Form 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[XX]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2001
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission File Number: 0-7775
WESTLAND DEVELOPMENT CO., INC.
------------------------------
(Exact name of small business issuer as
specified in its charter)
NEW MEXICO 85-0165021
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 Coors Blvd., N.W.,
Albuquerque, New Mexico 87121
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(Address of principal executive offices)
(505)831-9600
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(Issuer's telephone number)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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 [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity as of May 10, 2001:
No Par Value Common: 714,894
Class B $1.00 Par Value Common: 86,100
Transitional Small Business Format (check one) Yes [ ] No [ X ]
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WESTLAND DEVELOPMENT CO., INC.
BALANCE SHEET
(unaudited)
March 31, 2001
ASSETS
Cash and cash equivalents ........................ $ 373,875
Short-term investments ........................... 1,480,950
Receivables:
Real estate contracts ......................... $ 16,365
Note receivable - related party ............... 100,576
Other receivables ............................. 153,588 270,529
------------
Land and improvements held for
future development ............................ 8,140,813
Income producing properties, net ................. 11,876,456
Property and equipment, net of accumulated
depreciation of $573,419 ...................... 345,624
Investment in Partnerships and joint ventures .... 231,048
Income taxes receivable .......................... 542,585
Other ............................................ 169,742
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$ 23,431,622
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses
and other liabilities ......................... $ 583,449
Deferred income taxes ............................ 5,369,049
Notes, bonds, mortgages and assessments payable .. 11,010,551
------------
Total liabilities ............... 16,963,049
Stockholders' equity
Common stock - no par value;
authorized, 736,668 shares;
issued and outstanding,
714,894 shares ............................. 8,500
Class B common stock - $1.00 par
value; authorized, 491,112
shares; issued and outstanding,
86,100 shares .............................. 86,100
Additional paid-in capital .................... 591,811
Retained earnings ............................. 5,782,162 6,468,573
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$ 23,431,622
============
WESTLAND DEVELOPMENT CO., INC.
STATEMENTS OF OPERATIONS
(unaudited)
For the three months ended
March 31,
2001 2000
----------- -----------
Revenues
Land ...................................... $ 24,377 $ 1,480,079
Rentals ................................... 292,963 240,175
----------- -----------
317,340 1,720,254
Costs and expenses
Cost of land revenues ..................... -- 368,436
Cost of rentals ........................... 79,145 45,637
General and administrative ................ 414,875 417,162
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494,020 831,235
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Operating (loss) earnings .............. (176,680) 889,019
Other (income) expense
Interest income ........................... (28,830) (65,718)
Other income .............................. (9,121) (4,044)
Interest expense .......................... 219,070 138,516
----------- -----------
181,119 68,754`
----------- -----------
(Loss) earnings before income taxes .... (357,799) 820,265
Income tax (benefit) expense ................. (141,000) 328,000
----------- -----------
NET (LOSS) EARNINGS .................... $ (216,799) $ 492,265
=========== ===========
Weighted average common shares
outstanding ............................... 800,994 802,708
=========== ===========
(Loss) earnings per common share ............. $ (.27) $ .61
=========== ===========
WESTLAND DEVELOPMENT CO., INC.
STATEMENTS OF OPERATIONS
(unaudited)
For the nine months ended
March 31,
2001 2000
----------- -----------
Revenues
Land ...................................... $ 492,624 $ 5,813,280
Rentals ................................... 810,210 644,948
----------- -----------
1,302,834 6,458,228
Costs and expenses
Cost of land revenues ..................... 296,126 1,200,183
Cost of rentals ........................... 221,392 208,807
General and administrative ................ 1,544,143 1,321,085
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2,061,661 2,730,075
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Operating (loss) earnings .............. (758,827) 3,728,153
Other (income) expense
Interest income ........................... (116,901) (173,142)
Other income .............................. (20,779) (11,781)
Interest expense .......................... 558,208 467,295
----------- -----------
420,528 282,372
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(Loss) earnings before income taxes .... (1,179,355) 3,445,781
Income tax (benefit) expense ................. (470,000) 1,378,000
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NET (LOSS) EARNINGS .................... $ (709,355) $ 2,067,781
=========== ===========
Weighted average common shares
outstanding ............................... 801,165 802,708
=========== ==========
(Loss) earnings per common share ............. $ (.89) $ 2.58
=========== ==========
WESTLAND DEVELOPMENT CO., INC.
