UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1996
Commission File No. 0-1392
CENTRAL COAL & COKE CORPORATION
(Exact name of registrant as specified in its charter)
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Delaware 44-0195290
__________________ __________________
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
127 West 10th Street, Suite 666, Kansas City, Missouri 64105
______________________________________________________ _____
(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: 816/842-2430
____________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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None None
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common stock ($1 par value)
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(Title of Class)
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
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period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes [ X ]
No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by nonaffiliates
of the registrant (173,167 shares), as of February 14, 1997 was
$5,281,593.50.
The number of shares outstanding of the issuer's only class of common stock
as of December 31, 1995, is as follows:
Common Stock ($1.00 Par Value) . . . . . . 365,366
(This figure does not include 11,322 shares of treasury stock)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to security holders for fiscal year
ended December 31, 1996, captioned "Selected Consolidated Financial Data,"
"Management's Discussion & Analysis of Financial Condition & Results of
Operations" and "Market for Registrant's Common Equity and Related
Stockholder Matters." (Part II)
Definitive Proxy Statement furnished to security holders and the
Securities and Exchange Commission on March 20, 1997, relative to the
Annual Meeting of Stockholders to be held on April 16, 1997. (Part III)
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PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS. During the year 1993, the
registrant formed a new wholly-owned subsidiary corporation which was
authorized to become involved in a newly created fast food bagel and
delicatessen business located in Athens, Ohio, near the campus of Ohio
University. The business commenced operation during the fourth quarter of
1993. A second facility located in Columbus, Ohio, near the campus of Ohio
State University, opened during the third quarter of 1994. As of December
31, 1994, the subsidiary was merged with and into Beekman's Deli Systems,
Limited Liability Company, an Ohio limited liability company in which the
registrant is a majority member and a wholly-owned subsidiary of the
registrant is the only other member, and this business segment is now being
conducted by the limited liability company. A third facility was opened in
State College, Pennsylvania in the third quarter of 1995, and a lease was
signed on a new facility located in an area of San Diego, California known as
Pacific Beach early in 1996. The results of operation of the Pacific Beach
location have been disappointing and it is scheduled to be closed upon
termination of the Lease as of March 31, 1997. The registrant had invested
approximately $819,000 in the aggregate in this venture as of December 31,
1996. Other than the expansion of that venture, since the beginning of the
fiscal year there have been no material changes or developments in the
business done or intended to be done by registrant. However, as described
more fully in Management's Discussion & Analysis of Financial Condition &
Results of Operations described in Item 7 of this report, it had previously
been anticipated that the business of that venture would be expanded into
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additional locations but the operating results of the venture have been
mixed, and management of the registrant is rethinking its strategy. The
initial two locations operate profitably, but overall profitability has not
been achieved, and the registrant may not follow through with the anticipated
expansion. Also, management continues to investigate other activities
involving deployment of registrant's assets in an effort to increase
earnings. Since the beginning of the fiscal year, there have been no
bankruptcy, receivership or similar proceedings with respect to the
registrant; there has been no material reclassification, merger or
consolidation of the registrant; there has been no acquisition or disposition
of any material amount of assets otherwise than in the ordinary course of
business; and there has been no material change in the mode of conducting the
business of the registrant.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. During the year
1996, the registrant had two reportable segments which are identified as the
Energy Business Segment and the Retail Food Business Segment. See footnote
10 to the accompanying consolidated financial statements for more detail as
to these separate Business Segments and financial information with respect
thereto. There were no separate segments of the registrant prior to 1993.
(c) NARRATIVE DESCRIPTION OF BUSINESS. One business activity of the
registrant consists of the management of its interests in real properties and
as discussed above is now identified as the Energy Business Segment. Such
real property interests have been held and managed by registrant for lease to
others for exploration for and the extraction of coal and oil and gas and for
surface use. From time to time sales of portions of such properties have
been made. During 1994 the registrant sold forty (40) acres of surface land
located in Macon County, Missouri and the timber rights on some adjoining
property which generated a gain of approximately $33,000, and in 1995 sold
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approximately 4.41 additional acres of surface land in that county generating
a gain of $2,141.58 and 40 additional acres of timber rights were sold for
$8,900. In 1996 the registrant sold 7.25 acres of real property in Sebastian
County, Arkansas, for $6,050, and in 1995 had sold 103 acres of surface land
in that county for a gain of $56,768. Also sold in 1996 was 45 acres of real
property in Pittsburg County, Oklahoma for $31,500. The properties owned at
the end of the fiscal year are described in Item 2. As described more fully
in Item 1(a) above, a subsidiary of the registrant began operation in late
1993 of a fast food bagel and delicatessen business located in Athens, Ohio,
and opened an additional facility in Columbus, Ohio in 1994, and State
College, Pennsylvania in 1995, and Pacific Beach in San Diego, California in
1996. Additionally, the registrant continues to examine and evaluate the
deployment of its assets and owned and operated enterprises as described
above. During the last five years, the registrant reviewed at least six
possible new business opportunities in addition to the fast food bagel and
delicatessen business described above, resulting in a formal bid for one
company which was not accepted, rejected two other opportunities as not
suitable, and another such opportunity reviewed was taken off the market.
Also, during 1993 the registrant commenced a voluntary program of
reforestation on reclaimed open pit coal mining property located in Arkansas
and Oklahoma. The program was not federally or state mandated, but was
undertaken to enhance the value of its real property and in furtherance of
its concept of social responsibility. Some additional reforestation on its
properties in Arkansas has been commenced in line with this program, but it
is not anticipated that the expenses in connection therewith will exceed
$2,000. Thus, the financial impact upon the registrant, both in terms of
short-term expenditures and future income should not be material.
Another business activity of registrant consists of the ownership and
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management of its investment portfolio of marketable securities and United
States government and agency obligations.
Other than as described above, the registrant produces no products nor
renders any services; however, oil, gas, and coal are extracted by lessees
from properties owned by the registrant as more fully explained in Item 2.
Other than the fast food bagel and delicatessen business described
above, there have been no new products nor industry segments requiring the
investment of a material amount of assets of the registrant, and there have
been no public announcements nor has information otherwise become public
involving any such new products or industry segments.
Raw materials are not essential to registrant's businesses.
There are no patents, trademarks, licenses, franchises and concessions
held by registrant, other than a U.S. Service Mark for the service mark
"BAGELWICH," and a pending U.S. Service Mark Application for registration of
the service mark "BEEKMAN'S BAGEL" held by a subsidiary of registrant in
connection with the fast food bagel and delicatessen business described
above.
To the extent that the fast food bagel and delicatessen facilities are
located at or near college campuses as described above, sales are somewhat
greater when school is in regular session and the full student body is
present on campus, and this could be considered "seasonal." Other than that,
no business of any industry segment of the registrant is or may be seasonal.
The registrant has no significant practices relating to working
capital since it carries no significant amount of inventory and does not
provide extended payment terms to customers.
