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 September 30, 2002
[ ]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
- ------------------------------- -------------------------------
(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 November 12, 2002:
No Par Value Common: 714,231
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)
September 30, 2002
ASSETS
Cash and cash equivalents ........................ $ 7,345,099
Receivables:
Real estate contracts ......................... $ 18,871
Note receivable - related party ............... 94,247
Other receivables ............................. 95 113,213
------------
Land and improvements held for
future development ............................ 8,546,986
Income producing properties, net ................. 11,476,006
Property and equipment, net of accumulated
depreciation of $602,379 ...................... 329,719
Investment in Partnerships and joint ventures .... 194,212
Other ............................................ 228,075
------------
$ 28,233,310
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses
and other liabilities ......................... $ 805,695
Dividends declared ............................... 250,256
Deferred income taxes ............................ 7,362,021
Notes, bonds, mortgages and assessments payable .. 8,712,899
------------
Total liabilities ............... 17,130,871
Stockholders' equity
Common stock - no par value;
authorized, 736,668 shares;
issued and outstanding,
714,231 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 ............................. 10,416,028 11,102,439
------------ ------------
$ 28,233,310
============
WESTLAND DEVELOPMENT CO., INC.
STATEMENTS OF OPERATIONS
(unaudited)
For the three months ended
September 30,
2002 2001
----------- -----------
Revenues
Land ...................................... $ 6,106,340 $ 932,390
Rentals ................................... 303,280 299,725
----------- -----------
6,409,620 1,232,115
Costs and expenses
Cost of land revenues ..................... 571,075 488,327
Cost of rentals ........................... 82,841 67,504
General and administrative ................ 630,961 416,384
----------- -----------
1,284,877 972,215
----------- -----------
Income from operations ................. 5,124,743 259,900
Other (income) expense
Interest income ........................... (8,350) (21,744)
Other income .............................. (14,438) (8,957)
Interest expense .......................... 182,356 191,909
----------- -----------
159,568 161,208
----------- -----------
Earnings before income taxes ........... 4,965,175 98,692
Income tax expense ........................... 1,999,000 39,500
----------- -----------
NET EARNINGS ........................... $ 2,966,175 $ 59,192
=========== ===========
Weighted average common shares
outstanding ............................... 805,393 800,941
=========== ===========
Earnings per common share .................... $ 3.68 $ .07
=========== ===========
WESTLAND DEVELOPMENT CO., INC.
STATEMENTS OF CASH FLOWS
(unaudited)
For the three months ended
September 30,
2002 2001
------------ -------------
Cash flows from operating activities
Cash received from land sales
and collections on real
estate contracts receivable ................. $ 6,103,163 $ 1,054,139
Development and closing costs paid
on land sales ............................... (810,188) (686,579)
Cash received from rental operations .......... 303,280 312,084
Cash paid for rental operations ............... (9,120) (5,307)
Cash (paid for) received for property taxes ... (56,656) 15,130
Interest received ............................. 8,473 9,554
Interest paid ................................. (167,979) (245,478)
Income taxes paid ............................. (106,931) (9,200)
General and administrative costs paid ......... (496,034) (442,531)
------------ ------------
Net cash provided by
operating activities ........................ 4,768,008 1,812
------------ ------------
Cash flows from investing activities
Distributions from partnerships
and joint ventures .......................... 15,142 10,750
Change in short-term investments .............. -- 1,196,763
Proceeds from note receivable-related party ... 1,343 888
------------ ------------
Net cash provided by
investing activities ........................ 16,485 1,208,401
------------ ------------
Cash flows from financing activities
Borrowing on notes, mortgages and
assessments payable ......................... 763,853 339,871
Repayments of bonds, mortgages,
notes and assessments payable ............... (837,235) (1,463,694)
Payment of dividends .......................... (602,479) --
------------ ------------
Net cash used in financing activities ....... (675,861) (1,123,823)
------------ ------------
NET INCREASE IN CASH
AND CASH EQUIVALENTS ......................... 4,108,632 86,390
Cash and cash equivalents at
beginning of period .......................... 3,236,467 764,001
------------ ------------
Cash and cash equivalents at
end of period ................................ $ 7,345,099 $ 850,391
============ ============
Reconciliation of net earnings
to net cash provided by
operating activities
Net earnings ................................... $ 2,966,175 $ 59,192
Adjustments to reconcile net
earnings to net cash
provided by operating activities
Depreciation .............................. 85,420 84,842
Change in
Rents receivable, accrued interest,
property tax and other assets ........... 197 85,686
Real estate contracts ..................... 26,553 1,294
Land and improvements held for
future development and income
producing properties .................... (257,352) (197,924)
Other assets .............................. (16,225) (48,016)
Accounts and retainages payable,
accrued interest and other
liabilities ............................. 71,170 (13,562)
Income taxes payable ...................... 1,892,070 30,300
------------ ------------
Net cash provided by
operating activities ......................... $ 4,768,008 $ 1,812
============ ============
Noncash investing and financing activities:
Dividends declared but not paid .............. $ 250,256 $ --
WESTLAND DEVELOPMENT CO., INC.
