-----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, Dw1lrtBnqIOLPnLITv3x0bHOlHrrQXL1ie0YOj/0P6dBccE7TsY9Q7gXL7oZp5iR n9Fm3deXF4BFEEohte45eg== /in/edgar/work/0000950153-00-001543/0000950153-00-001543.txt : 20001115 0000950153-00-001543.hdr.sgml : 20001115 ACCESSION NUMBER: 0000950153-00-001543 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NZ CORP CENTRAL INDEX KEY: 0000071478 STANDARD INDUSTRIAL CLASSIFICATION: [6552 ] IRS NUMBER: 430433090 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00497 FILM NUMBER: 765979 BUSINESS ADDRESS: STREET 1: 3033 N 44TH ST STREET 2: STE 270 CITY: PHOENIX STATE: AZ ZIP: 85018-7228 BUSINESS PHONE: 6029528836 MAIL ADDRESS: STREET 1: 3033 NORTH 44TH STREET STREET 2: SUITE 270 CITY: PHOENIX STATE: AZ ZIP: 85018-7228 FORMER COMPANY: FORMER CONFORMED NAME: NEW MEXICO & ARIZONA LAND CO DATE OF NAME CHANGE: 19920703 10-Q 1 p64078e10-q.txt FORM 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (mark one) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000. [ ] Transition Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934 For the transition period from N/A to N/A. Commission File Number: 0-497 NZ CORPORATION (Exact name of registrant as specified in its charter) ARIZONA 43-0433090 (State or other jurisdiction of ( I.R.S. Employer incorporation or organization) Identification No.) 333 N. 44TH STREET, SUITE 420, PHOENIX, ARIZONA 85008 (Address of principal executive offices) (Zip Code) 602/952-8836 (Registrant's telephone number, including area code) New Mexico and Arizona Land Company 3033 N. 44th Street, Suite 270 Phoenix, Arizona 85018 [Registrant's former name and address] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. COMMON STOCK, NO PAR VALUE 6,842,736 Class Outstanding at November 4, 2000
1 2 NZ Corporation and Subsidiaries FORM 10-Q
(UNAUDITED) CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, December 31, (in thousands, except share data) 2000 1999 - ----------------------------------------------------------------------------------------------------------------- Assets Properties, net $43,287 $46,324 Commercial real estate loans, net 33,792 26,773 Receivables 5,970 6,237 Investments in joint ventures 6,628 3,134 Cash and cash equivalents 2,646 3,661 Other 1,123 1,089 ------- ------- Total assets $93,446 $87,218 ------- ------- Liabilities and Shareholders' Equity Notes payable and lines of credit $25,109 $20,983 Accounts payable and accrued liabilities 2,063 2,014 Deferred income taxes 3,679 4,834 Deferred revenue 7,530 6,951 ------- ------- Total liabilities 38,381 34,782 ------- ------- Non-controlling interests 143 560 ------- ------- Shareholders' equity: Preferred stock, no par value; 10,000,000 shares authorized; none issued Common stock, no par value; 30,000,000 shares authorized; 6,925,636 shares issued; 6,851,136 and 6,925,636 shares outstanding at September 30, 2000 and December 31, 1999, respectively 35,341 35,341 Treasury stock, at cost, 74,500 and no shares at September 30, 2000 and December 31, 1999, respectively (388) -- Retained earnings 19,969 16,535 ------- ------- Total shareholders' equity 54,922 51,876 ------- ------- Total liabilities and shareholders' equity $93,446 $87,218 ======= =======
See accompanying Notes to Condensed Consolidated Financial Statements. 2 3 NZ Corporation and Subsidiaries FORM 10-Q CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended Nine months ended September 30, September 30, (in thousands, except per share data) 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------------- Revenue: Property sales $ 1,678 $ 6,713 $ 8,314 $ 19,339 Property rentals 836 640 2,549 1,589 Commercial real estate lending 1,452 1,321 4,328 3,275 Investment income 128 133 408 451 Other 112 107 609 287 -------- -------- -------- -------- 4,206 8,914 16,208 24,941 -------- -------- -------- -------- Expenses: Cost of property sales 439 4,588 4,286 12,979 Property rentals 474 510 1,483 1,048 General and administrative 597 903 2,021 3,191 Interest 700 414 1,858 1,089 Depreciation, depletion and amortization 214 137 640 450 -------- -------- -------- -------- 2,424 6,552 10,288 18,757 -------- -------- -------- -------- Income Before Joint Ventures, Non-controlling Interests and Income Taxes 1,782 2,362 5,920 6,184 Equity in losses from joint ventures (17) -- (17) -- Non-controlling interests (10) (13) (32) (543) -------- -------- -------- -------- Income Before Income Taxes 1,755 2,349 5,871 5,641 Income taxes 839 931 2,437 2,234 -------- -------- -------- -------- Net Income $ 916 $ 1,418 $ 3,434 $ 3,407 -------- -------- -------- -------- Net income per Share of Common Stock Basic $ 0.13 $ 0.20 $ 0.49 $ 0.49 Diluted $ 0.13 $ 0.20 $ 0.49 $ 0.49 -------- -------- -------- -------- Weighted Average Number of Common Shares Basic 6,860 6,926 6,885 6,926 Diluted 6,860 6,926 6,899 6,926 ======== ======== ======== ========
