-----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, IVxhDGDvzGngVe784Q0WfWdMnRxh4p19spK0QUwYO+9nzmN0JMrNMZGVJIuIZGZV Z3uVilvNAOeMDjH8cPsisQ== 0000916641-01-500561.txt : 20010615 0000916641-01-500561.hdr.sgml : 20010615 ACCESSION NUMBER: 0000916641-01-500561 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010430 FILED AS OF DATE: 20010614 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: 1660456 BUSINESS ADDRESS: STREET 1: 4 NORTH 4TH STREET CITY: RICHMOND STATE: VA ZIP: 92656-2606 BUSINESS PHONE: 9493492000 MAIL ADDRESS: STREET 1: 4 NORTH 4TH STREET CITY: RICHMOND STATE: VA ZIP: 92656-2606 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 MASSEY 10-Q 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 April 30, 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 June 8, 2001 there were 74,371,409 shares of common stock, $0.625 par value, outstanding. - -------------------------------------------------------------------------------- 1 MASSEY ENERGY COMPANY FORM 10-Q FOR THE QUARTERLY PERIOD ENDED APRIL 30, 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 12 Part II: Other Information 13 Item 1. Legal Proceedings 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 - --------------------------------------------------------------------------------------------------------- 2
PART I: FINANCIAL INFORMATION ITEM 1: CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MASSEY ENERGY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME UNAUDITED
Three Months Ended Six Months Ended April 30, April 30, ------------------------------------ ---------------------------------- IN THOUSANDS, EXCEPT PER SHARE AMOUNTS 2001 2000 2001 2000 ---- ---- ---- ---- Net sales $ 307,893 $ 260,540 $ 581,005 $ 519,614 Other revenue 9,895 17,863 17,112 31,080 ---------------- ---------------- --------------- -------------- Total revenue 317,788 278,403 598,117 550,694 Costs and expenses Cost of sales 254,227 198,445 479,271 390,338 Depreciation, depletion and amortization 44,678 43,698 87,572 85,679 Selling, general and administrative 10,516 8,081 19,317 16,779 ---------------- ---------------- --------------- -------------- Total costs and expenses 309,421 250,224 586,160 492,796 Earnings before interest and taxes 8,367 28,179 11,957 57,898 Interest income 4,079 4,198 6,543 8,900 Interest expense 9,197 - 17,467 - ---------------- ---------------- --------------- -------------- Earnings before taxes 3,249 32,377 1,033 66,798 Income tax expense 1,168 11,520 304 22,088 ---------------- ---------------- --------------- -------------- Net earnings $ 2,081 $ 20,857 $ 729 $ 44,710 ================ ================ =============== ============== Earnings per share (Note 6) Basic and Diluted $ 0.03 $ 0.28 $ 0.01 $ 0.61 ================ ================ =============== ============== Shares used to calculate earnings per share (Note 6) Basic 73,663 73,469 73,733 73,469 ================ ================ =============== ============== Diluted 74,277 73,469 74,167 73,473 ================ ================ =============== ============== Dividends Per Share $ 0.04 $ - $ 0.08 $ - ================ ================ =============== ============== See Notes to Condensed Consolidated Financial Statements. - -------------------------------------------------------------------------------------------------------------------------------- 3
MASSEY ENERGY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS April 30, 2001 and October 31, 2000 UNAUDITED
APRIL 30, OCTOBER 31, $ IN THOUSANDS 2001 2000 * - ----------------------------------------------------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 11,221 $ 6,929 Trade and other accounts receivable 198,075 215,574 Inventories 98,486 104,132 Deferred taxes 8,527 8,398 Prepaid expenses and other 82,040 67,813 --------------------- --------------------- Total current assets 398,349 402,846 Net Property, Plant and Equipment 1,559,934 1,559,426 Other Noncurrent Assets Pension assets 73,890 67,740 Other 142,979 131,118 --------------------- --------------------- Total other noncurrent assets 216,869 198,858 --------------------- --------------------- Total assets $ 2,175,152 $ 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 April 30, 2001 and October 31, 2000 UNAUDITED
APRIL 30, OCTOBER 31, $ IN THOUSANDS 2001 2000 * - -------------------------------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable, principally trade, and bank overdrafts $ 157,927 $ 152,063 Commercial paper 216,886 - Payroll and employee benefits 30,790 30,784 Income taxes payable 11,826 12,222 Other current liabilities 55,788 79,814 ----------------------- ---------------------- Total current liabilities 473,217 274,883 Long-term debt 300,000 - Noncurrent liabilities Deferred taxes 253,877 254,022 Other noncurrent liabilities 271,848 257,607 ----------------------- ---------------------- Total noncurrent liabilities 525,725 511,629 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 - 74,322,269 shares 46,451 - Additional capital 9,713 - Retained earnings 825,383 - Unamortized executive stock plan expense (5,337) - Net investment by Fluor Corporation - 1,653,682 Due from Fluor Corporation - (279,064) ----------------------- ---------------------- Total shareholders' equity 876,210 1,374,618 ----------------------- ---------------------- Total liabilities and shareholders' equity $ 2,175,152 $ 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 Six Months Ended April 30, 2001 and 2000 UNAUDITED
