0000096869-95-000016.txt : 19950821 0000096869-95-000016.hdr.sgml : 19950821 ACCESSION NUMBER: 0000096869-95-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950810 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEJON RANCH CO CENTRAL INDEX KEY: 0000096869 STANDARD INDUSTRIAL CLASSIFICATION: 0100 IRS NUMBER: 770196136 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07183 FILM NUMBER: 95560504 BUSINESS ADDRESS: STREET 1: 4436 LEBEC ROAD STREET 2: PO BOX 1000 CITY: LEBEC STATE: CA ZIP: 93243 BUSINESS PHONE: 8053278481 MAIL ADDRESS: STREET 1: 4436 LEBEC RD STREET 2: PO BOX 1000 CITY: LEBEC STATE: CA ZIP: 93243 10-Q 1 FORM 10Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 ------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from to ----------- ----------- For Quarter Ended Commission File Number June 30, 1995 1-7183 ------------------- -------------------------- TEJON RANCH CO. (Exact name of Registrant as specified in its charter) Delaware 77-0196136 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) P.O. Box 1000, Lebec, California 93243 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code...(805) 248-6774 -------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Total Shares of Common Stock issued and outstanding on June 30, 1995, were 12,682,244. - 1 - PART I FINANCIAL INFORMATION TEJON RANCH CO. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) THREE MONTHS ENDED SIX MONTHS ENDED June 30 June 30 ------------------ ---------------- 1995 1994 1995 1994 ---- ---- ------ ---- Revenues: Livestock $ 565 $ 3,941 $ 893 $ 4,201 Farming 49 150 171 234 Oil and Minerals 319 308 582 602 Commercial and Land Use 517 458 843 807 Interest Income 342 343 712 739 ------- ------- ------- ------- 1,792 5,200 3,201 6,583 Costs and Expenses: Livestock 720 3,014 1,318 3,465 Farming 323 370 1,125 725 Oil and Minerals 41 55 52 91 Commercial and Land Use 721 422 1,167 813 Corporate Expense 566 541 1,141 1,041 Interest Expense 103 63 182 158 ------- ------- ------- ------ 2,474 4,465 4,985 6,293 ------- ------- ------- ------ Operating Income(Loss) (682) 735 (1,784) 290 Income Tax Expense(Benefit) (273) 294 (714) 116 ------- ------- ------- ------- Net Income(Loss) $ (409) $ 441 $(1,070) $ 174 Earnings Per Share $ (.03) $ .03 $ (.08) $ .01 Cash Dividends Paid Per Share $ .025 $ .025 $ .025 $ .025 See Notes to Consolidated Condensed Financial Statements. - 2 - TEJON RANCH CO. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands) JUNE 30, 1995 DECEMBER 31, 1994* --------------- ----------------- (Unaudited) ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 180 $ 68 Short-term Investments 21,481 23,718 Accounts & Notes Receivable 742 2,125 Inventories: Cattle 4,833 3,020 Farming 1,993 39 Other 90 69 Prepaid Expenses and Other 792 1,223 --------- --------- Total Current Assets 30,111 30,262 PROPERTY AND EQUIPMENT-NET 14,737 13,284 OTHER ASSETS 982 1,374 --------- --------- TOTAL ASSETS $ 45,830 $ 44,920 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Trade Accounts Payable $ 873 $ 1,061 Other Accrued Liabilities 128 465 Other Current Liabilities 5,228 1,950 --------- --------- Total Current Liabilities 6,229 3,476 LONG-TERM DEBT 1,750 1,950 DEFERRED CREDITS 2,425 2,736 --------- --------- Total Liabilities 10,404 8,162 STOCKHOLDERS' EQUITY Common Stock 6,341 6,341 Additional Paid-In Capital 387 387 Retained Earnings 29,015 30,402 Marketable Securities - Unrealized Gains (Losses), Net (20) (372) Defined Benefit Plan - Funding Adjustment, Net (297) --- --------- -------- Total Stockholders' Equity 35,426 36,758 --------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 45,830 $ 44,920 ========= ========= See Notes to Consolidated Condensed Financial Statements. * The Balance Sheet at December 31, 1994 has been derived from the audited financial statements at that date. - 3 - TEJON RANCH CO. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW (In thousands) (Unaudited) SIX MONTHS ENDED June 30 ---------------- 1995 1994 ---- ---- OPERATING ACTIVITIES Net Income (Loss) $ (1,070) $ 174 Items Not Effecting Cash: Depreciation and Amortization 495 445 Decrease in Deferred Items -0- (29) Decrease in Deferred Taxes (89) -0- (Gain) Loss on Sale of Investments 2 (52) Changes in Operating Assets and Liabilities: Receivables, Inventories and Other Assets, Net (2,153) 2,353 Current Liabilities, Net 2,639 (2,645) --------- ------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (176) 246 INVESTING ACTIVITIES Maturities and Sales of Marketable Securities 4,788 11,091 Funds Invested in Marketable Securities (2,022) (8,608) Property and Equipment Expenditures (1,913) (1,046) Net Change in Breeding Herds 3 53 Other (45) (24) --------- ------- NET CASH