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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
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 NUMBER 0-7181
ROCHESTER & PITTSBURGH COAL COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
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)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 412-349-5800
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
NONE NONE
</TABLE>
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 7, 1997, the aggregate market value of the voting stock of
Registrant held by its non-affiliates was $47,384,016.
Indicate the number of shares of each of Registrant's classes of common
stock outstanding as of March 7, 1997: 3,440,984 shares.
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DOCUMENTS INCORPORATED BY REFERENCE:
None.
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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 1996, sales to the utility
customers of Registrant's subsidiaries were somewhat in excess of 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 1996. When such
work is completed, which is anticipated in late 1997, Registrant will be
engaged, as a material portion of its planned operations, in the eastern and
midwestern utility coal markets 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 1996 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.
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 the coal properties and 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 at Mine No. 84. 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, upgraded coal handling and
preparation facilities and development work to accommodate the installation of
the first of the two planned longwall mining units is completed. The first
longwall commenced operations in the third quarter of 1995; the second unit is
scheduled to commence operations in the third quarter of 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 mining
in longwall panels, Eighty-Four produced 3,026,551 tons of coal in 1996
substantially all of which were sold in the commercial market to fourteen
customers which included utilities, industrial coal users and foreign customers.
Since longwall operations commenced in 1995, Eighty-Four has experienced
problems in achieving continuous miner advance rates required for economical
longwall mining. During the fourth quarter of 1996, an independent mining
consulting firm evaluated Eighty-Four's operation and advised management
regarding a plan to enhance advance rates in the continuous miner sections. Such
plan has been implemented and the advance rates have improved. The recent
progress in the advance rate is being monitored by the consulting firm and
Eighty-Four's management. Eighty-Four anticipates that the advance rates will
continue to improve and that long-term advance rates acceptable for economical
longwall mining are achievable.
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A citizens group has appealed various provisions of Eighty-Four's Coal
Mining Activity Permit (the "Permit"). The appeal is pending before the
Pennsylvania Environmental Hearing Board. 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 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 by Eighty-Four, and generally
accepted mining practices in the Pittsburgh Seam utilizing longwall mining
techniques.
During 1996, marketing efforts for the sale of coal by Eighty-Four
continued. As a result of such efforts, Eighty-Four expects to sell
approximately 4.8 million tons of coal from Mine No. 84 in 1997 to utility and
industrial customers, in either spot market sales or under longer term contracts
none of which, at present, extends beyond 2000. 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. Eighty-Four has been successful in addressing such uses for
Mine No. 84 coal by utilities that use the coal as blender with Western low
sulphur coals. Longer-term demand for this 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. In 1996, Mine No. 84 shipped 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 varying contract
durations.
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 is 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
1996, KCMC delivered 3,182,580 tons to the Keystone Station pursuant to the
Keystone Agreement. Should the parties not agree to an extension of the Keystone
Agreement beyond 2004, as to which no assurance can be given, 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. Coal sold pursuant to the
Keystone Agreement is delivered by a series of belt conveyors directly from
KCMC's mines (the "Keystone Mines") or by truck 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 coal delivered to the
Keystone Station.
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, 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, subject to a price cap, 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.
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(1) Saleable means total coal mine output less tonnage rejected during
processing for market.
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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 ($15,554,863 at December 31, 1996)
or KCMC's 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 since December 1990. See Note C of the Notes to
the Consolidated Financial Statements. 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 quality of the coal KCMC is able to produce. The Keystone
Owners also have the right to terminate the Keystone Agreement if certain coal
size and quality requirements are not met by KCMC.
In 1996, KCMC delivered 2,404,753 tons of coal from its Keystone Mines and
777,827 tons of purchased coal to the Keystone Station, compared with deliveries
to the Keystone Station in 1995 of 3,161,913 tons of coal from its Keystone
Mines and 338,152 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 "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 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 Homer City 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 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 Homer
City Agreement is a base price with escalation and adjustments based on the
quality of the coal delivered. The Homer City Agreement also provides for early
termination by either party under hardship provisions as defined in the Homer
City Agreement and further allows the Homer City Owners to terminate the 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 the Consolidated
Financial Statements.
In 1996, Helvetia delivered 1,822,792 tons of coal from its deep mines and
115,677 tons of purchased coal to the Homer City Station compared with
deliveries to the Homer City Station in 1995 of 1,421,383 tons of deep-mined
coal and 171,763 tons of purchased coal. In 1996, 86 tons of coal recovered from
refuse were delivered to the Homer City Station compared with delivery of 4,593
tons of coal recovered from refuse in 1995.
In 1996, five deep mines of Registrant's subsidiaries supplied coal to the
Homer City and Keystone Stations (the "Stations"). The mines are described in
Item 2 hereof, 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 Homer City Agreements (the "Agreements"),
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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 suppliers of 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 Stations, the
Keystone and Homer City Owners could reduce the amount of power produced by
those Stations and, consequently, the amount of coal purchased from Registrant
under the Agreements could be reduced. In addition, the deregulation of the
electric generating industry, the dimensions of which are not yet fully
apparent, could have a material effect on Registrant's business if the utilities
to which its subsidiaries supply coal are unable to compete effectively in a
deregulated environment.
During 1996, a substantial 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 Agreements, described
herein. See also Note C of the Notes to the Consolidated Financial Statements.
Gross sales pursuant to the Keystone Agreement and the Homer City Agreement
accounted for approximately 58% and 34%, respectively, of Registrant's sales in
the year ended December 31, 1996. If the Owners of the 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 Stations could decrease, and if such decrease were
significant, the change could materially adversely affect the business of
Registrant.
United Eastern Coal Sales Corporation ("United Eastern"), a wholly-owned
subsidiary of Registrant, 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. In October 1996, Congress passed the Federal Aviation
Reauthorization Act of 1996 (the "Reauthorization Act"). Leatherwood does not
comply with a provision of the Reauthorization Act which addresses the siting of
landfills in relation to the location of a municipal airport. The DEP
subsequently suspended Leatherwood's permit until such time as Leatherwood is in
compliance with the Reauthorization Act. Leatherwood is evaluating possible
alternatives, including litigation, to address the provisions of the
Reauthorization Act.
Information concerning backlog is not considered material to an
understanding of Registrant's business.
At December 31, 1996, 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 698 million
tons of coal. During 1996, Registrant produced approximately 4,290,360 tons of
coal excluding coal produced from Mine No. 84. Of the 698 million tons of
estimated recoverable reserve
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(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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base, approximately 71 million tons of coal (10%), are dedicated under the
Agreements. With the exception of approximately 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 present area of operations and the effect of
increasingly stringent environmental requirements, Registrant might 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 areas 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 represents 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.
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
possible development of Leatherwood and the acquisition and development of Mine
No. 84. 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, 1996, Registrant has made an investment in
the Mine No. 84 project of $109 million in the form of equity and loans
(including the $53.6 million adjusted purchase price), and as of March 31, 1997,
through an affiliated company of Registrant, loaned an additional $51 million to
the project. Also, in March 1997, Eighty-Four and Lucerne Land amended and
restructured their long-term credit agreements, reducing the amount available
thereunder from $85 million to $60 million, $50 million of which was outstanding
at March 31, 1997. In addition, Eighty-Four has entered into $24 million of
capital leases and has also obtained a commitment to lease additional longwall
equipment necessary to complete development of Mine No. 84. 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.
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 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 the productivity of Registrant's
Subsidiaries. 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 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, especially the Clean Air Act Amendments of 1990, on
Registrant's business
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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 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 quality of 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, 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 $3.6 million in
the five years ended December 31, 1996, and it is estimated that annual capital
expenditures of approximately $.5 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 1,600 persons, of whom 1,440 are
engaged directly in the production and processing of coal for sale and 150 are
engaged in executive, administrative, engineering, exploration, sales, and
clerical capacities. Registrant has approximately 1,182 employees who are
covered by the National Bituminous Coal Wage Agreement of 1993 (the "1993
Agreement") with the United Mine Workers of America (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. During 1996, the 1993
Agreement was modified by the BCOA and the UMWA to provide for changes in health
and retirement benefits, wage bonuses to be paid in 1996 and 1997, other
administrative items, and to eliminate the ability of the BCOA or the UMWA to
reopen the 1993 Agreement prior to the third and fourth anniversary dates of the
1993 Agreement. While Registrant's subsidiaries resigned from BCOA in 1994, they
remain signatories to the 1993 Agreement and the 1996 modifications.
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, 1996, 1995, and 1994.
<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>
1996.................................. $185,841 $ 7,450 $8,974 $ 202,265
1995.................................. 198,394 10,730 7,562 216,686
1994.................................. 173,774 10,765 7,452 191,991
</TABLE>
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(d) Financial Information About Foreign and Domestic Operations and Export
Sales.
In the years ended December 31, 1996, 1995, and 1994, R&P Canada had sales
of $7,235,578, $10,268,032 and $10,985,434, respectively, primarily to customers
located in 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 38,200 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 $188,000. These
leases expire at various times over the next five years and the amount of
aggregate rents payable during that period will depend on the extent of
renewals.
As indicated in Item 1 hereof, as of December 31, 1996, 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 areas 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 698 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.
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Registrant operated six underground mines in 1996. 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:
ROCHESTER & PITTSBURGH COAL COMPANY
ESTIMATED RECOVERABLE RESERVE BASE AS OF DECEMBER 31, 1996
PRODUCTION TONNAGE
<TABLE>
<CAPTION>
RECOVERABLE RESERVE BASE
(TONS X 1000)(1) PRODUCTION IN TONS
---------------------------- -------------------------------------
PROVEN PROBABLE TOTAL 1996 1995 1994
------- -------- ------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Underground
KCMC
Assigned -- Dedicated
Emilie(3).................. 2,216 1,211 3,427 1,004,314(4) 843,104(4) 1,001,453(4)
Emilie #4(3)............... 0 0 0 0(4) 249,617(4) 218,375(4)
Jane(3).................... 0 0 0 0(4) 358,813(4) 515,978(4)
Margaret #11 -- 2(3)....... 0 0 0 0(4) 361,343(4) 361,700(4)
Margaret #11 -- 3(3)....... 0 505 505 0(4) 0(4) 101,445(4)
Plumcreek #1(3)............ 534 660 1,194 440,942(4) 296,244(4) 129,007(4)
Urling #1(3)............... 0 3,193 3,193 865,027(4) 726,567(4) 753,425(4)
Unassigned -- Dedicated....... 36,957 16,343 53,300 0 0 0
Helvetia
Assigned -- Dedicated
Lucerne #6 -- E(2)......... 4,175 2,162 6,337 999,245(4) 988,945(4) 1,089,693
Marshall Run(2)............ 2,317 420 2,737 819,850(4) 451,768(4) 531
Lucerne #8(2).............. 0 0 0 0 0 597,567
Lucerne #9(2).............. 0 0 0 0 0 559,391
Unassigned -- Dedicated....... 0 0 0 0 0 0
Lucerne Land
Assigned
Mine No. 84(5)............. 65,732 9,178 74,910 3,026,551(4) 1,344,189(4) 288,588(4)
Unassigned.................... 0 95,612 95,612 0 0 0
Registrant
Unassigned.................... 196,543 256,998 453,541 0 0 0
Total -- Underground....... 308,474 386,282 694,756 7,155,929 5,620,590 5,617,153
Surface
Registrant
Assigned...................... 185 44 229 160,981 210,827 78,357
Unassigned.................... 1,524 1,797 3,321 0 0 0
Total -- Surface.............. 1,709 1,841 3,550 160,981 210,827 78,357
TOTAL........................... 310,183 388,123 698,306 7,316,910(4) 5,831,417(4) 5,695,510(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. Additional ventilation openings
may be required for underground mines due to normal mine expansion.
8
<PAGE> 10
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: 1994 -- 78,357 tons, 1995 -- 210,827 tons, and 1996 -- 160,982 tons.
All surface-mined coal produced in 1996 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. See Note D of the Notes to the
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.
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 matter 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, a citizens group, People United To Save Homes
("the Appellant") filed an appeal of the issuance by DEP of Eighty-Four's
Permit. The appeal is pending before the Pennsylvania Environmental Hearing
Board (the "EHB") at EHB Docket No. 95-233-R. While Registrant believes that the
appeal of the Appellant is not meritorious and will be denied by the EHB, the
outcome of such appeal cannot be determined at this time. In the event that the
Appellant 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
Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Registrant did not submit any matters to a vote of stockholders during the
fourth quarter of 1996.
