-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QmfA0YfMQ+1zFjTPfZ4oyLocSfR+LSuji4aNwQqPZQRaX4mwYoD4RiDQ0/SIwX33 ZnyLtJDLjP28QnoH5sosWg== /in/edgar/work/20001101/0000077159-00-000049/0000077159-00-000049.txt : 20001106 0000077159-00-000049.hdr.sgml : 20001106 ACCESSION NUMBER: 0000077159-00-000049 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN VIRGINIA CORP CENTRAL INDEX KEY: 0000077159 STANDARD INDUSTRIAL CLASSIFICATION: [1311 ] IRS NUMBER: 231184320 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13283 FILM NUMBER: 750878 BUSINESS ADDRESS: STREET 1: 100 MATSONFORD ROAD SUITE 200 STREET 2: ONE RADNOR CORPORATE CENTER CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 6106878900 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 0001.txt 16 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 period ended September 30, 2000 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to 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.) 100 MATSONFORD ROAD SUITE 200 RADNOR, PA 19087 (Address of principal executive offices) (Zip Code) (610) 687-8900 (Registrant's telephone number, including area code) (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 October 31, 2000: 8,327,324 PENN VIRGINIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME - Unaudited (in thousands, except per share amounts) Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 Revenues: Natural gas $ 13,032 $ 5,950 $ 30,495 $ 14,830 Oil and condensate 194 128 615 293 Coal royalties 5,512 4,283 16,815 12,257 Timber 637 664 1,812 1,170 Dividends 661 661 1,984 1,984 Gain on sale of property 801 - 899 - Other income 670 620 3,596 1,718 Total revenues 21,507 12,306 56,216 32,252 Expenses: Operating expenses 1,273 1,122 3,614 3,125 Exploration expenses 1,258 696 2,653 1,370 Taxes other than income 931 662 2,800 1,985 General and administrative 2,599 2,198 7,641 6,345 Depreciation, depletion, amortization 3,191 2,198 8,659 6,120 Total expenses 9,011 6,876 25,126 18,945 Operating Income 12,255 5,430 30,849 13,307 Other (Income) Expense: Interest expense 2,379 793 5,643 1,864 Other income (389) (351) (1,097) (1,072) Income before income tax 10,265 4,988 26,303 12,515 Income tax expense 3,063 1,043 7,576 2,490 Net Income $ 7,202 $ 3,945 $ 18,727 $ 10,025 Net Income per share, basic $ 0.88 $ 0.47 $ 2.28 $ 1.19 Net Income per share, diluted $ 0.85 $ 0.46 $ 2.25 $ 1.18 Weighted average shares outstanding, basic 8,213 8,423 8,203 8,401 Weighted average shares outstanding, diluted 8,473 8,532 8,312 8,490
The accompanying notes are an integral part of these condensed consolidated financial statements. PENN VIRGINIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) September 30, December 31, 2000 1999 (Unaudited) ASSETS Current assets Cash and cash equivalents $ 364 $ 657 Accounts receivable 9,136 6,880 Current portion of long-term notes receivable 845 816 Current deferred income taxes 155 155 Other 582 813 Total current assets 11,082 9,321 Investments 47,984 67,816 Long-term notes receivable 2,798 3,518 Oil and gas properties; wells and equipment, using the successful efforts method of accounting 236,567 185,048 Other property and equipment 83,677 82,772 Less: Accumulated depreciation, depletion and amortization (84,857) (76,553) Total property and equipment 235,387 191,267 Other assets 1,846 2,089 Total assets $299,097 $274,011
The accompanying notes are an integral part of these condensed consolidated financial statements. PENN VIRGINIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) September 30, December 31, 2000 1999 (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current installments on long-term debt $ 34 $ 34 Accounts payable 1,698 1,570 Accrued expenses 5,003 5,470 Taxes on income 1,842 - Total current liabilities 8,577 7,074 Other liabilities 5,321 5,854 Deferred income taxes 23,758 28,265 Long-term debt 108,300 78,475 Shareholders' equity Preferred stock of $100 par value- 100,000 shares authorized; none issued - - Common stock of $6.25 par value- 16,000,000 shares authorized; 8,921,864 issued 55,762 55,762 Other paid-in capital 7,557 8,096 Retained earnings 74,065 60,860 Accumulated other comprehensive income 29,126 42,017 166,510 166,735 Less: 610,077 shares in 2000 and 498,238 in 1999 of common stock held in treasury, at cost 12,269 11,142 Unearned compensation - ESOP 1,100 1,250 Total shareholders' equity 153,141 154,343 Total liabilities and shareholders' equity $ 299,097 $ 274,011
