-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PUoGvWJ0gxa9IJVuZtdm8DqD7qAZv2ZrHSgLe13FLtgothQqphbWivmv9R69RSFU YwyyHrt7f3Ci+WsRIhsT/A== 0001008878-98-000058.txt : 19981207 0001008878-98-000058.hdr.sgml : 19981207 ACCESSION NUMBER: 0001008878-98-000058 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19981204 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: 10KSB/A SEC ACT: SEC FILE NUMBER: 000-07775 FILM NUMBER: 98764412 BUSINESS ADDRESS: STREET 1: 401 COORS BOULEVARD S W CITY: ALBUQUERQUE STATE: NM ZIP: 87121 BUSINESS PHONE: 5058319600 MAIL ADDRESS: STREET 1: 401 COORS BLVD S W CITY: ALBUQUERQUE STATE: NM ZIP: 87121 10KSB/A 1 Westland Development Co., Inc. 401 Coors Blvd., N.W. Albuquerque, New Mexico 87121 Telephone: 505-831-9600 Fax: 505-831-4865 United States Securities and Exchange Commission Washington, D.C. By Edgar Transmission Re: Westland Development Co., Inc., Commission File No. 7775, amendment to Annual Report to Shareholders as incorporated into the referenced corporation's Form 10-KSB for the fiscal year ended June 30, 1998. Ladies and Gentlemen: Enclosed for filing on behalf of the above referenced registrant is an amendment to the financial statements included in its Annual Report to shareholders which was incorporated by reference into its Form 10-KSB for the fiscal year ended June 30, 1998, and filed as Exhibit 13 to that Form at the time of filing. This amendment is made to add a footnote to the financial statements that discusses the purchase by the registrant of a piece of property from sellers that included the registrant's president and her sister. This additional information will be furnished to each shareholder who previously was furnished a copy of the registrant's Annual Report to Shareholders. If you have any question regarding this amendment, please call me at 505-831-9600. Thad H. Turk, Counsel UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10K-SB/A ITEM 7: FINANCIAL STATEMENTS The financial statements were included in the registrant's Annual Report to Shareholders and incorporated by reference into this item of the registrant's Form 10KSB for the year ended June 30, 1998. Those financial statements are being amended by this filing to include the following adition to note M. ADDITION TO NOTE M - RELATED PARTY TRANSACTIONS During the year ended June 30, 1998, the Company acquired land from an ownership group which included a member of the Board of Directors and a member of the Director's immediate family. Under the sales agreement, the Board member received approximately $81,000 and the family member received approximately $49,000. EXHIBIT 13: Annual Report to Shareholders FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS WESTLAND DEVELOPMENT CO., INC. June 30, 1998 and 1997 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, 1998, and the related statements of earnings, stockholders' equity, and cash flows for each of the two years in the period ended June 30, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Westland Development Co., Inc., as of June 30, 1998, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 1998 in conformity with generally accepted accounting principles. GRANT THORNTON LLP Oklahoma City, Oklahoma August 28, 1998 Westland Development Co., Inc. BALANCE SHEET June 30, 1998 ASSETS Cash and cash equivalents .......................... $ 3,209,893 Receivables Real estate contracts (note B) .................. $ 59,774 Less related deferred profit ................. 30,306 ----------- 29,468 Note receivable - related party (note M) ........ 65,601 Other receivables ............................... 44,080 139,149 ----------- Land and improvements held for future development (notes C and E) ................................. 6,457,473 Income-producing properties, net (notes D and E) ... 7,058,640 Property and equipment, net of accumulated depreciation of $447,768 (note E) ............... 379,685 Investments in partnerships and joint ventures ..... 229,908 Other assets ....................................... 82,345 ----------- $17,557,093 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, accrued expenses, and other liabilities ........................... $ 627,274 Deferred income taxes (note F) ..................... 4,527,000 Notes, mortgages, and assessments payable (note E) ........................................ 6,196,579 ----------- Total liabilities ................... 11,350,853 Commitments and contingencies (notes E, K, and L) .. -- Stockholders' equity (note G) Common stock - no par value; authorized, 736,668 shares; issued and outstanding, 716,608 shares ............................... $ 8,500 Class A common stock - $1 par value; authorized, 736,668 shares; issued, none ................. -- Class B common stock - $1 par value; authorized, 491,112 shares; issued and outstanding, 86,100 shares ................................ 