UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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
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)
NONE
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Number of shares of common stock of registrant outstanding
at June 30, 1994: 4,279,540
<PAGE>
<TABLE>
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Six Months
Ended June 30, Ended June 30,
<CAPTION>
1994 1993 1994 1993
(In thousands, except
per share data)
<S> <C> <C> <C> <C>
Operating revenues:
Sales $ 101 $ 10 $ 222 $ 133
Coal royalties 3,848 3,424 7,376 6,567
Oil and gas sales and
royalties 4,039 3,554 8,380 7,574
Dividends 857 589 1,434 1,130
Other income, net 481 644 1,059 1,015
Total 9,326 8,221 18,471 16,419
Expenses:
Cost of sales 801 672 1,441 1,313
Selling, general and administrative 1,689 1,799 3,371 3,404
Exploration and development 185 155 254 398
Depreciation, depletion and
amortization 1,481 1,300 3,032 2,665
Taxes other than on income 355 426 764 859
Interest 420 471 874 952
Total 4,931 4,823 9,736 9,591
Income from operations 4,395 3,398 8,735 6,828
Income taxes 1,118 820 2,218 1,652
Net income $ 3,277 $ 2,578 $ 6,517 $ 5,176
Income per common share (based on
4,279,540 weighted average shares
outstanding in 1994 and 1993): $ .76 $ .60 $ 1.52 $ 1.21
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PENN VIRGINIA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<CAPTION>
(UNAUDITED)
June 30, 1994 December 31, 1993
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 9,847 $ 23,869
Receivables 5,058 3,880
Current portion of long-term notes receivable 3,571 3,571
Inventory 638 438
Current deferred tax benefit 669 669
Other 868 514
Total current assets 20,651 32,941
Investments 85,544 94,562
Long-term notes receivable, net of current portion 10,210 11,841
Property, plant and equipment (net) 80,347 74,093
Other assets 805 822
Total assets $ 197,557 $ 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 1,110 4,456
Accrued expenses 3,493 4,535
Deferred income 207 214
Taxes on income - 587
Total current liabilities 12,435 17,417
Other liabilities 7,491 7,669
Deferred taxes 31,685 34,821
Long-term debt, net of current installments 11,050 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 33,283 30,603
95,702 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 600 900
Add: Unrealized holding gain, net of tax-
investments 47,229 53,090
Total shareholders' equity 134,896 137,777
Total liabilities and shareholders' equity $ 197,557 $ 214,259
<FN>
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months
Ended June 30,
(In Thousands)
<CAPTION>
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net cash flows from operating activities $ 2,259 $ 8,606
Cash flows from (used in) investing activities:
Payment received on long-term notes 2,057 1,917
Proceeds from the sale of fixed assets - 73
Purchases of fixed assets (9,277) (2,753)
Net cash flows (used in) investing
activities (7,220) (763)
Cash flows from (used in) financing activities:
Dividends paid (3,836) (3,825)
Repayment of long-term borrowings (5,525) (1,725)
Reduction in Guaranteed debt to ESOP 300 300
Net cash flows (used in) financing activitie (9,061) (5,250)
Net increase (decrease) in cash and cash equivalents (14,022) 2,593
Cash and cash equivalents - beginning balance 23,869 4,153
Cash and cash equivalents - ending balance $ 9,847 $ 6,746
Supplemental disclosures of cash flow information:
Cash paid to date for:
Interest $ 1,097 $ 891
Income taxes $ 2,770 $ 1,052
<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 June 30, 1994, and the results of operations for the three and six
months ended June 30, 1994 and 1993 and cash flows for the six months
ended June 30, 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:
June 30, 1994 December 31, 1993
(In thousands)
Property, plant and equipment $ 111,166 $ 101,940
Less: Accumulated depreciation
and depletion (30,819) (27,847)
Net property, plant and equipment $ 80,347 $ 74,093
During the second quarter of 1994, Penn Virginia Oil and Gas Corporation
(PVOG) acquired the assets of CD & G Development Corporation of
Pikeville, Kentucky for approximately $7 million. The CD & G assets
include 116 producing oil and gas wells with proved reserves estimated
at 17.5 billion cubic feet of gas. The CD & G acquisition, which
increased PVOG's proven reserves by approximately 10%, also includes
approximately sixty future drilling locations as well as numerous
recompletion opportunities and provides an excellent fit with PVOG's
existing properties in eastern Kentucky and West Virginia.
