-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QDiO+k9mk54c9JETYF75a4A/Tuc/g/VCA8sowYEja7XTKsYzdwGZM4ky3whqsXKQ LTsM5r7/ul3QKw70IR9gPw== 0000893220-96-001376.txt : 19960816 0000893220-96-001376.hdr.sgml : 19960816 ACCESSION NUMBER: 0000893220-96-001376 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN VIRGINIA CORP CENTRAL INDEX KEY: 0000077159 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 231184320 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00753 FILM NUMBER: 96613254 BUSINESS ADDRESS: STREET 1: 800 BELLEVUE STREET 2: 200 S BROAD ST CITY: PHILADELPHIA STATE: PA ZIP: 19102 BUSINESS PHONE: 2155456600 MAIL ADDRESS: STREET 1: 800 BELLEVUE 200 S BROAD ST CITY: PHILADELPHIA STATE: PA ZIP: 19102 FORMER COMPANY: FORMER CONFORMED NAME: VIRGINIA COAL & IRON CO DATE OF NAME CHANGE: 19670501 10-Q 1 FORM 10-Q PENN VIRGINIA CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) /X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended June 30, 1996 or / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to ----------------------- ---------------------- Commission File Number 0-753 PENN VIRGINIA CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Virginia 23-1184320 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 MATSONFORD ROAD SUITE 200 RADNOR, PA 19087 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (610) 687-8900 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Number of shares of common stock of registrant outstanding at May 9, 1996: 4,341,064 2 PENN VIRGINIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
Three Months Six Months Ended June 30, Ended June 30, ---------------- -------------- 1996 1995 1996 1995 ---- ---- ---- ---- REVENUES: Timber & land sales $196 $152 $270 $372 Oil and condensate sales 238 231 405 462 Natural gas sales 4341 2,878 9,703 5,987 Royalties-coal 1,666 2,961 3,385 6,129 Royalties-oil & gas 422 341 968 689 Dividends 794 592 1,411 1,217 Other income 152 144 537 290 ----- ----- ------ ------- Total revenues $7,809 $7,299 $16,679 $15,146 EXPENSES: Operating expenses $784 $728 $1,510 $1,452 Exploration and development 166 124 247 242 Taxes other than income 666 458 1,313 899 General and administrative 1,688 1,608 3,383 3,451 Depreciation, depletion, amortization 1,617 1,832 3,243 3,718 ----- ----- ----- ----- TOTAL EXPENSES $4,921 $4,750 $9,696 $9,762 OPERATING INCOME $2,888 $2.549 $6,983 $5,384 OTHER (INCOME) EXPENSE: Interest expense $ 329 $624 $603 $1,010 Gain on sale of securities 0 (4,106) 0 (4,106) Gain on sale of property (5) (62) (22) (113) Other income (1,102) (721) (1,911) (1,156) ------- ------- ------- ------- Income before income tax $3,666 $6,814 $8,313 $9,759 Income tax expense 1,129 1,465 1,519 1,768 ------- ------- ------- ------- NET INCOME $2,537 $5,349 $6,794 $7,991 ======= ======= ======= ======= Net Income per share .58 1.25 1.58 1.87 ======= ======= ======= ======= WEIGHTED AVERAGE SHARES OUTSTANDING (IN THOUSANDS) 4,296 4,269 4,296 4,269
See accompanying notes to condensed consolidated financial statements. 1 3 PENN VIRGINIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED)
Three Months Six Months Ended June 30, Ended June 30, ---------------- -------------- 1996 1995 1996 1995 ---- ---- ---- ---- CASH FLOW FROM OPERATING ACTIVITIES: Net Income $2,537 $5,349 $6,794 $7,991 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion, and amortization 1,617 1,832 3,243 3,718 Gain on sale of property, plant and equipment (5) (63) (22) (113) Gain on sale of securities 0 (4,106) 0 (4,106) Deferred income taxes 55 (319) (654) 33 Other (1,094) (374) (1,611) (595) Decrease in current assets 457 1,178 967 1,493 Increase (Decrease) in current liabilities 525 (287) 544 (2,156) (Increase) Decrease in other assets 2 (16) 3 (77) Increase (Decrease) in other liabilities (1,086) 495 (728) (288) Decrease in minority interest (3) (6) (7) (8) -------- -------- -------- -------- NET CASH PROVIDED BY OPERATING ACTIVITIES $3,005 $3,683 $8,529 $5,892 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from notes $1,432 $1,381 $2,780 $2,333 Proceeds from the sale of securities 0 4,278 0 4,278 Proceeds from sale of fixed assets 5 116 25 116 Capital expenditures (12,712) (2,748) (12,785) (22,943) -------- ------- -------- -------- NET CASH PROVIDED, (USED) BY INVESTING ACTIVITIES $(11,275) $ 3,027 $(9,980) $(16,216) CASH FLOWS FROM FINANCING ACTIVITIES: Dividends paid (1,950) (1,921) (3,868) (3,841) Proceeds from debt borrowings 19,125 1,500 19,125 18,000 Repayment of long-term debt (3,875) (6,275) (7,825) (7,325) Purchase of treasury stock 0 0 0 (230) Issuance of stock 329 0 652 0 Reduction in guaranteed debt to ESOP 0 150 0 300 -------- ------- ------- ------- NET CASH PROVIDED,(USED) BY FINANCING ACTIVITIES $13,629 $(6,546) $8,084 $6,904 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $5,359 $164 $6,633 $(3,420) CASH AND CASH EQUIVALENTS-BEGINNING BALANCE 4,267 3,455 2,993 7,039 ----- ----- ----- ----- CASH AND CASH EQUIVALENTS-ENDING BALANCE $9,626 $3,619 $9,626 $3,619 ===== ===== ===== ===== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid to date for: Interest $145 $917 $ 268 $997 Income taxes $848 $173 $1,681 $373
