<PAGE>
SOUTHERN OHIO COAL COMPANY
Page
CONTENTS
Statements of Income and Statements of Retained Earnings . . . . . 1
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . 2
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . 3-4
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . 5-13
<PAGE>
<PAGE>
<TABLE>
SOUTHERN OHIO COAL COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
OPERATING REVENUES -
Sales to Parent Company . . . . . . . . $227,523 $217,810 $218,611
OPERATING EXPENSES
(including depreciation, depletion and
amortization of mining plant of
$19,643,000 in 1998, $23,167,000 in
1997 and $16,962,000 in 1996). . . . . 217,811 202,311 194,037
OPERATING INCOME . . . . . . . . . . . . 9,712 15,499 24,574
INTEREST CHARGES . . . . . . . . . . . . 2,836 4,273 5,575
OPERATING INCOME BEFORE FEDERAL
INCOME TAXES. . . . . . . . . . . . . . 6,876 11,226 18,999
FEDERAL INCOME TAXES ON OPERATIONS . . . 5,973 6,779 10,696
NET INCOME FROM OPERATIONS . . . . . . . 903 4,447 8,303
NONOPERATING INCOME (LOSS) . . . . . . . 750 (152) 1,375
NET INCOME . . . . . . . . . . . . . . . $ 1,653 $ 4,295 $ 9,678
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
RETAINED EARNINGS JANUARY 1. . . . . . . $23,335 $24,064 $23,199
NET INCOME . . . . . . . . . . . . . . . 1,653 4,295 9,678
CASH DIVIDENDS DECLARED. . . . . . . . . 1,650 5,024 8,813
RETAINED EARNINGS DECEMBER 31. . . . . . $23,338 $23,335 $24,064
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SOUTHERN OHIO COAL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1998 1997 1996
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . $ 1,653 $ 4,295 $ 9,678
Adjustments for Noncash Items:
Depreciation, Depletion and
Amortization. . . . . . . . . . . . 19,643 23,167 16,962
Deferred Federal Income Taxes. . . . (4,931) (8,359) (4,740)
Accrued Postretirement Benefits
Other Than Pensions. . . . . . . . 5,765 5,727 5,647
Reclamation Reserve. . . . . . . . . 6,236 8,245 2,835
Changes in Certain Current Assets
and Liabilities:
Accounts Receivable. . . . . . . . . 20,102 6,740 (17,734)
Coal, Materials and Supplies . . . . 574 (214) (129)
Accounts Payable . . . . . . . . . . 4,044 163 (2,353)
Payment of Disputed Tax and Interest
Related to COLI . . . . . . . . . . . (28,791) - -
Other (net). . . . . . . . . . . . . . 4,617 2,008 5,743
Net Cash Flows From Operating
Activities. . . . . . . . . . . 28,912 41,772 15,909
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . (4,128) (2,241) (401)
Proceeds from Sales of Property. . . . (289) (40) 13
Net Cash Flows Used For
Investing Activities. . . . . . (4,417) (2,281) (388)
FINANCING ACTIVITIES:
Issuance of Long-term Debt . . . . . . - 50,100 -
Retirement of Long-term Debt . . . . . (41,002) (24,834) (8,319)
Change in Short-term Debt (net). . . . 6,000 (1,500) 1,500
Return of Capital Contributions to
Parent Company. . . . . . . . . . . . - (47,141) (20,859)
Dividends Paid . . . . . . . . . . . . (1,650) (5,024) (8,813)
Net Cash Flows Used For
Financing Activities. . . . . . (36,652) (28,399) (36,491)
Net Increase (Decrease) in Cash and
Cash Equivalents . . . . . . . . . . . (12,157) 11,092 (20,970)
Cash and Cash Equivalents January 1. . . 16,657 5,565 26,535
Cash and Cash Equivalents December 31. . $ 4,500 $ 16,657 $ 5,565
See Notes to Financial Statements.
