-----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, PhgJExILwEvzgPv4XOsA/g/sh5ZoIX5e72UO90jXWs0EhqxSWPRklLm3sXnBBFbE lbUaifgFbuy3kvRbaG4b5w== 0000950144-96-007927.txt : 19961113 0000950144-96-007927.hdr.sgml : 19961113 ACCESSION NUMBER: 0000950144-96-007927 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALUMAX INC CENTRAL INDEX KEY: 0000912600 STANDARD INDUSTRIAL CLASSIFICATION: PRIMARY PRODUCTION OF ALUMINUM [3334] IRS NUMBER: 132762395 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12374 FILM NUMBER: 96659877 BUSINESS ADDRESS: STREET 1: 5655 PEACHTREE PKWY CITY: NORCROSS STATE: GA ZIP: 30092 BUSINESS PHONE: 4042466600 MAIL ADDRESS: STREET 1: 5655 PEACHTREE PKWY CITY: NORCROSS STATE: GA ZIP: 30092 10-Q 1 ALUMAX, INC. FORM 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 ------------------------------------------------ or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-12374 ---------------- (LOGO) ALUMAX INC. (Exact name of registrant as specified in its charter) Delaware 13-2762395 - ------------------------------------------------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5655 Peachtree Parkway, Norcross, Georgia 30092 - ------------------------------------------------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (770) 246-6600 - -------------------------------------------------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares of common stock of registrant outstanding at October 31, 1996: 44,998,680 -1- 2 Part I. Financial Information Item 1. Financial Statements ALUMAX INC. CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ------------------------ 1996 1995 1996 1995 --------- --------- --------- ---------- (In Millions, Except Per Share Amounts) NET SALES . . . . . . . . . . . . . . . . . . . . . . $ 809.1 $ 767.7 $ 2,463.1 $ 2,187.5 --------- --------- ---------- ---------- Cost and expenses: Cost of goods sold . . . . . . . . . . . . . . . 657.9 592.4 1,970.2 1,714.0 Selling and general . . . . . . . . . . . . . . 70.1 56.6 203.4 168.6 Depreciation and amortization . . . . . . . . . 36.7 27.7 105.7 85.9 --------- --------- ---------- ---------- 764.7 676.7 2,279.3 1,968.5 --------- --------- ---------- ---------- EARNINGS FROM OPERATIONS . . . . . . . . . . . . . . 44.4 91.0 183.8 219.0 Gain on sales of assets . . . . . . . . . . . . . . . 71.7 - 242.9 128.8 Other income (expense), net . . . . . . . . . . . . . (1.9) (2.2) 13.0 5.6 Interest expense, net . . . . . . . . . . . . . . . . (15.8) (15.1) (49.9) (52.0) --------- --------- ---------- ---------- EARNINGS BEFORE INCOME TAXES . . . . . . . . . . . . 98.4 73.7 389.8 301.4 Income tax provision . . . . . . . . . . . . . . . . (46.0) (30.7) (158.9) (108.8) --------- --------- ----------- ---------- NET EARNINGS . . . . . . . . . . . . . . . . . . . . 52.4 43.0 230.9 192.6 Preferred dividends . . . . . . . . . . . . . . . . . (2.3) (2.3) (7.0) (7.0) --------- --------- ---------- ---------- EARNINGS APPLICABLE TO COMMON SHARES . . . . . . . . $ 50.1 $ 40.7 $ 223.9 $ 185.6 ========= ========= ========== ========== Primary earnings per common share . . . . . . . . . . $ 1.10 $ .90 $ 4.91 $ 4.11 ========= ========= ========== ========== Fully diluted earnings per common share . . . . . . . $ 0.95 $ .78 $ 4.18 $ 3.51 ========= ========= ========== ========== Weighted average primary shares outstanding . . . . . 45.6 45.4 45.6 45.2 ========= ========= ========== ========== Weighted average fully diluted shares outstanding . . 55.2 55.0 55.2 54.8 ========= ========= ========== ==========
The accompanying notes are an integral part of these financial statements. -2- 3 ALUMAX INC. CONDENSED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
September 30, December 31, 1996 1995 ------------- ------------ (Millions of Dollars, Except per Share Amounts) ASSETS Current Assets: Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 68.1 $ 205.9 Accounts receivable, less allowance for doubtful accounts (1996-$17.8; 1995-$17.7) . . . . . . . . . . . . . . . . . . . . . 447.9 437.8 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 524.1 558.3 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 124.5 89.0 --------- ---------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . 1,164.6 1,291.0 --------- ---------- Noncurrent Assets: Property, plant and equipment at cost, less accumulated depreciation and amortization (1996-$1,015.7; 1995-$1,051.3) . . . 2,003.3 1,611.9 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175.5 232.1 --------- ---------- Total noncurrent assets . . . . . . . . . . . . . . . . . . . . . . 2,178.8 1,844.0 --------- ---------- TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,343.4 $ 3,135.0 ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 145.2 $ 148.8 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 315.6 237.3 Current maturities of long-term debt . . . . . . . . . . . . . . . . . 38.5 137.0 --------- ---------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . 499.3 523.1 --------- ---------- Noncurrent Liabilities: Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673.7 708.9 Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . 540.5 503.7 --------- ---------- Total noncurrent liabilities . . . . . . . . . . . . . . . . . . . 1,214.2 1,212.6 --------- ---------- Commitments and Contingencies Stockholders' Equity: Preferred stock of $1.00 par value . . . . . . . . . . . . . . . . . . 2.3 2.3 Common stock of $.01 par value . . . . . . . . . . . . . . . . . . . . .4 .4 Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . 915.7 909.5 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 707.5 483.6 Cumulative foreign currency translation adjustment . . . . . . . . . . 4.0 3.5 --------- ---------- Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 1,629.9 1,399.3 --------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . $ 3,343.4 $ 3,135.0 ========= ==========
The accompanying notes are an integral part of these financial statements. -3- 4 ALUMAX INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30, ------------------------------------- 1996 1995 ------------ ----------- (Millions of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . $ 230.9 $ 192.6 Reconciliation of net earnings to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . 105.7 85.9 Provision for doubtful accounts . . . . . . . . . . . . . . . . 4.9 1.7 Gain on sales of assets . . . . . . . . . . . . . . . . . . . . (242.9) (132.7) Deferred income taxes . . . . . . . . . . . . . . . . . . . . . (1.1) 18.3 Other noncash items . . . . . . . . . . . . . . . . . . . . . . 6.2 3.5 Changes in working capital, net of effects of acquisition/disposition . . . . . . . . . . . . . . . . . 37.5 (33.6) Net change in other noncurrent assets and liabilities . . . . . 14.2 1.9 --------- -------- Net cash provided by operating activities . . . . . . . . . . 155.4 137.6 --------- -------- INVESTING ACTIVITIES: Dispositions, net of cash sold . . . . . . . . . . . . . . . . . . 497.0 148.3 Acquisition, net of cash acquired . . . . . . . . . . . . . . . . (436.5) - Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . (171.1) (131.1) --------- -------- Net cash provided by (used in) investing activities . . . . . (110.6) 17.2 --------- -------- FINANCING ACTIVITIES: Repayments of long-term and short-term debt . . . . . . . . . . . (550.6) (62.0) Proceeds from short-term debt . . . . . . . . . . . . . . . . . . 375.0 - Dividends paid on preferred stock . . . . . . . . . . . . . . . . (7.0) (7.0) --------- -------- Net cash used in financing activities . . . . . . . . . . . . (182.6) (69.0) --------- -------- Net increase (decrease) in cash and equivalents . . . . . . . . . . . . (137.8) 85.8 Cash and equivalents at beginning of year . . . . . . . . . . . . . . . 205.9 93.0 --------- -------- Cash and equivalents at end of period . . . . . . . . . . . . . . . . . $ 68.1 $ 178.8 ========= ======== Supplemental Cash Flow Information: Income tax payments . . . . . . . . . . . . . . . . . . . . . . . $ 57.9 $ 60.6 Interest paid, net of amounts capitalized . . . . . . . . . . . . $ 53.1 $ 56.9
The accompanying notes are an integral part of these financial statements. -4- 5 ALUMAX INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) NOTE 1. PRESENTATION These unaudited interim condensed financial statements of Alumax Inc. ("Alumax" or the "Company") should be read in conjunction with the audited financial statements for the year ended December 31, 1995. In management's opinion, all adjustments necessary for a fair presentation are reflected in the interim periods presented. NOTE 2. STRATEGIC TRANSACTIONS The Company periodically implements strategic actions which it believes afford it the opportunity to redeploy resources to enhance profitability and growth. During the nine months ended September 30, 1996 and 1995, the following has occurred: Dispositions On September 25, 1996, the Company sold certain Fabricated Products businesses in Western Europe and in the United States for $246.6 in cash, net of cash sold of $5.4. The Company recorded an after-tax gain of $36.7, net of a $35.0 tax provision, in the third quarter of 1996. In June 1996, the Company sold its investment in mining interests for $160 in cash. The Company recorded an after-tax gain of $55.1, net of a $37.7 tax provision, in the second quarter of 1996. In January 1996, the Company sold a 23 percent undivided interest in its Mt. Holly primary aluminum reduction facility for $89.3, which the Company applied to the early retirement of a $90.7 promissory note due in May 1996. The Company recorded an after-tax gain of $48.6, net of a $29.8 tax provision, in the first quarter of 1996. This transaction reduced the Company's ownership in the Mt. Holly facility to 50.33 percent. In March 1995, the Company sold a 14 percent undivided interest in each of the Company's Intalco and Eastalco primary aluminum reduction facilities for cash proceeds of $147.6, resulting in an after-tax gain of $81.3, net of a $47.5 tax provision, recorded in the first quarter of 1995. This transaction reduced the Company's ownership in each facility to 61 percent. Acquisition On January 31, 1996, the Company purchased all of the common shares of privately held Cressona Aluminum Company ("Cressona") for a cash cost, including expenses, of $436.5, net of $3.1 of cash acquired. In conjunction with the acquisition, liabilities of $87.4 were acquired. Cressona is a leading manufacturer of extruded aluminum products. The transaction has been accounted for as a purchase and the results of operations of Cressona have been included in the consolidated financial statements since January 31, 1996. The acquisition was financed with cash on hand and $375 of borrowings obtained under available credit facilities. All of these borrowings have been repaid as of September 30, 1996. -5- 6 ALUMAX INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED) Pro Forma Information The following summary presents Alumax's unaudited pro forma consolidated net sales, net earnings, and primary earnings per common share for the quarters and nine months ended September 30, 1996 and 1995, respectively, as if the acquisition of Cressona and the sale of the Fabricated Products businesses each occurred on January 1, 1996 and 1995. The pro forma adjustments for the nine months ended September 30, 1996 include the addition of Cressona's operating results for the month of January 1996. Since the acquisition occurred on January 31, 1996, the Company's actual results include Cressona from February 1, 1996 through September 30, 1996.
