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, 1997
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
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
127 West 10th Street, Suite 666, Kansas City, Missouri 64105
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(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code: 816/842-2430
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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
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 [ ]
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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 (160,696 shares), as of February 6, 1998 was $5,021,750.
The number of shares outstanding of the issuer's only class of common stock
as of December 31, 1997, is as follows:
Common Stock ($1.00 Par Value) . . . . . . 356,595
(This figure does not include 20,093 shares of treasury stock)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to security holders for fiscal year
ended December 31, 1997, 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 18, 1998, relative to the
Annual Meeting of Stockholders to be held on April 15, 1998. (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 fourth facility
located in an area of San Diego, California known as Pacific Beach was opened
early in 1996. The results of operation of the Pacific Beach location were
disappointing and it was closed upon termination of the Lease as of March 31,
1997. The registrant had invested approximately $909,790 in the aggregate in
this venture as of December 31, 1997. Other than the closing of the Pacific
Beach location, 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. As described more fully in Management's Discussion & Analysis
of Financial Condition & Results of Operations described in Item 7 of this
report, due to continuing operating losses, the carrying value of the assets
of this venture were adjusted as of the end of 1997 as reflected in the
accompanying financial statements and Note 1 thereto. At this time registrant
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has no further expansion plans for this venture.
In addition, 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
1997, the registrant had two reportable segments which are identified as the
Energy Business Segment and the Retail Food Business Segment. See Note 10
to the accompanying 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
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
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$8,900, and in 1997 sold approximately 88.17 acres in that county for a gain
of $37,309.50. In 1997 the registrant sold 1.75 acres of surface land in
Sebastian County, Arkansas, for for a gain of $800, in 1996 had sold 7.25
acres of surface land in that county for a gain of $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. In addition, in 1997 the registrant sold a waiver of surface rights
on 7.21 acres of its Walker County, Texas property for $2,500. 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 (which facility was closed in 1997 as discussed above). 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 took place in 1997 on which the registrant spent
approximately $1,100 during that year. The financial impact upon the
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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
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
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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
$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, and as
experienced with the Pacific Beach, California location described above,
profitable operations on a continuing basis may not be feasible at some of
the locations.
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 60 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 1,699 acres in fee
simple, of minerals underlying approximately 16,406 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, and 1.75 acres in 1997.
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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. In 1997 another 120 acres were leased
for a 3-year term. As yet there is no production under any of these 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
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minerals were being produced in paying quantities then the reservation
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, which
the lessee has exercised in January 1998, upon payment of approximately
$194,000 to the registrant. The lessee originally paid a bonus of
approximately $311,000 in connection with the initial term of this lease.
As yet there is no production under this lease. In 1997 one additional lease
was made on 241.73 acres of registrant's Walker, Texas property, and as yet
there is no production on this lease.
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(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
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
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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.
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. This property is currently
available for lease and 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 292 acres in fee simple (having sold 4 acres of
surface land in 1995 and approximately 88 acres of surface land in 1997) and
of the minerals underlying 5,825 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.
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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.
(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.
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
(a) The information required in subsection (a) of this item pursuant
to Item 201 of Regulation S-K is set forth on the back cover of the Annual
Report as of December 31, 1997, 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. There have been no sales
of either registered or unregistered securities by the registrant during the
past three years.
(b) There have been no sales of either registered or unregistered
securities by the registrant during the past three years.
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, 1997, 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.
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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, 1997, 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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This item is not applicable to the registrant for 1997 in accordance
with Exchange Act Release No. 38223, because it is not a bank or thrift and
its market capitalization on January 28, 1997 was less than $2.5 billion.
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, 1997 and 1996;
Consolidated Statements of Earnings - Years ended December 31, 1997,
1996 and 1995;
Consolidated Statements of Stockholders' Equity - Years ended December
31, 1997, 1996 and 1995.
Consolidated Statements of Cash Flows - Years ended December 31, 1997,
1996 and 1995;
Notes to Consolidated Financial Statements
These financial statements are filed as a part of this report, beginning on
page 24 hereof, and are incorporated herein by this reference.
