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 March 31, 1998
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 March 31, 1998
$1 par value; 356,595 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 - March 31, 1998 and
December 31, 1997
Consolidated Statements of Earnings and Retained Earnings
- Three months ended March 31, 1998 and 1997
Consolidated Statements of Cash Flows - Three months
ended March 31, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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
March 31, 1998 and December 31, 1997
(Unaudited)
(amounts in unit dollars)
ASSETS 1998 1997
__________ __________
Current assets:
Cash and cash equivalents $ 1,949,112 1,493,966
Accounts receivable 0 22,500
Securities maturing within one year, at
amortized cost (note 2) (fair value
$7,438,380 and $7,443,950 at March 31,
1998 and December 31, 1997) 7,439,787 7,443,948
Other 49,606 46,382
__________ __________
Total current assets 9,438,505 9,006,796
Equity securities, at fair value (note 2) 896,732 828,797
Coal deposits, real estate, equipment and
leasehold improvements:
Coal deposits 1,602,882 1,602,882
Mineral rights 39,988 39,988
Surface land 27,445 28,115
Equipment and leasehold improvements 284,373 284,373
__________ __________
1,954,688 1,955,358
Less accumulated depletion, depreciation
and amortization 802,376 785,537
__________ __________
Net coal deposits, real estate, equipment
and leasehold improvements 1,152,312 1,169,821
__________ __________
$ 11,487,549 11,005,414
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 29,200 16,962
Deferred oil lease bonus 170,374 0
Federal and state income taxes 90,070 26,520
Dividends payable (note 4) 178,298 0
__________ __________
Total current liabilities 467,942 43,482
Deferred income taxes 94,526 69,840
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 9,239,941 9,252,798
__________ __________
11,247,829 11,260,686
Less cost of 20,093 shares held in treasury 599,032 599,032
Net unrealized appreciation of investments
available-for-sale, net of deferred taxes
of $148,768 and $124,082 at March 31, 1998
December 31, 1997 276,284 230,438
__________ __________
Total stockholders' equity 10,925,081 10,892,092
$ 11,487,549 11,005,414
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Earnings
Three months ended March 31, 1998 and 1997
(Unaudited)
(amounts in unit dollars)
1998 1997
__________ __________
Operating revenue:
Coal royalties $ 2,493 1,565
Oil and gas royalties 172,456 307,709
Oil and other mineral lease rentals
and bonuses 28,434 80,196
Food sales 207,620 258,996
__________ __________
Total operating revenue 411,003 648,466
Operating expenses:
Cost of food sales 81,298 103,793
Food operations 163,193 209,061
General and administrative expenses 95,030 131,701
__________ __________
Total operating expenses 339,521 444,555
Operating income 71,482 203,911
Nonoperating income:
Investment income 140,640 123,747
Gain on sales of real estate 36,897 785
Other 37 46
__________ __________
Total nonoperating income 177,574 124,578
Earnings before income taxes 249,056 328,489
Income taxes 83,615 106,792
__________ __________
Net earnings 165,441 221,697
Retained earnings at beginning of period 9,252,798 9,014,238
Deduct cash dividends declared of $.50
per share in 1998 and 1997 (178,298) (182,684)
__________ __________
Retained earnings at end of period $ 9,239,941 9,053,251
Earnings per share - basic and diluted $ 0.46 0.61
Weighted average number of shares of common
stock outstanding 356,595 365,366
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Cash Flows
Three months ended March 31, 1998 and 1997
(Unaudited)
(amounts in unit dollars)
1998 1997
__________ __________
Cash flows from operating activities:
Net earnings $ 165,441 221,697
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depletion, depreciation and amortization 16,839 17,956
Amortization of premiums and discounts
of securities, net (102,222) (97,135)
Gain on sales of real estate (36,897) (785)
Gain on sales of equity securities (20,955) (12,364)
Changes in assets and liabilities:
Accounts receivable 22,500 22,500
Income taxes receivable and
other assets (3,224) 13,212
Deferred oil lease bonus 170,374 (37,083)
Accounts payable and accrued expenses 12,238 21,135
Federal and state income taxes payable 63,550 66,658
__________ __________
Total adjustments 122,203 (5,906)
Net cash provided by operating activities 287,644 215,791
Cash flows from investing activities:
Proceeds from matured/called investment
debt securities 7,500,000 7,500,000
Purchases of investment debt securities (7,393,617) (7,389,475)
Proceeds from sales of land 37,567 800
Purchases of equity securities (27,567) (68,811)
Proceeds from sales of equity securities 51,119 59,954
__________ __________
Net cash provided by investing activities 167,502 102,468
Net increase in cash and cash equivalents 455,146 318,259
Cash and cash equivalents, beginning of year 1,493,966 1,342,955
Cash and cash equivalents, end of year $ 1,949,112 1,661,214
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
March 31, 1998
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 March 31, 1998,
and the results of operations and cash flows for the three months ended
March 31, 1998 and 1997.
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).
Reporting Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No.
130, Reporting Comprehensive Income, on January 1, 1998. This statement
requires the reporting of comprehensive income and its components.
Comprehensive income is defined as the change in equity from transactions
and other events and circumstances from nonowner sources, and excludes
investments by and distributions to owners. Comprehensive income includes
net income and other items of comprehensive income meeting the above
criteria. The Company's only component of other comprehensive income is
the unrealized holding gains and losses on available-for-sale securities.
