<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year
ended December 31,1995
Commission file number 1-737
TEXAS PACIFIC LAND TRUST
(Exact name of registrant as specified in its charter)
NOT APPLICABLE 75-0279735
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
80 Broad Street, Suite 2700, New York, New York 10004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code:
(212) 269-2266
Securities registered pursuant to Section 12(b) of the act:
<TABLE>
<CAPTION>
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
------------------- ----------------------------
<C> <C>
Sub-shares in Certificate
of Proprietary Interest New York Stock Exchange
(par value $.16-2/3 per share)
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act: None.
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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<PAGE> 2
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (section 229,405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. /X/
As of January 31, 1996, the aggregate market value of the voting stock
held by non-affiliates of the registrant is approximately $77,804,606. Documents
Incorporated by Reference: None.
ITEM 1: BUSINESS
(a) General Development of Business. The registrant (hereinafter called
"Texas Pacific" or the "Trust") was organized under a Declaration of Trust dated
February 1, 1888, to receive and hold title to extensive tracts of land in the
State of Texas, previously the property of the Texas and Pacific Railway
Company, and to issue transferrable Certificates of Proprietary Interest prorata
to the holders of certain debt securities of the Texas and Pacific Railway
Company. The Trustees are empowered under the Declaration of Trust to manage the
lands with all the powers of an absolute owner, and to use the lands and the
proceeds of sale of the lands, either to pay dividends to the Certificate
holders or to buy in and cancel outstanding Certificates. The Trust's income is
derived primarily from land sales, oil and gas royalties, grazing leases, and
interest. This method of operation has continued through the present. During the
last five years there has not been any reorganization, disposition of any
material amount of assets not in the ordinary course of business (although in
the ordinary course of business Texas Pacific does sell or lease large tracts of
land owned by it), or any material change in the mode of conducting business.
Texas Pacific's income from oil and gas royalties has been limited in
the past by the level of production authorized for prorated wells each year by
the regulations of the Railroad Commission of Texas. The monthly percentage of
allowable production has averaged 100% in recent years but because of the
limited capacity of older wells and other operating problems, the percentage
permitted by the Commission could not be produced by most operators.
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<PAGE> 3
(b) Financial Information about Industry Segments. Texas Pacific does
not have identifiable industry segments, although as shown in the Statements
of Income included in the financial statements land sales, oil and gas
royalties and interest income are the major contributors to the income of
Texas Pacific. See Statements of Income for additional sources of income for
the last three (3) years of Texas Pacific.
(c) Narrative Description of Business. (1) As previously indicated the
business done and intended to be done by Texas Pacific consists of sales and
leases of land owned by it, retaining oil and gas royalties, temporary cash
investments and the overall management of the land owned by it.
(i) During the last three fiscal years the following items have
accounted for more than fifteen percent (15%) of
consolidated revenues.
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Land Sales 32% 57% 28%
Oil and Gas Royalties 39% 23% 41%
</TABLE>
(ii) Texas Pacific is not in the business of development of new
products.
(iii) Raw materials are not necessary to the business of Texas
Pacific.
(iv) Patents, trademarks, licenses, franchises or concessions
held are not material to any business of Texas Pacific.
(v) The business of Texas Pacific is not seasonal in nature.
(vi) The business of Texas Pacific does not require Texas Pacific
to maintain any particular amount or item of working
capital.
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<PAGE> 4
(vii) Texas Pacific Land Trust received $646,193 or 25.7 percent
of its oil and gas royalty income from 138 leases operated
by Texaco Inc.
(viii) Backlogs are not relevant to an understanding of Texas
Pacific's business.
(ix) No material portion of Texas Pacific business is subject to
renegotiation or termination at the election of the
Government.
(x) The Trust does not have competitors as such in that it sells,
leases and generally manages land owned by it and to that
extent any owner of property located in areas comparable to
the Trust is a potential competitor.
(xi) Research activities relating to the development of new
products or services or to the improvement of existing
products or services are not material to the Trust's
business.
(xii) Compliance with Federal, State and local provisions that have
been enacted or adopted regulating the discharge of
materials into the environment, or otherwise relating to the
protection of the environment, have had no material effect
upon the capital expenditures, earnings and competitive
position of Texas Pacific. To date Texas Pacific has not
been called upon to expend any funds for these purposes.
(xiii) Texas Pacific has nine (9) full-time employees.
(d) Financial Information about Foreign and Domestic Operations and
Export Sales. Texas Pacific does not and has not during the preceding three (3)
fiscal years had any export sales or foreign operations and the only geographic
area in the United States in which land is sold or income derived is Texas.
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<PAGE> 5
ITEM 2: PROPERTIES.
Texas Pacific Land Trust owns the surface estate in approximately
1,107,075 acres of land located in 21 counties in the western part of Texas.
Also, the Trust owns a 1/128 nonparticipating perpetual oil and gas royalty
interest under 85,414 acres of land and a 1/16 nonparticipating perpetual oil
and gas royalty interest under 386,988 acres of land in the western part of
Texas. At December 31, 1995, grazing leases were in effect on 97.4 percent or
approximately 1,078,042 acres of the Trust's land. Approximately 27,604 acres
of land were sold in 1995. The Trust leases office space in Dallas and El Paso,
Texas and New York, New York.
