<PAGE>   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 QUARTER ENDED
                                 MARCH 31, 2001

                                       OR

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                        COMMISSION FILE NUMBER 333-60599

                               PEN HOLDINGS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

           TENNESSEE                                     62-0852576
(STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)

                          5110 MARYLAND WAY, SUITE 300
                           BRENTWOOD, TENNESSEE 37027
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 371-7300

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

        SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

         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 [ ] No [ ] N/A

         Indicate the number of shares of each of the registrant's classes of
common stock, as of the latest practicable date: As of May 30, 2001, Class I
Common Stock, $.01 par value per share, 4,290,000 shares and Class II Common
Stock, $.01 par value per share, 177,550 shares


<PAGE>   2

                               PEN HOLDINGS, INC.

                                      INDEX

<TABLE>
<CAPTION>
                                                                                                 PAGE
                                                                                                NUMBER
                                                                                                ------
<S>                                                                                             <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
   Consolidated Balance Sheet - March 31, 2001 and December 31, 2000                               1
   Consolidated Statement of Operations - Three Months Ended March 31, 2001 and 2000               2
   Consolidated Statement of Changes In Shareholders' Equity for the Three Months
     Ended March 31, 2001                                                                          3
   Consolidated Statement of Cash Flows - Three Months Ended March 31, 2001 and 2000               4
   Notes to Consolidated Financial Statements                                                      5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations     10

Item 3. Quantitative and Qualitative Disclosures about Market Risk                                14

PART II - OTHER INFORMATION
Item 1. Legal Proceedings                                                                         15
Item 2. Changes in Securities and Use of Proceeds                                                 15
Item 3. Defaults Upon Senior Securities                                                           15
Item 4. Submission of Matters to a Vote of Security Holders                                       15
Item 5. Other Information                                                                         15
Item 6. Exhibits and Reports on Form 8-K                                                          15

Signatures                                                                                        15
</TABLE>


                                      -i-
<PAGE>   3

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

                               PEN HOLDINGS, INC.

                           CONSOLIDATED BALANCE SHEET
                    (in thousands, except share information)

<TABLE>
<CAPTION>
                                                                                   MARCH 31,    DECEMBER 31,
                                                                                     2001          2000
                                                                                    --------     --------
                                                                                  (UNAUDITED)
<S>                                                                               <C>           <C>
                                   ASSETS

Current assets:
   Cash and cash equivalents ..................................................     $     98     $    178
   Accounts receivable (net of allowance for doubtful accounts of $645 and
     $635 respectively)........................................................       16,600       14,253
   Inventories ................................................................        3,947        3,004
   Deferred income taxes ......................................................        4,739        4,739
   Refundable income taxes ....................................................        1,376        3,015
   Other assets ...............................................................        2,717        2,886
                                                                                    --------     --------
     Total current assets .....................................................       29,477       28,075

Investment in unconsolidated affiliated company ...............................       10,195        3,046
Coal reserves and mine development costs, net .................................      152,253      151,845
Property, plant and equipment, net ............................................       86,608       85,771
Long-term investments .........................................................        9,267       16,960
Other assets ..................................................................        6,107        6,281
                                                                                    --------     --------
                                                                                    $293,907     $291,978
                                                                                    ========     ========

                    LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Revolving credit loans .....................................................     $ 38,671     $ 31,936
   Current maturities of long-term debt .......................................      103,301      103,312
   Current maturities of capital leases .......................................       12,676       13,717
   Accounts payable ...........................................................       16,325       12,224
   Accrued liabilities ........................................................       20,683       20,985
                                                                                    --------     --------
     Total current liabilities ................................................      191,656      182,174

Deferred income taxes .........................................................       48,803       51,780
Other liabilities .............................................................        5,490        5,404
                                                                                    --------     --------
     Total liabilities ........................................................      245,949      239,358
                                                                                    --------     --------
Mandatorily redeemable preferred stock ........................................       14,383       14,110

Contingencies (Note 8)

Shareholders' equity:
   Class I common stock, $.01 par value; 7,800,000 shares authorized, 4,290,000
     shares issued and outstanding.............................................           43           43
   Class II common stock, $.01 par value; 200,000 shares authorized, 177,550
     shares issued and outstanding ............................................            2            2
   Additional paid-in capital .................................................           19           19
   Retained earnings ..........................................................       33,511       38,446
                                                                                    --------     --------
     Total shareholders' equity ...............................................       33,575       38,510
                                                                                    --------     --------
                                                                                    $293,907     $291,978
                                                                                    ========     ========
</TABLE>



The accompanying notes are an integral part of these financial statements.



<PAGE>   4

                               PEN HOLDINGS, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED
                                                           MARCH  31,
                                                      --------------------
                                                        2001        2000
                                                      --------    --------
                                                          (UNAUDITED)
<S>                                                   <C>         <C>
Revenues ..........................................   $ 36,258    $ 39,757
Operating expenses:
   Cost of sales ..................................     37,733      37,390
   Selling, general and administrative ............      1,675       1,441
                                                      --------    --------
Operating income (loss) ...........................     (3,150)        926

Other (income) expense:
   Interest expense ...............................      3,642       2,028
   Interest income ................................        (34)        (33)
   Litigation settlement ..........................        453          --
   Other  expense .................................        148         128
                                                      --------    --------
Loss from continuing operations before income taxes     (7,359)     (1,197)

Provision (benefit) for income taxes ..............     (2,697)       (456)
                                                      --------    --------
Net loss before income from discontinued operations     (4,662)       (741)
Loss from discontinued operations .................         --         (21)
                                                      --------    --------
Net loss ..........................................     (4,662)       (762)

Accretion of mandatorily redeemable preferred stock        273         268
                                                      --------    --------
Net loss to common shareholders ...................   $ (4,935)   $ (1,030)
                                                      ========    ========

</TABLE>











The accompanying notes are an integral part of these financial statements.




