Edgar Filing: CKX LANDS, INC.

ckx_10q-093011.htm

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 September 30, 2011

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		(I.R.S. Employer Identification No.)
incorporation or organization)

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 September 30, 2011

Table of Contents

Part I. Financial Information			Page

Item 1.		Financial Statements

	a.	Balance Sheets as of September 30, 2011 and December 31, 2010 (Unaudited)	1
	b.	Statements of Income for the quarter and nine months ended September 30, 2011 and 2010 (Unaudited)	2
	c.	Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2011 and 2010 (Unaudited)	3
	d.	Statements of Cash Flows for the nine months ended September 30, 2011 and 2010 (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

September 30, 2011 and December 31, 2010

(Unaudited)

	2011			2010
Assets
Current Assets:
Cash and cash equivalents	$	4,933,135		$	5,182,316
Certificates of deposit		735,625			240,000
Accounts receivable		235,539			149,795
Prepaid expense and other assets		125,026			114,232
Total current assets		6,029,325			5,686,343
Securities available for sale		--			783,772
Certificates of deposit		480,000			250,000
Property and equipment:
Building and equipment less accumulated depreciation of $78,257 and $72,794, respectively		12,380			17,193
Timber less accumulated depletion of $678,609 and $632,565, respectively		775,884			557,253
Land		3,526,288			3,192,491
Total property and equipment, net		4,314,552			3,766,937
Total assets	$	10,823,877		$	10,487,052

Liabilities and Stockholders’ Equity
Current Liabilities:
Trade payables and accrued expenses	$	68,855		$	58,520
Income tax payable:
Current		85,972			469
Deferred		--			--
Total current liabilities		154,827			58,989
Noncurrent Liabilities:
Deferred income tax payable		181,818			181,818
Total liabilities		336,645			240,807
Stockholders’ Equity:
Common stock, no par value: 3,000,000 shares authorized; 2,100,000 shares issued		72,256			72,256
Retained earnings		10,790,492			10,543,924
Accumulated other comprehensive income		--			5,581
Less cost of treasury stock (157,505 shares)		(375,516	)		(375,516	)
Total stockholders’ equity		10,487,232			10,246,245
Total liabilities and stockholders’ equity	$	10,823,877		$	10,487,052

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

CKX Lands, Inc.

Statements of Income

Quarter and Nine Months Ended September 30, 2011 and 2010

(Unaudited)

	Quarter Ended September 30,					Nine Months Ended September 30,
	2011		2010			2011			2010
Revenues:
Oil and gas	$	565,573	$	287,867		$	1,200,186		$	1,028,629
Timber		83,193		18,717			86,632			132,842
Agriculture		22,124		26,408			46,588			69,975
Total revenues		670,890		332,992			1,333,406			1,231,446
Costs and Expenses:
Oil and gas		38,794		25,807			90,208			81,541
Timber		17,778		3,374			32,414			14,067
Agriculture		2,258		1,542			5,220			6,323
General and administrative		99,712		98,769			319,387			301,317
Depreciation and depletion		30,210		25,047			51,507			94,292
Total cost and expenses		188,752		154,539			498,736			497,540
Income from operations		482,138		178,453			834,670			733,906
Other Income / (Expense):
Interest income		9,817		9,797			30,286			28,190
Dividend income		3,854		10,403			13,381			35,700
Gain/(Loss) on securities available-for-sale		10,688		(42,341	)		10,688			(13,814	)
Gain on sale of land and other assets		--		--			306			255
Net other income / (expense)		24,359		(22,141	)		54,661			50,331
Income before income taxes		506,497		156,312			889,331			784,237
Federal and state income taxes:
Current		160,247		32,199			259,779			222,747
Deferred		863		(2,579	)		(11,565	)		(17,909	)
Total income taxes		161,110		29,620			248,214			204,838
Net Income	$	345,387	$	126,692		$	641,117		$	579,399

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

Net Income	$	0.18	$	0.07		$	0.33		$	0.30

Dividends	$	0.07	$	0.07		$	0.21		$	0.21

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

CKX Lands, Inc.

