SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- -------------
Commission File No. 0-7181
ROCHESTER & PITTSBURGH COAL COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 25-0761480
(State or other jurisdiction of (I.R.S. Employer Iden-
incorporation or organization) tification No.)
655 Church Street, Indiana, Pennsylvania 15701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 724/349-5800
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements
for the past 90 days. Yes x No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of
shares outstanding of each of the issuer's classes of common stock,
as of July 31, 1998. 3,440,984 shares.
<PAGE> 2
<TABLE>
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Amounts in thousands, except for outstanding shares and per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Production Tonnage 2,515 1,064 4,905 2,096
=========== =========== ========= ===========
Sales Tonnage 2,661 1,466 5,408 2,840
=========== =========== ========= ===========
Sales $ 79,124 $ 49,896 162,332 101,784
Other Income:
Gain on sale of property 4,566 8,194 4,717 10,253
Interest and dividends 802 630 1,570 1,759
Net investment gains (losses) -- (2) 13 (173)
Miscellaneous 354 330 718 721
----------- ----------- --------- -----------
84,846 59,048 169,350 114,344
Costs and Expenses:
Cost of sales 69,205 43,034 145,196 91,121
Depreciation, depletion,
and amortization 9,402 3,242 18,373 6,711
Selling, general,
and administrative 1,905 1,560 3,420 3,212
Interest 2,403 406 4,798 874
Write-down of property,
plant, and equipment -- 17,047 -- 17,047
Miscellaneous 292 432 563 1,301
----------- ----------- --------- -----------
83,207 65,721 172,350 120,266
----------- ----------- --------- -----------
Income (Loss) Before
Income Taxes 1,639 (6,673) (3,000) (5,922)
Provision (Credit) for
Income Taxes 1,497 (738) (2,850) (8)
----------- ----------- --------- -----------
Net Income (Loss) $ 142 $ (5,935) $ (150) $ (5,914)
=========== =========== ========= ===========
Net Income (Loss) Per Share $ 0.04 $ (1.73) $ (0.04) $ (1.72)
=========== =========== ========= ===========
<PAGE> 3
Average shares outstanding
used in the computation
of per share amounts 3,440,984 3,440,984 3,440,984 3,440,834
Shares issued and outstanding
at June 30 3,440,984 3,440,984 3,440,984 3,440,984
Cash dividends declared
per share $ .15 $ .15 $ .30 $ .30
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 4
<TABLE>
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
June 30 December
1998 1997
------------ -----------
ASSETS (Unaudited)
------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 38,479 $ 37,026
Short-term investments -- --
Receivables 35,221 29,414
Inventories and other current assets 11,962 13,914
Deferred income taxes 4,618 4,714
------------ -----------
Total Current Assets 90,280 85,068
Other Assets
Investments in marketable securities 22,131 20,166
Funding for:
Workers' compensation benefits 13,863 12,950
Mine closing reserves 12,606 12,135
Deferred income taxes 20,734 14,894
Miscellaneous 18,575 17,475
------------ -----------
87,909 77,620
Property, plant, and equipment 596,045 585,356
Less allowances for depreciation, depletion,
and amortization 247,427 229,910
------------ -----------
348,618 355,446
------------ -----------
$ 526,807 $ 518,134
============ ===========
<PAGE> 5
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable $ 17,064 $ 16,780
Accrued liabilities 22,985 21,038
Income taxes payable 3,624 6,111
Current maturities of long-term debt 18,312 10,301
------------ -----------
Total Current Liabilities 61,985 54,230
Other Liabilities and Long-Term Debt
Other postretirement benefits 88,457 81,469
Workers' compensation benefits 45,048 42,006
Mine closing reserves 25,321 24,300
Black lung benefits 9,128 8,708
Deferred income taxes 13,429 13,853
Miscellaneous 3,392 3,518
Long-term debt (less current maturities) 75,744 84,535
------------ -----------
260,519 258,389
Shareholders' Equity
Common stock issued, 3,989,121 shares 59,837 59,837
Capital in excess of stated value 133,125 133,125
Retained earnings 39,942 41,124
Accumulated other comprehensive income (loss) (796) (766)
------------ -----------
232,108 233,320
Less treasury stock at cost - 548,137 shares 27,805 27,805
------------ -----------
204,303 205,515
------------ -----------
Total Liabilities and Shareholders' Equity $ 526,807 $ 518,134
============ ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 6
<TABLE>
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Six Months Ended
June 30
----------------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (150) $ (5,914)
Adjustments for non-cash items 7,448 12,151
Changes in certain assets and liabilities
providing (using) cash 4,776 2,230
