8-K
Farmland Partners Inc. (FPI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 26, 2023
FARMLAND PARTNERS INC.
(Exact name of registrant as specified in its charter)
| <br><br><br><br> | <br><br><br><br> | <br><br><br><br> |
|---|---|---|
| Maryland<br><br>(State or other jurisdiction<br><br>of incorporation) | 001-36405<br><br>(Commission<br><br>File Number) | 46-3769850<br><br>(IRS Employer<br><br>Identification No.) |
| <br><br><br><br> | <br><br> |
|---|---|
| 4600 S. Syracuse Street , Suite 1450<br><br>Denver , Colorado<br><br>(Address of principal executive offices) | 80237<br><br>(Zip Code) |
Registrant’s telephone number, including area code: ( 720 ) 452-3100
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | FPI | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02.Results of Operations and Financial Condition.
On July 26, 2023, Farmland Partners Inc. (the “Company”) issued a press release announcing its financial position as of June 30, 2023, results of operations for the three and six months ended June 30, 2023 and other related information. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Company intends to make certain supplemental information available on its website www.farmlandpartners.com under the section “Investor Relations—Presentations” prior to the Company’s conference call with investors on Thursday, July 27, 2023 at 11:00 a.m. (Eastern Time).
In accordance with General Instruction B.2 of Form 8-K, the information included in this Current Report on Form 8-K, including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01.Financial Statements and Exhibits.
| | | |
|---|---|---|
| Exhibit<br>No. | Description | |
| 99.1* | | Press release dated July 26, 2023. |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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| | | | FARMLAND PARTNERS INC. | | |
| | | | | | |
| Date: July 26, 2023 | | By: | /s/ Luca Fabbri | | |
| | | | Luca Fabbri | | |
| | | | President and Chief Executive Officer | | |
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Farmland Partners Inc. Reports Second Quarter 2023 Results
FPI Demonstrates Strong Value Appreciation through Asset Sales
DENVER, July 26, 2023 (BUSINESS WIRE) -- Farmland Partners Inc. (NYSE: FPI) (“FPI” or the “Company”) today reported financial results for the three and six months ended June 30, 2023.
Selected Highlights
During the quarter ended June 30, 2023, the Company:
| ● | recorded net income of $7.9 million, or $0.14 per share available to common stockholders, compared to $3.0 million, or $0.04 per share available to common stockholders for the same period in 2022; |
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| ● | recorded AFFO of ($1.1) million, or ($0.02) per share, compared to $1.1 million, or $0.02 per share, for the same period in 2022; |
| --- | --- |
| ● | completed 17 farm dispositions for approximately $44.4 million in aggregate consideration and recognized an aggregate gain on sale of approximately $11.1 million; |
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| ● | completed one farm acquisition for total consideration of $8.9 million; |
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| ● | maintained access to liquidity of $131.9 million; and |
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| ● | repurchased 4,136,946 shares of its common stock at a weighted average price of $11.37 per share. |
| --- | --- |
Subsequent to June 30, 2023, the Company:
| ● | repurchased an additional 116,593 shares of its common stock at an average price of $12.22 per share (with year-to-date repurchases totaling 5,711,925 at an average price of $11.03); and |
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| ● | completed two partial farm dispositions for approximately $2.7 million in aggregate consideration. |
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Identified transactions:
| ● | FPI currently has 11 farms under contract to sell for aggregate consideration of approximately $22 million and an estimated aggregate gain on sale of $9 million to $10 million; |
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| ● | FPI has planned auctions of farms with proceeds estimated in the $30 million to $33 million range; |
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| ● | FPI is in advanced negotiations to sell up to $26 million of additional farmland, all of which (including consummated sales) total up to approximately $135 million of identified transactions year-to-date; and |
| --- | --- |
| ● | one farm under contract to purchase for a purchase price of $11.0 million. |
| --- | --- |
CEO Comments
Luca Fabbri, President and Chief Executive Officer: “Farmland appreciation is at the core of our investment strategy. In the first half of 2023, we realized significant gains on over $50 million of farm sales, providing proof of appreciation and generating value for our shareholders via stock repurchases. In the second half of 2023, we are targeting additional farm sales of over $80 million, proceeds from which will be used to reduce high-cost debt. Beyond the approximately $135 million of identified transaction mentioned above, we are working with potential buyers on additional sales to close before year-end. Based on REIT tax rules, the level of capital gains on sales of our farms in 2023 may result in additional dividends being declared at a later time, which decision will be based actual results, further internal financial analysis, and would be subject to board approval. Reflecting industry-wide trends, we are experiencing lower-than-expected transaction volumes in our auction and brokerage channels, which, along with higher interest expense, will impact our results. Despite the challenges of 2023, the U.S. farm economy remains strong and a pillar of worldwide food security.”
