Tejon Ranch Co. Reports Year-to-Date and Third Quarter 2015 Results
Tejon Ranch Co. (NYSE:TRC), a diversified real estate development and
agribusiness company, today released the results of operations for the
nine- and three-months ended September 30, 2015.
Nine months ended September 30, 2015:
-
Revenue from operations for the nine months ended September 30, 2015,
totaled $35,579,000, a decrease of $931,000, or 3%, compared to
$36,510,000 in revenue for the same period in 2014;
-
Net income attributable to common stockholders for the nine months
ended September 30, 2015, was $1,235,000, or $0.06 per common share,
compared to net income attributable to common stockholders of
$3,739,000, or $0.18 per common share, for the same period in 2014.
All per share references in this release are presented on a fully
diluted basis.
The year-over-year reduction in net income attributable to common
stockholders during the first nine months of 2015 was primarily the
result of reduced revenues in our commodity-based business units in
farming and mineral resources, and increased expenses across all
business units, with the exception of commercial/industrial real estate,
which saw both higher revenues and lower expenses. The reduction in net
income was partially offset by a nearly 60% increase in our share of
earnings from our TA/Petro joint venture.
Three months ended September 30, 2015:
-
For the third quarter ended September 30, 2015, the Company reported
revenue from operations of $11,946,000, a decrease of $1,891,000, or
14%, compared to $13,837,000 during the same period in 2014;
-
Net loss attributable to common stockholders was $788,000, or ($0.04)
per common share, in the third quarter of 2015, compared to net income
attributable to common stockholders of $1,752,000, or $0.08 per common
share, for the third quarter of 2014.
The primary driver of the decline and resulting loss in net income for
the quarter was a decline in farming and mineral resource revenues,
which was partially offset by an improvement in equity in earnings of
joint ventures.
“Like many other companies that operate businesses linked to
commodities, 2015 has presented a series of challenges,” said Gregory S.
Bielli, president and CEO. “In addition to the mild winter, which caused
a historic decline in pistachio production throughout the region and
impacted our farming revenues, a more than 50% decline in oil prices
negatively impacted our mineral resources business unit. While we are
optimistic that commodities will ultimately regain their strength, we
are pleased to see continued growth in areas where we can exercise more
control, such as our commercial/industrial real estate operations.
Importantly, our Board of Directors has approved the detailed business
plan that will guide the ultimate development and marketing of Tejon
Mountain Village. This marks a significant milestone for this project.”
Results of Operations for the First Nine Months of 2015:
Total revenue from operations for the first nine months of 2015
decreased by $931,000, or 3%, as compared to the same period in 2014,
largely due to lower revenues from the Company’s farming and mineral
resources business units, which were partially offset by increased
commercial/industrial revenue. Revenue from commercial/industrial real
estate was up by $868,000 while farming revenue and mineral resources
revenue declined by $1,172,000 and $627,000 respectively.
Commercial/industrial revenue totaled $8,935,000 for the first nine
months of the year, an 11% increase compared to the same period in 2014.
The increase was primarily due to a $275,000 improvement in percentage
lease rent from the power plant lease, a $239,000 increase in property
management fees related to the outlet center, and an increase of
$335,000 in commercial lease revenues as three new tenants took
possession under their respective lease terms.
The Company’s share of earnings from joint ventures was $4,861,000, an
increase of $1,568,000, or 48%, during the first nine months of 2015
compared to the same period in 2014, primarily due to $1,819,000 in
higher net income from the TA/Petro joint venture. The improvement in
operations within the joint venture was driven by an increase in diesel
volume of 1.5 million gallons and gas volume of 890,000 gallons. Tejon
Ranch also saw a $0.13 per gallon improvement in the margin on gas sales
for the first nine months of 2015. The improvement in gallons sold is
due to growing traffic along Interstate-5 and the expansion of offerings
at TRCC such as the Outlets at Tejon. Additionally, the TA/Petro joint
venture is benefitting from an increase in non-fuel revenue margins
during 2015 due to an increase in the volume of activity and the
addition of a new restaurant that opened at the end of 2014.
Mineral resource revenues declined $627,000, or 4%, to $14,174,000,
compared to the same nine-month period in 2014, primarily due to an oil
royalty revenue decline of $2,883,000. Oil prices were down
approximately 52% during the period, declining to an average of $45 per
barrel compared to $98 per barrel during 2014. The price decline also
lead to a drop in production. The decrease in oil revenue was partially
offset by a $2,462,000 increase in water sales revenue resulting from
the sale of 7,922 acre feet of water. During the first quarter of 2015,
following a determination that the Company had excess water supply for
its 2015 needs, it sold its entire allotment of the 2015 Kern River
water plus carry forward inventory from 2014.