Bethlehem Steel Corporation was the lessee under a coal lease from
registrant for a term of 40 years commencing in June, 1969, providing for
minimum royalties of $50,000 annually for each of the first three years and
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$90,000 annually for the next 36 years, together with provisions for
royalties of 22-1/2 cents per ton of coal mined and shipped against which
the minimum royalties are to be applied. On October 1, 1984, this lease
was amended to increase the royalty to the greater of $1.00 per ton or 3%
of the F.O.B. mine selling price for all coal paid for by actual royalty or
minimum royalty after that date, and Bethlehem assigned the lease to
another. A portion of the leased property was subsequently subleased to
another party, but Bethlehem continues to guarantee the total royalty
payment. A small amount of mining has been done on the lease. The loss of
the revenues from this lease would result in a material diminution in the
income of registrant, but the registrant has no reason to believe that the
lessee has either the legal right or intention to cease making the required
payments thereunder.
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Except as discussed above, there are no customers to which sales are
made in an amount which equals ten percent or more of the registrant's
consolidated revenue.
Registrant's businesses do not have any backlog of unfilled orders.
No material portions of the businesses of registrant may be subject to
renegotiation of profits or termination of contracts or subcontracts at the
election of the Government.
There are no competitive conditions in the businesses in the
registrant's Energy Business Segment which have a material impact on its
operations. As to the Retail Food Business Segment, competition is
vigorous in all markets as a part of the retail fast food industry, but it
is too early in the development of this business segment to be able to
evaluate any material impact on its operations.
Registrant spent no money during any of the last three fiscal years on
material company-sponsored research and development activities as
determined in accordance with generally accepted accounting principles. In
addition, registrant spent no money during such years on material customer-
sponsored research activities relating to the development of new products,
services or techniques or the improvement of existing products, services or
techniques.
Compliance with Federal, State and local provisions regulating the
discharge of materials into the environment, or otherwise relating to the
protection of the environment, will have no material effect upon the capital
expenditures, earnings and competitive position of the registrant. There
are no material estimated capital expenditures for environmental control
facilities for the remainder of the current fiscal year and the succeeding
fiscal year or for any further periods which the registrant deems material.
The total number of persons employed by the registrant itself, as of
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the end of the fiscal year, was 4. The fast food bagel and delicatessen
business described in Item 1(a) above employs approximately 85 people in
all locations in the aggregate.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND
EXPORT SALES. The registrant does not engage in operations in foreign
countries, nor are portions of sales or revenues derived from customers in
foreign countries.
ITEM 2. PROPERTIES
(a) The principal physical properties of the registrant are whole or
partial interests in approximately 64,000 acres of real property located in
Arkansas, Louisiana, Texas, Kansas, Oklahoma and Missouri. Its mineral
reservation under the Sam Houston National Forest in Texas on an additional
76,000 acres expired on January 1, 1985, but was extended for a five-year
period on about 6,280 acres with producing wells, which period expired
January 1, 1990. Another 640 of these acres were lost on January 1, 1990,
and an additional 1,623 of these acres were lost on January 1, 1995,
leaving the registrant's rights in 4,017 remaining acres, now to expire
January 1, 2000, unless extended. In later parts of this Item 2 references
are made to the ownership of "minerals." The registrant is the owner of
all or part of the subsurface minerals on large portions of the properties
involved, but the only minerals of primary interest to the registrant are
coal, oil and gas.
(1) REAL PROPERTY INTERESTS IN THE STATE OF ARKANSAS.
The registrant is the owner of approximately 1,701 acres in fee
simple, of minerals underlying approximately 16,404 additional acres, and
of a number of town lots in three small towns, all in Sebastian County,
Arkansas, having sold approximately 103 acres of surface in 1995, and 7.25
Acres in 1996.
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Mineral interests underlying approximately 13,600 acres are under
a coal lease to the assignee of Bethlehem Steel Corporation under the coal
lease described in Item l(c). An additional 48 acres of the registrant's
Arkansas properties are currently being leased under coal leases. Another
586 acres were leased in 1993 under two separate oil and gas leases (both
to the same lessee) for 5-year terms. As yet there is no production under
either of these new leases.
Of the 13,600 acres currently under a coal lease to the assignee
of Bethlehem Steel Corporation as described in the preceding paragraph,
10,537.23 acres were leased to C.D. Exploration, Inc. in 1995 under an Oil
& Gas Lease for a term of five years, for which the lessee paid a bonus of
approximately $105,000. An additional 414 acres were leased in 1994 under
three separate oil and gas leases (two to the same lessee), one for a three
year term and the other two for five year terms. An additional 1,483.31 acres
were leased in 1996 in one oil and gas lease for a term of five years. As yet
there is no production under any of these leases. In addition, registrant
has fractional royalty interests in 8 small producing gas wells which are
located on a 5,354 acre tract of which registrant owns 1,044 acres.
(2) REAL PROPERTY INTERESTS IN THE STATE OF TEXAS.
The registrant was the owner of practically all of the mineral
interests in approximately 90,551 acres located in the Texas counties of
San Jacinto, Walker and Montgomery, of which approximately 82,674 acres
were under a reservation (in a deed of December, 1935) which covered all
oil, gas, sulphur and other minerals on, in, under or that may be produced
from the lands for a period commencing with the date of the deed and ending
on January 1, 1985, and provided further that if on said latter date
minerals were being produced in paying quantities then the reservation
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would be extended for a five-year period as to an area of one square mile
of which the well is the center and for subsequent extensions for
additional five-year periods so long as paying operations are being
conducted on the premises. The right to prospect for and mine and remove
minerals was further limited by various requirements of the United States.
As described in Item 2(a) above, this reservation expired on January 1,
1985, and the wells then producing on such properties permitted the
registrant to retain until January 1, 1990, about 6,280 acres in the Mercy
Field, West Mercy Field and Moroil Field, and as of January 1, 1995, the
registrant continued to retain 4,017 of such acres, while production
continues. The reservation is extended for an additional five-year term
ending January 1, 2000, at the end of which this acreage will be lost if
there is no production then continuing.
The registrant's mineral interests in its remaining acreages in
Texas are reservations of perpetual mineral rights. In the case of
approximately 7,600 acres, one-thirty-second of the minerals are vested in
the owner of the surface of said properties but with the right in the
registrant to make all leases on the acreage and to keep all bonuses and
rentals received under such leases. In January, 1995, 7,788.55 acres of
these mineral interests were leased under one oil and gas lease for a term
of three years with one option to renew for an additional two years. The
lessee paid a bonus of approximately $311,000 in connection with this
lease. As yet there is no production under this lease.
(3) REAL PROPERTY INTERESTS IN THE STATE OF LOUISIANA.
In January, 1967, the registrant sold approximately 35,000 acres
of Louisiana real property reserving mineral servitudes thereon. Under
Louisiana law the ownership of mineral servitudes not exercised through
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production or drilling to a depth at which production reasonably can be
expected to be found expires by liberative prescription after a period of
such nonuser of ten years. No production or drilling occurred on
approximately 14,000 of the acres sold in 1967 within the ten-year period
and, hence, the registrant's ownership of the mineral servitudes under such
approximately 14,000 acres was extinguished as of January 26, 1977. During
1978, the registrant's ownership of the mineral servitudes under 1,243
additional acres was extinguished because production had been exhausted for
ten years. Mineral servitudes under the remaining acres sold in 1967 have
been extended by drilling or production for various periods expiring after
January 26, 1977. The registrant's rights to approximately 8,530
additional acres of these servitudes expired during 1994.