See accompanying Notes to Condensed Consolidated Financial Statements. 3 4 NZ Corporation and Subsidiaries FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, (in thousands) 2000 1999 - ---------------------------------------------------------------------------------------------- CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net income $ 3,434 $ 3,407 Non-cash items included above: Depreciation, depletion and amortization 640 450 Deferred revenue 175 1,025 Deferred income taxes (1,155) 1,094 Allowance for bad debts 100 250 Equity in losses from joint ventures 17 -- Non-controlling interests 32 543 Net change in: Receivables 267 (1,117) Properties under development 911 1,961 Other properties 1,712 3,150 Other assets (34) (292) Accounts payable and accrued liabilities 214 (628) Increase (decrease) in interest and income taxes payable (164) 773 -------- -------- Net cash provided by operating activities 6,149 10,616 -------- -------- CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Additions to properties (226) (14,145) Contributions to joint ventures (3,011) -- Collections of principal on commercial real estate loans 14,356 9,176 Additions to commercial real estate loans (21,572) (17,659) -------- -------- Net cash (used in) investing activities (10,453) (22,628) -------- -------- CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from debt 22,507 29,622 Payments of debt (18,381) (19,711) Distribution to non-controlling interests (449) (999) Purchase of treasury stock (388) -- -------- -------- Net cash provided by financing activities 3,289 8,912 -------- -------- Net increase (decrease) in cash and cash equivalents (1,015) (3,100) -------- -------- Cash and cash equivalents at beginning of period 3,661 4,669 -------- -------- Cash and cash equivalents at end of period $ 2,646 $ 1,569 ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION CASH PAID DURING THE YEAR FOR: Interest (net of amount capitalized) $ 1,817 $ 1,391 Income taxes 3,486 2,106 -------- -------- Supplemental disclosure of non-cash investing activities. Conversion of real estate loan to investment in joint venture $ 500 ========
See accompanying Notes to Condensed Consolidated Financial Statements. 4 5 NZ Corporation and Subsidiaries FORM 10-Q NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements contain all normal, recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The accompanying statements do not include all disclosures considered necessary for a fair presentation in conformity with generally accepted accounting principles. Therefore, it is recommended that the accompanying statements be read in conjunction with the consolidated financial statements appearing in the Company's 1999 annual report on Form 10-K. 2. The results of operations for the nine months ended September 30, 2000 and 1999 are not necessarily comparable and may not be indicative of the results which may be expected for future quarters or future years. 3. The Company's consolidated financial statements include those of its wholly-owned subsidiaries, Bridge Financial Corporation ("BFC"), NZ Properties, Inc., NZ Development Corporation, NZU, Inc. and Great Vacations International, Inc., together with majority owned partnerships. 4. Certain prior period amounts have been reclassified for comparative purposes. 5. Net income per share computations are based on the weighted average number of shares outstanding for the period. For the nine months ended September 30, the weighted average number of shares outstanding were 6,885,000 (basic) and 6,899,000 (diluted) in 2000 and 6,926,000 basic and diluted in 1999. For the three months ended September 30, the weighted average number of shares outstanding were 6,860,000 basic and diluted in 2000 and 6,926,000 basic and diluted in 1999. 5 6 6. New Accounting Standards In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded on the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133, as amended by SFAS No. 138, cannot be applied retroactively and will be adopted as required January 1, 2001. The Company has completed an initial evaluation of the adoption of SFAS No. 133. The Company does not use derivative investments for hedging or other purposes. Certain contracts to which the Company is a party may have embedded derivative instruments within the meaning of SFAS No. 133. The Company believes the adoption of SFAS No. 133 will not have a material effect on the Company's financial position or results of operations. 7. The Company is engaged in three operating segments; Real Estate, Short-term Commercial Real Estate Lending and Other Business. The Short-term Commercial Real Estate Lending segment is primarily conducted through BFC. Reconciliation of Segment Information to Consolidated Amounts Management evaluates the performance of each segment based on income before income taxes and identifiable assets. Income before income taxes includes allocations of corporate overhead expenses. Identifiable assets include assets employed in the generation of income for each segment. The basis of measurement of segment income reported below differs from the measurement used in prior years' reports. Management previously evaluated segment performance based on income before joint ventures, non-controlling interests and income taxes. Beginning with reports for periods ending on or after March 31, 2000, management now evaluates performance of segments based on income after joint ventures and non-controlling interests, but before income taxes. Prior period amounts have been reclassified for comparative purposes. Information for the Company's reportable segments reconciles to the Company's consolidated totals as follows: REVENUES (UNAUDITED):
Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2000 1999 2000 1999 --------------------------------------------------------------------------------------------------------- Real Estate $ 2,293 $ 7,298 $10,418 $21,219 Short-term Commercial Real Estate Lending 1,827 1,576 5,439 3,624 Other 86 40 351 98 ------- ------- ------- ------- Consolidated total $ 4,206 $ 8,914 $16,208 $24,941 ======= ======= ======= =======
6 7 INCOME AFTER ALLOCATIONS (UNAUDITED):
Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2000 1999 2000 1999 - -------------------------------------------------------------------------------------------------------------- Real Estate $1,157 $1,676 $4,060 $3,946 Short-term Commercial Real Estate Lending 521 637 1,492 1,604 Other 77 36 319 91 ------ ------ ------ ------ Income before income taxes $1,755 $2,349 $5,871 $5,641 ====== ====== ====== ======
IDENTIFIABLE ASSETS:
UNAUDITED SEPTEMBER 30, December 31, (in thousands) 2000 1999 ---------------------------------------------------------------------------- Real Estate $43,043 $46,914 Short-term Commercial Real Estate Lending 49,609 39,489 Other 794 815 ------- ------- Consolidated total $93,446 $87,218 ======= =======
7 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On June 20, 2000, New Mexico & Arizona Land Company changed its name to NZ Corporation. The name change was effected following approval of the Company's shareholders at the Company's annual meeting held on June 9, 2000. RESULTS OF OPERATIONS Consolidated discussions represent data of the Company as presented in the Condensed Consolidated Statements of Income. Segment discussions represent data as reported by segment in Note 7 of the Notes to Condensed Consolidated Financial Statements included elsewhere in this report. Consolidated Revenues decreased 35% from $24,941,000 to $16,208,000 for the nine-month period ended September 30, 2000 as compared to the same period in 1999 and decreased 53% from $8,914,000 to $4,206,000 for the three-month period ended September 30, 2000 as compared to the same period in 1999. The decrease for the third quarter 2000 is primarily due to a lower volume and different mix of property sales in 2000 than in 1999, partially offset by an increase in revenue from property rentals due to a higher occupancy rate. The decrease for the nine-month period is primarily due to a lower volume and different mix of property sales in 2000 than in 1999. The decrease in property sales for the nine-month period is partially offset by increased revenues from commercial real estate lending due to a larger loan portfolio, increased revenues from property rentals due to a higher occupancy rate in 2000 than in 1999, and increased other income due to the sale of mineral rights in 2000 with no corresponding sale in 1999. For the nine months ended September 30, 2000, net income was $3,434,000 ($0.49 per share) compared to $3,407,000 ($0.49 per share) for the same period in 1999. For the three months ended September 30, 2000, net income was $916,000 ($0.13 per share) compared to $1,418,000 ($0.20 per share) for the same period in 1999. Pre-tax earnings from property sales declined 37% from $6,360,000 to $4,028,000 for the nine-month period ended September 30, 2000 as compared to the same period in 1999. The decrease is primarily due to the sale in the 1999 period of three apartment complexes the Company owned in New Mexico, a bulk lot sale of 203 lots made by one of the Albuquerque joint ventures in which the Company owns a 75% interest, and three bulk land sales. These sales are compared to three bulk land sales in 2000 and a bulk lot sale of 38 lots by the Albuquerque joint venture. The gross margin on pre-tax earnings from property sales increased significantly in the three-month period ended September 30, 2000 as compared to the same period in 1999. The increase is due to an $825,000 change in accounting estimate of total costs of the Seven Bar project, which develops and sells residential lots in Albuquerque, New Mexico. Pre-tax earnings from property sales declined 42% from $2,125,000 to $1,239,000 for the three- 8 9 month period ended September 30, 2000 as compared to the same period in 1999. The decrease is primarily due to the recognition of deferred profit from the prior sale of an apartment