The accompanying notes are an integral part of these condensed consolidated financial statements. PENN VIRGINIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED CASH FLOW STATEMENTS - Unaudited (in thousands) Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 Cash flow from operating activities: Net Income $ 7,202 $ 3,945 $18,727 $10,025 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization 3,191 2,198 8,659 6,120 Gain on sale of property and equipment (801) - (899) - Deferred income taxes 1,168 767 2,434 1,004 Dry hole expense 732 481 1,141 601 Other (307) (323) (937) (978) Changes in operating assets and liabilities: Current assets 383 (1,317) (2,026) (488) Current liabilities (354) 404 1,505 (1,740) Other assets (4) (321) 161 (316) Other liabilities (123) (122) (532) (369) Net cash provided by operating activities 11,087 5,712 28,233 14,597 Cash flows from investing activities: Proceeds from notes receivable 567 417 1,710 1,252 Proceeds from sale of property and equipment 801 - 902 - Capital expenditures (7,582) (49,418) (53,926) (54,253) Net cash used in investing activities (6,214) (49,001) (51,314) (53,001) Cash flows from financing activities: Dividends paid (1,843) (1,895) (5,521) (5,673) Debt borrowings (payments), net (5,205) 45,025 29,825 42,721 Purchase of treasury stock - - (5,056) - Issuance of stock 2,539 63 3,540 1,131 Net cash provided by (used in) financing activities (4,509) 43,176 38,179 (38,179) Net increase (decrease) in cash and cash equivalents 364 (113) (293) (225) Cash and cash equivalents-beginning - 113 657 225 Cash and cash equivalents-ending $ 364 $ - $ 364 $ - Supplemental disclosures of cash flow information: Cash paid to date for: Interest $ 2,226 $ 842 $ 5,161 $ 1,907 Income taxes 1,500 - 3,300 1,600
The accompanying notes are an integral part of these condensed consolidated financial statements. PENN VIRGINIA CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 (1) ACCOUNTING POLICIES The accompanying unaudited consolidated financial statements of Penn Virginia Corporation and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial reporting and SEC regulations. These statements involve the use of estimates and judgments where appropriate. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the Company's consolidated financial statements and footnotes included in the Company's December 31, 1999 annual report on Form 10-K. Operating results for the nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. (2) ACQUISITIONS In May 2000, Penn Virginia successfully completed the purchase of over 35 Bcf of proved natural gas reserves in West Virginia, Virginia and Kentucky for $34.9 million. In September 1999, the Company acquired fee mineral and lease rights for coal reserves and related assets in West Virginia. Both acquisitions were funded by borrowings from the Company's revolving credit facility (the "Revolver") and accounted for at fair value. The operations have been included in the Company's statement of income as of the closing date. The following unaudited pro forma results of operations have been prepared as though the aforementioned acquisitions had been completed on January 1, 1999. The unaudited pro forma results of operations consist of the following (in thousands, except share data): Three Months Nine Months Ended September 30, 2000 Ended September 30, 2000 2000 1999 2000 1999 Revenues $21,507 $26,844 $58,559 $39,802 Net income $ 7,202 $ 3,966 $19,191 $10,553 Net income per share, diluted $ 0.85 $ 0.46 $ 2.31 $ 1.24
The summarized pro forma information has been prepared for comparative purposes only. (3) SECURITIES The cost, gross unrealized holding gains or losses and market value for available-for-sale securities at September 30, 2000 were as follows (in thousands): Gross Unrealized Market Cost Holding Gain Value Available-for-Sale: Norfolk Southern Corporation $ 2,839 $45,115 $47,954 Other - 30 30 $ 2,839 $45,145 $47,984
