Tejon Ranch (TRC) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides detailed financial statements, management's discussion and analysis, and market risk disclosures Item 1. Financial Statements This section presents the unaudited consolidated financial statements of Tejon Ranch Co. and its subsidiaries for the periods ended June 30, 2025, and December 31, 2024 (balance sheets) and June 30, 2025, and 2024 (statements of operations, comprehensive income, cash flows, and changes in equity). It includes detailed notes explaining the basis of presentation, significant accounting policies, and specific financial instrument details Consolidated Balance Sheets This section presents the Company's financial position, detailing assets, liabilities, and equity at specific dates Consolidated Assets | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Cash and cash equivalents | $2,500 | $39,267 | | Marketable securities | $17,554 | $14,441 | | Total current assets | $33,264 | $69,402 | | Real estate development | $384,035 | $377,905 | | TOTAL ASSETS | $618,541 | $607,998 | Consolidated Liabilities and Equity | LIABILITIES AND EQUITY (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Total current liabilities | $14,822 | $16,796 | | Revolving line of credit | $81,942 | $66,942 | | Total liabilities | $131,650 | $119,042 | | Total equity | $486,891 | $488,956 | | TOTAL LIABILITIES AND EQUITY | $618,541 | $607,998 | - Total assets increased by $10.50 million from December 31, 2024, to June 30, 2025, primarily driven by increases in real estate and improvements held for lease and real estate development[13] - Cash and cash equivalents significantly decreased from $39.27 million at December 31, 2024, to $2.50 million at June 30, 2025[13] - The revolving line of credit increased by $15.00 million, from $66.94 million to $81.94 million, indicating increased borrowings[13] Unaudited Consolidated Statements of Operations This section outlines the Company's revenues, expenses, and net income or loss for the reported periods Statements of Operations Summary | (in thousands, except per share) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $8,307 | $5,689 | $16,516 | $13,095 | | Total costs and expenses | $12,362 | $9,237 | $24,737 | $20,627 | | Operating loss | $(4,055) | $(3,548) | $(8,221) | $(7,532) | | Net (loss) income | $(1,713) | $956 | $(3,179) | $42 | | Net (loss) income per share, basic | $(0.06) | $0.04 | $(0.12) | $0.00 | - Total revenues increased by $2.62 million (46.19%) for the three months ended June 30, 2025, and by $3.42 million (26.12%) for the six months ended June 30, 2025, compared to the respective prior periods[15] - The company reported a net loss of $1.71 million for the three months ended June 30, 2025, a significant decline from a net income of $0.96 million in the prior year, and a net loss of $3.18 million for the six months ended June 30, 2025, compared to a net income of $0.04 million in the prior year[15] Unaudited Consolidated Statements of Comprehensive (Loss) Income This section presents the Company's net income or loss and other comprehensive income or loss for the reported periods Statements of Comprehensive (Loss) Income Summary | (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(1,713) | $956 | $(3,179) | $42 | | Other comprehensive (loss) income | $(4) | $2 | $(10) | $(4) | | Comprehensive (loss) income | $(1,717) | $958 | $(3,189) | $38 | - Comprehensive loss for the three months ended June 30, 2025, was $(1.72) million, a decrease from comprehensive income of $0.96 million in the prior year[18] - For the six months ended June 30, 2025, comprehensive loss was $(3.19) million, compared to comprehensive income of $0.04 million in the prior year[18] Unaudited Consolidated Statements of Cash Flows This section details the Company's cash inflows and outflows from operating, investing, and financing activities Cash Flow Activities Summary | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Operating Activities | $(1,726) | $(1,026) | | Investing Activities | $(49,551) | $(1,643) | | Financing Activities | $14,510 | $3,794 | | (Decrease) increase in cash, cash equivalents, and restricted cash | $(36,767) | $1,125 | | Cash, cash equivalents, and restricted cash at end of period | $3,000 | $33,532 | - Net cash used in operating activities increased to $(1.73) million for the six months ended June 30, 2025, from $(1.03) million in the prior year[21] - Net cash used in investing activities significantly increased to $(49.55) million for