-----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, L1EH4QKidCvWKQm2xpZQPqjTpETLFp3UDtKvimgpNv4/cUBydW+YYmAsD6dheALR WSpCDIJ68WfjjAzCn/vdZg== 0000950153-99-000600.txt : 19990511 0000950153-99-000600.hdr.sgml : 19990511 ACCESSION NUMBER: 0000950153-99-000600 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW MEXICO & ARIZONA LAND CO CENTRAL INDEX KEY: 0000071478 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [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: 99616181 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 10-Q 1 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1999. [ ] 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 NEW MEXICO AND ARIZONA LAND COMPANY (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.) 3033 N. 44TH STREET, SUITE 270, PHOENIX, ARIZONA 85018-7228 (Address of principal executive offices) (Zip Code) 602/952-8836 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports 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 6,925,636 Class Outstanding at April 30, 1999
2 New Mexico and Arizona Land Company and Subsidiaries FORM 10-Q CONSOLIDATED BALANCE SHEETS
UNAUDITED MARCH 31, December 31, (Dollars in thousands) 1999 1998 - -------------------------------------------------------------------------------------------- Assets Properties, net $39,443 $43,340 Commercial real estate loans, net 21,168 20,695 Receivables 6,773 4,898 Investments in joint ventures 11 11 Cash and cash equivalents 3,970 4,669 Other 771 772 - -------------------------------------------------------------------------------------------- Total assets $72,136 $74,385 ============================================================================================ Liabilities and Shareholders' Equity Notes payable and lines of credit $ 9,077 $14,264 Accounts payable and accrued liabilities 762 1,407 Deferred revenue 7,324 5,520 Deferred income taxes 5,069 4,160 - -------------------------------------------------------------------------------------------- Total liabilities 22,232 25,351 - -------------------------------------------------------------------------------------------- Non-controlling interests 1,533 1,889 - -------------------------------------------------------------------------------------------- Commitments and contingencies - -------------------------------------------------------------------------------------------- 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 issued and outstanding 35,341 35,341 Retained earnings 13,030 11,804 - -------------------------------------------------------------------------------------------- Total shareholders' equity 48,371 47,145 - -------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $72,136 $74,385 ============================================================================================
See accompanying Notes to Consolidated Financial Statements. 2 3 New Mexico and Arizona Land Company and Subsidiaries FORM 10-Q CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three months ended March 31,
(in thousands, except per share data) 1999 1998 - --------------------------------------------------------------------------------------- Revenue: Property sales $ 9,027 $ 4,167 Property rentals 498 740 Commercial real estate lending 959 627 Investment income 130 79 Other 100 74 - --------------------------------------------------------------------------------------- 10,714 5,687 - --------------------------------------------------------------------------------------- Expenses: Cost of property sales 6,291 3,378 Property rentals 209 238 General and administrative 1,238 671 Interest 341 268 Depreciation, depletion and amortization 128 164 - --------------------------------------------------------------------------------------- 8,207 4,719 - --------------------------------------------------------------------------------------- Income Before Joint Ventures, Non-controlling Interests and Income Taxes 2,507 968 Gain from joint ventures -- 5 Non-controlling interests (486) (110) - --------------------------------------------------------------------------------------- Income Before Income Taxes 2,021 863 Income taxes 795 346 - --------------------------------------------------------------------------------------- Net Income $ 1,226 $ 517 ======================================================================================= Earnings per Share of Common Stock BASIC $ 0.18 $ 0.07 DILUTED $ 0.18 $ 0.07 ======================================================================================= Weighted Average Number of Common Shares BASIC 6,926 6,926 DILUTED 6,934 6,930 =======================================================================================
See accompanying Notes to Consolidated Financial Statements. 3 4 New Mexico and Arizona Land Company and Subsidiaries FORM 10-Q CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Three Months Ended March 31,