--------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 12,074 8,467
--------- ---------
INVESTING ACTIVITIES
Proceeds from investment activity 2,700 38,400
Acquisition of investments (4,489) (2,775)
Acquisition and development of
property, plant, and equipment (11,763) (16,473)
Proceeds from sale of property, plant, and
equipment 5,259 11,040
--------- ---------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (8,293) 30,192
--------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings 46,347 83,625
Payments on borrowings (47,127) (122,322)
Debt issue costs -- (2,263)
Cash dividends paid (1,548) (1,548)
---------- ---------
NET CASH (USED IN)
FINANCING ACTIVITIES (2,328) (42,508)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,453 (3,849)
Cash and cash equivalents at beginning of year 37,026 34,466
--------- ---------
CASH AND CASH EQUIVALENTS AT JUNE 30 $ 38,479 $ 30,617
========= =========
<PAGE> 7
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid (net of capitalized interest) $ 4,750 $ 559
========= =========
Income taxes paid $ 5,838 $ 315
========= =========
Noncash financing and investing activities--
Capital leases and seller financing of
equipment to be leased. $ -- $ 11,704
========= =========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE> 8
ROCHESTER & PITTSBURGH COAL COMPANY
AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1998
Note A - Basis for Presentation
- -------------------------------
The accompanying unaudited Consolidated Condensed Financial Statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month and six month periods ended June 30, 1998 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1997.
The Company's subsidiary, Eighty-Four Mining Company ("Eighty-Four"),
completed development of its Mine No. 84 in October 1997. Prior to
completion of development, Eighty-Four's provision for income taxes, certain
real estate tax expenses, and certain general and administration expenses,
which were not considered costs of mine development, were included in the
1997 results in the accompanying Consolidated Condensed Statements of
Operations.
Note B - Comprehensive Income
- -----------------------------
As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," which
establishes new rules for the reporting and display of comprehensive income
and its components. The adoption of this Statement had no impact on the
Company's results of operations or shareholders' equity. Statement 130
requires unrealized gains or losses on the Company's available-for-sale
securities and foreign currency translation adjustments, which prior to
adoption were reported separately in shareholders' equity, to be included
in other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.
<PAGE> 9
The components of comprehensive income (loss), net of related tax, for the
three-month and six month periods ended June 30, 1998 and 1997 are as
follows:
Three months ended Six months ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
(in thousands) (in thousands)
Net income (loss) $142 $(5,935) $(150) $(5,914)
Unrealized gains
(losses) on available-for-
sale securities 71 322 64 (141)
Foreign currency
translation adjustments (122) 10 (94) (28)
----- ------- ------- ---
Comprehensive income
(loss) $ 91 $(5,603) $(180) $(6,083)
==== ======= ===== =======
The components of accumulated other comprehensive income (loss), net of
related tax, at June 30, 1998 and December 31, 1997 are as follows:
1998 1997
---- ----
(in thousands)
Unrealized gains (losses) on
available-for-sale securities $ 474 $ 410
Foreign currency translation
adjustments (1,270) (1,176)
------ -------
Accumulated other comprehensive
income (loss) $ (796) $ (766)
====== =======
Note C - Newly issued accounting standards
- ------------------------------------------
In February 1998, Statement of Financial Accounting Standards No. 132,
"Employers' Disclosure about Pensions and Other Postretirement Benefits"
was issued. Statement No. 132 does not change the recognition or
measurement of pension or postretirement benefit plans, but standardizes
disclosure requirements for pensions and other postretirement benefits,
eliminates unnecessary disclosure and requires additional information.
Statement No. 132 is required to be adopted in 1998 and restatement of
disclosures for prior periods provided for comparative purposes is required.
The application of Statement No. 132 is not expected to have a material
effect on the disclosures included in the consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which is required to be adopted in years beginning after
June 15, 1999. Because of the Company's minimal use of derivatives,
management does not anticipate that the adoption of Statement No. 133 will
have a significant effect on earnings or the financial position of the
Company.
