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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-4462
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STEPAN COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 36-1823834
- -------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Edens and Winnetka Road, Northfield, 60093
Illinois
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number including area code: 847-446-7500
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
REGISTERED
----------- --------------
Common Stock, $1 par value New York Stock Exchange (Effective
March 14, 1996)
American Stock Exchange (Cancelled
March 13, 1996)
Chicago Stock Exchange
5 1/2% Convertible Preferred Stock, no New York Stock Exchange (Effective
par value March 14, 1996)
Chicago Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
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(Title of Class)
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. [ ]
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, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
AGGREGATE MARKET VALUE AT FEBRUARY 29, 1996, OF VOTING STOCK HELD BY
NONAFFILIATES OF THE REGISTRANT: $141,542,000.*
NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF COMMON STOCK
AS OF FEBRUARY 29, 1996:
CLASS OUTSTANDING AT FEBRUARY 29, 1996
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Common Stock, $1 par value 10,039,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K DOCUMENT INCORPORATED
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Part I, Item 1 1995 Annual Report to Stockholders
Part II, Items 5-8 1995 Annual Report to Stockholders
Part III, Items 10-12 Proxy Statement dated April 5, 1996
*Based on reported ownership by all directors, officers and beneficial
owners of more than 5% of registrant's voting stock. However, this
determination does not constitute an admission of affiliate status for any of
these holders.
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PART I
ITEM 1. BUSINESS
Stepan Company and its subsidiaries (the "company") produce specialty and
intermediate chemicals which are sold to other manufacturers and then made
into a variety of end products. The company sells three groups of products:
surfactants, polymers and specialty products. Surfactants refer to chemical
agents which affect the interaction between two surfaces; they can provide
actions such as detergency (i.e., the ability of water to remove soil from
another surface), wetting and foaming, dispersing, emulsification (aiding two
dissimilar liquids to mix), demulsification and viscosity modifications.
Surfactants are the basic cleaning agent in detergents for washing clothes,
dishes, carpets, fine fabrics, floors and walls. Surfactants are also used for
the same purpose in shampoos and conditioners, toothpastes, cosmetics and
other personal care products. Commercial and industrial applications include
emulsifiers for agricultural insecticides and herbicides, emulsion polymers
such as floor polishes and latex foams and coatings, wetting and foaming
agents for wallboard manufacturing and surfactants for enhanced oil recovery.
Polymers refer to intermediate chemicals including phthalic anhydride, polyols
and urethane foam systems used in plastics, building materials and
refrigeration industries. Specialty products consist of flavor and
pharmaceutical intermediates, fine chemicals, esters, synthetic lubricants and
other specialty products.
In 1991, Stepan Company purchased the ACCOSOFT(R) line of fabric softeners
from Karlshamns U.S.A., Inc. The company also purchased from ICI Americas,
Inc. the U.S. portion of the sulfonate and sulfonate blend line used in
agricultural products and industrial coatings.
In 1993, Stepan Company entered into a 50 percent joint venture with
Coldequim, S.A. called Stepan Colombiana de Quimicos, Ltda in Colombia, South
America. Under the agreement, Stepan Colombiana manufactures selected
surfactants and markets the company's complete line of surfactants in the
Andean Pact countries of Colombia, Venezuela, Peru, Bolivia and Ecuador.
In 1994, Stepan Company entered into a 50 percent joint venture with United
Coconut Chemicals, Inc. and United Coconut Planters International in the
Philippines. The venture, called Stepan Philippines, Inc., will manufacture
selected surfactants for sale in the Philippines and Asia/Pacific markets
commencing in 1996.
In January 1996, Stepan Company agreed in principle to acquire a sulfonation
plant and sulfonated products business from Shell Group in Cologne, Germany.
This plant will allow the company to serve Northern European customers with a
wide range of sulfate and sulfonate products used in household, personal care,
individual, institutional and agricultural markets.
MARKETING AND COMPETITION
Principal markets for all products are manufacturers of cleaning or washing
compounds (including detergents, shampoos, toothpastes and household
cleaners), paints, cosmetics, food and beverages, agricultural insecticides
and herbicides, plastics, furniture, building materials and automotive and
refrigeration equipment. Sales of the company tend not to be seasonal.