                                      -2-
<PAGE>   5

                               PEN HOLDINGS, INC.

            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                          (in thousands, except shares)

<TABLE>
<CAPTION>
                                              CLASS I                     CLASS II
                                           COMMON STOCK                 COMMON STOCK     ADDITIONAL
                                    -------------------------        ------------------   PAID-IN     RETAINED
                                      SHARES          AMOUNTS         SHARES    AMOUNTS   CAPITAL     EARNINGS       TOTAL
                                    ----------        -------        -------    -------  ----------   --------      -------
<S>                                 <C>               <C>            <C>        <C>      <C>          <C>           <C>
Balance at December 31, 2000         4,290,000        $    43        177,550       $2       $19       $38,446       $38,510

Accretion of mandatorily
   redeemable preferred stock
   (unaudited) ..............                                                                            (273)         (273)
Net loss (unaudited) ........                                                                          (4,662)       (4,662)
                                    ----------        -------        -------       --       ---       -------       -------
Balance at March 31, 2001
   (unaudited) ..............        4,290,000        $    43        177,550       $2       $19       $33,511       $33,575
                                    ==========        =======        =======       ==       ===       =======       =======
</TABLE>







The accompanying notes are an integral part of these financial statements.




                                      -3-
<PAGE>   6

                               PEN HOLDINGS, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED
                                                                                     MARCH 31,
                                                                                -------------------
                                                                                 2001        2000
                                                                                -------    --------
                                                                                    (UNAUDITED)
<S>                                                                             <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss .................................................................   $(4,662)   $   (762)
   Adjustments to reconcile net loss to net cash provided (used) by operating
    activities:
       Depreciation, depletion and amortization .............................     4,772       3,916
       Equity in net losses of affiliates ...................................       213         438
       Deferred income taxes ................................................      (796)       (253)
       Gain on sale of equipment ............................................        --         (16)
       Interest income on long-term investments .............................      (268)       (320)
                                                                                -------    --------
   Cash generated from (used by) operations, before changes in assets and
    liabilities .............................................................      (741)      3,003

   Changes in assets and liabilities, net of effects from dispositions:
       Accounts receivable ..................................................    (2,347)     (3,978)
       Inventories ..........................................................      (943)     (1,634)
       Accounts payable and accrued expenses ................................     3,799       4,396
       Other ................................................................      (298)        116
                                                                                -------    --------
       Net cash provided (used) by operating activities .....................      (530)      1,903
                                                                                -------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures .....................................................    (5,759)    (11,172)
   Proceeds from sale of equipment ..........................................        --          25
   Investments in affiliated companies ......................................    (7,416)       (100)
   Maturity of long term investments ........................................     7,961          --
                                                                                -------    --------
   Net cash used by investing activities ....................................    (5,214)    (11,247)
                                                                                -------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Repayment of long-term debt ..............................................       (30)        (28)
   Repayment of capital leases ..............................................    (1,041)       (370)
   Net borrowings under line of credit agreements and current notes payable..     6,735       9,226
                                                                                -------    --------
   Net cash provided by financing activities ................................     5,664       8,828
                                                                                -------    --------
   Net decrease in cash .....................................................       (80)       (516)
   Cash and cash equivalents at beginning of period .........................       178         599
                                                                                -------    --------
   Cash and cash equivalents at end of period ...............................   $    98    $     83
                                                                                =======    ========
Supplemental disclosure of cash flow information:

   Cash paid for:
       Interest .............................................................   $   920    $    660
       Income taxes .........................................................        --          --
</TABLE>

Supplemental disclosure of non-cash transactions:

     In March 2000, the Company financed through capital lease transactions the
  purchase of $2,049,000 of equipment.

     In the three months ended March 31, 2001 and 2000, the Company recorded
  accretion of mandatorily redeemable stock in the amounts of $273,000 and
  $268,000, respectively.



The accompanying notes are an integral part of these financial statements.




                                      -4-
<PAGE>   7

                               PEN HOLDINGS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - DESCRIPTION OF BUSINESS:

DESCRIPTION OF THE BUSINESS

       Pen Holdings, Inc. ("Pen Holdings") and its consolidated subsidiaries
(references to the "Company" refer to Pen Holdings and its consolidated
subsidiaries) are primarily engaged in the mining and sale of coal, selling
predominantly to utility companies. The Company also receives royalty income
from coal reserves leased to other companies. The Company's coal reserves and
mining operations are in Kentucky and West Virginia.

       On March 15, 2001, Pen Holdings and certain of its subsidiaries entered
into the Forbearance and Amendment No. 4 to the Amended and Restated Credit
Agreement (the "Credit Facility" or "Credit") between Pen Holdings, certain of
its subsidiaries and Mellon Bank, N.A. ("Mellon") as agent under the Credit
Facility and for itself, CIBC, Inc., and AmSouth Bank (collectively, the
"Banks") dated June 3, 1998, as amended. The Bank Forbearance Agreement was
necessary as a result of the occurrence of certain potential defaults or events
of default occurring under the Credit Facility which arose as a result of the
Supreme Court of Kentucky's decision not to review the lower state court's
decision in The Elk Horn Coal Corporation ("Elk Horn Coal") v. Cheyenne
Resources, Inc. (the "Cheyenne Litigation"). The Forbearance Agreement has been
extended to May 31, 2001.

