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SOUTHERN OHIO COAL COMPANY
QUARTERLY REPORT PER REQUIREMENTS
OF HOLDING COMPANY ACT RELEASE NO. 26573
FOR THE QUARTER ENDED MARCH 31, 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
Calculation of Allowed Cost of Capital -
Effective April 1, 1997 8
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SOUTHERN OHIO COAL COMPANY
STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1997
(UNAUDITED)
(in thousands)
OPERATING REVENUES - Sales to Parent $63,289
COST OF OPERATION 57,221
OPERATING INCOME 6,068
INTEREST CHARGES 1,145
OPERATING INCOME BEFORE FEDERAL INCOME TAXES 4,923
FEDERAL INCOME TAXES ON OPERATIONS 3,126
NET INCOME FROM OPERATIONS 1,797
NONOPERATING INCOME 105
NET INCOME $ 1,902
STATEMENT OF RETAINED EARNINGS
FOR THE QUARTER ENDED MARCH 31, 1997
(UNAUDITED)
(in thousands)
BALANCE AT BEGINNING OF PERIOD $24,064
NET INCOME 1,902
CASH DIVIDENDS DECLARED 1,902
BALANCE AT END OF PERIOD $24,064
The common stock of the Company is wholly owned by Ohio Power Company.
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SOUTHERN OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
March 31,
1997
(in thousands)
ASSETS
MINING PLANT:
Mining Plant in Service $363,638
Accumulated Depreciation and Amortization 201,676
NET MINING PLANT 161,962
OTHER PROPERTY AND INVESTMENTS 60,402
CURRENT ASSETS:
Cash and Cash Equivalents 9,429
Accounts Receivable:
General 4,761
Insurance 13,011
Affiliated Companies 13,776
Coal 1,287
Materials and Supplies 10,285
Other 4,707
TOTAL CURRENT ASSETS 57,256
REGULATORY ASSETS 52,180
DEFERRED CHARGES 3,845
TOTAL $335,645
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SOUTHERN OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
March 31,
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 81,834
Retained Earnings 24,064
TOTAL SHAREHOLDER'S EQUITY 115,899
LONG-TERM DEBT - Notes Payable 45,000
OTHER NONCURRENT LIABILITIES:
Obligations Under Capital Leases 19,542
Operating Reserves 50,456
TOTAL OTHER NONCURRENT LIABILITIES 69,998
CURRENT LIABILITIES:
Long-term Debt Due Within One Year 16,681
Accounts Payable:
General 3,554
Affiliated Companies 1,957
Taxes Accrued 6,179
Accrued Vacation Pay 3,178
Workers' Compensation Claims 13,320
Obligations Under Capital Leases 11,244
Other 5,104
TOTAL CURRENT LIABILITIES 61,217
DEFERRED INCOME TAXES 37,925
DEFERRED CREDITS 5,606
TOTAL $335,645
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SOUTHERN OHIO COAL COMPANY
INFORMATION CONCERNING MINE OPERATIONS AND CAPITAL IMPROVEMENTS
FOR THE QUARTER ENDED MARCH 31, 1997
There were no significant changes with regard to the Company's
operations and mining plant during the quarter.