$ IN THOUSANDS 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 729 $ 44,710 Adjustments to reconcile net earnings to cash utilized by operating activities: Depreciation, depletion and amortization 87,572 85,679 Deferred taxes 114 13,486 Changes in operating assets and liabilities, excluding effects of business acquisitions/dispositions (1,923) (150,831) Other, net 1,509 (15,539) ------------------- ---------------- Cash utilized by operating activities 88,001 (22,495) ------------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (99,907) (99,946) Cash from sale of interest in Appalachian Synfuel, LLC 3,600 - Proceeds from sale of property, plant and equipment 946 16,744 ------------------- ---------------- Cash utilized by investing activities (95,361) (83,202) ------------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES Decrease in short-term borrowings, net (61,343) - Decrease in amount due from Fluor Corporation 67,554 98,037 Equity contributions from Fluor Corporation 2,476 8,363 Cash dividends paid (5,827) - Stock options exercised 8,048 - Other, net 744 - ------------------- ---------------- Cash provided by financing activities 11,652 106,400 ------------------- ---------------- Increase in cash and cash equivalents 4,292 703 Cash and cash equivalents at beginning of period 6,929 8,051 ------------------- ---------------- Cash and cash equivalents at end of period $ 11,221 $ 8,754 =================== ================ 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 and six months ended April 30, 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 April 30, 2001, its consolidated results of operations for the three months and six months ended April 30, 2001 and 2000, and its consolidated cash flows for the six months ended April 30, 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 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, $278.5 million of Fluor commercial paper, other equity contributions from Fluor, and assumed Fluor's common stock equity structure. These Spin-Off occurrences, in addition to the net income for the six months ended April 30, 2001, dividends paid, and options exercised, resulted in a change in shareholders' equity from $1,374.6 million at October 31, 2000 to $876.2 million at April 30, 2001, a net reduction of $498.4 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 Hedging Activities". The adoption of these accounting standards did not have a significant impact on the Company's financial statements. The Derivatives Implementation Group (DIG), a group sponsored by the FASB, continues to develop interpretive guidance. In April 2001, the Financial Accounting Standards Board (FASB) released certain implementation guidance related to SFAS 133 concluded by the DIG. The Company has reviewed its contracts in light of the new implementation guidance. Management continues to evaluate whether certain of its contracts will be subject to the fair value accounting under SFAS 133 as a result of this new interpretative guidance. If any of the Company's current contracts are required to be recorded at fair value the Company would record the change as a cumulative effect of a change in accounting principle in the third fiscal quarter of 2001. The DIG has not yet concluded on certain other issues that could ultimately impact Massey's application of FAS 133. (4) Inventories are comprised of: April 30, October 31, $ in thousands 2001 2000 ------------------------------------------------------------------ Coal $ 77,332 $ 82,636 Other 21,154 21,496 -------- --------- $ 98,486 $ 104,132 ======== ========= (5) Net Property, Plant and Equipment is comprised of:
April 30, October 31, $ in thousands 2001 2000 ------------------------------------------------------------------------------------------ Property, Plant and Equipment, at cost $2,573,368 $2,517,052 Accumulated depreciation, depletion and amortization (1,013,434) (957,626) ---------- ---------- $1,559,934 $1,559,426 ========== ==========
(6) The number of shares used to calculate basic earnings per share for the three months and six months ended April 30, 2000 is based on the number of Massey shares outstanding immediately following the Spin-Off. The number of shares used to calculate basic earnings 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 per share is based on the number of shares used to calculate basic earnings per share plus the dilutive effect of stock options and other stock-based instruments held by Massey employees each period. (7) On March 15, 2001, the Company sold a substantial interest in its synfuel producing subsidiary, Appalachian Synfuel, LLC, contingent upon a favorable Internal Revenue Service ruling. The Company received cash of $3.6 million,a recourse promissory note for $15.2 million that will be paid in quarterly installments of $765,000 plus interest, and a contingent promissory note that is paid on a cents per Section 29 credit dollar earned based on synfuel tonnage shipped. All gains associated with the sale of this facility have been deferred. The Company will continue to manage the facility under an operating agreement. (8) With respect to the Martin County Coal impoundment discharge described in the Company Annual Report on Form 10-K for the fiscal year ended October 31, 2000, and the Company's Quarterly Report on Form 10-Q for the first quarter of fiscal year 2001, the Company increased the remediation accrual, included in other current liabilities, and the probable insurance recoveries, included in trade and other accounts receivables, by $10 million, respectively. Given that remediation efforts are still in progress and there remains a degree of uncertainty with respect to certain claims, fines and penalties, it is reasonably possible the Company's estimates with respect to the slurry spill could change. - -------------------------------------------------------------------------------- 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 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: (866) 814-6512. The Company disclaims any intent or obligation to update its forward-looking statements. RESULTS OF OPERATIONS - --------------------- Three months ended April 30, 2001 compared with the three months ended April 30, - -------------------------------------------------------------------------------- 2000. - ----- In the second fiscal quarter of 2001, net sales increased 18 percent to $307.9 million in 2001 compared with $260.5 million for the same period in 2000. Two factors that impacted net sales during the second quarter 2001 were: o The volume of tons sold increased from 10.1 million tons to 11.3 million tons consisting of an increase of utility and industrial tons sold of 21 and 16 percent, respectively and a decrease of metallurgical tons sold of 2 percent, for an overall increase of 13 percent. o The average per ton realized price for coal sold increased by 5 percent. The market for utility coal continued to improve during the second quarter of fiscal year 2001 as spot market prices of Central Appalachian coal have increased to 20-year highs. Unfortunately, most of the Massey tonnage