UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| | | |
| þ | | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2006
OR
| | | |
| o | | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECRUITES EXCHANGE ACT OF 1934 |
Commission File No. 000-10810
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 and 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. Yesþ Noo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filero Accelerated filero Non- accelerated filerþ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yeso Noþ
KIEWIT ROYALTY TRUST
FORM 10-Q
For the Quarter Ended March 31, 2006
INDEX
Forward-Looking Statements
This Form 10-Q, including specifically the section entitled “Trustee’s Discussion and Analysis of Financial Condition and Results of Operations,” includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbor created thereby. All statements other than statements of historical fact included in this Form 10-Q are forward-looking statements. Such statements include, without limitation, certain statements regarding the Trust’s financial position, industry conditions and other matters contained in this Item 2. Although the Trustee believes that the expectations reflected in such forward-looking statements are reasonable, such expectations are subject to numerous risks and uncertainties and the Trustee can give no assurance that they will prove correct. There are many factors, none of which is within the Trustee’s control, that may cause such expectations not to be realized, including, among other things, factors identified in the Trust’s most recent Form 10-K affecting coal prices (including, without limitation, the domestic and foreign supply of coal and the price of foreign imports, market demand, the price and availability of alternative fuels and the effect of governmental regulations) and recoverability of “Tons Under Lease” and “Current Economic Tons,” general economic conditions, and other changes in the domestic and international coal markets.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
KIEWIT ROYALTY TRUST
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
unaudited as of March 31, 2006 and audited as of December 31, 2005
| | | | | | | | | |
| | | March 31, | | | December 31, | |
| | | 2006 | | | 2005 | |
| | | (unaudited) | | | | | |
ASSETS | | | | | | | | |
| | | | | | | | | |
| Cash and cash equivalents | | $ | 1,004,695 | | | $ | 168,310 | |
| Royalty and overriding royalty interests in coal leases | | | 167,817 | | | | 167,817 | |
| Less accumulated amortization | | | (144,927 | ) | | | (144,927 | ) |
| | | | | | | |
| | | | | | | | | |
| Net royalty and overriding royalty interests in coal leases | | | 22,890 | | | | 22,890 | |
| | | | | | | |
| | | | | | | | | |
| Total Assets | | $ | 1,027,585 | | | $ | 191,200 | |
| | | | | | | |
| | | | | | | | | |
LIABILITIES AND TRUST CORPUS | | | | | | | | |
| | | | | | | | | |
| Distributions payable to unit holders | | $ | 1,004,695 | | | $ | 168,310 | |
| Trust corpus: 12,633,432 units of beneficial interest authorized and outstanding | | | 22,890 | | | | 22,890 | |
| | | | | | | |
| | | | | | | | | |
| Total Liabilities and Trust Corpus | | $ | 1,027,585 | | | $ | 191,200 | |
| | | | | | | |
The accompanying notes are an integral part
of the financial statements.
1
KIEWIT ROYALTY TRUST
STATEMENTS OF DISTRIBUTABLE INCOME
(unaudited)
| | | | | | | | | |
| | | Three Months Ended March 31 | |
| | | 2006 | | | 2005 | |
| Royalty income | | $ | 1,008,302 | | | $ | 1,711,110 | |
| Royalty income recognized on settlement of litigation | | | — | | | | 783,317 | |
| Interest income | | | 7,350 | | | | 11,576 | |
| Trust expenses | | | (10,957 | ) | | | (36,953 | ) |
| | | | | | | |
| | | | | | | | | |
| Distributable income | | $ | 1,004,695 | | | $ | 2,469,050 | |
| | | | | | | |
| | | | | | | | | |
| Distributable income per unit | | $ | 0.0795267 | | | $ | 0.1954378 | |
| | | | | | | |
STATEMENTS OF CHANGES IN TRUST CORPUS
(unaudited)
| | | | | | | | | |
| | | Three Months Ended March 31 | |
| | | 2006 | | | 2005 | |
| Trust corpus as of January 1 | | $ | 22,890 | | | $ | 25,091 | |
| Amortization of royalty interests | | | — | | | | (2,158 | ) |
| Distributable income | | | 1,004,695 | | | | 2,469,050 | |
| Distributions to unit holders | | | (1,004,695 | ) | | | (2,469,050 | ) |
| | | | | | | |
| | | | | | | | | |
| Trust corpus as of March 31 | | $ | 22,890 | | | $ | 22,933 | |
| | | | | | | |
The accompanying notes are an integral part
of the financial statements.
2
KIEWIT ROYALTY TRUST
NOTES TO FINANCIAL STATEMENTS
as of March 31, 2006 and December 31, 2005
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, 2005.
