Tejon Ranch Co.
Annual Report 2007

Plain-text annual report

Te j o n R a n c h C o m p a n y 2 0 0 7 A n n u a l R e p o r t T e j o n R a n c h C o m p a n y 2 0 0 7 A n n u a l R e p o r t R2_2433_covermech_final_v1.indd 1 R2_2433_covermech_final_v1.indd 1 4/15/08 1:20:00 AM 4/15/08 1:20:00 AM Tejo n Ranch Com pa ny page 1 Landscapes certainly look different when viewed from above. A view from 30,000 feet can give you perspective and the big picture, but you can miss the individual details that, together, give character and identity to what you’re viewing. The same thing can be true of a company. Often in our quest to see the big picture, we miss the individual components that make up a company – like its employees. We never want that to be the case at Tejon Ranch Company. We believe the strength of our Company comes from talented individual employees who work together to achieve what is best for the Company, its shareholders – and for California – as we pursue our vision to “Preserve California’s Legacy” and “Provide for California’s Future.” R3_2433_interior_final_v1.indd 1m1-1 R3_2433_interior_final_v1.indd 1m1-1 4/15/08 2:34:03 AM 4/15/08 2:34:03 AM pa g e 2 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 3 To our valued shareholders: In 2007, I celebrated my 11th anniversary at today – not because it’s been untouched – Tejon Ranch. As I look back at where we but because we’ve purposefully taken good were eleven years ago and where the Company care of the land. is today, the differences are striking. We’ve transitioned Tejon Ranch Co. from primarily The Ranch Vision calls for more acreage to a ranching and agricultural operation to be devoted to conservation and preservation a diversified real estate development and than for any other purpose. We believe this is agribusiness company. In the process, we have good for the land and for our shareholders. developed and articulated a long term vision Conservation land certainly possesses its to guide the Company as it moves forward. own intrinsic value. But even if the land The guiding principles behind the Tejon was never part of a transaction, experience Ranch Vision are the Ranch’s historic core teaches that significant conservation areas values of conservation and good stewardship. often greatly increase the value of the lands The Vision identifi es those values and activities surrounding them. we believe to be important and defi nes our areas of concentration for the next 25 to 30 years. Not only does this commitment to conservation involve our land, it also extends First, the Tejon Ranch Vision outlines our to the wildlife on the Ranch. We continue to long-standing commitment to conservation. work with the U.S. Fish and Wildlife Service Tejon Ranch has often been described as on plans to conserve habitat for endangered a “jewel,” an unspoiled natural landscape species, including the California condor. Last of great beauty. Such a description not year we announced a ban on the use of lead only reflects Tejon’s God-given physical ammunition on the Ranch, an action hailed by attributes, but serves as testimony to our good condor experts as the most important step we stewardship. Tejon Ranch has experienced a could take to enhance the condor’s recovery. great deal of physical activity over the years, including the building of the California Tejon Ranch is authentic California and Aqueduct as well as construction of a number our Vision calls for us to continue with the of utility easements that cross the Ranch. The historic activities that have taken place on truth is Tejon Ranch is in the condition it’s in the Ranch over the years. Ranching, farming Tejon Ranch is located approximately 60 miles north of Los Angeles and 30 miles south of Bakersfi eld. At nearly 270,000 acres, it’s the largest contiguous piece of private property in California. and hunting are the epitome of what it means to “Preserve California’s Legacy” and “Provide for California’s Future.” Our ranching and farming operations not only preserve an important legacy on the Ranch, R3_2433_interior_final_v1.indd 2-3 R3_2433_interior_final_v1.indd 2-3 4/15/08 1:04:11 AM 4/15/08 1:04:11 AM pa g e 4 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 5 they also provide food for California and Last year was certainly not a banner year the rest of the world. This land was hunted for the residential real estate market and long before the first European ever set foot experts are divided as to when we might see on the territory they named “Tejon,” and a significant recovery. But while the current our renowned wildlife management operation down cycle could potentially impact the is helping maintain the healthiest and timing of the commencement of construction most diverse wildlife population you’ll find of Centennial and/or Tejon Mountain in California. Village, it will have no impact on the size, scope and scale of the overall plan. Both The Tejon Ranch Vision also calls for using communities will be built in phases over a small portion of the Ranch to build high a 15 to 25 year time frame and could quality, environmentally sensitive communities. experience several real estate cycles during Together with our partners in our planned their build out periods. residential communities of Centennial and Tejon Mountain Village, we are working We saw good progress last year at Tejon diligently to finish the Environmental Impact Industrial Complex (TIC). In April, the Reports (EIR) for those two communities. 