<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
----------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
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)
(858) 535-9282
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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, $.001 PAR VALUE RIGHT TO PURCHASE SERIES E JUNIOR PARTICIPATING
PREFERRED STOCK, $.001 PAR VALUE
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
------- -------
As of February 11, 2000, there were 7,894,012 shares of registrant's common
stock outstanding.
<PAGE> 2
WESTERN WATER COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Item Page
- ---- ----
<S> <C>
PART I - FINANCIAL INFORMATION
1 Financial statements:
Consolidated balance sheets-
December 31 (unaudited) and March 31, 1999 3
Unaudited consolidated statements of operations and
comprehensive income-
Three months ended December 31, 1999 and 1998 4
Unaudited consolidated statements of operations and
comprehensive income-
Nine months ended December 31, 1999 and 1998 5
Unaudited consolidated statements of cash flows-
Nine months ended December 31, 1999 and 1998 6
Notes to consolidated financial statements 7
2 Management's discussion and analysis of financial
condition and results of operations 12
3 Quantitative and qualitative market risk disclosures 20
PART II - OTHER INFORMATION
6 Exhibits and Reports on Form 8-K 20
Signatures 21
</TABLE>
2
<PAGE> 3
WESTERN WATER COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31 and March 31, 1999
<TABLE>
<CAPTION>
1999
-----------------------------
ASSETS December 31, March 31,
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,721,194 $ 739,126
Cash and cash equivalents-restricted (Note 2) 1,472,201 --
Investment in available-for-sale securities -- 14,061,410
Investment in available-for-sale securities-restricted (Note 2) 3,151,483 --
Current portion of notes receivable 211,646 216,912
Current portion of accrued income receivable, net of discount (Note 7) 417,886 46,082
Other current assets 329,755 472,753
------------ ------------
Total Current Assets 8,304,165 15,536,283
Accrued income receivable, net of discount, less current portion (Note 7) 325,028 --
Notes receivable, less current portion 540,996 1,169,491
Land held for sale 5,422,604 4,505,227
Water rights 19,200,980 18,716,519
Prepaid leasing costs, net of accumulated amortization 3,235,539 3,585,759
Other water assets, net of accumulated amortization (Note 3) 3,029,006 3,276,872
Deferred debt costs, net of accumulated amortization 368,837 598,966
Property and equipment, net of accumulated depreciation 181,513 189,659
Other assets 101,878 52,084
------------ ------------
$ 40,710,546 $ 47,630,860
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 84,966 $ 92,108
Accrued expenses and other liabilities (Note 4) 902,280 490,095
Accrued interest 267,798 91,988
Current maturities of long-term debt 656,983 1,245,721
------------ ------------
Total Current Liabilities 1,912,027 1,919,912
Long-term debt, less current maturities (Note 5) 3,230,366 2,972,349
9% Convertible subordinated debentures (Note 9) 9,740,000 14,740,000
Deferred gain on sale 13,333 43,333
------------ ------------
Total Liabilities 14,895,726 19,675,594
Series C convertible redeemable preferred stock, $1,000 stated value, 100,000
shares authorized; 10,165 shares issued and outstanding (aggregate liquidation
preference of $10,165,000) at December 31 and March 31, 1999, respectively 9,807,464 9,780,867
Series D convertible redeemable preferred stock, $1,000 stated value, 25,000
shares authorized; 10,000 shares issued and outstanding (aggregate liquidation
preference of $10,000,000) at December 31 and March 31, 1999, respectively 10,000,000 10,000,000
Stockholders' equity:
Common stock, $0.001 par value, 20,000,000 shares authorized; 8,239,816
shares issued at December 31 and March 31, 1999, respectively 8,240 8,240
Additional paid-in capital 24,423,470 24,347,502
Accumulated deficit ($14,405,252 of accumulated deficit eliminated in
quasi-reorganization of October 1, 1994) (17,049,479) (14,922,313)
Treasury stock, at cost, 345,804 and 292,200 shares at December 31,
and March 31, 1999, respectively (Note 6) (1,374,875) (1,259,030)
------------ ------------
Total Stockholders' Equity 6,007,356 8,174,399
------------ ------------
$ 40,710,546 $ 47,630,860
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
WESTERN WATER COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
Three months ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenue:
Water $ 1,580,573 $ 758,847
Real estate -- --
----------- -----------
1,580,573 758,847
----------- -----------
Costs of Revenue:
Water 981,814 728,768
Real estate -- --
----------- -----------
981,814 728,768
----------- -----------
Gross Profit 598,759 30,079
General and Administrative Expenses (Note 4) 1,775,019 1,312,223
----------- -----------
Operating Income (Loss) (1,176,260) (1,282,144)
----------- -----------
Other Income (Expenses):
Interest income 119,008 216,120
Interest expense (274,083) (398,119)
Gain on sale of investment in limited liability company 10,000 10,000
Other (5,731) 16,100
----------- -----------
(150,806) (155,899)
----------- -----------
Income (Loss) before Income Taxes (1,327,066) (1,438,043)
Income Taxes (Note 8) -- --
----------- -----------
Net Income (Loss) (1,327,066) (1,438,043)
Accretion of preferred stock to redemption value (9,041) (8,355)
Preferred stock dividends (187,500) (104,166)
----------- -----------
Net Income (Loss) Applicable to Common Stockholders (1,523,607) (1,550,564)
Other comprehensive income (loss)-
Unrealized holding gains (losses) arising during period -- (67,341)
----------- -----------
Comprehensive Income (Loss) $(1,523,607) $(1,617,905)
=========== ===========
Earnings per share-Basic and Diluted:
Net income (loss) applicable to common stockholders $ (0.19) $ (0.19)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
WESTERN WATER COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
Nine months ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Revenue:
Water $ 2,429,158 $ 904,208
Real estate -- 345,615
----------- -----------
2,429,158 1,249,823
----------- -----------
Costs of Revenue:
Water 1,471,331 759,158
Real estate -- 184,000
----------- -----------
1,471,331 943,158
----------- -----------
Gross Profit 957,827 306,665
