Tejon Ranch Co. — 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. This annual filing reports full-year results, not standalone fourth-quarter results. Tejon Ranch is a diversified California land, real estate development, agriculture, mineral-resource and ranch-operations company, with approximately 270,000 acres and five reporting segments.
Financial performance and condition
| Metric | 2021 | 2020 |
|---|---|---|
| Segment revenue | $55.6 million | $37.8 million |
| Total revenue and other income, including equity earnings from joint ventures | $64.9 million | $43.2 million |
| Operating loss | $0.3 million | $6.7 million |
| Equity earnings from unconsolidated joint ventures | $9.2 million | $4.5 million |
| Net income (loss) attributable to common stockholders | $5.35 million | $(0.74) million |
| Diluted earnings (loss) per share | $0.20 | $(0.03) |
| Operating cash flow | $2.8 million | $15.5 million |
| Capital expenditures | $20.9 million | $22.3 million |
| Cash and marketable securities at year-end | $47.2 million | $58.1 million |
| Long-term debt, including current maturities | $52.8 million | $57.1 million |
The operating loss narrowed, while net income turned positive, principally reflecting higher commercial land-sale income, increased mineral-resource earnings and greater joint-venture earnings. Joint-venture earnings include a significant contribution from the sale of land by 18-19 West LLC. The filing reports no consolidated profit margin.
- Commercial/industrial: Revenue rose 104% to $19.5 million; segment profit increased to $7.5 million. Two land transactions contributed $10.0 million in reported revenue, including a contribution of land to a joint venture.
- Mineral resources: Revenue rose 95% to $21.0 million and segment profit to $7.4 million. Water sales reached $15.5 million, compared with $5.9 million, amid drought and low State Water Project allocations.
- Farming: Revenue fell 20% to $11.0 million; the segment loss widened to $3.1 million. Almond shipping disruptions and lower pistachio insurance proceeds were key factors.
- Ranch operations: Revenue increased to $4.1 million; the segment loss narrowed to $0.6 million.
- Liquidity and leverage: Current assets were $63.0 million and current liabilities $15.6 million. The revolving credit line was undrawn, with $35 million available at the filing date. Debt-to-total-capitalization was 10.3%, down from 13.1%; the company reported compliance with its credit-facility covenants.
Material changes and business developments
- 2021 commercial results included a 38.86-acre land contribution to a Majestic joint venture and a 17.1-acre third-party land sale. The 18-19 West joint venture sold land for approximately $15.2 million, increasing Tejon’s equity earnings.
- Tejon and Majestic began construction of a 629,274-square-foot industrial building at TRCC, with completion expected in 2022. The company also received approval for up to 495 apartments at TRCC and formed a joint venture for the project in February 2022.
- Mountain Village received approval of its first final map, covering 401 residential lots and related parcels. Centennial litigation remained unresolved at the filing date; a settlement with Climate Resolve addressed specified emissions and fire-protection commitments, while CBD/CNPS objections and related proceedings continued.
- Net cash from operations dropped to $2.8 million from $15.5 million. Investing activities used $14.7 million, and financing activities used $6.1 million. Year-end cash and cash equivalents were $36.2 million; marketable securities were $11.0 million.
Outlook, risks and unusual items
- Management expects to continue funding TRCC development and land planning, permitting, mapping and litigation for its residential master plans. It anticipates 2022 capital investments of approximately $12.7 million for TRCC infrastructure, $3.3 million for farming improvements, up to $8.5 million for residential-project predevelopment and litigation, and $4.5 million for water-related investments. Timing and actual spending may differ.
- Management believes available cash, operating cash flows and credit availability can fund near-term needs, but says future master-plan development may require additional capital, including joint ventures, debt or equity issuance. No specific earnings or revenue guidance is provided.
- Water availability is a central risk: the preliminary 2022 State Water Project allocation was 15%. Management expected other water sources to support near-term farming needs, but drought, groundwater rules and delivery constraints could affect farming and development. Contractual water payments total an estimated $285.6 million over future periods.
- Other key risks include lengthy entitlement processes and litigation, construction inflation and labor or supply shortages, agricultural commodity prices and crop yields, oil and gas price and production declines, COVID-19-related disruption, and dependence on joint ventures. Tejon guarantees $127.1 million of joint-venture debt; management does not expect the guarantees to be called.
- The 2021 effective income-tax rate was 41.7%, including discrete stock-compensation tax items and a deferred-tax true-up. No impairment loss was recorded. The company paid no cash dividends in 2021 or 2020 and stated no current intention to pay them.
Important facts for investors to verify
- Reconcile reported segment revenue, total revenue and other income, and the contribution of joint-venture earnings and land-sale transactions to 2021 net income.
- Review the terms and status of Centennial litigation and settlement obligations, and assess the timeline and funding required for Centennial, Grapevine and Mountain Village.
- Track actual 2022 water allocations, farm water costs, crop shipments and prices, and the impact of groundwater restrictions.
- Confirm the progress, leasing and financing of the TRCC industrial and residential projects, alongside estimated completion costs and infrastructure reimbursements.
- Monitor liquidity and capital needs against the $285.6 million of contractual water payments, scheduled debt service, and $127.1 million of guaranteed joint-venture debt.
- Check the filing’s differing housing-unit totals: the business discussion says approved projects may include up to 35,278 units, while the residential-project table totals 34,783.