For The Quarterly Period Ended March 31, 2005
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-QSB

 

 

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2005

 

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from              to             

 

Commission file number 0-9669

 

 

CALCASIEU REAL ESTATE & OIL CO., INC.

(Exact name of small business issuer as specified in its charter)

 

 

Louisiana   72-0144530

(State or other jurisdiction of

incorporation or organization)

  

(IRS Employer

Identification No.)

 

One Lakeside Plaza, Lake Charles, Louisiana 70601

(Address of principal executive offices)

 

337-494-4256

(Issuer’s telephone number)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

 

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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  ¨

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

 

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.    Yes  ¨    No  ¨

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 1,942,495

 

Transitional Small Business Disclosure Format (Check one):    Yes  ¨    No  x

 

Table of Contents

Calcasieu Real Estate & Oil Co., Inc.

 

Form 10-QSB

 

For the Quarter Ended March 31, 2005

 

INDEX

 

        Page

Part I.

   Financial Information    
    Item 1.   Financial Statements    
       

a. Balance Sheet as of March 31, 2005

  1-2
       

b. Income Statements
for the three months ended March 31, 2004 and 2005

  3
       

c. Cash Flow Statements
for the three months ended March 31, 2004 and 2005

  4
       

d. Stockholder’s Equity Statement
for the three months ended March 31, 2005

  5
       

e. Notes to Financial Statements

  6
    Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   8
    Item 4.   Controls and Procedures   9
Part II.   Other Information    
    Item 4.   Submission of Matters to a Vote of Security Holders   10
    Item 6.   Exhibits and Reports on Form 8-K   11
Signatures   11
Certifications    

Table of Contents

Part I. Financial Information

 

Item 1. Financial Statements

 

Calcasieu Real Estate & Oil Co., Inc.

 

Balance Sheet

 

Assets

 

     March 31, 2005

Current Assets

       

Cash and cash equivalents

    $ 1,056,933

Accounts receivables

      337,498

Prepaid expense

      8,625

Interest receivable

      10,892
    

Total Current Assets

      1,413,948
    

Securities Available for Sale

      2,702,555
    

Property and Equipment (less accumulated depreciation of $66,641)

      10,680

Timber (less accumulated depletion of $380,760)

      478,717

Land

      3,887,776
    
       4,377,173
    
     $ 8,493,676
    

 

See accompanying notes

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Calcasieu Real Estate & Oil Co., Inc.

 

Balance Sheet

 

Liabilities & Stockholders’ Equity

 

     March 31, 2005

Current Liabilities

       

Trade payables and accrued expenses

    $ 21,274

Dividend payable

      330,451

Income taxes payable:

       

Current

      145,571

Deferred

      52,967
    

Total Current Liabilities

      550,263
    

Stockholders’ Equity

       

Common stock, no par value: 3,000,000 shares authorized; 2,100,000 shares issued

    $ 72,256

Retained earnings

      8,216,821

Accumulated other comprehensive income

      29,852
    
       8,318,929

Less cost of treasury stock (157,505 shares)

      375,516
    
       7,943,413
    
     $ 8,493,676
    

 

See accompanying notes

 

2

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Calcasieu Real Estate & Oil Co., Inc.

 

Statements of Income

 

     Three Months Ended
March 31, 2005
    Three Months Ended
March 31, 2004

Revenues:

              

Oil and gas

    $ 548,595    $ 454,076

Agriculture

      58,496      73,661

Timber

      2,992       
    
  
       610,083      527,737
    
  

Costs and expenses:

              

Oil and gas production

      43,482      34,859

Agriculture

      417      1,532

Timber

      10,288      1,699

General and administrative

      104,724      105,910

Depreciation and depletion

      1,559      1,841
    
  
       160,470      145,841
    
  

Income from operations

      449,613      381,896
    
  

Other income (expense):

              

Gain-Sale of land

             1,426

Interest income

      12,949      4,065

Dividends on stock

      6,399      7,948
    
  
       19,348      13,439
    
  

Income before income taxes

      468,961      395,335
    
  

Federal and state income taxes:

              

Current

      142,193      120,290

Deferred

              
    
  
       142,193      120,290
    
  

Net Income

    $ 326,768    $ 275,045
    
  

Per common stock (2005; 1,942,495 shares; 2004; 1,942,495 shares)

    $ .17    $ .14

Dividends per share

    $ .17    $ .07

 

See accompanying notes

 

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Calcasieu Real Estate & Oil Co., Inc.

