Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended December 31, 1997 Commission File Number 0-9669
CALCASIEU REAL ESTATE AND OIL CO., INC.
(Exact Name of registrant as specified in its charter)
Louisiana 72-0144530
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Lakeside Plaza 70601
Lake Charles, Louisiana (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (318) 494-4256
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each Class on which registered
------------------- ---------------------
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 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
------ -------
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Trading in the Company's common stock is limited and sporadic
and its common stock has no readily established market value.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date. Common Stock, No Par Value,
1,997,252 shares outstanding at February 27, 1998.
Documents Incorporated by Reference
Document Part of Form 10K
-------- ----------------
Definitive Proxy Statement Parts I and III
PART 1
ITEM 1. BUSINESS
--------
The registrant, Calcasieu Real Estate and Oil Co., Inc., (the "Company")
was incorporated under Louisiana law in 1930 as a spin-off of the Calcasieu
National Bank of Lake Charles, Louisiana to hold certain real estate and royalty
interests therefore owned by Calcasieu National Bank.
The principal office of the Company is One Lakeside Plaza, Lake Charles,
Louisiana. The business of the Company is conducted primarily at the principal
offices of its officers, who have other full-time employment.
The principal business of the Company has been the ownership and
preservation of the assets acquired at the Company's organization and
subsequently. The Company's primary activities have consisted of leasing its
properties and collecting rents and royalties derived therefrom. The mineral
interests of the Company are located in the Parishes of Calcasieu, Allen,
Acadia, Cameron, St. Landry, St. Mary, Vermilion and Jefferson Davis in
Louisiana. The Company owns approximately 10,740 acres of land in fee in the
Parishes of Allen, Beauregard, Calcasieu, Cameron, Jefferson Davis, LaFourche,
Sabine, St. Landry and Vermilion in Louisiana. Most of the Company's land and
mineral interests are located within 100 miles of the City of Lake Charles, in
southwestern and central Louisiana.
Of this total, 4,272 represents a 12.5% interest in 34,189 acres purchased
in 1990. The Company already owned a 40% interest in 1,577 of these acres. Of
the total acreage purchased, 3,608 acres were purchased without the minerals.
In April, 1992, the Company purchased a 100% interest in the surface rights
and a 50% interest in the mineral rights to 952 acres, consisting of mainly
timber lands located in Beauregard and Calcasieu Parishes.
On October 29, 1997, Calcasieu Real Estate and Oil Co., Inc. purchased
3,496 acres of agricultural land in Cameron Parish, Louisiana, from Amoco
Production for $1,663,000. No minerals were included in the purchase.
OPERATIONS
- - ----------
The Company's income is derived primarily from its oil and gas properties.
Agriculture and timber income are the next largest sources of income.
Additional oil and gas income in the future will come from discoveries on the
Company's land.
1
INDUSTRY SEGMENTS
- - -----------------
The purchase of additional real estate in 1990, 1992, and 1997 has created
"Agricultural Properties" and "Timber Properties" as additional industry
segments because revenues from these properties exceed 10% of total revenues.
The Company also receives mineral rentals and royalties from some of these
properties. Note 6 to the Financial Statements on page 23 sets forth
information on the business segments.
EMPLOYEES
- - ---------
The Company currently employs a total of five persons in a part-time
capacity. The Company is subject to no union contracts nor does the Company
have any pension, profit sharing or deferred compensation plans.
CUSTOMERS
- - ---------
The Company had three customers, the sales to which equal or exceed 10% of
the Company's total revenues. In 1997, sales to Riceland Petroleum Company
accounted for 35% of revenues, sales to Woodlawn accounted for 12% of revenues
and sales to Coastal accounted for 12% of revenues.
ITEM 2. PROPERTIES
----------
Until early 1990, the Company owned 2,022 acres in fee, a 50% undivided
interest in 440 acres, and a 40% undivided interest in 1,748 acres of immovable
(real) property located in the parishes of Allen, Beauregard, Calcasieu,
Jefferson Davis, Sabine and St. Landry in Louisiana. The Company also owns a
20% interest in the minerals under approximately 3,330 surface acres, and a 40%
interest in the minerals under approximately 160 surface acres, located in the
parishes of Acadia, Allen, Cameron, Jefferson Davis, St. Landry, St. Mary and
Vermilion in Louisiana. All of the foregoing property is located in
southwestern and central Louisiana, within approximately 100 miles of the City
of Lake Charles. Approximately half of the acreage in which mineral interests
are held is in oil and gas production. In addition, the Company owns fractional
royalty interest in 36 properties covering 6,040 gross acres in eight parishes
in Louisiana.
In February of 1990 the Company acquired a 12.5% undivided fee interest in
34,309 acres (4,289) net acres) located in the Louisiana parishes of Allen,
Beauregard, Calcasieu, Cameron, Jefferson Davis, Sabine and Vermilion. A
portion of these lands are the same as the 1,748 acres in which the company
owned a 40% position described in the first paragraph above. This new
acquisition consists of 17,088 gross acres of agriculture land, 7,572 acres of
commercial timber, 4,196 acres in pasture, 4,253 acres of marsh land and 1,200
acres for future
2
subdivision as it is contiguous to the city limits of Lake Charles. As a result
of this acquisition, the company now participates in oil and gas production in
Southeast Lunita Field, Lake Arthur Field, Edgerly Field, Welsh Field and North
Indian Village Field. The Company has also participated for the 12.5% interest
in the granting of oil and gas leases which are yet to be drilled.
