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<PAGE>
SOUTHERN OHIO COAL COMPANY
QUARTERLY REPORT PER REQUIREMENTS
OF HOLDING COMPANY ACT RELEASE NO. 26573
FOR THE QUARTER ENDED JUNE 30, 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
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SOUTHERN OHIO COAL COMPANY
STATEMENT OF INCOME
FOR THE QUARTER ENDED JUNE 30, 1998
(UNAUDITED)
(in thousands)
OPERATING REVENUES $60,707
COST OF OPERATION 57,457
OPERATING INCOME 3,250
INTEREST CHARGES 694
OPERATING INCOME BEFORE FEDERAL INCOME TAXES 2,556
FEDERAL INCOME TAXES ON OPERATIONS 2,297
NET INCOME FROM OPERATIONS 259
NONOPERATING INCOME 156
NET INCOME $ 415
STATEMENT OF RETAINED EARNINGS
FOR THE QUARTER ENDED JUNE 30, 1998
(UNAUDITED)
(in thousands)
BALANCE AT BEGINNING OF PERIOD $23,335
NET INCOME 415
CASH DIVIDENDS DECLARED 412
BALANCE AT END OF PERIOD $23,338
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,
1998
(in thousands)
ASSETS
MINING PLANT:
Mining Plant in Service $389,580
Construction Work in Progress 233
Total Mining Plant 389,813
Accumulated Depreciation and Amortization 241,743
NET MINING PLANT 148,070
OTHER PROPERTY AND INVESTMENTS 61,984
CURRENT ASSETS:
Cash and Cash Equivalents 19,682
Accounts Receivable:
General 4,070
Affiliated Companies 12,742
Coal 3,806
Materials and Supplies 10,699
Other 200
TOTAL CURRENT ASSETS 51,199
REGULATORY ASSETS 43,557
DEFERRED CHARGES 2,974
TOTAL $307,784
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SOUTHERN OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
June 30,
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 23,338
TOTAL SHAREHOLDER'S EQUITY 68,032
LONG-TERM DEBT:
Notes Payable 30,000
Finance Obligations 29,729
TOTAL LONG-TERM DEBT 59,729
OTHER NONCURRENT LIABILITIES:
Obligations Under Capital Leases 31,378
Accrued Postretirement Benefits Other Than Pensions 35,102
Operating Reserves 35,731
TOTAL OTHER NONCURRENT LIABILITIES 102,211
CURRENT LIABILITIES:
Long-term Debt Due Within One Year 18,035
Accounts Payable:
General 4,177
Affiliated Companies 3,269
Taxes Accrued 3,307
Interest Accrued 771
Accrued Vacation Pay 2,987
Workers' Compensation Claims 6,117
Obligations Under Capital Leases 13,914
Other 6,054
TOTAL CURRENT LIABILITIES 58,631
DEFERRED INCOME TAXES 18,641
DEFERRED CREDITS 540
TOTAL $307,784
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SOUTHERN OHIO COAL COMPANY
INFORMATION CONCERNING MINE OPERATIONS AND CAPITAL IMPROVEMENTS
FOR THE QUARTER ENDED JUNE 30, 1998
During the second quarter of 1998, the Company settled with
its insurance carriers claims for a 1993 inundation of Meigs 31
mine. The settlement terminated legal proceedings related to
this issue and did not have a material effect on results of
operations.
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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, 1998
(in thousands, except as noted)
<CAPTION> April through
June
1998
<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 No. 26573:
10.51% per annum, 2.6275% per quarter .026275
C. Earnings Allowable on Equity Investment
1. Current Quarter $ 1,174
2. Year-to-Date $ 2,324
D. Net Income per Statement of Income (a) $ 415
Add: Interest Charges 694
Less: Nonoperating Income 156
E. Applied Cost-of-Capital Billing Adder:
1. Current Quarter $ 953
2. Year-to-Date $ 1,986
II. Coal Billing Calculation - Meigs Division:
A. Total Operating Expenses (b) $ 59,754
B. Add: Cost-of-Capital Billing Adder as Applied per E. 1. of Section I 953
C. Cost Applicable to Current Quarter Coal Billings to Ohio Power $ 60,707
D. Coal Sold and Shipped in Current Quarter to Ohio Power (in tons) 1,656,568
E. Average Price per Ton to Ohio Power (in dollars) (C/D) $36.65
(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, 1998
(in thousands)
Direct Labor-UMW* $ 2,023
Indirect Labor-UMW* 5,496
Benefits-UMW* 6,919
Salaries and Benefits-Nonunion 5,376
Operating Supplies 3,678
Repair Parts and Materials 7,595
Electricity and Other Utilities 1,899
Outside Services-Maintenance, Haulage and Reclamation 3,239
Taxes Other Than Federal Income Taxes** 2,147
Rental of Equipment 6,782
Depreciation, Depletion and Amortization 5,975
Mining Cost Normalization*** 8,121
Other Production Costs 924
Subtotal 60,174
Transfers of Production Costs (to)/from Coal Inventory (2,717)
Total $57,457
* 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, 1998
Net
Gross Accumulated Carrying
Cost Provisions Amount
(in thousands)
Description
Surface Lands $ 7,615 $ - $ 7,615
Mining Structures and Equipment 245,103 162,539 82,564
Coal Interests (net of depletion) 2,713 - 2,713
Mine Development Costs 134,149 79,204 54,945
Total Mining Plant in Service $389,580 $241,743 $147,837
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