(4) LEGAL The Company is involved in various legal proceedings arising in the ordinary course of business. While the ultimate results of these cannot be predicted with certainty, Company management believes these claims will not have a material effect on the Company's financial position, liquidity or operations. (5) NET INCOME PER SHARE The following is a reconciliation of the numerators and denominators used in the calculation of basic and diluted net income per share (in thousands, except per share amounts): Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 Net Income $ 7,202 $ 3,945 $18,727 $10,025 Weighted average shares, basic 8,213 8,423 8,203 8,401 Dilutive securities: Stock options 260 109 109 89 Weighted average shares, diluted 8,473 8,532 8,312 8,490 Net Income per share, basic $ 0.88 $ 0.47 $ 2.28 $ 1.19 Net Income per share, diluted $ 0.85 $ 0.46 $ 2.25 $ 1.18
(6) COMPREHENSIVE INCOME Comprehensive income represents all changes in equity during the reporting period, including net income and charges directly to equity, which are excluded from net income. For the three and nine month periods ended September 30, 2000 and 1999, the components of comprehensive income are as follows (in thousands): Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 Net income $ 7,202 $ 3,945 $18,727 $10,025 Unrealized holding loss, net of tax of $430, $6,513, $6,941 and $8,320, respectively (798) (12,093) (12,891) (15,452) Comprehensive income (loss) $ 6,404 $(8,148) $ 5,836 $(5,427)
(7) SEGMENT INFORMATION Penn Virginia's operations are classified into two operating segments: Oil and Gas - crude oil and natural gas exploration, development and production. Coal Royalty and Land Management - the leasing of mineral rights and subsequent collection of royalties and the development and harvesting of timber. Coal Royalty and Land Corporate Oil and Gas Management and Other Consolidated (in thousands) For the nine months ended September 30, 2000 Revenues $31,523 $22,709 $ 1,984 $56,216 Operating income (loss) 17,754 16,371 (3,276) 30,849 Other income and expense, net 4,546 For the nine months ended September 30, 1999 Revenues $15,716 $14,551 $1,985 $32,252 Operating income (loss) 3,285 11,385 (1,363) 13,307 Other income and expense, net 792 Identifiable assets September 30, 2000 $169,137 $ 81,119 $ 48,841 $299,097 December 31, 1999 120,954 83,975 69,082 274,011
Operating income is total revenue less operating expenses. Operating income does not include certain other income items, gain (loss) on sale of securities, unallocated general corporate expenses, interest expense and income taxes. Identifiable assets are those assets used in the Company's operations in each segment. Corporate assets are principally cash and marketable securities. (8) RECENT ACCOUNTING ISSUES In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133, as amended by SFAS 137 and SFAS 138, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, (collectively referred to as derivatives) and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to changes in the fair value of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-forsale security, or a foreign-currency-denominated forecasted transaction. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the statements of income. Under present conditions, management does not expect the initial adoption of SFAS 133, as amended, to have a material effect on the Company's financial position, results of operations or liquidity. The Company is required to adopt the statements in the first quarter of 2001. In December 1999, the Securities and Exchange ("SEC") issued Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101, as amended, summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. At this time, management does not expect the adoption of SAB 101 to have a material effect on the Company's financial position, results of operations or liquidity. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Penn Virginia operates two primary business segments: oil and gas, and coal royalty and land management. The oil and gas segment explores for, develops and produces crude oil and natural gas in the eastern and southern portions of the United States, particularly in Appalachia. The coal royalty and land management segment includes Penn Virginia's mineral rights to coal reserves, timber assets and land assets. The Company earns coal royalty revenue, based on long-term lease agreements with several coal mining operators which generally require royalty payments to Penn Virginia based on a minimum annual payment, a minimum dollar royalty per ton and/or a percentage of the coal's gross sales price. On May 31, 2000, the Company successfully completed the purchase of certain oil and gas mineral rights in West Virginia, Virginia and Kentucky