Business Context and Reporting Period
Company: Calcasieu Real Estate & Oil Co., Inc. (Note: Input metadata referenced "CKX Lands, Inc." but the filing text identifies Calcasieu Real Estate & Oil Co., Inc.)
Filing Type: Form 10-Q
Period: Quarter ended March 31, 2002
Operations: The company derives revenue primarily from oil and gas properties, agricultural properties, and timber properties. The North English Bayou Field, a primary oil and gas asset, is described as almost totally depleted.
Key Financial Metrics
| Metric | Q1 2002 | Q1 2001 |
|---|---|---|
| Total Revenue | $227,088 | $473,032 |
| Net Income | $89,991 | $266,821 |
| Earnings Per Share | $0.05 | $0.14 |
| Operating Cash Flow | $130,683 | $315,205 |
| Cash and Equivalents (Ending) | $446,936 | $947,757 |
| Total Assets | $6,312,831 | $6,407,663 |
| Total Liabilities | $141,736 | $228,598 |
| Shareholders' Equity | $6,171,095 | $6,179,065 |
Investment Activity: During the quarter, the company purchased $700,000 in U.S. Treasury Bills, $100,000 in National Rural Utility bonds, and $100,000 in convertible preferred stock.
Material Changes vs. Prior Period
- Revenue Decline: Total revenues decreased 52% ($245,944) compared to Q1 2001. This was driven by lower oil and gas production from the depleting North English Bayou Field and lower commodity prices.
- Profitability: Net income dropped 66.3% ($176,830) year-over-year.
- Expense Stability: Total expenses remained virtually unchanged ($104,620 in 2002 vs. $104,728 in 2001). While forestry and agriculture expenses rose slightly due to higher income from those sectors, and G&A expenses increased due to audit and tax costs, oil and gas expenses decreased due to lower severance taxes.
- Liquidity: Cash and cash equivalents decreased significantly from $1,419,084 to $446,936, primarily due to a net cash outflow of $907,106 in investing activities (purchase of securities) and dividend payments of $195,725.
Outlook, Risks, and Management Commentary
- Management Outlook: Management believes current revenues are sufficient to meet existing and anticipated future needs. Long-term trends depend on finding new production to replace depleting mineral assets and increasing income from timber and agriculture.
- Risks: The primary risk identified is the depletion of the North English Bayou Field. Future performance is contingent on successful exploration for new mineral production.
- Dividends: Dividends declared for the quarter were $97,961. Dividends payable on the balance sheet were $97,973.
- Corporate Governance: An annual meeting was held on April 25, 2002, where nine directors were elected. No opposition was solicited.
Investor Verification Checklist
- Verify the extent of remaining reserves in the North English Bayou Field and the timeline for total depletion.
- Assess the company's strategy and capital allocation for finding new oil and gas production to replace declining revenues.
- Review the composition and yield of the new securities portfolio ($900,000 in new investments) to understand future interest income stability.
- Confirm the sustainability of the dividend policy given the 66% drop in net income and the significant reduction in cash reserves.
- Monitor the growth of timber and agricultural income segments to determine if they can offset the decline in oil and gas revenue.