In the Hurricane Creek Field, Beauregard Parish, Louisiana, 880
acres are held by production which commenced in 1947. The leases of the
registrant in the Hurricane Creek Field provide for one-eighth gross
royalties except as to 160 acres for which the gross royalty is one-fourth.
In 1964, a Unitization Agreement covering one producing sand was executed
by various interested parties in the Hurricane Creek Field so as to permit
a secondary recovery program, and a second Unitization Agreement was
executed in March, 1994.
In the Clear Creek Field, Beauregard Parish, Louisiana,
approximately 600 acres were held under oil and gas leases by production
which commenced in 1955 and were terminated during 1991. The registrant's
interest in this 600 acres will continue for 10 years from this date
pursuant to the Louisiana law concerning mineral servitudes as described
above. In addition, approximately 400 additional acres in Beauregard
Parish, Louisiana, are held under production pursuant to a lease, the
original term of which expired many years ago but which continues by
production.
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The registrant leased approximately 9339 acres of its real
property in Vernon Parish, Louisiana, for a term of four years, pursuant to
the exercise of a geo-option made in early 1991. This lease was extended
for an additional year in 1995, and one well was drilled but it turned out
to be a "dry hole," and there was no production. If there is no further
attempted production by December, 2006, the registrant's rights in this
property will expire.
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(4) REAL PROPERTY INTERESTS IN OKLAHOMA AND KANSAS.
The registrant is the owner of interests in real property in
three counties in eastern Oklahoma and three counties in southeast Kansas,
which ownership consists of approximately 1,385 acres in fee simple, and
approximately 13,511 additional acres of underlying minerals. A
substantial part of such 13,511 acres of mineral ownership is described in
the conveyances or reservations giving rise to such ownership as "coal" or
"coal and asphaltic minerals."
The registrant in the past has also rented the surface of
portions of its lands in Kansas and Oklahoma, largely for agricultural
purposes, under leases of not to exceed one year.
(5) REAL PROPERTY INTERESTS IN THE STATE OF MISSOURI.
In Randolph and Macon Counties, Missouri, the registrant is the
owner of approximately 380 acres in fee simple (having sold 4 acres of
surface land in 1995) and of the minerals underlying 5,837 acres.
Substantially all of the mineral ownership is described in the conveyances
from which it arose as "coal" or "coal and other minerals." The properties
involved were acquired by predecessor companies for the principal purpose
of mining coal therefrom, and extensive mining was conducted thereon by the
predecessors.
The registrant has rented the surface of portions of its lands in
Missouri, largely for agricultural purposes, under leases of not to exceed
one year.
(b) The registrant does not participate in any oil and gas
operations. However, the registrant is the owner of certain properties
(fully described above in this Item), part of which are leased to outside
interests for the production of oil and gas. The registrant receives
bonuses, rentals and royalties for the use of the land and mineral
interests leased by it.
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(6) RETAIL FOOD BUSINESS SEGMENT LEASES.
The operations of the fast food bagel and delicatessen facilities
constituting the Retail Food Business Segment are carried out from premises
leased at the locations specified in Item 1(a) above. The financial
commitments for those leases are described in Note 7 to the accompanying
financial statements.
ITEM 3. LEGAL PROCEEDINGS
(a) There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which the
registrant is a party or of which any of its property is the subject.
There are no material proceedings to which any director, officer of
affiliate of the registrant, any owner of record or beneficially of more
than five percent of any class of voting securities of the registrant, or
any associate of any such director, officer or security holder is a party
adverse to the registrant or has a material interest adverse to the
registrant. Further, there are no administrative or judicial proceedings
involving the registrant arising under any federal, state or local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment or primarily for the purpose of protecting
the environment.
(b) There were no such material legal proceedings which were
terminated during the fourth quarter of the fiscal year covered by this
report.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders through the
solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this item is set forth on the back
cover of the Annual Report as of December 31, 1996, furnished to the
stockholders of the registrant, and attached as an exhibit hereto, which
portion of the Annual Report is incorporated herein by this reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is set forth under the caption
"SELECTED CONSOLIDATED FINANCIAL DATA" in the Annual Report as of December
31, 1996, furnished to the stockholders of the registrant, and attached as
an exhibit hereto, which portion of the Annual Report is incorporated
herein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is set forth under the caption
"MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS" in the Annual Report as of December 31, 1996, furnished to the
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stockholders of the registrant, and attached as an exhibit hereto, which
portion of the Annual Report is incorporated herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements required by this item are as
follows:
Consolidated Balance Sheets as of December 31, 1996 and 1995;
Consolidated Statements of Earnings - Years ended December 31, 1996,
1995 and 1994;
Consolidated Statements of Stockholders' Equity - Years ended December
31, 1996, 1995 and 1994.
Consolidated Statements of Cash Flows - Years ended December 31, 1996,
1995 and 1994;
Notes to Consolidated Financial Statements
These financial statements are filed as a part of this report, beginning on
page 23 hereof, and are incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
(a) The only independent accountant who was engaged during the
registrant's two most recent fiscal years or any subsequent interim period
as the principal accountant to audit the registrant's financial statements
has not resigned (nor indicated it has declined to stand for re-election
after the completion of the current audit) nor was dismissed.
(b) No new independent accountant has been engaged as the principal
accountant to audit the registrant's financial statements during the
registrant's two most recent fiscal years or any subsequent interim period.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth on pages 2, 3 and 4
of registrant's definitive proxy statement filed with the Securities and
Exchange Commission pursuant to Schedule 14A promulgated under the
Securities Exchange Act of 1934, under the caption "ELECTION OF DIRECTORS",
which portion of said definitive proxy statement is incorporated herein by
this reference.
No disclosure is being made herein of reporting person delinquencies
in response to Item 405 of Securities and Exchange Commission regulation S-
K, and the registrant, at the time of filing of this FORM 10-K, has
reviewed the information necessary to ascertain, and has determined that,
Item 405 disclosure is not expected to be contained in this Part III of
FORM 10-K or incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth on pages 2, 3 and 4
of registrant's definitive proxy statement filed with the Securities and
Exchange Commission pursuant to Schedule 14A promulgated under the
Securities Exchange Act of 1934, under the caption "ELECTION OF DIRECTORS",
which portion of said definitive proxy statement is incorporated herein by
this reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth on pages 1, 2 and 3
of registrant's definitive proxy statement filed with the Securities and
Exchange Commission pursuant to Schedule 14A promulgated under the
Securities Exchange Act of 1934, under the captions "VOTING SECURITIES
OUTSTANDING AND VOTING RIGHTS" and "ELECTION OF DIRECTORS", which portions
of said definitive proxy statement are incorporated herein by this
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth on pages 2, 3 and 4
of registrant's definitive proxy statement filed with the Securities and
Exchange Commission pursuant to Schedule 14A promulgated under the
Securities Exchange Act of 1934, under the caption "ELECTION OF DIRECTORS,"
which portion of said definitive proxy statement is incorporated herein by
this reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Independent Auditors' Report
2. Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Earnings - Years ended December 31,
1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity - Years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - Years ended December
31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
3. Consolidated Financial Statement Schedules:
All schedules are omitted as none are currently required.
4. Exhibits:
(3) (i) Certificate of Incorporation (including all
amendments to date) is incorporated herein by reference to
Exhibit (3) to the Annual Report on Form 10-K for the
registrant for the fiscal year ended December 31, 1989.
