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SOUTHERN OHIO COAL COMPANY
QUARTERLY REPORT PER REQUIREMENTS
OF HOLDING COMPANY ACT RELEASE NO. 26573
FOR THE QUARTER ENDED JUNE 30, 1997
CONTENTS
Page
Statements of Income and Retained Earnings 1
Balance Sheets 2-3
Information Concerning Mine Operations and
Capital Improvements 4
Calculation of Cost of Capital and
Statement of Cost of Commercial Coal Sold and Shipped 5
Statement of Cost of Operation 6
Analysis of Mining Plant in Service 7
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SOUTHERN OHIO COAL COMPANY
STATEMENT OF INCOME
FOR THE QUARTER ENDED JUNE 30, 1997
(UNAUDITED)
(in thousands)
OPERATING REVENUES - Sales to Parent $48,406
COST OF OPERATION 44,614
OPERATING INCOME 3,792
INTEREST CHARGES 1,039
OPERATING INCOME BEFORE FEDERAL INCOME TAXES 2,753
FEDERAL INCOME TAXES ON OPERATIONS 1,330
NET INCOME FROM OPERATIONS 1,423
NONOPERATING INCOME 156
NET INCOME $ 1,579
STATEMENT OF RETAINED EARNINGS
FOR THE QUARTER ENDED JUNE 30, 1997
(UNAUDITED)
(in thousands)
BALANCE AT BEGINNING OF PERIOD $24,064
NET INCOME 1,579
CASH DIVIDENDS DECLARED 1,944
BALANCE AT END OF PERIOD $23,699
The common stock of the Company is wholly owned by Ohio Power Company.
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SOUTHERN OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
June 30,
1997
(in thousands)
ASSETS
MINING PLANT:
Mining Plant in Service $363,234
Construction Work in Progress 52
Total Mining Plant 363,286
Accumulated Depreciation and Amortization 205,904
NET MINING PLANT 157,382
OTHER PROPERTY AND INVESTMENTS 59,765
CURRENT ASSETS:
Cash and Cash Equivalents 19,427
Accounts Receivable:
General 5,603
Insurance 13,011
Affiliated Companies 8,082
Coal 1,122
Materials and Supplies 10,405
Other 3,107
TOTAL CURRENT ASSETS 60,757
REGULATORY ASSETS 48,847
DEFERRED CHARGES 4,526
TOTAL $331,277
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SOUTHERN OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
June 30,
1997
(in thousands)
CAPITALIZATION AND LIABILITIES
SHAREHOLDER'S EQUITY:
Common Stock - Par Value $1:
Authorized and Outstanding - 5,000 Shares $ 5
Premium on Common Stock 9,996
Other Paid-in Capital 34,693
Retained Earnings 23,699
TOTAL SHAREHOLDER'S EQUITY 68,393
LONG-TERM DEBT:
Notes Payable 45,000
Finance Obligations 40,263
TOTAL LONG-TERM DEBT 85,263
OTHER NONCURRENT LIABILITIES:
Obligations Under Capital Leases 20,281
Operating Reserves 54,007
TOTAL OTHER NONCURRENT LIABILITIES 74,288
CURRENT LIABILITIES:
Long-term Debt Due Within One Year 26,518
Accounts Payable:
General 3,892
Affiliated Companies 1,808
Taxes Accrued 2,616
Interest Accrued 1,276
Accrued Vacation Pay 3,144
Workers' Compensation Claims 12,318
Obligations Under Capital Leases 11,149
Other 3,792
TOTAL CURRENT LIABILITIES 66,513
DEFERRED INCOME TAXES 34,357
DEFERRED CREDITS 2,463
TOTAL $331,277
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SOUTHERN OHIO COAL COMPANY
INFORMATION CONCERNING MINE OPERATIONS AND CAPITAL IMPROVEMENTS
FOR THE QUARTER ENDED JUNE 30, 1997
In June 1997 the Company entered into a sale-leaseback
agreement for the Meigs preparation plant and related facilities
and received $50,100,000. The preparation plant will remain on
the books and continue to be depreciated. A finance obligation
of $50,100,000 was recorded as Long-term Debt. The Company used
the proceeds from this sale to return capital of $47,141,000 to
its parent, Ohio Power Company and at the same time pay dividends
of $1,944,000.
