-----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, Ht+LHvig7TdoafZlhnqi7qqVXd6c9c5hH4V1lVHatvJc8wuji4AWG5uQTL66hKM9 xOsxkEP8rgyOXQ0GyzECIg== 0000905722-01-500020.txt : 20010814 0000905722-01-500020.hdr.sgml : 20010814 ACCESSION NUMBER: 0000905722-01-500020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUNTCO INC CENTRAL INDEX KEY: 0000905722 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 431643751 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-13600 FILM NUMBER: 1707072 BUSINESS ADDRESS: STREET 1: 14323 SOUTH OUTER FORTY STREET 2: STE 600 N CITY: TOWN & COUNTRY STATE: MO ZIP: 63017 BUSINESS PHONE: 3148780155 MAIL ADDRESS: STREET 1: 14323 S OUTER FORTY STREET 2: STE 600N CITY: TOWN & COUNTRY STATE: MO ZIP: 63017 10-Q 1 form10q2.txt FORM 10-Q (SECOND QUARTER 2001) 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 June 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: 1-13600 ------- HUNTCO INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) MISSOURI 43-1643751 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 14323 SOUTH OUTER FORTY, SUITE 600N, TOWN & COUNTRY, MISSOURI 63017 -------------------------------------------------------------------- (Address of principal executive offices) (314) 878-0155 -------------- (Registrant's telephone number, including area code) NOT APPLICABLE ---------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No As of August 1, 2001, the number of shares outstanding of each class of the Registrant's common stock was as follows: 5,292,000 shares of Class A common stock and 3,650,000 shares of Class B common stock. HUNTCO INC. INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets June 30, 2001 (Unaudited) and December 31, 2000 (Audited) Condensed Consolidated Statements of Operations Six and Three Months Ended June 30, 2001 and 2000 (Unaudited) Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, 2001 and 2000 (Unaudited) Notes to Condensed Consolidated Financial Statements (Unaudited) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk PART II. OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds. Item 3. Defaults Upon Senior Securities Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K PART I. FINANCIAL INFORMATION ----------------------------------- Item 1. Financial Statements ----------------------------------- HUNTCO INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) June 30, December 31, 2001 2000 ---------- ----------- (unaudited) (audited) ASSETS Current assets: Cash $ 812 $ 1,322 Accounts receivable, net 24,173 25,979 Inventories 35,182 46,517 Other current assets 593 769 -------- -------- 60,760 74,587 Property, plant and equipment, net 54,366 57,072 Assets held for sale - 7,180 Other assets 9,082 8,061 -------- -------- $124,208 $146,900 ======== ======== LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 36,210 $ 35,109 Accrued expenses 6,079 1,670 Current maturities of long-term debt 388 359 Current maturities of long-term debt expected to be refinanced 54,348 - -------- -------- 97,025 37,138 -------- -------- Long-term debt 9,868 83,255 -------- -------- Shareholders' equity: Series A preferred stock (issued and outstanding, 225; stated at liquidation value) 4,500 4,500 Common stock: Class A (issued and outstanding, 5,292) 53 53 Class B (issued and outstanding, 3,650) 37 37 Additional paid-in-capital 87,220 86,530 Accumulated deficit (74,495) (64,613) -------- -------- 17,315 26,507 -------- -------- $124,208 $146,900 ======== ======== See Accompanying Notes to Condensed Consolidated Financial Statements HUNTCO INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share amounts)
Six Months Three Months Ended June 30 Ended June 30 2001 2000 2001 2000 ------- ------- ------- ------- Net sales $102,142 $165,282 $ 42,672 $ 79,421 Cost of sales 99,778 152,188 42,984 74,396 ------- ------- ------ ------ Gross profit 2,364 13,094 (312) 5,025 Selling, general and administrative expenses 8,665 8,965 4,894 4,418 ------- ------- ------ ------ Income (loss) from operations (6,301) 4,129 (5,206) 607 Interest, net (3,581) (5,074) (1,638) (2,567) ------ ------- ------ ------ Loss before income taxes (9,882) (945) (6,844) (1,960) Benefit for income taxes - (351) - (741) ------- ------- ------ ------ Net loss (9,882) (594) (6,844) (1,219) Preferred dividends 100 100 50 50 ------- ------- ------ ------ Net loss available for common shareholders $ (9,982) $ (694) $(6,894) $(1,269) ======= ======= ====== ====== Loss per common share: Basic and diluted $(1.12) $(.08) $(.77) $(.14) ====== ===== ===== ===== Weighted average common shares outstanding: (Basic and diluted) 8,942 8,942 8,942 8,942 ===== ===== ===== ===== See Accompanying Notes to Condensed Consolidated Financial Statements
HUNTCO INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Six Months Ended June 30, 2001 2000 ------- ------- Cash flows from operating activities: Net loss $(9,882) $ (594) ------- ------- Adjustments to reconcile net loss to net cash provided (used) by operating activities: Depreciation and amortization 2,948 5,212 Decrease (increase) in: accounts receivable 1,806 2,674 inventories 11,335 (5,926) other current assets 176 139 other assets (749) 131 Increase (decrease) in: accounts payable 1,101 (3,514) accrued expenses 4,409 (331) non-current deferred taxes - (349) Other - (220) ------- ------- Total adjustments 21,026 (2,184) ------- ------- Net cash provided (used) by operations 11,144 (2,778) ------- ------- Cash flows from investing activities: Acquisition of property, plant and equipment, net (773) (874) Proceeds from sale of property, plant & equipment, net of direct selling costs 16,409 - Liquidation of operating leases on sold equipment (8,280) - ------- ------- Net cash provided (used) by investing activities 7,356 (874) ------- ------- Cash flows from financing activities: Net proceeds from (payments on): Revolving credit facilities (28,640) 4,926 Newly issued Enron debt 10,000 - Other debt and capital lease obligations (370) (143) Dividends paid - (100) ------- ------- Net cash provided (used) by financing activities (19,010) 4,683 ------- ------- Net increase in cash (510) 1,031 Cash, beginning of period 1,322 414 ------- ------- Cash, end of period $ 812 $ 1,445 ======= ======= See Accompanying Notes to Condensed Consolidated Financial Statements HUNTCO INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) ----------------------------------------------------------- 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Huntco Inc. and subsidiaries (the "Company") have prepared the condensed consolidated balance sheet as of June 30, 2001, the condensed consolidated statements of operations for the six and three months ended June 30, 2001 and 2000, and the condensed consolidated statement of cash flows for the six months ended June 30, 2001 and 2000, without audit. In the opinion of management, all adjustments (which include only normal, recurring adjustments) necessary to present fairly the financial position at June 30, 2001, and the results of operations and cash flows for the interim periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted where inapplicable. A summary of the significant accounting policies followed by the Company is set forth in Note 1 to the Company's consolidated financial statements included within Item 8 to the Company's annual report on Form 10-K for the year ended December 31, 2000 (the "Form 10-K"), which Form 10-K was filed with the Securities and Exchange Commission on June 14, 2001. In addition, the Company entered into a number of significant agreements in the second quarter of 2001 that are described in the notes to the consolidated financial statements in the Form 10-K, and in Item 2 of Part I, "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Form 10-Q. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2000, included in the aforementioned Form 10-K. The results of operations for the period ended June 30, 2001 are not necessarily indicative of the operating results for the full year. 2. INVENTORIES Inventories consisted of the following as of: June 30, December 31, 2001 2000 ------- --------- Raw materials $ 25,409 $ 33,426 Finished goods 9,773 13,091 -------- -------- $ 35,182 $ 46,517 ======== ======== The Company classifies its inventory of cold rolled steel coils as finished goods, which coils can either be sold as master coils, without further processing, or may be slit, blanked or cut-to-length by the Company prior to final sale. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - --------------------------------------------------------------------------- This Quarterly Report on Form 10-Q contains certain statements that are forward-looking and involve risks and uncertainties. Words such as "expects," "believes," and "anticipates," and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are based on current expectations and projections concerning the Company's plans for 2001 and about the steel processing industry in general, as well as assumptions made by Company management and are not guarantees of future performance. Therefore, actual events, outcomes, and results may differ materially from what is expressed or forecasted in such forward-looking statements. The Company encourages those who make use of this forward-looking data to make reference to a complete discussion of the factors which may cause the forward-looking data to differ materially from actual results, which discussion is contained under the title "Business Risk Factors" included within Item 1, "Business", of the Company's annual report on Form 10-K for the year ended December 31, 2000, as filed with the Securities and Exchange Commission on June 14, 2001. RESULTS OF OPERATIONS RECENT DEVELOPMENTS Market for common shares: The New York Stock Exchange ("NYSE") suspended trading in the shares of Class A common stock of the Company on June 13, 2001, citing that Huntco Inc. has not met the NYSE's continued listing criteria, in that its total market capitalization has been less than $15.0 million over an extended period of time. The NYSE filed an application on July 18, 2001 with the Securities and Exchange Commission (the "SEC") to obtain the SEC's approval to delist the Class A common stock with the NYSE effective at the opening of the trading session on August 10, 2001. Even though delisted with the NYSE, the Class A common stock will continue to be registered with the SEC under the Securities Exchange Act of 1934 (the "Exchange Act"), and the Company intends to file with the SEC all reports required under the Exchange Act. As of June 13, 2001, Huntco Inc. was assigned a new stock-trading symbol of "HCOIA". Bid and ask quotes for over-the-counter