In April of 1992, the Company purchased 952 acres of timberland in
Calcasieu and Beauregard Parishes for $475,000.
On October 29, 1997, Calcasieu Real Estate and Oil Co., Inc. purchased
3,496 acres of land in Cameron Parish, Louisiana, from Amoco Production Company
for $1,663,000.
The table below shows, for the years ended December 31, 1997, December 31,
1996, and December 31, 1995, net gas produced in thousands of cubic feet (MCF)
and net oil (including condensate and natural gas liquids) produced in barrels
(Bbl), average sales prices and average production costs, relating to oil and
gas attributable to the royalty interests and working interest held by the
Company.
Year Ended Year Ended Year Ended
12/31/95 12/31/96 12/31/97
Net gas produced (MCF) 80,371 60,056 107,403
Average gas sales price (Per MCF)(1) $ 1.81 $ 2.81 $ 2.85
Net Oil Produced (Bbl) 6,557 4,915 4,956
Average Oil Sales price (Per Bbl)(1) $ 16.78 $ 20.16 $ 19.60
Average sales price of oil and gas
per MCF equivalent (1)(2) $ 2.10 $ 3.32 $ 2.87
Average production cost of oil and
gas per MCF equivalent (2)
Royalty Interests .15 .18 .14
Working Interests 1.30 1.69 2.90
- - ----------------
(1) Before deduction of production and severance taxes.
(2) Oil production is converted to MCF equivalents at the rate of 6 MCF's per
barrel, representing the approximate relative energy content of oil and
natural gas.
ITEM 3. LEGAL PROCEEDINGS
-----------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There were no matters submitted to security holders during the fourth
quarter.
3
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
--------------------------------------------------------
As of February 27, 1998, the common stock of Calcasieu Real Estate and Oil
Co., Inc. was owned by 728 stockholders. During the three years preceding the
date hereof, there has been only limited and sporadic trading in the Company's
Common Stock, principally among its shareholders.
In the year ended December 31, 1997, 96,000 shares were traded with a high of
5-1/4 and a low of 2-3/4. The last trade during this period was on November 21,
1997, for 100 shares at a price of 4-1/2. Below is the trading range.
Volume High Low
01/01/97 - 3/31/97 45,500 3-1/2 2-3/4
04/01/97 - 06/30/97 38,300 3-7/8 3
01/07/97 - 09/30/97 9.600 3-5/8 3-1/4
10/01/97 - 12/31/97 2,600 5-1/4 3-5/8
Dividends were paid per share on Common Stock as follows by record date:
June 30, 1995, $.02; September 29, 1995, $.02; December 29, 1995, $.02;
March 22, 1996, $.02; July 5, 1996, $.02; September 27, 1996, $.02; December 22,
1996, $.03; March 28, 1997, $.03; June 27, 1997, $.03; September 26, 1997, $.03;
December 30, 1997, $.03. There are no restrictions on the paying of dividends.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Year Ended Ended Ended Ended Ended
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
Revenues $ 558,338 $ 378,982 $ 812,137 $ 672,294 $ 967,632
Income before income
taxes and cumulative
effect of a change in
accounting principle 290,304 120,775 518,093 1,244,583 776,445
Earnings per common
share before cumulative
effect of a change in
accounting principle (1) .11 .05 .17 .40 .26
Earnings per common
share (1) after
cumulative effect of a
change in accounting
principle (1) .13 .05 .17 .40 .26
Total assets $2,657,021 $2,587,082 $3,018,542 $3,445,721 $4,307,077
Cash Dividends declared
per common stock .09 .04 .06 .09 .12
4
(1) Earnings per common share presented are based on the weighted average
outstanding shares of about 1,997,000 in 1997, 1,997,000 in 1996, 1,998,000
in 1995, 2,007,000 in 1994 and 2,010,000 in 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------------
Income after taxes was down 36% in 1997 from 1996. This was caused by
several factors. First, the company recognized a gain of approximately $751,000
on the sale of its CM Bank stock in 1996. The bank was purchased by another
bank in an all cash transaction. During 1997, gas production increases 79%
while the average sale price increased 1%. Oil production increased 1% and the
average sales price decreased 3%. Income from mineral leases and lease bonuses
increased 81%. The total net income before taxes for all operations from the
property purchased in 1990 was up from $107,701 to $154,338 or an increase of
43%. The increase income from operations was primarily due to an increase in
oil and gas related activities. In 1997 and 1996, the Company had no
expenditures for dry holes versus $2,843 in 1995.
Information on the oil and gas properties is included in the notes to
financial statements, specifically as to reserve quantities and standardized
measure of discounted net cash flows. Both of those are unaudited.
Management believes that the company's revenues will be sufficient to meet
its existing capital needs and the needs of its anticipated future operations.
Long-term trends will depend upon the ability of management to find new
production to replace the depletion of the Company's present minerals.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
All Financial statements required by Regulation S-X are listed in the Table
of Contents to Financial Statements and Supplemental Schedules appearing
immediately after the signature page of this Form 10K and are included herein by
reference. See Item 14.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------
Not applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The information required by Item 10 as to directors is included in the
Registrant's definitive proxy statement to be filed pursuant to Section 14(a) of
the Securities Exchange Act of 1934 and is included herein by reference.
