-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CiM+4aIFaHgGAIYeXhvdG3qS+kbxnNElSdvv1YnQoQkBdWD/QbTvxlpWlsuzyRFd L128KMgP9Ng9lOSuM/ZnIw== 0000916641-01-500010.txt : 20010319 0000916641-01-500010.hdr.sgml : 20010319 ACCESSION NUMBER: 0000916641-01-500010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010131 FILED AS OF DATE: 20010316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MASSEY ENERGY CO CENTRAL INDEX KEY: 0000037748 STANDARD INDUSTRIAL CLASSIFICATION: HEAVY CONSTRUCTION OTHER THAN BUILDING CONST - CONTRACTORS [1600] IRS NUMBER: 950740960 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07775 FILM NUMBER: 1570158 BUSINESS ADDRESS: STREET 1: 4 NORTH 4TH STREET CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8047881800 MAIL ADDRESS: STREET 1: 4 NORTH 4TH STREET CITY: RICHMOND STATE: VA ZIP: 23219 FORMER COMPANY: FORMER CONFORMED NAME: FLUOR CORP/DE/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FLUOR CORP LTD DATE OF NAME CHANGE: 19710624 10-Q 1 d10q.txt QUARTERLY REPORT FOR THE PERIOD ENDED 1/31/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________to__________________ Commission File Number: 1-7775 MASSEY ENERGY COMPANY - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) Delaware 95-0740960 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Incorporation or organization) Identification Number) 4 North 4th Street, Richmond, Virginia 23219 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (804) 788-1800 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 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 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[ ] As of February 26, 2001 there were 73,829,043 shares of common stock, $0.625 par value, outstanding. - -------------------------------------------------------------------------------- 1 MASSEY ENERGY COMPANY FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2001
TABLE OF CONTENTS PAGE - ---------------------------------------------------------------------------------------------------- Part I: Financial Information Item 1. Condensed Consolidated Financial Statements 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Discussions About Market Risk 11 Part II: Other Information 12 Item 1. Legal Proceedings 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13
- -------------------------------------------------------------------------------- 2 PART I: FINANCIAL INFORMATION ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MASSEY ENERGY COMPANY CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended January 31, 2001 and 2000 UNAUDITED
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 2001 2000 - ------------------------------------------------------------------------------------------------------------- Net sales $ 273,112 $ 259,074 Other revenue 7,217 13,217 ----------- ----------- Total revenue 280,329 272,291 ----------- ----------- Costs and expenses Cost of sales 225,044 191,893 Depreciation, depletion and amortization 42,894 41,981 Selling, general and administrative 8,801 8,698 ----------- ----------- Total costs and expenses 276,739 242,572 ----------- ----------- Earnings before interest and taxes 3,590 29,719 Interest income 2,464 4,702 Interest expense 8,270 -- ----------- ----------- Earnings (loss) before taxes (2,216) 34,421 Income tax expense (benefit) (864) 10,568 ----------- ----------- Net earnings (loss) $ (1,352) $ 23,853 =========== =========== Earnings (loss) per share (Note 6) Basic $ (0.02) $ 0.32 =========== =========== Diluted $ (0.02) $ 0.32 =========== =========== Shares used to calculate earnings (loss) per share (Note 6) Basic 73,902 73,469 =========== =========== Diluted 74,155 73,476 =========== =========== Dividends Per Share $ 0.04 $ -- =========== =========== See Notes to Condensed Consolidated Financial Statements. - -------------------------------------------------------------------------------------------------------------- 3
MASSEY ENERGY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS January 31, 2001 and October 31, 2000 UNAUDITED
JANUARY 31, OCTOBER 31, $ IN THOUSANDS 2001 2000 * - ----------------------------------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 2,189 $ 6,929 Trade and other accounts receivable 200,302 215,574 Inventories 98,577 104,132 Deferred taxes 6,963 8,398 Prepaid expenses and other 96,796 67,813 ------------- ------------- Total current assets 404,827 402,846 Net Property, Plant and Equipment 1,557,632 1,559,426 Other Noncurrent Assets Pension assets 70,791 67,740 Other 118,049 131,118 ------------- ------------- Total other noncurrent assets 188,840 198,858 ------------- ------------- Total assets $ 2,151,299 $ 2,161,130 ============= ============= * Amounts at October 31, 2000 have been derived from audited financial statements. (Continued On Next Page) - ------------------------------------------------------------------------------------------------------ 4
MASSEY ENERGY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS January 31, 2001 and October 31, 2000 UNAUDITED
JANUARY 31, OCTOBER 31, $ IN THOUSANDS 2001 2000 * - -------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable, principally trade $ 93,279 $ 120,891 Commercial paper 269,000 -- Notes payable and bank overdrafts 24,932 32,566 Payroll and employee benefits 26,216 30,784 Income taxes payable 7,837 12,222 Other current liabilities 51,370 78,420 ----------- ----------- Total current liabilities 472,634 274,883 Long-term debt 300,000 -- Noncurrent liabilities Deferred taxes 255,317 254,022 Other noncurrent liabilities 257,638 257,607 ----------- ----------- Total noncurrent liabilities 512,955 511,629 Shareholders' Equity Capital Stock Preferred - authorized 20,000,000 shares without par value; none issued -- -- Common - authorized 150,000,000 shares of $0.625 par value; issued and outstanding - 73,748,470 shares 46,093 -- Additional capital 3,448 -- Retained earnings 821,998 -- Unamortized executive stock plan expense (5,829) -- Net investment by Fluor Corporation -- 1,653,682 Due from Fluor Corporation -- (279,064) ----------- ----------- Total shareholders' equity 865,710 1,374,618 ----------- ----------- Total liabilities and shareholders' equity $ 2,151,299 $ 2,161,130 =========== =========== * Amounts at October 31, 2000 have been derived from audited financial statements. See Notes to Condensed Consolidated Financial Statements. - --------------------------------------------------------------------------------------------------------------------- 5
MASSEY ENERGY COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Three Months Ended January 31, 2001 and 2000 UNAUDITED
