-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MOJ57VBrF7/racTmNdVHAnTZU+3Zt075fO+ENVKzgHrsr/VY64cU93csHydE4cxg NsvDaHcOVPDACf5C9rKBFA== 0000106423-04-000014.txt : 20041115 0000106423-04-000014.hdr.sgml : 20041115 20041115160503 ACCESSION NUMBER: 0000106423-04-000014 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041115 DATE AS OF CHANGE: 20041115 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTLAND DEVELOPMENT CO INC CENTRAL INDEX KEY: 0000106423 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 850165021 STATE OF INCORPORATION: NM FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-07775 FILM NUMBER: 041145252 BUSINESS ADDRESS: STREET 1: 401 COORS BOULEVARD S W CITY: ALBUQUERQUE STATE: NM ZIP: 87121 BUSINESS PHONE: 5058319600 MAIL ADDRESS: STREET 1: 401 COORS BLVD S W CITY: ALBUQUERQUE STATE: NM ZIP: 87121 10QSB 1 wdci10qsb.txt 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, 2004 [ ]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 - ------------------------------------------------------------------------------- (Address of principal executive offices) (505)831-9600 - ------------------------------------------------------------------------------- (Issuer's telephone number) N/A - ------------------------------------------------------------------------------- (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, 2004: No Par Value Common: 709,830 Class B $1.00 Par Value Common: 85,100 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, 2004 ASSETS Cash and cash equivalents ........................ $ 8,240,238 Receivables ...................................... 217,310 Land and improvements held for future development ............................ 19,292,176 Income producing properties, net of accumulated depreciation of $2,114,234................. 12,537,625 Property and equipment, net of accumulated depreciation of $672,972...................... 303,733 Other assets...................................... 254,938 ------------ $ 40,846,020 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, accrued expenses and other liabilities ......................... $ 750,861 Deferred income taxes ............................ 7,248,902 Notes and mortgages .............................. 17,738,452 Income taxes payable ............................. 30,591 ------------ Total liabilities ............... 25,768,806 Stockholders' equity Common stock - no par value; authorized, 736,668 shares; issued and outstanding, 709,830 shares ............................. 8,500 Class B common stock - $1.00 par value; authorized, 491,112 shares; issued and outstanding, 85,100 shares .............................. 85,100 Additional paid-in capital .................... 491,061 Retained earnings ............................. 14,492,553 15,077,214 ------------ ------------ $ 40,846,020 ============ The accompanying notes are an integral part of this statement. WESTLAND DEVELOPMENT CO., INC. STATEMENTS OF OPERATIONS (unaudited) For the three months ended September 30, 2004 2003 ----------- ----------- Revenues Land ...................................... $ 1,419,962 $ 2,513,078 Rentals ................................... 342,357 303,275 ----------- ----------- 1,762,319 2,816,353 Costs and expenses Cost of land revenues ..................... 780,636 1,091,621 Cost of rentals ........................... 96,838 81,111 General and administrative ................ 776,384 723,997 ----------- ----------- 1,653,858 1,896,729 ----------- ----------- Income from operations ................. 108,461 919,624 Other (income) expense Interest income ........................... (17,032) (11,374) Gain on sale of assets .................... - (250) Other ..................................... 4,269 794 Interest expense .......................... 74,855 159,979 ----------- ----------- 62,092 149,149 ----------- ----------- Earnings before income taxes ........... 46,369 770,475 Income tax expense ........................... 18,548 308,000 ----------- ----------- NET EARNINGS ........................... $ 27,821 $ 462,475 =========== =========== Weighted average common shares outstanding ............................... 794,931 797,643 =========== =========== Earnings per common share, basic and diluted ......................... $ 0.03 $ 0.58 =========== =========== The accompanying notes are an integral part of this statement. WESTLAND DEVELOPMENT CO., INC. STATEMENTS OF CASH FLOWS (unaudited) For the three months ended September 30, 2004 2003 ------------ ------------ Cash flows from operating activities Cash received from land sales and collections on real estate contracts receivable .......... $ 1,406,870 $ 2,516,586 Development and closing costs paid on land sales ............................... (3,051,221) (1,825,208) Cash received from rental operations .......... 342,357 292,567 Cash paid for rental operations ............... (11,789) (376) Cash paid for property taxes .................. (10,239) (8,241) Interest received ............................. 