Edgar Filing: CKX LANDS, INC.

ckx_10q-033112.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, 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 March 31, 2012

Table of Contents

		Page
Part I. Financial Information

Item 1.	Financial Statements

a.	Balance Sheets as of March 31, 2012 and December 31, 2011 (Unaudited)	1
b.	Statements of Income and Comprehensive Income for the Quarters ended March 31, 2012 and 2011 (Unaudited)	2
c.	Statements of Changes in Stockholders’ Equity for the Quarters ended March 31, 2012 and 2011 (Unaudited)	3
d.	Statements of Cash Flows for the Quarters ended March 31, 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

March 31, 2012 and December 31, 2011

(Unaudited)

	2012			2011
Assets
Current Assets:
Cash and cash equivalents	$	4,764,067		$	4,124,908
1031 trust account – restricted		159,003			--
Certificates of deposit		501,384			495,625
Accounts receivable		307,522			276,217
Prepaid expense and other assets		75,763			20,828
Total current assets		5,807,739			4,917,578
Certificates of deposit		480,000			480,000
Property and equipment:
Building and equipment less accumulated depreciation of $72,490 and $70,818, respectively		17,942			19,614
Timber less accumulated depletion of $691,880 and $691,436, respectively		1,150,465			1,146,743
Land		4,396,034			4,431,034
Total property and equipment, net		5,564,441			5,597,391
Total assets	$	11,852,180		$	10,994,969

Liabilities and Stockholders’ Equity
Current Liabilities:
Trade payables and accrued expenses	$	98,676		$	58,662
Dividends payable		135,974			--
Income tax payable:
Current		246,370			87,419
Deferred		2,028			5,153
Total current liabilities		483,048			151,234
Noncurrent Liabilities:
Deferred income tax payable		231,417			181,818
Total liabilities		714,465			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		11,440,975			10,965,177
Accumulated other comprehensive income		--			--
Less cost of treasury stock (157,505 shares)		(375,516	)		(375,516	)
Total stockholders’ equity		11,137,715			10,661,917
Total liabilities and stockholders’ equity	$	11,852,180		$	10,994,969

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

CKX Lands, Inc.

Statements of Income and Comprehensive Income

Quarters Ended March 31, 2012 and 2011

(Unaudited)

	Three Months Ended March 31
	2012		2011
Revenues:
Oil and gas	$	904,642	$	295,779
Agriculture		25,533		7,726
Timber		4,935		3,439
Total revenues		935,110		306,944
Costs and Expenses:
Oil and gas production		65,040		22,988
Agriculture		807		507
Timber		8,169		9,651
General and administrative		101,476		91,656
Depreciation and depletion		2,116		20,560
Total cost and expenses		177,608		145,362
Income from operations		757,502		161,582
Other Income / (Expense):
Interest income		538		10,193
Dividend income		--		4,863
Gain on sale of land and other assets		124,000		306
Net other income / (expense)		124,538		15,362
Income before income taxes		882,040		176,944
Federal and State Income Taxes:
Current		230,299		44,994
Deferred		39,969		148
Total income taxes		270,268		45,142
Net income		611,772		131,802
Other Comprehensive Income, Net of Taxes:
Change in unrealized net holding gains occurring during period, net of taxes of $508		--		763
Other comprehensive income		--		763
Comprehensive Income	$	611,772	$	132,565

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

Net Income	$	0.32	$	.07

Dividends	$	.07	$	.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, 2012 and 2011

(Unaudited)

Quarter Ended March 31, 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		611,772			611,772
Other comprehensive income		--						--
Dividends		(135,974	)		(135,974	)		--		--		--

March 31, 2012 Balance	$	11,137,715			11,440,975			--		72,256		375,516

Quarter Ended March 31, 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		131,802			131,802
Other comprehensive income		763						763
Dividends		(135,975	)		(135,975	)		--		--		--

March 31, 2011 Balance	$	10,242,835			10,539,751			6,344		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, 2012 and 2011

(Unaudited)

	2012			2011
Cash Flows From Operating Activities:
Net Income	$	611,772		$	131,802
Less non-cash (income) expenses included in net income:
Depreciation, depletion and amortization		2,116			20,560
Deferred income tax expense		39,969			148
Less non-operating activities:
Gain from sale of land and other assets		(124,000	)		(306	)
Change in operating assets and liabilities:
(Increase) decrease in current assets		79,716			(21,448	)
Increase (decrease) in current liabilities		40,014			7,989
Net cash provided from operating activities		649,587			138,745

