CDZI

CADIZ INC. 10-Q Summary: Period Ended September 30, 2000

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended September 30, 2000, and the nine months ended on that date. Cadiz Inc. operates through two primary segments: Sun World International, Inc., an agricultural company engaged in farming, packing, and marketing of table grapes, stonefruit, and peppers; and Cadiz, which focuses on water resource development, specifically the Cadiz Groundwater Storage and Dry-Year Supply Program. The company reported a net loss for the period, driven by lower agricultural commodity prices and significant interest expenses.

Key Financial Metrics

Note: Debt figures derived from Balance Sheet current portion ($25,451) and long-term ($117,999) plus revolving credit facility ($4,600).

Material Changes vs. Prior Period

• Revenue Decline: Revenues for the nine months ended September 30, 2000, decreased to $90.2 million from $93.4 million in the prior year. This was primarily due to a 7% decrease in average F.O.B. prices for table grapes, wine grapes, and stonefruit caused by industry oversupply.
• Widened Losses: The net loss for the nine months increased significantly to $15.5 million compared to a $6.3 million loss in the same period of 1999. Operating results shifted from a profit of $7.1 million in 1999 to a loss of $1.1 million in 2000.
• Farming Performance: Farming net income dropped from $9.9 million in the prior nine-month period to $0.9 million. While proprietary products commanded a price premium, commodity product losses offset these gains.
• Liquidity Pressure: Cash and cash equivalents decreased from $4.5 million at year-end 1999 to $0.5 million at September 30, 2000. Net cash used in operating activities increased to $3.7 million from $2.1 million.
• Debt Utilization: Borrowings under the Sun World Revolver increased to $4.6 million to meet seasonal working capital needs, whereas no borrowings were outstanding at the end of the prior year.

Guidance, Outlook, and Risks

Outlook and Strategy: Management continues to pursue the Cadiz Groundwater Storage and Dry-Year Supply Program. A Supplement to the Draft Environmental Impact Report was released in October 2000 for a 45-day public review. The program is anticipated to be operational within 18 months of final regulatory approval. The company expects to fund its share of the estimated $125 million to $150 million capital costs through long-term financing or payments from the Metropolitan Water District.

Risks and Contingencies:

• Legal Proceedings: The company is engaged in litigation against Waste Management, Inc., regarding a proposed landfill. While federal securities claims were dismissed, state court claims for unfair business practices remain pending. A settlement was reached with the County of San Bernardino involving restitution payments by Rail Cycle, L.P.
• Debt Maturity: Cadiz's senior term loan and revolving credit facility mature on January 31, 2001. An agreement in principle has been reached for a one-year extension, subject to final documentation.
• Market Volatility: Future results remain subject to weather conditions, yield fluctuations, and pricing volatility in the agricultural sector.

Investor Verification Checklist

• Verify the status of the extension agreement for the Cadiz debt facilities maturing January 31, 2001.
• Monitor the progress of the Supplement to the Draft Environmental Impact Report and the timeline for final regulatory approval of the Water Program.
• Assess the impact of industry oversupply on future F.O.B. pricing for table grapes and stonefruit.
• Review the outcome of the pending state court litigation against Waste Management, Inc.
• Confirm the company's ability to maintain liquidity given the low cash balance ($548,000) and upcoming debt obligations.