Three months
ended March 31,
1998 1997
__________ __________
Net earnings $ 165,441 221,697
Change in unrealized gain (loss), net 45,846 (6,206)
__________ __________
Comprehensive income $ 211,287 215,491
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
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 March 31, 1998
and December 31, 1997 are as follows:
Gross Gross
unrealized unrealized
Amortized holding holding Fair
March 31, 1998 cost gains losses value
__________________ __________ __________ __________ __________
Held-to-maturity:
U. S. government
securities $ 7,439,787 0 (4,107) 7,438,380
Available-for-sale:
Equity securities $ 471,680 435,710 (10,658) 896,732
December 31, 1997
_________________
Held-to-maturity:
U. S. government
agency securities $ 7,443,948 113 (111) 7,443,950
Available-for-sale:
Equity securities $ 474,277 388,761 (34,241) 828,797
Note (3) Food Operations
Food operations of the Company's fast food bagel and delicatessen
business includes the following expenses for the three ended March 31,
1998 and 1997:
1998 1997
__________ __________
Salaries and wages $ 61,970 82,802
Occupancy expense 24,089 37,338
Depreciation expense 14,007 15,135
Utility expense 8,398 8,725
Other expenses 54,729 65,061
__________ __________
$ 163,193 209,061
Note (4) Dividends
During the quarter ended March 31, 1998 the Company's Board of
Directors declared a $.50 dividend per share which is payable May 1,
1998.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
There was no significant change in the financial condition of the
Registrant during the first quarter of 1998 from the end of the last
fiscal year, and it continues very strong. The liquidity of the
Registrant continues to be high.
Revenue from oil and gas royalties decreased substantially in the
first quarter of 1998 from the first quarter of 1997 due to lower oil
prices and somewhat reduced production. Revenue from oil and other
mineral lease rentals and bonuses was down in the first quarter of 1998
from the first quarter of 1997 due to fewer new leases made with income
recognizable in the current period.
Revenue from food sales decreased in the first quarter of 1998 from
the first quarter of 1997 by approximately 20%. Revenue from this source
results from the operation of Beckman's Deli Systems, Limited Liability
Company, a limited liability company in which the Registrant is a member
(hereinafter "Beekman's"). The reason for the decrease in the current
period was that fewer facilities were in operation during the first
quarter of 1998 than in the first quarter of 1997. Four facilities were
in operation during the first quarter of 1997, but one of the facilities,
the one located in an area of San Diego, California known as Pacific
Beach, was closed at the end of March, 1997 because of disappointing
sales. In addition, sales from the remaining facilities, in the aggregate
were somewhat lower in the first quarter of 1998 from the first quarter of
1997, and this also contributed to the reduction in revenue from this
source.
Revenue from investment income was up approximately 14 % in the
first quarter of 1998 over the first quarter of 1997 due primarily to a
somewhat higher rate of return on investments during the current period.
Revenue from gain on sales of real estate was higher in the first quarter
of 1998 over the first quarter of 1997 due to more surface land being sold
in the current period then in the previous period under comparison.
Included in operating expenses are cost of food sales and food
operations. Cost of food sales decreased by approximately 22% in the
first quarter of 1998 from the first quarter of 1997. Cost of food sales
is directly related to food sales made which, as explained above,
decreased in the first quarter of 1998 from the first quarter of 1997.
Expenses categorized as food operations were also down in the first
quarter of 1998 from the first quarter of 1997 primarily because of fewer
facilities being operated in the current period as explained above. As
has been discussed in previous reports, there have been recent increases
in the federal minimum wage. Beekman's employs a number of workers at the
prevailing minimum wage, and thus is experiencing somewhat increased labor
expense which has been partially offset by price increases which results
in nominal, overall impact on the results of operations.
General and administrative expenses were down approximately 28 % in
the first quarter of 1998 from the first quarter of 1997 due primarily to
reduced payments to outside service providers, particularly in connection
with the operation of the bagel and delicatessen business. Also, state
franchise tax expense which is a component of this expense item was lower
in the current period than in the prior period under comparison.
Income taxes were lower in the 1998 period from the 1997 period as a
result of decreased earnings before income taxes.
In 1997, the Financial Accounting Standards Board issued Statement
No. 130, Reporting Comprehensive Income, effective for the period ended
March 31, 1998. The effect of the application of this Statement is
explained in note 1 to the accompanying consolidated financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
Cash flows increased in the first quarter of 1998 and also in the first
quarter of 1997, but the increase was greater in the first quarter of
1998. A significant component in the increase of net cash provided by
operating activities in the current period over the prior period is the
increase of deferred oil lease bonuses. Net cash provided by investing
activities was greater in the current period due to the timing of
purchases of equity securities.
During the first quarter of 1998, the Company's Board of Directors
declared a cash dividend of $.50 per share payable May 1, 1998. A
dividend in the same amount was paid on May 1, 1997.
As the year 2000 approaches, issues have emerged regarding how
existing application software programs and operating systems can
accommodate this date. Based on information currently available,
management does not anticipate that the Registrant will incur significant
operating expenses or be required to incur material costs to be year 2000
compliant. In addition, the Registrant has relationships with third
parties that have a computer system that may not be year 2000 compliant.
To the extent the Registrant's or such third parties' system are not fully
year 2000 compliant, there can be no assurance that potential systems
interruptions or the cost necessary to update software would not have a
material adverse effect on the Registrant's business, financial condition,
results of operation, or business prospects, but given the nature of the
Registrant's activities, this is not anticipated.
The Registrant has no specific commitment for material capital
expenditures at the present time. Management continues to actively pursue
other business opportunities which will result in a more productive
deployment of its assets and ultimately increase earnings. Management
continues 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.
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: May 15, 1998
____________________________
By: /s/ Gary J. Pennington
____________________________
Gary J. Pennington,
Assistant Secretary-
General Manager, Principal
Financial and Accounting Officer
Date: May 15, 1998
____________________________
By: /s/ Leonard L. Noah
____________________________
Leonard L. Noah,
Vice President, Treasurer