complex and one bulk land sale in 1999, with no comparable revenues in 2000. Operating income from property rentals increased 97% from $541,000 to $1,066,000 for the nine-month period ended September 30, 2000 as compared to the same period in 1999 and increased 178% from $130,000 to $362,000 for the three-month period ended September 30, 2000 as compared to the same period in 1999. The nine-month period ended September 30, 2000 includes operating income from five industrial buildings at a higher occupancy rate for the entire period as compared to a lower occupancy rate with three buildings included for only part of the period in 1999. Additionally, operating income from the industrial buildings for the same period is partially offset by an operating loss of approximately $410,000 and $240,000 in 2000 and 1999 respectively with respect to real estate owned and operated due to a foreclosure. The operating loss associated with this property is included in the Commercial real estate lending segment. The third quarter of 2000 includes operating income from five industrial buildings at a higher occupancy rate than in 1999. Also, one building was included for only part of the quarter for the third quarter of 1999. General and administrative expense declined by $1,170,000 or 37%, from $3,191,000 to $2,021,000 for the nine-month period ended September 30, 2000 as compared to the same period in 1999 and by $306,000 or 34%, from $903,000 to $597,000 for the three-month period ended September 30, 2000 as compared to the same period in 1999. Approximately 95% of the decline for the nine-month period is due primarily to four items. Approximately $590,000 of the decrease is due to decreased legal expense since the settlement of the Sedona litigation during the fourth quarter of 1999. Approximately $160,000 of the decrease is due to decreased accounting costs, approximately $215,000 of the decrease is due to a reduction in staff costs primarily related to the sale of the Company's apartment complexes in New Mexico, and approximately $150,000 of the decrease is due to a greater increase in the allowance for bad debts in 1999 than in 2000. The decline for the three-month period is due primarily to decreased legal expense of approximately $140,000, a reduction in staff costs of approximately $80,000, and an increase in the allowance for bad debts of $150,000 for 1999 with no similar increase in 2000. The managed loan portfolio of Bridge Financial Corporation ("BFC"), a wholly-owned subsidiary of the Company, stood at $49.1 million as of September 30, 2000, of which $11.4 million was participated with other lenders and $33.8 million (net of an allowance for bad debts of $.7 million and undisbursed loan proceeds of $.9 million) was recorded in the Company's financial statements in "Commercial real estate loans, net" and $2.3 million was recorded in "Investments in joint ventures". This compares to a September 30, 1999 managed portfolio of $62.7 million of which $28.1 million was participated with other lenders and $33.9 million (net of an allowance for bad debts of $.5 million and undisbursed loan proceeds of $.2 million) was recorded in the Company's financial statements in "Commercial real estate loans, net". As of October 31, 2000 the managed portfolio was $48.8 million of which $12.0 million was participated and $32.9 9 10 million (net of an allowance for bad debts of $.7 million and undisbursed loan proceeds of $.9 million) was recorded in the Company's financial statements in "Commercial real estate loans, net" and $2.3 million was recorded in "Investments in joint ventures". The decrease in the managed portfolio is primarily due to two items. In the third quarter of 2000, the Company completed a foreclosure on a hotel property located in Peoria, Arizona, which was collateral for one of the Company's loans. The Company had a participant in the loan. The participant is now a co-owner of the hotel with the Company, in the same proportion as in the loan participation. The Company's portion of the asset is recorded in investments in joint ventures but is not included in the managed portfolio. Additionally, the Company acquired certain land located in Arizona from a borrower. The acquisition was paid for by the extinguishment of indebtedness and cash. The Company had a participant in the loan. The participant is now a co-owner of the land with the Company, in the same proportion as in the loan participation. The Company's portion of the asset continues to be recorded in investments in joint ventures as it was prior to the acquisition, but is not included in the managed portfolio. Real Estate Segment Segment performance is based on income before income taxes and identifiable assets. Income before income taxes includes allocations of corporate overhead expenses. Identifiable assets include assets employed in the generation of income for each segment. Revenues decreased 51% from $21,219,000 to $10,418,000 for the