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, 1998
( ) 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
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(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 August 31, 1998 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,
------------------ ------------------
1998 1997 1998 1997
-------- -------- -------- --------
REVENUES:
Pipeline operations $ 72 $ 71 $ 217 $ 158
Oil and gas royalties - net of
excise taxes 48 61 168 175
Farm produce sales 108 1 118 8
Pasture and ranch lease rentals 29 29 89 89
-------- -------- -------- --------
Total revenues $ 257 $ 162 $ 592 $ 430
-------- -------- -------- --------
COSTS AND EXPENSES:
Operating expenses $ 115 $ 47 $ 221 $ 92
Administrative and general expenses 41 40 147 143
Depreciation 30 23 79 66
Other (income) - net (16) (17) (26) (28)
Taxes other than income taxes 15 12 33 31
-------- -------- -------- --------
Total costs and expenses $ 185 $ 105 $ 454 $ 304
-------- -------- -------- --------
INCOME BEFORE PROVISION FOR INCOME
TAXES $ 72 $ 57 $ 138 $ 126
Provision for income taxes (Note 2) 11 18 32 41
-------- -------- -------- --------
NET INCOME $ 61 $ 39 $ 106 $ 85
======== ======== ======== ========
NET INCOME PER SHARE (1,451,000
weighted average shares outstanding) $ .04 $ .03 $ .08 $ .06
======== ======== ======== ========
DIVIDENDS PER SHARE None None .07 .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, 1998
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE DATA)
(UNAUDITED)
JULY 31,
ASSETS 1998
---------
CURRENT ASSETS:
Cash and cash equivalents $ 5
Accounts receivable 160
Refundable income taxes 26
Other 13
---------
Total current assets $ 204
PROPERTY AND EQUIPMENT - net 1,670
OTHER ASSETS 105
---------
TOTAL $ 1,979
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 90
Dividend payable 2
Accrued taxes - other than taxes on income 20
Deferred income taxes 38
---------
Total current liabilities $ 150
---------
OTHER LIABILITIES AND CREDITS:
Deferred income taxes $ 101
Unearned lease income 9
---------
Total other liabilities and credits $ 110
---------
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 268
---------
Total shareholders' equity $ 1,719
---------
TOTAL $ 1,979
=========
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, 1998 AND 1997
INCREASE IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
FOR THE NINE
MONTHS ENDED
JULY 31,
------------------
1998 1997
-------- --------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 106 $ 85
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 79 66
Deferred income taxes 11 15
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (51) 132
Inventories 138 27
Other current assets 23 41
Increase (decrease) in liabilities:
Accounts payable and other (48) (91)
Accrued income taxes (1) 2
Accrued taxes - other than taxes
on income (8) 19
Deferred income taxes (1) -
-------- --------
Net cash provided by operating
activities $ 248 $ 296
-------- --------
(CONTINUED)
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1998 AND 1997
INCREASE IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
(CONTINUED)
FOR THE NINE
MONTHS ENDED
JULY 31,
------------------
1998 1997
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Expenditures for property and equipment $ (257) $ (145)
Loan to individual (10) (47)
Investment in Trinity Valley Pecan Co. (50) -
-------- --------
Net cash used in investing activities $ (317) $ (192)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES -
Dividend paid $ (58) $ (58)
-------- --------
NET INCREASE (DECREASE)IN CASH AND CASH
EQUIVALENTS $ (127) $ 46
CASH AND CASH EQUIVALENTS - beginning of period 132 97
-------- --------
CASH AND CASH EQUIVALENTS - end of period $ 5 $ 143
======== ========
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ - $ -
======== ========
Income taxes $ 14 $ (4)
======== ========
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 1997 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, 1998 and the
results of its operations and its cash flows for the periods ended July 31,
1998 and 1997. Such adjustments consisted only of normal recurring items.
The results of operations for the periods ending July 31, 1998 and 1997 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 1998 was
23.2%, 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 32.5%. The Company's effective tax rate for the year ended
October 31, 1997 was 22.1%.
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, 1998
increased $59,000 or 37.3% as compared to the nine months ended July 31, 1998.
The increased profitability is attributable to selling raw gas rather than
processing the gas through a gas plant.
Farm produce sales increased $110,000 or 1,375%. The increase is due to
receiving crop insurance proceeds during this quarter due to the extreme
drought conditions. The normal harvest is in the fall of the year.
Operating Expenses - Expenses for the nine months ended July 31, 1998
increased $172,000 or 186.96% as compared to the nine months ended July 31,
1997. The increase in pipeline operating expenses is attributable to expenses
of the new jointly owned compression and dehydration facility.
Depreciation - Depreciation for the nine months ended July 31, 1998
increased $13,000 or 19.7% as compared to the nine months ended July 31, 1997.
The increase is attributable to additions of property and equipment.
Provision for Income Taxes - Provision for income taxes for the nine months
ended July 31, 1998 decreased $9,000 as compared to the nine months ended
July 31, 1997. This is due to an adjustment of the effective income tax rate.
Liquidity and Capital Resources
The Company generated $205,000 of cash flows from operating activities for
the nine months ended July 31, 1998 which is a decrease of $91,000 or 30.7% as
compared to July 31, 1997. This decrease in cash flows is primarily due to
decreases in accounts receivable and accounts payable.
On July 16, 1998, Seven J Stock Farm, Inc invested $50,000 for a 50%
interest in Trinity Valley Pecan Co ("Trinity"), The other owner is the J. R.
Parten Ranch Trust. Trinity is in the process of constructing a pecan
shelling plant which will cost in excess of $550,000. Approximately two acres
of land are leased by the Company to Trinity for operations. In July, 1998,
Trinity entered into a loan agreement with First National Bank of Crockett,
Texas covering an obligation of $554,000. The interest rate is 9.95% with
maturity in 2005. Proceeds of the loan will be used for construction of the
pecan shelling plant. The company and the J. R. Parten Ranch Trust have
guaranteed the loan. It is anticipated that additional funds will be invested
in Trinity by the Company.
The Company anticipates that adequate working capital will continue to be
provided from future operations.
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, 1998.
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, 1998 SEVEN J STOCK FARM, INC.
(Registrant)
R. F. Pratka
------------------------------------------
R. F. Pratka, Vice-President and Treasurer
(Principal Financial Officer)
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEVEN J
STOCK FARM, INC. CONSOLIDATED BALANCE SHEET AT JULY 31, 1998 AND
CONSOLIDATED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED JULY 31, 1998,
AND IS QUALIFIED IN ITS ENTIRETY BY REFRENCE TO SUCH FINANCIAL STATEMNTS.
</LEGEND>
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