(in thousands) 1999 1998 - ---------------------------------------------------------------------------------------------------- CASH FLOWS PROVIDED BY/(USED IN) OPERATING ACTIVITIES: Net income $ 1,226 $ 517 Gain from sales of properties (857) (117) Non-cash items included above: Depreciation, depletion and amortization 128 164 Deferred revenue (351) 1,051 Deferred income taxes 909 (1,373) Allowance for bad debts 100 -- Equity in earnings of joint ventures -- (5) Non-controlling interests 486 110 Net change in: Receivables 180 (2,717) Properties under development 2,038 1,993 Other assets 1 (33) Accounts payable and accrued liabilities (645) 1,792 - ---------------------------------------------------------------------------------------------------- Net cash flows provided by/(used in) operating activities 3,215 1,382 - ---------------------------------------------------------------------------------------------------- CASH FLOWS PROVIDED BY/(USED IN) INVESTING ACTIVITIES: Additions to properties (1,477) (1,538) Proceeds from sale of properties 3,887 439 Distributions from joint ventures -- 15 Collections of principal on commercial real estate loans 1,961 1,419 Additions to commercial real estate loans (2,256) (6,378) - ---------------------------------------------------------------------------------------------------- Net cash flows provided by/(used in) investing activities 2,115 (6,043) - ---------------------------------------------------------------------------------------------------- CASH FLOWS PROVIDED BY/(USED IN) FINANCING ACTIVITIES: Proceeds from debt 192 4,255 Payments of debt (5,379) (1,079) Distributions to non-controlling partners (842) (46) - ---------------------------------------------------------------------------------------------------- Net cash flows provided by/(used in) financing activities (6,029) 3,130 - ---------------------------------------------------------------------------------------------------- Net (decrease) in cash and cash equivalents (699) (1,531) - ---------------------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of period 4,669 6,016 - ---------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 3,970 $ 4,485 ====================================================================================================
See accompanying Notes to Consolidated Financial Statements. 4 5 New Mexico and Arizona Land Company and Subsidiaries FORM 10-Q NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. In the opinion of the Company, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position, the 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 1998 annual report on Form 10-K. 2. The results of operations for the three months ended March 31, 1999 and 1998, 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 joint ventures which the Company controls or in which the Company holds a majority ownership. 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 of 6,926,000 (basic) and 6,934,000 (diluted) in 1999 and 6,926,000 (basic) and 6,930,000 (diluted) in 1998. 6. During the three months ended March 31, 1999 the Company sold properties in exchange for cash and approximately $2,055,000 in notes receivable. Approximately $1,877,000 of the profit on these sales has been deferred. 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 the Company's wholly owned subsidiary BFC. Reconciliation of Segment Information to Consolidated Amounts Management evaluates the performance of each segment based on income after allocations and identifiable assets. Income after allocations is income before joint ventures, non-controlling interests and income taxes, including allocations of corporate overhead expenses. Identifiable assets include assets employed in the generation of income for each segment. 5 6 Information for the Company's reportable segments reconciles to the Company's consolidated totals as follows:
REVENUES (UNAUDITED): Three Months Ended March 31, (in thousands) 1999 1998 ------------------------------------------------------------------------------------------ Real Estate $9,718 $5,027 Short-term Commercial Real Estate Lending 965 629 Other 31 31 ------------------------------------------------------------------------------------------ Consolidated total $10,714 $5,687 ==========================================================================================
INCOME AFTER ALLOCATIONS (UNAUDITED): Three Months Ended March 31, (in thousands) 1999 1998 ------------------------------------------------------------------------------------------ Real Estate $1,998 $558 Short-term Commercial Real Estate Lending 479 380 Other 30 30 ------------------------------------------------------------------------------------------ Income before joint ventures, non-controlling interests and income taxes $2,507 $968 ==========================================================================================
IDENTIFIABLE ASSETS: UNAUDITED MARCH 31, December 31, (in thousands) 1999 1998 ------------------------------------------------------------------------------------------ Real Estate $45,727 $48,134 Short-term Commercial Real Estate Lending 25,573 25,428 Other 836 823 ------------------------------------------------------------------------------------------ Consolidated total $72,136 $74,385 ==========================================================================================
6 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the three months ended March 31, 1999, net income was $1,226,000 ($0.18 per share) compared to $517,000 ($0.07 per share) for the same period in 1998. Pre-tax earnings from property sales were up, by approximately $1,947,000, for the three month period ended March 31, 1999 as compared to the same period in 1998. The increase is principally due to the sale of two apartment complexes the Company owned in New Mexico and a bulk lot sale of 203 lots by one of the Albuquerque joint ventures in which the Company owns a 75% interest, as compared to one bulk land sale in 1998. The Company experienced a 43% decline in pre-tax earnings from property rentals for the three month period ended March 31, 1999 as compared to the same period in 1998. The decline is primarily due to the sale of three of the four federally-subsidized apartment complexes in New Mexico (one was sold in late 1998 and two were sold in the first quarter of 