nine-month period ended September 30, 2000 as compared to the same period in 1999 and decreased 69% from $7,298,000 to $2,293,000 for the three-month period ended September 30, 2000 as compared to the same period in 1999. The decrease for each period is primarily due to a lower volume and different mix of property sales in 2000 than in 1999, partially offset by increased revenues from property rentals in 2000 as compared to 1999. Income before income taxes increased slightly from $3,946,000 to $4,060,000 for the nine-month period ended September 30, 2000 as compared to the same period in 1999 and decreased 31% from $1,676,000 to $1,157,000 for the three-month period ended September 30, 2000 as compared to the same period in 1999. The decrease for the third quarter 2000 is primarily attributable to a decrease in property sales, partially offset by an increase in operating income from property rentals and a decrease in general and administrative expenses. The increase for the nine-month period is primarily due to an increase in operating income from property rentals and a decrease in general and administrative expenses related to decreased legal expenses and a significant increase in interest expense allocation to the lending segment, partially offset by a decrease in property sales. The decrease in identifiable assets from $46,914,000 at December 31, 1999 to $43,043,000 at September 30, 2000 is primarily due to the disposition of real estate during the period. Short-term Commercial Real Estate Lending Segment 10 11 Revenues increased 50% from $3,624,000 for the nine-month period ended September 30, 1999 to $5,439,000 in the same period for 2000. The increase is primarily attributable to increased revenues as a result of a larger loan portfolio, with a reduced principal amount of participated loans in 2000 than in 1999, increased revenues related to real estate owned and operated, and lot sales. Income before income taxes decreased slightly from $1,604,000 in the nine-month period ended September 30, 1999 to $1,492,000 in the same period in 2000. The decrease in income before income taxes is primarily attributable to the increased revenues being offset by higher expenses for three items: approximately 16% of the increased expenses are related to increased cost of sales from lot sales; approximately 24% is due to increased operating expenses for real estate owned and operated; and approximately 62% is due to increased interest expense. Revenues increased 16% from $1,576,000 for the three-month period ended September 30, 1999 to $1,827,000 in the same period in 2000. The increase is primarily attributable to increased revenues related to real estate owned lot sales. Income before income taxes decreased 18% from $637,000 for the three-month period ended September 30, 1999 to $521,000 in the same period for 2000. The decrease is primarily attributable to an increase in expenses incurred from real estate owned and an increase in interest expense. The increase in identifiable assets from $39,489,000 at December 31, 1999 to $49,609,000 at September 30, 2000 is primarily attributable to the growth of the loan portfolio. LIQUIDITY AND CAPITAL RESOURCES The Company expects to continue to generate cash from the sale of real estate this year. Cash will also be generated from principal repayments on maturing loans in the Company's existing loan portfolio. In addition, the Company uses and intends to continue to use participants or other joint funding sources in connection with funding certain real estate loans. Further, the Company has lines of credit with non-bank commercial lenders and a commercial bank from which it can fund loans. The Company intends to negotiate additional or modified lines of credit, as business circumstances require. The Company's goal in these negotiations will be to enhance the effectiveness and cost of available capital and to provide lines of credit of a size appropriate for the Company's expected needs. A principal outcome of the Company's discussions with potential lenders will be to determine how rapidly the Company will be able to grow its commercial real estate lending business. The terms of any new or changed financing arrangement will likely have a material effect upon the Company's margins in its lending business and on the size of the managed loan portfolio. If the Company is not successful in negotiating such financing, the principal effect will be a slower growth in the Company's lending business, with the pace of growth in the near term being determined at least in significant part by the timing of the Company's sales of existing real estate assets. For the nine months ended September 30, 2000, the Company's operating activities 11 12 provided $6,132,000 of net cash flows, its investing activities used $10,436,000 of net cash flows and financing activities provided $3,289,000 of net cash flows. As of September 30, 2000, the Company has a $15 million partially secured