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, 1999
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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 (I.R.S. Employer
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, 1999 and DECEMBER 31, 1998
June 30, December 31,
ASSETS 1999 1998
------ ----------- -----------
(Unaudited)
Cash $ 76,837 $ 147,375
Temporary cash investments at cost which approximates market 2,000,000 2,450,000
Accounts receivable 259,512 255,544
Accrued interest receivable 348,364 408,486
Prepaid expenses 16,424 41,059
Federal income taxes receivable 229,647 --
Notes receivable for land sales 9,259,750 11,006,307
Real estate acquired through foreclosure:
(26,413.09 acres at June 30, 1999 and 26,450.63 acres at December 31, 1998) 4,652,873 4,422,078
Water wells, leasehold improvements, furniture and
equipment - at cost less accumulated depreciation 131,094 125,565
Property, no value assigned:
Land (surface rights) situated in twenty-one counties in
Texas - 1,032,315.22 acres in 1999 and 1,034,386.64 acres in 1998 -- --
Town lots in Iatan, Loraine and Morita - 628 lots in 1999 and 1998 -- --
1/16 nonparticipating perpetual royalty interest in 386,987.70 acres in 1999 and 1998 -- --
1/128 nonparticipating perpetual royalty interest in 85,413.60 acres in 1999 and 1998 -- --
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$16,974,501 $18,856,414
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LIABILITIES AND CAPITAL
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Federal income taxes payable $ -- $ 348,311
Other taxes payable 149,295 16,854
Other liabilities payable 13,839 2,064
Escrow deposits on land sales -- 7,000
Deferred taxes payable 4,328,298 4,840,479
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Total liabilities 4,491,432 5,214,708
Capital
Certificates of Proprietary Interest, par value $100
each; outstanding one certificate in 1999 and 1998 -- --
Sub-share Certificates in Certificates of Proprietary Interest, par value
$.16 2/3 each; outstanding 2,639,705 sub-shares in 1999 and
2,669,805 sub-shares in 1998 -- --
Net proceeds from all sources 12,483,069 13,641,706
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Total capital 12,483,069 13,641,706
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$16,974,501 $18,856,414
=========== ===========
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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1999 1998 1999 1998
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Income:
Rentals, royalties and sundry income $ 952,052 $1,233,545 $2,109,102 $2,699,061
Land sales 238,400 291,427 315,421 2,170,827
Interest 237,509 256,720 498,127 501,554
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1,427,961 1,781,692 2,922,650 5,371,442
---------- ---------- ---------- ----------
Expenses:
Taxes, other than Federal income taxes 110,065 121,522 213,612 245,940
General and administrative expenses 275,984 294,470 626,943 642,113
Basis in real estate sold -- -- 1,578 --
---------- ---------- ---------- ----------
386,049 415,992 842,133 888,053
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Income before provision for
Federal income taxes 1,041,912 1,365,700 2,080,517 4,483,389
Provision for Federal income taxes 317,547 419,865 639,967 1,395,901
---------- ---------- ---------- ----------
Net income $ 724,365 $ 945,835 $1,440,550 $3,087,488
========== ========== ========== ==========
Average number of sub-share certificates
and equivalent sub-share certificates
outstanding 2,648,305 2,735,072 2,657,097 2,743,030
========== ========== ========== ==========
Basic earnings per sub-share certificate $ .27 $ .35 $ .54 $ 1.13
========== ========== ========== ==========
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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1999 1998
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Cash flows from operating activities:
Net income $ 1,440,550 $ 3,087,488
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 21,600 57,000
Deferred taxes payable (512,181) 256,908
(Increase) decrease in assets:
Accounts receivable (3,968) (15,723)
New notes receivable from land sales (201,750) (1,446,650)
Payments received on notes receivable 1,727,981 631,578
Accrued interest receivable 49,653 38,852
Federal income taxes receivable (229,647) (162,349)
Prepaid expenses 24,635 27,300
Increase (decrease) in liabilities:
Federal income taxes payable (348,311) (42,783)
Other taxes payable 132,441 145,640
Escrow deposits on land sales (7,000) 5,000
Other liabilities payable 11,775 301,043
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Total adjustments 665,228 (204,184)
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Net cash provided by operating activities 2,105,778 2,883,304
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Cash flows from investing activities -
Additions to water wells, leasehold improvements,
furniture and equipment (27,129) (28,637)
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Cash flows from financing activities:
Sub-shares purchased for retirement (1,531,985) (2,013,964)
Dividends paid (1,067,202) (1,102,802)
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Net cash used by financing activities (2,599,187) (3,116,766)
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Net decrease in cash and cash equivalents (520,538) (262,099)
Cash and cash equivalents at beginning
of year 2,597,375 1,912,591
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Cash and cash equivalents at end
of period $ 2,076,837 $ 1,650,492
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See accompanying notes to financial statements.
