Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of financial condition and results of operations should be read together with the Unaudited Condensed Consolidated Financial Statements and accompanying Notes included elsewhere in this report, and the Consolidated Financial Statements and accompanying Notes included in our Annual Report on Form 10-K for the year ended December 31, 2016.2021.
This Quarterly Report on Form 10-Q (including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section) contains “forward-looking statements,” as defined in Section 21E of the United States Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended regarding our business, financial condition, results of operations, and prospects, including, without limitation, statements about our expectations, beliefs, intentions, anticipated developments, and other information concerning future matters. Words such as “may,” “will,” “could,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “should,” “target,” “projects,” “contemplates,” “predicts,” “potential,” “continue,” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report on Form 10-Q. Although forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on current expectations and assumptions. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and the actual results and outcomes could differ materially from what is expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those discussed under the headings “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016,2021, in “Item 1A: Risk Factors” of Part II of this Quarterly Report on Form 10-Q, and in other filings made from time to time with the United States Securities and Exchange Commission (“SEC”) after the date of this Quarterly Report on Form 10-Q. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to (and we expressly disclaim any obligation to) revise or update any forward-looking statement, whether as a result of new information, subsequent events, or otherwise (except as may be required by law), in order to reflect any event or circumstance which may arise after the date of this Quarterly Report on Form 10-Q. Readers are urged to carefully review and consider the various disclosures made in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K and other filings with the SEC.
Our objective is to maximize long-term shareholder value. Currently, we believe the highest potential return to shareholders is from a return of capital. As we monetize assets, rather than reinvest the proceeds, we intend to return capital back to shareholders through a stock repurchase program or by other means such as special dividends. Nonetheless, we may, from time to time, reinvest a portion of proceeds from asset monetizations in further development of existing assets, if we believe the returns on such reinvestment outweigh the benefits of a return of capital.
(1) Amount represents deferred compensation that will be paid to plan participants no sooner than July 2018.
We had no liabilities or potential interest for unrecognized tax benefits associated with uncertain tax positions at September 30, 2017.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Our balance sheet includes a significant amount of assets and liabilities whose fair value is subject to market risk. Market risk is the risk of loss arising from adverse changes in market interest rates or prices. We currently have interest rate risk as it relates to investments in debt securities, and equity price risk as it relates to our marketable equity securities. The estimated fair value of our debt is based on cash flow models discounted at the then-current interest rates and an estimate of the then-current spread above those rates at which we could borrow, which are Level 3 inputs in the fair value hierarchy.
At September 30, 2017, we had $70.9 million of marketable debt securities and $60.4 million of marketable equity securities, and at December 31, 2016, we had $4.4 million of debt securities and $20.7 million of marketable equity securities, which were subject to market risk.
Our debt securities principally consist of bonds with short and medium terms to maturity. The deferred compensation accounts have held both investment-grade and below investment-grade bonds. In the deferred compensation accounts, we manage interest rate risk by matching the maturities of the bonds to the participant’s pre-selected payout schedule.
We use two models to report the sensitivity of our assets and liabilities subject to the above risks. For debt securities, we use duration modeling to calculate changes in fair value. The model calculates the price of a fixed maturity assuming a theoretical 100 basis point, or a 1% increase in interest rates and compares that to the current price of the security. At September 30, 2017 and September 30, 2016 the model did not calculate a material loss in fair value. For our marketable equity securities, we use a hypothetical 20% decrease in fair value to analyze the sensitivity. The hypothetical 20% decrease in fair value of our marketable equity securities would produce a loss in fair value of approximately $12.1 million and $4.1 million at September 30, 2017 and 2016, respectively, that would reduce our unrealized appreciation in shareholders’ equity.
Actual results may differ from the hypothetical results assumed in this disclosure due to possible actions we may take to mitigate adverse changes in fair value, and because the fair value of securities may be affected by both factors related to the individual securities (e.g. credit concerns about a bond issuer) and general market conditions.
Item 4: Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Under the supervision of, and with the participation of our management, including our principal executive officer and principal financial officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15(d)-15(e)15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly reportQuarterly Report on Form 10-Q.
Although we believe our disclosure controls and procedures and internal control over financial reporting are effective, management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures and internal control over financial reporting will prevent all errors, misstatements, or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide definitive assurance that all control issues and instances of fraud, if any, have been detected.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)13a and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2017,March 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II: Other Information
Item 1: Legal Proceedings
None.The Company is from time to time involved in various claims, legal proceedings and complaints arising in the ordinary course of business. Please refer to Note 4 — Commitments and Contingencies to the condensed consolidated financial statements contained in this report for certain information regarding our legal proceedings.
Item 1A: Risk Factors
The following information sets out factors that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Quarterly Report on Form 10-Q and those we may make from time to time. YouInvestors evaluating our business and prospects should carefully consider the following risks, together with other matters described in this Quarterly Report on Form 10-Q or incorporated herein by reference in evaluating our business and prospects.reference. If any of the following risks occurs,occur, our business, financial condition or operating results could be harmed. In such case, the trading price of our securities could decline, in some cases significantly.
1.Risks Relating to the Pending Transaction with Purchaser
We may not complete the pending transaction with Parent within the time frame we anticipate, or at all, which could have an adverse effect on our business, financial results and/or operations.
On April 13, 2022, we entered into the Merger Agreement with Parent and Purchaser. Pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, on April 27, 2022, Purchaser commenced a cash tender offer, or the tender offer, to acquire all of the issued and outstanding shares of our common stock at a price per share of $15.75, in cash, subject to any applicable withholding taxes and without interest. Following the successful closing of the tender offer, and subject to the terms and conditions of the Merger Agreement, Purchaser will merge with and into our company, with our company surviving as a wholly owned subsidiary of Parent, and each issued and outstanding share of our common stock (other than shares of common stock held by us or our direct or indirect subsidiaries (including shares held in treasury), shares held by Parent, Purchaser or any of Parent’s other direct or indirect wholly owned subsidiaries, shares validly tendered and irrevocably accepted for payment by Purchaser in the tender offer and shares held by stockholders who are entitled to demand, and who properly demand, appraisal rights under Delaware law) will be converted into the right to receive $15.75 per share in cash, without interest and subject to any required tax withholding.