for $34.9 million. The acquisition was funded by borrowings from the Company's revolving credit facility and estimated proved reserves, net to the Company's interests, approximate 35 Bcfe. Results of Operations - Third quarters of 2000 and 1999 compared. Penn Virginia reported 2000 third quarter net income of $7.2 million, or $0.85 per share (diluted), compared with $3.9 million, or $0.46 per share (diluted), for the third quarter of 1999. On a consolidated basis, operating income increased $6.8 million in the third quarter of 2000 primarily due to a $5.4 million increase in the oil and gas segment and a $1.6 million increase in the coal royalty and land management segment. Results of Operations - Nine months of 2000 and 1999 compared. Penn Virginia's net income for the nine months ended September 30, 2000 was $18.7 million, or $2.25 per share (diluted), compared with $10.0 million, or $1.18 per share (diluted), for the 1999 comparable period. On a consolidated basis, operating income increased $17.5 million primarily as a result of an $11.6 million increase in the oil and gas segment and a $6.6 million increase in the coal and land segment. Selected operating and financial data by segment is presented below. Oil and Gas Segment Operating income for the oil and gas segment was $15.2 million for the nine months ended September 30, 1999, compared with $3.3 million for the same period in 1999. Operational and financial data for the Company's oil and gas segment for the three and nine months ended September 30, 2000 and 1999 is as follows: Operations Summary Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 Production Natural gas (MMcf) 3,107 2,316 8,439 6,398 Oil and condensate (MBbls) 7 8 24 24 Production, MMcfe 3,149 2,364 8,583 6,542 Average Realized Prices Natural gas ($/Mcf) $ 4.19 $ 2.57 $ 3.61 $ 2.32 Oil and condensate ($/Bbl) 27.57 17.07 25.63 12.47 Average Costs (per Mcfe) Lease operating $ 0.36 $ 0.47 $ 0.38 $ 0.47 Exploration expenses 0.35 0.25 0.27 0.16 Taxes other than income 0.24 0.22 0.25 0.24 General and administrative 0.20 0.22 0.21 0.24 Depreciation, depletion and amortization 0.84 0.79 0.82 0.79 Total costs $ 1.99 $ 1.95 $ 1.93 $ 1.90
In the first nine months of 2000, over 80 percent of Penn Virginia's natural gas production was sold at market prices. Currently, the Company has fixed price term contracts totaling 9,300 Mcf per day which began in the second quarter of 2000 and expire in December 2000 and March 2001 at an average of $3.39 per Mcf. Management believes these fixed price term contracts should account for approximately onefourth of remaining 2000 production. The Company will, when circumstances warrant, hedge the price received through fixed price term contracts and/or financial instruments (such as futures, forward and option contracts and swaps) to mitigate the price risks associated with fluctuations in natural gas prices as they relate to the Company's anticipated production. If applicable, gains and losses from hedging activities are included in natural gas revenues when the hedged production occurs. Currently, the Company is not involved in any such hedging activities; however, the Company recognized a $0.3 million and a $0.2 million hedging loss for the three and nine months ended September 30, 1999. The following table shows the effect of hedging activities on the Company's working interest natural gas prices: Hedging Summary Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 Natural gas prices ($/Mcf): Actual price received for production $ 4.19 $ 2.70 $ 3.61 $ 2.36 Effect of hedging activities - (.13) - (.04) Average price $ 4.19 $ 2.57 $ 3.61 $2.32
Financial Summary Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 (in thousands) Revenues: Natural gas sales $13,032 $5,950 $30,495 $14,830 Oil and condensate 194 128 615 293 Gain on sale of property 6 - 6 - Other 88 144 407 593 Total revenues 13,318 6,222 31,523 15,716 Expenses: Operating expenses 1,152 1,101 3,254 3,053 Exploration expenses 1,087 595 2,267 1,043 Taxes other than income 755 530 2,181 1,561 General and administrative 625 519 1,840 1,582 Depreciation and depletion 2,651 1,863 7,070 5,192 Total expenses 6,270 4,608 16,612 12,431 Operating income $ 7,048 $ 1,614 $14,911 $ 3,285