General and Administrative Expenses (Note 4) 5,100,048 3,654,986
----------- -----------
Operating Income (Loss) (4,142,221) (3,348,321)
----------- -----------
Other Income (Expenses):
Interest income 501,602 657,126
Interest expense (976,716) (1,073,119)
Gain on sale of investment in limited liability company 30,000 30,000
Other (68,860) 336,100
----------- -----------
(513,974) (49,893)
----------- -----------
Income (Loss) before Income Taxes (4,656,195) (3,398,214)
Income Taxes (Note 8) 3,200 2,400
----------- -----------
Income (loss) before extraordinary item (4,659,395) (3,400,614)
Extraordinary income on early extinguishment of debt (Note 9) 3,489,803 --
----------- -----------
Net Income (Loss) (1,169,592) (3,400,614)
Accretion of preferred stock to redemption value (26,597) (24,578)
Preferred stock dividends (930,977) (447,314)
----------- -----------
Net Income (Loss) Applicable to Common Stockholders (2,127,166) (3,872,506)
Other comprehensive income (loss)-
Unrealized holding gains (losses) arising during period -- (492,413)
----------- -----------
Comprehensive Income (Loss) $(2,127,166) $(4,364,919)
=========== ===========
Earnings per share-Basic and Diluted:
Income (loss) applicable to common stockholders $ (0.71) $ (0.47)
excluding extraordinary item
Extraordinary item 0.44 --
----------- -----------
Net income (loss) $ (0.27) $ (0.47)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
WESTERN WATER COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine months ended December 31, 1999 and 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,169,592) $ (3,400,614)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 824,413 365,784
Compensation expense on vesting of unexercised
compensatory stock options 75,963 96,646
Gain on sale of investment in limited liability company (30,000) (30,000)
Asset impairment charge 204,298 --
Loss on disposition of property and equipment 2,544 1,982
Extraordinary income on early extinguishment of debt (3,489,803) --
Allowance for water project costs 808,791 429,282
Discount on accrued income receivable 75,880 --
Changes in assets and liabilities:
(Increase) decrease in:
Accrued income receivable (772,712) 332
Other current assets 121,673 (546,253)
Land held for sale (594,353) (541,205)
Other assets (49,794) (159,882)
Decrease in water rights 737,055 --
Increase (decrease) in:
Accounts payable (7,142) 90,224
Accrued expenses and other liabilities 412,185 (427,454)
Accrued interest 333,618 306,269
------------ ------------
Net cash used in operating activities (2,516,976) (3,814,889)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Deposits for purchase of land and water rights -- (140,500)
Principal payments received on notes receivable 290,062 201,888
Purchase of property and equipment (38,277) (53,034)
Purchase of available-for-sale securities (1,029,552) (10,604,022)
Sales of available-for-sale securities 11,939,479 11,984,720
Additions to water rights (393,792) (982,891)
Purchase of water rights (1,325,000) (3,215,880)
Additions to other water assets (124,484) (6,932)
Prepayment of leasing costs (511,653) (3,754,400)
------------ ------------
Net cash provided by (used in) investing activities 8,806,783 (6,571,051)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 800,000 3,560,000
Payment of debt issue costs -- (84,900)
Preferred stock dividends (930,977) (104,166)
Purchase of common stock (115,840) (565,726)
Proceeds from issuance of common stock -- 27,000
Proceeds from issuance of redeemable preferred stock -- 10,000,000
Purchase of convertible subordinated debentures (1,500,000) --
Principal payments on long-term debt (1,088,721) (281,538)
Cash restricted to fund water development costs (1,472,201) --
------------ ------------
Net cash (used in) provided by financing activities (4,307,739) 12,550,670
------------ ------------
Net increase in cash and cash equivalents 1,982,068 2,164,730
Cash and cash equivalents, beginning of period 739,126 304,988
------------ ------------
Cash and cash equivalents, end of period $ 2,721,194 $ 2,469,718
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE> 7
WESTERN WATER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES:
Basis of Presentation
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which include only normal
recurring adjustments) necessary to present fairly the consolidated
balance sheet of Western Water Company and Subsidiaries as of December
31, 1999, the consolidated statements of operations and comprehensive
income for the three and nine months ended December 31, 1999 and 1998
and the consolidated statements of cash flows for the nine months ended
December 31, 1999 and 1998. The consolidated financial statements of
Western Water Company include Western Water Service Company and YG
Procyon Corporation, the Company's wholly-owned subsidiaries, YG Rice
Farms, L.P., a limited partnership directly and indirectly wholly-owned
and controlled by the Company, and Western Agua, L.P., a limited
partnership in which the Company owns a 70% interest ("the Company").
The accounting policies followed by the Company are set forth in Note 1
to the Company's consolidated financial statements as stated in its
annual report on Form 10-K for the fiscal year ended March 31, 1999.
Income (loss) per share
The weighted average shares used for basic and diluted net income per
share were 7,895,213 and 7,920,286 shares for the three and nine months
ended December 31, 1999, and 8,214,849 and 8,229,398 shares for the
three and nine months ended December 31, 1998.
Stock options to purchase 1,932,733 and 1,663,208 shares of common
stock at exercise prices ranging from $2.00-$21.00 and $5.44-$21.00 per
share for the three and nine months ended December 31, 1999 and 1998,
respectively, were not included in the computation of diluted net
income per share as their effect would have been antidilutive.
Warrants to purchase 83,000 shares of common stock expired in October
1999, and therefore were not included in the computation of diluted net
income per share for the three months and nine months ended December
31, 1999. Warrants to purchase 20,000 and 98,000 shares of common stock
at $5.75 and $17.50 per share were not included in the computation of
diluted net income per share for the three and nine months ended
December 31, 1998, respectively, as their effect would have been
antidilutive.
