Stratus Properties Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

strs-20200630

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-37716

Stratus Properties Inc.

(Exact name of registrant as specified in its charter)


Delaware						72-1211572
(State or other jurisdiction of						(I.R.S. Employer Identification No.)
incorporation or organization)

212 Lavaca Street, Suite 300

Austin

78701

(Address of principal executive offices)

(Zip Code)

(512) 478-5788

(Registrant’s telephone number, including area code)

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, par value $0.01 per share	STRS	The NASDAQ Stock Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☑
Non-accelerated filer	☐	Smaller reporting company	☑
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

On July 31, 2020, there were issued and outstanding 8,210,139 shares of the registrant’s common stock, par value $0.01 per share.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

STRATUS PROPERTIES INC.

CONSOLIDATED BALANCE SHEETS (Unaudited)

(In Thousands)


	June 30, 2020		December 31, 2019
ASSETS
Cash and cash equivalents	$	16,138	$	19,173
Restricted cash	18,734		19,418
Real estate held for sale	6,960		14,872
Real estate under development	94,351		95,026
Land available for development	56,574		45,539
Real estate held for investment, net	324,341		329,103

Lease right-of-use assets	11,067		11,378
Deferred tax assets	9,580		12,311
Other assets	13,960		14,548

Total assets	$	551,705	$	561,368

LIABILITIES AND EQUITY
Liabilities:
Accounts payable	$	10,346	$	16,053

Accrued liabilities, including taxes	8,861		11,580
Debt	363,849		365,749
Lease liabilities	12,894		12,636
Deferred gain	7,030		7,654
Other liabilities	12,738		13,614

Total liabilities	415,718		427,286

Commitments and contingencies

Equity:
Stockholders’ equity:

Common stock	93		93
Capital in excess of par value of common stock	186,422		186,082
Accumulated deficit	(40,503)		(43,567)

Common stock held in treasury	(21,600)		(21,509)
Total stockholders’ equity	124,412		121,099
Noncontrolling interests in subsidiaries	11,575		12,983
Total equity	135,987		134,082
Total liabilities and equity	$	551,705	$	561,368

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

Table of Contents

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

(In Thousands, Except Per Share Amounts)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Revenues:
Real estate operations	$	1,893	$	4,129	$	14,229	$	7,077
Leasing operations	5,718		4,413		11,450		8,042
Hotel	1,030		8,962		6,941		17,287
Entertainment	290		6,220		4,445		11,016
Total revenues	8,931		23,724		37,065		43,422
Cost of sales:
Real estate operations	1,921		3,795		12,176		3,841
Leasing operations	4,070		2,447		7,152		4,586
Hotel	1,766		6,831		7,665		13,506
Entertainment	1,208		4,441		4,306		7,920
Depreciation	3,377		2,703		7,010		5,333
Total cost of sales	12,342		20,217		38,309		35,186
General and administrative expenses	3,103		2,919		5,918		6,118


Income from forfeited earnest money	(15,000)		—		(15,000)		—
Loss (gain) on sale of assets	—		161		—		(1,952)
Total	445		23,297		29,227		39,352
Operating income	8,486		427		7,838		4,070
Interest expense, net	(3,666)		(2,911)		(7,581)		(5,483)

Gain (loss) on interest rate derivative instruments	42		(123)		(79)		(182)
Loss on early extinguishment of debt	—		—		—		(16)
Other income, net	89		12		108		311
Income (loss) before income taxes and equity in unconsolidated affiliates' loss	4,951		(2,595)		286		(1,300)
Equity in unconsolidated affiliates' loss	—		(13)		—		(13)
(Provision for) benefit from income taxes	(1,148)		218		1,370		(215)


Net income (loss) and total comprehensive income (loss)	3,803		(2,390)		1,656		(1,528)
Total comprehensive loss attributable to noncontrolling interests in subsidiaries	331		1		1,408		1
Net income (loss) and total comprehensive income (loss) attributable to common stockholders	$	4,134	$	(2,389)	$	3,064	$	(1,527)

Basic and diluted net income (loss) per share attributable to common stockholders	$	0.50	$	(0.29)	$	0.37	$	(0.19)








Weighted-average common shares outstanding:
Basic	8,210		8,177		8,205		8,172
Diluted	8,228		8,177		8,230		8,172

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

Table of Contents

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(In Thousands)