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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, 1997 and 1996
Consolidated Statements of Earnings - Years ended December 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity - Years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December
31, 1997, 1996 and 1995
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-
Qualified Stock Option Plan is incorporated herein by
reference to Exhibit (10)(iii)(A) to the Annual Report on
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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 15, 1998
previously filed with the Commission.
(13) Portions of the Annual Report to security holders for
year ended December 31, 1997 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, 1998
-22-
<PAGE> 23
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, 1998
/s/ Gary Pennington
________________________________
Gary J. Pennington
General Manager, Principal
Financial Officer, and
Date: March 26, 1998 Principal Accounting Officer
By /s/ Leonard Noah
________________________________
Leonard Noah, Director
Date: March 26, 1998
By /s/ Beekman Winthrop
________________________________
Beekman Winthrop, Director
Date: March 26, 1998
By /s/ Ernest N. Yarnevich, Jr.
________________________________
Ernest N. Yarnevich, Jr., Director
-23-
<PAGE> 24
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, 1997 and 1996
Consolidated Statements of Earnings - years ended December 31, 1997,
1996 and 1995
Consolidated Statements of Stockholders' Equity - years ended December
31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows - years ended December 31, 1997,
1996 and 1995
Notes to Consolidated Financial Statements
-24-
<PAGE> 25
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, 1997 and 1996
and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 1997, in conformity with
generally accepted accounting principles.
KPMG Peat Marwick, LLP
Kansas City, Missouri
January 16, 1998
-25-
<PAGE> 26
<TABLE>
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Balance Sheets
December 31, 1997 and 1996
(amounts in unit dollars)
<CAPTION>
ASSETS 1997 1996
__________ __________
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,493,966 1,342,844
Accounts receivable 22,500 22,500
Securities maturing within one year,
at amortized cost (note 2)(fair value
$7,443,950 in 1997 and $7,420,525 in 1996) 7,443,948 7,420,236
Income Tax Receivable 0 8,697
Other 46,382 56,238
__________ __________
Total current assets 9,006,796 8,850,626
Equity securities, at fair value (note 2) 828,797 799,210
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 28,115 28,868
Equipment and leasehold improvements 284,373 436,230
__________ __________
1,955,358 2,107,968
Less accumulated depletion, depreciation
and amortization 785,537 720,336
Net coal deposits, real estate, __________ __________
equipment and leasehold improvements 1,169,821 1,387,642
__________ __________
$ 11,005,414 11,037,478
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses 16,962 26,926
Deferred oil lease bonus 0 74,166
Federal and state income taxes (note 5) 26,520 0
__________ __________
Total current liabilities 43,482 101,092
Deferred income taxes (note 5) 69,840 89,004
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 9,252,798 9,014,238
Less cost of 20,093 shares in 1997 and
11,322 shares in 1996 held in treasury (599,032) 335,389
Net unrealized appreciation of investments
available-for-sale, net of deferred taxes
of $124,082 in 1997 and $86,501 in 1996 230,438 160,645
__________ __________
Total stockholders' equity 10,892,092 10,847,382
__________ __________
$ 11,005,414 11,037,478
<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 Earnings
Years ended December 31, 1997, 1996 and 1995
(amounts in unit dollars)
<CAPTION>
1997 1996 1995
_________ _________ _________
<S> <C> <C> <C>
Operating revenue:
Coal royalties (note 3) $ 99,101 97,731 102,779
Oil and gas royalties 861,829 776,732 460,597
Oil and other mineral lease rentals
and bonuses 145,495 284,545 437,720
Food sales 901,835 1,117,793 870,380
_________ _________ _________
Total operating revenue 2,008,260 2,276,801 1,871,476
Operating expenses:
Cost of food sales 359,090 459,803 355,500
Food operations (note 12) 687,112 833,698 538,004
