<PAGE>
WINDSOR COAL COMPANY
1997 Annual Report
Page
CONTENTS
Statements of Income and Statements of Retained Earnings . . . 1
Statements of Cash Flows . . . . . . . . . . 2
Balance Sheets . . . . . . . . . . . . 3-4
Notes to Financial Statements . . . . . . . . . 5-11
<PAGE>
<PAGE>
<TABLE>
WINDSOR COAL COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1997 1996 1995
(in thousands)
<S> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . $68,555 $57,615 $49,453
OPERATING EXPENSES (including depreciation, depletion
and amortization of mining plant of $4,441,000 in
1997, $4,789,000 in 1996 and $2,424,000 in 1995) . . 66,973 55,931 47,343
OPERATING INCOME . . . . . . . . . . . . . . . . . . . 1,582 1,684 2,110
NONOPERATING INCOME. . . . . . . . . . . . . . . . . . 223 93 71
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . 1,805 1,777 2,181
INTEREST CHARGES (including $14,000 in 1997, $14,000
in 1996 and $13,000 in 1995 on long-term debt to
Parent Company). . . . . . . . . . . . . . . . . . . 14 14 13
INCOME BEFORE FEDERAL INCOME TAXES . . . . . . . . . . 1,791 1,763 2,168
FEDERAL INCOME TAXES . . . . . . . . . . . . . . . . . 631 400 805
NET INCOME . . . . . . . . . . . . . . . . . . . . . . $ 1,160 $ 1,363 $ 1,363
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1997 1996 1995
(in thousands)
<S> <C> <C> <C>
RETAINED EARNINGS JANUARY 1. . . . . . . . . . . . . . $1,268 $ 245 $1,383
NET INCOME . . . . . . . . . . . . . . . . . . . . . . 1,160 1,363 1,363
CASH DIVIDENDS DECLARED. . . . . . . . . . . . . . . . 2,350 340 2,501
RETAINED EARNINGS DECEMBER 31. . . . . . . . . . . . . $ 78 $1,268 $ 245
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
WINDSOR COAL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1997 1996 1995
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . $ 1,160 $ 1,363 $ 1,363
Adjustments for Noncash Items:
Depreciation, Depletion and Amortization . . . . 4,441 4,790 2,424
Deferred Income Taxes. . . . . . . . . . . . . . (3,526) (3,545) (1,874)
Accrued Other Postretirement Benefits. . . . . . 1,134 1,231 1,538
Accrued Rent and Royalty . . . . . . . . . . . . 1,497 2,131 2,268
Reclamation Reserve. . . . . . . . . . . . . . . 2,600 1,343 -
Changes in Certain Current Assets and Liabilities:
Accounts Receivable. . . . . . . . . . . . . . . 460 (1,972) (5,370)
Coal, Materials and Supplies . . . . . . . . . . (682) (17) 463
Accounts Payable . . . . . . . . . . . . . . . . 1,817 (813) 1,671
Other (net). . . . . . . . . . . . . . . . . . . . 1,494 385 713
Net Cash Flows From Operating Activities . . 10,395 4,896 3,196
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . (956) (68) (145)
Proceeds from Sales of Property. . . . . . . . . . 3 5 -
Net Cash Flows Used For Investing Activities (953) (63) (145)
FINANCING ACTIVITIES:
Capital Contributions from (Returned to) Parent Co (1,594) - -
Common Stock . . . . . . . . . . . . . . . . . . . (406) - -
Issuance of Long-term Debt . . . . . . . . . . . . - - 137
Retirement of Long-term Debt . . . . . . . . . . . (569) (569) (626)
Change in Short-term Debt (net). . . . . . . . . . - - (66)
Dividends Paid . . . . . . . . . . . . . . . . . . (2,350) (340) (2,501)
Net Cash Flows Used For Financing Activities (4,919) (909) (3,056)
Net Increase (Decrease) in Cash and Cash Equivalents 4,523 3,924 (5)
Cash and Cash Equivalents January 1. . . . . . . . . 3,937 13 18
Cash and Cash Equivalents December 31. . . . . . . . $ 8,460 $ 3,937 $ 13
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
WINDSOR COAL COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
December 31,
1997 1996
(in thousands)
<S> <C> <C>
ASSETS
MINING PLANT:
Surface Lands . . . . . . . . . . . . . . . . . . . . . . . . . $ 634 $ 634
Mining Structures and Equipment . . . . . . . . . . . . . . . . 49,431 47,839
Coal Interests (net of depletion) . . . . . . . . . . . . . . . 1,227 1,544
Mine Development Costs. . . . . . . . . . . . . . . . . . . . . 10,041 10,041
Construction Work in Progress . . . . . . . . . . . . . . . . . 25 189
Total Mining Plant. . . . . . . . . . . . . . . . . . . 61,358 60,247
Accumulated Depreciation and Amortization . . . . . . . . . . . 35,322 30,854
NET MINING PLANT. . . . . . . . . . . . . . . . . . . . 26,036 29,393