Farming segment revenues decreased by $1,172,000, or 9%, to $12,470,000
during the first nine months of 2015, compared to the same period in
2014. The decrease was primarily due to a $3,338,000 decrease in
pistachio revenues, which were severely impacted by the mild winter.
During a mild winter, the number of hours pistachio trees are dormant
decreases, which adversely impacts the pollination of the pistachio
tree. The Company typically expects 5% to 10% of its crops to produce
blanks or hollow shells. However, Tejon Ranch experienced blanks in 90%
of its pistachio crop, which is unprecedented compared to historical
trends. This impact to pistachio production impacted a large majority of
the pistachio production throughout California. The decrease in sales
was partially offset by a $693,000 and $1,769,000 increase in wine grape
and almond sales, respectively. Wine grape revenues increased as 2,782
tons in new grape production came on line during 2015. Almond revenues
increased as a result of an increase in the selling price per pound.
Operating expenses increased $4,064,000, or 12%, during the period
primarily due to increases in farming segment expenses of $2,329,000,
mineral resources expenses of $1,091,000, and corporate expenses of
$926,000. The increase in farming expense is due to higher cultural
costs for wine grapes and pistachios and higher staffing costs. Mineral
resources was driven by higher water resource costs primarily due to a
$967,000 increase in water cost of sales. The increase in corporate
expense was mainly due to increased staffing costs driven by higher
employee benefit costs and performance-based stock and bonus expense
during 2015, as compared to 2014.
Results of Operations for the Third Quarter of 2015:
Total revenue declined $1,891,000, or 14%, during the quarter, as
compared to the same period in 2014, due to a reduction in farming and
mineral resources revenues.
Commercial/industrial revenues were $2,548,000 for the quarter, a net
decline of $24,000 compared to the same period in 2014. The 1% drop in
revenue was primarily due to a decline of $324,000 in grazing revenues
as the exercise of a drought clause reduced the amount of revenue
recognized. Revenue from commercial lease activities increased $299,000
during the quarter.
Tejon Ranch’s share of earnings from joint ventures increased by
$348,000, or 20%, when compared to the same period in 2014, primarily
due to higher net income from the TA/Petro joint venture as a result of
improved operations as noted in the description of results for the first
nine months of 2015.
Mineral resource revenues declined $1,071,000, or 45%, during the
quarter as lower oil prices led to lower royalties and production.
Farming revenues declined $796,000, or 9%, during the quarter due to a
drop in pistachio revenues of $1,982,000 resulting from the 2015 mild
winter previously described. The decrease in sales was partially offset
by a $693,000 and $485,000 increase in wine grape and almond sales,
respectively.
2015 Outlook:
Tejon Ranch manages its cash and marketable securities, along with cash
flow, for the pursuit of land entitlement, development, farming and
conservation. As of September 30, 2015, the Company had cash and
securities totaling $37,218,000 and $21,060,000 of availability on a
line of credit to meet any short-term funding needs. As of October 26,
2015, the Company had the full availability of $30,000,000 on its line
of credit.
The Company believes the variability of its quarterly and annual
operating results will continue during the remainder 2015 due to the
inherent uncertain nature of its commodity-based farming and mineral
resources business units, its real estate activities and to the majority
of projected water sales for 2015 being completed through the second
quarter of 2015. The 2015 mild winter severely impacted pistachio
production as described earlier, and while the Company expects improved
production in 2016, it is cautious on the level of improvement due to
the minimal amount of growth in the pistachio trees during 2015.
Commercial retail activity continues to grow and the Company expects to
open a new convenience store/gas station at TRCC-East before the end of
the year through its TA/Petro joint venture.
The Company also announced today in a separate press release that the
Board of Directors has approved the detailed business plan for Tejon
Mountain Village, including authorizing the first steps to commence
Tentative Tract Maps preparation. The maps are required before any
construction can begin.
Many of the Company’s projects, especially in real estate, require a
lengthy process to complete the entitlement and development phases
before revenue can begin to be recognized. The timing of projects and
sales of both real estate inventory and non-strategic assets can vary
from year-to-year; therefore, it is difficult for the Company to
accurately predict quarterly and annual revenues and results of
operations.
About Tejon Ranch Co.