NOTES TO THE FINANCIAL STATEMENTS
(unaudited)
September 30, 2002
1. The balance sheet at September 30, 2002, statements of cash flows and
statements of operations for the three months ended September 30, 2002 and
September 30, 2001 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, 2002. The results of operations for the
three months ended September 30, 2002 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 month periods ended
September 30, 2002 and September 30, 2001 were 805,393 and 800,941,
respectively.
3. Financial information for the two industry segments, land sales and
rental operations, are as follows:
General
Land Rentals corporate Total
---- ------- --------- -----
Three months ended
September 30, 2002:
Revenues $6,106,340 $303,280 $ -- $6,409,620
Costs and expenses 571,075 82,841 630,961 1,284,877
---------- -------- ----------- ----------
Income (loss) from
operations 5,535,265 220,439 (630,961) 5,124,743
Interest income -- -- (8,350) (8,350)
Other income -- -- (14,438) (14,438)
Interest expense 94 177,563 4,699 182,356
---------- -------- ----------- ----------
Earnings (loss)
before income taxes $5,535,171 $ 42,876 $ (612,872) $4,965,175
========== ======== =========== ==========
Three months ended
September 30, 2001:
Revenues $ 932,390 $299,725 $ -- $1,232,115
Costs and expenses 488,327 67,504 416,384 972,215
---------- -------- ----------- ----------
Income (loss) from
operations 444,063 232,221 (416,384) 259,900
Interest income -- -- (21,744) (21,744)
Other income -- -- (8,957) (8,957)
Interest expense 7,745 183,591 573 191,909
---------- -------- ----------- ----------
Earnings (loss)
before income taxes $ 436,318 $ 48,630 $ (386,256) $ 98,692
========== ======== =========== ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This document contains statements that are not historical but are
forward-looking statments within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
include statements regarding the expectations, beliefs, intentions or strategies
for the future. The Company intends that all forward-looking statements be
subject to the safe-harbor provisions of the Private Securities Litigation
Reform Act 1995. These forward-looking statements reflect the Company's views as
of the date they are made with respect to future events and financial
performance but are subject to many uncertainties and risks which could cause
the actual results of the Company to differ materially from any future results
expressed or implied by such forward-looking statements. Examples of such
uncertainties and risks include, but are not limited to: fluctuations in
occupancy levels and labor costs; the availability and cost of financing to
redeem common shares and to expand the Company's business; and public resistance
to privatization. additional risk factors include those discussed in reports
filed by the Company from time to time on forms 10-KSB, 10-QSB and 8-K. The
Company does not undertake any obligation to update any forward-looking
statements.
Management's Discussion and Analysis should be read in conjunction with our
Financial Statements and the notes to our Financial Statements.
Financial condition:
During the three months ended September 30, 2002, the Company's cash and
cash equivalents increased by $4,108,632. During this period, operations
provided $4,768,008 and investing activities provided $16,485. Also, the Company
repaid debt of $73,382, net and paid dividends of $602,479. Except for
short-term borrowing, the Company's primary source of cash is the sale of land.
Although rental operations generated $303,280 in the first fiscal quarter, most
of those receipts normally are used to service the mortgage debt for those
properties. Other than trade payables and mortgages, the other significant debt
is $188,640 on a construction line of credit. This amount fluctuates, and is
paid from receipts from lot sales. The Company will continue to improve its land
projects to create saleable product.
