<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
-------------- ---------------
Commission file number 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
incorporation or organization) Identification No.)
655 Church Street, Indiana, Pennsylvania 15701
- ---------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412-349-5800 Securities
registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- -----------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
(Title of class)
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 .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
As of March 8, 1996, the aggregate market value of the voting stock of
Registrant held by its non-affiliates was $54,095,057.
Indicate the number of shares of each of Registrant's classes of common stock
outstanding as of March 8, 1996: 3,440,984 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of Registrant's Annual Report to Shareholders for the year
ended December 31, 1995 in Parts I, II and IV.
2. Portions of Registrant's Proxy Statement for its 1996 Annual Meeting
of Shareholders in Part III.
<PAGE> 2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
---------------- -----------------
Commission file number 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
incorporation or organization) Identification No.)
655 Church Street, Indiana, Pennsylvania 15701
- ---------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412-349-5800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
-----------------------------
(Title of class)
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 .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
---
As of March 8, 1996, the aggregate market value of the voting stock of
Registrant held by its non-affiliates was $54,095,057.
Indicate the number of shares of each of Registrant's classes of common stock
outstanding as of March 8, 1996: 3,440,984 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
1. Portions of Registrant's Annual Report to Shareholders for the year
ended December 31, 1995 in Parts I, II and IV.
2. Portions of Registrant's Proxy Statement for its 1996 Annual Meeting
of Shareholders in Part III.
<PAGE> 3
PART I
ITEM 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS.
Registrant and its predecessors have been engaged in the
mining of coal in central and western Pennsylvania since 1881. Since the
mid-1960's, Registrant and its subsidiaries have been principally engaged in
the deep mining of bituminous steam coal for sale to electric generating plants
located adjacent to or near Registrant's mines. Substantially all of these
sales have been made pursuant to long-term coal supply contracts. During 1995,
sales to the utility customers of Registrant's subsidiaries were at or near
minimum contract requirements. In 1992, through a subsidiary, Registrant
acquired coal properties and an underground coal mine in southwestern
Pennsylvania. Development and rehabilitation work continued at this mine in
1995. When such work is completed, which is anticipated in 1997, Registrant
will be engaged, as a material portion of its planned operations, in the
general eastern utility coal market in addition to the sales of coal pursuant
to long-term coal supply contracts.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Registrant is of the opinion that all of its material
operations are within one industry segment and that no information as to
business segments is required pursuant to Statement of Financial Accounting
Standards No. 14 or Regulation S-K.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
Registrant, through its subsidiaries, is currently principally
engaged in deep and, to a minor extent, surface mining of bituminous steam
coal in Pennsylvania. A majority of Registrant's deep-mined production
in 1995 was sold pursuant to two long-term coal supply contracts, described
below, to two mine-mouth electric generating plants adjacent to or near its
mines. Steam coal is not suitable for metallurgical use because of excessive
levels of ash or sulphur.
United Eastern Coal Sales Corporation ("United Eastern"), a
wholly-owned subsidiary, is a coal broker and sales agent which buys and sells,
either as principal or agent, coal produced in the United States. Registrant's
wholly-owned subsidiary, Rochester & Pittsburgh Coal Co. (Canada) Limited ("R&P
Canada"), is engaged in the sale of coal to customers in Canada. United
Eastern and R&P Canada serve customers principally in the Mid-Atlantic states
and the Province of Ontario.
Leatherwood, Inc. ("Leatherwood"), a wholly-owned subsidiary
of Registrant, is engaged in developing solid waste management facilities. In
1995, the Pennsylvania Department of Environmental Protection (the "DEP")
issued a permit to operate a 1,500 ton-per-day municipal solid waste landfill
in Jefferson County, Pennsylvania. Various local governmental entities have
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appealed the issuance of the permit by the DEP. Leatherwood has made no
decision with respect to commencement of construction of the landfill. This
facility is also designed to accept residual waste. Three Pennsylvania
counties have designated this landfill as a primary disposal facility in their
statutorily-required county master plan for the disposal of solid waste.
Discussions with other counties and waste collectors are continuing. Two
contracts with collection companies or brokers have been executed.
In 1992, Registrant established two wholly-owned subsidiaries,
Eighty-Four Mining Company ("Eighty-Four") and Lucerne Land Company ("Lucerne
Land"), which acquired coal properties and Mine No. 84 from Bethlehem Steel
Corporation and affiliated entities ("Bethlehem") on December 31, 1992. The
final purchase price of Mine No. 84 was $53.6 million after taking into account
post-closing adjustments.
Since February 1993, Eighty-Four has been engaged in the
renovation, rehabilitation, and replacement of key operating systems. Part of
this work, which included installation of a new five-mile long, 6,700 ton per
hour underground belt conveyor system, a new portal and ventilating shaft and
other underground rehabilitation work, construction of new above-ground coal
storage and unit-train load out facilities, is completed. Other work,
including upgrading coal handling and preparation facilities and development
work to accommodate the installation of the first of the two planned longwall
mining units was completed in 1995. The first longwall commenced operations in
the third quarter of 1995; the second unit is scheduled to commence operations
in 1997. When full capacity is reached, which is expected to occur in 1997,
Eighty-Four's facilities will permit production of approximately 7.0 million
tons of coal per year. In connection with the development of the longwall
panels and the initiation of mining in longwall panels, one of which was
completed in 1995, Eighty-Four produced 1,344,189 tons of coal in 1995 all of
which were sold in the commercial market to twelve customers, of whom ten were
electric utilities and two were steel companies.
In September 1995, the DEP issued an amended Coal Mining
Activity Permit (the "Permit") to Eighty-Four. The Permit approved the mining
plan for Mine No. 84 and sets forth requirements for the protection of surface
structures and facilities. A citizens group, a township and two local utility
companies have filed separate appeals of various provisions of the Permit.
Eighty-Four has also appealed certain provisions. See also Item 3 hereof.
The properties acquired from Bethlehem are estimated to
contain approximately 175 million saleable(1) tons of high quality Pittsburgh
Seam steam and metallurgical coal, of which approximately 80 million tons are
within Eighty-Four's current mine plan which provides for mining through 2008.
The 175 million ton estimate, which was developed by Registrant's Geology
- --------------------
(1) Saleable means total coal mine output less tonnage rejected during
processing for market.
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and Engineering personnel and which is subject to continuing review and
verification by them, is based upon review of data and test results provided by
Bethlehem, data available from outside sources, application of generally
accepted mining practices in the geographic area of mining, and generally
accepted mining practices in the Pittsburgh Seam utilizing longwall mining
techniques.
During 1995, efforts to secure arrangements or contracts for
the sale of coal by Eighty-Four continued. As a result of such efforts,
Eighty-Four expects to sell approximately 3.6 million tons of coal from Mine
No. 84 in 1996 to utility and industrial customers, in either spot market sales
or under longer term contracts none of which is expected to extend beyond 1999.
The coal from Mine No. 84, however, is of such quality that it should position
Registrant to respond to the increased demand for coal that meets the air
quality standards under Phase I of the Clean Air Act. Longer-term demand for
this lower sulphur coal should remain strong because, after cleaning, the coal
will remain a cost-effective product for electric generating stations utilizing
scrubbers. Additionally, a significant portion of the coal from Mine No. 84
has historically been sold on the domestic and international metallurgical
market and, after initial tests by potential customers, favorable results have
been obtained. As noted above, two such contracts for metallurgical use were
entered into in 1995, and in 1996, Mine No. 84 will ship its first coal to an
international customer. Marketing activities undertaken by Eighty-Four have
been directed to a diverse geographic and customer base, thus reducing reliance
upon a single customer, group of customers, or type of market while enabling
price escalation risks to be partially hedged due to the varying contract
durations anticipated.
Registrant's wholly-owned subsidiary, Keystone Coal Mining
Corporation ("KCMC") is a party to a coal supply agreement effective as of
January 1, 1991 (the "Keystone Agreement") with the seven public utilities (the
"Keystone Owners") that own the Keystone Steam Electric Station (the "Keystone
Station") near Shelocta, Pennsylvania. The Keystone Agreement amended,
extended, and restated an earlier agreement dated January 1, 1972, among the
same parties pursuant to which coal has been delivered to the Keystone Station
by KCMC. The Keystone Agreement, which was further amended in 1995, has a term
ending on December 31, 2004, and provides that KCMC will sell and deliver
3,250,000 tons annually subject to increase or decrease by up to 250,000 tons
through 1999. In 1995, KCMC delivered 3,500,065 tons to the Keystone Station
pursuant to the Keystone Agreement. Should the parties not agree to an
extension of the Keystone Agreement beyond 2004, production and deliveries will
decrease between 2000 and 2004 with an aggregate of 6,500,000 tons to be
delivered during that five-year period. Substantially all of the coal sold
pursuant to the Keystone Agreement is delivered by a series of conveyor belts
directly from KCMC's mines (the "Keystone Mines") to the Keystone Station.
In connection with its Keystone Mines, KCMC also owns and
operates a coal handling and preparation facility (the "Keystone Cleaning
Plant") which processes coal to enhance the thermal value of the product
delivered to the Keystone Station.
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The price paid by the Keystone Owners to KCMC pursuant to the
Keystone Agreement consists of an amount equal to all costs of production
incurred by KCMC in mining, processing, and delivering the coal, subject to a
price cap, including mine development costs and capital expenditures, mine
closing costs, general and administrative costs, interest costs, plus a profit
that varies according to KCMC's ability to meet or exceed certain cost
standards, plus a royalty of $.25 per ton, with an annual minimum royalty
payment of $375,000. The profit calculation is subject to adjustment for
cumulative changes in the Gross National Product Implicit Price Deflator ("GNP
Deflator") based upon the Btu content of the coal delivered and KCMC's cost of
production compared to standard costs established in the Keystone Agreement.
The standard costs are adjusted according to various cost and market price
indices.
KCMC dedicated approximately 90 million tons of coal at
January 1, 1991 pursuant to the Keystone Agreement which coal cannot be mined
for sale to others without the Keystone Owners' consent. Substantially all of
the dedicated coal properties are leased or subleased by KCMC from Registrant.
Under certain conditions described in the Keystone Agreement, the Keystone
Owners have the option to purchase all of the capital stock of KCMC at the net
book value thereof at the time of exercising the option ($14,334,425 at
December 31, 1995) or its net assets at book value, and to lease KCMC's coal
properties from Registrant. In such event, Registrant would receive a royalty
equal to approximately $1.03 per ton, a substantial portion of which would be
adjusted for changes in the GNP Deflator from December 1990. See Note C of the
Notes to the Consolidated Financial Statements incorporated herein by
reference. The Keystone Owners also have the right to terminate the Keystone
Agreement effective at the end of 1999 or any calendar year thereafter, upon
five years prior notice, if the Keystone Owners determine, in their sole
discretion, that it is unlawful or commercially impracticable, in light of the
then applicable governmental regulations, to operate the Keystone Station with
the coal KCMC is able to produce. The Keystone Owners also have the right to
terminate the Keystone Agreement if certain size and quality requirements are
not met by KCMC.
In 1995, KCMC delivered 3,161,913 tons of coal from its
Keystone Mines and 338,152 tons of purchased coal to the Keystone Station,
compared with deliveries to the Keystone Station in 1994 of 2,709,355 tons of
coal from its Keystone Mines and 196,624 tons of purchased coal.
Registrant's wholly-owned subsidiary, Helvetia Coal Company
("Helvetia"), is a party to a coal sales agreement effective January 1, 1995
(the "1995 Homer City Agreement") with the two public utilities (the "Homer
City Owners") that own the Homer City Steam Electric Station (the "Homer City
Station") near Homer City, Pennsylvania.
The 1995 Homer City Agreement provides that Helvetia will sell
and deliver to the Homer City Owners approximately 14 million tons of coal
through 2003 at an initial rate of 1.8 million tons of coal per year. Such
coal is leased from Registrant. Coal sold pursuant to the 1995 Homer City
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Agreement is delivered to the Homer City Station by conveyor belts and trucks.
To enhance the quality of delivered coal and thereby gain the benefit of
premiums under the pricing structure of the 1995 Homer City Agreement, Helvetia
built a new coal cleaning plant (the "Helvetia Cleaning Plant") which began
operation in February 1995.
The price paid by the Homer City Owners to Helvetia pursuant
to the 1995 Homer City Agreement is a base price with escalation and
adjustments based on the quality of the coal delivered. The 1995 Homer City
Agreement also provides for early termination by either party under hardship
provisions as defined in the 1995 Homer City Agreement and further allows the
Homer City Owners to terminate the 1995 Homer City Agreement for their
convenience, in which event they are required to make certain payments to
Helvetia. See Note C of the Notes to Consolidated Financial Statements
incorporated herein by reference.
In 1995, Helvetia delivered 1,421,383 tons of coal from its
deep mines and 171,763 tons of purchased coal to the Homer City Station
compared with deliveries to the Homer City Station in 1994 of 1,786,239 tons of
deep-mined coal and 0 tons of purchased coal. In addition, in 1995, 2,372 tons
of coal were delivered to the Homer City Station from production incidental to
the development of a drift access to a new underground mine compared with
27,283 tons of coal from such development in 1994. In 1995, 4,593 tons of coal
recovered from refuse were delivered to the Homer City Station.
In 1995, eight deep mines of Registrant's subsidiaries
supplied coal to the Homer City and Keystone Stations. The mines are described
in Item 2, to which reference is hereby made.
Registrant maintains comprehensive general liability and
umbrella liability, pollution liability, and boiler and machinery insurance for
all of its operations. Registrant also maintains business interruption and
property damage insurance for all of its subsidiaries' operations and
properties except for KCMC. KCMC is not fully insured for business
interruption and property damage because it is able to recover such losses in
whole or in part under the Keystone Agreement. Registrant has self-insurance
programs for workers' compensation and has insurance coverage for catastrophic
losses. Registrant also has automobile liability, fiduciary liability, and
fidelity insurance.
The bituminous coal industry in general is intensely
competitive. Although the majority of Registrant's coal production is
currently sold pursuant to the Keystone and 1995 Homer City Agreements, because
of the nature of the power supply system in the Mid-Atlantic Region of the
United States, Registrant remains subject to material competition from other
coal suppliers primarily as to price, coal quality, and environmental
considerations, and other types of fuel, principally oil, natural gas,
hydroelectric power, and nuclear fuel. That system is operated as a pool of
electric power so that to the extent other sources of power within the system,
or available to it, are cheaper than the power produced at the Keystone and
Homer City Stations, the Keystone and Homer City
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Owners could reduce the amount of power produced by those Stations and,
consequently, the amount of coal purchased from Registrant under the Keystone
and 1995 Homer City Agreements could be reduced.
During 1995, a portion of Registrant's surface-mined coal was
sold to Helvetia. To the extent that Registrant is engaged in the wholesale and
retail sale of coal, it constitutes a minor competitive factor in such industry
and is in competition with other sellers of coal and other fuels, principally
oil and natural gas.
Registrant's business is materially dependent on the Keystone
Agreement and the 1995 Homer City Agreement, described herein. See also Note C
of the Notes to the Consolidated Financial Statements incorporated herein by
reference. Gross sales pursuant to the Keystone Agreement and the Homer City
Agreement accounted for approximately 66% and 26%, respectively, of
Registrant's sales in the year ended December 31, 1995. If the Owners of the
Keystone and Homer City Stations were to use other stations not served by
Registrant to meet a greater percentage of their power generation demand, or if
power were procured from other sources, their requirements for the Keystone and
Homer City Stations could decrease, and if such decrease were significant, the
change could materially adversely affect the business of Registrant.
Information concerning backlog is not considered material to
an understanding of Registrant's business.
At December 31, 1995, Registrant had an estimated
recoverable(2) reserve base(3) in leased or owned properties in Armstrong,
Indiana, Westmoreland, Washington, and other nearby Pennsylvania counties, of
approximately 711 million tons of coal. During 1995, Registrant produced
approximately 4,487,228 tons of coal excluding coal produced from Mine No. 84.
Of the 711 million tons of estimated recoverable reserve base, approximately 79
million tons of coal (11%), are dedicated under the Keystone and 1995 Homer City
Agreements. With the exception of 80 million of the 175 million saleable tons of
coal acquired from Bethlehem, recovery of the remaining unassigned recoverable
reserve base would require new mines which would entail substantial capital
expenditures the amount of which cannot be estimated at this time. Registrant
has made no decision regarding any new mines and, depending upon Registrant's
continuing evaluation of economic conditions affecting the sale of coal in
Registrant's
- ------------------------
(2) Those portions of the reserve base that are owned or leased by
Registrant that are potentially extractable using an appropriate
recovery factor(s) to account for coal lost-in-mining and dilution
introduced during the mining process.
(3) Reserve base means those parts of an identified resource, proven and
probable, that are currently economic, and some of those that are
currently sub-economic that have a reasonable potential for becoming
economically available within planning horizons beyond those that
assume proven technology and current economics.
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present area of operations and the effect of increasingly stringent
environmental requirements, Registrant may not open new mines to access its
existing, undedicated coal. The estimated recoverable reserve base stated
herein was determined by Registrant's staff based upon the prior experience of
Registrant in mining in the area of its present recoverable reserve base and
upon data from tests conducted by Registrant, and Registrant's mining
experience in the seams and area of Registrant's present recoverable reserve
base, and represent coal which is recoverable on the basis of current mining
practices and techniques. Consequently, Registrant's estimates are subject to
continuing review and refinement.
Registrant also owns coal lands in West Virginia, some of
which are under lease to another, unrelated coal company. The leased reserves
are near exhaustion. Registrant also subleases coal lands in West Virginia to
another unrelated coal company.
Patents and licenses are not material to the operation of
Registrant's business.
In order to acquire, and to determine the location and extent
of, new sources of coal properties, Registrant has entered into option
agreements with owners of coal lands in various parts of Pennsylvania. Under
these agreements, Registrant obtains the right to explore for and, at its
option, to acquire title by lease or purchase to the coal.
Registrant has made no public announcement, nor has
information otherwise become public, about any new product or line of business
which would require the investment of a material amount of Registrant's total
assets, other than the development of Leatherwood and the acquisition and
development of Mine No. 84 and coal reserves as noted above. While a
substantial capital investment may ultimately be made in development of
Leatherwood's projects, the amount of such investment has not yet been
determined. Through December 31, 1995, Registrant has made an investment in
the Mine No. 84 project of $100 million (including the $53.6 million adjusted
purchase price) and will make additional investments in the form of loans or
equity contribution in the future. During 1994, and as reported in a Form 8-K
Current Report dated June 16, 1994, Eighty-Four and Lucerne Land entered into
agreements for $85 million in long-term debt, $71 million of which was
outstanding at December 31, 1995. In addition, Eighty-Four entered into a $17
million capital lease. Over the life of Mine No. 84, additional funding,
including capital and operating leases to provide remaining funding
requirements of the project, is anticipated. See also Notes B and D of the
Notes to the Consolidated Financial Statements incorporated herein by
reference.
Registrant's business is subject to numerous state and federal
statutes which establish strict standards with respect to mining health and
safety and environmental consequences. In addition to prescribing civil and
criminal penalties for violations, both the Federal Mine Safety and Health Act
of 1977 and the Surface Mining Control and Reclamation Act of 1977 authorize
the closure under certain circumstances of noncomplying operations.
Pennsylvania statutes applicable to Registrant's
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mining operations are both more and less stringent than the federal statutes.
Numerous federal and state laws and regulations pertaining to the discharge of
materials into the environment impose requirements for capital expenditures in
the normal course of mine development and for subsequent events which cause
adverse environmental effects, irrespective of fault or willfulness by the
mining company involved. These statutes have in the past and will in the
future require substantial capital investments and may adversely affect
productivity. Because of the inclusion of environmental-related elements in
the normal expenditures for mine development and operation, environmental-
related costs cannot be precisely isolated but Registrant does not believe such
costs have materially adversely affected Registrant's financial condition. See
also Item 3 hereof.
Both federal and state law and regulations impose sulphur
emission standards, which will increase in stringency during the next several
years, on uses of coal. However, substantially all of Registrant's coal is
sold pursuant to the Keystone and 1995 Homer City Agreements, which contain no
provisions warranting that the sulphur content of the coal will meet emission
standards when burned. Should the cost of compliance as an element of
production costs become burdensome, the competitive position and earnings of
Registrant could be adversely affected. The impact of recent legislation on
Registrant's business, especially the Clean Air Act Amendments of 1990, remains
uncertain at this time. Registrant believes that improvements in clean coal
technologies or in techniques to neutralize or treat emissions from generating
stations are such that, with the benefit of such technologies, its coal will
meet standards under currently enacted legislation. However, these amendments
could have an adverse effect on the sales of coal to the Keystone Station and
the Homer City Station (the "Stations"). Also, as described above, at the end
of 1999 and any year thereafter, the Keystone Owners have the right to
terminate the Keystone Agreement if it is unlawful or commercially
impracticable, in light of then applicable government regulations, to operate
the Keystone Station with the coal KCMC is able to produce. Moreover, in the
event of the enactment of legislation or regulations imposing more stringent
environmental standards on the Stations, Registrant could be adversely affected
if the owners of the Stations purchased more coal from others or generated less
electricity from these Stations. Environmental legislation and regulation may
have an adverse effect on Registrant's ability to market its coal reserves not
dedicated under existing contracts and may require modifications to the
marketing plans of Eighty-Four.
As indicated in the Consolidated Financial Statements
incorporated herein by reference, Registrant has made substantial capital
investments in the past three years in addition to the development of Mine No.
84. Inasmuch as a substantial portion of these investments has been for
several purposes, e.g., to extend mine and equipment life, to increase
productivity, and to comply with safety and/or environmental legislation,
Registrant cannot indicate with precision capital investments required solely
to comply with environmental and safety legislation. However, Registrant
estimates such expenditures totalled approximately $3.4 million in the five
years ended December 31, 1995, and it is
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estimated that annual capital expenditures of approximately $ 1 million per
year for the next several years will be attributable to environmental and
safety laws. Such legislation also adversely affected Registrant's deep mine
productivity. No assurance can be given that additional, more stringent mining
and environmental legislation will not be enacted or that such legislation, if
enacted, would not have a material adverse effect upon Registrant's operations.
Registrant currently employs approximately 1,670 persons, of
whom 1,510 are engaged directly in the production and processing of coal for
sale and 160 are engaged in executive, administrative, engineering,
exploration, sales, and clerical capacities. Registrant has approximately
1,216 employees who are covered by the National Bituminous Coal Wage Agreement
of 1993 (the "1993 Agreement") with the UMWA, which, was ratified on December
16, 1993 after a seven-month strike against Bituminous Coal Operators'
Association ("BCOA") member companies. The 1993 Agreement will terminate on or
after August 1, 1998 by either party giving to the other party at least 60 days
notice of the desired termination date. The 1993 Agreement may be reopened at
the election of the UMWA prior to the third and fourth anniversary dates for
the sole purpose of renegotiating changes in wage rates and pension benefits,
and may be reopened at the election of the UMWA or the BCOA prior to the third
and fourth anniversary dates for the sole purpose of renegotiating changes in
the health care bonus and annual health care deductible established under the
1993 Agreement. While Registrant's subsidiaries resigned from BCOA in 1994,
they remain signatories to the 1993 Agreement.
Registrant's business is not seasonal in any material respect.
Registrant is engaged principally in a single line of business,
the mining and sale of coal. Excluding the sales of Eighty-Four which is in the
development stage, the following table sets forth the amount of Registrant's
sales contributed by each class of Registrant's products which accounted for
more than 10% of Registrant's total sales during each of Registrant's three
fiscal years ended December 31, 1995, 1994, and 1993.
<TABLE>
<CAPTION>
Sales of
Coal Under Other
Year Ended Long-Term Sales of
December 31 Contracts Coal Other Total Sales
- ----------- ------------ -------- ----- -----------
(Amounts expressed in thousands)
<S> <C> <C> <C> <C>
1995 $198,394 $10,730 $7,562 $216,686
1994 173,774 10,765 7,452 191,991
1993 141,093 8,678 3,857 153,628
</TABLE>
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES.
In the years ended December 31, 1995, 1994, and 1993, R&P
Canada, had sales of $10,268,032, $10,985,434, and $8,093,174, respectively,
primarily to customers located in
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Canada. Registrant does not consider its sales of coal in Canada to be subject
to any particular risks merely because its customers are located in Canada.
However, foreign business in general can be subject to special risks, including
exchange controls, changes in currency valuations, restrictions on the
repatriation of funds, restrictions on the ownership of foreign corporations or
the composition of their boards of directors, export restrictions, the
imposition or increase of taxes and tariffs, and international financial
instability. No assurance can be given that any of these factors might not
have an adverse effect on Registrant's future foreign operations.
ITEM 2. PROPERTIES.
Registrant's executive and administrative offices are located
in a 76,309 square foot building in Indiana, Pennsylvania, which it owns.
Registrant also owns approximately 39,100 acres of surface land in
Pennsylvania. Registrant's subsidiaries lease various properties in the United
States and Canada under leases having a current annual aggregate rental of
approximately $209,000. These leases expire at various times over the next
five years and the amount of aggregate rental payable during that period will
depend on the extent of renewals.
As indicated in Item 1 hereof, as of December 31, 1995, based
upon the prior experience of Registrant in mining in the area of Registrant's
operations and data from tests conducted by it and, in the case of the coal
properties acquired by Eighty-Four and Lucerne Land, a review of data provided
by others and mining practices in the area and seam acquired, Registrant had an
estimated recoverable reserve base in leased or owned properties in Indiana,
Armstrong, Westmoreland, Washington and other nearby Pennsylvania counties of
approximately 711 million tons of coal. Substantially all of the coal leased
by Registrant is leased until exhaustion. Registrant has not conducted
sufficient tests to determine the degree to which reserves, if any, exist on
its owned or leased properties located outside of Indiana, Armstrong,
Westmoreland, Washington and other nearby Pennsylvania counties.
Including three of the Keystone Mines closed at the end of
1995, Registrant operated nine underground mines in 1995. Information on the
production of those mines and on the estimated recoverable reserve base of
these mines and the estimated recoverable reserve base of Registrant is
provided in the following table:
11
<PAGE> 13
Rochester & Pittsburgh Coal Company
Estimated Recoverable Reserve Base as of December 31, 1995
Production Tonnage
<TABLE>
<CAPTION>
------------------------- -------------------------------------
RECOVERABLE RESERVE BASE PRODUCTION IN TONS
(TONS X 1000)(1)
------------------------- -------------------------------------
PROVEN PROBABLE TOTAL 1995 1994 1993
------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Underground
Keystone Coal Mining Corp.
Assigned - Dedicated
Emilie(3) 3,081 1,688 4,769 843,104(4) 1,001,453(4) 855,237(4)
Emilie #4(3) 0 0 0 249,617(4) 218,375(4) 216,179(4)
Jane(3) 0 0 0 358,813(4) 515,978(4) 565,980(4)
Margaret #11 - 2(3) 0 0 0 361,343(4) 361,700(4) 220,882(4)
Margaret #11 - 3(3) 0 505 505 0(4) 101,445(4) 20,691(4)
Plumcreek #1(3) 2,025 262 2,287 296,244(4) 129,007(4) 0
Urling #1(3) 0 5,517 5,517 726,567(4) 753,425(4) 452,353(4)
Unassigned - Dedicated 36,957 17,642 54,599 0 0 0
Helvetia Coal Company
Assigned - Dedicated
Lucerne #6 - E(2) 4,299 2,979 7,278 988,945 1,089,693 377,946
Marshall Run(2) 2,527 1,155 3,682 451,768 531 0
Lucerne #8(2) 0 0 0 0 597,567 332,522
Lucerne #9(2) 0 0 0 0 559,391 271,178
Unassigned - Dedicated 0 0 0 0 0 0
Lucerne Land Co.
Assigned
Mine No. 84(5) 68,769 9,178 77,947 1,344,189(4) 288,588(4) 71,559(4)
Unassigned 0 95,612 95,612 0 0 0
R & P Coal Co.
Unassigned 190,837 263,771 454,608 0 0 0
Total - Underground 308,495 398,309 706,804 5,620,590 5,617,153 3,384,527
Surface
Assigned 362 185 547 210,827 78,357 53,744
Unassigned 1,906 2,008 3,914 0 0 0
Total - Surface 2,268 2,193 4,461 210,827 78,357 53,744
TOTAL 310,763 400,502 711,265 5,831,417(4) 5,695,510(4) 3,438,271(4)
</TABLE>
Notes:
Recoverable - Those portions of the reserve base that are owned or
leased by Registrant that are potentially extractable
using an appropriate recovery factor(s) to account
for coal lost-in-mining and dilution introduced
during the mining process.
Assigned - Areas that can be mined through the use of existing
mine openings and coal handling and processing
facilities based on the Registrant's current mining
plans.
12
<PAGE> 14
Additional ventilation openings may be required for
underground mines due to normal mine expansion.
Unassigned - Areas that would require substantial capital
expenditures for new mine openings and equipment
prior to any mining activity.
Dedicated - Areas committed under coal sales agreements.
(1) These figures represent calculations based upon continuing evaluation
and refinement of estimates reflecting evaluation of new and existing
geologic data, improved computational methods, and the effects of
legal and environmental considerations, and are rounded to the nearest
thousand. "Proven" tonnage is estimated by projection of thickness
and quality data for a radius of 2,000 feet from a point of
measurement. "Probable" tonnage is estimated by projection of
thickness and quality data for a radius greater than 2,000 feet and
less than 5,000 feet from a point of measurement and when
consideration is made for other factors, such as mining conditions,
coal quality and mine operating experience.
(2) Operated by Helvetia.
(3) Operated by KCMC.
(4) Tonnage figures represent clean coal after washing and preparation at
the Keystone Cleaning Plant, the Helvetia Cleaning Plant or at Mine
No. 84's preparation facilities. See also Item 1 hereof.
(5) Operated by Eighty-Four.
Surface mining is also conducted by Registrant and by
independent contractors utilized by Registrant, who are obligated by law and by
contract with Registrant to restore the surface in accordance with Pennsylvania
and federal laws. Production from surface mining for the last three years has
been as follows: 1993--53,744 tons, 1994--78,357 tons and 1995--210,827 tons.
All surface-mined coal produced in 1995 was sold on the commercial market.
Registrant anticipates limited surface mining activity in the near future and,
therefore, while Registrant is continuing to acquire additional coal properties
suitable for surface mining, no assurance can be given that Registrant will be
able to maintain adequate resources for surface-mined coal in the future.
All of the properties of Registrant and KCMC dedicated under
the Keystone Agreement are subject to a mortgage given as security for
indebtedness of KCMC. All of the properties of Eighty-Four and Lucerne Land
are subject to a mortgage given as security for their indebtedness. Also, the
debt of Eighty-Four and Lucerne Land is further secured by certain investment
securities of Registrant. See Note D of Notes to Consolidated Financial
Statements incorporated by reference herein.
Registrant has miscellaneous other non-coal mineral interests,
primarily natural gas, which it leases to unrelated parties. Registrant also
participates in gas well joint ventures in Pennsylvania and nearby states.
13
<PAGE> 15
ITEM 3. LEGAL PROCEEDINGS.
As described in Item 1 hereof, the nature of Registrant's
business subjects it to numerous state and federal laws and regulations
pertaining to environmental matters and administrative and judicial proceedings
involving alleged violations thereof are considered incidental to Registrant's
business.
Other than the Item discussed herein, Registrant is not a
party to any pending litigation which it deems material to its financial
condition, although it is a party to litigation incidental to the conduct of
its business.
As noted in Item 1 hereof, during October and November 1995, a
citizens group, People United To Save Homes, The Township of South Strabane,
Pennsylvania American Water Company and Columbia Gas of Pennsylvania, Inc.
(collectively "the Appellants") filed separate appeals to the issuance by DEP
of an amended Coal Mining Activity Permit to Eighty-Four. Eighty-Four has also
appealed certain provisions of the Permit. The appeals, which have been
consolidated, are pending before the Pennsylvania Environmental Hearing Board
(the "EHB") at EHB Docket No. 95-231-R. While Registrant believes that the
appeals of the citizens group, the township and the utilities are without merit
and will be denied by the EHB, the outcome of such appeals cannot be determined
at this time. In the event that the Appellants were to prevail with respect to
material provisions of the permit, Eighty-Four might then be required to amend
its mining plan or to incur additional operating expenses which could have an
adverse financial effect on the Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Registrant did not submit any matters to a vote of security
holders during the fourth quarter of 1995.
