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, 2021.
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, that is currently in operation focusing on leasing, 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.
“The Company is maintaining positive momentum even in the face of challenges in the current economic and business environment,” said Gregory S. Bielli, President and CEO. “On the industrial real estate front, all 4.8 million square feet of leasable space has been leased and occupied at Tejon Ranch Commerce Center and we have started construction on another 630,000 square-foot industrial spec building to provide additional opportunities for growth and reoccurring revenues. On the residential side, we are advancing our projects and have submitted for approval the final map for the initial phases of our Mountain Village community.”
Third Quarter Financial Results
- Net income attributable to common stockholders for the third quarter of 2021 was $0.2 million, or net income per share attributed to common stockholders, basic and diluted, of $0.01, compared with a net income attributable to common stockholders of $0.4 million, or net income per share attributed to common stockholders, basic and diluted, of $0.02, for the third quarter of 2020.
- Revenues and other income, for the third quarter of 2021, including equity in earnings of unconsolidated joint ventures were $16.5 million, compared with $15.1 million for the third quarter of 2020. Factors affecting the quarterly results include:
- Mineral resources segment revenues were $4.8 million for the three months ended September 30, 2021, an increase of $3.5 million, or 261%, from $1.3 million for the three months ended September 30, 2020. The dry 2020/2021 winter diminished water availability in California, eventually resulting in a State Water Project Allocation of 5%, which increased water transaction opportunities. With this demand, the Company generated $3.1 million in additional water sales. During the quarter ended September 30, 2021, the Company sold 2,603 acre-feet of water, while comparatively, there were no water sales during the third quarter of 2020. Additionally, the Company generated more rock aggregate royalties due to demand fueled by increased infrastructure construction throughout the state.
- Farming segment revenues were $6.7 million for the three months ended September 30, 2021, a decrease of $1.8 million, or 21%, from $8.5 million for the third quarter of 2020. Pistachio revenues for the quarter decreased $1,243,000 primarily due to a decrease in insurance proceeds received in 2021 when compared to 2020. In 2020, the Company received pistachio crop insurance proceeds of $3,789,000 as weather conditions negatively impacted the expected yields, but because the 2021 pistachio crop year is a down bearing production year and yields were expected to be lower, the insurance proceeds were only $466,000, a decrease of $3,323,000. With respect to yields, the Company sold 1,615,000 and 456,000 pounds of pistachios for the quarters ended September 30, 2021 and 2020, respectively. Almond revenues decreased $472,000 as a result of the timing of sales. Comparatively, the Company sold 337,000 and 529,000 pounds of almonds for the quarters ended September 30, 2021 and 2020, respectively. Supply chain disruption could hinder the Company’s ability to sell the entirety of its almond crop in 2021, which would result in a greater portion of the 2021 crops being sold in the 2022.
- Equity in earnings from the Company’s joint ventures were $1.5 million for the three months ended September 30, 2021, an increase of $0.4 million or 38%, from $1.1 million during the same period in 2020. The changes are primarily attributed to the following:
- The Petro Travel Plaza improved its operating results during the quarter now that all of its restaurants are open for business. Additionally, the joint venture saw an increase in traffic as evidenced by a 22% increase in fuel sales volumes over the comparative period.
- The TRCC/Rock Outlet Center improved its operating results as a result of not having to issue COVID-19 related lease concessions in 2021. Additionally, there were fewer tenant departures over the comparative periods.
Year-to-Date Financial Results
- Net income attributable to common stockholders for the first nine months of 2021 was $2.0 million, or net income per share attributed to common stockholders, basic and diluted, of $0.08, compared with a net loss attributable to common stockholders of $0.6 million, or net loss per share attributed to common stockholders, basic and diluted, of $0.02, for the first nine months of 2020.
