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Section 1: 8-K (8-K)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 


 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): November 11, 2019

 


 

FARMLAND PARTNERS INC.

(Exact name of registrant as specified in its charter)

 


 

Maryland
(State or other jurisdiction
of incorporation)

 

001-36405
(Commission
File Number)

 

46-3769850
(IRS Employer
Identification No.)

 

4600 S. Syracuse Street, Suite 1450
Denver, Colorado
(Address of principal executive offices)

 

 

80237
(Zip Code)

 

Registrant’s telephone number, including area code: (720) 452-3100

 

Not Applicable

(Former name or former address, if changed since last report)

 


 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock

 

FPI

 

New York Stock Exchange

6.00% Series B Participating Preferred Stock

 

FPI.PRB

 

New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company x

 

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. x

 

 

 


 

Item 2.02.                                        Results of Operations and Financial Condition.

 

On November 11, 2019, Farmland Partners Inc. (the “Company”) issued a press release announcing its financial position as of September 30, 2019, results of operations for the three and nine months ended September 30, 2019 and other related information. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Company intends to make certain supplemental information concerning the Company’s financial results and operations for the three and nine months ended September 30, 2019 available on its website www.farmlandpartners.com under the section “Investor Relations — Presentations” prior to the Company’s conference call with investors on Tuesday, November 12, 2019 at 11:00 a.m. (Eastern Time).

 

In accordance with General Instruction B.2 of Form 8-K, the information included in this Current Report on Form 8-K, including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing made by the Company under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01.                                        Financial Statements and Exhibits.

 

Exhibit
No.

 

Description

 

 

 

99.1*

 

Press release dated November 11, 2019.

 


*  Furnished herewith.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

FARMLAND PARTNERS INC.

 

 

 

Dated: November 12, 2019

By:

/s/ Luca Fabbri

 

 

Luca Fabbri

 

 

Chief Financial Officer and Treasurer

 

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Section 2: EX-99.1 (EX-99.1)

Exhibit 99.1

 

Farmland Partners Inc. Reports Third Quarter 2019 Results

 

DENVER, November 11, 2019 /PRNewswire/ - Farmland Partners Inc. (NYSE: FPI) (the “Company”) today reported financial results for the quarter ended September 30, 2019.

 

“Despite the disappointing quarterly results, largely due to non-recurring events, we are comfortable with the quality of our assets and the continued long-term appreciation trends indicated by the annual USDA Land Value Survey published in August,” said Paul A. Pittman, the Company’s CEO. “We look forward to an eventual recovery in the ag economy after the compounded impact of negative international trade conditions and extreme weather events.”

 

Financial Results

 

The Company’s financial performance for the three and nine months ended September 30, 2019, was impacted by a number of factors, including but not limited to the timing of certain variable rent payments, asset sales, costs related to adverse weather events, the impact of trade conflicts on tree nut prices, alternate bearing nature of pistachio yields, and litigation expenses. These negative factors were partially offset by a reduction in general and administrative expenses. Management believes that the Company’s financial performance for periods shorter than the full year are not necessarily indicative of the expected full year comparison because the majority of bonus and crop share rent payments are expected to be received in the fourth quarter.

 

For the three months ended September 30, 2019, the Company recorded a net loss of $1.5 million and a basic net loss to common stockholders of $0.15 per share, as compared to net income of $4.2 million and a basic net income to common stockholders of $0.02 per share for the same period during 2018. For the nine months ended September 30, 2019, the Company recorded net income of $5.1 million and a basic net loss to common stockholders of $0.16 per share, as compared to net income of $5.6 million and a basic net loss to common stockholders of $0.14 per share for the same period during 2018.

 

For the three months ended September 30, 2019, the Company recorded Adjusted Funds from Operations (“AFFO”) of -$2.0 million and AFFO per fully diluted share of -$0.06, as compared to AFFO of $0.7 million and AFFO per fully diluted share of $0.02 for the same period during 2018. For the nine months ended September 30, 2019, the Company recorded AFFO of -$4.6 million and AFFO per fully diluted share of -$0.14, as compared to AFFO of $0.9 million and AFFO per fully diluted share of $0.02 for the same period during 2018.

