10QSB 1 0001.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 December 31, 2000 [ ]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 February 12, 2001: No Par Value Common: 714,894 Class B $1.00 Par Value Common: 86,100 Transitional Small Business Format (check one) Yes [ ] No [ X ] PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WESTLAND DEVELOPMENT CO., INC. BALANCE SHEET (unaudited) December 31, 2000 ASSETS Cash and cash equivalents ........................ $ 537,151 Short-term investments ........................... 1,609,921 Receivables: Real estate contracts ......................... $ 17,586 Note receivable - related party ............... 101,426 Other receivables ............................. 142,675 261,687 ------------ Land and improvements held for future development ............................ 7,572,222 Income producing properties, net ................. 11,973,218 Property and equipment, net of accumulated depreciation of $558,579 ...................... 359,175 Investment in Partnerships and joint ventures .... 232,177 Income taxes receivable .......................... 401,585 Other ............................................ 197,021 ------------ $ 23,144,157 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, accrued expenses and other liabilities ......................... $ 882,263 Deferred income taxes ............................ 5,369,049 Notes, bonds, mortgages and assessments payable .. 10,207,473 ------------ Total liabilities ............... 16,458,785 Stockholders' equity Common stock - no par value; authorized, 736,668 shares; issued and outstanding, 714,894 shares ............................. 8,500 Class B common stock - $1.00 par value; authorized, 491,112 shares; issued and outstanding, 86,100 shares .............................. 86,100 Additional paid-in capital .................... 591,811 Retained earnings ............................. 5,998,961 6,685,372 ------------ ------------ $ 23,144,157 ============ WESTLAND DEVELOPMENT CO., INC. STATEMENTS OF OPERATIONS (unaudited) For the 3 months ended December 31, 2000 1999 ----------- ----------- Revenues Land ...................................... $ 136,710 $ 377,944 Rentals ................................... 298,063 199,176 ----------- ----------- 434,773 577,120 Costs and expenses Cost of land revenues ..................... 110,693 116,295 Cost of rentals ........................... 81,632 111,831 General and administrative ................ 465,072 472,933 ----------- ----------- 657,397 701,059 ----------- ----------- Operating loss ......................... (222,624) (123,939) Other (income) expense Interest income ........................... (31,083) (62,305) Other income .............................. (5,737) 62,956 Interest expense .......................... 192,851 152,971 ----------- ----------- 156,031 153,622` ----------- ----------- Loss before income taxes ............... (378,655) (277,561) Income tax benefit ........................... (152,000) (121,000) ----------- ----------- NET LOSS ............................... $ (226,655) $ (156,561) =========== =========== Weighted average common shares outstanding ............................... 801,103 802,708 =========== =========== Loss per common share ........................ $ (.28) $ (.20) =========== =========== WESTLAND DEVELOPMENT CO., INC. STATEMENTS OF OPERATIONS (unaudited) For the 6 months ended December 31, 2000 1999 ----------- ----------- Revenues Land ...................................... $ 468,247 $ 4,333,201 Rentals ................................... 517,247 404,773 ----------- ----------- 985,494 4,737,974 Costs and expenses Cost of land revenues ..................... 296,126 831,747 Cost of rentals ........................... 142,247 163,170 General and administrative ................ 1,129,268 903,923 ----------- ----------- 1,567,641 1,898,840 ----------- ----------- Operating (loss) income ................ (582,147) 2,839,134 Other (income) expense Interest income ........................... (88,071) (107,424) Other income .............................. (11,658) (7,737) Interest expense .......................... 339,138 328,779 ----------- ----------- 239,409 213,618 ----------- ----------- (Loss) earnings before income taxes .... (821,556) 2,625,516 Income tax (benefit) expense ................. (329,000) 1,050,000 ----------- ----------- NET (LOSS) EARNINGS .................... $ (492,556) $ 1,575,516 =========== =========== Weighted average common shares outstanding ............................... 801,248 802,708 =========== ========== (Loss) earnings per common share ............. $ (.61) $ 1.96 =========== ========== WESTLAND DEVELOPMENT CO., INC. STATEMENTS OF CASH FLOWS (unaudited) For the six months ended December 31, 2000 1999 ------------- ------------- Cash flows from operating activities Cash received from land sales and collections on real estate contracts receivable ................. $ 499,906 $ 4,299,539 Development and closing costs paid on land sales ............................... (891,328) (285,861) Cash received from rental operations .......... 486,685 409,050 Cash paid for rental operations ............... (20,349) (69,064) Cash paid for property taxes .................. (33,880) (43,286) Interest received ............................. 87,314 107,510 Interest paid ................................. (324,959) (330,205) Income taxes paid ............................. (50,000) (428,000) General and administrative costs paid ......... (651,095) (1,102,797) Other ......................................... 100 (9,260) ------------ ------------ Net cash (used) provided by operating activities ..................... (897,606) 2,547,626 ------------ ------------ Cash flows from investing activities Capital expenditures for income producing and other properties .............. (3,956,389) (119,325) Investment in partnerships and joint ventures . 14,000 (1,585) Change in short-term investments .............. (1,500,007) (2,051,533) Proceeds from note receivable-related party ... 1,649 1,609 Proceeds from sale of assets .................. 