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Table of Contents

 

 

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, 2011

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                    

COMMISSION FILE NUMBER: 000-10810

 

 

KIEWIT ROYALTY TRUST

(Exact name of registrant as specified in its charter)

 

Nebraska   47-6131402

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

Trust Division

U.S. Bank National Association

1700 Farnam Street

Omaha, Nebraska 68102

(Address of principal executive offices)

Registrant’s telephone number, including area code: (402) 536-5100

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class

Units of Beneficial Interest

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨    No  x

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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x

There is no active trading market for the Units of Beneficial Interest. As a result, the aggregate market value of the Units of Beneficial Interest is not available.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

         Page  
PART I     
Item 1.  

Business

     1   
Item 1A.  

Risk Factors

     2   
Item 1B.  

Unresolved Staff Comments

     3   
Item 2.  

Properties

     3   
Item 3.  

Legal Proceedings

     3   
Item 4.  

Mine Safety Disclosures

     3   
PART II     
Item 5.  

Market for Registrant’s Common Equity, Related Unit Holder Matters and Issuer Purchases of Equity Securities

     3   
Item 7.  

Trustee’s Discussion and Analysis of Financial Condition and Results of Operations

     4   
Item 8.  

Financial Statements and Supplementary Data

     5   
Item 9.  

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

     12   
Item 9A.  

Controls and Procedures

     12   
Item 9B.  

Other Information

     12   
PART III     
Item 10.  

Directors, Executive Officers and Corporate Governance

     12   
Item 11.  

Executive Compensation

     13   
Item 12.  

Security Ownership of Certain Beneficial Owners and Management and Related Unit Holders Matters

     13   
Item 13.  

Certain Relationships and Related Transactions, and Director Independence

     13   
Item 14.  

Principal Accounting Fees and Services

     13   
PART IV     
Item 15.  

Exhibits and Financial Statement Schedules

     14   

Forward-Looking Statements

This Form 10-K includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbor created thereby. All statements other than statements of historical fact included in this Form 10-K are forward-looking statements. Such statements include, without limitation, factors affecting the price of coal and certain statements regarding the Trust’s financial position, industry conditions and other matters. Although the Trustee believes that the expectations reflected in such forward-looking statements are reasonable, such expectations are subject to numerous risks and uncertainties, and the Trustee can give no assurance that they will prove to be correct. There are many factors, none of which are within the Trustee’s control, that may cause such expectations not to be realized.


Table of Contents

PART I

ITEM 1. BUSINESS.

Purpose of the Trust. Kiewit Royalty Trust (the “Trust”) was organized by Peter Kiewit Sons’, Inc. (now, known as Level 3 Communications, Inc.) (the “Trustor”) under the laws of the State of Nebraska on May 17, 1982 to provide an efficient, orderly and practical means of administrating the income received from three royalty interests and sixteen overriding royalty interests in leases of four coal mines located in the States of Montana and Wyoming (the “Coal Royalties”). The trustee of the Trust is U.S. Bank National Association, Omaha, Nebraska (the “Trustee”), which is a wholly-owned subsidiary of U.S. Bancorp, a bank holding company. The Coal Royalties are the interests retained in the four mine properties under the leases of the mineral rights to the mining companies who have developed, mined, and sold the coal from these mines. In general, the Coal Royalties entitle the Trust to a specified portion of the value of the total coal production from these mines, free of the expense of development and operation.

The Coal Royalties were conveyed by the Trustor to the Trust for the benefit of the holders of record of the Trustor’s Class B and Class C common stock as of June 10, 1982. Ownership of beneficial interests in the Trust is represented by 12,633,432 units of beneficial interest (hereinafter referred to as “Units”). The Trust is a purely ministerial trust which distributes the available revenues generated by the Coal Royalties, net of the Trust’s expenses, to the holders of Units. Trust expenses include but are not limited to, fees of the Trustee, and compensation paid to geologists, engineers, accountants, attorneys, or other professionals that the Trustee may, in its discretion, employ in the administration of the Trust. With respect to any liability that is contingent or uncertain in amount or that otherwise is not currently due, the Trustee has the discretion to establish cash reserves for the payment thereof.

