SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from............to............
Commission File Number 0-12114
CADIZ LAND COMPANY, INC.
(Exact name of registrant specified in its charter)
DELAWARE 77-0313235
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10535 Foothill Boulevard, Suite 150
Rancho Cucamonga, CA 91730
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (909) 980-2738
Securities Registered Pursuant to Section 12(b) of the Act: None
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
----
The number of shares outstanding of each of the Registrant's classes of
Common Stock at May 13, 1997 was 31,953,616 shares of Common Stock, par
value $0.01.
Cadiz Land Company, Inc.
Index to the Condensed Consolidated Financial Statements
For the Three Months Ended March 31, 1997 Page(s)
I. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. Statement of Operations . . . . . . . . . . . 1
B. Balance Sheet . . . . . . . . . . . . . . . . 2
C. Statement of Cash Flows . . . . . . . . . . . 4
D. Statement of Redeemable Preferred Stock,
Preferred Stock, Common Stock and Other
Stockholders' Equity . . . . . . . . . .. . .5
E. Notes . . . . . . . . . . . . . . . . . . . .6
II. SUPPLEMENTARY INFORMATION
A. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 7
B. Other Information . . . . . . . . . . . . . . 13
C. Signatures . . . . . . . . . . . . . . . . . .14
CADIZ LAND COMPANY, INC.
Condensed Consolidated Statement of Operations
For the Three Months Ended March 31, 1997 1996
-------- -------
($ in thousands except per share data)
(unaudited)
Revenues $ 4,805 $ 321
-------- --------
Costs and expenses:
Cost of sales 5,018 863
Resource development 75 109
Landfill prevention activities 204 1,248
General and administrative 2,616 519
Depreciation 475 211
Amortization 58 59
-------- --------
Total costs and expenses 8,446 3,009
-------- --------
Operating loss (3,641) (2,688)
Other (income) expense (82) -0-
Interest expense, net 3,837 453
-------- --------
Net loss (7,396) (3,141)
Less: Preferred stock dividends (438) -0-
-------- --------
Net loss applicable to common stock (7,834) (3,141)
======== ========
Net loss per common share $ (.33) $ (.17)
========= ========
Weighted average shares outstanding 23,800 18,500
========= ========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Condensed Consolidated Balance Sheet
March 31, December 31,
1997 1996
---------- ---------
(unaudited)
(Assets ($ in thousands):
Current assets:
Cash and cash equivalents $ 19,163 $ 33,307
Accounts receivable, net 3,838 7,533
Assets held for sale 4,771 6,534
Inventories 21,006 14,121
Prepaid expenses and other 960 1,225
-------- -----------
Total current assets 49,738 62,720
Investment in partnerships 5,731 6,122
Property, plant and equipment, net 137,603 137,897
Land held for development 12,680 12,671
Water rights and transfer and
storage projects 4,964 4,705
Other assets 1,635 1,695
Excess purchase price over net
assets acquired, net 4,922 4,980
-------- ---------
$ 217,273 $ 230,790
========== ===========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Condensed Consolidated Balance Sheet
March 31, December 31,
1997 1996
--------- ----------
(Unaudited)
Liabilities and Other Stockholders' Equity
($ in thousands)
Current liabilities:
Accounts payable $ 5,513 $ 7,435
Accrued liabilities 4,032 5,172
Long-term debt, current portion 4,810 4,753
Other current liabilities 153 591
--------- ---------
Total current liabilities 14,508 17,951
Long-term debt 146,118 149,111
Deferred income taxes 4,347 4,347
Other liabilities 4,284 4,209
Commitments and contingencies
Series A redeemable preferred
stock - $.01 par value
($1,000 liquidation value);
60,000 shares authorized;
27,431 shares issued and
outstanding at March 31, 1997
and December 31, 1996 27,431 27,431
Preferred stock - $.01 par value;
40,000 shares authorized,
shares issued and outstanding -
100 at March 31, 1997 and
340 shares at December 31, 1996
Common stock - $.01 par value;
45,000,000 shares
authorized; shares issued and