9
<PAGE> 11
EXECUTIVE OFFICERS OF REGISTRANT.
Information on executive and other officers of Registrant as of February
28, 1997, is as follows:
<TABLE>
<CAPTION>
FAMILY
NAME AGE POSITION WITH REGISTRANT RELATIONSHIP
- ------------------------------ --- ----------------------------------- -------------
<S> <C> <C> <C>
Thomas W. Garges, Jr.......... 57 President and Chief Executive None
Officer
W. Joseph Engler, Jr.......... 56 Vice President and General Counsel None
George M. Evans............... 49 Vice President and Treasurer None
Peter Iselin.................. 76 Vice President -- Finance and (1)
Secretary
Thomas M. Majcher............. 44 Vice President -- Corporate None
Development
A. W. Petzold................. 60 Vice President -- Operations None
Jeffrey A. Mack............... 39 Controller 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, 1997, is as follows:
<TABLE>
<CAPTION>
POSITION WITH REGISTRANT FAMILY
NAME AGE SUBSIDIARIES RELATIONSHIP
- ------------------------------ --- ----------------------------------- -------------
<S> <C> <C> <C>
Robert D. Anderson............ 52 President -- KCMC None
President -- Helvetia
Robert A. McGregor............ 54 President -- Eighty-Four None
</TABLE>
Each of the officers of Registrant and the 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.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKET AND DIVIDEND INFORMATION
The following tables show the quarterly cash dividends and the range of bid
and ask prices of Registrant'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
10
<PAGE> 12
represent actual transactions. On December 31, 1996, Registrant had
approximately 680 shareholders of record.
<TABLE>
<CAPTION>
1996
--------------------------------------------------------
MARKET PRICE CASH
--------------------------------------- DIVIDENDS
QUARTER HIGH BID LOW BID HIGH ASK LOW ASK DECLARED(1)(2)
- ------------------------------------- -------- ------- -------- ------- --------------
<S> <C> <C> <C> <C> <C>
First................................ $33.00 $28.00 $34.50 $29.50 $.15
Second............................... 33.00 31.50 34.50 32.50 .15
Third................................ 31.50 30.50 32.75 31.50 .15
Fourth............................... 32.25 25.00 33.25 27.00 .15
----
$.60
====
</TABLE>
<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>
- ---------------
(1) All dividends were declared and paid in the same period shown with the
exception of the dividends declared in the fourth quarters of 1996 and 1995
which were paid on January 2, 1997 and January 2, 1996, respectively.
(2) The long-term debt agreements to finance the development of Mine No. 84
limit additional indebtedness, acquisitions, and investments and require
that Registrant comply with certain other covenants and maintain certain
financial ratios. In addition, Registrant's ability to declare dividends is
dependent on consolidated earnings meeting criteria in the long-term debt
agreements. Registrant required waivers from the senior lenders in order to
declare the 1995 dividends. Future dividends will be dependent on
Registrant'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 $109,000,000 are restricted from being transferred to Registrant.
11
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(AMOUNTS EXPRESSED IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Tons of coal produced........... 4,290 4,492 4,976 3,218 5,584
Sales........................... $202,265 $216,686 $191,991 $153,628 $198,502
Depreciation, depletion, and 11,795 13,285 12,215 10,406 10,967
amortization.................
Provision (credit) for income 3,969 (337) 1,838 1,502 4,459
taxes........................
Net income (loss)(2)............ 11,261 (3,535) 2,466 7,083 14,190
- --------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital................. $ 36,547 $ 41,969 $ 50,145 $ 31,025 $ 39,333
Property, plant, and 365,625 322,363 230,169 183,009 144,974
equipment -- net.............
Net capital expenditures........ 46,878 88,090 58,848 48,213 77,119
Total assets.................... 531,398 491,407 410,994 356,884 327,579
Long-term debt.................. 100,501 120,784 75,693 29,455 13,203
Shareholders' equity............ 211,185 203,114 207,450 210,794 209,401
- --------------------------------------------------------------------------------------------------
PER SHARE DATA(1)
Average shares outstanding...... 3,441 3,439 3,439 3,441 3,449
Net income (loss)(2)............ $ 3.27 $ (1.03) $ .72 $ 2.06 $ 4.11
Cash dividends declared......... .60 .75 1.50 1.50 1.50
Book value at year-end.......... 61.37 59.06 60.33 61.31 60.84
</TABLE>
- ---------------
(l) Adjusted for 10% stock dividends paid annually 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.
- --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
The operating results for 1996 include combined pretax income of $2.9
million at two of Registrant's principal subsidiaries, KCMC and Helvetia, which
had pretax losses in 1995 of $8.4 million and $4.6 million, respectively. In
addition, the 1996 results include gains on the sales of property totalling $7.7
million, including the sale of land containing two refuse piles.
As discussed in Note B to the Consolidated Financial Statements,
rehabilitation and development of Eighty-Four's operations will continue into
the third quarter of 1997, when a second longwall mining system is expected to
start production. Costs incurred net of sales revenue from coal produced
incidental to development are being capitalized. Eighty-Four has obtained the
necessary permits to develop and operate the mine as planned. However, these
permits have been appealed by certain parties. Registrant believes, however,
that the issuance of these permits will be upheld.
Mine No. 84 has experienced difficulty in achieving continuous mining
advance rates necessary for economical operation of the longwall mining system,
creating delays in late 1995 and 1996. Management, with the aid of an
independent consultant, implemented a productivity improvement plan in the
fourth quarter of 1996, and continuous miner advance rates have improved since
the third quarter of 1996. As a result,
12
<PAGE> 14
forecasts have been revised and management believes that the shortfalls in
continuous miner advance rates will continue to improve, and that the project
will provide for recoverability of capitalized development costs, as well as
other project assets.
The closing of three of KCMC's six deep mines at the end of 1995, which is
discussed in Note C to the Consolidated Financial Statements, and replacement of
this production with raw coal purchased from third party suppliers improved
KCMC's operating costs in 1996. The remaining mines had productivity
improvements in 1996 despite a major roof fall at one mine in the fourth
quarter. KCMC's cleaning plant operations improved, resulting in the enhancement
of the quality of coal sold. KCMC's 1996 results also benefitted from the
favorable effect of decreasing coal inventories under the pricing provisions of
its coal supply agreement and the effect of slightly improved market prices on
its profit formula.
In 1995, KCMC had experienced continuing problems in conjunction with major
modifications made to its coal cleaning plant in 1994, which caused inventories
of unprocessed coal to build to unusually high levels at the end of 1994 and in
early 1995. As a result, production was idled for over a month and further
modifications to the cleaning plant were completed in mid-1995. In addition, in
1995 KCMC continued to experience poor geological conditions, a reduction in the
market price index used to adjust its sales price, and declining productivity
levels. As a result of these factors, KCMC's operating costs in 1995 were higher
than its sales revenue, which, while determined under a cost-plus pricing
mechanism, is subject to a maximum price cap.
Since January 1, 1995, Helvetia's coal deliveries have been under the terms
of a fixed-price coal sales agreement discussed in Note C to the consolidated
financial statements. In 1996, Helvetia's results of operations benefitted from
the first full year of production at its Marshall Run mine and the favorable
effect on operating profit of the adjustment to estimated workers' compensation
liabilities for prior years discussed more fully in Note H to the Consolidated
Financial Statements. Total tons produced at Helvetia increased 26% and
deliveries under its coal sales agreement, including coal purchased from
affiliates, increased to 1.9 million tons in 1996 compared to 1.6 million tons
in 1995 and 1.8 million tons in 1994. Helvetia's other mine, Lucerne #6E,
remained unprofitable. However, efforts to improve its productivity, including
the installation of a new portal in the first quarter of 1997, are continuing.
The decline in tonnage and losses experienced in 1995 at Helvetia were due
to the closure of Lucerne #8 and #9 mines at the end of 1994, delays in
completing development of Marshall Run and low productivity at Lucerne #6E. In
1994, Helvetia's pretax income, under its previous cost-plus agreement, was
approximately $1 million.
In 1996 and 1995, Registrant's other operating subsidiaries recorded pretax
income of approximately $1.7 million and $1.9 million, respectively, from
surface mining operations and reclamation contracts with the Commonwealth of
Pennsylvania for the restoration of abandoned mine lands. In 1994, these
operations recorded a slight loss.
During the past two years, Registrant realized net investment gains from
the sale of marketable securities. 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.
Interest and dividend income continued to increase in 1996 in part from
investing funds received from Helvetia's utility customers for certain
liabilities incurred under its previous cost-plus contract. Average yields,
which increased in 1995, decreased slightly in 1996.
Depreciation, depletion, and amortization was higher in 1995 than in 1996
and 1994 due to the recording of additional amounts of depreciation relating to
the closure of three Keystone mines in 1995.
Selling, general, and administrative expenses, increased slightly in 1996
from 1995, which included certain costs for severance and early retirement
expenses incurred as a result of the closing of the three KCMC mines. A
substantial portion of selling, general, and administrative expenses relative to
Eighty-Four are expensed as incurred. Selling, general, and administrative
expenses were abnormally low in 1994 due to a credit for favorable settlement of
prior years' state capital stock taxes.
13
<PAGE> 15
Interest expense decreased in 1996 due to reductions in the amounts
borrowed to finance KCMC's operations. During 1994 and 1995, KCMC required
financing for certain receivables for strike costs incurred in 1993 which were
deferred in accordance with its long-term coal sales agreement, and for
increases in coal inventories in those years. Interest on Eighty-Four's debt is
being capitalized as mine development costs.
Registrant's effective income tax rates are discussed in Note F to the
Consolidated Financial Statements. Higher effective income tax rates are
expected for 1997, the final year of mine development at Mine No. 84.
After five years of steady declines in coal prices in Registrant's
marketing area, prices recovered slightly in 1996. The general downward trend,
however, has forced Registrant's subsidiaries, as well as its 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 KCMC's and
Helvetia's long-term coal sales agreements. Thus, as a result of lower 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 past several years by Registrant and its subsidiaries,
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. Registrant expects
market prices to remain highly competitive. The profitability of these
subsidiaries, including Eighty-Four, will be highly dependent on their ability
to maximize productivity and continue to implement sustained cost reduction
programs. In addition, market prices and competition in the Eastern and Midwest
coal markets could be affected by the pending breakup of Conrail, Eighty-Four's
primary rail carrier.
Leatherwood has received notification that its permit to develop a solid
waste landfill in Jefferson County, Pennsylvania, has been suspended by
Pennsylvania's Department of Environmental Protection. The action follows from
enactment of a new provision in the Reauthorization Act which purports to bar
construction of Leatherwood's landfill. The suspension, by its terms, will
remain in effect until Leatherwood is in compliance with the Act. Leatherwood is
examining possible legal initiatives including a challenge to the Federal law.
Because of the lengthy process of such legal actions, if pursued, development of
the Leatherwood project will be delayed indefinitely. Leatherwood has previously
expensed a substantial portion of the costs incurred in securing this permit.
Thus, if Leatherwood were to permanently terminate development of the landfill,
the effect on Registrant's financial statements would not be material.
In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
96-1, "Environmental Remediation Liabilities" (SOP 96-1) which becomes effective
in the first quarter of 1997. Registrant does not believe that the effect of
adoption will be material.
LIQUIDITY AND CAPITAL RESOURCES
As discussed in Notes B and D to the Consolidated Financial Statements, as
of December 31, 1996 Registrant had contributed equity in the amount of $105
million and had loaned $3.5 million through a consolidated affiliate company to
Eighty-Four for the acquisition, rehabilitation, and development of Mine No. 84
and related coal properties. In addition, long-term debt, totalling $85 million,
and equipment leases had been utilized to provide the remaining funding
requirements.
In March, 1997, Eighty-Four and Lucerne Land amended and restructured their
long-term credit agreements which provide for financing of the Mine No. 84
project. Investment securities of Registrant having a market value of $25
million, which had been pledged to secure the debt, were liquidated and the
proceeds, combined with $10 million in additional funds, were loaned by a
consolidated affiliate to Eighty-Four and used to repay the Senior Fixed Rate
Notes in the amount of $35 million to the institutional lender. In addition,
during the first quarter of 1997, $16.5 million was loaned to Eighty-Four by the
same affiliate to fund development. The amendment provided for a bank to
underwrite: 1) a new senior secured term loan totalling $25 million; 2) a
revolving credit note totalling $35 million; and, 3) a working capital line of
credit totalling $8 million. All of the above facilities are to be repaid by
June 30, 2000. These facilities also replace the $50 million revolving credit
note previously outstanding. As a result of this amendment, $25 million,
representing the net reduction in credit facilities exclusive of the working
capital line of credit, has been
14
<PAGE> 16
classified as a current liability. Also in March, 1997, Registrant obtained a
commitment to lease additional longwall equipment necessary to complete
development of the mine.
