ITEM 1. BUSINESS
(a) General Development of Business. The general development of the registrant's current one business segment, the Energy Business Segment is described in the narrative description of the business contained in Section 1(c) hereafter. The registrant historically has been involved in that business segment. The registrant operated in a second business segment, the Retail Food Business Segment which was discontinued in 1998.
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 other than the acquisition of 97,231 shares of treasury stock (194,462 shares after giving effect to the stock dividend described in Note 12 to the accompanying financial statements) in connection with the settlement of disputes described more fully in Item 3 hereof. There has been no material change in the mode of conducting the business of the registrant, other than the change of a majority of Directors in 1999 as described in Item 3.
(b) Financial Information about Industry Segments. During the year 2000, the registrant had one reportable segment which is identified as the Energy Business Segment. For the years prior to 2000 there was a second reportable segment, the Retail Food Business Segment, which was discontinued in 1998. See Note 8 to the accompanying financial statements for more detail as to the discontinuance of the Retail Food Business Segment and financial information with respect thereto. There were no separate segments of the registrant prior to 1993.
(c) Narrative Description of Business. The one current 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 nterests have been held and managed by registrant for lease to others for exploration 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. In 1997 the registrant sold approximately 88.17 acres of surface land in Macon County, Missouri for a gain of $37,309.50, and in 1998 sold approximately 196 acres of surface land in that county for a gain of $85,421.31, and in 1999 sold approximately 26 acres of surface land for a gain of $19,282.38, and in 2000 sold approximately 4.67 acres of surface land for a gain of $3,390.36. In 1998 the registrant sold approximately 41 acres of surface land in Sebastian County, Arkansas, for a gain of $19,923, in 1997 had sold 1.75 acres of surface land in that county for a gain of $800, in 1996 had sold 7.25 acres of surface land in that county for a gain of $6,050. Also sold in 1996 was 45 acres of real property in Pittsburg County, Oklahoma for $31,500, and in 1999 the registrant sold approximately 35 acres of surface land in that county for a gain of $24,207. 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.
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. Registrant's 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, which were due to expire January 1, 2000, unless extended. These properties were evaluated by the appropriate United States government agency to determine what portion of the acreage was in fact extended by production as of that date and what portion did expire and it appears that no material portion of that acreage failed to be extended by production. 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 1,658 acres in fee simple, of minerals underlying approximately 16,447 additional acres, and of a number of town lots in three small towns, all in Sebastian County, Arkansas, having sold approximately 7.25 acres in 1996, 1.75 acres in 1997, and 41 acres in 1998.
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 30 acres of the registrant's Arkansas properties are currently being leased under a coal lease. Another 586 acres were leased in 1993 under two separate oil and gas leases (both to the same lessee) for 5-year terms, one of which expired in 1998 without any production, but the other of which commenced production during that year. In 1997 another 120 acres were leased for a 3-year term. Production commenced on this lease during 1999. In 1998 another 250 acres were leased under three separate oil and gas leases, each for a 3 year term. Production commenced on all three leases during 1999. In 2000, another 119 acres were leased for a 5-year term. As yet there is no production under this lease.
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, one of which expired in 1997 with no production, one of which expired in 1999 with no production, and one of which commenced production in 1998. 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 this lease. In addition, registrant has fractional royalty interests in 13 small producing gas wells which are located on an approximately 7,040 acre tract of which registrant owns 2,192 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 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 approximately 4,017 of such acres, while production continues. The reservation was extended for an additional five-year term which ended January 1, 2000. As discussed in Item 2(a) above,
the property was evaluated to determine what portion thereof the registrant is entitled to retain by production, and what portion thereof has expired, and it appears no material portion thereof expired.
In addition to the wells still under production from the earlier leases, in 1997 one additional lease was made on 241.73 acres of registrant's Walker County, Texas property, and a producing well was drilled on this property during 1999. In year 2000 10 acres were leased for a 3-year term. As yet there is no production under this lease.
The registrant's mineral interests in its remaining acreages of approximately 7,788.55 acres in Texas are reservations of perpetual mineral rights. In the case of approximately 7,600 of those 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, the entire 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. There was no production under this lease, and therefore it expired in January, 2000, and this acreage is now open for 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 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.
