Earnings Call Transcript
GLADSTONE LAND Corp (LAND)
Earnings Call Transcript - LAND Q4 2021
Operator, Operator
Greetings and welcome to Gladstone Land's Fourth Quarter and Year End Earnings Call. All participants are currently in listen-only mode, and a question-and-answer session will take place after the formal presentation. This conference is being recorded. It is my pleasure to introduce your host, David Gladstone, Chief Executive Officer and President. Thank you, you may begin.
David Gladstone, CEO
All right. Thank you, Jessie. This is a nice introduction. This is David Gladstone and welcome to the quarterly and annual conference call for Gladstone Land, and thank you all for calling in today. We appreciate you taking time to listen to our presentation. We’re going to start out with Michael LiCalsi, who is our General Counsel and Secretary and he is also President of Gladstone Administration, which is the administrator for all of the Gladstone funds. Michael, you want to go?
Michael LiCalsi, General Counsel and Secretary
Sure. Thanks David and good morning everybody. Today's report may include forward-looking statements under the Securities Act of 1933 and the Securities Exchange Act of 1934, including those regarding our future performance. These forward-looking statements involve certain risks and uncertainties that are based upon our current plans, which we believe to be reasonable. Many factors may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements, including all risk factors in our Form 10-K and other documents we file with the SEC. You can find those on our website, which is www.gladstoneland.com, specifically go to the Investors page or on the SEC's website, that’s www.sec.gov. Now, we undertake no obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Today, we will discuss FFO, that’s funds from operations. Now, FFO is a non-GAAP accounting term defined as net income excluding the gains or losses from the sale of real estate and any impairment losses from property, plus depreciation and amortization of real estate assets. Now, we will also discuss core FFO, which we generally define as FFO adjusted for certain non-recurring revenues and expenses, also adjusted FFO, which further addresses core FFO for certain non-cash items, such as converting GAAP rents to normalized cash rents. And we believe these are better indications of our operating results and allow you to better compare our performance period-over-period. Now, we ask that you take the opportunity to visit our website, once again its www.gladstoneland.com, sign up for our e-mail notification service so you can stay up-to-date on what's going on at the company. You can also find us on Facebook, keyword there is The Gladstone Companies and our Twitter handle is @GladstoneComps. Today's call is an overview of our results, so we ask that you review our press release and Form 10-Q, both issued yesterday, for more detailed information. Now, with that I will turn it back to David.
David Gladstone, CEO
Okay. Thanks Michael. I'll start with a brief summary of our current farmland holdings. We currently own approximately 113,000 acres on 164 farms and about 45,000 acre-feet of banked water, valued all of this together at about $1.5 billion for the land and the water. Our farms are located in 15 different states and more importantly, they're in 29 different growing regions. These growing regions determine just about everything about the farm and its ability to grow. Our farms continue to be 100% occupied and are leased to 85 different tenant farmers, all of whom are unrelated to us and the tenants on these farms are growing over 60 different crops. Given the number of different growing regions, tenants, farms, and types of crops, I think there's sufficient diversification to provide safety and security for the cash flows coming in from the rent. We believe this diversification helps protect dividends that we pay to our shareholders. We had another active quarter, where the year ending 2021, for the year we had 294 million in new acquisitions. About half of these, or 147 million, came during the fourth quarter. And while this is a good year from an earnings perspective, we didn't get to see as much of an impact from the acquisitions in 2021. So we're looking forward to reporting what we hope are even stronger results in 2022. We had a good year in terms of participation rents. In fact, it was a fantastic year. We recorded about $3.4 million in additional income during the fourth quarter. This resulted in us recording total participation rents of about $5.2 million for the year, which is more than twice the amount recorded in each of the prior two years. This increase was largely driven by results of participation rents and their components on certain farms becoming active for the first time in 2021. We have a few more farms with participation rents that are scheduled to come online in 2022. So we should see a little bit of a bump there. However, we're not yet able to estimate the amount of participation rents for 2022, as these numbers are largely dependent upon the yields achieved on the farms and the prices of the crops that are sold. So we'll need to wait until later in the year before we can announce any of these figures. We continue to be able to renew all expiring leases without