Financial and Operating Results
| ● | The tables below show financial and operating results for the three and six months ended June 30, 2023 and 2022. | |||||||||||||||||||||||
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| | | | | | | | | For the three months ended | | | | | For the six months ended | | | | ||||||||
| (in thousands) | | | | | | | | June 30, | | | | | June 30, | | | | ||||||||
| Financial Results: | | | | | | | | 2023 | **** | 2022 | **** | Change | **** | 2023 | **** | 2022 | **** | Change | ||||||
| Net Income | | | | | | | | $ | 7,899 | | $ | 2,993 | | 163.9 | % | | $ | 9,612 | | $ | 4,131 | | 132.7 | % |
| Net income per share available to common stockholders | | | | | | | | $ | 0.14 | | $ | 0.04 | | 250.0 | % | | $ | 0.15 | | $ | 0.05 | | 200.0 | % |
| AFFO | | | | | | | | $ | (1,131) | | $ | 1,111 | | NM | | | $ | 419 | | $ | 3,266 | | (87.2) | % |
| AFFO per weighted average common shares | | | | | | | | $ | (0.02) | | $ | 0.02 | | NM | | | $ | 0.01 | | $ | 0.07 | | (85.7) | % |
| Adjusted EBITDAre | | | | | | | | $ | 5,400 | | $ | 5,758 | | (6.2) | % | | $ | 12,487 | | $ | 12,518 | | (0.2) | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating Results: | | | | | | | | | | | | | | | | | | | | | | | | |
| Total Operating Revenues | | | | | | | | $ | 11,584 | | $ | 12,357 | | (6.3) | % | | $ | 24,256 | | $ | 26,247 | | (7.6) | % |
| Operating Income | | | | | | | | $ | 2,757 | | $ | 3,455 | | (20.2) | % | | $ | 7,593 | | $ | 7,773 | | (2.3) | % |
| Net Operating Income (NOI) | | | | | | | | $ | 8,176 | | $ | 8,966 | | (8.8) | % | | $ | 17,720 | | $ | 19,462 | | (9.0) | % |
NM = Not Meaningful
| ● | See “Non-GAAP Financial Measures” for complete definitions of AFFO, Adjusted EBITDAre, and NOI and the financial tables accompanying this press release for reconciliations of net income to AFFO, Adjusted EBITDAre and NOI. |
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Acquisition and Disposition Activity
| ● | During the six months ended June 30, 2023, the Company acquired two properties for total consideration of $9.0 million. |
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| ● | During the six months ended June 30, 2023, the Company completed 19 property dispositions for cash consideration of $51.5 million and total gain on sale of $12.9 million. |
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Balance Sheet
| ● | The Company had total debt outstanding of $473.5 million at June 30, 2023, compared to total debt outstanding of $439.5 million at December 31, 2022. |
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| ● | At June 30, 2023, the Company had access to liquidity of $131.9 million, consisting of $11.2 million in cash (including restricted cash of $2.2 million) and $120.7 million in undrawn availability under its credit facilities, respectively, compared to cash of $7.7 million and $169.0 million in undrawn availability under its credit facilities at December 31, 2022. |
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| ● | During the six months ended June 30, 2023, the Company repurchased 5,595,332 shares of its common stock at a weighted average price of $11.01 per share. |
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| ● | As of July 21, 2023, the Company had 50,074,329 shares of common stock outstanding on a fully diluted basis. |
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Dividend Declarations
The Company’s Board of Directors declared a quarterly cash dividend of $0.06 per share of common stock and Class A Common OP unit. The dividends are payable on October 16, 2023, to stockholders and common unit holders of record on October 2, 2023.
