10-K405
1
PENN VIRGINIA CORP. FORM 10-K405
1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
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
800 The Bellevue, 200 South Broad Street
Philadelphia, PA 19102
INCORPORATED IN I.R.S.EMPLOYER
VIRGINIA IDENTIFICATION NO.
23-1184320
Securities registered pursuant to Section 12(g)of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $6.25 Par Value NASDAQ National Market
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
---
Based on the closing price of March 1, 1995, the aggregate market value of
common stock held by nonaffiliates of the registrant was $102,294,323.
The number of common shares outstanding of the registrant was 4,272,240 as of
March 1, 1995.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Proxy Statement for Stockholder Meeting on
May 2, 1995 __________________________________________________Part III
(1)
2
PART 1
Item 1 - Business
BACKGROUND
Penn Virginia Corporation ("Penn Virginia" or the "Company"), is a
Virginia corporation founded in 1882. The Company is engaged, primarily
through subsidiaries, in leasing of mineral rights and the collection of
royalties, the exploration and production of oil and gas and the management of
investments as well as the receipt of related dividends.
The Company's strategy for the leasing of mineral rights is to make
every prudent attempt to assure a strong mix of quality lessees to operate on
its property and to make the necessary investments to maintain the long term
integrity of the coal royalty stream. The Company plans to invest in
Appalachian coal reserve opportunities which meet its financial criteria and to
maintain, as dividends to its shareholders, as much as possible of the
after-tax cash derived from the coal activities.
The strategy for the oil and gas segment is to pursue a program of
continued growth in Appalachia. The objective is to significantly increase
cash flow from oil and gas operations in the next three years by implementing a
program that includes: drilling more wells on existing leases, actively seeking
new leasing opportunities and acquiring operating oil and gas companies.
The investment segment strategy is to manage the investments for the
long term to support the growth of the other segments of the business.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
For certain financial information concerning the Company's business
segments, see Note 11 ("Segment Information - Continuing Operations") of the
Notes to the Consolidated Financial Statements of Penn Virginia Corporation
which are part of this report. The Company employed seventy-one people as of
December 31, 1994.
COAL AND LAND OPERATIONS
Penn Virginia Resources Corporation ("PVRC"), and its wholly-owned
subsidiary, Penn Virginia Coal Company, headquartered in Duffield, Virginia,
owns approximately 106,000 fee acres of coal bearing land in Virginia, West
Virginia and Kentucky. The bituminous coal mined from the property is
primarily low sulfur, and is sold to domestic and international steam and
metallurgical markets.
The coal is mined by several operators according to lease agreements
which generally require royalty payments to PVRC based on a percentage of the
coal's selling price and, in some cases, subject to certain deductions.
Westmoreland Coal
(2)
3
Company (see Investments), the major coal lessee, operates under a lease
agreement that runs to the exhaustion of the coal reserves. Westmoreland has
recently completed a strategic review of its mining operations and is currently
seeking to withdraw from its remaining Appalachian coal properties.
The Westmoreland lease provides for periodic rate renegotiations. The
current rate agreement which covers the preponderance of the Penn Virginia
Resources Corporation coal leased by Westmoreland became effective July 1, 1988
and will extend until July 1, 1998. The royalty rates are fixed over the ten
year term at competitive levels for deep and strip mined coals. Penn Virginia
Coal Company also has leases with nine independent operating coal companies
other than Westmoreland. The royalty rates and terms of the leases vary with
the individual operators.
During 1994, coal royalty income remained the largest source of
operating income and cash flow for Penn Virginia.
Forest management is included in PVRC's activities. Logging
contractors produced 2.9 and 2.4 million board feet of saw timber in each of
1994 and 1993 and 21,863 and 11,613 tons of pulp wood from the property in 1994
and 1993, respectively.
OIL AND GAS OPERATIONS
Penn Virginia's working and royalty interest holdings produced 6.3 BCF
of gas and 73,000 barrels of oil during 1994. The results compare to 5.3 BCF
of gas and 83,000 barrels of oil produced in 1993 and to the 2.7 BCF of gas and
107,000 barrels of oil produced in 1992. In December, 1992 Penn Virginia
Corporation acquired the West Virginia operations of Sonat Exploration
Corporation. The acquisition included 66,000 gross acres of leases and 197
producing wells. The Sonat purchase accounts for the bulk of changes in gas
production in 1993 from 1992 and acreage and well position in 1992 from 1991
which are shown in the tables below. In 1994, Penn Virginia Oil and Gas
Corporation acquired the assets of CD&G Enterprises, Inc. The acquisition
included 16,176 acres and 143 producing gas wells, most of which are in eastern
Kentucky.
The table below sets forth the Company's leased acreage position as of
December 31 of the indicated year.
Gross Acres Net Acres
-------------------------------------------
1994 475,836 232,317
1993 439,489 185,134
1992 367,940 154,497
During 1994 the Company participated in the drilling and completion of
57 gross (25 net) wells in the Appalachian basin. One hundred percent of the
wells were successfully completed. Additionally, the Company recompleted 12
existing wells in new producing zones and deepened five existing wells to new
producing zones. The drilling program added proven net reserves of 12 BCF of
gas and 12,500 barrels of oil. A summary of the Company's well position is
presented below.
(3)
4
Gross Wells Net Wells
------------------------------------------
1994 879 508
1993 822 483
1992 721 392
Roaring Fork Field:
The Roaring Fork Field includes the oil and gas rights on
approximately 185,000 acres in southwest Virginia. Roughly 101,000 acres of
this property. which accounts for the majority of the project's production, is
leased by PVRC to Columbia Gas, which in turn has a farmout arrangement with
the Roaring Fork consortium.
Equitable Resources has a 72% working interest in Roaring Fork and is
the operator, PVRC owns a 13.8% working interest, Columbia Gas maintains an
11.7% interest and 2.5% is owned by various investors.
Since taking over operatorship in late 1991, Equitable Resources has
pursued an active drilling program in Roaring Fork. During 1994, 24 wells were
drilled by Equitable. These wells were all completed as gas producers. A
coalbed methane test program continued in 1994 with the drilling of seven
wells. Results are still being evaluated.
In addition to its working interest, PVRC earned royalties on the gas
produced from its leases of $1,734,000 in 1994, $1,605,000 in 1993, and
$1,350,000 in 1992.
Pikeville Field:
PVRC owns approximately 29,800 acres of oil and gas leases near
Pikeville, Kentucky. During 1994, four wells were successfully recompleted.
No new wells were drilled during 1994. The Pikeville gathering system was
modified in 1993 which added compression that increased production.
Virginia Gas Company Joint Venture ("E&H"):
A total of 24,000 acres are contained in this joint venture located in
southwest Virginia. The completion of a new pipeline in late 1993 linking the
field to the East Tennessee pipeline system allowed for continuous gas sales to
be made. Four conventional gas wells were drilled in 1994, one of which was
plugged and abandoned. Two successful recompletions also resulted in added gas
production.
Cutshin Field:
No new wells were drilled in this eastern Kentucky oilfield during
1994.
(4)
5
Batson Field:
During 1993, PVRC completed a high resolution, 3-D seismic survey and
drilled a six well pilot pattern for its proposed steamflood project in Hardin
County, Texas. Steam injection began in the fourth quarter of 1994.
Lomak Petroleum Joint Venture ("MRC"):
PVRC participated in the successful drilling of one well with Lomak
(UMC) during 1994. Revenues from the existing wells in Pennsylvania were
negatively impacted by lower production than was forecast.
Southern West Virginia Field:
Penn Virginia purchased the southern West Virginia properties of Sonat
Exploration Corporation in December of 1992. During 1993 these properties were
fully incorporated into PVRC's existing overhead structure. By the end of 1994
daily production was 76% greater than the volume prior to Penn Virginia's
ownership. Sixteen new wells, five drill-deepers and two workovers were
successfully completed during 1994.
INVESTMENTS
Penn Virginia Equities Corporation ("PVEC") held investments
throughout 1994 which included 18.9 percent of the total voting power of
Westmoreland Coal Company, 16 percent of Westmoreland Resources, Inc. and
slightly less than one percent of Norfolk Southern Corporation. For 1994, $2.7
million of the $3.2 million in revenues received by PVEC were from dividends.
During the year Westmoreland Coal Company continued to compete in a
difficult market. Low prices, due primarily to overcapacity, remain a global
problem that plagues the entire coal industry. Westmoreland is also burdened
with significant costs for retirees which must be borne by a declining
production base. As a result of its performance and a general disaffection
with the coal industry, Westmoreland's stock price has dropped substantially
over the past few years.
In December 1992, Penn Virginia wrote down the carrying value of its
remaining investment in Westmoreland by $12.9 million on a pretax basis. In
December 1993, faced with further declines in the stock price, Penn Virginia
again wrote down the carrying value of its investment. The 1993 pre-tax
adjustment was $8.8 million. Both writedowns were taken pursuant to the
accounting rules for marketable securities and were the result of the market
value of Westmoreland remaining below Penn Virginia's carrying value for an
extended period.
Westmoreland Resources, Inc. ("WRI"), is a coal mining company in
which PVEC has a 16 percent interest. Westmoreland Coal has a 60 percent
interest in WRI and
(5)
6
Morrison-Knudsen Company, Inc. owns the remaining 24 percent.
WRI operates a surface mine on approximately 15,000 acres in
southeastern Montana. The reserves which are low-sulfur, subbituminous coal
are leased from the Crow Tribe of Indians. Cash dividends received from WRI
were $400,000 in 1994, $144,000 in 1993, and $920,000 in 1992. The decrease in
1993 was due to anticipated 1994 capital additions.
Norfolk Southern Corporation is a Virginia-based holding company that
came about through the combination of two major operating railroads (Southern
Railway and Norfolk and Western Railway). At December 31, 1994 the Company
held 1,202,400 shares of Norfolk Southern common stock with a related market
value of $84.8 million. Dividend income received from Norfolk Southern
amounted to $2.3 million in 1994, and $2.2 million in 1993 and 1992,
respectively.
Item 2 - Properties
COAL DEPOSITS
Penn Virginia Resources Corporation's ("PVRC") recoverable reserves,
i.e., coal that is mineable using existing equipment and methods under federal
and state laws now in effect, are estimated at 258 million tons as of December
31, 1994. Reserve estimates are adjusted annually for production, unmineable
areas and sales of coal in place. Approximately 54% of PVRC's coal reserves
are leased to Westmoreland Coal Company, which makes its own estimates and
evaluations regarding the coal it has under lease.
The amount of coal that a lessee can profitably mine at any given time
is subject to several factors and may be substantially different from
"recoverable reserves." Included among the factors that influence
profitability are the existing market price, coal quality and operating costs.
The majority of PVRC's reserves are low in sulfur and suitable for
either the steam or metallurgical markets.
OIL AND GAS RESERVES & RELATED FACILITIES
Roaring Fork Field:
The Roaring Fork Project in southwestern Virginia controls 225,000
acres (101,000 acres of which is PVRC property). As of December 31, 1994,
there were 283 gas wells in the Project.
The Project's pipeline, in which PVRC has a 15.6 percent working
interest, consists of 82 miles of 8-inch main line, 230 miles of gathering
lines and seven compressor stations. Modifications were made to the gathering
system in 1993 to remove flow restrictions for increased gas volumes associated
with 1993 and 1992
(6)
7
drilling programs. This resulted in field production increasing from 15
million cubic feet of gas per day ("mmcfg") to over 22 mmcfg. The operator,
Equitable Resources is planning to drill 20 conventional gas wells and 10
coalbed methane wells during 1995.
Pikeville Field:
PVRC has, under lease or farmout, the oil and gas rights on about
45,900 acres in Martin and Pike Counties in eastern Kentucky. As is normally
the case, the timing of additional drilling is dependent upon market
conditions. No new wells are planned for 1995, but an active recompletion
program is scheduled.
Cutshin Field:
PVRC holds leases on 4,000 acres in Leslie County, Kentucky and owns
interests in 14 oil wells. No new wells are planned for this field in 1995.
VA Gas Company Joint Venture (E&H):
The joint venture holds leases on 24,000 acres in Buchanan and
Dickenson Counties, Virginia. During 1994, four conventional gas wells were
drilled to bring the joint venture total to 45 producing wells. No additional
wells are planned in 1995.