the six months ended June 30, 2025, from $(1.64) million in the prior year, primarily due to increased real estate and equipment expenditures[21] - Net cash provided by financing activities increased to $14.51 million for the six months ended June 30, 2025, from $3.79 million in the prior year, mainly from increased borrowings on the line of credit[21] Unaudited Consolidated Statements of Changes in Equity This section reports changes in the Company's equity components over the specified periods Statements of Changes in Equity Summary | (in thousands, except shares) | Balance, December 31, 2024 | Net loss | Other comprehensive loss | Restricted stock issuance | Stock compensation | Shares withheld for taxes and tax benefit of vested shares | Balance, June 30, 2025 | | :---------------------------- | :------------------------- | :------- | :----------------------- | :------------------------ | :----------------- | :------------------------------------------------------- | :--------------------- | | Common Stock Shares Outstanding | 26,822,768 | — | — | 89,403 | — | (31,503) | 26,880,668 | | Common Stock | $13,412 | — | — | $45 | — | $(16) | $13,441 | | Additional Paid-In Capital | $348,497 | — | — | $(45) | $1,614 | $(474) | $349,592 | | Retained Earnings | $111,598 | $(3,176) | — | — | — | — | $108,422 | | Total Stockholders' Equity | $473,594 | $(3,176) | $(10) | — | $1,614 | $(490) | $471,532 | - Total Tejon Ranch Co. stockholders' equity decreased from $473.59 million at December 31, 2024, to $471.53 million at June 30, 2025, primarily due to a net loss of $3.18 million[24] - Retained earnings decreased by $3.18 million due to the net loss for the six months ended June 30, 2025[24] - Stock compensation added $1.61 million to additional paid-in capital, while shares withheld for taxes reduced it by $0.47 million[24] Notes to Unaudited Consolidated Financial Statements This section provides detailed explanations of significant accounting policies and specific financial instrument details supporting the consolidated financial statements 1. BASIS OF PRESENTATION This note outlines the basis of financial statement preparation, segment reporting, and recent accounting pronouncements - The financial statements are unaudited and include all necessary normal, recurring adjustments for a fair statement of interim results[26] - The Company operates in five reportable segments: commercial/industrial real estate development, resort/residential real estate development, mineral resources, farming, and ranch operations[28] - Results are not indicative of the full year due to the seasonal nature of agricultural and water activities, and timing of real estate sales and leasing[29] - New accounting pronouncements adopted include ASU No. 2023-05 (Joint Venture Formations) and ASU No. 2023-09 (Income Tax Disclosures), neither of which had a material effect[33][34] - The SEC's climate-related disclosure rules are currently stayed, and the Company is evaluating potential impacts for fiscal years beginning December 31, 2027[35] 2. EQUITY This note details the components of equity, including common stock and diluted shares outstanding Weighted-Average Shares Outstanding | Weighted-average number of shares outstanding | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Common stock | 26,878,658 | 26,800,594 | 26,865,687 | 26,794,469 | | Common stock equivalents | — | 48,746 | — | 83,702 | | Diluted shares outstanding | 26,878,658 | 26,849,340 | 26,865,687 | 26,878,171 | - For the three and six months ended June 30, 2025, restricted stock shares were excluded from diluted EPS calculation as they were antidilutive due to net loss[37] 3. MARKETABLE SECURITIES This note provides information on the Company's marketable securities, including fair value and unrealized gains or losses Marketable Securities Fair Value | Marketable Securities (in thousands) | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :----------------------------------- | :----------------------- | :--------------------------- | | Certificates of deposit | $1,170 | $248 | | U.S. Treasury and agency notes | $15,293 | $13,692 | | Corporate notes | $579 | $— | | Municipal notes | $512 | $501 | | Total | $17,554 | $14,441 | - The fair market value of investment securities was $10 thousand below their cost basis as of June 30, 2025, with gross unrealized losses of $12 thousand[39] - Unrealized losses on U.S. Treasury and agency notes and corporate notes are due to interest rate changes, not credit quality, and no credit losses