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, 1995
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, 1995. 3,439,275 shares.
<PAGE> 2
<TABLE>
<CAPTION>
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
September December 31
1995 1994
------------ -----------
ASSETS
------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 18,620 $ 30,656
Receivables 31,383 25,213
Inventories and other current assets 12,329 25,275
Deferred income taxes 1,632 1,632
------------ -----------
Total Current Assets 63,964 82,776
Other Assets
Investments in marketable securities 38,721 46,838
Funding for:
Workers' compensation benefits 16,737 19,521
Mine closing reserves 9,669 8,956
Other postretirement benefits 7,611 --
Deferred income taxes 8,668 7,211
Miscellaneous 14,678 15,523
------------ -----------
96,084 98,049
Property, plant, and equipment 506,710 404,962
Less allowances for depreciation, depletion,
and amortization 187,579 174,793
------------ -----------
319,131 230,169
------------ -----------
$ 479,180 $ 410,994
============ ===========
<PAGE> 3
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable $ 13,305 $ 19,140
Accrued liabilities 14,664 11,484
Short-term note payable 6,750 --
Current maturities of long-term debt 2,495 2,007
------------ -----------
Total Current Liabilities 37,214 32,631
Other Liabilities and Long-Term Debt
Workers' compensation benefits 41,934 39,965
Mine closing reserves 21,050 19,818
Other postretirement benefits 48,259 20,586
Deferred income taxes 7,522 4,542
Miscellaneous 13,197 10,309
Long-term debt (less current maturities) 109,389 75,693
------------ -----------
241,351 170,913
Shareholders' Equity
Common stock issued, 3,989,121 shares 59,837 59,837
Capital in excess of stated value 133,162 133,170
Retained earnings 35,506 42,360
------------ -----------
228,505 235,367
Less treasury stock at cost - 549,846 and
550,346 shares 27,891 27,917
------------ -----------
200,614 207,450
------------ -----------
$ 479,179 $ 410,994
============ ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Amounts in thousands, except for outstanding shares and per share amounts)
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Production Tonnage 1,178 1,081 3,231 3,860
=========== =========== ========= ==========
Sales Tonnage 1,448 944 3,887 3,908
=========== =========== ========= ===========
Sales $ 53,443 $ 37,288 147,904 145,005
Other Income:
Interest and dividends 1,030 726 2,879 2,130
Net investment gains 326 (39) 974 237
Miscellaneous 480 585 1,967 1,864
----------- ----------- --------- -----------
55,279 38,560 153,724 149,236
Costs and Expenses:
Cost of sales 49,858 32,899 145,081 129,458
Depreciation, depletion,
and amortization 2,360 2,623 7,381 8,476
Selling, general,
and administrative 1,365 1,014 4,617 4,742
Interest 802 655 2,550 1,579
Miscellaneous 389 287 1,006 930
----------- ----------- --------- -----------
54,774 37,478 160,635 145,185
----------- ----------- --------- -----------
Income (Loss) Before
Income Taxes 505 1,082 (6,911) 4,051
Income Taxes 437 572 (1,082) 1,673
----------- ----------- --------- -----------
Net Income (Loss) $ 68 $ 510 $ ( 5,829) $ 2,378
=========== =========== ========= ===========
Net Income (Loss) $ .02 $ .15 $ (1.69) $ .69
Per Share =========== =========== ========= ===========
Average shares outstanding
used in the computation
of per share amounts 3,439,275 3,438,775 3,439,231 3,438,740
<PAGE> 5
Shares issued and
outstanding at
September 30 3,439,275 3,438,775 3,439,275 3,438,775
Cash dividends declared
per share $ .15 $ .30 $ .60 $ .90
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 6
<TABLE>
<CAPTION>
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Nine Months Ended
September 30
-----------------------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (5,829) $ 2,378
Adjustments for non-cash items 7,198 9,537
Changes in certain assets and liabilities
(using) or providing cash 12,476 (10,055)
--------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 13,845 1,860
--------- ---------
INVESTING ACTIVITIES
Proceeds from investment activity 27,003 20,993
Acquisition of investments (16,496) (10,924)
Acquisition and development of
property, plant, and equipment (73,658) (45,661)
Proceeds from sale of property, plant, and
equipment 445 2,619
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES (62,706) (32,973)
--------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings 122,441 153,638
Payments on borrowings (81,507) (107,982)
Cash dividends paid (4,127) (5,158)
Treasury stock issued 18 19
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 36,825 40,517
--------- ---------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (12,036) 9,404
Cash and cash equivalents at beginning of year 30,656 22,737
--------- ---------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $ 18,620 $ 32,141
========= =========
<PAGE> 7
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid (net of capitalized interest) $ 2,570 $ 1,687
========= =========
Income taxes paid (tax refunds received) $ (4,408) $ (3,590)
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 8
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1995
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 nine month period ended September 30, 1995 are
not necessarily indicative of the results that may be expected for the
year ended December 31, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1994.