trading of shares of the Company's Class A common stock are available in the Pink Sheets Electronic Quotation Service and on the OTC Bulletin Board. Enron Transactions: In June 2001, the Company entered into a series of transactions with Enron North America Corp. ("ENA"), EBF LLC ("EBF"), in which ENA is a member, and Enron Industrial Markets LLC ("EIM")(hereinafter ENA and EIM are collectively referred to as "Enron"). Following is a brief discussion of these different transactions: Sale of cold rolling and pickling assets: The Company sold its cold rolling and coil pickling operations to EBF in June 2001, and used the net sale proceeds to reduce its long-term debt, and to retire certain operating lease commitment obligations associated with leased equipment used in the operations sold. With this transaction, the Company no longer is in the business of producing cold rolled steel coils for its own account. The Company did retain ownership of its original coil pickling line in Blytheville, Arkansas, and is exploring opportunities to either redeploy or sell this asset. Operation and maintenance of cold rolling and coil pickling assets: In conjunction with the sale of the cold rolling and coil pickling assets, the Company further contracted to provide EBF with ongoing operating and maintenance assistance for these assets on a cost-plus reimbursement basis. As a result, the Company will continue to employ personnel to operate the assets sold to EBF in accordance with EBF's instructions, and as otherwise called for in the contractual arrangement. Under the Operation and Maintenance Agreement (the "O&M agreement"), the Company is providing production, maintenance, and administrative services to EBF for a variable fee, depending upon production levels, along with various production and yield incentives. The Company is also subject to penalties not to exceed the amount of the variable fees and incentives due from EBF for not achieving certain production and yield goals. The O&M agreement is for an initial three-year term, with renewal options and provisions for earlier termination at EBF's option. The Company also expects to have the ability to procure pickled and cold rolled steel coil products on a competitive basis in support of the flat rolled processing business of its other facilities stemming from its involvement with EBF in connection with the O&M agreement. Inventory supply and price risk management agreement: The Company entered into a fifteen-year inventory supply and price risk management agreement (the "Enron inventory agreements"), under which Enron will provide inventory to the Company for its use at then current market rates as defined in the agreements. This arrangement will result in steel coil inventory previously held as raw material on the Company's books to eventually be held by Enron for acquisition by the Company just prior to the time of processing and sale. To promptly respond to customer orders for its products, the Company has traditionally maintained a substantial inventory of steel coils in stock and on order. Prior to implementing the Enron inventory agreements, the Company's commitments for steel purchases were generally at prevailing market prices in effect at the time the Company placed its orders, which for imported material could be up to six to nine months prior to receipt at one of the Company's facilities. While the Company will continue to procure its steel coil products through its current supply channels, the Enron inventory agreements will allow the Company to generally acquire its inbound steel coil purchases from Enron at prevailing market prices at the time of processing and sale. As a result, the Company expects to be less susceptible to the negative effects of future steel coil price fluctuations. As prevailing market prices rise, causing the Company to pay more for steel purchases from Enron, it expects that it will be able to pass along such increases to its traditional spot market customer base. Conversely, as prevailing market prices decline, the Company's customers typically demand lower selling prices. Under the Enron inventory agreements, the Company expects to better maintain its margins in such a declining market environment due to the expected decline in the price at which it will acquire its steel coil requirements from Enron at the time of processing the customer's order. The Enron inventory agreements are also expected to improve the Company's liquidity. The Company's revolving credit agreement provides for borrowings of up to 65% of the value of the Company's inventories. Future purchases pursuant to the Enron inventory agreements will effectively provide the liquidity equivalent of an approximate 85% advance rate against the value of the Company's steel coil purchase needs. After full implementation of the Enron inventory agreements, the Company also expects to be able to reduce its average inventory holding periods from historical levels of 75-120 days to less than 30 days. Reference should be made to the caption "Implementation of inventory management agreements" found under the "Business Risk Factors" section of Item 1 "Business," of the Company's Form 10-K for the year ended December 31, 2000 for a discussion of why actual results may differ materially from the forward-looking statements contained in these paragraphs. The Company began executing steel purchase transactions as contemplated by the Enron inventory agreements on July 19, 2001. Newly issued $10.0 million debt to Enron: The Company obtained a new $10.0 million five-year term loan from Enron, which is generally secured by all of the assets of the Company, the security interests of Enron being subordinate to those of the Company's lender under its asset-based revolving credit agreement. Issuance of common stock warrants: The Company issued Enron a warrant for the issuance of up to 1.0 million shares of Huntco Inc. Class A common stock, exercisable within ten years from the date of grant with a strike price of $1.45 per share of Class A common stock. See Note 2 to the Consolidated Financial Statements included within the Company's annual report on Form 10-K for the year ended December 31, 2000, as filed with the Securities and Exchange Commission on June 14, 2001, for a further discussion of these transactions. Background on decision to sell cold rolling and pickling assets: The Company committed significant capital and operating resources to the development of this line of business since the mid-1990s, only to be faced with unexpected and unpredictable eroding spreads between hot rolled and cold rolled pricing that occurred since its decision to construct the cold mill and related assets in 1993. Erratic and volatile flat rolled steel coil pricing at both the hot rolled and cold rolled levels has been fed over the last few years by the heightened amount of steel imports, domestic overcapacity constructed at the producer levels for hot rolled, cold rolled, and galvanized steel coils, which producers of such products represented suppliers to, competitors of, and customers for the Company's cold rolling operations, respectively. The difficulties faced by the Company in supplying its cold rolling operations on an independent basis in competition with producing hot mills or against duty-free cold rolled imports were staggering in light of the significant volatility in hot rolled and cold rolled steel coil prices that impaired the Company's liquidity over the last three years. Import restrictions on hot rolled coils without commensurate restrictions on cold rolled products put pressure on the traditional spread between hot rolled and cold rolled steel prices. As a result, the Company was no longer able to generate sufficient margins on this business to justify any continued investment in these operations. Unfortunately, the hot rolled/cold rolled spreads that existed when the Company committed to construct its cold rolling facility in 1993 and when it started up these operations in 1995 deteriorated to the point that the Company concluded in late calendar 2000 that the best course of action was to divest itself of its cold rolling and pickling assets. The spread between hot rolled and cold rolled transaction prices according to Purchasing Magazine averaged just over $150 per ton in 1994 and 1995, as the Company was constructing and starting up its cold rolling operations. Unfortunately, the average spread between hot rolled and cold rolled transaction prices, according to Purchasing Magazine, declined to approximately $107 per ton over the course of 1998, 1999 and 2000. Beyond the deterioration in cold rolled transaction margins referred to above, in order for the Company to operate as an independent cold rolled producer, it had to acquire hot rolled coils in advance to ensure it could meet its customer demands. As a result, the Company was further exposed to deteriorating and volatile hot rolled steel prices due to its need to maintain hot rolled feedstock for its cold rolling operations. As the Company's cold rolling operations improved in quality, it also found that certain of its customers' orders were best met by using steel produced by integrated mills as this resulted in a higher quality cold rolled coil. However, the Company was not able to domestically source a sufficient quantity of such integrated hot rolled supply, as such integrated producers were also competitors of the Company's cold rolling mill. In addition, with Nucor's construction of a cold rolling and galvanizing plant immediately adjacent to the Company's cold rolling facility in Arkansas, sourcing of hot rolled material from Nucor for cold rolling purposes also dropped off. In order to meet the Company's feedstock requirements for the cold mill, it looked to import sources for much of its hot rolled coil needs. Importing such requirements required the Company to commit to fixed hot rolled purchase prices as long as 6-9 months in advance of when the material would be available for use in its cold reduction process. The Company was not only exposed to the volatile nature of steel coil prices on such advance purchases, but also to the sizes it ordered in light of an evolving and changing customer order book given the competitive landscape that it faced. It was often necessary for the Company to order wider hot rolled coils than might have otherwise been called for (if the hot bands could have been ordered with shorter lead times and more visibility to the Company's sales order book), in order to ensure that it had a sufficient amount of feedstock available for cold rolling purposes. The result of this situation was that the mix of the Company's orders for specified finished