were recorded[41][42] 4. REAL ESTATE This note details the Company's real estate development and held-for-lease assets Real Estate Development Costs | Real Estate Development (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------- | :------------ | :---------------- | | Mountain Village | $159,736 | $158,348 | | Centennial | $126,009 | $124,136 | | Grapevine | $43,798 | $42,456 | | Tejon Ranch Commerce Center | $54,492 | $52,965 | | Total Real estate development | $384,035 | $377,905 | Real Estate and Improvements Held for Lease | Real estate and improvements - held for lease, net (in thousands) | June 30, 2025 | December 31, 2024 | | :---------------------------------------------------------------- | :------------ | :---------------- | | Tejon Ranch Commerce Center | $40,762 | $16,253 | - Total real estate development costs increased by $6.13 million from December 31, 2024, to June 30, 2025[44] - Real estate and improvements held for lease, net, significantly increased from $16.25 million to $40.76 million, primarily due to residential components at Tejon Ranch Commerce Center[44] 5. LONG-TERM WATER ASSETS This note describes the Company's long-term water assets, including purchase contracts and sales data - Long-term water assets include water and water purchase contracts held for future use or sale, valued at cost[45] - The Company holds SWP water purchase contracts totaling 3,444 acre-feet annually through 2085 and a contract to purchase 6,693 acre-feet annually from Nickel Family, LLC through 2044 (with a 35-year extension option)[46][47] Water Sales Performance | Water Sales (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------- | :----------------------------- | :----------------------------- | | Acre-Feet Sold | 1,100 | 1,325 | | Revenues | $1,468 | $1,660 | | Cost of sales | $1,183 | $1,415 | | Profit | $285 | $245 | Total Water Resources | Total Water Resources (in acre-feet) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Total water held for future use | 129,785 | 122,966 | | Total purchased water contracts | 31,433 | 31,433 | | Grand Total | 161,218 | 154,399 | 6. ACCRUED LIABILITIES AND OTHER CURRENT LIABILITIES This note presents a breakdown of accrued liabilities and other current liabilities Accrued Liabilities Breakdown | Accrued Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Accrued vacation | $588 | $707 | | Accrued paid personal leave | $153 | $295 | | Accrued bonus | $1,250 | $2,425 | | Accrued stock compensation expense | $— | $1,831 | | Other | $382 | $291 | | Total | $2,373 | $5,549 | - Total accrued liabilities and other current liabilities decreased by $3.18 million, primarily due to the absence of accrued stock compensation expense at June 30, 2025, and lower accrued bonuses[51] 7. LINE OF CREDIT AND LONG-TERM DEBT This note details the Company's revolving credit facility and outstanding debt - The Company has a Revolving Credit Facility of $160.00 million with AgWest Farm Credit, PCA, maturing January 1, 2029[53] - As of June 30, 2025, the outstanding balance was $81.94 million, with an effective interest rate of 6.60% (one-month term SOFR plus 2.25% margin, before patronage)[53] 8. OTHER LIABILITIES This note provides information on other non-current liabilities, including retirement plan obligations Other Liabilities Breakdown | Other Liabilities (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Supplemental executive retirement plan liability | $5,636 | $5,720 | | Excess joint venture distributions and other | $9,375 | $9,078 | | Total | $15,011 | $14,798 | - Total other liabilities increased slightly from $14.80 million to $15.01 million, primarily due to an increase in excess joint venture distributions[54] 9. STOCK COMPENSATION - RESTRICTED STOCK AND PERFORMANCE SHARE GRANTS This note describes the Company's stock compensation plans and associated costs - The Company issues restricted stock with service conditions, performance share grants (Performance Condition Grants), and performance share grants with threshold, target, and maximum achievement levels (Performance Milestone Grants)[55] Stock Grant Activity | Stock Grant Activity (at target achievement) | Six Months Ended June 30, 2025 | | :------------------------------------------- | :----------------------------- | | Stock grants outstanding beginning of period | 312,564 | | New stock grants/additional shares | 170,925 | | Vested grants | (25,012) | | Expired/forfeited grants | (10,966) | | Stock grants outstanding end of period | 447,511 | - The