Tejon Ranch Company (NYSE: TRC) is a growth-oriented, diversified real
estate development and agribusiness company whose principal asset is its
270,000-acre land holding located approximately 60 miles north of Los
Angeles and 25 miles south of Bakersfield. Tejon Ranch is positioned for
growth with its fully operational commercial/industrial real estate
development and three master planned communities on the horizon.
More information about Tejon Ranch Co. can be found online at http://www.tejonranch.com.
Forward-Looking Statements
The statements contained herein, which are not historical facts, are
forward-looking statements based on economic forecasts, strategic plans
and other factors, which by their nature involve risk and uncertainties.
In particular, among the factors that could cause actual results to
differ materially are the following: business conditions and the general
economy, future commodity prices and yields, market forces, the ability
to obtain various governmental entitlements and permits, interest rates
and other risks inherent in real estate and agriculture businesses. For
further information on factors that could affect the Company, the reader
should refer to the Company’s filings with the Securities and Exchange
Commission.
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TEJON RANCH CO.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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THIRD QUARTER ENDED SEPTEMBER 30
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(In thousands, except earnings per share)
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(Unaudited)
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Three Months Ended
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Nine Months Ended
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September 30
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September 30
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2015
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2014
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2015
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2014
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Revenues:
|
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|
|
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|
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|
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Real estate – commercial/industrial
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|
$
|
2,548
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$
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2,572
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$
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8,935
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|
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$
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8,067
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Mineral resources
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1,322
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2,393
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14,174
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14,801
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Farming
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8,076
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8,872
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12,470
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13,642
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Total revenues
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11,946
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13,837
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35,579
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36,510
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Costs and Expenses:
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Real estate – commercial/industrial
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3,273
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3,374
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9,570
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10,021
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Real estate – resort/residential
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558
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|
|
565
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1,885
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|
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1,716
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Mineral resources
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606
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|
505
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7,023
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5,932
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Farming
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8,123
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6,089
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|
|
|
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11,710
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|
|
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9,381
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Corporate expenses
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|
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2,927
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|
|
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2,932
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|
|
|
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9,214
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|
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8,288
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Total expenses
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|
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15,487
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|
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13,465
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|
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39,402
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35,338
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|
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Operating income (loss)
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|
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(3,541
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)
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|
|
372
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|
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(3,823
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)
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1,172
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Other income
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|
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|
|
|
|
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Investment income
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|
|
116
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|
|
|
138
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|
|
|
|
413
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|
|
|
521
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Other income
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|
|
125
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|
|
81
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|
|
|
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180
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|
|
|
311
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Total other income
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241
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|
219
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|
593
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832
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Income (loss) from operations before equity in earnings of
unconsolidated joint ventures
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|
|
|
|
|
|
|
|
|
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(3,300
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)
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|
|
591
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|
|
|
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(3,230
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)
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|
|
2,004
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Equity in earnings of unconsolidated joint ventures, net
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|
|
|
|
|
|
|
|
|
|
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2,055
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|
|
|
1,707
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|
|
|
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4,861
|
|
|
|
3,293
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Income before income tax expense
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|
|
(1,245
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)
|
|
|
2,298
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|
|
|
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1,631
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|
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5,297
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Income tax expense
|
|
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(434
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)
|
|
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627
|
|
|
|
|
464
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|
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1,647
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Net income
|
|
|
(811
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)
|
|
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1,671
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|
|
|
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1,167
|
|
|
|
3,650
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Net loss attributable to non-controlling interest
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|
|
(23
|
)
|
|
|
(81
|
)
|
|
|
|
(68
|
)
|
|
|
(89
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)
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Net income attributable to common stockholders
|
|
|
(788
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)
|
|
|
1,752
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|
|
|
|
1,235
|
|
|
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3,739
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Net income per share to common stockholders, basic
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|
$
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(0.04
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)
|
|
$
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0.09
|
|
|
|
$
|
0.06
|
|
|
$
|
0.18
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|
Net income per share to common stockholders, diluted
|
|
$
|
(0.04
|
)
|
|
$
|
0.08
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|
|
|
$
|
0.06
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|
|
$
|
0.18
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Weighted average number of shares outstanding:
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Common stock
|
|
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20,669,348
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20,591,529
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20,658,750
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|
|
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20,582,082
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Common stock equivalents – stock options
|
|
|
79,544
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|
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32,006
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|
|
|
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70,969
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|
|
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33,100
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Diluted shares outstanding
|
|
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20,748,892
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|
|
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20,623,535
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|
|
|
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20,729,719
|
|
|
|
20,615,182
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