<PAGE> 10
Rochester & Pittsburgh Coal Company
and Subsidiaries
Management's Discussion and Analysis of Results of
Operations and Financial Position
June 30, 1998
The following is management's discussion and analysis of certain
significant factors which have affected the Company's (1) results of
operations during the periods included in the accompanying Consolidated
Condensed Statements of Operations and (2) financial position since
December 31, 1997:
Results of Operations
- ---------------------
Eighty-Four completed development of Mine No. 84 as of October, 1997
and the capitalization of mine development costs in effect since 1993 ended
as of that date. Amounts for the provisions for income taxes, certain
property taxes, and certain general and administrative costs are included
in the Consolidated Condensed Statements of Operations for the periods
through October, 31, 1997 since such costs were not considered mine
development costs. Therefore, amounts for Eighty-Four's sales, cost of
sales, interest expense, and depreciation, depletion, and amortization in
the condensed consolidated operating results for the six months ended
June 30, 1998 affect the comparison to the condensed consolidated operating
results for the six months ended June 30, 1997.
Eighty-Four recorded pretax losses of $4.7 million and $12.2 million
for the three and six months ended June 30, 1998, respectively. These
losses compare to pretax losses of $600,000 and $1.9 million for the three
and six months ended June 30, 1997, respectively, periods in which
Eighty-Four was in the development stage and in which costs associated with
developing the mine were capitalized.
The 1998 losses at Eighty-Four are due to the first longwall
experiencing a delay, from early February until late April, in starting its
new mining panel. This delay was due to the cumulative effect of not
attaining acceptable continuous miner advance rates. In addition, the second
longwall mining unit experienced poor mining conditions in its mining panel
completed in early April and was out of operation through mid-May. These
longwall mining units performed well when they resumed operations in April
and May, respectively, and Mine No. 84 was profitable in June. At present,
the development of future longwall panels is sufficient to prevent delays
during the remainder of 1998. However, unless suitable continuous miner
advance rates are maintained, future longwall delays cannot be avoided.
Keystone Coal Mining Corporation ("KCMC") recorded profits of
$1.1 million and $1.2 million for the three and six months ended
June 30, 1998, respectively, which were comparable to the corresponding
periods in the prior year. Lower costs of coal purchased from third
party suppliers and the favorable effect in 1998 of decreasing coal
inventories under the pricing provisions of KCMC's coal supply agreement
offset the effects of lower productivity in 1998 compared to 1997.
<PAGE> 11
Helvetia Coal Company ("Helvetia") recorded pretax losses of $900,000
and $300,000 for the three and six months ended June 30, 1998, respectively.
Productivity, which experienced improvements in the first quarter, declined
in the second quarter. Helvetia recorded pretax losses of $16.4 million
and $18 million in the three and six months ended June 30, 1997,
respectively, including the write-down of the $17 million carrying value of
Helvetia's fixed assets to zero in the second quarter of 1997 in accordance
with Statement of Financial Accounting Standards No. 121 and other
nonrecurring adjustments. Helvetia's 1998 results do not include
depreciation expense due to the write-down of Helvetia's plant and
equipment to zero in the second quarter of 1997. Had the write-down not
occurred, depreciation expense in the three and six months ended June 30,
1998 would have been approximately $1 million and $2 million, respectively.
The Company's pretax income was enhanced in the three and six months
ended June 30, 1998 from the sale of certain nonstrategic properties
resulting in gains of $4.5 million and $4.7 million, respectively, compared
to similar gains in the three and six months end June 30, 1997 of
$8.2 million and $10.3 million, respectively.
Depreciation, depletion, and amortization was substantially higher
in the 1998 periods due to the inclusion of amounts for Eighty-Four. The
increase was partially offset by the aforementioned reduction in Helvetia's
depreciation and amortization due to the FASB No. 121 write-off in the
second quarter of 1997.
While average long-term debt balances were lower in 1998 than 1997,
interest expense thereon, as recorded in the Consolidated Condensed
Statements of Operations increased. This increase was due to the inclusion
of amounts relating to Eighty-Four in the statement of operations for the
three and six months ended June 30, 1998. Such amounts were capitalized
as development costs through October 31, 1997.
The decrease in miscellaneous expense in the six months ended June 30,
1998 reflects the write-off in the first quarter of 1997 of certain debt
issuance costs relating to the modification of Eighty-Four's debt
arrangement in March, 1997.