outstanding - 24,191,300 at
March 31, 1997 and 23,445,868
at December 31, 1996 242 234
Additional paid-in capital 89,244 88,574
Accumulated deficit (68,901) (61,067)
--------- ---------
$ 217,273 $ 230,790
========= ==========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Condensed Consolidated Statement of Cash Flows
For the Three Months Ended March 31, 1997 1996
--------- ---------
($ in thousands)
(unaudited)
Cash flows from operating activities:
Net loss from operations $ (7,396) $ (3,141)
Adjustments to reconcile net loss
from operations to cash
used for operating activities:
Depreciation and amortization 731 482
Issuance of shares for refinancing 140 -0-
Interest capitalized to debt 250 94
Share of partnership operations (398) -0-
Changes in operating assets and
liabilities, net of acquisition of
Sun World:
Decrease (increase) in
accounts receivable 3,695 (117)
Increase in inventories (5,393) -0-
(Increase) decrease in prepaid
expenses and other 67 265
(Decrease) increase in accounts
payable (1,922) 944
(Decrease) in accrued liabilities (1,548) -0-
(Decrease) in other current
liabilities (438) -0-
Increase in other liabilities 75 -0-
-------- --------
Net cash used for operating
activities (12,137) (1,473)
--------- --------
Cash flows from investing activities:
Additions to property, plant and
equipment (291) (141)
Proceeds from disposal of property,
plant and equipment 1,764 -0-
Land purchase and development (27) (243)
Water transfer and storage projects (259) (104)
Additions to developing crops (1,363) -0-
Partnership distributions 790 -0-
Decrease in other assets 59 -0-
Acquisition of Sun World, net of
cash acquired -0- (693)
-------- --------
Net cash provided by (used for)
investing activities 673 (1,181)
-------- --------
Cash flows from financing activities:
Net proceeds from issuance of stock 505 5,058
Principal payments on long-term debt (3,260) (152)
Proceeds from short-term debt 75 301
-------- --------
Net cash provided by (used for)
financing activities (2,680) 5,207
-------- --------
Net increase (decrease) in cash
and cash equivalents (14,144) 2,553
Cash and cash equivalents, beginning
of period 33,307 2,600
-------- --------
Cash and cash equivalents, end of period $ 19,163 $ 5,153
========= ==========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
Condensed Consolidated Statement of Redeemable Preferred Stock,
Preferred Stock, Common Stock and Other Stockholders' Equity
For the Three Months Ended March 31, 1997
($ in thousands)
Redeemable Preferred Additional
Preferred Stock Stock Common Stock Paid-in Accumulated
---------------- ----------- --------------- -------- -----------
Shares Amount Shares Amount Shares Amount Capital Deficit
Balance as
of
December
31, 1996 27,431 $ 27,431 340 $ - 23,445,868 $ 234 $ 88,574 $ (61,067)
Exercise
of stock
options
and
warrants 131,000 2 503
Issuance of
stock for
refinancing 30,000 140
Dividends
paid in
common
stock on
conversion
of
preferred
stock 9,392 33
Accrued
dividends
on preferred
stock (438)
Conversion of
preferred
stock to
common stock (240) 575,040 6 (6)
Net loss (7,396)
------ ------- ----- ---- --------- ------ -------- ----------
As of
March 31,
1997 27,431 $ 27,431 100 $ - 24,191,300 $ 242 $ 89,244 $ (68,901)
======= ======== ==== ===== ========== ===== ======== ==========
See accompanying notes to the consolidated financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - 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 nine month period ended December 31, 1996. The
foregoing Consolidated Financial Statements include all adjustments,
consisting only of normal recurring adjustments which the Company considers
necessary for a fair presentation. The results of operations for the three
months ended March 31, 1997 are not necessarily indicative of the results to
be expected for the full fiscal year.
See Note 2 to the Condensed Consolidated Financial Statements included
in the Company's latest Form 10-K for a discussion of the Company's accounting
policies.
