TEJON RANCH CO

Previous wording

This discussion and analysis are based on, should be read together with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in Item 15(a) of this Form 10-K, beginning at page F-1. It also should be read in conjunction with the disclosure under “Forward-Looking Statements” in Part 1 of this Form 10-K. When this report uses the words “we,” “us,” “our,” “Tejon,” “TRC,” and the “Company,” they refer to Tejon Ranch Co. and its subsidiaries, unless the context otherwise requires. References herein to fiscal year refer to our fiscal years ended or ending December 31.

Current wording

This discussion and analysis is based on, should be read together with, and is qualified in its entirety by, the consolidated financial statements and notes thereto included in Item 15(a) of this Form 10-K, beginning at page F-1. It also should be read in conjunction with the disclosure under “Forward-Looking Statements” in Part 1 of this Form 10-K. When this report uses the words “we,” “us,” “our,” “Tejon,” “TRC,” and the “Company,” they refer to Tejon Ranch Co. and its subsidiaries, unless the context otherwise requires. References herein to fiscal year refer to our fiscal years ended or ending December 31.

Previous wording

We are a diversified real estate development and agribusiness company committed to responsibly using our land and resources to meet the housing, employment, and lifestyle needs of Californians and to create value for our shareholders. In support of these objectives, we have been investing in land planning and entitlement activities for new commercial/industrial and resort/residential land developments and in infrastructure improvements within our active industrial development. Our prime asset is approximately 270,000 acres of contiguous, largely undeveloped land that, at its most southerly border, is 60 miles north of Los Angeles and, at its most northerly border, is 15 miles east of Bakersfield.

Current wording

We are a diversified real estate development and agribusiness company focused on responsibly utilizing our land resources to meet the housing, employment, and lifestyle needs of Californians while creating long-term shareholder value. In support of these objectives, we have been investing in land planning and entitlement activities for new commercial/industrial and resort/residential land developments and in infrastructure improvements within our active industrial development. Our prime asset is approximately 270,000 acres of contiguous, largely undeveloped land that, at its most southerly border, is 60 miles north of Los Angeles and, at its most northerly border, is 15 miles east of Bakersfield.

Previous wording

We currently operate in five reporting segments: real estate - commercial/industrial; real estate - resort/residential; mineral resources; farming; and ranch operations.

Current wording

We currently operate in six reporting segments: real estate - commercial/industrial; multifamily; real estate - resort/residential; mineral resources; farming; and ranch operations.

Previous wording

Our commercial/industrial real estate segment generates revenues from real estate leases, and land and building sales. The primary commercial/industrial development is TRCC. In 2025, we plan to expand our real estate operations to include residential leasing, further diversifying our portfolio and enhancing long-term recurring revenue streams. The resort/residential real estate development segment is actively involved in the land entitlement and pre-development efforts both internally and through a joint venture. Our active developments within this segment are MV, Centennial, and Grapevine. Our mineral resources segment generates revenues from oil and gas royalty leases, rock and aggregate mining leases, a lease with National Cement of California Inc., and water sales. The farming segment produces revenues from the sale of wine grapes, almonds, and pistachios, and we intend to expand into olives. Lastly, the ranch operations segment consists of game management revenues and ancillary land uses, such as grazing leases and filming.

Current wording

Our resort/residential real estate development segment is actively involved in the land entitlement and pre-development activities, both internally and through a joint venture. Our active developments within this segment include Mountain Village, Grapevine, and Centennial.

Previous wording

During 2025, we will continue to invest funds towards vertical development within our active commercial and industrial development, including construction on Terra Vista at Tejon, our new multi-family apartment community located immediately adjacent to the Outlets at Tejon at TRCC. We will also invest funds as necessary towards litigation defense, permits, and maps for our master plan mixed-use developments and for master project infrastructure. Securing entitlements for our land is a long, arduous process that can take several years and involves litigation. During the next few years, our net income will fluctuate from year-to-year based upon, among other factors, commodity prices, production within our farming segment, the timing of land sales and the leasing of land, industrial space, and/or multi-family apartment units within our industrial developments, and equity in earnings generated from our unconsolidated joint ventures.