Statements of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2011 and 2010

(Unaudited)

Nine Months Ended September 30, 2011:
	Comprehensive Income			Retained Earnings			Accumulated Other Comprehensive Income			Capital Stock Issued		Treasury Stock
December 31, 2010 Balance				$	10,543,924			5,581			72,256		375,516

Comprehensive Income:
Net income	$	641,117			641,117			--			--		--
Other comprehensive income:
Change in unrealized net holding gains occurring during period, net of taxes of $3,721		(5,581	)					(5,581	)
Total comprehensive income	$	635,536
Dividends					(407,924	)
Dividend reversion					13,375			--			--		--

September 30, 2011 Balance				$	10,790,492			--			72,256		375,516

Nine Months Ended September 30, 2010:
	Comprehensive Income		Retained Earnings			Accumulated Other Comprehensive Income		Capital Stock Issued		Treasury Stock
December 31, 2009 Balance			$	10,170,940			33,352		72,256		375,516

Comprehensive Income:
Net income	$	579,399		579,399			--		--		--
Other comprehensive income:
Change in unrealized net holding gains occurring during period, net of taxes of $38,610		57,915					57,915
Total comprehensive income	$	637,314
Dividends				(407,924	)		--		--		--

September 30, 2010 Balance			$	10,342,415			91,267		72,256		375,516

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

CKX Lands, Inc.

Statements of Cash Flows

Nine Months Ended September 30, 2011 and 2010

(Unaudited)

	2011			2010
Cash Flows From Operating Activities:
Net Income	$	641,117		$	579,399
Less non-cash (income) expenses included in net income:
Depreciation, depletion and amortization		51,507			94,292
Deferred income tax expense		(11,565	)		(17,909	)
Less non-operating activities:
Unrealized (gain) loss on securities		--			--
(Gain) loss from securities sales		--			13,814
Gain from sale of land and other assets		(306	)		(255	)
Change in operating assets and liabilities:
(Increase) decrease in current assets		7,724			(12,880	)
Increase (decrease) in current liabilities		11,551			19,945
Net cash provided from operating activities		700,028			676,406

Cash Flows From Investing Activities:
Certificates of Deposit:
Maturity proceeds		--			480,000
Purchases		(725,625	)		(250,000	)
Securities:
Sales proceeds		787,841			199,053
Purchases		(12,560	)		(312,174	)
Proceeds from dissolution of partnership		--			255
Land, timber, equipment and other assets:
Sales proceeds		167			--
Purchases		(604,483	)		(601,079	)
Net cash provided from (used in) investing activities		(554,660	)		(483,945	)

Cash Flows From Financing Activities:
Dividends paid, net of reversion		(394,549	)		(407,924	)
Net cash used in financing activities		(394,549	)		(407,924	)

Net increase (decrease) in cash and cash equivalents		(249,181	)		(215,463	)

Cash and cash equivalents:
Beginning		5,182,316			3,977,106
Ending	$	4,933,135		$	3,761,643

Supplemental disclosures of cash flow information:
Cash payments for:
Interest	$	--		$	--
Income taxes	$	139,660		$	212,500

Supplemental schedule of non-cash investing and financing activities:
Net change in recognized and unrecognized unrealized gains (losses) on available-for-sale securities	$	(9,302	)	$	96,525

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

CKX Lands, Inc.

Notes to Financial Statements

September 30, 2011

(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, 2010. 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, 2010 and Form 10-Q for the quarterly period ended September 30, 2011.

Note 2. 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.

