TPL 10-Q Quarter ended March 31, 2017

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

NOT APPLICABLE

(State or Other Jurisdiction of Incorporation

or Organization)

75-0279735

(I.R.S. Employer

Identification No.)

1700 Pacific Avenue, Suite 2770, Dallas, Texas

(Address of Principal Executive Offices)

75201

(Zip Code)

Large accelerated filer ☑

Accelerated filer ☐

Non-accelerated filer ☐  (Do not check if a smaller reporting company)

Smaller reporting company ☐

Emerging growth company ☐

March 31,

December 31,

2017

2016

(Unaudited)

Cash and cash equivalents

Accrued receivables

Other assets

Deferred tax asset

Notes receivable for land sales

Water wells, vehicles, furniture, and equipment - at cost less accumulated depreciation

Real estate acquired: (10,065 acres at March 31, 2017 and 10,065 acres at December 31, 2016)

Real estate and royalty interests assigned through the 1888 Declaration of Trust, no value assigned:

Land (surface rights) situated in eighteen counties in Texas – 877,644 acres in 2017 and 877,488 acres in 2016

1/16 nonparticipating perpetual royalty interest in 373,777 acres in 2017 and 2016

1/128 nonparticipating perpetual royalty interest in 85,414 acres in 2017 and 2016

LIABILITIES AND CAPITAL

Accounts payable and accrued expenses

Income taxes payable

Other taxes payable

Unearned revenue

Total liabilities

Capital:

Certificates of Proprietary Interest, par value $100 each; outstanding 0 Certificates

Sub-share Certificates in Certificates of Proprietary Interest, par value $.03 1/3 each; outstanding: 7,897,818 Sub-shares in 2017 and 7,927,314 Sub-shares in 2016

Other comprehensive loss

)

)

Net proceeds from all sources

Total capital

Three Months Ended
March 31,

2017

2016

Income:

Oil and gas royalties

Land sales

Easements and sundry income

Other income

Expenses:

Taxes, other than income taxes

General and administrative expenses

Operating income

Interest income earned from investments

Income before income taxes

Income taxes

Net income

Other comprehensive income – periodic pension costs, net of income taxes of $9,407 and $12,307, respectively

Total comprehensive income

Average number of sub-share certificates and equivalent sub-share certificates outstanding

Basic and dilutive earnings per sub-share certificate on net income

Cash dividends per sub-share certificate

Three Months
Ended March 31,

2017

2016

Cash flows from operating activities:

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Deferred taxes

)

Depreciation and amortization

(Gain) loss on disposal of fixed assets

)

Changes in operating assets and liabilities:

Accrued receivables and other assets

)

)

Notes receivable for land sales

Accounts payable, accrued expenses and other liabilities

Income taxes payable

Net cash provided by operating activities

Cash flows from investing activities:

Proceeds from sale of fixed assets

Purchase of fixed assets

)

)

Net cash used in investing activities

)

)

Cash flows from financing activities:

Purchase of Sub-share Certificates in Certificates of Proprietary Interest

)

)

Dividends paid

)

)

Net cash used in financing activities

)

)

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

(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 (the “Trust”) as of March 31, 2017 and the results of its operations for the three month periods ended March 31, 2017 and 2016, respectively, and its cash flows for the three month periods ended March 31, 2017 and 2016, respectively. The financial statements and footnotes included herein should be read in conjunction with the Trust’s annual financial statements as of December 31, 2016 and 2015 and for each of the years in the three year period ended December 31, 2016 included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2016. Beginning with the second quarter of 2015, the Trust updated the format of the revenue section in the Statements of Income and Total Comprehensive Income to provide more detail regarding revenue sources.

(2)

We evaluate events that occur after the balance sheet date but before financial statements are, or are available to be, issued to determine if a material event requires our amending the financial statements or disclosing the event. We evaluated subsequent events through May 4, 2017, the date we issued these financial statements.

