-----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, OeF890q9RK+pOxgcemh5NM6cwj4oInYdkFFpct4t09PyBK92sWVnWHuRgtm8pc7t +Lz37fCCije7ya/t+xWF0w== /in/edgar/work/20000908/0001008878-00-000042/0001008878-00-000042.txt : 20000922 0001008878-00-000042.hdr.sgml : 20000922 ACCESSION NUMBER: 0001008878-00-000042 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000908 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTLAND DEVELOPMENT CO INC CENTRAL INDEX KEY: 0000106423 STANDARD INDUSTRIAL CLASSIFICATION: [6552 ] IRS NUMBER: 850165021 STATE OF INCORPORATION: NM FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-07775 FILM NUMBER: 718598 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 10KSB 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended June 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission File Number: 0-7775 WESTLAND DEVELOPMENT CO., INC. ------------------------------ (Exact name of Westland as specified in its charter) New Mexico 85-0165021 ---------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or other organization) Identification No.) 401 Coors Boulevard, N.W., Albuquerque, New Mexico, 87121 --------------------------------------------------------- (Address of principal executive offices) (Zip Code) Westland's telephone number, including area code: 505-831-9600 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: No Par Value Common Stock ------------------------- (Title of Class) 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 Westland was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of Westland's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ] State issuer's revenues for its most recent fiscal year: $7,355,024. State the aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days. On September 1, 2000, there were 705,290 No Par Value Common shares and 30,700 Class B shares owned by non-affiliates. The stock was sold on September 1, 2000 for $22 per share. Thus the aggregate market value of the voting stock held by non-affiliates was $16,191,780. The number of shares outstanding of each of Westland's classes of common stock, as of September 1, 2000, was: No Par Value Common: 715,293 shares. Class B $1.00 Par Value: 86,100 shares. DOCUMENTS INCORPORATED BY REFERENCE: 1) Proxy statement and Proxy for Annual Meeting of Shareholders for the year ended June 30, 2000. 2) Annual Report to shareholders for the year ended June 30, 2000. PART I ITEM 1: DESCRIPTION OF BUSINESS I. General Development of Business. - ----------------------------------- Westland Development Co., Inc., a New Mexico for-profit corporation ("Westland"), is the successor to a community land grant corporation named Town of Atrisco, which itself was a successor to a Spanish community land grant named the Atrisco Land Grant. Information concerning the historical background of these predecessor organizations and the conversion in 1967 from a community land grant corporation into a business corporation can be found in Westland's Form 10 and its Form 10-K for the fiscal year ended June 30, 1974. With limited exceptions, only lineal descendants of the incorporators of the Town of Atrisco may own shares of Westland's Common Stock. Westland's executive offices are located in its own building at 401 Coors Boulevard, N.W., Albuquerque, New Mexico, 87121, telephone (505) 831-9600, on land which was originally part of the Atrisco Land Grant. Westland is the owner of approximately 59,000 acres of land located on the west side of Albuquerque, New Mexico. Most of its property is held for long term investment and is leased for cattle grazing. Westland derives revenues through commercial and land leases, partnerships formed for various development projects, lot development sales and sales and bulk land sales to other land developers. In 1998 the City of Albuquerque and the County of Bernalillo finalized the approval of a master plan for development of 6,400 acres of Westland's land. For Westland to begin developing or selling land within this planned area, Albuquerque must make available the required utilities. The City and Westland have reached a pre-annexation agreement through which the City will annex the initial 1,665 acres and Westland is to furnish sewer and water utilities to the initial 1,665 acres . The lands within the master plan area have been segregated by Westland for development. As previously stated, for Westland to be able to develop the Master Plan area it must make provision for utilities that do not presently exist on any of the Master Planned lands. Westland has agreed that it will bear the initial cost of the major water and sewer infrastructure to the initial 1,665 acres, which are now estimated to be as much as $10,000,000. An additional $5,000,000 to $10,000,000 will also be required for standard development costs. When completed, Westland will convey the utilities to the City. Although Westland must advance the cost of the utilities, it will recover those costs through a "hook-up" fee that will be charged to each lot sold in the annexed area. Depending upon the growth of development in this area, it may take 15 or more years for Westland to recover these costs. Westland is currently soliciting financing for the construction of the initial phase of the Master Plan infrastructure. Although no commitments have yet been received, Management believes that Westland will obtain the required financing and begin construction of improvements within the next fiscal year. Management remains committed to begin the construction of residential, industrial and commercial developments for lease or sale. Westland's long term business philosophy is to enhance the value of Westland's land through careful planning and development, while retaining ownership of a major portion of the land in perpetuity and simultaneously increasing the value of Westland's stock and to provide dividends for its shareholders, when consistent with Westland's need for a sufficient cash flow to meet current operating expenses. II. Status of Westland's Business. - ----------------------------------- Over the past 20 years, Westland developed six master plans and sold all of the acreage included in them. Those master plans are identified as Atrisco Urban Center and El Rancho Atrisco, Phases I through V. These lands, except for the Phase V master plan which was abandoned due the introduction of the Petroglyph National Monument, have now been substantially developed and sold. As discussed above, the new Master Plan encompasses approximately 6,400 acres in an area located north of I-40, between Unser and Paseo del Volcan. Initial utility development of Phase I of the Master Planned area should begin in the next fiscal year, depending upon available funding. A. Oil and Gas and Grazing Leases. - ---------------------------------- Approximately 57,000 acres of Westland's land is not planned for development and 55,139 acres are leased to non-affiliated people for cattle grazing. The leases provided revenue of approximately $22,000 in fiscal 2000. Because of the extreme drought in the area, Westland has granted rent abatements to the tenant in both of the last two fiscal years. On June 6, 2000, Westland granted an oil and gas lease on approximately 6,365 acres to an exploration corporation. The lessee paid Westland a rental bonus of $9,547 in consideration of the lease. Management is not aware of any drilling or other activities having been conducted on the property by the lessee during since the date of the lease. Westland also owns and leases certain commercial buildings at an aggregate annual rental of $840,000 (See "Revenue Producing Properties). B. Development Properties. - -------------------------- As of June 30, 2000, Westland continued to own approximately 175 acres of developed and unsold land. The effort of Westland and its staff is being devoted to the implementation of the new Master Plan at the earliest possible date. A summary of Westland Master Plan is as follows: C. Westland Master Plan. - ------------------------ Westland's new Master Plan covers approximately 6,400 acres located north of Interstate 40 and south of the area designated for the Petroglyph National Monument, west of Unser Boulevard. Westland and the City of Albuquerque have agreed on the conditions through which the City will annex the first 1,665 acres in the Master Plan area and Westland will begin introducing water and sewer utilities to the portions of land that will be initially developed. As discussed above, Westland has agreed to pay the cost of water and sewer utilities to the land with its costs being recovered over time through hook-up fees. Westland anticipates paying the costs incurred to furnish these utilities through a combination of borrowing and use of portions of its income. In addition, any water rights now owned or subsequently acquired by Westland in the 6,400 acres of the master planned area must be assigned to the City for only the 1,665 acres of the master planned area to which the City supplies water and sewer service. It is anticipated that there are no insurmountable obstacles remaining, including acquiring the necessary financing, to begin of the implementation of the Master Plan. Management expects that the first sale of lands in the master planned area will occur in the next fiscal year, barring unforeseen delays. D. Other Projects. - ------------------ 1. Volcano Business Park. Volcano Business Park consists of approximately 22 acres zoned for industrial park uses, which were platted and developed into 14 lots. Westland, through a partnership arrangement owns 50% of a 172-unit self-storage facility on approximately 1.7 acres of this property. As of August 1, 2000, the facility was substantially occupied. During the year, the facility was expanded storage of motor vehicles and boats. 