FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from___________ to _______________
Commission file number 1-9900
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ARIZONA LAND INCOME CORPORATION
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(Exact name of registrant as specified in its charter)
Arizona 86-0602478
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2999 N. 44th Street, Suite 100, Phoenix, Arizona 85018
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(Address of principal executive offices)
(Zip Code)
(602) 952-6800
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required 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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes N/A No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
As of October 24, 1996, there were 2,522,580 shares of Class A common
stock and 100 shares of Class B common stock issued and outstanding.
<PAGE>
Table of Contents
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Page
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Part I
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Item 1. Financial Statements ...........................................3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............7 & 8
Part II
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Item 1. Legal Proceedings...............................................9
Item 2. Changes in Securities...........................................9
Item 3. Defaults upon Senior Securities ................................9
Item 4. Submission of Matters to a Vote of
Security Holders............................................9
Item 5. Other Information...............................................9
Item 6. Exhibits and Reports on Form 8-K................................9
Signatures...............................................................9
<PAGE>
ARIZONA LAND INCOME CORPORATION
Balance Sheets
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<TABLE>
<CAPTION>
September 30,
1996 December 31,
(Unaudited) 1995
------------ ------------
<S> <C> <C> <C>
Assets
Cash and temporary investments $ 3,375,632 $ 1,391,357
------------ ------------
Investments -
Accrued interest receivable 176,385 303,479
Mortgages receivable 4,712,395 6,722,529
Investment in partnerships 386,307 314,307
Land held for sale 10,686,074 11,136,319
------------ ------------
15,961,161 18,476,634
Less - Reserve for losses (1,513,953) (1,513,953)
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Total investments, net 14,447,208 16,962,681
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Other assets, net 20,894 64,418
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Total assets $ 17,843,734 $ 18,418,456
============ ============
Liabilities
Dividends payable $ 0 $ 65
Accounts payable and other liabilities 194,081 191,226
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Total liabilities 194,081 191,291
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Stockholders' Equity
Common stock-Class A 252,258 253,258
Common stock-Class B 10 10
Additional paid-in capital 24,536,138 24,585,170
Distributions in excess of income (7,138,753) (6,611,273)
------------ ------------
Total stockholders' equity 17,649,653 18,227,165
------------ ------------
Total liabilities and stockholders' equity $ 17,843,734 $ 18,418,456
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
ARIZONA LAND INCOME CORPORATION
Statements of Operations
(Unaudited)
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<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended ended ended ended
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Income
Interest on Mortgages $ 117,419 $ 125,176 $ 380,278 $ 357,363
Interest on Temporary Investments 29,909 16,738 65,634 45,941
Farm Lease Income 11,054 10,549 32,162 38,327
-------------- ------------- ------------ --------------
Total income before sale of properties 158,382 152,463 478,074 441,631
-------------- ------------- ------------ --------------
Expenses
Interest Expense 1,457 1,831 5,371 3,761
Professional Services 7,610 3,868 57,221 48,466
Advisory Fee 12,016 12,515 41,326 40,171
Administration and General 2,540 10,975 27,507 40,404
Directors' Fees 5,800 5,800 17,400 21,600
Property Taxes 19,363 38,796 96,953 115,523
-------------- ------------- ------------ --------------
Total expenses before sale of properties 48,786 73,785 245,778 269,925
-------------- ------------- ------------ --------------
Income before gain (loss) on sale of properties 109,596 78,678 232,296 171,706
Gain (loss) on sale of properties - 1,290 - 192,181
-------------- ------------- ------------ --------------
Net income $ 109,596 $ 79,968 $ 232,296 $ 363,887
============== =========== ============ ==============
Earnings per common share $0.04 $0.03 $0.09 $0.14
Dividends declared per share $0.00 $0.00 $0.30 $0.75
Weighted average number of shares of
common stock outstanding 2,522,580 2,532,580 2,522,580 2,553,830
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
ARIZONA LAND INCOME CORPORATION
