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 30,1998
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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 (I.R.S. Employer
of incorporation or organization) Identification No.)
80 Broad Street, Suite 2700, New York, New York 10004
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(Address of principal executive offices)
(Zip Code)
212/269-2266
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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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, 1998 and DECEMBER 31, 1997
(Unaudited)
June 30, December 31,
ASSETS 1998 1997
----------- -----------
Cash $ 200,492 $ 112,591
Temporary cash investments, at cost which approximates market 1,450,000 1,800,000
Accounts receivable 402,504 386,781
Accrued interest receivable 372,822 411,674
Prepaid expenses 18,200 45,500
Federal income taxes receivable 162,349 --
Notes receivable for land sales 10,122,290 9,307,218
Real estate acquired through foreclosure:
(27,585.95 acres in 1998 and in 1997) 4,466,895 4,466,895
Water wells, leasehold improvements, furniture and
equipment - at cost less accumulated depreciation 114,267 142,630
Property, no value assigned:
Land (surface rights) situated in twenty-one counties in
Texas - 1,040,256.00 acres in 1998 and 1,065,481.33 acres in 1997. -- --
Town lots in Iatan, Loraine and Morita - 628 lots in 1998 and 1997. -- --
1/16 nonparticipating perpetual royalty interest in 386,987.70 acres in 1998 and 1997. -- --
1/128 nonparticipating perpetual royalty interest in 85,413.60 acres in 1998 and 1997. -- --
----------- -----------
$17,309,819 $16,673,289
=========== ===========
LIABILITIES AND CAPITAL
Federal income taxes payable $ -- $ 42,783
Other taxes payable 170,012 24,372
Other liabilities 394,115 93,072
Escrow deposits on land sales 5,000 --
Deferred taxes 4,548,764 4,291,856
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Total liabilities 5,117,891 4,452,083
Capital
Certificates of Proprietary Interest, par value $100
each; outstanding one certificate in 1998 and 1997 -- --
Sub-share Certificates in Certificates of Proprietary Interest, par value
$.16 2/3 each; outstanding 2,706,505 sub-shares in 1998 and
2,753,205 sub-
shares in 1997 -- --
Net proceeds from all sources 12,191,928 12,221,206
----------- -----------
Total capital 12,191,928 12,221,206
$17,309,819 $16,673,289
=========== ===========
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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1998 1997 1998 1997
---------- ---------- ---------- ----------
Income:
Rentals, royalties and sundry income $1,233,545 $1,145,581 $2,699,061 $2,431,527
Land sales 291,427 2,344,150 2,170,827 4,532,322
Interest 256,720 180,848 501,554 349,716
---------- ---------- ---------- ----------
1,781,692 3,670,579 5,371,442 7,313,565
---------- ---------- ---------- ----------
Expenses:
Taxes, other than Federal income taxes 121,522 137,900 245,940 290,335
General and administrative expenses 294,470 349,381 642,113 648,437
Basis in real estate sold -- 1,568,074 -- 1,568,074
---------- ---------- ---------- ----------
415,992 2,055,355 888,053 2,506,846
---------- ---------- ---------- ----------
Income before provision for
Federal income taxes 1,365,700 1,615,224 4,483,389 4,806,719
Provision for Federal income taxes 419,865 502,409 1,395,901 1,516,577
---------- ---------- ---------- ----------
Net income $ 945,835 $1,112,815 $3,087,488 $3,290,142
========== ========== ========== ==========
Average number of sub-share certificates
and equivalent sub-share certificates
outstanding 2,735,072 2,820,572 2,743,030 2,831,739
========== ========== ========== ==========
Basic earnings per sub-share certificate $ .35 $ .39 $ 1.13 $ 1.16
========== ========== ========== ==========
Cash dividend 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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1998 1997
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Cash flows from operating activities:
Net income $ 3,087,488 $ 3,290,142
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 57,000 20,100
Deferred taxes 256,908 357,154
(Increase) decrease in assets:
Accounts receivable (15,723) (4,332)
New notes receivable from land sales (1,446,650) (3,069,317)
Payments received on notes receivable 631,578 422,224
Accrued interest receivable 38,852 (45,004)
Federal income taxes receivable (162,349) (18,696)
Prepaid expenses 27,300 27,444
Real estate acquired through foreclosure -- 1,568,074
Increase (decrease) in liabilities:
Federal income taxes (42,783) (99,824)
Other taxes payable 145,640 170,556
Escrow deposits on land sales 5,000 --
Other liabilities 301,043 79,002
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Total adjustments (204,184) (592,619)
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Net cash provided by operating activities 2,883,304 2,697,523
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Cash flows from investing activities:
Additions to water wells, leasehold improvements,
furniture and equipment (28,637) (45,662)
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Cash flows from financing activities:
Sub-shares purchased for retirement (2,013,964) (1,173,232)
Dividends paid (1,102,802) (1,134,882)
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Net cash used by financing activities (3,116,766) (2,308,114)
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Net (decrease) increase in cash and cash equivalents (262,099) 343,747
Cash and cash equivalents at beginning
of period 1,912,591 1,794,898
Cash and cash equivalents at end ------------ ------------
of period $ 1,650,492 $ 2,138,645
============ ============
See accompanying notes to financial statements.