2. Project Development. (a) North Tract The Company is currently preparing marketing information and considering financial options and the optimum timing for initiating development, marketing, and sales of land in the Sector Plan area. The Company has undertaken the subdivision planning, design and approval process for 290 single-family lots in a six-phase project presently called the Painted Sky Subdivision. The Company and Mesa Golf of Dallas, Texas, recently obtained approval for a 27 hole golf course community located on 500 acres adjoining the Petroglyph National Monument within the Sector Plan area from the City of Albuquerque's Environmental Planning Commission. Unfortunately the City's approval was appealed by Mr. Jaime Chavez "on behalf of concerned Atrisco Land Grant heirs" in the name of Water Information Network. The appeal may delay the golf course project, and possibly the Sector Plan area's development, increase expenses for the Company, and damage the Company's reputation. The Company is also developing three additional subdivisions in an area west of Unser Blvd. And North of I-40 east of the Master planned area. Sales of lots in one or more of these three newly developing areas are anticipated to begin during the current fiscal year. (b) South Tract During fiscal 2000 the Company sold 100 acres of land located near the proposed extension of Rio Bravo Blvd. to a manufactured housing community developer. In addition, during fiscal year 2000 Bernalillo County commenced construction of the connection of Rio Bravo Blvd. from Coors S.W. to Paseo del Volcan S.W. Completion of the connection of Rio Bravo from Coors to Paseo del Volcan is anticipated by the end of calendar year 2000. 3. Recreation Complex Westland previously reported that in 1994 it entered into a lease/option arrangement related to approximately 100 acres located north of I-40 on Paseo del Volcan. Westland took possession and ownership of the facility in 1997 as a result of default in the terms of the lease/option. The Park contains a fully developed recreation and softball complex. 4. Education and Community Projects Westland has a continuing corporate program of donating land or otherwise assisting in projects that its management believes have a long term beneficial effect to the development and furtherance of the educational and health of the community and citizens. As previously reported, Westland has donated lands for the purpose of building schools, churches, and health care facilities. During fiscal 1999, Westland donated approximately fifty acres to YES Housing, Inc., a nonprofit corporation, for the purpose of construction of a facility devoted to the housing and employment of mentally ill citizens. During fiscal 2000, Westland received no requests for assistance through the grant of land. Management will continue to review all requests of a similar nature to determine the merits, on a case by case basis, of future requests for similar donations. 5. Land Sales Westland has, in the last year, completed 28 transactions totaling approximately 235 acres. 6. Reinvestment Properties As part of Westland's plans to defer the tax burden arising from the sale of its lands to the National Park Service under threat of condemnation for inclusion in the Petroglyph National Monument, it reinvested the sale proceeds in the properties discussed below and two vacant land parcels. As a result of these purchases, Westland believes that it has deferred payment of taxes on the sales of land to the National Park Service. The Commercial properties are the following: a) A commercial building at Coors Boulevard and Sequoia Road in Albuquerque at a cost of $2,630,000, $1,729,442 of which is subject to a Mortgage upon which Westland must pay monthly payments of $17,970. This building has been leased to Walgreen Co. for 20 years at a fixed rent of $19,173 per month plus additional rent based upon a formula of gross sales up to a maximum rent of $460,161 in any one year. b) A commercial building in Albuquerque's Midway Industrial Park at a cost of $1,074,000, $693,358 of which is subject to a Mortgage upon which Westland must make monthly payments of $6,893. This building has been leased to Circuit City Stores for a term of 10 years at an escalating rental beginning at $4.25 per square foot the first year and increasing in stages to $5.55 per square foot in the tenth year. The lessee has also been granted the right to extend the lease for two additional 5 year terms at escalating rental rates during each of the years of any extended term. The current rent is $9,804 per month. c) A commercial building located at Coors Boulevard and Central Avenue at a cost of $3,593,000, which is subject to a mortgage of $2,613,731 requiring payments of $24,682 per month. The building has been leased to Walgreen Co. on a minimum 20 year lease at a fixed rent of $26,122 per month plus a percentage of gross sales, with the maximum annual rent being capped at $626,922. Walgreen Co. may continue the term of the lease for an additional 40 years. d) A commercial building located at the SE corner of Eubank and Spain, N.E., at a cost of approximately $1,331,000, which is subject to a mortgage of $915,820 requiring payments of $9,079 per month. The building has been leased to Marie Callender Pie Shops, Inc., on a minimum 10-year lease at a fixed rent of $11,000, plus a Percentage Rent in the amount of 6% of Annual Gross Sales in excess of $132,000. The tenant has the right to renew the lease for as many as three 5 year terms. Current Real Estate Market Conditions The market conditions for the development and sale of properties in Albuquerque have slowed but remain positive at the present time. Westland has been able to sell the residential properties it had available for sale. Management believes that for the foreseeable future commercial and industrial construction will continue at a rapid pace while the demand for single family residential construction will continue at a more moderate pace. Competition - ----------- Westland's industrial parks - The Atrisco Urban Center, Volcano Business Park and Ladera Industrial Park compete with other business and industrial parks in the Albuquerque area, including some that are more established and some that are located nearer the major population centers of Albuquerque. Residential subdivisions on Westland's land compete with other areas in the Albuquerque housing market (essentially Bernalillo County and portions of Sandoval County and Valencia County), as well as with other subdivisions on the western side of the City of Albuquerque. A number of large subdivisions to the north of Westland's land are not fully sold. These include Rio Rancho (about six miles north of Westland's land), Paradise Hills and Ventana Ranch (about five miles north of Westland's land), Volcano Cliffs and Taylor Ranch (each about two to three miles north of Westland's land). The implementation of certain mandated impact fees may have an as yet undetermined affect on Westland's ability to sell property in competition with developers of land located in neighboring counties. (See "Governmental Regulations") Employees - --------- As of June 30, 2000, Westland had ten full-time and seven part-time employees. Westland's president, who is also a director, is a full time employee. Westland also had contractual relationships with other individuals, including two of Westland's officers and directors, who provided various services to the Company. Government Regulations - ---------------------- Westland's ability to undertake an active program of development of its land and management of its rental properties, (whether such development is performed by Westland itself or by sale of Westland's land to others for development), is dependent on Westland's ability to comply with laws and regulations of the State of New Mexico and Bernalillo County, and the City of Albuquerque, applicable to general environmental protection, land-use planning, annexation, zoning and subdivisions. Both County and City regulate the subdivision of land and impose zoning and building permit requirements. The subdivision regulations of both Bernalillo County and the City of Albuquerque require, as a condition of approval of proposed subdivisions, that adequate provision be made by the developer for land use planning, water (both to quantity and quality), liquid waste disposal, solid waste disposal, sufficient and adequate roads and storm drain management. Although the compliance with federal, state, and local provisions relating to the protection of the environment, including laws regulating subdivisions and land-use planning and endangered species, has in recent years had no material effect upon the capital expenditures, earnings and competitive position of Westland, no assurance can be given that this situation will continue. Requests relating to drainage, traffic flow and similar matters from the City of Albuquerque have occasionally delayed the receipt of necessary approvals and required modification of development proposals. The opening of the Double Eagle II Municipal Airport by the City of Albuquerque to the north of Westland's Land on Paseo del Volcan may have an impact on the use of and planning for Westland's land in the vicinity of the airport as will the creation of the Petroglyph National Monument, although Management believes both facilities will favorably impact the Company's lands. At Westland's request, the City of Albuquerque created Special Assessment Districts affecting the Atrisco Urban Center and the El Rancho Atrisco areas for the financing of water, sewer, paving and other street improvements, and levied assessment liens on them. This has provided a mechanism for financing these improvements, and SAD's may be available for future development of Westland's property. A mandate by the State Legislature for implementation of Impact Fees may result in Westland's lands being disadvantaged because the fees that surrounding counties charge may be less than those that will be charged by Albuquerque and Bernalillo County. Bernalillo County began the assessment of such fees on January 1, 1996, but Albuquerque has not yet implemented the fees. Westland does not believe that these fees will fees adversely impact its business in any material way. Availability