Tejon Ranch Co., or the Company, (NYSE:TRC), a diversified real
estate development and agribusiness company, today announced
financial results for the three- and nine-months ended
September 30, 2023.
"The momentum we've built over the last several
years at the Tejon Ranch Commerce Center (TRCC) continues, as the
Company is experiencing increased activity," said Gregory S.
Bielli, President and CEO of Tejon Ranch Co. "A Los Angeles-based
company recently pre-leased space at TRCC, and construction of our
newest industrial building (MRC-5), which is also pre-leased, is on
track for completion by the first quarter of 2024, adding to our
portfolio of income producing assets. We continue to add new stores
to the Outlets at Tejon, and later this month will be welcoming a
major new tenant, American sportswear company Under Armour. On the
residential front, we are aggressively pursuing an appeal of the
court ruling in the CEQA challenge involving Centennial.
Additionally, in 2016 the Company was instrumental in the
separation of the White Wolf Subbasin, where our Kern County
agricultural and development lands are located, from the adjacent
Kern County Subbasin. This led to the formation of the White Wolf
Groundwater Sustainability Agency, whose Groundwater Sustainability
Plan was approved by the California Department of Water Resources
on October 26, 2023. This is important to the Company in that it
allows the local water districts (Tejon-Castac, Wheeler Ridge
Maricopa and Arvin-Edison) management of the groundwater basin that
is currently balanced and not overdrawn."
Commercial/Industrial Real Estate
Highlights
- TRCC industrial
portfolio, through the Company's joint venture partnerships,
consists of 2.3 million square feet of gross leasable area
(GLA), and is 100% leased. In total, TRCC comprises
6.4 million square feet of GLA.
- TRCC commercial
portfolio, wholly owned and through joint venture partnerships,
comprises 620,907 square feet of GLA and is 94% leased.
- Construction of a
446,400 square foot industrial building is nearing completion, with
final completion expected by the first quarter of 2024; a lease for
this building was secured in advance of construction.
- Signed a lease with a
manufacturer and distributor of industrial components for 240,000
square feet of space currently occupied by Sunrise Brands, an
apparel company, which will vacate the space and relocate to the
new 446,400 square foot building upon completion.
- Design and engineering
for Phase 1 of the Company's planned multi-family residential
development at TRCC is underway. Phase 1 includes 228 of the
planned 495 residential units.
Third Quarter
2023 Financial Results
- GAAP net loss
attributable to common stockholders for the third quarter of 2023
was $341,000, or net loss per share attributable to common
stockholders, basic and diluted, of $0.01. For the third quarter of
2022, the Company had net income attributable to common
stockholders of $10.2 million, or net income per share attributable
to common stockholders, basic and diluted, of $0.38.
- The primary driver of
this decrease resulted from the Company's commercial/industrial
segment, whose operating profit declined $14.2 million over the
comparative period, primarily related to the absence of a land sale
during the current period compared to one land sale in 2022.
- Partially offsetting
this decrease was a $4.5 million improvement in farming segment
operating results, driven by lower cost of sales and lower fixed
water charges.
- Revenues and other
income, including equity in earnings of unconsolidated joint
ventures, for the third quarter of 2023 were $12.0 million,
compared with $33.9 million for the third quarter of 2022.
- The primary driver of
this decrease resulted from the Company's commercial/industrial
segment, whose revenue declined $19.0 million over the comparative
period, primarily related to the absence of a land sale during the
current period compared to one land sale last year.
- Adjusted EBITDA, a
non-GAAP measure, was $5.7 million for the third quarter ended
September 30, 2023, compared with $16.3 million for the same
period in 2022.
Tejon Ranch Co. provides Adjusted EBITDA, a
non-GAAP financial measure, because management believes it offers
additional information for monitoring the Company's cash flow
performance. A table providing a reconciliation of Adjusted EBITDA
to its most comparable GAAP measure, as well as an explanation of,
and important disclosures about, this non-GAAP measure, is included
in the tables at the end of this press release.
Year-to-Date 2023 Financial
Results
- GAAP net income
attributable to common stockholders for the first nine months of
2023 was $1.7 million, or net income per share attributed to common
stockholders, basic and diluted, of $0.06, compared with net income
attributable to common stockholders of $13.8 million, or net income
per share attributed to common stockholders, basic and diluted, of
$0.52, for the first nine months of 2022.