5
Executive officer of Registrant as of February, 1998, are as follows:
NAME Age Position with Registrant
----- ---- --------------------------
Arthur Hollins, III 67 President & Director
William D. Blake 65 Vice President, Treasurer and Director
Charles D. Viccellio 64 Vice President, Secretary and Director
The occupations of such excessive officers during the last five years and other
principal affiliations are:
Name
- - ----
Arthur Hollins, III Director of the Company since 1975; President of the Company
since 1979; Chairman of the Board at the First National Bank of
Lake Charles since 1968 and President of the same bank from
1977 to 1992. Director of First Commerce Corporation.
William D. Blake Director of the Company since 1966; Secretary-Treasurer of the
Company from 1966-1979; Vice-President and Treasurer of the
Company since 1979; General Manager of J. A. Bel Estate
(ownership and cultivation of timberland) and the Quatre Parish
Company (rice farming); President of Bel Oil Corporation (oil
and gas exploration and development), Lacassane Co., Inc. and
Howell Industries, Inc.; Director of the First National Bank of
Lake Charles and Sweetlake Land and Oil Co., Inc.
Charles D. Viccellio Vice-President and Secretary of the Company since 1997 and
Director of the Company since 1996. Partner in the law firm of
Stockwell, Sievert, Viccellio, Clements & Shaddock, LLP.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The information required by Item 11 is included in the Registrant's
definitive proxy statement to be filed pursuant to Section 14(a) of the
Securities and Exchange Act of 1934 and is included herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
---------------------------------------------------
The information required by Item 12 is included in the Registrant's
definitive proxy statement to be filed pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and is included herein by reference.
6
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K
---------------------------------------------------------
(a) The following documents are filed as part of the report:
1. All Financial Statements. See Table of Contents to Financial
Statements and schedule on page 8.
2. Financial Statement Schedules. See Table of Contents to Financial
Statements and Schedules on page 8.
3. List of Exhibits -
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
CALCASIEU REAL ESTATE AND OIL CO., INC.
BY: /s/ Arthur Hollins, III
_________________________________________
Arthur Hollins, III, President
Dated March 18, 1998
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed below by the following persons in the capacities with regard to
Calcasieu Real Estate and Oil Co., Inc. and on the date indicated:
Arthur Hollins, III President
- - ------------------------------------ (Chief Executive Officer and Director)
William D. Blake Vice President and Treasurer
- - ------------------------------------ (Principal Financial Officer and Director)
Charles D. Viccellio Vice President and Secretary
- - ------------------------------------ (Director)
Troy Freund Director
- - ------------------------------------
Henry C. Alexander Director
- - ------------------------------------
Laura A. Leach Director
- - ------------------------------------
B. James Reaves, III Director
- - ------------------------------------
Frank O. Pruitt Director
- - ------------------------------------
Dated: March 18, 1998
7
CALCASIEU REAL ESTATE & OIL CO., INC.
Lake Charles, Louisiana
C O N T E N T S
Page
----
INDEPENDENT AUDITORS' REPORT ON THE FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION 9
FINANCIAL STATEMENTS
Balance sheets 10
Statements of income 11
Statements of stockholders' equity 12
Statements of cash flows 13-14
Notes to financial statements 15-28
SUPPLEMENTARY INFORMATION
Property, plant and equipment 29
Accumulated depreciation, depletion and amortization 30
SCHEDULE OMITTED
Schedules, other than those listed above, have been omitted
because of the absence of the conditions under which they
are required or because the required information is included
in the financial statements or notes thereto.
8
[LETTERHEAD MCELROY, QUIRK & BURCH APPEARS HERE]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Calcasieu Real Estate & Oil Co., Inc.
Lake Charles, Louisiana
We have audited the accompanying balance sheets of Calcasieu Real Estate &
Oil Co., Inc. as of December 31, 1997 and 1996, and the related statements of
income, stockholders' equity, and cash flows for the years ended December 31,
1997, 1996 and 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of the Co-owners' Undivided Fifty Percent Interest in Walker
Louisiana Properties, of which Calcasieu Real Estate & Oil Co., Inc. owns a
twenty-five percent undivided interest. The twenty-five percent undivided
interest consists of total assets of $1,128,744 and $1,106,892 as of December
31, 1997 and 1996, respectively, and total revenues of $221,626 and $167,464 for
the years then ended. Those statements were audited by other auditors whose
report has been furnished to us, and in our opinion, insofar as it relates to
the amounts included for the Co-owners' Undivided Fifty Percent Interest in
Walker Louisiana Properties, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of Calcasieu Real Estate & Oil Co., Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the years ended December 31, 1997, 1996 and 1995, in conformity with
generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information on pages
29 and 30 is presented for the purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
Lake Charles, Louisiana
March 2, 1998
9
CALCASIEU REAL ESTATE & OIL CO., INC.
