-----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, p2/0bB9LBNAjdIp2g4DC1wEBd7IcnJdv8+5T77zc1fgavN2s4uPg7i4c9cf8R34F CCP6ncuGCLe8tLmGep4V8Q== 0000077159-94-000005.txt : 19940819 0000077159-94-000005.hdr.sgml : 19940819 ACCESSION NUMBER: 0000077159-94-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN VIRGINIA CORP CENTRAL INDEX KEY: 0000077159 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94543932 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 June 30, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 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 June 30, 1994: 4,279,540 PENN VIRGINIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Six Months Ended June 30, Ended June 30,
1994 1993 1994 1993 (In thousands, except per share data) Operating revenues: Sales $ 101 $ 10 $ 222 $ 133 Coal royalties 3,848 3,424 7,376 6,567 Oil and gas sales and royalties 4,039 3,554 8,380 7,574 Dividends 857 589 1,434 1,130 Other income, net 481 644 1,059 1,015 Total 9,326 8,221 18,471 16,419 Expenses: Cost of sales 801 672 1,441 1,313 Selling, general and administrative 1,689 1,799 3,371 3,404 Exploration and development 185 155 254 398 Depreciation, depletion and amortization 1,481 1,300 3,032 2,665 Taxes other than on income 355 426 764 859 Interest 420 471 874 952 Total 4,931 4,823 9,736 9,591 Income from operations 4,395 3,398 8,735 6,828 Income taxes 1,118 820 2,218 1,652 Net income $ 3,277 $ 2,578 $ 6,517 $ 5,176 Income per common share (based on 4,279,540 weighted average shares outstanding in 1994 and 1993): $ .76 $ .60 $ 1.52 $ 1.21 See accompanying notes to condensed consolidated financial statements.
PENN VIRGINIA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands of Dollars)
(UNAUDITED) June 30, 1994 December 31, 1993 ASSETS Current assets Cash and cash equivalents $ 9,847 $ 23,869 Receivables 5,058 3,880 Current portion of long-term notes receivable 3,571 3,571 Inventory 638 438 Current deferred tax benefit 669 669 Other 868 514 Total current assets 20,651 32,941 Investments 85,544 94,562 Long-term notes receivable, net of current portion 10,210 11,841 Property, plant and equipment (net) 80,347 74,093 Other assets 805 822 Total assets $ 197,557 $ 214,259
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current installments on long-term debt $ 7,625 $ 7,625 Accounts payable 1,110 4,456 Accrued expenses 3,493 4,535 Deferred income 207 214 Taxes on income - 587 Total current liabilities 12,435 17,417 Other liabilities 7,491 7,669 Deferred taxes 31,685 34,821 Long-term debt, net of current installments 11,050 16,575 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 1994 and 1993 27,734 27,734 Other paid-in capital 34,685 34,685 Retained earnings 33,283 30,603 95,702 93,022 Less: 157,977 shares in 1994 and 1993 of common stock held in treasury 7,435 7,435 Guaranteed debt to Employee Stock Ownership Plan 600 900 Add: Unrealized holding gain, net of tax- investments 47,229 53,090 Total shareholders' equity 134,896 137,777 Total liabilities and shareholders' equity $ 197,557 $ 214,259 See accompanying notes to condensed consolidated financial statements.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, (In Thousands)
1994 1993 Cash flows from operating activities: Net cash flows from operating activities $ 2,259 $ 8,606 Cash flows from (used in) investing activities: Payment received on long-term notes 2,057 1,917 Proceeds from the sale of fixed assets - 73 Purchases of fixed assets (9,277) (2,753) Net cash flows (used in) investing activities (7,220) (763) Cash flows from (used in) financing activities: Dividends paid (3,836) (3,825) Repayment of long-term borrowings (5,525) (1,725) Reduction in Guaranteed debt to ESOP 300 300 Net cash flows (used in) financing activitie (9,061) (5,250) Net increase (decrease) in cash and cash equivalents (14,022) 2,593 Cash and cash equivalents - beginning balance 23,869 4,153 Cash and cash equivalents - ending balance $ 9,847 $ 6,746 Supplemental disclosures of cash flow information: Cash paid to date for: Interest $ 1,097 $ 891 Income taxes $ 2,770 $ 1,052 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 consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 1994, and the results of operations for the three and six months ended June 30, 1994 and 1993 and cash flows for the six months ended June 30, 1994 and 1993. At December 31, 1993, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". 2. Property, plant and equipment consist of the following: June 30, 1994 December 31, 1993 (In thousands) Property, plant and equipment $ 111,166 $ 101,940 Less: Accumulated depreciation and depletion (30,819) (27,847) Net property, plant and equipment $ 80,347 $ 74,093 During the second quarter of 1994, Penn Virginia Oil and Gas Corporation (PVOG) acquired the assets of CD & G Development Corporation of Pikeville, Kentucky for approximately $7 million. The CD & G assets include 116 producing oil and gas wells with proved reserves estimated at 17.5 billion cubic feet of gas. The CD & G acquisition, which increased PVOG's proven reserves by approximately 10%, also includes approximately sixty future drilling locations as well as numerous recompletion opportunities and provides an excellent fit with PVOG's existing properties in eastern Kentucky and West Virginia. 