sold in the second quarter was committed prior to the upturn in the market. Realized prices for utility sales in the second fiscal quarter continue to 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 non-strategic assets, decreased 45 percent to $9.9 million for the second quarter of 2001 compared with $17.9 million for the same period in 2000. The decrease was primarily due to a decrease in income from dispositions of non-strategic mineral reserves, which generated $8.5 million in 2000. As part of its management of coal reserves, Massey regularly sells reserves located in less strategic areas or exchanges them for reserves located in more synergistic locations. Cost of sales increased 28 percent to $254.2 million for the second quarter of 2001 from $198.4 million in same period in 2000. This primarily was due to the 13 percent increase in tons sold. Cost of sales on a per ton basis increased by approximately 15 percent in the second quarter of 2001 compared with same period in 2000 as operating difficulties at several of Massey's longwall mines continued to negatively impact production and costs during the second quarter. The Ellis Eagle longwall mine experienced flooding that caused significant disruption to coal production during April. The flooding caused reduced shipments from both the Marfork and Goals preparation plants. The Company's labor costs were higher in the quarter due to the extremely tight labor market in Central Appalachia and decreases in productivity related to the training of new miners. Cost of sales for the second quarter of fiscal year 2001 was partially offset by a $6.5 million pre-tax refund related to black lung excise taxes paid on coal export sales tonnage. The payment of black lung excise taxes on exported coal was determined to be unconstitutional by a 1998 federal district court decision. During the quarter, the Internal Revenue Service substantially completed its audit of the Company's requested refund of black lung excise tax payments. Depreciation, depletion and amortization increased by 2 percent to $44.7 million in the second quarter of 2001 compared to $43.7 million in 2000. The increase of $1.0 million was primarily due to capital expenditures made in recent years. Selling, general and administrative expenses were $10.5 million for the second quarter of 2001 compared to $8.1 million for 2000. The increase was attributed to additions in the administrative workforce due to the increased workload that is part of running a stand-alone publicly traded company, and to increases in accruals for long-term executive stock-based compensation plans as a result of increases in the Massey stock price during the quarter. Earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA"), was a positive $53.0 million for the three months ended April 30, 2001 compared to $71.9 million of the same period in 2000. Interest income decreased to $4.1 million for 2001 compared with $4.2 million for 2000. This decrease was primarily due to an intercompany receivable from Fluor Corporation, which was only in place in 2000 until the Spin-Off. The amount for the second quarter of 2001 includes $3.2 million (pre-tax) for interest due on the black lung excise tax refund as discussed above. Interest expense increased to $9.2 million for the three months ended April 30, 2001. The increase was primarily due to the addition of the 6.95 percent Senior Notes and commercial paper borrowings subsequent to the Spin-Off. Income tax expense was $1.2 million for the second quarter 2001 compared with income tax expense of $11.5 million for the same period in 2000. This primarily reflects the decrease in earnings before interest and taxes in the second quarter of 2001 compared to the income for 2000. Six months ended April 30, 2001 compared with the six months ended April 30, - ---------------------------------------------------------------------------- 2000. - ----- For the six months period ended April 30, 2001, net sales increased 12 percent to $581.0 million in 2001 compared with $519.6 million for the same period in 2000. Two factors that impacted net sales during the first six months of 2001 were: o The volume of tons sold increased from 19.4 million tons to 21.7 million tons consisting of an increase of utility, metallurgical and industrial tons sold of 15, 15 and 4 percent, respectively, for an overall increase of 12 percent. o The average per ton realized price for coal sold remained consistent over the periods. The market for utility coal has improved during the first six 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 six months was committed prior to the upturn in the market. Realized prices for utility sales in the first six months of 2001 reflect a bottoming of the market prior to the recent market upturn. - -------------------------------------------------------------------------------- 10 Other revenue, which consists of royalties, rentals, miscellaneous income and gains on the sale of non-strategic assets, decreased 45 percent to $17.1 million for the six months period ended April 30, 2001 compared with $31.1 million for the same period in 2000. The decrease was primarily due to a decrease in income from dispositions of non-strategic mineral reserves, which generated $15.9 million in 2000. Cost of sales increased 23 percent to $479.3 million for the six months ended April 30, 2001 from $390.3 million in same period in 2000. This primarily was due to the 12 percent increase in tons sold. Cost of sales on a per ton basis increased by approximately 11 percent for the six months period ended April 30, 2001 compared with same period in 2000 as operational problems and adverse geologic conditions were encountered. Operating difficulties were encountered at several longwall mines and during the expansion of Massey's two large surface mines. Two new longwall mines, which started in January 2001, suffered through normal start-up problems. One longwall mine encountered unfavorable mining conditions while mining at an interim location during November and December. The Ellis Eagle longwall mine experienced flooding that caused significant disruption to coal production during April. The flooding caused reduced shipments from both the Marfork and Goals preparation plants. The two surface mines experienced higher