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, 1998
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, 1998 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 30,1998,
were 12,685,994.
TEJON RANCH CO.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Statements of 3
Operations for the Three Months and Six Months
Ended June 30, 1998 and June 30, 1997
Unaudited Consolidated Balance Sheets 4
as of and June 30, 1998 and December 31, 1997
Unaudited Consolidated Statements of 5
Cash Flows for the Six Months Ended
June 30, 1998 and 1997
Notes to Unaudited Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis of 12
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
PART III EXHIBIT INDEX 18
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
1998 1997 1998 1997
REVENUES:
Livestock $6,382 $4,418 $13,493 $5,898
Farming 6 229 271 681
Resource Management 609 892 957 1,368
Real Estate 340 377 664 684
Interest Income 244 349 517 672
7,581 6,265 15,902 9,303
Costs and Expenses:
Livestock 6,561 4,355 13,895 5,855
Farming 231 99 621 543
Resource Management 550 469 886 728
Real Estate 786 743 1,563 1,350
Corporate Expense 670 430 1,213 1,044
Interest Expense 302 192 504 263
9,100 6,288 18,682 9,783
Operating Loss (1,519) (23) (2,780) (480)
Income Tax Benefit (576) (17) (1,056) (188)
Net Loss $ (943) ( 6) (1,724) (292)
Net Loss Per Share, diluted $ (0.07) $ (0.00) $( 0.14) $(0.02)
Cash Dividends Paid $ 0.025 $ 0.025 $ 0.025 $ 0.025
See Notes to Consolidated Condensed Financial Statements.
TEJON RANCH CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30,1998 DECEMBER 31, 1997*
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 258 $ 976
Marketable Securities 15,851 17,189
Accounts & Notes Receivable 7,001 8,448
Inventories:
Cattle 12,974 11,737
Farming 2,468 --
Other 408 485
Prepaid Expenses and Other 1,476 1,659
Total Current Asseta 40,436 40,494
PROPERTY AND EQUIPMENT-NET 23,120 21,778
OTHER ASSETS 1,899 1,421
TOTAL ASSETS $ 65,455 $63,693
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Accounts Payable $ 1,594 $ 2,889
Other Accrued Liabilities -- 390
Short-term Borrowings 17,539 11,955
Other Current Liabilities 838 742
Total Current Liabilities 19,971 15,976
LONG-TERM DEBT 3,862 3,925
DEFERRED INCOME TAXES 3,261 3,304
Total Liabilities 27,094 23,205
STOCKHOLDERS' EQUITY
Common Stock 6,343 6,343
Additional Paid-In Capital 385 385
Retained Earnings 31,610 33,651
Marketable Securities -
Unrealized Gains-Net 23 109
Total Stockholders' Equity 38,361 40,488
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 65,455 $ 63,693
See Notes to Consolidated Condensed Financial Statements.
* The Balance Sheet at December 31, 1997 has been derived from the
audited financial statements at that date.
TEJON RANCH CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
SIX MONTHS ENDED
June 30
1998 1997
OPERATING ACTIVITIES
Net Loss $(1,724) $ (292)
Items Not Affecting Cash:
Depreciation and Amortization 953 676
Deferred Income Taxes 15 --
Gain on Sale of Investments -- ( 4)
Changes in Operating Assets and
Liabilities:
Receivables, Inventories and
Other Assets, Net (1,999) (5,686)
Current Liabilities, Net (1,589) (789)
NET CASH USED BY
OPERATING ACTIVITIES (4,344) (6,095)
INVESTING ACTIVITIES
Acquisition of Champion Feeders -- (3,874)
Maturities and Sales of Marketable
Securities 2,453 4,085
Funds Invested in Marketable
Securities (1,259) (1,460)
Property and Equipment
Expenditures (2,253) (1,734)
Change in Breeding Herds (203) (59)
Other (317) (31)
NET CASH USED IN
INVESTING ACTIVITIES (1,579) (2,955)
FINANCING ACTIVITIES
Proceeds From Revolving Line
of Credit 11,081 14,740
Payments of Revolving Line
of Credit (5,496) (8,477)
Payments of Long-Term Debt (63) --
Borrowing of Long-Term Debt -- 2,500
Cash Divident Paid (317) (317)
NET CASH PROVIDED BY FINANCING
ACTIVITIES 5,205 8,446
(DECREASE) IN CASH AND
CASH EQUIVALENTS (718) (604)
Cash and Cash Equivalents at
Beginning of Year 976 693
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 258 $ 89
See Notes to Consolidated Condensed Financial Statements.
