As filed with the Securities and Exchange Commission on December 31, 1996
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CADIZ LAND COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 0100 77-0313235
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
10535 Foothill Boulevard, Suite 150
Rancho Cucamonga, California 91730
(909) 980-2738
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Keith Brackpool
10535 Foothill Boulevard, Suite 150
Rancho Cucamonga, California 91730
(909) 980-2738
(Name, address, and telephone number of agent for service)
Copies of communications to:
HOWARD J. UNTERBERGER, ESQ.
J. BRAD WIGGINS, ESQ.
Miller & Holguin
1801 Century Park East, Seventh Floor
Los Angeles, California 90067
(310) 556-1990
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. X
---
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
If this Form is a post effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
Proposed
Title of each maximum Proposed
class of offering maximum Amount of
securities to Amount price aggregate registration
be registered to be registered per unit offering price fee
- ------------------------------------------------------------------------------
Common Stock,
par value 8,384,555 shares(1) $4.6875(2) $39,302,601.57 $11,909.88
$.01 per share
Warrants for the
purchase of 240,000 warrants
Common Stock (the "Warrants")(3)
- ------------------------------------------------------------------------------
(1) Of this total, 463,881 shares are currently outstanding, 7,680,674
shares underlie outstanding convertible preferred stock ("Preferred
Stock"), and 240,000 shares underlie the Warrants which are included
in this Registration Statement. Also registered hereunder are an
indeterminate number of additional shares of Common Stock which may
become issuable by virtue of anti-dilution provisions of the
Preferred Stock and the Warrants.
(2) Estimated solely for the purpose of calculating the registration fee,
and based, pursuant to Rule 457(c), on the average of the high and
low prices of the Registrant's Common Stock as reported by Nasdaq
for December 27, 1996, which date is within 5 business days prior to
the initial filing date of this Registration Statement.
(3) No fee for registration of the Warrants is required by virtue of the
last sentence of Rule 457(g).
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
CADIZ LAND COMPANY, INC.
Cross-Reference Sheet Pursuant to Item 501(b) of Regulation S-K Showing
the Location in the Prospectus of the Information Required by Part I of Form
S-1
REQUIRED INFORMATION LOCATION IN PROSPECTUS
-------------------------------------- ---------------------------
1. Forepart of the Registration Statement Facing Page of Registration
and Outside Front Cover Page of Statement; Cross-Reference
Prospectus Sheet; Outside Front Cover
Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front Cover of
Pages of Prospectus Prospectus
3. Summary Information, Risk Factors and Prospectus Summary;
Ratios of Earnings to Fixed Charges Certain Factors
4. Use of Proceeds Inapplicable (as indicated on
Outside Front Cover of
Prospectus and in
Prospectus Summary and
Plan of Distribution)
5. Determination of Offering Price Inapplicable
6. Dilution Inapplicable
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Outside Front Cover of
Prospectus; Plan of
Distribution
9. Description of Securities to Description of Securities
Be Registered
10. Interests of Named Experts and Legal Matters; Experts
Counsel
11. Information with Respect to the Prospectus Summary; The
Registrant Company; Certain Factors;
Price Range of Common
Stock and Dividend Policy;
Selected Financial Data;
Management's Discussion
and Analysis of Financial
Condition and Results of
Operations; Business;
Management; Certain
Transactions; Principal
Stockholders; Financial
Statements
12. Disclosure of Commission Position on Inapplicable
Indemnification for Securities Act
Liabilities
PROSPECTUS
CADIZ LAND COMPANY, INC.
8,384,555 Shares of Common Stock
(including 393,000 Shares issued in recent private placements;
7,368,262 Shares issued or issuable upon conversion
of outstanding shares of Series A Preferred Stock;
383,293 Shares issued or issuable in payment of dividends upon
outstanding shares of Series A Preferred Stock;
and 240,000 Shares issuable upon exercise of outstanding Warrants)
and 240,000 Warrants for the purchase of Common Stock
This Prospectus relates to the offer by the security holders
named herein under the caption "Selling Security Holders"
(collectively, the "Selling Security Holders") for sale to the public
of the following shares of the $.01 par value common stock (the
"Common Stock") of Cadiz Land Company, Inc. (the "Company" or "Cadiz")
(collectively, the "Shares"): (i) 393,000 outstanding shares of
Common Stock previously issued by the Company in unregistered private
placements (the "Placement Shares"); (ii) 7,368,262
shares of Common Stock (the "Conversion Shares") which have been
issued or are issuable by the Company upon the conversion of shares of
the Company's Series A Preferred Stock (the "Series A Preferred"); (iii)
383,293 shares of Common Stock (the "Dividend Shares") which have been
issued or are issuable by the Company in payment of dividends on the
Preferred Stock; and (iv) 240,000 shares of Common Stock (the "Warrant
Shares") which are issuable by the Company upon the exercise of
outstanding warrants (the "Warrants"). In addition, this Prospectus
relates to the offer by one of the Selling Security Holders for sale
to the public of the Warrants for the purchase of the Warrant Shares.
The Company will not receive any proceeds from the sale by the
Selling Security Holders of the Shares or the Warrants offered
hereunder. See "Plan of Distribution."
The Conversion Shares covered by this Prospectus include
53,332 Conversion Shares which were previously issued upon conversion
of Series A Preferred and an additional 7,314,930 Conversion Shares
which are issuable upon conversion of outstanding shares of Series A
Preferred Stock. Each share of Series A
Preferred was issued for $1,000 and is convertible into Conversion
Shares at a rate of $3.75 per share. See "Description of Securities."
The Dividend Shares covered by this Prospectus include
17,549 Dividend Shares which were previously issued in payment of
stock dividends on Series A Preferred and an additional 365,744
Dividend Shares which are issuable upon payment of stock dividends on
outstanding shares of Series A Preferred Stock.
Dividends payable on the Company's Preferred Stock are payable in the
form of either cash or shares of Common Stock at the option of the
Company. The numbers of Dividend Shares used in this Prospectus have
been determined based on the assumption that all Preferred Stock
dividends will be paid in the form of shares of Common Stock. See
"Description of Securities."
The 240,000 Warrant Shares covered by this Prospectus are
issuable upon exercise of outstanding Warrants held by one of the
Company's institutional lenders. The Warrants are exercisable until
December 31, 2000 at an exercise price of $.05 per Warrant Share. See
"Description of Securities."
The Common Stock is quoted in the National Market System of the
National Association of Securities Dealers Automated Quotation system
("Nasdaq") under the symbol "CLCI." The closing sale price of the
Common Stock reported by Nasdaq on December 27, 1996, was $4.875. See
"Price Range of Common Stock and Dividend Policy."
The Selling Security Holders have advised the Company that they
may sell, directly or through brokers, all or a portion of the
securities offered hereby in negotiated transactions or in one or more
transactions in the market at the price prevailing at the time of
sale. In connection with such sales, the Selling Security Holders and
any participating broker may be deemed to be "underwriters" of the
Shares within the meaning of the Act. It is anticipated that usual
and customary brokerage fees will be paid by Selling Security Holders
in all open market transactions. The Company will pay substantially
all other expenses of the offering. See "Plan of Distribution."
The Company has filed a registration statement under the
Securities Act of 1933, as amended (the "Act"), covering the offer and
sale of the Shares by the Selling Security Holders. This registration
is in satisfaction of the terms of agreements by the Company with
certain Selling Security Holders to register their Shares and Warrants
for resale under the Act.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES
A HIGH DEGREE OF RISK. SEE "CERTAIN FACTORS."
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ___________, 1997
No dealer, salesman or other person has been authorized to give
any information or make any representations, other than those
contained in this Prospectus, in connection with the offering hereby,
and, if given or made, such information and representations must not
be relied upon as having been authorized by the Company or the Selling
Security Holders. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any securities to any
person in any State or other jurisdiction in which such offer or
solicitation is unlawful. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the
Company or the facts herein set forth since the date hereof.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission") a registration statement (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"),
with respect to the securities offered by this Prospectus. This
Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to the
Company and the securities offered hereby, reference is made to the
Registration Statement and to the schedules and exhibits filed
therewith, which may be inspected without charge at the principal
office of the Commission, 450 5th Street, N.W., Washington, D.C.
20549, and copies of the material contained therein may be obtained
from the Commission upon payment of applicable copying charges.
Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein are not necessarily
complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance
therewith files reports and other information with the Commission.
Such reports and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by
the Commission at Room 1024, 450 5th Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices at 7 World Trade
Center, Suite 1300, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission at 450 5th Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission also maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding the Company and other
registrants that file electronically with the Commission.
TABLE OF CONTENTS
Page
----
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . .
Certain Factors. . . . . . . . . . . . . . . . . . . . . . . .
Price Range of Common Stock and Dividend Policy. . . . . . . .
Selected Financial Data. . . . . . . . . . . . . . . . . . . .
Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . .
Business . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Stockholders. . . . . . . . . . . . . . . . . . . . .
Management . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions . . . . . . . . .
Selling Security Holders . . . . . . . . . . . . . . . . . . . .
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . .
Description of Securities. . . . . . . . . . . . . . . . . . . .
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . .
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index to Financial Statements. . . . . . . . . . . . . . . . . . F-1
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by
the detailed information and consolidated financial statements,
including the notes thereto, appearing elsewhere in this Prospectus
and, accordingly, should be read in conjunction with that information
and those financial statements and notes.
THE COMPANY
Cadiz Land Company, Inc. (the "Company" or "Cadiz") was formed in
1983 under the name AridTech, Inc. On May 9, 1988, the name of the
Company was changed to Pacific Agricultural Holdings, Inc., and in May
1992 the Company's shareholders approved the reincorporation of the
Company into Delaware under its current name.
The Company's business strategy is to create a portfolio of
landholdings, water resources, and agricultural operations within
central and southern California which possess sizable assured supplies
of water. Management believes that, with both the increasing scarcity
of water supplies in California and the increasing demand for water,
the Company's access to water will provide it with a competitive
advantage both as a major agricultural concern and as a supplier of
water which will lead to continued appreciation in the value of the
Company's portfolio.
With its September 13, 1996 acquisition of Sun World
International, Inc. ("Sun World"), the Company has become one of the
largest fully integrated agricultural companies in California. The
Sun World acquisition has added to the Company's portfolio more than
18,000 acres of prime agricultural land, packing facilities, marketing
expertise, proprietary agricultural products and the highly regarded
Sun World brand name. Sun World is renown for developing or acquiring
specialty produce varieties with unique characteristics which
differentiate them from commodity produce varieties. Sun World owns
patents and holds trademarks on a number of fruit varieties and, as a
result of its Research and Development Center, has a long history of
product innovation.
In addition to the above, the acquisition of Sun World provided
the Company senior water rights throughout the central and southern
valleys of California. The Company's portfolio also includes more
than 39,000 acres of land in eastern San Bernardino County. These
landholdings are underlain by excellent groundwater resources. The
largest property totals approximately 27,400 acres at Cadiz,
California, 1,600 acres of which have been developed for cultivation
of citrus orchards, table grape vineyards and row crops.
The Company's landholdings, which now total approximately 57,000
acres, are located adjacent to the major aqueduct systems of central
and southern California, and in close proximity to the Colorado River.
The Company expects to participate in a broad variety of water
transfer and storage projects, including the storage and transfer of
surplus water for public agencies which require supplemental sources
of water.
To date, the Company has employed much of its working capital in
development applications designed to increase the long term value of
its properties. A portion of these expenditures has related to the
planned Cadiz Valley and Piute Valley groundwater transfer and storage
projects. See "Business - Narrative Description of Business - Water
Resource Development." In addition, agricultural development and
operations continue to be an integral part of the Company's ongoing
business strategy, maximizing the value of its landholdings while
generating cash flow. See "Business - Narrative Description of
Business - Agricultural Operations."
The Company's acquisition of Sun World is a part of this
strategy. Sun World has added to the Company's portfolio more than
18,000 acres of prime agricultural land in the San Joaquin, Coachella,
and Colorado River valleys, increasing the Company's total
landholdings to approximately 57,000 acres. See "Business -
Properties."
The Company's principal offices are located at 10535 Foothill
Boulevard, Suite 150, Rancho Cucamonga, California 91730, and its
telephone number is (909) 980-2738.
THE OFFERING
Total Shares Offered by the
Selling Security Holders . . . . . . . . 8,384,555 Shares
Placement Shares. . . . . . . . . . . 393,000 Shares
Conversion Shares . . . . . . . . . . 7,368,262 Shares
Dividend Shares . . . . . . . . . . . 383,293 Shares
Warrant Shares. . . . . . . . . . . . 240,000 Shares
Total Warrants Offered by the
Selling Security Holders . . . . . . . . 240,000 Warrants
Common Stock Outstanding Prior
to this Offering(1). . . . . . . . . . . 22,999,467 shares
Common Stock to Be Outstanding
After Completion of this Offering(2) . . 30,920,141 shares
Certain Factors. . . . . . . . . . . . . This offering is speculative and
involves a high degree of risk.
See "Certain Factors."
Use of Proceeds. . . . . . . . . . . . . The Company will not receive any
proceeds from the sale of Shares
or the sale of Warrants pursuant
to this Prospectus.
Nasdaq National Market System Symbol CLCI
____________________
(1) As of December 27, 1996.
(2) Assumes the conversion of all outstanding Series A Preferred;
the payment of all dividends on all outstanding Series A Preferred
in the form of Dividend Shares; and the exercise of all outstanding
Warrants.
SUMMARY FINANCIAL DATA
The following summary is qualified in its entirety by, and should
be read in conjunction with, the Company's consolidated financial
statements and the notes thereto appearing elsewhere in this
Prospectus.
<TABLE> CADIZ LAND COMPANY, INC.
SUMMARY FINANCIAL DATA
($ in thousands, except for per share data)
<CAPTION>
Six Months Ended
September 30, Year Ended March 31,
1996(1) 1995 1996 1995 1994 1993 1992
---------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Revenues $ 4,820 $ 650 $ 1,441 $ 543 $ 190 $ -0- $ -0-
Loss from
continuing
operations
before
extraordinary
items $(4,429) $(3,686) $(8,487)$(4,706) $(4,239) $(4,087) $(4,659)
Gain (loss)
from
disposal of
discontinued
segment(2) $ -0- $ -0- $ -0- $ -0- $ 145 $ -0- $ (4,189)
Extraordinary
items $ -0- $ -0- $ -0- $ 115 $ 343 $ -0- $ 200
Net loss $(4,429)$(3,686) $(8,487)$(4,591) $(3,751) $(4,087) $ (8,648)
Per Share:
Net loss from
continuing
operations
before
extraordinary
items $ (0.23)$ (0.21) $ (0.48)$ (0.29) $ (0.33) $ (0.47) $ (0.82)
Net income
(loss)
from
operations
of discontinued
segment
and disposal of
discontinued
segment(1) $ -0- $ -0- $ -0- $ -0- $ 0.01 $ -0- $ (0.74)
Extraordinary
items $ -0- $ -0- $ -0- $ 0.01 $ 0.03 $ -0- $ 0.04
Net loss $ (0.23)$ (0.21) $ (0.48)$ (0.28) $ (0.29) $ (0.47) $ (1.52)
Dividends $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Weighted average
common shares and
equivalents 19,629 17,235 17,700 16,500 12,800 8,700 5,700
Six Months Ended
September 30, Year Ended March 31,
1996 1995 1996 1995 1994 1993 1992
----------------- ----------------------------------------------
BALANCE SHEET
DATA:
Total assets $255,202 $ 33,824 $ 38,663 $ 34,888 $ 34,058 $ 27,635 $27,862
Debt $148,839 $ 17,017 $ 17,617 $ 16,381 $ 13,740 $ 17,939 $18,846
Common stock
and
additional
paid-in-
capital $113,206 $ 64,916 $ 73,149 $ 62,857 $ 60,044 $ 45,199 $40,813
Accumulated
deficit $(58,870)$(49,595) $(54,396)$(45,909)$(41,318) $(37,567)$(33,480)
Stockholders'
equity $ 54,336 $ 15,321 $ 18,753 $ 16,948 $ 18,726 $ 7,632 $ 7,333
_________________
(1) On September 13, 1996, the Company acquired all of the outstanding
capital stock of Sun World. The Company's acquisition of Sun World will
be accounted for on a consolidated basis in the Company's financial
statements for periods ending after September 13, 1996 under the purchase
method of accounting. The selected financial data for the period ended
September 30, 1996 include Sun World from the date of acquisition.
(2) In December 1990, the Company committed to a plan to eliminate all agri-
business operations acquired as part of its 1988 merger with Pacific
Agricultural Services, Inc.
</TABLE>
CERTAIN FACTORS
The securities offered hereby involve a high degree of risk. Prior
to making an investment, prospective investors should carefully consider
the following risks affecting the Company and this offering. This
Prospectus, and particularly the Management's Discussion and Analysis
section, contains trend analysis and other forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Actual results could differ materially from those projected in
the forward-looking statements throughout this document.
HISTORICAL OPERATING LOSSES AND ACCUMULATED DEFICITS/UNCERTAINTY OF EFFECT
- --------------------------------------------------------------------------
OF SUN WORLD ACQUISITION
- ------------------------
The Company has a history of operating losses (approximately $8.5
million for the fiscal year ended March 31, 1996 and approximately $4.4
million for the six months ended September 30, 1996) and accumulated
deficits (approximately $54.4 million at March 31, 1996 and approximately
$58.9 million at September 30, 1996). See "Selected Financial Data" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations." As the results of operations of Sun World prior to September
14, 1996 have not been consolidated with those of the Company, such prior
operating history is not indicative of future trends; rather, the Company's
consolidated results of operations will be largely dependent upon the results
of operations of its Sun World subsidiary. The Company cannot predict with
any degree of accuracy what effect its acquisition of Sun World will
have on its business operations in the next several years. See "Risks
Inherent in Agricultural Operations," below.
RISKS INHERENT IN AGRICULTURAL OPERATIONS
- ------------------------------------------
The Company is subject to risks associated with its Sun World
agricultural operations. Numerous factors can affect the yield, price
and marketability of the crops grown on the Company's properties. The
agricultural industry in the United States is extraordinarily
competitive. Moreover, domestic growers and marketers of produce are
facing increased competition from abroad, particularly Mexico and South
America. There can be no assurance that the Company's agricultural
operations will be commercially profitable. In particular, a number of
factors outside of the Company's control, such as adverse weather
conditions, insects, blight or other diseases, labor problems such as
boycotts or strikes of work forces, shortages of competent laborers, and
adverse economic and market conditions could, alone or in combination,
materially adversely affect the Company's agricultural operations. The
marketability of crops grown on the Company's properties may be
adversely affected by changes in governmental policies, social and
economic conditions, and industry production levels. Prices may vary
greatly from year to year as a result of the relationship between
production and market demand. The production of a particular crop in
excess of demand in any particular year will depress market prices, and
inflationary factors and other unforeseeable economic changes may also,
at the same time, increase operating costs with respect to such crops.
UNCERTAINTIES ASSOCIATED WITH THE DEVELOPMENT OF WATER RESOURCES
- ------------------------------------------------------------------
The Company anticipates that it will continue to incur operating
losses from its non-Sun World operations until such time as it is able
to receive significant revenues from the development of its water
transfer projects. The Company does not expect to be able to obtain
such revenues before the third quarter of 1997 at the earliest. Additional
financing specifically in connection with the Company's water projects will
be required. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." In addition to the risk of delays
associated with receiving all necessary regulatory approvals and
permits, the Company may also encounter unforseen technical difficulties
which could result in construction delays and cost increases with
respect to the Company's water transfer projects. The Company is
continuing to negotiate the specific terms of water delivery and/or
storage arrangements with various California water agencies. However,
the outcome of these negotiations cannot be predicted with any degree of
certainty. There can be no assurances as to amount of water which the
Company will be able to deliver or store under such arrangements, nor as
to the price which the Company will be able to obtain. Furthermore, the
Company has no experience to date in the commercial production and
delivery of water in large amounts on a long term basis. There is,
therefore, a limited historical basis on which to evaluate future
performance of the Company's proposed operations in this area.
RAIL-CYCLE
- ----------
In November 1995 the San Bernardino County Board of Supervisors
certified the Environmental Impact Report/Environmental Impact Statement
("EIR/EIS") for, and approved a Conditional Use Permit for, the proposed
construction and operation of a massive landfill adjacent to the
Company's Cadiz properties (the "Rail-Cycle Project"). The Company
contends that the Rail-Cycle Project, as currently designed, poses
environmental risks to both the Company's agricultural operations at
Cadiz and to the groundwater basin underlying the Cadiz property. The
Company has vigorously opposed the Rail-Cycle Project on a number of
grounds and has filed a lawsuit seeking, among other things, to set
aside the County's certification of the EIR/EIS and approval of the
proposed project. There can be no assurances as to the outcome of the
Company's lawsuit. Furthermore, the Board of Supervisors decided to
require a business license tax to be levied against the Rail-Cycle
Project which, prior to adoption, required approval by a majority vote
at the general election. The business license tax was not approved,
thus at least temporarily halting the Rail-Cycle Project. There can be
no assurances that the Rail-Cycle Project, if constructed, will not have
a materially adverse impact upon the Company's business and results of
operations.
LIMITATIONS ON ACCESS TO SUN WORLD CASH FLOW AND RESTRICTIONS ON DIVIDENDS
- ---------------------------------------------------------------------------
The credit agreements with Sun World's secured lenders include
affirmative and negative covenants which restrict the Company's ability
to receive distributions from Sun World's cash flow, but which also
insulate the Company, as the parent of Sun World, from obligations
incurred directly by its Sun World subsidiary. While the Company does
not expect that Sun World will be permitted to pay any dividends to the
Company while any indebtedness to these secured lenders remains
outstanding, the Company does receive a quarterly management fee from
Sun World plus reimbursement for the Company's overhead expenditures
attributable to the operations of Sun World. If Sun World is unable to
generate sufficient cash flow from operations in the future, or if Sun
World fails to satisfy the financial tests under the credit agreements
with its secured lenders, it could face default on its obligations. A
default on the Sun World obligations could result in a loss of all of
the Company's investment in Sun World.
SIGNIFICANT LEVERAGE AND WORKING CAPITAL REQUIREMENTS
- -----------------------------------------------------
As a result of the Sun World acquisition, the consolidated
Company's capital structure is significantly leveraged. Substantially
all of the assets of Sun World are pledged as security for loans with an
outstanding balance of approximately $148 million as of November 30,
1996. Substantially all of the Company's non Sun World assets are
pledged as security for loans with an outstanding balance of
approximately $18.5 million as of November 30, 1996, which loans mature
January 31, 1997. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." In addition, Sun World
has significant seasonal working capital requirements. The Company's
leveraged capital structure could impair both the Company's and Sun
World's access to additional financing, should Sun World's existing
working capital and cash flow from operations be insufficient for Sun
World's ongoing debt service and working capital needs. The ability of
the Company and Sun World to reduce debt and increase equity will be
dependent upon the future performance of the Company and Sun World. In
addition, if Sun World is unable to generate sufficient cash flow from
operations in the future, or if Sun World fails to satisfy the financial
tests under its credit agreements with John Hancock and Credit Agricole,
it could face default on its obligations. A default on the Sun World
obligations could result in a loss of all of the Company's investment in
Sun World.
REGULATION AND REGULATORY APPROVALS
- ------------------------------------
Certain areas of the Company's operations are subject to varying
degrees of federal, state and local laws and regulations. Farm
operations such as those conducted on the Company's properties are
subject to federal, state and local laws and regulations controlling the
discharge of materials into the environment or otherwise relating to the
protection of the environment. Existing environmental regulations have
not, in the past, had a materially adverse effect upon the Company's
operations. There can be no assurances, however, as to the effect of
any environmental regulations which may be adopted in the future.
As the Company proceeds with the development of its properties,
including related infrastructure, the Company will be required to
satisfy various regulatory authorities that it is in compliance with the
laws, regulations and policies enforced by such authorities.
Groundwater development, and the export of surplus groundwater for sale
to single entities such as public water agencies, are not subject to
regulation by existing statutes, other than general environmental
statutes applicable to all development projects. Although applicable
laws, regulations and policies have not had a materially adverse effect
upon the ability of the Company to develop its Cadiz or other properties
to date, management cannot predict with certainty what requirements, if
any, may be imposed by regulators upon future development. In addition,
the time and costs associated with obtaining regulatory approvals for
resource development are significant, and there can be no assurance that
the Company will receive desired approvals for future development plans.
COMPETITION
- -------------
The agricultural business is highly competitive. The Company's
competitors include a limited number of large international food
companies, as well as a large number of smaller independent growers and
grower cooperatives. No single competitor has a dominant market share
in this industry due to the regionalized nature of these businesses.
Sun World utilizes brand recognition, product quality, harvesting in
favorable product windows, competitive pricing,
effective customer service and consumer marketing programs to enhance its
position within the highly competitive fresh food industry. Consumer and
institutional recognition of the Sun World trademark and related brands and
the association of these brands with high quality food products contribute
significantly to Sun World's ability to compete in the market for fresh
fruit and vegetables.
The Company faces competition for the acquisition, development and
sale of its properties from a number of competitors, some of which have
significantly greater resources than the Company. The Company may also
face competition in the development of water resources associated with
its properties. Since California has scarce water resources and an
increasing demand for available water, the Company believes that price
and reliability of delivery are the principal competitive factors
affecting transfers of water in California. In this regard, the ability
of the Company to price its water on a competitive basis will depend
upon the cost of constructing and maintaining delivery systems for its
surplus water. See "Business - Description of Business - Competition."
AUTHORIZATION OF "BLANK CHECK" PREFERRED STOCK
- -----------------------------------------------
The Company's Certificate of Incorporation, as amended, authorizes
the issuance of up to 100,000 shares of preferred stock with such
designations, rights and preferences as may be determined from time to
time by the Company's Board of Directors. Accordingly, the Board of
Directors is empowered, without stockholder approval, to issue preferred
stock in one or more series, and to fix for any series the dividend
rights, dissolution or liquidation preferences, redemption prices,
conversion rights, voting rights, and other rights, preferences or
privileges for such preferred stock which could adversely affect the
voting power or other rights of the holders of the Common Stock. To
date the Board of Directors has designated three series of Preferred
Stock for issuance, including (i) up to 60,000 shares of
Series A Preferred, of which 27,631 shares have been issued and
27,431 shares remain outstanding; (ii) up to 1,000 shares of 6% Convertible
Series B Preferred Stock (the "Series B Preferred"), of which 1,000 shares
have been issued and 390 shares remain outstanding; and (iii) up to 365
shares of 6% Convertible Series C Preferred Stock (the "Series C Preferred"),
of which 300 shares have been issued and 100 shares remain outstanding.
See "Description of Securities." The Board of Directors has no present
plans or arrangements for the issuance of additional shares of preferred
stock. However, there can be no assurance that the Company will not
issue such shares in the future. Such shares could, under certain
circumstances, be issued as a method of raising additional capital or
discouraging, delaying or preventing a change in control of the Company.
DILUTION UPON CONVERSION AND EXERCISE OF SECURITIES
- ----------------------------------------------------
The issuance of Shares upon conversion and exercise of outstanding
Preferred Stock and Warrants may have certain dilutive effects,
including dilution of the Company's earnings per share.
INCREASE IN NUMBER OF SHARES OF COMMON STOCK ELIGIBLE FOR RESALE
- -----------------------------------------------------------------
The registration for resale hereunder of 393,000 Placement Shares,
7,368,262 Conversion Shares, 383,293 Dividend Shares, and 240,000
Warrant Shares, for an aggregate total of 8,384,555 Shares, will
significantly increase the number of outstanding shares of Common Stock
of the Company eligible for resale. See "Description of Securities."
NO ASSURANCE OF DIVIDENDS ON COMMON STOCK
- ----------------------------------------------
To date, the Company has never paid a cash dividend on Common
Stock, and the Company's ability to pay such dividends is restricted by
agreements with the Company's lenders. The Company has retained an
investment banking firm to, among other things, advise the Company as to
the most tax efficient means of distributing revenues from the Company's
operations to its shareholders when revenues from the transfer of water
commence. The amount and frequency of any such dividends would be
subject to the discretion of the Board of Directors. See "Price Range
of Common Stock and Dividend Policy."
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is traded on the Nasdaq Stock Market
under the symbol "CLCI." Since July 1994, the Company's Common Stock
has been traded as a National Market System security. The following
table reflects, for periods up until the period ended June 30, 1994,
inter-dealer quotations, without retail markup, markdown or commission,
and may not necessarily represent actual transactions. For the periods
ended September 30, 1994 and thereafter, the table reflects actual sales
transactions. The high and low price range of the Common Stock for each
of the dates indicated has been provided by Nasdaq.
BID PRICES ASKED PRICES
---------- ------------
QUARTER ENDED HIGH LOW HIGH LOW
------ ------- ------ ------
1994:
March 31 $6.125 $4.375 $6.50 $4.625
June 30 $6.00 $3.75 $6.25 $4.125
High Low
Sales Price Sales Price
-------------- -------------
September 30 $5.25 $3.75
December 31 $5.25 $4.25
1995:
March 31 $5.438 $4.125
June 30 $4.875 $4.000
September 30 $5.50 $3.688
December 31 $6.25 $4.063
1996:
March 31 $6.375 $5.25
June 30 $6.50 $5.219
September 30 $5.938 $4.063
On December 27, 1996, the high, low and last sales prices for the
Company's Common Stock, as reported by Nasdaq, were $4.875, $4.50 and
$4.875, respectively.
The Company also has an authorized class of 100,000 shares of
preferred stock ("Preferred Stock"). To date the Board of Directors has
designated three series of Preferred Stock for issuance, including (i)
up to 60,000 shares of Series A Preferred, of which 27,631 shares have
been issued and 27,431 shares remain outstanding; (ii) up to 1,000 shares of
Series B Preferred, of which 1,000 shares have been issued and 390 shares
remain outstanding; and (iii) up to 365 shares of Series C Preferred,
of which 300 shares have been issued and 100 shares remain outstanding.
See "Description of Securities." The Board of Directors has no present
plans or arrangements for the issuance of additional shares of Preferred
Stock. See "Certain Factors - Authorization of "Blank Check" Preferred
Stock."
The estimated number of beneficial owners of the Company's Common
Stock is approximately 1,500, and the number of stockholders of record
on December 27, 1996, was 223.
To date, the Company has never paid a cash dividend on Common
Stock, and currently the Company's ability to pay such dividends is
restricted by agreements with the Company's lenders. See "Certain
Factors." The Company has retained an investment banking firm to, among
other things, advise the Company as to the most tax efficient means of
distributing revenues from the Company's operations to its stockholders
when revenues from the transfer of water commence. See "Business - Narrative
Description of Business - Water Resource Development." The amount and
frequency of any such dividends would be subject to the discretion of the
Board of Directors.
SELECTED FINANCIAL DATA
The following selected financial data, insofar as it relates to
each of the years ended March 31, 1996, 1995, 1994, 1993, and 1992 has
been derived from financial statements audited by Price Waterhouse LLP,
independent accountants. The selected financial data should be read in
conjunction with the audited consolidated financial statements of the
Company and notes thereto as of March 31, 1996 and for the three years
then ended included elsewhere herein. See also "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
audited consolidated financial statements included herein for Sun World,
which was acquired by the Company on September 13, 1996.
The interim selected financial data for the six months ended
September 30, 1996 and 1995 is unaudited. However, it reflects all
adjustments, consisting of normal recurring adjustments, which are, in
the opinion of management, necessary for a fair statement of the
financial condition and operating results for the interim period.
Results of operations for the six month period ended September 30, 1996
are not necessarily indicative of the results to be expected for the
current fiscal year. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE> CADIZ LAND COMPANY, INC.
SELECTED FINANCIAL DATA
($ in thousands, except for per share data)
<CAPTION>
Six Months Ended
September 30, Year Ended March 31,
1996(1) 1995 1996 1995 1994 1993 1992
---------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> >
Statement of
Operations Data:
Revenues $ 4,820 $ 650 $ 1,441 $ 543 $ 190 $ -0- $ -0-
Loss from
continuing
operations
before
extraordinary
items $(4,429) $(3,686) $(8,487)$(4,706) $(4,239) $(4,087) $(4,659)
Gain (loss)
from
disposal of
discontinued
segment(1) $ -0- $ -0- $ -0- $ -0- $ 145 $ -0- $ (4,189)
Extraordinary
items $ -0- $ -0- $ -0- $ 115 $ 343 $ -0- $ 200
Net loss $(4,429)$(3,686) $(8,487)$(4,591) $(3,751) $(4,087) $ (8,648)
Per Share:
Net loss from
continuing
operations
before
extraordinary
items $ (0.23)$ (0.21) $ (0.48)$ (0.29) $ (0.33) $ (0.47) $ (0.82)
Net income
(loss)
from
operations
of discounted
segment
and disposal of
discontinued
segment(2) $ -0- $ -0- $ -0- $ -0- $ 0.01 $ -0- $ (0.74)
Extraordinary
items $ -0- $ -0- $ -0- $ 0.01 $ 0.03 $ -0- $ 0.04
Net loss $ (0.23)$ (0.21) $ (0.48)$ (0.28) $ (0.29) $ (0.47) $ (1.52)
Dividends $ -0- $ -0- $ -0- $ -0- $ -0- $ -0- $ -0-
Weighted average
common shares and
equivalents 19,629 17,235 17,700 16,500 12,800 8,700 5,700
Six Months Ended
September 30, Year Ended March 31,
1996 1995 1996 1995 1994 1993 1992
----------------- --------------------------------------------
Balance Sheet
Data:
Total assets $255,202 $ 33,824 $ 38,663 $ 34,888 $ 34,058 $ 27,635 $27,862
Debt $148,839 $ 17,017 $ 17,617 $ 16,381 $ 13,740 $ 17,939 $18,846
Common stock
and
additional
paid-in-
capital $113,206 $ 64,916 $ 73,149 $ 62,857 $ 60,044 $ 45,199 $40,813
Accumulated
deficit $(58,870)$(49,595) $(54,396)$(45,909)$(41,318) $(37,567)$(33,480)
Stockholders'
equity $ 54,336 $ 15,321 $ 18,753 $ 16,948 $ 18,726 $ 7,632 $ 7,333
_________________
(1) On September 13, 1996, the Company acquired all of the outstanding
capital stock of Sun World. The Company's acquisition of Sun World will
be accounted for on a consolidated basis in the Company's financial
statements for periods ending after September 13, 1996 under the purchase
method of accounting. The selected financial data for the period ended
September 30, 1996 include Sun World from the date of acquisition.