The company does not sell directly to the retail market, but sells to a wide
range of manufacturers in many industries and has many competitors. The
principal methods of competition are product performance, price and
adaptability to the specific needs of individual customers. These factors
allow the company to compete on a basis other than solely price, reducing the
severity of competition as experienced in the sales of commodity chemicals
having identical performance characteristics. The company is one of the
largest merchant producers of surfactants in the United States. In the case of
surfactants, much of the company's competition comes from the internal
divisions of larger companies, as well as several large national and regional
producers. In the manufacture of polymers, the company competes with the
chemical divisions of several large companies, as well as with other small
specialty chemical manufacturers. In recent years, the company has also faced
periodic competition from foreign imports of phthalic anhydride. In specialty
products, the company competes with several large firms plus numerous small
companies. The company does not expect any significant changes in the
competitive environment in the foreseeable future.
MAJOR CUSTOMER AND BACKLOG
The company does not have any one single customer whose business represents
more than 10% of the company's consolidated revenue. Most of the company's
business is essentially on the "spot delivery basis" and does not involve a
significant backlog. The company does have some contract arrangements with
certain customers, but purchases are generally contingent on purchaser
requirements.
ENERGY SOURCES
Substantially all of the company's manufacturing plants operate on
electricity and interruptable gas purchased from local utilities. During peak
heating demand periods, gas service to all plants may be temporarily
interrupted for varying periods ranging from a few days to several months. The
plants operate on fuel oil during these gas interruption periods. The company
has not experienced any plant shutdowns or adverse effects upon its business
in recent years that were caused by a lack of available energy sources.
RAW MATERIALS
The most important raw materials used by the company are of a petroleum or
vegetable nature. For 1996, the company has commitments from suppliers to
cover its forecasted requirements and is not substantially dependent upon any
one supplier.
RESEARCH AND DEVELOPMENT
The company maintains an active research and development program to assist
in the discovery and commercialization of new knowledge with the intent that
such effort will be useful in developing a new product or in bringing about a
significant improvement to an existing product or process. Total expenses for
research and development during 1995, 1994 and 1993 were $12,425,000,
$12,281,000 and $12,613,000, respectively. During 1995 and 1994, the research
and development staff consisted of 175 and 170 employees, respectively. The
balance of expenses reflected on the Consolidated Statements of Income relates
to technical services which include routine product testing, quality control
and sales support service.
ENVIRONMENTAL COMPLIANCE
Compliance with applicable federal, state and local regulations regarding
the discharge of materials into the environment, or otherwise relating to the
protection of the environment, resulted in capital expenditures by the company
of approximately $6,840,000 during 1995. Such capital expenditures in 1996
should approximate $5.4 million. These expenditures represented approximately
17% of the company's capital expenditures in 1995 and are expected to be 10%
of such expenditures in 1996. These expenditures, when incurred, are
depreciated and charged on a straight-line basis to pre-tax earnings over
their respective useful lives which are typically 10 years. Compliance with
such regulations is not expected to have a material adverse effect on the
company's earnings and competitive position in the foreseeable future.
EMPLOYMENT
At December 31, 1995 and 1994, the company employed worldwide 1,267 and
1,265 persons, respectively.
FOREIGN OPERATIONS
See Note 12, Geographic Data, on page 29 of the company's 1995 Annual Report
to Stockholders.
PRODUCT GROUPS
The manufacture of specialty and intermediate chemicals constitutes the
company's only industry segment. The company's three groups of products and
their contribution to sales for the three years ended December 31, 1995, were:
SPECIALTY
SURFACTANTS POLYMERS PRODUCTS
----------- -------- ---------
1995....................................... 72% 22% 6%
1994....................................... 74% 18% 8%
1993....................................... 74% 18% 8%
2
ITEM 2. PROPERTIES
The company's corporate headquarters and central research laboratories are
located in Northfield, Illinois. The Northfield facilities contain
approximately 70,000 square feet on an 8 acre site. In addition, the company
leases 49,000 square feet of office space in a nearby office complex.
The Canadian sales office is located in Mississagua, Canada and is
approximately 2,300 square feet of leased space. Stepan Mexico maintains a
leased sales office in Mexico City, Mexico.