 

For the three months ended September 30, 2019, the Company recorded Adjusted Earnings Before Interest Taxes Depreciation and Amortization for real estate (“Adjusted EBITDAre”) of $5.9 million, as compared to $8.8 million for the same period during 2018. For the nine months ended September 30, 2019, the Company recorded Adjusted EBITDAre of $19.5 million, as compared to $24.1 million for the same period during 2018.

 

See “Non-GAAP Financial Measures” for complete definitions of AFFO and Adjusted EBITDAre and the financial tables accompanying this press release for reconciliations of net income to AFFO and Adjusted EBITDAre.

 

Operating Results

 

For the three months ended September 30, 2019, the Company recorded total operating revenues of $9.8 million, as compared to $12.5 million for the same period during 2018. For the nine months ended September 30, 2019, the Company recorded total operating revenues of $31.7 million, as compared to $35.2 million for the same period during 2018.

 

For the three months ended September 30, 2019, the Company recorded total operating income of $3.2 million and net operating income (“NOI”) of $7.8 million, as compared to total operating income of $6.2 million and NOI of $11.0 million for the same period in 2018. For the nine months ended September 30, 2019, the Company recorded total operating income of $11.7 million and NOI of $25.5 million, as compared to total operating income of $16.2 million and NOI of $29.9 million for the same period in 2018.

 

See “Non-GAAP Financial Measures” for a complete definition of NOI and the financial tables included in this press release for reconciliations of net income to NOI.

 

1


 

Acquisition and Disposition Activity

 

During the quarter ended September 30, 2019, the Company completed a $1.1 million farm disposition, resulting in a $0.4 million gain over gross book value.

 

Balance Sheet

 

During the quarter ended September 30, 2019, the Company repurchased 243,541 shares of common stock at a weighted average price of $7.04 per share for an aggregate purchase price of $1.7 million. The Company also repurchased 1,900 shares of the Series B Participating Preferred stock at an average price of $23.85 per share for an aggregate purchase price of $0.05 million.

 

Following the quarter’s end, the Company’s Board of Directors authorized an increase in the Company’s share buyback program of $50.0 million. After such increase, total availability under the Company’s share buyback program is $51.9 million.

 

As of September 30, 2019, the Company had 31,980,634 shares of common stock outstanding on a fully diluted basis.

 

During the quarter the Company repaid $1.1 million in outstanding debt.

 

The Company had total debt outstanding of $512.9 million at September 30, 2019, compared to total debt outstanding of $525.3 million at December 31, 2018.

 

Dividend Declarations

 

The Company announced that its Board of Directors has declared a quarterly cash dividend of $0.05 per share of common stock and per Class A Common OP unit.  The dividends are payable on January 15, 2020, to stockholders and unit holders of record on January 1, 2020.

 

The Company also announced today that its Board of Directors has declared a quarterly cash dividend of $0.3750 per share of Series B Participating Preferred Stock. The dividends are payable on December 31, 2019 to holders of Series B Participating Preferred Stock of record on December 13, 2019.

 

Conference Call Information

 

The Company has scheduled a conference call on November 12, 2019 at 11:00 a.m. (Eastern Time) to discuss its financial results for the quarter ended September 30, 2019. The call can be accessed live over the phone toll-free by dialing 1-866-262-6804 (U.S.), or 1-855-669-9657 (Canada), or 1-412-902-4107 (International).  Participants can reference the Farmland Partners Inc. Third Quarter 2019 Earnings Call. The conference call will also be available via a live listen-only webcast and can be accessed through the Investor Relations section of the Company’s website, www.farmlandpartners.com. A replay of the conference call will be available beginning November 12, 2019 at 1:00 p.m. (Eastern Time) until December 6, 2019 at 11:59 p.m. (Eastern Time), by dialing 1-877-344-7529 (U.S.), or 1-855-669-9658 (Canada), or 1-412-317-0088 (International); passcode: 10136766. A replay of the webcast will also be accessible on the Investor Relations section of the Company’s website for a limited time following the event.

