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<PAGE>
SOUTHERN OHIO COAL COMPANY
QUARTERLY REPORT PER REQUIREMENTS
OF HOLDING COMPANY ACT RELEASE NO. 26573
FOR THE QUARTER ENDED DECEMBER 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
Construction Expenditure Budget 8
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SOUTHERN OHIO COAL COMPANY
STATEMENT OF INCOME
FOR THE QUARTER ENDED DECEMBER 31, 1997
(UNAUDITED)
(in thousands)
OPERATING REVENUES $51,019
COST OF OPERATION 47,767
OPERATING INCOME 3,252
INTEREST CHARGES 991
OPERATING INCOME BEFORE FEDERAL INCOME TAXES 2,261
FEDERAL INCOME TAXES ON OPERATIONS 2,106
NET INCOME FROM OPERATIONS 155
NONOPERATING INCOME 252
NET INCOME $ 407
STATEMENT OF RETAINED EARNINGS
FOR THE QUARTER ENDED DECEMBER 31, 1997
(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)
December 31,
1997
(in thousands)
ASSETS
MINING PLANT:
Mining Plant in Service $384,417
Construction Work in Progress 1,978
Total Mining Plant 386,395
Accumulated Depreciation and Amortization 219,510
NET MINING PLANT 166,885
OTHER PROPERTY AND INVESTMENTS 60,781
CURRENT ASSETS:
Cash and Cash Equivalents 16,657
Accounts Receivable:
General 9,794
Insurance 13,011
Affiliated Companies 9,919
Coal 1,523
Materials and Supplies 11,664
Other 432
TOTAL CURRENT ASSETS 63,000
REGULATORY ASSETS 48,630
DEFERRED CHARGES 5,476
TOTAL $344,772
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SOUTHERN OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
December 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 34,693
Retained Earnings 23,335
TOTAL SHAREHOLDER'S EQUITY 68,029
LONG-TERM DEBT:
Notes Payable 45,000
Finance Obligations 35,086
TOTAL LONG-TERM DEBT 80,086
OTHER NONCURRENT LIABILITIES:
Obligations Under Capital Leases 37,631
Operating Reserves 65,037
TOTAL OTHER NONCURRENT LIABILITIES 102,668
CURRENT LIABILITIES:
Long-term Debt Due Within One Year 26,861
Accounts Payable:
General 5,020
Affiliated Companies 2,113
Taxes Accrued 735
Interest Accrued 1,250
Accrued Vacation Pay 3,147
Workers' Compensation Claims 5,331
Obligations Under Capital Leases 14,129
Other 7,177
TOTAL CURRENT LIABILITIES 65,763
DEFERRED INCOME TAXES 27,695
DEFERRED CREDITS 531
TOTAL $344,772
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SOUTHERN OHIO COAL COMPANY
INFORMATION CONCERNING MINE OPERATIONS AND CAPITAL IMPROVEMENTS
FOR THE QUARTER ENDED DECEMBER 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 DECEMBER 31, 1997
(in thousands, except as noted)
<CAPTION> October through
December
1997
<S> <C>
I. Calculation of Cost-of-Capital Compensation:
A. Equity Investment at Beginning of Period:
Common Stock $ 5
Premium on Common Stock 9,996
Other Paid-in Capital 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 on Equity Investment
1. Current Quarter $ 1,150
2. Year-to-Date $ 7,418
D. Net Income per Statement of Income (a) $ 407
Add: Interest Charges 991
Less: Nonoperating Income 252
E. Applied Cost-of-Capital Billing Adder:
1. Current Quarter $ 1,146
2. Year-to-Date $ 8,720
II. Coal Billing Calculation - Meigs Division:
A. Total Operating Expenses (b) $ 49,873
B. Add: Cost-of-Capital Billing Adder as Applied per E. 1. of Section I 1,146
C. Cost Applicable to Current Quarter Coal Billings $ 51,019
Less: Cost Appliable to Coal Sold to Unaffiliated Companies 2,508
Cost Applicable to Current Quarter Coal Billings to Ohio Power $ 48,511
D. Coal Sold and Shipped in Current Quarter to Ohio Power (in tons) 1,280,122
E. Average Price per Ton to Ohio Power (in dollars) (C/D) $37.90
(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 DECEMBER 31, 1997
(in thousands)
Direct Labor-UMW* $ 1,643
Indirect Labor-UMW* 4,098
Benefits-UMW* 5,888
Salaries and Benefits-Nonunion 5,181
Operating Supplies 3,482
Repair Parts and Materials 4,270
Electricity and Other Utilities 1,898
Outside Services-Maintenance, Haulage and Reclamation 4,230
Taxes Other Than Federal Income Taxes** 2,119
Rental of Equipment 7,120
Depreciation, Depletion and Amortization 5,085
Mining Cost Normalization*** (1,801)
Reclamation 1,737
Other Production Costs 3,796
Subtotal 48,746
Transfers of Production Costs (to)/from Coal Inventory (979)
Total $47,767
* 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
December 31, 1997
Net
Gross Accumulated Carrying
Cost Provisions Amount
(in thousands)
Description
Surface Lands $ 7,412 $ - $ 7,412
Mining Structures and Equipment 239,693 147,789 91,904
Coal Interests (net of depletion) 3,163 - 3,163
Mine Development Costs 134,149 71,721 62,428
Total Mining Plant
in Service $384,417 $219,510 $164,907
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SOUTHERN OHIO COAL COMPANY
CONSTRUCTION EXPENDITURE BUDGET - 1998*
Description Budgeted Amount
(in thousands)
Bleeder Shaft $1,851
Northeast Intake Shaft 1,538
Mine Plant Blanket 599
Upgrade Water Treatment Facilty 567
Pre-Planning Blanket and Other 108
$4,663
*This budget does not include any possible lease transactions.
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