FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-737
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TEXAS PACIFIC LAND TRUST
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(Exact name of registrant as specified in its charter)
NOT APPLICABLE 75-0279735
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
1700 Pacific Avenue, Suite 1670, Dallas, Texas 75201
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(Address of principal executive offices)
(Zip Code)
214/969-5530
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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
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Part I
FINANCIAL INFORMATION
TEXAS PACIFIC LAND TRUST
BALANCE SHEETS
JUNE 30, 2002 and DECEMBER 31, 2001
June 30, December 31,
ASSETS 2002 2001
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(Unaudited)
Cash $ 253,294 $ 85,065
Temporary cash investments at cost which approximates market 2,500,000 2,500,000
Accounts receivable 345,628 334,888
Accrued interest receivable 515,443 417,817
Prepaid expenses 24,455 61,138
Notes receivable for land sales 10,534,981 11,421,331
Real estate acquired through foreclosure:
(7,791.86 acres at June 30, 2002 and December 31, 2001) 2,450,886 2,450,886
Water wells, leasehold improvements, furniture and
equipment - at cost less accumulated depreciation 211,501 207,388
Prepaid Federal income taxes -- 149,668
Property, no value assigned:
Land (surface rights) situated in twenty-one counties in
Texas - 1,008,404.49 acres in 2002 and 1,013,792.00 acres in 2001 -- --
Town lots in Iatan, Loraine and Morita - 628 lots in 2002 and 2001 -- --
1/16 nonparticipating perpetual royalty interest in 386,987.70 acres in 2002 and 2001 -- --
1/128 nonparticipating perpetual royalty interest in 85,413.60 acres in 2002 and 2001 -- --
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$ 16,836,188 $ 17,628,181
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LIABILITIES AND CAPITAL
Federal income taxes payable $ 43,182 $ --
Other taxes 131,403 20,521
Other liabilities 34,754 2,537
Escrow deposits on land sales 1,000 5,000
Deferred taxes 4,130,660 4,402,481
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Total liabilities 4,340,999 4,430,539
Capital:
Certificates of Proprietary Interest, par value $100
each; outstanding no certificates in 2002 and 2001 -- --
Sub-share Certificates in Certificates of Proprietary Interest, par value
$.16 2/3 each; outstanding 2,362,587 sub-shares in 2002 and
2,398,393 sub-shares in 2001 -- --
Net proceeds from all sources 12,495,189 13,197,642
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Total capital 12,495,189 13,197,642
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$ 16,836,188 $ 17,628,181
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See accompanying notes to financial statements.
(1)
TEXAS PACIFIC LAND TRUST
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
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2002 2001 2002 2001
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Income:
Rentals, royalties and sundry income $ 1,372,109 $ 1,625,758 $ 2,451,621 $ 3,041,326
Land sales 128,205 81,115 321,961 99,655
Interest 244,081 202,053 493,457 415,674
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1,744,395 1,908,926 3,267,039 3,556,655
------------ ------------ ------------ ------------
Expenses:
Taxes, other than Federal income taxes 117,370 141,739 222,273 301,078
Basis in real estate sold -- -- -- 15,821
General and administrative expenses 325,064 322,183 730,123 708,192
------------ ------------ ------------ ------------
442,434 463,922 952,396 1,025,091
------------ ------------ ------------ ------------
Income before
Federal income taxes 1,301,961 1,445,004 2,314,643 2,531,564
Federal income taxes 387,437 419,755 689,029 719,584
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Net income $ 914,524 $ 1,025,249 $ 1,625,614 $ 1,811,980
============ ============ ============ ============
Average number of sub-share certificates
and equivalent sub-share certificates
outstanding 2,372,137 2,484,855 2,378,812 2,492,997
============ ============ ============ ============
Basic and dilutive earnings per sub-share certificate $ .38 $ .41 $ .68 $ .72
============ ============ ============ ============
Cash dividends per sub-share certificate -- -- $ .40 $ .40
============ ============ ============ ============
See accompanying notes to financial statements.