TEJON RANCH CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
June 30, 1998
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 quarters.
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, 1997.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of Registrant and its wholly-owned subsidiaries. All
intercompany transactions have been eliminated in consolidation.
Cash Equivalents -- Registrant considers all highly liquid investments,
with a maturity of three months or less when purchased, to be cash
equivalents. The carrying amount for cash equivalents approximates fair
value.
Marketable Securities - Registrant considers those investments not
qualifying as cash equivalents, but which are readily marketable, to be
marketable securities. The Registrant classifies all marketable securities
as available-for-sale. Such securities are stated at fair value with the
unrealized gains (losses), net of tax, reported in a separate component of
stockholders' equity and comprehensive income.
Credit Risk -- Registrant grants credit to customers, principally large
cattle purchasers, feedlot customers, co-ops, wineries, nut marketing
companies, and lessees of Registrant facilities located in California.
Registrant performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral.
Farm Inventories -- Costs of bringing crops to harvest are capitalized when
incurred. Such costs are expensed when the crops are sold. Farm
inventories held for sale are valued at the lower of cost (first-in, first-
out method) or market.
Cattle Inventories and Breeding Herd -- Cattle raised on the Ranch are
stated at the accumulated cost of developing such animals for sale or
transfer to a productive function and purchased cattle are stated at cost
plus development costs. All cattle held for sale are valued at the lower
of cost (first-in, first-out method) or market and are included in the
caption inventories. Purchased bulls and cows included in the breeding
herd and used for breeding are depreciated using the straight-line method
over five to seven years.
Commodity Contracts Used to Hedge Price Fluctuations -- Registrant enters
into futures and option contracts to hedge its exposure to price
fluctuations on its stocker cattle and its cattle feed costs. The goal of
Registrant is to protect or create a future price for its cattle and feed
that will provide a profit once the cattle are sold and all costs are
deducted. Realized gains, losses, and costs associated with closed
contracts are included in prepaid assets and are recognized in cost of
sales expense at the time the hedged cattle are sold or feed is used.
Property and Equipment --Property and equipment accounts are stated on the
basis of cost, except for land acquired upon organization in 1936 which is
stated on the basis (presumed to be at cost) carried by Registrant's
predecessor. Depreciation is computed using the straight-line method over
the estimated useful lives of the various assets. Buildings and
improvements are depreciated over a 10 year to 27.5 year life. Machinery
and equipment is depreciated over a three year to 10 year life depending on
the type of equipment. Vineyards and orchards are generally depreciated
over a 20 year life with irrigation systems over a 10 year life. Oil, gas
and mineral reserves have not been appraised, so no value has been assigned
to them.
Vineyards and Orchards -- Costs of planting and developing vineyards and
orchards are capitalized until the crops become commercially productive.
Interest costs and depreciation of irrigation systems and trellis
installations during the development stage are also capitalized. Revenue
from crops earned during the development stage are credited against
development costs. Depreciation commences when the crops become
commercially productive.
At the time crops are harvested and delivered to buyers and revenues are
estimable, revenues and related costs are recognized, which traditionally
occurs during the third and fourth quarters of each year. Orchard revenues
are based upon estimated selling prices, whereas vineyard revenues are
recognized at the contracted selling price. Estimated prices for orchard
crops are based upon the quoted estimate of what the final market price
will be by marketers and handlers of the orchard crops. Actual final
orchard crop selling prices are not determined for several months following
the close of Registrant's fiscal year due to supply and demand fluctuations
within the orchard crop markets. Adjustments for differences between
original estimated and actual revenues received are recorded during the
period in which such amounts become known.