The risk factorscompletion of the transaction is conditioned on the satisfaction or waiver, to the extent permitted under applicable legal requirements, of customary conditions, including (i) there being validly tendered and not properly withdrawn Shares that, considered together with all other Shares (if any) beneficially owned by Parent and Purchaser, represent one more Share than
50% of the total number of the then-issued and outstanding Shares at the expiration of the offer (the “Minimum Condition”), (ii) the accuracy of the Company’s representations and warranties (subject to customary materiality and “material adverse effect” thresholds), (iii) the Company’s compliance or performance in this report haveall material respects of the obligations, covenants and agreements it is required to comply with or perform at or prior to the expiration of the Offer, (iv) the absence, since the date of the Merger Agreement, of a Company Material Adverse Effect (as defined in the Merger Agreement) that is continuing as of the time of the Purchaser accepts Shares for purchase pursuant to the Offer, (v) the expiration or termination of the waiting period (or any extension thereof) applicable to the Transactions under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, (vi) the absence of any law or order prohibiting the consummation of the Offer or the Merger, and (vii) the Merger Agreement not having been revisedterminated in accordance with its terms.. In addition, the Merger Agreement may be terminated under certain specified circumstances, including, but not limited to, incorporate changesa change in the recommendation of our Board of Directors or a termination of the Merger Agreement by us to enter into an agreement for a Superior Offer (as defined in the Merger Agreement). As a result, we cannot assure you that the transaction with Parent will be completed, or that, if completed, it will be exactly on the terms set forth in the Merger Agreement or within the expected time frame.
If the transaction is not completed within the expected time frame or at all, we may be subject to a number of material risks. The price of our common stock may decline to the extent that current market prices reflect a market assumption that the transaction will be completed. We could be required to pay Parent a termination fee of approximately $10.9 million if the Merger Agreement is terminated under specific circumstances described in the Merger Agreement. The failure to complete the transaction also may result in negative publicity and negatively affect our relationship with our stockholders, employees, collaborators, customers, vendors, regulators and other third parties. We may also be required to devote significant time and resources to litigation relating to the Merger Agreement, including the Offer, the Merger, and other transactions contemplated thereby, including claims raised by stockholders challenging the proposed transactions, or claims relating to any failure to complete the merger or related to any enforcement proceeding commenced against us to perform our obligations under the Merger Agreement.
The announcement and pendency of the transaction with Parent could adversely affect our business, financial results and/or operations.
Our efforts to complete the transaction could cause substantial disruptions in, and create uncertainty surrounding, our business, which may materially adversely affect our results of operation and our business. Uncertainty as to whether the transaction will be completed may affect our ability to recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the transaction is pending because employees may experience uncertainty about their roles following the transaction. A substantial amount of our management’s and employees’ attention is being directed toward the completion of the transaction and thus is being diverted from our day-to-day operations. Uncertainty as to our riskfuture could adversely affect our business and our relationship with collaborators, vendors, customers, regulators and other business partners. For example, vendors, collaborators and other counterparties may defer decisions concerning working with us, or seek to change existing business relationships with us. Changes to or termination of existing business relationships could adversely affect our results of operations and financial condition, as well as the market price of our common stock. The adverse effects of the pendency of the transaction could be exacerbated by any delays in completion of the transaction or termination of the Merger Agreement.
While the Merger Agreement is in effect, we are subject to restrictions on our business activities.
While the Merger Agreement is in effect, we are subject to restrictions on our business activities, generally requiring us to conduct our business in the ordinary course, consistent with past practice, and subjecting us to a variety of specified limitations absent Parent’s prior consent. These limitations include, among other things, restrictions on our ability to acquire other businesses and assets, dispose of our assets, make investments, enter into certain contracts, repurchase or issue securities, hire or terminate employees (other than for cause), pay dividends, make capital expenditures, take certain actions relating to intellectual property, amend our organizational documents and incur indebtedness. These restrictions could prevent us from pursuing strategic business opportunities, taking actions with respect to our business that we may consider advantageous and responding effectively and/or timely to competitive pressures and industry developments, and may as a result materially and adversely affect our business, results of operations and financial condition.
In certain instances, the Merger Agreement requires us to pay a termination fee to Parent, which could require us to use available cash that would have otherwise been available for general corporate purposes.
Under the terms of the Merger Agreement, we may be required to pay Parent a termination fee of approximately $10.9 million if the Merger Agreement is terminated under specific circumstances described in the Merger Agreement. If the Merger Agreement is terminated under such circumstances, the termination fee we may be required to pay under the Merger Agreement may require us to use available cash that would have otherwise been available for general corporate purposes and other uses.
For these and other reasons, termination of the Merger Agreement could materially and adversely affect our business operations and financial condition, which in turn would materially and adversely affect the price of our common stock.
We have incurred, and will continue to incur, direct and indirect costs as a result of the pending transaction with Parent.
We have incurred, and will continue to incur, significant costs and expenses, including fees for professional services and other transaction costs, in connection with the pending transaction. We must pay substantially all of these costs and expenses whether or not the transaction is completed. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses.
2. Asset and Market Concentration Risk
Our water resource and water storage operations are concentrated in a limited number of assets and markets, making the success of our operations highly dependent on the conditions and fluctuations of the local economies where those operations and assets are located.
We anticipate that a significant amount of our water resource and water storage revenue, results of operations, and cash flows will result from those includeda limited number of assets that primarily consist of our water rights in Nevada and our Annual Reportwater storage operations in Arizona.Our two most significant assets are our water credits to serve the North Valleys area of Reno, Nevada, and our water storage operations in Arizona.As a result of this geographic concentration, we expect the ultimate return on Form 10-K forour invested capital, results of operations, and cash flows will be closely associated with the year ended December 31, 2016. The risk factors set forth below with an asterisk (*) next toconditions and fluctuations of the title are new risk factors or risk factors containing changes,local economies, including any material changes from the risk factors previously disclosed in Item 1Alocal and regional government land use, zoning, permitting approvals, and other regulatory actions in these regions.Any economic downturn, or additional permitting, zoning or planning regulatory requirements in these markets, would adversely impact our results of operations, cash flows, and our Annual Report on Form 10-Kfinancial condition.Any prolonged weak demand or lack of permitting approvals for the year ended December 31, 2016, as filed with the SEC.
General economic conditions couldnew homes and residential and commercial development would adversely affect our assets in Nevada and Arizona and would have a material adverse effect on our financialfuture revenues, results financial conditionof operations, cash flows, and the return on our investment from those assets.
Our Fish Springs Ranch project to sell water credits to the North Valleys area of Reno, Nevada could adversely affect our results of operations, if we are unable to sell water credits.
We constructed a pipeline approximately 35 miles long to deliver water from Fish Springs Ranch to the North Valleys area of Reno, Nevada.As of March 31, 2022, the total cost of the pipeline project, including our water credits (net of impairment losses incurred to date), carried on our balance sheet was approximately $80.7 million.To date, we have sold only a small amount of the water credits, and we cannot provide any assurance that the sales prices we may obtain in the future will provide an adequate economic return, if at all.Demand for these water credits is anticipated to come primarily from both local and national developers planning to construct new projects in the North Valleys area of Reno, Nevada. The success of these projects is dependent on numerous factors beyond our control, including local government approvals, employment growth in the greater Reno area, and the ability of the developers to finance these projects.