ITEM 3: LEGAL PROCEEDINGS.
Texas Pacific is not involved in any material pending legal proceedings.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
This item is not applicable to Texas Pacific.
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<PAGE> 6
ITEM 5: MARKET FOR SUB-SHARE CERTIFICATES AND RELATED SECURITY HOLDER MATTERS.
The range of reported sales for sub-shares on the New York Stock
Exchange for the past two years has been as follows:
<TABLE>
<CAPTION>
1995 1994
----------------------- -----------------------
HIGH LOW HIGH LOW
------- ------- ------- -------
<S> <C> <C> <C> <C>
1st Quarter $19 5/8 $17 $21 1/2 $18 3/4
2nd Quarter 26 7/8 19 20 1/2 18 1/4
3rd Quarter 28 3/4 24 7/8 20 1/2 19 1/8
4th Quarter 27 1/4 22 3/8 22 1/8 18
</TABLE>
Certificates of Proprietary Interest and sub-shares are interchangeable
in the ratio of one certificate for 600 sub-shares or 600 sub-shares for one
Certificate of Proprietary Interest. Texas Pacific has paid a dividend once a
year for the preceding 40 years. The dividend was $.40 per sub-share in 1995 and
$.40 per sub-share in 1994. Texas Pacific is not a party to any agreement that
would limit its ability to pay dividends in the future, although any future
dividends are subject to sufficient earnings of the Trust being accomplished.
The approximate number of holders of Certificates of Proprietary
Interest and sub-shares as of January 31, 1996 were:
<TABLE>
<S> <C>
Certificates of Proprietary Interest 1
Sub-shares in Certificates of Proprietary Interest 1,176
-----
TOTAL 1,177
=====
</TABLE>
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<PAGE> 7
ITEM 6: SELECTED FINANCIAL DATA.
SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Gross revenue $ 6,440,285 $ 9,102,833 $ 5,262,762 $ 4,332,613 $ 4,924,645
Expenses 1,688,567 1,792,839 1,681,745 1,591,693 1,647,748
----------- ----------- ----------- ----------- -----------
Income before provision for
Federal taxes on income 4,751,718 7,309,994 3,581,017 2,740,920 3,276,897
Provision for Federal taxes
on income 1,422,817 2,336,325 1,894,131* 732,575 1,016,972
----------- ----------- ----------- ----------- -----------
Net income $ 3,328,901 $ 4,973,669 $ 1,686,886 $ 2,008,345 $ 2,259,925
=========== =========== =========== =========== ===========
Net income per Sub-share $ 1.09 $ 1.58 $ .52 $ .60 $ .66
Dividends per Sub-share $ .40 $ .40 $ .40 $ .40 $ .40
Average number of Sub-shares
outstanding 3,038,847 3,149,609 3,248,709 3,348,784 3,429,601
=========== =========== =========== =========== ===========
Total assets, exclusive of
property with no assigned
value $13,901,804 $14,971,994 $13,255,288 $14,165,216 $15,401,865
=========== =========== =========== =========== ===========
</TABLE>
* Includes $812,030, $.25 per sub-share, cumulative effect of change in
accounting for income taxes in 1993.
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<PAGE> 8
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Land sales amounted to $2,057,764 in 1995 compared with $5,230,430 in
1994 and $1,484,123 in 1993. A total of 27,604.37 acres were sold in 1995 at an
average price of $75 per acre, compared with 23,386.50 acres in 1994 and
14,724.48 acres in 1993 at an average price per acre of $192 and $99,
respectively. In as much as land sales may vary from year to year, the dollar
volume and total number of acres sold in any one year should not be assumed to
be indicative of land sales in future years.
Oil and gas royalty revenue was $2,508,663 in 1995 compared with
$2,064,324 in 1994 and $2,166,045 in 1993. Oil royalty revenue was $1,773,060
and gas royalty revenue amounted to $735,603 in 1995. Crude oil production from
Trust royalty wells increased 10.4%. The average price per royalty barrel was
$16.54 in 1995, $15.22 in 1994 and $17.26 in 1993. Interest revenue was
$609,895 in 1995 compared with $571,257 in 1994 and $535,313 in 1993. Interest
on notes receivable amounted to $480,073 in 1995 compared with $502,889 in 1994
and $469,264 in 1993. Sundry interest amounted to $129,822 in 1995, $68,368 in
1994 and $66,049 in 1993.
Taxes, other than Federal taxes on income, were $558,697 in 1995
compared with $510,635 in 1994 and $525,423 in 1993. Oil and gas production
taxes were $138,018 in 1995 compared with $112,990 in 1994 and $116,335 in
1993. Ad valorem taxes were $390,122 in 1995, $363,034 in 1994 and $378,413 in
1993. Other expenses were $1,129,870 in 1995, $1,282,204 in 1994 and $1,156,322
in 1993.
The Trust's oil and gas royalty revenue, lease rentals, and receipts of
interest and principal payments on notes receivable have generated more than
adequate amounts of cash to meet the Trust's needs and should continue to do so
in the predictable future.