(2) In December 1990, the Company committed to a plan to eliminate all agri-
business operations acquired as part of its 1988 merger with Pacific
Agricultural Services, Inc.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
- -----------
Cadiz Land Company, Inc. (formerly known as Pacific Agricultural
Holdings, Inc.) was incorporated in Delaware on April 27, 1992. On May
6, 1992, the shareholders of Pacific Agricultural Holdings, Inc.
approved its reincorporation as a Delaware corporation, a one-for-five
reverse stock split, and the change of its name to Cadiz Land Company,
Inc. (the "Company"). The reincorporation, reverse split, and name
change became effective on May 26, 1992.
On September 13, 1996, Cadiz acquired all of the outstanding capital
stock of Sun World. The Company's acquisition of Sun World will be
accounted for on a consolidated basis in the Company's financial
statements for periods ending after September 13, 1996 under the
purchase method of accounting. The Company's consolidated financial
statements include Sun World from the date of acquisition. The
financial statements set forth herein for the period ending September
30, 1996 are the first financial statements of the Company to reflect
Cadiz' acquisition of Sun World. The operations of Sun World have, and
will continue to have, a significant impact upon the Company's financial
statements.
Prior to the acquisition of Sun World, Cadiz had utilized an
unclassified balance sheet (eliminating the distinction between current
assets and long-term assets and current liabilities and long-term
liabilities). The financial statements set forth herein utilize a
classified balance sheet, thus requiring certain classifications to be
made to the prior period balances to conform with the September 30, 1996
presentation.
RESULTS OF OPERATIONS
- ---------------------
The following is management's discussion of certain factors which
have affected the Company's financial condition and results of
operations for the six month period ended September 30, 1996 and the
fiscal years ended March 31, 1996 and 1995, as compared to prior
periods.
The Company's results of operations for the period ended September
30, 1996 include the results of operations of Sun World for the period
September 14, 1996 through September 30, 1996. The results of
operations of Sun World prior to September 14, 1996 have not been
consolidated with those of the Company. As a result of the foregoing,
direct comparisons of the Company's consolidated results of operations
for the six months ended September 30, 1996 with results for the six
months ended September 30, 1995 will not, in the view of management of
the Company, prove meaningful. Instead, a summary of the elements which
management of the Company believes essential to an analysis of the
results of operations for such periods, and the likely effect of the Sun
World acquisition upon such elements, is presented below. For purposes
of this summary, the term Sun World will be used with respect to the
operations and activities of the Company's Sun World subsidiary, and the
term Cadiz will be used with respect to those operations and activities
of the Company not involving Sun World.
The following discussion contains trend analysis and other forward-
looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Actual results could differ materially from those
projected in the forward-looking statements throughout this document.
SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO SIX MONTHS ENDED
- -----------------------------------------------------------------
SEPTEMBER 30, 1995
- ------------------
During the six months ended September 30, 1996, the Company incurred
a net loss of $4,429,000 compared to a loss of $3,686,000 during the
same period in 1995. The following table summarizes the net loss for
both periods ($000's omitted):
1996 1995
Revenues $ 4,820 $ 650
------- ------
Costs and expenses:
Cost of sales 3,723 -0-
Resource development 1,445 1,569
Landfill prevention activities 262 531
General and administrative 1,938 826
Depreciation 481 410
Amortization 158 117
Interest expense, net 1,576 883
Litigation settlement (334) -0-
-------- ------
Net loss $ 4,429 $ 3,686
======= =======
The operations of Sun World for the period September 14 through
September 30, 1996 are included above; however, due to the seasonality
of the operations of Sun World, this is not indicative of the results of
operations should a full six months of activity be included.
REVENUES. Of the $4,820,000 in revenues recognized by the Company
for the six months ended September 30, 1996, $4,662,000 related to the
operations of Sun World in the seventeen day period September 14, 1996
through September 30, 1996. The balance of the Company's revenues were
recognized from the resource development activities of Cadiz, consisting
primarily of gross crop proceeds from the Cadiz ranch.
COST OF SALES. Cost of sales for the six months ended September
30, 1996 consisted of all direct costs and an allocation of indirect
costs related to revenue generated by Sun World for the seventeen day
period ended September 30, 1996.
RESOURCE DEVELOPMENT. Resource development expenses, which consist
of costs incurred in the agricultural, land and water development of
Cadiz' landholdings, totaled $1,445,000 for the six months ended
September 30, 1996 as compared to $1,569,000 for the same period in
1995.
LANDFILL PREVENTION ACTIVITIES. Cadiz is engaged in opposition to
the proposed construction and operation of a landfill proposed to be
located adjacent to the Company's Cadiz property, and has filed a
lawsuit seeking, among other things, to set aside regulatory approvals
for the landfill project. See "Business - Legal Proceedings." During
the six months ended September 30, 1996, expenses incurred in connection
with activities in opposition to the project, such as litigation costs
and professional fees and expenses, totaled $262,000 as compared to
$531,000 during the same period of the prior year.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
during both periods consisted primarily of corporate operating expenses,
professional fees and salaries. These expenses increased by $1,112,000
during the six months ended September 30, 1996 as compared to the same
period in 1995 due to an increased level of activity primarily as a
result of the acquisition of Sun World and the addition of corporate and
administrative costs related to Sun World in the amount of $279,000 for
the period September 14, 1996 through September 30, 1996.
DEPRECIATION. Depreciation totaled $481,000 for the six months
ended September 30, 1996 as compared to $410,000 for the six months
ended September 30, 1995. The increase is primarily attributable to
depreciation for the seventeen day period ending September 30, 1996
related to the consolidation of Sun World owned assets.
INTEREST EXPENSE. Net interest expense totaled $1,576,000 during
the six months ended September 30, 1996 as compared to $883,000 during
the same period in 1995. The following table summarizes the components
of net interest expense for the six month periods ended September 30,
1996 and 1995 ($ 000's omitted):
1996 1995
Interest expense on
outstanding debt $ 1,251 $ 490
Amortization of financing
costs 420 421
Interest income (95) (28)
------- ------
$ 1,576 $ 883
======= ======
The increase in interest expense on outstanding debt during the
period ended September 30, 1996 is attributable to Sun World debt
service subsequent to the acquisition. Financing costs are amortized
over the life of the debt agreement.
LITIGATION SETTLEMENT. During the period ended September 30, 1996,
Cadiz was awarded and received approximately $334,000 as final payment
toward full reimbursement of its legal fees and costs incurred in
defending a legal action.
YEAR ENDED MARCH 31, 1996 COMPARED TO YEAR ENDED MARCH 31, 1995
During the year ended March 31, 1996, the Company incurred a net
loss of $8,487,000 as compared to a net loss of $4,591,000 during the
previous year. The following table summarizes the net loss for both
periods (in thousands):
1996 1995
Revenues $ 1,441 $ 543
======= =======
Costs and expenses:
Resource development 3,329 1,545
Landfill prevention
activities 1,919 -0-
General and administrative 1,826 1,525
Depreciation 833 737
Amortization 234 234
Interest expense, net 1,787 1,208
Gain on debt settlement -0- (115)
-------- -------
Net Loss $ 8,487 $ 4,591
======= =======
REVENUES. Revenues are recognized from the Company's resource
development as a result of the Company's ability to enter into joint
venture or leasing arrangements with third party growers for the farming
of crops on its properties. A combination of gross crop proceeds from
the citrus orchard and both rent and percentage of gross crop proceeds
from the vineyard totaled $608,000 and $543,000 for the years ended
March 31, 1996 and 1995, respectively. Gross crop proceeds from the
additional acreage developed to row crops in the latter part of fiscal
year 1995 totaled $751,000 for the year end March 31, 1996, primarily
from the harvest of honeydew melons and seedless watermelon. Revenue
from the produce brokerage operation which commenced in May 1995 totaled
$82,000 during the 1996 fiscal year.
Management expects that revenue from the Company's Cadiz
agricultural development will increase over the next several years as a
result of increased revenues from existing developed acreage and the
further development of additional acreage.
RESOURCE DEVELOPMENT. Expenses recorded in this category consist
of costs incurred in the agricultural, land and water resource
development of the Company's Cadiz landholdings. As an integral part of
its strategy to control the ultimate use of the resources associated
with the Cadiz project, the Company continues to maintain control of
management of both the infrastructure associated with these properties
as well as the development of the area for agricultural use.
Accordingly, costs related to the Company's management of its
infrastructure and agricultural development are included in Resource
Development, as well as the Company's share of joint venture crop costs.
Additionally, operating costs associated with the Company's produce
brokerage and the Company's continual evaluation of additional potential
land acquisition sites, such as overhead, legal and travel are included
within this category. The Company also anticipates the development and
transfer of surplus water from its Cadiz and Piute properties. See
"Business - Narrative Description of Business." In relation to the
Cadiz water transfer project, the Company expects completion of the
required EIS/EIR process within 18 months and completion of the
necessary delivery systems within several months thereafter, although
no assurances may be given.
Resource development expenses totaled $3,329,000 for the year ended
March 31, 1996 as compared to $1,545,000 for the year ended March 31,
1995. As activities were taking place on multiple water projects during
the 1996 fiscal year, costs associated with development increased as
compared to the prior year when the Company was involved in only the
Cadiz water transfer project. In addition, with the development of an
additional 240 acres to row crops at the beginning of the 1996 fiscal
year, the Company has attracted third party growers to enter into joint
venture and similar arrangements with the Company for multiple harvests
throughout the year ended March 31, 1996. As a result, the Company has
incurred its share of joint venture production costs associated with the
various row crops, as well as an increase in costs associated with
management of the Cadiz ranch with respect to the additional acreage.
Also included in resource development are costs associated with
evaluation of the potential acquisition of additional sites.
LANDFILL PREVENTION ACTIVITIES. The Company is engaged in vigorous
opposition to the proposed construction and operation of a landfill
proposed to be located adjacent to the Company's Cadiz property, and has
filed a lawsuit seeking, among other things, to set aside regulatory
approvals for the landfill project. See "Business - Legal Proceedings."
During the year ended March 31, 1996, expenses incurred in connection with
activities in opposition to the project totaled $1,919,000, including
litigation costs, professional fees and expenses, and contributions in
support of a local coalition which actively opposed the Rail-Cycle
Project.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
during both periods consisted primarily of corporate operating expenses,
professional fees and salaries. These expenses increased by $301,000
during the year ended March 31, 1996 as compared to the prior year.
During the 1996 fiscal year the Company was engaged in, among other
things, the acquisition of Sun World; negotiations and/or discussions
with prospective purchasers regarding several of the Company's water
transfer projects; management of the Company's permanent crops; and
production of additional acreage to row crops in its farming operation.
In the prior year, by contrast, activities pertained to evaluation of
only one water transfer project and management of the Company's
permanent crops. As a result of this increased level of activity, the
Company has incurred a corresponding increase in costs related to
overhead, professional fees, salaries and travel, among others.
DEPRECIATION. Depreciation totaled $833,000 for the year ended
March 31, 1996 as compared to $737,000 for the prior year. The increase
of $96,000 was primarily due to a full year of depreciation on
infrastructure improvements at the Cadiz property, including the
development of additional irrigation wells which were completed during
the fourth quarter of fiscal 1995.
INTEREST EXPENSE. Net interest expense totaled $1,787,000 during
the year ended March 31, 1996 as compared to $1,208,000 during the same
period in 1995. The following table summarizes the components of net
interest expense for the years ended March 31, 1996 and 1995 (in
thousands):
1996 1995
Interest expense on
outstanding debt $1,000 $ 842
Amortization of
financing costs 841 479
Interest income (54) (113)
------ -------
Net interest expense $1,787 $1,208
====== ======
Interest expense on outstanding debt increased during the year as a
result of an increased level of borrowing and due to slightly higher
interest rates. Amortization of financing costs increased as a result
of debt issue costs incurred in connection with the Company's March 1995
loan facility. Such costs are amortized over the life of the debt
arrangement, which matures on January 31, 1997.
GAIN ON DEBT SETTLEMENT. In June 1994, the Company retired a note
payable in the amount of $249,000 to an individual at a discounted
amount resulting in an extraordinary gain on settlement of debt of
$115,000. The note, which originated in 1985, was scheduled to be
retired with a balloon payment in December 1996.
YEAR ENDED MARCH 31, 1995 COMPARED TO YEAR ENDED MARCH 31, 1994
During the year ended March 31, 1995, the Company had a net loss of
$4,591,000 as compared to a net loss of $3,751,000 during the previous
year. The following table summarizes the net loss for both periods (in
thousands):
1995 1994
-------- ---------
Revenues $ 543 $ 190
Costs and expenses:
Resource development 1,545 955
General and administrative 1,525 1,904
Depreciation 737 483
Amortization 234 234
Interest expense, net 1,208 853
Gain on disposal of
discontinued segment -0- (145)
Gain on debt settlements (115) (343)
-------- ---------
Net loss $ 4,591 $ 3,751
======== =========
REVENUES. Revenue, as a result of the Company's agricultural
operations, consisted of a combination of gross crop proceeds from the
citrus orchard and both rent and a percentage of gross crop proceeds
from the vineyard which totaled $543,000 and $190,000 for the years
ended March 31, 1995 and 1994, respectively.
RESOURCE DEVELOPMENT. Resource development expenses increased in
1995 by $590,000 as compared to the prior year primarily due to an
overall increase in resource development, largely resulting from
activities related to the water transfer projects, and the establishment
of an Agricultural Development Department in April 1994.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses for both periods consisted primarily of salaries and
professional fees. Total expenses decreased by $379,000 for the year
ended March 31, 1995 compared to the prior year. Professional fees
declined from $970,000 in 1994 to $768,000 in 1995, primarily as a
result of the favorable conclusion of litigation in May 1994.
DEPRECIATION. Depreciation for the year ended March 31, 1995
totaled $737,000 as compared to $483,000 for the prior year. The
increase of $254,000 in fiscal 1995 was primarily attributable to
depreciation of the Company's citrus orchard at Cadiz. Prior to fiscal
1995, the orchard was considered to be in its development stage and, as
such, no depreciation was recorded.
INTEREST EXPENSE. Net interest expense totaled $1,208,000 during
the year ended March 31, 1995, compared to $853,000 during the same
period in 1994. The following table summarizes the components of
interest expense for the years ended March 31, 1995 and 1994 (in
thousands):
1995 1994
------- --------
Interest expense on outstanding debt $ 842 $ 831
Interest on citrus orchard capitalized -0- (252)
Amortization of financing costs 479 340
Interest income (113) (66)
------- ---------
Net Expense $ 1,208 $ 853
======= =========
Interest expense on outstanding debt increased due to higher
interest rates on the Rabobank loan and an increase in Ansbacher debt
outstanding. See "Liquidity and Capital Resources - Current Financing
Arrangements," below. Interest expense related to the citrus orchard
was capitalized in 1994, as the orchard had not yet reached maturity
during the period. As the orchard is no longer in the developmental
stage, such interest is no longer capitalized. The amortization of debt
issue costs and debt discount increased $139,000 in 1995 compared to
1994 due to the costs related to the refinancing of the Rabobank and
Ansbacher loans in January 1994. Such costs are amortized over the life
of the debt arrangement, which matures on January 31, 1997. Interest
income increased in 1995 compared to 1994 due to higher cash balances
throughout 1995.
GAIN ON DISPOSAL OF DISCONTINUED SEGMENT. There were no such
transactions during the fiscal year ended March 31, 1995. However,
during the fiscal year ended March 31, 1994, the Company reversed
valuation reserves and liabilities related to discontinued operations
totaling $145,000. Of this amount, $75,000 resulted from a reduction in
a reserve no longer necessary following the disposition of a cooler
property in Arizona as part of a settlement of a $925,000 note
obligation, as discussed under "Gain on Debt Settlements," below. In
addition, approximately $70,000 resulted from a write off of an accrued
liability for certain crop advances previously received by the Company
which the Company determined would not be claimed by the advancing
party.
GAIN ON DEBT SETTLEMENTS. In June 1994, the Company retired a note
payable in the amount of $249,000 to an individual at a discounted
amount resulting in an extraordinary gain on settlement of debt of
$115,000. The note, which originated in 1985, was scheduled to be
retired with a balloon payment in December 1996. During the quarter
ended June 1993, the Company concluded a settlement agreement regarding
a $925,000 note obligation which resulted in a extraordinary gain of
$300,000 on settlement of debt.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
GENERAL DISCUSSION OF LIQUIDITY AND CAPITAL RESOURCES. Pursuant to
its business strategy, the Company has, other than in connection with
the Sun World acquisition, utilized its working capital primarily for
development purposes; that is, for purposes designed to increase the
long term value of its properties. As the Company has not received
significant revenues from its development operations to date, the
Company has been required to obtain financing to bridge the gap between
the time development expenses are incurred and the time that a revenue
stream will commence. Accordingly, the Company has looked to outside
funding sources to address its liquidity and working capital needs.
Historically, the Company has addressed these needs primarily through
secured debt financing arrangements with its lenders, private equity
placements and the exercise of outstanding stock options. See "Current
Financing Arrangements" and "Equity Placements," below.
On September 13, 1996, the Company acquired all of the stock of Sun
World. Total consideration was approximately $179 million, of which
approximately $156 million was represented by a restructuring of
previously existing debt with Sun World's secured lenders. See "Current
Financing Arrangements," below. Substantially all of the remainder of
the purchase price, as well as a cash capital contribution of $15
million into Sun World, was funded by the Company from the proceeds of
the issuance of Preferred Stock. See "Equity Placements," below. The
$15 million cash capital contribution was made by the Company with the
intent of eliminating the requirement for Sun World to have any
additional debt facilities beyond those owed to its existing secured
creditors. As a result, the Company believes that additional outside
funding will not be needed to meet the working capital requirements of
Sun World's operations, although no assurances can be given.
CURRENT FINANCING ARRANGEMENTS. Cadiz' two primary lenders are
Cooperative Centrale Raiffeisen Boerenleenbank B.A., a Netherlands
commercial bank ("Rabobank") and Henry Ansbacher & Co. Limited, a
banking corporation organized under the laws of England ("Ansbacher")
(collectively, the "Banks"). Cadiz' obligations to Rabobank of
approximately $9.1 million and to Ansbacher of approximately $9.4
million mature in January 1997. In September 1996, Rabobank agreed to
grant to Cadiz two one-year extensions provided the total debt
outstanding to Rabobank at January 31, 1997 does not exceed $8.5
million. In consideration for this agreement, Cadiz paid an initial
commitment fee of $150,000 and issued 30,000 warrants to purchase the
Company's Common Stock at $.05 per share exercisable for five years
following the date of issuance. Upon exercise of the first and second
extension, Cadiz would be required to pay Rabobank certain fees. The
interest rate in effect pursuant to this agreement will be at Rabobank's
cost of funds plus one and one quarter percent (1-1/4%). Cadiz also
currently intends to replace or renegotiate the terms of its current
obligation to Ansbacher prior to January 31, 1997. Ansbacher and
Rabobank hold senior and subordinate deeds of trust, respectively, on
substantially all of Cadiz' non-Sun World related property.
In furtherance of the Company's business strategy and in light of
the Company's progress with its business plan, in January 1994, the
Banks completed arrangements which extended the maturity dates of the
debt from December 31, 1994 until January 31, 1997, and fixed the
interest rates for the period. Rabobank agreed to accrue and capitalize
interest payments through December 1994. Ansbacher agreed to accrue and
capitalize interest through maturity and further agreed to give the
Company an additional letter of credit of approximately $800,000 to be
used to pay interest to Rabobank with effect from January 1995. In
addition, the Company reduced its obligation to Rabobank by $4,000,000
by way of a $2,000,000 advance from Ansbacher, together with $2,000,000
of proceeds raised from a private placement in January 1994.
In March 1995, the Company arranged to draw $2.45 million from an
additional $3 million loan facility provided by Ansbacher. From these
proceeds, the Company used $250,000 to reduce the Company's existing
Rabobank loan and to reimburse Rabobank for various fees and expenses
with the balance to be applied towards the Company's estimated working
capital requirements through March 31, 1996. In connection with this
facility, the Company issued 110,000 shares of Common Stock to Ansbacher
and issued to Rabobank 35,000 Common Stock purchase warrants exercisable
for three years at $0.05 per share.
Sun World's two primary lenders are John Hancock Mutual Life
Insurance Company ("John Hancock") and Caisse Nationale de Credit
Agricole, acting through its Grand Cayman branch ("Credit Agricole")
(collectively, the "Sun World Lenders"). Sun World's obligations to
John Hancock and Credit Agricole totaling approximately $143,784,000
mature in September 2006. Substantially all of the assets of Sun World
are encumbered in favor of one or both of the Sun World Lenders.
As the Company continues to aggressively pursue its business
strategy, additional financing specifically in connection with the
Company's water projects will be required. The nature of such
additional financing for the water transfer and/or storage projects will
depend upon how the development and ownership of each project is
ultimately structured, and how much of each project's funding will be
the Company's responsibility. Should the Company determine that it will
be able to maximize its profit potential through construction and
ownership of the water delivery and/or storage systems used in the
project, the Company will be required to obtain long-term project
financing. Based upon the results of analyses performed by an
investment banking firm retained by the Company, management believes
that several alternative long-term financing arrangements are available
to the Company which will be further evaluated once funding
responsibility and ownership alternatives are determined.
EQUITY PLACEMENTS. During the six month period ended September 30,
1996, Cadiz utilized equity placements to fund its acquisition of Sun
World. The total cash requirements of Cadiz related to the Sun World
acquisition were funded from: (i) the issuance by Cadiz of $27.631
million of newly authorized Series A Preferred; (ii) the issuance by
Cadiz of $7.6 million of newly authorized Series B Preferred; (iii) the
issuance by Cadiz $2.6 million of newly authorized Series C Preferred;
and (iv) $1 million previously deposited by Cadiz from its working
capital in trust with the Official Committee Holding Unsecured Claims in
the Sun World bankruptcy case. Of such funds, approximately $35 million
was applied to cash disbursements required at closing under the Sun
World plan of reorganization, including the $15 million capital
contribution referred to above and approximately $5.5 million of
principal reduction to secured lenders. The remainder has been utilized
by Cadiz substantially for the payment of expenses relating to the
acquisition, as well as for the capital and operating requirements of
Cadiz.
Under the terms of the plan of reorganization in the Sun World
bankruptcy case, as originally approved, the total cash requirements of
the Company in order to close the acquisition would have been
approximately $39 million, with $15 million of this amount to be
deposited by the Company at closing into the trusteed unsecured claims
reserve account. However, in order to protect against stockholder
dilution, shortly before completion of the Sun World acquisition the
Company was able to successfully negotiate a reduction in this required
initial cash deposit to $11 million, thereby effectively reducing cash
requirements at closing to $35 million. As a condition to this
reduction in the amount of the initial deposit, the Company agreed to
deposit an additional amount into the unsecured claims reserve account
subsequent to the closing, when the final claims amounts could more
readily be determined. In order to fund the remaining amounts necessary
to complete its requirements in this regard, on November 26, 1996, the
Company issued 240 shares of its Series B Preferred and 40 shares of its
Series C Preferred for total aggregate consideration of $2.8 million, or
$10,000 per share. The amount of shares so issued by the Company was
less than the additional amount which the Company would otherwise have
needed to issue prior to the Sun World acquisition if the amount of the
initial cash deposit had not been reduced.
During the six month period ended September 30, 1996, Cadiz
received gross proceeds of $916,500 through the exercise of previously
outstanding stock options.
During the fiscal year ended March 31, 1996, the Company completed
private placements of 2,114,157 shares of its Common Stock, resulting in
gross proceeds of $9,932,000. In addition, the Company received proceeds
of approximately $360,000 through the exercise of outstanding stock
options and warrants. Cadiz utilized such proceeds to fund its capital
projects related to development of its water transfer projects, for the
purchase of additional acreage and for operating requirements, including
the payment of expenses incurred in connection with the acquisition of
Sun World.
The Series A Preferred is convertible into shares of Common Stock,
at the option of the holder, at a price of $3.75 per share. Holders are
entitled to cumulative dividends payable at a rate of six percent (6%)
per annum. Both the Series B Preferred and the Series C Preferred are
convertible into shares of Common Stock at a price equal to the lower of
(a) $5.8125 per share or (b) eighty-five percent (85%) of the average
closing bid price over the ten trading-day period ending on the day
prior to the submission of any conversion notice. Holders are also
entitled to cumulative dividends at the rate of six percent (6%) per
annum until conversion. The Company reserves the right to redeem any
convertible shares of Preferred Stock for their full cash equivalent by
giving the investors five (5) days notice. As of December 27, 1996, 200
shares (or $200,000 worth) of Series A Preferred have been converted
into 53,332 shares of Common Stock; 610 shares (or $6,100,000 worth) of
Series B Preferred have been converted into 2,026,725 shares of Common
Stock, and 200 shares (or $2,000,000 worth) of Series C Preferred have
been converted into 578,326 shares of Common Stock.
WORKING CAPITAL RESOURCES. As noted above, subsequent to the Sun
World acquisition, the Company adopted a classified balance sheet
thereby requiring the distinction between current assets and long-term
assets and current liabilities and long-term liabilities. As a result,
on a consolidated basis, the Company had, at September 30, 1996, working
capital of $40,180,000, cash of $40,083,000 and a current ratio of
approximately two to one. Cash used for operating activities totaled
$4,431,000 for the six month period ended September 30, 1996 as compared
to $3,022,000 for the same period in 1995. The increase in cash used
for operating activities primarily resulted from the decrease in
accounts payable of $5,634,000 of which $3,150,000 was paid to satisfy
certain of Sun World's unsecured creditors pursuant to the Plan, net of
the decrease in accounts receivable and inventory attributable to Sun
World operations. The balance of the net cash used for operating
activities resulted from the increased activity level of Cadiz during
1996. During the 1996 six month period, the Company has been engaged
in, among other things, the acquisition of Sun World; negotiations
and/or discussions with prospective purchasers regarding several of the
Cadiz' water transfer projects and management of Cadiz' permanent and
seasonal crops. In 1995, by contrast, activities pertained to
evaluation of only one water transfer project and management of Cadiz'
permanent and seasonal crops. In addition, Sun World's operations for
the seventeen day period ending September 30, 1996 are included in the
1996 period.
Cash provided by investing activities totaled $1,698,000 during the
six months ended September 30, 1996 as compared to cash used for
investing activities of $883,000 for the same period in 1995. Cadiz
invested $425,000 in the purchase of land, property, plant and equipment
and in furtherance of its water transfer and storage projects. In
addition the acquisition of Sun World resulted in net cash provided to
the Company of $2,123,000 as shown below ($000's omitted):
Investment in Sun World $ 43,127
Less:
Initial cash deposit with
trustee for payment
of unsecured creditor claims (11,000)
Accrued additional cash
requirement for creditor
claims to be provided
by the Company (1,695)
Cost of acquisition incurred
prior to April 1, 1996 (692)
-------------
29,740
Less:
Cash contributed to Sun
World at acquisition
for working capital (15,000)
Cash balance of Sun World
acquired (16,863)
-------------
Net cash provided from acquisition
of Sun World,
net of cash acquired $ 2,123
============
Financing activities provided $37,663,000 for the six months ended
September 30, 1996 as compared to $2,320,000 during the six months ended
September 30, 1995. Net proceeds from the issuance of Common Stock and
Preferred Stock totaled $39,000,000 during the six month period ended
September 30, 1996. Proceeds from the issuance of Common Stock as a
result of the exercise of previously outstanding stock options totaled
$917,500 during the same period. Principal payments on long term debt
totaled $2,442,000.
The following table summarizes the Company's cash position for the
fiscal years ended March 31, 1996 and 1995 (amounts in thousands):
Year Ended March 31,
1996 1995
------- ------
Net cash used for
continuing activities $ (5,736) $ (2,890)
Net cash provided by
discontinued
operating activities -0- 57
-------- --------
Net cash used for operating
activities (5,736) (2,833)
Net cash used for investing
activities (2,357) (3,368)
Net cash provided by financing
activities 10,792 4,247
Net increase (decrease) in
cash 2,699 (1,954)
Cash, beginning of year 2,454 4,408
-------- --------
Cash, end of year $ 5,153 $ 2,454
======== ========
OUTLOOK. The Company believes that the operations of Sun World are
self-sufficient for working capital purposes on an ongoing basis. Cadiz
does not expect, in the foreseeable future, to make additional capital
contributions to Sun World, although no assurances can be given.
However, the working capital available to Sun World is generally not
available to Cadiz for use in connection with its operations.
Concurrently with the Sun World acquisition, Cadiz entered into
agreements with both of its existing lenders and with Sun World's
principal secured lenders which restrict the amount of cash that can
flow from Cadiz to Sun World and vice versa.
In the short term, Cadiz expects to meet its ordinary working
capital needs through a combination of quarterly management fee payments
from Sun World, payments from Sun World under an agricultural lease
whereby Sun World now operates the Company's 1,600 acres of developed
agricultural property at Cadiz, California, and the possible exercise of
outstanding stock options.
As the Company is actively pursuing the development of its water
resources, it is seeking the finalization of the regulatory approvals
needed to commence construction of a water delivery and/or storage
project at Cadiz. Once the lengthy regulatory review process is
finalized and construction of the necessary delivery and/or storage
system has commenced, the Company anticipates generating a revenue
stream within less than a year thereafter which will be sufficient to
meet the then existing operating requirements of the Company although no
assurances can be given. Concurrently with the regulatory review
process, the Company is also negotiating the terms of water delivery
and/or storage arrangements with various California water agencies,
which include issues such as financing, pricing concepts and formulas
and ownership of the pipeline and the delivery and/or storage system.
In addition to the development of its water resources, the Company
is actively involved in further agricultural development of its
landholdings as a result of San Bernardino County's approval of a
General Plan Amendment covering 9,600 acres of the Company's landholding
at Cadiz and the increased grower interest in Cadiz as an agricultural
area. Such development will be systematic and in furtherance of the
Company's business strategy to provide for maximization of the value of
its assets.
Such development is expected to continue to be accomplished through
its Sun World subsidiary or negotiated arrangements with third parties
which will significantly reduce any capital outlay required of the
Company in connection with such development activities and provide a
revenue stream in the future.
BUSINESS
The strategy of Cadiz Land Company, Inc. (the "Company") is to
create a portfolio of landholdings, water resources, and agricultural
operations within central and southern California which possess
sizable assured supplies of water. Management believes that, with
both the increasing scarcity of water supplies in California and the
increasing demand for water, the Company's access to water will
provide it with a competitive advantage both as a major agricultural
concern and as a supplier of water which will lead to continued
appreciation in the value of the Company's portfolio.
With its September 13, 1996 acquisition of Sun World, the Company has
become one of the largest fully integrated agricultural companies in
California. The Sun World acquisition has added to the Company's portfolio
more than 18,000 acres of prime agricultural land, packing facilities,
marketing expertise, proprietary agricultural products and the highly
regarded Sun World brand name. Sun World is renown for developing or
acquiring specialty produce varieties with unique characteristics which
differentiate them from commodity produce varieties. Sun World owns
patents and holds trademarks on a number of fruit varieties and, as a
result of its Research and Development Center, has a long history of
product innovation.
In addition to the above, the acquisition of Sun World provided
the Company senior water rights throughout the central and southern
valleys of California. The Company's portfolio also includes more
than 39,000 acres of land in eastern San Bernardino County. These
landholdings are underlain by excellent groundwater resources. The
largest property totals approximately 27,400 acres at Cadiz,
California, 1,600 acres of which have been developed for cultivation
of citrus orchards, table grape vineyards and row crops.
The Company's landholdings, which now total approximately 57,000
acres, are located adjacent to the major aqueduct systems of central
and southern California, and in close proximity to the Colorado River.
The Company expects to participate in a broad variety of water
transfer and storage projects, including the storage and transfer of
surplus water for public agencies which require supplemental sources
of water.
GENERAL DEVELOPMENT OF BUSINESS
- ---------------------------------
On September 13, 1996, the Company acquired all of the stock of a
reorganized Sun World pursuant to a consensual plan of reorganization
(Debtors' Modified Fourth Amended Consolidated Plan of Reorganization
dated June 3, 1996 (Modified)) which was confirmed by the U.S.
Bankruptcy Court at a hearing on July 12, 1996 (the "Plan"). Sun
World and certain subsidiaries of Sun World had filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code on
October 3, 1994 after debt restructuring negotiations with Sun World's
existing lenders failed.
Total consideration was approximately $179 million of which
approximately $156 million was represented by a restructuring of
previously existing debt with Sun World's secured lenders. In
addition, the Company made a capital contribution of $15 million to
Sun World, with the intent of eliminating the requirement for Sun
World to have any additional debt facilities beyond those owed to its
existing secured creditors. The consideration paid by the Company was
determined in arms-length negotiations between the Company and the
various constituents of the Sun World bankruptcy case. The Company
intends to continue operating Sun World within the same markets in
which it has been historically engaged and does not contemplate any
significant change in the use of Sun World's properties.
In addition to Sun World, over the past 13 years the Company has
acquired more than 39,000 acres in various portions of eastern San
Bernardino County, California. Although located in desert terrain,
these landholdings are underlain by groundwater resources having
active recharge of high quality. In addition, the Company's
landholdings have excellent potential for agricultural development and
other uses, including municipal, recreational, and industrial
applications.