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . 8,460 3,937
Accounts Receivable - General . . . . . . . . . . . . . . . . . 953 3,847
Accounts Receivable - Affiliated Companies. . . . . . . . . . . 6,899 4,465
Coal - at average cost. . . . . . . . . . . . . . . . . . . . . 144 18
Materials and Supplies - at average cost. . . . . . . . . . . . 4,503 3,947
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 266
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . 21,203 16,480
REGULATORY ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 527 784
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . 5,033 581
DEFERRED CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . 371 391
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . $53,170 $47,629
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
WINDSOR COAL COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
December 31,
1997 1996
(in thousands)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
SHAREOWNER'S EQUITY:
Common Stock - Par Value $100:
Authorized - 5,000 Shares
Outstanding - 4,064 Shares. . . . . . . . . . . . . . . . . . $ - $ 406
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . 8,876 10,470
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . 78 1,268
TOTAL SHAREOWNER'S EQUITY . . . . . . . . . . . . . . . 8,954 12,144
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . 7,366 7,935
OTHER NONCURRENT LIABILITIES:
Obligations Under Capital Leases. . . . . . . . . . . . . . . . 1,559 1,459
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,041 14,630
TOTAL OTHER NONCURRENT LIABILITIES. . . . . . . . . . . 22,600 16,089
CURRENT LIABILITIES:
Long-term Debt Due Within One Year. . . . . . . . . . . . . . . 570 570
Accounts Payable - General. . . . . . . . . . . . . . . . . . . 3,237 1,587
Accounts Payable - Affiliated Companies . . . . . . . . . . . . 857 690
Workers' Compensation . . . . . . . . . . . . . . . . . . . . . 2,105 2,959
Obligations Under Capital Leases. . . . . . . . . . . . . . . . 1,395 848
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,838 1,577
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . 10,002 8,231
DEFERRED CREDITS. . . . . . . . . . . . . . . . . . . . . . . . . 55 -
REGULATORY LIABILITIES:
Amounts Due To Parent Company For Future Income Tax Benefits. . 3,879 2,953
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314 277
TOTAL REGULATORY LIABILITIES. . . . . . . . . . . . . . 4,193 3,230
CONTINGENCIES (Note 2)
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . $53,170 $47,629
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
WINDSOR COAL COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
Organization and Regulation. Windsor Coal Company (the Company or WCCo), is
a wholly- owned subsidiary of Ohio Power Company (OPCo), which is a
subsidiary of American Electric Power Company, Inc. (AEP Co., Inc.), a public
utility holding company. The Company conducts underground mining operations
in West Virginia on properties owned or leased by OPCo or the Company. Coal
is mined and sold to generating units wholly owned by OPCo and jointly owned
by OPCo and an unaffiliated company at prices regulated by the Securities and
Exchange Commission (SEC) under the Public Utility Holding Company Act of
1935 (1935 Act). The prices billed are sufficient to recover expenses and
provide for a return on OPCo's equity investment excluding retained earnings.
The Company also has been authorized to sell coal to unaffiliated companies
with the net proceeds used to reduce the price of coal sold to OPCo. The
majority of the Company's coal production is shipped to OPCo's Cardinal
Plant.
Basis of Accounting. As a cost-based rate-regulated entity, WCCo's financial
statements reflect the actions of regulators that result in the recognition
of revenues and expenses in different time periods than enterprises that are
not rate regulated. In accordance with Statement of Financial Accounting
Standards (SFAS) No. 71 "Accounting for the Effects of Certain Types of
Regulation," regulatory assets (deferred expenses) and regulatory liabilities
(deferred income) are recorded to reflect the economic effects of regulation.
Such deferrals are amortized commensurate with their inclusion in billings to
OPCo.