Eighty-Four, Lucerne Land, and Registrant, because of its guaranty, are
subject to numerous financial covenants and restrictions. At December 31, 1996,
Eighty-Four and Lucerne Land were in violation of several covenants and
subsequently obtained extensions of the cure period for such violations. The
amended debt agreements waived covenant violations in existence at year end.
They also contain revised covenants and restrictions including limitations on
the payment of interest and principal on the amounts loaned from affiliated
companies.
Working capital was $37 million, $42 million, and $50 million, at December
31, 1996, 1995, and 1994, respectively. Registrant's current ratio (ratio of
current assets to current liabilities) was 1.62 to 1 at December 31, 1996
compared to 2.25 to 1 and 2.5 to 1 at December 31, 1995 and 1994, respectively.
The decreases in working capital and the current ratio in 1996 and in 1995 were
primarily due to reductions in KCMC's coal inventory and receivables to more
normal operating levels and the effect in 1995 of KCMC's and Helvetia's
operating losses. The classification of a portion of Eighty-Four's debt which
was prepaid in 1997 as current along with the securities liquidated to provide
for the prepayment also contributed to the lower current ratio in 1996. The
increase in cash and investments in 1996 has resulted from amounts collected
from Helvetia's utility customers for obligations incurred under its previous
cost-plus contract.
Because of the utilization of additional internally generated funds for the
Eighty-Four project in 1997, Registrant is actively pursuing the sale of
nonstrategic coal reserves and surface properties in order to improve liquidity.
15
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................................ 17
Consolidated Balance Sheets, December 31, 1996, 1995 and 1994......................... 18
Statements of Consolidated Income for the years ended December 31, 1996, 1995 and
1994................................................................................ 20
Statements of Consolidated Shareholders' Equity for the years ended December 31, 1996,
1995 and 1994....................................................................... 21
Statements of Consolidated Cash Flows for the years ended December 31, 1996, 1995 and
1994................................................................................ 22
Notes to Consolidated Financial Statements, December 31, 1996......................... 23
</TABLE>
16
<PAGE> 18
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
------------------------------------------------------------------
To the Shareholders
ROCHESTER & PITTSBURGH COAL COMPANY
Indiana, Pennsylvania
We have audited the accompanying consolidated balance sheets of Rochester &
Pittsburgh Coal Company and subsidiaries and the related consolidated statements
of income, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1996. Our audits also included the financial
statement schedules listed in the Index at Item 14(a). These financial
statements and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules 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 consolidated 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, 1996, 1995,
and 1994, and the consolidated results of their operations and cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
As discussed in Note A, the Company changed its method of accounting for
investments in 1994.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
March 31, 1997
17
<PAGE> 19
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents -- Note J........................ $ 34,466 $ 27,437 $ 30,656
Short-term investments and marketable securities -- Notes
D, I, and J............................................. 25,000 2,645 --
Receivables................................................ 21,945 29,576 25,213
Coal inventories........................................... 5,835 6,128 15,096
Mine supply inventories.................................... 1,579 1,532 1,819
Income taxes receivable.................................... -- 1,819 4,013
Prepaid expenses and other current assets.................. 4,475 4,267 4,347
Deferred income taxes...................................... 2,093 2,166 1,632
-------- -------- --------
TOTAL CURRENT ASSETS............................... 95,393 75,570 82,776
OTHER ASSETS
Investments in marketable securities -- Notes D, I, and
J....................................................... 28,558 44,410 46,838
Funding for -- Notes H, I, and J:
Workers' compensation benefits.......................... 14,229 16,915 19,521
Mine closing reserves................................... 11,651 10,271 8,956
Deferred income taxes...................................... 8,839 7,712 7,211
Prepaid royalties.......................................... 6,242 6,323 6,322
Miscellaneous.............................................. 9,861 7,843 9,201
-------- -------- --------
79,380 93,474 98,049
PROPERTY, PLANT, AND EQUIPMENT -- Notes B and D
Coal and surface lands..................................... 87,640 87,638 87,503
Plant and equipment........................................ 291,125 294,815 239,642
Mine development........................................... 133,236 108,720 53,038
Construction in progress................................... 29,543 20,452 24,779
-------- -------- --------
541,544 511,625 404,962
Less allowances for depreciation, depletion, and
amortization............................................ 184,919 189,262 174,793
-------- -------- --------
356,625 322,363 230,169
-------- -------- --------
$531,398 $491,407 $410,994
======== ======== ========
</TABLE>
18
<PAGE> 20
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable........................................... $ 15,329 $ 14,809 $ 17,077
Accrued payrolls and related expenses...................... 8,116 9,823 7,283
Other accrued liabilities.................................. 5,282 5,939 4,201
Dividends payable.......................................... 516 516 2,063
Income taxes payable....................................... 1,367 -- --
Current portion of long-term debt.......................... 28,236 2,514 2,007
-------- -------- --------
TOTAL CURRENT LIABILITIES.......................... 58,846 33,601 32,631
OTHER LIABILITIES
Other postretirement benefits -- Note G.................... 72,346 46,458 20,586
Workers' compensation benefits -- Note H................... 40,384 40,292 39,965
Mine closing reserves -- Note H............................ 23,929 23,153 19,818
Black lung benefits -- Note H.............................. 9,231 11,348 6,222
Deferred income taxes...................................... 11,079 8,169 4,542
Miscellaneous.............................................. 3,897 4,488 4,087
-------- -------- --------
160,866 133,908 95,220
LONG-TERM DEBT (less current maturities) -- Notes B, D, and
J.......................................................... 100,501 120,784 75,693
LONG-TERM AGREEMENTS -- Note C
COMMITMENTS AND CONTINGENCIES -- 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.......................... 133,125 133,162 133,170
Retained earnings.......................................... 46,028 38,007 42,360
-------- -------- --------
238,990 231,006 235,367
Less treasury stock at cost -- 548,137; 549,846; and
550,346 shares.......................................... 27,805 27,892 27,917
-------- -------- --------
211,185 203,114 207,450
-------- -------- --------
$531,398 $491,407 $410,994
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 21
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
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
SALES -- NOTE C........................................... $202,265 $216,686 $191,991
OTHER INCOME
Gain on sale of property................................ 7,678 2,164 746
Interest and dividends.................................. 4,723 3,917 2,852
Net investment gains (losses)........................... 776 1,262 (361)
Miscellaneous........................................... 1,840 1,850 1,545
-------- -------- --------
217,282 225,879 196,773
COSTS AND EXPENSES
Cost of sales -- Note C................................. 180,302 205,283 171,038
Depreciation, depletion, and amortization............... 11,795 13,285 12,215
Selling, general, and administrative.................... 6,589 6,321 5,561
Interest -- Note D...................................... 2,032 3,238 2,480
Miscellaneous........................................... 1,334 1,624 1,175
-------- -------- --------
202,052 229,751 192,469
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES......................... 15,230 (3,872) 4,304
PROVISION (CREDIT) FOR INCOME TAXES -- NOTE F............. 3,969 (337) 1,838
-------- -------- --------
NET INCOME (LOSS)......................................... $ 11,261 $ (3,535) $ 2,466
======== ======== ========
NET INCOME (LOSS) PER SHARE............................... $ 3.27 $ (1.03) $ .72
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 22
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, 1994..................... $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 tax of
$878...................................... 1,701
Foreign currency translation gain............ 60
------- -------- ------- -------
Balance at December 31, 1995................... 59,837 133,162 38,007 27,892
Net income for the year...................... 11,261
Treasury stock issued........................ (37) (87)
Cash dividends -- $.60 per share............. (2,065)
Change for the year in net unrealized
securities losses, net of income tax
benefit of $598........................... (1,160)
Foreign currency translation loss............ (15)
------- -------- ------- -------
Balance at December 31, 1996................... $59,837 $133,125 $46,028 $27,805
======= ======== ======= =======
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 23
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)....................................... $ 11,261 $ (3,535) $ 2,466
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion, and amortization.......... 11,795 13,285 12,215
Deferred income taxes.............................. 2,454 1,713 5,476
Gain on investment activity........................ (956) (1,523) (775)
Loss on investment activity........................ 180 261 1,136
Gain on sale of property, plant, and equipment..... (7,678) (2,164) (746)
Change in certain assets and liabilities (using) or
providing cash:
Receivables................................... 7,631 (4,363) 2,201
Inventories................................... 246 9,255 (11,733)
Income taxes payable.......................... 3,186 2,194 --
Workers' compensation benefits and
funding.................................... 661 4,471 (662)
Mine closing reserves and funding............. (604) 2,267 2,214
Other postretirement benefits................. 25,888 13,648 86
Accounts payable.............................. 520 (2,268) 5,395
Accrued liabilities........................... (2,364) 4,278 (243)
Other......................................... (1,901) 890 (1,186)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.......... 50,319 38,409 15,844
--------- --------- ---------
INVESTING ACTIVITIES
Proceeds from available-for-sale securities............. 42,082 45,886 43,860
Acquisition of available-for-sale securities............ (48,740) (43,077) (32,868)
Acquisition and development of property, plant, and
equipment............................................ (41,164) (72,223) (60,815)
Other................................................... 7,721 3,261 2,713
--------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES.............. (40,101) (66,153) (47,110)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings................................ 109,925 151,790 174,025
Payments on borrowings.................................. (111,099) (123,156) (128,512)
Cash dividends paid..................................... (2,065) (4,126) (5,158)
Issuance of treasury stock.............................. 50 17 19
Debt issue costs........................................ -- -- (2,189)
--------- --------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES...................................... (3,189) 24,525 38,185
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... 7,029 (3,219) 6,919
Cash and cash equivalents at beginning of year.......... 27,437 30,656 23,737
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR........... $ 34,466 $ 27,437 $ 30,656
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 24
ROCHESTER & PITTSBURGH COAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE A -- OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
Operations -- Rochester & Pittsburgh Coal Company (the "Company") and its
subsidiaries are principally engaged in the deep mining of bituminous steam coal
for sale to electric generating plants in the eastern and midwestern United
States. A significant portion of these sales is made pursuant to long-term coal
supply contracts.
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 was
amended in August 1996 and terminates on August 1, 1998.
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, in November 1995,
the Company 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.
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.
23
<PAGE> 25
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, 1996, accumulated foreign currency translation losses
charged to retained earnings amounted to $1,026,000.
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 the first quarter of 1996, the
Company adopted 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), 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 adoption of this statement had no effect on the
accompanying financial statements.
In October, 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
96-1 "Environmental Remediation Liabilities" (SOP 96-1) which becomes effective
in the first quarter of 1997. The Company does not believe that the effect of
adoption will be material.
Reclassifications -- Certain accounts in the consolidated financial
statements for prior years have been reclassified to conform to the statement
presentation for the current year. The reclassifications had no effect on net
income.
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 7 million tons. 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. Since Eighty-Four will be in the development stage into
1997, when the second longwall system is scheduled to be operational, 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.
The costs of rehabilitating and developing these facilities in 1996 and
cumulatively, amounted to $24,516,000 and $133,236,000, respectively, exclusive
of expenditures for plant and equipment of $26,844,000 and $105,042,000,
respectively. Eighty-Four has obtained the necessary permits to develop and
operate the mine as planned. However, these permits have been appealed by a
local citizens group. The Company believes, however, that the issuance of these
permits will be upheld.
Since the inception of longwall operations in the third quarter of 1995,
Eighty-Four has experienced problems in achieving continuous miner advance rates
required for economical longwall mining. Management,
24
<PAGE> 26
with the aid of an independent consultant, implemented a productivity
improvement plan in the fourth quarter of 1996 to increase these advance rates.
Based upon this plan, forecasts have been revised and management believes that
the significant shortfalls in continuous miner advance rates experienced in 1996
will improve, that economical long-term advance rates are achievable, and that
capitalized development costs and other project assets will be recovered.