The registrant leased approximately 9,339 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.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
(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 1,350 acres in fee simple (having sold approximately 35 acres of surface land located in Pittsburg County, Oklahoma during 1999), and approximately 13,546 additional acres of underlying minerals. A substantial part of such 13,546 acres of mineral ownership is described in the conveyances or reservations giving rise to such ownership as "coal" or "coal and asphaltic minerals."
In the year 2000, 710 acres were leased for a 3-year term. As yet there is no production from this lease. 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 44 acres in fee simple, (having sold 4 acres of surface land in 1995, approximately 88 acres of surface land in 1997, approximately 196 acres of surface land in 1998, and approximately 26 acres of surface land in 1999, and approximately 3 acres of surface land in year 2000) and of the minerals underlying 6,147 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 previously rented the surface of portions of its lands in Missouri, largely for agricultural purposes, under leases of not to exceed one year, but no such leases are in effect at this time.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
(6) RETAIL FOOD BUSINESS SEGMENT LEASES.
The operations of the fast food bagel and delicatessen facilities constituting the Retail Food Business Segment had previously been carried out from leased premises. This business segment was discontinued in 1998 as described above and all leases were either assigned to other unrelated parties or terminated.
(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.
ITEM 3. LEGAL PROCEEDINGS
(a) The 1999 annual meeting of Stockholders of the registrant was held April 21, 1999 pursuant to notice duly sent to the Stockholders as required by law. Management had solicited proxies pursuant to Regulation 14A of the Securities Exchange Act of 1934 to elect a slate of the incumbent Directors consisting of Leonard Noah, Gary J. Pennington, Beekman Winthrop, Phelps M. Wood, and Ernest N. Yarnevich, Jr.
At the meeting Stockholders present in person and by proxy elected an alternative slate of Directors consisting of Ray A. Infantino, Patrick J. Moran, Phelps C. Wood, Phelps M. Wood, and James R. Ukropina.
The shares voted for the alternative slate of Directors totaled 171,270 shares, except for Phelps M. Wood who received votes of 327,063 shares as he received votes cast in favor of the
incumbent slate nominated by management as well as the alternative slate, while votes cast in favor of the incumbent slate nominated by management were 155,792 shares for Messrs, Noah, Pennington and Yarnevich and 155,793 shares for Mr. Winthrop. Cumulative voting was not permitted. (All references to shares in this Item 3(a) are NOT adjusted for the stock dividend of one share of common stock for each common share outstanding distributed February 13, 2001 as described in Note 12 to the accompanying financial statements.)
At the meeting of the newly elected Board of Directors following the Stockholders meeting, the Bylaws of the registrant were amended to increase the number of Directors to seven (7). By motion unanimously adopted, Bruce L. Franke and Beekman Winthrop were offered seats on the Board of Directors. Mr. Franke accepted and Mr. Winthrop expressed his desire to consider the matter further and notify the Board of his acceptance or rejection of the offer by the end of May.
On May 14, 1999, Beekman Winthrop, together with a few other Stockholders, filed a lawsuit in state court in Delaware challenging the results of the election of Directors. The action styled Winthrop, et al v. Central Coal & Coke Corporation, et al, C.A. No. 17162, was pending in the Court of Chancery for the State of Delaware in and for New Castle County. The registrant and all newly elected Directors were named as defendants, and the plaintiffs asked the court to invalidate the election of the new Board. Subsequently, on May 28, 1999 Mr. Winthrop advised the registrant that he declined the invitation to become a Director.
Discovery in the lawsuit proceeded, and a trial was scheduled for August 3, 1999. On July 29, 1999 the record owners of 179,009 shares of common stock of the registrant (a majority of the outstanding shares) executed written consents which were delivered to the registrant on July 29, 1999.
Pursuant to the consents, Phelps M. Wood, Phelps C. Wood, Bruce L. Franke, Ray A. Infantino, Patrick J. Moran and James R. Ukropina were elected Directors of the registrant, confirming the results of the election held at the Annual Meeting on April 21, 1999. The action taken by the written consents was done pursuant to Section 228 of the Delaware General Corporation Law.
