SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- -------------
Commission File No. 0-7181
ROCHESTER & PITTSBURGH COAL COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0761480
(State or other jurisdiction of (I.R.S. Employer Iden-
incorporation or organization) tification No.)
655 Church Street, Indiana, Pennsylvania 15701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 412/349-5800
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number
of shares outstanding of each of the issuer's classes of common
stock, as of July 31, 1997. 3,440,984 shares.
<PAGE> 2
<TABLE>
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
June 30 December 31
1997 1996
------------ -----------
ASSETS
------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 30,617 $ 34,466
Short-term investments -- 25,000
Receivables 25,085 21,945
Inventories and other current assets 10,254 11,889
Deferred income taxes 2,362 2,093
------------ -----------
Total Current Assets 68,318 95,393
Other Assets
Investments in marketable securities 17,836 28,558
Funding for:
Workers' compensation benefits 13,782 14,229
Mine closing reserves 12,062 11,651
Deferred income taxes 12,664 8,839
Miscellaneous 18,766 16,103
------------ -----------
75,110 79,380
Property, plant, and equipment 576,757 541,544
Less allowances for depreciation, depletion,
and amortization 213,910 184,919
------------ -----------
362,847 356,625
------------ -----------
$ 506,275 $ 531,398
============ ===========
<PAGE> 3
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable $ 13,219 $ 15,845
Accrued liabilities 17,117 13,398
Income taxes payable 145 1,367
Current maturities of long-term debt 5,095 28,236
------------ -----------
Total Current Liabilities 35,576 58,846
Other Liabilities and Long-Term Debt
Other postretirement benefits 77,397 72,346
Workers' compensation benefits 39,482 40,384
Mine closing reserves 24,543 23,929
Black lung benefits 9,787 9,231
Deferred income taxes 13,675 11,079
Miscellaneous 3,181 3,897
Long-term debt (less current maturities) 98,565 100,501
------------ -----------
266,630 261,367
Shareholders' Equity
Common stock issued, 3,989,121 shares 59,837 59,837
Capital in excess of stated value 133,125 133,125
Retained earnings 38,912 46,028
------------ -----------
231,874 238,990
Less treasury stock at cost - 548,137 shares 27,805 27,805
------------ -----------
204,069 211,185
------------ -----------
Total Liabilities & Shareholders' Equity $ 506,275 $ 531,398
============ ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 4
<TABLE>
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Amounts in thousands, except for outstanding shares and per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Production Tonnage 1,064 1,178 2,096 2,406
=========== =========== ========= ===========
Sales Tonnage 1,466 1,481 2,840 2,990
=========== =========== ========= ===========
Sales $ 49,896 $ 52,997 101,784 108,887
Other Income:
Gain on sale of property 8,194 -- 10,253 6,575
Interest and dividends 630 1,104 1,759 2,210
Net investment gains (2) 390 (173) 656
Miscellaneous 330 509 721 962
----------- ----------- --------- -----------
59,048 55,000 114,344 119,290
Costs and Expenses:
Cost of sales 43,034 46,678 91,121 96,071
Depreciation, depletion,
and amortization 3,242 2,957 6,711 6,211
Selling, general,
and administrative 1,560 1,677 3,212 3,546
Interest 406 575 874 1,194
Write-down of property,
plant, and equipment 17,047 -- 17,047 --
Miscellaneous 432 376 1,301 710
----------- ----------- --------- -----------
65,721 52,263 120,266 107,732
----------- ----------- --------- -----------
Income (Loss) Before
Income Taxes (6,673) 2,737 (5,922) 11,558
Provision (Credit) for
Income Taxes (738) 1,168 (8) 4,943
------------ ----------- --------- -----------
Net Income (Loss) $ (5,935) $ 1,569 $ (5,914) $ 6,615
=========== =========== ========= ===========
Net Income (Loss) Per Share $ (1.73) $ .45 $ (1.72) $ 1.92
=========== =========== ========= ===========
<PAGE> 5
Average shares outstanding
used in the computation
of per share amounts 3,440,984 3,440,984 3,440,984 3,440,759
Shares issued and outstanding
at June 30 3,440,984 3,440,984 3,440,984 3,440,984
Cash dividends declared
per share $ .15 $ .15 $ .30 $ .30
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 6
<TABLE>
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Six Months Ended
June 30
----------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (5,914) $ 6,615
Adjustments for non-cash items 12,151 2,062
Changes in certain assets and liabilities
(using) or providing cash 2,230 16,642
--------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 8,467 25,319
--------- ---------
INVESTING ACTIVITIES
Proceeds from investment activity 38,400 20,889
Acquisition of investments (2,775) (14,587)
Acquisition and development of
property, plant, and equipment (16,473) (27,862)
Proceeds from sale of property, plant, and