(ii) Bylaws (including all amendments to date) are
incorporated herein by reference to Exhibit 3(ii) to the
Annual Report on Form 10-K for the registrant for the
fiscal year ended December 31, 1993.
(10) Material Contracts:
(iii)(A) Central Coal & Coke Corporation's Directors Non-
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Qualified Stock Option Plan is incorporated herein by
reference to Exhibit (10)(iii)(A) to the Annual Report on
Form 10-K for the registrant for the fiscal year ended
December 31, 1994. This Plan was approved by the
registrant's stockholders at the Annual Meeting held April
19, 1995, and is discussed in the Definitive Proxy
Statement for that meeting previously filed with the
Commission and in the Definitive Proxy Statement for the
Annual Meeting of Stockholders to be held April 16, 1997
previously filed with the Commission.
(13) Portions of the Annual Report to security holders for
year ended December 31, 1996 captioned "Selected
Consolidated Financial Data," "Management's Discussion &
Analysis of Financial Condition & Results of Operations"
and "Market for Registrant's Common Equity and Related
Stockholder Matters."
(21) Subsidiaries of the registrant
(b) No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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
By /s/ Beekman Winthrop
________________________________
Beekman Winthrop, President
Date: March 26, 1997
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Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ Beekman Winthrop
________________________________
Beekman Winthrop, President
Principal Executive Officer
Date: March 26, 1997
/s/ Gary Pennington
________________________________
Gary J. Pennington
General Manager, Principal
Financial Officer, and
Date: March 26, 1997 Principal Accounting Officer
By /s/ Leonard Noah
________________________________
Leonard Noah, Director
Date: March 26, 1997
By /s/ Beekman Winthrop
________________________________
Beekman Winthrop, Director
Date: March 26, 1997
By /s/ Ernest N. Yarnevich, Jr.
________________________________
Ernest N. Yarnevich, Jr., Director
-22-
<PAGE> 23
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Index to Consolidated Financial Statements
Independent Auditors' Report
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Earnings - years ended December 31, 1996,
1995 and 1994
Consolidated Statements of Stockholders' Equity - years ended December
31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows - years ended December 31, 1996,
1995 and 1994
Notes to Consolidated Financial Statements
-23-
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
KPMG Peat Marwick, LLP
1000 Walnut, Suite 1600
P.O. Box 13127
Kansas City, MO 64199
The Board of Directors
Central Coal & Coke Corporation
and Subsidiaries:
We have audited the consolidated financial statements of Central Coal & Coke
Corporation and subsidiaries as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Central
Coal & Coke Corporation and subsidiaries as of December 31, 1996 and 1995 and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick, LLP
Kansas City, Missouri
January 17, 1997
-24-
<PAGE> 25
<TABLE>
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Balance Sheets
December 31, 1996 and 1995
(amounts in unit dollars)
<CAPTION>
ASSETS 1996 1995
__________ __________
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,342,844 755,422
Accounts receivable 22,500 22,500
Securities maturing within one year,
at amortized cost (note 2)(fair value
$7,420,525 in 1996 and $8,352,711 in 1995) 7,420,236 8,337,926
Accrued interest receivable 0 38,724
Income Tax Receivable 8,697 0
Other 56,238 43,836
__________ __________
Total current assets 8,850,626 9,198,408
Equity securities, at fair value (note 2) 799,210 576,749
Coal deposits, real estate, equipment
and leasehold improvements (notes 3 and 4):
Coal deposits 1,602,882 1,602,882
Mineral rights 39,988 39,988
Surface land 28,868 29,320
Equipment and leasehold improvements 436,230 379,164
__________ __________
2,107,968 2,051,354
Less accumulated depletion, depreciation
and amortization 720,336 644,965
Net coal deposits, real estate, __________ __________
equipment and leasehold improvements 1,387,642 1,406,389
__________ __________
$ 11,181,546 11,181,546
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses 26,926 25,534
Deferred oil lease bonus 74,166 0
Federal and state income taxes (note 5) 0 218,527
__________ __________
Total current liabilities 101,092 244,061
Deferred income taxes 89,004 38,138
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 9,014,238 8,910,323
__________ __________
11,022,126 10,918,511
Less cost of 11,322 shares in 1996 and
2,858 shares in 1995 held in treasury 335,389 74,058
Net unrealized appreciation (depreciation)
of investments available-for-sale, net of
deferred taxes of $29,559 and $11,164
in 1994 160,645 54,894
__________ __________
Total stockholders' equity 10,847,382 10,899,347
__________ __________
$ 11,037,478 11,181,546
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-25-
<PAGE> 26
<TABLE>
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Earnings
Years ended December 31, 1996, 1995 and 1994
(amounts in unit dollars)
<CAPTION>
1996 1995 1994
_________ _________ _________
<S> <C> <C> <C>
Operating revenue:
Coal royalties (note 3) $ 97,731 102,779 97,303
Oil and gas royalties 776,732 460,597 474,290
Oil and other mineral lease rentals
and bonuses 284,545 437,720 114,065
Food sales 1,117,793 870,380 406,291
_________ _________ _________
Total operating revenue 2,276,801 1,871,476 1,091,949
Operating expenses:
Cost of food sales 459,803 355,500 160,587
Food operations (note 12) 833,698 538,004 243,263
General and administrative expenses 444,058 483,619 363,933
_________ _________ _________
Total operating expenses 1,737,559 1,377,123 767,783
Operating income 539,242 494,353 324,166
Nonoperating income:
Investment income (note 2) 555,674 618,648 433,812
Gain on sale of real estate 37,024 68,162 32,925
Other 2,273 2,077 122
_________ _________ _________
Total nonoperating income 594,971 688,887 466,859
Earnings before income taxes 1,134,213 1,183,240 791,025
Income taxes (note 5) 344,123 352,578 321,611
Net earnings 790,090 830,662 469,414
Earnings per share $ 2.13 2.22 1.26
Weighted average number of
shares of common stock
outstanding 371,507 373,830 373,830
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-26-
<PAGE> 27
<TABLE>
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1996, 1995 and 1994
(amounts in unit dollars)
<CAPTION>
Net
unrealized
appreciation
(depreciation)
Common Addtnal Retained Treasury available
Stock Capital Earnings Stock for sale Total
_______ _________ _________ _________ ________ __________
<S> <C> <C> <C> <C> <C>
Balance,
12/31/93 376,688 1,631,200 8,675,962 (74,058) 0 10,609,792
Net Earnings 0 0 469,414 0 0 469,414
Cash dividends
($1.00 per
share) 0 0 (373,830) 0 0 (373,830)
Net unrealized
depreciation
on investments
available-for-
sale 0 0 0 0 (20,732) (20,732)
Balance,
12/31/94 376,688 1,631,200 8,771,546 (74,058) (20,732) 10,684,644
Net Earnings 0 0 830,662 0 0 830,662
Cash dividends
($1.85 per
share) 0 0 (691,585) 0 0 (691,585)
Net unrealized
depreciation
on investments
available-for-
sale 0 0 0 0 75,626 75,626
Balance,
12/31/95 376,688 1,631,200 8,910,623 (74,058) 54,894 10,899,347
Net Earnings 0 0 790,090 0 0 790,090
Cash dividends
($1.85 per
share) 0 0 (686,475) 0 0 (686,475)
Purchase of
8,464 shares
of common
stock for
treasury 0 0 0 (261,331) 0 (261,331)
Net unrealized
depreciation
on investments
available-for-
sale 0 0 0 0 105,751 105,751
Balance,
12/31/96 376,688 1,631,200 9,014,238 (335,389) 160,645 10,847,382
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-27-
<PAGE> 28
<TABLE>
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
(amounts in unit dollars)
<CAPTION>
1996 1995 1994
___________ ___________ ___________
<S> <C> <C> <C>
Cash flows from operating
