UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from to
Commission file number 0-9669
CALCASIEU REAL ESTATE & OIL CO., INC.
(Exact name of small business issuer as specified in its charter)
Louisiana | 72-0144530 | |
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
One Lakeside Plaza, Lake Charles, Louisiana 70601
(Address of principal executive offices)
337-494-4256
(Issuers telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ¨
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 1,942,495
Transitional Small Business Disclosure Format (Check one): Yes ¨ No x
Calcasieu Real Estate & Oil Co., Inc.
Form 10-QSB
For the Quarter Ended March 31, 2005
INDEX
Page | ||||||
Part I. |
Financial Information | |||||
Item 1. | Financial Statements | |||||
1-2 | ||||||
b.
Income Statements |
3 | |||||
c.
Cash Flow Statements |
4 | |||||
d.
Stockholders Equity Statement |
5 | |||||
6 | ||||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations | 8 | ||||
Item 4. | Controls and Procedures | 9 | ||||
Part II. | Other Information | |||||
Item 4. | Submission of Matters to a Vote of Security Holders | 10 | ||||
Item 6. | Exhibits and Reports on Form 8-K | 11 | ||||
Signatures | 11 | |||||
Certifications |
Calcasieu Real Estate & Oil Co., Inc.
Balance Sheet
Assets
March 31, 2005 | |||
Current Assets |
|||
Cash and cash equivalents |
$ | 1,056,933 | |
Accounts receivables |
337,498 | ||
Prepaid expense |
8,625 | ||
Interest receivable |
10,892 | ||
Total Current Assets |
1,413,948 | ||
Securities Available for Sale |
2,702,555 | ||
Property and Equipment (less accumulated depreciation of $66,641) |
10,680 | ||
Timber (less accumulated depletion of $380,760) |
478,717 | ||
Land |
3,887,776 | ||
4,377,173 | |||
$ | 8,493,676 | ||
See accompanying notes
Calcasieu Real Estate & Oil Co., Inc.
Balance Sheet
Liabilities & Stockholders Equity
March 31, 2005 | |||
Current Liabilities |
|||
Trade payables and accrued expenses |
$ | 21,274 | |
Dividend payable |
330,451 | ||
Income taxes payable: |
|||
Current |
145,571 | ||
Deferred |
52,967 | ||
Total Current Liabilities |
550,263 | ||
Stockholders Equity |
|||
Common stock, no par value: 3,000,000 shares authorized; 2,100,000 shares issued |
$ | 72,256 | |
Retained earnings |
8,216,821 | ||
Accumulated other comprehensive income |
29,852 | ||
8,318,929 | |||
Less cost of treasury stock (157,505 shares) |
375,516 | ||
7,943,413 | |||
$ | 8,493,676 | ||
See accompanying notes
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Calcasieu Real Estate & Oil Co., Inc.
Statements of Income
Three Months Ended March 31, 2005 |
Three Months Ended March 31, 2004 | |||||
Revenues: |
||||||
Oil and gas |
$ | 548,595 | $ | 454,076 | ||
Agriculture |
58,496 | 73,661 | ||||
Timber |
2,992 | |||||
610,083 | 527,737 | |||||
Costs and expenses: |
||||||
Oil and gas production |
43,482 | 34,859 | ||||
Agriculture |
417 | 1,532 | ||||
Timber |
10,288 | 1,699 | ||||
General and administrative |
104,724 | 105,910 | ||||
Depreciation and depletion |
1,559 | 1,841 | ||||
160,470 | 145,841 | |||||
Income from operations |
449,613 | 381,896 | ||||
Other income (expense): |
||||||
Gain-Sale of land |
1,426 | |||||
Interest income |
12,949 | 4,065 | ||||
Dividends on stock |
6,399 | 7,948 | ||||
19,348 | 13,439 | |||||
Income before income taxes |
468,961 | 395,335 | ||||
Federal and state income taxes: |
||||||
Current |
142,193 | 120,290 | ||||
Deferred |
||||||
142,193 | 120,290 | |||||
Net Income |
$ | 326,768 | $ | 275,045 | ||
Per common stock (2005; 1,942,495 shares; 2004; 1,942,495 shares) |
$ | .17 | $ | .14 | ||
Dividends per share |
$ | .17 | $ | .07 |
See accompanying notes
3
Calcasieu Real Estate & Oil Co., Inc.