14
<PAGE> 16
EXECUTIVE OFFICERS OF REGISTRANT.
Information on executive and other officers of Registrant as
of February 28, 1996, is as follows:
<TABLE>
<CAPTION>
Position Family
Name Age With Registrant Relationship
- ---- --- --------------- ------------
<S> <C> <C> <C>
Thomas W. Garges, Jr. 56 President and Chief
Executive Officer None
W. Joseph Engler, Jr. 55 Vice President and
General Counsel None
George M. Evans 48 Vice President and
Treasurer None
Peter Iselin 75 Vice President--Finance
and Secretary (1)
Thomas M. Majcher 43 Vice President--Corporate
Development None
A. W. Petzold 59 Vice President--
Operations None
</TABLE>
- --------------
(1) Mr. Peter Iselin is the father of Mr. O'Donnell Iselin II, and the
uncle of Mr. Gordon B. Whelpley, Jr., Directors of Registrant.
Officers of Registrant are elected annually by the Board of
Directors at its organization meeting following the Annual Meeting of
Shareholders.
Significant Employees of Registrant's Subsidiaries.
Information on certain significant employees of KCMC, Helvetia, and
Eighty-Four as of February 28, 1996, is as follows:
<TABLE>
<CAPTION>
Position With
Registrant's Family
Name Age Subsidiaries Relationship
- ---- --- ------------- ------------
<S> <C> <C> <C>
Robert D. Anderson 51 President -- Keystone None
Coal Mining Corporation
President -- Helvetia Coal
Company
Robert A. McGregor 53 President -- Eighty-Four None
Mining Company
</TABLE>
Each of the officers of Registrant or significant employees of
Registrant's subsidiaries named above has held a position with Registrant or a
subsidiary for the past five years with the exception of: Mr. McGregor who
joined Eighty-Four, as President in February 1993. Prior to 1993, he had been
President of Oneida Coal Company (1986-1991) and Shamrock Coal Company
(1990-1993), both subsidiaries of Sun Coal Company.
15
<PAGE> 17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The answer to this Item is incorporated by reference to
Registrant's 1995 Annual Report to Shareholders, which is included as Exhibit
(13) to this Form 10-K Report, at page 23.
ITEM 6. SELECTED FINANCIAL DATA.
The answer to this Item is incorporated by reference to
Registrant's 1995 Annual Report to Shareholders, which is included as Exhibit
(13) to this Form 10-K Report, at pages 24 and 25.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The answer to this Item is incorporated by reference to
Registrant's 1995 Annual Report to Shareholders, which is included as Exhibit
(13) to this Form 10-K Report, at pages 24 through 28.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The answer to this Item is incorporated by reference to
Registrant's 1995 Annual Report to Shareholders, which is included as Exhibit
(13) to this Form 10-K Report, at page 5, Report of Ernst & Young LLP,
Independent Auditors, at pages 6 through 22, and by reference to Item 14
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
During applicable time periods, Registrant has not changed
accountants and has had no disagreements with its accountants on accounting and
financial disclosure matters.
16
<PAGE> 18
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Except for information concerning executive officers of
Registrant included as an unnumbered item in Part I above, information relating
to the Directors of Registrant is set forth under the caption "Directors and
Nominees For Election as Director" in Registrant's definitive Proxy Statement
in connection with its Annual Meeting of Shareholders to be held May 7, 1996.
Such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to executive compensation is set forth
under the caption "Executive Compensation" in Registrant's definitive Proxy
Statement in connection with its Annual Meeting of Shareholders to be held May
7, 1996. Such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information relating to the ownership of equity securities of
the Registrant by certain beneficial owners and management is set forth under
the caption "Beneficial Ownership of Common Stock" in Registrant's definitive
Proxy Statement in connection with its Annual Meeting of Shareholders to be
held May 7, 1996. Such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information relating to certain relationships and certain
related transactions is set forth under the caption "Directors and Nominees For
Election as Director" in Registrant's definitive Proxy Statement in connection
with its Annual Meeting of Shareholders to be held May 7, 1996. Such
information is incorporated herein by reference.
17
<PAGE> 19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) Financial Statements, Financial Statement Schedules
and Exhibits:
1. Financial Statements
The following consolidated financial statements of
Rochester & Pittsburgh Coal Company and subsidiaries, included
in the Annual Report of Registrant to its shareholders for the
year ended December 31, 1995, are incorporated herein by
reference in Item 8 (pages 6 through 22 and page 5):
Consolidated balance sheets--
December 31, 1995, 1994, and 1993
Statements of consolidated income--
Years ended December 31, 1995, 1994, and 1993
Statements of consolidated shareholders' equity--
Years ended December 31, 1995, 1994, and 1993
Statements of consolidated cash flows--
Years ended December 31, 1995, 1994, and 1993
Notes to consolidated financial statements--
December 31, 1995
Report of independent auditors
The following financial information for the years 1995, 1994,
and 1993 is submitted herewith.
<TABLE>
<CAPTION>
2. Financial Statement Schedules
Consent of Independent Auditors Ernst & Young LLP - See Exhibit
(23) hereto.
Schedules for Rochester & Pittsburgh Coal Company and subsidiaries:
Page
----
<S> <C>
Schedule I -- Condensed Financial
Information of Registrant 27
Schedule II -- Valuation and Qualifying
Accounts 32
</TABLE>
All other schedules for Rochester & Pittsburgh Coal Company
and subsidiaries for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions or are inapplicable and
therefore have been omitted.
18
<PAGE> 20
(b) Reports on Form 8-K:
None.
(c) Exhibits to this Form 10-K:
Exhibit Number
(3) Articles of Incorporation and By-Laws.
A. Articles of Incorporation, as Amended.
Registrant's Articles of Incorporation, as
amended, were filed with Registrant's Annual
Report on Form 10-K dated March 28, 1991.
The Articles, as amended, are incorporated
herein by reference.
B. By-Laws of Registrant, as Amended.
Registrant's By-Laws, as amended, were filed
with Registrant's Annual Report on Form 10-K
dated March 30, 1989. An Amendment to the
By-Laws was filed with Registrant's Annual
Report on Form 10- K dated March 28, 1991.
The By-Laws, as amended, are incorporated
herein by reference.
(10) Material Contracts.
* Management contract or compensatory
plan or arrangement required to be
filed as an exhibit to this form
pursuant to Item 14(c) of this
report.
A. 1991 Keystone Coal Supply Agreement.
The 1991 Keystone Coal Supply
Agreement was filed as an exhibit to
Registrant's Annual Report on Form
10-K dated March 28, 1991. Amendment
to the 1991 Keystone Coal Supply
Agreement, filed herewith. The
Agreement is incorporated herein by
reference.
B. 1995 Homer City Coal Sales Agreement.
The 1995 Homer City Coal Sales
Agreement was filed with Registrant's
Current Report on Form 8-K dated
December 7, 1994. The Agreement is
incorporated herein by reference.
19
<PAGE> 21
C. Employment and Deferred Compensation
Agreement between Registrant and W.
G. Kegel, as Amended.*
The Employment and Deferred
Compensation Agreement between
Registrant and W. G. Kegel was filed
with Registrant's Annual Report on
Form 10-K dated March 26, 1981.
Amendments to the Employment and
Deferred Compensation Agreement were
filed with Registrant's Annual Report
on Form 10-K dated March 30, 1989.
The Agreement and amendments are
incorporated herein by reference.
D. Registrant's Key Executives
Incentive Compensation Plan.*
The Rochester & Pittsburgh Coal
Company Key Executives Incentive
Compensation Plan was filed with
Registrant's Annual Report on Form
10-K dated March 26, 1992. The Plan
is incorporated herein by reference.
E. Registrant's Pension Plan, as
Amended.*
Registrant's Pension Plan and an
Amendment thereto, filed herewith.
F. Registrant's 401(k) Savings and
Retirement Plan, as Amended.*
Registrant's 401(k) Savings and
Retirement Plan was filed with
Registrant's Annual Report on Form
10-K dated March 28, 1991. Amendments
to Registrant's 401(k) Savings and
Retirement Plan, filed herewith. The
Plan is incorporated herein by
reference.
G. Employment Agreement between
Registrant and Thomas W. Garges, Jr.*
Employment Agreement between
Registrant and Thomas W. Garges, Jr.,
dated as of May 1, 1992, was filed
with Registrant's Annual Report on
Form 10-K dated March 25, 1993. The
Agreement is incorporated herein by
reference.
20
<PAGE> 22
H. Asset Purchase Agreement Between
Bethlehem Steel Corporation and
Lucerne Land Company.
The Asset Purchase Agreement between
Bethlehem Steel Corporation and
Lucerne Land Company dated December
30, 1992, was filed with Registrant's
Current Report on Form 8-K dated
January 13, 1993. The Agreement is
incorporated herein by reference.
I. Asset Purchase Agreement Between
BethEnergy Mines Inc. and Lucerne
Land Company.
The Asset Purchase Agreement between
BethEnergy Mines Inc. and Lucerne
Land Company dated December 30, 1992,
was filed with Registrant's Current
Report on Form 8-K dated January 13,
1993. The Agreement is incorporated
herein by reference.
J. Asset Purchase Agreement between
Bethlehem Steel Corporation and
Eighty-Four Mining Company.
The Asset Purchase Agreement between
Bethlehem Steel Corporation and
Eighty-Four Mining Company dated
December 30, 1992, was filed with
Registrant's Current Report on Form
8-K dated January 13, 1993. The
Agreement is incorporated herein by
reference.
K. Asset Purchase Agreement between
BethEnergy Mines Inc. and Eighty-Four
Mining Company.
The Asset Purchase Agreement between
BethEnergy Mines Inc. and Eighty-Four
Mining Company dated December 30,
1992, was filed with Registrant's
Current Report on Form 8-K dated
January 13, 1993. The Agreement is
incorporated herein by reference.
21
<PAGE> 23
(13) Annual Report To Security Holders.
Annual Report to Security Holders for the
year ended December 31, 1995, filed herewith.
Except as expressly incorporated by reference
herein, the Rochester & Pittsburgh Coal
Company Annual Report 1995 is furnished for
information of the Securities and Exchange
Commission and is not to be deemed filed
herewith.
(21) Subsidiaries of the Registrant.
Registrant's list of subsidiaries, filed
herewith.
(23) Consent of Independent Auditors.
Consent of Ernst & Young LLP, Independent
Auditors for the Company, filed herewith.
(24) Powers of Attorney.
Powers of Attorney of certain directors of
Registrant, filed herewith.
(27) Financial Data Schedule.
Registrant's financial data schedule, filed
herewith.
22
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ROCHESTER & PITTSBURGH COAL COMPANY
By: /s/ THOMAS W. GARGES, JR.
-------------------------------
Thomas W. Garges, Jr.
President and Chief Executive
Officer
Date: April 12, 1996
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/THOMAS W. GARGES, JR. President and Chief April 12, 1996
- ------------------------
Thomas W. Garges, Jr. Executive Officer
(Principal Executive Officer)
/s/GEORGE M. EVANS Vice President and April 12, 1996
- -----------------------
George M. Evans Treasurer
(Principal Financial Officer)
(Principal Accounting Officer)
* Chairman of the Board April 12, 1996
- -----------------------
William G. Kegel of Directors
* Vice President--Finance April 12, 1996
- -----------------------
Peter Iselin and Director
* Director April 12, 1996
- -----------------------
David H. Davis
* Director April 12, 1996
- -------------------------
Columbus O'D. Iselin, Jr.
</TABLE>
23
<PAGE> 25
<TABLE>
<S> <C> <C>
* Director April 12, 1996
- ------------------------
John L. Schroder, Jr.
* Director April 12, 1996
- ---------------------------
O'Donnell Iselin II
* Director April 12, 1996
- ---------------------------
L. Blaine Grube
* Director April 12, 1996
- ---------------------------
Gordon B. Whelpley, Jr.
* Director April 12, 1996
- ---------------------------
Thomas M. Hyndman, Jr.
</TABLE>
*By /s/ W. JOSEPH ENGLER, JR.
------------------------------
W. Joseph Engler, Jr.
Attorney-in-Fact
pursuant to Powers of
Attorney filed herewith
24
<PAGE> 26
ANNUAL REPORT ON FORM 10-K
ITEM 14(a)(1) and (2) and ITEM 14(c) and (d)
FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS SCHEDULES
YEAR ENDED DECEMBER 31, 1995
ROCHESTER & PITTSBURGH COAL COMPANY
INDIANA, PENNSYLVANIA
25
<PAGE> 27
FINANCIAL STATEMENT SCHEDULES
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
DECEMBER 31, 1995
26
<PAGE> 28
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ROCHESTER & PITTSBURGH COAL COMPANY
CONDENSED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
December 31
------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,542 $ 2,850 $ 8,662
Receivables from subsidiaries 6,736 6,818 8,514
Prepaid expenses and other
current assets 782 1,348 755
Income taxes receivable 2,036 3,864 3,078
-------- -------- --------
Total Current Assets 13,096 14,880 21,009
INVESTMENTS IN SUBSIDIARY COMPANIES
Equity method 198,386 203,813 198,887
OTHER ASSETS
Investment in marketable securities 281 856 711
Miscellaneous 9,516 9,372 9,658
-------- -------- --------
9,797 10,228 10,369
PROPERTY,PLANT, AND EQUIPMENT 52,555 52,371 52,277
Less allowances for depreciation,
depletion, and amortization 25,764 24,623 23,500
-------- -------- --------
26,791 27,748 28,777
-------- -------- --------
$248,070 $256,669 $259,042
======== ======== ========
</TABLE>
27
<PAGE> 29
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ROCHESTER & PITTSBURGH COAL COMPANY
CONDENSED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31
------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable:
Trade accounts $ 383 $ 1,050 $ 305
Dividends 516 2,063 2,063
Subsidiaries 5,817 8,313 7,168
Other current liabilities 861 468 1,497
-------- -------- --------
Total Current Liabilities 7,577 11,894 11,033
OTHER LIABILITIES
Loan from subsidiary 30,000 30,000 30,000
Payable to subsidiaries
for federal income taxes 4,229 4,229 4,229
Miscellaneous 3,150 3,096 2,985
-------- -------- --------
37,379 37,325 37,214
SHAREHOLDERS' EQUITY
Common stock 59,837 59,837 59,837
Capital in excess of stated value 133,162 133,170 133,177
Retained earnings 38,007 42,360 45,723
-------- -------- --------
231,006 235,367 238,737
Less treasury stock at cost 27,892 27,917 27,942
-------- -------- --------
203,114 207,450 210,795
-------- -------- --------
$248,070 $256,669 $259,042
======== ======== ========
</TABLE>
28
<PAGE> 30
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ROCHESTER & PITTSBURGH COAL COMPANY
CONDENSED STATEMENTS OF INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
Management fees and royalties
from subsidiaries $ 13,668 $ 12,601 $ 12,724
Interest, dividends, and other 5,572 3,488 3,186
-------- -------- --------
19,240 16,089 15,910
Costs and expenses
Selling, general and
administrative 11,211 10,593 11,801
Interest on loan from subsidiary 2,649 2,109 1,765
Miscellaneous 4,120 3,413 3,776
-------- -------- --------
17,980 16,115 17,342
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES,
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES, AND EQUITY
IN NET INCOME OF SUBSIDIARIES 1,260 (26) (1,432)
Income taxes (99) (101) (1,049)
-------- -------- --------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
FOR INCOME TAXES AND EQUITY IN
NET INCOME OF SUBSIDIARIES 1,359 75 (383)
Cumulative effect to January 1, 1993
of change in accounting for
income taxes 0 0 283
-------- -------- --------
INCOME (LOSS) BEFORE EQUITY IN
NET INCOME OF SUBSIDIARIES 1,359 75 (100)
Equity in net income (loss) of subsidiaries (4,894) 2,391 7,183
-------- -------- --------
NET INCOME (LOSS) $ (3,535) $ 2,466 $ 7,083
======== ======== ========
</TABLE>
29
<PAGE> 31
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ROCHESTER & PITTSBURGH COAL COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (3,535) $ 2,466 $ 7,083
Adjustments for non-cash items 4,645 8,284 9,747
Changes in certain assets and
liabilities (using or
providing cash) 84 1,282 1,774
-------- -------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 1,194 12,032 18,604
-------- -------- --------
INVESTING ACTIVITIES
Investments in subsidiaries 0 (40,000) (10,000)
Return of subsidiary capital 1,000 27,000 0
Acquisition of property, plant,
and equipment (204) (183) (312)
Proceeds from sale of property,
plant, and equipment 2,184 479 284
Proceeds from sales of
investments 626 0 0
-------- -------- --------
NET CASH (USED IN) INVESTING
ACTIVITIES 3,606 (12,704) (10,028)
-------- -------- --------
FINANCING ACTIVITIES
Cash dividends paid (4,126) (5,158) (5,163)
Acquisition of treasury stock-net 18 18 (153)
-------- -------- --------
NET CASH USED IN
FINANCING ACTIVITIES (4,108) (5,140) (5,316)
-------- -------- --------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 692 (5,812) 3,260
Cash and cash equivalents at
beginning of year 2,850 8,662 5,402
-------- -------- --------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 3,542 $ 2,850 $ 8,662
======== ======== ========
</TABLE>
30
<PAGE> 32
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ROCHESTER & PITTSBURGH COAL COMPANY
Notes to Condensed Financial Statements
Note A - Basis of Presentation
In the parent company - only financial statements, the Company's investment in
subsidiaries is stated at cost plus equity in undistributed earnings of
subsidiaries since the date of acquisition. Dividends received from subsidiaries
were $1,375,000 in 1995, $9,700,000 in 1994, and $16,350,000 in 1993. The parent
company - only financial statements should be read in conjunction with the
Company's consolidated financial statements.
Note B - Guarantees and Obligations
Eighty-Four Mining Company and Lucerne Land Company, subsidiaries of the
Company, have $35,000,000 of long-term debt outstanding under senior fixed rate
construction notes, $36,000,000 outstanding and an additional $14,000,000
available for borrowing under a revolving credit agreement as of December 31,
1995. Under the terms of these debt agreements, the Company has guaranteed the
payment of all principal and interest and have pledged securities having a
market value of $25,000,000 which have been borrowed for purposes of this pledge
only, from its subsidiary, Church Street Holdings, Inc. During 1995, the Company
and these subsidiaries did not meet certain of the debt covenants. The banks and
institutional lenders agreed to certain amendments to the note agreements and
granted waivers during 1995, including a waiver permitting the Company to
declare the dividends paid in 1995 and on January 2, 1996. Updated projections
for development operations indicate that the Company will not be able to comply
with certain development operations and cash flow covenant requirements during
1996. On April 12, 1996, the banks and institutional lenders approved additional
amendments to the note agreements which modified certain provisions in order to
eliminate the projected noncompliance with certain covenants for 1996. The
updated projections and agreement with the banks and institutional lenders will
require additional funding for Eighty-Four of approximately $30,000,000. The
Company will use internally generated funds to make an equity contribution, and
temporary loans in order to meet approximately $18 million of this requirement.
Eighty-Four plans to secure additional permanent financing later in 1996.
Under the terms of certain of its self-insurance programs, the Company could be
liable for obligations of its subsidiaries arising under laws related to
occupational disease. The Company and these subsidiaries have established
irrevocable trusts for black lung benefit funding which have assets which are
sufficient to fund the related actuarial liability, except for the liability for
employees hired in connection with the acquisition by a subsidiary of the Mine
No. 84 properties which amounts to $11,348,000.
Health benefits for the Company's UMWA employees who retired prior to 1976 are
provided by the United Mine Workers' of America Combined Benefit Fund (Combined
Fund) which was created by the Coal Industry Retiree Health Benefit Act of 1992.
The Combined Fund also provide benefits to retirees whose employers are out of
business. The Company's contributions to this plan are assessed primarily on the
basis of the number of beneficiaries assigned to it. The Company allocates these
charges to its mining subsidiaries. The present value of the expected future
assessments from the Combined Fund is estimated to be in the range of
$30,000,000.
31
<PAGE> 33
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
(Dollars in thousands)
<TABLE>
<CAPTION>
===================================================================================================================================
COL. A COL. B COL. C COL. D COL. E
- -----------------------------------------------------------------------------------------------------------------------------------
Description Balance ADDITIONS Deductions Balance at
at -Describe End of
Beginning Period
of Period
----------------------------
COL. 1 COL. 2
Charged Charged to
to Costs Other
and Accounts -
Expenses Describe
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Reserves:
Mine closing reserve $ 19,818 $ 3,052 $ 609(1) $ 326(2) $23,153
======== ======= ======== ======= =======
Surface mine reclamation reserve $ 985 $ 351 $ -- $ 157(2) $ 1,179
======== ======= ======== ======= =======
Valuating allowance deducted from asset accounts:
Deferred income tax valuation allowance $ 4,108 $ 2,477 $ -- $ -- $ 6,585
======== ======= ======== ======= =======
Year ended December 31, 1994:
Reserves:
Mine closing reserve $ 18,156 $ 754 $ 1,072(1) $ 164(2) $19,818
======== ======= ======== ======= =======
Surface mine reclamation reserve $ 991 $ 165 $ -- $ 171(2) $ 985
======== ======= ======== ======= =======
Valuating allowance deducted from asset accounts:
Deferred income tax valuation allowance $ 4,498 $ (390) $ -- $ -- $ 4,108
======== ======= ======== ======= =======
Year ended December 31, 1993:
Reserves:
Mine closing reserve $ 17,124 $ 621 $ 1,051(1) $ 640(2) $18,156
======== ======= ======== ======= =======
Surface mine reclamation reserve $ 569 $ 613 $ -- $ 191(2) $ 991
======== ======= ======== ======= =======
Valuation allowance deducted
from asset accounts:
Deferred income tax valuation allowance $ -- $ 4,498 $ -- $ -- $ 4,498
======== ======= ======== ======= =======
</TABLE>
(1) Interest earned on funds invested to meet reserve requirements.
(2) Expense incurred to satisfy previously reserved requirements.
32
<PAGE> 34
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
(3) Articles of Incorporation and By-Laws.
A. Articles of Incorporation, as
Amended.
Registrant's Articles of
Incorporation, as amended, were
filed with Registrant's Annual
Report on Form 10-K dated March 28,
1991. The Articles, as amended,
are incorporated herein by reference.
B. By-Laws of Registrant, as Amended.
Registrant's By-Laws, as amended,
were filed with Registrant's Annual
Report on Form 10-K dated March 30,
1989. An Amendment to the By-Laws
was filed with Registrant's Annual
Report on Form 10- K dated March 28,
1991. The By-Laws, as amended, are
incorporated herein by reference.
(10) Material Contracts.
* Management contract or compensatory
plan or arrangement required to be
filed as an exhibit to this form
pursuant to Item 14(c) of this
report.
A. 1991 Keystone Coal Supply Agreement.
The 1991 Keystone Coal Supply
Agreement was filed as an exhibit to
Registrant's Annual Report on Form
10-K dated March 28, 1991. Amendment
to the 1991 Keystone Coal Supply
Agreement, filed herewith. The
Agreement is incorporated herein by
reference.
B. 1995 Homer City Coal Sales Agreement.
The 1995 Homer City Coal Sales
Agreement was filed with Registrant's
Current Report on Form 8-K dated
December 7, 1994. The Agreement is
incorporated herein by reference.
C. Employment and Deferred Compensation
Agreement between Registrant and W.
G. Kegel, as Amended.*
The Employment and Deferred
Compensation Agreement between
Registrant and W. G. Kegel was filed
with Registrant's Annual Report on
Form 10-K dated March 26, 1981.
Amendments to the Employment and
Deferred Compensation Agreement were
filed with Registrant's Annual Report
on Form 10-K dated March 30, 1989.
The Agreement and amendments are
incorporated herein by reference.
D. Registrant's Key Executives
Incentive Compensation Plan.*
The Rochester & Pittsburgh Coal
Company Key Executives Incentive
Compensation Plan was filed with
Registrant's Annual Report on Form
10-K dated March 26, 1992. The Plan
is incorporated herein by reference.
E. Registrant's Pension Plan, as
Amended.*
Registrant's Pension Plan and an
Amendment thereto, filed herewith.
F. Registrant's 401(k) Savings and
Retirement Plan, as Amended.*
Registrant's 401(k) Savings and
Retirement Plan was filed with
Registrant's Annual Report on Form
10-K dated March 28, 1991. Amendments
to Registrant's 401(k) Savings and
Retirement Plan, filed herewith. The
Plan is incorporated herein by
reference.
G. Employment Agreement between
Registrant and Thomas W. Garges, Jr.*
Employment Agreement between
Registrant and Thomas W. Garges, Jr.,
dated as of May 1, 1992, was filed
with Registrant's Annual Report on
Form 10-K dated March 25, 1993. The
Agreement is incorporated herein by
reference.
H. Asset Purchase Agreement Between
Bethlehem Steel Corporation and
Lucerne Land Company.
The Asset Purchase Agreement between
Bethlehem Steel Corporation and
Lucerne Land Company dated December
30, 1992, was filed with Registrant's
Current Report on Form 8-K dated
January 13, 1993. The Agreement is
incorporated herein by reference.
I. Asset Purchase Agreement Between
BethEnergy Mines Inc. and Lucerne
Land Company.
The Asset Purchase Agreement between
BethEnergy Mines Inc. and Lucerne
Land Company dated December 30, 1992,
was filed with Registrant's Current
Report on Form 8-K dated January 13,
1993. The Agreement is incorporated
herein by reference.
J. Asset Purchase Agreement between
Bethlehem Steel Corporation and
Eighty-Four Mining Company.
The Asset Purchase Agreement between
Bethlehem Steel Corporation and
Eighty-Four Mining Company dated
December 30, 1992, was filed with
Registrant's Current Report on Form
8-K dated January 13, 1993. The
Agreement is incorporated herein by
reference.
K. Asset Purchase Agreement between
BethEnergy Mines Inc. and Eighty-Four
Mining Company.
The Asset Purchase Agreement between
BethEnergy Mines Inc. and Eighty-Four
Mining Company dated December 30,
1992, was filed with Registrant's
Current Report on Form 8-K dated
January 13, 1993. The Agreement is
incorporated herein by reference.
(13) Annual Report To Security Holders.
Annual Report to Security Holders
for the year ended December 31,
1995, filed herewith. Except as
expressly incorporated by reference
herein, the Rochester & Pittsburgh
Coal Company Annual Report 1995 is
furnished for information of the
Securities and Exchange Commission
and is not to be deemed filed
herewith.
(21) Subsidiaries of the Registrant.
Registrant's list of subsidiaries,
filed herewith.
(23) Consent of Independent Auditors.
Consent of Ernst & Young LLP,
independent auditors for the
Company, filed herewith.
(24) Powers of Attorney.
Powers of Attorney of certain
directors of Registrant, filed
herewith.
(27) Financial Data Schedule.
Registrant's financial data
schedule, filed herewith.
<PAGE> 1
EXHIBIT (10A)
KEYSTONE COAL MINING CORPORATION
P.O. BOX 729
INDIANA, PENNSYLVANIA 15701
Area Code 412
349-5800
December 22, 1995
Mr. John B. Olansen
Keystone-Conemaugh Projects Office
PO Box 68
682 Philadelphia Street
Indiana, PA 15701
Subject: Amendment to the 1991 Keystone Coal Supply Agreement
Dear Mr. Olansen:
This letter is to formally request the following modifications to the 1991
Keystone Coal Supply Agreement:
Section 29 Purchase of Coal by Mining Company - We request that Section 29(a)
be rewritten as follows:
"Mining Company shall have the right, without prior approval by Owners, to
purchase coal from others for delivery hereunder to the Keystone Station of
up to 1.5 million tons of the Annual Contract Quantity for each year, and
may provide additional quantities of coal by purchases from others in
amounts and at times as approved in writing by Owners."
Part I of Schedule 12(b) - The Managed Cost Components - We request that the
following be added to Part I of Schedule 12(b):
(IX) Any additional costs associated with the Jane, Margaret #11, and Emilie
#4 mines, as determined in accordance with Generally Accepted
Accounting Principles, which may result from the modification of
Section 29(a) as described in this Amendment to the 1991 Keystone Coal
Supply Agreement dated December 22, 1995, and which the Keystone Owners
in good faith deem to be reasonable and appropriate. These costs may
include, but are not limited to, the following: continuing water
treatment costs, the write off of net book value associated with fixed
assets, equipment recovery costs, equipment lease
<PAGE> 2
termination costs, and recognition of workers' compensation claims
development.
Nothing in this Amendment should be construed to require duplicate payment
of any costs paid prior to this Amendment through accrual costs previously
characterized as Cost of Production.
Nothing in this Amendment should be construed as a change to Section 2 of the
1991 Keystone Coal Supply Agreement, and the Annual Contract Quantity specified
therein shall remain in effect.
Your signature below will evidence your concurrence with the foregoing and will
constitute a formal amendment to the 1991 Keystone Coal Supply Agreement.
