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PICO Holdings, Inc. Announces Fourth Quarter and Full Year 2008 Results
LA JOLLA, Calif., Mar 2, 2009 (GlobeNewswire via COMTEX News Network) -- PICO Holdings, Inc. (Nasdaq:PICO) reported shareholders' equity of $477.7 million ($25.36 per share) at December 31, 2008, compared to $501.3 million ($26.61 per share) at September 30, 2008, and $525.9 million ($27.92 per share) at December 31, 2007.
In July 2008, PICO's wholly-owned subsidiary Vidler Water Company, Inc. sold its remaining interest of 30,000 acre-feet of storage capacity in the Semitropic Water Banking and Exchange Program in California for $11.7 million. The sale added $8.7 million to pre-tax income for the third quarter and 2008 financial year.
In April 2008, PICO sold its 22.5% shareholding in Jungfraubahn Holding AG, a publicly-traded Swiss corporation which operates railway and related tourism and transport activities in the Swiss Alps, for net proceeds of $75.3 million. The sale of Jungfraubahn added $46.1 million to pre-tax income for the second quarter and 2008 financial year, but only had a minimal effect on shareholders' equity and book value per share, as most of the gain and related tax effects had already been recorded in previous accounting periods in shareholders' equity, as a net unrealized gain.
Commenting on the 2008 financial year, PICO's President and Chief Executive Officer, John Hart, said:
"Although net income in 2008 was positive, driven by the sale of our interests in Jungfraubahn and Semitropic, PICO's book value per share declined by 9.2% during 2008, primarily due to a decrease in the unrealized appreciation in the investment portfolios of our insurance company subsidiaries.
"The financial crisis, and steep decline in investor and business confidence in the fourth quarter of 2008, had a negative impact on all of our businesses. We expect the slow down to persist for the foreseeable future, and cannot predict when activity will pick up. However, demographics remain favorable in our key markets, so we are confident in the long term prospects for our key water resource and real estate assets.
"Currently, the parent company and our non-insurance subsidiaries have more than $80 million in cash and liquid investments, and we expect to receive more than $16 million in tax refunds in the near future. With our robust balance sheet, we are well placed to weather the storm and to add to our existing assets and operations if we see companies and assets that are selling for prices that provide for a high probability of a superior rate of return with below average risk.
"We remain committed to being a hard asset' company, as it is highly likely that all of the funds being pumped into the financial system and economies around the world will lead to high rates of inflation in the medium term. In this environment, our hard assets of water resources, low-basis land in our real estate operations, and the asset-rich stocks in our insurance company investment portfolios should provide a safe haven with above average returns.
"Vidler's most important asset is the Fish Springs water credits, which represent the only source of new water supply available to developers in the north valleys of Reno. Due to our financial structure, we are under no pressure to sell any asset at less than full value. Given long-term demographics, these unique assets should continue to increase in value. As and when the real estate market in the area begins to recover, developers will need to secure water supplies before they can obtain permits and begin new development.
"Vidler is also actively developing new water resources for municipal and industrial use. In particular, Vidler is constructing the infrastructure required to connect the municipal water systems of Carson City, Nevada and Lyon County, Nevada. In addition, Vidler has acquired or has the right to acquire water rights in the area, which, on completion of the project, could result in more than 4,000 acre-feet of water being available for municipal and industrial use in the Dayton corridor of Lyon County, where there is only limited water available to support development. We anticipate that most of the water will be delivered through the new infrastructure, which has an estimated total capital cost of approximately $23 million over a four to six year period.
"At Nevada Land & Resource Company, the level of sales was significantly lower than in recent years. During 2008, we closed on the sale of 17,097 acres of land for $2.3 million, which generated a gross margin of $1.6 million. Exploration activity on properties that we have leased to mining and geothermal companies continues for precious metals and geothermal energy sources.
