-----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, UMe9lNaIo8eHAMkk9Bex74i4qFrtvP0DZT6BRrQHV+k+4/mtEcVrgNMFUhG1ajoR yzh1OTxu+cGDDR55xYom0Q== 0000950153-99-001043.txt : 19990813 0000950153-99-001043.hdr.sgml : 19990813 ACCESSION NUMBER: 0000950153-99-001043 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 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: 99685626 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 June 30, 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 August 3, 1999
2 New Mexico and Arizona Land Company and Subsidiaries FORM 10-Q CONSOLIDATED BALANCE SHEETS
UNAUDITED JUNE 30, December 31, (in thousands, except share data) 1999 1998 - ------------------------------------------------------------------------------------------- Assets Properties, net $50,246 $43,340 Commercial real estate loans, net 21,349 20,695 Receivables 5,627 4,898 Investments in joint ventures 11 11 Cash and cash equivalents 3,305 4,669 Other 828 772 - ------------------------------------------------------------------------------------------- Total assets $81,366 $74,385 - ------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Notes payable and lines of credit $18,391 $14,264 Accounts payable and accrued liabilities 1,281 1,407 Deferred revenue 6,419 5,520 Deferred income taxes 4,652 4,160 - ------------------------------------------------------------------------------------------- Total liabilities 30,743 25,351 - ------------------------------------------------------------------------------------------- Non-controlling interests 1,489 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 13,793 11,804 - ------------------------------------------------------------------------------------------- Total shareholders' equity 49,134 47,145 - ------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $81,366 $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 June 30, Six months ended June 30, 1999 1998 1999 1998 (in thousands, except per share data) - ---------------------------------------------------------------------------------------------------------------- Revenue: Property sales $ 3,599 $ 3,884 $ 12,626 $ 8,051 Property rentals 451 745 949 1,485 Commercial real estate lending 995 991 1,954 1,618 Investment income 188 79 318 158 Other 80 94 180 168 - ---------------------------------------------------------------------------------------------------------------- 5,313 5,793 16,027 11,480 - ---------------------------------------------------------------------------------------------------------------- Expenses: Cost of property sales 2,100 2,570 8,391 5,948 Property rentals 329 251 538 489 General and administrative 1,050 818 2,288 1,489 Interest 334 311 675 579 Depreciation, depletion and amortization 185 152 313 316 - ---------------------------------------------------------------------------------------------------------------- 3,998 4,102 12,205 8,821 - ---------------------------------------------------------------------------------------------------------------- Income Before Joint Ventures, Non-controlling Interests and Income Taxes 1,315 1,691 3,822 2,659 Gain from joint ventures -- 447 -- 452 Non-controlling interests (44) (146) (530) (256) - ---------------------------------------------------------------------------------------------------------------- Income Before Income Taxes 1,271 1,992 3,292 2,855 Income taxes 508 781 1,303 1,127 - ---------------------------------------------------------------------------------------------------------------- Net Income $ 763 $ 1,211 $ 1,989 $ 1,728 ================================================================================================================ Net income per Share of Common Stock Basic $ 0.11 $ 0.17 $ 0.29 $ 0.24 Diluted $ 0.11 $ 0.17 $ 0.29 $ 0.24 ================================================================================================================ Weighted Average Number of Common Shares Basic 6,926 6,926 6,926 6,926 Diluted 6,926 6,934 6,926 6,934 ================================================================================================================
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) Six Months Ended June 30,
(in thousands) 1999 1998 - --------------------------------------------------------------------------------------------------- CASH FLOWS PROVIDED BY/(USED IN) OPERATING ACTIVITIES: Net income $ 1,989 $ 1,728 Non-cash items included above: Depreciation, depletion and amortization 313 316 Deferred revenue 426 896 Deferred income taxes 492 (1,200) Allowance for bad debts 100 -- Equity in earnings of joint ventures -- (452) Non-controlling interests 530 256 Net change in: Receivables (729) (4,072) Properties under development 2137 589 Other properties (685) 2,742 Other assets (56) (373) Accounts payable and accrued liabilities (126) 1,068 - --------------------------------------------------------------------------------------------------- Net cash flows provided by/(used in) operating activities 4,391 1,498 - --------------------------------------------------------------------------------------------------- CASH FLOWS PROVIDED BY/(USED IN) INVESTING ACTIVITIES: Additions to properties (8,670) (1,322) Distributions from joint ventures -- 852 Collections of principal on commercial real estate loans 5,663 3,476 Additions to commercial real estate loans (5,944) (11,838) - --------------------------------------------------------------------------------------------------- Net cash flows provided by/(used in) investing activities (8,951) (8,832) - --------------------------------------------------------------------------------------------------- CASH FLOWS PROVIDED BY/(USED IN) FINANCING ACTIVITIES: Proceeds from debt 13,226 6,083 Payments of debt (9,100) (1,954) Distributions to non-controlling partners (930) (200) - --------------------------------------------------------------------------------------------------- Net cash flows provided by/(used in) financing activities 3,196 3,929 - --------------------------------------------------------------------------------------------------- Net (decrease) in cash and cash equivalents (1,364) (3,405) - --------------------------------------------------------------------------------------------------- Cash and cash equivalents at beginning of period 4,669 6,016 - --------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 3,305 $ 2,611 ===================================================================================================