See accompanying notes to condensed consolidated financial statements. 2 4 PENN VIRGINIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
June 30 December 31, 1996 1995 ---- ---- (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $9,626 $2,993 Receivables 3,415 3,924 Current portion of long-term notes receivable 4,321 4,321 Current deferred tax benefit 865 865 Recoverable income taxes 0 375 Inventory 245 187 Prepaid expenses 88 229 ------- ------- TOTAL CURRENT ASSETS 18,560 12,894 Investments 102,575 96,645 Long-term notes receivable-net of current portion 3,304 4,582 Property, plant and equipment (net) 102,092 91,016 Intangible assets, net of amortization 737 740 Other assets 122 124 -------- -------- TOTAL ASSETS $227,390 $206,001 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 5 PENN VIRGINIA CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
JUNE 30, DECEMBER 31, 1996 1995 ---- ---- (UNAUDITED) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current installments on long-term debt $4,400 $2,000 Accounts payable 766 2,094 Accrued expenses 5,058 4,670 Deferred liabilities 143 188 Taxes on income 928 358 ------- ------- TOTAL CURRENT LIABILITIES 11,295 9,310 ------ ----- Other liabilities 6,674 7,402 Deferred taxes 30,942 29,040 Long-term debt, net of current installments 22,418 12,700 Minority interest 185 192 SHAREHOLDERS' EQUITY Preferred stock of $100 par value- authorized 100,000 shares; none issued Common stock of $6.25 par value- authorized 8,000,000 shares, issued 4,450,717 shares and 4,437,517 shares, respectively 27,817 27,735 Other paid in capital 36,124 35,856 Retained earnings 40,902 37,979 ------- ------- 104,843 101,570 Less: 109,653 and 175,277 shares of common stock, respectively, held in treasury 5,582 7,928 Unearned Compensation - ESOP 1,950 Pensions-additional liability 899 899 Add: unrealized investment holding gain, net of tax 59,464 54,614 ------- ------ TOTAL SHAREHOLDERS' EQUITY 155,876 147,357 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $227,390 $206,001 ======== ========
See accompanying notes to condensed consolidated financial statements. 4 6 PENN VIRGINIA CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1996 (1) ACCOUNTING POLICIES The accompanying unaudited consolidated financial statements of Penn Virginia Corporation and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial reporting and SEC regulations. These statements involve the use of estimates and judgments where appropriate. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the Company's consolidated financial statements and footnotes included in the Company's December 31, 1995 annual report on Form 10-K. Operating results for the six months ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. (2) SECURITIES The amortized cost, gross unrealized holding gains or losses and market value for available-for-sale securities at June 30, 1996 were as follows:
(Dollars in thousands) Amortized Gross Unrealized Market Cost Holding Gain (loss) Value ---- ------------------- ----- Available-for-sale: Westmoreland Coal Company $5,263 $877 $6,140 Westmoreland Resources, Inc. 3000 0 3000 Norfolk Southern Corporation 2,839 90,589 93,428 Blue Diamond Coal Company 3 4 7 ---------- --------- ---------- $11,105 $91,470 $102,575
The amortized cost and fair value of notes receivable which are classified as held-to maturity securities were $7,625,000 at June 30, 1996. (3) OTHER TRANSACTIONS In May, 1996, the Company completed a coal transaction in which Westmoreland Coal Company relinquished its rights under a lease of the Company's Virginia reserves. Penn Virginia paid $10.7 million in cash and other considerations to Westmoreland Coal Company for the reserve relinquishment. Westmoreland retained a lease of certain Virginia reserves. Of the approximately 115 million tons of recoverable coal reserves relinquished, approximately 50 million have been leased to new operators. Leases for the remaining 65 million tons of coal reserves are being negotiated with several coal operators and should be in place by year-end. In January 1996, the Company entered into three lease agreements with an operator covering approximately 60 million tons of its coal reserves in West Virginia. The leases have a fifteen-year initial term with the option to renew for an additional five-year term. The operator is permitting on the property and is expected to begin operations in early 1997. 