Tejon Ranch Co. Announces Fourth Quarter and Year-Ended December 31, 2023 Financial Results
Tejon Ranch Co. announced financial results for Q4 and year-ended December 31, 2023, highlighting a new $160 million credit facility, completion of a 446,000 sq ft industrial building, and the start of construction on a multi-family residential development. The company reported GAAP net income of $1.6 million for Q4 2023, with revenues of $18.8 million. Adjusted EBITDA was $4.8 million, down from $7.2 million in Q4 2022.
Positive
Tejon Ranch Co. secured a new $160 million unsecured revolving credit facility with AgWest Farm Credit to fund future real estate projects.
The company completed the construction of a 446,000 sq ft pre-leased industrial building at Tejon Ranch Commerce Center.
Construction started on Terra Vista at Tejon, a new multi-family apartment community, marking a significant milestone for the company.
TRCC's industrial portfolio consists of 2.8 million sq ft of GLA and is fully leased, while the commercial portfolio includes 620,907 sq ft of GLA and is 96% leased.
Q4 2023 GAAP net income was $1.6 million, with revenues of $18.8 million. Adjusted EBITDA was $4.8 million.
Negative
Commercial/industrial segment revenues decreased by 63% in Q4 2023 compared to Q4 2022.
Adjusted EBITDA decreased from $7.2 million in Q4 2022 to $4.8 million in Q4 2023.
The absence of a land contribution in Q4 2023 impacted commercial/industrial segment revenues negatively.
The recent announcement by Tejon Ranch Co. regarding their financial results for the fourth quarter and year-ended December 31, 2023, reveals several key financial metrics that merit close examination. A notable detail is the 9% decrease in revenues and other income, which contrasts with the strategic advancements the company has made, such as securing a new $160 million unsecured revolving credit facility and completing construction on a significant industrial building. The financial impact of these developments needs to be assessed in the context of the company's overall performance and future growth potential.
While the company's net income has decreased slightly from the previous year, this could be attributed to the absence of a land contribution that boosted revenues in the fourth quarter of 2022. This fluctuation is important for investors to consider as it highlights the variability in the company's income streams. Moreover, the increase in farming revenues, particularly from pistachio sales, indicates a recovery in agricultural production which could have a stabilizing effect on the company's financials moving forward.
The company's move to diversify its portfolio through the development of the Terra Vista at Tejon multi-family residential development is a strategic decision that could generate additional revenue streams. However, the full financial impact of this development will depend on the successful leasing and management of the new residential units.
Tejon Ranch Co.'s expansion into mixed-use developments, as evidenced by the construction of Terra Vista at Tejon, signals a strategic pivot towards creating a master-planned community. This transition is reflective of broader industry trends where mixed-use developments are increasingly favored for their potential to create synergies between commercial, industrial and residential spaces. The completion and pre-leasing of the 446,000 square foot industrial building further consolidates Tejon Ranch Co.'s position in the market, with a 100% leased industrial portfolio and a 96% leased commercial portfolio.
Given the company's high occupancy rates, the strategic significance of these developments cannot be overstated. They are likely to contribute to the company's long-term asset value and revenue potential. However, the real estate sector is subject to market cycles and the success of these projects will be contingent upon continued demand for industrial and residential space. The company's ability to navigate these cycles and maintain high occupancy rates will be critical to their sustained success.
Tejon Ranch Co.'s increase in farming revenues, particularly from pistachio sales, is a significant point of interest. The agricultural sector is known for its volatility due to factors such as weather patterns and market demand. The rebound in pistachio production suggests favorable conditions and successful crop management, which has a direct impact on the company's bottom line. This is especially relevant given the mild winter of 2022, which led to a lack of fruit-bearing crops.
Investors should note that while the increase in agricultural revenues is promising, it is important to consider the cyclical nature of crop yields and the potential impact of climate variability on future production. The company's diversification into real estate development could be a strategic hedge against the inherent risks in the agricultural sector, providing a more balanced portfolio with multiple revenue streams.
