more than seventy (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"). If no record date is fixed for the determination of shareholders entitled to demand a special shareholder meeting or to notice of or to vote at a meeting of shareholders, (a) the close of business on the day before the Corporation receives the first written demand for a special shareholder meeting, or (b) the close of business on the day before the first notice of the meeting is mailed or otherwise delivered to shareholders, as the case may be, shall be the record date for the determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall be applied to any adjournment thereof unless the Board of Directors fixes a new record date and except as otherwise required by law. A new record date must be set if a meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting.

2.06 Quorum. Except as otherwise provided in the Articles of Incorporation or in the Wisconsin Business Corporation Law, a majority of the votes entitled to be cast by shares entitled to vote as a separate voting group on a matter, represented in person or by proxy, shall constitute a quorum of that voting group for action on that matter at a meeting of shareholders. Once a share is represented for any purpose at a meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is considered present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that meeting.

2.07 Conduct of Meeting. The Chairman of the Board, or in his or her absence, the President, and in the President's absence, any Officer or Director chosen by the shareholders present or represented by proxy shall call the meeting of the shareholders to order and shall act as Chairman of the meeting, and the Secretary shall act as Secretary of all meetings of the shareholders, but, in the absence of the Secretary, the presiding Officer may appoint any other person to act as Secretary of the meeting.

2.08 Voting of Shares. Each outstanding share shall be entitled to one (1) vote on each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares are enlarged, limited or denied by the Articles of Incorporation or the Wisconsin Business Corporation Law.

2.09 Shareholder List. The officer or agent having charge of the stock transfer books for shares of the Corporation shall, before each meeting of shareholders, make a complete record of the shareholders entitled to notice of such meeting, arranged by class or series of shares and showing the address of and the number of shares held by each shareholder. The shareholder list shall be available at the meeting and may be inspected by any shareholder or his or her agent or attorney at any time during the meeting or an adjournment. Any shareholder or his or her agent or attorney may inspect the shareholder list beginning two (2) business days after the notice of the meeting is given 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, and, subject to Section 180.1602 (2)(b) 3 to 5 of the Wisconsin Business Corporation Law, may copy the list, during regular business hours and at his or her expense, during the period that it is available for inspection hereunder. The original stock transfer books and nominee certificates on file with the Corporation (if any) shall be prima facie evidence as to the shareholders entitled to inspect the shareholder list or to vote at any meeting of shareholders. Refusal or failure to comply with the requirements of this Section 2.09 shall not affect the validity of any action taken at such meeting.

2.10 Proxies. At all meetings of shareholders, a shareholder entitled to vote may vote in person or by proxy appointed in writing by the shareholder or by his or her duly authorized attorney-in-fact. All proxy appointment forms shall be filed with the Secretary or other officer or agent of the Corporation authorized to tabulate votes before or at the time of the meeting. Unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest, a proxy appointment may be revoked at any time. The presence of a shareholder who has filed a proxy appointment shall not of itself constitute a revocation. No proxy appointment shall be valid after eleven months from the date of its execution, unless otherwise expressly provided in the appointment form. The Board of Directors shall have the power and authority to make rules that are not inconsistent with the Wisconsin Business Corporation Law as to the validity and sufficiency of proxy appointments.

ARTICLE III BOARD OF DIRECTORS

3.01 General Powers. All corporate powers shall be exercised by or under the authority of, and the business affairs of the Corporation shall be managed under the direction of, its Board of Directors.

3.02 Resignations and Qualifications. The term of office of any person serving as a Director shall terminate on the day and hour of the Annual Shareholders Meeting next following the attainment of age 70, except for those Directors elected prior to April 23, 1993. The term of office for Directors elected prior to 1993 shall terminate on the day and hour of the Annual Shareholders Meeting next following the attainment of age 72. The vacancy created as a result of a sitting Director being disqualified by age shall be filled in accordance with Article V (c) of the Articles of Incorporation.

3.03 Regular Meetings. A regular meeting of the Board of Directors shall be held, without other notice than this Bylaw, immediately after the annual meeting of shareholders, and each adjourned session thereof. The place of such regular meeting shall be the same as the place of the meeting of shareholders which precedes it, or such other suitable place as may be announced at such meeting of shareholders. The Board of Directors and any committee may provide, by resolution, the time and place, either within or without the State of Wisconsin, for the holding of additional regular meetings without other notice than such resolution.

