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CENTRAL OHIO COAL COMPANY
QUARTERLY REPORT PER REQUIREMENTS
OF HOLDING COMPANY ACT RELEASE NO. 26573
FOR THE QUARTER ENDED JUNE 30, 2000
CONTENTS
Page
Statements of Income and Retained Earnings 1
Balance Sheets 2-3
Information Concerning Mine Operations and
Capital Improvements 4-5
Calculation of Cost of Capital and
Statement of Cost of Commercial Coal Sold and Shipped 6
Statement of Cost of Operation 7
Analysis of Mining Plant in Service 8
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CENTRAL OHIO COAL COMPANY
STATEMENT OF INCOME
FOR THE QUARTER ENDED JUNE 30, 2000
(UNAUDITED)
(in thousands)
OPERATING REVENUES $6,249
COST OF OPERATION 6,670
OPERATING LOSS (421)
NONOPERATING INCOME 350
LOSS BEFORE FEDERAL INCOME TAXES (71)
FEDERAL INCOME TAX CREDIT (71)
NET INCOME $ -
STATEMENT OF RETAINED EARNINGS
FOR THE QUARTER ENDED JUNE 30, 2000
(UNAUDITED)
(in thousands)
BALANCE AT BEGINNING OF PERIOD $2
NET INCOME -
BALANCE AT END OF PERIOD $2
The common stock of the Company is wholly owned by Ohio Power Company.
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CENTRAL OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
JUNE 30,
2000
(in thousands)
ASSETS
MINING PLANT:
Mining Plant in Service $ 50,416
Accumulated Depreciation and Amortization 49,778
NET MINING PLANT 638
OTHER PROPERTY AND INVESTMENTS 12,820
CURRENT ASSETS:
Cash and Cash Equivalents 608
Accounts Receivable:
General 88
Affiliated Companies 3,431
Advances to Affiliates 42,217
Coal 1,223
Materials and Supplies 6,229
Prepayments 30
TOTAL CURRENT ASSETS 53,826
DEFERRED INCOME TAXES 54,098
REGULATORY ASSETS 913
DEFERRED CHARGES 1,135
TOTAL $123,430
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CENTRAL OHIO COAL COMPANY
BALANCE SHEET
(UNAUDITED)
JUNE 30,
2000
(in thousands)
CAPITALIZATION AND LIABILITIES
SHAREHOLDER'S EQUITY:
Common Stock - Par Value $0.10:
Authorized - 100,000 Shares
Outstanding - 69,000 Shares $ 7
Retained Earnings 2
TOTAL SHAREHOLDER'S EQUITY 9
OTHER NONCURRENT LIABILITIES:
Accrued Postretirement Benefits Other Than Pensions 52,492
Accrued Reclamation Costs 36,604
Mine Closure Costs 1,260
Other Operating Reserves 20,690
TOTAL OTHER NONCURRENT LIABILITIES 111,046
CURRENT LIABILITIES:
Accounts Payable:
General 1,963
Affiliated Companies 454
Taxes Accrued 521
Accrued Reclamation Costs 5,316
Accrued Vacation Pay 513
Workers' Compensation Claims 1,236
Other 1,931
TOTAL CURRENT LIABILITIES 11,934
REGULATORY LIABILITIES & DEFERRED CREDITS 441
TOTAL $123,430
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CENTRAL OHIO COAL COMPANY
INFORMATION CONCERNING MINE OPERATIONS AND CAPITAL IMPROVEMENTS
FOR THE QUARTER ENDED JUNE 30, 2000
TAXES
As discussed in Note 2 of the Notes to Financial Statements in the
1999 Annual Report, the deductibility of certain interest deductions
related to American Electric Power's (AEP's) corporate owned life
insurance (COLI) program for taxable years 1991-1996 is under review by
the Internal Revenue Service (IRS). Adjustments have been or will be
proposed by the IRS disallowing COLI interest deductions COLI interest
deductions. A disallowance of COLI interest deductions through June 30,
2000 would increase expenses by approximately $10.9 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 Sheet 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.
Notwithstanding 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 all of its costs
under the terms of the coal supply agreement.
BLACK LUNG
In April 2000 the Company recorded a $649,000 provision for black
lung expense. The amount was based on an actuarial valuation prepared
as of January 1, 2000 which projected the amount of current black lung
liabilities in excess of available trust funds.
