10-Q 1 trc-20230930.htm 10-Q trc-20230930
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In determining the classification of cash inflows and outflows related to water asset activity, the Company’s practices are supported by Accounting Standards Codification (“ASC”) 230-10-45-22, which provides that “Certain cash receipts and payments have aspects of more than one class of cash flows…. If so, the appropriate classification shall depend on the activity that is likely to be the predominant source of cash flows for the item.” Also, at the 2006 American Institution of Certified Public Accountants Conference on Current SEC and PCAOB Developments, the Securities and Exchange Commission, or SEC staff discussed that an entity should be consistent in how it classifies cash outflows and inflows related to an asset’s purchase and sale and noted that when cash flow classification is unclear, registrants must use judgment and analysis that considers the nature of the activity and the predominant source of cash flow for these items.

Given the nature of our water assets and the aforementioned authoritative guidance, the Company estimates the appropriate classification of water assets purchased based on the timing of the sale of the water. Water purchased in prior periods that was classified as investing was sold for $1.3 million in 2023, this cash inflow is appropriately classified in the Company’s investing activities. The profit of $0.5 million related to the water purchased in prior periods is appropriately being deducted from operating activities for the current period. The Company has and will continue to apply this methodology to water asset transactions that meet this fact pattern.
In determining the classification of cash inflows and outflows related to land development costs, the Company’s practices are supported by Accounting Standards Codification (“ASC”) 230-10-45-22, which provides that “Certain cash receipts and payments have aspects of more than one class of cash flows…. If so, the appropriate classification shall depend on the activity that is likely to be the predominant source of cash flows for the item.” Also, at the 2006 American Institution of Certified Public Accountants Conference on Current SEC and PCAOB Developments, the Securities and Exchange Commission, or SEC staff discussed that an entity should be consistent in how it classifies cash outflows and inflows related to an asset’s purchase and sale and noted that when cash flow classification is unclear, registrants must use judgment and analysis that considers the nature of the activity and the predominant source of cash flow for these items.

Given the nature of our land development costs and the aforementioned authoritative guidance, the Company estimates the appropriate classification of land development costs based on the timing of the sale of land. Land development costs incurred during prior periods that were classified as investing were sold for $26.7 million in gross proceeds in 2022, this cash inflow is appropriately classified in the Company’s investing activities. The profit of $18.4 million related to land development costs incurred in prior periods is appropriately being deducted from operating activities for the first quarter of 2022. The Company has and will continue to apply this methodology to land sale transactions that meet this fact pattern.
The Company had an interest rate swap agreement with Wells Fargo Bank, N.A. to reduce its exposure to fluctuations in the floating interest rate tied to the London Inter-Bank Offered Rate, or LIBOR, under a term note with Wells Fargo. The hedging relationship qualified as an effective cash flow hedge at the initial assessment, based upon a regression analysis, and is recorded at fair value. On June 27, 2022, the Company terminated the interest rate swap agreement with Wells Fargo and received a $1,123,200 cash termination fee from Wells Fargo. See Interest rate swap liability (Note 10) for further discussion.
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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 September 30, 2023
OR
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: 1-07183
brandnoguides.jpg
TEJON RANCH CO.
(Exact name of registrant as specified in its charter) 

Delaware
(State or other jurisdiction of incorporation or organization)
77-0196136
(I.R.S. Employer Identification No.)
P.O. Box 1000, Tejon Ranch, California 93243
(Address of principal executive offices) (Zip Code)
(661) 248-3000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.50 par valueTRCNew York Stock Exchange
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 filerAccelerated filer
Non-accelerated filerSmaller 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
The number of the Company’s outstanding shares of Common Stock on October 31, 2023 was 26,734,193.



TEJON RANCH CO. AND SUBSIDIARIES
TABLE OF CONTENTS
  Page
PART I.FINANCIAL INFORMATION
Item 1.Financial Statements
Unaudited Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2023 and 2022
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
2


Glossary
The following initialisms or acronyms may be used in this document and shall be defined as set forth below:
AKIPAdvance Kern Incentive Program
ASCAccounting Standards Codification
ASUAccounting Standards Update
AVEKAntelope Valley East Kern Water Agency
CFLCentennial Founders, LLC
CBDCenter for Biological Diversity
CEQACalifornia Environmental Quality Act
CFDCommunity Facilities District
CNPSCalifornia Native Plant Society
EBITDAEarnings Before Interest Tax Depreciation and Amortization
EIREnvironmental Impact Report
FTZForeign Trade Zone
GAAPGenerally Accepted Accounting Principles
GHGGreen House Gas
LIBORLondon Interbank Offered Rate
MVMountain Village at Tejon Ranch
NOINet Operating Income
PEFPastoria Energy Facility, LLC
RWATejon Ranch Conservation and Land Use Agreement
SECSecurities and Exchange Commission
SOFRSecured Overnight Financing Rate
SWPState Water Project
TCWDTejon-Castac Water District
TRCCTejon Ranch Commerce Center
TRPFFATejon Ranch Public Facilities Financing Authority
WRMWSDWheeler Ridge Maricopa Water Storage District
3


PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TEJON RANCH CO. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Revenues:
Real estate - commercial/industrial$3,397 $22,352 $8,706 $32,163 
Mineral resources3,118 3,139 11,630 19,238 
Farming2,642 4,776 4,852 7,352 
Ranch operations1,052 1,208 3,384 3,011 
Total revenues10,209 31,475 28,572 61,764 
Costs and Expenses:
Real estate - commercial/industrial2,137 6,845 5,517 11,403 
Real estate - resort/residential367 372 1,079 1,218 
Mineral resources2,000 1,745 6,991 11,347 
Farming2,157 8,752 5,644 13,976 
Ranch operations1,196 1,143 3,864 3,708 
Corporate expenses2,315 1,630 6,824 6,230 
Total expenses10,172 20,487 29,919 47,882 
Operating income (loss)37 10,988 (1,347)13,882 
Other Income:
Investment income700 204 1,775 300 
Other (loss) income, net(30)211 272 1,038 
Total other income670 415 2,047 1,338 
Income from operations before equity in earnings of unconsolidated joint ventures707 11,403 700 15,220 
Equity in earnings of unconsolidated joint ventures, net1,161 1,991 4,616 4,867 
Income before income tax expense 1,868 13,394 5,316 20,087 
Income tax expense2,215 3,221 3,619 6,262 
Net (loss) income(347)10,173 1,697 13,825 
Net (loss) income attributable to non-controlling interest(6)(11)(3)1 
Net (loss) income attributable to common stockholders$(341)$10,184 $1,700 $13,824 
Net (loss) income per share attributable to common stockholders, basic$(0.01)$0.38 $0.06 $0.52 
Net (loss) income per share attributable to common stockholders, diluted$(0.01)$0.38 $0.06 $0.52 

See accompanying notes.