$ IN THOUSANDS 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings (loss) $ (1,352) $ 23,853 Adjustments to reconcile net earnings (loss) to cash utilized by operating activities: Depreciation, depletion and amortization 42,894 41,981 Deferred taxes 3,118 5,613 Changes in operating assets and liabilities, excluding effects of business acquisitions/dispositions (68,250) (81,065) Other, net 1,910 (7,268) -------- -------- Cash utilized by operating activities (21,680) (16,886) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (43,010) (55,223) Proceeds from sale of property, plant and equipment -- 8,021 -------- -------- Cash utilized by investing activities (43,010) (47,202) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Decrease in short-term borrowings, net (9,229) -- Decrease in amount due from Fluor Corporation 67,554 62,140 Equity contributions from Fluor Corporation 2,476 4,754 Cash dividends paid (2,870) -- Stock options exercised 1,452 -- Other, net 567 -- -------- -------- Cash provided by financing activities 59,950 66,894 -------- -------- Increase (Decrease) in cash and cash equivalents (4,740) 2,806 Cash and cash equivalents at beginning of period 6,929 8,051 -------- -------- Cash and cash equivalents at end of period $ 2,189 $ 10,857 ======== ======== See Notes to Condensed Consolidated Financial Statements. - ----------------------------------------------------------------------------------------------------------------------------- 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) The condensed consolidated financial statements do not include footnotes and certain financial information normally presented annually under accounting principles generally accepted in the United States and, therefore, should be read in conjunction with Massey Energy Company's ("Massey" or "the Company") Annual Report on Form 10-K for the fiscal year ended October 31, 2000. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for the three months ended January 31, 2001 are not necessarily indicative of results that can be expected for the full year. The condensed consolidated financial statements included herein are unaudited; however, they contain all adjustments (consisting of normal recurring accruals) which, in the opinion of the Company, are necessary to present fairly its consolidated financial position at January 31, 2001 and its consolidated results of operations and cash flows for the three months ended January 31, 2001 and 2000. Certain 2000 amounts have been reclassified to conform with the 2001 presentation. (2) On November 30, 2000, Fluor Corporation ("Fluor") completed a reverse spin-off, which divided it into two separate publicly-traded corporations. As a result of the reverse spin-off (the "Spin-Off"), Fluor separated into (i) the spun-off corporation, "new" Fluor Corporation ("New Fluor"), which owns all of Fluor's then existing businesses except for the coal-related business conducted by A. T. Massey Coal Company, Inc. ("A.T. Massey"), and (ii) Fluor Corporation, subsequently renamed Massey Energy Company, which owns the coal-related business. Further discussion of the Spin-Off may be found in Massey's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 as filed with the Securities and Exchange Commission. Immediately after the Spin-Off, Massey had 73,468,707 shares of $0.625 par value common stock outstanding. In connection with the Spin-Off, A. T. Massey became the sole direct, and wholly owned subsidiary of Massey. A. T. Massey now represents the sole operating subsidiary of Massey, as Massey has no separate independent operations. Due to the relative significance of the businesses transferred to New Fluor following the Spin-Off, New Fluor has been treated as the "accounting successor" for financial reporting purposes and the Company has been treated by New Fluor as a discontinued operation despite the legal form of separation resulting from the Spin-Off. As a result of the Spin-Off, the following occurred which affected Massey's ongoing operations: o Massey no longer invests in the Fluor commercial paper; o Massey no longer loans amounts in excess of operating and capital needs to Fluor and the amounts due from Fluor were repaid as part of the Spin-Off; o Fluor's previously issued $300 million of 6.95 percent Senior Notes due March 1, 2007, with interest payable semi-annually on March 1 and September 1 of each year, became the obligation of Massey; and o Massey issued $275 million of its own commercial paper and utilized $3.5 million of cash to refund the $278.5 million of Fluor commercial paper assumed as a result of the Spin-Off. Massey's equity structure was also impacted as a result of the Spin- Off. As noted above, Massey assumed from Fluor $300 million of 6.95 percent Senior Notes and $278.5 million of Fluor commercial paper, in addition to other equity contributions from Fluor. These Spin-Off occurrences, in addition to the net loss for the three months ended January 31, 2001, dividends paid, and options exercised, resulted in a change in shareholders' equity from $1,374.6 million at October 31, 2000 to $865.7 million at January 31, 2001, a net reduction of $508.9 million. - -------------------------------------------------------------------------------- 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) (3) Effective November 1, 2000, the Company adopted Statement of Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133), as amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities". The adoption of these accounting standards did not have a significant effect on the Company's financial statements, however, the Financial Accounting Standards Board ("FASB") continues to finalize and release interpretive guidance, and, therefore, no assurance can be given that any new interpretive guidance, if contrary to Massey's current interpretation of SFAS 133 and SFAS 138, will not have a significant impact on Massey's future financial position, results of operations, or cashflows. (4) Inventories are comprised of: January 31, October 31, $ in thousands 2001 2000 ---------------------------------------------------------------- Coal $ 76,835 $ 82,636 Other 21,742 21,496 -------- --------- $ 98,577 $ 104,132 ======== ========= (5) Net Property, Plant and Equipment is comprised of: January 31, October 31, $ in thousands 2001 2000 -------------------------------------------------------------------------------------- Property, Plant and Equipment, at cost $2,547,170 $2,517,052 Accumulated depreciation, depletion and amortization (989,538) (957,626) ---------- ---------- $1,557,632 $1,559,426