Sincerely,
/s/ GEORGE M. EVANS
---------------------------
George M. Evans
Vice President & Treasurer
jem
Approved for the Keystone Owners
By /s/ JOHN B. OLANSEN
---------------------------
John B. Olansen
Administrative Manager
<PAGE> 1
EXHIBIT (10E)
THE ROCHESTER & PITTSBURGH COAL COMPANY
PENSION PLAN
As Amended and Restated Effective July 1, 1989
<PAGE> 2
THE ROCHESTER & PITTSBURGH COAL COMPANY
PENSION PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1--Definitions .................................................... 2
Section 1.1. Accredited Service................................... 2
Section 1.2. Accrual Fraction..................................... 4
Section 1.3. Accrued Benefit...................................... 4
Section 1.4. Act.................................................. 6
Section 1.5. Active Participant................................... 6
Section 1.6. Actuarial Equivalent................................. 6
Section 1.7. Actuary.............................................. 7
Section 1.8. Associated Company................................... 7
Section 1.9. Average Monthly Compensation......................... 8
Section 1.10. Average Social Security Wage Base................... 9
Section 1.11. Board............................................... 9
Section 1.12. Break in Service.................................... 9
Section 1.13. Code................................................ 10
Section 1.14. Committee........................................... 10
Section 1.15. Company............................................. 10
Section 1.16. Compensation........................................ 10
Section 1.17. Date of Employment.................................. 12
Section 1.18. Date of Separation.................................. 12
Section 1.19. Disability.......................................... 12
Section 1.20. Early Retirement Date............................... 13
Section 1.21. Employee............................................ 15
Section 1.22. Employer............................................ 15
Section 1.23. Fund................................................ 15
Section 1.24. Funding Agent....................................... 15
Section 1.25. Key Employee........................................ 15
Section 1.26. Leased Employee..................................... 16
Section 1.27. Management Employee................................. 16
Section 1.28. Normal Retirement Date.............................. 17
Section 1.29. Participant......................................... 17
Section 1.30. Period of Service................................... 17
Section 1.31. Plan................................................ 17
Section 1.32. Plan Year........................................... 17
Section 1.33. Primary Social Security Benefit..................... 18
Section 1.34. Prior Plan.......................................... 18
Section 1.35. Prior Plan Benefit.................................. 19
Section 1.36. Qualified Domestic Relations Order.................. 20
Section 1.37. Qualified Joint and Survivor Benefit................ 21
Section 1.38. Qualified Spouse.................................... 22
Section 1.39. Service............................................. 22
Section 1.40. Service............................................. 24
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 2--Age, Service and Other Requirements ............................ 25
Section 2.1. Participation and Vesting............................ 25
Section 2.2. Normal Retirement.................................... 25
Section 2.3. Early Retirement..................................... 25
Section 2.4. Disability Retirement................................ 25
Section 2.5. Eligibility for Vested Deferred Pension.............. 25
Section 2.6. Eligibility for Spouse's Pension..................... 26
ARTICLE 3--Retirement Benefits ............................................ 28
Section 3.1. General.............................................. 28
Section 3.2. Normal Retirement Pension............................ 28
Section 3.3. Early Retirement Pension............................. 31
Section 3.4. Disability Retirement Pension........................ 34
Section 3.5. Vested Deferred Pension.............................. 36
Section 3.6. Manner of Payment.................................... 36
Section 3.7. Manner and Time of Elections......................... 38
Section 3.8. Reemployment......................................... 38
Section 3.9. Small Pensions....................................... 40
Section 3.10. Cost of Living Adjustments.......................... 43
Section 3.11. Transfer to Associated Company Maintaining
Comparable Plan.......................................... 44
Section 3.12. Fresh Start Rule.................................... 47
ARTICLE 4--Spouse's Pension ............................................... 49
Section 4.1. Amount and Duration of Payment....................... 49
Section 4.2. Alternative Timing and Method of Payment............. 50
Section 4.3. Death Following Commencement of Benefits............. 51
ARTICLE 5--Contributions .................................................. 52
Section 5.1. Employer Contributions............................... 52
Section 5.2. Fund................................................. 52
Section 5.3. Return of Contributions.............................. 52
Section 5.4. Employee Contributions............................... 53
Section 5.5. Forfeitures.......................................... 53
ARTICLE 6--Administration ................................................. 54
Section 6.1. In General........................................... 54
Section 6.2. Conduct of Committee Business........................ 54
Section 6.3. Expenses............................................. 55
Section 6.4. Records and Reports.................................. 55
Section 6.5. Claims Procedures.................................... 56
Section 6.6. Qualified Domestic Relations Orders.................. 56
Section 6.7. Funding Agent........................................ 56
ARTICLE 7--Amendment, Termination or Merger ............................... 58
Section 7.1. Amendment............................................ 58
Section 7.2. Termination.......................................... 59
Section 7.3. Merger............................................... 59
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE 8--Other Provisions Affecting Benefits ............................ 61
Section 8.1. Nonassignability..................................... 61
Section 8.2. Lost Beneficiary..................................... 61
Section 8.3. Tax Withholding...................................... 61
Section 8.4. Change of Classification............................. 61
Section 8.5. Transfer............................................. 62
ARTICLE 9--Limitations on Benefits and Top-Heavy Requirements ............. 63
Section 9.1. Restrictions on Certain Employees.................... 63
Section 9.2. Limitation on Benefits............................... 64
Section 9.3. Top-Heavy Requirements............................... 70
ARTICLE 10--Adoption of Plan by an Associated Company ..................... 72
Section 10.1. Authorization....................................... 72
Section 10.2. Procedure........................................... 72
Section 10.3. Single Plan......................................... 72
Section 10.4. Disposition of Subsidiary........................... 73
ARTICLE 11--Miscellaneous ................................................. 75
Section 11.1. No Employment Rights................................ 75
Section 11.2. Headings............................................ 75
Section 11.3. Number and Gender................................... 75
Section 11.4. Construction........................................ 75
Section 11.5. Legal Effect........................................ 75
</TABLE>
iii
<PAGE> 5
THE ROCHESTER & PITTSBURGH COAL COMPANY
PENSION PLAN
ROCHESTER & PITTSBURGH COAL COMPANY, a corporation with its principal
office in Indiana, Pennsylvania, does hereby amend, and continue as amended, a
pension plan for the benefit of its qualified Management Employees and those of
its Associated Companies which adopt the Plan, upon the terms and conditions
described hereinafter.
<PAGE> 6
ARTICLE 1
DEFINITIONS
When used herein the words or phrases defined hereinafter shall have the
following meaning unless a different meaning is clearly required by the context
of the Plan.
SECTION 1.1. ACCREDITED SERVICE shall mean the Employee's total period
or periods of Service with the Company, subject to the qualifications set forth
below:
(a) The following Service with the Company shall not be counted:
(1) Service in a classification other than Management
Employee; or
(2) Periods of Service which are included as Service with the
Company solely by reason of Section 1.39(d), (e), (f) or (g).
(b) For purposes of computing the pension payable after Normal
Retirement Date under Section 3.4, a Participant suffering from Disability shall
be credited with Accredited Service prior to his Normal Retirement Date as if he
had continued in full-time employment during his Disability.
(c) Accredited Service of any Employee as of July 1, 1976 shall be
equal to that which he would have had on such date for purposes of computing the
amount of benefits under the rules of the Plan in effect on June 30, 1976,
determined without regard to the provision excluding service before age 25 and
service in excess of 35 years.
2
<PAGE> 7
(d) Accredited Service of any Employee as of October 1, 1984 who was
employed by The Florence Mining Company on September 30, 1984 shall be equal to
the management service credit which he would have had for purposes of computing
the amount of benefit under the Prior Plan as of September 30, 1984, provided,
however, that such service shall not be counted as Accredited Service if the
amount of benefits under the Prior Plan is calculated by reference to any
benefit provided under this Plan.
(e) The provisions of Section 3.11 shall be taken into account;
provided, however, that:
(1) In the case of an Employee hired by an Employer after June
30, 1992 who was covered by The Florence Mining Company Pension Plan and who had
never before been covered by this Plan, Accredited Service shall not include
periods taken into account in calculating the Employee's benefits under The
Florence Mining Company Pension Plan;
(2) In the case of an Employee hired by an Employer after
April 14, 1992 and on or before June 30, 1992 who was covered by The Florence
Mining Company Pension Plan and who had never before been covered by this Plan,
Accredited Service shall include all management service taken into account in
calculating benefits under the Florence Mining Company Pension Plan as of
October 29, 1991.
(f) Accredited Service as of December 30, 1992 of any Employee who was
employed on such date or on layoff status on such date by BethEnergy Mines Inc.
at Mine 84 shall be equal to the management service credit which he would have
had for purposes of
3
<PAGE> 8
computing the amount of his accrued benefit under the Prior Plan as of December
30, 1992.
SECTION 1.2. ACCRUAL FRACTION shall mean, as of any specified date, a
fraction, the numerator of which is the number of years and fractional years of
the Participant's Accredited Service as of such specified date and the
denominator of which is the number of years and fractional years of Accredited
Service which the Participant could obtain if he continued employment until
Normal Retirement Date.
SECTION 1.3. ACCRUED BENEFIT shall mean, as of any specified date, the
monthly retirement benefit payable at age 62 which a Participant has earned as
of such date, and shall be the amount determined under (a) below, subject to the
maximum set forth in (b) below, reduced by the amount described in (c) below,
modified as provided in Section 3.12, if applicable, and increased to the
nearest whole dollar:
(a) the greater of (1), (2) or (3) below (but, in the case of a
Participant who was covered by the Plan on June 30, 1976, not less than (4)
below):
(1) 1.75% of the Participant's Average Monthly Compensation
calculated as of such specified date multiplied by the number of years and
fractional years of the Participant's Accredited Service as of such specified
date, up to a maximum of 35 years, reduced by the product of:
(A) the Participant's Primary Social Security
Benefit, and
4
<PAGE> 9
(B) that percentage which is determined by
multiplying 50% by the Accrual Fraction as of such specified date; or
(2) 1.25% of the Participant's Average Monthly Compensation
calculated as of such specified date not in excess of the Average Social
Security Wage Base multiplied by the number of years and fractional years of the
Participant's Accredited Service as of such specified date; or
(3) $150.00 multiplied by the Accrual Fraction as of such
specified date; or
(4) the sum of the Basic Pension and the Supplemental Pension
of such Participant computed as if the provisions of the Plan in effect on June
30, 1976 had continued up to such specified date and assuming that Compensation
as of June 30, 1976 had continued in effect until such specified date;
(b) the amount of the maximum pension shall be the greater of (1) or
(2) below:
(1) the Participant's Average Monthly Compensation calculated
as of such specified date multiplied by that percentage which is determined by
multiplying 80% by the Accrual Fraction as of such specified date, reduced by
the product of:
(A) the Participant's Primary Social Security Benefit, and
(B) that percentage which is determined by multiplying 100% by
the Accrual Fraction as of such specified date; or
5
<PAGE> 10
(2) $250.00 multiplied by the Accrual Fraction as of such
specified date;
(c) the monthly amount of the Participant's Prior Plan Benefit stated
as a single life annuity commencing at age 62.
SECTION 1.4. ACT shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time, and any successor thereto.
SECTION 1.5. ACTIVE PARTICIPANT shall mean a Participant who is
currently employed by the Employers as a Management Employee.
SECTION 1.6. ACTUARIAL EQUIVALENT shall mean a benefit of a value equal
to that of the benefit to which it is being compared when computed in accordance
with the following bases:
(a) The amount payable as a Qualified Joint and Survivor Benefit under
Section 3.6(a) shall be determined by converting the pension otherwise payable
under Section 3.6(b) on the basis of the following formula: 90%, plus (or minus)
4/10% for each year that the age of the Qualified Spouse is greater (or less)
than the age of the Participant, plus 4/10% (or minus 6/10%) for each year that
retirement precedes (or follows) age 65, to a maximum of 99%; except that the
age of a Participant who suffers from a Disability shall be adjusted to age 62.
(b) In all other cases, Actuarial Equivalent amounts shall be
calculated by use of the following rates, factors and assumptions:
(1) interest at 8% compounded annually, provided that:
(A) for purposes of Section 9.2(c)(2)(C), such rate
shall be 5%;
6
<PAGE> 11
(B) for purposes of Sections 3.9 and 4.2(b), such
rate shall be subject to a maximum equal to the interest rate which would be
used, as of the beginning of the Plan Year in which distribution occurs, by the
Pension Benefit Guaranty Corporation in determining the present value of an
immediate annuity on Plan termination;
(2) mortality, in accordance with the UP-1984 Table, with the
age adjusted to 62 in the case of a Participant who suffers from a Disability.
SECTION 1.7. ACTUARY shall mean an enrolled actuary, as defined in the
Act, or firm of actuaries which has on its staff an enrolled actuary, selected
by the Committee to provide actuarial services for the Plan.
SECTION 1.8. ASSOCIATED COMPANY shall mean any corporation which is a
member of a controlled group of corporations (as defined in Code section 414(b)
as modified by Code section 415(h)) which includes any Employer, any trade or
business (whether or not incorporated) under common control (as defined in Code
section 414(c) as modified by Code section 415(h)) with any Employer, any
organization which is a member of an affiliated service group (within the
meaning of Code section 414(m)) which includes any Employer, any organization or
other arrangement which is required to be aggregated with any Employer pursuant
to regulations under Code section 414(o), and any other organization which is
designated by resolution of the Board as an Associated Company for purposes of
this Plan.
7
<PAGE> 12
SECTION 1.9. AVERAGE MONTHLY COMPENSATION shall mean, with respect to
an Employee, an amount calculated as follows:
(a) The Employee's Compensation shall be determined for the period
consisting of four calendar quarters ending coincident with or last preceding
his Date of Separation and for each of the 9 preceding four calendar quarter
periods (or, if the period of employment is less than 10 years, for all
preceding four calendar quarter periods);
(b) If the number of four calendar quarter periods determined under
subsection (a) is more than five, those periods in excess of five for which
Compensation is lowest shall be discarded;
(c) Compensation shall be aggregated for the remaining periods and
divided by 60 (or, if the number of four calendar quarter periods determined
under subsection (a) is less than five, by the aggregate number of months in the
periods taken into account);
(d) For purposes of determining the amount of a Disability Retirement
Pension under Section 3.4, Average Monthly Compensation shall be determined by
substituting "last day of active employment" for "Date of Separation" in
subsection (a) above.
SECTION 1.10. AVERAGE SOCIAL SECURITY WAGE BASE shall mean the average,
for the 60 calendar months prior to Date of Separation, of the maximum amount of
monthly earnings which may be considered "wages" for each such month under Code
section 3121(a)(1).
SECTION 1.11. BOARD shall mean the Board of Directors of the Company.
8
<PAGE> 13
SECTION 1.12. BREAK IN SERVICE shall mean a period beginning with a
Date of Separation and continuing until the next subsequent Date of Employment,
for which an Employee is not directly or indirectly compensated by the Employer
for the performance of duties or otherwise, which period consists of:
(a) for any Employee entitled to Accredited Service under the Plan as
of June 30, 1985, or any date thereafter, the applicable period shall be 60 or
more consecutive months;
(b) in the case of any absence from work commencing after June 30, 1985
by reason of pregnancy, birth or adoption of a child or caring for a child
immediately following such birth or adoption, the applicable period shall be 72
or more consecutive months;
(c) in all other cases, the applicable period shall be 12 or more
consecutive months.
SECTION 1.13. CODE shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
SECTION 1.14. COMMITTEE shall mean the Pension Committee described in
Article 6.
SECTION 1.15. COMPANY shall mean Rochester & Pittsburgh Coal Company, a
Pennsylvania corporation, or any successor corporation which agrees to assume
the duties of the Company hereunder.
SECTION 1.16. COMPENSATION shall mean the aggregate of all wages,
salaries and other amounts (including bonuses, commissions, and overtime
premiums) paid for personal services actually rendered which are received by an
Employee from the Affiliated Group, but shall not include contributions to
qualified plans, compensation
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<PAGE> 14
which is deferred and unpaid, amounts realized in connection with stock options,
premiums for group term life insurance and other distributions which receive
special tax benefits, subject to the following limitations:
(a) Effective as of July 1, 1989, for a Participant retiring or
terminating employment before July 1, 1994, Compensation taken into account for
any purpose under the Plan shall not exceed $200,000 per year, provided,
however, that the imposition of the limitation on Compensation shall not reduce
a Participant's Accrued Benefit below the amount determined as of June 30, 1989.
As of the first day of each Plan Year beginning on and after July 1, 1990, the
applicable limitation as determined by the Commissioner of Internal Revenue for
the calendar year in which that Plan Year begins shall become effective as the
maximum Compensation to be taken into account for Plan purposes for that Plan
Year in lieu of the $200,000 limitation set forth in the immediately preceding
sentence. As the limit is increased each year, the increased limit will apply to
all prior years.
(b) Effective as of July 1, 1994, Compensation taken into account for
any purpose under the Plan shall not exceed $150,000 per year, provided,
however, that the imposition of the limitation on Compensation shall not reduce
a Participant's Accrued Benefit below the amount determined as of June 30, 1994.
The annual limit set forth in the preceding sentence shall be adjusted by the
Commissioner for increases in the cost of living in accordance with Code section
401(a)(17)(B). The cost-of-living adjustment in effect
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<PAGE> 15
for a calendar year applies to the Plan Year beginning in such calendar year. If
Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the annual limit
in effect for that prior determination period. For this purpose, for
determination periods beginning before July 1, 1994, the annual limit is
$150,000.
(c) The benefits of Participants whose Compensation is limited by
subsection (a) and/or (b) above will be determined in accordance with Section
3.12.
SECTION 1.17. DATE OF EMPLOYMENT shall mean any date on which a person
enters upon a status entitling him to be compensated directly or indirectly by
the Employers for the performance of duties.
SECTION 1.18. DATE OF SEPARATION shall mean the earlier of (a) the date
on which an Employee quits, retires, is discharged or dies or (b) the first
anniversary of the commencement date of any period of absence from employment
for any other reason, including an absence described in Section 1.12(b).
SECTION 1.19. DISABILITY shall mean a medically determinable, total and
permanent physical or mental impairment, as a result of which the Participant is
unable to engage in any substantial gainful activity. The determination of
whether a Participant suffers from a Disability shall be made by the Committee
after consultation with a doctor of medicine, which doctor may be
11
<PAGE> 16
selected by the Committee. A Participant shall not be considered to suffer from
a Disability for purposes of this Plan unless he is eligible for disability
under the federal Social Security laws and the effective date for entitlement to
Social Security disability benefits is within 24 months after the cessation of
active employment due to the condition giving rise to such Disability. A
Participant shall be deemed to have recovered from a Disability as of the
effective date of any cessation of Social Security disability benefits before
his Normal Retirement Date.
SECTION 1.20. EARLY RETIREMENT DATE shall mean the actual date upon
which a Participant leaves the service of the Employers before Normal Retirement
Date on or after the earlier of:
(a) the date on which he has attained age 60 and has completed 20 or
more years of Service in the Industry including at least one year of Service
with the Company immediately prior to retirement; or
(b) the date on which he has attained age 55 and has completed 15 or
more years of Service with the Company; or
(c) in the case of a Participant retiring on or before February 1, 1989
who was employed by the Company on October 1, 1988 and who attains age 60 on or
before February 1, 1989, the date on which he has completed five or more years
of Service with the Company.
(d) in the case of a Participant retiring on or before August 15, 1989,
who was employed by Keystone Coal Mining Corporation on January 1, 1989, and who
attains age 60 on or before August 15,
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<PAGE> 17
1989, the date on which he has completed five or more years of Service with the
Employers;
(e) in the case of a Participant who has attained age 55 on or before
December 31, 1991, who was employed in an eligible position (as described below)
on October 1, 1991, and who ceased to be so employed before January 1, 1992,
either (i) by reason of voluntary retirement or (ii) as a result of elimination
of his position, the date on which he ceased to be so employed; provided,
however, that if (ii) above applies the Participant has voluntarily executed a
waiver meeting the applicable requirements of Section 201 of the Older Workers
Benefit Protection Act. For this purpose, an eligible position is:
(1) employment at the General Office of the Company at 655
Church Street, Indiana, Pennsylvania;
(2) employment in the Training and Environmental Departments
of the Company, Route 286 South, Indiana, Pennsylvania;
(3) employment by DSB Company, 73 Main Street, Falls Creek,
Pennsylvania;
(4) Clerical Staff and Supply Administration at the Company,
Helvetia Coal Company, Keystone Coal Mining Corporation or Kent Coal Mining
Company.
SECTION 1.21. EMPLOYEE shall mean any person who is employed by one or
more Employers, but such term shall not include a Leased Employee.
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<PAGE> 18
SECTION 1.22. EMPLOYER shall mean the Company and each Associated
Company which has adopted the Plan for the benefit of its Management Employees.
SECTION 1.23. FUND shall mean the assets of the Plan held by the
Funding Agent.
SECTION 1.24. FUNDING AGENT shall mean the trustee or trustees with
whom the Company has entered into a trust agreement and/or the insurance company
or companies with whom the Company has entered into insurance or annuity
contracts for purposes of funding the benefits provided for under the Plan.
SECTION 1.25. KEY EMPLOYEE shall mean any Employee or former Employee
who is at any time during the Plan Year, or was during any one of the four
preceding Plan Years, any one or more of the following:
(a) an officer of an Employer having annual Compensation greater than
150% of the dollar amount in effect under Code section 415(c)(1)(A) for any such
Plan Year, unless 50 other such officers (or, if lesser, a number of such
officers equal the greater of three Employees or 10% of the Employees) have
higher annual Compensation;
(b) one of the 10 persons employed by an Employer having annual
Compensation greater than the limitation in effect under Code section
415(c)(1)(A) for any such Plan Year, and owning (or considered as owning within
the meaning of Code section 318) the largest interests in the Employers (for
this purpose if two
14
<PAGE> 19
Employees have the same interest, the one with the greater Compensation shall be
treated as owning the larger interest);
(c) any person owning (or considered as owning within the meaning of
Code section 318) more than 5% of the outstanding stock of an Employer or stock
possessing more than 5% of the total combined voting power of such stock;
(d) a person who would be described in subsection (c) above if "1%"
were substituted for "5%" and who has annual Compensation of more than $150,000.
For purposes of determining ownership under the foregoing rules, Code section
318(a)(2)(C) shall be applied by substituting "5%" for "50%" and the rules of
subsections (b), (c) and (m) of Code section 414 shall not apply. Any person who
is not a Key Employee shall be a non-Key Employee.
SECTION 1.26. LEASED EMPLOYEE shall mean any person who provides
services to an Employer on a substantially full-time basis for a period of one
year or more pursuant to an agreement with a leasing organization, if such
services are of a type historically performed by Employees in the Employer's
business
field.
SECTION 1.27. MANAGEMENT EMPLOYEE shall mean an Employee who is
employed by an Employer in an executive, supervisory, administrative, sales,
technical, clerical or security position and who is compensated on a salaried
basis. The term shall exclude production and labor Employees and Employees who
are compensated on an hourly or piece rate basis, but shall specifically include
non-exempt Employees of Eighty-Four Mining Company who are employed in
15
<PAGE> 20
the engineering, accounting, supply and mine clerk departments of Mine No. 84.
SECTION 1.28. NORMAL RETIREMENT DATE shall be the later of (a) the date
on which a Participant has attained age 62 and (b) the date on which he has
completed either (1) 20 or more years of Service in the Industry, including at
least one year of Service with the Company immediately prior to retirement, or
(2) five or more years of Service with the Company.
SECTION 1.29. PARTICIPANT shall mean a Management Employee or former
Management Employee who is currently employed by the Employers or who has
retired, terminated employment, or changed employment classification and is
receiving or entitled to receive benefits under the Plan.
SECTION 1.30. PERIOD OF SERVICE shall mean the period of time running
from a Date of Employment to the next succeeding Date of Separation.
SECTION 1.31. PLAN shall mean "The Rochester & Pittsburgh Coal Company
Pension Plan" as set forth herein or in any amendment hereto.
SECTION 1.32. PLAN YEAR shall mean the period of 12 months ending on
June 30 of each year.
SECTION 1.33. PRIMARY SOCIAL SECURITY BENEFIT shall mean the monthly
primary insurance benefit of a Participant payable under the federal Social
Security laws as in effect on his date of retirement or other termination of
employment assuming no further increases in the wage base or benefit formula,
including the
16
<PAGE> 21
maximum benefit to which such Participant is, shall become, or upon application
would become, entitled, without regard to any disqualification or any reduction
or loss in benefits which may result because of other income, delay in making
application, or any other reason; provided, however, that if a Participant's
employment terminates before age 62 for reasons other than Disability, his
Primary Social Security Benefit shall be computed by assuming continuation of
his Compensation until age 62 at the Compensation Rate as of the date of
termination of employment. Notwithstanding the foregoing, for purposes of
computing a Participant's Disability Retirement Pension by reference to his
Accrued Benefit, in case of Disability before Normal Retirement Age, the Primary
Social Security Benefit shall mean the actual monthly Social Security Benefit
being received by the Participant.
SECTION 1.34. PRIOR PLAN shall mean The North American Coal Company
Pension Plan, maintained on September 30, 1984 by North American Coal Company,
The Florence Mining Company Pension Plan maintained by The Florence Mining
Company, the Pension Plan of Bethlehem Steel Corporation and Subsidiary
Companies (including the Bethlehem 1989 Salaried Pension Plan and the Bethlehem
1983 Salaried Pension Plan), maintained as of December 30, 1992 by Bethlehem
Steel Corporation, as the context requires, or any successor plan to any of said
plans.
Section 1.35. Prior Plan Benefit shall mean the Participant's benefit
accrued under the Prior Plan determined at the time of commencement of benefits
under this Plan but in accordance with the
17
<PAGE> 22
provisions of the Prior Plan in effect as of the relevant date as described
below, such provisions to be applied as if the Prior Plan had continued
unchanged from the relevant date until the date of commencement of benefits
under this Plan regardless of whether the Prior Plan remains in existence until
such commencement date and regardless of the amount, if any, actually paid to or
on behalf of the Participant under the Prior Plan. Specifically, the term Prior
Plan Benefit shall mean:
(a) the Participant's benefit accrued under the North American Coal
Company Pension Plan as of September 30, 1984 and/or the Participant's benefit
accrued under the Florence Mining Company Pension Plan, provided that:
(1) the Prior Plan Benefit attributable to coverage under the
Florence Mining Company Pension Plan in the case of a Participant hired for the
first time by an Employer after April 14, 1992 and on or before June 30, 1992
shall not include any benefit accrued under The Florence Mining Company Pension
Plan after October 29, 1991;
(2) the Prior Plan Benefit in the case of a Participant hired
for the first time by an Employer after June 30, 1992 shall be zero.
(b) the Participant's benefit accrued as of December 30, 1992, under
the provisions of the Pension Plan of Bethlehem Steel Corporation and Subsidiary
Companies (including the Bethlehem 1989 Salaried Pension Plan and the Bethlehem
1983 Salaried Pension Plan) in effect on such date.
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<PAGE> 23
SECTION 1.36. QUALIFIED DOMESTIC RELATIONS ORDER shall mean any
judgment, decree or order pursuant to a state domestic relations or community
property law which relates to the provision of child support or marital property
rights, which creates or recognizes the existence of an alternate payee's right
(or assigns to an alternate payee the right) to receive all or part of a
Participant's Accrued Benefit, and which meets the requirements of (a) and (b)
below, as interpreted in accordance with Code section 414(p):
(a) such order specifies:
(1) the name and last known mailing address of the Participant
and each alternate payee;
(2) the amount or the percentage of the Participant's Accrued
Benefit to be paid to each alternate payee, or the manner in which such amount
or percentage is to be determined;
(3) the number of payments or period to which the order
applies; and
(4) each plan to which such order applies; and
(b) such order does not require the Plan to:
(1) provide any type or form of benefit or option not
otherwise provided under the Plan;
(2) provide increased benefits; or
(3) pay to an alternate payee amounts required to be paid to
another alternate payee under a prior Qualified Domestic Relations Order.
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<PAGE> 24
SECTION 1.37. QUALIFIED JOINT AND SURVIVOR BENEFIT shall mean a benefit
which is the Actuarial Equivalent of the single life annuity which would be
payable to the Participant if he were unmarried and which consists of a reduced
monthly pension for the life of the Participant with a monthly pension payable
after the Participant's death for the life of the joint annuitant which is 50%
of the reduced amount payable during the life of the Participant. The joint
annuitant shall be the person to whom the Participant was married on the date of
commencement of benefit payments. If the person to whom the Participant was
married on the date of commencement of benefit payments predeceases the
Participant, only the reduced monthly pension shall be payable to the
Participant for life.
SECTION 1.38. QUALIFIED SPOUSE shall mean a person to whom the
Participant has been married for a period of at least one year ending on the
date of death of the Participant.
SECTION 1.39. SERVICE with the Company shall mean the total time of an
Employee's employment with the Employers, which shall be the aggregate of all
Periods of Service; provided, however, that:
(a) Periods of Service prior to an interruption of employment
commencing before July 1, 1976 shall not be counted unless such Periods of
Service would have been counted under the rules of the Plan in effect on June
30, 1976.
(b) Periods of Service prior to a Break in Service commencing after
June 30, 1976 shall not be counted unless:
20
<PAGE> 25
(1) the Employee had completed five or more years of Service
with the Company before such Break in Service, or
(2) in the case of a Participant subject to Section 1.12(c),
the length of such Break in Service is less than the aggregate of the Periods of
Service previously accumulated.
(c) Service with the Company shall include employment with an Employer
other than the Company prior to the date on which such Employer became an
Associated Company, employment with a predecessor corporation of one of the
Employers to the extent required by Code section 414(a), and employment with an
Associated Company.
(d) Any interruption of an individual's Service with the Company (as
determined under the rules of this Section 1.39 other than this subsection) for
a period of not more than 12 months shall be disregarded.
(e) Service with the Company shall include periods of absence from
employment extending beyond Date of Separation if covered by an approved leave
of absence granted by the Employer in writing pursuant to a nondiscriminatory
leave policy.
(f) Service with the Company shall include, to the extent required by
federal law, periods of active service in the armed forces of the United States
giving rise to reemployment rights; provided, however, that the Employee
complied with the requirements of such federal law and was in fact reemployed by
the Employers.
(g) Service with the Company shall include Periods of Service as a
Leased Employee.
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<PAGE> 26
(h) Service with the Company as of July 1, 1984 shall not be less for
any Employee than that with which he would have been credited on such date under
the rules of the Plan in effect on June 30, 1984.
(i) Service with the Company shall include all service credited for
vesting purposes under the Prior Plan as of September 30, 1984 to Employees on
October 1, 1984 who were employed by The Florence Mining Company on September
30, 1984 plus any service with North American Coal Company or its affiliates
which would have been so credited but for any minimum age limitation on such
credit in the Prior Plan.
(j) Service with the Company shall include all service credited for
vesting purposes under the Prior Plan as of December 30, 1992 to Employees who
were employed by BethEnergy Mines Inc. at Mine 84 on such date or on layoff
status on such date plus any service with Bethlehem Steel Corporation or its
affiliates which would have been so credited but for any minimum age limitation
on such credit under the Prior Plan.
SECTION 1.40. SERVICE in the Industry shall mean the aggregate of the
period or periods of employment with the Employers and/or any other organization
which the Committee determines to be in the National Bituminous Coal Industry or
an allied industry by reason of being primarily engaged in the mining and/or
sale of coal and/or the production and/or sale of coke.
22
<PAGE> 27
ARTICLE 2
AGE, SERVICE AND OTHER REQUIREMENTS
SECTION 2.1. PARTICIPATION AND VESTING. Every Management Employee shall
be a Participant in the Plan. Every Participant shall be fully vested in his
Accrued Benefit upon attaining age 65 or upon earlier completion of five or more
years of Service with the Company.
SECTION 2.2. NORMAL RETIREMENT. A Normal Retirement Pension shall be
payable to a Participant who retires from the service of the Employers on or
after his Normal Retirement Date.
SECTION 2.3. EARLY RETIREMENT. An Early Retirement Pension shall be
payable to a Participant who retires from the service of the Employers before
age 62 on or after his Early Retirement Date.
SECTION 2.4. DISABILITY RETIREMENT. A Participant who is retired by an
Employer for reasons of Disability after completing at least one year of active
employment with the Employers (after completing five or more years of Service
with the Company in the case of a Disability commencing before January 1, 1990)
shall be entitled to receive a Disability Retirement Pension.
SECTION 2.5. ELIGIBILITY FOR VESTED DEFERRED PENSION. A Participant who
ceases to work for the Employers for reasons other than Disability before
meeting the age and service requirements of Section 2.2 or 2.3 shall be entitled
to receive a Vested Deferred Pension if he has completed five or more years of
Service with the Company.
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<PAGE> 28
SECTION 2.6. ELIGIBILITY FOR SPOUSE'S PENSION. The Qualified Spouse of
a Participant who dies before commencement of benefit payments (disregarding
payments under a Disability Retirement Pension commencing on or after July 1,
1997) shall be entitled to receive a Spouse's Pension as described in Article 4
if:
(a) the Participant was credited with 20 or more years of Service with
the Company and had attained 50 years of age;
(b) the Participant dies after August 22, 1984 and:
(1) was credited with five or more years of Service with the
Company, including any Service with the Company after August 22, 1984; or
(2) was entitled to a Vested Deferred Pension under Section
2.5 as of August 22, 1984 but had no Service with the Company after such date;
(c) the Participant was actively employed at date of death and had met
the requirements for a Normal Retirement Pension under Section 2.2 or an Early
Retirement Pension under Section 2.3; or
(d) the Participant had retired after becoming entitled to a Normal
Retirement Pension under Section 2.2 or an Early Retirement Pension under
Section 2.3 on account of Service with the Company, including any Service with
the Company after June 30, 1976.
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<PAGE> 29
ARTICLE 3
RETIREMENT BENEFITS
SECTION 3.1. GENERAL. The amount of the pension awarded to a qualified
Employee who retires after meeting the age, service and other requirements
described in Article 2 shall be computed and paid as described in this Article.
SECTION 3.2. NORMAL RETIREMENT PENSION. Unless an alternative method of
payment is applicable as described in Section 3.6(a), the amount of each monthly
pension payment to a Participant eligible for Normal Retirement under Section
2.2 shall be the amount determined under (a) below, subject to the maximum set
forth in (b) below, reduced by the amount described in (c) below, modified as
provided in (d) below or in Section 3.12, if applicable, and increased to the
next whole dollar:
(a) the greater of (1), (2) or (3) below (but, in the case of a
Participant who was covered by the Plan on June 30, 1976, not less than (4)
below):
(1) 1.75% of the Participant's Average Monthly Compensation
multiplied by the number of years and fractional years of the Participant's
Accredited Service, up to a maximum of 35 years, reduced by 50% of the
Participant's Primary Social Security Benefit; or
(2) 1.25% of the Participant's Average Monthly Compensation
not in excess of the Average Social Security Wage Base multiplied by the number
of years and fractional years of the Participant's Accredited Service; or
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<PAGE> 30
(3) $150.00; or
(4) the sum of the Basic Pension and the Supplemental Pension
of such Participant computed as if the provisions of the Plan in effect on June
30, 1976 had continued in effect until date of retirement and assuming
Compensation as of June 30, 1976 had continued in effect until date of
retirement;
(b) the amount of the maximum pension shall be the greater of (1) or
(2) below:
(1) 80% of the Participant's Average Monthly Compensation
reduced by 100% of the Participant's Primary Social Security Benefit; or
(2) $250.00;
(c) the monthly amount of the Participant's Prior Plan Benefit stated
as a single life annuity commencing at age 62;
(d) Notwithstanding the foregoing provisions of this Section 3.2:
(1) In the case of a Participant eligible for a Normal
Retirement Benefit under Section 2.2 who was employed by the Company on October
1, 1988 and who retires on or before February 1, 1989 after completing five or
more years of Service with the Company, the Participant's pension shall be
calculated by (i) substituting a 40 year maximum Accredited Service limit for
the 35 year maximum specified in Section 1.3(a)(1) and subsection (a)(1) above,
(ii) increasing Accredited Service by one-seventh (1/7th) of a year of
Accredited Service for each year of Accredited Service determined under Section
1.1, subject to the maximum specified in
26
<PAGE> 31
(i) above, and (iii) disregarding subsection (b) above.
