<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998.
[ ] 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 3,847,982
Class Outstanding at April 30, 1998
<PAGE> 2
New Mexico and Arizona Land Company and Subsidiaries FORM 10-Q
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended March 31,
<TABLE>
<CAPTION>
(in thousands, except per share data) 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Property sales $ 5,287 $ 1,973
Property rentals 740 778
Commercial real estate lending 627 253
Investment income 79 40
Other 74 80
- --------------------------------------------------------------------------------
6,807 3,124
- --------------------------------------------------------------------------------
Expenses:
Cost of property sales 3,378 1,110
Property rentals 238 304
Commercial real estate lending 116 --
General and administrative 555 400
Interest 268 254
Depreciation, depletion and amortization 164 119
- --------------------------------------------------------------------------------
4,719 2,187
Income Before Joint Ventures, Non-controlling
Interests and Income Taxes 2,088 937
Gain from joint ventures 5 16
Non-controlling interests (110) (143)
- --------------------------------------------------------------------------------
Income Before Income Taxes 1,983 810
Income taxes 793 326
- --------------------------------------------------------------------------------
Net Income $ 1,190 $ 484
================================================================================
Net Income per Share of Common Stock(1)(2)
BASIC $ 0.26 $ 0.12
DILUTED $ 0.26 $ 0.12
================================================================================
Weighted Average Number of Common Shares(1)(2)
BASIC 4,618 4,083
DILUTED 4,618 4,083
================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
(1) Prior year restated to include the effects of a 10% stock dividend paid
July 18, 1997 and a 20% stock dividend payable July 10, 1998.
(2) Current year includes the effect of a 20% stock dividend payable July 10,
1998.
2
<PAGE> 3
New Mexico and Arizona Land Company and Subsidiaries FORM 10-Q
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
MARCH 31, December 31,
(in thousands) 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Properties, net $45,912 $46,853
Commercial real estate loans, net 19,973 15,287
Receivables, net 2,810 93
Investments in joint ventures 401 411
Cash and cash equivalents 4,485 6,016
Other 884 851
- ---------------------------------------------------------------------------------------------
Total assets $74,465 $69,511
=============================================================================================
Liabilities and Shareholders' Equity
Notes payable and lines of credit $15,679 $12,503
Accounts payable and accrued liabilities 3,438 1,646
Deferred revenue 4,400 4,742
Deferred income taxes 4,435 5,361
- ---------------------------------------------------------------------------------------------
Total liabilities 27,952 24,252
- ---------------------------------------------------------------------------------------------
Non-controlling interests 1,857 1,793
- ---------------------------------------------------------------------------------------------
Shareholders' equity:
Preferred stock, no par value; 10,000,000 shares
authorized; none issued -- --
Common stock, no par value; 30,000,000 shares
authorized; 3,847,982 and 3,847,982 shares
issued and outstanding at March 31, 1998
and December 31, 1997, respectively 24,572 24,572
Retained earnings 20,084 18,894
- ---------------------------------------------------------------------------------------------
Total shareholders' equity 44,656 43,466
- ---------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $74,465 $69,511
=============================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 4
New Mexico and Arizona Land Company and Subsidiaries FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31,
<TABLE>
<CAPTION>
(in thousands) 1998 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS PROVIDED BY/(USED IN) OPERATING ACTIVITIES:
Net income $ 1,190 $ 484
Gain from sales of investment properties (117) (2)
Non-cash items included above:
Depreciation, depletion and amortization 164 119
Deferred revenue (69) (375)
Deferred income taxes (926) (138)
Gain from joint ventures (5) (16)
Non-controlling interests 110 143
Net change in:
Receivables (2,717) (96)
Properties under development 1,993 18
Other assets (33) (16)
Accounts payable and accrued liabilities 1,792 391
- ----------------------------------------------------------------------------------------
Net cash flows provided by/(used in) operating activities 1,382 512
- ----------------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY/(USED IN) INVESTING ACTIVITIES:
Additions to properties (1,538) (679)
Proceeds from sale of properties 439 2
Distributions from joint ventures 15 --
Proceeds from commercial real estate loans 1,419 407
Additions to commercial real estate loans (6,378) --
- ----------------------------------------------------------------------------------------
Net cash flows provided by/(used in) investing activities (6,043) (270)
- ----------------------------------------------------------------------------------------
CASH FLOWS PROVIDED BY/(USED IN) FINANCING ACTIVITIES:
Proceeds from debt 4,255 181
Payments of debt (1,079) (803)
Distributions to non-controlling partners (46) --
- ----------------------------------------------------------------------------------------
Net cash flows provided by/(used in) financing activities 3,130 (622)
- ----------------------------------------------------------------------------------------
Net (decrease) in cash and cash equivalents (1,531) (380)
- ----------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of period 6,016 7,142
- ----------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 4,485 $ 6,762
========================================================================================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 5
New Mexico and Arizona Land Company and Subsidiaries FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments necessary
to present fairly the financial position, the results of operations
and cash flows for the periods presented. The accompanying
statements do not include all disclosures considered necessary for
a fair presentation in conformity with generally accepted
accounting principles. Therefore, it is recommended that the
accompanying statements be read in conjunction with the
consolidated financial statements appearing in the Company's 1997
annual report on Form 10-K
2. The results of operations for the three months ended March 31, 1998 and
1997, 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, NZ Properties,
Inc., NZ Development Corporation, NZU Inc. and Great Vacations
International Inc., along with joint ventures in which
the Company holds a majority ownership.
