16
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the period ended September 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the transition period from to
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.)
100 MATSONFORD ROAD SUITE 200
RADNOR, PA 19087
(Address of principal executive offices) (Zip Code)
(610) 687-8900
(Registrant's telephone number,
including area code)
(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 October 31, 2000: 8,327,324
PENN VIRGINIA CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF INCOME - Unaudited
(in thousands, except per share amounts)
<TABLE>
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues:
Natural gas $ 13,032 $ 5,950 $ 30,495 $ 14,830
Oil and condensate 194 128 615 293
Coal royalties 5,512 4,283 16,815 12,257
Timber 637 664 1,812 1,170
Dividends 661 661 1,984 1,984
Gain on sale of property 801 - 899 -
Other income 670 620 3,596 1,718
Total revenues 21,507 12,306 56,216 32,252
Expenses:
Operating expenses 1,273 1,122 3,614 3,125
Exploration expenses 1,258 696 2,653 1,370
Taxes other than income 931 662 2,800 1,985
General and administrative 2,599 2,198 7,641 6,345
Depreciation, depletion,
amortization 3,191 2,198 8,659 6,120
Total expenses 9,011 6,876 25,126 18,945
Operating Income 12,255 5,430 30,849 13,307
Other (Income) Expense:
Interest expense 2,379 793 5,643 1,864
Other income (389) (351) (1,097) (1,072)
Income before income tax 10,265 4,988 26,303 12,515
Income tax expense 3,063 1,043 7,576 2,490
Net Income $ 7,202 $ 3,945 $ 18,727 $ 10,025
Net Income per share, basic $ 0.88 $ 0.47 $ 2.28 $ 1.19
Net Income per share, diluted $ 0.85 $ 0.46 $ 2.25 $ 1.18
Weighted average shares
outstanding, basic 8,213 8,423 8,203 8,401
Weighted average shares
outstanding, diluted 8,473 8,532 8,312 8,490
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
September 30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 364 $ 657
Accounts receivable 9,136 6,880
Current portion of long-term notes receivable 845 816
Current deferred income taxes 155 155
Other 582 813
Total current assets 11,082 9,321
Investments 47,984 67,816
Long-term notes receivable 2,798 3,518
Oil and gas properties;
wells and equipment, using the
successful efforts method of accounting 236,567 185,048
Other property and equipment 83,677 82,772
Less: Accumulated depreciation,
depletion and amortization (84,857) (76,553)
Total property and equipment 235,387 191,267
Other assets 1,846 2,089
Total assets $299,097 $274,011
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
September 30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments on long-term debt $ 34 $ 34
Accounts payable 1,698 1,570
Accrued expenses 5,003 5,470
Taxes on income 1,842 -
Total current liabilities 8,577 7,074
Other liabilities 5,321 5,854
Deferred income taxes 23,758 28,265
Long-term debt 108,300 78,475
Shareholders' equity
Preferred stock of $100 par value-
100,000 shares authorized; none issued - -
Common stock of $6.25 par value-
16,000,000 shares authorized;
8,921,864 issued 55,762 55,762
Other paid-in capital 7,557 8,096
Retained earnings 74,065 60,860
Accumulated other comprehensive income 29,126 42,017
166,510 166,735
Less: 610,077 shares in 2000 and
498,238 in 1999 of common
stock held in treasury, at cost 12,269 11,142
Unearned compensation - ESOP 1,100 1,250
Total shareholders' equity 153,141 154,343
Total liabilities and shareholders' equity $ 299,097 $ 274,011
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS - Unaudited
(in thousands)
<TABLE>
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Cash flow from
operating activities:
Net Income $ 7,202 $ 3,945 $18,727 $10,025
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation, depletion,
and amortization 3,191 2,198 8,659 6,120
Gain on sale of
property and equipment (801) - (899) -
Deferred income taxes 1,168 767 2,434 1,004
Dry hole expense 732 481 1,141 601
Other (307) (323) (937) (978)
Changes in operating assets
and liabilities:
Current assets 383 (1,317) (2,026) (488)
Current liabilities (354) 404 1,505 (1,740)
Other assets (4) (321) 161 (316)
Other liabilities (123) (122) (532) (369)
Net cash provided by
operating activities 11,087 5,712 28,233 14,597
Cash flows from
investing activities:
Proceeds from notes receivable 567 417 1,710 1,252
Proceeds from sale of
property and equipment 801 - 902 -
Capital expenditures (7,582) (49,418) (53,926) (54,253)
Net cash used in
investing activities (6,214) (49,001) (51,314) (53,001)
Cash flows from
financing activities:
Dividends paid (1,843) (1,895) (5,521) (5,673)
Debt borrowings (payments), net (5,205) 45,025 29,825 42,721
Purchase of treasury stock - - (5,056) -
Issuance of stock 2,539 63 3,540 1,131
Net cash provided by (used in)
financing activities (4,509) 43,176 38,179 (38,179)
Net increase (decrease) in cash
and cash equivalents 364 (113) (293) (225)
Cash and cash
equivalents-beginning - 113 657 225
Cash and cash
equivalents-ending $ 364 $ - $ 364 $ -
Supplemental disclosures
of cash flow information:
Cash paid to date for:
Interest $ 2,226 $ 842 $ 5,161 $ 1,907
Income taxes 1,500 - 3,300 1,600
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
PENN VIRGINIA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(1) ACCOUNTING POLICIES
The accompanying unaudited consolidated
financial statements of Penn Virginia
Corporation and its subsidiaries (the
"Company") have been prepared in accordance
with generally accepted accounting
principles for interim financial reporting
and SEC regulations. These statements involve
the use of estimates and judgments where
appropriate. In the opinion of management, all
adjustments, consisting of normal recurring
accruals, considered necessary for a
fair
presentation have been included. These financial
statements should be read in conjunction
with the Company's consolidated financial
statements and footnotes included in the
Company's December 31, 1999 annual report on
Form 10-K. Operating results for the nine
months ended September 30, 2000 are not
necessarily indicative of the results that may
be expected for the year ended December 31,
2000.
(2) ACQUISITIONS
In May 2000, Penn Virginia successfully
completed the purchase of over 35 Bcf of
proved natural gas reserves in West Virginia,
Virginia and Kentucky for $34.9 million. In
September 1999, the Company acquired fee
mineral and lease rights for coal reserves
and related assets in West
Virginia. Both acquisitions were funded by
borrowings from the Company's revolving credit
facility (the "Revolver") and accounted for at
fair value. The operations have been
included in the Company's statement of income
as of the closing date. The following
unaudited pro forma results of operations have
been prepared as though the aforementioned
acquisitions had been completed on January 1,
1999. The unaudited pro forma results of
operations consist of the following (in
thousands, except share data):
<TABLE>
Three Months Nine Months
Ended September 30, 2000 Ended September 30, 2000
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $21,507 $26,844 $58,559 $39,802
Net income $ 7,202 $ 3,966 $19,191 $10,553
Net income per
share, diluted $ 0.85 $ 0.46 $ 2.31 $ 1.24
</TABLE>
The summarized pro forma information has been
prepared for comparative purposes only.
(3) SECURITIES
The cost, gross unrealized holding gains or
losses and market value for available-for-sale
securities at September 30, 2000 were as follows
(in thousands):
<TABLE>
Gross Unrealized Market
Cost Holding Gain Value
<S> <C> <C> <C>
Available-for-Sale:
Norfolk Southern Corporation $ 2,839 $45,115 $47,954
Other - 30 30
$ 2,839 $45,145 $47,984
</TABLE>
(4) LEGAL
The Company is involved in various legal proceedings arising
in the ordinary course of business. While the ultimate
results of these cannot be predicted with certainty, Company
management believes these claims will not have a material
effect on the Company's financial position, liquidity or
operations.