Current wording

During 2026, we will continue to invest funds towards vertical development within our active commercial and industrial operations at TRCC, including the development of an additional industrial building and related infrastructure. We also expect to continue with lease-up activities at Terra Vista at Tejon, our multifamily apartment community located immediately adjacent to the Outlets at Tejon within TRCC. We will also invest funds as necessary towards permits, and maps for our master plan mixed-use developments and for master project infrastructure. Securing entitlements for land, as is currently the case with our Centennial project, is a lengthy and complex process that can take several years and involves litigation. During the next few years, our net income will fluctuate from year-to-year based upon, among other factors, commodity prices, production within our farming segment, the timing of land sales and the leasing of land, industrial space, and/or multi-family apartment units within our industrial developments, and equity in earnings generated from our unconsolidated joint ventures.

Previous wording

Impairment of Long-Lived Assets, Real Estate Development – We evaluate our real estate development projects for impairment on an ongoing basis. Our evaluation for impairment involves an initial assessment of each real estate development to determine whether events or changes in circumstances exist that may indicate that the carrying amounts of a real estate development are no longer recoverable. Possible indications of impairment may include events or changes in circumstances affecting the entitlement process, government regulation, litigation, geographical demand for new housing, and market conditions related to pricing of new homes and development costs.

Current wording

Impairment of Long-Lived Assets, Real Estate Development – We evaluate our real estate development projects for impairment on an ongoing basis. Our evaluation for impairment involves an initial assessment of each real estate development to determine whether events or changes in circumstances exist that may indicate that the carrying amounts of a real estate development are no longer recoverable. Possible indications of impairment may include events or changes in circumstances affecting the Company’s strategic plan for the real estate development, the entitlement process, government regulation, litigation, geographical demand for new housing, market conditions related to pricing of new homes and development costs.

Previous wording

•Commercial/industrial real estate segment expenses decreased $143,000, or 2%, from $8,053,000 in 2023 to $7,910,000 in 2024. The decrease in expenses is primarily attributed to lower property tax expense, partially offset by higher insurance cost and general and administrative expenses over the comparative period.

Current wording

•Commercial/industrial real estate segment expenses decreased $143,000, or 2%, from $8,053,000 in 2023 to $7,910,000 in 2024. The decrease in expenses is primarily attributed to lower property tax expenses, partially offset by higher insurance cost and general and administrative expenses over the comparative period.

Previous wording

For 2025, TRCC will continue to be the driver of new activity within the Company. Construction began in January of 2024 on Terra Vista at Tejon, our new multi-family apartment community located immediately adjacent to the Outlets at Tejon. We expect to start the construction of a 510,385 square-foot industrial building in 2025 through the TRC-DP 1 joint venture formed with Dedeaux Properties. We also expect the commercial/industrial segment to continue to experience operating costs, net of amounts capitalized, related to professional service fees, marketing, commissions, and planning costs as we continue to pursue development opportunities. These costs are expected to remain consistent with current levels of expense with any variability in the future tied to specific absorption transactions in any given year and near-term inflation, tariff and trade impacts. TCWD water assessments vary depending on water availability and variable costs of delivering the water.

Current wording

For 2026, TRCC is expected to remain the primary driver of new activity within the Company. Through the TRC-DP 1 joint venture formed with Dedeaux Properties, we expect to commence construction of a 510,385 square-foot industrial building during 2026. We also expect the commercial/industrial segment to continue to incur operating costs, net of amounts capitalized, related to professional service fees, marketing, commissions, and planning activities as we pursue additional development opportunities. These costs are expected to remain generally consistent with current levels, with variability in future periods driven primarily by the timing of specific absorption transactions, near-term inflationary pressures, and tariff and trade policy impacts.

Previous wording

The actual timing and completion of development is difficult to predict due to the uncertainties of the market. Infrastructure development and marketing activities and costs will continue over several years as we develop our land holdings. We anticipate shorter lead times and more stable prices for materials, with electrical components being a notable exception. We will also continue to evaluate land resources to determine the highest and best uses for our land holdings. Future sales of land are dependent on market circumstances and specific opportunities. Our goal in the future is to increase land value and create future revenue growth through planning and development of commercial and industrial properties.

Current wording

The actual timing and completion of development are difficult to predict due to the uncertainties of the market. Infrastructure development and marketing activities and costs will continue over several years as we develop our land holdings. We anticipate shorter lead times and more stable prices for materials, with electrical components being a notable exception. We will also continue to evaluate land resources to determine the highest and best uses for our land holdings. Future sales of land are dependent on market circumstances and specific opportunities. Our goal in the future is to increase land value and create future revenue growth through planning and development of commercial and industrial properties.

Previous wording

Our resort/residential segment activities include defending entitlements, land planning and pre-construction engineering and conservation activities for our Centennial, Grapevine, and MV projects.