Batson Field:
Ada Belle Oil Company (a subsidiary of PVRC) owns leases and fee
acreage on Batson Dome in Hardin County, Texas. Thirty producing oil wells are
currently located on the property. One steam injection pattern of 6 wells was
drilled in 1993, and steam injection began in the fourth quarter of 1994. The
Company plans to sell this property in 1995 in order to focus on its
Appalachian strategy.
McGraws Field:
Penn Virginia Oil and Gas Corporation (a subsidiary of PVRC) purchased
197 producing wells and 66,000 acres (52,121 net) from Sonat Exploration
Corporation in late 1992. The properties are located in eight counties in
southern West Virginia with the bulk of the reserves located in the McGraws
Field in Wyoming County. The purchase included a 15 mile-long, 6 inch pipeline
which was constructed in 1991. Sixteen new wells, two reworked wells and five
drill deepers were completed in 1994. Ten conventional wells, five well
deepenings or recompletions and four coalbed methane test wells are planned in
1995.
CD&G Field:
In May of 1994, Penn Virginia purchased the oil and gas interests of
CD&G Enterprises, Inc., most of which are located in Pike County, Kentucky.
This included
(7)
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143 producing gas wells and 16,176 acres in Kentucky, Virginia, and West
Virginia. Daily production by the end of 1994 had risen from 3,700 to 5,200
MCFG/D. This increase was due to a combination of greater operational
efficiency and a successful development program. The development program
included thirteen recompletions and one development well.
Item 3 - Legal Proceedings
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during
the fourth quarter of 1994.
Executive Officers of the Company
Below is a list of executive officers of the Company including their
ages and positions held. No family relationships exist among them. Each
officer is elected annually by the Board of Directors and serves at the
pleasure of the Board of Directors.
Office
NAME AGE OFFICE Held Since
------------------------- --- --------------------------------------- ----------
Lennox K. Black (1) 65 Chairman and Chief Executive Officer 1992
A. James Dearlove (2) 47 President and Chief Operating Officer 1994
Vincent Matthews, III (3) 52 Senior Vice President 1992
Robert J. Jaeger (4) 46 Vice President, Treasurer 1987
& Controller 1985
(1) Mr. Black is Chairman of the Board and Chief Executive Officer
of Teleflex, Inc. and has been a director of Penn Virginia
since 1983. In 1992, he was elected Chairman and Chief
Executive Officer of Penn Virginia.
(2) Mr. Dearlove was Manager of Development from 1977 to 1986 when
he was elected Vice President. He was elected Senior Vice
President, Administration in 1992 and President, Penn Virginia
Coal Company in 1994, and President and Chief Operating
Officer in October, 1994.
(8)
9
(3) Mr. Matthews was Vice President and Region Manager of Union
Pacific Resources from 1985 to 1989. Prior to that, he held
executive positions with Lear Petroleum Exploration, Inc. and
Amoco Production Company. He was elected Vice President, Oil
and Gas of Penn Virginia in July, 1989, Senior Vice President
in 1992 and President, Penn Virginia Oil and Gas Corporation
in 1993.
(4) Mr. Jaeger was elected Controller of Penn Virginia in 1985.
In December, 1987 he was elected Vice President and in 1989
was elected Treasurer.
(9)
10
PART II
Item 5 - Market for the Company's Common Stock and Related Stockholder Matters
Reference is hereby made to the section entitled "Common Stock Market
Prices and Dividends" on page 17.
Item 6 - Selected Financial Data
Reference is hereby made to the section entitled "Five Year Selected
Financial Data" on page 41.
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Reference is hereby made to the section entitled "Management's
Discussion and Analysis of Financial Conditions and Results of Operations"
appearing on pages 18 through 20 inclusive.
Item 8 - Financial Statements and Supplementary Data
Reference is hereby made to pages 21 to 40 inclusive.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
(10)
11
PART III
Items 10, 11, 12 and 13 - Directors and Executive Officers of the Company,
Executive Compensation, Security Ownership of Certain Beneficial Owners and
Management, and Certain relationships and Related Transactions:
Except for information concerning executive officers of the Company
included as an unnumbered item in Part 1, in accordance with General
Instruction G(3), reference is hereby made to the Company's definitive proxy
statement to be filed within 120 days after the end of the fiscal year covered
by this report.
(11)
12
PART IV
Item 14 - Exhibits, Financial Statements and Reports on Form 8-K
(a) Financial Statements
1. Financial Statements - The financial statements filed
herewith are listed in the Index to Financial
Statements on page 16 of this report.
(b) Exhibits
(3.1) Articles of incorporation of the Company
(incorporated by reference to Exhibit 4 (a) to the
Company's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission on May
13, 1991 (Registration No. 33-40430)).
(3.2) Bylaws of the Company.
(4.1) Copies of various long term debt instruments and
agreements of the Company are not filed pursuant to
Item 601(b) (4) (iii) (A) of Regulation S-K, and the
Company agrees to furnish copies of such debt
instruments and agreements to the Commission upon
request.
(10.1) Penn Virginia Corporation and Affiliated Companies
Employees' Stock Ownership Plan, as amended
(incorporated by reference to Exhibit 19 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1986 (Commission File No. 0-753)).
(10.2) Penn Virginia Corporation 1980 Incentive Stock Option
Plan (incorporated by reference to Appendix 5 of the
Prospectus comprising part of the Company's
Registration Statement on Form S-8 filed with the
Securities and Exchange Commission on May 13, 1982
(Registration No. 2-77500)).
(10.3) Form of agreement to evidence stock options and stock
appreciation rights granted under the Penn Virginia
Corporation 1980 Incentive Stock Option Plan
(incorporated by reference to Exhibit 15.1(b) to the
Company's Registration Statement on Form S-8 filed
with the Securities and Exchange Commission on May
13, 1982 (Registration No. 2-77500)).
(12)
13
(10.4) Amendment No. 1 to Penn Virginia Corporation 1980
Incentive Stock Option Plan (incorporated by
reference to Exhibit 19.1 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1987 (Commission File No. 0-753)).
(10.5) Penn Virginia Corporation and Affiliated Companies'
Employees' Retirement/Savings Plan (incorporated by
reference to Exhibit 18(b) to the Company's
Registration Statement on Form S-8 filed with the
Securities and Exchange Commission on May 13, 1991
(Registration No. 33-40430)).
(10.6) Penn Virginia Corporation 1992 Non-Qualified Stock
Option Plan.
(10.7) Form of Penn Virginia Corporation Non-Qualified Stock
Option Agreement.
(10.8) The Company has adopted a policy concerning severance
benefits for certain senior officers of the Company.
The description of such policy is incorporated herein
by reference to the description of such policy
contained in footnote 3 on page 6 of the Company's
definitive Proxy Statement dated March 31, 1994.
(10.9) Penn Virginia Corporation 1994 Stock Option Plan
(incorporated by reference to Annex A of the
Company's definitive Proxy Statement dated March 28,
1995.)
(10.10) Penn Virginia Corporation 1995 Directors' Stock
Option Plan (incorporated by reference to Annex B of
the Company's definitive Proxy Statement dated March
28, 1995.)
Exhibits 10.1 through 10.10, inclusive, are
management contracts or compensatory plans or
arrangements required to be filed as Exhibits
pursuant to Item 14(c) of this report.
(10.11) Amendment and Restatement of Virginia Lease dated
July 1, 1988 and Amendment and Restatement of Hampton
Lease dated July 1, 1988, each as amended by the
Lease Agreement dated May 6, 1992, between Penn
Virginia Resources Corporation and Westmoreland Coal
Company (incorporated by reference to Exhibit 19.3 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1992 (Commission File No.
0-753)).
(13)
14
(21) Subsidiaries of the Company.
(23) Consent of KPMG Peat Marwick LLP.
(c) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter
of 1994.
(14)
15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
March 29, 1995 By: ROBERT J. JAEGER
-----------------
(Robert J. Jaeger, Vice President,
Treasurer & Controller,
Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Chairman of the Board, Director
LENNOX K. BLACK and Chief Executive Officer March 29, 1995
---------------
(Lennox K. Black)
ECKHARD ALBRECHT Director March 29, 1995
----------------
(Eckhard Albrecht)
JOHN D. CADIGAN Director March 29, 1995
---------------
(John D. Cadigan)
HANS MICHAEL GAUL Director March 29, 1995
-----------------
(Hans Michael Gaul)
JOHN A. H. SHOBER Director March 29, 1995
-----------------
(John A. H. Shober)
Director March 29, 1995
-------------------------
(Frederick C. Witsell, Jr.)
MINTURN T. WRIGHT,III Director March 29, 1995
---------------------
(Minturn T. Wright, III)
(15)
16
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
Index to Financial Statements
The consolidated balance sheets of the Company and subsidiaries as of
December 31, 1994 and December 31, 1993 and the related consolidated statements
of income, shareholders' equity and cash flows for each of the years in the
three year period ended December 31, 1994, together with the summary of
significant accounting policies and notes to consolidated financial statements
and the report of KPMG Peat Marwick LLP, independent auditors are contained on
pages 21to 40 inclusive.
Schedules not included herein have been omitted because they are not applicable
or the required information is presented in the financial statements or related
notes.
(16)
17
COMMON STOCK MARKET PRICES AND DIVIDENDS
High and low stock prices and dividends for the last two years were:
-----------------------------------------------------------------------------------------------------------------
1994 1993
-----------------------------------------------------------------------------------------------------------------
CASH Cash
SALES PRICE DIVIDENDS Sales Price Dividends
-------------------------------------------------------------------------------------
Quarter Ended: HIGH LOW PAID High Low Paid
-----------------------------------------------------------------------------------------------------------------
March 31 $40-1/2 $31-1/2 $.45 $37 $34-1/2 $.45
-----------------------------------------------------------------------------------------------------------------
June 30 $33-3/4 $31 $.45 $37-1/2 $32 $.45
-----------------------------------------------------------------------------------------------------------------
September 30 $35 $30 $.45 $38 $32 $.45
-----------------------------------------------------------------------------------------------------------------
December 31 $35 $30 $.65* $40-1/2 $36 $1.55**
The Company's common stock is traded on * Includes a $.20 per share extra
the over-the-counter market. dividend
** Includes a $.10 per share extra
dividend and a special one-time
dividend of $1.00 per share.
SUMMARIZED QUARTERLY FINANCIAL DATA
for 1994 and 1993 were as follows:
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1994 1993
------------------------------------------------------------------------------------------------------------------------------------
QUARTERS ENDED Quarters Ended
(In thousands except per share data) MAR.31 JUNE 30 SEPT.30 DEC.31 Mar.31 June 30 Sept.30 Dec.31
------------------------------------------------------------------------------------------------------------------------------------
Revenues $ 9,145 $ 9,326 $ 8,984 $ 8,020 $ 8,198 $ 8,221 $ 7,888 $ 8,983
------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing
operations before income taxes 4,340 4,395 3,297 (1,154)(a) 3,430 3,398 3,385 (5,158)(b)
------------------------------------------------------------------------------------------------------------------------------------
Net income $ 3,240 $ 3,277 $ 3,487 $ 3,497 (d) $ 2,598 $ 2,578 $ 2,695 $ 2,381 (c)
------------------------------------------------------------------------------------------------------------------------------------
Net income per share $ .76 $ .76 $ .82 $ .81 $ .61 $ .60 $ .63 $ .56
------------------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 4,280 4,280 4,280 4,280 4,280 4,280 4,280 4,280
------------------------------------------------------------------------------------------------------------------------------------
(a) Includes the write-down of oil and gas properties totaling $1.8 million.
(b) Includes the write-down of the Westmoreland Coal Company common stock
investment of $8.8 million.
(c) Includes the after-tax gain on the disposal of the lime and limestone
division of $5.7 million.
(d) Includes the reduction of prior year deferred income tax provision.
(17)
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS - 1994, 1993 AND 1992
For 1994 income from continuing operations was $13.5 million or $3.15 per
share compared to $4.5 million or $1.06 per share in 1993. 1993 included a
non-cash write-down of the Company's investment in Westmoreland Coal Company of
$8.8 million. Net income was $13.5 million or $3.15 per share in 1994 and
$10.3 million or $2.40 per share in 1993 after the recognition of a $5.7
million after- tax gain ($1.34 per share) on the disposal of the lime and
limestone division (see Note 2 to the Consolidated Financial Statements).