Use of Estimates. The preparation of these financial statements in
conformity with generally accepted accounting principles requires in certain
instances the use of management's estimates. Actual results could differ
from those estimates.
Coal Supply Agreement. Pursuant to a coal supply agreement with OPCo, the
Company is obligated to deliver substantially all coal it mines to OPCo and
entitled to receive payment for all costs incurred, even under circumstances
in which such coal is not mined and/or delivered due to a natural disaster,
labor unrest or any other forced or voluntary cessation or curtailment of
mining, either temporary or permanent.
Mining Plant and Depreciation, Depletion and Amortization. Mining plant is
stated at cost and includes expenditures for mine development. Mine
development includes all costs to develop the mines in excess of amounts
realized from coal produced during the mine development period. As a
subsidiary of a regulated public utility, an allowance for funds used during
construction (AFUDC) is recorded as a noncash income item that is recovered
over the service life of mining plant through depreciation and represents a
reasonable return on funds used to finance construction projects. The
amounts of AFUDC for 1997, 1996 and 1995 were not significant. Depreciation,
depletion and amortization are provided over the estimated useful asset lives
and are calculated by use of the straight-line method for mining structures
and equipment and by use of the units-of-production method for coal interests
and mine development costs. In 1995 the Company changed the respective rates
to reflect a revised mining plan. This change in estimate had no impact on
net income.
Costs of ordinary maintenance, repairs, renewals and minor
replacements of property are expensed while major additions of property,
replacements of property and betterments are capitalized. Mining plant and
related accumulated provisions for depreciation, depletion and amortization
are relieved upon disposition of the related property with any gain or loss
recorded as income or expense in the period of disposition. Such gains and
losses are included in costs billed to OPCo under the coal supply agreement.
Cash and Cash Equivalents. Cash and cash equivalents include temporary cash
invest-ments with original maturities of three months or less.
Income Taxes. The Company follows the liability method of accounting for
income taxes as prescribed by SFAS 109, "Accounting for Income Taxes." Under
the liability method deferred income taxes are provided for all temporary
differences between book cost and tax basis of assets and liabilities which
will result in a future tax consequence. Where the flow-through method of
accounting for temporary differences is reflected in the Company's coal
billings and OPCo's fuel rates, deferred income taxes are recorded with
related regulatory assets and liabilities in accordance with SFAS 71.
Black Lung Benefits and Workers' Compensation. The Company is liable under
the Federal Coal Mine Health and Safety Act of 1969 (Act), as amended, to pay
certain black lung benefits to eligible present and former employees. A
Black Lung Benefits Trust is maintained under the Internal Revenue Code
which, based on the most recent actuarial study, is fully funded. No
accruals for Black Lung liabilities were made in 1997, 1996 or 1995.
The Company is self-insured for workers' compensation. The
estimated present value of workers' compensation claims is provided based on
known events and claims.
Reclamation. The Surface Mining and Reclamation Act of 1977 established
minimum standards for the final closure of mines after their coal resources
are exhausted. This would include, among other things, sealing the portals
at underground mines and the removal or covering of refuse piles and water
settling ponds. Reclamation costs are recorded and billed to OPCo in
accordance with the coal supply agreement.
2. CONTINGENCIES:
The Company is involved in a number of legal proceedings and
claims. While management is unable to predict the outcome of litigation, it
is not expected that the resolution of these matters will have a material
adverse effect on the results of operations, cash flows or financial
condition.
<PAGE>
The Company recovers all costs from OPCo under the coal supply
agreement.
3. CONTINUATION OF MINING OPERATIONS:
The Clean Air Act Amendments of 1990 (CAAA) require significant
reductions in sulfur dioxide and nitrogen oxide emissions from OPCo's
generating plants with the Phase I effective January 1, 1995 and Phase II
effective January 1, 2000. OPCo's Phase I compliance efforts did not impact
the Company. To meet Phase II compliance, tentative plans propose switching
Cardinal Plant Unit 1, which is supplied by the Company, to lower sulfur coal
from unaffiliated sources in 2001.
Under settlement agreements applicable to OPCo's Public Utilities
Commission of Ohio (PUCO) jurisdiction, OPCo's recovery of fuel costs is
fixed at predetermined prices and OPCo is provided with the opportunity to
recover its Ohio jurisdictional share of its investment in and the
liabilities and future shutdown costs of the Windsor mine to the extent the
actual cost of coal is sufficiently below the predetermined prices. Based on
the estimated future cost of coal supplies, from both affiliated and
unaffiliated sources, OPCo's management believes that OPCo will recover under
the terms of the settlement agreements the cost of the Windsor mining
operations including eventual mine closure liabilities attributable to its
PUCO jurisdiction.