Three Months Ended Nine Months Ended September 30, September 30, -------------------- --------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Net sales . . . . . . . . . . . . . . . . . . . . . $ 686.2 $ 762.8 $ 2,134.1 $ 2,181.5 Net earnings . . . . . . . . . . . . . . . . . . . . $ 46.2 $ 44.3 $ 220.2 $ 201.3 Primary earnings per common share . . . . . . . . . $ 0.96 $ 0.93 $ 4.67 $ 4.30
The pro forma results are based upon certain assumptions and estimates, which the Company believes are reasonable. The pro forma results do not purport to be indicative of results that actually would have been obtained had these transactions occurred on January 1, 1996 or 1995, nor are they intended to be a projection of future results. NOTE 3. INVENTORIES Components of inventories at September 30, 1996 and December 31, 1995 are:
1996 1995 ------- -------- Raw materials . . . . . . . . . . . . . . . . . . . . . $ 323.6 $ 361.6 Work in process . . . . . . . . . . . . . . . . . . . . 99.1 105.9 Finished products . . . . . . . . . . . . . . . . . . . 101.4 90.8 ------- -------- Total . . . . . . . . . . . . . . . . . . . . . . . . $ 524.1 $ 558.3 ======= ========
Approximately 77 percent and 72 percent of inventory at September 30, 1996 and December 31, 1995, respectively, have been determined on the LIFO cost basis. The excess of replacement cost over the LIFO basis of such inventory is approximately $62.6 and $101.2 at September 30, 1996 and December 31, 1995, respectively. NOTE 4. INCOME TAX PROVISION
Three Months Ended Nine Months Ended September 30, September 30, -------------------- --------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Federal . . . . . . . . . . . . . . . . . . . . . . $ 36.3 $ 28.1 $ 111.6 $ 92.4 Foreign . . . . . . . . . . . . . . . . . . . . . . 7.4 (1.5) 35.0 5.7 State . . . . . . . . . . . . . . . . . . . . . . . 2.3 4.1 12.3 10.7 -------- ------- -------- -------- Total . . . . . . . . . . . . . . . . . . . . . . $ 46.0 $ 30.7 $ 158.9 $ 108.8 ======== ======= ======== ========
The effective tax rates for these periods differ from statutory rates because of provisions for prior years and provisions for state and foreign taxes. In the three months ended September 30, 1996, the repatriation of foreign earnings associated with the sale of certain Fabricated Products businesses in Western Europe also contributed to an effective tax rate higher than the statutory rate. In the three months ended March 31, 1995, the -6- 7 ALUMAX INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED) Company also reversed a $13.4 federal income tax asset valuation allowance in anticipation of utilization of the asset due to the significant level of 1995 first quarter earnings. NOTE 5. OTHER INCOME The nine months ended September 30, 1996 and 1995 include $18.7 and $7.9, respectively, of dividend income received from investments in mining operations. NOTE 6. COMMITMENTS AND CONTINGENCIES The Company and its affiliates have been named as defendants in lawsuits in various matters relating to both current and former operations. In addition, the Company and certain of its subsidiaries have been named as defendants in lawsuits or as potentially responsible parties in state and federal administrative and judicial proceedings seeking contribution for costs associated with the investigation, analysis, correction and remediation of environmental conditions at various hazardous waste disposal sites. The Company continues to monitor these actions and proceedings and to vigorously defend both its own interests as well as the interests of its affiliates. The Company's ultimate liability in connection with present and future environmental claims will depend on many factors, including its volumetric share of the waste at a given site, the remedial action required, the total cost of remediation, and the financial viability and participation of the other entities involved with the site. Once it becomes probable that the Company will incur costs in connection with remediation of a site and such costs can be reasonably estimated, the Company establishes or adjusts its reserve for its projected share of these costs. Based upon current law and information known to the Company concerning the size of the sites known to it, anticipated costs, their years of operation and the number of other potentially responsible parties, Management believes that it has adequate reserves for the Company's potential share of the estimated aggregate liability for the costs of remedial actions and related costs and expenses. In addition, the Company establishes reserves for remedial measures required from time to time at its own facilities. The Company's environmental reserves totalled $27.2 and $22.8 at September 30, 1996, and December 31, 1995 ($27.2 with the inclusion of Cressona), respectively. Management believes that the reasonably probable outcomes of these matters will not materially exceed established reserves. Although the Company believes it has coverage for some environmental claims under certain insurance policies, insurance recoveries are not considered in estimating the Company's share of remediation costs at a site unless an insurance carrier has agreed to pay a portion of such costs. Insurance recoveries were not considered in establishing reserves for any of these sites absent an agreement between the carriers and the Company. On September 30, 1996, the Company, through its subsidiary Alumax Mill Products, Inc., exercised its option to purchase its leased Texarkana rolling mill facility in November 1997 for approximately $97 in cash. The Internal Revenue Service (the "IRS") has asserted that Alumax and certain of its subsidiaries were improperly included in the 1984, 1985 and 1986 consolidated income tax returns of AMAX Inc. and on that basis has asserted a federal income tax deficiency against Alumax of approximately $129. Interest on the deficiency through September 30, 1996, would be approximately $265. In response to the IRS' notice of deficiency, the Company filed a petition in the United States Tax Court (the "Court") seeking a redetermination in respect of the purported deficiency. The parties have waived their rights to a trial and the matter has been submitted to the Court for decision based upon the pleadings, stipulations, memoranda and other documents submitted, or to be submitted, to the Court by the parties. Payment of the deficiency with interest thereon would provide certain tax benefits to the Company that would offset in part the cost of paying the deficiency and interest. The Company believes that it has adequate reserves so that any unprovided for net deficiency would not have a material adverse -7- 8 ALUMAX INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (CONCLUDED) effect on the Company's financial condition. For information regarding additional commitments and contingencies, see Note 12 to the Financial Statements in the Company's 1995 Annual Report on Form 10-K. NOTE 7. STOCKHOLDER RIGHTS AGREEMENT On February 22, 1996, the Executive Committee of the Board of Directors of the Company declared a dividend distribution of one right (a "Right") for each outstanding share of the Company's Common Stock, par value $0.01 per share (the "Common Stock"), held of record at the close of business on February 22, 1996. The Rights attach automatically to each share of Common Stock outstanding as of February 22, 1996, and to each share of Common Stock issued after February 22, 1996. Each Right entitles the holder to purchase from the Company one one-hundredth of a share of the Company's Participating Preferred Stock at an exercise price of $130, subject to certain adjustments. The Rights will not be exercisable or transferable apart from the Common Stock until either the tenth business day after the announcement by a person or group of the commencement of a tender or exchange offer for 15 percent or more of the Voting Stock or the first date of announcement by the Company that a person or group has acquired beneficial ownership of 15 percent or more of the Voting Stock (an "Acquiring Person"). "Voting Stock" means shares of capital stock of the Company entitled to vote generally in the election of directors. If the Company is consolidated or merged with another company or 50 percent or more of its consolidated assets or earning power are sold and, at the time, an Acquiring Person controls the Company's Board of Directors, each holder of a Right will have the right to receive, upon exercise at the then current exercise price of the Right, that number of shares of common stock of the acquiring company which have a market value of twice the then current exercise price of the Right. If any person becomes an Acquiring Person, each holder of a Right other than the Acquiring Person (whose Rights will be void) will have the right to receive, upon exercise at the then current exercise price of the Right, that number of shares of Common Stock having a market value of twice the exercise price of the Right. The Rights will expire on February 22, 2006 and may be redeemed for $.01 per Right at any time prior to the time an Acquiring Person becomes such. Until a Right is exercised, the record holder will have no rights as a stockholder of the Company. After the announcement that an Acquiring Person has become such and prior to the acquisition by an Acquiring Person of 50 percent or more of the outstanding Voting Stock, the Board of Directors of the Company may exchange the Rights (other than Rights owned by such Acquiring Person) at an exchange ratio of one share of Common Stock, or one one-hundredth of a share of the Company's Participating Preferred Stock, per Right, subject to adjustment. The Company's Board of Directors may amend the Rights Agreement, in any respect, until the time an Acquiring Person becomes such. Thereafter, the Company's Board of Directors may amend the Rights Agreement in any respect not materially adverse to Rights holders generally. -8- 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Unaudited; millions of dollars, except per share and per tonne amounts) INTRODUCTION Net earnings totalled $52.4 and $230.9, or $1.10 and $4.91 per common share, for the three and nine months ended September 30, 1996, respectively, compared to net earnings of $43.0 and $192.6, or $.90 and $4.11 per common share, in the comparable 1995 periods. The 1996 results include after-tax gains of $36.7 ($0.81 per common share; $0.67 fully diluted) in the third quarter on the sale of certain Fabricated Products business, $55.1 ($1.21 per common share; $0.99 fully diluted) in the second quarter on the sale of mining interests and $48.6 ($1.07 per common share; $0.88 fully diluted) in the first quarter on the sale of a 23 percent interest in the Mt. Holly primary aluminum reduction facility. The 1995 results include a first quarter after-tax gain of $81.3 ($1.81 per common share; $1.49 fully diluted) on the sale of a 14 percent interest in each of the Intalco and Eastalco primary aluminum reduction facilities. RESULTS OF OPERATIONS Earnings from operations for the three and nine months ended September 30, 1996 totalled $44.4 and $183.8, respectively, compared to operating earnings of $91.0 and $219.0 for the three and nine months ended September 30, 1995, respectively.
Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ----------------------- 1996 1995 1996 1995 ------- -------- --------- --------- (unaudited) NET SALES Primary aluminum products . . . . . . . . . . . . . . $ 140.2 $ 208.0 $ 501.8 $ 509.7 Semi-fabricated products . . . . . . . . . . . . . . . 418.0 316.5 1,237.1 944.0 Fabricated products . . . . . . . . . . . . . . . . . 250.9 243.2 724.2 733.8 -------- -------- --------- --------- $ 809.1 $ 767.7 $ 2,463.1 $ 2,187.5 ======== ======== ========= ========= EARNINGS FROM OPERATIONS Aluminum processing . . . . . . . . . . . . . . . . . $ 55.1 $ 98.9 $ 215.0 $ 243.4 Corporate . . . . . . . . . . . . . . . . . . . . . . (10.7) (7.9) (31.2) (24.4) -------- -------- --------- --------- $ 44.4 $ 91.0 $ 183.8 $ 219.0 ======== ======== ========= ========= PRODUCTION AND SHIPMENTS (THOUSANDS OF TONNES) Sources of metal Primary aluminum production . . . . . . . . . . . . . 162.9 156.9 506.1 487.0 Aluminum purchases . . . . . . . . . . . . . . . . . . 107.7 89.4 337.3 271.9 -------- -------- --------- --------- 270.6 246.3 843.4 758.9 ======== ======== ========= ========= Metal shipments Aluminum processing (including tolling) Primary aluminum products . . . . . . . . . . . . . . 78.7 111.3 285.9 301.7 Semi-fabricated products(1) . . . . . . . . . . . . . 147.6 102.2 429.0 319.7 Fabricated products(1) (2) . . . . . . . . . . . . . . 35.6 35.7 104.6 110.4 -------- -------- --------- --------- 261.9 249.2 819.5 731.8 ======== ======== ========= =========
(1) Net sales and shipments for the Company's Magnolia operation have been reclassified from fabricated products to semi-fabricated products. Magnolia manufactures shower and tub enclosures, stadium seating, and other extruded products. (2) Included in Fabricated products' metal shipments for the three and nine months ended September 30, 1996, are billet shipments of 4.7 and 15.5 thousand tonnes, respectively, compared to 6.6 and 20.9 thousand tonnes in the same 1995 periods. -9- 10 NET SALES AND SHIPMENTS The Company generated quarterly sales of $809.1 on aluminum shipments of 261,900 tonnes in the third quarter of 1996 compared with sales of $767.7 on aluminum shipments of 249,200 tonnes in the third quarter of 1995. For the first nine months of 1996, the Company generated record sales of $2,463.1 on record aluminum shipments of 819,500 tonnes, compared with sales of $2,187.5 on aluminum shipments of 731,800 tonnes in the first nine months of 1995. As further described below, increases in net sales are a result of a growth in total shipments partially offset by lower realized selling prices. The London Metals Exchange (the "LME") cash price averaged $1,440 and $1,530 per tonne during the three and nine months ended September 30, 1996, compared to $1,840 and $1,850 per tonne in the same 1995 periods. The Company's net sales are sensitive to changes in the world pricing of primary aluminum. This price sensitivity impacts substantially all of the Company's products to varying degrees, with less impact on the more specialized and value-added products. As previously disclosed, during the first half of 1995, the Company settled forward sales contracts on 110,000 tonnes entered into in late 1993 at then prevailing market prices. The Company had not purchased call options to cover these forward sales. Purchase of call options in late 1993 to cover these forward sales would have favorably impacted the 1995 first half earnings from operations by approximately $82. The Company's shipments increased 5 percent and 12 percent in the three and nine months ended September 30, 1996, respectively, as compared to the same periods in 1995. The increases are substantially related to the Company's primary and semi-fabricated extrusions operations. The January 31, 1996 acquisition of Cressona Aluminum Company ("Cressona") more than doubled the capacity of the Company's extrusions business, creating the largest extrusions company in the United States. These increases have been partially offset by a decrease in external primary shipments, resulting from increased demand from downstream operations. COST AND EXPENSES The Company's cost and expenses were $764.7 and $2,279.3 for the three and nine months ended September 30, 1996, respectively, compared with cost and expenses of $676.7 and $1,968.5 for the three and nine months ended September 30, 1995, respectively. The increase is largely attributable to higher volumes combined with increased raw material costs. OTHER ITEMS AFFECTING NET EARNINGS Other Income (Expense), Net Other income, net for the three and nine months ended September 30, 1996 was ($1.9) and $13.0, respectively, compared with ($2.2) and $5.6 over the same periods in 1995. The nine months ended September 30, 1996 and 1995 include $18.7 and $7.9, respectively, of dividend income received from investments in mining operations. Interest Expense, Net Gross interest expense of $18.2 and $58.6 for the three and nine months ended September 30, 1996, respectively, decreased from $19.3 and $62.8 in the same 1995 periods as a result of lower average interest rates for the third quarter and lower average borrowings year-to-date. Interest income was $0.6 and $3.0 for the three and nine months ended September 30, 1996 as compared to $2.6 and $7.8 in the same 1995 periods. Capitalized interest was $1.8 and $5.7 for the three and nine months ended September 30, 1996 as compared to $2.4 and $3.0 in the same 1995 periods. -10- 11 Income Taxes The income tax provision for the three and nine months ended September 30, 1996 was $46.0 and $158.9, respectively, compared to $30.7 and $108.8 for the same 1995 periods. The effective tax rates for these periods differ from statutory rates because of provisions for prior years and provisions for state and foreign taxes. In the three months ended September 30, 1996, the repatriation of foreign earnings associated with the sale of certain Fabricated Products businesses in Western Europe also contributed to an effective tax rate higher than the statutory rate. In the three months ended March 31, 1995, the Company also reversed a $13.4 federal income tax asset valuation allowance in anticipation of utilization of the asset due to the significant level of 1995 first quarter earnings. STRATEGIC TRANSACTIONS The Company periodically implements strategic actions which it believes afford it the opportunity to redeploy resources to enhance profitability and growth. During the nine months ended September 30, 1996 and 1995, the following has occurred: Dispositions On September 25, 1996, the Company sold certain Fabricated Products businesses in Western Europe and in the United States for $246.6 in cash, net of cash sold of $5.4. The Company recorded an after-tax gain of $36.7 net of a $35.0 tax provision, in the third quarter of 1996. In June 1996, the Company sold its investment in mining interests for $160 in cash. The Company recorded an after-tax gain of $55.1, net of a $37.7 tax provision, in the second quarter of 1996. In January 1996, the Company sold a 23 percent undivided interest in its Mt. Holly primary aluminum reduction facility for $89.3, which the Company applied to the early retirement of a $90.7 promissory note due in May 1996. The Company recorded an after-tax gain of $48.6, net of a $29.8 tax provision, in the first quarter of 1996. This transaction reduced the Company's ownership in the Mt. Holly facility to 50.33 percent. In March 1995, the Company sold a 14 percent undivided interest in each of the Company's Intalco and Eastalco primary aluminum reduction facilities for cash proceeds of $147.6, resulting in an after-tax gain of $81.3, net of a $47.5 tax provision, recorded in the first quarter of 1995. This transaction reduced the Company's ownership in each facility to 61 percent. Acquisition On January 31, 1996, the Company purchased all of the common shares of privately held Cressona for a cash cost, including expenses, of $436.5, net of $3.1 of cash acquired. In conjunction with the acquisition, liabilities of $87.4 were acquired. Cressona is a leading manufacturer of extruded aluminum products. The transaction has been accounted for as a purchase and the results of operations of Cressona have been included in the consolidated financial statements since January 31, 1996. The acquisition was financed with cash on hand and $375 of borrowings obtained under available credit facilities. All of these borrowings have been repaid as of September 30, 1996. Pro Forma Information The following summary presents Alumax's unaudited pro forma consolidated net sales, net earnings, and primary earnings per common share for the quarters and nine months ended September 30, 1996 and 1995, respectively, as if the acquisition of Cressona and the sale of the Fabricated Products businesses each occurred on January 1, 1996 and 1995. The pro forma adjustments for the nine months ended September 30, 1996 include the addition of Cressona's operating results for the month of January 1996. Since the acquisition occurred on January 31, 1996, the Company's actual results include Cressona from February 1, 1996 through September 30, 1996. -11- 12
Three Months Ended Nine Months Ended September 30, September 30, -------------------- ---------------------- 1996 1995 1996 1995 -------- -------- -------- --------- Net sales . . . . . . . . . . . . . . . . . . . . . $ 686.2 $ 762.8 $ 2,134.1 $ 2,181.5 Net earnings . . . . . . . . . . . . . . . . . . . . $ 46.2 $ 44.3 $ 220.2 $ 201.3 Primary earnings per common share . . . . . . . . . $ 0.96 $ 0.93 $ 4.67 $ 4.30
The pro forma results are based upon certain assumptions and estimates, which the Company believes are reasonable. The pro forma results do not purport to be indicative of results that actually would have been obtained had these transactions occurred on January 1, 1996 or 1995, nor are they intended to be a projection of future results. The Company is currently in negotiations with Eduard Hueck GmbH & Co. KG ("Hueck") regarding the possible acquisition of privately held Hueck. Hueck is based in Ludenscheid, Germany and is a leading manufacturer of aluminum architectural products in Europe, with annual sales of approximately $230. The negotiations are ongoing and any transaction is dependent upon the execution of a mutually satisfactory definitive agreement, receipt of required governmental and regulatory approvals, and the approvals of the board of directors of Alumax and all selling parties. LIQUIDITY AND CAPITAL RESOURCES Operating Activities Operations provided $155.4 and $137.6 of cash during the first nine months of 1996 and 1995, respectively. Higher cash flows are directly related to working capital reductions (net of effects of the Cressona acquisition and the sale of Fabricated Products) partially offset by lower earnings from operations. Investing Activities Cash used by investing activities was $110.6 for the nine months ended September 30, 1996 compared to $17.2 of cash provided in the first nine months of 1995. As described under "Strategic Transactions", the Company received net cash of $60.5, in connection with strategic transactions during the first nine months of 1996. In addition, during the second quarter of 1996, the Company entered into a joint venture with Yunnan Aluminum Processing Factory in Kunming, China for the annual production of 8,000 to 10,000 tonnes of light gauge aluminum foil. Alumax will invest $38 of cash in the joint venture to develop a continuous cast foil operation. As of September 30, 1996, the Company has invested $4.0 in cash. In the first quarter of 1995, the Company received $147.6 from the sale of a 14 percent interest in each of the Intalco and Eastalco primary aluminum reduction facilities. Capital expenditures were $171.1 during the first nine months of 1996 compared to $131.1 in the first nine months of 1995. On September 30, 1996, the Company, through its subsidiary Alumax Mill Products, Inc., exercised an option to purchase its leased Texarkana rolling mill facility in November 1997 for approximately $97 in cash. Financing Activities Cash used by financing activities was $182.6 and $69.0 in the first nine months of 1996 and 1995, respectively. The Company borrowed $375 under available credit facilities in January 1996 to finance the acquisition of Cressona. During the first nine months of 1996, all of the Cressona acquisition borrowings were repaid. Total debt repayments of $550.6 in the first nine months of 1996 also included the early retirements of $39.3 of Cressona debt acquired and a $90.7 promissory note due in May 1996. At September 30, 1996, the Company's total debt to capital ratio was 30.4 percent, down from 42.3 percent in the