Farmland Partners Inc

Previous wording

Our primary strategic objective is to utilize our position as a leading institutional acquirer, owner and manager of high-quality farmland located in agricultural markets throughout North America to deliver strong risk adjusted returns to investors through a combination of cash dividends and asset appreciation. As of March 31, 2024, we owned farms with an aggregate of approximately 134,700 acres in Arkansas, California, Colorado, Florida, Illinois, Indiana, Kansas, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina and Texas. In addition, as of March 31, 2024, we owned land and buildings for four agriculture equipment dealerships in Ohio leased to Ag Pro under the John Deere brand and served as property manager for approximately 42,700 acres, including farms in Iowa. As of March 31, 2024, approximately 70% of our portfolio (by value) was used to grow primary crops, such as corn, soybeans, wheat, rice and cotton, and approximately 30% was used to produce specialty crops, such as almonds, pistachios, citrus, strawberries, and edible beans. We believe our portfolio gives investors the economic benefit of increasing global food demand in the face of growing scarcity of high-quality farmland and will continue to reflect the approximate allocation of U.S. agricultural

Current wording

Our primary strategic objective is to utilize our position as a leading institutional acquirer, owner and manager of high-quality farmland located in agricultural markets throughout North America to deliver strong risk adjusted returns to investors through a combination of cash dividends and asset appreciation. As of June 30, 2024, we owned farms with an aggregate of approximately 134,700 acres in Arkansas, California, Colorado, Florida, Illinois, Indiana, Kansas, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina and Texas. In addition, as of June 30, 2024, we owned land and buildings for four agriculture equipment dealerships in Ohio leased to Ag Pro under the John Deere brand and served as property manager for approximately 45,400 acres, including farms in Iowa. As of June 30, 2024, approximately 70% of our portfolio (by value) was used to grow primary crops, such as corn, soybeans, wheat, rice and cotton, and approximately 30% was used to produce specialty crops, such as almonds, pistachios, citrus, strawberries, and edible beans. We believe our portfolio gives investors the economic benefit of increasing global food demand in the face of growing scarcity of high-quality farmland and will continue to reflect the approximate allocation of U.S. agricultural

Previous wording

FPI was incorporated in Maryland on September 27, 2013, and is the sole member of the sole general partner of the Operating Partnership, which is a Delaware limited partnership that was formed on September 27, 2013. All of FPI’s assets are held by, and its operations are primarily conducted through, the Operating Partnership and its wholly owned subsidiaries. As of March 31, 2024, FPI owned 97.5% of the Common units and none of the Series A preferred units. See “Note 9—Stockholders’ Equity and Non-controlling Interests” within the notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding the non-controlling interests.

Current wording

FPI was incorporated in Maryland on September 27, 2013, and is the sole member of the sole general partner of the Operating Partnership, which is a Delaware limited partnership that was formed on September 27, 2013. All of FPI’s assets are held by, and its operations are primarily conducted through, the Operating Partnership and its wholly owned subsidiaries. As of June 30, 2024, FPI owned 97.6% of the Common units and none of the Series A preferred units. See “Note 9—Stockholders’ Equity and Non-controlling Interests” within the notes to the consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information regarding the non-controlling interests.

Previous wording

Most of our farming leases have lease terms of three years for row crops and up to seven years for permanent crops, pursuant to which each tenant is responsible for substantially all of the operating expenses related to the property, including maintenance, water usage and insurance. As a result, we believe that the effect on us of inflationary increases in operating expenses are borne largely by our tenants under the terms of their leases. We believe that inflationary increases in farmer profitability will continue to impact lease renegotiations upon renewals, as we experienced in the most recent renewal cycle in late 2023. Furthermore, high levels of inflation have prompted the Board of Governors of the United States Federal Reserve (the “Federal Reserve”) to increase the federal funds rate, which has led to a significant increase in market short- and long-term interest rates since the beginning of 2022. This increase in rates has significantly increased the cost of our floating rate debt and has also significantly increased the cost of certain of our MetLife debt with interest rates that have been reset since the beginning of 2022 and will reset again in 2024. The Federal Reserve may continue this policy of maintaining elevated rates, which would further increase interest expense for many businesses, including the Company.