Results of Operations - Oil and Gas Segment Revenues. Revenues increased to $13.3 million and $31.5 million for the three and nine months ended September 30, 2000 from $6.2 million and $15.7 million in the comparable 1999 periods. These increases were a result of a substantial increase in natural gas production and prices received. Natural gas sales increased 119 percent to $13.0 million in the third quarter of 2000 and 106 percent to $30.5 million for the first nine months of 2000, compared with the 1999 comparable periods. Natural gas volumes increased 34 percent and 32 percent for the three and nine months ended September 30, 2000, respectively, while the average price received increased 63 percent and 56 percent for the same periods. The Company's ambitious drilling program and acquisitions are the contributing factors for the increased production. Oil and condensate revenues increased 52 percent to $194,000 and 110 percent to $322,000 for the three and nine months ended September 30, 2000 from the comparable periods in 1999. These increases are attributable to increases in the average price received. Prices increased $10.50 per Bbl, or 62 percent, for the third quarter of 2000 compared with the same period of 1999 and $13.16 per Bbl, or 106 percent, for the first nine months of 2000 compared with the same period of 1999. Expenses. Expenses for the oil and gas segment increased to $6.0 million and $16.4 million for the three and nine months ended September 30, 2000, respectively, compared with $4.6 million and $12.4 million for the same periods in 1999. Lease operating expenses, on a Mcfe basis, decreased to $0.36 and $0.38 for the three and nine months ended September 30, 2000 from $0.47 for the same periods in 1999. The decrease was due to lower operating costs associated with the Company's Mississippi properties, the Company's recent $34.9 million acquisition of royalty gas and to several repair and maintenance projects performed in 1999. Exploration expenses increased to $1.1 million and $2.3 million for the three and nine months ended September 30, 2000 from $595,000 and $1.0 million for the same periods in 1999. These increases are attributable to increased dry hole costs related to the Company's ambitious drilling program and the purchase of additional seismic data. Taxes other than income, on a Mcfe basis, increased to $0.24 and $0.25 for the three and nine months ended September 30, 2000 from $0.22 and $0.24 for the same 1999 periods. The increase is attributable to increased severance taxes paid as a result of higher prices received for oil and gas. General and administrative expenses, on a Mcfe basis, decreased to $0.20 and $0.21 for the three and nine months ended September 30, 2000 from $0.22 and $0.24 for the same periods in 1999. The decrease is a result of increased production from drilling and acquisitions, offset by additional staffing needs for acquisitions. Depreciation and depletion, on a Mcfe basis, increased to $0.84 and $0.82 for the third quarter and first nine months of 2000 from $0.79 for both periods in 1999. The Company's recent acquisitions are the primary reason for the marginal increase in both periods. Coal Royalty and Land Management Segment Operating income for the coal and land segment was $18.0 million for the first nine months of 2000 and $11.4 million for the comparable period of 1999. The segment's operational and financial data for the three and nine months ended September 30, 2000 and 1999 is as follows: Operations Summary Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 Production Coal royalty tons (000's) 3,059 2,116 9,275 5,865 Timber (Mbf) 1,939 3,631 6,931 6,322 Average Realized Prices Coal royalties ($/ton) $ 1.80 $ 2.02 $ 1.81 $ 2.09 Timber ($/Mbf) 304 193 241 202
Financial Summary Three Months Nine Months Ended September 30, Ended September 30, 2000 1999 2000 1999 (in thousands) Revenues: Coal royalties $ 5,512 $ 4,283 $16,815 $12,257 Timber sales 637 664 1,812 1,170 Gain on sale of property 795 - 893 - Other income 583 475 3,189 1,124 Total revenues 7,527 5,422 22,709 14,551 Expenses: Operating expenses 122 21 361 72 Exploration expenses 132 89 283 154 Taxes other than income 149 102 479 316 General and administrative 755 614 2,069 1,797 Depreciation and depletion 495 294 1,522 827 Total expenses 1,653 1,120 4,714 3,166 Operating income $ 5,874 $ 4,302 $17,995 $11,385
