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, 2018.
The Company is in the process of entitling, planning and
developing four master planned developments. Three of the
developments are mixed-use residential communities and the fourth
is a large commercial/industrial center currently in execution with
more than 5.0 million square feet already developed and an
additional 14.8 million square feet available for development. When
all entitlements are approved, the Company's current and future
master planned developments will be home to just under 35,000
housing units and more than 35 million square feet of
commercial/industrial space. To date, the Company has received
entitlement approvals for 15,450 housing units, 750 lodging units
and 25.3 million square feet of commercial space at various levels
of approval.
"Tejon Ranch Co. achieved strong financial results in the third
quarter and continued to make solid progress with its real estate
development projects,” said Gregory S. Bielli, President and CEO.
“This year's pistachio crop yield of over four million pounds was a
record high. The pistachio crop, along with our other agricultural
commodities, provided the Company with a significant boost in
earnings when compared to the prior year. Water sales also
contributed significantly, as our sales are $6.7 million higher
thus far in 2018 compared to the year prior,” Bielli said.
"With respect to our development projects, the Los Angeles
County Regional Planning Commission recommended that the LA County
Board of Supervisors approve the Centennial Specific Plan,” Bielli
noted. “Our commercial center continues to expand its portfolio
with the successful lease of the remaining half of a
480,000-square-foot industrial building to L'Oréal. Additionally,
we formed a third joint venture with Majestic Realty Co. to develop
and operate a 580,000-square-foot industrial building at
TRCC-East."
Third Quarter Financial Results
- Net income attributable to common
stockholders for the third quarter of 2018 was $3.5 million, or
income per common share of $0.13, compared with a net loss of
$22,000, or a loss per common share of $0.00, for the third quarter
of 2017.
- Revenues and other income, including
equity in earnings of unconsolidated joint ventures, for the third
quarter of 2018 were $17.4 million, an increase of $3.7 million, or
27%, from $13.7 million for the same period in 2017. Factors behind
the increase include:
- Record high pistachio yields in excess
of 4,000,000 pounds improved farming revenues $3.4 million. Of the
4,000,000 pounds harvested, the Company sold 3,500,000 pounds of
pistachios compared to 643,000 pounds during the previous year.
Yields for 2017 were lower given that 2017 was a down bearing crop
year.
- Equity in earnings from our
unconsolidated joint ventures decreased $0.1 million to $1.6
million. Factors affecting equity in earnings include:
- The Company's share of the operating
results from TA/Petro increased $0.2 million due to improving fuel
margins resulting from a 23% increase in fuel revenues.
- The Company's share of the operating
results from TRCC/Rock Outlet Center decreased $0.4 million mostly
related to higher operating and loan interest costs.
Year-to-Date Financial Results
- Net income attributable to common
stockholders for the first nine months of 2018 was $3.9 million, or
income per common share of $0.15, compared with a net loss of $2.1
million, or a loss per common share of $0.10, for the first nine
months of 2017.
- Revenues and other income, including
equity in earnings of unconsolidated joint ventures, for the nine
months of 2018 were $37.3 million, an increase of $10.2 million, or
38%, from $27.1 million for the first nine months of 2017. Factors
behind this increase include:
- Moderate drought conditions in Kern
County increased water sales opportunities, leading to an
improvement in the Company’s Mineral Resources segment. The Company
sold 7,442 acre-feet of water during the first nine months of 2018,
generating $8.0 million in revenue. Water sales during the first
nine months of 2017 totaled 939 acre-feet, generating $1.3
million.
- Record high pistachio yields, as
discussed within the quarter end results, improved farming revenues
by $3.2 million.
- Equity in earnings from unconsolidated
joint ventures decreased $1.1 million. Factors affecting equity in
earnings include:
- The Company's share of the operating
results from TA/Petro decreased $0.8 million due to lower fuel
margins driven by higher fuel costs that were not offset by a 15%
increase in fuel revenues.
- The Company's share of the operating
results from TRCC/Rock Outlet Center decreased $1.1 million mostly
related to accelerating amortization of lease intangibles driven by
the removal of poor performing tenants.
- The Company saw improvements of $1.1
million from our TRC-MRC 2 joint venture stemming from the
reduction in amortization costs that were prevalent during the
prior year.
2018 Operational Highlights
- In January, the Company obtained
approval from Kern County on the first phase of the Farm Village
which will serve as the “front door” to Mountain Village.
- During 2018, approval for expansion of
the Foreign Trade Zone (FTZ) was granted by the U.S. Department of
Commerce. The expanded FTZ now covers all the industrial sites
within TRCC, an area totaling 1,094 acres. The FTZ designation
allows the user to secure the many benefits and cost reductions
associated with streamlined movement of goods in and out of the
zone. This FTZ designation is further supplemented by the Economic
Development Incentive Policy (EDIP) adopted by the Kern County
Board of Supervisors. EDIP is aimed to expand and enhance the
County's competitiveness by taking affirmative steps to attract new
businesses and to encourage the growth and resilience of existing
businesses. The EDIP provides incentives such as tax breaks,
building supporting infrastructure, or workforce development.
- The 480,000-square-foot industrial
building constructed in 2017, through a joint venture with Majestic
Realty Co. was fully-leased up in 2018, with half the space leased
to Dollar General and the other half to L'Oréal USA.
- In August, the Company received a 4-1
vote from the Los Angeles County Regional Planning Commission
recommending that the LA County Board of Supervisors approve the
Centennial Specific Plan. The Company is currently working with LA
County to advance the application on to the Board of
Supervisors.
2018 Outlook:
The Company's capital structure provides a solid foundation for
continued investment in ongoing and future projects. As of
September 30, 2018, total capital, including debt, was
approximately $501.4 million. The Company has cash and securities
totaling approximately $79.6 million and $30.0 million available on
its line of credit.