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Financial Statements attached hereto.
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<PAGE> 9
ITEM 9: CHANGE IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.
This item is not applicable to Texas Pacific.
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS.
(a) Directors:
<TABLE>
<CAPTION>
POSITION AND PERIOD DURING
OFFICES HELD WHICH PERSON
NAME AGE WITH REGISTRANT HAS SERVED IN OFFICE
- ---- --- -------------------- ----------------------
<S> <C> <C> <C>
George C. Fraser III 73 Trustee and Chairman Trustee since 10/01/61
of the Trustees
Maurice Meyer III 60 Trustee and Member Trustee since 02/28/91
of Audit Committee
Joe R. Clark 68 Trustee and Member Trustee since 02/20/87
of Audit Committee
</TABLE>
The Trustees hold office until their death, resignation or
disqualification. No Trustee was selected to be a Trustee pursuant to any
arrangement or understanding between him and any other person or persons, other
than the Trustees acting solely in their capacity as such.
(b) Executive Officers.
<TABLE>
<CAPTION>
POSITION AND PERIOD DURING
OFFICES HELD WHICH PERSON
NAME AGE WITH REGISTRANT HAS SERVED IN OFFICE
- ---- --- -------------------- ----------------------
<S> <C> <C> <C>
George C. Fraser III 73 Trustee and Chairman Chairman of Trustees
of the Trustees since 02/28/91
Roy Thomas 49 General Agent and General Agent of Texas
Secretary Pacific Land Trust
commencing 01/01/95
and Secretary
commencing 01/01/95;
Assistant General
Agent from 12/01/92
through 12/31/94
</TABLE>
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<PAGE> 10
The Chairman of the Trustees holds office until his death, resignation
or disqualification. General Agent and Secretary holds office until his death,
resignation, discharge or retirement pursuant to Texas Pacific Land Trust
Employees' Pension Plan. No executive officer was selected to be an officer
pursuant to any arrangement or understanding between him and any other person
or persons other than the Trustees acting solely in their capacity as such.
(c) Certain Significant Employees. The Trust does not employ any person
who is not an executive officer who makes or is expected to make significant
contributions to the business of the Trust.
(d) Family Relations. There is no family relationship between any
Trustee and any other Trustee or any executive officer of the registrant.
(e) Business Experience.
<TABLE>
<CAPTION>
NAME OF TRUSTEE OR PRINCIPAL OCCUPATION OR EMPLOYMENT
EXECUTIVE OFFICER DURING THE PAST FIVE YEARS
- ------------------ ----------------------------------
<S> <C>
George C. Fraser III Chairman of the Trustees of Texas
Pacific Land Trust; geologist Self-
employed as independent oil & gas
producer and operator, Austin, Texas
Maurice Meyer III Former Vice Chairman of Henderson
Brothers
Joe R. Clark Personal investments. Former
President of Texas Pacific Oil
Company, Inc.
Roy Thomas Assistant General Agent of Texas
Pacific Land Trust and General Agent
of Texas Pacific Land Trust
</TABLE>
(f) Involvement in Certain Legal Proceedings. During the past five
years, no Director or Executive Officer is or has been involved in any event
reportable under this caption.
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<PAGE> 11
ITEM 11: MANAGEMENT REMUNERATION AND TRANSACTIONS.
REMUNERATION TABLE
<TABLE>
<CAPTION>
(A) (B) (C) (D)
CASH & CASH EQUIVALENT AGGREGATE OF
NAME OF CAPACITIES FORMS OF REMUNERATION CONTINGENT FORMS
INDIVIDUALS IN WHICH SERVED SERVED OF REMUNERATION
- ----------- ---------------------- ---------------------- --------------------
<S> <C> <C> <C>
(C1) (C2)
SECURITIES OF
SALARIES, FEES, PROPERTY, INSURANCE
DIRECTOR'S FEES, BENEFITS OR
COMMISSIONS AND REIMBURSEMENTS;
BONUSES PERSONAL BENEFITS
---------------------- --------------------
Roy Thomas Secretary & $90,833.34 (1) (2)
General Agent
All Officers Trustees including $98,833.34 (1) (2)
& Directors Chairman;
as a Group General Agent
(four in number)
</TABLE>
(1) During the year ending December 31,1995, no Trustee or executive officer of
the registrant received any compensation for services to the registrant in
the form of securities or property, life or health insurance, medical
reimbursement, personal benefits or other unreported compensation except
for certain personal benefits such that the extent to which they were
personal rather than business cannot be specifically or precisely
ascertained without unreasonable effort or expenses and which did not in
any event exceed the minimum reportable amount under this caption.
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<PAGE> 12
(2) The registrant maintains Texas Pacific Land Trust Employees' Pension Plan,
a non-contributory defined benefit pension plan qualified under Section 401
of the Internal Revenue Code in which the employees, excluding the
Trustees, participate. The amount of the registrant's contribution, payment
or accrual in respect to Mr. Thomas is not and cannot readily be separately
or individually calculated by the regular actuaries for the Plan. Based
upon the Plan formula of 1-1/2% of each covered year times the average
salary of the last five years, Mr. Thomas is estimated to have retirement
benefits of $36,788.50 per year upon retirement age of 65. Total
compensation paid during 1995 to the nine (9) employees covered by the
Employees' Pension Plan was $413,800.00. No contribution was made to the
plan in 1995. The remuneration covered by the plan is salary. The Trust
does not maintain any other pension or retirement plan annuity contract,
deferred compensation plan, incentive compensation plan or arrangement,
stock purchase plan, profit sharing or thrift plan, or other similar
arrangement.