Current wording

Our resort/residential segment activities include defending entitlements, land planning and pre-construction engineering and conservation activities for our MV, Grapevine, and Centennial projects. We are in the preliminary stages of development; hence, no revenues are attributed to this segment for these reporting periods.

Previous wording

•The expenses within the resort/residential segment consisted of professional service fees of $1,352,000, general and administrative expenses of $1,215,000 and other expenses of $48,000 for the twelve months ended December 31, 2024. The main components of the other expenses included travel and entertainment expenses and depreciation expenses.

Current wording

•The expenses within the resort/residential segment consisted of operating expenses of $1,632,000, general and administrative expenses of $609,000 and depreciation and amortization of $36,000 for the twelve months ended December 31, 2025.

Previous wording

The resort/residential segment will continue to incur costs in the future related to professional service fees, public relations costs, and staffing costs as we continue to go forward with permitting and pre-development activities for the above communities. We expect these expenses to remain consistent with current years' cost in the near term and only begin to increase as we move into the development phase of each project in the future. The actual timing and completion of entitlement-related activities and the beginning of development is difficult to predict due to the uncertainties of the approval process, the length of time related to litigation defense, and the status of the economy. We will also continue to evaluate land resources to determine the highest and best use for our landholdings. Our long-term goal through this process is to increase the value of our land and create future revenue opportunities through resort and residential development.

Current wording

The resort/residential segment will continue to incur costs related to professional service fees, public relations, and staffing as we advance permitting and pre-development activities in the MV, Grapevine, and Centennial communities. These expenses are expected to remain consistent with current levels in the near term, increasing only as individual projects transition into active development. The timing and completion of entitlement-related activities and the commencement of development remain difficult to predict due to uncertainties of the regulatory approval process, and broader economic conditions. We continue to evaluate our land resources to identify the highest and best use for our holdings, with the long-term objective of enhancing land value and creating future revenue opportunities through resort and residential development.

Previous wording

•Ranch operations expenses decreased $179,000, or 4%, from 5,043,000 in 2023 to $4,864,000 in 2024. This decrease was primarily attributed to lower repair and maintenance expense of $109,000 and savings in payroll and compensation expenses of $54,000.

Current wording

•Ranch operations expenses decreased $179,000, or 4%, from $5,043,000 in 2023 to $4,864,000 in 2024. This decrease was primarily attributed to lower repair and maintenance expense of $109,000 and savings in payroll and compensation expenses of $54,000.

Previous wording

Corporate general and administrative costs increased $1,220,000, or 12.4%, to $11,092,000 during 2024 when compared to $9,872,000 in 2023. The increase was primarily attributable to higher stock compensation expense of $1,053,000 over the comparative period. The main components of the 2024 corporate expenses included salaries and compensation expenses of $10,261,000 and other expenses of $831,000. Other expenses include professional services fees, licenses and fees, and depreciation expenses. The year-over-year increase in compensation expense is not expected to be a trend, but rather to return to historical averages in the future.

Current wording

Corporate general and administrative costs increased $1,220,000, or 12.4%, to $11,092,000 during 2024 when compared to $9,872,000 in 2023. The increase was primarily attributable to higher stock compensation expense of $1,053,000 over the comparative period. The main components of the 2024 corporate expenses included general and administrative expenses of $6,578,000, operating and professional service expenses of $4,169,000, and depreciation and amortization of $345,000.

Previous wording

During 2023, equity in earnings from unconsolidated joint ventures decreased $884,000, or 11%, to $6,868,000 when compared to $7,752,000 in 2022.

Current wording

During 2025, equity in earnings from unconsolidated joint ventures decreased $2,519,000, or 23%, to $8,362,000 when compared to $10,881,000 in 2024.

Previous wording

•Equity in earnings for our TRC-MRC LLC joint ventures increased by $1,613,000 due to higher rental rates or rental escalations, and the new revenue stream generated by the completed industrial building of the TRC-MRC 5, LLC joint venture.

Current wording

•The Petro Travel Plaza equity in earnings increased $1,965,000 or 31% when compared to 2023, which is largely attributable to higher fuel margins. Equity in earnings for our TRC-MRC LLC joint ventures increased by $1,613,000 due to higher rental rates or rental escalations, and the new revenue stream generated by the completed industrial building of the TRC-MRC 5, LLC joint venture.

