<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------- ------------------------
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 incorporation (I.R.S. Employer
or organization) Identification No.)
80 Broad Street, Suite 2700, New York, New York 10004
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
212/269-2266
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
---- ----
<PAGE> 2
Part
I
FINANCIAL INFORMATION
TEXAS PACIFIC LAND TRUST
BALANCE SHEETS
SEPTEMBER 30, 1999 and DECEMBER 31, 1998
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Cash $ 678,089 $ 147,375
Temporary cash investments at cost which approximates market 2,150,000 2,450,000
Accounts receivable 256,215 255,544
Accrued interest receivable 327,416 408,486
Prepaid expenses 4,106 41,059
Notes receivable for land sales 8,443,222 11,006,307
Real estate acquired through foreclosure:
(26,413.09 acres at September 30, 1999 and 26,450.63 acres at December 31, 1998) 4,652,873 4,422,078
Water wells, leasehold improvements, furniture and
equipment - at cost less accumulated depreciation 125,750 125,565
Property, no value assigned:
Land (surface rights) situated in twenty-one counties in
Texas - 1,032,308.67 acres in 1999 and 1,034,386.64 acres in 1998 -- --
Town lots in Iatan, Loraine and Morita - 628 lots in 1999 and 1998 -- --
1/16 nonparticipating perpetual royalty interest in 386,987.70 acres in 1999 and 1998 -- --
1/128 nonparticipating perpetual royalty interest in 85,413.60 acres in 1999 and 1998 -- --
------------- -------------
$ 16,637,671 $ 18,856,414
============= =============
LIABILITIES AND CAPITAL
Federal income taxes payable $ 4,942 $ 348,311
Other taxes payable 213,257 16,854
Other liabilities payable 30,653 2,064
Escrow deposits on land sales 1,000 7,000
Deferred taxes 4,054,639 4,840,479
------------- -------------
Total liabilities 4,304,491 5,214,708
Capital
Certificates of Proprietary Interest, par value $100
each; outstanding one certificate in 1999 and 1998 -- --
Sub-share Certificates in Certificates of Proprietary
Interest, par value $.16 2/3 each; outstanding
2,624,405 sub-shares in 1999 and 2,669,805 sub-
shares in 1998 -- --
Net proceeds from all sources 12,333,180 13,641,706
------------- -------------
Total capital 12,333,180 13,641,706
------------- -------------
$ 16,637,671 $ 18,856,414
============= =============
</TABLE>
See accompanying notes to financial statements.
(1)
<PAGE> 3
TEXAS PACIFIC LAND TRUST
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income:
Rentals, royalties and sundry income $ 956,486 $ 919,344 $ 3,065,588 $ 3,618,405
Land sales 29,476 240,400 344,897 2,411,227
Interest 236,207 249,211 734,334 750,765
------------ ------------ ------------ ------------
1,222,169 1,408,955 4,144,819 6,780,397
------------ ------------ ------------ ------------
Expenses:
Taxes, other than Federal income taxes 112,707 115,042 326,319 360,982
General and administrative expenses 287,874 271,873 914,817 913,986
Basis in real estate sold -- 42,450 1,578 42,450
------------ ------------ ------------ ------------
400,581 429,365 1,242,714 1,317,418
------------ ------------ ------------ ------------
Income before provision for
Federal income taxes 821,588 979,590 2,902,105 5,462,979
Provision for Federal income taxes 240,930 296,312 880,897 1,692,213
------------ ------------ ------------ ------------
Net income $ 580,658 $ 683,278 $ 2,021,208 $ 3,770,766
============ ============ ============ ============
Average number of sub-share certificates
and equivalent sub-share certificates
outstanding 2,637,388 2,703,188 2,650,527 2,729,749
============ ============ ============ ============
Basic earnings per sub-share certificate $ .22 $ .25 $ .76 $ 1.38
============ ============ ============ ============
Cash dividend per sub-share certificate -- -- $ .40 $ .40
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
(2)
<PAGE> 4
TEXAS PACIFIC LAND TRUST
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,021,208 $ 3,770,766
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 32,400 85,500
Deferred taxes (785,840) 201,963
(Increase) decrease in assets:
Accounts receivable (671) (190)
New notes receivable from land sales (201,750) (1,623,650)
Payments received on notes receivable 2,544,509 943,657
Accrued interest receivable 70,601 30,677
Federal income taxes receivable -- (196,093)
Prepaid expenses 36,953 40,950
Real estate acquired through foreclosure -- 42,450
Increase (decrease) in liabilities:
Federal income taxes payable (343,369) (42,783)
Other taxes payable 196,403 218,258
Escrow deposits on land sales (6,000) 8,500
Other liabilities payable 28,589 (80,455)
-------------- --------------
Total adjustments 1,571,825 (371,216)
-------------- --------------
Net cash provided by operating activities 3,593,033 3,399,550
-------------- --------------
Cash flows from investing activities -
Additions to water wells, leasehold improvements,
furniture and equipment (32,585) (38,037)
-------------- --------------
Cash flows from financing activities:
Sub-shares purchased for retirement (2,262,532) (2,817,607)
Dividends paid (1,067,202) (1,102,802)
-------------- --------------
Net cash used by financing activities (3,329,734) (3,920,409)
-------------- --------------
Net increase (decrease) in cash and cash equivalents 230,714 (558,896)
Cash and cash equivalents at beginning
of year 2,597,375 1,912,591
-------------- --------------
Cash and cash equivalents at end
of period $ 2,828,089 $ 1,353,695
============== ==============
</TABLE>
See accompanying notes to financial statements.