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 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 1998 annual report on Form 10-K. 2. The results of operations for the three months and six months ended June 30, 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 for the period. For the six months ended June 30, the weighted average number of shares outstanding were 6,926,000 for basic and diluted in 1999 and 6,926,000 (basic) and 6,934,000 (diluted) in 1998. For the three months ended June 30, the weighted average number of shares outstanding were 6,926,000 for basic and diluted in 1999 and 6,926,000 (basic) and 6,934,000 (diluted) in 1998. 6. During the six months ended June 30, 1999 the Company sold properties in exchange for cash and approximately $3,069,000 in notes receivable. In accordance with the relevant accounting literature approximately $2,054,000 of the profit on these sales has been deferred until such time as the Company receives sufficient additional cash payments from the purchaser. 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 after allocations and identifiable assets. Income after allocations is income before joint 5 6 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. Information for the Company's reportable segments reconciles to the Company's consolidated totals as follows: REVENUES (UNAUDITED):
Three Months Ended June 30, Six months ended June 30, (in thousands) 1999 1998 1999 1998 ------------------------------------------------------------------------------------------------------------- Real Estate $4,203 $4,765 $13,921 $9,792 Short-term Commercial Real Estate Lending 1,083 997 2,048 1,626 Other 27 31 58 62 ------------------------------------------------------------------------------------------------------------- Consolidated total $5,313 $5,793 $16,027 $11,480 =============================================================================================================
INCOME AFTER ALLOCATIONS (UNAUDITED): Three Months Ended June 30, Six months ended June 30, (in thousands) 1999 1998 1999 1998 ------------------------------------------------------------------------------------------------------------- Real Estate $802 $988 $2,800 $1,546 Short-term Commercial Real Estate Lending 488 673 967 1,053 Other 25 30 55 60 ------------------------------------------------------------------------------------------------------------- Income before joint ventures, non-controlling Interests and income taxes $1,315 $1,691 $3,822 $2,659 =============================================================================================================
IDENTIFIABLE ASSETS:
UNAUDITED JUNE 30, December 31, (in thousands) 1999 1998 ---------------------------------------------------------------------------------------------- Real Estate $51,186 $48,134 Short-term Commercial Real Estate Lending 29,338 25,428 Other 842 823 ---------------------------------------------------------------------------------------------- Consolidated total $81,366 $74,385 ==============================================================================================
6 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS For the six months ended June 30, 1999, net income was $1,989,000 ($0.29 per share) compared to $1,728,000 ($0.24 per share) for the same period in 1998. Pre-tax earnings from property sales were up by approximately $2,132,000 for the six-month period ended June 30, 1999 as compared to the same period in 1998. The increase is primarily due to the sale of one apartment complex 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, the sale of the remainder of the Colorado property, and recognition of deferred profit from property in Scottsdale, Arizona the Company sold in 1998. The deferred profit on the 1998 sale was recognized in the second quarter 1999 because the purchaser paid in full the balance on a note receivable the Company had carried back when the property was sold. These sales are compared to four bulk land sales in 1998, for which profit recognition was lower due to lower aggregate sales prices and profit margins than in 1999. The timing of profit recognition on real estate sales is contingent on several factors and profit may not all be recognizable in the period property is sold. Consequently, the profit on property sales made by the Company in a period may be recognized in that period or later periods. Pre-tax earnings from property sales were slightly higher for the three-month period ended June 30, 1999 as compared to the same period in 1998. The Company experienced a 59% decline in pre-tax earnings from property rentals for the six-month period ended June 30, 1999 as compared to the same period in 1998 and a 75% decline in pre-tax earnings for the three-month period ended June 30, 1999 as compared to the same period in 1998. Both declines are primarily attributable to the sale of three of the four Federally-subsidized apartment complexes in New Mexico (one was sold in late 1998, two were sold