than expected overburden ratios in the first and second 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. Cost of sales for the first six months of 2001 was partially offset by a $6.5 million pre-tax refund related to black lung excise taxes paid on coal export sales tonnage. The payment of black lung excise taxes on exported coal was determined to be unconstitutional by a 1998 federal district court decision. During the second quarter, the Internal Revenue Service substantially completed its audit of the Company's requested refund of black lung excise tax payments. Depreciation, depletion and amortization increased by 2 percent to $87.6 million for the six months period ended April 30, 2001, compared to $85.7 million in 2000. The increase of $1.9 million was primarily due to capital expenditures made in recent years. Selling, general and administrative expenses were $19.3 million for 2001, an increase from $16.8 million for 2000. The increase was attributed to additions in the administrative workforce due to the increased workload that is part of running a stand-alone publicly traded company, and increases in accruals for long-term executive stock-based compensation plans as a result of increases in the Massey stock price over the last six months. Earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA"), was a positive $99.5 million for the six months ended April 30, 2001 compared to $143.6 million of the same period in 2000. Interest income decreased to $6.5 million for 2001 compared with $8.9 million for 2000. This decrease was primarily due to an intercompany receivable from Fluor Corporation, which was outstanding for one month in the first six months of fiscal 2001 compared to six months in 2000. As noted above, $3.2 million was accrued in 2001 for interest due on the black lung excise tax refund. Interest expense increased to $17.5 million for the six months ended April 30, 2001. The increase was primarily due to the addition of the 6.95 percent Senior Notes and commercial paper borrowings subsequent to the Spin-Off. Income tax expense was $0.3 million for the six months period ended April 30, 2001 compared with income tax expense of $22.1 million for the same period in 2000. This primarily reflects the decrease in earnings before taxes in the first two quarters of 2001 compared to the income for 2000. - -------------------------------------------------------------------------------- 11 LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- At April 30, 2001, the Company's available liquidity was $193.8 million, including cash and cash equivalents of $11.2 million and $182.6 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 37 percent at April 30, 2001. The cash flow provided/(utilized) by operating activities was $88.0 million in the first six months of 2001 and ($22.5) million for the same period in 2000. Cash utilized by operating activities reflects net earnings adjusted for non-cash charges and changes in working capital requirements. Net cash utilized by investing activities was $95.4 million for the first six months in 2001, and $83.2 million for the same period in 2000. The cash used in investing activities reflects capital expenditures in the amount of $99.9 million and $99.9 million for the six months ended April 30, 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 six months of 2001, the Company leased, through operating leases, $60.7 million of longwall and surface mining equipment. OUTLOOK - ------- The Company expects a loss for the third fiscal quarter as the tight labor market, operational problems and generally poor mining conditions experienced in the first half of the fiscal year continue to impact earnings. Massey has taken a number of steps to mitigate the effects of these events and is in the process of expanding production, including the opening of seven new surface mines. The Company expects that record spot coal prices and increasing demand for coal will positively impact sales in 2002 and 2003. 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 April 30, 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 April 30, 2001, Massey had $217.4 million of aggregate principal amount of commercial paper outstanding ($216.9 million net of discount). At April 30, 2001 Massey's commercial paper bore interest at an average rate of 5.26 percent. Based on the commercial paper balance outstanding at April 30, 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 $2.2 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. - -------------------------------------------------------------------------------- 12 PART II: OTHER INFORMATION Item 1. Legal Proceedings The following describes material developments in legal proceedings affecting the Company, as previously described in Part II, Item 1 in the Company's Quarterly Report on Form 10-Q dated March 16, 2001, as they relate to the fiscal quarter ending April 30, 2001. a) 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, and further discussed in the Company's Quarterly Report on Form 10-Q for the first quarter of Fiscal Year 2001, Martin County Coal reopened its preparation plant on April 2, 2001 after federal and state regulators approved an alternate means of refuse disposal. Martin County Coal is continuing to negotiate with the applicable agencies for refuse disposal areas that would allow for a long-term continuation of operations of Martin County Coal's preparation plant. Martin County Coal believes that the clean up of the spill is now largely complete. Item 4. Submission of Matters to a Vote of Security Holders a) On April 17, 2001, Massey Energy Company held its annual shareholders meeting for the purpose of (1) electing directors; (2) ratifying the appointment of Ernst and Young LLP as Massey Energy Company's independent public accountants for fiscal year 2001; (3) approving and adopting an amendment to the Stock Plan for Non-Employee Directors; and (4) approving and adopting an amendment to the 1997 Restricted Stock Plan for Non-Employee Directors. (1) Shareholders elected the following Class II directors and the vote tabulation for each individual director was as follows: Nominee For Withheld ------- --- -------- William R. Grant 62,564,014 185,013 Dr. Martha Seger 62,572,014 177,013 (2) Proposal to ratify the appointment