of Water and Municipal Services. - -------------------------------------------- The unavailability of sufficient water has often been a major inhibiting factor in the land development business in the Southwest. The extent of Westland's water rights has not been determined, however, Westland has retained the services of a water law specialist to investigate the existence of any Westland water rights and to otherwise consult with Westland on matters involving availability of water. However, lack of ownership of water rights by Westland would not be an inhibiting factor to the developing of Westland's land if adequate water were to be made available through the City of Albuquerque and/or Bernalillo County and/or other water sources or by purchase by Westland or by a developer that might purchase and develop land. For example, Tierra West Mobile Home Park sold by Westland near 9-mile hill and the recreation complex leased or purchased water rights and drilled wells to meet their water needs. Under present annexation policies of the City of Albuquerque, annexation to the City of Albuquerque of portions of Westland's land is a requirement by the City before it will extend water and sewer services within a reasonable period of time after annexation. However, the cost of water distribution and sewer lines would have to be borne by the developer, or by subsequent purchasers of the annexed portions. The City and Westland have now reached the agreement discussed above relating to provisions for utility services to the Master Plan lands and annexation by the City. Most of Westland's land lies outside the municipal limits of the City of Albuquerque and are not furnished with City water or other City services. Westland experienced little difficulty in having its other Master Plan area furnished with services, but the same cannot be assumed for other areas of Westland's land. Other Factors Affecting Development of Westland's Land - ------------------------------------------------------ Various activist groups, as well as neighborhood organizations occasionally take actions, which have, to some extent, delayed Westland's plans for the development of some of its lands. The most recent of these is the appeal by Mr. Chavez to the EPC of Westland's proposed golf course development. Two activist groups filed appeals with the City of Albuquerque related to Westland's Master Plan. However, the Master Plan was upheld with only minor modifications. ITEM 2: DESCRIPTION OF PROPERTIES The major physical assets owned by Westland are its land which is owned in fee simple. The land is mostly comprised of approximately 59,000 acres of undeveloped land held for long-term investment. Approximately 6,400 acres are located in Westland's Master Plan area. Westland also owns the Atrisco Urban Center office building, comprising approximately 11,097 square feet, 4,166 of which is leased to Bank of America at a monthly rental of $5,022, while the remainder is used by Westland for its executive offices. This building is not mortgaged. Westland also owns four commercial buildings that are leased to others and is a 50% owner of a self storage facility. See "Item 1. Business - Reinvestment Properties." Westland's land is crossed by Interstate Highway I-40, the main east-west thoroughfare through Albuquerque. Access to Westland's land from Interstate 40 is provided by the Coors Boulevard interchange near the eastern edge of Westland's land, by the Unser Boulevard interchange at the western edge of the Atrisco Urban Center, by the 98th Street interchange to the west of the Atrisco Urban Center and by the Paseo del Volcan interchange where I-40, Paseo del Volcan and Central Avenue meet. Running north from the I-40 interchange, Paseo del Volcan transverses about 4 1/2 miles of Westland's land to the Double Eagle II Airport.. Bernalillo County has extended Paseo del Volcan south of the I-40 interchange to the point at which it will intersect with the Rio Bravo extension to form an inner loop for the City's southwest quadrant and construction has commenced to link Rio Bravo and Paseo del Volcan. Westland and other landowners and developers (the Northwest Loop Association) dedicated land and have paid a portion of the design costs for the Northwest Loop, which has been approved by the New Mexico State Highway Commission. The Northwest Loop will extend for approximately 39 miles and will connect I-40 and 1-25, through New Mexico State Highway 44, and will cross the western portion of Westland's land within the Rio Puerco valley. In 1995 Westland donated 169 acres for development of the Northwest Loop. Completion of the Northwest Loop is not expected for 15 to 20 years. Most of Westland's land is remote and not readily accessible, not serviced by utilities, and Westland believes that the bulk of its land will not be available for development in the foreseeable future. A large portion of the undeveloped land is leased for agricultural uses (see "Item 1. Business" ). The bulk of Westland's undeveloped land is held for long term investment. In the opinion of the Company's Management, its developed property is adequately covered by insurance. ITEM 3: LEGAL PROCEEDINGS Other than 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 proceedings: ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended June 30, 2000. PART II ITEM 5: MARKET FOR WESTLAND'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information required by this item is incorporated by reference to the item in Westland's Annual Report to Shareholders for the year ended June 30, 2000 entitled "Market Price and Dividends on Westland's Common Equity and Related Stockholder Matters." ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this item is incorporated by reference to the item in Westland's Annual Report to Shareholders for the fiscal year ended June 30, 2000 entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations." ITEM 7: FINANCIAL STATEMENTS The information required by this item is incorporated by reference to the Financial Statements in Westland's Annual Report to Shareholders for the fiscal year ended June 30, 2000 which is attached as exhibit 13 to this report. ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no changes in or disagreements with Accountants of the kind described by Item 304 of Regulation S-B at any time during Westland's two (2) most recent fiscal years. PART III ITEM 9: DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The information required by this item is incorporated by reference to the items in Westland's definitive Proxy Statement for the October 20, 2000, Annual Meeting of Shareholders entitled "Election of Directors" and "Directors and Executive Officers". All reports required by Section 16(a) of the Exchange Act to be filed during the fiscal year were filed. ITEM 10: EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to the item in Westland's Definitive Proxy Statement for the October 20, 2000, Annual Meeting of Shareholders entitled "Executive Compensation". ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this item is incorporated by reference to the item in Westland's Definitive Proxy Statement for the October 20, 2000, Annual Meeting of Shareholders entitled "Voting Securities and Principal Holders Thereof". ITEM 12: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this item is incorporated by reference to the item in Westland's Definitive Proxy Statement for the October 20, 2000, Annual Meeting of Shareholders entitled "Voting Securities and Principal Holders Thereof" and "Executive Compensation". PART IV ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 1. Financial Statements, incorporated by reference to Westland's Annual Report to Shareholders for each of the two years ended June 30, 1999 and 2000: Report of Independent Certified Public Accountants Balance Sheet Statements of Earnings Statement of Stockholders' Equity Statements of Cash Flows Notes to Financial Statements 2. Exhibits: Exhibit (3) Articles of Incorporation and Bylaws: (3)(I) Articles of Incorporation filed as an exhibit to Westland's Registration Statement on Form 10-K on September 28, 1982 and incorporated herein by reference. (3)(ii) Restated Bylaws filed as an exhibit with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1993. (10) Material Contracts: (10.1) Consulting Agreement with Sosimo Padilla, dated December 18, 1992, as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1993, and incorporated herein by reference. (10.2) Consulting Agreement with Polecarpio (Lee) Anaya, dated December 18, 1992, as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1993, and incorporated herein by reference. (10.3) Employment Agreement with Barbara Page, dated December 18, 1992, as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1993, and incorporated herein by reference. (10.4)Lease Agreement dated April 25, 1994, between Central Avenue Partners and Walgreen Co., as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998, and incorporated herein by reference. (10.5) Assignment of Lease dated April 20, 1995, from Central Avenue Partners to Westland, as filed with the' Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1995, and incorporated herein by reference. (10.6) Lease Agreement dated March 14, 1995, between George Brunacini and Jeannette Brunacini and Circuit City Stores, Inc., as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1995, and incorporated herein by reference. (10.7) Assignment of Lease dated June 28, 1995, from George Brunacini and Jeannette Brunacini to Westland, as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1995, and incorporated herein by reference. (10.8) Lease Agreement dated March 19, 1996, between C.A.P. II, a New Mexico general partnership, and Walgreen Co., as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996, and incorporated herein by reference. (10.9) Assignment of Lease dated June 21, 1996, from C.A.P. II, a New Mexico general partnership, to Westland, as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996, and incorporated