first quarter, which is attributable to the aforementioned debt reduction combined with a year-to-date increase in stockholders' equity of $230.6, a 16 percent stockholders' equity increase from December 31, 1995. (See Note 8 to the Financial Statements in the Company's 1995 Annual Report on Form 10-K). -12- 13 Also, $7.0 in dividends were paid to holders of Alumax $4.00 Series A Convertible Preferred Stock in the first nine months of both 1996 and 1995. In April 1996, the Company withdrew its shelf registration with the Securities and Exchange Commission covering the issuance of up to 9.2 million shares of common stock (see Note 13 to the Financial Statements in the Company's 1995 Annual Report on Form 10-K). On November 4, 1996, the Company announced that it will redeem all outstanding shares of the $4.00 Series A Convertible Preferred Stock ("Preferred Stock"), par value $1.00 per share, on December 18, 1996. Each share of the Preferred Stock will be redeemed at a price of $52.40 per share, plus an amount equal to the quarterly dividend accrued on each share through the redemption date. As an alternative to redemption, each share of the Preferred Stock may be converted at the option of the holder into 4.11489 shares of the Company's common stock until the close of business on December 4, 1996. Based on the current market price of Alumax common stock, the Company expects all holders to convert the Preferred Stock into Alumax common stock prior to the close of business on December 4, 1996. As of September 30, 1996, approximately 2.3 million shares of the Preferred Stock were outstanding, which were convertible into 9.6 million common shares. Risk Management The Company utilizes certain financial instruments in connection with its risk management. The risk of loss related to counterparty nonperformance under financial instrument agreements at September 30, 1996 is not significant. The Company enters into forward fixed price arrangements that are required by certain customers and suppliers. The Company may utilize futures contracts which effectively convert forward fixed price arrangements to market prices in order to meet overall strategic objectives. Such contracts covered approximately 105,600 tonnes at September 30, 1996 and mature at various dates through 1999. Gains or losses with respect to these positions are reflected in earnings concurrently with consummation of the underlying fixed price transaction. Periodic value fluctuations of the futures contracts approximately offset the value fluctuations of the underlying fixed price transactions. The Company also may, from time to time, establish a floor selling price for varying quantities of future production, while preserving the opportunity to participate in upward price movements. This may be accomplished by purchasing put options, or by entering into forward sales of primary aluminum and purchases of call options, which together provide the same price protection as purchasing put options, in a manner which correlates with the Company's production and sales of primary aluminum. The strategy may be modified from time to time. At September 30, 1996, the Company's commitments with respect to these financial instruments covered 334,875 tonnes of future production. The Company would have received $9.7 to terminate these contracts at September 30, 1996. Certain of the Company's foreign operating expenditures are denominated in currencies other than the operations' functional currencies, which expose the Company to exchange rate risks. In order to mitigate its exposure to exchange rate risk where these conditions exist, the Company may utilize forward foreign currency contracts. At September 30, 1996, the Company had outstanding $127.0 in forward foreign currency contracts which mature during the remainder of 1996 and 1997. The gains or losses related to these contracts are deferred and included in the measurement of the related foreign currency denominated transactions. If these contracts had been terminated at September 30, 1996, the Company would have received approximately $0.9. The Company's debt instruments and related interest rate hedges are susceptible to market fluctuations based on changes in the cost of borrowing. At September 30, 1996, the fair value of total debt approximated book value. The Lauralco credit facility, which has a variable interest rate, required the Company to establish facilities to effectively limit the interest rate exposure of the commitment. To meet this requirement, the Company has obtained interest rate swaps with a notional amount of $400 through October 26, 2000 and a series of interest rate caps having notional amounts of $75 and $150 through October 28, 1996 and October 29, 1998, -13- 14 respectively, which decline with projected loan balances. The Company would have paid approximately $39.3 to terminate these agreements at September 30, 1996. For further information regarding the Company's risk management, see Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 20 to the Financial Statements in the Company's 1995 Annual Report on Form 10-K. Income Taxes The Internal Revenue Service (the "IRS") has asserted that Alumax and certain of its subsidiaries were improperly included in the 1984, 1985 and 1986 consolidated income tax returns of AMAX Inc. and on that basis has asserted a federal income tax deficiency against Alumax of approximately $129. Interest on the deficiency through September 30, 1996, would be approximately $265. In response to the IRS' notice of deficiency, the Company filed a petition in the United States Tax Court (the "Court") seeking a redetermination in respect of the purported deficiency. The parties have waived their rights to a trial and the matter has been submitted to the Court for decision based upon the pleadings, stipulations, memoranda and other documents submitted, or to be submitted, to the Court by the parties. Payment of the deficiency with interest thereon would provide certain tax benefits to the Company that would offset in part the cost of paying the deficiency and interest. The Company believes that it has adequate reserves so that any unprovided for net deficiency would not have a material adverse effect on the Company's financial condition. Environmental Matters The Company has been named as a defendant or identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws by governmental agencies and private parties at 39 pending waste disposal sites which, in most instances, were owned and operated by third parties. Management periodically evaluates such matters and records or adjusts liability reserves for remediation and other costs and potential damages when expenditures are considered probable and can be reasonably estimated. The Company's ultimate liability in connection with present and future environmental claims will depend on many factors, including its volumetric share of the waste at a given site, the remedial action required, the total cost of remediation and the financial viability and participation of the other entities involved with the site. Based upon current law and information known to the Company concerning the size of the sites known to it, anticipated costs, their years of operation, and the number of other potentially responsible parties, management believes that it has adequate reserves for the Company's probable share of the estimated aggregate liability for the costs of remedial actions and related costs and expenses and that such liability and related costs and expenses should not have a material adverse effect on the financial condition or results of operations of the Company. In addition, the Company establishes reserves for remedial measures required from time to time at its own facilities. Any expenditures for remediation programs it may be required to undertake, either individually or in the aggregate, are not expected to have a material adverse effect on the financial condition or results of operations of the Company. The Company's environmental reserves totaled $27.2 at September 30, 1996 and $22.8 at December 31, 1995 ($27.2 with the inclusion of Cressona). Management does not anticipate that commitments, operating expenses or capital expenditures for environmental compliance through and including the next fiscal year will have a material adverse effect on the Company's financial condition or results of operations. Based on historical trends toward stricter environmental standards, however, it appears likely that the Company will incur additional expenditures to remain in compliance with federal and state environmental laws. -14- 15 Part II. Other Information Item 1. Legal Proceedings STRINGFELLOW In 1983, the United States and the State of California commenced an action under CERCLA in the United States District Court for the Central District of California against the Company and 30 other potentially responsible parties in connection with the Stringfellow disposal site located at Glen Avon, California. In a proceeding in the United States District Court for the Central District of California, it was determined that both the defendants and the State of California are responsible for certain costs associated with the cleanup of the Stringfellow site. The issue of the allocation of liability among the defendants and the State was tried before a Special Master who filed his Findings of Fact, Conclusions of Law and Report and Recommendation of the Special Master Regarding the State Share Fact Finding Hearing on November 30, 1993. On January 23, 1995, the United States District Court entered an order adopting the findings, conclusions and recommendations of the Special Master with certain modifications, which do not adversely impact the Company. The order allocates liability on the basis of two different legal claims, each of which has a different legal standard of apportionment. As to CERCLA claims, the order allocates liability as follows: 65 percent to the State, ten percent to Stringfellow Quarry Company and 25 percent to all other parties (including the Company). As to the claims asserted against the State under state law theories such as negligence and breach of a mandatory duty, the order allocates 100 percent of the liability to the State. Reconsideration or appellate review of the order may be sought by one or more of the parties and the State may assert protection of the Eleventh Amendment to the United States Constitution, which limits suits against states in federal courts. On March 27, 1996, the United States Supreme Court issued its decision in Seminole Tribe of Florida v. Florida, which reversed an earlier Supreme Court decision that had held that Congress had the authority to abrogate protections of the Eleventh Amendment barring certain suits against states in federal courts, including under CERCLA. On July 16, 1996, the State of California filed a motion for reconsideration of the District Court's liability rulings against the State, based upon the Seminole Tribe decision. In that motion, the State contends that the Eleventh Amendment is a jurisdictional bar which cannot be waived through conduct in litigation and that the State has not expressly waived its Eleventh Amendment immunity. Consequently, the State argues that the liability rulings against the State must be reversed or the defendants' counterclaims limited to defensive recoupment. The defendants filed an opposition to that motion on August 2, 1996, which maintains that Seminole Tribe does not alter prior law by recognizing the Eleventh Amendment as a jurisdictional bar nor does the case address the doctrine of defensive recoupment. The opposition also asserts that Seminole Tribe does not affect the question of waiver of Eleventh Amendment immunity by conduct in litigation or the District Court's prior finding that the State waived its Eleventh Amendment immunity through its conduct of the lawsuit. The parties are scheduled to present oral argument to the Special Master on the State's motion on November 13, 1996. Oral argument to the Special Master also has been scheduled for the same date on the defendants' motion that CERCLA liability cannot be imposed on them retroactively, and on the United States' and the defendants' joint motion for entry of a judgment which will permit the parties to appeal rulings in the case to the United States Court of Appeals for the Ninth Circuit. After hearing argument on such motions, the Special Master will submit his recommendations to the District Court for rulings. Based on the present circumstances, the Company does not believe that any liability imposed in connection with the Stringfellow site will have a material adverse effect on the Company's financial