4


TEJON RANCH CO. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

 Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Net (loss) income$(347)$10,173 $1,697 $13,825 
Other comprehensive income:
Unrealized gain (loss) on available-for-sale securities52 (101)129 (278)
Unrealized gain on interest rate swap 1,734 1,608 2,019 5,819 
Other comprehensive income before taxes1,786 1,507 2,148 5,541 
Provision for income taxes related to other comprehensive income items(500)(422)(601)(1,553)
Other comprehensive income 1,286 1,085 1,547 3,988 
Comprehensive income939 11,258 3,244 17,813 
Comprehensive (loss) income attributable to non-controlling interests(6)(11)(3)1 
Comprehensive income attributable to common stockholders$945 $11,269 $3,247 $17,812 
See accompanying notes.
5


TEJON RANCH CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

September 30, 2023December 31, 2022
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents$43,149 $39,119 
Marketable securities - available-for-sale29,456 33,444 
Accounts receivable3,980 4,453 
Inventories8,925 3,369 
Prepaid expenses and other current assets3,520 2,660 
Total current assets89,030 83,045 
Real estate and improvements - held for lease, net16,780 16,940 
Real estate development (includes $117,518 at September 30, 2023 and $115,221 at December 31, 2022, attributable to CFL, Note 15)
330,566 321,293 
Property and equipment, net54,941 52,980 
Investments in unconsolidated joint ventures31,345 41,891 
Net investment in water assets52,507 47,045 
Other assets5,104 3,597 
TOTAL ASSETS$580,273 $566,791 
LIABILITIES AND EQUITY
Current Liabilities:
Trade accounts payable$6,393 $5,117 
Accrued liabilities and other4,504 3,602 
Deferred income2,326 1,531 
Income taxes payable3,088  
Current maturities of long-term debt1,844 1,779 
Total current liabilities18,155 12,029 
Long-term debt, less current portion46,793 48,161 
Long-term deferred gains11,447 11,447 
Deferred tax liability7,676 7,180 
Other liabilities15,212 10,380 
Total liabilities99,283 89,197 
Commitments and contingencies
Equity:
Tejon Ranch Co. Stockholders’ Equity
Common stock, $0.50 par value per share:
Authorized shares - 50,000,000
Issued and outstanding shares - 26,726,464 at September 30, 2023 and 26,541,553 at December 31, 2022
13,363 13,271 
Additional paid-in capital345,404 345,344 
Accumulated other comprehensive loss(481)(2,028)
Retained earnings107,343 105,643 
Total Tejon Ranch Co. Stockholders’ Equity465,629 462,230 
Non-controlling interest15,361 15,364 
Total equity480,990 477,594 
TOTAL LIABILITIES AND EQUITY$580,273 $566,791 
See accompanying notes.
6


TEJON RANCH CO. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine Months Ended September 30,
 20232022
Operating Activities
Net income$1,697 $13,825 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization3,003 3,342 
Amortization of (discount) premium of marketable securities(442)116 
Equity in earnings of unconsolidated joint ventures, net(4,616)(4,867)
Non-cash retirement plan expense200 81 
Profit from water sales1
(490)(1,889)
Profit from land sales2
 (18,372)
Loss (gain) on sale of property plant and equipment59 (1,140)
Deferred income taxes (315)
Stock compensation expense 2,369 2,088 
Excess tax (benefit) loss from stock-based compensation(105)3 
Loan fee write-off 85
Distribution of earnings from unconsolidated joint ventures13,176 7,336 
Changes in operating assets and liabilities:
Receivables, inventories, prepaids and other assets, net(5,231)851 
Current liabilities5,130 724 
Net cash provided by operating activities14,750 1,868 
Investing Activities
Maturities and sales of marketable securities91,831 27,961 
Funds invested in marketable securities(87,272)(48,614)
Real estate and equipment expenditures(13,513)(17,687)
Investment in unconsolidated joint ventures(3,750)(175)
Distribution of equity from unconsolidated joint ventures10,645 3,968 
Proceeds from water sales1
1,324 5,202 
Investments in water assets(6,070)(988)
Net proceeds from land sales2
 24,950 
Net cash used in investing activities(6,805)(5,383)
Financing Activities
Borrowings of long-term debt 49,080 
Repayments of long-term debt(1,321)(51,272)
Deferred financing costs(181)
Interest rate swap settlement3
 1,123 
Taxes on vested stock grants(2,594)(1,122)
Net cash used in financing activities(3,915)(2,372)
Increase (decrease) in cash and cash equivalents4,030 (5,887)
Cash, cash equivalents, and restricted cash at beginning of period39,619 37,398 
Cash, cash equivalents, and restricted cash at end of period$43,649 $31,511 
7


Reconciliation to amounts on consolidated balance sheets:
Cash and cash equivalents$43,149 $30,308 
Restricted cash (Shown in Other Assets)500 1,203 
Total cash, cash equivalents, and restricted cash$43,649 $31,511 
Supplemental cash flow information
Non-cash investing activities
Accrued capital expenditures included in current liabilities$742 $841 
Accrued long-term water assets included in current liabilities$1,248 $374 
1In determining the classification of cash inflows and outflows related to water asset activity, the Company’s practices are supported by ASC 230-10-45-22, which provides that “Certain cash receipts and payments have aspects of more than one class of cash flows…. If so, the appropriate classification shall depend on the activity that is likely to be the predominant source of cash flows for the item.” Also, at the 2006 American Institute of Certified Public Accountants Conference on Current SEC and PCAOB Developments, the SEC staff discussed that an entity should be consistent in how it classifies cash outflows and inflows related to an asset’s purchase and sale and noted that when cash flow classification is unclear, registrants must use judgment and analysis that considers the nature of the activity and the predominant source of cash flow for these items.

Given the nature of our water assets and the aforementioned authoritative guidance, the Company estimates the appropriate classification of water assets purchased based on the timing of the sale of the water. Water purchased in prior periods that was classified as investing was sold for $1.3 million in 2023, this cash inflow is appropriately classified in the Company’s investing activities. The profit of $0.5 million related to the water purchased in prior periods is appropriately being deducted from operating activities for the current period. The Company has and will continue to apply this methodology to water asset transactions that meet this fact pattern.
2In determining the classification of cash inflows and outflows related to land development costs, the Company’s practices are supported by ASC 230-10-45-22, which provides that “Certain cash receipts and payments have aspects of more than one class of cash flows…. If so, the appropriate classification shall depend on the activity that is likely to be the predominant source of cash flows for the item.” Also, at the 2006 American Institute of Certified Public Accountants Conference on Current SEC and PCAOB Developments, the SEC staff discussed that an entity should be consistent in how it classifies cash outflows and inflows related to an asset’s purchase and sale and noted that when cash flow classification is unclear, registrants must use judgment and analysis that considers the nature of the activity and the predominant source of cash flow for these items.