Surfactants are produced at four plants in the United States and three
wholly owned subsidiaries: one in France, Canada and Mexico. The principal
plant is located on a 626 acre site at Millsdale (Joliet), Illinois. A second
plant is located on a 39 acre tract in Fieldsboro, New Jersey. West Coast
operations are conducted on an 8 acre site in Anaheim, California. A fourth
plant is located on a 162 acre site in Winder, Georgia. The plant, laboratory
and office of Stepan Europe are located on a 20 acre site near Grenoble,
France. Stepan Canada, Inc. is located on a 70 acre leased, with an option to
purchase, site in Longford Mills, Ontario, Canada. Stepan Mexico is located on
a 13 acre site in Matamoros, Mexico. The phthalic anhydride, polyurethane
systems and polyurethane polyols plants are also located at Millsdale.
Specialty products are mainly produced at a plant located on a 19 acre site in
Maywood, New Jersey.
The company owns all of the foregoing facilities except the leased office
space and Canadian plant site mentioned above. The company believes these
properties are adequate for its operations.
ITEM 3. LEGAL PROCEEDINGS
Reference is made to the company's report Form 10-K for the years ended
1991, 1992 and 1994 and reports Form 10-Q for the quarters ended September 30,
1993, and September 30, 1995, regarding the company's Maywood site. No
remediation action has occurred at this site, but the company still
anticipates that the Record of Decision will be issued in the calendar year
1996.
Reference is made to the company's report Form 10-Q for the quarters ended
September 30, 1993, September 30, 1994, and September 30, 1995, regarding the
Ewan and D'Imperio cases and particularly U.S. v. Jerome Lightman (92 cv 4710
(JBS)). The government in this case has indicated a willingness to settle this
case and settlement discussions are underway. However, even if the case with
the government is settled, the case regarding issues of liability and
allocation between the company and other potentially responsible parties will
continue and is still scheduled for trial in the third or fourth quarter of
1996.
Reference is made to the company's report Form 10-K for the year ended 1992
and report Form 10-Q for the quarter ended September 30, 1995, relating to the
insurance recovery case brought by the company against its insurers to recover
the cost of remediation at various sites. On February 23, 1996, the Chancery
Court Cook County, State of Illinois, ruled that the Hartford Insurance
Company is "foreclosed" from contesting coverage under the policies which it
wrote over a period of 14 years. The company has made a demand upon the
Hartford which has not responded. After issuance of a final judgement order,
the Hartford may appeal the decision and the company cannot at this time
estimate what the outcome of such appeal, if any, will be.
Reference is made to the company's report Form 10-Q for the quarter ended
September 30, 1993, relating to the Biddle Sawyer site located in Keyport, New
Jersey. (Biddle Sawyer Corporation v. American Cyanamid Company in the United
States District Court of New Jersey CA-93-1063). As reported previously, the
company was named as a defendant in this action to recover remediation costs
incurred at the site. Trial on the issues will commence the last quarter of
1996 or the first quarter of 1997. The company cannot predict what the outcome
of the trial will be, but the company believes that it has defenses to all of
the plaintiff's allegations.
Reference is made to the company's report Form 10-Q for the quarter ended
March 31, 1995, relating to an action entitled General Electric Company v.
Buzby Brothers Materials Corporation et al. (CA 87-4263 JHR). As reported
previously, the company believed that it settled its liability at this site.
The court recently approved the settlement. However, the company must
cooperate in depositions by the non-settling parties.
3
Reference is made to the company's report 10-Q for the quarter ended March
31, 1995, referencing an action entitled Millmaster Onyx Group Inc. v. Stepan
Company (CA No. 93-510-LON). Trial is still scheduled to commence on June 4,
1996. The company cannot predict what the outcome of the trial will be, but
the company believes that it has defenses to all of the plaintiff's
allegations.
On March 15, 1996, the company was notified by the Occupational Safety and
Health Administration (OSHA) following an audit of the company's Maywood, New
Jersey facility that the OSHA would be issuing a preliminary fine of
approximately $206,000 for alleged violations at the Maywood site. The company
has 15 days in which to appeal the preliminary findings, and the company plans
to do so. At this time the company cannot anticipate what change, if any, to
the preliminary fine will be made following the appeal.
ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS
No matters were submitted to stockholders during the fourth quarter of the
fiscal year ended December 31, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers are elected annually by the Board of Directors at the
first meeting following the Annual Meeting of Stockholders to serve until the
next annual meeting of the Board and until their respective successors are
duly elected and qualified.
Effective May 22, 1995, Jeffrey W. Bartlett, formerly Vice President,
General Counsel and Corporate Secretary, was appointed Vice President,
Regulatory Affairs, General Counsel and Corporate Secretary. Effective January
1, 1995, James A. Hartlage, who was formerly the Senior Vice President--
Technology as of February, 1992, was appointed Senior Vice President--
Technology and Operations. In addition, during 1995 he assumed Administrative
responsibilities. Effective January 1, 1995, Earl H. Wagener, formerly Vice
President--Product Development, was appointed Vice President--Research and
Development.
Effective April 28, 1992, Charles W. Given, formerly Vice President--
Marketing, was appointed Vice President and General Manager--Surfactants.
Ronald L. Siemon, formerly Vice President--Polyurethanes, was appointed Vice
President and General Manager--Polymers.
Effective January 1, 1992, Walter J. Klein, formerly the Vice President and
Corporate Controller, was appointed Vice President--Finance. Mickey
Mirghanbari, who previously served in the capacity of Vice President for Plant
Operations, assumed the position of Vice President--Manufacturing and
Engineering. All other executive officers have remained in their current
capacity for over five years.
The Executive Officers of the company, their ages as of February 29, 1996,
and certain other information are as follows:
YEAR FIRST
NAME AGE TITLE ELECTED OFFICER
---- --- ----- ---------------
Chairman, President and Chief
F. Quinn Stepan..... 58 Executive Officer 1967
Senior Vice President--Technology
James A. Hartlage... 58 and Operations 1980
Vice President and General
Charles W. Given.... 59 Manager--Surfactants 1992
Vice President and General
Ronald L. Siemon.... 58 Manager--Polymers 1992
Vice President, Regulatory Affairs,
General Counsel
Jeffrey W. Bartlett. 52 and Corporate Secretary 1983
Walter J. Klein..... 49 Vice President--Finance 1985
Vice President--Manufacturing and
Mickey Mirghanbari.. 58 Engineering 1992
Vice President--Research and
Earl H. Wagener..... 55 Development 1995
4
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
(a) The company's common stock is listed and traded on both the New York
Stock Exchange (effective March 14, 1996) and the Chicago Stock Exchange. See
page 30 of the company's 1995 Annual Report to Stockholders for market price
information which is incorporated by reference herein.
The company's 5 1/2 percent convertible preferred stock is listed and traded
on the New York Stock Exchange (effective March 14, 1996) and the Chicago
Stock Exchange. See Note 6 on page 27 of the company's 1995 Annual Report to
Stockholders for the description of the preferred stockholders' rights which
is incorporated by reference herein.
From time to time the company purchases shares of its common stock in the
open market and in block transactions from dealers for the purpose of funding
option grants under its stock option plans and deferred compensation plans for
directors and officers. In addition to these funding requirements, on November
6, 1995, the Board of Directors approved an additional open market repurchase
of up to 300,000 shares of common stock.
(b) On February 29, 1996, there were 1,759 holders of record of common stock
of the company.
(c) See page 30 of the company's 1995 Annual Report to Stockholders for
dividend information which is incorporated by reference herein. Also see Note
3 on page 25 of the company's 1995 Annual Report to Stockholders which sets
forth the restrictive covenants covering dividends.
ITEM 6. SELECTED FINANCIAL DATA
See pages 30 and 31 of the company's 1995 Annual Report to Stockholders' for
a ten year summary of selected financial information which is incorporated by
reference herein.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
See pages 14 through 18 of the company's 1995 Annual Report to Stockholders
which is incorporated by reference herein.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See pages 19 through 29 of the company's 1995 Annual Report to Stockholders
for the company's consolidated financial statements, notes to the consolidated
financial statements and auditors' report which are incorporated by reference
herein.
See page 31 of the company's 1995 Annual Report to Stockholders for selected
quarterly financial data which is incorporated by reference herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors
See pages 3 through 5 of the company's Proxy Statement dated April 5,
1996, for the Annual Meeting of Stockholders which are incorporated by
reference herein.