5 7 (4) SUBSEQUENT EVENTS In July, 1996, the Company purchased a coal and timber property in West Virginia for approximately $8.0 million. The purchase included 15,000 acres holding 36 million tons of high BTU coal reserves and 11 million board feet of standing hardwood timber and other assets. Simultaneous with the acquisition, the Company entered into a long-term lease with the seller for the mining of the coal reserves. The seller expects to begin coal production from the property in 1998. In August, 1996, the Company entered into a $50.0 million senior unsecured revolving credit facility with a group of banks led by Texas Commerce National Bank. The borrowing base is calculated by the bank group and is based on cash flows by business segment comprised of oil and gas, coal, and Norfolk Southern dividends . The borrowing base will be determined semi-annually. Outstanding balances under the facility bear interest at LIBOR plus a percentage based on the borrowing capacity utilized. The agreement will require the Company to maintain certain levels of net worth, debt to capitalization and dividend limitation requirements. ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - SECOND QUARTERS OF 1996 AND 1995 COMPARED. Consolidated net income for the second quarter of 1996 is $2.5 million compared with $5.3 million for the second quarter of 1995. The 1995 consolidated net income included a pretax gain on the sale of securities of $4.1 million. Operating income for the second quarter of 1996 is $2.9 million compared with $2.5 million for the second quarter of 1995. The discussion of the segmented financial information included in this report will detail the specifics of this increase. Corporate and other non-operating income or expense consist primarily of general and administrative expense, other non-operating income, interest expense and income taxes. Corporate general and administrative expenses were $0.7 million for the second quarter of 1996 compared with $0.5 million for the second quarter 1995, this increase was due to the exercise of stock options by a former employee. Interest expense was down $0.3 million due to the reduction of outstanding debt. Other non-operating income increased from $0.7 million in the second quarter of 1995 to $1.1 million in the second quarter of 1996. This increase was related to an increase in interest income on various long-term notes receivable. Income taxes decreased from $1.4 million in the second quarter of 1995 to $1.1 million in the second quarter of 1996. This decrease is attributable to different components in the tax accrual for the second quarter of 1996. RESULTS OF OPERATIONS - SIX MONTHS OF 1996 AND 1995 COMPARED. Consolidated net income for the first six months of 1996 is $6.8 million compared with $8.0 million for the same period in 1995. The 1995 consolidated net income included a pretax gain on the sale of securities of $4.1 million. Operating income for the first six months of 1996 is $7.0 million compared with $5.3 million for the same period in 1995. The discussion of the segmented financial information included in this report will detail the specifics of this increase. 6 8 Corporate and other non-operating income or expense consist primarily of general and administrative expense, other non-operating income, interest expense and income taxes. Corporate general and administrative expenses were $1.5 million for the first six months of 1996 compared with $1.3 million for the same period in 1995, this increase was due to the exercise of stock options by a former employee. Interest expense was down $0.4 million due to the reduction of outstanding debt. Other non-operating income increased $0.7 million for the first six months of 1996 compared with the same period in 1995. This increase was result of damages received on an encroachment of the Company's coal reserves in Virginia and an increase in interest income on various long-term notes receivable. Income taxes decreased $0.2 for the first six months of 1996 compared with the same period in 1995. This decrease is attributable to different components in the tax accrual for the first six months of 1996. The table below illustrates the operating statistics for the various business segments of the Company and will be used to discuss the variances related to operating activities for the Company for the three months ended June 30, 1996 and 1995 and for the six months ended June 30, 1996 and 1995. OPERATIONS SUMMARY