Results of Operations - Coal Royalty and Land Management Segment Revenues. Revenues increased to $7.5 million in the third quarter of 2000 and $22.7 million for the first nine months of 2000 compared with $5.4 million and $14.6 million for the same periods in 1999. Coal royalties increased $1.2 million to $5.5 million in the third quarter of 2000 and $4.6 million to $22.7 million for the first nine months of 2000 compared with the same periods in 1999. These increases are attributable to increased production from existing lessees due to the completion of the Company's unit train loadout facility as well as the September 1999 acquisition of coal reserves in West Virginia. Timber sales remained constant for the third quarter of 2000 compared with the same 1999 period. Timber sales increased to $1.8 million for the nine months ended September 30, 2000 from $1.2 million in the comparable 1999 period. The increase is attributable to an increase in the amount of timber harvested as well as a modest increase in the average price received. The average realized price increased from $202 per Mbf for the nine months ended September 30, 1999 to $241 per Mbf for the comparable period in 2000. Other income increased $108,000 in the third quarter of 2000 and $2.1 million for the first nine months of 2000 compared with the same periods in 1999. These increases are largely due to $1.5 million received from the use of the unit train loadout facility by third parties in the first nine months of 2000 compared with $637,000 in the same period of 1999 and the receipt of $853,000 in forfeited minimums received from the Company's lessees. Expenses. Expenses increased to $1.7 million in the third quarter of 2000 and to $4.7 million for the first nine months of 2000 compared with $1.1 and $3.2 million for the same periods in 1999 primarily due to increases in general and administrative expenses and depreciation and depletion. Operating expenses increased to $122,000 and $361,000 for the three and nine months ended September 30, 2000, from $21,000 and $72,000 for the same periods in 1999. The increases are a result of costs associated with the maintenance and preservation of the Company's surface acreage. Taxes other than income for the three and nine months ended September 30, 2000 increased to $149,000 and $479,000 from $102,000 and $316,000 for the comparable periods in 1999. The increases are attributable to the Company's $30 million acquisition of coal reserves in September 1999. General and administrative expenses, on a per ton basis, decreased to $0.25 in the third quarter of 2000 and $0.22 for the first nine months of 2000 compared with $0.29 and $0.31 million for the same periods in 1999. The decrease is primarily due to the increase in lessee production and higher legal fees in 1999 to pursue the recoverability of coal reserves. Depreciation and depletion increased to $495,000 and $1.5 million for the three and nine months ended September 30, 2000 from $294,000 and $827,000 for the 1999 comparable periods. Depreciation and depletion, on a per ton basis, was $0.16 for the three and nine month periods ended September 30, 2000 compared with $0.14 for both periods in 1999. The depletion rate, on a per ton basis, increased due to the 1999 completion of the unit train loadout and the Company's $30 million acquisition in September 1999. Capital Resources and Liquidity. Net Cash Provided by Operating Activities. Funding for the Company's business activities has historically been provided by operating cash flows and bank borrowings. Net cash provided by operating activities was $28.2 million in the first nine months of 2000 compared with $14.6 million in the first nine months of 1999. Net Cash Used in Investing Activities. In the first nine months of 2000, capital expenditures totaled $53.9 million compared with $54.3 million in the first nine months of 1999. Acquisitions and oil and gas development activities were the primary uses of funds. The capital expenditures, including acquisitions, made by the Company for the first nine months of 2000 and 1999 are as follows: Nine Months Ended September 30, 2000 1999 (in thousands) Oil and Gas Segment Acquisitions $36,703 $14,066 Development 12,574 6,266 Exploration 3,508 953 Support equipment 233 156 Coal and Land Segment Acquisitions 111 30,698 Support equipment and facilities 559 2,070 Other 238 44 Total capital expenditures $53,926 $54,253