It may be necessary in the future to shut down the Windsor mining
operations if the predetermined price is not adequate to recover the Windsor
mining cost from PUCO jurisdictional fuel clause customers or if it is no
longer economical due to the CAAA or otherwise to continue mining operations.
The cost of a shutdown would be substantial and would include not only any
possible loss on disposition of assets but also employee benefits, lease
commitments, unaccrued reclamation and other shutdown costs. If a shutdown
should become necessary, results of operations and cash flows are not
expected to be affected since shutdown costs would be recoverable from OPCo
under the coal supply agreement.
4. OTHER RELATED-PARTY TRANSACTIONS:
American Electric Power Service Corporation (AEPSC) provides
certain managerial and professional services to AEP System companies
including WCCo. The costs of the services are billed by AEPSC on a direct-
charge basis, to the extent practicable, and on reasonable bases of proration
for indirect costs. The charges for services are made at cost and include no
compensation for the use of equity capital, which is furnished to AEPSC by
AEP Co., Inc. Billings from AEPSC are capitalized or expensed depending on
the nature of the services rendered. AEPSC and its billings are subject to
the regulation of the SEC under the 1935 Act.
<PAGE>
5. BENEFIT PLANS:
United Mine Workers of America (UMWA) Pension Plans
The Company provides UMWA pension benefits for UMWA employees
meeting eligibility requirements. Benefits are based on age at retirement
and years of service. Contributions are based on the number of hours worked,
are expensed when paid and totaled $327,000 in 1997, $283,000 in 1996 and
$241,000 in 1995. As of June 30, 1997, the UMWA actuary estimates that the
Company's share of the UMWA pension plans unfunded vested liabilities was
approximately $1.3 million. In the event the Company ceases or significantly
reduces mining operations or contributions to the UMWA pension plans, a
withdrawal obligation may be triggered for all or a portion of its share of
the unfunded vested liability.
AEP System Pension Plan
The Company participates in the AEP pension plan, a trusteed,
noncontributory defined benefit plan covering all employees meeting
eligibility requirements, except participants in the UMWA pension plans.
Benefits are based on service years and compensation levels. Pension costs
are allocated by first charging each System company with its service cost and
then allocating the remaining pension cost in proportion to its share of the
projected benefit obligation. The funding policy is to make annual trust
fund contributions equal to the net periodic pension cost up to the maximum
amount deductible for federal income taxes, but not less than the minimum
required contribution in accordance with the Employee Retirement Income
Security Act of 1974. The Company's share of the net pension cost of the AEP
System pension plan was $95,000, $119,000 and $83,000 for the years ended
December 31, 1997, 1996 and 1995, respectively.
AEP System Savings Plan
An employee savings plan is offered to non-UMWA employees which
allows participants to contribute up to 17% of their salaries into various
investment alternatives, including AEP Co., Inc. common stock. An employer
matching contribution, equaling one-half of the employees' contribution to
the plan up to a maximum of 3% of the employees' base salary, is invested in
AEP Co., Inc. common stock. The Company's annual contributions totaled
$81,000 in 1997, $76,000 in 1996 and $72,000 in 1995.
Postretirement Benefits Other Than Pensions (OPEB)
Postretirement medical benefits for the Company's UMWA employees
who have retired or will retire after January 1, 1976 (post 1975 UMWA
retirees) are the liability of the Company. They are eligible for
postretirement health care and life insurance if they have at least 10
service years and are age 55 or older when employment terminates. Non-active
UMWA employees become eligible at age 55 if they have 20 service years.
The AEP System provides certain other benefits for retired
employees under an AEP System plan. Substantially all non-UMWA employees are
eligible for postretirement health care and life insurance if they have at
least 10 service years and are age 55 or older when employment terminates.
OPEB costs for post 1975 UMWA retirees and the AEP System plan are
determined by the application of AEP System actuarial assumptions to each
company's employee complement. The annual accrued costs, which includes the
recognition of one-twentieth of the prior service transition obligation, was
$1.8 million in 1997, $1.9 million in 1996 and $2.2 million in 1995. The
funding policy for AEP's OPEB plan is to make contributions to an external
Voluntary Employees Beneficiary Association trust fund for all non-UMWA
employees equal to the incremental OPEB costs (i.e., the amount that the
total postretirement benefits cost under SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," exceeds the pay-as-you-go
amount). Contributions were $112,000 in 1997, $119,000 in 1996 and $140,000
in 1995.
