Bloggers Comment on Q2 Earnings Call

As originally appeared in the Troubled Company Reporter.

PICO Holdings, Inc. (Nasdaq:PICO), based in La Jolla, Calif., is a diversified holding company reporting recurring losses since 2008. PICO owns 57% of UCP, Inc. (NYSE:UCP), 100% of Vidler Water Company, Inc., a securities portfolio and various interests in small businesses. PICO has $662 million in assets and $426 million in shareholder equity. Central Square Management LLC and River Road Asset Management LLC collectively own more than 14% of PICO. Other activists at have taken to the Internet to advance the shareholder cause.

The bloggers comment on PICO’s 2nd Quarter earnings call, held on August 8, 2016. “We at RPN have collectively listened to thousands of earnings calls over the years. We have NEVER, EVER listened to an earnings call where the independent chairman subordinated the CEO.

That PICO Chairman Raymond Marino presided over John Hart on the Q2 earnings call, speaks to Mr. Hart’s place in the PICO/UCP Industrial Complex. Juicer has been managerially neutered — and then some. He is not even entrusted to host PICO’s earnings calls anymore. To continue the canine analogy, Mr. Hart is on a short leash.

The flip side of the neutered-Juicer coin is Mr. Marino’s improvement in PICO’s shareholder communication. Mr. Marino left the call open until all questions were answered and addressed individual shareholders. Mr. Marino may not move at the speed of Usain Bolt and his tenure has thus far been devoid of boldness, but he has improved PICO’s communication with owners.”

Next, the bloggers have high praise for PICO shareholder, Andrew Shapiro. “RPN offers our sincere applause to Mr. Shapiro, head of Lawndale Capital Management. In his questioning of PICO representatives, Mr. Shapiro politely and diplomatically hit most of the tough issues. And he insisted on clarity when the answers came in a little vague.

Mr. Shapiro is an institutional investor who owns a decent chunk of PICO shares. He can get on the phone and speak with Mr. Marino or the other Directors when he wants. That Mr. Shapiro posed his questions on the earnings call speaks to his dedication to shareholder democracy. The entire PICO/UCP shareholder body benefited from the disclosure that was extracted by Mr. Shapiro. Thank you, Mr. Shapiro.”

The bloggers would like to correct a few statements that they feel are inaccurate. “At the beginning of the call, Juicer said, ‘. . . should an opportunity present itself to realize fair value for our present position in UCP, we would act on it.’ He said roughly the same thing at the end of the call.

RPN received a few emails asking about these statements. We feel that, once again, Juicer was being deceptive. Every company operates in the state of “if we receive an offer that reflects fair value, we would act on it.” That is the state of all publicly traded companies, 24 hours per day, 7 days per week.

A Board of Directors has a fiduciary duty to consider any and all viable offers. Shareholders can hold such Directors liable if they do not. Mr. Hart’s words do not represent a change in attitude at PICO towards its investee, UCP. We characterize Juicer’s statements as a deceptive attempt to buy time and dodge accountability.”

Continuing along this line, the bloggers question CEO Hart’s previous statements about UCP. “When it comes to UCP, over the last year, Juicer has flip flopped like an out-of-water mackerel. For the last 9 months, whenever asked about a monetization of UCP, Juicer had several dismissive replies. PICO has no control over UCP. The UCP Board had to be convinced to sell. PICO’s 57% stake was not controlling in the event of a viable offer. The LLC structure made a change of control complicated and untenable.

Now, all of a sudden on August 8, those obstacles to a UCP sale seem to have disappeared and Juicer is talking about offers and fair value and “act on it.”

Where did all the previously mentioned complications go Juicer?”

The bloggers conclude with a half-compliment. “Quantitatively, it was not a good quarter for PICO. However, the earnings call revealed that PICO intends to improve its communications with the owners of the business.

While positive, there is no reason for cartwheels; PICO’s improved communications policy is standard practice at any functional corporation. But since PICO shareowners are like abused children, even a pat on the head feels rewarding.”