equipment 11,040 7,312
--------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 30,192 (14,248)
--------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings 83,625 61,650
Payments on borrowings (122,322) (61,723)
Debt issue costs (2,263) --
Cash dividends paid (1,548) (1,548)
Treasury stock issued -- 50
--------- ---------
NET CASH USED IN
FINANCING ACTIVITIES (42,508) (1,571)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (3,849) 9,500
Cash and cash equivalents at beginning of year 34,466 27,437
--------- ---------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 30,617 $ 36,937
========= =========
<PAGE> 7
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid (net of capitalized interest) $ 1,225 $ 988
========= =========
Income taxes paid (tax refunds received) $ 2,448 $ (1,999)
========= =========
Noncash financing and investing activities--
Capital leases and seller financing of
equipment to be leased. $ 13,618 $ 2,507
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 8
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1997
Note A - Basis for Presentation
- -------------------------------
The accompanying unaudited Consolidated Condensed Financial
Statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six
month period ended June 30, 1997 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1996.
Results for the Company's subsidiary, Eighty-Four Mining Company,
other than its provision for income taxes and a portion of general and
administration expenses, are not included in the accompanying
Consolidated Condensed Statements of Income because Eighty-Four is in
the development stage.
Note B - Write down of Impaired Assets
- --------------------------------------
In the second quarter of 1997, Helvetia Coal Company's operating
losses increased which prompted management to revise projections of
Helvetia's future operations. In accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," the Company has
evaluated the ongoing value of Helvetia's assets and has determined that
its property, plant, and equipment with a carrying value of $17,047,000
should be written down to zero in light of Helvetia's anticipated future
operating losses and estimated discounted future cash flows.
<PAGE> 9
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL POSITION
June 30, 1997
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's (1) results of
operations during the periods included in the accompanying Consolidated
Condensed Statements of Income and (2) financial position since
December 31, 1996:
Results of Operations
- ---------------------
As discussed in Note B to the Consolidated Condensed Financial
Statements, the Company's subsidiary, Helvetia Coal Company (Helvetia),
wrote down the $17 million carrying value of its fixed assets to zero in
accordance with the Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." The write-off of these assets resulted from 1)
continued operating losses experienced by Helvetia totaling $1.2 million
and $2.7 million for the three and six months ended June 30, 1997,
respectively, exclusive of favorable nonrecurring adjustments, and
2) projections which indicated that Helvetia's losses are expected to
continue. Helvetia is evaluating various alternatives in an attempt to
minimize future losses. Helvetia has a contract for deliveries to the
Homer City Station through 2004, however, under certain circumstances,
the contract can be terminated prior to that time.
The Company's subsidiary, Keystone Coal Mining Corporation (Keystone),
recorded pretax income of $1.1 million in both the second quarter and first
six months of 1997 compared to $1.1 million and $2.7 million in the second
quarter and first six months of 1996, respectively. Keystone's 1996 results
benefitted from the favorable effect of decreasing coal inventories under
the pricing provisions of its coal supply agreement. During the first six
months of 1997, Keystone has shipped in excess of the rate of annual
delivery under the coal supply agreement. The resulting limitation on
deliveries may reduce Keystone's profitability in the second half of 1997.
The Company's Eighty-Four Mining Company subsidiary (Eighty- Four)
is continuing its development of Mine No. 84 for installation of a second
longwall system in the third quarter of this year. Eighty-Four's results,
other than its provision for income taxes and certain general and
administrative costs, are not included in the accompanying Consolidated
Condensed Statements of Income because Eighty-Four is in the development
stage. As previously reported, Eighty-Four has experienced difficulty in
achieving the continuous miner advance rates necessary for economical
operation of the longwall mining system. While such advance rates have
improved in 1997, further improvement is required in order for Eighty-Four
to be profitable at the conclusion of the development period.