activities:
Net earnings $ 790,090 830,662 469,414
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depletion, depreciation
and amortization 79,000 55,837 22,671
Gain on sale of real estate (37,024) (68,162) (32,925)
Gain on sale of equity
securities (66,389) (52,880) (26,331)
Write-off of leasehold
improvements 17,029 0 0
Amortization of premiums and
discounts of securities, net (393,869) (407,477) (165,802)
Deferred income taxes (6,076) (1,421) 0
Changes in assets and
liabilities:
Receivables and other assets 26,322 (1,057) 32,777
Accounts payable and accrued
expenses 1,392 8,213 8,414
Deferred oil lease bonus 74,166 0 0
Federal and state income
taxes (227,224) 178,812 (22,683)
___________ ___________ ___________
Net cash provided by operating
activities 257,417 542,527 285,535
Cash flows from investing
activities:
Proceeds from matured/called
investment debt securities 17,500,000 20,790,000 12,390,000
Purchases of investment debt
securities (16,188,441) (21,507,820) (11,784,302)
Proceeds from sale of land 37,476 68,737 33,500
Purchases of equity securities (524,213) (120,927) (822,089)
Proceeds from sales of equity
securities 530,834 320,376 209,555
Capital expenditures (77,734) (234,838) (78,932)
___________ ___________ ___________
Net cash provided (used) by
investing activities 1,277,922 (684,472) (52,268)
Cash flows from financing
Activities:
Dividends paid (686,475) (691,585) (373,830)
Purchase of common stock for
treasury (261,311) 0 0
___________ ___________ ___________
Net cash used in financing
activities (947,806) 0 0
Net increase (decrease) in cash
and cash equivalents 587,533 (833,530) (140,563)
Cash and cash equivalents,
beginning of year $ 755,422 1,588,952 1,729,515
Cash and cash equivalents,
end of year $ 1,342,955 755,422 1,588,952
Income taxes paid during period $ 577,423 173,766 344,294
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-28-
<PAGE> 29
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
(1) Summary of Significant Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of
Central Coal & Coke Corporation (the Company) and its two wholly-owned
subsidiaries. The Company's subsidiaries are engaged in the ownership and
operation of a fast food bagel/delicatessen business. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposit accounts and a money
market deposit account. For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid debt instruments with
original maturities of three months or less to be cash equivalents.
Investment Securities
Investments in debt and certain equity securities are classified in one of
three categories: (1) held-to-maturity securities, which are carried at
amortized cost; (2) trading securities, which are carried at fair value,
with unrealized gains and losses included in earnings; and (3) available-
for-sale securities, which are carried at fair value, with unrealized
gains and losses excluded from earnings and reported in a separate
component of stockholders' equity, net of related income taxes until
realized.
Premiums and discounts are amortized or accreted over the life of the related
held-to-maturity security as an adjustment to yield using the effective
interest method. Dividend and interest income are recognized when earned.
Realized gains and losses for securities classified as available-for-sale
are included in earnings and are derived using the specific identification
method for determining the cost of securities sold.
Coal Deposits, Real Estate, Equipment and Leasehold Improvements
Coal deposits, mineral rights and surface lands were acquired from the
trustee in bankruptcy for predecessor companies (pursuant to a plan of
reorganization approved by the federal court) and were initially recorded
at the valuations placed thereon by the receivers in bankruptcy in 1931.
Subsequent additions and all other fixed assets are stated at cost.
Maintenance and repairs are charged to expense as incurred. Renewals and
betterments which extend the useful life of the asset are capitalized.
-29-
<PAGE> 30
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
Depreciation, Depletion and Amortization
Equipment and leasehold improvements are depreciated/amortized using the
straight-line method over their estimated useful lives or lease terms
which range from one to ten years.
Depletion of coal deposits is computed at the rate of $.025 per ton of coal
produced or purchased which approximates depletion computed on a wasting-
asset basis.
Coal, Oil and Gas Income
Coal royalties are based on a percentage of the production of land leased
from the Company or, in the case of no production, the minimum annual
royalty (see note 3). Oil and gas royalties are based on a percentage of
the production on land leased from the Company. Oil and other mineral
lease rentals and bonuses are derived from the leasing of land and mineral
rights prior to production.
Oil lease bonuses which relate to future periods are deferred and recognized
as income over the related future periods (generally one year).
Income Taxes
The Company and its subsidiaries file a consolidated federal income tax
return.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities for subsequent changes in tax rates
is recognized in income in the period that includes the tax rate change.
Stock Option Plan
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (APB)
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. As such, compensation expense would be recorded on the
date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company adopted
Statements of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," which permits entities to recognize as
expense over the vesting period the fair value of all stock-based awards
on the date of grant. Alternatively, SFAS No. 123 also allows entities to
continue to apply the provisions of APB Opinion No. 25 and provide pro
forma net income and pro forma earnings per share disclosures for employee
stock option grants made in 1995 and future years as if the fair value-
based method defined in SFAS No. 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No. 25 and
provide the pro forma disclosure provisions of SFAS No. 123 (see note 11).
-30-
<PAGE> 31
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," on January 1, 1996. This statement requires that long-lived assets
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison
of the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell. Adoption of this statement did not have a
material impact on the Company's financial position, results of operations
or liquidity.
Earnings and Dividends Per Common Share
Earnings per common share are based on the weighted average number of common
shares and dilutive common equivalent shares outstanding during the year.
Dividends per share are based on the number of shares outstanding on the
dividend dates of record.
(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 December 31, 1996 and 1995 are
presented below. Substantially all equity securities represent common
stocks of domestic corporations.
<TABLE>
<CAPTION>
Gross Gross
unrealized unrealized
Amortized holding holding Fair
1996 cost gains losses value
__________________ __________ __________ __________ __________
<S> <C> <C> <C> <C>
Held-to-maturity:
U. S. government
agency securities $ 7,420,236 333 44 7,420,525
Available-for-sale:
Equity securities $ 552,064 255,193 (8,047) 799,210
</TABLE>
<TABLE>
<CAPTION>
1995
_________________
<S> <C> <C> <C> <C>
Held-to-maturity:
U. S. government
securities $ 6,356,767 8,622 (340) 6,365,049
U. S. government
agency securities 1,981,159 6,905 (402) 1,987,662
__________ __________ __________ __________
$ 8,337,926 15,527 (742) 8,352,711
Available-for-sale:
Equity securities $ 492,296 111,891 (27,438) 576,749
</TABLE>
-31-
<PAGE> 32
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
At December 31, 1996 and 1995, all U. S. government and government agency
securities mature within one year.
