FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1994
Commission File No. 0-753
PENN VIRGINIA CORPORATION
(exact name of registrant as specified in its charter)
VIRGINIA 23-1184320
(State or other jurisdiction of (I.R.S. Employer's
incorporation or organization) Identification No.)
800 The Bellevue, 200 South Broad Street, Philadelphia, PA 19102
(Address of principal executive offices) (Zip Code)
(215) 545-6600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1994
Common Stock, $6.25 par value 4,279,540 Shares
<PAGE>
<TABLE>
PENN VIRGINIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months
Ended March 31
<CAPTION>
1994 1993
(In thousands, except
per share data)
<S> <C> <C>
Operating revenues:
Sales $ 121 $ 123
Coal royalties 3,528 3,143
Oil and gas sales and royalties 4,341 4,020
Dividends 577 541
Other income, net 578 371
Total 9,145 8,198
Expenses:
Cost of sales 640 641
Selling, general and administrative 1,682 1,605
Exploration and development 69 243
Depreciation, depletion and amortization 1,551 1,365
Taxes other than on income 409 433
Interest 454 481
Total 4,805 4,768
Income from operations 4,340 3,430
Income taxes 1,100 832
Net income $ 3,240 $ 2,598
Income per common share (based on 4,279,540
weighted average shares outstanding in 1994
and 1993): $ .76 $ .61
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PENN VIRGINIA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
(UNAUDITED)
March 31, 1994 December 31,1993
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 23,342 $ 23,869
Receivables 3,069 3,880
Current portion of long-term notes receivable 3,571 3,571
Inventory 552 438
Current deferred tax benefit 669 669
Other 411 514
Total current assets 31,614 32,941
Investments 87,498 94,562
Long-term notes receivable, net of current portion 11,120 11,841
Property, plant and equipment (net) 73,480 74,093
Other assets 813 822
Total assets $ 204,525 $ 214,259
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Current installments on long-term debt $ 7,625 $ 7,625
Accounts payable 1,643 4,456
Accrued expenses 4,977 4,535
Deferred income 210 214
Taxes on income 100 587
Total current liabilities 14,555 17,417
Other liabilities 7,578 7,669
Deferred taxes 32,209 34,821
Long-term debt, net of current installments 15,525 16,575
Shareholders' Equity
Preferred stock of $100 par value -
authorized 100,000 shares; issued none - -
Common stock of $6.25 par value -
authorized 8,000,000 shares; issued 4,437,517
shares in 1994 and 1993 27,734 27,734
Other paid-in capital 34,685 34,685
Retained earnings 31,925 30,603
94,344 93,022
Less: 157,977 shares in 1994 and 1993
of common stock held in treasury 7,435 7,435
Guaranteed debt to Employee Stock
Ownership Plan 750 900
Add: Unrealized holding gain - investments 48,499 53,090
Total shareholders' equity 134,658 137,777
Total liabilities and shareholders' equity $ 204,525 $ 214,259
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PENN VIRGINIA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months
Ended March 31
(In thousands)
<CAPTION>
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net cash flows from operating activities $ 2,290 $ 2,881
Cash flows from (used in) investing activities:
Payment received on long-term notes 934 979
Proceeds from the sale of fixed assets - 34
Purchases of fixed assets (933) (612)
Net cash flows provided by investing
activities 1 401
Cash flows from (used in) financing activities:
Dividends paid (1,918) (1,912)
Repayment of long-term debt principal (1,050) (150)
Reduction in Guaranteed debt to ESOP 150 150
Net cash flows (used) by
financing activities (2,818) (1,912)
Net increase (decrease) in cash and cash equivalents (527) 1,370
Cash and cash equivalents - beginning balance 23,869 4,153
Cash and cash equivalents - ending balance $ 23,342 $ 5,523
Supplemental disclosures of cash flow information:
Cash paid to date for:
Interest $ 295 $ 78
Income taxes $ 1,755 $ 184
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
PENN VIRGINIA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying condensed consolidated
financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial
position as of March 31, 1994, and the results of operations and cash
flows for the three months ended March 31, 1994 and 1993.
At December 31, 1993, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities".
