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CKX LANDS, INC. - Quarter Report: 2015 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

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

 

 

For the quarterly period ended March 31, 2015

 

 

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.)

     
     

1508 Hodges Street

   

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  ☒     No  ☐

 

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  ☒     No  ☐

 

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

Accelerated filer 

 

Non-accelerated filer

☐ 

Smaller reporting company 

 

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

 

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, 2015

 

Table of Contents

     

Page

Part I.

Financial Information  
       

Item 1.

  Financial Statements  
       
  a. Balance Sheets as of March 31, 2015 and December 31, 2014 (Unaudited)

1

  b. Statements of Income for the Quarters ended March 31, 2015 and 2014 (Unaudited)

2

  c. Statements of Changes in Stockholders’ Equity for the Quarters ended March 31, 2015 and 2014 (Unaudited)

3

  d. Statements of Cash Flows for the Quarters ended March 31, 2015 and 2014 (Unaudited)

4

  e. Notes to Financial Statements (Unaudited)

5

       

Item 2.

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

 6-7

       

Item 4.

  Controls and Procedures

 8

       

Part II.

Other Information  
       

Item 6.

  Exhibits

 9

       
    Signature

9

 

 
 

 

 

Part I – Financial Information

 

 

Item 1.

FINANCIAL STATEMENTS

 

CKX Lands, Inc.

Balance Sheets

March 31, 2015 and December 31, 2014

(Unaudited)

 

   

2015

   

2014

 

Assets

 

Current Assets:

               

Cash and cash equivalents

  $ 5,805,450     $ 5,225,594  

Certificates of deposit

    1,440,000       1,680,000  

Accounts receivable

    127,473       146,413  

Prepaid expense and other assets

    87,570       50,085  

Total current assets

    7,460,493       7,102,092  

Non-current Assets:

               

Certificate of deposit

    --       240,000  

Property and equipment:

               

Building and equipment less accumulated depreciation of $90,432 and $90,432, respectively

    --       --  

Timber less accumulated depletion of $803,189 and $803,189, respectively

    1,545,154       1,527,425  

Land

    4,956,967       4,957,135  

Total property and equipment, net

    6,502,121       6,484,560  

Total assets

  $ 13,962,614     $ 13,826,652  
                 

Liabilities and Stockholders’ Equity

 

Current Liabilities:

               

Trade payables and accrued expenses

  $ 105,729     $ 61,237  

Dividends payable

    135,975       --  

Income tax payable - current

    2,456       --  

Total current liabilities

    244,160       61,237  

Noncurrent Liabilities:

               

Deferred income tax payable

    224,426       224,426  

Total liabilities

    468,586       285,663  

Stockholders’ Equity:

               

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

    72,256       72,256  

Retained earnings

    13,797,288       13,844,249  

Less cost of treasury stock (157,505 shares)

    (375,516 )     (375,516 )

Total stockholders’ equity

    13,494,028       13,540,989  

Total liabilities and stockholders’ equity

  $ 13,962,614     $ 13,826,652  

 

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

 

 
 

 

 

CKX Lands, Inc.

Statements of Income

Quarters Ended March 31, 2015 and 2014

(Unaudited)

 

 

   

2015

   

2014

 

Revenues:

               

Oil and gas

  $ 230,222     $ 419,572  

Timber

    --       --  

Surface

    22,719       198,740  

Total revenues

    252,941       618,312  

Costs and Expenses:

               

Oil and gas production

    16,136       24,904  

Timber

    336       --  

Surface

    575       13  

General and administrative

    120,792       119,607  

Depreciation and depletion

    --       1,671  

Total cost and expenses

    137,839       146,195  

Income from operations

    115,102       472,117  

Other Income / (Expense):

               

Interest income

    4,297       4,071  

Gain on sale of land

    1,498       --  

Net other income / (expense)

    5,795       4,071  

Income before income taxes

    120,897       476,188  

Federal and State Income Taxes:

               

Current

    31,883       155,029  

Total income taxes

    31,883       155,029  

Net Income

  $ 89,014     $ 321,159  
                 

Per Common Stock (1,942,495 shares):

               
                 

Net Income

  $ 0.05     $ 0.17  

Dividends

  $ 0.07     $ 0.07  

 

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

 

 
 

 

  

CKX Lands, Inc.