       Under the Bank Forbearance Agreement, the Banks have agreed to forbear
from taking any action to accelerate the loans or dispose of or collect upon any
collateral under the Credit Facility or other ancillary documentation until May
31, 2001 (the "Forbearance Period") as a result of the known defaults or
potential defaults under the Credit Facility. The forbearance by the Banks will
terminate before the end of the Forbearance Period if (i) Pen Holdings or
certain of its subsidiaries fail to pay or perform any indebtedness, liability
or obligation under the Bank Forbearance Agreement; (ii) there is a material
adverse change in the condition of Pen Holdings or certain of its subsidiaries;
(iii) additional defaults occur under the Credit Facility; (iv) Pen Holdings or
certain of its subsidiaries fail to adhere to certain restrictions imposed on
their accounts with the Banks; (v) an event of default occurs under the Pen
Holdings' 9 7/8% Senior Notes due 2008 (the "Senior Notes" or "Notes"); or (vi)
Pen Holdings or Travelers Casualty and Surety Company of America ("Travelers")
breaches the Forbearance and Stand Still Agreement by and among Pen Holdings,
the Banks and Travelers, dated as of March 15, 2001, and extended to May 31,
2001 (the "Tri-Party Forbearance Agreement").

       Subject to the terms of the Credit Facility and the satisfaction of
certain conditions, the Banks have agreed to continue to make loans under the
Credit Facility during the term of the Bank Forbearance Agreement. In
conjunction with the Bank Forbearance Agreement, the Company is now paying a
default rate of interest, which imposes a 200 basis points penalty over the grid
spread. The current grid spread is 2.75% above LIBOR (or an effective rate when
calculated to include the default penalty of 4.75% above LIBOR) and 1.75% above
the Prime Rate (or an effective rate when calculated to include the default
penalty of 3.75% above the Prime Rate).

       Pen Holdings, the Banks and Travelers have also entered into the
Tri-Party Forbearance Agreement. Travelers is the administrator of the judgment
bond issued by Reliance Insurance Company in connection with the Cheyenne
Litigation. Because the Supreme Court of Kentucky's decision in the Cheyenne
Litigation is final and non-appealable, the plaintiff in the Cheyenne Litigation
was entitled to draw against the judgment bond in the amount of $14,500,000 on
or after March 16, 2001 (the "Cheyenne Judgment").

       In connection with the Banks agreeing to forbear from certain actions
under the Credit during the Forbearance Period, Travelers and its affiliates
have also agreed to forbear from taking action to demand payment, enforce any
remedies or commence any proceedings or take any action to enforce any remedies
(including foreclosure on the Cheyenne Judgment, commencement of any action
against Pen Holdings or any other indemnitor of the obligations of Elk Horn Coal
to Travelers or cancellation or termination of any reclamation or other bonds or
surety obligations of Travelers issued for the benefit of Pen Holdings or any of
its subsidiaries or affiliates) against Elk Horn Coal, Pen Holdings or any
subsidiary or affiliate of Pen Holdings or any assets or properties of any of
the foregoing, whether in connection with the judgment bond or any other
obligation of any of the foregoing owing to Travelers or any subsidiary or
affiliate of Travelers. Travelers is permitted, however, during the Forbearance
Period to (i) present the $4,000,000 letter of credit issued by Mellon under the
Credit to Mellon (the "Mellon LC") for payment; (ii) file or docket the Cheyenne
Judgment of record wherever Elk Horn Coal owns property or assets (provided that
Travelers is prohibited from taking any action to enforce or foreclose upon the
Cheyenne Judgment); or (iii) pursue its remedies or take enforcement actions if
the Banks are no longer prohibited from doing the same under the Bank
Forbearance Agreement. Travelers has filed or docketed the Cheyenne Judgment
against Elk Horn Coal in some jurisdictions, which resulted in a lien on certain
of Elk Horn Coal's assets. Travelers has also presented the Mellon LC for
payment.

       The purpose of the Forbearance Period is to allow Pen Holdings additional
time to attempt to implement a strategy that will remedy the events of default
or potential defaults under the Credit and structure a resolution that is
satisfactory to the Banks, Travelers and Pen Holdings' and its subsidiaries'
other creditors. Pen Holdings has engaged Houlihan, Lokey, Howard & Zukin to
advise and assist it in connection with structuring such a resolution as well as
assessing its strategic alternatives.

       As of March 31, 2001, all of the Company's debt is classified as current
due to potential defaults and events of default that occurred under the
Company's Credit Facility and the fact that these defaults could, absent
forbearance arrangements or waivers, trigger the cross-default provisions of the
Company's other debt.




                                      -5-
<PAGE>   8

NOTE 2-SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION

       The consolidated financial statements include the accounts of the Company
and its majority and wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.

       Investments in affiliated enterprises in which the Company owns less than
a controlling interest are presented under the equity basis of accounting
representing the Company's investment in affiliates, reduced by goodwill
amortization and increased (decreased) by the Company's proportionate equity in
net income (losses) of the unconsolidated affiliates.

