ckxlands_10q-033113.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2013
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
 
Commission File Number 1-31905

CKX Lands, Inc.
(Exact name of registrant as specified in its charter)
 
Louisiana
 
72-0144530
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
     
     
1424 Ryan Street, Suite A
   
Lake Charles, LA
 
70601
(Address of principal executive offices)
 
(Zip Code)
     
 
(337) 493-2399
 
 
(Registrant’s telephone number)
 


 
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  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                                Yes   x   No  o

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.

Large accelerated filer       o                                                                              Accelerated filer                        o
Non-accelerated filer         o                                                                            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   o No   x

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

 
 
CKX Lands, Inc.
Form 10-Q
For the Quarter ended March 31, 2013
 
Table of Contents
       
Page
Part I.   Financial Information
 
         
  Item 1.  
Financial Statements
 
         
    a.
Balance Sheets as of March 31, 2013 and December 31, 2012 (Unaudited)
1
    b.
 Statements of Income for the Quarters ended March 31, 2013 and 2012 (Unaudited)
2
    c.
Statements of Changes in Stockholders’ Equity for the Quarters ended March 31, 2013 and 2012 (Unaudited)
3
    d.
Statements of Cash Flows for the Quarters ended March 31, 2013 and 2012 (Unaudited)
4
    e.
Notes to Financial Statements (Unaudited)
5
         
  Item 2.  
 Management’s Discussion and Analysis of Financial Condition and Results of Operations
6
         
  Item 4.  
Controls and Procedures
7
         
Part II.  Other Information
 
         
  Item 6.  
Exhibits
8
         
     
Signature
8

 
 

 
 
Part I – Financial Information
 
 
Item 1.          FINANCIAL STATEMENTS
 
CKX Lands, Inc.
Balance Sheets
March 31, 2013 and December 31, 2012
(Unaudited)
 
   
2013
   
2012
 
Assets
 
Current Assets:
           
Cash and cash equivalents
  $ 6,566,316     $ 5,832,167  
Certificates of deposit
    240,000       741,384  
Accounts receivable
    240,671       260,989  
Prepaid expense and other assets
    142,970       68,081  
Total current assets
    7,189,957       6,902,621  
Property and equipment:
               
Building and equipment less accumulated depreciation of $79,176 and $77,504, respectively
    11,256       12,928  
Timber less accumulated depletion of $706,851and $700,564, respectively
    1,232,001       1,235,790  
Land
    4,434,081       4,434,081  
Total property and equipment, net
    5,677,338       5,682,799  
Total assets
  $ 12,867,295     $ 12,585,420  
                 
Liabilities and Stockholders’ Equity
Current Liabilities:
               
Trade payables and accrued expenses
  $ 79,208     $ 40,874  
Dividends payable
    135,975       --  
Income tax payable:
               
Current
    --       --  
Deferred
    --       --  
Total current liabilities
    215,183       40,874  
Noncurrent Liabilities:
               
Deferred income tax payable
    181,818       181,818  
Total liabilities
    397,001       222,692  
Stockholders’ Equity:
               
Common stock, no par value: 3,000,000 shares authorized; 2,100,000 shares issued
    72,256       72,256  
Retained earnings
    12,773,554       12,665,988  
Less cost of treasury stock (157,505 shares)
    (375,516 )     (375,516 )
Total stockholders’ equity
    12,470,294       12,362,728  
Total liabilities and stockholders’ equity
  $ 12,867,295     $ 12,585,420  
 
The accompanying notes are an integral part of these financial statements.
 
 
1

 
 
CKX Lands, Inc.
Statements of Income
Quarters Ended March 31, 2013 and 2012
 (Unaudited)
 
   
Three Months Ended March 31
 
   
2013
   
2012
 
Revenues:
           
Oil and gas
  $ 488,991     $ 904,642  
Agriculture
    32,815       25,533  
Timber
    13,759       4,935  
Total revenues
    535,565       935,110  
Costs and Expenses:
               
Oil and gas production
    35,897       65,040  
Agriculture
    127       807  
Timber
    12,377       8,169  
General and administrative
    137,422       101,476  
Depreciation and depletion
    7,959       2,116  
Total cost and expenses
    193,782       177,608  
Income from operations
    341,783       757,502  
Other Income / (Expense):
               
Interest income
    5,433       538  
Dividend income
    --       --  
Gain on sale of land and other assets
    --       124,000  
Net other income / (expense)
    5,433       124,538  
Income before income taxes
    347,216       882,040  
Federal and State Income Taxes:
               
Current
    103,675       230,299  
Deferred
    --       39,969  
Total income taxes
    103,675       270,268  
Net Income
  $ 243,541     $ 611,772  
                 
Per Common Stock (1,942,495 shares):
               
                 
Net Income
  $ 0.13     $ 0.32  
Dividends
  $ 0.07     $ 0.07  

The accompanying notes are an integral part of these financial statements.
 