General and administrative expenses 354,383 444,058 483,619
Asset impairment charge (note 1) 158,309 0 0
_________ _________ _________
Total operating expenses 1,558,894 1,737,559 1,377,123
Operating income 449,366 539,242 494,353
Nonoperating income:
Investment income (note 2) 627,622 555,674 618,648
Gain on sale of real estate 37,365 37,024 68,162
Other 3,696 2,273 2,077
_________ _________ _________
Total nonoperating income 668,683 594,971 688,887
Earnings before income taxes 1,118,049 1,134,213 1,183,240
Income taxes (note 5) 340,211 344,123 352,578
Net earnings 777,838 790,090 830,662
Earnings per share $ 2.15 2.13 2.22
Weighted average number of
shares of common stock
outstanding 361,790 371,507 373,830
<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 Stockholders' Equity
Years ended December 31, 1997, 1996 and 1995
(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,
12/31/94 376,688 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
Net Earnings 0 0 777,838 0 0 777,838
Cash dividends
($1.50 per
share) 0 0 (539,278) 0 0 (539,278)
Purchase of
8,771 shares
of common
stock for
treasury 0 0 0 (263,643) 0 (263,643)
Net unrealized
depreciation
on investments
available-for-
sale 0 0 0 0 69,793 69,793
Balance,
12/31/97 376,688 1,631,200 9,252,798 (599,032) 230,438 10,892,092
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-28-
<PAGE> 29
<TABLE>
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Consolidated Statements of Cash Flows
Years ended December 31, 1997, 1996 and 1995
(amounts in unit dollars)
<CAPTION>
1997 1996 1995
___________ ___________ ___________
<S> <C> <C> <C>
Cash flows from operating
activities:
Net earnings $ 777,838 790,090 830,662
Adjustments to reconcile net
earnings to net cash provided by
operating activities:
Depletion, depreciation
and amortization 65,213 79,000 55,837
Asset impairment charge 158,309 0 0
Gain on sale of real estate (37,365) (37,024) (68,162)
Gain on sale of equity
securities (160,800) (66,389) (52,880)
Write-off of leasehold
improvements 0 17,029 0
Amortization of premiums and
discounts of securities, net (403,754) (393,869) (407,477)
Deferred income taxes (56,745) (6,076) (1,421)
Changes in assets and
liabilities:
Receivables and other assets 18,553 26,322 (1,057)
Accounts payable and accrued
expenses (9,964) 1,392 8,213
Deferred oil lease bonus (74,166) 74,166 0
Federal and state income
taxes 26,520 (227,224) 178,812
___________ ___________ ___________
Net cash provided by operating
activities 303,639 257,417 542,527
Cash flows from investing
activities:
Proceeds from matured/called
investment debt securities 26,500,000 17,500,000 20,790,000
Purchases of investment debt
securities (26,119,958) (16,188,441) (21,507,820)
Proceeds from sale of land 38,118 37,476 68,737
Purchases of equity securities (246,601) (524,213) (120,927)
Proceeds from sales of equity
securities 485,188 530,834 320,376
Capital expenditures (6,454) (77,734) (234,838)
___________ ___________ ___________
Net cash provided (used) by
investing activities 650,293 1,277,922 (684,472)
Cash flows from financing
Activities:
Dividends paid (539,278) (686,475) (691,585)
Purchase of common stock for
treasury (263,643) (261,311) 0
___________ ___________ ___________
Net cash used in financing
activities (802,921) (947,806) 0
Net increase (decrease) in cash
and cash equivalents 151,011 587,533 (833,530)
Cash and cash equivalents,
beginning of year $ 1,342,955 755,422 1,588,952
Cash and cash equivalents,
end of year $ 1,493,966 1,342,955 755,422
Income taxes paid during period $ 361,739 577,423 173,766
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
-29-
<PAGE> 30
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(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 as either
held-to-maturity securities, which are carried at amortized cost or
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.
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 five to seven 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.
-30-
<PAGE> 31
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
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).
Advertising
Costs of advertising are expensed as incurred. Amounts charged to expense
were not significant for the years ended December 31, 1997, 1996 and 1995.