3.04 Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the Chairman of the Board, the President or any two (2) Directors. Special meetings of any committee may be called by or at the request of any of the foregoing persons or the Chairman of the committee. The persons calling any special meeting of the Board of Directors or committee may fix any place, either within or without the State of Wisconsin, as the place for holding any special meeting called by them, and if no other place is fixed, the place of meeting shall he the principal office of the Corporation in the State of Wisconsin.

3.05 Meetings by Telephone or other Communication Technology.

(a) Any or all Directors may participate in a regular or special meeting or in a committee meeting of the Board of Directors by, or conduct the meeting through the use of, telephone or any other means of communication by which either: (i) all participating Directors may simultaneously hear each other during the meeting or (ii) all communications during the meeting are immediately transmitted to each participating Director, and each participating Director is able to immediately send messages to all other participating Directors.   (b) If a meeting will he conducted through the use of any means described in paragraph (a), all participating Directors shall be informed that a meeting is taking place at which official business may be transacted. A Director participating in a meeting by any means described in paragraph (a) is deemed to be present in person at the meeting. 3.06 Notice of Meetings. Except as otherwise provided in the Articles of Incorporation or the Wisconsin Business Corporation Law, notice of the date, time and place of any special meeting of the Board of Directors and of any special meeting of a committee of the board shall be given orally or in writing to each Director or committee member at least forty-eight (48) hours prior to the meeting, except that notice by mail shall be given at least seventy-two (72) hours prior to the meeting. The notice need not describe the purpose of the meeting. Notice may be communicated in person, by telephone, telegraph or facsimile, by mail or private carrier. Oral notice is effective when communicated. Written notice is effective as follows: if delivered in person, when received; if delivered by mail, when deposited, postage prepaid, in the United States mail addressed to the Director at his or her business or home address (or such other address as the Director may have designated in writing filed with the Secretary); if given by facsimile, at the time transmitted to a facsimile number at any address designated above; if given by private carrier, when delivered to the private carrier, addressed to the Director at his or her business or home address (or such other address as the Director may have designated in writing filed with the Secretary); and if given by telegraph, when delivered to the telegraph company.

3.07 Quorum. Except as otherwise provided by the Wisconsin Business Corporation Law, a majority of the number of Directors specified in accordance with the Articles of Incorporation shall constitute a quorum of the Board of Directors. Except as otherwise provided by the Wisconsin Business Corporation Law, a majority of the number of Directors appointed to serve on a committee shall constitute a quorum of the committee. A majority of the Directors present at any meeting (though less than such quorum), may adjourn the meeting from time to time without further notices.

3.08 Manner of Acting. The act of the majority of the Directors present at a meeting at which a quo-mm is present shall be the act of a Board of Directors, unless the act of a greater number is required by law, the Articles of Incorporation, these Bylaws or any contract or agreement to which the Corporation is a party.

3.09 The Conduct of Meeting. The Chairman of the Board, or in his or her absence, the President, and in the President's absence, any Director chosen by the Directors present, shall call meetings of the Board of Directors to order and shall chair the meeting. The Secretary of the Corporation shall act as Secretary of all meetings of the Board of Directors, but in the absence of the Secretary, the presiding Officer may appoint any Assistant Secretary or any Director or other person present to act as Secretary of the meeting.

3.10 Vacancies. Any vacancy occurring in the Board of Directors shall be filled in the manner provided in the Articles of Incorporation.

3.11 Compensation. The Board of Directors, irrespective of any personal interest of any of its members, may fix the compensation of Directors.

3.12 Presumption of Assent. A Director who is present and is announced as present at a meeting of the Board of Directors or a committee thereof at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless (i) the Director objects at the beginning of the meeting or promptly upon his or her arrival to holding the meeting or transacting business at the meeting, or (ii) the Director's dissent or abstention from the action taken is entered in the minutes of the meeting, or (iii) the Director delivers his or her written dissent or abstention to the presiding Officer of the meeting before the adjournment thereof or to the Corporation immediately after the adjournment of the meeting. Such right to dissent or abstain shall not apply to a Director who voted in favor of such action.