 
2

 
 
 
CKX Lands, Inc.
Statements of Changes in Stockholders’ Equity
Quarters Ended March 31, 2013 and 2012
(Unaudited)

Quarter Ended March 31, 2013:
                       
   
Total
   
Retained
Earnings
   
Capital
Stock
Issued
   
Treasury
Stock
 
December 31, 2012 Balance
  $ 12,362,728       12,665,988       72,256       375,516  
Net income
    243,541       243,541                  
                                 
Dividends
    (135,975 )     (135,975 )     --       --  
                                 
March 31, 2013 Balance
  $ 12,470,294     $ 12,773,554       72,256       375,516  
 
 
Quarter Ended March 31, 2012:
                               
   
Total
   
Retained
Earnings
   
Capital
Stock
Issued
   
Treasury
Stock
 
December 31, 2011 Balance
  $ 10,661,917       10,965,177       72,256       375,516  
Net income
    611,772       611,772                  
                                 
Dividends
    (135,974 )     (135,974 )     --       --  
                                 
March 31, 2012 Balance
  $ 11,137,715       11,440,9751       72,256       375,516  
 
The accompanying notes are an integral part of these financial statements.
 
 
3

 
 
CKX Lands, Inc.
Statements of Cash Flows
Quarters Ended March 31, 2013 and 2012
(Unaudited)

   
2013
   
2012
 
Cash Flows From Operating Activities:
           
Net Income
  $ 243,541     $ 611,772  
Less non-cash (income) expenses included in net income:
               
Depreciation, depletion and amortization
    7,960       2,116  
Deferred income tax expense
            39,969  
Less non-operating activities:
               
Gain from sale of land and other assets
            (124,000 )
Change in operating assets and liabilities:
               
(Increase) decrease in current assets
    (54,571 )     79,716  
Increase (decrease) in current liabilities
    38,334       40,014  
Net cash provided from operating activities
    235,264       649,587  
                 
Cash Flows From Investing Activities:
               
Certificates of deposit:
               
Maturity proceeds
    501,384       255,625  
Purchases
            (261,384 )
Land, timber, equipment, and other assets::
               
Sales proceeds
    --       159,000  
Purchases and improvements
    (2,499 )     (4,666 )
Proceeds held in 1031 trust account
            (159,003 )
Net cash provided from (used in) investing activities
    498,885       (10,428 )
                 
Cash Flows From Financing Activities:
               
Dividends paid
    --       --  
Net cash used in financing activities
    --       --  
                 
Net increase (decrease) in cash and cash equivalents
    734,149       639,159  
                 
Cash and cash equivalents:
               
Beginning
    5,832,167       4,124,908  
Ending
  $ 6,566,316     $ 4,764,067  
                 
Supplemental disclosures of cash flow information:
               
Cash payments for:
               
Interest
  $ --     $ --  
Income taxes
  $ 125,780     $ 71,348  
                 
Supplemental schedule of non-cash investing and financing activities:
               
Net change in recognized and unrecognized unrealized gains (losses) on available-for-sale securities
  $ --     $ --  

The accompanying notes are an integral part of these financial statements.
 
 
4

 
 
CKX Lands, Inc.
Notes to Financial Statements
March 31, 2013
(Unaudited)

Note 1.       Basis of Presentation

The accompanying unaudited financial statements of CKX Lands, Inc. (“Company”) have been prepared in accordance with United States generally accepted accounting principles for interim financial information.  They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements.  Except as described herein, there has been no material change in the information disclosed in the notes to the financial statements included in our financial statements as of and for the year ended December 31, 2012.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included in the accompanying financial statements.

Interim results are not necessarily indicative of results for a full year.  These financial statements and accompanying notes should be read in conjunction with the Company’s Form 10-K for the year ended December 31, 2012 and Form 10-Q for the quarterly period ended March 31, 2013.

Note 2.       Recently Adopted Accounting Pronouncements

In 2012, we adopted Accounting Standards Update (ASU) 2011-05 which requires the presentation of the components of net income and other comprehensive income either in a single continuous statement or in two separate but consecutive statements.  This update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity.  The Company had no items of other comprehensive income during these reporting periods.

Note 3.       Income taxes:

In accordance with generally accepted accounting principles, the Company has analyzed its filing positions in federal and state income tax returns for the tax years ending December 31, 2009 through 2012 that remain subject to examination.  The Company believes that all filing positions are highly certain and that all income tax filing positions and deductions would be sustained upon a taxing jurisdiction’s audit. Therefore, no reserve for uncertain tax positions is required.  No interest or penalties have been levied against the Company and none are anticipated.
 
 
5

 
 
 
Item 2.           MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Results of Operations

Revenue

Revenues for the first three months of 2013 decreased by $399,545 from the revenues for the first three months of 2012.  This change is presented by revenue source below:

   
2013
   
2012
   
Increase /
(Decrease)
 
Oil and Gas Revenues
                 
Oil Royalties
  $ 335,092     $ 713,175     $ (378,083 )
Gas Royalties
    48,989       101,054       (52,065 )
Plant Royalties
    49,044       62,411       (13,367 )
Lease rentals
    55,866       28,001       27,865  
Geophysical
    --       --          
Timber Revenue
    13,759       4,935       8,824  
Agriculture Revenue
    32,815       25,534       7,281  
Total Revenue
  $ 535,565     $ 935,110     $ (399,545 )

Oil and gas revenues are reported to the Company by producers of the oil and gas wells.  The Company’s determination or calculation of the type, quantity and average prices are based on supporting royalty payment detail provided by the producer of the oil and gas wells.   Based on this information, the following schedule summarizes barrels and MCF produced and average price per barrel and per MCF.