Given the nature of our land development costs and the aforementioned authoritative guidance, the Company estimates the appropriate classification of land development costs based on the timing of the sale of land. Land development costs incurred during prior periods that were classified as investing were sold for $26.7 million in gross proceeds in 2022, this cash inflow is appropriately classified in the Company’s investing activities. The profit of $18.4 million related to land development costs incurred in prior periods is appropriately being deducted from operating activities for the first quarter of 2022. The Company has applied, and will continue to apply, this methodology to land sale transactions that meet this fact pattern.
3The Company had an interest rate swap agreement with Wells Fargo Bank, N.A. to reduce its exposure to fluctuations in the floating interest rate tied to the London Inter-Bank Offered Rate, or LIBOR, under a term note with Wells Fargo. The hedging relationship qualified as an effective cash flow hedge at the initial assessment, based upon a regression analysis, and is recorded at fair value. On June 27, 2022, the Company terminated the interest rate swap agreement with Wells Fargo and received a $1,123,200 cash termination fee from Wells Fargo. See Interest rate swap liability (Note 10) for further discussion.
See accompanying notes.
8


TEJON RANCH CO. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AND NON-CONTROLLING INTERESTS
(In thousands, except shares outstanding)

Common Stock Shares OutstandingCommon StockAdditional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeRetained EarningsTotal Stockholders' EquityNon-controlling InterestTotal Equity
Balance, June 30, 202326,718,773 $13,359 $344,434 $(1,767)$107,684 $463,710 $15,367 $479,077 
Net loss— — — — (341)(341)(6)(347)
Other comprehensive income— — — 1,286 1,286 — 1,286 
Restricted stock issuance7,691 4 (4)— — — —  
Stock compensation— — 974 — — 974 — 974 
Shares withheld for taxes and tax benefit of vested shares— — — — — — —  
Balance, September 30, 202326,726,464 $13,363 $345,404 $(481)$107,343 $465,629 $15,361 $480,990 
Balance, June 30, 202226,484,947 $13,242 $346,137 $(3,919)$93,475 $448,935 $15,374 $464,309 
Net income (loss)— — — — 10,184 10,184 (11)10,173 
Other comprehensive income— — — 1,085 1,085 — 1,085 
Restricted stock issuance6,823 4 (3)— — 1 — 1 
Stock compensation— — (39)— — (39)— (39)
Shares withheld for taxes and tax benefit of vested shares— — — — — — —  
Balance, September 30, 202226,491,770 $13,246 $346,095 $(2,834)$103,659 $460,166 $15,363 $475,529 

See accompanying notes.
9


Common Stock Shares OutstandingCommon StockAdditional Paid-In CapitalAccumulated Other Comprehensive (Loss) IncomeRetained EarningsTotal Stockholders' EquityNon-controlling InterestTotal Equity
Balance, December 31, 202226,541,553 $13,271 $345,344 $(2,028)$105,643 $462,230 $15,364 $477,594 
Net income— — — — 1,700 1,700 (3)1,697 
Other comprehensive income— — — 1,547 — 1,547 — 1,547 
Restricted stock issuance363,756 181 (183)— — (2)— (2)
Stock compensation— — 2,748 — — 2,748 — 2,748 
Shares withheld for taxes and tax benefit of vested shares(178,845)(89)(2,505)— — (2,594)— (2,594)
Balance, September 30, 202326,726,464 $13,363 $345,404 $(481)$107,343 $465,629 $15,361 $480,990 
Balance, December 31, 202126,400,921 $13,200 $344,936 $(6,822)$89,835 $441,149 $15,362 $456,511 
Net income— — — — 13,824 13,824 1 13,825 
Other comprehensive income— — — 3,988 — 3,988 — 3,988 
Restricted stock issuance154,709 77 (77)— — — —  
Stock compensation— — 2,327 — — 2,327 — 2,327 
Shares withheld for taxes and tax benefit of vested shares(63,860)(31)(1,091)— — (1,122)— (1,122)
Balance, September 30, 202226,491,770 $13,246 $346,095 $(2,834)$103,659 $460,166 $15,363 $475,529 
See accompanying notes.
10



TEJON RANCH CO. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION
The summarized information of Tejon Ranch Co. and its subsidiaries (the Company or Tejon), provided pursuant to Part I, Item 1 of Form 10-Q, is unaudited and reflects all adjustments which are, in the opinion of the Company’s management, necessary for a fair statement of the results for the interim period. All such adjustments are of a normal, recurring nature. The Company has evaluated subsequent events through the date of issuance of its consolidated financial statements.
The periods ended September 30, 2023 and 2022 include the consolidation of CFL’s statement of operations within the resort/residential real estate development segment, statements of changes in equity and non-controlling interests, and statements of cash flows. The Company’s September 30, 2023 and December 31, 2022 balance sheets are presented on a consolidated basis, including the consolidation of CFL.
The Company has identified five reportable segments: commercial/industrial real estate development, resort/residential real estate development, mineral resources, farming, and ranch operations. Information for the Company’s reportable segments is presented in its Consolidated Statements of Operations. The Company’s reportable segments follow the same accounting policies used for the Company’s consolidated financial statements. The Company uses segment profit or loss and equity in earnings of unconsolidated joint ventures as the primary measures of profitability to evaluate operating performance and to allocate capital resources.
The results of the period reported herein are not indicative of the results to be expected for the full year due to the seasonal nature of the Company’s agricultural activities, water activities, timing of real estate sales and leasing activities. Historically, the Company’s largest percentages of farming revenues are recognized during the third and fourth quarters of the fiscal year.
For further information and a summary of significant accounting policies, refer to the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Financial Instruments
Certain financial instruments are carried on the consolidated balance sheet at cost or amortized cost basis, which approximates fair value due to their short-term and highly liquid nature.  These instruments include cash and cash equivalents, restricted cash, time deposits, accounts receivable, security deposits held for customers, accounts payable, and other accrued liabilities. The fair value of the notes payable also approximates their carrying value, as the interest rates are primarily variable and approximate prevailing market interest rates for similar debt arrangements.
Restricted Cash
Restricted cash is included in Prepaid expenses and other current assets within the Consolidated Balance Sheets and primarily relates to funds held in escrow. The Company had $500,000 of restricted cash as of September 30, 2023.
Recent Accounting Pronouncements
Business Combinations - Joint Venture Formations
In August 2023, the Financial Accounting Standards Board, or FASB, issued ASU No. 2023-05, "Business Combinations - Joint Venture Formations." This ASU addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statements. The pronouncement requires a joint venture to initially measure contributions at fair value upon formation, which is more relevant than the carrying amounts of the contributed net assets and would reduce equity method basis differences. The amendments are effective prospectively for all joint venture formations with a formation date on or after January 1, 2025. This pronouncement is not expected to have a material effect on our consolidated financial statements.
11


