FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
For Quarter Ended Commission File Number
September 30, 1995 1-713
TEJON RANCH CO.
(Exact name of Registrant as specified in its charter)
Delaware 77-0196136
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
P.O. Box 1000, Lebec, California 93243
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code...(805) 248-6774
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
Total Shares of Common Stock issued and outstanding on September 30,
1995, were 12,682,244.
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PART I FINANCIAL INFORMATION
TEJON RANCH CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 September 30
1995 1994 1995 1994
Revenues:
Livestock $ 4,393 $ 508 $ 5,286 $ 4,709
Farming 3,035 101 3,206 335
Oil and Minerals 425 360 1,007 962
Commercial and Land Use 543 523 1,386 1,330
Interest Income 320 335 1,032 1,074
8,716 1,827 11,917 8,410
Costs and Expenses:
Livestock 3,839 808 5,157 4,273
Farming 1,665 268 2,790 993
Oil and Minerals 38 43 90 134
Commercial and Land Use 842 373 2,009 1,186
Corporate Expense 543 529 1,684 1,570
Interest Expense 171 61 353 219
7,098 2,082 12,083 8,375
Operating Income (Loss) 1,618 (255) (166) 35
Income Tax Expense (Benefit) 648 (102) (66) 14
Net Income (Loss) $ 970 $ (153) $ (100) $ 21
Earnings (Loss) Per Share $ .08 $ (.01) $ (.01) $ .00
Cash Dividends Paid
Per Share $ -- $ -- $ .025 $ .025
See Notes to Consolidated Condensed Financial Statements.
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TEJON RANCH CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
SEPTEMBER 30,1995 DECEMBER 31, 1994*
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 33 $ 68
Short-term Investments 20,547 23,718
Accounts & Notes Receivable 3,267 2,125
Inventories:
Cattle 3,123 3,020
Farming 2,188 39
Other 79 69
Prepaid Expenses and Other 972 1,223
Total Current Assets 30,209 30,262
PROPERTY AND EQUIPMENT-NET 14,854 13,284
OTHER ASSETS 1,030 1,374
TOTAL ASSETS $ 46,093 $ 44,920
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade Accounts Payable $ 685 $ 1,061
Other Accrued Liabilities 350 465
Other Current Liabilities 4,370 1,950
Total Current Liabilities 5,405 3,476
LONG-TERM DEBT 1,750 1,950
DEFERRED CREDITS 2,517 2,736
Total Liabilities 9,672 8,162
STOCKHOLDERS' EQUITY
Common Stock 6,341 6,341
Additional Paid-In Capital 387 387
Retained Earnings 29,985 30,402
Marketable Securities -
Unrealized Gains (Losses), Net 5 (372)
Defined Benefit Plan - Funding
Adjustment, Net (297) ---
Total Stockholders' Equity 36,421 36,758
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 46,093 $ 44,920
See Notes to Consolidated Condensed Financial Statements.
* The Balance Sheet at December 31, 1994 has been derived from the
audited financial statements at that date.
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TEJON RANCH CO. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOW
(In thousands)
(Unaudited)
NINE MONTHS ENDED
September 30
1995 1994
OPERATING ACTIVITIES
Net Income $ (100) $ 21
Items Not Effecting Cash:
Depreciation and Amortization 756 669
Decrease in Deferred Items --- (29)
Decrease in Deferred Taxes (89) ---
(Gain) Loss on Sale of Investments 6 (52)
Changes in Operating Assets and
Liabilities:
Receivables, Inventories and
Other Assets, Net (3,256) 183
Current Liabilities, Net 1,814 (1,039)
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES (869) (247)
INVESTING ACTIVITIES
Maturities and Sales of Marketable
Securities 5,816 13,216
Funds Invested in Marketable
Securities (2,079) (9,830)
Property and Equipment
Expenditures (2,274) (1,345)
Net Change in Breeding Herds (64) (52)
Other (46) (53)
NET CASH PROVIDED BY
INVESTING ACTIVITIES 1,353 1,936
FINANCING ACTIVITIES
Decrease in Long-Term Debt (200) (1,600)
Cash Dividend Paid (317) (317)
NET CASH USED IN FINANCING ACTIVITIES (517) (1,917)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (33) (228)
Cash and Cash Equivalents at
Beginning of Year 68 247
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 35 $ 19
See Notes to Consolidated Condensed Financial Statements.
- 4 -<PAGE>
TEJON RANCH CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1995
NOTE A - BASIS OF PRESENTATION
The summarized information furnished by Registrant pursuant to the
instructions to Part I of Form 10-Q is unaudited and reflects all
adjustments which are, in the opinion of Registrant's Management,
necessary for a fair statement of the results for the interim period.
All such adjustments are of a normal recurring nature.
The results of the period reported herein are not indicative of the
results to be expected for the full year due to the seasonal nature of
Registrant's agricultural activities. Historically, the largest
percentage of revenues are recognized during the fourth quarter.
F o r further information, refer to the Consolidated Financial
Statements and footnotes thereto included in Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994.
