0001008878-01-500025.txt : 20011019
0001008878-01-500025.hdr.sgml : 20011019
ACCESSION NUMBER: 0001008878-01-500025
CONFORMED SUBMISSION TYPE: ARS
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20010630
FILED AS OF DATE: 20011016
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: WESTLAND DEVELOPMENT CO INC
CENTRAL INDEX KEY: 0000106423
STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552]
IRS NUMBER: 850165021
STATE OF INCORPORATION: NM
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: ARS
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-07775
FILM NUMBER: 1760422
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
ARS
1
shareholdersreport01.txt
Dear Shareholders:
The past twelve months marked a time of change in your company's operations. As
I have described in recent newsletters and at last year's annual meeting,
Westland is becoming much more a land development enterprise. What this means is
that instead of selling raw or semi-improved acreage, the company is producing
finished lots, primarily for residential purposes. There's a greater risk in
taking this path, but the long-term results should be more profitable for the
company.
During fiscal year 2001, we developed both units of the Tierra Oeste subdivision
and started construction of the Painted Sky subdivision. Since the sale of these
finished lots lags the construction phase, we saw a decrease in revenues during
the year. This decline will be reversed during the current fiscal year as our
lot sales catch up with our construction activity. We are essentially sold out
of Tierra Oeste lots at this point, for example, and we have agreements in place
for the sale of most of Painted Sky. Other projects will come on line this
fiscal year. Specifically, we plan on continuing the development of Painted Sky
and a third unit of Tierra Oeste. We may also begin construction of The
Crossings subdivision.
We also hope to kick off the development of our master-planned acreage, now
known as The Petroglyphs. As I have reported on many occasions, the development
of the master plan is a critical element of the company's goals. This
undertaking comes at a steep price, however. Over the past six months, we have
been working with bond underwriters and counsel to come up with a financing
package for The Petroglyphs. We believe our efforts will soon come to fruition.
With regard to other activity during fiscal year 2001, Westland continued its
reinvestment program by acquiring another Walgreens store, this one located in
El Paso, Texas. The Walgreens lease for the El Paso store is similar to those of
our other Walgreens. The key component is a minimum 20-year lease term. We see
this as a low-risk opportunity for Westland to diversity its operations and
build a long-term asset.
Fiscal year 2001 also brought a 40-acre sale for property that will be developed
into an industrial park known as the Westland Business Center. As this
industrial park is developed, Westland will have the opportunity to come back
into the project as an equity partner. The property is located at the northwest
corner of I-40 and Paseo del Volcan. One of our objectives is to generate new
employment growth near and within our master plan. We feel the Westland Business
Center will assist this effort.
Finally, I would like to extend the board's deep gratitude to those shareholders
and heirs who have served or are currently enlisted in our nation's armed
forces. Our thanks also goes out to those of you serving in the police and
firefighting arenas. Despite these times of tragedy and uncertainty, we have
much to be thankful for and our men and women in uniform are largely
responsible.
Thank you for the opportunity to be of service and God bless.
Sincerely,
Barbara Page
President & CEO
BUSINESS OF WESTLAND
Westland ("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. 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, NW, 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 56,000 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 to homebuilders and bulk land sales to other
land developers.
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. Westland is now starting on its next major
undertaking as development on its new sector plan comes into existence. This
development 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.
Westland's New Master Plan
As Westland previously reported, in 1998 the City of Albuquerque and the County
of Bernalillo finalized the approval of a 6,400 acre master plan looking toward
the development of the acreage over the next ten to twenty years. For Westland
to begin developing or selling land within this planned area, the City must make
available the required utilities. In 2000, the City annexed an initial 1,665
acres per the terms of a Pre-Annexation Agreement executed by the Company and
the City of Albuquerque in November 1998. Westland is to furnish sewer and water
utilities to the initial 1,665 acres within the Master Plan area. Westland has
segregated the lands within the master plan area for development.
Utilities do not presently exist on any of the Master Planned lands. Per the
Pre-Annexation Agreement, Westland has agreed that it will finance or 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. When completed,
Westland will convey the utilities to the City. Although for the initial phase
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. An additional $5,000,000 to $10,000,000 will also be financed or borne by
Westland for additional water and sewer distribution and collection lines and
roads with no reimbursement. Depending upon the growth of development in this
area, it may take 10 to 15 years for Westland to recover these costs.