Net Income Per Share -- Effective December 31, 1997, Registrant adopted
SFAS No. 128, "Earnings Per Share" which replaced primary and fully diluted
earnings per share with basic and diluted earnings per share. Basic and
diluted net income per share are based upon the weighted average number of
shares of common stock outstanding, which for the three months and six
months ended June 30,1998 and 1997 was 12,685,994 and 12,682,244,
respectively. Basic and diluted common shares outstanding are the same for
the periods shown because the calculation for determining diluted common
shares outstanding resulted in antidilution.
In March 1992, Registrant's Board of Directors adopted the 1992 Stock
Option Plan providing for the granting of options to purchase a maximum of
230,000 shares of the Registrant's common stock to employees, advisors, and
consultants of the Registrant. Since the adoption of the Plan, Registrant
has granted options to purchase 179,000 shares at a price equal to fair
market value at date of grant. At June 30, 1998, options to purchase
172,178 shares were outstanding.
On January 26, 1998, the Board of Directors adopted the 1998 Stock
Incentive Plan. The Incentive Plan provides for the making of awards to
employees, consultants, and advisors of Registrant with respect to 800,000
shares of common stock. Since the adoption of the Incentive Plan,
Registrant has granted options to purchase 100,000 shares at a price equal
to the fair market value at date of grant, all of which are oustanding at
June 30, 1998.
Also, on January 26, 1998, the Board of Directors adopted the Non-Employee
Director Stock Incentive Plan. This plan is intended to enable Registrant
to attract, retain, and motivate its non-employee directors by providing
for or increasing the proprietary interests of such persons by Registrant.
The plan provides for making of awards to non-employee directors with
respect to an aggregated 200,000 shares of common stock. Since the
adoption of the plan, Registrant has granted options under the plan to
purchase 21,727 shares at a price equal to the fair market value at date of
grant.
The 1998 Stock Incentive Plan and the Non-Employee Director Stock Incentive
Plan were approved by stockholders at Registrant's Annual Meeting on May
11, 1998.
Long-Lived Assets -- In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," Registrant records
impairment losses on long-lived assets held and used in operations when
indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than their related
carrying amounts. SFAS No. 121 had no impact on Registrant's consolidated
financial position and results of operations in the current year.
Environmental -- Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures that
relate to an existing condition caused by past operations and which do not
contribute to current or future revenue generation are expensed.
Liabilities are recorded when environmental assessments and/or remedial
efforts are probable and the costs can be reasonably estimated. Generally,
the timing of these accruals coincides with the completion of a feasibility
study or Registrant's commitment to a formal plan of action. No
liabilities for environmental costs have been recorded at June 30, 1998 or
1997.
Use of Estimates -- The financial statements have been prepared in
conformity with generally accepted accounting principles and, as such,
include amounts based on informed estimates and judgments of management.
Actual results could differ from these estimates.
New Accounting Pronouncements -- In June 1997, the FASB issued SFAS No. 131
"Disclosure about Segments of an Enterprise and Related Information" which
is effective for fiscal years beginning after December 15, 1997.
Accordingly, Registrant plans to adopt SFAS No. 131 with the fiscal year
beginning January 1, 1998. SFAS No. 131 will not have any impact on the
financial results or financial condition of Registrant.
NOTE C - MARKETABLE SECURITIES
Statement of Financial Accounting Standard ("SFAS") No. 115, Accounting for
Certain Investments in Debt and Equity Securities, requires that an
enterprise classify all debt securities as either held-to-maturity,
trading, or available-for-sale. The Registrant has elected to classify its
securities as available-for-sale and therefore is required to adjust
securities to fair value at each reporting date.
The following is a summary of available-for-sale securities at December 31,
1997 and June 30, 1998:
June 30 December 31
1998 1997
Estimated Estimated
Fair Fair
Cost Value Cost Value
Marketable securities:
(in thousands)
U.S. Treasury and
agency notes $ 9,267 $ 9,309 $ 9,770 $ 9,947
Corporate notes 6,546 6,542 7,237 7,242
$15,813 $15,851 $17,007 $17,189
As of June 30, 1998, the cumulative fair value adjustment is a $38,000
unrealized gain. The cumulative fair value adjustment to stockholders'
equity, net of a deferred tax of $15,000, is an unrealized gain of $23,000.