- Revenues and other income, for the first nine months of 2021, including equity in earnings of unconsolidated joint ventures, totaled $45.6 million, compared with $34.5 million for the first nine months of 2020. Factors impacting the year-to-date results include:
- Commercial/industrial real estate development segment revenues totaled $12.8 million for the first nine months of 2021, an increase of $5.7 million, or 79%, from $7.1 million for the first nine months of 2020. The increase was primarily attributed to a land sale to the TRC-MRC 4 joint venture that resulted in $5.7 million in additional revenues.
- Mineral resources segment revenues were $19.4 million for the first nine months of 2021, an increase of $10.1 million, or 109%, from $9.3 million for the first nine months of 2020. The 2021 State Water Project Allocation of 5% brought about favorable sales conditions, resulting in a significant increase in water sales. Comparatively, the Company sold 13,199 acre-feet and 4,625 acre-feet of water as of September 30, 2021 and 2020, respectively. The Company in 2021 also generated additional rock aggregate royalties resulting from increased demand for building supplies.
- he above increases were partially offset by a decrease in farming revenues. Farming revenues were $7.6 million for the first nine months of 2021, a decrease of $2.1 million, or 22%, from $9.7 million for the first nine months of 2020. The decline is attributed to lower pistachio revenues of $1.3 million because of lower crop loss insurance proceeds, and lower almond revenues of $0.9 million as a result of the timing of sales as discussed previously.
- Equity in earnings were $2.8 million for the nine months ended September 30, 2021, a decrease of $0.8 million, or 22%, from $3.6 million during the same period in 2020. The decrease was primarily attributed to the Petro Travel Plaza Holdings joint venture, or Petro. Although Petro improved its fuel sales volume by 24% in 2021 when compared with 2020, the Company’s share of operating results declined by $0.9 million due to an 91% increase in the overall cost of fuel that was only partially offset by a 64% increase in fuel sales prices.
- Lastly, in 2020 the Company sold a building and land previously operated by a fast food tenant to its Petro joint venture. The Company received a cash distribution of $2.0 million from the joint venture, and realized a Gain on Sale of Real Estate of $1.3 million. There was no such transaction in 2021.
2021 Outlook:
TRCC has seen an increase in traffic as evidenced by a 24% increase in fuel sales volumes at the Petro Travel Plaza joint venture when compared to the same prior year period. The Company’s other segments continue to operate without restrictions as they are and continue to be deemed essential.
As it relates to COVID-19, the Company will continue to prioritize employee health and provide work safety guidelines prescribed by Cal/OSHA. The Company is adhering to the applicable COVID-19 safety requirements as prescribed by the Federal Government.
Uncertainty remains over long-term vaccine efficacy, global vaccine adoption and availability, and the possibility of reinstating pandemic restrictions arising from future mutations such as the Delta variant.
Labor shortages are increasing the Company’s cost of labor in its farming segment, while supply chain disruptions are impacting the ability to deliver our farm production to customers. We expect almond sales for 2021 to be affected by these two factors, however the total impact is not known at this time. The long-term impact of such uncertainties on the Company’s business are currently unknown and may vary in scope and severity from the impacts to-date.
The actions taken by governments, other businesses, and individuals in response to the supply chain disruptions and the pandemic will continue to have an impact on results of operations and overall financial performance.
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, 2021, total capital, including debt, was approximately $505.3 million. As of September 30, 2021, Company had cash and securities totaling approximately $45.5 million and $35.0 million available on its line of credit.
The Company will continue to aggressively pursue commercial/industrial development, multi-family development opportunities, leasing, sales, and investment within TRCC and its joint ventures. The Company will also continue to invest in its residential projects, including Mountain Village at Tejon Ranch, Centennial at Tejon Ranch and Grapevine at Tejon Ranch.
For the remainder of 2021, the Company will continue to invest in master project infrastructure, defending currently held entitlements, and 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. Throughout the next few years, the Company expects net income to fluctuate from year-to-year based on commodity prices, production within its farming and mineral resources segments, and the timing of sales and 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.
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