Subsequently, on August 5, 1999, the Court issued its Order of Dismissal, dismissing the lawsuit with prejudice, but retaining jurisdiction for purposes of entertaining any application for attorneys' fees and/or court costs. Legal counsel for the defendants and the plaintiffs commenced and continued settlement discussions involving the possible purchase by the registrant of the stock in the registrant owned by the plaintiffs and the resolution of all pending disputes. On or about November 2, 1999 the plaintiffs filed a Motion for Costs and Attorney Fees in the Action requesting the Court to grant their motion in the amount of' $106,956.65 The registrant and the other defendants contested the motion by filing briefs in opposition thereto.
The registrant was advised by its Delaware legal counsel in early November, 1999 that another lawsuit had been filed. This new lawsuit was filed in the United States District Court for the District of Delaware by the same plaintiffs against the Directors of the registrant individually and the registrant as a "Nominal Defendant." This new lawsuit also sought the removal of the Directors of the registrant and sought other relief against the individual Directors, but did not otherwise appear to seek relief against the registrant itself.
On November 23, 1999 Dudley Winthrop, one of the plaintiffs and a Stockholder of the registrant, notified the registrant that he intended to present a resolution for consideration at the
Annual Meeting of Stockholders to be held in April, 2000, and requesting that it be included in the proxy materials for that meeting. The Board of Directors of the registrantsubsequently determined to oppose the resolution and recommend to the Stockholders that they vote against it.
On January 28, 2000 the Vice Chancellor in the Delaware state court action denied the plaintiffs' Motion for Costs and Attorneys Fees.
Settlement discussions continued, and resulted in the execution by all parties on February 29, 2000 of an Agreement of Settlement and Release. According to the terms of this Agreement, the registrant would purchase all shares of stock in the registrant owned by the plaintiffs, totaling 97,231 shares for a purchase price of $33.50 per share, or aggregate consideration of $3,257,238.50. The Board of Directors of the registrant after careful consideration concluded that $33.50 per share was a fair price under the circumstances based upon a review of the registrant's financial statements and considering the costs and risks of continued litigation. The plaintiffs agreed not to pursue any other rights or remedies with respect to any of the pending litigation. Additionally, the plaintiffs agreed to standstill provisions whereby they would not directly or indirectly acquire any interest in the registrant in the future or participate in any proxy solicitation or become a member of a "group" within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934 with respect to the registrant. Additionally, the plaintiffs agreed to withdraw the stockholder proposal submitted November 23, 1999, described above, and to make no further proposals.
The Settlement Agreement was consummated on March 6, 2000 including the closing of the purchase of the plaintiffs' shares on the basis described herein.
As a result of the purchase of the plaintiffs' shares, as of March 7, 2000, there were 255,551 shares issued and outstanding (prior to the stock dividend described above).
Other than as described above, 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, and 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.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Board of Directors of the registrant solicited written consents of the Stockholders pursuant to a Consent Statement filed with the Securities and Exchange Commission December 11, 2000 in accordance with Schedule 14A promulgated under the Securities Exchange Act of 1934. The record owners of 183,608 shares of common stock of the registrant-a majority of the outstanding shares-executed written consents which were delivered to the registrant on or before December 26, 2000. Pursuant to the consents, the "Amended and Restated Certificate of Incorporation of Central Coal & Coke Corporation" in the form attached hereto as Exhibit 3(i)and
incorporated herein by this reference was approved. The Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware on December 26, 2000, and became effective as of December 31, 2000. Among other changes effected by the filing of the Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware, the corporate name of the registrant was changed from "Central Coal & Coke Corporation" to "Central Natural Resources, Inc." and the authorized number of shares have been increased to a total of 2,600,000, 2,500,000 shares of common stock of $1.00 par value and 100,000 shares of preferred stock of $1.00 par value.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The common stock of the registrant is traded over the counter. The approximate number of stockholders as of March 19, 2001 was 400. The range of bid and asked quotations and the dividends paid on such securities for each quarterly period during the registrant's two most recent fiscal years as required by Item 201 of Regulation S-K is set forth on the inside back cover of the Annual Report as of December 31, 2000, 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.
