Form 1O-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or
15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended June 30, 2000
Commission File No. 0-1392
Central Coal & Coke Corporation and Subsidiaries
Incorporated in State of Delaware IRS Number: 44-0195290
127 West 10th Street, Room 666
Kansas City, Missouri 64105
Phone: 816-842-2430
Common stock outstanding as of June 30, 2000
$1 par value; 254,871 shares
The Registrant (l) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been subject to such
filing requirements for the past ninety days.
Yes [X] No [ ]
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets - June 30, 2000 and
December 31, 1999
Consolidated Statements of Earnings and Retained Earnings
- Six months ended June 30, 2000 and 1999 three
months ended June 30, 2000 and 1999
Consolidated Statements of Comprehensive Income
-Six months ended June 30, 2000 and 1999 and
three months ended June 30, 2000 and 1999
Consolidated Statements of Cash Flows - Six months
ended June 30, 2000 and 1999
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risk
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Balance Sheets
June 30, 2000 and December 31, 1999
(amounts in unit dollars)
ASSETS 2000 1999
__________ __________
(Unaudited)
Current assets:
Cash and cash equivalents $ 1,689,713 1,894,021
Accounts receivable 0 42,000
Securities maturing within one year,
at amortized cost (note 2) 3,981,983 7,469,944
Notes receivable current 16,0523 15,40
Other 23,604 10,343
__________ __________
Total current assets 5,711,352 9,431,710
Equity securities, at fair value (note 2) 3,473,218 1,648,832
Notes receivable, noncurrent 87,799 100,007
Other investments 100,002 0
Coal deposits, real estate, equipment
and leasehold improvements:
Coal deposits 1,602,882 1,602,882
Mineral rights 39,988 39,988
Surface land 25,581 25,620
Equipment and leasehold improvements 1,303 1,303
__________ __________
1,669,754 1,669,793
Less accumulated depletion, depreciation
and amortization 578,824 578,225
__________ __________
Net coal deposits, real estate,
equipment and leasehold improvements 1,090,930 1,091,568
__________ __________
$ 10,463,301 12,272,117
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 10,823 26,062
Federal and state income taxes 49,372 42,011
__________ __________
Total current liabilities 60,195 68,073
Deferred income taxes 861,802 408,445
Stockholders' equity:
Common stock of $1 par value; authorized
500,000 shares; issued 376,688 shares 376,688 376,688
Additional capital 1,631,200 1,631,200
Retained earnings 9,510,121 9,591,919
__________ __________
11,989,244 11,807,819
Less cost of 121,817 shares in 2000 and
23,905 in 1999 held in treasury (3,993,059) (716,166)
Accumulated other comprehensive income,
net of deferred taxes of $832,406 and
$379,049 at June 30, 2000 and
December 31, 1999 1,545,895 703,946
__________ __________
Total stockholders' equity 9,541,304 11,795,599
__________ __________
$ 10,463,301 12,272,117
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Earnings and Retained Earnings
Six months ended June 30, 2000 and 1999 and
three months ended June 30, 2000 and 1999
(Unaudited)
(amounts in unit dollars)
Six months ended Three months ended
June 30, June 30,
2000 1999 2000 1999
_________ _________ _________ _________
Operating revenue:
Coal royalties $ 25,443 27,309 24,328 24,892
Oil and gas royalties 271,666 132,018 126,244 70,610
Oil and other mineral lease
rentals and bonuses 12,170 64,276 7,145 31,900
_________ _________ _________ _________
Total operating revenue 309,279 223,603 157,717 127,402
General and administrative
expenses 277,189 304,108 160,314 110,411
Operating income (loss) 32,090 (80,505) (2,597) 16,991
Nonoperating income:
Investment income 433,898 220,340 142,002 107,464
Gain on sale of real estate 3,385 0 0 0
Other 557 45 48 40