incurring any downtime on any of our farms. The farms in our primary region of focus, that is each of the coasts, are very heavily concentrated in California and Florida. We continue to execute renewals at high rental rates. We changed the lease structure on one of our farms in the Midwest, which was resulting in a lower amount of rent and recognized upfront, and I'll go over that in a bit. Overall, operations on our farms remain strong. And the demand for products grown on most of these farms remains high. These are products like berries, vegetables, and nuts. As anybody who goes to the grocery store can tell you, prices on these and many other types of food continue to increase. They are experiencing inflation with regard to the crops that are produced on these farms. During the fourth quarter, the team acquired seven farms, and about 20,000 acre-feet of banked water, with a total expenditure of about 147 million. Overall, the initial net cash yield to us on these acquisitions is about 5%. Additionally, all the leases on these farms contain certain provisions, such as participation rents or annual escalations that should push the figure higher in the future. As a reminder, this banked water is water that we own that is stored in a water district. We can use the water on any of the farmland located in Kern County, and that sub-basin where we have several farms, or we can sell it to third parties on the open market. Our plan is to hold the water to help safeguard our assets in the region against any future water shortages. All of our farms currently have enough water, but we like the security of having extra water. Regarding leasing, since the beginning of the fourth quarter, we executed 10 leases and we renewed on properties located in four different states. Overall, these renewals are expected to result in a decrease in the annual net operating income of about $138,000 from the prior leases. However, this decrease is primarily the result of one lease renewal on one property in which we invested $560,000 to cover a portion of the farm's operating costs in exchange for a significant participation rent component, capturing about 80% of the gross revenue earned on that farm. We made this adjustment because the farm needed some additional help. Based on current commodity prices and yield estimates, we think we will at least end up similar to where we would have been under the previous lease on this farm, or maybe even better if the farmer has a good year. But we will not know the results until the end of the year for this deal that we executed. Excluding this one lease, our other lease renewals are expected to result in increases in annual net operating income of approximately $247,000, or about 8% over that of the prior lease. Looking ahead, we have only one lease scheduled to expire over the next six months, and it makes up less than 1.5% of our total annualized lease revenue. We're in discussions with the existing tenant on the farm, as well as some potential new tenants, and we aren't currently expecting any downtime. We currently expect the new lease on this farm to be relatively flat from where it is today. There are a couple of items I'd like to mention before we move on. The first one is the ongoing drought in the West. They are still experiencing water shortages even though I think they received some additional water in this last round. Despite some recent record-breaking rainfalls in parts of the Western US, the entire region continues to deal with the drought. However, all of our properties are positioned where they have sufficient water to complete at least the current crop and most likely all the other crops that they will grow in the next 6 to 9 months. Where we have farms located in water districts, those districts have stored water or other supplemental sources to cover our farms for the short term. Almost all of our farms out west have wells on site, and most of them rely on groundwater as their primary source of irrigation. For these properties, we are seeing the typical seasonal drops in water levels, but not enough to cause concern. One thing you should know is that wet and dry weather cycles are the norm out west, especially in California throughout any long-term investment. We know that we will have both drought periods and wet periods. So when we underwrite a potential investment out west, we look for properties with multiple sources of water. We build in a drought scenario and we also take into account potential government regulations. Regarding the progress on our ESG policy, we are actively working on a solid list to go into our ESG disclosure. We'll continue to update you on this as we get closer to finalizing these policies. As mentioned on previous calls, we sometimes come across farmland owners who want to sell both their farmland and their operations. As a real estate investment trust, Gladstone Land is limited in its ability to operate operating companies because operating income is generally not permitted in a real estate investment trust. The Gladstone Acquisition SPAC was created to potentially take advantage of these opportunities where Gladstone Land could not participate. I'll stop here. That's enough on the operations. I'll turn it over to our CFO, Lewis Parrish, who will talk to you more about the numbers. Lewis.
