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, 2020.
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 operation with
nearly 6.0 million square feet completed and an additional 14.3
million square feet available for development. When these four
master planned developments are fully built out, Tejon Ranch will
be home to 34,783 housing units, more than 35 million square feet
of commercial/industrial space and 750 lodging units.
"We continue to see signs of a rebound from the impact of the
global pandemic and resulting governmental shutdowns. In September,
the Outlets at Tejon experienced the highest overall sales of any
September since our grand opening. Our gas stations at the Tejon
Ranch Commerce Center reported fuel volume sales at near
pre-COVID-19 levels during August and September. Under California's
Blueprint for a Safer Economy, we were just recently allowed to
open our full service restaurants, albeit at 25% capacity, and our
retail, gas stations, convenience stores and logistic centers
remain open," said Gregory S. Bielli, President and CEO. "Our
mineral resource segment is trailing behind as oil prices are
recovering at a slower pace than expected. The Company's hedging of
commodity production provided additional income to meet our
forecasted yield levels. We also continue to press ahead with our
mixed-use master planned communities, all the while managing our
expenditures to preserve cash in the event the COVID-19 pandemic
continues well into 2021."
Third Quarter Financial Results
- Net income attributable to common stockholders for the third
quarter of 2020 was $0.4 million, or net income per share
attributed to common stockholders, basic and diluted, of $0.02, an
improvement compared to net income attributable to common
stockholders of $47,000, or net income per share attributed to
common stockholders, basic and diluted, of $0.00, for the third
quarter of 2019.
- Revenues and other income, for the third quarter of 2020,
including equity in earnings of unconsolidated joint ventures were
up, $15.1 million, compared with $12.2 million for the third
quarter of 2019. Factors affecting the quarterly results include:
- Farming segment revenues were $8.5 million for the three months
ended September 30, 2020, an increase of $3.9 million, or 86%, from
$4.6 million during the same period in 2019. During the quarter,
the Company sold only 456,000 pounds of pistachios compared to
831,000 pounds during the previous year. Although 2020 is not a
down bearing year for pistachios, the crop did not receive adequate
chilling hours due to warm 2020 winter. Crops with inadequate
chilling hours will result in depressed yields and blooms. The
Company purchases crop production insurance annually as a hedge
against below average production for its almond and pistachio
crops. The insurance will pay for reduced production if crop
production for the year falls below insured levels. Accordingly,
the Company filed a claim with its insurance provider and
recuperated a portion of the reduced production. The insurance
claim for the Company's pistachio crop was $3.8 million, which was
finalized during the third quarter and is reflected in farming
revenue.
- The above increase was partially offset by a decrease in equity
in earnings from unconsolidated joint ventures. Equity in earnings
from unconsolidated joint ventures were $1.1 million for the three
months ended September 30, 2020, a decrease of $1.1 million or 50%,
from $2.2 million during the same period in 2019. The change is
primarily attributed to an $0.9 million decrease within the
Company's Petro Travel Plaza Holdings joint venture. There were
significant declines in fuel margins resulting from reduced sales
prices. Additionally, quick and full service restaurant margins
decreased as a result of closures due to COVID-19. Also
contributing to the year-over-year decline in this segment was the
fact that the Company experienced decreased operating results from
its Five West Parcel joint venture, due to the sale of building and
land, its only asset, during the fourth quarter of 2019.
Year-to-Date Financial Results
- Net loss attributable to common stockholders for the first nine
months of 2020 was $0.6 million, or net loss per share attributed
to common stockholders, basic and diluted, of $0.02, compared with
net income attributable to common stockholders of $0.9 million, or
net income per share attributed to common stockholders, basic and
diluted, of $0.03, for the first nine months of 2019.
- Revenues and other income, for the first nine months of 2020,
including equity in earnings of unconsolidated joint ventures, were
$34.5 million, compared with $35.4 million for the first nine
months of 2019. Factors impacting the year-to-date results include:
- Commercial/industrial real estate development segment revenues
were $7.1 million for the first nine months of 2020, a decrease of
$4.9 million, or 41%, from $12.0 million for the first nine months
of 2019. The absence of land sales and construction management fees
in 2020 drove a majority of this decrease.