Three Months Six Months Ended June 30, Ended June 30, -------------- -------------- 1996 1995 1996 1995 ---- ---- ---- ---- PRODUCTION Natural gas (MMcf)-WI 1,614 1,666 3,311 3,310 Natural gas (MMcf)-RI 181 155 347 310 Oil and condensate (MBbls) 13 13 23 28 Timber (Mbf) 1,073 1,218 1,538 2,290 Coal tons (000) 816 1,303 1,606 2,650 PRICES Natural gas ($/Mcf)-WI $2.69 $1.73 $2.93 $1.81 Natural gas ($/Mcf)-RI 2.33 2.20 2.79 2.22 Oil and condensate ($/Bbl) 18.31 17.77 17.61 16.50 Timber ($/Mbf) 168 108 160 145 Coal royalties ($/ton) 2.04 2.27 2.11 2.31
The Company operates three business segments, oil and gas, coal and land and investments. The segmented financial information on operating income with explanations regarding variances in each segment is presented below. 7 9 OIL AND GAS The table below illustrates the results of operations for the oil and gas segment for the three months ended June 30, 1996 and 1995 and for the six months ended June 30, 1996 and 1995. OIL AND GAS
Three Months Six Months Ended June 30, Ended June 30, -------------- -------------- 1996 1995 1996 1995 ----- ----- ---- ---- (Dollars in thousands) (Dollars in thousands) REVENUES: Natural gas sales $4,341 $2,878 $9,703 $5,987 Oil and gas royalties 422 341 968 689 Oil and condensate 238 231 405 462 Other income 141 133 491 243 ----- ----- ----- ----- TOTAL REVENUES $5,142 $3,583 $11,567 $7,381 ------ ------ ------- ------ EXPENSES: Operating expenses $ 746 $ 715 $ 1,446 $1,420 Exploration and development 114 82 175 146 Taxes other than income 531 346 1,073 658 General and administrative 634 800 1,215 1,534 Depreciation and depletion 1,579 1,779 3,166 3,634 ----- ----- ----- ----- TOTAL EXPENSES $3,604 $3,722 $7,075 $7,392 ------ ------ ------ ------ OPERATING INCOME $1,538 $ 139 $4,492 $ (11) ====== ====== ====== =======
RESULTS OF OPERATIONS - SECOND QUARTERS OF 1996 AND 1995 COMPARED. NATURAL GAS SALES. Natural gas sales increased $1.5 million (52 PERCENT) in the second quarter of 1996 compared with the same period of 1995. This was accomplished primarily on the strength of pricing, with volume remaining virtually unchanged between the two comparison periods. The average price received by the Company for its working interest gas was $2.69 per thousand cubic feet (Mcf) compared with $1.73 per Mcf for the same period of 1995. Penn Virginia has entered into several short-term contracts with prices ranging from $2.46 per Mcf to $2.65 per Mcf from April, 1996 thru March, 1997. These contracts cover approximately 20-25 percent of the Company's estimated production during this period. The Company also entered into two short-term contracts for the period May 1996 thru November 1996, with prices ranging from $2.65 per Mcf to $2.78 per Mcf. These contracts cover approximately 20-25 percent of the Company's estimated production during this period. OIL AND CONDENSATE SALES. Oil sales increased $7,000 (3 PERCENT) in the second quarter of 1996 compared with the same period of 1995. Prices per barrel were higher, averaging $18.31 per barrel (Bbl) for 1996 compared with $17.77 per Bbl for 1995. Production was unchanged for 1996 compared with the same period of 1995. The primary field affected by this increase was Cutshin. 8 10 OIL AND GAS ROYALTIES. Oil and gas royalties increased $81,000 (24 PERCENT) in the second quarter of 1996 compared with the same period of 1995. This variance resulted from an increase in volume of 26 million cubic feet (MMcf) and an upturn in average prices from $2.20 per Mcf in the second quarter 1995 to $2.33 per Mcf in the second quarter of 96. OTHER INCOME. Other income increased $8,000 (6 PERCENT) in the second quarter of 1996 compared with the same period of 1995. This increase resulted from additional gathering system income in the Roaring Fork field due to increased volume transported. OPERATING EXPENSES. Operating expenses for the second quarter of 1996 were $746,000, which is an increase of $31,000 (4 PERCENT) compared with the same period of 1995. This increase is related to the increased processing and gathering fees the Company is experiencing in certain fields, offset by decreases in repairs and maintenance, utilities and rentals and well workovers. EXPLORATION AND DEVELOPMENT. Exploration and development expenses increased $32,000 (39 percent) in the second quarter of 1996 compared with the same period of 1995. This increase was due to the timing of delay rental payments. TAXES OTHER THAN INCOME. Taxes other than income increased $185,000 (53 PERCENT) in the second quarter of 1996 compared with the same period in 1995. Severance and ad valorem taxes represented the majority of the increase, which is a function of the increase in the sales price received for the Company's natural gas. GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased $166,000 (21 PERCENT) in