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).
-31-
<PAGE> 32
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.
During the fourth quarter of 1997, the Company performed an impairment analysis
of its long-lived assets used in its fast food bagel/delicatessen business
as a result of continuing operating losses. In connection with this
analysis, the Company recognized an impairment charge of $158,309 ($95,645
after tax, or $.26 per share).
The impairment charge represented a reduction of the carrying amounts of
equipment and leasehold improvements to their estimated fair values. For
assets to be held and used in the business, estimated fair value was based
on estimated future cash flows. The estimated fair value for an
insignificant amount of assets to be disposed of was determined by using
estimated selling prices.
Earnings and Dividends Per Share
Earnings per share are based on the weighted average number of common shares
outstanding. Dilutive earnings per share are based on the weighted average
number of common shares adjusted for equivalent shares outstanding during
the year. Dividends per share are based on the number of shares outstanding
on the dividend dates of record.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings Per Share, which revised the calculation and
presentation provisions of Accounting Principles Board Opinion 15 and
related interpretations. Statement No. 128 became effective for the
Company's fiscal year ending December 31, 1997. Basic and diluted
earnings per share amounts have been presented for all periods. There
was no effect on reported earnings per share upon implementation of
Statement No. 128.
Use of Estimates
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.
-32-
<PAGE> 33
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
(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, 1997 and 1996 are
presented below. Substantially all equity securities represent common
stocks of domestic corporations.
<TABLE>
<CAPTION>
Gross Gross
unrealized unrealized
Amortized holding holding Fair
1997 cost gains losses value
__________________ __________ __________ __________ __________
<S> <C> <C> <C> <C>
Held-to-maturity:
U. S. government
agency securities $ 7,443,948 113 (111) 7,443,950
Available-for-sale:
Equity securities $ 474,277 388,761 (34,241) 828,797
</TABLE>
<TABLE>
<CAPTION>
1996
_________________
<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>
At December 31, 1997 and 1996, all U. S. government and government agency
securities mature within one year.
Investment income consists of the following for each of the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
__________ __________ __________
<S> <C> <C> <C>
Interest 455,734 477,158 545,016
Dividends 11,088 12,127 20,752
Gross gains on sales of equity
securities 201,682 133,030 63,764
Gross losses on sales of equity
securities (40,882) (66,641) (10,884)
__________ __________ __________
627,622 555,674 618,648
</TABLE>
-33-
<PAGE> 34
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
(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 twelve years. The agreements provide for minimum annual royalties of
$91,700. Coal deposits aggregating approximately 92,000,000 tons in place
with a net carrying value of approximately $710,000 at December 31, 1997
are not presently leased or producing coal in commercial quantities.
(4) Mineral Rights
At December 31, 1997, 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, 1997, 1996 and 1995 were
allocated as follows:
<TABLE>
<CAPTION>
1997 1996 1995
__________ __________ __________
<S> <C> <C> <C>
Income tax expense 340,211 344,123 352,578
Stockholders' equity, for unrealized
appreciation (depreciation) on
equity securities 37,581 56,942 40,723
__________ __________ __________
377,792 401,065 393,301
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
________ ________ ________
<S> <C> <C> <C>
Federal $ 302,561 304,988 382,011
State 37,650 39,135 (29,433)
________ ________ ________
Total income tax expense $ 340,211 344,123 352,578
</TABLE>
Total income tax expense for 1997, 1996 and 1995 includes deferred income tax
benefits of $(56,745), $(6,076) and $(1,421), respectively.