1999). The Company expects to replace the apartments with industrial or office buildings in Arizona in connection with tax-deferred exchanges under Section 1031 of the Internal Revenue Code. On May 5, 1999 the Company acquired the first such replacement property, by closing escrow on the purchase of a 113,100 square foot industrial building located in Gilbert, Arizona. As the Company acquires replacement properties for the apartments, earnings from property rentals are expected to increase. The increase in general and administrative expense of $567,000 in the first quarter of 1999 compared to the first quarter of 1998 is due primarily to increases in four items. Approximately 40% of the increase is due to increased legal expense, primarily attributable to the Sedona litigation. Approximately 15% of the increase is due to the use of two consultants in first quarter 1999 that were not used in first quarter 1998. One consultant was retained for investor relations and a different consultant for identifying sources of capital and evaluating alternative business strategies for the Company's mineral resources. The Company's expense for the latter firm is expected to diminish beginning in the mid-second quarter of 1999. Approximately 15% of the increase is due to increased accounting costs, primarily attributable to professional fees related to the Company's restatement of its 1998 quarterly financial statements and additional audit and tax consulting surrounding the Company's sale of several real estate assets. A portion of the increased accounting costs is also due to tax consulting related to improving the Company's tax analysis models and systems. Approximately 18% of the increase is due to the Company's decision to increase the allowance for bad debts, in anticipation of growth in the Company's managed loan portfolio. The managed loan portfolio of Bridge Financial Corporation stood at $62.6 million as of March 31, 1999, of which $40.7 million was participated with other lenders and $21.0 million (net of an allowance for bad debts of $.4 million and undisbursed loan proceeds of $.5 million) was recorded in the Company's books. As of April 30, 1999 the managed portfolio was $63.2 million, of which $41.1 million was participated and $21.2 million (net 7 8 of an allowance for bad debts of $.4 million and undisbursed loan proceeds of $.5 million) was recorded in the Company's books. This compares to a December 31, 1998 managed portfolio of $53.8 million, of which $32.4 million was participated and $20.7 million (net of an allowance for bad debts of $.3 million and undisbursed loan proceeds of $.4 million) was recorded in the Company's books, and compares to a March 31, 1998 managed portfolio of $55.4 million, of which $34.6 million was participated and $20.0 million (net of an allowance for bad debts of $.3 million and undisbursed loan proceeds of $.5 million) was recorded in the Company's books. The Company previously reported that it was negotiating with a potential buyer for the purchase of the property located at Ray and McClintock. That property is now in escrow to be sold. The Company also previously reported that it was negotiating with potential buyers for the purchase of the property located at Cooper and Warner. A portion of that property is now in escrow to be sold, and the remainder continues to be under negotiation. In addition, the Company previously reported that the Sedona project was for sale. That project is now in escrow to be sold. As is customary in the real estate business, the buyers of these properties (and of the other properties the Company has previously reported to be in escrow) have certain time periods within which to perform feasibility and due diligence investigations and may exercise certain contractual rights to cancel the purchase contracts. Any such cancellation, depending on the reason for and timing of such cancellation, may or may not cause the buyer to incur a penalty for such cancellation. No assurance can be given that any particular escrow will actually close. LIQUIDITY AND CAPITAL RESOURCES The real estate lending business will require larger amounts of capital than currently possessed by the Company in order for the Company to be an effective competitor in the market. Management estimates that during 1999, approximately $75 million of principal will be required to fund anticipated loan volume. In addition, the Company will require cash for working capital, for continuing development work on existing real estate projects and for projects that may be acquired through tax-deferred exchanges. (See "Continuation of New Business Activity and Change of Principal Business Emphasis" in Item 7 of the Company's 1998 Annual Report on Form 10-K.) The Company expects to generate a substantial amount of cash (approximately one-third of the amount required) from the sale of real estate over the next 12 months. This cash will be re-deployed into the lending business. Cash will also be generated from principal repayments on maturing loans in the Company's existing loan portfolio. In addition, the Company now uses and intends to continue to use participants or other joint funding sources on certain real estate loans. Further, the Company is engaged in negotiations with a large non-bank commercial lender to provide an additional warehouse line of credit which would be available to finance the Company's real estate lending activities. Discussions have not proceeded far enough to characterize any likely loan agreement, other than to say that it will probably be a secured revolving facility in the approximate amount of $30,000,000. 