 

About Farmland Partners Inc.

 

Farmland Partners Inc. is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of the date of this release, the Company owns approximately 158,000 acres in 17 states, including Alabama, Arkansas, California, Colorado, Florida, Georgia, Illinois, Kansas, Louisiana, Michigan, Mississippi, Nebraska, North Carolina, South Carolina, South Dakota, Texas and Virginia. We have approximately 26 crop types and over 100 tenants. The Company elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2014.

 

Forward-Looking Statements

 

This press release includes “forward-looking statements” within the meaning of the federal securities laws, including, without limitation, statements with respect to our outlook, proposed and pending acquisitions and dispositions, the potential impact of trade

 

2


 

disputes and recent extreme weather events on the Company’s results, financing activities, crop yields and prices and anticipated rental rates. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” or similar expressions or their negatives, as well as statements in future tense. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, beliefs and expectations, such forward-looking statements are not predictions of future events or guarantees of future performance and our actual results could differ materially from those set forth in the forward-looking statements. Some factors that might cause such a difference include the following: general volatility of the capital markets and the market price of the Company’s common stock or Series B participating preferred stock, changes in the Company’s business strategy, availability, terms and deployment of capital, the Company’s ability to refinance existing indebtedness at or prior to maturity on favorable terms, or at all, availability of qualified personnel, changes in the Company’s industry, interest rates or the general economy, adverse developments related to crop yields or crop prices, the degree and nature of the Company’s competition, the timing, price or amount of repurchases, if any, under the Company’s share repurchase program, the ability to consummate acquisitions or dispositions under contract and the other factors described in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, and the Company’s other filings with the Securities and Exchange Commission.  Any forward-looking information presented herein is made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking information to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise.

 

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Farmland Partners Inc.

Consolidated Balance Sheets

As of September 30, 2019 (Unaudited) and December 31, 2018

(in thousands except par value and share data)

 

 

 

September 30,

 

December 31,

 

 

 

2019

 

2018

 

ASSETS

 

 

 

 

 

Land, at cost

 

$

934,799

 

$

957,516

 

Grain facilities

 

12,103

 

12,184

 

Groundwater

 

11,473

 

11,473

 

Irrigation improvements

 

53,751

 

53,458

 

Drainage improvements

 

12,311

 

12,271

 

Permanent plantings

 

52,089

 

52,989

 

Other

 

7,827

 

8,196

 

Construction in progress

 

10,835

 

10,262

 

Real estate, at cost

 

1,095,188

 

1,118,349

 

Less accumulated depreciation

 

(23,317

)

(18,202

)

Total real estate, net

 

1,071,871

 

1,100,147

 

Deposits

 

50

 

 

Cash

 

8,563

 

16,891

 

Notes and interest receivable, net

 

7,765

 

11,877

 

Right of use asset

 

104

 

 

Deferred offering costs

 

 

218

 

Deferred financing fees, net

 

196

 

261

 

Accounts receivable, net

 

5,347

 

6,136

 

Inventory

 

1,196

 

341

 

Prepaid and other assets

 

1,956

 

3,638

 

TOTAL ASSETS

 

$

1,097,048

 

$

1,139,509

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

LIABILITIES

 

 

 

 

 

Mortgage notes and bonds payable, net

 

$

511,393

 

$

523,641

 

Lease liability

 

104

 

 

Dividends payable

 

1,599

 

1,681

 

Derivative liability

 

1,815

 

865

 

Accrued interest

 

3,630

 

4,296

 

Accrued property taxes

 

2,630

 

1,666

 

Deferred revenue

 

248

 

238

 

Accrued expenses

 

4,256

 

3,581

 

Total liabilities

 

525,675

 

535,968

 

 

 

 

 

 

 

Series B Participating Preferred Stock, $0.01 par value, 100,000,000 shares authorized; 5,972,059 shares issued and outstanding at September 30, 2019, and 6,013,587 at December 31, 2018

 

142,861

 

143,758

 

Redeemable non-controlling interest in operating partnership, Series A preferred units

 

119,633

 

