ML20202E857

Forwards 1985 Annual Financial Rept

ML20202E857
Person / Time
Site:	Haddam Neck File:Connecticut Yankee Atomic Power Co icon.png
Issue date:	04/07/1986
From:	Bishop R CONNECTICUT YANKEE ATOMIC POWER CO.
To:	Office of Nuclear Reactor Regulation
References
NUDOCS 8604140060
Download: ML20202E857 (15)

Text

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CONNECTICUT YANKEE ATOMIC POWER COMPANY B E R L I N. CONNECTICUT P o Box 270 HARTFORD. CONNECTICUT 06141-0270 1

1 TE'LEPHONE 203-665-5000 1

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I April 7, 1986 Director Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C. 20555

Dear Sir:

In accordance with paragraph 50.71(b) of 10CFR, Part 50, enclosed is one copy of the 1985 Annual Financial Report of this Company, license holder, certified by Arthur Andersen & Company, certified public accountants.

Please acknowledge receipt by returning the duplicate copy of this letter in the stamped, self-addressed envelope enclosed for your convenience.

Very truly yours, e

Robert W. Bish Secretary FJG/jem/SRR121c Enclosure mob' i (

i U604140060 860407 PDR ADOCK 05000213 I PDR

CONNECTICUT YANKEE ATOMIC POWER COMPANY 1985 Annual Report Together With Auditors' Report I I

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F Connecticut Yankee Atomic Power Company AUDITORS' REPORT To the Board of Directors of Connecticut Yankee Atomic Power Company:

We have examined the balance sheets of Connecticut Yankee Atomic Power Company (a Connecticut corporation) as of December 31, 1985 and 1984, and the related statements of income, retained earnings and sources of funds for gross property additions for each of the three years in the period ended December 31, 1985. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the financial statements referred to above present fairly the financial position of Connecticut Yankee Atomic Power Company as of December 31, 1985 and 1984, and the results of its operations and the sources of funds for gross property additions for each of the three years in the period ended December 31, 1985, in conformity with generally accepted accounting

. principles applied on a consistent basis.

ARTHUR ANDERSEN & CO.

Hartford, Connecticut March 20, 1986 1

Connecticut Yankee Atomic Power Company STATEMENTS OF INCOME For the Years Ended December 31, 1985 1984 1983 (Thousands of Dollars)

Operating Revenues......................... $152,381 $154,131 $155,018 Operating Expenses:

Operation -

Nuclear fue1.......................... 46,624 30,564 34,076 0ther................................. 39,605 39,279 35,786 Maintenance.............................. 7,043 22,859 18,829 Depreciation............................. 15,735 15,068 14,232 Federal and state income taxes (Note 2).. 15,506 18,401 21,854 Taxes other than income taxes............ 3,763 3,236 3,067 Total operating expenses.............. 128,276 129,407 127,844 operating Income........................... 24,105 24,724 27,174 Other Income:

Allowance for equity funds used during construction.................... 2,803 2,459 393 Other, net............................... 30 210 3 Income taxes applicable to other income (No t e 2) . . . . . . . . . . . . . . . . . . . . . . . . (63) (114) (6)

Other income, net.................... 2,770 2,555 390 Income before interest charges....... 26,875 27,279 27,564 Interest Charges:

Interest on long-term debt............... 8,735 9,726 10,212 Other interest........................... 2,071 1,699 3,635 Allowance for borrowed funds used during construction.................... (3,722) (2,762) (2,976)

Interest charges, net................ 7,084 8,663 10,871 Net Income................................. $ 19,791 $ 18,616 $ 16,693 STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31, 1985 1984 1983 (Thousands of Dollars)

Balance at beginning of period............. $ 50,725 $ 50,659 $ 33,966 Net income............................... 19,791 18,616 16,693 Dividends declared on common stock....... (19,600) (18,550) -

Balance at end of period. . . . . . . . . . . . . . . . . . . $ 50,916(a) $ 50,725 $ 50,659 (a) At December 31, 1985 there was approximately $42,517,000 of retained earnings available for payment of cash dividends on common stock under the provisions of the Company's First Mortgage Indenture.

The accompanying notes are an integral part of these financial statements.