To date, the Company has employed much of its working capital in
development applications designed to increase the long-term value of
its properties. A portion of these expenditures has related to the
planned Cadiz Valley and Piute Valley groundwater transfer and storage
projects. See "Narrative Description of Business - Water Resource
Development," below. In addition, agricultural development and
operations continue to be an integral part of the Company's ongoing
business strategy, maximizing the value of its landholdings while
generating cash flow. See "Narrative Description of Business -
Agricultural Operations" below.
The Company's acquisition of Sun World is a part of this
strategy. Sun World has added to the Company's portfolio more than
18,000 acres of prime agricultural land in the San Joaquin, Coachella,
and Colorado River valleys, increasing the Company's total
landholdings to approximately 57,000 acres. See "Properties."
The Company was formed in 1983 under the name AridTech, Inc. On
May 9, 1988, the name of the Company was changed to Pacific
Agricultural Holdings, Inc. ("PAH"). In May 1992 the Company's shareholders
approved the reincorporation of the Company into Delaware under the
name Cadiz Land Company, Inc. As a part of the reincorporation, the
Company's common stock was reverse split on a one-for-five basis,
giving each shareholder of the Company one share of Cadiz Land
Company, Inc. stock for every five shares of PAH stock held at the time of
the reincorporation.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
- ---------------------------------------------
During its fiscal year ended March 31, 1996, the Company operated
in one industry segment: resource development. See Consolidated
Financial Statements. Also, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
NARRATIVE DESCRIPTION OF BUSINESS
- ----------------------------------
Pursuant to its business strategy, the Company seeks to develop
and manage its portfolio of assets for their highest and best use.
The development and management activities of the Company are currently
focused on agricultural operations (primarily through its wholly-owned
Sun World subsidiary) and water resource development.
AGRICULTURAL OPERATIONS
- -----------------------
With the acquisition of Sun World, the Company has become one of
the largest agricultural companies in California. Sun World is a
vertically integrated agricultural operation which combines an
extensive research and development program, year round sourcing,
farming and packing activities and strong marketing capabilities.
PRODUCT LINE. Sun World ships dozens of varieties of fresh
fruits and vegetables to all 50 states and to more than thirty foreign
countries. Sun World is currently a leading grower and marketer of
table grapes, seedless watermelons, colored sweet peppers, plums,
peaches, nectarines, apricots and lemons. It is also one of the
world's largest independent marketers of grapefruit, tangerines,
mandarins, and dates.
The breadth and diversity of the product line helps to minimize
the impact of individual crop earnings fluctuations. In addition,
work can be spread more evenly over the course of a year because the
growing cycles vary from crop to crop allowing Sun World to utilize
its human and capital resources more efficiently than would be the
case if Sun World's sales were limited to only a few products.
Further, the breadth and diversity of its product offering provides
Sun World with greater presence and influence with its grocery and
food service customers.
Although most fruits and vegetables are fungible commodities, Sun
World has adopted a strategy of developing or acquiring specialty
produce varieties with unique characteristics which differentiate them
from the commodity produce varieties. Most of these varieties are
harvested during favorable marketing windows when available supply
from competitors is limited. These specialty varieties typically
command a price premium and are not subject to the same price
volatility as are the commodity varieties. They provide Sun World
with a dominant position in a number of product categories.
Branded produce grown and marketed by Sun World include sweet
colored peppers, Superior Seedless(TM) table grapes, Black Diamond (TM)
plums, Sun World Seedless(R) watermelons, Star Sweet(R) super red
grapefruit, Honeycot(R) apricots and Amber Crest(R) peaches. These
products were obtained through a combination of internal development
and acquisition. Sun World's Research and Development Center is
dedicated to developing additional high value proprietary varieties.
See "Research and Development," below.
FARMING OPERATIONS. Sun World's farming operations produce
approximately 7 million units of fruits and vegetables annually. Its
principal agricultural lands are located in the San Joaquin,
Coachella, and Colorado River valleys of California. See "Business -
Properties."
Sun World properties are primarily dedicated to producing
permanent commercial crops and open ground available for row crop
plantings. Over 1,300 acres are currently utilized for developing
crops (e.g. vines and trees that have not yet reached a commercially
viable age or level of fruit production).
The primary crop categories and approximate commercial and
developing acres for each are as follows:
CROP CATEGORY COMMERCIAL ACRES DEVELOPING ACRES
- ----------------------- ---------------- -------------------
Table grapes 4,250 160
Raisin and wine grapes 1,900 -0-
Plums 1,570 475
Lemons 1,100 -0-
Watermelons 885 -0-
Peppers 775 -0-
Nectarines 400 322
Peaches 165 246
Apricots 4 62
Other row crops 355 -0-
Sun World also operates the Company's 1,600 acres of developed
agricultural property at Cadiz under an agricultural lease entered
into concurrently with the Sun World acquisition. The Company
believes that its Cadiz Valley agricultural operations will benefit by
virtue of the ability of the Company to grow and pack and market the
Cadiz produce under the Sun World label and to market it to Sun
World's worldwide customer base.
PACKING AND MARKETING OPERATIONS. Sun World's packing facilities
handle approximately 12 million units of produce annually. These
facilities provide harvesting, packing, cooling and shipping services
for Sun World production as well as for other commercial clients. Sun
World owns five facilities, four of which are located in the Coachella
Valley and one of which is located in the San Joaquin Valley. See
"Business - Properties."
Sun World's integrated operations enable it to offer the market a
continuous stream of new, specialty products which receive a market
premium coupled with a large basket of other produce staples. As a
significant grower, Sun World is able to manage the quality of its own
product line, and as a significant packer/marketer, Sun World works
with other growers to ensure product quality through packing and
distribution.
Sun World sourcing, both external and internal, is diversified
geographically. Sun World's owned and leased farming operations are
located throughout California from the Coachella Valley in the south
to Central California's San Joaquin Valley as well as operations near
the coast. Sun World sources externally produced product from
throughout California, from other areas of the United States, and from
international sources. This geographic diversification reduces the
impact that unfavorable weather conditions and infestations could have
on Sun World if it were not geographically diverse. The geographic
diversification also provides Sun World with a longer selling season
for many crops since the harvests occur at different times.
In addition to merchandising its own products, Sun World provides
marketing services to other companies. It maintains a sizable and
highly diverse customer base which includes more than 2,000
supermarket retailers, food service entities, warehouse clubs, and
international trading companies located in approximately 30 countries.
Domestic customers include national retailers such as Safeway Stores
and Albertson's; club stores, including PriceCostco and Sam's; and
food service distributors, including Sysco and Marriott.
Approximately 7.5% of Sun World's products are marketed outside of the
United States in Europe, Australia, Japan, Hong Kong, Singapore,
Malysia and Taiwan. Sun World sells almost exclusively through key
importers and brokers in these markets, thereby limiting its financial
exposure. Only one customer, Safeway Stores (representing
approximately 15% of 1996 gross sales made by Sun World) accounts
for more than 10% of the Company's consolidated revenues.
RESEARCH AND DEVELOPMENT. Sun World has a long history of
product innovation, and its Research and Development Center maintains
a fruit breeding program that has commercialized more than 100,000
fruit seedlings and introduced dozens of proprietary fruit varieties
in the last five years. Recent product successes include the Black
Diamond (TM) plum, the Amber Crest(R) peach and the Honeycot(R) apricot.
There are several other promising grapes and stone fruits which are
scheduled for commercial planting and production in the near future.
Approximately 235 acres of Sun World property is used for the
Research and Development Center and crop experimentation. The
Research and Development Center facility houses residue testing
laboratories, transfer rooms, growth rooms, four greenhouses, and over
200 acres of experimental growing crops.
Sun World holds rights to more than 600 patents and trademarks
around the world. The patent registrations exist in most major fruit
producing countries and the trademarks are held in both fruit
producing and consuming regions. Sun World's patents have varying
expiration dates; however, the expiration of any individual patent
will not have a material effect upon Sun World's operations.
WATER RESOURCE DEVELOPMENT
- --------------------------
The increasing scarcity of water supplies in California will lead
to increasing dependence on water transfer and storage projects within
the state. The Company's portfolio of water resources, located
adjacent to the State Water Project, the Colorado River Aqueduct, and
the Colorado River, provides the Company with the opportunity to
participate in significant water transfer and storage projects
involving its various properties.
CADIZ WATER TRANSFER AND STORAGE PROJECT. The Company's 27,400
acres in the Cadiz and Fenner valleys of eastern California (the
"Cadiz Property") are underlain by a substantial high quality
groundwater basin. This groundwater is recharged by rain and snowfall
within a catchment area of nearly 1,300 square miles. See "Business -
Properties - The Cadiz Property."
As a result of an Environmental Impact Report ("EIR") and land
use approvals by San Bernardino County in 1993, the Company is
authorized to pump approximately 30,000 acre-feet of groundwater per
year for irrigation of the Cadiz Property. An acre foot is 326,000
gallons, or enough for approximately two families for one year. The
Company currently uses approximately 5,000 acre feet per year to
irrigate its Cadiz Valley agricultural development. Planned near term
development will likely require no more than 10,000 acre feet per
year. As a result, the Company intends to transfer groundwater -
surplus to its present and near term needs - to public agencies which
require supplemental sources of water. Such a project (the "Cadiz
Water Transfer and Storage Project") would require the completion of
environmental review and permit processes, construction of a well
field and a 30-mile pipeline linking the Cadiz Property to the
Colorado River Aqueduct. Geotechnical and engineering studies confirm
that the Cadiz Property is well suited for temporary storage of water
which could be imported from the Colorado River during periods of
excess supply.
The Cadiz Water Transfer and Storage Project will require further
regulatory approvals. The Company began technical and environmental
investigations in 1994; however, in order to receive all necessary
regulatory approvals and permits, the Company will be subject to
various waiting periods applicable to required submissions and
responses. There is a risk that delays in this process will result in
delays in completion of the Cadiz Water Transfer and Storage Project,
however the Company expects completion of the environmental review and
permit process within 18 months and completion of the necessary
delivery system within several months thereafter, although no
assurances can be given.
The Company is in discussions regarding transfer and storage
agreements with several public water agencies. These agreements, when
complete, will determine pricing formulas, financing, and ownership of
the facilities constructed to deliver and store the water.
PIUTE AND OTHER TRANSFER AND STORAGE PROJECTS. The Company has
also commenced water development operations at its 7,300 acre Piute
property, which is located in eastern San Bernardino County
approximately 15 miles from the resort community of Laughlin, Nevada
and about 12 miles from the Colorado River town of Needles,
California. See "Business - Properties - The Piute Property."
Hydrological studies and testing of a full scale production well have
demonstrated that this landholding is underlain by groundwater of
excellent quality.
Additional technical and environmental investigations are
currently underway for a water development project (the "Piute
Project") anticipated to transfer approximately 10,000 to 15,000 acre
feet per year. The Company has begun discussion with prospective
purchasers of water from the Piute Project.
The Company expects that much of the development work being
performed for the Cadiz Water Transfer and Storage Project will be
transferable to the Piute Project, thus making it possible for water
transfers from Piute to begin in parallel or shortly behind the Cadiz
water transfer and storage project.
Exploratory drilling is scheduled during 1997 to test the
potential for groundwater development, transfer, and underground
storage at other properties held by the Company in southeastern
California.
SUN WORLD WATER RESOURCES. As irrigation technology continues to
improve, Sun World's water resources (which include senior water
rights in central and southern California) may be in excess of actual
demands. This surplus may be available for further agricultural
development, or for possible water transfers, exchanges, and banking.
Sun World's landholdings and associated water resources are
located adjacent to the major aqueduct systems of central and southern
California, and in close proximity to the Colorado River. These
holdings complement the Company's other groundwater resources, and
will enhance the Company's opportunities to participate in a broad
variety of water transfer and storage projects.
SEASONALITY
- -----------
The Company's agricultural operations are significantly impacted
by the general seasonal trends that are characteristic of the
agricultural industry. Sun World has historically received the
majority of its earnings before interest, taxes, depreciation and
amortization (EBITDA) during the second and third calendar quarters
following the harvest and sale of its table grape and stonefruit crops.
In connection with the water resource development activities of
the Company, revenues are not expected to be seasonal in nature. The
Company does not expect that contracts entered into for the transfer
or storage of water will provide for revenue payments varying
significantly from season to season.
COMPETITION
- -----------
The agricultural business is highly competitive. The Company's
competitors include a limited number of large international food
companies, as well as a large number of smaller independent growers
and grower cooperatives. No single competitor has a dominant market
share in this industry due to the regionalized nature of these
businesses. Sun World utilizes brand recognition, product quality,
harvesting in favorable product windows, competitive pricing,
effective customer service and consumer marketing programs to enhance
its position within the highly competitive fresh food industry.
Consumer and institutional recognition of the Sun World trademark and
related brands and the association of these brands with high quality
food products contribute significantly to Sun World's ability to
compete in the market for fresh fruit and vegetables.
The Company faces competition for the acquisition, development
and sale of its properties from a number of competitors, some of which
have significantly greater resources than the Company. The Company
may also face competition in the development of water resources
associated with its properties. Since California has scarce water
resources and an increasing demand for available water, the Company
believes that price and reliability of delivery are the principal
competitive factors affecting transfers of water in California. In
this regard, the ability of the Company to price its water on a
competitive basis will depend upon the cost of constructing and
maintaining delivery systems for its surplus water.
EMPLOYEES
- -----------
As of December 23, 1996, the Company employed a total of 574
full-time employees, of whom 565 were employed by Sun World, 6 were
engaged in resource development activities and 3 were engaged in
general and administrative activities. Sun World from time to time
engages various part time and seasonal employees, with a seasonal high
of approximately 2,500 part time employees. Approximately 119 of the
Company's employees are represented by a labor union pursuant to a
contract that expires in 1999. Overall, the Company believes that its
employee relations are good.
REGULATION
- -----------
Certain segments of the Company's operations are subject to
varying degrees of federal, state and local laws and regulations. The
Company's agricultural operations are subject to a broad range of
evolving environmental laws and regulations. These laws and regulations
include the Clean Air Act, the Clean Water Act, the Resource Conservation
and Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act
and the Comprehensive Environmental Response, Compensation and
Liability Act. Compliance with these foreign and domestic laws and
related regulations is an ongoing process which is not currently
expected to have a material effect on the Company's capital
expenditures, earnings or competitive position. Environmental
concerns are, however, inherent in most major agricultural operations,
including those conducted by the Company, and there can be no
assurance that the cost of compliance with environmental laws and
regulations in the future will not be material.
The Company's food operations are also subject to regulations
enforced by, among others, the U.S. Food and Drug Administration and
state, local and foreign equivalents and to inspection by the U.S.
Department of Agriculture and other federal, state, local and foreign
environmental and health authorities. Among other things, the U.S.
Food and Drug Administration enforces statutory standards regarding
the safety of food products, establishes ingredients and manufacturing
procedures for certain foods, establishes standards of identity for
foods and determines the safety of food substances in the United
States. Similar functions are performed by state, local and foreign
governmental entities with respect to food products produced or
distributed in their respective jurisdictions. Existing environmental
regulations have not, in the past, had a materially adverse effect
upon the operations of the Company, and the Company believes that
existing environmental regulations will not, in the future, have a
materially adverse effect upon its operations. There can be no
assurances, however, as to the effect of any environmental regulations
which may be adopted in the future.
As the Company proceeds with the development of its properties,
including related infrastructure, the Company will be required to
satisfy various regulatory authorities that it is in compliance with
the laws, regulations and policies enforced by such authorities.
Groundwater development, and the export of surplus groundwater for
sale to single entities such as public water agencies, are not subject
to regulation by existing statutes, other than general environmental
statutes applicable to all development projects. Although applicable
laws, regulations and policies have not had a materially adverse
effect upon the ability of the Company to develop its Cadiz or other
properties to date, management cannot predict with certainty what
requirements, if any, may be imposed by regulators upon future
development. In addition, the time and costs associated with
obtaining regulatory approvals for resource development are
significant, and there can be no assurance that the Company will
receive desired approvals for future development plans.
PROPERTIES
- ----------
The Company leases executive offices in Rancho Cucamonga,
California. Sun World owns its offices in Bakersfield, California and
leases offices in Coachella, California. The Company and each of its
subsidiaries believe that their property and equipment are generally
well maintained, in good operating condition and adequate for their
present needs.
The following is a description of the Company's significant
properties.
THE CADIZ PROPERTY
- ------------------
In 1984, the Company conducted an investigation of the
feasibility of the agricultural development of land located in the
Mojave desert near Cadiz, California, and confirmed the availability
of prime quality water in commercial quantities appropriate for
agricultural development. Since 1985, the Company has acquired over
27,000 acres in the Cadiz vicinity.
The Company has determined that the groundwater basin which
underlies the Cadiz property contains more water than is needed for
both the present and projected agricultural development requirements
of the property. The Company therefore proposes to transfer water
from this basin to third party users. See "Business - Narrative
Description of Business - Water Resource Development."
In November 1993, the San Bernardino County Board of Supervisors
unanimously approved a General Plan Amendment establishing an
agricultural land use designation for 9,600 acres at Cadiz. This
Board action represented the largest land use approval on behalf of a
single property holder in the County's known history. This action
also approved permits to construct infrastructure and facilities to
house as many as 1,150 seasonal workers and 170 permanent residents
(employees and their families) and allows for the withdrawal of more
than 1,000,000 acre-feet of groundwater from the Company's underground
water basin.
To date, 1,600 acres of the Cadiz property have been developed
for table grapes, citrus and row crops. A total of 680 acres of the
table grape vineyard and 2,560 acres of undeveloped land at Cadiz are
held by Southwest Fruit Growers, L.P. ("SWFG"), a limited partnership
in which the Company acts as general partner. SWFG was formed as a
part of the restructuring of certain entities which had invested with
Pacific Agricultural Services, Inc. and PAH in table grape properties
at Cadiz and at Hyder, Arizona. The Company holds a 66.3 percent
limited partnership interest in SWFG. Allocable losses incurred
through the year ended March 31, 1991 served to eliminate the minority
interest for accounting purposes.
Substantially all other Cadiz acreage is held in fee directly by
the Company or through its wholly-owned subsidiary, Cadiz Valley
Development Corporation ("CVDC").
SUN WORLD PROPERTIES
- --------------------
FARM PROPERTIES. Sun World owns approximately 18,000 acres and
leases approximately 500 acres of improved land in central and
southern California. Substantially all of this land is used for the
cultivation of permanent and annual crops and support activities,
including packing facilities.
Sun World owned farming property is divided between five distinct
geographic regions: Madera, Bakersfield and Arvin (located within the
San Joaquin Valley), Coachella (located in the state's southeastern
corner near Palm Springs) and Blythe (located approximately 15 miles
east of the Coachella Valley adjoining the Colorado River). The
approximate acreage and primary use of these owned properties is as
follows:
REGION TOTAL ACRES PRIMARY USE
- --------------------- ------------ ---------------------
Madera 1,100 stonefruit
Bakersfield 8,500 grapes and row crops
Arvin 3,000 grapes and row crops
Coachella 1,000 grapes
Blythe 4,200 lemons
Sun World's largest leased property, consisting of approximately
400 acres, is located in Oxnard, California and is used for growing
peppers.
PACKING AND HANDLING FACILITIES. Sun World owns five packing and
handling facilities, four of which are located in the Coachella Valley
and one of which is located in the San Joaquin Valley at Kimberlina,
near Bakersfield.
The Kimberlina facility, located on an 83 acre parcel owned by
Sun World, consists of 95,000 square feet of cold storage areas and
50,000 square feet for stonefruit packing (including two highly
automated stonefruit production lines). An additional 14,300 square
feet is devoted to office space.
Sun World's primary Coachella Valley facility consists of two
independent sheds located on 22 acres of industrial commercial zoned
land in Coachella, California, two miles south of Indio. The 22 acres
consists of 5 acres of buildings and improvements, 6 acres of packing,
and 11 acres of open land. One shed is used primarily for the packing
of citrus, for receiving table grapes, for cold storage and for office
space. The other shed is used primarily for receiving, cooling and
storing table grapes.
Sun World's other operating facility in Coachella consists of one
shed on 4 acres of land and is used primarily for packing watermelons
and citrus and for storage.
The two remaining Coachella facilities, located in Indio, are not
currently being used for operations and are being held for sale.
All of the Sun World properties are subject to encumbrances in
favor of Sun World's two primary lenders as security for loans with
outstanding balances aggregating approximately $143 million as of
November 30, 1996. See "Managment's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources -
Current Financing Arrangements."
THE PIUTE PROPERTY
- -------------------
The Piute property consists of approximately 7,300 acres and is
located approximately 60 miles east of Cadiz and approximately 15
miles west of the Colorado River and Laughlin, Nevada, a small, fast
growing town with hotels, casinos and water recreation facilities.
The Piute property was identified for acquisition by the Company by a
combination of the satellite imaging and geological techniques which
were used by the Company to identify water at Cadiz.
The Piute acreage adjoins Highway 95, which is a direct route to
Las Vegas, approximately 60 miles north. The Santa Fe Railroad passes
through the land and Interstate 40 is approximately 12 miles to the
south. The property is held by the Company in fee title as to
approximately 3,600 acres, with the remaining acreage under option.
The Company has commenced the development of the water resources
of this property. See "Business - Narrative Description of Business
Water Resource Development."
THE HOMER PROPERTY
- ------------------
The Homer property, consisting of approximately 2,500 acres held
in fee, is located approximately six miles southwest of Piute in an
ecologically protected area. The value of the Homer land as part of
an ecologically protected area should allow the Company, if it so
chooses, to exchange the property for land elsewhere or to allow for
consolidation of other ares of ownership.
OTHER PROPERTIES
- ------------------
In addition to the Cadiz, Piute and Homer properties, the Company
owns approximately 1,719 additional acres in the Mojave Desert as to
which development has not yet commenced. The Company will continue to
seek to acquire additional properties both in Southern California
desert regions and elsewhere which are believed to be suitable for
development.
All of the Company's non-Sun World fee property is subject to
encumbrances in favor of the Company's two primary lenders as security
for loans with outstanding balances aggregating approximately $18.5
million as of November 30, 1996. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and Capital
Resources - Current Financing Arrangements."
LEGAL PROCEEDINGS
- -----------------
In November 1995, the San Bernardino County Board of Supervisors
certified an Environmental Impact Report/Environmental Impact
Statement ("EIR/EIS"), and approved a Conditional Use Permit for the
proposed construction and operation of a substantial landfill on the
shore of Bristol Lake near Amboy, California (the "Rail-Cycle"
Project). The general partner of Rail-Cycle is controlled by WMX
Technologies, Inc. (formerly Waste Management, Inc.). The Rail-Cycle
Project would be located within a few miles of land owned by the
Company at Cadiz, California, which the County of San Bernardino has
designated for agricultural use in its General Plan.
The Company has vigorously opposed the Rail-Cycle Project on a
number of grounds. In December 1995, an action styled CADIZ LAND
COMPANY, INC. VS. COUNTY OF SAN BERNARDINO, ET. AL. CASE NO. BCV 02341
was filed by the Company in Superior Court in San Bernardino County.
The action challenges the various decisions by the County of San
Bernardino relative to the Rail-Cycle Project. Named in this action,
in addition to the County of San Bernardino, were the Board of
Supervisors of the County of San Bernardino, three individual members
of the Board of Supervisors, an employee of the County, and Rail
Cycle. On February 1, 1996, Rail-Cycle and the County removed the
case to Federal District Court for the Central District of California
(Case No. CV-96-740-JGD [BQRS]). However, the case has subsequently
been remanded back to the San Bernardino Superior Court. The Company
alleges that the actions of the County of San Bernardino did not
comply with the guidelines prescribed by the California Environmental
Quality Act and violated state planning and zoning laws. The action
seeks to set aside the county certification of the EIR/EIS and
approval of the proposed Rail-Cycle Project. The Company continues to
believe the proposed Rail-Cycle Project, if constructed and operated
as currently designed, poses environmental risks both to the Company's
agricultural operations at Cadiz and to the groundwater basin
underlying the Cadiz property. Accordingly, the Company intends to
pursue a claim for damages against the County of San Bernardino and
Rail-Cycle and therefore, the action also seeks compensatory damages
in excess of $75 million. The action is currently in the discovery
phase. The court will likely hold a hearing on the Company's land use
and regulatory claims prior to scheduling a trial on the issue of the
Company's monetary damages. However, no dates have been set for any
hearings in this matter and the Company intends to continue vigorously
prosecuting its claims.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of December 27, 1996, the ownership of
Common Stock of the Company by each stockholder who is known by the
Company to own beneficially more than 5 percent of the outstanding
Common Stock, by each director, by each executive officer listed in the
Summary Compensation Table below, and by all directors and officers as a
group.
Amount and Nature of Percent
Name and Address Beneficial Ownership of Class
- ---------------- ------------------------ -------------
Morgan Stanley Group, Inc., et. al. 2,675,862<F1> 11.63%
1251 Avenue of the Americas
New York, NY 10020
Fidelity International Limited, et.al. 2,522,667<F2> 10.97%
Pembroke Hall
42 Crow Lane
Hamilton, Bermuda
The Capital Group Companies, Inc. 1,240,000<F3> 5.39%
333 South Hope Street
Los Angeles, CA 90071
Jupiter Asset Management Limited 1,141,633<F4> 4.96%
Knightsbridge House
197 Knightsbridge
London SW7 1RB England
Dwight W. Makins 425,000<F5> 1.82%
Beaurepaire House
Sherborne St. John
Basingstoke
Hampshire RG26 5EH
United Kingdom
Keith Brackpool 1,318,795<F6> 5.52%
10535 Foothill Blvd., Suite 150
Rancho Cucamonga, CA 91730
J.F.R. Hammond 915,017<F7> 3.97%
10 Compton Terrace
London N1 2UN
United Kingdom
Stephen D. Weinress 165,000<F8> 0.71%
3333 Michelson Dr.
Irvine, CA 92715
Susan K. Chapman 102,700<F9> 0.44%
10535 Foothill Blvd., Suite 150
Rancho Cucamonga, CA 91730
All Directors and Officers as a Group 2,931,512<F5><F6><F7> 12.75%
(7 individuals) <F8><F9>
<F1> A Schedule 13G has been filed with the Securities and Exchange
Commission indicating that Morgan Stanley Group, Inc. ("MS Group")
may be deemed to be the indirect beneficial owner of 1,744,000 shares
of Common Stock, arising from the indirect beneficial ownership of
such shares by Morgan Stanley Asset Management Limited ("MSAM"), a
subsidiary of MS Group. The address of MSAM is 25 Cabot Square,
Canary Wharf, London E14 4QA, England. The Schedule 13G indicates
that all such shares are held by MSAM in its capacity as an Investment
Adviser, and that MS Group and MSAM share voting and investment power
with respect to the shares which they may be deemed to beneficially
own. MS Group and MSAM each disclaim beneficial ownership of such
shares pursuant to Rule 13d-4 under the Securities Exchange Act of
1934. MSAM purchased an additional 90,000 shares of Common Stock
through a private placement during the year ended March 31, 1996 and
3,000 Series A Preferred shares in an institutional private placement
which provided financing for the Company's acquisition of Sun World.
The Series A Preferred is convertible into shares of Common Stock at
a conversion price of $3.75 per share.
<F2> Fidelity International Limited ("FIL") and FMR Corp. ("FMR") have each
filed Schedule 13Ds and amendments thereto with the Securities and
Exchange Commission indicating that, although they do not consider
themselves to be acting as a "group," they hold, directly or
indirectly, a total of 2,522,667 shares of Common Stock. The Schedule
13Ds state that FIL beneficially owns, as investment adviser or the
parent of the investment adviser to certain international funds and
international pension accounts, 2,522,667 shares of Common Stock and
that such funds and accounts and FIL, as investment adviser to the
funds and accounts, have sole voting and investment power as to all
such shares. According to the Schedule 13Ds, Mr. Edward C. Johnson
3d, who is Chairman of FIL and FMR, together with certain family
members owns 24.9 percent of the outstanding voting common stock
of FMR, and a partnership controlled by Mr. Johnson and
members of his family own shares of FIL with the right to cast
approximately 47.22 percent of the total votes which may be cast by
shareholders of FIL. The Schedule 13Ds indicate that FIL was a
subsidiary of Fidelity Management & Research Company ("Fidelity")
prior to June 30, 1980, at which time the shares of FIL held by
Fidelity were distributed as a dividend to the shareholders of FMR,
and that FIL currently operates as an entity independent of FMR
and Fidelity. The principal offices of FMR, Fidelity and Mr. Johnson
are located at 82 Devonshire Street, Boston, MA 02109. Fidelity
purchased an additional 190,000 shares of Common Stock through
private placements during the year ended March 31, 1996.
<F3> The Capital Group Companies, Inc. has filed a Schedule 13G with the
Securities and Exchange Commission indicating that it holds 990,000
shares as Discretionary Manager by virtue of its affiliates acting
as investment manager to a number of institutional investors. During
the year ended March 31, 1996, the Capital Group Companies subscribed
to an additional 250,000 shares of Common Stock through a private
placement.
<F4> Jupiter Asset Management Limited has filed a Schedule 13D with the
Securities and Exchange Commission indicating that it holds such
shares in its capacity as Discretionary Manager by virtue of its
acquisition, in July 1994, of all of the business and assets of
Queen Anne's Gate Asset Management Limited, which had previously
acted as investment manager with respect to such shares.
<F5> Includes 300,000 shares underlying presently exercisable options.
<F6> Includes 875,000 shares underlying presently exercisable options.
<F7> Includes 285,017 shares held by a corporation of which Mr. Hammond
is an affiliate. Also includes 125,000 shares underlying presently
exercisable options and 440,000 shares underlying 1,650 shares of
Series A Preferred held by a corporation of which Mr. Hammond is an
affiliate.
<F8> Includes 125,000 shares underlying presently exercisable options.
<F9> Includes 100,000 shares underlying presently exercisable options.
Does not include 25,000 shares underlying conditional options held
by Ms. Chapman, the conditions to the vesting of which have not yet
been met.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain biographical information, the present
occupation and business experience for the past five years of each director
and executive officer:
Name Age Position with the Company
_____________________________ ____ ____________________________
Dwight W. Makins 45 Chairman of the Board
Keith Brackpool 39 Chief Executive Officer & Director
J.F.R. Hammond 54 Director
Stephen D. Weinress 55 Director
Susan K. Chapman 43 Chief Financial Officer and Secretary
Timothy J. Shaheen 36 Chief Executive Officer of Subsidiary
Stanley E. Speer 36 Senior Vice President, Chief Financial
Officer and Secretary of Subsidiary
Dwight W. Makins was elected as Chairman of the Board in December 1991. Mr.
Makins currently serves as a director of King and Shaxson (Holdings) plc, a
British bank and discount house. Prior to July 1988, he was managing director
of John Govett & Co. Ltd. He is a director of a number of U.K. companies.
Mr. Makins is a member of the Audit Committee and Compensation Committee of
the Board of Directors.
Keith Brackpool is a founder of the Company, and has served as a member of the
Company's Board of Directors since September 1986, and served as Chairman of
the Board from 1989 through December 1991, when he was reappointed as Chief
Executive Officer of the Company. From October 1989 until May 1991, Mr.
Brackpool was employed as the President of Albert Fisher, Inc., a wholly-owned
subsidiary of The Albert Fisher Group PLC, a U.K. corporation and was a
director of The Albert Fisher Group PLC until May 31, 1991. Since 1988,
Mr. Brackpool has served as an officer and principal of the general partner
of 1334 Partners, Ltd., a California limited partnership which holds
commercial real estate in Southern California.
J.F.R. Hammond was named to the Company's Board of Directors in December
1991. Since March 1987 Mr. Hammond has been self-employed, and his business
activities primarily involve private investments in various companies. Mr.
Hammond also serves as Chairman of a Canadian oil and gas company traded on
the Alberta exchange. Prior to March 1987, Mr. Hammond was managing director
of Greenwell-Montagu Securities, a British brokerage firm. Mr. Hammond is a
member of the Audit Committee and Compensation Committee of the Board of
Directors.
Stephen D. Weinress was appointed a director of the Company in September 1993.
Since 1984 he has been the Managing Director of L.H. Friend, Weinress, Frankson
& Presson, Inc., an investment banking firm based in Irvine, California. Mr.
Weinress is a member of the Audit Committee and Compensation Committee of
the Board of Directors.
Susan K. Chapman became Chief Financial Officer and Secretary of the Company
in November 1993. From 1985 until she joined the Company, Ms. Chapman
served as Vice President of Operations and Controller of Agora Development,
Inc., a private real estate development company, where she supervised all
financial and operational aspects of the company. Prior thereto, she served
for five years as Senior Accountant with the accounting firm of Price
Waterhouse LLP, following which she served as a senior financial executive
of a privately held manufacturing company. Ms. Chapman is a Certified Public
Accountant.
Timothy J. Shaheen was appointed Chief Executive Officer of the Company's
Sun World subsidiary in September 1996. Mr. Shaheen has seven years of
experience in the produce industry, most recently serving as a senior
executive with Albert Fisher North America. While with Albert Fisher,
Mr. Shaheen also served as Director of its Canadian Produce Operations and
as a Director of Fresh Western Marketing, one of the largest growers/shippers
of fresh vegetables in the Salinas Valley of California. Mr. Shaheen has
also served as a past director of the Los Angeles Association of Produce
Wholesalers and Dealers. Prior to his employment with Albert Fisher,
Mr. Shaheen was a senior manager with the accounting firm of Ernst &
Young LLP. Mr. Shaheen is a Certified Public Accountant.
Stanley E. Speer joined the Company following completion of the acquisition
by the Company of Sun World as Senior Vice President, Chief Financial Officer
and Secretary of Sun World. Mr. Speer has fifteen years of experience in
public accounting with the accounting firm of Coopers & Lybrand LLP. Since
1992 he served as a partner in their financial advisory services group
specializing in business reorganization and mergers and acquisitions
consulting. Mr. Speer is a Certified Public Accountant and a Certified
Insolvency and Reorganization Accountant.