the second quarter of 1996 compared with the same period in 1995. The primary factor effecting the decrease was a reduction in personnel and their related benefit costs. DEPRECIATION AND DEPLETION. Depreciation and depletion expense decreased $200,000 (11 PERCENT) from $1,779,000 in the second quarter of 1995 to $1,579,000 in the second quarter 1996. This decrease was a result of lower depletion rates related to the implementation of the Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of. The implementation resulted in an impairment being recorded in the fourth quarter of 1995 on the Company's Pikeville field. RESULTS OF OPERATIONS - SIX MONTHS OF 1996 AND 1995 COMPARED. NATURAL GAS SALES. Natural gas sales increased $3.7 million (62 PERCENT) in the first six months of 1996 compared with the same period of 1995. This was accomplished primarily on the strength of pricing with volume remaining virtually unchanged between the two comparison periods. The average price received by the Company for its working interest gas was $2.93 per Mcf compared with $1.81 per Mcf for the same period of 1995. Working interest volume in MMcf for the first six months of 1996 was 3,311 compared with 3,310 for the same period of 1995. OIL AND CONDENSATE SALES. Oil sales decreased $57,000 (12 PERCENT) in the first six months of 1996 compared with the same period of 1995. This variance was a result of a reduction in volume of 5 MBbls for the first six months of 1996 compared with the same period of 1995. Pricing for oil was stronger for the first six months of 1996, averaging $17.61 per Bbl compared with $16.50 per Bbl for the first six months of 1995. OIL AND GAS ROYALTIES. Oil and Gas royalties increased $279,000 (41 PERCENT) in the first six months of 1996 compared with the same period of 1995. This variance resulted from an increase in 9 11 volume of 37 MMcf and an increase in average prices from $2.22 per Mcf in the first six months of 1995 compared with $2.79 per Mcf in the first six months of 1996. OTHER INCOME. Other income increased $248,000 (102 PERCENT) for the first six months of 1996 compared with the same period of 1995. This increase was primarily a result of additional funds from the final settlement received from the Company's natural gas contract claim settlement against Columbia, which was reported in 1995. OPERATING EXPENSES. Operating expenses increased $26,000 (2 PERCENT) for the first six months of 1996 compared with the same period of 1995. This variance is a result of increased gathering and processing fees in the Company's various fields, offset by decreases in repairs and maintenance, utilities and rentals and well workovers. EXPLORATION AND DEVELOPMENT. Exploration and development expenses increased $29,000 (20 PERCENT) in the first six months of 1996 compared with the same period of 1995. In 1995 there were adjustments to accruals for dry hole expenses that are not present in 1996. All other exploration and development expenses are consistent from 1995 to 1996. TAXES OTHER THAN INCOME. Taxes other than income increased $415,000 (63 PERCENT) in the first six months of 1996 compared with the same period of 1995. Severance and ad valorem taxes represented the majority of the increase, which is a function of the increase in sales price received for the Company's natural gas. GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased $319,000 (21 PERCENT) for the first six months of 1996 compared with the same period of 1995. The primary factor effecting the decrease is a reduction in personnel and their related benefit cost. DEPRECIATION AND DEPLETION. Depreciation and depletion decreased $468,000 (13 PERCENT) for the first six months of 1996 compared with the same period of 1995. This decrease is a result of lower depletion rates related to the implementation of the Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets to be Disposed of. The implementation resulted in an impairment being recorded in the fourth quarter of 1995 on the Company's Pikeville field. 10 12 COAL AND LAND The table below illustrates the results of operations for the coal and land segment for the three months ended June 30, 1996 and 1995 and for the six months ended June 30, 1996 and 1995. COAL AND LAND
Three Months Six Months Ended June 30, Ended June 30, -------------- -------------- 1996 1995 1996 1995 ---- ---- ---- ---- (Dollars in Thousands) (Dollars in Thousands) REVENUES: Coal royalties $1,666 $2,961 $3,385 $6,129 Timber and land sales 196 152 270 372 Other income 10 11 45 47 ----- ----- ----- ----- TOTAL REVENUES $1,872 $3,124 $3,700 $6,548 ------ ------ ------ ------ EXPENSES: Operating expenses $ 39 $ 12 $ 65 $ 31 Exploration and development 52 43 72 96 Taxes other than income 112 71 183 146 General and administrative 328 332 643 651 Depreciation and depletion 32 43 63 65 ------ ----- ------ ------ TOTAL EXPENSES $ 563 $ 501 $1,026 $ 989 ------ ------ ------ ------ OPERATING INCOME $1,309 $2,623 $2,674 $5,559 ====== ====== ====== ======
