<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from -------------- to --------------
Commission File No. 0-7181
ROCHESTER & PITTSBURGH COAL COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0761480
(State or other jurisdiction of (I.R.S. Employer Iden-
incorporation or organization) tification No.)
655 Church Street, Indiana, Pennsylvania 15701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412/349-5800
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of April 30,
1994. 3,438,775 shares.
<PAGE> 2
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Amounts in thousands, except for outstanding shares and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------------
1994 1993
---- ----
<S> <C> <C>
Production Tonnage 1,401 1,459
=========== ===========
Sales Tonnage 1,438 1,491
=========== ===========
Sales $ 52,474 $ 51,905
Other Income:
Interest and dividends 727 1,136
Net investment gains 417 601
Miscellaneous 665 419
----------- -----------
54,283 54,061
Costs and Expenses:
Cost of sales 47,295 44,855
Depreciation, depletion, and amortization 2,848 3,096
Selling, general, and administrative 1,910 2,025
Interest 436 267
Miscellaneous 426 492
Postretirement benefit costs for certain
operations -0- 2,678
----------- -----------
52,915 53,413
----------- -----------
Income before income taxes and cumulative
effect of change in accounting for income
taxes 1,368 648
Income Taxes 802 60
----------- -----------
Net income before cumulative effect of
change in accounting for income taxes 566 588
Cumulative effect to January 1, 1993 of
change in accounting for income taxes -0- 4,709
----------- -----------
Net Income $ 566 $ 5,297
=========== ===========
Income Per Share:
Net income before cumulative effect of
change in accounting for income taxes $ .16 $ .17
Cumulative effect to January 1, 1993 of
change in accounting for income taxes -0- 1.37
----------- -----------
Net Income Per Share $ .16 $ 1.54
=========== ===========
Average shares outstanding used in the
computation of per share amounts 3,438,669 3,443,098
Shares issued and outstanding at March 31 3,438,275 3,443,608
Cash dividends declared per share $ .30 $ .30
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 3
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31 December 31
-------- -----------
1994 1993
---- ----
<S> <C> <C>
ASSETS
------
Current Assets
Cash and cash equivalents $ 13,480 $ 22,737
Short-term investments 2,762 1,000
Receivables 28,701 20,704
Inventories and other current assets 13,718 12,606
Deferred income taxes 1,516 1,822
------------ -----------
Total Current Assets 60,177 58,869
Other Assets
Investment in marketable securities 33,528 42,731
Funding for:
Workers' compensation benefits 28,251 25,246
Mine closing reserves 16,999 16,655
Noncurrent receivables 4,911 6,710
Deferred income taxes 10,037 10,257
Miscellaneous 13,266 13,407
------------ -----------
106,992 115,006
Property, plant, and equipment 356,978 342,567
Less allowances for depreciation, depletion,
and amortization 163,289 159,558
------------ -----------
193,689 183,009
------------ -----------
$ 360,858 $ 356,884
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable $ 9,372 $ 13,745
Accrued liabilities 17,473 11,727
Current maturities of long-term debt 1,556 2,372
------------ -----------
Total Current Liabilities 28,401 27,844
Other Liabilities and Long-Term Debt
Workers' compensation benefits 38,647 37,433
Mine closing reserves 18,586 18,156
Other postretirement benefits 20,938 20,500
Deferred income taxes 3,084 2,511
Miscellaneous 9,514 10,191
Long-term debt (less current maturities) 31,613 29,455
------------ -----------
122,382 118,246
Shareholders' Equity
Common stock issued, 3,989,121 shares 59,837 59,837
Capital in excess of stated value 133,170 133,176
Retained earnings 44,985 45,723
------------ -----------
237,992 238,736
Less treasury stock at cost - 550,346 and
550,846 shares 27,917 27,942
------------ -----------
210,075 210,794
------------ -----------
$ 360,858 $ 356,884
============ ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 4
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 566 $ 5,297
Adjustments for non-cash items 3,388 (914)
Changes in certain assets and liabilities
(using) or providing cash (5,941) 4,306
--------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES (1,987) 8,689
--------- ---------
INVESTING ACTIVITIES
Proceeds from sale of investments 9,295 13,663
Acquisition of investments (1,515) (12,684)
Acquisition of property, plant, and equipment (13,481) (6,874)
Proceeds from sale of property, plant, and
equipment 165 6
--------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (5,536) (5,889)
--------- ---------
FINANCING ACTIVITIES
Proceeds from long-term debt 39,925 19,950
Payments on long-term debt (38,583) (18,226)
Cash dividends paid (3,095) (3,098)
Treasury stock issued 19 68
--------- ---------
NET CASH (USED IN) FINANCING ACTIVITIES (1,734) (1,306)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (9,257) 1,494