2.    EQUITY
Earnings Per Share (EPS)
Basic net income or loss per share attributable to common stockholders is based upon the weighted-average number of shares of common stock outstanding during the year. Diluted net income or loss per share attributable to common stockholders is based upon the weighted-average number of shares of common stock outstanding and the weighted-average number of shares outstanding assuming the issuance of common stock upon exercise of stock options, warrants to purchase common stock, and the vesting of restricted stock grants per ASC Topic 260, “Earnings Per Share.”
Three Months Ended September 30,Nine Months Ended September 30,
 2023202220232022
Weighted-average number of shares outstanding:
Common stock26,725,628 26,491,251 26,695,714 26,468,099 
Common stock equivalents72,435 47,507 76,668 164,364 
Diluted shares outstanding26,798,063 26,538,758 26,772,382 26,632,463 
3.     MARKETABLE SECURITIES
ASC Topic 320, “Investments – Debt and Equity Securities,” requires that an enterprise classify all debt securities as either held-to-maturity, trading or available-for-sale. The Company classifies its securities as available-for-sale and therefore is required to adjust securities to fair value at each reporting date. All costs and both realized and unrealized gains and losses on securities are determined on a specific identification basis. The following is a summary of available-for-sale securities at:
($ in thousands) September 30, 2023December 31, 2022
Marketable Securities:Fair Value
Hierarchy
CostFair ValueCostFair Value
U.S. Treasury and agency notes
with unrealized losses for less than 12 months$16,873 $16,827 $13,916 $13,832 
with unrealized losses for more than 12 months999 994 500 499 
with unrealized gains  1,250 1,251 
Total U.S. Treasury and agency notesLevel 217,872 17,821 15,666 15,582 
Corporate notes
with unrealized losses for less than 12 months11,262 11,235 17,236 17,112 
with unrealized losses for more than 12 months401 400 251 250 
with unrealized gains  499 500 
Total Corporate notesLevel 211,663 11,635 17,986 17,862 
$29,535 $29,456 $33,652 $33,444 
ASC Topic 326, "Financial Instruments - Credit Losses," requires the Company to use an allowance approach when recognizing credit loss for available-for-sale debt securities, measured as the difference between the security's amortized cost basis and the amount expected to be collected over the security's lifetime. Under this approach, at each reporting date, the Company records impairment related to credit losses through earnings offset with an allowance for credit losses, or ACL. At September 30, 2023, the Company has not recorded any credit losses.
As of September 30, 2023, the fair market value of marketable securities was $79,000 below their cost basis. The Company’s gross unrealized holding gains equaled $0 and gross unrealized holding losses equaled $79,000. For the nine-months ended September 30, 2023, the adjustment to accumulated other comprehensive loss reflected an improvement in market value of $129,000, including estimated taxes of $36,000.
The Company elected to exclude applicable accrued interest from both the fair value and the amortized cost basis of the available-for-sale debt securities, and separately present the accrued interest receivable balance per ASC Topic 326. The accrued interest receivables balance totaled $213,000 as of September 30, 2023 and was included within the Prepaid expenses and other current assets line item of the Consolidated Balance Sheets. The Company elected not to measure an allowance for credit losses on accrued interest receivable, as an allowance on possible uncollectible accrued interest is not warranted.
12


U.S. Treasury and agency notes
The unrealized losses on the Company's investments in U.S. Treasury and agency notes at September 30, 2023 and December 31, 2022 were caused by relative changes in interest rates since the time of purchase. The contractual cash flows for these securities are guaranteed by U.S. government agencies. The unrealized losses on these debt security holdings are a function of changes in investment spreads and interest rate movements and not changes in credit quality. As of September 30, 2023 and December 31, 2022, the Company did not intend to sell these securities and it is not more-likely-than-not the Company would be required to sell these securities before recovery of their cost basis. Therefore, these investments did not require an ACL as of September 30, 2023 and December 31, 2022.
Corporate notes
The contractual terms of those investments do not permit the issuers to settle the securities at a price less than the amortized cost basis of the investments. The unrealized losses on corporate notes are a function of changes in investment spreads and interest rate movements and not changes in credit quality. The Company expects to recover the entire amortized cost basis of these securities. As of September 30, 2023 and December 31, 2022, the Company did not intend to sell these securities and it is not more-likely-than-not the Company would be required to sell these securities before recovery of their cost basis. Therefore, these investments did not require an ACL as of September 30, 2023 and December 31, 2022.
The following tables summarize the maturities, at par, of marketable securities as of:
September 30, 2023
($ in thousands)20232024Total
U.S. Treasury and agency notes$7,070 $10,866 $17,936 
Corporate notes8,900 2,780 11,680 
$15,970 $13,646 $29,616 
 
December 31, 2022
($ in thousands)20232024Total
U.S. Treasury and agency notes$15,225 $500 $15,725 
Corporate notes17,470 500 17,970 
$32,695 $1,000 $33,695 
The Company’s investments in corporate notes are with companies that have an investment grade rating from Standard & Poor’s as of September 30, 2023.
4.     REAL ESTATE
Our accumulated real estate development costs by project consisted of the following:
($ in thousands)September 30, 2023December 31, 2022
Real estate development
Mountain Village$154,539 $153,156 
Centennial117,518 115,221 
Grapevine40,302 39,273 
Tejon Ranch Commerce Center18,207 13,643 
Real estate development$330,566 $321,293 
Real estate and improvements - held for lease
Tejon Ranch Commerce Center$20,690 $20,590 
Less accumulated depreciation(3,910)(3,650)
Real estate and improvements - held for lease, net$16,780 $16,940 
13



5.     LONG-TERM WATER ASSETS
Long-term water assets consist of water and water contracts held for future use or sale. The water is held at cost, which includes the price paid for the water and the cost to pump and deliver the water from the California aqueduct into the water bank. Water is currently held in a water bank on Company land in southern Kern County and by the TCWD in the Kern Water Banks.
The Company has secured SWP entitlements under long-term SWP water contracts within the Tulare Lake Basin Water Storage District, or Tulare Lake Basin, and the Dudley-Ridge Water District, or Dudley-Ridge, totaling 3,444 acre-feet of SWP entitlement annually, subject to SWP allocations. These contracts extend through 2035 and have been transferred to AVEK for the Company's use in the Antelope Valley. In 2013, the Company acquired a contract to purchase water that obligates the Company to purchase 6,693 acre-feet of water each year from the Nickel Family, LLC, or Nickel, a California limited liability company that is located in Kern County.
The initial term of the water purchase agreement with Nickel runs to 2044 and includes a Company option to extend the contract for an additional 35 years. The purchase cost of water in 2023 is $928 per acre-foot. The purchase cost is subject to annual cost increases based on the greater of the Consumer Price Index or 3%.
The water purchased above will ultimately be used in the development of the Company’s land for commercial/industrial real estate development, resort/residential real estate development, and farming. Interim uses may include the sale of portions of this water to third-party users on an annual basis until this water is fully allocated to Company uses, as described.
Water revenues and cost of sales were as follows for the nine months ended ($ in thousands):
September 30, 2023September 30, 2022
Acre-Feet Sold4,020 9,600 
Revenues$6,615 $13,635 
Cost of sales4,015 8,944 
Profit$2,600 $4,691 

The costs assigned to water assets held for future use were as follows ($ in thousands):
September 30, 2023December 31, 2022
Banked water and water for future delivery$31,469 $23,855 
Transferable water326 1,455 
Total water held for future use at cost$31,795 $25,310 

Intangible Water Assets
The Company’s carrying amounts of its purchased water contracts were as follows ($ in thousands):
September 30, 2023December 31, 2022
CostsAccumulated DepreciationCostsAccumulated Depreciation
Dudley-Ridge water rights$11,581 $(6,152)$11,581 $(5,790)
Nickel water rights18,740 (6,372)18,740 (5,890)
Tulare Lake Basin water rights6,479 (3,564)6,479 (3,385)
$36,800 $(16,088)$36,800 $(15,065)
Net cost of purchased water contracts20,712 21,735 
Total cost of water held for future use31,795 25,310 
Net investments in water assets$52,507 $47,045 