Our inability to sell all or part of our Arizona Long-Term Storage Credits could adversely affect our profitability.
Our Arizona Recharge Facility is one of the few private sector water storage sites in Arizona.At March 31, 2022, we had approximately 195,682 acre-feet of Long Term Storage Credits stored at the facility.In addition, at December 31, 2021, we had approximately 27,397 acre-feet of Long Term Storage Credits stored in the Phoenix Active Management Area.We have not stored any water on behalf of any customers and, as of March 31, 2022, we had sold 55,000 acre-feet of Long Term Storage credits to a single large customer in late 2021. However, we can not be certain that we will ultimately be able to sell the remaining stored water at a price sufficient to provide an adequate economic return, if at all.
The fair values of our water assets are linked to the rate of growth in the local markets in which our assets are concentrated; we may be unable to realize the value of our water assets in our projected time frame, and the value of those assets may be affected by broader economic issues.
Both the demand for, and fair value of, our water assets are significantly affected by the growth in population and the general state of the local economies where our real estate and water assets are located.The local economies where our real
estate and water assets are located, primarily in Arizona and northern Nevada, but also in southern Nevada, Colorado, and New Mexico.One or more of these economies may be adversely affected by factors such as the local level of employment, the availability and cost of financing for real estate development, and the affordability of housing.The unemployment rate in these states, as well as credit market conditions, may result in a slowdown of the local economies where our real estate and water assets are located.These developments, if they occur, could materially and adversely affect the demand for, and the fair value of, our assets.
All of our businesses are sensitive to general economic conditions, whether internationally, nationally, regionally, or locally. General poor economic conditions and the resulting effect of non-existent or slow rates of growth in the markets in which we operate could have a material adverse effect on the demand for our water assets. These poor economic conditions include higher unemployment, inflation, deflation, decreases in consumer demand, changes in buying patterns, a weakened dollar, higher consumer debt levels, and higher tax rates and other changes in tax laws or other economic factors that may affect commercial and residential real estate development.
Specifically, high national, regional, or local unemployment may arrest or delay any significant recovery of the residential real estate markets in which we operate, which couldand water assets and, consequently, adversely affect the demand for our water assets. Any prolonged lack of demand for our water assets could have a significant adverse effect on ourgrowth and revenues, results of operations, cash flows, and the return on our investment from these assets.
*3. Business, Operational and Financial Risks
Our future revenue is uncertain and depends on a number of factors that may make our revenue, profitability, cash flows, and the fair value of our assets volatile.
Our future revenue and profitability related toof our water resource and water storage operations will primarily be dependentdepend on our ability to develop and sell or lease our water assets. In light of the fact thatBecause our water resource and water storage operations represent a large percentagealmost the entirety of our overall business at present, our long-term profitability and the fair value of the assets related to our water resource and water storage operations willcould be adversely affected by various factors that may affect our assets, including the drought in the southwest, regulatory approvals and permits associated with suchthose assets, transportation arrangements, and changing technology. We may also encounter unforeseen technical or other difficulties which could result in cost increases with respect tofor our water resource and water storage development projects. Moreover, our profitability, and the fair value of the assets related to our water resource assets and water storage operations, isare significantly affected by changes in the market price of water. Future sales and prices of water may fluctuate widely, as demand is affected by climatic, economic, demographic, and technological factors, as well as the relative strength of the residential, commercial, financial, and industrial real estate markets.markets in the areas where our water assets are located. Additionally, to the extent that we possesshold junior or conditional water rights, during extreme climatic conditions, such as periods of low river flow or drought, our water rights could be subordinated to superior water rights holders. The factors described above are not within our control.
One or more of the above factors in one or more of our operating segments could impactnegatively affect our revenue and profitability, negatively affect our financial condition and cash flows, cause our results of operations to be volatile, and could negatively impactadversely affect our rate of return on our water assets and cause us to divest such assets for less than our intended return on our investment.
A downturn in the recent improvement that the homebuilding and land development industry has experienced would materiallyThe novel coronavirus, or COVID-19, pandemic, or an outbreak of another highly infectious or contagious disease, could adversely affect our business, financial condition, results of operations, and cash flow.
We believe that the demand foreconomic downturn resulting from the COVID-19 pandemic has adversely affected the pace of residential and the fair value of our assets.
The homebuilding industry experienced a significant and sustained downturn in recent years having been impacted by factors that include, but are not limited to, weak general economic and employment growth, a lack of consumer confidence, large supplies of resale and foreclosed homes, a significant number of homeowners whose outstanding principal balance on their mortgage loan exceeds the market value of their home, and tight lending standards and practices for mortgage loans that limit consumers’ ability to qualify for mortgage financing to purchase a home. These factors resulted in an industry-wide weakness in demand for new homes and caused a material adverse effect on the growth of the local economies and the homebuilding industry in the southwestern United States (“U.S.”) markets where a substantial amount of our water assets are located, including the states of Nevada, Arizona, California, Colorado, and New Mexico. However, in 2012, we noted a significant improvement in the housing market which led to increased levels ofcommercial real estate development activity. The continuation ofin the recent improvementregions in which our assets are located. Any downturn in residential and commercial real estate development process and activity is essential for our ability to generate operating income in our water resource and water storage, and land development and homebuilding businesses. We are unablemarkets is likely to predict whether and to what extent this recovery will continue or its timing. Any future slow-down in real estate and homebuilding activity could adversely impact various development projects within the markets in which our real estate and water assets are located and this could materially affect the demand for and the fair value of these assets and our ability to monetize these assets. Declines and weak conditions in the U.S. housing market have reduced our revenues and created losses in our water resource and water storage, and land development and homebuilding businesses in prior years and could do so in the future.
We may not be able to realize the anticipated value of our water assets in our projected time frame, if at all.
We expect that the current rate of growth of the economy will continue to have an impact on real estate market fundamentals. Depending on how markets perform both in the short and long-term, the state of the economy, both nationally and locally in the markets where our assets are concentrated, could result in a decline in the value of our existing water assets, or result in our having to retain such assets for longer than we initially expected, which would negatively impact our rate of return on our water assets, cause us to divest such assets for less than our intended return on investment, or cause us to incur impairments on the book values of such assets to estimated fair value. Such events would adversely impact our financial condition, results of operations and cash flows.
