Edgar Filing: CKX LANDS, INC.

ckx_10q-063011.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, 2011

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, 2011

Table of Contents

			Page
Part I. Financial Information

	Item 1.	Financial Statements

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

June 30, 2011 and December 31, 2010

(Unaudited)

	2011				2010
Assets
Current Assets:
Cash and cash equivalents		$	4,582,288			$	5,182,316
Certificates of deposit			495,625				240,000
Accounts receivable			172,528				149,795
Prepaid expense and other assets			139,517				114,232
Total current assets			5,389,958				5,686,343
Securities available for sale			799,044				783,772
Certificates of deposit			--				250,000
Property and equipment:
Building and equipment less accumulated depreciation of $76,321 and $72,794, respectively			13,666				17,193
Timber less accumulated depletion of $650,336 and $632,565, respectively			801,567				557,253
Land			3,522,989				3,192,491
Total property and equipment, net			4,338,222				3,766,937
Total assets		$	10,527,224			$	10,487,052
Liabilities and Stockholders’ Equity
Current Liabilities:
Trade payables and accrued expenses		$	49,230			$	58,520
Income tax payable:
Current			--				469
Deferred			9,294				--
Total current liabilities			58,524				58,989
Noncurrent Liabilities:
Deferred income tax payable			181,818				181,818,
Total liabilities			240,342				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			10,581,080				10,543,924
Accumulated other comprehensive income			9,062				5,581
Less cost of treasury stock (157,505 shares)			(375,516	)			(375,516	)
Total stockholders’ equity			10,286,882				10,246,245
Total liabilities and stockholders’ equity		$	10,527,224			$	10,487,052

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

CKX Lands, Inc.

Statements of Income

Quarter and Six Months Ended June 30, 2011 and 2010

(Unaudited)

	Quarter Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Revenues:
Oil and gas	$	338,834		$	404,191		$	634,613		$	740,762
Agriculture		16,738			20,761			24,464			43,567
Timber		--			112,472			3,439			114,125
Total revenues		355,572			537,424			662,516			898,454
Costs and Expenses:
Oil and gas production		28,256			27,932			51,244			55,734
Agriculture		2,455			2,230			2,962			2,949
Timber		4,986			11,948			14,637			12,525
General and administrative		128,187			111,012			219,843			202,549
Depreciation and depletion		738			66,055			21,298			69,244
Total cost and expenses		164,622			219,177			309,984			343,001
Income from operations		190,950			318,247			352,532			555,453
Other Income / (Expense):
Interest income		10,276			8,706			20,469			18,394
Dividend income		4,664			13,089			9,527			25,297
Gain/(Loss) on securities available-for-sale		--			28,526			--			28,526
Gain on sale of land and other assets		--			--			306			255
Net other income / (expense)		14,940			50,321			30,302			72,472
Income before income taxes		205,890			368,568			382,834			627,925
Federal and state income taxes:
Current		54,537			117,151			99,531			190,548
Deferred		(12,575	)		(16,727	)		(12,427	)		(15,330	)
Total income taxes		41,962			100,424			87,104			175,218
Net Income	$	163,928		$	268,144		$	295,730		$	452,707

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

Net Income	$	0.08		$	0.14		$	0.15		$	0.23

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, 2011 and 2010 (Unaudited)
Six Months Ended June 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	$	295,730		295,730			--		--		--
Other comprehensive income:
Change in unrealized net holding gains occurring during period, net of taxes of $2,321		3,481					3,481
Total comprehensive income	$	299,211
Dividends				(271,949	)
Dividend reversion				13,375			--		--		--

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

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

The accompanying notes are an integral part of these financial statements

CKX Lands, Inc.