3.13 Committees. Unless the Articles of Incorporation otherwise provide, the Board of Directors, by resolution adopted by the affirmative vote of a majority of all of the Directors then in office, may create one (1) or more committees, each committee to consist of two (2) or more Directors as members, which to the extent provided in the resolution as initially adopted, and as thereafter supplemented or amended by further resolution adopted by a like vote, may exercise the authority of the Board of Directors. Except as otherwise provided by law, each committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise such power and authority as the Board of Directors shall specify. Without further action of the Board of Directors, these Bylaws hereby create an Audit Committee and a Compensation Committee composed of independent Directors. Each such committee shall fix its own rules (consistent with the Wisconsin Business Corporation Law, the Articles of Incorporation and these Bylaws) governing the conduct of its activities and shall make such reports to the Board of Directors of its activities as the Board of Directors may request. Unless otherwise provided by the Board of Directors in creating a committee, the committee may employ counsel, accountants and other consultants to assist it in the exercise of authority. The creation of a committee, delegation of authority to a committee or action by a committee does not relieve the Board of Directors or any of its members of any responsibility imposed on the Board of Directors or its members by law.

ARTICLE IV OFFICERS

4.01 Appointments. The principal Officers may include a Chairman of the Board, Chief Executive Officer, a President, one (1) or more Executive Vice Presidents or Vice Presidents (the number and designations to be determined by the Board of Directors), a Secretary, a Treasurer, and such other Officers, if any, as may be deemed necessary by the Board of Directors, each of whom shall be appointed by the Board of Directors. Any two (2) or more offices may be held by the same person.

4.02 Resignation and Removal. An Officer shall hold office until he or she resigns, dies, is removed hereunder, or a different person is appointed to the office. An Officer may resign at any time by delivering an appropriate written notice to the Corporation. The resignation is effective when the notice is delivered, unless the notice specifies a later effective date and the Corporation accepts the later effective date. Any Officer may be removed by the Board of Directors with or without cause and notwithstanding the contract rights, if any, of the person removed. Except as provided in the preceding sentence, the resignation or removal is subject to any remedies provided by any contract between the Officer and the Corporation or otherwise provided by law. Appointment shall not of itself create contract rights.

4.03 Vacancies. A vacancy in any office because of death, resignation, removal or otherwise, may be filled by the Board of Directors. If a resignation is effective at a later date, the Board of Directors may fill the vacancy before the effective date if the Board of Directors provides that the successor may not take the office until the effective date.

4.04 Chairman of the Board/Chief Executive Officer. The Chairman of the Board shall be the Chief Executive Officer of the Corporation: he or she shall preside at all meetings of the shareholders and Board of Directors; he or she shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect.

4.05 President The President shall be the Chief Operating Officer of the Corporation. He or she shall supervise the day-to-day operations of the Corporation's business. In the absence of the Chairman of the Board, or in the event that office is for any reason vacant, the President shall perform the functions of the Chairman of the Board. The President shall perform such other duties as may be prescribed from time to time by the Chairman of the Board or the Board of Directors.

4.06 Shared Duties of Chairman of the Board and the President. The Chairman of the Board and the President each severally authorize 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 directed by the Board of Directors, the Chairman of the Board and the President may authorize any Executive Vice President or Vice President or other Officer or agent of the Corporation to sign, execute and acknowledge such documents or instruments in his or her place and steed.

4.07 Executive Vice Presidents and Vice Presidents. Any Executive Vice President or Vice President may sign, with the Secretary, certificates for shares of the Corporation; and shall perform such other duties and have such authority as from time to time may be delegated or assigned to him or her by the President or Chairman of the Board or the Board of Directors. The execution of any instrument of the Corporation by any Executive Vice President or Vice President shall be conclusive evidence, as to third parties, of the Executive Vice President's or Vice President's authority to act in the steed of the President.

4.08 Secretary. The Secretary shall: (a) keep (or cause to be kept) regular minutes of all meetings of the shareholders, the Board of Directors and any Committees of the Board of Directors in one (1) or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provision of these Bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the Corporation, if any, and see that the seal of the Corporation, if any, is affixed to all documents which are authorized to be executed on behalf of the Corporation under its seal; and (d) in general perform all duties incident to the office of Secretary and have such other duties and exercise such authority as from time to time may be delegated or assigned to him or her by the President or Chairman of the Board or by the Board of Directors.