(5) NET INCOME PER SHARE
The following is a reconciliation of the numerators and
denominators used in the calculation of basic and diluted net
income per share (in thousands, except per share amounts):
<TABLE>
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net Income $ 7,202 $ 3,945 $18,727 $10,025
Weighted average
shares, basic 8,213 8,423 8,203 8,401
Dilutive securities:
Stock options 260 109 109 89
Weighted average
shares, diluted 8,473 8,532 8,312 8,490
Net Income per share, basic $ 0.88 $ 0.47 $ 2.28 $ 1.19
Net Income per share, diluted $ 0.85 $ 0.46 $ 2.25 $ 1.18
</TABLE>
(6) COMPREHENSIVE INCOME
Comprehensive income represents all changes in equity during the
reporting period, including net income and charges
directly to equity, which are excluded from net income. For the
three and nine month periods ended September 30, 2000
and 1999, the components of comprehensive income are as
follows (in thousands):
<TABLE>
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Net income $ 7,202 $ 3,945 $18,727 $10,025
Unrealized holding loss,
net of tax of $430,
$6,513, $6,941 and
$8,320, respectively (798) (12,093) (12,891) (15,452)
Comprehensive income (loss) $ 6,404 $(8,148) $ 5,836 $(5,427)
</TABLE>
(7) SEGMENT INFORMATION
Penn Virginia's operations are classified into two
operating segments:
Oil and Gas - crude oil and natural gas exploration,
development and production.
Coal Royalty and Land Management - the leasing
of mineral rights and subsequent collection of
royalties and the development and harvesting of timber.
<TABLE>
Coal Royalty
and Land Corporate
Oil and Gas Management and Other Consolidated
(in thousands)
<S> <C> <C> <C> <C>
For the nine months
ended September 30, 2000
Revenues $31,523 $22,709 $ 1,984 $56,216
Operating income (loss) 17,754 16,371 (3,276) 30,849
Other income and
expense, net 4,546
For the nine months
ended September 30, 1999
Revenues $15,716 $14,551 $1,985 $32,252
Operating income (loss) 3,285 11,385 (1,363) 13,307
Other income and
expense, net 792
Identifiable assets
September 30, 2000 $169,137 $ 81,119 $ 48,841 $299,097
December 31, 1999 120,954 83,975 69,082 274,011
</TABLE>
Operating income is total revenue less operating
expenses. Operating income does not include
certain other income items, gain (loss) on sale
of securities, unallocated general corporate
expenses, interest expense and income taxes.
Identifiable assets are those assets used in
the Company's operations in each segment.
Corporate assets are principally cash and
marketable securities.
(8) RECENT ACCOUNTING ISSUES
In June 1998, the Financial Accounting
Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and
Hedging Activities." SFAS 133, as amended by
SFAS 137 and SFAS 138, establishes accounting
and reporting standards for derivative
instruments, including certain derivative
instruments embedded in other contracts,
(collectively referred to as derivatives) and for
hedging activities. It
requires that an entity recognize all derivatives
as either assets or liabilities in the statement
of financial position and measure those
instruments at fair value. If certain
conditions are met, a derivative may be
specifically designated as (a) a hedge of the
exposure to changes in the fair value of a
recognized asset or liability or an
unrecognized firm commitment, (b) a hedge of the
exposure to changes in the fair value of the
exposure to variable cash flows of a
forecasted transaction, or (c) a hedge of the
foreign currency exposure of a net investment in
a foreign operation, an unrecognized firm
commitment, an available-forsale security, or a
foreign-currency-denominated forecasted
transaction. Special accounting for
qualifying hedges allows a derivative's gains
and losses to offset related results on the
hedged item in the statements of income. Under
present conditions, management does not expect
the initial adoption of SFAS 133, as amended, to
have a material effect on the Company's
financial position, results of operations or
liquidity. The Company is required to adopt
the statements in the first quarter of 2001.
In December 1999, the Securities and Exchange
("SEC") issued Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial
Statements" ("SAB 101"). SAB 101, as amended,
summarizes certain of the SEC's views in applying
generally accepted accounting principles to
revenue recognition in financial statements.
At this time, management does not expect the
adoption of SAB 101 to have a material effect on
the Company's financial position, results of
operations or liquidity.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Penn Virginia operates two primary business
segments: oil and gas, and coal royalty and land
management.