NOTE 2 - LONG-TERM DEBT
- -----------------------
On April 16, 1997 Sun World completed a private placement of $115.0
million in secured notes (the "Sun World Notes"). The Sun World Notes were
sold through Smith Barney Inc., as initial purchaser, to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act of
1933, as amended (the "Securities Act")) and a limited number of institutional
"accredited investors" (as defined in the Securities Act). The proceeds from
the issuance of the Sun World Notes, when combined with Sun World's existing
cash and cash made available under a $30 million Revolving Credit Facility
entered into by Sun World concurrently with the issuance of the Sun World
Notes, were used to retire Sun World's existing indebtedness to John Hancock
Mutual Life Insurance Company ("John Hancock") and Caisse Nationale de Credit
Agricole, acting through its Grand Cayman branch ("Credit Agricole") as well
as the Company's existing indebtedness to Cooperatieve Centrale Raiffeisen-
Boerenleenbank B.A. ("Rabobank").
SUN WORLD OBLIGATIONS
The Sun World Notes, which were issued in the principal amount of $115
million on April 16, 1996 and will mature on April 15, 2004, accrue interest
at the rate of 11-1/4% per annum. Interest only is payable semi-annually on
April 15 and October 15 of each year, commencing October 15, 1997. The Sun
World Notes are secured by a first lien on substantially all of the assets of
Sun World and its subsidiaries, other than growing crops, crop inventories and
accounts receivable and proceeds thereof, which secure the Revolving Credit
Facility. The Sun World Notes are also secured by the guarantee of the
Company and the pledge by the Company of all of the stock of Sun World.
Sun World's $30 million Revolving Credit Facility matures in one year
and is guaranteed by the Company. Amounts borrowed under the Revolving Credit
Facility will accrue interest at either prime plus 1.50% or LIBOR plus 2.50%,
at Sun World's election, with an additional .50% payable for advances on
eligible inventory above specified levels.
NOTE 3 - PREFERRED AND COMMON STOCK
- ----------------------------------
During the three months ended March 31, 1997, 140 shares of Series B
Preferred Stock ("Series B Preferred") and 100 shares of Series C Preferred
Stock ("Series C Preferred") were converted into 333,529 and 241,511 shares
of common stock, respectively. Dividends paid in common stock on conversion
of the Series B Preferred and Series C Preferred totalled 9,392 shares of
common stock.
In addition, the Company delivered notice of exercise of its conversion
right to mandatorily convert all of the outstanding shares of the Series A
Redeemable Preferred Stock ("Series A Preferred"). Accordingly, on May 7,
1997, the 27,431 shares of Series A Preferred were converted into 7,314,917
shares of common stock. In addition, as a condition to such conversion, the
Company paid holders of the Series A Preferred one full year's worth of
dividends (less the amount of any dividends theretofore paid). Such dividends
were paid in the form of 166,312 shares of common stock.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(UNAUDITED)
GENERAL
On September 13, 1996, the Company acquired all of the outstanding
capital stock of Sun World. The Company's acquisition of Sun World was
accounted for on a consolidated basis using the purchase method of accounting.
The Consolidated Financial Statements include Sun World from the date of
acquisition. In addition, the Company has changed its fiscal year from March
31 to December 31 in order to align the Company's year end with that of Sun
World.
RESULTS OF OPERATIONS
The financial statements set forth herein for the first calendar quarter
ending March 31, 1997, reflect the results of operations for both the Company
and Sun World for the period January 1, 1997 through March 31, 1997. The
results of operations of Sun World prior to the September 13, 1996 acquisition
date 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 three months ended March 31, 1997 with results for the
three months ended March 31, 1996 will not, in the view of management of the
Company, prove meaningful. Instead, a summary of the Sun World elements which
management of the Company believes essential to an analysis of the results of
operations for such periods is presented below. For purposes of this summary,
the term Sun World will be used, when the context so requires, with respect
to the operations and activities of the Company's Sun World subsidiary, and
the term Cadiz will be used, when the context so requires, with respect to
those operations and activities of the Company not involving Sun World.