90 50 ------------ ------------ Net cash used in investing activities ........ (5,440,657) (2,170,784) ------------ ------------ Cash flows from financing activities Borrowing on notes, mortgages and assessments payable ......................... 4,247,109 581,475 Repayments of bonds, mortgages, notes and assessments payable ............... (255,066) (952,509) Payment of dividends .......................... (1,003,623) (802,708) Purchase/retirement of common stock, net ...... 4,434 -- ------------ ------------ Net cash provided (used) in financing activities .................... 2,992,854 (1,173,742) ------------ ------------ NET DECREASE IN CASH AND CASH EQUIVALENTS ......................... (3,345,409) (796,900) Cash and cash equivalents at beginning of period .......................... 3,882,560 1,300,182 ------------ ------------ Cash and cash equivalents at end of period ................................ $ 537,151 $ 503,282 ============ ============ Reconciliation of net (loss) earnings to net cash (used) provided by operating activities Net (loss) earnings ............................ $ (492,556) $ 1,574,516 Adjustments to reconcile net (loss) earnings to net cash (used) provided by operating activities Depreciation .............................. 154,249 128,905 Gain on sale/loss on retirement of assets . (90) (50) Change in Rents receivable, accrued interest, property tax and other assets ........... 11,921 (112,343) Real estate contracts ..................... 49,271 (46,727) Land and improvements held for future development and income producing properties .................... (600,900) 538,987 Other assets .............................. (46,698) (2,284) Accounts and retainages payable, accrued interest and other liabilities ............................ (379,000) (155,378) Income taxes payable/recoverable .......... 406,197 622,000 ------------ ------------ Net cash (used) provided by operating activities ......................... $ (897,606) $ 2,547,626 ============ ============ WESTLAND DEVELOPMENT CO., INC. NOTES TO THE FINANCIAL STATEMENTS (unaudited) December 31, 2000 1. The balance sheet at December 31, 2000, statements of operations for the three and six month periods ended December 31, 2000 and 1999 and statements of cash flows for six month periods ended December 31, 2000 and 1999 have been prepared by the Company, without audit. In the opinion of management, all adjustments, including normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the Company's audited financial statements at June 30, 2000. The results of operations for the three months and six months ended December 31, 2000 are not necessarily indicative of operating results for the full year. 2. The computation of earnings per common share has been based upon the weighted average number of shares of outstanding common stock and common stock issuable without further consideration, which for the three and six month periods ended December 31, 2000 were 801,103 and 801,248, respectively and for December 31, 1999 were 802,708. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General: The Company receives cash from the sale of its lands, from rental properties and from borrowing. It uses its cash to pay mortgage and other debt payments, to develop its properties for resale to others and for its general and administrative expenses. Also, it uses its cash to pay dividends to its shareholders. The Company has nearly exhausted its inventory of developed lands and must look to the development of the initial 1,600 acres of its Master Plan area for future sales. The cost of any development of these acres, pursuant to an agreement with the City of Albuquerque, requires the Company to install and transfer to the City all of the necessary infrastructure for delivery of water to the acreage, including water rights. The cost of this infrastructure for the entire Master Plan has been estimated at more than twenty million dollars. This is in addition to the cost of otherwise developing the land for resale to others. Most of this expenditure must be made prior to the development of the first acres in the Master Planned area. The Company does not have $20,000,000 in cash with which to construct the required infrastructure and is reviewing various alternative ways that it might finance the project. It is reviewing various forms of financing, including the possibility of industrial revenue bonds, commercial bonds and commercial loans. One alternative is to finance the project by debt arrangements, but no method of financing the project has been accepted by the board. Management is also evaluating the possibility of joining with others in some form of joint project with the costs of the project being underwritten by the other partners with the Company contributing the land for its share of the project. However, in this event, the Company will probably be required to turn over control of the project to others. Also, management is exploring the possibility of bulk sales of raw land to others as a way to acquire the financing necessary for the infrastructure costs. In this event, the Company will retain control of the development of the lands not sold to others, but will probably be required to sell the most immediately developable land to receive the best values for its properties. Each of these alternatives is under consideration and the board will select one or more of them for the project. Any failure by management to acquire the required financing will have a major impact on the Company's operations. If this should happen, which management thinks is unlikely, the Company would be without inventory for sale to others except for the sale of tracts of undeveloped, and possibly undevelopable, land at prices not presently capable of determination. In such event, the Company would be required to curtail most of its business activities and would probably not be able to pay dividends. If the infrastructure is financed by the Company, the city will charge each builder a utility hook-up fee at the time the finished lot is connected to the city's water supply. At that time, the Company will