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 June 30, 1997
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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 August 11, 1997, there were 2,360,080 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
Part II
- -------
Item 1. Legal Proceedings....................................................8
Item 2. Changes in Securities................................................8
Item 3. Defaults upon Senior Securities .....................................8
Item 4. Submission of Matters to a Vote of
Security Holders.................................................8
Item 5. Other Information....................................................8
Item 6. Exhibits and Reports on Form 8-K.....................................8
Signatures....................................................................8
<PAGE>
ARIZONA LAND INCOME CORPORATION
Balance Sheets
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<TABLE>
<CAPTION>
June 30, 1997 December 31,
(Unaudited) 1996
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<S> <C> <C>
Assets
Cash and temporary investments $ 4,013,385 $ 1,191,853
------------ ------------
Investments -
Accrued interest receivable 137,806 206,664
Mortgages receivable 5,191,495 4,363,668
Investment in partnerships 378,755 378,755
Accounts receivable 25,901 --
Land held for sale 7,127,920 10,162,284
------------ ------------
12,861,877 15,111,371
Less - Reserve for losses (1,513,953) (1,513,953)
------------ ------------
Total investments, net 11,347,924 13,597,418
------------ ------------
Total assets $ 15,361,309 $ 14,789,271
============ ============
Liabilities
Accounts payable and other liabilities $ 49,804 $ 62,140
Accrued property taxes 71,745 90,296
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Total liabilities 121,549 152,436
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Stockholders' Equity
Common stock-Class A 236,008 236,008
Common stock-Class B 10 10
Additional paid-in capital 23,791,072 23,791,072
Distributions in excess of income (8,787,330) (9,390,255)
------------ ------------
Total stockholders' equity 15,239,760 14,636,835
------------ ------------
Total liabilities & stockholders' equity $ 15,361,309 $ 14,789,271
============ ============
</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 Six months Six months
ended ended ended ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenue
Interest on Mortgages $ 78,658 $ 137,627 $ 179,759 $ 262,859
Interest on Temporary Investments 42,051 17,464 61,037 35,725
Farm Lease Income 13,319 11,054 23,478 21,108
-------------- ------------ ------------ --------------
Total revenue before sale of properties 134,028 166,145 264,274 319,692
-------------- ------------ ------------ --------------
Expenses
Interest Expense - - 1,747 3,914
Professional Services 12,634 22,250 36,265 49,611
Advisory Fee 10,235 12,509 20,427 24,967
Administration and General 10,363 12,378 18,819 29,310
Directors' Fees 5,000 5,800 10,800 11,600
Property Taxes 8,900 38,795 17,800 77,590
-------------- ----------- ------------ --------------
Total expenses 47,132 91,732 105,858 196,992
-------------- ----------- ------------ --------------
Income before gain on sale of properties 86,896 74,413 158,416 122,700
Gain on sale of properties 444,509 - 444,509 -
-------------- ----------- ------------ --------------
Net income $ 531,405 $ 74,413 $ 602,925 $ 122,700
============== =========== ============ ==============
Earnings per common share $0.23 $0.03 $0.26 $0.05
Dividends declared per share $0.00 $0.00 $0.00 $0.00
Weighted average number of shares of
common stock outstanding 2,360,080 2,522,580 2,360,080 2,522,580
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
ARIZONA LAND INCOME CORPORATION
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 1997 June 30, 1996
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<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 602,925 $ 122,700
Adjustments to reconcile net income to net cash provided by (used in)
operating activities-
Gain on land sale (444,509) -
Decrease in accrued interest receivable 68,858 107,761
(Decrease) in accounts payable and other liabilities (30,887) (20,140)
Other changes 11,599 15,254
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Net cash provided by (used in) operating activities 207,986 225,575
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Cash Flows from Investing Activities:
Cash payments for assessments and planning on land held for sale (412,150) (204,070)
Cash proceeds from land sale 2,894,353 684,887
Principal payments received under mortgages 131,343 270,060
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Net cash provided by investing activities 2,613,546 750,877
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Cash Flows from Financing Activities:
Payment of dividends - (759,774)
Purchase of investment in partnership - (40,000)
Repurchase of shares of Class A common stock - (50,033)
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Net cash used in financing activities - (849,807)
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Increase in Cash and Temporary Investments 2,821,532 126,645
Cash and temporary investments - beginning of period 1,191,853 1,391,357
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Cash and temporary investments - end of period $ 4,013,385 $ 1,518,002
=========== ============
Schedule of Non-Cash Investing and Financing Activities:
Seller financing in conjunction with land sale $ 959,170 $ -
Dividends declared in excess of dividends paid 65 65
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Arizona Land Income Corporation
Notes to Financial Statements
June 30, 1997
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 six months ended June
30, 1997, 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. The statements of operations
filed herewith cover the periods from April 1, 1997 through June 30, 1997.