RESULTS OF OPERATIONS - SECOND QUARTERS OF 1996 AND 1995 COMPARED COAL ROYALTIES. Coal royalties decreased $1.3 million (44 PERCENT) in the second quarter of 1996 compared with the same period in 1995. The largest single factor affecting this decrease was the idling of Westmoreland Coal Company operations on the Company's property located in Virginia. As reported earlier, this idling began in July, 1995. As reported in the notes to the financial statements included herein, this lease has been restructured and mining from the relinquished coal reserves is expected to begin in the fourth quarter of 1996. Westmoreland Coal Company retained a lease of approximately 40 million tons of recoverable coal reserves on which it employs two contract mining operations. Royalties from other lessees decreased approximately $0.2 million in the second quarter of 1996 compared with the second quarter of 1995 due to the depletion of reserves in certain areas. The Company also began to receive minimum royalty payments on the new leases in West Virginia signed in January, 1996. TIMBER AND LAND SALES. Timber and land sales increased $44,000 (29 PERCENT) in the second quarter of 1996 compared with the same period of 1995. In the second quarter of 1996, the Company sold 1,073 thousand board feet (Mbf) of timber compared with 1,218 Mbf for the same period in 1995. The sales price per Mbf increased from $108 per Mbf in the second quarter of 1995 to $168 per Mbf in the second quarter of 1996. This change in volume is a function of the timing of the Company's timber parcel sales. OTHER INCOME. Other income was virtually unchanged for the second quarter of 1996 compared with the second quarter of 1995. OPERATING EXPENSES. Operating expenses increased $27,000 (225 PERCENT) from $12,000 in the second quarter of 1995 to $39,000 in the second quarter of 1996 related to the recognition of expenses 11 13 associated with timber sales performed by the Company. Previously, the Company only used contractors to sell its timber. EXPLORATION AND DEVELOPMENT. Exploration and development expenses increased $9,000 (21 PERCENT) from $43,000 in the second quarter of 1995 to $52,000 in the second quarter of 1996. This increase resulted from the timing of the Company's coal core drilling program. TAXES OTHER THAN INCOME. Taxes other than income for the second quarter 1996 increased $41,000 (58 PERCENT) from $71,000 in 1995 to $112,000 in 1996 as a result of increased business franchise taxes in West Virginia. GENERAL AND ADMINISTRATIVE. General and administrative expenses for the second quarter 1996 were consistent with the second quarter 1995. DEPRECIATION AND DEPLETION. Depreciation and depletion decreased $11,000 (26 PERCENT) from $43,000 in the second quarter of 1995 to $32,000 in the second quarter of 1996. This decrease is a result of lower depletion expense due to decreased coal production offset by an increase in depreciation expense on fixed assets. RESULTS OF OPERATIONS - SIX MONTHS OF 1996 AND 1995 COMPARED. COAL ROYALTIES. Coal royalties decreased $2.7 million (44 PERCENT) for the first six months of 1996 compared with the same period of 1995. The largest single factor affecting this decrease was the idling of Westmoreland Coal Company operations on the Company's property located in Virginia. As reported earlier this idling began in July, 1995. Royalties from other lessees in the first six months of 1996 decreased approximately $.3 million due to the depletion of reserves in certain areas and the transition of new mining start-ups, offset by cash received for an encroachment on the Company's reserves. TIMBER AND LAND SALES. Timber and land sales decreased $102,000 (27 PERCENT) for the first six months of 1996 compared with the same period of 1995. The primary reason for this decline is the timing of parcel sales, the bulk of which are not scheduled until the third and fourth quarters of 1996. The sales price per Mbf did increase in the first six months of 1996 compared with the same period in 1995. The price increased from $145 per Mbf to $160 per Mbf. In the first six months of 1996, the Company sold 1,538 Mbf of timber compared with 2,290 Mbf for the same period in 1995. OTHER INCOME. Other Income was virtually unchanged for the first six months of 1996 compared with the first six months of 1995. OPERATING EXPENSES. Operating expenses increased $34,000 (110 PERCENT) from $31,000 in the first six months of 1995 to $65,000 for