Exhibit 13
September 1, 2000
Dear Shareholders:
Greetings!
Your Board of Directors is pleased to report that fiscal year 2000 was a
remarkable period for your Company. Revenues from our operations reached new
highs and we continued to make progress in implementing our development plans.
We are well into the infrastructure design stage for our Sector Plan, and the
initial projects for the area have started to take shape. Financing the
infrastructure is a key component to our future success. We are currently
working on a number of possibilities in this regard.
Our Cedar Ridge project is completely sold out, and we have started construction
on two new subdivisions. We have executed a letter of intent with Kaufman &
Broad Homes for one of the projects and expect to begin marketing the second
subdivision in the near future. A third residential project, Painted Sky, should
come into focus by the end of the year. Overall, while the Albuquerque market
for new housing has slowed some over the past twelve months, we continue to see
a good demand for our area.
Over the past 10 years, we have made the Company's cemeteries a priority. Many
new improvements were introduced in fiscal year 2000, and we continue to work to
beautify these areas. Like all of our projects, we want you to feel proud of the
cemeteries.
The business of real estate and land development faces a lot of adversity from
individuals and organizations opposed to Albuquerque's growth. We are committed
meet the needs for employment, housing, education, and recreation by building
new communities on the west side. Our goal is to develop the land in a
responsible manner and to be mindful of water conservation and air quality and
the many issues that face a growing economy. We are proud of our successful ten
years and more excited about the Company's future.
I look forward to seeing you at our Annual Shareholder Meeting. Please feel free
to call upon me anytime.
Sincerely,
Barbara Page
President and Chief Executive Officer
BUSINESS OF WESTLAND
Westland owns a large tract of land consisting of approximately 59,000 acres
(the "Land") located on the west side of the City of Albuquerque, New Mexico.
Most of the Land is held for long-term investment and is leased to others for
grazing purposes while the balance is held for development, sales and leasing
activities. Approximately 48,000 acres of this Land were originally part of the
Atrisco Land Grant, which was granted to a group of Spanish settlers in 1692.
Westland generates cash internally through its land operations (grazing leases,
real estate sales and commercial leases) and externally through long and
short-term borrowing. The profitability and resulting cash flows of Westland's
land operations depend on numerous factors, such as demand for grazing leases,
land leases, supply of competitively priced, developed or undeveloped,
properties for residential, industrial or commercial uses. Over the long term,
Westland expects that residential and industrial growth on Albuquerque's west
side will continue to increase the demand for Westland's land, thus continuing
Westland's ability to generate revenue from land development and sales. In the
short term, however, periodic local and national economic conditions may
decrease the number of land sales and hinder development, such as during the
period from 1986 through 1992. Westland is now starting on its next major
undertaking as development on its new sector plan comes into existence. This
development start culminates a decade of hard and diligent work by Westland's
Directors and employees.
Westland's basic business philosophy continues to be to hold certain areas of
the land in trust for shareholders and to enhance the value of other areas of
the Land through careful planning and development to assure perpetual benefit to
the Company and its shareholders.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION OPERATIONS
In the past fiscal year, land sales were greater than the prior year as the
Company experienced about the same sales of improved residential lots as last
year and greater large parcel sales. During fiscal 1999 there were $2,605,000 of
sales of lands to the National Park Service ("NPS") as part of its acquisition
of the lands included in the Petroglyph National Monument. This was the final
acquisition of land to be purchased from the Company by NPS. Such sales amounted
to approximately 54% of the Company's sales revenue for 1999.
During fiscal 2000, Albuquerque continued a slower but still significant pattern
of growth that has benefited Westland for the past eight years. Albuquerque
continues to be one of the fastest growing cities in the Southwest and, because
of certain geographical and other limitations on its growth, Westland's lands
lie directly in the path of future predictable growth patterns. Sales of
improved residential lots in fiscal 2000 were approximately $1,148,000, compared
to sales of approximately $1,221,000 in fiscal 1999.
Westland's future revenues will continue to be largely dependent upon the sale
of land. The Company's assets are illiquid, comprising principally undeveloped
land. Sales are dependent upon the market conditions in Albuquerque, New Mexico.