cold rolled widths did not necessarily match up with its hot rolled feedstock sizes. As a result, the Company incurred increased yield loss (i.e., scrap) due to such longer lead time feedstock purchases, as it was often necessary to specify the width of the incoming hot rolled feedstock before actual orders were in hand. In addition to the factors relating to price volatility, transaction spreads and yields discussed above, subsequent to the Company's decision to develop its cold rolling capacity, competitors added over 3.0 million tons of additional new cold rolling capacity in the Company's market territories since it opened its cold mill in 1995. Unfortunately, the market could not absorb all of this additional capacity, as evidenced by the bankruptcy filing of Heartland Steel, Inc., an Indiana-based steel processor that commenced operations at a newly constructed cold rolling mill approximately two years ago and well after the Company's entry in the cold rolled market. The above-referenced situation manifested itself over the course of 1998, 1999 and 2000, as the average spread between the price of cold rolled steel for the current month versus the price of hot rolled steel as of six months earlier fell to $20-$25 per ton in the fourth quarter of 2000, and only averaged $78 and $87 per ton in 1999 and 2000, respectively. Given that the Company incurred production costs, inclusive of scrap and non-cash expenses such as depreciation, ranging from approximately $80 per ton during the first half of 2000 when capacity utilization was relatively high to in excess of $100 per ton as capacity utilization declined significantly in the second half of 2000 and the first quarter of 2001, to convert hot rolled coils into fully processed cold rolled coils, the deteriorated spreads referred to above rendered it virtually impossible for the Company to earn a return sufficient to cover its selling, overhead and financing costs associated with these operations. The Company also attempted to create a niche market for its cold rolling operations by selling more full hard cold rolled product to galvanizers for use as feedstock in the production of hot dipped galvanized coils. Unfortunately, overcapacity built in this industry sector also led to a drop in the spread between cold rolled and galvanized prices. Per Purchasing Magazine, the average per ton spread between cold rolled and galvanized prices declined from $112 in 1998, to $36 and $13 in 1999 and 2000, respectively, with certain months showing cold rolled prices either the same as or higher than hot dipped galvanized prices. The Company believes that these deteriorations in market fundamentals resulted in the idling of one of the Company's largest cold rolled customers, Galvpro, in the first quarter of 2001. Given this market environment, the Company's prospects of maintaining its independent cold rolling facility were greatly diminished. 2001 versus 2000: Net sales for the quarter ended June 30, 2001 were $42.7 million, a decrease of 46.2% in comparison to net sales of $79.4 million for the three months ended June 30, 2000. The Company attributes the decrease in net sales to a reduction in shipping volume and average selling prices as well as lower sales volumes resulting from the June 2001 sale of the cold rolling and pickling assets. Average selling prices for the Company's products during the 2001 second quarter were approximately 15.9% lower than those of the 2000 second quarter. With respect to volumes, the Company processed and shipped 167,860 tons of steel in the quarter, a decrease of 32.6% in comparison to the prior year's second quarter. The Company's direct sales volume for the second quarter of 2001 versus 2000 declined by 35.6%, with the largest decline found at the Company's cold rolling operations. The Company's toll processing volumes also declined by 24.3%. Approximately 30.0% of the tons processed in the second quarter of 2001 represented customer-owned material processed on a per ton, fee basis, versus a tolling percentage of 26.7% in the comparable period of the prior year. Net sales for the six months ended June 30, 2001 were $102.1 million, a decrease of 38.2% in comparison to net sales of $165.3 million for the six months ended June 30, 2000. The Company attributes the decrease in net sales to a reduction in shipping volume and average selling prices. Average selling prices for the Company's products during the 2001 first half were approximately 12.9% lower than those of the 2000 first half. With respect to volumes, the Company processed and shipped 395,630 tons of steel in the first six months of 2001, a decrease of 22.8% in comparison to the comparable prior year period. The Company's direct sales volume for the first half of 2001 versus 2000 declined by 27.4%, with the largest decline found at the Company's cold rolling operations. The Company's toll processing volumes also declined by 7.9%. Approximately 28.5% of the tons processed in the first half of 2001 represented customer-owned material processed on a per ton, fee basis, versus a tolling percentage of 23.9% in the comparable period of the prior year. Gross profit expressed as a percentage of net sales was (.7%) and 2.3% for the three and six months ended June 30, 2001, which compares to 6.3% and 7.9% for the comparable prior year periods. During the 2000 first quarter, the Company benefited from generally rising steel prices and good utilization of its facilities. However, the Company was faced with declining selling values and a soft economic environment during the first half of 2001, especially with respect to its cold rolling and coil pickling operations, which the Company sold in June 2001. Gross profit margins for the first half of 2001 were especially negatively impacted by the underutilization of the Company's cold rolling operations. This was attributable to a combination of an over capacity situation plaguing the cold rolling sector of the flat rolled steel industry, a general market slowdown affecting the manufacturing sector of the economy as a whole, and the narrowing spreads between prevailing hot rolled and cold rolled steel prices that was exacerbated by the decision of the International Trade Commission to uphold steel import duties on hot rolled steel, but not similarly on cold rolled products. Such actions have had a negative impact on independent cold rolled steel processors, such as the Company, and contributed to the Company's decision to sell its cold rolling productive assets. Exclusive of the Company's cold rolling and coil pickling operations which were sold during the 2001 second quarter, the Company's gross profit would have been approximately 8.8% on net sales of $88.2 million, during the first half of 2001, versus 9.0% on net sales of $122.8 million during the first half of 2000. Selling, general and administrative ("SG&A") expenses of $4.9 million and $8.7 million for the three and six months ended June 30, 2001, reflect an increase of $.5 million and a decrease of $.3 million from the respective prior year periods. The increase in the second quarter of 2001 versus the second quarter of 2000 was caused by an increased bad debt provision of approximately $1.0 million recorded during the quarter, primarily related to customers of the Company's cold rolling operations. The decreases in spending on selling, general and administrative expenses which otherwise occurred in the three and six month periods ended June 30, 2001 versus the comparable prior year periods is attributable to the Company's ongoing efforts to streamline its operations in the face of a difficult market environment. Approximately $2.5 million of the selling, general and administrative expenses incurred during the first half of 2001 relate to the cold rolling and coil pickling operations, which were sold in June 2001. The Company reported a loss from operations of $5.2 million and $6.3 million in the three and six month periods ended June 30, 2001, which compares to income from operations of $.6 and $4.1 million as reported for the corresponding period of the prior year. These changes reflect the factors discussed in the preceding paragraphs, principally the discussion concerning the change in the Company's gross profit. Net interest expense of $1.6 million and $3.6 million was incurred during the three and six month periods ended June 30, 2001, versus $2.6 million and $5.1 million, respectively, in the comparable prior year periods. These decreases are primarily attributable to lower interest rates being in effect and lower average borrowings during the 2001 periods versus the comparable 2000 periods. The Company maintained substantially lower amounts of working capital during the 2001 periods versus the comparable 2000 periods, which resulted in lower borrowings against the Company's credit facility. For instance, inventories stood at $83.8 million on June 30, 2000 and had been reduced to $35.2 million as of June 30, 2001. Accounts receivables balances also declined by $15.0 million between June 30, 2000 and June 30, 2001, as transaction pricing and volumes declined from the robust levels of the first half of 2000, reflective of the general market slowdown in the manufacturing sector of the economy during 2001. The effective income tax rate experienced by the Company was 37.1% in the first half of 2000. The absence of an income tax benefit related to the Company's 2001 pre-tax loss reflects the Company's decision to establish and maintain a valuation allowance against its net deferred tax assets, which allowance was initially established as of December 31, 2000. The Company continues to evaluate the likelihood of its ability to realize the benefit of its deferred tax assets given the continuing uncertainty of the domestic steel market. The Company will continue to assess the valuation allowance and to the extent it is determined that it is not necessary, the allowance will be subsequently adjusted. The Company reported a net loss for common shareholders of $6.9 million and $10.0 million (or $(.77) and $(1.12) per share both basic and diluted) for the three and six months ended June 30, 2001, compared to a net loss available for common shareholders of $1.3 million and $.7 million (or $(.14) and $(.08) per share both basic and diluted) in the comparable 2000 periods. These changes reflect the factors discussed in the preceding paragraphs. LIQUIDITY AND CAPITAL RESOURCES In June 2001, the Company finalized an agreement to sell its cold rolling and coil pickling operations located in Blytheville, Arkansas to EBF, which took an assignment of the asset purchase from EIM, for $16.0 million, net of related transaction costs. In connection with