the first six months of 1996. This increase was due to the renewal of a land lease on a unit-train load-out site. EXPLORATION AND DEVELOPMENT. Exploration and development expenses decreased $24,000 (25 PERCENT) for the first six months of 1996 compared with the same period of 1995. This decrease is a result of the timing of the Company's coal core drilling program and the reduction of the Company's cash contribution to a research project it participates in with Virginia Tech. TAXES OTHER THAN INCOME. Taxes other than income increased $37,000 (25 PERCENT) in the first six months of 1996 compared with the same period of 1995. This increase is due to additional business franchise taxes in the state of West Virginia. 12 14 GENERAL AND ADMINISTRATIVE. General and administrative expenses for the first six months of 1996 were consistent with the first six months of 1995. DEPRECIATION AND DEPLETION. Depreciation and depletion decreased $2,000 (3 PERCENT) for the first six months of 1996 compared with the same period of 1995. This decrease is a result of lower depletion expense due to decreased coal production offset by an increase in depreciation expense on fixed assets. INVESTMENTS The table below illustrates the investments held at June 30, 1996 and the results of operations for the investment segment for the three months ended June 30, 1996 and 1995 and for the six months ended June 30, 1996 and 1995.
June 30, 1996 ------------- COMMON SHARES OWNED: Norfolk Southern Corporation 1,102,400 Westmoreland Coal Company 1,754,411 Westmoreland Resources, Inc 1,600 Blue Diamond Coal Company 287
INVESTMENTS
Three Months Six Months Ended June 30, Ended June 30, -------------- -------------- 1996 1995 1996 1995 ---- ---- ---- ---- (Dollars in thousands) (Dollars in Thousands) REVENUES: Dividends $794 $592 $1,411 $1,217 ---- ---- ------ ------ TOTAL REVENUES 794 592 1,411 1,217 --- --- ----- ----- EXPENSES: General and administrative 8 3 13 9 ----- ----- ----- ----- TOTAL EXPENSES 8 3 13 9 ----- ----- ----- ----- OPERATING INCOME $ 786 $ 589 $1,398 $1,208 === === ===== ======
RESULTS OF OPERATIONS - SECOND QUARTERS OF 1996 AND 1995 COMPARED. DIVIDENDS. Dividend income from the Company's various investments in energy related companies is $794,000 for the second quarter 1996 an increase of $202,000 (34 PERCENT) due to the timing of the payment of Westmoreland Resources, Inc. dividends. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $5,000 (167 PERCENT) from the second quarter of 1995 to the second quarter of 1996 as a result of increases in professional services being rendered. 13 15 RESULTS OF OPERATIONS - SIX MONTHS OF 1996 AND 1995 COMPARED. DIVIDENDS. Dividend income from the Company's various investments in energy related companies increased $194,000 (16 PERCENT) for the first six months of 1996 compared with the same period in 1995 due to the timing of the payment of Westmoreland Resources, Inc. dividends. GENERAL AND ADMINISTRATIVE. General and administrative expenses increased $4,000 (44 PERCENT) for the first six months of 1996 compared with the same period of 1995 as a result of increases in professional services being rendered. CAPITAL EXPENDITURES, CAPITAL RESOURCES AND LIQUIDITY. CAPITAL EXPENDITURES. During the first six months of 1996, capital expenditures totaled $12.8 million compared with $22.9 million for the first six months of 1995. In May, 1996 the Company completed a transaction with Westmoreland Coal Company in which the Company regained control of its Virginia coal reserves. Penn Virginia paid $10.7 million in cash and other considerations to Westmoreland Coal Company in exchange for the reserve relinquishment. Westmoreland also retained a lease of certain Virginia reserves. Of the approximately 115 million tons of recoverable coal reserves relinquished, approximately 50 million have been leased to new operators. Leases for the remaining 65 million tons of coal are being negotiated with several coal operators and should be in place by year-end. The remaining $2.1 million of capital expenditures have been made in the oil and gas segment within the first six months of 1996. Drilling of the budgeted thirty to forty development wells has begun. At June 30, 1996, 14.6 net wells had been drilled with 13.6 net wells successful and 1.0 net developmental dry hole. The Company also began its exploratory drilling program in the Hinton field. Results are encouraging, at June 30, 1996, 2.0 net wells had been successfully drilled. The Company will continue with an 8 to 10 well exploratory drilling program for 1996. In the first six months of 1995 the Company acquired certain oil and gas properties in southern West Virginia for approximately $17.0 million in