(3)
<PAGE> 5
TEXAS PACIFIC LAND TRUST
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
(1) In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of Texas
Pacific Land Trust (Trust) as of September 30, 1999 and the results of
its operations for the three and nine months ended September 30, 1999
and 1998 and its cash flows for the nine months ended September 30,
1999 and 1998, respectively. These financial statements and footnotes
included herein should be read in conjunction with the Trust's annual
financial statements as of December 31, 1998 and 1997, and for each of
the years in the three year period ended December 31, 1998, included in
the Trust's Form 10-K.
(2) No value is assigned to the land, unless acquired through foreclosure;
consequently, no allowance for depletion is computed, and no charge to
income is made therefore, and no cost is deducted from the proceeds of
the land sales in computing gain or loss thereon.
(3) The Sub-shares and the Certificates of Proprietary Interest are freely
interchangeable in the ratio of one Certificate of Proprietary Interest
for 600 Sub-shares or 600 Sub-shares for one Certificate of Proprietary
Interest.
(4) The Trust's effective Federal income tax rate is less than the 34%
statutory rate because taxable income is reduced by statutory
percentage depletion allowed on mineral royalty income.
(5) The results of operations for the three and nine months ended September
30, 1999 are not necessarily indicative of the results to be expected
for the full year.
(6) Cash in excess of daily requirements is invested in money market
instruments with maturities of ninety days or less. Such investments
are deemed to be cash equivalents for purposes of the statements of
cash flows.
Supplemental cash flow information for the nine months ended September
30, 1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Federal income taxes paid $ 2,010,106 $ 1,729,126
============ ============
Non - cash operating activity -
Notes receivable plus accrued interest converted to
real estate acquired through foreclosure $ 230,795 --
============ ============
</TABLE>
(4)
<PAGE> 6
(7) The Trust has adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information which establishes standards for the
way public business enterprises are to report information about
operating segments. SFAS No. 131 utilizes the management approach as a
basis for identifying reportable segments. The management approach is
based on the way that management organizes the segments within the
enterprise for making operating decisions and assessing performance.
The Trust's management views its operations as one segment and believes
the only significant activity is managing the land which was conveyed
to the Trust in 1888. Trust management makes decisions about resource
allocation and performance assessment based on the same financial
information presented in these financial statements. Managing the land
includes sales and leases of such land, and the retention of oil and
gas royalties.
(5)
<PAGE> 7
Management's Discussion and
Analysis of Financial Condition and
Results of Operations for the
Nine and Three Months Ended
September 30, 1999 and 1998
Results of Operations for Quarter Ended September 30, 1999 Compared to Quarter
Ended September 30, 1998
Earnings per sub-share certificate for the third quarter of 1999 were $.22
compared to $.25 in the third quarter of 1998. Total revenues were $1,222,169
compared to $1,408,955, a decrease of 13.3%.
In the third quarter of 1999, land sales totaled $29,476 which was 6.55 acres at
$4,500 per acre. In the comparable period of 1998, 1,521.27 acres were sold for
$240,400, an average of $158 per acre.
Land sales may vary widely from year to year and quarter to quarter. The total
dollar amount, the average price per acre, and the number of acres sold in any
one year or quarter should not be assumed to be indicative of land sales in the
future. The Trust is a passive seller of land; it does not actively solicit
sales of land. The demand for and the sales price of any particular tract of the
Trust's land is influenced by many factors including the national and local
economies, the rate of residential and commercial development in nearby areas,
livestock carrying capacity, and the conditions of the local agricultural
industry which itself is influenced by range conditions and prices for livestock
and other agricultural products. Approximately 99% of the Trust's land is
classified as ranch land and intermingled with other ownerships to form ranching
units. Ranch land sales are, therefore, largely dependent on the actions of the
adjoining landowners.
Rentals, royalties and sundry income were $956,486 for the third quarter of 1999
compared to $919,344 for the third quarter of 1998, an increase of 4.0%.
Oil and gas royalty revenue was $646,704 compared to $599,585 for the third
quarter of 1998, up 7.9%. Oil royalty revenue was $391,462, up 4.5% from the
third quarter of 1998. Oil royalty production subject to the Trust's royalty
interest was down 31.0% in the third quarter of 1999, while the average price
per royalty barrel of crude oil was up 51.6%. Gas royalty revenue for the third
quarter was $255,242, up 13.5% on a volume decrease of 1.5% and price increase
of 15.5%.
Easement and sundry income was $183,703 for the third quarter of 1999, down 3.9%
from the third quarter of 1998. These categories of income are not predictable
and commonly have large swings in any given period.
