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: Windsor Coal Company
(File No. 70-6568
Ohio Power Company
CIK 0000073986)
Gentlemen:
As a supplement to our March 30, 1994 EDGAR filing of the
fourth quarter 1993 report, Windsor 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>
[TEXT]
<PAGE>
W I N D S O R C O A L C O M P A N Y
1993 Annual Report
AMERICAN ELECTRIC POWER SYSTEM<PAGE>
[TEXT]
<PAGE>
WINDSOR COAL COMPANY
Page
CONTENTS
Statements of Income and Statements of Retained Earnings . . 1
Balance Sheets . . . . . . . . . . . 2-3
Statements of Cash Flows. . . . . . . . . 4
Notes to Financial Statements. . . . . . . . 5-12
<PAGE>
<PAGE>
<TABLE>
WINDSOR COAL COMPANY
STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Year Ended December 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . $57,934 $57,174 $56,509
OPERATING EXPENSES (including depreciation, depletion
and amortization of mining plant of $1,565,000 in
1993, $1,599,000 in 1992 and $1,645,000 in 1991) . . 55,111 54,356 54,026
OPERATING INCOME . . . . . . . . . . . . . . . . . . . 2,823 2,818 2,483
NONOPERATING INCOME. . . . . . . . . . . . . . . . . . 94 16 25
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . 2,917 2,834 2,508
INTEREST CHARGES (including $278,000 each year on
long-term debt to Parent Company). . . . . . . . . . 703 718 710
INCOME BEFORE FEDERAL INCOME TAXES . . . . . . . . . . 2,214 2,116 1,798
FEDERAL INCOME TAXES . . . . . . . . . . . . . . . . . 851 753 435
NET INCOME . . . . . . . . . . . . . . . . . . . . . . $ 1,363 $ 1,363 $ 1,363
</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. . . . . . . . . . . . . . $ 697 $ 694 $ 691
NET INCOME . . . . . . . . . . . . . . . . . . . . . . 1,363 1,363 1,363
CASH DIVIDENDS DECLARED. . . . . . . . . . . . . . . . 1,360 1,360 1,360
RETAINED EARNINGS DECEMBER 31. . . . . . . . . . . . . $ 700 $ 697 $ 694
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
WINDSOR COAL COMPANY
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
December 31,
1993 1992
(in thousands)
ASSETS
<S> <C> <C>
MINING PLANT:
Mining Plant in Service . . . . . . . . . . . . . . . . . . . . $66,027 $67,002
Construction Work in Progress . . . . . . . . . . . . . . . . . 3,365 -
Total Mining Plant. . . . . . . . . . . . . . . . . . . 69,392 67,002
Accumulated Depreciation and Amortization . . . . . . . . . . . 26,109 22,627
NET MINING PLANT. . . . . . . . . . . . . . . . . . . . 43,283 44,375
CURRENT ASSETS:
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . 2,211 34
Accounts Receivable:
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 411
Affiliated Companies. . . . . . . . . . . . . . . . . . . . . 3,652 2,916
Coal - at average cost. . . . . . . . . . . . . . . . . . . . . 302 43
Materials and Supplies - at average cost. . . . . . . . . . . . 3,895 3,553
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 243
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . 10,475 7,200
REGULATORY ASSETS . . . . . . . . . . . . . . . . . . . . . . . . 565 491
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . $54,323 $52,066
See Notes to Financial Statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
WINDSOR 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 - 5,000 Shares
Outstanding - 4,064 Shares. . . . . . . . . . . . . . . . . . $ 406 $ 406
Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . 10,470 10,470
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . 700 697
TOTAL SHAREOWNER'S EQUITY . . . . . . . . . . . . . . . 11,576 11,573
LONG-TERM DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . 6,344 15,041
OTHER NONCURRENT LIABILITIES:
Obligations Under Capital Leases. . . . . . . . . . . . . . . . 4,431 5,702
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865 562
TOTAL OTHER NONCURRENT LIABILITIES. . . . . . . . . . . 5,296 6,264
CURRENT LIABILITIES:
Long-term Debt Due Within One Year. . . . . . . . . . . . . . . 8,697 397
Notes Payable . . . . . . . . . . . . . . . . . . . . . . . . . 2,251 -
Accounts Payable:
General . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,144 766
Affiliated Companies. . . . . . . . . . . . . . . . . . . . . 550 442
Accrued Other Postretirement Benefits . . . . . . . . . . . . . 2,121 -
