TEJON RANCH CO
For the period ended Jun 30, 2024. Filed Aug 6, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 6, 2024
TRC$17.04+1.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0000096869-24-000008
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000096869-24-000011
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 131 previous paragraphs and 140 current paragraphs.
75 unchanged; 45 reworded; 20 added; 11 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 13 previous and 18 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
Summary of Second Quarter 2024 Performance
Current report
For the six months ended June 30, 2024, we had net income attributable to common stockholders of $43,000 compared to $2,041,000 for the same period in 2023. This decrease in net income was primarily attributable to reductions in operating profits within the mineral resources segment of $2,231,000 caused by limited opportunities to sell water, and within the resort/residential segments of $1,276,000 due to higher professional service fees incurred, along with an increase in corporate expenses of $1,340,000 associated with higher stock compensation expenses. Partially offsetting the above-mentioned factors was an increase in tax benefits recognized of $3,522,000 during 2024 when compared with 2023.
Current report
•Commercial/industrial real estate development segment revenues were $2,550,000 for the three months ended June 30, 2024, a decrease of $83,000, or 3%, from $2,633,000 for the three months ended June 30, 2023. The decrease was primarily attributable to the decrease in revenue of Pastoria Energy Facility of $87,000 due to lower spark spread percentage revenue during the period.
Current report
•Commercial/industrial real estate development segment expenses were $1,990,000 for the three months ended June 30, 2024, an increase of $305,000, or 18%, from $1,685,000 for the three months ended June 30, 2023. The increase was primarily attributable to higher payroll expense of $103,000 and an increase in insurance cost of $90,000 over the comparative period. Additionally, bad debt reserve increased by $34,000 due to the delinquency related to one tenant, and stock compensation expense for this segment increased by $27,000 over the comparative period.
Current report
•Commercial/industrial real estate development segment expenses were $3,917,000 for the six months ended June 30, 2024, an increase of $537,000, or 16%, from $3,380,000 for the six months ended June 30, 2023. The increase was primarily attributable to higher payroll and stock compensation expense of $242,000 and higher insurance cost of $175,000 over the comparative period.
Current report
Resort/residential real estate development segment expenses were $427,000 for the three months ended June 30, 2024, an increase of $103,000 from $324,000 for the three months ended June 30, 2023. This increase was primarily attributable to an additional $71,000 of payroll expense recorded over the comparative period attributable to an increase in staffing in this segment. We don't expect to see further increase in the near future.
Current report
•Mineral resources segment revenues were $2,032,000 for the three months ended June 30, 2024, an increase of $432,000, or 27%, from $1,600,000 for the three months ended June 30, 2023. The increase in revenues was mainly due to higher water sales revenue of $297,000 and an increase in rock aggregate royalties of $156,000 attributable to higher pricing.
Current report
•Mineral resources segment expenses were $1,115,000 for the three months ended June 30, 2024, an increase of $190,000, or 21%, from $925,000 for the three months ended June 30, 2023. The increase was primarily associated with higher water cost of sales of $231,000 recognized during the quarter.
Current report
•Farming segment revenues were $142,000 for the three months ended June 30, 2024, a decrease of $883,000, or 86%, from $1,025,000 during the same period in 2023. Almond sales revenue fell by $878,000, due to the lack of crop sales in the second quarter of 2024 compared with 508,000 pounds of crops sold during the second quarter of 2023.
Current report
•Farming segment expenses were $1,087,000 for the three months ended June 30, 2024, a decrease of $387,000, or 26%, from $1,474,000 during the same period in 2023. This decrease was consistent with the reduced almonds sales volume when compared to the previous period.
Current report
•Farming segment revenues were $1,007,000 for the first six months of 2024, a decrease of $1,203,000, or 54%, from $2,210,000 during the same period in 2023. Almond sales revenue fell by $832,000 due to lower units sold in the current year. The Company sold 381,000 and 914,000 pounds of almonds during the first six months ended June 30, 2024 and 2023, respectively. Other revenues decreased by $227,000 which was attributable to less farm water sold. Additionally, hay sales revenue decreased by $109,000 due to lower sales volume.
Current report
•Farming segment expenses were $3,154,000 for the first six months of 2024, a decrease of $333,000, or 10%, from $3,487,000 when compared to the same period in 2023. Decreases in year-to-date expenses occurred mainly due to lower cost of crop sales over the comparative period.
Current report
•Ranch operations revenues were $965,000 for the three months ended June 30, 2024, an increase of $125,000, or 15%, from $840,000 for the same period in 2023. The increase was attributable to higher grazing lease revenues of $80,000 and an increase in game management and other revenue of $45,000 primarily related to higher membership revenue and filming location revenues.
Current report
•Ranch operations expenses were $1,261,000 for the three months ended June 30, 2024, a decrease of $77,000, or 6%, from $1,338,000 for the same period in 2023. This decrease was primarily attributable to the savings in payroll and compensation expense of $65,000 and a reduction in building repairs and maintenance expense of $40,000. The above savings were partially offset by an increase in supplies cost of $49,000 compared to the prior period.
Current report
Corporate general and administrative costs were $5,849,000 for the first six months of 2024, an increase of $1,340,000, or 30%, from $4,509,000 for the same period in 2023. We experienced a $979,000 increase in stock compensation expense and a $262,000 increase in professional service fees related to ongoing CEO search during the first six months ended June 30, 2024.
Current report
Total other income was $559,000 for the three months ended June 30, 2024, a decrease of $28,000 from $587,000 for the same period in 2023.
Current report
•Equity in earnings was $2,769,000 for the three months ended June 30, 2024, an increase of $831,000, from $1,938,000 during the same period in 2023. The increase was primarily attributable to higher equity in earnings recorded for the TA/Petro joint venture of $651,000 as a result of higher fuel margins, and for the TRC-MRC 4 LLC joint venture of $173,000 due to a full quarter of rental revenue recorded compared with partial revenue over comparative quarter due to a tenant's taking occupancy in the middle of the year. The above increases were partially offset by a decrease in equity in earnings for TRC-MRC1 LLC joint venture of $119,000 associated with higher repair cost over comparative period.