(2)
TEXAS PACIFIC LAND TRUST
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
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2002 2001
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Cash flows from operating activities:
Net income $ 1,625,614 $ 1,811,980
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 20,400 23,400
Deferred taxes (271,821) (363,117)
(Increase) decrease in assets:
Accounts receivable (10,740) 529
New notes receivable from land sales (145,000) (74,735)
Payments received on notes receivable 1,031,350 1,228,037
Accrued interest receivable (97,626) 99,929
Prepaid Federal income taxes 149,668 --
Prepaid expenses 36,683 26,275
Real estate acquired through foreclosure -- 15,820
Increase (decrease) in liabilities:
Federal income taxes payable 43,182 250,538
Other taxes payable 110,882 134,264
Escrow deposits on land sales (4,000) 3,660
Other liabilities payable 32,217 24,999
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Total adjustments 895,195 1,369,599
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Net cash provided by operating activities 2,520,809 3,181,579
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Cash flows from investing activities-
Additions to water wells, leasehold improvements,
furniture and equipment (24,513) (125,494)
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Cash flows from financing activities:
Sub-shares purchased for retirement (1,371,072) (1,310,934)
Dividends paid (956,995) (1,003,522)
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Net cash used by financing activities (2,328,067) (2,314,456)
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Net increase in cash and cash equivalents 168,229 741,629
Cash and cash equivalents at beginning
of period 2,585,065 1,613,834
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Cash and cash equivalents at end
of period $ 2,753,294 $ 2,355,463
============= =============
See accompanying notes to financial statements.
(3)
TEXAS PACIFIC LAND TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002
(1) In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of Texas
Pacific Land Trust (Trust) as of June 30, 2002 and the results of its
operations for the three and six months ended June 30, 2002 and 2001
and its cash flows for the six months ended June 30, 2002 and 2001,
respectively. These financial statements and footnotes included herein
should be read in conjunction with the Trust's annual financial
statements as of December 31, 2001 and 2000 and for each of the years
in the three year period ended December 31, 2001 included in the
Trust's Form 10-K.
(2) No value is assigned to the land, unless acquired through foreclosure;
consequently, no allowance for depletion is computed, and no charge to
income is made therefore, and no cost is deducted from the proceeds of
the land sales in computing gain or loss thereon.
(3) The Sub-shares and the Certificates of Proprietary Interest are freely
interchangeable in the ratio of one Certificate of Proprietary Interest
for 600 Sub-shares or 600 Sub-shares for one Certificate of Proprietary
Interest.
(4) The Trust's effective Federal income tax rate is less than the 34%
statutory rate because taxable income is reduced by statutory
percentage depletion allowed on mineral royalty income.
(5) The results of operations for the three and six months ended June 30,
2002 are not necessarily indicative of the results to be expected for
the full year.
(6) Cash in excess of daily requirements is invested in money market
instruments with maturities of ninety days or less. Such investments
are deemed to be cash equivalents for purposes of the statements of
cash flows.
Supplemental cash flow information for the six months ended June 30,
2002 and 2001 is summarized as follows:
2002 2001
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Federal income taxes paid $ 768,000 $ 832,163
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(4)
(7) SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information establishes standards for the way public business
enterprises are to report information about operating segments. SFAS
No. 131 utilizes the management approach as a basis for identifying
reportable segments. The management approach is based on the way that
management organizes the segments within the enterprise for making
operating decisions and assessing performance. The Trust's management
views its operations as one segment and believes the only significant
activity is managing the land which was conveyed to the Trust in 1888.
Trust management makes decisions about resource allocation and
performance assessment based on the same financial information
presented in these financial statements. Managing the land includes
sales and leases of such land, and the retention of oil and gas
royalties.
(8) Effective January 1, 2002, the Trust adopted SFAS No. 144, "Accounting
for the Impairment of Disposal of Long Lived Assets." SFAS No. 144
supersedes and amends SFAS No. 121 and the relevant portions of APB
Opinion No. 30. The adoption of SFAS No. 144 had no impact on the
financial position, results of operations or cash flows.
(5)
Management's Discussion and
Analysis of Financial Condition and
Results of Operations for the
Six Months Ended
June 30, 2002 and 2001
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Results of Operations for Quarter Ended June 30, 2002 Compared to Quarter Ended
June 30, 2001
Earnings per sub-share were $.38 for the second quarter of 2002 compared to $.41
in the second quarter of 2001. Total revenues were $1,744,395 compared to
$1,908,926, a decrease of 8.6%.
Land sales for the second quarter of 2002 were 2,406.65 acres at an average
price of approximately $53 per acre for a total of $128,205. This compares to
1,159 acres at an average price of approximately $70 per acre for a total of
$81,115 in the second quarter of 2001.
Land sales may vary widely from year to year and quarter to quarter. The total
dollar amount, the average price per acre, and the number of acres sold in any
one year or quarter should not be assumed to be indicative of land sales in the
future. The Trust is a passive seller of land; it does not actively solicit
sales of land. The demand for and the sales price of any particular tract of the
Trust's land is influenced by many factors including the national and local
economies, the rate of residential and commercial development in nearby areas,
livestock carrying capacity, and the conditions of the local agricultural
industry which itself is influenced by range conditions and prices for livestock
and other agricultural products. Approximately 99% of the Trust's land is
classified as ranch land and intermingled with other ownerships to form ranching
units. Ranch land sales are, therefore, largely dependent on the actions of the
adjoining landowners.