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<TABLE> SOUTHERN OHIO COAL COMPANY
CALCULATION OF COST OF CAPITAL AND STATEMENT OF COST OF COMMERCIAL COAL SOLD AND SHIPPED
FOR THE QUARTER ENDED JUNE 30, 1997
(in thousands, except as noted)
<CAPTION> April 1 through June 28 through April through
June 27 June 30 June
1997 1997 1997
<S> <C> <C> <C>
I. Calculation of Cost-of-Capital Compensation:
A. Equity Investment at Beginning of Period:
Common Stock $ 5 $ 5
Premium on Common Stock 9,996 9,996
Other Paid-in Capital 81,834 34,693
91,835 44,694
B. Rate of Return Allowable per HCAR No. 26573:
10.29% per annum, 2.5725% per quarter;
prorated to April 1 through June 27, 1997
period and June 28 through June 30, 1997 period .024868 .000857
C. Earnings Allowable on Equity Investment
1. Current Quarter $ 2,284 $ 38 $ 2,322
2. Year-to-Date $ 5,118
D. Net Income per Statement of Income (a) $ 1,579
Add: Interest Charges 1,039
Less: Nonoperating Income 156
E. Applied Cost-of-Capital Billing Adder:
1. Current Quarter $ 2,462
2. Year-to-Date $ 5,404
II. Coal Billing Calculation - Meigs Division:
A. Total Operating Expenses (b) $ 45,944
B. Add: Cost-of-Capital Billing Adder as Applied per E. 1. of Section I 2,462
C. Cost Applicable to Current Quarter Coal Billings to Ohio Power $ 48,406
D. Coal Sold and Shipped in Current Quarter to Ohio Power (in tons) 1,444,618
E. Average Price per Ton to Ohio Power (in dollars) (C/D) $33.51
(a) The Company sold its Martinka mining division and most of the Martinka related coal reserves
to an unaffiliated company. No return on equity investment associated with these operations has been billed
since the division ceased mining coal effective July 1, 1992. All results associated with the Martinka
division since then are billed to the Parent Company, Ohio Power Company, eliminating any earnings
effect to the Company.
(b) As represented by "Cost of Operation" plus "Federal Income Taxes On Operations" reported in Statement of
Income.
/TABLE
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SOUTHERN OHIO COAL COMPANY
STATEMENT OF COST OF OPERATION
FOR THE QUARTER ENDED JUNE 30, 1997
(in thousands)
Direct Labor-UMW* $ 1,711
Indirect Labor-UMW* 5,115
Benefits-UMW* 3,493
Salaries and Benefits-Nonunion 4,585
Operating Supplies 3,586
Repair Parts and Materials 5,741
Electricity and Other Utilities 1,759
Outside Services-Maintenance, Haulage and Reclamation 3,501
Taxes Other Than Federal Income Taxes** 2,255
Rental of Equipment 3,621
Depreciation, Depletion and Amortization 5,787
Mining Cost Normalization*** (3,151)
Reclamation 1,970
Other Production Costs 4,476
Subtotal 44,449
Transfers of Production Costs (to)/from Coal Inventory 165
Total $44,614
* United Mine Workers of America.
** Excludes FICA, Federal Unemployment and State Unemployment.
These costs are reflected in employee benefits.
*** Represents the deferral/accrual required to establish a selling
price based on forecasted results for the year.
The amount of mining cost normalization is established on an
"overall" company basis(i.e., not itemized) and is eliminated by
year-end.
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SOUTHERN OHIO COAL COMPANY
ANALYSIS OF MINING PLANT IN SERVICE
AND RELATED ACCUMULATED PROVISIONS FOR
DEPRECIATION AND AMORTIZATION
June 30, 1997
Net
Gross Accumulated Carrying
Cost Provisions Amount
(in thousands)
Description
Surface Lands $ 7,412 $ - $ 7,412
Mining Structures and Equipment 218,033 141,332 76,701
Coal Interests (net of depletion) 3,640 - 3,640
Mine Development Costs 134,149 64,572 69,577
Total Mining Plant in Service $363,234 $205,904 $157,330