PROVIDED BY INVESTING ACTIVITIES 805 1,466 FINANCING ACTIVITIES Decrease in Long-Term Debt (200) (1,600) Cash Dividend Paid (317) (317) --------- ------- NET CASH USED IN FINANCING ACTIVITIES (517) (1,917) --------- ------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 112 (205) Cash and Cash Equivalents at Beginning of Year 68 247 --------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 180 $ 42 ========= ======= See Notes to Consolidated Condensed Financial Statements. - 4 - TEJON RANCH CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS ---------------------------------------------------- (Unaudited) June 30, 1995 NOTE A - BASIS OF PRESENTATION ------------------------------ The summarized information furnished by Registrant pursuant to the instructions to Part I of Form 10-Q is unaudited and reflects all adjustments which are, in the opinion of Registrant's Management, necessary for a fair statement of the results for the interim period. All such adjustments are of a normal recurring nature. The results of the period reported herein are not indicative of the results to be expected for the full year due to the seasonal nature of Registrant's agricultural activities. Historically, the largest percentage of revenues are recognized during the fourth quarter. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. NOTE B - CALCULATIONS OF EARNINGS PER SHARE ------------------------------------------- Earnings per share are calculated using the weighted average number of c o m mon shares outstanding during the period. Common shares outstanding for the three month and six month periods ended June 30, 1995 and 1994 were 12,682,244. Registrant has a Stock Option Plan providing for the granting of options to purchase a maximum of 230,000 shares of Registrant's Common Stock to employees, advisors and consultants of Registrant. Currently, options to purchase 130,000 shares are outstanding at prices equal to the fair market value at date of grant (96,000 shares at $20.00 and 20,000 shares at $15.00, and 14,000 shares at $11.88). Stock options granted will be treated as common stock equivalents in accordance with the treasury method when such amounts would be dilutive. Fully diluted common shares outstanding for the three month period ended June 30, 1995 were 12,683,844. For the six month period ended June 30, 1995 fully diluted common shares were 12,683,303. At June 30, 1994, common stock equivalents were antidilutive. NOTE C - MARKETABLE SECURITIES ------------------------------ Registrant has elected to classify its securities as available-for- s a le per Statement of Financial Accounting Standard No. 115, Accounting for Certain Investments in Debt and Equity Securities, and therefore is required to adjust securities to fair value at each reporting date. - 5 - Marketable securities consist of the following at: June 30 December 31 1995 1994 ----------------------------------- Estimated Fair Estimated Fair Cost Value Cost Value ----------------------------------- Marketable securities: U.S. Treasury and agency notes $15,859 $15,800 $18,837 $18,409 Corporate notes 5,655 5,681 5,445 5,309 ------------------------------------ $21,514 $21,481 $24,282 $23,718 ==================================== As of June 30, 1995, the cumulative fair value adjustment is a $33,000 unrealized loss. The cumulative fair value adjustment to stockholders' equity, net of tax benefit of $13,000, is an unrealized loss of $20,000. Registrant's gross unrealized holding gains equals $195,000, while gross unrealized holding losses equals $228,000. On June 30, 1995, the average maturity of U.S. Treasury and agency securities was 2.3 years and corporate notes was 1.5 years. Currently, Registrant has no securities with a weighted average life of greater than five years. During 1995, Registrant has recognized losses of $2,000 on the sale of $3.4 million of securities, carried at historical cost adjusted for amortization and accretion. Market value equals quoted market price, if available. If a quoted market price is not available, market value is estimated using quoted market prices for similar securities. Registrant's investments in Corporate notes are with companies with a credit rating of A or better. NOTE D - COMMODITY DERIVATIVES USED TO HEDGE PRICE FLUCTUATIONS --------------------------------------------------------------- Registrant uses commodity derivatives to hedge its exposure to price fluctuations on its purchased stocker cattle. The objective is to protect or create a future price for stocker cattle that will provide profit once the cattle are sold and all costs are deducted and protect Registrant against a disastrous cattle market decline. To help achieve this objective Registrant uses the