The Company's net income or loss in future fiscal periods will be
largely reflective of the operations of Sun World. Sun World conducts its
operations through four operating divisions: farming, packing, marketing and
proprietary product development. Net income from farming operations varies
from year to year primarily due to yield and pricing fluctuations which can
be significantly influenced by weather conditions, and are, therefore,
generally subject to greater annual variation than Sun World's other
divisions. However, the geographic distribution of Sun World's farming
operations and the diversity of its crop mix makes it unlikely that adverse
weather conditions would affect all of Sun World's properties or all of its
crops in any single year. Nevertheless, as net profit from Sun World's
packing, market operations and proprietary product development tends to be
more consistent from year to year than net profit from Sun World's farming
operations, Sun World is seeking to expand volume in the packing and marketing
areas by increasing the number of growers with which Sun World maintains
packing and marketing arrangements. Sun World is also actively exploring
various domestic and international opportunities to license selected
proprietary fruit varieties.
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.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996
- -------------------------------------------------------------------------------
The Company's agricultural operations are impacted by the general
seasonal trends that are characteristic of the agricultural industry. Sun
World has historically received the majority of its net income during the
second and third quarters following the harvest and sale of its table grape
and tree fruit crops. Due to this concentrated activity, Sun World has,
therefore, historically incurred a loss with respect to its agricultural
operations in the first and fourth calendar quarters.
The table below sets forth, for the periods indicated, the results of
operations for the Company's four main operating divisions (before elimination
of any interdivisional charges) as well as the categories of costs and
expenses incurred by the Company which are not included within the divisional
results (in thousands):
Three Months Ended
March 31,
---------
1997 1996
---- ----
Divisional net income (loss):
Farming $ 106 (542)
Packing (522) -0-
Marketing (203) -0-
Proprietary product development 241 -0-
------- ------
(378) (542)
Resource development expense 75 109
Landfill prevention expense 204 1,248
General and administrative expense 2,451 519
Depreciation expense 475 211
Amortization 58 59
Other (income) expense (82) -0-
Interest expense 3,837 453
-------- -------
Net loss $ (7,396) $ (3,141)
======== ========
The consolidated net loss for the quarter ended March 31, 1997 was $7.4
million compared to a loss of $3.1 million for the same period last year.
Since farming, packing and marketing operations are highly seasonal in nature,
the Company does not view the first quarter net loss as indicative of results
to be expected during the remainder of the current year.
FARMING OPERATIONS. The Company's agricultural properties, which total
approximately 18,900 acres, are primarily dedicated to producing permanent
commercial crops and, to a lesser extent, row crops. Net income from farming
operations, totaling $0.1 million for the quarter ended March 31, 1997,
primarily resulted from the harvest of carrots and artichokes under third
party arrangements, lemon operations at the Cadiz ranch, and sub lease income
from the Cadiz vineyard. For the quarter ended March 31, 1996, the $0.5
million loss from farming operations resulted primarily from the Cadiz citrus
operations.
PACKING OPERATIONS. The Company experienced a net loss of $0.5 million at
Sun World's four packing and handling facilities during the quarter ended
March 31, 1997. During the quarter, the Company packed 390,000 units and
handled 457,000 units which primarily consisted of citrus products packed for
third party growers in the Coachella Valley. Packing and handling revenue for
these operations of $1.6 million was more than offset by $2.1 million of
expenses largely due to the fixed infrastructure costs associated with the
Company's four packing facilities. Packing operations generally reflect a
loss during the first quarter of the year as less than 10% of the annual
volume is packed or handled during the quarter. As all of the Company's
packing operations are conducted through Sun World, no such operations were
conducted by the Company during the 1996 period.