Several UMWA health plans pay the postretirement medical benefits
for the Company's UMWA retirees who retired before January 2, 1976 and their
survivors plus retirees and others whose last employer is no longer a
signatory to the UMWA contract or is no longer in business. The UMWA health
plans are funded by payments from current and former UMWA wage agreement
signatories, the 1950 UMWA Pension Plan surplus and the Abandoned Mine Land
Reclamation Fund surplus. Required annual payments to the UMWA health funds
made by the Company were recognized as expense when paid and totaled $345,000
in 1997, $98,000 in 1996 and $247,000 in 1995.
The Energy Policy Act of 1992 (Energy Act) permits recovery of
excess Black Lung Trust funds of the AEP System to pay certain postretirement
medical benefits under one of the UMWA health plans. Reimbursement
limitations apply to the System's excess funding. The Company's portion of
the trust fund surplus was inadequate to reimburse its covered medical
benefits so it was able to acquire surplus fund transfers from other AEP
System companies that are members of the fund and have a surplus. The
Company pays cash for the amount transferred. The amounts of Black Lung
surplus utilized in accordance with the Energy Act were $502,000 in 1997,
$579,000 in 1996 and $664,000 in 1995 to reimburse the Company for benefits
paid. In addition, the amounts of Black Lung surplus utilized reflect
$37,000 in 1997, $101,000 in 1996 and $176,000 in 1995 reallocated from the
surplus Black Lung trust fund of other System member companies. The
Company's share of the Black Lung Trust funds surplus at December 31, 1997
and 1996 was a surplus of $1,000 and $841,000, respectively, and at December
31, 1995 was a deficit of $297,000.
6. FEDERAL INCOME TAXES:
The details of federal income taxes are as follows:
Year Ended December 31,
1997 1996 1995
(in thousands)
Current (net) . . . . . . . . . . . . . . . . . $ 4,158 $ 3,945 $ 2,679
Deferred (net). . . . . . . . . . . . . . . . . (3,525) (3,545) (1,874)
Total Federal Income Taxes. . . . . . . . . . . $ 633 $ 400 $ 805
<PAGE>
Federal income taxes as reported are different from pre-tax book
income multiplied by the statutory tax rate predominantly due to the practice
of flow-through accounting for book/tax differences associated with self
insurance reserves.
The Company joins in the filing of a consolidated federal income
tax return with its affiliated companies in the AEP System. The allocation
of the AEP System's current consolidated federal income tax to the System
companies is in accordance with SEC rules under the 1935 Act. These rules
permit the allocation of the benefit of current tax losses to the System
companies giving rise to them in determining their current tax expense. The
tax loss of the System parent company, AEP Co., Inc., is allocated to its
subsidiaries with taxable income. With the exception of the loss of the
parent company, the method of allocation approximates a separate return
result for each company in the consolidated group.
The AEP System has settled with the Internal Revenue Service (IRS)
all issues from the audits of the consolidated federal income tax returns for
the years prior to 1991. Returns for the years 1991 through 1996 are
presently open and under audit by the IRS. In the opinion of management, the
final settlement of open years will not have a material effect on results of
operations and cash flows.
The following tables show the elements of the net deferred tax
liability and the significant temporary differences giving rise to such
deferrals:
December 31,
1997 1996
(in thousands)
Deferred Tax Assets. . . . . . . . . . . . . $10,930 $ 8,745
Deferred Tax Liabilities . . . . . . . . . . (5,897) (8,164)
Net Deferred Tax Assets. . . . . . . . . . $ 5,033 $ 581
Property Related Temporary Differences . . . $(4,854) $(6,273)
Amounts Due To Parent Company
For Future Federal Income Taxes. . . . . . 1,243 1,239
Self-Insurance Reserves. . . . . . . . . . . 1,251 1,083
Accrued Postretirement Expenses. . . . . . . 2,958 2,547
Accrued Leased Asset Book Rent Expense . . . 830 651
Accrued Book Royalty Expense . . . . . . . . 1,234 889
Accrued Mine Reclamation Expense . . . . . . 1,380 470
Deferred State Income Taxes. . . . . . . . . 327 (588)
All Other (net). . . . . . . . . . . . . . . 664 563
Total Net Deferred Tax Assets. . . . . . . $ 5,033 $ 581
<PAGE>
7. SUPPLEMENTARY CASH FLOW INFORMATION:
Year Ended December 31,
1997 1996 1995
(in thousands)
Cash was paid for:
Interest . . . . . . . . . . . . . . . . $ 14 $ 13 $ 13
Income Taxes . . . . . . . . . . . . . . 5,669 5,306 3,201
Noncash acquisitions under
capital leases were. . . . . . . . . . . 1,685 291 84
8. LEASES:
Leases of property, plant and equipment are for periods of up to 20
years and require payments of related property taxes, maintenance and
operating costs. The majority of the leases have purchase or renewal options
and will be renewed or replaced by other leases as long as mining operations
continue.
