U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended January 31, 1999
( ) 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 March 11, 1999 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
FOR THE THREE MONTHS ENDED JANUARY 31, 1999 AND 1998
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE DATA)
(UNAUDITED)
FOR THE THREE
MONTHS ENDED
JANUARY 31,
-----------------------
1999 1998
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REVENUES:
Pipeline operations $ 70 $ 55
Oil and gas royalties - net of excise taxes 31 44
Pasture and ranch lease rentals 30 30
Farm produce sales 35 7
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Total revenues $ 166 $ 136
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COSTS AND EXPENSES:
Operating expenses $ 60 $ 46
Administrative and general expenses 58 51
Depreciation 26 24
Equity in loss of 50% owned affiliate 35 -
Other costs and expenses 11 9
Interest expense 2 -
Other (income) expense - net (9) (4)
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Total costs and expenses $ 183 $ 98
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INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES $ (17) $ 10
Provision for income taxes (Note 2) 5 2
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NET INCOME (LOSS) $ (22) $ 8
========== ==========
NET INCOME (LOSS) PER SHARE (1,451,000 weighted -
average shares outstanding) $ (.02) $ .01
========== ==========
DIVIDENDS PER SHARE None None
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
JANUARY 31, 1999
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE DATA)
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9
Accounts receivable 116
Accounts and notes receivable - other 48
Refundable income tax 4
Other current assets 15
------------
Total current assets $ 192
INVESTMENTS AND ADVANCES TO 50% OWNED AFFILIATE 140
PROPERTY AND EQUIPMENT - net 1,631
OTHER ASSETS 1
------------
TOTAL $ 1,964
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 26
Accrued taxes - other than taxes on income 6
Accrued expenses - other 35
Current maturities of long-term debt 18
------------
Total current liabilities $ 85
------------
LONG-TERM DEBT $ 107
------------
OTHER LIABILITIES AND CREDITS:
Deferred income taxes $ 98
Unearned lease income 9
------------
Total other liabilities and credits $ 107
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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 214
------------
Total shareholders' equity $ 1,665
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TOTAL $ 1,964
============
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 THREE MONTHS ENDED JANUARY 31, 1999 AND 1998
(DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
FOR THE THREE
MONTHS ENDED
JANUARY 31,
-----------------------
1999 1998
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(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (22) $ 8
Adjustments to reconcile net income(loss) to net
cash provided by (used in) operating activities:
Depreciation 26 24
Equity in loss of 50% owned affiliate 35 -
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 8 29
Accounts & notes receivable - other 5 -
Refundable income taxes (4) 2
Other current assets - 8
Other assets - (7)
Increase (decrease) in liabilities:
Accounts payable (23) (40)
Accrued income taxes (31) (1)
Accrued taxes - other than taxes on income (19) (27)
Accrued expenses - other 12 (1)
Deferred income taxes 1 -
Other liabilities - (1)
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Net cash provided by (used in) operating
activities $ (12) $ (5)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures $ (16) $ (91)
Investment and advances to 50% owned affiliate (105) -
--------- ----------
Net cash (used in) investing activities $ (121) $ (91)
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CASH FLOWS FROM FINANCING ACTIVITIES-
Long-term borrowing $ 125 $ -
--------- ---------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS $ (8) $ (96)
CASH AND CASH EQUIVALENTS - beginning of period 17 132
--------- ----------
CASH AND CASH EQUIVALENTS - end of period $ 9 $ 36
========= ==========
(CONTINUED)
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1999 AND 1998
(DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
(CONTINUED)
FOR THE THREE
MONTHS ENDED
JANUARY 31,
-----------------------
1999 1998
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(in thousands)
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ 1 $ -
=========== ==========
Income taxes $ 36 $ -
=========== ==========
NON CASH PURCHASE OF PROPERTY AND EQUIPMENT $ - $ -
=========== ==========
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 1998 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 January 31, 1999 and
the results of its operations and its cash flows for the periods ended
January 31, 1999 and 1998. Such adjustments consisted only of normal
recurring items. The results of operations for the periods ending
January 31, 1999 and 1998 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 for the prior period have been reclassified.
The reclassifications have no effect on net income.
NOTE 2 - PROVISION FOR INCOME TAXES
The reported income tax rate on income excluding equity in loss of 50%
owned affiliate in the first three months of fiscal year 1999 was 27.78%
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 20.0%. The Company's effective tax rate for the year ended
October 31, 1998 was 28.8%.
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 three months ended January 31, 1999
increased $15,000 or 27.3% as compared to the three months ended January 31,
1998.. This is primarily the result of an increase in gas volume transmitted.
Net Oil and Gas Royalties - Revenue for the three months ended January 31,
1999 decreased $13,000 or 29.5% as compared to the three months ended
January 31, 1998. The decrease is due to the decline in oil prices.
Farm Produce Sales - Revenue for the three months ended January 31, 1999
increased $28,000 or 400% as compared to the three months ended January 31,
1998. This was the result of a government farm production payment.
Administrative and General Expenses - Expenses for the three months ended
January 31, 1999 increased $7,000 or 13.7%. This increase is primarily the
result of an increase in allocated salaries.
Equity in loss of 50% owned affiliate - The company's investment in Trinity
Valley Pecan Co produced a loss of $35,000. The loss was a result of pecans
not being available due to bad weather conditions and start-up productions
costs.
Provision for Income Taxes - Provision for income taxes for the three months
ended January 31, 1999 increased $3,000 as compared to the three months ended
January 31, 1998. This is due to an increase in income before provision for
income taxes excluding equity in loss of 50% owned affiliate.
Liquidity and Capital Resources
The Company had negative cash flow of $12,000 in operating activities for
the three months ended January 31, 1999 as compared to a negative cash flow
of $5,000 from operating activities for the three months ended January 31,
1998. During the current period, the company borrowed $125,000 for investment
in Trinity Valley Pecan Co. a 50% owned affiliate. The company had previously
guaranteed a loan of the affiliate in the amount of $514,000. 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 January 31, 1999.
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.
SEVEN J STOCK FARM, INC.
(Registrant)
March 16, 1999 R. F. Pratka
------------------------------------------
R. F. Pratka, Vice-President and Treasurer
(Principal Financial Officer)
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEVEN J
STOCK FARM, INC. CONSOLIDATED BALANCE SHEET AT JANUARY 31, 1999 AND
CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED JANUARY 31,
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
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<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
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<RECEIVABLES> 164
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<CURRENT-ASSETS> 192
<PP&E> 3608
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<EPS-PRIMARY> (.02)
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