INTERIM FINANCIAL INFORMATION

       The accompanying interim financial statements have been prepared without
audit, and certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted, although the Company believes that
the disclosures herein are adequate to make information presented not
misleading. These statements should be read in conjunction with the Company's
financial statements for the year ended December 31, 2000, which are included in
the Company's Form 10-K for the year ended December 31, 2000 as filed with the
Securities and Exchange Commission on April 30, 2001. The results of operations
for the three month period are not necessarily indicative of results for the
full year. Certain prior year amounts have been reclassified for comparative
purposes.

       In the opinion of management, the accompanying interim financial
statements contain all adjustments of a normal and recurring nature necessary
for a fair presentation of the Company's financial position as of March 31,
2001, and its results of operations and its cash flows for the three months
ended March 31, 2001 and 2000, respectively.

NOTE 3-INVENTORIES:

       Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
                                           MARCH 31,    DECEMBER 31,
                                             2001          2000
                                          ---------      ---------
<S>                                       <C>           <C>
         Coal .......................     $   2,575      $   1,604
         Supplies ...................         1,372          1,400
                                          ---------      ---------
                                          $   3,947      $   3,004
                                          =========      =========
</TABLE>

NOTE 4-COAL RESERVES AND MINE DEVELOPMENT COSTS:

       Coal reserves and mine development costs consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                           MARCH 31,    DECEMBER 31,
                                             2001          2000
                                          ---------      ---------
<S>                                       <C>           <C>
         Coal reserves ..............     $ 153,884      $ 153,967
         Other mine development costs        33,685         31,625
                                          ---------      ---------
                                            187,569        185,592
         Accumulated depletion ......       (35,316)       (33,747)
                                          ---------      ---------
                                          $ 152,253      $ 151,845
                                          =========      =========
</TABLE>

       Mine development costs include $8,311,000 at March 31, 2001 and at
December 31, 2000 of capitalized interest on the Fork Creek reserves.




                                      -6-
<PAGE>   9

NOTE 5-PROPERTY, PLANT AND EQUIPMENT:

       Property, plant and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
                                       MARCH 31,    DECEMBER 31,
                                         2001          2000
                                      ---------      ---------
<S>                                   <C>           <C>
         Machinery and equipment      $ 101,005      $  99,160
         River terminals .........       11,633         11,633
         Buildings ...............        8,347          8,135
         Coal preparation plants..       21,307         20,042
         Other ...................        4,174          3,713
                                      ---------      ---------
                                        146,466        142,683
         Accumulated depreciation       (59,858)       (56,912)
                                      ---------      ---------
                                      $  86,608      $  85,771
                                      =========      =========
</TABLE>

NOTE 6-REVOLVING LINES OF CREDIT:

       The Company has a revolving line of credit under its current credit
facility with credit commitments from the Company's lenders in an aggregate
principal amount equal to $40,000,000. The credit facility expires in June 2003.
The borrowings under the credit facility are collateralized by certain of the
Company's assets, certain contracts of the Company, and the Company's
inventories and receivables. Borrowings bear interest at a variable rate based
on either LIBOR (an effective rate of 10.34% at March 31, 2001) or the lender's
prime lending rate (an effective rate of 11.75% at March 31, 2001). The
revolving line of credit had an outstanding cash balance of $38,671,000 and
$31,936,000 at March 31, 2001 and December 31, 2000, respectively. Additionally,
$360,000 and $4,360,000 was committed for outstanding standby letters of credit
at March 31, 2001 and December 31, 2000 respectively. These agreements contain
minimum operating and financial ratios and covenants as defined in the
agreements. The Company was not in compliance with certain financial ratio
covenants as of March 31, 2001. See additional information in NOTE 1.




                                      -7-
<PAGE>   10

NOTE 7-LONG TERM DEBT:

       Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                                     MARCH 31,      DECEMBER 31,
                                                                                       2001            2000
                                                                                     ---------      ---------
                                                                                  (IN THOUSANDS)  (IN THOUSANDS)
<S>                                                                               <C>             <C>
9-7/8% Senior Notes (the "Senior Notes") due 2008 in the aggregate principal
   amount of $100,000,000. On June 8, 1998, Pen Holdings issued the Senior Notes
   which accrue interest at 9-7/8%, payable semi-annually in June and December
   through the maturity date of June 15, 2008. The entire principal amount is
   due at the maturity date. The Senior Notes were issued with an aggregate
   original issue discount of $784,000, which is being amortized over the ten
   year term of the Senior Notes. The Senior Notes are general unsecured
   obligations of Pen Holdings ranking generally the same in priority of payment
   with all existing and future unsubordinated indebtedness of the Company. The
   Senior Notes are unconditionally guaranteed (the "Guarantees") on a senior
   unsecured basis, as to the payment of principal, premium, if any, and
   interest, fully and unconditionally, jointly and severally, by certain of Pen
   Holdings' subsidiaries (the "Guarantors"). The Guarantees will rank generally
   the same in priority of payment with all existing and future unsubordinated
   indebtedness of the Guarantors and senior in right of payment to all existing
   and future indebtedness of the Guarantors. The Senior Notes are redeemable at
   the option of Pen Holdings, in whole or in part, at any time on or after June
   15, 2003 at premiums to face value identified in the Indenture by and among
   Pen Holdings, the Guarantors, and The Bank of New York, as Trustee, dated
   June 8, 1998 (the "Indenture"), relating to the Senior Notes.................     $  99,438      $  99,419