cattle futures and cattle options markets. Registrant continually monitors any open futures and options contracts to determine the appropriate hedge based on market movement of the underlying asset, stocker cattle. The option and futures contracts used typically expire on a quarterly or semi-annual basis and are structured to expire as close to or during the month the stocker cattle are scheduled to be sold. Payments received and paid related to outstanding options contracts are deferred in prepaid and other current assets and were approximately $69,000 at June 30, 1995. Cattle futures contracts are carried off-balance sheet until the contracts are settled. Realized gains, losses, and costs associated with closed contracts equal to $220,000 of net gain is included in cattle inventory and will be recognized in cost of sales expense at the time the hedged stocker cattle are sold. Registrant maintains a margin account with its commodity broker for the purpose of buying and selling cattle futures and options. The margin account totalled $127,000 at June 30, 1995. - 6 - The following table identifies the cattle futures contract amounts and options contract costs outstanding at June 30, 1995: Cattle Hedging Activity Original Estimated Commodity Future/Option Contract/Cost Fair Value Description No. Contracts At Settlement -------------------------------------------------------------------- Cattle futures sold 50 $1,258,000 $1,256,000 (Off-balance sheet) Cattle Options: Calls sold 195 82,000 78,000 Puts bought 240 151,000 66,000 NOTE E - CONTINGENCIES ---------------------- Registrant leases land to National Cement Company of California, Inc. ("National") for the purpose of manufacturing portland cement from limestone deposits on the leased acreage. National, LaFarge Corporation (the parent company of the previous operator) and Registrant have been ordered to cleanup and abate an old industrial waste landfill site on the leased premises. Under existing lease agreements, National and LaFarge are required to indemnify Registrant for costs and liabilities incurred in connection with the cleanup order. Due to the financial strength of National and LaFarge, Registrant believes that it is remote there will be a material effect on the Company. MANAGEMENT'S ANALYSIS OF FINANCIAL STATEMENTS --------------------------------------------- Results of Operations --------------------- Total revenues, including interest income, for the first six months of 1995 were $3,201,000 compared to $6,583,000 for the first six months of 1994. Revenues decreased $3,382,000, of which approximately $3,308,000 is attributable to the timing of cattle sales during 1995. During 1995, Registrant has sold only 1,271 head of cattle compared to 6,685 head of cattle during the same period in 1994. Normally cattle are sold during May and June of each year but due to low prices Registrant decided to delay the sale of stocker cattle and place the cattle on feed. By placing the cattle on feed the cattle would gain additional weight, and Registrant believes that cattle prices will improve over the summer. Approximately 7,200 head of cattle were placed in feedlots and were hedged in the market by using cattle futures and options contracts. These cattle were hedged in order to protect a future sales price. At the time the cattle went to feedlots the market price was approximately $.60 per hundred weight. The cattle are currently hedged to return approximately $.64 per hundred weight. See Note D - Commodity Derivatives used to Hedge Price Fluctuations, for a further discussion of Registrant's hedging program. Registrant expects to begin selling the 7,200 head of cattle during August 1995 and to complete the sales during October 1995. - 7 - Operating activities during the first six months of 1995 resulted in a net loss of $1,070,000, or $.08 per share, compared to net income of $174,000, or $.01 per share, for the same period in 1994. The decrease in net income compared to 1994 is due to a reduction in revenues as described above, a $400,000 pre tax charge-off ($240,000, or $.02, after tax) of almond trees destroyed by wind during a winter storm in January 1995, and an increase in land planning and entitlement costs of $279.000. Partially offsetting these unfavorable variances was a temporary decline in livestock expense due to a reduction in costs of sales because of fewer cattle having been sold. Total revenues for the second quarter, including interest income, were $1,792,000 compared to $5,200,000 for the second quarter of 1994. The decline in second quarter revenues is due to the timing of cattle sales as described above. During the second quarter of 1995 Registrant recognized a loss of $409,000, or $.03 per