(3)
TEXAS PACIFIC LAND TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(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, 1998 and the
results of its operations and its cash flows for the three and six
months ended June 30, 1998 and June 30, 1997, respectively. These
financial statements and footnotes included herein should be read in
conjunction with the Trust's annual financial statements as of
December 31, 1997 and 1996 and for each of the years in the three year
period ended December 31, 1997 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 therefor, 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 six months ended June 30, 1998 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,
1998 and 1997 is summarized as follows:
1998 1997
---- ----
Federal income taxes paid $1,344,126 $1,277,943
========== ==========
There were no non-cash investing and financing activities during the
six months ended June 30, 1998 and 1997.
(4)
Management's Discussion and
Analysis of Financial Condition and
Results of Operations for the
Six Months Ended
June 30, 1998 and 1997
Quarter Ended June 30, 1998 Compared to Quarter Ended June 30, 1997
Earnings per sub-share were $.35 for the second quarter of 1998 compared to
$.39 in the second quarter of 1997. Total revenues were $1,781,692 compared to
$3,670,579, a decrease of 51.5%. This decrease was caused by a decrease in land
sales which, as noted below, may vary widely from quarter to quarter.
Land sales for the second quarter of 1998 consisted of 1,536.35 acres at an
average price of $190 per acre for a total of $291,427. This compares to 881.7
acres at an average price of $2,659 for a total of $2,344,150 in the second
quarter of 1997.
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 $1,233,545 for the second
quarter of 1998 compared to $1,145,581 for the second quarter of 1997, up 7.7%.
Oil and gas royalty revenue was $685,629 for the second quarter of 1998, down
15.6% compared to the second quarter of 1997. Oil royalty revenue was $448,381,
down 26.1% for the 1998 period. Crude oil production subject to the Trust's
royalty interest was up 9.9% in the second quarter of 1998 and the average price
per barrel was down 32.5%. Gas royalty revenue was $237,248 in the second
quarter of 1998, up 15.3% on a volume increase of 9.9%, and price increase of
4.6%.
Easement and other Sundry income was $351,679 for the second quarter of 1998,
up 138.9% over the second quarter of 1997. This was mainly due to increases in
pipeline easement and seismic permit income both which cannot be predicted, and
are not recurring.
Interest revenue was up 42.0% in the second quarter of 1998 compared to 1997.
Interest from notes receivable amounted to $231,461 up 48.8% for the 1998
period. Notes receivable for land sold were $10,122,290 as of June 30, 1998, an
increase of 31.2% over the second quarter of 1997. Sundry interest was $25,259
for the second quarter of 1998 which was down $77 compared to the second quarter
of 1997.
Taxes, other than Federal income taxes, were down 11.9% due to the decrease of
land inventory and decrease in royalty income in the second quarter of 1998
compared to the second quarter of 1997.
General and administrative expenses were down 15.7% in 1998 primarily resulting
from a $90,000 environmental cleanup expense taken in the second quarter of 1997
causing an unusual increase at that time.
(5)
Management's Discussion (cont'd)
Six-Months Ended June 30, 1998 Compared to Six-Months Ended June 30, 1997
Earnings per sub-share for the first six-months of 1998 were $1.13 compared to
$1.16 in the first six-months of 1997. Total revenues were $5,371,442 compared
to $7,313,565, a decrease of 26.6%. This decrease is due to the decrease in
land sales for the period which as noted may vary widely from one period to
another.
Land sales for the first six-months of 1998 were 25,224.35 acres at an average
price of $86 per acre for a total of $2,170,827. This compares to 6,721.09
acres at an average price of $674 per acre for a total of $4,532,322 in the
first six-months of 1997.
Rentals, royalties and sundry income amounted to $2,699,061 for the first
six-months of 1998 compared to $2,431,527 in the first six-months of 1997, up
11.0%.
Oil and gas royalty revenue for the first six-months was $1,440,616, down 22.9%
compared to the first six-months of 1997. Oil royalty revenue was $957,629,
down 27.1% for the 1998 period. Crude oil production subject to the Trust's
royalty interest was up 6.9% in the first six-months of 1998, and the average
price per barrel was down 31.8%. Gas royalty revenue was $482,987 in the first
six-months of 1998, down 12.8% on a volume increase of 4.1% and price decrease
of 16.1%.
Easement and other Sundry income was $974,689 in the first six-months of 1998,
up 240.6% over the first six-months of 1997. This was mainly due to increases in
pipeline easement and seismic permit income, both