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 232,296 $ 363,887
Adjustments to reconcile net income to net cash provided by operating activities-
Gain on land sale - (192,181)
(Increase) decrease in accrued interest receivable 127,094 (47,109)
(Increase) decrease in accounts payable and other liabilities 2,790 (295,819)
Accretion of discount mortgages - (657)
Decrease in other assets 43,524 28,504
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Net cash (used in) provided by operating activities 405,704 (143,375)
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Cash Flows from Investing Activities:
Cash payments for assessments and planning on land held for sale (234,644) -
Cash proceeds from land sale 684,887 3,066,364
Principal payments received under mortgages 2,010,135 211,786
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Net cash provided by investing activities 2,460,378 3,278,150
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Cash Flows from Financing Activities:
Payment of dividends (759,774) (1,899,435)
Purchase of investment in partnership (72,000) (40,000)
Repurchase of shares of Class A common stock (50,033) (125,897)
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Net cash used in financing activities (881,807) (2,065,332)
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Increase in Cash and Temporary Investments 1,984,275 1,069,443
Cash and temporary investments - beginning of period 1,391,357 315,801
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Cash and temporary investments - end of period $ 3,375,632 $ 1,385,244
=========== ===========
Schedule of Non-Cash Investing and Financing Activities:
Seller financing in conjunction with land sale $ - $ 3,289,340
Dividends declared in excess of dividends paid 65 65
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest 5,371 3,761
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Arizona Land Income Corporation
Notes to Financial Statements
September 30, 1996
Note 1 Basis of Presentation - The financial statements have been
prepared by Arizona Land Income Corporation (the "Company")
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the
Company, the unaudited financial statements contain all
adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position, the
results of operations and cash flows for the periods
presented.
Note 2 The results of operations for the three and nine months ended
September 30, 1996, are not necessarily indicative of the
results to be expected for the full year.
Note 3 See Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations for a discussion of
mortgages in default. It is the Company's normal policy to
discontinue the accrual of interest for notes in default as of
the default date.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Arizona Land Income Corporation (the "Company") is an Arizona
corporation which has elected to be treated as a real estate investment trust (a
"REIT") under the Internal Revenue Code of 1986.
For the quarter ended September 30, 1996, the Company had income before
sale of properties of $158,000 compared to $152,000 for the quarter ended
September 30, 1995. This increase was primarily attributable to an increase in
interest of temporary investments from $17,000 in 1995 to $30,000 in 1996, which
resulted from an increase of cash on hand in 1996.
The Company's expenses decreased to approximately $49,000 during the
third quarter of fiscal 1996 from approximately $74,000 in the third quarter of
fiscal 1995. This decrease is primarily attributable to a property tax refund of
$19,000, received in the third quarter of 1996.
For the nine months ended September 30, 1996, the Company reported
income before sale of properties of $478,000 compared to $442,000 for the same
period in the prior fiscal year. This increase can be attributed to an increase
in interest of temporary investment income from $46,000 in fiscal 1995 to
$66,000 in the first three quarter of fiscal 1996.
For the nine months ended September 30, 1996, the Company's expenses
declined to $246,000 from $270,000 in 1995. This decrease is primarily
attributable to a $20,000 decrease in property taxes and a $13,000 decrease in
administration and general expenses.
For the quarter ended September 30, 1996, the Company reported net
income of $110,000, or $0.04 per share of Class A Common Stock, compared to a
net income of $80,000, or $0.03 per share for the comparable period in the prior
fiscal year. This increase was primarily attributable to a decline in expenses
of $25,000.
For the first nine months of fiscal 1996, the Company reported net
income of $232,000, or $0.09 per share of Class A Common Stock, compared to a
net income of $364,000, or $0.14 per share for the comparable period in the
prior fiscal year. For the nine month period ending September 30, 1995, the
income is reflective of a $192,000 gain on sale of properties. Without this gain
considered, the Company earned $232,000 for the nine month period ending
September 30, 1996, compared to $172,000 for the comparable prior period.