condition or results of operations given the nature and extent of its involvement at the site and available reserves. See "Legal Proceedings-- Stringfellow" in the Company's Annual Report on Form 10-K for the year ended December 31, 1995. -15- 16 HAMMONS V. ALCAN, ET AL. Alumax and four other producers of primary aluminum, together with The Aluminum Association, an industry trade association, were served with a summons and complaint in March 1996, alleging violations of California's State antitrust act (the Cartwright Act). The suit was originally filed in the Superior Court for Los Angeles County, but was removed by the defendants to the United States District Court for the Central District of California. Plaintiff alleges that the defendants conspired, together with the United States Government and the governments of several other sovereign nations, to fix the prices of primary aluminum by agreeing to reduce production. The allegations arise from the Memorandum of Understanding Concerning the Aluminum Market ("MOU") negotiated by the United States and other governments in 1993 and 1994, and executed by them in Brussels in 1994, and the actions of the defendants alleged to have been undertaken in accordance with the terms of the MOU. The complaint was brought by a California bicycle manufacturer as a purported class action on behalf of all direct and indirect purchasers of primary aluminum and aluminum products produced during the period January 1, 1994 to March 5, 1996. The complaint seeks injunctive relief and recovery of damages that, when trebled, are alleged to be in excess of $26 billion. Following removal of the action to the District Court, the defendants filed a motion to dismiss. Upon considering that motion, plaintiff's opposition and the defendants' reply, the court by order dated May 28, 1996, converted the motion to dismiss to a motion for summary judgment by the defendant-aluminum producers. In the same order, the court granted The Aluminum Association's motion to dismiss for lack of personal jurisdiction. Following the filing of briefs in support and in opposition to summary judgment, the court granted summary judgment in favor of the defendant-aluminum producers and dismissed the complaint with prejudice by order dated July 1, 1996. The court denied plaintiff's subsequent motion for reconsideration by order entered on July 16, 1996. On July 17, 1996, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit from the United States District Court's orders granting The Aluminum Association's motion to dismiss and the aluminum producers' motion for summary judgment and the order denying the plaintiff's motion for reconsideration. Plaintiff's appeal to the United States Court of Appeals is currently in the process of being briefed. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits
Exhibit Number Description - ------ ----------- 3.01 Alumax Inc. Restated By-Laws (as amended on September 5, 1996). 10.01 Agreement, dated as of June 28, 1996, by and between Minas Penoles, S.A. de C.V. and The Fresnillo Company. 11.01 Calculation of Earnings per Common Share. 27.01 Financial Data Schedule. (for SEC use only)
-16- 17 (b) Information concerning the Current Report on Form 8-K filed by the Company during the quarter ended September 30, 1996 is presented below.
Date of Report Matters Reported - -------------- ---------------- September 25, 1996 The Company reported the sale on September 25, 1996 of certain of its fabricated products businesses in Western Europe and the United States to Euramax International, Ltd. (Items 2 and 7). In addition, the Company and Eduard Hueck GmbH & Co. KG ("Hueck") announced on October 10, 1996 that they have entered into negotiations regarding the possible acquisition of Hueck by the Company (Item 5).
-17- 18 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. Alumax Inc. By /s/ Helen M. Feeney --------------------------------------- Helen M. Feeney Vice President and Corporate Secretary By /s/ Michael T. Vollkommer --------------------------------------- Michael T. Vollkommer Vice President and Controller Date: November 12, 1996 -18- 19 EXHIBIT INDEX
Exhibit Number Description - ------ ----------- 3.01 Alumax Inc. Restated By-Laws (as amended on September 5, 1996). 10.01 Agreement, dated as of June 28, 1996, by and between Minas Penoles, S.A. de C.V. and The Fresnillo Company. 11.01 Calculation of Earnings per Common Share. 27.01 Financial Data Schedule. (for SEC use only)
-19- EX-3.01 2 RESTATED BY-LAWS 1 EXHIBIT 3.01 RESTATED BY-LAWS OF ALUMAX INC. AS AMENDED ON SEPTEMBER 5, 1996 ARTICLE I Stockholders Section 1.1. Annual Meetings. An annual meeting of stockholders shall be held for the election of Directors at such date, time and place either within or without the State of Delaware as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. Section 1.2. Special Meetings. Special meetings of stockholders may only be called pursuant to a resolution approved by a majority of the Board of Directors or by the Chairman of the Board, to be held at such date, time and place either within or without the State of Delaware as may be stated in the notice of the meeting. Stockholders are not permitted to call a special meeting or to require the Board of Directors to call a special meeting of stockholders. Section 1.3. Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Section 1.4. Adjournments. Any meeting of stockholders, annual or special, may be adjourned from time to time, to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of 2 the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 1.5. Quorum. At each meeting of stockholders, except where otherwise provided by law or the Restated Certificate of Incorporation or these By-laws, the holders of a majority of the outstanding shares of stock entitled to vote on a matter at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, where a separate vote by class or classes is required for any matter, the holders of a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum to take action with respect to that vote on that matter. Two or more classes or series of stock shall be considered a single class if the holders thereof are entitled to vote together as a single class at the meeting. In the absence of a quorum of the holders of any class of stock entitled to vote on a matter, the holders of such class so present or represented may, by majority vote, adjourn the meeting of such class from time to time in the manner provided by Section 1.4 of these By-laws until a quorum of such class shall be so present or represented. Shares of its own capital stock belonging on the record date for the meeting to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of Directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. Section 1.6. Organization. Meetings of stockholders shall be presided over by the Chairman of the Board of Directors, if any, or in the absence of the Chairman of the Board of Directors by the President, or in the absence of the President by a Vice President, or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting. The order of business at each such meeting shall be as determined by the chairman of the meeting. The chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting, including, without limitation, the -2- 3 establishment of procedures for the maintenance of order and safety, limitations on the time allotted to questions or comments on the affairs of the Corporation, restrictions on entry to such meeting after the time prescribed for the commencement thereof and the opening and closing of the voting polls. Section 1.7. Inspectors. Prior to any meeting of stockholders, the Board of Directors or the President shall appoint one or more inspectors to act at such meeting and make a written report thereof and may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at the meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall ascertain the number of shares outstanding and the voting power of each, determine the shares represented at the meeting and the validity of proxies and ballots, count all votes and ballots, determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors and certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons to assist them in the performance of their duties. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxy or vote, nor any revocation thereof or change thereto, shall be accepted by the inspectors after the closing of the polls. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted therewith, any information provided by a stockholder who submits a proxy by telegram, cablegram or other electronic transmission from which it can be determined that the proxy was authorized by the stockholder, ballots and the regular books and records of the corporation, and they may also consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for such purpose, they shall, at the time they make their certification, specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by -3- 4 which the information was obtained and the basis for the inspectors' belief that such information is accurate and reliable. Section 1.8. Voting; Proxies. Unless otherwise provided in the Restated Certificate of Incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. If the Restated Certificate of Incorporation provides for more or less than one vote for any share on any matter, every reference in these By-laws to a majority or other proportion of stock shall refer to such majority or other proportion of the votes of such stock. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power, regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at meetings of stockholders need not be by written ballot unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or represented by proxy at such meeting shall so determine. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of Directors. In all other matters, unless otherwise provided by law or by the Restated Certificate of Incorporation or these By-laws, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class or classes, except as otherwise provided by law or by the Restated Certificate of Incorporation or these By-laws. -4- 5 Section 1.9. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. Section 1.10. List of Stockholders Entitled to Vote. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. -5- 6 Section 1.11. Advance Notice of Stockholder Proposals. At any annual or special meeting of stockholders, proposals by stockholders and persons nominated for election as Directors by stockholders shall be considered only if proper for action at the meeting and if advance notice thereof has been timely given as provided herein and such proposals or nominations are otherwise proper for consideration under applicable law and the Restated Certificate of Incorporation and By-laws of the Corporation. Notice of any proposal to be presented by any stockholder or of the name of any person to be nominated by any stockholder for election as a Director of the Corporation at any meeting of stockholders shall be delivered to the Secretary of the Corporation at its principal executive office not less than sixty (60) nor more than ninety (90) days prior to the date of the meeting; provided, however, that if the date of the meeting is first publicly announced or disclosed (in a public filing or otherwise) less than seventy (70) days prior to the date of the meeting, such advance notice shall be given not more than ten (10) days after such date is first so announced or disclosed. Public notice shall be deemed to have been given more than seventy (70) days in advance of the annual meeting if the Corporation shall have previously disclosed, in these By-laws or otherwise, that the annual meeting in each year is to be held on a determinable date, unless and until the Board of Directors determines to hold the meeting on a different date. Any stockholder who gives notice of any such proposal shall deliver therewith the text of the proposal to be presented and a brief written statement of the reasons why such stockholder favors the proposal and setting forth such stockholder's name and address, the number and class of all shares of each class of stock of the Corporation beneficially owned by such stockholder and any material interest of such stockholder in the proposal (other than as a stockholder). Any stockholder desiring to nominate any person for election as a Director of the Corporation shall deliver with such notice a statement in writing setting forth the name of the person to be nominated, the number and class of all shares of each class of stock of the Corporation beneficially owned by such person, the information regarding such person required by paragraphs (a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and Exchange Commission (or the corresponding provisions of any regulation subsequently adopted by the Securities and Exchange Commission applicable to the Corporation), such person's signed consent to serve as a Director of the Corporation if elected, such stockholder's name and address and the number and class of all shares of each class of stock of the Corporation beneficially owned by such stockholder. As used herein, shares "beneficially owned" shall mean all shares as to which such person, together with such person's affiliates and associates (as defined in Rule -6- 7 12b-2 under the Securities Exchange Act of 1934), may be deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as well as all shares as to which such person, together with such person's affiliates and associates, has the right to become the beneficial owner pursuant to any agreement or understanding, or upon the exercise of warrants, options or rights to convert or exchange (whether such rights are exercisable immediately or only after the passage of time or the occurrence of conditions). The person presiding at the meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall determine whether a proposal is proper for action at the meeting and whether such notice has been duly given and shall direct that proposals and nominees not be considered if such notice has not been given or the proposal is otherwise not proper for action at the meeting. ARTICLE II Board of Directors Section 2.1. Powers; Number; Qualifications. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the Restated Certificate of Incorporation. The Board of Directors shall consist of three (3) or more members, the number thereof to be determined from time to time by the Board of Directors. Directors need not be stockholders. Section 2.2. Election; Term of Office; Resignation; Removal; Vacancies. The Directors of the Corporation shall be divided into three classes, as nearly equal in number as reasonably possible, as determined by the Board of Directors, with the initial term of office of the first class of such Directors to expire at the first annual meeting of stockholders thereafter, the initial term of office of the second class of such Directors to expire at the second annual meeting of stockholders thereafter and the initial term of office of the third class of such Directors to expire at the third annual meeting thereafter, with each class of Directors to hold office until their successors have been duly elected and qualified. At each annual meeting of stockholders following such initial classification and election, Directors elected to succeed the Directors whose terms expire at such annual meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders in the third year following the year of their election and until their successors have been duly elected and qualified. If the number of Directors is changed, any increase or decrease shall -7- 8 be apportioned among the classes so as to maintain or attain a number of Directors in each class as nearly equal as reasonably possible, but no decrease in the number of Directors may shorten the term of any incumbent Director. Any Director may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. Any Director or the entire Board of Directors may be removed, with cause in accordance with the provisions of the Restated Certificate of Incorporation, by the holders of a majority of the shares then entitled to vote at an election of Directors. Whenever the holders of any class or series of stock are entitled to elect one or more Directors by the Restated Certificate of Incorporation, the provisions of the preceding sentence shall apply to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Unless otherwise provided in the Restated Certificate of Incorporation or these By-laws, vacancies and newly created directorships resulting from any increase in the authorized number of Directors elected by all of the stockholders having the right to vote as a single class or from any other cause shall be filled by a majority of the Directors then in office, although less than a quorum, or by the sole remaining Director. Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more Directors by the Restated Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the Directors elected by such class or classes or series thereof then in office, or by the sole remaining Director so elected. Any Director elected or appointed to fill a vacancy shall hold office until the next election of the class of Directors of the Director which such Director replaced, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Section 2.3. Regular Meetings. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of Directors may from time to time determine, and if so determined notice thereof need not be given. Section 2.4. Special Meetings. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman of the Board of Directors, if any, by the President or by a majority of the Directors. Reasonable notice thereof shall be given by the person or persons calling the meeting. -8- 9 Section 2.5. Participation in Meetings by Conference Telephone Permitted. Unless otherwise restricted by the Restated Certificate of Incorporation or these By-laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this By-law shall constitute presence in person at such meeting. Section 2.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors a majority of the entire Board of Directors shall constitute a quorum for the transaction of business. The vote of a majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the Restated Certificate of Incorporation or these By-laws shall require a vote of a greater number. In case at any meeting of the Board of Directors a quorum shall not be present, the members of the Board of Directors present may adjourn the meeting from time to time until a quorum shall be present. Section 2.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairman of the Board of Directors, if any, or in the absence of the Chairman of the Board of Directors by the President, if a member of the Board of Directors, or if the President is not a member of the Board of Directors or in the President's absence by a chairman chosen at the meeting. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting, but in the absence of the Secretary and any Assistant Secretary, the chairman of the meeting may appoint any person to act as secretary of the meeting. Section 2.8. Action by Directors Without a Meeting. Unless otherwise restricted by the Restated Certificate of Incorporation or these By-laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board of Directors or of such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee. Section 2.9. Compensation of Directors. The stockholders or the Board of Directors may from time to time by resolution fix the fees or other compensation of the Directors for services as such to the Corporation, including attendance at meetings of the Board of Directors or committees of the Board. -9- 10 ARTICLE III Committees Section 3.1. Executive Committee. The Board of Directors shall designate an Executive Committee to consist of three or more Directors. The Board of Directors shall designate one of the members of the Executive Committee as Chairman of the Executive Committee. The Executive Committee shall have and may exercise, so far as may be permitted by law, all of the powers and authority of the Board in the management of the business and affairs of the Corporation during the intervals between meetings of the Board of Directors, and may authorize the seal of the Corporation to be affixed to or imprinted on all papers which may require it. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve, the Executive Committee. The Executive Committee may hold meetings and make rules for the conduct of its business and appoint such committees and assistants as it shall from time to time deem necessary. A majority of the members of the Executive Committee shall constitute a quorum. The Executive Committee shall keep minutes of its meetings, in which minutes shall be recorded all action taken, and all action of the Executive Committee shall be reported to the Board at the meeting next succeeding such action. The Executive Committee shall also be authorized and empowered to authorize the issue of securities or other instruments of the Corporation including, but not limited to, Common Stock, par value $0.01 per share, of the Corporation. Section 3.2. Finance Committee. The Board of Directors shall designate a Finance Committee to consist of three or more Directors. The Board of Directors shall designate one of the members of the Finance Committee as Chairman of the Finance Committee. The Finance Committee shall have the power to authorize the investment from time to time of the liquid or working assets of the Corporation in readily marketable securities not purchased as a permanent or semi-permanent investment as a part of the Corporation's operations, and to authorize the sale of any such investment. The Board shall have power at any time to fill vacancies in, to change the membership of, or to dissolve, the Finance Committee, and the Finance Committee shall not have power to fill any vacancies in such Committee. The Finance Committee may hold meetings and make rules for the conduct of its business and appoint such committees as it shall from time to time deem necessary. The Finance Committee shall elect its Secretary and may designate such other assistants as it shall from time to time deem necessary. A majority of the members -10- 11 of the Finance Committee shall constitute a quorum. The Finance Committee shall keep minutes of its meetings, in which minutes shall be recorded all action taken, and all action of the Finance Committee shall be reported to the Board at the meeting next succeeding such action. Section 3.3. Audit Committee. The Board of Directors shall designate an Audit Committee to consist of three or more Directors. No Director who is also an officer shall be a member of the Audit Committee. The Board of Directors shall designate one of the members of the Audit Committee as Chairman of the Audit Committee. The Audit Committee shall recommend to the Board a firm of independent public accountants, which shall conduct the annual audit of the accounts of the Corporation, and the nature and scope of the audit, which shall be in accordance with accepted accounting practices, and it shall furnish the Board with a written report at least annually containing its said recommendations and any comments it may desire to make about the financial organization or accounting practices of the Corporation and the qualifications or performance of its past or proposed auditing firm. The Audit Committee shall recommend to the Board policies with regard to avoidance of employee conflicts of interest and shall review the administration of such policies on a regular basis. The Board shall have power at any time to fill vacancies in, to change the membership of, or to dissolve, the Audit Committee, and the Audit Committee shall not have power to fill any vacancies in such Committee. The Audit Committee may hold meetings and make rules for the conduct of its business. The Audit Committee shall elect its Secretary and may designate such other assistants as it shall from time to time deem necessary. A majority of the members of the Audit Committee shall constitute a quorum. The Audit Committee shall keep minutes of its meetings, in which minutes shall be recorded all action taken and all action of the Audit Committee shall be reported to the Board at the meeting next succeeding such action. Section 3.4. Nominating Committee. The Board of Directors shall designate a Nominating Committee to consist of three or more Directors. The Board of Directors shall designate one of the members of the Nominating Committee who is not an officer of the Corporation as Chairman of the Committee. The Nominating Committee shall recommend to the Board prospective members of the Board of Directors. In fulfilling its duties, the Nominating Committee shall consider suggestions from all sources it deems appropriate, including stockholders. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve, the Nominating Committee, and the Nominating Committee shall not have the power to fill any vacancies in -11- 12 such Committee. The Nominating Committee may hold meetings and make rules for the conduct of its business and appoint such committees as it may from time to time deem necessary. The Nominating Committee shall elect its Secretary and may designate such other assistants as it shall from time to time deem necessary. A majority of the members of the Nominating Committee shall constitute a quorum. The Nominating Committee shall keep minutes of its meetings, in which minutes shall be recorded all action taken, and all action of the Nominating Committee shall be reported to the Board at the meeting next succeeding such action. Section 3.5. Human Resources and Compensation Committee. The Board of Directors shall designate a Human Resources and Compensation Committee to consist of three or more Directors. No Director who is an officer of the Corporation or its subsidiaries or who is otherwise employed by, or a consultant to, the Corporation or its subsidiaries shall be a member of the Human Resources and Compensation Committee. The Board of Directors shall designate one of the members of the Human Resources and Compensation Committee as Chairman of such Committee. The Human Resources and Compensation Committee shall (i) establish, implement and monitor the Corporation's program for executive development, succession planning and compensation of Executive Officers and other senior managerial employees of the Corporation and (ii) perform various administrative tasks with respect to certain employee benefit matters. The Human Resources and Compensation Committee shall also be authorized and empowered to authorize the issue of securities or other instruments of the Corporation including, but not limited to, Common Stock, par value $0.01 per share, of the Corporation in connection with any grant, award or other transaction under or in connection with an employee benefit plan maintained or sponsored by the Corporation, its subsidiaries or affiliated companies or under any other compensatory contract, agreement or arrangement to which the Corporation, its subsidiaries or affiliated companies is a party. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve, the Human Resources and Compensation Committee, and the Human Resources and Compensation Committee shall not have the power to fill any vacancies in such Committee. The Human Resources and Compensation Committee may hold meetings and make rules for the conduct of its business. The Human Resources and Compensation Committee shall elect its Secretary and may designate such other assistants as it shall from time to time deem necessary. A majority of the members of the Human Resources and Compensation Committee shall constitute a quorum. The Human Resources and Compensation Committee shall keep minutes of its meetings, in which minutes shall be -12- 13 recorded all action taken, and all action of the Human Resources and Compensation Committee shall be reported to the Board at the meeting next succeeding such action. Section 3.6. Other Committees. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more other committees, each committee to consist of one or more of the Directors of the Corporation, which shall and may exercise, so far as may be permitted by law, such powers as shall be conferred or authorized by the resolution appointing them. A majority of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board shall have power at any time to change the membership of any such committee, to fill vacancies, and to discharge any such committee. Section 3.7. Telephonic Participation in Meetings. Unless otherwise restricted by the Restated Certificate of Incorporation of the Corporation, or these By-laws, any member of any committee designated by the Board may participate in a meeting of such committee through conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this By-law shall constitute presence in person at such meeting. Section 3.8. Action by Written Consent. Unless otherwise restricted by the Restated Certificate of Incorporation of the Corporation, or by these By-laws, any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if all members of such committee consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of such committee. ARTICLE IV Officers Section 4.1. Officers; Election. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a President and a Secretary, and it may, if it so determines, elect from among its members a Chairman of the Board of Directors. The Board of Directors may also elect one or more Vice Presidents, one or more Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers and such other officers as the Board of Directors may deem desirable or appropriate and may give any of them such further -13- 14 designations or alternate titles as it considers desirable. Any number of offices may be held by the same person unless the Restated Certificate of Incorporation or these By-laws otherwise provide. Section 4.2. Term of Office; Resignation; Removal; Vacancies. Unless otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board of Directors or to the President or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein no acceptance of such resignation shall be necessary to make it effective. The Board of Directors may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation, but the election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board of Directors at any regular or special meeting or by unanimous written consent. Section 4.3. Powers and Duties. The officers of the Corporation shall have such powers and duties in the management of the Corporation as shall be stated in these By-laws or in a resolution of the Board of Directors which is not inconsistent with these By-laws and, to the extent not so stated, as generally pertain to their respective offices, subject to the control of the Board of Directors. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose. The Board of Directors may require any officer, agent or employee to give security for the faithful performance of his or her duties. Section 4.4. Voting Upon Stock in Other Corporations. Unless otherwise ordered by the Board of Directors, the Chairman of the Board or the President or any Executive Vice President or any Vice President or the Secretary or the Treasurer shall have full power and authority on behalf of the Corporation to execute and deliver a proxy or proxies for and/or to attend and to act and to vote at any meetings of stockholders of any corporation in which the Corporation may hold stock, and at any such meeting shall possess and may exercise any and all rights and powers incident to the ownership of such stock and which, as the owner thereof, the Corporation might have possessed and -14- 15 exercised if present. The Board of Directors, by resolution, from time to time, may confer like powers upon any other person or persons. ARTICLE V Stock Section 5.1. Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board of Directors, if any, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares of stock in the Corporation owned by such holder. If such certificate is manually signed by one officer or manually countersigned by a transfer agent or by a registrar, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. If the Corporation is authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided by law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. -15- 16 Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. ARTICLE VI Miscellaneous Section 6.1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 6.2. Seal. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Section 6.3. Waiver of Notice of Meetings of Stockholders, Directors and Committees. Whenever notice is required to be given by law or under any provision of the Restated Certificate of Incorporation or these By-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, Directors or members of a committee of Directors need be specified in any written waiver of notice unless so required by the Restated Certificate of Incorporation or these By-laws. Section 6.4. Indemnification of Directors, Officers and Employees. The Corporation shall indemnify to the full extent permitted by law any person made or threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person or such person's testator or intestate is or was a Director, officer or employee of the Corporation -16- 17 or serves or served at the request of the Corporation any other enterprise as a Director, officer or employee. Expenses, including attorneys' fees, incurred by any such person in defending any such action, suit or proceeding shall be paid or reimbursed by the Corporation promptly upon receipt by it of an undertaking of such person to repay such expenses if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation. The rights provided to any person by this By-law shall be enforceable against the Corporation by such person who shall be presumed to have relied upon it in serving or continuing to serve as a Director, officer or employee as provided above. For purposes of this By-law, the term "Corporation" shall include any predecessor of the Corporation and any constituent corporation (including any constituent of a constituent) absorbed by the Corporation in a consolidation or merger; the term "other enterprise" shall include any corporation, partnership, joint venture, trust or employee benefit plan; service "at the request of the Corporation" shall include service as a Director, officer or employee of the Corporation which imposes duties on, or involves services by, such Director, officer or employee with respect to an employee benefit plan, its participants or beneficiaries; any excise taxes assessed on a person with respect to an employee benefit plan shall be deemed to be indemnifiable expenses; and action by a person with respect to an employee benefit plan which such person reasonably believes to be in the interest of the participants and beneficiaries of such plan shall be deemed to be action not opposed to the best interests of the Corporation. The indemnification and payment of expenses provided by, or granted pursuant to, this Section 6.4 shall not be deemed exclusive of any other rights to which those seeking indemnification or payment of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Anything in these By-laws to the contrary notwithstanding, no elimination of this Section 6.4, and no amendment of this Section 6.4 adversely affecting the right of any person to indemnification hereunder, shall be effective until the 60th day following notice to such person of such action, and no elimination of or amendment to this Section 6.4 shall deprive any person of his or her rights hereunder arising out of alleged or actual events or acts occurring prior to such 60th day or actual or alleged failures to act prior to such 60th day. -17- 18 The Corporation shall not, except by elimination or amendment of this Section 6.4 in a manner consistent with the preceding paragraph, take any corporate action or enter into any agreement which prohibits, or otherwise limits the rights of any person to, indemnification in accordance with the provisions of this Section 6.4. The indemnification of any person provided by this Section 6.4 shall continue after such person has ceased to be a Director, officer or employee of the Corporation and shall inure to the benefit of such person's heirs, executors, administrators and legal representatives. Section 6.5. Interested Directors; Quorum. 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 her or their votes are counted for such purpose, if: (1) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested Directors, even though the disinterested Directors be less than a quorum; or (2) the material facts as to his or her relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the stockholders. Common or interested Directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. Section 6.6. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, microphotographs or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. -18- 19 Section 6.7. Amendment of By-laws. These By-laws may be amended or repealed, and new By-laws adopted, by the Board of Directors, but the stockholders entitled to vote may adopt additional By-laws and may amend or repeal any By-law whether or not adopted by them. -19- EX-10.01 3 AGREEMENT 1 EXHIBIT 10.01 THIS AGREEMENT ENTERED INTO AS OF JUNE 28, 1996, BY AND BETWEEN MINAS PENOLES, S.A. DE C.V., A COMPANY INCORPORATED UNDER THE LAWS OF THE UNITED MEXICAN STATES (HEREINAFTER "PENOLES"); AND THE FRESNILLO COMPANY, A COMPANY INCORPORATED UNDER THE LAWS OF THE STATE OF NEW YORK, U.S.A. (HEREINAFTER "TFC"). W I T N E S S E T H: WHEREAS, TFC is the owner of the fully issued, outstanding and non-assessable shares of the capital stock set forth in Schedule "A" attached hereto (hereinafter the "Shares") of Compania Fresnillo, S.A. de C.V., Compania Minera Las Torres, S.A. de C.V., Minera La Encantada, S.A. de C.V., Minera Proano, S.A. de C.V., Fresnillo Servicios, S.A. de C.V., and Fresnillo Exploraciones, S.A. de C.V. (collectively the "Companies"); WHEREAS, TFC wishes to sell to PENOLES the Shares, including any interests in exploration properties and projects owned and/or controlled by any of the Companies; and WHEREAS, PENOLES wishes to acquire and purchase the Shares. NOW, THEREFORE, in consideration of the mutual promises and covenants herein set forth, the parties hereto agree as follows: 1.