Registrant's gross unrealized holding gains equal $129,000, while gross
unrealized holding losses equal $91,000. On June 30, 1998, the average
maturity of U.S. Treasury and agency securities was 1.2 years and the
average maturity corporate notes was 2 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 CONTRACTS USED TO HEDGE PRICE FLUCTUATIONS
Registrant used commodity derivatives to hedge its exposure to price
fluctuations on its purchased stocker cattle and its cattle feed costs.
The objective is to protect or create a future price for stocker cattle
that will protect a profit or minimize a loss once the cattle are sold and
all costs are deducted and protect the Registrant against a disastrous
cattle market decline. To help achieve this objective the Registrant used
both the futures commodity markets and options commodity markets. A
futures contract is an obligation to make or take delivery at a specific
future time of a specifically defined, standardized unit of a commodity at
a price determined when the contract is executed. Options are contracts
that give their owners the right, but not the obligation, to buy or sell a
specified item at a set price on or before a specified date.
Registrant continually monitors any open futures and options contracts to
determine the appropriate hedge based on market movement of the underlying
asset. The options 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 and feed are scheduled to be sold or
purchased. The risk associated with hedging for the Registrant is that
hedging limits or caps the potential profits if cattle or feed prices begin
to increase dramatically or can add additional costs if cattle or grain
prices fall dramatically.
Payments received and paid related to outstanding options contracts are
deferred in prepaid and other current assets and were approximately
$105,000 at June 30, 1998. Futures contracts are carried off-balance sheet
until the contracts are settled because there is no exchange of cash until
settlement. Realized gains, losses, and costs associated with closed
contracts are included in prepaid and other assets and will be recognized
in cost of sales expense at the time the hedged stocker cattle are sold.
At June 30, 1998 there was $249,000 of hedging costs associated with closed
contracts included in prepaid and other assets.
The following table identifies the cattle futures contract amounts
outstanding at June 30, 1998 (in thousands, except number of contracts):
Cattle Hedging Estimated
Activity Original Fair Value Estimated
Commodity Contract At Gain
Future/Option No. (Bought) Settlement (Loss) at
Description Contracts Sold (Buy) Sell Settlement
Cattle futures 160 $4,387 $(4,153) $234
sold 40,000
lbs. per
contract
Cattle futures 40 (1,544) 1,435 (109)
bought, 50,000
lbs. per
contract
Cattle Futures 20 539 (505) 34
Sold, 50,000
lbs per
contract
Cattle options 295 (121) 180 59
bought,
40,000 lbs.
per contract
Cattle options 110 25 (2) 23
sold, 40,000
lbs per contract
Estimated fair value at settlement is based upon quoted market prices at
June 30, 1998.
NOTE E - COMPREHENSIVE INCOME
As of January 1, 1998, Registrant adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the
reporting and display of comprehensive income and its components; however,
the adoption of this Statement had no impact on Registrant's net income or
shareholders' equity. Statement 130 requires unrealized gains or losses on
Registrant's available-for-sale securities, which prior to adoption were
reported separately in shareholders' equity, to be included in other
comprehensive income.
The components of comprehensive income, net of related tax, for the six-
month periods ended June 30, 1998 and 1997 are as follows:
1998 1997
Net loss $(1,724) $(292)
Unrealized gain(loss) on
securities ( 86) (91)
Comprehensive loss $(1,810) $(201)
NOTE F - 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 and Lafarge Corporation
(the previous operator and referred to herein as "Lafarge") have been
ordered to clean up and abate certain hazardous waste sites on the leased
premises. Under existing lease agreements either National or Lafarge is
required to indemnify Registrant for costs and liabilities incurred in
connection with the orders, depending on when the obligation arises. Due
to the financial strength of National and its parent company, which
guaranteed National's obligations, and the financial strength of Lafarge,
Registrant believes that it is remote there will be a material effect on
Registrant.