2. Property, plant and equipment consist of the following:
March 31, 1994 December 31, 1993
(In thousands)
Property, plant and equipment $ 102,822 $ 101,940
Less: Accumulated depreciation
and depletion (29,342) (27,847)
Net property, plant and equipment $ 73,480 $ 74,093
3. The amortized cost, gross unrealized holding gains and fair value for
available-for-sale securities at March 31, 1994 were as follows:
Gross
Unrealized
Amortized Holding Fair
Cost Gain Value
(In thousands)
Available-for-sale
Westmoreland Coal Company $ 5,263 $ - $ 5,263
Westmoreland Resources, Inc. 4,530 - 4,530
Norfolk Southern Corporation 3,096 74,609 77,705
$ 12,889 $ 74,609 $ 87,498
The amortized cost and fair value of notes receivable which are
classified as held-to-maturity securities was $14,691,000 at March 31,
1994.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of operations for the quarter ended March 31, 1994 as compared to the
quarter ended March 31, 1993:
Income from operations before income taxes increased $910,000 or 27% for
the first quarter of 1994 compared to the first quarter of 1993. This increase
is composed of a $359,000 increase in the coal and land segment, a $154,000
increase in the investment segment, a $257,000 increase in the oil and gas
segment and a $140,000 decrease in general corporate expenses and interest.
Income taxes increased as a result of an increase in book taxable income
for the first quarter of 1994.
Coal and Land
1994 1993
(Thousands of dollars)
Revenues:
Sales $ 121 $ 123
Royalties 3,528 3,143
Other 290 275
Total 3,939 3,541
Expenses:
Cost of sales 26 5
Selling, general and administrative 309 278
Exploration and development 39 43
Depreciation, depletion and amortization 43 37
Taxes other than on income 41 56
Total 458 419
Operating Profit $ 3,481 $ 3,122
The increase in the coal and land segment operating profit of $359,000 or
12% is mainly attributable to increased coal royalties from independent coal
lessees due to increased tonnage.
Investments
1994 1994
(Thousands of dollars)
Revenues:
Dividends $ 577 $ 541
Other 125 -
Total 702 541
Expenses:
Selling, general and administrative 16 10
Depreciation 2 2
Taxes other than on income 1 -
Total 19 12
Operating Profit $ 683 $ 529
The increase in the investment segment of $154,000 or 29% is mainly
attributable to increased dividend income of $36,000 and interest income earned
on short-term investments of $125,000 offset in part by an increase of $6,000
in salary expense.
<PAGE>
Oil and Gas
1994 1993
(Thousands of dollars)
Revenues:
Sales $ 3,720 $ 3,571
Royalties 621 449
Other 106 29
Total 4,447 4,049
Expenses:
Cost of sales 613 636
Selling, general and administrative 665 497
Exploration and development 30 199
Depreciation, depletion and amortization 1,497 1,314
Taxes other than on income 326 344
Total 3,131 2,990
Operating Profit $ 1,316 $ 1,059
Operating profit for the oil and gas segment increased $257,000 or 24%
and is mainly attributable to increased gas pricing and gas royalties of
$321,000, an increase in delay rental income of $77,000 and a decrease in
exploration and development expense of $169,000 due to the timing of budgeted
1994 expenses. Offsetting this revenue increase is an increase in selling,
general and administrative expense of $168,000 and an increase in depreciation,
depletion and amortization expense of $183,000.
The increase is selling, general and administrative expenses is mainly
attributable to the expenses associated with relocating Company personnel. The
increase in depreciation, depletion and amortization expenses is due primarily
to increased gas sales volume and higher depletion rates.
Corporate
The decrease in general corporate expenses and interest of $140,000 or
11% was due to a decline in interest expense of $24,000 as a result of lower
debt balances outstanding and a $116,000 decline in general and administrative
expenses due mainly to reductions in salary, legal and consulting expenses.
Financial Condition as of March 31, 1994:
There were no material changes in the Company's financial condition from
that reported as of December 31, 1993.
Liquidity, Capital Resources and Other Financial Data at March 31,1994:
Working capital at March 31, 1994 was $17.0 million compared to $15.5
million at December 31, 1993. See the Condensed Consolidated Statement of Cash
Flows for details regarding the change.
At March 31, 1994, there were $3.0 million in unused credit lines.
