Tejon Ranch Co. Announces Fourth Quarter and Year-Ended December 31, 2023 Financial Results

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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.

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 (In thousands, except per share data)
	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 (In thousands, except earnings per share)
	Three-Months Ended December 31,						Year Ended December 31,
		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 (Unaudited)
	Three Months Ended December 31,						Year Ended December 31,
		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.
Brett A. Brown, 661-248-3000
Executive Vice President, Chief Financial Officer

Pondel Wilkinson
Laurie Berman, 310-279-5980
lberman@pondel.com

RPM Public Relations
Rae Pardini Matson
559.205.0721
rae@rpm-pr.com
RPM-PR.com

FAQ

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.

Tejon Ranch Co. Announces Fourth Quarter and Year-Ended December 31, 2023 Financial Results

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FAQ

What was Tejon Ranch Co.'s GAAP net income for Q4 2023?

How much was the new credit facility secured for by Tejon Ranch Co.?

What is the GLA of TRCC's industrial portfolio?

What percentage of TRCC's commercial portfolio is leased?

What was the decrease in revenues for the commercial/industrial segment in Q4 2023 compared to Q4 2022?

What was Tejon Ranch Co.'s Adjusted EBITDA for Q4 2023?

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Tejon Ranch Co. Announces Fourth Quarter and Year-Ended December 31, 2023 Financial Results

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FAQ

What was Tejon Ranch Co.'s GAAP net income for Q4 2023?

How much was the new credit facility secured for by Tejon Ranch Co.?

What is the GLA of TRCC's industrial portfolio?

What percentage of TRCC's commercial portfolio is leased?

What was the decrease in revenues for the commercial/industrial segment in Q4 2023 compared to Q4 2022?

What was Tejon Ranch Co.'s Adjusted EBITDA for Q4 2023?

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