2023 Earnings Guidance and Supplemental Package
For 2023 earnings guidance, please see page 15 of the supplemental package, which can be accessed through the Investor Relations section of the Company's website.
Conference Call Information
The Company has scheduled a conference call on July 27, 2023, at 11:00 a.m. (U.S. Eastern Time) to discuss the financial results and provide a company update.
The call can be accessed live over the phone by dialing 1-888-660-6359 and using the conference ID 2818086. The conference call will also be available via a live listen-only webcast and can be accessed through the Investor Relations section of the Company's website, www.farmlandpartners.com.
A replay of the conference call will be available beginning shortly after the end of the event until August 6, 2023, by dialing 1-800-770-2030 and using the playback ID 2818086. A replay of the webcast will also be accessible on the Investor Relations section of the Company's website for a limited time following the event.
About Farmland Partners Inc.
Farmland Partners Inc. is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of June 30, 2023, the Company owns and/or manages approximately 190,200 acres in 20 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Louisiana, Michigan, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Texas, and Virginia. In addition, the Company owns land and buildings for four agriculture equipment dealerships in Ohio leased to Ag Pro under the John Deere brand. The Company has approximately 26 crop types and over 100 tenants. The Company elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2014. Additional information: www.farmlandpartners.com or (720) 452-3100.
Forward-Looking Statements
This press release includes “forward-looking statements” within the meaning of the federal securities laws, including, without limitation, statements with respect to our outlook and the outlook for the farm economy generally, proposed and pending acquisitions and dispositions, financing activities, crop yields and prices and anticipated rental rates. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” or similar expressions or their negatives, as well as statements in future tense. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and our actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: the on-going war in Ukraine and its impact on the world agriculture market, world food supply, the farm economy, and our tenants’ businesses; general volatility of the capital markets and the market price of the Company’s common stock; changes in the Company’s business strategy, availability, terms and deployment of capital; the Company’s ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all; availability of qualified personnel; changes in the Company’s industry, interest rates or the general economy; adverse developments related to crop yields or crop prices; the degree and nature of the Company’s competition; the timing, price or amount of repurchases, if any, under the Company's share repurchase program; the ability to consummate acquisitions or dispositions under contract; and the other factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, and the Company’s other filings with the Securities and Exchange Commission. Any forward-looking information presented herein is made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.
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Farmland Partners Inc.
Consolidated Balance Sheets
As of June 30, 2023 and December 31, 2022
(in thousands)
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|---|---|---|---|---|---|---|
| | | June 30, | | December 31, | ||
| | **** | 2023 | **** | 2022 | ||
| ASSETS | | | | | | |
| Land, at cost | | $ | 954,522 | | $ | 980,521 |
| Grain facilities | | 11,180 | | 11,349 | ||
| Groundwater | | 17,550 | | 17,682 | ||
| Irrigation improvements | | 49,861 | | 50,097 | ||
| Drainage improvements | | 10,665 | | 12,543 | ||
| Permanent plantings | | | 51,054 | | | 50,394 |
| Other | | | 6,781 | | 6,967 | |
| Construction in progress | | 12,821 | | 14,810 | ||
| Real estate, at cost | | 1,114,434 | | 1,144,363 | ||
| Less accumulated depreciation | | (39,988) | | (38,447) | ||
| Total real estate, net | | 1,074,446 | | 1,105,916 | ||
| Deposits | | 126 | | 148 | ||
| Cash and cash equivalents and restricted cash | | 11,228 | | 7,654 | ||
