10QSB/A 1 form10qa3q01.txt Form 10-QSB/A U.S. Securities and Exchange Commission Washington, D.C. 20549 (Mark One) [XX]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2001 [ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from to Commission File Number: 0-7775 WESTLAND DEVELOPMENT CO., INC. ------------------------------ (Exact name of small business issuer as specified in its charter) NEW MEXICO 85-0165021 ------------------------------- ------------------------------- (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 May 10, 2001: No Par Value Common: 714,894 Class B $1.00 Par Value Common: 86,100 Transitional Small Business Format (check one) Yes [ ] No [ X ] PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WESTLAND DEVELOPMENT CO., INC. BALANCE SHEET (unaudited) March 31, 2001 ASSETS Cash and cash equivalents ........................ $ 373,875 Short-term investments ........................... 1,480,950 Receivables: Real estate contracts ......................... $ 16,365 Note receivable - related party ............... 100,576 Other receivables ............................. 153,588 270,529 ------------ Land and improvements held for future development ............................ 8,140,813 Income producing properties, net ................. 11,876,456 Property and equipment, net of accumulated depreciation of $573,419 ...................... 345,624 Investment in Partnerships and joint ventures .... 231,048 Income taxes receivable .......................... 542,585 Other ............................................ 169,742 ------------ $ 23,431,622 ============ LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, accrued expenses and other liabilities ......................... $ 583,449 Deferred income taxes ............................ 5,369,049 Notes, bonds, mortgages and assessments payable .. 11,010,551 ------------ Total liabilities ............... 16,963,049 Stockholders' equity Common stock - no par value; authorized, 736,668 shares; issued and outstanding, 714,894 shares ............................. 8,500 Class B common stock - $1.00 par value; authorized, 491,112 shares; issued and outstanding, 86,100 shares .............................. 86,100 Additional paid-in capital .................... 591,811 Retained earnings ............................. 5,782,162 6,468,573 ------------ ------------ $ 23,431,622 ============ WESTLAND DEVELOPMENT CO., INC. STATEMENTS OF OPERATIONS (unaudited) For the three months ended March 31, 2001 2000 ----------- ----------- Revenues Land ...................................... $ 24,377 $ 1,480,079 Rentals ................................... 292,963 240,175 ----------- ----------- 317,340 1,720,254 Costs and expenses Cost of land revenues ..................... -- 368,436 Cost of rentals ........................... 79,145 45,637 General and administrative ................ 414,875 417,162 ----------- ----------- 494,020 831,235 ----------- ----------- Operating (loss) earnings .............. (176,680) 889,019 Other (income) expense Interest income ........................... (28,830) (65,718) Other income .............................. (9,121) (4,044) Interest expense .......................... 219,070 138,516 ----------- ----------- 181,119 68,754` ----------- ----------- (Loss) earnings before income taxes .... (357,799) 820,265 Income tax (benefit) expense ................. (141,000) 328,000 ----------- ----------- NET (LOSS) EARNINGS .................... $ (216,799) $ 492,265 =========== =========== Weighted average common shares outstanding ............................... 800,994 802,708 =========== =========== (Loss) earnings per common share ............. $ (.27) $ .61 =========== =========== WESTLAND DEVELOPMENT CO., INC. STATEMENTS OF OPERATIONS (unaudited) For the nine months ended March 31, 2001 2000 ----------- ----------- Revenues Land ...................................... $ 492,624 $ 5,813,280 Rentals ................................... 810,210 644,948 ----------- ----------- 1,302,834 6,458,228 Costs and expenses Cost of land revenues ..................... 296,126 1,200,183 Cost of rentals ........................... 221,392 208,807 General and administrative ................ 1,544,143 1,321,085 ----------- ----------- 2,061,661 2,730,075 ----------- ----------- Operating (loss) earnings .............. (758,827) 3,728,153 Other (income) expense Interest income ........................... (116,901) (173,142) Other income .............................. (20,779) (11,781) Interest expense .......................... 558,208 467,295 ----------- ----------- 420,528 282,372 ----------- ----------- (Loss) earnings before income taxes .... (1,179,355) 3,445,781 Income tax (benefit) expense ................. (470,000) 1,378,000 ----------- ----------- NET (LOSS) EARNINGS .................... $ (709,355) $ 2,067,781 =========== =========== Weighted average common shares outstanding ............................... 801,165 802,708 =========== ========== (Loss) earnings per common share ............. $ (.89) $ 2.58 =========== ========== WESTLAND DEVELOPMENT CO., INC. STATEMENTS OF CASH FLOWS (unaudited) For the nine months ended March 31, 2001 2000 ------------- ------------- Cash flows from operating activities Cash received from land sales and collections on real estate contracts receivable ................. $ 509,488 $ 5,113,226 Development and closing costs paid on land sales ............................... (1,468,587) (918,589) Cash received from rental operations .......... 806,618 648,028 Cash paid for rental operations ............... (55,896) (67,876) Cash paid for property taxes .................. 48,129 (82,271) Interest received ............................. 116,155 173,605 Interest paid ................................. (540,178) (469,309) Income taxes paid ............................. (50,000) (740,000) General and administrative costs paid ......... (1,415,334) (1,421,581) Other ......................................... 100 456,997 ------------ ------------ Net cash (used) provided by operating activities ..................... (2,049,505) 2,692,230 ------------ ------------ Cash flows from investing activities Capital expenditures for income producing and other properties .............. (3,910,915) (125,188) Cash received from partnerships and joint ventures .......................... 