Current wording

Most of our farming leases have lease terms of three years for row crops and up to seven years for permanent crops, pursuant to which each tenant is responsible for substantially all of the operating expenses related to the property, including maintenance, water usage and insurance. As a result, we believe that the effect on us of inflationary increases in operating expenses are borne largely by our tenants under the terms of their leases. We believe that inflationary increases in farmer profitability will continue to impact lease renegotiations upon renewals, as we experienced in the most recent renewal cycle in late 2023. Furthermore, high levels of inflation have prompted the Board of Governors of the United States Federal Reserve (the “Federal Reserve”) to increase the federal funds rate, which has led to a significant increase in market short- and long-term interest rates since the beginning of 2022. This increase in rates has significantly increased the cost of our floating rate debt and has also significantly increased the cost of certain of our MetLife debt with interest rates that have been reset since the beginning of 2022. The Federal Reserve may continue this policy of maintaining elevated rates, which would further increase interest expense for many businesses, including the Company.

Previous wording

We expect that global demand for food, driven primarily by significant increases in the gross domestic product (“GDP”) per capita and global population, will continue to be the key driver of farmland values. We expect that global demand for most crops will continue to keep pace with global population growth. We also believe that growth in global GDP per capita, particularly in developing nations, will contribute significantly to increasing demand for primary crops. As global GDP per capita increases, the composition of daily caloric intake is expected to shift away from the direct consumption of primary crops toward more fruits, vegetables and animal-based proteins, which is expected to result in increased demand for primary crops as feed for livestock. We believe that once individuals increase consumption of higher

Current wording

We expect that global demand for food, driven primarily by significant increases in the gross domestic product (“GDP”) per capita and global population, will continue to be the key driver of farmland values. We expect that global demand for most crops will continue to keep pace with global population growth. We also believe that growth in global GDP per capita, particularly in developing nations, will contribute significantly to increasing demand for primary crops. As global GDP per capita increases, the composition of daily caloric intake is expected to shift away from the direct consumption of primary crops toward more fruits, vegetables and animal-based proteins, which is expected to result in increased demand for primary crops as feed for livestock. We believe that once individuals increase consumption of higher quality food, they will strongly resist returning to their former dietary habits, resulting in greater inelasticity in the demand for food. We anticipate these factors will lead to either higher crop prices and/or higher yields and, therefore, higher rental rates on our farmland, as well as sustained growth in farmland values over the long term.

Previous wording

As of March 31, 2024, $136.0 million of our outstanding indebtedness was subject to interest rates that reset before maturity (excluding our floating rate debt), of which $43.9 million was subject to interest rates that will be reset in 2024. As of March 31, 2024, the weighted average interest rate of the indebtedness subject to interest rate resets in 2024 was 3.07%.

Current wording

As of June 30, 2024, $136.0 million of our outstanding indebtedness was subject to interest rates that reset before maturity (excluding our floating rate debt). As of January 1, 2024, $43.9 million was subject to rate resets in 2024, and $16.8 million has been reset as of June 30, 2024. The remaining $27.1 million will be reset in October and December 2024.

Previous wording

At March 31, 2024, $100.4 million, or 26.2%, of our debt had variable interest rates, however, as stated in “Note 10—Hedge Accounting” to the accompanying consolidated financial statements, the Company has an interest rate swap with Rabobank for $33.2 million, which reduces floating rate exposure to $67.2 million. After adjusting the $33.2 million of swapped Rabobank debt as fixed rate debt, the ratio of floating rate debt to total debt decreased to 17.5%. Assuming no increase in the level of our variable rate debt spreads, if SOFR increased by 1.0%, our cash flow would decrease by approximately $0.7 million per year, and if SOFR decreased by 1.0%, our cash flow would increase approximately $0.7 million per year.

Current wording

At June 30, 2024, $110.4 million, or 28.1%, of our debt had variable interest rates, however, as stated in “Note 10—Hedge Accounting” to the accompanying consolidated financial statements, the Company has an interest rate swap with Rabobank for $33.2 million, which reduces floating rate exposure to $77.2 million. After adjusting the $33.2 million of swapped Rabobank debt as fixed rate debt, the ratio of floating rate debt to total debt decreased to 19.6%. Assuming no increase in the level of our variable rate debt spreads, if SOFR increased by 1.0%, our cash flow would decrease by approximately $0.8 million per year, and if SOFR decreased by 1.0%, our cash flow would increase approximately $0.8 million per year.