(2) In the case of a Participant eligible for a Normal Retirement
Benefit under Section 2.2 who was employed by Keystone Coal Mining Corporation
on January 1, 1989, and who retires on or before August 15, 1989, after
completing five or more years of Service with the Employers, the Participant's
pension shall be calculated by (i) substituting a 40 year maximum Accredited
Service limit for the 35 year maximum specified in Section 1.3(a)(1) and
subsection (a)(1) above, (ii) increasing Accredited Service by one-seventh
(1/7th) of a year of Accredited Service for each year of Accredited Service
determined under Section 1.1, subject to the maximum specified in (i) above, and
(iii) disregarding subsection (b) above.
(3) The pension of a Participant described in Section 1.20(e) who is
eligible for a Normal Retirement Benefit under Section 2.2 shall be calculated
by (i) adding five years to the Participant's years of Accredited Service
(subject to the 35 year maximum for purposes of applying the formula in Section
3.2(a)(1)) and (ii) disregarding Section 3.2(b);
(e) A Normal Retirement Pension shall commence as of the day following
retirement; provided, however, that in no event shall pension payments commence
later than the mandatory starting date specified in Section 3.6(e).
SECTION 3.3. EARLY RETIREMENT PENSION. The Early Retirement Pension of a
Participant eligible therefor under Section 2.3 shall be determined as follows:
27
<PAGE> 32
(a) An Early Retirement Pension shall be the Participant's Accrued Benefit
as of his Early Retirement Date, and shall be payable either:
(1) Commencing at Normal Retirement Date in the full unreduced amount,
or
(2) Commencing on any date coincident with or following Early
Retirement Date and before Normal Retirement Date which is selected by the
Participant, reduced by 5/12% for each month that commencement of the pension
precedes Normal Retirement Date.
(b) Notwithstanding subsection (a):
(1) In the case of a Participant retiring on or before February 1, 1989
who was employed by the Company on October 1, 1988 and who attains age 60 before
February 1, 1989, the following provisions shall apply:
(A) The Early Retirement Pension commencing on or before February
1, 1989 shall be the Participant's Accrued Benefit as of his Early Retirement
Date, calculated with the modifications set forth in Section 3.2(d).
(B) For months commencing before attainment of age 62, such a
Participant shall be entitled to a Social Security supplement which shall be a
monthly amount equal to the Participant's Primary Social Security Benefit
(calculated as provided in Section 1.33 but assuming no Compensation or other
earnings after termination) reduced according to the reduction factors
applicable under the federal Social Security laws for benefit commencing upon
attainment of age 62.
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<PAGE> 33
(C) The Qualified Joint and Survivor Benefit shall be calculated
and paid without regard to the Social Security supplement described in paragraph
(B) above.
(2) In the case of a Participant retiring on or before August 15, 1989,
who was employed by Keystone Coal Mining Corporation on January 1, 1989, and who
attains age 60 before August 15, 1989, the following provisions shall apply:
(A) The Early Retirement Pension commencing on or before August 15,
1989, shall be the Participant's Accrued Benefit as of his Early Retirement
Date, calculated with the modifications set forth in Section 3.2(d).
(B) For months commencing before attainment of age 62, such a
Participant shall be entitled to a Social Security supplement which shall be a
monthly amount equal to the Participant's Primary Social Security Benefit
(calculated as provided in Section 1.33 but assuming no Compensation or other
earnings after termination) reduced according to the reduction factors
applicable under the federal Social Security laws for benefits commencing upon
attainment of age 62.
(C) The Qualified Joint and Survivor Benefit shall be calculated
and paid without regard to the Social Security supplement described in paragraph
(B) above.
(3) In the case of a Participant described in Section 1.20(e) retiring
before January 1, 1992 who was employed by the Company on October 1, 1991 and
who attains age 55 before January 1, 1992, the following provisions shall apply:
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<PAGE> 34
(A) The Early Retirement Pension commencing on or before January 1,
1992 shall be the Participant's Accrued Benefit as of his Early Retirement Date,
calculated by (i) adding five years to the Participant's years of Accredited
Service (subject to the 35 year maximum for purposes of applying the formula in
Section 1.3(a)(1)) and (ii) disregarding Section 1.3(b).
(B) For months commencing before attainment of age 62, such a
Participant shall be entitled to a Social Security supplement which shall be a
monthly amount equal to the Participant's Primary Social Security Benefit
(calculated as provided in Section 1.33 but assuming no Compensation or other
earnings after termination) reduced according to the reduction factors
applicable under the federal Social Security laws for benefits commencing upon
attainment of age 62.
(C) The Qualified Joint and Survivor Benefit shall be calculated
and paid without regard to the Social Security supplement described in paragraph
(B) above.
SECTION 3.4. DISABILITY RETIREMENT PENSION. The Disability Retirement
Pension of a Participant becoming eligible therefor under Section 2.4 before
Normal Retirement Date shall be calculated and paid pursuant the following
rules:
(a) The amount of the Disability Retirement Pension shall be the greater
of:
(1) the Participant's Accrued Benefit (computed by (i) substituting the
monthly Social Security disability benefit actually being received by the
Participant for the Primary Social
30
<PAGE> 35
Security Benefit, and (ii) disregarding the Participant's Prior Plan Benefit),
or
(2) 50% of the Participant's Average Monthly Compensation reduced by
50% of the Social Security disability benefit actually being received by the
Participant.
(b) A Disability Retirement Pension shall commence on the later of
(1) the effective date of determination of Disability by the Committee,
or
(2) the passage of 24 months from the commencement of the absence from
employment (15 months if the commencement of such absence was before January 1,
1990), and shall be payable monthly until the earlier of the recovery of the
Participant (as evidenced by ineligibility for Social Security disability
benefits) or Normal Retirement Date (or prior death).
(c) If the Participant recovers from Disability before Normal Retirement
Date but is not reemployed, his eligibility for benefits under the Plan will be
determined under Section 2.3 or 2.5, whichever is applicable, and the amount of
any benefits to which he is entitled shall be determined under Article 3 based
on the Participant's Accredited Service and Average Monthly Compensation as of
the date his Disability commenced. If the Participant is reemployed after
recovery from Disability, he shall thereupon resume accrual of benefits as an
Active Participant in the Plan. If the Participant does not recover from
Disability and dies before Normal Retirement Date, the Disability Retirement
Pension shall
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cease, subject to the provisions of Article 4 if the Participant leaves a
surviving spouse.
(d) If the Participant does not recover from Disability before Normal
Retirement Date, and survives to such date, the Disability Retirement Pension
shall cease and he shall commence receiving a Normal Retirement Pension
determined in accordance with the formula set forth in Section 3.2, but (i)
calculating Accredited Service and Average Monthly Compensation as if the
Participant had continued in full-time employment until Normal Retirement Date
at the Compensation rate in effect at the time of cessation of active employment
and (ii) substituting the monthly Social Security disability benefit for the
Primary Social Security Benefit. The provisions of Sections 3.6 and 3.7 shall be
applied as if benefits were commencing with respect to the participant at Normal
Retirement Date.
SECTION 3.5. VESTED DEFERRED PENSION. A Vested Deferred Pension of a
Participant eligible therefor under Section 2.5 shall be his Accrued Benefit as
of his last Date of Separation. A Vested Deferred Pension shall be payable
commencing at Normal Retirement Date; provided, however, that at the election of
a Participant who has 15 or more years of Service with the Company, a Vested
Deferred Pension shall be payable commencing on any date on or after the
Participant's 55th birthday designated by the Participant, but in such case the
amount of the monthly benefit shall be reduced by 5/12% for each month that
commencement of the pension precedes Normal Retirement Date.
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SECTION 3.6. MANNER OF PAYMENT. Subject to Section 3.9, all pensions
described in this Article shall be payable monthly as follows:
(a) In the case of a Participant who was employed at any time after
September 1, 1974 and who is married on the effective date of commencement of
payments, such payments shall be made in the form of a Qualified Joint and
Survivor Benefit, the value of which shall be the Actuarial Equivalent of the
form of benefit described in subsection (b), unless the Participant elects in
writing, at the time and in the manner prescribed by the Committee, to receive
the form of benefit described in subsection (b).
(b) In the case of a Participant who is not described in subsection (a),
such payments shall be made for the life of the Participant and shall cease upon
his death.
(c) The provisions of subsections (a) and (b) shall not apply in the case
of a Disability Retirement Pension commencing on or after July 1, 1997, which
shall be payable as provided in Section 3.4(b) and (c) solely as an auxiliary
benefit.
(d) Monthly pension payment shall commence at the time provided in this
Plan and shall continue for the applicable period with payments on the first day
of the second and each subsequent calendar month. If the effective date of
commencement of the pension is not the first day of a calendar month, the amount
of such first payment shall be a pro-rata portion of the monthly amount
otherwise payable.
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(e) Notwithstanding any other provision of this Plan, all benefit payments
under this Plan shall conform to the regulations issued under Code section
401(a)(9), including Treasury Regulation Section 1.401(a)(9)-2 and the
incidental death benefit provisions of Code section 401(a)(9)(G), and such
regulations are incorporated herein by reference and shall override any Plan
provision inconsistent therewith. Pension payments shall commence, whether or
not a Participant has retired, not later than April 1 following the end of the
calendar year in which the Participant attains age 70-1/2.
SECTION 3.7. MANNER AND TIME OF ELECTIONS. An election provided under
Section 3.6(a) shall be made on a form prescribed by the Committee. Such
election shall be valid only if the Participant's spouse consents in writing to
such election and such consent is witnessed by a Plan representative or notary
public. An election not to receive the Qualified Joint and Survivor Benefit may
be made or revoked at any time within the 90 day period prior to the effective
date of commencement of pension payments. Not earlier than 90 days nor later
than 30 days before the effective date of commencement of pension payments, the
Committee shall furnish to each married Participant a written explanation in
nontechnical language of the terms and conditions of the Qualified Joint and
Survivor Benefit, the Participant's right to make, and the effect of, an
election to waive the Qualified Joint and Survivor Benefit, the rights of the
Participant's Qualified Spouse, and of the rules concerning election or
revocation of any election not to receive the Qualified Joint and Survivor
Benefit.
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SECTION 3.8. REEMPLOYMENT. Anything in this Plan to the contrary
notwithstanding, payment of any pension otherwise payable hereunder shall be
suspended according to the rules set forth in this Section 3.8.
(a) The pension of a Participant who is reemployed by the Employer in a
position other than as a Management Employee after commencement of such pension
and before Normal Retirement Date shall be suspended during the period of
reemployment prior to Normal Retirement Date.
(b) The pension of a Participant who is reemployed by the Employer as a
Management Employee after commencement of such pension and before the mandatory
commencement date specified in Section 3.6(e) shall be suspended during the
period of reemployment prior to the mandatory commencement date specified in
Section 3.6(e).
(1) Upon subsequent retirement or death of any Participant who is
reemployed as a Management Employee, benefits payable hereunder shall be
recomputed on the basis of Accredited Service and Average Monthly Compensation
at such subsequent retirement or death, provided that such recomputed pension
shall be reduced (but not to less than the amount of pension previously payable)
by the Actuarial Equivalent (using the Participant's age at commencement of
payments following subsequent retirement and the applicable actuarial factors
for the year of commencement of payments following subsequent retirement and
expressed as a monthly pension payable for life and ceasing upon death (or as a
lump sum
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<PAGE> 40
in the case of a lump sum payment at such subsequent retirement)) of pension
payments received by the Participant before his reemployment.
(2) For purposes of this Section 3.8, a Participant shall be deemed to
be reemployed during any month after his Normal Retirement Date only if he is
compensated directly or indirectly by the Employer with respect to eight or more
days of such month for the performance of duties or for vacation, holiday,
illness, incapacity, layoff, jury duty, military duty or leave of absence.
(c) No pension shall be suspended unless the reemployed Participant is
given timely written notification in accordance with regulations under the Act.
(d) If a pension payment is made to a Participant for any month during a
period of suspension the amount of such payment shall be recovered by reducing
or eliminating the first pension payment following the period of suspension and,
if necessary, by reducing subsequent payments to the extent of not more than 25%
of the monthly amount thereof.
SECTION 3.9. SMALL PENSIONS. Notwithstanding any other provisions of this
Plan, the Actuarial Equivalent lump sum present value of a Participant's Accrued
Benefit shall be payable to the Participant in a single lump sum in the
circumstances described in (a) and (b) below, subject to (c) through (e) below:
(a) In the case of a Participant who ceased benefit accruals under the Plan
during any Plan Year ending on or after June 30, 1987 and on or before June 30,
1991 by reason of a termination of
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employment as of August 7, 1990 pursuant to Section 10.4 or by reason of a prior
termination of employment with the Iselin Preparation Company, such present
value shall be paid in a single lump sum as soon as administratively feasible
after May 1, 1991.
(b) In any other case in which the Actuarial Equivalent lump sum present
value of the Participant's Accrued Benefit is not more than $7,500, such present
value shall be paid in a single lump sum as soon as administratively feasible
after termination of employment.
(c) Effective January 1, 1993, at the election of a payee who is a
Participant or spouse, payment of all or a specified amount of that part of any
lump sum payment pursuant to subsection (b) which is an eligible rollover
distribution (as defined in Code section 401(a)(31)(C)) shall be made by direct
transfer to the trustee or other custodian of an eligible retirement plan (as
defined in Code section 401(a)(31)(D)), subject to the following rules:
(1) This subsection (c) shall not apply to a payment which the
Committee determines to come within any de minimus exception for direct
transfers allowed under Code section 401(a)(31).
(2) To invoke the direct transfer option the payee must specify, in
such form and at such time as the Committee may prescribe, the eligible
retirement plan to which the distribution is to be paid and must provide to the
Committee in a timely manner adequate information regarding the designated
eligible retirement plan. The Committee may place reasonable reliance on such
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information and is not required to independently verify such information.
(3) the Committee shall, within a reasonable time before the effective
date of an eligible rollover distribution from the Plan, provide to the payee a
written explanation of the provisions under which the payee may have the
distribution directly transferred to another eligible retirement plan, the
provision which requires the withholding of tax on eligible rollover
distributions which are not directly transferred to an eligible retirement plan,
the provisions under which an eligible rollover distribution will not be subject
to tax if transferred to an eligible retirement plan within 60 days after
receipt, and the provisions concerning taxation of lump sum distributions.
Notwithstanding the foregoing, an alternate payee who is not the Participant's
spouse may not elect a direct transfer and a payee who is a spouse may elect a
direct transfer only to an eligible retirement plan which is an individual
retirement account.
(d) Notwithstanding the provisions of (a) through (c) above, if the
Actuarial Equivalent lump sum present value of a Participant's Accrued Benefit
is more than $3,500 such lump sum payment shall be made only with the written
consent of the Participant (and if the Participant is married the written
consent of the Participant's spouse witnessed by a Plan representative or notary
public) following written notice provided during the time period specified in
Section 3.7 which includes (in addition to the information otherwise required by
Section 3.7) an explanation of
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the right to postpone commencement of benefits until the date otherwise provided
in Sections 3.2 through 3.6 of this Article 3.
(e) If a Participant on whose behalf a distribution or direct transfer has
been made pursuant to this Section 3.9 subsequently returns to employment
covered by this Plan, any pension otherwise payable hereunder based on the same
period of Service with the Company shall be reduced by the Actuarial Equivalent
value of the amount previously paid.
SECTION 3.10. COST OF LIVING ADJUSTMENTS. Pensions granted under prior
provisions of this Plan which commenced before July 1, 1974 were increased
effective July 1, 1974 by 1/4% thereof for each full month before July 1, 1974
that such pension commenced, up to a maximum increase of 30%. Effective with the
monthly pension payment to a Participant or surviving spouse for July 1, 1981,
each pension (as increased in accordance with the preceding sentence, if
applicable) with a commencement date before July 1, 1981 was increased by 1/4%
thereof for each full month of the post-June 30, 1976 payment period plus 10%
thereof if the commencement date of such pension was before July 1, 1976, the
maximum increase being 25%. Effective with the monthly pension payment to a
Participant or surviving spouse for July 1, 1985, each pension (as increased in
accordance with the preceding sentence, if applicable) with a commencement date
before July 1, 1985, shall be increased by 1/4% thereof for each full month of
the post-June 30, 1981 payment period, the maximum increase being 12%. For
purposes of this Section:
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(a) the "post-June 30, 1976 payment period" shall be the period beginning
with the later of:
(1) July 1, 1976, or
(2) the commencement date and ending June 30, 1981;
(b) the "commencement date" shall be the effective date of commencement of
pension payments to the Participant or surviving spouse or, in the case of
payments to a surviving spouse of a Participant who died after pension payments
commenced, the effective date of commencement of such payments to such
Participant.
SECTION 3.11. TRANSFER TO ASSOCIATED COMPANY MAINTAINING COMPARABLE PLAN.
If any Associated Company (including the Company) or former Associated Company
maintains a defined benefit pension plan covering its employees which contains
provisions comparable to this Section 3.11, any Employee who accrues benefits
under this Plan and any such other plan shall, notwithstanding any provision of
this Plan to the contrary (but subject to Section 9.2), have an allocable
portion of such benefits provided under each such plan in accordance with the
rules of this Section set forth below:
(a) For purposes of this Section, the following definitions and special
rules shall apply:
(1) "Affiliated Plan" shall mean this Plan and each other defined
benefit plan maintained by an Associated Company or former Associated Company
with whom an Employee has been employed as a Management Employee provided such
plan contains provisions comparable to this Section 3.11.
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(2) "Tentative Pension Benefit" shall mean, with respect to any
Affiliated Plan, a former Employee's monthly benefit as determined under the
provisions of such Affiliated Plan as of the date of retirement or termination
as if the Employee had continued to be employed by the Associated Company (or
former Associated Company) maintaining such Affiliated Plan until such date, at
his rate of pay on the date he ceased to be employed by such Associated Company
(or former Associated Company), increased for each year thereafter at the rate
of 5%.
(3) If an Employee or a retired or terminated Employee transferred from
the Company to Keystone Coal Mining Corporation prior to July 1, 1978 Accredited
Service with the Company prior to the transfer shall be deemed to be Accredited
Service with Keystone Coal Mining Corporation.
(4) If an Employee or a retired or terminated Employee transferred
after September 30, 1984 from The Florence Mining Company to the Company or any
Associated Company or former Associated Company all Accredited Service prior to
October 1, 1984 shall be deemed to be Accredited Service with The Florence
Mining Company, in addition to any Accredited Service with The Florence Mining
Company on or after October 1, 1984.
(b) The pension benefit of a retired or terminated Employee under each
Affiliated Plan shall be as follows:
(1) Under the Affiliated Plan of each Associated Company or former
Associated Company by which he was formerly employed, the lesser of his
Tentative Pension Benefit or his pension benefit
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determined under the provisions of the Affiliated Plan of the Associated Company
or former Associated Company by which he was employed immediately before
retirement or termination (taking into account all Accredited Service for the
Associated Companies or former Associated Companies) multiplied by a fraction
the numerator of which is the number of days of the former Employee's Accredited
Service with such Associated Company or former Associated Company with which he
was formerly employed and the denominator of which is the number of days of
total Accredited Service.
(2) Under the Affiliated Plan of the Associated Company or former
Associated Company by which the former Employee was employed immediately before
retirement or termination, the employee's total pension benefit less the sum of
the amounts determined under paragraph (1) of this subsection (b) for the
Affiliated Plans of all other Associated Companies or former Associated
Companies.
SECTION 3.12. FRESH START RULE. The benefits payable on behalf of a
Participant who is a Section 401(a)(17) Employee (a Participant described in
Treasury Regulation Section 1.401(a)(17)-1(e)(2)(i) whose Compensation is
limited by the application of Section 1.16(a) and/or (b)) shall be calculated
under this Section 3.12.
(a) The benefit of a Section 401(a)(17) Employee as of any determination
date is equal to the greater of (1) or (2):
(1) the sum of:
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(A) the Participant's frozen Accrued Benefit; and
(B) the Participant's Accrued Benefit determined under the formula
applicable to benefit accruals in the current Plan Year ("current formula") as
applied to the Participant's Accredited Service after the fresh-start date; or
(2) the greater of:
(A) the Participant's frozen Accrued Benefit; or
(B) the Participant's Accrued Benefit determined under the current
formula as applied to the Participant's total Accredited Service (before and
after the fresh-start date) taken into account under the current formula.
(b) For purposes of subsection (a), the following definitions shall apply:
(1) A Section 401(a)(17) Employee is a Participant described in
Treasury Regulation Section 1.401(a)(17)- 1(e)(2)(i) whose Compensation is
limited by the application of Section 1.16(a) and/or (b).
(2) A "fresh-start date" is:
(A) For determination dates falling within the period July 1, 1989
through June 30, 1994, July 1, 1989;
(B) For determination dates after June 30, 1994, July 1, 1994.
(3) A Participant's "frozen Accrued Benefit" is:
(A) For periods from July 1, 1989 through June 30, 1994, the
Participant's Accrued Benefit, determined as if he
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<PAGE> 48
terminated employment with the Employers as of June 30, 1989 (or his actual
termination of employment date, if earlier);
(B) For periods after June 30, 1994, the Participant's Accrued
Benefit, determined as if he terminated employment with the Employers as of June
30, 1994 (or his actual termination of employment date, if earlier).
(c) This Section 3.12 is intended only to implement the extended wear-away
formula of Treas. Reg. Section 1.401(a)(4)- 13(c)(4)(iii), applying a fresh
start with respect to "Section 401(a)(17) Employees" and shall be construed
accordingly.
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ARTICLE 4
SPOUSE'S PENSION
SECTION 4.1. AMOUNT AND DURATION OF PAYMENT. In the case of death of an
Active Participant who was credited with 20 or more years of Service with the
Company and had attained 50 years of age, the Participant's Qualified Spouse
shall be entitled to a Spouse's Pension payable as a life annuity, commencing as
of the date of death, with monthly payments equal to 50% of the monthly pension
to which the Participant would have been entitled under Article 3 if he had
retired on the date of his death with the Qualified Joint and Survivor Benefit
in effect, disregarding for this purpose any limitation on eligibility for early
retirement by reason of Sections 1.20 and 2.3. In the case of the death of any
other Participant who meets the requirements of Section 2.6, the Participant's
Qualified Spouse shall be entitled to a Spouse's Pension payable as a life
annuity, commencing on the later of the date of the Participant's death or the
date on which the Participant would have attained age 55 (age 62 if death
occurred at a time when the Participant had completed less than 15 Years of
Service with the Company), with monthly payments equal to 50% of the monthly
pension to which the Participant would have been entitled under Article 3 if his
pension had commenced as of above-stated commencement date (assuming, in the
case of a Participant who dies before attaining age 55 (age 62, if applicable),
that he survived to such age after terminating employment on the earlier of
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<PAGE> 50
his Date of Separation or date of death), with the Qualified Joint and Survivor
Benefit in effect.
SECTION 4.2. ALTERNATIVE TIMING AND METHOD OF PAYMENT. Notwithstanding
anything herein to the contrary:
(a) A Qualified Spouse may elect in writing, in accordance with procedures
established by the Committee, to postpone commencement of a Spouse's Pension
from the date otherwise applicable under Section 4.1 to any date not later than
the date on which the Participant would have attained his Normal Retirement
Date, subject to subsection (b) of this Section 4.2. In the event of such a
deferral, the monthly amount payable to the Qualified Spouse shall be equal to
the amount that would have been payable to the Qualified Spouse if the
Participant had elected to have benefits commence at the deferred commencement
date and died on the day after such benefits commenced with a Qualified Joint
and Survivor Benefit in effect.
(b) If the Actuarial Equivalent lump sum present value of an annuity
payable to a Qualified Spouse under this Article 4 should be not more than
$7,500, such present value shall be paid as soon as administratively feasible
after death of the Participant (or, if later, as soon as administratively
feasible after September 28, 1989) as a single lump sum death benefit to the
Qualified Spouse in full discharge of the Plan's obligation hereunder, provided
that if such present value is more than $3,500 such lump sum payment shall be
made only with the written consent of the Qualified Spouse (witnessed by a Plan
representative or notary public) following a
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<PAGE> 51
written explanation consistent with the requirements of Section 3.9.
SECTION 4.3. DEATH FOLLOWING COMMENCEMENT OF BENEFITS. Except for payments
pursuant to a Qualified Joint and Survivor Annuity, no benefits shall be payable
with respect to a Participant who dies after commencement of pension benefits.
For purposes of the preceding sentence, pension benefits shall not be deemed to
have commenced merely by reason of commencement of payments under a Disability
Retirement Pension commencing on or after July 1, 1997.
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ARTICLE 5
CONTRIBUTIONS
SECTION 5.1. EMPLOYER CONTRIBUTIONS. Subject to the provisions of Article
7, the Employers shall contribute to the Funding Agent from time to time such
sums as are approved by the Board based upon actuarial studies obtained by the
Board. The Employers intend to make such contributions as are necessary to fund
the Plan in accordance with the Act.
SECTION 5.2. FUND. All contributions under this Plan shall be paid to the
Funding Agent and held, managed and disbursed pursuant to the terms of any trust
agreement or contract entered into by the Company pursuant to Section 6.7.
Except as otherwise provided in Section 5.3 and Section 7.2, all assets and
income of the Fund shall be for the exclusive benefit of Participants and their
Qualified Spouses, shall be used to pay benefits to such persons, or to pay
reasonable administrative expenses to the extent not paid by the Employers, and
prior to the satisfaction of all liabilities to Participants and their Qualified
Spouses shall not revert to or inure to the benefit of the Employers or any
other person.
SECTION 5.3. RETURN OF CONTRIBUTIONS .
(a) Notwithstanding Section 5.2, in the case of an excess contribution made
by reason of
(1) a good faith mistake in fact, or
(2) a good faith mistake in determining the deductibility of a
contribution, resulting in a disallowance of a deduction, the excess
contribution, as determined in (b) below, may be returned to
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<PAGE> 53
the Employers within one year after the date of payment, or in the case of a
disallowed contribution, the date of disallowance.
(b) The amount of the excess contribution shall be the lesser of:
(1) the excess of the amount contributed over the amount that would
have been contributed had said mistake or disallowance not occurred, or
(2) the amount determined in (1) above, less any losses attributable
thereto.
(c) After the allocation of the Trust Fund as provided under Section 7.2,
and after satisfaction of all fixed and contingent liabilities under the Plan,
any part of the Trust Fund remaining shall revert to the Employers.
SECTION 5.4. EMPLOYEE CONTRIBUTIONS. Employee contributions are neither
required nor permitted.
SECTION 5.5. FORFEITURES. Forfeitures arising under this Plan shall not be
used to increase benefits otherwise payable to other Participants but instead
shall be used to reduce Employer contributions.
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ARTICLE 6
ADMINISTRATION
SECTION 6.1. IN GENERAL. The Plan shall be administered by a Pension
Committee, consisting of four persons. The Committee shall be a named fiduciary
under the Plan and shall perform the duties of "Plan Administrator" under the
Act. The members of the Committee and their successors shall be appointed from
time to time by the Board and shall serve without compensation at its pleasure.
The Committee shall elect a Chairman and a Secretary and shall appoint such
subcommittees as it shall deem necessary and appropriate.
SECTION 6.2. CONDUCT OF COMMITTEE BUSINESS. The Committee shall conduct its
business and hold meetings as determined by it from time to time. A majority of
the Committee shall have power to act, and the concurrence of any member may be
by telephone, wire, cablegram or letter. The Committee shall have full
discretionary authority to determine eligibility for benefits under the terms of
the Plan, to interpret the terms of the Plan and to resolve any ambiguities, to
establish and revise rules and regulations relating to the Plan, to determine
the amount, timing and form of benefit payments due under the Plan, and to make
any other determinations that it believes necessary or advisable for the
administration of the Plan. Decisions and determinations by the Company shall be
final and binding upon all Employees, former Employees, Participants, spouses,
or other persons. In the administration of the Plan, the Committee may:
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(a) appoint agents to carry out nonfiduciary and fiduciary responsibilities
(other than trustee responsibilities as defined in section 405(c)(3) of the
Act);
(b) consult with counsel, who may be counsel to the Company;
(c) appoint an investment manager or managers (as defined in section 3(38)
of the Act) to manage (including the power to acquire and dispose of) all or any
part of the assets of the Plan; and
(d) provide for the allocation of fiduciary responsibilities (other than
trustee responsibilities as defined in section 405(c)(3) of the Act) among its
members. Actions dealing with fiduciary responsibilities shall be taken in
writing and the performance of agents, counsel and fiduciaries to whom fiduciary
responsibilities have been delegated shall be reviewed periodically.
SECTION 6.3. EXPENSES. The expenses of administering the Plan and the
compensation of all employees, agents or counsel of the Committee, including any
trustee fees, shall be paid by the Company unless paid from the assets of the
Fund. The Company shall reimburse and indemnify the members of the Committee for
any out-of-pocket expenses incurred in the performance of their duties under the
Plan.
SECTION 6.4. RECORDS AND REPORTS. The Committee shall keep a record of all
its proceedings, which shall be open to inspection by the Board. It shall
prepare and submit to the Board such reports and information as the Board
requests.
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SECTION 6.5. CLAIMS PROCEDURES. Pursuant to procedures established by the
Committee, adequate notice in writing shall be provided to any Participant or
Qualified Spouse whose claim for benefits under the Plan has been denied. Such
notice shall set forth the specific reason for such denial, written in a manner
calculated to be understood by the claimant, and, provided review is requested
within 60 days after receipt by the claimant of written notification of denial
of his claim, shall afford a reasonable opportunity to any claimant whose claim
for benefits has been denied to a full and fair review of the decision denying
the claim.
SECTION 6.6. QUALIFIED DOMESTIC RELATIONS ORDERS. The Committee shall
establish reasonable procedures to determine whether a domestic relations order
is a Qualified Domestic Relations Order within the meaning of Section 1.36.
SECTION 6.7. FUNDING AGENT. The Company, to fund the benefits provided
under the Plan, in its sole discretion, may execute or continue a trust
agreement with a trustee or trustees, or enter into or continue one or more
contracts with an insurance company or companies, or adopt a combination of both
methods of funding. The Company shall determine the form and terms of any such
trust agreement or insurance contract, and, in its sole discretion, may modify
such instruments from time to time, or remove or replace any Funding Agent.
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ARTICLE 7
AMENDMENT, TERMINATION OR MERGER
SECTION 7.1. AMENDMENT. The Company specifically reserves the right, by
resolution adopted by its Board, to amend the Plan described herein at any time
and in any respect whatsoever; provided, however, that:
(a) no amendment shall adversely affect pensions accrued prior to the date
of such amendment or the vested rights of any Employee or Qualified Spouse to a
pension or other benefit;
(b) if any early retirement feature is changed by amendment, no such
feature which pertains to Accrued Benefits as of the date of such amendment
shall be denied to a Participant who at any time on or after the amendment
satisfies the pre-amendment conditions therefor;
(c) if any optional form of benefit is eliminated by amendment, such form
will be preserved with respect to Accrued Benefits as of the date of the
amendment;
(d) no restrictions shall be added to previously unrestricted Accrued
Benefits; and
(e) no amendment shall be made which would make it possible for any part of
the Fund to be used for or diverted to purposes other than for the exclusive
benefit of the Participants and their Qualified Spouses.
