U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended July 31, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-1394
SEVEN J STOCK FARM, INC.
(Name of small business issuer as specified in its charter)
Texas 74-1110910
----- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
808 Travis Street, Suite 1453, Houston, TX 77002
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(Address of principal executive offices)
(713) 228-8900
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 ( )
As of September 11, 1997 there were 1,451,000 shares of Seven J Stock Farm,
Inc. common stock $1.00 par value outstanding.
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE DATA)
(UNAUDITED)
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
JULY 31, JULY 31,
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
REVENUES:
Pipeline operations $ 71 $ 34 $ 158 $ 110
Oil and gas royalties - net of
excise taxes 61 24 175 76
Farm produce sales 1 11 8 12
Pasture and ranch lease rentals 29 29 89 89
-------- -------- -------- --------
Total revenues $ 162 $ 98 $ 430 $ 287
-------- -------- -------- --------
COSTS AND EXPENSES:
Operating expenses $ 47 $ 21 $ 92 $ 54
Administrative and general
expenses 40 42 143 129
Depreciation 23 23 66 57
Other (income) - net (17) (6) (28) (21)
Taxes other than income taxes 12 8 31 36
-------- -------- -------- --------
Total costs and expenses $ 105 $ 88 $ 304 $ 255
-------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME
TAXES $ 57 $ 10 $ 126 $ 32
Provision for income taxes (Note 2) 18 1 41 4
-------- -------- -------- --------
NET INCOME $ 39 $ 9 $ 85 $ 28
======== ======== ======== ========
NET INCOME PER SHARE (1,451,000
weighted - average shares
outstanding) $ .03 $ .01 $ .06 $ .02
======== ======== ======== ========
DIVIDENDS PER SHARE None None $ .04 .04
======== ======== ======== ========
The notes to the condensed consolidated financial statements
are an integral part of this statement.
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
JULY 31, 1997
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE DATA)
(UNAUDITED)
JULY 31,
ASSETS 1997
---------
CURRENT ASSETS:
Cash and cash equivalents $ 143
Accounts receivable 93
Inventories - growing crops - at cost 7
Refundable income taxes 37
Other 13
---------
Total current assets $ 293
PROPERTY AND EQUIPMENT - net 1,432
OTHER ASSETS 44
---------
TOTAL $ 1,769
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 26
Accrued taxes - other than taxes on income 19
Accrued income taxes 3
Deferred income taxes 41
---------
Total current liabilities $ 89
---------
OTHER LIABILITIES AND CREDITS:
Deferred income taxes $ 84
Unearned lease income 9
---------
Total other liabilities and credits $ 93
---------
SHAREHOLDERS' EQUITY:
Common stock, par value $1.00 per share,
authorized 1,500,000 shares; issued and
outstanding 1,451,000 shares $ 1,451
Retained earnings 136
---------
Total shareholders' equity $ 1,587
---------
TOTAL $ 1,769
=========
The notes to the condensed consolidated financial statements
are an integral part of this statement.
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
FOR THE NINE
MONTHS ENDED
JULY 31,
------------------
1997 1996
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 85 $ 28
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 66 57
Deferred income taxes 15 2
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 132 (50)
Inventories 27 (38)
Other current assets 41 (26)
Increase (decrease) in liabilities:
Accounts payable and other (91) (28)
Accrued income taxes 2 (14)
Accrued taxes - other than taxes
on income 19 (6)
-------- --------
Net cash provided by (used in) operating
activities $ 296 $ (75)
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Expenditures for property and equipment $ (145) $ (225)
Loan to agricultural lessee for expenditure
regarding irrigation system (47) -
-------- --------
Net cash used in investing activities $ (192) $ (225)
-------- --------
(CONTINUED)
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1997 AND 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
(CONTINUED)
FOR THE NINE
MONTHS ENDED
JULY 31,
------------------
1997 1996
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES -
Dividend paid $ (58) $ -
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ 46 $ (300)
CASH AND CASH EQUIVALENTS - beginning of period 97 487
-------- --------
CASH AND CASH EQUIVALENTS - end of period $ 143 $ 187
======== ========
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ - $ -
======== ========
Income taxes $ (4) $ 43
======== ========
The notes to the condensed consolidated financial statements
are an integral part of this statement.