Investment income consists of the following for each of the years in the
three-year period ended December 31, 1996:
<TABLE>
<CAPTION>
1996 1995 1994
__________ __________ __________
<S> <C> <C> <C>
Interest 477,158 545,016 395,959
Dividends 12,127 20,752 11,522
Gross gains on sales of equity
securities 133,030 63,764 40,251
Gross losses on sales of equity
securities (66,641) (10,884) (13,920)
__________ __________ __________
555,674 618,648 433,812
</TABLE>
(3) Coal Deposits
The rights to 14,000 acres of coal deposits totaling approximately 84,000,000
tons of coal in place (of which from 50% to 90% could be expected to be
recoverable) are leased under agreements which extend for periods of two
to twenty years. The agreements provide for minimum annual royalties of
$94,600. Coal deposits aggregating approximately 92,000,000 tons in place
with a net carrying value of approximately $710,000 at December 31, 1996
are not presently leased or producing coal in commercial quantities.
(4) Mineral Rights
At December 31, 1996, the Company owns approximately 64,000 acres of mineral
rights in Missouri, Kansas, Oklahoma, Arkansas, Louisiana and Texas.
(5) Income Taxes
Total income taxes for the years ended December 31, 1996, 1995 and 1994 were
allocated as follows:
<TABLE>
<CAPTION>
1996 1995 1994
__________ __________ __________
<S> <C> <C> <C>
Income tax expense 344,123 352,578 321,611
Stockholders' equity, for unrealized
appreciation (depreciation) on
equity securities 56,942 40,723 (11,164)
__________ __________ __________
401,065 393,301 310,447
</TABLE>
-32-
<PAGE> 33
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
________ ________ ________
<S> <C> <C> <C>
Federal $ 304,988 382,011 268,467
State 39,135 (29,433) 53,144
________ ________ ________
Total income tax expense $ 344,123 352,578 321,611
</TABLE>
Total income tax expense for 1996, 1995 and 1994 includes deferred income tax
benefits of $(6,076), $(1,421) and $0, respectively.
Total income tax expense for 1996, 1995 and 1994 includes deferred income tax
benefits Income tax expense has been provided at effective rates of 30.3%,
29.8% and 40.7% for the years ended December 31, 1996, 1995 and 1994,
respectively. The reasons for the difference between the effective tax
rates and the corporate federal income tax rates of 34.0% in 1996, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
Percentage of earnings
before income taxes
1996 1995 1994
_____ _____ _____
<S> <C> <C> <C>
Expected statutory tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal
income tax effect 2.3 (1.6) 4.3
Depletion of coal deposits (3.7) (2.1) (2.9)
Other, net (2.3) (.5) 5.3
_____ _____ _____
Effective tax rate 30.3% 29.8% 40.7%
</TABLE>
The Company's Missouri corporation income tax returns were examined by the
Missouri Department of Revenue, and additional taxes and interest thereon
were assessed. The Company made certain payments under protest in 1993
and 1994 in connection with the examination adjustments.
In 1995, the Company entered into a settlement agreement with the Missouri
Department of Revenue which settled all issues relating to the
examinations. As a result of this settlement, in 1995 the Company
recorded a reduction to its estimated state income tax accrual established
in prior years amounting to $75,000.
-33-
<PAGE> 34
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1996 and 1995 are presented below:
<TABLE>
<CAPTION>
Deferred tax assets: 1996 1995
________ ________
<S> <C> <C>
Writedown of coal deposits 45,095 45,095
Coal development costs 29,053 29,053
Fixed assets 17,086 10,611
Land sales 14,342 14,452
Organization costs $ 3,034 6,000
Other nondeductible items 4,547 0
________ ________
113,157 105,211
Less valuation allowance (45,095) (45,095)
________ ________
Deferred tax assets 68,062 60,116
</TABLE>
<TABLE>
<CAPTION>
Deferred tax liabilities:
<S> <C> <C>
Depletion and depreciation (70,565) (68,695)
Unrealized appreciation on available-
for-sale securities (86,501) (29,559)
________ ________
Deferred tax liabilities (157,066) (98,254)
Net deferred tax asset (liability) $ (89,004) (38,138)
</TABLE>
(6) Pension Plan
The Company sponsored a defined contribution pension plan for eligible
employees. Contributions to the plan were $1,055 and $1,052 in 1995 and
1994, respectively.
In September 1996, an amendment to the pension plan was approved by the Board
of Directors. The amendment terminated the plan and all participants
became 100% vested in their accounts. No new participants were eligible
to participate in the plan after December 31, 1995.
(7) Operating Leases
The Company has an operating lease on a month-to-month basis for its
administrative office space in Kansas City, Missouri. In addition, the
subsidiaries of the Company have operating leases for certain retail
facilities. Rent expense for operating leases in the aggregate amounted
to $142,190, $90,192 and $47,541 for the years ended December 31, 1996,
1995 and 1994, respectively.
-34-
<PAGE> 35
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
A summary of minimum lease commitments, all of which relate to the food
operation, follows:
<TABLE>
<CAPTION>
Year ended
December 31,
____________
<S> <C>
1997 $ 91,390
1998 69,020
1999 62,400
2000 45,000
2001 30,400
</TABLE>
It is expected that, in the ordinary course of business, leases will be
renewed or replaced.
(8) Disclosures About Fair Value of Financial Instruments
Cash, Cash Equivalents, Trade Receivables and Trade Payables
The carrying amount approximates fair value because of the short maturity of
these financial instruments.
Debt and Equity Securities
The fair values of debt and equity securities are based on quoted market
prices. The fair value of debt and equity securities are disclosed in
note 2.
(9) Related Party Transaction
During February 1994, an Investment Management Agreement was entered into
between the Company and Woodwin Management, Inc. The Company's president
is also the president, director and stockholder of Woodwin Management,
Inc. Under this agreement, the Company has agreed to pay a fee at an
annual rate of .50% of the market value of the assets under management.
Woodwin Management, Inc. is managing the Company's equity securities
portfolio. The fee paid in 1996, 1995 and 1994 to Woodwin Management,
Inc. was $4,530, $3,625 and $1,845, respectively. In the opinion of
management of the Company, the terms of this Investment Management
Agreement are reasonable and competitive.