A supplemental pension in the amount of $20,000 annually was paid to
Frances L. McCaul, widow of James A. McCaul, Jr., former General Agent and
Secretary of the Trust. This supplemental payment was in addition to normal
pension benefits being paid to Mrs. McCaul from the Texas Pacific Land
Trust Employees' Pension Plan, and such supplemental payments continued
until November 1, 1995. A total of $18,333.00 was paid in 1995 under this
arrangement.
(3) The Chairman of the Trustees receives the sum of four thousand dollars per
year as compensation for his services, and the other two trustees receive
the sum of two thousand dollars per year for their services.
(4) There is no compensation plan or arrangement with respect to any individual
named in the remuneration table that results, or will result, from the
resignation, retirement or any other termination of such individual's
employment or from a change in control of Texas Pacific or in a change in
the individual's responsibilities following a change in control of Texas
Pacific.
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<PAGE> 13
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) The following table sets forth information as to all persons known
to the Trust to be the beneficial owner of more than 5% of the Trust's voting
securities.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES TYPE OF PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED SECURITIES OF CLASS
- ---------------- ------------------ ---------- --------
<S> <C> <C> <C>
Fund American Enterprises 246,000 (1) Sub-share 8.1%
Holdings, Inc. certificates
The 1820 House
Main Street
Norwich, VT 05055-0850
</TABLE>
(1) Reflects holdings as of December 31, 1995.
(b) Security Ownership of Management: The following table gives the
information indicated as to equity securities (Certificates of Proprietary
Interest and Sub-Share Certificates) of Texas Pacific beneficially owned
directly or indirectly by all trustees, naming them, and by all trustees and
officers of the registrant, as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME OF OF OWNERSHIP PERCENT
TITLE AND CLASS(1) BENEFICIAL OWNER ON JANUARY 31, 1996 OF CLASS
- ------------------ ---------------- ------------------ --------
<S> <C> <C> <C>
Sub-share certificates: George C. Fraser III 28,420 (2) .95%
Sub-share certificates: Maurice Meyer III 3,500 (3) .1%
Sub-share certificates: Joe R. Clark 500 .01%
Sub-share certificates: All Trustees and
Officers as a Group 32,420 1.06%
</TABLE>
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<PAGE> 14
(1) The sub-shares and the Certificates of Proprietary Interest are freely
interchangeable in the ratio of one Certificate of Proprietary Interest for
six hundred sub-shares or six hundred sub-shares for one Certificate of
Proprietary Interest, and are deemed to constitute a single class. On
December 31, 1995, no trustee or officer was the beneficial owner, directly
or indirectly, of any Certificates of Proprietary Interest.
(2) Includes 600 sub-shares owned by trusts of which Mr. Fraser is a trustee
and beneficiary.
(3) Does not include 300 sub-shares owned by the wife of Mr. Maurice Meyer III
in which Mr. Meyer disclaims any beneficial ownership.
(c) Changes in Control. Texas Pacific has no knowledge of any arrangement that
may result in any change of the control of the Trust.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transaction with management and others. There are no reportable
transactions or currently proposed transactions between Texas Pacific and any
Trustee or executive officer of Texas Pacific or any nominee for election as
Trustee or any security holder of Texas Pacific or any member of the immediate
family of the foregoing persons.
(b) Certain business relationships. There are no relationships existing
or have ever existed concerning Trustees or nominees for Trustee that are
required to be disclosed under this paragraph.
(c) Indebtedness of Management. There are no persons indebted to Texas
Pacific in an amount in excess of $60,000.00 that are required to be disclosed
under this paragraph.
(d) Transactions with Promoters. Texas Pacific has not been organized
within the last five years and disclosure under this paragraph is not applicable
to Texas Pacific.
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<PAGE> 15
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS SCHEDULE AND REPORT ON FORM 8-K.
(a) Financial Statements.
1. All schedules have been omitted because the required information is
contained in the financial statements or related notes, or is not
applicable or immaterial.
2. Exhibits required by Item 7 Regulation S-K
a. Annual Report to Security Holders
b. Copy of Trust Indenture
c. Exhibit No. 27 Financial Data Schedule
(b) No reports on Form 8-K have been filed for the last quarter of the period
covered by this report.
(c) See (a) (2) above.
(d) See (a) (1) above.