24,250 5,415 Change in short-term investments .............. (1,371,036) (93,881) Proceeds from note receivable-related party ... 2,499 2,525 Proceeds from sale of assets .................. 90 80 ------------ ------------ Net cash used in investing activities ........ (5,255,112) (211,049) ------------ ------------ Cash flows from financing activities Borrowing on notes, mortgages and assessments payable ......................... 5,294,617 693,975 Repayments of bonds, mortgages, notes and assessments payable ............... (499,496) (1,872,456) Payment of dividends .......................... (1,003,623) (802,708) Purchase/retirement of common stock, net ...... 4,434 -- ------------ ------------ Net cash provided (used) in financing activities .................... 3,795,932 (1,981,189) ------------ ------------ NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS .................... (3,508,685) 499,992 Cash and cash equivalents at beginning of period .......................... 3,882,560 1,300,182 ------------ ------------ Cash and cash equivalents at end of period ................................ $ 373,875 $ 1,800,174 ============ ============ Reconciliation of net (loss) earnings to net cash (used) provided by operating activities Net (loss) earnings ............................ $ (709,355) $ 2,067,781 Adjustments to reconcile net (loss) earnings to net cash (used) provided by operating activities Depreciation .............................. 240,854 194,763 Gain on sale/loss on retirement of assets . (90) (80) Change in Rents receivable, accrued interest, property tax and other assets ........... (20,758) 3,750 Real estate contracts ..................... 50,492 (44,529) Land and improvements held for future development and income producing properties .................... (1,169,491) 94,702 Other assets .............................. (28,540) (101,661) Accounts and retainages payable, accrued interest and other liabilities ............................ 107,383 (160,496) Income taxes payable/recoverable .......... (520,000) 638,000 ------------ ------------ Net cash (used) provided by operating activities ......................... $ (2,049,505) $ 2,692,230 ============ ============ WESTLAND DEVELOPMENT CO., INC. NOTES TO THE FINANCIAL STATEMENTS (unaudited) March 31, 2001 1. The balance sheet at March 31, 2001, statements of operations for the three and nine month periods ended March 31, 2001 and 2000 and statements of cash flows for the nine month periods ended March 31, 2001 and 2000 have been prepared by the Company, without audit. In the opinion of management, all adjustments, including normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the Company's audited financial statements at June 30, 2000. The results of operations for the three months and nine months ended March 31, 2001 are not necessarily indicative of operating results for the full year. 2. The computation of earnings per common share has been based upon the weighted average number of shares of outstanding common stock and common stock issuable without further consideration, which for the three and nine month periods ended March 31, 2001 were 800,994 and 801,165, respectively and for March 31, 2000 were 802,708. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General: The Company receives cash from the sale of its lands, from rental properties and from borrowing. It uses its cash to pay mortgage and other debt payments, to develop its properties for resale to others and for its general and administrative expenses. Also, it uses its cash to pay dividends to its shareholders. The Company has nearly exhausted its inventory of developed lands and must look to the development of the initial 1,600 acres of its Master Plan area for future sales. The cost of any development of these acres, pursuant to an agreement with the City of Albuquerque, requires the Company to install and transfer to the City all of the necessary infrastructure for delivery of water to the acreage, including water rights located within the 1600 acres annexed to the City of Albuquerque. The cost of this infrastructure for the entire Master Plan has been estimated at more than twenty million dollars. This is in addition to the cost of otherwise developing the land for resale to others. Most of this expenditure must be made prior to the development of the first acres in the Master Planned area. The Company does not have $20,000,000 in cash with which to construct the required infrastructure and is reviewing various alternative ways that it might finance the project. It is reviewing various forms of financing, including the possibility of industrial revenue bonds, commercial bonds and commercial loans. One alternative is to finance the project by debt arrangements, but no method of financing the project has been accepted by the board. Management is also evaluating the possibility of joining with others in some form of joint project with the costs of the project being underwritten by the other partners with the Company contributing the land for its share of the project. In this event, the Company will probably be required to turn over control of the project Also, management is exploring the possibility of bulk sales of raw land to others as a way to acquire the financing necessary for the infrastructure costs. In this event, the Company will retain control of the development of the lands not sold to others, but will probably be required to sell the most immediately developable land to receive the best values for its properties. Each of these alternatives is under consideration and the board will select one or more of them for the project. Any failure by management to acquire the required financing will have a major impact on the Company's operations. If this should happen, which management thinks is unlikely, the Company would be without inventory for sale to others except for the sale of tracts of undeveloped, and possibly undevelopable, land at prices not presently capable of determination. In such event, the Company would be required to curtail most of its business activities and would probably not be able to pay dividends. If the infrastructure is financed by the Company, the city will charge