<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 September 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 ______________
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 October 31,
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 Nine Months Ended
September 30 September 30
---------------------------- --------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Production Tonnage 1,081 320 3,860 2,792
========== ========== ========== ==========
Sales Tonnage 944 382 3,908 3,006
========== ========== ========== ==========
Sales $ 37,288 $ 28,431 $ 145,005 $ 125,165
Other Income:
Interest and dividends 726 1,148 2,130 3,473
Net investment gains (losses) (39) 490 237 1,679
Miscellaneous 585 548 1,864 1,495
---------- ---------- ---------- ----------
38,560 30,617 149,236 131,812
Costs and Expenses:
Cost of sales 32,899 25,153 129,458 109,561
Depreciation, depletion, and
amortization 2,623 2,456 8,476 8,284
Selling, general, and
administrative 1,014 1,848 4,742 5,948
Interest 655 279 1,579 781
Miscellaneous 287 267 930 1,441
Postretirement benefit costs
for certain operations -- -- -- 2,678
---------- ---------- ---------- ----------
37,478 30,003 145,185 128,693
---------- ---------- ---------- ----------
Income before income taxes and
cumulative effect of change in
accounting for income taxes 1,082 614 4,051 3,119
Income Taxes 572 421 1,673 971
---------- ---------- ---------- ----------
Net income before cumulative
effect of change in accounting
for income taxes 510 193 2,378 2,148
Cumulative effect to January 1, 1993
of change in accounting for income
taxes -- -- -- 4,709
---------- ---------- ---------- ----------
Net Income $ 510 $ 193 $ 2,378 $ 6,857
========== ========== ========== ==========
Income Per Share:
Net income before cumulative
effect of change in accounting
for income taxes $ .15 $ .05 $ .69 $ .62
Cumulative effect to January 1,
1993 of change in accounting
for income taxes -- -- -- 1.37
---------- ---------- ---------- ----------
Net Income Per Share $ .15 $ .05 $ .69 $ 1.99
========== ========== ========== ==========
Average shares outstanding used
in the computation of per share
amounts 3,438,775 3,438,275 3,438,740 3,441,389
Shares issued and outstanding at
September 30 3,438,775 3,438,275 3,438,775 3,438,275
Cash dividends declared per share $ .30 $ .30 $ .90 $ .90
</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>
September 30 December 31
1994 1993
------------ -----------
ASSETS
------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 32,141 $ 22,737
Short-term investments 1,215 1,000
Receivables 28,039 20,704
Inventories 15,077 2,918
Other Current Assets 6,771 9,688
Deferred income taxes 1,454 1,822
------------ -----------
Total Current Assets 84,697 58,869
Other Assets
Investment in marketable securities 32,398 42,731
Funding for:
Workers' compensation benefits 29,705 25,246
Mine closing reserves 17,888 16,655
Noncurrent receivables 1,750 6,710
Deferred income taxes 10,195 10,257
Miscellaneous 16,001 13,407
------------ -----------
107,937 115,006
Property, plant, and equipment 388,436 342,567
Less allowances for depreciation, depletion,
and amortization 169,681 159,558
------------ -----------
218,755 183,009
------------ -----------
$ 411,389 $ 356,884
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable $ 11,514 $ 13,745
Accrued liabilities 16,016 11,727
Short-term note payable 7,925 ---
Current maturities of long-term debt 3,321 2,372
------------ -----------
Total Current Liabilities 38,776 27,844
Other Liabilities and Long-Term Debt
Workers' compensation benefits 40,601 37,433
Mine closing reserves 19,473 18,156
Other postretirement benefits 20,411 20,500
Deferred income taxes 3,947 2,511
Miscellaneous 9,651 10,191
Long-term debt (less current maturities) 68,757 29,455
------------ -----------
162,840 118,246
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 44,683 45,723
------------ -----------
237,690 238,736
Less treasury stock at cost - 550,346 and
550,846 shares 27,917 27,942
------------ -----------
209,773 210,794
------------ -----------
$ 411,389 $ 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>
Nine Months Ended
September 30
----------------------------------
1994 1993
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,378 $ 6,857
Adjustments for non-cash items 9,537 4,786
Changes in certain assets and liabilities
(using) or providing cash (10,055) 2,395
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,860 14,038
--------- ---------
INVESTING ACTIVITIES
Proceeds from sale of investments 20,993 56,080
Acquisition of investments (10,924) (49,882)
Acquisition and development of property, plant,
and equipment (45,661) (23,332)
Proceeds from sale of property, plant, and
equipment 2,619 99
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (32,973) (17,035)
--------- ---------
FINANCING ACTIVITIES
Proceeds from line of credit and long-term
borrowings 153,638 69,300
Payments on line of credit and long-term
borrowings (107,982) (61,959)
Cash dividends paid (5,158) (5,162)
Treasury stock issued (acquired)--net 19 (153)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 40,517 2,026
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,404 (971)
Cash and cash equivalents at beginning of year 22,737 27,400
--------- ---------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $ 32,141 $ 26,429
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid (net of interest capitalized) $ 1,687 $ 677
========= =========
Income taxes paid (refunded) $ (3,590) $ 737
========== =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 5
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 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 nine month
period ended September 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 the second quarter, 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 September 30, 1994, $35,000,000 had been borrowed under
these notes, at a fixed rate of 10.37%.
