<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
Commission file number 0-18756
WESTERN WATER COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 33-0085833
(State of Incorporation) (I.R.S. Employer Identification No.)
4660 LA JOLLA VILLAGE DRIVE, SUITE 825, SAN DIEGO, CA 92122
(Address of principal executive offices) (Zip code)
(619) 535 - 9282
(Registrant's telephone number, including area code)
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
filing requirements for the past 90 days.
YES X NO
----- -----
As of August 9, 1996, 8,068,486 shares of $0.001 par value common stock
of the Registrant were issued and outstanding.
<PAGE> 2
WESTERN WATER COMPANY
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
<S> <C>
Item 1. Financial statements:
Consolidated balance sheets
June 30, 1996 and March 31, 1996 3
Consolidated statements of operations
Three months ended June 30, 1996 and 1995 5
Consolidated statements of cash flows
Three months ended June 30, 1996 and 1995 6
Notes to consolidated financial statements 7
Item 2. Management's discussion and analysis of financial condition 9
and results of operations
PART II - OTHER INFORMATION
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</TABLE>
<PAGE> 3
ITEM 1. FINANCIAL STATEMENTS
WESTERN WATER COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
JUNE 30, 1996 MARCH 31,
(UNAUDITED) 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 295,232 $ 540,883
Investments in marketable securities 2,515,187 2,815,927
Current portion notes receivable 315,061 343,530
Other current assets 325,168 252,654
----------- -----------
Total current assets 3,450,648 3,952,994
----------- -----------
NOTES RECEIVABLE, less current portion 1,811,115 2,342,426
----------- -----------
ASSETS HELD FOR SALE
Water rights 11,053,045 10,980,964
Real estate 5,912,956 5,626,857
----------- -----------
Total assets held for sale 16,966,001 16,607,821
----------- -----------
OTHER WATER ASSETS 3,220,235 3,234,816
----------- -----------
INVESTMENTS AND OTHER ASSETS
Investments in Limited Liability Company 11,748,718 11,925,109
Deferred tax benefit 1,100,000 1,100,000
Debt issue costs, net 757,637 777,926
Silica plant 557,823 557,823
Property and equipment, net 51,601 50,994
----------- -----------
14,215,779 14,411,852
----------- -----------
$39,663,778 $40,549,909
=========== ===========
</TABLE>
3
<PAGE> 4
WESTERN WATER COMPANY
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY JUNE 30, 1996 MARCH 31,
(UNAUDITED) 1996
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 341,812 $ 310,905
Accrued expenses 809,042 636,248
Current maturities of long-term debt 161,709 160,272
------------ ------------
Total current liabilities 1,312,563 1,107,425
------------ ------------
DEPOSIT 100,000 100,000
------------ ------------
LONG-TERM DEBT, less current maturities 3,200,561 3,275,408
------------ ------------
9% CONVERTIBLE SUBORDINATED DEBENTURES 15,000,000 15,000,000
------------ ------------
COMMITMENT AND CONTINGENCIES -- --
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $0.001 par value, 1,000,000 shares
authorized; no shares issued or outstanding -- --
Common stock, $0.001 par value, 10,000,000 shares
authorized; 8,068,486 shares issued at
June 30, 1996 and March 31, 1996 8,068 8,068
Additional paid-in capital 21,696,867 21,696,867
Unrealized loss on investments (46,949) (24,442)
Retained deficit ($14,405,252 of retained deficit
eliminated in the quasi-reorganization as of
October 1, 1994) (1,607,332) (613,417)
------------ ------------
Total stockholders' equity 20,050,654 21,067,076
------------ ------------
$ 39,663,778 $ 40,549,909
============ ============
</TABLE>
4
<PAGE> 5
WESTERN WATER COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
----------- -----------
<S> <C> <C>
REVENUES
Water rights $ 65,373 $ 35,072
Real estate -- 2,233,393
----------- -----------
Total revenues 65,373 2,268,465
COSTS OF REVENUES
Water rights 14,581 12,178
Real estate -- 802,055
----------- -----------
Total costs of revenues 14,581 814,233
----------- -----------
GROSS PROFIT 50,792 1,454,232
GENERAL AND ADMINISTRATIVE 577,794 569,375
----------- -----------
OPERATING INCOME (LOSS) (527,002) 884,857
OTHER INCOME (EXPENSES)
Interest income 85,459 92,455
Interest expense (360,683) (38,000)
Rental income, net (Note 4) 15,603 36,120