C nnecticut Ygnk20 Atomic Pow]r Comp;ny STATEMENTS OF SOURCES OF FUNDS FOR GROSS PROPERTY ADDITIONS For the Years Ended December 31, 1985 1984 1983 Funds Generated From Operations:

usands of Dollars)

Net income............................... $19,791 $18,616 $16,693 Principal noncash items:

Depreciation.......................... 10,122 11,326 14,232

. Nuclear fuel amortization and prior period spent fuel disposal costs................................ 41,752 27,018 30,404

, Deferred income taxes, net............ 5,527 11,230 21,885 Amortization of deferred charges and other noncash items.................. (213) 659 (156)

Allowance for equity funds used during construction......................... (2,803) (2,459) (393)

Total funds from operations.... 74,176 66,390 82,665 Less: Cash dividends on common stock.. 19,600 18,550 -

Net funds generated from operations.................... 54,576 47,840 82,665 Funds Obtained From (Used In) Financing Activity:

Decrease in short-term debt.............. - (13,000) (1,000)

Increase (decrease) in nuclear fuel payable................................. 2,510 2,881 (15,997)

Tota 1........................... 2,510 (10,119) (16,997)

Less: Reacquisitions and retirements of long-term debt..... 7,398 9,126 4,798 Net financing activity.......... (4,888) (19,245) (21,795)

Other Sources (Uses) of Funds:

Changes in components of working capital:

Cash and special deposits . . . . . . . . . . . . . (1) 40 1,121 Accounts receivable................... (4,809) 2,781 (3,792)

Refundable income taxes............... 3,154 2,155 (5,309)

Materials and supplies................ (788) (3,123) (1,955)

Accounts payable...................... (4,666) 13,395 (60)

Ac c ru e d t ax e s . . . . . . . . . . . . . . . . . . . . . . . . . 8,336 2,724 (5,705)

Other, net............................ (325) (838) 420 Net change...................... 901 17,134 (15,280)

Establishment of an independent decommissioning trust (Note 3).......... - (14,520) -

Other, net............................... (984) 127 2,667 Net other sources (uses) of funds.......................... (83) 2,741 (12,613)

Total Funds For Construction From Above Sources.................................. 49,605 31,336 48,257 Allowance For Equity Funds Used During

. Construction............................. 2,803 2,459 393 GROSS PROPERTY ADDITIONS................... $52,408 $33,795 $48,650

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Composition of Gross Property Additions:

Utility p1 ant............................ $17,901 $14,393 $18,914 Nuclear fue1............................. 34,507 19,402 29,736 Tota 1........................... $52,408 $33,795 $48,650 The accompanying notes are an integral part of these financial statements.

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Connecticut Yankee Atomic Power Company

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BALANCE SHEETS At December 31, 1985 1984 (Thousands of Dollars)

ASSETS Utility Plant, at original cost:

Electric.......................................... $202,781 $200,132 Less: Accumulated provision for depreciation.... 88,577 78,559 114,204 121,573 Construction work in progress (Note 8)............ 28,576 13,410 Nuclear fuel, net of amortization. . . . . . . . . . . . . . . . . 111,579 113,142 Total net utility plant...................... 254,359 248,125 Current Assets:

Cash and special deposits......................... 10 9 Accounts receivable............................... 20,886 16,077 Refundable income taxes........................... - 3,154 Materials and supplies, at average cost........... 9,382 8,594 Prepayments and other............................. 2,094 1,872 32,372 29,706 Deferred Charges:

Unrecovered spent nuclear fuel disposal costs..... 14,630 7,419 Unamortized debt expense.......................... 551 693 0ther............................................. 1,733 553 16,914 8,665 k

j Total Assets................................. $303,645 $286,496 l

l The accompanying notes are an integral part of these financial statements.

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Connecticut Yankee Atomic Power Company BALANCE SHEETS At December 31, 1985 1984 (Thousands of Dollars)

CAPITALIZATION AND LIABILITIES Capitalization:

Common stock - $100 par value. Authorized 700,000 shares; outstanding 350,000 shares in 19 8 5 and 19 84 (No t e 4) . . . . . . . . . . . . . . . . . . . . . . . . . $ 35,000 $ 35,000 Cap it al surplus , pai d 1n . . . . . . . . . . . . . . . . . . . . . . . . . 2,964 2,964 Retained earnings................................ 50,916 50,725 Tr,tal common stockholders ' equity. . . . . . . . . . . . 88,880 88,689 Long-term debt, net (Note 5)..................... 109,008 109,233 Total capitalization......................... 197,888 197,922 Current Liabilities:

Current portion of long-term debt (Note 5)....... 11,688 5,969 Nuclear fuel payable............................. 14,745 12,235 Accounts payable................................. 14,979 19,645 Accrued taxes.................................... 12,862 4,526 Accrued interest................................. 2,503 2,625 0ther............................................ 671 652 45,652

__57.448 Deferred Credits:

Unamortized gain on reacquired debt.............. 2,587 2,737 Accumulated deferred investment tax credits...... 17,604 15,446 Accumulated deferred income taxes................ 27,966 24,597 0ther............................................ 152 142 48,309 42,922 Commitments and Contingencies (Note 8)

Total Capitalization and Liabilities. . . . . . . . . $303,645 $286,496 The accompanying notes are an integral part of these financial statements.

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Conn 2cticut Yankas Atomic Powsr Comp ny

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NOTES TO FINANCIAL STATEMENTS (1)

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES General - Connecticut Yankee Atomic Power Company (the Company) owns and operates a single unit nuclear-power electric generating plant of the pressurized water type, having a net capability of 582,000 kilowatts. The plant commenced commercial operation on January 1, 1968. The company's common stock is owned by ten New England electric utilities.

The Company has entered into power contracts, as amended, with its ten stockholders (Sponsors) for the sale to them of the entire output of the plant for a minimum of thirty years commencing January 1,1968. Under the terms of the contracts each Sponsor is required to pay the Company an amount equal to its entitlement percentage of the Company's total operating expenses, including a return on net unit investment.

Two Sponsors, having a combined 44 percent ownership interest in the Company, are part of a public utility holding company system which furnishes accounting, engineering, construction, maintenance, financial, legal and other administrative services to the Company. The total cost of these services billed to the Company amounted to $26,228,000, $23,406.000, and $18,770,000 for the years ended December 31, 1985, 1984 and 1983, respectively.

Public Utility Regulation - The Company and each of its Sponsors is a public utility under Part II of the Federal Power Act and is subject to regulation by the Federal Energy Regulatory Commission (FERC) with respect to, among other matters, wholesale rates and accounting procedures. The Company is subject to further regulation regarding both its long-term and short-term financings by The Securities and Exchange Commission under the Public Utility Holding Company Act of 1935. In addition, the Connecticut Department of Public Utility Control has limited jurisdiction over the issuance of long-term debt.

Allowance for Funds Used During Construction (AFUDC) - AFUDC, a noncash item, represents the estimated cost of capital funds used to finance the Company's construction and nuclear fuel program. These costs, which are one component of the total capitalized ecsts of construction and nuclear fuel, generally are not recognized as part of the net unit investment until facilities are placed in service. AFUDC is recovered over the service life of plant in the form of increased revenue collected as a result of higher depreciation expense. AFUDC is also recovered as nuclear fuel is consumed in the reactor in the form of increased revenue collected as a result of higher nuclear fuel expense.

The effective AFUDC rates for 1985, 1984 and 1983 were 13.1 percent, 14.4 percent and 12.0 percent, respectively. These rates were calculated in accordance with FERC guidelines.

Nuclear Fuel - The cost of nuclear fuel is amortized to operation expense on a units-of-production method at rates based on estimated kilowatt-hours (kWh) of energy provided. The Company recovers through rates, with FERC approval, an estimate for spent nuclear fuel disposal costs pertaining to fuel consumed.

C nn:cticut Yrnkse Atomic Pow 2r Comp 1ny NOTES TO FINANCIAL STATEMENTS Under the Nuclear Waste Policy Act of 1982 (the Act), the Company is paying the United States Department of Energy (DOE), on a quarterly basis, a fee of 1.0 mill per kWh based on nuclear generation beginning April 7, 1983, for the disposal of spent nuclear fuel and high-level radioactive waste.

For nuclear fuel used to generate electricity prior to April 7, 1983 (prior period fuel), the fees are based on the amount of energy extracted from such fuel. In June 1985, the Company selected the deferred lump sum payment option as the payment arrangement for prior period fuel. Under this option, payment for prior period fuel may be made anytime prior to the first delivery of spent fuel to the DOE which will occur by January 31, 1998, as established by the Act. Interest is accrued from April 7, 1983 until payment is made, based on 13-week United States Treasury Bill rates compounded quarterly. Through December 31, 1985, these interest charges, as well as principal costs, have been capitalized.