Other factors affecting earnings are discussed below.
Coal and Land
1994 1993 1992
---------------------------------------------------------------------------------------------------
(thousands of dollars)
Revenues:
Sales $ 554 $ 500 $ 256
Royalties 14,794 14,231 12,749
Other 1,375 1,188 1,481
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Total 16,723 15,919 14,486
---------------------------------------------------------------------------------------------------
Expenses:
Operating costs 97 77 13
Selling, general and administrative 1,381 1,273 1,387
Exploration and development 287 284 283
Depreciation, depletion and amortization 174 185 176
Taxes other than on income 151 170 127
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Total 2,090 1,989 1,986
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Operating Profit $ 14,633 $ 13,930 $ 12,500
====== ====== ======
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Operating profit for this segment increased approximately $.7 million or 5%
in 1994 compared to 1993. This increase is mainly the result of increased
royalties due to increased production by the Company's independent lessees.
This increase in independent tonnage, which more than offset a decline in
Westmoreland Coal Company tonnage, is attributable to mine plan scheduling.
The Coal and Land strategy is to add to the Company's coal reserve base through
acquisition as well as to diversify the lessees working on its property. In
January 1995, the Company gained the release of its coal reserves located in
West Virginia and previously leased exclusively to Westmoreland Coal Company.
This transaction was the first step in the diversification of the number of
lessees operating on the Company's property. One new lease is in place with a
former Westmoreland contractor. The Company is evaluating other opportunities
to expand the coal reserve base through acquisitions, joint ventures and other
innovative programs that take advantage of its skill as coal, land and natural
resources managers.
Coal and Land reported a 1993 operating profit of $13.9 million, up 11%
from 1992. The improved performance was the result of an increase in coal
royalties of $1.5 million. This increase stems from an increase in tonnage
sold by Westmoreland Coal Company, the Company's largest lessee, and by various
independent lessees. Westmoreland provides approximately 80% of all coal
royalty income. The Westmoreland tonnage increase was due to the fact that a
new mine in Virginia was in production for the entire year. The increase by
the independent lessees was mainly due to the scheduling of their mining plans.
Other income includes interest income of $989,000 which declined as a result
of a reduction in the principal amount of notes receivable that were
outstanding during the year.
Oil and Gas
1994 1993 1992
---------------------------------------------------------------------------------------------------
(thousands of dollars)
Revenues:
Sales $ 13,676 $ 12,665 $ 7,142
Royalties 1,752 1,605 1,350
Other 148 308 145
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Total 15,576 14,578 8,637
---------------------------------------------------------------------------------------------------
Expenses:
Operating costs 3,285 2,508 1,936
Selling, general and administrative 2,979 2,330 2,156
Write-down of oil and gas properties 1,763 - -
Exploration and development 1,420 934 1,248
Depreciation, depletion and amortization 6,071 4,914 3,944
Taxes other than on income 1,168 1,259 598
---------------------------------------------------------------------------------------------------
Total 16,686 11,945 9,882
---------------------------------------------------------------------------------------------------
Operating Profit (Loss) $ (1,110) $ 2,633 $ (1,245)
======= ===== ========
---------------------------------------------------------------------------------------------------
(18)
19
The Oil and Gas operating loss was $1.1 million in 1994 compared to
operating profit of $2.6 million in 1993. The decrease of $3.7 million is the
result of the write-down of $1.8 million, well write-offs of $.7 million and
increased depletion of $1.2 million as a result of increased production.
Increases in operating costs and selling, general and administrative expenses
were offset by increased revenues due to increased production as prices
declined for the period. The strategy for this segment is to pursue a program
of continued growth, primarily in Appalachia. The objective is to increase
future earnings and cash flow from oil and gas operations by implementing a
program that includes: drilling more wells on existing leases, actively
seeking new leasing opportunities and acquiring operating oil and gas
companies.
Oil and Gas operating profit was $2.6 million in 1993, up $3.8 million from
a loss of $1.2 million in 1992. This increase was due to the inclusion of a
full year's production and sales from certain operating natural gas properties
located in southern West Virginia acquired in December 1992. The total volume
of gas sold increased approximately 175% in 1993 versus 1992 and prices were
unchanged during the same period.
Investments
1994 1993 1992
---------------------------------------------------------------------------------------------------
(thousands of dollars)
Revenues:
Dividends $ 2,709 $ 2,380 $ 2,164
(Loss) on disposition of securities - - (3,756)
Equity in net (loss) of affiliated companies - - (1,629)
Other 467 413 411
---------------------------------------------------------------------------------------------------
Total 3,176 2,793 (2,810)
Expenses:
Selling, general and administrative 61 51 175
Write-down of investment in
Westmoreland Coal Company - 8,772 12,915
Depreciation 41 60 83
Taxes other than on income 152 97 98
---------------------------------------------------------------------------------------------------
Total 254 8,980 13,271
---------------------------------------------------------------------------------------------------
Operating Profit (Loss) $ 2,922 $ (6,187) $ (16,081)
===== ======= ========
---------------------------------------------------------------------------------------------------
Investment operating profit was $2.9 million in 1994. This increase in
operating profit of $9.1 million from 1993 is attributable to an increase in
dividends paid by the Norfolk Southern Corporation and Westmoreland Resources,
Inc. (see Note 1 to Consolidated Financial Statements) and the fact that 1993's
results included a write-down of the investment in Westmoreland Coal Company.
The Investment segment recorded losses in 1993 and 1992. The primary
reasons for the losses in both years were non-cash write- downs of Penn
Virginia's investment in Westmoreland Coal Company. In both years the
write-downs were taken because the market value of Westmoreland was
significantly less than the Company's carrying value for an extended period of
time. Also contributing to the 1992 results was a $3.7 million loss on the
disposal of approximately 1.5 million shares of Westmoreland common stock and a
$1.6 million loss relating to the Company's share of loss of affiliated
companies accounted for under the equity method of accounting. The equity
method of accounting for the investments in Westmoreland Coal Company and
Westmoreland Resources, Inc. was discontinued in December 1992. See Note 1 to
the Consolidated Financial Statements.
Corporate
Corporate expenses include unallocated general corporate expenses, interest
and income taxes. In 1994, general corporate expenses increased approximately
$.5 million compared to 1993. This is the result of the recognition of
supplemental pension benefits due to early retirements. Interest expense
declined as the result of a decline in the amount of debt outstanding. The
income tax benefit recognized for book purposes resulted from the reversal of
deferred taxes based upon the favorable outcome of an Internal Revenue Service
examination for the years 1984 through 1986.
For 1993 compared to 1992, general corporate expenses decreased
approximately $1.8 million. The decrease is mainly due to the recognition in
1992 of supplemental pension benefits due to certain early retirements and the
anticipated cost relating to early extinguishment of a lease. In addition,
there were declines in salary and benefit expense and outside services expense
of almost $.7 million in 1993. Interest expense declined slightly and income
tax expense for continuing operations increased as a result of an increase in
pretax book income.
(19)
20
Liquidity, Capital Resources and Other Financial Data
Cash flows from operating activities were $16.2 million in 1994 and $17.3
million in 1993. Cash flows used in investing activities were $16.9 million in
1994 and cash flows from investing activities were $16.8 million in 1993. In
1993 the Company received $28.7 million from the sale of the lime and limestone
division and 1994 and 1993 included capital expenditures of $20.9 million and
$15.6 million, respectively.
Cash flows used in financing activities increased to $16.2 million in 1994
from $14.4 million in 1993. The main reason for the increase was an increase
in the scheduled repayment of long-term borrowings. Dividend payments of $12.3
million were the major component of the cash used in 1993. A $1.00 per share
special one-time dividend was declared to acknowledge a successful year and to
demonstrate the Company's appreciation to its shareholders. It is not the
policy of the Company to pay dividends in excess of earnings, however, the
Company's earnings in recent years have been impacted by non-cash charges for
write-downs of the investments in Westmoreland Coal Company and the lime and
limestone division as well as by the equity in the losses of Westmoreland Coal
Company.
While balance sheet ratios are adequate measures of financial condition
for many companies, Penn Virginia receives a significant portion of its cash
flows from royalties and dividends for which no related accounts payable exist.
Therefore ratio analysis should be tempered by trends in coal royalties and
dividend income received in order to measure liquidity.
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. During 1995, the Company will undertake to
commit a meaningful percentage of its production into the contract price market
at reasonable prices.
The second factor is the performance of Westmoreland Coal Company, our
largest coal lessee. Westmoreland has said that its strategy could result in
the eventual divestment of certain of its operations. If Westmoreland cannot
control its costs and mine reserves profitably, then Penn Virginia's cash flows
could be adversely affected. In addition, current low spot prices for coal
cause continual reevaluation of operating practices by Westmoreland. A
prolonged period of depressed prices would effect the merchantability of the
reserves leased to Westmoreland and could ultimately result in a curtailment of
production from Penn Virginia's reserves. In January 1995, Westmoreland
released to Penn Virginia its lessee's rights in the coal reserves located in
West Virginia in exchange for $3.0 million in cash.
The Company continues to evaluate its investment in Westmoreland Coal
Company and a carrying value for that investment in excess of market value
could result in additional losses. The Company plans to find efficient ways to
redeploy its Norfolk Southern investment to support the growth of the Company's
operations.
At December 31, 1994, unused lines of credit amounted to $2.0 million, of
which all are short-term. Capital expenditures are preliminarily estimated to
be approximately $33.0 million during 1995. It is anticipated that these
expenditures, primarily for the oil and gas segment, will be funded internally
or through bank borrowings, including a $20.0 million revolving credit and term
loan agreement completed in February 1995.
Inflation and Changing Prices
The Company's largest source of operating income is coal royalties. The
coal leases between Penn Virginia Coal Company and Westmoreland Coal Company
provide for percentage royalties based on the selling price of coal with
periodic renegotiation. Leases with other operators provide for various
royalty rates based on price, coal quality, mining conditions and seam
thickness.
The other sources of cash for the Company are provided by dividends
received and by an operating subsidiary. The Company has no control over the
amount of dividends it receives. The operating subsidiaries, to the extent
permitted by competition, pass increased costs on by increasing sales prices
over time.
Environmental Matters
The Company's environmental policies and practices are designed to ensure
compliance with existing laws and regulations and to minimize the possibility
of environmental damage. As of December 31, 1994, the Company has provided
for approximately $120,000 to complete the remediation of a previously owned
site. There is an estimated $100,000 of remediation required at a
Company-owned site for which no provision was made since the previous owner has
contractually agreed to reimburse the Company for the majority of that
expenditure.
In conjunction with the leasing of property to coal operators, all
environmental and reclamation liabilities are the responsibility of the
lessees, including Westmoreland Coal Company. However, if the lessee is not
financially capable of fulfilling those obligations, there is a possibility
that the appropriate authorities would attempt to assign those liabilities to
the land owner. The Company would vigorously contest such an assignment.