Westland anticipates making capital commitments for land development projects
over the next few years as the economy and opportunities dictate that such
expenditures would be warranted. Capital commitments may include special
assessment districts for roads and water and sewer lines on its land. In some
cases infrastructure improvements are paid for by assessments, which increase
the value of Westland's land and make further development possible. Westland
intends to incur capital expenditures when management determines such
investments will increase the value of the land and generate future revenue.
Land is Westland's principal capital resource, and is valued, for financial
accounting purposes, at its 1907 value plus the cost of improvements. Westland's
balance sheet does not reflect the actual current value of this asset. The
Company has no current appraisals of the land and, therefore, the actual value
of the land is not known. The carrying value of the land was increased during
the fiscal year ended June 30, 2000, primarily reflecting increased investment.
The carrying value will be increased or decreased regularly as Westland
acquires, sells or develops parcels of land. Management believes the June 30,
2000 carrying value of the land is substantially less than its current market
value. Westland's balance sheet also segregates income-producing properties
which consist of commercial real estate and improvements. The actual value of
Westland's land varies depending on national and local market conditions and the
amount and proximity of roads, utilities and other amenities to the land under
development. As Albuquerque continues to grow, the land value of both developed
and undeveloped land should increase.
As reported last year, after some delay, Westland received approval of its
Master Plan by both the City of Albuquerque and Bernalillo County. The Master
Planned land includes the area north of Interstate 40 and south of the area
designated for the Petroglyph National Monument between Unser Boulevard and
Paseo del Volcan Road. The Master Plan area encompasses approximately 6,400
acres, but does not include any land located within the Monument and will have
no adverse impact on the Monument. During the fiscal year the City of
Albuquerque annexed the initial 1,600 acres of the master planned area, which
will permit sewer and water services to be extended in an orderly manner to that
number of acres as they are developed. Westland has agreed with the City that it
will pay the cost of the infrastructure normally paid for by the city for new
development in the master planned area and will recover those costs through a
fee charged by the city as each lot is connected to the services. Management
still anticipates that development and sale of the initial parcels of land
within the Master Planned area will occur in the year 2000, however,
unforeseeable delays in getting utilities to the lands may cause this period to
be extended beyond that anticipated date.
Westland is currently preparing marketing information and considering financial
options and the optimum timing for initiating development, marketing, and sales
of land in the Sector Plan area. The Company and Mesa Golf of Dallas, Texas,
recently obtained approval for a 27 hole golf course community located on 500
acres adjoining the Petroglyph National Monument within the Sector Plan area
from the City of Albuquerque's Environmental Planning Commission. Unfortunately
the City's approval was appealed by Mr. Jaime Chavez "on behalf of concerned
Atrisco Land Grant heirs" in the name of Water Information Network. The appeal
may delay the golf course project, and possibly the Sector Plan area's
development, increase expenses for the Company, and damage the Company's
reputation.
Management remains committed to begin the construction of residential,
industrial and commercial developments for lease or sale. Westland's long term
business philosophy is to enhance the value of Westland's land through careful
planning and development, while retaining ownership of a major portion of the
land in perpetuity and simultaneously increasing the value of Westland's stock
and to provide dividends for its shareholders, when consistent with Westland's
need for a sufficient cash flow to meet current operating expenses.
Financial Condition:
During fiscal 2000, total assets increased to $20,237,662 from $19,900,219,
while liabilities decreased from $13,208,119 to $12,060,545. During fiscal 2000
Westland invested $2,183,749 in income producing and other assets and repaid
notes and mortgages of $1,161,221. Including these uses of cash and payment of
cash dividends of $802,708, cash equivalents and short-term investments
increased by $114,273, as operations provided $2,407,033.
In fiscal 2000, the Company maintained lines of credit with local banks
aggregating approximately $3,600,000, collateralized by certain real property.