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<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
(Registrant) TEXAS PACIFIC LAND TRUST
By: GEORGE C. FRASER III
-------------------------------
George C. Fraser III
Chief Executive Officer
Date: March 22, 1996
-------------------------------
By: ROY THOMAS
-------------------------------
Roy Thomas
Chief Financial and Chief
Accounting Officer
Date: March 22, 1996
-------------------------------
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<PAGE> 17
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: GEORGE C. FRASER III
--------------------------------
George C. Fraser III, Trustee
Date: March 22, 1996
--------------------------------
By: JOE R. CLARK
--------------------------------
Joe R. Clark, Trustee
Date: March 24, 1996
--------------------------------
By: MAURICE MEYER III
-------------------------------
Maurice Meyer III, Trustee
Date: March 25, 1996
-------------------------------
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<PAGE> 18
TEXAS PACIFIC LAND TRUST
10-K FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(With Independent Auditors' Report Thereon)
<PAGE> 19
TEXAS PACIFIC LAND TRUST
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report
Balance Sheets - December 31, 1995 and 1994
Statements of Income - Years ended December 31, 1995, 1994 and 1993
Statements of Net Proceeds from all Sources - Years ended December 31, 1995,
1994 and 1993
Statements of Cash Flows - Years ended December 31, 1995, 1994 and 1993
Notes to Financial Statements
Schedules - All schedules have been omitted because the required information is
contained in the financial statements or related notes, or is not applicable.
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
The Trustees and Certificate Holders
Texas Pacific Land Trust:
We have audited the financial statements of Texas Pacific Land Trust as listed
in the accompanying index. These financial statements are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Texas Pacific Land Trust as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1995,
in conformity with generally accepted accounting principles.
As discussed in notes 1 and 5 to the financial statements, the Trust adopted
the provisions of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," in 1993.
KPMG PEAT MARWICK LLP
Dallas, Texas
January 23, 1996
<PAGE> 21
TEXAS PACIFIC LAND TRUST
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
____________ ___________
<S> <C> <C>
ASSETS
Cash $ 72,985 $ 232,843
Temporary cash investments - at cost which
approximates market 2,950,000 2,000,000
Accounts receivable 294,582 227,067
Notes receivable for land sales ($749,740 due
in 1996 and $907,171 due in 1995) (note 1) 3,509,008 5,347,947
Accrued interest receivable 128,482 225,470
Prepaid expenses 48,365 48,365
Real estate acquired through foreclosure (note 3) 6,844,336 6,844,336
Water wells, leasehold improvements, furniture
and equipment - at cost less accumulated
depreciation 54,046 45,966
Property, no value assigned (note 1):
Land (surface rights) situated in twenty-one
counties in Texas - 1,078,934.61 acres in
1995 and 1,106,607.34 acres in 1994 - -
Town lots in Iatan, Loraine, and Morita,
Texas - 628 lots - -
1/16 nonparticipating perpetual royalty interest
in 386,987.70 acres - -
1/128 nonparticipating perpetual royalty
interest in 85,413.60 acres - -
----------- -----------
$13,901,804 $14,971,994
=========== ===========
LIABILITIES AND CAPITAL
Accounts payable and other liabilities $ 55,046 $ 104,575
Federal income taxes 240,412 218,708
Other taxes 17,401 13,084
Deferred taxes (note 5) 3,294,317 3,766,446
----------- ----------
Total liabilities 3,607,176 4,102,813
----------- ----------
Capital (notes 1 and 6):
Certificates of Proprietary Interest,
par value $100 each; outstanding 1 certificate - -
Sub-share Certificates in Certificates of
Proprietary Interest, par value
$.16-2/3 each; outstanding 2,962,405
sub-shares in 1995 and 3,075,305 sub-shares
in 1994 - -
Net proceeds from all sources 10,294,628 10,869,181
----------- -----------
Total capital 10,294,628 10,869,181
----------- -----------
$13,901,804 $14,971,994
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 22
TEXAS PACIFIC LAND TRUST
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Income:
Oil and gas royalties $2,508,663 $2,064,324 $2,166,045
Grazing lease rentals 531,927 538,106 529,757
Land sales (note 7) 2,057,764 5,230,430 1,484,123
Interest 609,895 571,257 535,313
Easements and sundry income 732,036 698,716 547,524
---------- ---------- ----------
6,440,285 9,102,833 5,262,762
---------- ---------- ----------
Expenses:
Taxes, other than federal
taxes on income 558,697 510,635 525,423
Salaries 413,800 508,200 448,452
General expense, supplies
and travel 455,972 475,427 475,953
Basis in real estate sold - 34,886 -
Legal and professional fees 192,218 125,420 168,997
Commissions to local agents 30,233 100,424 24,147
Depreciation 11,314 9,847 10,773
Trustees' compensation 8,000 8,000 8,000
Other 18,333 20,000 20,000
---------- ---------- ----------
1,688,567 1,792,839 1,681,745
---------- ---------- ----------
Income before provision for
federal taxes on income
and cumulative effect of
accounting change 4,751,718 7,309,994 3,581,017
---------- ---------- ----------
Provision for federal taxes
on income (note 5);
Current 1,894,946 1,611,105 1,268,852
Deferred (472,129) 725,220 (186,751)
---------- ---------- ----------
1,422,817 2,336,325 1,082,101
---------- ---------- ----------
Income before cumulative
effect of accounting
change 3,328,901 4,973,669 2,498,916
Cumulative effect of accounting
change (note 5) - - (812,030)
---------- ---------- ----------
Net income $3,328,901 $4,973,669 $1,686,886
========== ========== ==========
Per Sub-share Certificate:
Income before cumulative
effect of accounting change $1.09 $1.58 $.77
Cumulative effect of accounting
change - - (.25)
----- ----- ----
Net Income $1.09 $1.58 $.52
===== ===== ====
</TABLE>
See accompanying notes to financial statements.