| Assets held for sale | | | 30 | | | 33 |
| Loans and financing receivables, net | | 21,978 | | 21,921 | ||
| Right of use asset | | | 509 | | | 325 |
| Deferred offering costs | | — | | 63 | ||
| Accounts receivable, net | | 1,701 | | 7,055 | ||
| Derivative asset | | | 2,310 | | | 2,084 |
| Inventory | | 2,752 | | 2,808 | ||
| Equity method investments | | | 4,163 | | 4,185 | |
| Intangible assets, net | | | 2,045 | | | 2,055 |
| Goodwill | | | 2,706 | | | 2,706 |
| Prepaid and other assets | | 1,381 | | 3,196 | ||
| TOTAL ASSETS | | $ | 1,125,375 | | $ | 1,160,149 |
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| LIABILITIES AND EQUITY | | | | | | |
| LIABILITIES | | | | | | |
| Mortgage notes and bonds payable, net | | $ | 471,042 | | $ | 436,875 |
| Lease liability | | | 509 | | | 325 |
| Dividends payable | | 3,011 | | 3,333 | ||
| Accrued interest | | 5,082 | | 4,135 | ||
| Accrued property taxes | | 2,014 | | 2,008 | ||
| Deferred revenue | | 1,141 | | 44 | ||
| Accrued expenses | | 6,877 | | 9,215 | ||
| Total liabilities | | 489,676 | | 455,935 | ||
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| Commitments and contingencies | | | | | | |
| | | | | | | |
| Redeemable non-controlling interest in operating partnership, Series A preferred units | | | 100,485 | | | 110,210 |
| | | | | | | |
| EQUITY | | | | | | |
| Common stock, $0.01 par value, 500,000,000 shares authorized; 48,951,198 shares issued and outstanding at June 30, 2023, and 54,318,312 shares issued and outstanding at December 31, 2022 | | 475 | | 531 | ||
| Additional paid in capital | | 586,736 | | 647,346 | ||
| Retained earnings | | 11,368 | | 3,567 | ||
| Cumulative dividends | | (80,078) | | (73,964) | ||
| Other comprehensive income | | 3,512 | | 3,306 | ||
| Non-controlling interests in operating partnership | | 13,201 | | 13,218 | ||
| Total equity | | 535,214 | | 594,004 | ||
| | | | | | | |
| TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS IN OPERATING PARTNERSHIP AND EQUITY | | $ | 1,125,375 | | $ | 1,160,149 |
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Farmland Partners Inc.
Consolidated Statements of Operations
Three and Six Months Ended June 30, 2023 and 2022
(in thousands except per share amounts)
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|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | For the Three Months Ended | | For the Six Months Ended | ||||||||
| | | June 30, | | June 30, | ||||||||
| | **** | 2023 | **** | 2022 | **** | 2023 | **** | 2022 | ||||
| OPERATING REVENUES: | | | | | | | | | | | | |
| Rental income | | $ | 9,389 | | $ | 9,196 | | $ | 19,077 | | $ | 18,741 |
| Tenant reimbursements | | 831 | | 809 | | 1,869 | | 1,587 | ||||
| Crop sales | | | 515 | | | 1,150 | | | 875 | | | 1,845 |
| Other revenue | | 849 | | 1,202 | | 2,435 | | 4,074 | ||||
| Total operating revenues | | 11,584 | | 12,357 | | 24,256 | | 26,247 | ||||
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| OPERATING EXPENSES | | | | | | | | | | | | |
| Depreciation, depletion and amortization | | 2,207 | | 1,660 | | 4,001 | | 3,411 | ||||
| Property operating expenses | | 2,428 | | 2,058 | | 4,610 | | 4,013 | ||||
| Cost of goods sold | | | 980 | | | 1,333 | | | 1,926 | | | 2,772 |
| Acquisition and due diligence costs | | — | | — | | 14 | | 62 | ||||
| General and administrative expenses | | 2,904 | | 3,004 | | 5,510 | | 6,108 | ||||
| Legal and accounting | | 281 | | 816 | | 526 | | 2,072 | ||||
| Other operating expenses | | | 27 | | | 31 | | | 76 | | | 36 |
| Total operating expenses | | 8,827 | | 8,902 | | 16,663 | | 18,474 | ||||
| OPERATING INCOME | | 2,757 | | 3,455 | | 7,593 | | 7,773 | ||||
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| OTHER (INCOME) EXPENSE: | | | | | | | | | | | | |
| Other (income) expense | | | 75 | | | (34) | | | 64 | | | (14) |
| (Income) loss from equity method investment | | | (5) | | | (8) | | | 22 | | | (15) |
| (Gain) on disposition of assets | | | (11,060) | | | (3,335) | | | (12,886) | | | (3,995) |
| Interest expense | | 5,844 | | 3,743 | | 10,768 | | | 7,570 | |||
| Total other expense | | (5,146) | | 366 | | (2,032) | | 3,546 | ||||
| | | | | | | | | | | | | |
| Net income before income tax expense | | | 7,903 | | | 3,089 | | | 9,625 | | | 4,227 |
| | | | | | | | | | | | | |
| Income tax expense | | | 4 | | | 96 | | | 13 | | 96 | |