-
Commercial/industrial real estate development segment operating
profit of $3.2 million for the first nine months of 2023 compared
with $20.8 million for the first nine months of 2022, resulting
from the absence of land sales in 2023 compared to two land sales
in 2022.
- Mineral resources
segment operating profit was $4.6 million for the first nine months
of 2023, compared with $7.9 million for the first nine months of
2022. The decrease in operating profit was primarily attributed to
a reduction in water sales in 2023. The State Water Project
allocation is currently at 100%, whereas in 2022 it was at 5%,
which severely limits water sales opportunities.
- Partially
offsetting the above decreases was an improvement in farming
segment operating results of $5.8 million, attributable primarily
to lower cost of sales and lower fixed water charges.
- Also offsetting the
decreases was $2.6 million in lower income tax expense over the
comparative period, resulting from lower operating income
recognized for the year.
- Revenues and other
income, including equity in earnings of unconsolidated joint
ventures, for the first nine months of 2023, totaled $35.2 million,
compared with $68.0 million for the first nine months of 2022.
- The primary driver
of this decrease resulted from the Company's commercial/industrial
segment, whose revenue declined $23.5 million over the
comparative period, primarily related to the absence of land sales
in 2023 compared to two land sales in 2022.
- Adjusted EBITDA, a
non-GAAP measure, was $16.5 million for the nine-months ended
September 30, 2023, compared with $30.5 million for the same
period in 2022.
Liquidity and Capital
Resources
- As of
September 30, 2023, total capital, including debt, was
approximately $529.8 million. The Company had total liquidity of
approximately $113.2 million, consisting of cash and securities
totaling approximately $72.6 million and $40.6 million available on
its line of credit as of September 30, 2023.
2023 Outlook:
The Company will continue to aggressively pursue
commercial/industrial development, multi-family development,
leasing, sales, and investment within TRCC and its joint ventures.
The Company also will continue to invest in its residential
projects, including Mountain Village at Tejon Ranch, Centennial at
Tejon Ranch and Grapevine at Tejon Ranch.
California is one of the most highly regulated
states in which to engage in real estate development and, as such,
natural delays, including those resulting from litigation, can be
reasonably anticipated. Accordingly, throughout the next few years,
the Company expects net income to fluctuate from year-to-year based
on the above mentioned activity, along with commodity prices,
production within its farming and mineral resources segments, and
the timing of land sales and leasing of land within its industrial
developments.
Water sales opportunities each year are impacted by
the total precipitation and snowpack runoff in Northern California
from winter storms, as well as State Water Project, or SWP,
allocations. The current SWP allocation is at 100% of contract
amounts, so the Company anticipates that demand for its water over
the remainder of the year will be lower than in previous years when
the SWP allocation was significantly less.
The Company's farming operations in 2023 continue
to be impacted by higher costs of production such as fuel costs,
fertilizer costs, pest control costs, and labor costs. Higher than
historically normal almond inventory levels from prior years are
anticipated to have an adverse effect on selling prices for the
remainder of 2023. The current subjective production estimate for
the 2023 California almond crop is 2.6 billion pounds which is
consistent with 2022.
About Tejon Ranch Co.
Tejon Ranch Co. (NYSE: TRC) is a diversified real
estate development and agribusiness company, whose principal asset
is its 270,000-acre land holding located approximately 60 miles
north of Los Angeles and 30 miles south of Bakersfield.
The Company operates in a variety of land-based
business segments, including farming, mineral resources, and ranch
operations, as well as a commercial/industrial mixed use master
plan known as the Tejon Ranch Commerce Center, which is currently
in operation focusing on leasing, commercial/industrial
development, multi-family development, and sales. The Company is
also in the process of developing three additional mixed-use master
planned residential developments in southern California. When all
four master planned developments are fully built out, Tejon Ranch
will be home to 35,278 housing units, more than 35 million square
feet of commercial/industrial space and 750 lodging units.
More information about Tejon Ranch Co. can be found
on the Company's website at www.tejonranch.com.