<PAGE> 23
TEXAS PACIFIC LAND TRUST
STATEMENTS OF NET PROCEEDS FROM ALL SOURCES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of year $10,869,181 $ 9,237,084 $10,889,448
Add net income for year 3,328,901 4,973,669 1,686,886
----------- ----------- -----------
14,198,082 14,210,753 12,576,334
Deduct:
Cost of Sub-share Certificates
in Certificates of Proprietary
Interest purchased and cancelled
- 112,900 Sub-shares in 1995,
103,900 Sub-shares in 1994
and 107,200 Sub-shares in 1993 2,680,652 2,074,290 2,025,408
Dividends paid - per Certificate
of Proprietary Interest-$240.00
in 1995, 1994 and 1993; per
Sub-share Certificate-$.40
in 1995, 1994 and 1993 1,222,802 1,267,282 1,313,842
----------- ----------- -----------
3,903,454 3,341,572 3,339,250
----------- ----------- -----------
Balance at end of year $10,294,628 $10,869,181 $ 9,237,084
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 24
TEXAS PACIFIC LAND TRUST
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities;
Net income $3,328,901 $4,973,669 $1,686,886
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 11,314 9,847 10,773
Deferred taxes (472,129) 725,220 (186,751)
Cumulative effect of
accounting change - - 812,030
Change in assets and liabilities:
Notes receivable 1,838,939 (524,704) 787,527
Real estate acquired
through foreclosure - (938,227) (295,074)
Other assets 29,473 (15,810) 215,315
Accounts payable (49,529) (66,929) 142,504
Taxes payable 26,021 172,056 (28,711)
Deferred revenues on land sales - (745,738) 3,364
---------- ---------- ----------
Net cash provided by
operating activities 4,712,990 3,589,384 3,147,863
---------- ---------- ----------
Cash flows from investing activities -
additions to leasehold improvements,
furniture and equipment (19,394) (11,976) (17,890)
---------- ---------- ----------
Cash flows from financing activities:
Purchase of Sub-share Certificates in
Certificates of Proprietary
Interest (2,680,652) (2,074,290) (2,025,408)
Dividends (1,222,802) (1,267,282) (1,313,842)
---------- ---------- ----------
Net cash used in
financing activities (3,903,454) (3,341,572) (3,339,250)
---------- ---------- ----------
Net increase (decrease) in cash
and temporary cash investments 790,142 235,836 (209,277)
Cash and temporary cash investments
at beginning of year 2,232,843 1,997,007 2,206,284
---------- ---------- ----------
Cash and temporary cash investments
at end of year $3,022,985 $2,232,843 $1,997,007
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 25
TEXAS PACIFIC LAND TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) Summary of Significant Accounting Policies
(a) General
The fair market value of the Texas Pacific Land Trust's (Trust) land and
royalty interests was not determined in 1888 when the Trust was formed;
therefore, no value is assigned to the land, town lots, royalty interests,
Certificates of Proprietary Interest and Sub-share Certificates in
Certificates of Proprietary Interest in the balance sheets. Consequently,
in the statements of income, no allowance is made for depletion and no cost
is deducted from the proceeds of original land sales. Even though the 1888
value of the real properties cannot be precisely determined, the Trustees
have concluded that the effect of this matter can no longer be significant
to the Trust's financial position or results of operations. For Federal
income tax purposes, however, deductions are made for depletion, computed
on the statutory percentage basis of income received from royalties.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(b) Revenue Recognition and Notes Receivable
The Trust generally receives cash payments on land sales of 25% or more
within the first year of such sales. Thereafter, annual principal and
interest payments are required by the Trust. Accordingly, income is
recognized on land sales during the periods in which such sales are closed
and sufficient amounts of cash down payments are received. For Federal
income tax purposes such sales are recognized on the installment method.
The installment method is also used for sales not meeting the minimum down
payment requirements in Statement of Financial Accounting Standards No. 66.
Notes receivable related to land sales bear interest rates ranging from 9%
to 11% and are secured by first lien deeds of trust on the properties sold.
The annual installments on notes are generally payable over terms of 3 to
15 years. There is no penalty for prepayment of principal, and prepayments
in 1995, 1994 and 1993 were $1,638,911, $959,053 and $483,035,
respectively. The interest rates on notes receivable are considered
comparable with current rates on similar land sales, and accordingly, the
carrying value of such notes receivable approximates fair value. One
customer represented approximately 14% and another represented
approximately 10% of the Trust's notes receivable balance at December 31,
1995.