this transaction, the Company also arranged for a newly-issued $10.0 million five-year term secured loan from Enron, which bears interest at 3.0% over LIBOR. The Company utilized these net proceeds to retire certain of its operating lease obligations associated with assets formerly used in the cold rolling and pickling operation, to reduce the balance of the Company's asset-based revolving credit facility, and to fund a decrease in its balance of accounts payable. During the second quarter of 2001, the Company also entered into a fifteen year inventory supply and price risk management agreement under which Enron will provide inventory to the Company for its use at then current market rates as defined in the agreement. The Company believes this arrangement will result in approximately $20.0-$25.0 million of the steel coil inventory previously held as raw material on the Company's books to eventually be held by Enron for acquisition by the Company just prior to the time of processing and sale. The Company agreed to pay Enron, in monthly installments, an annualized price risk management fee of approximately $2.0 million per year during the term of the agreement. The Company further agreed to pay Enron a transaction fee equal to the value of held material at a rate of 2.25% over LIBOR. In connection with the transactions, the Company issued Enron a warrant for the issuance of up to 1.0 million shares of Huntco Inc. Class A common stock, exercisable within ten years from the date of grant with a strike price of $1.45 per Class A common share. The fair value of these warrants was approximately $.7 million, and will be amortized to expense over the fifteen-year life of the Enron inventory agreements. See Note 2 to the Consolidated Financial Statements included within the Company's annual report on Form 10-K for the year ended December 31, 2000, as filed with the Securities and Exchange Commission on June 14, 2001, for a further discussion of these transactions. The Company believes that the Enron inventory agreements should improve the Company's liquidity. The Company's revolving credit agreement provides for borrowings of up to 65% of the value of the Company's inventories. Future purchases through Enron will effectively provide the liquidity equivalent of an approximate 85% advance rate against the value of the Company's steel coil purchase needs. After full implementation of the Enron inventory agreements, the Company expects to be able to reduce its average inventory holding periods from historical levels of 75-120 days to less than 30 days. In connection with modifications agreed to in June 2001, the interest rates generally applicable to the revolver increased to 1.0% over prime or 2.75% over LIBOR for the daily revolving credit advances on the line. The total size of the revolving credit facility stood at $140.0 million until April 2001, whereupon the Company exercised its right to reduce the size of the facility to $90.0 million. In June 2001, the Company further agreed to three separate $10.0 million line reductions, each subject to a 0.5% premium, such that the size of the asset-based revolver will stand at $60.0 million as of the end of October 2001. The Company agreed to such reductions in light of the reduced borrowing needs on the revolver stemming from the sale of its cold rolling operations, receipt of the newly issued $10.0 million term loan from Enron, and the phase-in of the Enron inventory management and supply arrangement. The Company and its senior lender also agreed to amend the asset-based revolver to eliminate a maintenance of net worth covenant which the Company was otherwise in violation of as of December 31, 2000 and March 31, 2001 absent the amendment and waiver, and to replace this covenant with a fixed charge coverage covenant that became effective in July 2001. The term of the Company's revolving credit facility continues until April 15, 2002. The Company intends to explore extension of the facility, as well as the possibility of obtaining additional financing associated with its property, plant and equipment in order to reduce its dependence on vendor financing during the balance of 2001. However, there can be no assurance that the Company will be successful in its efforts to obtain additional borrowings, or that such borrowings will be available at what are deemed to be reasonable terms and financing rates. If the Company is not successful in reducing its dependence on vendor financing by obtaining additional financing, it will most likely pursue additional asset sales to accomplish this result. During the first half of 2001, the Company generated approximately $11.1 million of cash from operating activities (primarily from a reduction of its outstanding inventories) and $16.4 million from the sale of property, plant and equipment, primarily from the sale of its cold rolling and coil pickling operations. The Company used $28.6 million of cash during the first half of 2001 to reduce balances outstanding on its revolving credit facility and $8.3 million to retire operating lease obligations. The Company used relatively limited amounts of funds for capital expenditures during the first halves of 2001 and 2000, investing $.8 million and $.9 million, respectively. Total borrowings under the Company's asset-based revolving credit facility were approximately $54.4 million at June 30, 2001. The maximum amount of borrowings available to the Company under the revolver is based upon percentages of eligible accounts receivable and inventory, as well as amounts attributable to selected fixed assets of the Company. Close attention is given to managing the liquidity afforded under the Company's asset-based revolving credit agreement, which availability in excess of actual borrowings has been relatively limited throughout the term of the agreement. The Company has also accessed capital by way of other off balance sheet financing arrangements. The Company has entered into various operating leases for steel processing and other equipment at certain of its facilities. The Company did not pay any common dividends during 2000 or 2001. The Company's revolving credit agreement contains restrictions on the Company's ability to declare and pay common dividends. Pursuant to the terms of such revolving credit agreement, the Company has not been in a position to declare and pay common dividends since the first quarter of 1999. Dividends on the Company's Series A preferred stock are cumulative; were paid through the third quarter of 2000 and thereafter suspended. As a result, preferred dividend payments totaling $.15 million, are in arrears as of June 30, 2001. In conjunction with obtaining the consent of the Company's senior lender to the June 2001 transactions with Enron and EBF, the Company agreed to a restriction on its ability to pay dividends on its Series A preferred stock through the remaining term of the asset-based revolving credit agreement, which is set to expire on April 15, 2002. As a result, the Company will not be in a position to declare preferred or common dividends until April 15, 2002 at the earliest, absent a refinancing of its asset-based revolving credit facility that would not include this restriction. The Company's operations, unused borrowing capacity available under its asset-based revolving credit facility and off-balance sheet financing leverage available under the Enron inventory agreements, and potential additional asset sales are expected to generate sufficient funds to meet the Company's working capital commitments, debt service requirements, and necessary capital expenditures, over the next twelve months, assuming the Company is successful in obtaining an extension or replacement of its existing revolving credit facility on or before its expiration on April 15, 2002. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK - ------------------------------------------------------------------- In the ordinary course of business, the Company is exposed to interest rate risks by way of changes in short-term interest rates. The Company has currently elected not to hedge the market risk associated with its floating rate debt. As of June 30, 2001, $64.3 million of the Company's debt obligations bore interest at variable rates. Accordingly, the Company's earnings and cash flow are affected by changes in interest rates. Assuming the current level of borrowings at variable rates and assuming a one-half point increase in average interest rates under these borrowings, it is estimated that the Company's annual interest expense would increase by approximately $.3 million. In the event of an adverse change in interest rates, management would likely strive to take actions to mitigate the Company's exposure to interest rate risk. However, due to the variety of actions that could be taken depending on the circumstances and the different effects that could result based on the action taken, management cannot predict the results of an adverse change in interest rates. Further, this analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment. The Company does not have any significant amount of export sales denominated in foreign currencies, and acquires its raw material supply needs in U.S. dollar denominated transactions. Therefore, the Company is not viewed as being exposed to foreign currency fluctuation market risks. Although the Company both acquires and sells carbon steel coils and products, prior to Enron's recent efforts, no formal commodity exchange existed that the Company could access to hedge its risk to carbon steel price fluctuations. The Company believes that the fifteen year inventory supply and price risk management agreement entered into with Enron in June 2001 will serve to ameliorate the impacts of future inventory market price changes on the Company, as the Company will obtain its inventory requirements at market rates for the current processing of its traditional spot market-priced flat rolled steel orders. However, the Company may still be exposed to steel price changes during the time it holds and processes such material prior to sale to its customers. The Company has no material derivative financial instruments as of June 30, 2001, and does not enter into derivative financial instruments for trading purposes. The Company has evaluated the impact of FAS 133 on the Enron inventory agreements and does not believe the impact will have a material affect on its future results of operations. PART II. OTHER INFORMATION - ----------------------------- Item 2. Changes in Securities and Use of Proceeds - --------------------------------------------------- On June 8, 2001 Huntco Inc. issued a warrant to ENA to purchase from Huntco