Equity in Loss oF Limited Liability Company (176,391) --
Other (12,042) 600
----------- -----------
(448,054) 91,175
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS,
BEFORE INCOME TAXES (975,056) 976,032
INCOME TAXES 2,400 390,000
----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (977,456) 586,032
LOSS FROM DISCONTINUED OPERATIONS,
AFTER TAX EFFECT (16,458) (5,897)
----------- -----------
NET INCOME (LOSS) $ (993,914) $ 580,135
=========== ===========
INCOME (LOSS) PER COMMON SHARE (Note 2)
Continuing operations $ (.12) $ .07
Discontinued operations -- --
----------- -----------
NET INCOME (LOSS) PER COMMON SHARE $ (.12) $ .07
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING 8,068,486 7,909,862
=========== ===========
</TABLE>
5
<PAGE> 6
WESTERN WATER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
--------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $(993,914) $ 580,135
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 38,090 14,874
Equity in loss of Limited Liability Company 176,391 _
Changes in assets and liabilities:
(Increase) decrease in:
Notes receivable 559,780 (248,710)
Other current assets (72,514) (123,097)
Water rights held for sale (72,081) (1,536,843)
Real estate held for sale (286,099) 676,947
Other water assets -- (338,071)
Deferred tax benefit -- 387,000
Increase (decrease) in:
Accounts payable and accrued expenses 203,700 (70,014)
Notes payable (73,410) (580,365)
--------- -----------
Net cash used in operating activities (520,057) (1,238,144)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,826) (204)
Sales of marketable securities 278,232 --
--------- -----------
Net cash provided by (used in) investing activities 274,406 (204)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments for treasury stock -- (334)
--------- -----------
Net decrease in cash and cash equivalents (245,651) (1,238,682)
CASH AND CASH EQUIVALENTS:
Beginning 540,883 2,335,532
--------- -----------
Ending $ 295,232 $ 1,096,850
========= ===========
</TABLE>
6
<PAGE> 7
WESTERN WATER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited
financial statements contain all adjustments (which include
only normal recurring adjustments) necessary to present
fairly the balance sheet of Western Water Company and
Subsidiaries as of June 30, 1996 and the results of their
operations and their cash flows for the three months ended
June 30, 1996 and 1995, respectively. The financial
statements are consolidated to include the accounts of
Western Water Company and its subsidiary companies
(together, "the Company").
Certain 1995 amounts have been reclassified to conform to
current period presentation. These reclassification have no
effect on previously reported net income.
The accounting policies followed by the Company are set
forth in Note 1 to the Company's financial statements as
stated in its report on Form 10-K for the fiscal year ended
March 31, 1996.
NOTE 2. INCOME (LOSS) PER COMMON SHARE:
Income (Loss) per common share is based on the weighted
average number of common shares outstanding during the
period. No material dilution of earnings per share would
result for the periods if it were assumed that all
outstanding stock options were exercised.
The income (loss) per common share computations, and the
weighted average common shares outstanding, for the three
month period ended June 30, 1995 were adjusted to reflect
the effects of the stock split effected in the form of a
stock dividend in Fiscal 1996.
NOTE 3. INVESTMENT IN LIMITED LIABILITY COMPANY:
Nevada Land and Resource Company, LLC ("NLRC") is a Delaware
limited liability company which is owned 35.3% by the
Company and 64.7% by a joint venture comprised of Morgan
Stanley Real Estate Fund II, L.P. and two other affiliates
of that real estate partnership ("Morgan Stanley"). The
Company accounts for its investment in NLRC under the equity
method in accordance with Accounting Principles Board
Opinion No.18, "The Equity Method of Investments in Common
Stock" ("APB 18"). Accordingly, revenues or losses are
allocated in proportion to ownership interests. The
Company's equity in the loss of NLRC was $176,391 for the
three month period ended June 30, 1996. Intercompany profits
and losses which have not been realized have been
eliminated, in accordance with APB 18.
