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 March 31, 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
March 31, 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 March 31, 1996,
were 12,682,244.
PART I FINANCIAL INFORMATION
TEJON RANCH CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED
March 31
------------------
1996 1995
---- ----
Revenues:
Livestock $ 549 $ 328
Farming 24 122
Oil and Minerals 281 263
Commercial and Land Use 336 326
Interest Income 328 370
-------- --------
1,518 1,409
Costs and expenses:
Livestock 697 598
Farming 378 802
Oil and Minerals 43 11
Commercial and Land Use 480 446
Corporate Expenses 476 575
Interest Expense 50 79
------- --------
2,124 2,511
Operating Loss (606) (1,102)
Income Tax Benefit (242) (441)
-------- --------
Net Loss $ (364) $ (661)
======== ========
Net Loss Per Share $ (.03) $ (.05)
See Notes to Consolidated Condensed Financial Statements.
TEJON RANCH CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
MARCH 31, 1996 DECEMBER 31, 1995*
--------------- ------------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 78 $ 44
Marketable Securities 20,315 20,257
Accounts & Notes Receivable 1,036 4,487
Inventories:
Cattle 3,391 2,672
Farming 1,042 --
Other 86 155
Prepaid Expenses and Other 1,414 1,063
--------- ---------
Total Current Assets 27,362 28,678
PROPERTY AND EQUIPMENT-NET 15,273 15,073
OTHER ASSETS 1,534 1,452
--------- ---------
TOTAL ASSETS $ 44,169 $ 45,203
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Accounts Payable $ 848 $ 932
Other Accrued Liabilities 259 343
Other Current Liabilities 2,019 2,619
--------- ---------
Total Current Liabilities 3,126 3,894
LONG-TERM DEBT 1,800 1,800
DEFERRED CREDITS 2,657 2,540
--------- ---------
Total Liabilities 7,583 8,234
STOCKHOLDERS' EQUITY
Common Stock 6,341 6,341
Additional Paid-In Capital 387 387
Retained Earnings 29,838 30,202
Marketable Securities -
Unrealized Gains (Losses), Net 20 39
--------- ---------
Total Stockholders' Equity 36,586 36,969
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 44,169 $ 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.
TEJON RANCH CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
THREE MONTHS ENDED
March 31
------------------
1996 1995
OPERATING ACTIVITIES ------- ------
Net Loss $ (364) $ (661)
Items Not Effecting Cash:
Depreciation and Amortization 269 238
Deferred Income Taxes 134 -0-
Gain on Sale of Investments -0- 2
Changes in Current Assets and
Liabilities:
Receivables, Inventories and
Other Assets, Net 1,408 (279)
Current Liabilities, Net (689) (1,337)
-------- -------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 758 (2,037)
INVESTING ACTIVITIES
Maturities and Sales of Marketable
Securities 3,987 3,124
Funds Invested in Marketable
Securities (4,081) (518)
Property and Equipment
Expenditures (450) (1,414)
Net Change in Breeding Herds (104) 49
Other 3 7
--------- --------
NET CASH (USED IN) PROVIDED BY
INVESTING ACTIVITIES (645) 1,248
--------- --------
FINANCING ACTIVITIES
Proceeds From Revolving Line Of Credit 3,700 3,055
Payments on Revolving Line of Credit (3,779) (1,855)
--------- --------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (79) 1,200
--------- --------
INCREASE IN CASH AND CASH
EQUIVALENTS 34 411
Cash and Cash Equivalents at
Beginning of Year 44 68
--------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 78 $ 479
========= ========
See Notes to Consolidated Condensed Financial Statements.
TEJON RANCH CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
March 31, 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 fourth quarter.
F o r 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
c o m mon shares outstanding during the period. Common shares
outstanding for the three month period ended March 31, 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 79,000 shares are
outstanding at prices equal to the fair market value at date of grant
(59,000 shares at $20.00 per share, 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 March 31, 1996 and 1995
were 12,683,094 and 12,682,763 respectively. On April 10, 1996
Registrant announced that Robert A. Stine would become its President
and Chief Executive Officer, and effective May 1, 1996 an option to
purchase 100,000 shares was granted to Mr. Stine at $17.875 per share,
representing the fair market value of the shares on the date of grant.
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 the carrying value of securities to
fair value at each reporting date.
Marketable securities consist of the following at:
March 31 December 31
1996 1995
----------------------------------------
Estimated Estimated
Fair Fair
Cost Value Cost Value
----------------------------------------
Marketable securities: (in thousands)
U.S. Treasury and agency
notes $14,402 $14,420 $14,868 $14,869
Corporate notes 5,883 5,895 5,323 5,388
------- ------- ------- -------
$20,285 $20,315 $20,191 $20,257
==========================================
As of March 31, 1996, the cumulative fair value adjustment is a $30,000
unrealized gain. The cumulative fair value adjustment to stockholders'
equity, net of a deferred tax expense of $10,000, is an unrealized gain of
$20,000. Registrant's gross unrealized holding gains equals $165,000, while
gross unrealized holding losses equals $135,000. On March 31, 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 weighted average life 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 uses commodity derivatives 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 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. 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 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 futures contracts reduce profits. Any payments
received and paid related to options contracts are deferred in prepaid and
other current assets until contracts are closed or expire. There were no
outstanding option contracts at March 31, 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 $225,000 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.