(6) The number of shares used to calculate basic earnings (loss) per share for the three months ended January 31, 2000 is based on the number of Massey shares outstanding immediately following the Spin-Off. The number of shares used to calculate basic earnings (loss) per share for all other periods presented is based on the weighted average outstanding shares of Massey Energy during the respective periods. The number of shares used to calculate diluted earnings (loss) per share is based on the number of shares used to calculate basic earnings (loss) per share plus the dilutive effect of stock options and other stock-based instruments held by Massey employees each period. - -------------------------------------------------------------------------------- 8 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis is provided to increase understanding of, and should be read in conjunction with, the Condensed Consolidated Financial Statements and accompanying notes and the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000. FORWARD-LOOKING INFORMATION - --------------------------- From time to time, the Company makes certain comments and disclosures in reports and statements, including this report or statements made by its officers or directors which may be forward-looking in nature. Examples include statements related to Company growth, the adequacy of funds to service debt and the Company's opinions about trends and factors which may impact future operating results. These forward-looking statements could also involve, among other things, statements regarding the Company's intent, belief or expectation with respect to (i) the Company's results of operations and financial condition, (ii) the consummation of acquisition, disposition or financing transactions and the effect thereof on the Company's business, and (iii) the Company's plans and objectives for future operations and expansion or consolidation. Any forward-looking statements are subject to the risks and uncertainties that could cause actual results of operations, financial condition, cost reductions, acquisitions, dispositions, financing transactions, operations, expansion, consolidation and other events to differ materially from those expressed or implied in such forward-looking statements. Any forward-looking statements are also subject to a number of assumptions regarding, among other things, future economic, competitive and market conditions generally. These assumptions would be based on facts and conditions as they exist at the time such statements are made as well as predictions as to future facts and conditions, the accurate prediction of which may be difficult and involve the assessment of events beyond the Company's control. As a result, the reader is cautioned not to rely on these forward-looking statements. The Company wishes to caution readers that forward-looking statements, including disclosures which use words such as the Company "believes," "anticipates," "expects," "estimates" and similar statements, are subject to certain risks and uncertainties which could cause actual results of operations to differ materially from expectations. Any forward-looking statements should be considered in context with the various disclosures made by the Company about its businesses, including without limitation the risk factors more specifically described below in Item 1. Business, under the heading "Business Risks", in the Company's Annual Report on Form 10-K for its fiscal year ended October 31, 2000. Such filings are available publicly and upon request from Massey's Investor Relations Department: (804) 788-1800. The Company disclaims any intent or obligation to update its forward-looking statements. RESULTS OF OPERATIONS - --------------------- Three months ended January 31, 2001 compared with the three months ended January - -------------------------------------------------------------------------------- 31, 2000. - --------- In the first quarter of 2001, net sales increased 5 percent to $273.1 million in 2001 compared with $259.1 million for the same period in 2000. Two factors that impacted revenues during the first quarter 2001 were: o The volume of tons sold increased from 9.4 million tons to 10.4 million tons consisting of an increase of utility, metallurgical and industrial tons sold of 9, 11 and 14 percent, respectively, for an overall increase of 10.3 percent. o The average per ton realized price for coal sold declined by 5 percent. The metallurgical coal market continued to be adversely affected by a weak coal export market and continuing problems experienced by the domestic steel market. Demand was weak for United States coal exported to foreign markets as the U.S. dollar remained strong. The market for utility coal has improved during the first three months of 2001 as spot market prices of Central Appalachian coal increased to a 20 year high. Unfortunately, most of the Massey tonnage sold in the first quarter was committed prior to the upturn in the market. Prices for utility sales in the first three months of 2001 reflect a bottoming of the market prior to the recent market upturn. - -------------------------------------------------------------------------------- 9 Other revenue, which consists of royalties, rentals, miscellaneous income and gains on the sale of less strategic assets, decreased 45 percent to $7.2 million for the first quarter of 2001 compared with $13.2 million for the same period in 2000. The decrease was primarily due to a decrease in income from dispositions of less strategic mineral reserves, which generated $7.4 million in 2000. As part of its management of coal reserves, Massey regularly sells less strategic reserves or exchanges them for reserves located in more synergistic locations. Cost of sales increased 17 percent to $225.0 million for the first quarter of 2001 from $191.9 million in same period in 2000. This was primarily due to the 10.3 percent increase in tons sold. Cost of sales on a per ton basis increased by approximately 7 percent in the first quarter of 2001 compared with same period in 2000 as operational problems and adverse geologic conditions were encountered. Operating difficulties related to two longwall mines and the expansion of Massey's two large surface mines negatively affected the first quarter results. The two new longwall mines which started in January, 2001 suffered through normal start-up problems. One longwall mine suffered through difficult mining conditions while mining at an interim location during November and December. The two surface mines experienced higher than expected overburden ratios in the first quarter. Increases in operating costs related to the Martin County Coal slurry spill and the idling of the Martin County Coal preparation plant also negatively impacted cost of sales. Depreciation, depletion and amortization increased by 2 percent to $42.9 million in the first quarter of 2001 compared to $42.0 million in 2000. Selling, general and administrative expenses were $8.8 million for 2001 compared with $8.7 million for 2000. Interest income decreased to $2.5 million for 2001 compared with $4.7 million for 2000. This decrease was primarily due to an intercompany receivable from Fluor Corporation, which was outstanding for only one month in the first quarter of fiscal 2001 compared to three months in 2000. Interest expense increased to $8.3 million for the first three months of 2001. The increase was primarily due to the addition of the 6.95 percent Senior Notes and commercial paper borrowings subsequent to Spin-Off. Income tax benefit was $0.9 million for the first quarter 2001 compared with income tax expense of $10.6 million for the same period in 2000. This primarily reflects the loss incurred in the first quarter of 2001 compared to the income for 2000. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- At January 31, 2001 the Company's available liquidity was $133 million, including cash and cash equivalents of $2.2 million and $131 million from the Company's commercial paper program. Massey has $150 million 364-day and $250 million 3-year revolving credit facilities that serve to provide liquidity backstop to Massey's commercial paper program and are also available to meet the Company's ongoing liquidity needs. The total debt to book capitalization ratio was 39.7 percent at January 31, 2001. The cash flow utilized by operating activities was $21.7 million in the first three months of 2001 and $16.9 million for the same period in 2000. Cash utilized by operating activities reflects net earnings (loss) adjusted for non-cash charges and changes in working capital requirements. Net cash utilized by investing activities was $43.0 million for the first three months in 2001, and $47.2 million for the same period in 2000. The cash used in investing activities reflects capital expenditures in the amount of $43.0 million and $55.2 million for the three months ended January 31, 2001 and 2000, respectively. These capital expenditures are for replacement of mining equipment, the expansion of mining capacity and projects to improve the efficiency of mining operations. Financing activities primarily reflect changes in amounts due from Fluor Corporation and additional capital investments from Fluor prior to the Spin-Off. In addition to the cash spent on capital expenditures, during the first three months of 2001, the Company leased, through operating leases, $37 million of longwall and surface mining equipment. - -------------------------------------------------------------------------------- 10 OUTLOOK - ------- The second fiscal quarter of 2001 will continue to be difficult as the Martin County Coal preparation plant remains closed, two new longwall operations work through start up problems and two of the large surface mines work out of high overburden ratio areas. The second half of the fiscal year is expected to show improvement as the Company is expected to benefit from improved pricing on approximately 10 percent of fiscal year 2001 sales and increased production from new and expanding operations. These trends should continue into and throughout 2002 as well. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCUSSIONS ABOUT MARKET RISK Massey's interest expense is sensitive to changes in the general level of interest rates in the United States. At January 31, 2001, Massey had outstanding $300 million aggregate principal amount of debt under fixed-rate instruments, however, the Company's primary exposure to market risk for changes in interest rates relates to its commercial paper program. At January 31, 2001, Massey had an aggregate of $269 million in commercial paper outstanding. Massey's commercial paper bore interest at an average rate of 6.60 percent. Based on the commercial paper balance outstanding at January 31, 2001, a 100 basis point increase in the average issuance rate for Massey's commercial paper would increase Massey's annual interest expense by approximately $2.7 million. Almost all of Massey's transactions are denominated in U.S. dollars, and, as a result, it does not have material exposure to currency exchange-rate risks. Massey has not engaged in any interest rate, foreign currency exchange-rate or commodity price hedging transactions. - -------------------------------------------------------------------------------- 11 PART II: OTHER INFORMATION Item 1. Legal Proceedings The following describes material changes in legal proceedings affecting the Company described in Part I, Item 3 in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000. a) Big Sandy Company, L.P. ("Big Sandy") asserted a claim of forfeiture of two leases covering coal reserves in Pike County, Kentucky and which included active mining areas of Sidney Coal Company, Inc. ("Sidney"), an A.T. Massey subsidiary. The dispute was referred to arbitration and heard in October 2000. The arbitrators rendered a decision on February 6, 2001, holding that the leases remain in full force and effect and were not subject to forfeiture. However, Sidney will be required to pay approximately $150,000 in royalties that the arbitrators determined to be payable to Big Sandy. b) With respect to the Martin County Coal impoundment discharge described in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000, the Kentucky Department of Surface Mining, Reclamation and Enforcement and the Federal Mine Safety and Health Administration, on February 13, 2001, issued notices revoking the permit required for Martin County Coal to operate the impoundment. Martin County Coal has appealed the agency actions and is continuing to negotiate with the applicable agencies for approval of certain uses of the impoundment that would allow for resumed operations of Martin County Coal's preparation plant. Additionally, on March 6, 2001, Martin County Coal and the Environmental Protection Agency ("EPA") entered into an Agreed Order on Consent, which governs future clean-up and restoration activities and pursuant to which, Martin County Coal has agreed to reimburse EPA for costs incurred by EPA in responding to the impoundment discharge. EPA response costs for the period prior to January 31, 2001 were approximately $750,000. Martin County Coal believes that the clean up of the spill is approximately 90 percent complete. Approximately $31 million in clean up costs have been incurred through March 13, 2001. Item 4. Submission of Matters to a Vote of Security Holders (a) On November 30, 2000, the shareholders of Fluor approved the Spin-Off by a vote of 60,487,215 to 434,352 with 399,715 shares abstaining, and the Spin-Off was consummated on the same day. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 10.24 Employment Agreement between Massey Energy Company, A. T. Massey Coal Company, Inc. and and Don L. Blankenship dated as of November 1, 2001. (b) Reports on Form 8-K. The Company filed a Form 8-K on December 15, 2000 which included various agreements associated with the Spin-Off and certain resulting changes to incentive plans. - -------------------------------------------------------------------------------- 12 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. MASSEY ENERGY COMPANY --------------------- (Registrant) Date: March 16, 2001 /s/ J. M. Jarosinski ------------------------------------- J. M. Jarosinski, Vice President - Finance and Chief Financial Officer /s/ E. B. Tolbert ------------------------------------- E. B. Tolbert, Controller EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10.24 Employment Agreement between Massey Energy Company, A.T. Massey Coal Company, Inc. and Don L. Blankenship dated as of November 1, 2001. - -------------------------------------------------------------------------------- 13 EX-10.24 2 dex1024.txt EXH 10.24 - EMPLOYMENT AGREEMENT EXHIBIT 10.24 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), entered into as of November 1, 2001, by and between MASSEY ENERGY COMPANY ("Parent"), A.T. MASSEY COAL COMPANY, INC., ("Massey"), and DON L. BLANKENSHIP (the "Executive"). WITNESSETH: WHEREAS, Parent and Massey desire to retain the experience, abilities and service of the Executive upon the terms and conditions specified herein; and WHEREAS, the Executive is willing to enter into this Agreement upon the terms and conditions specified herein; NOW, THEREFORE, in consideration of the premises, the terms and provisions set forth herein, the mutual benefits to be gained by the performance thereof and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. Employment. Parent and Massey hereby offer employment to the ---------- Executive and the Executive hereby accepts such offers, all upon the terms and conditions set forth herein. SECTION 2. Term. Subject to the terms and conditions of this Agreement, ---- the Executive shall be employed by Parent and Massey commencing on November 1, 2001, (the "Effective Date") and terminating on April 30, 2005, (the "Primary Term") unless sooner terminated pursuant to Section 5 of this Agreement. SECTION 3. Duties and Responsibilities. --------------------------- A. Capacity. The Executive shall serve as Chairman and Chief Executive -------- Officer of Parent and Massey. The Executive shall perform the duties ordinarily expected of a Chairman and Chief Executive Officer and shall also perform such other duties consistent therewith as the Organization and Compensation Committee of Parent's Board of Directors (the "Committee") from time to time, reasonably determines. B. Full-Time Duties. The Executive shall devote his full business time, ---------------- attention and energies to the business of Parent and Massey. Notwithstanding anything herein to the contrary, the Executive shall be allowed to (a) manage the Executive's personal investments and affairs, and (b)(i) serve on boards or committees of civic or charitable organizations or trade associations, and (ii) with the permission of the Committee, serve on the board of directors of any corporation or as an advisory director of any corporation; provided that such activities do not interfere with the proper performance of his duties and responsibilities specified in Section SECTION 3(A). SECTION 4. Compensation. ------------ A. Base Salary. During the term of this Agreement, the Executive shall ----------- receive a salary (the "Base Salary") of $1,000,000 per annum. The Base Salary shall be payable by Massey in accordance with the general payroll practices of Massey in effect from time to time. B. Annual Incentive Bonus. The Executive shall be eligible for an ------------------------ annual bonus with a target amount of at least $700,000, $800,000, $900,000 and $450,000, based upon company performance for fiscal years ending in 2002, 2003, 2004 and 2005, respectively. The bonus amounts will be paid in installments on June 15 and December 15 consistent with past payment practices between Massey and the Executive. The following table shows the target payment amounts and payment dates for each fiscal year's performance: FYE June 15 December 15 TOTAL --- ------- ----------- ----- 2002 $350,000 $350,000 $700,000 2003 $400,000 $400,000 $800,000 2004 $450,000 $450,000 $900,000 2005 $450,000 N/A $450,000 The bonus payments will be based on the financial performance of Parent, Massey or both for each of the stated fiscal years. There will be predetermined performance goals and objectives established and mutually agreed to by the Committee and the Executive. The award payments will be made in accordance with standard Massey practices. C. Long Term Incentive Award. The Executive shall participate in --------------------------- Parent's Long Term Incentive Program. The Executive will participate in the fiscal year 2002, 2003, 2004 and 2005 performance cycles. The Long Term Incentive Award for each cycle shall consist of a target cash award of $300,000 (except for the half year fiscal 2005 performance cycle for which the target cash award shall be $150,000). The amount payable under each Long Term Incentive Award may range up to 2 times the target level as determined by the Committee in a manner consistent with Massey's established Long Term Incentive Program based on predetermined performance of Parent, Massey or both over the performance cycle. Each of the cash awards will be evidenced by an Award Agreement between Parent and the Executive pursuant to Parent's Special Executive Incentive Plan ("SEIP"). The Long Term Incentive Program will also consist of annual grants of 50,000 non-qualified stock options, 12,700 shares of restricted stock, and 7,300 restricted stock units (except for the half year fiscal 2005 performance cycle the Long Term Incentive Program will consist of 25,000 non-qualified stock options, 6,350 shares of restricted stock and 3,650 restricted stock units). Each of the stock options and restricted stock grants will be evidenced by an Award Agreement between Parent and the Executive pursuant to the Massey Energy Company 1996 Executive Stock Plan (the "ESP") or the Massey Energy Company 1999 Executive Performance Incentive Plan ("PIP"), as the case may be and each of the restricted unit grants will be evidenced by an Award Agreement between Parent and the Executive pursuant to the SEIP. 2 D. Shadow Stock. As of the Effective Date the Executive shall be ------------- granted 1,050,000 units of shadow stock ("Units") pursuant to the Massey Energy Company 1982 Shadow Stock Plan (the "Shadow Plan"), subject to the following terms and conditions, and the terms and conditions of the Shadow Stock Plan. In the event the Executive remains continuously employed by Parent or Massey from the Effective Date until the applicable vesting date, then all restrictions on the Units will expire