03/06/2024 - 09:15 AM
TEJON RANCH, Calif., March 06, 2024 (GLOBE NEWSWIRE) -- Tejon Ranch Co., or the Company, (NYSE:TRC), a diversified real estate development and agribusiness company, today announced financial results for the fourth quarter and year-ended December 31, 2023.
"In 2023, we established an important foundation for future growth with the closing of a new $160 million unsecured revolving credit facility with AgWest Farm Credit, based on the Company's deep agricultural heritage and ongoing ranching and farming operations. This new credit facility will be available to fund future real estate construction projects and other operations at favorable terms," said Gregory S. Bielli, President and CEO of Tejon Ranch Co. "Additionally, during the fourth quarter of 2023, we enhanced operations at Tejon Ranch Commerce Center by completing the construction of a 446,000 square foot pre-leased industrial building through one of our joint ventures. This new building adds another income producing asset to our robust portfolio, "We continue our progress into the first quarter of 2024, with the start of construction of Terra Vista at Tejon, a new multi-family apartment community located immediately adjacent to the Outlets at Tejon at TRCC. Terra Vista at Tejon marks the transition of TRCC to a mixed-use master-planned community, a significant milestone for our Company."
Commercial/Industrial Real Estate Highlights
TRCC Industrial portfolio, through the Company's joint venture partnerships, consists of 2.8 million square feet of gross leasable area (GLA) and is 100% leased. TRCC Commercial portfolio, wholly owned and through joint venture partnerships, consists of 620,907 square feet of GLA and is 96% leased. Construction of a 446,400 square foot industrial building was completed in December 2023. 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 that was previously occupied by Sunrise Brands, an apparel company. Sunrise relocated to the new 446,400 square foot building in January 2024. Construction started in the first quarter of 2024 on Phase 1 of Terra Vista at Tejon, the Company's multi-family residential development at TRCC. Phase 1 includes 228 of the planned 495 residential units. Fourth-Quarter 2023 Financial Highlights
GAAP net income attributable to common stockholders for the fourth quarter of 2023 was $1.6 million , or net income per share attributable to common stockholders, basic and diluted, of $0.06 , compared with net income attributable to common stockholders of $2.0 million , or net income per share attributable to common stockholders, basic and diluted, of $0.07 , for the fourth quarter of 2022. Revenues and other income, including equity in earnings of unconsolidated joint ventures, for the fourth quarter of 2023 were $18.8 million , a decrease of $1.9 million , or 9% , compared with $20.7 million for the same period in 2022. Factors behind this change included: Commercial/industrial segment revenues decreased $5.3 million , or 63% , when compared with the fourth quarter in 2022, primarily attributable to the absence of a land contribution in the fourth quarter 2023. During the fourth quarter of 2022, the Company contributed a 27.9-acre land parcel with a fair value of $8.5 million to the Company's TRC-MRC5, LLC joint venture. The Company recognized profit of $3.0 million and deferred profit of $3.0 million for this transaction. The decrease mentioned above was partially offset by an increase in farming revenues by $3.4 million , or 61% , when compared to the same period in 2022. The increase was largely attributed to an increase in pistachio sales in 2023, as the 2022 crop did not bear fruit due to a mild winter. Adjusted EBITDA, a non-GAAP measure, was $4.8 million for the quarter ended December 31, 2023, compared with $7.2 million for the quarter ended December 31, 2022. Tejon Ranch Co. provides Adjusted EBITDA, a non-GAAP financial measure, because 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.