17,032 7,870 Interest paid ................................. (69,578) (154,674) Income taxes paid ............................. (1,237,321) (91,000) General and administrative costs paid ......... (761,872) (919,794) Other ......................................... -- (794) ------------ ------------ Net cash used by operating activities ........................ (3,375,761) (183,064) ------------ ------------ Cash flows from investing activities Capital expenditures .......................... -- (2,053) Proceeds from sale of equipment ............... -- 250 ------------ ------------ Net cash used by investing activities ........................ -- (1,803) ------------ ------------ Cash flows from financing activities Borrowing on notes and mortgages .............. 4,969,085 1,330,685 Repayments of notes and mortgages ............. (1,485,735) (1,583,948) Payment of dividends .......................... (797,159) (799,822) Purchase of common stock ...................... -- (500) ------------ ------------ Net cash provided by (used in) financing activities ........................ 2,686,191 (1,053,585) ------------ ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS ......................... (689,570) (1,238,452) Cash and cash equivalents at beginning of period .......................... 8,929,808 6,355,807 ------------ ------------ Cash and cash equivalents at end of period ................................ $ 8,240,238 $ 5,117,355 ============ ============ The accompanying notes are an integral part of this statement. Reconciliation of net earnings to net cash used in operating activities Net earnings ................................... $ 27,821 $ 462,475 Adjustments to reconcile net earnings to net cash used in operating activities Depreciation .............................. 100,663 85,637 Gain on sale of equipment ................. -- (250) Change in Receivables ............................... (139,063) (42,068) Land and improvements held for future development ...................... (1,151,178) (741,833) Other assets .............................. (2,866) (3,267) Accounts payable, accrued expenses and other liabilities ................... (992,365) (160,758) Income taxes payable ...................... (1,218,773) 217,000 ------------ ------------ Net cash used in operating activities .......... $ (3,375,761) $ (183,064) ============ ============ The accompanying notes are an integral part of this statement. WESTLAND DEVELOPMENT CO., INC. NOTES TO THE FINANCIAL STATEMENTS (unaudited) September 30, 2004 1. The balance sheet at September 30, 2004, statements of cash flows and statements of operations for the three months ended September 30, 2004 and September 30, 2003 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 generally accepted in the United States of America, 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, 2004. The results of operations for the three months ended September 30, 2004 are not necessarily indicative of operating results for the full year. In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect certain reported amounts and disclosures; accordingly, actual results could differ from those estimates. 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, 2004 and September 30, 2003 were 794,931 and 797,643, 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, 2004: Revenues $1,419,962 $342,357 $ -- $1,762,319 Costs and expenses 780,636 96,838 776,384 1,653,858 ---------- -------- ----------- ---------- Income from operations 639,326 245,519 (776,384) 108,461 Interest income -- -- (17,032) (17,032) Other income -- -- 4,269 4,269 Interest expense 34,863 39,992 -- 74,855 ---------- -------- ----------- ---------- Earnings (loss) before income taxes $ 604,463 $205,527 $ (763,621) $ 46,369 ========== ======== =========== ========== Three months ended September 30, 2003: Revenues $2,513,078 $303,275 $ -- $2,816,353 Costs and expenses 1,091,621 81,111 723,997 1,896,729 ---------- -------- ----------- ---------- Income from operations 1,421,457 222,164 (723,997) 919,624 Interest income -- -- (11,374) (11,374) Other income -- -- 544 544 Interest expense 15,407 139,384 5,188 159,979 ---------- -------- ----------- ---------- Earnings (loss) before income taxes $1,406,050 $ 82,780 $ (718,355) $ 770,475 ========== ======== =========== ========== 4. The Company is engaged in various lawsuits either as plaintiff or defendant which have arisen in the conduct of its business which, in the opinion of management, based upon advice of counsel, would not have a material effect on the Company's financial position or operations. The Company also has certain claims asserted by other parties in conjunction with land development agreements totaling approximately $1.3 million with which the Company does not agree. The Company has paid approximately $130,000 and is disputing other charges. The Company accrued approximately $346,000 during the year ended June 30, 2002 for what it believes are the only valid other charges to the Company. However, the ultimate amount paid for these claims, if any, is subject to change and management believes such claims will be settled by the conveyance of land or other non-cash assets to the