*The fair values of our water assets are linked to growth factors concerning the local markets in which our assets are concentrated and may be impacted by broader economic issues.
Both the demand and fair value of our and water assets are significantly affected by the growth in population and the general state of the local economies where our real estate and water assets are located. The local economies where our real estate and water assets are located, primarily in Arizona and northern Nevada, but also in Colorado and New Mexico, may be affected by factors such as the local level of employment and the availability and cost of financing for real estate transactions. The unemployment rate in these states, as well as issues related to the credit markets, may prolong a slowdown of the local economies where our real estate and water assets are located. This could materially and adversely affect the demand for, and the fair value of, our water resources and real estate and water assets, and consequently,our ability to sell these assets. The length and effect of any economic downturn is uncertain, but a prolonged downturn could adversely affect our growthliquidity, and revenues,could limit or entirely curtail the repurchase of our stock. We have observed that governmental precautions taken in response to the COVID-19 pandemic have delayed the permitting process for real estate development and housing permits, potentially delaying our ability to monetize our water assets, particularly in the Reno, Nevada, area. A prolonged recession or market correction resulting from the COVID-19 pandemic or another highly infectious disease (the results of operations, cash flowsits aftermath) could materially and adversely affect our business and value of our common stock. We do not yet know the returnfull extent of potential delays or impacts on our investmentbusiness or the global economy that may result from these assets.the COVID-19 pandemic, but we intend to continue to monitor the situation as more information becomes available.
*The fair values of our water assets may decrease, which could adversely affect our results of operations by impairmentswith losses from asset impairments. The timing and write-downs.amount of our water asset sales will affect the value and return we are able to attain on our assets.
The fair value of our water resource and water storage assets depends on market conditions. We have acquired water resources and land for expansion into new markets and for replacement of inventory and expansion within our current markets. The valuation of real estate and water assets is inherently subjective, and based on the individual characteristics of each asset and the demand for that asset. Factors such as changes in regulatory requirements and applicable laws, political conditions, the condition of financial markets, local and national economic conditions, change in efficiencies of water use, the financial condition of customers, potentially adverse tax consequences, and interest and inflation rate fluctuations subject our asset valuations to uncertainties. In addition, our valuations are made on the basis of assumptions that may not prove to reflect economic or demographic reality. If population growth and, as a result, water and/or housing demand in our markets, fails to meet our expectations when we acquired our real estate and water assets, our profitability may be adversely affected, and we
may not be ableunable to recover our costs when we sell our real estate and water assets. We regularly review the value of our water assets. These reviews have resulted in recording significant impairmentsimpairment losses in prior years to our water resource assets. Such impairments have adversely affected our results of operations and our financial condition in those years.
If future market conditions, including, without limitation, delays or slowdowns resulting from the COVID-19 pandemic, delays and/or increased prices resulting from labor and supply shortages, and increased prices resulting from such shortages adversely impactaffect the anticipated timing of and amountthe volume of sales of our water assets, we may be required to record further significant impairments to the carrying value of our water assets, which would adversely affect our results of operations and our financial condition.
* The majority ofIf our remaining assets decline in value, our financial condition and operations consist ofthe return on our existing water resourceinvestment could suffer and water storage operations that are concentrated in a limited numberour ability to make future dispositions of assets making our cash flows, profitabilitymay be limited.
Historically, we have acquired and theinvested in businesses and assets that we believed were undervalued or that would benefit from additional capital, restructuring of operations, strategic initiatives, or operational efficiencies. If any previously acquired business, investment or asset fails or its fair value declines, we could experience a material adverse effect on our business, financial condition, the results of those assets difficult to predictoperations, and vulnerable to conditionscash flows. If we are not successful in managing our previous acquisitions and fluctuations in a limited number of local economies.
We anticipate that a significant amount ofinvestments, our water resource and water storage segment revenue,business, financial condition, results of operations and cash flows will come from a limited number of assets, which primarily consistcould be materially and adversely affected. Such business failures, declines in the fair value of our water resourcesassets, and/or failure to manage acquisitions or investments, could result in Nevadaa negative return on equity. We could also lose part or all of our capital in these businesses and Arizonaexperience reductions in our net income, cash flows, assets and equity.
Future dispositions of our water storagebusinesses, assets, operations, and investments, if unsuccessful, could reduce the value of our common stock. Any future asset dispositions may result in Arizona. Our two most significant changes in the composition of our assets areand liabilities. Consequently, our water storage operations in Arizona and our water resources to serve the northern valleys of Reno, Nevada. As a result of this concentration, we expect our invested capital andfinancial condition, results of operations willand the trading price of our common stock may be vulnerable toaffected by factors different from those historically affecting our financial condition, results of operations, and trading price at the conditions and fluctuations in these local economies, along with changes in local and regional government land use, zoning, and other regulatory action.present time.
Our Arizona Recharge Facilityplan to monetize assets and return capital to our shareholders may lead to a permanent reduction in our market capitalization and adversely affect the trading volume and liquidity for our stock.
Our current business plan is oneto monetize our assets and return capital to our shareholders through a stock repurchase program or by other means such as special dividends. As of the few private sector water storage sites in Arizona. At September 30, 2017,April 13, 2022 we have terminated our stock repurchase program. However as of March 31, 2022, we had used $51.3 million to repurchase approximately 251,000 acre-feet4.9 million of water stored atour common shares. As we continue to monetize assets, it is possible that our market capitalization will permanently decline, which could adversely affect the facility. In addition, we had approximately 56,400 acre-feet of water stored in the Phoenix Active Management Area at September 30, 2017. We have not stored any water on behalf of any customerstrading volume and as of September 30, 2017, had not generated any material revenue from the recharge facility. We cannot be certain that we will ultimately be able to sell all of the stored water at a price sufficient to provide an adequate economic profit, if at all.liquidity for our stock.
We constructed a pipeline approximately 35 miles long to deliver water from Fish Springs Ranch to the northern valleys of Reno, Nevada. As of September 30, 2017, the total cost of the pipeline project, including our water credits (net of impairment losses incurred to date) carried on our balance sheet was approximately $83.9 million. To date, we have sold only a small amount of the water credits and we cannot provide any assurance that the sales prices we may obtainneed additional capital in the future will provide an adequate economic return,to fund our business and financing may not be available on favorable terms, if at all.all, or without dilution to our shareholders.
We currently anticipate that our available capital resources and operating cash flows will be sufficient to meet our expected working capital and capital expenditure requirements for at least the next 12 months. However, we provide no assurances that our resources will be sufficient to fund our business over longer periods. We may be required to raise additional funds through public or private debt, equity, warrants or hybrid securities financings, including, without limitation, the issuance of securities.