7
<PAGE> 8
WESTERN WATER COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(CONTINUED)
NOTE 4. RENTAL INCOME, NET
Rental Income, Net is comprised of:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
------- -------
<S> <C> <C>
Rental Income $52,906 $59,741
Rental Expenses 37,303 23,621
------- -------
Net $15,603 $36,120
======= =======
</TABLE>
NOTE 5. SUBSEQUENT EVENT
NLRC has entered into an agreement (the "Agreement") with a
subsidiary of a major corporation (the "Purchaser") that
effectively gives the Purchaser the option to either (i) acquire
the property owned by NLRC on an "as is" basis for approximately
$100 million in cash; or (ii) purchase the entire interest of the
Morgan Stanley affiliated joint venture as a member of NLRC and a
portion of the Company's interest in NLRC. The parties are
negotiating with respect to the economic terms of the relationship
between the Company and the Purchaser, including the interest of
NLRC to be retained by the Company in the event the purchaser
selects the second option. The Purchaser has the absolute right to
terminate the Agreement for any reason whatsoever on or before
August 26, 1996.
The Agreement is the equivalent of an option, exercisable solely
at the discretion of the Purchaser. There can be no assurance that
the Purchaser will exercise its purchase rights or that it will
complete the closing should the option be exercised.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Western Water Company ("the Company") was formed in 1984 as Yuba Silica, Inc.
Until August 9, 1990, the Company was a wholly owned subsidiary of Yuba Natural
Resources, Inc. ("YNR"), a publicly-held company. From the time the Company was
formed in 1984 until May 1989, the Company's sole business was the sorting and
grinding of silica at the Company's silica plant (the "Silica Plant"). In August
1990, the Company, then known as YG Development Company, was spun-off from its
former parent (the "Spin-off"). Subsequently, the Company changed its name from
YG Development Company to Western Water Company and changed its primary business
to (i) acquiring, owning, developing, packaging, transferring, and marketing
water and water rights, and (ii) selling real estate properties acquired in
connection with its water rights acquisition program and otherwise. In addition,
the Company currently provides services to unaffiliated third parties in
identifying, developing, and marketing water assets owned by such third parties.
In October 1994, the Board of Directors determined that it was in the best
interests of the Company to liquidate the Silica Plant assets.
Due to the significant changes in the Company's business, the continuing
improvement of the Company's earnings potential and a change in direction of the
intended method of disposing of the discontinued silica operation, the Company
determined that it was appropriate to effect a quasi-reorganization. The
Company's Board of Directors authorized management to effect a
quasi-reorganization effective October 1, 1994, which reorganization was
ratified by the Company's stockholders in March 1995.
In a quasi-reorganization, assets and liabilities are restated to current values
as of the date of the reorganization. The amount of increases, however, are
limited to the decreases in other assets. In this regard, effective October 1,
1994 the Company recognized a write down in the value of the Silica Plant of
$1,830,914. This write down was offset by a corresponding write up of a like
amount which was allocated proportionately, based on the relative excess of fair
market value of each asset over historic book basis to real estate held for
resale of $454,604, water rights held for sale of $1,038,268, and water sale
fees of $338,042. Further, the accumulated deficit of $14,405,252, most of which
was due to the Company's prior and now discontinued operations, was eliminated
by a corresponding decrease in the Company's additional paid-in capital.
Retained earnings in the future will be dated to reflect only the results of
operations subsequent to October 1, 1994.
9
<PAGE> 10
RESULTS OF OPERATIONS
Significant consolidated results are summarized.
CONSOLIDATED
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
--------- -----------
<S> <C> <C>
Income (Loss) From Continuing Operations $(975,000) $ 976,000
Income Taxes 2,000 390,000
--------- -----------
Net Income (Loss) Continuing Operations (977,000) 586,000
Net Loss Discontinued Operations (17,000) (6,000)
--------- -----------
Consolidated Income (Loss) $(994,000) $ 580,000
========= ===========
Net Income (Loss) Per Share $ (.12) $ .07
Revenues $ 65,000 $ 2,268,000
</TABLE>
The Company reports its continuing operations in two segments, water rights and
real estate. As a result, the basis of each property that is acquired by the
Company is allocated to real estate and water rights based on the relative fair
market values of the components at the time of acquisition, and development
costs are allocated to properties whenever possible. Otherwise they are
allocated based on the relative fair value of the properties. Due to the limited
number of comparable water sales in the Cherry Creek Basin, the Company has
relied on periodic evaluations prepared by independent water engineers to
determine the relative fair values and market value of the water rights.
Accordingly, as properties or water rights are sold, the allocated portion of
the basis is included in costs of revenues.