In the oil and gas segment, the Company had capital expenditures totaling $53.0 million in the first nine months of 2000. In May 2000, Penn Virginia successfully completed the purchase of oil and gas mineral rights to approximately 35 Bcf of proved natural gas reserves in West Virginia, Virginia and Kentucky for $34.9 million. Additionally, the Company drilled 80 gross (62.1 net) development wells and 14 gross (8.7 net) exploratory wells in the first nine months of 1999. Due to increases in market prices for natural gas, the Company increased its 2000 capital budget to drill approximately 80 net development wells and 10 to 20 net exploratory wells. The Company also holds an investment in Norfolk Southern common stock which had a gross unrealized holding gain of $45.1 million at September 30, 2000. Net Cash Used in Financing Activities. Net cash provided by financing activities totaled $22.8 million and $38.2 million for the first nine months of 2000 and 1999, respectively. Net borrowings totaled $29.8 for the first nine months of 2000 and were used to fund oil and gas acquisitions. The Company also dividended $5.6 million in 2000 and purchased 300,000 common shares of Company stock outstanding for $5.1 million. The Company has a $120 million unsecured revolving credit facility (the "Revolver") with a final maturity of June 2003. The Revolver bears interest at LIBOR or the base rate at the option of the Company plus a percentage based on the borrowing base outstanding. The outstanding balance on the Revolver was $107.5 million at September 30, 2000. Management believes its portfolio of investments and sources of funding are sufficient to meet any liquidity needs not funded from by cash flows from operations. Forward-Looking Statements. Statements included in this report which are not historical facts (including any statements concerning plans and objectives of management for future operations or economic performance, or assumptions related thereto) are forwardlooking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. In addition, Penn Virginia and its representatives may from time to time make other oral or written statements which are also forwardlooking statements. Such forward-looking statements include, among other things, statements regarding development activities, capital expenditures, acquisitions and dispositions, drilling and exploration programs, expected commencement dates of coal mining or oil and gas production, projected quantities of future oil and gas production by Penn Virginia, projected quantities of future coal production by the Company's lessees producing coal from reserves leased from Penn Virginia, costs and expenditures as well as projected demand or supply for coal and oil and gas, which will affect sales levels, prices and royalties realized by Penn Virginia. These forward-looking statements are made based upon management's current plans, expectations, estimates, assumptions and beliefs concerning future events impacting Penn Virginia and therefore involve a number of risks and uncertainties. Penn Virginia cautions that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause the actual results of operations or financial condition of Penn Virginia to differ include, but are not necessarily limited to: the cost of finding and successfully developing oil and gas reserves; the cost of finding new coal reserves; the ability to acquire new oil and gas and coal reserves on satisfactory terms; the price for which such reserves can be sold; the volatility of commodity prices for oil and gas and coal; the risks associated with having or not having price risk management programs; Penn Virginia's ability to lease new and existing coal reserves; the ability of Penn Virginia's lessees to produce sufficient quantities of coal on an economic basis from Penn Virginia's reserves; the ability of lessees to obtain favorable contracts for coal produced from Penn Virginia reserves; Penn Virginia's ability to obtain adequate pipeline transportation capacity for its oil and gas production; competition among producers in the coal and oil and gas industries generally and in the Appalachian Basin in particular; the extent to which the amount and quality of actual production differs from estimated recoverable coal reserves and proved oil and gas reserves; unanticipated geological problems; availability of required materials and equipment; the occurrence of unusual weather or operating conditions including force majeure or events; the failure of equipment or