</TABLE>
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<TABLE>
SOUTHERN OHIO COAL COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
December 31,
1998 1997
(in thousands)
<S> <C> <C>
ASSETS
MINING PLANT:
Surface Lands . . . . . . . . . . . . . . . . . . $ 7,629 $ 7,412
Mining Structures and Equipment . . . . . . . . . 229,540 239,693
Coal Interests (net of depletion) . . . . . . . . 2,376 3,163
Mine Development Costs. . . . . . . . . . . . . . 134,149 134,149
Construction Work in Progress . . . . . . . . . . 3,308 1,978
Total Mining Plant. . . . . . . . . . . . 377,002 386,395
Accumulated Depreciation and Amortization . . . . 241,071 219,510
NET MINING PLANT. . . . . . . . . . . . . 135,931 166,885
OTHER PROPERTY AND INVESTMENTS. . . . . . . . . . . 87,652 60,781
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . 4,500 16,657
Accounts Receivable:
General . . . . . . . . . . . . . . . . . . . . 3,607 9,794
Insurance . . . . . . . . . . . . . . . . . . . - 13,011
Affiliated Companies. . . . . . . . . . . . . . 9,015 9,919
Coal - at average cost. . . . . . . . . . . . . . 1,794 1,523
Materials and Supplies - at average cost. . . . . 10,819 11,664
Accrued Tax Benefit . . . . . . . . . . . . . . . 1,753 -
Other . . . . . . . . . . . . . . . . . . . . . . 644 432
TOTAL CURRENT ASSETS. . . . . . . . . . . 32,132 63,000
REGULATORY ASSETS . . . . . . . . . . . . . . . . . 41,167 48,630
DEFERRED CHARGES. . . . . . . . . . . . . . . . . . 3,192 5,476
TOTAL . . . . . . . . . . . . . . . . . $300,074 $344,772
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
SOUTHERN OHIO COAL COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
December 31,
1998 1997
(in thousands)
<S> <C> <C>
CAPITALIZATION AND LIABILITIES
SHAREHOLDER'S EQUITY:
Common Stock - Par Value $1:
Authorized and Outstanding - 5,000 Shares . . . $ 5 $ 5
Paid-in Capital . . . . . . . . . . . . . . . . . 44,689 44,689
Retained Earnings . . . . . . . . . . . . . . . . 23,338 23,335
TOTAL SHAREHOLDER'S EQUITY. . . . . . . . 68,032 68,029
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . 55,042 80,086
OTHER NONCURRENT LIABILITIES:
Obligations Under Capital Leases. . . . . . . . . 26,838 37,631
Worker's Compensation Claims. . . . . . . . . . . 6,350 10,797
Postretirement Benefits Other Than Pensions . . . 37,984 32,219
Other . . . . . . . . . . . . . . . . . . . . . . 29,512 22,021
TOTAL OTHER NONCURRENT LIABILITIES. . . . 100,684 102,668
CURRENT LIABILITIES:
Long-term Debt Due Within One Year. . . . . . . . 10,903 26,861
Short-term Debt - Notes Payable to Parent . . . . 6,000 -
Accounts Payable - General . . . . . . . . . . . 8,343 5,020
Accounts Payable - Affiliated Companies . . . . . 2,834 2,113
Taxes Accrued . . . . . . . . . . . . . . . . . . - 735
Interest Accrued. . . . . . . . . . . . . . . . . 798 1,250
Accrued Vacation Pay. . . . . . . . . . . . . . . 3,555 3,147
Workers' Compensation Claims. . . . . . . . . . . 7,704 5,331
Obligations Under Capital Leases. . . . . . . . . 13,945 14,129
Other . . . . . . . . . . . . . . . . . . . . . . 5,035 7,177
TOTAL CURRENT LIABILITIES . . . . . . . . 59,117 65,763
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . 15,837 27,695
DEFERRED CREDITS. . . . . . . . . . . . . . . . . . 1,362 531
CONTINGENCIES (Note 2)
TOTAL . . . . . . . . . . . . . . . . . $300,074 $344,772
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
SOUTHERN OHIO COAL COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
Organization and Regulation
Southern Ohio Coal Company (the Company or SOCCo), 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's underground mining operations are conducted in
Meigs County in southern Ohio to supply coal to OPCo's Gavin Plant. Coal
is sold to OPCo at prices regulated by the Securities and Exchange
Commission (SEC) under the Public Utility Holding Company Act of 1935
(1935 Act). 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. At
December 31, 1998, owned proven coal reserves amounted to 116,025,000 tons
in Ohio and 65,003,000 tons in West Virginia.
