Discontinued Operations and Assets and Liabilities Held-for-Sale

3 Months Ended

Mar. 31, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations and Assets and Liabilities Held-for-Sale

Discontinued Operations and Assets and Liabilities Held-for-Sale

On April 10, 2017, UCP entered into an agreement with Century whereby each outstanding share of UCP common stock will be converted into $5.32 in cash and 0.2309 of a newly issued share of Century common stock. The Company anticipates owning approximately 9% of Century’s common stock outstanding at the close of the transaction and will classify such investment as available-for-sale in its consolidated financial statements. The transaction is expected to close by the end of the third quarter of 2017 and is subject to customary closing conditions. The common shares the Company will receive in the transaction are subject to an initial 60 day lock-up restriction. After the initial lock-up period, the Company is allowed to sell or transfer approximately 1.3 million of its Century shares every 50 days with the lock-up restrictions ending 210 days after the close.

As a result of the pending transaction, the Company will no longer have a controlling financial interest in UCP and will deconsolidate UCP when the transaction closes. The assets and liabilities of UCP qualified as held-for-sale at March 31, 2017 and have been classified as discontinued operations as of the earliest period presented. Consequently, prior periods presented have been recast from amounts previously reported to reflect the business as discontinued operations. The Company recorded an impairment loss of $7.1 million during the three months ended March 31, 2017, to write down the assets to their fair values as determined by the value of the transaction as of the date the transaction was announced. The final gain or loss is dependent on several variables which will not ultimately be known until the transaction closes (in thousands, except per share amounts):

	Shares and Per Share Amounts		Totals
Shares of UCP owned by the Company	10,402
Cash expected to be received	$	5.32	$	55,337
Shares of Century common stock expected to be received (0.2309 per share of UCP owned)	2,402
Value of Century common stock received (priced as of the announcement date)	$	26.10	$	62,686
Total consideration expected to be received			$	118,023
Carrying value of UCP at March 31, 2017 (reduced by $2.4 million in estimated tax distributions)			$	(125,171	)
Impairment loss on assets classified as held-for-sale			$	(7,148	)

Agribusiness:

In February 2017, the Company received the final $6 million that had been held in escrow for general indemnification claims related to the sale of its discontinued agribusiness operations. The Company guaranteed up to $8 million for any indemnification claims in excess of the $6 million general indemnification escrow pursuant to the terms of the sale. This guaranty will remain in force until July 31, 2020. The guaranty has been recorded at estimated fair value that reflects the Company’s expectation that no significant amounts will be paid out under the guaranty. However, any amounts paid by the Company in excess of the estimate will result in additional loss on the sale.

The following table presents the details of the Company’s results from discontinued operations included in the condensed consolidated statement of operations and comprehensive income or loss (in thousands):

	Three Months Ended March 31,
	2017			2016
Revenue and other income from discontinued real estate operations:
Sales of real estate	$	94,498		$	68,225
Other	448			27
Total revenue and other income	94,946			68,252
Cost of sales and expenses from discontinued real estate operations:
Cost of real estate sold	77,128			56,521
General, administrative, and other	8,215			7,465
Sales and marketing	5,149			4,429
Impairment loss on long-lived assets	102			—
Total cost of sales and expenses	90,594			68,415
Income (loss) before income taxes	4,352			(163		)
Provision for federal and state income taxes	521
Net income (loss) from discontinued real estate operations	3,831			(163		)
Net income (loss) from discontinued agribusiness operations, net of tax	56			(40		)
Total income (loss) from discontinued operations, net of tax	3,887			(203		)
Impairment loss on assets classified as held-for-sale, net of tax	(7,148		)
Income (loss) on sale of discontinued agribusiness operations, net of tax	2			(1,849		)
Net loss from discontinued operations, net of tax	(3,259		)	(2,052		)
Net (income) loss from discontinued operations attributable to noncontrolling interests	(1,391		)	60
Net loss from discontinued operations attributable to PICO Holdings, Inc.	$	(4,650	)	$	(1,992	)

The following table presents the details of the Company’s assets and liabilities classified as held-for-sale in the condensed consolidated balance sheets (in thousands):

	March 31, 2017			December 31, 2016
Real estate assets held-for-sale:
Cash and cash equivalents	$	34,270		$	40,931
Real estate	389,379			373,207
Accounts receivable	3,677			5,628
Other assets	15,322			14,418
Valuation allowance on assets held-for-sale	(7,148		)
Real estate assets held-for-sale	435,500			434,184
Agribusiness assets held-for-sale	67			6,505
Total assets held-for-sale	$	435,567		$	440,689
Real estate liabilities held-for-sale:
Debt, net	$	161,551		$	160,994
Account payable and accrued expenses	37,731			34,025
Other liabilities	14,415			12,271
Real estate liabilities held-for-sale	213,697			207,290
Agribusiness liabilities held-for-sale				276
Total liabilities held-for-sale	$	213,697		$	207,566