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 -
5
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)