The Company had made an equity investment of $105,000,000 in this project
and had loaned $3,500,000 to the project under a line of credit with a
consolidated affiliated company as of December 31, 1996. Long-term debt
totalling $85,000,000 and equipment leases have been utilized to provide the
remaining funding as of December 31, 1996. The forecasts indicate that
additional funding of approximately $34,500,000 will be required to complete the
project and provide working capital after 1996. As described in Note D, in March
1997, the financing agreements for Mine No. 84 were amended and provisions were
made for affiliated company loans and a working capital line of credit to meet
future funding requirements of the project.
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 1995
Coal Sales Agreement for deliveries commencing January 1, 1995 and the Homer
City Coal Sales Agreement for deliveries through 1994 (Helvetia, Homer City
Station, 1995 Homer City Agreement, and Prior 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 worth. 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 $116,990,000, $141,692,000, and
$109,971,000, for 1996, 1995, and 1994, respectively. At December 31, 1996,
Keystone's net book value was $15,555,000.
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 was replaced with raw coal
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 were recovered under terms of the Keystone
Agreement.
Helvetia -- The 1995 Homer City Agreement provides 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.
Sales to the Homer City Station were $68,859,000 in 1996, $56,701,000 in 1995,
and $63,803,000 in 1994.
25
<PAGE> 27
NOTE D -- LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Keystone:
Revolving credit note................... $ 20,000 $ 25,000 $30,000
Line of credit note..................... 2,800 10,000 10,725
Term note............................... -- 640 1,280
Eighty-Four and Lucerne Land:
Revolving credit notes.................. 50,000 36,000 --
Senior fixed rate construction notes.... 35,000 35,000 35,000
Capitalized lease obligations........... 20,937 16,658 360
Helvetia:
Capitalized lease obligations........... -- -- 335
-------- -------- -------
128,737 123,298 77,700
Less current portion...................... 28,236 2,514 2,007
-------- -------- -------
$100,501 $120,784 $75,693
======== ======== =======
</TABLE>
Interest paid (net of capitalized interest) in 1996, 1995, and 1994 was
$2,120,000, $3,712,000, and $1,879,000, respectively. Aggregate maturities on
long-term debt outstanding at December 31, 1996 for the next five years,
reflecting the 1997 amendments to the Eighty-Four and Lucerne Land credit
agreement discussed below, are as follows: 1997 -- $28,236,000;
1998 -- $10,922,000; 1999 -- $22,562,000; 2000 -- $35,646,000; and
2001 -- $2,243,000.
The amount of subsidiaries' net assets which are restricted from being
transferred to the Company under these debt agreements totals $108,611,000.
Keystone -- Keystone has a revolving credit agreement with two commercial
banks permitting maximum borrowings of $25,000,000 as of December 31, 1996. 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 1997 and 1998 and $7,500,000 each in 1999 and 2000. As of
December 31, 1996 Keystone had a total of $10,000,000 available under a line of
credit which expires March 31, 1998. The weighted-average interest rates on
borrowings on the line of credit were 8.4% in 1996, 9.2% in 1995, and 8.2% in
1994.
These credit facilities provide for a commitment fee of 1/4 of 1% per annum
and interest at the prime rate (8.25% at December 31, 1996). Keystone, at its
option, can select fixed interest rates for periods up to six months based on
the CD rate plus 1.5% or LIBOR rates plus 1.5%. At December 31, 1996, all of
Keystone's borrowings on the revolver were at the CD rate, which was 6.94%.
Borrowings are secured by the assignment of the Keystone Agreement and by
Keystone's assets, including the noncurrent funding for workers' compensation
and mine closing obligations which has been pledged to secure these borrowings.
Eighty-Four and Lucerne Land -- At December 31, 1996 Eighty-Four and
Lucerne Land (borrowers) had 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 borrowers, and the Company, as guarantor, are subject to various
financial covenants and restrictions regarding acquisitions, earnings, cash
flows, financial position, and dividends. At December 31, 1996, the borrowers
were in violation of several covenants and subsequently requested and received
extensions of the cure period for such violations.
In March, 1997, the borrowers amended and restructured the long-term credit
agreements which provide for financing of the Mine No. 84 project. Investment
securities of the Company having a market value of
26
<PAGE> 28
$25,000,000, which had been pledged to secure the debt, were liquidated and the
proceeds, combined with additional cash amounts, were loaned by a consolidated
affiliate to Eighty-Four and used to repay the senior fixed rate notes to the
institutional lender. The amendment provided for a bank to underwrite: 1) a new
senior secured term loan totalling $25,000,000; 2) a revolving credit note
totalling $35,000,000; and, 3) a working capital line of credit totalling
$8,000,000. All of the above facilities are to be repaid by June 30, 2000. These
facilities also replace the $50,000,000 revolving credit note previously
outstanding. As a result of this amendment, $25,000,000, representing the net
reduction in credit facilities exclusive of the working capital line of credit,
has been classified as a current liability.
These credit facilities are secured by principally all of the assets of the
borrowers. The amendment waived covenant violations in existence at year end and
revised covenants and restrictions including limitations on the payment of
interest and principal on the amounts loaned from affiliate companies.
The new senior secured term note includes interest at prime rate plus 2%
or, at the option of the borrowers, at LIBOR plus 3.5%. The revolving credit
note is subject to mandatory reductions in the amount available of $7,000,000 in
1998, $20,000,000 in 1999 and $8,000,000 in 2000 and provides for interest based
on the prime rate plus an amount up to 1.5%, or, at the borrowers' option, on
the LIBOR rate plus an amount from 2.5% to 3.0% for fixed periods. Borrowings
from the working capital line of credit will bear interest at prime rate plus an
amount up to 1%, or at the borrowers' option, the LIBOR rate plus an amount from
2% to 2.5% for fixed periods. Commitment fees of .5% per annum are payable on
the unused portion of the commitment.
In 1995 and 1996, Eighty-Four entered into capitalized lease agreements for
longwall mining equipment with payments commencing in August, 1995, and
continuing through July, 2004 with effective interest rates ranging 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 $25,566,000 including imputed
interest of $4,629,000. These payments for the next five years are as follows:
1997 -- $4,676,000; 1998 -- $4,412,000; 1999 -- $3,494,000; 2000 -- $3,371,000;
and 2001 -- $2,795,000. The gross amount of capitalized lease assets and related
accumulated depreciation included in the balance sheet was $23,578,000 and
$3,708,000, respectively, at December 31, 1996 and $16,963,000 and $827,000,
respectively, at December 31, 1995. In March 1997, the Company obtained a
commitment to lease additional longwall equipment necessary to complete
development of the mine.
Interest expense on the capitalized leases and the notes, including
amortization of debt issuance costs using the interest method, amounted to
$9,666,000 in 1996, $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
$6,169,000 in 1996 including $2,132,000 which was capitalized as mine
development, $8,177,000 in 1995 including $1,217,000 which was capitalized as
mine development, and $7,597,000 in 1994 including $118,000 which was
capitalized as mine development. Aggregate remaining rental payments on these
leases are $16,610,000 with the following minimum rentals over the next five
years: 1997 -- $5,145,000; 1998 -- $5,170,000; 1999 -- $4,073,000;
2000 -- $1,668,000; and 2001 -- $524,000.
27
<PAGE> 29
NOTE F -- INCOME TAXES
The provision (credit) for income taxes consists of the following for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision (credit) for income taxes:
Current:
Federal.......................................... $ (130) $(3,146) $(4,281)
State............................................ 1,298 524 (9)
Canadian......................................... 347 572 652
-------- -------- --------
1,515 (2,050) (3,638)
-------- -------- --------
Deferred:
Federal.......................................... (112) (2,407) 2,304
State............................................ 2,579 4,122 3,187
Canadian......................................... (13) (2) (15)
-------- -------- --------
2,454 1,713 5,476
-------- -------- --------
$ 3,969 $ (337) $ 1,838
======== ======== ========
</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>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Other postretirement benefits....................... $34,182 $26,961 $ 8,931
Net operating loss (begins to expire in 2009)....... 20,135 16,154 3,875
Self-insurance...................................... 17,784 17,721 17,735
Alternative minimum tax............................. 5,902 5,696 8,785
Black lung.......................................... 3,119 2,604 639
Vacation pay........................................ 1,881 1,679 1,632
Other deferred tax assets........................... 2,762 2,693 1,923
-------- -------- --------
85,765 73,508 43,520
Valuation allowance................................. (7,375) (6,585) (4,108)
-------- -------- --------
Total deferred tax assets........................ 78,390 66,923 39,412
Deferred tax liabilities:
Depreciation and related charges.................... 73,567 59,840 31,295
Pension............................................. 2,817 1,570 1,032
Intangible drilling costs........................... 695 817 881
Unrealized securities gains......................... 73 671 --
Other deferred tax liabilities...................... 1,385 2,316 1,903
-------- -------- --------
Total deferred tax liabilities................... 78,537 65,214 35,111
-------- -------- --------
Net deferred tax (liabilities) assets............ $ (147) $ 1,709 $ 4,301
======== ======== ========
</TABLE>
Income (loss) before income taxes includes income (losses) attributable to
United States operations of $14,468,000 in 1996, $(5,140,000) in 1995, and
$2,852,000 in 1994 and income attributable to Canadian operations of $761,000 in
1996, $1,268,000 in 1995, and $1,452,000 in 1994.
28
<PAGE> 30
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>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Tax at U.S. statutory rates................................. 35.0% (35.0)% 35.0%
Increase (decrease) resulting from:
State taxes, net of federal benefits...................... 16.6 76.8 45.9
Depletion................................................. (18.1) (79.0) (39.5)
Prior year accruals....................................... (9.2) (19.4) (24.3)
Canadian dividend withholding............................. -- 2.9 15.6
Rates..................................................... (3.9) (19.5) 18.4
Valuation allowance....................................... 5.2 63.9 (9.1)
Other items............................................... .5 .6 .7
------ ------ ------
-- -- --
26.1% (8.7)% 42.7%
======== ======== ========
</TABLE>
The Company's effective income tax rates are impacted by credits for
certain prior year accruals and the inability to carry back or carry forward tax
deductions in excess of current year income for state income tax purposes. In
addition, these excess deductions which are created principally by Eighty-Four's
mine development expenditures cannot be offset against state taxable income of
affiliates. 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 state deferred tax liabilities are being
provided with respect to these expenditures even though no benefit is being
realized for state income tax purposes.
Income tax refunds received in 1996, 1995, and 1994 were $1,672,000,
$4,356,000, and $2,623,000, respectively.
NOTE G -- PENSION AND BENEFIT PLANS
Pensions -- Non-UMWA Employees -- The Company has a trusteed pension plan
which provides for monthly pensions and other benefits for substantially all
employees of the Company and its subsidiaries not covered by the retirement
plans of the United Mine Workers of America (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 Employment
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 1996, 1995, and 1994 nor are any expected to be made in
1997. The plan's assets at December 31, 1996 are comprised primarily of
government and corporate debt securities and equities.
Amounts credited to expense relating to the pension plan include the
following components for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net periodic pension (credit) expense:
Service cost -- benefits earned during the
period........................................ $ 1,368 $ 1,525 $ 1,792
Interest cost on projected benefit obligation.... 3,085 3,056 3,074
Actual (return) loss on plan assets.............. (9,470) (15,902) 245
Net amortization and deferral.................... 3,339 10,182 (5,637)
-------- -------- --------
(1,678) (1,139) (526)
Amounts capitalized as mine development.......... 334 160 170
-------- -------- --------
Net periodic pension credit...................... $ (2,012) $ (1,299) $ (696)
======== ======== ========
</TABLE>
29
<PAGE> 31
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 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>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits.................................. $ 38,090 $ 37,779 $ 34,679
Nonvested benefits............................... 1,276 1,303 1,260
-------- -------- --------
Accumulated benefits............................. 39,366 39,082 35,939
Effect of projected future salary increases...... 8,338 8,069 9,047
-------- -------- --------
Total projected benefit obligation................. 47,704 47,151 44,986
Plan assets at fair value.......................... 85,460 78,795 65,401
-------- -------- --------
Plan assets in excess of projected benefit
obligation....................................... 37,756 31,644 20,415
Unrecognized net gain.............................. (26,267) (21,112) (11,727)
Unrecognized prior service cost.................... 1,125 1,187 1,645
Unrecognized transition asset...................... (8,153) (8,936) (9,720)
-------- -------- --------
Prepaid pension asset.............................. $ 4,461 $ 2,783 $ 613
======== ======== ========
</TABLE>
The weighted-average discount rates used in determining the actuarial
present value of the projected benefit obligation were 7.125% at December 31,
1996, 6.75% at December 31, 1995, and 7% at December 31, 1994 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
each year.