and the Unit shall vest at the times and in the amounts set forth in the following table: Vesting Date Number of Units ------------ --------------- October 31, 2002 300,000 Units October 31, 2003 300,000 Units October 31, 2004 300,000 Units April 30, 2005 150,000 Units On each date that Units vest in accordance with the foregoing table, the then value of the Units will thereupon be credited to the Executive's account in the Massey Executive Deferred Compensation Program. In the event the Executive's employment with Parent and Massey terminates prior to the expiration of the Primary Term and following a "Change of Control" (as such term is hereinafter defined) or if the Executive's employment is terminated by Parent or Massey for reasons which do not constitute "Cause" as defined herein, then any Units which have not vested in accordance with the foregoing table shall be vested as of such termination date and all restrictions on the Units will expire and the then value of the Units will thereupon be credited to the Executive's account in the Massey Executive Deferred Compensation Program. In the event the Executive's employment with Parent and Massey terminates prior to the expiration of the Primary Term for any reason other than those set forth in the preceding sentence, then all of the Executive's rights in the Units which have not previously vested in accordance with the foregoing table shall terminate as of the date of termination, and all rights thereunder shall cease. The Units will be evidenced by a Shadow Stock Agreement between Parent and the Executive. E. Stock Appreciation Rights (SARs). As of the Effective Date, the ----------------------------------- Executive shall be granted units of Stock Appreciation Rights (SARs) pursuant to the Massey Energy Company 1997 Stock Appreciation Rights Plan (the "SAR Plan"). The number of shares awarded shall be 787,500. All restrictions on the SARs will expire and the then value of the SARs will thereupon be credited to Executive's account in the Massey Executive Deferred Compensation Program in the event that the Executive remains continuously employed by Parent or Massey from the Effective Date until the applicable vesting date in accordance with the following table: 3 Vesting Date Number of SARs ------------ -------------- October 31, 2002 225,000 SARs October 31, 2003 225,000 SARs October 31, 2004 225,000 SARs April 30, 2005 112,500 SARs In addition, all restrictions on the SARs will expire and the then value of the SARs will thereupon be credited to the Executive's account in the Massey Executive Deferred Compensation Plan in the event that the Executive's employment with Parent and Massey terminates prior to the expiration of the Primary Term following a "Change of Control" (as such term is hereinafter defined) or the Executive's employment is terminated by Parent or Massey for reasons which do not constitute "Cause" as defined herein. In the event that the Executive's employment with Parent and Massey terminates prior to the expiration of the Primary Term for any reason other than those set forth in the preceding sentence, then all of the Executive's rights in the SARs which have not previously vested in accordance with the foregoing table shall terminate as of the date of termination, and all rights thereunder shall cease. The SARs shall have a ten-year term from the Effective Date, subject to earlier expiration in accordance with the plan documents. The SARs will be evidenced by an SAR Agreement between Parent and the Executive. F. Retention Stock Award. As of the Effective Date the Executive will ---------------------- be awarded 222,250 shares of restricted stock and 127,750 restricted stock units. The grants will be evidenced by Award Agreements between Parent and the Executive pursuant to the ESP or the PIP (in the case of the restricted stock) and the SEIP (in the case of the restricted stock units). All restrictions on the restricted stock and the restricted stock units will expire on April 30, 2005 if the Executive remains in the continuous employ of Parent or Massey from the Effective Date until April 30, 2005. In addition, all restrictions on the restricted stock and the restricted stock units will expire on the date of the Executive's termination of employment if the Executive's employment with Parent and Massey terminates prior to April 30, 2005 and following a "Change of Control" (as such term is hereinafter defined) or if the Executive's employment is terminated by Parent or Massey for reasons which do not constitute "Cause" as defined herein. In the event that the Executive's employment with Parent and Massey terminates prior to April 30, 2005 due to death or permanent and total disability as defined by Massey personnel policy, then the restrictions shall lapse as to a pro rata portion of the restricted stock and restricted stock units in accordance with the following table and the portion as to which the restrictions do not lapse shall terminate and all rights thereunder shall cease: 4 Date of Death Pro rata Portion or Disability to be Vested ------------- ------------ November 1, 2001 through 2/7 October 31, 2002 November 1, 2002 through 4/7 October 31, 2003 November 1, 2003 through 6/7 October 31, 2004 On or after November 1, 2004 7/7 In the event that the Executive's employment with Parent and Massey terminates prior to April 30, 2005 for any reason other than those set forth in the two preceding sentences, then all of the Executive's rights in the restricted stock and restricted stock units shall terminate as of the date of termination and all rights thereunder shall cease. G. Retention Cash Award. The Executive's account in the Massey ---------------------- Executive Deferred Compensation Plan will be credited with $400,000 on each of October 31, 2002, October 31, 2003 and October 31, 2004 and an additional $200,000 on April 30, 2005. All restrictions on such amounts and the bookkeeping earnings thereon shall lapse on April 30, 2005 if the Executive remains in the continuous employ of Parent or Massey from the Effective Date until April 30, 2005. In the event the Executive's employment with Parent and Massey terminates prior to April 30, 2005 and following a "Change in Control" (as such term is hereinafter defined) or if the Executive's employment is terminated by Parent or Massey for reasons which do not constitute "Cause" as defined herein, then the date for the addition any credits to the Massey Executive Deferred Compensation Plan referred to in the first sentence of this paragraph shall be accelerated to such termination date and all restrictions on all such amounts (including amounts credited before the termination date) and the bookkeeping earnings thereon shall lapse as of such termination date. In the event that the Executive's employment with Parent and Massey terminates prior to April 30, 2005 due to death or permanent and total disability as defined by Massey personnel policy, all restrictions shall lapse on amounts scheduled to be credited to the Executive's account in the Massey Executive Deferred Compensation Plan on or before the Executive's termination date and the bookkeeping earnings thereon. In the event that the Executive's employment with Parent and Massey terminates prior to April 30, 2005 for any reason other than those set forth in the two preceding sentences, then all of the Executive's rights with respect to amounts credited or to be credited to the Executive's account in the Massey Executive Deferred Compensation Plan pursuant to the first sentence of this paragraph shall terminate as of the date of such termination of employment. 