14


Water contracts with the WRMWSD, and TCWD are also in place, but were entered into with each district at inception of the contract, and not purchased later from third-parties, and do not have a related financial value on the books of the Company. Therefore, there is no amortization expense related to these contracts. Total water resources, including both recurring and one-time usage, are:
(in acre-feet, unaudited)September 30, 2023December 31, 2022
Water held for future use
TCWD - Banked water owned by the Company62,379 52,554 
Company water bank52,631 50,349 
Transferable water3,097 2,548 
Recharged project water6,590  
Total water held for future use124,697 105,451 
Purchased water contracts
Water Contracts (Dudley-Ridge, Nickel and Tulare)10,137 10,137 
WRMWSD - Contracts with the Company15,547 15,547 
TCWD - Contracts with the Company5,749 5,749 
Total purchased water contracts31,433 31,433 
Total water held for future use and purchased water contracts156,130 136,884 
Tejon Ranchcorp, or Ranchcorp, a wholly-owned subsidiary of Tejon Ranch Co., entered into a Water Supply Agreement with PEF in 2015. PEF is the current lessee of the Company in a land lease for the operation of a power plant. Pursuant to the Water Supply Agreement, PEF may purchase from the Company up to 3,500 acre-feet of water per year from January 1, 2017 through July 31, 2030, with an option to extend the term by three additional five-year periods. PEF is under no obligation to purchase water from the Company in any year but is required to pay the Company an annual option payment equal to 30% of the maximum annual payment. The price of the water under the Water Supply Agreement for 2023 is $1,261 per acre-foot of annual water, subject to 3% annual increases over the life of the contract. The Water Supply Agreement contains other customary terms and conditions, including representations and warranties which are typical for agreements of this type. The Company's commitments to sell water can be met through current water assets.
6.     ACCRUED LIABILITIES AND OTHER
Accrued liabilities and other consisted of the following:
($ in thousands)September 30, 2023December 31, 2022
Accrued vacation$676 $735 
Accrued paid personal leave309 348 
Accrued bonus1,896 2,280 
Property tax payable1,344  
Other279 239 
$4,504 $3,602 
7.     LINE OF CREDIT AND LONG-TERM DEBT
Debt consisted of the following:
($ in thousands)September 30, 2023December 31, 2022
Notes payable$48,832 $50,154 
Less: line-of-credit and current maturities of long-term debt(1,844)(1,779)
Less: deferred loan costs(195)(214)
Long-term debt, less current portion$46,793 $48,161 
On June 30, 2022, the Company entered into a variable rate term note, or New Term Note, and a new Revolving Line of Credit Note, or New RLC, with Bank of America, N.A, or collectively the New Credit Facility. The New Term Note provided a principal amount of $49,080,000 and a maturity date of June 30, 2032, which was used to pay off the existing Wells Fargo
15


Amended Term Note. The Company evaluated the debt exchange under ASC 470 and determined that the exchange should be treated as a debt extinguishment. The amount available from the New RLC under the New Credit Facility is $40,607,000.
The New Term Note had a $47,338,000 balance as of September 30, 2023. The interest rate per annum applicable to the New Term Loan is the daily SOFR plus a margin of 1.55 percentage points. The interest rate for the term of the New Term Note has been fixed through the use of an interest rate swap at a rate of 4.62%. The New Term Note requires monthly amortization payments pursuant to a schedule set forth in the New Term Note, with the final outstanding principal amount due June 30, 2032. The New Credit Facility is secured by the Company's farmland and farm assets, which include equipment, crops and crop receivables; the PEF power plant lease and lease site; and related accounts and other rights to payment and inventory.
The New RLC had no outstanding balance as of September 30, 2023. At the Company’s option, the interest rate on this line of credit can float at a rate equal to Daily SOFR plus 1.37% or can be fixed at a rate equal to Term SOFR plus 1.37% above Term SOFR for interest periods elected by the Company. During the term of this RLC (which expires on June 30, 2027), the Company can borrow at any time and partially or wholly repay any outstanding borrowings and then re-borrow, as necessary.
The Company also has a $4,750,000 promissory note agreement whose principal and interest due monthly began October 1, 2013. The promissory note is secured by four commercial properties at TRCC-West that are leased by fast casual restaurant operators. The interest rate on this promissory note is 4.25% per annum, with principal and interest payments ending on September 1, 2028. The balance as of September 30, 2023 was $1,494,000.

8.     OTHER LIABILITIES
Other liabilities consisted of the following:
($ in thousands)September 30, 2023December 31, 2022
Pension liability (See Note 13)1
$ $38 
Supplemental executive retirement plan liability (See Note 13)6,040 6,186 
Excess joint venture distributions and other9,172 4,156 
Total$15,212 $10,380 
1The Company's pension account had an asset balance of $175,000 as of September 30, 2023 and is recorded under the caption Other Assets on the Consolidated Balance Sheets.

9.     STOCK COMPENSATION - RESTRICTED STOCK AND PERFORMANCE SHARE GRANTS
The Company’s stock incentive plans provide for the making of awards to employees based upon a service condition or through the achievement of performance-related objectives. The Company has issued three types of stock grant awards under these plans: restricted stock with service condition vesting; performance share grants that only vest upon the achievement of specified performance conditions, such as share price, or as Performance Condition Grants; and performance share grants that include threshold, target, and maximum achievement levels based on the achievement of specific performance measures, or Performance Milestone Grants. Performance Condition Grants with market-based conditions are based on the achievement of a target share price. The share price used to calculate fair value for market-based awards is determined using a Monte Carlo simulation. Failure to achieve the target share price will result in the forfeiture of shares. Forfeiture of share awards with service conditions or performance-based restrictions will result in a reversal of previously recognized share-based compensation expense. Forfeiture of share awards with market-based restrictions does not result in a reversal of previously recognized share-based compensation expense.