Note payable secured by a lien on an office building which serves as the
   Company's headquarters, with a net book value of $2,795,000 at March 31,
   2001, payable in monthly installments of $37,000 through 2016. Interest
   included in the monthly installments is a fixed rate of 8.33% ...............         3,863          3,893
                                                                                     ---------      ---------
Total long-term debt ...........................................................       103,301        103,312

Current maturities of long-term debt ...........................................      (103,301)      (103,312)
                                                                                     ---------      ---------
                                                                                     $      --      $      --
                                                                                     =========      =========
</TABLE>

         The Indenture for the Senior Notes contains various covenants, the most
significant of which restricts the Company's ability to incur certain forms of
additional indebtedness, pay dividends or transfer or sell assets except in the
ordinary course of business. The proceeds from the issuance of the Senior Notes
were used to repay previously existing indebtedness, redeem warrants on the
Company's common stock and provide working capital for future development of
mining properties. Certain of the Company's other loan agreements contain
minimum operating and financial ratios and covenants as defined in the separate
agreements. See additional information in NOTE 1.

NOTE 8-CONTINGENCIES:

         There are legal proceedings pending against the Company arising from
the normal course of business. Management of the Company and its legal counsel
handling such matters do not expect any of these matters to have a material
effect on the Company's financial position or results of operations or cash
flows.

         The Company is a guarantor of $2,600,000 of debt that the purchaser of
its Pen Cotton of South Carolina operation incurred to purchase the business.








                                      -8-
<PAGE>   11

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         The statements contained in this report that are not historical facts
are "forward looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995), which statements can be identified by
the use of forward looking terminology such as "believes," "expects," "may,"
"will," "should," "intends," "predicts" "potential," "estimates," "continues" or
"anticipates" or the negative thereof or other variations thereof or comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
Management cautions the reader that these forward looking statements are only
predictions. No assurance can be given that future results will be achieved;
actual events or results may differ materially as a result of risks facing Pen
Holdings and its consolidated subsidiaries. Such risks include, but are not
limited to the Company's reliance on long-term sales contracts, the Company's
reliance on long-term mineral leases, the competitive environment in which the
Company operates, the risks inherent to the mining industry, acquisitions,
government regulation, reclamation and mine closure accruals, the effects of
Clean Air Act Amendments on the coal industry, replacement and recoverability of
coal reserves, economic conditions in the coal industry generally and
technological developments. Management also cautions readers that any forward
looking statements made by the Company are not guarantees of future performance
and that actual results may differ materially from those in the forward looking
statements as a result of various factors, including, but not limited to, the
following: (i) there can be no assurance that the Company's creditors will not
accelerate the indebtedness owing by the Company due to the financial covenant
defaults by the Company that have occurred and are anticipated to occur in the
future; (ii) the Company's available cash may not be sufficient to fund the
Company's working capital needs for an extended period of time; (iii) there can
be no assurance Travelers will not execute on the Cheyenne Judgment bond causing
defaults under the Credit and the Indenture and (iv) there can be no assurance
that the Company will be able to divest certain of its assets, refinance any of
its existing debt or renegotiate any contract in order to increase liquidity or
to fund working capital requirements and repay its long term debt. Such risks
and factors are described in more detail in the Company's Form 10-K for the year
ended December 31, 2000 in ITEM 1 -- "Business -- Factors That May Affect Future
Results" and ITEM 7 -- "Management's Discussion and Analysis of Financial
Condition and Results of Operations. Such risks could cause actual results to
vary materially from the future results indicated, expressed or implied, in such
forward looking statements.

GENERAL

         The Company is engaged in the mining, preparation, marketing and
leasing of primarily compliance and low-sulfur coal from mines located in the
Central Appalachian region of eastern Kentucky and southern West Virginia. Based
on the reserve information compiled by third-parties, the Company believes that
it controls the mineral rights to approximately 209 million tons of coal
reserves. In the three months ended March 31, 2001, the Company sold
approximately 1.4 million tons of coal, approximately 98.6% of which was
generated from captive production, with the remainder purchased from other coal
mine operators. During the three months ended March 31, 2001, approximately
67.9% of the tonnage was sold to seven long-term sales contract customers, with
the remainder sold to spot market customers. The Company sells coal primarily to
domestic public utilities and industrial customers. Coal sales under long-term
sales contracts (contracts with a term longer than one year) are the primary
source of revenues for the Company. Subsequent to March 31, 2001, the Company
has re-negotiated certain existing customer contracts to increase the sales
prices to levels more in line with the current market prices.

         The Company also generates revenues by leasing portions of its mineral
rights to independent coal producers in exchange for revenue-based lease
royalties. Generally, the lease terms provide the Company with a royalty fee of
up to 10% of the sales price of the coal with a minimum of $1.75 to $2.50 per
ton. The term of such leases varies from five years to the life of the reserves.
A minimum advance royalty is required whether or not the property is mined. Such
minimum royalty can be recouped by the lessee as a credit against royalties owed
on production if such production is within a specified period of time after a
minimum advance royalty is paid by the lessee.

         The Company's cost of sales is primarily composed of expenses related
to coal operations and coal leasing. Cost of coal sales are principally related
to (i) costs associated with production, (ii) contract mining fees, (iii) coal
purchases and (iv) upriver loading charges. The Company's costs associated with
production include labor, haulage, depreciation and depletion, coal preparation
plant costs, coal fees and taxes, supplies, and repairs and maintenance. The
Company's other cost of sales vary due to the level of contract mining
production, the quantity and quality of tonnage purchased and spot market coal
prices. The Company's cost of sales related to its lease operations consist
primarily of depletion and administrative costs.