Inc. up to 1,000,000 shares (the "Warrant Shares") of Class A common stock, par value $.01 per share at an exercise price of $1.45 per share (the "Warrant"). The Warrant is exercisable in whole or in part during the period beginning June 8, 2001 and ending at 5:00 p.m. Central Time, on June 8, 2011. The exercise price may be paid in cash or by surrendering shares of Class A common stock otherwise issuable upon exercise of the Warrant having a fair market value equal to the aggregate exercise price with respect to the shares for which the Warrant is being exercised. The Warrant was issued by Huntco Inc. to ENA as consideration for and in connection with the execution by ENA of the Master Steel Purchase and Sale Agreement, the Inventory Management Agreement for Phase I and the Inventory Management Agreement for Phase II. The entire commercial transaction with ENA and its affiliates is described in detail in "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in Item 2 of Part I of this Form 10-Q. Huntco Inc. did not register the transaction under which the Warrant was offered or sold in reliance on the exemption from registration under Section 4(2) of the Securities Act of 1933, as amended. There was no public distribution of the Warrant in that the only purchaser of the Warrant was Enron, a large publicly held company to which Huntco Inc. provided access to all of the books and records, financial or otherwise of itself and each of Huntco Inc.'s subsidiaries. The issuance of the Warrant was part of a large commercial transaction between Huntco Inc. and its subsidiaries and Enron and its affiliates and an investment of Enron in Huntco Inc., of which the issuance of the warrant was only one part. Item 3. Defaults Upon Senior Securities - -------------------------------------------- (a) Defaults: On June 8, 2001, the Company and its senior lender agreed to amend the Company's asset-based revolver to eliminate a maintenance of net worth covenant which the Company was otherwise in violation of as of December 31, 2000 and March 31, 2001 absent the amendment and waiver, and to replace this covenant with a fixed charge coverage covenant that became effective in July 2001. (b) Preferred stock arrearage: Dividends on the Company's outstanding 225,000 shares of Series A convertible preferred stock (having a liquidation preference of $20.00 per share) are cumulative; were paid through the third quarter of 2000 and thereafter suspended. As a result, preferred dividend payments totaling $.15 million are in arrears as of the date of this Quarterly Report on Form 10-Q. In conjunction with obtaining the consent of the Company's senior lender to the June 2001 transactions with Enron and EBF, the Company agreed to a restriction on its ability to pay dividends on its Series A preferred stock through the remaining term of the asset-based revolving credit agreement, which is set to expire on April 15, 2002. As a result, the Company will not be in a position to declare preferred or common dividends until April 15, 2002, absent a refinancing of its asset-based revolving credit facility that would not include this restriction. Item 5. Other Information - ------------------------------ Effective August 15, 2001, Paul M. Green (37) is named Vice President - Finance, Chief Financial and Accounting Officer for the Company. For the previous five years, Mr. Green has served in executive capacities for the company and its subsidiaries, specifically, as Vice President and Controller of Huntco Inc. from 1999 to the present date and prior thereto as Vice President - Finance of Huntco Steel, Inc. Item 6. Exhibits and Reports on Form 8-K - -------------------------------------------- (a) See the Exhibit Index included herein. (b) Reports on Form 8-K: The Company filed a Form 8-K on April 30, 2001, which filing discussed under Item 5, "Other Events", that the Company had agreed to sell its cold rolling and coil pickling operations located in Blytheville, Arkansas to Enron and had further entered into a long-term, inventory price risk management agreement with Enron. It further discussed the company's notice of its intentions to permanently close its cold rolling and coil pickling operations prior to the sale to Enron. The Company filed a Form 8-K on June 20, 2001, which filing discussed under Item 2, "Acquisition or Disposition of Assets" that the Company had completed its sale of its cold rolling and coil pickling operations to EBF LLC and had agreed to continue to operate these assets on behalf of the purchaser pursuant to the terms of an Operating and Maintenance Agreement. The filing also discussed under Item 5, "Other Events", that the Company had entered into a five-year, $10.0 million term loan with Enron; had issued Enron a warrant to purchase up to 1.0 million shares of Huntco Inc. Class A common stock at a strike price of $1.45; and had obtained waivers from its senior lenders of a default of a financial covenant contained in its revolving credit facility and waivers necessary to consummate the transactions with EBF LLC and Enron. The filing further discussed under Item 7, "Financial Statements and Exhibits" the filing of proforma financial statements reflecting the sale of the cold rolling and coil pickling operations to EBF LLC, including proforma Statements of Operations for the three month periods ended March 31, 2001 and 2000 and for the twelve month period ended December 31, 2000; as well as a proforma Balance Sheet as of March 31, 2001. The Company filed a Form 8-K on June 25, 2001, which filing discussed under Item 5 "Other Events", the timing for submission of proposals to be presented at the Company's Annual Meeting of Shareholders on July 20, 2001. *************************** SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HUNTCO INC. (Registrant) Date: August 13, 2001 By: /s/ ROBERT J. MARISCHEN ----------------------- Robert J. Marischen, Vice Chairman, President and Chief Executive Officer (on behalf of the Registrant and as principal financial officer) EXHIBIT INDEX These Exhibits are numbered in accordance with the Exhibit Table of Item 601 of Regulation S-K. 2: Omitted - not applicable. 3: 3(ii): Bylaws of the Company as amended effective April 6, 2001. 4: 4(ii)(a)(3): Amendment No. 1 to Loan and Security Agreement dated June 8, 2001, by and among Congress Financial Corporation (Central), as Lender; Huntco Steel, Inc. and Midwest Products, Inc., as Borrowers; and Huntco Inc., Huntco Nevada, Inc., and HSI Aviation, Inc., as Guarantors, incorporated by reference to Exhibit 4(ii)(a)(3) included with the Company's Form 8-K filed on June 20, 2001 4(ii)(a)(4): Pledge Agreement dated June 8, 2001, executed by Huntco Nevada, Inc. in favor of Congress Financial Corporation (Central), as Lender; similar pledge agreement executed in favor of Congress Financial Corporation (Central) by Huntco Inc., incorporated by reference to Exhibit 4(ii)(a)(4) included with the Company's Form 8-K filed on June 20, 2001 4(ii)(b)(1): Loan Agreement by and among Enron North America Corp., Lender, Huntco Steel, Inc., Borrower, and Huntco Inc., Huntco Nevada, Inc., Midwest Products, Inc., and HSI Aviation, Inc. as additional obligors dated April 6, 2001, incorporated by reference to Exhibit 4(ii)(b)(1) included with the Company's Form 8-K filed on June 20, 2001 4(ii)(b)(2): First Amendment to Loan Agreement by and among Enron North America Corp. as Lender, Huntco Steel, Inc. as Borrower, and Huntco Inc., Huntco Nevada, Inc., Midwest Products, Inc., and HSI Aviation, Inc. as additional obligors dated April 6, 2001, incorporated by reference to Exhibit 4(ii)(b)(2) included with the Company's Form 8-K filed on June 20, 2001 4(ii)(b)(3): Security Agreement dated April 6, 2001, executed by Huntco Inc. in favor of Enron North America Corp., as secured Party; similar Security Agreements executed in favor of Enron North America Corp. by each of Huntco Nevada, Inc., Huntco Steel, Inc. and Midwest Products, Inc., incorporated by reference to Exhibit 4(ii)(b)(3) included with the Company's Form 8-K filed on June 20, 2001 4(ii)(b)(4): Pledge Agreement dated April 6, 2001, executed by Huntco Inc., in favor of Enron North America Corp., as Lender; similar pledge agreement executed in favor of Enron North America Corp. by Huntco Nevada, Inc., incorporated by reference to Exhibit 4(ii)(b)(4) included with the Company's Form 8-K filed on June 20, 2001 4(ii)(c): Intercreditor and Subordination Agreement dated June 8, 2001, by and among Congress Financial Corporation (Central) and Enron North America Corp., acknowledged by Huntco Steel, Inc., Huntco Inc., Huntco Nevada, Inc. and Midwest Products, Inc., incorporated by reference to Exhibit 4(ii)(c) included with the Company's Form 8-K filed on June 20, 2001 10: 10(i)(a): Huntco Inc. Class A common stock warrant dated June 8, 2001, incorporated by reference to Exhibit 10(i)(a) included with the Company's Form 8-K filed on June 20, 2001 10(i)(b): Registration Rights Agreement dated June 8, 2001, between the Company and Enron North America Corp., incorporated by reference to Exhibit 10(i)(b) included with the Company's Form 8-K filed on June 20, 2001 10(ii)(B)(1): Master Steel Purchase and Sale Agreement between Huntco Steel, Inc. and Enron North America Corp. dated April 6, 2001, incorporated by reference to Exhibit 10(ii)(B)(1) included with the Company's Form 8-K filed on June 20, 2001 10(ii)(B)(2): Inventory Management Agreement Phase I dated April 6, 2001, by and between Enron North America Corp. and Huntco Steel, Inc, incorporated by reference to Exhibit 10(ii)(B)(2) included with the Company's Form 8-K filed on June 20, 2001 10(ii)(B)(3): Inventory Management Agreement Phase II dated April 6, 2001, by and between Enron North America Corp. and Huntco Steel, Inc., incorporated by reference to Exhibit 10(ii)(B)(3) included with the Company's Form 8-K filed on June 20, 2001 10(ii)(C)(1) Asset Purchase Agreement dated as of April 30, 2001 by and among Huntco Steel, Inc., Huntco Inc., and Enron Industrial Markets LLC, with respect to the Company's sale of its cold rolling and coil pickling operations, incorporated by reference to Exhibit 10(ii)(C)(1) included with the Company's Form 8-K filed on June 20, 2001 10(ii)(C)(2): First Amendment to Asset Purchase Agreement dated June 8, 2001, by and among Enron Industrial Markets LLC, Huntco Steel, Inc. and Huntco Inc., with respect to the Company's sale of its cold rolling and coil pickling operations, incorporated by reference to Exhibit 10(ii)(C)(2) included with the Company's Form 8-K filed on June 20, 2001 10(ii)(C)(3) Assignment of Contract dated June 8, 2001, by and among Enron Industrial Markets LLC ("EIM") in favor of EBF LLC, whereby EIM assigned its rights pursuant to that certain Asset Purchase Agreement dated April 30, 2001, as amended on June 8, 2001, to EBF LLC; with Huntco Steel, Inc. and Huntco, Inc. acknowledging their consent to the Assignment, incorporated by reference to Exhibit 10(ii)(C)(3) included with the Company's Form 8-K filed on June 20, 2001 11: Omitted - not applicable. 