Forward Looking Statements:
The statements contained herein, which are not
historical facts, are forward-looking statements based on economic
forecasts, strategic plans and other factors, which by their nature
involve risk and uncertainties. In particular, among the factors
that could cause actual results to differ materially are the
following: business conditions and the general economy, future
commodity prices and yields, external market forces, the ability to
obtain various governmental entitlements and permits, interest
rates, and other risks inherent in real estate and agriculture
businesses. For further information on factors that could affect
the Company, the reader should refer to the Company’s filings with
the Securities and Exchange Commission.
(Financial tables follow)
|
TEJON RANCH CO.CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except earnings per
share)(Unaudited) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
Revenues: |
|
|
|
|
|
|
|
Real estate - commercial/industrial |
$ |
3,397 |
|
|
$ |
22,352 |
|
|
$ |
8,706 |
|
|
$ |
32,163 |
Mineral resources |
|
3,118 |
|
|
|
3,139 |
|
|
|
11,630 |
|
|
|
19,238 |
Farming |
|
2,642 |
|
|
|
4,776 |
|
|
|
4,852 |
|
|
|
7,352 |
Ranch operations |
|
1,052 |
|
|
|
1,208 |
|
|
|
3,384 |
|
|
|
3,011 |
Total revenues |
|
10,209 |
|
|
|
31,475 |
|
|
|
28,572 |
|
|
|
61,764 |
Cost and Expenses: |
|
|
|
|
|
|
|
Real estate - commercial/industrial |
|
2,137 |
|
|
|
6,845 |
|
|
|
5,517 |
|
|
|
11,403 |
Real estate - resort/residential |
|
367 |
|
|
|
372 |
|
|
|
1,079 |
|
|
|
1,218 |
Mineral resources |
|
2,000 |
|
|
|
1,745 |
|
|
|
6,991 |
|
|
|
11,347 |
Farming |
|
2,157 |
|
|
|
8,752 |
|
|
|
5,644 |
|
|
|
13,976 |
Ranch operations |
|
1,196 |
|
|
|
1,143 |
|
|
|
3,864 |
|
|
|
3,708 |
Corporate expenses |
|
2,315 |
|
|
|
1,630 |
|
|
|
6,824 |
|
|
|
6,230 |
Total expenses |
|
10,172 |
|
|
|
20,487 |
|
|
|
29,919 |
|
|
|
47,882 |
Operating income (loss) |
|
37 |
|
|
|
10,988 |
|
|
|
(1,347 |
) |
|
|
13,882 |
Other Income: |
|
|
|
|
|
|
|
Investment income |
|
700 |
|
|
|
204 |
|
|
|
1,775 |
|
|
|
300 |
Other (loss) income, net |
|
(30 |
) |
|
|
211 |
|
|
|
272 |
|
|
|
1,038 |
Total other income |
|
670 |
|
|
|
415 |
|
|
|
2,047 |
|
|
|
1,338 |
Income from operations before equity in earnings of unconsolidated
joint ventures |
|
707 |
|
|
|
11,403 |
|
|
|
700 |
|
|
|
15,220 |
Equity in earnings of unconsolidated joint ventures, net |
|
1,161 |
|
|
|
1,991 |
|
|
|
4,616 |
|
|
|
4,867 |
Income before income tax expense |
|
1,868 |
|
|
|
13,394 |
|
|
|
5,316 |
|
|
|
20,087 |
Income tax expense |
|
2,215 |
|
|
|
3,221 |
|
|
|
3,619 |
|
|
|
6,262 |
Net (loss) income |
|
(347 |
) |
|
|
10,173 |
|
|
|
1,697 |
|
|
|
13,825 |
Net (loss) income attributable to non-controlling interest |
|
(6 |
) |
|
|
(11 |
) |
|
|
(3 |
) |
|
|
1 |
Net (loss) income attributable to common stockholders |
$ |
(341 |
) |
|
$ |
10,184 |
|
|
$ |
1,700 |
|
|
$ |
13,824 |
Net (loss) income per share attributable to common stockholders,
basic |
$ |
(0.01 |
) |
|
$ |
0.38 |
|
|
$ |
0.06 |
|
|
$ |
0.52 |
Net (loss) income per share attributable to common stockholders,
diluted |
$ |
(0.01 |
) |
|
$ |
0.38 |
|
|
$ |
0.06 |
|
|
$ |
0.52 |
Weighted average number of shares outstanding: |
|
|
|
|
|
|
|
Common stock |
|
26,725,628 |
|
|
|
26,491,251 |
|
|
|
26,695,714 |
|
|
|
26,468,099 |
Common stock equivalents |
|
72,435 |
|
|
|