86,100 Additional paid-in capital ...................... 581,527 Retained earnings ............................... 5,530,113 6,206,240 ----------- ----------- $17,557,093 =========== The accompanying notes are an integral part of these statements. Westland Development Co., Inc. STATEMENTS OF EARNINGS Year ended June 30, 1998 1997 ----------- ----------- Revenues Land .......................................... $ 4,630,523 $ 3,613,620 Deferred profit recognized on installment sales 20,701 45,560 Rentals ....................................... 697,385 621,171 ----------- ----------- 5,348,609 4,280,351 Costs and expenses Cost of land revenues ......................... 449,791 385,553 Cost of rentals ............................... 169,907 170,589 Other general, administrative, and operating .. 2,101,493 1,775,739 Legal ......................................... 4,902 11,384 ----------- ----------- 2,726,093 2,343,265 ----------- ----------- Operating income .................. 2,622,516 1,937,086 Other (income) expense Interest income ............................... (99,672) (71,415) Gain on sale of property and equipment ........ (779) (1,752) Other, net .................................... 11,451 36,774 Interest expense .............................. 631,356 572,508 ----------- ----------- 542,356 536,115 ----------- ----------- Earnings before income taxes ...... 2,080,160 1,400,971 Income tax expense (note F) ...................... 826,000 605,690 ----------- ----------- NET EARNINGS ...................... $ 1,254,160 $ 795,281 =========== =========== Weighted average common shares outstanding ....... 807,755 802,184 =========== =========== Earnings per common share ........................ $ 1.55 $ .99 =========== =========== The accompanying notes are an integral part of these statements. Westland Development Co., Inc. STATEMENT OF STOCKHOLDERS' EQUITY Years ended June 30, 1998 and 1997
Class A Class B Common stock Common stock Common stock Additional no par value $1 par value $1 par value paid-in Retained ----------------- ----------------- ------------------ Shares Amount Shares Amount Shares Amount capital earnings Total ------- ------- ------- ------- ------- -------- --------- ----------- ----------- Balances at July 1, 1996 716,608 $ 8,500 -- $ -- 78,600 $ 78,600 $ 547,702 $ 4,562,828 $ 5,197,630 Net earnings ............ -- -- -- -- -- -- -- 795,281 795,281 Options exercised ....... -- -- -- -- 7,500 7,500 33,825 -- 41,325 Cash dividends paid - $.60 per share ....... -- -- -- -- -- -- -- (480,125) (480,125) Cash dividends declared - $.75 per share ..... -- -- -- -- -- -- -- (602,031) (602,031) ------- ------- ------- ------- ------- -------- --------- ----------- ----------- Balances at June 30, 1997 716,608 8,500 -- -- 86,100 86,100 581,527 4,275,953 4,952,080 Net earnings ............ -- -- -- -- -- -- -- 1,254,160 1,254,160 ------- ------- ------- ------- ------- -------- --------- ----------- ----------- Balances at June 30, 1998 716,608 $ 8,500 -- $ -- 86,100 $ 86,100 $ 581,527 $ 5,530,113 $ 6,206,240 ======= ======= ======= ======= ======= ======== ========= =========== =========== The accompanying notes are an integral part of these statements.
Westland Development Co., Inc. STATEMENTS OF CASH FLOWS Year ended June 30, 1998 1997 ----------- ----------- Increase (Decrease) in Cash and Cash Equivalents Cash flows from operating activities Cash received from land sales and collections on real estate contracts receivable ........ $ 4,647,316 $ 3,873,634 Development and closing costs paid ............ (874,634) (1,226,110) Cash received from rental operations .......... 732,254 533,289 Cash paid for rental operations ............... (816) (87,509) Cash paid for property taxes .................. (58,150) (96,349) Interest received ............................. 100,866 71,369 Interest paid ................................. (667,609) (597,443) Income taxes (paid) refunded, net ............. 18,274 (262,000) Legal and other general and administrative costs paid ................................. (1,536,439) (1,699,509) Other ......................................... 21,839 1,512 ----------- ----------- Net cash provided by operating activities ............ 2,382,901 510,884 Cash flows from investing activities Capital expenditures .......................... (60,958) (938,403) (Investments in) distributions from partnerships and joint ventures ............ 