Statements of Changes in Stockholders’ Equity

Quarters Ended March 31, 2015 and 2014

(Unaudited)

 

Quarter Ended March 31, 2015:

 

   

Total

   

Retained
Earnings

   

Capital
Stock
Issued

   

Treasury
Stock

 

December 31, 2014 Balance

  $ 13,540,989     $ 13,844,249     $ 72,256     $ 375,516  

Net income

    89,014       89,014       --       --  

Dividends

    (135,975 )     (135,975 )     --       --  

March 31, 2015 Balance

  $ 13,494,028     $ 13,797,288     $ 72,256     $ 375,516  

 

 

Quarter Ended March 31, 2014:

 

   

Total

   

Retained
Earnings

   

Capital
Stock
Issued

   

Treasury
Stock

 

December 31, 2013 Balance

  $ 12,788,600     $ 13,091,860     $ 72,256     $ 375,516  

Net income

    321,159       321,159       --       --  

Dividends

    (135,974 )     (135,974 )     --       --  

March 31, 2014 Balance

  $ 12,973,785     $ 13,277,045     $ 72,256     $ 375,516  

 

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

 

 
 

 

 

CKX Lands, Inc.

Statements of Cash Flows

Quarters Ended March 31, 2015 and 2014

(Unaudited)

 

   

2015

   

2014

 

Cash Flows From Operating Activities:

               

Net Income

  $ 89,014     $ 321,159  

Less non-operating activities:

               

Gain on sale of land

    (1,498 )     --  

Less non-cash (income) expenses included in net income:

               

Depreciation, depletion and amortization

    --       1,671  

Change in operating assets and liabilities:

               

Increase in current assets

    (18,545 )     (23,414 )

Increase in current liabilities

    46,948       84,451  

Net cash provided from operating activities

    115,919       383,867  
                 

Cash Flows From Investing Activities:

               

Certificates of deposit:

               

Purchases

    (240,000 )     --  

Maturity proceeds

    720,000       516,000  

Land, timber, equipment, and other assets:

            --  

Proceeds from sale of land

    1,666       --  

Purchases and reforestation

    (17,729 )     (5,764 )

Net cash provided from (used in) investing activities

    463,937       510,236  
                 

Cash Flows From Financing Activities:

               

Dividends paid

    --       --  

Net cash used in financing activities

    --       --  
                 

Net increase (decrease) in cash and cash equivalents

    579,856       894,103  
                 

Cash and cash equivalents:

               

Beginning

    5,225,594       4,529,051  

Ending

  $ 5,805,450     $ 5,423,154  
                 

Supplemental disclosures of cash flow information:

               

Cash payments for:

               

Interest

  $ --     $ --  

Income taxes

  $ --     $ 68,000  
                 

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.

 

 
 

 

 

CKX Lands, Inc.

Notes to Financial Statements

March 31, 2015

(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, 2014. 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, 2014 and Form 10-Q for the quarterly period ended March 31, 2014.

 

 

Note 2.

Income Taxes

 

In accordance with generally accepted accounting principles, the Company has analyzed its filing positions in federal and state income tax returns that remain subject to examination, generally 3 years after filing. 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.

 

 
 

 

 

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Results of Operations

 

Revenue

 

Comparison of Revenues for the three months ended March 31, 2015 and 2014 follows:

 

   

2015

   

2014

   

$ Change

   

% Change

 

Oil and Gas

    230,222       419,572       (189,350 )     (45.13 )%

Timber

    --       --       --       -- %

Surface

    22,719       198,740       (176,021 )     (88.57 )%
                                 

Total

    252,941       618,312       (365,371 )     (59.09 )%

 

Oil and Gas

 

CKX leases its property to oil and gas operators and collects income through its land ownership in the form of oil and gas royalties and lease rentals and geophysical revenues. A breakdown of oil and gas revenues follows:

 

   

2015

   

2014

   

$ Change

   

% Change

 

Oil

    158,193       356,597       (198,404 )     (55.64 )%

Gas

    63,418       40,153       23,265       57.94 %

Lease and Geophysical

    8,611       22,822       (14,211 )     (62.27 )%
                                 

Total

    230,222       419,572       (189,350 )     (45.13 )%

 

CKX received oil and/or gas revenues from 116 and 100 wells during the three month period ended March 31, 2015 and 2014, respectively. During the quarter, CKX received approximately $23,000 from EOG Resources, Inc. for a mineral interest on approximately 480 acres located in Gonzales County, Texas. This income represented one month’s production. Based on the information received, this production was derived from six (6) horizontal wells.

 

The following schedule summarizes barrels and MCF produced and average price per barrel and per MCF.

 

   

2015

   

2014

 

Net oil produced (Bbl)(2)

    2,753       3,278  

Average oil sales price (per Bbl)(1,2)

  $ 53.43     $ 97.99  
                 

Net gas produced (MCF)

    15,498       8,634  

Average gas sales price (per MCF)(1)

  $ 4.09     $ 4.65  

 

Notes to above schedule:

 

(1) Before deduction of production and severance taxes.

(2) Excludes plant products.

 

 

Oil and Gas revenues declined by $189,350 from 2014 revenues. As indicated from the schedule above the decline was due to reductions in the barrels of oil produced, the average price per barrel, and the average price per MCF. MCF of gas produced increase from the 2014 reported amounts.

 

 
 

 

 

Item 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

 

Lease and geophysical revenues decreased $14,211 from 2014 amounts. These revenues are dependent on oil and gas producers’ activities, are not predictable and can vary significantly from year to year.

 

Management believes oil and gas activity is driven by the current and forecasted commodity prices, demand for oil and gas, and upstream and downstream industry activity. Based on available public information, management believes that oil and gas activity which includes oil and gas production as well as lease rentals and geophysical will continue to be depressed when compared to 2014 reported amounts.

 

During the first quarter of 2015, the Company marketed timber for sale and has found the demand for timber to be depressed. The Company will continue to market timber for sale during 2015 but acceptable offer prices will determine if a sale is made in 2015.

 

Surface revenue decreased due to several large right of way agreements being executed in 2014. As previously noted by management, pipeline, utility and other right of ways are not unusual to the Company; however agreements of the magnitude seen in 2014 are unusual. Surface revenues are not predictable and can vary significantly from year to year.

 

Costs and Expenses

 

Oil and gas production costs, primarily severance taxes, decreased by $8,768 in 2015. With the reduction in oil and gas revenues, the decrease was expected.

 

General and administrative expenses increased by $1,185 primarily due to decrease in compensation of $7,510 which was offset by an increase in legal fees of $8,258 primarily due to a failed land acquisition.

 

Other costs and expenses incurred for the three months ended March 31, 2015 were materially consistent with 2014 reported amounts.

 

Financial Condition

 

Current assets totaled $7,460,493 and total liabilities equaled $468,586 at March 31, 2015. Management believes available cash and certificates of deposit together with funds generated from operations should be sufficient to meet operating requirements and provide funds for strategic acquisitions. Additional sources of liquidity include an available bank line of credit of $5,000,000.

 

The Company declared a seven cents ($0.07) per common share quarterly dividend during the quarter ended March 31, 2015. In assessing the amount of or if a quarterly dividend will be declared, the Board of Directors will review recent earnings, current liquidity, and other relevant information.

 

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 with 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 a significant portion of the Company’s net income and cash flows. These revenues come from wells operated by other companies on property owned by CKX Lands, Inc. Consequently, these revenues fluctuate due to changes in oil and gas prices and changes in the operations of these 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, concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by the report.

 

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 are incorporated by reference to Exhibit (3.3) to Form 10-Q for the quarter ended March 31, 2013.

 

 

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

Certification 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: April 30, 2015

/s/ Brian R. Jones 

 

Brian R. Jones

 

President and Treasurer