The Coal Royalties. The Coal Royalties provide for the payment of either a specified amount per ton of coal produced, or a fixed percentage of the value or price with respect to the coal produced under the leases relating to these interests. The remaining terms of the individual Coal Royalties vary considerably, as does the acreage covered by the underlying coal leases, the estimated total tons of coal within a legal description of property as evidenced by a lease (the “Tons Under Lease”) and the estimated total tons of coal under lease that can be economically extracted under existing market conditions (“Current Economic Tons”). In general, the Current Economic Tons will be less than the total Tons Under Lease because the cost of extracting a portion of the total Tons Under Lease will outweigh the price at which the coal could be sold. In addition, Current Economic Tons may be reduced by the refusal of a state and/or federal authority to grant a permit to mine portions of the coal reserves within a specific property. The inability to extract the total Tons Under Lease or the inability to sell any portion of the coal extracted will reduce the royalties payable to the Trust.

The following chart sets forth the actual total amount of coal production during the past two years at the Decker and Spring Creek mines:

Tons of Coal Produced

 

     2011      2010  

Decker Mine

     2,889,803         3,081,228   

Spring Creek Mine

     10,210,995         12,651,811   
  

 

 

    

 

 

 

Total

     13,100,798         15,733,039   
  

 

 

    

 

 

 

The following sets forth certain information about each of the mine properties in which the Trust continues to hold a Coal Royalty:

DECKER MINE. Decker Coal Company (“Decker”) operates this mine, which is located in Big Horn County, Montana, approximately 20 miles north of Sheridan, Wyoming. Decker is a joint venture between KCP Inc., a wholly-owned subsidiary of Level 3 Communications, Inc. and Rio Tinto Energy America. Each company owns a fifty percent (50%) interest in the joint venture. This mine is managed by the Kiewit Mining Group. The

 

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Table of Contents

Decker Mine in its entirety includes approximately 23,371 acres. The Trust owns overriding royalty interests in six leases at the Decker Mine. The terms of the Trust’s overriding royalty interests of each lease as of December 31, 2011, are set forth in the table below, of which the accompanying notes are an integral part:

 

Lease Number

   Lessor    Terms of Overriding
Royalties(1)
 

M-073093(2)

   United States      5 cents per ton   

M-061685(2)

   United States      10 cents per ton   

M-057934(2)

   United States      10 cents per ton   

C-1085-93(3)

   Montana      10 cents per ton   

C-1087-95(3)

   Montana      10 cents per ton   

C-1095-97(3)

   Montana      5 cents per ton   

 

1

The Trust has an undivided one-half interest in a second overriding royalty pertaining to each of these leases. By the terms of the assignment by which it was created, this second overriding royalty, when added to all other royalties pertaining to each of these leases, may not exceed fifty percent (50%) of the royalty paid to the lessor under each of these leases.

2

The operator of this lease has indicated that it expects mining to continue.

3 

The operator of this lease expects little or no mining activity in the future.

SPRING CREEK MINE. Spring Creek Coal Company (“Spring Creek”) operates this mine, which is located in Big Horn County, Montana, approximately 25 miles north of Sheridan, Wyoming. Spring Creek is a subsidiary of NERCO, Inc. The Spring Creek Mine in its entirety includes approximately 2,560 acres. The Trust owns an overriding royalty interest in one lease at the Spring Creek Mine. The terms of the overriding royalty interest of the lease as of December 31, 2011, are set forth in the table below, of which the accompanying note is an integral part:

 

Lease Number

   Lessor      Terms of Overriding
Royalties(5)
 

M-069782(4)

     United States         10.75

 

4 

The operator of this lease has indicated that it expects mining to continue.

5

Under the terms of the lease, the Trust receives a royalty payment equivalent to 10.75% of the applicable production royalty payable to the United States. The royalties paid to the United States are based on sales and fluctuate based on the value of coal.

