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, 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 June 30, 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 - June 30, 1998 and
December 31, 1997
Consolidated Statements of Earnings and Retained Earnings
- Six and three months ended June 30, 1998 and 1997
Consolidated Statements of Cash Flows - Six months
ended June 30, 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
June 30, 1998 and December 31, 1997
(Unaudited)
(amounts in unit dollars)
ASSETS 1998 1997
__________ __________
Current assets:
Cash and cash equivalents $ 1,693,442 1,493,966
Accounts receivable 0 22,500
Securities maturing within one year,
at amortized cost (note 2) (fair value
$7,441,300 and $7,443,950 at June 30, 1998
and December 31, 1997) 7,443,100 7,443,948
Other 48,320 46,382
__________ __________
Total current assets 9,184,862 9,006,796
Equity securities, at fair value (note 2) 1,043,490 828,797
Coal deposits, real estate, equipment
and leasehold improvements:
Coal deposits 1,602,882 1,602,882
Mineral rights 39,988 39,988
Surface land 27,437 28,115
Equipment and leasehold improvements 300,894 284,373
__________ __________
1,971,201 1,955,358
Less accumulated depletion, depreciation
and amortization 819,783 785,537
__________ __________
Net coal deposits, real estate,
equipment and leasehold improvements 1,151,418 1,169,821
__________ __________
$ 11,379,770 11,005,414
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 51,275 16,962
Deferred oil lease bonus 146,035 0
Federal and state income taxes 38,742 26,520
__________ __________
Total current liabilities 236,052 43,482
Deferred income taxes 94,811 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 9,363,238 9,252,798
__________ __________
11,371,126 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 $149,053 and $124,082 at June 30, 1998
and December 31, 1997 276,813 230,438
__________ __________
Total stockholders' equity 11,048,907 10,892,092
__________ __________
$ 11,379,770 11,005,414
<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, 1998 and 1997 and
three months ended June 30, 1998 and 1997
(Unaudited)
(amounts in unit dollars)
Six months ended Three months ended
June 30, June 30,
1998 1997 1998 1997
_________ _________ _________ _________
Operating revenue:
Coal royalties $ 27,898 27,421 25,405 25,856
Oil and gas royalties 289,223 492,974 116,767 185,265
Oil and other mineral lease
rentals and bonuses 66,043 117,279 37,609 37,083
Food sales 394,915 497,539 187,295 238,543
_________ _________ _________ _________
Total operating revenue 778,079 1,135,213 367,076 486,747
Operating expenses:
Cost of food sales 156,834 203,195 75,536 99,402
Food operations 322,550 380,335 159,357 171,274
General and administrative
expenses 166,953 216,246 71,923 84,545
_________ _________ _________ _________
Total operating expenses 646,337 799,776 306,816 355,221
Operating income 131,742 335,437 60,260 131,526
Nonoperating income:
Investment income 265,027 257,082 124,387 133,335
Gain on sale of real estate 37,189 785 292 0
Other 452 2,561 415 2,515
_________ _________ _________ _________
Total nonoperating income 302,668 260,428 125,094 135,850
Earnings before income
taxes 434,410 595,865 185,354 267,376
Income taxes 145,672 196,829 62,057 90,037
_________ _________ _________ _________
Net earnings 288,738 399,036 123,297 177,339
Retained earnings at
beginning of period 9,252,798 9,014,238 9,239,941 9,053,251
Deduct cash dividends declared
of $.50 per share in 1998
and 1997 (178,298) (182,684) 0 0
_________ _________ _________ _________
Retained earnings at end
of period $ 9,363,238 9,230,590 9,363,238 9,230,590
Earnings per share-
basic and diluted $ 0.81 1.09 0.35 0.48
Weighted average number
of shares of common
stock outstanding 356,595 365,056 356,595 364,750
<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, 1998 and 1997
(Unaudited)
(amounts in unit dollars)
1998 1997
__________ __________
Cash flows from operating activities:
Net earnings $ 288,738 399,036
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depletion, depreciation
and amortization 34,246 33,949
Amortization of premiums and
discounts of securities, net (202,037) (197,587)
Gain on sale of real estate (37,189) (785)
Gain on sale of equity securities (26,580) (28,596)
Changes in assets and liabilities:
Accounts receivable 22,500 22,500
Other assets (1,938) (40,818)
Deferred oil lease bonus 146,035 (74,166)
Accounts payable and accrued expenses 34,313 15,138
Federal and state income taxes 12,222 0
__________ __________
Total adjustments (18,428) (270,365)
Net cash provided by operating activities 270,310 128,671
Cash flows from investing activities:
Capital expenditures (16,521) 0
Proceeds from matured/called investment
debt securities 15,000,000 11,500,000
Purchases of investment debt securities (14,797,115) (11,335,278)
Proceeds from sale of land 37,867 801
Purchases of equity securities (170,331) (89,672)
Proceeds from sales of equity
securities 53,564 149,176
__________ __________
Net cash provided by
investing activities 107,464 225,027
Cash flows from financing activities:
Purchase of treasury stock 0 (51,425)
Payment of dividends (178,298) (182,684)
__________ __________
Net cash used in financing activities (178,298) (234,109)
Net increase in cash and
cash equivalents 199,476 119,589
Cash and cash equivalents,
beginning of year 1,493,966 1,342,955
Cash and cash equivalents,
end of period $ 1,693,442 1,462,544
<FN>
See accompanying notes to consolidated financial statements.