 

Statement of Changes in Cash Flows

 

     Three Months Ended
March 31, 2005
     Three Months Ended
March 31, 2004
  

Cash Flows From Operating Activities

                 

Net Income

    $ 326,768     $ 275,045  

Noncash (income) expenses included in net income:

                 

Depreciation and depletion

      1,589       1,841  

(Gain) on sale of assets

              (1,426 )

(Increase) decrease in current assets

      (6,314 )     (26,167 )

Increase (decrease) in current liabilities

      348,949       110,339  
    
 

Net cash provided by operating activities

      670,962       359,632  
    
 

Cash Flows From Investing Activities

                 

Proceeds from sale of land

              5,454  

Purchase of available for sale securities

      (494,751 )     (202,682 )

Sale of available for sale securities

                 

Purchase of property, equipment and timber

      (3,234 )     (8,709 )
    
 

Net cash provided by (used in) investing activities

      (497,985 )     (205,937 )
    
 

Cash Flows From Financing Activities

                 

Dividends paid net of refunds

      (330,449 )     (123,861 )
    
 

Net cash (used in) investing activities

      (330,449 )     (123,861 )
    
 

Net increase (decrease) in cash and cash equivalents

      (157,472 )     29,834  

Cash and cash equivalents:

                 

Beginning

      1,214,405       527,219  
    
 

Ending

    $ 1,056,933     $ 557,053  
    
 

 

See accompanying notes

 

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Calcasieu Real Estate & Oil Co., Inc.

 

Statement of Changes in Stockholders’ Equity

 

Quarter Ended March 31, 2005

 

     Comprehensive
Income
     Retained
Earnings
     Accumulated
Other
Comprehensive
Income
     Capital
Stock
Issued
    Treasury
Stock

Balance, December 2004

            $ 8,220,502     $ 50,781     $ 72,256    $ 375,516

Comprehensive income:

                                      

Net income

    $ 326,768       326,768                       

Other comprehensive income:

                                      

Unrealized holdings loss occurring during period net of taxes of $13,953

      (20,929 )             (20,929 )             
    
                            

Total comprehensive income

    $ 305,839                               
    
                            

Dividends

              (330,449 )                     
            
 
 
  

Balance, March 31, 2005

            $ 8,216,821     $ 29,852     $ 72,256    $ 375,516
            
 
 
  

 

See accompanying notes

 

5

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Calcasieu Real Estate & Oil Co., Inc.

 

Notes to Financial Statements

 

March 31, 2005

(Unaudited)

 

Note 1. Basis of Presentation

 

In the opinion of management, the accompanying balance sheet and related interim statements of income, cash flows, and stockholders’ equity include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in accordance with generally accepted accounting principles of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-QSB should be read in conjunction with Management’s Discussion and Analysis and financial statements and notes thereto included in the Calcasieu Real Estate & Oil Co., Inc. 2004 Form 10-KSB.

 

Note 2. Nature of Business and Significant Accounting Policies

 

Nature of business:

 

The Company’s business is the ownership and management of land. The primary activities consist of leasing its properties for mineral (oil and gas) and agriculture and raising timber.

 

Significant accounting polices:

 

Cash and equivalents:

 

For purposes of the statement of each flows, cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less.

 

Pervasiveness of estimates:

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

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Investment securities:

 

The Company complies with the provisions of Financial Accounting Standards Board Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities. Under the provisions of this statement, management must make a determination at the time of acquisition whether certain investments in debt and equity securities are to be held as investments to maturity, held as available for sale, or held for trading. Management, under a policy adopted by the board of directors of the Company, made a determination that all debt and equity securities owned at that date and subject to the provisions of the statement would be classified as held available-for-sale.

 

Under the accounting policies provided for investments classified as held available- for-sale, all such debt securities and equity securities that have readily determinable fair value shall be measured at fair value in the balance sheet. Unrealized holding gains and losses for available-for-sale securities shall be excluded from earnings and reported as a net amount (net of income taxes) as a separate component of retained earnings until realized. Realized gains and losses on available-for-sale securities are included in income. The cost of securities sold is based on the specific identification method. Interest on debts securities is recognized in income as earned, and dividends on marketable equity securities are recognized in income when declared.

 

Declines in the fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

 

Property and equipment:

 

Property and equipment is stated at cost. Major additions are capitalized; maintenance and repairs are charged to income currently. Depreciation is computed on the straight-line and accelerated methods over the estimated useful lives of the assets.

 

Timber:

 

When timber land is purchased with standing timber, the cost is divided between land and timber based on timber cruises contracted by the Company. The costs of reforestation are capitalized. The timber asset is amortized when the timber is sold based on the percentage of the timber sold from a particular tract applied to the amount capitalized for timber for that tract.

 

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Oil and gas:

 

Oil and gas income is booked when the Company is notified by the well’s operators as to the Company’s share of the sales proceeds together with the withheld severance taxes. The Company has no capitalized costs relating to oil and gas producing activities and no costs for property acquisition, exploration and development activities.

 

Note 3. Earnings per share:

 

Earnings per share is based on the weighted average number of common shares outstanding during the years.

 

Note 4. Income taxes:

 

Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.