Fiscal 2023 Financial Highlights
GAAP net income attributable to common stockholders for fiscal 2023 was $3.3 million , or net income per share attributable to common stockholders, basic and diluted of $0.12 , compared with net income attributable to common stockholders of $15.8 million , or $0.60 per share basic and diluted, for 2022. Revenues and other income, including equity in earnings of unconsolidated joint ventures, were $54.0 million in 2023, a decrease of $34.7 million , or 39% , compared with $88.7 million in 2022. Factors driving this decrease included: A decrease in commercial/industrial segment revenue of $28.8 million , or 71% , compared with 2022, primarily resulting from the absence of land sales in 2023. A decrease in mineral resources segment revenue of $7.1 million , or 33% , compared with 2022, primarily attributed to lower water sales revenue. The State Water Project (SWP) allocation was at 100% in 2023, which severely limited the Company's water sales opportunities. In 2022 the SWP allocation was 5% . Additionally, the Company experienced a decrease in royalties due to the lower price per barrel for oil production, combined with lower production volume of cement and aggregate, when compared with 2022. The decrease mentioned above was partially offset by a 69% decrease in income tax over the comparative period, resulting from lower operating income recognized for the year. Adjusted EBITDA, a non-GAAP measure, was $21.4 million for the year ended December 31, 2023, compared with $37.7 million for the year ended December 31, 2022. Tejon Ranch Co. provides Adjusted EBITDA, a non-GAAP financial measure, because 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.
Liquidity and Capital Resources
As of December 31, 2023, total capital, including debt, was approximately $531.0 million . As of December 31, 2023, the Company had cash and securities totaling approximately $64.5 million and $108.6 million available on its line of credit.
2024 Outlook:
In January of 2024, the Company announced that Nestlé USA will start construction on its new distribution center at TRCC East. The new multi-story building, which will total more than 700,000 square feet, will be located on the 58-acre parcel of land that was sold to Nestlé in November 2022.
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 along with SWP allocations. The current SWP allocation is at 15% of contract amounts, with the expectation that the allocation may increase.
The Company expects its 2024 farming operations to continue to be impacted by higher costs of production, such as fuel costs, fertilizer costs, pest control costs, and labor costs. The Company is anticipating higher almond industry inventory levels, which may have an adverse effect on 2024 selling prices.
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 15 miles south of Bakersfield.
More information about Tejon Ranch Co. can be found online at http://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, 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. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31 2023 2022 ASSETS Current Assets: Cash and cash equivalents $ 31,907 $ 39,119 Marketable securities - available-for-sale 32,556 33,444 Accounts receivable 8,352 4,453 Inventories 3,493 3,369 Prepaid expenses and other current assets 3,502 2,660 Total current assets 79,810 83,045 Real estate and improvements - held for lease, net 16,609 16,940 Real estate development (includes $119,788 at December 31, 2023 and $115,221 at December 31, 2022, attributable to Centennial Founders, LLC, Note 17) 337,257 321,293 Property and equipment, net 53,985 52,980 Investments in unconsolidated joint ventures 33,648 41,891 Net investment in water assets 52,130 47,045 Other assets 4,084 3,597 TOTAL ASSETS $ 577,523 $ 566,791 LIABILITIES AND EQUITY Current Liabilities: Trade accounts payable $ 6,457 $ 5,117 Accrued liabilities and other 3,214 3,602 Deferred income 1,891 1,531 Current maturities of long-term debt — 1,779 Total current liabilities 11,562 12,029 Long-term debt, less current portion — 48,161 Revolving line of credit 47,942 — Long-term deferred gains 11,447 11,447 Deferred tax liability 8,269 7,180 Other liabilities 15,207 10,380 Total liabilities 94,427 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 - 26,770,545 at December 31, 2023 and 26,541,553 at December 31, 2022 13,386 13,271 Additional paid-in capital 345,609 345,344 Accumulated other comprehensive loss (171 ) (2,028 ) Retained earnings 108,908 105,643 Total Tejon Ranch Co. Stockholders’ Equity 467,732 462,230 Non-controlling interest 15,364 15,364 Total equity 483,096 477,594 TOTAL LIABILITIES AND EQUITY $ 577,523 $ 566,791