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS 1997 1996
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 221,910 $ 313,463
Securities available-for-sale - 495,500
Accounts receivable 68,039 73,555
Inventory-harvested crops 13,617 2,850
Prepaid expense and other 1,762 10,158
---------- ----------
Total current assets 305,328 895,526
---------- ----------
SECURITIES AVAILABLE-FOR-SALE 263,224 521,330
---------- ----------
PROPERTY AND EQUIPMENT, less accumulated depreciation,
depletion and amortization 11,760 12,652
Timber, less accumulated depletion 374,762 354,471
Land 3,352,003 1,661,742
---------- ----------
3,738,525 2,028,865
---------- ----------
$4,307,077 $3,445,721
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 53,461 $ -
Trade payables and accrued expenses 22,791 7,846
Dividends payable 59,918 59,918
Income taxes payable:
Current 22,817 261,069
Deferred, net 14,628 10,634
---------- ----------
Total current liabilities 173,615 339,467
---------- ----------
LONG-TERM DEBT, less current maturities 746,539 -
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, no par value; 3,000,000 shares authorized;
2,100,000 shares issued 72,256 72,256
Retained earnings 3,445,006 3,164,703
Net unrealized appreciation on available-for-sale
securities, net of tax of $4,908 in 1997 and $4,625 in 1996 7,364 6,938
---------- ----------
3,524,626 3,243,897
Less cost of treasury stock (1997 102,748 and
1996 102,728 shares) 137,703 137,643
---------- ----------
3,386,923 3,106,254
---------- ----------
$4,307,077 $3,445,721
========== ==========
See Notes to Financial Statements.
10
CALCASIEU REAL ESTATE & OIL CO., INC.
STATEMENTS OF INCOME
Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
---------- ----------- ----------
Revenues $ 967,632 $ 672,294 $ 812,137
--------- ---------- ---------
Costs and expenses:
Oil and gas production 59,503 33,028 37,613
Dry holes - - 2,843
Agricultural 12,419 36,547 33,135
Timber 18,062 11,538 14,312
Depreciation, depletion and amortization 14,359 12,325 101,855
--------- ---------- ---------
104,343 93,438 189,758
--------- ---------- ---------
Income from operations 863,289 578,856 622,379
--------- ---------- ---------
Other income (expense):
Interest income 68,177 29,054 12,032
Dividends on stock 530 26,407 25,443
Realized gain on sale of investments in
available-for-sale securities 19,356 751,417 -
General and administrative (161,735) (138,926) (131,477)
Interest expense (13,172) (2,225) (10,284)
--------- ---------- ---------
(86,844) 665,727 (104,286)
--------- ---------- ---------
Income before income taxes 776,445 1,244,583 518,093
--------- ---------- ---------
Federal and state income taxes:
Current 259,817 441,154 173,005
Deferred (benefit) 3,710 (1,661) (3,693)
--------- ---------- ---------
263,527 439,493 169,312
--------- ---------- ---------
Net income (per common share):
1997 $.26; 1996 $.40; 1995 $.17 $ 512,918 $ 805,090 $ 348,781
========= ========== =========
See Notes to Financial Statements.
11
CALCASIEU REAL ESTATE & OIL CO., INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended December 31, 1997, 1996 and 1995
Net
Unrealized
Appreciation
on
Capital Securities
Stock Retained Available Treasury
Issued Earnings for Sale Stock
-------- ------------ ------------- ---------
Balance, January 1, 1995 $72,256 $2,310,426 $ 66,781 $123,301
Net income - 348,781 - -
Purchase of treasury stock - - - 14,342
Dividends - (119,840) - -
Net change attributable to
unrealized gain on securities
available for sale, net of
taxes of $49,518 - - 74,276 -
-------- ---------- ------------ ---------
Balance, December 31, 1995 72,256 2,539,367 141,057 137,643
Net income - 805,090 - -
Dividends - (179,754) - -
Net change attributable to
realized and unrealized gains
on available-for-sale
securities, net of taxes
of $(89,413) - - (134,119) -
-------- ---------- ------------ ---------
Balance, December 31, 1996 72,256 3,164,703 6,938 137,643
Net income - 512,918 - -
Purchase of treasury stock - - - 60
Dividends - (232,615) - -
Net change attributable to
realized and unrealized gains
on available-for-sale
securities, net of taxes
of $(283) - - 426 -
-------- ---------- ------------ ---------
Balance, December 31, 1997 $72,256 $3,445,006 $ 7,364 $137,703
======== ========== ============ =========
See Notes to Financial Statements.
12
CALCASIEU REAL ESTATE & OIL CO., INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
------------ ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 512,918 $ 805,090 $ 348,781
Noncash (income) expenses included in
net income:
Depreciation, depletion and amortization 14,359 12,325 101,855
Realized (gains) on sale of available-
for-sale securities (19,356) (751,417) -
Change in assets and liabilities:
(Increase) decrease in trade accounts
and other receivables 5,516 (12,721) 7,086
(Increase) decrease in inventory (10,767) 7,692 (6,976)
(Increase) decrease in prepaid expenses 8,396 (9,001) (327)
Decrease in prepaid income taxes - - 43,340
Increase (decrease) in trade payables 14,945 (2,812) (6,271)
Increase (decrease) in other
liabilities (238,996) 121,295 194,338
----------- --------- ---------
Net cash provided by operating
activities 287,015 170,451 681,826
----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from rights of way 7,760 400 -
Available-for-sale securities:
Maturities 500,000 197,623 -
Purchases (250,951) (997,107) (197,623)
Sales 529,077 928,098 -
Purchase of property and equipment (33,758) (2,320) (1,451)
Purchase of land (1,698,021) - (934)
----------- --------- ---------
Net cash provided by (used in)
investing activities (945,893) 126,694 (200,008)
----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings 900,000 - -
Principal payments on long-term borrowing (100,000) (93,108) (95,000)
Dividends paid (232,615) (179,754) (119,840)
Payments to acquire treasury stock (60) - (14,342)
----------- --------- ---------
Net cash provided by (used in)
financing activities 567,325 (272,862) (229,182)
----------- --------- ---------
Net increase (decrease) in cash and
cash equivalents (91,553) 24,283 252,636
Cash and cash equivalents:
Beginning 313,463 289,180 36,544
----------- --------- ---------
Ending $ 221,910 $ 313,463 $ 289,180
=========== ========= =========
(continued on next page)
13
CALCASIEU REAL ESTATE & OIL CO., INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997, 1996 and 1995
(Continued)
1997 1996 1995
-------- -------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash payments for:
Interest $ 12,255 $ 7,408 $ 15,573
Income taxes 498,069 338,171 (28,421)
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Net change in unrealized and realized
gains on available-for-sale
securities 426 (134,119) 74,276
See Notes to Financial Statements.
