Five Point(US:FPH)2024-10-18 20:18PART I. FINANCIAL INFORMATION Financial Statements The company's financial statements reflect a slight decrease in assets and liabilities, with net income up but attributable net income down, and a significant shift to net cash outflow from operations Condensed Consolidated Balance Sheet Data (in thousands) | Balance Sheet Items | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $2,949,464 | $2,969,288 | | Cash and Cash Equivalents | $224,521 | $353,801 | | Inventories | $2,340,031 | $2,213,479 | | Total Liabilities | $885,395 | $962,184 | | Notes payable, net | $524,909 | $622,186 | | Total Capital | $2,039,069 | $1,982,104 | Condensed Consolidated Statements of Operations Data (in thousands, except per share data) | Performance Metrics | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Total Revenues | $78,140 | $92,973 | | Total Costs and Expenses | $60,579 | $96,107 | | Net Income | $56,645 | $54,979 | | Net Income Attributable to the Company | $21,804 | $25,638 | | Diluted EPS (Class A) | $0.31 | $0.37 | Condensed Consolidated Statements of Cash Flows Data (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net Cash (Used in) Provided by Operating Activities | $(67,612) | $65,064 | | Net Cash Provided by Investing Activities | $41,208 | $29,946 | | Net Cash Used in Financing Activities | $(102,876) | $(8,517) | | Net (Decrease) Increase in Cash | $(129,280) | $86,493 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the company's mixed-use development operations, a major debt restructuring, primary revenue sources, significant commitments, and ongoing litigation - The company is an owner and developer of mixed-use planned communities in California, operating through its majority-owned subsidiary, the Operating Company, with significant investments in unconsolidated entities like the Great Park Venture (37.5% interest) and the Gateway Commercial Venture (75% interest)2021 - In January 2024, the company settled a debt exchange, swapping $623.5 million of its 7.875% Senior Notes due 2025 for $523.5 million of new 10.500% initial rate Senior Notes due 2028 and $100.0 million in cash, accounted for as a debt modification with $5.9 million in related third-party costs expensed2349 - The company has significant outstanding commitments, including $367.0 million in performance bonds for development obligations and guarantees of up to $198.3 million for infrastructure and construction at the San Francisco Venture5455 - The company is a defendant in a class action lawsuit (Bayview Action) related to alleged fraudulent testing and remediation by a contractor at The San Francisco Shipyard, seeking damages and an injunction against development57 Revenue by Segment (in thousands) | Segment | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2024 | | :--- | :--- | :--- | | Valencia | $812 | $2,598 | | San Francisco | $171 | $507 | | Great Park (Management Services) | $15,915 | $74,679 | | Commercial (Management Services) | $115 | $356 | | Total Consolidated Revenue | $17,013 | $78,140 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a Q3 net income decline due to absent land sales, offset by venture compensation, with liquidity maintained despite cash reduction from debt exchange and development Operational Highlights Operational highlights for Q3 2024 include net income from venture compensation, stable SG&A, strong liquidity, and steady land and home sales - Generated consolidated net income of $12.3 million for Q3 2024, compared to $14.2 million in Q3 202381 - Maintained total liquidity of $349.5 million, comprising $224.5 million in cash and $125.0 million available under the revolving credit facility81 - The Great Park Venture closed two commercial land sales totaling 12.8 acres for a gross price of $25.4 million, with the company receiving $49.4 million in distributions and fees from this venture81 - Guest builders sold 89 homes at Valencia and 166 homes at Great Park Neighborhoods in Q3 2024, with residential land sales expected to close at both communities in Q4 202481 Results of Operations Results of operations show a significant Q3 2024 revenue decrease due to absent Valencia land sales, partially offset by Great Park management services and positive equity earnings Revenue Comparison (in millions) | Period | Q3 2024 | Q3 2023 | Change | YTD 2024 | YTD 2023 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $17.0 | $65.9 | -74.2% | $78.1 | $93.0 | -16.0% | - The significant revenue decrease in Q3 and YTD 2024 compared to 2023 was primarily due to land sales at the Valencia segment occurring in 2023 but not in the same periods of 20248485 - The revenue decline was partially offset by an increase in management services revenue from the Great Park segment, which rose by $11.5 million in Q3 2024 and $45.5 million YTD8485 - Equity in earnings from unconsolidated entities increased to $12.0 million in Q3 2024 from a loss of $0.6 million in Q3 2023, primarily due to the net income generated by the Great Park Venture from land sales85 Segment Results and Financial Information Segment results highlight Valencia's revenue decline, San Francisco's development delays, Great Park's strong land sales and management fee performance, and a small Commercial segment loss - Valencia Segment: Revenue decreased by $60.3 million in Q3 2024 compared to Q3 2023, due to the sale of 146 homesites in 2023 versus no land sales in the current period94 - San Francisco Segment: Development is hindered by delays in land transfer from the U.S. Navy at The San Francisco Shipyard due to resampling efforts and related litigation96 - Great Park Segment: Land sales revenue increased to $61.5 million in Q3 2024 from $3.3 million in Q3 2023, primarily from a 12.8-acre commercial land sale and recognition of $30.0 million in additional estimated variable consideration from prior sales98 - Great Park Management Fees: Management fee revenue from the Great Park Venture increased to $15.9 million in Q3 2024 from $4.4 million in Q3 2023, mainly due to higher variable incentive compensation recognized8798 Liquidity and Capital Resources Liquidity decreased due to debt exchange and development costs, with future needs met by available cash, distributions, and land sales, alongside significant bond and TRA commitments Liquidity Position | Component | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and Cash Equivalents | $224.5 million | $353.8 million | | Revolving Credit Facility Availability | $125.0 million | Not specified | | Total Liquidity | $349.5 million | N/A | - In January 2024, the company exchanged $623.5 million of its 7.875% senior notes for $100.0 million in cash and $523.5 million in new 10.500% initial rate senior notes due 2028105 - Net cash used in operating activities was $67.6 million for the nine months ended Sep 30, 2024, a significant shift from the $65.1 million provided by operations in the prior-year period, driven by investments in inventory and $7.7 million in costs related to the senior notes exchange107 - The company has outstanding performance bonds of $367.0 million and guarantees for the San Francisco Venture of $198.3 million, with payments under the Tax Receivable Agreement (TRA) expected to be substantial but not anticipated to begin until after 2028105106 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is its $524.9 million fixed-rate indebtedness, mitigating interest rate fluctuation risk, with no use of derivatives - The company's primary market risk is from its indebtedness, with $524.9 million in outstanding consolidated net indebtedness as of September 30, 2024114 - All of the company's outstanding debt bears interest at fixed rates, minimizing exposure to fluctuations in prevailing market interest rates114 Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2024, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of September 30, 2024115 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls116 PART II. OTHER INFORMATION Legal Proceedings Legal proceedings refer to Note 11, primarily detailing the 'Bayview Action' class-action lawsuit regarding alleged fraudulent environmental testing at The San Francisco Shipyard - For disclosures on legal proceedings, the report incorporates by reference Note 11 to the condensed consolidated financial statements118 Risk Factors No material changes to risk factors were reported from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023 - There have been no material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2023119 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported during the period - The company reported no unregistered sales of equity securities or use of proceeds during the period119 Other Information No other information was reported under this item - The company reported no other information under this item119 Exhibits This section lists exhibits filed with the Form 10-Q, including an amendment to the Great Park Venture agreement and CEO/CFO certifications - Key exhibits filed include the Third Amendment to the Development Management Agreement with Heritage Fields El Toro, LLC, and certifications by the Principal Executive Officer and Principal Financial Officer121122 Signatures