NOTE B - CALCULATIONS OF EARNINGS PER SHARE
Earnings per share are calculated using the weighted average number of
c o m mon shares outstanding during the period. Common shares
outstanding for the three month and nine month periods ended September
30, 1995 and 1994 were 12,682,244. Registrant has a Stock Option
Plan providing for the granting of options to purchase a maximum of
230,000 shares of Registrant's Common Stock to employees, advisors and
consultants of Registrant. Currently, options to purchase 130,000
shares are outstanding at prices equal to the fair market value at
date of grant (96,000 shares at $20.00 and 20,000 shares at $15.00,
and 14,000 shares at $11.88). Stock options granted will be treated
as common stock equivalents in accordance with the treasury method
when such amounts would be dilutive. Fully diluted common shares
outstanding for the three month period ended September 30, 1995 were
12,685,198. For the nine month period ended September 30, 1995 fully
diluted common shares were 12,683,946. At September 30, 1994, common
stock equivalents were antidilutive.
NOTE C - MARKETABLE SECURITIES
Registrant has elected to classify its securities as available-for-
s a le per Statement of Financial Accounting Standard No. 115,
Accounting for Certain Investments in Debt and Equity Securities, and
therefore is required to adjust securities to fair value at each
reporting date.
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Marketable securities consist of the following at:
September 30 December 31
1995 1994
------------------- --------------------
Estimated Fair Estimated Fair
Cost Value Cost Value
------------------- --------------------
Marketable securities:
U.S. Treasury and agency
notes $15,354 $15,331 $18,837 $18,409
Corporate notes 5,185 5,216 5,445 5,309
---------------------------------------
$20,539 $20,547 $24,282 $23,718
=======================================
As of September 30, 1995, the cumulative fair value adjustment is an
$8,000 unrealized gain. The cumulative fair value adjustment to
stockholders' equity, net of a deferred tax expense of $3,000, is an
unrealized gain of $5,000. Registrant's gross unrealized holding
gains equals $222,000, while gross unrealized holding losses equals
$214,000. On September 30, 1995, the average maturity of U.S.
Treasury and agency securities was 2.3 years and corporate notes was
1.5 years. Currently, Registrant has no securities with a weighted
average life of greater than five years. During 1995, Registrant has
recognized losses of $6,000 on the sale of $4.1 million of
securities, carried at historical cost adjusted for amortization and
accretion.
Market value equals quoted market price, if available. If a quoted
market price is not available, market value is estimated using quoted
market prices for similar securities. Registrant's investments in
Corporate notes are with companies with a credit rating of A or
better.
NOTE D - COMMODITY DERIVATIVES USED TO HEDGE PRICE FLUCTUATIONS
Registrant uses commodity derivatives to hedge its exposure to price
fluctuations on its purchased stocker cattle. The objective is to
protect or create a future price for stocker cattle that will provide
a profit once the cattle are sold and all costs are deducted and
protect Registrant against market declines. To help achieve this
objective Registrant uses the cattle futures and cattle options
markets. Registrant continually monitors any open futures and
options contracts to determine the appropriate hedge based on market
movement of the underlying asset, stocker cattle. The option and
futures contracts used typically expire on a quarterly or semi-annual
basis and are structured to expire close to or during the month the
stocker cattle are scheduled to be sold. Payments received and paid
related to options contracts are deferred in prepaid and other
current assets and were approximately $19,000 at September 30, 1995.
Cattle futures contracts are carried off-balance sheet until the
contracts are settled. Realized gains, losses, and costs associated
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with closed contracts equal to $32,000 of net gain is included in
cattle inventory and will be recognized in cost of sales expense at
the time the hedged stocker cattle are sold. Registrant maintains a
margin account with its commodity broker for the purpose of buying
and selling cattle futures and options. At September 30, 1995,
Registrant's margin account was zero.
There were no cattle futures contracts or options contracts outstanding
at September 30, 1995.
NOTE E - CONTINGENCIES
Registrant leases land to National Cement Company of California, Inc.
("National") for the purpose of manufacturing portland cement from
limestone deposits on the leased acreage. National, LaFarge
Corporation (the parent company of the previous operator) and
Registrant have been ordered to cleanup and abate an old industrial
waste landfill site on the leased premises. Under existing lease
agreements, National and LaFarge are required to indemnify Registrant
for costs and liabilities incurred in connection with the cleanup
order. Due to the financial strength of National and LaFarge,
Registrant believes that it is remote there will be a material effect
on the Company.
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MANAGEMENT'S ANALYSIS OF FINANCIAL STATEMENTS
Results of Operations
RESULTS OF OPERATIONS
Total revenues, including interest income, for the first nine months
of 1995 were $11,917,000 compared to $8,410,000 for the first nine
months of 1994. The increase in revenues during 1995 is attributable
to increases in livestock revenues and farming revenues. Livestock
revenues increased due to the sale of 7,233 head of cattle during
1995 compared to 7,190 head of cattle in 1994 and to higher average
weights on the cattle sold during 1995. Farming revenues are higher
due to the timing of the crop harvest and the recording of crop
revenues. In 1995, almond and zinfandel grape harvests were
completed during the third quarter whereas in 1994 harvests were not
completed until the fourth quarter for all crops. Approximately
$2,900,000 of the increase in revenues is attributable to this timing
difference in farming revenues.