Lewis Parrish, CFO
Alright, thank you, David and good morning, everyone. Again, briefly with our balance sheet. During the fourth quarter, our total assets increased by about $90 million due to new acquisitions. These were financed with a mix of debt and equity proceeds. From a financing perspective, since the beginning of the fourth quarter, we secured about $31 million of new long-term borrowings at a weighted average rate of 3.4%, which is fixed for the next nine plus years. On the equity side, since the beginning of the fourth quarter, we've raised about $49 million in net proceeds through sales of our common stock under the ATM program, and about $35 million in net proceeds from sales of our Series C preferred stock. Moving on to our operating results. First, I’ll note, net income for the quarter was about $2 million and net loss to common shareholders of $1.4 million or $0.042 per common share. For the year, we had net income of about $3.5 million and a net loss to common shareholders of $8.7 million or $0.286 per common share. On a quarter-over-quarter basis, adjusted FFO for the fourth quarter was approximately $6.7 million compared to $5.3 million in the third quarter, an increase of about 28%. And AFFO per share was $0.199 in the fourth quarter versus $0.166 in the third quarter, an increase of 19%. Dividends declared per share were about $0.136 in the fourth quarter versus $0.135 in the third quarter. On an annual basis, adjusted FFO for 2021 was approximately $20.4 million compared to $14.3 million in 2020, an increase of 42%, and AFFO per share was $0.668 in 2021 versus $0.641 in 2020, an increase of 4%. The year-over-year increase in the per share figures was a bit muted due to an early lease termination fee received during the first quarter of 2020, which resulted in additional AFFO of about $0.10 per share last year. Dividends declared per share were $0.541 in 2021 and $0.537 in 2020. Our common dividend payout ratio was about 81% of AFFO in 2021 versus 84% in 2020. The primary driver behind the increases in AFFO was higher top-line revenues, partially offset by increases in related party fees and additional borrowing costs. Fixed base cash rents increased by about $1.2 million or 7% on a quarter-over-quarter basis and by about $17.6 million or 35% on a year-over-year basis. These increases were primarily driven by additional revenues earned from recent acquisitions. As David mentioned, during the fourth quarter, we recorded about $3.4 million of participation rents compared to $1.8 million in the previous quarter. And for the year, that gave us participation rents of about $5.2 million versus $2.4 million last year. During 2021, we had 39 farms under leases that had an active participation rent component versus 19 farms during 2020. We do have a few additional farms with a participation rent component that are scheduled to come online later in 2022. On a same-property basis and including participation rates, but excluding income from early lease terminations, our 2021 lease revenues increased by approximately $2.3 million, 4.5% over that of 2020. On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, our core operating expenses increased by about $679,000 on a quarter-over-quarter basis and by about $3.6 million on a year-over-year basis. These increases were both primarily driven by higher related party fees. The base management fee paid to our advisor increased due to additional assets acquired during the year, while the increase in the incentive fee was driven by higher pre-incentive fee FFO achieved during each of the current periods. Removing related party fees, our core operating expenses decreased by about $256,000 on a quarter-over-quarter basis and increased by about $652,000 on a year-over-year basis. The decrease on a quarter-over-quarter basis was primarily due to less water costs incurred on one of our properties in Colorado, partially offset by additional legal fees incurred to protect water rights on certain farms in California. The increase on a year-over-year basis was primarily due to the additional water costs incurred on these Colorado and California properties, an increase in property tax expenses due to certain recent acquisitions, and changes in certain lease structures. Just one last note on expenses. During 2021, we incurred approximately $572,000 of additional water costs related to the Colorado property. We do not expect these costs to continue into 2022. Additionally, we recorded about $282,000 of costs related to protecting our water rights on certain farms in California. We do currently expect these costs to continue at similar levels for the next few years. Moving on to net asset value, we had 24 farms and one cooling facility revalued during the quarter, all based on third-party appraisals. Overall, these farms increased in value by about $2.1 million over their previous valuations from about a year ago. As of December 31st, our portfolio was valued at about $1.5 billion, and all of this was supported by either third-party appraisals or the actual purchase prices. Based on these updated valuations and including the fair value of our debt and all preferred stock, our net asset value per common share at December 31st was $14.31, which is up by $0.51 from last quarter. Turning to our capital makeup and overall liquidity. From an overall standpoint, regarding our borrowings, our loan-to-value ratio and our total farmland holdings on a fair value basis net of cash was about 44% as of December 31st. Over 99% of our borrowings are currently at fixed rates, and on a weighted average basis, these rates are fixed at 3.36% for another six years. Therefore, we believe we are currently well-protected on the debt side against any future interest rate hikes. Regarding upcoming debt maturities, we currently have about $65 million coming due over the next 12 months. However, about $48 million of this represents various loan maturities, and the properties collateralizing these loans have increased in value by a total of about $24 million since their respective acquisitions. Consequently, we do not foresee any problems refinancing any of these loans if and when we choose to do so. Removing these maturities, we only have about $17 million of amortizing principal payments coming due over the next 12 months or about 3% of our total debt outstanding. From a liquidity standpoint, including availability, our lines of credit, and other undrawn notes, we currently have about $115 million of dry powder in addition to over $35 million of unpledged properties. We recently increased the size of our MetLife facility. This now gives us ample availability under each of our two largest borrowing facilities. We also continue to reach out to new lenders for additional borrowings. Overall, credit continues to be readily available to us from multiple lenders. Finally, I'll touch on our common distributions. We recently raised our common dividend again to $0.0453 per share per month. Over the past 28 quarters, we raised our common dividend 25 times, resulting in an overall increase of 51% over this time. Since 2013, we've paid 108 consecutive monthly dividends to common shareholders, totaling $0.0552 per share in total distributions. Our goal is to continue to increase the dividend at regular intervals. When considering the relative stability and security of the underlying assets and the related cash flows, we continue to believe this stock offers a compelling investment alternative, particularly in light of today's inflationary environment. With that, I'll turn the program back over to David.