8,588 (18,680) Proceeds from sale of assets .................. 3,150 2,173 Proceeds from sinking fund .................... -- 410,024 Proceeds from note receivable - related party . 2,402 2,173 ----------- ----------- Net cash used in investing activities ............ (46,818) (542,713) Cash flows from financing activities Borrowings on notes, mortgages, and assessments payable ............... 132,063 2,538,056 Repayments of notes, mortgages, and assessments payable ............... (987,372) (1,920,035) Stock options exercised .................. -- 41,325 Payment of dividends ..................... (602,031) (480,125) ----------- ----------- Net cash provided by (used in) financing activities ............ (1,457,340) 179,221 ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS ................ 878,743 147,392 Cash and cash equivalents at beginning of year ... 2,331,150 2,183,758 ----------- ----------- Cash and cash equivalents at end of year ......... $ 3,209,893 $ 2,331,150 =========== =========== Reconciliation of Net Earnings to Net Cash Provided by Operating Activities Net earnings ..................................... $ 1,254,160 $ 795,281 Adjustments to reconcile net earnings to net cash provided by operating activities Depreciation ............................... 221,879 215,433 Loss on partnerships and joint ventures .... 33,289 36,534 Gain on sale of property and equipment ..... (779) (1,752) Collections on real estate contracts receivable .................... 9,259 294,627 Profit recognized on installment sales ..... (20,701) (45,560) Deferred income taxes ...................... 517,000 777,000 Change in Income taxes recoverable/payable ....... 327,274 (433,310) Other receivables ...................... 105,163 (98,693) Land and improvements held for future development .............. (424,843) (840,557) Other assets ........................... 130,632 (67,191) Accounts payable, accrued expenses, and other liabilities ............... 266,821 (95,993) Accrued interest payable ............... (36,253) (24,935) ----------- ----------- Net cash provided by operating activities ............ $ 2,382,901 $ 510,884 =========== =========== Noncash investing and financing activities: - ------------------------------------------- At June 30, 1997, declared but unpaid dividends totaled $602,031. The accompanying notes are an integral part of these statements. Westland Development Co., Inc. NOTES TO FINANCIAL STATEMENTS June 30, 1998 and 1997 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 land holdings, all of which are located near Albuquerque, New Mexico. The Company may use joint ventures or participation in limited partnerships to accomplish these activities. Revenue sources for the years ended June 30, 1998 and 1997 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. At June 30, 1998, United States Treasury Bills of approximately $2,248,000 are included in cash and cash equivalents. 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. 4. 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. 5. Income-Producing Properties and Property and Equipment ------------------------------------------------------ Income-producing properties and property and equipment are stated at cost, less accumulated depreciation, computed on a straight-line basis over their estimated lives of three to thirty years. The cost of the building in which the Company has its offices, a portion of which is rented to others, has been allocated to property and equipment and income-producing properties based upon square footage. 6. Recognition of Income on Real Estate Transactions ------------------------------------------------- The Company recognizes the entire gross profit on sales where the down payment is sufficient to meet the requirements for the full-accrual method. Transactions where the down payment is not sufficient to meet the requirements for the full-accrual method are recorded using the deposit or installment method. Under the deposit method, cash received is recorded as a deposit on land sale. Under the installment method, the Company records the entire contract price and the related costs at the time the transaction is recognized as a sale. Concurrently, the gross profit on the sale is deferred and is subsequently recognized as revenue in the statements of earnings as payments of principal are received on the related contract receivable. 7. 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. 