Tejon Ranch Co. Reports Third Quarter Results Of Operations – 2012

Tejon Ranch Co. (NYSE:TRC) today released the results of operations for the nine months ended September 30, 2012, with the Company showing net income attributable to common stockholders of $4,414,000, or $0.22 per common share, compared to net income attributable to common stockholders of $10,656,000, or $0.54 per common share, for the same period in 2011. Revenue from operations for the nine months ended September 30, 2012 was $33,542,000, compared to $43,283,000 of revenue for the same period during 2011. All per share references in this release are presented on a fully diluted basis.

For the third quarter ended September 30, 2012, the Company had net income attributable to common stockholders of $4,021,000, or $0.20 per common share, compared to net income of $2,558,000, or $0.13 per common share during the third quarter of 2011. Revenue from operations for the third quarter of 2012 was $16,114,000 compared to $14,765,000 of revenue during the same period of 2011.

Results of Operations for the First Nine Months of 2012:

When compared to the same period of 2011, the decline in net income attributable to common stockholders and revenue from operations during the first nine months of 2012, is primarily due to the recognition of $15,750,000 in income during the first quarter of 2011 that came from the closing of conservation easement sales. On a comparison basis, excluding the sale of conservation easements during the first quarter of 2011, total revenue from operations increased during the first nine months of 2012.

Commercial/industrial revenue increased $3,589,000 during the first nine months of 2012, when compared to the same period in 2011, due to growth in oil and gas revenue of $3,359,000 resulting from an increase in production and pricing, and to the recognition of deferred revenue from the Caterpillar land sale in 2011.

Farming revenues increased $2,369,000 during the first nine months of 2012, when compared to 2011, due primarily to an increase of $1,955,000 in pistachio revenues related to the sale of 2011 crop pistachios during 2012 and to positive price adjustments received on pistachios sold. We also saw an increase in almond revenues compared to the prior year mainly due to improved prices and the timing of sales.

Equity in earnings of unconsolidated joint ventures during the period also increased as a result of improved operating margins at our Petro/TA joint venture due to higher gasoline sales, and to improved revenues in our Rockefeller joint venture coming from the full lease up of a building with Dollar General in late 2011.

Contributing to the decline in net income during the first nine months of 2012 was an overall increase in operating expense of $1,849,000. This increase in expense was driven by higher compensation cost due to the timing of hiring employees in 2011 and early 2012, the recognition of additional stock compensation costs related to the vesting and the timing of vesting of milestone performance grants, and a change of employee benefits. These cost increases were partially offset by approximately $530,000 of lower water costs due to credits received from prior years.

Results of Operations for the Third Quarter of 2012:

The growth in third quarter 2012 revenues of $1,349,000 is attributable to an increase in oil and gas revenues resulting from increased production and an $880,000 increase in farming revenues due to higher pistachio and almond sales revenues stemming from both a larger inventory carryover of the 2011 crop and higher prices. Equity in earnings from unconsolidated joint ventures also improved during the quarter when compared to the same period of 2011 as described above.

The improvement in net income for the third quarter of 2012 of $1,412,000, as compared to the same period of 2011, is due to the improvement in revenues discussed above. The improvement in revenue was partially offset by higher farming cost of sales, compensation expense as described above, and higher tax expenses.

2012 Outlook:

Management believes that the capital structure of the Company provides a solid foundation for the continued future growth of the Company. On September 30, 2012, total capital was approximately $308,000,000, with debt accounting for less than one percent of total capital. On September 30, 2012, we also had cash and securities totaling approximately $75,000,000 and $30,000,000 of availability on lines of credit to meet any short-term funding needs.

During the remainder of 2012, the Company will continue to aggressively pursue land entitlement activities and investment within the Tejon Ranch Commerce Center and in our joint ventures. As an example, during the third quarter of 2012 we began a new phase of master infrastructure development within the Tejon Ranch Commerce Center to open up retail and industrial sites in the southern section of the development. We also entered into a Letter of Intent with the Rockefeller Group to jointly pursue the potential development of a retail outlet center, which is planned for the area where infrastructure work is underway.

The Company believes the variability of its quarterly and annual operating results will continue during 2012. Prices received by the Company for many of its products are dependent upon the prevailing market conditions and commodity prices. Many of the Company’s projects, especially in real estate, require a lengthy process to complete the entitlement and development phases before revenue can begin to be recognized. The timing of projects and sales of both real estate inventory and non-strategic assets can vary from year-to-year; therefore, it is difficult for the Company to accurately predict quarterly and annual revenues and results of operations.

Tejon Ranch Co. is a diversified real estate development and agribusiness company, whose principal asset is its 270,000-acre land holding located approximately 60 miles north of Los Angeles and 30 miles south of Bakersfield.

More information about Tejon Ranch Co. can be found online at http://www.tejonranch.com.

Forward Looking Statements:

The statements contained herein, which are not historical facts, are forward-looking statements based on economic forecasts, strategic plans and other factors, which by their nature involve risk and uncertainties. In particular, among the factors that could cause actual results to differ materially are the following: business conditions and the general economy, future commodity prices and yields, market forces, the ability to obtain various governmental entitlements and permits, interest rates and other risks inherent in real estate and agriculture businesses. For further information on factors that could affect the Company, the reader should refer to the Company’s filings with the Securities and Exchange Commission.

TEJON RANCH CO.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THIRD QUARTER ENDED SEPTEMBER 30

(In thousands, except earnings per share)

(Unaudited)
                     
Three Months Ended September 30 Nine Months Ended September 30
  2012     2011     2012     2011  
Revenues:
Real estate - commercial/industrial $ 6,185 $ 5,760 $ 18,741 $ 15,152
Real estate - resort/residential 132 88 267 15,966
Farming   9,797     8,917     14,534     12,165  
Total revenues 16,114 14,765 33,542 43,283
 
Costs and Expenses:
Real estate - commercial/industrial 3,089 3,249 9,184 9,435
Real estate - resort/residential 1,430 1,001 3,585 2,878
Farming 5,003 4,825 8,224 8,015
Corporate expenses   2,590     2,655     9,437     8,253  
Total expenses   12,112     11,730     30,430     28,581  
 
Operating income 4,002 3,035 3,112 14,702
 
Other income (expense)
Investment income 313 317 948 927
Interest income (expense) 33 - (2 ) -
Other income   15     17     50     77  
Total other income 361 334 996 1,004
 
Income from operations before equity in earnings
of unconsolidated joint ventures 4,363 3,369 4,108 15,706
Equity in earnings of unconsolidated
joint ventures, net   1,114     613     1,648     583  
Income before income tax expense (benefit) 5,477 3,982 5,756 16,289
Income tax expense   1,525     1,442     1,461     5,710  
Net income 3,952 2,540 4,295 10,579
Net loss attributable to non-controlling interest   (69 )   (18 )   (119 )   (77 )
Net income attributable to common stockholders   4,021     2,558     4,414     10,656  
Net income per share to common stockholders, basic $ 0.20   $ 0.13   $ 0.22   $ 0.54  
Net income per share to common stockholders, diluted $ 0.20   $ 0.13   $ 0.22   $ 0.54  
Weighted average number of shares outstanding:
Common stock 20,074,233 19,973,160 20,030,396 19,862,355
Common stock equivalents – stock options   18,821     20,740     58,695     35,117  
Diluted shares outstanding   20,093,054     19,993,900     20,089,091     19,897,472  

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