5 H. Life Insurance Policy. The Executive's rights under the $4,000,000 --------------------- split dollar life insurance policies or program owned by Parent and in force on the Effective Date shall be vested if the Executive remains in the continuous employ of the Parent or Massey from the Effective Date until April 30, 2005 or, if earlier, the termination of the Executive's employment (x) following a "Change in Control" (as such term is hereinafter defined), (y) by Parent or Massey for reasons which do not constitute "Cause" as defined herein or (z) due to death or permanent and total disability as defined by Massey's personnel policy. The Executive's rights under the $4,000,000 split dollar life insurance policies or program owned by Parent and in force on the Effective Date shall be determined without regard to this paragraph if the Executive's employment with Parent and Massey terminates before April 30, 2005 for a reason other than those set forth in items (x), (y) or (z) of the preceding sentence. SECTION 5. Termination of Employment. ------------------------- Notwithstanding the provisions of Section 2, the Executive's employment hereunder may terminate under any of the following conditions: A. Death. The Executive's employment under this Agreement shall ----- terminate automatically upon his death. B. Disability. The Executive's employment under this Agreement may be ---------- terminated due to his Disability. "Disability" shall mean permanent and total disability as defined by Massey personnel policy. C. Termination by Company for Cause. The Executive's employment ------------------------------------ hereunder may be terminated for Cause by Parent or Massey. For purposes of this Agreement, "Cause" means: (1) willful and persistent failure by the Executive to reasonably perform his duties: (2) conviction of a misdemeanor involving moral turpitude which materially affects the Executive's ability to perform his duties hereunder or materially adversely affects the Executive's, the Parent's or Massey's reputation or conviction of a felony; (3) material dishonesty, defalcation, or embezzlement or misappropriation of corporate assets or opportunities; or (4) any material default by the Executive in the performance of any covenants or agreements of the Executive set forth in this Agreement. Any termination of the Executive's employment for Cause under this Section 5(C) shall be authorized by the Parent's Board of Directors (the "Board"). The Executive shall be given notice by the Board specifying in detail the particular act or failure to act on which the Board is relying in proposing 6 to terminate him for Cause and offering the Executive an opportunity, on a date at least 1 day after the receipt of such notice, to have a hearing, with counsel, before the Board. SECTION 6. Change of Control. ----------------- A. Upon the Executive's termination of employment for any reason (including, by way of example and not of limitation, the Executive's death or permanent and total disability as defined by Massey personnel policy),within two years following a Change of Control, as defined below, any restrictions on any stock option, restricted stock, stock appreciation right, Unit or other equity-based incentive provided under the PIP, ESP, the SAR Plan, the Shadow Plan or any other plan of Parent (a "Stock Plan") shall lapse immediately. B. Upon the Executive's termination of employment for any reason (including, by way of example and not of limitation, the Executive's death or disability as defined by Massey personnel policy), within two years following a Change of Control, as defined below, the Executive's account in the Massey Executive Deferred Compensation Plan shall be credited with any credits accelerated in accordance with Section 4(G) and the Executive shall be vested in his rights under the split dollar life insurance policies or program in accordance with Section 4(H). C. A Change of Control shall have the meaning set forth in the PIP as of the Effective Date, or any definition that is more favorable to the Executive that is set forth in any subsequent Stock Plan or that is approved by the Board for the benefit of Massey's senior executives. SECTION 7. Payments Upon Termination. ------------------------- A. Upon termination of the Executive's employment for any reason prior to the expiration of the Primary Term, Parent and/or Massey shall be obligated to pay, and the Executive shall be entitled to receive: (1) all accrued and unpaid Base Salary under Section 4(A) to the date of termination; (2) any unpaid bonus under Section 4(B) or long-term incentive award under Section 4(C) for the fiscal year or performance cycle ending prior to the date of termination; (3) any benefits to which he is entitled under the terms of the Executive Deferred Compensation Program, the Long Term Incentive Award Program, and any other applicable employee pension or benefit plan or program, or applicable law. B. Upon termination of the Executive's employment by Parent or Massey without Cause pursuant to Section 5(C), Parent and/or Massey shall be obligated to pay and the Executive shall be entitled to receive: (1) all of the amounts and benefits described in Section 7(A); 7 (2) Base Salary under Section 4(A) for the remainder of the Primary Term, as if there had been no termination; (3) annual bonuses under Section 4(B)for the remainder of the Primary Term equal to the target bonus for each such fiscal year, such bonuses to be paid at the same time annual bonuses are regularly paid by Massey to him; (4) accelerated vesting of Units of shadow stock and corresponding credits to the Executive's account under the Massey Executive Deferred Compensation Plan in accordance with Section 4(D); (5) accelerated vesting of SARs and corresponding credits to the Executive's account under the Massey Executive Deferred Compensation Plan in accordance with Section 4(E); (6) accelerated vesting