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
June 30, 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 June 30, 1998,
and the results of operations and cash flows for the three months ended
June 30, 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,
net of related deferred income taxes.
Six months Three months
ended June 30, ended June 30,
1998 1997 1998 1997
________ ________ ________ ________
Net earnings $ 288,738 399,036 123,297 177,339
Other comprehensive income 46,375 70,405 529 76,611
________ ________ ________ ________
Comprehensive income $ 335,113 469,441 123,826 253,950
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 June 30, 1998
and December 31, 1997 are as follows:
Gross Gross
unrealized unrealized
Amortized holding holding Fair
June 30, 1998 cost gains losses value
__________________ __________ __________ __________ __________
Held-to-maturity:
U. S. government
securities $ 7,443,100 0 (1,800) 7,441,300
Available-for-sale:
Equity securities $ 617,624 457,581 (31,715) 1,043,490
December 31, 1997
_________________
Held-to-maturity:
U. S. government
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 include the following expenses for the six months and three
months ended June 30, 1998 and 1997:
Six months Three months
ended June 30, ended June 30,
1998 1997 1998 1997
__________ __________ __________ __________
Salaries and wages $ 122,459 156,855 60,489 74,053
Occupancy expense 45,886 60,403 21,797 23,065
Depreciation expense 28,014 27,723 14,007 12,588
Utility expense 17,291 18,153 8,893 9,428
Other expenses 108,900 117,201 54,171 52,140
__________ __________ __________ __________
$ 322,550 380,335 159,357 171,274
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 six months 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 six months of 1998 from the first six months of 1997 and also
in the second quarter of 1998 from the second quarter of 1997. The
decreases in the current periods were due to low oil prices and
reduced production. Revenue from oil and other mineral lease rentals
and bonuses was down substantially in the first six months of 1998
from the first six months of 1997 while there was a slight increase
in the second quarter of 1998 over the second quarter of 1997. The
decrease in the six-month period was due to fewer new leases being
made with income recognizable in the current period.
Revenue from food sales decreased approximately 21% in the first six
months of 1998 from the first six months of 1997 and by approximately
the same percentage in the second quarter of 1998 from the second
quarter of 1997. Revenue from this source results from the operation
of Beekman's Deli Systems, Limited Liability Company, a limited
liability company in which the Registrant is a majority member
(hereinafter "Beekman's"). Beekman's operates fast food bagel and
delicatessen facilities, and sales were down at all locations during
the current periods. Also, there were fewer facilities in operation
in the 1998 periods than the same periods for the previous year, with
facilities being operated during the first six months of 1998 in
Athens, Ohio; Columbus, Ohio; and State College, Pennsylvania. A
fourth facility which previously had been operated in an area of San
Diego, California, known as Pacific Beach, was closed at the end of
March, 1997, because of disappointing sales. Effective July 1, 1998,
the facility at State College, Pennsylvania was closed and the
premises subleased to another party.
Revenue from investment income was up slightly in the first six
months of 1998 over the first six months of 1997 while being down
somewhat in the second quarter of 1998 from the second quarter of
1997. These fluctuations are basically due to variations in rate of
return on temporary fixed income investments and somewhat lower
capital gains income in the second quarter of 1998.