Operating activities during the first nine months of 1995 resulted in
a net loss of $100,000 or $.01 per share, compared to net income of
$21,000, or $.00 per share, for the same period in 1994. The
decrease in net income compared to 1994 is due to a $400,000 pre tax
charge-off ($240,000, or $.02 per share, after tax) of almond trees
destroyed by wind during a storm in January 1995, an increase in
consultant and legal fees of approximately $862,000 related to right-
o f -way issues, easement issues and land planning activities,
increased farming expenses, and increased cost of sales within
livestock operations. Farming expenses increased when compared to
1994 due to the timing of the recognition of expenses for almonds and
zinfandel grapes, which are related to the farming revenues described
above. Livestock cost of sales have increased due to the added costs
of feeding the cattle sold on feedlots throughout the summer months.
These unfavorable variances were partially offset by the increase in
revenues described above.
Total revenues for the third quarter, including interest income, were
$8,716,000 compared to $1,827,000 for the third quarter of 1994. The
increase in third quarter revenues is due to the sale of 5,622 head
of cattle during the third quarter of 1995 compared to 505 head of
cattle during 1994. Normally the cattle sold during the third
quarter of 1995 would have been sold during the second quarter but
due to low cattle prices Registrant decided to delay the sale of
these cattle and place them on feed throughout the summer. The cattle
were then scheduled for sale during the period of August through
October. Revenues also increased due to the timing of farming
revenues as described above.
During the third quarter of 1995 Registrant recognized net income of
$970,000, or $.08 per share, compared to a loss of $153,000, or $.01
per share, for the same period in 1994. The increase in net income
compared to 1994 is due to the increase in revenues as described
above. These revenues were partially offset by increased livestock
cost of sales and to increased farming costs as explained above.
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As explained in Management's Discussion and Analysis of Financial
Condition and Results of Operations of Registrant's 1994 Form 10-K,
Registrant's farming operations suffered damages as a result of high
winds that were associated with a series of winter storms. Nearly
all of the loss occurred in Registrant's producing almond orchards.
Approximately 200 acres of trees were uprooted by a combination of
high winds and saturated soil conditions due to heavy rainfall. The
loss of these trees resulted in the charge-off described above.
Registrant is currently replanting the damaged acreage with new
almond trees. The loss of mature trees will affect future revenues
until the replanted crops begin full production which could take
three to five years.
Registrant's farming revenues will be affected by the loss of trees
as described above but not as severally as originally reported for
1995. At this point in the crop harvest it appears that higher grape
production and higher almond prices will offset the lost revenue from
the destroyed almond trees for 1995. In future years revenue will be
affected until the replanted almond trees begin production which
generally takes three to five years.
As described in Part I, Item 1 - "Business - Farming Operations" of
Registrant's 1994 Form 10-K, Laval Farms Limited Partnership (Laval),
formerly named Tejon Agricultural Partners, entered into an agreement
for the sale of its farmland and eventual dissolution of the
partnership. As of April 20, 1995 all of the 13,000 acres that
existed at the start of the sale program have been sold. Laval is
continuing to utilize Registrant's management services until the
partnership is dissolved. Registrant is currently receiving $10,000
per month for management services and is expected to receive this fee
for the remainder of 1995.
Registrant is involved in various environmental proceedings related
to leased acreage. For a further discussion refer to Registrant's
1994 Form 10-K, Part I, item 3, - "Legal Proceedings". There have
been no changes since the filing of the 1994 Form 10-K.
Prices received by Registrant for many of its products are dependent
upon prevailing market conditions and commodity prices. Therefore,
Registrant is unable to accurately predict revenue, just as it cannot
pass on any cost increases caused by general inflation, except to the
extent reflected in market conditions and commodity prices. The
operations of the Registrant are seasonal and results of operations
cannot be predicted based on quarterly results.
Liquidity and Capital Resources
Cash and short-term investments on September 30, 1995 were $20.6
million compared to $23.8 million on December 31, 1994. Working
capital on September 30, 1995 was $24.8 million compared to $26.8
million on December 31, 1994. The decrease in working capital at
September 30, 1995 as compared to December 31, 1994 is primarily due
to a temporary increase in short-term borrowings due to the timing of
c a t tle sales, the purchase of property, capital improvement
expenditures, and the payment of dividends.
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Cash provided from operations and cash and short-term investments on
hand are expected to be sufficient to satisfy all anticipated working
capital and capital expenditure needs in the near term.
- 10 -
Impact of Accounting Change
None
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports - None
- 11 -<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
TEJON RANCH CO.
(Registrant)
BY
Date Allen E. Lyda
Vice President, Finance
& Treasurer
- 12 -<PAGE>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET, INCOME STATEMENT, AND FOOTNOTES AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
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