There are two main factors that could influence future earnings and cash
flow of the Company. One of these is gas prices. Since the majority of the
Company's gas is sold in the spot market or under contracts less than one year
in duration, future earnings will be directly related to the fluctuation of
those prices. Any sustained decline in these prices could result in some
impairment of oil and gas assets.
<PAGE>
The second factor is the performance of Westmoreland Coal Company, our
largest coal lessee. In 1993, Westmoreland reported a loss from continuing
operations of $99 million that was caused primarily by the writedown of the
assets of various eastern operations. On April 18, 1994, Westmoreland Coal
Company ("WCC") announced that its outside auditors had issued a qualified
opinion on the Company's 1993 financial statements due to the uncertainty of
its ability to continue as a going concern. The opinion was based on losses
associated with WCC's eastern coal operations, a working capital deficiency
caused by a reclassification of its revolving credit and insurance company debt
to current liabilities, and violation of various covenants in the Company's
principal credit arrangements.
After the filing of its annual report, WCC announced an agreement in
principle to sell the assets of its cogeneration subsidiary for an amount in
excess of $50 million plus the assumption of certain equity commitments. WCC
is negotiating with its lenders to restructure its credit facilities. On
May 9, 1994, WCC announced that it had suspended the payment of its preferred
stock dividend as a result of negotiations with its lenders. WCC reported that
it expects to repay its lenders with the proceeds from the sale of its
cogeneration facilities and plans to begin payment of preferred stock dividends
again at that time. It is also continuing the process of reviewing its eastern
properties with potential purchasers, but no decision nor binding agreements
have been made.
Westmoreland is burdened by a difficult coal price environment and
significant costs for retirees and idle mines that must be borne by a shrinking
production base. The Company is striving to redefine itself and establish a
core of profitable operations upon which it can base its recovery. If
Westmoreland cannot mine profitably, then Penn Virginia's cash flows would be
adversely affected. A prolonged period of depressed prices for coal would
affect the merchantability of the reserves leased to Westmoreland and could
ultimately result in a curtailment of production from Penn Virginia's reserves.
The Company continues to evaluate its investment in Westmoreland and any
deterioration in their financial condition that results in the carrying value
for that investment being in excess of fair value could result in additional
losses.
Except for matters discussed above, management is not presently aware of
any trends or demands which exist or uncertainties which are reasonably likely
to result in the Company's liquidity increasing or decreasing in any material
way.
<PAGE>
REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The accompanying condensed consolidated financial statements have been
reviewed by the Company's independent certified public accountants, KPMG Peat
Marwick, in accordance with the established professional standards and
procedures for such a limited review.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 15: Letter Re: Unaudited interim financial information.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the quarter ended March 31,
1994.
<PAGE>
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.
PENN VIRGINIA CORPORATION
(Registrant)
Date: May 13, 1994 Robert J. Jaeger
(Robert J. Jaeger, Vice President, Treasurer &
Controller)
(Principal Financial and Accounting Officer)
<PAGE>
INDEPENDENT ACCOUNTANT'S REPORT
The Board of Directors
Penn Virginia Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of Penn
Virginia Corporation and subsidiaries as of March 31, 1994 and the related
condensed consolidated statements of income and cash flows for the three month
periods ended March 31, 1994 and 1993. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Penn Virginia Corporation and
subsidiaries as of December 31, 1993, and the related consolidated statements
of income, shareholders' equity and cash flows for the year then ended (not
presented herein); and in our report dated March 1, 1994, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1993, is fairly presented, in all material
respects in relation to the consolidated balance sheet from which it has been
derived.
KPMG PEAT MARWICK
KPMG Peat Marwick
Philadelphia, PA
May 10, 1994
<PAGE>
Exhibit 15
Penn Virginia Corporation
200 S. Broad Street
800 The Bellevue
Philadelphia, PA 19102
Re: Registration Statement Nos. 2-67355, 2-77500 and 33-40430
Gentlemen:
With respect to the subject Registration Statements, we acknowledge our
awareness of the use therein of our report dated May 10, 1994 related to our
review of interim financial information.
Pursuant to Rule 436(c) under the Securities Act, such report is not considered
a part of a Registration Statement prepared or certified by an accountant or a
report prepared or certified by an accountant within the meaning of Sections 7
and 11 of the Act.
Very truly yours,
KPMG Peat Marwick
KPMG PEAT MARWICK
May 10, 1994