David Gladstone, CEO
Okay. Thank you, Lewis. Nice report. Acquisition activity remains good for us, and we continue to see buying opportunities coming our way. A few final points I'd like to make before we get some questions. We believe that investing in farmland and growing crops that contribute to healthy lifestyles, such as fruits, vegetables, and nuts, follows the trend we're seeing in the marketplace today. Overall, demand for prime farmland growing berries and vegetables remains stable to strong among all areas where the farms are located, particularly along the West Coast, including most of California, Oregon, and Washington, as well as the East Coast, especially in Florida and some other states. Farmland continues to perform well compared to other assets. The NCREIF Index, which I mention often because it is the Farmland Index, currently makes up about $13.8 billion worth of agricultural properties in the United States and has an average annual return of about 12.6% over the past 20 years, with no negative years during that period. This is equal to that of the overall REIT Index and higher than the S&P Index, both of which had four negative years over that time period. In closing, please remember that purchasing stock in this company is a long-term investment. It's a slow-moving piece of machinery that makes money day in and day out. I think an investment in our stock really has two points. First of all, it's similar to gold in that it's hard assets—this is dirt. It's been there for centuries, maybe even longer, and has intrinsic value because there is a limited amount of good farmland, which is being used up by urban developments, especially in California and Florida. We have many farms in those areas, and at some point, somebody will show up and buy one of our farms to build houses on it. Second, unlike gold and other alternative assets, it's an active investment asset, which has cash flows to investors, and we believe that’s better than a bond fund because we keep increasing the dividend. We expect inflation, particularly in the food sector, to increase, and we expect the values of underlying farmland to increase as a result. We expect this to be especially true for the fresh produce food sector as the trend of more people in the U.S. eating healthy foods continues to grow. Now we'll have some questions from those who follow us. Operator, if you'll come on and tell them how they can ask some questions.
Edward Riley, Analyst
Good morning guys.
David Gladstone, CEO
Good morning.
Lewis Parrish, CFO
Good morning.
Edward Riley, Analyst
Yeah. So you guys really deployed an impressive amount of capital in the fourth quarter. Do you think you could speak to the state of the current pipeline and maybe give us some information on how much capital you think you may be able to put to work next year? It seems year-over-year you're continuously deploying more and more capital. Do you think that trend will continue?
David Gladstone, CEO
We're hoping so. We've, as you know, in 2019 and 2020, we had about $250 million in acquisitions each year, close to $300 million, $294 million this year. Each of the years do tend to start off slowly. I know we had more than $100 million, I think close to $200 million of acquisitions in the fourth quarter last year, close to $150 million this year. So it takes us time in the beginning of the following year to replenish the pipeline that we've depleted in the fourth quarter, and we're seeing that right now. We do have deals that we're looking at; they're in various stages. It's hard to see what we'll do for the year right now, but internally, we do set a target between $200 million to $300 million. Understanding that's a pretty wide range that depends on opportunities, but it really just depends on the opportunities that we see and which ones fit our investment criteria. Right now we have between two and five deals that are beyond the initial review stage that we're looking at. Not sure if we'll get anything close in Q1, but hopefully by early Q2, we'll have something to announce.
Edward Riley, Analyst
Okay, great. And what sources of capital do you plan on drawing to fund these new deals?