3. The amortized cost, gross unrealized holding gains and fair value for available-for-sale securities at June 30, 1994 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 72,655 75,751 $ 12,889 $ 72,655 $ 85,544 The amortized cost and fair value of notes receivable which are classified as held-to-maturity securities was $13,781,000 at June 30, 1994. Management's Discussion and Analysis of Results of Operations and Financial Condition Results of operations for the quarter ended June 30, 1994 as compared to the quarter ended June 30, 1993: Income from operations before income taxes increased $997,000 or 29% for the second quarter of 1994 compared to the second quarter of 1993. This in- crease is composed of a $598,000 increase in the coal and land segment, a $383,000 increase in the investment segment, a $166,000 decrease in the oil and gas segment and a $182,000 decrease in general corporate expenses and interest. Income taxes increased as a result of an increase in book taxable income for the second quarter of 1994. Coal and Land Three Months Ended June 30, 1994 1993 (Thousands of dollars) Revenues: Sales $ 101 $ 10 Royalties 3,848 3,424 Other 298 290 Total 4,247 3,724 Expenses: Cost of sales 15 21 Selling, general and administrative 285 358 Exploration and development 51 43 Depreciation, depletion and amortization 43 50 Taxes other than on income 33 30 Total 427 502 Operating Profit $ 3,820 $ 3,222 The increase in the coal and land segment operating profit of $598,000 or 19% is mainly attributable to increased coal royalties from independent coal lessees and Westmoreland Coal Company's Virginia operations of $285,000 and $204,000 respectively, due to increased tonnage and also to an increase in bulk timber sales of $91,000. Penn Virginia Corporation received royalties from Westmoreland Coal Company totalling $2,941,000 and $2,801,000 for the three months ending June 30, 1994 and 1993 respectively. Investments Three Months Ended June 30, 1994 1993 (Thousands of dollars) Revenues: Dividends $ 857 $ 589 Other 99 - Total 956 589 Expenses: Selling, general and administrative 16 32 Depreciation 2 2 Total 18 34 Operating Profit $ 938 $ 555 The increase in the investment segment operating profit of $383,000 or 69% is mainly attributable to increased dividend income of $268,000 due to the timing of Westmoreland Resources, Inc. dividend receipt. Interest income earned on short-term investments increased $99,000 and legal expenses decreased $27,000 offset in part by an increase of $11,000 in salary expense. Oil and Gas Three Months Ended June 30, 1994 1993 (Thousands of dollars) Revenues: Sales $ 3,579 $ 3,113 Royalties 460 441 Other 30 307 Total 4,069 3,861 Expenses: Cost of sales 787 651 Selling, general and administrative 662 545 Exploration and development 134 113 Depreciation, depletion and amortization 1,426 1,235 Taxes other than on income 287 378 Total 3,296 2,922 Operating Profit $ 773 $ 939 Operating profit for the oil and gas segment decreased $166,000 or 18%. This decrease is due mainly to a decrease in other income of $277,000, an increase in cost of sales of $136,000, an increase of $117,000 in selling general and administrative expenses and an increase in depreciation, depletion and amortization of $191,000 offset in part by a decrease in taxes other than on income of $91,000 and an increase in oil and gas sales of $466,000. The decrease in other income of $277,000 is due mainly to a one-time payment for leased property received in 1993. The increase in cost of sales of $136,000 correlates to the increased oil and gas sales volume activity during the second quarter of 1994. Depreciation, depletion and amortization increased $191,000 due primarily to higher depletion rates and increased oil and gas sales volume. Selling, general and administrative expenses increased $117,000 due mainly to company personnel relocation expenses and the move of Penn Virginia Oil and Gas Corporation's headquarters from Duffield, Virginia to Kingsport, Tennessee. The decrease in taxes other than on income of $91,000 was due primarily to lower property and franchise tax expense. The increase in oil and gas sales is due mainly to increased gas volumes from existing producing properties located in West Virginia. Corporate The decrease in general corporate expenses and interest of $182,000 or 18% was due to a decline in interest expense of $51,000 as a result of lower debt balances outstanding and a $131,000 decline in general and administrative expenses due mainly to reductions in salary, insurance and consulting expenses. Results of operations for the six months ended June 30, 1994 as compared