herein by reference. (10.10) Lease Agreement dated June 29, 1999, between Marie Callender Restaurant and Pie Shop, a California corporation, as filed with Westland's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1999. (11) Statement regarding computation of per share earnings is incorporated by reference to Note A(9) to the Financial Statements incorporated herein by reference to Westland's Annual Report to Shareholders for the Fiscal year ended June 30, 2000. Annual Report to Shareholders for the Fiscal year ended June 30, 2000. Subsidiaries of Westland: Westland has the following subsidiaries: Name State of Incorporation El Campo Santo, Inc New Mexico - non-profit Westland Community Services, Inc New Mexico - non-profit All other exhibits required by Item 601 of Regulation S-B are inapplicable to this filing. (b) Reports on Form 8-K: During the last quarter of the period covered by this report, Westland filed no reports on Form 8-K: SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, Westland caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WESTLAND DEVELOPMENT CO., INC. By: Barbara Page ----------------------- Barbara Page, President, Chief Executive Officer, Chief Financial Officer and Director Date: September 6, 2000 In accordance with the Exchange Act, this report has been signed below by thefollowing persons in behalf of Westland and in the capacities and on the dates indicated. By: David C. Armijo ----------------------- David C. Armijo, Secretary-Treasurer and Principal Financial Officer Date: September 6, 2000 In accordance with the Exchange Act, this report has been signed below by the following persons in behalf of Westland and in capacities and on the dates indicated. By: David C. Armijo ---------------------- David C. Armijo, Director Date: September 6, 2000 By: Lee Anaya ---------------------- Polecarpio (Lee) Anaya, Executive Vice President and Director Date: September 6, 2000 By: Sosimo S. Padilla ---------------------- Sosimo S. Padilla, Director and Chairman of the Board Date: September 6, 2000 By: Josie G. Castillo ---------------------- Josie G. Castillo, Director Date: September 6, 2000 By: Carmel T. Chavez ---------------------- Carmel T. Chavez, Director Date: September 6, 2000 By: Joe S. Chavez ---------------------- Joe S. Chavez, Director Date: September 6, 2000 By: Charles V. Pena ---------------------- Charles V. Pena, Director Date: September 6, 2000 By: Carlos Saavedra ---------------------- Carlos Saavedra, Director Date: September 6, 2000 By: Barbara Page ---------------------- Barbara Page, Director Date: September 6, 2000 EX-13 2 0002.txt Exhibit 13 September 1, 2000 Dear Shareholders: Greetings! Your Board of Directors is pleased to report that fiscal year 2000 was a remarkable period for your Company. Revenues from our operations reached new highs and we continued to make progress in implementing our development plans. We are well into the infrastructure design stage for our Sector Plan, and the initial projects for the area have started to take shape. Financing the infrastructure is a key component to our future success. We are currently working on a number of possibilities in this regard. Our Cedar Ridge project is completely sold out, and we have started construction on two new subdivisions. We have executed a letter of intent with Kaufman & Broad Homes for one of the projects and expect to begin marketing the second subdivision in the near future. A third residential project, Painted Sky, should come into focus by the end of the year. Overall, while the Albuquerque market for new housing has slowed some over the past twelve months, we continue to see a good demand for our area. Over the past 10 years, we have made the Company's cemeteries a priority. Many new improvements were introduced in fiscal year 2000, and we continue to work to beautify these areas. Like all of our projects, we want you to feel proud of the cemeteries. The business of real estate and land development faces a lot of adversity from individuals and organizations opposed to Albuquerque's growth. We are committed meet the needs for employment, housing, education, and recreation by building new communities on the west side. Our goal is to develop the land in a responsible manner and to be mindful of water conservation and air quality and the many issues that face a growing economy. We are proud of our successful ten years and more excited about the Company's future. I look forward to seeing you at our Annual Shareholder Meeting. Please feel free to call upon me anytime. Sincerely, Barbara Page President and Chief Executive Officer BUSINESS OF WESTLAND Westland owns a large tract of land consisting of approximately 59,000 acres (the "Land") located on the west side of the City of Albuquerque, New Mexico. Most of the Land is held for long-term investment and is leased to others for grazing purposes while the balance is held for development, sales and leasing activities. Approximately 48,000 acres of this Land were originally part of the Atrisco Land Grant, which was granted to a group of Spanish settlers in 1692. Westland generates cash internally through its land operations (grazing leases, real estate sales and commercial leases) and externally through long and short-term borrowing. The profitability and resulting cash flows of Westland's land operations depend on numerous factors, such as demand for grazing leases, land leases, supply of competitively priced, developed or undeveloped, properties for residential, industrial or commercial uses. Over the long term, Westland expects that residential and industrial growth on Albuquerque's west side will continue to increase the demand for Westland's land, thus continuing Westland's ability to generate revenue from land development and sales. In the short term, however, periodic local and national economic conditions may decrease the number of land sales and hinder development, such as during the period from 1986 through 1992. Westland is now starting on its next major undertaking as development on its new sector plan comes into existence. This development start culminates a decade of hard and diligent work by Westland's Directors and employees. Westland's basic business philosophy continues to be to hold certain areas of the land in trust for shareholders and to enhance the value of other areas of the Land through careful planning and development to assure perpetual benefit to the Company and its shareholders. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION OPERATIONS In the past fiscal year, land sales were greater than the prior year as the Company experienced about the same sales of improved residential lots as last year and greater large parcel sales. During fiscal 1999 there were $2,605,000 of sales of lands to the National Park Service ("NPS") as part of its acquisition of the lands included in the Petroglyph National Monument. This was the final acquisition of land to be purchased from the Company by NPS. Such sales amounted to approximately 54% of the Company's sales revenue for 1999. During fiscal 2000, Albuquerque continued a slower but still significant pattern of growth that has benefited Westland for the past eight years. Albuquerque continues to be one of the fastest growing cities in the Southwest and, because of certain geographical and other limitations on its growth, Westland's lands lie directly in the path of future predictable growth patterns. Sales of improved residential lots in fiscal 2000 were approximately $1,148,000, compared to sales of approximately $1,221,000 in fiscal 1999. Westland's future revenues will continue to be largely dependent upon the sale of land. The Company's assets are illiquid, comprising principally undeveloped land. Sales are dependent upon the market conditions in Albuquerque, New Mexico. Westland anticipates making capital commitments for land development projects over the next few years as the economy and opportunities dictate that such expenditures would be warranted. Capital commitments may include special assessment districts for roads and water and sewer lines on its land. In some cases infrastructure improvements are paid for by assessments, which increase the value of Westland's land and make further development possible. Westland intends to incur capital expenditures when management determines such investments will increase the value of the land and generate future revenue. Land is Westland's principal capital resource, and is valued, for financial accounting purposes, at its 1907 value plus the cost of improvements. Westland's balance sheet does not reflect the actual current value of this asset. The Company has no current appraisals of the land and, therefore, the actual value of the land is not known. The carrying value of the land was increased during the fiscal year ended June 30, 2000, primarily reflecting increased investment. The carrying value will be increased or decreased regularly as Westland acquires, sells or develops parcels of land. Management believes the June 30, 2000 carrying value of the land is substantially less than its current market value. Westland's balance sheet also segregates income-producing properties which consist of commercial real estate and improvements. The actual value of Westland's land varies depending on national and local market conditions and the amount and proximity of roads, utilities and other amenities to the land under development. As Albuquerque continues to grow, the land value of both developed and undeveloped land should increase. As reported last year, after some delay, Westland received approval of its Master Plan by both the City of Albuquerque and Bernalillo County. The Master Planned land includes the area north of Interstate 40 and south of the area designated for the Petroglyph National Monument between Unser Boulevard and Paseo del Volcan Road. The Master Plan area encompasses approximately 6,400 acres, but does not include any land located within the Monument and will have no adverse impact on the Monument. During the fiscal