MARKETING OPERATIONS. The Company's marketing operations include selling,
merchandising and promoting Sun World grown products, as well as providing
these services for third party growers. During the three months ended March
31, 1997, a total of 872,000 units were sold consisting primarily of citrus
from domestic third party growers, sweet red and yellow peppers through a
Mexican joint venture and Chilean grapes and tree fruit. These unit sales
resulted in marketing revenue of $0.7 million. Marketing expenses totaled
$0.9 million for the quarter ended March 31, 1997 resulting in a net loss
from marketing operations of $0.2 million. Similar to the packing operations,
marketing operations generally reflect a loss during the first quarter of the
year as less than 10% of the annual volume of units are sold occur during the
quarter. As all of the Company's marketing operations are conducted through
Sun World, no such operations were conducted by the Company during the 1996
period.
PROPRIETARY PRODUCT DEVELOPMENT. Sun World has a long history of product
innovation, and its research and development center maintains a fruit breeding
program that has introduced dozens of proprietary fruit varieties during the
past five years. In addition, Sun World has a 50% interest in American
Sunmelon, a partnership engaged in proprietary development, production and
marketing of seedless watermelon seed. During the three months ended March
31, 1997, net income from proprietary product development was $0.2 million
consisting of the Company's share of partnership income totaling $0.4 million
offset by $0.2 million in research and development expenses. As proprietary
product development is conducted solely through Sun World, no such activity
was conducted by the Company during the 1996 period.
RESOURCE DEVELOPMENT. Expenses recorded in this category consist of costs
incurred in the land and water resource development of the Company's
landholdings. These costs include the operating costs associated with the
Company's continual evaluation of additional potential land acquisition sites,
such as overhead, legal and travel, as well as the costs associated with the
development and transfer of surplus water from the Company's Cadiz and Piute
properties. Resource development expenses totaled $0.1 million for the three
months ended March 31, 1997 and 1996.
LANDFILL PREVENTION ACTIVITIES. The Company is engaged in opposition to
the proposed construction and operation of a landfill to be located adjacent
to its Cadiz Valley property, and has filed a lawsuit seeking, among other
things, to set aside regulatory approvals for the landfill project. During
the three months ended March 31, 1997, expenses incurred in connection with
activities in opposition to the project, such as litigation costs and
professional fees and expenses totaled $0.2 million as compared to $1.2
million during the 1996 period. The decrease is due to the fact that the
lawsuit is in the discovery phase; however, management believes expenses in
the future will increase since the Company plans to vigorously oppose the
proposed project.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
during both the three months ended March 31, 1997 and the three months ended
March 31, 1996 consisted primarily of corporate operating expenses,
professional fees and salaries. These expenses increased by $2.0 million
during the three months ended March 31, 1997 as compared to the 1996 period
primarily due to the addition of Sun World administrative costs in the amount
of $1.7 million for the three months ended March 31, 1997.
DEPRECIATION EXPENSE. Depreciation expense for the quarter ended March 31,
1997 totaled $0.5 million compared to $0.2 million for the same period in
1996. The increase is attributable to depreciation relating to the acquired
Sun World assets.
INTEREST EXPENSE. Net interest expense totaled $3.8 million during the
three months ended March 31, 1997, compared to $0.5 million during the same
period in 1996. The following table summarizes the components of net interest
expense for the two periods (in thousands):
Three Months Ended
March 31,
---------
1997 1996
-------- --------
Interest on outstanding debt - Sun World $ 3,263 $ -0-
Interest on outstanding debt - Cadiz 278 256
Amortization of financing costs 687 224
Interest income (391) (27)
-------- --------
$ 3,837 $ 453
======== =======
The increase in interest on outstanding debt during the 1997 period is
attributable to the long-term debt acquired as part of the Sun World
acquisition and an increased level of borrowing by Cadiz. Financing costs,
which include legal fees and extension fees, are amortized over the life of
the debt agreement.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL DISCUSSION OF LIQUIDITY AND CAPITAL RESOURCES. Pursuant to its
business strategy, the Company has 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 water resource development activity to date, the Company has been
required to obtain financing to bridge the gap between the time water resource
development expenses are incurred and the time that revenue 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. However, following the completion of an offering by Sun World of
$115.0 million in secured notes and a $30.0 million Revolving Credit Facility,
as further discussed below, the Company believes it will be able to meet its
working capital needs without looking to additional outside funding sources,
although no assurances can be made. See "Current Financing Arrangements" and
"Equity Placements," below.
