Kiewit Royalty Trust (KIRY) 10-Q 2001 Q3 Quarterly report

FORM 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended September 30, 2001

Commission File No. 0-10810

KIEWIT ROYALTY TRUST
(Exact name of Registrant as specified in its charter)

Nebraska	47-6131402
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

Trust Division
U.S. Bank National Association
1700 Farnam Street
Omaha, Nebraska 68102     

(Address of Principal Executive Offices)

(402) 348-6000

(Registrant’s telephone no. including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   X  No     

APPLICABLE ONLY TO CORPORATE REGISTRANTS

     Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

     As of November 14, 2001, there were 12,633,432 Units of Beneficial Interest of the registrant outstanding.

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

KIEWIT ROYALTY TRUST
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

ASSETS	September 30, 2001			December 31, 2000
	(unaudited)
Cash equivalents	$	1,214,377		$	170,566
Trust reserves		783,317			—
Royalty and overriding
royalty interests in coal
leases		167,817			167,817
Less accumulated amortization		(129,385	)		(124,364	)
Net royalty and overriding
royalty interests in coal leases		38,432			43,453
Total Assets	$	2,036,126		$	214,019
LIABILITIES AND TRUST CORPUS
Distributions payable to unit holders	$	1,214,377		$	170,566
Trust reserves		783,317			—
Trust corpus: 12,633,432 units of
beneficial interest authorized and outstanding		38,432			43,453
Total Liabilities and Trust Corpus	$	2,036,126		$	214,019

The accompanying notes are an integral part
of the financial statements

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KIEWIT ROYALTY TRUST
STATEMENTS OF DISTRIBUTABLE INCOME
(unaudited)

	Three Months Ended September 30						Nine Months Ended September 30
	2001			2000			2001			2000
Royalty income	$	2,012,101		$	2,621,668		$	4,004,834		$	4,984,252
Interest income		10,762			27,921			29,284			52,234
Trust expenses		(25,169	)		(16,805	)		(59,023	)		(58,818	)
Trust reserves		(783,317	)		—			(783,317	)		—
Distributable income	$	1,214,377		$	2,632,784		$	3,191,778		$	4,977,668
Distributable income per unit	$	.096124		$	.208398		$	.252645		$	.394008

STATEMENTS OF CHANGES IN TRUST CORPUS
(unaudited)

	Nine Months Ended September 30
	2001			2000
Trust corpus as of January 1	$	43,453		$	56,642
Amortization of royalty interests		(5,021	)		(9,440	)
Distributable income		3,191,778			4,977,668
Distributions to unit holders		(3,191,778	)		(4,977,668	)
Trust corpus as of September 30	$	38,432		$	47,202

The accompanying notes are an integral part
of the financial statements

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KIEWIT ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS
as of September 30, 2001 and December 31, 2000

Basis of Presentation

               The accompanying unaudited financial statements have been prepared in accordance with the instructions for Form 10-Q and do not necessarily include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the Trustee’s opinion, all adjustments necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes included in the Trust’s annual report on Form 10-K for the year ended December 31, 2000.

Summary of Significant Accounting Policies

               The accompanying unaudited financial statements have been prepared on the following basis:

(a)	The royalty income recorded for a month is the amount received from the lease holder for such month.
(b)	Trust administration expenses are recorded in the month they accrue.

This basis for reporting royalty income is thought to be the most meaningful because distributions to unit holders for a month are based on net cash receipts for such month. However, these statements differ from financial statements prepared in accordance with accounting principles generally accepted in the United States of America because, under such principles, royalty income for a month would be based on production for such month, without regard to when royalty payments are received. In addition, amortization of the net royalty and overriding royalty interests, which is calculated on a units-of-production basis on a lease, is charged directly to trust corpus since such amount does not affect distributable income.

Recent Development

               On June 29, 2001, the Trustee received notification from the operator of the Spring Creek Mine of alleged overpayments aggregating approximately $476,000 related to the Trust’s overriding royalty interest that were remitted during the period from 1996 to 2000. The Trustee is currently reviewing and evaluating various agreements, leases and other documentation to determine the legitimacy of these alleged overpayments and impact to the Trust, if any, as related to these alleged overpayments. In addition, the $783,317 royalty payment received from the Spring Creek Mine on July 31, 2001, is being held in reserve in connection with this matter. The ultimate outcome of this issue is uncertain at this time.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

               a.     Material Changes in Financial Condition.

                       The Trust is a royalty trust with royalty and overriding royalty interests in certain coal leases. The Trust was formed for the purposes of (1) administering the income received from such coal leases and (2) distributing such income (together with interest earned thereon less payment of or provision for obligations) to the holders of the Units of Beneficial Interest.

               b.     Material Changes in Results of Operations.