(3)
TEXAS PACIFIC LAND TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(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, 1999 and the results of its
operations for the three and six months ended June 30, 1999 and 1998
and its cash flows for the six months ended June 30, 1999 and 1998,
respectively. These financial statements and footnotes included herein
should be read in conjunction with the Trust's annual financial
statements as of December 31, 1998 and 1997, and for each of the years
in the three year period ended December 31, 1998, 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,
1999 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,
1999 and 1998 is summarized as follows:
1999 1998
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Federal income taxes paid $1,730,106 $1,344,126
========== ==========
Non-cash operating activity -
Notes receivable plus accrued interest converted to
real estate acquired through foreclosure $ 230,795 --
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(4)
(7) The Trust has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information which 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, 1999, the Trust implemented the provisions of
Statement of Position (SOP) 98-5, Reporting on the Costs of Start-Up
Activities. SOP 98-5 requires that the costs of start-up activities,
including organizational costs, be expensed as incurred. SOP 98-5,
required initial application to be recorded as of the beginning of the
fiscal year in which the SOP is first adopted. Due to the nature of the
Trust's operations, there was no effect of implementation of this new
pronouncement on the financial condition or results of operations of
the Trust.
(5)
Management's Discussion and
Analysis of Financial Condition and
Results of Operations for the
Six Months Ended
June 30, 1999 and 1998
Results of Operations for Quarter Ended June 30, 1999 Compared to Quarter Ended
June 30, 1998
Earnings per sub-share were $.27 for the second quarter of 1999 compared to $.35
in the second quarter of 1998. Total revenues were $1,427,961 compared to
$1,781,692, a decrease of 19.9%.
Land sales for the second quarter of 1999 were 665 acres at an average price of
approximately $358 per acre for a total of $238,400. This compares to 1,536.35
acres at an average price of approximately $190 per acre for a total of $291,427
in the second quarter of 1998.
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 $952,052 for the second quarter
of 1999 compared to $1,233,545 for the second quarter of 1998, down 22.8%.
Oil and gas royalty revenue was $585,594 for the second quarter of 1999, down
14.6% compared to the second quarter of 1998. Oil royalty revenue was $399,694,
down 10.9% for the 1999 period. Crude oil production subject to the Trust's
royalty interest was down 17.7% in the second quarter of 1999 which was offset
by an 8.3% increase in the average price per barrel. Gas royalty revenue was
$185,900 in the second quarter of 1999, down 21.6% on a volume decrease of 6.6%
and a price decrease of 16.3%.
Easement and other sundry income was $174,644 for the second quarter of 1999,
down 50.3% from the second quarter of 1998. This is mainly due to lack of
pipeline easement and seismic permit income which were unusually high in the
second quarter of 1998.
Interest revenue was down 7.5% in the second quarter of 1999 compared to the
same period of 1998. Interest from notes receivable amounted to $215,251, a 7.0%
decrease from the 1998 period. Notes receivable for land sold were $9,259,750 as
of June 30, 1999, down 8.5% from June 30, 1998, due to payments received from
note makers. Sundry interest was $22,258 for the second quarter of 1999, down
11.9% from the second quarter of 1998. 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 9.4% due to a decrease in land
inventory and decrease in royalty income in the second quarter of 1999 compared
to the second quarter of 1998.