-34-
<PAGE> 35
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
Income tax expense has been provided at effective rates of 30.4%, 30.3%
and 29.8% for the years ended December 31, 1997, 1996 and 1995,
respectively. The reasons for the difference between the effective tax
rates and the corporate federal income tax rates of 34.0% in 1997, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
Percentage of earnings
before income taxes
1997 1996 1995
_____ _____ _____
<S> <C> <C> <C>
Expected statutory tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal
income tax effect 2.2 2.3 (1.6)
Depletion of coal deposits (3.7) (3.7) (2.1)
Other, net (2.1) (2.3) (.5)
_____ _____ _____
Effective tax rate 30.4% 30.3% 29.8%
</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.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1997 and 1996 are presented below:
<TABLE>
<CAPTION>
Deferred tax assets: 1997 1996
________ ________
<S> <C> <C>
Writedown of coal deposits 45,095 45,095
Asset impairment charge 62,664 0
Coal development costs 29,053 29,053
Fixed assets 18,450 17,086
Land sales 13,801 14,342
Organization costs 2,485 3,034
Other nondeductible items 2,319 4,547
________ ________
173,867 113,157
Less valuation allowance (45,095) (45,095)
________ ________
Deferred tax assets 128,772 68,062
</TABLE>
<TABLE>
<CAPTION>
Deferred tax liabilities:
<S> <C> <C>
Depletion of coal deposits (74,530) (70,565)
Unrealized appreciation on available-
for-sale securities (124,082) (86,501)
________ ________
Deferred tax liabilities (198,612) (157,066)
Net deferred tax asset (liability) $ (69,840) (89,004)
</TABLE>
-35-
<PAGE> 36
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
(6) Pension Plan
The Company sponsored a defined contribution pension plan for eligible
employees. 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. Contributions to the plan were $1,055 in 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 $118,908, $142,190 and $90,192 for the years ended December 31, 1997,
1996 and 1995, respectively.
A summary of minimum lease commitments, all of which relate to the food
operation, follows:
<TABLE>
<CAPTION>
Year ended
December 31,
____________
<S> <C>
1998 $ 96,520
1998 89,900
1999 72,500
2000 57,900
2001 13,750
</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.
-36-
<PAGE> 37
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
(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 1997, 1996 and 1995 to Woodwin Management,
Inc. was $5,997, $4,530 and $3,625, respectively. In the opinion of
management of the Company, the terms of this Investment Management
Agreement are reasonable and competitive.
(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 1997, 1996 and 1995 were received from three,
four and three customers, with 91%, 92% and 87% being received from the
largest customer. Oil and mineral leases and bonuses were received from
nine, six and four customers in 1997, 1996 and 1995, with 51%, 38% and 71%
being recognized from the largest customer. Oil and gas royalties were
received from twelve, four and four customers in 1997, 1996 and 1995, with
97%, 97% and 96% 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 which closed in March 1997.
Business segment information for 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Retail
1997 Energy food Total
_________ _________ __________
<S> <C> <C> <C>
Operating revenue $ 1,106,425 901,835 2,008,260
Operating income (loss) $ 1,102,886 (373,593) 729,293
General corporate expenses (279,967)
Investment income 627,662
Gain on sale of real estate 37,365
Other 3,696
__________
Earnings before income
taxes $ 1,118,049
Depreciation and depletion $ 2,365 62,848 65,213
Capital expenditures $ 0 6,454 6,454
Identifiable assets $ 1,120,067 112,582 1,232,649
Corporate assets 9,772,765
__________
Total assets $ 11,005,414
</TABLE>
-37-
<PAGE> 38
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
<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>
<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>
-38-
<PAGE> 39
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES
KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
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.
(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 1997, 2,500 options were granted with an exercise price of $30.50.
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 1997, 1996 or 1995. At December 31, 1997,
there were 17,500 shares available for grant under the Plan.
