Market Overview

Tejon Ranch Co. Reports Second Quarter and Year-to-Date 2018 Results of Operations


Tejon Ranch Co., or the Company, (NYSE:TRC), a diversified real estate
development and agribusiness company, today announced financial results
for the three- and six-months ended June 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 under 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, 15,450 housing units, 750
lodging units and 25.3 million square feet of commercial space have
received various levels of approval.

"Despite a few headwinds that affected second-quarter results, Tejon
Ranch has a solid financial foundation as we proceed through the
development process to unlock asset value in a strategically located,
growing region," said Gregory S. Bielli, President and CEO. "We are
aggressively moving forward with plans to develop mixed-use residential
communities that are tailored to support housing needs and economic
development, while at the same time embracing sustainability and
conservation. In addition, we continue to execute our development plans
within the Tejon Ranch Commerce Center."

Second Quarter Financial Results

  • Net loss attributable to common stockholders for the second quarter of
    2018 was $1.0 million, or a loss per common share of $0.04, compared
    with a net loss of $0.2 million, or a loss per common share of $0.01,
    for the second quarter of 2017.
  • Revenues and other income, including equity in earnings of
    unconsolidated joint ventures, for the second quarter of 2018 were
    $6.1 million, a decrease of $1.2 million, or 16%, compared with $7.3
    million for the same period in 2017. Factors behind the decrease
    • Farming revenues decreased approximately $1.0 million as a result
      • Almond revenues decreased $0.5 million resulting from the
        timing of carryover crop sales. The Company sold 86,000 and
        177,000 pounds during the quarters ended June 30, 2018 and
        2017, respectively
      • Pistachio revenues decreased $0.3 million, resulting from
        depressed crop yields for the 2017 pistachio crop. The Company
        sold 38,000 and 148,000 pounds for the quarters ended June 30,
        2018 and 2017, respectively.
    • Equity in earnings from our unconsolidated joint ventures
      decreased $0.9 million to $0.7 million as a result of:
      • Our share of the operating results from TA/Petro decreased
        $0.6 million due to lower fuel margins driven by higher fuel
        costs that were not offset by a 15% increase in fuel revenues.
      • Our share of the operating results from TRCC/Rock Outlet
        Center decreased $0.6 million mostly related to accelerating
        amortization of lease intangibles driven by the removal of
        poor performing tenants. The Company is actively seeking
        replacement tenants.
      • The Company saw improvements of $0.4 million from our TRC-MRC
        2 joint venture stemming from the absence of non-cash GAAP
        losses that were prevalent during the prior year.

Year-to-Date Financial Results

  • Net income attributable to common stockholders for the first six
    months of 2018 was $0.5 million, or earnings per diluted common share
    of $0.02, compared with a net loss of $2.1 million, or a loss per
    common share of $0.10, for the first six months of 2017.
  • Revenues and other income, including equity in earnings of
    unconsolidated joint ventures, for the six months of 2018 were $20.0
    million, an increase of $6.6 million, or 49%, compared with $13.4
    million for the first six months in 2017. Factors behind this increase
    • Moderate drought conditions in Kern County increased water sales
      opportunities. The Company sold 7,442 acre-feet of water during
      the first six months of 2018, generating $8.0 million in revenue.
      Water sales during the six months ended of 2017 totaled 939
      acre-feet, generating $1.2 million.
    • Our share of the operating results from the Company's
      unconsolidated joint ventures decreased approximately $1.0 million
      for the same reasons discussed for the quarter end results.

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. Farm Village will include fresh culinary
    offerings, artisan markets, boutique lodging, and an array of trails,
    gardens, and agriculture that will be intertwined to create a unique
    and relaxing experience while fulfilling the needs of residents of
    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, or 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.
  • In March, the Company successfully leased half of a
    480,000-square-foot industrial building to Dollar General. The
    building was constructed in 2017 through a joint venture formed with
    Majestic Realty Co. The joint venture is currently in negotiations
    with a prospective tenant for the remaining space.

2018 Outlook:

The Company's capital structure provides a solid foundation for
continued investment in ongoing and future projects. As of June 30,
2018, total capital, including debt, was approximately $497.5 million.
The Company has cash and securities totaling approximately $80.6 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. It is currently too
premature to predict what our crop production will be as it is too early
in the growing cycle. 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 over 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

To watch a video overview of Tejon Ranch Co., please visit:

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


(In thousands, except earnings per share)


Three Months Ended June 30, Six Months Ended June 30,
2018       2017 2018       2017
Real estate - commercial/industrial $ 2,189 $ 2,083 $ 4,343 $ 4,272
Mineral resources 1,500 1,519 10,631 3,520
Farming 542 1,501 1,737 1,932
Ranch operations 839   860   1,828   1,941  
Total revenues from Operations 5,070 5,963 18,539 11,665
Operating Profits:
Real estate - commercial/industrial 801 181 1,636 627
Real estate - resort/residential (433 ) (500 ) (848 ) (1,130 )
Mineral resources 905 990 5,805 1,667
Farming (649 ) 243 (1,292 ) (649 )
Ranch operations (509 ) (601 ) (909 ) (1,013 )
Income (loss) from Operating Segments 115   313   4,392   (498 )
Investment income 346 95 629 198
Other loss, net (10 ) (275 ) (24 ) (289 )
Corporate expense (2,464 ) (2,368 ) (5,196 ) (5,119 )
Loss from operations before equity in earnings of unconsolidated
joint ventures
(2,013 ) (2,235 ) (199 ) (5,708 )
Equity in earnings of unconsolidated joint ventures, net 652   1,560   819   1,788  
(Loss) income before income tax expense (1,361 ) (675 ) 620 (3,920 )
Income tax (benefit) expense (348 ) (472 ) 178   (1,804 )
Net (loss) income (1,013 ) (203 ) 442 (2,116 )
Net loss attributable to non-controlling interest (16 ) (27 ) (18 ) (38 )
Net (loss) income attributable to common stockholders $ (997 ) $ (176 ) $ 460   $ (2,078 )
Net (loss) income per share attributable to common stockholders,
$ (0.04 ) $ (0.01 ) $ 0.02   $ (0.10 )
Net (loss) income per share attributable to common stockholders,
$ (0.04 ) $ (0.01 ) $ 0.02   $ (0.10 )
Weighted average number of shares outstanding:
Common stock 25,950,851 20,855,112 25,931,940 20,841,627
Common stock equivalents 19,748   22,837   29,198   44,003  
Diluted shares outstanding 25,970,599   20,877,949   25,961,138   20,885,630  

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.

Non-GAAP Financial Measures


Three Months Ended June 30, Six Months Ended June 30,
2018       2017 2018       2017
Net (loss) income $ (1,013 ) $ (203 ) $ 442 $ (2,116 )
Net loss attributed to non-controlling interest (16 ) (27 ) (18 ) (38 )
Interest, net:
Consolidated (346 ) (95 ) (629 ) (198 )
Our share of interest expense from unconsolidated joint ventures 554   428   1,056   832  
Total interest, net 208 333 427 634
Income taxes (348 ) (472 ) 178 (1,804 )
Depreciation and amortization:
Consolidated 1,149 1,132 2,220 2,282
Our share of depreciation and amortization from unconsolidated joint
1,135   1,322   2,053   2,638  
Total depreciation and amortization 2,284 2,454 4,273 4,920
EBITDA 1,147   2,139   5,338   1,672  
Stock compensation expense 828 883 1,776 1,694
Adjusted EBITDA $ 1,975   $ 3,022   $ 7,114   $ 3,366  

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