The Board of Directors of the registrant has expressed its current intention to continue paying a $0.25 per share quarterly dividend if the operating results and financial condition of the registrant continue to justify it.
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.
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, 2000, 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.
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 AND ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS" in the Annual Report as of December 31, 2000, 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information concerning quantitative and qualitative disclosures concerning market risk required by Item 305 of Regulation S-K is contained in Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 7 above of this report which is incorporated herein by this reference.
ITEM 8.
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, 2000 and 1999;
Consolidated Statements of Earnings - Years ended December 31, 2000, 1999 and 1998;
Consolidated Statements of Comprehensive Income - Years Ended December 31, 2000, 1999 and 1998;
Consolidated Statements of Stockholders' Equity - Years ended December 31, 2000, 1999 and 1998.
Consolidated Statements of Cash Flows - Years ended December 31, 2000, 1999 and 1998;
Notes to Consolidated Financial Statements
These financial statements are filed as a part of this report, beginning on page 31 hereof, and areincorporated herein by this reference.
ITEM 9.
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.
	 PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth on pages 1 through 6 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 on March 20, 2001, under the caption "ELECTION OF DIRECTORS", which portion of said definitive proxy statement is incorporated herein by this reference with the following corrections. The ages of both Phelps M. Wood and Ray A. Infantino were incorrect. As of the date of filing of this report, Mr. Wood is 65 and Mr. Infantino is 64.
In response to Item 405 of Securities and Exchange Commission Regulation S-K, and as is disclosed in 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 sub-caption "Section 16(a) Beneficial Ownership Reporting Compliance," which portion of said definitive proxy statement is incorporated herein by this reference, Mr. Phelps M. Wood as a result of an inquiry conducted by the Securities and Exchange Commission (S.E.C.) discovered that he had inadvertently made a number of filings late in prior years. Mr. Wood, on April 20, 2001 consented to the entry of a Cease and Desist Order (the "Order") entered by the S.E.C. on April 12, 2000,
without admitting or denying the matters therein in which it was acknowledged that he failed to timely file a Form 3 reporting his holdings of the registrant for a period of two weeks, failed to file timely for periods ranging from one week to more than nineteen years and five months twenty-three Forms 4, and failed to file timely for periods of eleven months and two weeks and three years and eleven months two Forms 5. The Order requires Mr. Wood to cease and desist from committing or causing any violations of and committing or causing, any future violations of, Section 13(d) and 16(a) of the Exchange Act and Rules 13d-1, 13d-2, 16a-2 and 16a-3 promulgated thereunder. The registrant, at the time of filing of this FORM 10-K, has reviewed the information necessary to ascertain, and has determined that, other than as to Mr. Phelps M. Wood's late filings described above, Item 405 disclosure is not expected to be contained in this Part III of FORM 10-K or incorporated by reference.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth on page 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 filed March 20, 2001, under the caption "ELECTION OF DIRECTORS", which portion of said definitive proxy statement is incorporated herein by this reference.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
ITEM 12.
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.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth on pages 1 through 5 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.
	[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
PART IV ITEM 14.
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, 2000 and 1999
Consolidated Statements of Earnings - Years ended December 31, 2000, 1999 and 1998
Consolidated Statements of Stockholders' Equity - Years ended December 31, 2000, 1999 and 1998
Consolidated Statements of Comprehensive Income - Years ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows - Years ended December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
3. Consolidated Financial Statement Schedules:
All schedules are omitted as none are currently required.
4. Exhibits:
(3) (i) Amended and Restated Certificate of Incorporation.
(3)(ii)Bylaws.
(10) Material Contracts:
(i) Agreement of Settlement and Release dated February 29, 2000 is incorporated by reference to Exhibit 10(i) to the Annual Report on Form 10-K for the registrant for the fiscal year ended December 31, 1999.
(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 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 19, 2001, previously filed with the Commission.