share, compared to net income of $441,000, or $.03 per share, for the same period of 1994. The decrease in net income compared to 1994 is due to reduced revenues as described above and to increased land planning costs. These variances were partially offset by lower livestock expenses because of fewer cattle having been sold. As explained in Management's Discussion and Analysis of Financial Condition and Results of Operations of Registrant's 1994 Form 10-K, Registrant's farming operations suffered damages as a result of high winds that were associated with a series of winter storms. Nearly all of the loss occurred in Registrant's producing almond orchards. Approximately 200 acres of trees were uprooted by a combination of high winds and saturated soil conditions due to heavy rainfall. The loss of these trees resulted in the charge-off described above. Registrant is currently replanting the damaged acreage with new almond trees. The loss of mature trees will affect future revenues until the replanted crops begin full production which could take three to five years. Registrant's farming revenues are likely to be significantly lower than in 1994 due to the loss of trees as described above and expectations of a smaller nut crop. Partially offsetting the reduction in production is the expectation of higher almond prices due to the estimated small nut crop statewide. As described in Part I, Item 1 - "Business - Farming Operations" of Registrant's 1994 Form 10-K, Laval Farms Limited Partnership (Laval), formerly named Tejon Agricultural Partners, entered into an agreement for the sale of its farmland and eventual dissolution of the partnership. As of April 20, 1995 all of the 13,000 acres that existed at the start of the sale program have been sold. Laval is continuing to utilize Registrant's management services until the partnership is dissolved. Registrant is currently receiving $10,000 per month for management services and is expected to receive this fee for the remainder of 1995. Registrant is involved in various environmental proceedings related to leased acreage. For a further discussion refer to Registrant's 1994 Form 10-K, Part I, Item 3, - "Legal Proceedings". There have been no changes since the filing of the 1994 Form 10-K. - 8 - Prices received by Registrant for many of its products are dependent upon prevailing market conditions and commodity prices. Therefore, Registrant is unable to accurately predict revenue, just as it cannot pass on any cost increases caused by general inflation, except to the extent reflected in market conditions and commodity prices. The operations of the Registrant are seasonal and results of operations cannot be predicted based on quarterly results. Liquidity and Capital Resources ------------------------------- Cash and short-term investments on June 30, 1995 were $21.7 million compared to $23.8 million on December 31, 1994. Working capital on June 30, 1995 was $23.9 million compared to $26.8 million on December 31, 1994. The decrease in working capital at June 30, 1995 as compared to December 31, 1994 is primarily due to a temporary increase in short-term borrowings due to the timing of cattle sales, the purchase of property, capital improvement expenditures, and the payment of dividends. Cash provided from operations and cash and short-term investments on hand are expected to be sufficient to satisfy all anticipated working capital and capital expenditure needs in the near term. Impact of Accounting Change --------------------------- None PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings ------------------------------------ Not Applicable Item 2. Changes in Securities ---------------------------------------- Not Applicable Item 3. Defaults upon Senior Securities -------------------------------------------------- Not Applicable Item 4. Submission of Matters to a Vote of Security Holders ---------------------------------------------------------------------- Not Applicable Item 5. Other Information ------------------------------------ None Item 6. Exhibits and Reports on Form 8-K --------------------------------------------------- (a) Exhibits - None (b) Reports - None - 9 - SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TEJON RANCH CO. ----------------- (Registrant) ------------------------ BY---------------- DATE Allen E. Lyda Vice President, Finance & Treasurer - 10 - EX-27 2 FINANCIAL DATE SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET, INCOME STATEMENT, AND FOOTNOTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 6-MOS DEC-31-1995 JUN-30-1995 180 21,481 742 0 6,916 30,111 27,893 (13,156) 45,830 6,229 0 6,341 0 0 29,085 45,830 3,201 3,201 3,662 3,662 1,141 0 182 (1,784) (714) (1,070) 0 0 0 (1,070) (.08) (.08)