Statement of Changes in Cash Flows
Three Months Ended March 31, 2005 |
Three Months Ended March 31, 2004 |
|||||||
Cash Flows From Operating Activities |
||||||||
Net Income |
$ | 326,768 | $ | 275,045 | ||||
Noncash (income) expenses included in net income: |
||||||||
Depreciation and depletion |
1,589 | 1,841 | ||||||
(Gain) on sale of assets |
(1,426 | ) | ||||||
(Increase) decrease in current assets |
(6,314 | ) | (26,167 | ) | ||||
Increase (decrease) in current liabilities |
348,949 | 110,339 | ||||||
Net cash provided by operating activities |
670,962 | 359,632 | ||||||
Cash Flows From Investing Activities |
||||||||
Proceeds from sale of land |
5,454 | |||||||
Purchase of available for sale securities |
(494,751 | ) | (202,682 | ) | ||||
Sale of available for sale securities |
||||||||
Purchase of property, equipment and timber |
(3,234 | ) | (8,709 | ) | ||||
Net cash provided by (used in) investing activities |
(497,985 | ) | (205,937 | ) | ||||
Cash Flows From Financing Activities |
||||||||
Dividends paid net of refunds |
(330,449 | ) | (123,861 | ) | ||||
Net cash (used in) investing activities |
(330,449 | ) | (123,861 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
(157,472 | ) | 29,834 | |||||
Cash and cash equivalents: |
||||||||
Beginning |
1,214,405 | 527,219 | ||||||
Ending |
$ | 1,056,933 | $ | 557,053 | ||||
See accompanying notes
4
Calcasieu Real Estate & Oil Co., Inc.
Statement of Changes in Stockholders Equity
Quarter Ended March 31, 2005
Comprehensive Income |
Retained Earnings |
Accumulated Other Comprehensive Income |
Capital Stock Issued |
Treasury Stock | ||||||||||||||
Balance, December 2004 |
$ | 8,220,502 | $ | 50,781 | $ | 72,256 | $ | 375,516 | ||||||||||
Comprehensive income: |
||||||||||||||||||
Net income |
$ | 326,768 | 326,768 | |||||||||||||||
Other comprehensive income: |
||||||||||||||||||
Unrealized holdings loss occurring during period net of taxes of $13,953 |
(20,929 | ) | (20,929 | ) | ||||||||||||||
Total comprehensive income |
$ | 305,839 | ||||||||||||||||
Dividends |
(330,449 | ) | ||||||||||||||||
Balance, March 31, 2005 |
$ | 8,216,821 | $ | 29,852 | $ | 72,256 | $ | 375,516 | ||||||||||
See accompanying notes
5
Calcasieu Real Estate & Oil Co., Inc.
Notes to Financial Statements
March 31, 2005
(Unaudited)
Note 1. Basis of Presentation
In the opinion of management, the accompanying balance sheet and related interim statements of income, cash flows, and stockholders equity include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in accordance with generally accepted accounting principles of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. The information included in this Form 10-QSB should be read in conjunction with Managements Discussion and Analysis and financial statements and notes thereto included in the Calcasieu Real Estate & Oil Co., Inc. 2004 Form 10-KSB.
Note 2. Nature of Business and Significant Accounting Policies
Nature of business:
The Companys business is the ownership and management of land. The primary activities consist of leasing its properties for mineral (oil and gas) and agriculture and raising timber.
Significant accounting polices:
Cash and equivalents:
For purposes of the statement of each flows, cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less.
Pervasiveness of estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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Investment securities:
The Company complies with the provisions of Financial Accounting Standards Board Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities. Under the provisions of this statement, management must make a determination at the time of acquisition whether certain investments in debt and equity securities are to be held as investments to maturity, held as available for sale, or held for trading. Management, under a policy adopted by the board of directors of the Company, made a determination that all debt and equity securities owned at that date and subject to the provisions of the statement would be classified as held available-for-sale.
Under the accounting policies provided for investments classified as held available- for-sale, all such debt securities and equity securities that have readily determinable fair value shall be measured at fair value in the balance sheet. Unrealized holding gains and losses for available-for-sale securities shall be excluded from earnings and reported as a net amount (net of income taxes) as a separate component of retained earnings until realized. Realized gains and losses on available-for-sale securities are included in income. The cost of securities sold is based on the specific identification method. Interest on debts securities is recognized in income as earned, and dividends on marketable equity securities are recognized in income when declared.
Declines in the fair value of available-for-sale securities below their cost that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment losses, management considers (1) length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) the intent and ability of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.
Property and equipment:
Property and equipment is stated at cost. Major additions are capitalized; maintenance and repairs are charged to income currently. Depreciation is computed on the straight-line and accelerated methods over the estimated useful lives of the assets.
Timber:
When timber land is purchased with standing timber, the cost is divided between land and timber based on timber cruises contracted by the Company. The costs of reforestation are capitalized. The timber asset is amortized when the timber is sold based on the percentage of the timber sold from a particular tract applied to the amount capitalized for timber for that tract.
7
Oil and gas:
Oil and gas income is booked when the Company is notified by the wells operators as to the Companys share of the sales proceeds together with the withheld severance taxes. The Company has no capitalized costs relating to oil and gas producing activities and no costs for property acquisition, exploration and development activities.
Note 3. Earnings per share:
Earnings per share is based on the weighted average number of common shares outstanding during the years.
Note 4. Income taxes:
Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws.