4.09 Chief Financial Officer. The Chief Financial Officer shall: (a) have charge and custody of and be responsible for all funds and securities of the Corporation; and (b) in general perform all of the duties incident to the office of the Chief Financial Officer and have such other duties and exercise such other authority as from time to time may be delegated or assigned to him or her by the President or Chairman of the Board or by the Board of Directors.

4.10 Assistants and Acting Officers. The Board of Directors and the Chairman of the Board shall have the power to appoint any person to act as assistant to any Officer, or as agent for the Corporation in the Officer's steed, or to perform the duties of such Officer whenever for any reason it is impractical for such Officer to act personally, and such assistant or acting Officer or other agent so appointed by the Board of Directors or Chairman of the Board shall have the power to perform all of the duties of the office to which that person is so appointed to be assistant, or as to which he or she is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors or the Chairman of the Board.

4.11 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 such Officer is also a Director of the Corporation.

ARTICLE V CERTIFICATES FOR SHARES AND THEIR TRANSFERS

5.01 Certificates for Shares. All shares of this Corporation shall be represented by certificates. Certificates representing shares of the Corporation shall be in such form, consistent with law, as shall be determined by the Board of Directors. At a minimum, a share certificate shall state on its face the name of the Corporation and that it is organized under the laws of the State of Wisconsin, the name of the person to whom issued, and the number and class of shares and the designation of the shares, if any, that the certificate represents. Such certificates shall be signed, either manually or in facsimile, by the Chairman of the Board, the President, and Executive Vice President or a Vice President and by the 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 certificates shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except as provided for in Section 5.05.

5.02 Signature by Former Officer, Transfer Agent or Registrar. In case any Officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any certificate for shares has ceased to be such Officer, transfer agent or registrar before such certificate is issued, the certificate may be issued by the Corporation with the same effect as if that person were still an Officer, transfer agent or registrar at the date of its issue.

5.03 Transfer of Shares. Prior to due presentment of a certificate for shares for registration of transfer, and unless the Corporation has established a procedure by which a beneficial owner of shares held by a nominee is to be recognized by the Corporation as the shareholder, the Corporation may treat the registered owner of such shares as the person exclusively entitled to vote, to receive notifications and otherwise to have and exercise all the rights and powers of an owner. The Corporation may require reasonable assurance that all transfer endorsements are genuine and effective and in compliance with all regulations prescribed by or under the authority of the Board of Directors.

5.04 Restrictions on Transfer. The face or reverse side of each certificate representing shares shall bear a conspicuous notation of any restriction upon the transfer of such shares imposed by the Corporation.

5.05 Lost, Destroyed or Stolen Certificates. When the owner claims that his or her certificate for shares has been lost, destroyed or wrongfully taken, a new certificate shall be issued in place thereof if the owner (a) so requests before the Corporation has notice that such shares have been acquired by a bona fide purchaser and (b) if required by the Corporation, files with the Corporation a sufficient indemnity bond, and (c) satisfies such other reasonable requirements as may be prescribed by or under the authority of the Board of Directors.

5.06 Consideration for Shares. The shares of the Corporation may be issued for such consideration as shall be fixed from time to time and determined to be adequate by the Board of Directors, provided that any shares having a par value shall not be issued for consideration less than the par value thereof. The consideration may consist of any tangible or intangible property or benefit to the Corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the Corporation. When the Corporation receives the consideration for which the Board of Directors authorized the issuance of shares, such shares shall be deemed to be fully paid and nonassessable by the Corporation.

5.07 Stock Regulations. The Board of Directors shall have the power and authority to make all such 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, including the appointment or designation of one (1) or more stock transfer agents and one (1) or more registrars.

ARTICLE VI WAIVER OF NOTICE

6.01 Shareholder Written Waiver. A shareholder may waive any notice required by the Wisconsin Business Corporation Law, the Articles of Incorporation or these Bylaws before or after the date and time stated in the notice. The waiver shall be in writing and signed by the shareholder entitled to the notice and shall contain the same information that would have been required in the notice under the Wisconsin Business Corporation Law except that the time and place of meeting need not be stated, and shall be delivered to the Corporation for inclusion in the corporate records.