In addition to its interests in the foregoing leases, the Trust has overriding royalty interests in other leases from which no production is currently contemplated and/or which are considered to be not mineable because of access, alluvial valley, or other problems.

Financial Information about Segments. The Trust’s sole activity is the collection and distribution of the revenues generated by the Coal Royalties. Accordingly, the Trust operates in a single business segment.

Financial Information about Geographic Areas. All of the Trust’s 2011 income was generated from royalty income received from sources located in the United States.

Available Information. The Trust does not have an Internet website. However, the Trust electronically files annual, quarterly and current reports with the SEC. The SEC maintains a web site at www.sec.gov that contains the Trust’s SEC filings. The Trustee will provide any Unit Holder with a paper copy of the Trust’s SEC filings free of charge upon request.

ITEM 1A. RISK FACTORS.

Not applicable.

 

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ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

The Trust does not own any real property. Information on each of the mine properties in which the Trust continues to hold a Coal Royalty is set forth in the section titled, “BUSINESS.”

ITEM 3. LEGAL PROCEEDINGS.

There are no pending material legal proceedings to which the Trust is a party.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED UNIT HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information. There is no established public trading market for the Units. The Units have not been registered under the Securities Act of 1933, nor have they been registered under the securities laws of any state. Accordingly, resales of the Units are subject to certain legal restrictions on transferability. Unit Holders should consult with their own counsel regarding their ability to sell their Units.

None of the Units are subject to outstanding options or warrants to purchase, and no securities are convertible into Units. Under the terms of the Trust Indenture, the Trust may not issue additional Units.

Holders. The Units are the only class of security issued by the Trust. As of March 16, 2012, there were approximately 854 record holders of Units.

Distributions to Unit Holders. All income of the Trust plus any amounts released from reserves, less amounts used to pay Trust expenses and amounts placed in reserves, is distributed pro rata on a quarterly basis to Unit Holders. The following table shows the aggregate distributions made to Unit Holders for each quarter during 2011 and 2010:

2011

 

            Distribution Amounts  

Quarter Ended

   Date Distributed      In Total      Per Unit  

March 31, 2011

     April 8, 2011       $ 405,102       $ 0.032066   

June 30, 2011

     July 12, 2011         12,166         0.000963   

September 30, 2011

     October 7, 2011         2,060,302         0.163083   

December 31, 2011(1)

     January 11, 2012         15,465         0.001224   
     

 

 

    

 

 

 
      $ 2,493,035       $ 0.197336   
     

 

 

    

 

 

 

2010

 

            Distribution Amounts  

Quarter Ended

   Date Distributed      In Total      Per Unit  

March 31, 2010

     April 8, 2010       $ 575,475       $ 0.045552   

June 30, 2010

     July 9, 2010         31,340         0.002481   

September 30, 2010

     October 8, 2010         2,310,873         0.182917   

December 31, 2010(1)

     January 12, 2011         6,445         0.000510   
     

 

 

    

 

 

 
      $ 2,924,133       $ 0.231460   
     

 

 

    

 

 

 

 

(1) For additional information on fourth quarter expenses, see Item 7. Trustee’s Discussion and Analysis of Financial Condition and Results of Operations.

 

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Securities Authorized for Issuance under Equity Compensation Plans.

Not applicable.

Recent Sales of Unregistered Securities.

None.

Issuer Purchases of Equity Securities.

None.

ITEM 7. TRUSTEE’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Distributable income is the total amount of net royalty and overriding royalty payments received from the various mines increased by the amount of interest earned and any other amounts received by the Trust and decreased by the amount of trust expenses. During 2011, distributable income decreased by $431,098 to $2,493,035 from $2,924,133 in 2010. The 14.7% decrease was attributable to less coal production at the Decker and Spring Creek Mines

The following schedule reflects the royalty and overriding royalty payments received by the Trust in respect of leases at the following mines:

 

     2011      2010  

Decker Mine

   $ 923,625       $ 1,064,617   

Spring Creek Mine

     1,717,193         1,979,335   
  

 

 

    

 

 

 

Total

   $ 2,640,819       $ 3,043,952   
  

 

 

    

 

 

 

Decker Mine. The amount of royalties and overriding royalties received by the Trust with respect to the Decker Mine decreased to $923,625 in 2011 from $1,064,617 in 2010, a decrease of 13.2%. This change resulted from fewer tons of coal produced.