Current report
•Equity in earnings were $4,282,000 for the six months ended June 30, 2024, an increase of $827,000, or 24%, from $3,455,000 during the same period in 2023. The biggest driver was the TRCC/Rock Outlet Center joint venture, which was over 90% occupied as of June 30, 2024. Rental revenue for this joint venture increased by $509,000 in the first six months of 2024 over the comparative period. Equity in earnings for our TRC-MRC LLC joint ventures increased due to higher rental rates or rental escalations, except for a decrease in TRC-MRC 1 LLC earnings caused by an increase of repair cost from storm damage of $225,000 over the prior year period, these costs are partially offset by insurance reimbursements of $150,000.
Current report
During the first six months of 2024, our operations used $1,026,000. Our operating assets were increased by using $1,104,000 of cash, and our current liabilities were reduced by using $452,000 of cash. Partially offsetting the above-mentioned cash usages was cash distribution from unconsolidated joint ventures of $674,000.
Current report
1 - The increase represents our contractual commitments related to our multifamily development.
Removed paragraphs (11)
Previous report
◦TRC-MRC 1, LLC operates a 480,480 square foot industrial building in TRCC-East that is fully leased;
Previous report
◦TRC-MRC 2, LLC operates a 651,909 square foot building in TRCC-West that is fully leased;
Previous report
◦TRC-MRC 3, LLC operates a 579,040 square foot industrial building in TRCC-East that is fully leased;
Previous report
◦TRC-MRC 4, LLC operates a 629,274 square foot industrial building in TRCC-East that is fully leased; and
Previous report
◦TRC-MRC 5, LLC operates a 446,400 square foot industrial building in TRCC-East that is fully leased.
Previous report
Summary of First Quarter 2024 Performance
Previous report
•Commercial/industrial real estate development segment expenses were $1,927,000 for the three months ended March 31, 2024, an increase of $232,000, or 14%, from $1,695,000 for the three months ended March 31, 2023. The increase was primarily attributable to an increase in payroll and stock compensation expense of $115,000 and an increase in insurance cost of $85,000 over the comparative period.
Previous report
•Farming segment revenues were $865,000 for the three months ended March 31, 2024, a decrease of $320,000, or 27%, from $1,185,000 during the same period in 2023. The decrease is mainly caused by declines in other revenues - farming water sales of $212,000 decline due to higher level of water availability, and hay sales revenue fell $119,000 following the Company's decision to ramp down the hay business.
Previous report
•Farming segment expenses were $2,067,000 for the three months ended March 31, 2024, an increase of $54,000, or 3%, from $2,013,000 during the same period in 2023.
Previous report
•Equity in earnings was $1,513,000 for the three months ended March 31, 2024, a decrease of $4,000, from $1,517,000 during the same period in 2023. The decrease is primarily attributed to lower equity in earnings realized on Petro Travel Plaza joint venture as a result of lower fuel sales volume, offset by higher equity in earnings realized on the TRC-MRC joint ventures including a new revenue stream generated by the recently completed building of TRC-MRC5 LLC joint venture.
Previous report
During the first three months of 2024, our operations provided $777,000 primarily as a result of collection of account receivables, offset by increases in inventories and prepaid expenses, and our net loss from operations.
Reworded paragraphs (45)
Previous wording
This Quarterly Report on Form 10-Q contains forward-looking statements, including without limitation statements regarding strategic alliances, the almond, pistachio and grape industries, the future plantings of permanent crops, future yields, prices and water availability for the Company's crops and real estate operations, future prices, production and demand for oil and other minerals, future development of the Company's property, future revenue and income of its jointly-owned travel plaza and other joint venture operations, potential losses to Tejon Ranch Co. and its subsidiaries (the Company, Tejon, we, us, and our) as a result of pending environmental proceedings, the adequacy of future cash flows to fund our operations, and of current assets and contracts to meet our water and other commitments, market value risks associated with investment and risk management activities and with respect to inventory, accounts receivable and our own outstanding indebtedness, ongoing negotiations and other future events and conditions. In some cases, these statements are identifiable through use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “will,” “should,” “would,” “likely,” and similar expressions such as “in the process.” In addition, any statements that refer to projections of our future financial performance, our anticipated growth, and trends in our business and other characterizations of future events or circumstances are forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. These forward-looking statements are not a guarantee of future performance, are subject to assumptions and involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance, or achievement implied by such forward-looking statements. These risks, uncertainties and important factors include, but are not limited to, weather, market and economic forces, availability of financing for land development activities, and competition and success in obtaining various governmental approvals and entitlements for land development activities. No assurance can be given that the actual future results will not differ materially from the forward-looking statements that we make for several reasons, including those described above and in the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K.
Current wording
This Quarterly Report on Form 10-Q contains forward-looking statements, including without limitation statements regarding strategic alliances, the almond, pistachio and grape industries, the future plantings of permanent crops, future yields, prices and water availability for the Company's crops and real estate operations, future prices, production and demand for oil and other minerals, future development of the Company's property, future revenue and income of its jointly-owned travel plaza and other joint venture operations, the adequacy of future cash flows to fund our operations, the adequacy of current assets and contracts to meet our water and other commitments, market value risks associated with investment and risk management activities and with respect to inventory and accounts receivable, our outstanding indebtedness, ongoing negotiations and other future events and conditions. In some cases, these statements are identifiable through use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “will,” “should,” “would,” “likely,” and similar expressions such as “in the process.” In addition, any statements that refer to projections of our future financial performance, our anticipated growth, and trends in our business and other characterizations of future events or circumstances are forward-looking statements. We caution you not to place undue reliance on these forward-looking statements. These forward-looking statements are not a guarantee of future performance, are subject to assumptions and involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company, or industry results, to differ materially from any future results, performance, or achievement implied by such forward-looking statements. These risks, uncertainties and important factors include, but are not limited to, weather, market, geopolitical and economic forces, availability of financing for land development activities, and competition and success in obtaining various governmental approvals and entitlements for land development activities. No assurance can be given that the actual future results will not differ materially from the forward-looking statements that we make for several reasons, including those described above and in the section entitled “Risk Factors” in our most recent Annual Report on Form 10-K.
