Edgar Filing: CKX LANDS, INC.

ckx10q-063012.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 June 30, 2012

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.)


700 Pujo Street, Suite 200
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 June 30, 2012

Table of Contents

		Page
Part I. Financial Information

Item 1.	Financial Statements

a.	Balance Sheets as of June 30, 2012 and December 31, 2011 (Unaudited)	1
b.	Statements of Income and Comprehensive Income for the quarter and six months ended June 30, 2012 and 2011 (Unaudited)	2
c.	Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2012 and 2011 (Unaudited)	3
d.	Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (Unaudited)	4
e.	Notes to Financial Statements (Unaudited)	5-6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7-8

Item 4.	Controls and Procedures	8

Part II. Other Information

Item 6.	Exhibits	9

	Signature	10

Part I – Financial Information

Item 1. FINANCIAL STATEMENTS

CKX Lands, Inc.

Balance Sheets

June 30, 2012 and December 31, 2011

(Unaudited)

	2012			2011
Assets
Current Assets:
Cash and cash equivalents	$	4,628,568		$	4,124,908
1031 trust account		159,003			--
Certificates of deposit		501,384			495,625
Accounts receivable		219,774			276,217
Prepaid expense and other assets		109,060			20,828
Total current assets		5,617,789			4,917,578
Securities available for sale		--			--
Certificates of deposit		480,000			480,000
Property and equipment:
Building and equipment less accumulated depreciation of $74,162 and $70,818, respectively		16,270			19,614
Timber less accumulated depletion of $691,823 and $691,436, respectively		1,150,522			1,146,743
Land		4,396,034			4,431,034
Total property and equipment, net		5,562,826			5,597,391
Total assets	$	11,660,615		$	10,994,969

Liabilities and Stockholders’ Equity
Current Liabilities:
Trade payables and accrued expenses	$	54,435		$	58,662
Income tax payable:
Current		--			87,419
Deferred		3,976			5,153
Total current liabilities		58,411			151,234
Deferred income tax payable		181,818			181,818
Total liabilities		240,229			333,052
Stockholders’ Equity:
Common stock, no par value: 3,000,000 shares authorized; 2,100,000 shares issued		72,256			72,256
Retained earnings		11,723,646			10,965,177
Accumulated other comprehensive income		--			--
Less cost of treasury stock (157,505 shares)		(375,516	)		(375,516	)
Total stockholders’ equity		11,420,386			10,661,917
Total liabilities and stockholders’ equity	$	11,660,615		$	10,994,969

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

CKX Lands, Inc.

Statements of Income and Comprehensive Income

Quarter and Six Months Ended June 30, 2012 and 2011

(Unaudited)

		Quarter Ended June 30,						Six Months Ended June 30,
		2012			2011			2012			2011
Revenues:
Oil and gas	$	520,682		$	338,834		$	1,425,324		$	634,613
Agriculture		284,510			16,738			310,043			24,464
Timber		70			--			5,005			3,439
Total revenues		805,262			355,572			1,740,372			662,516
Costs and Expenses:
Oil and gas production		57,939			28,256			122,979			51,244
Agriculture		1,047			2,455			1,854			2,962
Timber		6,057			4,986			14,226			14,637
General and administrative		115,493			128,187			216,969			219,843
Depreciation and depletion		1,615			738			3,731			21,298
Total cost and expenses		182,151			164,622			359,759			309,984
Income from operations		623,111			190,950			1,380,613			352,532
Other Income / (Expense):
Interest income		4,706			10,276			5,244			20,469
Dividend income		55			4,664			55			9,527
Gain on sale of land and other assets		--			--			124,000			306
Net other income / (expense)		4,761			14,940			129,299			30,302
Income before income taxes		627,872			205,890			1,509,912			382,834
Federal and state income taxes:
Current		255,026			54,537			485,325			99,531
Deferred		(45,800	)		(12,575	)		(5,831	)		(12,427	)
Total income taxes		209,226			41,962			479,494			87,104
Net Income		418,646			163,928			1,030,418			295,730
Other Comprehensive Income, Net of Taxes:
Change in unrealized net holding gains occurring during period, net of taxes of $1,813 and $2,321, respectively for 2011		--			2,718			--			3,481
Other comprehensive income		--			2,718			--			3,481
Comprehensive Income	$	418,646		$	166,646		$	1,030,418		$	299,211

Per Common Stock (1,942,495 shares):
Net Income	$	0.22		$	0.08		$	0.53		$	0.15
Dividends	$	0.07		$	0.07		$	0.14		$	0.14

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

CKX Lands, Inc.