The income tax provision for the three months and six months ended
June 30, 1998 is based on the estimated effective rate for 1998. The
estimated effective tax rate differs from statutory rates due to the
reversal of state and federal deferred tax liabilities for temporary
differences that arose during the development of Eighty-Four and the
relationship of those amounts to pretax operating results.
In February 1998, Statement of Financial Accounting Standards No. 132,
"Employers' Disclosure about Pensions and Other Postretirement Benefits"
was issued. Statement No. 132 does not change the recognition or
measurement of pension or postretirement benefit plans, but standardizes
disclosure requirements for pensions and other postretirement benefits,
eliminates unnecessary disclosure and requires additional information.
Statement No. 132 is required to be adopted in 1998 and restatement of
disclosures for prior periods provided for comparative purposes is required.
The application of Statement No. 132 is not expected to have a material
effect on the disclosures included in the consolidated financial statements.
<PAGE> 12
In June 1998, the Financial Accounting Standards Board issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which is required to be adopted in years beginning after
June 15, 1999. Because of the Company's minimal use of derivatives,
management does not anticipate that the adoption of Statement No. 133 will
have a significant effect on earnings or the financial position of the
Company.
The Company is in the process of making modifications to a portion of
its computer programs that contain time sensitive software with a
limitation on accepting dates after 1999. The Company has made an
assessment of which computer programs require modification or replacement
and has, in fact, been making such modifications over the last several
years. All systems are scheduled to be complete in the first half of
1999. The costs of making necessary modifications or ultimately replacing
the software, if necessary, is not expected to be material to the Company's
consolidated financial condition or results of operations in any given year.
The Company, during the fourth quarter of 1998, plans to initiate contact
with third party parties (i.e., vendors, bankers, etc.) to determine their
year 2000 compliance efforts. However, there can be no assurance that the
computer systems of other companies on which the Company may rely also will
be timely modified or that the failure to modify such systems would not
have an adverse effect on the Company.
All statements contained in this Form 10-Q that are not historical
facts are based on current expectations. Such statements are
forward-looking (as defined in the Private Securities Litigation Reform Act
of 1995) in nature and involve a number of risks and uncertainties. Actual
results may vary materially. The factors that could cause actual results
to vary materially include: the ability of the Company to maintain
profitable operations, general business and economic conditions in the coal
mining industry, the Company's ability to maintain acceptable advance rates
at Mine No. 84, labor developments, the cost of coal compared to the cost
of other fuels used by the Company's utility customers, the quality of the
coal mined by the Company, the availability of adequate rail transportation,
Year 2000 compliance, and other risks that may be described from time to
time in reports the Company files with the Commission. Undue reliance
should not be placed on any such forward-looking statements.
Liquidity and Capital Resources
- -------------------------------
Working capital at June 30, 1998 was $28 million, compared to
$31 million at December 31, 1997. The Company's current ratio (ratio of
current assets to current liabilities) was 1.5 to 1 at June 30, 1998
compared to 1.6 to 1 at December 31, 1997. The reduction in the current
quarter is due to the operating losses at Eighty-Four for the first six
months and the increase in long-term debt payable within one year.
At June 30, 1998, Eighty-Four and Keystone had unused borrowing
capacity of $6.5 million and $18 million, respectively.
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
ROCHESTER & PITTSBURGH COAL COMPANY
THOMAS W. GARGES, JR.
Thomas W. Garges, Jr.
President and Chief Executive Officer
GEORGE M. EVANS
George M. Evans
Vice President and Treasurer
Date: August 13, 1998
<PAGE> 14
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 38,479
<SECURITIES> 0
<RECEIVABLES> 35,221
<ALLOWANCES> 0
<INVENTORY> 9,042
<CURRENT-ASSETS> 90,280
<PP&E> 596,045
<DEPRECIATION> 247,427
<TOTAL-ASSETS> 526,807
<CURRENT-LIABILITIES> 61,985
<BONDS> 75,744
<COMMON> 59,837
0
0
<OTHER-SE> 144,466
<TOTAL-LIABILITY-AND-EQUITY> 526,807
<SALES> 162,332
<TOTAL-REVENUES> 169,350
<CGS> 145,196
<TOTAL-COSTS> 145,196
<OTHER-EXPENSES> 22,356
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,798
<INCOME-PRETAX> (3,000)
<INCOME-TAX> (2,850)
<INCOME-CONTINUING> (150)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (150)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
