<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
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<TABLE>
SOUTHERN OHIO COAL COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . $230,383 $227,523 $217,810
OPERATING EXPENSES
(including depreciation, depletion and
amortization of mining plant of
$20,207,000 in 1999, $19,643,000 in
1998 and $23,167,000 in 1997). . . . . 221,139 217,811 202,311
OPERATING INCOME . . . . . . . . . . . . 9,244 9,712 15,499
INTEREST CHARGES . . . . . . . . . . . . 2,180 2,836 4,273
OPERATING INCOME BEFORE FEDERAL
INCOME TAXES. . . . . . . . . . . . . . 7,064 6,876 11,226
FEDERAL INCOME TAXES ON OPERATIONS . . . 6,718 5,973 6,779
NET INCOME FROM OPERATIONS . . . . . . . 346 903 4,447
NONOPERATING INCOME (LOSS) . . . . . . . 1,030 750 (152)
NET INCOME . . . . . . . . . . . . . . . $ 1,376 $ 1,653 $ 4,295
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
RETAINED EARNINGS JANUARY 1. . . . . . . $23,338 $23,335 $24,064
NET INCOME . . . . . . . . . . . . . . . 1,376 1,653 4,295
CASH DIVIDENDS DECLARED. . . . . . . . . 1,514 1,650 5,024
RETAINED EARNINGS DECEMBER 31. . . . . . $23,200 $23,338 $23,335
See Notes to Financial Statements.
</TABLE>
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<TABLE>
SOUTHERN OHIO COAL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1999 1998 1997
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . $ 1,376 $ 1,653 $ 4,295
Adjustments for Noncash Items:
Depreciation, Depletion and
Amortization. . . . . . . . . . . . 20,207 19,643 23,167
Deferred Federal Income Taxes. . . . (10,749) (4,931) (8,359)
Accrued Postretirement Benefits
Other Than Pensions. . . . . . . . 6,652 5,765 5,727
Reclamation Reserve. . . . . . . . . 6,569 6,236 8,245
Changes in Certain Current Assets
and Liabilities:
Accounts Receivable. . . . . . . . . 2,893 20,102 6,740
Coal, Materials and Supplies . . . . 1,667 574 (214)
Accounts Payable . . . . . . . . . . 3,254 4,044 163
Payment of Disputed Tax and Interest
Related to COLI . . . . . . . . . . . (1,734) (28,791) -
Other (net). . . . . . . . . . . . . . 12,977 4,617 2,008
Net Cash Flows From Operating
Activities. . . . . . . . . . . 43,112 28,912 41,772
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . (1,299) (4,128) (2,241)
Proceeds from Sales of Property. . . . 128 (289) (40)
Net Cash Flows Used For
Investing Activities. . . . . . (1,171) (4,417) (2,281)
FINANCING ACTIVITIES:
Issuance of Long-term Debt . . . . . . - - 50,100
Retirement of Long-term Debt . . . . . (11,762) (41,002) (24,834)
Change in Short-term Debt (net). . . . (600) 6,000 (1,500)
Return of Capital Contributions to
Parent Company. . . . . . . . . . . . (15,807) - (47,141)
Dividends Paid . . . . . . . . . . . . (1,514) (1,650) (5,024)
Net Cash Flows Used For
Financing Activities. . . . . . (29,683) (36,652) (28,399)
Net Increase (Decrease) in Cash and
Cash Equivalents . . . . . . . . . . . 12,258 (12,157) 11,092
Cash and Cash Equivalents January 1. . . 4,500 16,657 5,565
Cash and Cash Equivalents December 31. . $ 16,758 $ 4,500 $ 16,657
See Notes to Financial Statements.
