Kiewit Royalty Trust (KIRY) 10-Q 2002 Q3 Quarterly report

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

FORM 10-Q

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

For the quarterly period ended September 30, 2002

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 incorporation or organization)	(I.R.S. Employer Identification No.)

Trust Division U.S. Bank National Association 1700 Farnam Street Omaha, Nebraska	68102
(Address of Principal Executive Offices)	Zip Code

(402) 348-6000
(Registrant’s Telephone Number, 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 ______

     There were 12,633,432 Units of Beneficial Interest outstanding as of November 13, 2002.

KIEWIT ROYALTY TRUST

FORM 10-Q

For the Quarter Ended September 30, 2002

INDEX

Part I. Financial Information			Page
	Item 1. Financial Statements			3
	Item 2. Management’s Discussion and Analysis of Financial
		Condition and Results of Operations		6
	Item 3. Quantitative and Qualitative Disclosures
		About Market Risk		8
	Item 4. Controls and Procedures			8
Part II. Other Information
	Item 1. Legal Proceedings			9
	Item 2. Changes in Securities and Use of Proceeds			9
	Item 3. Defaults upon Senior Securities			9
	Item 4. Submission of Matters to a Vote of Security Holders			9
	Item 5. Other Information			9
	Item 6. Exhibits and Reports on Form 8-K			9
Signature				11
Certification				12

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PART I — FINANCIAL INFORMATION

Item 1.   Financial Statements.

KIEWIT ROYALTY TRUST
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
unaudited as of September 30, 2002 and audited as of December 31, 2001

ASSETS	September 30, 2002			December 31, 2001
	(unaudited)
Cash equivalents	$	2,185,426		$	188,882
Trust reserves		783,317			783,317
Royalty and overriding
royalty interests in coal
leases		167,817			167,817
Less accumulated amortization		(133,999	)		(130,431	)
Net royalty and overriding
royalty interests in coal leases		33,818			37,386
Total Assets	$	3,002,561		$	1,009,585
LIABILITIES AND TRUST CORPUS
Distributions payable to unit
holders	$	2,185,426		$	188,882
Trust reserves payable		783,317			783,317
Trust corpus: 12,633,432 units of
beneficial interest authorized
and outstanding		33,818			37,386
Total Liabilities and Trust Corpus	$	3,002,561		$	1,009,585

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
	2002			2001			2002			2001
Royalty income	$	2,195,813		$	2,012,101		$	4,472,388		$	4,004,834
Interest income		8,499			10,762			22,804			29,284
Trust expenses		(18,886	)		(25,169	)		(90,672	)		(59,023	)
Trust reserves		—			(783,317	)		—			(783,317	)
Distributable income	$	2,185,426		$	1,214,377		$	4,404,520		$	3,191,778
Distributable
income per unit	$	0.1729875		$	0.0961241		$	0.3486400		$	0.2526454

STATEMENTS OF CHANGES IN TRUST CORPUS
(unaudited )

	Nine Months Ended September 30
	2002			2001
Trust corpus as of January 1	$	37,386		$	43,453
Amortization of royalty interests		(3,568	)		(5,021	)
Distributable income		4,404,520			3,191,778
Distributions to unit holders		(4,404,520	)		(3,191,778	)
Trust corpus as of September 30	$	33,818		$	38,432

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, 2002 and December 31, 2001

Basis of Presentation

      The accompanying 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, 2001.

Summary of Significant Accounting Policies

     (a)    Basis of Accounting:

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

(1)	Royalty income is recorded on a cash receipt basis.
(2)	Trust administration expenses are recorded in the month in which they are paid.
(3)	Amortization of the net royalty and overriding royalty interests, which is calculated on a units-of-production basis, is charged directly to trust corpus since such amount does not affect distributable income.

     The preparation of financial statements requires estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

     While these statements differ from financial statements prepared in accordance with accounting principles generally accepted in the United States of America, the cash basis of reporting revenues is considered to be the most meaningful because Quarterly Distributions to Unit Holders are based on net cash receipts.

(b)    Cash Equivalents:

     Cash equivalents consist of money market funds, which are recorded at cost plus interest.

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

     a.    Material Changes in Financial Condition.

                 Kiewit Royalty 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, 2002, the Trust received a total of $4,472,388 of royalty and overriding royalty payments. The following schedule reflects the gross 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	2002		2001		2002		2001
Decker	$	1,394,848	$	1,228,784	$	3,621,423	$	3,170,117
Big Horn		—		—		—		1,400
Spring Creek		800,965		783,317		850,965		833,317
Totals:	$	2,195,813	$	2,012,101	$	4,472,388	$	4,004,834

             i.    Decker Mine.

                     Royalty and overriding royalty amounts received by the Trust from the Decker mine increased to $3,621,423 during the first nine-months of 2002 as compared to $3,170,117 received during the same period in 2001. For the third quarter of 2002, the payments received by the Trust from the Decker mine increased to $1,394,848 as compared to $1,228,784 received during the same quarter in 2001. 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.

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             ii.    Big Horn Mine.

                     No royalties were received from the Big Horn Mine during the first nine months of 2002 or 2001. 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 2002, the Big Horn Mine received no such rental payments. During the first nine months and during the third quarter of 2001, the Big Horn Mine received rental payments of $1400 and $0, respectively.

             iii.    Spring Creek Mine.