Previous wording

For the twelve months ended December 31, 2024, the Company's net income tax expense was $976,000 compared to $2,323,000 for the twelve months ended December 31, 2023. These amounts represent effective income tax rates of approximately 27% and 42% for the twelve months ended December 31, 2024 and 2023, respectively. Our effective income tax rate for the year ended December 31, 2024 was comparable to the federal statutory rate in the United States, with minor adjustments due to temporary differences. As of December 31, 2024 and 2023, we had income tax receivable of $1,279,000 and $1,245,000, respectively.

Current wording

For the twelve months ended December 31, 2025, the Company's net income tax expense was $1,088,000 compared to $976,000 for the twelve months ended December 31, 2024. These amounts represent effective income tax rates of approximately 93.9% and 26.6% for the twelve months ended December 31, 2025 and 2024, respectively. Our effective income tax rate for the year ended December 31, 2025 was higher than the federal statutory rate in the United States, as a result of permanent differences arising from non-deductible compensation under Section 162(m) of the Tax Cuts and Jobs Act of 2017. As of December 31, 2025 and 2024, we had income tax receivable of $1,475,000 and $1,279,000, respectively.

Previous wording

As of December 31, 2024, we had net deferred tax liabilities of $9,059,000 compared to $8,269,000 as of December 31, 2023. Our largest deferred tax assets were made up of temporary differences related to stock compensation, deferred gains, pension adjustments, an interest rate swap, and capitalization of costs. Deferred tax liabilities consist of joint venture differences, depreciation, deferred gains, and an interest rate swap. Due to the nature of most of our deferred tax assets, we believe they will be used in future years and an allowance is not necessary.

Current wording

As of December 31, 2025, we had net deferred tax liabilities of $9,849,000 compared to $9,059,000 as of December 31, 2024. Our largest deferred tax assets were made up of temporary differences related to deferred gains, pension adjustments, stock compensation, an interest rate swap, and capitalization of costs. Deferred tax liabilities consist of joint venture differences, depreciation, deferred gains, capitalization of stock compensation, and an interest rate swap. Due to the nature of most of our deferred tax assets, we believe they will be used in future years and an allowance is not necessary.

Previous wording

The Company classifies interest and penalties incurred on tax payments as income tax expenses. The Company made income tax payments of $315,000 in 2024 and $2,564,000 in 2023. The Company received refunds of $1,000 in 2024 and $0 in 2023.

Current wording

The Company classifies interest and penalties incurred on tax payments as income tax expenses. The Company made $50,000 in estimated federal tax payments in 2025 and $0 in 2024. The Company made $380,000 in estimated California state tax payments in 2025 and $315,000 in 2024. The Company received tax refunds of $28,000 and $1,000 in 2025 and 2024, respectively.

Previous wording

Our financial position allows us to pursue our strategies of continued development of TRCC, funding of operating activities, land entitlement, development, and conservation. Accordingly, we have established well-defined priorities for our available cash, including investing in core operating segments to achieve profitable future growth. We have historically funded our operations with cash flows from operating activities, investment proceeds, and short-term borrowings from our bank credit facilities. In the past, we have also issued common stock and used the proceeds for capital investment activities.

Current wording

Our financial position allows us to pursue our strategies of continued development of TRCC, funding of operating activities, land entitlement, development, and conservation. Accordingly, we have established well-defined priorities for our available cash, including investing in core operating segments to achieve profitable future growth. Our primary sources of liquidity include cash generated from operations, investment proceeds, distributions from our unconsolidated joint venture investments and short-term borrowings from our bank credit facilities. In the past, we have also issued common stock and used the proceeds for capital investment activities. Our liquidity may fluctuate throughout the year due to seasonal production cycles within our farming segment, weather conditions, and market demand for our agricultural and real estate products. To meet working capital requirements and fund agricultural inputs and development activities, we utilize our revolving credit facilities as needed.

Previous wording

To enhance shareholder value over the long term, we expect to continue to invest funds towards vertical development within our active commercial and industrial development, including construction on Terra Vista at Tejon, our new multi-family apartment community located immediately adjacent to the Outlets at Tejon at TRCC. We will also make investments as necessary in our real estate segments to secure land entitlement approvals, build infrastructure for our developments, invest in to be leased assets, provide adequate water supplies, and provide funds for general land development activities. Within our farming segment, we intend to make investments as needed to improve efficiency and add capacity to its operations when it is profitable to do so.

Current wording

To enhance shareholder value over the long term, we expect to continue to invest funds towards vertical development within our active commercial and industrial development. We will also make investments as necessary in our real estate segments to secure land entitlement approvals, build infrastructure for our developments, invest in assets to be leased, provide adequate water supplies, and provide funds for general land development activities. Within our farming segment, we intend to make investments as needed to improve efficiency and expand operational capacity when it is economically advantageous to do so. As part of this strategy, we are investing in the development of an additional 150 acres of olives to enhance long-term production capacity and support future revenue growth.