Cash and cash equivalents at beginning of year 22,737 27,400
--------- ---------
CASH AND CASH EQUIVALENTS AT MARCH 31 $ 13,480 $ 28,894
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 305 $ 201
========= =========
Income taxes paid $ (455) $ 433
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 5
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1994
Note A - Basis for Presentation
The accompanying unaudited consolidated condensed financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Certain accounts in the consolidated
condensed financial statements for prior years have been reclassified to
conform to the statement presentation for the current year. These
reclassifications have no effect on net income. Operating results for the
three month period ended March 31, 1994 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1994. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10K for the year ended
December 31, 1993.
Note B - Investments
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" for investments held as of or acquired after January 1,
1994. There was no cumulative effect as of January 1, 1994 of adopting
Statement 115. The opening balance of shareholders' equity was increased by
$1,081,000 (net of $619,000 in deferred income taxes) to reflect the net
unrealized holding gains on securities classified as available-for- sale
previously carried at the lower of amortized cost or market.
Management determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. Debt securities are classified as held-to-maturity when
the Company has the positive intent and ability to hold the securities to
maturity. Held-to-maturity securities are stated at amortized cost, adjusted
for amortization of premiums and accretion of discounts to maturity. Such
amortization is included in investment income. Interest on securities
classified as held-to-maturity is included in investment income. All of the
securities included in the funding for workers' compensation benefits and mine
closing reserves are currently designated as held-to-maturity.
Marketable equity securities and debt securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses, net
of tax, reported in a separate component of shareholders' equity. The
amortized cost of debt securities in this category is adjusted for amortization
of premiums and accretion of discounts to maturity. Such amortization is
included in investment income. Realized gain and losses and declines in value
judged to be other-than-temporary on available-for-sale securities are included
in investment income. The cost of securities sold is based on the specific
identification method. Interest and dividends on securities classified as
available-for- sale are included in investment income. The securities
comprising short-term investments and investment in marketable securities are
classified as available-for-sale.
<PAGE> 6
The following is a summary of available-for-sale securities and
held-to-maturity securities:
<TABLE>
<CAPTION>
Available-for-Sale Securities
------------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
March 31, 1994 -------- -------- -------- ---------
<S> <C> <C> <C> <C>
U.S. government and agencies $ 17,274 $ 434 $ 311 $ 17,397
Corporate securities 12,491 21 368 12,144
Other debt securities 300 9 -0- 309
-------- -------- -------- --------
Total debt securities 30,065 464 679 29,850
Equity securities 6,301 475 336 6,440
-------- -------- -------- --------
$ 36,366 $ 939 $ 1,015 $ 36,290
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Held-to-Maturity Securities
------------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
March 31, 1994 -------- -------- -------- ---------
<S> <C> <C> <C> <C>
U.S. government and agency
securities $ 34,568 $ 750 $ 248 $ 35,070
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Available-for-Sale Securities
------------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
December 31, 1993 -------- -------- -------- ---------
<S> <C> <C> <C> <C>
U.S. government and agencies $ 21,779 $ 947 $ 33 $ 22,693
Corporate securities 11,513 56 68 11,501
Other debt securities 1,863 95 -0- 1,958
-------- -------- -------- --------
Total debt securities 35,155 1,098 101 36,152
Equity securities 8,576 771 121 9,226
-------- -------- -------- --------
$ 43,731 $ 1,869 $ 222 $ 45,378
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Held-to-Maturity Securities
---------------------------------------------------------
Gross Gross Estimated
Unrealized Unrealized Fair
(In Thousands) Cost Gains Losses Value
December 31, 1993 -------- -------- -------- ---------
<S> <C> <C> <C> <C>
U.S. government and agency
securities $ 34,427 $ 1,847 $ 20 $ 36,254
======== ======== ======== ========
</TABLE>
In 1994, the gross realized gains on sales of available-for-sale
securities totaled $443,000, the gross realized losses totaled $26,000, and the
net adjustment for unrealized holding gains (losses) on available-for-sale
securities included as a separate component of shareholders' equity totaled
$(1,130,000).