Note B - Long-term Debt
- -----------------------
In the third quarter of 1995, the Keystone Coal Mining Corporation
lenders and the lenders to the Eighty-Four Mining Company project
separately amended a portion of the respective loan agreements in order to
reset several of the loan covenants for future periods. In addition,
these lenders waived the applicability of certain covenants for the period
ended September 30, 1995. Due to the losses incurred thus far in 1995, the
Company has requested a waiver from the Eighty-Four lenders of certain
restrictions relating to its declaration of dividends.
Note C - Other Postretirement Benefits and Black Lung Benefits
- --------------------------------------------------------------
In the current year, the Company's wholly-owned subsidiary Eighty-Four
Mining Company, which acquired Mine 84 from a third party in December 1992,
hired a significant number of miners whose last previous service was with
the third party. Since the miners' prior service is included toward their
20 year vesting for postretirement health benefits, an accumulated
postretirement benefit obligation of $13,400,000 was recognized for these
recalled miners. In addition, the estimated past service costs for black
lung for these recalled miners, amounting to $3,000,000 was recognized.
These were recorded as adjustments to the original purchase price of the
Mine 84 assets in the current quarter.
As previously discussed in the footnotes to the annual financial
statements, in connection with the new Homer City Coal Supply Agreement,
the unrecognized cost of postretirement benefits attributable to service
prior to January 1, 1995 of Helvetia employees is being reimbursed by the
Homer City Station Owners over three years beginning in 1995.
<PAGE> 9
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
September 30, 1995
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, 1994:
Results of Operations
- ---------------------
The Company's Keystone Coal Mining Corporation subsidiary operations
stabilized during the current quarter after experiencing significant losses
in each of the first two quarters. Keystone's production for the three
months ended September 30 was 140,000 tons, or 23%, higher than in the
third quarter of 1994. However, on a year to date basis, Keystone's
production was 340,000 tons, or 14%, below 1994 levels. In order to reduce
Keystone's inventory of unprocessed coal resulting from problems
experienced at its coal cleaning plant, Keystone curtailed production at
its deep mines from March 11 through mid-April. Keystone has also
experienced poor geological conditions at several mines and an overall
decline in productivity in 1995. These factors resulted in a pretax loss
at Keystone of $9.8 million for the nine months ended September 30, 1995.
Keystone's sales tonnage, including coal purchased from others, for
the three months ended September 30 was 515,000 tons higher than tonnage
sold in the third quarter of 1994. On a year to date basis, Keystone
sales are 171,000 tons, or 7%, higher than 1994 amounts. Keystone tonnage
sold for the last half of 1994 and the first half of 1995 was limited by
problems with major modifications to its coal cleaning plant in 1994 which
resulted in the substantial buildup of inventory. Further modifications
to the coal cleaning plant were undertaken during the second quarter and
successfully completed on July 15, 1995. Since that time, the cleaning
plant has been operating as designed and inventory quantities are
approaching normal levels.
Helvetia, in 1995, is operating under a new base price long-term
coal sales agreement which replaced the previous cost-plus agreement.
Two of Helvetia's mines were closed late in 1994 and a new mine completed
development in the second quarter of this year. It currently operates two
mines. Helvetia's sales tonnage was 4% and 14% lower for the third
quarter and first nine months of 1995, respectively, than in the prior
year, while production tonnage was 23% and 27% lower for the third quarter
and first nine months of 1995, respectively, than in 1994. Helvetia's
older operating mine has experienced poor geological conditions and
unacceptable productivity levels which have resulted in this subsidiary's
recording pretax losses of $1.2 million for the current quarter and
$2.9 million for the nine months ended September 30, 1995.