The oil and gas segment explores for, develops
and produces crude oil and natural gas in the
eastern and southern portions of the United
States, particularly in Appalachia. The coal
royalty and land management segment includes
Penn Virginia's mineral rights to coal reserves,
timber assets and land assets. The Company
earns coal royalty revenue, based on long-term
lease agreements with several coal mining
operators which generally require royalty
payments to Penn Virginia based on a minimum
annual payment, a minimum dollar royalty per
ton and/or a percentage of the coal's gross
sales price.
On May 31, 2000, the Company successfully
completed the purchase of certain oil and gas
mineral rights in West Virginia, Virginia
and Kentucky for $34.9 million. The
acquisition was funded by borrowings from the
Company's revolving credit facility and estimated proved
reserves, net to the Company's interests,
approximate 35 Bcfe.
Results of Operations - Third quarters of
2000 and 1999 compared.
Penn Virginia reported 2000 third quarter net
income of $7.2 million, or $0.85 per share
(diluted), compared with $3.9 million, or
$0.46 per share (diluted), for the third quarter
of 1999. On a consolidated basis,
operating income
increased $6.8 million in the third
quarter of 2000 primarily due to a $5.4
million increase in the oil and gas segment and
a $1.6 million increase in the coal royalty and
land management segment.
Results of Operations - Nine months of
2000 and 1999 compared.
Penn Virginia's net income for the nine
months ended September 30, 2000 was $18.7
million, or $2.25 per share (diluted),
compared with $10.0 million, or $1.18 per
share (diluted), for the 1999 comparable
period. On a
consolidated basis, operating income increased
$17.5 million primarily as a result of an $11.6
million increase in the oil and gas segment
and a $6.6 million increase in the coal and land
segment.
Selected operating and financial data by
segment is presented below.
Oil and Gas Segment
Operating income for the oil and gas segment
was $15.2 million for the nine months ended
September 30, 1999, compared with $3.3
million for the same period in 1999.
Operational and financial data for the Company's
oil and gas segment for the three and nine
months ended September 30, 2000 and 1999 is as
follows:
<TABLE>
Operations Summary
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Production
Natural gas (MMcf) 3,107 2,316 8,439 6,398
Oil and condensate (MBbls) 7 8 24 24
Production, MMcfe 3,149 2,364 8,583 6,542
Average Realized Prices
Natural gas ($/Mcf) $ 4.19 $ 2.57 $ 3.61 $ 2.32
Oil and condensate ($/Bbl) 27.57 17.07 25.63 12.47
Average Costs (per Mcfe)
Lease operating $ 0.36 $ 0.47 $ 0.38 $ 0.47
Exploration expenses 0.35 0.25 0.27 0.16
Taxes other than income 0.24 0.22 0.25 0.24
General and administrative 0.20 0.22 0.21 0.24
Depreciation, depletion
and amortization 0.84 0.79 0.82 0.79
Total costs $ 1.99 $ 1.95 $ 1.93 $ 1.90
</TABLE>
In the first nine months of 2000, over 80 percent of
Penn Virginia's natural gas production was sold at
market prices.
Currently, the Company has fixed price
term contracts totaling 9,300 Mcf per day which
began in the second quarter of 2000 and expire
in December 2000 and March 2001 at an average
of $3.39 per Mcf. Management believes these
fixed price term contracts should account for
approximately onefourth of remaining 2000
production. The Company will, when
circumstances warrant, hedge the price
received through fixed price term contracts
and/or financial instruments (such as futures,
forward and option contracts and swaps) to
mitigate the price risks associated with
fluctuations in natural gas prices as they
relate to the Company's anticipated
production. If applicable, gains and losses
from hedging activities are included in natural
gas revenues when the hedged production occurs.