(20)
21
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------
(in thousands except per share data)
REVENUES
Sales $ 554 $ 500 $ 256
Coal royalties 14,794 14,231 12,749
Oil and gas sales and royalties 15,428 14,270 8,492
Dividends 2,709 2,380 2,164
(Loss) on disposition of securities - - (3,756)
Share of (loss) of affiliated companies - - (1,629)
Other income 1,990 1,909 2,037
---------------------------------------------------------------------------------------------------------------------------
35,475 33,290 20,313
---------------------------------------------------------------------------------------------------------------------------
EXPENSES
Cost of sales 3,382 2,585 1,949
Selling, general and administrative 8,390 6,902 9,809
Write-down of oil and gas properties 1,763 - -
Exploration and development 1,707 1,433 1,531
Write-down of investment in Westmoreland Coal Company - 8,772 12,915
Depreciation, depletion and amortization 6,286 5,159 4,203
Taxes other than on income 1,471 1,526 823
Interest 1,598 1,858 1,931
---------------------------------------------------------------------------------------------------------------------------
24,597 28,235 33,161
---------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 10,878 5,055 (12,848)
Income tax expense (benefit) (2,623) 537 (5,082)
---------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before
cumulative effect of change in accounting principle 13,501 4,518 (7,766)
---------------------------------------------------------------------------------------------------------------------------
Discontinued operations:
Income from operations of lime and limestone division
(net of income tax expense of $152 in 1992) - - 295
Gain (loss) on disposal of lime and limestone division (net of
income tax expense (benefit) of $3,087 and
($3,622) in 1993 and 1992, respectively) - 5,734 (7,029)
Cumulative effect of accounting change for postretirement
health care costs (net of income tax benefit of $1,333) - - (2,588)
---------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 13,501 $ 10,252 $ (17,088)
---------------------------------------------------------------------------------------------------------------------------
Income (loss) per common share
Continuing operations $ 3.15 1.06 $ (1.82)
Discontinued operations - 1.34 (1.57)
Cumulative effect of accounting change
for postretirement health care costs - - (.60)
---------------------------------------------------------------------------------------------------------------------------
Net income (loss) per share $ 3.15 $ 2.40 $ (3.99)
---------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 4,280 4,280 4,278
---------------------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
(21)
22
CONSOLIDATED BALANCE SHEETS
December 31 1994 1993
---------------------------------------------------------------------------------------------------------------------------
(in thousands)
ASSETS
Current assets
Cash and cash equivalents $ 7,039 $ 23,869
Accounts receivable 3,286 3,880
Current portion of long-term notes receivable 3,646 3,571
Inventories 599 438
Current deferred income taxes 1,451 669
Other 1,895 514
---------------------------------------------------------------------------------------------------------------------------
Total current assets 17,916 32,941
---------------------------------------------------------------------------------------------------------------------------
Investments 85,321 94,562
Long-term notes receivable 8,881 11,841
Property, plant and equipment 86,246 74,093
Other assets 895 822
---------------------------------------------------------------------------------------------------------------------------
Total assets $ 199,259 $ 214,259
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments on long-term debt $ 7,325 $ 7,625
Accounts payable 4,409 4,456
Accrued expenses 3,913 4,535
Deferred income 220 214
Taxes on income - 587
---------------------------------------------------------------------------------------------------------------------------
Total current liabilities 15,867 17,417
---------------------------------------------------------------------------------------------------------------------------
Other liabilities 8,237 7,669
Deferred income taxes 28,459 34,821
Long-term debt 9,250 16,575
---------------------------------------------------------------------------------------------------------------------------
Total liabilities 61,813 76,482
---------------------------------------------------------------------------------------------------------------------------
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 27,734 27,734
Other paid-in capital 34,793 34,685
Retained earnings 35,571 30,603
---------------------------------------------------------------------------------------------------------------------------
98,098 93,022
Add: Unrealized holding gain - investments 47,083 53,090
Less: 157,977 shares of common stock held in treasury, at cost 7,435 7,435
Guaranteed debt to employee stock ownership plan 300 900
---------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 137,446 137,777
---------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 199,259 $ 214,259
---------------------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
(22)
23
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1994, 1993 and 1992
Guaranteed
Debt To
Unrealized Employees
Other holding Stock Total
Common Paid-in Retained gain- Treasury Ownership Stockholders'
Stock Capital Earnings investments Stock Plan Equity
----------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Balance at December 31, 1991 $27,734 $ 35,757 $ 57,834 $ - $ (7,484) $ (2,100) $ 111,741
----------------------------------------------------------------------------------------------------------------------------------
Net (loss) - - (17,088) - - - (17,088)
Dividends paid, $1.90 per share - - (8,055) - - - (8,055)
Treasury shares of 1,509 issued
as bonuses - (17) - - 70 - 53
Reversal of additional liability
for pension plan - 116 - - - - 116
Contribution to employee stock
ownership plan - - - - - 600 600
----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 $27,734 $ 35,856 $ 32,691 $ - $ (7,414) $ (1,500) $ 87,367
----------------------------------------------------------------------------------------------------------------------------------
Net income - - 10,252 - - - 10,252
Dividends paid, $2.90 per share - - (12,340) - - - (12,340)
Additional liability for pension plan - (1,171) - - - - (1,171)
Unrealized holding gain adjustment - - - 53,090 - - 53,090
Special dividend paid on unallocated
shares in employee stock
ownership plan - - - - (21) - (21)
Contribution to employee stock
ownership plan - - - - - 600 600
----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 $27,734 $ 34,685 $ 30,603 $ 53,090 $ (7,435) $ (900) $ 137,777
----------------------------------------------------------------------------------------------------------------------------------
Net income - - 13,501 - - - 13,501
Dividends paid, $2.00 per share - - (8,533) - - - (8,533)
Reversal of additional liability for
pension plan - 108 - - - - 108
Unrealized holding gain adjustment - - - (6,007) - - (6,007)
Contribution to employee stock
ownership plan - - - - - 600 600
----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $27,734 $ 34,793 $ 35,571 $ 47,083 $ (7,435) $ (300) $ 137,446
----------------------------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
(23)
24
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from (used in) operating activities:
Net income (loss) $ 13,501 $ 10,252 $ (17,088)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation, depletion and amortization 6,286 5,159 4,203
Share of loss of affiliated companies - - 2,694
Write-down of investment in Westmoreland Coal Company - 8,772 12,915
Write-down of oil and gas properties 1,763 - -
Loss on disposition of securities - - 3,756
(Gain), loss on the sale of property, plant and equipment (125) 11 (96)
(Gain), loss on disposal of lime and limestone division - (8,821) 10,651
Income from discontinued operations - - (295)
Other 2,178 (2,037) 1,146
Change in assets and liabilities:
Short-term investments - - 9
Accounts receivable 594 (556) 4,972
Inventories (161) (54) (10)
Other current assets (2,163) 97 51
Accounts payable and accrued expenses (2,432) 3,356 2,409
Deferred income 6 (15) 1
Taxes on income (587) 565 (882)
Deferred income taxes (3,128) 312 (11,315)
Other assets and liabilities and investments 474 275 4,484
----------------------------------------------------------------------------------------------------------------------
Net cash flows from operating activities $ 16,206 $ 17,316 $ 17,605
----------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) investing activities:
Proceeds from the sale of marketable securities $ - $ - $ 314
Proceeds from the sale of investments and discontinued operations - 28,714 18,496
Proceeds from the sale of property, plant and equipment 314 123 386
Payments received on long-term notes receivable 3,738 3,572 3,167
Purchases of property, plant and equipment (20,930) (15,644) (26,398)
----------------------------------------------------------------------------------------------------------------------
Net cash flows from (used in) investing activities $ (16,878) $ 16,765 $ (4,035)
----------------------------------------------------------------------------------------------------------------------
Cash flows from (used in) financing activities:
Dividends paid $ (8,533) $ (12,340) $ (8,055)
Proceeds from long-term borrowings - - 9,000
Repayment of long-term borrowings (7,625) (2,025) (10,522)
Proceeds from short-term borrowings - - 1,000
Repayment of short-term borrowings - - (5,000)
----------------------------------------------------------------------------------------------------------------------
Net cash flows (used in) financing activities (16,158) (14,365) (13,577)
Net increase (decrease) in cash and cash equivalents (16,830) 19,716 (7)
Cash and cash equivalents - beginning of year 23,869 4,153 4,160
----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents - end of year $ 7,039 $ 23,869 $ 4,153
----------------------------------------------------------------------------------------------------------------------
Supplemental disclosures:
Cash paid during the year for:
Interest $ 1,673 $ 1,817 $ 1,939
----------------------------------------------------------------------------------------------------------------------
Income taxes $ 3,496 $ 2,991 $ 2,912
----------------------------------------------------------------------------------------------------------------------
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
(24)
25
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION The consolidated financial statements include the accounts
of Penn Virginia Corporation and all wholly- owned
subsidiaries. Intercompany balances and transactions have
been eliminated in consolidation.
INVENTORIES Inventories are valued at the lower of average cost or
market and consist primarily of well supplies.
INVESTMENTS Investments consist of corporate debt and equity
securities. The Company adopted the provisions of
Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115) at December 31, 1993. Under SFAS
115, the Company classifies its debt and equity securities
in one of three categories; trading, available-for-sale,
or held-to-maturity. Trading securities are bought and
held principally for the purpose of selling them in the
near term. Held-to-maturity securities are those
securities in which the Company has the ability and intent
to hold the security until maturity. All other securities
not included in trading or held-to-maturity are
classified as available-for-sale. Trading and
available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized
cost, adjusted for the amortization or accretion of
premiums or discounts. Unrealized holding gains and
losses, net of the related tax effect, on
available-for-sale securities are excluded from earnings
and are reported as a separate component of stockholders'
equity until realized. A decline in the market value of
any available-for-sale or held-to-maturity security below
cost, that is deemed other than temporary results, is
charged to earnings resulting in the establishment of a
new cost basis for the security. Premiums and discounts
are amortized or accredited over the life of the related
held-to-maturity security as an adjustment to yield using
the effective interest method. Dividend and interest
income are recognized when earned. Realized gains and
losses for securities classified as available-for-sale and
held-to-maturity are included in earnings and are derived
using the specific identification method for determining
the cost of securities sold.
PROPERTY, Property, plant and equipment are carried at cost and
PLANT AND include expenditures for new facilities and for
EQUIPMENT improvements which substantially increase the productive
lives of existing plant and equipment. Maintenance
and repair costs are expensed as incurred. Coal in place
is depleted at a rate based upon the cost of the
mineral properties and estimated recoverable tonnage
therein. Depreciation of plant and equipment is generally
determined by the straight-line method. When an asset is
retired or sold, its cost and related accumulated
depreciation are removed from the accounts. The
difference between undepreciated cost and proceeds from
disposition is recorded as gain or loss.
OIL AND GAS For oil and gas exploration and development costs, the
EXPLORATION Company follows the successful efforts method of
AND accounting. Under this method both tangible and
DEVELOPMENT intangible costs of drilling and developing producing oil
COSTS and gas wells and related facilities, including
development dry holes, are capitalized and amortized on a
unit-of-production basis. Exploratory costs including;
exploratory dry holes, annual delay rental and geophysical
costs, are charged to expense when incurred. The
estimated costs (net of salvage value)of plugging and
abandoning gas and oil wells is included in the Company's
unit-of-production depletion rates.
NATURAL GAS Natural gas revenues generally are recorded using the
REVENUES sales method whereby the Company recognizes natural
gas revenues based on the amount of gas sold to purchasers
on its behalf. As of December 31, 1994 the Company did
not have any material gas imbalances.
INCOME TAX The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109). SFAS 109 requires a company to
recognize deferred tax liabilities and assets for the
expected future tax consequences of events that have been
recognized in a company's financial statements or tax
returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the
financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates.
RETIREMENT The cost of pension plans includes the current year's
BENEFITS normal cost and interest on and amortization of prior
service cost over a period of 20 years. The Company's
policy is to fund pension costs currently. Effective
January 1, 1992, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106). SFAS 106 requires accrual
accounting for all postretirement benefits other than
pensions. Under the prescribed accrual method the
Company's obligation for these postretirement benefits is
to be fully accrued by the date employees attain full
eligibility for such benefits.
PER SHARE Per share data are based on the weighted average number of
DATA shares outstanding during the year. Common share
equivalents based on outstanding options, are excluded
from the calculation since the dilutive effect is
not material.
(25)
26
DIVIDEND AND Dividend income from investments is recognized as of the
ROYALTY INCOME record date. Royalty income is recognized on the basis of
production and sales.
STATEMENTS For purposes of the Statements of Cash Flows, the Company
OF CASH FLOWS considers all highly liquid debt instruments with a
maturity of three months or less to be cash equivalents.
FAIR VALUE OF The carrying value of financial instruments approximates
FINANCIAL fair value. The Company's financial instruments
INSTRUMENTS are accounts receivable, notes receivables, accounts
payable and long-term debt.
