PICO Holdings, Inc. (NASDAQ:PICO) reported results for the third
quarter ended September 30, 2016. PICO reported
shareholders’ equity of $334.9 million ($14.52 per share) at
September 30, 2016, compared to $346.4 million ($15.04 per
share) at December 31, 2015.
Third quarter Segment Results of
Operations
For the third quarter of 2016, PICO reported a
net loss of $2.9 million ($0.13 per share), compared to a net loss
of $14.1 million ($0.61 per share) in the third quarter of
2015. Our third quarter segment results of operations were as
follows (in thousands):
|
Three Months Ended September 30, |
|
2016 |
|
2015 |
Revenue by
operating segment: |
|
|
|
Water
resource and water storage operations |
$ |
553 |
|
|
$ |
3,468 |
|
Real
estate operations |
95,567 |
|
|
73,777 |
|
Corporate |
588 |
|
|
846 |
|
Total revenue |
$ |
96,708 |
|
|
$ |
78,091 |
|
|
|
|
|
Income (loss)
before taxes by operating segment: |
|
|
|
Water
resource and water storage operations |
$ |
(1,029 |
) |
|
$ |
834 |
|
Real
estate operations |
2,876 |
|
|
3,839 |
|
Corporate |
(4,094 |
) |
|
(3,574 |
) |
Income (loss) from
continuing operations before income taxes and equity in loss of
unconsolidated affiliates |
(2,247 |
) |
|
1,099 |
|
Benefit
(provision) for federal, foreign, and state income taxes |
406 |
|
|
(22 |
) |
Equity in
loss of unconsolidated affiliate |
|
|
(1,942 |
) |
Loss from continuing
operations |
(1,841 |
) |
|
(865 |
) |
Loss from
discontinued agribusiness operations, net of tax |
(18 |
) |
|
(10,225 |
) |
Gain
(loss) on sale of discontinued agribusiness operations, net of
tax |
2 |
|
|
(1,348 |
) |
Net loss from
discontinued agribusiness operations, net of tax |
(16 |
) |
|
(11,573 |
) |
Net loss |
(1,857 |
) |
|
(12,438 |
) |
Net
(income) loss attributable to noncontrolling interests |
(1,043 |
) |
|
(1,654 |
) |
Net loss attributable
to PICO Holdings, Inc. |
$ |
(2,900 |
) |
|
$ |
(14,092 |
) |
|
|
|
|
|
|
|
|
First Nine Month Segment Results of
Operations
For the first nine months of 2016, we reported a
net loss of $13.1 million ($0.57 per share), compared to a net loss
of $80.7 million ($3.51 per share) in the first nine months of
2015. Our nine months segment results of operations were as
follows (in thousands):
|
Nine Months Ended September 30, |
|
2016 |
|
2015 |
Revenue by
operating segment: |
|
|
|
Water
resource and water storage operations |
$ |
813 |
|
|
$ |
4,191 |
|
Real
estate operations |
246,731 |
|
|
172,243 |
|
Corporate |
1,910 |
|
|
(17,911 |
) |
Total revenue |
$ |
249,454 |
|
|
$ |
158,523 |
|
|
|
|
|
Income (loss)
before taxes by operating segment: |
|
|
|
Water
resource and water storage operations |
$ |
(4,263 |
) |
|
$ |
(1,907 |
) |
Real
estate operations |
4,713 |
|
|
(1,661 |
) |
Corporate |
(10,286 |
) |
|
(31,248 |
) |
Loss from continuing
operations before income taxes and equity in loss of unconsolidated
affiliates |
(9,836 |
) |
|
(34,816 |
) |
Benefit
for federal, foreign, and state income taxes |
372 |
|
|
2,949 |
|
Equity in
loss of unconsolidated affiliate |
|
|
(3,422 |
) |
Loss from continuing
operations |
(9,464 |
) |
|
(35,289 |
) |
Loss from
discontinued agribusiness operations, net of tax |
(102 |
) |
|
(29,520 |
) |
Loss on
sale of discontinued agribusiness operations, net of tax |
(1,858 |
) |
|
(18,251 |
) |
Net loss from
discontinued agribusiness operations, net of tax |
(1,960 |
) |
|
(47,771 |
) |
Net loss |
(11,424 |
) |
|
(83,060 |
) |
Net
(income) loss attributable to noncontrolling interests |
(1,676 |
) |
|
2,373 |
|
Net loss attributable
to PICO Holdings, Inc. |
$ |
(13,100 |
) |
|
$ |
(80,687 |
) |
|
|
|
|
|
|
|
|
PICO’s President and Chief Executive Officer,
Max Webb, commented:
“Comparing the third quarter of 2016 to the same
period in 2015, UCP continued to increase revenue. In particular,
their homebuilding revenue increased by 27.8% to $89.8 million.
