PICO Holdings, Inc. (NASDAQ:PICO) reported results for the fourth
quarter and full year ended December 31, 2016. PICO
reported shareholders' equity of $328 million ($14.22 per share) at
December 31, 2016, compared to $334.9 million ($14.52 per
share) at September 30, 2016 and $346.4 million ($15.04 per
share) at December 31, 2015.
Fourth Quarter Segment Results of
Operations
For the fourth quarter of 2016, PICO reported a net
loss of $8.8 million ($0.38 per share), compared to a net loss of
$1.2 million ($0.05 per share) for the fourth quarter of
2015. Our fourth quarter segment results of operations were
as follows (in thousands):
|
Three Months EndedDecember
31, |
|
2016 |
|
2015 |
Revenue by
operating segment: |
|
|
|
Water
resource and water storage operations |
$ |
139 |
|
|
$ |
141 |
|
Real
estate operations |
108,014 |
|
|
106,953 |
|
Corporate |
4,971 |
|
|
1,046 |
|
Total revenue |
$ |
113,124 |
|
|
$ |
108,140 |
|
|
|
|
|
Income (loss)
before taxes by operating segment: |
|
|
|
Water
resource and water storage operations |
$ |
(1,213 |
) |
|
$ |
(1,951 |
) |
Real
estate operations |
3,351 |
|
|
8,055 |
|
Corporate |
(10,305 |
) |
|
(2,438 |
) |
Income (loss) from
continuing operations before income taxes and equity in loss of
unconsolidated affiliates |
(8,167 |
) |
|
3,666 |
|
Benefit
for federal, foreign, and state income taxes |
5,979 |
|
|
13 |
|
Income (loss) from
continuing operations |
(2,188 |
) |
|
3,679 |
|
Income
(loss) from discontinued agribusiness operations, net of tax |
581 |
|
|
(1,019 |
) |
Gain
(loss) on sale of discontinued agribusiness operations, net of
tax |
1 |
|
|
(478 |
) |
Net income (loss) from
discontinued agribusiness operations, net of tax |
582 |
|
|
(1,497 |
) |
Net income (loss) |
(1,606 |
) |
|
2,182 |
|
Net
income attributable to noncontrolling interests |
(7,160 |
) |
|
(3,353 |
) |
Net loss attributable
to PICO Holdings, Inc. |
$ |
(8,766 |
) |
|
$ |
(1,171 |
) |
Full Year Segment Results of
Operations
For 2016, we reported a net loss of $21.9 million
($0.95 per share), compared to a net loss of $81.9 million ($3.56
per share) for 2015. Our full year segment results of
operations were as follows (in thousands):
|
Year Ended December 31, |
|
2016 |
|
2015 |
Revenue by
operating segment: |
|
|
|
Water
resource and water storage operations |
$ |
952 |
|
|
$ |
4,332 |
|
Real
estate operations |
354,745 |
|
|
279,196 |
|
Corporate |
6,881 |
|
|
(16,865 |
) |
Total revenue |
$ |
362,578 |
|
|
$ |
266,663 |
|
|
|
|
|
Income (loss)
before taxes by operating segment: |
|
|
|
Water
resource and water storage operations |
$ |
(5,476 |
) |
|
$ |
(3,858 |
) |
Real
estate operations |
8,064 |
|
|
6,394 |
|
Corporate |
(20,591 |
) |
|
(33,686 |
) |
Loss from continuing
operations before income taxes and equity in loss of unconsolidated
affiliates |
(18,003 |
) |
|
(31,150 |
) |
Benefit
for federal, foreign, and state income taxes |
6,351 |
|
|
2,961 |
|
Equity in
loss of unconsolidated affiliate |
|
|
(3,422 |
) |
Loss from continuing
operations |
(11,652 |
) |
|
(31,611 |
) |
Income
(loss) from discontinued agribusiness operations, net of tax |
479 |
|
|
(30,539 |
) |
Loss on
sale of discontinued agribusiness operations, net of tax |
(1,856 |
) |
|
(18,729 |
) |
Net loss from
discontinued agribusiness operations, net of tax |
(1,377 |
) |
|
(49,268 |
) |
Net loss |
(13,029 |
) |
|
(80,879 |
) |
Net
income attributable to noncontrolling interests |
(8,836 |
) |
|
(979 |
) |
Net loss attributable
to PICO Holdings, Inc. |
$ |
(21,865 |
) |
|
$ |
(81,858 |
) |
PICO’s President and Chief Executive Officer, Max
Webb, commented:
“2016 was a year of transition that saw us begin
the process of monetizing our assets with the objective of
returning capital to shareholders. Additionally, the year witnessed
the implementation of a series of key corporate initiatives for
PICO. Following the CEO succession process we undertook in
the fourth quarter, the Board adopted a new executive compensation
plan designed to reduce overall executive compensation while
bringing our compensation program more in line with what we believe
to be the expectations of our shareholders. During the year
we also implemented a series of additional cost saving measures
that have significantly reduced our net annual cash costs on a go
forward basis.
“As part of our stated strategy of monetizing
assets to enable return of capital to our shareholders, we entered
into a number of transactions aimed at furthering this goal:
- We entered into significant water sales transactions in 2016
that closed in the first quarter of 2017 pursuant to which we
realized gross proceeds of $25 million.