year the City of Albuquerque annexed the initial 1,600 acres of the master planned area, which will permit sewer and water services to be extended in an orderly manner to that number of acres as they are developed. Westland has agreed with the City that it will pay the cost of the infrastructure normally paid for by the city for new development in the master planned area and will recover those costs through a fee charged by the city as each lot is connected to the services. Management still anticipates that development and sale of the initial parcels of land within the Master Planned area will occur in the year 2000, however, unforeseeable delays in getting utilities to the lands may cause this period to be extended beyond that anticipated date. Westland is currently preparing marketing information and considering financial options and the optimum timing for initiating development, marketing, and sales of land in the Sector Plan area. The Company and Mesa Golf of Dallas, Texas, recently obtained approval for a 27 hole golf course community located on 500 acres adjoining the Petroglyph National Monument within the Sector Plan area from the City of Albuquerque's Environmental Planning Commission. Unfortunately the City's approval was appealed by Mr. Jaime Chavez "on behalf of concerned Atrisco Land Grant heirs" in the name of Water Information Network. The appeal may delay the golf course project, and possibly the Sector Plan area's development, increase expenses for the Company, and damage the Company's reputation. Management remains committed to begin the construction of residential, industrial and commercial developments for lease or sale. Westland's long term business philosophy is to enhance the value of Westland's land through careful planning and development, while retaining ownership of a major portion of the land in perpetuity and simultaneously increasing the value of Westland's stock and to provide dividends for its shareholders, when consistent with Westland's need for a sufficient cash flow to meet current operating expenses. Financial Condition: During fiscal 2000, total assets increased to $20,237,662 from $19,900,219, while liabilities decreased from $13,208,119 to $12,060,545. During fiscal 2000 Westland invested $2,183,749 in income producing and other assets and repaid notes and mortgages of $1,161,221. Including these uses of cash and payment of cash dividends of $802,708, cash equivalents and short-term investments increased by $114,273, as operations provided $2,407,033. In fiscal 2000, the Company maintained lines of credit with local banks aggregating approximately $3,600,000, collateralized by certain real property. The purpose of these lines is to provide funds necessary for its continued expansion. At June 30, 2000, the lines had no outstanding balances During fiscal 2001, the Company will be obligated to pay income tax of approximately $1,200,000 should replacement properties totaling $2,986,000 for lands sold to the National Park Service not be acquired. Management diligently seeks income producing properties for acquisition as replacement properties and fully expects to off-set this tax obligation. Management believes that the uncommitted balance of cash, cash equivalents, investments and its borrowing capacity are sufficient to meet all of the Company's obligations during 2001 without considering additional revenues that may be generated during that period. Results of Operations: In fiscal 2000, land revenues increased by $1,726,720 from $4,785,199 in 1999 to $6,511,919. The related cost of land revenues increased to $1,253,870, or $415,838 from $838,032 in fiscal 1999. Rental revenue increased from $702,065 to $843,105 and the related costs increased from $173,800 to $258,572. These increases are expected to continue as the Company expands its activities in these areas. In 1999, other income and expense included gain on disposition and cost of land donated to charity. MARKET PRICE OF AND DIVIDENDS ON WESTLAND'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Because ownership of Westland's stock is restricted in the manner discussed below, no established public trading market exists for Westland's outstanding shares and, to the best of Westland's knowledge, no dealer has made, is making, or is attempting to create such a market from which to determine an aggregate market value of any of Westland's stock. In 1989, Westland entered into an arrangement with an independent stockbroker to broker transactions in Westland's stock between shareholders. The broker has informed Westland that the price at which Westland's common stock had been bought and sold by Westland's shareholders during the ninety (90) days preceding this date of this report has been $22 per share. Since 1982, the outstanding shares have been subject to restrictions imposed by a majority of Westland's shareholders who amended Westland's Articles of Incorporation. Those Articles prohibit (with certain limited exceptions) transfer of Westland stock to persons other than lineal descendants of the original incorporators of the Town of Atrisco (a New Mexico Community Land Grant Corporation). The following table sets forth the approximate number of holders of record of each class of Westland's common stock as of September 1, 2000: Number of Title of Class Record Holders ---------------------- -------------- No Par Value Common 5622 $1.00 Par Value Common Class A 0 $1.00 Par Value Common Class B 22 Dividends: During each of the last two (2) fiscal years ended June 30, 1999 and June 30, 2000, Westland paid cash dividends to shareholders, aggregating a total during those two years of $1,605,416. Subsequent to June 30, 2000, the Company has paid an additional cash dividend of $1.25 per share for an aggregate dividend payment to the shareholders of $1,001,471. ON WRITTEN REQUEST, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORMS 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30, 2000, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THE FINANCIAL STATEMENTS AND THE SCHEDULES THERETO) TO ANY RECORD HOLDER OR BENEFICIAL OWNER OF THE COMPANY'S SHARES AS OF THE CLOSE OF BUSINESS ON SEPTEMBER 1, 2000. ANY EXHIBIT WILL BE PROVIDED ON REQUEST UPON PAYMENT OF THE REASONABLE EXPENSES OF FURNISHING THE EXHIBIT. ANY SUCH WRITTEN REQUEST SHOULD BE ADDRESSED TO DAVID C. ARMIJO, SECRETARY, WESTLAND DEVELOPMENT CO., INC., and 401 COORS BOULEVARD, N.W., ALBUQUERQUE, NEW MEXICO 87121. Report of Independent Certified Public Accountants Stockholders Westland Development Co., Inc. We have audited the accompanying balance sheet of Westland Development Co., Inc., as of June 30, 2000, and the related statements of earnings, stockholders' equity, and cash flows for each of the two years in the period ended June 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Westland Development Co., Inc., as of June 30, 2000, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2000 in conformity with generally accepted accounting principles. GRANT THORNTON LLP Oklahoma City, Oklahoma August 11, 2000 Westland Development Co., Inc. BALANCE SHEET June 30, 2000 ASSETS Cash and cash equivalents .......................... $ 3,882,560 Short-term investments ............................. 109,914 Receivables Real estate contracts (note B) ................... $ 66,857 Note receivable - related party (note M) ......... 103,075 Other receivables ................................ 93,596 263,528 ----------- Land and improvements held for future development (notes C and E) ...................... 6,971,322 Income-producing properties, net (notes D and E) ... 8,202,679 Property and equipment, net of accumulated depreciation of $527,642 (note E) ................ 388,574 Investments in partnerships and joint ventures ..... 234,709 Income taxes receivable ............................ 22,585 Other assets ....................................... 161,791 ----------- $20,237,662 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, accrued expenses, and other liabilities ................................ $ 476,066 Deferred income taxes (note F) ..................... 5,369,049 Notes, mortgages, and assessments payable (note E) . 6,215,430 ----------- Total liabilities 12,060,545 Commitments and contingencies (notes E and L) ...... -- Stockholders' equity (note G) Common stock - no par value; authorized 736,668 shares; issued and outstanding, 715,293 shares ................................. $ 8,500 Class B common stock - $1 par value; authorized, 491,112 shares; issued and outstanding, 86,100 shares .................................. 86,100 Additional paid-in capital ..................... 581,527 Retained earnings .............................. 7,500,990 8,177,117 ----------- ----------- $20,237,662 =========== The accompanying notes are an integral part of this statement. Westland Development Co., Inc. STATEMENTS OF EARNINGS Year ended June 30, 2000 1999 ----------- ----------- Revenues Land ......................................... $ 6,511,919 $ 4,785,199 Deferred profit recognized on installment sales .......................... -- 30,306 Rentals ...................................... 843,105 702,065 ----------- ----------- 7,355,024 5,517,570 Costs and expenses Cost of land revenues ........................ 1,253,870 838,032 Cost of rentals .............................. 258,572 173,800 Other general, administrative, and operating .............................. 1,802,016 1,991,667 ----------- ----------- 3,314,458 3,003,499 ----------- ----------- Operating income ................. 4,040,566 2,514,071 Other (income) expense Interest income .............................. (234,872) (136,611) Gain on sale or disposition of property and equipment (note O) ............ (280) (747,560) Other, net (note O) .......................... (16,223) 789,158 Interest expense ............................. 605,277 540,516 ----------- ----------- 353,902 445,503 ----------- ----------- Earnings before income taxes ..... 3,686,664 2,068,568 Income tax expense (note F) .................... 1,354,464 780,000 ----------- ----------- NET EARNINGS ..................... $ 2,332,200 $ 1,288,568 =========== =========== Weighted average common shares outstanding ..... 802,626 807,775 =========== =========== Earnings per common share ...................... $ 2.91 $ 1.60 =========== =========== The accompanying notes are an integral part of these statements. Westland Development Co., Inc. STATEMENT OF STOCKHOLDERS' EQUITY Years ended June 30, 2000 and 1999