The following table identifies the futures contract amounts and option
contract costs outstanding at March 31, 1996 (in thousands, except No. of
Contracts):
Cattle Hedging Activity Estimated
Commodity Future/Option Fair Value Estimated
Description Original At Gain
No. Contract Settlement (Loss) at
Contracts (Bought) Sold (Buy) Sell Settlement
----------------------------------------------------------------------------
Corn futures bought
10,000 Bushels per
contract 50 $ (163) $ 169 $ 6
Cattle futures sold
50,000 lbs. per
contract 120 3,473 (3,376) 97
Estimated fair value at settlement is based upon quoted market prices at
March 31, 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 found on the leased acreage. National, LaFarge Corporation (the
parent company of the previous operator) and Registrant have been ordered to
clean up and abate old industrial waste landfill sites and other contamination
of land and groundwater 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.
NOTE F - PAYMENT OF DIVIDEND
----------------------------
On March 8, 1996, the Board of Directors voted to declare a cash dividend of
two and one-half cents ($0.025) per share. The dividend will apply to
stockholders of record as of the close of business on May 15, 1996 with
payment to be made on June 17, 1996.
MANAGEMENT'S ANALYSIS OF QUARTERLY INCOME STATEMENTS
----------------------------------------------------
Results of Operations
---------------------
Total revenues, including interest income, for the first quarter of 1996
were $1,518,000 compared to $1,409,000 for the first quarter of 1995. The
increase in revenues during 1996 is attributable to increases in
livestock revenues and commercial and land use revenues that were
partially offset by reduced farming revenues. Livestock revenues increased
due to the sale of 731 head of cattle during 1996 compared to 398 head of
cattle in 1995 and to higher average weights on the cattle sold thus far
in 1996. The cattle sold during the first quarter of 1996 were ranch raised
calves that normally would have been sold during 1995 but, due to low prices
and weights, the sales were postponed to 1996. Commercial and land use
revenues have increased due to growth in the percentage rentals Registrant
receives. With respect to commercial and land use revenues, the
increase is due to higher traffic volumes at highway interchanges which
favorably impacts percentage rents. Farming revenues have declined due to
reduced farm management fees as a result of the completion of the sale of
Farmland by Laval Farms Partners, a limited partnership whose farming
operations were managed by Registrant.
Operating activities during the first quarter of 1995 resulted in a net
loss of $364,000, or $.03 per share, compared to a net loss of $661,000, or
$.05 per share, for the same period of 1995. The decrease in the net loss
when compared to 1995 is due to improved revenues as described above, and a
reduction in farming and general and administrative expenses. These favorable
variances were partially offset by an increase in commercial and land
planning expenses. The decrease in farming expenses when compared to the same
period of 1995 was due to the $400,000 ($240,000, or $.02 per share, after tax)
charge to earnings in 1995 due to almond trees being destroyed in a winter
storm. For further information related to the destroyed almond trees please
refer to Registrant's 1995 Form 10-K. General and administrative expenses
have declined due to a reduction in staffing costs related to the timing of
hiring a new chief executive officer. Commercial and land use costs have
increased due to higher water storage costs and higher maintenance costs at
the commercial interchanges along Interstate 5.
Registrant continues to be concerned that cattle prices will stay at the
current low levels or even decrease further due to high cattle inventories
within the industry, high grain prices, and the potential in the near term for
negative publicity related to the mad cow scare in England. Registrant does
not expect an improved cattle market until after 1996.
Based on industry estimates it appears that the California almond crop will
not be as large as originally believed due to bad weather during the
pollination cycle. Based on lower almond production figures the price per
pound for almonds could again be over $2.00 as it was in 1995. Registrant's
crops, however, appear to be doing very well, especially the almonds and
grapes. It appears that Registrant's pistachio crop may be below expectations
due to a lack of winter chilling hours. Although Registrant and others find it
necessary from time to time to make business decisions based on projections of
future yields and prices, such projections 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 any such projections will turn out to be
accurate.
Registrant is involved in various environmental proceedings related to leased
acreage. For a further discussion refer to Registrant's 1995 Form 10-K, Part
I, Item 3, - "Legal Proceedings". There have been no changes since the
filing of the 1995 Form 10-K.
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 March 31, 1996 were $20.4 million
compared to $20.3 million on December 31, 1995. Working capital on March 31,
1996 was $24.2 million compared to $24.8 million on December 31, 1995. The
decrease in working capital at March 31, 1996 as compared to December 31, 1995
is primarily due to property and equipment expenditures.
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
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
5
3-MOS
DEC-31-1996
MAR-31-1996
78
20,315
1,036
0
4,519
27,362
29,087
(13,814)
44,169
3,126
0
6,341
0
0
30,628
44,169
1,518
1,518
1,598
1,598
476
0
50
(606)
(242)
(364)
0
0
0
(364)
(.03)
(.03)
