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 September 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 September 30, 2000
$1 par value; 253,707 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
- September 30, 2000 and December 31, 1999
Consolidated Statements of Earnings and Retained Earnings
- Nine and three months ended September 30, 2000 and 1999
Consolidated Statements of Comprehensive Income
- Nine and three months ended September 30, 2000 and 1999
Consolidated Statements of Cash Flows
- Nine months ended September 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
September 30, 2000 and December 31, 1999
(amounts in unit dollars)
ASSETS 2000 1999
__________ __________
(Unaudited)
Current assets:
Cash and cash equivalents $ 2,075,400 1,894,021
Accounts receivable - 22,500
Securities maturing within one year,
at amortized cost (note 2) 3,946,730 7,469,944
Notes receivable, current 16,052 15,402
Other 16,349 10,343
__________ __________
Total current assets 6,054,531 9,431,710
Equity securities, at fair value (note 2) 2,917,899 1,648,832
Notes receivable, noncurrent 87,799 100,007
Other Investments 100,002 -
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 579,401 578,225
__________ __________
Net coal deposits, real estate,
equipment, and leasehold improvements 1,090,353 1,091,568
__________ __________
Total assets $ 10,250,584 12,272,117
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 23,281 26,062
Federal and state income taxes 175,155 42,011
__________ __________
Total current liabilities 198,436 68,073
Deferred income taxes 627,148 408,445
Stockholders' equity:
Common stock of $1 par value; 500,000 shares
authorized, 376,688 shares issued 376,688 376,688
Additional capital 1,631,200 1,631,200
Retained earnings 10,334,899 9,799,931
__________ __________
12,342,787 11,807,819
Less cost of 122,981 shares in 2000 and
23,905 in 1999 held in treasury (4,027,895) (716,166)
Accumulated other comprehensive income, net
of deferred taxes of $597,752 at
September 30, 2000 and $379,049 at
December 31, 1999 1,110,108 703,946
__________ __________
Total stockholders' equity 9,425,000 11,759,599
__________ __________
Total liabilities and stockholders' equity $ 10,250,584 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
Nine months ended September 30, 2000 and 1999 and
three months ended September 30, 2000 and 1999
(Unaudited)
(amounts in unit dollars)
Nine months ended Three months ended
September 30, September 30,
2000 1999 2000 1999
_________ _________ _________ _________
Operating revenue:
Coal royalties $ 49,127 50,551 23,684 23,242
Oil and gas royalties 425,013 249,475 153,347 117,457
Oil and other mineral lease
rentals and bonuses 43,782 99,152 31,612 34,876
_________ _________ _________ _________
Total operating revenue 517,922 399,178 208,643 175,575
General and administrative
expenses 398,219 485,876 121,030 181,768
Operating income (loss) 119,703 (86,698) 87,613 (6,193)
Nonoperating income:
Investment income (note 2) 908,519 417,904 474,621 197,564
Gain on sales of real estate 3,385 24,207 - 24,207
Other 601 54 44 9
_________ _________ _________ _________
Total nonoperating income 912,505 442,165 474,665 221,780
Earnings from continuing
operations before income
taxes 1,032,208 335,467 562,278 215,587
Income taxes 369,464 120,500 208,735 76,021
_________ _________ _________ _________
Net earnings 662,744 234,967 353,543 139,566
Retained earnings at
beginning of period 9,799,931 9,591,919 9,981,356 9,510,121
Deduct cash dividends declared
of $.50 per share in 2000
and 1999 (127,776) (177,199) 0 0
_________ _________ _________ _________
Retained earnings at end
of period $10,334,899 9,649,687 10,334,899 9,649,687
Earnings per share-
basic and diluted $ 2.38 0.66 1.39 0.39
Weighted average number
of shares of common
stock outstanding 278,341 354,874 255,157 354,398
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Comprehensive Income
(Unaudited)
Nine months ended September 30, 2000 and 1999
three months ended September 30, 2000 and 1999
(amounts in unit dollars)
Nine months ended Three months ended
September 30, September 30,
2000 1999 2000 1999
_________ _________ _________ _________
Net earnings $ 662,744 234,967 353,543 139,566
_________ _________ _________ _________
Other comprehensive income:
Realized gains and unrealized
appreciation on investments 1,238,193 346,849 (288,391) (94,945)
Income taxes (433,367) (121,398) 100,397 35,230
_________ _________ _________ _________
Realized gains and
unrealized appreciation
on investments, net 804,826 255,451 (187,994) (59,715)
Less:
Realized investment gains
included in net earnings (613,328) (91,213) (383,050) (84,857)
Income taxes 214,665 31,925 134,067 27,700
_________ _________ _________ _________
(398,663) (59,288) (248,983) (57,157)
_________ ________ _________ _________
406,163 166,163 (436,977) (116,872)
_________ ________ _________ _________
Comprehensive income (loss) $ 1,068,907 401,130 (83,434) 22,694
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Cash Flows
Nine months ended September 30, 2000 and 1999
(Unaudited)
(amounts in unit dollars)
2000 1999
_________ _________
Cash flows from operating activities:
Net earnings $ 662,744 234,967
Adjustments to reconcile net earnings to
net cash provided by (used in) operating
activities:
Depletion, depreciation,
and amortization 1,177 1,194
Amortization of premiums and
discounts of securities, net (213,364) (272,553)
Gain on sales of real estate (3,385) (24,207)
Gain on sales of equity securities (613,328) (91,213)
Changes in assets and liabilities:
Accounts receivable and other assets 35,994 9,731
Deferred oil lease bonus - (73,018)
Accounts payable and accrued expenses (2,781) 16,607
Federal and state income taxes payable 133,144 129,288
__________ _________
Total adjustments (662,543) (304,171)
Net cash provided by (used in)