Previous wording

Our cash and cash equivalents and marketable securities totaled approximately $53,708,000 at December 31, 2024, a decrease of $10,755,000, or 17%, from the corresponding amount at the end of 2023.

Current wording

Our cash and cash equivalents and marketable securities totaled approximately $24,894,000 at December 31, 2025, a decrease of $28,814,000, or 54%, from the corresponding amount at the end of 2024.

Previous wording

During 2024, investing activities used $25,748,000, which was largely attributed to capital expenditures of $57,234,000 used primarily for real estate development. Of the $57,234,000, we primarily used $43,018,000 to develop multi-family units, road, and water infrastructures at TRCC. We also spent $3,014,000 on permitting efforts for MV, $3,963,000 on litigation defense for Centennial, and $1,417,000 on permitting efforts for Grapevine. All real estate capital expenditures are inclusive of capitalized interest, payroll and overhead. Our farming segment had cash outlays of $4,891,000 for cultural and water costs tied to crops not yet in production, developing new almond and olive orchards, and replacing old farm equipment. Additionally, our mineral resources segment spent $8,874,000 to acquire water for use as needed and for future residential development activity. Lastly, the Company reinvested $73,995,000 into marketable securities. Offsetting cash outlays were maturities on marketable securities of $92,605,000, distributions from unconsolidated joint ventures of $6,336,000, and CFD reimbursements of $15,745,000.

Current wording

During 2024, investing activities used $25,748,000, which was largely attributed to capital expenditures of $57,234,000 used primarily for real estate development. Of the $57,234,000, we primarily used $43,018,000 to develop the Terra Vista at Tejon multi-family units, road, and water infrastructures at TRCC. We also spent $3,014,000 on permitting efforts for MV, $3,963,000 on litigation defense for Centennial, and $1,417,000 on permitting efforts for Grapevine. All real estate capital expenditures are inclusive of capitalized interest, payroll and overhead. Our farming segment had cash outlays of $4,891,000 for cultural and water costs tied to crops not yet in production, developing new almond and olive orchards, and replacing old farm equipment. Additionally, our mineral resources segment spent $8,874,000 to acquire water for use as needed and for future residential development activity. Lastly, the Company reinvested $73,995,000 into marketable securities. Offsetting cash outlays were maturities on marketable securities of $92,605,000, distributions from unconsolidated joint ventures of $6,336,000, and CFD reimbursements of $15,745,000.

Previous wording

Our estimated capital investment for 2025 is primarily related to our real estate projects as it was in 2024. These estimated investments include approximately $45,341,000 of development costs at TRCC-East. Of that amount, $29,657,000 is to complete the Terra Vista at Tejon multi-family project phase 1 development and $10,072,000 for road infrastructures, water treatment system improvements, and expansion of the wastewater treatment plant for future anticipated absorption. We expect to possibly invest up to $8,591,000 for entitlement and permitting activities, predevelopment activities and land planning design at MV and Grapevine and litigation defense and supplemental recirculated environmental impact report preparation for Centennial. All real estate capital expenditures are inclusive of capitalized interest, payroll and overhead. The timing of these investments is dependent on our coordination efforts with Los Angeles County regarding litigation defense for Centennial, permitting activities for Grapevine, and design, civil engineering, land planning and design for MV. Our efforts within our master plan projects are managed to minimize each year's investment. Our plans also include $8,322,000 for payment of annual water inventory and water related investments. We are also investing approximately $3,542,000 to continue a farm redevelopment program, and $511,000 in the normal replacement of operating equipment, such as ranch equipment, and vehicles.

Current wording

Our estimated capital investment for 2026 is primarily related to our real estate projects as it was in 2025. These estimated investments include approximately $16,857,000 of development costs at TRCC-East for road infrastructure, water treatment system improvements, and expansion of the wastewater treatment plant for future anticipated absorption. We are also investing approximately $5,254,000 to continue developing olive and almond orchards and replacing old farming equipment. We may invest up to $11,142,000 for entitlement and permitting activities, predevelopment activities and land planning design at MV and Grapevine and litigation defense and ongoing entitlement efforts for Centennial. All real estate capital expenditures are inclusive of capitalized interest, payroll and overhead. The timing of these investments is dependent on our coordination efforts with Los Angeles County regarding litigation defense for Centennial, permitting activities for Grapevine, and design, civil engineering, land planning and design, and capital raising for MV. Our efforts within our master plan projects are managed to minimize each year's investment. Our plans also include $7,212,000 for payment of annual water inventory and water related investments.