In the fiscal year ended March 31, 1996 ("Fiscal 1996"), the Company effected a
two-for-one stock split in the form of a 100% stock dividend (the "Stock
Dividend"). Accordingly, the weighted average common shares outstanding and
per-share information for the prior periods has been restated to reflect the
effects of the Stock Dividend.
The $975,000 loss for the three month period ended June 30, 1996 is due
primarily to the $2,203,000 decrease in revenues compared to the three month
period ended June 30, 1995. The decrease in revenues is due to the lack of sales
of the Company's real estate assets and due to the lack of revenues from the
Company's water assets. These factors are discussed separately below.
10
<PAGE> 11
WATER RIGHTS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
------- -------
<S> <C> <C>
Revenues $65,000 $35,000
Cost of Revenues 14,000 12,000
------- -------
Operating Income before Corporate Expenses $51,000 $23,000
======= =======
</TABLE>
Water rights revenues in the three month periods ended June 30, 1996 and 1995,
consisted primarily of payments under the Cucamonga Water Fee Agreement under
which the Company receives payments based on sales of water made by a third
party to the Cucamonga County Water District (San Bernadino County, California).
During the three month period ended June 30, 1995, the Company received 3.252%
of such water sales revenues. The Company has increased its interest to 3.7398%.
The higher water revenues during the period ended June 30, 1996, in part,
reflect the Company's increased interest. The costs of revenues in each period
consist of amortization of the Cucamonga Water Fee Agreement.
The Company is continuing its efforts to complete the development of its various
water assets, and is establishing other potential sources of water revenues,
including a water transfer program. The Company is considering several water
transfer opportunities in California whereby water from Northern California can
be purchased by the Company, delivered to, and resold in Southern California. In
connection with its water transfer activities, in June 1996 the Company entered
into an agreement with the Placer County Water Agency in Northern California to
purchase up to 40,000 acre feet of water for a price of $50 per acre foot. The
purchase is contingent upon, among other things, the Company obtaining various
governmental approvals. In July 1996, the Company also entered into an agreement
with the Orange County Water District in Southern California to sell up to
20,000 acre feet of the Placer County water to the water district at a price of
$250 per acre foot. The sale is also contingent upon the Company receiving
approval of this transfer from the State Water Resources Control Board and upon
the Company arranging for the transport of such water. The Company is required
to pay all transportation costs related to the proposed water transfer. Although
the Company expects that it will obtain all necessary approvals to consummate
the foregoing purchase and sale of water, numerous regulatory approvals need to
be obtained, the receipt of which is uncertain. In August 1996, the Company
entered into a Memorandum of Understanding with the City of Pasadena to
determine the feasibility of the formation of a public private partnership for
the joint development of a water bank, water storage, and water marketing
program. If such a partnership is determined to be feasible it would enhance the
Company's future water transfer activities. With respect to its other on-going
water related activities, the Company anticipates that future water revenues
will primarily be recognized at such time as all necessary water rights
development and marketing plans have been successfully implemented. The Company
cannot estimate if and when such future water revenues will be generated. To
date, the Company has not derived significant revenues from its water
development and marketing programs, and, other than the forgoing Cucamonga Water
Fee Agreement revenues, no such revenues were derived during either the current
or the 1995 three month periods.
11
<PAGE> 12
REAL ESTATE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
---- ----------
<S> <C> <C>
Revenues - $2,233,000
Cost of Revenues - 802,000
---- ----------
Operating Income before Corporate Expenses - $1,431,000
==== ==========
</TABLE>
Until some of the Company's water development activities are completed, the
Company's principal source of revenues is expected to be revenues generated from
the disposition of real estate that the Company acquired in connection with its
acquisition of water assets. The real estate assets to be sold are not needed
for the Company's water development program. In connection with its proposed
sale of such properties, the Company has completed the subdivision of, and is
currently marketing, 245 acres of the approximately 1900 acres it will be
developing in the Cherry Creek basin, Colorado. The Company is also attempting
to sell certain other California real estate assets. However, no sales of any of
the Company's properties were consummated during the fiscal quarter ended June
30, 1996, and any sales in the future are likely to occur intermittently.
Real estate revenues in the three months ended June 30, 1995, were comprised of
$1,469,000 from the transfer of 257 acres in the Cherry Creek basin in exchange
for certain water rights, and $764,000 derived from the sale of a 315 acre
portion of the Company's California rice farms and ranches.