120,510

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

Common stock, $0.01 par value, 500,000,000 shares authorized; 30,076,842 shares issued and outstanding at September 30, 2019, and 30,594,592 shares issued and outstanding at December 31, 2018

 

292

 

300

 

Additional paid in capital

 

338,791

 

332,996

 

Retained earnings

 

179

 

4,852

 

Cumulative dividends

 

(47,268

)

(42,695

)

Other comprehensive income

 

(1,815

)

(865

)

Non-controlling interests in operating partnership

 

18,700

 

44,685

 

Total equity

 

308,879

 

339,273

 

 

 

 

 

 

 

TOTAL LIABILITIES, REDEEMABLE NON-CONTROLLING INTERESTS IN OPERATING PARTNERSHIP AND EQUITY

 

$

1,097,048

 

$

1,139,509

 

 

4


 

Farmland Partners Inc.

Consolidated Statements of Operations

For the three months ended September 30, 2019 and 2018

(Unaudited, in thousands except per share amounts)

 

 

 

For the Three Months Ended

 

 

 

September 30,

 

 

 

2019

 

2018

 

OPERATING REVENUES:

 

 

 

 

 

Rental income

 

$

9,111

 

$

11,216

 

Tenant reimbursements

 

458

 

984

 

Crop sales

 

(145

)

 

Other revenue

 

424

 

349

 

Total operating revenues

 

9,848

 

12,549

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

Depreciation, depletion and amortization

 

2,087

 

2,154

 

Property operating expenses

 

2,050

 

1,502

 

Acquisition and due diligence costs

 

 

34

 

General and administrative expenses

 

1,444

 

1,688

 

Legal and accounting

 

421

 

1,016

 

Other operating expenses

 

620

 

 

Total operating expenses

 

6,622

 

6,394

 

OPERATING INCOME

 

3,226

 

6,155

 

 

 

 

 

 

 

OTHER (INCOME) EXPENSE:

 

 

 

 

 

Other income

 

(147

)

(53

)

Loss (gain) on disposition of assets

 

18

 

(2,950

)

Interest expense

 

4,818

 

5,001

 

Total other expense

 

4,689

 

1,998

 

 

 

 

 

 

 

Net income before income tax expense

 

(1,463

)

4,157

 

 

 

 

 

 

 

Income tax expense

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

 

(1,463

)

4,157

 

 

 

 

 

 

 

Net (income) loss attributable to non-controlling interests in operating partnership

 

99

 

(518

)

 

 

 

 

 

 

Net income (loss) attributable to the Company

 

(1,364

)

3,639

 

 

 

 

 

 

 

Nonforfeitable distributions allocated to unvested restricted shares

 

(18

)

(15

)

Distributions on redeemable non-controlling interests in operating partnership, preferred units

 

(3,117

)

(3,140

)

 

 

 

 

 

 

Net loss available to common stockholders of Farmland Partners Inc.

 

$

(4,499

)

$

484

 

 

 

 

 

 

 

Basic and diluted per common share data:

 

 

 

 

 

Basic net (loss) available to common stockholders

 

$

(0.15

)

$

0.02

 

Diluted net (loss) available to common stockholders

 

$

(0.15

)

$

0.02

 

Basic weighted average common shares outstanding

 

29,497

 

32,222

 

Diluted weighted average common shares outstanding

 

29,497

 

32,222

 

Dividends declared per common share

 

$

0.05

 

$

0.05

 

 

5


 

Farmland Partners Inc.

Reconciliation of Non-GAAP Measures

For the three months ended September 30, 2019 and 2018

(Unaudited, in thousands except per share amounts)

 

 

 

For the three months ended
September 30,

 

(in thousands except per share amounts)

 

2019

 

2018

 

Net income (loss)

 

$

(1,463

)

$

4,157

 

(Gain) loss on disposition of assets

 

18

 

(2,950

)

Depreciation, depletion and amortization

 

2,087

 

2,154

 

FFO

 

642

 

3,361

 

 

 

 

 

 

 

Stock based compensation

 

481

 

406

 

Indirect equity offering costs

 

 

 

Real estate related acquisition and due diligence costs

 

 

34

 

Distributions on Preferred units

 