Currently, the Company is not involved in any
such hedging activities; however, the Company
recognized a $0.3 million and a $0.2 million
hedging loss for the three and nine months ended
September 30, 1999. The following table shows
the effect of hedging activities on the
Company's working interest natural gas prices:
<TABLE>
Hedging Summary
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Natural gas prices ($/Mcf):
Actual price received
for production $ 4.19 $ 2.70 $ 3.61 $ 2.36
Effect of hedging activities - (.13) - (.04)
Average price $ 4.19 $ 2.57 $ 3.61 $2.32
</TABLE>
Financial Summary
<TABLE>
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
Natural gas sales $13,032 $5,950 $30,495 $14,830
Oil and condensate 194 128 615 293
Gain on sale of property 6 - 6 -
Other 88 144 407 593
Total revenues 13,318 6,222 31,523 15,716
Expenses:
Operating expenses 1,152 1,101 3,254 3,053
Exploration expenses 1,087 595 2,267 1,043
Taxes other than income 755 530 2,181 1,561
General and administrative 625 519 1,840 1,582
Depreciation and depletion 2,651 1,863 7,070 5,192
Total expenses 6,270 4,608 16,612 12,431
Operating income $ 7,048 $ 1,614 $14,911 $ 3,285
</TABLE>
Results of Operations - Oil and Gas Segment
Revenues. Revenues increased to $13.3 million and
$31.5 million for the three and nine months ended
September 30,
2000 from $6.2 million and $15.7 million in
the comparable 1999 periods. These
increases were a result of a substantial
increase in natural gas production and prices
received.
Natural gas sales increased 119 percent to $13.0
million in the third quarter of 2000 and 106
percent to $30.5 million for the first nine
months of 2000, compared with the 1999
comparable periods. Natural gas volumes
increased 34
percent and 32 percent for the three and nine
months ended September 30, 2000,
respectively, while the average price received
increased 63 percent and 56 percent for the
same periods. The Company's ambitious
drilling program and acquisitions are the
contributing factors for the increased
production.
Oil and condensate revenues increased 52 percent
to $194,000 and 110 percent to $322,000 for
the three and nine months ended September 30,
2000 from the comparable periods in 1999.
These increases are attributable to increases in
the average price received. Prices increased
$10.50 per Bbl, or 62 percent, for the third
quarter of 2000 compared with the same period of
1999 and $13.16 per Bbl, or 106 percent, for
the first nine months of 2000 compared with the
same period of 1999.
Expenses. Expenses for the oil and gas segment
increased to $6.0 million and $16.4 million for
the three and nine months ended September 30,
2000, respectively, compared with $4.6 million
and $12.4 million for the same periods in 1999.
Lease operating expenses, on a Mcfe basis,
decreased to $0.36 and $0.38 for the three
and nine months ended September 30, 2000 from
$0.47 for the same periods in 1999. The
decrease was due to lower operating costs
associated with the Company's Mississippi
properties, the Company's recent $34.9
million acquisition of royalty gas and to
several repair and maintenance projects
performed in 1999.
Exploration expenses increased to $1.1
million and $2.3 million for the three and
nine months ended September 30, 2000 from
$595,000 and $1.0 million for the same periods
in 1999. These increases are attributable to
increased dry hole costs related to the
Company's ambitious drilling program and the
purchase of additional seismic data.
Taxes other than income, on a Mcfe basis,
increased to $0.24 and $0.25 for the three and
nine months ended September 30, 2000 from
$0.22 and $0.24 for the same 1999 periods. The
increase is attributable to increased severance
taxes paid as a result of higher prices
received for oil and gas.
General and administrative expenses, on a
Mcfe basis, decreased to $0.20 and $0.21 for
the three and nine months ended September 30,
2000 from $0.22 and $0.24 for the same periods
in 1999. The decrease is a result of
increased production from drilling and
acquisitions, offset by
additional staffing needs for acquisitions.
Depreciation and depletion, on a Mcfe basis,
increased to $0.84 and $0.82 for the third
quarter and first nine months of 2000 from
$0.79 for both periods in 1999. The Company's
recent acquisitions are the primary reason for
the marginal increase in both periods.