For the quarter ended June 30, 1997, the Company had total income of
$134,000 compared to $166,000 for the quarter ended June 30, 1996. This decrease
was primarily attributable to a decrease of $79,000 in interest income on
mortgage receivables.
The Company expenses decreased to approximately $47,000 during the
second quarter of fiscal 1997 from approximately $208,000 in the second quarter
of fiscal 1996. This decrease is primarily attributable to a decrease of
approximately $30,000 in property taxes, and a decrease of $9,000 in
professional services.
The Company reported net income of $531,000 for the quarter ended June
30, 1997, compared to $74,000 for the quarter ended June 30, 1996.
For the operating period of January 1, 1997 through June 30, 1997, cash
flow provided by operating activities totaled $208,000 and consisted of $69,000
from a decrease in accrued interest and a decrease of $31,000 in accounts
payable and other liabilities.
For the operating period of January 1, 1997 through June 30, 1997, cash
flow provided by investing activities totaled $2,613,000 and consisted of
$2,900,000 collected sales and $131,000 principal payments received on its
mortgage portfolio offset by $412,000 paid pursuant to an agreement on one of
its properties.
For the operating period of January 1, 1997 through June 30, 1997, the
Company reported total revenues of $264,000 compared to $320,000 for the
operating period of January 1, 1996 through June 30, 1996. This decrease was a
result of a decrease of mortgage interest received, which decreased from
$263,000 in 1996 to $180,000 in 1997. The Company also reported expenses of
$106,000 for the first six months of fiscal 1997 as compared to $197,000 for the
same period during fiscal 1996.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per
Share." The new standard simplifies the computation of earnings per share (EPS)
and increases comparability to international standards. The Company is required
to adopt the new standard in its fiscal year 1997 financial statements. All
prior-period EPS information, including interim EPS, is required to be restated
at that time; however, because of the simple capital structure of the Company,
SFAS 128 is not expected to have a material impact on the Company's reported
EPS, and on a pro forma basis would not have changed EPS in either the first two
quarters of 1997 or in 1996.
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 four land sales during the second quarter of
1997. The first resulted from the sale of a 15 acre parcel of property located
in Phoenix, Arizona, which the Company acquired through foreclosure on Loan No.
10. This sale netted the Company $868,000 cash and a note receivable totaling
$959,000. The second sale was an 8 acre parcel which had secured Loan No. 17 and
was received through foreclosure by the Company. This sale netted the Company
$954,000 cash, plus a receivable of $38,000. The third sale was a 3.36 acre
parcel of property which the Company acquired through foreclosure on Loan No.
17. This sale netted the Company $623,000 cash. The fourth sale resulted from
the sale of a 2 acre parcel of property located in Phoenix, Arizona, which the
Company acquired through foreclosure on Loan No. 17. This sale netted the
Company $448,000 cash.
On August 11, 1997, the Board of Directors declared a $.25 per share
dividend with a record date of September 1, 1997, and payable September 15,
1997. The total amount to be distributed to shareholders will be approximately
$590,000.
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.
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 August 7, 1997, 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.
7
<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.
(a) The Company held the Annual Meeting of Shareholders on May 7,
1997.
(b) Thomas Hislop, Burton Freireich and Robert Blackwell were
elected directors of the Company at the Annual Meeting.
(c) Tabulation of the voting was as follows:
Votes Votes Broker
Name of Nominee Votes For Against Withheld Nonvotes
--------------- --------- ------- -------- --------
Thomas R. Hislop 2,223,074 0 0 0
Burton P. Freireich 2,223,074 0 0 0
Robert Blackwell 2,223,074 0 0 0
(d) 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
August 11, 1997
- -------------------------- ------------------------------------------
Date Thomas R. Hislop
Vice President and Chief Financial Officer
8
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<ARTICLE> 5
<CIK> 830748
<NAME> Arizona Land Income Corp.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 4,013
<SECURITIES> 0
<RECEIVABLES> 26
<ALLOWANCES> 1,514
<INVENTORY> 12,698
<CURRENT-ASSETS> 4,151
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 15,361
<CURRENT-LIABILITIES> 121
<BONDS> 0
0
0
<COMMON> 236
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,361
<SALES> 0
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<CGS> 0
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<NET-INCOME> 603
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