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

Certificate of Deposits	$	735,625		--		480,000		--		1,215,625		--
Mutual Funds		--		--		--		--		--		--
Equity Securities		--		--		--		--		--		--

Total	$	735,625		--		480,000		--		1,215,625		--

	September 30, 2010
	Current				Non-Current				Total
	Fair Value		Unrealized Gain/(Loss)		Fair Value		Unrealized Gain/(Loss)		Fair Value		Unrealized Gain/(Loss)

Certificate of Deposits	$	240,000		--		490,000		--		730,000		--
Mutual Funds		--		--		785,429		19,654		785,429		19,654
Equity Securities		--		--		1,204,269		130,432		1,204,269		130,432

Total	$	240,000		--		2,479,698		150,086		2,719,698		150,086

CKX Lands, Inc.

Notes to Financial Statements

September 30, 2011

(Unaudited)

Fair value measurements disclosure for securities is as follows.

		September 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	$	1,215,625	--	--

Mutual Funds		--	--	--

Equity Securities	$	--	--	--

	September 30, 2010
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Certificate of Deposit	$	730,000		--		--

Mutual Funds		785,429		--		--

Equity Securities	$	1,204,269		--		--

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, 2008 through 2010 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 4: Land and Timber Purchases:

During the first quarter of 2011, the Company purchased two parcels of land with standing timber for $592,750. Approximately 320 acres were purchased for $330,665 and the standing timber was valued at $262,085 based on timber cruises.

Note 5: Subsequent Event:

On October 7, 2011, the Company purchased eight separate tracts of land totaling approximately 800 acres, all of which are located in Beauregard Parish, Louisiana, for approximately $1,280,000. Management has estimated that approximately $382,000 of standing timber exists on the acquired tracts at acquisition date. The remainder of the purchase price, $898,000, was allocated to the land purchased. The Company paid cash for the purchased tracts.

Item 2.

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

Results of Operations

Revenue

Revenues for the first nine months of 2011 increased by $101,960 from the revenues for the first nine months of 2010 to $1,333,406.

Oil and gas revenues increased by $171,557 to $1,200,186 in 2011. Oil and gas revenues consists of royalty, lease rental and geophysical revenue. Royalty revenue increased by $134,569 and lease rentals increased by $18,533 from 2010. Geophysical revenues increased by $18,455 from 2010.

Gas production decreased by 1,058 MCF, and the average gas sales price per MCF decreased by 9.28% resulting in a decrease in gas revenue of $30,952. Revenue from oil production increased by $167,664, due to an increase of 53.14% in the average barrel sales price and a decrease in production of approximately 1,378 barrels. Revenues from plant products decreased by $2,143 from 2010 revenues.

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

	Nine Months Ended 09/30/11		Nine Months Ended 09/30/10
Net gas produced (MCF)		48,372		49,430
Average gas sales price (per MCF)(1)	$	5.05	$	5.57

Net oil produced (Bbl)(2)		7,279		8,657
Average oil sales price (per Bbl)(1,2)	$	103.15	$	67.36

Notes to above schedule:

(1) Before deduction of production and severance taxes.

(2) Excludes plant products.

Timber revenue decreased from $132,842 to $86,632 in 2011. 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 decreased $23,387 to $46,588 in 2011, primarily due to lower farm rental rates.

Costs and Expenses

Oil and gas production costs, primarily severance taxes, increased by $8,667 in 2011. This increase is directly related to higher oil and gas revenues.

Timber expenses increased by $18,347 in 2011 due to a timber cruise mapping project and maintenance costs.

General and administrative expenses increased by $18,070 primarily due to a one time public company compliance expense of $17,500.

Financial Condition

Current assets and certificates of deposit non-current totaled $6,509,325 and total liabilities equaled $336,645 at September 30, 2011. 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 and paid another seven cents per common share during the quarter ended September 30, 2011. 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.

10.1

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.

10.2

Contract to purchase eight separate tracts of land, 800 acres, all of which are located in Beauregard Parish, Louisiana effective October 7, 2011.

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

** 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: November 10, 2011		/s/ Joseph K. Cooper
		Joseph K. Cooper
		President and Chief Executive Officer



Date: November 10, 2011		/s/ Brian R. Jones
		Brian R. Jones
		Treasurer and Chief Financial Officer