operating activities 201 (69,204)
Cash flows from investing activities:
Proceeds from note receivable 11,558 9,220
Proceeds from matured/called investment
debt securities 22,972,217 23,000,000
Purchases of investment debt securities (19,235,702) (22,719,808)
Proceeds from sales of land 3,424 24,501
Purchases of equity securities (921,058) (40,743)
Proceeds from sales of equity
securities 890,246 269,232
Purchase of other investments (100,002) -
_________ _________
Net cash provided by
investing activities 3,620,683 542,402
_________ _________
Cash flows from financing activities:
Purchase of treasury stock (3,311,729) (49,427)
Payment of dividends (127,776) (177,199)
_________ _________
Net cash used in financing activities (3,439,505) (226,626)
_________ _________
Net increase in cash and
cash equivalents 181,379 246,572
Cash and cash equivalents,
beginning of year 1,894,021 1,606,992
_________ _________
Cash and cash equivalents,
end of period $ 2,075,400 1,853,564
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
September 30, 2000
Note (1) Basis of Presentation
In the opinion of the 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 September 30, 2000,
and the results of operations and cash flows for the periods ended
September 30, 2000 and 1999.
Oil Lease Bonuses
Oil lease bonuses which relate to future periods are deferred and
recognized as income over the related future periods (generally one
year).
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 September 30, 2000 and
December 31, 1999 are as follows:
Gross Gross
unrealized unrealized
Amortized holding holding Fair
September 30, 2000 cost gains losses value
__________________ __________ __________ __________ __________
Held-to-maturity:
U. S. government
securities $ 3,946,730 0 (774) 3,945,956
Available-for-sale:
Equity securities $ 1,210,039 1,788,020 (80,160) 2,917,899
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 September 30:
Nine months ended Three months ended
September 30, September 30,
2000 1999 2000 1999
________ _______ _______ _______
Realized gains on sales
of equity securities $ 613,328 91,213 383,050 84,857
Interest Income 282,512 318,406 86,827 109,867
Dividend Income 12,679 8,285 4,744 2,840
________ _______ _______ _______
$ 908,519 417,904 474,621 197,564
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 nine 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 Stock
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
obligation. The liquidty of the Registrant is somewhat reduced as a result
of this transacation,but overall the Registrant continues to enjoy very
high liqudity with current assets still greatly exceding current
liabilities, and a significant portion of its net worth being represented
by liquid assets.
Total operating revenue was up approximately 30% in the first nine months of
2000 over the first nine months of 1999, and up approximately 19% in the
third quarter of 2000 over the third 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 materially in the first
nine months of 2000 from the first nine months of 1999, and down slightly in
the third quarter of 2000 from the third 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 nine months of 2000
over the first nine months of 1999, and also in the third quarter of 2000
over the third 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 due to the sizeable
redemption of treasury stock described above. The increase in the current
periods was also partially offset by decreased gain on sales of real estate
which occurred because of less excess surface land being sold in the
current periods.
General and administrative expenses were down materially in the first nine
months of 2000 from the first nine months of 1999, and also down in the third
quarter of 2000 from the third quarter of 1999. The expenses were lower in
the current periods because there were higher expenses in the earlier periods
due to significant fees paid to outside service providers, particularly legal
fees in connection with the litigation resulting in the stock redemption
described above and also fees paid to financial advisers and appraisers of
Registrant's real estate and mineral assets.
Income taxes were higher in the first nine months of 2000 from the first nine
months of 1999 as a result of substantially higher earnings before income
taxes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
There was a net increase in cash and cash equivalents in both the first nine
months of 2000 and the first nine months of 1999, but the increase was
greater in the prior period. The smaller increase 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, the purchase of other investments
during the current period, and decreased proceeds from sales of land,
somewhat offset by significantly higher net earnings 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. The Board of
Directors also declared a dividend of $1.25 per share payable November 20,
2000 to stockholders of record on October 20, 2000.
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 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 investment portfolio
which consists of U. S. government agency securities. All such
securities are held-to-maturity and 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 September 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
September 30, 2000 was approximately $21,019.
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 - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K - None
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: November 13, 2000
____________________________
By: /s/ Gary J. Pennington
____________________________
Gary J. Pennington,
Assistant Treasurer-
General Manager, Principal
Financial and Accounting Officer
Date: November 13, 2000
____________________________
By: /s/ Phelps M. Wood
____________________________
Phelps M. Wood
President