(3,117

)

(3,140

)

AFFO

 

$

(1,994

)

$

661

 

 

 

 

 

 

 

AFFO per diluted weighted average share data:

 

 

 

 

 

 

 

 

 

 

 

AFFO weighted average common shares

 

32,015

 

37,122

 

 

 

 

 

 

 

Net loss per share available to common stockholders

 

$

(0.15

)

$

0.02

 

Income available to redeemable non-controlling interest and non-controlling interest in operating partnership

 

0.11

 

0.09

 

Depreciation and depletion

 

0.07

 

0.06

 

Stock based compensation

 

0.02

 

0.01

 

(Gain) loss on disposition of assets

 

0.00

 

(0.08

)

Real estate related acquisition and due diligence costs

 

 

 

Distributions on Preferred units

 

(0.10

)

(0.08

)

AFFO per diluted weighted average share

 

$

(0.06

)

$

0.02

 

 

 

 

For the three months ended

 

 

 

September 30,

 

(in thousands)

 

2019

 

2018

 

Net income (loss)

 

$

(1,463

)

$

4,157

 

Interest expense

 

4,818

 

5,001

 

Income tax expense

 

 

 

Depreciation, depletion and amortization

 

2,087

 

2,154

 

(Gain) loss on disposition of assets

 

18

 

(2,950

)

EBITDAre

 

$

5,460

 

$

8,362

 

 

 

 

 

 

 

Stock based compensation

 

481

 

406

 

Real estate related acquisition and due diligence costs

 

 

34

 

Adjusted EBITDAre

 

$

5,941

 

$

8,802

 

 

 

 

For the Three Months Ended

 

 

 

September 30,

 

 

 

2019

 

2018

 

OPERATING REVENUES:

 

 

 

 

 

Rental income

 

$

9,111

 

$

11,216

 

Tenant reimbursements

 

458

 

984

 

Crop sales

 

(145

)

 

Other revenue

 

424

 

349

 

Total operating revenues

 

$

9,848

 

$

12,549

 

 

 

 

 

 

 

Property operating expenses

 

2,050

 

1,502

 

NOI

 

$

7,798

 

$

11,047

 

 

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Non-GAAP Financial Measures

 

The Company considers the following non-GAAP measures as useful to investors as key supplemental measures of its performance: FFO, NOI, AFFO, EBITDAre and Adjusted EBITDAre. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income or loss as a measure of the Company’s operating performance. FFO, NOI, AFFO, EBITDAre and Adjusted EBITDAre, as calculated by the Company, may not be comparable to other companies that do not define such terms exactly as the Company.

 

FFO

 

The Company calculates FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT. NAREIT defines FFO as net income (loss) (calculated in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, plus real estate related depreciation, depletion and amortization (excluding amortization of deferred financing costs), and after adjustments for unconsolidated partnerships and joint ventures. Management presents FFO as a supplemental performance measure because it believes that FFO is beneficial to investors as a starting point in measuring the Company’s operational performance. Specifically, in excluding real estate related depreciation and amortization and gains and losses from sales of depreciable operating properties, which do not relate to or are not indicative of operating performance, FFO provides a performance measure that, when compared year over year, captures trends in occupancy rates, rental rates and operating costs. The Company also believes that, as a widely recognized measure of the performance of REITs, FFO will be used by investors as a basis to compare the Company’s operating performance with that of other REITs. However, other equity REITs may not calculate FFO in accordance with the NAREIT definition as the Company does, and, accordingly, the Company’s FFO may not be comparable to such other REITs’ FFO.

 

AFFO

 

The Company calculates AFFO by adjusting FFO to exclude the income and expenses that the Company believes are not reflective of the sustainability of the Company’s ongoing operating performance, including, but not limited to, real estate related acquisition and due diligence costs and stock-based compensation.

