Tejon Ranch Co. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are to FY2021 unless noted. Tejon Ranch is a diversified California land, real estate development and agribusiness company, with approximately 270,000 acres and five reporting segments.
Financial results and liquidity
| Metric | FY2022 | FY2021 |
|---|---|---|
| Segment revenues | $79.2 million | $55.6 million |
| Total revenues and other income, including equity earnings from joint ventures | $87.6 million | $64.9 million |
| Operating income (loss) | $13.7 million | $(0.3) million |
| Net income attributable to common stockholders | $15.8 million; $0.60 per diluted share | $5.3 million; $0.20 per diluted share |
| Cash provided by operating activities | $8.5 million | $2.8 million |
| Cash and marketable securities at year-end | $72.6 million | $47.2 million |
| Total debt at year-end | $50.2 million | $52.8 million |
FY2022 capital expenditures were $22.6 million, primarily for development. Total assets were $566.8 million and total equity was $477.6 million at year-end. The company reported a 9.5% debt-to-total-capitalization ratio and no borrowings on its revolving credit line. The $48.5 million term loan is effectively fixed at 4.62% through an interest-rate swap; it matures in 2032. The company paid no cash dividends in 2022 or 2021.
Material changes versus FY2021
- Commercial/industrial revenue increased to $40.5 million from $19.5 million, mainly due to three land sales totaling 98.2 acres for $29.8 million. Segment profit rose to $24.2 million from $7.5 million.
- Mineral Resources revenue was $21.6 million, up 3%; segment profit increased to $8.6 million. Higher oil and gas royalties were partly offset by lower water-sale revenue.
- Farming revenue increased 18% to $13.0 million, but the segment loss widened to $6.8 million from $3.1 million. The 2022 pistachio crop produced no fruit; revenue included insurance proceeds and prior-crop bonuses. Costs also reflected a $1.1 million almond inventory write-down and higher production costs.
- Equity earnings from unconsolidated joint ventures declined to $7.8 million from $9.2 million; FY2021 included a $5.2 million gain from a joint-venture land sale. FY2022 benefited from stronger travel-plaza fuel margins.
- Cash and marketable securities increased by $25.4 million. The company replaced its Wells Fargo term loan with a Bank of America facility in June 2022 and received a $1.1 million cash termination payment on the old swap.
Outlook, risks and unusual items
- Management expects to continue investing in TRCC infrastructure and in permitting, litigation defense and planning for its master-planned communities. Estimated 2023 investment includes $14.2 million for TRCC infrastructure, $5.1 million for farming assets, up to $7.9 million for residential-project planning and permitting, and $1.8 million for water-related investments. Timing and spending may change.
- Management stated that available cash, operating cash flow and credit availability should cover internal needs over the next 12 months. Further development of major projects may require additional capital, including joint ventures, debt or equity; financing availability and terms are not assured.
- Centennial remains subject to environmental litigation and further proceedings after a settlement with Climate Resolve; the company could not estimate the monetary value of remaining claims. Centennial approvals and other development plans remain exposed to permitting delays, appeals and environmental challenges.
- Water availability is a significant operational and development risk. The filing reports a preliminary 35% State Water Project allocation for 2023 and $277.7 million of contractual water payments over future periods, including long-term purchase commitments.
- Other key exposures include California drought and groundwater restrictions, crop yields and commodity prices, farm labor and inflation, interest rates, tenant and joint-venture performance, and real estate market conditions. The company guarantees varying portions of joint-venture debt: $147.7 million of $161.0 million outstanding JV debt was subject to guarantees; this is not consolidated company debt.
- The company reported no impairment loss on real estate development in 2022. Its auditor identified impairment-indicator assessment for real estate development as a critical audit matter. Management and the auditor reported effective internal control over financial reporting; the financial statement audit opinion was unqualified.
Important facts for investors to verify
- How much of FY2022 earnings and cash generation depended on episodic land sales, joint-venture distributions and water sales, versus recurring rents and royalties.
- Whether the farming segment can reduce losses amid weak almond pricing, crop variability, water costs and labor inflation.
- Current status and potential cost or schedule effects of Centennial litigation, Grapevine permitting and Mountain Village development financing.
- Liquidity needs against substantial planned investment and long-dated water commitments; confirm current credit-line availability and covenant compliance.
- Terms, status and potential exposure of guarantees on joint-venture borrowings, and the leasing and performance of recently completed or planned industrial projects.