Debentures convertible into 614,123 and 945,763 shares of common stock
at a conversion price of $15.86 per share were not included in the
computation of diluted net income per share for the three and nine
months ended December 31, 1999 and 1998, respectively, as their effect
would have been antidilutive.
Series C redeemable preferred stock convertible into 611,593 and
569,551 shares of common stock at a conversion price of $16.62 per
share was not included in the computation of diluted net income per
share for the three and nine months ended December 31, 1999 and 1998,
respectively, as its effect would have been antidilutive.
7
<PAGE> 8
WESTERN WATER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES: (CONTINUED)
Income (loss) per share
Series D redeemable preferred stock convertible into 1,112,347 shares
of common stock at a conversion price of $8.99 per share was not
included in the computation of diluted net income per share for the
three and nine months ended December 31, 1999 and 1998, as its effect
would have been antidilutive.
Reclassifications
Certain reclassifications of prior period amounts have been made in
order to conform to the current year presentation.
NOTE 2. RESTRICTED CASH:
Under the Company's Strategic Relationship Agreement (the "Agreement")
with Sociedad General de Aguas de Barcelona, S. A. ("Agbar"), the
Company can only use the proceeds from the sale of Series D Preferred
Stock to fund development costs of specific water projects and related
capital costs, including Series D Preferred Stock dividends, that were
identified and agreed upon by Agbar. As of December 31, 1999, a total
of $5,376,316 had been expended on such project development and capital
costs. Prior to the quarter ended December 31, 1999, management of the
Company had a reasonable expectation that Agbar would waive or modify
the restrictions under the Agreement. During the quarter ended December
31, 1999, management initiated discussions with Agbar seeking such a
waiver or modification of these restrictions. Pending a resolution of
this issue, management has decided to classify the remaining proceeds
of the Series D Preferred Stock as restricted. Thus, the Company treats
as restricted the remaining proceeds from the Series D Preferred Stock
amounting to $4,623,684. Investment in available-for-sale securities of
$3,151,483 and cash and cash equivalents of $1,430,201 totaling
$4,623,684 are restricted.
NOTE 3. ASSET IMPAIRMENT:
Other water assets include the Company's investment in shares of
certain Southern California mutual water companies ("Investment"). The
Investment is carried at cost plus the Company's proportionate share of
capital assessments by the mutual water companies. Pursuant to SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of," the Company evaluated the
recoverability of its Investment and determined that its future
undiscounted cash flows (without interest) was below its carrying
value. Accordingly, during the three months ended December 31, 1999,
the Company adjusted the carrying value of the Investment to its
estimated fair value, resulting in a non-cash impairment loss of
$204,298.
NOTE 4. CONSOLIDATION CHARGES:
During the quarter ended December 31, 1999, the Company decided to
consolidate its corporate headquarters into its Point Richmond,
California office and to close its existing San Diego office. The
consolidation, which is expected to be completed during the quarter
ending June 30, 2000, will result in the reduction of five
administrative
8
<PAGE> 9
WESTERN WATER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 4. CONSOLIDATION CHARGES: (CONTINUED)
personnel from its San Diego office, of which four employees remain as
of December 31, 1999, and the early termination of (or other provision
for) its office and equipment leases in San Diego. As of December 31,
1999, total severance costs and payroll taxes related to the
termination of the five employees amounting to $69,611 were charged to
general and administrative expenses, of which $60,548 was accrued. In
addition, exit costs of $96,339 comprised of lease termination and
other costs, were also charged to general and administrative expenses.
Total accrued consolidation costs amounting to $156,887 were included
on the balance sheet as of December 31, 1999 as "accrued expenses and
other liabilities." There were no other adjustments to the liability
account as of December 31, 1999.
The consolidation is anticipated to result in the elimination of two
administrative positions and the transfer of three positions to Point
Richmond.
In addition, the Company identified certain fixed assets that will be
sold upon the closing of its existing San Diego office. Accordingly,
the Company has revised the estimated useful lives of these fixed
assets which will be used until the closing of its existing San Diego
office, and has recorded an additional depreciation charge amounting to
$6,253 for the quarter ended December 31, 1999.
NOTE 5. LONG-TERM DEBT:
During June 1999, the Company acquired 240 acres of land and
associated water rights on property located in Inyo County,
California. The purchase price of $1,004,768 was allocated to water
rights ($645,000) and real estate held for sale ($359,768) based on
the relative fair values of the assets. The Company paid $204,768 in
cash and $800,000 was financed with an 8% secured promissory note.
Interest only payments are payable semi-annually beginning December
1999 until February 28, 2001, at which time the entire unpaid
principal balance together with unpaid interest is due.
NOTE 6. TREASURY STOCK PURCHASE PROGRAM:
In November 1998, the Company's Board of Directors authorized the
repurchase of up to 500,000 shares of the Company's common stock in the
open market. For the nine months ended December 31, 1999, the Company
repurchased 49,000 shares of common stock at a cost of $115,840. Since
November 1998, the Company has repurchased 341,200 shares of common
stock at a cost of $1,374,870.
NOTE 7. DISCOUNT ON ACCRUED INCOME RECEIVABLE:
The Company has recorded a discount on accrued income receivable of
$75,880 to account for the interest free period under one of its water
sales contracts. Beginning January 1, 2000, the Company will recognize
interest income from the accretion of the discount of $50,908 and
9
<PAGE> 10
WESTERN WATER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
NOTE 7. DISCOUNT ON ACCRUED INCOME RECEIVABLE: (CONTINUED)
$24,972 over the twelve months ended December 31, 2000 and 2001,
respectively, or sooner in the event of an earlier payment of the
receivable.
NOTE 8. INCOME TAXES:
Management does not expect there will be taxable income for the fiscal
year ended March 31, 2000. Accordingly, the Company has not recorded a
federal income tax liability and has recorded the minimum state income
tax provision for the three and nine months ended December 31, 1999.