14
CALCASIEU REAL ESTATE & OIL CO., INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Nature of Business and Significant Accounting Policies
Nature of business:
The Company's business is the ownership and preservation of the assets
acquired at the Company's organization and subsequent thereto. The
primary activities have consisted of leasing its properties and
collecting rents and royalties derived therefrom.
In February, 1990, the Company acquired a 12.5% interest in 34,189
acres of land in Southwest Louisiana. Among other uses, a portion of
the land is devoted to agricultural purposes.
In April, 1992, the Company purchased a 100% interest in the surface
rights and a 50% interest in the mineral rights to 952 acres,
consisting of mainly timber land.
In October, 1997, the Company purchased approximately 3,496 acres of
agricultural property.
Significant accounting policies:
Cash and cash 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.
Inventory:
Inventory consists of harvested crops valued at estimated selling
price at the date of the balance sheet.
15
NOTES TO FINANCIAL STATEMENTS
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.
Agricultural revenue:
Most agricultural income is derived under U.S. Government subsidy
programs. Under these programs, loans are made against crops as
harvested. However, delivery of the crops fulfills any further
obligation under the loan agreement, and thus revenues are recognized
as the harvested crops are delivered. Differences in the price at
ultimate sale of the products could result from quantity, grade, and
price, and additional revenues are derived at that time.
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 and declines in value judged to be other than
temporary 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.
16
NOTES TO FINANCIAL STATEMENTS
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.
Successful efforts accounting method:
The Company uses the successful efforts method of accounting for its
oil and gas operations. Under the successful efforts method, the
costs of acquiring mineral interest, drilling and equipping
successful exploratory wells, and all development wells and related
facilities are capitalized. All other exploration costs, including
geological and geophysical costs, lease rentals and the cost of
drilling unsuccessful exploratory wells are charged to expense. Due
to the Company's small percentage ownership (in relation to the
total) of oil and gas properties, reserve information is not
available to the Company for mineral interests acquired. Depletion
of these interests is computed on the straight-line and accelerated
methods over an estimated life of five to seven years. Acquisition
costs of proved mineral interests for which reserve information is
available are depleted using the unit-of-production method based on
production and estimated proved reserves. Related tangible and
intangible costs are depreciated and amortized using the unit-of-
production method based on production and estimated proved developed
reserves.
Earnings per share:
Earnings per share is based on the weighted average number of common
shares outstanding during the years.
Income taxes:
The Company complies with the provisions of FASB Statement of
Financial Accounting Standards 109, Accounting for Income Taxes
relative to the reporting of income taxes. This statement requires
an asset and liability approach for financial accounting and
reporting for income taxes. The objectives are to recognize the
amount of taxes payable or refundable for the current year, and to
recognize deferred tax liabilities and assets for the future tax
consequences of events that have been recognized in the Company's
financial statements or tax returns. The elements with different
bases for financial and tax purposes are property and equipment,
investments, accounts receivable, inventory and accounts payable.
17
NOTES TO FINANCIAL STATEMENTS
The basic principles to be applied in accounting for income taxes at
the date of the financial statements are:
1. A current tax liability or asset is recognized for the estimated
taxes payable or refundable on tax returns for the current year.
2. A deferred tax liability or asset is recognized for the estimated
future tax effects attributable to temporary differences and
carryforwards.
3. The measurement of current and deferred tax liabilities and assets
is based on provisions of the enacted tax law; the effects of
future changes in tax laws or rates are not anticipated.
4. The measurement of deferred tax assets is reduced, if considered
necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized.
