Edgar Filing: CKX Lands Inc

Form 10-QSB

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, 2007

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to

Commission file number 0-9669

CKX LANDS, 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.)

751 Bayou Pines East, Suite C, Lake Charles, Louisiana 70601

(Address of principal executive offices)

337-310-0547

(Issuer’s 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 issuer’s classes of common equity, as of the latest practicable date: 1,942,495

Transitional Small Business Disclosure Format (Check one): Yes ¨ No ¨

CKX Lands, Inc.

Form 10-QSB

For the Quarter Ended March 31, 2007

INDEX


			Page
Part I.	Financial Information

	Item 1.	Financial Statements

		a. Balance Sheet as of March 31, 2007	1

		b. Statements of Income for the three months ended March 31, 2007 and 2006	2

		c. Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2007 and 2006	3

		d. Statements of Cash Flows for the three months ended March 31, 2007 and 2006	4

		e. Notes to Financial Statements	5

	Item 2.	Management’s Discussion and Analysis or Plan of Operations	7

	Item 3.	Controls and Procedures	8

Part II.	Other Information

	Item 4.	Submission of Matters to a Vote of Security Holders	9

	Item 6.	Exhibits	9

Signatures			10

Certifications

Part I. Financial Information

Item 1. Financial Statements

CKX Lands, Inc.

Balance Sheet


	March 31, 2007
ASSETS
Current Assets:
Cash and cash equivalents	$	913,783
Certificate of deposit		1,000,000
Accounts receivables		392,540
Prepaid expense and other		32,966

Total Current Assets		2,339,289

Securities Available for Sale		1,637,895

Property and Equipment:
Building and equipment less accumulated depreciation of $88,012		89,853
Timber less accumulated depletion of $446,834		400,514
Land		4,004,963

Total Property and Equipment, net		4,495,330

Total Assets	$	8,472,514

Liabilities and Stockholders’ Equity
Current Liabilities:
Trade payables and accrued expenses	$	50,934
Income taxes payable:
Current		136,574
Deferred		137,974

Total Current Liabilities		325,482

Noncurrent Liabilities:
Deferred income tax payable		166,833

Stockholders’ Equity:
Common stock, no par value: 3,000,000 shares authorized; 2,100,000 shares issued		72,256
Retained earnings		8,131,427
Accumulated other comprehensive income		152,032
Less cost of treasury stock (157,505 shares)		(375,516	)

Total stockholders’ equity		7,980,199

Total Liabilities and Stockholders’ Equity	$	8,472,514

See accompanying notes

CKX Lands, Inc.

Statements of Income


	Three Months Ended March 31, 2007			Three Months Ended March 31, 2006
Revenues:
Oil and gas	$	603,314		$	578,508
Agriculture		67,166			57,139
Timber		33,634			19,819

Total revenues		704,114			655,466

Costs and Expenses:
Oil and gas production		53,905			30,736
Agriculture		5,640			1,410
Timber		649			13,586
General and administrative		125,224			116,019
Depreciation and depletion		7,606			2,984

Total cost and expenses		193,024			164,735

Income from operations		511,090			490,731

Other Income / (Expense):
Interest income		24,800			33,285
Dividend income		8,469			7,454
Gain / (loss) on sale of securities available for sale		(2,068	)		7,285

Net other income / (expense)		31,201			48,024

Income before income taxes		542,291			538,755

Federal and state income taxes:
Current		169,443			167,510
Deferred		—			—

Total income taxes		169,443			167,510

Net Income	$	372,848		$	371,245

Per common stock (1,942,495 shares)	$	0.19		$	0.19

Dividends per share	$	0.07		$	0.17

See accompanying notes

CKX Lands, Inc.

Statements of Changes in Stockholders’ Equity

Three Months Ended March 31, 2007:


	Comprehensive Income			Retained Earnings			Accumulated Other Comprehensive Income		Capital Stock Issued		Treasury Stock
December 31, 2006 Balance				$	7,895,007		$	132,193	$	72,256	$	375,516

Comprehensive income:
Net income	$	372,848			372,848			—		—		—

Other comprehensive income:
Unrealized net holdings gains occurring during period net of taxes of $12,067		18,101
Less: reclassification adjustment for net losses included in net income, net of taxes of $1,159		(1,738	)

Other Comprehensive income, net of taxes		19,839			—			19,839		—		—

Total comprehensive income	$	392,687

Dividends					(136,428	)		—		—		—

March 31, 2007 Balance				$	8,131,427		$	152,032	$	72,256	$	375,516


Three Months Ended March 31, 2006:
	Comprehensive Income			Retained Earnings			Accumulated Other Comprehensive Income		Capital Stock Issued		Treasury Stock
December 31, 2005 Balance				$	9,042,971		$	31,503	$	72,256	$	375,516

Comprehensive income:
Net income	$	371,245			371,245			—		—		—
Other comprehensive income:
Unrealized net holdings gains occurring during period net of taxes of $14,568		21,851			—			21,851		—		—

Total comprehensive income	$	393,096

Dividends					(323,039	)

March 31, 2006 Balance				$	9,091,177		$	53,354	$	72,256	$	375,516

See accompanying notes

CKX Lands, Inc.