8. Earnings Per Common Share ------------------------- Earnings per common share are based upon the weighted average number of common shares outstanding during the year, including the number of no par value common shares which may be issued in connection with eliminating fractional shares (which resulted from the determination made by the Court in the heirship case) and the number of no par value common shares for which the Court ruled that no incorporator or heirs existed. The Company has no potential common stock items. 9. Investments in Partnerships and Joint Ventures ---------------------------------------------- Investments in partnerships and joint ventures are accounted for on the equity method. 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 are summarized as follows at June 30, 1998: Contracts, due in varying monthly installments, with interest rates ranging from 10% to 12%; collateralized by land $ 59,774 ========= Principal collections due on the real estate contracts receivable for the years ending June 30 are as follows: 1999 $ 35,774 2000 4,393 2001 4,829 2002 5,308 2003 9,470 --------- $ 59,774 ========= 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, 1998: Land $1,060,226 Improvements 5,397,247 ---------- $6,457,473 ========== NOTE D - INCOME-PRODUCING PROPERTIES Income-producing properties consist of three single-tenant retail store buildings and one-half of the Company's office building and are summarized as follows at June 30, 1998: Buildings and equipment $5,082,882 Less accumulated depreciation 523,275 ---------- 4,559,607 Land 2,499,033 ---------- $7,058,640 ========== The Company's rentals from income-producing properties are principally obtained from tenants through rental payments as provided for under noncancelable operating leases. The lease terms range from one to twenty years and typically provide for guaranteed minimum rent, percentage rent, and other charges to cover certain operating costs. Minimum future rentals from income-producing properties on noncancelable tenant operating leases as of June 30, 1998 are as follows: Year ending June 30 1999 $ 757,190 2000 670,740 2001 664,353 2002 665,669 2003 669,379 Thereafter 7,247,183 ----------- $10,674,514 =========== NOTE E - NOTES, MORTGAGES, AND ASSESSMENTS PAYABLE Notes, mortgages, and assessments payable are summarized as follows at June 30, 1998: Promissory note, due in monthly installments of $17,970 through May 2015, including interest at 9.37%; collateralized by income-producing properties $1,826,831 Note payable, due in monthly installments of $6,893 through September 2015, including interest at 8.75%; collateralized by income-producing properties 733,676 Note payable to bank; due on demand, but if no demand is made, then on August 29, 1998, with interest at 9.5%; collateralized primarily by real estate 506,484 Note payable to bank; due in monthly installments of $6,701 with any unpaid amounts due May 14, 1999, interest at 9.5%; collateralized primarily by real estate 326,657 Mortgage note, due in monthly installments of $24,682, including interest at 8.52%, due November 1, 2016; collateralized by income-producing properties 2,748,443 Other notes, mortgages, and assessments payable 54,488 ---------- $6,196,579 ========== The Company maintains a line of credit with a bank due in June 1999 which provides a maximum of $2,000,000 at the bank's prime rate of interest, payable quarterly, and is collateralized by specific tracts of land. At June 30, 1998, no amounts were outstanding on this line of credit. Also, at June 30, 1998, the Company had approximately $19,000 of outstanding letters of credit to the City of Albuquerque in connection with subdivision improvements done for the Company. Aggregate required principal payments of the notes, mortgages, and assessments payable as of June 30, 1998 are as follows: Year ending June 30 1999 $ 994,693 2000 157,212 2001 160,767 2002 172,391 2003 185,340 Thereafter 4,526,176 ----------- $ 6,196,579 =========== NOTE F - INCOME TAXES An analysis of the deferred income tax assets and liabilities as of June 30, 1998 is as follows: Deferred tax assets Contribution carryforwards .............................. $ 89,004 Property, equipment, and land ........................... 291,555 Investments ............................................. 35,888 Other ................................................... 100,913 Valuation allowance ..................................... (89,000) ----------- 428,360 Deferred tax liabilities Deferred tax gain on involuntary conversion of land ................................... 4,955,360 ----------- Net deferred tax liability ................. $ 4,527,000 =========== Income tax expense (benefit) consists of the following: Year ended June 30, 1998 1997 --------- --------- Current Federal ................... $ 289,242 $(156,043) State ..................... 