Adverse market conditions negatively affected real estate values in the
Southwest during the early 1990's resulting in a decline in real estate values
and an increase in mortgage defaults. The Southwest real estate market has begun
to improve and land values have stabilized and improved in certain instances.
The Company believes that such improvements will reduce the number of loan
defaults or modifications; however, there can be no assurances in this regard.
Nonetheless, the Company will continue to vigorously assert any and all its
legal rights in the event of a default
The Company completed two land sales during the second quarter of 1996.
The first resulted from the sale of a 5 acre parcel of property located in
Phoenix, Arizona, which the Company acquired through foreclosure on Loan No. 17.
This sale netted the Company $412,000 cash. The second sale was a 3 acre parcel
which had secured Loan No. 17. This sale netted the Company $273,000. In
summary, the Company had two land sales during the second quarter of 1996, which
produced $685,0000 cash.
In addition to the above-referenced two land sales, the Company has 4
parcels of land resulting from foreclosure on Loan No. 17. All of these parcels
are in escrow to close in the first quarter of 1997. If such sales are
consummated, the Company should receive $2,400,000 in cash or notes receivable;
however, there can be no assurance that such sales will be consummated. In its
endeavor to sell the property associated with Loan No. 17, the Company
anticipates an expenditure of approximately $400,000 to $500,000 to fund
additional planning/zoning requirements of the City of Phoenix and to access
improvements required by the purchasers.
The Company, during the second quarter of 1996, agreed to sell a 3 acre
portion of its property located at 16th Street and Bell Road in Phoenix,
Arizona. This property was acquired through foreclosure on Loan No. 10. The sale
closed October 2, 1996, and netted the Company $691,000 cash in the fourth
quarter of 1996.
During the third quarter of 1996, the Company received cash in payoffs
for three of its loans. Loan No. 1 with a principal amount of $449,000, Loan No.
12 with a principal amount of $1,092,000, and Loan No. 20 with a principal
amount of $128,000, were all paid off and cash was received.
On March 21, 1996, the Company declared a $.30 per share extraordinary
cash distribution, which was paid on April 15, 1996, to the shareholders of
record on April 1, 1996.
The Company believes that funds generated from operations will be
sufficient to meet its capital requirements. No other arrangements, such as
lines of credit, have been made to obtain external sources of capital. While no
assurance can be given, the Company believes that such arrangements could be
obtained by the Company, if necessary.
7
<PAGE>
Item 2. (Cont.)
As disclosed in the Company's prospectus used in connection with the
Company's 1988 initial public offering, the Company intends to dissolve within
approximately eight years from the date of such public offering. The precise
date on which the Company will dissolve will be determined by the Company's
Board of Directors and will depend upon market conditions and other pertinent
factors. The Board of Directors also has the discretion to indefinitely continue
the operation of the Company. As of October 23, 1996, the Board has not made a
decision regarding the dissolution of the Company.
The mortgage loan numbers referred to in the above paragraphs are
identifiers for those loans on the books and records of the Company.
Additionally, these numbers are identified in the Company's initial offering
prospectus dated June 6, 1988.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities.
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Furnish the exhibits required by Item 601 of Regulation S-K.
Exhibit No. Description Method of Filing
----------- ----------- ----------------
27 Financial Data Schedules Filed Herewith
(b) Reports of Form 8-K
None
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.
ARIZONA LAND INCOME CORPORATION
(S) Thomas R. Hislop
October 24, 1996
- ---------------------------- --------------------------------
Date Thomas R. Hislop
Vice President and Chief Financial Officer
9
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<ARTICLE> 5
<CIK> 830748
<NAME> Arizona Land Income Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-30-1996
<EXCHANGE-RATE> 1
<CASH> 3,376
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 1,514
<INVENTORY> 15,784
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<TOTAL-ASSETS> 17,844
<CURRENT-LIABILITIES> 194
<BONDS> 0
0
0
<COMMON> 252
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<NET-INCOME> 232
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</TABLE>