Spring Creek Mine. The amount of royalties and overriding royalties received by the Trust with respect to the Spring Creek Mine decreased to $1,717,193 in 2011 from $1,979,335 in 2010, a decrease of 13.2%. The amount of coal produced also decreased.

Trust Expenses. Trust expenses increased to $147,784 in 2011 from $119,819 in 2010. Trust expenses included fees of the Trustee, accountants, attorneys, and other professionals that the Trustee employs in the administration of the Trust. Trustee fees recorded in trust expenses were $80,000 and $36,667 in fiscal 2011 and 2010, respectively. The trust expenses for 2011 and 2010 did not include the Trustee’s fee of $20,000 for the fourth quarters of such years. The Trust did not pay the Trustee’s fees in these quarters due to insufficient royalty income. The fourth quarter fees were paid in the first quarter of 2012 and 2011, respectively, after the Trust had sufficient royalty income. Pursuant to the terms of the Indenture, the Trustee has the ability to increase its fees, in its sole discretion.

Liquidity and Capital Resources. The Trust’s primary source of capital is the royalty payments. In accordance with the provisions of the Trust Indenture, generally all income received by the Trust, net of Trust expenses and any amounts placed in reserves, are distributed to the Unit Holders on a quarterly basis. During 2011, the Trust did not establish any reserves.

 

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Off-Balance Sheet Arrangements. As required by the Trust Indenture, the Trust is intended to be passive in nature and the Trustee does not have any control over or any responsibility relating to the operation of the mines under which the Trust has any royalty interests and overriding royalty interests. The Trustee has powers to collect and distribute proceeds received by the Trust and pay Trust liabilities and expenses and its actions have been limited to those activities. As a result, the Trust has not engaged in any off-balance sheet arrangements.

Critical Accounting Policies and Estimates. The Trust’s financial statements are prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America, and as such there are no critical accounting policies or estimates.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Financial Statements. The following documents are filed as part of the Trust’s financial statements for the years ended December 31, 2011 and 2010:

 

  (1) Report of Independent Registered Public Accounting Firm

 

  (2) Statements of Assets, Liabilities and Trust Corpus as of December 31, 2011 and 2010

 

  (3) Statements of Distributable Income for the years ended December 31, 2011 and 2010

 

  (4) Statements of Changes in Trust Corpus for the years ended December 31, 2011 and 2010

 

  (5) Notes to Financial Statements

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustee and Unit Holders of

Kiewit Royalty Trust

Omaha, Nebraska

We have audited the accompanying statements of assets, liabilities and trust corpus of Kiewit Royalty Trust (the “Trust”) as of December 31, 2011 and 2010, and the related statements of distributable income and changes in trust corpus for each of the two years in the period ended December 31, 2011. These financial statements are the responsibility of the Trustee. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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.

As described in Note 1, the financial statements were prepared on the modified cash basis of accounting, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America.

In our opinion, such financial statements present fairly, in all material respects, the assets, liabilities and trust corpus of Kiewit Royalty Trust as of December 31, 2011 and 2010, and the distributable income and changes in trust corpus for each of the two years in the period ended December 31, 2011, on the basis of accounting described in Note 1.