claimees. The Company has entered into employment contracts with eight of its key officers and employees for periods from one to five years which are automatically renewed each year for one additional period. In the event of involuntary employee termination, these employees may receive from one to six times annual compensation. The remaining terms under the agreements range from one to six years and the maximum salaries to be paid under the remaining contract periods are approximately $1,612,000. The Company has deferred gains for tax reporting for the involuntary conversion of land by governmental authorities resulting in deferred tax liabilities. The deferral requires that the Company replace the land with the proceeds of conversion within specified time limits. As of September 30, 2004, the Company must purchase replacement property of at least $496,000 by June 30, 2004 (extension to June 30, 2005 pending), $500,000 by June 30, 2005 and $5,279,000 by June 30, 2006 in order to comply with the requirements of its election for income tax deferral. If replacement property is not purchased, the Company may be required to pay income taxes on the conversions of approximately $200,000, $200,000 and $2,110,000 for the tax years ended June 30, 2004, 2005 and 2006, respectively. 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 statements 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, 2004, the Company's cash and cash equivalents decreased by $689,570. During this period, operations used $3,375,361 and financing activities provided $2,686,191. The Company borrowed $3,483,350, net and paid dividends of $797,159. Except for short-term borrowing, the Company's primary source of cash is the sale of land. Although rental operations generated $342,357 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 $8,477,000 on construction lines of credit. During the current year quarter the Company capitalized $141,571 in accordance with FAS 34 against current construction projects (predominantly the 'Petroglyphs' Master Plan) compared to $30,740 during the same quarter in fiscal year 2004. This amount fluctuates, and is paid from receipts from lot sales. The Company plans to 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 $1,762,319 compared to $2,816,353 during the same period in the prior fiscal year. Land revenues decreased significantly due to a decrease in the number of developed lot sales during the first quarter. Improved lot sales decreased by approximately $1,117,000 to $1,259,000. The decrease was primarily attributable to sales and marketing efforts being diverted to the Company's 'Petroglyphs' Master Plan Community which began selling heavily in October, 2004. The Company anticipates that its developed lot sales will remain strong through the remainder of the year. Operating expenses during the three months ended September 30, 2004, were $1,653,858 compared to $1,896,729 during the comparable period in 2003. The decrease was due principally to the associated decrease in cost of land revenues by approximately $311,000, due to decreased lot sales. The Company has begun sales of lots in its sector develoment plan, now called 'The Petroglyphs', which should continue into the next few fiscal years. 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 the approximately $21,399,000 received, the Company has remaining approximately $996,000 of replacement lands and property to acquire by June 30, 2005, and $5,279,000 by June 30, 2006. 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. Indirect 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. Contingencies: Management continues to be diligent in recognizing possible liabilities as they become known. In fiscal 2002, 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 these amounts are 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 maintains disclosure controls and procedures designed to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized and reported on a timely basis. The Company's principal executive officer who is also the chief financial and accounting officer has reviewed and evaluated the Company's disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this report (the "Evaluation Date"). Based on such evaluation, such officer has concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in bringing to their attention on a timely basis material information relating to the Company required to be included in the Company's periodic filings under the Exchange Act. There have not been any changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the Company's most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 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 31, Certification pursuant to Section 302 of the Sarbanes-Oxley Act (b) Exhibit 31.2, Principal executive and financial officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (c) 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, 2004 By: Barbara Page --------------------------- Barbara Page, President, Chief Executive Officer and Chief Accounting Officer -----END PRIVACY-ENHANCED MESSAGE-----