STATEMENTS OF CASH FLOWS
(unaudited)
For the nine months ended
March 31,
2001 2000
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Cash flows from operating activities
Cash received from land sales
and collections on real
estate contracts receivable ................. $ 509,488 $ 5,113,226
Development and closing costs paid
on land sales ............................... (1,468,587) (918,589)
Cash received from rental operations .......... 806,618 648,028
Cash paid for rental operations ............... (55,896) (67,876)
Cash paid for property taxes .................. 48,129 (82,271)
Interest received ............................. 116,155 173,605
Interest paid ................................. (540,178) (469,309)
Income taxes paid ............................. (50,000) (740,000)
General and administrative costs paid ......... (1,415,334) (1,421,581)
Other ......................................... 100 456,997
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Net cash (used) provided
by operating activities ..................... (2,049,505) 2,692,230
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Cash flows from investing activities
Capital expenditures for income
producing and other properties .............. (3,910,915) (125,188)
Cash received from partnerships
and joint ventures .......................... 24,250 5,415
Change in short-term investments .............. (1,371,036) (93,881)
Proceeds from note receivable-related party ... 2,499 2,525
Proceeds from sale of assets .................. 90 80
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Net cash used in investing activities ........ (5,255,112) (211,049)
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Cash flows from financing activities
Borrowing on notes, mortgages and
assessments payable ......................... 5,294,617 693,975
Repayments of bonds, mortgages,
notes and assessments payable ............... (499,496) (1,872,456)
Payment of dividends .......................... (1,003,623) (802,708)
Purchase/retirement of common stock, net ...... 4,434 --
------------ ------------
Net cash provided (used)
in financing activities .................... 3,795,932 (1,981,189)
------------ ------------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS .................... (3,508,685) 499,992
Cash and cash equivalents at
beginning of period .......................... 3,882,560 1,300,182
------------ ------------
Cash and cash equivalents at
end of period ................................ $ 373,875 $ 1,800,174
============ ============
Reconciliation of net (loss)
earnings to net cash (used)
provided by operating activities
Net (loss) earnings ............................ $ (709,355) $ 2,067,781
Adjustments to reconcile net (loss)
earnings to net cash (used)
provided by operating activities
Depreciation .............................. 240,854 194,763
Gain on sale/loss on retirement of assets . (90) (80)
Change in
Rents receivable, accrued interest,
property tax and other assets ........... (20,758) 3,750
Real estate contracts ..................... 50,492 (44,529)
Land and improvements held for
future development and income
producing properties .................... (1,169,491) 94,702
Other assets .............................. (28,540) (101,661)
Accounts and retainages payable,
accrued interest and other
liabilities ............................ 107,383 (160,496)
Income taxes payable/recoverable .......... (520,000) 638,000
------------ ------------
Net cash (used) provided by
operating activities ......................... $ (2,049,505) $ 2,692,230
============ ============
WESTLAND DEVELOPMENT CO., INC.
NOTES TO THE FINANCIAL STATEMENTS
(unaudited)
March 31, 2001
1. The balance sheet at March 31, 2001, statements of operations for the
three and nine month periods ended March 31, 2001 and 2000 and statements of
cash flows for the nine month periods ended December 31, 2001 and 2000 have been
prepared by the Company, without audit. In the opinion of management, all
adjustments, including normal recurring adjustments necessary to present fairly
the financial position, results of operations and cash flows, have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the Company's audited financial statements at June
30, 2000. The results of operations for the three months and nine months ended
March 31, 2001 are not necessarily indicative of operating results for the full
year.
2. The computation of earnings per common share has been based upon the
weighted average number of shares of outstanding common stock and common stock
issuable without further consideration, which for the three and nine month
periods ended December 31, 2001 were 800,994 and 801,165, respectively and for
March 31, 2000 were 802,708.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General:
The Company receives cash from the sale of its lands, from rental properties and
from borrowing. It uses its cash to pay mortgage and other debt payments, to
develop its properties for resale to others and for its general and
administrative expenses. Also, it uses its cash to pay dividends to its
shareholders.
The Company has nearly exhausted its inventory of developed lands and must look
to the development of the initial 1,600 acres of its Master Plan area for future
sales. The cost of any development of these acres, pursuant to an agreement with
the City of Albuquerque, requires the Company to install and transfer to the
City all of the necessary infrastructure for delivery of water to the acreage,
including water rights located within the 1600 acres annexed to ther City of
Albuquerque. The cost of this infrastructure for the entire Master Plan has been
estimated at more than twenty million dollars. This is in addition to the cost
of otherwise developing the land for resale to others. Most of this expenditure
must be made prior to the development of the first acres in the Master Planned
area.
The Company does not have $20,000,000 in cash with which to construct the
required infrastructure and is reviewing various alternative ways that it might
finance the project. It is reviewing various forms of financing, including the
possibility of industrial revenue bonds, commercial bonds and commercial loans.
One alternative is to finance the project by debt arrangements, but no method of
financing the project has been accepted by the board. Management is also
evaluating the possibility of joining with others in some form of joint project
with the costs of the project being underwritten by the other partners with the
Company contributing the land for its share of the project. event, the Company
will probably be required to turn over control of the project Also, management
is exploring the possibility of bulk sales of raw land to others as a way to
acquire the financing necessary for the infrastructure costs. In this event, the
Company will retain control of the development of the lands not sold to others,
but will probably be required to sell the most immediately developable land to
receive the best values for its properties. Each of these alternatives is under
consideration and the board will select one or more of them for the project.
Any failure by management to acquire the required financing will have a major
impact on the Company's operations. If this should happen, which management
thinks is unlikely, the Company would be without inventory for sale to others
except for the sale of tracts of undeveloped, and possibly undevelopable, land
at prices not presently capable of determination. In such event, the Company
would be required to curtail most of its business activities and would probably
not be able to pay dividends.