Previous wording
Our primary business objective is to maximize long-term shareholder value through the improvement and monetization of our land-based assets. A key element of our strategy is to entitle and then develop large-scale mixed-use master planned residential and commercial/industrial real estate development projects to serve the growing populations of Southern and Central California. Our mixed-use master planned residential developments include up to 35,278 housing units, and more than 35 million square feet of commercial space. We have obtained entitlements on MV and the first approved final map for the project consisting of 401 residential lots and parcels for hospitality, amenities, and public uses. The Grapevine at Tejon Community has approved entitlements for 12,000 units and 5 million square feet of commercial development. Centennial at Tejon Ranch, or Centennial, had entitlements approved in 2019 by the Los Angeles County Board of Supervisors. These approvals were litigated in two lawsuits filed in Los Angeles County Superior Court in May 2019 and the Company has since worked on defending and addressing the ongoing litigation, including considering all options to address the Superior Court’s January 2022 decision and the Superior Court’s March 22, 2023 final judgment. On May 26, 2023, we filed a Notice of Appeal, thereby appealing the Superior Court’s decision to the Second District of the California Court of Appeal. On June 27, 2023, CBD/CNPS cross-appealed the Superior Court’s ruling. During the appeal process the Superior Court’s order of the rescission of project approvals have been placed on hold. See Note 11 (Commitments and Contingencies) of the Notes to Unaudited Consolidated Financial Statements for additional information regarding the Centennial litigation.
Current wording
Our primary business objective is to maximize long-term shareholder value through the improvement and monetization of our land-based assets. A key element of our strategy is to entitle and then develop large-scale mixed-use master planned residential and commercial/industrial real estate development projects to serve the growing populations of Southern and Central California. Our mixed-use master planned residential developments include up to 35,278 housing units, and more than 35 million square feet of commercial space. We have obtained entitlements on MV and the first approved final map for the project consisting of 401 residential lots and parcels for hospitality, amenities, and public uses. Grapevine at Tejon Ranch, or Grapevine, has approved entitlements for 12,000 units and 5 million square feet of commercial development. Centennial at Tejon Ranch, or Centennial, had entitlements approved in 2019 by the Los Angeles County Board of Supervisors. These approvals were litigated in two lawsuits filed in Los Angeles County Superior Court in May 2019 and we have since worked on defending and addressing the ongoing litigation, including considering all options to address the Superior Court’s January 2022 decision and the Superior Court’s March 22, 2023 final judgment. On May 26, 2023, we filed a Notice of Appeal, thereby appealing the Superior Court’s decision to the Second District of the California Court of Appeal. On June 27, 2023, CBD/CNPS cross-appealed the Superior Court’s ruling. During the appeals process the Superior Court’s order of the rescission of project approvals has been placed on hold. See Note 11 (Commitments and Contingencies) of the Notes to Unaudited Consolidated Financial Statements for additional information regarding the Centennial litigation.
Previous wording
We are currently executing on value creation as we are engaged in construction, commercial sales, and leasing at our fully operational commercial/industrial center, TRCC. During the first quarter of 2024, the Company began construction of the first phase of a multi-family community, Terra Vista at Tejon, within TRCC. The development is located on a 22-acre site located immediately north of the Outlets at Tejon. In this first phase, the Company plans to develop 228 units of multi-family residences, in seven apartment buildings, as well as a clubhouse with pool and fitness facilities. The Conditional Use Permit approved by Kern County Board of Supervisors authorized up to a maximum of 495 multi-family residences to be constructed. All of these efforts are supported by diverse revenue streams generated from other operations, including: farming, mineral resources, ranch operations, and our various joint ventures.
Current wording
We are currently executing on value creation as we are engaged in construction, commercial sales, and leasing at our fully operational commercial/industrial center, TRCC. During the first quarter of 2024, we began construction of the first phase of a multi-family community, Terra Vista at Tejon, within TRCC. The development is located on a 22-acre site located immediately north of the Outlets at Tejon. In this first phase, we are developing 228 units of multi-family residences, in seven apartment buildings, as well as a clubhouse with pool and fitness facilities. The Conditional Use Permit approved by Kern County Board of Supervisors authorized up to a maximum of 495 multi-family residences to be constructed. Our goal is to deliver the first phase on budget and on time, and we are currently meeting both objectives. All of these efforts are supported by diverse revenue streams generated from other operations, including: farming, mineral resources, ranch operations, and our various joint ventures.
Previous wording
At the heart of the commercial/industrial real estate development segment is TRCC, a 20 million square foot commercial/industrial development on Interstate 5 just north of the Los Angeles basin. Over eight million square feet of industrial, commercial and retail space has already been developed or under development, including distribution centers for IKEA, Caterpillar, Nestlé, Famous Footwear, L'Oreal, Camping World, Sunrise Brands, Dollar General and RectorSeal. TRCC sits on both sides of Interstate 5, giving distributors immediate access to the west coast’s principal north-south goods movement corridor.
Current wording
At the heart of the commercial/industrial real estate development segment is TRCC, a 20 million square foot commercial/industrial development on Interstate 5 just north of the Los Angeles basin. Over eight million square feet of industrial, commercial and retail space has already been developed or is under development, including distribution centers for IKEA, Caterpillar, Nestlé, Famous Footwear, L'Oreal, Camping World, Sunrise Brands, Dollar General and RectorSeal. TRCC sits on both sides of Interstate 5, giving distributors immediate access to the west coast’s principal north-south goods movement corridor.
Previous wording
•Five joint ventures with Majestic Realty Co., or Majestic, to develop, manage, and operate industrial buildings within TRCC:
Current wording
•Five joint ventures with Majestic Realty Co., or Majestic, to develop, manage, and operate five industrial buildings comprising of 2.8 million square feet of industrial space all within TRCC and all fully leased.