On April 16, 1997, Sun World completed a private placement of $115.0
million in secured notes (the "Sun World Notes"). The Sun World Notes were
sold through Smith Barney Inc., as initial purchaser, to "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act of
1933, as amended (the "Securities Act")) and a limited number of institutional
"accredited investors" (as defined in the Securities Act). The proceeds from
the issuance of the Sun World Notes, when combined with Sun World's existing
cash and cash made available under a $30 million Revolving Credit Facility
entered into by Sun World concurrently with the issuance of the Sun World
Notes, were used to retire Sun World's existing indebtedness to John Hancock
Mutual Life Insurance Company ("John Hancock") and Caisse Nationale de Credit
Agricole, acting through its Grand Cayman branch ("Credit Agricole"), as well
as Cadiz' existing indebtedness to Cooperatieve Centrale Raiffeisen-
Boerenleenbank B.A. ("Rabobank") (referred to hereinafter as the "Debt
Refinancing" ).
Under Sun World's historical working capital cycle, working capital is
required primarily to finance the costs of growing and harvesting crops, which
occurs from January through September with a peak need in June. Sun World
harvests and sells the majority of its crops during the period from May
through September, when it receives the majority of its revenues. In order
to bridge the gap between incurrence of expenditures and receipt of revenues,
large cash outlays are required each year. Prior to its Debt Refinancing, Sun
World's cash balance was sufficient to provide for these seasonal working
capital requirements without the need for additional outside funding.
However, a substantial portion of Sun World's cash on hand was used upon
issuance of the Sun World Notes to fund debt repayments. Therefore, Sun World
will depend upon the Revolving Credit Facility to meet its seasonal working
capital needs in 1997.
After giving effect to the issuance of the Sun World Notes and the
application of the net proceeds therefrom, Sun World has $120.0 million of
indebtedness outstanding and $30.0 million of borrowing availability under the
Revolving Credit Facility. Cadiz has approximately $10.0 million of
indebtedness outstanding. See "Cadiz Obligations," below. Management
believes that the terms of the Company's debt facilities following the
issuance of the Sun World Notes are more favorable to the Company than the
terms of the retired debt facilities. See "Outlook," below.
CURRENT FINANCING ARRANGEMENTS.
SUN WORLD OBLIGATIONS
The Sun World Notes, which were issued in the principal amount of $115
million on April 16, 1997 and will mature on April 15, 2004, accrue interest
at the rate of 11-1/4% per annum. Interest only is payable semi-annually on
April 15 and October 15 of each year, commencing October 15, 1997. The Sun
World Notes are secured by a first lien on substantially all of the assets of
Sun World and its subsidiaries, other than growing crops, crop inventories and
accounts receivable and proceeds thereof, which secure the Revolving Credit
Facility. The Sun World Notes are also secured by the guarantee of Cadiz and
the pledge by Cadiz of all of the stock of Sun World.
Sun World entered into a one year $30 million Revolving Credit Facility
which is guaranteed by Cadiz. Amounts borrowed under the Revolving Credit
Facility will accrue interest at either prime plus 1.50% or LIBOR plus 2.50%,
at Sun World's election, with an additional .50% payable for advances on
eligible inventory above specified levels.
CADIZ OBLIGATIONS
As discussed in the Company's latest Form 10-K, Cadiz' primary current
lender is ING Baring (U.S.) Capital Corporation ("ING"). The maturity date
of the ING obligations is April 30, 1998 (with the interest rate of such
obligations adjusted as of May 1, 1997 to LIBOR plus 200 basis points, payable
at LIBOR only semi-annually, with the remaining accrued interest added to
principal). Currently, ING holds a senior deed of trust on substantially all
of Cadiz' non-Sun World related property.