Westland has put the major water system out to bid and is currently soliciting
financing for the construction of the initial phase of the Master Plan
infrastructure. The method being pursued is the recently legislated Public
Improvement District that allows bond financing at favorable rates. 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 create revenues by enhancing the value of Westland's
land through careful planning and development, while retaining ownership of a
major portion of the land in perpetuity and to provide dividends for its
shareholders, when consistent with Westland's need for a sufficient cash flow to
meet current operating expenses.
Oil and Gas and Grazing Leases
Approximately 54,300 acres of Westland's land are not planned for current
development and 55,063 acres are leased to non-affiliated people for cattle
grazing. The leases provided revenue of approximately $22,059 in fiscal 2001.
Because of the extreme drought in the area, Westland has granted rent abatements
to the tenant in each of the last three 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 for the first year's rent. Management is
not aware of any drilling or other activities having been conducted on the
property by the lessee since the date of the lease.
Westland also owns and leases certain commercial buildings at an aggregate
annual rental of $1,229,103.
Current Albuquerque 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 has developed and is hopeful that these sales
will increase next year due to the introduction of Painted Sky and Tierra Oeste
subdivisions. Management believes that for the foreseeable future, residential,
commercial and industrial construction will continue at a moderate pace.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
During fiscal 2001, Albuquerque continued a significant pattern of growth and
continues to be one of the fastest growing cities in the Southwest. Because of
certain geographical and other limitations on its growth, Westland's lands lie
directly in the path of future predictable growth patterns of Albuquerque.
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
both fiscal years ended June 30, 2001 and 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, 2001 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 2002, however, foreseeable
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,
during fiscal 2000 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. The
project was delayed because an appeal was filed by Mr. Jaime Chavez on behalf of
Water Information Network, a local group, which was subsequently denied.
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, Liquidity and Capital Resources
During fiscal 2001, total assets increased to $23,865,926 from $20,237,662, and
liabilities increased from $12,060,545 to $17,086,310. The increase in assets is
occurred primarily in Land and improvements and Income producing properties,
which increased by $4,861,392 together, and Cash and equivalents, which
decreased by $3,118,559. This is the effect of increased investment in current
projects and the addition of the El Paso Walgreens store. Receivables increased
by $463,692 because of a year-end land sale the proceeds of which were not
received in 2001. The increase in liabilities is the result of the added
mortgage in the amount of $3,004,348 for the new Walgreens property and
increases in revolving lines of credit of $2,309,681, drawn primarily to fund
increased property investment.
In fiscal 2001, 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, 2001, the lines had outstanding balances of $2,309,681.
During fiscal 2002, the Company will be obligated to pay income tax of
approximately $800,000 should replacement properties totaling $2,007,000 for the
involuntary conversion of land by the National Park Service not be acquired.
Management diligently seeks income producing properties for acquisition as
replacement properties and fully expects to offset this tax obligation. Because
the Company has deferred gains of approximately $15,700,000 for tax reporting,
deferred income tax liabilities of approximately $6,100,000 are recorded in the
Company's financial statements. In the event replacement properties are sold,
deferred income taxes will become currently payable.
Management is not certain that the uncommitted balance of cash, cash
equivalents, investments and its borrowing capacity are sufficient to meet all
of the Company's obligations during 2002 without considering additional revenues
that may be generated during that period.
Results of Operations
In fiscal 2001, land revenues decreased by $4,490,929 from $6,511,919 in 2000 to
$2,020,990. The related cost of land revenues decreased to $831,029, or $422,841
from $1,253,870 in fiscal 2000. Rental revenue increased from $843,105 to
$1,108,177 and the related costs increased from $258,572 to $293,727. These
increases are expected to continue as the Company expands its activities in this
area.
In the past fiscal year, land sales were less than the prior year as the Company
experienced diminished sales of improved residential lots and fewer large parcel
sales. Sales of improved residential lots in fiscal 2000 were approximately
$1,148,000, and large parcel sales were approximately $4,810,000. In fiscal
2001, the Company's sales of improved lots declined to $1,102,000 and large
parcel sales decreased to $830,000, primarily because the Company's sales effort
for the year included several large parcels which did not close in 2001.Gross
profits on land revenues decreased from 81% in 2000 to 59% in 2001, because of
the decreased amount of large parcel sales, which have a higher gross profit
ratio, in 2001. Gross profits on rental operations increased slightly in 2001,
from 69% to 73%, primarily from the addition of the new Walgreens unit in El
Paso.