Previous wording
The resort/residential real estate development segment is actively involved in the land entitlement and development process internally and through a joint venture. Our active developments within this segment are MV, Centennial, and Grapevine.
Current wording
The resort/residential real estate development segment is actively involved in the land entitlement and development process internally and through a joint venture. Our active developments within this segment are MV, Centennial, and Grapevine, with Grapevine North representing a fourth opportunity in this segment.
Previous wording
•MV encompasses a total of 26,417 acres, of which 5,082 acres will be used for a mixed-use development that will include housing, retail, and commercial components. MV is entitled for 3,450 homes, 160,000 square feet of commercial development, 750 hotel keys, and more than 21,335 acres of open space. The first final map for the project consisting of 401 residential lots and parcels for hospitality, amenities, and public uses was approved by Kern County in December 2021;
Current wording
•MV encompasses a total of 26,417 acres, of which 5,082 acres is expected to be used for a mixed-use development that will include housing, retail, and commercial components. MV is entitled for 3,450 homes, 160,000 square feet of commercial development, 750 hotel keys, and more than 21,335 acres of open space. The first final map for the project consisting of 401 residential lots and parcels for hospitality, amenities, and public uses was approved by Kern County in December 2021;
Previous wording
For the three months ended March 31, 2024, we had a net loss attributable to common stockholders of $914,000 compared to net income of $1,774,000 for the three months ended March 31, 2023. The primary driver of this decrease of $2,688,000 was our mineral resources segment. Net income from this segment decreased by $2,473,000 mainly due to lower water sales revenue resulting from heavy rainfall in California. Additionally, expenses in the resort/residential segment increased by $1,173,000 due to higher professional service fees incurred during the quarter. Partially offsetting the above unfavorable variances was $942,000 of tax benefits recorded during this quarter compared to $1,013,000 of tax provisions recorded over the comparative period.
Current wording
For the three months ended June 30, 2024, we had net income attributable to common stockholders of $957,000 compared to net income of $267,000 for the three months ended June 30, 2023. The primary driver of this increase of $690,000 was $1,176,000 of tax benefits recorded during this quarter compared to $391,000 of tax provisions recorded over the comparative period. Equity in earnings of unconsolidated joint ventures increased by $831,000 mainly related to improved fuel margins of our TA/Petro joint venture. Corporate expenses experienced an increase of $1,135,000, primarily attributable to higher stock compensation expenses recorded during the quarter.
Previous wording
During the three months ended March 31, 2024, our critical accounting policies have not changed since the filing of our Annual Report on Form 10-K for the year ended December 31, 2023. Please refer to that filing for a description of our critical accounting policies. Please also refer to Note 1 (Basis of Presentation) in the Notes to Unaudited Consolidated Financial Statements in this report for newly adopted accounting principles.
Current wording
During the six months ended June 30, 2024, our critical accounting policies have not changed since the filing of our Annual Report on Form 10-K for the year ended December 31, 2023. Please refer to that filing for a description of our critical accounting policies. Please also refer to Note 1 (Basis of Presentation) in the Notes to Unaudited Consolidated Financial Statements in this report for newly adopted accounting principles.
Previous wording
•Commercial/industrial real estate development segment revenues were $2,945,000 for the three months ended March 31, 2024, an increase of $269,000, or 10%, from $2,676,000 for the three months ended March 31, 2023. The increase was primarily attributable to additional landscaping revenues of $196,000 due to an increase in out-of-scope services, such as clean-up and repairs, caused by the heavy winter storms. TRCC management fees and reimbursements also increased by $110,000 due to higher management fees of $95,000 and higher development fees of $65,000 recognized for TRC-MRC5, LLC joint venture, partially offset by lower tenant reimbursements revenue of $50,000.
Current wording
•Commercial/industrial real estate development segment revenues were $5,495,000 for the six months ended June 30, 2024, an increase of $186,000, or 4%, from $5,309,000 for the six months ended June 30, 2023. The driver of this increase was higher landscaping revenue of $211,000 due to more out-of-scope services, such as clean-up and repairs caused by the heavy winter storms. Partially offsetting the increase was a decrease of $160,000 in revenue from Pastoria Energy Facility due to lower spark spread recorded for the period. Additionally, bad debt reserve increased by $100,000 due to delinquency related to one tenant over comparative period.
Previous wording
During the quarter ended March 31, 2024, vacancy rates in the Inland Empire climbed 110 basis points to 6.2% and net absorption retreated with 2.7 million square feet of negative demand. Average asking rents declined for the third consecutive quarter. The San Fernando Valley and Ventura County industrial markets continue to see tight conditions, as vacancy and availability remained at historically low numbers. Vacancy was unchanged, and the overall net absorption slightly outpaced new supply. See below for the vacancy rates and average asking rent of Inland Empire, San Fernando Valley and Ventura County.
Current wording
During the quarter ended June 30, 2024, vacancy rates in the Inland Empire continued to climb but at a much slower pace to 6.6%, while leasing activity posted a 24-month high of 11.4 million square feet and net absorption returned to positive territory at 6.5 million square feet. Average asking rents declined for the fourth consecutive quarter. The San Fernando Valley and Ventura County industrial markets continue to experience tight conditions. Vacancy increased marginally to 1.5% in San Fernando Valley and rose by 10 basis points to 2.2% in Ventura County, while overall net absorption was negative in both markets. Average asking rent saw a slight quarter-over-quarter decline in the San Fernando Valley, dropping by $0.05 to $1.68, and by $0.01 in Ventura County to $1.26. See below for the vacancy rates and average asking rent of Inland Empire, San Fernando Valley and Ventura County.
Previous wording
Resort/residential real estate development segment expenses were $1,561,000 for the three months ended March 31, 2024, an increase of $1,173,000 from $388,000 for the three months ended March 31, 2023. This increase is primarily attributable to an additional $1,251,000 related to professional service fees and planning costs related to capital efforts tied to our master planned communities.