47,507 |
|
|
|
76,668 |
|
|
|
164,364 |
Diluted shares outstanding |
|
26,798,063 |
|
|
|
26,538,758 |
|
|
|
26,772,382 |
|
|
|
26,632,463 |
|
TEJON RANCH CO. AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(In thousands, except per share data) |
|
|
September 30, 2023 |
|
December 31, 2022 |
|
(unaudited) |
|
|
ASSETS |
|
|
|
Current Assets: |
|
|
|
Cash and cash equivalents |
$ |
43,149 |
|
|
$ |
39,119 |
|
Marketable securities - available-for-sale |
|
29,456 |
|
|
|
33,444 |
|
Accounts receivable |
|
3,980 |
|
|
|
4,453 |
|
Inventories |
|
8,925 |
|
|
|
3,369 |
|
Prepaid expenses and other current assets |
|
3,520 |
|
|
|
2,660 |
|
Total current assets |
|
89,030 |
|
|
|
83,045 |
|
Real estate and improvements - held for lease, net |
|
16,780 |
|
|
|
16,940 |
|
Real estate development (includes $117,518 at September 30,
2023 and $115,221 at December 31, 2022, attributable to CFL) |
|
330,566 |
|
|
|
321,293 |
|
Property and equipment, net |
|
54,941 |
|
|
|
52,980 |
|
Investments in unconsolidated joint ventures |
|
31,345 |
|
|
|
41,891 |
|
Net investment in water assets |
|
52,507 |
|
|
|
47,045 |
|
Other assets |
|
5,104 |
|
|
|
3,597 |
|
TOTAL ASSETS |
$ |
580,273 |
|
|
$ |
566,791 |
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
Current Liabilities: |
|
|
|
Trade accounts payable |
$ |
6,393 |
|
|
$ |
5,117 |
|
Accrued liabilities and other |
|
4,504 |
|
|
|
3,602 |
|
Deferred income |
|
2,326 |
|
|
|
1,531 |
|
Income taxes payable |
|
3,088 |
|
|
|
— |
|
Current maturities of long-term debt |
|
1,844 |
|
|
|
1,779 |
|
Total current liabilities |
|
18,155 |
|
|
|
12,029 |
|
Long-term debt, less current portion |
|
46,793 |
|
|
|
48,161 |
|
Long-term deferred gains |
|
11,447 |
|
|
|
11,447 |
|
Deferred tax liability |
|
7,676 |
|
|
|
7,180 |
|
Other liabilities |
|
15,212 |
|
|
|
10,380 |
|
Total liabilities |
|
99,283 |
|
|
|
89,197 |
|
Commitments and contingencies |
|
|
|
Equity: |
|
|
|
Tejon Ranch Co. Stockholders’ Equity |
|
|
|
Common stock, $0.50 par value per share: |
|
|
|
Authorized shares - 50,000,000 |
|
|
|
Issued and outstanding shares - 26,726,464 at September 30,
2023 and 26,541,553 at December 31, 2022 |
|
13,363 |
|
|
|
13,271 |
|
Additional paid-in capital |
|
345,404 |
|
|
|
345,344 |
|
Accumulated other comprehensive loss |
|
(481 |
) |
|
|
(2,028 |
) |
Retained earnings |
|
107,343 |
|
|
|
105,643 |
|
Total Tejon Ranch Co. Stockholders’ Equity |
|
465,629 |
|
|
|
462,230 |
|
Noncontrolling interest |
|
15,361 |
|
|
|
15,364 |
|
Total equity |
|
480,990 |
|
|
|
477,594 |
|
TOTAL LIABILITIES AND EQUITY |
$ |
580,273 |
|
|
$ |
566,791 |
|
|
Non-GAAP Financial Measure
This press release includes references to the
Company’s non-GAAP financial measure “EBITDA.” EBITDA represents
the Company's share of consolidated net income in accordance with
GAAP, before interest, taxes, depreciation, and amortization, plus
the allocable portion of EBITDA of unconsolidated joint ventures
accounted for under the equity method of accounting based upon
economic ownership interest, and all determined on a consistent
basis in accordance with GAAP. EBITDA is a non-GAAP financial
measure and is used by the Company and others as a supplemental
measure of performance. Tejon Ranch uses Adjusted EBITDA to assess
the performance of the Company's core operations, for financial and
operational decision making, and as a supplemental or additional