cash. This transaction included 58 producing wells and approximately 47 billion cubic feet (Bcf) of natural gas reserves. Also, during this period, the Company regained control of its West Virginia coal reserves when Westmoreland Coal Company relinquished its lease in return for $3.0 million and other consideration. The remainder of capital expenditures in the first six months of 1995 were related to the developmental drilling program in the oil and gas segment. At June 30, 1995, 19.1 net wells had been drilled successfully with no dry holes. Subsequent to the end of the second quarter the Company completed an acquisition of a coal and timber bearing property in West Virginia. For approximately $8.0 million, the Company acquired 15,000 acres holding 36 million tons of high-BTU coal reserves of which 17 to 20 million tons are currently estimated to be recoverable and 11 million board feet of standing timber. Simultaneous with the acquisition, the company leased the reserves back to the seller, who will mine the coal. The current year capital expenditure program and proved property acquisitions will be funded by internally generated cash flow and additional debt. CAPITAL RESOURCES AND LIQUIDITY. Cash provided by operating activities and an increase in long-term borrowing were the primary sources of capital in the first six months of 1996. Net cash provided by operating activities was $8.5 million during the first six months of 1996, compared with $5.9 million for the first six months of 1995. The primary reason for this increase was the price the Company received for its oil and natural gas. As disclosed earlier, the Company has entered into short-term contracts for its natural gas to partially reduce price volatility. 14 16 Long term debt proceeds for the first six months of 1996 were $19.1 million compared with $18.0 million for the same period in 1995. Subsequent to the end of the second quarter of 1996 the Company entered into a $50.0 million senior unsecured revolving credit facility with a group of banks led by Texas Commerce National Bank. The borrowing base is calculated by the bank group and is based on cash flows by business segment comprised of oil and gas, coal, and Norfolk Southern dividends . The borrowing base will be determined semi-annually. Outstanding balances under the facility bear interest at LIBOR plus a percentage based on the borrowing capacity utilized. The agreement will require the Company to maintain certain levels of net worth, debt to capitalization and dividend limitation requirements. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (15) Letter Re: Unaudited interim financial information (27) Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed for the quarter ended June 30, 1996 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PENN VIRGINIA CORPORATION Date: August 14, 1996 By: /s/ STEVEN W. THOLEN --------------------------- ------------------------------------- Steven W. Tholen, Vice President, Chief Financial Officer Date: August 14, 1996 By: /s/ ANN N. HORTON --------------------------- ------------------------------------- Ann N. Horton, Controller 16 18 PENN VIRGINIA CORPORATION INDEX - --------------------------------------------------------------------------------
PAGE ---- PART I Financial Information: Item 1. Financial Statements Condensed Consolidated Statements of Income for the three 1 and six months ended June 30, 1996 and 1995 Condensed Consolidated Statements of Cash Flows for the three 2 and six months ended June 30, 1996 and 1995 Condensed Consolidated Balance Sheets as of June 30, 1996 and 3 December 31, 1995 Notes to Condensed Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition 6 and Results of Operations PART II Other Information Item 6. Exhibits and Reports on Form 8-K 15
17 EX-15 2 CONSENT FROM KPMG PEAT MARWICK 1 Exhibit 15 Penn Virginia Corporation Suite 200 100 Matsonford Road Radnor, PA 19087 RE: Registration Statement Nos. 2-67355, 2-77500, 33-40430, 33-59647 and 33-59651 Gentlemen: With respect to the subject Registration Statements, we acknowledge our awareness of the use therein of our report dated August 13, 1996 related to our review of interim financial information. Pursuant to Rule 436(c) under the Securities Act, such report is not considered a part of a Registration Statement prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act. Very truly yours, /s/ KPMG Peat Marwick LLP Houston, Texas August 13, 1996 EX-27 3 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 9,626 0 3,415 0 245 18,560 154,701 52,609 227,390 11,295 0 0 0 27,817 128,059 227,390 10,378 16,679 1,510 1,510 8,186 0 603 8,313 1,519 6,794 0 0 0 6,794 1.58 1.58
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