"During the fourth quarter of 2008, we expanded the business of our new subsidiary, Union Community Partners. UCP was formed to take advantage of the slowdown in the real estate market, and in particular the financial challenges facing developers and builders in select locations in central California, by acquiring attractive and well-located finished lots and partially-developed lots. At this stage, we are concentrating on the Fresno metropolitan area, due to the affordability of housing in the area and its relatively diversified economy. As of December 31, 2008, UCP has acquired or controls 389 finished lots and 1,501 potential lots in various stages of entitlement in and around Fresno.
"Our insurance company investment portfolio generated a total return of -41% in 2008, and was the principal cause of the decrease in PICO's shareholders' equity during the year. This decline was in line with the indices in the key stock markets we invest in, being the United States, Switzerland, New Zealand, and Australia. The decline was exacerbated by the counter-intuitive increase in the U.S. dollar during the last four months of 2008, which significantly reduced the U.S. dollar prices of our international holdings.
"The equity portfolios of our insurance companies are managed on an absolute value basis, using the 'Graham and Dodd' approach. Typically we buy stocks at a significant discount to our assessment of the value of the company's hard assets. We also own shares in operating companies, which are undervalued on the basis of their earnings and cash flow, and whose businesses have special or unique characteristics. We invest with a patient, long term orientation, with the intention of holding a stock until fair and full value is realized. The gap between market price and intrinsic value may persist for several years, and we typically hold stocks for 3 to 5 years, or longer. In many cases, we only sell a stock when the company is acquired by a third party. During periods of weakness in the broad stock market, such as 2008, the gap between market price and intrinsic value may widen, but we only sell the stock if it has reached our target, its fundamentals have deteriorated, or other changes limit upside potential on a risk-adjusted basis.
"Over time, we expect the stocks in our insurance company portfolios to generate significantly higher returns than if we were to solely invest in fixed-income securities and cash & cash equivalents. We assumed direct management of our insurance company portfolios in 2000. The subsequent eight years, which include the substantial market decline of 2008, have not been favorable for investors in the broad U.S. stock market, with the DJ Wilshire 5,000 Index declining by approximately 25%. Over the same eight year period, the insurance companies' investment portfolios generated a positive total return of approximately 44%, with the equities portion generating a total return of approximately 109%. Excluding 2008, the investment portfolios generated a total return of approximately 75%, with the equities portion generating a total return of approximately 244%.
"Just as we don't believe that the underlying businesses of the companies in which we hold shares in our insurance portfolios are worth 41% less than they were a year ago, we believe that the stock market sell-off has led to attractive buying opportunities, and during 2009 we see the potential to add to a number of key shareholdings at appealing discounts to underlying intrinsic value."
NET BOOK VALUE
The following summary is provided as a supplement to the financial statements contained in PICO's 10-K, to illustrate the relative size of the Company's assets and activities.
--------------------------------------------------------------------- Segment Net Book Value Percentage Water Resource and Water Storage Operations $206.4 million 43.2% Real Estate Operations 80.9 million 16.9% Insurance Operations in "Run Off" 64.4 million 13.5% Corporate 126.0 million 26.4% -------------- ---------- Shareholders' Equity $477.7 million 100.0% ---------------------------------------------------------------------
2008 FULL YEAR SEGMENT RESULTS OF OPERATIONS
For the 2008 financial year, PICO reported net income of $28.6 million ($1.52 per share), compared to a net loss of $1.3 million ($0.07 per share) in 2007.
Our segment results of operations for the past two years are:
--------------------------------------------------------------------- 2008 2007 Income (Loss) Before Taxes & Minority Interest By Operating Segment: Water Resource and Water Storage Operations $4,185,000 $(5,283,000) Real Estate Operations 366,000 8,109,000 Insurance Operations in "Run Off" (1,486,000) 9,779,000 Corporate 53,324,000 (10,591,000) ----------- ----------- Income (Loss) Before Taxes & Minority Interest $56,389,000 $2,014,000 Income tax benefit (provision) (28,491,000) (3,536,000) Minority interest 733,000 252,000 ----------- ----------- Net Income (Loss) $28,631,000 $(1,270,000) ---------------------------------------------------------------------
FOURTH QUARTER SEGMENT RESULTS OF OPERATIONS
In the fourth quarter of 2008, PICO reported net income of $1.5 million ($0.08 per share), compared to net income of $1.4 million ($0.08 per share) in the fourth quarter of 2007.