Basis of Accounting
As a cost-based rate-regulated entity, SOCCo'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.
Regulatory assets are comprised of the following:
December 31,
1998 1997
(in thousands)
Regulatory Assets:
Amounts Due From Parent Company For
Future Income Taxes $28,027 $34,954
Raccoon Mine Abandoned Assets 5,741 7,737
Postemployment Benefits 4,854 5,207
Other 2,545 732
Total Regulatory Assets $41,167 $48,630
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.
<PAGE>
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 mine 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 1998, 1997 and 1996 were
not significant.
Depreciation, depletion and amortization are provided over the estimated
useful asset lives and are calculated using the straight-line method for
mining structures and equipment and the units-of-production method for
coal rights and mine development costs. In 1997 the Company changed the
respective rates to reflect a revised mining plan through December 31,
2001. 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 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.
Other Property and Investments
Other property and investments consists primarily of the Cove North coal
reserves (net book value $27.3 million at December 31, 1998) in West
Virginia; the net present value of a receivable from the sale of the
Martinka mining operations in 1992 ($27.4 million at December 31, 1998
discounted at 8-1/2%); and a payment of disputed tax and interest related
to a corporate owned life insurance program (see Note 2).
Cash and Cash Equivalents
Cash and cash equivalents include temporary cash investments with original
maturities of three months or less.
<PAGE>
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 the 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 1998, 1997 or 1996.
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 reserves are
exhausted. This would include 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
Litigation
The Internal Revenue Service (IRS) agents auditing the AEP System's
consolidated federal income tax returns for the years 1991 to 1993
requested a ruling from their National Office that certain interest
deductions claimed by the Company relating to AEP's corporate owned life
insurance (COLI) program should not be allowed. As a result of a suit
filed by the Company in US District Court (discussed below) this request
for ruling was withdrawn by the IRS agents. Adjustments have been or will
be proposed by the IRS disallowing COLI interest deductions for taxable
years 1991-96.
In 1998 the Company made payments of taxes and interest attributable to
COLI interest deductions for taxable years 1991-97 to avoid the potential
assessment by the IRS of any additional above market rate interest on the
contested amount. The payments to the IRS are included on the balance
sheet in other property and investments pending the resolution of this
matter. The Company will seek refund, either administratively or through
litigation, of all amounts paid plus interest. In order to resolve this
issue without further delay, on March 24, 1998, the Company filed suit
against the US in the US District Court for the Southern District of Ohio.
Management believes that it has a meritorious position and will vigorously
pursue this lawsuit. A disallowance of the COLI interest deductions
through December 31, 1998 would total approximately $30.6 million
(including interest). In the event the resolution of this matter is
unfavorable, the Company expects to recover from OPCo all of its costs
under the terms of the coal supply agreement.
The Company is involved in a number of other legal proceedings and claims.
While management is unable to predict the ultimate 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.
The Company recovers all of its 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 oxides emitted from OPCo's generating
plants. The installation of leased scrubbers at the Gavin Plant to permit
the continued burning of Ohio high-sulfur coal was an integral part of
OPCo's plan to comply with the CAAA. The plan further provides for
Gavin's coal to be supplied by the Company's Meigs mine, long-term
contracts with unaffiliated sources and spot market purchases.
It may be necessary in the future to shut down the Meigs mining operations
if it is no longer economical 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. In the event
of a shutdown, the Company expects to recover from OPCo all of its costs
under the terms of 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
SOCCo. 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.
5. BENEFIT PLANS
The Company participates in the United Mine Workers of America (UMWA)
pension plan, a defined contribution plan which covers its UMWA employees.