Fees due to the DOE for the disposal of nuclear fuel used prior to April 7, 1983 are approximately $61.6 million, including interest costs of

$12.9 million accrued from April 7,1983 through December 31, 1985. As of December 31, 1985, $47.0 million had been collected through rates.

A portion of the Company's nuclear fuel is being financed pursuant to a fuel supply trust agreement under which the Haddam Fuel Supply Trust owns and finances natural uranium prior to the fuel being fabricated. The trust obtains funds through bank loans and/or the sale of commercial paper. The Company is obligated to purchase the uranium and reimburse the trust for payments made by the trust and for financing costs. Payments are made just prior to delivery of the fuel for fabrication. Interest costs of approximately $1,188,000 in 1985, $1,290,000 in 1984 and $2,010,000 in 1983 were incurred in connection with financing nuclear fuel under the trust agreement. These interest costs were capitalized by the Company. The weighted average interest rate charged by the trust was 9.4 percent in 1985, 11.9 percent in 1984 and 10.2 percent in 1983. The Company has been notified by the lenders who supply Letter of Credit support for the issuance of commercial paper under the trust that such Letter of Credit support will not be available af ter June 30, 1987. The Company anticipates that its present lines of credit will be adequate to finance the fuel.

Depreciation - The provision for depreciation is calculated using the straight-line method based on estimated remaining lives of the depreciable utility plant in service, adjusted for expected salvage value and removal costs as approved by the FERC. Depreciation factors are applied to the average plant in service during the period. When plant is retired from service, the original cost of plant, including costs of removal, less salvage, is charged to the accumulated provision for depreciation.

. The depreciation rates for the various classes of plant in service are equivalent to composite rates of 7.7 percent in 1985, 7.6 percent in 1984 and 7.8 percent in 1983.

Income Taxes - The tax ef fect of timing dif ferences (dif ferences between the periods in which transactions affect income in the financial statements Conn cticut Yank;9 Atomic Powsr Comp ny NOTES TO FINANCIAL STATEMENTS and the periods in which they af fect taxable income) is accounted for in accordance with the ratemaking treatment of the FERC.

The Company did not provide deferred income taxes for certain timing dif ferences during periods when the FERC did not permit the recovery of such income taxes through rates. The cumulative net amount of income tax timing diff erences for which deferred taxes have not been provided was approximately $14,821,000 at December 31, 1985. As required under current regulatory practices, deferred taxes not previously provided are being collected in rates over the remaining life of the unit.

(2) INCOME TAXES The components of the federal and state income tax provisions are:

For the Years Ended December 31, 1985 1984 1983 (Thousands of Dollars)

Current income taxes:

Federa1........................... $ 6,832 $ 3,536 $ (125)

State............................. 3,210 3,749 100 Total current................... 10,042 7.285 (25)

Deferred income taxes, net:

Investment tax credits............ 2,158 8,899 (2,313)

Federal........................... 2,036 1,681 19,128 State............................. 1,333 650 5,070 Total deferred.................. 5,527 11,230 21,885 Total income tax expense........ 15.569 18,515 21,860 Less: Income taxes included in other income................. 63 114 6 Total income taxes charged to operating expenses............. $15,506 $18,401 $21,854 Deferred income taxes are comprised of the tax effects of timing differences as follows:

Investment tax credits............ $ 2,158 $ 8,899 $ (2,313)

Allowance for borrowed funds used during construction.............. 1,893 1,921 1,936 Spent nuclear fuel disposal costs............................ 3,486 (2,740) 22,629 Decommissioning cost accruals..... (2,582) - -

• Liberalized depreciation.......... 333 2,655 (466) 0ther............................. 239 495 99 Deferred income taxes, net.... $ 5,527 $11,230 $21,885 s

C:nn cticut YKnksa Atomic Powar Company NOTES TO FINANCIAL STATEMENTS The effective income tax rate is computed by dividing total income tax expense by the sum of such taxes and net income. The dif ferences between the effective income tax rate and the federal statutory income tax rate are:

For the Years Ended December 31, 1985 1984 1983 Federal statutory income tax rate...... 46.0% 46.0% 46.0%