unamortized cost associated with unvested stock grants was $3.46 million as of June 30, 2025, expected to be recognized over 19 months[57] Total Stock Compensation Costs | Total Stock Compensation Costs (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------- | :----------------------------- | :----------------------------- | | Employee | $1,190 | $2,498 | | Director | $424 | $279 | | Total | $1,614 | $2,777 | 10. INCOME TAXES This note outlines the Company's income tax benefit and effective tax rate - The Company used a discrete effective tax rate method for the six months ended June 30, 2025, due to uncertainty in estimating annual pretax earnings[61] Income Tax Benefit and Effective Rate | Income Tax Benefit (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Income tax benefit | $837 | $2,118 | | Effective tax rate | 21% | 102% | - The One Big Beautiful Bill Act, signed into law on July 4, 2025, is not expected to have a material impact on the Company's financial statements for the period reported[63] 11. COMMITMENTS AND CONTINGENCIES This note details significant contractual obligations and legal contingencies - The Company's contractual obligation for future water payments was $1.46 billion as of June 30, 2025, with $10.04 million paid during the six months ended June 30, 2025[64] - The Centennial project approvals were rescinded and the EIR decertified by the Court of Appeal on June 26, 2025, affirming the Superior Court's decision, requiring additional analysis for GHG impacts and wildland fire risk[74] - The Company is working with LA County to advance the Centennial project, but the monetary value of any adverse decision cannot be estimated at this time[75] - The Company is obligated to pay an earned incentive fee for the Grapevine Development upon successful receipt of litigated project entitlements and a value measurement date five years after[65] 12. RETIREMENT PLANS This note provides information on the Company's defined benefit and supplemental executive retirement plans - The Company sponsors a defined benefit retirement plan (Benefit Plan) frozen in April 2017 for future benefit accruals, with no expected contributions in 2025[78] Net Periodic Pension Cost | Total Net Periodic Pension Cost (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------- | :----------------------------- | :----------------------------- | | Benefit Plan | $(40) | $(12) | | SERP | $(168) | $(164) | - The Benefit Plan's investment mix at June 30, 2025, and December 31, 2024, was approximately 99% debt and 1% money market funds[79] 13. REPORTING SEGMENTS AND RELATED INFORMATION This note presents financial data by the Company's five operating segments - The Company operates five reporting segments: commercial/industrial real estate development, resort/residential real estate development, mineral resources, farming, and ranch operations[82] Segment Revenues | Segment Revenues (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Commercial/industrial | $5,107 | $2,550 | $7,861 | $5,495 | | Mineral resources | $1,510 | $2,032 | $4,105 | $4,521 | | Farming | $607 | $142 | $2,163 | $1,007 | | Ranch operations | $1,083 | $965 | $2,387 | $2,072 | | Total segment revenues | $8,307 | $5,689 | $16,516 | $13,095 | Segment Operating Results | Segment Operating Results (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Commercial/industrial | $4,126 | $3,329 | $6,191 | $5,860 | | Resort/residential | $(304) | $(427) | $(690) | $(1,988) | | Mineral resources | $720 | $917 | $1,230 | $1,290 | | Farming | $(890) | $(945) | $(1,882) | $(2,147) | | Ranch operations | $(252) | $(296) | $(221) | $(416) | | Total segment operating results | $3,400 | $2,578 | $4,628 | $2,599 | Identifiable Assets by Segment | Identifiable Assets (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Commercial/industrial | $123,957 | $98,185 | | Resort/residential | $335,196 | $330,513 | | Mineral resources | $64,869 | $54,658 | | Farming | $56,124 | $54,478 | | Ranch operations | $2,574 | $2,658 | | Corporate | $35,821 | $67,506 | | Total | $618,541 | $607,998 | Capital Expenditures by Segment | Capital Expenditures (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Commercial/industrial | $28,513 | $14,228 | | Resort/residential | $4,405 | $4,100 | | Mineral resources | $56 | $— | | Farming | $3,752 | $3,317 | | Ranch operations | $156 | $313 | | Corporate | $264 | $119 | | Total | $37,146 | $22,077 | 14. INVESTMENT IN UNCONSOLIDATED AND CONSOLIDATED JOINT VENTURES This note details the Company's