Coal Royalty and Land Management Segment
Operating income for the coal and land segment
was $18.0 million for the first nine months of
2000 and $11.4 million for the comparable period
of 1999. The segment's operational and
financial data for the three and nine months
ended September 30, 2000 and 1999 is as follows:
<TABLE>
Operations Summary
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Production
Coal royalty tons (000's) 3,059 2,116 9,275 5,865
Timber (Mbf) 1,939 3,631 6,931 6,322
Average Realized Prices
Coal royalties ($/ton) $ 1.80 $ 2.02 $ 1.81 $ 2.09
Timber ($/Mbf) 304 193 241 202
</TABLE>
Financial Summary
<TABLE>
Three Months Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
Coal royalties $ 5,512 $ 4,283 $16,815 $12,257
Timber sales 637 664 1,812 1,170
Gain on sale of property 795 - 893 -
Other income 583 475 3,189 1,124
Total revenues 7,527 5,422 22,709 14,551
Expenses:
Operating expenses 122 21 361 72
Exploration expenses 132 89 283 154
Taxes other than income 149 102 479 316
General and administrative 755 614 2,069 1,797
Depreciation and depletion 495 294 1,522 827
Total expenses 1,653 1,120 4,714 3,166
Operating income $ 5,874 $ 4,302 $17,995 $11,385
</TABLE>
Results of Operations - Coal Royalty and Land
Management Segment
Revenues. Revenues increased to $7.5 million in the
third quarter of 2000 and $22.7 million for the first
nine months
of 2000 compared with $5.4 million and $14.6
million for the same periods in 1999.
Coal royalties increased $1.2 million to $5.5
million in the third quarter of 2000 and $4.6
million to $22.7 million for the first nine
months of 2000 compared with the same periods in 1999. These
increases are attributable to increased
production from existing lessees due to the
completion of the Company's unit train loadout
facility as well as the September 1999
acquisition of coal reserves in West
Virginia.
Timber sales remained constant for the third
quarter of 2000 compared with the same 1999
period. Timber sales increased to $1.8 million
for the nine months ended September 30, 2000
from $1.2 million in the comparable 1999
period. The increase is attributable to an
increase in the amount of timber harvested as
well as a modest increase in the average price
received. The average realized price increased
from $202 per Mbf for the nine months ended
September 30, 1999 to $241 per Mbf for the
comparable period in 2000.
Other income increased $108,000 in the third
quarter of 2000
and $2.1 million for the first nine months of
2000 compared with the same periods in 1999.
These increases are largely due to $1.5 million
received from the use of the unit train loadout
facility by third parties in the first nine
months of 2000 compared with $637,000 in the
same period of 1999 and the receipt of
$853,000 in forfeited minimums received from the
Company's lessees.
Expenses. Expenses increased to $1.7 million in
the third quarter of 2000 and to $4.7
million for the first nine months of 2000
compared with $1.1 and $3.2 million for the
same periods in 1999 primarily due to increases
in general and administrative expenses and
depreciation and depletion.
Operating expenses increased to $122,000 and
$361,000 for the three and nine months ended
September 30, 2000, from $21,000 and $72,000
for the same periods in 1999. The
increases are a result of costs associated
with the
maintenance and preservation of the
Company's surface acreage.
Taxes other than income for the three and nine
months ended September 30, 2000 increased to
$149,000 and $479,000 from $102,000 and
$316,000 for the comparable periods in 1999.
The increases are attributable to the Company's
$30 million acquisition of coal reserves in
September 1999.
General and administrative expenses, on a per
ton basis, decreased to $0.25 in the third
quarter of 2000 and $0.22 for the first nine
months of 2000 compared with $0.29 and $0.31
million for the same periods in 1999. The
decrease is primarily due to the increase in
lessee production and higher legal fees in
1999 to pursue the recoverability of coal
reserves.
Depreciation and depletion increased to
$495,000 and $1.5 million for the three and
nine months ended September 30, 2000 from
$294,000 and $827,000 for the 1999 comparable
periods. Depreciation and depletion, on a per
ton basis, was $0.16 for the three and
nine month periods ended September 30, 2000
compared with $0.14 for both periods in 1999.
The depletion rate, on a per ton basis,
increased due to the 1999 completion of the
unit train loadout and the Company's $30
million acquisition in September 1999.
Capital Resources and Liquidity.
Net Cash Provided by Operating Activities.
Funding for the Company's business
activities has
historically been provided by operating cash
flows and bank borrowings. Net cash provided
by operating activities was $28.2 million in
the first nine months of 2000 compared with
$14.6 million in the first nine months of 1999.
Net Cash Used in Investing Activities.