The amortized cost and estimated fair value of debt and marketable
equity securities at March 31, 1994, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because the issuers
of the securities may have the right to prepay obligations without prepayment
penalties.
<PAGE> 7
<TABLE>
<CAPTION>
Estimated
Fair
(In Thousands) Cost Value
AVAILABLE-FOR-SALE -------- ---------
<S> <C> <C>
Due in one year or less $ 2,727 $ 2,762
Due after one year through three years 12,742 12,928
Due after three years 14,596 14,160
-------- --------
30,065 29,850
Equity securities 6,301 6,440
-------- --------
$ 36,366 $ 36,290
======== ========
HELD-TO-MATURITY
Due in one year or less $ 2,251 $ 2,271
Due after one year through three years 11,121 11,291
Due after three years 21,196 21,508
-------- --------
$ 34,568 $ 35,070
======== ========
</TABLE>
Note C - Postemployment Benefits
All companies were required to adopt as of January 1, 1994 Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." This standard requires that the benefits provided by
employers to former or inactive employees, their beneficiaries, and covered
dependents after active employment but before retirement be accrued over the
employees' service period or at the time of an event which gives rise to the
obligation for such benefits, as appropriate. The Company has accounted for
these benefits in that manner prior to the issuance of FASB No. 112 and
therefore, the Company's adoption of this statement does not have a material
impact on income.
<PAGE> 8
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
March 31, 1994
The following is Management's discussion and analysis of certain significant
factors which have affected the Company's (1) earnings during the periods
included in the accompanying Consolidated Condensed Statements of Income and
(2) financial position since December 31, 1993:
Results of Operations
A substantial portion of the Company's sales revenue is derived
through sales made by subsidiaries under two long-term coal sales agreements.
Sales prices are based on the cost of production plus profit determined under
formulas providing for incentives for reduced costs.
While production and sales tonnage is down slightly compared to 1993,
production costs were significantly higher. The effect of the seven-month coal
strike, which was settled on December 16, 1993, continued through the first
quarter of 1994 by delaying the timely start-up of two new mines, development
of new areas in a third mine, and the installation of a portal facility at an
existing mine. The inability to have these facilities efficiently operating as
scheduled has resulted in reduced production and increased costs during the
first quarter of 1994. The record setting cold temperatures and heavy snowfall
during January and February created many weather related outages and caused
abnormally high absenteeism. This also resulted in increased costs and further
reduced production by delaying the start-up of the new facilities.
The Company's subsidiary, Helvetia Coal Company, and the Homer City
Station Owners have agreed upon a Letter of Intent outlining terms for a new
fixed-price coal sales agreement which will replace the existing agreement to
supply coal to the Homer City Generating Station. The Letter is in the process
of being executed by the parties. It is the intention of the parties to
negotiate a definitive agreement based on the Letter of Intent by the third
quarter of this year. The new agreement will provide for deliveries by
Helvetia totaling 16 million tons through 2003 at an initial rate of 1.8
million tons per year.
Interest and dividend income decreased in the first quarter of 1994
due to lower average amounts invested as a result of the utilization of
internally generated funds for the rehabilitation and development of Mine No.
84 while the increase in miscellaneous income was primarily due to foreign
exchange gains experienced at the Company's Canadian subsidiary.