Costs of real estate revenues include the allocated purchase price of the
properties sold, directly related development costs, sales commissions and other
sales costs.
GENERAL & ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
---------- ----------
<S> <C> <C>
General and Administrative Expense $ 578,000 $ 569,000
</TABLE>
General and Administrative expenses for the three months ended June 30, 1996
rose slightly from the three months ended June 30, 1995. Salaries and related
expenses increased due to the addition of two employees, whereas, legal expenses
decreased due to the resolution of a lawsuit in Fiscal 1996. During the current
three month period, the Company had amortization costs related to the sale of
the 9% Convertible Subordinated Debentures (the "Debentures"), that were issued
in September, 1995, which amortization amounted to $20,000 for the three month
period. No such amortization expenses were incurred during the comparable
quarter in 1995.
12
<PAGE> 13
OTHER NON-SEGMENT INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1996 1995
--------- --------
<S> <C> <C>
Interest Income $ 85,000 $ 92,000
Interest Expense (361,000) (38,000)
Rental Income (Expense), Net 16,000 36,000
Equity in Loss of Limited Liability Company (176,000) --
</TABLE>
Interest income is comprised of interest earned on the Company's cash reserves
and investments and interest earned on the secured promissory notes the Company
received in connection with the properties that it has resold. The secured notes
bear interest at rates between 7% and 10% per annum. During Fiscal 1996, the
Company sold or discounted secured promissory notes with a principal amount of
$1,267,000 from its promissory notes portfolio which resulted in lower interest
income in the current three month period as compared to the prior year's period.
At June 30, 1996, the outstanding balance on notes receivable was $2,026,000,
compared to $4,404,000 at June 30, 1995. These notes will continue to generate
interest income in future periods.
Interest expense increased significantly in the current year three month period
due to interest expenses related to the $15,000,000 Debentures. Interest of
$55,000 and $57,000 on debt incurred in connection with properties being
developed for resale was capitalized during the three months ended June 30, 1996
and 1995, respectively.
Rental income and expenses are primarily related to the Company's California
rice farm and ranch. The Company also receives miscellaneous rents on certain of
the Cherry Creek, Colorado properties.
The Company is accounting for its investment in Nevada Land and Resource Company
(the"Nevada LLC") under the equity method of accounting and accordingly income
or losses are allocated according to the ownership interests. For the three
months ended June 30, 1996 the Company's portion of the Nevada LLC's loss was
$176,000.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased by $708,000 during the three month
period ended June 30, 1996 due to lower revenues. As a result, the Company's
current ratio at June 30, 1996, was 2.6 to 1, compared to 3.6 to 1 on March 31,
1996.
The Company believes that its existing capital resources will be sufficient to
fund the Company's foreseeable working capital needs in excess of revenues for a
period of at least one year from the date of this report. The Company plans to
meet its commitments thereafter from revenues derived from water,
13
<PAGE> 14
water rights transactions, sales of properties or by refinancing or selling the
properties securing its long-term debt.
OPERATING ACTIVITIES
During the current three month period, the Company had negative cash flow from
operations of $520,000. In addition to operating expenses, the Company used cash
reserves of $358,000 for a net increase in assets held for sale. The cash
outflow was partially offset by cash of $560,000 that was received from payoffs
on promissory notes receivable. Other operating activities generated cash of
approximately $272,000.
Although there were no real estate sales in the current three month period, the
Company intends to continue sales of portions of its real property located in
the Cherry Creek basin and its rice farm and ranch. The Company expects,
however, that its operating revenues will continue to be highly volatile.
Continued revenues from disposition of real estate will be dependent on the
Company's ability to dispose of real estate parcels on acceptable terms, as to
which there can be no assurance. Revenues from sale of water or water rights
will likewise be dependent on individually negotiated transactions. Revenues
from leasing the Company's three rice farms, from the Cucamonga Water Fee
Agreement, and from principal and interest payments received on promissory notes
held by the Company will be more predictable, but will be insufficient by
themselves to cover the Company's general and administrative expenses and the
Company's interest obligations under the Debentures. Accordingly, until the
Company can increase its on-going revenues from water sales of its own water
rights, or acting as an agent for others, the Company's liquidity will be
largely dependent upon its ability to sell real estate.