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| NET INCOME | | 7,899 | | 2,993 | | 9,612 | | 4,131 | ||||
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| Net (income) attributable to non-controlling interests in operating partnership | | (188) | | (77) | | (226) | | | (110) | |||
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| Net income attributable to the Company | | | 7,711 | | | 2,916 | | | 9,386 | | | 4,021 |
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| Nonforfeitable distributions allocated to unvested restricted shares | | | (27) | | | (16) | | | (43) | | | (31) |
| Distributions on Series A Preferred Units | | | (683) | | | (840) | | | (1,485) | | | (1,680) |
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| Net income available to common stockholders of Farmland Partners Inc. | | $ | 7,001 | | $ | 2,060 | | $ | 7,858 | | $ | 2,310 |
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| Basic and diluted per common share data: | | | | | | | | | | | | |
| Basic net income available to common stockholders | | $ | 0.14 | | $ | 0.04 | | $ | 0.15 | | $ | 0.05 |
| Diluted net income available to common stockholders | | $ | 0.12 | | $ | 0.04 | | $ | 0.15 | | $ | 0.05 |
| Basic weighted average common shares outstanding | | 50,860 | | 50,362 | | 52,425 | | 48,084 | ||||
| Diluted weighted average common shares outstanding | | 59,112 | | 50,362 | | 52,425 | | 48,084 | ||||
| Dividends declared per common share | | $ | 0.06 | | $ | 0.06 | | $ | 0.12 | | $ | 0.11 |
Farmland Partners Inc.
Reconciliation of Non-GAAP Measures
Three and Six Months Ended June 30, 2023 and 2022
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|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | For the three months ended June 30, | | For the six months ended June 30, | ||||||||
| (in thousands except per share amounts) | **** | 2023 | **** | 2022 | **** | 2023 | **** | 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 |
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| Stock-based compensation and incentive | | 506 | | | 601 | | 965 | | | 1,243 | ||
| Deferred impact of interest rate swap terminations | | — | 32 | | | 198 | 94 | |||||
| Real estate related acquisition and due diligence costs | | — | | | — | | | 14 | | | 62 | |
| Distributions on Preferred units and stock | | | (683) | | | (840) | | | (1,485) | | | (1,680) |
| AFFO | | $ | (1,131) | | $ | 1,111 | | $ | 419 | | $ | 3,266 |
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| AFFO per diluted weighted average share data: | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| AFFO weighted average common shares | | 52,454 | | 51,985 | | 54,002 | | 49,739 | ||||
| | | | | | | | | | | | | |
| Net income available to common stockholders of Farmland Partners Inc. | | $ | 0.14 | | $ | 0.04 | | $ | 0.15 | | $ | 0.05 |
| Income available to redeemable non-controlling interest and non-controlling interest in operating partnership | | 0.01 | 0.02 | | | 0.04 | 0.04 | |||||
| Depreciation, depletion and amortization | | 0.04 | | 0.03 | | 0.07 | | 0.07 | ||||
| Stock-based compensation and incentive | | 0.01 | | 0.01 | | 0.02 | | 0.02 | ||||
| (Gain) on disposition of assets | | | (0.21) | | | (0.06) | | | (0.24) | | | (0.08) |
| Distributions on Preferred units and stock | | (0.01) | | (0.02) | | (0.03) | | | (0.03) | |||
| AFFO per diluted weighted average share | | $ | (0.02) | | $ | 0.02 | | $ | 0.01 | | $ | 0.07 |
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| | | For the three months ended | | For the six months ended | ||||||||
| | | June 30, | | June 30, | ||||||||
| (in thousands) | **** | 2023 | **** | 2022 | | 2023 | **** | 2022 | ||||
| Net income | | $ | 7,899 | | $ | 2,993 | | $ | 9,612 | | $ | 4,131 |
| Interest expense | | 5,844 | | 3,743 | | | 10,768 | | 7,570 | |||
| Income tax expense | | 4 | | 96 | | | 13 | | 96 | |||
| Depreciation, depletion and amortization | | 2,207 | | 1,660 | | | 4,001 | | 3,411 | |||
| (Gain) on disposition of assets | | | (11,060) | | | (3,335) | | | (12,886) | | | (3,995) |
| EBITDAre | | $ | 4,894 | | $ | 5,157 | | $ | 11,508 | | $ | 11,213 |
| | | | | | | | | | | | | |
| Stock-based compensation and incentive | | | 506 | | | 601 | | | 965 | | | 1,243 |
| Real estate related acquisition and due diligence costs | | | — | | | — | | | 14 | | | 62 |
| Adjusted EBITDAre | | $ | 5,400 | | $ | 5,758 | | $ | 12,487 | | $ | 12,518 |
Farmland Partners Inc.