Revenue from gain on sales of real estate was higher in the first six
months of 1998 over the first six months of 1997 due to more surface
land being sold in the current period than in the previous period
under comparison.
Included in operating expenses are cost of food sales and food
operations. Cost of food sales decreased approximately 23% in the
first six months of 1998 from the first six months of 1997 and also
decreased approximately 24% in the second quarter of 1998 from the
second quarter of 1997. Cost of food sales is directly related to
food sales made which, as explained above, decreased in the first six
months of 1998 from the first six months of 1997 and in the second
quarter of 1998 from the second quarter of 1997. Expenses
categorized as food operations were also down in the first six months
of 1998 from the first six months of 1997 because of lower sales and
fewer facilities being operated in the current period as explained
above. Also, 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 result in nominal overall
impact on the results of operations.
General and administrative expenses where down approximately 23% in
the first six months of 1998 from the first six months of 1997 and
down also in the second quarter of 1998 from the second 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 1998 than in 1997.
Income taxes were lower in the 1998 periods than in the 1997 periods
as a result of decreased earnings before income taxes.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued
In 1997, the Financial Accounting Standards Board issued Statement
No. 130, Reporting Comprehensive Income, effective for the period
beginning January 1, 1998. The effect of the application of this
statement is explained in note 1 to the accompanying consolidated
financial statements.
Cash flows increased in the first six months of 1998 and also in the
first six months of 1997, but the increase was significantly greater
in the first six months of 1998. Significant components of the
increase of net cash provided by operating activities in the current
period over the prior period include the increase of liabilities for
deferred oil lease bonuses and an increase in accrued accounts
payable. Net cash provided by investing activities decreased in the
current period primarily because of differences in the amounts of
proceeds from matured/called investment debt securities which were
reinvested, and the timing of purchases and sales of equity
securities during the respective periods. Also net cash used in
financing activities decreased in the current period as there were
treasury stock purchases during the 1997 period and no such purchases
during the 1998 period.
During the first quarter of 1998, the Company's Board of Directors
declared a cash dividend of $.50 per share which was paid on 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 computer systems 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.
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities (Statement 133), was
issued by Financial Accounting Standards board in June 1998.
Statement 133 standardizes the accounting for derivative instruments.
Under the standard, entities are required to carry all derivative
instruments in the statement of financial position at fair value.
The Company must adopt Statement 133 by January 1, 2000; however,
early adoption is permitted. On adoption, the provisions of
Statement 133 must be applied prospectively. The Company anticipates
that the adoption of Statement 133 will not have a materiel impact in
the Company's financial statements.
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 - Attached
Item 6. Exhibits and Reports on Form 8-K - None
ITEM 5. OTHER INFORMATION
The proxy statement sent to stockholders on March 18, 1998, with
respect to the annual meeting of stockholders which was held April
15, 1998, included information concerning stockholder proposals which
stated that for a stockholder proposal to be included in the proxy
materials for next year's annual meeting, it must be received at the
Registrant's principal office in Kansas City, Missouri on or before
November 18, 1998. The Registrant's proxy has, in the past,
contained and is expected to contain in the future, authority for the
named proxies to vote in their discretion on other business that may
properly come before the meeting. Recent amendments to Securities
and Exchange Commission Rule 14a-4, provide that if a stockholder
wishes to present a proposal at the annual meeting and the Registrant
does not have notice of the proposal at least forty-five days before
the date on which the Registrant first mailed its proxy materials for
the prior year's annual meeting, that the proxy may confer
discretionary authority to vote on such proposal. Accordingly, if a
proposal is to be submitted by a stockholder for consideration at the
annual meeting to be held in 1999, and the Registrant does not
receive notice of such proposal by February 1, 1999, the Registrant's
proxy for that meeting may confer discretionary authority to vote on
such proposal.
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 13, 1998
____________________________
By: /s/ Gary J. Pennington
____________________________
Gary J. Pennington,
Assistant Secretary-
General Manager, Principal
Financial and Accounting Officer
Date: August 13, 1998
____________________________
By: /s/ Leonard L. Noah
____________________________
Leonard L. Noah,
Vice President, Treasurer