We may experience difficulty in raising necessary capital in view of the recent volatility in the capital markets and increases in the cost of finance, especially for a small capitalization company like ours. Increasingly stringent rating standards could make it more difficult for us to obtain financing. If we raise additional funds through the issuance of equity, warrants or convertible or other debt securities, the ownership of our shareholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing shareholders. Indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. The additional financing we may need may not be available to us, or available on favorable terms. If adequate funds are not available or are not available on acceptable terms, if and when needed, our ability to fund our operations or otherwise execute our business and operating plan would be significantly limited. In any such case, our business, operating results, or financial condition could be materially adversely affected.
Purchasers of our real estate and water assets may default on their obligations to us and adversely affect our results of operations and cash flow.
In certain circumstances, we finance our sales of real estate and water assets, and we secure that financing through deeds of trust on the property, that are only released when we have been fully paid. Purchasers of our real estate and water assets may default on their financing obligations. Any prolonged weak demand for new homes, residentialdefaults may result in enforcement expense and commercial development, and, as a result, for our assets in Nevada and Arizona, would have a materialan adverse effect on our future revenues,business, financial condition, and the results of operations and cash flows,flows.
4. Legal and the return on our investment from those assets. Demand for these water credits is anticipated to primarily come from both local and national developers planning to construct new projects in the northern valleys. The success of these projects is dependent on numerous factors beyond our control, including local government approvals, employment growth in the greater Reno area, and the ability of the developers to finance these projects.Regulatory Risks
We may suffer uninsured losses or suffer material losses in excess of insurance limits.
We could suffer physical damage to any of our assets at one or more of our different businesses and liabilities resulting in losses that may not be fully recoverable by insurance. In addition, certain types of risks, such as personal injury claims, may be, or may become in the future, either uninsurable or not economically insurable, or may not be currently or in the future covered by our insurance policies or otherwise be subject to significant deductibles or limits. Should an uninsured loss or a loss in excess of insured limits occur or be subject to deductibles, we could sustain financial loss or lose capital invested in the affected asset(s) as well as anticipated future income from that asset. In addition, we could be liable to repair damage or meet liabilities caused by risks that are uninsured or subject to deductibles.
We may not receive all of the permitted water rights we expect from the water rights applications we have filed in Nevada and New Mexico.Nevada.
We have filed certain water rights applications in Nevada and New Mexico. In Nevada this isNevada. The filings are primarily as part of the water teaming agreement with Lincoln County. We deploy the capital required to enable the filed applications to be converted into permitted water rights over time as and when we deem appropriate, or as otherwise required. We only expend capital in those areas where our initial investigations lead us to believe that we can obtain a sufficient volume of water to provide an adequate economic return on the capital employedinvested in the project. These capital expenditures largely consist of drilling and engineering costs for water production, costs of monitoring wells, legal and consulting costs for hearings with the relevant State Engineer, and other compliance costs. Until the Nevada State Engineer, or other authority in the relevant state, permits the water rights we are applying for, we cannot provide any assurance that we will be awarded all of the water that we expect based on the results of our drilling and our legal position, and it may be a considerable period of time before we are able to ascertain the final volume of water rights, if any, that will be permitted by the Nevada State Engineers.Engineer or other relevant authority. Any significant reduction in the volume of water awarded to us from our original base expectation of the amount of water that maycould be permitted may result in the write down of capitalized costs whichthat could adversely affect the return on our investment from those assets, our revenues, results of operations, and cash flows.
Variances in physical availability of water, along with environmental and legal restrictions and legal impediments, could impactadversely affect profitability.
We value our water assets, in part, based upon the volume (as measured in acre-feet) of water we anticipate from water rights applications and our permitted water rights. TheOur water and water rights, held by us and the transferability of these rights to other uses, persons, and places of use, are governed by the laws concerning water rights in the states of Arizona, Colorado, Nevada, and New Mexico. The volumes of water actually derived from the water rights applications or permitted rights may vary considerably based upon physical availability and may be further limited by applicable legal restrictions.restrictions, including, with limitation, restrictions on transfer of water rights.
As a result, the volume of water anticipated from the water rights applications or permitted rights may not in every case represent a reliable, firm annual yield of water, but in some cases describe the face amount of the water right claims or management’s best estimate of such entitlement. Additionally, we may face legal restrictions on the sale or transfer of some of our water assets, which may adversely affect their commercial value. If the volume of water yielded from our water rights applications is less than our expectations, or we are unable to transfer or sell our water assets, we may losebe unable to achieve some or all of our anticipated returns, which may adversely affect our revenues, profitability, and cash flows.
Purchasers of our real estate and water assets may default on their obligations to us and adversely affect our results of operations and cash flow.
In certain circumstances, we finance sales of real estate and water assets, and we secure such financing through deeds of trust on the property, which are only released once the financing has been fully paid off. Purchasers of our real estate and water assets may default on their financing obligations. Such defaults may have an adverse effect on our business, financial condition, and the results of operations and cash flows.
* Our sale of water assets may be subject to environmental regulations which would impact ouradversely affect revenues, profitability, and cash flows.
The quality of the water assets we lease or sell may be subject to regulation by the United States Environmental Protection Agency, acting pursuant to the United States Safe Drinking Water Act, alongand with other federal, state and local regulations. While environmental regulations may not directly affect us, the regulations regarding the quality of water distributed affectsaffect our intended customers and may, therefore, depending on the quality of our water, impactaffect the price and terms upon which we may in the future sell our water assets. If we need to reduce the price of our water assets in order to make a salesales to our intended customers, our balance sheet, return on investment, results of operations, and financial condition could suffer.
Our water assets may be impactedadversely affected by legal and political opposition in certain locations.
The water assets we hold, and the transferability of these assets and rights to other uses, persons, or places of use, are governed by the laws and regulations concerning water rights in the states of Arizona, Nevada, Colorado and New Mexico, and may be directly or indirectly affected by other federal, state and local laws and regulations related to water and land use. Our development and sale of water assets is subject to the risks of delay associated with receiving all necessary regulatory approvals and permits.permits, or the refusal to issue regulatory approvals or permits, and possible litigation. Additionally, the transfer of water resources from one use to another may affect the economic base or impact other community issues, of a community including development, and will, in some instances, be met with local opposition. Moreover, municipalities who will likelymay regulate the use of any water we might sell to them in order to manage growth could createalso impose additional requirements that we must satisfy to sell and conveyour water assets.
If we are unable to effectively transfer, sell, and convey water resources, our ability to monetize thesethose assets will suffer, and our return on investment, revenues and financial condition would decline.