NOTE 9. EXTRAORDINARY INCOME:
On August 6, 1999, the Company repurchased $5,000,000 of its
outstanding 9% Debentures, plus accrued interest of $157,808, for
$1,500,000. After reducing related deferred debt costs of $272,956, net
of accumulated amortization of $104,951, the Company recognized a
$3,489,803 extraordinary gain on the early extinguishment of debt.
NOTE 10. SEGMENT INFORMATION:
The Company has two operating segments: a) the acquisition and
development of water rights and the sale or lease of water, and b) the
sale of real estate interests acquired in connection with the
acquisition of water rights. Information concerning the operating
segments for the three and nine months ended December 31, 1999 and 1998
is presented below:
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Segment revenue:
Water $ 1,580,573 $ 758,847 $ 2,429,158 $ 904,208
Real estate -- -- -- 345,615
----------- ----------- ----------- -----------
$ 1,580,573 $ 758,847 $ 2,429,158 $ 1,249,823
=========== =========== =========== ===========
Net income (loss):
Segment:
Water $ 598,759 $ 30,079 $ 1,472,331 $ 145,050
Real estate -- -- -- 161,615
Non-segment (1,925,825) (1,468,122) (2,641,923) (3,707,279)
----------- ----------- ----------- -----------
$(1,327,066) $(1,438,043) $(1,169,592) $(3,400,614)
=========== =========== =========== ===========
Depreciation and amortization expense:
Segment-Water $ 245,000 $ 235,460 $ 718,548 $ 264,622
Non-segment 32,094 48,017 105,865 101,162
----------- ----------- ----------- -----------
$ 277,094 $ 283,477 $ 824,413 $ 365,784
=========== =========== =========== ===========
</TABLE>
10
<PAGE> 11
WESTERN WATER COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
The Company recognized revenue of $45,000 and $135,000 under the
Cucamonga Fee Agreement for the three and nine months ended December
31, 1999 and 1998, respectively. For the three and nine months ended
December 31, 1999, the Company recognized revenue of $320,665 and
$961,995 from the City of Inglewood. For the three and nine months
ended December 31, 1998, the Company recognized revenue of $320,665
from the City of Inglewood. No other recurring customer accounted for
more than 10% of the Company's revenue.
NOTE 11. SUPPLEMENTAL CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
Nine months ended
December 31,
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 705,243 $ 830,056
Interest capitalized during the period 62,145 78,508
Cash paid during the period for income taxes 3,200 2,400
Supplemental disclosure of non-cash investing and financing
activities:
Recognition of gain on sale of investment in limited
liability company (30,000) (30,000)
Preferred stock issued in lieu of cash dividends -- 343,148
Accretion of preferred stock to redemption value 26,597 24,578
Unrealized loss on available-for-sale securities -- (492,413)
Disposition of property and equipment
and related accumulated depreciation:
Property and equipment (2,678) (2,477)
Accumulated depreciation 134 495
Forgiveness of debt resulting from sale of land
held for sale:
Long-term debt (42,000) --
Land held for resale 42,000 --
Forgiveness of note receivable and related accrued
interest from purchase of land held for sale:
Land held for sale (365,024) --
Note receivable 343,699 --
Other current assets 21,325 --
Write off of other water assets, prepaid leasing costs
and related allowance for water project costs:
Other water assets 248,624 --
Prepaid leasing costs 21,514 --
Allowance for water project costs (270,138) --
</TABLE>
11
<PAGE> 12
WESTERN WATER COMPANY AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS
In addition to historical information contained herein, this Quarterly Report
contains forward-looking statements. The forward-looking statements contained
herein are subject to certain risks and uncertainties that could cause actual
results to differ materially from those reflected in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations". Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis only as of the date hereof based on information
currently available to management. Western Water Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. Readers should carefully
review the risk factors described in other documents the Company files from time
to time with the Securities and Exchange Commission, including the Annual Report
on Form 10-K for the year ended March 31, 1999, the Quarterly Reports on Form
10-Q filed by the Company in 1999, any Current Reports on Form 8-K filed by the
Company and any Registration Statements on Form S-3 filed by the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Western Water Company (the "Company") identifies, acquires, develops,
sells and leases water and water rights in the western United States. For the
last few years, the Company has been developing this business through the
acquisition of water rights and other interests in water, the purchase of real
estate for the water rights associated with such real estate, and recently, the
sale or lease of water. The Company, directly and indirectly, owns a diverse
portfolio of water rights, as well as real estate, in California and Colorado.
The Company's current principal activity is the acquisition and development of
water rights and the sale or lease of its water. Although the Company has
increased revenue derived from water sales, the Company has historically derived
most of its revenue from the sale of real estate that it acquired for the
associated water rights.
Capital structure changes
On September 22, 1995, the Company completed the private placement of
$15,000,000 of its 9% Convertible Subordinated Debentures Due 2005 (the
"Debentures"). The Debentures bear interest at 9% per annum payable
semi-annually on September 30 and March 31 of each year, and mature on September
30, 2005. The Debentures are convertible at any time at the option of the holder
into shares of Common Stock at a conversion price of $15.86 per share, subject
to certain anti-dilution adjustments (the "Conversion Price"). On August 6,
1999, the Company repurchased $5,000,000 of the outstanding Debentures. Taking
into account prior repurchases, the amount of Debentures outstanding as of
December 31, 1999 was $9,740,000.
In 1997, the Company issued $9,000,000 of its Series C Preferred Stock.
Each share of Series C Preferred Stock is convertible at any time at the option
of the holder into shares of Common Stock at a conversion price of $16.62 per
share. The holders of the Series C Preferred Stock are entitled to receive,
12
<PAGE> 13
WESTERN WATER COMPANY AND SUBSIDIARIES
when and if declared by the Board of Directors, dividends at the annual rate of
7.25% of the stated value of the Series C Preferred Stock. Such dividends are
currently payable semi-annually in cash.