Tax effect of differences:

Additional depreciation for tax purposes............................ 4.2 6.7 8.1 Investment tax credit amortization... (8.4) (7.1) (4.2)

State income taxes, net of federal benefit............................. 6.9 6.4 7.2 Allowance for equity funds used during construction-not recognized as income for tax purposes. . . . . . . . . . (3.7) (3.0) (.5)

Other, net........................... (1.0) .9 .1 Effective income tax rate.............. 44.0% 49.9% 56.7%

(3) NUCLEAR DECOMMISSIONING The Company accrues decommissioning costs, which are included in depreciation expense, on the basis of immediate dismantlement at retirement. The estimated decommissioning costs, based on a 1985 study, are approximately $122.1 million in year-end 1985 dollars. Decommissioning studies are reviewed and updated periodically to reflect changes in decommissioning requirements, technology and inflation. Changes in requirements or technology or adoption of a decommissioning method other than immediate dismantlement would change these estimates.

In 1984 the Company established an independent, irrevocable trust, maintained by a commercial bank. Each month the Sponsors are billed for their proportionate share of decommissioning expense and the funds collected are deposited in the trust. The trust balance, including interest earnings, must be used exclusively to discharge decommissioning costs as incurred. As of December 31, 1985, the decommissioning trust balance was $24.1 million.

(4) CAPITAL CONTRIBUTIONS The Sponsors are obligated under the terns of the Capital Funds Agreements, entered into with the Company in 1964, to provide their percentage ownership of capital to the Company either through common stock

• purchases, loans or advances. The total obligation of the Sponsors under these agreements is limited to an aggregate amount of $70 million, of which

$32 million was available at December 31, 1985.

Connceticut Yankso Atezic Pow 2r Comp:ny NOTES TO FINANCIAL STATEMENTS l

l (5) LONG-TERM DEBT Details of outstanding long-term debt (net of reacquired amounts) are:

December 31, 1985 1984 (Thousands of Dollars) l First Mortgage Bonds Series A, 4-1/2% due January 1, 1993.......... $ 5,475 $ 7,622 First Mortgage Bonds, Series B, 9-3/4% due July 1, 1986............. 6,800 8,200 l Debentures, 17% due 1996.............. 42,298 46,149 Pollution Control Note, 6.0% due

, 1997................................ 4,500 4,500 Fees and interest due for spent nuclear fuel disposal costs......... 61,620 48,726 Unamortized premium................... 3 5 120,696 115,202 Less: Amounts due within one year.... 11,688 5,969

$109,008 $109,233 The First Mortgage Indenture, secured by utility plant, requires l deposits of $945,000 semiannually of cash and/or the expenditure of $945,000 of cash to purchase Series A Bonds for deposit into a sinking-fund through July 1, 1992. Series B Bonds have a final maturity of $6,800,000 due on July 1, 1986.

The Company's 17% Debentures, which are guaranteed (Series A) or owned (Series B) by the Sponsors have annual sinking fund requirements of

$3,851,000 through October 1, 1995, and a final payment of $3,788,000 due on October 1, 1996. The 6.0% Pollution Control Notes require annual deposits of $375,000 into a sinking fund through November 1, 1996.

(6) SHORT-TERM DEBT To meet its general working capital needs, the Company has a

$40 million Eurodollar Credit Agreement with nine foreign banks. To supplement that Agreement, on August 5, 1985, the Company executed a

$25 million Revolving Credit Agreement with four domestic banks.

Under the terms of the $40 million Eurodollar Credit Agreement, the Company is obligated to pay a commitment fee of three-eighths of one percent per annum on the daily average of the unborrowed portion of the commitment. Terms call for interest rates equal to the Libor rate plus five-eighths of one percent. On December 31, 1985, the Company had no borrowings outstanding under this agreement. Borrowings under this agreement are not guaranteed by the Sponsors.

Under the terms of the $25 million Revolving Credit Agreement, the Company is obligated to pay a commitment fee of three-eighths of one percent per annum and an agency fee of one-eighth of one percent per annum,

Conn cticut Yanks 2 Ato2ic Pow 2r Comptny NOTES TO FINANCIAL STATEMENTS both on the daily average of the unborrowed portion of the commitment.