Effective January 1, 1995, the Trust concurrently adopted Statement of
Financial Accounting Standards (SFAS) No. 114, "Accounting by Creditors for
Impairment of a Loan," and SFAS No. 118, "Accounting by Creditors for
Impairment of a Loan -- Income Recognition and Disclosures." SFAS No. 114
requires that impaired loans be measured based on the present value of
expected future cash flows discounted at the loan's effective interest rate
or the market price or fair value of the collateral if the loan is
collateral dependent. SFAS No. 118 amends SFAS No. 114 to allow a creditor
to
(continued)
<PAGE> 26
2
TEXAS PACIFIC LAND TRUST
NOTES TO FINANCIAL STATEMENTS
use existing methods for recognizing interest income on an impaired loan
and amends certain disclosure requirements. The adoption of SFAS No. 114
and No. 118 had no effect on the Trust's financial statements.
(c) Income per Sub-Share
The cost of Sub-share Certificates purchased and retired is charged to net
proceeds from all sources. Net income per Sub-share Certificate is based on
the weighted average number of sub-share Certificates in Certificates of
Proprietary Interest and equivalent Sub-share Certificates of Proprietary
Interest outstanding during each period (3,038,847 in 1995, 3,149,609 in
1994 and 3,248,709 in 1993).
(d) Cash Flows
Temporary cash investments at December 31, 1995 and 1994 consist primarily
of commercial paper. For purposes of the statements of cash flows, the
Trust considers all highly liquid debt instruments with original maturities
of three months or less to be temporary cash investments. Cash disbursed
for income taxes in 1995, 1994 and 1993 was $1,873,242, $1,438,373 and
$1,294,073, respectively.
(e) Depreciation
Provision for depreciation of depreciable assets is made by charges to
income at straight-line and accelerated rates considered to be adequate to
amortize the cost of such assets over their useful lives.
(f) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Effective January 1, 1993, the Trust adopted SFAS No. 109 and has reported
the cumulative effect of that change in method of accounting for income
taxes in the 1993 statement of income.
(2) Segment Information
The Trust's only significant activity is managing the land which was conveyed to
the Trust in 1888 and includes sales and leases of such land, and the retention
of oil and gas royalties.
(continued)
<PAGE> 27
3
TEXAS PACIFIC LAND TRUST
NOTES TO FINANCIAL STATEMENTS
(3) Real Estate Acquired through Foreclosure
Real Estate acquired through foreclosure is carried at the lower of cost or fair
value less disposition costs at the date of foreclosure. Cost is considered to
be the aggregate of the outstanding principal balance, accrued interest, past
due ad valorem taxes and other fees incurred relating to the foreclosure.
Valuations are periodically performed or obtained by management and any further
losses are recorded by a charge to operations and a valuation allowance (none at
December 31, 1995 and 1994) if the carrying value of the property exceeds its
estimated fair value.
Real estate acquired through foreclosure included the following activity for the
years ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
ACRES BOOK VALUE ACRES BOOK VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Balance at January 1 28,140.75 $ 6,844,336 4,359.71 $ 5,906,109
Additions - - 24,666.02 973,114
Sales - - (884.98) (34,887)
--------- ----------- --------- -----------
Balance at December 31 28,140.75 $ 6,844,336 28,140.75 $ 6,844,336
========= =========== ========= ===========
</TABLE>
(4) Retirement Plan
The Trust has a noncontributory pension plan available to all regular employees
having one or more years of continuous service. The plan provides for normal
retirement at age 65. Contributions to the plan reflect benefits attributed to
employees' services to date, as well as services expected in the future. Plan
assets consist primarily of investments in NationsBank of Texas, N.A. common
trust funds.
Net pension cost (income) for the years ended December 31, 1995, 1994 and 1993
includes the following components:
<TABLE>
<CAPTION>
1995 1994 1993
------- -------- --------
<S> <C> <C> <C>
Service cost of the current period $30,305 $ 39,487 $ 32,254
Interest cost on projected benefit
obligation 79,734 78,056 75,370
Actual return on assets (88,963) (116,090) (110,319)
Net amortization and deferral (16,273) (18,238) (18,238)
------- -------- --------
Net periodic pension cost (income) $ 4,803 $(16,785) $(20,933)
======= ======== ========
</TABLE>
The following is a reconciliation of the funding status of the Plan at December
31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits $943,268 $867,876
Nonvested benefits 15,822 12,714
-------- --------
Accumulated benefit obligation $959,090 $880,590
======== ========
</TABLE>
(continued)
<PAGE> 28
4
TEXAS PACIFIC LAND TRUST
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Projected benefit obligation for services
rendered to date $(1,114,906) $(1,077,146)
Plan assets at fair value 1,322,678 1,443,551
----------- ----------
Plan assets in excess of projected benefit
obligation 207,772 366,405
Unrecognized net loss 163,024 5,844
Unrecognized net asset at transition (185,737) (208,955)
Unrecognized prior service cost 48,549 53,529
----------- ----------
Prepaid pension cost $ 233,608 $ 216,823
=========== ==========
</TABLE>
The actuarial present value of vested and nonvested accrued benefits is based
on an assumed discount rate of 7.5% in 1995 and 1994, and a weighted-average
expected long-term rate of return on Plan assets of 7.0%. The projected benefit
obligations were calculated assuming annual rates of salary increases ranging
from 5.3% to 11.0% depending upon the employee's age category.
