<PAGE>
Securities and Exchange Commission
Office of Public Utility Regulation
Division of Investment Management
450 Fifth Street, N.W.
Washington, D.C. 20549-1004
April 28, 1994
Via EDGAR
Re: Central Ohio Coal Company
(File No. 70-6447
Ohio Power Company
CIK 0000073986)
Gentlemen:
As a supplement to our March 30, 1994 EDGAR filing of the fourth
quarter 1993 report, Central Ohio Coal Company's 1993 Annual Report
which includes a statement of significant accounting policies is
filed herewith.
Very truly yours,
G.C. Dean
American Electric Power
Service Corporation
GCD/clm
<PAGE>
C E N T R A L O H I O
C O A L C O M P A N Y
1993 Annual Report
AMERICAN ELECTRIC POWER SYSTEM
<PAGE>
<PAGE>
CENTRAL 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 . . . . . . . . 5-11
<PAGE>
<PAGE>
<TABLE>
CENTRAL OHIO COAL COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
OPERATING REVENUES - Sales to Parent Company . . . . . $112,770 $95,398 $106,183
OPERATING EXPENSES (including depreciation, depletion
and amortization of mining plant of $2,220,000 in
1993, $2,743,000 in 1992 and $2,749,000 in 1991) . . 110,785 97,278 103,482
OPERATING INCOME (LOSS). . . . . . . . . . . . . . . . 1,985 (1,880) 2,701
NONOPERATING INCOME. . . . . . . . . . . . . . . . . . 1,019 1,995 1,659
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . 3,004 115 4,360
INTEREST CHARGES (including $50,000 in 1993,
$541,000 in 1992 and $661,000 in 1991 on
long-term debt to Parent Company). . . . . . . . . . 56 596 661
INCOME (LOSS) BEFORE FEDERAL INCOME TAXES. . . . . . . 2,948 (481) 3,699
FEDERAL INCOME TAX EXPENSE (CREDIT). . . . . . . . . . 292 (3,137) 1,043
NET INCOME . . . . . . . . . . . . . . . . . . . . . . $ 2,656 $ 2,656 $ 2,656
</TABLE>
<TABLE>
STATEMENTS OF RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
RETAINED EARNINGS JANUARY 1. . . . . . . . . . . . . . $ 346 $ 346 $ 344
NET INCOME . . . . . . . . . . . . . . . . . . . . . . 2,656 2,656 2,656
CASH DIVIDENDS DECLARED. . . . . . . . . . . . . . . . 2,655 2,656 2,654
RETAINED EARNINGS DECEMBER 31. . . . . . . . . . . . . $ 347 $ 346 $ 346
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
CENTRAL OHIO COAL COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . $ 2,656 $ 2,656 $ 2,656
Adjustments for Noncash Items:
Depreciation, Depletion and Amortization . . . . 2,220 2,743 2,749
Deferred Federal Income Taxes. . . . . . . . . . (3,620) 1,252 135
Amortization of Deferred Strike Costs (net). . . 51 615 615
Changes in Certain Current Assets
and Liabilities:
Accounts Receivable. . . . . . . . . . . . . . . (94) (2,952) 1,066
Coal, Materials and Supplies . . . . . . . . . . 4,513 3,684 3,495
Accounts Payable . . . . . . . . . . . . . . . . 228 (1,619) (629)
Taxes Accrued. . . . . . . . . . . . . . . . . . 4,186 (1,643) 234
Accrued Other Postretirement Benefits. . . . . . 3,941 - -
Other (net). . . . . . . . . . . . . . . . . . . . (1,313) 83 (6,260)
Net Cash Flows From Operating Activities . . 12,768 4,819 4,061
INVESTING ACTIVITIES:
Cash Used for Construction Expenditures. . . . . . (303) (198) (962)
Proceeds from Sales of Property. . . . . . . . . . 3,537 11 2
Net Cash Flows From (Used For)
Investing Activities . . . . . . . . . . . 3,234 (187) (960)
FINANCING ACTIVITIES:
Retirement of Long-term Debt . . . . . . . . . . . - (8,957) -
Receipts from (Payments to) Parent Company for
Future Coal Deliveries . . . . . . . . . . . . . (1,730) (5,225) (682)
Dividends Paid . . . . . . . . . . . . . . . . . . (2,655) (2,656) (2,654)
Net Cash Flows Used For Financing Activities (4,385) (16,838) (3,336)
Net Increase (Decrease) in Cash and Cash Equivalents 11,617 (12,206) (235)
Cash and Cash Equivalents January 1. . . . . . . . . 35 12,241 12,476
Cash and Cash Equivalents December 31. . . . . . . . $11,652 $ 35 $12,241
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
CENTRAL OHIO COAL COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
December 31,
1993 1992
(in thousands)
ASSETS
<S> <C> <C>