On October 27, 1998, the Company sold $10,000,000 of its Series D
Convertible Redeemable Preferred Stock ("Series D Preferred Stock") to an
affiliate of Sociedad General de Aguas de Barcelona, S. A. ("Agbar"). Each share
of Series D Preferred Stock has a stated value of $1,000, has a dividend rate of
7.5% of its stated value, and is convertible at any time at the option of the
holder into the number of shares of common stock determined by dividing the
amount of the liquidation preference on the conversion date by the conversion
price of such shares in effect on the conversion date. The conversion price is
$8.99 per share and is subject to adjustment in certain events to prevent
dilution.
In November 1998, the Company's Board of Directors authorized the
repurchase of up to 500,000 shares of the Company's common stock in the open
market. Since November 1998, the Company repurchased 341,200 shares of common
stock at a cost of $1,374,870.
Consolidation of offices
During the quarter ended December 31, 1999, the Company decided to consolidate
its corporate headquarters into its Point Richmond, California office and to
close its existing San Diego office.
RESULTS OF OPERATIONS
The following is a description of the Company's results of operations for the
three and nine months ended December 31, 1999 and 1998.
CONSOLIDATED
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $ 1,581,000 $ 759,000 $ 2,429,000 $ 1,250,000
=========== =========== =========== ===========
Loss before income taxes $(1,327,000) $(1,438,000) $(4,656,000) $(3,399,000)
Income taxes -- -- 3,000 2,000
----------- ----------- ----------- -----------
Loss before extraordinary item (1,327,000) (1,438,000) (4,659,000) (3,401,000)
Extraordinary item on early extinguishment
of debt -- -- 3,490,000 --
----------- ----------- ----------- -----------
Net income (loss) (1,327,000) (1,438,000) (1,169,000) (3,401,000)
Accretion of preferred stock to
redemption value (9,000) (8,000) (27,000) (25,000)
Preferred stock dividends (188,000) (105,000) (931,000) (447,000)
----------- ----------- ----------- -----------
Net income (loss) applicable to
common stockholders $(1,524,000) $(1,551,000) $(2,127,000) $(3,873,000)
=========== =========== =========== ===========
Basic and diluted net income (loss)
applicable to common stockholders $ (.19) $ (.19) $ (.27) $ (.47)
=========== =========== =========== ===========
</TABLE>
13
<PAGE> 14
WESTERN WATER COMPANY AND SUBSIDIARIES
The Company reports its operations in two segments, water rights and real
estate. As a result, upon the purchase of assets that contain both real estate
and water rights, the basis of such assets is allocated to real estate and water
rights based on the relative fair values of the components at the time of
acquisition, and subsequent development costs are allocated to the appropriate
component whenever possible. In some cases, the Company had relied on valuations
prepared by independent water engineers to determine the relative fair values of
the water rights acquired by the Company through its purchases of real estate.
As properties or water rights are sold, the allocated portion of the basis is
included in costs of revenue.
Management does not expect that the Company will generate taxable income for the
fiscal year ending March 31, 2000. Accordingly, the Company has not recorded a
federal income tax liability and has recorded the minimum state income tax
provision for the three and nine months ended December 31, 1999.
WATER RIGHTS
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
----------------------- -----------------------
1999 1998 1999 1998
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Revenue $1,581,000 $759,000 $2,429,000 $904,000
Cost of Revenue 982,000 729,000 1,471,000 759,000
---------- -------- ---------- --------
Gross Profit $ 599,000 $ 30,000 $ 958,000 $145,000
========== ======== ========== ========
</TABLE>
Water revenue for the three and nine months ended December 31, 1999 includes
water sales of $1,295,000 and $1,936,000, water rights leases of $232,000 and
$339,000, and amounts accrued under the Cucamonga Fee Agreement and other of
$54,000 and $154,000, respectively. Water revenue for the three and nine months
ended December 31, 1998 includes water sales of $691,000 and $691,000, water
rights leases of zero and $33,000, and of payments received under the Cucamonga
Fee Agreement and other of $68,000 and $180,000, respectively.
Cost of revenue for the three and nine months ended December 31, 1999 includes
$230,000 and $690,000, respectively, of fees and lease costs, $737,000 of water
sold from the Company's inventory, and amortization of the Cucamonga Water Fee
Agreement. Cost of revenue for the three and nine months ended December 31, 1998
includes $714,000 of fees and lease costs, and the amortization of the Cucamonga
Water Fee Agreement.
The small gross margin (4%) for water transactions in the three months ended
December 31, 1998 was due to the inclusion of a sale to the Santa Margarita
Water District in a pilot program in cooperation with the Metropolitan Water
District of Southern California. Taking into account all costs and expenses
related to the pilot transaction, the Company incurred a net loss of $110,000 on
that transaction, which net loss negatively impacted the gross margin for the
period.
14
<PAGE> 15
WESTERN WATER COMPANY AND SUBSIDIARIES
REAL ESTATE
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
------------------- --------------------
1999 1998 1999 1998
------ ------ ------- --------
<S> <C> <C> <C> <C>
Revenue $ -- $ -- $ -- $346,000
------ ------ ------- --------
Cost of Revenue -- -- -- 184,000
------ ------ ------- --------
Gross Profit $ -- $ -- $ -- $162,000
------ ====== ------- ========
</TABLE>
The Company attempts to dispose of real estate acquired in connection with the
acquisition of water rights, but not needed for water rights development. The
Company retains a substantial portion of its water rights on the properties
sold.
There were no real estate sales for the three months ended December 31, 1999 and
1998.
Real estate revenue for the nine months ended December 31, 1998 resulted from
the sale of 72 acres of Cherry Creek property and from the sale of 20 acres of
property in Glenn County, California. Cost of real estate revenue include the
allocated purchase price of the property sold, directly related development
costs, sales commissions and other sales costs.