Terms call for interest rates equal to the prime rate of The Connecticut Bank and Trust Company, N.A. On December 31, 1985, the Company had no borrowings outstanding under this agreement. The Sponsors have guaranteed their proportionate ownership shares of any borrowings under this agreement.

s (7) RETIREMENT PLAN The Company has a noncontributory retirement plan covering all regular employees. The Company's policy is to fund annually the actuarially determined contribution which includes that year's normal cost, and the anortization of prior years' actuarial gains or losses and the amortization of prior service costs over periods approximating the remaining life of the plant. Total pension cost, part of which was charged to utility plant, approximated $833,000 in 1985, $784,000 in 1984 and $727,000 in 1983.

The actuarial present value of accumulated plan benefits and plan net aseets available for benefits for the Company's plan are:

January 1, 1985 1984 (Thousands of Dollars)

Benefits:

Vested............................ $2,787 $2,018 Nonvested......................... 1,080 1,063

$3,867 $3,081 Net assets available for benefits... $8,313 $7,274 The assumed rate of return used to determine the actuarini present value of accumulated plan benefits was 7.5 percent for 1985 and 1984. In addition to pension benefits, the Company provides certain henith care and life insuranca benefits to eligible retired employees. The cost of providing those benefits was not material for the years 1985, 1984 and 1983. The Company recognizes health care benefits primarily as incurred and provides for life insurance benefits through premiuns paid to an insurance company.

In December 1983, the Financial Accounting Standards Poard (FASB) issued a new statement entitled " Employers' Accounting for Pensions," which supersedes previous pension accounting standards and will be effective for fiscal years beginning after December 15, 1986. This statement prescribes a standardized method for measuring net periodic pension costs, expanded footnote disclosures, and, in some cases, recognition of a pension liability. The Company cannot predict at this time what impact, if any, this new statement will have on its results of operations or how this

, impact might be considered by the FERC when it establishes rates.

Conn:cticut Yanksa Atomic Pow 2r Comptny NOTES TO FINANCIAL STATEMENTS i

(8) COMMITMENTS AND CONTINGENCIES Construction Program - The Company's currently approved construction budget for 1986 is $50.1 million, including AFUDC. A preliminary estimate for the construction program for the years 1987-1990 is $95.0 million, including AFUDC.

The construction program is subject to periodic review and revision, and actual construction expenditures may vary f rom such estimates due to factors such as inflation, revised nuclear safety regulations, the availability and cost of capital, and the granting of timely and adequate rate relief by the FERC, as well as actions by other regulatory bodies.

Nuclear Fuel - The Company currently forecasts nuclear fuel expenditures of $103.9 million (excluding AFUDC) for the years 1986-1990, of which

$29.4 million is for 1986.

Nuclear Insurance Contingencies - The Price-Anderson Act currently limits public liability from a single incident at a nuclear power plant to

$650 million. The first $160 million of liability would be covered by the maximum provided by private pool insurance. The additional liability of

$490 million would be provided by an assessment of $5 million per incident levied on each of the 98 nuclear units operating in the United States, subject to a maximum assessment of $10 million per nuclear unit in any year. Under the provisions of the power contracts, the Company's assessment would be passed on to the Sponsors.

Insurance has been purchased from Nuclear Electric Insurance Limited (NEIL) to cover the cost of repair, replacement or decontamination of utility property resulting from insured occurrences. Under this policy, the Company is subject to retroactive assessments if losses exceed the accumulated funds available to NEIL. The maximum potential assessment against the Company with respect to losses arising during the current policy year is approximately $6.8 million which would be passed on to the Sponsor companies. Although the Company has purchased the limits of coverage currently available from conventional nuclear insurance pools, the cost of a nuclear incident could exceed available insurance proceeds.

(9) LEASES The Company is leasing a portion of Northeast Nuclear Energy Company's nuclear control room simulator building. In addition, the Sponsors which provide administrative support to the Company have entered into lease agreenents for the use of data processing equipment, office equipment, vehicles and office space. The Company is billed for its proportionate share of these leanes. In 1985, the Company charged $929,700 of rental payments to operating expense. Future minimum lease payments, excluding executory costs, are approximately:

1986................... $ 984,000 1987................... 770,000 1988................... 539,000 1989................... 383,000 1990................... 331,000 After 1990............. 2,713,000 55,720,000