                                      -9-
<PAGE>   12

RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, certain
operating and other data of the Company presented as a percent of revenues.

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED
                                                                 --------------------
                                                                       MARCH 31,
                                                                  2001         2000
                                                                 ------       ------
<S>                                                               <C>          <C>
OPERATING DATA:
Revenues ...................................................      100.0%       100.0%
Operating expenses:
   Cost of sales ...........................................      104.1         94.0
   Selling, general and administrative .....................        4.6          3.6
                                                                 ------       ------
Operating income (loss) ....................................       (8.7)         2.4

   Interest expense ........................................       10.0          5.1
   Interest income .........................................       (0.1)        (0.1)
   Litigation settlements ..................................        1.3          0.0
   Other income ............................................        0.4          0.3
                                                                 ------       ------
Income (loss) from continuing operations before
   income taxes ............................................      (20.3)        (2.9)

   Provision (benefit) for income taxes ....................       (7.4)        (1.1)
                                                                 ------       ------
Net income (loss) before income from discontinued operations      (12.9)        (1.8)

Income (loss) from discontinued operations .................        0.0         (0.1)
                                                                 ------       ------
Net loss ...................................................      (12.9)%       (1.9)%
                                                                 ======       ======
</TABLE>

THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2000

REVENUES

         Coal sales. Coal sales revenues were $34,442,000 for the three months
ended March 31, 2001 compared to $37,041,000 for the three months ended March
31, 2000, a decrease of 7.0%. Coal sales volume increased to 1,368,000 tons for
the three months ended March 31, 2001 from 1,367,000 tons for the three months
ended March 31, 2000. The decrease in coal sales revenue resulted primarily from
(1) contract tonnage that was replaced with lower priced spot sales prior to the
recent market increases and (2) a price reduction in one contract that was
re-negotiated in 2000 prior to the recent market increases.

         Coal leasing. Coal leasing revenues were $1,816,000 for the three
months ended March 31, 2001 compared to $1,835,000 for the three months ended
March 31, 2000, a decrease of 1.0%. Production from the lessee mines which was
765,000 tons for the three months ended March 31, 2001 compared to 961,000 for
the three months ended March 31, 2000, a decrease of 20.4%. Even with this
significant decrease in tonnage, coal leasing revenue remained close to the
level achieved for the three months ended March 31, 2000 primarily because of
the increased leasing royalties resulting from the recent increase in the market
price of coal.

         Other. The Company had no other revenues for the three months ended
March 31, 2001 compared to $881,000 for the three months ended March 31, 2000.
Other revenues for the three months ended March 31, 2000 were timber sales from
the Company's Fork Creek reserves.




                                      -10-
<PAGE>   13

COST OF SALES

         Cost of sales-Coal sales. Cost of coal sales totaled $36,831,000 for
the three months ended March 31, 2001 compared to $36,481,000 for the three
months ended March 31, 2000, an increase of 1.0%. The increase is primarily
related to adverse mining conditions at the Company's Fork Creek mines.

         Cost of sales-Leasing. Cost of coal lease revenues totaled $902,000
for the three months ended March 31, 2001 compared to $909,000 for the three
months ended March 31, 2000, a decrease of 0.8%.

OTHER

         Selling, general and administrative expenses totaled $1,675,000 for the
three months ended March 31, 2001 compared to $1,441,000 for the three months
ended March 31, 2000, an increase of $234,000. Selling, general and
administrative expenses were 4.6% and 3.6% of revenues for the three months
ended March 31, 2001 and 2000, respectively. The increase primarily resulted
from costs incurred in connection with service fees, investment banking fees,
and related expenses arising in connection with entering into the forbearance
arrangements with the Banks and Travelers.

         As a result, EBITDA ("EBITDA" as defined to mean operating income plus
depreciation, depletion and amortization and other non-cash items; EBITDA is not
intended to represent cash flow from operations as defined by generally accepted
accounting principles and should not be used as an alternative to net income or
as an indicator of operating performance or to cash flows as a measure of
liquidity) totaled $1,379,000 for the three months ended March 31, 2001 compared
to $4,767,000 for the three months ended March 31, 2000, a decrease of 71%. This
decrease is primarily attributable to increased mining costs.

         Interest expense totaled $3,642,000 for the three months ended March
31, 2001 compared to $2,028,000 for the three months ended March 31, 2000, an
increase of $1,614,000. The increase is a result of (1) not capitalizing
interest in the three months ended March 31, 2001 compared to $1,178,000
capitalized on Fork Creek development for the three months ended March 31, 2000,
(2) incurring the higher default rate of interest on the Company's revolving
lines of credit, and (3) higher levels of borrowing on the Company's revolving
lines of credit.

         Interest income totaled $34,000 for the three months ended March 31,
2001 compared to $33,000 for the three months ended March 31, 2000, a decrease
of 3.0% or $1,000.

         The Litigation settlement expense of $453,000 for the three months
ended March 31, 2001 relates to interest accrued on the Cheyenne Litigation.

         Other expense of $148,000 for the three months ended March 31, 2001
compared to other expense of $128,000 for the three months ended March 31, 2000.
Other expense for the three months ended March 31, 2001 was primarily related to
depreciation on idled facilities and equipment. Other expense for the three
months ended March 31, 2000 was primarily related to the Company's share of the
loss from its one-third partnership interest in International Marine Terminals
(IMT).