15: Omitted - not applicable. 18: Omitted - not applicable. 19: Omitted - not applicable. 22: Omitted - not applicable. 23: Omitted - not applicable. 24: Omitted - not applicable. 99: Omitted - not applicable. EX-3 2 bylaws.txt BY-LAWS (AMENDED) AMENDED AND RESTATED BYLAWS OF HUNTCO INC. ARTICLE I OFFICES 1. Principal Office. The principal office of the Corporation shall be located at such place, either within or without the State of Missouri, as the Board of Directors shall designate from time to time. 2. Registered Office and Agent. The Corporation shall have and continuously maintain a registered office and a registered agent within the State of Missouri. The Board of Directors, from time to time by resolution, may change the registered agent and the address of the registered office. 3. Additional Offices. The Corporation may also have offices and branch offices at such other places as the Board of Directors from time to time may designate or the business of the Corporation may require. ARTICLE II SEAL The seal of the Corporation shall be a circular impression with the name of the Corporation in the upper portion of the rim thereof, the word "MISSOURI" in the lower portion of the rim thereof, and the word "SEAL" in the center. The corporate seal, or a facsimile thereof, may be impressed or affixed or in any manner reproduced. The Board of Directors, by resolution, may change the form of the corporate seal from time to time. ARTICLE III MEETINGS OF SHAREHOLDERS 1. Place. All meetings of the shareholders shall be held at such place within or without the State of Missouri as may be designated by the Board of Directors at a meeting held not less than ten (10) days prior to such meeting of shareholders. In the event the Board of Directors fails to designate a place for the meeting to be held, then the meeting shall be held at the principal office of the Corporation. Anything to the contrary in this Article III notwithstanding, any meeting of shareholders called expressly for the purpose of removing one (1) or more Directors shall be held at the registered office or principal business office of the Corporation in this state or in the city or county in this state in which the principal business office of the Corporation is located. 2. Annual Meeting. An annual meeting of shareholders for the election of Directors and the transaction of such other business as may properly come before the meeting shall be held on the first Thursday of May of each year, or such other day as the Board of Directors may so indicate. If such day is a legal holiday, then the annual meeting will be held on the next business day. 3. Special Meetings. Special meetings of the shareholders will be called by the Secretary upon request of the Chairman or Chief Executive Officer or a majority of the members of the Board of Directors or upon the request of the holders of not less than one-fifth (1/5) of the outstanding vote of the Corporation's stock. 4. Notice. Notice, given as provided in Article X of these Bylaws, of each meeting of shareholders, stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, is required to be delivered or given as provided in Article X of these Bylaws not less than ten (10) nor more than seventy (70) days prior to the date of said meeting. 5. Quorum. The holders of a voting majority of the shares of stock issued and outstanding and entitled to vote at any meeting, present in person or represented by proxy, constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by law, by the Articles of Incorporation or by these Bylaws; provided, however, that in the absence of such quorum, the holders of a voting majority of such shares present and voting at said meeting, either in person or by proxy, have the right successively to adjourn the meeting to a specified date not longer than ninety (90) days after such adjournment, and no notice of such adjournment need be given to shareholders not present at the meeting. In all matters, every decision of a majority of the votes entitled to be cast on the subject matter and which are represented in person or by proxy at a meeting at which a quorum is present shall be valid as an act of the shareholders, unless a larger vote is required by law, by these Bylaws or the Articles of Incorporation. Shares represented by a proxy which directs that the shares be voted to abstain or to withhold a vote on a matter shall be deemed to be represented at the meeting as to such matter. 6. Informal Action by Shareholders. Any action required to be taken at a meeting of the shareholders may be taken without a meeting if consents in writing, setting forth the action so taken, shall be signed by all the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE IV VOTING PROCEDURE 1. List of Voters. The officers having charge of the transfer book for shares of the Corporation shall make a complete list of the shareholders entitled to vote at any meeting at least ten (10) days before such meeting. Said list shall be arranged in alphabetical order with the address and the number of shares held by each. Said list shall be kept on file at the registered office or the principal place of business of the Corporation within the State of Missouri, at least ten (10) days prior to such meeting, and shall be open to the inspection of any shareholder during said period and up to the adjournment of the meeting. The original share ledger or transfer book or a duplicate thereof kept in the State of Missouri shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders. Failure to comply with the requirements of this section shall not affect the validity of any action taken at such meeting. 2. Inspectors. Every meeting of the shareholders shall be called to order by the Chairman or Chief Executive Officer, Vice Chairman, President, Secretary or persons calling said meeting. If the object of said meeting be to elect Directors or to take a vote of the shareholders on any proposition, then, if requested to do so by any officer of the Corporation or the holders of a voting majority of shares present at such meeting, in person or by proxy, the person presiding at said meeting shall appoint not less than two (2) persons who are not Directors as inspectors to receive and canvass the votes given at such meeting and certify the results to the person presiding. In all cases where the right to vote upon any share or shares shall be questioned, it shall be the duty of the inspectors or the persons conducting the vote to require the transfer books as evidence of shares held, and all shares that may appear standing thereon in the name of any person or persons shall be entitled to be voted upon by such person or persons directly to themselves or by proxy. 3. Inspectors' Oath. Any inspector, before he shall enter upon the duties of his office, shall take and subscribe the following oath before any officer authorized by law to administer oaths: "I do solemnly swear that I will execute the duties of an inspector of the election now to be held with strict impartiality and according to the best of my ability." 4. Close of Transfer Books. At each meeting of the shareholders, whether annual or special, the transfer books of the Corporation shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder. The Board of Directors shall have the power to close the transfer books, or fix in advance a date not exceeding seventy (70) days preceding the date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting. If the Board of Directors shall not have closed the transfer books of its shareholders entitled to notice of, and to vote at, a meeting of shareholders, only the shareholders who are shareholders of record at the close of business on the twentieth (20th) day preceding the date of the meeting shall be entitled to notice of, and to vote at, the meeting, and any adjournment of the meeting; except that, if prior to the meeting written waivers of notice of the meeting are signed and delivered to the Corporation by all the shareholders of record at the time the meeting is convened, only the shareholders who are shareholders of record at the time the meeting is convened shall be entitled to vote at the meeting and any adjournment of the meeting. ARTICLE V VOTERS 1. Eligible Voters. Any shareholder owning one or more shares of stock on record in the stock books of the Corporation on the record date or on the date of closing of the transfer books of the Corporation as provided in paragraph 4 of Article IV of these Bylaws shall be eligible to vote at any meeting of shareholders; provided, however, that no person shall be admitted to vote on any shares belonging or hypothecated to the Corporation. On each matter submitted to a vote, including the election of Directors of this Corporation, each such Class A common shareholder shall have as many votes as he has Class A common shares of stock in this Corporation. Each Class B common shareholder shall have ten (10) times as many votes as he has Class B common shares of stock in this Corporation. 2. Proxies. A shareholder may vote either in person or by proxy executed in writing by the shareholder or his duly authorized attorney in fact. No proxy shall be valid after eleven months from the date of execution unless otherwise provided in the proxy. ARTICLE VI BOARD OF DIRECTORS 1. Management and Number. The property, business and affairs of the Corporation shall be controlled and managed by a Board of Directors. Six (6) Directors shall constitute the first Board of Directors. Thereafter the number of Directors on the Board of Directors shall be fixed, from time to time, by resolutions adopted by the Board, but shall not be less than three (3) persons. The Board shall be divided into three classes whose terms expire at different times. At the annual shareholders' meeting to be held in 1994, two (2) Directors shall be elected for a term of one (1) year; two (2) Directors for a term of two (2) years; and two (2) Directors for a term of three (3) years. At each subsequent annual shareholders' meeting, successors to the class of Directors whose terms expire that year shall be elected to hold office for a term of three (3) years. Notwithstanding the provisions of any other Article herein, this Section of the Bylaws may not be amended or repealed without the consent of the holders of two-thirds of the outstanding votes of the Corporation. 