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 that expenditures for the asset have been made and interest cost has been incurred. Capitalized interest for the years ended December 31, 2024 and 2023, of $4,353,000 and $3,098,000, respectively, is classified in real estate development. We also capitalized payroll costs related to development, pre-construction, and construction projects, which aggregated $2,884,000 and $2,270,000 for the years ended December 31, 2024 and 2023, respectively. Expenditures for repairs and maintenance are expensed as incurred. As noted above, these costs are included in the above investment numbers.

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 that expenditures for the asset have been made and interest cost has been incurred. Capitalized interest for the years ended December 31, 2025 and 2024, of $5,091,000 and $4,353,000, respectively, is classified in real estate development. We also capitalized payroll costs related to development, pre-construction, and construction projects, which aggregated $2,881,000 and $2,884,000 for the years ended December 31, 2025 and 2024, respectively. Expenditures for repairs and maintenance are expensed as incurred. As noted above, these costs are included in the above investment numbers.

Previous wording

During 2023, financing activities used $6,865,000, which is comprised of long-term debt repayments of $50,357,000 and tax payments on vested stock grants of $3,353,000. This was partially offset by borrowings from the new line-of-credit facility of $47,942,000.

Current wording

During 2025, financing activities generated $26,431,000, which is comprised of borrowings from the line-of-credit facility of $27,000,000 to fund construction projects and other ongoing development such as Terra Vista and TRCC infrastructure, partially offset by the tax payments on vested stock grants of $569,000.

Previous wording

It is difficult to accurately predict cash flows due to the nature of our businesses and fluctuating economic conditions. Our earnings and cash flows will be affected from period to period by the commodity nature of our farming and mineral operations, the timing of sales and leases of property within our development projects, and the beginning of development within our residential projects. The timing of sales and leases within our development projects is difficult to predict due to the time necessary to complete the development process and negotiate sales or lease contracts. Often, the timing aspect of land development can lead to particular years or periods having more or less earnings than comparable periods. Based on our experience, we believe we will have adequate cash flows, cash balances, and availability on our line of credit over the next twelve months to fund internal operations. As we move forward with the completion of the litigation, permitting and engineering design for our master planned communities and prepare to move into the development stage, we may need to secure additional funding in the long-term through either the issuance of equity and/or by securing other forms of financing such as joint ventures equity and debt financing.

Current wording

Cash flows and earnings may fluctuate from period to period due to the commodity-driven nature of our farming and mineral operations and the timing of sales and leasing activity within our development projects. Some farming crops, notably pistachios, bear in alternate years which results in reduced revenues for those years. Development timelines, market conditions, and the time required to negotiate transactions can cause variability in reported results across periods. Often, the timing aspect of land development can lead to particular years or periods having more or less earnings than comparable periods. Based on current projections and available liquidity, management expects to maintain sufficient cash resources to fund internal operations over the next 12 months. As we move forward with the completion of the litigation, permitting and engineering design for our master planned communities and prepare to move into the development stage, we may need to secure additional funding in the long-term through either the issuance of equity and/or by securing other forms of financing such as joint ventures equity and debt financing.

Previous wording

At December 31, 2024, total capitalization at book value was $555,898,000 consisting of $66,942,000 of debt and $488,956,000 of equity, resulting in a debt-to-total-capitalization ratio of approximately 12.0%, representing an increase when compared to the debt-to-total-capitalization ratio of 9.0% at December 31, 2023.

Current wording

At December 31, 2025, total capitalization at book value was $584,498,000 consisting of $93,942,000 of debt and $490,556,000 of equity, resulting in a debt-to-total-capitalization ratio of approximately 16.1%, representing an increase when compared to the debt-to-total-capitalization ratio of 12.0% at December 31, 2024.

Previous wording

To maintain availability of funds, undrawn amounts under the RCL will accrue an unused fee of 15 basis points per annum except that, for the LOC Sub-Facility, TRC will incur a fee of 2.00% per annum for each letter of credit issued to TRC. TRC’s ability to borrow/draw additional funds is subject to compliance with certain financial and other covenants, some of which are further described below, and the continuing accuracy of certain representations and warranties contained in the Revolving Credit Facility. Currently there are no letter of credits outstanding.