The purpose of these lines is to provide funds necessary for its continued
expansion. At June 30, 2000, the lines had no outstanding balances During fiscal
2001, the Company will be obligated to pay income tax of approximately
$1,200,000 should replacement properties totaling $2,986,000 for lands sold to
the National Park Service not be acquired. Management diligently seeks income
producing properties for acquisition as replacement properties and fully expects
to off-set this tax obligation. Management believes that the uncommitted balance
of cash, cash equivalents, investments and its borrowing capacity are sufficient
to meet all of the Company's obligations during 2001 without considering
additional revenues that may be generated during that period.
Results of Operations:
In fiscal 2000, land revenues increased by $1,726,720 from $4,785,199 in 1999 to
$6,511,919. The related cost of land revenues increased to $1,253,870, or
$415,838 from $838,032 in fiscal 1999. Rental revenue increased from $702,065 to
$843,105 and the related costs increased from $173,800 to $258,572. These
increases are expected to continue as the Company expands its activities in
these areas. In 1999, other income and expense included gain on disposition and
cost of land donated to charity.
MARKET PRICE OF AND DIVIDENDS ON WESTLAND'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Because ownership of Westland's stock is restricted in the manner discussed
below, no established public trading market exists for Westland's outstanding
shares and, to the best of Westland's knowledge, no dealer has made, is making,
or is attempting to create such a market from which to determine an aggregate
market value of any of Westland's stock. In 1989, Westland entered into an
arrangement with an independent stockbroker to broker transactions in Westland's
stock between shareholders. The broker has informed Westland that the price at
which Westland's common stock had been bought and sold by Westland's
shareholders during the ninety (90) days preceding this date of this report has
been $22 per share.
Since 1982, the outstanding shares have been subject to restrictions imposed by
a majority of Westland's shareholders who amended Westland's Articles of
Incorporation. Those Articles prohibit (with certain limited exceptions)
transfer of Westland stock to persons other than lineal descendants of the
original incorporators of the Town of Atrisco (a New Mexico Community Land Grant
Corporation).
The following table sets forth the approximate number of holders of record of
each class of Westland's common stock as of September 1, 2000:
Number of
Title of Class Record Holders
---------------------- --------------
No Par Value Common 5622
$1.00 Par Value Common Class A 0
$1.00 Par Value Common Class B 22
Dividends: During each of the last two (2) fiscal years ended June 30, 1999 and
June 30, 2000, Westland paid cash dividends to shareholders, aggregating a total
during those two years of $1,605,416. Subsequent to June 30, 2000, the Company
has paid an additional cash dividend of $1.25 per share for an aggregate
dividend payment to the shareholders of $1,001,471.
ON WRITTEN REQUEST, THE COMPANY WILL PROVIDE, WITHOUT CHARGE, A COPY OF ITS
ANNUAL REPORT ON FORMS 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30, 2000, FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING THE FINANCIAL STATEMENTS
AND THE SCHEDULES THERETO) TO ANY RECORD HOLDER OR BENEFICIAL OWNER OF THE
COMPANY'S SHARES AS OF THE CLOSE OF BUSINESS ON SEPTEMBER 1, 2000. ANY EXHIBIT
WILL BE PROVIDED ON REQUEST UPON PAYMENT OF THE REASONABLE EXPENSES OF
FURNISHING THE EXHIBIT. ANY SUCH WRITTEN REQUEST SHOULD BE ADDRESSED TO DAVID C.
ARMIJO, SECRETARY, WESTLAND DEVELOPMENT CO., INC., and 401 COORS BOULEVARD,
N.W., ALBUQUERQUE, NEW MEXICO 87121.
<PAGE>
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, 2000, and the related statements of earnings, stockholders'
equity, and cash flows for each of the two years in the period ended June 30,
2000. 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, 2000, and the results of its operations and its cash flows for
each of the two years in the period ended June 30, 2000 in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
August 11, 2000
<PAGE>
Westland Development Co., Inc.