David Gladstone, CEO
Right now with the availability on our line of credit, the MetLife facility, and certain other loans that we've closed but have not drawn on yet since we don't have an immediate need for the cash. We have $115 million of dry powder that we could deploy today. That's not even leveraged, so divided by with a 6% LTV that gets us close to $300 million worth of acquisitions. We also have $35 million of unpledged properties. So that would be the first source, but anything beyond that we do have other Series C sales that are continuing to come in strong. We have availability under our common ATM that we've made very good use of. During 2021, I think we sold just under $170 million worth. That price remains very attractive for us. And, of course, additional borrowings when we do need those as well. We have plenty of sources of funding right now.
Edward Riley, Analyst
Awesome, awesome. And could you remind me of the interest rate on the line of credit?
David Gladstone, CEO
It has a floor of 2.5%, and that's where it's at right now. It's LIBOR plus a spread of 2%.
Edward Riley, Analyst
Okay, got you. And I'm curious to know what was impacting the operations of the farmer in the Midwest whose operating expenses you guys have chosen to cover in exchange for participation rents? What sort of problem was that farmer experiencing?
David Gladstone, CEO
We had one farmer that was leasing two farms from us. And this farmer was facing bankruptcy, so we were releasing him from the lease and bringing on a new tenant. One of the farms, the new tenant we were bringing on was very familiar with and competent enough to sign a long-term lease with us. The other one was relatively new to him, so he wasn't comfortable signing a long-term lease on that farm. So what we did was we executed a one-year lease, where we'll pay upfront the majority of the operating costs fixed, and in return, we will receive a large majority—80%—of gross proceeds on the farm at the end of the year. As you know, commodity prices are very strong right now. We're confident in the farmers’ ability and the yields that are possible on this farm. So we think we're likely to come out ahead, but there is of course no guarantee of that. At the end of this first lease year, hopefully this tenant will become more comfortable with the farm and we'll be able to sign up a long-term lease with him at the end of the year.
Edward Riley, Analyst
Great. And just to confirm the increase in operating expenses, I believe you guys said $560,000. Is that right?
David Gladstone, CEO
That was the commitment we made to this new tenant, yes.
Edward Riley, Analyst
Got it. Got it. Finally, could you give us an update on the SPAC, regarding any potential developments there? Congratulations on the new IPO for the asset management firm. I would love to kind of hear some of their objectives as well.
Lewis Parrish, CFO
It's hard to talk about other funds during this conversation, but quite frankly, we've got some opportunities and we're going to try to get those done soon, so that the SPAC can get funded. No guarantees; it's always hard to get those things done and much harder than we ever thought it would be getting into that business. So right now, the SPAC is cruising along, and we're hopeful that we'll have something to announce in the next 60 days. As far as the rest of the companies, they're all doing extremely well. Each of our four public companies is doing extremely well, including this one, of course.
Edward Riley, Analyst
Okay, great. I don't want to hold the line. So I'll turn it over to other analysts. Thank you, guys.
Operator, Operator
Thank you. Our next question is coming from Craig Kucera with B. Riley Securities. Please proceed with your question.
Craig Kucera, Analyst
Hey, good morning, guys. I wanted to talk first about variable rents. Clearly, there was a pretty major increase year-over-year. And this may be a tough question to answer, but if you were to take a guess, how much would you attribute this to food inflation versus maybe rolling out an increasing number of leases with a variable rent component?
David Gladstone, CEO
You’re right. That is a difficult question to answer. We can definitely say that certain crops gave us a better return than others. For example, pistachio pricing was very high for us. The yields were good on those farms. Almond pricing for conventional pricing was down a little bit this year, which was a slight offset, but the majority of our revenues for 2021 were coming from the pistachio crop. Not that I know that doesn't exactly answer your question, but I think that might be the best we can do right now.
Craig Kucera, Analyst
No, that's helpful. I appreciate the color there. And circling to kind of water issues at a few farms, whether that's in Colorado or California, which are expecting to be a little more sustainable, is that influencing how you think about underwriting and are those types of considerations increasingly coming into the market regarding pricing?