SECTION 7.2. TERMINATION. It is the intention of the Employers to continue
the Plan indefinitely and to make contributions as herein provided. The Company
specifically reserves the right,
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however, by resolution adopted by its Board, to terminate the Plan in whole or
in part at any time and for any reason. In the event of the termination or
partial termination of the Plan, all Accrued Benefits of affected Employees
shall be nonforfeitable and fully vested; provided, however, that the assets of
the Fund shall constitute the sole source of payment of benefits under the Plan
and under no circumstances shall the Employers be liable for pension payments
except in accordance with Title IV of the Act. Upon termination or partial
termination of the Plan, the assets of the Fund shall be allocated among the
Participants and their Qualified Spouses in the manner determined by the
Committee consistent with the provisions of the Plan and Title IV of the Act and
shall be administered and distributed at such time or times as is determined by
the Committee.
SECTION 7.3. MERGER. In the case of any merger or consolidation of this
Plan and/or the Fund with, or transfer of the assets or liabilities of the Plan
and/or Fund to, any other plan, the terms of such merger, consolidation or
transfer shall be such that each Participant would receive (in the event of
termination of this Plan or its successor immediately thereafter) a benefit
which is no less than he would have received in the event of termination of this
Plan immediately before such merger, consolidation or transfer.
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ARTICLE 8
OTHER PROVISIONS AFFECTING BENEFITS
SECTION 8.1. NONASSIGNABILITY. The right of a Participant to receive any
benefit under the provisions of this Plan shall not be subject to alienation or
assignment, nor shall such right be subject to attachment, execution,
garnishment, sequestration or other legal or equitable process. The preceding
sentence shall apply to domestic relations orders, but shall not apply to
Qualified Domestic Relations Orders.
SECTION 8.2. LOST BENEFICIARY. Any benefit payable under the Plan shall be
forfeited if the Committee, after reasonable effort, is unable to locate the
Participant or Qualified Spouse to whom payment is due. Any such forfeited
benefit shall be reinstated and become payable, however, if a claim is made by
the Participant or Qualified Spouse for such forfeited benefit.
SECTION 8.3. TAX WITHHOLDING. All pensions payable under this Plan shall be
subject to reduction for any tax withheld pursuant to law.
SECTION 8.4. CHANGE OF CLASSIFICATION. A Management Employee who ceases to
be such by reason of change to another classification shall thereupon cease to
accrue benefits under this Plan. Upon subsequent retirement or other termination
of employment, he shall, provided all other requirements for benefits are met
after taking into account his combined Service with the Company as a Management
Employee and in all other classifications, be entitled to a pension benefit from
this Plan, calculated as of the date of subsequent
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<PAGE> 60
retirement or other termination of employment under the provisions of this Plan
in effect at such time, but with his Accredited Service and Average Monthly
Compensation determined as of the date of his change of classification and his
Primary Social Security Benefit determined as if he had terminated employment on
the date of change of classification.
SECTION 8.5. TRANSFER. A Management Employee who is transferred to
employment with any Employer from an Associated Company which is not an Employer
hereunder shall be entitled to a benefit under this Plan (if any) determined by
taking into account all Service with the Company for periods before and after
such transfer, but such benefit shall be reduced by any benefit based on the
same periods of service payable under any qualified plan maintained by any such
Associated Company. A Management Employee who is transferred from employment
with any Employer to an Associated Company which is not an Employer hereunder
shall be entitled to a benefit (if any) under this Plan, at the time of
retirement or other termination of employment from such Associated Company,
determined by taking into account all Service with the Company for periods
before and after such transfer for purposes of eligibility for such benefit, but
counting Accredited Service only up to the date of such transfer.
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ARTICLE 9
LIMITATIONS ON BENEFITS AND TOP-HEAVY REQUIREMENTS
SECTION 9.1. RESTRICTIONS ON CERTAIN EMPLOYEES. Upon termination of the
Plan, the benefit of any Highly Compensated Employee (including a former
Employee) shall be limited to a benefit which is nondiscriminatory under Code
section 401(a)(4). If the value of the Plan assets is less than 110% of the
value of current liabilities (as defined in Code section 412(l)(7)) and the
value of the benefits of any of the most highly compensated 25 Employees who are
Highly Compensated Employees (including former Employees) equals or exceeds one
percent of such current liabilities, the annual payments to each of such 25
Employees shall be restricted to an amount equal to the payments that would be
made on behalf of such Employee under a single life annuity that is the
actuarial equivalent of the sum of the Employee's Accrued Benefit and the
Employee's other benefits under the Plan. The foregoing restrictions are
designed to comply with Treasury Regulation Section 1.401(a)(4)-5(b) and are to
be interpreted accordingly. The provisions of this Section 9.1 do not apply if
the IRS determines that such provisions are not necessary to prevent the
prohibited discrimination that may occur in the event of an early termination of
the plan. The provisions of this Section 9.1 are included for purposes of tax
qualification only and are not intended to confer any right to enforce this
provision on anyone other than the Internal Revenue Service.
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<PAGE> 62
SECTION 9.2. LIMITATION ON BENEFITS. Notwithstanding anything in this Plan
to the contrary, in no event shall the benefits for any Participant exceed the
limits described in this Section.
(a) Annual Benefit Limit. The Annual Benefit to which a Participant is
entitled at any time under this Plan may not, during the Plan Year, exceed the
Maximum Permissible Amount. If the Annual Benefit would, but for this subsection
(a), exceed the Maximum Permissible Amount during the Plan Year, the rate of
benefit accrual under the Plan shall be reduced to the extent necessary to
prevent the Annual Benefit from exceeding the Maximum Permissible Amount.
(b) Overall Limit. For any Participant of this Plan who at any time
participated in a defined contribution plan of the Affiliated Group, the rate of
benefit accrual by such Participant under this Plan during any Plan Year, or his
Annual Benefit, after applying subsection (a), shall be reduced to the extent
necessary to prevent the sum of the following fractions, computed as of the
close of the Plan Year, from exceeding 1.0:
(1) Defined Benefit Plan Fraction. The numerator is the projected
annual benefit of the Participant under this Plan and the denominator is the
lesser of (A) the product of 1.25, multiplied by the dollar limitation in effect
under subsection (c)(6) below for such Plan Year, or (B) the product of (i) 1.4
multiplied by (ii) the percentage limitation under subsection (c)(5) with
respect to such Participant for such Plan Year.
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<PAGE> 63
(2) Defined Contribution Plan Fraction. The numerator is the sum of
Annual Additions to such Participant's account under all defined contribution
plans in such Plan Year and for all prior Plan Years and the denominator is the
sum of the lesser of the following amounts determined for such year and for each
prior year of service with the Affiliated Group: (A) the product of 1.25,
multiplied by the dollar limitation in effect under Code section 415(c)(1)(A)
for such Plan Year, or (B) the product of (i) 1.4, multiplied by (ii) 25% of the
Participant's Compensation for such Plan Year. For purposes of applying the
foregoing fraction the aggregate amount taken into account in determining the
numerator with respect to Plan Years before January 1, 1976 is deemed not to
exceed the aggregate amount taken into account in determining the denominator.
(c) Definitions. For purposes of this Section, the following definitions and
rules of interpretation shall apply:
(1) "Annual Additions" shall mean the sum, credited to a Participant's
account under a defined contribution plan for any Plan Year, of:
(A) Employer contributions,
(B) forfeitures, if any, and
(C) the lesser of:
(i) the amount of contributions by the Participant (excluding
rollover deposits and voluntary deductible contributions) in excess of 6% of the
Participant's Compensation for the Plan Year, or
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<PAGE> 64
(ii) one-half of the amount of contributions by the Participant
(excluding rollover deposits and voluntary deductible contributions) for the
Plan Year.
(2) "Annual Benefit" shall mean a benefit which is payable annually in
the form of a straight life annuity under the Plan, not including any benefit
attributable to either Employee contributions or rollover contributions;
provided that:
(A) If the benefit under the Plan is paid in a form other than a
single life annuity, for purposes of applying the limitations under this
Section, the benefit shall be adjusted to an Actuarial Equivalent single life
annuity in accordance with rules determined pursuant to regulations under the
Code, except that for this purpose there shall not be taken into account:
(i) the value of a qualified joint and survivor annuity (as
defined in Code section 401(a)(11)(G)(iii) and the regulations thereunder)
provided by the Plan to the extent that such value exceeds the sum of the value
of a single life annuity beginning on the same date and the value of any
post-retirement death benefits which would be payable even if the annuity was
not in the form of a joint and survivor annuity, or
(ii) the value of pre-retirement disability and death benefits.
(B) If the benefit of a Participant commences before the
Participant's Social Security retirement age, the dollar limitation of Code
section 415(b)(1)(A) shall be reduced so that such limitation (as so reduced) is
the Actuarial Equivalent of an
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<PAGE> 65
annual benefit of $90,000 (as adjusted pursuant to Code section 415(d)(1)(A))
beginning at the Social Security retirement age, provided that in the case of
commencement on or after age 62, such adjustment shall be made as follows:
(i) If the Participant's Social Security retirement age is 65,
the dollar limit is reduced by 5/9ths of 1% for each month by which the benefits
commence before the month in which the Participant attains age 65.
(ii) If the Participant's Social Security retirement age is
over 65, the reduction is 5/9ths of 1% for each of the first 36 months and
5/12ths of 1% for each additional month by which the benefits commence before
the month in which the Participant attains Social Security retirement age.
(C) If the benefit under the Plan begins after the Participant's
65th birthday, the determination as to whether the limitation has been satisfied
shall be made, in accordance with regulations prescribed by the Commissioner, by
adjusting such benefit so that it is the Actuarial Equivalent of a benefit
beginning at the Participant's 65th birthday.
(3) "Maximum Permissible Amount" shall mean the lesser of $90,000 or
100% of the Participant's average Compensation for his high three consecutive
years of Service, subject to the following rules:
(A) If a Participant has less than 10 years of Service with the
Affiliated Group at the time of commencement of benefits, the limitations
described in Code section 415(b)(1) shall
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be reduced by multiplying the otherwise applicable limitation by a fraction:
(i) the numerator of which is the years of Service with the
Affiliated Group as of, and including the current Plan Year, and
(ii) the denominator of which is 10.
(B) As of January 1 of each Plan Year commencing with the calendar
year 1988, the dollar limitation set forth above shall be adjusted automatically
to equal the dollar limitation as determined for that year under Code section
415(d)(1)(A). The Annual Benefit payable to a terminated Participant which is
otherwise limited by the dollar limitation shall be increased to take into
account the adjustment of the dollar limitation.
(4) "Projected Annual Benefit" shall mean the annual benefit to which a
Participant would be entitled under the Plan on the assumption of continuation
of employment until the Participant's 65th birthday (or current age, if later),
continuation of Compensation at the same rate as in effect for the Plan Year
under consideration until such age, and on the assumption that all other
relevant factors used to determine benefits under the Plan remain constant as of
the current Plan Year for all future Plan Years.
(d) In addition to other limitations set forth in the Plan and
notwithstanding any other provisions of the Plan, the Accrued Benefit, including
the right to any optional benefits provided in the Plan (and all other defined
benefit plans required to be
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<PAGE> 67
aggregated with this Plan under the provisions of Code section 415), shall not
increase to an amount in excess of the amount permitted under section 415 of
such Code at any time. Notwithstanding any provision of this Plan to the
contrary, for purposes of the preceding sentence and for purposes of determining
whether the benefits of this Plan exceed the limitations of section 415 of such
Code, with respect to limitation years beginning after December 31, 1986, the
term "annual addition" shall include all Employee contributions to the Plan.
This shall not require the recomputation of annual additions for limitation
years beginning before January 1, 1987.
(e) The provisions of this Section 9.2 shall be interpreted in accordance
with the provisions of Code section 415 and any regulations thereunder, which
are hereby expressly incorporated by reference.
SECTION 9.3. TOP-HEAVY REQUIREMENTS. Notwithstanding any other provision of
the Plan, the following rules shall apply for any Plan Year if as of the last
day of the preceding Plan Year, based on valuations as of such date applying
rates and factors prescribed in Section 1.6, the sum of the present value of
Accrued Benefits for Key Employees under this Plan and all other defined benefit
plans maintained by the Company or any Associated Company and accounts for Key
Employees under any defined contribution plan so maintained exceeds 60% of a
similar sum for all Employees under each such plan, except that for Plan Years
beginning after June 30, 1985 Accrued Benefits and accounts shall not be taken
into account with
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respect to any individual who has not performed any service for the Employers at
any time during the 5 year period ending on the determination date set forth
above:
(a) All present and all future Accrued Benefits under the Plan shall be
immediately 100% vested.
(b) An Employee's minimum Accrued Benefit shall be equal to his average
Compensation for the period of 5 consecutive years during which he had the
greatest aggregate Compensation multiplied by 20%.
(c) For purposes of Section 9.2(b), the dollar limitations in the defined
benefit plan fraction and the defined contribution plan fraction shall be
multiplied by 1.0 rather than 1.25, and no benefits may be accrued for a
Participant over the 1.0 limit. The provisions of this Section 9.3 shall be
interpreted in accordance with the provisions of Code section 416 and any
regulations thereunder, which are hereby expressly incorporated by reference.
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<PAGE> 69
ARTICLE 10
ADOPTION OF PLAN BY AN ASSOCIATED COMPANY
SECTION 10.1. AUTHORIZATION. Subject to the approval of the Board, any
Associated Company shall be authorized to adopt the Plan for the benefit of the
Management Employees of such Associated Company in accordance with the terms and
conditions described in this Article.
SECTION 10.2. PROCEDURE. In order to adopt the Plan, the board of directors
of an Associated Company shall approve a resolution agreeing to adopt the Plan
for the benefit of its Management Employees, to pay the cost of funding the
benefits under the Plan for its Management Employees to the Funding Agent
selected by the Board, and to appoint the Company as its agent to designate the
members of the Committee, to administer and amend the Plan, and to enter into a
funding instrument with such Funding Agent as is selected by the Company. Two
certified copies of such resolution shall be transmitted to the Company and upon
acceptance thereof shall be deemed to constitute the adoption of the Plan and
funding arrangement by such Associated Company as of the date prescribed in such
resolution.
SECTION 10.3. SINGLE PLAN. Notwithstanding any other provision of this Plan,
and the participation in the Plan of more than one Employer, the Plan shall
constitute a single plan in the sense that all assets of the Fund are available
to pay benefits to Participants who are Management Employees of any Employer.
65
<PAGE> 70
SECTION 10.4. DISPOSITION OF SUBSIDIARY. If a corporation which was
participating as an Employer pursuant to this Article 10 and which was an
Associated Company by reason of being one of a controlled group of corporations
(as defined in Code section 414(b) as modified by Code section 415(h)) which
includes the Company ceases to be a member of such a controlled group by reason
of a sale or other disposition of the stock of such corporation, then unless the
Board determines otherwise such corporation shall thereupon cease to be an
Employer under the Plan and the Participants whose status as Employees for
purposes of the Plan is dependent upon the status of such corporation as an
Employer shall be deemed for all purposes of the Plan to have thereupon
terminated employment with a Date of Separation coincident with such sale or
other disposition. Entitlement to benefits shall be determined pursuant to
Article 2, provided that the timing and amount of a Disability Retirement
Pension shall not be adversely affected by a sale or other disposition described
in this Section 10.4 in the case of a Participant who
(a) on the date of such sale or other disposition has completed the
requisite period of active employment (or years of Service with the Company)
under Section 2.4, and
(b) ceased active employment before such sale or other disposition because
of a condition thereafter determined to constitute a Disability.
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<PAGE> 71
ARTICLE 11
MISCELLANEOUS
SECTION 11.1. NO EMPLOYMENT RIGHTS. Nothing contained in the Plan shall be
construed as a contract of employment between the Employer and any Employee or
as a right of any Employee to be continued in employment or as a limitation on
the right of any Employer to discharge any of its Employees with or without
cause.
SECTION 11.2. HEADINGS. The headings are for reference only. In the event of
a conflict between a heading and the content of a Section, the content of the
Section shall control.
SECTION 11.3. NUMBER AND GENDER. The masculine pronoun used herein shall
include the feminine pronoun and the singular number shall include the plural
number unless the context of the Plan requires otherwise.
SECTION 11.4. CONSTRUCTION. Except to the extent preempted by federal law
pursuant to the Act, the provisions of the Plan shall be interpreted in
accordance with the laws of the Commonwealth of Pennsylvania.
SECTION 11.5. LEGAL EFFECT. The terms and conditions of the Plan as restated
herein shall, except as otherwise specifically provided, amend and supersede, as
of July 1, 1989, all provisions of the Plan as embodied in "The Rochester &
Pittsburgh Coal Company Pension Plan" as amended and restated effective July 1,
1987 ("1987 Plan"); provided, however, that except to the extent that Section
3.10 and Section 3.11 applies or unless otherwise expressly stated herein, the
rights of former Management Employees whose last day of
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<PAGE> 72
work was prior to July 1, 1989 shall be governed by the terms of the Plan in
effect at that time, including the provision whereby the benefits of former
Management Employees whose last day of work was prior to July 1, 1990 are to be
calculated by applying the definitions of "Compensation" and "Average Monthly
Compensation" as in effect on December 31, 1985 if those rules produce a larger
amount.
ROCHESTER & PITTSBURGH COAL COMPANY
By: /s/ GEORGE M. EVANS
-------------------------------
GEORGE M. EVANS, TREASURER
ATTEST:
/s/ JOYCE E. MILLER
- -------------------
Assistant Secretary
68
<PAGE> 73
EXHIBIT (10E)
AMENDMENT TO
THE ROCHESTER & PITTSBURGH COAL COMPANY
The Rochester & Pittsburgh Coal Company hereby amends The Rochester &
Pittsburgh Coal Company Pension Plan, as amended and restated effective July 1,
1989, in the following manner:
AMENDMENT NO. 1
Section 1.20 is hereby amended to change the period at the end of subsection
(e) thereof to a semicolon and add a new subsection (f) as follows:
(f) in the case of a Participant who:
(1) has attained age 55 before February 1, 1996,
(2) as of December 1, 1995, was an active Management Employee,
based in the Commonwealth of Pennsylvania, of the Company (other than
Employee who was a Highly Compensated Employee within the meaning of Code
section 414(q) as of such date), or an active Management Employee of
Keystone Coal Mining Corporation or the Central Supply Department of Kent
Coal Mining Company,
(3) ceased to be so employed before March 16, 1996, either by
reason of voluntary retirement or as a result of reduction in work force,
and
(4) voluntarily executed a waiver meeting the applicable
requirements of Section 201 of the Older Workers Benefit Protection Act, the
date on which he ceased to be so employed.
<PAGE> 74
AMENDMENT NO. 2
Section 3.2(d) is hereby amended to add a new paragraph (4) at the end
thereof as follows:
(4) The pension of a Participant described in Section 1.20(f) who
is eligible for a Normal Retirement Benefit under Section 2.2 shall be
calculated by adding three years to the Participant's years of Accredited
Service.
AMENDMENT NO. 3
Subsection (b) of Section 3.3 is hereby amended to add a new paragraph (4)
as follows:
(4) In the case of a Participant described in Section 1.20(f) who
attained age 55 before February 1, 1996, the following provisions shall
apply:
(A) The Early Retirement Pension commencing on or before March
16, 1996 shall be the Participant's Accrued Benefit as of his Early
Retirement Date, calculated by disregarding Section 1.3(b).
(B) For months commencing before attainment of age 62, such a
Participant shall be entitled to a Social Security supplement which shall be
a monthly amount equal to one-third of the Participant's Primary Social
Security Benefit (calculated as provided in Section 1.33 but assuming no
Compensation or other earnings after 1995) reduced according to the
reduction factors applicable under the federal Social Security laws for
benefits commencing upon attainment of age 62.
<PAGE> 75
(C) The Qualified Joint and Survivor Benefit shall be
calculated and paid without regard to the Social Security supplement
described in paragraph (B) above.
EFFECTIVE DATE
The foregoing Amendments shall be effective for Participants whose last day
of work was on or after December 1, 1995 and before March 16, 1996.
RATIFICATION
All terms and conditions of The Rochester & Pittsburgh Coal Company Pension
Plan which are not expressly changed herein are hereby ratified and confirmed.
Adopted this 25th day of January, 1996.
ROCHESTER & PITTSBURGH COAL COMPANY
By /s/ GEORGE M. EVANS
-------------------------------
GEORGE M. EVANS
ATTEST:
/s/ JOYCE E. MILLER
- -------------------
Assistant Secretary
<PAGE> 1
EXHIBIT (10F)
FIRST AMENDMENT
TO THE
ROCHESTER & PITTSBURGH COAL COMPANY
401(K) SAVINGS AND RETIREMENT PLAN
WHEREAS, Rochester & Pittsburgh Coal Company, a Pennsylvania corporation
(hereinafter called the "Company"), has adopted and maintains the Rochester &
Pittsburgh Coal Company 401(k) Savings and Retirement Plan (hereinafter called
the "Savings Plan"); and
WHEREAS, in paragraph 13.2 of the Savings Plan, the Company has retained the
right to amend the Savings Plan; and
WHEREAS, the Company now desires to amend the Savings Plan in order to have
certain provisions comply with the requirements of Sections 401(a)(4),
401(a)(17), 401(k), 401(m), 411, 415, 416 and 417 of the Internal Revenue Code
of 1986, as amended;
NOW THEREFORE, the Savings Plan is hereby amended as follows:
1. The last sentence of paragraph 2.30 is hereby deleted and replaced by the
following:
"Salary in excess of $200,000 shall be disregarded. Such amount shall be
adjusted at the same time and in such manner as permitted under Code section
415(d). In applying this limitation, the family group of a Highly
Compensated Employee, as defined in paragraph 4.1.2 hereof, who is subject
to the family member aggregation rules of Code Section 414(q)(6) because
such Participant is either a 'five percent owner' of the Employer or one of
the ten (10) Highly Compensated Employees paid the greatest Total
Compensation during the year, shall be treated as a single Participant,
except that for this purpose family members shall include only the affected
Participant's spouse and any lineal descendants who have not attained age
nineteen (19) before the close of the year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is exceeded,
then the limitation shall be prorated among the affected family members in
proportion to each such family member's Salary prior to the application of
this limitation."
<PAGE> 2
2. The following three sentences are hereby inserted after the second
sentence of subparagraph 4.1.2(a):
"The number of officers shall be limited to the lesser of (i) 50 employees;
or (ii) the greater of 3 employees or 10 percent of all employees. For the
purpose of determining the number of officers, employees (1) with less than
six (6) months of service; (2) who normally work less than 17 1/2 hours per
week; (3) who normally work less than six (6) months during a year; and (4)
who have not yet attained age 21 shall be excluded, but such employees shall
still be considered for the purpose of identifying the particular employees
who are officers. If the Employer does not have at least one officer whose
Total Compensation is in excess of 50% of the Code Section 415(b)(1)(A)
limit, then the highest paid officer of the Employer will be treated as a
Highly Compensated Employee."
3. Paragraph 4.1.4 is hereby amended by the addition of paragraph 4.1.4.1
which shall read as follows:
"4.1.4.1 Special Rules. The following special rules shall apply to the
calculation of the ADP:
(1) The ADP for any HCE who is eligible to have salary deferral
contributions allocated to his or her accounts under two or more plans
described in Code Section 401(a) or arrangements described in Code Section
401(k), that are maintained by the Employer, shall be determined as if the
total of such salary deferral contribution amounts was made under each plan.
If an HCE participates in two or more cash or deferred arrangements that
have different plan years, all cash or deferred arrangements ending with or
within the same calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as separate if
mandatorily disaggregated under regulations under Code Section 401(k).
(2) In the event that this Plan satisfies the requirements of Code
Sections 401(a)(4) and 410(b) (other than Section 410(b)(2)(A)(ii)) only if
aggregated with one or more other plans, or if one or more other plans
satisfy the requirements of such sections of the Code only if aggregated
with this Plan, than this paragraph 4.1 shall be applied by determining the
ADP of employees as if all such plans were a single plan. Plans may be
aggregated in order to satisfy Code Section 401(k) only if the have the same
plan year and only if they satisfy Code Sections 401(a)(4) and 410(b) as
though they were a single plan.
<PAGE> 3
(3) The determination and treatment of the ADP amounts of any Participant
shall satisfy such other requirements as may be prescribed by the Secretary
of the Treasury."
4. Paragraph 4.6 is hereby amended by the addition of paragraph 4.6.4 which
shall read as follows:
"4.6.4 Multiple Use. If one or more HCEs participate in both a CODA and a
plan subject to the ACP test maintained by the Employer and the sum of the
ADP and ACP of those HCEs subject to either or both tests exceeds the
Aggregate Limit, then the ACP of those HCEs who also participate in a CODA
will be reduced (beginning with such HCE whose ACP is the highest) so that
the limit is not exceeded. The amount by which each HCE's Contribution
Percentage Amounts is reduced shall be treated as an Excess Aggregate
Contribution. The ADP and ACP of the HCEs are determined after any
corrections required to meet the ADP and ACP tests. Multiple use does not
occur if either the ADP or ACP of the HCEs does not exceed 1.25 multiplied
by the ADP and ACP of the NHCEs."
5. Subparagraph 4.7.2(c) is hereby amended to read as follows:
"(c) The determination and correction of Excess Contributions of an HCE
whose ADP under Code Section 401(k)(3) is determined under the family
aggregation rules shall be made pursuant to the applicable procedures set
forth under Treasury Reg. Section 1.401(k)-1(f)(5)(ii), which are
incorporated herein by this reference."
6. The second and third sentences of paragraph 4.7.3 are hereby amended to
read as follows:
"To determine the amount of the Excess Aggregate Contribution for each
HCE, the 'leveling method' set forth in Treasury Reg. Section Section
1.401(m)-1(e)(2) and (3) shall be used and is incorporated herein by this
reference. If an HCE's ACP was determined under the family aggregation
rules, the determination and correction of Excess Aggregate Contributions
shall be made under the appropriate procedures set forth in Treasury Reg.
Section 1.401(m)- 1(e)(2)(iii), which are incorporated herein by this
reference."
<PAGE> 4
7. Paragraph 4.8.2 is hereby amended by the addition of the following
sentence at the end thereof:
"'Lesser' is substituted for 'greater' in '(i)', above, and 'greater' is
substituted for 'lesser' after 'two plus the' in '(ii)', above, if it
would result in a larger Aggregate Limit."
8. Paragraphs 4.8.13 and 4.8.14 are hereby amended to read as follows:
"4.8.13 'Qualified Matching Contributions' shall mean Employer Matching
Contributions which are subject to the distribution and nonforfeitability
requirements under Section 401(k) of the Code when made, other than those
applicable to hardship distributions pursuant to Code Section
401(k)(3)(B)(i)(IV)."
"4.8.14 'Qualified Non-Elective Contributions' shall mean contributions
(other than Employer Matching Contributions, Qualified Matching
Contributions or other Employer Contributions) made by the Employer and
allocated to the Participants' Accounts that the Participants may not elect
to receive in cash until distributed from the Plan; that are nonforfeitable
when made; and that are distributable only in accordance with the
distribution provisions that are applicable to Pre-Tax Contributions and
Qualified Matching Contributions, other than those applicable to hardship
distributions pursuant to Code Section 401(k)(2)(B)(i)(IV)."
9. Paragraph 7.3 is hereby amended to read as follows:
"7.3 Consent Requirement. Notwithstanding the provisions of paragraph 7.2
hereof, if the vested balance credited to a Participant's Account is to be
distributed to him or her, and if such balance has ever exceeded $3,500, no
portion of the Participant's Account shall be distributed to the
Participant, until he or she attains Normal Retirement Age, unless the
Participant consents to receive an earlier distribution."
10. The first sentence of subparagraph 15.1(d)(2) is hereby amended to read
as follows:
"One of the ten Employees of the Employer or an Affiliated Company owning
(or considered as owning under the attribution rules set forth in Section
318 of the Code and the regulations thereunder) the largest interests in
the Employer and all Affiliated Companies on an aggregate basis, provided
that each such interest must be more than 1/2%."
<PAGE> 5
11. The provisions of this First Amendment shall be effective as of April 1,
1990.
TO RECORD the adoption of this First Amendment, the Company caused its
authorized officers to affix its corporate name and seal hereto on this 16th day
of December 1992.
Attest: ROCHESTER & PITTSBURGH COAL COMPANY
/s/ JOYCE E. MILLER BY: /s/ GEORGE M. EVANS
- ------------------- -------------------------------
Secretary Title: Vice President & Treasurer
<PAGE> 6
SECOND AMENDMENT
TO THE
ROCHESTER & PITTSBURGH COAL COMPANY
401(k) SAVINGS AND RETIREMENT PLAN
WHEREAS, Rochester & Pittsburgh Coal Company, a Pennsylvania corporation
(hereinafter called the "Company"), maintains the Rochester & Pittsburgh Coal
Company 401(k) Savings and Retirement Plan (hereinafter called the "Savings
Plan"); and
WHEREAS, paragraph 13.2 of the Savings Plan provides that the Company may
amend the Savings Plan at any time and the Company desires to do so in order to
lower the maximum compensation used for determining contributions and to provide
for eligible rollover distributions, all as required by the Omnibus Budget
Reconciliation Act of 1993 and the Unemployment Compensation Amendments of 1992,
respectively;
NOW THEREFORE, the Savings Plan is hereby amended as follows:
1. Paragraph 2.30 is hereby amended to read as follows:
"2.30 'Salary' shall mean the wages, salaries, and fees for professional
services and other amounts received (without regard to whether or not an
amount is paid in cash) for personal services actually rendered in the
course of employment with the Employer to the extent that the amounts are
includable in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of profits,
commissions on insurance premiums, tips, bonuses, fringe benefits, and
reimbursements or other expense allowances under a nonaccountable plan (as
described in Section 1.62.2(c) of the Income Tax Regulations) and excluding
the following:
(a) Employer contributions to a plan of deferred compensation which are
not includible in the Employee's gross income for the taxable year in which
contributed, or employer contributions under a simplified employee pension
plan, or any distributions from a plan of deferred compensation;
<PAGE> 7
(b) Amounts realized from the exercise of a non-qualified stock option,
or when restricted stock (or property) held by the Employee either becomes
freely transferable or is no longer subject to a substantial risk of
forfeiture;
(c) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
(d) Other amounts which received special tax benefits.
Salary shall include only that compensation which is actually paid to the
Participant during the determination period. For this purpose, the determination
period shall be the Plan Year.
For Plan Years beginning on or after January 1, 1989, and before January 1,
1994, the Salary of each Participant taken into account for determining all
benefits provided under the Plan for any Plan Year shall not exceed $200,000.
This limitation shall be adjusted at the same time and in the same manner as
under Section 415(d) of the code, except that the dollar increase in effect on
January 1 of any calendar year is effective for Plan Years beginning in such
calendar year.
For Plan Years beginning on or after January 1, 1994, the Salary of each
Participant taken into account for determining all benefits provided under the
Plan for any Plan Year shall not exceed $150,000, as adjusted for increases in
the cost-of-living in accordance with Section 401(A)(17)(B) of the Code. The
cost-of-living adjustment in effect for a calendar year applies to any
determination period beginning in such calendar year.
If a determination period consists of fewer than 12 months the annual
compensation limit shall be an amount equal to the otherwise applicable annual
compensation limit multiplied by a fraction, the numerator of which is the
number of months in the short determination period, and the denominator of which
is 12.
In determining the Salary of a Participant for purposes of applying the
annual compensation limitation, the rules of Section 414(q)(6) of the Code shall
apply, except in applying such rules, the term "family", shall include only the
Spouse of the Participant and any lineal descendants of the Participant who have
not attained age 19 before the close of the adjusted annual compensation
limitation is exceeded, then the limitation shall be prorated among the affected
individuals in proportion to each such individual's Salary as determined under
this paragraph prior to the application of this limitation."