Previous wording

After a 33% decrease in exports of corn for the 2022/2023 marketing year (September 2022 to August 2023), the U.S. Department of Agriculture (the “USDA”) estimates corn exports will be up 26% for the 2023/2024 marketing year (September 2023 to August 2024). After a 7% decrease in exports of soybeans for the 2022/2023 marketing year, the USDA estimates soybean exports will be down 15% for the 2023/2024 marketing year, due to competition from South American production and the strong U.S. Dollar.

Current wording

After a 34% increase in exports of corn for the 2023/2024 marketing year (September 2023 to August 2024), the U.S. Department of Agriculture (the “USDA”) estimates corn exports will remain flat for the 2024/2025 marketing year (September 2024 to August 2025). After a 15% decrease in exports of soybeans for the 2022/2023 marketing year, the USDA estimates soybean exports will be up 7% for the 2024/2025 marketing year, due to less competition from South American production.

Previous wording

According to the USDA Outlook for Agricultural Trade, the top three export countries from the United States were China, Mexico, and Canada. Exports to China for fiscal year 2023 (October 2022 to September 2023) were $33.7 billion, down 7% from 2022. Exports to Canada were $27.9 billion, down 3% from 2022. Exports to Mexico were $28.2 billion, up 1% from 2022. Exports to China for fiscal year 2024 are forecast to decrease to $28.7 billion, while exports to Mexico and Canada are expected to increase slightly to $28.4 billion and $28.0 billion, respectively.

Current wording

According to the USDA Outlook for Agricultural Trade, the top three export countries from the United States were China, Mexico, and Canada. Exports to China for fiscal year 2023 (October 2022 to September 2023) were $33.7 billion, down 7% from 2022. Exports to Canada were $27.9 billion, down 3% from 2022. Exports to Mexico were $28.2 billion, up 1% from 2022. Exports to China for fiscal year 2024 are forecast to decrease to $27.7 billion, while exports to Mexico and Canada are expected to increase slightly to $28.7 billion and $28.4 billion, respectively.

Previous wording

Rental income decreased $0.5 million, or 4.8%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, resulting primarily from dispositions that occurred in 2023, partially offset by increased variable rent.

Current wording

Rental income decreased $0.7 million, or 6.7%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, resulting primarily from dispositions that occurred in 2023.

Previous wording

Depreciation, depletion and amortization decreased $0.3 million, or 17.4%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This decrease was a result of asset dispositions in 2023 and more assets becoming fully depreciated, partially offset by depreciable assets being placed into service.

Current wording

Depreciation, depletion and amortization decreased $0.8 million, or 35.2%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. This decrease was a result of asset dispositions in 2023 and more assets becoming fully depreciated, partially offset by depreciable assets being placed into service.

Previous wording

Property operating expenses decreased $0.4 million, or 17.6%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, resulting from lower tax expenses, insurance and repairs.

Current wording

Property operating expenses decreased $0.6 million, or 23.0%, for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, resulting from lower tax expenses, insurance and repairs.

Previous wording

Cost of goods sold decreased $0.4 million, or 42.8%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This decrease was the result of a lower volume of crop sold on citrus farms, partially offset by an increase in walnuts in the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Cost of goods sold totaled $0.8 million for the three months ended June 30, 2024 compared to $1.0 million for the three months ended June 30, 2023. This decrease was the result of a lower volume of crop sold on walnut farms, partially offset by an increase in citrus in the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Previous wording

Other income remained relatively flat at $0.1 million and $0.0 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Other expense remained relatively flat at $0.1 million for the three months ended June 30, 2024 and 2023.

Previous wording

(Income) loss from equity method investment remained relatively flat at $0.1 million and $0.0 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Income from equity method investment was negligible during the three months ended June 30, 2024 and remained relatively consistent compared to the three months ended June 30, 2023.

Previous wording

(Gain) loss on disposition of assets, net changed from gain on disposition of assets of $1.8 million for the three months ended March 31, 2023 to loss on disposition of assets of $0.1 million for the three months ended March 31, 2024. The loss on sale of assets during the three months ended March 31, 2024 was attributable to dispositions of fixed assets while the gain on sale of assets during the three months ended March 31, 2023 was attributable to dispositions of two properties, as well as the disposal of fixed assets.