MINING PLANT:
Mining Plant in Service . . . . . . . . . . . . . . . . . . . . $84,004 $117,108
Construction Work in Progress . . . . . . . . . . . . . . . . . 244 -
Total Mining Plant. . . . . . . . . . . . . . . . . . . 84,248 117,108
Accumulated Depreciation and Amortization . . . . . . . . . . . 52,091 66,448
NET MINING PLANT. . . . . . . . . . . . . . . . . . . . 32,157 50,660
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . 11,652 35
Accounts Receivable:
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 459 739
Affiliated Companies. . . . . . . . . . . . . . . . . . . . . 2,869 2,495
Coal - at average cost. . . . . . . . . . . . . . . . . . . . . 2,893 4,193
Materials and Supplies - at average cost. . . . . . . . . . . . 10,816 14,029
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,379 1,534
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . 30,068 23,025
FEDERAL INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . 4,965 5,464
REGULATORY ASSETS:
Amounts Due From Customers For
Future Federal Income Taxes . . . . . . . . . . . . . . . . . 4,118 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,422 1,109
TOTAL REGULATORY ASSETS . . . . . . . . . . . . . . . . 5,540 1,109
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . $72,730 $ 80,258
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
CENTRAL OHIO COAL COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
December 31,
1993 1992
(in thousands)
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
SHAREOWNER'S EQUITY:
Common Stock - Par Value $100:
Authorized - 100,000 Shares
Outstanding - 69,000 Shares . . . . . . . . . . . . . . . . . $ 6,900 $ 6,900
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . 13,069 13,069
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . 347 346
TOTAL SHAREOWNER'S EQUITY . . . . . . . . . . . . . . . 20,316 20,315
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 1,500
OTHER NONCURRENT LIABILITIES:
Obligations Under Capital Leases. . . . . . . . . . . . . . . . 10,470 21,572
Operating Reserves. . . . . . . . . . . . . . . . . . . . . . . 9,083 9,040
TOTAL OTHER NONCURRENT LIABILITIES. . . . . . . . . . . 19,553 30,612
CURRENT LIABILITIES:
Accounts Payable:
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,880 1,638
Affiliated Companies. . . . . . . . . . . . . . . . . . . . . 644 658
Accrued Reclamation Costs . . . . . . . . . . . . . . . . . . . 7,616 7,478
Accrued Vacation Pay. . . . . . . . . . . . . . . . . . . . . . 829 1,270
Accrued Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 328 325
Obligations Under Capital Leases. . . . . . . . . . . . . . . . 3,373 5,321
Accrued Other Postretirement Benefits . . . . . . . . . . . . . 3,941 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,791 921
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . 23,402 17,611
DEFERRED GAIN ON SALE AND LEASEBACK OF PLANT. . . . . . . . . . . 7,901 8,490
RECEIPTS FROM PARENT COMPANY FOR FUTURE COAL DELIVERIES . . . . . - 1,730
DEFERRED CREDITS. . . . . . . . . . . . . . . . . . . . . . . . . 58 -
COMMITMENTS AND CONTINGENCIES (Note 2)
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . $72,730 $80,258
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
CENTRAL OHIO COAL COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
Organization and Regulation. Central Ohio Coal Company (the Company or
COCCo), 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 conducts surface mining operations in
southeastern Ohio to supply coal to OPCo's Muskingum River Plant. All 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 in connection with coal sales are sufficient to recover expenses and
provide for a return on OPCo's equity investment excluding retained earnings.
Basis of Accounting. As a regulated entity, COCCo's financial statements
reflect actions of regulators that result in the recognition of revenues and
expenses in different time periods than enterprises that are not regulated.