 

Changes in GAAP accounting and reporting rules that were put in effect after the establishment of NAREIT’s definition of FFO in 1999 result in the inclusion of a number of items in FFO that do not correlate with the sustainability of the Company’s operating performance.  Therefore, in addition to FFO, the Company presents AFFO and AFFO per share, fully diluted, both of which are non-GAAP measures.  Management considers AFFO a useful supplemental performance metric for investors as it is more indicative of the Company’s operational performance than FFO. AFFO is not intended to represent cash flow or liquidity for the period, and is only intended to provide an additional measure of the Company’s operating performance. Even AFFO, however, does not properly capture the timing of cash receipts, especially in connection with full-year rent payments under lease agreements entered into in connection with newly acquired farms. Management considers AFFO per share, fully diluted to be a supplemental metric to GAAP earnings per share. AFFO per share, fully diluted provides additional insight into how the Company’s operating performance could be allocated to potential shares outstanding at a specific point in time. Management believes that AFFO is a widely recognized measure of the operations of REITs, and presenting AFFO will enable investors to assess the Company’s performance in comparison to other REITs. However, other REITs may use different methodologies for calculating AFFO and AFFO per share, fully diluted and, accordingly, the Company’s AFFO and AFFO per share, fully diluted may not always be comparable to AFFO and AFFO per share amounts calculated by other REITs. AFFO and AFFO per share, fully diluted should not be considered as an alternative to net income (loss) or earnings per share (determined in accordance with GAAP) as an indication of financial performance, or as an alternative to net income (loss) earnings per share (determined in accordance with GAAP) as a measure of the Company’s liquidity, nor are they indicative of funds available to fund the Company’s cash needs, including its ability to make distributions.

 

EBITDAre and Adjusted EBITDAre

 

The Company calculates Earnings Before Interest Taxes Depreciation and Amortization for real estate (“EBITDAre”) in accordance with the standards established by NAREIT in its September 2017 White Paper. NAREIT defines EBITDAre as net income (calculated in accordance with GAAP) excluding interest expense, income tax, depreciation and amortization, gains or losses on disposition of depreciated property (including gains or losses on change of control), impairment write-downs of depreciated property and of investments in unconsolidated affiliates caused by a decrease in value of depreciated property in the affiliate, and adjustments to reflect the entity’s pro rata share of EBITDAre of unconsolidated affiliates.  EBITDAre  is a key financial measure used to evaluate the Company’s operating performance but should not be construed as an alternative to operating income, cash flows from operating

 

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activities or net income, in each case as determined in accordance with GAAP.  The Company believes that EBITDAreis a useful performance measure commonly reported and will be widely used by analysts and investors in the Company’s industry. However, while EBITDAre is a performance measure widely used across the Company’s industry, the Company does not believe that it correctly captures the Company’s business operating performance because it includes non-cash expenses and recurring adjustments that are necessary to better understand the Company’s business operating performance.  Therefore, in addition to EBITDAre, management uses Adjusted EBITDAre, a non-GAAP measure.

 

The Company calculates Adjusted EBITDAre by adjusting EBITDAre  for certain items such as stock-based compensation and real estate related acquisition and due diligence costs that the Company considers necessary to understand its operating performance. The Company believes that Adjusted EBITDAre provides useful supplemental information to investors regarding the Company’s ongoing operating performance that, when considered with net income and EBITDAre, is beneficial to an investor’s understanding of the Company’s operating performance. However, EBITDAre and Adjusted EBITDAre have limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under GAAP.

 

In prior periods, the Company has presented EBITDA and Adjusted EBITDA. In accordance with NAREIT’s recommendation, beginning with the Company’s reported results for the three months ended March 31, 2018, the Company is reporting EBITDAre and Adjusted EBITDAre in place of EBITDA and Adjusted EBITDA.

 

Net Operating Income (NOI)

 

The Company calculates net operating income (NOI) as total operating revenues (rental income, tenant reimbursements, crop sales and other revenue) less property operating expenses (direct property expenses and real estate taxes). Since net operating income excludes general and administrative expenses, interest expense, depreciation and amortization, acquisition-related expenses, other income and losses and extraordinary items, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and leasing farmland real estate, providing a perspective not immediately apparent from net income. However, net operating income should not be viewed as an alternative measure of the Company’s financial performance since it does not reflect general and administrative expenses, interest expense, depreciation and amortization costs, other income and losses.

 

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