Statements of Cash Flows


	Three Months Ended March 31, 2007			Three Months Ended March 31, 2006
Cash Flows From Operating Activities:
Net Income	$	372,848		$	371,245
Noncash (Income) expenses included in net income:
Depreciation, depletion and amortization		7,606			2,984
(Gain) / loss from securities sales		2,068			—
Change in operating assets and liabilities:
(Increase) decrease in current assets		(11,889	)		118,352
Increase (decrease) in current liabilities		156,554			99,096

Net cash provided by operating activities		527,187			591,677

Cash Flows From Investing Activities:
Net sale of certificate of deposits		511,713			—
Available-for-sale securities:
Purchases		(487,870	)		(4,888	)
Sales		1,492,657			347,658

Net cash provided by (used in) investing activities		1,516,500			342,770

Cash Flows From Financing Activities
Dividends paid net of refunds		(2,214,897	)		(128,790	)

Net cash (used in) financing activities		(2,214,897	)		(128,790	)

Net increase (decrease) in cash and cash equivalents		(171,210	)		805,657
Cash and cash equivalents:
Beginning		1,084,993			920,489

Ending	$	913,783		$	1,726,146

See accompanying notes

CKX Lands, Inc.

Notes to Financial Statements

March 31, 2007

(Unaudited)

Note 1.

Basis of Presentation

In the opinion of management, the accompanying balance sheet and related interim statements of income, changes in stockholders’ equity, and cash flows 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 Management’s Discussion and Analysis and financial statements and notes thereto included in the CKX Lands, Inc. 2006 Form 10-KSB.

Note 2.

Nature of Business and Significant Accounting Policies

Nature of business:

The Company’s business is the ownership and management of land. The primary activities consist of leasing its properties for minerals (oil and gas) and agriculture and raising timber.

Significant accounting polices:

Cash and equivalents:

For purposes of the statement of cash 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.

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 debt 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.

Oil and gas:

Oil and gas income is booked when the Company is notified by the well’s operators as to the Company’s 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 year.

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.

Management’s Discussion and Analysis or Plan of Operations

Results of Operations

Revenue

Revenue for the first three months of 2007 was $704,114, an increase of $48,648 or 7.4% over the first three months of 2006. Oil and gas income exceed 2006 by $63,068 and both barrels produced and MCF produced exceed 2006 volumes. However, as illustrated in the schedule below, average price per barrel and MCF were lower in 2007.


	Three Months Ended March 31, 2007		Three Months Ended March 31, 2006
Oil Income	$	283,384	$	173,194
Barrels produced		4,765		2,857
Average price per barrel	$	59.47	$	60.62

Gas income	$	251,441	$	298,563
MCF produced		31,914		22,669
Average price per MCF	$	7.88	$	13.17

The increase in both oil and gas production was due to new fields more than offsetting depletion in older fields. There were two new fields, Bon Air and South Lake Charles which accounted for all of the increase in both oil and gas production. Neither field had been brought in prior to March 31, 2006. The Company’s share of Bon Air oil production in the first quarter of 2007 was 1,923 barrels. The Company’s share of oil produced in the first quarter of 2007 from South Lake Charles was 250 barrels. The Company’s share of gas produced in 2007 from Bon Air was 17,286 MCF and from South Lake Charles was 2,363 MCF.

Largest decline in production for oil was from the Vinton field which declined 368 barrels from 1,085 barrels to 717 barrels. The largest decrease in gas production were from Castor Creek which went from 11,699 MCF to 7,281 MCF and Bunchy Creek which went from 2,395 MCF to 513 MCF.

The Company will have an approximately 1.5% in new production from the Abdalla #1 in Southeast Unita field which tested at 125 barrels of oil and 2,500 MCF of gas. The Company has also signed a division order for the Glover #1 in Calcasieu Parish and will have a 0.23528% interest in the production. The Company will also have a small interest in the Irby #4 in Beauregard Parish which is currently being completed.

On April 30, 2007, Walker Louisiana Properties completed the sale of 100 acres on South Park Drive for $1,912,050. This is the first sale from a tract of land totaling approximately 1,300 acres which Walker Louisiana Properties owns on the South border of Lake Charles, LA. The Company owns a one-sixth interest in this land which has a basis of approximately $1,000 per acre.

Revenue from both Agriculture and Timber activities remained relatively the same as in previous years.

Operating Expenses

Operating expenses increased by $28,289 or 17.2% during the first quarter of 2007 over the same period in 2006. The largest increase was $23,169 for increased production severance taxes reported from oil and gas operators.

Financial Condition

Current assets plus securities available for sale totaled $3,977,184 at March 31, 2007, compared with $5,625,409 at December 31, 2006 and $5,096,936 at March 31, 2006. Total liabilities were $492,315 at March 31, 2007, compared to $2,404,405 at December 31, 2006 and $702,931 at March 31, 2006

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, 2007. 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 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.

Controls and Procedures

Under the supervision and with the participation of the Company’s 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-15(e) as of March 31, 2007. 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 Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation.

Part II. Other Information

Item 4.

Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders was held on April 26, 2007.

The following proposals were adopted by the margins indicated:

To elect a Board of Directors to hold office until their successors are elected and qualified.


	Number of Shares
	For	Withheld
Arthur Hollins, III	1,511,985	2,326
Brian R. Jones	1,511,985	2,326
Charles D. Viccellio	1,511,985	2,326
Henry E. Blake	1,511,985	2,326
Laura A. Leach	1,511,651	2,660
Frank O. Pruitt	1,511,985	2,326
B. James Reaves, III	1,511,985	2,326
Mary W. Savoy	1,511,985	2,326
William Gray Stream	1,511,835	2,476
Mary Leach Werner	1,511,985	2,326

To approve McElroy, Quirk and Burch APC as auditors for the 2007 fiscal year.


For		1,513,146
Against		0
Abstained		1,165

Item 6.

Exhibits

(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 Brian R. Jones, Treasurer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 filed herewith.

32		Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Items 1, 2, 3 and 5 are not applicable.

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 9, 2007				/s/ Brian R. Jones
				Brian R. Jones
				Treasurer and Chief Financial Officer

				/s/ Arthur Hollins, III
				Arthur Hollins, III
				President and Chief Executive Officer

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