In addition, the Company and its subsidiaries have a 401(k) Plan for
management employees. Company contributions and administrative costs
approximated $262,000 for 1996, and $288,000 for 1995 and 1994.
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 $4,312,000 in 1996 including $1,574,000 which was
capitalized as mine development, $5,459,000 in 1995 including $1,516,000 which
was capitalized as mine development, and $5,695,000 in 1994 including $930,000
which was capitalized as mine development. The present value of the expected
future assessments from the Combined Fund and 1992 Fund is estimated to be in
the range of $35,000,000. The Company's obligations for these funds could
increase if other companies become unable to fund their obligations. 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 periods
up to twelve months. These layoff benefit costs are charged to expense in the
month in which the layoff occurs.
30
<PAGE> 32
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.
Postretirement benefit expense under FASB 106 includes the following
components for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Net annual expense:
Service cost -- benefits earned during the period... $ 3,636 $ 2,914 $ 2,877
Interest cost on accumulated postretirement benefit
obligation....................................... 12,926 11,315 10,804
Actual (return) loss on plans' assets............... (4,573) (9,659) 907
Amortization of transition obligation............... 19,012 11,723 4,086
Net amortization and deferral....................... 82 3,614 (4,776)
------- ------- -------
31,083 19,907 13,898
Amounts capitalized as mine development............. (2,912) (2,247) (1,278)
------- ------- -------
Net annual expense............................... $28,171 $17,660 $12,620
======= ======= =======
</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 a period of not more than three years
beginning in 1995. The amounts recognized in 1996 and 1995 and included as a
component of net amortization were $16,720,000 and $8,843,000, respectively.
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 equity
securities and 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 1996, 7.2% in 1995, and 7.1% in 1994.
31
<PAGE> 33
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>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation
(APBO):
Retirees......................................... $ 65,651 $ 63,261 $ 58,577
Fully eligible active plan participants.......... 65,561 62,611 38,135
Other active plan participants................... 46,811 58,658 60,447
-------- -------- --------
178,023 184,530 157,159
Plans' assets at fair value........................ 90,212 85,430 72,291
-------- -------- --------
Accumulated postretirement benefit obligation in
excess of plans' assets.......................... (87,811) (99,100) (84,868)
Unrecognized net loss.............................. 1,816 20,264 20,464
Unrecognized prior service cost.................... (1,891) (2,174) (2,457)
Unrecognized transition obligation................. 15,540 34,552 46,275
-------- -------- --------
Accrued postretirement benefit cost................ $(72,346) $(46,458) $(20,586)
======== ======== ========
</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 9.0% for 1997 and is
assumed to decrease gradually to 5.2% for 2006 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,
1996 by $37,900,000 and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for 1996 by $3,900,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.38% at December 31, 1996, 7.12% at
December 31, 1995, and 7.75% at December 31, 1994. In 1996, the APBO decreased
due to the increase in the discount rate. In 1995, the APBO increased as the 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 the base
year medical costs.
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. In 1996, the
actuarial valuation of future payouts of prior years' workers' compensation
claims resulted in a reduction of the recorded liabilities for those years in
the amount of $2,000,000. Since a portion of these costs were recoverable under
the Prior Homer City Agreement, the effect on pretax income in the fourth
quarter was $1,100,000. 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 have established black lung
32
<PAGE> 34
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. At December 31,
1996 the market value of trust assets, which are comprised of U.S. Government
notes and bonds, totaled $51,500,000, compared to an actuarial liability of
$37,100,000, of which $9,231,000 relating to employees of Eighty-Four is
recorded as a liability on the Consolidating Balance Sheet. Eighty-Four's
actuarial liability at December 31, 1996 reflects a reduction of $3,230,000 due
to changes in actuarial assumptions which was credited to mine development costs
in 1996. 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, 1996
U.S. Government and agencies............. $57,039 $ 488 $299 $ 57,228
Corporate................................ 12,015 58 54 12,019
Other debt securities.................... 250 3 -- 253
------- ------ ----- -------
Total debt securities.................. 69,304 549 353 69,500
Equities................................. 9 18 -- 27
------- ------ ----- -------
69,313 567 353 69,527
Cash equivalents included in noncurrent
funding................................ 9,911 -- -- 9,911
------- ------ ----- -------
$79,224 $ 567 $353 $ 79,438
======= ====== ===== =======
Schedule of maturities
One year or less....................... $ 8,666 $ 8,686
One year through three years........... 34,546 34,789
After three years...................... 26,092 26,025
------- -------
69,304 69,500
Equities................................. 9 27
------- -------
$69,313 $ 69,527
======= =======
</TABLE>
33
<PAGE> 35
At December 31, 1996, securities with a value of $25,000,000 have been
classified as current since such amounts will be utilized to repay short-term
obligations.
<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
======= ====== ===== =======
</TABLE>
<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, 1996: short-term investments;
investments in marketable securities; and noncurrent funding for workers'
compensation benefits and mine closing reserves. 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.
Short-term Investments and Marketable Securities -- Fair values are based
on quoted market prices.
34
<PAGE> 36
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............................... $ 34,466 $ 34,466
Short-term investments and marketable securities --
available-for-sale................................... 53,558 53,558
Funding for workers'
compensation -- available-for-sale................... 14,229 14,229
Funding for mine closing
reserves -- available-for-sale....................... 11,651 11,651
Long-term debt (excluding capitalized leases)........... 107,800 109,044
</TABLE>
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.
35
<PAGE> 37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors of Registrant are as follows:
CLASS A DIRECTORS
<TABLE>
<CAPTION>
YEAR
TERM
DIRECTOR WILL
NAME AGE PRINCIPAL OCCUPATION SINCE EXPIRE
- ---------------------------------------- --- --------------------------------- -------- ------
<S> <C> <C> <C> <C>
L. Blaine Grube(3)(4)................... 80 Retired Vice President and
Treasurer of Registrant 1986 1997
Peter Iselin(1)(2)...................... 76 Vice President-Finance and
Secretary of Registrant since
1965 1954 1997
William G. Kegel(1)(3).................. 75 Chairman of the Board of
Registrant; Retired President and
Chief Executive Officer of
Registrant 1973 1997
Gordon B. Whelpley, Jr.(2)(4)........... 43 President since 1996 - Goodnow &
Whelpley, Inc., Residential
Building Company; Project Manager
1986-1996 - Louis E. Lee Co.
Builders, Commercial and
Residential Contractors 1987 1997
</TABLE>
CLASS B DIRECTORS
<TABLE>
<CAPTION>
YEAR
TERM
DIRECTOR WILL
NAME AGE PRINCIPAL OCCUPATION SINCE EXPIRE
- ---------------------------------------- --- --------------------------------- -------- ------
<S> <C> <C> <C> <C>
Columbus O'D. Iselin, Jr.(1)(4)......... 65 Independent Consultant-Aerospace
and Defense 1967 1998
David H. Davis(1)(4).................... 85 Coal Consultant 1976 1998
John L. Schroder, Jr.(1)................ 78 Retired Dean, College of Mineral
and Energy Resources, West
Virginia University 1983 1998
Thomas W. Garges, Jr.(3)................ 57 President and Chief Executive
Officer of Registrant since
October 1988 1988 1998
</TABLE>
CLASS C DIRECTORS
<TABLE>
<CAPTION>
YEAR
TERM
DIRECTOR WILL
NAME AGE PRINCIPAL OCCUPATION SINCE EXPIRE
- ---------------------------------------- --- --------------------------------- -------- ------
<S> <C> <C> <C> <C>
Thomas M. Hyndman, Jr.(1)(3)(4)......... 72 Of Counsel since 1993, Partner
(1957-1992), Duane, Morris &
Heckscher, Attorneys at Law(5) 1972 1999
O'Donnell Iselin II(1)(2)(4)............ 43 Manager, Finance Staff, Hughes
Electronics Corporation since
1989 1983 1999
</TABLE>
- ---------------
(1) Member, Compensation Committee. The Compensation Committee, composed of
seven Directors, administers Registrant's Key Executives Incentive
Compensation Plan (the "Incentive Plan"), recommends certain executives for
participation in such plan and bonuses to be paid pursuant thereto, and
considers and recommends compensation arrangements for executive personnel.
See "Compensation
36
<PAGE> 38
Committee Interlocks and Insider Participation". During 1996, the
Compensation Committee met three times.
(2) Mr. Peter Iselin is the father of Mr. O'Donnell Iselin II and the uncle of
Mr. Gordon B. Whelpley, Jr. Mr. O'Donnell Iselin II and Mr. Gordon B.
Whelpley, Jr. are cousins.
(3) Mr. Garges is a Director and Messrs. Grube and Kegel are Directors Emeriti
of S&T Bancorp, Inc., Indiana, Pa. Mr. Hyndman is a Director of Penn
Engineering & Manufacturing Corp., Danboro, Pa.
(4) Member, Audit Committee. The Audit Committee, composed of six Directors,
recommends the selection of independent auditors, reviews the regular annual
audits, and performs such other functions related to accounting and auditing
as determined by the Audit Committee or the Board of Directors. During 1996,
the Audit Committee met twice.
(5) The law firm to which Mr. Hyndman is Of Counsel rendered legal services to
Registrant during 1996.
There is no nominating committee of the Board of Directors. During 1996,
the Board of Directors held ten meetings. During 1996, each Director attended
not less than 75% of the aggregate number of meetings of the Board of Directors
and meetings of all Committees on which he served, except Messrs. Davis and
Schroder because of health reasons. Mr. Davis attended 60% and Mr. Schroder
attended 66% of the aggregate number of Board and Committee meetings.
DIRECTOR COMPENSATION
Registrant's non-employee Directors receive a fee of $1,200 per month. In
addition, all of Registrant's Directors receive a fee of $500 for each meeting
of the Board of Directors and each committee meeting attended.
Pursuant to the terms of an Employment and Deferred Compensation Agreement,
as amended, with Mr. Kegel, effective December 31, 1988, Mr. Kegel retired as an
employee of Registrant. He continues to serve as a Director, Chairman of the
Board, and as an independent consultant to Registrant. In 1996, he received
remuneration of $25,000 for services to Registrant in addition to fees received
as a Director of Registrant. In addition, in 1996, under terms of the Agreement,
as amended, Mr. Kegel was paid, as deferred compensation, an aggregate of
$59,801. The Agreement, as amended, provides for aggregate payments of $538,211
in 108 equal consecutive monthly installments which commenced in January 1990,
and will continue through December 1998.
SECTION 16 COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires Registrant's officers, directors, and persons who own more than 10% of
a class of Registrant's equity securities registered under the Exchange Act, to
file reports of their ownership of such securities as well as monthly statements
of any changes in such ownership with the SEC and Registrant. Based solely on
its review of the copies of the Section 16(a) reports received by it, and
written representations from Registrant's officers, directors, and greater than
10% shareholders, Registrant believes that during 1996 all filing requirements
applicable to its officers, directors, and greater than 10% shareholders were
met.
37
<PAGE> 39
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the past three years of
each of Registrant's five most highly compensated executive officers, including
the Chief Executive Officer, (collectively the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------- OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) COMPENSATION($)
- ----------------------------------- ---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Thomas W. Garges, Jr............... 1996 329,500 35,000(2) 40,710(5) 7,608(6)
President and Chief Executive 1995 319,900 50,000(3) 7,805(6)
Officer(1) 1994 314,521 54,500(4) 7,805(6)
A. W. Petzold...................... 1996 180,250 18,025(2) 750(7)
Vice President-Operations 1995 175,000 5,000(3) 750(7)
1994 172,137 5,000(4) 750(7)
George M. Evans.................... 1996 167,500 16,750(2) 2,750(8)
Vice President and Treasurer 1995 159,500 15,000(3) 2,750(8)
1994 156,773 15,000(4) 2,750(8)
W. Joseph Engler, Jr............... 1996 153,500 15,350(2) 2,750(8)
Vice President and 1995 146,200 15,000(3) 2,750(8)
General Counsel 1994 143,708 12,000(4) 2,750(8)
Thomas M. Majcher.................. 1996 149,200 14,920(2) 750(7)
Vice President- 1995 144,800 15,000(3) 750(7)
Corporate Development 1994 142,358 10,000(4) 750(7)
</TABLE>
- ---------------
(1) Mr. Garges is employed pursuant to the terms of an Employment Agreement. See
"Employment and Change in Control Agreements".
(2) The 1996 figure represents cash bonuses.