Workers' Compensation . . . . . . . . . . . . . . . . . . . . . 1,330 1,341
Obligations Under Capital Leases. . . . . . . . . . . . . . . . 2,151 2,414
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,495 2,779
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . 21,739 8,139
DEFERRED FEDERAL INCOME TAXES . . . . . . . . . . . . . . . . . . 5,532 10,215
AMOUNTS DUE TO CUSTOMERS FOR FUTURE
FEDERAL INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . 3,673 -
REGULATORY LIABILITIES AND DEFERRED CREDITS . . . . . . . . . . . 163 834
COMMITMENTS AND CONTINGENCIES (Note 2)
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . $54,323 $52,066
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
WINDSOR 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 . . . . . . . . . . . . . . . . . . . . $ 1,363 $ 1,363 $ 1,363
Adjustments for Noncash Items:
Depreciation, Depletion and Amortization . . . . 1,565 1,599 1,645
Deferred Federal Income Taxes. . . . . . . . . . (1,010) 363 (170)
Deferred Strike Costs (net). . . . . . . . . . . 18 220 220
Changes in Certain Current Assets and Liabilities:
Accounts Receivable. . . . . . . . . . . . . . . (467) (1,970) 152
Coal, Materials and Supplies . . . . . . . . . . (601) 15 (832)
Accounts Payable . . . . . . . . . . . . . . . . 486 (312) (401)
Accrued Other Postretirement Benefits. . . . . . 2,121 - -
Other (net). . . . . . . . . . . . . . . . . . . . 1,153 738 (74)
Net Cash Flows From Operating Activities . . 4,628 2,016 1,903
INVESTING ACTIVITIES:
Construction Expenditures. . . . . . . . . . . . . (2,435) (1,955) (1,647)
Proceeds from Sales of Property. . . . . . . . . . 99 16 78
Net Cash Flows Used For
Investing Activities . . . . . . . . . . . (2,336) (1,939) (1,569)
FINANCING ACTIVITIES:
Change in Short-term Debt (net). . . . . . . . . . 2,251 (1,208) 1,208
Issuance of Long-term Debt . . . . . . . . . . . . - 2,154 -
Retirement of Long-term Debt . . . . . . . . . . . (397) (352) (289)
Receipts from (Payments to) Parent Company for
Future Coal Deliveries . . . . . . . . . . . . . (609) 609 -
Dividends Paid . . . . . . . . . . . . . . . . . . (1,360) (1,360) (1,360)
Net Cash Flows Used For Financing Activities (115) (157) (441)
Net Increase (Decrease) in Cash and Cash Equivalents 2,177 (80) (107)
Cash and Cash Equivalents January 1. . . . . . . . . 34 114 221
Cash and Cash Equivalents December 31. . . . . . . . $ 2,211 $ 34 $ 114
See Notes to Financial Statements.
</TABLE>
<PAGE>
<PAGE>
WINDSOR COAL COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES:
Organization and Regulation. Windsor Coal Company (the Company or WCCo), 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 underground mining operations in West
Virginia on properties owned or leased by OPCo or the Company. All coal is
mined and sold to plants wholly owned by OPCo and jointly owned by OPCo and an
unaffiliated company at prices regulated by the Securities and Exchange
Commission (SEC) under the Public Utility Holding Company Act of 1935 (1935
Act). The majority of the Company's coal production is shipped to OPCo's
Cardinal Plant. Prices billed 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, WCCo's financial statements
reflect actions of regulators that may 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 Certains 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 AFUDC
rates used 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.
<PAGE>
<PAGE>
<TABLE>
Mining plant in service (at original cost) at December 31, 1993 and
1992 was comprised of the following:
December 31,
1993 1992
(in thousands)
<S> <C> <C>
Surface Lands. . . . . . . . . . . . $ 638 $ 794
Mining Structures and Equipment. . . 52,950 53,647
Coal Interests (net of depletion). . 2,398 2,520
Mine Development Costs . . . . . . . 10,041 10,041
$66,027 $67,002
</TABLE>
Depreciation, depletion and amortization are provided over the
estimated useful asset lives and are calculated by use of the straight-line
method for mining structures and equipment and by use of the units-of-
production method for coal interests 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, depletion 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
invest-ments 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.