revolving line of credit from a commercial bank, which can be used for general corporate purposes. The line bears interest at the prime rate and expires December 14, 2000. At September 30, 2000 there was an outstanding balance of $7,125,000. As of October 31, 2000 the line had an outstanding balance of $5,175,000. This loan contains financial covenants which require the Company to maintain a specified minimum ratio of net notes receivable (as defined) to the outstanding loan balance; a specified minimum excess of current assets over current liabilities (as defined); and a specified minimum tangible net worth. At September 30, 2000 the Company was in compliance with these financial covenants. The Company is processing a renewal of this line with the lender. BFC has a $25,000,000 warehouse line of credit with a large non-bank commercial lender to finance certain portions of BFC's real estate lending activities. The line bears interest at rates ranging from 30-day LIBOR plus 250 basis points to 30-day LIBOR plus 300 basis points and expires November 30, 2000. As amounts are drawn, the line will be secured by certain loan assets of the Company. At September 30, 2000 and October 31, 2000 the line had an outstanding balance of $2,737,500. This loan contains financial covenants which require BFC to maintain a minimum tangible net worth; a specified maximum ratio of debt to tangible net worth; and a specified minimum ratio of liquid assets to tangible net worth. At September 30, 2000 BFC was in compliance with these financial covenants. The line of credit is guaranteed by the Company. The Company is processing a renewal of this line of credit with the lender. Additionally, BFC has a revolving $20,000,000 warehouse line of credit with a different large non-bank commercial lender to finance certain portions of BFC's real estate lending activities. As amounts are drawn, the line will be secured by certain loan assets of the Company. The line bears interest at 30-day LIBOR plus 475 basis points and expires October 1, 2001. At September 30, 2000 and October 31, 2000 there was no outstanding balance. This loan contains financial covenants that require BFC to maintain a minimum tangible net worth and a minimum interest coverage ratio. At September 30, 2000 BFC was in compliance with these financial covenants. The line of credit is guaranteed by the Company. In addition to bank lines, the Company may seek qualified joint venture partners to finance large real estate development projects or loans to the extent that the Company actually engages in such projects or makes such loans in the future. The use of joint venture partners provides a source of capital, mitigates the Company's risk by sharing it with another party, and gives the Company access to expertise that it might not otherwise have for particular projects. 12 13 The Company's Board of Directors approved a stock buy-back program in September 1999. The buy-back program authorized the repurchase of up to 500,000 shares of the Company's common stock in the open market over the 12-month period ending September 30, 2000. In August 2000, the Company's Board of Directors extended the buy-back program to September 30, 2001. The Company repurchased 15,900 shares for $75,787 for the three-month period ended September 30, 2000 and 74,500 shares for $388,157 for the nine-month period ended September 30, 2000. No shares were repurchased in 1999. New Accounting Standards In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded on the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No. 133, as amended by SFAS No. 138, cannot be applied retroactively and will be adopted as required January 1, 2001. The Company has completed an initial evaluation of the adoption of SFAS No. 133. The Company does not use derivative investments for hedging or other purposes. Certain contracts to which the Company is a party may have embedded derivative instruments within the meaning of SFAS No. 133. The Company believes the adoption of SFAS No. 133 will not have a material effect on the Company's financial position or results of operations. 13 14 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit 27.1 - Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter ended September 30, 2000. 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. NZ Corporation /s/ Jerome L. Joseph - ---------------------------------------- Controller and Treasurer (Principal Financial Officer) /s/ R. Randy Stolworthy - ---------------------------------------- President and Chief Executive Officer (Principal Executive Officer) Date: November 10, 2000 ---------------------------- 14 EX-27.1 2 p64078ex27-1.txt EXHIBIT 27.1 - FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-2000 SEP-30-2000 2,646 0 40,417 655 0 31,910 50,171 2,587 93,446 11,106 25,109 0 0 35,341 19,969 93,446 8,314 16,208 4,286 10,288 49 100 1,858 5,871 2,437 3,434 0 0 0 3,434 .49 .49
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