(5) Federal Taxes on Income
As discussed in note 1, the Trust adopted SFAS No. 109 as of January 1, 1993.
The cumulative effect of this change in accounting for income taxes of $812,030
was determined as of January 1, 1993 and is reported separately in the
statement of income for the year ended December 31, 1993.
The Trust is taxed as if it were a corporation. Total income tax expense
differed from the amounts computed by applying the U.S. federal income tax rate
of 34% to pretax income from operations as a result of the following:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Computed tax expense at the expected
statutory rate $1,615,584 $2,485,398 $1,217,546
Reduction in income taxes resulting from:
Statutory depletion (149,394) (128,005) (127,039)
Other, net (43,373) (21,068) (8,406)
---------- ---------- ----------
$1,422,817 $2,336,325 $1,082,101
========== ========== ==========
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax liabilities at December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Basis differences in real estate acquired
through foreclosure $2,030,847 $2,046,938
Deferred installment revenue on land sales 1,263,470 1,719,508
---------- ----------
Total deferred tax liability $3,294,317 $3,766,446
========== ==========
</TABLE>
(Continued)
<PAGE> 29
5
TEXAS PACIFIC LAND TRUST
NOTES TO FINANCIAL STATEMENTS
(6) Capital
Certificates of Proprietary Interest (Certificates) and Sub-share Certificates
in Certificates of Proprietary Interest (Sub-shares) are exchangeable in the
ratio of one Certificate to 600 Sub-shares. No Certificates were exchanged for
Sub-shares in 1995 or 1994.
The number of Certificates authorized for issuance at a given date is the
number then outstanding plus one/six-hundredth of the number of Sub-shares then
outstanding. The number of Sub-shares authorized for issuance at a given date
is the number then outstanding plus six hundred times the number of
Certificates then outstanding.
The Declaration of Trust was executed and delivered in New York. In the opinion
of counsel for the Trust, under the laws of the State of New York the
Certificate and Sub-share Certificate holders are not subject to any personal
liability for the acts or obligations of the Trust.
The assets of the Trust are located in Texas. In the opinion of Texas counsel,
under the laws of the State of Texas, the Certificate and Sub-share Certificate
holders may be held personally liable with respect to claims against the Trust,
but only after the assets of the Trust first have been exhausted.
(7) Deferred Revenue on Land Sales
In 1991, the Trust sold 362.15 acres of land for total consideration of
$1,035,749. The Trust received $129,470 in cash and an 11%, 15-year note
receivable for the remainder. This transaction was accounted for under the
installment method of accounting; accordingly, a portion of the profit was
deferred and recognized ratably into income as the note amortized. During 1994,
the note was collected and the remaining deferred revenue of $745,738 was
recognized.
(8) Oil and Gas Producing Activities (Unaudited)
The Trust's share of oil and gas produced, all of which is from royalty
interests, was as follows for the years ended December 31, 1995, 1994 and 1993,
respectively: oil (in barrels) - 107,203, 97,066 and 94,482; and gas (in
thousands of cubic feet) - 504,177, 362,827 and 319,362. Reserves related to the
Trust's royalty interests are not presented because the information is
unavailable.
(Continued)
<PAGE> 30
6
TEXAS PACIFIC LAND TRUST
NOTES TO FINANCIAL STATEMENTS
(9) Selected Quarterly Financial Data (Unaudited)
The following tables present unaudited financial data of the Trust for each
quarter of 1995 and 1994:
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1995 1995 1995 1995
------------ ------------- ---------- ----------
<S> <C> <C> <C> <C>
Income $1,509,210 $1,073,625 $2,181,662 $1,675,788
============ ============= ========== ==========
Income before provision for federal
taxes on income $1,122,450 $ 694,766 $1,725,774 $1,208,728
============ ============= ========== ==========
Net income $ 784,401 $ 492,057 $1,200,935 $ 851,508
============ ============= ========== ==========
Net income per Sub-Share
Certificate $.26 $.16 $.39 $.28
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1994 1994 1994 1994
------------ ------------- ---------- ----------
<S> <C> <C> <C> <C>
Income $2,212,887 $2,715,940 $1,948,991 $2,225,015
============ ============= ========== ==========
Income before provision for federal
taxes on income $1,806,352 $2,285,489 $1,506,491 $1,711,662
============ ============= ========== ==========
Net income $1,242,265 $1,542,743 $1,036,689 $1,151,972
============ ============= ========== ==========
Net income per Sub-Share
Certificate $.40 $.49 $.33 $.36
==== ==== ==== ====
</TABLE>
<PAGE> 31
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,022,985
<SECURITIES> 0
<RECEIVABLES> 3,932,072
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,494,414
<PP&E> 6,884,336
<DEPRECIATION> 11,314
<TOTAL-ASSETS> 13,901,804
<CURRENT-LIABILITIES> 312,859
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,901,804
<SALES> 0
<TOTAL-REVENUES> 6,440,285
<CGS> 0
<TOTAL-COSTS> 1,688,567
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,751,718
<INCOME-TAX> 1,422,817
<INCOME-CONTINUING> 3,328,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,328,901
<EPS-PRIMARY> 1.09
<EPS-DILUTED> 0
</TABLE>