   
Three Months
Ended
 03/31/13
   
Three Months
 Ended
03/31/12
 
Net oil produced (Bbl)(2)
    3,310       6,513  
Average oil sales price (per Bbl)(1,2)
  $ 101.22     $ 109.51  
                 
Net gas produced (MCF)
    12,098       25,906  
Average gas sales price (per MCF)(1)
  $ 4.05     $ 3.90  

Notes to above schedule:
 
(1) Before deduction of production and severance taxes.
(2) Excludes plant products.
 
Based on the producer provided information, the decrease in oil and gas royalty revenues was due to well depletion and no new production coming on line during this quarter.  In addition to the reduction in barrels and MCF, the average sales price per barrel decreased $8.29 but the average sales price per MCF increased by $0.15.

Lease rentals increased from the 2012 amounts.  These revenues are not predictable.

Management believes that current oil and gas activity is driven by the current and forecasted commodity prices and demand for oil and gas.  Management believes that oil and gas activity which includes lease rentals and geophysical as well as oil and gas production will continue to be strong for the next six months.

Generally, timber prices have been depressed for the last several years and the Company has elected to only harvest timber for internal maintenance programs for age class timber and storm protection measures.  Timber revenues are generated from these maintenance programs and management does not see the timber market improving within the next 6 months.
 
 
6

 

Agriculture revenue increased by $7,281 from 2012 revenue.  This increase is due to the timing of several short term surfaces leases being executed and a decrease in farm rental payments which are recorded at the time of payment receipt.  Management does not expect any significant change to agriculture revenue over the next six months.

Costs and Expenses

Oil and gas production costs, primarily severance taxes, decreased by $29,053 in 2013. This decrease is directly related to lower oil and gas revenues.

Timber and agriculture expenses were relatively flat for the quarter.

General and administrative expenses increased by $35,946 primarily due to increase in expected property management expenses related to personnel changes at the property manager and management does not believe this increase will be recurring.
 
  Financial Condition
 
Cash and short term certificates of deposit total $6,806,316 and total liabilities equaled $397,001 at March 31, 2013.  Management believes existing cash and investments together with funds generated from operations should be sufficient to meet operating requirements and provide funds for strategic acquisitions.

The Company declared another seven cents per common share during the quarter ended March 31, 2013. It is anticipated that the Company will be able to continue paying a seven cents per common share dividend each quarter.  From time to time, the Company may elect to pay an extra dividend.  In determining if an extra dividend will be declared, the Board of Directors will take into consideration the Company’s current liquidity and capital resources and the availability of suitable timberland that has mineral potential.

Issues and Uncertainties

This Quarterly Report contains forward-looking statements.  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 discussed 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 CKX Lands, Inc.  Consequently, these revenues fluctuate due to changes in oil and gas prices and changes in the operations of the other companies.
 
Item 3.
Not applicable.
 
Item 4.
CONTROLS AND PROCEDURES
 
Evaluation of Disclosure Controls and Procedures

The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the period covered by this report. Based on the evaluation, performed under the supervision and with the participation of the Company’s management, including the President and Treasurer, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by the report.
 
 
7

 
 
Changes in Internal Control Over Financial Reporting

There were no significant changes with respect to the Company’s internal control over financial reporting or in other factors that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting during the quarter covered by this report.
 

Part II.  Other Information
 
 
Item 1 – 5.
Not Applicable
 
 
Item 6.
EXHIBITS
 

 
3.1
Restated/Articles of Incorporation of the Registrant are incorporated by reference to Exhibit (3)-1 to Form 10 filed April 29, 1981.

 
3.2
Amendment to Articles of Incorporation of the Registrant is incorporated by reference to Exhibit (3.2) to Form 10-K for year ended December 31, 2003.

 
3.3
By-Laws of the Registrant.

 
10
Contract to Purchase and Sell approximately 3,495 acres in Cameron Parish, Louisiana effective July 3, 2007 is incorporated by reference to Exhibit (10) to Form 10-QSB filed August 13, 2007.

 
31
Certification of Brian R. Jones, President and Treasurer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.

 
32
Certifications of President and Treasurer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 filed herewith.

101.INS**
 
XBRL Instance
101.SCH**
 
XBRL Taxonomy Extension Schema
101.CAL**
 
XBRL Taxonomy Extension Calculation
101.DEF**
 
XBRL Taxonomy Extension Definition
101.LAB** 
 
XBRL Taxonomy Extension Labels
101.PRE** 
 
XBRL Taxonomy Extension Presentation
                   
** XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.


*************************

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.
 
 
CKX Lands, Inc.
 
     
Date: May 9, 2013       
/s/ Brian R. Jones  
  Brian R. Jones  
  President and Treasurer  

 
8