In accordance with Statement of Financial Accounting Standards (SFAS) No. 71,
Accounting for the Effects of Certain Types of Regulation (SFAS 71),
regulatory assets and liabilities are recorded to defer expenses or revenues
reflecting such differences.
Coal Supply Agreement. Pursuant to a coal supply agreement with OPCo, the
Company is obligated to deliver the 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 in excess of amounts realized from coal
produced during the development of commercial mines. 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 average rates used
to accrue AFUDC were 9.50% in 1993, 7.25% in 1992 and 9.75% in 1991. Since
there were no major long-term construction projects, AFUDC was not significant
in 1993, 1992 and 1991.
<TABLE>
Mining plant in service (at original cost) at December 31, 1993 and
1992 was comprised of the following:
<CAPTION>
December 31,
1993 1992
(in thousands)
<S> <C> <C>
Surface Lands. . . . . . . . . . . . . . . . $ 324 $ 324
Mining Structures and Equipment. . . . . . . 70,827 95,342
Coal Interests (net of depletion). . . . . . 9,870 10,110
Other. . . . . . . . . . . . . . . . . . . . 2,983 11,332
$84,004 $117,108
/TABLE
<PAGE>
<PAGE>
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.
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.
Cash and Cash Equivalents. Cash and cash equivalents include temporary cash
investments with original maturities of three months or less.
Inventories. Coal and materials and supplies inventories are stated at cost,
determined on a moving-average basis.
In connection with surface mining operations, costs of removing
overburden (the soil and rock that covers the coal seams) are deferred. These
costs will be charged to expense as the uncovered coal is mined and sold.
Income Taxes. Effective January 1, 1993, the Company adopted the liability
method of accounting for income taxes as prescribed by SFAS 109, Accounting
for Income Taxes. Under this standard deferred federal 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. In
prior years deferred federal income taxes were provided for differences
between book and taxable income except where flow-through accounting for
certain differences was reflected in billings. Flow-through accounting is a
method whereby federal income tax expense for a particular item is the same
for accounting and coal billing purposes as in the federal income tax return.
As a result of the adoption of SFAS 109, significant additional deferred tax
liabilities were recorded for items afforded flow-through treatment in
billings. In accordance with SFAS 71, significant corresponding regulatory
assets were also recorded to reflect the future recovery of additional taxes
due when the temporary differences reverse. As a result of this change in
accounting effective January 1, 1993, deferred federal income tax liabilities
and regulatory assets increased by $4.4 million with no effect on net income.
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. An
irrevocable Black Lung Benefits Trust is maintained under the Internal Revenue
Code which, based on the most recent actuarial study, is fully funded.
Therefore no accruals for Black Lung liabilities were made in 1993, 1992 or
1991.
The Company is self-insured for workers' compensation. The
estimated present value of workers' compensation claim payments has been
provided based on known events and claims.
Reclamation. Accruals are made for estimated costs of direct reclamation as
a result of the surface mining of coal. The accrual is for the estimated
amount necessary to restore the land and water resources affected by the
mining operations to their post mining land uses, as approved by the Ohio
Department of Natural Resources.
<PAGE>
<PAGE>
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 reclaiming the support acreage at surface mines
and the removal or covering of refuse piles and water settling ponds.
Reclamation costs associated with support operations at the Company's surface
mines are recorded as incurred.
Reclassifications. Certain prior-period amounts were reclassified to conform
with current-period presentation.
2. COMMITMENTS AND CONTINGENCIES:
Construction expenditures for the years 1994 through 1996 are
estimated to be $2.6 million and, in connection with the construction program,
commitments have been made.
The Company recovers all costs from OPCo under the coal supply
agreement.
3. CONTINUATION OF MINING OPERATIONS:
The Clean Air Act Amendments of 1990 (CAAA) requires significant
reductions in sulfur dioxide and nitrogen oxides emitted from OPCo's
generating plants. In November 1992 the Public Utilities Commission of Ohio
(PUCO) approved OPCo's compliance plan. The PUCO approved plan sets forth
compliance measures for the System's affected generating units including
switching in 1995 to low sulfur coal for Muskingum River Plant Unit 5 (which
represents about 40% of the Muskingum River Plant capacity). The plan
tentatively proposes switching units 1 through 4 to natural gas in the year
2000.