BALANCE SHEET
June 30, 2000
ASSETS
Cash and cash equivalents .......................... $ 3,882,560
Short-term investments ............................. 109,914
Receivables
Real estate contracts (note B) ................... $ 66,857
Note receivable - related party (note M) ......... 103,075
Other receivables ................................ 93,596 263,528
-----------
Land and improvements held for future
development (notes C and E) ...................... 6,971,322
Income-producing properties, net (notes D and E) ... 8,202,679
Property and equipment, net of accumulated
depreciation of $527,642 (note E) ................ 388,574
Investments in partnerships and joint ventures ..... 234,709
Income taxes receivable ............................ 22,585
Other assets ....................................... 161,791
-----------
$20,237,662
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable, accrued expenses, and
other liabilities ................................ $ 476,066
Deferred income taxes (note F) ..................... 5,369,049
Notes, mortgages, and assessments payable (note E) . 6,215,430
-----------
Total liabilities 12,060,545
Commitments and contingencies (notes E and L) ...... --
Stockholders' equity (note G)
Common stock - no par value; authorized
736,668 shares; issued and outstanding,
715,293 shares ................................. $ 8,500
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 .............................. 7,500,990 8,177,117
----------- -----------
$20,237,662
===========
The accompanying notes are an integral part of this statement.
<PAGE>
Westland Development Co., Inc.
STATEMENTS OF EARNINGS
Year ended June 30,
2000 1999
----------- -----------
Revenues
Land ......................................... $ 6,511,919 $ 4,785,199
Deferred profit recognized on
installment sales .......................... -- 30,306
Rentals ...................................... 843,105 702,065
----------- -----------
7,355,024 5,517,570
Costs and expenses
Cost of land revenues ........................ 1,253,870 838,032
Cost of rentals .............................. 258,572 173,800
Other general, administrative,
and operating .............................. 1,802,016 1,991,667
----------- -----------
3,314,458 3,003,499
----------- -----------
Operating income ................. 4,040,566 2,514,071
Other (income) expense
Interest income .............................. (234,872) (136,611)
Gain on sale or disposition of
property and equipment (note O) ............ (280) (747,560)
Other, net (note O) .......................... (16,223) 789,158
Interest expense ............................. 605,277 540,516
----------- -----------
353,902 445,503
----------- -----------
Earnings before income taxes ..... 3,686,664 2,068,568
Income tax expense (note F) .................... 1,354,464 780,000
----------- -----------
NET EARNINGS ..................... $ 2,332,200 $ 1,288,568
=========== ===========
Weighted average common shares outstanding ..... 802,626 807,775
=========== ===========
Earnings per common share ...................... $ 2.91 $ 1.60
=========== ===========
The accompanying notes are an integral part of these statements.
<PAGE>
Westland Development Co., Inc.
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended June 30, 2000 and 1999
<TABLE>
<CAPTION>
Class B
Common stock Common stock
no par value $1 par value Additional
-------------------------- ------------------------- paid-in Retained
Shares Amount Shares Amount capital earnings Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at July 1, 1998 ...... 716,608 $ 8,500 86,100 $ 86,100 $ 581,527 $ 5,530,113 $ 6,206,240
Net earnings .................. -- -- -- -- -- 1,288,568 1,288,568
Cash dividends paid -
$1 per share ................ -- -- -- -- -- (802,708) (802,708)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances at June 30, 1999 ..... 716,608 8,500 86,100 86,100 581,527 6,015,973 6,692,100
Net earnings .................. -- -- -- -- -- 2,332,200 2,332,200
Cash dividends paid -
$1 per share ................ -- -- -- -- -- (802,708) (802,708)
Purchase/retirement of
common stock ................ (1,315) -- -- -- -- (44,475) (44,475)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances at June 30, 2000 ..... 715,293 $ 8,500 86,100 $ 86,100 $ 581,527 $ 7,500,990 $ 8,177,117
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Westland Development Co., Inc.
