Edgar Filing: CKX Lands Inc

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, 2010

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.)


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, 2010

Table of Contents

		Page
Part I. Financial Information

Item 1.	Financial Statements

a.	Balance Sheets as of June 30, 2010 and December 31, 2009 (Unaudited)	1
b.	Statements of Income for the quarter and six months ended June 30, 2010 and 2009 (Unaudited)	2
c.	Statements of Changes in Stockholders’ Equity for the six months ended June 30, 2010 and 2009 (Unaudited)	3
d.	Statements of Cash Flows for the six months ended June 30, 2010 and 2009 (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, 2010 and December 31, 2009

(Unaudited)

	2010			2009
Assets
Current Assets:
Cash and cash equivalents	$	3,381,543		$	3,977,106
Certificates of deposit		480,000			720,000
Accounts receivable		209,099			162,356
Prepaid expense and other assets		97,673			36,225
Total current assets		4,168,315			4,895,687
Securities available for sale		1,893,290			1,793,866
Certificates of deposit		490,000			240,000
Property and equipment:
Building and equipment less accumulated depreciation of $73,126 and $70,447, respectively		10,930			13,609
Timber less accumulated depletion of $641,622 and $575,057, respectively		544,214			350,665
Land		3,192,491			2,851,526
Total property and equipment, net		3,747,635			3,215,800
Total assets	$	10,299,240		$	10,145,353

Liabilities and Stockholders’ Equity
Current Liabilities:
Trade payables and accrued expenses	$	52,462		$	46,594
Income tax payable:
Current		33,482			--
Deferred		--			15,909
Total current liabilities		85,944			62,503
Noncurrent Liabilities:
Deferred income tax payable		181,818			181,818
Total liabilities		267,762			244,321
Stockholders’ Equity:
Common stock, no par value: 3,000,000 shares authorized; 2,100,000 shares issued		72,256			72,256
Retained earnings		10,351,698			10,170,940
Accumulated other comprehensive income		(16,960	)		33,352
Less cost of treasury stock (157,505 shares)		(375,516	)		(375,516	)
Total stockholders’ equity		10,031,478			9,901,032
Total liabilities and stockholders’ equity	$	10,299,240		$	10,145,353

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

CKX Lands, Inc.

Statements of Income - Unaudited

Quarter and Six Months Ended June 30, 2010 and 2009

(Unaudited)

	Quarter Ended June 30,						Six Months Ended June 30,
	2010			2009			2010			2009
Revenues:
Oil and gas	$	404,191		$	279,328		$	740,762		$	737,549
Agriculture		20,761			14,275			43,567			48,972
Timber		112,472			8,046			114,125			18,503
Total revenues		537,424			301,649			898,454			805,024
Costs and Expenses:
Oil and gas production		27,932			26,611			55,734			67,493
Agriculture		2,230			1,996			2,949			2,577
Timber		11,948			3,601			12,525			19,478
General and administrative		111,012			100,617			202,549			185,340
Depreciation and depletion		66,055			1,884			69,244			3,878
Total cost and expenses		219,177			134,709			343,001			278,766
Income from operations		318,247			166,940			555,453			526,258
Other Income / (Expense):
Interest income		8,706			3,854			18,394			8,741
Dividend income		13,089			5,079			25,297			11,702
Change in unrealized losses on securities available-for-sale		--			(23,920	)		--			(23,920	)
Gain/(Loss) on securities available-for-sale		28,526			--			28,526			--
Gain on sale of land and other assets		--			30,719			255			40,719
Net other income / (expense)		50,321			15,732			72,472			37,242
Income before income taxes		368,568			182,672			627,925			563,500
Federal and state income taxes:
Current		117,151			59,496			190,548			173,822
Deferred		(16,727	)		(5,919	)		(15,330	)		(37,829	)
Total income taxes		100,424			53,577			175,218			135,993
Net Income	$	268,144		$	129,095		$	452,707		$	427,507

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

Net Income	$	0.14		$	0.07		$	0.23		$	0.22

Dividends	$	0.07		$	0.07		$	0.14		$	0.14

See accompanying Notes to Financial Statements.

CKX Lands, Inc.

Statements of Changes in Stockholders’ Equity - Unaudited

Six Months Ended June 30, 2010 and 2009

(Unaudited)


Six Months Ended June 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	$	452,707			452,707			--			--		--
Other comprehensive income:
Change in unrealized net holding gains occurring during period, net of taxes of $33,541		(50,312	)					(50,312	)
Total comprehensive income	$	402,395
Dividends					(271,949	)		--			--		--

June 30, 2010 Balance				$	10,351,698			(16,960	)		72,256		375,516

Six Months Ended June 30, 2009:
	Comprehensive Income			Retained Earnings			Accumulated Other Comprehensive Income			Capital Stock Issued		Treasury Stock
December 31, 2008 Balance				$	9,857,876			8,265			72,256		375,516

Comprehensive Income:
Net income	$	427,507			427,507			--			--		--
Other comprehensive income:
Change in unrealized net holding gains occurring during period, net of taxes of $11,987		(17,982	)					(17,982	)
Total comprehensive income	$	409,525
Dividends					(271,949	)		--			--		--

June 30, 2009 Balance				$	10,013,434			(9,717	)		72,256		375,516

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

CKX Lands, Inc.