<PAGE> 8
2. Article VII is hereby amended by the addition of paragraph 7.11 thereto
which shall read as follows:
"7.11 Direct Rollover of Plan Distribution. Effective for Plan Years
beginning after December 31, 1992 and notwithstanding any provisions of the
Plan to the contrary that would otherwise limit a distributee's election
under this paragraph 7.11, a distributee may elect, at the time and in the
manner prescribed by the Plan Administrator, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
7.11.1 Definitions. For purposes of this paragraph 7.11, the following
definitions shall apply:
(1) Eligible rollover distribution means any distribution of all
or any portion of the balance to the credit of the distributee, except that
an eligible rollover distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not less
frequently than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and the
portion of any distribution that is not includable in gross income
(determined without regard to the exclusion for net unrealized appreciation
with respect to employer securities).
(2) Eligible retirement plan means an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an eligible rollover
distribution to a surviving Spouse, an eligible retirement plan is an
individual retirement account or individual retirement annuity.
(3) Distributee means an Eligible Employee or former Eligible
Employee. In addition, the Eligible Employee's or former Eligible Employee's
surviving Spouse and the Eligible Employee's or former Eligible Employee's
Spouse or former Spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the Code, are
distributees with regard to the interests of the Spouse or former Spouse.
(4) Direct rollover means a payment by the Plan to the eligible
retirement plan specified by the distributee.
<PAGE> 9
7.11.2 Waiver of Notice Period. Notwithstanding any provision of Section
1.411(a)-11(c) of the Income Tax Regulations to the contrary, if a
distribution is one to which Sections 401(a)(11) and 417 of the Code do not
apply, such distribution may commence less than 30 days after the notice
required under Section 1.411(a)-11(c) of the Income Tax Regulations is
given, provided that:
(1) the Plan Administrator clearly informs the Participant that
the Participant has a right to a period of at least 30 days after receiving
the notice to consider the decision of whether or not to elect a
distribution (and, if applicable, a particular distribution option); and
(2) the Participant, after receiving the notice, affirmatively
elects a distribution."
3. Paragraph 1 of this Second Amendment shall be effective as of January 1,
1994. Paragraph 2 shall be effective as of January 1, 1993.
TO RECORD the adoption of this Second Amendment, the Company has caused its
authorized officers to execute this amendment as of the 15th day of December,
1994.
Attest: ROCHESTER & PITTSBURGH COAL COMPANY
/s/ JOYCE E. MILLER By: /s/ GEORGE M. EVANS
- ------------------- -------------------------------
Secretary Title: Vice President & Treasurer
<PAGE> 10
THIRD AMENDMENT
TO THE
ROCHESTER & PITTSBURGH COAL COMPANY
401(k) SAVINGS AND RETIREMENT PLAN
WHEREAS, Rochester & Pittsburgh Coal Company, a Pennsylvania corporation
(hereinafter called the "Company"), maintains the Rochester & Pittsburgh Coal
Company 401(k) Savings and Retirement Plan (hereinafter called the "Savings
Plan"); and
WHEREAS, paragraph 13.2 of the Savings Plan provides that the Company may
amend the Savings Plan at any time and the Company desires to do so in order to
implement the daily valuation of plan assets, to change various administrative
provisions affected by such daily valuation, and to revise certain provisions
concerning the top-heavy plan requirements and the amendment procedures;
NOW THEREFORE, the Savings Plan is hereby amended to read as follows:
1. Paragraph 2.2 is hereby amended to read as follows:
"2.2 'Appropriate Form' shall mean (i) the form or forms, as provided by
the Plan Administrator for any specific occurrence, which must be filed with
the appropriate party within the period of time specified thereon or in this
Plan or (ii) an authorized telephonic communication as to which a written
confirmation will be provided to the Participant."
2. Paragraph 2.35 is hereby amended to read as follows:
"2.35 'Valuation Date' shall mean each day on which the New York Stock
Exchange is open for business."
3. The last sentence of paragraph 4.4 is hereby amended to read as follows:
"Employer Matching Contributions shall be allocated to the Account of
each 401(k) Participant who has made a Pre-Tax Contribution and shall be
paid to the Trust Fund monthly with respect to Pre-Tax Contributions made
during each calendar month."
<PAGE> 11
4. The first sentence of subparagraph 4.7.1(b) is hereby amended to read as
follows:
"The Excess Elective Deferrals to be distributed to a Participant with
respect to a taxable year is the amount specified by the Participant (not
to exceed the Pre-Tax Contribution made to the Plan for the taxable year)
plus allocable income or minus allocable loss attributable to such
amount, provided that the distributed Excess Elective Deferrals shall not
include any income or loss for the 'gap period', which is the period
between the end of the Participant's taxable year and the date of
distribution of the Excess Elective Deferral."
5. Subparagraph 4.7.1(c) is hereby deleted in its entirety.
6. The last sentence in the flush language of subparagraph 4.7.2 is hereby
amended to read as follows:
"Excess Contributions, as adjusted for the income or loss allocable
thereto, shall be distributed to HCEs within twelve months after the
close of the Plan Year in which the Excess Contributions arose, provided
that the distributed Excess Contributions shall not include any income or
loss for the 'gap period', which is the period from the end of the
Participant's taxable year and the date of distribution of the Excess
Contribution, and further provided that if such excess amounts are
distributed more than 2 1/2 months after the last day of the Plan Year in
which the excess amounts arose, a ten percent (10%) excise tax will be
imposed on the Employer with respect to such amounts."
7. Subparagraph 4.7.2(a) is hereby amended to read as follows:
"(a) The income or loss allocable to an Excess Contribution shall be the
income or loss allocable to the portion of the Participant's Account to
which Elective Deferrals are credited (and, if applicable, the Qualified
Non-Elective Contribution account or the Qualified Matching Contribution
account or both) for the Plan Year multiplied by a fraction the numerator of
which is the Excess Contribution on behalf of the Participant for the year
and the denominator of which is the then balance in the Participant's
Account attributable to Elective Deferrals (and Qualified Non-Elective
Contributions or Qualified Matching Contributions, or both, if any of such
contributions are included in the ADP test) without regard to any income or
loss occurring during such Plan Year."
<PAGE> 12
8. Subparagraph 4.7.3(a) is hereby amended to read as follows:
"(a) Excess Aggregate Contributions shall be adjusted for any income or
loss attributable thereto, provided that the distributed Excess Aggregate
Contributions shall not include any income or loss for the 'gap period',
which is the period between the end of the Participant's taxable year and
the date of distribution of the Excess Aggregate Contributions. The income
or loss allocable to Excess Aggregate Contributions is the income or loss
allocable to the Participant's employee contribution account, if any,
Employer Matching Contribution Account (if any, and if all amounts therein
are not used in the ADP test) and, if applicable, the portion of the Account
to which Qualified Non-Elective Contributions and Elective Deferrals are
credited for the Plan Year multiplied by a fraction, the numerator of which
is such Participant's Excess Aggregate Contributions for the year and the
denominator is the Participant's Account balance(s) attributable to
Contribution Percentage Amounts without regard to any income or loss
occurring during such Plan Year."
9. Subparagraph 4.11.1(a), (b) and (c) are hereby amended to read as
follows:
"(a) At the time an Employee becomes eligible for the Plan, he or she
shall complete an Appropriate Form stating the percentage of his or her
contributions, as to which investment direction is allowed, to be invested
in the available investment funds. Allocations to an investment fund shall
be in such percentage of a contribution amount as shall be designated from
time to time by the Plan Administrator.
(b) A Participant may change his or her election with respect to future
contributions by filing an Appropriate Form at such intervals as may be
designated from time to time by the Plan Administrator.
(c) A Participant may elect to transfer all or part of his or her balance
in one investment fund to another by filing an Appropriate Form with the
Plan Administrator at such intervals as may be designated from time to time
by the Plan Administrator. Any such transfer shall be made in such
percentage multiples as shall be designated from time to time by the Plan
Administrator. Four such transfers shall be allowed during each Plan year
without cost. Each transfer in excess of four during a Plan Year shall be
subject to an additional charge which shall be determined from time to time
by the Plan Administrator."
<PAGE> 13
10. Paragraph 6.2 is hereby amended to read as follows:
"6.2 Investment Earnings. To determine the value of the Participants'
Accounts, the net assets of the Trust Fund shall be revalued on each
Valuation Date at their then current market value, before crediting any
contributions then due, and the Accounts of the Participants shall be
adjusted to reflect any change in the value of such net assets which shall
result either from net earnings of the Trust Fund or from the increase or
decrease in the market value of such assets. Following such revaluation, any
unallocated contributions shall be credited to the Accounts of the
Participants for whom they have been made."
11. Paragraph 8.5 is hereby amended by the addition of subparagraph (c) at
the end thereof which shall read as follows:
"(c) Each approved loan may be made on any Valuation Date on which the
limitation set forth in paragraph 8.6 is satisfied.:
12. The last sentence of subparagraph 8.8(b) is hereby amended to read as
follows:
"Each note shall also specify the interest rate, which shall be
determined by the Plan Administrator and which shall be at least one
percent (1%) over the prime rate in effect at Pittsburgh National Bank
on the first day of the month immediately preceding the date on which
the loan is made."
13. The third sentence of paragraph 9.2 is hereby amended to read as
follows:
"The nonvested portion of such Account, if any, shall be forfeited on
the same Valuation Date as of which the distribution of a Participant's
Vested Interest is made and shall first be utilized to the extent
necessary to provide for the reinstatement of previously forfeited
Account balances in accordance with paragraphs 10.1 and 10.2 and any
remaining balance of such forfeitures shall be utilized to reduce
Employer Matching Contributions for the portion of the Plan Year
following the date on which such forfeitures arose."
<PAGE> 14
14. Paragraph 11.7 is hereby amended to read as follows:
"11.7 Administrative Expenses. All fees or expenses charged by, or
arising in connection with, the Designated Mutual Funds in which the
balances in the Participants' Accounts have been invested, any fees or costs
related to Participant loans or any withdrawal penalty imposed by an
investment fund shall be paid from the Accounts to which such fees,
expenses, costs or penalties have been charged. All other expenses incurred
in the administration of the Plan, including legal and Trustee's fees, shall
be paid from each Participant's Account on a pro rata basis. Notwithstanding
the foregoing, the Employers may pay all or any portion of such expenses and
any such payment by the Employers shall not be deemed to be Employer
Contributions."
15. Paragraph 13.2 is hereby amended by the addition of subparagraph 13.2.1
and 13.2.2 at the end thereof which shall read as follows:
"13.2.1 Amendment Procedure. Except as hereinafter provided, each
amendment shall be set forth in a written instrument and shall be authorized
by a resolution of the Board of Directors. Any amendment may be made
retroactively in order to obtain the initial qualification or to maintain
the qualification of the Plan and Trust under the applicable provisions of
the Code, ERISA, and the regulations thereunder; provided that any such
amendment must have been effective for all purposes and for the entire
period during which the Plan failed to be qualified. Any amendment necessary
to obtain the initial qualification or to maintain the qualification of the
Plan and Trust under Sections 401(a) and 501(a) of the Code may be adopted
without the approval of the Board of Directors, if signed by the proper
officers of the Plan Sponsor.
13.2.2 No Reduction in Accrued Benefits. Except as permitted by
regulations (including Regulations Section 1.411(d)(4), no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger, plan
transfer or similar transaction) shall be effective if it eliminates or
reduces any 'Section 411(d)(6) protected benefit' or adds or modifies
conditions relating to 'Section 411(d)(6) protected benefits' the result of
which is a further restriction on which benefits unless such protected
benefits are preserved with respect to benefits accrued as of the later of
the adoption date or effective date of the amendment. Section 411(d)(6)
protected benefits are benefits described in Code Section 411(d)(6)(A),
early retirement benefits and retirement-type subsidies, and optional forms
of benefit."
<PAGE> 15
16. The last two lines of subparagraph 15.1(a) are hereby amended to read as
follows:
"meaning of Section 414(c) of the Code, an 'affiliated service group'
within the meaning of Section 414(m) of the Code or any other entity
required to be aggregated with any Employer pursuant to the regulations
issued under Code Section 414(o)."
17. The first sentence of subparagraph 15.1(d)(1) is hereby amended to read
as follows:
"An officer of the Employer or any Affiliated Company having annual
compensation greater than 50% of the amount in effect under Code Section
415(b)(1)(A) for the calendar year containing the Determination Date."
18. Subparagraph 15.1(1) is hereby amended to read as follows:
"(1) 'Top-Heavy Compensation' shall mean a Participant's compensation
(as defined for purposes of Section 415 of the Code and the regulations
thereunder) but exclusive of any annual earnings in excess of the annual
compensation limitation set forth in Code Section 401(a)(17) (or such
adjusted amount as is determined by the Secretary of the Treasury or his
delegate pursuant to the provisions of Section 401(a)(17)(B) of the Code)
and, in the case of a Top-Heavy Plan Year of a duration shorter than 12
months, Top-Heavy Compensation shall exclude annual earnings in excess of
the amount determined by multiplying the maximum annual compensation
limitation by a fraction, the numerator of which is the number of completed
calendar months occurring in such short Plan Year and the denominator of
which is 12."
19. The provisions of this Third Amendment, other than paragraphs 16, 17 and
18, shall be effective as of March 1, 1995. Paragraph 18 shall be effective as
of January 1, 1994, while paragraphs 16 and 17 shall be effective as of April 1,
1990.
<PAGE> 16
TO RECORD the adoption of this Third Amendment, the Company has caused its
authorized officers to execute this amendment as of the 25th day of January
1995.
ATTEST: ROCHESTER & PITTSBURGH COAL COMPANY
/s/ JOYCE E. MILLER By: /s/ GEORGE M. EVANS
- ------------------- -------------------------------
Secretary Title: Vice President & Treasurer
<PAGE> 1
[ROCHESTER LOGO]
ANNUAL
REPORT
- 1995 -
<PAGE> 2
ROCHESTER & PITTSBURGH COAL COMPANY
DIRECTORS
WILLIAM G. KEGEL
Chairman of the Board of the Company
DAVID H. DAVIS
Coal Consultant, Retired Division President and Corporate Vice President,
Consolidation Coal Company
THOMAS W. GARGES, JR.
President and Chief Executive Officer of the Company
L. BLAINE GRUBE
Retired Vice President and Treasurer of the Company
THOMAS M. HYNDMAN, JR.
Of Counsel, Duane, Morris & Heckscher,
Attorneys at Law
COLUMBUS O'D. ISELIN, JR.
Independent Consultant, Aerospace and Defense
O'DONNELL ISELIN II
Manager, Finance Staff, Hughes Electronics Corporation
PETER ISELIN
Vice President -- Finance and Secretary of the Company
JOHN L. SCHRODER, JR.
Retired Dean, College of Mineral and Energy Resources, West Virginia
University
GORDON B. WHELPLEY, JR.
Project Manager, Louis E. Lee Co. Builders
OFFICERS
THOMAS W. GARGES, JR.
President and Chief Executive Officer
W. JOSEPH ENGLER, JR.
Vice President and General Counsel
GEORGE M. EVANS
Vice President and Treasurer
PETER ISELIN
Vice President -- Finance and Secretary
THOMAS M. MAJCHER
Vice President -- Corporate Development
ADOLPH W. PETZOLD
Vice President -- Operations
WILLIAM M. DARR
Assistant Secretary
WILLIAM J. GIULIANI
Assistant Treasurer
JEFFREY A. MACK
Assistant Controller
JOYCE E. MILLER
Assistant Secretary
------------------------------
Principal Office -- 655 Church Street, Indiana, PA 15701 412/349-5800
Transfer Agent and Registrar -- First Chicago Trust Company of New York
Auditors -- Ernst & Young LLP
<PAGE> 3
FINANCIAL HIGHLIGHTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
FOR THE YEAR
Production Tonnage(1).......................... 4,492 4,976 3,218
Sales Tonnage(1)(2)............................ 5,417 5,042 3,435
Sales.......................................... $216,686 $191,991 $153,628
Income (Loss) Before Income Taxes.............. $ (3,872) $ 4,304 $ 3,876
Net Income (Loss)(3)........................... $ (3,535) $ 2,466 $ 7,083
Net Income (Loss) Per Share(3)................. $ (1.03) $ .72 $ 2.06
Cash Dividends Per Share....................... $ .75 $ 1.50 $ 1.50
Average Shares Outstanding..................... 3,439 3,439 3,441
AT YEAR-END
Long-term Debt................................. $120,784 $ 75,693 $ 29,455
Shareholders' Equity........................... $203,114 $207,450 $210,794
Shares Issued and Outstanding.................. 3,439 3,439 3,438
Treasury Shares Held........................... 550 550 551
Shareholders' Equity Per Outstanding Share..... $ 59.06 $ 60.33 $ 61.31
</TABLE>
(1) Production tonnage and sales tonnage exclude tons produced by Eighty-Four
Mining Company which is in the development stage.
(2) Sales tonnage includes coal purchased from others for resale.
(3) Net Income and Net Income Per Share for 1993 include a credit of $4,709,000
and $1.37, respectively, for the cumulative effect to January 1, 1993 of a
change in accounting for income taxes.
------------------------------
TO THE SHAREHOLDERS:
After net losses of $7,720,000 for the first seven months of 1995, the last
five months of the year were profitable and the Company ended 1995 with a net
loss of $3,535,000 or $1.03 per share compared to a net income of $2,466,000 or
72c per share in 1994.
Continuing operating problems and lagging productivity improvements at the
Keystone and Helvetia subsidiaries were responsible for the poor results.
Keystone and Helvetia generated a pretax loss of $8,400,000 and $4,600,000,
respectively. Other income of $9,200,000 partially offset these losses.
During the year, Keystone solved its cleaning plant capacity problems and
reduced its inventory of unprocessed coal to a reasonable level. Overall,
productivity failed to improve and, unrelated to the operation of the cleaning
plant, two Keystone mines, Jane and Margaret #11, incurred losses of
approximately $7,600,000. Despite all efforts to improve performance, these
operations continued to exhibit no potential for improvement, thus, the decision
was made to close these two mines at the end of December. A third marginally
profitable mine, Emilie #4, which had its transportation system adversely
affected by these closings, also was closed. Keystone's contractual deliveries
to the Keystone Generating Station remain unchanged and production from the
closed mines will be replaced with raw coal purchased from third party suppliers
for processing at Keystone's cleaning plant.
[1]
<PAGE> 4
The elimination of these high-cost operations will have a positive effect
on Keystone's results. In addition to reducing overall costs with competitively
priced purchased coal, the production potential of the remaining mines was
enhanced with the installation, in March 1996, of one new and two additional
continuous haulage units transferred from the closed mines. The remaining
operations now have 77% of their mining units equipped with the more productive
continuous haulage systems.
Helvetia's losses were principally due to poor results at its Lucerne #6E
mine. Entering into 1995, the profitability of this mine under Helvetia's new
fixed-price coal sales agreement was highly dependent on the success of an
alternate work schedule. The program was initially promising but had to be
canceled due to high weekend absenteeism. Measures have been taken to bolster
Helvetia's performance by installing an additional continuous haulage unit at
this mine and another mining unit in its Marshall Run mine.
The Company's Eighty-Four Mining Company subsidiary commenced operation of
its first longwall mining unit, as scheduled, in mid-September. The longwall
performed well in completing its first two panels, however, due to a combination
of adverse mining conditions and problems created by the rapid expansion of the
mine, delays have been experienced in achieving the projected continuous mining
production levels required for the timely preparation of mining areas for the
longwall system. In the fourth quarter of 1995 and in the first quarter of 1996,
delays have been experienced in moving the longwall system to new mining areas.
Such delays have resulted in increased development costs and lower production
tonnage. Due to the lost revenues resulting from these tonnage shortfalls, the
Company will be required to commit additional equity and secure additional
financing for the project. Measures are being taken which are expected to
improve continuous miner performance and no additional longwall mining delays
are anticipated for the remainder of 1996. Installation of the second longwall
mining unit continues to be scheduled for 1997.
Mine No. 84 was issued an amended Coal Mining Activity Permit by the
Pennsylvania Department of Environmental Protection in September 1995. This
permit approved the mining plan and sets forth requirements for protection of
surface structures and facilities. Litigation challenging the permit is being
pursued by a local citizens' group, a local municipality, and the local gas and
water utilities. The Company believes that the appeals will be denied.
In 1995, twelve customers, consisting of ten electric utilities and two
steel companies, purchased the entire output of Mine No. 84. Three multi-year
sales contracts are now in place and additional sales for 1996 have been
finalized with eight other customers. Mine No. 84 will ship its first export
order in 1996. The electric utility industry continues to prepare for
deregulation through internal restructuring, mergers and other cost cutting
measures. This has presented an opportunity for Mine No. 84 to enter into
discussions with select utilities to form strategic alliances for long-term coal
supply relationships.
Marketing of Mine No. 84 production is progressing and, because the severe
winter had the effect of increasing utility coal requirements, coal supply and
demand in our markets are currently well balanced. In 1995, the electric
utilities substantially over complied with the sulfur dioxide emission limits
established by the 1990 Amendments to the Clean Air Act. This has created an
over-supply of emission allowances which the utilities have available to sell to
other utilities or retain for their own use. As a result, emission allowance
prices have declined substantially and utilities have been able to combine these
lower priced allowances with higher sulfur coal and narrow the price
differential with lower sulfur coal.
Market prices have remained relatively flat. In the industry's very
competitive atmosphere, Mine No. 84's premium quality coal is a significant
advantage but efficient mining and productivity must be continually sustained
and improved in order to capitalize on that advantage.
[2]
<PAGE> 5
In May 1995, the Company's subsidiary, Leatherwood, Inc., received a permit
to operate a 1,500 ton-per-day municipal solid waste landfill in western
Pennsylvania. The local authorities are appealing issuance of the permit. We
believe the appeals will be denied. The permit meets and/or exceeds all state
and federal requirements.
The actions taken during the past year have better positioned the Company
for improved performance. The painful issues of closing three mines,
restructuring management and reducing overhead were dealt with objectively and
forthrightly by your management. We are squarely focused on our efforts to
stabilize and improve financial results for the growth of shareholder value and
the restoration of previous dividend distribution levels to shareholders.
We are pleased to report that, on February 21, 1996, the Company completed
the sale of property on which are located two refuse piles. The sale price,
after allowing for certain adjustments and contingencies, yielded approximately
$6.5 million.
In closing, we wish to express our deep appreciation to Norman S. Smith,
Professor Emeritus of Mining Engineering, University of Missouri-Rolla, who,
upon his retirement from teaching, resigned as a Director after sixteen years of
service. His thoughtful counsel during these years was of great benefit.
Submitted on behalf of the Board of Directors,
Thomas W. Garges, Jr.
President and
Chief Executive Officer
Indiana, Pennsylvania
March 28, 1996
------------------------------
THE COMPANY
Founded in 1881, Rochester & Pittsburgh Coal Company was formally
incorporated in Pennsylvania under its present name in 1927. The Company has
been engaged in the mining of bituminous coal in western Pennsylvania since
1882. The main office of the Company is located in Indiana, Pennsylvania. On
December 31, 1995, the Company had approximately 750 shareholders of record and,
including its subsidiaries, had 1,670 employees. The Company controlled
estimated raw recoverable reserves of 711,000,000 tons at year-end. A
description of the Company's major subsidiaries is provided below.
KEYSTONE COAL MINING CORPORATION
Keystone Coal Mining Corporation supplies bituminous coal by way of a
conveyor belt system to the Keystone Steam Electric Station located in Armstrong
County, near Shelocta, Pennsylvania. This Station, having a nameplate capacity
of 1.8 million kilowatts, is owned by Atlantic City Electric Company, Baltimore
Gas and Electric Company, Delmarva Power & Light Company, Jersey Central Power &
Light Company, Pennsylvania Power & Light Company, PECO Energy Company, and
Public Service Electric and Gas Company.
In 1995, Keystone Coal Mining Corporation delivered 3,500,000 tons of coal
to the Keystone Station from its six deep mines and other sources, compared to
2,906,000 tons in 1994.
The coal deliveries were made pursuant to the 1991 Keystone Coal Supply
Agreement, which became effective January 1, 1991, and has a term of fourteen
years. This agreement, which extended, amended, and restated the previous coal
sales agreement in effect since 1972, calls for deliveries of
[3]
<PAGE> 6
3,250,000 tons plus or minus 250,000 tons from 1993 through 1999. Deliveries are
scheduled to be 3,250,000 tons in 1996. In the event the parties do not
negotiate a further extension, deliveries will gradually decrease during the
years 2000 through 2004 with a maximum delivery of 6,500,000 tons during that
five-year period.
HELVETIA COAL COMPANY
Helvetia Coal Company supplies bituminous coal to the Homer City Steam
Electric Station located near Homer City, Indiana County, Pennsylvania. This
Station, having a nameplate capacity of 2 million kilowatts, is owned jointly by
New York State Electric & Gas Corporation and Pennsylvania Electric Company.
Helvetia's mines delivered 1,600,000 tons to the Homer City Station in 1995
compared to 1,814,000 tons delivered in 1994. Helvetia and the Homer City
Station Owners entered into agreements to terminate deliveries under the prior
cost-plus agreement and to provide for deliveries after January 1, 1995 under
the terms of a new, base-price plus escalation agreement. The 1995 coal sales
agreement provides for Helvetia to deliver in excess of 14,000,000 tons through
2003 at an initial rate of 1,800,000 tons per year. Under certain circumstances,
the agreement may be terminated earlier by either party under hardship
provisions. In addition, the Station Owners may terminate the agreement for
their convenience but would in that event have to make certain payments to
Helvetia. It is estimated that Helvetia will supply approximately 1,800,000 tons
in 1996.
EIGHTY-FOUR MINING COMPANY
Eighty-Four Mining Company was created in 1992 when it purchased Mine No.
84 and certain properties from Bethlehem Steel Corporation and its BethEnergy
Mines Inc. subsidiary. The mine is presently in the development stage. At
projected full production capacity, which is scheduled to be attained in 1997,
this mine will produce approximately 7 million tons annually of high quality
steam and metallurgical coal utilizing two modern longwall mining units.
UNITED EASTERN COAL SALES CORPORATION
United Eastern Coal Sales Corporation, which has its corporate sales office
in Indiana, Pennsylvania, serves as sales agent for the Company as well as for
other producers in the domestic and export markets.
ROCHESTER & PITTSBURGH COAL CO. (CANADA) LIMITED
This Company is engaged primarily in the sale of coal in Canada. Its main
office is located in Toronto. A subsidiary company, Cargo Dockers Limited,
manages a dock at Bowmanville, Ontario.
DIVIDENDS
The long-term debt agreements to finance the development of Mine No. 84
contain restrictions with respect to the payment of dividends by the Company.
The Company's ability to declare and pay dividends, without a waiver from the
lenders, is dependent on consolidated earnings meeting criteria in the long-term
debt agreements. The Company required a waiver from the lenders for the declared
dividends in 1995. Future dividends will be dependent on the Company's
performance and its ability to satisfy the applicable criteria in the long-term
debt agreements or to obtain a waiver of the dividend restriction. No assurance
can be given that such waiver will be granted.
[4]
<PAGE> 7
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
------------------------------------------------------------------
To the Shareholders
ROCHESTER & PITTSBURGH COAL COMPANY
Indiana, Pennsylvania
We have audited the consolidated balance sheets of Rochester & Pittsburgh
Coal Company and subsidiaries as of December 31, 1995, 1994, and 1993, and the
related statements of consolidated income, shareholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Rochester &
Pittsburgh Coal Company and subsidiaries at December 31, 1995, 1994, and 1993,
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.
As discussed in Notes A and F, the Company changed its method of accounting
for investments in 1994 and income taxes in 1993.
Pittsburgh, Pennsylvania
March 8, 1996 except for the Eighty-Four
and Lucerne Land section of Note D,
as to which the date is April 12, 1996.
