SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION
13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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.)
100 Wilshire Boulevard, Suite 1600
Santa Monica, CA 90401-1111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 899-4700
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, 1998 was 33,124,161 shares of Common Stock, par value
$0.01.
CADIZ LAND COMPANY, INC.
INDEX TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 1998
I. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. Statement of Operations
B. Balance Sheet
C. Statement of Cash Flows
D. Consolidated Statement of Stockholders' Equity
E. Notes
II. SUPPLEMENTARY INFORMATION
A. Management's Discussion and Analysis of
Financial Condition and Results of Operations
B. Other Information
C. Signatures
CADIZ LAND COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
For the Three Months Ended March 31, 1998 1997
----- -----
($ in thousands except per share data)
Revenues $ 5,484 $4,887
------- -------
Costs and expenses:
Cost of sales 5,013 5,018
Landfill prevention activities 313 204
General and administrative 2,605 2,691
Depreciation and amortization 744 533
------- -------
Total costs and expenses 8,675 8,446
------- -------
Operating loss (3,191) (3,559)
Interest expense, net 3,999 3,837
------- -------
Net loss (7,190) (7,396)
Less: Preferred stock dividends - (438)
------- -------
Net loss applicable to common stock (7,190) (7,834)
======= =======
Net loss per common share $ (.22) $ (.33)
======== ========
Weighted average shares outstanding 32,791 23,800
======= =======
See accompanying notes to the condensed consolidated financial statements.
CADIZ LAND COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, December 31,
1998 1997
----- -----
($ in thousands)
ASSETS
Current assets:
Cash and cash equivalents $ 3,099 $5,298
Accounts receivable, net 3,229 5,881
Inventories 22,565 13,838
Prepaid expenses and other 1,028 1,161
------- -------
Total current assets 29,921 26,178
Investment in partnerships 6,549 6,327
Property, plant, equipment and
water programs, net 164,058 160,193
Other assets 10,461 10,351
------- -------
$210,989 $203,049
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,159 $8,517
Accrued liabilities 9,623 6,114
Revolving credit facility 9,792 -
Long-term debt, current portion 318 519
------- -------
Total current liabilities 26,892 15,150
Long-term debt 131,725 131,689
Deferred income taxes 5,447 5,447
Other liabilities 505 382
Commitments and contingencies
Stockholders' equity:
Common stock - $.01 par value;
45,000,000 shares authorized;
shares issued and outstanding -
33,124,161 at March 31, 1998
and 32,646,661 at December 31, 1997 331 326
Additional paid-in capital 124,097 120,873
Accumulated deficit (78,008) (70,818)
------- -------
Total stockholders' equity 46,420 50,381
------- -------
$210,989 $203,049
======== ========
See accompanying notes to the condensed consolidated financial statements.
CADIZ LAND COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended March 31, 1998 1997
----- -----
($ in thousands)
Cash flows from operating activities:
Net loss $(7,190) $(7,396)
Adjustments to reconcile net loss
from operations to cash used for
operating activities:
Depreciation and amortization 1,052 731
Issuance of shares for refinancing - 140
Issuance of shares for services 264 -
Interest capitalized to debt - 250
Share of partnership operations (431) (398)
Changes in operating assets
and liabilities:
Decrease in accounts receivable 2,652 3,695
Increase in inventories (7,456) (5,393)
Decrease in prepaid expense
and other 133 67
Decrease in accounts payable (1,358) (1,922)
Increase (decrease) in accrued
liabilities 3,760 (1,548)
Decrease in other current
liabilities - (438)
(Decrease) increase in other
liabilities (77) 75
------- -------
Net cash used for operating
activities (8,651) (12,137)
------- -------
Cash flows from investing activities:
Additions to property, plant and
equipment (1,732) (318)
Proceeds from disposal of property, plant
and equipment 11 1,764
Additions to water programs (385) (259)
Additions to developing crops (1,101) (1,363)
Partnership distributions 210 790
(Increase) decrease in other assets (379) 59
------- -------
Net cash (used for) provided by
investing activities (3,376) 673
------- -------
Cash flows from financing activities:
Net proceeds from issuance of stock 337 505
Principal payments on long-term debt (301) (3,260)
Net proceeds from short-term debt 9,792 75
------- -------
Net cash provided by (used for)
financing activities 9,828 (2,680)
------- -------
Net decrease in cash and cash
equivalents (2,199) (14,144)
Cash and cash equivalents, beginning
of period 5,298 33,307
------- -------
Cash and cash equivalents, end of period $ 3,099 $19,163
======= =======
See accompanying notes to the condensed consolidated financial statements.