IfOur water rights are subject to challenge in judicial and administrative proceedings. Adverse outcomes may change our businesseswater rights priorities or investments otherwise fail or decline in value, our financial condition and the return on our investment could suffer.
Historically, we have acquired and invested in businesses and assetsrequire that we believed were undervalued or that would benefit from additional capital, restructuring of operations, strategic initiatives, or improved competitiveness through operational efficiencies. If any previously acquired business, investment or asset fails or its fair value declines, we could experience a material adverse effect on our business, financial condition, the results of operations and cash flows. If we are not successful managing our previous acquisitions and investments, our business, financial condition, results of operations and cash flows could be materially affected. Such business failures, declines in fair values, and/or failure to manage acquisitions or investments, could result in a negative return on equity. We could also lose part or all of our capital in these businesses and experience reductions in our net income, cash flows, assets and equity.
Future dispositions of our businesses, assets, operations and investments, if unsuccessful, could reduceimpair the value of our common shares. Any future dispositionsassets.
In all of the states in which we have operations, water rights are subject to a high degree of regulation. As a result, water rights that we have may resultbe subject to challenge in significant changes injudicial or administrative proceedings, or we may be required to bring such proceedings to protect our rights. These proceedings can adversely affect the compositionpriority of our assetswater rights claims or the right to sell or transfer those rights, among many other things. Legal and liabilities. Consequently,administrative challenges to our financial condition, resultswater rights claims, or our initiation of operationsproceeding to defend our claims, may be expensive, and adverse determinations may impair the trading pricevalue of our common shares may be affected by factors different from those historically affecting our financial condition, results of operationsinvestment and trading price at the present time.
We may need additional capital in the future to fund our business and financing may not be available on favorable terms, if at all, or without dilution to our shareholders.
We currently anticipate that our available capital resources and operating cash flows will be sufficient to meet our expected working capital and capital expenditure requirements for at least the next 12 months. However, we cannot provide any assurance that such resources will be sufficient to fund our business. We may raise additional funds through public or private debt, equity or hybrid securities financings, including, without limitation, through the issuance of securities. We currently have an effective shelf registration statement which allows us to sell up to $400 million of a variety of securities in one or more offerings in the public markets.
We may experience difficulty in raising necessary capital in view of the recent volatility in the capital markets and increases in the cost of finance. Increasingly stringent rating standards could make it more difficult for us to obtain financing. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our shareholders could be significantly diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing shareholders. Indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. The additional financing we may need may not be available to us, or on favorable terms. If adequate funds are not available or are not available on acceptable terms, if and when needed,adversely affect our ability to fundmonetize our operations or otherwise execute our strategic plan would be significantly limited. In any such case, our business, operating results or financial condition could be materially adversely affected.investment.
* Our ability to utilize net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), if our Company undergoeswe undergo an “ownership change” (generally defined as a greater than 50%fifty-percent (50%) change (by value) in our equitythe percentage of stock owned by one or more five percent (5%) or more shareholders (measured by the relative fair market value of that shareholder’s stock compared to the total value of all outstanding stock, excluding changes in ownership attributable to fluctuations in value between different classes of stock)) as of the testing date, measured over a three year period),period, or a period beginning with any previous testing date, whichever is shorter, the ability to use our pre-change net operating loss carryforwards (“NOLs”) and other pre-change tax attributes to offset our post-change income may be limited. Notwithstanding our adoptionThe Company’s previous plan to protect NOLs from loss due to ownership changes expired on July 24, 2020. Our Board of Directors adopted a new tax benefit preservation plan it is possible that wedated July 24, 2020, which was ratified by our shareholders at our 2021 annual meeting. The Company could experience ownership changes in the future as a result of shifts in our stock ownership. If the new tax benefit preservation plan were triggered by a change in ownership, acquiring shareholders and certain other shareholders could experience substantial dilution. Furthermore, Section 382 (and other tax code and regulatory provisions relating to NOLs) has recently been subject to proposed regulations by the Treasury Department and Internal Revenue Service which, if finalized in their current form, may have the effect of further reducing the value of NOLs, in certain circumstances, of a corporation that undergoes an ownership change. As of September 30, 2017,December 31, 2021, we had federal and state net operating loss carryforwards of approximately $187.1$139.7 million and $235.5$125.9 million, respectively, which, depending on our value at the time of any ownership changes, could be limited.limited by Section 382 of the Code.
5. General Economic Risks
General economic conditions could have a material adverse effect on our financial results, financial condition, and the demand for and the fair value of our assets.
Our operations are sensitive to the general economic conditions in the local markets in which our assets are located. International, national, and regional economic conditions may also affect our markets. General weak economic conditions and either slow or nonexistent rates of growth in the markets in which we operate could have a material adverse effect on the demand for and value of our water assets. Weak economic conditions include higher unemployment, inflation, deflation, decreases in consumer demand, changes in buying patterns, a weakened dollar, higher consumer debt levels, higher interest rates, especially higher mortgage rates, higher tax rates, and other changes in tax laws or other economic factors that may affect commercial and residential real estate development.
Our business could be negatively affected if the recent supply chain and inflation rates persist.
In the last 15 months, the United States economy has experienced a relatively high rate of inflation that, along with supply chain disruptions, has increased, among other things, the cost of transportation and of commercial and residential construction. Increases in home and commercial construction costs may reduce demand for commercial and residential space and, as a result, may adversely affect the demand for our water resources that are sold or leased to support new commercial and residential development.
The performance of real estate markets in the short and long-term and the state of the economy, nationally and locally where our assets are concentrated, could affect the value of our existing water assets; a decline in the market could adversely affect the value of our water assets or cause us to retain these assets longer than we initially expected, which would negatively affect our rate of return on our water assets, cause us to divest such assets for less than our targeted return on investment, or cause us to impair the book values of such assets to estimated fair value.
A downturn in the homebuilding and land development sectors in our markets would materially adversely affect our business, results of operations, and the demand for and the fair value of our assets.
The homebuilding industry experienced a significant and sustained downturn in past years, resulting from factors that include, but are not limited to, weak general economic and employment growth, limited access to capital, a lack of consumer confidence, large supplies of resale and foreclosed homes, a significant number of homeowners whose mortgage loan balances exceeded the market value of their homes, and tight lending standards for mortgage loans that limited consumers’ ability to qualify for mortgage financing to purchase a home. These factors resulted in an industry-wide weakness in demand for new homes and caused a material adverse effect on the growth of the local economies and the homebuilding industry in the southwestern United States (“U.S.”) markets, where all of our water assets are located, including the states of Nevada, Arizona, Colorado, and New Mexico.