                       During the nine months ended September 30, 2001 the Trust received a total of $4,004,834 of royalty and overriding royalty payments. The following schedule reflects the royalty and overriding royalty payments received by the Trust in respect of leases at the following mines:

	Three Months Ended September 30				Nine Months Ended September 30
Mine	2001		2000		2001		2000
Decker	$	1,228,784		1,488,665	$	3,170,117	$	3,742,883
Big Horn		—		12,399		1,400		120,765
Spring Creek		783,317		1,120,604		833,317		1,120,604
	$	2,012,101	$	2,621,668	$	4,004,834	$	4,984,252

                      i.     Decker Mine.

                             Royalty and overriding royalty amounts received by the Trust from the Decker Mine decreased to $3,170,117 during the first nine months of 2001 compared to $3,742,883 during the same period in 2000. For the third quarter of 2001, the payments received by the Trust from the Decker Mine decreased to $1,228,784 compared to $1,488,665 received during the same period in 2000. These changes in royalty and overriding royalty amounts received were due to (i) changes in the relative amounts of coal mined under leases bearing high and low overriding royalty rates per ton, which are a normal result of the execution of a mining plan encompassing several coal leases bearing different royalty rates; and (ii) a reduction in sales tonnage of approximately 21% during the period from which payment received during the first nine months of 2001 is derived compared to the same period in 2000.

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                       ii.     Big Horn Mine.

                               No royalties were received from the Big Horn Mine during the first nine months of 2001 compared to $120,765 received during the same period in 2000 and compared to $12,399 received for the third quarter of 2000. The Big Horn Mine has reached the end of its production cycle and it is foreseen that the Trust will receive no further payments deriving from coal production from the Big Horn Mine. However, the Big Horn Mine will continue to receive minor rental payments until reclamation of the mine is achieved. In the past, the amount of such rental payments was included in the figure representing receipt of royalty and overriding royalty payments. During the first nine months and during the third quarter of 2001, the Big Horn Mine received rental payments of $1,400 and $0, respectively.

                      iii.     Spring Creek Mine.

                                Royalty and overriding royalty amounts received by the Trust from the Spring Creek Mine decreased to $833,317 during the first nine months of 2001 compared to $1,120,604 received during the same period in 2000. For the third quarter of 2001, the payments received by the Trust from the Spring Creek Mine decreased to $783,317 compared to $1,120,604 received during the same period in 2000. These changes in royalty and overriding royalty amounts received were due to changes in the relative amounts of coal mined under leases bearing high and low overriding royalty rates per ton, which are a normal result of the execution of a mining plan encompassing several coal leases bearing different royalty rates. Although royalties with respect to this mine are typically paid by the mine operators on an annual basis during the second half of a calendar year, the Spring Creek mine made a $50,000 payment immediately prior to the end of the second quarter of 2001.

               c.     Recent Development

                       On June 29, 2001, the Trustee received notification from the operator of the Spring Creek Mine of possible overpayments aggregating approximately $476,000 related to the Trust’s overriding royalty interest that were remitted during the period from 1996 to 2000. The Trustee is currently reviewing and evaluating various agreements, leases and other documentation to determine the legitimacy of these alleged overpayments and impact to the Trust, if any, as related to these alleged overpayments. In addition, the $783,317 royalty payment received from the Spring Creek Mine on July 31, 2001, is being held in reserve in connection with this matter. See “Recent Development” under Notes to Financial Statements set forth above.

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PART II — OTHER INFORMATION.

Item 1. Legal Proceedings

                       There are no material pending legal proceedings to which the Trust is a party or which any of its property is the subject.

Item 2.	Changes in Securities and Use of Proceeds
	Not applicable.
Item 3.	Defaults Upon Senior Securities
	Not applicable.
Item 4.	Submission of Matters to a Vote of Security Holders
	Not applicable.
Item 5.	Other Information
	Not applicable.
Item 6.	Exhibits and Reports on Form 8-K

(a)	Exhibits
4.1	Kiewit Royalty Trust Indenture dated May 17, 1982, as amended June 9, 1982 and June 23, 1982 (filed as Exhibit 1 to the Trust’s Form 10 filed with the Securities and Exchange Commission on December 23, 1982, and incorporated herein by reference).
4.2	Order dated September 23, 1994, of the County Court of Douglas County, Nebraska (filed as Exhibit 2 to the Trust’s Form 10-Q filed with the Securities and Exchange Commission on November 14, 1994, and incorporated herein by reference).
(b)	No reports on Form 8-K were filed during the quarter for which this report is filed.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	KIEWIT ROYALTY TRUST     (Registrant)
	By:	U. S. Bank National Association in its capacity as Trustee and not in its individual capacity or otherwise
		/s/ SUSAN K. ROSBURG Susan K. Rosburg Trust Officer
Dated:  November 14, 2001

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