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying interim condensed consolidated financial statements are
unaudited and include the accounts of Seven J Stock Farm, Inc. (the "Company")
and its wholly owned subsidiary, Madison Pipe Line Company.
The unaudited interim condensed consolidated financial statements and
related notes have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The accompanying unaudited interim
condensed consolidated financial statements and related notes should be read
in conjunction with the financial statements and related notes included in the
Company's 1996 Annual Report to Shareholders.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the Company's financial position as of July 31, 1997 and the
results of its operations and its cash flows for the periods ended July 31,
1997 and 1996. Such adjustments consisted only of normal recurring items.
The results of operations for the periods ending July 31, 1997 and 1996 are
not necessarily indicative of the results to be expected for the full year.
Interim results are subject to year-end adjustments and audit by independent
public accountants.
Certain items and amounts have been reclassified. The reclassifications
have no effect on net income.
NOTE 2 - PROVISION FOR INCOME TAXES
The reported tax rate in the first nine months of fiscal year 1997 was
32.5%, which is the Company's current estimate of the effective tax rate for
the entire year. The reported tax rate in the corresponding period of the
previous year was 12.5%. The Company's effective tax rate for the year ended
October 31, 1996 was 29.4%.
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Pipeline Operations - Revenue for the nine months ended July 31, 1997
increased $48,000 or 43.6% as compared to the nine months ended July 31, 1996.
The Company entered into an agreement effective December 1, 1996 to jointly
operate their gas gathering system with a related party's gas gathering
system. A joint central compression and dehydration facility has been built.
The income, costs and expenses are shared equally. The nature of the
operations of the joint venture including the products have the effect of
increasing prices.
Net Oil and Gas Royalties - Revenue for the nine months ended July 31, 1997
increased $99,000 or 130.3% as compared to the nine months ended July 31,
1996. The increase is primarily due to a new well drilled on the Company's
land.
Operating expenses - Expenses for the nine months ended July 31, 1997
increased $38,000 or 70.4% as compared to the nine months ended July 31, 1996.
An increase in pipeline operating expense was offset by a decrease in ranch
maintenance expense. The increase in pipeline operating expenses is
attributable to expenses of the new jointly owned compression and dehydration
facility.
Administrative and General Expenses - Expenses for the nine months ended
July 31, 1997 increased $14,000 or 10.9% as compared to the nine months ended
July 31, 1996. Ranch administrative expense increased as the result of an
increase in allocated salaries from related parties.
Depreciation Expense - Depreciation for the nine months ended July 31, 1997
increased $9,000 or 15.8% as compared to the nine months ended July 31, 1996.
The increase is attributable to additions in property and equipment.
Other (Income) - Net - Other (Income) - Net for the nine months ended
July 31, 1997 increased $7,000 or 33.3% as compared to the nine months ended
July 31, 1996. Other (Income) - Net primarily increased due to income earned
from services performed by ranch personnel.
Provision for Income Taxes - Provision for income taxes for the nine months
ended July 31, 1997 substantially increased as compared to the nine months
ended July 31, 1996. This is due to the increase in income before provision
for income taxes.
Liquidity and Capital Resources
The Company generated $296,000 of cash flows from operating activities for
the nine months ended July 31, 1997 as compared to using $75,000 of net cash
flow from operating activities for the nine months ended July 31, 1996. The
Company has expended $88,000 representing its 50% share of the construction
cost of a jointly owned compression and dehydration facility. The Company
anticipates that adequate working capital will continue to be provided from
future operations. During the third quarter, the Company paid dividends of
$.04 a share to its shareholders.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - none
(B) Reports on Form 8-K - there were no reports on Form 8-K filed for
the quarter ended July 31, 1997.
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.
Date: September 11, 1997 SEVEN J STOCK FARM, INC.
(Registrant)
R. F. Pratka
------------------------------------------
R. F. Pratka, Vice-President and Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEVEN J
STOCK FARM, INC. CONSOLIDATED BALANCE SHEET AT JULY 31, 1997 AND
CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED JULY 31, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<CURRENT-ASSETS> 293
<PP&E> 3262
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