In the first nine months of 2000, capital
expenditures totaled $53.9 million compared
with $54.3 million in the first nine months
of 1999. Acquisitions and oil and gas
development activities were the primary uses of
funds. The capital expenditures, including
acquisitions, made by the Company for the
first nine months of 2000 and 1999 are as
follows:
<TABLE>
Nine Months
Ended September 30,
2000 1999
(in thousands)
<S> <C> <C>
Oil and Gas Segment
Acquisitions $36,703 $14,066
Development 12,574 6,266
Exploration 3,508 953
Support equipment 233 156
Coal and Land Segment
Acquisitions 111 30,698
Support equipment and facilities 559 2,070
Other 238 44
Total capital expenditures $53,926 $54,253
</TABLE>
In the oil and gas segment, the Company had
capital expenditures totaling $53.0 million in the
first nine months
of 2000. In May 2000, Penn Virginia
successfully completed the purchase of oil and
gas mineral rights to approximately 35 Bcf of
proved natural gas reserves in West Virginia,
Virginia and Kentucky for $34.9 million.
Additionally, the Company drilled 80 gross
(62.1 net) development wells and 14 gross (8.7
net) exploratory wells in the first nine months
of 1999. Due to increases in market prices for
natural gas, the Company increased its 2000
capital budget to drill approximately 80 net
development wells and 10 to 20 net
exploratory wells.
The Company also holds an investment in
Norfolk Southern common stock which had a
gross unrealized holding gain of $45.1 million
at September 30, 2000.
Net Cash Used in Financing Activities.
Net cash provided by financing activities
totaled $22.8 million and $38.2 million for the
first nine months of 2000 and 1999,
respectively. Net borrowings totaled $29.8 for
the first nine months of 2000 and were used to
fund oil and gas acquisitions. The Company
also dividended $5.6 million in 2000 and
purchased 300,000 common shares of Company stock
outstanding for $5.1 million. The Company
has a $120 million unsecured revolving credit
facility (the "Revolver") with a final
maturity of June 2003. The Revolver bears
interest at LIBOR or the base rate at the
option of the Company plus a percentage
based on the borrowing base outstanding.
The outstanding balance on the Revolver was
$107.5 million at September 30, 2000.
Management believes its portfolio of
investments and sources of funding are
sufficient to meet any liquidity needs not
funded from by cash flows from operations.
Forward-Looking Statements.
Statements included in this report which are
not historical facts (including any
statements concerning plans and
objectives of management for future operations
or economic performance, or assumptions
related thereto) are forwardlooking statements
within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and
Section 27A of the Securities Act of 1933, as
amended. In addition, Penn Virginia and its
representatives may from time to time make
other oral or written statements which are
also forwardlooking statements.
Such forward-looking statements include, among
other things, statements regarding
development activities, capital
expenditures, acquisitions and dispositions,
drilling and exploration programs, expected
commencement dates of coal
mining or oil and gas production, projected
quantities of future oil and gas production
by Penn Virginia, projected quantities of
future coal production by the Company's
lessees producing coal from reserves leased
from Penn Virginia, costs and expenditures as
well as projected demand or supply for coal and
oil and gas, which will affect sales levels,
prices and royalties realized by Penn Virginia.
These forward-looking statements are made
based upon management's current plans,
expectations,
estimates,
assumptions and beliefs concerning future
events impacting Penn Virginia and therefore
involve a number of risks and uncertainties.
Penn Virginia cautions that forward-looking
statements are not guarantees and that actual
results could differ materially from those
expressed or implied in the forward-looking
statements.