Note 5. Contingencies:
There are no material contingencies known to management. The Company does not participate in off balance sheet arrangements.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Revenue
Revenue for the first quarter of 2005 was $610,083, an increase of $83,246 or 15.6% over the first quarter of 2004. Agriculture income was down $15,165 or 20.6% from the first quarter of 2004. This was due to rent timing differences. Oil and gas income was up $94,519 or 20.8% in the first quarter of 2005 compared to the first quarter of 2004. Of this $94,519 increase oil leases and seismic fees accounted for $16,167 of the increase as we saw more leasing activity. In the first quarter of 2005 the largest source, of oil and gas royalties was the Companys interest in the Castor Creek field. The Companys interest in this field in 2005 was 518.18 barrels of oil and 18,758 MCF of gas for gross royalties of $166,677 as compared to 276.52 barrels of oil, 5,199 MCF of gas and $41,667 gross royalties in 2004 when the field was initially coming on stream. The average price per barrel of oil was 26.9% higher in 2005 than 2004 and the average price per MCF of gas was 25.5% higher from this production. This contrasts with the results from the South Gordon field which was the largest source of oil and gas income in 2004. Although the average price per barrel of oil at South Gordon increased 32.4% and the average
8
price per MCF of gas increased 7% it was not enough to off set the decline in production. The Companys share of oil produced declined 1,403 barrels or 36.1% and the MCF of gas declined 2,654 MCF or 40.7%. Income from South Gordon declined $37,497. The remainder of the Companys oil and gas income remained approximately equal with the prior year as declines in production were off set by increases in prices.
Operating Expenses
Operating expenses increased $14,629 in the first quarter of 2005 as compared to the first quarter of 2004 or 10%. All of the increase was due to an increase of $8,623 in state oil and gas severance taxes and an increase of $8,589 in timber expense. The severance taxes are a percentage of the oil and gas royalties and the timber expenses were incurred to take advantage of good weather.
Financial Condition
Current assets plus securities available for sale totaled $4,116,503 on March 31, 2005, compared with $3,807,789 on December 31, 2004, and $2,981,568 on March 31, 2004. Current liabilities, which were also total liabilities were $550,263 on March 31, 2005, compared to $215,267 on December 31, 2004, and $312,953 on March 31, 2004.
Management believes existing cash and short-term investments together with funds generated from operations should be sufficient to meet operating requirements and provide funds for strategic acquisitions.
The Company declared the normal seven cents per common share during the quarter ended March 31, 2005, plus an extra dividend of ten cents per common share. It is anticipated that the Company will be able to continue paying a seven cents per common share per quarter.
Issues and Uncertainties
This Quarterly Report contains statements that are forward-looking. 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 listed below, which, among others, should be considered in evaluating the Companys financial outlook.
Revenues from oil and gas provide most of the Companys income. All of these revenues come from wells operated by other companies from property belonging to Calcasieu Real Estate & Oil Co., Inc. Consequently, these revenues fluctuate due to changes in oil and gas prices and changes in the operations of the other companies.
Item 4. Controls and Procedures
Under the supervision and with the participation of the Companys Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Exchange Act Rule 13a -14(c) within 90
9
days of the filing date of this quarterly report. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective. There were no significant changes in the Companys internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on April 19, 2005.
The following proposals were adopted by the margins indicated:
1. | To elect a Board of Directors to hold office until their successors are elected and qualified. |
Number of Shares | ||||
For |
Withheld | |||
William D. Blake |
1,458,282 | 28,090 | ||
Troy A. Freund |
1,481,222 | 5,150 | ||
Arthur Hollins, III |
1,481,222 | 5,150 | ||
Laura A. Leach |
1,479,132 | 7,240 | ||
Frank O. Pruitt |
1,481,222 | 5,150 | ||
B. James Reaves, III |
1,479,462 | 6,910 | ||
Mary W. Savoy |
1,479,142 | 7,230 | ||
Michael P. Terranova |
1,479,462 | 6,910 | ||
Charles D. Viccellio |
1,479,472 | 6,900 | ||
Mary Leach Werner |
1,479,462 | 6,910 |
2. | To amend the Restated Articles of Incorporation to change the name of the Company to CKX Lands, Inc. |
For |
1,344,493 | |
Against |
125,188 | |
Abstain |
16,916 |
The name change will be effective when the Company files the amendment with the Louisiana Secretary of State. This will occur when the Company has obtained a new CUSIP number and new stock certificates.
3. | To approve McElroy, Quirk & Burch APC as auditors for 2005. |
For |
1,481,677 | |
Against |
4,034 | |
Abstain |
886 |
10
Item 6. Exhibits and Reports on Form 8-K
(A) | Exhibits |
31.1 | Certification of Arthur Hollins, III, President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith. | |
31.2 | Certification of William D. Blake, Vice-President and Treasurer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith. | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1850 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1850 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
(B) | Reports on Form 8-K |
On January 13, 2005, we filed a Current Report on Form 8-K containing a press release correcting erroneous information about the Company or the interest.
On March 11, 2005, we filed a Current Report on Form 8-K containing a press release correcting erroneous information about the Company.
Items 1, 2, 3 and 5 are not applicable and have been omitted.
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.
Calcasieu Real Estate & Oil Co., Inc. | ||
Date: May 3, 2005 |
/s/ William D. Blake | |
William D. Blake | ||
Vice-President and Treasurer | ||
Chief Financial Officer | ||
/s/ Arthur Hollins, III | ||
Arthur Hollins, III | ||
President and | ||
Chief Executive Officer |
11