<PAGE> 6
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 September 30, 1994, no amounts have
been borrowed under the revolver.
Interest on these borrowings through September 30, 1994 was $677,000
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
September 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 lasted from May 25, 1993 until
December 16, 1993. The effect of the strike 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. In addition,
unfavorable mining conditions have been encountered 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 in the first quarter of 1995.
Management is implementing various other measures to increase productivity and
reduce costs. Keystone's coal deliveries have been limited by downtime
experienced in conjunction with major modifications to its coal cleaning plant.
This situation has reduced sales and has significantly increased inventory
levels and related costs of financing and handling the inventory. Installation
of additional new equipment and refinements to the cleaning plant circuitry
will continue into the fourth quarter.
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 the Eighty-Four Mining Company
subsidiary's mine. The increase in miscellaneous income was primarily due to
revenue from option agreements to sell certain idle properties.
Selling, general, and administrative and miscellaneous expenses
declined in 1994 as a result of cost reduction programs implemented in 1993.
Interest expense was higher in 1994 than in 1993 due to: (1) higher prime
interest rates; and, (2) 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 and to finance the buildup of
inventory in the third quarter.
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
<PAGE> 8
medical and life insurance benefits for certain operations with limited
projected future activity.
The Company's effective tax rate was 53% for the third quarter and 41%
for the nine months ended September 30, 1994. However, the year to date
effective rate for 1994 would have been 54% exclusive of adjustments recorded
in the second quarter relating to (1) prior years and (2) a decrease in the
Pennsylvania state income tax rate. The increase in the 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's mine development will be substantially
completed.
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.
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 close to
concluding a definitive agreement to be effective January 1, 1995 based on the
Letter of Intent. The new agreement will provide for total deliveries by
Helvetia of approximately 14 million tons through 2003 at an initial rate of
1.8 million tons per year.
Liquidity and Capital Resources
- -------------------------------
The increase in the Company's working capital at September 30, 1994
was the result of (1) increases in coal inventories at Keystone which have been
funded with additional borrowings under its credit agreements and (2)
borrowings of $17.5 million each in May and September in conjunction with
Eighty-Four Mining Company's financing of which a portion, due to be spent on
fourth quarter mine development, remained in cash at September 30.
Keystone's and Helvetia's credit agreements provide for combined
borrowings of $44 million. Under terms of their existing long-term coal sales
agreements, Keystone's and Helvetia's debts are to be repaid from funds
generated by depreciation and amortization. As of September 30, 1994, a
combined total of $10.5 million of additional funds were available under the
respective debt agreements. Keystone is currently planning for an additional
line of credit based on its working capital needs brought about by the increase
in coal inventory. Funding for Helvetia, which is developing a new mine, will
be provided by either new debt or the utilization of internal funds.
<PAGE> 9
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: November 14, 1994
<PAGE> 10
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 32141
<SECURITIES> 1215
<RECEIVABLES> 28039
<ALLOWANCES> 0
<INVENTORY> 15077
<CURRENT-ASSETS> 84697
<PP&E> 388436
<DEPRECIATION> 169681
<TOTAL-ASSETS> 411389
<CURRENT-LIABILITIES> 38776
<BONDS> 68757
<COMMON> 59837
0
0
<OTHER-SE> 149936
<TOTAL-LIABILITY-AND-EQUITY> 411389
<SALES> 145005
<TOTAL-REVENUES> 149236
<CGS> 129458
<TOTAL-COSTS> 129458
<OTHER-EXPENSES> 14148
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1579
<INCOME-PRETAX> 4051
<INCOME-TAX> 1673
<INCOME-CONTINUING> 2378
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2378
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
</TABLE>