4. Certain amounts have been reclassified for comparative purposes.
5. Net income per share computations are based on the weighted average number
of shares outstanding of 4,617,578 and 4,083,414 in 1998 and 1997
respectively.
6. On May 8, 1998 the Company declared a 20% stock dividend payable July 10,
1998 to shareholders of record as of June 10, 1998. The net income per
share and weighted average shares outstanding reported in the Financial
Statements include the effect of this dividend for all periods presented.
7. During the quarter, the Company sold a 108 acre parcel of land in
Scottsdale, Arizona. The entire profit on the transaction is approximately
$1 million. Even though the economic substance of the sale is completed
and the buyer has no contractual right to rescind the transaction, the
Company has deferred reporting approximately $870,000 of the profit due
to certain technical provisions in the related accounting literature with
respect to the buyer's initial investment in the property.
8. In connection with a January 1, 1998 modification to the historical
contractual relationship the Company has had with the real estate
broker retained to sell 40-acre parcels, the Company re-evaluated the
portion of the sales price of those parcels which is carried in deferred
revenue and determined that approximately $1,120,000 of such deferred
revenue should be recognized in the current period.
5
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The real estate lending business will require large amounts of capital in
order for the Company to be an effective competitor in the market. Management
estimates that during the 1998 fiscal year, approximately $80 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 "New Business Activity and Change of Principal
Business Emphasis" in Item 7 of the Company's 1997 Annual Report on Form 10-K.)
The Company expects to generate a substantial amount of cash from the sale
of real estate over the next 12 to 18 months. (See "Results of Operations"
below.) This cash will be re-deployed into the lending or development 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.
The Company currently has a $3 million unsecured revolving line of credit
from a commercial bank, which can be used for general corporate purposes. The
line bears interest at the prime rate and expires in December, 1998. At March
31, 1998 the line had an outstanding balance of $2 million. As of April 30, 1998
the line had an outstanding balance of $3 million. This loan contains financial
covenants which require the Company to maintain a specified minimum ratio of
current assets to current liabilities; a specified minimum excess of current
assets over current liabilities; and a specified maximum ratio of total
liabilities to tangible net worth. At March 31, 1998 the Company was in
compliance with these financial covenants. The bank recently approved an
increase in the size of the line to $10 million. As of May 12, 1998, the details
of the new loan agreement were being negotiated. All or some portion of the loan
balance will be secured by certain real estate and loan assets of the Company.
The same commercial bank has made a construction loan to the Company to
finance development of the Grove Commons project. The construction loan is for a
one year term expiring December 31, 1998, and bears interest at the prime rate.
As of March 31, 1998 the loan had an outstanding balance of $641,000. As of
April 30, 1998 the loan had an outstanding balance of $645,000. From a different
commercial bank, one of the Albuquerque joint ventures has loan facilities to be
utilized for lot development. At March 31, 1998 the aggregate outstanding
balance under these loan facilities was $492,000. As of April 30, 1998, there
was $614,000 borrowed against these lines of credit.
In addition to the bank lines, the Company is negotiating with a large
non-bank commercial lender to provide a warehouse line of credit which would be
available to finance the Company's real estate lending activities. Discussions
are on-going and have proceeded to the term-letter stage for this secured
revolving facility. At this time it is not possible to predict when or if this
transaction will close, nor the amount of borrowings that may be available to
the Company under the facility.
6
<PAGE> 7
The Company expects to negotiate other credit facilities during the 1998
fiscal year. The proceeds of any such facilities would be used to fund the
Company's real estate lending business and for general corporate purposes.
The Company also intends to seek qualified joint venture partners to
finance large real estate development projects. 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.
RESULTS OF OPERATIONS
For the three months ended March 31, 1998, net income was $1,190,000 ($0.26
per share) compared to $484,000 ($0.12 per share) for the same period in 1997.