investments in joint ventures and their financial contributions - The Company accounts for unconsolidated joint ventures using the equity method, with a total investment of $31.26 million as of June 30, 2025[94] - Key unconsolidated joint ventures include Petro Travel Plaza Holdings, LLC (50% voting, 60% profit/loss), TRCC/Rock Outlet Center LLC (50% voting, managing member, but significant participating rights for partner), and five TRC-MRC LLCs with Majestic Realty Co. (50/50)[94][95][97] Equity in Earnings (Loss) of Unconsolidated Joint Ventures | TRC Equity in Earnings (Loss) of Unconsolidated Joint Ventures (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------------------------------------------------- | :----------------------------- | :----------------------------- | | Petro Travel Plaza Holdings, LLC | $2,624 | $3,219 | | TRCC/Rock Outlet Center LLC | $(868) | $(633) | | TRC-MRC 1, LLC | $463 | $151 | | TRC-MRC 2, LLC | $1,022 | $888 | | TRC-MRC 3, LLC | $244 | $214 | | TRC-MRC 4, LLC | $177 | $321 | | TRC-MRC 5, LLC | $51 | $122 | | Total equity in earnings (loss) | $3,713 | $4,282 | - Centennial Founders, LLC (CFL), where the Company owns 93.75%, is consolidated within the Company's financial statements[97][99] 15. RELATED PARTY TRANSACTIONS This note describes transactions with related parties, including water contracts and consulting agreements - The Company is the largest landowner and taxpayer within TCWD and has a water purchase service contract with them[100] - The Company has water contracts with WRMWSD for SWP water deliveries, paying $3.44 million for these contracts and related costs as of June 30, 2025[101] - A consulting services agreement with former CEO Mr. Bielli for strategic counsel to the Board and current CEO, with compensation of $85 thousand per month for one year[102] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations for the three and six months ended June 30, 2025, compared to the prior year. It details performance by segment, discusses critical accounting estimates, outlines cash flow and liquidity, capital structure, contractual obligations, off-balance sheet arrangements, and reconciles non-GAAP financial measures OVERVIEW This section provides an executive summary of the Company's business model, strategic initiatives, and key financial highlights - The Company is a diversified real estate development and agribusiness company focused on maximizing long-term shareholder value through strategic land improvement and monetization[104][105] - Key master planned communities include TRCC (active development), Mountain Village (entitled, litigation prevailed), Grapevine (reapproved, litigation prevailed), and Centennial (entitlements rescinded by Court of Appeal, working with LA County to advance)[106][107][108] - Residential leasing commenced in May 2025 with the launch of Terra Vista at Tejon, diversifying the portfolio and enhancing recurring revenue[109] - Net loss attributable to common stockholders increased by $2.67 million for Q2 2025 and $3.22 million for YTD 2025, primarily due to $2.32 million and $3.40 million, respectively, in professional fees for a contested board election and proxy defense[118][119] Results of Operations by Segment This section analyzes the financial performance of each of the Company's operating segments Real Estate – Commercial/Industrial This section analyzes the financial performance of the commercial and industrial real estate segment Commercial/Industrial Segment Revenues and Operating Income | Commercial/Industrial Revenues (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :-------------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Total commercial/industrial revenues | $5,107 | $2,550 | $2,557 | 100% | | Total commercial/industrial expenses | $3,536 | $1,990 | $1,546 | 78% | | Operating income | $1,571 | $560 | $1,011 | 181% | - Revenue increase was primarily due to $2.37 million in land sale revenue recognized from a 2022 transaction and improved spark spread from Pastoria Energy Facility[124] - Expense increase was mainly due to $1.78 million cost of land sales related to the 2022 transaction, partially offset by lower general and administrative expenses[124] - Industrial land prices at TRCC have increased 1,479% since 2000, from $0.57 to $9.00 per square foot, and industrial rents increased 236% over the past eight years[132] Real Estate – Resort/Residential This section reviews the financial performance and development status of the resort and residential real estate