- Equity in earnings was $3.6 million for the nine months ended
September 30, 2020, a decrease of $1.4 million, or 28%, from $5.0
million during the same period in 2019. The decline is attributed
to the same factors discussed within the third quarter financial
results.
- The above decreases were partially offset by an increase in
farming revenues. Farming segment revenues were $9.7 million for
the first nine months of 2020, an increase of $3.4 million, or 54%,
from $6.3 million during the same period in 2019. Increases in
year-to-date revenues occurred for the same reasons mentioned
within the third quarter financial results above.
- The Company recognized a $1.3 million gain from selling real
estate to the TA/Petro joint venture in 2020, partially offsetting
the above mentioned decreases.
- Lastly, Mineral Resources segment revenues were $9.3 million
for the first nine months of 2020, an increase of $0.9 million, or
11%, from $8.4 million for the first nine months of 2019. In 2019,
the Company had an unfavorable water sales adjustment of $1.1
million that was tied to an increase in State Water Project (SWP)
allocation levels, impacting prior sales pricing. In 2020 however,
SWP allocation levels were more favorable to the Company, which in
turn improved pricing, resulting in additional water sales
revenues. Also in 2020, the Company experienced improved cement and
rock aggregate revenues.
- Income tax expense was $1.1 million as of September 30, 2020
compared with $0.3 million for the same period in 2019. The Company
had a net loss for the nine months ended September 30, 2020, due to
the Company recognizing income tax expense primarily as a result of
permanent differences related to Section 162(m) compensation
deduction limitations and discrete tax expense associated with
stock compensation. The Section 162(m) limitations occurred as a
result of changes in tax law arising from the 2017 Tax Cuts and
Jobs Act, which did not impact the Company until this year. The
discrete item was triggered when stock grants were issued to
participants at a price less than the original grant price, causing
a deferred tax shortfall. The shortfall recognized during the
quarter represents the reversal of excess deferred tax assets
recognized in prior periods. The recognition of the shortfall is
not anticipated to have an impact on the Company's current income
tax payable.
2020 Outlook:
Currently, California is taking a more cautious approach toward
reopening than many other states. The Company is beginning to see
meaningful improvements in traffic counts at its commerce center.
Nevertheless, until the COVID-19 virus is better maintained and/or
a vaccine is approved for nationwide distribution, the Company will
need to continue to monitor the performance of its operating
segments and the solvency of its tenants.
The Company's capital structure provides a solid foundation for
continued investment in ongoing and future projects during this
time of uncertainty. As of September 30, 2020, total capital,
including debt, was approximately $503.1 million. The Company had
cash and securities totaling approximately $50.4 million and $35.0
million available on its line of credit. The Company is also taking
steps to maximize positive cash flow, in the event a lack of
liquidity in the economy resulting from responses to the COVID-19
pandemic limits the Company's access to future third party
funding.
The Company's agribusiness operations are deemed essential and
allowed to operate under California's Blueprint for a Safer
Economy. COVID-19 did not have a measurable impact on the Company's
ability to plant, cultivate and harvest its crops.
The almond industry is on pace for a record production due to a
great bloom cycle. The industry continues to see strong demand for
its product, but the expected increase in production has begun to
negatively impact prices. The mix of demand has been changed in the
near term as a result of COVID-19 as more product is moving through
wholesale markets and less through high end users such as
restaurants. This temporary trend has also negatively impacted
pricing.
With regards to pistachios, although 2020 is an on production
year, unfavorable warm winter conditions adversely impacted the
Company's pistachio blooms and yields. Overall 2020 pistachio
yields decreased 45% when compared to 2019 which was a down bearing
year. The impact of lower chill hours has impacted pistachio
growers in the southern end of the San Joaquin Valley where the
Company farms, and lower production has been seen in these areas as
well. Overall in California, production is up due to 2020 being an
on production year and chill hours being greater in growing areas
to the north of the Company's landholdings.