- We sold the majority of our oil and gas assets in 2016 for
gross proceeds of $9.6 million and have a detailed plan to wind
down the remaining oil and gas operations in 2017.
"Looking forward, we continue to seek avenues to
maximize value through opportunistic monetizations of our
assets.
“We made a number of corporate governance
enhancements to the Company during the year, including that the
Board accelerated its planned declassification to take effect prior
to our May 2017 annual meeting of shareholders. Following
this meeting the Board will be reduced to 5 members, which we
believe will allow us to pursue our strategy more efficiently while
minimizing director costs.
“UCP reported net income before income tax of $9.2
million. Comparing 2016 to 2015, UCP continued to increase
revenue. In particular, their homebuilding revenue increased
by 36.2% to $343.9 million. UCP’s homebuilding gross margin
percentage increased to 18.3% in 2016 from 17.8% in 2015 while
selling, general and administrative costs decreased to 13.9% of
UCP’s total revenue compared to 16.4%% in 2015. UCP’s unit
backlog at December 31, 2016 was $149.6 million (362 units)
compared to $108.8 million (249 units) at December 31,
2015.
“Vidler did not record any significant sale
transactions in the year. Previously announced sale
transactions of a total of 100,000 acre feet of our Arizona Long
Term Storage Credits for $25 million did not close until the first
quarter of 2017 and as a result our water segment recorded a loss
of $5.5 million for the year.
“During 2016, we also accrued severance expense to
our former CEO of $10.4 million, which was recorded in the
Corporate segment and together with the results of selling the
majority of our oil and gas assets, writing off our investment in
Synthonics, and corporate overhead contributed to the Corporate
segment’s loss for the year of $20.6 million.”
Net Operating Loss
Carryforwards
At December 31, 2016, PICO had approximately
$137.1 million of (pre-tax) federal net operating loss
carryforwards, or NOLs, that could be utilized in certain
circumstances to offset PICO’s taxable income and reduce its
federal income tax liability. Additional information with
respect to these NOLs is contained in PICO’s Annual Report on Form
10-K for the year ended December 31, 2016 that PICO has filed
with the Securities and Exchange Commission.
Net Book Value
The following table is provided as a supplement to
the consolidated financial statements contained in our Annual
Report on Form 10-K, to illustrate the relative size of our assets
and activities (in millions):
Segment |
|
Net Book Value |
|
|
12/31/2016 |
Water resource and
water storage operations |
|
$ |
183.9 |
|
Real estate
operations |
|
128.1 |
|
Corporate and
discontinued agribusiness operations |
|
16 |
|
Shareholders’ equity |
|
$ |
328 |
|
About PICO Holdings, Inc.
PICO Holdings is a diversified holding
company. Currently, we believe the highest potential return
to shareholders is from a return of capital to shareholders.
As we monetize assets, rather than reinvest the proceeds, we intend
to return the capital derived therefrom, less any working capital
requirements, back to shareholders through a stock repurchase
program or by other means such as special dividends taking into
effect liquidity requirements, debt covenants and any other
contractual and legal restrictions that may exist at the time.
As of December 31, 2016, our two major
investments were:
- Vidler Water Company, Inc., a water resource and water storage
business; and
- a 56.8% interest in UCP, Inc. (NYSE: UCP), a publicly-traded
homebuilder and land developer in markets located in California,
Washington State, North Carolina, South Carolina and
Tennessee.
OTHER INFORMATION
At December 31, 2016, PICO Holdings, Inc.
had a market capitalization of $349.5 million, and 23,069,381
shares outstanding.
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Statements in this press release that are not
historical, including statements regarding our business objectives
and ability to reduce costs, our ability to wind down our remaining
oil and gas operations, our ability to utilize NOLs to offset
taxable income and reduce our federal income liability, and our
ability to monetize assets and return capital to shareholders
through stock repurchases or through other means, are
forward-looking statements based on current expectations and
assumptions that are subject to risks and uncertainties.
In addition, a number of other factors may cause
results to differ materially from our expectations, such as: any
slow down or downturn in the housing recovery or in the real estate
markets in which UCP and Vidler operate; fluctuations in the prices
of water and water rights; physical, governmental and legal
restrictions on water and water rights; a downturn in some sectors
of the stock market; general economic conditions; prolonged
weakness in the overall U.S. and global economies; the performance
of the businesses; the continued service and availability of key
management personnel; and potential capital requirements and
financing alternatives.
For further information regarding risks and
uncertainties associated with our business, please refer to the
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Risk Factors” sections of our SEC
filings, including our Annual Report on Form 10-K and our Quarterly
Reports on Form 10-Q, copies of which may be obtained by contacting
us at (858) 456-6022 or at http://investors.picoholdings.com.
We undertake no obligation to (and we expressly
disclaim any obligation to) update our forward-looking statements,
whether as a result of new information, subsequent events, or
otherwise, in order to reflect any event or circumstance which may
arise after the date of this press release, except as may otherwise
be required by law. Readers are urged not to place undue
reliance on these forward-looking statements, which speak only as
of the date of this press release.
This news release was distributed by
GlobeNewswire, www.globenewswire.com.
CONTACT:
Financial Profiles, Inc.
Lisa Mueller
pico@finprofiles.com
310-478-2700
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