2. Vacancies. Whenever any vacancy on the Board of Directors shall occur for any reason, a majority of the remaining Directors then in office, even if that majority is less than a majority of the entire Board of Directors, may fill the vacancy or vacancies so created until a successor or successors shall be duly elected by the shareholders and shall qualify. The Board of Directors may apportion any increase or decrease in Directorships among the classes as nearly equal in number as possible. Notwithstanding the provisions of any other Article herein, only the remaining Directors of the Corporation shall have the authority, in accordance with the procedure stated above, to fill any vacancy which exists on the Board of Directors. 3. Removal for Failure to Meet Qualifications. Any Director of the Corporation may be removed for cause by action of a majority of the entire Board of Directors if the Director to be removed, at the time of removal, shall fail to meet the qualifications stated in the Articles of Incorporation or these Bylaws for election as a Director or shall be in breach of any agreement between such Director and the Corporation relating to such Director's services as a Director or employee of the Corporation. Notice of any proposed removal shall be given to all Directors of the Corporation prior to action thereon. 4. Quorum. A majority of the Directors shall constitute a quorum for the transaction of business by the Board of Directors. Any act or decision of the majority of the Directors present at a meeting at which a quorum is present shall be the act or decision of the Board of Directors. 5. Place of Meetings. Meetings of Directors shall be held at the principal office of the Corporation or such other place or places, either within or without the State of Missouri, as may be agreed upon by the Board of Directors. Members of the Board of Directors may also participate in meetings of the board by means of conference telephone or other communications equipment whereby all persons participating in the meeting can hear each other, and participation in a meeting in such manner shall be deemed presence in person at the meeting for all purposes. 6. Regular and Special Meetings. Regular meetings of the Board of Directors shall be held as frequently and at such time and place as may be determined by the Board of Directors from time to time. Special meetings of the Board of Directors shall be called by the Secretary at any time on request of the Chairman or Chief Executive Officer, Vice Chairman, President or two (2) members of the Board of Directors. 7. Notice. Regular meetings of the Board of Directors may be held without notice. Special meetings of the Board of Directors may be held upon one (1) days notice, given as provided in Article XII of these Bylaws. 8. Interest in Transactions. No contract or transaction between the Corporation and one or more of its Directors or officers, or between the Corporation and any other Corporation, partnership, association, or other organization in which one or more of its Directors or officers are Directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the Director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (a) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested Directors, even though the disinterested Directors be less then a quorum; or (b) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized or approved by the Board of Directors, a committee thereof, or the shareholders. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or a committee which authorizes the contract or transaction. 9. Compensation. By resolution of the Board of Directors, each Director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors or a committee thereof and may be paid a stated salary as Director or a fixed sum for attendance at each such meeting or both, and may also be paid such other compensation, in whatever form, as shall be determined by the Board of Directors. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. 10. Executive Committee. The Board of Directors may appoint two or more Directors to constitute an Executive Committee and may vest such committee with all or any portion of the powers vested by law or in these bylaws in the full Board of Directors and may provide for rules of procedure to govern the operation of such committee; provided that in no event shall the Executive Committee have the power to fill vacancies on the Board of Directors, fill vacancies on the Executive Committee or approve amendments of these bylaws or the Articles of Incorporation of the Corporation. 11. Audit Committee. The Board of Directors may appoint two or more Directors to constitute an Audit Committee and may, by resolution, establish the authority and function of such committee and provide for rules of procedure to govern the operation of such committee. At least two of the members of the Audit Committee shall not be employees of the Corporation and shall otherwise be independent of management and free from any relationships that, in the opinion of the Board of Directors, would interfere with their exercise of independent judgment as a committee member. 12. Compensation Committee. The Board of Directors may appoint two or more Directors to constitute a Compensation Committee and may, by resolution, establish the authority and function of such committee and provide for rules of procedure to govern the operation of such committee. 13. Other Committees. The Board of Directors may, by resolution adopted by a majority of the whole Board of Directors, designate one or more other committees, each committee to be composed of two or more members of the Board of Directors. Each such committee, to the extent provided in such resolution, shall have and exercise all of the authority of the Board of Directors in the management of the Corporation. 14. Informal Action by Directors. Any action which is required to be or may be taken at a meeting of the Directors may be taken without a meeting if consents in writing, setting forth the action so taken, are signed by all the Directors. The consents shall have the same force and effect as a unanimous vote of the Directors at a meeting duly held, and may be stated as such in any certificate or document filed under the provisions of the General and Business Corporation Law of Missouri. The Secretary shall file the consents with the minutes of the meetings of the Board of Directors. ARTICLE VII OFFICERS 1. Officers. The Officers of the Corporation shall be a Chairman of the Board, Vice Chairman of the Board, Chief Executive Officer, President and a Secretary, and such other additional officers, including Vice Presidents, a Treasurer, and Assistant Secretaries and Assistant Treasurers as the Board of Directors may from time to time elect. Any two or more offices may be held by the same individual. 2. Election and Term. The Officers of the Corporation shall be elected by a majority of the whole number of the Board of Directors, and shall hold office at the pleasure of the Board of Directors. At any meeting the Board of Directors may elect such other officers and agents as it shall deem necessary, who shall hold office at the pleasure of the Board of Directors, and who shall have such authority and shall perform such duties as from time to time shall be prescribed by the Board of Directors. 3. Removal. Any officer elected by the Board of Directors may be removed by the affirmative vote of a majority of the entire Board of Directors whenever in its judgment the interests of the Corporation will be served thereby. ARTICLE VIII DUTIES OF OFFICERS 1. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the shareholders and of the Board of Directors, except as may be otherwise required under the law of Missouri. He shall act in an advisory capacity with respect to matters of policy and other matters of importance pertaining to the affairs of the Corporation. He, alone or with the Vice Chairman of the Board, the President and/or the Secretary shall sign and send out reports and other messages which are to be sent to shareholders from time to time. He shall also perform such other duties as may be assigned to him by these By-Laws, the Board of Directors or, if applicable, the Chief Executive Officer. 2. Vice Chairman of the Board. The Vice Chairman of the Board shall, in the absence of the Chairman of the Board, preside at all meetings of the shareholders and of the Board of Directors. He shall perform such other duties as may be assigned to him by these By-Laws, the Board of Directors, the Chairman of the Board or the Chief Executive Officer. 3. Chief Executive Officer. The Chief Executive Officer shall have the general and active management and supervision of the business of the Corporation. He shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall also perform such other duties as may be assigned to him by these By-Laws or the Board of Directors. The Chief Executive Officer shall designate who shall perform the duties of the Chief Executive Officer in his absence. 4. President. The President shall, in the absence of the Chairman of the Board or the Vice Chairman of the Board, preside at all meetings of the shareholders and of the Board of Directors. He shall perform such other duties as may be assigned to him by these By-Laws, the Board of Directors or the Chief Executive Officer. 5. Executive, Senior, Group and other Vice Presidents. Each Executive Vice President, Senior Vice President, Group Vice President and other Vice President shall perform the duties and functions and exercise the powers assigned to him by the Board of Directors or the Chief Executive Officer. 6. Secretary. The Secretary shall attend all meetings of the Board of Directors and of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the Board of Directors and, when appropriate, shall cause the corporate seal to be affixed to any instruments executed on behalf of the Corporation. The Secretary shall also perform all duties incident to the office of the Secretary and such other duties as may be assigned to him by these By-Laws, the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board or the Chief Executive Officer. 7. Assistant Secretaries. The Assistant Secretaries shall, during the absence of the Secretary, perform the duties and functions and exercise the powers of the Secretary. Each Assistant Secretary shall perform such other duties as may be assigned to him by the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer or the Secretary. 