</TABLE>
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<TABLE>
SOUTHERN OHIO COAL COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
December 31,
1999 1998
(in thousands)
<S> <C> <C>
ASSETS
MINING PLANT:
Surface Lands . . . . . . . . . . . . . . . . . . $ 7,578 $ 7,629
Mining Structures and Equipment . . . . . . . . . 243,228 229,540
Coal Interests (net of depletion) . . . . . . . . 1,613 2,376
Mine Development Costs. . . . . . . . . . . . . . 134,149 134,149
Construction Work in Progress . . . . . . . . . . 754 3,308
Total Mining Plant. . . . . . . . . . . . 387,322 377,002
Accumulated Depreciation and Amortization . . . . 275,104 241,071
NET MINING PLANT. . . . . . . . . . . . . 112,218 135,931
OTHER PROPERTY AND INVESTMENTS. . . . . . . . . . . 85,937 87,652
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . 16,758 4,500
Accounts Receivable:
General . . . . . . . . . . . . . . . . . . . . 4,836 3,607
Affiliated Companies. . . . . . . . . . . . . . 4,893 9,015
Coal - at average cost. . . . . . . . . . . . . . 112 1,794
Materials and Supplies - at average cost. . . . . 10,834 10,819
Accrued Tax Benefit . . . . . . . . . . . . . . . - 1,753
Other . . . . . . . . . . . . . . . . . . . . . . 713 644
TOTAL CURRENT ASSETS. . . . . . . . . . . 38,146 32,132
REGULATORY ASSETS . . . . . . . . . . . . . . . . . 32,364 41,167
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . 1,613 -
DEFERRED CHARGES. . . . . . . . . . . . . . . . . . 2,234 3,192
TOTAL . . . . . . . . . . . . . . . . . $272,512 $300,074
See Notes to Financial Statements.
</TABLE>
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<TABLE>
SOUTHERN OHIO COAL COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
December 31,
1999 1998
(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 . . . . . . . . . . . . . . . . . 28,882 44,689
Retained Earnings . . . . . . . . . . . . . . . . 23,200 23,338
TOTAL SHAREHOLDER'S EQUITY. . . . . . . . 52,087 68,032
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . 42,506 55,042
OTHER NONCURRENT LIABILITIES:
Obligations Under Capital Leases. . . . . . . . . 20,318 26,838
Workers' Compensation Claims. . . . . . . . . . . 3,720 6,350
Postretirement Benefits Other Than Pensions . . . 44,636 37,984
Accrued Reclamation Costs . . . . . . . . . . . . 23,885 17,316
Other . . . . . . . . . . . . . . . . . . . . . . 13,994 12,196
TOTAL OTHER NONCURRENT LIABILITIES. . . . 106,553 100,684
CURRENT LIABILITIES:
Long-term Debt Due Within One Year. . . . . . . . 11,677 10,903
Short-term Debt - Notes Payable to Parent . . . . 5,400 6,000
Accounts Payable - General . . . . . . . . . . . 10,634 8,343
Accounts Payable - Affiliated Companies . . . . . 3,797 2,834
Taxes Accrued . . . . . . . . . . . . . . . . . . 2,108 -
Interest Accrued. . . . . . . . . . . . . . . . . 814 798
Accrued Vacation Pay. . . . . . . . . . . . . . . 3,242 3,555
Workers' Compensation Claims. . . . . . . . . . . 8,213 7,704
Obligations Under Capital Leases. . . . . . . . . 20,339 13,945
Other . . . . . . . . . . . . . . . . . . . . . . 3,908 5,035
TOTAL CURRENT LIABILITIES . . . . . . . . 70,132 59,117
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . - 15,837
DEFERRED CREDITS. . . . . . . . . . . . . . . . . . 1,234 1,362
CONTINGENCIES (Note 3)
TOTAL . . . . . . . . . . . . . . . . . $272,512 $300,074
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, 1999, owned proven coal reserves
amounted to 111,268,000 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,
1999 1998
(in thousands)
Regulatory Assets:
Amounts Due From Parent Company For
Future Income Taxes $21,326 $28,027
Raccoon Mine Abandoned Assets 3,822 5,741
Postemployment Benefits 5,299 4,854
Other 1,917 2,545
Total Regulatory Assets $32,364 $41,167
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 1999,
1998 and 1997 were not significant.
Depreciation, depletion and amortization are provided over the estimated
useful asset lives or the estimated life of the mine, whichever is
shorter, 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, 1999) in West
Virginia; the net present value of a receivable from the sale of the
Martinka mining operations in 1992 ($23.9 million at December 31, 1999
discounted at 8-1/2%); and a payment of disputed tax and interest
related to a corporate owned life insurance program ($30.7 million at
December 31, 1999, see Note 3).