Class B Common stock Common stock no par value $1 par value Additional -------------------------- ------------------------- paid-in Retained Shares Amount Shares Amount capital earnings Total ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balances at July 1, 1998 ...... 716,608 $ 8,500 86,100 $ 86,100 $ 581,527 $ 5,530,113 $ 6,206,240 Net earnings .................. -- -- -- -- -- 1,288,568 1,288,568 Cash dividends paid - $1 per share ................ -- -- -- -- -- (802,708) (802,708) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balances at June 30, 1999 ..... 716,608 8,500 86,100 86,100 581,527 6,015,973 6,692,100 Net earnings .................. -- -- -- -- -- 2,332,200 2,332,200 Cash dividends paid - $1 per share ................ -- -- -- -- -- (802,708) (802,708) Purchase/retirement of common stock ................ (1,315) -- -- -- -- (44,475) (44,475) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balances at June 30, 2000 ..... 715,293 $ 8,500 86,100 $ 86,100 $ 581,527 $ 7,500,990 $ 8,177,117 =========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements. Westland Development Co., Inc. STATEMENTS OF CASH FLOWS Year ended June 30,
2000 1999 ----------- ----------- Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities Cash received from land sales and collections on real estate contracts receivable ...................................................... $ 6,415,088 $ 4,822,132 Development and closing costs paid ........................................... (1,179,963) (1,277,974) Cash received from rental operations ......................................... 915,206 680,780 Cash paid for rental operations .............................................. (70,535) (5,321) Cash paid for property taxes ................................................. (135,736) (78,409) Interest received ............................................................ 234,872 136,735 Interest paid ................................................................ (604,029) (538,845) Income taxes paid, net ....................................................... (1,315,000) (171,162) Other general and administrative costs paid .................................. (1,871,536) (1,983,301) Other ........................................................................ 18,666 106,804 ----------- ----------- Net cash provided by operating activities ...................... 2,407,033 1,691,439 Cash flows from investing activities Capital expenditures ......................................................... (238,281) (1,404,295) Investments in partnerships and joint ventures ............................... (2,808) (1,993) Change in short-term investments ............................................. 2,468,105 (2,578,019) Change in note receivable - related party .................................... (43,267) 5,793 ----------- ----------- Net cash provided by (used in) investing activities ............ 2,183,749 (3,978,514) Cash flows from financing activities Borrowings on notes, mortgages, and assessments payable ...................... 990,698 2,498,309 Repayments of notes, mortgages, and assessments payable ...................... (2,151,919) (1,318,237) Payment of dividends ......................................................... (802,708) (802,708) Purchase of common stock ..................................................... (44,475) -- ----------- ----------- Net cash provided by (used in) financing activities ............ (2,008,404) 377,364 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........... 2,582,378 (1,909,711) Cash and cash equivalents at beginning of year ................................... 1,300,182 3,209,893 ----------- ----------- Cash and cash equivalents at end of year ......................................... $ 3,882,560 $ 1,300,182 =========== ===========
The accompanying notes are an integral part of these statements Westland Development Co., Inc. STATEMENTS OF CASH FLOWS - CONTINUED Year ended June 30,
2000 1999 ----------- ----------- Reconciliation of Net Earnings to Net Cash Provided by Operating Activities Net earnings ..................................................................... $ 2,332,200 $ 1,288,568 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation .............................................................. 259,253 227,955 (Gain) loss on sale of property and equipment ............................. (280) 2,440 Profit recognized on installment sales .................................... -- (30,306) Deferred income taxes ..................................................... 57,049 785,000 Proceeds from sale of property and equipment .............................. 280 -- Change in Income taxes recoverable/payable ...................................... (17,585) (177,273) Other receivables ..................................................... (54,265) 4,749 Land and improvements held for future development ..................... (73,907) (439,942) Other assets .......................................................... (9,744) (69,702) Accounts payable, accrued expenses, and other liabilities ............. (44,649) 62,796 Accrued interest payable .............................................. 1,247 1,671 Real estate contracts receivable ...................................... (42,566) 35,483 ----------- ----------- Net cash provided by operating activities ...................... $ 2,407,033 $ 1,691,439 =========== ===========
The accompanying notes are an integral part of these statements Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS June 30, 2000 and 1999 NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES 1. History of Company and Beginning Basis of Financial Reporting ------------------------------------------------------------- In 1892, the descendants of the owners of a land grant deeded in 1692 by the Kingdom of Spain became incorporators of a land grant corporation named Town of Atrisco. Ownership of the Town of Atrisco was based on proportionate ownership of the land grant. In 1967, the Town of Atrisco was reorganized and became Westland Development Co., Inc. (the "Company"), with the heirs receiving shares in the Company in proportion to their ancestors' interests in the Town of Atrisco corporation. The net assets of $232,582 at the date of reorganization were assigned as follows: Value of no par common stock as stated in the Articles of Incorporation $ 8,500 Additional paid-in capital 224,082 --------- $ 232,582 ========= The Company estimated that it owned approximately 49,000 acres of land at the date of incorporation as Westland Development Co., Inc. Such acreage was used as the beginning cost basis for financial reporting purposes and was valued at $127,400 ($2.60 per acre) based on an appraisal in 1973 which determined the approximate value of the land in 1907. This date approximates the date that the Patent of Confirmation covering the land comprising the Atrisco Land Grant was given to the Town of Atrisco by the United States of America. Since the date of the Patent of Confirmation, the Company's acreage has increased in market value, but a full determination of such value has not been made. 2. Nature of Operations -------------------- The Company develops, sells, or leases its real estate holdings, all of which are located near Albuquerque, New Mexico. The Company may use joint ventures or participation in limited partnerships to accomplish these activities. Revenue sources for the years ended June 30, 2000 and 1999 consist primarily of proceeds from land sales and rentals from developed properties, such as single-tenant retail stores and office space. Land sales are primarily to commercial developers and others in the Albuquerque area and certain governmental agencies, and the terms of sale include both cash and internal financing by the Company. Such sales are collateralized by the land. The Company has relied primarily upon cash land sales over the past several years due to the collection risk associated with real estate contracts. 3. Cash and Cash Equivalents ------------------------- Cash and cash equivalents are considered to include highly liquid investments with maturities of three months or less and money market funds. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits and in certain other funds which are not federally insured. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2000 and 1999 NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED 4. Investments ----------- Short-term investments include certificates of deposit carried at cost, which approximates fair value. Such investments generally have maturities of more than three months and less than one year. Investments in partnerships and joint ventures owned 20% to 50% are accounted for by the equity method. Accordingly, the financial statements include the Company's share of the investees' net earnings. 5. Land and Improvements Held for Future Development ------------------------------------------------- Land and improvements held for future development are recorded at cost not to exceed net realizable value. Improvements consist of abstracts, surveys, legal fees, master and sector plans, infrastructure improvements, and other costs related to land held by the Company which are allocated to respective tracts primarily by specific identification of costs. 6. Income-Producing Properties and Property and Equipment ------------------------------------------------------ Income-producing properties and property and equipment are stated at cost, less accumulated depreciation, computed on a straight-line basis over their estimated lives of three to thirty years. The cost of the building in which the Company has its offices, a portion of which is rented to others, has been allocated to property and equipment and income-producing properties based upon square footage. 