<PAGE> 10
The Company's continuing program of selling certain nonstrategic
properties resulted in gains of $10.3 million in the first six months of
1997 compared to gains of $6.6 million in the first six months of 1996
from the sale of property containing two refuse piles.
The Company recorded net investment losses of $173,000 in the first
six months of 1997 due to the sale of securities in order to provide
funding required for the Mine No. 84 project. Interest and dividend
income decreased in the second quarter of 1997, compared to the second
quarter of 1996 due to the reduction in amounts invested.
The increase in miscellaneous expense in the first six months of
1997 reflects the write-off of certain debt issuance costs relating to
Eighty-Four's previous debt arrangement.
Interest expense in the first six months of 1997 was lower than
the first six months of the prior year due to decreased amounts borrowed
by Keystone. Interest expense incurred by Eighty-Four is being
capitalized while it is in the development stage.
The Company's effective tax rates for 1997 and 1996 vary from the
normal expected rates due to higher income tax provisions being recorded
for Eighty-Four. The higher effective income tax rates are expected to
continue through 1997, the final year of mine development at Mine No. 84.
Liquidity and Capital Resources
- -------------------------------
Working capital at June 30, 1997 was $33 million, compared to
$37 million at December 31, 1996, and the current ratios were 1.9 to 1
and 1.6 to 1, respectively. The decrease in working capital resulted
primarily from the utilization of internal funds for the reduction of
Eighty-Four's debt in March, 1997 and for the further development of
Mine No. 84.
At June 30, 1997, the Company had invested $160 million in the
Mine No. 84 project in the form of equity and subordinated loans to
Eighty-Four and Lucerne Land. As previously reported, Eighty-Four and
Lucerne Land amended and restated their credit agreements in March, 1997
to provide for: 1) a new senior secured term loan totaling $25 million;
2) a revolving credit note totaling $35 million, of which $24 million
was borrowed at June 30, 1997; and, 3) a working capital line of credit
totaling $8 million which was unused at June 30, 1997.
The Company is continuing to pursue the sale of nonstrategic coal
reserves and surface properties in order to improve liquidity.
<PAGE> 11
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
PART II: OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders.
(a) Registrant's Annual Meeting of Shareholders was held on
May 13, 1997. Of the 3,440,984 shares eligible to
vote, 2,995,458 shares were represented in person or by
proxy at the meeting.
(c) Messrs. L. Blaine Grube, Peter Iselin, William G. Kegel
and Gordon B. Whelpley, Jr., were re-elected as Class A
Directors of Registrant. A summary of votes for each
Class A Director is as follows:
L. Blaine Grube
FOR 2,987,247
WITHHELD 8,211
Peter Iselin
FOR 2,990,748
WITHHELD 4,710
William G. Kegel 2,987,072
FOR 8,386
WITHHELD
Gordon B. Whelpley, Jr.
FOR 2,950,641
WITHHELD 4,817
Ernst & Young LLP, independent public accountants, was
selected as Registrant's auditor for 1997. A summary
of votes for, against, and abstentions is as follows:
FOR 2,967,056
AGAINST 3,212
ABSTAIN 25,190
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
ROCHESTER & PITTSBURGH COAL COMPANY
THOMAS W. GARGES, JR.
Thomas W. Garges, Jr.
President and Chief Executive Officer
GEORGE M. EVANS
George M. Evans
Vice President and Treasurer
Date: August 14, 1997
<PAGE> 13
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 30,617
<SECURITIES> 0
<RECEIVABLES> 25,085
<ALLOWANCES> 0
<INVENTORY> 5,977
<CURRENT-ASSETS> 68,318
<PP&E> 576,757
<DEPRECIATION> 213,910
<TOTAL-ASSETS> 506,275
<CURRENT-LIABILITIES> 35,576
<BONDS> 98,565
<COMMON> 59,837
0
0
<OTHER-SE> 144,232
<TOTAL-LIABILITY-AND-EQUITY> 506,275
<SALES> 101,784
<TOTAL-REVENUES> 114,344
<CGS> 91,121
<TOTAL-COSTS> 91,121
<OTHER-EXPENSES> 28,271
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 874
<INCOME-PRETAX> (5,922)
<INCOME-TAX> (8)
<INCOME-CONTINUING> (5,914)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,914)
<EPS-PRIMARY> (1.72)
<EPS-DILUTED> (1.72)
</TABLE>