The Company will continue to aggressively pursue development,
leasing, sales, and investment within the Tejon Ranch Commerce
Center and its joint ventures, and will also continue to invest in
its residential projects, including Mountain Village at Tejon
Ranch, Centennial at Tejon Ranch and Grapevine at Tejon Ranch.
During 2020, the Company will continue to invest funds in master
project infrastructure, defending currently held entitlements, as
well as vertical development within its active commercial and
industrial developments. 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 mineral resources segment, and the timing of
sales of land and the leasing of land within its industrial
developments.
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 the
Company's 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. Some of 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, the impact of COVID-19, 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,
2020
2019
2020
2019
Revenues:
Real estate - commercial/industrial
$
2,710
$
2,620
$
7,144
$
12,041
Mineral resources
1,322
1,559
9,276
8,351
Farming
8,537
4,602
9,698
6,303
Ranch operations
944
876
2,483
2,570
Total revenues from Operations
13,513
9,657
28,601
29,265
Operating Income (Loss):
Real estate - commercial/industrial
684
652
1,440
3,688
Real estate - resort/residential
(273
)
(582
)
(1,225
)
(1,872
)
Mineral resources
674
983
4,036
3,345
Farming
429
(1,377
)
(1,211
)
(2,099
)
Ranch operations
(220
)
(384
)
(1,265
)
(1,433
)
Income (Loss) from Operating Segments
1,294
(708
)
1,775
1,629
Investment income
455
294
834
972
(Loss) gain on sale of real estate
(2
)
—
1,331
—
Other income, net
68
19
64
67
Corporate expense
(2,121
)
(1,760
)
(7,148
)
(6,524
)
Loss from operations before equity in
earnings of unconsolidated joint ventures
(306
)
(2,155
)
(3,144
)
(3,856
)
Equity in earnings of unconsolidated joint
ventures, net
1,093
2,199
3,629
5,046
Income before income tax expense
787
44
485
1,190
Income tax expense
403
7
1,111
320
Net income (loss)
384
37
(626
)
870
Net loss attributable to non-controlling
interest
(14
)
(10
)
(9
)
(3
)
Net income (loss) attributable to common
stockholders
$
398
$
47
$
(617
)
$
873
Net income (loss) per share attributable
to common stockholders, basic
$
0.02
$
0.00
$
(0.02
)
$
0.03
Net income (loss) per share attributable
to common stockholders, diluted
$
0.02
$
0.00
$
(0.02
)
$
0.03
Weighted average number of shares
outstanding:
Common stock
26,229,226
26,041,353
26,193,058
26,022,022
Common stock equivalents
57,484
195,957
157,579
194,699
Diluted shares outstanding
26,286,710
26,237,310
26,350,637
26,216,721
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,
($ in thousands)
2020
2019
2020
2019
Net income (loss)
$
384
$
37
$
(626)
$
870
Net loss attributable to non-controlling
interest
(14)
(10)
(9)
(3)
Net income (loss) attributable to common
stockholders
398
47
(617)
873
Interest, net:
Consolidated
(455)
(294)
(834)
(972)
Our share of interest expense from
unconsolidated joint ventures
653
708
1,971
2,176
Total interest, net
198
414
1,137
1,204
Income taxes
403
7
1,111
320
Depreciation and amortization:
Consolidated
1,455
1,426
3,635
3,562
Our share of depreciation and amortization
from unconsolidated joint ventures
1,167
1,013
3,222
3,147
Total depreciation and amortization
2,622
2,439
6,857
6,709
EBITDA
3,621
2,907
8,488
9,106
Stock compensation expense
1,167
338
3,566
1,930
Adjusted EBITDA
$
4,788
$
3,245
$
12,054
$
11,036
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201103005169/en/
Tejon Ranch Co. Robert D. Velasquez, 661-248-3000 Senior Vice
President and Chief Financial Officer
Tejon Ranch (NYSE:TRC)
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