STATEMENTS OF CASH FLOWS
Year ended June 30,
<TABLE>
<CAPTION>
2000 1999
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents
<S> <C> <C>
Cash flows from operating activities
Cash received from land sales and collections on real estate
contracts receivable ...................................................... $ 6,415,088 $ 4,822,132
Development and closing costs paid ........................................... (1,179,963) (1,277,974)
Cash received from rental operations ......................................... 915,206 680,780
Cash paid for rental operations .............................................. (70,535) (5,321)
Cash paid for property taxes ................................................. (135,736) (78,409)
Interest received ............................................................ 234,872 136,735
Interest paid ................................................................ (604,029) (538,845)
Income taxes paid, net ....................................................... (1,315,000) (171,162)
Other general and administrative costs paid .................................. (1,871,536) (1,983,301)
Other ........................................................................ 18,666 106,804
----------- -----------
Net cash provided by operating activities ...................... 2,407,033 1,691,439
Cash flows from investing activities
Capital expenditures ......................................................... (238,281) (1,404,295)
Investments in partnerships and joint ventures ............................... (2,808) (1,993)
Change in short-term investments ............................................. 2,468,105 (2,578,019)
Change in note receivable - related party .................................... (43,267) 5,793
----------- -----------
Net cash provided by (used in) investing activities ............ 2,183,749 (3,978,514)
Cash flows from financing activities
Borrowings on notes, mortgages, and assessments payable ...................... 990,698 2,498,309
Repayments of notes, mortgages, and assessments payable ...................... (2,151,919) (1,318,237)
Payment of dividends ......................................................... (802,708) (802,708)
Purchase of common stock ..................................................... (44,475) --
----------- -----------
Net cash provided by (used in) financing activities ............ (2,008,404) 377,364
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ........... 2,582,378 (1,909,711)
Cash and cash equivalents at beginning of year ................................... 1,300,182 3,209,893
----------- -----------
Cash and cash equivalents at end of year ......................................... $ 3,882,560 $ 1,300,182
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
Westland Development Co., Inc.
STATEMENTS OF CASH FLOWS - CONTINUED
Year ended June 30,
<TABLE>
<CAPTION>
2000 1999
----------- -----------
Reconciliation of Net Earnings to Net Cash Provided by Operating Activities
<S> <C> <C>
Net earnings ..................................................................... $ 2,332,200 $ 1,288,568
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation .............................................................. 259,253 227,955
(Gain) loss on sale of property and equipment ............................. (280) 2,440
Profit recognized on installment sales .................................... -- (30,306)
Deferred income taxes ..................................................... 57,049 785,000
Proceeds from sale of property and equipment .............................. 280 --
Change in
Income taxes recoverable/payable ...................................... (17,585) (177,273)
Other receivables ..................................................... (54,265) 4,749
Land and improvements held for future development ..................... (73,907) (439,942)
Other assets .......................................................... (9,744) (69,702)
Accounts payable, accrued expenses, and other liabilities ............. (44,649) 62,796
Accrued interest payable .............................................. 1,247 1,671
Real estate contracts receivable ...................................... (42,566) 35,483
----------- -----------
Net cash provided by operating activities ...................... $ 2,407,033 $ 1,691,439
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000 and 1999
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 real estate 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, 2000 and 1999
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.
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.
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2000 and 1999
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED
4. Investments
-----------
Short-term investments include certificates of deposit carried at cost,
which approximates fair value. Such investments generally have maturities of
more than three months and less than one year.
Investments in partnerships and joint ventures owned 20% to 50% are
accounted for by the equity method. Accordingly, the financial statements
include the Company's share of the investees' net earnings.
5. 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.
6. 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.
7. 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.
8. 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.
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2000 and 1999
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED
9. 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.
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.
12. Reclassifications
-----------------
Certain reclassifications have been made to the 1999 financial statements to
conform to the 2000 presentation.
NOTE B - REAL ESTATE CONTRACTS RECEIVABLE
Real estate contracts receivable at June 30, 2000 consist of two contracts,
due in monthly installments with an interest rate of 9% and 9.5%, and are
collateralized by land.