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 and related regulatory assets and liabilities are
established 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, 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 1999, 1998 or 1997.
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. 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. Under the plan
the Gavin Plant would be supplied by the Company's Meigs mine, long-term
contracts with unaffiliated sources and spot market purchases. Partly
as a result to the CAAA, the Meigs mine is scheduled to close in
December 2001. The cost of shutdown is expected to 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. The Company expects to recover from OPCo all of
its shutdown costs under the terms of the coal supply agreement.
3. CONTINGENCIES
Litigation
The Internal Revenue Service (IRS) agents auditing the AEP System's
consolidated federal income tax returns 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 in U.S. 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. A
disallowance of COLI interest deductions through December 31, 1999 would
increase expenses by approximately $30.7 million (including interest).
The Company made payments of taxes and interest attributable to COLI
interest deductions for taxable years 1991-1998 to avoid the potential
assessment by the IRS of any additional above market rate interest on
the contested amount. These payments to the IRS are included on the
balance sheets in other property and investments pending the resolution
of this matter. The Company is seeking refunds through litigation of
all amounts paid plus interest.
In order to resolve this issue, the Company filed suit against the
United States (U.S.) in the U.S. District Court for the Southern
District of Ohio in March 1998. In 1999 a U.S. Tax Court judge decided
in the Winn-Dixie Stores v. Commissioner case that a corporate
taxpayer's COLI interest deductions should be disallowed. Notwith-standing the
Tax Court's decision in Winn-Dixie, management has made no
provision for any possible adverse earnings impact from this matter
because it believes, and has been advised by outside counsel, that it
has a meritorious position and will vigorously pursue its lawsuit. In
the event the resolution of this matter is unfavorable, the Company
expects to recover from Ohio Power Company (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.
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 $101,000 in 1999, $703,000 in 1998 and
$987,000 in 1997. As of June 30, 1999, the UMWA actuary estimates that
the Company's share of the UMWA pension plans unfunded vested
liabilities was approximately $9.6 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.
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 (credits) for the years ended
December 31, 1999, 1998 and 1997 were $(90,000), $217,000 and $225,000,
respectively.
A defined contribution employee savings plan offered to non-UMWA
employees required that the Company make contributions to the plan
totaling $314,000 in 1999, $312,000 in 1998 and $293,000 in 1997.
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 $10.8 million in 1999,
$9.3 million in 1998 and $9.1 million in 1997.
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 $221,000 in 1999, $219,000 in
1998 and $155,000 in 1997.
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 and $3.3 million in 1997 of which $1.8 million in 1998
and $2.8 million in 1997 was to reimburse the Company for benefits paid.
In addition, the amounts of Black Lung surplus utilized reflect $0.3
million in 1998 and $0.5 million in 1997 reallocated from the Company's
surplus Black Lung trust fund to other System member companies. No
Black Lung surpluses were used to reimburse the Company for retiree
medical benefits paid in 1999 and no reallocation from the Company's
surplus Black Lung trust fund to other System member companies was made
in 1999. The Company's share of the Black Lung Trust funds surplus at
December 31, 1999, 1998 and 1997 was $0.6 million, $0.5 million and $1.9
million, respectively.