/s/ Deloitte & Touche LLP

Omaha, Nebraska

March 26, 2012

 

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Table of Contents

KIEWIT ROYALTY TRUST

STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS

December 31, 2011 and 2010

 

     2011     2010  

Assets

    

Cash and cash equivalents

   $ 15,465      $ 6,445   

Royalty and overriding royalty interests in coal leases

     167,817        167,817   

Less accumulated amortization

     (167,817     (167,817
  

 

 

   

 

 

 

Net royalty and overriding royalty interests in coal leases

     —          —     
  

 

 

   

 

 

 

Total assets

   $ 15,465      $ 6,445   
  

 

 

   

 

 

 

Liabilities

    

Distributions payable to unit holders

   $ 15,465      $ 6,445   

Trust Corpus: 12,633,432 units of beneficial interest authorized, issued and outstanding

     —          —     
  

 

 

   

 

 

 

Total liabilities and trust corpus

   $ 15,465      $ 6,445   
  

 

 

   

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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KIEWIT ROYALTY TRUST

STATEMENTS OF DISTRIBUTABLE INCOME

for the years ended December 31, 2011 and 2010

 

     2011     2010  

Royalty income

   $ 2,640,819      $ 3,043,952   

Trust expenses

     (147,784     (119,819
  

 

 

   

 

 

 

Distributable income

   $ 2,493,035      $ 2,924,133   
  

 

 

   

 

 

 

Distributable income per unit

   $ 0.197336      $ 0.231460   
  

 

 

   

 

 

 

KIEWIT ROYALTY TRUST

STATEMENTS OF CHANGES IN TRUST CORPUS

for the years ended December 31, 2011 and 2010

 

     2011     2010  

Trust corpus, beginning of year

   $ —        $ 9,603   

Amortization of royalty interest

     —          (9,603

Distributable income

     2,493,035        2,924,133   

Distributions payable to unit holders

     (2,493,035     (2,924,133
  

 

 

   

 

 

 

Trust corpus, end of year

   $ —        $ —     
  

 

 

   

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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KIEWIT ROYALTY TRUST

NOTES TO FINANCIAL STATEMENTS

AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

1. Summary of Significant Accounting Policies:

 

  (a) Basis of Accounting:

The financial statements of the Trust, as prepared on the modified cash basis, reflect the Trust’s assets, liabilities, trust corpus, and distributable income as follows:

1. Royalty income and interest income are recognized in the month in which amounts are received by the Trust.

2. Trust expenses, consisting principally of routine general and administrative costs, include payments made during the accounting period.

3. Reserves for liabilities that are contingent or uncertain in amount may also be established if considered necessary.

4. Net royalty and overriding royalty interests that are producing properties are amortized using the unit-of-production method. This amortization is shown as a reduction of Trust corpus.

5. Distributions to Unit Holders are recognized when declared by the Trustee.

6. Production withholding taxes withheld from Unit Holder distributions and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from royalty income in the statement of distributable income.

The financial statements of the Trust differ from financial statements prepared in conformity with U.S. generally accepted accounting principles because of the following:

 

   

Royalty income and interest income are recognized in the month received rather than in the month of production.

 

   

Expenses generally are not accrued.

 

   

Amortization of the net royalty and overriding royalty interests is shown as a reduction to Trust corpus and not as a charge to operating results.

 

   

Reserves may be established for contingencies that would not be recorded under U.S. generally accepted accounting principles.

These statements differ from financial statements prepared in accordance with United States generally accepted accounting principles (GAAP) and were prepared on the modified cash basis of reporting, which is considered to be the most meaningful because Distributions to Unit Holders are based on net cash receipts. This comprehensive basis of accounting, other than GAAP, corresponds to the accounting permitted for royalty trusts by the U.S. Securities and Exchange Commission as specified by Staff Accounting Bulletin Topic 12E, Financial Statements of Royalty Trusts.

 

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  (b) Cash and Cash Equivalents:

The Trust considers all highly liquid financial instruments with original maturities of three months or less when purchased to be cash equivalents.

 

  (c) Related Party:

The Trust was organized to provide an efficient, orderly and practical means of administering the income received from royalty interests and is administered by U.S. Bank National Association, as the sole trustee (the “Trustee”). Pursuant to the terms of the Trust Indenture, the Trust pays the Trustee an annual fee, and the Trustee may adjust this fee annually in its sole discretion. From January 1, 2010 through July 31 2010, the Trust paid the Trustee an annualized amount of $40,000 per year. On May 12, 2010, the Trustee notified the Unit Holders that the Trustee adjusted the fee to $80,000 per year, effective August 1, 2010. Trustee fees recorded in trust expenses were $80,000 and $36,667 for fiscal 2011 and 2010, respectively. The Trust did not pay the Trustee’s fee of $20,000 for the fourth quarter of 2010 or the fourth quarter of 2011 due to insufficient royalty income. The fees were paid in the first quarter of 2011 and 2012, respectively, after the Trust had sufficient royalty income.