General and administrative expenses remained relatively constant from 2000 to
2001, but interest income decreased from $234,872 to $141,122, as the Company
reduced its holdings of interest bearing investments, and interest expense
increased from $605,277 to $816,357 from added debt incurred in 2001.
Cash Flow
During fiscal 2001 Westland invested $5,291,417 in income producing and other
assets and had net borrowing of $4,978,715. Including these uses of cash and
payment of cash dividends of $1,003,623, cash equivalents and short-term
investments decreased by $3,118,559, as operations used $1,806,668. In 2000,
operating and investing activities provided $2,407,033 and $2,183,749,
respectively, while financing activities used $2,008,404, including net debt
repayment of $1,161,221, resulting in an increase in cash and equivalents of
$2,582,378.
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 the 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 15, 2001:
Number of
Title of Class Record Holders
No Par Value Common 5731
$1.00 Par Value Common Class A 0
$1.00 Par Value Common Class B 26
Dividends: During each of the 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. During fiscal year ended June 30, 2001,
Westland paid a cash dividend of $1.25 per share.
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, 2001,
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 OCTOBER 1, 2001. 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, 2001, and the related statements of operations,
stockholders' equity and cash flows for each of the two years in the period
ended June 30, 2001. 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 auditing standards generally accepted
in the United States of America. 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, 2001, and the results of its operations and its cash flows for
each of the two years in the period ended June 30, 2001 in conformity with
accounting principles generally accepted in the United States of America.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
August 24, 2001
Westland Development Co., Inc.
BALANCE SHEET
June 30, 2001
ASSETS
Cash and cash equivalents .......................... $ 764,001
Short-term investments ............................. 1,497,275
Receivables
Real estate contracts (note B) ................. $ 475,114
Note receivable - related party (note L) ....... 99,707
Other receivables .............................. 152,399 727,220
-----------
Land and improvements held for future
development (notes C and E) ...................... 8,191,471
Income-producing properties, net (notes D and E) ... 11,843,922
Property and equipment, net of accumulated
depreciation of $583,957 (note E) ................ 337,855
Investments in partnerships and joint ventures ..... 228,452
Income taxes receivable ............................ 14,257
Other assets ....................................... 261,473
-----------
$23,865,926
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses and
other liabilities ................................ $ 475,742
Deferred income taxes (note F) ..................... 5,416,423
Notes, mortgages and assessments
payable (note E) ................................. 11,194,145
-----------
Total liabilities ................ 17,086,310
Commitments and contingencies (notes E and K) ...... --
Stockholders' equity (note G)
Common stock - no par value; authorized,
736,668 shares; issued and
outstanding, 714,841 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 ..................... 591,811
Retained earnings .............................. 6,093,205 6,779,616
----------- -----------
$23,865,926
===========
The accompanying notes are an integral part of this statement.
Westland Development Co., Inc.
STATEMENTS OF OPERATIONS
Year ended June 30,
2001 2000
----------- -----------
Revenues
Land ..................................... $ 2,020,990 $ 6,511,919
Rentals .................................. 1,108,177 843,105
----------- -----------
3,129,167 7,355,024
Costs and expenses
Cost of land revenues .................... 831,029 1,253,870
Cost of rentals .......................... 293,727 258,572
Other general, administrative
and operating .......................... 1,835,303 1,802,016
----------- -----------
2,960,059 3,314,458
----------- -----------
Operating income ........... 169,108 4,040,566
Other (income) expense
Interest income .......................... (141,122) (234,872)
Gain on sale or disposition of
property and equipment ................. (100) (280)
Other income ............................. (26,993) (16,223)
Interest expense ......................... 816,357 605,277
----------- -----------
648,142 353,902
----------- -----------
Earnings (loss)
before income taxes ...... (479,034) 3,686,664
Income tax expense (benefit) (note F) ........ (80,722) 1,354,464
----------- -----------
NET EARNINGS (LOSS) ........ $ (398,312) $ 2,332,200
=========== ===========
Weighted average common shares
outstanding, basic and diluted ............. 801,116 802,626
=========== ===========
Earnings (loss) per common share,
basic and diluted .......................... $ (.50) $ 2.91
=========== ===========
The accompanying notes are an integral part of these statements.