Current wording

(Gain) loss on disposition of assets, net changed from gain on disposition of assets of $11.1 million for the three months ended June 30, 2023 to loss on disposition of assets of $0.0 million for the three months ended June 30, 2024. The loss on sale of assets during the three months ended June 30, 2024 was attributable to dispositions of fixed assets while the gain on sale of assets during the three months ended June 30, 2023 was attributable to dispositions of 17 properties, as well as the disposal of fixed assets.

Previous wording

Our net income for the three months ended March 31, 2024 was affected partially by acquisitions and dispositions that occurred since the quarter ended March 31, 2023, as well as by higher crop sales, lower cost of goods sold, and income from forfeited deposits.

Current wording

Our net income for the six months ended June 30, 2024 was affected partially by acquisitions and dispositions that occurred since the quarter ended June 30, 2023, as well as severance expense of $1.4 million, partially offset by higher crop sales, lower cost of goods sold, lower interest expense and income from forfeited deposits.

Previous wording

Crop sales increased $0.3 million, or 83.3%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This increase was the result of a higher volume of walnut sales on our directly operated properties.

Current wording

Crop sales increased $0.7 million, or 82.3%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This increase was the result of a higher volume of walnut and citrus sales on our directly operated properties.

Previous wording

Other revenue decreased $0.5 million, or 29.2%, for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. This decrease was primarily due to a decrease of $0.6 million in crop insurance proceeds and $0.1 million in auction and brokerage revenue, partially offset by an increase of $0.2 million in management fees and interest income.

Current wording

Other revenue decreased $0.3 million, or 14.0%, for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This decrease was primarily due to a decrease of $0.6 million in crop insurance proceeds and $0.1 million in auction and brokerage revenue, partially offset by an increase of $0.4 million in interest income.

Previous wording

Acquisition and due diligence costs were negligible during the three months ended March 31, 2024 and remained relatively consistent compared to the three months ended March 31, 2023.

Current wording

Acquisition and due diligence costs were negligible during the six months ended June 30, 2024 and remained relatively consistent compared to the six months ended June 30, 2023.

Previous wording

(Income) from forfeited deposits was $1.2 million for the three months ended March 31, 2024 compared to $0.0 million for the three months ended March 31, 2023, due to the termination of a repurchase agreement and the retention of $1.2 million in earnest money payments.

Current wording

(Income) from forfeited deposits was $1.2 million for the six months ended June 30, 2024 compared to $0.0 million for the six months ended June 30, 2023, due to the termination of a repurchase agreement and the retention of $1.2 million in earnest money payments.

Previous wording

High levels of inflation have prompted the Federal Reserve to increase interest rates which has resulted in, and may continue to result in, increased interest expense. We expect to meet our liquidity needs through cash on hand, undrawn availability under our lines of credit ($178.9 million in availability as of March 31, 2024), operating cash flows, borrowings, proceeds from equity issuances and selective asset dispositions where such dispositions are deemed to be in the best interests of the Company.

Current wording

High levels of inflation prompted the Federal Reserve to increase interest rates which has resulted in, and may continue to result in, increased interest expense. We expect to meet our liquidity needs through cash on hand, undrawn availability under our lines of credit ($158.1 million in availability as of June 30, 2024), operating cash flows, borrowings, proceeds

Previous wording

On May 6, 2022, we entered into equity distribution agreements under which we issued and sold from time to time, through sales agents, shares of our common stock having an aggregate gross sales price of up to $100.0 million in an at-the-market offering program (the “ATM Program”). The ATM Program was intended to provide cost-effective financing alternatives in the capital markets. The ATM Program expired on April 9, 2024 in connection with the expiration of the Company’s shelf registration statement as described below. In connection with the expiration of the ATM Program, the Company intends to explore additional financing alternatives, including, without limitation, entry into another at-the-market offering program.