segment - This segment is in preliminary development stages and generated no revenues or profits[133] - Expenses decreased by $0.12 million (28.8%) for the three months ended June 30, 2025, primarily due to a $0.10 million decrease in payroll-related expense[133] - Expenses decreased by $1.30 million (65%) for the six months ended June 30, 2025, mainly due to $1.25 million in additional professional service fees and planning costs in 2024 that did not reoccur[134] - The long-term strategy to develop MV, Centennial, and Grapevine remains unchanged, supported by California's housing demand and demographic migration[135] Mineral Resources This section examines the financial results of the mineral resources segment, including water and royalties Mineral Resources Segment Revenues and Operating Income | Mineral Resources Revenues (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Total mineral resources revenues | $1,510 | $2,032 | $(522) | (26)% | | Total mineral resources expenses | $790 | $1,115 | $(325) | (29)% | | Operating income | $720 | $917 | $(197) | (21)% | - Revenue decrease was primarily due to a $0.30 million decrease in water sales (due to above-average rainfall) and a $0.13 million decrease in cement royalties (lower production volumes)[137] - Expense decrease was mainly associated with a $0.28 million decrease in water cost of sales[137] - Water assets are expected to become increasingly important due to anticipated regulatory changes related to groundwater management in California[139] Farming This section details the financial performance of the farming segment, focusing on crop sales and related expenses Farming Segment Revenues and Operating Loss | Farming Revenues (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | | Total farming revenues | $607 | $142 | $465 | 327% | | Total farming expenses | $1,497 | $1,087 | $410 | 38% | | Operating loss | $(890) | $(945) | $55 | (6)% | - Revenue increase was primarily attributed to $0.43 million in almond carryover crop sales (156,000 pounds) during Q2 2025, with no almond sales in Q2 2024[144] - Expense increase was mainly due to a $0.41 million increase in almond cost of sales associated with higher crop sales volume[144] - The USDA projects a 10% increase in the 2025 California almond crop, potentially leading to downward pressure on almond pricing[147] - Unusually warm winter in early 2025 and late spring rainstorms may affect pistachio yields and crop management schedules[148] Ranch Operations This section analyzes the financial results of the ranch operations segment, including game management and other revenues Ranch Operations Segment Revenues and Operating Loss | Ranch Operations Revenues (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Total ranch operations revenues | $1,083 | $965 | $118 | 12% | | Total ranch operations expenses | $1,335 | $1,261 | $74 | 6% | | Operating loss | $(252) | $(296) | $44 | 15% | - Revenue increase was primarily driven by a $0.10 million rise in game management and other revenues, including higher guided hunt revenues and increased revenue from the High Desert Hunt Club[151] - Expense increase was mainly attributable to higher operating expenses of $0.12 million, largely due to increased repairs and maintenance costs[151] Corporate and Other This section covers corporate general and administrative costs and other non-segment specific financial items - Corporate general and administrative costs increased by $1.54 million (45.97%) for Q2 2025 and $3.29 million (56%) for YTD 2025, primarily due to professional fees for proxy defense[153][154] - Total other income decreased by $0.34 million for Q2 2025 and $0.68 million for YTD 2025, mainly due to lower investment income from a decrease in marketable securities balance[155] Joint Ventures This section discusses the equity in earnings or losses from the Company's joint venture investments Joint Ventures Equity in Earnings (Loss) | Equity in Earnings (Loss) (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change ($) | Change (%) | | :--------------------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Total equity in earnings | $2,555 | $2,769 | $(214) | (8)% | - Equity in earnings decreased by $(0.21) million for Q2 2025 and $(0.57) million for YTD 2025, primarily due to a reduction in TA/Petro joint venture earnings (7% decline in nonfuel gross margins, 10% increase in operating expense)[157][158] - Equity in loss from TRCC/Rock Outlet Center LLC increased due to decreased contingent rental income from reduced