Contributions totaled $703,000 in 1998, $987,000 in 1997 and $921,000 in
1996. As of June 30, 1998, the UMWA actuary estimates that the Company's
share of the UMWA pension plans unfunded vested liabilities was
approximately $15.7 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.
<PAGE>
The Company participates in the AEP System qualified pension plan, a
defined benefit plan which covers all employees, except participants in
the UMWA pension plans. Net pension costs for the years ended December
31, 1998, 1997 and 1996 were $217,000, $225,000 and $377,000,
respectively.
A defined contribution employee savings plan offered to non-UMWA employees
required that the Company make contributions to the plan totaling $312,000
in 1998, $293,000 in 1997 and $286,000 in 1996.
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. The AEP System provides certain other
benefits for retired employees under an AEP System plan. The annual
accrued costs for these plans were $9.3 million in 1998, $9.1 million in
1997 and $9 million in 1996.
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. Required
annual payments to these plans totaled $219,000 in 1998, $155,000 in 1997
and $157,000 in 1996.
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 has a fund
surplus that it is able to transfer to other AEP System companies that are
members of the fund and have a deficit. In June 1998 management decided
to cease reimbursing retiree medical costs due to the reduced levels of
available Black Lung surplus and proposed new rules that could liberalize
the current claims process. The amounts of Black Lung surplus utilized in
accordance with the Energy Act were $2.1 million in 1998, $3.3 million in
1997 and $3.9 million in 1996 of which $1.8 million in 1998 and $2.8
million in 1997 and 1996 was to reimburse the Company for benefits paid.
In addition, the amounts of Black Lung surplus utilized reflect $0.3
million in 1998, $0.5 million in 1997 and $1.1 million in 1996 reallocated
from the Company's surplus Black Lung trust fund to other System member
companies. The Company's share of the Black Lung Trust funds surplus at
December 31, 1998, 1997 and 1996 was $0.5 million, $1.9 million and $6.3
million, respectively.
<PAGE>
6. FEDERAL INCOME TAXES
The details of federal income taxes are as follows:
Year Ended December 31,
1998 1997 1996
(in thousands)
Charged (Credited) to Operations:
Current (net) . . . . . . . . . . . . . . $12,043 $15,603 $15,536
Deferred (net). . . . . . . . . . . . . . (6,070) (8,824) (4,840)
Total . . . . . . . . . . . . . . . . . 5,973 6,779 10,696
Charged (Credited) to Nonoperating Income:
Current (net) . . . . . . . . . . . . . . (1,523) (1,636) (593)
Deferred (net). . . . . . . . . . . . . . 1,139 465 100
Total . . . . . . . . . . . . . . . . . (384) (1,171) (493)
Total Federal Income Taxes. . . . . . $ 5,589 $ 5,608 $10,203
Federal income taxes as reported are different than pre-tax book income
multiplied by the statutory tax rate predominantly due to permanent
differences for corporate owned life insurance and the practice of flow-through
accounting for book/tax differences associated with self insurance
reserves, mine development costs and certain depreciation differences.
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 Company has settled with the 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 being audited by the
IRS. With the exception of the deductibility of interest deductions
related to AEP's corporate owned life insurance program, which are
discussed under the heading, Litigation, in Note 2, management is not
aware of any issues from open tax years that upon final resolution are
expected to have a material adverse effect on results of operations.