each builder a utility hook-up fee at the time the finished lot is connected to the city's water supply. At that time, hook-up fees in their entirety will be paid to Westland until Westland's investment in construction of the required infrastructure is reimbursed. In this way, it is hoped that the Company will eventually recapture the costs it may expend for the water system. Financial Condition. During the nine months ended March 31, 2001, the Company's cash and cash equivalents decreased by $3,508,685. During this period, operations used $2,049,505, the Company invested $5,255,112 in fixed and other assets, incurred $5,294,617 of debt, net and paid dividends in the amount of $1,003,623. In 2000, operations provided $2,692,230, $1,872,456 of debt was repaid, $211,049 was invested in fixed and other assets and dividends were paid in the amount of $802,708. Cash and equivalents increased by $499,992. The lack of developed lands for sale and the lack of sales of undeveloped lands during the current nine-month period has resulted in the Company using its cash reserves for ordinary operating expenses. The use of the cash reserves increases the amount of money that must be borrowed to meet the Company's long term commitments. To the extent that the Company can not meet its long term cash requirements, the Company's business will be substantially curtailed and it may again enter a period where it can not meet its current cash requirements or pay dividends to its shareholders. Potential Tax Liability The Company may expend approximately $2,500,000 or more to acquire replacement lands and property for the land sold to various government entities under threat of condemnation. In the event the Company does not replace the property sold to the government, it may need to utilize a substantial portion of its liquid investments for federal and state income taxes. It is the Company's aim to acquire high quality income producing properties as replacement property for the lands sold to the government under threat of condemnation. Such properties are not readily available in Albuquerque. The tax code in this instance permits the Company to acquire other properties as a tax-free like kind exchange. Because of these sales to the government, the Company has received income on which it must pay income taxes of approximately $1,000,000 if replacement properties are not acquired before the taxes become payable. It is Management's intention to acquire a property or properties that will qualify for the exchange and not to pay the taxes that might have been incurred by the sale to the government. Gains on these sales have been recognized by the Company and deferred income taxes have been recorded for the differences between book and tax recognition of these gains. Management has for the past several years continued to look at prospective income producing properties that meet certain requirements as to tenant, income, mortgage costs and maintenance expense. It is Management's intent to acquire properties that will earn sufficient rental income for the Company so that the Company will not have any expenses resulting for the ownership of the property. It was management's intent to acquire these properties in Albuquerque, but it was found that there were not sufficient properties available in Albuquerque for purchase. The last property that met Management's requirements was found in El Paso, Texas. Management is confident that a property meeting The Company's requirements will be timely found. Results of Operations During the third quarter of the current fiscal year, the Company had revenues of $317,340 compared to $1,720,254 during the same period in the prior fiscal year. Operating costs and expenses during the three months ended March 31, 2001, were $494,020 compared to $831,235 during the comparable period in 2000. For the year to date, revenues were $1,302,834 in 2001 and $6,458,228 in 2000. Operating costs and expenses were $2,061,661 in 2001 and $2,730,075 in 2000. In 2001, the Company sold approximately $435,000 in small developed lots to a single buyer, and no sales of large parcels. In 2000, small lot sales were $1,147,000 and large parcel sales were $4,810,000. In 2000, cost of land revenues were significantly higher than 2001 due to larger sales volume. As a real estate developer, the Company spends significant amounts of time and cash to complete land preparation prior to being able to offer the developed lots for sale to builders. The Company has learned that to maximize the value of its lands, it must develop the lands with the sale of completely developed lots ready to build on rather than to sell its land in an undeveloped condition to developers. Because of this there is a time lag between the time the expenditure for development is made and the revenue from the sale of lots is received. Sometimes this time lag can be over a period of quarters, and in some instances of large developments, over a period of years. Because of the fluctuations in Albuquerque's real estate market resulting from overbuilding, under building and economic conditions the Company is not able to equalize income and expenses. Because Albuquerque has been one of the fastest growing communities in the country these fluctuations have been especially hard to anticipate and predict. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Other than the ordinary routine litigation incidental to the Company's business, neither the Company nor any member of management is the subject of any pending or threatened legal proceeding. ITEM 2. CHANGES IN SECURITIES NONE ITEM 3. DEFAULTS IN SENIOR SECURITIES NONE ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE ITEM 5. OTHER INFORMATION NONE ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) There are no exhibits required by Item 601 of Regulation S-B. (b) Reports on Form 8-K. State whether any reports on Form 8-K have been filed during the quarter for which this report is filed, listing the items reported, any financial statements filed, and the dates of any such reports. NONE SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WESTLAND DEVELOPMENT CO., INC. DATE: May 10, 2001 By: Barbara Page --------------------------- Barbara Page, President, Chief Executive Officer and Chief Accounting Officer