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.
CASH USED FOR OPERATING ACTIVITIES. Cash used for operating activities
totaled $12.1 million for the three months ended March 31, 1997 as compared
to cash used for continuing operating activities of $1.5 million for the same
period in 1996. The increase in cash used for operating activities primarily
resulted from the inclusion of Sun World's operations and seasonal working
capital requirements in the 1997 period. Significant working capital changes
included a decrease in accounts payable of $1.9 million and the increase in
inventories of $5.4 million attributable to the seasonality of Sun World's
agricultural operations offset by the decrease in accounts receivable of $3.7
million.
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES. Cash provided by
investing activities totaled $0.7 million during the three months ended March
31, 1997 as compared to cash used for investing activities of $1.2 million
during the prior year's period. Although the Company invested $1.4 million
in developing crops and $0.6 million in the purchase of land, property, plant
and equipment and in furtherance of its water transfer and storage projects,
the Company received proceeds of $1.8 million from the disposal of
underproducing Sun World assets through an asset disposal program. In
addition, partnership distributions received by Sun World totaled $0.8
million.
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES. Cash used for
financing activities totaled $2.7 million for the three months ended March 31,
1997 as compared to cash provided by financing activities of $5.2 million
during the quarter ended March 31, 1996. Principal payments on long-term debt
totaled $3.3 million for the three months ended March 31, 1997. Net proceeds
from the exercise of previously outstanding stock options totaled $.5 million
during the three months ended March 31, 1997.
OUTLOOK
With the issuance of the Sun World Notes, the Company believes that,
based upon current levels of operations and anticipated growth, Sun World can
adequately service its indebtedness and meet its seasonal working capital
needs utilizing available internal cash and the Revolving Credit Facility.
Although the indenture securing the Sun World Notes (the"Sun World
Indenture") and agreements between Cadiz and its principal current lender
restrict the amount of cash that can flow from Sun World to Cadiz and vice
versa, Cadiz expects to be able to meet its ordinary working capital needs,
in the short-term, 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. In addition, there are provisions in the Sun World Indenture
allowing for certain additional payments to be made from Sun World to Cadiz,
subject to Sun World meeting specific tests and ratios.
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 and reinvestment in its
landholdings. Such development will be systematic and in furtherance of the
Company's business strategy to provide for maximization of the value of its
assets.
OTHER INFORMATION
Item 1 - Legal Proceedings
See "Item 3. Legal Proceedings" included in the Company's
latest Form 10-K for a complete discussion.
Item 2 - Change in Securities
Not applicable.
Item 3 - Defaults Upon Senior Securities
Not applicable.
Item 4 - Submission of Matter to a Vote of Security Holders
Not applicable.
Item 5 - Other Information
Not applicable.
Item 6 - Exhibits and Reports on Form 8-K
A. Exhibits
1. Exhibit 27 - Financial Data Schedule
B. Reports on Form 8-K
1. Report on Form 8-K dated February 14, 1997 reporting
the extension of the Registrant's debt facilities with
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.,
and Henry Ansbacher & Company to April 30, 1997 and
March 13, 1997 respectively.
2. Report on Form 8-K dated March 31, 1997 reporting the
issuance of 30,000 shares to Henry Ansbacher & Co.
Limited, pursuant to Regulation S, as consideration for
Ansbacher's agreement to sell the outstanding
obligations owed by the Registrant to ING Baring (U.S.)
Capital Corporation.
3. Report on Form 8-K dated April 16, 1997 providing a
Press Release issued by the Company announcing a
private placement of $115.0 million in First Mortgage
Notes due April 15, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Cadiz Land Company, Inc.
By: /s/ Keith Brackpool May 14, 1997
------------------------------------ ---------------
Keith Brackpool Date
Chief Executive Officer and Director
By: /s/ Susan K. Chapman May 14, 1997
------------------------------------ ---------------
Susan K. Chapman Date
Chief Financial Officer and Secretary
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