in the first quarter of 1999 and the fourth is expected to be sold in the third quarter of 1999). The Company expects to replace the apartments with industrial warehouse buildings in Arizona in connection with tax-deferred exchanges under Section 1031 of the Internal Revenue Code. The Company acquired two such replacement properties in the second quarter of 1999. One property is a 113,100 square foot industrial warehouse building located in Gilbert, Arizona and the other property is a 76,800 square foot industrial warehouse building located in Phoenix, Arizona. The Company expects to close on the third replacement property in the third quarter of 1999. As the Company acquires replacement properties for the apartments, earnings from property rentals are expected to increase. The replacement properties have been acquired with a combination of cash contained in the 1031 exchange escrows and debt. The increase in general and administrative expense of $799,000 for the six months ended June 30, 1999 as compared to same period in 1998 is due primarily to increases in four items. Approximately 39% of the increase is due to increased legal expense, primarily attributable to the Sedona litigation. Approximately 11% of the increase is due to the use of two consultants in the period ended June 30, 1999 that were only used in the second 7 8 quarter in 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 diminishes beginning in the mid-second quarter of 1999. Approximately 25% 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 12% of the increase is due to the increase, in the first quarter, of the allowance for bad debts. The increase in general and administrative expense of $232,000 for the three months ended June 30, 1999 as compared to the same period in 1998 is due primarily to increases in two items. Approximately 38% of the increase is due to increased legal expense, primarily attributable to the Sedona litigation. Approximately 49% 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. The managed loan portfolio of Bridge Financial Corporation stood at $58.2 million as of June 30, 1999, of which $36.2 million was participated with other lenders and $21.3 million (net of an allowance for bad debts of $.4 million and undisbursed loan proceeds of $.3 million) was recorded in the Company's financial statements. As of July 31, 1999 the managed portfolio was $57.3 million, of which $34.7 million was participated and $21.9 million (net of an allowance for bad debts of $.4 million and undisbursed loan proceeds of $.3 million) was recorded in the Company's financial statements. 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 financial statements, and compares to a June 30, 1998 managed portfolio of $65.5 million of which $41.5 million was participated and $23.4 million (net of an allowance for bad debts of $.3 million and undisbursed loan proceeds of $.3 million) was recorded in the Company's financial statements. The Company 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 with two separate purchasers. The Company previously reported that the Mesa property was for sale. That property is now in escrow. 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 8 9 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 during 1999. 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 proceeded far enough to say that a loan agreement, if one is entered into, will be a secured revolving facility in the approximate amount of $20,000,000. As of June 30, 1999 the Company had 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 expired July 2, 1999. The bank has renewed this loan to July 3, 2000 at the same interest rate and has increased the maximum amount available to $15,000,000. At June 30, 1999 there was an outstanding balance of $4,545,000. As of July 31, 1999 the line had an outstanding balance of $4,645,000. 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 June 30, 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. At June 30, 1999 and July 31, 1999 the loan had an outstanding balance of $1,895,000. The Company expects to replace this loan with longer-term financing prior to its maturity. In July 1999, one of the Albuquerque joint ventures, in which the Company owns a 75% interest, entered into a loan agreement with a commercial bank to finance lot development. The loan bears interest at the prime rate plus 1/4% and expires March 1, 2000. At July 31, 1999 there was no outstanding balance. 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 9 10 line will be secured by certain loan assets of the Company. At June 30, 1999 and July 31, 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 June 30, 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 inventory item in Phase I, and the action necessary to bring the identified items in compliance. The Company has completed approximately 100% of Phase II. 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 complete 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 40% 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 June 30, 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' 10 11 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 to 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. 11 12 PART II - OTHER INFORMATION There were no proceedings, changes, occurrences or other matters occurring during the six month period ended June 30, 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: August 6, 1999 -------------------- 12 EX-27.1 2 EX-27.1
5 1,000 6-MOS DEC-31-1999 JUN-30-1999 3,305 0 27,351 375 0 20,983 53,198 2,941 81,366 8,584 18,391 0 0 35,341 13,793 81,366 12,626 16,027 8,391 12,205 530 100 675 3,292 1,303 1,989 0 0 0 1,989 .29 .29
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