8 9 The Company currently has a $10,000,000 partially secured revolving line of credit from a commercial bank that may be used for general corporate purposes. The line bears interest at the prime rate and expires July 31, 1999. At March 31, 1999 there was an outstanding balance of $2,050,000. As of April 30, 1999 the line had an outstanding balance of $3,650,000. This loan contains financial covenants which require the Company to maintain a specified minimum ratio of current assets to current liabilities (as defined); a specified minimum excess of current assets over current liabilities (as defined); and a specified maximum ratio of total liabilities to tangible net worth. At March 31, 1999 the Company was in compliance with these financial covenants. The same commercial bank has made a construction loan to the Company to finance development of the Grove Commons project. The loan is secured by the property. The loan bears interest at the prime rate and expires December 31, 1999. As of March 31, 1999 the loan had an outstanding balance of $1,446,000. As of April 30, 1999 the loan had an outstanding balance of $1,452,000. Additionally, 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 September 17, 1999. As amounts are drawn, the line will be secured by certain loan assets of the Company. At March 31, 1999 and April 30, 1999 there were no outstanding balances. 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 March 31, 1999 BFC was in compliance with these financial covenants. The line 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 to the extent that the Company actually engages in such projects in the future. The use of joint venture partners provides a source of development 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. YEAR 2000. The Year 2000 problem is the result of computer programs being written in code which uses two digits rather than four digits to identify a year. These computer programs do not properly recognize a year that begins with "20" instead of the familiar "19" which could cause the computer applications to fail or create erroneous results. The Company has implemented a four phase internal plan to address the Year 2000 issue through assessment, development, execution and integration. The plan includes the assessment of information technology ("IT") systems and non-IT systems. Phase I includes learning about Year 2000, identifying and taking inventory of the business environment and assessing the extent to which the Company's business environment will be impacted by the Year 2000 problem. The Company has completed 100% of Phase I. Phase II is the development of a detailed plan to determine the category of readiness for each identified 9 10 inventory item in Phase I, and the action necessary to bring the identified items in compliance. The Company has completed approximately 95% of Phase II and expects to complete Phase II by July 1999. Phase III plans the time line to execute Phase II including critical data recovery and data transfer procedures. The Company has completed approximately 90% of Phase III and expects to compete Phase III by the end of the third quarter 1999. Phase IV integrates and tests compliance of the inventory items. The Company has completed approximately 38% of Phase IV and expects to complete Phase IV by the end of the third quarter 1999. Costs incurred to bring the Company's internal systems into year 2000 compliance are not expected to have a material impact on the Company's financial position or results of operations. The Company estimates it will incur approximately $50,000 in costs related to year 2000 compliance. All such costs are expected to be incurred in 1999. As of March 31, 1999, the Company has incurred costs of approximately $24,000 related to Year 2000 compliance. The Company will be exposed to the risk that third parties the Company deals with may not be Year 2000 compliant, which could cause disruptions in the Company's activities with those third parties and with the Company's relationships with customers, creditors and others. The Company's Year 2000 plan includes an evaluation of these parties' compliance. Based on currently available information, management believes that the most reasonably likely worst-case scenario could result in minor short-term business interruptions. The Company's Year 2000 plan includes an assessment of material third parties' Year 2000 readiness, but the Company cannot be certain as to the actual Year 2000 readiness of the parties or the impact that any non-compliance on their part may have on the Company's business, results of operations or financial condition. A contingency plan is expected to be completed by the end of the third quarter 1999. 10 11 PART II - OTHER INFORMATION There were no proceedings, changes, occurrences or other matters occurring during the three month period ended March 31, 1999, requiring a response to Items 1 through 5. 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 reporting quarter. 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. New Mexico and Arizona Land Company /s/Jerome L. Joseph - --------------------------------------- Controller and Treasurer (Principal Financial Officer) /s/R. Randy Stolworthy - --------------------------------------- President and Chief Executive Officer (Principal Executive Officer) Date: May 6, 1999 --------------------- 11 EX-27 2 EX-27
5 1,000 3-MOS DEC-31-1999 MAR-31-1999 3,970 0 28,316 375 0 22,054 42,267 2,813 72,136 5,004 9,077 0 0 35,341 13,030 72,136 9,027 10,714 6,291 8,207 486 100 341 2,021 795 1,226 0 0 0 1,226 .18 .18
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