The Company will continue to aggressively pursue development,
leasing, and investment within Tejon Ranch Commerce Center (TRCC)
and in its joint ventures. The Company will also continue to invest
in its residential projects, including Mountain Village at Tejon
Ranch, advancing the entitlement of Centennial at Tejon Ranch and
defending litigation for Grapevine at Tejon Ranch.
During 2018, the Company will continue to invest funds in master
project infrastructure, as well as vertical development within its
active commercial and industrial development. 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 commodity prices, production
within its farming segment, and the timing of sales of land and the
leasing of land within its industrial developments.
The Company believes the variability of its quarterly and annual
operating results will continue during 2018 due to the nature of
its current farming and real estate activities. The Company is
currently in the process of completing its wine grape and almond
harvests. Thus far, the Company expects almond yields to be
slightly lower than the previous year while wine grape yields will
remain comparable to prior year. The Company is also unable to
predict the outcome of ongoing trade discussions with foreign
nations nor is the Company able to predict the resulting impact on
crop demand or pricing. Increased tariffs from China and India
which are major customers of almonds and pistachios, can make
American products non-competitive and push customers to switch to
another producing country.
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.
More information about Tejon Ranch Co. can be found on our
website at www.tejonranch.com.
To watch a video overview of Tejon Ranch Co., please visit:
http://tejonranch.com/investorvideo/.
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, 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.
TEJON RANCH CO.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except earnings per
share)
(Unaudited)
Three Months Ended September 30, Nine Months Ended September
30, 2018 2017 2018 2017 Revenues: Real
estate - commercial/industrial $ 2,445 $ 2,432 $ 6,788 $ 6,704
Mineral resources 1,355 1,142 11,986 4,662 Farming 10,836 7,466
12,573 9,398 Ranch operations 796 868 2,624
2,809 Total revenues from Operations 15,432 11,908 33,971
23,573 Operating Profits: Real estate - commercial/industrial 767
1,117 2,403 1,744 Real estate - resort/residential (471 ) (271 )
(1,319 ) (1,401 ) Mineral resources 781 614 6,586 2,281 Farming
4,295 (455 ) 3,003 (1,104 ) Ranch operations (557 ) (285 ) (1,466 )
(1,298 ) Income (loss) from Operating Segments 4,815 720
9,207 222 Investment income 351 91 980 289
Other loss, net (16 ) (2 ) (40 ) (291 ) Corporate expense (2,100 )
(2,223 ) (7,296 ) (7,342 ) Income (loss) from operations before
equity in earnings of unconsolidated joint ventures 3,050 (1,414 )
2,851 (7,122 ) Equity in earnings of unconsolidated joint ventures,
net 1,592 1,724 2,411 3,512 Income
(loss) before income tax expense 4,642 310 5,262 (3,610 ) Income
tax (benefit) expense 1,155 336 1,333 (1,468 )
Net income (loss)
3,487 (26 ) 3,929 (2,142 ) Net loss attributable to non-controlling
interest (1 ) (4 ) (19 ) (42 )
Net income (loss) attributable to common
stockholders
$ 3,488 $ (22 ) $ 3,948 $ (2,100 )
Net income (loss) per share attributable
to common stockholders, basic
$ 0.13 $ — $ 0.15 $ (0.10 )
Net income (loss) per share attributable
to common stockholders, diluted
$ 0.13 $ — $ 0.15 $ (0.10 ) Weighted average
number of shares outstanding: Common stock 25,959,546 20,864,470
25,941,243 20,849,325 Common stock equivalents 20,881 30,003
31,716 43,951 Diluted shares outstanding
25,980,427 20,894,473 25,972,959 20,893,276
Non-GAAP Financial Measure
This news release includes references to the Company’s non-GAAP
financial measure “EBITDA.” EBITDA represents our 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 us and
others as a supplemental measure of performance. We use Adjusted
EBITDA to assess the performance of our 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. We believe Adjusted EBITDA
provides investors relevant and useful information because it
permits investors to view income from our operations on an
unleveraged 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 our performance independent of our capital structure and
indebtedness and, therefore, allow for a more meaningful comparison
of our performance to that of other companies, both in the real
estate industry and in other industries. We believe that excluding
charges related to share-based compensation facilitates a
comparison of our 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 our control), and the assumptions and the
variety of award types that a company can use. EBITDA and Adjusted
EBITDA have limitations as measures of our performance. EBITDA and
Adjusted EBITDA do not reflect our 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, our 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, 2018 2017 2018 2017 Net (loss)
income $ 3,487 $ (26 ) $ 3,929 $ (2,142 ) Net loss attributed to
non-controlling interest (1 ) (4 ) (19 ) (42 ) Interest, net:
Consolidated (351 ) (91 ) (980 ) (289 ) Our share of interest
expense from unconsolidated joint ventures 712 431
1,768 1,262 Total interest, net 361 340 788 973
Income taxes 1,155 336 1,333 (1,468 ) Depreciation and
amortization: Consolidated 1,604 1,140 3,284 3,422 Our share of
depreciation and amortization from unconsolidated joint ventures
1,119 1,333 3,172 3,970 Total
depreciation and amortization 2,723 2,473 6,456 7,392 EBITDA 7,727
3,127 12,525 4,797 Stock compensation
expense 825 877 2,601 2,571 Adjusted EBITDA $ 8,552 $ 4,004
$ 15,126 $ 7,368
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181106005297/en/
Tejon Ranch Co.Allen Lyda, 661-248-3000Executive Vice President
& Chief Financial Officer
Tejon Ranch (NYSE:TRC)
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