Directors of the Company hold office until the next annual meeting of
stockholders or until their successors are elected and qualified. There are
no family relationships between any directors or current officers of the
Company. Officers serve at the discretion of the Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities ("reporting persons"), to file with the Securities and
Exchange Commission (the "Commission") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities
of the Company. Reporting persons are required by Commission regulations
to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of reports
and amendments thereto on Forms 3, 4 and 5 furnished to the Company by
reporting persons during, and with respect to, its fiscal year ended March 31,
1996, and on a review of written representations from reporting persons to
the Company that no other reports were required to be filed for such fiscal
year, all Section 16(a) filing requirements applicable to the Company's
directors, executive officers and greater than ten percent beneficial owners
during such period were satisfied in a timely manner.
EXECUTIVE COMPENSATION
The tables and discussion below set forth information about the compensation
awarded to, earned by, or paid to the Company's executive officers during the
fiscal years ended March 31, 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
-------------------- -------------
Name and Principal Fiscal Stock
Position Year Salary<F1> Bonus Options
- ------------------------ ---- --------------------- ---------
Keith Brackpool 1996 $350,000 $175,000 -0-
Chief Executive Officer 1995 280,000 -0- 750,000
1994 202,083 50,000 500,000
David Peterson<F2> 1996 $185,000 $ -0- 50,000<F3>
Vice President of 1995 150,000 30,000 200,000<F3>
Agricultural Development
Susan K. Chapman<F4> 1996 $130,000 $ -0- -0-
Chief Financial Officer 1995 110,000 -0- 25,000<F5>
and Secretary 1994 40,542 -0- 100,000<F6>
Theodore W. Dutton<F7> 1996 $120,000 $ -0- -0-
Vice President of 1995 120,000 -0- 150,000
Development 1994 101,666 $ 10,000 325,000<F8>
- ----------------------
[FN]
<F1> Does not include the dollar value of other annual compensation not
properly categorized as salary or bonus, which consisted entirely
during each fiscal year of perquisites and other personal benefits
aggregating less than 10 percent of the total of annual salary
reported for each of the above named executive officers for each
fiscal year. See "Employment Arrangements".
<F2> No disclosure for the fiscal year ended March 31, 1994 is provided
for Mr. Peterson because he joined the Company after the end of the
1994 fiscal year, in April 1994. On September 13, 1996, Mr. Peterson
assumed other duties with the Company's Sun World subsidiary and is,
therefore, no longer deemed an executive officer of Cadiz.
<F3> 100,000 of the options granted to Mr. Peterson during the fiscal year
ended March 31, 1995 were conditional options. 50,000 of such
options have since vested. The 50,000 options granted to Mr.
Peterson during fiscal year ended March 31, 1996 were conditional
options, none of which have since vested.
<F4> Ms. Chapman joined the Company in November 1993. Salary
reported for fiscal 1994 represents compensation for the period
November 1993 through March 31, 1994.
<F5> The 25,000 options granted to Ms. Chapman during the fiscal year
ended March 31, 1995 were conditional options, none of which have
since vested.
<F6> The 100,000 options granted to Ms. Chapman during the fiscal year
ended March 31, 1994 were conditional options, all of which have
since vested.
<F7> Mr. Dutton retired from the Company in June 1996.
<F8> 225,000 of the options granted to Mr. Dutton during the fiscal year
ended March 31, 1994 were conditional, all of which have since vested.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Relizable
Percent of Value
Total Options At Assumed
Granted to Annual Rates
Employees Exercise of Stock Price
in Price Appreciation for
Options Fiscal Per Share Expiration Option Term<F5>
Name Granted<F1> Year<F2> ($/Sh)<F3> Date<F4> 5% 10%
- -------------- ----------- -------- ------- --------- -------------------
David Peterson 50,000<F6> 8.23% $4.25 4-20-00 $117,752 $ 141,835
<F1> All options granted to the named officer were non-qualified options.
<F2> Also includes options granted to consultants during the fiscal year.
<F3> All options were granted at market value (average of closing bid and
asked prices for the Company's Common Stock as reported by Nasdaq)
at date of grant.
<F4> All options have a fixed term of five years.
<F5> Potential gains are reported net of the option exercise price, but
before taxes associated with exercise. These amounts represent certain
assumed rates of appreciation only. Actual gains on stock option
exercises are dependent on the future performance of the Common Stock
and overall stock market conditions. The amounts reflected in this
table may not necessarily be achieved.
<F6> The vesting of all 50,000 options was conditioned upon certain
criteria to be established by the Board of Directors of the Company.
None of these options have become vested.
FISCAL YEAR-END OPTION VALUES
Value of
Number of Unexercised Unexercised In-the-Money
Options at FY-End (#) Options at FY-End
Name Exercisable/Unexercisable Exercisable/Unexercisable<F1>
- ------------------- ------------------------- -----------------------------
Keith Brackpool 750,000/-0- $1,312,500/$ -0-
David Peterson 150,000/100,000<F2> $300,000/$200,000<F2>
Susan K. Chapman 100,000/25,000<F3> $325,000/$43,750<F3>
Theodore W. Dutton 300,000/0 $1,012,500/$ -0-
<F1> Based upon the Nasdaq closing sales price per share at fiscal year end.
No options were exercised by the named executive officers during the
last fiscal year.
<F2> Includes 150,000 shares underlying presently exercisable options. Does
not include 100,000 shares underlying conditional options, the conditions
to the vesting of which have not yet been met.
<F3> Includes 100,000 shares underlying presently exercisable options. Does
not include 25,000 shares underlying conditional options, the conditions
to the vesting of which have not yet been met.
EMPLOYMENT ARRANGEMENTS
- -----------------------
Mr. Brackpool is compensated pursuant to a Compensation Agreement effective
April 2, 1993. Under the terms of this Agreement, Mr. Brackpool receives
compensation of $29,167 per month. Mr. Brackpool also receives the use of
an automobile owned by the Company.
Ms. Chapman is compensated pursuant to a letter agreement effective November
5, 1993 which provides for base compensation of $130,000 per annum. Ms.
Chapman also receives the use of an automobile owned by the Company.
Timothy J. Shaheen has been engaged by the Company to act as Chief Executive
Officer of Sun World. In this capacity, Mr. Shaheen receives compensation
from Sun World at an annual rate of $250,000 and the Board of Directors has
approved the grant to Mr. Shaheen of an aggregate of 400,000 incentive stock
options at an exercise price of $4.50 per share. The vesting of 200,000 of
these options is subject to the satisfaction of certain
performance criteria which are either tied to the performance of Sun World
or are subject to the discretion of the Company's Board of Directors.
Stanley E. Speer has been engaged by the Company to act as Senior Vice
President, Chief Financial Officer and Secretary of Sun World. In this
capacity, Mr. Speer receives compensation from Sun World at an annual rate
of $225,000 and the Board of Directors has approved the grant to Mr. Speer
of an aggregate of 200,000 incentive stock options at an exercise price of
$4.50 per share. The vesting of 100,000 of these options is subject to
the satisfaction of certain performance criteria which are either tied to
the performance of Sun World or are subject to the discretion of the
Company's Board of Directors.
COMPENSATION OF DIRECTORS
- -------------------------
Mr. Brackpool does not receive any additional compensation for services as
a director of the Company.
Mr. Makins receives cash compensation for his services as Chairman pursuant
to a Compensation Agreement effective April 2, 1993, which provides for base
compensation of $75,000 per year, payable quarterly in advance, plus payment
for certain additional services performed within the United Kingdom, or (ii)
$1,500 per day if such services are performed outside the United Kingdom.
During the Company's 1996 fiscal year, Mr. Makins received total cash
compensation of $77,750 pursuant to this Compensation Agreement.
Mr. Hammond receives cash compensation for his services as Director pursuant
to a Compensation Agreement effective April 2, 1993, which provides for
compensation of $25,000 per year, payable quarterly in advance. During
the Company's 1996 fical year, Mr. Hammond received total cash compensation
of $25,000 pursuant to this arrangement.
Mr. Weinress receives cash compensation for his services as a Director in
the amount of $25,000 per year, payable quarterly in advance. During the
Company's 1996 fiscal year, Mr. Weinress received total cash compensation
of $25,000 pursuant to this arrangement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
- ------------------------------------------------------------
During the Company's fiscal year ended March 31, 1996, all decisions
concerning executive officer compensation were made by the Compensation
Committee of the Board of Directors. The members of such committee were
Messrs. Makins, Weinress and Hammond, all of whom are non-employee
directors. Mr. Makins serves as Chairman of the Board. See "Directors and
Executive Officers."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -----------------------------------------------
Since April 1, 1995, the Company has issued in private placements a total of
190,000 shares of stock ranging in price from $4.00 per share to $5.75 per
share to Fidelity Investment Services, whose affiliates have filed a Schedule
13D with the Securities and Exchange Commission indicating that they hold in
excess of five percent of the Company's outstanding Common Stock in their
capacity as discretionary manager for a number of investment funds. See
"Principal Stockholders."
Since April 1, 1995, the Company has issued in private placements a total of
90,000 shares of stock at a price of $5.75 per share to Morgan Stanley Asset
Management, Inc., an affiliate of Morgan Stanley Group, Inc., who filed a
Schedule 13G with the Securities and Exchange Commission indicating that it may
be deemed to be the indirect beneficial owner of in excess of five percent of
the Company's outstanding Common Stock in its capacity as an Investment
Advisor. See "Principal Stockholders." In addition, on September 13, 1996,
the Company issued 3,000 shares of Series A Preferred for $1,000 per share
to Morgan Stanley Asset Management, Inc. in an institutional private placement
which provided financing for the Company's acquisition of Sun World. The
Series A Preferred is convertible into shares of Common Stock at a conversion
price of $3.75 per share. See "Description of Securities."
In March 1996, the Company issued in a private placement a total of 250,000
shares of Common Stock at $5.75 per share to The Capital Group Companies,
Inc., which filed a Schedule 13G with the Securities and Exchange Commission
indicating that it holds in excess of five percent of the Company's
outstanding Common Stock in its capacity as discretionary manager by virtue
of its affiliates acting as investment manager to a number of institutional
investors. See "Principal Stockholders."
In connection with a private placement in October 1995, the Company issued
82,317 shares of Common Stock at a price of $4.10 per share to a corporation
of which Mr. J.F.R. Hammond, a director of the Company, is an affiliate.
See "Principal Stockholders." In addition, on September 13, 1996, the Company
issued 1,650 shares of Series A Preferred at a price of $1,000 per share to
a corporation of which Mr. Hammond is an affiliate. Each share of Series A
Preferred is convertible into Common Stock at a conversion price of $3.75
per share.
In September 1996, L.H. Friend, Weinress, Frankson & Presson, Inc. ("L.H.
Friend"), an investment banking firm which is an affiliate of Mr. Stephen
D. Weinress, a director of the Company, received $145,500 from the Company
in payment for services rendered in connection with the placement of the
Series A Preferred. In addition, the Company has paid the Weinress Group,
a consulting firm which is an affiliate of Mr. Weinress, 72 shares of
Series A Preferred with a value of $1,000 per share, for services rendered
in connection with the placement of the Series A Preferred.
On September 13, 1996, the Company granted an aggregate of 400,000 incentive
stock options, at the exercise price of $4.50 per share, to Timothy J.
Shaheen in consideration of Mr. Shaheen's employment as Chief Executive
Officer of Sun World. The vesting of 200,000 of these options is subject
to the satisfaction of certain performance criteria which are either tied
to the performance of Sun World or are subject to the discretion of the
Company's Board of Directors.
On September 13, 1996, the Company granted an aggregate of 200,000 incentive
stock options, at the exercise price of $4.50 per share, to Stanley E. Speer
in consideration of Mr. Speer's employment as Senior Vice President, Chief
Financial Officer and Secretary of Sun World. The vesting of 100,000 of
these options is subject to the satisfaction of certain performance
criteria which are either tied to the performance of Sun World or are subject
to the discretion of the Company's Board of Directors.
The grant by the Company of additional incentive stock options is intended to
provide compensation in a manner designed to preserve the cash resources of the
Company while providing significant ongoing incentives for management
performance based upon an increase of the Company's value to its stockholders.
The Company believes that the terms of the foregoing transactions were at
least as favorable to the Company as those which could have been negotiated
in arm's length transactions with unaffiliated third parties.
SELLING SECURITY HOLDERS
The following table sets forth, as of December 27,
1996, certain ownership information with respect to the Selling
Security Holders. The information set forth below is based upon
reports of beneficial ownership filed with the Securities and
Exchange Commission and records of the Company and its transfer
agent, Continental Stock Transfer & Trust Company. If the
Selling Security Holders were to sell all of the Shares covered
by this Prospectus, (1) each Selling Security Holder would have
no further beneficial interest in the Company's Common Stock
except as otherwise noted. Unless noted, the Selling Security
Holders have not had any position, office or other material
relationship with the Company or any of its affiliates within the
past three years.
SHARES
BENEFICIALLY
OWNED SHARES
NAME (2) OFFERED (2)
- ---------------------------------- ------------ ------------
Cooperative Centrale Raiffeisen-
Boerenleenbank B.A. ("Rabobank")(3) 240,000 (6) 240,000 (6)
Nina J. Cohen 12,500 (7) 12,500 (7)
Lar Ze Company 50,500 (8) 50,500 (8)
Zenith Insurance Company 80,000 (9) 80,000 (9)
Capital Group Companies, Inc. 1,240,000 (10) 250,000 (10)
MeesPierson Securities, Ltd. 2,174,808 (11) 2,174,808 (11)
Pengo Securities Corp.
(Smith Asset Management) 1,403,103 (12) 1,403,103 (12)
BT Holdings (NY) Inc.
(Bankers Trust) 1,122,483 (13) 1,122,483 (13)
Morgan Stanley Asset
Management, Inc. 2,675,862 (14) 841,862 (14)
Heritable & General Investment
Bank Ltd. 420,931 (15) 420,931 (15)
Amberwood Investments Ltd. 420,931 (16) 420,931 (16)
Singer & Friedlander (IOM) Ltd. 420,931 (17) 420,931 (17)
William Harris Investments Inc.
(Harris Trust) 280,617 (18) 280,617 (18)
Wood Gundy, Inc. 138,044 (19) 138,044 (19)
Smith Barney Inc. (5) 493,050 (20) 493,050 (20)
The Weinress Group (4) 20,204 (21) 20,204 (21)
Henderson Crosthwaite Institutional
Brokers Ltd. (5) 14,591 (22) 14,591 (22)
____________________________________________________
(1) The Selling Security Holders are not required to sell all
or any part of the Shares covered by this Prospectus; therefore,
the number and percentage of outstanding Shares to be held by
them after completion of the offering may exceed that indicated
herein.
(2) Includes Conversion Shares, Dividend Shares, and Warrant
Shares offered under this Prospectus which have not yet been issued.
(3) Lender to the Company. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(4) A consulting firm which is an affiliate of a Director of
the Company. See "Management-Directors and Executive Officers."
(5) Consultant to the Company.
(6) Includes 240,000 Warrant Shares underlying Warrants
exercisable at $0.05 per share, which expire December 31, 2000.
(7) Includes 12,500 Placement Shares.
(8) Includes 50,500 Placement Shares.
(9) Includes 80,000 Placement Shares.
(10) Includes 250,000 Placement Shares. Assuming the sale of
all Shares covered by this Prospectus, Capital Group Companies, Inc.
would continue to beneficially own 990,000 shares of Common Stock
(11) Includes 2,066,666 Conversion Shares and 108,142 Dividend Shares.
(12) Includes 1,333,333 Conversion Shares and 69,770 Dividend Shares.
(13) Includes 1,066,666 Conversion Shares and 55,817 Dividend Shares.
(14) Includes 800,000 Conversion Shares and 41,862 Dividend Shares.
Assuming the sale of all Shares covered by this Prospectus,
Morgan Stanley Asset Management, Inc. would continue to beneficially
own 1,834,000 shares of Common Stock.
(15) Includes 400,000 Conversion Shares and 20,931 Dividend Shares.
(16) Includes 400,000 Conversion Shares and 20,931 Dividend Shares.
(17) Includes 400,000 Conversion Shares and 20,931 Dividend Shares.
(18) Includes 266,666 Conversion Shares and 13,951 Dividend Shares.
(19) Includes 133,332 Conversion Shares and 4,712 Dividend Shares.
(20) Includes 468,533 Conversion Shares and 24,517 Dividend Shares.
(21) Includes 19,200 Conversion Shares and 1,004 Dividend Shares.
(22) Includes 13,866 Conversion Shares and 725 Dividend Shares.
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Security
Holders that there are no underwriting arrangements with
respect to the sale of the Shares and Warrants, that the
Shares and Warrants will be sold from time to time (i) as
to the Shares only, in the over-the-counter market
(through Nasdaq) at then prevailing prices, or (ii) as to
the Shares and the Warrants, in private transactions at
negotiated prices, and that usual and customary brokerage
fees may be paid by the Selling Security Holders in
connection therewith. The Company will receive none of
the proceeds from sales by the Selling Security Holders of
the Shares and Warrants.
In connection with such sales, the Selling
Security Holders and any participating broker may be
deemed to be "underwriters" of the Shares and Warrants, as
such term is defined in the Act, although the offering of
the Shares and Warrants will not be underwritten by a
broker-dealer or investment banking firm. Sales of the
Shares may be made in the over-the-counter market to
broker-dealers making a market in the Common Stock or to
other broker-dealers, and such broker-dealers, upon their
resale of the Shares, may also be deemed to be "underwriters"
under the Act.
The Company has agreed to indemnify certain of the
Selling Security Holders against liabilities they may
incur as a result of any untrue statement of a material
fact in the Registration Statement of which this
Prospectus forms a part, or any omission herein or therein
to state a material fact necessary in order to make the
statements made, in the light of the circumstances under
which they were made, not misleading. Such
indemnification includes liabilities that such Selling
Security Holders may incur under the Act. No such
indemnification must be given by the Company if the untrue
statement or omission was made in reliance upon and in
conformity with information furnished in writing to the
Company by the Selling Stockholder for use in the
Registration Statement.
The Company will bear all costs and expenses of
the registration of the Shares and Warrants under the Act
and certain state securities laws, other than fees of
counsel (if any) retained by the Selling Security Holders
and any discounts or commissions payable with respect to
sales of the Shares and Warrants.
The Company has advised the Selling Security
Holders of (i) the requirement for delivery of this
Prospectus in connection with any sale of the Shares or
Warrants, and (ii) the relevant cooling off period
specified by Rule 10b-6 and restrictions upon the Selling
Security Holders' bidding for or purchasing securities of
the Company during the distribution of Shares and
Warrants.
DESCRIPTION OF SECURITIES
GENERAL
- -------
The Company is authorized to issue 45,000,000
shares of Common Stock, par value $.01 per share, and
100,000 shares of Preferred Stock, par value $.01 per
share ("Preferred Stock").
COMMON STOCK
- --------------
Holders of Common Stock are entitled to one vote,
either in person or by proxy, for each share held of
record by them on all matters submitted to a vote of
stockholders. Except as otherwise provided by law, action
can be taken by a majority of shares entitled to vote at a
meeting. Holders of Common Stock are entitled to
dividends when, as and if declared by the Board of
Directors out of funds legally available therefor, subject
to the prior rights of the holders of any Preferred Stock.
In the event of liquidation or dissolution and winding up
of the Company, holders of Common Stock are entitled to
share ratably in the assets of the Company remaining after
payment of liabilities and after provision has been made
for each class of stock, including any Preferred Stock
outstanding at that time, that has preference over the
Common Stock. Holders of Common Stock, as such, have no
conversion, preemptive or other subscription rights, and
there are no redemption or sinking fund provisions
applicable to the Common Stock. All of the outstanding
shares of Common Stock are, and, when issued, the Warrant
Shares of Common Stock offered under this Prospectus will
be, fully paid and nonassessable.
PREFERRED STOCK
- ----------------
Shares of Preferred Stock may be issued without
stockholder approval. The Board of Directors is
authorized to issue such shares in one or more series and
to fix the rights, preferences, powers, qualifications,
limitations and restrictions thereof, including dividend
rights and rates, conversion rights, voting rights, terms
of redemption, redemption prices, liquidation preferences
and the number of shares constituting any series or the
designation of such series, without any vote or action by
the stockholders.
To date the Board of Directors has designated
three series of Preferred Stock for issuance, including
(i) up to 60,000 shares of Series A Preferred, of which
27,631 shares have been issued and 27,431 shares remain
outstanding; (ii) up to 1,000 shares of Series B
Preferred, of which 1,000 shares have been issued and 390
shares remain outstanding; and (iii) up to 365 shares of
Series C Preferred, of which 300 shares have been issued
and 100 shares remain outstanding.
The Series A Preferred is convertible into shares
of Common Stock, at the option of the holder, at a price
of $3.75 per share. Holders thereof are entitled to
cumulative dividends payable at a rate of six percent (6%)
per annum. Both the Series B Preferred and the Series C
Preferred are convertible into shares of Common Stock at a
price equal to the lower of (a) $5.8125 per share or (b)
eighty-five percent (85%) of the average closing bid price
over the ten trading-day period ending on the day prior to
the submission of any conversion notice. Holders thereof
are also entitled to cumulative dividends at the rate of
six percent (6%) per annum until conversion. The Company
reserves the right to redeem any convertible shares of
Preferred Stock for their full cash equivalent by giving
the investors five (5) days' notice.
Subject to the rights of creditors, holders of
Series A Preferred are entitled, in the event of any
voluntary or involuntary liquidation of the Company, to an
amount in cash equal to $1,000 for each share outstanding
and for each share issuable with respect to all accrued
and unpaid dividends. Holders of Series B Preferred and
Series C Preferred have similar liquidation rights as to
an amount in cash equal to $10,000 for each share
outstanding and for each share issuable with respect to
all accrued and unpaid dividends. In the event of such a
liquidation, the Series A Preferred, Series B Preferred
and Series C Preferred would rank equally with each other
and on a parity with any other class or series of
Preferred Stock of the Company, and would rank senior and
prior to the Company's Common Stock.
Except as provided by law, holders of Series A
Preferred, Series B Preferred and Series C Preferred shall
not be entitled to vote upon any matter submitted to a
vote of the Company's stockholders.
As of the date of this Prospectus, the Company has
no current plans for the issuance of any additional shares
of Preferred Stock. However, any Preferred Stock that may
be issued in the future could rank prior to the Common
Stock offered hereby with respect to dividend rights and
rights on liquidation. The Board of Directors may,
without stockholder approval, issue Preferred Stock with
voting and conversion rights that could adversely affect
the voting power of holders of the Common Stock offered
hereby or create impediments to persons seeking to gain
control of the Company, although there is no present
intention to do so. See "Certain Factors - Authorization
of 'Blank Check' Preferred Stock."
WARRANTS
- --------
The Warrants offered for sale hereunder by one of
the Company's institutional lenders are exercisable for
the purchase of up to 240,000 shares of Common Stock at an
exercise price of $.05 per share. The Warrants expire on
December 31, 2000. The exercise price and the number and kind
of securities purchasable upon exercise of the Warrants are
subject to standard anti-dilution and other adjustments to be
made from time to time in the event of any (i) dividend or
distribution in shares of Common Stock, (ii) subdivision,
reclassification or combination of Common Stock, (iii)
issuance to all holders of Common Stock of rights or warrants
entitling them to purchase shares of Common Stock at a price
less than the current market price of the Common Stock, (iv)
issuance to all holders of Common Stock of evidences of the
Company's indebtedness or assets (excluding cash dividends
or distributions) or rights or warrants (excluding those
referred to in (iii) above), or (v) shares of Common Stock,
or securities convertible into or exchangeable for shares
of Common Stock, at a price less than the current market
price of the Common Stock. No such adjustment in the
exercise price shall be required unless the adjustment would
require an increase or decrease of at least one-half cent
($0.005) in the exercise price, but any such adjustment that
is not made must be carried forward and taken into account
at the time of any subsequent adjustment that is required
to be made.
TRANSFER AGENT
- ---------------
The transfer agent for the Company's Common Stock
is Continental Stock Transfer & Trust Company, New York,
New York.
LEGAL MATTERS
Certain legal matters in connection with the
issuance of the securities offered hereby will be passed
upon for the Company by Miller & Holguin, attorneys at
law, Los Angeles, California.
EXPERTS
The consolidated financial statements of the
Company as of March 31, 1996 and 1995 and for each of the
three years ended March 31, 1996, and of Sun World as of
September 13, 1996 and for the period January 1, 1996
through September 13, 1996, which are included in this
Prospectus have been so included in reliance on the report
of Price Waterhouse LLP, independent accountants, given on
the authority of said firm as experts in auditing and
accounting.
The consolidated financial statements of Sun World as of
December 31, 1995 and 1994 and for each of the two years
ended December 31, 1995 and 1994 which are included in
this Prospectus have been so included in reliance on the
report (which report expresses an unqualified opinion
and includes an explanatory paragraph referring to Sun
World's bankruptcy and reorganization) of Deloitte & Touche LLP,
independent accountants, given on the authority of said
firm as experts in auditing and accounting.
INDEX TO FINANCIAL STATEMENTS
Index to Audited Financial Statements of Cadiz Land Company, Inc.
for the fiscal year ended March 31, 1996:
Report of Independent Accountants...................................F-3
Consolidated Balance Sheet..........................................F-4
Consolidated Statement of Cash Flows................................F-6
Consolidated Statement of Operations................................F-7
Consolidated Statement of Stockholders' Equity......................F-8
Notes to the Consolidated Financial Statements......................F-9
Index to Unaudited Financial Statements of Cadiz Land Company, Inc.
for the six months ended September 30, 1996:
Consolidated Balance Sheet..........................................F21
Consolidated Statement of Cash Flows................................F23
Consolidated Statement of Operations (three months).................F24
Consolidated Statement of Operations (six months)...................F25
Consolidated Statement of Stockholders' Equity......................F26
Notes to Consolidated Financial Statements..........................F27
Index to Audited Financial Statements of Sun World International, Inc.
for the years ended December 31, 1995 and 1994:
Independent Auditors' Report.........................................F35
Consolidated Balance Sheets..........................................F36
Consolidated Statements of Operations and Accumulated Deficit........F37
Consolidated Statements of Cash Flows................................F38
Notes to Consolidated Financial Statements...........................F39
Index to Audited Financial Statements of Sun World International, Inc.
for the period January 1, 1996 through September 13, 1996:
Report of Independent Accountants....................................F54
Consolidated Balance Sheet...........................................F55
Consolidated Statement of Operations & Accumulated Deficit...........F56
Consolidated Statement of Cash Flows.................................F57
Notes to the Consolidated Financial Statements.......................F58
Index to Unaudited Pro Forma Combined Financial Statements of
Cadiz Land Company, Inc. and Sun World International, Inc.:
Description of Transaction...........................................F74
Pro Forma Combined Statement of Operations for the year ended
March 31, 1996......................................................F75
Pro Forma Combined Statement of Operations for the six months
ended September 30, 1996............................................F76
Notes to the Pro Forma Combined Statements of Operations.............F77
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Cadiz Land Company, Inc.
In our opinion, the accompanying consolidated balance sheet
and the related statements of operations, of stockholders'
equity and of cash flows present fairly, in all material respects,
the financial position of Cadiz Land Company, Inc. and its
subsidiaries at March 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three
years in the period ended March 31, 1996, in conformity with
generally accepted accounting principles. 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 of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
indicates examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
/s/ Price Waterhouse LLP
-------------------------
PRICE WATERHOUSE LLP
Los Angeles, California
July 12, 1996
CADIZ LAND COMPANY, INC.
CONSOLIDATED BALANCE SHEET
March 31
Assets 1996 1995
($ in thousands) ------ ------
Cash and cash equivalents (Note 8) $ 5,153 $ 2,454
Accounts receivable 443 131
Inventory 266 198
Property and equipment, net (Note 3) 2,252 2,308
Land and improvements, net (Note 4)
Developed property 9,429 9,715
Unimproved land 12,236 11,792
Water transfer projects 2,496 1,764
Excess of purchase price over net
assets acquired, net 5,155 5,389
Debt issue costs and other assets 1,233 1,137
------- -------
$38,663 $34,888
======= =======
[FN]
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
CONSOLIDATED BALANCE SHEET
March 31
Liabilities & Stockholders' Equity 1996 1995
($ in thousands except number of shares ------- -------
Accounts payable $ 1,772 $ 1,174
Other liabilities 521 385
Debt (Note 5) 17,617 16,381
Contingencies (Note 9)
Stockholders' equity
Common stock - $.01 par value, 24,000,000
shares authorized; shares issued and
outstanding - 19,247,611 at March 31
1996 and 16,988,454 at March 31, 1995 192 170
Preferred stock - $.01 par value,
100,000 shares authorized; no shares
outstanding
Additional paid-in-capital 72,957 62,687
Accumulated deficit (54,396) (45,909)
--------- -------
Total stockholders' equity 18,753 16,948
--------- ---------
$ 38,663 $ 34,888
======== ========
[FN]
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Consolidated Statement of Cash Flows
Years ended March 31,
($ in thousands) 1996 1995 1994
---------------------------
Cash flows from operating
activities:
Loss from continuing operations $ (8,487) $ (4,591) $ (3,751)
Adjustments to reconcile loss
from continuing operations to
net cash used for continuing
operating activities:
Depreciation and amortization 1,909 1,450 1,029
Extraordinary gains on debt
settlement -0- (115) (343)
Stock issued for services -0- -0- 17
Interest capitalized to debt 474 734 760
The effect on net cash used for
continuing operating activities
from changes in assets and
liabilities:
Inventory and receivables (379) (198) 19
Other assets 13 (158) (396)
Accounts payable and other
liabilities 734 (12) (762)
-------- --------- -------
Net cash used for continuing
operating activities (5,736) (2,890) (3,427)
Net cash provided by discontinued
operating activities -0- 57 52
--------- -------- -------
Net cash used for operating
activities (5,736) (2,833) (3,375)
--------- -------- -------
Cash flows from investing activities:
Land purchase and development (574) (315) (1,441)
Water transfer projects (732) (1,547) (217)
Additions to property and
equipment (358) (1,506) (406)
Sun World International, Inc.-
acquisition costs (693) -0- -0-
--------- --------- -------
Net cash used for investing
activities (2,357) (3,368) (2,064)
--------- --------- -------
Cash flows from financing activities:
Net proceeds from issuance of
common stock 10,292 2,307 11,925
Proceeds from issuance of debt 677 2,470 2,485
Principal payments on debt (177) (530) (4,622)
-------- -------- -------
Net cash provided by financing
activities 10,792 4,247 9,788
------- -------- -------
Net increase (decrease) in cash
and cash equivalents 2,699 (1,954) 4,349
Cash and cash equivalents,
beginning of year 2,454 4,408 59
Cash and cash equivalents, end -------- -------- -------
of year $ 5,153 $ 2,454 $ 4,408
======= ======== =======
[FN]
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Consolidated Statement of Operations
($ in thousands except per share data)
Years ended March 31
1996 1995 1994
---------------------------
Revenues $ 1,441 $ 543 $ 190
-------- ------- -------
Costs and expenses
Resource development 3,329 1,545 955
Landfill prevention activities
(Note 9) 1,919 -0- -0-
General and administrative 1,826 1,525 1,904
Depreciation 833 737 483
Amortization 234 234 234
-------- ------- -------
8,141 4,041 3,576
-------- ------- -------
Operating loss (6,700) (3,498) (3,386)
Interest expense, net 1,787 1,208 853
-------- ------- -------
Loss before discontinued
operations and extraordinary
item (8,487) (4,706) (4,239)
Gain on disposal of
discontinued segment -0- -0- 145
--------- -------- -------
Loss before extraordinary item: (8,487) (4,706) (4,094)
Extraordinary item - gain on debt
settlements (Note 5) -0- 115 343
--------- -------- -------
Net loss $ (8,487) $(4,591) $(3,751)
======== ======== =======
Earnings (loss) per share:
Loss before discontinued
operations and extraordinary
item $ (.48) $ (.29) $ (.33)
Gain on disposal of
discontinued segment -0- -0- .01
Extraordinary item -0- .01 .03
-------- -------- --------
Net loss per share $ (.48) $ (.28) $ (.29)
======== ========= =======
[FN]
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Consolidated Statement of Stockholders' Equity
For the year ended March 31, 1996
($ in thousands except number of shares)
Additional Total
Common Stock Paid in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
--------- ------ --------- -------- --------
Balance as of
March 31, 1993 10,204,863 $ 102 $ 45,097 $ (37,567) $ 7,632
Issuance of
shares in
connection
with private
placements 4,320,000 43 11,832 11,875
Issuance of
stock upon
conversion
of debt 512,251 5 1,358 1,363
Issuance of
shares for
professional
services 155,000 1 541 542
Issuance of
stock for
vineyard
parcel 78,750 1 235 236
Issuance of
stock warrants
for services 779 779
Exercise of
stock options 160,000 2 48 50
Net loss (3,751) (3,751)
---------- ------ -------- --------- --------
Balance as of
March 31, 1994 15,430,864 154 59,890 (41,318) 18,726
Issuance of
shares for
professional
services 110,000 1 384 385
Issuance of
stock warrants
for services 121 121
Exercise of stock
options and
warrants 1,447,590 15 2,292 2,307
Net loss (4,591) (4,591)
---------- ------ ------- -------- --------
Balance as of
March 31,
1995 16,988,454 170 62,687 (45,909) 16,948
Issuance of
shares in
connection
with private
placements 2,114,157 21 9,911 9,932
Exercise of
stock options 145,000 1 359 360
Net loss (8,487) (8,487)
---------- ------- -------- --------- --------
Balance as of
March 31,
1996 19,247,611 $ 192 $ 72,957 $(54,396) $ 18,753
========== ====== ======== ======== ========
[FN]
See accompanying notes to the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- -----------------------------------------------
NOTE 1 CURRENT STATUS AND DESCRIPTION OF BUSINESS
- ---------------------------------------------------
BUSINESS OF THE COMPANY
- -----------------------
Cadiz Land Company, Inc. (the "Company") identifies, acquires
and develops properties (to date in the desert regions of Southern
California) which have significant indigenous supplies of water.
