-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, msOoL+CTsk/8Co8o+aV6rYsV+D6ihrZS+j3EjLgiEn7R6eLB9V0C7CwzJXi/wKWz LI3D5A2/rzrVTsi73J2UYw== 0000077159-95-000002.txt : 19950516 0000077159-95-000002.hdr.sgml : 19950516 ACCESSION NUMBER: 0000077159-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN VIRGINIA CORP CENTRAL INDEX KEY: 0000077159 STANDARD INDUSTRIAL CLASSIFICATION: MINERAL ROYALTY TRADERS [6795] IRS NUMBER: 231184320 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00753 FILM NUMBER: 95538934 BUSINESS ADDRESS: STREET 1: 800 BELLEVUE STREET 2: 200 S BROAD ST CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2155456600 MAIL ADDRESS: STREET 1: 800 BELLEVUE 200 S BROAD ST CITY: PHILADELPHIA STATE: PA ZIP: 19102 FORMER COMPANY: FORMER CONFORMED NAME: VIRGINIA COAL & IRON CO DATE OF NAME CHANGE: 19670501 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q (X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-753 PENN VIRGINIA CORPORATION (Exact name of registrant as specified in its charter) VIRGINIA 23-1184320 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 800 THE BELLEVUE 200 SOUTH BROAD STREET, PHILADELPHIA, PA 19102 (Address of principal executive offices) (Zip code) (215)545-6600 (Registrant's telephone number; including area code) NONE (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 Number of shares of common stock of registrant outstanding at March 31, 1995: 4,273,240 PENN VIRGINIA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended March 31
1995 1994 (In thousands, except per share data) Revenues: Sales $ 220 $ 121 Coal royalties 3,168 3,528 Oil and gas sales and royalties 3,791 4,341 Dividends 625 577 Other income, net 540 578 8,344 9,145 Expenses: Cost of sales 724 640 Selling, general and administrative 1,844 1,682 Exploration and development 118 69 Depreciation, depletion and amortization 1,886 1,551 Taxes other than on income 441 409 Interest 386 454 5,399 $4,805 Income from operations 2,945 4,340 Income taxes 303 1,100 Net income $ 2,642 $ 3,240 Income per common share (based on 4,275,890 and 4,279,540 weighted average shares outstanding in 1995 and 1994): $ .62 $ .76 See accompanying notes to condensed consolidated financial statements.
PENN VIRGINIA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
(UNAUDITED) March 31, 1995 December 31, 1994 ASSETS Current assets Cash and cash equivalents $ 3,455 $ 7,039 Receivables 3,278 3,286 Current portion of long-term notes receivable 3,646 3,646 Inventory 607 599 Current deferred tax benefit 1,451 1,451 Recoverable income taxes 1,388 1,646 Other 192 249 Total current assets 14,017 17,916 Investments 90,204 85,321 Long-term notes receivable, net of current portion 8,259 8,881 Property, plant and equipment (net) 104,522 86,246 Other assets 952 895 Total assets $ 217,954 $ 199,259 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current installments on long-term debt $ 7,175 $ 7,325 Accounts payable 1,173 4,409 Accrued expenses 4,751 3,913 Deferred income 217 220 Taxes on income 529 - Total current liabilities 13,845 15,867 Other liabilities 8,093 8,237 Deferred taxes 29,882 28,459 Long-term debt, net of current installments 24,850 9,250 Shareholders' Equity Preferred stock of $100 par value - authorized 100,000 shares; issued none - - Common stock of $6.25 par value - authorized 8,000,000 shares; issued 4,437,517 shares in 1995 and 1994 27,734 27,734 Other paid-in capital 34,793 34,793 Retained earnings 36,294 35,571 98,821 98,098 Less: 165,277 and 157,977 shares in 1995 and 1994 of common stock held in treasury 7,644 7,435 Guaranteed debt to Employee Stock Ownership Plan 150 300 Add: Unrealized holding gain - investments 50,257 47,083 Total shareholders' equity 141,284 137,446 Total liabilities and shareholders' equity $ 217,954 $ 199,259
[FN] See accompanying notes to condensed consolidated financial statements. PENN VIRGINIA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months Ended March 31 (In thousands)
1995 1994 Cash flows from operating activities: Net cash flows from operating activities $ 2,209 $ 2,290 Cash flows from (used in) investing activities: Payment received on long-term notes 952 934 Purchases of fixed assets (20,195) (933) Net cash flows provided (used) by investing activities (19,243) 1 Cash flows from (used in) financing activities: Dividends paid (1,920) (1,918) Repayment of long-term debt principal (1,050) (1,050) Proceeds from long-term borrowings 16,500 - Purchase of treasury stock (230) - Reduction in Guaranteed debt to ESOP 150 150 Net cash flows provided (used) by financing activities 13,450 (2,818) Net (decrease) in cash and cash equivalents (3,584) (527) Cash and cash equivalents - beginning balance 7,039 23,869 Cash and cash equivalents - ending balance $ 3,455 $ 23,342 Supplemental disclosures of cash flow information: Cash paid to date for: Interest $ 80 $ 295 Income taxes $ - $ 1,755