CADIZ LAND COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
For the Three Months Ended March 31, 1998
($ in thousands)
Additional Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity
------ ------ ------- ---------- ------------
Balance as of
December 31, 1997 32,646,661 $ 326 $ 120,873 $ (70,818) $ 50,381
Exercise of
stock options 72,500 1 336 - 337
Stock issued
for services 30,000 - 264 - 264
Acquisition of
hydrological
research company 375,000 4 2,624 - 2,628
Net loss
(7,190) (7,190)
-------- ----- ------- -------- -------
Balance as of
March 31, 1998 33,124,161 $ 331 $ 124,097 $ (78,008) $ 46,420
========== ===== ========== ========== ========
See accompanying notes to the consolidated financial statements.
CADIZ LAND COMPANY, INC.
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 year ended December 31, 1997. The
foregoing Condensed 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, 1998 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 - REVOLVING CREDIT FACILITY
- -----------------------------------
In April 1997, in connection with Sun World's debt
restructuring described in Note 3, Sun World entered into a
one year $30 million Revolving Credit Facility ("1997
Facility"). The 1997 Facility is secured by eligible
accounts receivable and inventory, and is guaranteed by the
Company. Amounts borrowed under the facility accrue
interest at either prime plus 1.50% or LIBOR plus 2.50% at
the election of the Company with an additional .50% payable
for advances on eligible inventory above specified levels.
$9.8 million was outstanding under the Revolving Credit
Facility at March 31, 1998.
On April 1, 1998, Sun World entered into a new $25
million one year Revolving Credit Facility ("1998 Facility")
which replaces the 1997 Facility described above. Amounts
borrowed under the 1998 Facility accrue interest at prime
plus 1.0% or LIBOR plus 2.5% at the Company's election.
NOTE 3 - COMMON STOCK
- ---------------------
In February 1998, the Company issued 375,000 shares of
common stock to a hydrological research company in order to
acquire title to substantially all of its assets.
During the first quarter of 1997, 30,000 shares of
common stock were issued for services including 10,000
shares to the Company's Chief Executive Officer as part of a
performance bonus with respect to the year ended December
31, 1997.
CADIZ LAND COMPANY, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The financial statements set forth herein as of and for
the three months ended March 31, 1998 and 1997 reflect the
results of operations for the Company and its wholly-owned
subsidiaries, Sun World and Southwest Fruit Growers ("SWFG")
in which the Company is the general partner and has an
approximate 66.3 percent partnership interest. For purposes
of this discussion, 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 (a) the operations of
the Cadiz/Fenner Water Storage and Supply Program and (b)
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, net profit from Sun World's packing, marketing
and proprietary product development operations tends to be
more consistent from year to year than net profit from Sun
World's farming operations. As such, Sun World continues to
strategically add volume in the packing and marketing areas
that will complement Sun World's in-house production or fill
in contra-seasonal marketing windows. 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 and 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, 1998 COMPARED TO THREE MONTHS
- ----------------------------------------------------------
ENDED MARCH 31, 1997
- --------------------
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 months of June to
October following the harvest and sale of its table grape
and treefruit crops. Due to this concentrated activity, Sun
World has historically incurred losses with respect to its
agricultural operations during the other months of the year.
The effects of the El Nino weather conditions experienced
in California have not, to date, had a significant impact on
the Company's outlook for 1998. However, the cooler weather
patterns in California have had the effect of delaying the
anticipated harvest of all California grape and stonefruit
production by as much as four weeks from the 1997 harvest
schedule which will, to a certain extent, delay recognition of
revenues from the second to the third quarter.