Reconciliation of Non-GAAP Measures
Three and Six Months Ended June 30, 2023 and 2022
| | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | For the three months ended June 30, | | For the six months ended June 30, | ||||||||
| ($ in thousands) | | 2023 | **** | 2022 | **** | 2023 | | 2022 | ||||
| OPERATING REVENUES: | | | | | | | | | | | | |
| Rental income | | $ | 9,389 | | $ | 9,196 | | $ | 19,077 | | $ | 18,741 |
| Tenant reimbursements | | 831 | | 809 | | 1,869 | | 1,587 | ||||
| Crop sales | | | 515 | | | 1,150 | | | 875 | | | 1,845 |
| Other revenue | | 849 | | 1,202 | | 2,435 | | 4,074 | ||||
| Total operating revenues | | 11,584 | | 12,357 | | 24,256 | | 26,247 | ||||
| | | | | | | | | | | | | |
| Property operating expenses | | | 2,428 | | | 2,058 | | | 4,610 | | | 4,013 |
| Cost of goods sold | | | 980 | | | 1,333 | | | 1,926 | | | 2,772 |
| NOI | | | 8,176 | | | 8,966 | | | 17,720 | | | 19,462 |
| | | | | | | | | | | | | |
| Depreciation, depletion and amortization | | | 2,207 | | | 1,660 | | | 4,001 | | | 3,411 |
| Acquisition and due diligence costs | | | — | | | — | | | 14 | | | 62 |
| General and administrative expenses | | | 2,904 | | | 3,004 | | | 5,510 | | | 6,108 |
| Legal and accounting | | | 281 | | | 816 | | | 526 | | | 2,072 |
| Other operating expenses | | | 27 | | | 31 | | | 76 | | | 36 |
| Other (income) expense | | | 75 | | | (34) | | | 64 | | | (14) |
| (Income) loss from equity method investment | | | (5) | | | (8) | | | 22 | | | (15) |
| (Gain) on disposition of assets | | | (11,060) | | | (3,335) | | | (12,886) | | | (3,995) |
| Interest expense | | | 5,844 | | | 3,743 | | | 10,768 | | | 7,570 |
| Income tax expense | | | 4 | | | 96 | | | 13 | | | 96 |
| NET INCOME | | $ | 7,899 | | $ | 2,993 | | $ | 9,612 | | $ | 4,131 |
Non-GAAP Financial Measures
The Company considers the following non-GAAP measures as useful to investors as key supplemental measures of its performance: FFO, NOI, AFFO, EBITDAre and Adjusted EBITDAre. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as a measure of the Company’s operating performance. FFO, NOI, AFFO, EBITDAre and Adjusted EBITDAre, as calculated by the Company, may not be comparable to other companies that do not define such terms exactly as the Company.
FFO
The Company calculates FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as net income (loss) (calculated in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, plus real estate related depreciation, depletion and amortization (excluding amortization of deferred financing costs), and after adjustments for unconsolidated partnerships and joint ventures. Management presents FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring the Company’s operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from sales of depreciable operating properties, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. The Company also believes that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare the Company’s operating performance with that of other REITs. However, other equity REITs may not calculate FFO in accordance with the NAREIT definition as the Company does, and, accordingly, the Company’s FFO may not be comparable to such other REITs’ FFO.