Note 2. Securities Available-for-Sale
Debt and equity securities have been classified in the balance sheet
according to management's intent in the current and noncurrent asset
sections under the headings securities available-for-sale. The carrying
amount of securities and their approximate fair values at December 31,
1997 and 1996 follow:
Gross Gross
Amortized Unrealized Unrealized
Cost Gains Losses Fair Value
----------- ---------- ---------- -----------
Available-for-sale securities:
December 31, 1997:
Equity securities $ 56,123 $ 718 $ - $ 56,841
Municipal securities 194,828 11,555 - 206,383
U.S. government securities - - - -
---------- ------- ---------- ----------
$ 250,951 $12,273 $ - $ 263,224
========== ======= ========== ==========
Available-for-sale securities:
December 31, 1996:
Equity securities $ 8,160 $ 5,858 $ - $ 14,018
U.S. government securities 997,105 5,755 48 1,002,812
---------- ------- ---------- ----------
$1,005,265 $11,613 $ 48 $1,016,830
========== ======= ========== ==========
18
NOTES TO FINANCIAL STATEMENTS
Gross realized gains and gross realized losses on sales of available-for-
sale securities were:
1997 1996
-------- ---------
Gross realized gains:
U.S. government and agency securities $ 7,956 $ -
Equity securities 11,400 751,417
------- ---------
$19,356 $751,417
======= =========
Gross realized losses:
U.S. government and agency securities $ - $ -
Equity securities - -
------- ----------
$ - $ -
======= ==========
The scheduled maturities of securities (other than equity securities)
available-for-sale at December 31, 1997 were as follows:
Amortized Fair
Cost Value
--------- ---------
Due in one year or less $ - $ -
Due from one year to three years - -
Due from three to five years - -
Due after five years 194,828 206,383
--------- ---------
$194,828 $206,383
========= =========
Expected maturities may differ from contractual maturities because the
issuers of certain debt securities do have the right to call or prepay
their obligations without any penalties. The amount classified as
current assets on the accompanying balance sheets represent the expected
maturities of the debt securities during the next year.
19
NOTES TO FINANCIAL STATEMENTS
Note 3. Oil and Gas Properties
Results of operations for oil and gas producing activities at December
31, 1997, 1996 and 1995 is as follows:
1997 1996 1995
--------- --------- ---------
Gross revenues:
Royalty interests $353,862 $245,368 $203,001
Working interests 39,894 59,587 47,840
-------- -------- --------
393,756 304,955 250,841
Less:
Production costs 59,503 33,028 37,613
Exploration expenses - - 2,843
Depreciation, depletion and
amortization 1,515 2,827 3,409
-------- -------- --------
Results before income tax
expenses 332,738 269,100 206,976
Income tax expenses 112,932 95,026 67,639
-------- -------- --------
Results of operations from
producing activities
(excluding corporate
overhead) $219,806 $174,074 $139,337
======== ======== ========
Costs incurred in oil and gas activities:
The major costs incurred in connection with the Company's oil and gas
operations (which are conducted entirely within the United States) at
December 31, 1997, 1996 and 1995 are as follows:
1997 1996 1995
--------- --------- --------
Acquisition costs-working and
royalty interests $ - $ - $ -
========= ========= =========
Exploration costs-primarily
dry hole costs $ - $ - $ 2,843
========= ========= =========
Development costs $ 862 $ 591 $ 439
========= ========= =========
20
NOTES TO FINANCIAL STATEMENTS
Reserve quantities (unaudited):
Reserve information relating to estimated quantities of the Company's
interest in proved reserves of natural gas and crude (including
condensate and natural gas liquids) is not available. Such reserves
are located entirely within the United States. A schedule indicating
such reserve quantities is, therefore, not presented.
The wells remain in production at December 31, 1997, including royalty
interests and working interests obtained through back-in provisions of
royalty agreements. Production from such royalty interests and working
interests comprises 100% of the Company's oil and gas revenues in 1997,
1996 and 1995.
Actual production has exceeded original estimates of reserves, and
remaining reserves have not been revised. Therefore, the Company is
not able to complete the computations of discounted future cash flows
and reconciliation thereof.
Note 4. Income Taxes
The Company files federal income tax returns on a calendar year basis.
The net deferred tax liability in the accompanying balance sheet includes
the following components at December 31, 1997 and 1996:
1997 1996
---------- ----------
Deferred tax assets $ 1,293 $ 919
Valuation allowance - -
Deferred tax liabilities (11,013) (9,210)
Deferred tax liabilities on unrealized
appreciation on securities available
for sale (4,908) (2,343)
-------- --------
Net deferred tax liability $(14,628) $(10,634)
======== ========
21
NOTES TO FINANCIAL STATEMENTS
A reconciliation between income taxes, computed by applying statutory tax
rates to income before income taxes and income taxes provided at December
31, 1997, 1996 and 1995 is as follows:
1997 1996 1995
---------- ---------- ----------
Tax at statutory rates $263,991 $423,159 $176,152
Tax effect of the following:
Statutory depletion (18,384) (12,923) (10,444)
Graduated tax rates - - (2,789)
Dividend exclusion (126) (6,285) (6,055)
State income tax 21,226 38,316 13,497
Investment tax credit (1,000) - -
Other (2,180) (2,774) (1,049)
-------- -------- --------
$263,527 $439,493 $169,312
======== ======== ========
Deferred income taxes result from timing differences in the recognition
of revenue and expenses for tax and financial statement purposes. The
Company was entitled to an investment tax credit related to reforestation
expenditures totaling $1,000 for the year ended December 31, 1997. The
effect of these timing differences at December 31, 1997 and 1996 is as
follows:
1997 1996
---------- ----------
Conversion of tax return from cash
to accrual basis for financial
reporting $ (9,570) $ (5,537)
Excess of depreciation and depletion
expensed for tax purposes (under)
amount expensed for financial
statement purposes (150) (472)
Unrealized gain on marketable securities (4,908) (4,625)
-------- ---------
$(14,628) $(10,634)
======== =========
Note 5. Long-Term Debt
Long-term debt consisted of a note payable in 59 monthly installments of
$9,863, including interest at 8.25%, with a final payment estimated at
$492,062 on December 26, 2002. This debt is secured by a mortgage on the
real estate acquired with the proceeds from the debt.