Current wording

On May 6, 2022, we entered into equity distribution agreements under which we issued and sold from time to time, through sales agents, shares of our common stock having an aggregate gross sales price of up to $100.0 million in an at-the-market offering program (the “ATM Program”). The ATM Program was intended to provide cost-effective financing alternatives in the capital markets. The ATM Program expired on April 9, 2024 in connection with the expiration of the Company’s shelf registration statement on Form S-3 (File No. 333-254834) (the “2021 Shelf Registration Statement”). On May 8, 2024, we filed a new shelf registration statement on Form S-3 (File No. 333-279210), which was declared effective by the SEC on May 17, 2024 (the “2024 Shelf Registration Statement”), pursuant to which we may issue and sell additional equity or debt securities. The Company does not currently have an at-the-market offering program, but may enter into a new equity distribution agreement in the future pursuant to which sales may be made under the 2024 Shelf Registration Statement.

Previous wording

When material debt repayments are due within the following 12 months, we work with current and new lenders and other potential sources of capital sufficiently in advance of the debt maturity to ensure that all of our obligations are satisfied in a timely manner. We have a history of being able to refinance or extend our debt obligations to manage our debt maturities. Our ability to access the equity capital markets will depend on a number of factors as well, including general market conditions. Prior to April 9, 2024, we had an effective shelf registration statement whereby we could issue additional equity or debt securities, which we have done successfully in the past as described above. The Company’s shelf registration statement expired on April 9, 2024. In connection with such expiration, the Company anticipates that it will file another shelf registration statement with the SEC, pursuant to which it may issue and sell shares from time to time pursuant to a new at-the-market offering program as described above. The Company has no material debt maturities due before 2025.

Current wording

When material debt repayments are due within the following 12 months, we work with current and new lenders and other potential sources of capital sufficiently in advance of the debt maturity to ensure that all of our obligations are satisfied in a timely manner. We have a history of being able to refinance or extend our debt obligations to manage our debt maturities. Our ability to access the equity capital markets will depend on a number of factors as well, including general market conditions. The Company has $25.0 million in debt maturities due within the next 12 months.

Previous wording

During the three months ended March 31, 2024, we repurchased no shares of our common stock. We currently have authority to repurchase up to an aggregate of $83.3 million in additional shares of our common stock.

Current wording

During the six months ended June 30, 2024, we repurchased no shares of our common stock. We currently have authority to repurchase up to an aggregate of $83.3 million in additional shares of our common stock.

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2024 and 2023:

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023:

Previous wording

As of March 31, 2024, we had $6.2 million of cash and cash equivalents compared to $12.2 million at March 31, 2023.

Current wording

As of June 30, 2024, we had $5.7 million of cash and cash equivalents compared to $11.2 million at June 30, 2023.

Previous wording

Net cash and cash equivalents provided by operating activities decreased by $3.9 million primarily as a result of the following:

Current wording

Net cash and cash equivalents provided by operating activities decreased by $3.6 million primarily as a result of the following:

Previous wording

Net cash and cash equivalents provided by (used in) investing activities decreased by $20.4 million primarily as a result of the following:

Current wording

Net cash and cash equivalents provided by (used in) investing activities decreased by $55.7 million primarily as a result of the following:

Previous wording

Net cash and cash equivalents provided by (used in) financing activities increased by $20.5 million primarily as a result of the following:

Current wording

Net cash and cash equivalents provided by (used in) financing activities increased by $56.0 million primarily as a result of the following:

Previous wording

We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or Nareit. Nareit defines FFO as net income (loss) (calculated in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, real estate related depreciation, depletion and amortization (excluding amortization of deferred financing costs), impairment write-downs of depreciated property, and adjustments associated with impairment write-downs for unconsolidated partnerships and joint ventures. FFO is a supplemental non-GAAP financial measure. Management presents FFO as a supplemental performance measure because it believes that FFO is

Current wording

We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or Nareit. Nareit defines FFO as net income (loss) (calculated in accordance with GAAP), excluding gains (or

Previous wording

beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from sales of depreciable operating properties, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs.

Current wording

losses) from sales of depreciable operating property, real estate related depreciation, depletion and amortization (excluding amortization of deferred financing costs), impairment write-downs of depreciated property, and adjustments associated with impairment write-downs for unconsolidated partnerships and joint ventures. FFO is a supplemental non-GAAP financial measure. Management presents FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring our operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from sales of depreciable operating properties, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. We believe that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare our operating performance with that of other REITs.