If the infrastructure is financed by the Company, the city will charge each
builder a utility hook-up fee at the time the finished lot is connected to the
city's water supply. At that time, hook-up fees in their entirety will be paid
to Westland until Westland's investment in construction of the required
infrastructure is reimbursed. In this way, it is hoped that the Company will
eventually recapture the costs it has expended for the water system.
Financial Condition.
During the nine months ended March 31, 2001, the Company's cash and cash
equivalents decreased by $3,508,685. During this period, operations used
$2,049,505, the Company invested $5,255,112 in fixed and other assets, incurred
$5,294,617 of debt, net and paid dividends in the amount of $1,003,623.
In 2000, operations provided $2,692,230, $1,872,456 of debt was repaid, $211,049
was invested in fixed and other assets and dividends were paid in the amount of
$802,708. Cash and equivalents increased by $499,992.
The lack of developed lands for sale and the lack of sales of undeveloped lands
during the current nine-month period has resulted in the Company using its cash
reserves for ordinary operating expenses. The use of the cash reserves increases
the amount of money that must be borrowed to meet the Company's long term
commitments. To the extent that the Company can not meet its long term cash
requirements, the Company's business will be substantially curtailed and it may
again enter a period where it can not meet its current cash requirements or pay
dividends to its shareholders.
Potential Tax Liability
The Company may expend approximately $2,500,000 or more to acquire replacement
lands and property for the land sold to various government entities under threat
of condemnation. In the event the Company does not replace the property sold to
the government, it may need to utilize a substantial portion of its liquid
investments for federal and state income taxes.
It is the Company's aim to acquire high quality income producing properties as
replacement property for the lands sold to the government under threat of
condemnation. Such properties are not readily available in Albuquerque. The tax
code in this instance permits the Company to acquire other properties as a
tax-free like kind exchange.
Because of these sales to the government, the Company has received income on
which it must pay income taxes of approximately $1,000,000 if replacement
properties are not acquired before the taxes become payable. It is Management's
intention to acquire a property or properties that will qualify for the exchange
and not to pay the taxes that might have been incurred by the sale to the
government. Gains on these sales have been recognized by the Company and
deferred income taxes have been recorded for the differences between book and
tax recognition of these gains.
Management has for the past several years continued to look at prospective
income producing properties that meet certain requirements as to tenant, income,
mortgage costs and maintenance expense. It is Management's intent to acquire
properties that will earn sufficient rental income for the Company so that the
Company will not have any expenses resulting for the ownership of the property.
It was management's intent to acquire these properties in Albuquerque, but it
was found that there were not sufficient properties available in Albuquerque for
purchase. The last property that met Management's requirements was found in El
Paso, Texas. Management is confident that a property meeting The Company's
requirements will be timely found.
Results of Operations
During the third quarter of the current fiscal year, the Company had revenues of
$317,340 compared to $1,720,254 during the same period in the prior fiscal year.
Operating costs and expenses during the three months ended March 31, 2001, were
$494,020 compared to $831,235 during the comparable period in 2000. For the year
to date, revenues were $1,302,834 in 2001 and $6,458,228 in 2000. Operating
costs and expenses were $2,061,661 in 2001 and $2,730,075 in 2000.
In 2001, the Company had sales of approximately $435,000 in small developed lots
to a single buyer, and no sales of large parcels. In 2000, small lot sales were
$1,147,000 and large parcel sales were $4,810,000. In 2000, cost of land
revenues were significantly higher than 2001 due to larger sales volume.
As a real estate developer, the Company spends significant amounts of time and
cash to complete land preparation prior to being able to offer the developed
lots for sale to builders. The Company has learned that to maximize the value of
its lands, it must develop the lands with the sale of completely developed lots
ready to build on rather than to sell its land in an undeveloped condition to
developers. Because of this there is a time lag between the time the expenditure
for development is made and the revenue from the sale of lots is received.
Sometimes this time lag can be over a period of quarters, and in some instances
of large developments, over a period of years. Because of the fluctuations in
Albuquerque's real estate market resulting from overbuilding, under building and
economic conditions the Company is not able to equalize income and expenses.
Because Albuquerque has been one of the fastest growing communities in the
country these fluctuations have been especially hard to anticipate and predict.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than the ordinary routine litigation incidental to the Company's
business, neither the Company nor any member of management is the subject of any
pending or threatened legal proceeding.
ITEM 2. CHANGES IN SECURITIES
NONE
ITEM 3. DEFAULTS IN SENIOR SECURITIES
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 5. OTHER INFORMATION
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no exhibits required by Item 601 of Regulation S-B.
(b) Reports on Form 8-K. State whether any reports on Form 8-K have been
filed during the quarter for which this report is filed, listing the items
reported, any financial statements filed, and the dates of any such reports.
NONE
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.
WESTLAND DEVELOPMENT CO., INC.
DATE: May 10, 2001 By: Barbara Page
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Barbara Page, President,
Chief Executive Officer and
Chief Accounting Officer