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 July 31, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-1394
SEVEN J STOCK FARM, INC.
(Name of small business issuer as specified in its charter)
Texas 74-1110910
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(State of incorporation) (I.R.S. Employer Identification No.)
808 Travis Street, Suite 1453, Houston, TX 77002
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(Address of principal executive offices)
(713) 228-8900
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes (X) No ( )
As of September 10, 1996 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
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE DATA)
(UNAUDITED)
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
JULY 31, JULY 31,
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1996 1995 1996 1995
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REVENUES:
Pipeline operations $ 34 $ 45 $ 110 $ 135
Oil and gas royalties - net of
excise taxes 24 26 76 84
Farm produce sales 11 1 12 2
Pasture and ranch lease rentals 29 29 89 89
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Total revenues $ 98 $ 101 $ 287 $ 310
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COSTS AND EXPENSES:
Operating expenses $ 21 $ 22 $ 54 $ 52
Administrative and general
expenses 42 29 129 108
Depreciation 23 16 57 48
Other (income) - net (6) (6) (21) (17)
Other costs and expenses 8 8 36 36
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Total costs and expenses $ 88 $ 69 $ 255 $ 227
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INCOME BEFORE PROVISION FOR INCOME
TAXES $ 10 $ 32 $ 32 $ 83
Provision for income taxes (Note 2) 1 6 4 14
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NET INCOME $ 9 $ 26 $ 28 $ 69
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NET INCOME PER SHARE (1,451,000
weighted - average shares
outstanding) $ .01 $ .02 $ .02 $ .05
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DIVIDENDS PER SHARE None None $ .04 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
JULY 31, 1996
(IN THOUSANDS EXCEPT FOR SHARES AND PER SHARE DATA)
(UNAUDITED)
JULY 31,
ASSETS 1996
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CURRENT ASSETS:
Cash and cash equivalents $ 187
Accounts receivable 103
Accounts receivable - related party 58
Inventories - growing crops - at market 43
Deferred income taxes 19
Other 34
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Total current assets $ 444
PROPERTY AND EQUIPMENT - net 1,336
OTHER ASSETS 8
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TOTAL $ 1,788
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 107
Dividend payable 58
Accrued taxes - other than taxes on income 21
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Total current liabilities $ 186
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OTHER LIABILITIES AND CREDITS:
Deferred income taxes $ 83
Unearned lease income 9
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Total other liabilities and credits $ 92
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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 59
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Total shareholders' equity $ 1,510
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TOTAL $ 1,788
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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 STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
FOR THE NINE
MONTHS ENDED
JULY 31,
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1996 1995
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CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 28 $ 69
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 57 48
Deferred income taxes 2 (2)
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (50) 4
Inventories (38) (2)
Other current assets (26) 6
Increase (decrease) in liabilities:
Accounts payable and other (28) (37)
Accrued income taxes (14) -
Accrued taxes - other than taxes
on income (6) (9)
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Net cash provided by (used in) operating
activities $ (75) $ 77
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(CONTINUED)
SEVEN J STOCK FARM, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 31, 1996 AND 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(IN THOUSANDS)
(UNAUDITED)
(CONTINUED)
FOR THE NINE
MONTHS ENDED
JULY 31,
---------------------------
1996 1995
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CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from redemption of
certificates of deposit $ - $ 75
Purchase of certificates of deposit - (225)
Expenditures for property and equipment (225) (114)
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Net cash used in investing activities $ (225) $ (264)
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $ (300) $ (187)
CASH AND CASH EQUIVALENTS - beginning of period 487 301
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CASH AND CASH EQUIVALENTS - end of period $ 187 $ 114
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SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ - $ -
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Income taxes $ 43 $ 20
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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 1995 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 July 31, 1996 and the
results of its operations and its cash flows for the periods ended July 31,
1996 and 1995. Such adjustments consisted only of normal recurring items.
The results of operations for the periods ending July 31, 1996 and 1995 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 tax rate in the first nine months of fiscal year 1996 was
13.6%, 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 16.9%. The Company's effective tax rate for the year ended
October 31, 1995 was 28.6%.
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 nine months ended July 31, 1996
decreased $25,000 or 18.5% as compared to the nine months ended July 31, 1995.
The decline is the result of a decrease in the volume of natural gas
transmitted through the system.
Net Oil and Gas Royalties - Revenue for the nine months ended July 31, 1996
decreased $8,000 or 9.5% as compared to the nine months ended July 31, 1995.
The decline is due to a decrease in production.
Farm Produce Sales - Revenue for the nine months ended July 31, 1996
increased $10,000 or 500% as compared to the nine months ended July 31, 1995.
The increase is due to an increase in United State Department of Agriculture
subsidy payments received.
Administrative and General Expenses - Expenses for the nine months ended
July 31, 1996 increased $21,000 or 19.4% as compared to the nine months ended
July 31, 1995. Increases in accounting costs and in the cost of contract
office personnel were the primary causes of the increases in administrative
and general expenses.
Depreciation Expense - Depreciation expense for the nine months ended
July 31, 1996 increased $9,000 or 18.75% as compared to the nine months
ended July 31, 1995. Additional property, plant, and equipment placed in
service had the effect of increasing depreciation expense.
Other Income - Other income for the nine months ended July 31, 1996 increased
$4,000 or 23.5% as compared to the nine months ended July 31, 1995. This
increase is due to an increase in interest income.
Provision for Income Taxes - Provision for income taxes for the nine months
ended July 31, 1996 decreased $10,000 or 71.4% as compared to the nine months
ended July 31, 1995. This is due to a decrease in income.
Liquidity and Capital Resources
The Company used $75,000 cash for operating activities for the nine months
ended July 31, 1996 as compared to generating $77,000 of net cash flow for the
prior period. The change was primarily attributable to an increase in accounts
receivable for pasture and ranch lease rentals. It is anticipated that the
account receivable will be collected in the fourth quarter. The Company
anticipates that adequate working capital will be provided from future
operations. A dividend of $58,040 (.04 per share of common stock) will be paid
on October 26, 1996 to holders of record May 15, 1996. Cash requirements will
be provided in part by redemption of short-term certificates of deposit.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits - none
(B) Reports on Form 8-K - there were no reports on Form 8-K filed for
the quarter ended July 31, 1996.
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: September , 1996 SEVEN J STOCK FARM, INC.
(Registrant)
R. F. Pratka
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R. F. Pratka, Vice-President and Treasurer
(Principal Financial Officer)