consumer traffic[157][158] General Outlook This section provides management's forward-looking perspective on operational seasonality and market conditions - Operations are seasonal, with farming revenues typically recognized in the third and fourth quarters, making quarterly results unreliable for full-year prediction[159] - Real estate activity and leasing are difficult to predict due to market conditions and specific opportunities[159] Income Taxes This section details the Company's income tax benefit and effective tax rate for the reporting period Income Tax Benefit and Effective Rate | Income Tax Benefit (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Income tax benefit | $837 | $2,118 | | Effective tax rate | 21% | 102% | - As of June 30, 2025, the Company had income tax receivables of $2.44 million[161] Cash Flow and Liquidity This section analyzes the Company's cash flows from operating, investing, and financing activities and its liquidity position - Cash, cash equivalents, and marketable securities decreased by $33.65 million to $20.05 million as of June 30, 2025, primarily due to funding construction of the Terra Vista at Tejon multi-family apartment community[165] Cash Flow Activities Summary | Cash Flow Activities (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(1,726) | $(1,026) | | Investing activities | $(49,551) | $(1,643) | | Financing activities | $14,510 | $3,794 | - Investing activities used $49.55 million, primarily for real estate development ($37.15 million, including Terra Vista and TRCC infrastructure) and water asset acquisition ($9.52 million)[168][169] - Financing activities provided $14.51 million, mainly from $15.00 million in borrowings on the line of credit[174] - Estimated capital investment for the remainder of 2025 includes $6.81 million for Terra Vista at Tejon, $5.00 million for TRCC-East infrastructure, and up to $4.19 million for MV, Centennial, and Grapevine[172] Capital Structure and Financial Condition This section describes the Company's capitalization, debt, and compliance with financial covenants - Total capitalization at book value was $568.83 million at June 30, 2025, with a debt-to-total-capitalization ratio of approximately 14.4%[178] - The Revolving Credit Facility provides a $160.00 million revolving credit line (RCL) and a $15.00 million letter of credit sub-facility, maturing January 1, 2029[179] - The interest rate spread for the RCL is based on the consolidated net liabilities to equity ratio (NLER), with the Company currently in Tier 3 (NLER < 35%) at a 2.25% spread[182] - The Company was in compliance with all financial covenants (total liabilities/tangible net worth, debt service coverage ratio, liquidity ratio) at June 30, 2025, and December 31, 2024[184][186] - The Company has a strong liquidity position with $20.05 million in cash and securities and $78.06 million available on its RLC[189] Contractual Cash Obligations This section outlines the Company's significant contractual cash obligations, including water payments and debt Contractual Obligations | Contractual Obligations (in thousands) | Total | One Year or Less | Years 2-3 | Years 4-5 | Thereafter | | :------------------------------------- | :------------ | :--------------- | :----------- | :----------- | :------------- | | Estimated water payments | $1,462,769 | $4,602 | $29,828 | $31,646 | $1,396,693 | | Revolving line-of-credit | $81,942 | $— | $— | $81,942 | $— | | Cash contract commitments | $16,016 | $14,427 | $518 | $— | $1,071 | | Defined Benefit Plan | $5,490 | $484 | $1,000 | $995 | $3,011 | | SERP | $5,247 | $580 | $1,134 | $1,090 | $2,443 | | Total contractual obligations | $1,571,464 | $20,093 | $32,480 | $115,673 | $1,403,218 | - The largest contractual obligation is estimated water payments, totaling $1.46 billion, extending through 2085 for SWP contracts and 2044 (with option to extend) for the Nickel water contract[191][192] - Cash contract commitments primarily relate to infrastructure development, entitlement costs, and an incentive fee for the Grapevine Development[193] Off-Balance Sheet Arrangements This section details the Company's off-balance sheet arrangements, including community facilities districts and joint venture guarantees - TRPFFA has created two Community Facilities Districts (CFDs) that have placed liens on Company land to secure bond debt for public infrastructure[195] - Aggregate outstanding debt of unconsolidated joint ventures was $218.90 million, with $20.38 million attributable to the TRCC/Rock