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. |
| |
| (4) | | Distributions to Unit Holders are recognized when declared by the Trustee. |
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 and Cash Equivalents:
The Trust considers all highly liquid financial instruments with original maturities of three months or less when purchased to be cash equivalents.
Item 2. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations.
a.Material Changes in Financial Condition.
Kiewit Royalty Trust (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.
3
b.Material Changes in Results of Operations.
During the three-month period ended March 31, 2006 and 2005, the Trust received a total of $1,008,302 and $1,711,110, respectively, 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 March 31 | |
| | | 2006 | | | 2005 | |
| Decker | | $ | 1,008,302 | | | $ | 1,711,110 | |
| Spring Creek | | | — | | | | — | |
| | | | | | | |
| Total | | $ | 1,008,302 | | | $ | 1,711,110 | |
| | | | | | | |
i.Decker Mine.
Royalty and overriding royalty amounts received by the Trust from the Decker Mine decreased to $1,008,302 during the first three months of 2006, as compared to $1,711,110 received during the same period in 2005. 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. Seasonal fluctuations occur in the relative amounts of coal mined under the leases with a majority of the royalty payments being received during the first and third calendar quarters of the year.
ii.Spring Creek Mine.
No royalties were received from the Spring Creek Mine during the first three months of 2006 and 2005 because royalties with respect to this mine are typically paid by the mine operators on an annual basis during the second half of the calendar year.
iii.Trust Expenses.
Trust expenses decreased to $10,957 in the first three months of 2006, as compared to $36,953 for the same period in 2005. This decrease was a result of one time trust administrative expenses related to the settlement of the Spring Creek Coal Company litigation, which were paid in the first quarter of 2005.
iv.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, was 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 certain portions of lands encompassed by Lease M-069782 at Spring Creek Mine. The Spring Creek Coal Company was seeking the return of $790,776 in allegedly mistaken payments made by it to the Trust under this lease. In December 2004, the parties reached a settlement and the case was dismissed with prejudice. As a result of the settlement, during the first quarter of 2005, the Trustee distributed to the Unit Holders the $783,317 which was held in trust reserves.
4
c. Critical Accounting Policies and Estimates.
The Trust’s financial statements reflect the selection and application of accounting policies which require the Trust to make significant estimates and assumptions. The following are some of the more critical judgment areas in the application of accounting policies that currently affect the Trust’s financial condition and results of operations:
| | • | | Royalty income and interest income are recognized in the month in which amounts are received by the Trust. |
| |
| | • | | Trust expenses, consisting principally of routine general and administrative costs, include payments made during the accounting period. |
| |
| | • | | Reserves for liabilities which are contingent or uncertain in amount may also be established if considered necessary. |
| |
| | • | | Net royalty and overriding royalty interests that are producing properties are amortized using the unit-of-production method. This amortization is shown as a reduction of Trust corpus. |
| |
| | • | | Distributions to Unit Holders are recognized when declared by the Trustee. |
The financial statements of the Trust differ from financial statements prepared in conformity with accounting principles generally accepted in the United States of America because of the following:
| | • | | Royalty income is recognized in the month received rather than in the month of production. |
| |
| | • | | Expenses are not accrued. |
| |
| | • | | Amortization of the net royalty and overriding royalty interests is shown as a reduction to Trust corpus and not as a charge to operating results. |
| |
| | • | | Reserves may be established for contingencies that would not be recorded under accounting principles generally accepted in the United States of America. |
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
a. As of the end of the period covered by this Form 10-Q, the officer of the Trustee conducted an evaluation of the Trust’s disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934). Based upon this evaluation, the officer of the Trustee concluded that the Trust’s disclosure controls and procedures are effective in timely alerting him of any material information relating to the Trust that is required to be disclosed by the Trust in the reports it files or submits under the Securities Exchange Act of 1934.
b. There was no significant change in the Trust’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) that occurred during the Trust’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Trust’s internal control over financial reporting.
5
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
There are no material legal proceedings to which the Trust is a party or to which any of its property is subject.
Item 1A. Risk Factors.
The risk factors affecting the Trust are described in Item 1A “Risk Factors” of the Trust’s 2005 Annual Report on Form 10-K. There have been no changes to the risk factors affecting the Trust from those discussed therein.
Item 2. Unregistered Sales of Equity 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.
| | | |
| 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, 2003, 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, 2003, and incorporated herein by reference). |
| | | |
| 31* | | Certification of Trust Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. |
| | | |
| 32* | | Certification of Trust Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
6
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 | |
| | | | |
| | | By: U.S. Bank National Association in its | |
| | | capacity as Trustee and not in its individual | |
| | | capacity or otherwise | |
| |
| | | /s/ Ted L. Hall Ted L. Hall | |
| | | Vice President and Trust Officer | |
Dated: May 15, 2006
7