of Ernst & Young LLP as auditors for the fiscal year ending October 31, 2001. This proposal was approved by a vote of 62,615,014 to 45,020, with 88,993 shares abstaining. (3) Proposal to approve and adopt an amendment to the Massey Energy Company Stock Plan for Non-Employee Directors that increases the number of shares of Common Stock authorized to be issued under such plan from 25,000 to 100,000. This proposal as approved by a vote of 60,445,933 to 2,072,471, with 219,063 shares abstaining. (4) Proposal to approve and adopt an amendment to the Massey Energy Company 1997 Restricted Stock Plan for Non-Employee Directors that increases the number of shares of Common Stock authorized to be issued under such plan from 60,000 to 200,000. This proposal was approved by a vote of 60,624,280 to 1,846,057, with 266,631 shares abstaining. Item 5. Other Information a) The Company's subsidiary, Marfork Coal Company, experienced unforeseen flooding of its Ellis Eagle longwall mine. The flooding, which began on April 14, 2000, has caused significant disruption to coal production. Shipments from both the Marfork and Goals preparation plants have been impacted. Additionally, the Marfork plant has suffered numerous flood-related operating problems due to excessive moisture in the raw coal. As a result, the affected Massey subsidiaries have issued notices of force majeure to about 15 domestic and export customers. Certain customers have complained about short falls in coal shipments. Massey has taken a number of steps to mitigate the effects of these events, and the Martin County spill including the establishment of additional surface mines and the restarting of the Martin County preparation plant. b) On October 20, 1999, the United States District Court for the Southern District of West Virginia ("District Court") issued an injunction against the West Virginia Division of Environmental Protection ("DEP") prohibiting it from issuing permits for the construction of valley fills over both intermittent and perennial stream segments as part of - -------------------------------------------------------------------------------- 13 mining operations. While Massey is not a party to this litigation, virtually all mining operations (including those of Massey) utilize valley fills to dispose of excess materials mined during coal production. On April 24, 2001, the Fourth Circuit Court of Appeals overruled the district court, finding that the 11th Amendment to the U.S. Constitution barred the suit against DEP in Federal Court. The plaintiffs may appeal the Fourth Circuit decision to the U.S. Supreme Court. c) On May 4, 2001, the Board of Directors unanimously elected James H. Harless as a Class I Director. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit No. Description ----------- ----------- 3.1 Restated Bylaws (as amended effective April 27, 2001) of Massey Energy Company (b) Reports on Form 8-K. The Company filed a Form 8-K on May 24, 2001 which updated the description of the capital stock of Massey Energy Company ("Massey Energy"), which had been previously filed with the Securities and Exchange Commission under the Securities and Exchange Act of 1934, as amended, for the purpose of incorporation by reference in future filings under the securities laws. - -------------------------------------------------------------------------------- 14 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: June 14, 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 - ------ ----------- 3.1 Restated Bylaws (as amended effective April 27, 2001) of Massey Energy Company - -------------------------------------------------------------------------------- 15 EX-3.1 2 dex31.txt EXHIBIT 3.1 EXHIBIT 3.1 RESTATED BYLAWS (as amended as of April 27, 2001) OF MASSEY ENERGY COMPANY (a Delaware corporation) ARTICLE I OFFICES Section 1.01 Registered Office. The registered office of MASSEY ENERGY COMPANY (hereinafter called the "Corporation") in the State of Delaware shall be at 9 East Loockerman Street, City of Dover, County of Kent, and the name of the registered agent at that address shall be National Registered Agents, Inc. Section 1.02 Principal Office. The principal office for the transaction of the business of the Corporation shall be at Four North Fourth Street, Richmond, Virginia 23219. The Board of Directors (hereinafter called the "Board") is hereby granted full power and authority to change said principal office from one location to another. Section 1.03 Other Offices. The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 2.01 Annual Meetings. Annual meetings of the stockholders of the Corporation for the purpose of electing directors and for the transaction of such other proper business as may come before such meetings may be held at such time, date and place as the Board shall determine by resolution. Section 2.02 Special Meetings. Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by the Board, or by a committee of the Board which has been duly designated by the Board and whose powers and authority, as provided in a resolution of the Board or in the Bylaws, include the power to call such meeting, but such special 1 meetings may not be called by any other person or persons; provided, however, that if and to the extent that any special meetings of stockholders may be called by any other person or persons specified in any provisions of the Certificate of Incorporation or any amendment thereto or any certificate filed under Section 151(g) of the Delaware General Corporation Law (or its successor statute as in effect from time to time hereafter), then such special meeting may also be called by the person or persons, in the manner, at the times and for the purposes so specified. Section 2.03 Place of Meetings. All meetings of the stockholders shall be held at such places, within or without the State of Delaware, as may from time to time be designated by the person or persons calling the respective meeting and specified in the respective notices or waivers of notice thereof. Section 2.04 Notice of Stockholder Business. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who complies with the notice procedures set forth in this Section 2.04. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal office of the Corporation, not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the books of the Corporation, of the stockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by the stockholder, and (d) any material interest of the stockholder in such business. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 2.04. The Chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 2.04, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Section 2.05 Notice of Meetings. Except as otherwise required by law, notice of each meeting of the stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the 2 meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him or her personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him or her at his or her post office address furnished by him or her to the Secretary of the Corporation for such purpose or, if he or she shall not have furnished to the Secretary his or her address for such purposes, then at his or her post office address last known to the Secretary, or by transmitting a notice thereof to him or her at such address by telegraph, cable or wireless. Except as otherwise expressly required by law, no publication of any notice of a meeting of the stockholders shall be required. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and, in the case of a special meeting, shall also state the purpose or purposes for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall have waived such notice and such notice shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, except a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. Section 2.06 Quorum. Except in the case of any meeting for the election of directors summarily ordered as provided by law, the holders of record of a majority in voting interest of the shares of stock of the Corporation entitled to be voted thereat, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders of the Corporation or any adjournment thereof. In the absence of a quorum at any meeting or any adjournment thereof, a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat or, in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally called. Section 2.07 Voting. (a) Each stockholder shall, at each meeting of the stockholders, be entitled to vote in person or by proxy each share or fractional share of the stock of the Corporation having voting rights on the matter in question and which shall have been held by him or her and registered in his or her name on the books of the Corporation: (i) on the date fixed pursuant to Section 6.05 of the Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, or 3 (ii) if no such record date shall have been so fixed, then (a) at the close of business on the day next preceding the day on which notice of the meeting shall be given or (b) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which meeting shall be held. (b) Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he or she shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his or her proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of the State of Delaware. (c) Any such voting rights may be exercised by the stockholder entitled thereto in person or by his or her proxy appointed by an instrument in writing, subscribed by such stockholder or by his or her attorney thereunto authorized and delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date unless said proxy shall provide for a longer period. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he or she shall in writing so notify the secretary of the meeting prior to the voting of the proxy. At any meeting of the stockholders all matters, except as otherwise provided in the Certificate of Incorporation, in the Bylaws or by law, shall be decided by the vote of a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat and thereon, a quorum being present. The vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot each ballot shall be signed by the stockholder voting, or by his or her proxy, if there be such proxy, and it shall state the number of shares voted. Section 2.08 List of Stockholders. The Secretary of the Corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also 4 be produced and kept at the time and place of the meeting during the entire duration thereof, and may be inspected by any stockholder who is present. Section 2.09 Judges. If at any meeting of the stockholders a vote by written ballot shall be taken on any question, the chairman of such meeting may appoint a judge or judges to act with respect to such vote. Each judge so appointed shall first subscribe an oath faithfully to execute the duties of a judge at such meeting with strict impartiality and according to the best of his or her ability. Such judges shall decide upon the qualification of the voters and shall report the number of shares represented at the meeting and entitled to vote on such question, shall conduct and accept the votes, and, when the voting is completed shall ascertain and report the number of shares voted respectively for and against the question. Reports of the judges shall be in writing and subscribed and delivered by them to the Secretary of the Corporation. The judges need not be stockholders of the Corporation, and any officer of the Corporation may be a judge on any question other than a vote for or against a proposal in which he or she shall have a material interest. ARTICLE III BOARD OF DIRECTORS Section 3.01 General Powers. The property, business and affairs of the Corporation shall be managed by the Board. Section 3.02 Number. The authorized number of directors of the Corporation shall be seven and such authorized number shall not be changed except by a Bylaw or amendment thereof duly adopted by the stockholders in accordance with the Certificate of Incorporation or by the Board amending this Section 3.02. Section 3.03 Election of Directors. The directors shall be elected by the stockholders of the Corporation, and at each election the persons receiving the greatest number of votes, up to the number of directors then to be elected, shall be the persons then elected. The election of directors is subject to any provisions contained in the Certificate of Incorporation relating thereto, including any provisions for a classified board and for cumulative voting. Section 3.04 Notice of Stockholder Nominees. Only persons who are nominated in accordance with the procedures