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
<TABLE>
<CAPTION>
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
------- ------- ------- ------- ------- -------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
======= ======= ======= ======= ======= ======== ========= =========== ===========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
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.