Current wording

To maintain availability of funds, undrawn amounts under the RCL will accrue an unused fee of 15 basis points per annum except that, for the LOC Sub-Facility, TRC will incur a fee of 2.00% per annum for each letter of credit issued to TRC. TRC’s ability to borrow/draw additional funds is subject to compliance with certain financial and other covenants, some of which are further described below, and the continuing accuracy of certain representations and warranties contained in the Revolving Credit Facility. Currently, there are no letters of credit outstanding.

Previous 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 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 December 31, 2024, the Company's NLER was in tier 3, or less than 35%, and the applicable interest rate spread was 2.25%. We received partial patronage credit in February 2025 of $420,000 which represents 125 basis points from the primary lender. We expect to receive the remaining patronage credit in March 2025 for $206,000 which represents 100 basis point from the other participating lenders.

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 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 December 31, 2025, the Company's NLER was in tier 3, or less than 35%, and the applicable interest rate spread was 2.25%. We received partial patronage credit in February 2026 of $646,000 which represents 125 basis points from the primary lender, and the remaining patronage credit in March 2026 for $310,000 which represents 100 basis points from the other participating lenders. As a result, our effective cost of debt for 2025 was approximately SOFR plus 100 basis points.

Previous wording

As noted above, at December 31, 2024, we had $53,708,000 in cash and securities and as of the filing date of this Form 10-K, we had $93,058,000 available on credit lines to meet any short-term liquidity needs.

Current wording

As noted above, at December 31, 2025, we had $24,894,000 in cash and securities and as of the filing date of this Form 10-K, we had $66,058,000 available on credit lines to meet any short-term liquidity needs.

Previous wording

We continue to expect that substantial investments will be required to develop our land assets. To meet these capital requirements, we may need to secure additional debt financing and continue to renew our existing credit facilities. In addition to debt financing, we will use other capital alternatives, such as joint ventures with financial partners, sales of assets, and/or the issuance of common stock. As we move into 2025, we will be evaluating various options for funding the potential start of development projects. There is no assurance that we can obtain financing or that we can obtain financing at favorable terms. We believe we have adequate capital resources to fund our cash needs and our capital investment requirements in the near-term, as described earlier in the cash flow and liquidity discussions.

Current wording

We continue to expect that substantial investments will be required to develop our land assets. To meet these capital requirements, we may need to secure additional debt financing and continue to renew our existing credit facilities. In addition to debt financing, we will use other capital alternatives, such as joint ventures with financial partners, sales of assets, and/or the issuance of common stock. As we move into 2026, we will be evaluating various options for funding the potential start of development projects. There is no assurance that we can obtain financing or that we can obtain financing at favorable terms.

Previous wording

As discussed in Note 14 (Retirement Plans) of the Notes to Consolidated Financial Statements, we have long-term liabilities for deferred employee compensation, including pension and supplemental retirement plans. Payments in the above table reflect estimates of future defined benefit plan contributions from the Company to the plan trust, estimates of payments to employees from the plan trust, and estimates of future payments to employees from the Company that are in the SERP program. During 2024, we didn't make any pension contributions and we don't expect to make contributions in 2025.

Current wording

As discussed in Note 14 (Retirement Plans) of the Notes to Consolidated Financial Statements, we have long-term liabilities for deferred employee compensation, including pension and supplemental retirement plans. Payments in the above table reflect estimates of future defined benefit plan contributions from the Company to the plan trust, estimates of payments to employees from the plan trust, and estimates of future payments to employees from the Company that are in the SERP program. During 2025, we did not make any pension contributions and we do not expect to make contributions in 2026.

Previous wording

As of December 31, 2024, aggregate outstanding debt of unconsolidated joint ventures was $221,465,000; $20,545,000 of this debt was attributable to the loan for TRCC/Rock Outlet joint venture. This loan was 100% guaranteed at December 31, 2024. All other outstanding debt attributed to our joint ventures have met their respective debt covenants hence not subject to an effective guarantee at December 31, 2024. We do not provide a guarantee on the $11,793,000 of debt related to our joint venture with TA/Petro.

Current wording

As of December 31, 2025, aggregate outstanding debt of unconsolidated joint ventures was $216,092,000; $20,039,000 of this debt was attributable to the loan for TRCC/Rock Outlet joint venture. This loan was 100% guaranteed at December 31, 2025. All other outstanding debt attributed to our joint ventures have met their respective debt covenants and therefore were not subject to an effective guarantee at December 31, 2025. The $11,030,000 of debt related to our joint venture with TA/Petro does not require a guarantee from the joint venture or its members.