(26)
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. INVESTMENTS AND OTHER INCOME
The amortized cost, gross unrealized holding gains and fair value for
available-for-sale and held-to-maturity securities were as follows:
Gross
Unrealized
Amortized Holding Fair
At December 31, 1994 Cost Gains Value
---------------------------------------------------------------------------------------------------------------------
(in thousands)
Available-for-sale:
Westmoreland Coal Company $ 5,263 $ 2,632 $ 7,895
Westmoreland Resources, Inc. 4,530 - 4,530
Norfolk Southern Corporation 3,096 69,800 72,896
---------------------------------------------------------------------------------------------------------------------
$ 12,889 $ 72,432 $ 85,321
---------------------------------------------------------------------------------------------------------------------
Held-to-Maturity:
Notes Receivable $ 12,527 $ - $ 12,527
---------------------------------------------------------------------------------------------------------------------
At December 31, 1993
---------------------------------------------------------------------------------------------------------------------
Available-for-sale:
Westmoreland Coal Company $ 5,263 $ - $ 5,263
Westmoreland Resources, Inc. 4,530 - 4,530
Norfolk Southern Corporation 3,096 81,673 84,769
---------------------------------------------------------------------------------------------------------------------
$ 12,889 $ 81,673 $ 94,562
---------------------------------------------------------------------------------------------------------------------
Held-to-Maturity:
Notes Receivable $ 15,412 $ - $ 15,412
---------------------------------------------------------------------------------------------------------------------
Maturities of securities classified as held-to-maturity is as follows:
Amortized Cost and Fair Value
------------------------------
1994 1993
---------------------------------------------------------------------------------------------------------------------
(in thousands)
Current $ 3,646 $ 3,571
Due after one year through five years 3,299 4,868
Due after five years through ten years $ 5,123 $ 3,335
Due after ten years 459 3,638
---------------------------------------------------------------------------------------------------------------------
$ 12,527 $ 15,412
---------------------------------------------------------------------------------------------------------------------
Related dividend income is as follows:
1994 1993 1992
---------------------------------------------------------------------------------------------------------------------
(in thousands)
Westmoreland Resources, Inc. $ 400 $ 144 $ -
Norfolk Southern Corporation 2,309 2,236 2,164
---------------------------------------------------------------------------------------------------------------------
$ 2,709 $ 2,380 $2,164
---------------------------------------------------------------------------------------------------------------------
(27)
28
In addition, cash dividends received from Westmoreland Resources, Inc. in
1992 and recorded as a reduction of investment were $920,000.
During July 1992, Penn Virginia Corporation sold to Westmoreland Coal
Company 1,295,589 shares of its investment in Westmoreland Coal Company for
$14.276 per share, resulting in a pretax loss of $2,768,000. This sale reduced
Penn Virginia Corporation's ownership interest in Westmoreland Coal Company to
21.3 percent of the outstanding voting stock. In October 1992, Penn Virginia
Corporation restructured its representation on the Westmoreland Coal Company
board of directors. This change left only one Penn Virginia Corporation
representative on the Westmoreland Coal Company board of directors. In
December 1992, Penn Virginia Corporation contributed an additional 220,000
shares of its Westmoreland Coal Company investment to an irrevocable trust,
known as a Voluntary Employees' Beneficiary Association, to fund life,
sickness, accident or other employee or retiree benefits. The assets of this
trust are managed by an independent trustee. This contribution resulted in a
pretax loss of $988,000 and reduced Penn Virginia Corporation's ownership
position to 18.96 percent of Westmoreland Coal Company's outstanding voting
stock. As a result, Penn Virginia Corporation discontinued accounting for its
Westmoreland Coal Company and Westmoreland Resources, Inc. investments under
the equity method in December 1992. In December 1993 and 1992, after
considering that the market value of its Westmoreland stock was less than Penn
Virginia's carrying value in each of those years, the Company wrote down its
investment in Westmoreland Coal Company to reflect the Company's estimate of
Westmoreland's then current value. In 1993 and 1992 these decisions resulted
in a pretax non-cash charge to earnings of $8,772,000 and 12,915,000,
respectively, and a corresponding reduction in the carrying value of the
Westmoreland investment. The Company owns 1,754,411 shares of Westmoreland
Coal Company's common stock.
Payments received by the Company from Westmoreland Coal Company include the
following:
1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------
(in thousands)
Royalties on coal $ 11,019 $ 11,699 $10,689
Dividends (recorded as reductions of investment) - - 839
---------------------------------------------------------------------------------------------------------------------------
Totals $ 11,019 $ 11,699 $11,528
====== ====== =======
---------------------------------------------------------------------------------------------------------------------------
Royalty rates, independently negotiated with Westmoreland Coal Company ,are
generally comparable to rates charged to unaffiliated lessees.
The Company owns 1,202,400 shares of Norfolk Southern Corporation stock.
Interest income included in other income amounted to $1,290,000, $1,323,000
and $1,363,000 in 1994, 1993 and 1992, respectively. Included in 1994, 1993
and 1992 interest income was $962,000, $989,000 and $1,036,000, respectively,
relating to notes receivable on the sale of coal in place in 1986.
(28)
29
2. DISCONTINUED OPERATIONS
In December 1992, the Company adopted a formal plan to sell the lime and
limestone segment of its business. In October 1993 the Company completed the
sale of this segment. The assets of the lime and limestone segment to be sold
consisted primarily of accounts receivable, inventories, and property, plant
and equipment. The selling price was $28.7 million in cash and generated a gain
of $5.7 million (net of income tax expense of $3.1 million). In 1992, the
Company estimated a loss on disposal of the lime and limestone segment of $7.0
million (net of income tax benefit of $3.6 million). Operating results of the
lime and limestone segment for the year ended December 31, 1992 are shown
separately in the accompanying Consolidated Statements of Income.
Revenues of the lime and limestone segment for 1992 were $28,917,000 and
are not included in revenues in the accompanying Consolidated Statements of
Income.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment includes:
1994 1993
-------------------------------------------------------------------------------------------------------------
(in thousands)
Land $ 704 $ 704
Mineral deposits and timber 188 188
Coal in place 5,595 5,595
Oil and gas properties 110,279 90,935
Plant and equipment 3,485 4,518
-------------------------------------------------------------------------------------------------------------
120,251 101,940
Less: Accumulated depreciation, depletion and amortization 34,005 27,847
-------------------------------------------------------------------------------------------------------------
Net property, plant and equipment $ 86,246 $ 74,093
========== ==========
-------------------------------------------------------------------------------------------------------------
In December 1992, the Company purchased leases, wells, equipment and all
contracts relating to certain natural gas properties located in southern West
Virginia for a cash price of $20.3 million.
The acquisition was recorded using the purchase method of accounting. The
following unaudited pro forma results of continuing operations assume that this
purchase occurred as of the beginning of the respective year presented after
giving effect to certain adjustments including depreciation, depletion and
amortization on the assets acquired, increased interest expense on acquisition
debt and related income tax effects.
1992
------------------------------------------------------------------------------------------------------------
(in thousands except per share data)
Revenues $ 24,906
------------------------------------------------------------------------------------------------------------
(Loss) from continuing operations before cumulative effect
of change in accounting principle $(6,803)
------------------------------------------------------------------------------------------------------------
(Loss) from continuing operations before cumulative effect
of change in accounting principle per share $ (1.59)
------------------------------------------------------------------------------------------------------------
The pro forma financial information does not purport to be indicative of
the results of operations that would have occurred had the acquisition taken
place at the beginning of the periods presented or of future results of
operations.
In January 1995, Westmoreland Coal Company released to Penn Virginia its
lessee's rights in the coal reserves located in West Virginia in exchange for
$3.0 million in cash.
In February 1995, the Company acquired leases, wells, equipment and
contracts relating to certain natural gas properties located in southern West
Virginia abutting existing properties. These assets were acquired for
approximately $16.9 million in cash and include 58 producing wells and
approximately 34,600 acres of leases.
(29)
30
4. LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1993 is summarized in the following
table.
1994 1993
----------------------------------------------------------------------------------------------------
(in thousands)
Unsecured: Due 1995 to 1998; 3.07% to 9.0% (weighted average interest
rate 1994 -8.59%; 1993 - 7.31%) $ 16,575 $ 24,200
Less: Current maturities (7,325) (7,625)
----------------------------------------------------------------------------------------------------
$ 9,250 $ 16,575
===== ======
----------------------------------------------------------------------------------------------------
A loan agreement contains restrictive covenants which limit the liabilities
the Company can incur to a percentage of tangible net assets, restrict the
disposition of assets, require the maintenance of certain levels of tangible
net worth and working capital, and limit the sum of dividends and net cash
outlays for the purchase of common stock to $50,000,000 plus 75 percent of net
income as determined in the agreement after December 31, 1985. At December 31,
1994, retained earnings of $5,908,000 were unrestricted. At December 31, 1994,
unused credit lines amounted to $2.0 million of which all are short-term. Penn
Virginia has agreed to maintain compensating balances that range between 7.5%
and 10% of the lines. None of the Company's cash is restricted as to
disposition or use. During 1994, the Company maintained collective balances
sufficient to meet its average and year-end collected balance requirement of
$175,000. In February, 1995, the Company completed a $20.0 million revolving
credit and term loan agreement with substantially the same terms as existing
loan agreements.
Aggregate installments of long-term debt maturing in the years 1996, 1997,
and 1998 amount to $5,250,000, $2,000,000 and $2,000,000 respectively.
5. ACCRUED EXPENSES
Accrued expenses at December 31, 1994 and 1993 are summarized in the
following table.
1994 1993
-----------------------------------------------------------------------------------------------------
(in thousands)
Pension $ 1,243 $ 1,973
Compensation 368 316
Relocation 800 800
Other 1,502 1,446
----------------------------------------------------------------------------------------------------
$ 3,913 $ 4,535
========= ======
----------------------------------------------------------------------------------------------------
6. INCOME TAXES
The provision (benefit) for income taxes from continuing operations is
comprised of the following:
Year Ended December 31
-----------------------------
1994 1993 1992
---------------------------------------------------------------------------------------------------------------------
(in thousands)
Current
Federal $ 533 $ 2,418 $ 1,324
State 756 829 812
---------------------------------------------------------------------------------------------------------------------
Total current 1,289 3,247 2,136
Deferred
Federal (3,839) (2,970) (7,198)
State (73) 260 (20)
---------------------------------------------------------------------------------------------------------------------
Total deferred (3,912) (2,710) (7,218)
---------------------------------------------------------------------------------------------------------------------
Total income tax expense (benefit) $ (2,623) $ 537 $ (5,082)
======== ======= =======
---------------------------------------------------------------------------------------------------------------------
(30)
31
The reconciliation between tax expense (benefit) from continuing operations
computed by multiplying pretax income by the U.S. federal statutory tax rate
and the reported amount of income tax expense (benefit) is as follows:
Year Ended December 31
-------------------------------------------
1994 1993 1992
----------------------------------------------------------------------------------------------------------------
(in thousands)
Computed at U.S. statutory tax rate $ 3,807 $ 1,769 $ (4,368)
State income taxes, net of federal income tax benefit 444 708 523
Dividends received deduction (664) (583) (962)
Non-conventional fuel source credit (1,750) (1,000) (1,000)
Adjustment to prior year provisions (3,500) - -
Percentage depletion (495) (357) (422)
Other (465) - 1,147
-----------------------------------------------------------------------------------------------------------------
Total income tax expense (benefit) $ (2,623) $ 537 $ (5,082)
========== ======= =======
-----------------------------------------------------------------------------------------------------------------
Temporary differences between the financial statement carrying amounts and tax
bases of assets and liabilities that give rise to significant portions of the
deferred tax liability at December 31, 1994 and 1993 relate to the following:
1994 1993
----------------------------------------------------------------------------------------------------
(in thousands)
Unrealized investment gain $ 25,351 $ 28,583
Investments due to reserves and the equity method of accounting (745) (742)
Drilling costs capitalized for financial reporting purposes 13,677 9,245
Notes receivable for financial reporting purposes (821) 6
Other property, plant and equipment, principally due to difference
in depreciation and depletion (4,105) (2,980)
Tax credit carryforwards (2,945) (804)
Other (3,404) 844
----------------------------------------------------------------------------------------------------
Net deferred income tax liability $ 27,008 $ 34,152
========= ======
----------------------------------------------------------------------------------------------------
The Company's federal income tax returns have been examined by the Internal
Revenue Service and settled through 1990. As a result of the settlement of
various issues raised during the examination of the 1984 through 1986 tax
returns, in 1994 the Company recognized a $3.5 million adjustment to its prior
year provision for deferred taxes.