The Company evaluates, on an ongoing basis, the various means by
which the land and water resources available to its portfolio of
properties can be utilized for the purpose of enhancing the long
term appreciation of its properties. The Company currently owns or
controls approximately 43,000 acres, with its largest property
totalling approximately 31,800 acres at Cadiz, California.
CURRENT OPERATING ENVIRONMENT
- -----------------------------
As of March 31, 1996, approximately $18.8 million has been
invested by the Company in the agricultural development of its
Cadiz properties, where 800 acres have been developed to table
grapes, 560 acres have been developed to citrus, and 240 acres have
been planted to various row crops. Since receiving approval in
fiscal 1994 from San Bernardino County to develop up to 9,600 acres
of its Cadiz property to agriculture, the Company has been
analyzing the various alternatives available for continued
agricultural development.
The Company has attracted third party growers and has been
able to enter into joint venture or leasing arrangements for the
farming of crops on its properties, thereby minimizing working
capital requirements. Revenues from these arrangements totalled
$1,441,000, $543,000 and $190,000 for the years ended March 31,
1996, 1995 and 1994, respectively.
The Company also proposes to sell water from the Cadiz basin
which is surplus to both its present and projected agricultural
requirements. During the past year the Company has continued its
negotiations with various public agencies which have expressed
interest in utilizing the Company's surplus water. The Company has
also continued to work towards obtaining the environmental and
other regulatory approvals required prior to commencing
construction of a water delivery project at Cadiz.
In furtherance of the Company's strategic business plan to
expand its property portfolio, in late 1995 the Company began
formally evaluating a possible acquisition of Sun World
International, Inc. ("Sun World") which has agricultural
landholdings of approximately 20,000 acres with senior water rights
primarily in the Central Valley of California and assets
complimentary to the Company in agriculture, produce marketing and
water rights. On July 12, 1996 a consensual Plan of Reorganization
providing for the acquisition of Sun World by the Company (the
"Plan") was confirmed at a hearing before the U.S. Bankruptcy
Court. Assuming satisfaction of all Plan requirements (including
completion of satisfactory documentation), ownership of Sun World
is expected to be transferred to the Company shortly after
confirmation.
In addition to the development of its existing properties, the
Company will continue to seek to add to its portfolio properties
which possess rights to commercially usable quantities of water.
Pursuant to its business strategy, the Company has
historically utilized its working capital primarily for development
purposes: that is, for purposes designed to increase the long term
value of its properties. As the Company has not received
significant revenues from its development operations to date, the
Company has been required to obtain financing to bridge the gap
between the time development expenses are incurred and the time a
revenue stream will commence. Accordingly, the Company has looked
to outside funding sources to address its liquidity and working
capital needs. Historically, the Company has addressed these needs
primarily through secured debt financing arrangements with its
lenders, private placements and the exercise of outstanding stock
options. Total debt outstanding at March 31, 1996 of $17.7 million
matures in January 1997. As discussed in Note 5, the Company has
reached an agreement in principle with one of its primary lenders
whereby the Company has been granted two one year extensions. The
Company also intends to replace or renegotiate the terms of its
current obligations to its other primary lender prior to January
1997.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------
PRINCIPLES OF CONSOLIDATION
- ----------------------------
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries, Cadiz Valley
Development Corporation, Inc. and Southwest Fruit Growers Limited
Partnership, a limited partnership ("SWFG") in which the Company is
the general partner and has an approximate 66.3 percent partnership
interest. SWFG owns a total of 680 acres of table grape vineyard
and 2,560 acres of undeveloped land at Cadiz, California.
Allocable losses incurred through the year ended March 31, 1991
served to eliminate the minority interest for accounting purposes.
All material intercompany balances and activity have been
eliminated from the consolidated financial statements.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
- -------------------------------------------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
DEVELOPED PROPERTY
- ------------------
Developed property is stated at cost which management believes
is less than net realizable value and is expected to be recovered
through future revenues. Cost includes land acquisitions and
improvements, and, during development periods, interest and direct
holding costs which consist principally of net farming costs. The
development costs associated with mature properties are depreciated
on a straight line basis over the estimated productive life of the
property, which range from twenty to thirty years.
UNIMPROVED LAND
- ---------------
Unimproved land consists of approximately 41,400 acres of
undeveloped land in Cadiz, Piute and other desert regions of
California. Unimproved land is stated at cost, which management
believes is less than net realizable value, and is expected to be
recovered through future revenues. Cost includes those that are
directly related to the acquisition of the acreage, such as the
cost to purchase, commissions, real estate taxes and legal and
other professional fees.
PROPERTY AND EQUIPMENT
- ------------------------
Property and equipment are stated at cost. Depreciation is
provided using the straight line method over the estimated useful
lives of the assets, generally five to fifteen years for land
improvements and buildings, and three to fifteen years for
machinery, equipment, vehicles and office furniture and equipment.
STATEMENT OF CASH FLOWS
- -----------------------
The Company considers all short term deposits with an original
maturity of three months or less to be cash equivalents. The
Company invests its excess cash in deposits with major
international banks and, therefore, bears minimal risk. Such
investments are stated at cost, which approximates fair value, and
are considered cash equivalents for purposes of reporting cash
flows.
Cash paid for interest during 1996, 1995 and 1994 was
$455,000, $6,000 and $131,000, respectively.
WATER TRANSFER PROJECTS
- ----------------------------
All water transfer projects are stated at cost, which
management believes is less than net realizable value. All costs
directly attributable to the development of the water transfer
projects are being capitalized by the Company. These costs, which
are expected to be recovered through future revenues, consist of
drilling costs, hydrological costs, consulting fees for various
engineering, environmental and feasibility studies, and other
professional and legal fees.
INVENTORY
- ---------
Growing crops are stated at the lower of cost or estimated
market. Cost consists of cultural and harvest costs and are
accumulated by commodity.
REVENUES
- ---------
Revenues from crop proceeds are recorded when received.
AMORTIZATION
- ------------
The excess of purchase price over net assets acquired is being
amortized at the rate of $234,000 annually on a straight line basis
over thirty years. Accumulated amortization was $1,851,000 and
$1,617,000 at March 31, 1996 and 1995, respectively. At each
balance sheet date, the Company reviews the recoverability of
intangible assets by comparing projected operating income on an
undiscounted basis to the net book value of the related assets.
DEBT ISSUE COSTS
- ----------------
Debt issue costs relate to the March 1995 and January 1994
debt agreements as described in Note 5. These charges totalled
approximately $543,000 and $879,000, respectively, and are being
amortized over the remaining life of the debt. The accumulated
amortization is $940,000, and $361,000 at March 31, 1996 and 1995,
respectively.
INCOME TAXES
- ------------
Income taxes are accounted for using an asset and liability
approach which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary
differences between the financial statement and tax bases of assets
and liabilities at the applicable enacted tax rates.
EARNINGS PER SHARE
- ------------------
Earnings per share is computed for each year presented using
the weighted average number of shares outstanding during the year.
The weighted average number of shares outstanding used to calculate
earnings per share were approximately 17.7 million, 16.5 million,
and 12.8 million, for the years ended March 31, 1996, 1995, and
1994, respectively.
NEW ACCOUNTING STANDARDS
- ---------------------------
In March 1995, Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long Lived Assets and for
Long Lived Assets to be Disposed of" ("SFAS 121") was issued. SFAS
No. 121 establishes new guidelines in accounting for the impairment
of long lived assets, including identifiable intangibles. When
circumstances indicate that the carrying amount of an asset may not
be recoverable as demonstrated by estimated cash inflows, an
impairment loss shall be recorded based on fair value. Management
believes SFAS No. 121 will have no material effect on the financial
statements of the Company upon adoption in fiscal 1997.
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123 ("SFAS
123") "Accounting for Stock Based Compensation," which becomes
effective for fiscal years beginning after December 15, 1995. SFAS
123 establishes new financial accounting and reporting standards
for stock based compensation plans. Entities will be allowed to
measure compensation expense for stock based compensation under
SFAS 123 or APB Opinion No. 25, "Accounting for Stock Issued to
Employees." Entities electing to remain with the accounting in APB
Opinion No. 25 will be required to make pro forma disclosures of
net income and earnings per share as if the provisions of SFAS 123
had been applied. The Company intends to continue to follow the
accounting pursuant to APB No. 25 and, as a result, adoption of
SFAS 123 in fiscal year 1997 will have no effect on the Company's
financial statements.
NOTE 3 PROPERTY AND EQUIPMENT
- ---------------------------------
Property and equipment consisted of the following (net of
accumulated depreciation, in thousands):
March 31,
1996 1995
------- ------
Land improvements $1,790 $1,732
Buildings 852 730
Equipment 470 365
Autos and trucks 315 303
Office furniture and equipment 340 292
------ ------
3,767 3,422
Less accumulated depreciation (1,515) (1,114)
------ ------
$2,252 $2,308
====== ======
NOTE 4 - LAND AND IMPROVEMENTS
- -------------------------------
Developed property consisted of the following (net of
accumulated depreciation, in thousands):
March 31,
1996 1995
------- -------
Land $2,364 $ 2,307
Citrus orchard 3,613 3,613
Vineyard 4,885 4,885
------ -----
10,862 10,805
Less accumulated depreciation (1,433) (1,090)
------ ------
$9,429 $ 9,715
====== ======
NOTE 5 - DEBT
- -------------
The Company maintains its primary financing relationships
with Cooperative Centrale Raiffeisen Boerenleenbank B.A.
(Rabobank) and Henry Ansbacher & Co. Limited (Ansbacher),
collectively the "Banks". At March 31, 1996, the Company's
obligations to Rabobank and Ansbacher amounted to $9.1 million
and $8.6 million, respectively, both of which mature in January
1997. In July 1996, the Company and Rabobank reached an
agreement in principle whereby the Company has been granted two
one year extensions provided the total debt outstanding to
Rabobank at January 31, 1997 does not exceed $8.5 million. In
consideration for this agreement, the Company is required to pay
an initial commitment fee of $150,000 and issue 30,000 warrants
to purchase the Company's common stock at $.05 per share
exercisable for five years following the date of issuance. Upon
exercise of the first and second extension, the Company would be
required to pay Rabobank certain fees. The interest rate in
effect pursuant to this agreement would be at Rabobank's cost of
funds plus one and one quarter percent (1-1/4%). The Company also
currently intends to replace or renegotiate the terms of its
current obligations to Ansbacher prior to January 1997.
Ansbacher and Rabobank hold senior and subordinate deeds of
trust, respectively, on substantially all of the Company's
property.
At March 31, 1996, and 1995, the carrying amount of the
Company's outstanding debt, which approximates fair value, is
summarized as follows (in thousands):
1996 1995
-------- -------
Rabobank $9,100 $ 9,100
Ansbacher 8,630 7,713
Other 105 48
-------- -------
17,835 16,861
Debt discount (218) (480)
------ -------
$17,617 $16,381
======= =======
On March 15, 1995, the Company entered into an agreement
whereby Ansbacher would provide a loan facility aggregating
$3,000,000. The first advance in the amount of $2,450,000,
issued on March 31, 1995, was used to reduce the Company's
existing obligation to Rabobank and to reimburse Rabobank for
various fees and expenses from this and previous arrangements in
the amount of $250,000 and provide the Company with $2,200,000 to
be applied toward the Company's estimated working capital
requirements through March 31, 1996. The remaining $550,000 of
this facility, which has not been drawn upon, is available to the
Company any time subsequent to April 1, 1996, and may be applied
toward the Company's estimated working capital requirements for
the fiscal year ending March 31, 1997. Ansbacher agreed to
accrue and capitalize interest on the outstanding principal
amount of these advances through January 1997.
In consideration for the above agreement, Ansbacher received
110,000 shares of common stock valued at $3.50 per share. The
Company also issued to Rabobank 35,000 warrants to purchase the
Company's common stock at $.05 per share exercisable for three
years following the date of issuance. The total value of these
warrants, $121,000, has been recorded as a debt discount and will
be amortized over the remaining term of the debt. In addition,
Rabobank agreed to subordinate to Ansbacher's senior security
interests in substantially all of the Company's property.
The balance of the Company's outstanding obligations to the
Banks are governed by the January 1994 financing arrangements
whereby interest rates on outstanding debt to the Banks are fixed
until January 1997, the maturity date. Interest on the Ansbacher
portion is accrued and capitalized until maturity. Rabobank
interest is paid quarterly subsequent to December 1994, through
draw downs against a letter of credit provided by Ansbacher for
that purpose. Interest capitalized during the year ended March
31, 1996 and 1995 totalled $474,000 and $734,000, respectively.
The amount drawn under the line of credit totalled $455,000 at
March 31, 1996. In addition, as a result of the January 1994
financing arrangements, Rabobank returned and canceled 533,000
outstanding warrants in exchange for 175,000 new warrants to
purchase the Company's common stock at $0.05 per share
exercisable for three years following the date of issuance. The
total value of these warrants, $604,000, has been recorded as a
debt discount and will be amortized over the remaining term of
the debt. Ansbacher received 100,000 shares of common stock as
an arrangement fee and 50,000 shares of common stock as an
advisory fee valued at $3.50 per share. Additionally, the
Company agreed to convert $770,000 of debt to Ansbacher into
220,000 shares of common stock.
In June 1994, the Company retired a note payable in the
amount of $249,000 to an individual at a discounted amount,
resulting in an extraordinary gain of $115,000. The note, which
originated in 1985, was scheduled to be retired with a balloon
payment in December 1996.
In June 1993, the Company entered into a transaction by
which debt was exchanged for commercial property resulting in a
gain of $300,000. In addition, during December 1993, the Company
recorded an additional gain of $43,000 on the settlement of a
debt at less than book value. The total gain from these two
transaction resulted in an extraordinary gain of $343,000 and was
recorded as such for the year ended March 31, 1994.
The rate in effect on the Rabobank debt was 4.81 percent at
March 31, 1996. The average rate in effect on the Ansbacher debt
was 6.44 percent at March 31, 1996. Annual maturities of debt
outstanding at March 31, 1996, prior to the effect of the
Rabobank debt extension, are as follows: 1997 - $17,767,000;
1998 - $24,000; 1999 -$20,000; 2000 - $5,000; 2001 - $19,000, and
none thereafter.
NOTE 6 INCOME TAXES
- ---------------------
As of March 31, 1996, the Company has a net operating loss
(NOL) carryforward of approximately $56,076,000 for federal and
$22,254,000 for state income tax purposes. For financial
statement purposes, as of March 31, 1996, the Company has a net
operating loss carryforward of $49,403,000 and $19,708,000 for
federal and state purposes, respectively. Such carryforwards
expire in varying amounts through the year 2011. For financial
reporting purposes, the tax benefit resulting from utilization of
such NOL carryforward will be applied to reduce the excess of
purchase price over net assets acquired.
In accordance with the Tax Reform Act of 1986, NOL
utilization may be subject to an annual limitation. When there
is a change in ownership of more than 50 percent (as defined) of
a corporation, the use of any NOL existing at the date of the
change of ownership is limited annually to an amount defined by
law. Based upon such formula, use of approximately $45,400,000
of the federal NOL is limited to approximately $4,500,000 per
year. As a result of a subsequent ownership change in September
1993, utilization of the federal NOL was limited to $720,000. At
March 31, 1996, approximately $20,800,000 of the federal NOL is
currently available to offset federal taxable income in any
future years, while the balance is available subject to annual
limitations. Similar limitations apply also to the state NOL
carryforward.
Deferred taxes are recorded based upon differences between
the financial statement and tax basis of assets and liabilities
and available carryforwards. Temporary differences and
carryforwards which give rise to a significant portion of
deferred tax assets and liabilities as of March 31, 1996 and 1995
were as follows (in thousands):
1996 1995
------- --------
Basis difference in partnership interest $(4,337) $ (3,884)
Net operating loss 21,136 18,275
State taxes (407) (364)
Other 283 194
------- --------
Net deferred tax asset $16,675 $ 14,221
======= =========
Valuation allowance $(16,675) $ (14,221)
======= ==========
A reconciliation of the provision (credit) for income taxes
to the statutory federal income tax rate is as follows (in
thousands):
Years Ended March 31,
1996 1995 1994
----- ----- ----
Expected federal income tax
credit at 34% $(2,886) $(1,561)$(1,276)
Net operating loss carryforward
for financial reporting purposes
(for which benefit is fully reserved) 2,405 1,468 1,197
Amortization 80 79 79
Other nondeductible expenses 401 14 -0-
------- ------- -------
$ -0- $ -0- $ -0-
======= ======= ========
NOTE 7 STOCK OPTIONS
- ---------------------------
The Company issues options which are not pursuant to a plan.
During the year ended March 31, 1996, the Board of Directors of the
Company granted options to purchase 607,500 shares of the Company's
common stock at an exercise price of $4.25 per share to $5.50 per
share of which 450,000 options are conditional based upon terms of
employment and certain performance criteria. The recipients of all
such options were officers, directors, consultants, and employees
of the Company.
The following table summarizes options granted and outstanding
as of March 31, 1996 which were not issued pursuant to a plan. All
options listed below were issued to officers, directors,
consultants and other employees.
Options Outstanding Price
Number Range
----------------- ---------------
Outstanding at March 31, 1995 2,335,500 $1.25 to $5.00
Granted 607,500 $4.25 to $5.50
Exercised (145,000) $1.25 to $5.00
Canceled or expired ( 7,000) $4.625 to $5.00
Outstanding at March 31, 1996 2,791,000 * $1.25 to $5.50
(*) Expiration dates vary from May 24, 1996 to February 1, 2001.
NOTE 8 ACQUISITION OF SUN WORLD INTERNATIONAL, INC.
- -------------------------------------------------------
Sun World and certain of its subsidiaries filed voluntary
petitions for relief under Chapter 11 of the Bankruptcy Code on
October 3, 1994 after debt restructuring negotiations with its
existing lenders failed. In late 1995, the Company commenced its
due diligence review of Sun World and its operations. Since that
time, the Company has been engaged in negotiations with all parties
to the bankruptcy proceedings in an effort to develop a Plan of
Reorganization for Sun World (the "Plan") which would result in
terms acceptable to the Company. A consensual Plan to this effect
(Debtors' Modified Fourth Amended Consolidated Plan of
Reorganization dated June 3, 1996) was confirmed at a hearing on
July 12, 1996. Upon satisfaction of all Plan requirements
(including completion of satisfactory documentation), ownership of
Sun World is expected to be transferred to the Company shortly
thereafter.
Under the Plan, the Company will acquire all of the stock of
a reorganized Sun World for total consideration of approximately
$175 million of which approximately $153 million will be owed to
Sun World's existing secured lenders through a restructuring of
existing debt. In addition, the Company will make a cash capital
contribution of $15 million to Sun World, with the intent of
eliminating the requirement for Sun World to have any additional
debt facilities beyond those owed to its existing secured
creditors.
The total cash requirements related to the acquisition will be
funded from a combination of (i) the exercise by the Company of up
to $30 million in Standby Purchase Commitments issued to the
Company in June, 1996 in a private placement of newly authorized
Convertible Series A Preferred Stock which are convertible into
shares of common stock at $4.50 per share; (ii) the issuance of 6%
Convertible Series B Preferred Stock in a private placement
totalling $10 million; (iii) $1 million previously deposited by the
Company, and included in cash and cash equivalents in the
accompanying Balance Sheet, in trust with the Official Committee
Holding Unsecured Claims in the Sun World bankruptcy case; and (iv)
the Company's existing working capital. As of July 12, 1996, in
connection with the private placement of 6% Convertible Series B
Preferred Stock, the Company received $7.5 million and expects to
receive an additional $2.5 million.
NOTE 9 CONTINGENCIES
- -------------------------
The Company was awarded full reimbursement for its legal fees
and costs incurred in defending a legal action for which the
plaintiffs filed an appeal. In August 1995, the Arizona Court of
Appeals ruled in favor of the trial court's judgment upholding the
award for full reimbursement to the Company for such legal fees and
costs incurred. In addition, the Court of Appeals has awarded the
Company reimbursement for legal fees on appeal. The plaintiffs
have posted a cash bond from which the Company expects to collect
its judgement of approximately $268,000 within the first half of
its 1997 fiscal year, at which time the gain will be recorded.
In addition, in December 1995 the Company filed an action
relative to the proposed construction and operation of a landfill
to be located adjacent to the Company's Cadiz property (the
"Rail-Cycle Project"), with the Superior Court in San Bernardino
County against the County of San Bernardino and Rail-Cycle, L.P.,
among others. The Company alleges the County of San Bernardino did
not comply with the guidelines prescribed by the California
Environmental Quality Act and violated state planning and zoning
laws when approving a General Plan Amendment and granting a
conditional use permit for the proposed landfill. The Company is
seeking specific action and compensatory damages in excess of
$75,000,000. The action is currently in the discovery phase and
the Company intends to continue to vigorously prosecute its claims
in this matter. In addition, the Company provided support for a
local coalition which actively opposed the Rail-Cycle Project and
which placed a county wide initiative on the ballot for the general
election held March 26, 1996. This initiative would have required
that no large solid waste landfill overlie or be located within ten
miles from the point of extraction of a significant water resource
unless such a facility had been fully permitted, constructed or
operational as of March 14, 1995. Although this particular ballot
initiative was defeated, commencement of the Rail-Cycle Project has
nevertheless been at least temporarily delayed due to the fact that
a separate ballot initiative supported by Rail-Cycle, which
required approval in order to proceed with the project, was also
defeated at the general election. During the fiscal year ended
March 31, 1996, the Company incurred $1,919,000 in connection with
this matter.
<TABLE> CADIZ LAND COMPANY, INC.
Condensed Consolidated Balance Sheet
<CAPTION>
September 30, March 31,
Assets: 1996 1996
------------- ---------
($ in thousands) (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 40,083 $ 5,153
Receivables, net 17,424 443
Assets held for sale 17,888 -0-
Inventory 11,031 266
Prepaid expense 1,726 -0-
-------- --------
Total current assets 88,152 5,862
Investment in affiliates 4,822 -0-
Property, plant and equipment, net 124,086 11,681
Land held for development 12,433 12,236
Water rights and transfer and
storage projects 4,770 2,496
Other assets 1,465 1,233
Intangible assets 19,474 5,155
--------- ---------
Total assets $ 255,202 $ 38,663
========= ========
<FN>
See accompany notes to the consolidated financial statements.
</TABLE>
<TABLE> Cadiz Land Company, Inc.
Condensed Consolidated Balance Sheet
<CAPTION>
September 30, March 31,
Liabilities and Stockholders' Equity: 1996 1996
------------- ---------
($ in thousands except number of shares) (Unaudited)
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 11,566 $ 1,772
Accrued liabilities 4,162 521
Long-term debt, current portion 18,436 17,617
Other current liabilities 13,808 -0-
--------- -------
Total current liabilities 47,972 19,910
Long-term debt 148,839 -0-
Deferred income taxes 4,000 -0-
Other accrued and long-
term liabilities 55 -0-
------- -------
Total liabilities 200,866 19,910
Contingencies (Note 9)
Stockholders' equity:
Common stock - $.01 par value;
24,000,000 shares authorized;
shares issued and outstanding -
21,835,503 at September 30, 1996
and 19,247,611 at March 31, 1996 218 192
Preferred stock - $.01 par value;
100,000 shares authorized;
28,217 shares outstanding
Additional paid-in capital 112,988 72,957
Accumulated deficit (58,870) (54,396)
--------- ---------
Total stockholders' equity 54,336 18,753
--------- ----------
Total liabilities and stockholders'
equity $ 255,202 $ 38,663
======== =========
<FN>
See accompany notes to the consolidated financial statements.
</TABLE>
<TABLE> Cadiz Land Company, Inc.
Condensed Consolidated Statement of Cash Flows
<CAPTION>
For the Six Months Ended September 30, 1996 1995
--------- ---------
($ in thousands)
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss from operations $ (4,429) $ (3,686)
Adjustments to reconcile loss from operations
to cash used for operating activities:
Depreciation and amortization 1,041 949
Reserve adjustments (87) -0-
Interest capitalized to debt 344 244
Share of partnership operations (11) -0-
Changes in operating assets and liabilities,
net of acquisition of Sun World:
(Increase) decrease in accounts receivable 1,365 (280)
(Increase) decrease in inventory 2,392 (124)
(Increase) decrease in prepaid expenses and other (552) (52)
Increase (decrease) in accounts payable (5,634) (213)
Increase (decrease) in accrued liabilities 1,145 140
Increase (decrease) in deferred revenue (5) -0-
------- -------
Net cash used for operating activities (4,431) (3,022)
Cash flows from investing activities:
Additions to property, plant and equipment (27) (234)
Land purchase and development (233) (175)
Water transfer projects (139) (474)
Other assets (26) -0-
Acquisition of Sun World, net of cash acquired 2,123 -0-
-------- --------
Net cash provided (used) for investing activities 1,698 (883)
Cash flows from financing activities:
Net proceeds from issuance of stock 39,918 2,059
Principal payments on long-term debt (2,442) -0-
Proceeds from short-term debt 221 265
Principal payments on short-term debt (15) (4)
Dividends paid on preferred stock (19) -0-
--------- --------
Net cash provided by financing activities 37,663 2,320
Net increase in cash 34,930 (1,585)
Cash and cash equivalents at beginning of period 5,153 2,454
--------- --------
Cash and cash equivalents at end of period $ 40,083 $ 869
======= ======
<FN>
See accompany notes to the consolidated financial statements.
</TABLE>
<TABLE> Cadiz Land Company, Inc.
Condensed Consolidated Statement of Operations
<CAPTION>
For the Three Months Ended September 30, 1996 1995
-------- --------
($ in thousands except per share data)
(unaudited)
<S> <C> <C>
Revenues $ 4,738 $ 596
------ -------
Costs and expenses:
Cost of sales 3,723 -0-
Resource development 865 1,135
Landfill prevention activities 135 175
General and administrative 1,004 410
Depreciation 281 209
Amortization 100 59
----- -------
Total costs and expenses 6,108 1,988
------- -------
Operating loss (1,370) (1,392)
Interest expense, net (1,137) (443)
Litigation settlement (Note 9) 65 -0-
-------- --------
Net loss $ (2,442) $ (1,835)
========== ===========
Net loss per common share:
Primary loss per common share $ (.11) $ (.10)
========== ===========
Fully diluted loss per common share $ (.10) $ (.10)
========== ===========
<FN>
See accompany notes to the consolidated financial statements.
</TABLE>
<TABLE> Cadiz Land Company, Inc.
Condensed Consolidated Statement of Operations
<CAPTION>
For the Six Months Ended September 30, 1996 1995
-------- ---------
($ in thousands except per share data)
(unaudited)
<S> <C> <C>
Revenues $ 4,820 $ 650
-------- -------
Costs and expenses:
Cost of sales 3,723 -0-
Resource development 1,445 1,569
Landfill prevention activities 262 531
General and administrative 1,938 826
Depreciation 481 410
Amortization 158 117
-------- -------
Total costs and expenses 8,007 3,453
Operating loss (3,187) (2,803)
Interest expense, net (1,576) (883)
Litigation settlement (Note 5) 334 -0-
--------- --------
Net loss $ (4,429) $ (3,686)
========= =======
Net loss per common share:
Primary loss per common share $ (.23) $ (.21)
========== =========
Fully diluted loss per common share $ (.19) $ (.21)
========== ==========
<FN>
See accompany notes to the consolidated financial statements.
</TABLE>
<TABLE> Cadiz Land Company, Inc.
Condensed Consolidated Statement of Stockholders' Equity
<CAPTION>
For the Six Months Ended September 30, 1996
($ in thousands except number of shares)
(unaudited)
Additional Total
Common Stock Preferred Stock Paid-In Accumulated Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
------ ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as
of March
31, 1996 19,247,611 $192 -0- $ -0- $ 72,957 $ (54,396) $ 18,753
Exercise of
stock options
(Note 8) 325,000 3 914 917
Common stock
issued at
acquisition
of Sun
World 1,090,908 11 3,262 3,273
Proceeds from
private
placement
of preferred
stock, net 26,770 33,846 33,846
Cash dividends
paid at 6% on
conversion of
preferred stock
plus cash in
lieu of
fractional shares (19) (19)
Dividends paid
in common stock
at 6% on
conversion of
preferred
stock 6,905 26 (26) -0-
Preferred shares
issued for fees 1,881 1,881 1,881
Conversion of
preferred stock
to common
stock 1,165,079 12 (434) (12) -0-
Issuance of
stock warrants
for services 114 114
Net loss (4,429) (4,429)
-------- ---- -------- ---------- --------- --------
Balance
as of
September
30,
1996 21,835,503 $218 28,217 $ -0- $112,988 $ (58,870) $ 54,336
========= ===== ====== ===== ======== ========= =========
<FN>
See accompany notes to the consolidated financial statements.
</TABLE>
CADIZ LAND COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 DESCRIPTION OF BUSINESS
- ---------------------------------
Business of the Company
- ------------------------
The strategy of Cadiz Land Company, Inc. (the "Company") is to
create a portfolio of landholdings, water resources, and
agricultural operations within central and southern California which
possess sizable assured supplies of water. Management believes
that, with both the increasing scarcity of water supplies in
California and the increasing demand for water, the Company's access
to water will provide it with a competitive advantage both as a
major agricultural concern and as a supplier of water which will
lead to continued appreciation in the value of the Company's
portfolio.
With its September 13, 1996 acquisition of Sun World International,
Inc. ("Sun World"), the Company has become one of the largest fully
integrated agricultural companies in California. The Sun World
acquisition added to the Company's portfolio more than 21,000 acres
of prime agricultural land, packing facilities, marketing expertise,
proprietary agricultural products and the highly regarded Sun World
brand name. Sun World is renown for developing or acquiring
specialty produce varieties with unique characteristics which
differentiates them from commodity produce varieties. Sun World
owns patents and holds trademarks on a variety of plant and fruit
varieties and, as a result of its Research and Development Center,
has a long history of product innovation.
In addition to the above, the acquisition of Sun World provided the
Company senior water rights throughout the central and southern
valleys of California. The Company's portfolio also includes more
than 43,000 acres of land in eastern San Bernardino County. These
landholdings are underlain by excellent groundwater resources. The
largest property totals approximately 31,800 acres at Cadiz,
California, 1,600 acres of which have been developed for cultivation
of citrus orchards, table grape vineyards and row crops.
The Company's landholdings, which now total more than 64,000 acres
are located adjacent to the major aqueduct systems of central and
southern California, and in close proximity to the Colorado River.
The Company expects to participate in a broad variety of water
transfer and storage projects, including the transfer of surplus
water to public agencies which require supplemental sources of
water.
Basis of Presentation
- ----------------------
The Condensed Consolidated Financial Statements have been prepared
by the Company without audit and should be read in conjunction with
the consolidated financial statements and notes thereto included in
the Company's latest Form 10 K for the year ended March 31, 1996.
The foregoing Condensed Consolidated Financial Statements include
all adjustments, consisting only of normal recurring adjustments
which the Company considers necessary for a fair presentation.
Throughout the remainder of this document, when reference is made to
"Sun World," it will henceforth mean the operations pertaining to
Sun World International, Inc. and its subsidiaries only. When
reference is made to "Cadiz," it will henceforth mean the operations
of the Company other than those of Sun World (including those
operations conducted by the Company prior to acquisition of Sun
World). When reference is made to the "Company," it will henceforth
mean, with respect to operations subsequent to the acquisition of
Sun World, the consolidated operations of Cadiz Land Company, Inc.
and its subsidiaries including Sun World International, Inc.
On September 13, 1996, Cadiz acquired all of the outstanding capital
stock of Sun World. Cadiz' acquisition of Sun World is accounted
for under the purchase method of accounting. The Consolidated
Financial Statements include Sun World from the date of acquisition.
As the financial statements set forth herein reflect the operations
of Sun World for the period September 14, 1996 through September 30,
1996, the results of operations for the six months ended September
30, 1996 are not indicative of the results to be expected for the
full fiscal year nor are they reflective of operations on a go
forward basis.
Prior to the acquisition of Sun World, Cadiz had utilized an
unclassified balance sheet (eliminating the distinction between
current assets and long term assets and current liabilities and long
term liabilities). The financial statements set forth herein
utilize a classified balance sheet, thus requiring certain
reclassifications to be made to the prior period balances to conform
with the September 30, 1996 presentation.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------
Upon the acquisition of Sun World, the following accounting policies
were adopted by the Company in addition to those previously followed
by Cadiz as discussed in Note 2 to the Condensed Consolidated
Financial Statements included in the Cadiz' latest Form 10 K.
Investment in Partnerships
- --------------------------
Wholly owned subsidiaries of Sun World have investments in various
partnerships. Sun World's two principal partnerships are American
Sunmelon and Sun Date, both of which are 50% owned. American
Sunmelon is engaged in proprietary seed development, production, and
marketing of seedless watermelons. Sun Date is engaged in the
marketing, processing, and farming of dates. These partnership
investments are accounted for using the equity method.
Assets Held for Sale
- --------------------
As part of the acquisition of Sun World, specific properties were
identified to be sold. These properties, which are included in the
accompanying consolidated balance sheet at the lower of cost or net
realizable value, consist of both farmland and facilities that were
determined not core to the Company's continuing operations.
Intangible Assets
- -----------------
Intangible assets consist of (i) the excess of purchase price over
net assets acquired and (ii) costs such as legal and professional
fees to establish and defend Sun World owned patents and trademarks
both domestically and internationally.
Revenue Recognition
- -------------------
Sun World recognizes crop sale revenue after harvest and delivery to
customers. Packing revenues are recognized as units are packed.
Marketing commission revenues are recognized at the time of product
shipment.
Research and Development
- ------------------------
Sun World incurs costs to research and develop new varieties of
proprietary products. Research and development costs are expensed
as incurred.