Current wording
Resort/residential real estate development segment expenses were $1,988,000 for the first six months of 2024, an increase of $1,276,000, or 179%, from $712,000 for the first six months of 2023. The increase was primarily attributable to an additional $1,197,000 of professional service fees and planning costs related to capital efforts tied to our master planned communities.
Previous wording
Our long-term business plan of developing the communities of MV, Centennial, and Grapevine remains unchanged. Long-term macro fundamentals, primarily California's large population and household formation, will support housing demand in our region. California also has a significant documented housing shortage, which we believe our communities will help ease. A majority the expenditures and capital investment to be incurred within our resort/residential real estate segment are expected to continue to focus on the mixed-use master planned communities of Centennial, Grapevine, and Mountain Village.
Current wording
Our long-term business plan of developing the communities of MV, Centennial, and Grapevine remains unchanged. Long-term macro fundamentals, primarily California's large population and household formation, will support housing demand in our region. California also has a significant documented housing shortage, which we believe our communities will help ease. A majority of the expenditures and capital investment to be incurred within our resort/residential real estate segment are expected to continue to focus on the mixed-use master planned communities of Centennial, Grapevine, and Mountain Village.
Previous wording
As we move forward with our master planned communities, we expect to explore funding opportunities for the future development of our projects. Such funding opportunities could come from a variety of sources, such as joint ventures with financial partners, debt financing, or the Company’s issuance of additional common stock.
Current wording
As we move forward with our master planned communities, we expect to explore funding opportunities for the future development of our projects. Such funding opportunities could come from a variety of sources, such as joint ventures with financial partners, debt financing, or our issuance of additional common stock.
Previous wording
•Mineral resources segment revenues were $2,489,000 for the three months ended March 31, 2024, a decrease of $4,423,000, or 64%, from $6,912,000 for the three months ended March 31, 2023. The reduction in revenues is primarily attributed to a decline in water sales revenue of $3,736,000 due to the heavy rainfalls in California, which severely limited water sales opportunities. Reimbursable revenues also decreased $767,000 due to mineral resources taxes reassessment for this segment.
Current wording
•Mineral resources segment revenues were $4,521,000 for the first six months of 2024, a decrease of $3,991,000, or 47%, from $8,512,000 for the first six months of 2023. The reduction in revenues was primarily attributable to a decline in water sales revenue of $3,439,000 due to back-to-back above average rainfall years in California, which severely limited water sales opportunities. Reimbursable revenues also decreased $767,000 due to a mineral resources tax reassessment for this segment.
Previous wording
•Mineral resources segment expenses were $2,116,000 for the three months ended March 31, 2024, a decrease of $1,950,000, or 48%, from $4,066,000 for the three months ended March 31, 2023. The decrease is primarily due to lower water cost of sales recognized of $1,625,000 when compared to the previous year.
Current wording
•Mineral resources segment expenses were $3,231,000 for the first six months of 2024, a decrease of $1,760,000, or 35%, when compared to the same period in 2023. The decrease was primarily due to lower water cost of sales recognized of $1,394,000, and a decrease in property tax expense of $488,000 when compared to the previous year.
Previous wording
Our almond, pistachio, and wine grape crop sales are highly seasonal, with most of our sales occurring during the third and fourth quarters. Each year, almonds and pistachios are sold at market prices, while grapes are sold to wineries at contracted prices. Higher anticipated 2024 California state almond production is anticipated to have an adverse effect on selling prices throughout 2024. It is too early in the production cycle for 2024 to have a subjective estimate of potential production for almonds, grapes, and pistachios.
Current wording
Our almond, pistachio, and wine grape crop sales are highly seasonal, with most of our sales occurring during the third and fourth quarters. Each year, almonds and pistachios are sold at market prices, while grapes are sold to wineries at contracted prices. The 2024 California state almond production is estimated to come in at 13% above last year, however, there is an expectation that the carryover crop is expected to be less than originally estimated. If the carryover crop is at or below historical averages of 500,000 pounds, the industry has the potential to see an improvement in selling prices. It is too early in the production cycle for 2024 to have a subjective estimate of potential production for almonds, grapes, and pistachios.
Previous wording
Weather conditions can also impact the number of tree and vine dormant hours, which are integral to tree and vine growth. Farmers in California faced a warm winter negatively impacting dormant hours, which can impact production especially within pistachios. Late winter and early spring rainstorms impacted the timing of various farming activities such as pesticide sprays, any impact to production will not be known until later in the summer. In addition, higher cultural and financing costs and a reduced bloom cycle with highly compromised bee flight hours created more adversity for farmers. The abundant rain and snow have vastly improved the water situation, while shipping logistics continue to improve.
Current wording
Weather conditions can also impact the number of tree and vine dormant hours, which are integral to tree and vine growth. Farmers in California faced a warm winter negatively impacting dormant hours, which can impact production especially within pistachios. Late winter and early spring rainstorms impacted the timing of various farming activities such as pesticide sprays, any impact to production will not be known until later in the summer. In addition, higher cultural costs and a reduced bloom cycle with highly compromised bee flight hours created more adversity for farmers. The abundant rain and snow have vastly improved the water situation this year for farmers, while shipping logistics continue to improve.
Previous wording
Labor costs, both internal and through labor contractors, continue to increase and the Company expects this trend to continue over the foreseeable future. The Company utilizes external labor contractors, as necessary, for large projects, such as pruning and harvesting, as a way to manage our labor needs. From a broader inflationary standpoint, the Company is seeing, and will continue to see, an increase in production costs, most notably chemicals such as herbicides and pesticides, and fuel costs.
Current wording
Labor costs, both internal and through labor contractors, continue to increase and the Company expects this trend to continue over the near future. The Company utilizes external labor contractors, as necessary, for large projects, such as pruning and harvesting, as a way to manage our labor needs. From a broader inflationary standpoint, the Company is seeing, and will continue to see, an increase in production costs, most notably chemicals such as herbicides and pesticides, and fuel costs.
