LA JOLLA, Calif., Aug. 11, 2008 (PRIME NEWSWIRE) -- PICO Holdings, Inc. (Nasdaq:PICO) reported shareholders' equity of $518.6 million ($27.53 per share) at June 30, 2008, compared to $525.1 million ($27.88 per share) at March 31, 2008, and $525.9 million ($27.92 per share) at December 31, 2007.
In April, 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 approximately $30 million to net income for the second quarter and first half of 2008, 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.
During the first half of 2008, shareholders' equity declined by $7.3 million, representing a decrease in book value per share of 1.4%. The principal reason for the decline in shareholders' equity was a reduction of approximately $11.1 million in net unrealized appreciation in investments other than Jungfraubahn.
Commenting on the year to date, PICO's President and Chief Executive Officer, John Hart, said:
"In July, our subsidiary Fish Springs Ranch, LLC dedicated the Fish Springs pipeline and related infrastructure to Washoe County, Nevada, per the previously announced Infrastructure Dedication Agreement. Under this agreement, Washoe County is now responsible for the operation and maintenance of the Fish Springs pipeline, and Fish Springs has the exclusive right to use the pipeline to convey water to the north valleys of Reno, Nevada. As a result, the 8,000 acre-feet of water from Fish Springs is now available for sale. During the current third quarter, ending September 30, 2008, we expect to close on the sale of 119.5 acre-feet of water at a price of $45,000 per acre-foot.
"During the second quarter, Vidler Water Company began construction of the infrastructure needed 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 approximately 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.
"Also in July, after the end of the second quarter, Vidler closed on the sale of its remaining interest of 30,000 acre-feet of storage capacity in the Semitropic Water Banking and Exchange Program in California. The sale generated cash proceeds of $11.7 million, and is expected to add approximately $8.7 million before tax to income in PICO's third quarter. We still own approximately 10,000 acre-feet of water in storage at Semitropic, and we are actively pursuing the sale of this water.
"At Nevada Land & Resource Company, LLC, the level of sales is significantly lower than in recent years. During the first six months of 2008, we closed on the sale of 10,076 acres of land for $1.1 million, generating a gross margin of $773,000. Exploration is continuing for precious metals and geothermal energy sources. Currently we are managing seven geothermal leases, in varying stages of development with five different electricity-generating companies, and 22 precious minerals exploration leases covering approximately 28,000 acres. Nevada Land will earn royalties if geothermal energy plants or mines are ultimately developed.
"We are capitalizing on the slowdown in the real estate market, and particularly on the financial challenges facing developers and builders in select locations in central California, by continuing to build our new business, Union Community Partners. UCP was formed with the objective of acquiring attractive and well-located finished lots, partially-developed lots, and un-entitled land in select California markets, initially in the Fresno area. As of June 30, 2008, UCP has acquired or controls 57 finished lots and 1,033 lots in various stages of entitlement in and around Fresno. During July, we acquired a further 180 finished lots, and another 106 potential lots with tentative map approval, in the Fresno region. Our current focus is on finished and entitled, but unfinished, lots. We currently have six proposals out, which would lead to the acquisition of more than 700 lots, if all of the proposals are accepted and proceed to closing.
"Our insurance company investment portfolio, which now includes all of our holdings in Switzerland, generated a total return of -6.3% in the first six months of 2008, and was the principal cause of the decrease in PICO's shareholders' equity during the first half. While we are never happy with negative returns, this decline was significantly less than the broader market averages due to the defensive nature of our holdings, and the diversification away from the U.S. dollar and U.S. assets provided by our holdings in Switzerland, New Zealand, and Australia. We are confident that our holdings represent excellent value, and we are looking to add to a number of key shareholdings as the dust settles. In several cases, the best value we have seen in years has emerged as a result of stocks being sold down heavily to substantial discounts to underlying intrinsic value.
"In an environment where many have learned the downside of excessive leverage in an attempt to maximize short-term earnings, and are now looking to the federal government, sovereign wealth funds, and their own shareholders to bail them out, we continue to manage the Company and our assets conservatively. Our balance sheet remains very robust, with just under $149 million of cash available to the parent company and its non-insurance subsidiaries at June 30, 2008. Our only bank debt is approximately $22 million of borrowings denominated in Swiss Francs, which provide a partial hedge against our exposure to the U.S. Dollar: Swiss Franc exchange rate."
NET BOOK VALUE
The following summary is provided as a supplement to the financial statements contained in PICO's 10-Q, to illustrate the relative size of the Company's assets and activities.
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Segment Net Book Value Percentage
Water Resource and Water Storage
Operations $202.1 million 39.0%
Real Estate Operations 75.6 million 14.6%
Insurance Operations in "Run Off" 100.1 million 19.3%
Corporate 140.8 million 27.1%
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Shareholders' Equity $518.6 million 100.0%
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FIRST HALF SEGMENT RESULTS OF OPERATIONS
For the first half of 2008, PICO reported net income of $26.6 million ($1.41 per share), compared to a net loss of $3.2 million ($0.18 per share) in the first half of 2007.
Our segment results of operations for the first 6 months are:
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2008 2007
Income (Loss) Before Taxes &
Minority Interest By Operating
Segment:
Water Resource and Water Storage
Operations $(2,188,000) $(7,591,000)
Real Estate Operations 863,000 3,839,000
Insurance Operations in "Run Off" 5,708,000 2,563,000
Corporate 43,902,000 (3,055,000)
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Income (Loss) Before Taxes &
Minority Interest $48,285,000 $(4,244,000)
Income tax benefit (provision) (22,295,000) 1,052,000
Minority interest 606,000
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Net Income (Loss) $26,596,000 $(3,192,000)
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SECOND QUARTER SEGMENT RESULTS OF OPERATIONS
In the second quarter of 2008, PICO reported net income of $28.2 million ($1.49 per share), compared to a net loss of $3.7 million ($0.20 per share) in the second quarter of 2007.
Our second quarter segment results of operations are:
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2008 2007
Income (Loss) Before Taxes &
Minority Interest By Operating
Segment:
Water Resource and Water Storage
Operations $(1,228,000) $(7,209,000)
Real Estate Operations 441,000 1,639,000
Insurance Operations in "Run Off" 4,498,000 862,000
Corporate 42,559,000 (981,000)
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Income (Loss) Before Taxes &
Minority Interest $46,270,000 $(5,689,000)
Income tax benefit (provision) (18,328,000) 1,976,000
Minority interest 300,000
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Net Income (Loss) $28,242,000 $(3,713,000)
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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 449,000 acres of former railroad land in northern Nevada, and certain water, mineral and geothermal rights related to the property.
The PICO Holdings, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=5044
OTHER INFORMATION AND WHERE TO FIND IT
At June 30, 2008, PICO Holdings, Inc. had a market capitalization of $818.5 million, and 18,838,772 shares issued and outstanding (net of treasury stock).
Given the size and diversity of our asset base, this release only summarizes the most significant elements in our results for the first half of 2008. For fuller information on our principal activities and assets, recent developments, and the current outlook, we encourage all investors to read our Form 10-Q report for the second quarter of 2008, which has already been filed with the SEC. 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", that is statements related to future, not past, events, regarding, among other things, our financial condition, businesses, results of operations, and prospects, including, without limitation, statements concerning our 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". By their nature, forward-looking statements address matters that are, to different degrees, uncertain. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements (other than as may be required by law) and undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. 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 northern 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 subject to a number of risks, uncertainties, and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Such risks and uncertainties are detailed from time to time in PICO's filings with the U.S. Securities and Exchange Commission, including those described under the heading "Risk Factors" in our annual report on Form 10-K.