of shares of restricted stock and restricted stock units in accordance with Section 4(F); (7) accelerated credits to the Executive's account under the Massey Executive Deferred Compensation Plan in accordance with Section 4(G); (8) accelerated vesting of the Executive's rights under the split dollar life insurance policy in accordance with Section 4(H). C. Upon termination of the Executive's employment on account of the Executive's death or permanent and total disability as defined by Massey personnel policy, Parent and/or Massey shall be obligated to pay, and the Executive shall be entitled to receive: (1) all of the amounts and benefits described in Section 7(A); (2) accelerated vesting of a pro rata number of shares of restricted stock and restricted stock units in accordance with Section 4(F); (3) crediting of the Executive's account in the Massey Executive Deferred Compensation Plan in accordance with Section 4(G); (4) accelerated vesting of the Executive's rights under the split dollar life insurance policy in accordance with Section 4(H). D. In the event of any termination of employment under this Section 7, the Executive shall be under no obligation to seek other employment, and there shall be no offset against amounts due the Executive under this Agreement on account of any remuneration attributable to any subsequent employment that he may obtain. SECTION 8. Amendment; Waiver. The terms and provisions of this ------------------ Agreement may be modified or amended only by a written instrument executed by each of the parties hereto, and compliance with the terms and provisions hereof may be waived only by a written instrument executed by each Party entitled to 8 the benefits thereof. No failure or delay on the part of any party in exercising any right, power or privilege granted hereunder shall constitute a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege granted hereunder. SECTION 9. Entire Agreement. Except as contemplated herein, this ----------------- Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any and all prior written or oral agreements, arrangements of understandings between Parent, Massey and the Executive with respect thereto; provided, however, that this Agreement shall not affect or impair in any way the rights and obligations of Parent and Executive under the Special Successor Development and Retention Program established in August, 1998. SECTION 10. Notices. All notices or communications hereunder shall be ------- in writing, addressed as follows or to any address subsequently provided to the other party: To Parent: Massey Energy Company Attention: Chief Legal Officer 4 North 4th Street Richmond, VA 23219 To Massey: A. T. Massey Coal Company, Inc. Attention: Chief Legal Officer 4 North 4th Street Richmond, VA 23219 To the Executive: Don Blankenship P.O. Box 895 Matewan, WV 25678 All such notices shall be conclusively deemed to be received and shall be effective, (i) if sent by hand delivery or overnight courier, upon receipt, (ii) if sent by telecopy or facsimile transmission, upon confirmation of receipt by the sender of such transmission or (iii) if sent by registered or certified mail, on the fifth day after the day on which such notice is mailed. SECTION 11. Severability. In the event that any term or provision of ------------ this Agreement is found to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining terms and provisions hereof shall not be in any way affected or impaired thereby, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained therein. 9 SECTION 12. Binding Effect; Assignment. This Agreement shall be binding -------------------------- upon and inure to the benefit of the parties and their respective successors and assigns (it being understood and agreed that, except as expressly provided herein, nothing contained in this Agreement is intended to confer upon any other person or entity any rights, benefits or remedies of any kind or character whatsoever). No rights or obligations of Parent or Massey under this Agreement may be assigned or transferred by Parent or Massey except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which Parent or Massey is not the continuing entity, or the sale or liquidation as described of all or substantially all of the assets of Parent or Massey, provided that the assignee or transferee is the successor to all or substantially all of the assets of Parent or Massey and such assignee or transferee assumes the liabilities, obligations and duties of Parent or Massey, as contained in this Agreement, either contractually or as a matter of law. Parent and Massey further agree that, in the event of a sale of assets or liquidation as described in the preceding sentence, each shall take whatever action it legally can in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of Parent or Massey hereunder. In the event of the sale, liquidation, consolidation, or merger of Massey or substantially all the assets of Massey in which Parent does not retain an ownership interest of more than 50%, Parent agrees to guarantee payment to Executive of all amounts due under this or related agreements referenced herein. SECTION 13. Governing Law; Dispute Resolution. This Agreement shall be --------------------------------- governed by and construed in accordance with the laws of the Commonwealth of Virginia (except that no effect shall be given to any conflicts of law principles thereof that would require the application of the laws of another jurisdiction). Any dispute or misunderstanding arising out of or in connection with this Agreement shall first be settled, if possible, by the parties themselves through negotiation and, failing success at negotiation through mediation, and failing success at mediation, shall be arbitrated at Richmond, Virginia. Unless otherwise agreed upon by Massey and the Executive, the arbitration shall be had before three arbitrators, each party designating an arbitrator and the two designees naming a third arbitrator experienced in employment related controversies. The procedure shall be in accordance with the rules and regulations of the American Arbitration Association. SECTION 14. Headings. The headings of the sections contained in this -------- Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. SECTION 15. Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10 IN WITNESS WHEREOF, the undersigned have executed this Agreement effective as of the date set forth above. MASSEY ENERGY COMPANY By: /s/ Admiral Bobby R. Inman --------------------------------------- A.T. MASSEY COAL COMPANY, INC. By: /s/ Roger L. Nicholson --------------------------------------- Executive: /s/ Donald L. Blankenship --------------------------------------- Donald L. Blankenship 11 -----END PRIVACY-ENHANCED MESSAGE-----