Farmland Partners(FPI) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Presents unaudited consolidated financial statements for the periods ended June 30, 2023, including balance sheets, operations, and cash flows Consolidated Balance Sheets Total assets decreased to $1.125 billion while total liabilities increased to $489.7 million as of June 30, 2023 Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $1,125,375 | $1,160,149 | | Total real estate, net | $1,074,446 | $1,105,916 | | Cash and cash equivalents | $11,228 | $7,654 | | Total Liabilities | $489,676 | $455,935 | | Mortgage notes and bonds payable, net | $471,042 | $436,875 | | Total Equity | $535,214 | $594,004 | Consolidated Statements of Operations Net income rose to $7.9 million for Q2 and $9.6 million for H1 2023, driven by significant gains on asset dispositions Statement of Operations Highlights (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $11,584 | $12,357 | $24,256 | $26,247 | | Operating income | $2,757 | $3,455 | $7,593 | $7,773 | | (Gain) on disposition of assets | $(11,060) | $(3,335) | $(12,886) | $(3,995) | | Interest expense | $5,844 | $3,743 | $10,768 | $7,570 | | Net income | $7,899 | $2,993 | $9,612 | $4,131 | | Diluted EPS | $0.12 | $0.04 | $0.15 | $0.05 | | Dividends declared per common share | $0.06 | $0.06 | $0.12 | $0.11 | Consolidated Statements of Cash Flows Cash from operations was $9.4 million, with investing activities providing $39.9 million and financing activities using $45.8 million in H1 2023 Six Months Ended June 30, Cash Flow Summary (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $9,394 | $8,438 | | Net cash provided by (used in) investing activities | $39,949 | $(16,503) | | Net cash (used in) financing activities | $(45,769) | $(2,409) | | Net increase (decrease) in cash | $3,574 | $(10,474) | | Cash at end of period | $11,228 | $19,697 | - Key financing activities in H1 2023 included $68.0 million in borrowings, $34.0 million in debt repayments, and $61.7 million in common stock repurchases, contrasting with H1 2022 which saw no repurchases[21] Notes to Consolidated Financial Statements Provides details on the company's REIT structure, accounting policies, asset transactions, debt, equity, and ongoing litigation - As of June 30, 2023, the Company owned approximately 159,200 acres of farmland and managed an additional 31,000 acres, operating as a REIT[25][26][27] - During H1 2023, the company acquired two properties for $9.0 million and disposed of 19 properties for $51.5 million, recognizing a gain of $12.9 million[98][99] - The company repurchased 5,595,332 shares for $61.7 million in H1 2023, with $53.8 million remaining available under the share repurchase program[154] - On June 30, 2023, the Court of Appeals reversed a trial court's dismissal of the Company's claims against Sabrepoint, remanding the case for further proceedings[131] Management's Discussion and Analysis of Financial Condition and Results of Operations Discusses operating results, financial condition, liquidity, capital resources, and key performance factors for the periods ended June 30, 2023 Overview and Factors Influencing Results Outlines the farmland acquisition strategy, portfolio composition, and the impact of commodity prices and interest rates on performance - As of June 30, 2023, the portfolio consists of ~159,200 owned acres, with 70% by value in primary crops and 30% in specialty crops[196] - Management anticipates that high demand for U.S. primary crops due to the war in Ukraine will sustain high profitability for U.S. farmers[208] - Rising interest rates have significantly increased debt costs; a 1.0% increase in rates would decrease annual cash flow by approximately $1.5 million[209][233] Lease Expirations by Annual Fixed Rents (as of June 30, 2023) | Year Ending Dec 31 | Annual Fixed Rents (in thousands) | % of Annual Fixed Rents | | :--- | :--- | :--- | | 2023 (remaining) | $11,452 | 35.1% | | 2024 | $11,052 | 33.8% | | 2025 | $6,645 | 20.3% | | 2026 | $1,670 | 5.1% | | 2027 | $1,700 | 5.2% | | Thereafter | $139 | 0.5% | Results of Operations Net income increased for Q2 and H1 2023, primarily due to higher gains on asset sales offsetting lower revenues and higher interest expense Comparison of Three Months Ended June 30 (in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $11,584 | $12,357 | $(773) | (6.3)% | | (Gain) on disposition of assets | $(11,060) | $(3,335) | $(7,725) | 231.6% | | Interest expense | $5,844 | $3,743 | $2,101 | 56.1% | | Legal and accounting | $281 | $816 | $(535) | (65.6)% | | Net Income | $7,899 | $2,993 | $4,906 | 