5
(b) Executive Officers
See Executive Officers of the Registrant in Part I above.
ITEM 11. EXECUTIVE COMPENSATION
See page 7 of the company's Proxy Statement dated April 5, 1996, for the
Annual Meeting of the Stockholders which is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See Pages 1 through 6 of the company's Proxy Statement dated April 5, 1996,
for the Annual Meeting of Stockholders which are incorporated by reference
herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) & (d) Financial Statements and Schedules
See the Index to the Consolidated Financial Statements and Supplemental
Schedule filed herewith.
(b) Reports on Form 8-K
A report on Form 8-K was filed on April 12, 1995, regarding quarterly
earnings.
A report on Form 8-K was filed on October 24, 1995, regarding quarterly
earnings.
(c) Exhibits
See Exhibit Index filed herewith.
6
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.
STEPAN COMPANY
By: Jeffrey W. Bartlett
Vice President, Regulatory Affairs,
General Counsel and
Corporate Secretary
March 25, 1996
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.
F. Quinn Stepan Chairman, President, Chief March 25, 1996
____________________________________ Executive Officer and Director
F. Quinn Stepan
Thomas F. Grojean Director March 25, 1996
____________________________________
Thomas F. Grojean
James A. Hartlage Senior Vice President--Technology March 25, 1996
____________________________________ and Operations and Director
James A. Hartlage
Walter J. Klein Vice President--Finance, March 25, 1996
____________________________________ Principal Financial and
Walter J. Klein Accounting Officer
Paul H. Stepan Director March 25, 1996
____________________________________
Paul H. Stepan
Robert D. Cadieux Director March 25, 1996
____________________________________
Robert D. Cadieux
Robert G. Potter Director March 25, 1996
____________________________________
Robert G. Potter
JEFFREY W. BARTLETT, PURSUANT TO POWERS OF ATTORNEY EXECUTED BY EACH OF THE
DIRECTORS AND OFFICERS LISTED ABOVE, DOES HEREBY EXECUTE THIS REPORT ON BEHALF
OF EACH OF SUCH DIRECTORS AND OFFICERS IN THE CAPACITY IN WHICH THE NAME OF
EACH APPEARS ABOVE.
JEFFREY W. BARTLETT
March 25, 1996
7
INDEX TO THE
CONSOLIDATED FINANCIAL STATEMENTS
AND
SUPPLEMENTAL SCHEDULE
A copy of Stepan Company's Annual Report to Stockholders for the year ended
December 31, 1995, has been filed as an exhibit to this Annual Report on Form
10-K. Pages 19 through 29 of such Annual Report to Stockholders contain the
Consolidated Balance Sheets as of December 31, 1995 and 1994, the Consolidated
Statements of Income, Stockholders' Equity and Cash Flows and Notes to
Consolidated Financial Statements for the three years ended December 31, 1995,
and the Auditors' Report covering the aforementioned financial statements.
These consolidated financial statements and the Auditors' Report thereon are
incorporated herein by reference.
Supplemental Schedule II--Allowance for Doubtful Accounts--to Consolidated
Financial Statements, which is required to comply with regulation S-X, and the
Auditors' report on such Supplemental Schedule are included on pages 9 and 10
of this Form 10-K.
Certain supplemental schedules are not submitted because they are not
applicable or not required, or because the required information is included in
the financial statements or notes thereto.
8
STEPAN COMPANY
SUPPLEMENTAL SCHEDULE TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1995
AS REQUIRED TO COMPLY WITH REGULATIONS S-X
SCHEDULE II--ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Below is an analysis of the allowance for doubtful accounts for the three
years ended December 31, 1995:
1995 1994 1993
------ ------ ------
(IN THOUSANDS)
Balance, Beginning of Year........................ $1,585 $1,739 $1,444
Provision charged to income..................... 349 291 621
Accounts written off, net of recoveries......... (190) (445) (326)
------ ------ ------
Balance, End of Year.............................. $1,744 $1,585 $1,739
====== ====== ======
9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
To Stepan Company:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in Stepan Company's Annual Report to
Stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 9, 1996. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The supplemental
schedule listed in the index of financial statements is the responsibility of
the company'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. This 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
Chicago, Illinois,
February 9, 1996
10
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
(3)a Copy of the Certificate of Incorporation, and the Certificates of
Amendment of Certificate of Incorporation dated May 6, 1968, April
20, 1972, April 16, 1973, December 2, 1983. Filed with the Company's
Annual Report on Form 10-K for the year ended December 31, 1983, and
incorporated herein by reference.