7. PENSION PLANS
The Company and its wholly-owned subsidiaries provided a non-contributory,
defined benefit pension plan for eligible employees. Benefits are based on
the employee's average annual compensation and years of service. Pension
expense amounted to $971,000, $703,000 and $1,485,000 in 1994, 1993 and 1992,
respectively.
Pension expense for 1992 includes discontinued operations because the ultimate
disposition of these liabilities had not been determined and the components of
the expense are as follows:
1994 1993 1992
---------------------------------------------------------------------------------------------------------------------
(in thousands)
Service Cost $ 108 $ 115 $ 281
Interest cost on projected benefit obligations 821 852 934
Actual return on plan assets 25 (551) (487)
Net amortization and deferral (620) (98) (262)
Special termination benefits 637 385 1,019
---------------------------------------------------------------------------------------------------------------------
Pension expense $ 971 $ 703 $ 1,485
======== === =====
---------------------------------------------------------------------------------------------------------------------
(31)
32
The following sets forth the funded status of the plans at December 31,
1994 and 1993.
1994 1993
-----------------------------------------------------------------------------------------------------
(in thousands)
Actuarial present value of benefit obligations:
Vested benefits $ 10,568 $ 11,231
Nonvested benefits 57 78
-----------------------------------------------------------------------------------------------------
Accumulated benefit obligations 10,625 11,309
Effect of assumed future compensation levels 298 373
-----------------------------------------------------------------------------------------------------
Projected benefit obligation 10,923 11,682
Fair value of assets held in plan (6,767) (6,957)
Unrecognized cumulative net gain (loss) (1,381) (1,436)
Unrecognized prior service cost (321) (115)
Unrecognized implementation pension asset (65) (301)
Additional liability recognized 1,891 1,662
-----------------------------------------------------------------------------------------------------
Unfunded accrued pension cost $ 4,280 $ 4,535
========== =====
-----------------------------------------------------------------------------------------------------
Unfunded accrued pension cost at beginning of year 4,535 2,859
Current year's pension expense 971 703
Additional liability recognized (118) 1,171
Current year's contributions (1,076) (323)
Other (32) 125
-----------------------------------------------------------------------------------------------------
Unfunded accrued pension cost at end of year $ 4,280 $ 4,535
===== =====
-----------------------------------------------------------------------------------------------------
A portion of the unfunded accrued pension cost is included in the caption
"Other liabilities", on the Company's balance sheet.
The weighted average discount rate used to measure the projected benefit
obligations is 8.25% in 1994 and 7.25% in 1993, the rate of increase in future
compensation levels is 6%, and the expected long-term rate of return on assets
is 9.5%. Plan assets consist primarily of listed stocks, including $315,000 of
the Company's stock, insurance contracts and cash equivalents.
8. OTHER POSTRETIREMENT BENEFITS
The Company sponsors a defined benefit postretirement plan that covers
employees hired prior to January 1, 1991 who retire from active service by
meeting specific age and years of service requirements. The plan provides
health care (medical benefits) for the retiree and his/her eligible dependents
and life insurance benefits for the retiree. The health care coverage is
non-contributory for retirees who retired prior to January 1, 1991 and may be
contributory for retirees who retired after December 31, 1990.
Postretirement benefit expense for 1994 and 1993 include the following
components:
1994 1993
----------------------------------------------------------------------------------------------------
(in thousands)
Service Cost $ 30 $ 78
Interest cost on accumulated postretirement benefit obligation 281 356
Actual return on plan assets 1 (338)
Net amortization and deferral (61) 202
-----------------------------------------------------------------------------------------------------
$ 251 $ 298
=== ===
-----------------------------------------------------------------------------------------------------
(32)
33
The following sets forth the funded status of the plan at December 31, 1994
and 1993:
1994 1993
---------------------------------------------------------------------------------------------------------------------
(in thousands)
Accumulated postretirement benefit obligation:
Retirees $ 3,454 $ 4,025
Fully eligible active plan participants 270 214
------ --------
3,724 4,239
Plan assets at fair value (1,798) (2,055)
------- -------
Accumulated postretirement benefit obligation in excess of plan assets 1,926 2,184
Unrecognized prior service cost (52) ( 460)
---- ------
Unfunded accrued postretirement benefit cost $ 1,874 $ 1,724
===== =====
---------------------------------------------------------------------------------------------------------------------
1994 1993
---------------------------------------------------------------------------------------------------------------------
(in thousands)
Unfunded accrued postretirement benefit cost at beginning of year $ 1,724 $ 1,556
Current year's postretirement benefit expense 251 298
Current year's contributions (101) (130)
---------------------------------------------------------------------------------------------------------------------
Unfunded accrued postretirement benefit cost at end of year $ 1,874 $ 1,724
===== -----
---------------------------------------------------------------------------------------------------------------------
For measurement purposes, an annual rate of increase for medical benefits
(trend rate) was assumed for retirees under 65 and for retirees aged 65 and
older. These rates were assumed to be 12.4% and 10.1% for 1994 and 13.3% and
10.6% for 1993. The rates were assumed to decrease gradually to 5.5% for both
groups in the year 2003 and remain at that level thereafter. The health care
cost trend rate assumption has a significant effect on the amounts reported.
Increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as
of December 31, 1994 by $259,000 and the aggregate of the service and interest
cost components of postretirement expense for the year then ended by $23,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8.25% in 1994 and 7.25% in 1993. The
assumed long-term rate of return on plan assets after estimated taxes was 3%.
At December 31, 1994, plan assets consist primarily of tax exempt securities.
9. OTHER LIABILITIES
Other liabilities at December 31, 1994 and 1993 are summarized in the
following table:
1994 1993
---------------------------------------------------------------------------------------------------------------------
(in thousands)
Postretirement health care $ 1,722 $ 1,724
Deferred income 2,028 2,228
Pension 3,037 2,338
Other 1,450 1,379
---------------------------------------------------------------------------------------------------------------------
$ 8,237 $ 7,669
====== ======
---------------------------------------------------------------------------------------------------------------------
(33)
34
10. STOCK OPTION AND STOCK OWNERSHIP PLANS
(a) Stock Option Plans.
Under the terms of its 1980 Incentive Stock Plan, approved by the
shareholders in 1980, the Company may offer an aggregate of 200,000 shares
(subject to adjustments for stock dividends, stock splits and the like) of the
Company's common stock to officers and key employees in a management role of
the Company and its subsidiaries upon the exercise of stock options or stock
appreciation rights (SAR's) granted to them pursuant to the 1980 Plan. A SAR
gives the holder, as an alternative to the exercise of the related stock
option, the right to receive, without payment to the Company, any appreciation
in the value of the shares subject to the related option that has taken place
between the dates of grant and exercise. Subject to certain restrictions, the
holder may receive this gain in cash or stock or in a combination of both. A
stock option or SAR granted under the 1980 Plan may be exercised at any time
after twelve months and prior to ten years following the date it is granted,
subject to certain restrictions that apply when an officer or employee holds
two or more options and to special rules that apply in the event of death,
retirement or termination of employment of an optionee. Upon exercise of a
stock option any related SAR automatically expires. On January 27, 1982 the
Company amended the 1980 Plan in order to permit the grant of Incentive Stock
Options on or after that date. Options granted prior to that date remain
non-qualified options. At December 31, 1994, options and related SAR's for
283,050 shares of the Company's common stock have been granted to officers and
employees. Of these, options to purchase 239,700 shares have been exercised,
forfeited or have expired, and options to purchase 43,350 shares remain
outstanding.
In 1992, the Company granted non-qualified options for 30,000 shares of the
Company's common stock to two non-employee directors. The Company granted
non-qualified options for 20,000 shares of the Company's common stock to one
non-employee director in 1994. These options may be exercised any time after
twelve months and prior to four years following the day of grant. At December
31, 1994, these options for 30,000 and 20,000 shares of the Company's common
stock remain outstanding. The following table sets forth certain information
concerning option transaction under the 1980 Plan and the 1992 grants during
the years ended December 31, 1994, 1993 and 1992.
1994 1993 1992
---------------------------------------------------------------------------------------------------------------------
Option shares outstanding at beginning of year 84,050 97,100 72,900
Option granted 20,000 - 59,000
Options forfeited or expired (10,700) (13,050) (34,800)
Options or SAR's exercise - - -
---------------------------------------------------------------------------------------------------------------------
Options shares outstanding at end of year 93,350 84,050 97,100
---------------------------------------------------------------------------------------------------------------------
The following table sets forth, as of December 31, 1994, the number of
shares of common stock subject to all stock options then outstanding under
grants made by the Company, the per share option prices for such shares, and
the years in which such options expire.
Year of Expiration 1996 1997 1998 1999 2002 2004
-----------------------------------------------------------------------------------------------------------------------
Number of shares 30,000 5,500 5,750 10,100 22,000 20,000
Average per share
option price $39.08 $57.00 $45.64 $48.00 $42.75 $31.25
-----------------------------------------------------------------------------------------------------------------------
(b) 1985 Employee Stock Ownership Plan
Effective June 1, 1985, the Company adopted a noncontributory Employee
Stock Ownership Plan (ESOP) and Trust for the benefit of all non-union
employees. The Trust borrowed $6.0 million from a bank and $4.0 million of the
proceeds of the loan were used to purchase treasury stock (81,633 shares at
$49.00 per share). The remainder was used to purchase Penn Virginia shares on
the open market. A total of 122,583 shares were purchased at an average cost
of $48.95 (which includes the 81,633 shares). Under the loan agreement, the
Company guaranteed the loan and is obligated to make annual contributions
sufficient to enable the Trust to repay the loan, including interest.
Principal is due in forty quarterly installments of $150,000 which began
September 1985. The outstanding obligations of the Trust guaranteed by the
Company is recorded in long-term debt and a like amount is recorded as a
separate deduction from shareholder's equity in the consolidated balance sheet.
Both the obligation and the deduction from shareholders' equity are reduced by
the amount of any payment by the Trust of the loan, and by the amount of any
current accrual of contributions by the Company. The amount of interest
incurred on the ESOP debt was $25,000, $39,000 and $77,000 in 1994, 1993 and
1992, respectively. Dividends on ESOP shares used for debt service amounted to
$27,000 , $70,000 and $72,000 in 1994, 1993 and 1992, respectively.
(34)
35
11. SEGMENT INFORMATION CONTINUING OPERATIONS
Coal and Land Oil and Gas Investment Consolidated
---------------------------------------------------------------------------------------------------------------------------
(in thousands)
December 31, 1994:
------------------
Revenues $ 16,723 $ 15,576 $ 3,176 $ 35,475
Operating profit (loss) 14,633 (1,110) 2,922 16,445
Identifiable assets 23,967 83,745 86,963 194,675
Corporate assets - - - 4,584
Total assets 199,259
Depreciation, depletion
and amortization $ 174 $ 6,071 $ 41 $ 6,286
--------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 239 $ 20,683 $ 8 $ 20,930
--------------------------------------------------------------------------------------------------------------------------
December 31, 1993:
-----------------
Revenues $ 15,919 $ 14,578 $ 2,793 $ 33,290
Operating profit (loss) 13,930 2,633 (6,187) 10,376
Identifiable assets 26,023 69,043 113,229 208,295
Corporate assets - - - 5,964
Total assets 214,259
Depreciation, depletion
and amortization $ 185 $ 4,914 $ 60 $ 5,159
--------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 463 $ 15,169 $ 12 $ 15,644
--------------------------------------------------------------------------------------------------------------------------
December 31, 1992:
------------------
Revenues $ 14,486 $ 8,637 $ (2,810) $ 20,313
Operating profit (loss) 12,500 (1,245) (16,081) (4,826)
Identifiable assets 31,796 55,836 22,106 109,738
Corporate assets - - - 3,470
Total assets 113,208
Depreciation, depletion
and amortization $ 176 $ 3,944 $ 83 $ 4,203
--------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 489 $ 25,875 $ 34 $ 26,398
--------------------------------------------------------------------------------------------------------------------------
Activities in coal and land operations mainly involve the leasing of
mineral rights and the collection of royalties. The oil and gas operations
include exploration for the production of oil and gas. The operations of
investments involve the management of investments as well as the receipt of
related dividends.