GENERAL AND ADMINISTRATIVE EXPENSES
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
--------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
General and Administrative Expenses $ 1,775,000 $1,312,000 $ 5,100,000 $3,655,000
</TABLE>
General and administrative expenses for the three months ended December 31, 1999
increased by $463,000 (35%) from the comparable period ended December 31, 1998,
primarily due to non-recurring charges. The increase was due to an asset
impairment charge ($204,000), consolidation costs related to the closing of its
existing San Diego office ($166,000), increased allowance for water rights
projects under development ($112,000) and increased non-capitalizable consulting
and engineering ($92,000) which increases were offset, in part, by a decrease in
legal costs ($114,000). The consolidation, which is expected to be completed
during the quarter ending June 30, 2000, will result in the net reduction of two
administrative personnel and the early termination of (or other provision for)
its office and equipment leases in San Diego. As of December 31, 1999, total
severance and payroll taxes related to the termination of the five employees in
the San Diego office amounting to $70,000 were charged to general and
administrative expenses, of which $61,000 was accrued. General and
administrative expenses for the nine months ended December 31, 1999 increased by
$1,445,000 (40%) from the comparable period ended December 31, 1998, were due,
in part, to non-recurring charges. The increase was due to increased allowance
for water rights projects under development ($379,000), an increase in
non-capitalizable consulting and engineering expenses ($326,000), severance
costs related to the resignation of one of its officers ($254,000), an asset
impairment charge ($204,000), consolidation costs related to the reductions in
personnel and the closing of its existing San Diego office ($166,000), and
increased travel expenses related to the Company's expanded efforts to develop
its water sales program ($67,000).
15
<PAGE> 16
WESTERN WATER COMPANY AND SUBSIDIARIES
OTHER NON-SEGMENT INFORMATION
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
----------------------- ---------------------------
1999 1998 1999 1998
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income $ 119,000 $ 216,000 $ 502,000 $ 657,000
Interest expense (274,000) (398,000) (977,000) (1,073,000)
Gain on sale of investment in limited
liability company 10,000 10,000 30,000 30,000
Other (6,000) 16,000 (69,000) 336,000
Extraordinary income -- -- 3,490,000 --
</TABLE>
Interest income is comprised of interest earned on the Company's cash and cash
equivalents and investments and interest earned on the secured promissory notes
received by the Company in connection with the properties that it has sold. The
secured notes bear interest at rates between 8% and 9.5% per annum. Interest
income decreased for the three and nine months ended December 31, 1999 from the
comparable periods ended December 31, 1998 due primarily to lower investment
balances.
Interest expense includes $219,000 and $817,000 and $338,000 and $1,013,000 of
interest related to the principal amount of outstanding Debentures for the three
and nine months ended December 31, 1999 and 1998, respectively. Interest expense
for the three and nine months ended December 31, 1999 also includes $55,000 and
$160,000 and $60,000 and $60,000, respectively, of interest related to the
$2,843,000 term loan. Interest of $22,000 and $62,000 and $19,000 and $51,000
was capitalized during the three and nine months ended December 31, 1999 and
1998, respectively, in connection with the development of water rights.
The Company sold its interest in the Nevada Land & Resource Company ("Nevada
LLC") in April 1997. As a result of the sale, the Company deferred gain of
$120,000 relating to estimated future consulting services that are to be
provided in accordance with a consulting agreement related to the Nevada LLC.
The Company realized $10,000 and $30,000 of the deferred gain during the three
and nine months ended December 31, 1999 and 1998, respectively.
Other income/loss for the three and nine months ended December 31, 1999 includes
net rental loss of $12,000 and $124,000 related to the Company's California rice
farm and ranch properties. Other income/loss for the three and nine months ended
December 31, 1998 includes net rental income of $16,000 and net rental loss of
$25,000, respectively. In addition, other income/loss for the nine months ended
December 31, 1998 includes the reversal of $290,637 of severance costs recorded
in the fiscal year ended March 31, 1998 related to the resignation of an
officer. This reversal resulted from the Company selling to two of its former
officers its 40% interest in an option to purchase certain shares of stock of
Integrated Water Technologies, Inc.
On August 6, 1999, the Company repurchased $5,000,000 of its 9% outstanding
Debentures, plus accrued interest of $157,808, for $1,500,000. After reducing
related deferred debt costs of $272,956, net of accumulated amortization of
$104,951, the Company recognized a $3,489,803 extraordinary gain on the early
extinguishment of debt. The repurchase of these Debentures will reduce the
Company's annual interest expense by $450,000.
16
<PAGE> 17
WESTERN WATER COMPANY AND SUBSIDIARIES
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1999 the Company classified $4,623,684 of its assets as
restricted. Considering this adjustment, the Company had working capital and a
current ratio of $1,768,454 and .92 to l, as compared to $13,616,371 and 8.09 to
1, respectively, at March 31, 1999.
Operating Activities
For the nine months ended December 31, 1999 the Company recognized revenues of
$2,429,158 and a gross profit of $957,827, primarily from water sales and the
lease of water rights. However, the gross profit was offset by $5,100,048 of
general and administrative expenses consisting of payroll and fringes
($1,457,535), consulting and engineering costs ($910,398), allowance for water
rights projects under development ($808,792), severance and consolidation costs
($420,340), an asset impairment charge ($204,298), and miscellaneous costs of
$1,298,685. The Company recognized $501,062 from interest income earned
primarily from its cash and cash equivalents and investments. This interest
income was offset by $976,716 interest expense incurred on its Debentures and
$2,843,000 term loan. The Company's nine-month operating loss of $4,659,395 was
partially offset by a $3,489,803 extraordinary non-cash gain on the early
extinguishment of debt.
For the nine months ended December 31, 1999, the Company had negative cash flow
from operating activities of $2,516,976. During prior periods, the Company
generated cash from the sale of its real estate, including in particular, its
real estate in Cherry Creek. However, the Company has made no real estate sales
this fiscal year and it does not expect real estate sales to be as significant
in future periods.