Previous wording

The following table sets forth a reconciliation of AFFO share information to basic weighted average common shares

Current wording

The following table sets forth a reconciliation of AFFO share information to basic weighted average common shares outstanding, the most directly comparable GAAP equivalent, for the periods indicated below (unaudited):

Previous wording

The Company calculates Earnings Before Interest Taxes Depreciation and Amortization for real estate (“EBITDAre”) in accordance with the standards established by Nareit in its September 2017 White Paper. Nareit defines EBITDAre as net income (calculated in accordance with GAAP) excluding interest expense, income tax, depreciation and amortization, gains or losses on disposition of depreciated property (including gains or losses on change of control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s pro rata share of EBITDAre of unconsolidated affiliates. EBITDAre is a key financial measure used to evaluate the Company’s operating performance but should not be construed as an alternative to operating income, cash flows from operating activities or net income, in each case as determined in accordance with GAAP. The Company believes that EBITDAre is a useful performance measure commonly reported and will be widely used by analysts and investors in the Company’s industry. However, while EBITDAre is a performance measure widely used across the Company’s industry, the Company does not believe that it correctly captures the Company’s business operating performance because it includes non-cash expenses and recurring adjustments that are necessary to better understand the Company’s business operating performance. Therefore, in addition to EBITDAre, management uses Adjusted EBITDAre, a non-GAAP measure.

Current wording

The Company calculates Earnings Before Interest Taxes Depreciation and Amortization for real estate (“EBITDAre”) in accordance with the standards established by Nareit in its September 2017 White Paper. Nareit defines EBITDAre as net income (calculated in accordance with GAAP) excluding interest expense, income tax, depreciation and amortization, gains or losses on disposition of depreciated property (including gains or losses on change of control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s pro rata share of EBITDAre of unconsolidated affiliates. EBITDAre is a key financial measure used to evaluate the Company’s operating performance but should not be construed as an alternative to operating income, cash flows from operating activities or net income, in each case as determined in accordance with GAAP. The Company believes that EBITDAre is a useful performance measure commonly reported and will be widely used by analysts and investors in the Company’s industry. However, while EBITDAre is a performance

Previous wording

We further adjust EBITDAre for certain additional items such as stock-based compensation and incentive, indirect offering costs, real estate acquisition related audit fees and real estate related acquisition and due diligence costs (for a full discussion of these adjustments, see AFFO adjustments discussed above) that we consider necessary to understand our operating performance. We believe that Adjusted EBITDAre provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income and EBITDAre, is beneficial to an investor’s understanding of our operating performance.

Current wording

We further adjust EBITDAre for certain additional items such as stock-based compensation and incentive, indirect offering costs, real estate acquisition related audit fees and real estate related acquisition and due diligence costs and severance expense (for a full discussion of these adjustments, see AFFO adjustments discussed above) that we consider necessary to understand our operating performance. We believe that Adjusted EBITDAre provides useful supplemental information to investors regarding our ongoing operating performance that, when considered with net income and EBITDAre, is beneficial to an investor’s understanding of our operating performance.

Previous wording

We recognize rental revenue from fixed-rate farmland leases on a pro rata basis over the non-cancellable term of the lease in accordance with accounting principles generally accepted in the United States (“GAAP”). Notwithstanding GAAP accounting requirements to spread rental revenue over the lease term, a significant portion of fixed rent is received in a lump sum before planting season, in the first quarter, and after harvest, in the fourth quarter. We receive a significant portion of our variable rental payments in the fourth calendar quarter of each year, following harvest, with only a portion of such payments being recognized ratably through the year in accordance with GAAP, in relation to crop insurance contracts entered into by our tenants. The highly seasonal nature of the agriculture industry causes seasonality in our business to some extent. Our financial performance should be evaluated on an annual basis, which eliminates impacts of seasonality and other similar factors that may cause our quarterly results to vary during the course of the year.

Current wording

accounting requirements to spread rental revenue over the lease term, a significant portion of fixed rent is received in a lump sum before planting season, in the first quarter, and after harvest, in the fourth quarter. We receive a significant portion of our variable rental payments in the fourth calendar quarter of each year, following harvest, with only a portion of such payments being recognized ratably through the year in accordance with GAAP, in relation to crop insurance contracts entered into by our tenants. The highly seasonal nature of the agriculture industry causes seasonality in our business to some extent. Our financial performance should be evaluated on an annual basis, which eliminates impacts of seasonality and other similar factors that may cause our quarterly results to vary during the course of the year.