7. Recognition of Income on Real Estate Transactions ------------------------------------------------- The Company recognizes the entire gross profit on sales where the down payment is sufficient to meet the requirements for the full-accrual method. Transactions where the down payment is not sufficient to meet the requirements for the full-accrual method are recorded using the deposit or installment method. Under the deposit method, cash received is recorded as a deposit on land sale. Under the installment method, the Company records the entire contract price and the related costs at the time the transaction is recognized as a sale. Concurrently, the gross profit on the sale is deferred and is subsequently recognized as revenue in the statements of earnings as payments of principal are received on the related contract receivable. 8. Income Taxes ------------ Deferred income tax assets or liabilities are determined based on the difference between financial statement and tax bases of certain assets and liabilities as measured by the enacted tax rates in effect using the liability method. Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2000 and 1999 NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED 9. Earnings Per Common Share ------------------------- Earnings per common share are based upon the weighted average number of common shares outstanding during the year, including the number of no par value common shares which may be issued in connection with eliminating fractional shares (which resulted from the determination made by the Court in the heirship case) and the number of no par value common shares for which the Court ruled that no incorporator or heirs existed. The Company has no potential common stock items. 10. Use of Estimates ---------------- In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect certain reported amounts and disclosures; accordingly, actual results could differ from those estimates. 11. Long-Lived Assets ----------------- Long-lived assets to be held and used are reviewed for impairment, generally on a property-by-property basis, whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses are recognized based upon the estimated fair value of the asset. 12. Reclassifications ----------------- Certain reclassifications have been made to the 1999 financial statements to conform to the 2000 presentation. NOTE B - REAL ESTATE CONTRACTS RECEIVABLE Real estate contracts receivable at June 30, 2000 consist of two contracts, due in monthly installments with an interest rate of 9% and 9.5%, and are collateralized by land. Principal collections due on real estate contracts receivable for the years ending June 30 are as follows: 2001 $ 8,273 2002 9,076 2003 13,900 2004 4,508 2005 4,930 Thereafter 26,170 -------- $ 66,857 ======== Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2000 and 1999 NOTE C - LAND AND IMPROVEMENTS HELD FOR FUTURE DEVELOPMENT The Company estimates that it presently owns in excess of 59,000 acres of land, primarily including land located within the boundaries of the Town of Atrisco Land Grant and land located elsewhere which the Company has acquired since incorporation. Plans for ultimate development of the properties have not been finalized. Land and improvements consist of the following at June 30, 2000: Land $1,058,512 Improvements 5,912,810 ---------- $6,971,322 ========== NOTE D - INCOME-PRODUCING PROPERTIES Income-producing properties consist primarily of four single-tenant retail store buildings and a portion of the Company's office building and are summarized as follows at June 30, 2000: Buildings and equipment $5,765,755 Less accumulated depreciation 879,791 ---------- 4,885,964 Land 3,316,715 ---------- $8,202,679 ========== The Company's rentals from income-producing properties are principally obtained from tenants through rental payments as provided for under noncancelable operating leases. The lease terms range from one to twenty years and typically provide for guaranteed minimum rent, percentage rent, and other charges to cover certain operating costs. Minimum future rentals from income-producing properties on noncancelable tenant operating leases as of June 30, 2000 are as follows: Year ending June 30 2001 $ 891,019 2002 861,458 2003 865,280 2004 868,263 2005 808,983 Thereafter 6,611,177 ----------- $10,906,180 =========== Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2000 and 1999 NOTE E - NOTES, MORTGAGES, AND ASSESSMENTS PAYABLE Notes, mortgages, and assessments payable are summarized as follows at June 30, 2000: Promissory note, due in monthly installments of $17,970 through May 2015, including interest at 9.37%; collateralized by income-producing properties $ 1,729,442 Promissory note, due in monthly installments of $9,079 through July 2014, including interest at 8%; collateralized by income-producing properties 915,820 Note payable, due in monthly installments of $6,893 through September 2015, including interest at 8.75%; collateralized by income-producing properties 693,358 Mortgage note, due in monthly installments of $24,682, including interest at 8.52%, due November 1, 2016; collateralized by income-producing properties 2,613,731 Mortgage note, due in monthly installments of $3,000 through October 2002, including interest at 9%; collateralized by specific tracts of land 81,232 Note payable, due in monthly installments of $5,093 through February 2002, including interest at 9%; collateralized by specific tracts of land 90,656 Balloon note, interest due quarterly in arrears at 9%, principal due March 2003; collateralized by specific tracts of land 83,048 Other 8,143 ----------- $ 6,215,430 =========== The Company's revolving line of credit with a bank provides for borrowings up to $2,000,000 at the bank's prime rate of interest collateralized by real estate, which matures September 2000. At June 30, 2000, there was no outstanding balance on this line of credit. The Company's line of credit with a bank provides for borrowings up to approximately $1,600,000 at the bank's prime rate of interest collateralized by real estate, which matures May 2001. At June 30, 2000, there was no outstanding balance on this line of credit. Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2000 and 1999 NOTE E - NOTES, MORTGAGES, AND ASSESSMENTS PAYABLE - CONTINUED Aggregate required principal payments on the notes, mortgages, and assessments payable as of June 30, 2000 are as follows: Year ending June 30 2001 $ 283,465 2002 280,064 2003 330,425 2004 249,472 2005 272,070 Thereafter 4,799,934 ----------- $ 6,215,430 =========== NOTE F - INCOME TAXES An analysis of the deferred income tax assets and liabilities as of June 30, 2000 is as follows: Deferred tax assets Contribution carryforwards $ 238,252 Property, equipment, and land 434,652 Investments 24,608 Other 11,667 Valuation allowance (121,216) ----------- 587,963 =========== Deferred tax liabilities Deferred tax gain on involuntary conversion of land 5,957,012 ----------- Net deferred tax liability $ 5,369,049 =========== Income tax expense (benefit) consists of the following: Year ended June 30, --------------------------- 2000 1999 ---------- ---------- Current Federal $1,015,805 $ (5,000) State 281,610 -- ---------- ---------- 1,297,415 (5,000) Deferred Federal 44,497 667,000 State 12,552 118,000 ---------- ---------- 57,049 785,000 ---------- ---------- $1,354,464 $780,000 ========== ========== Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2000 and 1999 NOTE F - INCOME TAXES - CONTINUED The income tax provision is reconciled to the tax computed at statutory rates as follows: Year ended June 30, ---------------------------- 2000 1999 ---------- ---------- Tax expense at statutory rates $1,253,466 $ 703,000 State income taxes at statutory rates 280,186 104,000 Change in valuation allowance (194,784) 227,000 Change in effective state tax rate -- (159,000) Nontaxable gain -- (255,000) Nondeductible expenses 19,926 27,000 Expiration of contribution carryforwards -- 73,000 Other (4,330) 60,000 ---------- ---------- Total expense $1,354,464 $ 780,000 ========== ========== A valuation allowance of approximately $121,216 has been recognized at June 30, 2000 based on estimates of tax assets which are not likely to be realized in the future. Significant changes in assumptions concerning future taxable income and deductions may cause changes in the valuation allowance. NOTE G - COMMON STOCK Under its original Articles of Incorporation (the "Articles"), the Company was authorized to issue 1,964,448 shares of common stock. During 1999, the Articles were amended to eliminate the authority to issue 736,668 shares of Class A common stock for $1.45 a share. The remaining authorized stock is as follows: (a) 736,668 shares of no par value common stock to represent $8,500 estimated value of land held by the Town of Atrisco; (b) 491,112 shares to be sold for a price to be determined by the Board of Directors, designated as Class B, $1 par value, common stock. The holders of no par value common stock have no preemptive rights to purchase Class B stock. At June 30, 2000, the 5,047 shares of no par value common stock, upon judicial determination, can be distributed to stockholders of record as of the date of incorporation. Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2000 and 1999 NOTE G - COMMON STOCK - CONTINUED There is no established market value for the Company's common stock. At June 30, 2000, 715,293 shares of the Company's no par value common stock were issued and outstanding. Of the 5,047 shares of no par value common stock issuable, 1,872 shares may be issued in connection with eliminating fractional shares which resulted from the determinations made by the Court in the heirship case and 3,175 shares represent shares for which the Court in the heirship case ruled that no incorporator or heirs existed. The Company also has reacquired and canceled 15,013 shares of no par value common stock which have been constructively retired. These shares have not been formally retired and, as such, may be issuable to stockholders of record as of the date of incorporation. During the year ended June 30, 1999, the Board of Directors approved protection against takeover measures whereby a threat of change of three or more directors in any one year would result in directors threatened with replacement being granted an immediate Class B stock bonus of 5,000 shares if in office as a director ten years or more, and 2,500 shares of Class B stock if in office as a director for less than ten years. The maximum number of shares which could be issued under this agreement at June 30, 2000 is 40,000 shares. NOTE H - SEGMENT INFORMATION The Company operates primarily in two industry segments. They are as follows: Land - Operations involve the development and sale of tracts, both residential and commercial. In addition, included are incidental revenues from leasing of grazing rights. Rentals - Operations involve rentals from four single-tenant retail store buildings and a portion of the Company's office building. Financial information for each industry segment is summarized as follows:
2000 1999 -------------------------------------------------- ---------------------------------------------------- General General Land Rentals corporate Total Land Rentals corporate Total ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------- Revenues .............. $6,511,919 $ 843,105 $ -- $ 7,355,024 $4,815,505 $ 702,065 $ -- $ 5,517,570 Operating income (loss) 4,658,425 508,774 (1,126,633) 4,040,566 3,341,526 445,421 (1,272,876) 2,514,071 Interest income ....... -- -- 234,872 234,872 -- -- 136,611 136,611 Interest expense ...... (20,106) (536,240) (48,931) (605,277) (57,331) (464,335) (18,850) (540,516) Income tax expense .... -- -- 1,354,464 1,354,464 -- -- (829,000) (829,000) Identifiable assets ... 7,141,245 8,426,628 4,669,789 20,237,662 6,981,514 8,442,383 4,476,322 19,900,219 Capital expenditures .. -- 169,624 68,657 238,281 -- 1,330,931 73,364 1,404,295 Depreciation .......... -- 188,037 71,216 259,253 -- 168,479 59,476 227,955 Noncash gain on dispo- sition of land ...... -- -- -- -- -- -- 750,000 750,000
General corporate assets consist primarily of cash, furniture, equipment, and a portion of an office building, of which the remaining portion is included in rentals. Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2000 and 1999 NOTE I - BENEFIT PLANS The Company has certain defined contribution employee retirement plans that provide for employee and employer contributions. The Company's contribution expense for these plans was $95,000 and $121,000 for 2000 and 1999, respectively. NOTE J - SALES TO MAJOR CUSTOMERS Sales to major customers are summarized as follows: During the year ended June 30, 2000, land sales to three customers individually accounted for 12%, 29%, and 16% of total revenues. During the year ended June 30, 1999, land sales to two customers individually accounted for 47% and 21% of total revenues. NOTE K - SALE OF LAND FOR NATIONAL PARK On June 28, 1990, the Petroglyph National Monument ("National Monument") was established by an act of the United States Congress ("Congress"). Under the bill passed by Congress, the National Park Service is authorized to acquire acreage within the National Monument using funds specifically appropriated by Congress each year. In 1999, approximately 362 acres were transferred to the National Park Service for cash of $2,600,000. The Company has no remaining land set aside for sale to the National Park Service at this time. NOTE L - COMMITMENTS AND CONTINGENCIES 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. 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 for one additional period. In the event of involuntary employee termination employees may receive from one to six times annual compensation. The remaining terms under the agreements range from one to two-and-one-half years and the maximum salaries to be paid under the remaining contract periods are approximately $670,000. NOTE M - RELATED PARTY TRANSACTIONS During the year ended June 30, 1999, the Company sold land to a member of the Board of Directors. Under the sales agreement, the Board member paid approximately $52,000 for three lots. The Company purchases its directors' and officers' liability insurance through a corporation controlled by a member of the Board of Directors. Total premiums for these policies paid in 2000 and 1999 were $92,500 and $50,000, respectively. Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2000 and 1999 NOTE M - RELATED PARTY TRANSACTIONS - CONTINUED The note receivable - related party is from a joint venture partner, is payable in monthly installments of $1,033 including interest at 8.5%, and is collateralized by developed property. The note matures November 2014. NOTE N - FINANCIAL INSTRUMENTS The following table includes various estimated fair value information as required by Statement of Financial Accounting Standards ("SFAS") No. 107, Disclosures about Fair Value of Financial Instruments. Such information, which pertains to the Company's financial instruments, is based on the requirements set forth in SFAS No. 107 and does not purport to represent the aggregate net fair value of the Company. The carrying amounts in the table are the amounts at which the financial instruments are reported in the financial statements. All of the Company's financial instruments are held for purposes other than trading. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: 1. Cash and Cash Equivalents The carrying amount approximates fair value because either the Company has the contractual right to receive immediate payment or because of short maturities. 2. Short-Term Investments The carrying amount approximates fair value due to the short maturities of the investments. 3. Real Estate Contracts Receivable These notes receivable are generally collateralized by real estate and accrue interest at 9.5%. Because the ultimate collectibility of these notes is not reasonably assured, it is not practicable to estimate fair value. 4. Note Receivable - Related Party Note receivable - related party is valued at the present value of future cash flows based on the cur-rent rates at which similar loans would be made to borrowers with similar credit ratings. 5. Notes, Mortgages, and Assessments Payable The discounted amount of future cash flows using the Company's current incremental rate of bor-rowing for similar liabilities is used to estimate fair value. Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS - CONTINUED June 30, 2000 and 1999 NOTE N - FINANCIAL INSTRUMENTS - CONTINUED The carrying amounts and estimated fair values of the Company's financial instruments at June 30, 2000 are as follows: Carrying Estimated amount fair value ---------- ---------- Financial assets Cash and cash equivalents ................ $3,882,560 $3,882,560 Short-term investments ................... 109,914 109,914 Real estate contract receivable (not practicable to estimate fair value) 66,857 -- Note receivable - related party .......... 103,075 103,075 Financial liabilities Notes, mortgages, and assessments payable 6,215,430 5,803,155 NOTE O - CONTRIBUTION OF LAND In keeping with the Company's long-standing commitment to the furtherance of community projects which benefit the education and welfare of its less fortunate citizens, during 1999 the Company donated approximately fifty acres of land to a nonprofit organization to develop a residential and work facility for seriously disabled/mentally ill persons. The contributed land had a fair value of approximately $790,000 which was recorded as an other expense and a pretax gain of approximately $750,000 was recorded on the donation. NOTE P - SUBSEQUENT EVENT On July 20, 2000, the Company declared a dividend of $1.25 per share for stockholders of record as of July 20, 2000. The dividend is payable on August 4, 2000. DIRECTORS OF WESTLAND SOSIMO S. PADILLA, Chairman of the Board of Directors and Director. Member of the Executive Committee. Mr. Padilla is retired from the circulation department of the Albuquerque Publishing Company and was owner/operator of Western Securities Transportation Corporation for over thirty years. BARBARA PAGE, President, Chief Executive Officer and Director. Secretary of the Executive Committee. Ms. Page is employed by Westland Development Co., Inc. as its President. POLECARPIO (LEE) ANAYA, Executive Vice President, Assistant Secretary/Treasurer and Director. Mr. Anaya is also Chairman of the Executive Committee. Mr. Anaya was owner/operator of Lee's Conoco. DAVID C. ARMIJO, Secretary/Treasurer and Director. Mr. Armijo is an insurance broker and serves as President and Chairman of the Board of California's All-Risk Insurance Agency, Inc. in Los Angeles, California. CARMEL CHAVEZ, Director. Member of the Executive Committee and the Disclaimer Committee and Vice Chairman of El Campo Santo, Inc. Mr. Chavez is a retired employee of the Albuquerque Public Schools. JOSIE G. CASTILLO, Director. Member of the Executive Committee, Chairman of El Campo Santo, Inc. and member of the Disclaimer Committee. Ms. Castillo is retired from the Human Services Department of the State of New Mexico. CARLOS SAAVEDRA, Director. Alternate member of the Executive Committee, Alternate Member of El Campo Santo, Inc. and Chairman of the Disclaimer Committee. Dr. Saavedra is a former director of bilingual education for the Colorado Department of Education and the Oakland Unified School District, Oakland, California. Dr. Saavedra retired from education in 1985. JOE S. CHAVEZ, Director. Member of the Disclaimer Committee. Mr. Chavez is employed at Galles Chevrolet in Albuquerque, New Mexico. CHARLES V. PENA, Director. Member of El Campo Santo, Inc., and the Disclaimer Committee. Mr. Pena owns and operates CJ's New Mexican Food Restaurant. EX-27 3 0003.txt
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