<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 June 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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 July 31,
1994. 3,438,775 shares.
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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 Six Months Ended
June 30 June 30
------------------------------ -----------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Production Tonnage 1,378 1,013 2,779 2,472
========== ========== ========== ==========
Sales Tonnage 1,526 1,133 2,964 2,624
========== ========== ========== ==========
Sales $ 55,243 $ 44,829 $ 107,717 $ 96,734
Other Income:
Interest and dividends 677 1,189 1,404 2,325
Net investment gains (losses) (141) 588 276 1,189
Miscellaneous 615 528 1,279 947
---------- ---------- ---------- ----------
56,394 47,134 110,676 101,195
Costs and Expenses:
Cost of sales 49,264 39,609 96,559 84,530
Depreciation, depletion, and
amortization 3,005 2,732 5,853 5,828
Selling, general, and
administrative 1,818 2,019 3,728 3,978
Interest 488 235 924 502
Miscellaneous 218 682 643 1,174
Postretirement benefit costs
for certain operations -- -- -- 2,678
---------- ---------- ---------- ----------
54,793 45,277 107,707 98,690
---------- ---------- ---------- ----------
Income before income taxes and
cumulative effect of change in
accounting for income taxes 1,601 1,857 2,969 2,505
Income Taxes 299 490 1,101 550
---------- ---------- ---------- ----------
Net income before cumulative
effect of change in accounting
for income taxes 1,302 1,367 1,868 1,955
Cumulative effect to January 1, 1993
of change in accounting for income
taxes -- -- -- 4,709
---------- ---------- ---------- ----------
Net Income $ 1,302 $ 1,367 $ 1,868 $ 6,664
========== ========== ========== ==========
Income Per Share:
Net income before cumulative
effect of change in accounting
for income taxes $ .38 $ .40 $ .54 $ .57
Cumulative effect to January 1,
1993 of change in accounting
for income taxes -- -- -- 1.37
---------- ---------- ---------- ----------
Net Income Per Share $ .38 $ .40 $ .54 $ 1.94
========== ========== ========== ==========
Average shares outstanding used
in the computation of per share
amounts 3,438,775 3,442,846 3,438,723 3,442,971
Shares issued and outstanding at
June 30 3,438,775 3,438,275 3,438,775 3,438,275
Cash dividends declared per share $ .30 $ .30 $ .60 $ .60
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
June 30 December 31
1994 1993
------------ -----------
ASSETS
------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 20,104 $ 22,737
Short-term investments 2,207 1,000
Receivables 26,385 20,704
Inventories and other current assets 18,438 12,606
Deferred income taxes 1,454 1,822
------------ -----------
Total Current Assets 68,588 58,869
Other Assets
Investment in marketable securities 30,863 42,731
Funding for:
Workers' compensation benefits 28,676 25,246
Mine closing reserves 17,456 16,655
Noncurrent receivables 3,059 6,710
Deferred income taxes 6,970 10,257
Miscellaneous 15,933 13,407
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102,957 115,006
Property, plant, and equipment 371,305 342,567
Less allowances for depreciation, depletion,
and amortization 166,407 159,558
------------ -----------
204,898 183,009
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$ 376,443 $ 356,884
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable $ 10,129 $ 13,745
Accrued liabilities 18,282 11,727
Current maturities of long-term debt 1,860 2,372
------------ -----------
Total Current Liabilities 30,271 27,844
Other Liabilities and Long-Term Debt
Workers' compensation benefits 39,623 37,433
Mine closing reserves 19,035 18,156
Other postretirement benefits 19,961 20,500
Deferred income taxes 3,145 2,511
Miscellaneous 9,623 10,191
Long-term debt (less current maturities) 44,503 29,455
------------ -----------
135,890 118,246
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 45,192 45,723
------------ -----------
238,199 238,736
Less treasury stock at cost - 550,346 and
550,846 shares 27,917 27,942
------------ -----------
210,282 210,794
------------ -----------
$ 376,443 $ 356,884
============ ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
-----------------------------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,868 $ 6,664
Adjustments for non-cash items 9,474 1,895
Changes in certain assets and liabilities
(using) or providing cash (5,839) 13,072
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,503 21,631
--------- ---------
INVESTING ACTIVITIES
Proceeds from sale of investments 17,375 31,824
Acquisition of investments (6,609) (34,660)
Acquisition of property, plant, and equipment (27,262) (17,549)
Proceeds from sale of property, plant, and
equipment 523 30
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (15,973) (20,355)
--------- ---------
FINANCING ACTIVITIES
Proceeds from line of credit and long-term
borrowings 95,238 47,675
Payments on line of credit and long-term
borrowings (83,294) (50,029)
Cash dividends paid (4,126) (4,131)
Treasury stock issued (acquired)--net 19 (153)
--------- ---------
NET CASH USED IN FINANCING ACTIVITIES 7,837 (6,638)
--------- ---------
(DECREASE) IN CASH AND CASH EQUIVALENTS (2,633) (5,362)
Cash and cash equivalents at beginning of year 22,737 27,400
--------- ---------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 20,104 $ 22,038
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid (net of interest capitalized) $ 634 $ 457
========= =========
Income taxes paid (refunded) $ (185) $ 604
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
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ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 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. Operating results for the six month
period ended June 30, 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 - Long-Term Debt
In May, 1994 the Company's wholly owned subsidiaries, Eighty-Four Mining
Company and Lucerne Land Company (the Borrowers), entered into a credit
agreement with four banks to provide for revolving credit notes totaling
$50,000,000 and a note agreement with institutional lenders to provide for
$35,000,000 in senior fixed rate construction notes in order to finance the
project costs of rehabilitating, constructing and developing Mine No. 84.