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,
---------
1998 1997
---- ----
Divisional net income (loss):
Farming $ 770 $ 188
Packing (421) (522)
Marketing (377) (290)
Proprietary product development 239 241
------- -------
211 (296)
Landfill prevention activities 313 204
General and administrative 2,345 2,439
Depreciation and amortization 744 533
Interest expense 3,999 3,837
------- -------
Net loss $(7,190) $ (7,396)
======== ========
FARMING OPERATIONS. The Company farms over 19,000
acres of agricultural properties located primarily in two
major growing areas of California, the San Joaquin Valley
and the Coachella Valley. The Company's agricultural
properties are primarily dedicated to producing permanent
commercial crops and to a lesser extent, row crops. Net
income from farming operations totaled $0.8 million for the
three months ended March 31, 1998, compared to $0.2 million
for the three months ended March 31, 1997. This favorable
increase primarily resulted from timing of lemon sales from
Cadiz and Blythe into the fresh and juice markets as well as
profits from the sale of desert artichokes and sweet red
peppers from Mexico.
PACKING OPERATIONS. For the quarter ended March 31,
1998, Sun World's four packing and handling facilities
contributed revenues of $1.6 million offset by $2.0 million
of expenses largely due to the fixed infrastructure
associated with these facilities for a net loss of $0.4
million compared to a net loss of $0.5 million for the
quarter ended March 31, 1997. Packing operations generally
reflect a loss in the first quarter of the year as less than
10% of the annual volume is packed or handled during the
quarter. Units packed during the quarter totaled 384,000 in
1998 compared to 390,000 in 1997. An unfavorable variance
in citrus units packed for third party growers in Coachella
of approximately 130,000 units was totally offset by the new
citrus production that began operating in the fourth quarter
of 1997 at the Company's Kimberlina facility in the San
Joaquin Valley.
MARKETING OPERATIONS. Sun World's marketing operations
include the sale and promotion of Sun World grown products,
as well as providing these services for third
party growers. During the three months ended March 31,
1998, a total of approximately 810,000 units were sold,
consisting primarily of citrus from domestic third party
growers and sweet red peppers from Mexico compared to 872,000
units sold during the three months ended March 31, 1997.
This reduction in units was primarily due to a planned reduction
in the marketing of Chilean grapes and treefruit. The 1998 unit
sales resulted in marketing revenue of $0.6 million while marketing
expenses totaled $1.0 million for a net loss of $0.4 million
for the quarter. For the first quarter of 1997, marketing
revenues were $0.7 million while marketing expenses were $1.0
million for a net loss of $0.3 million. Similar to the packing
operations, marketing operations ordinarily reflect a loss during
the first quarter of the year as less than 10% of the annual
volume of units marketed are sold during the quarter.
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 many 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, 1998 and 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
research and development expenses of $0.2 million.
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/Fenner Valley
properties, and has filed three lawsuits seeking, among
other things, to set aside approvals for the landfill
project and monetary damages. During the three months ended
March 31, 1998, expenses incurred in connection with
activities in opposition to the project, such as litigation
costs and professional fees and expenses totaled $0.3
million as compared to $0.2 million during the 1997 period.
GENERAL AND ADMINISTRATIVE EXPENSES. General and
administrative expenses during the three months ended March
31, 1998 totaled $2.3 million compared to $2.4 for the three
months ended March 31, 1997. This reduction primarily
resulted from reductions in the administrative staff of Sun
World during 1997.
DEPRECIATION AND AMORTIZATION. Depreciation and
amortization expense for the three months ended March 31,
1998 totaled $0.7 million compared to $0.5 million for the
same period in 1997. The increase is primarily due to the
reduced capitalization of depreciation in inventory resulting
from the timing of crop sales.
INTEREST EXPENSE, NET. Net interest expense totaled
$4.0 million during the three months ended March 31, 1998,
compared to $3.8 million during the same period in 1997.