processes to operate in accordance with specifications or expectations; delays in anticipated start-up dates; environmental risks affecting the drilling and producing of oil and gas wells or the mining of coal reserves; the timing of receipt of necessary governmental permits; labor relations and costs; accidents; changes in governmental regulation or enforcement practices, especially with respect to environmental, health and safety matters, including with respect to emissions levels applicable to coal-burning power generators; risks and uncertainties relating to general domestic and international economic (including inflation and interest rates) and political conditions; the experience and financial condition of lessees of coal reserves, joint venture partners and purchasers of reserves in transactions financed by Penn Virginia, including their ability to satisfy their royalty, environmental, reclamation and other obligations to Penn Virginia and others; changes in financial market conditions; changes in the market prices or value of the marketable securities owned by Penn Virginia, including the price of Norfolk Southern common stock and other risk factors detailed in Penn Virginia's Securities and Exchange commission filings. Many of such factors are beyond Penn Virginia's ability to control or predict. Readers are cautioned not to put undue reliance on forward-looking statements. While Penn Virginia periodically reassesses material trends and uncertainties affecting Penn Virginia's results of operations and financial condition in connection with the preparation of Management's Discussion and Analysis of Results of Operations and Financial Condition and certain other sections contained in Penn Virginia's quarterly, annual or other reports filed with the Securities and Exchange Commission, Penn Virginia does not intend to publicly review or update any particular forward-looking statement, whether as a result of new information, future events or otherwise. PART II Other information Item 5. Shareholder Proposals Any shareholder who, in accordance with and subject to the provisions of the proxy rules of the Securities and Exchange commission, wishes to submit a proposal for inclusion in the Company's proxy statement for its 2001 Annual Meeting of Shareholders must deliver such proposal in writing to the Company's Secretary at the Company's principal executive offices at One Radnor Corporate Center, Suite 200, 100 Matsonford Road, Radnor, Pennsylvania 19087, not later than November 27, 2000. Pursuant to new amendments to Rule 14a- 4(c) of the Securities Exchange Act of 1934, as amended, and the Company's By-laws, if a shareholder who intends to present a proposal at the 2001 Annual Meeting of Shareholders does not notify the Company of such proposal on or prior to the earlier of 90 days prior to the date of the 2001 Annual Meeting or February 1, 2001, then management proxies will be permitted to use their discretionary authority to vote on the proposal when the proposal is raised at the 2001 Annual Meeting of Shareholders, even though there is no discussion of the proposal in the 2001 proxy statement. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits (27) Financial Data Schedule, filed herewith. (b) Reports on Form 8-K No reports on Form 8-K were filed for the quarter ended September 30, 2000. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PENN VIRGINIA CORPORATION Date: November 1, 2000 By:/s/ Steven W. Tholen Steven W. Tholen, Vice President and Chief Financial Officer Date: November 1, 2000 By:/s/ Ann N. Horton Ann N. Horton, Controller and Principal Accounting Officer PENN VIRGINIA CORPORATION INDEX PAGE PART I Financial Information: Item 1. Financial Statements Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2000 and 1999 1 Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 2 Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2000 and 1999 4 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II Other Information Item 5. Shareholder Proposals 17 Item 6. Exhibits and Reports on Form 8-K 17 Article 5 of Regulation S-X EX-27 2 0002.txt ART. 5 FDS FOR 3RDQUARTER 10-Q
5 1000 9-MOS DEC-31-2000 SEP-30-2000 0 0 9,136 0 0 11,082 320,485 84,857 299,338 8,665 0 0 0 55,762 97,532 299,338 49,737 56,216 3,614 3,614 21,512 0 5,643 26,544 7,664 18,880 0 0 0 18,880 2.30 2.27
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