Net Loss per Common Share
- --------------------------
Primary loss per common share is computed for each period presented
using the weighted average number of common shares outstanding of
19,628,997 and 17,235,066 for the six month periods ending September
30, 1996 and 1995, respectively. On a fully diluted basis, both net
loss and shares outstanding are adjusted to assume the conversion of
the Company's outstanding convertible preferred stock and the
exercise of outstanding stock options.
NOTE 3 ACQUISITION OF SUN WORLD INTERNATIONAL, INC.
- ------------------------------------------------------
On September 13, 1996, Cadiz acquired all of the stock of a
reorganized Sun World pursuant to a consensual plan of
reorganization (Debtors' Modified Fourth Amended Consolidated Plan
of Reorganization dated June 3, 1996 (Modified) which was confirmed
by the U.S. Bankruptcy Court at a hearing on July 12, 1996 (the
"Plan"). The acquisition of Sun World was accounted for as a
purchase. Accordingly, the purchase price was allocated to the net
assets acquired based upon management's preliminary estimate of
their fair values. The value as presently allocated to intangible
assets is approximately $14.435 million and subject to further
possible revision. Since the purchase price allocation is based on
preliminary estimates it will most likely be revised at a later
date.
Total consideration was approximately $179 million of which
approximately $156 million was represented by a restructuring of
previously existing debt with Sun World's existing secured lenders.
In addition, Cadiz made a capital contribution of $15 million to Sun
World, with the intent of eliminating the requirement for Sun World
to have any additional debt facilities beyond those owed to its
existing secured creditors.
The total cash requirements of Cadiz related to the acquisition were
funded from: (i) the issuance by Cadiz of $27.631 million of newly
authorized Convertible Series A Preferred Stock; (ii) the issuance
by Cadiz of $7.6 million of newly authorized 6% Convertible Series
B Preferred Stock; (iii) the issuance by Cadiz of $2.6 million of
newly authorized 6% Convertible Series C Preferred Stock; and (iv)
$1 million previously deposited by Cadiz from its working capital in
trust with the Official Committee Holding Unsecured Claims. Of such
funds, approximately $35 million was applied to cash disbursements
required at closing under the Plan, including the $15 million
capital contribution referred to above and approximately $5.5
million of principal reduction to Sun World's existing secured
lenders. The remainder has been utilized by Cadiz substantially for
the payment of expenses relating to the acquisition.
The consideration paid by Cadiz was determined in arms length
negotiations between Cadiz and the various constituents of the Sun
World bankruptcy case. As required under the Plan, a total of $3
million in cash and 829,090 shares of newly issued common stock was
delivered to the previous holders of the stock of Sun World upon
transfer of such stock to Cadiz. None of such holders were
affiliates of Cadiz at the time of the transaction.
Pursuant to the Plan, the Company agreed to establish and maintain
a trusteed unsecured claims reserve account and disbursement
account, whereby the claims of unsecured creditors as determined
during reorganization would be paid once the amounts of such claims
were allowed. Therefore, at the closing of the acquisition of Sun
World, Cadiz made an initial deposit of $11,000,000 into the trust
account. As of September 30, 1996, $3,150,000 had been disbursed to
satisfy certain unsecured claims, leaving a balance of $7,850,000
which is recorded as Cash and Cash Equivalents on the Balance Sheet.
Management estimates that an additional deposit of approximately
$1,500,000 will be required to satisfy the remaining unsecured
claims. The total amount of these obligations are included in Other
Current Liabilities on the Balance Sheet.
The acquisition of Sun World enabled the Company to become one of
California's leading fully integrated agricultural companies. For
the year ended December 31, 1995, Sun World recorded revenues of
approximately $118,000,000 and earnings before interest, taxes,
depreciation and amortization (EBITDA) in excess of $20,000,000.
Sun World ships approximately 75 varieties of fresh produce to
nearly every state in the United States and exports fresh fruits and
vegetables to over thirty foreign countries. Sun World's farming
operations produce approximately 7 million units of fruits and
vegetables annually, while its packing facilities handle
approximately 9 million units of produce annually. Sun World's
marketing operations include selling, merchandising and promoting
Sun World grown products as well as providing such services to a
sizable and highly diverse world wide customer base which
domestically includes national retailers, club stores and food
service distributors.
In addition, Sun World operates Cadiz' 1,600 acres of developed
agricultural property in the Cadiz Valley under an agricultural
lease entered into concurrently with the Sun World acquisition. The
Company believes its Cadiz Valley agricultural operations will
benefit by virtue of the ability of the Company to grow, pack and
market its Cadiz produce under the Sun World umbrella.
The following unaudited pro forma summary combines the consolidated
results of operations of Cadiz and Sun World as if the acquisition
had occurred on April 1, 1996, the beginning of the Company's fiscal
year, after giving effect to certain proforma adjustments,
including, among others, the amortization of intangible assets,
decreased interest expense as a result of the refinancing of Sun
World's existing secured lenders, increased interest income due the
$15 million cash infusion at acquisition, increased depreciation as a result
of the purchase price allocation and elimination of reorganization
costs, such as professional fees and adequate protection fees. This
pro forma financial information is presented for informational
purposes only and may not be indicative of the results of operations
as they would have been if Cadiz and Sun World had been a single
entity during the six months ended September 30, 1996, nor is it
indicative of the results of operations which may occur in the
future.
For the six months ended September 30, 1996
(in thousands except per share data)
(unaudited)
Actual Pro forma
--------- ----------
Revenue $ 4,820 $ 79,181
Net income (loss) $ (4,429) $ 91
Primary income(loss)
per common share $ (.23) $ .01
Pro forma summary information for the comparable period of the prior
year is not presented as the required data to compute the summary
information is not available.
NOTE 4 ACCOUNTS RECEIVABLE
- ----------------------------
As of September 30, 1996, accounts receivable consisted of the
following ($000's omitted):
Trade receivables $ 11,905
Due from unaffiliated growers 893
Other 4,807
-------
17,605
Less allowance for doubtful accounts (181)
-------
$ 17,424
=======
Substantially all domestic receivables are unsecured and are from
large national and regional supermarket chain stores and produce
brokers. Amounts due from unaffiliated growers represent
receivables for services (harvest, haul and pack) provided on
behalf of growers under agreement with Sun World and are recovered
from proceeds of product sales. Other receivables primarily
include by product sales, grape sales to wineries, and accounts
receivable from joint venture partners.
NOTE 5 INVENTORIES
- ---------------------
Inventories at September 30, 1996 consisted of the following
($000's omitted):
Growing crops $5,528
Pepper seed, net 2,217
Harvested product 1,375
Materials and supplies 1,911
------
$11,031
========
Pepper seed is net of a valuation allowance of $395,000 as of
September 30, 1996 to reduce such inventory to its net realizable
value. In addition, costs related to management of the
infrastructure at Cadiz, California are included beginning
September 14, 1996 pursuant to an agricultural lease between Cadiz
and Sun World executed concurrently with the Sun World
acquisition.
NOTE 6 ASSETS HELD FOR SALE
- -----------------------------
In conjunction with the Sun World acquisition, certain assets have
been identified as either idle facilities, fallow land or farming
operations which have experienced consistently low returns on
investment. As of September 30, 1996, assets totalling
$17,888,000 have been identified which the Company reasonably
believes can be sold within one year and accordingly, have been
included as a current asset.
NOTE 7 DEBT
- ---------------
Cadiz has agreed to terms with one of its secured lenders which
will allow the Company to, among other things, extend the maturity
of $9,100,000 of debt for two one year periods beyond the original
January 31, 1997 maturity date. The Company is in the process of
replacing the debt obligation to Cadiz' other secured lender prior
to January 31, 1997, its maturity date. In addition, Sun World
entered into new financing arrangements with its existing secured
lenders concurrently with Cadiz' acquisition of Sun World. A
summary of long term debt as of September 30, 1996 follows ($000's
omitted):
Cadiz obligations:
Ansbacher $ 9,196
Rabobank 9,100
Other 89
Unamortized warrants (201)
Sun World obligations:
Credit Agricole 54,198
John Hancock 89,566
Other 5,327
------
167,275
Less current portion
of debt 18,436
--------
Long term portion
of debt $ 148,839
========
NOTE 8 STOCK OPTIONS EXERCISED AND PRIVATE PLACEMENTS
- -------------------------------------------------------
During the three months ended September 30, 1996, previously
outstanding stock options of 172,222 were exercised resulting in
gross proceeds to the Company of $287,500.
During the quarter ended September 30, 1996, Cadiz completed a
private placement of 27,631 shares of Series A Preferred Stock,
760 shares of 6% Convertible Series B Preferred Stock, and 260
shares of 6% Convertible Series C Preferred Stock resulting in
gross proceeds to Cadiz of $27,631,000, $7,600,000 and $2,600,000,
respectively.
NOTE 9 CONTINGENCIES
- ----------------------
Cadiz was awarded full reimbursement for its legal fees and costs
incurred in defending a legal action for which Cadiz collected its
judgment of approximately $269,000 in July 1996 and an additional
$65,000 in September 1996.
As further discussed in Note 9 to the Condensed Consolidated
Financial Statements included in Cadiz' latest Form 10-K, Cadiz
filed an action relative to the proposed construction and
operation of a landfill to be located adjacent to its property in
Cadiz, California (the Rail-Cycle Project), with the Superior
Court in San Bernardino County against the County of San
Bernardino and Rail-Cycle, L.P., among others. The action is
currently in the discovery phase and the Company intends to
continue to prosecute its claims in this matter.
The Internal Revenue Service (IRS) has filed claims against Sun
World and certain subsidiaries, for taxes refunded to Sun World
for certain workers that the IRS claims were employees. Sun World
contends that the workers are excluded from the definition of
employment under the Internal Revenue Code. Sun World intends to
object to the Claims asserted by the IRS. The total amount of
claims filed against Sun World are approximately $6,100,000
including tax deficiency, interest and penalties. Sun World has
recorded a reserve for these claims representing management's estimate
of the ultimate amount that will be paid.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Sun World International, Inc.
We have audited the accompanying consolidated balance sheets of Sun
World International, Inc. and subsidiaries (the "Company") as of December
31, 1995 and 1994, and the related consolidated statements of operations and
accumulated deficit and of cash flows for the years then ended. These
consolidated 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, such consolidated financial statements present fairly in all
material respects the financial position of the Company as of December 31,
1995 and 1994, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the Company
and certain of its subsidiaries filed voluntary petitions for relief under
Chapter 11 of the Bankruptcy Code on October 3, 1994. Since that date, the
companies had been operating under Bankruptcy protection and had been
negotiating with all parties to the Bankruptcy proceedings in an effort to
develop a Plan of Reorganization (the "Plan"). On July 12, 1996, the
Bankruptcy Court confirmed the Plan, which became effective on September
13, 1996. Under the Plan, the Company is required to comply with certain
terms and conditions as more fully described in Note 1.
/s/ Deloitte & Touche LLP
-----------------------
September 20, 1996
<TABLE>
SUN WORLD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
December 31,
---------------------------------------------------
1995 1994
ASSETS -------- ---------
<S> <C> <C>
Current assets:
Cash $ 23,333 $ 11,836
Accounts receivable, net 13,879 11,386
Inventories 12,710 13,875
Prepaid expenses and other 1,353 1,521
--------- -------
Total current assets 51,275 38,618
Investment in partnerships 1,948 2,220
Property, plant and equipment, net 81,680 112,088
Assets held for sale 17,969 -0-
Other assets 4,652 4,762
--------- -------
Total assets $ 157,524 $157,688
========= =======
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 13,926 $ 10,566
Accrued liabilities 2,074 2,588
Long-term debt due in one year 1,063 -0-
--------- --------
Total current liabilities 17,063 13,154
Long-term debt 1,458 -0-
Deferred revenue and other 79 292
Deferred income taxes 7,500 7,500
Liabilities subject to compromise under
reorganization proceedings 177,455 174,036
Commitments and contingencies
Stockholders' deficit:
Convertible 10% preferred stock,
75,000 shares authorized;
38,501 shares issued and
outstanding (liquidation
preference $11,550,000) 11,550 11,550
Common stock, $1 par value,
300,000 shares authorized;
42,000 shares issued and outstanding 42 42
Additional paid-in capital 29,350 29,350
Accumulated deficit (86,973) (78,236)
--------- ---------
Total stockholders' deficit (46,031) (37,294)
---------- --------
Total liabilities and
stockholders' deficit $ 157,524 $157,688
========= ========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
<TABLE>
SUN WORLD INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Dollars in thousands)
<CAPTION>
Years ended December 31,
-------------------------
1995 1994
----------- ---------
<S> <C> <C>
Revenues $117,623 $127,169
-------- --------
Costs and expenses:
Cost of sales 85,546 112,661
General and administrative 6,287 11,368
Permanent crop abandonments 1,560 1,312
-------- -------
Total operating costs 93,393 125,341
-------- --------
Operating profit 24,230 1,828
Provision for loss on asset disposals 4,868 2,136
Other expense/(income) 686 (178)
Interest expense 16,756 15,442
-------- --------
Income (loss) before reorganization
items 1,920 (15,572)
-------- --------
Reorganization items:
Professional fees 7,976 4,693
Adequate protection fees 3,214 2,259
Debt issuance costs 0 1,487
Interest income (533) (107)
-------- ----------
Total reorganization items 10,657 8,332
-------- ------------
Net loss (8,737) (23,904)
Accumulated deficit beginning of year (78,236) (54,332)
--------- -----------
Accumulated deficit end of year $(86,973) $(78,236)
========= =========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
<TABLE>
SUN WORLD INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Years Ended December 31,
1995 1994
-----------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,737) $ (23,904)
Adjustments to reconcile net
loss to cash provided
by operating activities:
Depreciation and amortization 6,705 7,037
Loss on sale of property,
plant and equipment 605 162
Writeoff of debt issuance costs 0 1,487
Provision for loss on disposal
of assets 4,868 2,136
Permanent crop abandonments 1,560 1,312
Share of partnership operations (400) 738
Changes in operating assets and
liabilities:
(Increase)/decrease in
accounts receivable (2,493) 9,954
Decrease in inventories 1,165 7,588
Decrease in prepaid expenses
and other 168 104
Increase in accounts payable 3,360 10,565
(Decrease)/increase in accrued
liabilities (514) 2,588
(Decrease) in deferred revenue
and other (213) (62)
---------- -------
6,074 19,705
---------- ---------
Increase/(decrease) in liabilities
subject to compromise under
reorganization proceedings 6,038 (2)
---------- --------
Net cash provided by operating
activities 12,112 19,703
---------- ---------
Cash flows from investing activities:
Additions to property, plant
and equipment (929) (2,623)
Additions to developing crops (1,355) (2,341)
Partnership distributions 672 379
(Increase)/decrease in other assets (436) 13
Proceeds from disposal of property,
plant and equipment 1,530 75
---------- --------
Net cash used in investing activities (518) (4,497)
----------- ---------
Cash flows from financing activities:
Payments of long-term debt
subject to compromise (97) (696)
Proceeds from short-term borrowings 91,303 16,431
Payments on short-term borrowings (91,303) (20,594)
----------- ----------
Net cash used in financing activities (97) (4,859)
------------ ----------
Net increase in cash 11,497 10,347
----------- ----------
Cash at beginning of year 11,836 1,489
----------- -----------
Cash at end of year $ 23,333 $ 11,836
======== ========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
SUN WORLD INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND REORGANIZATION UNDER CHAPTER 11
Sun World International, Inc. ("SWII") and its subsidiaries
(collectively the "Company") own and farm approximately 21,000
acres in two major growing areas of California, the Southern San
Joaquin Valley and Coachella Valley. Fresh produce, including
table grapes, tree fruit, peppers and watermelon are marketed,
packed and shipped to food wholesalers and retailers located
throughout the United States and in certain foreign countries. Export
sales accounted for approximately 7% of the Company's sales for the
years ended December 31, 1995 and 1994. As of December 31,
1995, the Company owned and operated eight cold storage and/or
packing facilities located in California. In 1996, three of those
facilities were sold.
On October 3,1994, SWII and certain of its subsidiaries filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code. Since that date, the companies had been operating under
Bankruptcy protection and had been negotiating with all parties to
the bankruptcy proceedings in an effort to develop a Plan of
Reorganization (the "Plan"). On July 12, 1996, the Bankruptcy
Court confirmed the Plan, which became effective on September 13,
1996 (the"Effective Date"). Pursuant to the Plan, SWII, Sun World,
Inc., Coachella Growers and Sun Desert, Inc. (all wholly-owned
subsidiaries of SWII) emerged from the Chapter 11 Bankruptcy
proceedings and 100% of SWII's stock (both preferred and common)
was acquired by Cadiz Land Company, Inc. ("Cadiz"). The Plan
also provided for, among other things, the cancellation of certain
indebtedness in exchange for cash, elimination of all intercompany
debts, new indebtedness, issuance of new equity securities, the
discharge of other prepetition claims, the cancellation of all
prepetition ownership interests in the Company, the settlement of
certain claims and mutual releases of certain claims of the Company
and other persons or entities (including certain affiliated persons or
entities), the assumption or rejection of executory contracts and
unexpired leases to which the Company was a party, and the
establishment of procedures for the selection of a Board of Directors
for the Company. The Plan did not provide for the reorganization of
the estate or the resolution of outstanding third-party claims and
equity interests for AAI Services, Inc., a wholly-owned subsidiary of
SWII.
Cadiz acquired all of the capital stock of the Company for total
consideration of approximately $179 million including
approximately $150 million which will be owed to the Company's
existing secured lenders through issuance of new notes. In addition,
Cadiz made a cash capital contribution of $15 million to the
Company to provide additional operating capital.
The following table summarizes the recoveries to the prepetition
creditors and equity holders pursuant to the Plan based upon the
Company's estimate of total claims to be allowed as of September
13, 1996 (dollars in thousands) (unaudited):
Recovery
-----------------------------------------
Estimated Cadiz
Allowed Claims Long-Term Common Total
Claims/Interest Amount (1) Cash Debt Stock Recovery
- --------------------------------------------------------------------------
Administrative,
Tax and Priority $ 5,000 $ 5,000 $ 0 $ 0 $ 5,000
Credit Agricole
Secured Debt 58,621 3,500 55,121 0 58,621
John Hancock
Secured Debt 93,084 2,000 91,084 0 93,084
Zenith Secured
Debt 3,065 250 2,575 240 3,065
Other Secured
Debt 1,050 0 1,050 0 1,050
General Unsecured
Claims 20,800 12,500 0 0 12,500
Convertible
Preferred Stock
and Common Stock 11,592 3,000 0 2,487 5,487
-------- ---------- --------- -------- ---------
$193,212 $ 26,250 $149,830 $ 2,727 $178,807
======= == ====== ======= ====== =======
(1) Excludes any recovery to the Internal Revenue Service for claims
as further discussed by Note 14.
Management believes that the aggregate fair value of the Company's
long-term debt issued pursuant to the Plan approximates the
aggregate book value.
The Plan provided for a consolidation of the assets and liabilities of
SWII and its subsidiaries and pursuant to the Plan, SWII was merged
into Sun World, Inc. with the surviving corporation retaining the
name of Sun World International, Inc. All payments and
distributions required by the Plan to be made by SWII or any of its
subsidiaries in respect of prepetition claims have been made or
provided for, and SWII and its subsidiaries expect to have no further
obligation with respect to any prepetition claims.
Cadiz intends to account for this acquisition using the purchase
method which will materially change the amounts reported in the
accompanying consolidated balance sheet as of December 31, 1995.
The consolidated financial statements do not give effect to
adjustments of assets or liabilities, or classifications of such
amounts, which may be necessary as a consequence of the Cadiz
acquisition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The consolidated financial statements
include the accounts of SWII and its subsidiaries, substantially all of
which are wholly owned. All significant intercompany transactions
have been eliminated.
The Company has accounted for all transactions related to the
Chapter 11 proceedings in accordance with Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," issued by the American Institute of Certified
Public Accountants. Accordingly, liabilities subject to compromise
under reorganization proceedings have been segregated on the
consolidated balance sheets and are recorded at the amounts that
have been or are expected to be allowed based upon known claims.
INVENTORIES Growing crops, pepper seed, and materials and
supplies are stated at the lower of cost, on a first-in, first-out (FIFO)
basis, or market. Growing crops inventory includes direct costs and
an allocation of indirect costs.
INVESTMENT IN PARTNERSHIPS Wholly-owned subsidiaries
of the Company have investments in various partnerships. The
Company's two principal partnerships are Sun Date and American
Sunmelon, both of which are 50% owned. American Sunmelon is
engaged in proprietary seed development, production, and marketing
of seedless watermelons. Sun Date is engaged in the marketing,
processing, and farming of dates. These partnership investments are
accounted for using the equity method.
PROPERTY, PLANT AND EQUIPMENT Property, plant and
equipment is stated at cost for all acquisitions subsequent to
September 30, 1983. All property, plant and equipment acquired
prior to September 30, 1983 was restated to estimated fair value at
that date in connection with the Company's quasi-reorganization.
The Company capitalizes the direct and certain indirect costs of
planting and developing orchards and vineyards until they reach
maturity, which varies by crop and ranges from three to seven years.
Depreciation on trees and vines commences in the year commercial
production is achieved.
The Company computes depreciation applicable to property, plant
and equipment on the straight-line method using the following
estimated useful lives:
Buildings and improvements 10-45 years
Machinery and equipment 3-25 years
Permanent crops 10-20 years
Upon the sale, retirement or abandonment of property, plant and
equipment, applicable gains or losses are recognized in income.
ASSETS HELD FOR SALE In conjunction with the Company's
1996 Business Plan, specific properties were identified to be sold.
These properties, which are included in the accompanying
consolidated balance sheet at the lower of cost or net realizable
value, consist of both farmland and facilities that were determined
not vital to the Company's ongoing operations. The Company
has sold certain facilities in 1996 including facilities located in
Reedley, Arvin and Thermal.
OTHER ASSETS Other assets include professional fees and
other costs to establish and defend trademark and patent rights.
These assets are amortized over a 10-year period on a straight-line
basis. Also included in other assets are water rights that were
obtained in connection with a 1988 divestiture of the Company's
interest in a partnership. The Company is amortizing these water
rights over 97 years using the straight-line method.
PROVISION FOR LOSS ON ASSET DISPOSALS In 1995 and
1994, the Company recorded provisions for loss on disposal of
assets totaling $4,868,000 and $2,136,000, respectively. Such
write-downs represented amounts necessary to reduce the assets to
their expected net realizable value.
REVENUE RECOGNITION The Company recognizes crop
sale revenue after harvest and delivery to customers. Packing
revenues are recognized as units are packed. Marketing
commission revenues are recognized at the time of product
shipment.
REORGANIZATION ITEMS The net expenses incurred as a
result of the Chapter 11 filing and subsequent reorganization
proceedings have been segregated from recurring operations in the
consolidated statements of operations.
INCOME TAXES Deferred income taxes on the difference
between financial statement basis and tax basis of assets and
liabilities are provided for at the statutory rates.
SUPPLEMENTAL CASH FLOW INFORMATION Cash
payments for interest were $6,258,000 and $6,673,000 in the years
ended December 31, 1995 and 1994, respectively. In 1995 and
1994 the Company paid income tax, net of refunds, of $13,000
and $633,000, respectively.
RESEARCH AND DEVELOPMENT The Company incurs
costs to research and develop new varieties of proprietary
products. Research and development costs are expensed as
incurred. Such costs were approximately $393,000 and
$1,127,000 for the years ended December 31, 1995 and 1994,
respectively.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL
STATEMENTS The preparation of consolidated financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and related notes. Actual results could differ from
these estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS In March
1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121") was issued.
SFAS No. 121 establishes new guidelines in accounting for the
impairment of long-lived assets, including identifiable intangibles.
When circumstances indicate that the carrying amount of an asset
may not be recoverable as demonstrated by estimated future cash
inflows, an impairment loss shall be recorded based on fair value.
The Company has not yet adopted SFAS No. 121 but believes that
its impact when adopted will not be material.
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (dollars
in thousands):
December 31,
1995 1994
---------- ---------
Trade receivables $ 6,791 $ 4,107
Due from unaffiliated
growers 1,962 903
Due from affiliated
growers 257 840
Other 5,051 5,904
--------- ---------
14,061 11,754
Less allowance for
doubtful accounts 182 368
--------- ---------
$13,879 $ 11,386
====== ==========
Substantially all domestic trade receivables are from large
national and regional supermarket chain stores and produce
brokers and are unsecured. The amounts due from growers
represent receivables for services (harvest, haul and pack)
provided on behalf of growers under agreement with the
Company and are recovered from proceeds of product sales.
Other receivables primarily include lemon crop sales, by-product
sales, and amounts receivable from joint venture partners.
4. INVENTORIES
Inventories consisted of the following (dollars in thousands):
December 31,
-------------------
1995 1994
---------- --------
Growing crops $ 8,337 $ 9,103
Pepper seed 2,328 2,950
Materials and supplies 2,045 1,822
-------- -----------
$ 12,710 $ 13,875
======= ======
Pepper seed is net of valuation allowance of $395,000
and $375,000 at December 31, 1995 and 1994,
respectively, to reduce such inventories to their net
realizable value.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following
(dollars in thousands):
December 31,
----------------
1995 1994
----------- -----------
Land $ 27,446 $ 39,194
Permanent crops 42,837 49,217
Buildings and improvements 27,860 38,607
Machinery and equipment 19,485 29,562
----------- ----------
117,628 156,580
Less accumulated
depreciation 35,948 44,492
----------- ----------
$ 81,680 $ 112,088
======== ============
6. INCOME TAXES
Significant components of the Company's deferred income tax
assets and liabilities as of December 31, 1995 and 1994 are as
follows (dollars in thousands):
1995 1994
---------- -------------
Deferred tax liabilities:
Net fixed asset basis
difference $ 23,630 $ 22,122
State taxes 181 181
------------ --------
Total deferred tax
liabilities 23,811 22,303
Deferred tax assets:
Net operating losses 29,779 28,655
Tax credit carryforwards 1,604 1,760
Reserve for notes
receivable 5,769 5,769
Capitalized legal fees 2,789 2,789
Basis difference in
water rights 1,198 1,198
Deferred crop costs 484 1,685
Allowance for doubtful
accounts 79 159
Basis difference in
partnership investments 40 12
State taxes 353 353
-------- --------
Total deferred tax
assets 42,095 42,380
Valuation allowance for
deferred
tax assets (25,784) (27,577)
Total deferred tax
assets, net 16,311 14,803
-------- -------------
Net deferred
tax liability $ 7,500 $ 7,500
========= ==========
The Company has provided a valuation allowance for the tax
benefits of deferred tax assets which may not be realizable.
Income tax expense (benefit) varies from the amount
computed by applying the statutory federal income tax rate to
the income (loss) before income taxes. The reasons for this
difference are as follows:
December 31,
-----------------
1995 1994
-------- ----------
Statutory federal rate (34.0)% (34.0)%
State taxes, less
federal benefit (6.2)% (6.2)%
Valuation allowance 40.2 % 40.2 %
----------- ----------
Effective rate 0.0 % 0.0 %
========== ==========
At December 31, 1995, the Company had net operating loss
carryforwards for federal and state income tax purposes of
approximately $40,439,000 and $8,032,000, respectively, which
expires at various dates from 1997 through 2010. In addition, a
wholly-owned subsidiary acquired in 1989 has net operating loss
carryforwards of approximately $44,950,000 for federal tax
purposes, which are subject to an annual limitation for a fifteen-
year period. The federal loss carryforwards expire at various
dates from 2001 through 2004.
The Company had investment and research and experimental tax
credit carryforwards of approximately $747,000 which expire
from 1996 to 2007. The Company also had alternative minimum
tax carryforwards of approximately $857,000.
The utilization of the net operating loss and credit carryforwards
could be limited or eliminated by a reduction in liabilities as a
result of the Plan and/or by changes in the Company's stock
ownership resulting from the Cadiz acquisition.
7. FINANCING
Pursuant to the Plan, the Company issued new debt (along with
Cadiz common stock) to settle prepetition long-term debt. The
following is a discussion of the Company's financing
arrangements prior to and as of the Effective Date.
Prepetition Financing:
Debt and other financing arrangements of the Company at
December 31, 1995 and 1994 were as follows, based on the
original contractual maturities:
December 31,
------------------
(in thousands)
1995 1994
------------ -------------
Secured Debt:
Revolving credit facility $ 34,277 $ 34,277
Note payable to an insurance
company, monthly
installments of $824,000
(includes interest), due
on November 1, 2000,
interest at 10.6%
(default interest at
12.6%) 77,234 77,234
Note payable to bank,
semi-annual installments
of $750,000, due November
30, 1999, interest
at prime plus 1.25%
(9.75% at December 31,
1995), payable quarterly
(default interest at
prime plus 3.25%) 5,793 5,793
Note payable to bank,
annual installments of
$1,500,000 due November
30, 1996, interest
at prime plus 1.25%
(9.75% at December 31,
1995), payable quarterly
(default interest at
prime plus 3.25%) 10,500 10,500
Note payable to insurance
company, monthly
installments of $60,000
(includes interest),
interest at 12.9% 2,838 2,694
Unsecured Debt
Note payable to bank,
due July 1, 1995, interest
only at 10.0%, payable
quarterly 1,500 1,500
Note payable to partnership,
due September 1, 1994,
interest at 13.25% 1,150 1,150
------- -------
$133,292 $133,148
========= ========
All of this prepetition debt has been classified in the
accompanying consolidated balance sheets as "Liabilities
subject to compromise under reorganization proceedings." As
a result of the bankruptcy, all required principal payments on
prepetition debt were suspended. For the period subsequent to
the Petition Date, interest on the unsecured prepetition debt
was not paid or accrued. Interest on secured prepetition debt
continued to be accrued in the period subsequent to the
Petition Date at the default interest rates. Pursuant to
Bankruptcy Court order, adequate protection payments were
made on the secured debt amounting to $3,214,000 and
$2,259,000 for the years ended December 31, 1995 and 1994,
respectively. "Liabilities subject to compromise under
reorganization proceedings" included $19,248,000 and
$9,098,000 related to unpaid interest accrued on secured debt
for the years ended December 31, 1995 and 1994,
respectively.
These credit facilities described above were collateralized by
substantially all of the assets of the Company. The Company
was in default on substantially all of the covenants under these
credit facilities as of December 31, 1995 and 1994.
Debtor In Possession Financing:
The Bankruptcy Court entered an order on January 20, 1995
approving a debtor in possession (DIP) financing agreement
for the Company in an aggregate amount of $30,000,000. The
DIP financing granted to the DIP lender security interests in
all the real and personal property of the Company including all
contract accounts, contract rights, fixtures, copyrights, patents
and trademarks. Under the terms of the loan and the
Bankruptcy Code, the security interest of the DIP lender had
priority over virtually all prepetition claims and Chapter 11
administrative expense claims. The DIP financing also
contained a clause to provide adequate protection to certain
prepetition secured lenders in the form of (a) replacement liens
and (b) payment of specified amounts on the prepetition
secured debt to cover interest and professional fees incurred by
the lenders.
Interest on the DIP borrowings was prime plus 1.25%. During
1995, the Company borrowed and repaid up to $21,181,000
under this facility and had no balance outstanding at December
31, 1995. Total interest and fees paid during 1995 related to
the DIP facility was $681,000.
The DIP facility was amended and restated as of February 28,
1996 to extend the facility through the 1996 operating season
in an aggregate amount of $20,000,000. The DIP facility
expired when the Company emerged from bankruptcy on
September 13, 1996.
Postpetition Financing:
On or about October 27, 1995, the Bankruptcy Court issued
the Weyerhaeuser Order pursuant to which the Company
assumed certain agreements with Weyerhaeuser for corrugated
shipping containers and related financing. Pursuant to the
Weyerhaeuser Order, the Company was required to make
certain adequate protection payments and entered into a
secured note which had an outstanding balance at December
31, 1995 as follows:
(in thousands)
Note payable to supplier,
monthly installments of $ 2,521
$104,000 (includes interest),
due March 1, 1998,
interest at 10.00%.
Less: current portion 1,063
----------
$ 1,458
===========
Plan Financing:
Pursuant to the Plan, the Company entered into new financing
agreements totaling approximately $150 million with its
existing secured lenders which are collateralized by
substantially all of the assets of the Company. Annual
maturities of the debt outstanding upon emergence from
bankruptcy on September 13, 1996 (including the postpetition
financing) is as follows: 1996-$4,502,000; 1997-$8,789,000;
1998-$7,970,000; 1999-$9,369,000; 2000-$11,377,000; 2001
and thereafter - $110,322,000.
8. PREFERRED STOCK
In May 1985, the Board of Directors of the Company
designated 40,000 shares of Preferred Stock as Series I
Preferred Stock. Each share of Series I Preferred Stock was
convertible into one share of Common Stock and was entitled
to receive cash dividends of $30 per share for each of the fiscal
years ending on or after September 30, 1987. Such dividends
were cumulative under certain circumstances and included
other rights such as a liquidation preference per share equal to
the sum of $300, plus all accrued but unpaid dividends.
Pursuant to the Plan, all prepetition ownership interests of the
Company, including the Series I Preferred Stock, as of the
Effective Date were sold to Cadiz. At that time, accumulated
undeclared dividends on the preferred stock of $10,395,000
and $9,240,000 at December 31, 1995 and 1994 were released.
9. LEASING ARRANGEMENTS
The Company leases certain parcels of land, facilities,
machinery, and equipment under noncancelable operating
leases which expire in various years through 2000.
At December 31, 1995, future minimum lease commitments
under noncancellable leases (exclusive of property taxes and
insurance) consist of the following (dollars in thousands):
Facilities &
Land Equipment Total
-------- ----------- ---------
1996 $ 119 $ 1,543 $ 1,662
1997 114 348 462
1998 114 60 174
1999 0 9 9
2000 0 9 9
--------- ------ -------
$ 347 $ 1,969 $ 2,316
======== ======= ========
Operating lease payments for the years ended December 31,
1995 and 1994 were $2,554,000 and $4,595,000, respectively.
10. LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION PROCEEDINGS
Liabilities subject to compromise under reorganization
proceedings consisted of the following as of December 31
(dollars in thousands):
1995 1994
------------ -----------
Accounts payable $ 20,792 $ 27,667
Interest payable 19,248 9,098
Other accrued liabilities 4,123 4,123
Long-term debt (see
Note 7) 133,292 133,148
----------- -----------
$ 177,455 $ 174,036
========= ==========
11. COMMITMENTS
DEBT GUARANTEE The Company was co-guarantor with
its partner on a bank loan to the Sun Date partnership (see
Note 13). The loan totaled $1,150,000 at December 31, 1995
and 1994. In connection with the Sun Date settlement during
the bankruptcy proceeding, the Company will be released from
this bank guarantee and Cadiz has agreed to guarantee the
bank loan up to a maximum of $350,000.
PURCHASE AGREEMENT In 1995, the Company entered
into an agreement with its major corrugated container supplier
in connection with a prepetition liability settlement. The
settlement stipulated that the original agreement to purchase
containers from the supplier would remain in effect until
March 21, 1998 and required the Company to issue a secured
note payable to the supplier (see Note 7). Thereafter, the
original agreement will automatically renew unless either
party gives written notice ninety days prior to the end of the
renewal period.
12. RETIREMENT PLANS
The Company has a defined contribution pension plan
covering substantially all of its employees not covered by a
collective bargaining agreement, with at least one year of
service and who have worked at least 1,000 hours.
Contributions are 2% of each covered employee's salary and
totaled approximately $207,000 and $300,000 for the years
ended December 31, 1995 and 1994, respectively. For those
hourly employees covered under a collective bargaining
agreement, contributions are made to a multiemployer pension
plan in accordance with negotiated labor contracts, are
generally based on the number of hours worked, and totaled
approximately $11,000 and $25,000 for the years ended
December 31, 1995 and 1994, respectively.
13. RELATED PARTY TRANSACTIONS
AG-ACCOUNTING, INC. The Company has entered into
agreements to market products obtained from growers in
which a former major stockholder/director of the Company
has financial interests and/or farm management contracts.
Ag-Accounting, Inc. ("Ag-Accounting"), which is wholly owned
by this former stockholder/director, provides accounting
services to these affiliated growers. The Company recognized
marketing commission revenues from these affiliated growers
of $104,000 and $436,000 for the years ended December 31,
1995 and 1994, respectively. The Company makes crop
advances and charges for some or all of harvesting, hauling,
packing and marketing services provided to these growers.
These charges are deducted from crop proceeds paid to
growers. As of December 31, 1994, the amount due Ag-Accounting
from the Company was $404,000 (none in 1995). Amounts due the
Company from Ag-Accounting totaled $233,000 and $634,000 as
of December 31, 1995 and 1994, respectively. The Company bills
the affiliated growers monthly for services and remits net
proceeds to each grower for the crops marketed by the Company.
In certain instances, the Company has also obtained financing for
these affiliated growers.
Costs related to a product incentive program and certain
payroll and office expenses of $395,000 and $503,000 were
incurred on behalf of Ag-Accounting for the years ended
December 31, 1995 and 1994, respectively.
In 1993, the Company determined that receivables due from
Ag-Accounting and growers affiliated with Ag-Accounting in
the amount of $8,652,000 were uncollectible. These amounts
which were written off represent advances made by the
Company to Ag-Accounting for operating expenses and to Ag-
Accounting ranches for growing and harvesting costs. Under
the Plan, Ag-Accounting, the majority stockholder/director,
and the affiliated growers have been released from all claims
and liabilities related to the Company.
ANTHONY VINEYARDS, INC. Anthony Vineyards, Inc. is
a farming entity owned by a former officer and director of the
Company. The Company entered into marketing agreements
and provided packing and marketing services to this grower.
The Company makes grower advances for harvesting, hauling,
and packing materials which are recovered from the grower at
the time the Company receives the crop proceeds. The
Company recognized marketing commission revenues from
Anthony Vineyards of $1,277,000 and $980,000 for the years
ended December 31, 1995 and 1994, respectively. In addition,
at December 31, 1994, the Company had liabilities owed to
Anthony Vineyards, Inc. of $841,000 (none in 1995). The
amounts due the Company from Anthony Vineyards as of
December 31, 1995 and 1994 were $26,000 and $125,000,
respectively.
STOCKHOLDERS In 1993, the Company determined that
$3,771,000 in receivables due from stockholders were
uncollectible and were written off. As part of the Plan, all
liabilities and claims between the former stockholders and the
Company have been released.
LSL BIOTECHNOLOGIES, INC. LSL Biotechnologies,
Inc. (LSL) is an entity that develops, produces and markets
seed varieties in which former officers and/or directors of the
Company have or had ownership interests. The Company and
LSL entered into growing agreements and seed purchase
contracts related to peppers and tomatoes. For the year ended
December 31, 1994, the Company made royalty payments to
LSL of $1,339,000 (none in 1995). During the bankruptcy
proceeding, LSL made significant claims for prepetition and
postpetition amounts owed by the Company under the
agreements which the Company disputed. On September 9,
1996, an agreement between the Company and LSL was
reached that settled all LSL pre and postpetition claims against
the Company. The settlement included the allowance of the
prepetition unsecured claim for $900,000, and postpetition
administrative claim of $650,000 for postpetition royalties
owed to LSL for pepper and tomato sales. In addition, the
Company agreed to convey the trade name and trademark Le
Rouge Royale(R) to LSL and obtained a license to utilize the
trademark until December 31, 1997 for an additional royalty
of $100,000.
THE IRVINE COMPANY The Company had orchard and
row crop farming, packing and marketing agreements with
The Irvine Company. A former major stockholder/director of
the Company owned stock in and was a director of The Irvine
Company, a large land owner and developer in Southern
California. In 1993, the orchard agreement was terminated
and in 1994 the row crop agreement was terminated. As of
December 31, 1995 and 1994, the Company had liabilities
owed to The Irvine Company, primarily for land rent and crop
proceeds, of $4,946,000 and $5,400,000, respectively. In
connection with the Plan, the Company agreed to allow a
claim of $5,000,000 in settlement of Irvine's prepetition
liability and claim against the Company.
AMERICAN SUNMELON For the years ended December
31, 1995 and 1994, the Company made payments to American
Sunmelon of $849,000 and $1,101,000, respectively, primarily
for royalty payments and seed purchases. As of December 31,
1995 and 1994, the Company had liabilities owed to American
Sunmelon of $128,000 and $210,000, respectively. The
Company's share of partnership income from American
Sunmelon was $1,111,000 and $480,000 for the years ended
December 31, 1995 and 1994, respectively.
SUN DATE On September 9, 1996, the Company and Sun
Date entered into an agreement that included a release or
settlement of all prepetition claims between Sun Date and the
Company, and included provisions for the Company to sell the
dates produced by Sun Date. A former major
stockholder/director of the Company, prior to September 13,
1996, had ownership interests in various date farming
partnerships that provided unprocessed dates to Sun Date. For
the years ended December 31, 1995 and 1994, the Company
recognized marketing commissions from date sales of
$116,000 and $68,000, respectively. In addition, as of
December 31, 1995 and 1994, the Company had liabilities
payable to Sun Date of $1,175,000 and $1,546,000,
respectively, including a $1,150,000 prepetition note payable
which was settled as described above. The Company's share
of the partnership loss from Sun Date was $677,000 and
$669,000 for the years ended December 31, 1995 and 1994,
respectively.
14. CONTINGENCIES
The Internal Revenue Service (IRS) has filed claims against
the Company, and certain subsidiaries, for taxes refunded to
the Company for certain workers that the IRS claims were
employees. The Company contends that the workers are
excluded from the definition of employment under the Internal
Revenue Code. A complaint has been filed by the Company
in the Bankruptcy Court seeking refunds of taxes paid on
account of agricultural workers for other years. The Company
intends to object to the claims asserted by the IRS. The total
amount of claims filed against the Company are approximately
$4,300,000 including tax deficiency, interest and penalties. At
December 31, 1995 and 1994, the Company has recorded a
reserve for these claims representing management's best
estimate of the ultimate amount that will be paid.
On January 3, 1996, the Company brought an action against
Corona College Heights Orange & Lemon Association (CCH)
alleging breach of contract, intentional interference with
economic advantage and unfair competition. On April 17,
1996, CCH counterclaimed against the Company, alleging
breach of contract, breach of fiduciary duty, negligence, fraud
and deceit, negligent misrepresentation, constructive fraud,
intentional interference with prospective economic advantage,
unjust enrichment and constructive trust and accounting. This
matter is in the early stages of discovery.
In the normal course of agricultural operations, the Company
handles, stores, transports and dispenses products identified as
hazardous materials. The Company has had regulatory
agencies conduct inspections and there has been a claim
asserted relating to these materials. Although the Company
does not believe remedial action, if any, will require the
expenditure of funds material to the Company's financial
condition, no assurance can be given regarding the outcome of
environmental claims, investigations or remedial actions in the
future.
The Company is involved in other legal and administrative
proceedings and claims. In the opinion of management, the
ultimate outcome of each proceeding or all such proceedings
combined will not have a material adverse impact on the
Company's financial statements.
* * * * * *
REPORT OF INDEPENDENT ACCOUNTANTS
November 22, 1996
To the Board of Directors and
Shareholders of Sun World International, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and accumulated deficit and of cash
flows present fairly, in all material respects, the financial position of Sun
World International, Inc. and its subsidiaries (the Company) at September
13, 1996, and the results of their operations and their cash flows for the
period January 1, 1996 through September 13, 1996 in conformity with
generally accepted accounting principles. 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 audit. We
conducted our audit of these statements in accordance with generally
accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion
expressed above.
As discussed in Note 1, the Company and certain of its subsidiaries filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code on
October 3, 1994. On July 12, 1996, the Bankruptcy Court confirmed the
Plan of Reorganization (the Plan) which became effective on September 13,
1996. Concurrent with the approval of the Plan, the Company was acquired
by Cadiz Land Company, Inc. The accompanying consolidated financial
statements do not include any adjustments for the forgiveness of
indebtedness or for the adjustment of assets and other liabilities which will
result from the Plan nor do they give effect to any adjustments which may
be necessary as a consequence of the acquisition.
/s/ Price Waterhouse LLP
-----------------------
<TABLE>
SUN WORLD INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
<CAPTION>
September 13,
1996
ASSETS ------------------
<S> <C>
Current assets:
Cash $ 17,113
Accounts receivable, net 18,347
Inventories 12,991
Assets held for sale 15,074
Prepaid expenses and other 1,241
--------------
Total current assets 64,766
Investment in partnerships 1,752
Property, plant and equipment, net 80,723
Other assets 5,425
---------------
$ 152,666
=========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 11,710
Accrued liabilities 1,878
Long term debt due within one year 1,269
---------------
Total current liabilities 14,857
Long term debt 1,484
Deferred revenue and other 59
Liabilities subject to compromise
under reorganization proceedings 180,249
Deferred income taxes 7,500
Commitments and contingencies
Stockholders' deficit:
Convertible 10% preferred stock,
75,000 shares authorized;
38,501 shares issued and
outstanding (liquidation
preference $11,550,000) 11,550
Common stock, $1 par value,
300,000 shares authorized;
42,000 shares issued and outstanding 42
Additional paid in capital 29,350
Accumulated deficit (92,425)
---------
Total stockholders' deficit (51,483)
---------
$ 152,666
=========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
<TABLE>
SUN WORLD INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED
DEFICIT
(Dollars in thousands)
<CAPTION> January 1 to
September 13,
1996
--------------
<S> <C>
Revenues $77,938
---------
Costs and expenses:
Cost of sales 60,300
General and administrative 5,934
---------
66,234
--------
Operating income 11,704
Other income (242)
Interest expense 10,806
------------
Net income before reorganization items 1,140
------------
Reorganization items:
Professional fees 4,085
Adequate protection fees 3,007
Interest income (500)
------------
Total reorganization items 6,592
------------
Net loss (5,452)
Accumulated deficit beginning of year (86,973)
-------------
Accumulated deficit at September 13, 1996 $(92,425)
========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
<TABLE>
SUN WORLD INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
<CAPTION> January 1 to
September 13,
1996
---------------------
<S> <C>
Cash flows from operating activities:
Net loss $ (5,452)
Adjustments to reconcile
net loss to cash used in
operating activities:
Depreciation and amortization 4,085
Gain on sale of property,
plant and equipment (10)
Share of partnership operations (628)
Changes in operating assets
and liabilities:
Increase in accounts receivable,
net (4,468)
Increase in inventories (340)
Decrease in prepaid expenses
and other 112
Decrease in accounts payable (2,216)
Decrease in accrued liabilities (196)
Decrease in deferred revenue
and other (20)
-------------
(9,133)
-------------
Increase in liabilities subject to
compromise under
reorganized proceedings 2,794
------------
Net cash used in
operating activities (6,339)
-------------
Cash flows from investing activities:
Additions to property,
plant and equipment (2,321)
Additions to developing crops (462)
Partnership distributions 825
Increase in other assets (1,146)
Proceeds from disposal of
property, plant & equipment 2,991
------------
Net cash used in investing
activities (113)
-------------
Cash flows from financing activities:
Increase in long term debt 1,050
Payments of long term debt (818)
Proceeds from short term borrowings 46,711
Payments on short term borrowings (46,711)
------------
Net cash provided by
financing activities 232
------------
Net decrease in cash (6,220)
-------------
Cash at beginning of year 23,333
------------
Cash at September 13, 1996 $17,113
========
<FN>
See accompanying notes to the consolidated financial statements.
</FN>
</TABLE>
SUN WORLD INTERNATIONAL, INC.
Notes to Consolidated Financial Statements
1. NATURE OF OPERATIONS AND REORGANIZATION UNDER CHAPTER 11
Sun World International, Inc. ("SWII") and its subsidiaries
(collectively the "Company") own and farm approximately 21,000
acres in two major growing areas of California, the Southern San
Joaquin Valley and Coachella Valley. Fresh produce, including
table grapes, tree fruit, peppers and watermelon are marketed,
packed and shipped to food wholesalers and retailers located
throughout the United States and in certain foreign countries. Export
sales accounted for approximately 7.5% of the Company's sales for
the period ended January 1, 1996 to September 13, 1996. As of
September 13, 1996, the Company owned and operated five cold
storage and/or packing facilities located in California.
On October 3, 1994, SWII and certain of its subsidiaries filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code. Since that date, the companies had been operating under
bankruptcy protection and had been negotiating with all parties to
the bankruptcy proceedings in an effort to develop a Plan of
Reorganization (the "Plan"). On July 12, 1996, the Bankruptcy
Court confirmed the Plan, which became effective on September 13,
1996 (the"Effective Date"). Pursuant to the Plan, SWII, Sun World,
Inc., Coachella Growers and Sun Desert, Inc. (all wholly owned
subsidiaries of SWII) emerged from the Chapter 11 Bankruptcy
proceedings and 100% of SWII's stock (both preferred and common)
was acquired by Cadiz Land Company, Inc. ("Cadiz"). The Plan
also provided for, among other things, the cancellation of certain
indebtedness in exchange for cash, elimination of all intercompany
debts, new indebtedness, issuance of new equity securities, the
discharge of other prepetition claims, the cancellation of all
prepetition ownership interests in the Company, the settlement of
certain claims and mutual releases of certain claims of the Company
and other persons or entities (including certain affiliated persons or
entities), the assumption or rejection of executory contracts and
unexpired leases to which the Company was a party, and the
establishment of procedures for the selection of a Board of Directors
for the Company. The Plan did not provide for the reorganization of
the estate or the resolution of outstanding third party claims and
equity interests for AAI Services, Inc., a wholly owned subsidiary of
SWII.
Cadiz acquired all of the capital stock of the Company for total
consideration of approximately $179 million including
approximately $150 million which will be owed to the Company's
existing secured lenders through issuance of new notes. In addition,
Cadiz made a cash capital contribution of $15 million to the
Company to provide additional operating capital.
The following table summarizes the recoveries to the prepetition
creditors and equity holders pursuant to the Plan based upon the
Company's estimate of total claims to be allowed as of September
13, 1996 (dollars in thousands) (unaudited):
Recovery
-----------------------------------------------------------------
Estimated Cadiz
Allowed Claims Long term Common Total
Claims/Interest Amount (1) Cash Debt Stock Recovery
- ----------------------------------------------------------------------------
Administrative,
Tax and Priority $ 5,000 $ 5,000 $ 0 $ 0 $ 5,000
Credit Agricole
Secured Debt 58,621 3,500 55,121 0 58,621
John Hancock
Secured Debt 93,084 2,000 91,084 0 93,084
Zenith Secured
Debt 3,065 250 2,575 240 3,065
Other Secured
Debt 1,050 0 1,050 0 1,050
General Unsecured
Claims 20,800 12,500 0 0 12,500
Convertible
Preferred Stock
and Common Stock 11,592 3,000 0 2,487 5,487
-------- -------- --------- ---------- --------
$193,212 $ 26,250 $ 149,830 $ 2,727 $178,807
======== ======= ======== ======== ========
(1) Excludes any recovery to the Internal Revenue Service for claims as further
discussed by Note 14.
Management believes that the aggregate fair value of the Company's
long term debt issued pursuant to the Plan approximates the
aggregate book value.
The Plan provided for a consolidation of the assets and liabilities of
SWII and its subsidiaries and pursuant to the Plan, SWII was merged
into Sun World, Inc. with the surviving corporation retaining the
name of Sun World International, Inc. All payments and
distributions required by the Plan to be made by SWII or any of its
subsidiaries in respect of prepetition claims have been made or
provided for, and SWII and its subsidiaries expect to have no further
obligation with respect to any prepetition claims.
Cadiz intends to account for this acquisition using the purchase
method which will materially change the amounts reported in the
accompanying consolidated balance sheet as of September 13, 1996.
The consolidated financial statements do not give effect to
adjustments of assets or liabilities, or classifications of such
amounts, which may be necessary as a consequence of the Cadiz
acquisition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING The consolidated financial statements
include the accounts of SWII and its subsidiaries, substantially all of
which are wholly owned. All significant intercompany transactions
have been eliminated.
The Company has accounted for all transactions related to the
Chapter 11 proceedings in accordance with Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code," issued by the American Institute of Certified
Public Accountants. Accordingly, liabilities subject to compromise
under reorganization proceedings have been segregated on the
consolidated balance sheet and are recorded at the amounts that have
been or are expected to be allowed based upon known claims. The
accompanying financial statements do not include any adjustments
for the forgiveness of indebtedness or for the adjustment of assets or
other liabilities which will result from the Plan.
INVENTORIES Growing crops, pepper seed, and materials and
supplies are stated at the lower of cost, on a first in, first out (FIFO)
basis, or net realizable value. Growing crops inventory includes
direct costs and an allocation of indirect costs.
INVESTMENT IN PARTNERSHIPS Wholly owned subsidiaries
of the Company have investments in various partnerships. The
Company's two principal partnerships are Sun Date and American
Sunmelon, both of which are 50% owned. American Sunmelon is
engaged in proprietary seed development, production, and marketing
of seedless watermelons. Sun Date is engaged in the marketing,
processing, and farming of dates. These partnership investments are
accounted for using the equity method.
PROPERTY, PLANT AND EQUIPMENT Property, plant and
equipment is stated at cost for all acquisitions subsequent to
September 30, 1983. All property, plant and equipment acquired
prior to September 30, 1983 was restated to estimated fair value at
that date in connection with the Company's quasi-reorganization.
The Company capitalizes the direct and certain indirect costs of
planting and developing orchards and vineyards until they reach
maturity, which varies by crop and ranges from three to seven years.
Depreciation on trees and vines commences in the year commercial
production is achieved.
The Company computes depreciation applicable to property, plant
and equipment on the straight line method using the following
estimated useful lives:
Buildings and improvements 10-45 years
Machinery and equipment 3-25 years
Permanent crops 10-20 years
Upon the sale, retirement or abandonment of property, plant and
equipment, applicable gains or losses are recognized in income.
ASSETS HELD FOR SALE In conjunction with the Company's
1996 Business Plan, specific properties were identified to be sold.
These properties, which are included in the accompanying
consolidated balance sheet at the lower of cost or fair value less
estimated costs to sell, consist of both farmland and facilities that
were determined not vital to the Company's on going operations. It
is expected that the assets will be sold within twelve months from
the balance sheet date.
OTHER ASSETS Other assets include professional fees and other
costs to establish and defend trademark and patent rights. These
assets are amortized over a 10 year period on a straight line basis.
Also included in other assets are water rights that were obtained in
connection with a 1988 divestiture of the Company's interest in a
partnership. The Company is amortizing these water rights over 97
years using the straight line method.
REVENUE RECOGNITION The Company recognizes crop sale
revenue after harvest and delivery to customers. Packing revenues
are recognized as units are packed. Marketing commission revenues
are recognized at the time of product shipment.
REORGANIZATION ITEMS The net expenses incurred as a
result of the Chapter 11 filing and subsequent reorganization
proceedings have been segregated from recurring operations in the
consolidated statement of operations.
INCOME TAXES Income taxes are accounted for using an asset
and liability approach which requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of
temporary differences between the financial statement and tax bases
of assets and liabilities at the applicable enacted tax rates.
SUPPLEMENTAL CASH FLOW INFORMATION Cash
payments for interest were $9,308,000 for the period ended January
1, 1996 to September 13, 1996. In 1996 the Company paid income
tax, net of refunds, of $11,000.
RESEARCH AND DEVELOPMENT The Company incurs costs
to research and develop new varieties of proprietary products.
Research and development costs are expensed as incurred. Such
costs were approximately $296,000 for the period ended January 1,
1996 to September 13, 1996.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL
STATEMENTS The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and related notes.
Actual results could differ from these estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS In March
1995, Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long Lived Assets and for Long
Lived Assets to be Disposed of ("SFAS 121") was issued. SFAS
No. 121 establishes new guidelines in accounting for the impairment
of long lived assets, including identifiable intangibles. When
circumstances indicate that the carrying amount of an asset may not
be recoverable as demonstrated by estimated future cash inflows, an
impairment loss shall be recorded based on fair value. The adoption
of SFAS No. 121 in 1996 resulted in no adjustments to the financial
statements.
3. ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (dollars in
thousands):
September 13
1996
----------------
Trade receivables $14,178
Due from unaffiliated growers 709
Other 3,642
-------
18,529
Less allowance for doubtful
accounts 182
-----------
$18,347
=========
Substantially all domestic trade receivables are from large
national and regional supermarket chain stores and produce
brokers and are unsecured. The amounts due from growers
represent receivables for services (harvest, haul and pack)
provided on behalf of growers under agreement with the
Company and are recovered from proceeds of product sales.
Other receivables primarily include lemon crop sales, by product
sales, and amounts receivable from joint venture partners.
4. INVENTORIES
Inventories consisted of the following (dollars in thousands):
September 13,
1996
------------
Growing crops $ 6,732
Harvested product 1,912
Pepper seed 2,206
Materials and supplies 2,141
-----------
$12,991
=========
Pepper seed is net of a valuation allowance of $395,000 at
September 13, 1996, to reduce such inventories to their net
realizable value.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following
(dollars in thousands):
September 13,
1996
------------------
Land $ 27,446
Permanent crops 43,764
Buildings and improvements 27,236
Machinery and equipment 20,250
-------------
118,696
Less accumulated depreciation 37,973
-------------
$ 80,723
============
6. INCOME TAXES
Significant components of the Company's deferred income tax
assets and liabilities as of September 13, 1996, are as follows
(dollars in thousands):
Deferred tax liabilities:
Net fixed asset basis difference $23,078
State taxes 181
--------
Total deferred tax liabilities 23,259
Deferred tax assets:
Net operating losses 29,779
Tax credit carryforwards 1,549
Reserve for notes receivable 5,769
Capitalized legal fees 4,447
Basis difference in water rights 1,198
Allowance for doubtful accounts 79
Basis difference in partnership investments 290
Revolving funds reserve 114
State taxes 353
-------
Total deferred tax assets 43,578
Valuation allowance for deferred tax assets (27,819)
Total deferred tax assets, net 15,759
-----------
Net deferred tax liability $ 7,500
=======
The Company has provided a valuation allowance for the tax
benefits of deferred tax assets which may not be realizable.
Income tax expense (benefit) varies from the amount
computed by applying the statutory federal income tax rate to
the income (loss) before income taxes. The reasons for this
difference are as follows:
September 13,
1996
---------------
Statutory federal rate (34.0%)
State taxes, less federal benefit (6.2%)
Valuation allowance 40.2%
-----------
Effective rate 0.0%
========
At September 13, 1996, the Company had net operating loss
carryforwards for federal and state income tax purposes of
approximately $40,439,000 and $8,032,000, respectively,
which expire at various dates from 1997 through 2011. In
addition, a wholly owned subsidiary acquired in 1989 has net
operating loss carryforwards of approximately $44,950,000 for
federal tax purposes, which are subject to an annual limitation
for a fifteen year period. The federal loss carryforwards expire
at various dates from 2001 through 2004.
The Company had investment and research and experimental
tax credit carryforwards of approximately $692,000 which
expire from 1997 to 2007. The Company also had alternative
minimum tax carryforwards of approximately $857,000.
The utilization of the net operating loss and credit
carryforwards could be limited or eliminated by a reduction in
liabilities as a result of the Plan and/or by changes in the
Company's stock ownership resulting from the Cadiz
acquisition.
7. FINANCING
Pursuant to the Plan, the Company issued new debt (along
with Cadiz common stock) to settle prepetition long term debt.
The following is a discussion of the Company's financing
arrangements prior to and as of the Effective Date.
Prepetition Financing:
Debt and other financing arrangements of the Company at
September 13, 1996 were as follows, based on the original
contractual maturities:
September 13,
1996
--------------
(in thousands)
Secured Debt:
Revolving credit facility $ 34,277
Note payable to an insurance
company, monthly installments
of $824,000 (includes
interest), due on November
1, 2000, interest
at 10.6% (default interest
at 12.6%) 77,234
Note payable to bank, semi
annual installments
of $750,000, due November
30, 1999, interest
at prime plus 1.25%
(9.75% at December 31,
1995), payable quarterly
(default interest at
prime plus 3.25%) 5,793
Note payable to bank,
annual installments of
$1,500,000 due November 30,
1996, interest
at prime plus 1.25%
(9.75% at December 31,
1995), payable quarterly
(default interest at prime
plus 3.25%) 10,500
Note payable to insurance
company, monthly
installments of $60,000
(includes interest), interest
at 12.9% 2,838
Unsecured Debt:
Note payable to bank,
due July 1, 1995, interest
only at 10.0%, payable
quarterly 1,500
Note payable to partnership,
due September 1, 1994,
interest at 13.25% 1,150
--------
$ 133,292
==========
All of this prepetition debt has been classified in the
accompanying consolidated balance sheet as "Liabilities subject
to compromise under reorganization proceedings." As a result
of the bankruptcy, all required principal payments on prepetition
debt were suspended. For the period subsequent to the Petition
Date, interest on the unsecured prepetition debt was not paid or
accrued. Interest on secured prepetition debt continued to be
accrued in the period subsequent to the Petition Date at the
default interest rates. Pursuant to Bankruptcy Court order,
adequate protection payments (including $3,417,000 in asset sale
proceeds) were made on the secured debt amounting to
$11,650,000 for the period from January 1, 1996 to September
13, 1996. "Liabilities subject to compromise under
reorganization proceedings" included $18,486,000 related to
unpaid interest accrued on secured debt and $5,642,000 of
unpaid professional fees incurred by the secured lenders as of
September 13, 1996. Pursuant to the Plan, this accrued but
unpaid interest and unpaid professional fees have been included
as part of the principal balance of the respective new financing
agreements.
These credit facilities described above were collateralized by
substantially all of the assets of the Company. The Company
was in default on substantially all of the covenants under these
credit facilities as of September 13, 1996.
Debtor In Possession Financing:
The Bankruptcy Court entered an order on January 20, 1995
approving a debtor in possession (DIP) financing agreement for
the Company in an aggregate amount of $30,000,000. The DIP
facility was amended and restated as of February 28, 1996 to
extend the facility through the 1996 operating season in an
aggregate amount of $20,000,000. The DIP financing granted to
the DIP lender security interests in all the real and personal
property of the Company including all contract accounts,
contract rights, fixtures, copyrights, patents and trademarks.
Under the terms of the loan and the Bankruptcy Code, the
security interest of the DIP lender had priority over virtually all
prepetition claims and Chapter 11 administrative expense claims.
The DIP financing also contained a clause to provide adequate
protection to certain prepetition secured lenders in the form of (a)
replacement liens and (b) payment of specified amounts on the
prepetition secured debt to cover interest and professional fees
incurred by the lenders.
Interest on the DIP borrowings was prime plus 1.25%. During
1996, the Company borrowed and repaid up to $6,790,000 under
this facility and had no balance outstanding at September 13,
1996. Total interest and fees paid during 1996 related to the DIP
facility was $106,000.
The DIP facility expired when the Company emerged from
bankruptcy on September 13, 1996.
Postpetition Financing:
On or about October 27, 1995, the Bankruptcy Court issued the
Weyerhaeuser Order pursuant to which the Company assumed
certain agreements with Weyerhaeuser for corrugated shipping
containers and related financing. Pursuant to the Weyerhaeuser
Order, the Company was required to make certain adequate
protection payments and entered into a secured note. In addition,
during 1996, the Company, with Bankruptcy Court approval,
agreed to purchase certain equipment which had been under lease
and entered in a secured note. The outstanding balances at
September 13, 1996 for these notes were as follows:
(in thousands)
Note payable to supplier,
monthly installments of $ 1,728
$104,000 (includes interest),
due March 1, 1998,
interest at 10.00%.
Note payable to financing company,
monthly installments
of $18,155 (includes interest),
due July 1, 2002,
interest at 7.50% 1,025
----------
2,753
Less: current portion 1,269
-----------
$ 1,484
==========
Plan Financing:
Pursuant to the Plan, the Company entered into new financing
agreements totaling approximately $150 million with its
existing secured lenders which are collateralized by
substantially all of the assets of the Company. These
financing agreements require, among other terms, minimum
amounts, as defined, of working capital and tangible net worth
and minimum ratios of current assets to current liabilities and
indebtedness to net worth. Annual maturities of the debt
outstanding upon emergence from bankruptcy on September
13, 1996 is as follows: remainder of 1996-$3,705,000; 1997-$8,789,000;
1998-$7,970,000; 1999-$9,369,000; 2000-$11,377,000; 2001 and thereafter
- $110,322,000.
8. PREFERRED STOCK
In May 1985, the Board of Directors of the Company
designated 40,000 shares of Preferred Stock as Series I
Preferred Stock. Each share of Series I Preferred Stock was
convertible into one share of Common Stock and was entitled
to receive cash dividends of $30 per share for each of the fiscal
years ending on or after September 30, 1987. Such dividends
were cumulative under certain circumstances and included
other rights such as a liquidation preference per share equal to
the sum of $300, plus all accrued but unpaid dividends.
Pursuant to the Plan, all prepetition ownership interests of the
Company, including the Series I Preferred Stock, as of the
Effective Date were sold to Cadiz. At that time, accumulated
undeclared dividends on the preferred stock of $10,395,000 at
September 13, 1996 were released.
9. LEASING ARRANGEMENTS
The Company leases certain parcels of land, facilities,
machinery, and equipment under non cancelable operating
leases which expire in various years through 2000.
At September 13, 1996, future minimum lease commitments
under noncancellable leases (exclusive of property taxes and
insurance) consist of the following for each fiscal year ended
December 31 (dollars in thousands):
Facilities &
Land Equipment Total
------ ---------- -------
1996 $ 61 $ 344 $ 405
1997 117 351 468
1998 102 51 153
1999 3 0 3
2000 3 0 3
--------- --------- --------
$ 286 $ 746 $ 1,032
======= ======= =======
Total operating lease rental expense for the period ended
January 1, 1996 to September 13, 1996 was $862,000.
10. LIABILITIES SUBJECT TO COMPROMISE UNDER REORGANIZATION PROCEEDINGS
Liabilities subject to compromise under reorganization
proceedings consisted of the following as of September 13,
1996 (dollars in thousands):
Accounts payable $ 24,348
Interest payable 18,486
Other accrued liabilities 4,123
Long term debt (see Note 7) 133,292
-------------
$ 180,249
========
11. COMMITMENTS
DEBT GUARANTEE The Company was co guarantor with
its partner on a bank loan to the Sun Date partnership (see
Note 13). The loan totaled $1,150,000 at September 13, 1996.
In connection with the Sun Date settlement during the
bankruptcy proceeding, the Company will be released from
this bank guarantee and Cadiz has agreed to guarantee the
bank loan up to a maximum of $350,000.
PURCHASE AGREEMENT In 1995, the Company entered
into an agreement with its major corrugated container supplier
in connection with a prepetition liability settlement. The
settlement stipulated that the original agreement to purchase
containers from the supplier would remain in effect until
March 21, 1998 and required the Company to issue a secured
note payable to the supplier (see Note 7). Thereafter, the
original agreement will automatically renew unless either
party gives written notice ninety days prior to the end of the
renewal period.
12. RETIREMENT PLANS
The Company established on January 1, 1996 a 401(k) Plan
for salaried employees. Employees must work 1,000 hours
and have completed one year service to be eligible to
participate in this plan. The Company contributed $105,000 to
the plan for the period from January 1, 1996 to September 13,
1996.
The Company has a defined contribution pension plan
covering substantially all of its employees not covered by a
collective bargaining agreement, with at least one year of
service and who have worked at least 1,000 hours.
Contributions are 2% of each covered employee's salary.
There were no contributions made for the period from January
1, 1996 to September 13, 1996. For those hourly employees
covered under a collective bargaining agreement, contributions
are made to a multiemployer pension plan in accordance with
negotiated labor contracts and are generally based on the
number of hours worked. There were no contributions made
to these plans for the period from January 1, 1996 to
September 13, 1996.