3. The amortized cost, gross unrealized holding gains and fair value for
available-for-sale securities at June 30, 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 72,655 75,751
$ 12,889 $ 72,655 $ 85,544
The amortized cost and fair value of notes receivable which are
classified as held-to-maturity securities was $13,781,000 at June 30,
1994.
<PAGE>
Management's Discussion and Analysis of
Results of Operations and Financial Condition
Results of operations for the quarter ended June 30, 1994 as compared to the
quarter ended June 30, 1993:
Income from operations before income taxes increased $997,000 or 29% for
the second quarter of 1994 compared to the second quarter of 1993. This in-
crease is composed of a $598,000 increase in the coal and land segment, a
$383,000 increase in the investment segment, a $166,000 decrease in the oil and
gas segment and a $182,000 decrease in general corporate expenses and interest.
Income taxes increased as a result of an increase in book taxable income
for the second quarter of 1994.
Coal and Land
Three Months
Ended June 30,
1994 1993
(Thousands of dollars)
Revenues:
Sales $ 101 $ 10
Royalties 3,848 3,424
Other 298 290
Total 4,247 3,724
Expenses:
Cost of sales 15 21
Selling, general and administrative 285 358
Exploration and development 51 43
Depreciation, depletion and amortization 43 50
Taxes other than on income 33 30
Total 427 502
Operating Profit $ 3,820 $ 3,222
The increase in the coal and land segment operating profit of $598,000 or
19% is mainly attributable to increased coal royalties from independent coal
lessees and Westmoreland Coal Company's Virginia operations of $285,000 and
$204,000 respectively, due to increased tonnage and also to an increase in bulk
timber sales of $91,000. Penn Virginia Corporation received royalties from
Westmoreland Coal Company totalling $2,941,000 and $2,801,000 for the three
months ending June 30, 1994 and 1993 respectively.
Investments
Three Months
Ended June 30,
1994 1993
(Thousands of dollars)
Revenues:
Dividends $ 857 $ 589
Other 99 -
Total 956 589
Expenses:
Selling, general and administrative 16 32
Depreciation 2 2
Total 18 34
Operating Profit $ 938 $ 555
The increase in the investment segment operating profit of $383,000 or
69% is mainly attributable to increased dividend income of $268,000 due to
the timing of Westmoreland Resources, Inc. dividend receipt. Interest income
earned on short-term investments increased $99,000 and legal expenses
decreased $27,000 offset in part by an increase of $11,000 in salary expense.
<PAGE>
Oil and Gas
Three Months
Ended June 30,
1994 1993
(Thousands of dollars)
Revenues:
Sales $ 3,579 $ 3,113
Royalties 460 441
Other 30 307
Total 4,069 3,861
Expenses:
Cost of sales 787 651
Selling, general and administrative 662 545
Exploration and development 134 113
Depreciation, depletion and amortization 1,426 1,235
Taxes other than on income 287 378
Total 3,296 2,922
Operating Profit $ 773 $ 939
Operating profit for the oil and gas segment decreased $166,000 or 18%.
This decrease is due mainly to a decrease in other income of $277,000, an
increase in cost of sales of $136,000, an increase of $117,000 in selling
general and administrative expenses and an increase in depreciation, depletion
and amortization of $191,000 offset in part by a decrease in taxes other than
on income of $91,000 and an increase in oil and gas sales of $466,000.
The decrease in other income of $277,000 is due mainly to a one-time
payment for leased property received in 1993. The increase in cost of sales of
$136,000 correlates to the increased oil and gas sales volume activity during
the second quarter of 1994. Depreciation, depletion and amortization increased
$191,000 due primarily to higher depletion rates and increased oil and gas
sales volume. Selling, general and administrative expenses increased $117,000
due mainly to company personnel relocation expenses and the move of Penn
Virginia Oil and Gas Corporation's headquarters from Duffield, Virginia to
Kingsport, Tennessee.