Results of operations:
During the first quarter of the current fiscal year, the Company had
revenues of $6,409,620 compared to $1,232,115 during the same period in the
prior fiscal year. Land revenues increased significantly primarily due to the
sale of a single large parcel for approximately $5,279,000. Improved lot sales
decreased by approximately $100,000 to $810,200. Operating expenses during the
three months ended September 30, 2002, were $1,284,877 compared to $972,215
during the comparable period in 2001. The increase was due principally to
increases in cost of land revenues by approximately $83,000 and $215,000 in
general and administrative expenses. As the Company sells the remaining lots in
its Tierra Oeste and Painted Sky units this year, it will begin sales of lots in
the Crossings subdivisions, which should continue into the next fiscal year.
For the past ten years, governmental entities have been buying land from
Westland pursuant to condemnation. The Company is allowed to defer federal and
state income tax on the gain from these sales if it reinvests the proceeds
within a specified time. The result has been a deferred tax liability of
$7,362,021. Of the approximately $21,899,000 received, the Company has remaining
approximately $2,681,000 of replacemant lands and property to acquire by June
30, 2003, $500,000 by June 30, 2004 and $5,279,000 by June 30, 2005. In the
event the Company does not replace the property sold pursuant to condemnation,
it may need to utilize a substantial portion of its liquid investments for the
payment of these taxes.
Critical Accounting Policies:
Income recognition and cost allocation:
In recent years, the Company has had very few installment sales, so income is
recognized when a property is sold with financing provided by the buyer. Some of
the sales are basically raw land which has little more than its original cost of
$2.60 per acre. Other parcels benefit from certain infrastructure improvements
such as roads financed by Special Assessment District obligations, which are
generally allocated to the subject property based on site location and acreage.
Improved lots bear costs such as roads, sewer, sidewalk, etc. as they are
incurred by subdivision. "Soft" costs such as engineering fees and improvements
which benefit an entire project are generally allocated to units based on number
of lots or acreage. This policy has been consistently applied over most of the
last decade.
Contingencies:
Management continues to be diligent in recognizing possible liabilities as they
become known. In June, the Company accrued $346,000 against possible loss due to
a claim made by Bernalillo County for costs allegedly incurred in researching
creation of a new municipality for Westland's sector development plan.
Management believes this is sufficient to liquidate alleged damages, if any.
Asset Impairment:
Management periodically assesses the possibility that the carrying value of its
assets is greater than its realizable value. For the most part, this question is
obviated because the carrying cost of land is very low compared to any
reasonable sale price. When property is improved for sale as individual lots, a
commitment exists by contract obligating the purchaser prior to undertaking the
development. However, the Company owns several properties held for the
production of income, designed for a specific use, which could become impaired
if the lessee vacated or rescinded its lease under bankruptcy. Management
periodically determines by inspection that the properties are suitably
maintained and insured and that the lessees are Conducting proper operations.
ITEM 3. CONTROLS AND PROCEDURES
The Company's principal executive and financial officer has evaluated the
effectiveness of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14(c) and 15d-14(c)) as of a date within 90 days of the
filing date (the "Evaluation Date") of this quarterly report, and has concluded
that as of the Evaluation Date, the Company's disclosure controls were adequate,
effective and ensure that material information relating to the Company would be
made known to her timely by others within the entity.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect the Company's disclosure controls
and procedures subsequent to the Evsaluation Date, nor were there any
significant deficiencies or material weaknesses in such disclosure controls and
procedures requiring corrective actions. As a result, no corrective actions
were taken.
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) Exhibit 99, Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, attached.
(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: November 12, 2002 By: Barbara Page
---------------------------
Barbara Page, President,
Chief Executive Officer and
Chief Accounting Officer
CERTIFICATION
I, Barbara Page, the principal executive and financial officer, of
Westland Development Co., Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Westland Development
Co., Inc., SEC file No 0-7775;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to us by others within
this entity, particularly during the period in which this quarterly report
is being prepared.
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) preseented in this quarterly report my conclusions about the effectiveness
of the disclosure controls and procedures based on my evaluation as of the
Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and board of directors:
a) all significant defiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and rport financial data and have identidied for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whetheror not material, that involves management or other
employees who have a sighificant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most recent
evaluation, including any corrective actions with regard to significant
defiencies and material weaknesses.
Date: November 12, 2002
Barbara Page
----------------------------------
Barbara Page, principal executive
and financial officer
[Signature] [Title]
There are no other certifying officers.