MONEY POOL
On June 15, 2000, the Company became a participant in the American
Electric Power (AEP) System Money Pool (Money Pool). The Money Pool is
a mechanism structured to meet the short-term cash requirements of the
participants with AEP Company, Inc. acting as the primary borrower on
behalf of the Money Pool. The Company's affiliates that are U.S.
domestic electric utility operating companies and coal-mining companies
are the primary participants in the Money Pool.
The operation of the Money Pool is designed to match on a daily
basis the available cash and borrowing requirements of the participants.
Participants with excess cash loan funds to the Money Pool reducing the
amount of external funds AEP Company, Inc. needs to borrow to meet the
short-term cash requirements of other participants with advances from
the Money Pool. AEP Company, Inc. borrows the funds needed on a daily
basis to meet the net cash requirements of the Money Pool participants.
A weighted average daily interest rate which is calculated based on the
outstanding short-term debt borrowings made by AEP Company, Inc. is
applied to each Money Pool participant's daily outstanding investment or
debt position to determine interest income or interest expense. Interest
income is included in nonoperating income, and interest expense is
included in interest charges. At June 30, 2000 the Company was a net
investor in the Money Pool and reports its investment in the Money Pool
as Advances to Affiliates on the Balance Sheet.
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<TABLE>
CENTRAL OHIO COAL COMPANY
CALCULATION OF COST OF CAPITAL AND STATEMENT OF COST OF COMMERCIAL COAL SOLD AND SHIPPED
FOR THE QUARTER ENDED JUNE 30, 2000
(in thousands, except as noted)
<CAPTION> April through
June
2000
<S> <C>
I. Calculation of Cost-of-Capital Compensation:
A. Equity Investment at Beginning of Period:
Common Stock $ 7
B. Rate of Return Allowable per HCAR No. 26573:
10.27% per annum, 2.5675% per quarter .025675
C. Earnings Allowable on Equity Investment
1. Current Quarter $ -
2. Year-to-Date $ -
D. Net Income per Statement of Income $ -
Add: Interest Charges -
Less: Nonoperating Income 350
E. Applied Cost-of-Capital Billing Adder:
1. Current Quarter $ (350)
2. Year-to-Date $ (1,036)
II. Coal Billing Calculation:
A. Total Operating Expenses (a) $ 6,599
B. Add: Cost-of-Capital Billing Adder as Applied per E. 1. of Section I (350)
C. Cost Applicable to Current Quarter Coal Billings $ 6,249
D. Coal Sold and Shipped in Current Quarter to Ohio Power (in tons) 275,398
E. Average Price per Ton to Ohio Power (in dollars) (C/D) $22.69
(a) As represented by ?Cost of Operation? plus ?Federal Income Taxes? reported in Statement of Income.
</TABLE>
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CENTRAL OHIO COAL COMPANY
STATEMENT OF COST OF OPERATION
FOR THE QUARTER ENDED JUNE 30, 2000
(in thousands)
Direct Labor-UMW* $ 373
Indirect Labor-UMW* 1,137
Benefits-UMW* 3,104
Salaries and Benefits-Nonunion 858
Operating Supplies 1,291
Repair Parts and Materials 1,047
Electricity and Other Utilities 565
Outside Services-Maintenance, Haulage and Reclamation 564
Taxes Other Than Federal Income Taxes** 353
Rental of Equipment 15
Mining Cost Normalization*** (626)
Reclamation (2,308)
Other Production Costs 486
Subtotal 6,859
Transfers of Production Costs (to)/from Coal Inventory (189)
Total $ 6,670
* United Mine Workers of America.
** Excludes FICA, Federal Unemployment and State Unemployment Taxes.
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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CENTRAL OHIO COAL COMPANY
ANALYSIS OF MINING PLANT IN SERVICE
AND RELATED ACCUMULATED PROVISIONS FOR
DEPRECIATION AND AMORTIZATION
JUNE 30, 2000
Net
Gross Accumulated Carrying
Cost Provisions Amount
(in thousands)
Description
Surface Lands $ 324 $ - $324
Mining Structures and Equipment 47,800 47,486 314
Leasehold Improvements 2,292 2,292 -
Total Mining Plant in Service $50,416 $49,778 $638