19,758 (15,267) --------- --------- 309,000 (171,310) Deferred Federal ................... 439,000 660,450 State ..................... 78,000 116,550 --------- --------- 517,000 777,000 --------- --------- $ 826,000 $ 605,690 ========= ========= The income tax provision is reconciled to the tax computed at statutory rates as follows: June 30, 1998 1997 Tax expense at statutory rates ............. $ 707,000 $ 476,330 State income taxes at statutory rates ...... 97,000 84,058 Change in valuation allowance .............. (151,000) 19,382 Nondeductible expenses ..................... 23,000 36,904 Expiration of contribution carryforwards ... 104,000 -- Other ...................................... 46,000 (10,984) --------- --------- Total expense ........................... $ 826,000 $ 605,690 ========= ========= A valuation allowance of approximately $89,000 has been recognized at June 30, 1998 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 Articles of Incorporation, the Company is authorized to issue 1,964,448 shares of common stock classified 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)736,668 shares to be sold for $1.45 a share, designated as Class A, $1 par value common stock. Class A stock is to be sold only to the stockholders of record as of the date of incorporation as follows: At the first sale of such stock, each stockholder shall have the right to purchase up to the number of shares obtained by dividing the total number of stockholders of record on the date of incorporation into 736,668 shares. Any stock remaining unpurchased shall be offered for sale at subsequent sales, and only subsequent sale, each one being entitled to purchase up to the number of shares obtained by stockholders who purchased stock at a preceding sale shall have the right to purchase stock at a dividing the total number of stockholders of record who purchased at the preceding sale into the total number of unpurchased shares remaining after the preceding sale. (c)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. Those acquiring no par value common stock and Class A, $1 par value common stock have no preemptive rights to purchase Class B, $1 par value common st ock. The following summarizes, at June 30, 1998, the number of shares of common stock which, upon judicial determination, can be distributed (no par) or offered for sale (Class A) to stockholders of record as of the date of incorporation: Price Number ------------------- of Per shares share Total ---------- ------ ---------- Shares issuable No par value common ........ 5,047 $ -- $ -- Class A, $1 par value common 736,668 1.45 1,068,169 ---------- ------ ---------- 741,715 -- $1,068,169 ========== ====== ========== There is no established market value for the Company's common stock. At June 30, 1998, 716,608 shares of the Company's no par value common stock were issued and outstanding. Of the 5,047 shares of no par value common stock issuable, 1,872 shares may be issued in connection with eliminating fractional shares which resulted from the determinations made by the Court in the heirship case and 3,175 shares represent shares for which the Court in the heirship case ruled that no incorporator or heirs existed. The Company also has reacquired and canceled 15,013 shares of no par value common stock which have been constructively retired. These shares have not been formally retired and, as such, may be issuable to stockholders of record as of the date of incorporation. The Company had a stock option plan for certain directors and employees which was terminated in 1987. Options under this plan for 7,500 shares of Class B common stock were exercised during 1997 and all remaining unexercised options expired in December 1996. NOTE H - SEGMENT INFORMATION The Company operates primarily in two industry segments. They are as follows: Land - Operations involve the development and sale of tracts, both residential and commercial. In addition, included are incidental revenues from leasing of grazing rights. Rentals - Operations involve rentals from three single-tenant retail store buildings and one-half of the Company's office building. Financial information for each industry segment is summarized as follows: General Land Rentals corporate Total ----------- ----------- ------------ ----------- 1998 Revenues ........... $ 4,651,224 $ 697,385 $ -- $ 5,348,609 Operating income (expense) ....... 3,547,773 433,945 (1,359,202) 2,622,516 Identifiable assets 6,552,542 7,277,962 3,726,589 17,557,093 Capital expenditures -- 972 59,986 60,958 Depreciation ....... -- 169,091 52,788 221,879 1997 Revenues ........... $ 3,659,180 $ 621,171 $ -- $ 4,280,351 Operating income (expense) ....... 