Statements of Changes in Stockholders’ Equity

Six Months Ended June 30, 2012 and 2011

(Unaudited)

Six Months Ended June 30, 2012:
	Total			Retained Earnings			Accumulated Other Comprehensive Income		Capital Stock Issued		Treasury Stock
December 31, 2011 Balance	$	10,661,917		$	10,965,177		$	--	$	72,256	$	375,516
Net income		1,030,418			1,030,418			--		--		--
Other comprehensive income		--			--			--		--		--
Dividends		(271,949	)		(271,949	)		--		--		--
June 30, 2012 Balance	$	11,420,386		$	11,723,646		$	--	$	72,256	$	375,516

Six Months Ended June 30, 2011:
	Total			Retained Earnings			Accumulated Other Comprehensive Income		Capital Stock Issued		Treasury Stock
December 31, 2010 Balance	$	10,246,245		$	10,543,924		$	5,581	$	72,256	$	375,516
Net income		295,730			295,730			--		--		--
Other comprehensive income		3,481			--			3,481		--		--
Dividends		(271,949	)		(271,949	)		--		--		--
Dividend reversion		13,375			13,375			--		--		--

June 30, 2011 Balance	$	10,286,882		$	10,581,080		$	9,062	$	72,256	$	375,516

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

CKX Lands, Inc.

Statements of Cash Flows

Six Months Ended June 30, 2012 and 2011

(Unaudited)

	2012			2011
Cash Flows From Operating Activities:
Net Income		1,030,418			295,730
Less non-cash (income) expenses included in net income:
Depreciation, depletion and amortization		3,731			21,298
Deferred income tax expense		(5,831	)		(12,427	)
Less non-operating activities:
Gain from sale of land and other assets		(124,000	)		(306	)
Change in operating assets and liabilities:
Increase in current assets		(27,135	)		(88,587	)
Decrease in current liabilities		(91,646	)		(9,290	)
Net cash provided from operating activities		785,537			206,418

Cash Flows From Investing Activities:
Certificates of deposit:
Maturity proceeds		255,625			--
Purchases		(261,384	)		(5,625	)
Securities:
Purchases		--			(9,470	)
Land, timber, equipment and other assets:
Sales proceeds		159,000			167
Purchases		(4,166	)		(532,944	)
Proceeds held in 1031 trust account		(159,003	)		--
Net cash used in investing activities		(9,928	)		(547,872	)

Cash Flows From Financing Activities:
Dividends paid, net of reversion		(271,949	)		(258,574	)
Net cash used in financing activities		(271,949	)		(258,574	)
Net increase (decrease) in cash and cash equivalents		503,660			(600,028	)

Cash and cash equivalents:
Beginning		4,124,908			5,182,316
Ending		4,628,568			4,582,288

Supplemental disclosures of cash flow information:
Cash payments for:
Interest		--			--
Income taxes		606,641			112,160

Supplemental schedule of non-cash investing and financing activities:
Net change in recognized and unrecognized unrealized gains (losses) on available-for-sale securities		--			5,802

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

CKX Lands, Inc.

Notes to Financial Statements

June 30, 2012

(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, 2011. 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, 2011 and Form 10-Q for the quarterly period ended June 30, 2011.

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 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.

Note 3: Disclosures about Fair Value:

Securities available for sale and certificate of deposits (securities held to maturity) are valued at fair value. The Company’s estimated fair values of securities are as follows.

