-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dh1XUk4KnnDiy315RRKO2ipXd5bscN0YROsY74OuFXcfGDrOwWEFiXfgprhTHlr4 xX6oMQo6cYZtG8uwi9iuHA== 0000096869-96-000014.txt : 19961106 0000096869-96-000014.hdr.sgml : 19961106 ACCESSION NUMBER: 0000096869-96-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961105 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEJON RANCH CO CENTRAL INDEX KEY: 0000096869 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [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: 96654007 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 September 30, 1996 ------------------ 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 ----------------- ---------------------- September 30, 1996 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 September 30, 1996, 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 NINE MONTHS ENDED September 30 September 30 ------------------ ----------------- 1996 1995 1996 1995 ---- ---- ---- ---- Revenues: Livestock $ 1,022 $ 4,601 $ 4,840 $ 5,644 Farming 3,765 3,035 3,839 3,206 Oil and Minerals 353 425 972 1,007 Commercial and Land Use 372 335 1,044 1,028 Interest Income 312 320 959 1,032 ----- ----- ------ ------ 5,824 8,716 11,654 11,917 Costs and Expenses: Livestock 952 3,888 4,229 5,323 Farming 2,145 1,665 2,892 2,790 Oil and Minerals 43 38 126 90 Commercial and Land Use 430 793 1,498 1,843 Corporate Expense 646 543 1,708 1,684 Interest Expense 78 171 182 353 ----- ----- ------ ------ 4,294 7,098 10,635 12,083 ----- ----- ------ ------ Operating Income (Loss) 1,530 1,617 1,019 (166) Income Tax Expense (Benefit) 611 648 407 (66) ----- ----- ------ ------ Net Income (Loss) $ 919 $ 970 $ 612 $ (100) ===== ====== ====== ====== Earnings (Loss) Per Share $ .07 $ .08 $ .05 $ (.01) Cash Dividends Paid Per Share $ -- $ -- $ .025 $ .025 See Notes to Consolidated Condensed Financial Statements. - 2 - TEJON RANCH CO. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In thousands) SEPTEMBER 30,1996 DECEMBER 31, 1995* (Unaudited) ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 123 $ 44 Short-term Investments 20,140 20,257 Accounts & Notes Receivable 4,615 4,487 Inventories: Cattle 2,081 2,672 Farming 1,989 -- Other 117 155 Prepaid Expenses and Other 1,153 1,063 Total Current Assets 30,218 28,678 PROPERTY AND EQUIPMENT-NET 15,663 15,073 OTHER ASSETS 1,504 1,452 TOTAL ASSETS $ 47,385 $ 45,203 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Trade Accounts Payable $ 562 $ 932 Other Accrued Liabilities 263 343 Other Current Liabilities 4,876 2,619 Total Current Liabilities 5,701 3,894 LONG-TERM DEBT 1,800 1,800 DEFERRED CREDITS 2,652 2,540 Total Liabilities 10,153 8,234 STOCKHOLDERS' EQUITY Common Stock 6,341 6,341 Additional Paid-In Capital 387 387 Retained Earnings 30,496 30,202 Marketable Securities - Unrealized Gains, Net 8 39 Total Stockholders' Equity 37,232 36,969 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 47,385 $ 45,203 See Notes to Consolidated Condensed Financial Statements. *The Balance Sheet at December 31, 1995 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) NINE MONTHS ENDED September 30 --------------- 1996 1995 ---- ---- OPERATING ACTIVITIES Net Income $ 612 $ (100) Items Not Affecting Cash: Depreciation and Amortization 889 756 Decrease Income Taxes 134 (89) Gain on Sale of Investments -0- 6 Changes in Operating Assets and Liabilities: Receivables, Inventories and Other Assets, Net (1,579) (3,256) Current Liabilities, Net 394 (1,241) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 450 (3,924) INVESTING ACTIVITIES Maturities and Sales of Marketable Securities 6,767 5,816 Funds Invested in Marketable Securities (6,703) (2,079) Property and Equipment Expenditures (1,424) (2,274) Net Change in Breeding Herds (81) (64) Other (26) (46) NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES (1,467) 1,353 FINANCING ACTIVITIES Proceeds From Revolving Line of Credit 9,803 7,610 Payments of Revolving Line of Credit (8,390) (4,555) Decrease in Long-Term Debt -0- (200) Cash Dividend Paid (317) (317) NET CASH PROVIDED BY FINANCING ACTIVITIES 1,096 2,538 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 79 (33) Cash and Cash Equivalents at Beginning of Year 44 68 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 123 $ 35 See Notes to Consolidated Condensed Financial Statements. - 4 - TEJON RANCH CO. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) September 30, 1996 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 third and 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, 1995. NOTE B - CALCULATIONS OF EARNINGS PER SHARE ------------------------------------------- Earnings per share are calculated using the weighted average number of common shares outstanding during the period. Common shares outstanding for the three month and nine month periods ended September 30, 1996 and 1995 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 179,000 shares are outstanding at prices equal to the fair market value at date of grant (100,000 shares at $17.875, 59,000 shares at $20.00 per share, and 20,000 shares at $15.00 per share). During the first quarter of 1996, an option to purchase 14,000 shares was cancelled. 