to the six months ended June 30, 1993: Income from operations before income taxes increased $1,907,000 or 28%. This increase is comprised of a $957,000 increase in the coal and land segment, a $537,000 increase in the investment segment, a $91,000 increase in the oil and gas segment and a decrease of $322,000 in general corporate expenses and interest. Income taxes increased as a result of an increase in book taxable income for the first half of 1994. Coal and Land Six Months Ended June 30, 1994 1993 (Thousands of dollars) Revenues: Sales $ 222 $ 133 Royalties 7,376 6,567 Other 588 565 Total 8,186 7,265 Expenses: Cost of sales 41 26 Selling, general and administrative 594 636 Exploration and development 90 86 Depreciation, depletion and amortization 86 87 Taxes other than on income 74 86 Total 885 921 Operating Profit $ 7,301 $ 6,344 The increase in the coal and land segment operating profit of $957,000 or 15% is mainly attributable to increased coal royalties from independent coal lessees and Westmoreland Coal Company's Virginia operations of $685,000 and $167,000 respectively, due to increased tonnage mined and to an increase in bulk timber sales of $99,000 in the first half of 1994 versus 1993. Penn Virginia Corporation received royalties from Westmoreland Coal Company total- ling $5,543,000 and $5,419,000 for the six months ending June 30, 1994 and 1993 respectively. Investments Six Months Ended June 30, 1994 1993 (Thousands of dollars) Revenues: Dividends $ 1,434 $ 1,130 Other 224 - Total 1,658 1,130 Expenses: Selling, general and administrative 32 42 Depreciation 4 4 Taxes other than on income 1 - Total 37 46 Operating Profit $ 1,621 $ 1,084 The increase in the investment segment operating profit of $537,000 or 50% is mainly attributable to increased dividend income of $304,000 due to the timing of dividends received from Westmoreland Resources, Inc. in 1994. Interest income earned on short-term investments increased $224,000 and legal expenses decreased $32,000 offset in part by an increase in salary expense of $20,000. Oil and Gas Six Months Ended June 30, 1994 1993 (Thousands of dollars) Revenues: Sales $ 7,299 $ 6,684 Royalties 1,081 890 Other 136 336 Total 8,516 7,910 Expenses: Cost of sales 1,400 1,287 Selling, general and administrative 1,327 1,042 Exploration and development 164 312 Depreciation, depletion and amortization 2,923 2,549 Taxes other than on income 613 722 Total 6,427 5,912 Operating Profit $ 2,089 $ 1,998 Operating profit for the oil and gas segment increased $91,000 or 5%. This increase is due mainly to increased gas sales and royalties as a result of an increase in gas pricing, a decrease in exploration and development expense and a decrease in property and franchise tax expense offset in part by a re- duction in other income and higher depletion expense due to higher depletion rates and gas sales volume. Additional offsets to this operating profit in- crease include an increase in the cost of sales due to higher sales volume and increased selling, general and administrative expenses due in part to the relocation of the headquarter offices and personnel of Penn Virginia Oil and Gas Corporation from Duffield, Virginia to Kingsport, Tennessee during the month of June. Corporate The decrease in general corporate expenses and interest of $322,000 or 12% was due to a decline in interest expense of $78,000 as a result of lower debt balances outstanding and a $244,000 decline in general and administrative expenses due mainly to reductions in salary, insurance and consulting expenses. Financial Condition as of June 30, 1994: There were no material changes in the Company's financial condition from that reported as of December 31, 1993 except for the change in working capital discussed below. Liquidity, Capital Resources and Other Financial Data at June 30, 1994: Working capital at June 30, 1994 was $8.2 million compared to $15.5 million at December 31, 1993. See the Condensed Consolidated Statement of Cash Flows for details regarding the change. At June 30, 1994, there were $2.0 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. The second factor is the performance of Westmoreland Coal Company, ("WCX") our largest coal lessee. In 1993, WCX reported a loss from continuing operations of $99 million that was caused primarily by the writedown of the assets of various eastern operations. On April 18, 1994, WCX announced that its outside auditors had issued a qualified opinion on its 1993 financial statements due to the uncertainty of its ability to continue as a going concern. The opinion was based on losses associated with WCX's eastern coal operations, a working capital deficiency caused by a reclass- ification of its revolving credit and insurance company debt to current liabilities, and violation of various covenants in WCX's principal credit arrangements. After the filing of its annual report, WCX announced an agreement in principle to sell the assets of its cogeneration