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, a reduction in net deferred tax
liabilities was recorded and in accordance with SFAS 71, corresponding
regulatory liabilities were also recorded. As a result of this change in
accounting effective January 1, 1993, net deferred tax liabilities decreased
by $3.8 million and regulatory liabilities shown on the balance sheet as
Amounts Due to Customers For Future Federal Income Taxes of $3.8 million were
recorded, 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. A 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.<PAGE>
<PAGE>
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. The Surface Mining and Reclamation Act of 1977 established
minimum standards for the final closure of mines after their coal resources
are exhausted. This would include, among other things, sealing the portals at
underground mines and the removal or covering of refuse piles and water
settling ponds. Reclamation costs are accrued as incurred.
Reclassifications. Certain prior-period amounts were reclassified to conform
with current-period presentation.
2. COMMITMENTS AND CONTINGENCIES:
The aggregate construction program expenditures for 1994 - 1996 are
estimated to be $1.6 million and, in connection therewith, certain 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) require 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 which includes switching to low-sulfur
coal for Cardinal Plant Unit 1 for CAAA Phase II compliance in the year 2000.
The PUCO indicated that OPCo should take steps to have Cardinal Plant Unit 1
(which represents about 33% of the Cardinal Plant capacity) available for fuel
switching to low sulfur coal for CAAA Phase I compliance in 1995. The PUCO is
examining in OPCo's current fuel clause proceeding whether it would be a
lower-cost alternative to fuel-switch Cardinal Plant Unit 1 in Phase I rather
than in Phase II.
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 Cardinal Plant. OPCo's coal
cost at the four generating stations subject to the stipulated predetermined
price including the cost of Windsor coal is currently less than the
predetermined price. In the stipulation agreement the parties agreed to
negotiate any dispute concerning the cost of affiliated coal burned at OPCo's
Cardinal Plant after November 30, 1994, the end of the stipulation agreement.
As a result of clean air compliance efforts at the Cardinal 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.<PAGE>
<PAGE>
4. OTHER RELATED-PARTY TRANSACTIONS:
American Electric Power Service Corporation (AEPSC) provides certain
managerial and professional services to AEP System companies including WCCo.
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 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:
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 $5.5 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, expensed when paid and totaled
$360,000 in 1993, $350,000 in 1992 and $360,000 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 was
$177,000 for the years ended December 31, 1993 and 1992, and $104,000 for
December 31, 1991.
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 $94,000 in 1993, $91,000 in 1992 and $81,000 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 $1.4 million and $1.9 million, respectively.
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 at 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
$44,000 and $46,000 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 from non-UMWA employees. 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 $2.8 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
$89,000 advance contribution was made to the trust fund, the maximum amount
deductible for federal income tax purposes. In 1993, an additional $192,000
contribution was made to the VEBA trust fund from amounts recovered through
coal billings.
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 $0.3 million in 1993,
$1.7 million in 1992 and $1.4 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 of the AEP System equal to the
expense of certain benefits other than pensions for those covered by the UMWA
Combined Benefit Fund. Reimbursement limitations apply to the System's excess
funding, therefore funds recovered are transferred between the funds surplus
and deficit member companies. In 1993, $655,000 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, and $133,000 was
transferred from amounts recovered by other System companies. The Black Lung
Trust had excess funds at December 31, 1993 and 1992 of $29,000 and $551,000,
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) . . . . . . . . . . . . . . . . . . $ 1,861 $390 $ 605
Deferred (net). . . . . . . . . . . . . . . . . . (1,010) 363 (170)
Total Federal Income Taxes. . . . . . . . . . . . $ 851 $753 $ 435
</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 self
insurance reserves.
<PAGE>
<PAGE>
The net deferred tax liability of $5,532,000 at December 31, 1993
includes deferred tax assets of $4,411,000 and deferred tax liabilities of
$9,943,000. The significant temporary differences giving rise to the net
deferred tax liabilities are:
<TABLE>
<CAPTION>
Deferred Tax Asset
(Liability)
(in thousands)
<S> <C>
Property Related Temporary Differences . . . . . . $(8,577)
Amounts Due To Customers For Future
Federal Income Taxes . . . . . . . . . . . . . . 1,285
Self-Insurance Reserves. . . . . . . . . . . . . . 889
Accrued Postretirement Expenses. . . . . . . . . . 774
All Other (net). . . . . . . . . . . . . . . . . . 97
Total Net Deferred Tax Liability . . . . . . . . $(5,532)
</TABLE>
<TABLE>
<CAPTION>
7. SUPPLEMENTARY CASH FLOW INFORMATION:
Year Ended December 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Cash was paid for:
Interest . . . . . . . . . . . . . . . . . $ 703 $ 721 $ 710
Income Taxes . . . . . . . . . . . . . . . $2,221 $ 825 $ 780
Noncash acquisitions under
capital leases were. . . . . . . . . . . . $1,020 $2,891 $5,052
</TABLE>
8. LEASES:
Leases of property, plant and equipment are for periods up to 20
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.