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 September 30, 1996 and 1995 were 12,683,670 and 12,685,198 respectively. Fully diluted common shares outstanding for the nine month period ended September 30, 1996 and 1995 were 12,684,042 and 12,683,946 respectively. There is no change in earnings per share based on the fully diluted common shares outstanding. NOTE C - MARKETABLE SECURITIES ------------------------------ Registrant has elected to classify its securities as available-for- sale 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: September 30 December 31 1996 1995 ------------ ----------- Estimated Estimated Fair Fair Cost Value Cost Value Marketable securities: (in thousands) U.S. Treasury and agency notes $13,314 $13,332 $14,868 $14,869 Corporate notes 6,813 6,808 5,323 5,388 ------ ------ ------ ------ $20,127 $20,140 $20,191 $20,257 As of September 30, 1996, the cumulative fair value adjustment is a $13,000 unrealized gain. The cumulative fair value adjustment to stockholders' equity, net of a deferred tax of $5,000, is an unrealized gain of $8,000. Registrant's gross unrealized holding gains equal $183,000, while gross unrealized holding losses equal $170,000. On September 30, 1996, the average maturity of U.S. Treasury and agency securities was 1.2 years and corporate notes was 1.7 years. Currently, Registrant has no securities with a remaining term to maturity of greater than five years. 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 contracts to hedge its exposure to price fluctuations on its purchased stocker cattle and cattle feed costs. The objective is to protect or create a future price for stocker cattle that will provide a profit or minimize a loss once the cattle are sold and all costs are deducted and to protect Registrant against market declines. To help achieve this objective Registrant uses the cattle futures and cattle options markets to hedge the price of cattle. Registrant also hedges to protect against fluctuations in feed cost by using the corn futures and options markets. Feed costs are hedged in order to protect against large pricing increases in feed costs. Registrant continually monitors any open futures and options contracts to determine the appropriate hedge based on market movement of the underlying asset. The option and futures contracts used typically expire on a quarterly or semi-annual basis and are structured to expire close to or during the month the stocker cattle are scheduled to be sold. The risk associated with hedging is that hedging imposes a limit on the potential profits from the sale of cattle if cattle prices begin to increase dramatically. The costs of buying and selling options and future contracts - 6 - reduce profits. Any payments received and paid related to options contracts are deferred in and reflected as an asset on the balance sheet in prepaid expenses until contracts are closed or expire. There were no outstanding option contracts at September 30, 1996. Cattle futures contracts are carried off-balance sheet until the contracts are settled. Realized gains, losses, and costs associated with closed contracts equal to $587,000 of net gains are currently included in cost of sales expense due to the sale of hedged cattle. The following table identifies the cattle futures contract amounts outstanding at September 30, 1996 (in thousands, except No. of Contracts): Cattle Hedging Estimated Activity Original Fair Value Estimated Commodity Contract Contract At Gain Future/Option No. Expiration (Bought) Settlement (Loss) at Description Contracts Date Sold (Buy) Sell Settlement -------------- --------- ---------- --------- ---------- ---------- Cattle Futures sold 50,000 lbs. per contract 20 Oct. 96 $ 633 $ (644) $(11) 10 Jan. 97 302 (328) (26) 15 Apr. 97 466 (487) (21) 20 May. 97 645 (650) (5) Estimated fair value at settlement is based upon quoted market prices at September 30, 1996. 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 clean up and abate certain hazardous waste sites on the leased premises. Under existing lease agreements, National or LaFarge is required to indemnify Registrant for costs and liabilities incurred in connection with the cleanup order depending on when the release of hazardous waste occurred. Due to the financial strength of National and LaFarge, Registrant believes that it is remote there will be a material effect on Registrant. Registrant leases land to TA Operating Corporation, dba Truckstops of America ("TA") for the purpose of operating a truck stop at an exit off of Interstate 5. Registrant has recently learned that a Notice of Violation was issued to TA by the California Regional Water Quality Control Board with respect to two sites on the leased land alleged to contain high concentrations of total petroleum hydrocarbons, including diesel fuel. Although Registrant has not been notified by the Water Board that it is also a responsible party, the Board has taken the position in the past that owners of leased property are responsible for releases of polluting materials by their tenants and Registrant may be designated as a responsible party in the future. Under - 7 - existing lease agreements, TA is obligated to restore the land to a clean condition and to indemnify Registrant for its losses and expenses incurred in connection with any cleanup order. Under an existing guaranty, BP Exploration & Oil Inc., as the successor of the Standard Oil Company of Ohio ("BP"), has guaranteed all of the obligations of TA under the lease. Due to the financial strength of BP, Registrant believes that it is remote there will be a material effect on Registrant. MANAGEMENT'S ANALYSIS OF FINANCIAL STATEMENTS - --------------------------------------------- RESULTS OF OPERATIONS - --------------------- Total revenues, including interest income, for the first nine months of 1996 were $11,654,000 compared to $11,917,000 for the first nine months of 1995. The decrease in revenues during 1996 is primarily attributable to lower livestock revenue that was partially