means of evaluating period-to-period comparisons on a consistent
basis. Adjusted EBITDA is calculated as EBITDA, excluding stock
compensation expense. The Company believes Adjusted EBITDA provides
investors relevant and useful information because it permits
investors to view income from operations on an unlevered basis
before the effects of taxes, depreciation and amortization, and
stock compensation expense. By excluding interest expense and
income, EBITDA and Adjusted EBITDA allow investors to measure the
Company's performance independent of its capital structure and
indebtedness and, therefore, allow for a more meaningful comparison
of the Company's performance to that of other companies, both in
the real estate industry and in other industries. The Company
believes that excluding charges related to share-based compensation
facilitates a comparison of its operations across periods and among
other companies without the variances caused by different valuation
methodologies, the volatility of the expense (which depends on
market forces outside the Company's control), and the assumptions
and the variety of award types that a company can use. EBITDA and
Adjusted EBITDA have limitations as measures of the Company's
performance. EBITDA and Adjusted EBITDA do not reflect Tejon
Ranch's historical cash expenditures or future cash requirements
for capital expenditures or contractual commitments. While EBITDA
and Adjusted EBITDA are relevant and widely used measures of
performance, they do not represent net income or cash flows from
operations as defined by GAAP, and they should not be considered as
alternatives to those indicators in evaluating performance or
liquidity. Further, the Company's computation of EBITDA and
Adjusted EBITDA may not be comparable to similar measures reported
by other companies.
|
TEJON RANCH CO.Non-GAAP Financial
Measures(Unaudited) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
($ in thousands) |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net (loss) income |
$ |
(347 |
) |
|
$ |
10,173 |
|
|
$ |
1,697 |
|
|
$ |
13,825 |
|
Net (loss) income attributable to non-controlling interest |
|
(6 |
) |
|
|
(11 |
) |
|
|
(3 |
) |
|
|
1 |
|
Net (loss) income attributable to common stockholders |
|
(341 |
) |
|
|
10,184 |
|
|
|
1,700 |
|
|
|
13,824 |
|
Interest, net |
|
|
|
|
|
|
|
Consolidated |
|
(700 |
) |
|
|
(204 |
) |
|
|
(1,775 |
) |
|
|
(300 |
) |
Our share of interest expense from unconsolidated joint
ventures |
|
1,216 |
|
|
|
725 |
|
|
|
3,618 |
|
|
|
1,955 |
|
Total interest, net |
|
516 |
|
|
|
521 |
|
|
|
1,843 |
|
|
|
1,655 |
|
Income taxes |
|
2,215 |
|
|
|
3,221 |
|
|
|
3,619 |
|
|
|
6,262 |
|
Depreciation and amortization: |
|
|
|
|
|
|
|
Consolidated |
|
1,028 |
|
|
|
1,294 |
|
|
|
3,003 |
|
|
|
3,342 |
|
Our share of depreciation and amortization from unconsolidated
joint ventures |
|
1,393 |
|
|
|
1,095 |
|
|
|
4,005 |
|
|
|
3,337 |
|
Total depreciation and amortization |
|
2,421 |
|
|
|
2,389 |
|
|
|
7,008 |
|
|
|
6,679 |
|
EBITDA |
|
4,811 |
|
|
|
16,315 |
|
|
|
14,170 |
|
|
|
28,420 |
|
Stock compensation expense |
|
864 |
|
|
|
1 |
|
|
|
2,369 |
|
|
|
2,088 |
|
Adjusted EBITDA |
$ |
5,675 |
|
|
$ |
16,316 |
|
|
$ |
16,539 |
|
|
$ |
30,508 |
|
Tejon Ranch Co. |
Brett A. Brown, 661-248-3000 |
Executive Vice President, Chief Financial Officer |
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