Pre-tax earnings from property sales were up by approximately $1,046,000 for the
three month period ended March 31, 1998 as compared to the same period in 1997.
In connection with the closing of a sale of a 108-acre parcel in Scottsdale,
Arizona in March, 1998 an additional $870,000 of pre-tax earnings from property
sales has been deferred and is expected to be recognized in earnings during the
year. In connection with a January 1, 1998 modification to the historical
contractual relationship the Company has had with the real estate broker
retained to sell 40-acre parcels, the Company re-evaluated the portion of the
sales price of those parcels which is carried in deferred revenue and determined
that approximately $1,120,000 of such deferred revenue should be recognized in
the current period. General and administrative expenses are slightly higher
primarily due to increased legal and accounting costs.
The managed portfolio of Bridge Financial Corporation stood at $ 55.4
million as of March 31, 1998, of which $34.6 million was participated with other
lenders and $20.0 million (net of an allowance for bad debts of $.3 million and
undisbursed loan proceeds of $.5 million) was recorded in the Company's books.
As of April 30, 1998 the managed portfolio is $ 62.1 million, of which $40.1
million is participated and $21.0 million (net of an allowance for bad debts of
$.3 million and undisbursed loan proceeds of $.7 million) is recorded in the
Company's books. This compares to a December 31, 1997 managed portfolio of
$34.0 million, of which $17.8 million was participated and $15.3 million (net
of an allowance for bad debts of $.3 million and undisbursed loan proceeds of
$.6 million) was recorded in the Company's books.
The material loan which was previously reported to be in default in the
Company's 1997 Annual Report on Form 10-K was paid in full, including certain
default charges, during March, 1998. The Company incurred no loss with respect
to this loan.
The Company's four apartment complexes in New Mexico are now in escrow. A
contract for the sale of approximately 2800 acres in Fremont County, Colorado
was finalized and that property is now in escrow. The property in Flagstaff,
Arizona located at Zuni and Walapai Streets, previously reported to be in
escrow, closed escrow on April 27, 1998. On May 11, 1998 the buyer on the
Cottonwood property, which was previously reported to have been in escrow,
exercised its rights under the sales contract to cancel the agreement.
SUBSEQUENT EVENT - STOCK DIVIDEND
On May 8, 1998 the Company declared a 20% stock dividend payable July 10,
1998 to shareholders of record on June 10, 1998. The net income per share and
weighted average shares outstanding reported in the financial statements
include the effect of this dividend for all periods presented.
7
<PAGE> 8
PART II - OTHER INFORMATION
There were no proceedings, changes, occurrences or other matters occurring
during the three month period ended March 31, 1998, requiring a response to
Items 1 through 5.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27, Financial Data Schedule
Exhibit 28, Revised Financial Data Schedule for 1997
(b) No reports on Form 8-K were filed during the reporting quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
New Mexico and Arizona Land Company
/s/Jerome L. Joseph
- -------------------------------------
Controller and Treasurer
(Principal Financial Officer)
/s/R. Randy Stolworthy
- -------------------------------------
President and Chief Executive Officer
(Principal Executive Officer)
Date: May 18, 1998
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 4,485
<SECURITIES> 0
<RECEIVABLES> 23,058
<ALLOWANCES> 275
<INVENTORY> 0
<CURRENT-ASSETS> 12,118
<PP&E> 51,875
<DEPRECIATION> 5,562
<TOTAL-ASSETS> 74,465
<CURRENT-LIABILITIES> 10,685
<BONDS> 15,679
0
0
<COMMON> 24,572
<OTHER-SE> 20,084
<TOTAL-LIABILITY-AND-EQUITY> 74,465
<SALES> 5,287
<TOTAL-REVENUES> 6,807
<CGS> 3,378
<TOTAL-COSTS> 4,719
<OTHER-EXPENSES> 110
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 268
<INCOME-PRETAX> 1,983
<INCOME-TAX> 793
<INCOME-CONTINUING> 1,190
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,190
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,308
<SECURITIES> 0
<RECEIVABLES> 9,661
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 48,006
<DEPRECIATION> 5,410
<TOTAL-ASSETS> 66,335
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 13,738
<OTHER-SE> 22,374
<TOTAL-LIABILITY-AND-EQUITY> 66,335
<SALES> 1,973
<TOTAL-REVENUES> 3,124
<CGS> 1,110
<TOTAL-COSTS> 1,414
<OTHER-EXPENSES> 519
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 254
<INCOME-PRETAX> 810
<INCOME-TAX> 326
<INCOME-CONTINUING> 484
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 484
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