offset by increased farming revenues. Livestock revenues decreased due to 4,721 fewer head of cattle being sold during 1996 and to lower average weights on the cattle sold during 1996. The reduction in the number of head sold was caused by the timing of sales during 1996 and the sale of cattle in 1995 that were originally scheduled for sale in 1994. Cattle weights were lower due to less forage on the ranch. Registrant continues to hedge the future sales price of stocker cattle using commodity contracts. See Note D - Commodity Contracts Used to Hedge Price Fluctuations, for further information. Farming revenues are higher due to the timing of crop harvests and the recording of crop revenues. In 1996, pistachio and French Colombard, Zinfandel, and Cabernet Sauvignon grape harvests were completed during the third quarter whereas in 1995 only almond and Zinfandel harvests were completed during the third quarter. This resulted in $3,715,000 of crop revenue in 1996 compared to $2,953,000 of crop revenue in 1995. In addition to the timing of crop harvests, grape prices are slightly higher thus far in 1996 than in 1995. Registrant's operations during the first nine months of 1996 resulted in net income of $612,000, or $.05 per share, compared to a net loss of $100,000, or $.01 per share, for the same period in 1995. The increase in net income when compared to 1995 is due to reductions in livestock and commercial/land planning expenses. These favorable expense variances were partially offset by the decrease in revenues as described above. The decrease in livestock expense is primarily due to lower cost of sales of $1,265,000 on cattle sold during 1996. Cost of sales declined due to fewer cattle being sold and the recognition of hedging gains as described in Note D - Commodity Contracts Used to Hedge Price Fluctuations. Commercial/land planning expenses have decreased due to a reduction in consulting fees associated with planning and entitlement activities. Total revenues for the third quarter, including interest income, were $5,824,000 compared to $8,716,000 for the third quarter of 1995. The decrease in revenue when compared to 1995 is due to a reduction in livestock revenues that were partially offset by increased farming revenues. Livestock revenues decreased in 1996 due to 3,259 fewer head of cattle being sold during the third quarter of 1996. This large variation in the number of cattle sold is due to the decision during the second quarter of 1995 to delay - 8 - the sale of stocker cattle until the fall of 1995 due to low market prices. The increase in farming revenues is described above. During the third quarter of 1996 Registrant had net income of $919,000, or $.07 per share, compared to net income of $970,000, or $.08 per share, for the same period of 1995. The decline in net income when compared to 1995 is due to the decrease in revenues as described above. The decline in revenues was partially offset by reduced expenses as described above. Registrant continues to be concerned that cattle prices will stay at lower levels due to high cattle inventories and high grain prices. Registrant does not expect an improved cattle market during the balance of 1996. Based on the 1996 harvest completed during October, it appears that the California almond crop will be approximately 520 to 550 million pounds. Based on this estimate and the beginning low inventory levels due to the small 1995 almond crop, the price per pound for almonds could again be over $2.00 as it was in 1995. The yields for all of Registrant's crops appear to be within expectations with the exception of the almond crop which is coming in slightly below expectations. However, any decline in almond production appears to be offset by higher price levels. Although Registrant finds it necessary from time to time to make projections of future yields and prices in connection with the operation of its business, such projections above as to yields and prices are subject to many uncertainties, by necessity are made on the basis of only limited information and are subject to factors beyond the control of Registrant, such as weather and market forces. No assurance can be given that any such projections will turn out to be accurate. Registrant is involved in various environmental proceedings related to leased acreage. See Note E - Contingencies. For a further discussion refer to Registrant's 1995 Form 10-K, Part I, Item 3, - "Legal Proceedings". The only material change since the filing of the 1995 Form 10-K is that Registrant may become involved in administrative or legal proceedings respecting the contamination of the Truckstops of America leased premises, as described above under Note E - Contingencies. 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 marketable securities on September 30, 1996 were $20.3 million compared to $20.3 million on December 31, 1995. Working capital on September 30, 1996 was $24.5 million compared to $24.8 million on December 31, 1995. The decrease in working capital at September 30, 1996 as compared to December 31, 1995 is primarily due to property and equipment expenditures, which were partially offset by increased inventory levels. - 9 - 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 - 10 - 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 - 11 - EX-27 2 SEPTEMBER
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. 9-MOS DEC-31-1996 SEP-30-1996 123 20,140 4,615 0 4,187 30,218 29,919 (14,256) 47,385 5,701 0 0 0 6,341 30,883 47,385 11,654 11,654 8,745 8,745 1,708 0 182 1,019 407 612 0 0 0 612 .05 .05
-----END PRIVACY-ENHANCED MESSAGE-----