The following table summarizes the components of net
interest expense for the two periods (in thousands):
Three Months Ended
March 31,
-------
1998 1997
---- ----
Interest on outstanding debt -
Sun World $ 3,430 $ 3,263
Interest on outstanding debt -
Cadiz 329 278
Amortization of financing costs 307 687
Interest income (67) (391)
------- -------
$ 3,999 $ 3,837
======= =======
The increase in interest expense from $3.8 million
during the first quarter of 1997 to $4.0 million in 1998 is
primarily due to the Company's debt refinancing in April
1997, whereby Sun World issued $115 million of First
Mortgage Notes and used the proceeds and existing cash
balance to pay off approximately $130 million of long-term
debt. Financing costs, which include legal fees and warrants,
are amortized over the life of the debt agreements.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL DISCUSSION OF LIQUIDITY AND CAPITAL RESOURCES.
With the revolving credit facilities in place for both Caduz
and Sun World, 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" below.
In order to provide additional availability of working
capital and to provide a readily available funding mechanism
for add-on acquisition opportunities, Cadiz entered into a
three year $15 million revolving credit facility with ING
Baring (U.S.) Capital Corporation ("ING") (the "Cadiz ING
Revolver") in November 1997. As of March 31, 1998, $5
million was outstanding under the Cadiz ING Revolver.
On April 16, 1997, Sun World completed a private
placement of $115.0 million in secured 11-1/4% Series A
First Mortgage Notes (the "Sun World Notes"). The notes
have subsequently been exchanged for Series B first Mortgage
Notes registered under the Securities Act of 1933 and are
publicly traded.
The proceeds from the Sun World Notes, when combined
with Sun World's existing cash and cash made available under
a one year $30 million revolving credit facility with
Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A.
("Rabobank") (the "1997 Revolver") 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 and Caisse Nationale
de Credit Agricole, as well as Cadiz' existing term indebtedness
to Rabobank (referred to hereinafter as the "Debt Refinancing").
Management believes that the terms of Sun World's debt
facilities following the issuance of the Sun World Notes are
more favorable to Sun World than the terms of the retired
debt facilities.
Under Sun World's historical working capital cycle,
working capital is required primarily to finance the costs
of growing and harvesting corps, 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 June through October, 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,
management determined that utilizing a substantial portion of
Sun World's on hand to pay down long-term debt and concurrently
entering into the 1997 Revolver to meet its seasonal working
capital needs was a more effective use of its financial
resources. As of March 31, 1998, $9.8 million was
outstanding under the 1997 Revolver. On April 1, 1998, Sun
World replaced the 1997 Revolver with a $25 million one year
facility (the "1998 Revolver"), which, in management's view,
provides more favorable terms. See "Current Financing
Arrangements - Sun World Obligations" below.
As of March 31, 1998, Cadiz had approximately $14.0
million of indebtedness outstanding and $10.0 million of
borrowing availability under the Cadiz ING revolver. Sun
World had $127.8 million of indebtedness outstanding and
approximately $20.2 million of borrowing availability under
the 1997 Revolver.
CURRENT FINANCING ARRANGEMENTS
CADIZ OBLIGATIONS
As Cadiz has not received significant revenues from its
water resource activity to date, Cadiz 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. Historically, Cadiz has addressed
these needs primarily through secured debt financing
arrangements with its lenders, private equity placements and
the exercise of outstanding stock options.
As of March 31, 1998, Cadiz was obligated to ING for
approximately $9.8 million under a senior term loan
facility. With Cadiz' election to extend the facility in April
1998, the maturity date of the ING obligation is April 30, 1999.
The Company issued 75,000 additional warrants in conjunction with
the extension. Cadiz also has the right to obtain an additional
one-year extension. Upon exercise of that extension, Cadiz would
be required to issue certain warrants to ING and the interest
rate would be further adjusted. Currently, ING holds a
senior deed of trust on substantially all of Cadiz' non-Sun
World related property.
In November 1997, the Company entered into the Cadiz
ING Revolver to provide additional availability of working
capital and to provide a readily available funding mechanism
for add-on acquisition opportunities. The Cadiz ING
Revolver is secured by a second lien on all of the non-Sun
World assets of the Company. Principal is due on December
31, 2000. Interest is payable semi-annually at 8% if paid
in cash and at 10% if paid in common stock of the Company.