_________ _________ _________ _________
Total nonoperating income 437,840 220,385 142,050 107,504
Earnings before income
taxes 469,930 139,880 139,453 124,495
Income taxes 160,729 44,479 41,468 43,809
_________ _________ _________ _________
Net earnings 309,201 95,401 97,985 80,686
Retained earnings at
beginning of period 9,799,931 9,591,919 9,883,371 9,606,634
Deduct cash dividends paid
of $.50 per share in 2000
and 1999 (127,776) (177,199) 0 (177,199)
_________ _________ _________ _________
Retained earnings at end
of period $ 9,981,356 9,510,121 9,981,356 9,510,121
Earnings per share-
basic and diluted $ 1.07 0.27 0.38 0.23
Weighted average number
of shares of common
stock outstanding 290,060 355,117 255,118 354,524
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Comprehensive Income
Six months ended June 30, 2000 and 1999
three months ended June 30, 2000 and 1999
(Unaudited)
(amounts in unit dollars)
Six months ended Three months ended
June 30, June 30,
2000 1999 2000 1999
_________ _________ _________ _________
Net earnings $ 309,201 95,401 97,985 80,686
_________ _________ _________ _________
Other comprehensive income:
Realized gains and unrealized
appreciation on investments 1,525,584 441,794 891,902 333,022
Income taxes (533,954) (154,628) (312,165) (116,558)
_________ _________ _________ _________
Realized gains and
unrealized appreciation
on investments, net 991,630 287,166 579,737 216,464
Less:
Realized investment gains
included in net
earnings (230,278) (6,356) (52,990) (2,129)
Income taxes 80,597 2,225 18,546 745
_________ _________ _________ _________
(149,681) (4,131) (34,444) (1,384)
841,949 283,035 545,293 215,080
Comprehensive income $1,151,150 376,436 643,278 295,766
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999
(Unaudited)
(amounts in unit dollars)
2000 1999
_________ _________
Cash flows from operating activities:
Net earnings $ 309,201 95,401
Adjustments to reconcile net earnings to
net cash used in operating activities:
Depletion, depreciation
and amortization 599 623
Amortization of premiums and
discounts of securities, net (148,894) (178,125)
Gain on sales of real estate (3,385) 0
Gain on sales of equity securities (230,278) (6,356)
Changes in assets and liabilities:
Accounts receivable and other assets 28,739 2,777
Deferred oil lease bonus 0 (48,679)
Accounts payable and accrued expenses (15,239) 7,953
Federal and state income taxes payable 7,361 78,267
_________ _________
Total adjustments (361,097) (143,540)
Net cash used in
operating activities (51,896) (48,139)
Cash flows from investing activities:
Proceeds from note receivable 11,558 9,220
Proceeds from matured/called investment
debt securities 14,972,217 15,500,000
Purchases of investment debt securities (11,335,425) (15,296,307)
Proceeds from sales of land 3,424 0
Purchases of equity securities (671,792) (8,263)
Proceeds from sales of equity securities 373,053 22,713
Purchase of other investments (100,002) 0
_________ _________
Net cash provided by
investing activities 3,253,033 227,363
Cash flows from financing activities:
Purchase of treasury stock (3,277,669) (49,427)
Payment of dividends (127,776) (177,199)
_________ ________
Net cash used in financing activities (3,405,445) (226,626)
Net decrease in cash and
cash equivalents (204,308) (47,402)
Cash and cash equivalents,
beginning of year 1,894,021 1,606,992
Cash and cash equivalents,
end of period $ 1,689,713 1,559,590
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
June 30, 2000
Note (1) Basis of Presentation:
In the opinion of Central Coal & Coke Corporation (the Company),
the accompanying unaudited consolidated financial statements
contain all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the financial position as of June 30, 2000
and the results of operations and cash flows for the three months ended
June 30, 2000 and 1999.