	Six Months Ended
	June 30,
	2020		2019
Cash flow from operating activities:
Net income (loss)	$	1,656	$	(1,528)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation	7,010		5,333
Cost of real estate sold	8,732		4,324
Gain on sale of assets	—		(1,952)
Loss on interest rate derivative instruments	79		182
Loss on early extinguishment of debt	—		16
Amortization of debt issuance costs and stock-based compensation	1,095		546


Equity in unconsolidated affiliates' loss	—		13

Increase in deposits	46		185
Deferred income taxes	2,731		(38)
Purchases and development of real estate properties	(8,655)		(5,756)

Municipal utility district reimbursements applied to real estate under development	—		920
Decrease (increase) in other assets	1,215		(1,636)
Decrease in accounts payable, accrued liabilities and other	(8,464)		(2,187)
Net cash provided by (used in) operating activities	5,445		(1,578)

Cash flow from investing activities:
Capital expenditures	(4,397)		(44,990)
Proceeds from sale of assets	—		3,170
Payments on master lease obligations	(691)		(766)
Purchase of noncontrolling interest in consolidated subsidiary	—		(4,589)
Other, net	—		(4)
Net cash used in investing activities	(5,088)		(47,179)

Cash flow from financing activities:
Borrowings from credit facility	12,800		14,086
Payments on credit facility	(21,304)		(15,648)
Borrowings from project loans	11,926		51,006
Payments on project and term loans	(6,976)		(5,619)

Cash dividend paid for stock-based awards	(8)		(17)
Stock-based awards net payments	(91)		(100)


Financing costs	(423)		(231)
Net cash (used in) provided by financing activities	(4,076)		43,477
Net decrease in cash, cash equivalents and restricted cash	(3,719)		(5,280)

Cash, cash equivalents and restricted cash at beginning of year	38,591		38,919
Cash, cash equivalents and restricted cash at end of period	$	34,872	$	33,639

The accompanying Notes to Consolidated Financial Statements (Unaudited), which include information regarding noncash transactions, are an integral part of these consolidated financial statements.

Table of Contents

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

(In Thousands)

THREE MONTHS ENDED JUNE 30



	Stockholders’ Equity
									Common Stock Held in Treasury					Total Stockholders' Equity
	Common Stock					Capital in Excess of Par Value		Accum-ulated Deficit											Noncontrolling Interests in Subsidiaries
	Number of Shares	At Par Value								Number of Shares		At Cost						Total Equity
Balance at March 31, 2020	9,347	$	93	$	186,244	$	(44,637)		1,137	$	(21,600)	$	120,100	$	11,906	$	132,006



Stock-based compensation	—	—		178		—			—	—		178		—		178





Total comprehensive income (loss)	—	—		—		4,134			—	—		4,134		(331)		3,803
Balance at June 30, 2020	9,347	$	93	$	186,422	$	(40,503)		1,137	$	(21,600)	$	124,412	$	11,575	$	135,987








Balance at March 31, 2019	9,305	$	93	$	186,424	$	(40,241)	1,128	$	(21,360)	$	124,916	$	18,076	$	142,992




Stock-based compensation	—	—		(90)		—		—	—		(90)		—		(90)




Total comprehensive loss	—	—		—		(2,389)		—	—		(2,389)		(1)		(2,390)
Balance at June 30, 2019	9,305	$	93	$	186,334	$	(42,630)	1,128	$	(21,360)	$	122,437	$	18,075	$	140,512

Table of Contents

STRATUS PROPERTIES INC.

CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

(In Thousands)

SIX MONTHS ENDED JUNE 30


	Stockholders’ Equity
									Common Stock Held in Treasury					Total Stockholders' Equity
	Common Stock					Capital in Excess of Par Value		Accum-ulated Deficit											Noncontrolling Interests in Subsidiaries
	Number of Shares	At Par Value								Number of Shares		At Cost						Total Equity
Balance at December 31, 2019	9,330	$	93	$	186,082	$	(43,567)		1,133	$	(21,509)	$	121,099	$	12,983	$	134,082


Exercised and vested stock-based awards	17	—		—		—			—	—		—		—		—
Stock-based compensation	—	—		340		—			—	—		340		—		340


Tender of shares for stock-based awards	—	—		—		—			4	(91)		(91)		—		(91)