Westland Development Co., Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended June 30, 2001 and 2000
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, 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
Net loss ...................... -- -- -- -- -- (398,312) (398,312)
Cash dividends paid -
$1.25 per share ............ -- -- -- -- -- (1,003,623) (1,003,623)
Purchase/retirement
of common stock ............. (452) -- -- -- -- (5,850) (5,850)
Insurance reimbursement for
common stock purchases ...... -- -- -- -- 10,284 -- 10,284
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances at June 30, 2001 ..... 714,841 $ 8,500 86,100 $ 86,100 $ 591,811 $ 6,093,205 $ 6,779,616
=========== =========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of this statement.
Westland Development Co., Inc.
STATEMENTS OF CASH FLOWS
Year ended June 30,
2001 2000
----------- ------------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Cash received from land sales and collections on real estate
contracts receivable .......................................... $ 1,464,566 $ 6,415,088
Development and closing costs paid ............................... (2,051,178) (1,179,963)
Cash received from rental operations ............................. 1,089,983 915,206
Cash paid for rental operations .................................. (28,299) (70,535)
Cash paid for property taxes ..................................... (20,303) (135,736)
Interest received ................................................ 140,382 234,872
Interest paid .................................................... (765,429) (604,029)
Income tax refunds (paid) ........................................ 136,424 (1,315,000)
Other general and administrative costs paid ...................... (1,799,707) (1,871,536)
Other ............................................................ 26,893 18,666
----------- -----------
Net cash provided by (used in) operating activities (1,806,668) 2,407,033
Cash flows from investing activities
Capital expenditures ............................................. (3,913,681) (238,281)
Investments in partnerships and joint ventures ................... 6,257 (2,808)
Change in short-term investments ................................. (1,387,361) 2,468,105
Change in note receivable - related party ........................ 3,368 (43,267)
----------- -----------
Net cash provided by (used in) investing activities (5,291,417) 2,183,749
Cash flows from financing activities
Borrowings on notes, mortgages and assessments payable ........... 5,625,062 990,698
Repayments of notes, mortgages and assessments payable ........... (646,347) (2,151,919)
Payment of dividends ............................................. (1,003,623) (802,708)
Purchase of common stock ......................................... (5,850) (44,475)
Insurance reimbursement for common stock purchases ............... 10,284 --
----------- -----------
Net cash provided by (used in) financing activities 3,979,526 (2,008,404)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,118,559) 2,582,378
Cash and cash equivalents at beginning of year ....................... 3,882,560 1,300,182
----------- -----------
Cash and cash equivalents at end of year ............................. $ 764,001 $ 3,882,560
=========== ===========
Westland Development Co., Inc.
STATEMENTS OF CASH FLOWS - CONTINUED
Year ended June 30,
2001 2000
----------- ------------
Reconciliation of Net Earnings (Loss) to Net Cash Provided by
(Used in) Operating Activities
Net earnings (loss) ................................................. $ (398,312) $ 2,332,200
Adjustments to reconcile net earnings (loss) to net cash provided by
(used in) operating activities
Depreciation ................................................. 323,257 259,253
Gain on sale of property and equipment ....................... (100) (280)
Deferred income taxes ........................................ 47,374 57,049
Proceeds from sale of property and equipment ................. -- 280
Change in
Income taxes recoverable/payable ......................... 8,328 (17,585)
Other receivables ........................................ (58,803) (54,265)
Land and improvements held for future development ........ (1,220,149) (73,907)
Other assets ............................................. (99,682) (9,744)
Accounts payable, accrued expenses and other liabilities . (51,252) (44,649)
Accrued interest payable ................................. 50,928 1,247
Real estate contracts receivable ......................... (408,257) (42,566)
----------- -----------
Net cash provided by (used in) operating activities $(1,806,668) $ 2,407,033
=========== ===========
The accompanying notes are an integral part of these statements.
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 2001 and 2000
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, most 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, 2001 and 2000
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.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2001 and 2000
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED
4. Investments
-----------
Short-term investments include treasury bills carried at 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 30 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 income-producing properties and property and equipment based
upon square footage.
7. Recognition of Income on Real Estate Transactions and Rentals
-------------------------------------------------------------
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 operations as
payments of principal are received on the related contract receivable.