Statements of Cash Flows

Six Months Ended June 30, 2011 and 2010

(Unaudited)

	2011			2010
Cash Flows From Operating Activities:
Net Income	$	295,730		$	452,707
Less non-cash (income) expenses included in net income:
Depreciation, depletion and amortization		21,298			69,244
Deferred income tax expense		(12,427	)		(15,330	)
Less non-operating activities:
Unrealized (gain) loss on securities		--			(28,526	)
Gain from sale of land and other assets		(306	)		(255	)
Change in operating assets and liabilities:
(Increase) decrease in current assets		(88,587	)		(108,191	)
Increase (decrease) in current liabilities		(9,290	)		72,313
Net cash provided from operating activities		206,418			441,962

Cash Flows From Investing Activities:
Certificates of Deposit:
Maturity proceeds		--			240,000
Purchases		(5,625	)		(250,000	)
Securities:
Sales proceeds		--			153,359
Purchases		(9,470	)		(308,111	)
Proceeds from dissolution of partnership		--			255
Land, timber, equipment and other assets:
Sales proceeds		167			--
Purchases		(532,944	)		(601,079	)
Net cash provided from (used in) investing activities		(547,872	)		(765,576	)

Cash Flows From Financing Activities:
Dividends paid, net of reversion		(258,574	)		(271,949	)
Net cash used in financing activities		(258,574	)		(271,949	)

Net increase (decrease) in cash and cash equivalents		(600,028	)		(595,563	)

Cash and cash equivalents:
Beginning		5,182,316			3,977,106
Ending	$	4,582,288		$	3,381,543

Supplemental disclosures of cash flow information:
Cash payments for:
Interest	$	--		$	--
Income taxes	$	112,160		$	133,500

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		$	(83,853	)

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

CKX Lands, Inc.

Notes to Financial Statements

June 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 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 values 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	$	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

	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	)

CKX Lands, Inc.

Notes to Financial Statements

June 30, 2011

(Unaudited)

Fair value measurements disclosure for securities is as follows.

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

Certificate of Deposit	$	495,625		--		--

Mutual Funds		799,044		--		--

Equity Securities	$	--		--		--

	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		--		--

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:

Duringthe first quarter of 2011, the Company purchased 2 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.

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 2011 decreased by $235,938 from the revenues for the first six months of 2010 to $662,516.

Oil and gas revenues decreased by $106,149 to $634,613 in 2011. Oil and gas revenues consists of royalty, lease rental and geophysical revenue. Royalty revenue decreased by $35,142 and lease rentals decreased by $78,104 from 2010. Geophysical revenues increased by $7,097 from 2010.

Gas production decreased by 837 MCF, and the average gas sales price per MCF decreased by 15.28% resulting in a decrease in gas revenue of $32,665. Revenue from oil production increase by $3,782, due to an increase of 29.94% in the average barrel sales price and a decrease in production of approximately 1,196 barrels. Revernues from plant products decreased by 6,259 from 2010 revenue.

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

	Six Months Ended 06/30/11		Six Months Ended 06/30/10
Net gas produced (MCF)		32,665		33,502
Average gas sales price (per MCF)(1)	$	4.74	$	5.59

Net oil produced (Bbl)(2)		4,064		5,259
Average oil sales price (per Bbl)(1,2)	$	100.05	$	77.00

Notes to above schedule:

(1) Before deduction of production and severance taxes.

(2) Excludes plant products.

Timber revenue decreased from $114,125 to 3,439 in 2011. During the second quarter of 2010, the Company harvested timber for internal maintenance programs which was not performed 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 from $43,567 to 24,464 in 2011, primarily due to non-renewal of one sugarcane related lease.

Costs and Expenses

Oil and gas production costs, primarily severance taxes, decreased by $4,490 in 2011. This decrease is directly related to lower oil and gas revenues.

Timber expenses increased by $2,112 in 2011 due to a timber cruise mapping project.

General and administrative expenses increased by $17,294 primarily due to a one time public company compliance expense of $17,500.

Financial Condition

Current assets and securities available for sale totaled $6,189,002 and total liabilities equaled $240,342 at June 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 June 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.

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 11, 2011		/s/Joseph K. Cooper
		Joseph K. Cooper
		President and Chief Executive Officer


Date: August 11, 2011		/s/ Brian R. Jones
		Brian R. Jones
		Treasurer and Chief Financial Officer