Operating profit is total revenue less operating expenses. In computing
operating profit none of the following items have been added or deducted:
general corporate expenses (other unallocated charges), interest expense and
income taxes.
Identifiable assets are those assets that are used in the Company's
operations in each segment. Corporate assets are principally cash and
marketable securities.
At December 31, 1994, the Company has an 18.9% interest in the voting
power of Westmoreland Coal Company, the principal lessee of the Company's coal.
Westmoreland operates in the United States and sells in the United States and
abroad. Coal royalties from Westmoreland accounted for $11,019,000,
$11,699,000 and $10,689,000 in 1994, 1993 and 1992, respectively, of the
operating revenues of the natural resources segment.
The Company also has a 16% investment in Westmoreland Resources, Inc. which
is solely engaged in coal mining operations in the United States.
(35)
36
12. COMMITMENTS AND CONTINGENCIES
Under the terms of a sale/leaseback transaction completed in 1984, minimum
rental payments under noncancelable operating leases are $499,000 per year
until 1999. The Company has guaranteed these lease payments. The Company
leases office space under a noncancelable operating lease that expires in 1999
and has rental payments of approximately $220,000 per year. In connection with
the sale of the lime and limestone division, the company guaranteed rental
payments of approximately $240,000 per year under an equipment operating lease.
The lease and guarantee expire in July 1996.
13. CONCENTRATION OF CREDIT RISK
At December 31, 1994 the Company had notes receivable with face values of
$42.9 million and unamortized discount of $30.4 million for a net carrying
value of $12.5 million due from three purchasers of coal reserves and gas
leases who are believed to be highly leveraged. The notes are secured by the
assets purchased and are being repaid from the cash flow from the sale of the
coal or gas reserves.
14. SUPPLEMENTARY INFORMATION ON OIL AND
GAS PRODUCING ACTIVITIES (UNAUDITED)
The following supplementary information regarding the oil and gas producing
activities of Penn Virginia is presented in accordance with the requirements of
the Securities and Exchange Commission (SEC) and the Financial Accounting
Standards No. 69. The amounts shown include Penn Virginia's net working and
royalty interests in all of its oil and gas operations.
Capital Costs Relating to Oil and Gas Producing Activities
1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
(in thousands)
Proved properties $ 28,913 $ 24,475 $ 24,475
Unproved properties 2,362 3,395 2,950
Wells, equipment and facilities 76,403 62,783 48,303
Support equipment and facilities 2,601 1,026 898
--------------------------------------------------------------------------------------------------------------------
110,279 91,679 76,626
Accumulated depreciation, depletion and amortization 29,491 22,636 17,836
--------------------------------------------------------------------------------------------------------------------
Net capitalized costs $ 80,788 $ 69,043 $ 58,790
====== ====== ======
--------------------------------------------------------------------------------------------------------------------
Costs Incurred in Certain Oil and Gas Activities
1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
(in thousands)
Property acquisition costs - Proved $ 4,438 $ - $ 15,853
Property acquisition costs - Unproved 1,544 445 235
Exploration costs 1,420 930 1,248
Development costs 14,701 14,724 9,787
--------------------------------------------------------------------------------------------------------------------
Results of Operation for Oil and Gas Producing Activities
The following schedule includes results solely from the production and sale
of oil and gas and excludes gains or losses on property dispositions. The
income tax expense is calculated by applying the statutory tax rates to the
revenues after deducting costs, which include depletion allowances and giving
effect to permanent differences and tax credits. The results of operations
exclude general and administrative overhead which is attributable to oil and
gas production.
1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
(in thousands)
Revenues $ 15,428 $ 14,270 $ 8,492
Production costs 4,452 3,730 2,499
Exploration costs 1,420 930 1,248
Depreciation, depletion, amortization and write-downs 7,833 4,838 3,874
--------------------------------------------------------------------------------------------------------------------
1,723 4,772 871
Income tax expense 603 1,670 221
--------------------------------------------------------------------------------------------------------------------
Results of operations $ 1,120 $ 3,102 $ 650
===== ===== ===
--------------------------------------------------------------------------------------------------------------------
(36)
37
Oil and Gas Reserves (unaudited)
The following schedule presents the estimated oil and gas reserves owned by
Penn Virginia as of December 31, 1994. This information includes Penn
Virginia's royalty and working interest share of the reserves of the Roaring
Fork Project as well as the working interest share of reserves held in certain
counties in eastern Kentucky and southern West Virginia. These reserves were
estimated by Williamson Petroleum Consultants, Inc. of Houston, Texas. The
Company considers the estimates to be reasonable, however, by their nature they
are subject to upward and downward revisions as additional information
regarding fields and technology becomes available. All reserves are located in
the United States.
Oil Gas
Proved Developed and Undeveloped Reserves: (Bbls) (MMcf)
--------------------------------------------------------------------------------------------------------------------
(in thousands)
December 31,1991 732 48,300
--------------------------------------------------------------------------------------------------------------------
Revisions of previous estimates (160) (2,002)
Extensions, discoveries and other additions 171 9,011
Production (107) (2,707)
Purchase of reserves - 58,767
--------------------------------------------------------------------------------------------------------------------
December 31, 1992 636 111,369
--------------------------------------------------------------------------------------------------------------------
Revisions of previous estimates (79) (3,933)
Extensions, discoveries and other additions 31 15,034
Production (83) (5,327)
--------------------------------------------------------------------------------------------------------------------
December 31, 1993 505 117,143
--------------------------------------------------------------------------------------------------------------------
Revisions of previous estimates 32 (16,650)
Extensions, discoveries and other additions 3 12,980
Production (73) (6,295)
Purchase of reserves - 20,754
--------------------------------------------------------------------------------------------------------------------
December 31, 1994 467 127,932
--------------------------------------------------------------------------------------------------------------------
Proved Developed Reserves:
December 31, 1992 542 60,803
December 31, 1993 394 70,263
December 31, 1994 371 78,125
--------------------------------------------------------------------------------------------------------------------
Standardized Measure of Discounted Future Net Cash Flows (Unaudited)
The following schedule shows the estimates of future net cash flows from
proved reserves prepared by independent consultants. These estimates are
prepared based on the prices of oil and gas in effect at year end, with only
price escalations guaranteed by existing contractual agreements over the life
of the producing properties used. These estimated future cash flows are
reduced by estimated future development and production costs based on year-end
cost levels, assuming continuation of existing economic conditions. Cash flows
are further reduced by estimated future income tax expense calculated by
applying the current statutory income tax rate to the total pretax future cash
flows, less the tax basis of the properties involved and the tax effects of any
permanent differences and credits. Most of the Company's gas reserves are at
spot prices and a change in gas prices will have an effect on the future net
cash flows calculations. A sustained decline in prices may result in some
impairment.
The monetary amounts presented in the following information are computed
using the Financial Accounting Standards Board's standardized assumptions and
should not be construed as being management's estimate of the fair market
value, replacement cost or any financial measure of the value of the reserves
owned by the Company. These assumptions reflect stable conditions over a
period of up to twenty years and therefore ignore possible changes in tax laws.
(37)
38
1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
(in thousands)
Future cash inflows $ 274,323 $ 316,804 $ 316,930
Future production costs 87,729 84,104 79,967
Future development costs 33,957 31,611 34,150
--------------------------------------------------------------------------------------------------------------------
152,637 201,089 202,813
--------------------------------------------------------------------------------------------------------------------
Future income tax expense 36,923 53,442 63,192
--------------------------------------------------------------------------------------------------------------------
Future net cash flows 115,714 147,647 139,621
10% annual discount for estimated timing of cash flows 59,634 83,580 81,704
--------------------------------------------------------------------------------------------------------------------
Standardized measure of discounted future net cash flows $ 56,080 $ 64,067 $ 57,917
====== ====== ======
--------------------------------------------------------------------------------------------------------------------
Changes in Standardized Measure of Discounted Future Net Cash Flows
(Unaudited)
1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
(in thousands)
Sales of oil and gas, net of production costs $ (10,976) $ (10,540) $ (5,993)
Net changes in prices and production costs (26,667) (11,860) (4,195)
Extension, discoveries and additions, net of costs 3,930 9,088 7,300
Development costs incurred during the period 14,701 14,724 9,787
Revisions of previous quantity estimates (10,074) (5,235) (4,264)
Purchase of minerals-in-place 8,285 - 36,400
Accretion of discount 8,726 8,440 4,349
Net change in income taxes (4,466) 4,013 (14,227)
Other changes 8,554 (2,480) (2,832)
--------------------------------------------------------------------------------------------------------------------
Net increase (decrease) (7,987) 6,150 26,325
Beginning of year 64,067 57,917 31,592
--------------------------------------------------------------------------------------------------------------------
End of year $ 56,080 $ 64,067 $ 57,917
====== ====== ======
--------------------------------------------------------------------------------------------------------------------
(38)
39
MANAGEMENT'S REPORT ON FINANCIAL INFORMATION
Management of Penn Virginia Corporation is responsible for the preparation
and integrity of the financial information included in this annual report. The
financial statements have been prepared in accordance with generally accepted
accounting principles which involve the use of estimates and judgments where
appropriate.
The corporation has a system of internal accounting controls designed to
provide reasonable assurance that assets are safeguarded against loss or
unauthorized use and to produce the records necessary for the preparation of
financial information. The system of internal control is supported by the
selection and training of qualified personnel, the delegation of management
authority and responsibility, and dissemination of policies and procedures.
There are limits inherent in all systems of internal control based on the
recognition that the costs of such systems should be related to the benefits to
be derived. We believe the corporation's systems provide this appropriate
balance.
The corporation's independent public accountants, KPMG Peat Marwick LLP,
have developed an understanding of our accounting and financial controls and
have conducted such tests as they consider necessary to support their opinion
on the financial statements. Their report contains an independent, informed
judgment as to the corporation's reported results of operations and financial
position.
The Board of Directors pursues its oversight role for the financial
statements through the Audit Committee, which consists solely of outside
directors. The Audit Committee meets regularly with management, the internal
auditor and KPMG Peat Marwick LLP, jointly and separately, to review
management's process of implementation and maintenance of internal controls,
and auditing and financial reporting matters. The independent and internal
auditors have unrestricted access to the Audit Committee.
Lennox K. Black Robert J. Jaeger
Lennox K. Black Robert J. Jaeger
Chairman and Vice President and
Chief Executive Officer Chief Financial Officer
(39)
40
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders 1600 Market Street
Penn Virginia Corporation Philadelphia, Pennsylvania 19103
We have audited the accompanying consolidated balance sheets of Penn
Virginia Corporation and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1994.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Penn
Virginia Corporation and subsidiaries as of December 31, 1994 and 1993, and the
results of their operation and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in the Summary of Significant Accounting Policies the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" at December 31, 1993 and adopted the
provisions of SFAS 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" as of January 1, 1992.
KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
March 1, 1995
(40)
41
FIVE YEAR SELECTED FINANCIAL DATA
1994 1993 1992 1991 1990
----------------------------------------------------------------------------------------------------------------------------------
(in thousands except per share data)
Revenues $ 35,475 $ 33,290 $ 20,313 $ 21,552 $ 30,966
----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations
before cumulative effect of change
in accounting principle 13,501 4,518 (7,766) 785 10,040
----------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting change - - (2,588) -- --
----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 13,501 $ 10,252 $ (17,088) $ 1,245 $ 10,592
====== ====== ======= ===== ======
----------------------------------------------------------------------------------------------------------------------------------
Per Common share:
Income (loss) from continuing operations
before cumulative effect of change
in accounting principle $ 3.15 $ 1.06 $ (1.82) $ .18 $ 2.31
----------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting change - - (.60) -- --
----------------------------------------------------------------------------------------------------------------------------------
Dividends paid $ 2.00 $ 2.90 $ 1.90 $ 1.90 $ 1.90
----------------------------------------------------------------------------------------------------------------------------------
Weighted average shares outstanding 4,280 4,280 4,278 4,289 4,339
===== ===== ===== ===== =====
----------------------------------------------------------------------------------------------------------------------------------
Assets:
Continuing operations $ 199,259 $ 214,259 $ 113,208 $ 138,983 $ 144,066
Discontinued operations, net - - 19,431 31,172 29,638
----------------------------------------------------------------------------------------------------------------------------------
Total $ 199,259 $ 214,259 $ 132,639 $ 170,155 $ 173,704
----------------------------------------------------------------------------------------------------------------------------------
Long -term debt $ 9,250 $ 16,575 $ 22,700 $ 19,892 $ 17,747
----------------------------------------------------------------------------------------------------------------------------------
(41)
42
BYLAWS
PENN VIRGINIA CORPORATION
AS AMENDED FEBRUARY 8, 1995
ARTICLE I
SHAREHOLDERS
SECTION 1. MEETINGS.