Cash Flows From Investing Activities:
Certificates of Deposit:
Maturity proceeds		255,625			--
Purchases		(261,384	)		(5,625	)
Securities:
Sales proceeds		--			(4,864	)
Land, timber, equipment and other assets:
Sales proceeds		159,000			166
Purchases		(4,666	)		(532,944	)
Proceeds held in 1031 trust account		(159,003	)
Net cash provided from (used in) investing activities		(10,428	)		(543,267	)

Cash Flows From Financing Activities:
Dividends paid		--			--
Net cash used in financing activities		--			--

Net increase (decrease) in cash and cash equivalents		639,159			(404,522	)

Cash and cash equivalents:
Beginning		4,124,908			5,182,316
Ending	$	4,764,067		$	4,777,794

Supplemental disclosures of cash flow information:
Cash payments for:
Interest	$	--		$	--
Income taxes	$	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	$	--		$	1,271

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

CKX Lands, Inc.

Notes to Financial Statements

March 31, 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 March 31, 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 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.

	March 31, 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		--		--		--		--		--		--
Total	$	501,384		--		480,000		--		981,384		--

	March 31, 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		--		--		789,907		8,547		789,907		8,547
Total	$	495,625		--		789,907		8,547		1,285,532		8,547

CKX Lands, Inc.

Notes to Financial Statements

March 31, 2012

(Unaudited)

Fair value measurements disclosure for securities is as follows.

	March 31, 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	$	--		--		--

	March 31, 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	$	789,907		--		--

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. 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. Due to the 1031 exchange, the gain of $124,000 is deferred for income tax purposes. At March 31, 2012, the 1031 exchange has not been completed and $159,003 in net proceeds is held by the intermediary and restricted to use by the Company.

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 2012 increased by $628,166 from the revenues for the first three months of 2011. This change is presented by revenue source below:

	2012		2011		Increase / (Decrease)
Oil and Gas Revenues
Oil Royalties	$	713,175	$	172,791	$	540,384
Gas Royalties		101,054		73,387		27,667
Plant Royalties		62,411		8,275		54,136
Lease rentals		28,001		34,229		(6,228	)
Geophysical		--		7,097		(7,097	)
Timber Revenue		4,935		3,439		1,496
Agriculture Revenue		25,534		7,726		17,808
Total Revenue	$	935,110	$	306,944	$	628,166

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 03/31/12		Three Months Ended 03/31/11
Net oil produced (Bbl)(2)		6,513		1,903
Average oil sales price (per Bbl)(1,2)	$	109.51	$	90.79

Net gas produced (MCF)		25,906		17,746
Average gas sales price (per MCF)(1)	$	3.90	$	4.14

Notes to above schedule:

(1) Before deduction of production and severance taxes.

(2) Excludes plant products.

Based on the producer provided information, the increase in oil and gas royalty revenues was due to new production being brought online in the quarter and the Company receiving royalty payments of approximately $426,000 from that new production. The remainder of the increase was due to an increase in oil production of approximately 1,459 barrels (Bbl) from existing production and an increase in the average price per Bbl which was offset by a decline in metric cubic feet (MCF) of gas produced of 2,816 and a decrease in the average gas sales price. Royalty revenue from plants, exclusive of the new production, increased by $7,820 over 2011 quarter.

Both lease rentals and geophysical revenues decreased from the 2011 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 changing within the next 6 months.

Agriculture revenue increased by $17,808 from 2011. This increase is due to the timing of 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, increased by $42,052 in 2012. This increase is directly related to higher oil and gas revenues.

Timber and agriculture expenses were relatively flat for the quarter.

General and administrative expenses increased by $9,907 primarily due to legal expenses incurred for routine corporate matters.

Financial Condition

Current assets less restricted cash and non-current certificates of deposit total $6,128,735 and total liabilities equaled $714,465 at March 31, 2012. 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, 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: May 10, 2012		/s/ Joseph K. Cooper
		Joseph K. Cooper
		President and Chief Executive Officer


Date: May 10, 2012		/s/ Brian R. Jones
		Brian R. Jones
		Treasurer and Chief Financial Officer