Interest revenue was down 5.2% for the third quarter of 1999 compared to the
third quarter of 1998. Interest from notes receivable was $208,425, down 9.0%
for the 1999 period due to a decrease in note receivable balances from the prior
year. Notes receivable for land sold were $8,443,222 as of September 30, 1999, a
decrease of 15.5% from the end of the third quarter of 1998. Sundry interest was
$27,782 for the third quarter of 1999, which was up 38.3% from the third quarter
of 1998. The increase of sundry interest earned was due to more funds available,
which was mainly due to the pay off of notes receivable.
Taxes, other than Federal income taxes, were down 2.0% for the third quarter of
1999 compared to the third quarter of 1998.
General and administrative expenses were up 5.9% over the third quarter of 1998.
This is mainly due to increases in professional fees and repair and maintenance
cost on foreclosed property.
(6)
<PAGE> 8
Management's Discussion (cont'd)
Results of Operations for Nine Months Ended September 30, 1999 Compared to Nine
Months Ended September 30, 1998
Earnings per sub-share for the first nine months of 1999 were $.76 compared to
$1.38 for the first nine months of 1998. Total revenues were $4,144,819 compared
to $6,780,397, a decrease of 38.9%.
The first nine months of 1999 had total land sales of 2,117.98 acres for
$344,897, an average of $163 per acre, compared to 26,745.61 acres for
$2,411,227, an average of $90 per acre in 1998.
Rentals, royalties, and sundry income were $3,065,588 for the first nine months
compared to $3,618,405 for the first nine months of 1998, a decrease of 15.3%.
Oil and gas royalty revenue for the first nine months was $1,696,141 compared to
$2,040,201 for the first nine months of 1998, down 16.9%. Oil royalty revenue
was $1,072,869, down 19.5% for the 1999 period. Crude oil production subject to
the Trust's royalty interest was down 20.7% for the first nine months of 1999,
while the average price per barrel of crude oil was up 1.6%. Gas royalty revenue
was $623,272 for the first nine months of 1999, down 12.0% on a volume decrease
of 3.7%, and a price decrease of 8.7%.
Easement and sundry income was $963,781 for the first nine months of 1999, down
17.3% from the first nine months of 1998. These categories of income are not
predictable, and may have large increases or decreases in any given period or
year.
Interest revenue was down 2.2% for the first nine months of 1999 compared to the
first nine months of 1998. Interest from notes receivable was $647,224, down
3.6% for the 1999 period and sundry interest was $87,110, up 9.6%.
Taxes, other than Federal income taxes were down 9.6% for the first nine months
of 1999 from the first nine months of 1998.
General and administrative expenses were up 1/10 of 1% for the first nine months
of 1999 over the comparable 1998 period.
Liquidity and Capital Resource
The Trust's oil and gas royalty revenues, lease rentals and receipts of interest
and principal on notes receivable has generated more than adequate amounts of
cash to meet the Trust's needs and should continue to do so in the predictable
future.
Year 2000 Issue
The Trust recognized that the arrival of the Year 2000 poses a unique challenge
to the ability of its entity's information technology system and non-information
technology systems to recognize the date change from December 31, 1999 to
January 1, 2000. As of September 30, 1999, the Trust has assessed and made
certain changes to provide for continued functionality of its systems. Due to
the nature and extent of the Trust's operations that are affected by Year 2000
issues, the Trust does not believe that Year 2000 issues will have a material
adverse effect on the business operation or the financial performance of the
Trust. There can be no assurance, however, that
(7)
<PAGE> 9
Management's Discussion (cont'd)
Year 2000 issues will not adversely effect the Trust or its business. The Trust
believes that the cost to make appropriate changes to its internal and external
systems will not be significant and that such costs will be funded completely
through operations.
Words or phrases when used in this Form 10-Q or other filings with the
Securities and Exchange Commission, such as "does not believe" and "believes",
or similar expressions are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Quantitative and Qualitative
Disclosures About Market Risk
There have been no material changes in the information related to market risk of
the Trust since December 31, 1998.
(8)
<PAGE> 10
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. Interim report furnished to shareholders upon request
per sub-part Item 601 (19) Regulation S-K.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. The registrant has filed no reports on Form
8-K during the quarter for which this report is filed.
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.
TEXAS PACIFIC LAND TRUST
------------------------------
(Registrant)
Date November 12, 1999 By /s/ ROY THOMAS
--------------------------------- -----------------------------------
Roy Thomas, General Agent,
Authorized Signatory and Principal
Financial Officer
(9)
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- --------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,828,089
<SECURITIES> 0
<RECEIVABLES> 9,026,853
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,415,826
<PP&E> 4,778,623
<DEPRECIATION> 32,400
<TOTAL-ASSETS> 16,637,671
<CURRENT-LIABILITIES> 249,852
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 16,637,671
<SALES> 0
<TOTAL-REVENUES> 4,144,819
<CGS> 0
<TOTAL-COSTS> 1,242,714
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,902,105
<INCOME-TAX> 880,897
<INCOME-CONTINUING> 2,021,208
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,021,208
<EPS-BASIC> 0.76
<EPS-DILUTED> 0.76
</TABLE>