The decrease in taxes other than on income of $91,000 was due primarily to
lower property and franchise tax expense. The increase in oil and gas sales is
due mainly to increased gas volumes from existing producing properties located
in West Virginia.
Corporate
The decrease in general corporate expenses and interest of $182,000 or 18%
was due to a decline in interest expense of $51,000 as a result of lower debt
balances outstanding and a $131,000 decline in general and administrative
expenses due mainly to reductions in salary, insurance and consulting expenses.
Results of operations for the six months ended June 30, 1994 as compared to the
six months ended June 30, 1993:
Income from operations before income taxes increased $1,907,000 or 28%.
This increase is comprised of a $957,000 increase in the coal and land segment,
a $537,000 increase in the investment segment, a $91,000 increase in the oil
and gas segment and a decrease of $322,000 in general corporate expenses and
interest.
Income taxes increased as a result of an increase in book taxable income
for the first half of 1994.
<PAGE>
Coal and Land
Six Months
Ended June 30,
1994 1993
(Thousands of dollars)
Revenues:
Sales $ 222 $ 133
Royalties 7,376 6,567
Other 588 565
Total 8,186 7,265
Expenses:
Cost of sales 41 26
Selling, general and administrative 594 636
Exploration and development 90 86
Depreciation, depletion and amortization 86 87
Taxes other than on income 74 86
Total 885 921
Operating Profit $ 7,301 $ 6,344
The increase in the coal and land segment operating profit of $957,000 or
15% is mainly attributable to increased coal royalties from independent coal
lessees and Westmoreland Coal Company's Virginia operations of $685,000 and
$167,000 respectively, due to increased tonnage mined and to an increase in
bulk timber sales of $99,000 in the first half of 1994 versus 1993. Penn
Virginia Corporation received royalties from Westmoreland Coal Company total-
ling $5,543,000 and $5,419,000 for the six months ending June 30, 1994 and 1993
respectively.
Investments
Six Months
Ended June 30,
1994 1993
(Thousands of dollars)
Revenues:
Dividends $ 1,434 $ 1,130
Other 224 -
Total 1,658 1,130
Expenses:
Selling, general and administrative 32 42
Depreciation 4 4
Taxes other than on income 1 -
Total 37 46
Operating Profit $ 1,621 $ 1,084
The increase in the investment segment operating profit of $537,000 or 50%
is mainly attributable to increased dividend income of $304,000 due to the
timing of dividends received from Westmoreland Resources, Inc. in 1994.
Interest income earned on short-term investments increased $224,000 and
legal expenses decreased $32,000 offset in part by an increase in salary
expense of $20,000.
<PAGE>
Oil and Gas
Six Months
Ended June 30,
1994 1993
(Thousands of dollars)
Revenues:
Sales $ 7,299 $ 6,684
Royalties 1,081 890
Other 136 336
Total 8,516 7,910
Expenses:
Cost of sales 1,400 1,287
Selling, general and administrative 1,327 1,042
Exploration and development 164 312
Depreciation, depletion and amortization 2,923 2,549
Taxes other than on income 613 722
Total 6,427 5,912
Operating Profit $ 2,089 $ 1,998
Operating profit for the oil and gas segment increased $91,000 or 5%.
This increase is due mainly to increased gas sales and royalties as a result of
an increase in gas pricing, a decrease in exploration and development expense
and a decrease in property and franchise tax expense offset in part by a re-
duction in other income and higher depletion expense due to higher depletion
rates and gas sales volume. Additional offsets to this operating profit in-
crease include an increase in the cost of sales due to higher sales volume
and increased selling, general and administrative expenses due in part to the
relocation of the headquarter offices and personnel of Penn Virginia Oil and
Gas Corporation from Duffield, Virginia to Kingsport, Tennessee during the
month of June.
Corporate
The decrease in general corporate expenses and interest of $322,000 or 12%
was due to a decline in interest expense of $78,000 as a result of lower debt
balances outstanding and a $244,000 decline in general and administrative
expenses due mainly to reductions in salary, insurance and consulting expenses.
Financial Condition as of June 30, 1994:
There were no material changes in the Company's financial condition from
that reported as of December 31, 1993 except for the change in working
capital discussed below.