22
NOTES TO FINANCIAL STATEMENTS
Scheduled payments on this note in each of the next five years are as
follows:
1998 $ 53,461
1999 58,108
2000 62,994
2001 68,636
2002 556,801
--------
$800,000
========
Note 6. Business Segment and Major Customer Information
The Company's operations are classified into three principal industry
segments: oil and gas properties, agricultural properties, and timber
properties. The agricultural and timber properties were acquired in
February of 1990. Additional timber properties were acquired in April,
1992 and additional agricultural properties were acquired in October,
1997. Following is a summary of segmented information for 1997, 1996 and
1995:
1997 1996 1995
--------- --------- ---------
REVENUES
Oil and gas properties $691,934 $453,862 $287,426
Agricultural properties 82,329 67,437 54,790
Timber properties 179,543 114,741 466,757
All other segments 13,826 36,254 3,164
-------- -------- --------
$967,632 $672,294 $812,137
======== ======== ========
COSTS AND EXPENSES
Oil and gas properties $ 61,018 $ 35,855 $ 43,866
Agricultural properties 14,699 36,547 35,476
Timber properties 27,764 20,445 109,977
All other segments 862 591 439
-------- -------- --------
$104,343 $ 93,438 $189,758
======== ======== ========
23
NOTES TO FINANCIAL STATEMENTS
1997 1996 1995
------------ ----------- ------------
INCOME FROM OPERATIONS
Oil and gas properties $ 630,916 $ 418,007 $ 243,560
Agricultural properties 67,630 30,890 19,314
Timber properties 151,779 94,296 356,780
All other segments 12,964 35,663 2,725
---------- ---------- ----------
863,289 578,856 622,379
OTHER INCOME (EXPENSE) (86,844) 665,727 (104,286)
---------- ---------- ----------
INCOME BEFORE INCOME TAXES $ 776,445 $1,244,583 $ 518,093
========== ========== ==========
IDENTIFIABLE ASSETS
Oil and gas properties $ 546,971 $ 554,068 $ 532,584
Agricultural properties 2,303,368 621,391 632,656
Timber properties 969,842 929,811 939,118
All other segments - - 6,289
---------- ---------- ----------
3,820,181 2,105,270 2,110,647
GENERAL AND CORPORATE ASSETS 486,896 1,334,745 907,895
---------- ---------- ----------
TOTAL ASSETS $4,307,077 $3,445,721 $3,018,542
========== ========== ==========
CAPITAL EXPENDITURES
Oil and gas properties $ - $ 1,502 $ -
Agricultural properties 1,678,281 - -
Timber properties 40,101 - -
All other segments - - -
---------- ---------- ----------
$1,718,382 $ 1,502 $ -
========== ========== ==========
DEPRECIATION, DEPLETION AND
AMORTIZATION
Oil and gas properties $ 1,515 $ 2,827 $ 3,409
Agricultural properties 2,280 - 2,342
Timber properties 9,702 8,907 95,665
All other segments 862 591 439
---------- ---------- ----------
$ 14,359 $ 12,325 $ 101,855
========== ========== ==========
24
NOTES TO FINANCIAL STATEMENTS
There are no intersegment sales reported in the accompanying income
statements. Income before income tax represents net sales less operating
expenses and other income and expenses of a general corporate nature.
Identifiable assets by segment are those assets that are used in the
Company's operations within that industry. General corporate assets
consist principally of cash and cash items, accounts receivable, and
marketable equity and debt securities.
The following summarizes major customer information at December 31, 1997,
1996 and 1995 from oil and gas revenues:
Sales to Purchaser as a
Percentage of Total Revenues
-----------------------------
Purchaser 1997 1996 1995
--------- ------- ------ -------
Whitson - 3% 24%
Riceland Petroleum Company 35% 29% 30%
Coastal 12% 15% 13%
Woodlawn 12% 23% -
Note 7. Related Party Transactions
The President of the Company is Chairman of the Board of the First
National Bank of Lake Charles (the Bank). At December 31, 1997 and 1996,
the Company had $187,071 and $313,463, respectively, deposited in money-
market and noninterest bearing checking accounts with the Bank. At
December 31, 1997, the Company also had an $800,000 mortgage note payable
to the bank, described at Note 5.
During 1997, some board members entered into leases with the Company for
water fowl hunting on property acquired during the year. Lease income
from these leases amounted to $4,800 for the year ended December 31,
1997.
In 1990, the Company purchased interests in properties managed by Walker
Louisiana Properties (WLP), such properties being subject to a management
agreement described at Note 10.
Note 8. Supplementary Income Statement Information
Taxes other than income taxes of $62,188, $51,829 and $52,054, were
charged to expense during 1997, 1996 and 1995, respectively.
25
NOTES TO FINANCIAL STATEMENTS
Note 9. Major Transactions
In February, 1990 the Company acquired a 12.5% interest in 34,189 acres
and other properties in Allen, Beauregard, Calcasieu, Cameron, Jefferson
Davis, Lafourche, Sabine, and Vermillion Parishes for $1,275,000. Of the
total acreage, 30,581 acres were acquired in fee and 3,608 were acquired
in surface rights only.