(a) Annual Meeting. Unless otherwise fixed by the board of
directors the annual meeting of shareholders for the election of
directors and for other business shall be held on the first Tuesday of
May in each year or, if that day is a legal holiday, on the first
subsequent business day.
(b) Special Meetings. Special meetings of the shareholders may be
called at any time by the chief executive officer, or a majority of
the board of directors, or the holders of at least one-fifth of the
shares of stock of the Company outstanding and entitled to vote.
(c) Place. Meetings of the shareholders shall be held at such
place in Philadelphia, Pennsylvania or elsewhere, as may be fixed by
the board of directors in the notice of meeting.
SECTION 2. NOTICE.
Written notice of the time and place of all meetings of
shareholders and of the purpose of each special meeting of
shareholders shall be given to each shareholder entitled to vote
thereat at least ten days before the date of the meeting, unless a
greater period of notice is required by law in a particular case.
SECTION 3. VOTING.
(a) Voting Rights. Except as otherwise provided herein, or in the
Articles of Incorporation, or by law, every shareholder shall have the
right at every shareholders' meeting to one vote for every share
standing in his name on the books of the Company which is entitled to
vote at such meeting. Every shareholder may vote either in person or
by proxy.
(b) Election of Directors. At each annual meeting the
shareholders shall elect the Board of Directors. The Board of
Directors shall have the authority to determine the number of
directors, provided that the entire board shall be composed of not
less than seven nor more than twelve directors.
(42)
43
BYLAWS
PENN VIRGINIA CORPORATION
AS AMENDED FEBRUARY 8, 1995
Section 4. Quorum.
The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of stock of the Company entitled to
vote at a meeting shall constitute a quorum. If a quorum is not
present, no business shall be transacted except to adjourn to a future
time.
ARTICLE II
DIRECTORS
SECTION 1. TERM OF OFFICE.
Each director elected at an annual meeting of the shareholders
shall hold office until the next annual meeting, unless properly
removed or disqualified, and until such further time as his successor
is elected and has qualified.
SECTION 2. POWERS.
The business of the Company shall be managed by the board of
directors which shall have all powers conferred by law and these
bylaws. The board of directors shall elect, remove or suspend
officers, determine their duties and compensations, and require
security in such amounts as it may deem proper.
SECTION 3. MEETINGS.
(a) Regular Meetings. Regular meetings shall be held at such
times as the board shall designate by resolution. Notice of regular
meetings need not be given.
(b) Special Meetings. Special meetings of the board may be called
at any time by the chief executive officer and shall be called by him
upon the written request of one-third of the directors. Written
notice of the time, place and the general nature of the business to be
transacted at each special meeting shall be given to each director at
least three days before such meeting.
(c) Place. Meetings of the board of directors shall be held at
such place as the board may designate or as may be designated in the
notice calling the meeting.
(43)
44
BYLAWS
PENN VIRGINIA CORPORATION
AS AMENDED FEBRUARY 8, 1995
SECTION 4. QUORUM.
A majority of the number of directors in office immediately
before the meeting begins shall constitute a quorum for the
transaction of business at any meeting and, except as provided in
Article VII, the acts of a majority of the directors present at any
meeting at which a quorum is present shall be the acts of the board of
directors.
SECTION 5. VACANCIES.
Vacancies in the board of directors (including one resulting
from an increase by not more than two) shall be filled by vote of a
majority of the remaining members of the board though less than a
quorum. Such election shall be for the balance of the unexpired term
or until a successor is duly elected by the shareholders and has
qualified.
ARTICLE III
BOARD COMMITTEES
SECTION 1. EXECUTIVE COMMITTEE.
The board of directors by resolution of a majority of the
number of directors then in office may designate three or more
directors to constitute an executive committee, which, to the extent
provided in such resolution, shall have and may exercise all the
authority of the board of directors except to approve an amendment of
the Company's articles of incorporation or a plan of merger or
consolidation. If an executive committee is so designated it will
elect one of its members to be its chairman.
SECTION 2. COMPENSATION AND BENEFITS COMMITTEE.
The board of directors by resolution of a majority of the
number of directors then in office may designate three or more outside
directors to constitute a compensation and benefits committee, which
shall have such power and authority as may be provided in such
resolution.
SECTION 3. OTHER COMMITTEES.
The board of directors by resolution of a majority of the
number of directors then in office may create or disband other
committees, as deemed to be proper.
(44)
45
BYLAWS
PENN VIRGINIA CORPORATION
AS AMENDED FEBRUARY 8, 1995
ARTICLE IV
OFFICERS
SECTION 1. ELECTION.
At its first meeting after each annual meeting of the
shareholders, the board of directors shall elect a president,
treasurer and secretary, and such other officers as it deems
advisable. Any two or more offices may be held by the same person
except the offices of president and secretary.
SECTION 2. CHAIRMAN AND PRESIDENT.
(a) Chairman. The chairman shall preside at all meetings of the
board and of the shareholders. If so designated by the board of
directors, the chairman shall be the chief executive officer.
(b) President. The president shall be either the chief executive
officer or the chief operating officer of the Company, as designated
by the board of directors. The president shall have such duties as
the board of directors and the chairman of the Company shall
prescribe.
SECTION 3. OTHER OFFICERS.
The duties of the other officers shall be those usually
related to their offices, except as otherwise prescribed by resolution
of the board of directors.
SECTION 4. GENERAL.
In the absence of the chairman and president, the person who
has served longest as vice president or any other officer designated
by the board shall exercise the powers and perform the duties of the
chief executive officer or chief operating officer or both.
The chief executive officer or any officer or employee
authorized by him may appoint, remove or suspend agents or employees
of the Company and may determine their duties and compensation.
(45)
46
BYLAWS
PENN VIRGINIA CORPORATION
AS AMENDED FEBRUARY 8, 1995
ARTICLE V
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION.
The Company shall indemnify any person who was or is a party
or threatened to be a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal, and whether or not by
or in the right of the corporation, by reason of the fact that he is
or was a director or officer of the Company (or a predecessor
corporation adsorbed in a merger or other transaction), or, while a
director or officer of the Company or such predecessor, is or was
serving at the request of the Company or such predecessor as a
director, officer, partner, trustee, administrator, employee or agent
of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, for expenses (including attorney's
fees), judgments, fines, penalties, including any excise tax assessed
with respect to an employee benefit plan, and amounts paid in
settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding, to the extent that (a) such person is
not otherwise indemnified, (b) such person has not improperly received
a personal benefit and (c) the liability did not result from such
person's gross negligence or willful misconduct.
SECTION 2. ADVANCE OF EXPENSES.
Expenses incurred by a director or officer of the Company in
defending a civil or criminal action, suit or proceeding shall be paid
by the Company in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of
the director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Company.
SECTION 3. PROCEDURE FOR DETERMINING PERMISSIBILITY.
The procedure for determining the permissibility of
indemnification (including the advance of expenses) shall be that set
forth in Section 13.1-701.B of the Virginia Corporation Law, provided
that, if there has been a change in control of the Company between the
time of the action or failure to act giving rise to the claim for
indemnification and such claim, then at the option of the person
seeking indemnification, the permissibility of indemnification shall
be determined by special legal counsel selected jointly by the Company
and the person seeking indemnification. The reasonable expenses of
any director or officer in prosecuting a successful claim for
indemnification, and the fees and expenses of any special legal
counsel engaged to determine permissibility of indemnification, shall
be borne by the Company.
(46)
47
BYLAWS
PENN VIRGINIA CORPORATION
AS AMENDED FEBRUARY 8, 1995
SECTION 4. CONTRACTUAL OBLIGATION; INURING OF BENEFIT.
The obligations of the Company to indemnify a person under
this Article V, including the obligation to advance expenses, shall be
considered contractual obligations of the Company to such person,
subject only to the determination of permissibility as set forth in
the preceding Section, and no modification or repeal of any provision
of this Article V shall affect, to the detriment of such person, the
obligations of the Company in connection with a claim based on any act
or failure to act occurring before such modification or repeal. The
obligations of the Company to indemnify a person such modification or
repeal. The obligations of the Company to indemnify a person under
this Article V, including the obligation to advance expenses, shall
inure to the benefit of the heirs, executors and administrators of
such person.
SECTION 5. INSURANCE AND OTHER INDEMNIFICATION.
The board of directors of the Company shall have the power but
shall not be obliged to (a) purchase and maintain, at the Company
expense, insurance on behalf of the Company and its director,
officers, employees and agents against liabilities asserted against
any of them, including the Company's obligations to indemnify and
advance expenses, to the extent that power to do so is not prohibited
by applicable law, and (b) give other indemnification to the extent
not prohibited by applicable law.
ARTICLE VI
CERTIFICATES OF STOCK
SECTION 1. SHARE CERTIFICATES.
Every shareholder of record shall be entitled to a share
certificate representing the shares held by him. Every share
certificate shall bear the corporate seal and the signature of the
president or a vice president and the secretary or an assistant
secretary or treasurer of the Company.
SECTION 2. TRANSFERS.
Shares of stock of the Company shall be transferable on the
books of the Company only by the registered holder or by duly
authorized attorney. A transfer shall be made only upon surrender of
the share certificate.
(47)
48
BYLAWS
PENN VIRGINIA CORPORATION
AS AMENDED FEBRUARY 8, 1995
ARTICLE VII
AMENDMENTS
These bylaws may be changed at any regular or special meeting
of the board of directors by the vote of a majority of the number of
directors in office immediately before the meeting or at any annual or
special meeting of shareholders by the vote of the holders of a
majority of the outstanding stock entitled to vote. Notice of any
such meeting of shareholders shall set forth the proposed change or a
summary thereof.
(48)
49
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
27 Financial Data Schedule
EX-21
2
SUBSIDIARIES OF REGISTRANT
1
EXHIBIT (21)
Subsidiaries of Registrant
Percentage State of
(%) of Incorporation or
Name of Subsidiary Ownership Organization
------------------ --------- ------------
Penn Virginia Equities Corporation 100.00 Delaware
Penn Virginia Equipment Corporation 100.00 Delaware
Penn Virginia Resources Corporation 100.00 Virginia
Penn Virginia Oil and Gas Corporation 100.00 Virginia
Penn Virginia Coal Company 100.00 Virginia
(49)
EX-23
3
CONSENT OF INDEPENDENT AUDITORS
1
KPMG Peat Marwick LLP
Certified Public Accountants
1600 Market Street
Philadelphia, PA 19103
EXHIBIT (23)
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Penn Virginia Corporation:
We consent to incorporation by reference in the Registration Statements Nos:
2-67355,2-77500 and 33-40430 on Form S-8 of Penn Virginia Corporation of our
report dated March 1, 1995, relating to the consolidated balance sheets of Penn
Virginia Corporation and subsidiaries as of December 31, 1994 and 1993 and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1994 which
report appears in the December 31, 1994 annual report on Form 10-K of Penn
Virginia Corporation.
Our reports refer to a change in 1993 in the method of accounting for certain
investments in debt and equity securities and a change in 1992 in the method of
accounting for postretirement benefits other than pensions.
KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
March 29, 1995
(50)
EX-27
4
FINANCIAL DATA SCHEDULE
5
1,000
YEAR
DEC-31-1994
DEC-31-1994
7,039
0
6,932
0
599
17,916
120,251
34,005
199,259
15,867
0
27,734
0
0
109,712
199,259
14,230
35,475
3,382
3,382
19,617
0
1,598
10,878
(2,623)
13,501
0
0
0
13,501
3.15
3.15