[FN] See accompanying notes to condensed consolidated financial statements. PENN VIRGINIA CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of the Company, the accompanying condensed consoli- dated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of March 31, 1995, and the results of operations and cash flows for the three months ended March 31, 1995 and 1994. Property, plant and equipment consist of the following: March 31, 1995 December 31, 1994 (In thousands) Property, plant and equipment $ 140,407 $ 120,251 Less: Accumulated depreciation and depletion (35,885) (34,005) Net property, plant and equipment $ 104,522 $ 86,246 2. During the first quarter of 1995 the Company completed two signifi- cant asset transactions. The first transaction consisted of the relinquishment of the West Virginia Hampton lease by Westmoreland Coal Company. The second transaction consisted of the acquisition of an oil and gas property located in eastern Kentucky that increased the Company's oil and gas reserves by approximately 42 billion cubic feet(bcf) at a cost of approximately $17 million. This oil and gas property is contiguous to a previously acquired oil and gas property in 1992 and will allow access to an additional gas pipeline transmission system thereby widening the marketability of the Company's gas reserves. 3. The amortized cost, gross unrealized holding gains and fair value for available-for-sale securities at March 31, 1995 were as follows: Gross Unrealized Amortized Holding Fair Cost Gain Value (In thousands) Available-for-sale Westmoreland Coal Company $ 5,263 $ - $ 5,263 Westmoreland Resources, Inc. 4,530 - 4,530 Norfolk Southern Corporation 3,096 77,315 80,411 $ 12,889 $ 77,315 $ 90,204 On April 21, 1995 the Company sold 65,000 shares of its Norfolk Southern Corporation common stock investment for approximately $4.3 million in cash. The proceeds from this sale will be utilized for general corporate purposes as well as for working capital and debt service requirements. The amortized cost and fair value of notes receivable which are classified as held-to-maturity securities was $11,905,000 at March 31, 1995. 4. During the first quarter of 1995 the Company set in place a new $20 million loan and agency agreement with First Fidelity Bank as the lead lender and a couple of other commercial bank lenders. The pro- ceeds from this debt borrowing were used to finance the acquisition of the Loup Creek oil and gas property and the relinquishment of the Hampton leases from Westmoreland Coal Company. As of March 31, 1995, $16.5 million was drawndown on this agreement and is included with long-term debt on the Company's balance sheet. The remainder of $3.5 million is available for future drawdowns as deemed necessary by the Company. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of operations for the quarter ended March 31, 1995 as compared to the quarter ended March 31, 1994: Income from operations before income taxes decreased $1,395,000 or 32% for the first quarter of 1995 compared to the first quarter of 1994. This decrease is composed of a $96,000 decrease in the coal and land segment, a $61,000 de- crease in the investment segment, a $1,187,000 decrease in the oil and gas segment and a $51,000 increase in general corporate expenses and interest. Income taxes decreased in the first quarter of 1995 versus 1994 by $797,000 or 72% due mainly to a decrease in book taxable income and the esti- mated decrease in the effective federal tax rate due to the effect of an increased dividends received deduction, percentage depletion and shale tax credits relative to lower operating revenues. Coal and Land 1995 1994 (Thousands of dollars) Revenues: Sales $ 220 $ 121 Royalties 3,168 3,528 Other 484 290 Total 3,872 3,939 Expenses: Cost of sales 19 26 Selling, general and administrative 319 309 Exploration and development 52 39 Depreciation, depletion and amortization 22 43 Taxes other than on income 75 41 Total 487 458 Operating Profit $ 3,385 $ 3,481 The decrease in the coal and land segment operating profit of $96,000 or 3% is mainly attributable to decreased coal royalties from Westmoreland Coal Company's Virginia and West Virginia leases as well as a decrease in coal tonnages mined by independents in Virginia. Partially offsetting this decrease in coal royalty income was an increase in bulk timber sales and higher interest income recognized on long-term coal notes due to higher coal production. Investments 1995 1994 (Thousands of dollars) Revenues: Dividends $ 625 $ 577 Other 3 125 Total 628 702 Expenses: Selling, general and administrative 6 16 Depreciation - 2 Taxes other than on income - 1 Total 6 19 Operating Profit $ 622 $ 683 The decrease in the investment segment of $61,000 or 9% is mainly attributable to a decrease in