Lewis Parrish, CFO
I think everybody who buys a farm is looking at water very carefully. California goes through good times and bad, and it's sort of in the middle right now; it may get worse and it may get better. We seem to be in a good position to handle either one of those. They thought the snowpack in the mountains was going to be much bigger than it is today, but it didn't quite live up to that. We are expected to get some rain out that way. If you're in the business that we're in, you're constantly looking at the weather to determine whether the water is coming in from the ocean side—all of the things going on out there—and forecasting the weather can be tremendously difficult. And after about 20 years in the business, I've developed a stronger affinity for those trying to forecast weather because it's unpredictable. However, we've been fortunate to manage well over the years. Our guys who operate in California, especially in Oxnard and Watsonville, are all looking at the weather machines out in the ocean and trying to predict how much water is coming our way. So, it's a risk. But generally speaking, the farmers out there tend to get by, and almost all of the farms have wells that provide enough water to grow our crops. They may not always have enough, but they do today. We don't have that issue in Florida, so we appreciate Florida for that reason: the water tables are high, making it easier to ascertain what kind of water we will have there. We'll continue assessing and targeting the right farm. The advantage is we have historical data on nearly every farm; some of them date back to the 1930s when they were producing turnips, and that has changed year after year.
Craig Kucera, Analyst
Got it. Lew, changing directions. You typically book the bulk of your interest patronage in the first quarter. Can you give us a sense of how you're thinking about that here in 2022?
Lewis Parrish, CFO
So internally, we usually pencil in a similar amount to the prior year. We do believe that to be conservative because every year we do have additional loans from farm credit. So if the payout ratio—percentage—remains the same, then we should have more. But of course, these amounts are never guaranteed and could theoretically be zero for any given association, although we see this as a remote possibility. So we still await information from additional associations as well. I believe last year we recorded about $2.5 million in total patronage, of which $300,000 was a prepayment due to challenges farmers faced with COVID. So, all else being equal, the payout may not be quite as high as last year. I think around $2.2 million was a regular payout, and $300,000 was additional. But again, we will have to wait a couple of months for clarity.
Craig Kucera, Analyst
Got it. And just one more from me. I feel like a year or two ago, you were raising rents pretty aggressively; the farm economy was really doing well. This is the first quarter obviously for more of an anomaly—you had a pretty decent rent roll down subsequent to the year end, but I'd be curious about your thoughts on other leases expiring this year and the ability of farmers to pass through some of their higher operating costs such as fertilizer or other business components?
David Gladstone, CEO
Keep in mind that the roll down from the 2022 renewals so far is really just that one anomaly—one lease where we fronted the expenses. If you remove that one lease, our other leases renewed in 2022 have increased by about 5%. Not as high as the 8% to 10% we had in prior years, but only a couple of farms have renewed so far this year. On the farm from which we experienced the roll down, we expect to recoup all of that or at least a majority of it, if not all, when the crop share numbers come in at year-end. Therefore, we believe we will end up okay with that farm. I just want to emphasize that the roll down is largely a function of that one change in lease structure. We have one lease coming due over the next six months, and we expect that lease to remain flat from its current state. We have a few more leases expiring in the latter half of the year and have begun negotiations on those, but it is too early for estimates; we currently do not foresee any significant roll downs in any of those.
Craig Kucera, Analyst
Okay. Thanks. I appreciate it, guys.
Operator, Operator
Our next question is from James Villard of Ladenburg Thalmann. Please go ahead with your question.
James Villard, Analyst
Good morning, guys.
David Gladstone, CEO
Good morning.
James Villard, Analyst
Can you give us some more color on what you're seeing for capital rate outlook as you get started in 2022?
David Gladstone, CEO
I don’t think there's any big change coming in cap rates. There are some factors in the marketplace today that may change everything, but all the inflation that's going on hasn't hurt us in the past. I don't expect it to hurt us now. Cap rates should remain between 5% and 5.5% for good solid properties, and that's where we operate.
James Villard, Analyst
Got it. Yes, just one more thing. I guess as you highlighted the weather issues, did this have any impact on participating rents, and is it something that just typically happens every year that you just incorporate into your model, or is it more of a one-time issue?
David Gladstone, CEO
It's one of those variables based on weather, and it can be difficult to forecast. I don't expect any fundamental changes in terms of the way we conduct business. If there were a way to insure against weather, that would be ideal. We're ultimately at the mercy of the weather fluctuations, which are unpredictable. However, it has consistently worked out for us each year.
James Villard, Analyst
Thanks for the answers; I appreciate that. That's all for me.
David Gladstone, CEO
Okay, next question.
Operator, Operator
It appears we have no additional questions at this time. So I'd like to pass the floor back to management for closing remarks.
David Gladstone, CEO
Okay, thank you very much. I appreciate everybody calling in, and we'll see you next quarter. That's the end of this call.
Operator, Operator
Ladies and gentlemen, this concludes today's teleconference and webcast. Once again, we thank you for your participation and you may disconnect at this time.