163.9% | Comparison of Six Months Ended June 30 (in thousands) | Metric | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | $24,256 | $26,247 | $(1,991) | (7.6)% | | (Gain) on disposition of assets | $(12,886) | $(3,995) | $(8,891) | 222.6% | | Interest expense | $10,768 | $7,570 | $3,198 | 42.2% | | Legal and accounting | $526 | $2,072 | $(1,546) | (74.6)% | | Net Income | $9,612 | $4,131 | $5,481 | 132.7% | Liquidity and Capital Resources Liquidity is supported by cash, operating cash flows, credit facilities, and asset sales, with significant H1 2023 share repurchases - As of June 30, 2023, the company had $11.2 million in cash and $120.7 million available under its lines of credit[259][266] - The company's At-the-Market (ATM) Program had $50.5 million remaining capacity as of June 30, 2023, with no shares sold in H1 2023[261] - Cash from investing activities was a source of $39.9 million in H1 2023, a significant shift from a use of $16.5 million in H1 2022, driven by higher property dispositions[267][269] - Cash used in financing activities increased to $45.8 million in H1 2023 from $2.4 million in H1 2022, mainly due to $61.7 million in common stock repurchases[267][270] Non-GAAP Financial Measures Defines and reconciles non-GAAP measures, showing lower AFFO and stable Adjusted EBITDAre compared to the prior year Reconciliation of Net Income to FFO and AFFO (in thousands) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | $7,899 | $2,993 | $9,612 | $4,131 | | (Gain) on disposition of assets | $(11,060) | $(3,335) | $(12,886) | $(3,995) | | Depreciation, depletion and amortization | $2,207 | $1,660 | $4,001 | $3,411 | | FFO | $(954) | $1,318 | $727 | $3,547 | | Adjustments (Stock comp, etc.) | $(177) | $(207) | $(308) | $(281) | | AFFO | $(1,131) | $1,111 | $419 | $3,266 | Reconciliation of Net Income to Adjusted EBITDAre (in thousands) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net income | $7,899 | $2,993 | $9,612 | $4,131 | | Interest, Taxes, D&A, etc. | $(3,005) | $2,164 | $1,896 | $7,082 | | EBITDAre | $4,894 | $5,157 | $11,508 | $11,213 | | Adjustments | $506 | $601 | $979 | $1,305 | | Adjusted EBITDAre | $5,400 | $5,758 | $12,487 | $12,518 | Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate exposure on $186.5 million of variable-rate debt, partially hedged by an interest rate swap - As of June 30, 2023, $186.5 million (39.4%) of the company's debt had variable interest rates[290] - A 1.0% increase in interest rates would decrease the company's annual cash flow by approximately $1.5 million[290] - The company uses an interest rate swap with a notional amount of $33.2 million to reduce its floating rate exposure[290] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[292] - There were no changes in the company's internal controls over financial reporting during H1 2023 that have materially affected, or are reasonably likely to materially affect, the controls[294] PART II. OTHER INFORMATION Legal Proceedings An appeals court reversed a lower court's dismissal of the company's lawsuit against Sabrepoint, allowing the case to proceed - On June 30, 2023, the Court of Appeals for the Fifth District of Texas reversed a trial court's summary judgment against the Company in its lawsuit against Sabrepoint, remanding the case for further proceedings[131][295] Risk Factors No material changes were reported from the risk factors disclosed in the 2022 Annual Report on Form 10-K - As of June 30, 2023, there were no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[297] Unregistered Sales of Equity Securities and Use of Proceeds Details Q2 2023 share repurchase activity, totaling 4.1 million shares, and an increased repurchase authorization Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Shares Purchased (thousands) | Average Price Paid per Share | Approx. Value Remaining for Repurchase (thousands) | | :--- | :--- | :--- | :--- | | April 2023 | 1,180 | $10.75 | $13,169 | | May 2023 | 1,120 | $10.94 | $75,901 | | June 2023 | 1,837 | $12.03 | $53,767 | | Total | 4,137 | $11.37 | $53,767 | - On May 3, 2023, the Board of Directors approved a $75.0 million increase to the share repurchase program authorization[299] Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None[303] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[303] Other Information No other material information was reported for the period - None[303] Exhibits Lists all exhibits filed with the report, including Sarbanes-Oxley certifications and Inline XBRL data - Exhibits filed include CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and Inline XBRL data files[304][305]