	June 30, 2012
	Current				Non-Current				Total
	Fair Value		Unrealized Gain/(Loss)		Fair Value		Unrealized Gain/(Loss)		Fair Value		Unrealized Gain/(Loss)

Certificate of Deposits	$	501,384		--		480,000		--		981,384		--
Mutual Funds		--		--		--		--		--		--
Equity Securities		--		--		--		--		--		--

Total	$	501,384		--		480,000		--		981,384		--

	June 30, 2011
	Current				Non-Current				Total
	Fair Value		Unrealized Gain/(Loss)		Fair Value		Unrealized Gain/(Loss)		Fair Value		Unrealized Gain/(Loss)

Certificate of Deposits	$	495,625		--		--		--		495,625		--
Mutual Funds		--		--		799,044		13,078		799,044		13,078
Equity Securities		--		--		--		--		--		--

Total	$	495,625		--		799,044		13,078		1,294,669		13,078

CKX Lands, Inc.

Notes to Financial Statements

June 30, 2012

(Unaudited)

Fair value measurements disclosure for securities is as follows.

	June 30, 2012
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Certificate of Deposit	$	981,384		--		--

Mutual Funds		--		--		--

Equity Securities	$	--		--		--

	June 30, 2011
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Certificate of Deposit	$	495,625		--		--

Mutual Funds		799,044		--		--

Equity Securities	$	--		--		--

Note 4: 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, 2008 through 2011 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.

Note 5: Land Sale:

During the first quarter of 2012, the Company sold 80 acres of land for $160,000 and reported a gain of $124,000. At March 31, 2012, this transaction was structured as a “deferred exchange using a qualified intermediary” pursuant to Paragraph 1031 of the Internal Revenue Code (1031 Exchange) for income tax purposes and as such the gain of $124,000 was deferred for income tax purposes. During July, 2012, the Company determined that it would not be able to complete the 1031 Exchange and the $159,000 held by the intermediary was returned to the Company. At June 30, 2012, the Company recorded the $124,000 gain as current for income tax purposes

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

Results of Operations

Revenue

Revenues for the first six months of 2012 increased by $1,077,856 from the revenues for the first six months of 2011 to $1,740,372.

Oil and gas revenues increased by $790,711 to $1,425,324 in 2012. Oil and gas revenues consists of royalty, lease rental and geophysical revenue. Royalty revenue increased by $767,816 and lease rentals decreased by $6,970 from 2011. Geophysical revenues increased by $29,864 from 2011.

Gas production increased by 10,203 MCF, and the average gas sales price per MCF decreased by 26.80% resulting in a decrease in gas revenue of $5,944. Revenue from oil production increased by $684,365, due to an increase of 9.17% in the average barrel sales price and a increase in production of approximately 5,924 barrels. Revenues from plant products increased by $89,395 from 2011 revenues.

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

	Six Months Ended 06/30/12		Six Months Ended 06/30/11
Net gas produced (MCF)		42,868		32,665
Average gas sales price (per MCF)(1)	$	3.47	$	4.74

Net oil produced (Bbl)(2)		9,988		4,064
Average oil sales price (per Bbl)(1,2)	$	109.22	$	100.05

Notes to above schedule:

(1) Before deduction of production and severance taxes.

(2) Excludes plant products.

Timber revenue increased from $3,439 to $5,005 in 2012. 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.

Agriculture revenue increased from $24,464 to $310,042 in 2012, primarily due to a pipeline right of way fee.

Costs and Expenses

Oil and gas production costs, primarily severance taxes, increased by $71,735 in 2012 due to increased oil and gas revenues.

Other costs and expenses incurred for the six months ended December 31, 2012 were generally flat from 2011 reported amounts.

Financial Condition

Current assets less restricted cash and non-current certificates of deposit totaled $5,938,786 and total liabilities equaled $240,229 at June 30, 2012. Management believes available 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 and paid another seven cents per common share during the quarter ended June 30, 2012. 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 Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), the Company’s management, including the CEO and CFO, 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-K for year ended December 31, 2003.

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.

31.1

Certification of Joseph K. Cooper, President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.

31.2

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

Certifications of Chief Executive Officer and Chief Financial Officer 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: August 9, 2012		/s/ Joseph K. Cooper
		Joseph K. Cooper
		President and Chief Executive Officer



Date: August 9, 2012		/s/ Brian R. Jones
		Brian R. Jones
		Treasurer and Chief Financial Officer