Outlet Center LLC loan, which was 100% guaranteed by the Company[196] Non-GAAP Financial Measures This section presents and reconciles non-GAAP financial measures like EBITDA, Adjusted EBITDA, and Net Operating Income - EBITDA and Adjusted EBITDA are non-GAAP measures used to assess core operations, excluding interest, taxes, depreciation, amortization, and stock compensation expense[197] EBITDA and Adjusted EBITDA | Non-GAAP Financial Measures (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | EBITDA | $2,803 | $3,305 | $3,891 | $4,919 | | Adjusted EBITDA | $5,743 | $5,146 | $8,580 | $7,273 | - NOI (Net Operating Income) is a non-GAAP measure reflecting property-level income and expenses, useful for evaluating real estate asset performance[199] Net Operating Income (NOI) | Net Operating Income (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Commercial/Industrial NOI | $3,716 | $3,668 | | NOI of unconsolidated joint ventures | $18,881 | $19,881 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's exposure to market risks, primarily related to interest rates and commodity prices. It details the sensitivity of financial instruments and farming inventories to these risks - The Company is exposed to market risk from changes in interest rates and commodity prices[203] - Investment activities prioritize principal preservation, limiting investments to securities with maturities under five years and investment-grade ratings[205] Interest Rate Sensitivity Analysis | Interest Rate Sensitivity (in thousands, except percentage) | June 30, 2025 Total | June 30, 2025 Fair Value | | :------------------------------------------ | :------------------ | :----------------------- | | Marketable securities | $17,564 | $17,554 | | Weighted average interest rate | 4.18% | | | Revolving line-of-credit | $81,942 | $81,942 | | Weighted average interest rate | S+2.25% | | - Farming inventories and accounts receivable are exposed to price fluctuations of almonds, grapes, and pistachios[213] Item 4. Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal control over financial reporting - Management, under CEO and CFO supervision, concluded that disclosure controls and procedures were effective as of June 30, 2025[214] - No material changes in internal control over financial reporting occurred during the last fiscal quarter[215] PART II. OTHER INFORMATION This section includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, and a list of exhibits Item 1. Legal Proceedings This section refers to Note 11 of the financial statements for details on legal proceedings, which primarily cover commitments and contingencies related to water contracts, community facilities districts, and the Centennial project litigation - Legal proceedings information is detailed in Note 11 (Commitments and Contingencies) of the Unaudited Consolidated Financial Statements[216] Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the Company's most recent Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K[217] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that there were no unregistered sales of equity securities or use of proceeds during the period - None[218] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - None[218] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the Company - Not applicable[219] Item 5. Other Information This section reports that there is no other information to disclose under this item - None[219] Item 6. Exhibits This section provides a comprehensive list of exhibits filed with the Form 10-Q, including various corporate documents, agreements, and certifications, many of which are incorporated by reference from previous SEC filings - The report includes a list of exhibits, such as the Restated Certificate of Incorporation, Amended and Restated Bylaws, various stock incentive plans, ground leases, and joint venture agreements[220] - Recent exhibits include the Credit Agreement with AgWest Farm Credit, PCA (FN 45), Consulting Letter Agreement with Gregory S. Bielli (FN 46), and the Limited Liability Company Agreement of TRC-DP 1, LLC (FN 47)[220] - Certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002 are filed herewith[220] SIGNATURES This section contains the official signatures of the Company's executive officers, certifying the report - The report is signed by Matthew H. Walker, President and Chief Executive Officer, and Robert D. Velasquez, Chief Financial Officer, Treasurer, Senior Vice President, Finance and Chief Accounting Officer, on August 7, 2025[228]