Lease rentals for both operating and capital leases are generally
charged to operating expenses. The components of rental cost are as follows:
Year Ended December 31,
1997 1996 1995
(in thousands)
Operating Leases . . . . . . . . . . . . . . $ 906 $ 943 $ 953
Amortization of Capital Leases . . . . . . . 976 883 2,023
Interest on Capital Leases . . . . . . . . . 154 155 289
Total Rental Costs . . . . . . . . . $2,036 $1,981 $3,265
Properties under capital leases and related obligations recorded on
the Balance Sheets are as follows:
December 31,
1997 1996
(in thousands)
Mining Plant. . . . . . . . . . . . . . . . . . . . . $7,482 $6,928
Accumulated Amortization. . . . . . . . . . . . . . . 4,528 4,621
Net Property under Capital Leases . . . . . . . . $2,954 $2,307
Capital Lease Obligations:
Noncurrent Liability. . . . . . . . . . . . . . . $1,559 $1,459
Liability Due Within One Year . . . . . . . . . . 1,395 848
Total Capital Lease Obligations . . . . . . . $2,954 $2,307
Properties under operating leases and related obligations are not
included in the Balance Sheets.
<PAGE>
Future minimum lease rentals, consisted of the following at
December 31, 1997:
Capital
Leases
(in thousands)
1998. . . . . . . . . . . . . . . . . . . . . . . . $1,344
1999. . . . . . . . . . . . . . . . . . . . . . . . 938
2000. . . . . . . . . . . . . . . . . . . . . . . . 645
2001. . . . . . . . . . . . . . . . . . . . . . . . 29
2002. . . . . . . . . . . . . . . . . . . . . . . . 6
Later Years . . . . . . . . . . . . . . . . . . . . 26
Total Future Minimum Lease Rentals. . . . . . . . . 2,988
Less Estimated Interest Element Included Therein. . (34)
Estimated Present Value of Future
Minimum Lease Rentals . . . . . . . . . . . . . . $2,954
9. RETURN OF CAPITAL:
On October 1, 1997 the Company returned $2,000,000 to its parent
out of capital and reduced the par value of its authorized common shares from
$100 per share to $0.10 per share, thereby reducing its stated capital from
$406,000 to $406. On January 29, 1998 the Company returned to its parent
$5,000,000 out of capital surplus. On February 27, 1998 the Company returned
to its parent $3,876,429 out of capital surplus. This completed the return
of capital by the Company to its parent as authorized by HCAR No. 26573.
10. LONG-TERM DEBT AND SHORT-TERM DEBT:
Long-term debt was outstanding as follows:
December 31,
1997 1996
(in thousands)
Advances from Parent - 6% open account . . . . . . . . $ 225 $ 225
Finance Obligations. . . . . . . . . . . . . . . . . . 7,711 8,280
7,936 8,505
Less Portion Due Within One Year . . . . . . . . . . . 570 570
Total . . . . . . . . . . . . . . . . . . . . . . $7,366 $7,935
Finance obligations were entered into for the West Liberty portal
in 1989, the Long's Run Ventilation facility in 1992 and the Short Creek Acid
Mine Drainage facility in 1994 through sale and leaseback transactions. The
term on these obligations is 20 years (Long's Run is for 10 years with a
10-year renewal) with a bargain purchase option at expiration of the
agreements. In accordance with SFAS 98, the transactions did not qualify as a
sale and leaseback for accounting purposes. Future minimum payments under these
agreements are $570,000 per year for 1998 through 2002 and $4,861,000 in
later years.