subsidiary for an amount in excess of $50 million plus the assumption of certain equity commitments. On May 9, 1994, WCX announced that it had suspended the payment of its preferred stock dividend as a result of negotiations with its lenders. WCX reported that it expects to repay its lenders with the proceeds from the sale of its cogeneration facilities and plans to begin payment of preferred stock dividends again at that time. WCX also announced that it is also continuing the process of reviewing its eastern properties with potential purchasers. On July 13, 1994 WCX announced that it had reached an agreement with its lenders to extend the maturity dates of two of its credit lines until July 29, 1994. At that time, the balance due on these facilities was $21 million. WCX is also currently working to extend the maturity of its other outstanding indebtedness of $25 million, relating to letters of credit issued in connection with WCX's interest in a coal export facility. Additionally, WCX has stated that it is continuing discussions with all of its lenders to allow an extension of all its debt maturities beyond July 29, 1994 to correspond with the expected closing of certain asset sales. WCX announced that these bank negotiations and asset sales are part of its ongoing efforts to reduce costs and reestablish itself as a profitable enterprise. WCX is continuing to mine and sell coal from its principal operations both on and off the Penn Virginia leases. On July 28, 1994 WCX announced that it had reached a definitive agreement to sell the assets of its wholly-owned subsidiary, Kentucky Criterion Coal Company, to CONSOL of Kentucky, Inc., a member of the CONSOL coal group for $85 million subject to an inventory adjustment at closing. The sale is subject to third party consents. WCX has stated that the proceeds from this sale would enable it to discharge its debt obligations of approximately $46 million. WCX anticipates the closing of this sale to occur sometime in the fourth quarter of 1994 and believes that its creditors will extend repayment of its outstanding debt obligations until the closing. 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, then Penn Virginia's cash flows would be adversely affected. A prolonged period of depressed prices for coal would affect the reserves leased to WCX and could ultimately result in a curtailment of production from Penn Virginia's reserves. The Company continues to evaluate its investment in WCX and any deterioration in their 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 ACCOUNTANT The accompanying condensed consolidated financial statements have been reviewed by the Company's independent certified public accountants, KPMG Peat Marwick, in accordance with the established professional standards and procedures for such a limited review. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of the Shareholders of Penn Virginia Corporation was held on May 3, 1994, for the purpose of electing a board of directors for the ensuing year and to transact such other business as may properly come before the meeting. Proxies for the meeting were solicited pursuant to Section 14(a) of the Securities Exchange Act of 1934 and the results of the election of the board of directors are as follows: FOR AGAINST ABSTAINING Eckhard Albrecht 82.4% 1.0% 16.6% Lennox K. Black 82.4% 1.0% 16.6% John D. Cadigan 82.4% 1.0% 16.6% Hans Michael Gaul 82.4% 1.0% 16.6% John A. H. Shober 82.4% 1.0% 16.6% Frederick C. Witsell, Jr. 82.4% 1.0% 16.6% Minturn T. Wright, III 82.4% 1.0% 16.6% No other business at the meeting required a shareholder vote. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits Exhibit 15: Letter Re: Unaudited interim financial information. (b) Reports on Form 8-K: No reports on Form 8-K were filed for the quarter ended June 30, 1994. 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: August 12, 1994 ROBERT J. JAEGER Robert J. Jaeger, Vice President, Treasurer & Controller (Principal Financial and Accounting Officer) INDEPENDENT ACCOUNTANTS' 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 June 30, 1994 and the related condensed consolidated statements of income for the three and six month periods ended June 30, 1994 and 1993, and condensed consolidated statement of cash flows for the six month periods ended June 30, 1994 and 1993. 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 procedures 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, 1993, 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, 1994, 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, 1993, is fairly presented, in all material respects in relation to the consolidated balance sheet from which it has been derived. KPMG PEAT MARWICK KPMG PEAT MARWICK Philadelphia, PA August 12, 1994 EX-15 2 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 August 12, 1994 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 KPMG PEAT MARWICK August 12, 1994 -----END PRIVACY-ENHANCED MESSAGE-----