- SALE OF SHARES TFC hereby agrees to sell and transfer to PENOLES and PENOLES agrees to purchase and acquire all of the Shares, including any exploration properties and projects owned and/or controlled by any of the Companies, free and clear of any lien or encumbrance, for an aggregate purchase price of One Hundred Thirty Nine Million Nine Hundred Fifty One Thousand Two Hundred Forty U.S. Dollars (US$139,951,240) less applicable Mexican withholding income tax of Twenty Two Million Seven Hundred Seventy Thousand One Hundred Seventy Four and 80/100 U.S. dollars (US$22,770,174.80), (the "Purchase Price"), payable at the closing to be held at the offices of Sullivan & Cromwell, 125 Broad Street, New York, New York at 11:00 a.m. on July 1, 1996. The sales shall be effective as of 12:00 noon on June 30, 1996. 2.- CLOSING OF THE SALE OF SHARES On the closing of the sale of the Shares: (a) PENOLES shall wire transfer to TFC at such bank account in New York, New York as TFC designates the Purchase Price in immediately available funds; and (b) TFC shall deliver to PENOLES (i) the Shares, duly endorsed or such other documentation of transfer as the parties hereto may agree; (ii) a copy of a certificate issued 1 2 by the appropriate authorities of the State of New York confirming that TFC is in "good standing" to the extent that concept is recognized; (iii) a Certificate of the Secretary of TFC confirming that TFC is a resident of the United States with Federal Employer Identification Number 13-5593662 (TFC shall deliver a Certificate of Residency, Form 6166, upon receipt from the United States Internal Revenue Service), and (iv) a Certificate of the Secretary of TFC certifying that TFC is entitled to relief under the Convention between the Government of the United Mexican States and the Government of the United States of America for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Protocol (the "Convention") because it falls under the provisions of paragraph 1(d) or 1(f) of Article 17 of the Convention. 3.- UNDERTAKINGS BY TFC TFC hereby undertakes to (i) designate a representative resident in Mexico for tax purposes and to notify the tax authorities of said designation within 15 days as of the designation as provided in Article 160 of the Mexican Income Tax Law and to file such returns as are required under said Mexican Income Tax Law, and (ii) provide PENOLES a copy of said designation, notice and returns filed for the sale of the shares of the capital stock of Fresnillo Servicios, S.A. de C.V. and Fresnillo Exploraciones, S.A. de C.V. and to provide PENOLES the documents listed in Section 2(b)(ii), (iii) and (iv) for the sale of the shares of the capital stock of Compania Minera Las Torres, S.A. de C.V. and Minera La Encantada, S.A. de C.V., in order for PENOLES not to withhold any Mexican income tax pursuant to the Convention. 4.- UNDERTAKINGS BY PENOLES PENOLES hereby undertakes to: (a) Cause the Companies to cooperate fully with TFC, its officers, representatives and advisors, providing such information, documents and access to each of the Companies' accounting, tax, financial and corporate records as may be required by TFC for the determination of TFC's tax cost of the Shares in order for TFC to define any Mexican income tax applicable to the sale and purchase of the Shares as provided in Section 3(i) above; (b) Give notice to Mexico's Federal Competition Commission as required under Mexico's Federal Economic Competition Law with respect to the purchase of the shares of capital stock of Compania Fresnillo, S.A. de C.V.: (c) Withhold the applicable 20% Mexican income tax from the portion of the Purchase Price applicable to the sale of the shares of the capital stock of Compania Fresnillo, S.A. de C.V. and Minera Proano, S.A. de C.V., pay it to the appropriate Mexican tax authorities and to provide a copy of the corresponding tax return to TFC; 2 3 (d) Cause each of the Companies to hold shareholders meetings within 30 calendar days following the closing, designating new Directors and their respective Alternates in lieu of the Directors and Alternates designated by TFC and releasing and indemnifying such TFC designees from any liability they may have incurred during their tenure; (e) Give notice within 30 calendar days following the closing, to each of the Companies of the acquisition of the Shares so that PENOLES becomes the shareholder of record of said Shares; and (f) Cause each of the Companies to give notice within 30 calendar days following the closing, to the Mexican Foreign Investment Registry and the Public Registry of Mining of the acquisition of the Shares. 5.- RELEASE AND INDEMNIFICATION PENOLES shall and shall cause each of the Companies to jointly and severally indemnify and save harmless TFC and its stockholder Alumax Inc., and their respective directors, officers, employees, agents, affiliates, successors, and assigns as well as their representatives on the Boards of Directors of the Companies from any and all actions, claims, demands or causes of action and any and all costs, expenses, damages, losses, or liabilities, whether contingent or otherwise, whatsoever relating in any way to the Companies, including, without limitation, registration and recordal fees, exploration costs, development costs, environmental claims, labor claims, taxes or royalty payments. 6.- SURVIVAL OF OBLIGATIONS All obligations of each of the parties hereto in Sections 3, 4 and 5 above shall survive the closing and continue indefinitely. 7.- NOTICES Unless otherwise provided herein, any notice or communication to any party hereto may be given by delivering the same by hand to a representative of such party or by cable or telecopier or by registered, postage prepaid mail, addressed as follows: (a) If to PENOLES: Minas Penoles, S.A. de C.V. Rio de la Plata 48, 15th Floor Col. Cuauhtemoc 06500 Mexico, D.F. Att'n: Jamie Lomelin, President Telecopier No. (525) 231-3569 3 4 (b) If to TFC: The Fresnillo Company c/o Alumax Inc. 5655 Peachtree Parkway Norcross, Georgia 30092-2812 Att'n: Vice President and General Counsel Telecopier No. (770)246-6769 or to such other address as the parties may from time to time designate for themselves in writing and any such notice, so cabled, telecopied or mailed shall be deemed to have been made and received at the latest on the business day following the cabling or telecopying, or on the fifth business day following the mailing thereof. 8.- EXPENSES Each party hereto shall be responsible for its own costs and expenses, including legal, administrative and tax costs as well as travel expenses. 9.- INUREMENT This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns. 10.- ARBITRATION In the event of TFC and PENOLES being unable to resolve any dispute under this Agreement, it shall be resolved through binding arbitration. Either party may initiate resolution of such dispute through binding arbitration, by giving written notice of such decision to the other party. Such notice shall identify the arbitrator nominated by such party and the other party shall have twenty days to nominate a second arbitrator. Within twenty days after the nomination of the second arbitrator by the party receiving the election to arbitrate or by the American Arbitration Association, as hereinafter provided, the two arbitrators shall jointly nominate a third arbitrator to act as chairman. In the event of being unable to agree on such an arbitrator, TFC and PENOLES shall proceed to the American Arbitration Association for the nomination of this arbitrator. If either of TFC or PENOLES fails to nominate its own arbitrator the said American Arbitration Association shall do so at the request of the other party. To the extent not otherwise provided in this Section, the arbitration shall be conducted in accordance with the rules of International Arbitration of the American Arbitration Association. The arbitration proceedings will take place in New York, New York in the English language. All costs and expenses of any such arbitration shall be borne by the parties as determined by the arbitrators. Arbitrators need not be nationals of countries other than the United States or Mexico. The arbitrators shall interpret and enforce this Agreement to the fullest extent possible in accordance with its terms but if a dispute cannot be resolved by application of that standard, they may decide ex aequo et bono. A 4 5 judgment upon the award rendered may be entered into any court of competent jurisdiction or application may be made to such court for a judicial acceptance of the award or an order of enforcement, as the case may be. 11.- SECTION HEADINGS Section headings are inserted for the sake of convenience only and shall not be used in construing or interpreting this Agreement. 12.- GOVERNING LAW AND INTERPRETATION This Agreement shall be governed and interpreted in accordance with the internal laws of the State of New York, United States of America, without regard to choice of law rules as if this Agreement was executed and performance hereunder was entirely within the State of New York. One or more specific agreements may be executed by and between TFC and PENOLES in respect of the sale of the shares of the capital stock of one or more of the Companies. In the event that the terms and conditions of any such separate agreement is inconsistent or conflicts with the terms and conditions of this Agreement, the terms and conditions of this Agreement shall prevail and govern the transaction or issue. 13.- ENTIRE AGREEMENT This Agreement sets forth the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and cancels any and all prior agreements and understandings among the parties, express or implied, oral or in writing. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written. MINAS PENOLES, S.A. DE C.V. Per: /s/ Jaime Lomelin --------------------------- Name: Jaime Lomelin Title: President THE FRESNILLO COMPANY Per: /s/ R.P. Wolf --------------------------- Name: R.P. Wolf Title: Vice-President 5 6 SCHEDULE A
COMPANY NUMBER OF SHARES SERIES % - ------- ---------------- ------ - Compania Fresnillo, S.A. de C.V. 1,840,200 B 40.0 Compania Minera Las Torres, S.A. de C.V. 14,100 B 14.10 Minera La Encantada, S.A. de C.V. 14,100 B 14.10 Minera Proano, S.A. de C.V. 684 B 0.040592 Fresnillo Servicios, S.A. de C.V. 400,400 B 40.0 Fresnillo Exploraciones, S.A. de C.V. 1,041,600 B 40.0
6 EX-11.01 4 CALCULATION OF EARNINGS PER COMMON SHARE 1 EXHIBIT 11.01 ALUMAX INC. CALCULATION OF EARNINGS PER COMMON SHARE (In Millions, Except Per Share Amounts)
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- Primary earnings per common share 1. Net earnings ....................................... $52.4 $43.0 $230.9 $192.6 2. Deduct -- Series A Convertible Preferred dividends .............................. (2.3) (2.3) (7.0) (7.0) ----- ----- ------ ------ 3. Earnings applicable to common shares ............... $50.1 $40.7 $223.9 $185.6 ===== ===== ====== ====== 4. Average primary shares outstanding ................. 45.6 45.4 45.6 45.2 ===== ===== ====== ====== 5. Primary earnings per common share (line 3 divided by line 4) ....................... $1.10 $ .90 $ 4.91 $ 4.11 ===== ===== ====== ====== Fully diluted earnings per common share 6. Earnings applicable to common shares ............... $50.1 $40.7 $223.9 $185.6 7. Add -- Series A Convertible Preferred dividends .... (2.3) (2.3) (7.0) (7.0) ----- ----- ------ ------ 8. Earnings applicable to common shares ............... $52.4 $43.0 $230.9 $192.6 ===== ===== ====== ====== 9. Average fully diluted shares outstanding ........... 55.2 55.0 55.2 54.8 ===== ===== ====== ====== 10. Fully diluted earnings per common share (line 8 divided by line 9) ....................... $0.95 $ .78 $ 4.18 $ 3.51 ===== ===== ====== ======
EX-27.1 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONDENSED FINANCIAL STATEMENTS OF ALUMAX INC. AT SEPTEMBER 30, 1996 AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 9-MOS DEC-31-1996 SEP-30-1996 68 0 470 18 524 1,165 3,019 1,016 3,343 499 674 0 2 0 1,627 3,343 2,463 2,463 1,970 2,279 0 5 50 390 159 231 0 0 0 231 4.91 4.18
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