Previous wording
•Ranch operations revenues were $1,107,000 for the three months ended March 31, 2024, a decrease of $385,000, or 26%, from $1,492,000 for the same period in 2023. The decrease is attributed to lower filming location revenues of $469,000, partially offset by higher revenues recognized for grazing leases of $79,000.
Current wording
•Ranch operations revenues were $2,072,000 for the first six months of 2024, a decrease of $260,000, or 11%, from $2,332,000 for the same period in 2023. The decrease was primarily attributable to lower filming location revenues of $488,000, partially offset by an increase in grazing lease revenue of $160,000.
Previous wording
•Ranch operations expenses were $1,227,000 for the three months ended March 31, 2024, a decrease of $103,000, or 8%, from $1,330,000 for the same period in 2023. This decrease is mainly attributed to the savings in payroll and compensation expense of $64,000, reduction in landscaping services of $19,000 and reduction in insurance expense of $15,000.
Current wording
•Ranch operations expenses were $2,488,000 for the first six months of 2024, a decrease of $180,000, or 7%, from $2,668,000 for the same period in 2023. This decrease was primarily attributable to the savings in payroll and compensation expense of $145,000.
Previous wording
Corporate general and administrative costs were $2,492,000 for the three months ended March 31, 2024, an increase of $205,000, or 9%, from $2,287,000 for the same period in 2023. The increase is primarily attributable to higher salary expense and stock compensation expense recognized during the period.
Current wording
Corporate general and administrative costs were $3,357,000 for the three months ended June 30, 2024, an increase of $1,135,000, or 51%, from $2,222,000 for the same period in 2023. The increase was primarily attributable to higher stock compensation expense of $1,009,000 over the comparative period.
Previous wording
Total other income was $615,000 for the three months ended March 31, 2024, a decrease of $175,000 from $790,000 for the same period in 2023. This decrease is primarily attributed to a decrease in other income of $404,000, mainly due to the employee retention credit received in the first quarter of 2023 of $426,000, which did not reoccur in 2024. The decrease in other income was partially offset by an increase in interest income of $229,000 resulting from higher interest rates over the comparative periods.
Current wording
Total other income was $1,174,000 for the six months ended June 30, 2024, a decrease of $203,000, from $1,377,000 for the same period in 2023. The decrease was primarily attributable to the $426,000 employee retention credit received during the first quarter of 2023, which did not reoccur in 2024. Partially offsetting this decrease was an increase in investment income of $240,000 resulting from higher interest rates over the comparative periods.
Previous wording
For the three months ended March 31, 2024, we had an income tax benefit of $942,000 compared to income tax expense of $1,013,000 for the three months ended March 31, 2023. The effective tax rates approximated 51% and 36% for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, there were no income taxes payable. We classify interest and penalties incurred on tax payments as income tax expenses. Our effective tax rates were higher than statutory rates primarily because of permanent differences related to Section 162(m). The Section 162(m) compensation deduction limitations occurred due to changes in tax law arising from the 2017 Tax Cuts and Jobs Act.
Current wording
For the six months ended June 30, 2024, we had an income tax benefit of $2,118,000 compared to income tax expense of $1,404,000 for the six months ended June 30, 2023. The effective tax rates approximated 102% and 41% for the six months ended June 30, 2024 and 2023, respectively. As of June 30, 2024, the Company had income taxes receivable of $3,646,000. We classify interest and penalties incurred on tax payments as income tax expenses. Our effective tax rates were higher than statutory rates primarily because of permanent differences related to Section 162(m). The Section 162(m) compensation deduction limitations occurred due to changes in tax law arising from the 2017 Tax Cuts and Jobs Act.
Previous wording
Our cash, cash equivalents and marketable securities totaled approximately $60,671,000 as of March 31, 2024, a decrease of $3,792,000 from $64,463,000 as of December 31, 2023.
Current wording
Our cash, cash equivalents and marketable securities totaled approximately $49,565,000 as of June 30, 2024, a decrease of $14,898,000 from $64,463,000 as of December 31, 2023.
Previous wording
The following table shows our cash flow activities for the three months ended March 31,
Current wording
The following table shows our cash flow activities for the six months ended June 30,
Previous wording
During the first three months of 2023, the Company's operations provided $3,413,000 primarily as a result of distributions of earnings from unconsolidated joint ventures and our net income from operations.
Current wording
During the first six months of 2023, our operations provided $1,169,000 primarily as a result of distributions of earnings from unconsolidated joint ventures and net income from operations.
Previous wording
During the first three months of 2024, investing activities provided $3,074,000. We made capital expenditures, inclusive of capitalized interest and payroll (exclusive of stock compensation), of $8,112,000, which includes predevelopment activities for our master planned communities, $599,000 consisting of permitting efforts for MV, $353,000 consisting of permitting efforts for Grapevine, and costs related to litigation defense for Centennial of $994,000. At TRCC, we spent $2,446,000 ofconstruction cost on Terra Visa at Tejon and $1,573,000 on infrastructure improvements at TRCC-East. Within our farming segment, we spent $1,846,000, which includes cultural costs for orchards currently classified as under development and replacement of machinery and equipment. Additionally, we used $5,248,000 to acquire water assets. We had marketable securities of $46,239,000 that matured, and we reinvested $38,614,000. Lastly, we received proceeds of $5,500,000 from joint venture distributions.
Current wording
During the first six months of 2024, investing activities used $1,643,000. We made capital expenditures, inclusive of capitalized interest and payroll (exclusive of stock compensation), of $22,077,000, which included predevelopment activities for our master planned communities, $1,256,000 consisting of permitting efforts for MV, $696,000 consisting of permitting efforts for Grapevine, and costs related to litigation defense for Centennial of $2,148,000. At TRCC, we spent $6,768,000 ofconstruction cost on Terra Visa at Tejon and $6,998,000 on infrastructure improvements at TRCC-East. Within our farming segment, we spent $3,317,000, which included cultural costs for orchards currently classified as under development and replacement of machinery and equipment. Additionally, we used $5,066,000 to acquire water assets. We had marketable securities of $76,869,000 that matured, and we reinvested $60,500,000. Lastly, we received proceeds of $5,811,000 from joint venture distributions and reimbursements of $3,309,000 from a Community Facilities District.
