#USA #Tejon Ranch #Strathmore Capital #Matthew Walker #Wellington, Florida

Strathmore Capital Calls for Action from Tejon Ranch

In a recent letter addressed to the Board of Directors of Tejon Ranch Co. (NYSE:TRC), Strathmore Capital, Inc., a long-term shareholder, expressed important concerns regarding the company's financial management. The firm highlighted the need for strategic changes, particularly focusing on slashing general and administrative (G&A) expenses and enhancing free cash flow production.

Commendation for Initial Steps

Strathmore Capital commended CEO Matthew Walker for taking a commendable step by appointing an internal employee as interim CFO. This move has been lauded as a sign towards reducing executive overhead costs, which is an essential first step in fostering fiscal prudence within the organization. However, Strathmore believes substantial additional cuts are necessary for unlocking Tejon's full operational potential.

Areas of Concern for Tejon Ranch

According to Strathmore's analysis, a significant portion of the income generated by Tejon Ranch comes from relatively passive revenue streams, which include royalties and land leases. Despite this, the company maintains an extensive executive structure, with five Vice Presidents of Real Estate among its ranks, including one who recently averaged nearly $1 million in annual compensation. Given the passive nature of Tejon's income stream, Strathmore questions the necessity of sustaining multiple senior executives in this domain.

In addition to the real estate executives, Tejon employs numerous personnel in communication and public affairs roles. Strathmore argues that one officer could manage this aspect effectively, suggesting that much of the current expenditure in this area is unjustified.

Recommendations for Corporate Restructuring

Strathmore Capital emphasized the urgent need for Tejon's Board to support CEO Walker in implementing significant cuts. The letter advocated for a reassessment of the Board's size, which currently consists of ten members—a number considered excessive for a company of Tejon's scale. Reducing the Board could yield immediate cost savings.

Additionally, Strathmore pointed out an unnecessary consulting contract awarded to the former CEO, valued at about $1 million annually, as demonstrative of the pervasive waste within Tejon's corporate budget.

Rebuilding Trust and Shareholder Value

The firm acknowledged Mr. Walker's commitment to shareholder engagement as a positive move. For Strathmore, restoring investor confidence hinges on the ability of leadership to deliver tangible value, something they feel has been long overdue. They assert that achieving this investor mandate necessitates empowering Walker to execute needed cost reductions that would redefine the company’s financial landscape.

The letter concludes with a strong call to action, underscoring the importance of ending longstanding practices that have not prioritized shareholder interests. Strathmore conveyed its aspiration to see Tejon Ranch transform into a more efficient and shareholder-centric company, moving away from a history typified by fiscal inefficiency.

For over forty years, it has been observed that Tejon Ranch's operating cost structure has not adequately prioritized the interests of its shareholders, resulting primarily from insufficient oversight and accountability. Strathmore Capital's plea heralds a potential turning point, emphasizing that the legacy trends must give way to a focus on operational efficiency that benefits all stakeholders involved at Tejon Ranch.