interest income earned on short-term investments of $122,000 offset in part by an increase of $48,000 in dividend income. Oil and Gas 1995 1994 (Thousands of dollars) Revenues: Sales $ 3,443 $ 3,720 Royalties 348 621 Other 10 106 Total 3,801 4,447 Expenses: Cost of sales 705 613 Selling, general and administrative 734 665 Exploration and development 64 30 Depreciation, depletion and amortization 1,856 1,497 Taxes other than on income 313 326 Total 3,672 3,131 Operating Profit $ 129 $ 1,316 Operating profit for the oil and gas segment decreased $1,187,000 or 90%. The decrease is mainly attributable to a 30% decline in gas prices in 1995 versus 1994 that reduced sales by $277,000 or 7%. The gas price reduction and gas production decreases lowered oil and gas royalties by $273,000 or 44%. Other income decreased by $96,000 or 91% due mainly to a decline in delay rental income from coal-bed methane gas leases. The increase in cost of sales of $92,000 or 15% is due mainly to increased well workover and well tending expense, increased joint venture related ex- penses and additional lease operating expenses associated with oil and gas properties acquired subsequent to the first quarter of 1994. Selling, general and administrative expenses increased by $69,000 or 10% due mainly to the new office lease costs following the relocation to Kingsport, Tennessee in the second quarter of 1994. The increase in exploration and development is mainly attributable to a 1994 first quarter reversal of accrued geological and geo- physical costs that did not reoccur in 1995. Depreciation, depletion and amortization increased by $359,000 or 24% due mainly to the effect of lower gas pricing and higher gas production volumes on the depletion rate calculation for 1995. Corporate The increase in general corporate expenses and interest of $51,000 or 4% is mainly attributable to a $117,000 increase in selling, general and admin- istrative expenses due to higher salary, legal, consulting and environmental related expenses. Partially offsetting this increase is a decrease of $68,000 in interest expense due mainly to lower debt balances outstanding. Financial Condition, Liquidity, Capital Resources and Other Financial Data at March 31,1995: Working capital at March 31, 1995 was $172,000 compared to $2 million at December 31, 1994. See the Condensed Consolidated Statement of Cash Flows for details regarding the change. On April 21, 1995 the Company sold 65,000 shares of Norfolk Southern Corporation common stock for approximately $4.3 million in cash. The proceeds from this sale will be utilized for general corporate purposes as well as for working capital and debt service requirements. At March 31, 1995, there were $5.5 million in unused credit lines. There are two main factors that could influence future earnings and cash flow of the Company. One of these is gas prices. Since the majority of the Company's gas is sold in the spot market or under contracts less than one year in duration, future earnings will be directly related to the fluctuation of those prices. Any sustained decline in these prices could result in some impairment of oil and gas assets. In an effort to mitigate the recent decline in gas prices, which are expected to continue through the summer of 1995, the Company has undertaken several steps. The current year's drilling program has been curtailed to maximize the financial returns from our reserves; a program to further reduce general and administrative expenses has been instituted and a program to lock in roughly 35% of our production at acceptable (but below 1994) prices through the summer was completed. The second factor is the performance of Westmoreland Coal Company (WCX), our largest coal lessee. In 1994, WCX reported net income of $20.2 million compared to a net loss of $97.6 million for 1993. In a news release dated March 31, 1995 WCX stated that the improvement in net income in 1994 included $41.1 million of gains from the sales of the assets of Kentucky Criterion Coal Coal Company and certain idled facilities in West Virginia. In addition, WCX added that during 1994 $55 million of debt was repaid and that it currently has adequate cash reserves. However, as further stated by WCX, it still faces significant challenges including substantial heritage costs for postretirement medical and workers' compensation liabilities, ongoing operating losses at the Virginia division and the loss of above-market price coal contracts at that location in 1995 and mid-1996. WCX reported that it continues to review various options including the possible future downsizing, sale or shut-down of all or a portion of the Virginia Division, at which time it may be required to accelerate the recognition, for accounting purposes, of a significant portion of its postretirement medical liabilities. WCX also stated that