Total comprehensive income (loss)	—	—		—		3,064			—	—		3,064		(1,408)		1,656
Balance at June 30, 2020	9,347	$	93	$	186,422	$	(40,503)		1,137	$	(21,600)	$	124,412	$	11,575	$	135,987






Balance at December 31, 2018	9,288	$	93	$	186,256	$	(41,103)	1,124	$	(21,260)	$	123,986	$	22,665	$	146,651




Exercised and vested stock-based awards	17	—		—		—		—	—		—		—		—

Stock-based compensation	—	—		78		—		—	—		78		—		78

Tender of shares for stock-based awards	—	—		—		—		4	(100)		(100)		—		(100)
Purchase of noncontrolling interest in consolidated subsidiary	—	—		—		—		—	—		—		(4,589)		(4,589)

Total comprehensive loss	—	—		—		(1,527)		—	—		(1,527)		(1)		(1,528)
Balance at June 30, 2019	9,305	$	93	$	186,334	$	(42,630)	1,128	$	(21,360)	$	122,437	$	18,075	$	140,512

The accompanying Notes to Consolidated Financial Statements (Unaudited) are an integral part of these consolidated financial statements.

Table of Contents

STRATUS PROPERTIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1.GENERAL

The unaudited consolidated financial statements, and the accompanying notes, are prepared in accordance with generally accepted accounting principles in the United States (GAAP) and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2019, included in Stratus Properties Inc.’s (Stratus) Annual Report on Form 10-K for the year ended December 31, 2019 (Stratus 2019 Form 10-K) filed with the United States (U.S.) Securities and Exchange Commission. The information furnished herein reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods reported and consist of normal recurring adjustments.

Operating results for the second quarter of 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. In particular, the impact of the COVID-19 pandemic intensified late in the first quarter of 2020 and has continued during and subsequent to the second quarter of 2020. As a result, this interim period, as well as future interim periods in 2020, will not be comparable to past performance or indicative of future performance.

The preparation of Stratus’ consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions, including those related to the potential impacts arising from the COVID-19 pandemic and related government actions, that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ materially from those estimates. As the impact of the COVID-19 pandemic continues to evolve, and the extent of its impact cannot be determined with certainty, estimates and assumptions about future events and their effects require increased judgement. Stratus’ assessment of the future magnitude and duration of the COVID-19 pandemic and related economic disruption, as well as other factors, could result in material changes to the estimates used in and material impacts to Stratus’ consolidated financial statements in future reporting periods.

Terminated Block 21 Sale. Block 21 is Stratus’ wholly owned mixed-use real estate development and entertainment business in downtown Austin, Texas that contains the 251-room W Austin Hotel and is home to Austin City Limits Live at the Moody Theater, a 2,750-seat entertainment venue that serves as the location for the filming of Austin City Limits, the longest running music series in American television history. Block 21 also includes Class A office space, retail space and the 3TEN ACL Live entertainment venue and business.

On December 9, 2019, Stratus entered into definitive agreements to sell Block 21 to Ryman Hospitality Properties, Inc. (Ryman) for $275 million. Ryman deposited $15.0 million in earnest money to secure its performance under the agreements governing the sales. As the proposed sale represented a strategic shift for Stratus, the assets and liabilities of Block 21 were classified as held for sale - discontinued operations in the consolidated balance sheet of Stratus' 2019 Form 10-K. On May 21, 2020, Ryman delivered a termination letter, which was agreed to and accepted by Stratus, terminating the agreements to sell Block 21 and authorizing the release of Ryman's $15.0 million in earnest money to Stratus. During the second quarter of 2020, Stratus recorded the $15.0 million as operating income, used $13.8 million of the $15.0 million earnest money to pay down its Comerica Bank revolving credit facility and used the remaining $1.2 million for Block 21 debt service and required monthly reserves. As a result of the termination of the agreements to sell Block 21, Stratus has concluded that such assets and liabilities no longer qualified as held for sale. The carrying amounts as of December 31, 2019, of Block 21’s major classes of assets and liabilities, which were previously classified as held for sale - discontinued operations in the consolidated balance sheet of Stratus' 2019 Form 10-K follow (in thousands):