2,697,194 355,852 (1,115,960) 1,937,086 Identifiable assets 6,151,103 7,555,231 3,134,098 16,840,432 Capital expenditures -- 907,158 31,245 938,403 Depreciation ....... -- 163,369 52,064 215,433 General corporate assets consist primarily of cash, furniture, equipment, and one-half of an office building, of which the remaining one-half is included in income-producing properties. NOTE I - BENEFIT PLANS The Company has certain defined benefit employee retirement plans that provide for employee and employer contributions. The Company's contribution expense for these plans was $89,000 and $74,000 for 1998 and 1997, respectively. NOTE J - SALES TO MAJOR CUSTOMERS Sales to major customers are summarized as follows: During the year ended June 30, 1998, sales to two customers individually accounted for 28% and 13% of total revenues. During the year ended June 30, 1997, sales to two customers individually accounted for 47% and 21% of total revenues. NOTE K - SALE OF LAND FOR NATIONAL PARK On June 28, 1990, the Petroglyph National Monument (National Monument) was established by an act of the United States Congress (Congress). Under the bill passed by Congress, the National Park Service is authorized to acquire acreage within the National Monument using funds specifically app ropriated by Congress each year. In 1998, approximately 85 acres were transferred to the National Park Service for cash of $1,500,000. The Company's remaining land within the National Monument boundary of approximately 362 acres is expected to be sold in a series of transactions over the next several years. NOTE L - LITIGATION 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. NOTE M - 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 1998 and 1997 were $50,000 each year. The note receivable - related party is from a joint venture partner, is payable in monthly installments of $758 including interest at 10%, and is collateralized by developed property. The note matures April 2006. During the year ended June 30, 1998, the Company acquired land from an ownership group which included a member of the Board of Directors and a member of the Director's immediate family. Under the sales agreement, the Board member received approximately $81,000 and the family member received approximately $49,000. NOTE N - FINANCIAL INSTRUMENTS The following table includes various estimated fair value information as required by Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures about Fair Value of Financial Instruments. Such information, which pertains to the Company's financial instruments, is based on the r equirements set forth in SFAS No. 107 and does not purport to represent the aggregate net fair value of the Company. The carrying amounts in the table are the amounts at which the financial instruments are reported in the financial statements. All of the Company's financial instruments are held for purposes other than trading. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: 1. Cash and Cash Equivalents ------------------------- The carrying amount approximates fair value because either the Company has the contractual right to receive immediate payment or because of short maturities. 2. Real Estate Contracts Receivable -------------------------------- These notes receivable are generally collateralized by real estate and accrue interest at rates from 10% to 12%. Because the ultimate collectibility of these notes is not reasonably assured, it is not practicable to estimate fair value. 3. Other Notes Receivable ---------------------- Other notes receivable are valued at the present value of future cash flows based on the current rates at which similar loans would be made to borrowers with similar credit ratings. 4. Notes, Mortgages, and Assessments Payable ----------------------------------------- The discounted amount of future cash flows using the Company's current incremental rate of borrowing 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, 1998 are as follows: Carrying Estimated amount fair value Financial assets Cash and cash equivalents ........... $3,209,893 $3,209,893 Real estate contracts receivable (not practicable to estimate fair value) ...................... 29,468 -- Other notes receivable .............. 65,601 65,601 Financial liabilities Notes, mortgages, and assessments payable .......................... 6,196,579 6,642,000 NOTE O - SUBSEQUENT EVENT On July 31, 1998, the Company declared a dividend of $1 per share for stockholders of record as of August 10, 1998. The dividend is payable on September 1, 1998. -----END PRIVACY-ENHANCED MESSAGE-----