the total amount of that recognition is not currently known, but the book impact of this non-cash expense on its shareholders' equity could affect its legal ability to pay preferred stock dividends. WCX is burdened by a difficult coal price environment and significant costs for retirees and idle mines that must be borne by a shrinking production base. If WCX cannot mine profitably or significantly curtails its mining activity, then Penn Virginia's cash flows would be adversely affected. A prolonged period of depressed prices for coal would affect the merchantability of the reserves leased to WCX and could ultimately result in a curtailment of production from Penn Virginia's reserves. In an effort to diversify the risks associated with having one principal lessee on the Company's West Virginia coal properties and more fully exploit the mineable coal reserves the Company obtained the relinquishment of the WCX Hampton leases in February, 1995. It is the Company's intent to have several lessees mining coal on this property by expanding the current mineable reserve base. Management is currently evaluating several options from po- tential coal lessees that could have a positive impact on coal royalty income in the future. The Company continues to evaluate its investment in WCX, and any deterioration in its financial condition that results in the carrying value for that investment being in excess of fair value could result in additional losses. Except for matters discussed above, management is not presently aware of any trends or demands which exist or uncertainties which are reasonably likely to result in the Company's liquidity increasing or decreasing in any material way. REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The accompanying condensed consolidated financial statements have been reviewed by the Company's independent certified public accountants, KPMG Peat Marwick LLP, in accordance with the established professional standards and procedures for such a limited review. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits Exhibit 15: Letter Re: Unaudited interim financial information. Exhibit 27: Financial data schedule for the three months ending March 31, 1995. (b) Reports on Form 8-K: No reports on Form 8-K were filed for the quarter ended March 31, 1995. 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. PENN VIRGINIA CORPORATION (Registrant) Date: May 15, 1995 A. James Dearlove (A. James Dearlove, President and Chief Operating Officer) Date: May 15, 1995 William M. Swenson (William M. Swenson, Assistant Controller) (Principal Accounting Officer) KPMG Peat Marwick LLP Certified Public Accountants 1600 Market Street Philadelphia, PA 19103 INDEPENDENT ACCOUNTANT'S REPORT The Board of Directors Penn Virginia Corporation: We have reviewed the accompanying condensed consolidated balance sheet of Penn Virginia Corporation and subsidiaries as of March 31, 1995 and the related condensed consolidated statements of income and cash flows for the three month periods ended March 31, 1995 and 1994. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical review pro- cedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of Penn Virginia Corporation and subsidiaries as of December 31, 1994, and the related consolidated statements of income, shareholders' equity and cash flows for the year then ended (not presented herein); and in our report dated March 1, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1994, is fairly presented, in all material respects in relation to the consolidated balance sheet from which it has been derived. KPMG PEAT MARWICK LLP KPMG PEAT MARWICK LLP Philadelphia, PA May 10, 1995 EXHIBIT INDEX Exhibit No. Description 15 Letter re unaudited interim financial information 27 Financial data schedule EX-15 2 KPMG Peat Marwick LLP Certified Public Accountants 1600 Market Street Philadelphia, PA 19103 Exhibit 15 Penn Virginia Corporation 200 S. Broad Street 800 The Bellevue Philadelphia, PA 19102 Re: Registration Statement Nos. 2-67355, 2-77500 and 33-40430 Gentlemen: With respect to the subject Registration Statements, we acknowledge our awareness of the use therein of our report dated May 10, 1995 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act, such report is not considered a part of a Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act. Very truly yours, KPMG PEAT MARWICK LLP KPMG PEAT MARWICK LLP May 15, 1995 EX-27 3 ARTICLE 5 FDS FOR 1ST QUARTER 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1995 AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31,1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1994 MAR-31-1995 3,455 0 6,924 0 607 14,017 140,407 35,885 217,954 13,845 0 27,734 0 0 113,550 217,954 3,663 8,344 724 724 4,289 0 386 2,945 303 2,642 0 0 0 2,642 .62 .62
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