Rental income is recognized when earned under lease agreements. Rents
received in advance are deferred until earned. Revenue from leases with
escalating rental payments are recognized on a straight-line basis over the
minimum lease term. For leases with provisions for additional rental
payments based on percentages of annual sales, contingent rental income is
recognized when the lessee provides an accounting which reflects the
contingent rental income has been earned under the terms of the lease
agreements.
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.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2001 and 2000
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED
9. Earnings (Loss) Per Common Share
--------------------------------
Earnings (loss) 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.
NOTE B - REAL ESTATE CONTRACTS RECEIVABLE
Real estate contracts receivable at June 30, 2001 consist of three
contracts, one payable in monthly installments of principal and interest and
two due in lump sum payments of principal and interest at maturity with
interest rates from 8% to 9.5%, and are collateralized by land.
Principal collections due on real estate contracts receivable for the years
ending June 30 are as follows:
2002 $455,308
2003 9,806
2004 -
2005 -
2006 10,000
-------
$475,114
=======
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2001 and 2000
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, 2001:
Land $1,058,283
Improvements 7,133,188
---------
$8,191,471
=========
NOTE D - INCOME-PRODUCING PROPERTIES
Income-producing properties consist primarily of five single-tenant retail
store buildings and a portion of the Company's office building and are
summarized as follows at June 30, 2001:
Buildings and equipment $ 8,787,426
Less accumulated depreciation 1,145,219
----------
7,642,207
Land 4,201,715
----------
$11,843,922
==========
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 20 years
and typically provide for guaranteed minimum rent, five-year renewals at
tenants' options, 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, 2001 are as follows:
Year ending June 30
2002 $ 1,229,103
2003 1,210,947
2004 1,213,930
2005 1,144,675
2006 1,041,581
Thereafter 10,248,121
----------
$16,088,357
==========
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2001 and 2000
NOTE E - NOTES, MORTGAGES AND ASSESSMENTS PAYABLE
Notes, mortgages and assessments payable are summarized as follows at June
30, 2001:
Promissory note, due in monthly installments
of $17,970 through May 2015, including interest at
9.37%; collateralized by income-producing properties $ 1,673,491
Promissory note, due in monthly installments of $9,079
through July 2014, including interest at 8%;
collateralized by income-producing properties 878,804
Note payable, due in monthly installments of $6,893
through September 2015, including interest at 8.75%;
collateralized by income-producing properties 670,405
Mortgage note, due in monthly installments of $24,682,
including interest at 8.52%, due November 1, 2016;
collateralized by income-producing properties 2,537,296
Mortgage note, due in monthly installments of $25,403,
including interest at 7.8%, due April 15, 2020;
collateralized by income-producing properties 3,004,348
Note payable, due in monthly installments of $5,140
through February 2002, including interest at 9%;
collateralized by specific tracts of land; paid off
in July 2001 34,876
Balloon note, interest due quarterly at 9%,
principal due March 2003; collateralized by specific
tracts of land; paid off in July 2001 83,048
Revolving line of credit with a bank, variable
interest payable quarterly (7% at June 30, 2001),
principal due September 29, 2001; collateralized
by real estate with borrowings up to $2,000,000 800,000
Revolving line of credit with a bank, interest payable
quarterly at 8.25%, principal due April 25, 2002;
collateralized by real estate with borrowings up to
$1,600,000 1,509,681
Assessments payable 2,196
-----------
$11,194,145
===========
Aggregate required principal payments on the notes, mortgages and
assessments payable as of June 30, 2001 are as follows:
Year ending June 30
2002 $ 2,703,673
2003 298,045
2004 324,363
2005 353,016
2006 384,213
Thereafter 7,130,835
----------
$11,194,145
==========
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2001 and 2000
NOTE F - INCOME TAXES
An analysis of the deferred income tax assets and liabilities as of June 30,
2001 is as follows:
Deferred tax assets
Improvements held for future development $ 129,728
Property, equipment and land 553,397
Investments 24,192
Other 122,346
Valuation allowance (121,216)
---------
708,447
Deferred tax liabilities
Deferred tax gain on involuntary
conversion of land 6,124,870
---------
Net deferred tax liability $5,416,423
=========
Income tax expense (benefit) consists of the following:
Year ended June 30,
--------------------------
2001 2000
--------- ----------
Current
Federal $(111,429) $1,015,805
State (16,668) 281,610
--------- ----------
(128,097) 1,297,415
Deferred
Federal 35,257 44,497
State 12,118 12,552
--------- ----------
47,375 57,049
--------- ----------
$ (80,722) $1,354,464
========== ==========
The income tax provision is reconciled to the tax computed at statutory
rates as follows:
Year ended June 30,
-------------------------
2001 2000
-------- ---------
Tax expense (benefit) at statutory rates $(162,872) $1,253,466
State income taxes at statutory rates (36,407) 280,186
Change in valuation allowance - (194,784)
Nondeductible expenses 21,459 19,926
Other 1,195 (4,330)
Revision of prior year estimates 95,903 -
-------- ---------
Total expense (benefit) $ (80,722) $1,354,464
======== =========
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2001 and 2000
NOTE F - INCOME TAXES - CONTINUED
A valuation allowance of approximately $121,000 has been recognized at June
30, 2001 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, 2001, 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.