(3)

No value has been assigned to the land held by the Trust other than parcels which have been acquired through foreclosure and a limited number of parcels which have been acquired because they were offered for sale and were contiguous to parcels already owned by the Trust. Consequently, no allowance for depletion is computed, and no charge to income is made, with respect thereto, and no cost is deducted from the proceeds of the land sales in computing gain or loss thereon.

(4)

The Sub-shares and the Certificates of Proprietary Interest are freely interchangeable in the ratio of one Certificate of Proprietary Interest for 3,000 Sub-shares or 3,000 Sub-shares for one Certificate of Proprietary Interest.

(5)

The Trust’s effective Federal income tax rate is less than the 35% statutory rate because taxable income is reduced by statutory percentage depletion allowed on mineral royalty income.

(6)

The results of operations for the three month period ended March 31, 2017 are not necessarily indicative of the results to be expected for the full year.

(7)

The Trust invests cash in excess of daily requirements primarily in bank deposit and savings accounts and certificates of deposit with maturities of ninety days or less. Such investments are deemed to be highly liquid debt instruments and classified as cash equivalents for purposes of the statements of cash flows.

2017

2016

Income taxes paid

(8)

ASC 280, “ Segment Reporting,” establishes standards for the way public business enterprises are to report information about operating segments. In accordance with ASC 280, the Trust 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 and any other land thereafter acquired. The Trust’s 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.

(9)

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue Recognition (Topic 606): Revenue from Contracts with Customers” (“ASU 2014-09”). This ASU introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. This standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Trust is reviewing and analyzing the impact that this ASU will have on our financial statements. This review process includes evaluating key accounting policy decisions, judgments, estimates, and disclosures for each significant category of revenue. This ASU will require additional disclosures on revenue and could affect the timing of revenue recognition. Certain categories of revenue may be more impacted than others. The Trust will complete its implementation process during the second and third quarters of 2017, including preparing the quantitative impact on comparable periods, if applicable.

(10)

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). This ASU requires lessees to recognize a right of use asset and lease liability on the balance sheet for all leases, with the exception of short-term leases. The new guidance will also require significant disclosures about the amount, timing, and uncertainty of cash flows from leases. This standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period. The Trust is currently evaluating the new guidance to determine the impact it will have on our financial statements.

(11)

In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments – Credit Losses (Topic 326 )” (“ASU 2016-13”). This ASU modifies the measurement of expected credit losses of certain financial instruments. This standard is effective for fiscal years beginning after December 15, 2019. The Trust is currently evaluating the new guidance to determine the impact it will have on our financial statements.

(c)

During the first quarter of 2017, the Trust repurchased Sub-share certificates as follows:

Period

Total

Number of

Sub-shares

Purchased

Average

Price Paid

per

Sub-share

Total Number

of Sub-shares

Purchased as

Part of Publicly

Announced Plans

or Programs

Maximum

Number (or

Approximate

Dollar Value) of

Sub-shares that

May Yet Be

Purchased Under

the Plans or

Programs

January 1, through January 31, 2017

February 1, through February 28, 2017

March 1, through March 31, 2017

Total

31.1

Rule 13a-14(a) Certification of Chief Executive Officer.

31.2

Rule 13a-14(a) Certification of Chief Financial Officer.

32.1

Certification of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation

101.DEF

XBRL Taxonomy Extension Definition

101.LAB

XBRL Taxonomy Extension Labels

101.PRE

XBRL Taxonomy Extension Presentation

TEXAS PACIFIC LAND TRUST

Date: May 4, 2017

By:

/s/ Tyler Glover

Tyler Glover, General Agent and

Chief Executive Officer

EXHIBIT

NUMBER

DESCRIPTION

31.1

Rule 13a-14(a) Certification of Chief Executive Officer.

31.2

Rule 13a-14(a) Certification of Chief Financial Officer.

32.1

Certification of Chief Executive Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chief Financial Officer furnished pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.