The continued improvement in residential and commercial real estate development activity is essential to our ability to generate revenue and operating income in our water resource and water storage business. We are unable to predict whether and to what extent this improvement will continue. Any future slow-down in real estate and homebuilding activity could adversely affect development projects within the markets in which our water assets are located, and could adversely affect the demand for and the fair value of our assets and our ability to monetize them. Declines and weak conditions in the U.S. housing market in prior years have reduced our revenues and created losses in our water resource and water storage, and land development and homebuilding businesses and could do so in the future. Additionally, the recent tax law changes limiting, among other things, deductibility of mortgage interest and of state and local income taxes may have a negative effect on the national housing market and in the markets in which we operate, although the Nevada market may be less affected due to the lack of a state income tax.
Constricted National and Local Labor Markets and Product Supply Chains May Adversely Affect the Demand for our Assets and Our Ability to Sell Our Assets Timely.
As the COVID-19 pandemic has begun to subside, many national and local labor markets and product supply chains are constrained, resulting in substantial price increases for labor and materials, including the cost of constructing residential and commercial projects. Price increases in the cost of finished products to account for more expensive inputs may result in lower demand for residential and commercial projects, as potential purchasers are priced out of markets, affecting the demand for our water assets that are necessary to support these projects, or may slow the rate at which such projects come onto the market. Product shortages may result in delays in commencing and bringing projects to market and may affect the size of projects that are undertaken. It is unclear how long these conditions may persist, or what the ultimate effect of these developments may have on the Company’s ability to execute its business plan to monetize our water assets.
6. Other General Risks
Our business could be negatively impacted by cyber security threats.
In the ordinary course of our business, we use our data centers and our networks to store and access our proprietary business information. We face various cyber security threats, including without limitation, cyber security attacks to our information technology infrastructure and attempts by others to gain access to our proprietary or sensitive information. The procedures and controls we use to monitor these threats and mitigate our exposure may not be ablesufficient to retain key management personnel we needprevent cyber security incidents. The result of these incidents could include disrupted operations, lost opportunities, misstated financial data, liability for stolen assets or information, increased costs arising from the implementation of additional security protective
measures, litigation and reputational damage. Any remedial costs or other liabilities related to succeed, whichcyber security incidents may not be fully insured or indemnified by other means, and our payment of these costs could adversely affect our ability to successfully operate our businesses.
To run our day-to-day operations and to successfully manage our businesses we must, among other things, continue to retain key management. We rely on the services of a small team of key executive officers. If they depart, it could have a significant adverse effect upon our business. Also, increased competition for skilled management and staff employees in our businesses could cause us to experience significant increases in operating costs and reduced profitability.
*Analysts and investors may not be able to evaluate us adequately, which may negatively influence the priceresults of our stock.operations.
We own assets that are unique, complex in nature, and difficult to understand. In particular, our water resource business is a developing industry in the United States with very little historical and comparable data, very complex valuation issues and a limited following of analysts. Because our assets are unique, analysts and investors may not be able to adequately evaluate our operations and enterprise as a going concern. This could cause analysts and investors to make inaccurate evaluations of our stock, or to overlook PICO in general. As a result, the trading volume and price of our stock could suffer and may be subject to excessive volatility.
* Fluctuations in the market price of our common stock may affect your ability to sell your shares.
The trading price of our common stock has historically been, and we expect will continue to be, subject to fluctuations. The market price of our common stock may be significantly impactedaffected by:
•quarterly variations in financial performance and condition of our various businesses;business;
•shortfalls in revenue or earnings from estimates forecast by securities analysts or others;
•changes in estimates by such analysts;
•the ability to monetize our assets related to our water resource businessassets for an adequate economic return, including the length of time any such monetization may take;
•our competitors’ announcements of extraordinary events such as acquisitions;
•litigation; and
•general economic conditions and other matters described herein.herein;
•the number of analysts who follow our stock and their understanding of our business; and
•the volume of trading in our stock.
Our results of operations have been subject to significant fluctuations, particularly on a quarterly basis, and our future results of operations could fluctuate significantly from quarter to quarter and from year to year. Causes of such fluctuations may include the inclusion or exclusion of operating earnings from sold operations, one time transactions and impairment losses. The price of our stock may be negatively affected by irregular cash flows due to the timing and variances in the amount of our assets sold or leased. Statements or changes in opinions, ratings, or earnings estimates made by brokerage firms or industry analysts relating to the markets in which we do business or relating to us specifically could result in an immediate and adverse effect on the market price of our common stock. Such fluctuationsFluctuations in the market price of our common stock could affect the value of your investment and your ability to sell your shares.
Litigation may harm our business or otherwise distract our management.
Substantial, complex or extended litigation could cause us to incur large expenditures and distract our management. For example, lawsuits by employees, shareholders or customers could be very costly and substantially disrupt our business. Additionally, from time to time we or our subsidiaries will have disputes with companies, governmental and tribal entities, special interest groups, or individuals which may result in litigation that could necessitate our management’s attention and require us to expend our resources. We may be unable to accurately assess our level of exposure to specific litigation, and we cannot provide any assurance that we will always be able to resolve such disputes out of court or on terms favorable to us. We may be forced to resolve litigation in a manner not favorable to us, and such resolution could have a material adverse impact on our consolidated financial condition or results of operations.
We may not be able to retain key management personnel we need to succeed, which could adversely affect our ability to successfully operate our businesses.
To run our day-to-day operations and to successfully manage our businesses we must, among other things, continue to retain key management. We rely on the services of a small team of key executive officers. If any key executive departs, it could have a significant adverse effect upon our business. Also, increased competition for skilled management and staff employees in our businesses could cause us to experience significant increases in operating costs and reduced profitability.
We may suffer uninsured losses or suffer material losses in excess of insurance limits.
We could suffer physical damage to our assets and the losses resulting from any damage may not be fully recoverable by insurance. In addition, certain types of risks, such as personal injury claims or other tortious conduct, may be, or may become in the future, either uninsurable or uneconomical to insure, or may not be currently, or in the future, covered by our insurance or subject to significant deductibles or limits. If an uninsured loss, or a loss in excess of insured limits, occurs or is subject to a large deductible, we could sustain financial loss or lose capital invested in the affected asset(s), as well as anticipated future income from that asset. In addition, we could be liable to repair damage or meet liabilities caused by risks that are uninsured or subject to deductibles.
We have been and continue to be, the subject of stockholdershareholder activism efforts that could cause a material disruption to our business.