The allocation of the purchase price, which was applied pro rata over the
fair market values of the assets acquired is as follows:
Cash and accounts receivable $ 1,607
Harvested crops 17,799
Buildings and equipment 14,610
Land:
Agricultural 606,982
Other 233,445
Timber 380,792
Oil and gas properties 19,765
----------
$1,275,000
==========
The primary sources of income from the property are the leasing of
mineral rights, timber sales, and agricultural rents.
The President of this Company is President and majority stockholder of a
corporation that also purchased a 12.5% undivided interest in the same
acreage at the same time and at the same price.
In February, 1992, the Company purchased 952 acres of timberland located
in Calcasieu and Beauregard Parishes for $475,000. The down payment of
$95,000 was paid at the closing date from the Company's cash reserves and
the remaining $380,000 was financed with a mortgage note payable. This
note was paid in full in April, 1996. The seller retained a 50% mineral
interest in the property.
In October, 1997, the Company purchased approximately 3,496 acres of
agricultural properties located in Cameron Parish for $1,663,000 plus
related expenses. The down payment of $813,000 was paid at the closing
date from proceeds of the sale of securities and cash reserves. The
remaining $850,000 was financed with a mortgage note payable described in
Note 5.
26
NOTES TO FINANCIAL STATEMENTS
Note 10. Management Agreement
During 1990, the Company purchased an undivided interest in numerous
parcels of land and other properties as described at Note 9. The
Company's interest, along with the interests of other co-owners, is
managed by an entity under a management agreement whereby costs are
shared based on the percent of ownership.
Note 11. Concentration of Credit Risk
The Company maintains its cash balances in one financial institution.
The amount on deposit in the financial institution is insured by the
Federal Deposit Insurance Corporation up to $100,000.
Note 12. Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it was practical
to estimate that value:
Cash and cash equivalents:
For these short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Securities available-for-sale:
Debt and equity securities were valued at fair value, which equals
quoted market price.
Long-term debt:
The fair value of the Company's long-term debt is estimated based on
the current rates offered to the Company for debt of the same
remaining maturities.
27
NOTES TO FINANCIAL STATEMENTS
The estimated fair value of the Company's financial instruments at
December 31, 1997 and 1996 are as follows. Amounts are presented in
thousands.
1997 1996
------------------ -----------------
Carrying Fair Carrying Fair
Financial Assets Value Value Value Value
--------- ------- -------- -------
Cash and cash equivalents $ 222 $ 222 $ 313 $ 313
Securities available for sale 263 263 1,017 1,017
Long-term debt (800) (800) - -
----- ----- ------ -------
$(315) $(315) $1,330 $1,330
===== ===== ====== =======
28
CALCASIEU REAL ESTATE & OIL CO., INC.
PROPERTY, PLANT AND EQUIPMENT
Years Ended December 31, 1997, 1996 and 1995
Balance, Adjustments Balance,
Beginning and End of
1997 of Period Additions Retirements Period
------ ----------- ----------- ----------- -----------
Oil and gas properties-proved $ 377,732 $ - $ 66 $ 377,666
Other property:
Buildings and equipment 90,959 3,831 3,849 90,941
Timber 545,792 29,993 - 575,785
Land 1,661,742 1,698,021 7,760 3,352,003
---------- ---------- ------- ----------
$2,676,225 $1,731,845 $11,675 $4,396,395
========== ========== ======= ==========
1996
------
Oil and gas properties-proved $ 376,230 $ 1,502 $ - $ 377,732
Other property:
Buildings and equipment 99,036 818 8,895 90,959
Timber 545,792 - - 545,792
Land 1,662,142 - 400 1,661,742
---------- ---------- ------- ----------
$2,683,200 $ 2,320 $ 9,295 $2,676,225
========== ========== ======= ==========
1995
------
Oil and gas properties-proved $ 377,213 $ - $ 983 $ 376,230
Other property:
Buildings and equipment 101,756 - 2,720 99,036
Timber 545,792 - - 545,792
Land 1,661,209 933 - 1,662,142
---------- ---------- ------- ----------
$2,685,970 $ 933 $ 3,703 $2,683,200
========== ========== ======= ==========
29
CALCASIEU REAL ESTATE & OIL CO., INC.
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
Years Ended December 31, 1997, 1996 and 1995
Balance, Adjustments Balance,
Beginning and End of
1997 of Period Additions Retirements Period
------ --------- --------- ----------- ---------
Oil and gas properties-proved $374,626 $ 1,515 $ - $376,141
Other property:
Buildings and equipment 81,413 3,142 3,849 80,706
Timber 191,321 9,702 - 201,023
-------- -------- ----------- --------
$647,360 $ 14,359 $3,849 $657,870
======== ======== =========== ========
1996
------
Oil and gas properties-proved $371,799 $ 2,827 $ - $374,626
Other property:
Buildings and equipment 89,717 591 8,895 81,413
Timber 182,414 8,907 - 191,321
-------- -------- ----------- --------
$643,930 $ 12,325 $8,895 $647,360
======== ======== =========== ========
1995
------
Oil and gas properties-proved $368,391 $ 3,408 $ - $371,799
Other property:
Buildings and equipment 92,090 2,781 5,154 89,717
Timber 86,749 95,665 - 182,414
-------- -------- ----------- --------
$547,230 $101,854 $5,154 $643,930
======== ======== =========== ========
30