(3) The figure includes a bonus of 1,709 shares of Registrant's Common Stock
having a value of $50,000 on the date of issue to Mr. Garges. In February
1996, Mr. Garges received a cash payment of $40,710 to cover income taxes in
respect of such issuance. Such amount is reported herein under the caption
"Other Annual Compensation". The figure represents cash bonuses of $5,000
paid to Mr. Petzold and $15,000 paid to each of Messrs. Evans, Engler, and
Majcher.
(4) The figure includes a cash bonus of $37,500 and 500 shares of Registrant's
Common Stock having a value of $17,000 on the date of issue to Mr. Garges.
Mr. Garges paid the taxes on the value of the stock issuance. The figure
represents cash bonuses of $15,000 paid to Mr. Evans, $5,000 paid to Mr.
Petzold, $12,000 paid to Mr. Engler, and $10,000 paid to Mr. Majcher.
(5) The figure represents an amount sufficient to pay income taxes due on bonus
payments.
(6) The 1996 figures include Registrant's $750 contribution to the Rochester &
Pittsburgh Coal Company 401(k) Savings and Retirement Plan (the "401(k)
Plan"), $564 in insurance premiums paid by Registrant for additional
insurance on Mr. Garges's life and $6,294 in Directors' fees paid by
Registrant and certain of its subsidiaries to Mr. Garges. The 1995 and 1994
figures include Registrant's $750 contribution to the 401(k) Plan, $564 in
insurance premiums paid by Registrant for additional insurance on Mr.
Garges's life and $6,491 in Directors' fees paid by Registrant and certain
of its subsidiaries to Mr. Garges. See "Employment and Change in Control
Agreements."
(7) The figure represents Registrant's contribution to the 401(k) Plan.
(8) The figures include Registrant's $750 contribution to the 401(k) Plan and
$2,000 in Directors' fees paid by two of Registrant's subsidiaries to
Messrs. Engler and Evans.
38
<PAGE> 40
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
In 1993, Registrant entered into an Employment Agreement with Mr. Garges,
effective as of May 1, 1992, (the "1992 Agreement"). Under the 1992 Agreement,
Mr. Garges's term of employment is for a period of three years and, until notice
of termination is given by either party, Mr. Garges's employment is extended
each day for one additional day so that at all times his term of employment is
for a period of three years. Under the 1992 Agreement, Mr. Garges is paid an
annual base salary of not less than $300,000, plus such additional compensation
as may be determined from time to time by the Board of Directors, in its sole
discretion.
Under the 1992 Agreement, in the event that Mr. Garges's employment
continues for such period of time as will entitle him to receive a pension under
Registrant's Pension Plan, Registrant will pay to Mr. Garges or his spouse, upon
the commencement of the payment of the pension benefits under the Pension Plan,
a monthly supplement consisting of the sum of (i) an amount equal to the monthly
pension benefit Mr. Garges or his spouse would have received pursuant to the
Pension Plan, without regard to certain limitations imposed by the Internal
Revenue Code of 1986 (the "Code"), and (ii) the difference between the monthly
pension benefits actually paid to Mr. Garges or his spouse under the Pension
Plan and the monthly pension benefit which would have been payable to Mr. Garges
or his spouse under the Pension Plan without application of said limitations.
The supplemental pension payments will terminate at the earlier of (i) the
expiration of ten years from the date of the first monthly supplemental pension
payment or (ii) the termination of pension payments under the Pension Plan to
Mr. Garges, his spouse or the survivor of them, if applicable. Should Mr. Garges
die prior to July 22, 2001, and his spouse become eligible to receive pension
benefits under the Pension Plan, no monthly supplement shall be paid to her. In
addition to life insurance under Registrant's existing benefit program, under
the 1992 Agreement, Registrant has agreed to pay the premium cost of life
insurance on Mr. Garges's life (payable to such beneficiaries as he may
designate) in such amount as is necessary to bring the total face amount of
insurance on Mr. Garges's life paid for by Registrant to $1,200,000. Upon Mr.
Garges reaching age 62, the face amount of life insurance shall be reduced to
$500,000.
In February 1997, Registrant and Mr. Garges entered into an amendment (the
"Amendment") to the 1992 Agreement. The Amendment provides that (i) the
three-year term of the 1992 Agreement may be terminated by either Registrant or
Mr. Garges upon 90 days written notice following a change in control of
Registrant and that, in the event of a change in control of Registrant, (ii)
Registrant would pay Mr. Garges an amount equal to three times his then annual
salary upon the change in control without regard to whether Mr. Garges continues
in the employ of Registrant, (iii) Mr. Garges would be entitled to a
continuation of his medical benefits (as defined in the Amendment) for a period
of 36 months following the change in control and (iv) for the purposes of
computing the monthly pension supplement to which Mr. Garges is entitled Mr.
Garges would be given credit for his actual years of service with Registrant
plus three years.
In 1997, Registrant entered into change in control agreements (the
"Agreements") with the Named Executive Officers (other than Mr. Garges) and
certain other key employees (the "Executives"). The term of each of the
Agreements is until the earlier of (a) the termination of the Executive's
employment with Registrant for any reason prior to a change in control of
Registrant or (b) December 31, 1999, and the term is automatically extended for
successive one-year periods beginning on December 31, 1999. A change in control
occurs during the term of the Agreement if (i) any "person" or "group" (as such
items are used in Rule 13d-3 under the Securities Exchange Act of 1934) other
than the Executive or a group of which the Executive is a member acquires shares
of Registrant in a transaction or series of transactions that result in such
person or group directly or indirectly first owning beneficially more than 50%
of the outstanding shares of Registrant's Common Stock after the date of the
Agreement or (ii) as the result of or in connection with any cash tender offer
or exchange offer, merger or other business combination, sale of assets or
contested election of directors, or any combination of the foregoing
transactions (a "Transaction"), the persons who were the directors of Registrant
before the Transaction shall cease to constitute a majority of the Board of
Directors of Registrant or any successor to Registrant after the Transaction. In
the event of a change in control, and subject to the possibility of reduction
under certain enumerated circumstances, the Executive will receive varying
amounts depending upon the salary and length of service of such Executive,
payable over two or three year periods (depending on the amount received) and
medical benefits (as defined in the Agreements) for 24-month or
39
<PAGE> 41
36-month periods (consistent with the length of time payment is made under the
Agreement), each without regard to whether the Executive continues in the employ
of Registrant or any successor to Registrant following a change in control of
Registrant.
PENSION PLAN
Under Registrant's Pension Plan covering officers and other management
employees, annual benefits are payable monthly upon retirement. Such benefits
are, in general, based upon an employee's (i) average monthly earnings during
the five highest four calendar quarter periods out of the last ten four calendar
quarter periods of management service prior to retirement and (ii) length of
management service, with a maximum of 35 years. Pension benefits are subject to
a deduction for 50% of Social Security benefits. The full cost of such pension
program is paid by Registrant. There is no requirement that employees retire at
a designated age. With some exceptions, benefits are payable on a reduced basis
upon retirement between the ages of 55 and 62.
The amounts shown in the following table, before a deduction for 50% of
Social Security benefits, are those payable in the event of retirement at age 65
in 1996:
<TABLE>
<CAPTION>
AVERAGE ANNUAL EARNINGS
DURING THE HIGHEST FIVE ANNUAL BENEFITS UPON RETIREMENT
OF THE FINAL TEN WITH YEARS OF SERVICE INDICATED
FOUR CALENDAR QUARTER PERIODS --------------------------------------------------------
OF MANAGEMENT SERVICE 10 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- ----------------------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$150,000......................... $ 26,250 $ 52,500 $ 65,625 $ 78,750 $ 91,875
200,000......................... 35,000 70,000 87,500 105,000 122,500
250,000......................... 43,750 87,500 109,375 131,250 153,125
300,000......................... 52,500 105,000 131,250 157,500 183,750
350,000......................... 61,250 122,500 153,125 183,750 214,375
400,000......................... 70,000 140,000 175,000 210,000 245,000
450,000......................... 78,750 157,500 196,875 236,250 275,625
500,000......................... 87,500 175,000 218,750 262,500 306,250
</TABLE>
The compensation utilized for determination of benefits under the Pension
Plan as summarized in the table above is salary and bonus. Of the individual
officers named in the Summary Compensation Table, assuming retirement at age 65,
Mr. Garges, Mr. Petzold, Mr. Evans, Mr. Engler, and Mr. Majcher, will have 17,
16, 36, 35 and 28 years of service, respectively.
The information in the foregoing table does not reflect certain limitations
imposed on qualified plans by the Code. Beginning in 1994, the Code prohibits
the inclusion of earnings in excess of $150,000 per year (adjusted periodically
for cost-of-living increases) in the average earnings used to calculate
benefits. The Code also limits the maximum annual pension (currently $120,000,
but adjusted annually for cost-of-living increases) that can be payable to each
eligible employee at age 65.
40
<PAGE> 42
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth, as of March 7, 1997, the amount and
percentage of Registrant's outstanding Common Stock beneficially owned by (i)
each person who is known by Registrant to own beneficially more than 5% of its
Common Stock, (ii) each Director, (iii) each executive officer named in the
Summary Compensation Table and (iv) all Directors and executive officers as a
group.
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME OF INDIVIDUAL BENEFICIALLY OUTSTANDING
OR IDENTITY OF GROUP OWNED(1) COMMON STOCK(2)
- -------------------------------------------------- ---------------- ---------------
<S> <C> <C>
5% HOLDERS:
Peter Iselin
40 Wall Street
New York, New York 10005
Emilie I. Wiggin 1,749,665 shares(3)(4) 50.8%
106 Pear Tree Point Road
Darien, Connecticut 06820
O'Donnell Iselin II
40 Wall Street
New York, New York 10005
DIRECTORS: (5)
David H. Davis.................................... 2,663
Thomas W. Garges, Jr. ............................ 5,940
L. Blaine Grube................................... 7,258
Thomas M. Hyndman, Jr. ........................... 1,260
Columbus O'D. Iselin, Jr. ........................ 14,908
William G. Kegel.................................. 3,482
John L. Schroder, Jr. ............................ 1,497
Gordon B. Whelpley, Jr. .......................... 21,796
EXECUTIVE OFFICERS: (6)
W. Joseph Engler, Jr. ............................ 3,200
George M. Evans................................... 812
A. W. Petzold..................................... 250
Thomas M. Majcher................................. 250
All Directors and executive officers as a group
(15 persons).................................... 1,798,133 52.3%
</TABLE>
- ---------------
(1) Information furnished by each individual. Includes shares that are owned
jointly, in whole or in part, with the individual's spouse, or individually
by his or her spouse.
(2) Less than 1% unless otherwise indicated.
(3) Under the rules of the Securities and Exchange Commission (the "SEC"), a
person is deemed to be the beneficial owner of securities if he has, or
shares, "voting power" (which includes the power to vote, or to direct the
voting of, such securities) or "investment power" (which includes the power
to dispose, or to direct the disposition, of such securities). Under these
rules, more than one person may be deemed the beneficial owner of the same
securities. The information set forth in the above table includes all shares
of Common Stock of Registrant over which Peter Iselin, Emilie I. Wiggin, and
O'Donnell Iselin II, individually or together, exercise voting power or
investment power, adjusted, however, to eliminate repeated reporting of
shares so as not to overstate the aggregate beneficial ownership of such
persons.
(4) Under the rules of the SEC, the maximum number of shares of Registrant's
Common Stock that Peter Iselin, Emilie I. Wiggin, and O'Donnell Iselin II,
individually could be deemed to beneficially own is 1,713,161 shares
(49.8%), 1,646,633 shares (47.8%), and 909,050 shares (26.4%), respectively.
(5) Excludes Directors listed under 5% Holders.
(6) Excludes Executive Officers listed under Directors.
41
<PAGE> 43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None, other than as reported in Items 10 and 12 hereof.
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 Co. and subsidiaries are included in Item 8:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................................. 17
Consolidated balance sheets -- December 31, 1996, 1995, and 1994............ 18
Statements of consolidated income -- Years ended December 31, 1996, 1995,
and 1994.................................................................. 20
Statements of consolidated shareholders' equity -- Years ended December 31,
1996, 1995, and 1994...................................................... 21
Statements of consolidated cash flows -- Years ended December 31, 1996,
1995, and 1994............................................................ 22
Notes to consolidated financial statements -- December 31, 1996............. 23
</TABLE>
The following financial information for the years 1996, 1995, and 1994 is
submitted herewith.