Rentals, royalties and sundry income amounted to $1,372,109 for the second
quarter of 2002 compared to $1,625,758 for the second quarter of 2001, down
15.6%.
Oil and gas royalty revenue was $909,324 for the second quarter of 2002, down
27.3% compared to the second quarter of 2001. Oil royalty revenue was $612,521,
down 17.8% for the 2002 period. Crude oil production subject to the Trust's
royalty interest was down 5.6% in the second quarter of 2002. The average price
of crude oil was decreased 12.9%. Gas royalty revenue was $296,803 in the second
quarter of 2002, down 41.2% on a volume increase of 11.7% and a price decrease
of 47.3%.
Easement and other sundry income was $281,655 for the second quarter of 2002, up
52.1% from the second quarter of 2001. This income is unpredictable and may vary
greatly from quarter to quarter.
Interest revenue was up 20.8% in the second quarter of 2002 compared to the same
period of 2001. Interest from notes receivable amounted to $231,118, a 25.2%
increase from the 2001 period. Notes receivable for land sold were $10,534,981
as of June 30, 2002, up 41.6% from June 30, 2001, due to installment sales made
in third quarter 2001. Sundry interest was $12,963 for the second quarter of
2002, down 25.9% from the second quarter of 2001. Sundry interest income
fluctuates based on cash on hand for investment, and interest rates on short
term investments.
Taxes, other than Federal income taxes, were down 17.2% due to a decrease in ad
valorem taxes and royalty income production taxes in the second quarter of 2002
compared to the second quarter of 2001.
General and administrative expenses were up less than 1% for the second quarter
of 2002 compared with the same period of 2001.
(6)
Management's Discussion (cont'd)
Results of Operations for Six Months Ended June 30, 2002 Compared to Six Months
Ended June 30, 2001
Earnings per sub-share for the first six months of 2002 were $.68 compared to
$.72 in the first six months of 2001. Total revenues were $3,267,039 compared to
$3,556,655, a decrease of 8.1%.
Land sales for the first six months of 2002 were 5,387.51 acres at an average
price of approximately $60 per acre for a total of $321,961. This compares to
1,160.85 acres at an average price of approximately $86 per acre for a total of
$99,655 in the first six months of 2001.
Rentals, royalties, and sundry income amounted to $2,451,621 for the first six
months of 2002 compared to $3,041,326 for the first six months of 2001, down
19.4%.
Oil and gas royalty revenue for the first six months of 2002 was $1,607,681,
down 34.1% compared to the first six months of 2001. Oil royalty revenue was
$1,086,454, down 22.6% for the 2002 period. Crude oil production was up 4.4% in
the first six months of 2002, and the average price per barrel was down 25.8%.
Gas royalty revenue was $521,227 in the first six months of 2002, down 49.7% on
a volume increase of 12.9%, and a price decrease of 55.4%.
Easement and other sundry income was $574,088 in the first six months of 2002,
up 77.1% from the first six months of 2001. This income is unpredictable and may
vary greatly from one period to another.
Interest revenue was $493,457 for the first six months of 2002, up 18.7% from
the 2001 period. Interest from notes receivable was $464,868, up 23.4% from the
2001 period. Sundry interest was $28,589 for the first six months, down 26.8%
from the 2001 period.
Taxes, other than Federal income taxes in the first six months of 2002 were down
26.2%. This is due to the decrease in royalty income taxes and ad valorem taxes.
General and administrative expenses for the first six months of 2002 were up
3.1% from the first six months of 2001.
Liquidity and Capital Resources
The Trust's oil and gas royalty revenues, lease rentals and receipts of interest
and principal on notes receivable have generated more than adequate amounts of
cash to meet the Trust's needs and should continue to do so in the predictable
future.
Words or phrases when used in this Form 10-Q or other filings with the
Securities and Exchange Commission, such as "does not believe" and "believes",
or similar expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Quantitative and Qualitative
Disclosures About Market Risk
There have been no material changes in the information related to market risk of
the Trust since December 31, 2001.
(7)
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. Interim report furnished to shareholders upon request per
sub-part Item 601 (19) Regulation S-K.
(b) Reports on Form 8-K. The registrant has filed no reports on Form 8-K
during the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
TEXAS PACIFIC LAND TRUST
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(Registrant)
Date August 14, 2002 By /s/ ROY THOMAS
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Roy Thomas, General Agent,
Authorized Signatory and Chief
Financial Officer
(8)
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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99.1 CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
99.2 CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002