                     Royalty and overriding royalty amounts received by the Trust from the Spring Creek mine increased to $850,965 during the first nine-months of 2002 as compared to $833,317 received during the same period in 2001. For the third quarter of 2002, the payments received by the Trust from the Spring Creek Mine increased to $800,965 as compared to $783,317 received during the same quarter in 2001. 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 2002 and 2001.

             iv.    Trust Expenses.

                     Trust expenses increased to $90,672 in the first nine months of 2002, as compared to $59,023 for the same period in 2001. This increase was due principally to increased legal fees related to trust operations, trust ownership transfers and the Trust Reserve discussed below. Trust expenses for the third quarter of 2002 decreased to $18,886 as compared to $25,169 for the same period in 2001 primarily due to a decrease in legal fees paid during the third quarter of 2002.

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             v.    Trust Reserve.

                     On June 29, 2001, the Trustee received notification from the operator of the Spring Creek Mine initially alleging overpayments aggregating approximately $476,000 related to the Trust’s overriding royalty interest that were remitted during the period from 1996 to 2000. Accordingly, 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. In April 2002, the Trust filed a complaint in federal district court seeking a declaratory judgment and accounting against Spring Creek Coal Company, the operator of the Spring Creek Mine, in connection with this matter. On October 28, 2002, the Spring Creek Coal Company filed an answer and a counterclaim to the Trust’s complaint alleging that the Trust does not own an overriding royalty interest in lease M-069782 at Spring Creek Mine. The Spring Creek Coal Company seeks the return of $351,371 in allegedly mistaken payments made by it to the Trust under such lease. There can be no assurance as to the outcome of this litigation or whether it will have a material adverse effect on the Trust’s results of operations or financial condition. For a more detailed discussion of the legal action instituted by the Trust, see “Legal Proceedings.”

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

                 Not Applicable.

Item 4.    Controls and Procedures.

           a.    Evaluation of Disclosure Controls and Procedures.

                   Within the 90-day period prior to the filing date of this quarterly report, the Trust conducted an evaluation, under the supervision and with the participation of the trust officer of the Trustee of the effectiveness of the design and operation of the Trust’s disclosure controls and procedures (as defined in Rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934). Based upon this evaluation, the trust officer of the Trustee concluded that the Trust’s disclosure controls and procedures are effective in timely alerting the trust officer of the Trustee to any material information relating to the Trust required to be disclosed by the Trust in the reports that it files or submits under the Securities Exchange Act of 1934.

             b.    Changes in Internal Controls.

                     There have not been any significant changes in the Trust’s internal controls or in other factors that could significantly affect these controls subsequent to the date the Trust carried out its evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

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PART II — OTHER INFORMATION.

Item 1.    Legal Proceedings.

                             In April 2002, the Trust filed a complaint in Federal District Court for the District of Montana, Billings Division, seeking a declaratory judgment and accounting against Spring Creek Coal Company, the operator of the Spring Creek Mine. The suit seeks adjudication of a reimbursement request to the Trust from Spring Creek Coal Company and an accounting of all coal overriding royalties that Spring Creek Coal Company should have paid to the Trust under certain agreements between the parties. On October 28, 2002, the Spring Creek Coal Company filed an answer and a counterclaim to the Trust’s complaint alleging that the Trust does not own an overriding royalty interest in lease M-069782 at Spring Creek Mine. The Spring Creek Coal Company seeks the return of $351,371 in allegedly mistaken payments made by it to the Trust under such lease. There can be no assurance as to the outcome of this litigation or whether it will have a material adverse effect on the Trust’s results of operations or financial condition.. There are no other pending material 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 4.1 to the Trust’s Form 10-K filed with the Securities and Exchange Commission on March 28, 2002, and incorporated herein by reference).
4.2	Order dated September 23, 1994, of the County Court of Douglas County, Nebraska (filed as Exhibit 4.2 to the Trust’s Form 10-K filed with the Securities and Exchange Commission on March 28, 2002, and incorporated herein by reference).

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99.1 Certification Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

b.    Reports on Form 8-K.

        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 13, 2002

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CERTIFICATION

I, Susan K. Rosburg, the trust officer of U.S. Bank National Association, the trustee of Kiewit Royalty Trust, certify that:

     1.    I have reviewed this quarterly report on Form 10-Q of Kiewit Royalty Trust;

     2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

     3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

     4.    I am responsible for establishing and maintaining disclosure controls and procedures and internal controls and procedures for financial reporting (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     (a)  Designed such disclosure controls and procedures to ensure that material information relating to the registrant is made known to me by others within the registrant, particularly during the period in which this quarterly report is being prepared;

     (b)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

     (c)  Presented in this quarterly report my conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date; and

     5.    I have disclosed, based on my most recent evaluation, to the registrant’s auditors:

     (a)  All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

     (b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

     6.    I have indicated in this quarterly report whether or not there were any significant changes in the internal controls or in other factors that could significantly affect internal controls subsequent to the date of my most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

     Date: November 13, 2002

/s/ Susan K. RosburgSusan K. Rosburg
Trust Officer
U.S. Bank National Association
Trustee

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