13. RELATED PARTY TRANSACTIONS
AG ACCOUNTING, INC. The Company has entered into
agreements to market products obtained from growers in
which a former major stockholder/director of the Company
has financial interests and/or farm management contracts. Ag
Accounting, Inc. ("Ag Accounting"), which is wholly owned
by this former stockholder/director, provides accounting
services to these affiliated growers. The Company recognized
marketing commission revenues from these affiliated growers
of $151,000 for the period January 1, 1996 to September 13,
1996. The Company makes crop advances and charges for
some or all of harvesting, hauling, packing and marketing
services provided to these growers. These charges are
deducted from crop proceeds paid to growers. Amounts due
the Company from Ag Accounting totalled $84,000 as of
September 13, 1996. The Company bills the affiliated
growers monthly for services and remits net proceeds to each
grower for the crops marketed by the Company. In certain
instances, the Company has also obtained financing for these
affiliated growers. Costs related to a product incentive
program of $115,000 were incurred on behalf of Ag
Accounting for the period from January 1, 1996 to September
13, 1996.
ANTHONY VINEYARDS, INC. Anthony Vineyards, Inc. is
a farming entity owned by a former officer and director of the
Company. During 1996, the Company entered into marketing
agreements and provided packing and marketing services to
this grower. The Company makes grower advances for
harvesting, hauling, and packing materials which are
recovered from the grower at the time the Company receives
the crop proceeds. At September 13, 1996, the Company
owed Anthony Vineyards, Inc. $706,000 for net crop proceeds
received. The Company recognized marketing commission
revenues from Anthony Vineyards of $717,000 for the period
from January 1, 1996 to September 13, 1996.
LSL BIOTECHNOLOGIES, INC. LSL Biotechnologies,
Inc. (LSL) is an entity that develops, produces and markets
seed varieties in which former officers and/or directors of the
Company have or had ownership interests. The Company and
LSL entered into growing agreements and seed purchase
contracts related to peppers and tomatoes. During the
bankruptcy proceeding, LSL made claims for prepetition and
postpetition amounts owed by the Company under the
agreements which the Company disputed. On September 9,
1996, an agreement between the Company and LSL was
reached that settled all LSL pre and postpetition claims against
the Company. The settlement included the allowance of a
prepetition unsecured claim in the amount of $900,000 and a
postpetition administrative claim of $650,000 for postpetition
royalties owed to LSL for pepper and tomato sales. The
prepetition allowed claim of $900,000 is included in
"Liabilities subject to compromise under reorganization
proceedings" in the accompanying balance sheet. The
postpetition allowed claim of $650,000 is included in accounts
payable in the accompanying balance sheet. In addition, the
Company agreed to convey the trade name and trademark Le
Rouge Royale to LSL and obtained a license to utilize the
trademark until December 31, 1997 for an additional royalty
of $100,000.
THE IRVINE COMPANY In prior years, the Company had
orchard and row crop farming, packing and marketing
agreements with The Irvine Company. A former major
stockholder/director of the Company owned stock in and was
a director of The Irvine Company, a large land owner and
developer in Southern California. In 1993, the orchard
agreement was terminated and in 1994 the row crop agreement
was terminated. As of September 13, 1996, the Company had
liabilities owed to The Irvine Company, primarily for land rent
and crop proceeds, of $5,000,000, which will be settled for
sixty percent of the total amount pursuant to the Plan.
AMERICAN SUNMELON For the period from January 1,
1996 through September 13, 1996, the Company made
payments to American Sunmelon of $461,000 primarily for
royalty payments and seed purchases. As of September 13,
1996, the Company had liabilities owed to American
Sunmelon of $188,000.
SUN DATE Prior to September 13, 1996, a former major
stockholder/director of the Company had ownership interests
in various date farming partnerships that provided unprocessed
dates to Sun Date. For the period January 1, 1996 through
September 13, 1996, the Company recognized marketing
commissions from date sales of $37,000. In addition, as of
September 13, 1996, the Company had liabilities payable to
Sun Date of $1,163,00, including a $1,150,000 prepetition
note payable which will be settled for sixty percent of the total
outstanding balance pursuant to the Plan.
14. CONTINGENCIES
The Internal Revenue Service (IRS) has filed claims against
the Company, and certain subsidiaries, for taxes refunded to
the Company for certain workers that the IRS claims were
employees. The Company contends that the workers are
excluded from the definition of employment under the Internal
Revenue Code. A complaint has been filed by the Company
in the Bankruptcy Court seeking refunds of taxes paid on
account of agricultural workers for other years. The Company
intends to object to the claims asserted by the IRS. The total
amount of claims filed against the Company are approximately
$4,300,000 including tax deficiency, interest and penalties. At
September 13, 1996, the Company has recorded a reserve for
these claims representing management's best estimate of the
ultimate amount that will be paid.
On January 3, 1996, the Company brought an action against
Corona College Heights Orange & Lemon Association (CCH)
alleging breach of contract, intentional interference with
economic advantage and unfair competition. On April 17,
1996, CCH counterclaimed against the Company, alleging
breach of contract, breach of fiduciary duty, negligence, fraud
and deceit, negligent misrepresentation, constructive fraud,
intentional interference with prospective economic advantage,
unjust enrichment and constructive trust and accounting. This
matter is in the early stages of discovery.
In the normal course of agricultural operations, the Company
handles, stores, transports and dispenses products identified as
hazardous materials. The Company has had regulatory
agencies conduct inspections and there has been a claim
asserted relating to these materials. Although the Company
does not believe remedial action, if any, will require the
expenditure of funds material to the Company's financial
position, no assurance can be given regarding the outcome of
environmental claims, investigations or remedial actions in the
future.
The Company is involved in other legal and administrative
proceedings and claims. In the opinion of management, the
ultimate outcome of each proceeding or all such proceedings
combined will not have a material adverse impact on the
Company's financial statements.
DESCRIPTION OF TRANSACTION
- --------------------------
On September 13, 1996, Cadiz Land Company, Inc. (the "Company")
acquired all of the stock of a reorganized Sun World International, Inc.
("Sun World") pursuant to a consensual plan of reorganization (Debtors'
Modified Fourth Amended Consolidated Plan of Reorganization dated June
3, 1996 (Modified) which was confirmed by the U.S. Bankruptcy Court at
a hearing on July 12, 1996 (the "Plan"). Total consideration was
approximately $179 million of which approximately $150 million will be
owed to Sun World's existing secured lenders through a restructuring of
previously existing debt. In addition, the Company made a capital
contribution of $15 million to Sun World, with the intent of eliminating the
requirement for Sun World to have any additional debt facilities beyond
those owed to its existing secured creditors.
The acquisition is accounted for by the purchase method of accounting for
business combinations and, accordingly, the cost to acquire the assets of Sun
World was allocated to the underlying net assets to the extent of their
respective fair values. The pro forma adjustments reflected in the pro forma
information have been based on an estimated purchase price allocation,
which management is currently in the process of finalizing.
The unaudited pro forma balance sheet reflecting this transaction is not
required and, accordingly is not included herewith, since this transaction was
reflected in the balance sheet filed with the Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.
The unaudited pro forma statement of operations for the year ended March
31, 1996 and the six months ended September 30, 1996 reflect combined
results of operations as if the acquisition had occurred at April 1, 1995.
Since the fiscal year ends of Cadiz and Sun World differ, for pro forma
purposes the results of operations for the year ended March 31, 1996 consist
of Cadiz operations for the twelve months ended March 31, 1996 combined
with Sun World operations utilizing the results of operations for the twelve
months ended December 31, 1995 less first quarter 1995 operations (January
1, 1995 through March 31, 1995) plus first quarter 1996 operations (January
1, 1996 through March 31, 1996). The results of operations for the interim
period April 1, 1996 through September 30, 1996 consist of Cadiz'
operations for the six months ended September 30, 1996 combined with Sun
World's operations for the six months ended September 30, 1996.
The pro forma combined financial information should be read in conjunction
with the historical financial statements of Cadiz, including the notes
thereto, which are contained in Cadiz' Quarterly Report on Form 10 Q for the
six months ended September 30, 1996 and Cadiz' Annual Report on Form 10-K
for the year ended March 31, 1996, as well as the historical financial
statements of Sun World from which the pro forma combined financial
statements of operations have been derived.
The following unaudited pro forma consolidated financial statements of
operations are presented for informational purposes only and are not
necessarily indicative of operating results that would have occurred if the
acquisition had been consummated as of April 1, 1995, nor are they
necessarily indicative of the future operating results of Cadiz.
In addition to the above, certain pro forma adjustments and assumptions
have been incorporated which are described more fully in the accompanying
notes to the pro forma financial information.
<TABLE>
CADIZ LAND COMPANY, INC. &
SUN WORLD INTERNATIONAL, INC.
Pro Forma Combined Statement of Operations
For the years ended March 31, 1996
($ in thousands except per share data)
(Unaudited)
<CAPTION>
Cadiz Land Sun World Pro Forma
Company, Inc. Intn'l Adjustments
(Audited) Inc. Increase Pro Forma
(Decrease) Combined
--------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues $ 1,441 $ 116,487 $ 1,646<F8> $ 119,574
-------- --------- ------------ ----------
Costs and expenses:
Cost of sales 0 78,862 78,862
Resource development 3,329 0 3,329
Landfill prevention
activities 1,919 0 1,919
General and
administrative 1,826 17,347 (11,139)<F5> 8,034
Permanent crop
abandonments 0 1,560 (1,560)<F6> 0
Depreciation 833 5,747 (519)<F4> 6,061
Amortization 234 886 439 <F3> 1,559
------------- ------------ ------------ -------
Total costs and
expenses 8,141 104,402 (12,779) 99,764
Operating income (loss) (6,700) 12,085 14,425 19,810
Asset impairment 4,868 (4,868)<F7> 0
Interest expense, net 1,787 15,894 (2,882)<F1><F2> 14,799
------------- ------------ ------------ -------
Net income (loss) $ (8,487) $ (8,677) $ 22,175 $ 5,011
========= ========= ======== ========
Net income per common share: $ 0.27
========
Primary income per common share
Fully diluted income per
common share $ 0.16
========
Weighted average common shares outstanding:
Primary 18,777,000
========
Fully diluted <F9> 31,082,000
===========
<FN>
See accompanying notes to the pro forma combined statement of operations.
</TABLE>
<TABLE>
Pro Forma Combined Statement of Operations for the six months
ended September 30, 1996
($ in thousands except per share data)
(Unaudited)
<CAPTION> Pro Forma
Cadiz Land Sun World Adjustments
Company, Intnt'l Increase Pro Forma
Inc. Inc. (Decrease) Combined
---------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues $ 158 $ 78,739 $ $ 78,897
--------- ---------- ----------- --------
Costs and expenses:
Cost of sales 0 57,887 57,887
Resource development 1,445 1,445
Landfill prevention
activities 262 262
General and
administrative 1,602 8,613 (4,784)<F5> 5,431
Depreciation 428 2,566 972 <F4> 3,966
Amortization 117 206 201 <F3> 524
------- --------- ------------- --------
Total costs and expenses 3,854 69,272 (3,611) 69,515
Operating income (loss) (3,696) 9,467 3,611 9,382
Interest expense, net 843 7,924 1,778<F1><F2> 6,989
Litigation settlement 334 334
----------- ---------- -------------- -------
Net income (loss) $ (4,205) $ 1,543 $ 5,389 $2,727
======== ========== ========== ========
Net income per common share:
Primary income per common share $ 0.13
========
Fully diluted income per
common share $ 0.08
========
Weighted average common shares outstanding:
Primary 20,616,000
=========
Fully diluted <F9> 32,900,000
==========
<FN>
See accompanying notes to the pro forma combined statement of operations.
NOTES TO THE PRO FORMA COMBINED STATEMENTS OF OPERATIONS
- ----------------------------------------------------------
(a) The unaudited pro forma combined statement of operations have been adjusted
by the following to reflect the acquisition of Sun World by Cadiz as if it
were effective at April 1, 1995:
Year Ended Six Months Ended
March 31, September 30,
1996 1996
---------- ----------------
(Increase(decrease) to Income)
<F1> Increase in interest income resulting from
the capital contribution at acquisition by
Cadiz of $15 million, net of principal and
interest payments related to the restructuring
of Sun World's debt obligations $ 828 $ 352
<F2> Decrease in interest expense and adequate
protection payments as a result of the
restructured debt obligations of Sun World 2,054 1,426
<F3>Increase in amortization as a result of the
acquisition cost of Sun World exceeding
the fair value of the net assets acquired (439) (201)
<F4> Change in depreciation resulting from
adjustments to reflect the fair value
carrying amounts of plant and equipment 519 (972)
<F5> The unaudited proforma combined
statement of operations have been
prepared on a continuing operations
basis and, therefore, do not give effect
to the reorganization costs incurred
as a result of Sun World emerging from
bankruptcy 11,139 4,784
<F6>Elimination of the provision for permanent
crop abandonments since assets were written
down to their fair value as part of the
purchase price allocation adjustment 1,560
<F7> Elimination of the provision for loss on
asset impairment since assets were written
down to their fair value as part of the
purchase price allocation adjustment 4,868
<F8> Eliminate loss on disposal of assets since
assets were written down to their fair value
as part of the purchase price allocation
adjustment 1,646
----------- -----------
Total adjustments $ 22,175 $ 5,389
======= =======
<F9> Includes outstanding unconditional stock options which, if assumed
exercised, would result in gross proceeds of approximately $12 million
to the Company.
</FN>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
- ------------------------------------------------------
The Company estimates that expenses in connection with the
distribution described in this Registration Statement will be as
shown below. All expenses incurred with respect to the
distribution will be paid by the Company. See "Plan of
Distribution."
SEC registration fee . . . . . . . . . . . . . . . . . $ 11,909
Printing expenses. . . . . . . . . . . . . . . . . . . 1,500
Accounting fees and expenses . . . . . . . . . . . . . 10,000
Legal fees and expenses. . . . . . . . . . . . . . . . 30,000
Miscellaneous. . . . . . . . . . . . . . . . . . . . . 5,000
Total. . . . . . . . . . . . . . . . . . . . . $ 58,409
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
- -----------------------------------------------------
Section 145 of the Delaware General Corporation Law permits
the Registrant's Board of Directors to indemnify any person against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with any threatened, pending or completed action, suit
or proceeding in which such person is made a party by reason of his
being or having been a director, officer, employee or agent of the
Registrant, in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). The statute
provides that indemnification pursuant to its provisions is not
exclusive of other rights of indemnification to which a person may
be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise.
The Registrant's Bylaws (Exhibit 3.2 hereto) provide for
mandatory indemnification of directors and officers of the Company,
and those serving at the request of the Company as directors,
officers, employees, or agents of other entities (collectively,
"Agents"), to the maximum extent permitted by law. The Bylaws
provide that such indemnification shall be a contract right between
each Agent and the Company.
In 1990, the Company entered into an Indemnity Agreement with
each of the individuals then serving as an executive officer or
director of the Company, including Keith Brackpool, the current
Chief Executive Officer of the Company. The Indemnity Agreement as
to Mr. Brackpool remains in effect; all of the other executive
officers and directors who executed an Indemnity Agreement with the
Company have since resigned from their positions with the Company.
The Indemnity Agreement provides for the indemnification of the
indemnified party with respect to his activities as a director or
officer of the Company or an affiliate of the Company against
expenses and liabilities, of whatever nature, incurred in
connection with any claim made against him by reason of facts which
include his affiliation with the Company. Such indemnification is
provided to the maximum extent permitted by the Company's charter
documents, insurance policies and/or any applicable law.
The Subscription Agreements between the Company and the
purchasers (the "Purchasers") of certain of the securities
registered hereunder provide that the Company shall indemnify the
Purchasers under certain circumstances and the Purchasers shall
indemnify the Company and controlling persons of the Company under
certain circumstances, including indemnification for liabilities
arising under the Act.
The Company's Certificate of Incorporation provides that a
director of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper
personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
- --------------------------------------------------
The Company believes that the sales of securities in the
transactions described below were all either exempt from, or not
subject to, the registration requirements of the Act:
Date Title Amount Consideration Purchaser(s)
- ----- -------------- --------- ------------- ---------------------
01/94 Common Stock 125,000 $6,250 Henry Ansbacher & Co.
shares(2) (exercise Limited ("Ansbacher")
of warrants)
01/94 - Common Stock 625,000 $2,500,000 Private
02/94 shares(1) investors
02/94 Common Stock 220,000 $770,000 Ansbacher
shares(2) principal
conversion
of debt
02/94 Common Stock 150,000 Extension Ansbacher
shares(2) of credit
02/94 Warrants to 175,000 Modification Rabobank
Purchase warrants(1) of credit terms
Common Stock
02/94 Common Stock 330,000 $1,732,500 Private investors
shares(2)
03/94 Note $127,600 Forbearance Mark Liggett
Convertible note con- re: nonpayment
to common vertible of original
stock into 36,457 Convertible
(extension of shares(3) Note
due date)
04/94 Options to 200,000 Long-term Employee
purchase options(1) employment
Common Stock agreement
05/94 Options to 1,430,500 Services Directors, officers
purchase options(1) and employees
Common Stock
02/95 Options to 120,000 Services Employees and
purchase options(1) consultant
Common Stock
03/95 Warrants to 35,000 Extension Rabobank
purchase warrants(1) of credit
Common Stock
03/95 Common Stock 110,000 Extension Ansbacher
shares(2) of credit
03/95 - Common Stock 100,000 Settlement Private investor
04/95 shares(1) of dispute
04/95 Options to 50,000 Services Employee
purchase options(1)
Common Stock
05/95 Options to 50,000 Services Employee
purchase options(1)
Common Stock
07/95 Common Stock 450,000 $1,800,000 Private investors
shares(2)
09/95 Options to 50,000 Services Employee
purchase options(1)
Common Stock
10/95 Common Stock 49,157 Sale of Private investor
& 6/96 shares(2) interest in group
real property
10/95 Common Stock 500,000 $2,050,000 Private investors
shares(2)
12/95 Common Stock 225,000 $1,035,000 Private investors
shares(2)
01/96 Options to 57,500 Services Employee
purchase options(1)
Common Stock
03/96 Common Stock 900,000 $5,175,000 Private investors
shares(2)
07/96 Preferred 760 $7,600,000 Private investors
Stock - shares(2)
Series B
09/96 Options to 1,850,000 Services Directors, officers
purchase options(1) employees and
Common Stock consultants
09/96 Preferred 27,631 $27,631,000 Private investors
Stock - shares(1)
Series A
09/96 Preferred 260 $2,600,000 Private investors
Stock - shares(2)
Series C
09/96 Warrants to 30,000 Modification Rabobank
purchase warrants(1) of credit
Common Stock terms
11/96 Preferred 240 $2,400,000 Private investors
Stock - shares(2)
Series B
11/96 Preferred 40 $400,000 Private investors
Stock - shares(2)
Series C
_________________________
(1) The Company believes that the transactions in which these
securities were sold were exempt from registration under the
Act by virtue of Section 4(2) thereof as transactions not
involving any public offerings. In each transaction, the number
of investors was limited, the investors
confirmed to the Company their investment intent, the investors
were provided with information about the Company and/or access to
such information, and restrictions were placed on resales of the
securities.
(2) The Company believes that the transactions in which these
securities were sold were not subject to the registration
requirements of the Act by virtue of Rules 901 and 903 of
Regulation S promulgated under the Act. In each transaction, the
offers and sales were made in offshore transactions, without
any directed selling efforts, to investors which certified
that they were not U.S. persons.
(3) The Company believes that the extension of the Convertible
Note was exempt from registration under the Act by virtue of
Section 3(a)(9) thereof as an exchange of securities by an
issuer with an existing security holder. No commission or
other remuneration was paid or given for soliciting the
extension of the Convertible Note.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
- -----------------------------------------------------
(a) EXHIBITS
--------
The following exhibits are filed or incorporated by
reference as part of this Registration Statement.
2.1 Debtors' Modified Fourth Amended Consolidated Plan of
Reorganization dated June 3, 1996 (as modified)(1)
2.2 Plan Implementation Agreement dated July 12, 1996(1)
2.3 Supplement to Plan Support Agreement dated June 3,
1996(1)
2.4 Stock Purchase Agreement with Howard Marguleas dated
September 13, 1996(2)
2.5 Form of Stock Purchase Agreement with Minority
Stockholders of Sun World dated September 13, 1996(2)
3.1 Certificate of Incorporation of the Company, as
amended(3)
3.2 Amendment to Certificate of Incorporation dated
November 8, 1996(4)
3.3 Bylaws of the Company, as amended to date(5)
4.1 Specimen Form of Stock Certificate for the Company's
registered stock(5)
4.2 Certificate of Designations of 6% Convertible Series A
Preferred Stock(2)
4.3 Certificate of Designations of 6% Convertible Series B
Preferred Stock(6)
4.4 Certificate of Designations of 6% Convertible Series C
Preferred Stock(2)
5.1 Opinion of Miller & Holguin as to certain corporate law
matters
10.1 1984 Incentive Stock Option Plan(7)
10.2 1988 Nonstatutory Stock Option Plan(8)
10.3 1996 Stock Option Plan(13)
10.4 Stock Purchase and Fee Agreement dated March 22, 1989
between the Company and Mark A. Liggett(7)
10.5 Form of Limited Partnership Agreement of Southwest
Fruit Growers, L.P.(9)
10.6 Farm Management Agreement dated as of March 28, 1990
between the Company and Southwest Fruit Growers, L.P.(9)
10.7 Promissory Note in the amount of $3,486,868 dated as of
March 28, 1990 issued by Southwest Fruit Growers, L.P.
in favor of the Company (Hyder Note)(9)
10.8 Promissory Note in the amount of $4,934,922 dated as of
March 28, 1990 issued by Southwest Fruit Growers, L.P.
in favor of the Company (Cadiz Note)(9)
10.9 Promissory Note in the amount of $3,141,344 dated as of
March 28, 1990 issued by Southwest Fruit Growers, L.P.
in favor of the Company (Farming Note)(9)
10.10 Agricultural Lease between Southwest Fruit Growers,
L.P. and the Company, on the one hand, and Donald
Kizirian, on the other hand, dated December 20, 1992(10)
10.11 Second Amendment and Supplement to Stock Purchase and
Fee Agreement, dated December 23, 1992 between the
Company and Mark Liggett(10)
10.12 Letter Agreement re: Services dated August 31, 1994
between the Company and Prudential Securities
Incorporated(11)
10.13 Letter Agreement re: Services dated October 5, 1994
between L.H. Friend, Weinress & Frankson, Inc. and
Prudential Securities Incorporated(11)
10.14 Letter Agreement re: Services dated February 1, 1995
between the Company and L.H. Friend, Weinress, Frankson
& Presson, Inc.(11)
10.15 Loan Agreement dated March 15, 1995 between the
Company, CVDC and Ansbacher(11)
10.16 Fourth Loan Modification Agreement dated March 15, 1995
between the Company, CVDC and Rabobank(11)
10.17 Form of Option Agreement dated April 20, 1995 between
the Company and David Peterson(11)
10.18 Plan Support Agreement dated December 11, 1995(12)
10.19 Waiver of Certain Provisions of Plan Support Agreement
dated January 12, 1996(12)
10.20 Amended and Restated Credit Agreement between Sun World
International, Inc. and Caisse Nationale de Credit
Agricole dated September 13, 1996(4)
10.21 Promissory Note between Sun World International, Inc.
and Caisse Nationale de Credit Agricole dated September
13, 1996(4)
10.22 New Hancock Credit Agreement between Sun World
International, Inc. and John Hancock Mutual Life
Insurance Company dated September 13, 1996(4)
10.23 Secured Promissory Note between Sun World
International, Inc. and John Hancock Mutual Life
Insurance Company dated September 13, 1996(4)
21.1 Subsidiaries of the Registrant
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Deloitte & Touche LLP
23.3 Consent of Miller & Holguin (included in Exhibit 5.1)
27.1 Financial Data Schedule(1)(4)(6)
______________________________
(1) Previously filed as Exhibit to the Company's Report on Form
10-Q for the quarter ended June 30, 1996
(2) Previously filed as Exhibit to the Company's Report on Form
8-K dated September 13, 1996
(3) Previously filed as Exhibit to the Company's Registration
Statement on Form S-1 (Registration No. 33-75642) declared
effective May 16, 1994
(4) Previously filed as Exhibit to the Company's Report on Form
10-Q for the quarter ended September 30, 1996
(5) Previously filed as Exhibit to the Company's Report on Form
8-K dated May 6, 1992
(6) Previously filed as Exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1996
(7) Previously filed as Exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1989
(8) Previously filed as Exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1988
(9) Previously filed as Exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1990
(10) Previously filed as Exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1993
(11) Previously filed as Exhibit to the Company's Annual Report
on Form 10-K for the fiscal year ended March 31, 1995
(12) Previously filed as Exhibit to the Company's Report on Form
10-Q for the quarter ended December 31, 1995
(13) Previously filed as Exhibit A to the Company's Proxy
Statement relating to the Annual Meeting of Stockholders
held on November 8, 1996
(b) FINANCIAL STATEMENT SCHEDULES
-----------------------------------
The following financial statement schedules are filed as
part of this Registration Statement and should be read in
conjunction with the consolidated financial statements of the
Company:
SCHEDULE PAGE
Schedule II: Valuation and Qualifying Accounts S-2
Schedule III: Real Estate and Accumulated S-3
Depreciation
Note to Schedule III: Real Estate and Accumulated S-4
Depreciation
Schedules not listed above have been omitted because they
are not applicable or are not required or the information
required to be set forth therein is included in the Company's
Consolidated Financial Statements or the Notes thereto.
ITEM 17. UNDERTAKINGS.
---------------
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(h) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California,
on December 31, 1996.
CADIZ LAND COMPANY, INC.
By: /s/ Keith Brackpool
---------------------------------
Keith Brackpool
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- -------------------- --------------------- -----------------------
/S/ Dwight W. Makins Chairman of the Board December 31, 1996
---------------- and Director
Dwight W. Makins
/S/ Keith Brackpool Chief Executive Officer December 31, 1996
--------------- and Director
Keith Brackpool (Principal Executive
Officer)
/S/ J.F.R. Hammond Director December 31, 1996
---------------
J.F.R. Hammond
/S/ Stephen D. Weinress Director December 31, 1996
-------------------
Stephen D. Weinress
/S/ Susan K. Chapman Chief Financial Officer December 31, 1996
---------------- and Secretary
Susan K. Chapman (Principal Financial &
Accounting Officer)
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedule II: Valuation and Qualifying Accounts....................S-2
Schedule III: Real Estate and Accumulated Depreciation.............S-3
Note to Schedule III: Real Estate and Accumulated Depreciation.....S-4
CADIZ LAND COMPANY, INC.
Schedule II Valuation & Qualifying Accounts
For the years ended March 31, 1996, 1995 & 1994
($ in thousands)
Additions
-----------------
Charged Charged
Balance at to to Balance
Beginning Costs & Other at end
Of Period Expenses Accounts Deductions of Period
--------- -------- -------- ------- ---------
Fiscal year
ended March
31, 1996
Allowance for
doubtful
accounts $ -0- $ -0- $ -0- $ -0- $ -0-
Allowance for
discontinued
operation
losses -0- -0- -0- -0- -0-
Amortization
of excess of
purchase price
over net
assets
acquired 1,617 234 -0- -0- 1,851
------- ------ ------ ------ ------
$1,617 $ 234 $ -0- $ -0- $1,851
======= ======= ====== ====== =======
Fiscal year
ended
March 31, 1995
Allowance for
doubtful
accounts $ -0- $ -0- $ -0- $ -0- $ -0-
Allowance for
discontinued
operation
losses -0- -0- -0- -0- -0-
Amortization
of excess of
purchase
price over
net assets
acquired 1,383 234 -0- -0- 1,617
------ ------ ------ ------- ------
$1,383 $ 234 $ -0- $ -0- $1,617
====== ====== ====== ====== ======
Fiscal year
ended
March 31, 1994
Allowance for
doubtful
accounts $ 218 $ -0- $ -0- $ 218 $ -0-
Allowance for
discontinued
operation
losses 75 -0- -0- 75 -0-
Amortization
of excess of
purchase
price over
net assets
acquired 1,150 233 -0- -0- 1,383
------ ------- ------- ------ ------
$1,443 $ 233 $ -0- $ 293 $1,383
====== ======= ======= ====== ======
CADIZ LAND COMPANY, INC.
Schedule III - Real Estate & Accumulated Depreciation
For the Year Ended March 31, 1996
(in thousands)
Net Amount
Cost at which
Initial Capitalized Carried at
Cost to Subsequent to Close
Company Acquisition of Period
--------- --------------- ------------
Land Accumu- Land
and lated and
Encumber- Improve- Improve- Carrying Depre- Improve-
Description rances ments ments Costs ciation ments Acquired
- ----------- ---------- -------- ---------- ------ -------- -------- --------
Unimproved
land,
Cadiz, CA (1) $8,552 $ $ 694 $ (365) $ 8,881 May 1988
Dec. 1995
Unimproved
land,
Piute, CA (1) 1,356 180 1,536 Jan. 1993
Jan. 1996
Unimproved
land,
Homer, CA (1) 1,086 22 1,108 Sept.1993
Unimproved
land, (1) 266 2 268 July 1994
other Jan. 1996
Agricultural
land, planted
to citrus,
Cadiz, CA (1) 160 3,779 251 (360) 3,830 May 1988
Agricultural
land planted
to grapes
Cadiz, CA (1) 6,486 (944) 5,542 Mar. 1990
Agricultural
land
planted to
row crops,
Cadiz, CA (1) 57 57 April 1995
Miscellaneous
investments (1) 443 443
------- ------ ------- -------- -------
$17,963 $3,779 $1,592 $ (1,669) $21,665
======= ======= ====== ========= ========
(1) Included in collateral securing debt totalling $17.7 million.
CADIZ LAND COMPANY, INC.
Note to Schedule III
Real Estate & Accumulated Depreciation
($ in thousands)
Fiscal Year Ended March 31,
1996 1995 1994
----- ---- -----
Carrying cost
of land and
improvements
at beginning of
period $ 21,507 $ 21,607 $ 20,057
Additions:
Acquisitions 442 189 591
Option payments -0- -0- 495
Improvements -0- 14 273
Capitalized
carrying cost 132 113 427
--------- -------- --------
574 316 1,786
--------- -------- --------
Deductions:
Depreciation
of developed
property 416 416 236
--------- -------- --------
416 416 236
--------- -------- --------
Balance at end
of period $ 21,665 $ 21,507 $ 21,607
========= ======== ========
</TABLE>
EXHIBIT 5.1
-----------
December 31, 1996
Cadiz Land Company, Inc.
10535 Foothill Blvd.
Suite 150
Rancho Cucamonga, CA 91730
Re: Registration Statement on Form S-1 (the "Registration Statement")
Ladies and Gentlemen:
Our opinion has been requested in connection with the
Registration Statement filed by Cadiz Land Company, Inc., a
Delaware corporation (the "Company"), with the Securities and
Exchange Commission relating to the offer and sale by certain
security holders of the Company named therein (the "Selling
Security Holders") of a total of 8,384,555 shares (the "Shares") of
Common Stock of the Company, consisting of 393,000 Placement
Shares, 7,368,262 Conversion Shares, 383,293 Dividend Shares
and 240,000 Warrant Shares, and 240,000 Warrants (as such terms
are defined in the Registration Statement).
We have examined such corporate records and other documents and
have made such examinations of law as we have deemed relevant.
Based on and subject to the above, it is our opinion that the
Placement Shares, 53,332 of the Conversion Shares, and 17,549
of the Dividend Shares are duly authorized, legally issued, fully paid
and non-assessable, and that the Warrants, the Warrant Shares and
the balance of the Conversion Shares and Dividend Shares,
when issued as contemplated under the terms of
the agreements and instruments governing their issuance, will be
duly authorized, legally issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as an Exhibit to the
Registration Statement.
We are delivering this opinion to the Company, and no person
other than the Company may rely upon it.
Very truly yours,
/S/ Miller & Holguin
- -----------------------------
MILLER & HOLGUIN
EXHIBIT 21.1
------------
SUBSIDIARIES OF THE COMPANY
Sun World International, Inc.
Pacific Real Estate, Inc.
Cadiz Valley Development Corporation
Rancho Cadiz Mutual Water Company
Southwest Fruit Growers, LP
Pacific Packing, Inc.
PSWRI Limited
EXHIBIT 23.1
-------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part
of this Registration Statement on Form S-1 of our report dated
July 12, 1996, relating to the financial statements of Cadiz Land
Company, Inc. and its subsidiaries, which appears in such
Prospectus. We also consent to the application of such report to
the Financial Statement Schedules for the three years ended March
31, 1996 listed under Item 16(b) of this Registration Statement
when such schedules are read in conjunction with the financial
statements referred to in our report. The audits referred to in
such report also included these schedules. We also consent to
the use of our report dated November 22, 1996, relating to the
financial statements of Sun World International, Inc., which
appears in such Prospectus. We also consent to the references to
us under the headings "Experts" and "Selected Financial Data" in
such Prospectus. However, it should be noted that Price
Waterhouse LLP has not prepared or certified such "Selected
Financial Data."
/S/ PRICE WATERHOUSE LLP
Los Angeles, California
December 30, 1996
EXHIBIT 23.2
------------
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of Cadiz Land
Company, Inc. on Form S-1 of our report dated September 20, 1996
(which expresses an unqualified opinion and includes an explanatory
paragraph referring to Sun World's bankruptcy and reorganization)
with respect to the consolidated financial statements of Sun World
International, Inc. for the years ended December 31, 1995 and 1994,
apearing in the Prospectus, which is a part of this Registration
Statement.
We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/S/ DELOITTE & TOUCHE LLP
Oakland, California
December 30, 1996