(iv) Central Natural Resources, Inc. 2001 Stock Incentive Plan approved by the Board of Directors February 7, 2001 and submitted to Stockholders for approval at the Annual Meeting of Stockholders to be held April 19, 2001. This Plan is discussed in the Definitive Proxy Statement for that meeting and was filed with the Commission with that Proxy Statement and is incorporated herein by this reference.
(13) Portions of the Annual Report to security holders for year ended December 31, 2000 captioned "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition & Results of Operations" and range of bid and asked quotations and dividends paid on common stock.
(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, but a Form 8-K was filed January 3, 2001 with respect to the approval by the Stockholders of the Amended and Restated Certificate of Incorporation described in Item 4 above of this report, which Amended and Restated Certificate of Incorporation was filed with the Secretary of State of Delaware effective December 31, 2000.
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/ Phelps M. Wood ________________________________ Phelps M. Wood, President
Date: March 29, 2001
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/ Phelps M. Wood ________________________________ Phelps M. Wood, President Principal Executive Officer Date: March 29, 2001
/s/ Gary J. Pennington ________________________________ Gary J. Pennington General Manager, Principal Financial Officer, and Date: March 29, 2001 Principal Accounting Officer
By /s/ Bruce L. Franke ________________________________ Bruce L Franke, Director Date: March 29, 2001
By /s/ Ray A. Infantino ________________________________ Ray A. Infantino, Director Date: March 29, 2001
By /s/ Patrick J. Moran ________________________________ Patrick J. Moran, Director
Date: March 29, 2001
By /s/ James R. Ukropina ________________________________ James R. Ukropina, Director Date: March 29, 2001
By /s/ Phelps C.Wood ________________________________ Phelps C. Wood, Director Date: March 29, 2001
By /s/ Phelps M. Wood ________________________________ Phelps M. Wood, Director
CENTRAL COAL & COKE CORPORATION AND SUBSIDIARIES KANSAS CITY, MISSOURI
Page
Independent Auditors' Report 31
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2000 and 1999 32
Consolidated Statements of Earnings - years ended December 31, 2000, 1999 and 1998 34
Consolidated Statements of Stockholders' Equity - years ended December 31, 2000, 1999 and 1998 35
Consolidated Statements of Comprehensive Income - years ended December 31, 2000, 1999 and 1998 36
Consolidated Statements of Cash Flows - years ended December 31, 2000, 1999 and 1998 37
Notes to Consolidated Financial Statements 38
INDEPENDENT AUDITORS' REPORT
The Board of Directors Central Natural Resources, Inc. and Subsidiaries:
We have audited the consolidated financial statements of Central Natural Resources, Inc. and subsidiaries, as listed in the accompanying table of contents. 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 auditing standards generally accepted in the United States of America. 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 Natural Resources, Inc. and subsidiaries as of December 31, 2000 and 1999 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America.
KPMG LLP
Kansas City, Missouri January 19, 2001, except as to note 12,which is as of February 13, 2001
CENTRAL NATURAL RESOURCES, INC. KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(1) Summary of Significant Accounting Policies
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of Central Natural Resources, Inc. (the Company) and its two wholly owned subsidiaries. The Company's subsidiaries were engaged in the ownership and operation of a fast food bagel/delicatessen business, as described below. All significant intercompany accounts and transactions have been eliminated in consolidation. Effective December 31, 2000, the corporate name was changed from Central Coal & Coke Corporation to Central Natural Resources, Inc.
The Company's subsidiaries operated a fast food bagel/delicatessen business with four separate locations. A facility which previously had been operated in an area of San Diego, California was closed in March 1997. On July 1, 1998, the facility at State College, Pennsylvania was closed. As of September 1, 1998, the assets of the remaining two facilities located in Athens, Ohio and Columbus, Ohio were sold to an unrelated third party. As a result, the Company is no longer engaged in the food business and, accordingly, the accompanying consolidated 1998 financial statements present the Company's food operations as discontinued operations (see note 8).
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 other comprehensive income.
A decline in the market value of any available-for-sale or held-to-maturity security below cost that is deemed to be other than temporary results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established.