2. Financial Statement Schedules
The following Consolidated Financial Statement Schedules of Rochester &
Pittsburgh Coal Co. and subsidiaries are included in Item 14(d):
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
Schedule I -- Condensed Financial Information of Registrant............. S-2
Schedule II -- Valuation and Qualifying Accounts......................... S-7
</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.
(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.
42
<PAGE> 44
(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. An Amendment
to the 1991 Keystone Coal Supply Agreement was filed with Registrant's
Annual Report on Form 10-K dated April 12, 1996. The Agreement and
Amendment are 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 Amendments thereto were filed with
Registrant's Annual Report on Form 10-K dated April 12, 1996. The Plan and
Amendments are incorporated herein by reference.
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. The Plan and
Amendments are incorporated herein by reference. Amendments to Registrant's
401(k) Savings and Retirement Plan were filed with Registrant's Annual
Report on Form 10-K dated April 12, 1996. Amendment to Registrant's 401(k)
Savings and Retirement Plan, filed herewith.
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. Amendment to Employment Agreement, filed herewith.
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.
43
<PAGE> 45
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) Subsidiaries of the Registrant.
Registrant's list of subsidiaries, 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.
44
<PAGE> 46
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 11, 1997
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
- ------------------------------------- ----------------------------------- ---------------
<C> <S> <C>
/s/ THOMAS W. GARGES, JR. President and Chief Executive April 11, 1997
- ------------------------------------- Officer (Principal Executive
Thomas W. Garges, Jr. Officer)
/s/ GEORGE M. EVANS Vice President and Treasurer April 11, 1997
- ------------------------------------- (Principal Financial Officer)
George M. Evans
/s/ JEFFREY A. MACK Controller (Principal Accounting April 11, 1997
- ------------------------------------- Officer)
Jeffrey A. Mack
* Chairman of the Board of Directors April 11, 1997
- -------------------------------------
William G. Kegel
* Vice President -- Finance and April 11, 1997
- ------------------------------------- Director
Peter Iselin
* Director April 11, 1997
- -------------------------------------
David H. Davis
* Director April 11, 1997
- -------------------------------------
Columbus O'D. Iselin, Jr.
* Director April 11, 1997
- -------------------------------------
John L. Schroder, Jr.
</TABLE>
45
<PAGE> 47
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ----------------------------------- ---------------
<C> <S> <C>
* Director April 11, 1997
- -------------------------------------
O'Donnell Iselin II
* Director April 11, 1997
- -------------------------------------
L. Blaine Grube
* Director April 11, 1997
- -------------------------------------
Gordon B. Whelpley, Jr.
* Director April 11, 1997
- -------------------------------------
Thomas M. Hyndman, Jr.
*By /s/ W. JOSEPH ENGLER, JR.
- -------------------------------------
W. Joseph Engler, Jr.
Attorney-in-Fact
pursuant to Powers of Attorney
filed herewith
</TABLE>
46
<PAGE> 48
FINANCIAL STATEMENT SCHEDULES
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
DECEMBER 31, 1996
S-1
<PAGE> 49
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
ROCHESTER & PITTSBURGH COAL COMPANY
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................ $ 3,485 $ 3,542 $ 2,850
Receivables from subsidiaries............................ 6,727 6,736 6,818
Prepaid expenses and other current assets................ 1,455 782 1,348
Income taxes receivable.................................. 0 2,036 3,864
-------- -------- --------
Total Current Assets............................. 11,667 13,096 14,880
INVESTMENTS IN SUBSIDIARY COMPANIES
Equity method............................................ 207,982 198,386 203,813
OTHER ASSETS
Investment in marketable securities...................... 280 281 856
Miscellaneous............................................ 9,768 9,516 9,372
-------- -------- --------
10,048 9,797 10,228
PROPERTY, PLANT, AND EQUIPMENT............................. 52,577 52,555 52,371
Less allowances for depreciation, depletion, and
amortization.......................................... 26,750 25,764 24,623
-------- -------- --------
25,827 26,791 27,748
-------- -------- --------
$255,524 $248,070 $256,669
======== ======== ========
</TABLE>
S-2
<PAGE> 50
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
ROCHESTER & PITTSBURGH COAL COMPANY
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable:
Trade accounts........................................ $ 1,460 $ 383 $ 1,050
Dividends............................................. 516 516 2,063
Subsidiaries.......................................... 3,100 5,817 8,313
Other current liabilities................................ 862 861 468
Income taxes payable..................................... 708 0 0
-------- -------- --------
Total Current Liabilities........................ 6,646 7,577 11,894
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............................................ 3,464 3,150 3,096
-------- -------- --------
37,693 37,379 37,325
SHAREHOLDERS' EQUITY
Common stock............................................. 59,837 59,837 59,837
Capital in excess of stated value........................ 133,125 133,162 133,170
Retained earnings........................................ 46,028 38,007 42,360
-------- -------- --------
238,990 231,006 235,367
Less treasury stock at cost.............................. 27,805 27,892 27,917
-------- -------- --------
211,185 203,114 207,450
-------- -------- --------
$255,524 $248,070 $256,669
======== ======== ========
</TABLE>
S-3
<PAGE> 51
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
ROCHESTER & PITTSBURGH COAL COMPANY
CONDENSED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Management fees and royalties from subsidiaries............... $12,078 $13,668 $12,601
Gain on sale of property...................................... 7,678 2,164 480
Interest, dividends, and other................................ 3,469 3,408 3,008
------- ------- -------
23,225 19,240 16,089
Costs and expenses
Selling, general and administrative......................... 10,280 11,211 10,593
Interest on loan from subsidiary............................ 2,525 2,649 2,109
Miscellaneous............................................... 3,887 4,120 3,413
------- ------- -------
16,692 17,980 16,115
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN NET INCOME
OF SUBSIDIARIES.......................................... 6,533 1,260 (26)
Income taxes.................................................. 1,543 (99) (101)
------- ------- -------
INCOME BEFORE EQUITY IN NET INCOME OF SUBSIDIARIES.......... 4,990 1,359 75
Equity in net income (loss) of subsidiaries................... 6,271 (4,894) 2,391
------- ------- -------
NET INCOME (LOSS)................................... $11,261 $(3,535) $ 2,466
======= ======= =======
</TABLE>
S-4
<PAGE> 52
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
ROCHESTER & PITTSBURGH COAL COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1996 1995 1994
-------- ------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 11,261 $(3,535) $ 2,466
Adjustments for non-cash items............................ (12,484) 4,645 8,284
Changes in certain assets and liabilities (using or
providing cash)........................................ 510 84 1,282
-------- ------- --------
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES...................................... (713) 1,194 12,032
-------- ------- --------
INVESTING ACTIVITIES
Investments in subsidiaries............................... (5,000) 0 (40,000)
Return of subsidiary capital.............................. 0 1,000 27,000
Acquisition of property, plant, and equipment............. (92) (204) (183)
Proceeds from sale of property, plant, and equipment...... 7,763 2,184 479
Proceeds from sales of investments........................ 0 626 0
-------- ------- --------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES...................................... 2,671 3,606 (12,704)
-------- ------- --------
FINANCING ACTIVITIES
Cash dividends paid....................................... (2,065) (4,126) (5,158)
Acquisition of treasury stock............................. 50 18 18
-------- ------- --------
NET CASH USED IN FINANCING ACTIVITIES............. (2,015) (4,108) (5,140)
-------- ------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... (57) 692 (5,812)
Cash and cash equivalents at beginning of year............ 3,542 2,850 8,662
-------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.......... $ 3,485 $ 3,542 $ 2,850
======== ======= ========
</TABLE>
S-5
<PAGE> 53
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- (CONTINUED)
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 $500,000 in 1996, $1,375,000 in 1995, and $9,700,000 in 1994.
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, had $35,000,000 of long-term debt outstanding under senior fixed rate
construction notes and $50,000,000 outstanding under a revolving credit
agreement as of December 31, 1996. In March, 1997 these long-term credit
agreements were amended and restructured to provide for a senior secured term
loan totalling $25,000,000, a revolving credit note totalling $35,000,000 and a
working capital line of credit totalling $8,000,000. Under the terms of the debt
agreements, the Company has guaranteed payment of all principal and interest on
these notes.
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 (black lung). At December 31, 1996, the Company and
these subsidiaries have irrevocable trusts for black lung benefit funding which
have assets totalling $51,500,000, compared to an actuarial liability of
$37,100,000. The Company also guarantees certain of its subsidiaries
self-insurance obligations for workers' compensation.
The Company's wholly-owned subsidiary, Helvetia Coal Company, (Helvetia)
has indemnified its customers for certain liabilities related to its operations
under its previous coal supply agreement. On the earlier of January 1, 1998 or
the occurrence of certain specified events, either Helvetia must provide
security for these indemnified obligations in the form of bonds or the Company
must unconditionally guarantee Helvetia's performance of those obligations.
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.
S-6
<PAGE> 54
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
- -----------------------------------------------------------------------------------------------------------
BALANCE
AT BALANCE AT
BEGINNING DEDUCTIONS END OF
DESCRIPTION OF PERIOD ADDITIONS --DESCRIBE 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, 1996:
Reserves:
Mine closing reserve.................. $23,153 $1,298 $ 630(1) $1,152(2) $ 23,929
======= ====== ====== ====== =======
Surface mine reclamation reserve...... $ 1,179 $ 274 $ -- $ 207(2) $ 1,246
======= ====== ====== ====== =======
Valuation allowance deducted from asset
accounts:
Deferred income tax valuation
allowance.......................... $ 6,585 $ 790 $ -- $ -- $ 7,375
======= ====== ====== ====== =======
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
======= ====== ====== ====== =======
Valuation 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
======= ====== ====== ====== =======
Valuation allowance deducted from asset
accounts:
Deferred income tax valuation
allowance.......................... $ 4,498 $ (390) $ -- $ -- $ 4,108
======= ====== ====== ====== =======
</TABLE>
- ---------------
(1) Interest earned on funds invested to meet reserve requirements.
(2) Expense incurred to satisfy previously reserved requirements.
S-7
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------
<C> <S> <C>
(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 ByLaws was
filed with Registrant's Annual Report on Form 10-K dated March 28, 1991.
The ByLaws, 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. An Amendment
to the 1991 Keystone Coal Supply Agreement was filed with Registrant's
Annual Report on Form 10-K dated April 12, 1996. The Agreement and
Amendment are 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 Amendments thereto were filed with
Registrant's Annual Report on Form 10-K dated April 12, 1996. The Plan and
Amendments are incorporated herein by reference.
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------
<C> <S> <C>
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. The Plan and
Amendments are incorporated herein by reference. Amendments to
Registrant's 401(k) Savings and Retirement Plan were filed with
Registrant's Annual Report on Form 10-K dated April 12, 1996. Amendment to
Registrant's 401(k) Savings and Retirement Plan, filed herewith.
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.
Amendment to Employment Agreement, filed herewith.
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) Subsidiaries of the Registrant.
Registrant's list of subsidiaries, filed herewith.
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT NUMBER
- --------------
<C> <S> <C>
(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.
</TABLE>
<PAGE> 1
EXHIBIT (10F)
FOURTH 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
change the maximum salary deferral percentage for nonhighly compensated
employees and to increase the number of loans that can be taken during any year;
NOW THEREFORE, the Savings plan is hereby amended as follows:
1. The second sentence of paragraph 4.1 is hereby amended to read as
follows:
"A 401(k) Participant may elect to defer a portion of each payment of
Salary for each payroll period that would otherwise be made to him or
her, after the election becomes effective and while it remains effective
pursuant to paragraph 4.2, equal to any whole percentage from 1% to 10%
(inclusive) for Highly-Compensated Employees (as defined in paragraph
4.1.2 hereof) and any whole percentage from 1% to 15% (inclusive) for
Non-Highly Compensated Employees (as defined in paragraph 4.1.2 hereof);
provided, however, that the amount of a 401(k) Participant's Pre-Tax
Contribution in any calendar year shall not exceed $7,000 ($7,979 for
1990 and adjusted annually thereafter for cost of living increases in
accordance with Section 415(d) of the Code)."
2. Subparagraph 8.5(b) is hereby amended to read as follows:
"(b) No more than two loans will be approved in any
12-consecutive-month period and no more than two loans may be outstanding
at any one time."
3. The provisions of this Fourth Amendment shall be effective on July 1,
1996.
TO RECORD the adoption of this Fourth Amendment, the Company has caused its
authorized officers to execute this amendment as of the 1st day of July, 1996.