The following is a summary of the Company’s Performance Condition Grants outstanding as of September 30, 2023:
Performance Condition Grants
Target performance221,245 
Maximum performance319,559 
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The following is a summary of the Company’s stock grant activity, both time and performance share grants, assuming target achievement for outstanding performance grants for the nine months ended September 30, 2023:
September 30, 2023
Stock Grants Outstanding Beginning of Period at Target Achievement234,899 
New Stock Grants/Additional Shares due to Achievement in Excess of Target321,026 
Vested Grants(169,621)
Expired/Forfeited Grants(16,610)
Stock Grants Outstanding End of Period at Target Achievement369,694 
The following is a summary of the assumptions used to determine the fair value for the Company’s outstanding market-based Performance Condition Grants as of September 30, 2023:
($ in thousands except for share prices)
Grant date12/11/202003/18/202112/16/202103/17/202212/14/202206/16/202306/16/2023
Vesting end12/31/202303/18/202412/16/202403/17/202512/14/202512/31/202312/31/2025
Target share price to achieve award$17.07$20.02$21.58$20.43$21.99$19.24$20.72
Expected volatility29.25%30.30%31.29%31.54%32.14%27.09%26.58%
Risk-free interest rate0.19%0.33%0.92%2.13%3.84%5.2%4.38%
Fair value per share at grant date$15.59$18.82$21.48$21.75$26.00$13.18$20.24
Shares granted3,62810,9053,53613,3384,61333,03528,545
Total fair value of award$57$205$76$290$120$435$578
The unamortized cost associated with unvested stock grants and the weighted average period over which it is expected to be recognized as of September 30, 2023 were $2,780,000 and 20 months, respectively. The fair value of restricted stock with time-based vesting features is based upon the Company’s share price on the date of grant and is expensed over the service period. The fair value of Performance Milestone Grants that cliff vest based on the achievement of performance conditions is based on the share price of the Company’s stock on the day of grant multiplied by the number of shares probable to vest based on the estimated achievement of specific performance measures. Because the ultimate vesting of all performance grants is tied to the achievement of a performance condition, the Company estimates whether the performance condition will be met and over what period of time. Ultimately, the Company will adjust stock compensation costs according to the actual outcome of the performance condition.
Under the 2023 Stock Incentive Plan, each non-employee director receives all or a portion of his or her annual compensation in stock. The stock is granted at the end of each quarter based on the quarter-end stock price.
The following table summarizes stock compensation costs for the Company's 2023 Stock Incentive Plan, and outstanding grants for the 1998 Stock Incentive Plan, or the Employee Plan for the following periods:
($ in thousands)Nine Months Ended September 30,
Employee:20232022
    Expensed$1,967 $1,646 
    Capitalized379 239 
2,346 1,885 
Director - Expensed402 442 
Total Stock Compensation Costs$2,748 $2,327 
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10.     INTEREST RATE SWAP
On June 30, 2022, the Company entered into a variable rate term note, or New Term Note, with Bank of America, N.A. On the same day, the Company entered into a new interest rate swap agreement to reduce its exposure to fluctuations in the floating interest rate tied to SOFR under the New Term Note. Per ASC 815, an entity may apply the shortcut method to hedging relationships that meet all of the conditions under ASC 815. The Company performed an initial assessment of the hedging relationship and determined it is appropriate to apply the shortcut method as all conditions were met. The new interest rate swap qualified as an effective cash flow hedge under the guidance of ASC 815. Applying the shortcut method allows the Company to assume that it has a perfectly effective hedging relationship, therefore there is no need for the Company to perform any quantitative assessments of whether the hedge is highly effective.
As of September 30, 2023, the fair value of the interest rate swap agreement was greater than its cost basis and as such, the mark-to-market adjustment is recorded within Other Assets on the Consolidated Balance Sheets. The Company had the following outstanding interest rate swap agreement designated as an interest rate cash flow hedge as of September 30, 2023 and December 31, 2022 ($ in thousands):
September 30, 2023
Effective DateMaturity DateFair Value HierarchyWeighted Average Interest Pay RateFair ValueNotional Amount
June 30, 2022June 30, 2032Level 24.62%$3,448$47,338
December 31, 2022
Effective DateMaturity DateFair Value HierarchyWeighted Average Interest Pay RateFair ValueNotional Amount
June 30, 2022June 30, 2032Level 24.62%$1,430$48,462
11.     INCOME TAXES
The Company’s provision for income taxes as of September 30, 2023 has been calculated by applying an estimate of the annual effective tax rate for the full year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items). For the nine months ended September 30, 2023, the Company’s income tax expense was $3,619,000 compared to $6,262,000 for the nine months ended September 30, 2022. Effective tax rates were 68% and 31% for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, the Company had income taxes payable of $3,088,000. The Company classifies interest and penalties incurred on tax payments as income tax expense.
For the nine months ended September 30, 2023, the Company’s effective tax rate was above statutory tax rates as a result of permanent differences related to Section 162(m) limitations. Section 162(m) compensation deduction limitations occurred as a result of changes in tax law arising from the 2017 Tax Cuts and Jobs Act.
12.     COMMITMENTS AND CONTINGENCIES
Water Contracts
The Company has secured water contracts that are encumbered by the Company's land. These water contracts require minimum annual payments, for which $11,657,000 is expected to be paid in 2023. For the first nine months of 2023, the Company has paid $10,700,000 for this water. These estimated water contract payments consist of SWP contracts with WRMWSD, TCWD, Tulare Lake Basin, Dudley-Ridge, and the Nickel water contract. The SWP contracts run through 2035 and the Nickel water contract runs through 2044, with an option to extend an additional 35 years. Contractual obligations for future water payments were $290,313,000 as of September 30, 2023.
Contracts
The Company exited a consulting contract during the second quarter of 2014 related to the Grapevine Development, or Grapevine project, and is obligated to pay an earned incentive fee at the time of its successful receipt of litigated project entitlements and at a value measurement date five-years after litigated entitlements have been achieved for Grapevine. The final amount of the incentive fee will not be determined until the future payment dates. As of September 30, 2023, the Company believes the net savings resulting from exiting the contract during this future time period will more than offset the incentive payment costs.
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Community Facilities Districts
The TRPFFA is a joint powers authority formed by Kern County and TCWD to finance public infrastructure within the Company’s Kern County developments. For the development of TRCC, TRPFFA has created two CFDs: the West CFD and the East CFD. The West CFD has placed liens on 420 acres of the Company’s land to secure payment of special taxes related to $19,540,000 of outstanding bond debt sold by TRPFFA for TRCC-West. The East CFD has placed liens on 1,931 acres of the Company’s land to secure payments of special taxes related to $72,055,000 of outstanding bond debt sold by TRPFFA for TRCC-East. At TRCC-West, the West CFD has no additional bond debt approved for issuance. At TRCC-East, the East CFD has approximately $44,035,000 of additional bond debt authorized by TRPFFA that can be sold in the future.
In connection with the sale of the bonds, there is a standby letter of credit for $4,393,000 related to the issuance of East CFD bonds. The standby letter of credit is in place to provide additional credit enhancement and cover approximately two years of interest on the outstanding bonds. This letter of credit will not be drawn upon unless the Company, as the largest landowner in the CFD, fails to make its property tax payments. The Company believes the letter of credit will never be drawn upon. The letter of credit is for two years and will be renewed in two-year intervals as necessary. The annual cost related to the letter of credit is approximately $62,000.
As a landowner in each CFD, the Company is obligated to pay its share of the special taxes assessed each year. The secured lands include both the TRCC-West and TRCC-East developments. Proceeds from the sale of West CFD bonds went to reimburse the Company for public infrastructure costs related to the TRCC-West development. As of September 30, 2023, there were no additional improvement funds remaining from the West CFD bonds. There are $9,763,557 of additional improvement funds remaining within the East CFD bonds for reimbursement of public infrastructure costs during future years. During fiscal 2023, the Company expects to pay approximately $2,775,000 in special taxes. As development continues to occur at TRCC, new owners of land and new lease tenants, through triple net leases, will bear an increasing portion of the assessed special tax. This amount could change in the future, based on the amount of bonds outstanding and the amount of taxes paid by others. The assessment of each individual property sold or leased is not determinable at this time, because it is based on the current tax rate and assessed value of the property at the time of sale or on its assessed value at the time it is leased to a third-party. Accordingly, the Company was not required to recognize an obligation on September 30, 2023.