Our fourth quarter segment results of operations are:
--------------------------------------------------------------------- 2008 2007 Income (Loss) Before Taxes & Minority Interest By Operating Segment: Water Resource and Water Storage Operations $(1,002,000) $(626,000) Real Estate Operations (16,000) 2,783,000 Insurance Operations in "Run Off" (6,184,000) 5,950,000 Corporate 7,632,000 (3,513,000) ----------- ----------- Income (Loss) Before Taxes & Minority Interest $430,000 $4,594,000 Income tax benefit (provision) 1,018,000 (3,397,000) Minority interest 54,000 252,000 ----------- ----------- Net Income (Loss) $1,502,000 $1,449,000 ---------------------------------------------------------------------
PICO is a diversified holding company. PICO seeks to acquire, build and operate businesses where significant value can be created from the development of unique assets, and to acquire businesses which we identify as undervalued and where our management participation in operations can aid in the recognition of the business's fair value, as well as create additional value.
Our objective is to maximize long-term shareholder value. We manage our operations to achieve a superior return on net assets over the long term, as opposed to short-term earnings. Currently our two major businesses are Vidler Water Company, a water resource development business, and Nevada Land & Resource Company, one of the largest private landowners in the state of Nevada. Vidler is a significant private sector owner of water resources and water storage operations in Nevada, Arizona, Idaho, California, and Colorado. Nevada Land owns approximately 440,000 acres of former railroad land in northern Nevada, and certain water, mineral and geothermal rights related to the property. Our Real Estate Operations also include a new business, UCP, a developer of residential lots in central California. As of December 31, 2008, UCP has acquired or controls 389 finished lots and 1,501 potential lots in various stages of entitlement in the Fresno, California metropolitan area.
The PICO Holdings, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5044
OTHER INFORMATION AND WHERE TO FIND IT
At February 27, 2009, PICO Holdings, Inc. had a market capitalization of $414 million, and 18,840,392 shares outstanding.
Given the size and diversity of our asset base, this release only summarizes the most significant elements in our 2008 results. For fuller information on our principal activities and assets, recent developments, and the current outlook, we encourage all investors to read our Annual Report on Form 10-K for 2008, which has already been filed with the Securities and Exchange Commission. The report can be accessed on-line via our web-site (www.picoholdings.com), or you can call Carlene Wilbur (614-475-3178 ext. 255) to request a paper copy.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements relate to future, not past, events, regarding, among other things, our financial condition, business, results of operations, and prospects, including, without limitation, statements concerning our expectations, beliefs, intentions, anticipated developments, and other information concerning future matters. In this context, forward-looking statements often address our current expected future business and financial performance, and often contain words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "will", "may", "should", "could", "target", "projects", "contemplates", "estimates", "predicts", "potential", or "continue" and similar expressions or variations of such words. Such statements include, but are not limited to, statements regarding the timeline for delivery of water through the Fish Springs pipeline; the trend for increasing water demand in the southwestern United States, including the markets we address such as the north valleys of Reno; long term projections for population growth in the western United States and the availability of developable water and land assets or projects; the future demand for, and fair market value of, water resources and lands owned or controlled by us; and our growth plans. Such forward-looking statements are not guarantees of future performance, and are subject to a number of risks, uncertainties, and other factors which could cause actual results and outcomes to differ materially from future results and outcomes expressed, or implied by, such forward-looking statements. Such risks and uncertainties are detailed from time to time in PICO's filings with the SEC, including those described under the heading "Risk Factors" in our Annual Report on Form 10-K, as may be updated in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. We do not undertake to (and we expressly disclaim any obligation to) update our forward-looking statements, whether as a result of new information, subsequent events, or otherwise, in order to reflect any event or circumstance that may arise after the date of this press release. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.
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SOURCE: PICO Holdings, Inc.
PICO Holdings, Inc. Max Webb, Chief Financial Officer (858) 456-6022 ext. 216
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