[5]
<PAGE> 8
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents -- Note J............ $ 27,437 $ 30,656 $ 23,737
Short-term investments -- Notes I and J........ 2,645 -- --
Receivables.................................... 29,576 25,213 20,704
Coal inventories............................... 6,128 15,096 2,919
Mine supply inventories........................ 1,532 1,819 2,263
Income taxes receivable........................ 1,819 4,013 4,466
Prepaid expenses and other current assets...... 4,267 4,347 2,958
Deferred income taxes.......................... 2,166 1,632 1,822
-------- -------- --------
TOTAL CURRENT ASSETS.................. 75,570 82,776 58,869
OTHER ASSETS
Investments in marketable securities -- Notes
D, I, and J................................. 33,454 46,838 42,731
Funding for -- Notes G, H, I, and J:
Workers' compensation benefits.............. 16,915 19,521 25,246
Mine closing reserves....................... 10,271 8,956 16,655
Other postretirement benefits............... 10,956 -- --
Noncurrent receivables......................... -- -- 6,710
Deferred income taxes.......................... 7,712 7,211 10,257
Prepaid royalties.............................. 6,323 6,322 6,394
Miscellaneous.................................. 7,843 9,201 7,013
-------- -------- --------
93,474 98,049 115,006
PROPERTY, PLANT, AND EQUIPMENT -- NOTES B AND D
Coal and surface lands......................... 87,638 87,503 87,408
Plant and equipment............................ 294,815 239,642 207,244
Mine development............................... 108,720 53,038 23,141
Construction in progress....................... 20,452 24,779 24,774
-------- -------- --------
511,625 404,962 342,567
Less allowances for depreciation, depletion,
and amortization............................ 189,262 174,793 159,558
-------- -------- --------
322,363 230,169 183,009
-------- -------- --------
$491,407 $410,994 $356,884
======== ======== ========
</TABLE>
[6]
<PAGE> 9
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable............................... $ 14,809 $ 17,077 $ 11,682
Accrued payrolls and related expenses.......... 9,823 7,283 7,209
Other accrued liabilities...................... 5,939 4,201 4,518
Dividends payable.............................. 516 2,063 2,063
Current maturities of long-term debt........... 2,514 2,007 2,372
-------- -------- --------
TOTAL CURRENT LIABILITIES............. 33,601 32,631 27,844
OTHER LIABILITIES
Workers' compensation benefits -- Note H....... 40,292 39,965 37,433
Mine closing reserves -- Note H................ 23,153 19,818 18,156
Other postretirement benefits -- Note G........ 46,458 20,586 20,500
Black lung benefits -- Note H.................. 11,348 6,222 5,862
Deferred income taxes.......................... 8,169 4,542 2,511
Miscellaneous.................................. 4,488 4,087 4,329
-------- -------- --------
133,908 95,220 88,791
LONG-TERM DEBT (less current maturities) -- Notes
B, D, and J.................................... 120,784 75,693 29,455
LONG-TERM AGREEMENTS -- Note C
COMMITMENTS -- Notes B and D
SHAREHOLDERS' EQUITY -- Note C
Common stock, no par value (stated value
$15) -- authorized 5,000,000 shares, issued
3,989,121 shares............................ 59,837 59,837 59,837
Capital in excess of stated value.............. 133,162 133,170 133,176
Retained earnings.............................. 38,007 42,360 45,723
-------- -------- --------
231,006 235,367 238,736
Less treasury stock at cost -- 549,846;
550,346; and 550,846 shares................. 27,892 27,917 27,942
-------- -------- --------
203,114 207,450 210,794
-------- -------- --------
$491,407 $410,994 $356,884
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
[7]
<PAGE> 10
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(Dollars in thousands, except those stated on a per share basis)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
SALES -- NOTE C............................... $216,686 $191,991 $153,628
OTHER INCOME
Interest and dividends...................... 3,917 2,852 4,450
Net investment gains (losses)............... 1,262 (361) 1,850
Miscellaneous............................... 4,014 2,291 2,013
-------- -------- --------
225,879 196,773 161,941
COSTS AND EXPENSES
Cost of sales -- Note C..................... 205,283 171,038 134,390
Depreciation, depletion, and amortization... 13,285 12,215 10,406
Selling, general, and administrative........ 6,321 5,561 7,930
Interest -- Note D.......................... 3,238 2,480 1,167
Miscellaneous............................... 1,624 1,175 1,494
Postretirement benefit costs for certain
operations -- Note G..................... -- -- 2,678
-------- -------- --------
229,751 192,469 158,065
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
FOR INCOME TAXES............................ (3,872) 4,304 3,876
PROVISION (CREDIT) FOR INCOME TAXES -- NOTE
F........................................... (337) 1,838 1,502
-------- -------- --------
NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME TAXES....... (3,535) 2,466 2,374
CUMULATIVE EFFECT TO JANUARY 1, 1993 OF CHANGE
IN ACCOUNTING FOR INCOME TAXES -- NOTE F.... -- -- 4,709
-------- -------- --------
NET INCOME (LOSS)............................. $ (3,535) $ 2,466 $ 7,083
======== ======== ========
INCOME (LOSS) PER SHARE:
NET INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING FOR INCOME TAXES....... $ (1.03) $ .72 $ .69
CUMULATIVE EFFECT TO JANUARY 1, 1993 OF CHANGE
IN ACCOUNTING FOR INCOME TAXES.............. -- -- 1.37
-------- -------- --------
NET INCOME (LOSS) PER SHARE................... $ (1.03) $ .72 $ 2.06
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
[8]
<PAGE> 11
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(Dollars in thousands, except those stated on a per share basis)
<TABLE>
<CAPTION>
CAPITAL IN
COMMON EXCESS OF RETAINED TREASURY
STOCK STATED VALUE EARNINGS STOCK
------- ------------ --------- --------
<S> <C> <C> <C> <C>
Balance at January 1, 1993........... $59,837 $133,195 $ 44,176 $ 27,807
Net income for the year............ 7,083
Treasury stock:
Issued.......................... (19) (86)
Purchased....................... 221
Cash dividends -- $1.50 per
share........................... (5,161)
Foreign currency translation
loss............................ (375)
------- -------- ------- -------
Balance at December 31, 1993......... 59,837 133,176 45,723 27,942
Net income for the year............ 2,466
Treasury stock:
Issued.......................... (6) (25)
Cash dividends -- $1.50 per
share........................... (5,158)
Adjustment to January 1, 1994
balance for change in accounting
for net unrealized securities
gains, net of income taxes
of $619......................... 1,081
Change for the year in net
unrealized securities losses,
net of income tax benefit of
$826............................ (1,480)
Foreign currency translation
loss............................ (272)
------- -------- ------- -------
Balance at December 31, 1994......... 59,837 133,170 42,360 27,917
Net loss for the year.............. (3,535)
Treasury stock:
Issued.......................... (8) (25)
Cash dividends -- $.75 per share... (2,579)
Change for the year in net
unrealized securities gains, net
of income taxes of $878......... 1,701
Foreign currency translation
gain............................ 60
------- -------- ------- -------
Balance at December 31, 1995......... $59,837 $133,162 $ 38,007 $ 27,892
======= ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
[9]
<PAGE> 12
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................... $ (3,535) $ 2,466 $ 7,083
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation, depletion, and
amortization....................... 13,285 12,215 10,406
Deferred income taxes................. 1,713 5,476 4,382
Cumulative effect of change in
accounting for income taxes........ -- -- (4,709)
Gain on investment activity........... (1,523) (775) (2,480)
Loss on investment activity........... 261 1,136 630
Gain on sale of property, plant, and
equipment.......................... (2,164) (746) (264)
Change in certain assets and
liabilities (using) or providing
cash:
Receivables...................... (4,363) 2,201 (5,200)
Inventories...................... 9,255 (11,733) 999
Income taxes receivable.......... 2,194 -- --
Workers' compensation benefits
and funding................... 4,471 (662) 1,104
Mine closing reserves and
funding....................... 2,267 2,214 (111)
Other postretirement benefits and
funding....................... 2,854 86 1,978
Accounts payable................. (2,268) 5,395 410
Accrued liabilities.............. 4,278 (243) 1,542
Other............................ 890 (1,186) (2,721)
--------- --------- --------
NET CASH PROVIDED BY OPERATING
ACTIVITIES......................... 27,615 15,844 13,049
--------- --------- --------
INVESTING ACTIVITIES
Proceeds from available-for-sale
securities............................... 35,604 43,860 --
Proceeds from investments................... -- -- 84,966
Acquisition of available-for-sale
securities............................... (22,001) (32,868) --
Acquisition of investments.................. -- -- (69,116)
Acquisition and development of property,
plant, and equipment..................... (72,223) (60,815) (46,146)
Other....................................... 3,261 2,713 923
--------- --------- --------
NET CASH USED IN INVESTING
ACTIVITIES......................... (55,359) (47,110) (29,373)
--------- --------- --------
FINANCING ACTIVITIES
Proceeds from borrowings.................... 151,790 174,025 93,725
Payments on borrowings...................... (123,156) (128,512) (76,616)
Cash dividends paid......................... (4,126) (5,158) (5,161)
Issuance (acquisition) of treasury
stock -- net............................. 17 19 (154)
Debt issue costs............................ -- (2,189) --
--------- --------- --------
NET CASH PROVIDED BY FINANCING
ACTIVITIES......................... 24,525 38,185 11,794
--------- --------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................ (3,219) 6,919 (4,530)
Cash and cash equivalents at beginning of
year..................................... 30,656 23,737 28,267
--------- --------- --------
CASH AND CASH EQUIVALENTS AT END
OF YEAR............................ $ 27,437 $ 30,656 $ 23,737
========= ========= ========
</TABLE>
See notes to consolidated financial statements.
[10]
<PAGE> 13
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE A -- OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
Operations -- Rochester & Pittsburgh Coal Company and its subsidiaries are
principally engaged in the deep mining of bituminous steam coal for sale to
electric generating plants located adjacent to or near its mines. Substantially
all of these sales are made pursuant to long-term coal supply contracts. In
1992, through its subsidiaries, the Company acquired coal properties and an
underground coal mine in southwest Pennsylvania. Development work continued at
this mine in 1995. When such work is completed, which is anticipated in 1997,
the Company will be engaged, as a material portion of its planned operations, in
the general eastern utility coal market in addition to the market described
above.
A substantial portion of the employees of the Company's operating
subsidiaries are covered by the National Bituminous Coal Wage Agreement of 1993
(the "1993 Agreement") with the United Mine Workers of America (UMWA) which
terminates on August 1, 1998. The 1993 Agreement may be reopened in certain
circumstances by either party in 1996 and 1997.
Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of the Company and its subsidiaries, all of
which are wholly owned. All significant intercompany accounts and transactions
have been eliminated in consolidation.
Cash and Cash Equivalents -- Cash and cash equivalents, which are primarily
maintained at three financial institutions, include highly liquid investments
that are readily convertible to known amounts of cash.
Investments -- The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (FASB 115) for investments held as of January 1, 1994 and
acquired thereafter. Upon adoption, 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.
The appropriate classification of securities is determined at the time of
purchase. Marketable equity securities and debt securities for which the Company
does not have the intent or ability to hold to maturity are classified as
available-for-sale. Available-for-sale securities are carried at fair value
based on quoted market prices, with the unrealized gains and losses, net of tax,
reported in a component of retained earnings. The amortized cost of debt
securities in this category is adjusted for amortization of premiums and
accretion of discounts. Realized gains and losses, determined using specific
cost identification, and declines in the value of held-to-maturity and
available-for-sale securities determined to be other-than-temporary are included
in investment income.
As permitted by the Financial Accounting Standards Board, the Company has
reassessed the appropriateness of the classification of securities which
comprise funding for workers' compensation benefits and mine closing reserves.
These securities had been classified as held-to-maturity. In order to provide
flexibility for the Company to manage these securities more actively, these
securities were reclassified to available-for-sale in November 1995. At the date
of transfer, the amortized cost of those securities was $21,534,000 and the
unrealized gain on those securities was $676,264, which was included in
shareholders' equity. Upon reclassification, all of the Company's securities are
classified as available-for-sale.
Inventories -- Inventories are carried at the lower of average cost or
market.
[11]
<PAGE> 14
Property, Plant, and Equipment -- Property, plant, and equipment is
recorded on the basis of cost including capitalized mine development costs and
the cost of equipment leased under capitalized financing leases. Depreciation is
computed principally at rates applied to tonnage produced. Such rates are based
on estimates of tons to be produced, the cost of property, plant, and equipment
employed, the estimated economic lives of the mines and equipment, and the
remaining lives of the long-term coal sales agreements referred to in Note C.
The rates are revised periodically to reflect operating experience and the
provisions of the long-term coal sales agreements. The resulting rates
approximate straight-line depreciation for normal annual periods. Depletion of
coal lands and amortization of mine development costs are computed on a tonnage
basis calculated to amortize their costs fully over the estimated recoverable
reserves.
Income Taxes -- Deferred income taxes are provided for temporary
differences between financial and tax accounting relating principally to
depreciation, mine development, other postretirement benefits, pension, vacation
pay, self-insurance costs, and for carryforwards of alternative minimum tax and
net operating losses.
Foreign Currency Translation -- The Canadian subsidiary's balance sheet
accounts are translated at the year-end exchange rate and the resulting
adjustment is made directly to retained earnings. Income statement items are
translated at the average exchange rate for the year. Gains or losses resulting
from foreign currency transactions, which are not material, are reported in
income. As of December 31, 1995, accumulated foreign currency translation losses
charged to retained earnings amounted to $1,012,000.
Per Share Amounts -- Per share computations are based on the average number
of shares of common stock outstanding during the respective years.
Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Newly Issued Accounting Statements -- In March 1995, Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of " (FASB 121), was issued
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The Company will adopt FASB 121 in the first quarter of 1996
and, based on current circumstances and estimates, does not believe the effect
of adoption will be material.
NOTE B -- ACQUISITION AND DEVELOPMENT OF MINING ASSETS
In December 1992, the Company, through its wholly owned subsidiaries
Eighty-Four Mining Company (Eighty-Four) and Lucerne Land Company (Lucerne
Land), acquired Mine No. 84 and approximately 175,000,000 tons of coal reserves
in Washington County, Pennsylvania.
The mine was idled in February 1993 for the installation of an underground
coal haulage belt conveyor system. In addition, surface handling and preparation
facilities are being upgraded to process the planned annual production of
approximately 6.6 million tons. This rate of production is scheduled to be
achieved in 1997 when the second longwall system is operational. Development
mining commenced in the second quarter of 1994 to prepare for the first longwall
system which became operational in the third quarter of 1995. (The costs of
rehabilitating and developing these facilities in 1995 and cumulatively,
amounted to $55,682,000 and $108,720,000, respectively, exclusive of
expenditures for plant and equipment of $40,686,000 and $78,198,000,
respectively.) Eighty-Four has obtained the necessary permits to develop and
operate the mine as planned. However, these permits have been appealed by
certain parties. The Company believes that the issuance of these permits will be
upheld. However, in the event the appealing parties were to prevail with respect
to material provisions of the permits, it could have an adverse financial effect
on the Company.
[12]
<PAGE> 15
The Company has made an equity investment of $100,000,000 in this project.
Long-term debt and equipment leases are being utilized to provide remaining
funding requirements. As discussed more fully in Note D, updated projections
indicate that additional funding will be required in 1996.
Since Eighty-Four anticipates being in the development stage into 1997,
costs of development net of sales revenue from coal produced incidental to
development are and will continue to be capitalized. Accordingly, the
accompanying Statements of Consolidated Income exclude all revenues and expenses
pertaining to the development of this operation. These capitalized development
costs will be amortized over the life of the mine and operating results will be
included in consolidated results of operations when full production capacity is
achieved.
NOTE C -- LONG-TERM COAL SALES AGREEMENTS
Two of the Company's subsidiaries have long-term contracts to supply coal
to two mine-mouth electric generating stations, as follows: Keystone Coal Mining
Corporation to the Keystone Steam Electric Station under the Keystone Coal
Supply Agreement (Keystone, Keystone Station, and Keystone Agreement) and
Helvetia Coal Company to the Homer City Steam Electric Station under the Homer
City Coal Sales Agreement for deliveries through 1994 and the 1995 Coal Sales
Agreement for deliveries commencing January 1, 1995 (Helvetia, Homer City
Station, Prior Homer City Agreement, and 1995 Homer City Agreement). Exclusive
of Eighty-Four's reserves, a substantial portion of the Company's remaining coal
reserves is dedicated to the production of coal for such agreements.
Keystone -- Under the terms of the Keystone Agreement, the price of coal
sold is based on the cost of production plus profit, subject to an annual price
cap which, if exceeded, can result in losses. Profitability also depends on the
quality of the coal sold, and the ability to control costs of production.
Certain funds generated by Keystone must be utilized within the operations
covered by the Keystone Agreement. The agreement, as well as debt agreements of
Keystone, includes certain restrictions on its net book value. Also, if Keystone
is in default under its loan agreements or the Keystone Agreement, the Keystone
Station Owners have an option to acquire Keystone at its net book value and to
lease the related coal and surface lands. In 1995, Keystone's costs exceeded the
price cap which resulted in losses before income taxes of $8,432,000 and a net
loss of $5,045,000. Keystone sales were $141,692,000, $109,971,000, and
$100,644,000, for 1995, 1994, and 1993, respectively. At December 31, 1995,
Keystone's net book value was $14,334,000.
On December 27, 1995, Keystone permanently closed its Jane, Emilie #4, and
Margaret #11 mines due to their continuing low productivity, high costs, and
resulting losses. Production from these mines will be replaced with raw coal to
be purchased from third party suppliers at competitive prices for processing at
Keystone's cleaning plant. Approximately $12 million in estimated costs
associated with these mine closings were accrued in 1995. Revenues increased by
a similar amount as such costs are recoverable under terms of the Keystone
Agreement.
Helvetia -- In November 1994, the 1995 Homer City Agreement was signed to
provide for deliveries in excess of 14 million tons from January 1, 1995 through
2003 at an initial rate of 1.8 million tons per year. The price to be paid by
the Homer City Station is a base-price with escalation and adjustment based on
quality of the coal delivered which replaced the "cost-plus" pricing arrangement
under the prior contract. The 1995 Homer City Agreement also provides for early
termination by either party under hardship provisions and further allows the
Homer City Station Owners to terminate the agreement for their convenience, in
which event they would have to make certain payments to Helvetia.
In addition, the Prior Homer City Agreement was amended in November 1994 to
provide for the payment to Helvetia by the Homer City Station Owners for certain
costs including those for past service postretirement benefits not paid pursuant
to deliveries under that agreement. In addition, the Homer City Station Owners'
option to acquire Helvetia's assets at net book value was terminated.
[13]
<PAGE> 16
Sales to the Homer City Station were $56,701,000 in 1995, $63,803,000 in 1994,
and $40,449,000 in 1993.
NOTE D -- LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Keystone:
Revolving credit note.................. $ 25,000 $30,000 $24,500
Line of credit note.................... 10,000 10,725 --
Term note.............................. 640 1,280 1,920
Eighty-Four and Lucerne Land:
Revolving credit notes................. 36,000 -- --
Senior fixed rate construction notes... 35,000 35,000 --
Capitalized lease obligations.......... 16,658 360 --
Helvetia:
Revolving credit note and term note.... -- -- 4,585
Capitalized lease obligations.......... -- 335 822
-------- ------- -------
123,298 77,700 31,827
Less current maturities.................. 2,514 2,007 2,372
-------- ------- -------
$120,784 $75,693 $29,455
======== ======= =======
</TABLE>
Interest paid (net of capitalized interest) in 1995, 1994, and 1993 was
$3,712,000, $1,879,000, and $1,103,000, respectively. Aggregate maturities on
long-term debt outstanding at December 31, 1995 for the next five years are as
follows: 1996 -- $2,514,000; 1997 -- $7,130,000; 1998 -- $31,230,000;
1999 -- $34,278,000; and 2000 -- $17,159,000.
The amount of subsidiaries' net assets which are restricted from being
transferred to the Company under these debt agreements totals $105,900,000.
Keystone -- Keystone has a revolving credit agreement with two commercial
banks with maximum borrowings thereunder of $30,000,000. The agreement was
amended in March 1996 to extend the expiration date from December 31, 1998 to
December 31, 2000 with mandatory reductions in the amount available of
$5,000,000 each in 1996, 1997, and 1998 and $7,500,000 each in 1999 and 2000.
Keystone's line of credit was also extended from March 31, 1996 to March 31,
1998, and the amount available was increased to $17,500,000 subject to quarterly
decreases of $2,500,000 in the amount available to $10,000,000 at December 31,
1996. Accordingly, the amount outstanding at December 31, 1995 has been
reclassified as noncurrent. The weighted-average interest rates on borrowings on
the line of credit were 9.2% in 1995, 8.2% in 1994, and 6% in 1993.
These credit facilities provide for a commitment fee of 1/4 of 1% per annum
and interest at the prime rate (8.5% at December 31, 1995). Keystone, at its
option, can elect under the amended agreement to lock in interest at LIBOR rates
plus 1.5% for specified periods of time. Keystone elected a similar option to
lock in an interest rate on the entire outstanding balance at various times
during 1995 (7.43% at December 31, 1995). The noncurrent funding for workers'
compensation and mine closing obligations has been pledged to secure these
borrowings.
Eighty-Four and Lucerne Land -- Eighty-Four and Lucerne Land have 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 Eighty-Four and Lucerne
Land and investment securities of the Company having a market value of
$25,000,000. Eighty-Four, Lucerne Land, and the
[14]
<PAGE> 17
Company, as guarantor, are subject to various financial covenants and
restrictions regarding acquisitions, earnings, cash flows, financial position,
and dividends. During 1995, the Company did not meet certain of these covenants.
The banks and institutional lenders agreed to certain amendments to the note
agreements and granted waivers during 1995, including a waiver permitting the
Company to declare the dividends paid in 1995 and on January 2, 1996. Updated
projections for development operations indicate that the Company will not be
able to comply with certain development operations and cash flow covenant
requirements during 1996. On April 12, 1996, the banks and institutional lenders
approved additional amendments to the note agreements which modified certain
provisions in order to eliminate the projected noncompliance with certain
covenants for 1996. The updated projections and agreements with the banks and
institutional lenders will require additional funding for Eighty-Four of
approximately $30,000,000. The Company will use internally generated funds to
make an equity contribution and temporary loans in order to meet approximately
$18 million of this requirement. Eighty-Four plans to secure additional
permanent financing later in 1996.
The revolving credit notes provide for quarterly mandatory reductions in
available borrowings of $5,500,000 beginning December 31, 1997 through September
30, 1999, with the final payment due on December 31, 1999. The revolving credit
notes provide for interest based on the prime rate plus an amount up to .75%, or
at the option of Eighty-Four and Lucerne Land on the LIBOR rate plus an amount
from 1.75% to 2.5%. In addition, commitment fees of .375% to .5% per annum are
payable on the unused portion of the commitment. Of the $36,000,000 outstanding
under the revolving credit notes at December 31, 1995, $32,500,000 is subject to
LIBOR based rates ranging from 8.06% to 8.38% for periods of one to six months
and $3,500,000 is subject to the prime based rate of 9.25% at December 31, 1995.
Borrowings under the senior fixed rate construction notes are subject to
interest at a fixed rate of 10.37%. These 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. Interest would be increased in the
event of default.
In 1995, Eighty-Four entered into a capitalized lease agreement for the
first longwall mining system having a value of $16,963,000 with payments
commencing in August 1995 and continuing through October 2003. Effective
interest rates range from 7.05% to 7.66%. The agreement includes buyout options
during and at the end of the lease term. Future minimum lease payments are
$21,783,000 including imputed interest of $5,177,000. These payments for the
next five years are as follows: 1996 -- $2,982,000; 1997 -- $3,147,000;
1998 -- $2,882,000; 1999 -- $1,961,000; and 2000 -- $2,233,000. Accumulated
depreciation of this equipment amounted to $827,000 at December 31, 1995.
Interest expense on the capitalized leases and the notes, including
amortization of debt issuance costs using the interest method, amounted to
$5,965,000 in 1995 and $1,851,000 in 1994 and is being capitalized as a part of
the mine development costs.
NOTE E -- OPERATING LEASES
The Company's deep mining subsidiaries are parties to operating lease
agreements for mining equipment. Rental expense under these leases was
$8,177,000 in 1995 including $1,217,000 which was capitalized as mine
development, $7,597,000 in 1994 including $118,000 which was capitalized as mine
development, and $7,437,000 in 1993 including $471,000 which was capitalized as
mine development. Aggregate remaining rental payments on these leases are
$19,645,000 with the following minimum rentals over the next five years:
1996 -- $5,883,000; 1997 and 1998 -- $4,590,000; 1999 -- $3,494,000; and
2000 -- $1,088,000.
[15]
<PAGE> 18
NOTE F -- INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FASB
109). The cumulative effect of adopting this standard as of January 1, 1993 was
to increase net income by $4,709,000, which represents the net increase to the
deferred income tax asset as of that date.
The provision (credit) for income taxes consists of the following for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision (credit) for income taxes:
Current:
Federal...................................... $(3,146) $(4,281) $(3,302)
State........................................ 524 (9) (139)
Canadian..................................... 572 652 561
------- ------- -------
(2,050) (3,638) (2,880)
------- ------- -------
Deferred:
Federal...................................... (2,407) 2,304 1,400
State........................................ 4,122 3,187 3,021
Canadian..................................... (2) (15) (39)
------- ------- -------
1,713 5,476 4,382
------- ------- -------
$ (337) $ 1,838 $ 1,502
======= ======= =======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. A valuation allowance has
been recognized due to the effects of statutory depletion and limited state
operating loss utilization on certain of the Company's operations. Significant
components of the Company's deferred tax assets and liabilities are as follows
at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Self-insurance.............................. $17,721 $17,735 $17,272
Other postretirement benefits............... 26,961 8,931 10,472
Alternative minimum tax..................... 5,696 8,785 4,800
Net operating loss
(begins to expire in 2009)............... 16,154 3,875 --
Vacation pay................................ 1,679 1,632 1,956
Black lung.................................. 2,604 639 1,102
Other deferred tax assets................... 2,693 1,923 --
------- ------- -------
73,508 43,520 35,602
Valuation allowance......................... (6,585) (4,108) (4,498)
------- ------- -------
Total deferred tax assets................ 66,923 39,412 31,104
Deferred tax liabilities:
Depreciation and related charges............ 59,840 31,295 19,226
Pension..................................... 1,570 1,032 925
Intangible drilling costs................... 817 881 877
Unrealized securities gains................. 671 -- --
Other deferred tax liabilities.............. 2,316 1,903 508
------- ------- -------
Total deferred tax liabilities........... 65,214 35,111 21,536
------- ------- -------
Net deferred tax assets.................. $ 1,709 $ 4,301 $ 9,568
======= ======= =======
</TABLE>
[16]
<PAGE> 19
Income (loss) before income taxes includes income (losses) attributable to
United States operations of $(5,140,000) in 1995, $2,852,000 in 1994 and
$2,666,000 in 1993 and income attributable to Canadian operations of $1,268,000
in 1995, $1,452,000 in 1994, and $1,210,000 in 1993.
The reconciliations between income tax expense (credit) and the amount
computed by applying the statutory U.S. income tax rate to income (loss) before
income taxes are as follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Tax at U.S. statutory rates............................. (35.0)% 35.0% 34.0%
Increase (decrease) resulting from:
State taxes, net of federal benefits.................. 76.8 45.9 49.1
Depletion............................................. (79.0) (39.5) (21.5)
Prior year accruals................................... (19.4) (24.3) (12.1)
Canadian dividend withholding......................... 2.9 15.6 --
Rates................................................. (19.5) 18.4 (2.9)
Valuation allowance................................... 63.9 (9.1) (2.0)
Other items........................................... .6 .7 (5.8)
----- ----- -----
(8.7)% 42.7% 38.8%
===== ===== =====
</TABLE>
Income tax refunds received in 1995, 1994, and 1993 were $4,356,000,
$2,623,000, and $616,000, respectively.
NOTE G -- PENSION AND BENEFIT PLANS
Pensions -- Non-UMWA Employees -- The Company and its subsidiaries have a
trusteed pension plan which provides for monthly pensions and other benefits for
substantially all employees not covered by the retirement plans of the UMWA.
Benefits are determined based on years of service and the employees' average
earnings near the end of service. The Company's funding policy is to contribute
to the plan amounts which are actuarially determined to provide assets
sufficient to meet benefits to be paid to plan members in accordance with the
requirements of the Employee Retirement Income Security Act of 1974 (ERISA).
Since plan assets are currently in excess of the Internal Revenue Code full
funding limitation, no contributions were made to the plan in 1995, 1994, and
1993 nor are any expected to be made in 1996. The plan's assets at December 31,
1995 are comprised primarily of government and corporate debt securities.
Amounts credited to expense relating to the pension plan include the
following components for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net periodic pension (credit) expense:
Service cost -- benefits earned during the
period...................................... $ 1,525 $ 1,792 $ 1,810
Interest cost on projected benefit
obligation.................................. 3,056 3,074 3,033
Actual return on plan assets................... (15,902) 245 (5,821)
Net amortization and deferral.................. 10,182 (5,637) 586
-------- ------- -------
(1,139) (526) (392)
Amounts capitalized as mine development........ 160 170 247
-------- ------- -------
Net periodic pension credit.................... $ (1,299) $ (696) $ (639)
======== ======= =======
</TABLE>
A curtailment gain of $1,671,000, and a charge of $640,000 for special
early retirement benefits relating to the closure of certain Keystone mines
discussed in Note C, were recorded in 1995. A
[17]
<PAGE> 20
substantial portion of these amounts were included as revenues and cost of sales
under terms of the Keystone Agreement.
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheets for the Company's defined benefit pension plan
at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.............................. $ 37,779 $ 34,679 $ 35,699
Nonvested benefits........................... 1,303 1,260 1,254
-------- -------- --------
Accumulated benefits......................... 39,082 35,939 36,953
Effect of projected future salary
increases................................. 8,069 9,047 11,711
-------- -------- --------
Total projected benefit obligation............. 47,151 44,986 48,664
Plan assets at fair value...................... 78,795 65,401 68,177
-------- -------- --------
Plan assets in excess of projected benefit
obligation................................... 31,644 20,415 19,513
Unrecognized net gain.......................... (21,112) (11,727) (10,717)
Unrecognized prior service cost................ 1,187 1,645 1,793
Unrecognized transition asset.................. (8,936) (9,720) (10,503)
-------- -------- --------
Prepaid pension asset.......................... $ 2,783 $ 613 $ 86
======== ======== ========
</TABLE>
The weighted-average discount rates used in determining the actuarial
present value of the projected benefit obligation were 6.75% at December 31,
1995, 7% at December 31, 1994, and 6.5% at December 31, 1993 and the rates of
increase in future compensation levels were 4.75% for each year. The
weighted-average expected long-term rate of return on plan assets was 7.75% for
1995 and 1994 and 8.0% for 1993.
In addition, the Company and its subsidiaries have a 401(k) Plan for
management employees. Company contributions and administrative costs
approximated $288,000 in each of 1995, 1994, and 1993.
UMWA Health and Retirement Funds -- In accordance with the collective
bargaining agreement between the Bituminous Coal Operators' Association and the
UMWA, the Company's mining subsidiaries are required to pay amounts, based
principally on hours worked, to the UMWA Retirement Funds which are defined
benefit pension plans. Health benefits for the Company's UMWA employees who
retired prior to 1976 are provided by the United Mine Workers' of America
Combined Benefit Fund (Combined Fund). The Combined Fund and the 1992 Benefit
Plan (1992 Plan) which were created by the Coal Industry Retiree Health Benefit
Act of 1992 (The 1992 Coal Act) also provide benefits to retirees whose
employers are out of business. The companies' contributions to these health
plans are assessed primarily on the basis of the number of beneficiaries
assigned to each employer.
Expense is being recognized as contributions are made to these plans.
Amounts charged to expense applicable to benefits administered by these various
multi-employer plans were $5,459,000 in 1995 including $1,516,000 which was
capitalized as mine development, $5,695,000 in 1994 including $930,000 which was
capitalized as mine development, and $4,816,000 in 1993 including $839,000 which
was capitalized as mine development. The present value of the expected future
assessments from the Combined Fund is estimated to be in the range of
$30,000,000. Certain of the Company's subsidiaries would be required under
federal law and the agreement to contribute additional amounts upon withdrawal
from or termination of certain of the plans.
Other Postretirement Benefits -- The Company provides life insurance
benefits and certain self-insured health care benefits for substantially all
UMWA employees who retire after 1975 and all salaried retirees. In addition,
employees terminated due to layoff are eligible for certain benefits for
[18]
<PAGE> 21
periods up to twelve months. These layoff benefit costs are charged to expense
in the month in which the layoff occurs.
The 1992 Coal Act requires that certain of the Company's subsidiaries
guarantee the benefits of their UMWA employees who retired prior to October 1,
1994 and to provide approximately $9,000,000 in security to the 1992 Plan for
these retirees. The Company's subsidiaries are discussing appropriate forms of
security with representatives of the 1992 Plan in light of the substantial
funding in place for postretirement benefits.
The Company and its subsidiaries accrue retiree medical and life insurance
benefits, over the employees' years of service to full eligibility in accordance
with Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits other than Pensions" (FASB 106). The Company is
amortizing past service liabilities at the date of adoption over the average
remaining service of the active employees except for the past service
liabilities for certain subsidiaries having limited activity projected beyond
1993, amounting to $2,678,000 which was charged to expense in the first quarter
of 1993.
Postretirement benefit expense under FASB 106 includes the following
components for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net annual expense:
Service cost -- benefits earned during the
period....................................... $ 2,914 $ 2,877 $ 2,695
Interest cost on accumulated postretirement
benefit obligation........................... 11,315 10,804 9,752
Actual return on plans' assets.................. (9,659) 907 (4,046)
Net amortization and deferral................... 15,337 (690) 4,470
-------- -------- --------
19,907 13,898 12,871
Postretirement benefit costs for certain
operations................................... -- -- 2,678
Amounts capitalized as mine development......... (2,247) (1,278) (940)
-------- -------- --------
Net annual expense........................... $17,660 $12,620 $14,609
======== ======== ========
</TABLE>
A curtailment loss of $578,000 relating to the closure of certain Keystone
mines as discussed in Note C was recorded in 1995.
In 1995, Eighty-Four recorded the past service liability of $12,224,000
associated with the recall of UMWA miners at Mine No. 84 not previously employed
by the Company. This amount was recorded as an adjustment to the original
acquisition cost of Mine No. 84's assets.
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 and recognized over three years beginning in 1995. The
amount recognized in 1995 and included as a component of net amortization was
$8,843,000.
Charges for postretirement benefits at the Company's Keystone and Helvetia
subsidiaries are being funded, net of estimated taxes, in custodial accounts and
union and salary VEBA trusts. The funding is comprised primarily of government
and government agency securities. Liabilities for the Company and its other
subsidiaries are not currently being funded. The weighted-average expected
long-term rate of return on plans' assets assumption was 7.2% in 1995, 7.1% in
1994, and 7.32% in 1993.
[19]
<PAGE> 22
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheets for the Company's postretirement benefit plans
at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation
(APBO):
Retirees..................................... $ 63,261 $ 58,577 $ 55,973
Fully eligible active plan participants...... 62,611 38,135 27,891
Other active plan participants............... 58,658 60,447 60,540
-------- -------- --------
184,530 157,159 144,404
Plans' assets at fair value.................... 85,430 72,291 62,739
-------- -------- --------
Accumulated postretirement benefit obligation
in excess of plans' assets................... (99,100) (84,868) (81,665)
Unrecognized net loss.......................... 20,264 20,464 13,650
Unrecognized prior service cost................ (2,174) (2,457) (2,846)
Unrecognized transition obligation............. 34,552 46,275 50,361
-------- -------- --------
Accrued postretirement benefit cost............ $(46,458) $(20,586) $(20,500)
======== ======== ========
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) is 10.2% for 1996 and is
assumed to decrease gradually to 6% for 2003 and remain at that level
thereafter. The health care cost trend rate assumption has a significant effect
on the amounts reported. For example, increasing the assumed health care cost
trend rates by one percentage point would increase the APBO as of December 31,
1995 by $39,300,000 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1995 by $3,300,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.12% at December 31, 1995, 7.75% at
December 31, 1994, and 7% at December 31, 1993. In 1995, the APBO increased as a
net result of the recall of miners to Mine No. 84 and a change in certain
assumptions, including the discount rate, offset by a reevaluation of base year
medical costs. In 1994, the APBO increased due to a change in demographic
assumptions and variances of actual experience from assumptions, offset by the
increase in the discount rate from 1993.