Principal collections due on real estate contracts receivable for the years
ending June 30 are as follows:
2001 $ 8,273
2002 9,076
2003 13,900
2004 4,508
2005 4,930
Thereafter 26,170
--------
$ 66,857
========
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2000 and 1999
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, 2000:
Land $1,058,512
Improvements 5,912,810
----------
$6,971,322
==========
NOTE D - INCOME-PRODUCING PROPERTIES
Income-producing properties consist primarily of four single-tenant retail
store buildings and a portion of the Company's office building and are
summarized as follows at June 30, 2000:
Buildings and equipment $5,765,755
Less accumulated depreciation 879,791
----------
4,885,964
Land 3,316,715
----------
$8,202,679
==========
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, 2000 are as follows:
Year ending June 30
2001 $ 891,019
2002 861,458
2003 865,280
2004 868,263
2005 808,983
Thereafter 6,611,177
-----------
$10,906,180
===========
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2000 and 1999
NOTE E - NOTES, MORTGAGES, AND ASSESSMENTS PAYABLE
Notes, mortgages, and assessments payable are summarized as follows at June
30, 2000:
Promissory note, due in monthly installments of
$17,970 through May 2015, including interest at
9.37%; collateralized by income-producing
properties $ 1,729,442
Promissory note, due in monthly installments of
$9,079 through July 2014, including interest at
8%; collateralized by income-producing
properties 915,820
Note payable, due in monthly installments of
$6,893 through September 2015, including
interest at 8.75%; collateralized by
income-producing properties 693,358
Mortgage note, due in monthly installments of
$24,682, including interest at 8.52%, due
November 1, 2016; collateralized by
income-producing properties 2,613,731
Mortgage note, due in monthly installments of
$3,000 through October 2002, including interest
at 9%; collateralized by specific tracts of
land 81,232
Note payable, due in monthly installments of
$5,093 through February 2002, including
interest at 9%; collateralized by specific
tracts of land 90,656
Balloon note, interest due quarterly in arrears
at 9%, principal due March 2003; collateralized
by specific tracts of land 83,048
Other 8,143
-----------
$ 6,215,430
===========
The Company's revolving line of credit with a bank provides for borrowings
up to $2,000,000 at the bank's prime rate of interest collateralized by real
estate, which matures September 2000. At June 30, 2000, there was no
outstanding balance on this line of credit.
The Company's line of credit with a bank provides for borrowings up to
approximately $1,600,000 at the bank's prime rate of interest collateralized
by real estate, which matures May 2001. At June 30, 2000, there was no
outstanding balance on this line of credit.
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2000 and 1999
NOTE E - NOTES, MORTGAGES, AND ASSESSMENTS PAYABLE - CONTINUED
Aggregate required principal payments on the notes, mortgages, and
assessments payable as of June 30, 2000 are as follows:
Year ending June 30
2001 $ 283,465
2002 280,064
2003 330,425
2004 249,472
2005 272,070
Thereafter 4,799,934
-----------
$ 6,215,430
===========
NOTE F - INCOME TAXES
An analysis of the deferred income tax assets and liabilities as of June 30,
2000 is as follows:
Deferred tax assets
Contribution carryforwards $ 238,252
Property, equipment, and land 434,652
Investments 24,608
Other 11,667
Valuation allowance (121,216)
-----------
587,963
===========
Deferred tax liabilities
Deferred tax gain on involuntary
conversion of land 5,957,012
-----------
Net deferred tax liability $ 5,369,049
===========
Income tax expense (benefit) consists of the following:
Year ended June 30,
---------------------------
2000 1999
---------- ----------
Current
Federal $1,015,805 $ (5,000)
State 281,610 --
---------- ----------
1,297,415 (5,000)
Deferred
Federal 44,497 667,000
State 12,552 118,000
---------- ----------
57,049 785,000
---------- ----------
$1,354,464 $780,000
========== ==========
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2000 and 1999
NOTE F - INCOME TAXES - CONTINUED
The income tax provision is reconciled to the tax computed at statutory
rates as follows:
Year ended June 30,
----------------------------
2000 1999
---------- ----------
Tax expense at statutory rates $1,253,466 $ 703,000
State income taxes at statutory rates 280,186 104,000
Change in valuation allowance (194,784) 227,000
Change in effective state tax rate -- (159,000)
Nontaxable gain -- (255,000)
Nondeductible expenses 19,926 27,000
Expiration of contribution carryforwards -- 73,000
Other (4,330) 60,000
---------- ----------
Total expense $1,354,464 $ 780,000
========== ==========
A valuation allowance of approximately $121,216 has been recognized at June
30, 2000 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 original Articles of Incorporation (the "Articles"), the Company
was authorized to issue 1,964,448 shares of common stock. During 1999, the
Articles were amended to eliminate the authority to issue 736,668 shares of
Class A common stock for $1.45 a share. The remaining authorized stock is 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) 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. The
holders of no par value common stock have no preemptive rights to
purchase Class B stock.