The per share weighted average fair value of stock options granted during
1997, 1996 and 1995 was $2.64, $1.84 and $2.29, respectively, on the date
of grant using the Black Scholes option-pricing model with the following
weighted average assumptions: 1997 - expected dividend yield 6.0%,
expected volatility of 15.0%, risk-free interest rate of 5.66% and an
expected life of five years; 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>
1997 1996 1995
__________ __________ __________
<S> <C> <C> <C>
Net Earnings:
As reported $ 777,838 790,790 830,662
Pro forma 777,329 786,878 826,636
Earnings per share:
As reported 2.15 2.13 2.22
Pro forma 2.14 2.12 2.21
</TABLE>
-39-
<PAGE> 40
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, 1997,
1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
________ ________ ________
<S> <C> <C> <C>
Salaries and wages $ 282,931 341,856 228,950
Occupancy expense 109,132 132,296 80,660
Depreciation and amortization
expense 62,848 76,651 53,435
Utility expense 38,224 41,194 28,134
Other expenses 193,977 241,701 146,825
________ ________ ________
$ 687,112 833,698 538,004
</TABLE>
-40-
[DESCRIPTION] Selected Consolidated Financial Data
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
Years ended December 31 1997 1996 1995
_____________ _____________ _____________
<S> <C> <C> <C>
Total operating revenue $ 2,008,260.00 2,276,801.00 1,871,467.00
Net Earnings 777,838.00 790,090.00 830,662.00
Net Earnings per common share 2.15 2.13 2.22
Cash dividends per common share 1.50 1.85 1.85
Total Assets $ 11,005,414.00 11,037,478.00 11,181,546.00
</TABLE>
<TABLE>
<CAPTION
Years ended December 31 1994 1993
_____________ _____________
<S> <C> <C>
Total operating revenue $ 1,091,949.00 729,379.00
Net Earnings 469,414,00 453,993.00
Net Earnings per common share 1.26 1.22
Cash dividends per common share 1.00 1.00
Total Assets $ 10,741,690.00 10,691,097.00
</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 1997, 1996, or 1995, and it continues very strong. The liquidity of the
Company continues to be high.
Revenue from oil and gas royalties was up approximately 11% in 1997 over 1996,
and up approximately 69% in 1996 over 1995. The reasons for the increases in
the current periods were greater production and somewhat higher oil prices.
Revenue from oil and other mineral lease rentals and bonuses was down
substantially in 1997 from 1996, and also down in 1996 from 1995. One component
of revenue from this source is bonuses on new mineral leases made, and there
was unusually high revenue in 1995 due to four new leases being made in that
year, 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.
In 1996 and 1997, there were fewer new leases made generating bonus income, and
less property in the aggregate was under lease during the current periods
resulting in less rental income payments than in the earlier years under
comparison. As described in note 1 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 revenue from that segment was slightly less in the aggregate in 1997
than in 1996, but higher in both of those years from 1995.
Revenue from food sales decreased in 1997 from 1996 approximately 19%, while
increasing in 1996 over 1995 by approximately 28%. Revenue from this source
results 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"). By the end of 1995 there were three fast-food bagel
and delicatessen facilities in operation (Athens, Ohio; Columbus, Ohio; and
State College, Pennsylvania). A fourth facility was opened in May of 1996 in
an area of San Diego, California known as Pacific Beach, however this facility
was closed at the end of March, 1997, because of disappointing sales. Thus,
fewer facilities were in operation during most of 1997 (three facilities) than
in 1996 (four facilities), partially accounting for the reduced sales revenue.
Also, sales from the existing facilities did fall somewhat in 1997 as compared
to 1996, and this also contributed to the reduction in revenue from this
source. Due to the continuing operating losses, the carrying value of the
assets of this venture were adjusted as of the end of 1997 as reflected in the
accompanying financial statements and Note 1 thereto. At this time the Company
has no further expansion plans for this venture.
Revenue from investment income was up approximately 13% in 1997 over 1996,
while 1996 investment income was down approximately 10% from 1995. The
increase in 1997 over 1996 was due primarily to capital gains realized on sales
of equity securities in the current year, partially offset by slightly lower
rate of return on temporary fixed income investments during the current year.
The decrease in 1996 from 1995 was due to a somewhat lower rate of return on
investments, and a slightly smaller amount of funds being invested. Revenue
from gain on sales of real estate was approximately the same in 1997 and 1996,
but was down substantially in both years from 1995. This reflects the sale of
more surface real estate in 1995 than in either 1996 or 1997. 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 1997.
Included in operating expenses are cost of food sales and food operations.