The Company has recently completed the sale of water previously acquired by the
Company. The sale generated gross profit, and the Company is attempting to
complete other similar transactions. The completion of many of these
transactions depend, however, on certain regulatory, administrative, and
environmental review and decision-making processes, the outcome of which are not
predictable. However, while revenues from (i) existing water sales contracts;
(ii) leasing the Company's rice farms and ranches; (iii) the Cucamonga Water Fee
Agreement; and (iv) cash received from principal and interest payments on
promissory notes held by the Company will be more predictable than the
occasional sales of real estate assets, such recurring revenues will be
insufficient to cover general and administrative expenses, and interest on
outstanding indebtedness and dividends when and if declared on its outstanding
preferred stock. Revenue from water operations will continue to be dependent on
individually negotiated transactions. Based on the Company's current estimates,
revenues from planned water sales and from its existing long-term water
development projects are expected to be insufficient to fund the Company's
working capital needs during the current fiscal year. Accordingly, the Company's
future operations will have to be funded primarily from the Company's existing
financial resources, from revenues derived from such water sales as the Company
hereafter may from time to time consummate, and from any future financing it may
arrange.
In order to reduce its on-going operating expenses the Company decided, during
the quarter ended December 31, 1999, to consolidate its corporate headquarters
into its Point Richmond, California office and to close its existing San Diego
office. The consolidation, which is expected to be completed during the quarter
ending June 30, 2000, will result in the net reduction of two administrative
personnel and the early termination of (or other provision for) its office and
equipment leases in San Diego. As of December 31, 1999, total severance costs
and payroll taxes related to the termination of the five employees in the San
Diego office amounting to $69,611 were charged to general and administrative
17
<PAGE> 18
WESTERN WATER COMPANY AND SUBSIDIARIES
expenses, of which $60,548 was accrued. In addition, exit costs of $96,339
comprised of lease termination and other costs, were also charged to general and
administrative expenses. Total accrued consolidation costs amounting to $156,887
were included on the balance sheet as of December 31, 1999 as "accrued expenses
and other liabilities." There were no other adjustments to the liability account
as of December 31, 1999.
The consolidation is anticipated to result in the elimination of two
administrative positions and the transfer of three positions to Point Richmond.
The Company believes that the expected increase in future earnings and cash flow
from reduced employee expense and lease costs associated with the consolidation
will approximate $230,000 per year. The Company anticipates realizing the
initial effects of the consolidation during the quarter ending March 31, 2000.
Investing and Financing Activities
On August 6, 1999, the Company repurchased $5,000,000 of the Debentures plus
accrued interest of $157,808 for $1,500,000. After reducing related deferred
debt costs of $272,956, net of accumulated amortization of $104,951, the Company
recognized a non-cash $3,489,803 extraordinary gain on the early extinguishment
of debt.
The Company is committed to certain material expenditures over the next several
years, including the following:
- - Scheduled payments of principal on existing outstanding indebtedness for the
remainder of the fiscal year ending March 31, 2000 and fiscal years ending
March 31, 2001, 2002, 2003 and 2004 are $157,000, $1,455,000, $781,000,
$903,000, and $463,000, respectively.
- - The Company is required to make semi-annual interest payments of $438,300 on
the $9,740,000 remaining outstanding principal amount of the Debentures.
- - The holders of the 10,165 outstanding shares of Series C Preferred Stock are
entitled to receive, when and if declared, annual cash dividends in the
amount of $72.50 per share, payable semi-annually on January 15 and July 15
of each year (aggregating $736,963 per year).
- - The holders of the 10,000 outstanding shares of Series D Preferred Stock are
entitled to receive, when and if declared, annual cash dividends in the
amount of $75 per share, payable quarterly on March 15, June 15, September
15, and December 15 of each year (aggregating $750,000 per year).
- - Commencing October 1998, the Company entered into a five-year and a
fifteen-year water rights lease. The five-year water rights lease is
expected to provide the Company with 1,008 acre-feet per year for a payment
by the Company $157.50 this year, which amount will escalate over the
remaining three-year period at $7.50 per acre-foot per year. The
fifteen-year water rights lease is expected to provide 250 acre-feet per
year for a payment by the Company of an amount per acre-foot of water
determined by multiplying the cost for the first year ($135) by the ratio of
the index price for each subsequent year divided by the index price for the
first year. The index price is the sum of the price established by the
Metropolitan Water District ("MWD") for full service untreated water and the
price components established by the West Basin Municipal Water District for
the MWD readiness-to-serve charge and the West Basin surcharge for basic
non-interruptible water.
18
<PAGE> 19
WESTERN WATER COMPANY AND SUBSIDIARIES
The Company's ability to operate over the long term will be dependent upon its
ability to derive revenues from its water resources, arrange the purchase and
sale of water it doesn't own at a profit, and/or arrange additional financing.
The Company's ability to derive revenue from its own water assets depends, in
part, on the outcome of regulatory, administrative and environmental review
processes. The Company's ability to derive profits from the sale of water it
does not currently own depends on its ability to acquire such water, make sales
to customers, and arrange delivery, all on an economic basis. Consummation of
profitable water sales is subject to a variety of restrictions designed to
protect third-party water users and the environment. The Company believes that
it can operate profitably within these restrictions. However, public agencies
which control critical segments of the public infrastructure necessary to
transport and deliver water in California, the Company's principal area of
operation at the current time, have restricted access to such facilities through
pricing and administrative action. The Company believes that many of these
latter restrictions violate the State's Wheeling Act (Section 1810 of the
California Water Code). Therefore, and in order to permit it to complete
profitable water sales, the Company has undertaken a variety of administrative,
legal, regulatory and legislative initiatives to identify and remove such
artificial barriers to voluntary water transfers. There can, of course, be no
assurance that the Company's initiatives will result in removal of such
artificial barriers to voluntary water transfers in California or, if they are
removed, when that might happen.