         Income taxes were a benefit of $2,697,000 for the three months ended
March 31, 2001 compared to a benefit of $456,000 for the three months ended
March 31, 2000, an increase of $2,241,000. The decrease in the effective rate
from 38% in the three months ended March 31, 2000 to 37% for the three months
ended March 31, 2001 results primarily from a decrease in statutory tax
depletion for the three months ended March 31, 2001.

         The Company had a net loss of $4,662,000 for the three months ended
March 31, 2001 compared to a net loss of $762,000 for the three months ended
March 31, 2000. The decrease resulted primarily from increased costs of coal
production.

INFLATION

         Inflation has not had a significant effect on the Company's business;
however, the Company's revenues and costs have been and are expected to continue
to be affected by fluctuations in coal market prices and diesel fuel costs.

LIQUIDITY AND CAPITAL RESOURCES

         On June 8, 1998, Pen Holdings issued the Senior Notes (the "Offering").
Interest on the Senior Notes is payable semiannually on June 15 and December 15
of each year, commencing December 15, 1998. As a result of the Offering, the
Company has significant indebtedness and debt service requirements. At March 31,
2001, the Company had total indebtedness including capital leases, revolving
credit loans, and current maturities of $154,648,000. The Indenture for the
Senior Notes permits the Company to incur additional indebtedness, subject to
certain limitations. The Indenture also includes certain covenants that, among
other things: (i) limit the incurrence by the Company of additional
indebtedness; (ii) restrict the ability of the Company to pay dividends or make
certain other payments; (iii) limit transactions by the Company with affiliates;
(iv) limit the ability of the Company to incur certain liens; (v) limit the
ability of the Company to consolidate or merge with or into, or to transfer all
or substantially all of its assets to, another person; and (vi) limit the
ability of the Company to engage in other lines of business.


                                      -11-
<PAGE>   14
         In connection with the Offering, Pen Holdings refinanced its senior
secured indebtedness and entered into an Amended and Restated Credit Agreement,
dated June 8, 1998, among Pen Holdings, certain of its subsidiaries and the
lenders named therein (the "Credit Facility"), which provides for aggregate
borrowings of up to $40,000,000 in principal. Interest rates on the revolving
loans under the Credit Facility are based, at the Company's option, on a grid
spread to LIBOR (as defined therein) or the Prime Rate (as defined therein). At
March 31, 2001, the Company's grid spread was 4.75% above LIBOR and 3.75% above
Prime Rate. At March 31, 2001, the Credit Facility had a borrowing of
$38,671,000 and a standby letter of credit commitment of $360,000. Borrowings
bear interest at a variable rate based on either LIBOR (an effective rate of
10.34% at March 31, 2001), or the Prime Rate (an effective rate of 11.75% at
March 31, 2001). The Credit Facility matures, subject to extensions requested by
the Company at the discretion of the lenders, five years after the closing date
which occurred simultaneously with the closing of the Offering. The Credit
Facility contains certain restrictions and limitations, including financial
covenants that require the Company to maintain and achieve certain levels of
financial performance and limit the payment of cash dividends and similar
payments. See Note 1.

         The Company's principal liquidity requirements are for debt service
requirements under the Senior Notes, and other outstanding indebtedness, and for
working capital needs and capital expenditures. Historically, the Company has
funded its capital and operating requirements with a combination of cash on
hand, operating cash flow and borrowings under credit facilities and capital
leases. The Company has utilized these sources of funds to make acquisitions,
fund significant capital investments in its properties, fund operations and
service debt under credit facilities.

         For the quarter ended March 31, 2001, the Company made capital
expenditures of $5,759,000. Capital expenditures were primarily related to the
Fork Creek development. The Fork Creek infrastructure was completed in
September, 2000 and the Company began shipping coal from that location at that
time. Management believes the level of tonnage shipped from Fork Creek will
continue to increase.

         As a result of the outcome of the Cheyenne Litigation, Pen Holdings
entered into the Bank Forbearance Agreement and the Tri-Party Forbearance
Agreement. (See PART II, ITEM 1, "LEGAL PROCEEDINGS"). Additionally, the Company
encountered unfavorable mining conditions during much of 2000. The combination
of these factors has placed severe limitations on the Company's ability to
obtain sufficient sources of liquidity to fund its capital expenditures and its
working capital needs.

         Although the Company has obtained forbearance under the Credit Facility
with respect to certain potential defaults or events of default occurring and a
forbearance agreement with Travelers, such forbearance terminates on May 31,
2001. If the Bank Forbearance Agreement and the Tri-Party Forbearance Agreement
are not extended, the Company would not be in compliance with certain financial
and other covenants under the Credit Facility permitting the Banks to accelerate
the indebtedness owing under the Credit Facility. The Company lacks the funds to
repay the Banks upon an acceleration of the Credit Facility which would in turn
cause defaults under other agreements of the Company including the Indenture and
Notes. The Banks hold liens on substantially all of the Company's assets and
could seek to enforce those liens upon acceleration of the indebtedness owing
under the Credit Facility. Additionally, once the Forbearance Period has
expired, Travelers can then take action to execute on the Cheyenne Judgment
against assets of the Company unless the Company pays the judgment. Currently,
the Company has no available source of funds to pay the total amount due under
the judgment bond.

         If the Bank Forbearance Agreement and the Tri-Party Forbearance
terminate and the Company's obligations are accelerated or Travelers executes on
the Cheyenne Judgment, such events would have a material adverse effect on the
Company's liquidity and financial position. Furthermore, if such obligations
were to be accelerated, in whole or in part, management cannot currently provide
any assurance that it would be successful in identifying or consummating
financing necessary to satisfy such obligations.