The Company had $5 million outstanding under the Cadiz ING
Revolver at March 31, 1998. The Company issued 200,000
warrants in connection with the initial borrowings at $7.00,
the market price at issuance. The agreement calls for the
issuance of certain additional warrants if and when the
remaining $10 million is drawn.
As the Company continues to actively pursue its
business strategy, additional financing specifically in
connection with the Company's water programs will be
required. The nature of such additional financing for the
water storage and supply programs (including the
Cadiz/Fenner Water Storage and Supply Program) 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 storage and/or delivery systems used in the program,
the Company will obtain appropriate long-term 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.
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 (subject to
certain permitted liens) 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 1997 Revolver, and certain real
property pledged to third parties. 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.
Commencing October 14, 1997, Sun World offered to
exchange (the "Exchange Offer") up to $115.0 million
aggregate principal amount of its 11-1/4% Series B First
Mortgage Notes (the "Exchange Notes") for $115.0 million
aggregate principal amount of the Sun World Notes. The
Exchange Notes are registered under the Securities Act of
1933 and have the same terms as the Sun World Notes. The
exchange of all of the Sun World Notes was completed on
November 12, 1997.
In April 1997, Sun World entered into the 1997 Revolver
which is guaranteed by Cadiz. As of March 31, 1998, $9.8
million was outstanding under the 1997 Revolver. To meet
working capital needs for 1998, Sun World has replaced the
existing 1997 Revolver with a one year $25 million revolving
credit facility (the "1998 Revolver") that provides more
favorable terms than the existing 1997 Revolver.
CASH USED FOR OPERATING ACTIVITIES. Cash used for operating
activities totaled $8.7 million for the three months ended
March 31, 1998 as compared to cash used for operating activities
of $12.1 million for the three months ended March 31, 1997.
The reduction in cash used from operating activities primarily
resulted from an increase in accrued liabilities related to
interest on the Sun World Notes offset by a $2.0 million increase
in inventories.
CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES. Cash
used for investing activities totaled $3.4 for the three
months ended March 31, 1998 as compared to cash provided by
investing activities of $0.7 million for the same period in
1997. The Company invested $1.1 million in developing crops
and $2.1 million in the purchase of property, plant and
equipment and in furtherance of its water storage and supply
programs during the first quarter of 1998.
CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES. Cash
provided by financing activities totaled $9.8 million for
the three months ended March 31, 1998, consisting primarily
of $9.8 million in borrowings under the 1997 Revolver, as
compared to cash used for financing activities of $2.7
million for the three months ended March 31, 1997.
Principal payments on long-term debt totaled $0.3 million
for the three months ended March 31, 1998. Net proceeds
from the exercise of stock options totaled $0.3 million
during the three months ended March 31, 1998.
OUTLOOK
The Company is actively pursuing the development of its
water resources. Specifically, the Company entered into an
interim agreement with the Metropolitan Water District of
Southern California ("MWD") to verify feasibility of and
develop principles and terms for a water storage and supply
program at its Cadiz, California property. The proposed
long-term program will involve the conveyance of water from
MWD's Colorado River Aqueduct, during periods of
excess supply, for storage in the aquifers underlying the
Company's properties. The water will be delivered through a
35-mile transmission pipeline have a capacity of 100,000
acre-feet per year. Total storage capacity is expected to
be approximately 500,000 acre-feet. During periods of
shortage, the stored water will be extracted by wells and
returned to the Colorado River Aqueduct. The program will
also have the ability to transfer high-quality indigenous
groundwater for distribution throughout MWD's service area.
MWD, assisted by an accredited panel of independent
industry experts, has completed a review of numerous
environmental, engineering, hydrological and other studies
which confirm the program's feasibility. Draft principles
and terms for agreement have been developed and will now
be presented to the Board's of both parties for approval.
If approved, facility optimization studies and the environmental
review process will commence. The program could be operational
by the year 2000. The Company anticipates that the revenue stream
generated by the program will be sufficient to meet the then
existing operating requirements of the Company, although no
assurances can be given.