<PAGE>
6. FEDERAL INCOME TAXES
The details of federal income taxes are as follows:
Year Ended December 31,
1999 1998 1997
(in thousands)
Charged (Credited) to Operations:
Current (net) . . . . . . . . . . . . . . $ 17,533 $12,043 $15,603
Deferred (net). . . . . . . . . . . . . . (10,815) (6,070) (8,824)
Total . . . . . . . . . . . . . . . . . 6,718 5,973 6,779
Charged (Credited) to Nonoperating Income:
Current (net) . . . . . . . . . . . . . . (5) (1,523) (1,636)
Deferred (net). . . . . . . . . . . . . . 66 1,139 465
Total . . . . . . . . . . . . . . . . . 61 (384) (1,171)
Total Federal Income Taxes. . . . . . $ 6,779 $ 5,589 $ 5,608
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 interest deductions related to AEP's
corporate owned life insurance program, which are discussed under the
heading "Litigation" in Note 3, 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 asset or
(liability) and the significant temporary differences giving rise to
such deferrals:
December 31,
1999 1998
(in thousands)
Deferred Tax Assets . . . . . . . . . . . . . $ 36,235 $ 31,068
Deferred Tax Liabilities. . . . . . . . . . . (34,622) (46,905)
Net Deferred Tax Assets (Liabilities) . . . $ 1,613 $(15,837)
Property Related Temporary Differences. . . . $(20,832) $(30,238)
Amounts Due From Parent Company
For Future Federal Income Taxes . . . . . . (7,444) (9,774)
Self Insurance Reserves . . . . . . . . . . . 4,975 5,982
Accrued Mine Reclamation Expense. . . . . . . 8,808 6,226
Postretirement Benefits . . . . . . . . . . . 16,583 13,901
All Other (net) . . . . . . . . . . . . . . . (477) (1,934)
Total Net Deferred Tax Assets (Liabilities) $ 1,613 $(15,837)
7. SUPPLEMENTARY CASH FLOW INFORMATION
Year Ended December 31,
1999 1998 1997
(in thousands)
Cash was paid for:
Interest . . . . . . . . . . . . . . $ 2,164 $ 3,288 $ 5,034
Income Taxes . . . . . . . . . . . . 13,674 13,402 14,704
Noncash acquisitions under capital
leases were . . . . . . . . . . . . . . 17,874 8,657 32,001
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,
1999 1998 1997
(in thousands)
Operating Leases . . . . . . . . . . . . . $ 1,212 $ 1,008 $ 1,281
Amortization of Capital Leases . . . . . . 17,534 17,084 9,905
Interest on Capital Leases . . . . . . . . 2,737 5,556 2,525
Total Rental Costs . . . . . . . . . . $21,483 $23,648 $13,711
<PAGE>
Properties under capital leases and related obligations recorded on the
Balance Sheets are as follows:
December 31,
1999 1998
(in thousands)
Mining Plant Under Capital Leases . . . . . . $84,930 $75,105
Accumulated Provision for Amortization. . . . 44,273 34,322
Net Property under Capital Leases . . . . $40,657 $40,783
Capital Lease Obligations:
Noncurrent Liability. . . . . . . . . . . . $20,318 $26,838
Liability Due Within One Year . . . . . . . 20,339 13,945
Total Capital Lease Obligations . . . . . $40,657 $40,783
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,
1999:
Non-
Cancelable
Capital Operating
Leases Leases
(in thousands)
2000. . . . . . . . . . . . . . . . . . . . . . . . $22,270 $ 697
2001. . . . . . . . . . . . . . . . . . . . . . . . 17,827 538
2002. . . . . . . . . . . . . . . . . . . . . . . . 1,654 538
2003. . . . . . . . . . . . . . . . . . . . . . . . 1,017 539
2004. . . . . . . . . . . . . . . . . . . . . . . . 520 419
Later Years . . . . . . . . . . . . . . . . . . . . 373 44
Total Future Minimum Lease Rentals. . . . . . . . . 43,661 $2,775
Less Estimated Interest Element . . . . . . . . . . 3,004
Estimated Present Value of Future
Minimum Lease Rentals. . . . . . . . . . . . . . . $40,657
9. RETURN OF CAPITAL
In 1999, the Company returned $15,807,000 out of paid-in capital to its
parent.
10. LONG-TERM DEBT
Long-term debt outstanding was as follows:
December 31,
1999 1998
(in thousands)
Notes Payable - 6.20% due January 2001. . . . . . . $30,000 $30,000
Finance Obligation. . . . . . . . . . . . . . . . . 24,183 35,945
54,183 65,945
Less: Portion Due Within One Year . . . . . . . . 11,677 10,903
Total . . . . . . . . . . . . . . . . . . $42,506 $55,042
<PAGE>
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 extends
through 2001. Future minimum payments under this agreement are $11.7
million in 2000 and $12.5 million in 2001.