General and administrative expenses were down 6.3% for the second quarter of
1999 compared with the same period of 1998.
(6)
Management's Discussion (cont'd)
Results of Operations for Six Months Ended June 30, 1999 Compared to Six Months
Ended June 30, 1998
Earnings per sub-share for the first six months of 1999 were $.54 compared to
$1.13 in the first six months of 1998. Total revenues were $2,922,650 compared
to $5,371,442, a decrease of 45.6%. The following decreases: land sales -
$1,855,406; oil and gas royalties - $391,179; and easement and sundry - $194,611
are the main components of decreased revenue of the first six months of 1999
compared to 1998.
Land sales for the first six months of 1999 were 2,111.43 acres at an average
price of approximately $149 per acre for a total of $315,421. This compares to
25,224.35 acres at an average price of approximately $86 per acre for a total of
$2,170,827 in the first six months of 1998.
Rentals, royalties, and sundry income amounted to $2,109,102 for the first
six months of 1999 compared to $2,699,061 for the first six months of 1998, down
21.9%.
Oil and gas royalty revenue for the first six months of 1999 was $1,049,437,
down 27.2% compared to the first six months of 1998. Oil royalty revenue was
$681,407, down 28.8% for the 1999 period. Crude oil production was down 15.9% in
the first six months of 1999, and the average price per barrel was down 15.4%.
Gas royalty revenue was $368,030 in the first six months of 1999, down 23.8% on
a volume decrease of 4.7%, and a price decrease of 20.1%.
Easement and other sundry income was $780,078 in the first six months of 1999,
down 20.0% from the first six months of 1998. This was mainly due to reduction
of pipeline easement and seismic permit income that were unusually high in the
first six months of 1998.
Interest revenue was $498,127 for the first six months of 1999, down $3,427 or
7/10 of 1% from the 1998 period. Interest from notes receivable was $438,799,
down 8/10 of 1% from the 1998 period. Sundry interest was $59,328 for the first
six months, down $70 for 1/10 of 1% from the 1998 period.
Taxes, other than Federal income taxes in the first six months of 1999 were down
13.1%. This is due to the decrease in land inventory and royalty income.
General and administrative expenses for the first six months of 1999 were down
2.4% from the first six months of 1998.
Liquidity and Capital Resource
The Trust's oil and gas royalty revenues, lease rentals and receipts of interest
and principal on notes receivable has generated more than adequate amounts of
cash to meet the Trust's needs and should continue to do so in the predictable
future.
Year 2000 Issue
The Trust recognized that the arrival of the Year 2000 poses a unique challenge
to the ability of an entity's information technology system and non-information
technology systems to recognize the date change from December 31, 1999 to
January 1, 2000. As of June 30, 1999, the Trust has assessed and made certain
changes to provide for continued functionality of its systems. An assessment of
the readiness of the Trust's external entities, such as vendors, customers,
payment systems and others is ongoing. Due to the nature and extent of the
Trust's operations that are affected by Year 2000 issues, the Trust does not
believe that Year 2000 issues will have a material
(7)
Management's Discussion (cont'd)
adverse effect on the business operation or the financial performance of the
Trust. There can be no assurance, however, that Year 2000 issues will not
adversely effect the Trust or its business. The Trust believes that the cost to
make appropriate changes to its internal and external systems will not be
significant and that such costs will be funded completely through operations.
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, 1998.
(8)
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.
Exhibit 27 - Financial Data Schedule
(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 and 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 12, 1999 By /s/ ROY THOMAS
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Roy Thomas, General Agent,
Authorized Signatory and
Principal Financial Officer
(9)
INDEX TO EXHIBITS
EXHIBIT
NUMBER EXHIBIT
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27 Financial Data Schedule