SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 October 31, 1997. 3,440,984 shares.
<PAGE> 2
<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 Nine Months Ended
September 30 September 30
------------------- ------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Production Tonnage 887 946 2,983 3,352
=========== =========== ========= ===========
Sales Tonnage 1,234 1,132 4,074 4,122
=========== =========== ========= ===========
Sales $ 42,307 $ 43,809 144,091 152,696
Other Income:
Gain on sale of property 3,562 616 13,815 7,301
Interest and dividends 737 1,261 2,496 3,471
Net investment gains -- 7 (173) 663
Miscellaneous 488 688 1,209 1,540
----------- ----------- --------- -----------
47,094 46,381 161,438 165,671
Costs and Expenses:
Cost of sales 39,076 40,704 130,197 136,775
Depreciation, depletion,
and amortization 1,948 2,580 8,659 8,791
Selling, general,
and administrative 1,767 1,189 4,979 4,735
Interest 386 475 1,260 1,669
Write-down of property,
plant, and equipment -- -- 17,047 --
Miscellaneous 403 295 1,704 1,005
----------- ----------- --------- -----------
43,580 45,243 163,846 152,975
----------- ----------- --------- -----------
Income (Loss) Before
Income Taxes 3,514 1,138 (2,408) 12,696
Provision for Income Taxes 1,637 345 1,629 5,288
----------- ----------- --------- -----------
Net Income (Loss) $ 1,877 $ 793 $ (4,037) $ 7,408
=========== =========== ========= ===========
Net Income (Loss) Per Share $ 0.55 $ 0.23 $ (1.17) $ 2.15
=========== =========== ========= ===========
<PAGE> 3
Average shares outstanding
used in the computation
of per share amounts 3,440,984 3,440,984 3,440,984 3,440,834
Shares issued and outstanding
at September 30 3,440,984 3,440,984 3,440,984 3,440,984
Cash dividends declared
per share $ 0.15 $ 0.15 $ 0.45 $ 0.45
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 4
<TABLE>
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
September 30 December 31
1997 1996
------------ -----------
ASSETS
------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 35,332 $ 34,466
Short-term investments -- 25,000
Receivables 34,356 21,945
Inventories and other current assets 8,610 11,889
Deferred income taxes 2,423 2,093
------------ -----------
Total Current Assets 80,721 95,393
Other Assets
Investments in marketable securities 19,083 28,558
Funding for:
Workers' compensation benefits 13,622 14,229
Mine closing reserves 12,117 11,651
Deferred income taxes 12,859 8,839
Miscellaneous 18,605 16,103
------------ -----------
76,286 79,380
Property, plant, and equipment 579,354 541,544
Less allowances for depreciation, depletion,
and amortization 220,235 184,919
------------ -----------
359,119 356,625
------------ -----------
$ 516,126 $ 531,398
============ ===========
<PAGE> 5
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable $ 13,919 $ 15,845
Accrued liabilities 20,315 13,398
Income taxes payable 2,036 1,367
Current maturities of long-term debt 6,112 28,236
------------ -----------
Total Current Liabilities 42,382 58,846
Other Liabilities and Long-Term Debt
Other postretirement benefits 79,088 72,346
Workers' compensation benefits 40,003 40,384
Mine closing reserves 24,662 23,929
Black lung benefits 10,059 9,231
Deferred income taxes 13,824 11,079
Miscellaneous 3,073 3,897
Long-term debt (less current maturities) 97,354 100,501
------------ -----------
268,063 261,367
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 40,524 46,028
------------ -----------
233,486 238,990
Less treasury stock at cost - 548,137 shares 27,805 27,805
------------ -----------
205,681 211,185
------------ -----------
Total Liabilities & Shareholders' Equity $ 516,126 $ 531,398
============ ===========
</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>
Nine Months Ended
September 30
-------------------------
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (4,037) $ 7,408
Adjustments for non-cash items 11,987 3,579
Changes in certain assets and liabilities
(using) or providing cash 871 18,351
--------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 8,821 29,338
--------- ---------
INVESTING ACTIVITIES
Proceeds from investment activity 38,400 24,461
Acquisition of investments (2,775) (18,209)
Acquisition and development of
property, plant, and equipment (16,692) (34,579)
Proceeds from sale of property, plant, and
equipment 15,605 8,085
--------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 34,538 (20,242)
--------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings 103,676 96,100
Payments on borrowings (141,841) (96,167)
Debt issue costs (2,263) --
Cash dividends paid (2,065) (2,064)
Treasury stock issued -- 50
--------- ---------
NET CASH USED IN
FINANCING ACTIVITIES (42,493) (2,081)
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 866 7,015
Cash and cash equivalents at beginning of year 34,466 27,437
--------- ---------
CASH AND CASH EQUIVALENTS AT SEPTEMBER 30 $ 35,332 $ 34,452
========= =========
<PAGE> 7
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid (net of capitalized interest) $ 1,700 $ 1,752
========= =========
Income taxes paid (tax refunds received) $ 2,416 $ (1,999)
========= =========
Noncash financing and investing activities--
Capital leases $ 12,894 $ 7,114
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 8
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 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 nine month period ended September 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 evaluated
the ongoing value of Helvetia's assets and 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
September 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, 1997:
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 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 and 2) management's
estimates that Helvetia's losses are likely 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),
operated at break-even in the third quarter and had $1.1 million in pretax
income in the first nine months of 1997, compared to a pretax loss of
$400,000 and pretax income of $2.3 million in the third quarter and first
nine months of 1996, respectively. Keystone's 1996 results benefitted from
the favorable effect of a reduction in coal inventories under the pricing
provisions of its coal supply agreement. During the first nine months of
1997, Keystone shipped approximately 82% of the annual delivery requirements
under the coal supply agreement. The resulting limitation on fourth quarter
deliveries is expected to reduce Keystone's pretax income for the current
year.