 

  (d) Subsequent Events:

We have evaluated the Trust activity and have concluded that there are no material subsequent events requiring additional disclosure or recognition in these financial statements.

2. Trust Organization and Provisions:

The Trust was established on May 17, 1982. Units of beneficial interest (“Units”) in the Trust were distributed on June 23, 1982 to Class B and Class C shareholders of record of Peter Kiewit Sons’, Inc. (now known as Level 3 Communications, Inc.) (the “Trustor”), as of June 10, 1982. These shareholders received one Unit in the Trust for each share of the Trustor’s stock held. On June 28, 1982, the Trustor conveyed to the Trust royalty and overriding royalty interests owned by the Trustor’s subsidiaries in certain coal properties in the States of Montana and Wyoming.

The terms of the trust indenture provide, among other things, that:

 

  (a) the Trust shall not engage in any business or investment activity of any kind or acquire any assets other than those initially conveyed to the Trust;

 

  (b) the Trustee may not sell all or any part of the royalty interests unless approved by a majority of Unit Holders outstanding, in which case the sale must be for cash and the proceeds promptly distributed;

 

  (c) the Trustee may establish a cash reserve for the payment of any liability which is contingent or uncertain in amount;

 

  (d) the Trustee will make cash distributions to the Unit Holders in January, April, July and October of each year as discussed in Note 4; and

 

  (e) in September 1994, the Trust Indenture was amended to authorize the Trustee to invest funds in government obligations, government-secured obligations and funds registered pursuant to the Investment Company Act of 1940.

3. Royalty and Overriding Royalty Interests:

The cash received by the Trustee from the royalty interests will consist of a specified amount per ton or a specified fraction of the value of the total production of the property, free of the expense of development and operation. Net royalty and overriding royalty interests that are producing properties are amortized using the unit-of-production method. This amortization is shown as a reduction of Trust corpus. Only one of the leases at the Decker

 

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mine was amortized in 2010, which amortization reduced the Trust corpus by $9,603 to $0. As of September 30, 2010, the Decker mine lease had been fully amortized, and no other royalty interests are amortized. The initial carrying value of the royalty and overriding royalty interests in coal leases of $167,817 represents the Trustor’s historical net book value at the date of the transfer to the Trust.

4. Distributions to Unit Holders:

The amounts to be distributed to Unit Holders (“Distribution Amount”) are determined on a quarterly basis. The Quarterly Distribution Amount is the excess of (i) the cash received during the quarter which is attributable to royalties plus any decrease in cash reserves, plus any other cash receipts of the Trust during the quarter over (ii) the liabilities of the Trust paid during the quarter, plus any increase in cash reserves. The Distribution Amount is payable to Unit Holders of record as of the last business day of each calendar quarter. The cash distributions are made quarterly within the first 10 business days of January, April, July and October.

5. Income Taxes:

Provision for federal and state income taxes has not been made in the financial statements since the Trust has been recognized by the IRS as a “grantor trust” which is not a taxable entity.

6. Selected Quarterly Financial Data (Unaudited):

The following is a summary of the unaudited quarterly financial information:

 

     Royalty Income      Distributable
Income
     Distributable
Income Per Unit
 

For the year ended December 31, 2011:

        

March 31, 2011

   $ 453,944       $ 405,102       $ 0.032066   

June 30, 2011

     23,241         12,166         0.000963   

September 30, 2011

     2,120,502         2,060,302         0.163083   

December 31, 2011

     43,132         15,465         0.001224   
  

 

 

    

 

 

    

 

 

 
   $ 2,640,819       $ 2,493,035       $ 0.197336   
  

 

 

    

 

 

    

 

 

 

 