INVESTING AND FINANCING ACTIVITIES
The Company is committed to certain material expenditures over the next several
years, including the following:
- Scheduled payments of principal and interest on existing
outstanding indebtedness, other than the Debentures, for the
remainder of the fiscal year ending March 31, 1997, and fiscal
years ending March 31, 1998, 1999, 2000, and 2001 are
approximately $374,000, $447,000, $446,000, $1,115,000, and
$302,000, respectively. In addition, balloon payments of
approximately $1,664,000 and $135,000 are due in the fiscal years
ending March 31, 2002 and 2003, respectively.
- The operating agreement of the Nevada LLC provides for additional
cash contributions if the executive committee, comprised of an
equal number of representatives from Morgan Stanley and the
Company, agree that a shortfall exists in the funds available to
cover necessary expenses. In lieu of cash contributions, the
executive committee may elect to obtain such funds thorough
borrowing. The Company, however, believes that the Nevada LLC has
sufficient working capital reserves to meet its requirements for
at least one year and that the Company will not be required to
provide any additional funds during the next twelve months.
14
<PAGE> 15
- The Company is required to make semiannual interest payments of
$675,000 on the $15,000,000 principal amount of Debentures.
ITEM 5. OTHER INFORMATION
The Company currently owns a 35.3% interest in the Nevada Land and
Resource Company LLC, a Delaware limited liability company (the "
Nevada LLC"). The other member of the Nevada LLC is a joint
venture comprised of Morgan Stanley Real Estate Fund II, L.P. and
two other affiliates of that real estate partnership. The Nevada
LLC owns approximately 1.4 million acres of land and related water
interests located in the State of Nevada (the "Nevada Property").
The Nevada LLC has entered into an agreement, as amended to date
(the "Agreement"), with Dynamic Holdings Corporation (the
"Purchaser") that effectively gives the Purchaser an option to
either (i) acquire the Nevada Property on an "as is" basis for
approximately $100 million in cash; or (ii)purchase the entire
interest of Morgan Stanley affiliated joint venture as a member of
the Nevada LLC and a potion of the Company's interest in the
Nevada LLC. The parties are still negotiating with respect to the
economic terms of the relationship between the Company and the
Purchaser, including the interest of the Nevada LLC to be retained
by the Company, in the event the Purchaser elects the second
option. The Agreement requires the purchaser to deposit $3 million
(the "Earnest Money") in escrow with an institutional escrow
holder, of which $1 million has already been deposited and
$100,000 has already been released to the Nevada LLC. However, the
Purchaser has the absolute right to terminate the Agreement for
any reason whatsoever on or before August 26, 1996. If the
purchaser chooses to terminate the Agreement on a timely basis,
all Earnest Money then held by the escrow holder will be returned
to the Purchaser. The Agreement further provides that if the
Purchaser makes the Earnest Money deposit but the closing does not
occur as a result of the Purchaser's default, then the sole remedy
of the Nevada LLC shall be to recover the Earnest Money deposit
then still held by the escrow agent.
There are a number of significant open business issues which are
the subject of intense negotiations between the parties. The
Agreement is the equivalent of an option, exercisable solely at
the discretion of the Purchaser. Because the Agreement is binding
on the Nevada LLC, the Company is reporting the existence of the
Agreement despite the uncertainty that this transaction will be
completed. There can be no assurance that the Purchaser will make
the remaining Earnest Money deposit or that if such Earnest Money
deposit is made, the Purchaser will complete the closing.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this report;
27- Financial Data Schedule
(b) None
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 10-Q to be signed on its
behalf by the undersigned thereunto duly authorized.
WESTERN WATER COMPANY
Date: August 14 , 1996 By: /s/Peter L. Jensen
------------------
Peter L. Jensen
President
Date: August 14, 1996 By: /s/Marilyn Buseman Dreyer
-------------------------
Marilyn Buseman Dreyer
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 295
<SECURITIES> 2315
<RECEIVABLES> 315
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3451
<PP&E> 51
<DEPRECIATION> 0
<TOTAL-ASSETS> 39664
<CURRENT-LIABILITIES> 1313
<BONDS> 15000
0
0
<COMMON> 8
<OTHER-SE> 20042
<TOTAL-LIABILITY-AND-EQUITY> 39664
<SALES> 0
<TOTAL-REVENUES> 65
<CGS> 0
<TOTAL-COSTS> 15
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 361
<INCOME-PRETAX> (975)
<INCOME-TAX> 2
<INCOME-CONTINUING> (977)
<DISCONTINUED> (16)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (994)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> 0
</TABLE>