<PAGE>
The following tables show the elements of the net deferred tax liability
and the significant temporary differences giving rise to such deferrals:
December 31,
1998 1997
(in thousands)
Deferred Tax Assets . . . . . . . . . . . . . $ 31,068 $ 27,683
Deferred Tax Liabilities. . . . . . . . . . . (46,905) (55,378)
Net Deferred Tax Liabilities. . . . . . . . $(15,837) $(27,695)
Property Related Temporary Differences. . . . $(30,238) $(38,343)
Amounts Due From Parent Company
For Future Federal Income Taxes . . . . . . (9,774) (12,179)
Self Insurance Reserves . . . . . . . . . . . 5,982 6,802
Accrued Mine Reclamation Expense. . . . . . . 6,226 3,878
Postretirement Benefits . . . . . . . . . . . 13,901 11,769
All Other (net) . . . . . . . . . . . . . . . (1,934) 378
Total Net Deferred Tax Liabilities. . . . . $(15,837) $(27,695)
7. SUPPLEMENTARY CASH FLOW INFORMATION
Year Ended December 31,
1998 1997 1996
(in thousands)
Cash was paid for:
Interest . . . . . . . . . . . . . . $ 3,288 $ 5,034 $ 5,629
Income Taxes . . . . . . . . . . . . 13,402 14,704 16,380
Noncash acquisitions under capital
leases were . . . . . . . . . . . . . . 8,657 32,001 9,163
8. LEASES
Leases of property, plant and equipment are for periods of up to 30 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,
1998 1997 1996
(in thousands)
Operating Leases . . . . . . . . . . . . . $ 1,008 $ 1,281 $ 2,054
Amortization of Capital Leases . . . . . . 17,084 9,905 8,925
Interest on Capital Leases . . . . . . . . 5,556 2,525 2,099
Total Rental Costs . . . . . . . . . . $23,648 $13,711 $13,078
<PAGE>
Properties under capital leases and related obligations recorded on the
Balance Sheets are as follows:
December 31,
1998 1997
(in thousands)
Mining Plant Under Capital Leases . . . . . . $75,105 $87,414
Accumulated Provision for Amortization. . . . 34,322 35,654
Net Property under Capital Leases . . . . $40,783 $51,760
Capital Lease Obligations:
Noncurrent Liability. . . . . . . . . . . . $26,838 $37,631
Liability Due Within One Year . . . . . . . 13,945 14,129
Total Capital Lease Obligations . . . . . $40,783 $51,760
Properties under operating leases and related obligations are not included
in the Balance Sheets.
Future minimum lease rentals consisted of the following at December 31,
1998:
Non-
Cancelable
Capital Operating
Leases Leases
(in thousands)
1999. . . . . . . . . . . . . . . . . . . . . . . . $16,121 $1,197
2000. . . . . . . . . . . . . . . . . . . . . . . . 14,390 697
2001. . . . . . . . . . . . . . . . . . . . . . . . 11,124 538
2002. . . . . . . . . . . . . . . . . . . . . . . . 1,563 538
2003. . . . . . . . . . . . . . . . . . . . . . . . 1,017 539
Later Years . . . . . . . . . . . . . . . . . . . . 893 463
Total Future Minimum Lease Rentals. . . . . . . . . 45,108 $3,972
Less Estimated Interest Element . . . . . . . . . . 4,325
Estimated Present Value of Future
Minimum Lease Rentals. . . . . . . . . . . . . . . $40,783
9. RETURN OF CAPITAL
In September 1996, the Company was granted permission by the SEC to return
to its parent up to $68,000,000 out of capital surplus through December
31, 1998. The Company returned $20,859,000 of paid-in capital to its
parent in 1996 and $47,141,000 in 1997.
<PAGE>
10. LONG-TERM DEBT
Long-term debt outstanding was as follows:
December 31,
1998 1997
(in thousands)
Notes Payable:
6.85% due January 1998. . . . . . . . . . . . . . $ - $ 16,681
Variable rate due January 1999. . . . . . . . . . - 15,000
6.20% due January 2001. . . . . . . . . . . . . . 30,000 30,000
Finance Obligation. . . . . . . . . . . . . . . . . 35,945 45,266
65,945 106,947
Less: Portion Due Within One Year . . . . . . . . 10,903 26,861
Total . . . . . . . . . . . . . . . . . . $55,042 $ 80,086
A finance obligation was entered into by the Company for the Meigs Mine
preparation plant and related facilities through sale and leaseback
transactions. In accordance with SFAS 98, the transaction did not qualify
as a sale and leaseback for accounting purposes and therefore is shown as
other long-term debt. The term of this long-term debt obligation is 4
years including renewals with bargain purchase options at expiration of
the agreement. Future minimum payments under this agreement are
$6,582,000 per year for 1999 through 2001.