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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 MARCH 31, 1997
(in thousands, except as noted)
<CAPTION> January through
March
1997
<S> <C>
I. Calculation of Cost-of-Capital Compensation:
A. Investment at Beginning of Period:
Common Stock $ 5
Premium on Common Stock 9,996
Other Paid-in Capital (excluding item D and item G) 50,155
60,156
B. Rate of Return Allowable per HCAR Nos. 20515 and
21008: 12.11% per annum, 3.0275% per quarter .030275
C. Earnings Allowable: (re investment in item A)
1. Current Quarter $ 1,821
2. Year-to-Date $ 1,821
D. Equity Investment for the months of June 1981, December 1981 and September 1982 $ 26,240
E. Rate of Return Allowable per HCAR Nos. 21008, 21537,
22129 and 22401: 12.04% per annum, 3.01% per quarter .0301
F. Earnings Allowable: (re investment in item D)
1. Current Quarter $ 790
2. Year-to-Date $ 790
G. Equity Investment for the months of March 1982, June 1982 and December 1982 $ 5,439
H. Rate of Return Allowable per HCAR Nos. 21008, 21537,
22129 and 22401: 13.58% per annum, 3.395% per quarter .03395
I. Earnings Allowable: (re investment in item G)
1. Current Quarter $ 185
2. Year-to-Date $ 185
J. Total Earnings Allowable:
1. Current Quarter (C.1. + F.1. + I.1.) $ 2,796
2. Year-to-Date (C.2. + F.2. + I.2.) $ 2,796
K. Net Income per Statement of Income (a) $ 1,902
Add: Interest Charges 1,145
Less: Nonoperating Income 105
L. Applied Cost-of-Capital Billing Adder:
1. Current Quarter $ 2,942
2. Year-to-Date $ 2,942
II. Coal Billing Calculation - Meigs Division:
A. Total Operating Expenses (b) $ 60,347
B. Add: Cost-of-Capital Billing Adder as Applied per L. 1. of Section I 2,942
C. Cost Applicable to Current Quarter Coal Billings to Ohio Power $ 63,289
D. Coal Sold and Shipped in Current Quarter to Ohio Power (in tons) 1,879,210
E. Average Price per Ton to Ohio Power (in dollars) (C/D) $33.68
(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 MARCH 31, 1997
(in thousands)
Direct Labor-UMW* $ 1,623
Indirect Labor-UMW* 6,023
Benefits-UMW* 5,187
Salaries and Benefits-Nonunion 5,248
Operating Supplies 3,781
Repair Parts and Materials 5,771
Electricity and Other Utilities 1,994
Outside Services-Maintenance, Haulage and Reclamation 2,425
Taxes Other Than Federal Income Taxes** 2,728
Rental of Equipment 3,660
Depreciation, Depletion and Amortization 6,788
Mining Cost Normalization*** 4,255
Reclamation 2,601
Other Production Costs 5,705
Subtotal 57,789
Transfers of Production Costs (to)/from Coal Inventory (568)
Total $57,221
* 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
March 31, 1997
Net
Gross Accumulated Carrying
Cost Provisions Amount
(in thousands)
Description
Surface Lands $ 7,476 $ - $ 7,476
Mining Structures and Equipment 218,169 140,120 78,049
Coal Interests (net of depletion) 3,844 - 3,844
Mine Development Costs 134,149 61,556 72,593
Total Mining Plant in Service $363,638 $201,676 $161,962
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OHIO POWER COMPANY'S (OPCo's) ACTIVE COAL MINES
CENTRAL OHIO COAL COMPANY; SOUTHERN OHIO COAL - MEIGS;
AND WINDSOR COAL COMPANY
ALLOWED AFTER-TAX COMPOSITE COST-OF-CAPITAL IS 10.29%
EFFECTIVE 4-1-97
THE 10.29% IS OPCo's WEIGHTED AVERAGE COST-OF-CAPITAL AND WAS
CALCULATED AS FOLLOWS:
CAPITALIZATION AFTER-TAX
@12/31/96 PERCENT EFFECTIVE WEIGHTED
COMPONENT (000) OF TOTAL COST RATE OF RETURN
Long-term Debt $ 957,626(a) 39.14% 7.47%(c) 2.92%
Preferred Stock 148,432 6.07% 5.73%(c) 0.35%
Common Stock 1,340,260(b) 54.79% 12.81%(d) 7.02%
Total $2,446,318 100.00% 10.29%*
Authorization: HCAR 35-26573 dated 9-13-96
(SEC File No. 70-8611).
(a) Includes long-term debt due in one year and is net of
unamortized debt premium and discount, unamortized debt
expense and unamortized loss on reacquired debt.
(b) Common equity includes premium on preferred stock and
excludes undistributed subsidiary earnings.
(c) Embedded cost at 12/31/96.
(d) No more than the rate allowed by the PUCO in a retail rate
proceeding involving OPCo and settled in 1995.
* Rate will be applied for billing purposes to the twelve
months period commencing April 1, 1997.