set forth in the Bylaws shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 3.04. Such nominations, other than those made by or at the direction of the Board of 5 Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder's notice shall be delivered to or mailed and received at the principal office of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 40 days' notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder's notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re- election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person's written consent to be named in the proxy statement as a nominee and to serve as a director if elected); and (b) as to the stockholder proposing such nomination (i) the name and address, as they appear on the books of the Corporation, of such stockholder, and (ii) the class and number of shares of the Corporation which are beneficially owned by such stockholder. At the request of the Board of Directors any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in the Bylaws. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the Bylaws, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded. Section 3.05 Mandatory Retirement. Each director of the Corporation serving at age 78 shall retire from the Board at the end of the calendar year in which his or her 78th birthday occurs unless such retirement age shall be waived by the unanimous vote of the directors. For purposes of this Section, "end of the calendar year" shall include the period ending with the seventh day of January next following. Section 3.06 Resignations. Any director of the Corporation may resign at any time by giving written notice to the Board or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, it shall take effect immediately upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 3.07 Vacancies. Except as otherwise provided in the Certificate of Incorporation, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum. Each director so chosen to fill a vacancy shall hold office until his or her successor shall have been elected and shall qualify or until he or she shall resign or shall have been removed. 6 Section 3.08 Place of Meeting, etc. The Board may hold any of its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such meeting. Directors may participate in any regular or special meeting of the Board by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board can hear each other, and such participation shall constitute presence in person at such meeting. Section 3.09 First Meeting. The Board shall meet as soon as practicable after each annual election of directors and notice of such first meeting shall not be required. Section 3.10 Regular Meetings. Regular meetings of the Board may be held at such times as the Board shall from time to time by resolution determine. If any day fixed for a meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day not a legal holiday. Except as provided by law, notice of regular meetings need not be given. Section 3.11 Special Meetings. Special meetings of the Board may be called at any time by the Chairman of the Board or the President or by any two directors, to be held at the principal office of the Corporation, or at such other place or places, within or without the State of Delaware, as the person or persons calling the meeting may designate. Notice of all special meetings of the Board shall be given to each director by two days' service of the same by telegram, by letter, or personally. Such notice may be waived by any director and any meeting shall be a legal meeting without notice having been given if all the directors shall be present thereat or if those not present shall, either before or after the meeting, sign a written waiver of notice of, or a consent to, such meeting or shall after the meeting sign the approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or be made a part of the minutes of the meeting. Section 3.12 Quorum and Manner of Acting. Except as otherwise provided in the Bylaws or by law, the presence of a majority of the authorized number of directors shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such. 7 Section 3.13 Action by Consent. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or such committee. Section 3.14 Compensation. No stated salary need be paid directors, as such, for their services, but, by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board or an annual directors' fee may be paid; provided that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefore. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 3.15 Committees. The Board may, by resolution passed by the Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. Except as otherwise provided in the Board resolution designating a committee, the presence of a majority of the authorized number of members of such committee shall be required to constitute a quorum for the transaction of business at any meeting of such committee. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have any power or authority in reference to amending the Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of the dissolution, or amending the Bylaws of the Corporation; and unless the resolution of the Board expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. Any such committee shall keep written minutes of its meetings and report the same to the Board at the next regular meeting of the Board. Section 3.16 Officers of the Board. The Board shall have a Chairman of the Board and may, at the discretion of the Board, have a Vice Chairman and other officers. The Chairman of the Board and the Vice Chairman shall be appointed from time to time by the Board, unless such positions are elected offices of the Corporation, currently filled, and shall have such powers and duties as shall be designated by the Board. 