Also in November 1992 the PUCO approved a stipulation agreement
between OPCo, the PUCO staff and the Ohio Consumers' Counsel. The agreement
provides for, among other things, a three-year predetermined price of $1.64
per million Btu for coal burned by OPCo from December 1991 to November 1994 at
four of its generating stations including the Muskingum River Plant. Although
the cost of the Company's Muskingum mine coal is above $1.64 per million Btu,
OPCo's coal cost at the four generating stations subject to the stipulated
predetermined price is currently less in total than the predetermined price.
Therefore, OPCo is recovering its cost of coal from ratepayers. In the
stipulation agreement the parties agreed to negotiate any dispute concerning
the cost of affiliated coal burned at OPCo's Muskingum River Plant after
November 30, 1994, the end of the predetermined price agreement.
As a result of clean air compliance efforts at the Muskingum River
Plant, it may be necessary to shut down the Company's mining operations in
1999 or earlier. If the predetermined price or any possible future price
limitations are not adequate to recover mining cost from PUCO jurisdictional
fuel clause customers the mines could close even sooner. 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,
reclamation and other shutdown costs. If a shutdown should become necessary,
the Company's results of operations are not expected to be affected since
shutdown costs are recoverable from OPCo under the coal supply agreement.
In November 1993, the Company laid off 131 employees due to reduced
production requirements as the Muskingum River Plant prepares to meet CAAA
Phase I emission standards.
<PAGE>
<PAGE>
4. OTHER RELATED-PARTY TRANSACTIONS:
American Electric Power Service Corporation (AEPSC) provides certain
managerial and professional services to AEP System companies including COCCo.
The costs of the services are determined 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 expensed or capitalized depending on the nature of the
services rendered. AEPSC and its billings are subject to the regulations of
the SEC under the 1935 Act.
5. BENEFIT PLANS:
United Mine Workers of America (UMWA) Pension Plans
The Company contributes to UMWA pension funds to provide pension
benefits for UMWA employees meeting eligibility requirements. Benefits are
based on age at retirement and years of service. As of June 30, 1993, the
UMWA actuary estimates that the Company's share of the UMWA pension plans
unfunded vested liabilities was approximately $10 million. In the event the
Company ceases or significantly reduces mining operations or contributions to
the pension plans, a withdrawal obligation may be triggered for all or a
portion of its share of the unfunded vested liability. Employer contributions
are based on the number of hours worked, are expensed when paid and totaled
$480,000 in 1993, $498,000 in 1992 and $579,000 in 1991.
AEP System Pension Plan
The Company participates in the AEP pension plan, a trusteed,
noncontributory defined benefit plan covering all employees meeting
eligibility requirements, except participants in the UMWA pension plans.
Benefits are based on service years and compensation levels. Effective
January 1, 1992 employees may retire without reduction of benefits at age 62
and with reduced benefits as early as age 55. Pension costs are allocated by
first charging each System company with its service cost and then allocating
the remaining pension cost in proportion to its share of the projected benefit
obligation. The funding policy is to make annual trust fund contributions
equal to the net periodic pension cost up to the maximum amount deductible for
federal income taxes, but not less than the minimum contribution required by
law.
The Company's share of net pension cost of the AEP pension plan for
the years ended December 31, 1993, 1992 and 1991 was $239,000, $307,000 and
$168,000, respectively.
AEP System Savings Plan
An employee savings plan is offered to non-UMWA employees which
allows participants to contribute up to 16% of their salaries into three
investment alternatives, including AEP Co., Inc. common stock. The Company
contributes an amount equal to one-half of the first 6% of the employees'
contribution. The Company's contribution is invested in AEP Co., Inc. common
stock and totaled $131,000 in 1993, $149,000 in 1992 and $160,000 in 1991.
<PAGE>
<PAGE>
Postretirement Benefits Other Than Pensions
Medical benefits for its UMWA retirees who retired after January 1,
1976 and its active UMWA employees are the liability of the Company. Current
UMWA employees are eligible for medical and life insurance benefits if they
have at least 10 service years and are at least age 55 at retirement. Former
UMWA employees become eligible at age 55 if they have 20 service years. The
cost of health care benefits for UMWA retirees was expensed when paid in 1992
and 1991 and totaled $3.3 million in both years.