Note (2) Investment Securities:
The amortized cost, gross unrealized holding gains, gross
unrealized holding losses and fair value for held-to-maturity and
available-for-sale securities by major security type at June 30, 2000
and December 31, 1999 are as follows:
Gross Gross
unrealized unrealized
Amortized holding holding Fair
June 30, 2000 cost gains losses value
__________________ __________ __________ __________ __________
Held-to-maturity:
U. S. government
securities $ 3,981,983 0 (647) 3,981,336
Available-for-sale:
Equity securities $ 1,094,917 2,452,133 (73,832) 3,473,218
December 31, 1999
_________________
Held-to-maturity:
U. S. government
securities $ 7,469,944 0 (544) 7,469,400
Available-for-sale:
Equity securities $ 565,837 1,097,631 (14,636) 1,648,832
Investment income consists of the following for each of the periods
ended June 30:
Six months ended Three months ended
June 30, June 30,
2000 1999 2000 1999
________ _______ _______ _______
Realized gains on sales
of equity securities $ 230,278 6,356 52,990 2,129
Interest Income 195,685 208,539 84,442 102,495
Dividend Income 7,935 5,445 4,570 2,840
________ _______ _______ _______
$ 433,898 220,340 142,002 107,464
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
Note (3) Dividends
During the quarter ended March 31, 2000, the Company's Board of
Directors declared a $.50 dividend per share which was paid on
May 1, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The financial condition of the Registrant continued very strong through
the end of the first six months of 2000. The liquidity of the Registrant
continues to be high as is evidenced by a favorable ratio of current assets
to current liabilities and the fact that a significant portion of the
Registrant's net worth is represented by liquid assets. During the first
quarter of 2000, the Registrant consummated the resolution of litigation
and other disputes with former Director Beekman Winthrop and other
Stockholders, as described in detail in Item 1 of Part II of Form 10-Q for
the quarter ended March 31, 2000, pursuant to an Agreement of Settlement
and Release executed by all parties, including the Registrant, on
February 29, 2000. The terms of the settlement included the purchase by
the Registrant of all stock in the Registrant owned by the plaintiffs,
totaling 97,231 shares for a purchase price of $33.50 per share, or aggregate
consideration of $3,257,238.50 which the Board of Directors of the
Registrant, after careful consideration, concluded was a fair price under
the circumstances based upon a review of the Registrant's financial
condition and considering the costs and risks of continued litigation.
The source of the funds used was available liquid assets of the Registrant
previously invested in U.S. Government Agency obligations. The liquidity
of the Registrant is somewhat reduced as a result of this transaction,
but overall the Registrant continues to enjoy very high liquidity with
current assets still greatly exceeding current liabilities, and a
significant portion of its net worth being represented by liquid assets.
Total operating revenue was up approximately 38% in the first six months of
2000 over the first six months of 1999, and up approximately 24% in the
second quarter of 2000 over the second quarter of 1999. In both cases, the
increases were due primarily to substantially increased revenues from oil
and gas royalties. The increases in each current period under comparison
were due to material increases in the price of oil during the current periods
over the prior periods, coupled with increased production. Revenue from oil
and other mineral lease rentals and bonuses was down in the first six months
of 2000 from the first six months of 1999, and also down in the second
quarter of 2000 from the second quarter of 1999, in both cases because
there were fewer new leases made in the current periods with income
recognizable in those periods.
Non-operating income was up substantially in the first six months of 2000
over the first six months of 1999, and also in the second quarter of 2000
over the second quarter of 1999 due primarily to increased investment income
resulting from increased capital gains realized on sales of equity securities
during the current periods and somewhat higher rates of return on temporary
fixed income investments during the current period partially offset by the
reduced size of the portfolio of fixed income investments during the current
periods, due to the sizeable redemption of treasury stock described above.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
General and administrative expenses were down in the first six months of
2000 from the first six months of 1999, while having increased somewhat in
the second quarter of 2000 over the second quarter of 1999. The expenses
were lower in the current six month period because there were higher
expenses in the earlier six month period due to significant fees paid
to outside service providers, particularly to financial advisers and
appraisers of the Registrant's real estate and mineral assets. The higher
expenses in the current quarter reflect increased legal fees and accounting
expenses during the current quarter, compared to the second quarter of 1999.
Income taxes were higher in the first six months of 2000 from the first six
months of 1999 as a result of substantially higher earnings before income
taxes.
There was a decrease in cash and cash equivalents in both the first six
months of 2000 and the first six months of 1999, but the decrease was greater
in the current period. The greater decrease in the current period reflects
differences in cash provided by investment activities, specifically
differences in the amount of proceeds from sale of equities during each such
period, differences in the amount of proceeds from matured/called investment
debt securities which were reinvested, and the purchase of other investments
during the current period, somewhat offset by higher net earnings before
income taxes in the current period and decreased deferred oil lease bonuses
in the current period. There was a significant cash expenditure in the
first quarter of 2000 with respect to the treasury stock purchase described
above, offset by proceeds from the sale of investment debt securities.
Cash used in payment of dividends was greater in the 1999 period than in
the 2000 period even though the per share amount of the dividends were
the same because there were fewer shares outstanding in the 2000 period
due to the redemption of treasury stock described above.