         The Company has engaged financial advisors and legal counsel to assist
reviewing its strategic and restructuring alternatives. The Company is (i)
engaged in discussions with the Banks and Travelers to extend the forbearance
agreements, (ii) seeking alternative sources of financing that may be able to
replace the credit that has been extended by the Banks, extinguish the
obligation to Travelers and provide additional liquidity, (iii) taking steps to
improve operational results, (iv) attempting to renegotiate the terms of certain
of its long-term coal contracts to take advantage of currently higher market
prices for coal, and (v) is exploring the disposition of certain of its assets.
There can be no assurance that the Company's efforts will be successful.

         Additionally, given the Company's current liquidity position,
management cannot anticipate how the Company's customers, other creditors,
service providers or vendors may react to its current financial position. There
can be no assurance that the Company will be able to continue to enter into
transactions and receive supplies and services required for its business from
its vendors and suppliers. Also, it is difficult to determine how the Company's
customers or other creditors may treat the Company given its current liquidity
position. The inability of the Company to engage vendors and suppliers on
customary terms, or at all, would have a materially adverse effect on the
Company's financial position and liquidity.

         Net cash used by operating activities was $530,000 for the three months
ended March 31, 2001 compared to net cash generated by operating activities of
$1,903,000 for the three months ended March 31, 2000. The $2,433,000 decrease in
cash flow from operating activities is primarily related to increased mining
costs at the Company's mining operations for the three months ended March 31,
2001.

         Net cash used by investing activities was $5,214,000 for the three
months ended March 31, 2001 compared to $11,247,000 for the three months ended
March 31, 2000. The $6,033,000 decrease is primarily the result of fewer capital
expenditures at Fork Creek during the three months ended March 31, 2001 than
during Fork Creek's development phase including the three months ended March 31,
2000.

                                      -12-
<PAGE>   15

         Net cash provided by financing activities of $5,664,000 for the three
months ended March 31, 2001 reflects a decrease of $3,164,000 over $8,828,000
used in the three months ended March 31, 2000. The decrease in net cash provided
by financing activities resulted primarily from decreased net borrowings under
the Company's revolving line of credit.

         The Company issued 10,000 shares of Convertible Preferred Stock in
connection with the recapitalization of the Company in 1995. The liquidation
value of $8,649,000 (which is net of a $1,588,000 reduction and a $3,413,000
reduction for settlement of the Company's tax matters in 1999 and 1998,
respectively) plus accrued dividends of $10,920,000 will be due in January 2006.
The Convertible Preferred Stock will be redeemed at that time by the issuance of
a note payable which amortizes over the 10 years following the redemption,
unless converted to Class I common stock in accordance with its terms.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.








                                      -13-
<PAGE>   16

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         On February 16, 2001, Pen Holdings announced that the Supreme Court of
Kentucky decided to not review a February 25, 2000 two-to-one split decision of
the Commonwealth of Kentucky Court of Appeals upholding a September 1998 Floyd
County Kentucky Circuit Court jury verdict in favor of Cheyenne Resources, Inc.
and its wholly-owned subsidiary, PC&H Construction, Inc. (collectively,
"Cheyenne"). The Floyd County Kentucky Circuit Court jury verdict awarded
Cheyenne damages of approximately $9.5 million (plus prejudgment interest of
approximately $5 million). This lawsuit was brought against Elk Horn Coal on a
case relating to a coal lease that was entered into by Elk Horn Coal prior to
the Company's purchase of Elk Horn Coal. The Supreme Court of Kentucky decision
not to review the lower court decision renders the judgment final and
non-appealable.

         The Company informed its senior lenders of the event and continues to
seek necessary extensions of forbearance under the Credit Facility and with
Travelers, the Cheyenne Judgment bondholder. There can be no assurance that any
necessary forbearance period will be extended. In the event that the Company's
senior lenders do not grant the necessary extension, do not permit the Company
to borrow under the Credit Facility, or seek to accelerate the indebtedness
under the facility, this will materially and adversely impact the liquidity and
financial position of the Company (See ITEM 2, "Management's Discussion And
Analysis Of Operations--Liquidity and Capital Resources". Additionally, once the
Forbearance Period has expired, Travelers then can take actions to execute on
the Cheyenne Judgment bond. Currently, the Company has no available source of
funds to pay the total amount due under the judgment bond.

         The Company previously had filed suit against Tredegar Industries for
any judgment the Company may have to pay with regard to the Cheyenne Litigation.
Tredegar Industries was the owner of Elk Horn Coal when part of the events that
gave rise to the Cheyenne Litigation occurred. The Company is pursuing this
litigation, however, this case is in its preliminary stages.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

ITEM 5. OTHER INFORMATION

Not Applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

None

(b) Reports on Form 8-K:

8-K filed on February 26, 2001 relating to events occurring on or after February
16, 2001.

8-K filed on March 20, 2001 relating to events occurring on or after March 15,
2001.


SIGNATURES

         Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

         Dated May 30, 2001

                                    PEN HOLDINGS, INC.



                                    By: /s/: WILLIAM E. BECKNER
                                        William E. Beckner
                                        President and Chief Executive Officer


                                    By: /s/: MARK A. OLDHAM
                                        Mark A. Oldham
                                        Senior Vice President, Secretary,
                                        Treasurer and Chief Financial Officer







                                      -14-