-35-
<PAGE> 36
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
(10) Business Segment Information
The Company operates in two business segments: energy and retail food. The
energy segment consists of the leasing of real properties and mineral
interests in the midwestern and southern United States to operating
leasees. Coal royalties in 1996 were received from four customers, with
92% being received from one customer. Oil and mineral leases and bonuses
were received from six customers in 1996, with 38% being recognized from
the largest customer. Oil and gas royalties were received from four
customers in 1996, with 97% being received from one customer. The retail
food segment, which commenced in 1993, consists of the operation of a fast
food bagel and delicatessen business with two locations in Ohio, one
location in Pennsylvania and one location in California. Business segment
information for 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Retail
1996 Energy food Total
_________ _________ __________
<S> <C> <C> <C>
Operating revenue $ 1,159,008 1,117,793 2,276,081
Operating income (loss) $ 1,155,701 (264,520) 891,181
General corporate expenses (351,939)
Investment income 555,674
Gain on sale of real estate 37,024
Other 2,273
__________
Earnings before income
taxes $ 1,134,213
Depreciation and depletion $ 2,349 76,651 79,000
Capital expenditures $ 0 77,734 77,734
Identifiable assets $ 1,123,661 349,099 1,472,760
Corporate assets 9,564,718
__________
Total assets $ 11,037,478
</TABLE>
-36-
<PAGE> 37
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
Retail
1995 Energy food Total
_________ _________ __________
<S> <C> <C> <C>
Operating revenue $ 1,001,096 870,380 1,871,476
Operating income (loss) $ 995,757 (119,848) 875,909
General corporate expenses (381,556)
Investment income 618,648
Gain on sale of real estate 68,162
Other 2,077
__________
Earnings before income
taxes $ 1,183,240
Depreciation and depletion $ 2,402 53,435 55,837
Capital expenditures $ 0 234,838 234,838
Identifiable assets $ 1,156,280 338,363 1,494,643
Corporate assets 9,686,903
__________
Total assets $ 11,181,546
</TABLE>
<TABLE>
<CAPTION>
Retail
1994 Energy food Total
_________ _________ __________
<S> <C> <C> <C>
Operating revenue $ 685,658 406,291 1,091,949
Operating income (loss) $ 683,077 (69,513) 613,564
General corporate expenses (289,398)
Investment income 433,812
Gain on sale of real estate 32,925
Other 122
__________
Earnings before income
taxes $ 791,025
Depreciation and depletion $ 2,341 20,330 22,671
Capital expenditures $ 0 78,932 78,932
Identifiable assets $ 1,130,136 145,680 1,275,816
Corporate assets 9,465,864
__________
Total assets $ 10,741,680
</TABLE>
Identifiable assets are those assets used in the Company's operations in
each segment. Corporate assets are principally cash and cash
equivalents and investments in securities. The operating income of each
industry segment includes the revenue generated on transactions
involving products and services within that industry segment less
identifiable and allocated expenses.
-37-
<PAGE> 38
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
(11) Stock Option Plan
In April 1995, the Company adopted a nonqualified stock option plan (the
Plan) pursuant to which the Company's Board of Directors may grant stock
options to Directors in lieu of cash compensation. The Plan authorizes
grants of options to purchase up to 25,000 shares of common stock. Stock
options are granted with an exercise price equal to the stock's fair
market value at the date of grant. All stock options have a term of ten
years and vest and become fully exercisable on the date of grant.
During 1996, 2,500 options were granted with an exercise price of $30.50.
During 1995, 2,500 options were granted with an exercise price of $29.00.
No options were exercised during 1996 or 1995. At December 31, 1996,
there were 20,000 shares available for grant under the Plan.
The per share weighted average fair value of stock options granted during
1996 and 1995 was $1.84 and $2.29 on the date of grant using the Black
Scholes option-pricing model with the following weighted average
assumptions: 1996 - expected dividend yield 6.0%, expected volatility of
9.0%, risk-free interest rate of 6.3% and an expected life of five years;
1995 - expected dividend yield 6.0%, expected volatility of 9.0%, risk-
free interest rate of 6.3% and an expected life of five years.
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock
options in the accompanying consolidated financial statements. Had the
Company determined compensation cost based on the fair value at the grant
date for its stock options under SFAS No. 123, the Company's net earnings
and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1996 1995
__________ __________
<S> <C> <C>
Net Earnings:
As reported $ 790,790 830,662
Pro forma 786,878 826,636
Earnings per share:
As reported 2.13 2.22
Pro forma 2.12 2.21
</TABLE>
-38-
<PAGE> 39
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
(12) Food Operations
Food operations of the Company's fast food bagel and delicatessen business
includes the following expenses for the years ended December 31, 1996,
1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
________ ________ ________
<S> <C> <C> <C>
Salaries and wages $ 341,856 228,950 113,996
Occupancy expense 132,296 80,660 38,609
Depreciation and amortization
expense 76,651 53,435 20,330
Utility expense 41,194 28,134 12,763
Other expenses 241,701 146,825 57,565
________ ________ ________
$ 833,698 538,004 243,263
</TABLE>
-39-
[DESCRIPTION] Selected Consolidated Financial Data
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
Years ended December 31 1996 1995 1994
_____________ _____________ _____________
<S> <C> <C> <C>
Total operating revenue $ 2,276,801.00 1,871,467.00 1,091,949.00
Net Earnings 790,090.00 830,662.00 469,414.00
Net Earnings per common share 2.13 2.22 1.26
Cash dividends per common share 1.85 1.85 1.00
Total Assets $ 11,037,478.00 11,181,546.00 10,741,690.00
</TABLE>
<TABLE>
<CAPTION
Years ended December 31 1993 1992
_____________ _____________
<S> <C> <C>
Total operating revenue $ 729,379.00 525,595.00
Net Earnings 453,993.00 489,719.00
Net Earnings per common share 1.22 1.31
Cash dividends per common share 1.00 1.50
Total Assets $ 10,691,097.00 10,583,109.00
</TABLE>
<PAGE>
[DESCRIPTION] Management's Discussion and Analysis
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION
& RESULTS OF OPERATIONS
There was no significant change in the financial condition of the Company
during 1996, 1995, or 1994, and it continues very strong. The liquidity of the
Company continues to be high.
Revenue from oil and gas royalties was up approximately 69% in 1996 over 1995,
but was slightly lower in 1995 than in 1994. The reasons for the increase in
1996 were greater production and somewhat higher oil prices, while the decrease
in 1995 from 1994 was due to lower gas prices and slightly lower production.
Revenue from oil and other mineral lease rentals and bonuses was down
significantly in 1996 from 1995, while 1995 and 1996 were both higher than
1994. Revenue from this source was very high in 1995 due to bonuses from four
new leases made in 1995, including one fairly sizeable lease on a portion of
the Company's Texas property. Also included in revenue from this source during
1995 were substantial rental payments received in 1995 for a lease extension
entered into with respect to certain of the Company's property in Vernon
Parish, Louisiana. Fewer new leases were entered into in 1996 and 1994 than in
1995. As described in note 10 to the accompanying consolidated financial
statements, the above components along with coal royalties, are characterized
as part of the Energy Business Segment and as described in more detail in note
10, operating income from that segment increased substantially in 1996 over
1995 and 1994.
Included in revenue for 1996, 1995 and 1994 was income from food sales which
increased substantially in 1996 over 1995 and in 1995 over 1994. These
revenues resulted from the operation of Beekman's Deli Systems, Limited
Liability Company, a limited liability company in which the Company is a
majority member (hereinafter "Beekman's"). Only one fast food bagel and
delicatessen facility was in operation in early 1994 (that being the one in
Athens, Ohio), with a second facility (located in Columbus, Ohio) being opened
in the third quarter of 1994, and a third facility (located in State College,
Pennsylvania) opening in the third quarter of 1995, and a fourth facility being
opened in May of 1996 in an area of San Diego, California known as Pacific
Beach. The increased number of facilities in operation primarily accounts for
the increased revenue in the current periods, over the earlier periods under
comparison. The results of operation of the Pacific Beach location have been
disappointing and it is scheduled to be closed upon termination of the Lease as
of March 31, 1997. New locations continue to be under investigation, but there
are no specific plans for new facilities at this time.