UCP’s homebuilding gross margin percentage decreased to 18.5% from
18.9% in the third quarter of 2015 while driving down
selling, general and administrative costs to 10.1% of UCP’s total
revenue, including 260 basis points benefit from a reduction in
contingent consideration, compared to 13.9% in the third quarter of
2015. UCP’s net income for the third quarter of 2016 was $3.1
million which included $2 million of net one - time expenses. UCP’s
unit backlog at September 30, 2016 was $157.2 million (387 units)
compared to $120.8 million (288 units) at September 30, 2015.
“Vidler did not close any significant
transactions in the third quarter: However, we continue to engage
in discussions and negotiations with several interested parties
with respect to our Long Term Storage Credits located in
Arizona. The demand for these assets is more resource driven
than market driven given the issues surrounding the over
allocation, or Structural Deficit, of the Colorado River.
“Shortly after the end of the quarter, we closed
on a couple of sale transactions for non - core assets. We
sold substantially all of our oil and gas assets for gross sale
proceeds of $10.2 million and real estate located in the Central
Valley of California for gross sale proceeds of $3.4 million.
We are in the process of winding down our remaining oil and gas
assets which will take place over the course of the next several
months.
“In addition, shortly after the end of the
quarter, the Board of Directors terminated John Hart as President
and Chief Executive Officer of the Company. I wish to thank
the independent directors and all employees of the group companies
for their endeavors to ensure that the transition of this
management change was as seamless as possible. All of us are
committed to executing the stated business plan as efficiently and
effectively as possible.”
Net Operating Loss
Carryforwards
At September 30, 2016, PICO had
approximately $139.6 million of (pre-tax) federal net operating
loss carryforwards, or NOLs, that could be utilized in certain
circumstances to offset PICO’s taxable income and reduce its
federal income tax liability. Additional information with
respect to these NOLs is contained in PICO’s Annual Report on Form
10-K for the year ended December 31, 2015 that PICO has filed with
the Securities and Exchange Commission.
Net Book Value
The following table is provided as a supplement
to the condensed consolidated financial statements contained in our
Quarterly Report on Form 10-Q, to illustrate the relative size of
our assets and activities (in millions):
Segment |
|
Net Book Value |
|
|
September 30, 2016 |
Water resource and
water storage operations |
|
$ |
184.0 |
|
Real estate
operations |
|
130.7 |
|
Corporate and
discontinued agribusiness operations |
|
20.2 |
|
Shareholders’ equity |
|
$ |
334.9 |
|
|
|
|
|
|
About PICO Holdings, Inc.
PICO Holdings is a diversified holding
company. Currently, we believe the highest potential return
to shareholders is from a return of capital to shareholders.
As we monetize assets, rather than reinvest the proceeds, we intend
to return the capital derived therefrom, less any working capital
requirements, back to shareholders through a stock repurchase
program or by other means such as special dividends taking into
effect liquidity requirements, debt covenants and any other
contractual and legal restrictions that may exist at the time.
As of September 30, 2016, our two major
investments were:
- Vidler Water Company, Inc., a water resource development
business; and
- a 56.9% interest in UCP, Inc. (NYSE: UCP), a publicly-traded
homebuilder and land developer in markets located in California,
Washington State, North Carolina, South Carolina and
Tennessee.
DIRECTOR RESIGNATION
On November 1, 2016, John R. Hart notified the Company that he
had resigned as a member of the Company’s Board of Directors,
effective immediately.
OTHER INFORMATION
At September 30, 2016, PICO Holdings, Inc.
had a market capitalization of $272 million, and 23,069,381 shares
outstanding.
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
Statements in this press release that are not
historical, including statements regarding our business objectives,
the future demand for our water resources and Long Term Storage
Credits, our ability to utilize NOLs to offset taxable income and
reduce our federal income liability, and our ability to monetize
assets and return capital to shareholders through stock repurchases
or through other means, are forward-looking statements based on
current expectations and assumptions that are subject to risks and
uncertainties.
In addition, a number of other factors may cause
results to differ materially from our expectations, such as: any
slow down or downturn in the housing recovery or in the real estate
markets in which UCP and Vidler operate; fluctuations in the prices
of water and water rights; physical, governmental and legal
restrictions on water and water rights; a downturn in some sectors
of the stock market; general economic conditions; prolonged
weakness in the overall U.S. and global economies; the performance
of the businesses; the continued service and availability of key
management personnel; and potential capital requirements and
financing alternatives.
For further information regarding risks and
uncertainties associated with our business, please refer to the
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Risk Factors” sections of our SEC
filings, including our Annual Report on Form 10-K and our Quarterly
Reports on Form 10-Q, copies of which may be obtained by contacting
us at (858) 456-6022 or at http://investors.picoholdings.com.
We undertake no obligation to (and we expressly
disclaim any obligation to) update our forward-looking statements,
whether as a result of new information, subsequent events, or
otherwise, in order to reflect any event or circumstance which may
arise after the date of this press release, except as may otherwise
be required by law. Readers are urged not to place undue
reliance on these forward-looking statements, which speak only as
of the date of this press release.
This news release was distributed by
GlobeNewswire, www.globenewswire.com.
CONTACT:
Financial Profiles, Inc.
Jim Barry
pico@finprofiles.com
310-478-2700
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