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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, 1998
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, 1998 8
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SOUTHERN OHIO COAL COMPANY
STATEMENT OF INCOME
FOR THE QUARTER ENDED MARCH 31, 1998
(UNAUDITED)
(in thousands)
OPERATING REVENUES $50,655
COST OF OPERATION 47,841
OPERATING INCOME 2,814
INTEREST CHARGES 800
OPERATING INCOME BEFORE FEDERAL INCOME TAXES 2,014
FEDERAL INCOME TAXES ON OPERATIONS 1,781
NET INCOME FROM OPERATIONS 233
NONOPERATING INCOME 174
NET INCOME $ 407
STATEMENT OF RETAINED EARNINGS
FOR THE QUARTER ENDED MARCH 31, 1998
(UNAUDITED)
(in thousands)
BALANCE AT BEGINNING OF PERIOD $23,335
NET INCOME 407
CASH DIVIDENDS DECLARED 407
BALANCE AT END OF PERIOD $23,335
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,
1998
(in thousands)
ASSETS
MINING PLANT:
Mining Plant in Service $389,547
Construction Work in Progress 215
Total Mining Plant 389,762
Accumulated Depreciation and Amortization 233,525
NET MINING PLANT 156,237
OTHER PROPERTY AND INVESTMENTS 63,516
CURRENT ASSETS:
Cash and Cash Equivalents 4,232
Accounts Receivable:
General 7,447
Insurance 13,011
Affiliated Companies 7,060
Coal 1,089
Materials and Supplies 10,366
Other 290
TOTAL CURRENT ASSETS 43,495
REGULATORY ASSETS 56,481
DEFERRED CHARGES 3,513
TOTAL $323,242
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SOUTHERN OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
March 31,
1998
(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 23,335
TOTAL SHAREHOLDER'S EQUITY 68,029
LONG-TERM DEBT:
Notes Payable 30,000
Finance Obligations 32,407
TOTAL LONG-TERM DEBT 62,407
OTHER NONCURRENT LIABILITIES:
Obligations Under Capital Leases 33,006
Operating Reserves 68,381
TOTAL OTHER NONCURRENT LIABILITIES 101,387
CURRENT LIABILITIES:
Long-term Debt Due Within One Year 25,357
Accounts Payable:
General 4,718
Affiliated Companies 1,463
Taxes Accrued 4,929
Interest Accrued 463
Accrued Vacation Pay 3,054
Workers' Compensation Claims 4,967
Accrued Rent 3,559
Obligations Under Capital Leases 13,616
Other 4,982
TOTAL CURRENT LIABILITIES 67,108
DEFERRED INCOME TAXES 23,780
DEFERRED CREDITS 531
TOTAL $323,242
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SOUTHERN OHIO COAL COMPANY
INFORMATION CONCERNING MINE OPERATIONS AND CAPITAL IMPROVEMENTS
FOR THE QUARTER ENDED MARCH 31, 1998
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, 1998
(in thousands, except as noted)
<CAPTION> January through
March
1998
<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) 34,693
44,694
B. Rate of Return Allowable per HCAR Nos. 26573,
10.29% per annum, 2.5725% per quarter .025725
C. Earnings Allowable: (re investment in item A)
1. Current Quarter $ 1,150
2. Year-to-Date $ 1,150
D. Net Income per Statement of Income (a) $ 407
Add: Interest Charges 800
Less: Nonoperating Income 174
E. Applied Cost-of-Capital Billing Adder:
1. Current Quarter $ 1,033
2. Year-to-Date $ 1,033
II. Coal Billing Calculation - Meigs Division:
A. Total Operating Expenses (b) $ 49,622
B. Add: Cost-of-Capital Billing Adder as Applied per E. 1. of Section I 1,033
C. Cost Applicable to Current Quarter Coal Billings to Ohio Power 50,655
Less: Cost Applicable to Coal Sold to Unaffiliated Companies 2,391
Cost Applicable to Current Quarter Coal Billings to Ohio Power $ 48,264
D. Coal Sold and Shipped in Current Quarter to Ohio Power (in tons) 1,317,079
E. Average Price per Ton to Ohio Power (in dollars) (C/D) $36.64
(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, 1998
(in thousands)
Direct Labor-UMW* $ 2,411
Indirect Labor-UMW* 7,028
Benefits-UMW* 6,607
Salaries and Benefits-Nonunion 4,980
Operating Supplies 3,563
Repair Parts and Materials 8,219
Electricity and Other Utilities 1,930
Outside Services-Maintenance, Haulage and Reclamation 3,282
Taxes Other Than Federal Income Taxes** 2,161
Rental of Equipment 7,125
Depreciation, Depletion and Amortization 5,150
Mining Cost Normalization*** (12,264)
Reclamation 1,737
Other Production Costs 5,478
Subtotal 47,407
Transfers of Production Costs (to)/from Coal Inventory 434
Total $ 47,841
* 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, 1998
Net
Gross Accumulated Carrying
Cost Provisions Amount
(in thousands)
Description
Surface Lands $ 7,412 $ - $ 7,412
Mining Structures and Equipment 245,006 158,425 86,581
Coal Interests (net of depletion) 2,980 - 2,980
Mine Development Costs 134,149 75,100 59,049
Total Mining Plant in Service $389,547 $233,525 $156,022
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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 10.51%
EFFECTIVE 4-1-98
THE 10.51% IS OPCo's WEIGHTED AVERAGE COST-OF-CAPITAL AND WAS
CALCULATED AS FOLLOWS:
CAPITALIZATION AFTER-TAX
@12/31/97 PERCENT EFFECTIVE WEIGHTED
COMPONENT (000) OF TOTAL COST RATE OF RETURN
Long-term Debt $ 960,665(a) 41.05% 7.45%(c) 3.06%
Preferred Stock 29,392 1.26% 5.00%(c) 0.06%
Common Stock 1,350,011(b) 57.69% 12.81%(d) 7.39%
Total $2,340,068 100.00% 10.51%*
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 12/31/97.
(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, 1998.