At the Company's subsidiary, Eighty-Four Mining Company (Eighty-Four),
the second longwall mining unit was installed on September 2, 1997, and has
experienced start-up problems, which continued into November, 1997. These
problems related to training new longwall personnel while adjusting the new
equipment and the mainline belt haulage system to handle the additional
tonnage. Despite these problems, the mine produced over 600,000 tons in
September, 1997 and 530,000 tons in October, 1997. With the installation
of the second longwall unit, major underground construction and development
projects necessary to support existing mining unit locations are
approaching completion. Consequently, development phase accounting treatment
is expected to end in the fourth quarter of 1997. These projects
have reduced the efficiency, availability, and advancement rates of the
continuous miner units resulting in advancement rates which have continued
to fall short of levels necessary for economical operation of the mine.
The cumulative effect of these advance rate shortfalls is expected to result
in longwall mining delays and consequent losses. Future profitability will
be dependent upon a combination of improvements in the advance rates,
introduction of other operating efficiencies, and an increase in market
<PAGE> 10
prices which have remained flat for the past several years. Because
Eighty-Four is presently in the development stage, $160 million in costs of
development, net of sales revenue from coal produced incidental to
development, have been capitalized through September 30, 1997 and its
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.
The Company's continuing program of selling certain nonstrategic
properties resulted in gains of $13.8 million in the first nine months of
1997 compared to gains of $7.3 million in the first nine months of 1996.
The Company recorded net investment losses of $171,000 in the first
quarter 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 third quarter of 1997, compared to the third quarter of
1996 due to the reduction in amounts invested.
The reduction in depreciation, depletion and amortization in the
quarter and nine months ended September 30, 1997 resulted from the
write-off of Helvetia's assets in the second quarter as discussed above.
Selling, general, and administrative expenses were higher in the third
quarter of 1997 compared to the third quarter of 1996, due, in part, to a
favorable adjustment in the third quarter of 1996 for state tax accruals.
Interest expense in the first nine months of 1997 was lower than the
first nine 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 increase in miscellaneous expense in the first nine months of 1997
reflects the write-off of a portion of debt issuance costs relating to
Eighty-Four's previous debt arrangement.
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 September 30, 1997 was $38 million, compared to
$37 million at December 31, 1996, and the Company's current ratios were
1.9 to 1 and 1.6 to 1, respectively. The increase in working capital
resulted primarily from the proceeds of sale of nonstrategic coal reserves
and surface properties, offset by 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 September 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;
<PAGE> 11
2) a revolving credit note totaling $35 million, of which $28.2 million
was borrowed at September 30, 1997; and, 3) a working capital line of
credit totaling $8 million which was unused at September 30, 1997. The
Company's dividend to shareholders paid in September, 1997 and future
dividends reduce dollar for dollar the amounts available to borrow under
the credit agreements. The second longwall was financed with a capital
lease having monthly installments payable through 2005.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
ROCHESTER & PITTSBURGH COAL COMPANY
THOMAS W. GARGES, JR.
Thomas W. Garges, Jr.
President and Chief Executive Officer
GEORGE M. EVANS
George M. Evans
Vice President and Treasurer
Date: November 14, 1997
<PAGE> 13
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 35,332
<SECURITIES> 0
<RECEIVABLES> 34,356
<ALLOWANCES> 0
<INVENTORY> 6,048
<CURRENT-ASSETS> 80,721
<PP&E> 579,354
<DEPRECIATION> 220,235
<TOTAL-ASSETS> 516,126
<CURRENT-LIABILITIES> 42,382
<BONDS> 97,354
<COMMON> 59,837
0
0
<OTHER-SE> 145,844
<TOTAL-LIABILITY-AND-EQUITY> 516,126
<SALES> 144,091
<TOTAL-REVENUES> 161,438
<CGS> 130,197
<TOTAL-COSTS> 130,197
<OTHER-EXPENSES> 32,389
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,260
<INCOME-PRETAX> (2,408)
<INCOME-TAX> 1,629
<INCOME-CONTINUING> (4,037)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,037)
<EPS-PRIMARY> (1.17)
<EPS-DILUTED> (1.17)
</TABLE>