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 net 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, surface land, and equipment 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.
CENTRAL NATURAL RESOURCES, INC. KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 2000, 1999, and 1998
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.
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 consolidated 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
The Company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its fixed plan stock options. 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. Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 123.
CENTRAL NATURAL RESOURCES, INC. KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 2000, 1999, and 1998
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Long-lived assets are 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 the asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the fair value. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Earnings and Dividends Per Share
Effective December 31, 2000, the authorized number of shares were increased to a total of 2,600,000 shares, 2,500,000 shares of common stock of $1.00 par value, and 100,000 shares of preferred stock of $1.00 par value.
The preferred stock authorization does not explicitly dictate the dividend amounts or preferences, liquidation preferences, voting rights, participation features, or other characteristics typical of preferred stock. This authorization is referred to as a blank check preferred, which at a later date the Board of Directors can approve the issuance of and, at that time, determine the specific characteristics of the preferred stock.
Basic 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 and dilutive common equivalent shares outstanding during the year.
Stock options are the only common stock equivalents, however, their effect was not dilutive in the calculation of earnings per share for the years ended December 31, 2000, 1999, and 1998. Dividends per share are based on the number of shares outstanding on the dividend dates of record.
Comprehensive Income
Comprehensive income consists of net income and net unrealized gains (losses) on available-for-sale securities and is presented in the consolidated statements of stockholders' equity and comprehensive income.
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 accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.
CENTRAL NATURAL RESOURCES, INC. KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 2000, 1999, and 1998
(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, 2000 and 1999 are presented below. Substantially all equity securities represent common stocks of domestic corporations.
At December 31, 2000 and 1999, all U. S. government and government agency securities mature within one year.
During the first quarter of 2000, the Company sold U. S. government agency securities classified as held-to-maturity to fund the purchase of Company stock (see note 10). The sales proceeds of $3,472,217 approximated the securities amortized cost.
Investment income consists of the following for each of the years ended December 31
CENTRAL NATURAL RESOURCES, INC, KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 2000, 1999, and 1998
(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 one to nine years. The agreements provide for minimum annual royalties of $90,000. Coal deposits aggregating approximately 92,000,000 tons in place with a net carrying value of approximately $710,000 at December 31, 2000 are not presently leased or producing coal in commercial quantities.
(4) Mineral Rights
At December 31, 2000, 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, 2000, 1999, and 1998 were allocated as follows:
The components of income tax expense from contiuning operations are as follows:
Total income tax expense for 2000, 1999, and 1998 includes deferred income tax expense (benefit) of $3,506, $(3,859), and $87,497, respectively.
CENTRAL NATURAL RESOURCES, INC. KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 2000, 1999, and 1998
Income tax expense relating to continuing operations has been provided at effective rates of 33.7%, 29.0%, and 33.7% for the years ended December 31, 2000, 1999, and 1998, respectively. The reasons for the difference between the effective tax rates and the corporate federal income tax rate of 34.0% are as follows:
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2000 and 1999 are presented below:
CENTRAL NATURAL RESOURCES, INC. KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 2000, 1999, and 1998
(6) Operating Leases
For 1998, the Company had an operating lease on a month-to-month basis for its administrative office in Kansas City, Missouri. In the fourth quarter of 1998, the Company entered into a five-year operating lease for that office space, which became effective January 1, 1999. The lease agreement includes the option to terminate the lease after three years and provides for annual rental payments of approximately $13,200 through 2003. In addition, the subsidiaries of the Company had operating leases for certain retail facilities through September 1, 1998, the date when the last two of the four facilities were disposed of. Rent expense amounted to $13,182, $13,155, and $69,763 for the years ended December 31, 2000, 1999, and 1998, respectively.
(7) 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.