<TABLE>
The components of rentals are as follows:
<CAPTION>
Year Ended December 31,
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
Operating Leases . . . . . . . . . . . . . . . . $ 895 $1,588 $1,110
Amortization of Capital Leases . . . . . . . . . 2,539 2,217 1,742
Interest on Capital Leases . . . . . . . . . . . 612 674 633
Total Rental Payments. . . . . . . . . . $4,046 $4,479 $3,485
</TABLE>
<PAGE>
<PAGE>
Properties under capital leases and related obligations recorded on
the balance sheet are as follows:
<TABLE>
<CAPTION>
December 31,
1993 1992
(in thousands)
<S> <C> <C>
Mining Plant. . . . . . . . . . . . . . . . . . . . . . $15,747 $14,926
Accumulated Amortization. . . . . . . . . . . . . . . . 9,165 6,810
Net Properties under Capital Leases . . . . . . . . $ 6,582 $ 8,116
Obligations under Capital Leases. . . . . . . . . . . . $ 6,582 $ 8,116
Less Portion Due Within One Year. . . . . . . . . . . . 2,151 2,414
Noncurrent Liability. . . . . . . . . . . . . . . . . . $ 4,431 $ 5,702
</TABLE>
Properties under operating leases and related obligations are not
included in the balance sheet.
<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. . . . . . . . . . . . . . . . . . . . . . . . $2,572 $ 854
1995. . . . . . . . . . . . . . . . . . . . . . . . 2,223 964
1996. . . . . . . . . . . . . . . . . . . . . . . . 1,224 964
1997. . . . . . . . . . . . . . . . . . . . . . . . 778 721
1998. . . . . . . . . . . . . . . . . . . . . . . . 586 -
Later Years . . . . . . . . . . . . . . . . . . . . 329 -
Total Future Minimum Lease Payments . . . . . . . . 7,712 $3,503
Less Estimated Interest Element Included Therein. . 1,130
Estimated Present Value of Future Minimum
Lease Payments. . . . . . . . . . . . . . . . . . $6,582
</TABLE>
<PAGE>
<PAGE>
<TABLE>
9. LONG-TERM DEBT AND SHORT-TERM DEBT:
<CAPTION>
Long-term debt was outstanding as follows:
December 31,
1993 1992
(in thousands)
<S> <C> <C>
Notes Payable to Banks - 8% due January 1994. . . . . . . . . $ 5,000 $ 5,000
Notes Payable to Parent - 8.02% due January 1994. . . . . . . 3,300 3,300
Advances from Parent - 6% open account. . . . . . . . . . . . 225 225
Finance Obligations . . . . . . . . . . . . . . . . . . . . . 6,516 6,913
15,041 15,438
Less Portion Due Within One Year. . . . . . . . . . . . . . . 8,697 397
Total. . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,344 $15,041
</TABLE>
The notes payable to banks are guaranteed by OPCo.
Finance obligations were entered into for the West Liberty portal in
August 1989 and the Long's Run Ventilation facility in June 1992 through sale
and leaseback transactions. The lease term on both obligations is 20 years
(Long's Run is for 10 years with a 10 year renewal) with a bargain purchase
option at the end of both leases. In accordance with SFAS 98, the
transactions did not qualify as a sale for accounting purposes. Future
minimum lease payments for both leases are $397,000 per year for 1994 through
1998 and $4,531,000 in later years.
In July 1993, WCCo entered into an agreement whereby it will
construct an acid mine drainage facility at an estimated cost of $2.9 million
and upon completion sell and leaseback the facility. Under this agreement the
Company has received advances from the lessor amounting to $2.3 million to
fund construction expenditures which are reported as short-term notes payable.