<PAGE> 10
The first longwall mining system was installed at the Company's
Eighty-Four Mining Company subsidiary mine in September. The mine will
continue to be in the development stage until 1997 when a second longwall
mining system is scheduled to be operational at which time the mine will
be at its expected capacity of 6.6 million annual tons. Eighty-Four Mining
Company's results, other than its provision for income taxes, are not
included in the accompanying Consolidated Condensed Statements of Income
since it is in the development stage.
The increase in interest and dividend income in 1995 is due to a
combination of higher amounts invested and an increase in interest rates
from those in effect during the corresponding nine months of 1994.
The decrease in depreciation, depletion, and amortization in 1995 was
primarily due to the decline in tons produced and the inclusion in 1994 of
the accelerated write-off of assets associated with the two Helvetia mines
closed late in that year.
Selling, general, and administrative expenses were higher for the
third quarter of 1995 when compared to 1994 amounts which included a
favorable adjustment for certain state tax accruals.
Interest expense was higher in 1995 than in 1994 due to higher prime
interest rates and increased amounts borrowed to finance the buildup of
Keystone's coal inventory. The Company's Eighty-Four Mining Company
subsidiary's interest expense is being capitalized due to its being in
the development stage.
Higher income tax provisions recorded for the Eighty-Four subsidiary
resulted in higher overall effective tax rates in the current quarter as
well as a lower credit provision than would normally be expected for the
current year to date.
Management continues to address the need for substantial improvements
in productivity and reduction in overall operating costs at Keystone's and
Helvetia's mines. In this regard, Helvetia and Keystone each added a
continuous haulage unit to their operations during both the second and
third quarters. Discussions with Keystone's customers to explore
appropriate revisions to Keystone's long-term coal sales agreement
continue. As previously reported, resolution of these preliminary
discussions may involve reductions in the annual rate of future coal
deliveries from Keystone's mines and the conversion from a cost-plus
pricing mechanism to a base price plus escalation agreement.
The Company has granted an option to a third party for the sale of
two tracts of surface land totalling approximately 400 acres, each of
which includes a sizeable coal refuse pile. This option expires on
November 30, 1995. The Company would have a significant profit from
the sale of these properties if the option is exercised.
<PAGE> 11
Liquidity and Capital Resources
- -------------------------------
The Company's working capital at September 30, 1995 was $27 million.
The Company's Keystone subsidiary is in the process of extending its line
of credit facility beyond March 31, 1996. Helvetia has utilized
internally generated funds for development of its new mine and
construction of its new coal preparation plant, both of which became
operational in the first half of 1995. As of September 30, 1995,
Keystone had $4.7 million available to borrow under its financing
agreements and Eighty-Four Mining Company had borrowed $29 million of the
$50 million available under its revolving credit agreement. During the
current quarter, Eighty-Four successfully concluded $17 million of lease
financing for its first longwall mining system which was installed in
September. This transaction was recorded as a capitalized lease.
In view of the operating results, the Company reduced its quarterly
dividends payable June 1 and September 1, 1995 from $.30 per share to
$.15 per share.
<PAGE> 12
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, 1995
<PAGE> 13
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-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 18,620
<SECURITIES> 0
<RECEIVABLES> 31,383
<ALLOWANCES> 0
<INVENTORY> 7,362
<CURRENT-ASSETS> 63,964
<PP&E> 506,710
<DEPRECIATION> 187,579
<TOTAL-ASSETS> 479,179
<CURRENT-LIABILITIES> 37,214
<BONDS> 118,634
<COMMON> 59,837
0
0
<OTHER-SE> 140,777
<TOTAL-LIABILITY-AND-EQUITY> 479,179
<SALES> 147,904
<TOTAL-REVENUES> 153,724
<CGS> 145,081
<TOTAL-COSTS> 145,081
<OTHER-EXPENSES> 13,004
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,500
<INCOME-PRETAX> (6,911)
<INCOME-TAX> (1,082)
<INCOME-CONTINUING> (5,829)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,829)
<EPS-PRIMARY> (1.69)
<EPS-DILUTED> (1.69)
</TABLE>