(8) Segment/Discontinued Operations Information
The Company had operated in two segments-energy and food. On September 1, 1998, the Company sold its remaining food operations for $135,000 and recorded a gain of $12,866 (net of applicable income taxes of $6,628). The food operations are presented as discontinued operations for 1998. As a result, the Company operates in only one segment. The energy segment consists of the leasing of real properties and mineral interests in the midwestern and southern United States. The Company has no foreign revenues. Coal royalties in 2000, 1999, and 1998 were received from two customers, with 95%, 92%, and 92% being received from the largest customer, respectively. Oil and mineral lease bonuses and rentals were received from four, four, and nine customers in 2000, 1999, and 1998, with 56%, 90%, and 76% being recognized from the largest customer, respectively. Oil and gas royalties were received from fourteen, twelve, and twelve customers in 2000, 1999, and 1998, with 62%, 62%, and 92%, being received from one customer, respectively.
CENTRAL NATURAL RESOURCES, INC. KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 2000, 1999, and 1998
The loss from the Company's discontinued food business is comprised of the following for the years ended December 31, 1998:
(9) 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 50,000 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 six months after the date of grant.
CENTRAL NATURAL RESOURCES, INC. KANSAS CITY, MISSOURI
Notes to Consolidated Financial Statements
December 31, 2000, 1999, and 1998
A summary of incentive stock option activity during 2000, 1999, and 1998 is as follows:
Year Ended 2000 1999 1998 Weighted Weighted Weighted average average average exercise exercise exercise Options price Options price Options price
Options outstanding, beginning of period 4,000 $15.05 20,000 15.18 15,000 15.00 Granted 6,000 17.00 0 0 5,000 15.69 Exercised (4,000) 15.05 0 0 0 0 Forfeited 0 0 16,000 15.18 0 0 ----- ----- -----
Options outstanding, end of period 6,000 17.00 4,000 15.05 20,000 15.18
Options exercisable end of period 6,000 17.00 4,000 15.05 20,000 15.18
Exercise prices for all options outstanding as of December 31, 2000 were $17.00. The per share weighted average fair value of stock options granted during 2000 and 1998 was $1.74 and $1.79, respectively, on the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions: 2000-expected dividend yield of 6.08%, expected volatility of 20.07%, risk-free interest rate of 5.75%, and an expected life of five years; 1999- expected dividend yield of 6.0%, expected volatility of 15.00%, risk-free interest rate of 5.66%, and an expected life of five years; 1998-expected dividend yield of 1.60%, expected volatility of 8.0%, risk-free interest rate of 4.25%, 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:
(10) Commitment and Contingencies
On March 6, 2000, the Company consummated the resolution of litigation and other disputes with a former director and other stockholders, which arose in connection with the election of directors at the Company's 1999 Annual Meeting, pursuant to an Agreement of Settlement and Release executed by all parties, including the Company, on February 29, 2000. The terms of the settlement included the purchase by the Company of all stock in the Company owned by the plaintiffs, totaling 194,462 shares for a purchase price of $16.75 per share, or aggregate consideration of $3,257,238. The source of the funds used was available liquid assets of the Company previously invested in U. S. government agency obligations.
(11)	Supplementary Quarterly Data (Unaudited)
First Second Third Fourth quarter quarter quarter quarter _______ _______ _______ _______
Operating revenue $ 151,562 157,717 208,643 223,567 Investment Income 291,896 142,002 474,621 154,860 Net earnings 211,216 97,985 353,543 193,837 Earnings per share basis and diluted 0.33 0.19 0.69 0.37 _______ _______ _______ _______
First Second Third Fourth quarter quarter quarter quarter _______ _______ _______ _______
Operating revenue $ 96,201 127,402 175,575 216,697 Investment Income 112,876 107,464 197,564 408,981 Net earnings 14,715 80,686 139,566 416,043 Earnings per share basis and diluted 0.02 0.12 0.20 0.58 _______ _______ _______ _______
(12) Subsequent Event
On January 19, 2001, the Board of Directors declared a stock dividend of one share of common stock for each issued and outstanding share of common stock held by stockholders of record as of January 29, 2001. The stock dividend was distributed on February 13, 2001 to stockholders of record as of January 29, 2001. As of January 19, 2001, there were 251,962 shares issued and outstanding so that after the distribution of the stock dividend, there will be 503,924 shares of common stock issued and outstanding. All per share and share data in the consolidated financial statements and related notes have been restated to reflect the stock dividend for all periods presented.