Revenue from investment income was down somewhat in 1996 from 1995 and was
higher in 1995 than 1994. The decrease in 1996 was due to a somewhat lower
rate of return on investments, and a slightly smaller amount of funds being
invested while both the rate of return and amount of funds invested were higher
in 1995 than in 1994. Revenue from gain on sale of real estate was down
substantially in 1996 from 1995 and 1995 was higher than 1994. This reflects
the sale of more surface real estate in 1995 than in either 1996 or 1994. Also
contained in this category was a gain from the sale of timber on certain of the
Company's real properties in 1995 which did not occur in either 1996 or 1994.
Included in operating expenses are cost of food sales and food operations.
Both occur in connection with the fast-food bagel and delicatessen business now
being conducted by Beekman's as discussed above. The primary reason for the
increased amount of expenditures in these categories in 1996 over 1995 and 1995
over 1994 is the same as explained above in connection with revenue from this
operation, that during the earlier periods under comparison there were fewer
facilities in operation than in the more recent periods.
Also contributing to the increased operating expenses in the current periods
were increased payments to outside service providers in connection with the
bagel and delicatessen business. Contributing to the higher general and
administrative expenses in 1995 over both 1996 and 1994 were professional
expenses in connection with the successful resolution in 1995 of disputes with
the Missouri Department of Revenue regarding state income taxes for several
years.
In 1996 Congress passed and President Clinton signed legislation increasing the
minimum wage in two increments. Since Beekman's employs a number of workers at
the prevailing minimum wage, an increase in labor expense is anticipated, but
at this time the Company is unable to predict the effect of this increase on
its net income from this operation.
Income taxes were somewhat lower in 1996 than in 1995 as a result of decreased
earnings before income taxes, while they were higher in 1995 than in 1994 due
to increased earnings before income taxes in 1995. The effective tax rate in
1995 was lower than 1996 and 1994 due to a reduction of $75,000 in the
Company's estimated state income tax accrual as a result of the settlement with
the Missouri Department of Revenue described above.
Cash flows from operating activities were $257,417, $542,527 and $285,535 for
the years ended December 31, 1996, 1995 and 1994, respectively. The decrease
in 1996 compared to 1995 is principally attributable to the timing of federal
and state income tax payments and tax refunds received in 1995. The increase
in 1995 compared to 1994 is principally attributable to tax payments and lower
net earnings in 1994.
Cash flows from investing activities provided cash of $1,277,922 in 1996 and
used cash of $684,472 and $52,268 in 1995 and 1994, respectively. The changes
between years principally reflect the differences in the amount of proceeds
from matured/called investment debt securities which were reinvested. In
addition, 1995 reflects higher capital expenditures related to the retail food
operations. Significant uses of the excess proceeds over the amounts
reinvested in debt securities in 1996 included the payment of dividends of
$686,475, the purchase of common stock for treasury of $261,331 and an increase
in cash and cash equivalents.
Because of the nature of the Company's businesses, inflation has little impact
on its expenses. It is not anticipated that changes in the price of coal will
have much impact on the income of the Company because of continuing low
activity of coal extraction and because the Company's existing coal leases have
fixed prices per ton and are not affected by market changes. Substantially
increased prices could cause an increase in the amount of coal mined, however.
As is indicated in the discussion above concerning revenue from oil and gas
royalties, changes in the price of oil do have an impact on the income of the
Company. Other than the possible impact of the increase of minimum wage
discussed above, it is not anticipated that in the foreseeable future inflation
will have an impact on the income or expenses of the fast-food bagel and
delicatessen business.
Although it has been previously anticipated that the fast-food bagel and
delicatessen business would be expanded into additional new locations, the
operating results of this venture have been mixed, and the Company is
rethinking its strategy. The initial two locations operate profitably, but
overall profitability has not been achieved, and the Company may not follow
through with the anticipated expansion.
In addition to reevaluating the direction of the fast-food bagel and
delicatessen business as described above, the Company does continue to actively
seek and evaluate other business opportunities which would 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 to attempt to lease more of its
mineral properties in order to generate more rental, bonus and royalty income.
During 1995 two significant new oil leases were entered into, one on the
Company's Walker County, Texas property and the other on its Arkansas property,
together generating an aggregate of approximately $330,000 in bonus income, and
a lease extension was entered into with respect to property in Vernon Parish,
Louisiana which generated in excess of $90,000 in bonus and rental income in
1995. Three new leases were made in 1996 generating bonus income, including a
methane gas lease which was entered into with respect to certain of the
Company's real property in Sebastian County, Arkansas which generated a
sizeable bonus which was received in early 1996. An additional rental payment
was received later in the year in 1996.
The Company's dividends per share was $1.85 in 1996 and the same amount in
1995, compared to a $1.00 per share in 1994.
<PAGE>
[DESCRIPTION] Market for Registrant's Common Equity
The common stock of Central Coal & Coke Corporation is traded over the
counter. The approximate number of stockholders of the Company's common
stock at December 31, 1996 was 530. The range of bid and asked quotations
and the dividends paid on such securities for each quarterly period during
the Company's two most recent years are as follows:
<TABLE>
<CAPTION>
1996
Bid Asked Dividends
Low High Low High Per Share
_____ _____ _____ _____ _________
<S> <C> <C> <C> <C> <C>
1st Quarter $ 30.00 30.50 .00 .00 $ .00
2nd Quarter 30.00 30.50 .00 .00 .25
3rd Quarter 31.00 32.00 .00 .00 .00
4th Quarter 30.25 31.00 .00 .00 1.60
For Year $ 30.25 31.00 .00 .00 $ 1.85
</TABLE>
<TABLE>
<CAPTION>
1995
Bid Asked Dividends
Low High Low High Per Share
_____ _____ _____ _____ _________
<S> <C> <C> <C> <C> <C>
1st Quarter $ 27.00 28.50 .00 .00 $ .00
2nd Quarter 27.50 29.00 .00 .00 .25
3rd Quarter 28.00 30.00 .00 .00 .00
4th Quarter 28.00 33.00 .00 .00 1.60
For Year $ 27.00 33.00 .00 .00 $ 1.85
</TABLE>
Exhibit 21
Subsidiaries of the Registrant
Set forth below are the subsidiaries of the Registrant and their respective
jurisdictions of incorporation or organization, as of December 31, 1996
The subsidiaries are included in the Consolidated Financial Statements
filed herewith.
<TABLE>
<CAPTION>
Jurisdiction of
Incorporation
Subsidiary Or Organization
____________________________ ________________
<S> <C>
CCC Capital Corporation Missouri
Beekman's Deli Systems,
Limited Liability Company Ohio
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1342955
<SECURITIES> 7420236
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8850626
<PP&E> 2107968
<DEPRECIATION> 720326
<TOTAL-ASSETS> 11037478
<CURRENT-LIABILITIES> 101092
<BONDS> 0
<COMMON> 376688
0
0
<OTHER-SE> 10470694
<TOTAL-LIABILITY-AND-EQUITY> 10847382
<SALES> 1117793
<TOTAL-REVENUES> 2276801
<CGS> 459803
<TOTAL-COSTS> 1737559
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1134213
<INCOME-TAX> 344123
<INCOME-CONTINUING> 790090
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 790090
<EPS-PRIMARY> 2.13
<EPS-DILUTED> 2.13
</TABLE>