8. Treasurer. The Treasurer shall have the custody of the funds and securities of the Corporation and shall deposit them in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors or by any officer or officers authorized by the Board of Directors to designate such depositories; disburse funds of the Corporation when properly authorized by vouchers prepared and approved by the Controller; and invest funds of the Corporation when authorized by the Board of Directors or a committee thereof. The Treasurer shall render to the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance or the Vice President- Finance, whenever requested, an account of all his transactions as Treasurer and shall also perform all duties incident to the office of Treasurer and such other duties as may be assigned to him by these By-Laws, the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance or the Vice President-Finance. 9. Assistant Treasurers. The Assistant Treasurers shall, during the absence of the Treasurer, perform the duties and functions and exercise the powers of the Treasurer. Each Assistant Treasurer shall perform such other duties as may be assigned to him by the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance, the Vice President-Finance or the Treasurer. 10. Controller. The Controller shall keep full and accurate account of receipts and disbursements in books of the Corporation and render to the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance or the Vice President-Finance, whenever requested, an account of all his transactions as Controller and of the financial condition of the Corporation. The Controller shall also perform all duties incident to the office of Controller and such other duties as may be assigned to him by these By-Laws, the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance or the Vice President- Finance. 11. Assistant Controllers. The Assistant Controllers shall, during the absence of the Controller, perform the duties and functions and exercise the powers of the Controller. Each Assistant Controller shall perform such other duties as may be assigned to him by the Board of Directors, the Chief Executive Officer, the Senior Vice President-Finance, the Vice President-Finance or the Controller. ARTICLE IX INDEMNIFICATION (1) The Corporation, except as provided in paragraph (2), shall indemnify any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether criminal, civil, administrative or investigative, including without limitation any action by or in the right of the Corporation, by reason of the fact that he was or is a director or officer of the Corporation or is or was a director or officer of the Corporation who is or was serving at the request of the Corporation as a director, officer, agent, employee, partner or trustee of another corporation, partnership, joint venture, trust or other enterprise; against expenses, including attorneys' fees, judgments, fines, taxes and amounts paid in settlement, actually and reasonably incurred by him in connection with such action, suit or proceeding if such person's conduct is not finally adjudged to be knowingly fraudulent, deliberately dishonest or willful misconduct. The right to indemnification conferred in this paragraph shall be a contract right and shall include the right to be paid by the Corporation expenses incurred in defending any actual or threatened civil or criminal action, suit or proceeding in advance of the final disposition of such action, suit or proceeding. Such right will be conditioned upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article. Such right shall survive any amendment or repeal of this Article with respect to expenses incurred in connection with claims, regardless of when such claims are brought, arising out of acts or omissions occurring prior to such amendment or repeal. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (2) If a claim under paragraph (1) of this Article is not paid in full by the Corporation within thirty (30) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under The General and Business Corporation Law of Missouri for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in The General and Business Corporation Law of Missouri, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (3) The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, partner, trustee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (4) The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, partner, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article. (5) For the purposes of this Article, references to the "Corporation" include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee, partner, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving corporation in the same capacity. (6) For purposes of this Article, the term "other enterprise" shall include employee benefit plans; the term "fines" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and the term "serving at the request of the Corporation" shall include any service as a director, officer, employee, partner, trustee or agent of, or at the request of, the Corporation which imposes duties on, or involves services by, such director, officer, employee, partner, trustee or agent with respect to an employee benefit plan, its participants, or beneficiaries. (7) In the event any provision of this Article shall be held invalid by any court of competent jurisdiction, such holding shall not invalidate any other provision of this Article and any other provisions of this Article shall be construed as if such invalid provision had not been contained in this Article. In any event, the Corporation shall indemnify any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation who is or was serving at the request of the Corporation as a director, officer, agent, employee, partner or trustee of another corporation, partnership, joint venture, trust or other enterprise, to the full extent permitted under Missouri law, as from time to time in effect. ARTICLE X CONTRACTS, LOANS, CHECKS AND DEPOSITS 1. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. 2. Loans. No loans shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. 3. Checks, Drafts, and Similar Instruments. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation, shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board of Directors may select. ARTICLE XI CERTIFICATES OF STOCK AND TRANSFERS 1. Issuance. Certificates of stock of the Corporation shall be issued and signed by the Chairman of the Board, Vice Chairman of the Board, President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall bear the corporate seal. Any and all of the foregoing signatures may be facsimile. Such seal may be facsimile, engraved or printed. Certificates shall be numbered consecutively and registered as they are issued. They shall indicate, upon their face, among other things, the owner's name, the number and class of shares of stock represented by the certificate, the par value of shares of such class, the date of its issuance and the manner in which the shares may be transferred. 2. Transfers. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing, and upon surrender of such certificate properly endorsed. 3. Transfer Books. Proper books shall be kept under the direction of the Secretary, showing the ownership and transfer of all certificates of stock. The Board of Directors shall have power to close said transfer books of the Corporation for a period not exceeding seventy (70) days preceding the date for payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion of shares shall go into effect. In lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date not exceeding seventy (70) days preceding the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares shall go into effect, as a record date for the determination of the shareholders entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any change, conversion or exchange of shares. In such case, such shareholders and only such shareholders as shall have been shareholders of record on the date of closing the transfer books or on the record date so fixed shall be entitled to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after such date of closing of the transfer books or such record date fixed as aforesaid. 4. Holders of Record. The Corporation shall be entitled to treat the holder of record of any shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of Missouri. ARTICLE XII NOTICE 1. Notice Deemed Given. Whenever under the provisions of these Bylaws notice is required to be delivered to any Director, officer or shareholder, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, or dispatched by telecopy or prepaid telegram, addressed to such individual at his address as it appears on the records of the Corporation, or when delivered in person to the individual. 2. Attendance as Waiver. Notice of any meeting required to be given under the provisions of these Bylaws or the laws of the State of Missouri shall be deemed waived by the attendance at such meeting of the party or parties entitled to notice thereof, except where a party or parties attend a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. 3. Waiver of Notice. Any notice required to be given under the provisions of these Bylaws or the laws of the State of Missouri may be waived by the persons entitled thereto signing a waiver of notice before or after the time of said meeting, and such waiver shall be deemed equivalent to the giving of such notice. Such waiver of notice may be executed in person by the party entitled thereto or by his agent duly authorized in writing so to do. ARTICLE XIII AMENDMENTS 1. By Shareholders. These Bylaws, or any of them, or any additional or supplementary Bylaws, may be altered, amended or repealed, and new Bylaws may be adopted at any annual meeting of the shareholders without notice, or at any special meeting the notice of which shall set forth the terms of the proposed Bylaw or action to be taken on any Bylaw, by holders of a voting majority of the shares represented in person or by proxy and entitled to vote at such annual or special meeting, as the case may be. 2. By Directors. To the extent provided for in the Articles of Incorporation, the Board of Directors shall also have the power to adopt new Bylaws, and to amend, alter and repeal these and any additional and supplementary Bylaws, at any regular or special meeting of the Board of Directors. Notice of any such action to be taken on any Bylaws need not be included in the call of said meeting. ARTICLE XIV FISCAL YEAR The fiscal year of the Corporation shall end each December 31. ARTICLE XV DIVIDENDS The Board of Directors may from time to time, declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Articles of Incorporation. -----END PRIVACY-ENHANCED MESSAGE-----