AFFO
The Company calculates AFFO by adjusting FFO to exclude the income and expenses that the Company believes are not reflective of the sustainability of the Company’s ongoing operating performance, including, but not limited to, real estate related acquisition and due diligence costs, stock-based compensation and incentive, deferred impact of interest rate swap terminations, and distributions on the Company’s preferred units.
Changes in GAAP accounting and reporting rules that were put in effect after the establishment of NAREIT’s definition of FFO in 1999 result in the inclusion of a number of items in FFO that do not correlate with the sustainability of the Company’s operating performance. Therefore, in addition to FFO, the Company presents AFFO and AFFO per share, fully diluted, both of which are non-GAAP measures. Management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO. AFFO is not intended to represent cash flow or liquidity for the period and is only intended to provide an additional measure of the Company’s operating performance. Even AFFO, however, does not properly capture the timing of cash receipts, especially in connection with full-year rent payments under lease agreements entered into in connection with newly acquired farms. Management considers AFFO per share, fully diluted to be a supplemental metric to GAAP earnings per share. AFFO per share, fully diluted provides additional insight into how the Company’s operating performance could be allocated to potential shares outstanding at a specific point in time. Management believes that AFFO is a widely recognized measure of the operations of REITs and presenting AFFO will enable investors to assess the Company’s performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and AFFO per share, fully diluted and, accordingly, the Company’s AFFO and AFFO per share, fully diluted may not always be comparable to AFFO and AFFO per share amounts calculated by other REITs. AFFO and AFFO per share, fully diluted should not be considered as an alternative to net income (loss) or earnings per share (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to net income (loss) earnings per share (determined in accordance with GAAP) as a measure of the Company’s liquidity, nor are they indicative of funds available to fund the Company’s cash needs, including its ability to make distributions.
EBITDAre and Adjusted EBITDAre
The Company calculates Earnings Before Interest Taxes Depreciation and Amortization for real estate (“EBITDAre”) in accordance with the standards established by NAREIT in its September 2017 White Paper. NAREIT defines EBITDAre as net income (calculated in accordance with GAAP) excluding interest expense, income tax, depreciation and amortization, gains or losses on disposition of depreciated property (including gains or losses on change of control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s pro rata share of EBITDAre of unconsolidated affiliates. EBITDAre is a key financial measure used to evaluate the Company’s operating performance but should not be construed as an alternative to operating income, cash flows from operating activities or net income, in each case as determined in accordance with GAAP. The Company believes that EBITDAre is a useful performance measure commonly reported and will be widely used by analysts and investors in the Company’s industry. However, while EBITDAre is a performance measure widely used across the Company’s industry, the Company does not believe that it correctly captures the Company’s business operating performance because it includes non-cash expenses and recurring adjustments that are necessary to better understand the Company’s business operating performance. Therefore, in addition to EBITDAre, management uses Adjusted EBITDAre, a non-GAAP measure.
The Company calculates Adjusted EBITDAre by adjusting EBITDAre for certain items such as stock-based compensation and incentive and real estate related acquisition and due diligence costs that the Company considers necessary to understand its operating performance. The Company believes that Adjusted EBITDAre provides useful supplemental information to investors regarding the Company’s ongoing operating performance that, when considered with net income and EBITDAre, is beneficial to an investor’s understanding of the Company’s operating performance. However, EBITDAre and Adjusted EBITDAre have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.
In prior periods, the Company has presented EBITDA and Adjusted EBITDA. In accordance with NAREIT’s recommendation, beginning with the Company’s reported results for the three months ended March 31, 2018, the Company is reporting EBITDAre and Adjusted EBITDAre in place of EBITDA and Adjusted EBITDA.
Net Operating Income (NOI)
The Company calculates net operating income (NOI) as total operating revenues (rental income, tenant reimbursements, crop sales and other revenue), less property operating expenses (direct property expenses and real estate taxes), less cost of goods sold. Since net operating income excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expenses, other income and losses and extraordinary items, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and leasing farmland real estate, providing a perspective not immediately apparent from net income. However, net operating income should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect general and administrative expenses, interest expense, depreciation and amortization costs, other income and losses.