     Royalty Income      Distributable
Income
     Distributable
Income Per Unit
 

For the year ended December 31, 2010:

        

March 31, 2010

   $ 599,675       $ 575,475       $ 0.045552   

June 30, 2010

     71,529         40,272         0.003188   

September 30, 2010

     2,335,775         2,301,942         0.182210   

December 31, 2010

     36,973         6,445         0.000510   
  

 

 

    

 

 

    

 

 

 
   $ 3,043,952       $ 2,924,133       $ 0.231460   
  

 

 

    

 

 

    

 

 

 

 

 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this Form 10-K, officers of the Trustee conducted an evaluation of the Trust’s disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934). Based upon this evaluation, the officer of the Trustee concluded that the Trust’s disclosure controls and procedures were effective in timely alerting them of any material information relating to the Trust that is required to be disclosed by the Trust in the reports it files or submits under the Securities Exchange Act of 1934.

Trustee’s Report on Internal Control over Financial Reporting. The Trustee is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. The Trustee has assessed the effectiveness of the Trust’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As a result of this assessment, the Trustee concluded that, as of December 31, 2011, the Trust’s internal control over financial reporting was effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes on the modified cash basis, which is a comprehensive basis of accounting other than United States generally accepted accounting principles.

Changes in Internal Control Over Financial Reporting. There were no changes in the Trust’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) that occurred during the Trust’s most recently completed fiscal quarter that has materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting.

Limitations on Controls. The Trustee does not expect that the Trust’s disclosure controls and procedures or the Trust’s internal control over financial reporting will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Trust have been detected.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Executive Officers and Board of Directors. The Trust is administered by officers and employees of the Trustee and has no Board of Directors or any committees. While there are no specific persons employed by the Trustee having the full-time duty of administering the Trust, the following officer of the Trustee acts as the chief executive officer and chief financial officer of the Trust:

Luke H. Paladino, age 34, Trust Officer with US Bank NA since September 2007. Mr. Paladino has been the Trust Officer responsible for the Trust since January 2008. Mr. Paladino has been a Trust Officer with US Bank NA since September 2007 in the Private Client Group. From 2005 through 2007, he served as Principal of Paladino Legal Group P.C., a law firm located in Omaha, Nebraska. Mr. Paladino received his J.D. from Creighton University School of Law and his B.A. from Rockhurst University.

Section 16(a) Beneficial Ownership Reporting Compliance. The Trust does not have any officers, directors or any beneficial owners holding more than 10% of the outstanding Units. Accordingly, the Trust believes that it was in full compliance for the year ended December 31, 2011 with all filing requirements under Section 16(a) of the Exchange Act.

 

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Code of Ethics. The Trust does not maintain its own Code of Ethics for its senior executive and financial officers as required by Section 406 of the Sarbanes-Oxley Act of 2002 because it does not have officers or employees. The Trustee maintains a Code of Conduct for all of its employees, including those who perform duties for the Trust. A copy of the Trustee’s Code of Conduct will be made available to Unit Holders without charge upon request.

ITEM 11. EXECUTIVE COMPENSATION.

The Trust does not have any officers or employees. Certain services are provided to the Trust by officers and employees of the Trustee. However, none of employees of the Trustee that perform the functions of the Trust’s officers receive any compensation from the Trust and the Trustee does not receive reimbursement from the Trust for any portion of the compensation paid to such employees. The Trust pays the Trustee an administrative fee of $80,000 per year.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The Trustee believes the only holder of more than 5% of the outstanding Units as of March 16, 2012, is Walter Scott, Jr., who beneficially owns 800,000 Units representing 6.33% of the class outstanding. Mr. Scott’s address is One Thousand Kiewit Plaza, Omaha, Nebraska 68131. These Units are held in trust by the Trustee for the benefit of Mr. Scott. No employee of the Trustee who performed the functions as an officer of the Trust owned any Units as of March 16, 2012. The Trust had no knowledge of any arrangements, the operation of which could, at a subsequent date, result in a change of control of the Trust. The Trust does not maintain any equity contribution plans as defined in Item 201(d) of Regulation S-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

During 2011, there were no transactions of any nature between the Trust and any employee of the Trustee who performed the functions of an officer of the Trust or any persons known to the Trustee to be the beneficial owners of more than 5% of the Units.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

The principal independent registered public accounting firm utilized by the Trust was Deloitte & Touche LLP.