(3)b Copy of the Bylaws of the company as amended through May 6, 1987.
(Note 1)
(3)c Copy of Certificate of Amendment, dated April 28, 1993, to Article
IV of Certificate of Incorporation. (Note 7)
(3)d Copy of Certificate of Amendment, dated May 5, 1987, to Article X of
Certificate of Incorporation. (Note 1)
(4)h Copy of Loan Agreement dated June 15, 1995, with Aid Association for
Lutherans, the Northwestern Mutual Life Insurance Company and The
Mutual Life Insurance Company of New York. (Note 9)
(4)i Copy of Revolving Credit and Term Loan Agreement dated February 20,
1990, with The First National Bank of Chicago and the amendment
dated March 21, 1990. (Note 3)
(4)m Copy of Second Amendment dated September 20, 1991, amending
Revolving Credit and Term Loan Agreement dated February 20, 1990
(see (4)i above). (Note 4)
(4)m(1) Copy of Third Amendment dated December 29, 1992, amending Revolving
Credit and Term Loan Agreement dated February 20, 1990 (see (4)i and
(4)m above). (Note 8)
(4)m(2) Copy of Fourth Amendment dated May 31, 1994, amending revolving
credit and Term Loan Agreement dated February 20, 1990 (see (4)i,
(4)m and (4)m(1) above).
(4)n(1) Copy of Certificate of Designation, Preferences and Rights of the 5
1/2% Convertible Preferred Stock, without Par Value and the Amended
Certificate dated August 12, 1992 and April 28, 1993. (Note 7)
(4)n(2) Copy of Issuer Tender Offer Statement on Schedule 13E-4 dated August
13, 1992. (Note 6)
(4)n(3) Copy of Amendment No. 1 to Schedule 13E-4 (see also (4)n(2) above)
dated September 23, 1992. (Note 6)
(4)n(4) Copy of the company's Form 8-A dated August 13, 1992. (Note 6)
In accordance with 601 (b)(4)(iii) of Regulation S-K, certain debt
instruments are omitted, where the amount of securities authorized
under such instruments does not exceed 10% of the total consolidated
assets of the Registrant. Copies of such instruments will be
furnished to the Commission upon request.
(10)a Description of the 1965 Directors Deferred Compensation Plan. (Note
2)
(10)b Copy of the 1969 Management Incentive Compensation Plan as amended
and restated as of January 1, 1992. (Note 5)
(10)d Copy of the 1982 Stock Option Plan. (Note 2)
(10)e Copy of Leveraged Employee Stock Ownership Plan. (Note 3)
(10)f Copy of the company's 1992 Stock Option Plan. (Note 5)
(11) Statement re computation of per share earnings.
(13) Copy of the company's 1995 Annual Report to Stockholders.
(18) Letter re change in accounting principle for the year ended December
31, 1992. (Note 8)
(21) Subsidiaries of Registrant at December 31, 1995.
(23) Consent of Independent Public Accountants.
(24) Power of Attorney.
(27) Financial Data Schedule.
- --------
NOTES TO EXHIBIT INDEX
NOTE NO.
--------
1. Filed with the company's Annual Report on Form 10-K for the year
ended December 31, 1987, and incorporated herein by reference.
2. Filed with the company's Annual Report on Form 10-K for the year
ended December 31, 1988, and incorporated herein by reference.
3. Filed with the company's Annual Report on Form 10-K for the year
ended December 31, 1989, and incorporated herein by reference.
4. Filed with the company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1991, and incorporated herein by
reference.
5. Filed with the company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1992, and incorporated herein by reference.
6. Filed with the company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1992, and incorporated herein by
reference.
7. Filed with the company's Current Report on Form 8-K filed on April
28, 1993, and incorporated herein by reference.
8. Filed with the company's Annual Report on Form 10-K for the year
ended December 31, 1992, and incorporated herein by reference.
9. Filed with the company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, and incorporated herein by reference.