Price	29.05	EPS	0
Shares	8	P/E	276
MCap	238	P/FCF	-60
Net Debt	-50	EBIT	1
TEV	188	TEV/EBIT	278
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-08-10
10-Q	2020-03-31	Filed 2020-06-25
10-K	2019-12-31	Filed 2020-03-16
10-Q	2019-09-30	Filed 2019-11-12
10-Q	2019-06-30	Filed 2019-08-09
10-Q	2019-03-31	Filed 2019-05-10
10-K	2018-12-31	Filed 2019-03-18
10-Q	2018-09-30	Filed 2018-11-09
10-Q	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-10
10-K	2017-12-31	Filed 2018-03-16
10-Q	2017-09-30	Filed 2017-11-09
10-Q	2017-06-30	Filed 2017-08-09
10-Q	2017-03-31	Filed 2017-05-10
10-K	2016-12-31	Filed 2017-03-16
10-Q	2016-09-30	Filed 2016-11-09
10-Q	2016-06-30	Filed 2016-08-09
10-Q	2016-03-31	Filed 2016-05-10
10-K	2015-12-31	Filed 2016-03-15
10-Q	2015-09-30	Filed 2015-11-09
10-Q	2015-06-30	Filed 2015-08-10
10-Q	2015-03-31	Filed 2015-05-08
10-K	2014-12-31	Filed 2015-03-16
10-Q	2014-09-30	Filed 2014-11-13
10-Q	2014-06-30	Filed 2014-08-14
10-Q	2014-03-31	Filed 2014-05-15
10-K	2013-12-31	Filed 2014-03-31
10-Q	2013-09-30	Filed 2013-11-14
10-Q	2013-06-30	Filed 2013-08-14
10-Q	2013-03-31	Filed 2013-05-15
10-K	2012-12-31	Filed 2013-03-29
10-Q	2012-09-30	Filed 2012-11-14
10-Q	2012-06-30	Filed 2012-08-14
10-Q	2012-03-31	Filed 2012-05-15
10-K	2011-12-31	Filed 2012-03-30
10-Q	2011-09-30	Filed 2011-11-14
10-Q	2011-06-30	Filed 2011-08-15
10-Q	2011-03-31	Filed 2011-05-16
10-K	2010-12-31	Filed 2011-03-31
10-Q	2010-09-30	Filed 2010-11-12
10-Q	2010-06-30	Filed 2010-08-16
10-Q	2010-03-29	Filed 2010-05-17
10-K	2009-12-31	Filed 2010-03-31

8-K	2020-08-10	Earnings, Exhibits
8-K	2020-07-15	Regulation FD, Exhibits
8-K	2020-06-25
8-K	2020-06-12
8-K	2020-06-03
8-K	2020-05-21
8-K	2020-05-11
8-K	2020-05-07
8-K	2020-04-13
8-K	2020-03-25
8-K	2020-03-16
8-K	2020-02-19
8-K	2019-12-09
8-K	2019-12-09
8-K	2019-11-12
8-K	2019-10-16
8-K	2019-09-30
8-K	2019-08-09
8-K	2019-07-17
8-K	2019-05-24
8-K	2019-05-10
8-K	2019-05-02
8-K	2019-04-17
8-K	2019-03-26
8-K	2019-03-18
8-K	2019-02-20
8-K	2018-12-06
8-K	2018-11-09
8-K	2018-10-17
8-K	2018-08-09
8-K	2018-07-18
8-K	2018-07-11
8-K	2018-06-29
8-K	2018-06-18
8-K	2018-05-10
8-K	2018-05-03
8-K	2018-04-18
8-K	2018-04-16
8-K	2018-03-16
8-K	2018-02-22

EX-31.1	a2q20exhibit311.htm
EX-31.2	a2q20exhibit312.htm
EX-32.1	a2q20exhibit321.htm
EX-32.2	a2q20exhibit322.htm


STRATUS PROPERTIES INC.
TABLE OF CONTENTS


			Page

Part I. Financial Information			2

Item 1. Financial Statements			2

Consolidated Balance Sheets (Unaudited)			2

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)			3

Consolidated Statements of Cash Flows (Unaudited)			4

Consolidated Statements of Equity (Unaudited)			5

Notes to Consolidated Financial Statements (Unaudited)			7

Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations			16

Item 3. Quantitative and Qualitative Disclosures About Market Risk			29

Item 4. Controls and Procedures			30

Part II. Other Information			30

Item 1A. Risk Factors			30

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			31



Item 6. Exhibits			32

Signature			S-1

STRS 10Q Quarterly Report

Stratus Properties Earnings 2020-06-30