8 ARTICLE IV OFFICERS Section 4.01 Officers. The officers of the Corporation shall be a Chairman of the Board, a Chief Executive Officer, a Secretary, a Treasurer and such other officers as may be appointed by the Board as the business of the Corporation may require. Officers shall have such powers and duties as are permitted or required by law or as may be specified by or in accordance with resolutions of the Board. Any number of offices may be held by the same person. Unless the Board shall otherwise determine, the Chairman of the Board shall be the Chief Executive Officer of the Corporation. In the absence of any contrary determination by the Board, the Chief Executive Officer shall, subject to the power and authority of the Board, have general supervision, direction and control of the officers, employees, business and affairs of the Corporation. Section 4.02 Election and Term. The officers of the Corporation shall be elected annually by the Board. The Board may at any time and from time to time elect such additional officers as the business of the Corporation may require. Each officer shall hold his or her office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Section 4.03 Removal and Resignation. Any officer may be removed, either with or without cause, by a majority of the directors at the time in office, at any regular or special meeting of the Board. Any officer may resign at any time by giving notice to the Board. Such resignation shall take effect at the time specified in such notice or, in the absence of such specification, at the date of the receipt by the Board of such notice. Unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Section 4.04 Vacancies. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, shall be filled in the manner prescribed in these Bylaws for the regular appointment to such office. ARTICLE V CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. Section 5.01 Execution of Contracts. The Board, except as in the Bylaws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name and on behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board or by the Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount. 9 Section 5.02 Checks, Drafts, etc. All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such person shall give such bond, if any, as the Board may require. Section 5.03 Deposit. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, the Chief Executive Officer, the President or the Treasurer (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall from time to time be determined by the Board) may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation. Section 5.04 General and Special Bank Accounts. The Board may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of the Bylaws, as it may deem expedient. ARTICLE VI SHARES AND THEIR TRANSFER Section 6.01 Certificates for Stock. Every owner of stock of the Corporation shall be entitled to have a certificate or certificates, to be in such form as the Board shall prescribe, certifying the number and class of shares of the stock of the Corporation owned by him or her. The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the President and by the Secretary. Any or all of the signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any such certificate shall thereafter have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may 10 nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature shall have been placed thereupon, were such officer, transfer agent or registrar at the date of issue. A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by such certificates, the number and class of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be cancelled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided for in Section 6.04 of the Bylaws. Section 6.02 Transfers of Stock. Transfers of shares of stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary, or with a transfer clerk or a transfer agent appointed as provided in Section 6.03 of the Bylaws, and upon surrender of the certificate or certificates for such shares properly endorsed and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be stated expressly in the entry of transfer if, when the certificate or certificates shall be presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so. Section 6.03 Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with the Bylaws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them. Section 6.04 Lost, Stolen, Destroyed, And Mutilated Certificates. In any case of loss, theft, destruction, or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, theft, destruction, or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sum as the Board may direct; provided, however, that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper so to do. Section 6.05 Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any 11 other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. If, in any case involving the determination of stockholders for any purpose other than notice of or voting at a meeting of stockholders, the Board shall not fix such a record date, the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board shall adopt the resolution relating thereto. A determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board may fix a new record date for the adjourned meeting. ARTICLE VII MISCELLANEOUS Section 7.01 Seal. The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and words and figures showing that the Corporation was incorporated in the State of Delaware and the year of incorporation. Section 7.02 Waiver of Notices. Whenever notice is required to be given by the Bylaws or the Certificate of Incorporation or by law, the person entitled to said notice may waive such notice in writing, either before or after the time stated therein, and such waiver shall be deemed equivalent to notice. Section 7.03 Fiscal Year. The fiscal year of the Corporation shall end on the 31st day of October of each year. Section 7.04 Amendments. The Bylaws, or any of them, may be rescinded, altered, amended or repealed, and new Bylaws may be made, (i) by the Board, by vote of a majority of the number of directors then in office as directors, acting at any meeting of the Board, or (ii) by the vote of the holders of not less than 80% of the total voting power of all outstanding shares of voting stock of the Corporation, at any annual meeting of stockholders, without previous notice, or at any special meeting of stockholders, provided that notice of such proposed amendment, modification, repeal or adoption is given in the notice of special meeting. Any Bylaws made or altered by the stockholders may be altered or repealed by the Board or may be altered or repealed by the stockholders. 12 -----END PRIVACY-ENHANCED MESSAGE-----