Based on its existing current assets and on its projected operating income and
expenses, the Company anticipates that it will be able to fund its foreseeable
working capital needs for approximately one year from the date of this report.
However, under the Company's Strategic Relationship Agreement with Agbar, the
Company can only use the proceeds from the sale of Series D Preferred Stock to
fund development costs of specific water projects and related capital costs,
including Series D Preferred Stock dividends, that were identified and agreed
upon by Agbar. As of December 31, 1999, a total of $5,376,316 had been expended
on such development and capital costs. Prior to the quarter ended December 31,
1999, management of the Company had a reasonable expectation that Agbar would
waive or modify the restrictions under the Strategic Relationship Agreement.
During the quarter ended December 31, 1999, management initiated discussions
with Agbar seeking such a waiver or modification of these restrictions. Pending
a resolution of this issue, management has decided to classify the remaining
proceeds of the Series D Preferred Stock as restricted. As a result, $4,623,684
of the Company's current assets, consisting of $3,151,483 of available-for-sale
securities and $1,472,201 of cash and cash equivalents, are restricted. Without
the use of these restricted funds, the Company believes it will not be able to
meet its anticipated financial obligations from unrestricted cash and other
currently available sources in the next twelve months. Any such waiver or
modification would likely be made within the context of a change in Agbar's
rights under the Strategic Relationship Agreement and for the Series D Preferred
Stock. The Company may attempt to improve its working capital position by
raising additional equity funds and/or selling some of its assets. No assurance
can be given that the Company will obtain Agbar's waiver to use the restricted
funds or, if the Company elects to do so, that it will be able to raise
additional funds.
In view of its cash situation the Company is considering the restructuring of
its preferred stock and/or Debentures to reduce its fixed charges and has
retained Houlihan Lokey Howard & Zukin Capital to assist in this effort.
YEAR 2000
The Company formed a project team to identify Year 2000 impacts, resolve Year
2000 problems and implement compliance plans. The Company developed a plan for
converting impacted items, and completed the conversion at a cost of
approximately $1,500. Through the date of this report, there have been no
adverse effects on the Company's business, results of operations or financial
condition as a result of Year 2000 problems with its computer systems and
operations. In addition, the Company has not encountered any Year 2000 problems
with any of its vendors. Although the Company has made reasonable efforts to
identify and protect itself with respect to external Year 2000 problems, there
can be no assurance that the Company will not be affected by such problems. The
Company will consider the
19
<PAGE> 20
WESTERN WATER COMPANY AND SUBSIDIARIES
necessity of implementing a contingency plan to mitigate any adverse effects
associated with the Year 2000 issue, should one arise.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1999, the Financial Accounting Standards Board issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective date of FASB Statement No. 133-an amendment of FASB Statement No.
133". The Company anticipates that the adoption of SFAS No. 133 will not have a
material effect on the financial position, results of operations or liquidity of
the Company, nor result in disclosures that will be materially different from
those presently included in its financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE MARKET RISK DISCLOSURES
The Company is exposed to market risk primarily due to fluctuations in interest
rates. The Company utilizes both fixed and variable rate debt. The Company's
interest rate risk management objective is to limit the impact of interest rate
changes on earnings and cash flows and to lower the Company's overall borrowing
costs. To achieve its objectives, the Company borrows primarily at fixed rates
and may enter into derivative financial instruments such as interest rate caps
in order to mitigate its interest rate risk on a related variable rate
obligation. The Company does not enter into any transactions for speculative or
trading purposes. The following table presents principal cash flows and related
weighted average interest rates of the Company's long-term fixed rate and
variable rate debt for the fiscal years ended is as follows:
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total
--------- ---------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed rate debt $ -- $ 787,000 $ 32,000 $ 71,000 $ 26,000 $9,868,000 $10,785,000
Weighted average
interest rate n/a 8.0% 8.7% 8.3% 9.0% 9.0% 8.9%
Variable rate debt $ 157,000 $ 668,000 $ 749,000 $ 832,000 $ 437,000 -- $ 2,843,000
Weighted average
interest rate 7.5% 7.5% 7.5% 7.5% 7.5% -- 7.5%
</TABLE>
The Company's variable rate on its variable rate debt is capped at 7.5% for the
duration of the loan.
PART II - OTHER INFORMATION
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) No reports on Form 8-K were filed during the prior fiscal quarter.
20
<PAGE> 21
WESTERN WATER COMPANY AND SUBSIDIARIES
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: February 11, 2000 By: /s/ Michael Patrick George
--------------------------------------------
Michael Patrick George
Chairman, President and Chief Executive Officer
Date: February 11, 2000 By: /s/ Ronald I. Simon
--------------------------------------------
Ronald I. Simon
Executive Vice President and
Chief Financial Officer
21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, THE CONSOLIDATED STATEMENTS OF OPERATIONS AND THE
CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,193
<SECURITIES> 3,151
<RECEIVABLES> 212
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,304
<PP&E> 294
<DEPRECIATION> (112)
<TOTAL-ASSETS> 40,711
<CURRENT-LIABILITIES> 1,912
<BONDS> 9,740
0
19,807
<COMMON> 8
<OTHER-SE> 5,999
<TOTAL-LIABILITY-AND-EQUITY> 40,711
<SALES> 0
<TOTAL-REVENUES> 2,429
<CGS> 0
<TOTAL-COSTS> 1,471
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (977)
<INCOME-PRETAX> (4,657)
<INCOME-TAX> 3
<INCOME-CONTINUING> (4,460)
<DISCONTINUED> 0
<EXTRAORDINARY> 3,490
<CHANGES> 0
<NET-INCOME> (1,170)
<EPS-BASIC> (0.27)
<EPS-DILUTED> (0.27)
</TABLE>