6.02 Shareholder Waiver by Attendance. A shareholder's attendance at a meeting, in person or by proxy, waives objection to both 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.   (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. 6.03 Director Written Waiver. A Director may waive any notice required by the Wisconsin Business Corporation Law, the Articles of Incorporation or these Bylaws before or after the date and time stated in the notice. The waiver shall be in writing, signed by the Director entitled to notice and retained by the Corporation.

6.04 Director Waiver by Attendance. A Director's attendance at or participation in a meeting of the Board of Directors or any committee thereof waives any required notice to him or her of the meeting unless the Director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

ARTICLE VII ACTION WITHOUT MEETINGS

7.01 Director Action Without Meeting. Unless the Articles of Incorporation provide otherwise, action required or permitted by the Wisconsin Business Corporation Law to be taken at a Board of Directors meeting or committee meeting may be taken without a meeting if the action is taken by all members of the Board or committee. The action shall be evidenced by one (1) or more written consents describing the action taken, signed by each Director and retained by the Corporation. Action taken hereunder is effective when the last Director signs the consent, unless the consent specifics a different effective date. A consent signed hereunder has the effect of a unanimous vote taken at a meeting at which all Directors or committee members were present, and may he described as such in any document.

ARTICLE VIII INDEMNIFICATION

8.01 Provisions of Indemnification. The Corporation shall, to the fullest extent permitted or required by Section 180.0850 to Section 180.0859 inclusive, of the Wisconsin Business Corporation Law, including any amendment thereto (but, in the case of any such amendment, only to the extent such amendment permits or requires the Corporation to provide broader identification rights than prior to such amendment), indemnify its Directors and Officers against any and all Liabilities, and advance any and all reasonable Expenses, incurred hereby in any Proceedings to which any such Director or Officer is a party because he or she is or was a Director or Officer of the corporation. The Corporation shall also indemnify an employee who is not a Director or Officer, to the extent that the employee has been successful on the merits or otherwise in defense of a Proceeding, for all Expenses incurred in the Proceeding if the employee was a party because he or she is or was an employee of the Corporation. The rights to indemnification granted hereunder shall not be deemed exclusive of any other right to indemnification against Liabilities or the advancement of Expenses which a Director, Officer or employee may be entitled under any written agreement, Board of Directors resolution, vote of shareholders, the Wisconsin Business Corporation Law or otherwise. The Corporation may, but shall not he required to, supplement the foregoing rights to indemnification against Liabilities and advances of Expenses under this Section 8.01 by the purchase of insurance on behalf of any one (1) or more of such Directors, Officers or employees, whether or not the Corporation would be obligated to indemnify or advance Expenses to such Director, Officer or employee under this Section 8.01. All capitalized terms used in this Section 8.01 and not otherwise defined herein shall have the meaning set forth in Section 180.0850 of the Wisconsin Business Corporation Law.

8.02 Written Request. A Director or Officer who seeks indemnification under Section 8.01 shall make a written request to the Corporation.

8.03 Nonduplication. The Corporation shall not indemnify a Director or Officer under Section 8.01 if the Director or Officer has previously received indemnification or allowance of expenses from any person, including the Corporation, in connection with the same proceeding. However, the Director or Officer has no duty to look to any other person for indemnification.

8.04 Liberal Construction. In order for the Corporation to obtain and retain qualified Directors, Officers and employees, the foregoing provisions shall be liberally administered in order to afford maximum indemnification of Directors, Officers, and employees. The indemnification above provided for shall be granted in all applicable cases unless to do so would clearly contravene law, controlling precedent or public policy.

ARTICLE IX SEAL

9.01 Seal. The Board of Directors may provide a corporate seal which may be circular in form and have inscribed thereon the name of the Corporation and the state of incorporation and the words "Corporate Seal".

ARTICLE X AMENDMENTS

10.01 By Shareholders. These Bylaws may be amended or repealed and new Bylaws may be adopted by the shareholders by the vote provided in Article VII of the Articles of Incorporation.

10.02 By Directors. Except as the Articles of Incorporation may otherwise provide, these Bylaws may also be amended or repealed and new Bylaws may he adopted by the Board of Directors by the vote provided in Section 3.08.
 
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