Previous wording
During the first three months of 2023, investing activities provided $877,000. The Company made capital expenditures, inclusive of capitalized interest and payroll (exclusive of stock compensation), of $5,037,000, which includes predevelopment activities for our master planned communities, $524,000 consisting of permitting efforts for MV, $326,000 consisting of permitting efforts for Grapevine, and costs related to litigation defense for Centennial of $700,000. At TRCC, we spent $1,286,000 on infrastructure improvements at TRCC-East. Within our farming segment, we spent $1,659,000, which includes cultural costs for orchards currently classified as under development and replacement of machinery and equipment. Additionally, the Company used $4,355,000 to acquire water assets. The Company had marketable securities maturities of $27,193,000 and reinvested $28,892,000. Lastly, the Company received proceeds of $10,644,000, and $1,324,000 from joint venture distributions, and water sales, respectively.
Current wording
During the first six months of 2023, investing activities used $9,480,000. We made capital expenditures, inclusive of capitalized interest and payroll (exclusive of stock compensation), of $10,188,000, which included predevelopment activities for our master planned communities; $1,006,000 consisting of permitting efforts for MV; $664,000 consisting of permitting efforts for Grapevine; and costs related to litigation defense for Centennial of $1,628,000. At TRCC, we spent $3,667,000 on infrastructure improvements at TRCC-East. Within our farming segment, we spent $2,738,000, which includes cultural costs for orchards currently classified as under development and replacing machinery and equipment. Lastly, we used $4,666,000 to acquire water assets. We had marketable securities of $53,038,000 that matured, and we reinvested $58,930,000. Lastly, we received proceeds of $10,692,000 and $1,324,000 from joint venture distributions, and water sales, respectively.
Previous wording
Our estimated capital investment, inclusive of capitalized interest and payroll, for the remainder of 2024 is primarily related to our real estate projects. These estimated investments include approximately $40,074,000 of construction costs for the Terra Vista at Tejon multi-family project phase 1 development and $14,832,000 of infrastructure development at TRCC-East to support the continued commercial retail and industrial development, water treatment system improvements, and expansion of the wastewater treatment plant for future anticipated absorption. We also expect to invest up to $7,652,000 for land planning, litigation/appeals, federal and state agency permitting activities, and development activities at MV, Centennial, and Grapevine during the remainder of 2024. Lastly, we plan to continue to invest $1,222,000 in cultural costs tied to new almond orchards and vineyards, and to replace farm equipment. The farm investments are part of a long-term farm management program to redevelop declining orchards and vineyards to maintain and improve future farm revenues.
Current wording
Our estimated capital investment, inclusive of capitalized interest and payroll, for the remainder of 2024 is primarily related to our real estate projects. These estimated investments include approximately $26,562,000 of construction costs for the Terra Vista at Tejon multi-family project phase 1 development and $13,192,000 of infrastructure development at TRCC-East to support the continued commercial retail and industrial development, water treatment system improvements, and expansion of the wastewater treatment plant for future anticipated absorption. We also expect to invest up to $4,336,000 for land planning, litigation/appeals, federal and state agency permitting activities, and development activities at MV, Centennial, and Grapevine during the remainder of 2024.
Previous wording
We capitalize interest cost as a cost of the project only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided expenditures for the asset have been made and interest cost has been incurred. Capitalized interest for the three months ended March 31, 2024 and 2023, was $968,000 and $621,000, respectively, and is classified within real estate development. We also capitalized payroll costs related to development, pre-construction, and construction projects, which aggregated $547,000 and $668,000 for the three months ended March 31, 2024 and 2023, respectively. Expenditures for repairs and maintenance are expensed as incurred.
Current wording
We capitalize interest cost as a cost of the project only during the period for which activities necessary to prepare an asset for its intended use are ongoing, provided expenditures for the asset have been made and interest cost has been incurred. Capitalized interest for the six months ended June 30, 2024 and 2023, was $2,009,000 and $1,210,000, respectively, and is classified within real estate development. We also capitalized payroll costs related to development, pre-construction, and construction projects, which aggregated $1,493,000 and $1,258,000 for the six months ended June 30, 2024 and 2023, respectively. Expenditures for repairs and maintenance are expensed as incurred.
Previous wording
During the first three months of 2024, financing activities used $206,000, which was attributable to the tax payments on vested share grants.
Current wording
During the first six months of 2024, financing activities provided $3,794,000, which was attributable to borrowings on the line of credit of $4,000,000, partially offset by the tax payments on vested share grants of $206,000.
Previous wording
During the first three months of 2023, financing activities used $3,030,000, which was attributable to long-term debt service of $436,000, and tax payments on vested share grants of $2,594,000.
Current wording
During the first six months of 2023, financing activities used $3,466,000, which was attributable to long-term debt service of $872,000, and tax payments on vested share grants of $2,594,000.
Previous wording
At March 31, 2024, total capitalization at book value was $530,664,000, consisting of $47,942,000 of debt and $482,722,000 of equity, resulting in a debt-to-total-capitalization ratio of approximately 9.0%.
Current wording
At June 30, 2024, total capitalization at book value was $536,525,000, consisting of $51,942,000 of debt and $484,583,000 of equity, resulting in a debt-to-total-capitalization ratio of approximately 9.7%.
Previous wording
On November 17, 2023, the Company entered into a Credit Agreement with AgWest Farm Credit, PCA, as administrative agent and letter of credit intermediary (Administrative Agent), and certain other lenders (the Credit Agreement Lenders), collectively, the Revolving Credit Facility. The Revolving Credit Facility provides TRC with (i) a revolving credit line (RCL) in the amount of $160,000,000 and (ii) the option for TRC to utilize a letter of credit sub-facility in the amount of $15,000,000 (LOC Sub-Facility). The LOC Sub-Facility is part of, and not in addition to, the RCL. As further summarized below, the RCL requires interest only payments and has a maturity date of January 1, 2029.