Statements of Cash Flows - Unaudited

Six Months Ended June 30, 2010 and 2009

(Unaudited)

	2010			2009
Cash Flows From Operating Activities:
Net Income	$	452,707		$	427,507
Less non-cash (income) expenses included in net income:
Depreciation, depletion and amortization		69,244			3,878
Deferred income tax expense		(15,330	)		(37,829	)
Less non-operating activities:
Unrealized (gain) loss on securities		(28,526	)		23,920
Gain from sale of land and other assets		(255	)		(40,719	)
Change in operating assets and liabilities:
(Increase) decrease in current assets		(108,191	)		23,695
Increase (decrease) in current liabilities		72,313			(45,672	)
Net cash provided from operating activities		441,962			354,780

Cash Flows From Investing Activities:
Certificates of Deposit:
Maturity proceeds		240,000			--
Purchases		(250,000	)		--
Securities:
Sales proceeds		153,359			--
Purchases		(308,111	)		--
Proceeds from dissolution of partnership		255			10,000
Land, timber, equipment and other assets:
Sales proceeds		--			33,806
Purchases		(601,079	)		(7,233	)
Net cash provided from (used in) investing activities		(765,576	)		36,573

Cash Flows From Financing Activities:
Dividends paid, net of refunds		(271,949	)		(271,949	)
Net cash used in financing activities		(271,949	)		(271,949	)

Net increase (decrease) in cash and cash equivalents		(595,563	)		119,404

Cash and cash equivalents:
Beginning		3,977,106			5,779,491
Ending	$	3,381,543		$	5,898,895

Supplemental disclosures of cash flow information:
Cash payments for:
Interest	$	--		$	--
Income taxes	$	133,500		$	216,890

Supplemental schedule of non-cash investing and financing activities:
Net change in recognized and unrecognized unrealized gains (losses) on available-for-sale securities	$	(83,853	)	$	(53,889	)

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

CKX Lands, Inc.

Notes to Financial Statements

June 30, 2010

(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, 2009. 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 Company’s Form 10-K for the year ended December 31, 2009 and Form 10-Q for the quarterly period ended June 30, 2010.

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 value of securities are as follows.

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

Certificate of Deposits	$	480,000		--		490,000		--			970,000		--
Mutual Funds		--		--		771,720		10,009			771,720		10,009
Equity Securities		--		--		1,121,570		(40,302	)		1,121,570		(40,302	)

Total	$	480,000		--		2,383,290		(30,293	)		2,863,290		(30,293	)

June 30, 2009

Current

Non-Current

Total

Unrealized

Fair Value

Gain/(Loss)

Fair Value

Gain/(Loss)

Fair Value

Gain/(Loss)

Equity Securities

429,006

(81,347

)

429,006

(81,347

)

CKX Lands, Inc.

Notes to Financial Statements

June 30, 2010

(Unaudited)

Fair value measurements disclosure for securities follows:

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

Certificate of Deposit	$	970,000		--		--

Mutual Funds		771,720		--		--

Equity Securities	$	1,121,570		--		--

June 30, 2009

Quoted Prices in

Significant

Active Markets for

Other

Unobservable

Identical Assets

Observable Inputs

Inputs

(Level 1)

(Level 2)

(Level 3)

Equity Securities

429,006

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, 2007 through 2009 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 second quarter of 2010, the Company purchased 4 parcels of land with standing timber for $599,944. Approximately 359 acres were purchased for $340,965 and the standing timber was valued at $258,979 based on timber cruises.

Item 2.

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

Results of Operations

Revenue

Oil and gas revenues for the first six months of 2010 increased by $3,213 to $740,762. Royalty revenue from oil and gas revenues declined by $102,291 from 2009. However, oil and gas lease bonuses and rentals increased by $105,504 from 2009. The following schedule summarizes barrels and MCF reported from producers and presents an average price per barrel and per MCF for 2010 and 2009.

	2010		2009
Oil Royalty Revenue	$	425,577	$	411,793
Barrels produced		6,766		7,728
Average price per barrel	$	62.90	$	53.29

Gas Royalty Revenue	$	187,356	$	290,026
MCF produced		33,502		45,323
Average price per MCF	$	5.59	$	6.40

The increase in oil royalty revenue is a net effect of a decrease in barrels produced and an increase in the average price per barrel. Whereas the decrease in gas royalty revenue is the result of a decrease in both MCF produced and the average price per MCF.

Agriculture revenue decreased from $48,972 to $43,567 in 2010, primarily due to non-renewal of one sugarcane related lease.

Timber revenue increased to $114,125 in 2010 from $18,503 in 2009. During the second quarter of 2010, the Company harvested timber for internal maintenance programs which was not performed in 2009. 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.

Costs and Expenses

Oil and gas production costs, primarily severance taxes, decreased by $11,759 in 2010. This decrease is directly related to lower oil and gas revenues.

Timber expenses decreased by $6,953 in 2010 due to a 2009 timber cruise mapping project.

General and administrative expenses increased by $17,209 primarily due to an increase in office rental expense and public company compliance expense as well as the timing of recording auditing and employee training expenses.

Financial Condition

Current assets and non-current certificates of deposit and securities available for sale totaled $6,551,605 and total liabilities equaled $267,762 at June 30, 2010. 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 June 30, 2010. 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.

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, 2010	/s/ Joseph K. Cooper
	Joseph K. Cooper
	President and Chief Executive Officer

Date: August 9, 2010	/s/ Brian R. Jones
	Brian R. Jones
	Treasurer and Chief Financial Officer