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. The Company also continually
evaluates acquisition opportunities which are complementary
to its current portfolio of landholdings, water resources
and agricultural operations.
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, the 1998
Revolver and, through an intercompany revolver with Cadiz.
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, draws from the
Cadiz ING Revolver, and the possible exercise of outstanding
stock options. Except for the foregoing, additional
intercompany cash payments between Sun World and Cadiz are
subject to certain restrictions under its current lending
arrangements.
YEAR 2000
The Company has developed and is currently implementing
plans to address the potential problems related to the
effect on its computer systems of the Year 2000. Key
financial, information, and operation systems are being
assessed and are currently on target to be Year 2000
compliant by December 31, 1999. If necessary modifications
and conversions by the Company and those with which it
conducts business are not completed on time, the Year 2000
issue may have a material adverse effect on the Company's
results of operations. The financial effect of making the
required systems changes is not expected to be material to
the Company's financial position, results of operations, or
cash flows.
ITEM 1. - LEGAL PROCEEDINGS
------------------
See "Item 3. Legal Proceedings" included in the
Company's latest Form 10-K for a complete discussion.
There have been no material changes in the status of
the action styled CADIZ LAND COMPANY, INC. V. COUNTY
OF SAN BERNARDINO, ET AL. Case No. BCV 02341.
In CADIZ LAND COMPANY, INC. V. WASTE MANAGEMENT,
INC., CASE NO. CV 97-7827 (the "Federal Action"), on
or about April 6, 1998, in response to motions filed
by defendants, the court has directed that the
Company amend its complaint to allege with greater
specificity the factual predicate for its RICO claims
asserted against defendants Waste Management, Inc.,
Waste Management of North America, Inc., Jacobs
Engineering Group, Stuart Clark, Glenn Odell and
Robert Muehl. Further , the court granted
defendants' motion to dismiss the Company's claim
under Section 10(b) of the Securities Exchange Act,
without leave to amend. Finally, the Court
dismissed, with prejudice, the claims asserted
against defendants Marsha Turoci and Michael
Dombrowski. In order to be fully responsive to the
court's direction on amending the complaint, the
Company requested and, on or about April 27, 1998,
the court entered a stay of all proceedings in the
Federal Action pending completion of a related
criminal investigation being conducted by the San
Bernardino District Attorney's office against Waste
Management of North America and others in connection
with the construction by Waste Management and its
joint venture partner, the Atchison, Topeka and Santa
Fe Railroad Company of a proposed trash dump in San
Bernardino County. A similar stay has been issued in
the Company's state court action, CADIZ LAND COMPANY,
INC. V. WASTE MANAGEMENT, INC., CASE NO. SC 05743.
The Company intends vigorously to continue to
prosecute its claims against defendants and intends,
inter alia, to file an amended complaint in the
Federal Action once the above-referenced stay is
lifted.
ITEM 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS
------------------------------------------
During the quarter ended March 31, 1998, the Company
sold the following securities which were not
registered under the Securities Act of 1933, as
amended (the "Securities Act"). The Company believes
that the transactions described below were all exempt
from the registration requirements of the Securities
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. In each transaction involving the
issuance of stock options or warrants, the exercise
price was equal to the fair market value of the
Company's common stock as of the date of grant of
such options or warrants. No underwriters were used
or commissions paid on connection with any such
sales.
In March, 1998, the Company issued a total of
455,000 options to purchase common stock to employees
of the Company under a new 1998 Non-Qualified Stock
Option Plan adopted by the Board of Directors in
February, 1998. All such options vest at 20% per
year over five years from issuance and are
exercisable until seven years from the date of grant.
The options granted in March are exercisable at
$9.375 per share. In February 1998, the Company
issued 375,000 shares to a hydrological research
company in order to acquire title to substantially
all of its assets.
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
None.
CADIZ LAND COMPANY, INC.
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, 1998
------------------------------------ ------------
Keith Brackpool, President and Date
Chief Executive Officer and Director
By: /s/ Stanley E. Speer May 14, 1998
------------------------------------ ------------
Stanley E. Speer Date
Chief Financial Officer
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