Centennial
On April 30, 2019, the Los Angeles County Board of Supervisors granted final entitlement approval for the Centennial project. On May 15, 2019, Climate Resolve filed an action in Los Angeles Superior Court (the Climate Resolve Action), pursuant to CEQA and the California Planning and Zoning Law, against the County of Los Angeles and the Los Angeles County Board of Supervisors (collectively, LA County) concerning LA County’s granting of approvals for the Centennial project, including certification of the final EIR and related findings (Centennial EIR); approval of associated general plan amendments; adoption of associated zoning; adoption of the Centennial Specific Plan; approval of a subdivision map for financing purposes; and adoption of a development agreement, among other approvals (collectively, the Centennial Approvals). Separately, on May 28, 2019, the CBD and the CNPS filed an action in Los Angeles County Superior Court (the CBD/CNPS Action) against LA County; like the Climate Resolve Action, the CBD/CNPS Action also challenges the Centennial Approvals. The Company, its wholly owned subsidiary Tejon Ranchcorp, and CFL are named as real parties-in-interest in both the Climate Resolve Action and the CBD/CNPS Action.
The Climate Resolve Action and the CBD/CNPS Action collectively allege that LA County failed to properly follow the procedures and requirements of CEQA and the California Planning and Zoning Law. The Climate Resolve Action and the CBD/CNPS Action have been deemed “related” and, while not consolidated under court rules or the rules of civil procedure, the Los Angeles Superior Court judge (or Court) trying both cases determined during early trial management conferences to hold one set of hearings and issue one ruling on the matters as part of the adjudication. The Climate Resolve Action and CBD/CNPS Action seek to invalidate the Centennial Approvals and require LA County to revise the environmental documentation related to the Centennial project. The Court held three hearings for the CBD/CNPS Action and Climate Resolve Action on September 30, 2020, November 13, 2020, and January 8, 2021.
On April 5, 2021, the Court issued its decision denying the petition for writ of mandate by CBD/CNPS and granting the petition for writ of mandate filed by Climate Resolve. In granting Climate Resolve’s petition, the Court found three specific areas where the EIR for the project was lacking. The Court ruled that California’s Cap-and-Trade Program cannot be used as a compliance pathway for mitigating GHG impacts for the project and therefore further ruled that additional analysis will be required related to all feasible mitigation of GHG impacts. The Court also found that the EIR must provide additional analysis and explanation of how wildland fire risk on lands outside of the project site, posed by on-site ignition sources, is mitigated to less than significant. On April 19, 2021, CBD filed a motion for reconsideration with the Court on the denial of their petition for writ of mandate to be granted prevailing party status in the Climate Resolve Action (“Motion for Reconsideration”). The hearing on the Motion for Reconsideration originally scheduled for August 13, 2021 was rescheduled to December 1, 2021 and further rescheduled as noted below.
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On November 30, 2021, the Company, together with Ranchcorp and CFL, entered into a Settlement Agreement with Climate Resolve. Pursuant to the Settlement Agreement, the Company has agreed: (1) to make Centennial a net zero GHG emissions project through various on-site and off-site measures including, but not limited to, installing electric vehicle chargers and establishing and funding incentive programs for the purchase of electric vehicles; (2) to fund certain on-site and off-site fire protection and prevention measures; and (3) to provide annual public reports and create an organization to monitor progress towards these commitments. The foregoing is only a summary of the material terms of the Settlement Agreement and does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the Settlement Agreement. In exchange, Climate Resolve filed a request for dismissal of the Climate Resolve Action with prejudice from the Court. On December 3, 2021, the Court granted and entered Climate Resolve’s dismissal with prejudice concluding the Climate Resolve Action. On December 1, 2021, the Court continued CBD/CNPS Motion for Reconsideration to January 14, 2022, directing CBD/CNPS to evaluate the Settlement Agreement reached in the Climate Resolve Action to address issues surrounding remedies should CBD be granted prevailing party status in the Climate Resolve Action, and to evaluate the potential to settle or otherwise address CBD’s objections to the Centennial project. To that end, the Company met and conferred twice on January 4, 2022 and January 20, 2022. On January 14, 2022, the Court heard CBD/CNPS' Motion for Reconsideration and issued its decision granting CBD/CNPS prevailing party status in the Climate Resolve Action.
The Court set a tentative hearing date of February 25, 2022 concerning the entry of final judgment and awarding of appropriate remedies, which was continued several times in 2022 either on the Court's own motion or at the request of the parties and was ultimately set for hearing on October 26, 2022. At the October 26th hearing, the Court agreed to: (a) hear the Company’s Motion for Reconsideration as to the successful challenges Climate Resolve prevailed upon within the Climate Resolve Action and ordered the Parties to appear on December 14, 2022 to hear the Company’s Motion for Reconsideration and (b) rule on the entry of final judgment and setting of remedies at a February 17, 2023 hearing date.
At the December 14, 2022 hearing, the Court denied the Company’s Motion for Reconsideration (finding that the Company’s motion failed to support the statutory elements necessary to prevail on such motion). At the February 17, 2023 hearing, the Court took into submission the Parties’ legal briefs and oral arguments. On March 22, 2023, the Court decided in favor of CBD/CNPS when the Judge signed CBD/CNPS’s proposed form of judgment, which included a full rescission of the Centennial project approvals previously issued by Los Angeles County. On May 26, 2023, the Company filed a Notice of Appeal with the Superior Court, thereby appealing the Superior Court’s decision to the Second District of the California Court of Appeal. On June 27, 2023, CBD/CNPS cross-appealed the Superior Court’s ruling. During the appeal process the Superior Court’s order of the rescission of project approvals have been placed on hold.
As the Company’s options to reinstate the project approvals remain pending, the monetary value of any adverse decision, if any, cannot be estimated at this time.
Proceedings Incidental to Business
From time to time, the Company is involved in other proceedings incidental to its business, including actions relating to employee claims, real estate disputes, contractor disputes and grievance hearings before labor regulatory agencies.
The outcome of these other proceedings is not predictable. However, based on current circumstances, the Company believes the ultimate resolution of these other proceedings will not have a material adverse effect on the Company’s financial position, results of operations or cash flows, either individually or in the aggregate.
13.    RETIREMENT PLANS
The Company sponsors a defined benefit retirement plan, or Benefit Plan, which covers eligible employees hired prior to February 1, 2007. The benefits are based on years of service and the employee’s five-year final average salary. Contributions are intended to provide for benefits attributable to service both to date and expected to be provided in the future. The Company funds the plan in accordance with the Employee Retirement Income Security Act of 1974 (ERISA). In April 2017, the Company froze the Benefit Plan as it relates to future benefit accruals for participants. The Company contributed $165,000 to the Benefit Plan in 2023.
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Benefit Plan assets consist of equity, debt and short-term money market investment funds. The Benefit Plan’s current investment policy changed during the third quarter of 2018. The policy's strategy seeks to minimize the volatility of the funding ratio. This objective will result in a prescribed asset mix between "return seeking" assets (e.g., stocks) and a bond portfolio (e.g., long duration bonds) according to a pre-determined customized investment strategy based on the Benefit Plan's funded status as the primary input. This path will be used as a reference point as to the mix of assets, which by design will de-emphasize the return seeking portion as the funded status improves. At September 30, 2023, the investment mixes were approximately at 99% debt and 1% money market funds. At December 31, 2022, the investment mixes were approximately 21% equity, 78% debt, and 1% money market funds. Equity investments consist of a combination of individual equity securities plus value funds, growth funds, large cap funds and international stock funds. The weighted-average discount rate used in determining the periodic pension cost is 5.00% in 2023 and 2022. The expected long-term rate of return on plan assets is 5.00% for both fiscal 2023 and 2022. The long-term rate of return on Benefit Plan assets is based on the historical returns within the plan and expectations for future returns.
Total pension and retirement earnings for the Benefit Plan was as follows:
Nine Months Ended September 30,
($ in thousands)20232022
 (Cost)/earnings components:
Interest cost$(312)$(234)
Expected return on plan assets315 414 
Net amortization and deferral(51)(36)
Total net periodic pension (cost)/earnings$(48)$144 