For a further discussion refer to Registrant's 1997 Form 10-K, Part I, Item
3, - "Legal Proceedings". There have been no changes since the filing of
the 1997 Form 10-K.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Results of Operations
This Management's discussion and Analysis of Financial Condition and
Results of Operations includes forward-looking statements that are subject
to many uncertainties and may turn out not to be accurate. These forward
looking statements are subject to factors beyond the control of Registrant
(such as weather and market forces) and with respect to Registrant's future
development of its land and other land transactions, the availability of
financing and the ability to obtain various governmental entitlements. No
assurance can be given that any such projections will turn out to be
accurate.
Total revenues, including interest income for the first six months of 1998
were $15,902,000 compared to $9,303,000 for the first six months of 1997.
The growth in revenues during 1998 is primarily attributable to increases
in livestock division revenues. This increase in revenues was partially
offset by reduced resource management division revenues and reduced farming
revenues. When compared to the same period of 1997, livestock revenues
grew due to increases in livestock sales of $4,791,000 and to an increase
in feedlot revenues of $2,798,000. Livestock sales increased due to 7,133
additional head of cattle being sold during the first six months of 1998
than during the same period of 1997. The increase in cattle sold is the
result of Registrant increasing its cattle herd throughout 1997.
Registrant's cattle herd at the end of the second quarter of 1998 was
approximately 32,000 head compared to approximately 20,000 head at June 30
1997. Feedlot revenues increased when compared to 1997 due to owning the
feedlot for a11 of the first quarter in 1998. The feedlot was purchased
March 10, 1997. Resource management revenues declined $411,000 in 1998 due
to reduced oil and mineral royalties and to the timing of payment of
hunting permit fees ($142,000). Oil and mineral royalties declined due to
lower prices for Kern County crude oil and lower cement production. The
lower oil prices have also caused a decline in oil production. It is
believed that oil prices will continue to have a negative impact on
Registrant's revenues throughout 1998. Farming revenues declined $410,000
during 1998 due to the receipt in 1997 of revenues related to 1996 grape,
pistachio, and walnut crops.
Operating activities during the first six months of 1998 resulted in a net
loss of $1,724,000, or $0.14 per share diluted, compared to a net loss of
$292,000, or $0.02 per share diluted, for the same period of 1997. The
increased loss when compared to 1997 is primarily attributable to increased
costs within the livestock division, lower market prices on cattle sold and
to increases in real estate expense and resource management expense. Cost
of sales on cattle increased $5,443,000 when compared to 1997 due to the
sale of additional cattle as described above. During the first six months
of 1998, Registrant recognized a net loss of $123,000 on the sale of cattle
due the dramatic drop in market prices because of the Asian economic crisis
and to the large number of cattle in feedlots during the first quarter of
1998. Feedlot expenses increased $2,645,000 when compared to 1997 due to
the timing of purchasing the feedlot during 1997. Real estate expense
increased due to higher staffing costs and fixed water costs. Resource
management expense increased due to an increase in professional services
fees related to the monitoring of activities at the National Cement lease
site.
Total revenues for the second quarter of 1998, including interest income,
were $7,581,000 compared to $6,251,000 for the second quarter of 1997. The
growth in second quarter revenues when compared to 1997 is due primarily to
an increase of 2,866 head of cattle being sold, which resulted in
$2,112,000 of additional sales during the second quarter of 1998. This
increase was partially offset by reduced farming revenues, reduced oil and
mineral revenues and the timing of receipt of hunting permit revenues, all
of which are described above.
During the second quarter of 1998, Registrant had a net loss of $943,000,
or $.07 per share, compared to a loss of $6,000, or $.00 per share for the
same period of 1997. The decrease in net income compared to the second
quarter of 1997 is due to the net increase in revenues described above
being more than offset by an increase in cost of sales on cattle, increased
farming expense ($132,000), and increased general and administrative
expense ($240,000). Cost of sales on cattle increased $2,431,000 when
compared to the same period of 1997 due to the additional number of head of
cattle being sold as described above.
Cattle prices during 1998 continue to be depressed due to the supply of
cattle held in feedlots and to lower export sales during 1998. Prices are
remaining below normal levels due to the continuing impact of the Asian
economic crisis on the beef market and the drought in Texas that is causing
additional animals to be brought to market earlier than normal. Of the
United States' trading partners, Asia is the largest importer of U.S. beef,
so any continuing decline in purchasing power within that region can hold
down prices within the beef market. It is a little early in the farm crop
year to make production estimates for grapes and nuts, but winter storms
and rain during the pollination period for almonds could negatively impact
1998 production. Estimates of production from the California Almond Board
show state wide production could be 150 million pounds below 1997
production, which could mean higher almond prices during the 1998 harvest.