Previous wording

EBITDA represents earnings before interest, taxes, depreciation, and amortization, a non-GAAP financial measure, and is used by us and others as a supplemental measure of performance. We use Adjusted EBITDA to assess the performance of our core operations, for financial and operational decision making, and as a supplemental or additional means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as EBITDA, excluding stock compensation expense. We believe Adjusted EBITDA provides investors relevant and useful information because it permits investors to view income from our operations on an unleveraged basis, before the effects of taxes, depreciation and amortization, and stock compensation expense. By excluding interest expense and income, EBITDA and Adjusted EBITDA allow investors to measure our performance independent of our capital structure and indebtedness and, therefore, allow for a more meaningful comparison of our performance to that of other companies, both in the real estate industry and in other industries. We believe that excluding charges related to share-based compensation facilitates a comparison of our operations across periods and among other companies without the variances caused by different valuation methodologies, the volatility of the expense (which depends on market forces outside our control), and the assumptions and the variety of award types that a company can use. EBITDA and Adjusted EBITDA have limitations as measures of our performance. EBITDA and Adjusted EBITDA do not reflect our historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. While EBITDA and Adjusted EBITDA are relevant and widely used measures of performance, they do not represent net income or cash flows from operations as defined by GAAP. Further, our computation of EBITDA and Adjusted EBITDA may not be comparable to similar measures reported by other companies.

Current wording

EBITDA represents earnings before interest, taxes, depreciation, and amortization, a non-GAAP financial measure, and is used by us and others as a supplemental measure of performance. We use Adjusted EBITDA to assess the performance of our core operations, for financial and operational decision making, and as a supplemental or additional means of evaluating period-to-period comparisons on a consistent basis. Adjusted EBITDA is calculated as EBITDA, excluding stock compensation expense and certain identified non-recurring items that are not indicative of our on-going operations or that may obscure our underlying results and trends. We believe EBITDA and Adjusted EBITDA provide investors relevant and useful information, when reconciled to their most comparable GAAP financial measure, because they permit investors to view income from our operations on an unleveraged basis, before the effects of taxes, depreciation and amortization, and stock compensation expense and other items impacting comparability. By excluding interest expense and income, EBITDA and Adjusted EBITDA allow investors to measure our performance independent of our capital structure and indebtedness and, therefore, allow for a more meaningful comparison of our performance to that of other companies, both in the real estate industry and in other industries. We believe that excluding charges related to share-based compensation facilitates a comparison of our operations across periods and among other companies without the variances caused by different valuation methodologies, the volatility of the expense (which depends on market forces outside our control), and the assumptions and the variety of award types that a company can use. In addition, the Company excludes certain items impacting comparability, such as shareholder activism advisory costs and legal expenses associated with the Centennial litigation, to provide investors with a clearer understanding of the Company’s core operating performance across periods. EBITDA and Adjusted EBITDA have limitations as measures of our performance. EBITDA and Adjusted EBITDA do not reflect our historical cash expenditures or future cash requirements for capital expenditures or contractual commitments. While EBITDA and Adjusted EBITDA are relevant and widely used measures of performance, they do not represent net (loss) income or cash flows from operations as defined by GAAP. Further, our computation of EBITDA and Adjusted EBITDA may not be comparable to similar measures reported by other companies. The following table reconciles EBITDA and Adjusted EBITDA to Net income, the most directly comparable GAAP measure.

Previous wording

NOI is a non-GAAP financial measure calculated as operating income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding general and administrative expenses, interest expense, depreciation and amortization, and gain or loss on sales of real estate. We believe NOI provides useful information to investors regarding our financial condition and results of operations because it primarily reflects those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets.

Current wording

NOI is a non-GAAP financial measure calculated as operating income, the most directly comparable financial measure calculated and presented in accordance with GAAP, excluding general and administrative expenses, interest expense, depreciation and amortization, and gain or loss on sales of real estate. We believe NOI provides useful information to investors regarding our financial condition and results of operations because it primarily reflects those income and expense items that are incurred at the property level. Therefore, we believe NOI is a useful measure for evaluating the operating performance of our real estate assets. The following tables reconcile operating income to NOI.

Previous wording

The following schedule reconciles net income from unconsolidated joint ventures to NOI of unconsolidated joint ventures.

Current wording

The following schedule reconciles net income of unconsolidated joint ventures to NOI of unconsolidated joint ventures. Please refer to Note 16 (Investment in Unconsolidated and Consolidated Joint Ventures) of the Notes to Unaudited Consolidated Financial Statements for further discussion on joint ventures.