The AEP System provides certain other benefits for retired
employees. Substantially all non-UMWA employees are eligible for health care
and life insurance benefits if they have a least 10 service years and,
effective January 1, 1992, are age 55 at retirement. Prior to 1993, net costs
of these benefits were also recognized as an expense when paid and totaled
$89,000 and $90,000 in 1992 and 1991, respectively.
SFAS 106, Employers' Accounting for Postretirement Benefits Other
Than Pensions, was adopted in January 1993 for the Company's aggregate
postretirement benefits other than pension (OPEB) liability. SFAS 106
requires the accrual of the present value liability for OPEB costs during the
employee's service years. Prior service costs are being recognized as a
transition obligation over 20 years in accordance with SFAS 106. OPEB costs
are based on actuarially-determined stand alone costs for each System company.
The funding policy is to contribute incremental amounts recovered through coal
billings for non-UMWA employees and cash generated by a corporate owned life
insurance (COLI) program. The annual accrued costs for 1993 required by SFAS
106 for employees and retirees, which includes the recognition of one-
twentieth of the prior service transition obligation, was $5.8 million.
To reduce the impact of adopting SFAS 106, management took several
measures. In 1990, a Voluntary Employees Beneficiary Association (VEBA) trust
fund for OPEB benefits for all non-UMWA employees was established and a
$178,000 advance contribution was made to the trust fund, the maximum amount
deductible for federal income tax purposes. In 1993, an additional $377,000
contribution was made to the VEBA trust fund from amounts recovered through
coal billings. In addition, to help fund and reduce the future costs of OPEB
benefits, the COLI program was implemented. The insurance policies have a
substantial cash surrender value which is recorded, net of equally substantial
policy loans, as other regulatory assets.
UMWA health plans pay the 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. The Energy Policy Act of 1992 secured lifetime
medical benefits for these retirees; reimposed funding obligations upon
companies who previously withdrew from the UMWA plans; eliminated the
withdrawal liability; eliminated the per-hour worked contribution feature for
the 1950 and 1974 UMWA Benefit Plans; assigned beneficiaries to their former
employees; and assigned to signatories on a pro rata basis those beneficiaries
who could not otherwise be assigned. In February 1993, the 1950 and 1974 UMWA
Benefit Plans were merged into the UMWA Combined Benefit Fund and a 1992
Benefit Plan was added. The Combined Fund is financed by payments from
current and former UMWA wage agreement signatories, the 1950 UMWA Pension Plan
surplus and the Abandoned Mine Land Reclamation Fund Surplus. Costs of the
1992 Benefit Plan are paid by signatories to 1988 and prior years' UMWA
contracts. Required annual payments to the UMWA health funds made by the
Company were recognized as expense when paid and totaled $342,000 in 1993,
$2.4 million in 1992 and $2.3 million in 1991.<PAGE>
<PAGE>
The 1993 National Bituminous Coal Wage Agreement provides for
establishment of the UMWA 1993 Benefit Plan for future orphaned retirees not
covered by the Energy Act. The 1993 Benefit Plan will be funded by signatory
operators with a per-hour-worked contribution during the duration of the
Agreement. Health benefits under this Plan are provided only for the duration
of the Agreement. In 1993 contributions under the agreement were not
significant.
The Energy Act also permits recovery, within established limits, of
excess funding in the Black Lung Trust funds equal to the expense of certain
benefits other than pensions for those covered by the UMWA Combined Benefit
Fund. In 1993, $1.5 million of Black Lung surplus was applied in accordance
with the Energy Act to reimburse the Company for benefits paid in 1992 and the
first nine months of 1993. The Black Lung Trust had excess funds at December
31, 1993 and 1992 of $4.8 million and $6.3 million, respectively, and these
funds may be applied to reimburse the Company for benefits provided in the
future.