Registrant continues to be involved in various environmental proceedings
related to leased acreage. For a further discussion, refer to Note F -
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
Registrant's cash, cash equivalents and short-term investments totaled
approximately $16,109,000 at June 30, 1998, compared to $18,165,000 on
December 31, 1997, a decrease of 13%. Working capital as of June 30, 1998
was $20,465,000 compared to $24,518,000 on December 31,1997. The decrease
in working capital during 1998 is due primarily to capital expenditures,
the payment of dividends and to the net loss for the first six months of
1998. The use of short-term credit has grown when compared to 1997 due to
increases in accounts receivable and inventories due to the growth of
Registrant's core business lines. The timing of short-term credit needs
has also changed due to the majority of Registrant's cattle sales and
revenues from crop harvests all coming during the second half of the year.
In past years cattle sales were primarily during the first half of each
year.
Registrant has revolving lines of credit of $13,000,000 that as of June 30,
1998 had a balance outstanding of $11,550,000 at an interest rate of 8.25%.
Registrant also has a short-term line of credit outstanding of $5,989,000
from an investment banking firm at an interest rate of 5.95%. The lines of
credit are expected to be paid down from the proceeds of cattle and crop
sales. The revolving lines of credit are used as a short-term cash
management tool.
The accurate forecasting of cash flows by Registrant is made difficult due
to the fact that commodity markets set the prices for the majority of
Registrant's products and the fact that the cost of water changes
significantly from year-to-year as a result of changes in its availability.
Registrant is currently evaluating the possibility of new farming
developments, continued expansion of the cattle herd, and additional
commercial development along the Interstate 5 corridor. These potential
new projects would be funded from current cash resources, from additional
borrowings, and possibly funds provided by joint venture partners involved
in particular projects.
Registrant has traditionally funded its growth and capital additions from
internally generated funds. Management believes that the combination of
net earnings, short-term investments and borrowing capacity will be
sufficient for its near term operations.
Item 8. Financial Statements and Supplementary Data.
The response to this Item is submitted in a separate section of this
report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
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 -
3.1 Restated Certificate of Incorporation *
3.2 Bylaws **
27.1 Financial Data Schedule (Edgar),
June 30, 1998
(b) Reports - None
* This document, filed with the Securities Exchange Commission in
Washington D.C. (file number 1-7183) under Item 14 to Registrant's
Annual Report on Form 10-K for year ended December 31, 1987, is
incorporated herein by reference.
** This document, filed with the Securities Exchange Commission in
Washington D.C. (file number 1-7183) under Item 14 to Registrant's
Annual Report on Form 10-K for year ended December 31, 1994, is
incorporated herein by reference.
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)
Date BY /S/ ALLEN E. LYDA
Allen E. Lyda
Vice President, Finance
& Treasurer
EXHIBIT INDEX
Exhibit No. Exhibit Description
3.1 Restated Certificate of Incorporation *
3.2 By-Laws **
27.1 Financial Data Schedule (Edgar), 19
June 30, 1998
* This document, filed with the Securities Exchange Commission in
Washington D.C. (file number 1-7183) under Item 14 to Registrant's
Annual Report on Form 10-K for year ended December 31, 1987, is
incorporated herein by reference.
** This document, filed with the Securities Exchange Commission in
Washington D.C. (file number 1-7183) under Item 14 to Registrant's
Annual Report on Form 10-K for year ended
December 31, 1994, is incorporated herein by reference.
5
1,000
6-MOS
DEC-31-1998
JAN-01-1998
JUN-30-1998
258
15,851
7,001
0
15,850
40,436
40,034
(16,914)
65,455
19,971
0
0
0
6,341
32,018
65,455
15,902
15,902
16,965
16,965
1,213
0
504
(2,780)
(1,056)
(1,724)
0
0
0
(1,724)
(.14)
(.14)