 

Note 5. Contingencies:

 

There are no material contingencies known to management. The Company does not participate in off balance sheet arrangements.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Results of Operations

 

Revenue

 

Revenue for the first quarter of 2005 was $610,083, an increase of $83,246 or 15.6% over the first quarter of 2004. Agriculture income was down $15,165 or 20.6% from the first quarter of 2004. This was due to rent timing differences. Oil and gas income was up $94,519 or 20.8% in the first quarter of 2005 compared to the first quarter of 2004. Of this $94,519 increase oil leases and seismic fees accounted for $16,167 of the increase as we saw more leasing activity. In the first quarter of 2005 the largest source, of oil and gas royalties was the Company’s interest in the Castor Creek field. The Company’s interest in this field in 2005 was 518.18 barrels of oil and 18,758 MCF of gas for gross royalties of $166,677 as compared to 276.52 barrels of oil, 5,199 MCF of gas and $41,667 gross royalties in 2004 when the field was initially coming on stream. The average price per barrel of oil was 26.9% higher in 2005 than 2004 and the average price per MCF of gas was 25.5% higher from this production. This contrasts with the results from the South Gordon field which was the largest source of oil and gas income in 2004. Although the average price per barrel of oil at South Gordon increased 32.4% and the average

 

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price per MCF of gas increased 7% it was not enough to off set the decline in production. The Company’s share of oil produced declined 1,403 barrels or 36.1% and the MCF of gas declined 2,654 MCF or 40.7%. Income from South Gordon declined $37,497. The remainder of the Company’s oil and gas income remained approximately equal with the prior year as declines in production were off set by increases in prices.

 

Operating Expenses

 

Operating expenses increased $14,629 in the first quarter of 2005 as compared to the first quarter of 2004 or 10%. All of the increase was due to an increase of $8,623 in state oil and gas severance taxes and an increase of $8,589 in timber expense. The severance taxes are a percentage of the oil and gas royalties and the timber expenses were incurred to take advantage of good weather.

 

Financial Condition

 

Current assets plus securities available for sale totaled $4,116,503 on March 31, 2005, compared with $3,807,789 on December 31, 2004, and $2,981,568 on March 31, 2004. Current liabilities, which were also total liabilities were $550,263 on March 31, 2005, compared to $215,267 on December 31, 2004, and $312,953 on March 31, 2004.

 

Management believes existing cash and short-term investments together with funds generated from operations should be sufficient to meet operating requirements and provide funds for strategic acquisitions.

 

The Company declared the normal seven cents per common share during the quarter ended March 31, 2005, plus an extra dividend of ten cents per common share. It is anticipated that the Company will be able to continue paying a seven cents per common share per quarter.

 

Issues and Uncertainties

 

This Quarterly Report contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of issues and uncertainties such as those listed below, which, among others, should be considered in evaluating the Company’s financial outlook.

 

Revenues from oil and gas provide most of the Company’s income. All of these revenues come from wells operated by other companies from property belonging to Calcasieu Real Estate & Oil Co., Inc. Consequently, these revenues fluctuate due to changes in oil and gas prices and changes in the operations of the other companies.

 

Item 4. Controls and Procedures

 

Under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a -14(c) within 90

 

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days of the filing date of this quarterly report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation.

 

Part II. Other Information

 

Item 4. Submission of Matters to a Vote of Security Holders

 

The Annual Meeting of Stockholders was held on April 19, 2005.

 

The following proposals were adopted by the margins indicated:

 

1. To elect a Board of Directors to hold office until their successors are elected and qualified.

 

   

Number of Shares

   

For

  

Withheld

William D. Blake

   1,458,282   28,090

Troy A. Freund

   1,481,222   5,150

Arthur Hollins, III

   1,481,222   5,150

Laura A. Leach

   1,479,132   7,240

Frank O. Pruitt

   1,481,222   5,150

B. James Reaves, III

   1,479,462   6,910

Mary W. Savoy

   1,479,142   7,230

Michael P. Terranova

   1,479,462   6,910

Charles D. Viccellio

   1,479,472   6,900

Mary Leach Werner

   1,479,462   6,910

 

2. To amend the Restated Articles of Incorporation to change the name of the Company to CKX Lands, Inc.

 

For

   1,344,493

Against

   125,188

Abstain

   16,916

 

The name change will be effective when the Company files the amendment with the Louisiana Secretary of State. This will occur when the Company has obtained a new CUSIP number and new stock certificates.

 

3. To approve McElroy, Quirk & Burch APC as auditors for 2005.

 

For

   1,481,677

Against

   4,034

Abstain

   886

 

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Item 6. Exhibits and Reports on Form 8-K

 

(A) Exhibits

 

31.1    Certification of Arthur Hollins, III, President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.
31.2    Certification of William D. Blake, Vice-President and Treasurer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.
32.1    Certification Pursuant to 18 U.S.C. Section 1850 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2    Certification Pursuant to 18 U.S.C. Section 1850 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

(B) Reports on Form 8-K

 

On January 13, 2005, we filed a Current Report on Form 8-K containing a press release correcting erroneous information about the Company or the interest.

 

On March 11, 2005, we filed a Current Report on Form 8-K containing a press release correcting erroneous information about the Company.

 

Items 1, 2, 3 and 5 are not applicable and have been omitted.

 

Signature

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

Calcasieu Real Estate & Oil Co., Inc.

Date: May 3, 2005

  

/s/ William D. Blake

   

William D. Blake

   

Vice-President and Treasurer

   

Chief Financial Officer

   

/s/ Arthur Hollins, III

   

Arthur Hollins, III

   

President and

   

Chief Executive Officer

 

11