6. FEDERAL INCOME TAXES:
<TABLE>
The details of Federal income taxes are as follows:
<CAPTION>
Year Ended December 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Current (net) . . . . . . . . . . . . . . . . . . . $ 3,912 $(4,389) $ 908
Deferred (net). . . . . . . . . . . . . . . . . . . (3,620) 1,252 135
Total Federal Income Taxes. . . . . . . . . . . . . $ 292 $(3,137) $1,043
</TABLE>
Federal income taxes as reported are different from pre-tax book
income multiplied by the statutory tax rate predominantly due to the practice
of flow-through accounting for book/tax differences associated with corporate
owned life insurance and certain depreciation differences. Additionally in
1992, adjustments were recorded associated with Internal Revenue Service
audits of prior years' tax returns.
The net deferred tax asset of $4,965,000 at December 31, 1993
includes deferred tax assets of $11,358,000 and deferred tax liabilities of
$6,393,000. The significant temporary differences giving rise to the net
deferred tax assets are:
<TABLE>
<CAPTION>
Deferred Tax Asset
(Liability)
(in thousands)
<S> <C>
Property Related Temporary Differences. . . . . . $(3,844)
Amounts Due From Customers
For Future Federal Income Taxes . . . . . . . . (1,441)
Accrued Mine Reclamation Expense. . . . . . . . . 5,781
Deferred Book Gain - Sale/Leaseback of Plant. . . 2,765
Accrued Postretirement Expense. . . . . . . . . . 1,442
All Other (net) . . . . . . . . . . . . . . . . . 262
Total Net Deferred Tax Asset. . . . . . . . . . $ 4,965
</TABLE>
<PAGE>
<PAGE>
<TABLE>
7. SUPPLEMENTARY CASH FLOW INFORMATION:
<CAPTION>
Year Ended December 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Cash was paid (received) for:
Interest. . . . . . . . . . . . . . . . . $ 56 $ 597 $ 661
Income Taxes. . . . . . . . . . . . . . . $ (43) $(2,712) $1,160
Noncash acquisitions under capital leases. . $1,255 $ 5,395 $3,025
</TABLE>
8. LONG-TERM DEBT:
Long-term debt at December 31, 1993 and 1992 consisted of $1.5
million open-account advances from OPCo, at 3.3% interest.
9. LEASES:
<TABLE>
Leases of property, plant and equipment are for periods 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 are primarily charged to operating expenses. The
components of rentals are as follows:
<CAPTION>
Year Ended December 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Operating Leases. . . . . . . . . . . . . . . . $11,620 $14,294 $14,511
Amortization of Capital Leases. . . . . . . . . 4,052 4,687 4,760
Interest on Capital Leases. . . . . . . . . . . 1,227 2,446 2,679
Total Rental Payments . . . . . . . . . . . $16,899 $21,427 $21,950
<CAPTION>
Properties under capital leases and related obligations recorded on
the balance sheet are as follows:
December 31,
1993 1992
(in thousands)
<S> <C> <C>
Mining Plant. . . . . . . . . . . . . . . . . . . . . . $35,882 $56,561
Accumulated Provision for Amortization. . . . . . . . . 22,039 29,668
Net Properties under Capital Leases . . . . . . . . . $13,843 $26,893
Obligations under Capital Leases. . . . . . . . . . . . $13,843 $26,893
Less Portion Due Within One Year. . . . . . . . . . . . 3,373 5,321
Noncurrent Liability. . . . . . . . . . . . . . . . . . $10,470 $21,572
</TABLE>
Properties under operating leases and related obligations are not
included in the balance sheet.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Future minimum lease payments consisted of the following at December
31, 1993:
Non-
Cancelable
Capital Operating
Leases Leases
(in thousands)
<S> <C> <C>
1994. . . . . . . . . . . . . . . . . . . . . . . . . $ 4,303 $10,999
1995. . . . . . . . . . . . . . . . . . . . . . . . . 3,368 10,066
1996. . . . . . . . . . . . . . . . . . . . . . . . . 2,930 8,741
1997. . . . . . . . . . . . . . . . . . . . . . . . . 2,571 7,892
1998. . . . . . . . . . . . . . . . . . . . . . . . . 2,076 7,844
Later Years . . . . . . . . . . . . . . . . . . . . . 1,163 24,678
Total Future Minimum Lease Payments . . . . . . . . . 16,411 $70,220
Less Estimated Interest Element . . . . . . . . . . . 2,568
Estimated Present Value of Future
Minimum Lease Payments . . . . . . . . . . . . . . $13,843
</TABLE>
