U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 2000
( ) 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.)
16945 Northchase Dr., Ste 1800, Houston, TX 77060-2151
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(Address of principal executive offices)
(281) 875-9100
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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 June 9, 2000 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 (LOSS)
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE DATA)
(UNAUDITED)
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
APRIL 30, APRIL 30,
------------------ ------------------
2000 1999 2000 1999
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REVENUES:
Pipeline operations $ 71 $ 63 $ 147 $ 133
Oil and gas royalties - net of
excise taxes 88 46 123 77
Farm produce sales 11 52 71 87
Pasture and ranch lease rentals 30 30 60 60
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Total revenues $ 200 $ 191 $ 401 $ 357
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COSTS AND EXPENSES:
Operating expenses $ 94 $ 84 $ 177 $ 144
Administrative and general expenses 73 72 158 130
Depreciation and amortization 34 28 64 54
Equity in loss of 50% owned affiliate 6 182 16 217
Interest expense 5 4 6 6
Other (income) - net (9) (10) (18) (19)
Other costs and expenses 10 7 20 18
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Total costs and expenses $ 213 $ 367 $ 423 $ 550
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INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES $ (13) $ (176) $ (22) $ (193)
Provision for income taxes - (1) 1 4
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NET INCOME (LOSS) $ (13) $ (175) $ (23) $ (197)
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NET INCOME (LOSS) PER SHARE
(1,451,000 weighted average shares
outstanding) $ (.01) $ (.12) $ (.02) $ (.14)
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DIVIDENDS PER SHARE NONE NONE NONE NONE
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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
APRIL 30, 2000
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE DATA)
(UNAUDITED)
APRIL 30,
ASSETS 2000
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CURRENT ASSETS:
Cash and cash equivalents $ 4
Accounts receivable 49
Accounts and notes receviable - other 104
Refundable income taxes 16
Deferred income taxes 39
Other 7
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Total current assets $ 219
INVESTMENT AND ADVANCES TO 50% OWNED AFFILIATE -
PROPERTY AND EQUIPMENT - net 1,793
OTHER ASSETS 1
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TOTAL $ 2,013
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable $ 12
Current maturities of long-term debt 43
Accounts payable 351
Accrued liabilities-other 5
Accrued income taxes 1
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Total current liabilities $ 412
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OTHER LIABILITIES AND CREDITS:
Long-term debt $ 84
Deferred income taxes $ 69
Unearned lease income 94
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Total other liabilities and credits $ 247
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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 (97)
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Total shareholders' equity $ 1,354
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TOTAL $ 2,013
=========
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 SIX MONTHS ENDED APRIL 30, 2000 AND 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
FOR THE SIX
MONTHS ENDED
APRIL 30,
------------------
2000 1999
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CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) $ (23) $ (197)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 64 54
Deferred income taxes (3) 2
Equity in loss of 50% owned affiliate 16 217
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (9) (20)
Inventories - (37)
Other current assets 1 3
Increase (decrease) in liabilities:
Accounts payable and other 123 74
Accrued income taxes - (30)
Accrued expenses - other (40) (12)
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Net cash provided by operating
activities $ 129 $ 54
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(CONTINUED)
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
(CONTINUED)
FOR THE SIX
MONTHS ENDED
APRIL 30,
------------------
2000 1999
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CASH FLOW FROM INVESTING ACTIVITIES:
Expenditures for property and equipment $ (95) $ (95)
Investment and advances to 50% owned affiliate - (207)
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Net cash used in investing activities $ (95) $ (302)
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CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from note payable $ - $ 95
Payments on long-term debt (90) 150
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Net cash provided by financing activities $ (90) $ 245
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (56) $ (3)
CASH AND CASH EQUIVALENTS - beginning of period 60 17
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CASH AND CASH EQUIVALENTS - end of period $ 4 $ 14
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SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ 6 $ 5
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Income taxes $ - $ 36
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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 April 30, 2000 and the
results of its operations and its cash flows for the periods ended April 30,
2000 and 1999. Such adjustments consisted only of normal recurring items.
The results of operations for the periods ending April 30, 2000 and 1999 are
not necessarily indicative of the results to be expected for the full year.
Interim results are subject to year-end adjustments and audit by independent
public accountants.
Certain items and amounts have been reclassified. The reclassifications
have no effect on net income.
NOTE 2 - PROVISION FOR INCOME TAXES
The reported income tax rate on income excluding equity in loss of 50%
owned affiliate in the first six months of fiscal year 2000 was 15.0% which
is the Company's current estimate of the effective tax rate for the entire
year. The reported tax rate in the corresponding period of the previous
year was 32.7%. The Company's effective tax rate for the year ended October 31,
1999 was 15.0%.
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 six months ended April 30, 2000,
increased $14,000 or 10.5% as compared to the six months ended April 30,
1999. This is primarily the result of an increase in gas volume transmitted.
Net Oil and Gas Royalties - Revenue for the six months ended April 30, 2000,
increased $46,000 or 59.7% as compared to the six months ended April 30,
1999. The increase is due to the increase in oil and gas prices.
Farm Produce Sales - Revenue for the six months ended April 30, 2000 decreased
$16,000 or 18.4% as compared to the six months ended April 30, 1999. This
decline was due to a reduction in government farm production payments
received.
Operating Expenses - Expenses for the six months ended April 30, 2000,
increased $33,000 or 22.9% as compared to the six months ended April 30,
1999. The increase in expenses is attributable to pipeline operations.
Administrative and General Expenses - Expenses for the six months ended April
30, 2000, increased $28,000 or 21.5%. This increase is primarily the result
of increased salaries allocation.
Depreciation and Amortization - Expenses for the six months ended April 30,
2000, increased $10,000 or 18.5% as compared to the six months ended April
30, 1999. The increase is attributable to additions to the Company's
property and equipment.
Equity in loss of 50% owned affiliate - The Company recorded a loss of $16,000
attributable to its 50% investment and advances in Trinity Valley Pecan Co.
("Trinity") The cumulative losses equal the Company's total outlay in
Trinity including projected repayment of loan guarantees.
Provision for Income Taxes - Provision for income taxes for the six months
ended April 30, 2000 decreased $3,000 as compared to the six months ended
April 30, 1999. The decrease is attributable to a decrease in income before
provision for income taxes excluding equity in loss of 50% owned affiliate.
Liquidity and Capital Resources
The Company had positive cash flow of $129,000 in operating activities for the
six months ended April 30, 2000 as compared to the positive cash flow of
$54,000 from operating activities for the six months ended April 30, 1999.
On February 17, 2000, the Company guaranteed a loan of Trinity Valley Pecan
Company in the amount of $300,000. In addition to collateral consisting of
1,554 acres of land, the loan was also guaranteed by the J.R. Parten Ranch
Trust which owns 50% of Trinity Valley Pecan Company. The Company anticipates
that adequate working capital will continue to be provided from future
operations, subject to repayment of loan guarantees of Trinity Valley Pecan
Company.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(A) Annual meeting of shareholders was held March 21, 2000.
(B) Seven J Stock Farm, Inc. did not solicit proxies and the following
directors were elected
1. John R. Parten
2. R. F. Pratka
3. Patrick J. Moran
4. William C. Bennett
(C) Shareholders approved the appointment of the firm Mattison and
Riquelmy as the Company's Independent Auditors.
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 April 30, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: June 13, 2000 SEVEN J STOCK FARM, INC.
(Registrant)
R. F. Pratka
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R. F. Pratka, Vice-President and Treasurer
(Principal Financial Officer)