During the first quarter of 2000, the Registrant's Board of Directors
declared a semi-annual dividend of $0.50 per share which was paid
May 1, 2000. A dividend of the same amount was paid on June 1, 1999.
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities, was issued by the Financial
Accounting Standards Board in June, 1998. SFAS No. 133 standardizes the
accounting for derivative instruments. Under the statement, entities are
required to carry all derivative instruments in the statement of financial
condition at fair value. The Registrant is required to adopt SFAS No. 133,
as amended by SFAS No. 138, by January 1, 2001. On adoption, the provisions
of SFAS No. 133 will not have a material impact on its financial position
or results of operations.
As contemplated in prior reports, the Registrant has not experienced any
systems interruptions of its operations or the operations of third parties
with which it does business affecting the Registrant's operations from the
commencement of the year 2000 with respect to the utilization of existing
computer application software programs and operating systems.
The Registrant has no specific commitment for material capital expenditures
at the present time. Management continues to actively pursue other business
opportunities which may result in a more productive deployment of its assets
and ultimately increase earnings. Management is continuing to aggressively
pursue development of increased income from its oil and gas and coal
properties, and continues to attempt to lease more of its mineral properties
in order to generate additional rental, bonus and royalty income.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The primary market risk exposures of the Registrant relate to changes in
interest rates, changes in equity security prices, and changes in certain
commodity prices.
The Registrant's exposure to market risk for changes in interest rates
relates solely to its fixed income portfolio which consists of
U. S. Government Agency securities. All such securities have original
maturities of less than one year. The Registrant does not use
derivative financial instruments to hedge interest rates on its
fixed income investment securities.
The Registrant's exposure to market risk for changes in equity security
prices relates solely to its marketable equity investment portfolio which
consists primarily of common stocks of domestic, publicly held enterprises.
The Registrant periodically enters into equity option contracts on a
limited basis primarily relating to marketable equity securities held in
its investment portfolio. At June 30, 2000 the Registrant held 105 option
contracts with a short position relating primarily to marketable equity
securities held by it. The fair value of option contracts at
June 30, 2000 was approximately $23,950.
The Registrant's exposure to market risk for changes in commodity prices
relates to changes in the prices of coal, oil, and natural gas, and the
effect thereof on its royalties and rentals relating to coal deposits and
mineral rights, as is discussed in more detail in Management's Discussion
and Analysis of Financial Condition and Results of Operations set forth
in Part 1, Item 2 of this report. The Registrant does not use derivative
commodity instruments to hedge its commodity risk exposures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - Attached
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
PART II, ITEM 4. - SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
The following meeting of Stockholders was held during the second quarter of
2000, the quarter to which this report pertains.
(a) The Annual Meeting of Stockholders was held April 19, 2000.
(b) The meeting involved the election of Directors and the following
are the Directors elected at that meeting:
Bruce L. Franke
Ray A. Infantino
Patrick J. Moran
James R. Ukropina
Phelps C. Wood
Phelps M. Wood
There were no other Directors whose term of office as a Director continued
after the meeting.
(c) For the election of Directors the votes received by all nominees
were as follows:
Bruce L. Franke 229,437
Ray A. Infantino 229,437
Patrick J. Moran 229,438
James R. Ukropina 229,437
Phelps C. Wood 229,437
Phelps M. Wood 229,438
Cumulative voting is not permitted.
PART II, ITEM 4. - SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS, Continued
At the same meeting, the Stockholder approved the appointment of the
accounting firm KPMG LLP as independent public accountants to examine the
financial statements of the Registrant for the year ending
December 31, 2000 and to perform other appropriate accounting services.
The owners of 228,837 shares cast their votes in favor of that appointment,
the votes of 122 shares were cast against it, and the holders of 730
shares abstained.
(d) There were no settlements between the Registrant and any other
participants terminating any solicitation subject to Rule 14a-11.
SIGNATURES
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.
CENTRAL COAL & COKE CORPORATION
(Registrant)
Date: August 15, 2000
____________________________
By: /s/ Gary J. Pennington
____________________________
Gary J. Pennington,
Assistant Treasurer-
General Manager, Principal
Financial and Accounting Officer
Date: August 15, 2000
____________________________
By: /s/ Phelps M. Wood
____________________________
Phelps M. Wood
President