At June 30, 2000, the 5,047 shares of no par value common stock, upon
judicial determination, can be distributed to stockholders of record as of
the date of incorporation.
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2000 and 1999
NOTE G - COMMON STOCK - CONTINUED
There is no established market value for the Company's common stock. At June
30, 2000, 715,293 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.
During the year ended June 30, 1999, the Board of Directors approved
protection against takeover measures whereby a threat of change of three or
more directors in any one year would result in directors threatened with
replacement being granted an immediate Class B stock bonus of 5,000 shares
if in office as a director ten years or more, and 2,500 shares of Class B
stock if in office as a director for less than ten years. The maximum number
of shares which could be issued under this agreement at June 30, 2000 is
40,000 shares.
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 four single-tenant retail
store buildings and a portion of the Company's office
building.
Financial information for each industry segment is summarized as follows:
<TABLE>
<CAPTION>
2000 1999
-------------------------------------------------- ----------------------------------------------------
General General
Land Rentals corporate Total Land Rentals corporate Total
---------- ---------- ----------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues .............. $6,511,919 $ 843,105 $ -- $ 7,355,024 $4,815,505 $ 702,065 $ -- $ 5,517,570
Operating income (loss) 4,658,425 508,774 (1,126,633) 4,040,566 3,341,526 445,421 (1,272,876) 2,514,071
Interest income ....... -- -- 234,872 234,872 -- -- 136,611 136,611
Interest expense ...... (20,106) (536,240) (48,931) (605,277) (57,331) (464,335) (18,850) (540,516)
Income tax expense .... -- -- 1,354,464 1,354,464 -- -- (829,000) (829,000)
Identifiable assets ... 7,141,245 8,426,628 4,669,789 20,237,662 6,981,514 8,442,383 4,476,322 19,900,219
Capital expenditures .. -- 169,624 68,657 238,281 -- 1,330,931 73,364 1,404,295
Depreciation .......... -- 188,037 71,216 259,253 -- 168,479 59,476 227,955
Noncash gain on dispo-
sition of land ...... -- -- -- -- -- -- 750,000 750,000
</TABLE>
General corporate assets consist primarily of cash, furniture, equipment,
and a portion of an office building, of which the remaining portion is
included in rentals.
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2000 and 1999
NOTE I - BENEFIT PLANS
The Company has certain defined contribution employee retirement plans that
provide for employee and employer contributions. The Company's contribution
expense for these plans was $95,000 and $121,000 for 2000 and 1999,
respectively.
NOTE J - SALES TO MAJOR CUSTOMERS
Sales to major customers are summarized as follows:
During the year ended June 30, 2000, land sales to three customers
individually accounted for 12%, 29%, and 16% of total revenues.
During the year ended June 30, 1999, land 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 appropriated
by Congress each year. In 1999, approximately 362 acres were transferred to
the National Park Service for cash of $2,600,000. The Company has no
remaining land set aside for sale to the National Park Service at this time.
NOTE L - COMMITMENTS AND CONTINGENCIES
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.
The Company has entered into employment contracts with eight of its key
officers and employees for periods from one to five years which are
automatically renewed for one additional period. In the event of involuntary
employee termination employees may receive from one to six times annual
compensation. The remaining terms under the agreements range from one to
two-and-one-half years and the maximum salaries to be paid under the
remaining contract periods are approximately $670,000.
NOTE M - RELATED PARTY TRANSACTIONS
During the year ended June 30, 1999, the Company sold land to a member of
the Board of Directors. Under the sales agreement, the Board member paid
approximately $52,000 for three lots.
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 2000 and 1999 were $92,500 and
$50,000, respectively.
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2000 and 1999
NOTE M - RELATED PARTY TRANSACTIONS - CONTINUED
The note receivable - related party is from a joint venture partner, is
payable in monthly installments of $1,033 including interest at 8.5%, and is
collateralized by developed property. The note matures November 2014.