NOTE H -- SELF-INSURANCE AND OTHER LIABILITIES
Workers' Compensation Benefits -- The Company and its mining subsidiaries
have self-insurance programs for workers' compensation liabilities for which
provisions are made based upon actuarial evaluations of claims. Insurance
coverage is maintained for catastrophic losses. These benefits are funded as
accrued for the Company's Keystone subsidiary. However, a portion of this
funding is utilized to reimburse working capital for the payment of income taxes
directly attributable to the nondeductibility of these liabilities for income
tax reporting purposes until payments on workers' compensation claims are made.
In future years, when income tax deductions for this item exceed book expenses,
the Company intends to restore funds from working capital. These funds are
mainly comprised of U.S. Government and agency securities.
Mine Closing Reserves -- The Company's mining subsidiaries provide for
projected costs of closing mine facilities. These costs are based on engineering
estimates, which consider the estimated economic lives of the facilities and the
remaining lives of the long-term sales agreements. The related reserves are
reviewed periodically to reflect operating experience and the provisions of the
long-term coal sales agreements and are funded as accrued for the Company's
Keystone subsidiary. Funding consists principally of U.S. Government notes and
bonds.
Black Lung Benefits -- The Company and its mining subsidiaries have
self-insurance programs for coal workers' pneumoconiosis (black lung)
liabilities and, except for Eighty-Four Mining
[20]
<PAGE> 23
Company, have established black lung trusts under the provisions of the Internal
Revenue Code. The principal purpose of the trusts is to pay federal and state
black lung liabilities for miners covered by Company administered self-insured
programs. These liabilities are being accrued over the estimated average working
life of the subject employees based on annual actuarial calculations. These
calculations are based on various assumptions, among which are future benefit
levels, mortality, claim frequencies, and discount rates. The Company also
maintains escrowed insurance arrangements for certain liabilities not covered by
the trusts. The market value of trust assets at December 31, 1995, which are
comprised of U.S. Government notes and bonds, totaled $50,100,000, which is
sufficient to fund the related actuarial liability, except for the liability for
employees hired in connection with the acquisition of the Mine No. 84 properties
(see Note B) which amounts to $11,348,000. Funding of the trusts has ceased
until such time that the actuaries determine additional provisions and funding
are required.
In 1995, Eighty-Four recorded the past service liability of $4,156,000
associated with the recall of miners at Mine No. 84, not previously employed by
the Company. This amount was recorded as an adjustment to the original
acquisition cost of Mine No. 84's assets.
NOTE I -- INVESTMENTS
The following is a summary of available-for-sale securities and
held-to-maturity securities (in thousands):
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
---------------------------------------------------
ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
December 31, 1995
U.S. Government and agencies.......... $46,388 $1,470 $ 17 $47,841
Corporate............................. 12,902 167 22 13,047
Other debt securities................. 250 3 -- 253
------- ------ ------ -------
Total debt securities............... 59,540 1,640 39 61,141
Equities.............................. 4,623 425 53 4,995
------- ------ ------ -------
64,163 2,065 92 66,136
Cash equivalents included in
noncurrent funding.................. 8,105 -- -- 8,105
------- ------ ------ -------
$72,268 $2,065 $ 92 $74,241
======= ====== ====== =======
Schedule of maturities
One year or less.................... $ 8,015 $ 8,072
One year through three years........ 36,036 37,010
After three years................... 15,489 16,059
------- -------
59,540 61,141
Equities.............................. 4,623 4,995
------- -------
$64,163 $66,136
======= =======
</TABLE>
[21]
<PAGE> 24
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
---------------------------------------------------
ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
December 31, 1994
U.S. Government and agencies.......... $ 6,591 $-- $ 147 $ 6,444
Corporate............................. 32,141 5 745 31,401
Other debt securities................. 300 2 -- 302
------- ------ ------ -------
Total debt securities............... 39,032 7 892 38,147
Equities.............................. 8,412 630 351 8,691
------- ------ ------ -------
$47,444 $637 $1,243 $46,838
======= ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
HELD-TO-MATURITY SECURITIES
---------------------------------------------------
ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
U.S. Government and agency............ $20,846 $ 9 $700 $20,155
Cash equivalents included in
noncurrent funding.................. 7,631 -- -- 7,631
------- ------ ----- - -------
$28,477 $ 9 $700 $27,786
======= ====== ====== =======
</TABLE>
The following balance sheet captions are comprised of the
available-for-sale securities at December 31, 1995: short-term investments;
investments in marketable securities; and noncurrent funding for workers'
compensation benefits, mine closing reserves, and other postretirement benefits.
The amounts included in the held-to-maturity category at December 31, 1994
represent funding for Keystone's workers' compensation and mine closing
liabilities. As explained in Note A, in November 1995, these securities were
reclassified to available-for-sale.
NOTE J -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
disclosures for financial instruments:
Cash and Cash Equivalents -- The carrying amounts reported approximate fair
value.
Investments in Marketable Securities -- Fair values are based on quoted
market prices.
Long-term Debt -- Fair value of debt is based on the borrowing rates for
loans with similar terms and average maturities.
<TABLE>
<CAPTION>
CARRYING FAIR
VALUE VALUE
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Summary by Balance Sheet caption:
Cash and cash equivalents............................. $ 27,437 $27,437
Short-term investments -- available-for-sale.......... 2,645 2,645
Investments in marketable
securities -- available-for-sale................... 33,454 33,454
Funding for workers'
compensation -- available-for-sale................. 16,915 16,915
Funding for mine closing
reserves -- available-for-sale..................... 10,271 10,271
Funding for other postretirement
benefits -- available-for-sale..................... 10,956 10,956
Long-term debt........................................ 123,298 126,300
</TABLE>
NOTE K -- SUBSEQUENT EVENT
In February 1996, the Company completed the sale of certain real property
containing sizeable coal refuse deposits pursuant to an option exercised in
1995, which will result in a gain of approximately $6,500,000 to be recorded in
the first quarter of 1996.
[22]
<PAGE> 25
MARKET AND DIVIDEND INFORMATION
The following tables show the quarterly cash dividends paid and the range
of bid and ask prices of the Company's stock which is traded in the
over-the-counter market. The quotations, taken from daily newspapers, represent
prices between dealers and do not include retail mark-up, mark-down, or
commission and do not necessarily represent actual transactions. On December 31,
1995, the Company had approximately 750 shareholders of record.
<TABLE>
<CAPTION>
1995
---------------------------------------------------------
MARKET PRICE CASH
---------------------------------------- DIVIDENDS
QUARTER HIGH BID LOW BID HIGH ASK LOW ASK DECLARED(1)(2)
- ------------------------------ -------- ------- -------- ------- --------------
<S> <C> <C> <C> <C> <C>
First......................... $34.00 $34.00 $36.00 $35.50 $ .30
Second........................ 34.00 29.00 36.00 30.50 .15
Third......................... 29.75 28.50 31.00 29.50 .15
Fourth........................ 30.63 28.00 32.50 29.25 .15
-------
$ .75
==============
</TABLE>
<TABLE>
<CAPTION>
1994
---------------------------------------------------------
MARKET PRICE CASH
---------------------------------------- DIVIDENDS
QUARTER HIGH BID LOW BID HIGH ASK LOW ASK DECLARED(1)
- ------------------------------ -------- ------- -------- ------- --------------
<S> <C> <C> <C> <C> <C>
First......................... $38.25 $36.00 $40.75 $37.50 $ .30
Second........................ 36.25 34.25 38.50 37.00 .30
Third......................... 35.50 34.00 37.00 36.00 .30
Fourth........................ 34.50 34.00 37.00 35.50 .60
-------
$ 1.50
==============
</TABLE>
(1) All dividends were declared and paid in the same period shown with the
exception of the dividends declared in the fourth quarters of 1995 and 1994
which were paid on January 2, 1996 and January 3, 1995, respectively.
(2) The long-term debt agreements to finance the development of Mine No. 84
limit additional indebtedness, acquisitions, and investments and require
that the Company comply with certain other covenants and maintain certain
financial ratios. In addition, the Company's ability to declare and pay
dividends is dependent on consolidated earnings meeting criteria in the
long-term debt agreements. The Company required waivers from the lenders in
order to declare the dividends paid in 1994, 1995, and on January 2, 1996.
Future dividends will be dependent on the Company's performance and its
ability either to satisfy the applicable criteria in the long-term debt
agreements or to obtain a waiver of the dividend restriction. No assurance
can be given that such waiver will be granted. In accordance with the
subsidiaries' debt agreements, net assets totaling $106,000,000 are
restricted from being transferred to the Company.
[23]
<PAGE> 26
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
TEN YEAR SELECTED FINANCIAL DATA
(Amounts expressed in thousands, except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
RESULTS OF OPERATIONS
Tons of coal produced.......................... 4,492 4,976 3,218
Sales.......................................... $216,686 $191,991 $153,628
Depreciation, depletion, and amortization...... 13,285 12,215 10,406
Provision (credit) for income taxes............ (337) 1,838 1,502
Net income(2).................................. (3,535) 2,466 7,083
- ---------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital................................ $ 41,969 $ 50,145 $ 31,025
Property, plant, and equipment -- net.......... 322,363 230,169 183,009
Net capital expenditures....................... 88,090 58,848 48,213
Total assets................................... 491,407 410,994 356,884
Long-term debt................................. 120,784 75,693 29,455
Shareholders' equity........................... 203,114 207,450 210,794
- ---------------------------------------------------------------------------------------
PER SHARE DATA(1)
Average shares outstanding..................... 3,439 3,439 3,441
Net income (loss)(2)........................... $ (1.03) $ .72 $ 2.06
Cash dividends declared........................ .75 1.50 1.50
Book value at year-end......................... 59.06 60.33 61.31
</TABLE>
- ---------------
(l) Adjusted for 10% stock dividends paid annually from 1974 through 1991.
(2) Net income and net income per share for 1993 include a credit of $4,709,000
and $1.37, respectively, for the cumulative effect to January 1, 1993 of a
change in accounting for income taxes.
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
The Company's operating results for 1995 reflect pretax losses at two of
its subsidiaries, Keystone Coal Mining Corporation and Helvetia Coal Company, of
$8.4 million and $4.6 million, respectively.
Keystone experienced problems in conjunction with major modifications made
to its coal cleaning plant in 1994 which continued into 1995. Inventories of
unprocessed coal continued to build in early 1995 from the unusually high level
at December 31, 1994. As a result, production was idled at Keystone's six deep
mines in March and April and further modifications to the cleaning plant were
completed at mid-year. Since then, the cleaning plant has operated as designed
and coal inventories have been significantly reduced.
Keystone also experienced poor geological conditions at several mines in
1995, a reduction in the market price index used to adjust its sales price, and
productivity at levels substantially below those achieved prior to the UMWA
strike in 1993. As a result of these factors, Keystone's operating costs were
higher than its sales revenue which, while determined under a cost-plus pricing
mechanism, is subject to a maximum price cap.
[24]
<PAGE> 27
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
-------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
5,584 6,550 7,254 6,883 8,370 9,473 9,183
$198,502 $311,432 $387,965 $297,260 $375,945 $392,935 $420,217
10,967 12,875 14,112 14,150 16,696 16,356 17,012
4,459 4,633 6,325 8,058 5,196 5,712 6,900
14,190 16,306 18,505 20,113 15,652 16,559 18,564
--------------------------------------------------------------------------------------------
$ 39,333 $ 71,256 $ 70,447 $ 73,443 $ 88,288 $ 66,427 $ 59,499
144,974 78,689 95,919 100,112 106,834 123,376 122,649
77,119 15,524 12,754 7,725 7,118 17,083 21,281
327,579 302,222 358,117 303,281 302,707 295,022 282,442
13,203 13,778 20,754 22,039 36,077 44,118 52,462
209,401 204,195 198,082 187,918 172,198 163,469 150,871
--------------------------------------------------------------------------------------------
3,449 3,543 3,659 3,711 3,735 3,826 3,843
$ 4.11 $ 4.60 $ 5.06 $ 5.42 $ 4.19 $ 4.33 $ 4.83
1.50 1.36 1.24 1.13 1.02 .93 .85
60.84 58.17 54.69 50.71 46.33 42.88 39.40
</TABLE>
- --------------------------------------------------------------------------------
The closing of three of Keystone's six deep mines in December 1995,
discussed in Note C to the consolidated financial statements, and the plan to
replace this production with raw coal purchased from third party suppliers are
expected to improve Keystone's operating costs in the future. In addition, three
continuous haulage units were installed at Keystone in the first quarter of
1996, two of which were transferred from the closed mines, which should improve
productivity and lower operating costs.
In 1994, Keystone's production was adversely affected by high absenteeism
and production outages related to severe weather conditions in the first
quarter, in addition to several roof collapses in major conveyor haulage-ways, a
storage bin collapse, and delays in receiving three continuous haulage systems
later in the year. The problems encountered with modifying its coal cleaning
facility resulted in high year-end coal inventories and, thus, lower tonnage
sold in 1994.
Operating results for 1993 were adversely impacted by a seven-month strike
by the United Mine Workers of America (UMWA). All operations of Helvetia and
three operations of Keystone were on strike from May 25 through December 16,
1993 when a new five-year labor agreement was ratified.
[25]
<PAGE> 28
Helvetia, which began 1995 under the terms of a new fixed-price coal sales
agreement discussed in Note C to the consolidated financial statements,
experienced losses at its Lucerne #6E mine due to unfavorable geological
conditions, low productivity, and high absenteeism. In the second quarter of
1995, Helvetia completed development of its other deep mine, Marshall Run, which
operated at a slight loss the remainder of the year. Because of the low
productivity at Lucerne #6E, delays experienced in completing development of
Marshall Run, and the closure of the Lucerne #8 and #9 mines in the fourth
quarter of 1994 due to depletion of reserves, Helvetia's production declined 20%
from 1994 amounts and deliveries under its coal sales agreement totaled 1.6
million tons in 1995 versus 1.8 million tons in 1994. While an additional
continuous haulage system was installed at Lucerne #6E in the first quarter of
1996, an overall improvement in productivity is necessary to return Helvetia to
profitable levels. Helvetia's performance is also dependent on the coal market
price index used to adjust its sales price. That index decreased slightly in
1995. Prior to 1995, Helvetia operated under a cost-plus agreement. In each of
the prior two years, Helvetia's pretax income was approximately $1 million. The
1993 results were impacted by the seven-month UMWA strike, however, the costs
incurred during the strike were substantially recovered under the terms of
Helvetia's long-term coal sales agreement.
As discussed in Note B to the consolidated financial statements,
rehabilitation and development of Eighty-Four Mining Company's operations, which
are expected to more than double the present annual production capacity of the
Company, are projected to continue into 1997. Costs incurred net of sales
revenue from coal produced incidental to development were capitalized in 1995.
Mine No. 84 has experienced difficulty in achieving continuous mining production
necessary for timely preparation for the longwall mining system. In the fourth
quarter of 1995 and in the first quarter of 1996, delays have been experienced
in moving the longwall system to new mining sections due to this problem. Such
delays have resulted in lower tonnage and increased development costs. Increases
in the productivity of the development sections from existing levels are
necessary in order to minimize or eliminate future delays and the corresponding
impact on development costs. Mine No. 84's amended Coal Mining Activity Permit
issued in September 1995, approved the mining plan and set forth requirements
for protection of surface structures and facilities. Litigation challenging the
permit is being pursued by a local citizens' group, a local municipality, and
the local gas and water utilities. The Company is vigorously defending its
permit and believes that it will prevail in the litigation.
In 1995, the Company's other operating subsidiaries recorded pretax income
of approximately $1.9 million due to increases in production from surface mining
operations and to reclamation contracts entered into with the Commonwealth of
Pennsylvania for the restoration of abandoned mine lands. In 1994, these
subsidiaries had recorded a slight loss.
In 1995 and 1993, the Company realized net investment gains on marketable
security sales. In 1994, Helvetia sold certain investment securities at a
$525,000 pretax loss in order to retire bank debt and provide funds for capital
expenditures and the completion of Marshall Run's mine development in 1995.
The increase in interest and dividend income in 1995 reflects an increase
in average yields as well as amounts invested. Internally generated funds were
utilized for the acquisition of Mine No. 84 and the related coal reserves in
December 1992 and subsequent development of Mine No. 84 through May 1994 when
project financing was closed. As a result, interest and dividend income in 1994
was lower than 1993 amounts.
Miscellaneous income increased in 1995 due to the sale of certain surplus
coal and surface land.
[26]
<PAGE> 29
The increase in depreciation, depletion, and amortization in 1995 was due
to the recording of additional amounts of depreciation relating to the closure
of three Keystone mines. In 1994, the closing of two Helvetia mines resulted in
higher depreciation expense than in 1993.
Selling, general, and administrative expenses in 1994 included a favorable
settlement of prior years's state capital stock taxes and also reflected the
effect of cost reduction programs implemented in 1993. Selling, general, and
administration expenses increased in 1995 in the absence of a similar, favorable
settlement and due to the inclusion of certain costs for severance and early
retirement expenses incurred as a result of the closing of the three Keystone
mines.
The increases in interest expense in both 1995 and 1994 were due to higher
interest rates than those in effect in prior years as well as higher amounts
borrowed to finance Keystone's operations. During 1994 and 1995, Keystone
required financing for certain receivables, which were deferred during the 1993
strike in accordance with its long-term coal supply agreement. Additional
funding was also required for the increase in coal inventories discussed above.
Interest on Eighty-Four's borrowings is being capitalized as mine development
costs.
The adoption of FASB Statement No. 109, "Accounting for Income Taxes,"
effective January 1, 1993, resulted in an increase to net income of $4.7 million
which represented the net increase to the Company's deferred income tax asset as
of that date. The Company's effective income tax rate was 43% for 1994 compared
to 39% in 1993. The increase in the effective income tax rate in 1994 resulted
in part from a decrease in income before income taxes and its relationship to
the temporary differences between financial and income tax reporting created
principally by Eighty-Four's mine development expenditures and the inability to
carry back or carry forward tax deductions in excess of current year income for
Pennsylvania income tax purposes. In addition, these excess deductions cannot be
offset against state taxable income of other subsidiaries. For federal income
tax purposes, these expenditures are being utilized to offset current year
income and then carried back to recover taxes paid in prior years. Federal and
Pennsylvania deferred tax liabilities are being provided with respect to these
expenditures even though no benefit is being realized for Pennsylvania income
tax reporting. The credit provision for income taxes recorded in 1995 was lower
than would normally be expected due to the tax provisions recorded for
Eighty-Four. The higher effective income tax rates are expected to continue
through 1996.
Over the past five years, coal prices in the Company's marketing area have
declined. This decline has forced the Company's subsidiaries, as well as their
competitors, to mitigate the effects of inflation on costs by endeavoring to
increase productivity and reduce overall operating costs. The change in market
prices is a significant element in the determination of sales prices under
Keystone's and Helvetia's long-term coal sales agreements. Due to the decline in
these market price indices, the respective sales prices have not kept pace with
cost inflation. While staff reductions and operating efficiencies have been
implemented over the last several years by the Company and its subsidiaries,
necessary productivity improvements have not occurred. Consequently, these
subsidiaries have not been able to cover these inflationary effects and there
can be no assurance that they can do so in the future. The Company expects
market prices to remain highly competitive. The profitability of these
subsidiaries, including Eighty-Four Mining Company, will be highly dependent on
their ability to maximize productivity and continue to implement sustained cost
reduction programs.
Leatherwood received a permit for a municipal landfill in western
Pennsylvania, the issuance of which is being appealed by several local groups.
Leatherwood is defending the issuance of the permit vigorously and believes it
will prevail. The Company has made no decision with respect to commencement of
construction and operation of this property.
In March 1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of " (FASB 121), was
[27]
<PAGE> 30
issued which requires impairment losses to be recorded on long-lived assets used
in operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the assets'
carrying amount. The Company will adopt FASB 121 in the first quarter of 1996
and, based on current circumstances and estimates, does not believe the effect
of adoption will be material.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at December 31, 1995 was $42 million compared to $50
million at December 31, 1994 and $31 million at December 31, 1993. The Company's
current ratio (ratio of current assets to current liabilities) was 2.25 to 1 at
December 31, 1995 versus 2.5 to 1 and 2.1 to 1 at December 31, 1994 and 1993,
respectively. The decrease in working capital and in the current ratio in 1995
are primarily due to the reduction in Keystone's coal inventory to a more normal
operating level and the effect of Keystone's and Helvetia's operating losses.
The decline in the investment in marketable securities of approximately $13
million reflects Helvetia's utilization of a portion of these funds for plant
and equipment and mine development in 1995.
As discussed in Note D to the consolidated financial statements, Keystone
amended its credit agreement in March 1996 to extend the expiration date of its
revolving credit agreement until December 31, 2000. In addition, Keystone's line
of credit agreement was extended two years to March 1998 and increased by $7.5
million for a portion of 1996.
As discussed in Notes B and D to the consolidated financial statements, the
Company has contributed equity in the amount of $100 million for the
acquisition, rehabilitation, and development of Mine No. 84 and related coal
properties. In 1995, a capitalized lease for Mine No. 84's first longwall mining
system was completed and, as of December 31, 1995, $71 million had been borrowed
under the $85 million credit facility in place for the development and operation
of this mine. In the first quarter of 1996, an additional $7.5 million was
borrowed under this facility.
In conjunction with its guarantee of the Eighty-Four project, the Company,
Eighty-Four, and Lucerne Land are subject to numerous financial covenants and
restrictions. As a result of operating losses at Keystone and Helvetia and the
related impact on the Company's consolidated results of operations, the Company
obtained waivers of and amendments to certain provisions in the debt agreements,
including a waiver for dividends declared during 1994 and 1995. In addition, a
waiver was obtained for 1995 due to less than expected productivity of mining
units developing the longwall mining panels. As discussed in Note D to the
consolidated financial statements, the banks and institutional lenders also
agreed to certain amendments to the note agreements relating to projected
noncompliance for 1996. While $6.5 million remained to be borrowed under the
credit agreement as of March 31, 1996, current operating projections, taking
into account the lower production levels, indicate the need for approximately
$30 million in additional funding to complete development. While the Company
will provide a portion of this funding, the borrowers plan to secure additional
permanent financing later in 1996. A second longwall system, to be delivered and
operational in 1997, will, like the first system, be leased.
[28]
<PAGE> 31
ROCHESTER & PITTSBURGH COAL COMPANY
SALES SUBSIDIARIES
UNITED EASTERN COAL SALES CORPORATION
CORPORATE AND GENERAL SALES OFFICE
655 Church Street, Indiana, PA 15701 412/349-6254
MARK A. STEFANOV, Vice President
ROCHESTER & PITTSBURGH COAL CO. (CANADA) LIMITED
CORPORATE AND GENERAL SALES OFFICE
1 City Centre Drive, Mississauga, Ontario L5B 1M2 905/277-2665
GARY F. WHITE, President
<PAGE> 1
EXHIBIT (21)
SUBSIDIARIES
State or Jurisdiction
Name of Subsidiary(1) of Incorporation
- --------------------- ---------------------
Helvetia Coal Company Pennsylvania
Keystone Coal Mining Corporation Pennsylvania
Rochester & Pittsburgh Coal Co.
(Canada) Limited Canada
Cargo Dockers Ltd.(2) Canada
Cordin Ltd.(3) Canada
United Eastern Coal Sales Corporation Pennsylvania
The White Star Coal Co., Inc.(4) New York
RFC Fuel Corporation New York
Leatherwood, Inc. Pennsylvania
Westco Coal Company Pennsylvania
Kent Coal Mining Company(5) Pennsylvania
O'Donnell Coal Company(5) Pennsylvania
Pyrra Mining Company(5) Pennsylvania
Jeffco Coal Company Pennsylvania
DSB Company(6) Pennsylvania
Maud Mining Company(6) Pennsylvania
Mary Margaret Mining Company(6) Pennsylvania
Subco, Incorporated Pennsylvania
Church Street Holdings, Inc.(7) Delaware
Allegheny Highlands Realty Company(7) Pennsylvania
Cowanshannock Coal Company, Inc.(8) Pennsylvania
Young Township Coal Company, Inc.(8) Pennsylvania
New Century Holdings, Inc. Delaware
Eighty-Four Mining Company(9) Pennsylvania
Lucerne Land Company(9) Pennsylvania
<PAGE> 2
- ----------------
(1) All subsidiaries do business under the name as listed.
(2) Subsidiary of Rochester & Pittsburgh Coal Co. (Canada) Limited.
(3) This corporation is a nonoperating subsidiary of Rochester & Pittsburgh
Coal Co. (Canada) Limited.
(4) Subsidiary of United Eastern Coal Sales Corporation.
(5) Subsidiary of Westco Coal Company.
(6) Subsidiary of Jeffco Coal Company.
(7) Subsidiary of Subco, Incorporated.
(8) These corporations are nonoperating subsidiaries of Subco, Incorporated.
(9) Subsidiary of New Century Holdings, Inc.
<PAGE> 1
EXHIBIT (23)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Rochester & Pittsburgh Coal Company and subsidiaries of our report dated
March 8, 1996, except for the second paragraph of the Eighty-Four and Lucerne
Land section of Note D, as to which the date is April 12, 1996, included in the
1995 Annual Report to Shareholders of Rochester & Pittsburgh Coal Company and
subsidiaries.
Our audits also included the financial statement schedules of Rochester &
Pittsburgh Coal Company listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the financial statement schedules
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the information set
forth therein.
ERNST & YOUNG LLP
Ernst & Young LLP
Pittsburgh, Pennsylvania
March 8, 1996 except for the Eighty-Four and
Lucerne Land section of Note D,
as to which the date is April 12, 1996.
<PAGE> 1
EXHIBIT (24)
POWER OF ATTORNEY
Know all men by these presents, that the undersigned hereby constitutes
and appoints W. Joseph Engler, Jr. and William M. Darr, and each or either of
them, as such person's true and lawful attorneys-in-fact and agents, with full
power of substitution, for him, and in his name, place and stead, in any and all
capacities, to sign the Form 10-K Annual Report for the fiscal year ended
December 31, 1995 of Rochester & Pittsburgh Coal Company and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Dated: April 4, 1996 /s/ WILLIAM G. KEGEL
----------------- ---------------------
(Signature)
WILLIAM G. KEGEL
---------------------
(Print name)
<PAGE> 2
EXHIBIT (24)
POWER OF ATTORNEY
Know all men by these presents, that the undersigned hereby constitutes
and appoints W. Joseph Engler, Jr. and William M. Darr, and each or either of
them, as such person's true and lawful attorneys-in-fact and agents, with full
power of substitution, for him, and in his name, place and stead, in any and all
capacities, to sign the Form 10-K Annual Report for the fiscal year ended
December 31, 1995 of Rochester & Pittsburgh Coal Company and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Dated: March 28, 1996 /s/ PETER ISELIN
----------------- ------------------
(Signature)
PETER ISELIN
------------------
(Print name)
<PAGE> 3
EXHIBIT (24)
POWER OF ATTORNEY
Know all men by these presents, that the undersigned hereby constitutes
and appoints W. Joseph Engler, Jr. and William M. Darr, and each or either of
them, as such person's true and lawful attorneys-in-fact and agents, with full
power of substitution, for him, and in his name, place and stead, in any and all
capacities, to sign the Form 10-K Annual Report for the fiscal year ended
December 31, 1995 of Rochester & Pittsburgh Coal Company and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Dated: March 28, 1996 /s/ DAVID H. DAVIS
----------------- -------------------
(Signature)
DAVID H. DAVIS
-------------------
(Print name)
<PAGE> 4
EXHIBIT (24)
POWER OF ATTORNEY
Know all men by these presents, that the undersigned hereby constitutes
and appoints W. Joseph Engler, Jr. and William M. Darr, and each or either of
them, as such person's true and lawful attorneys-in-fact and agents, with full
power of substitution, for him, and in his name, place and stead, in any and all
capacities, to sign the Form 10-K Annual Report for the fiscal year ended
December 31, 1995 of Rochester & Pittsburgh Coal Company and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Dated: March 28, 1996 /s/ COLUMBUS O'D. ISELIN
----------------- -------------------------
(Signature)
COLUMBUS O'D. ISELIN
-------------------------
(Print name)
<PAGE> 5
EXHIBIT (24)
POWER OF ATTORNEY
Know all men by these presents, that the undersigned hereby constitutes
and appoints W. Joseph Engler, Jr. and William M. Darr, and each or either of
them, as such person's true and lawful attorneys-in-fact and agents, with full
power of substitution, for him, and in his name, place and stead, in any and all
capacities, to sign the Form 10-K Annual Report for the fiscal year ended
December 31, 1995 of Rochester & Pittsburgh Coal Company and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Dated: March 28, 1996 /s/ JOHN L. SCHRODER, JR.
----------------- ---------------------------
(Signature)
JOHN L. SCHRODER, JR.
---------------------------
(Print name)
<PAGE> 6
EXHIBIT (24)
POWER OF ATTORNEY
Know all men by these presents, that the undersigned hereby constitutes
and appoints W. Joseph Engler, Jr. and William M. Darr, and each or either of
them, as such person's true and lawful attorneys-in-fact and agents, with full
power of substitution, for him, and in his name, place and stead, in any and all
capacities, to sign the Form 10-K Annual Report for the fiscal year ended
December 31, 1995 of Rochester & Pittsburgh Coal Company and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Dated: March 28, 1996 /s/ O'DONNELL ISELIN II
----------------- -------------------------
(Signature)
O'DONNELL ISELIN II
-------------------------
(Print name)
<PAGE> 7
EXHIBIT (24)
POWER OF ATTORNEY
Know all men by these presents, that the undersigned hereby constitutes
and appoints W. Joseph Engler, Jr. and William M. Darr, and each or either of
them, as such person's true and lawful attorneys-in-fact and agents, with full
power of substitution, for him, and in his name, place and stead, in any and all
capacities, to sign the Form 10-K Annual Report for the fiscal year ended
December 31, 1995 of Rochester & Pittsburgh Coal Company and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Dated: March 28, 1996 /s/ L. BLAINE GRUBE
----------------- ---------------------
(Signature)
L. BLAINE GRUBE
---------------------
(Print name)
<PAGE> 8
EXHIBIT (24)
POWER OF ATTORNEY
Know all men by these presents, that the undersigned hereby constitutes
and appoints W. Joseph Engler, Jr. and William M. Darr, and each or either of
them, as such person's true and lawful attorneys-in-fact and agents, with full
power of substitution, for him, and in his name, place and stead, in any and all
capacities, to sign the Form 10-K Annual Report for the fiscal year ended
December 31, 1995 of Rochester & Pittsburgh Coal Company and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Dated: March 28, 1996 /s/ GORDON B. WHELPLEY, JR.
----------------- ----------------------------
(Signature)
GORDON B. WHELPLEY, JR.
----------------------------
(Print name)
<PAGE> 9
EXHIBIT (24)
POWER OF ATTORNEY
Know all men by these presents, that the undersigned hereby constitutes
and appoints W. Joseph Engler, Jr. and William M. Darr, and each or either of
them, as such person's true and lawful attorneys-in-fact and agents, with full
power of substitution, for him, and in his name, place and stead, in any and all
capacities, to sign the Form 10-K Annual Report for the fiscal year ended
December 31, 1995 of Rochester & Pittsburgh Coal Company and any or all
amendments thereto, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Dated: March 28, 1996 /s/ THOMAS M. HYNDMAN, JR.
----------------- ---------------------------
(Signature)
THOMAS M. HYNDMAN, JR.
---------------------------
(Print name)
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANTS
1995 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
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<RECEIVABLES> 29,576
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<PP&E> 511,625
<DEPRECIATION> 189,262
<TOTAL-ASSETS> 491,407
<CURRENT-LIABILITIES> 33,601
<BONDS> 120,784
0
0
<COMMON> 59,837
<OTHER-SE> 143,277
<TOTAL-LIABILITY-AND-EQUITY> 491,407
<SALES> 216,686
<TOTAL-REVENUES> 225,879
<CGS> 205,283
<TOTAL-COSTS> 205,283
<OTHER-EXPENSES> 21,230
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,238
<INCOME-PRETAX> (3,872)
<INCOME-TAX> (337)
<INCOME-CONTINUING> (3,535)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,535)
<EPS-PRIMARY> (1.03)
<EPS-DILUTED> (1.03)
</TABLE>