Liquidity, Capital Resources and Other Financial Data at June 30, 1994:
Working capital at June 30, 1994 was $8.2 million compared to $15.5
million at December 31, 1993. See the Condensed Consolidated Statement of Cash
Flows for details regarding the change.
At June 30, 1994, there were $2.0 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,
("WCX") our largest coal lessee. In 1993, WCX 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, WCX
announced that its outside auditors had issued a qualified opinion on its
1993 financial statements due to the uncertainty of its ability to continue
as a going concern. The opinion was based on losses associated with WCX's
eastern coal operations, a working capital deficiency caused by a reclass-
ification of its revolving credit and insurance company debt to current
liabilities, and violation of various covenants in WCX's principal credit
arrangements.
After the filing of its annual report, WCX 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.
On May 9, 1994, WCX announced that it had suspended the payment of its
preferred stock dividend as a result of negotiations with its lenders. WCX
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. WCX also announced that it is also continuing
the process of reviewing its eastern properties with potential purchasers.
On July 13, 1994 WCX announced that it had reached an agreement with its
lenders to extend the maturity dates of two of its credit lines until July 29,
1994. At that time, the balance due on these facilities was $21 million.
WCX is also currently working to extend the maturity of its other outstanding
indebtedness of $25 million, relating to letters of credit issued in connection
with WCX's interest in a coal export facility. Additionally, WCX has stated
that it is continuing discussions with all of its lenders to allow an
extension of all its debt maturities beyond July 29, 1994 to correspond with
the expected closing of certain asset sales. WCX announced that these bank
negotiations and asset sales are part of its ongoing efforts to reduce costs
and reestablish itself as a profitable enterprise. WCX is continuing to mine
and sell coal from its principal operations both on and off the Penn Virginia
leases.
On July 28, 1994 WCX announced that it had reached a definitive agreement
to sell the assets of its wholly-owned subsidiary, Kentucky Criterion Coal
Company, to CONSOL of Kentucky, Inc., a member of the CONSOL coal group for
$85 million subject to an inventory adjustment at closing. The sale is
subject to third party consents. WCX has stated that the proceeds from this
sale would enable it to discharge its debt obligations of approximately $46
million. WCX anticipates the closing of this sale to occur sometime in the
fourth quarter of 1994 and believes that its creditors will extend repayment
of its outstanding debt obligations until the closing.
WCX 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. If WCX cannot mine profitably, then Penn Virginia's cash
flows would be adversely affected. A prolonged period of depressed prices
for coal would affect the reserves leased to WCX and could ultimately result
in a curtailment of production from Penn Virginia's reserves.
<PAGE>
The Company continues to evaluate its investment in WCX 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 ACCOUNTANT
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Shareholders of Penn Virginia Corporation was
held on May 3, 1994, for the purpose of electing a board of directors for the
ensuing year and to transact such other business as may properly come before
the meeting. Proxies for the meeting were solicited pursuant to Section 14(a)
of the Securities Exchange Act of 1934 and the results of the election of the
board of directors are as follows:
FOR AGAINST ABSTAINING
Eckhard Albrecht 82.4% 1.0% 16.6%
Lennox K. Black 82.4% 1.0% 16.6%
John D. Cadigan 82.4% 1.0% 16.6%
Hans Michael Gaul 82.4% 1.0% 16.6%
John A. H. Shober 82.4% 1.0% 16.6%
Frederick C. Witsell, Jr. 82.4% 1.0% 16.6%
Minturn T. Wright, III 82.4% 1.0% 16.6%
No other business at the meeting required a shareholder vote.
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 June 30,
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: August 12, 1994 ROBERT J. JAEGER
Robert J. Jaeger, Vice President, Treasurer & Controller
(Principal Financial and Accounting Officer)
<PAGE>
INDEPENDENT ACCOUNTANTS' 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 June 30, 1994 and the related
condensed consolidated statements of income for the three and six month periods
ended June 30, 1994 and 1993, and condensed consolidated statement of cash
flows for the six month periods ended June 30, 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
August 12, 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 August 12, 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
August 12, 1994