Principal Accounting Fees and Services

The aggregate fees billed by Deloitte & Touche LLP for the fiscal years ended December 31, 2011 and 2010 are as follows:

 

     Fiscal 2011      Fiscal 2010  

Audit fees

   $ 40,600       $ 40,800   

All other fees

     —           —     
  

 

 

    

 

 

 

Total:

   $ 40,600       $ 40,800   
  

 

 

    

 

 

 

Audit fees. Audit fees consist of fees billed for professional services rendered for the audit of the Trust’s annual financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by the accountant in connection with statutory and regulatory filings. Except for the Audit Fees, no other fees were paid by the Trust to Deloitte & Touche LLP for the fiscal years ended December 31, 2011 and 2010.

 

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As referenced in Item 10 above, the Trust has no audit committee and, as a result, has no audit committee pre-approval policy with respect to fees paid to Deloitte & Touche LLP.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

1. The following statements are filed herewith:

Report of Independent Registered Public Accounting Firm

Statements of Assets, Liabilities and Trust Corpus as of December 31, 2011 and 2010

Statements of Distributable Income for the years ended December 31, 2011 and 2010

Statements of Changes in Trust Corpus for the years ended December 31, 2011 and 2010

Notes to Financial Statements

2. Financial Statement Schedules—No financial statement schedules are filed herewith because either such schedules are not required or the information has been presented in the aforementioned financial statements.

3. Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:

 

4.1   Kiewit Royalty Trust Indenture dated May 17, 1982, as amended June 9, 1982 and June 23, 1982 (filed as Exhibit 4.1 to the Trust’s Form 10-K filed with the Securities and Exchange Commission on March 28, 2002, and incorporated herein by reference).
4.2   Order dated September 23, 1994, of the County Court of Douglas County, Nebraska (filed as Exhibit 4.2 to the Trust’s Form 10-K filed with the Securities and Exchange Commission on March 28, 2002, and incorporated herein by reference).
31*   Certification of Trust Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934
32**   Certification of Trust Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1   Location Map of Coal Properties (incorporated herein by reference to Exhibit 2 to the Trust’s Form 10-K filed with the Securities and Exchange Commission on March 31, 1985, and incorporated herein by reference).
101.INS***   XBRL Instance Document
101.SCH***   XBRL Taxonomy Extension Schema Document
101.CAL***   XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB***   XBRL Taxonomy Extension Label Linkbase Document
101.PRE***   XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith
** Furnished herewith
*** Furnished herewith. Pursuant to applicable federal securities rules and regulations, the Trust has complied with the reporting obligation relating to the submission of interactive data files in such exhibits. Therefore, the Trust is not subject to liability under any anti-fraud provisions of the federal securities laws if the Trust (i) makes a good faith attempt to comply with the interactive data file submission and posting requirements and (ii) upon becoming aware that any such data file fails to comply with such requirements, promptly amends any noncompliant data file. The Trust is also not subject to the liability and anti-fraud provisions of the federal securities laws if an error or omission in an electronic filing results solely from electronic transmission errors beyond the filer’s control and, upon becoming aware of such error or omission, the filer corrects the error or omission by filing an electronic amendment as soon as reasonably practicable. Users of this data are advised that the interactive data files are furnished and not filed, are not part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Exchange Act, as amended, and otherwise are not subject to liability under those sections.

 

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SIGNATURES

Pursuant to the requirements of Section 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.

 

      March 26, 2012     KIEWIT ROYALTY TRUST
    By: U.S. Bank National Association in its capacity as Trustee and not in its individual capacity or otherwise
            By:   /s/ Luke H. Paladino
          Luke H. Paladino, Trust Officer

(The Registrant has no directors or executive officers.)

 

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