Cost of food sales was substantially down in 1997 from 1996, but was up in 1996
over 1995. Cost of food sales is directly related to food sales made which, as
explained above, was down in 1997 compared to 1996, but up in 1996 over 1995.
Expenses categorized as food operations were also down in 1997 from 1996 and up
in 1996 over 1995 primarily because of fewer facilities being operated in 1997
and 1995 than in 1996.
As has been referred to in last year's Annual Report, legislation was passed in
1996 increasing the federal minimum wage. Beekman's employs a number of
workers at the prevailing minimum wage, and thus is experiencing somewhat
increased labor expenses which has been partially offset by price increases
which results in a nominal overall impact on the results of operations.
General and administrative expenses were down approximately 20% in 1997 from
1996 and down approximately 8% in 1996 from 1995. The decrease in 1997 from
1996 was due primarily to reduced payments to outside service providers,
particularly in connection with the operation of the bagel and delicatessen
business. Contributing to the higher general and administrative expenses in
1995 over both 1996 and 1997 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.
Income taxes were slightly lower in 1997 from 1996 and in 1996 from 1995 as a
result of decreased earnings before income taxes. The effective tax rate was
slightly higher in 1997 than in 1996, and in both 1997 and 1996 over 1995 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 in 1995
described above.
In 1997, FASB issued SFAS No. 130 (Reporting Comprehensive Income) and SFAS No.
131 (Disclosures about Segments of an Enterprise and Related Information).
SFAS No. 130 is effective for the period ending March 31, 1998. SFAS No. 131
is effective for the Company's year ending December 31, 1998. These statements
expand or modify disclosures and will not affect financial position, results of
operations, cash flows or segment reporting.
Cash flows increased both in 1997 and 1996 but the increase was greater during
1996. Both years were higher than 1995 when there was a net use of cash. The
most significant component of the change between the years reflects the
difference in cash provided by investing activities, specifically differences
in the amounts of proceeds from matured/called investment debt securities which
were reinvested, and the purchases and sales of equity securities during the
year. The change also reflects somewhat lower net earnings in 1997, due in
part to the asset impairment charge explained above, and increased payments for
the purchase of Treasury Stock. These were partially offset by lower income
tax payments in 1997, a decrease in liabilities for deferred oil lease bonuses,
and decreased dividend payments.
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 further increases 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.
As the year 2000 approaches, an issue has 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 Company will incur significant operating expenses or be required to incur
material costs to be year 2000 compliant. In addition, the Company has
relationships with third parties that have a computer system that may not be
year 2000 compliant. To the extent the Company'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 Company's business, financial condition, results
of operations, or business prospects, but given the nature of the Company's
activities, this is not anticipated.
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 cash dividends per share was $1.50 in 1997 and $1.85 in 1996 and
1995.
<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, 1997 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>
1997
Bid Asked Dividends
Low High Low High Per Share
_____ _____ _____ _____ _________
<S> <C> <C> <C> <C> <C>
1st Quarter $ 30.25 31.00 .00 .00 $ .00
2nd Quarter 30.00 30.25 .00 .00 .50
3rd Quarter 29.00 32.00 .00 .00 .00
4th Quarter 29.50 30.50 .00 .00 1.00
For Year $ 29.00 32.00 .00 .00 $ 1.50
</TABLE>
<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>
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, 1997.
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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1493966
<SECURITIES> 7443948
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9006796
<PP&E> 1955358
<DEPRECIATION> 785537
<TOTAL-ASSETS> 11005414
<CURRENT-LIABILITIES> 43482
<BONDS> 0
<COMMON> 376688
0
0
<OTHER-SE> 10515404
<TOTAL-LIABILITY-AND-EQUITY> 11005414
<SALES> 901835
<TOTAL-REVENUES> 2008260
<CGS> 359090
<TOTAL-COSTS> 1558894
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1118049
<INCOME-TAX> 340211
<INCOME-CONTINUING> 777838
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 777838
<EPS-PRIMARY> 2.15
<EPS-DILUTED> 2.15
</TABLE>