TEJON RANCH CO. CONSOLIDATED STATEMENTS OF OPERATIONS Three-Months Ended Year Ended 2023 2022 2023 2022 Revenues: Real estate - commercial/industrial $ 3,052 $ 8,352 $ 11,758 $ 40,515 Mineral resources 2,894 2,357 14,524 21,595 Farming 9,098 5,649 13,950 13,001 Ranch operations 1,123 1,095 4,507 4,106 Total revenues 16,167 17,453 44,739 79,217 Costs and expenses: Real estate - commercial/industrial 2,536 4,953 8,053 16,356 Real estate - resort/residential 449 411 1,528 1,629 Mineral resources 1,694 1,622 8,685 12,969 Farming 9,613 5,835 15,257 19,811 Ranch operations 1,179 1,316 5,043 5,024 Corporate expenses 3,048 3,469 9,872 9,699 Total expenses 18,519 17,606 48,438 65,488 Operating (loss) income (2,352 ) (153 ) (3,699 ) 13,729 Other income: Investment income 782 334 2,557 634 Other (expense) income (410 ) 50 (138 ) 1,088 Total other income 372 384 2,419 1,722 (Loss) income from operations before equity in earnings of unconsolidated joint ventures and income tax expense (1,980 ) 231 (1,280 ) 15,451 Equity in earnings of unconsolidated joint ventures, net 2,252 2,885 6,868 7,752 Income before income taxes 272 3,116 5,588 23,203 Income tax (benefit) expense (1,296 ) 1,131 2,323 7,393 Net income 1,568 1,985 3,265 15,810 Net income attributable to non-controlling interest 3 1 — 2 Net income attributable to common stockholders $ 1,565 $ 1,984 $ 3,265 $ 15,808 Net income per share attributable to common stockholders, basic $ 0.06 $ 0.07 $ 0.12 $ 0.60 Net income per share attributable to common stockholders, diluted $ 0.06 $ 0.07 $ 0.12 $ 0.59 Weighted average number of shares outstanding: Common stock 26,739,791 26,508,061 26,706,824 26,478,171 Common stock equivalents – stock options 2,789 224,778 — 174,748 Diluted shares outstanding 26,742,580 26,732,839 26,706,824 26,652,919
Non-GAAP Financial Measure
This news release includes references to the Company’s non-GAAP financial measure “EBITDA.” EBITDA represents earnings before interest, taxes, depreciation, and amortization, 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 and asset abandonment charges. 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, stock compensation expense, and abandonment charges. 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. 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 Three Months Ended Year Ended 2023 2022 2023 2022 Net income $ 1,568 $ 1,985 $ 3,265 $ 15,810 Net income attributed to non-controlling interest 3 1 — 2 Interest, net: Consolidated (782 ) (334 ) (2,557 ) (634 ) Our share of interest expense from unconsolidated joint ventures 1,261 1,019 4,879 2,974 Total interest, net 479 685 2,322 2,340 Income tax expense (1,296 ) 1,131 2,323 7,393 Depreciation and amortization: Consolidated 1,803 1,286 4,806 4,628 Our share of depreciation and amortization from unconsolidated joint ventures 1,413 1,281 5,418 4,618 Total depreciation and amortization 3,216 2,567 10,224 9,246 EBITDA $ 3,964 $ 6,367 $ 18,134 $ 34,787 Stock compensation expense $ 883 $ 789 $ 3,252 $ 2,877 Adjusted EBITDA $ 4,847 $ 7,156 $ 21,386 $ 37,664
Tejon Ranch Co.
Pondel Wilkinsonlberman@pondel.com
RPM Public Relations
What was Tejon Ranch Co.'s GAAP net income for Q4 2023?
Tejon Ranch Co.'s GAAP net income for Q4 2023 was $1.6 million.
How much was the new credit facility secured for by Tejon Ranch Co.?
Tejon Ranch Co. secured a new $160 million unsecured revolving credit facility.
What is the GLA of TRCC's industrial portfolio?
TRCC's industrial portfolio consists of 2.8 million square feet of GLA.
What percentage of TRCC's commercial portfolio is leased?
TRCC's commercial portfolio is 96% leased.
What was the decrease in revenues for the commercial/industrial segment in Q4 2023 compared to Q4 2022?
Commercial/industrial segment revenues decreased by 63% in Q4 2023 compared to Q4 2022.
What was Tejon Ranch Co.'s Adjusted EBITDA for Q4 2023?
Tejon Ranch Co.'s Adjusted EBITDA for Q4 2023 was $4.8 million.