Important factors that could cause the actual
results of operations or financial condition of
Penn Virginia to differ include, but are not
necessarily limited to: the cost of
finding and successfully developing oil and
gas reserves; the cost of finding new coal
reserves; the ability to acquire new oil
and gas and coal reserves on satisfactory
terms; the price for which such reserves can be
sold; the volatility of commodity prices for
oil and gas and coal; the risks associated
with having or not having price risk
management programs; Penn Virginia's ability to
lease new and existing coal reserves; the
ability of Penn Virginia's lessees to produce
sufficient quantities of coal on an economic
basis from Penn Virginia's reserves; the ability
of lessees to obtain favorable contracts for
coal produced from Penn Virginia reserves; Penn
Virginia's ability to obtain adequate
pipeline transportation capacity for its oil and
gas production; competition among producers in
the coal and oil and gas industries generally
and in the Appalachian Basin in particular;
the extent to which the amount and quality
of actual production differs from estimated
recoverable coal reserves and proved oil and
gas reserves; unanticipated geological
problems; availability of required
materials and equipment; the occurrence of
unusual weather or operating conditions
including force majeure or events; the failure
of equipment or processes to operate in
accordance with specifications or expectations;
delays in anticipated start-up dates;
environmental risks affecting the drilling
and producing of oil and gas wells or the
mining of coal reserves; the timing of receipt
of necessary governmental permits; labor
relations and costs; accidents; changes in
governmental regulation or enforcement
practices, especially with respect to
environmental, health and safety matters,
including with respect to emissions
levels applicable to coal-burning power
generators; risks and uncertainties relating
to general domestic and international economic
(including inflation and interest rates) and
political conditions; the experience and
financial condition of lessees of coal
reserves, joint venture partners and
purchasers of reserves in transactions
financed by Penn
Virginia, including their ability to satisfy
their royalty,
environmental, reclamation and other
obligations to Penn
Virginia and others; changes in financial market
conditions; changes in the market prices or
value of the marketable securities owned by
Penn Virginia, including the price of Norfolk
Southern common stock and other risk
factors
detailed in Penn Virginia's Securities
and Exchange commission filings. Many of
such factors are beyond Penn Virginia's
ability to control or predict. Readers are
cautioned not to put undue reliance on
forward-looking statements.
While Penn Virginia periodically reassesses
material trends and uncertainties affecting
Penn Virginia's results of operations and
financial condition in connection with the
preparation of Management's Discussion and
Analysis of Results of Operations and
Financial Condition and certain other sections
contained in Penn Virginia's quarterly,
annual or other reports filed with the
Securities and Exchange Commission, Penn
Virginia does not intend to publicly review
or update any particular forward-looking
statement, whether as a result of new
information, future events or otherwise.
PART II Other information
Item 5. Shareholder Proposals
Any shareholder who, in accordance with and
subject to the provisions of the proxy rules of
the Securities and Exchange commission, wishes
to submit a proposal for inclusion in the
Company's proxy statement for its 2001 Annual
Meeting of Shareholders must deliver such
proposal in writing to the Company's
Secretary at the Company's principal
executive offices at One Radnor Corporate
Center, Suite 200, 100 Matsonford Road,
Radnor, Pennsylvania 19087, not later than
November 27, 2000.
Pursuant to new amendments to Rule 14a-
4(c) of the
Securities Exchange Act of 1934, as
amended, and the Company's By-laws, if a
shareholder who intends to present a proposal at
the 2001 Annual Meeting of Shareholders does not
notify the Company of such proposal on or
prior to the earlier of 90 days prior to
the date of the 2001 Annual Meeting or
February 1, 2001, then management proxies will
be permitted to use their discretionary
authority to vote on the proposal when the
proposal is raised at the 2001 Annual Meeting
of Shareholders, even though there is no
discussion of the proposal in the 2001 proxy
statement.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule, filed
herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the
quarter ended September 30, 2000.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be
signed on its behalf by the undersigned,
thereunto duly authorized.
PENN VIRGINIA CORPORATION
Date: November 1, 2000 By:/s/ Steven W. Tholen
Steven W. Tholen, Vice President and
Chief Financial Officer
Date: November 1, 2000 By:/s/ Ann N. Horton
Ann N. Horton, Controller and
Principal Accounting Officer
PENN VIRGINIA CORPORATION
INDEX
PAGE
PART I Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the
three and nine months ended September 30, 2000 and 1999 1
Condensed Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999 2
Condensed Consolidated Statements of Cash Flows for
the three and nine months ended September 30, 2000
and 1999 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 9
PART II Other Information
Item 5. Shareholder Proposals 17
Item 6. Exhibits and Reports on Form 8-K 17
Article 5 of Regulation S-X