The Company has a Supplemental Executive Retirement Plan, or SERP, to restore to executives designated by the Compensation Committee of the Board of Directors the full benefits under the pension plan that would otherwise be restricted by certain limitations now imposed under the Internal Revenue Code. The SERP is currently unfunded. In April 2017, the Company froze the SERP as it relates to the accrual of additional benefits.
The pension and retirement expense for the SERP was as follows:
Nine Months Ended September 30,
($ in thousands)20232022
Cost components:
Interest cost$(219)$(138)
Net amortization and other(30)(87)
Total net periodic pension cost$(249)$(225)
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14.    REPORTING SEGMENTS AND RELATED INFORMATION
The Company currently operates five reporting segments: commercial/industrial real estate development, resort/residential real estate development, mineral resources, farming, and ranch operations. For further details of the revenue components within each reporting segment, see Results of Operations by Segment in Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Real Estate - Commercial/Industrial Development
Commercial/Industrial real estate development segment revenues consist of land sale revenues, leases of land and/or building space to tenants at the Company's commercial retail and industrial developments, base and percentage rents from the PEF power plant lease, communication tower rents, land sales, and payments from easement leases. Refer to Note 15 (Investment in Unconsolidated and Consolidated Joint Ventures) for discussion of unconsolidated joint ventures.
The following table summarizes revenues, expenses and operating income from this segment for the periods ended:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2023202220232022
Commercial/industrial revenues$3,397 $22,352 $8,706 $32,163 
Equity in earnings of unconsolidated joint ventures1,161 1,991 4,616 4,867 
Commercial/industrial revenues and equity in earnings of unconsolidated joint ventures4,558 24,343 13,322 37,030 
Commercial/industrial expenses2,137 6,845 5,517 11,403 
Operating results from commercial/industrial and unconsolidated joint ventures $2,421 $17,498 $7,805 $25,627 
Real Estate - Resort/Residential Development
The Resort/Residential real estate development segment is actively involved in pursuing land entitlement and development processes both internally and through joint ventures. The segment incurs costs and expenses related to land management activities on land held for future development, but currently generates no revenue. The segment generated losses of $367,000 and $372,000 for the three months ended September 30, 2023 and 2022, respectively. The segment generated losses of $1,079,000 and $1,218,000 for the nine months ended September 30, 2023 and 2022, respectively.
Mineral Resources
The Mineral Resources segment revenues include water sales and oil and mineral royalties from exploration and development companies that extract or mine natural resources from the Company's land. The following table summarizes revenues, expenses and operating results from this segment for the periods ended:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2023202220232022
Mineral resources revenues$3,118 $3,139 $11,630 $19,238 
Mineral resources expenses2,000 1,745 6,991 11,347 
Operating results from mineral resources $1,118 $1,394 $4,639 $7,891 
Farming
The Farming segment revenues include the sale of almonds, pistachios, wine grapes, and hay. The following table summarizes revenues, expenses and operating results from this segment for the periods ended:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2023202220232022
Farming revenues$2,642 $4,776 $4,852 $7,352 
Farming expenses2,157 8,752 5,644 13,976 
Operating results from farming$485 $(3,976)$(792)$(6,624)
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Ranch Operations
The Ranch Operations segment consists of game management revenues and ancillary land uses, such as grazing leases and on-location filming. The following table summarizes revenues, expenses and operating results from this segment for the periods ended:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2023202220232022
Ranch operations revenues$1,052 $1,208 $3,384 $3,011 
Ranch operations expenses1,196 1,143 3,864 3,708 
Operating results from ranch operations$(144)$65 $(480)$(697)
15.    INVESTMENT IN UNCONSOLIDATED AND CONSOLIDATED JOINT VENTURES
The Company maintains investments in joint ventures. The Company accounts for its investments in unconsolidated joint ventures using the equity method of accounting, unless the venture is a variable interest entity, or VIE, and meets the requirements for consolidation. The Company’s investment in its unconsolidated joint ventures as of September 30, 2023 was $31,345,000. Equity in earnings from unconsolidated joint ventures was $4,616,000 for the nine months ended September 30, 2023. The unconsolidated joint ventures have not been consolidated as of September 30, 2023, because the Company does not control the investments. The Company’s current joint ventures are as follows:
Petro Travel Plaza Holdings LLC – Petro Travel Plaza Holdings LLC, or Petro, is an unconsolidated joint venture with TravelCenters of America that develops and manages travel plazas, gas stations, convenience stores, and fast-food restaurants throughout TRCC. The Company has 50% of the voting rights but participates in 60% of all profits and losses. The Company does not control the investment due to having only 50% of the voting rights. The Company's partner is the managing partner and performs all of the day-to-day operations and has significant decision-making authority over key business components, such as fuel inventory and pricing at the facilities. The Company's investment in this joint venture was $17,209,000 as of September 30, 2023.
Majestic Realty Co. – Majestic Realty Co., or Majestic, is a privately-held developer and owner of master planned business parks in the United States. The Company has five active 50/50 joint ventures with Majestic to acquire, develop, manage, and operate industrial real estate at TRCC. The partners have equal voting rights and share equally in the profit and loss of the joint ventures.
On March 29, 2022, TRC-MRC 5 LLC was formed to pursue the development, construction, lease-up, and management of an approximately 446,400 square foot industrial building located within TRCC-East. The construction is financed by a $49,226,000 construction loan that had an outstanding balance of $25,049,000 as of September 30, 2023. This debt is guaranteed by both the Company and Majestic. In December 2022, the Company contributed land with fair value of $8,501,000 to TRC-MRC5, LLC. The total cost of the land was $2,477,000. The Company recognized profit of $3,012,000 and deferred profit of $3,012,000 after applying the five-step revenue recognition model in accordance with ASC Topic 606 - Revenue From Contracts With Customers and ASC Topic 323, Investments - Equity Method and Joint Ventures. The project is currently under construction and is expected to be completed by the first quarter of 2024. The joint venture has leased