Depreciation expense continued to decrease in 1994 due to the
utilization of operating leases for certain mining equipment requirements in
recent years. Interest expense was higher in 1994 than in 1993 due to
increased amounts borrowed primarily to fund receivables which were deferred
during the strike in accordance with the terms of Keystone's long-term coal
supply agreement. Selling, general, and administrative and miscellaneous
expenses declined in the first quarter of 1994 as a result of additional cost
reduction programs implemented in the second half of 1993.
As previously discussed, income before income taxes for the first
quarter of 1993 was reduced by a charge for the entire past service liability
for retiree medical and life insurance benefits for certain operations with
limited projected future activity.
<PAGE> 9
The Company's effective income tax rate for 1994 was 59% compared to
9% for 1993. The increase in the 1994 effective tax rate over statutory tax
rates results from the temporary differences between financial and income tax
reporting created principally by Eighty-Four Mining Company's mine development
expenditures and the inability to carryback or carryforward tax deductions in
excess of current year income for Pennsylvania income tax reporting purposes.
In addition, these excess deductions cannot be offset against state taxable
income of other subsidiaries. Federal and Pennsylvania deferred tax
liabilities are required to be provided for these expenditures even though no
benefit is being realized for Pennsylvania income tax reporting. These higher
effective income tax rates are expected to continue through 1996 when
Eighty-Four Mining Company's mine development will be substantially completed.
The lower than normal tax rate for 1993 was due to deductions for
postretirement benefit costs at certain operations at full statutory rates.
The rehabilitation and development of Eighty-Four Mining Company
operations, which are expected to more than double the present annual
production capacity of the Company, are projected to continue into 1997. Thus,
costs incurred net of sales revenue from coal produced incidental to
development will continue to be capitalized. Such amounts are projected to
total $100 million through 1996. Development mining commenced in April, 1994.
Liquidity and Capital Resources
The Company's current ratio and working capital at March 31, 1994
remained comparable to year-end levels. The decrease in cash and investments
primarily reflects the use of internal funds for the continued rehabilitation
of Mine No. 84, while the increase in receivables is due to the return to
normal production and sales levels for operations affected by the UMWA strike.
Eighty-Four Mining Company has a commitment in place for the lease of
the first longwall mining system to be operational in the third quarter of
1995. In addition, agreements for total borrowings in the amount of $85
million are in the final stages of documentation.
Keystone and Helvetia have combined borrowing limits of $44 million.
Approximately $12 million of this capacity has been utilized to fund
receivables which were deferred during the strike in accordance with the terms
of Keystone's long-term coal supply agreement. The receivable will be
collected ratably through 1995. Under terms of their existing long-term coal
sales agreements, Keystone's and Helvetia's debt is to be repaid from funds
generated by depreciation and amortization. As of March 31, 1994, a combined
total of $14.5 million of funds were available under the respective debt
agreements. Helvetia Coal Company will require increased debt in the near
future to fund both existing and planned operations. It is expected that
amendments to Helvetia's existing debt agreements will be made to increase
amounts available for borrowing once negotiations with its customers for a new
fixed-price sales agreement conclude successfully.
<PAGE> 10
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
PART II: OTHER INFORMATION
Item 5: Other Information
Registrant's subsidiary, Helvetia Coal Company, ("Helvetia")
and the Homer City Station Owners, (the "Owners") have agreed upon the terms of
a Letter of Intent outlining terms of a new fixed-price coal sales agreement to
replace the existing agreement to supply coal to the Homer City Generating
Station. The letter is in the process of being executed by the parties.
Helvetia and the Owners intend to negotiate a definitive agreement pursuant to
terms of the Letter of Intent by the third quarter of 1994. The new agreement
will provide for deliveries by Helvetia in the aggregate of 16 million tons of
coal through 2003 at an initial rate of 1.8 million tons per year.
<PAGE> 11
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.
ROCHESTER & PITTSBURGH COAL COMPANY
THOMAS W. GARGES, JR.
Thomas W. Garges, Jr.
President and Chief Executive Officer
GEORGE M. EVANS
George M. Evans
Vice President and Treasurer
Date: May 13, 1994