In the past, certain investors have takentook steps to involve themselves in the governance and strategic direction of our Company due to governance and strategic-related disagreements with us. While we have formally settled with certain of suchthose activists, other investors could take steps to involve themselves in the governance and strategic direction of our Company. Such stockholdershareholder activism efforts could result in substantial costs and diversion of management’s attention and resources, harming our business and adversely affecting the market price of our common stock.
*Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of us more complicated and the removal and replacement of our directors and management more difficult.
Provisions of our certificate of incorporation and bylaws, as well as provisions of Delaware law, could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders. These provisions may also make it difficult for stockholders to remove and replace our board of directors and management. For example, these provisions limit who may call a special meeting of stockholders and establish advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings. In addition, on July 24, 2017,2020, our board of directors adopted a tax benefits preservation plan designed to preserve our ability to utilize our net operating lossesNOLs as a result of certain stock ownership changes, which may have the effect of discouraging transactions involving an actual or potential change in our ownership.
Analysts and investors may not be able to evaluate us adequately, which may negatively influence the price of our stock.
We own assets that are unique, complex in nature, and difficult to understand. In particular, our water resource business is a developing industry in the United States with very little historical and comparable data, complex valuation issues, and a limited following of analysts. Because our assets are unique, analysts and investors may be unable to adequately evaluate our operations and enterprise as a going concern. This could cause analysts and investors to make inaccurate evaluations of our stock, or to overlook the Company in general. As a result, the trading volume and price of our stock could suffer and may be subject to excessive volatility.
If equity analysts do not publish research or reports about our business, or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.
The trading market for our common stock will rely in part onbe affected by the research and reports that equity research analysts may publish about us and our business. We do not control these analysts. The price of our stock could decline if one or more equity analysts downgrade our stock, or if those analysts issue other unfavorable commentary, or cease publishing reports about us or our business.us.
Our business could be negatively impacted by cyber security threats.
In the ordinary course of our business, we use our data centers and our networks to store and access our proprietary business information. We face various cyber security threats, including cyber security attacks to our information technology infrastructure and attempts by others to gain access to our proprietary or sensitive information. The procedures and controls we use to monitor these threats and mitigate our exposure may not be sufficient to prevent cyber security incidents. The result of these incidents could include disrupted operations, lost opportunities, misstated financial data, liability for stolen assets or information, increased costs arising from the implementation of additional security protective measures, litigation and reputational damage. Any remedial costs or other liabilities related to cyber security incidents may not be fully insured or indemnified by other means.
THE FOREGOING FACTORS, INDIVIDUALLY OR IN AGGREGATE, COULD MATERIALLY ADVERSELY AFFECT OUR OPERATING RESULTS, AND CASH FLOWS, AND FINANCIAL CONDITION AND COULD MAKE COMPARISON OF HISTORICAL FINANCIAL STATEMENTS, INCLUDING RESULTS OF OPERATIONS, AND CASH FLOWS, AND BALANCES, DIFFICULT OR NOT MEANINGFUL.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes repurchases of our common stock made during the three months ended September 30, 2017:March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Period | | Total number of shares of common stock repurchased | | Average price paid per share of common stock (including commissions) | | Total number of shares of common stock repurchased as part of publicly announced plans or programs | | Maximum dollar value of shares of common stock that may yet be repurchased under the plans or programs (in thousands) (1) |
| January 1 to January 31, 2022 | | 4,888 | | | $ | 11.77 | | | 4,923,746 | | | $ | 48,624 | |
| February 1 to February 28, 2022 | | 3,773 | | | $ | 11.94 | | | 4,927,519 | | | $ | 48,579 | |
| March 1 to March 31, 2022 | | 2,217 | | | $ | 12.04 | | | 4,929,736 | | | $ | 48,553 | |
| Total | | 10,878 | | | | | | | |
|
| | | | | | | | | | | | | | |
| Period | | Total number of shares of common stock purchased | | Average price paid per share of common stock (including commissions) | | Total number of shares of common stock purchased as part of publicly announced plans of programs | | Maximum dollar value of shares of common stock that may yet be purchased under the plans of programs (in thousands) (1) |
| July 1 to July 31, 2017 | | | | | | | | $ | 49,310 |
|
| August 1 to August 31, 2017 | | | | | | | |
|
| September 1 to September 30, 2017 | | | | | | | |
|
| Total | | — |
| | $ | — |
| | — |
| | $ | 49,310 |
|
(1) The stock repurchase program authorization was announcedterminated on March 2, 2017. Our BoardApril 13, 2022 pursuant to the 10b5-1 plan due to consummation of Directors authorized up to $50 million to be used under this programa Definitive merger agreement between the Company and there is no set expiration date.D.R. Horton, Inc..
Item 3: Defaults Upon Senior Securities
None
None.
Item 4: Mine Safety Disclosures
Not applicable
Not applicable.
Item 5: Other Information
Not applicable
None.
Item 6. Exhibits
|
| | | | | | | |
| Exhibit Number | | Description |
| 2.1 |
| | |
3.13.1A |
| | |
3.23.1B |
| | |
3.33.2 |
| | |
| 3.3 | | | |
| 4.1 |
| | |
| 4.2 |
| | |
4.331.1 |
| | |
31.1 |
| | |
| 31.2 |
| | |
| 32.1 |
| | |
| 32.2 |
| | |
| 101.INS |
| | Inline XBRL Instance Document |
| 101.SCH |
| | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL |
| | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF |
| | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB |
| | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE |
| | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | | | Cover Page Interactive Data File: the cover page XBRL tags are embedded within the Inline XBRL document and are contained within Exhibit 101 |
|
| | | | |
(1) | Incorporated by reference to the Current Report om Form 8-K filed with the SEC on July 17, 2015. |
(2)
| Incorporated by reference to the Current Report om Form 8-K filed with the SEC on June 1, 2017. |
(3)
(2) | Incorporated by reference to the Current Report omRegistration Statement on Form 8-A filed with the SEC on July 24, 2020. |
| (3) | Incorporated by reference to Form 8-K filed with the SEC on July 24, 2017.March 8, 2021. |
(4) | Incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on August 9, 2017. |
(5)
| Incorporated by reference to the Current Report om Form 8-K filed with the SEC on October 2, 2017.April 14, 2022. |
| |
PICO HOLDINGS,VIDLER WATER RESOURCES, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the United States Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | | | | | | | | | | | | | | | |
| | | PICO HOLDINGS,VIDLER WATER RESOURCES, INC. |
| | | | |
| | | | |
| Date: | November 7, 2017May 13, 2022 | By: /s/ John T. PerriMaxim C.W. Webb |
| | John T. PerriMaxim C.W. Webb |
| | Chief Financial Officer |
| | (Principal Financial Officer and Authorized Signatory) |