receive a portion of the hook-up fee. In this way, it is hoped that the Company will eventually recapture the costs it has expended for the water system. Financial Condition. During the six months ended December 31, 2000, the Company's cash and cash equivalents decreased by $3,345,409. During this period, operations used $897,516, the Company invested $3,956,389 in fixed and other assets, primarily in short-term investments, incurred $4,247,109 of debt, net and paid dividends in the amount of $1,003,623. In 1999, operations provided $2,547,626, $371,034 of debt was repaid, $119,325 was invested in fixed assets and dividends were paid in the amount of $802,708. Cash and equivalents decreased by $796,900. The lack of developed lands for sale and the lack of sales of undeveloped lands during the current six-month period has resulted in the Company using its cash reserves for ordinary operating expenses. The use of the cash reserves increases the amount of money that must be borrowed to meet the Company's long term commitments. To the extent that the Company can not meet its long term cash requirements, the Company's business will be substantially curtailed and it may again enter a period where it can not meet its current cash requirements or pay dividends to its shareholders. Potential Tax Liability The Company may expend approximately $2,200,000 or more to acquire replacement lands and property for the land sold to various government entities under threat of condemnation. In the event the Company does not replace the property sold to the government, it may need to utilize a substantial portion of its liquid investments for federal and state income taxes. It is the Company's aim to acquire high quality income producing properties as replacement property for the lands sold to the government under threat of condemnation. Such properties are not readily available in Albuquerque. The tax code in this instance permits the Company to acquire other properties as a tax-free like kind exchange. Because of these sales to the government, the Company has received income on which it must pay income taxes of approximately $880,000 if replacement properties are not acquired before the taxes become payable. It is Management's intention to acquire a property or properties that will qualify for the exchange and not to pay the taxes that might have been incurred by the sale to the government. Gains on these sales have been recognized by the Company and deferred income taxes have been recorded for the differences between book and tax recognition of these gains. Management has for the past several years continued to look at prospective income producing properties that meet certain requirements as to tenant, income, mortgage costs and maintenance expense. It is Management's intent to acquire properties that will earn sufficient rental income for the Company so that the Company will not have any expenses resulting for the ownership of the property. It was management's intent to acquire these properties in Albuquerque, but it was found that there were not sufficient properties available in Albuquerque for purchase. The last property that met Management's requirements was found in El Paso, Texas. Management is confident that a property meeting The Company's requirements will be timely found. Results of Operations During the second quarter of the current fiscal year, the Company had revenues of $434,773 compared to $577,120 during the same period in the prior fiscal year. Operating costs and expenses during the three months ended December 31, 2000, were $657,397 compared to $701,059 during the comparable period in 1999. For the year to date, revenues were $985,494 in 2000 and $4,737,974 in 1999. Operating costs and expenses were $1,567,641 in 2000 and $1,898,840 in 1999. In 1999, the Company had approximately $912,000 in sales of small developed lots to a single builder, and $3,327,000 sales of large, undeveloped parcels, including $2,148,000 to a single buyer. In 2000, Small lot sales were $435,000. In 1999, cost of land revenues were significantly higher than 2000 due to larger sales volume. As a real estate developer, the Company spends significant amounts of time and cash to complete land preparation prior to being able to offer the developed lots for sale to builders. The Company has learned that to maximize the value of its lands, it must develop the lands with the sale of completely developed lots ready to build on rather than to sell its land in an undeveloped condition to developers. Because of this there is a time lag between the time the expenditure for development is made and the revenue from the sale of lots is received. Sometimes this time lag can be over a period of quarters, and in some instances of large developments, over a period of years. Because of the fluctuations in Albuquerque's real estate market resulting from overbuilding, under building and economic conditions the Company is not able to equalize income and expenses. Because Albuquerque has been one of the fastest growing communities in the country these fluctuations have been especially hard to anticipate and predict. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Other than the ordinary routine litigation incidental to the Company's business, neither the Company nor any member of management is the subject of any pending or threatened legal proceeding. ITEM 2. CHANGES IN SECURITIES NONE ITEM 3. DEFAULTS IN SENIOR SECURITIES NONE ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE ITEM 5. OTHER INFORMATION NONE ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) There are no exhibits required by Item 601 of Regulation S-B. (b) Reports on Form 8-K. State whether any reports on Form 8-K have been filed during the quarter for which this report is filed, listing the items reported, any financial statements filed, and the dates of any such reports. NONE SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WESTLAND DEVELOPMENT CO., INC. DATE: February 12, 2001 By: Barbara Page --------------------------- Barbara Page, President, Chief Executive Officer and Chief Accounting Officer