Current wording
On November 17, 2023, we entered into a Credit Agreement with AgWest Farm Credit, PCA, as administrative agent and letter of credit intermediary (Administrative Agent), and certain other lenders (the Credit Agreement Lenders), collectively, the Revolving Credit Facility. The Revolving Credit Facility provides TRC with (i) a revolving credit line (RCL) in the amount of $160,000,000 and (ii) the option for TRC to utilize a letter of credit sub-facility in the amount of $15,000,000 (LOC Sub-Facility). The LOC Sub-Facility is part of, and not in addition to, the RCL. As further summarized below, the RCL requires interest only payments and has a maturity date of January 1, 2029.
Previous wording
Upon closing of the Revolving Credit Facility, funds from the RCL were used to pay off and close out the existing Bank of America, N.A. Term Note and Revolving Line of Credit Note. The amount of this pay off was $47,078,564 plus accrued interest and fees on the Bank of America Term Note. The Company evaluated the debt exchange under Accounting Standards Codification (ASC) 470 and determined that the exchange should be treated as a debt extinguishment. Future borrowings under the Revolving Credit Facility will be used for ongoing working capital requirements, including to fund future construction projects, farming and ranching operations, and other general corporate purposes.
Current wording
Upon closing of the Revolving Credit Facility, funds from the RCL were used to pay off and close out the existing Bank of America, N.A. Term Note and Revolving Line of Credit Note. The amount of this pay off was $47,078,564 plus accrued interest and fees on the Bank of America Term Note. We evaluated the debt exchange under Accounting Standards Codification (ASC) 470 and determined that the exchange should be treated as a debt extinguishment. Future borrowings under the Revolving Credit Facility will be used for ongoing working capital requirements, including to fund future construction projects, farming and ranching operations, and other general corporate purposes.
Previous wording
The interest rate per annum applicable to the Revolving Credit Facility is the one-month term SOFR plus an interest rate spread that is based on TRC’s consolidated net liabilities to equity ratio (NLER). The interest rate spread for the NLER has three tiers: (1) 2.75% if the NLER is 55% or more; (2) 2.5% if the NLER is between 35% and less than 55%; and (3) 2.25% if the NLER is less than 35%. The interest rate spread in the previous sentence may effectively be reduced by applying a patronage credit for TRC’s participation in the farm credit program, which patronage credit historically has been (for reference and information purposes only and not as a guarantee of future patronage credit) between 100-125 basis points. The patronage credit is paid annually by the Administrative Agent in the form of a dividend. As of March 31, 2024, the Company's NLER was in tier 3, or less than 35%, and the applicable interest rate spread was 2.25%.
Current wording
The interest rate per annum applicable to the Revolving Credit Facility is one-month term SOFR plus an interest rate spread that is based on TRC’s consolidated net liabilities to equity ratio (NLER). The interest rate spread for the NLER has three tiers: (1) 2.75% if the NLER is 55% or more; (2) 2.5% if the NLER is between 35% and less than 55%; and (3) 2.25% if the NLER is less than 35%. The interest rate spread in the previous sentence may effectively be reduced by applying a patronage credit for TRC’s participation in the farm credit program, which patronage credit historically has been (for reference and information purposes only and not as a guarantee of future patronage credit) between 100-125 basis points. The Administrative Agent pays the patronage credit annually in the form of a dividend. As of June 30, 2024, the Company's NLER was in tier 3, or less than 35%, and the applicable interest rate spread was 2.25%.
Previous wording
The Revolving Credit Facility also contains customary negative covenants that limit the ability of the Company to, among other things, make capital expenditures, incur indebtedness and issue guaranties, consummate certain asset sales, acquisitions or mergers, make investments, pay dividends or repurchase stock, make a change in capital ownership, or incur liens on any assets.
Current wording
The Revolving Credit Facility also contains customary negative covenants that limits our ability to, among other things, make capital expenditures, incur indebtedness and issue guaranties, consummate certain asset sales, acquisitions or mergers, make investments, pay dividends or repurchase stock, make a change in capital ownership, or incur liens on any assets.
Previous wording
We have a strong liquidity position at March 31, 2024 with $60,671,000 in cash and securities and $108,615,000 available on our New RLC to meet any short-term liquidity needs. See Note 3 (Marketable Securities) and Note 7 (Line of Credit and Long-Term Debt) of the Notes to Unaudited Consolidated Financial Statements for more information.
Current wording
We had a strong liquidity position at June 30, 2024 with $49,565,000 in cash and securities and $104,615,000 available on our RLC to meet any short-term liquidity needs. See Note 3 (Marketable Securities) and Note 7 (Line of Credit and Long-Term Debt) of the Notes to Unaudited Consolidated Financial Statements for more information.
Previous wording
Our cash contract commitments consist of contracts in various stages of completion related to infrastructure development within our industrial developments and entitlement costs related to our industrial and residential development projects. Also, included in the cash contract commitments are estimated fees earned in 2014 by a consultant, related to the entitlement of the Grapevine Development Area. We exited a consulting contract in 2014 related to the Grapevine Development and are obligated to pay an earned incentive fee at the time of successful receipt of all project permits and entitlements and at a value measurement date five-years after entitlements have been achieved for Grapevine. The final amount of the incentive fees will not be finalized until the future payment dates. We believe that net savings from exiting the contract over this future time period will more than offset the incentive payment costs.
Current wording
Our cash contract commitments consist of contracts in various stages of completion related to infrastructure development within our industrial and multi-family developments and entitlement costs related to our industrial and residential development projects. Also, included in the cash contract commitments are estimated fees earned in 2014 by a consultant, related to the entitlement of the Grapevine Development Area. We exited a consulting contract in 2014 related to the Grapevine Development and are obligated to pay an earned incentive fee at the time of successful receipt of all project permits and entitlements and at a value measurement date five-years after entitlements have been achieved for Grapevine. The final amount of the incentive fees will not be finalized until the future payment dates. We believe that net savings from exiting the contract over this future time period will more than offset the incentive payment costs.
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