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
requirements 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. Short-Term Investments
The carrying amount approximates fair value due to the short maturities of
the investments.
3. Real Estate Contracts Receivable
These notes receivable are generally collateralized by real estate and
accrue interest at 9.5%. Because the ultimate collectibility of these notes
is not reasonably assured, it is not practicable to estimate fair value.
4. Note Receivable - Related Party
Note receivable - related party is valued at the present value of future
cash flows based on the cur-rent rates at which similar loans would be made
to borrowers with similar credit ratings.
5. Notes, Mortgages, and Assessments Payable
The discounted amount of future cash flows using the Company's current
incremental rate of bor-rowing for similar liabilities is used to estimate
fair value.
<PAGE>
Westland Development Co., Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 2000 and 1999
NOTE N - FINANCIAL INSTRUMENTS - CONTINUED
The carrying amounts and estimated fair values of the Company's financial
instruments at June 30, 2000 are as follows:
Carrying Estimated
amount fair value
---------- ----------
Financial assets
Cash and cash equivalents ................ $3,882,560 $3,882,560
Short-term investments ................... 109,914 109,914
Real estate contract receivable
(not practicable to estimate fair value) 66,857 --
Note receivable - related party .......... 103,075 103,075
Financial liabilities
Notes, mortgages, and assessments payable 6,215,430 5,803,155
NOTE O - CONTRIBUTION OF LAND
In keeping with the Company's long-standing commitment to the furtherance of
community projects which benefit the education and welfare of its less
fortunate citizens, during 1999 the Company donated approximately fifty
acres of land to a nonprofit organization to develop a residential and work
facility for seriously disabled/mentally ill persons. The contributed land
had a fair value of approximately $790,000 which was recorded as an other
expense and a pretax gain of approximately $750,000 was recorded on the
donation.
NOTE P - SUBSEQUENT EVENT
On July 20, 2000, the Company declared a dividend of $1.25 per share for
stockholders of record as of July 20, 2000. The dividend is payable on
August 4, 2000.
<PAGE>
DIRECTORS OF WESTLAND
SOSIMO S. PADILLA, Chairman of the Board of Directors and Director. Member of
the Executive Committee. Mr. Padilla is retired from the circulation department
of the Albuquerque Publishing Company and was owner/operator of Western
Securities Transportation Corporation for over thirty years.
BARBARA PAGE, President, Chief Executive Officer and Director. Secretary of the
Executive Committee. Ms. Page is employed by Westland Development Co., Inc. as
its President.
POLECARPIO (LEE) ANAYA, Executive Vice President, Assistant Secretary/Treasurer
and Director. Mr. Anaya is also Chairman of the Executive Committee. Mr. Anaya
was owner/operator of Lee's Conoco.
DAVID C. ARMIJO, Secretary/Treasurer and Director. Mr. Armijo is an insurance
broker and serves as President and Chairman of the Board of California's
All-Risk Insurance Agency, Inc. in Los Angeles, California.
CARMEL CHAVEZ, Director. Member of the Executive Committee and the Disclaimer
Committee and Vice Chairman of El Campo Santo, Inc. Mr. Chavez is a retired
employee of the Albuquerque Public Schools.
JOSIE G. CASTILLO, Director. Member of the Executive Committee, Chairman of El
Campo Santo, Inc. and member of the Disclaimer Committee. Ms. Castillo is
retired from the Human Services Department of the State of New Mexico.
CARLOS SAAVEDRA, Director. Alternate member of the Executive Committee,
Alternate Member of El Campo Santo, Inc. and Chairman of the Disclaimer
Committee. Dr. Saavedra is a former director of bilingual education for the
Colorado Department of Education and the Oakland Unified School District,
Oakland, California. Dr. Saavedra retired from education in 1985.
JOE S. CHAVEZ, Director. Member of the Disclaimer Committee. Mr. Chavez is
employed at Galles Chevrolet in Albuquerque, New Mexico.
CHARLES V. PENA, Director. Member of El Campo Santo, Inc., and the Disclaimer
Committee. Mr. Pena owns and operates CJ's New Mexican Food Restaurant.