The notes are secured by all of the properties of the Borrowers and
investment securities of the Company having a market value of $25,000,000. The
Parent Company has guaranteed the indebtedness, and along with the Borrowers is
subject to numerous financial covenants and restrictions regarding earnings,
cash flows, financial position, and dividends.
The senior fixed rate construction notes will convert to term notes by
September 30, 1997 and will be payable at $750,000 per quarter in 1999 and
$2,000,000 per quarter in 2000 through 2003. Borrowings are subject to
interest at rates in effect at the date the loans are made and a commitment fee
on the amount of loans not yet made. Interest would be increased in the event
of default. As of June 30, 1994, $17,500,000 had been borrowed under these
notes, at a fixed rate of 10.4%.
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The revolving credit notes provide for up to $50,000,000 in borrowings
with quarterly mandatory reductions of $5,500,000 beginning December 31, 1997
through September 30, 1999 and $6,000,000 on December 31, 1999. Borrowings are
subject to interest based on the banks' prime rate or on a LIBOR based rate, at
the option of the Borrowers. In addition, commitment fees are payable on the
unused portion of the commitment. As of June 30, 1994, no amounts have been
borrowed under the revolver.
Interest on these borrowings through June 30, 1994 was $152,000 which
has been capitalized as part of the development costs of Mine No. 84.
<PAGE> 7
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
June 30, 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.
Current quarter and year to date production and sales tonnage for 1994
have increased over the volumes for the same periods for 1993, which were
adversely affected by the UMWA coal strike which began on May 25, 1993. The
effect of the seven-month coal strike, which was settled on December 16, 1993,
continued into 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 in 1994. The record setting cold temperatures and heavy
snowfall during the first quarter created many weather related outages and
caused abnormally high absenteeism. While per ton production costs and
profitability have improved in the second quarter at the Company's Helvetia
Coal Company subsidiary, unfavorable mining conditions continued at the
Keystone Coal Mining Corporation subsidiary adversely affecting costs and
profitability. Keystone has also experienced delays in implementing new
continuous haulage systems designed to improve productivity. These systems are
currently being modified and are expected to be fully operational by the end of
this year. Management is implementing various other measures to increase
productivity and reduce costs.
The Company's subsidiary, Helvetia Coal Company, and the Homer City
Station Owners have executed 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 parties are in the
process of negotiating a definitive agreement based on the Letter of Intent.
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 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
<PAGE> 8
primarily due to foreign exchange gains experienced at the Company's Canadian
subsidiary.
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 1994 as a result of cost reduction programs implemented in 1993.
Results for the six months ended June 30, 1993 included severance costs
incurred in conjunction with these programs.
As previously reported, 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.
Income taxes were favorably affected in the current quarter due to
adjustments to prior year provisions. The Company also recorded an unfavorable
adjustment to its deferred tax provision for changes in the Pennsylvania state
income tax rate. The Company's effective income tax rate would have been 51%
for the second quarter and 54% for the six months ended June 30, 1994 had these
adjustments not occurred, compared to 26% and 22% for the comparable periods in
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 limited ability 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 June 30, 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.
<PAGE> 9
As more fully discussed in Note B, Eighty-Four Mining Company and Lucerne
Land Company have negotiated a credit agreement for total borrowings in the
amount of $85 million with a group of banks and an institutional investor. A
total of $17.5 million has been borrowed under these agreements as of June 30,
1994. Eighty-Four also has a commitment in place for the lease of the first
longwall mining system to be operational in the third quarter of 1995.
Keystone and Helvetia have combined borrowing limits of $44 million.
Approximately $10 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 June 30, 1994, a combined
total of $18.9 million of additional 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 4: Submission of Matters to a Vote of Security Holders.
(a) Registrant's Annual Meeting of Shareholders was held on May 3,
1994. Of the 3,438,775 shares eligible to vote, 2,888,460
shares were represented in person or by proxy at the meeting.
(c) Messrs. L. Blaine Grube, Peter Iselin, William G. Kegel, and
Gordon B. Whelpley, Jr. were re-elected as Class A Directors of
Registrant. A summary of votes for each Class A Director is as
follows:
L. Blaine Grube
FOR 2,884,297
WITHHELD 4,163
Peter Iselin
FOR 2,884,359
WITHHELD 4,101
William G. Kegel
FOR 2,871,573
WITHHELD 16,887
Gordon B. Whelpley, Jr.
FOR 2,884,037
WITHHELD 4,423
Ernst & Young, independent public accountants, was selected as
Registrant's auditor for 1994. A summary of votes for, against, and
abstentions is as follows:
FOR 2,884,194
AGAINST 3,681
ABSTAIN 585
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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: August 12, 1994