<TABLE>
<S> <C>
ATTEST: ROCHESTER & PITTSBURGH COAL COMPANY
/s/ JOYCE E. MILLER By: /s/ GEORGE M. EVANS
- ------------------------------------------ -----------------------------------------------
Assistant Secretary Title: Vice President & Treasurer
</TABLE>
<PAGE> 1
EXHIBIT 10G
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT (this "Amendment") dated as of February 27, 1997 is made to
the Employment Agreement (the "Agreement") effective as of the first day of May,
1992, by and between ROCHESTER & PITTSBURGH COAL COMPANY, a Pennsylvania
corporation (hereinafter called the "Company"), and Thomas W. Garges, Jr.
(hereinafter called "Garges"). All capitalized terms used herein but not defined
herein shall have the respective meanings assigned to them in the Agreement.
RECITAL
Garges is presently employed by the Company as its President and Chief
Executive Officer pursuant to the Agreement. The Board of Directors of the
Company believes it is in the best interests of the Company and the stockholders
of the Company to seek the sale of the Company, and, in connection therewith,
wishes to provide incentive to Garges to cooperate in the efforts to sell the
Company and maximize the consideration payable to the Company's stockholders.
It is the purpose of this Amendment to set forth the severance benefits
that will be provided to Garges in the event of a change in control of the
Company under the circumstances as described herein. Except as expressly amended
by this Amendment, the terms and conditions of the Agreement shall remain in
full force and effect and are hereby ratified and confirmed.
1. Section 2 of the Agreement is hereby amended so that as amended Section
2 shall read in its entirety as follows:
"2. Term. Until notice of termination has been given by either
party, the term of Garges' employment under the Agreement shall be extended
automatically each day for one additional day so that at all times after
the date hereof and until notice of termination has been given, the term of
the employment shall be for a period of three years. In the event that one
party gives notice of termination to the other, then the terms of Garges'
employment will expire on that day which is three years after the day on
which the notice is given, provided, however, that if such notice is given
after a change in control of the Company (as defined herein), the term of
Garges' employment hereunder shall expire on that day which is 90 days
after the day on which the notice of termination is received by the party
to whom or to which the notice is given. For the purposes of this
Amendment, a "change in control of the Company" shall be deemed to have
occurred if during the term of the Agreement (a) any "person" or "group"
(as such terms are used in Rule 13d-3 under the Securities Exchange Act of
1934) other than Garges or a group of which Garges is a member acquires
shares of the Company in a transaction or series of transactions that
result in such person or group directly or indirectly first owning
beneficially more than 50% of the outstanding shares of the Company's
Common Stock after the date of this Amendment or (b) as the result of or in
connection with any cash tender offer or exchange offer, merger or other
business combination, sale of assets or contested election of directors or
any combination of the foregoing transactions (a "Transaction"), the
persons who were the directors of the Company before the Transaction shall
cease to constitute a majority of the Board of Directors of the Company or
any successor to the Company."
2. Section 5 of the Agreement is hereby amended so that as amended Section
5 shall read in its entirety as follows:
"5. Compensation
"(a) For all services rendered by Garges under this Agreement,
during the term of his employment the Company shall pay Garges a base
salary at such annual rate as shall be determined by the Board of
Directors from time to time, provided that the base salary shall not be
less that $300,000 per year. In addition, Garges shall be paid such
bonuses and other additional compensation, if any, as the Company's
Board of Directors may determine from time to time in its sole
<PAGE> 2
discretion; provided that Garges in his sole discretion may elect, by
notice to the Company given within ten (10) days after he is awarded a
bonus, to have any bonus paid to him wholly in stock in such proportions
as he may determine. Garges' base salary shall be paid to him in equal
monthly installments or in such other manner as may be mutually agreed.
(b) Upon the date of consummation of a change in control of the
Company as defined herein and without regard to whether Garges continues
in the employ of the Company or any successor to the Company following a
change in control of the Company, the Company shall make a payment on
such date to Garges equal to three times his then annual rate of salary.
(c) For the 90-day period during which the employment of Garges
will continue following a notice of termination given after a change in
control of the Company as provided in Section 1 of this Amendment,
Garges shall be paid at his annual rate of salary as in effect on the
day before the date of the change in control of the Company and during
such 90-day period Garges shall continue to receive the same medical
benefits he was receiving on the day before the date of the change in
control of the Company.
(d) For 36 consecutive months following the date of the change in
control of the Company or the death of Garges, which ever is earlier,
Garges shall continue to be treated as an employee of the Company under,
and shall be entitled to all medical benefits, programs and arrangements
of the Company, as if Garges were still employed by the Company during
such period and such benefits, programs and arrangements were maintained
during such period on terms and conditions no less favorable to Garges
than those which existed immediately prior to the change in control of
the Company or the death of Garges. If, despite the provisions of this
Section 5(d), medical benefits under any such plan, program or
arrangement shall not be payable or provided under any such plan,
program or arrangement to Garges or his dependents, because of any
change in the terms or conditions of such plan, program or arrangement
or because Garges is no longer an employee of the Company, the Company
itself shall to the extent necessary pay or provide for payment of such
benefits to Garges and his dependents.
(e) For purposes hereof, any salary or other payments made to
Garges by any wholly or majority owned subsidiary of the Company shall
be treated as having been made by the Company."
3. Section 8 of the Agreement is hereby amended so that as amended Section
8 of the Agreement shall read in its entirety as follows:
"8. Pension Matters.
(a) Garges is a participant in the Company's pension plan, as the
same may be amended hereafter from time to time (the "Plan") and shall
be entitled to receive such benefits thereunder as are provided pursuant
to the terms and conditions thereof.
(b) Garges shall also be entitled to receive a pension supplement,
except in the circumstances described in paragraph (d) of this Section 8
or Section 9 of the Agreement, whereby the Company will pay to Garges or
his spouse upon the commencement of the payment of the pension benefit
under the Plan, as a monthly supplement to the monthly benefit payable
under the Plan, an amount equal to the sum of the following:
(i) an amount equal to the monthly pension benefit which would have
been payable to Garges or his spouse pursuant to the Plan at Garges'
normal retirement age of 62, without regard to the limitations imposed
by Sections 401(a)(17) and 415 of the Internal Revenue Code of 1986, as
now or hereafter amended or supplemented (hereinafter referred to as the
"Statutory Limitations"); plus
(ii) an amount equal to the difference between (A) the monthly
pension benefit actually payable to Garges at age 62 pursuant to the
Plan and (B) the monthly pension benefit which would have been payable
to Garges or his spouse at Garges' normal retirement age of 62 pursuant
to the Plan without application of the Statutory Limitations.
<PAGE> 3
The supplemental payments hereunder shall be calculated in
conformity with the benefit option selected by Garges under the Plan.
Such supplemental payments will terminate at the earlier of (A) the
expiration of ten years from the date of the first monthly supplemental
payment or (B) the termination of pension payments pursuant to the Plan
to Garges, his spouse or the survivor of them, if applicable.
(c) If the date of consummation of a change in control of the
Company occurs before the commencement of the pension supplement
provided in paragraph (b) of this Section 8, in lieu of that pension
supplement the Company shall: (i) calculate the amount of Garges'
accrued monthly pension supplement as of such consummation date assuming
that Garges elects to begin receiving his pension benefit under the Plan
at age 62 in the form of a qualified joint and survivor annuity and that
Garges' service with the Company is equal to the sum of (x) Garges'
actual service with the Company to the day before such consummation date
and (y) three additional years and (ii) make a payment to Garges on such
consummation date equal to the present value of the accrued monthly
pension supplement calculated under clause (i) of this paragraph (c)
using a discount rate of 120% of the applicable federal rate in effect
on such date determined under Section 1274(d) of the Internal Revenue
Code of 1986, as amended (the "Code") compounded semiannually.
(d) In the event that Garges' spouse becomes entitled to receive
pension benefits under the Plan as a result of Garges' death while
employed by the Company prior to July 22, 2001, no monthly supplemental
benefit shall be paid to his widow."
4. A new Section 17 shall be added to the Agreement which Section 17 shall
read in its entirety as follows:
"17. Miscellaneous General Provisions.
(a) Non-Alienation. Garges shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts
provided under the Agreement as amended hereby, and no benefits payable
hereunder shall be assignable in anticipation of payment either by
voluntary or involuntary acts or by operation of law.
(b) Deductibility of Payments. In the event that any payment or
benefit received or to be received by Garges hereunder, whether payable
pursuant to the terms of the Agreement as amended hereby or any other
plan, arrangement or agreement with the Company or any corporation
affiliated with the Company (an "Affiliate") within the meaning of
Section 1504 of the Code would not be deductible, in whole or in part,
by the Company or an Affiliate as a result of Section 280G of the Code
the payments to be made pursuant to the Agreement as amended hereby
shall be reduced until no portion of the payments is not deductible as a
result of Section 280G of the Code or the payments are reduced to zero.
For purposes of this limitation, (i) no portion of the payments, the
receipt or enjoyment of which Garges shall have effectively waived in
writing prior to the date of payment, shall be taken into account and
(ii) no portion of the payments shall be taken into account which in the
opinion of tax counsel selected by the Company's independent auditors
and acceptable to Garges does not constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code.
(c) Non-Mitigation. Garges shall not be required to mitigate the
amount of any payment or benefit provided for under the Agreement as
amended hereby by seeking other employment or otherwise, nor shall the
amount of any payment provided for under the Agreement as amended hereby
be reduced by any compensation received subsequent to the date of the
change in control of the Company by Garges as a result of any employment
or retirement benefits from any other source, provided, however, that
the Company shall not be required to provide Garges and his eligible
dependents with medical insurance coverage as long as Garges and his
eligible dependents are receiving comparable medical insurance coverage
from another employer.
<PAGE> 4
(d) Interest on Amounts Due Under the Agreement. Any amount due to
Garges under the Agreement as amended hereby which is not paid when due
shall bear interest at the rate of one percent per month from the date
such amount was due until the date when paid."
5. In all other respects, the Agreement shall remain in full force and
effect and is hereby ratified and confirmed.
IN WITNESS WHEREOF, the undersigned parties have hereunto set their hands
and seals to this Agreement the day and year first above written.
[SEAL]
<TABLE>
<S> <C>
Attest: ROCHESTER & PITTSBURGH COAL COMPANY
/s/ Joyce E. Miller By: /s/ Peter Iselin
V.P.
- --------------------------------------------- ---------------------------------------------
Assistant Secretary Peter Iselin
Vice President -- Finance & Secretary
Witness:
/s/ Judi K. Peila By: /s/ Thomas W. Garges,
Jr.
- --------------------------------------------- ---------------------------------------------
Thomas W. Garges, Jr. [SEAL]
</TABLE>
<PAGE> 1
EXHIBIT (21)
SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OR JURISDICTION
NAME OF SUBSIDIARY(1) OF INCORPORATION
- ---------------------------------------------------------------------------- ---------------------
<S> <C>
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
</TABLE>
- ---------------
(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 (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, 1996 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 27, 1997 /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, 1996 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 27, 1997 /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, 1996 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 27, 1997 /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, 1996 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 27, 1997 /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, 1996 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 27, 1997 /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, 1996 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 27, 1997
/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, 1996 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 27, 1997
/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, 1996 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 27, 1997
/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, 1996 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 27, 1997
/s/ THOMAS M. HYNDMAN, JR.
--------------------------------------
(Signature)
THOMAS M. HYNDMAN, JR.
--------------------------------------
(Print name)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANTS
1996 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 34,466
<SECURITIES> 25,000
<RECEIVABLES> 21,945
<ALLOWANCES> 0
<INVENTORY> 7,414
<CURRENT-ASSETS> 95,393
<PP&E> 541,544
<DEPRECIATION> 184,919
<TOTAL-ASSETS> 531,398
<CURRENT-LIABILITIES> 58,846
<BONDS> 100,501
0
0
<COMMON> 59,837
<OTHER-SE> 151,348
<TOTAL-LIABILITY-AND-EQUITY> 531,396
<SALES> 202,265
<TOTAL-REVENUES> 217,282
<CGS> 180,302
<TOTAL-COSTS> 180,302
<OTHER-EXPENSES> 19,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,032
<INCOME-PRETAX> 15,230
<INCOME-TAX> 3,969
<INCOME-CONTINUING> 11,261
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,261
<EPS-PRIMARY> 3.27
<EPS-DILUTED> 3.27
</TABLE>