There is no established market for the Company's common stock. At June 30,
2001, 714,841 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 16,780 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, 2001 is
40,000 shares.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2001 and 2000
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 rentalsfrom five 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 2001
----------------------------------------------------- --------------------------------------------------
General General
Land Rentals corporate Total Land Rentals corporate Total
----------- ----------- ----------- ----------- ----------- --------- ----------- -----------
Revenues ............. $ 2,020,990 $ 1,108,177 $ -- $ 3,129,167 $ 6,511,919 $ 843,105 $ -- $ 7,355,024
Operating income ..... 471,768 728,473 (1,031,133) 169,108 4,658,425 508,774 (1,126,633) 4,040,566
Interest income ...... -- -- 141,122 141,122 -- -- 234,872 234,872
Interest expense ..... (109,256) (668,699) (38,402) (816,357) (20,106) (536,240) (48,931) (605,277)
Income tax expense
(benefit) .......... -- -- (80,722) (80,722) -- -- 1,354,464 1,354,464
Identifiable assets .. 8,913,781 12,061,614 2,890,531 23,865,926 7,141,245 8,426,628 4,669,789 20,237,662
Capital expenditures . -- 3,906,671 7,010 3,913,681 -- 169,624 68,657 238,281
Depreciation ......... -- 265,528 57,729 323,257 -- 188,037 71,216 259,253
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.
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 $107,000 and $95,000 for 2001 and 2000,
respectively.
NOTE J - SALES TO MAJOR CUSTOMERS
Sales to major customers are summarized as follows:
During the year ended June 30, 2001, land sales to two customers
individually accounted for 35% and 19% of total revenues.
During the year ended June 30, 2000, land sales to three customers
individually accounted for 12%, 29% and 16% of total revenues.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2001 and 2000
NOTE K - 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 or operations.
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, these employees may receive from one to six times
annual compensation. The remaining terms under the agreements range from one
to nine-and-one-half years and the maximum salaries to be paid under the
remaining contract periods are approximately $1,283,000.
NOTE L - RELATED PARTY TRANSACTIONS
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 were $92,500.
The note receivable - related party is from a joint venture partner, is
payable in monthly installments of $1,000, including interest at 8.5%, and
is collateralized by developed property. The note matures November 2014.
NOTE M - FINANCIAL INSTRUMENTS
The following table includes various estimated fair value information, which
pertains to the Company's financial instruments, 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
----------------------
Short-term investments represent investments in treasury bills and are
carried at fair value.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2001 and 2000
NOTE M - FINANCIAL INSTRUMENTS - CONTINUED
3. Real Estate Contracts Receivable
--------------------------------
These notes receivable are generally collateralized by real estate and
accrue interest at 8% to 9.5%. The fair value of real estate notes is based
upon the present value of future cash flows using current interest rates.
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.
The carrying amounts and estimated fair values of the Company's financial
instruments at June 30, 2001 are as follows:
Carrying Estimated
amount fair value
----------- -----------
Financial assets
Cash and cash equivalents $ 764,001 $ 764,001
Short-term investments 1,497,275 1,497,275
Real estate contracts receivable 475,114 475,114
Note receivable - related party 99,707 111,830
Other receivables 152,399 152,399
Financial liabilities
Notes, mortgages and assessments
payable 11,194,145 11,579,135
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 and alternate member of El Campo Santo, Inc. 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 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,
Chairman 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.