5th District Court of Appeals affirmed a Largely due to court decisions and other legal lower court ruling allowing the expansion actions, the process of complying with the of TIC to the east side of Interstate 5. This California Environmental Quality Act has important victory clears the way for us to become increasingly complex and costly. commence with construction on the east side Changes in standards and regulations often of the freeway, beginning with a new travel require changes to EIRs. For example, center. That construction, along with other the EIRs for both Centennial and Tejon infrastructure work needed to prepare the Mountain Village will now have sections site for additional commercial and industrial devoted to an analysis of greenhouse gas offerings, is expected to begin later this year. emissions. Twelve months ago that would The Company realized a significant gain last not have been necessary. year when the Tejon-Dermody warehouse was sold to ProLogis. Our 50% interest in the building generated $8.7 million in before- tax income. We also added more commercial offerings at TIC last year, including a new In-N-Out Burger. On the industrial side, a 606,000-square-foot building begun in 2007 in conjunction with our partnership with R3_2433_interior_final_v1.indd 4-5 R3_2433_interior_final_v1.indd 4-5 4/15/08 1:04:24 AM 4/15/08 1:04:24 AM pa g e 6 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 7 Rockefeller Group Development Corporation We are very proud of our people. They are is now complete. IKEA is currently occupying smart and dedicated and work well together. much of the building on a month-to-month That’s important because teams play a vital basis while we pursue a permanent tenant. role at Tejon Ranch. They allow us to combine Our partnership with The Rockefeller Group the expertise and experience of individuals is also planning to begin construction this from different and diverse departments and year on a separate, slightly smaller facility at TIC. bring them together to accomplish a common goal. We recognize, as did Ken Blanchard, that We recognize that what we’ve already “none of us is smarter than all of us.” accomplished, and what we hope to achieve in the years to come, doesn’t happen alone. All Tejon Ranch employees are highly qualified It takes the combined efforts of our and are critical to our success as a company. employees and our partners. In last year’s Our intention, in shining the spotlight on annual report, we looked outward at the just a few, is not to infer that some are more strategic partnerships we’ve formed to help important than others. Rather, we present us carry out our business plan. This year them as examples of how we use teams from we’d like to focus our attention inward and different departments and divisions to highlight some of the many internal cross- move the company forward. The ones we are departmental teams who are working to help highlighting in this year’s annual report, our us realize the Tejon Ranch Vision. Conservation, Water and Real Estate teams, are simply representative of many others that exist throughout the organization. All our teams share the same goal – to execute the Tejon Ranch Vision and build shareholder value. Thank you for your confidence as we move ahead, together, in that pursuit. Robert A. Stine President & CEO R3_2433_interior_final_v1.indd 6-7 R3_2433_interior_final_v1.indd 6-7 4/15/08 1:04:29 AM 4/15/08 1:04:29 AM R3_2433_interior_final_v1.indd 8-9 R3_2433_interior_final_v1.indd 8-9 4/15/08 1:04:31 AM 4/15/08 1:04:31 AM pa g e 1 0 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 11 CONSERVATION TEAM Conservation and good stewardship are fundamental principles at Tejon Ranch, identified in the Company’s mission statement as core values that guide and influence everything we do. We believe we have a responsibility to continue that legacy of good stewardship that pre-dates the establishment of Tejon Ranch in 1843 and its subsequent purchase by General Edward Fitzgerald Beale a decade or so later. From the native Americans who first inhabited the land, to the Beales, to the Chandlers, to today, Tejon Ranch recognizes that the beauty and integrity of the land is the Ranch’s single greatest asset. Good stewardship is not something that happens by itself. The very concept of stewardship involves active management. That certainly has been the history at the Ranch. From grazing and farming practices, to wildlife management, to limiting access, Tejon Ranch’s stewardship of the land has been planned, intentional and successful. That’s quite an accomplishment considering we are dealing with an area larger than the city limits of Los Angeles. The Ranch is in the condition it’s in today because it’s been actively cared for, evidence of our fundamental core values of conservation and good stewardship. It requires a variety of disciplines to ensure Tejon Ranch is properly cared for. That’s why the Ranch’s Conservation team is made up of members from a number of different departments. Some, like those from our Ranch Operations department, are responsible for the maintenance and monitoring of the physical condition of the Ranch. Others, from our Real Estate Planning and Entitlements department, for example, are involved in future conservation planning and interfacing with various resource agencies and groups. Our Geographic Information Systems department provides vital information critical to both the on going stewardship of the Ranch as well as future planning efforts. While these are just a few of the departments that play active roles in the conservation and stewardship of the Ranch, we’d like to highlight representatives from these respective departments as we introduce you to members of Tejon Ranch’s Conservation team. R3_2433_interior_final_v1.indd 10-11 R3_2433_interior_final_v1.indd 10-11 4/15/08 1:04:41 AM 4/15/08 1:04:41 AM pa g e 1 2 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 13 Donald N. Geivet Dennis Atkinson Vi c e P r e s i d e n t o f R a n ch O p e r a t i o n s biog raphy: Don Geivet’s tenure at Tejon Ranch is among the longest of any of our employees. He’s been a part of the Ranch for more than 35 years, beginning his career in 1972 as assistant manager of the Livestock division. In 1982 he was promoted to Manager of the Game Management/Special Services division and in 2005 was named Vice President of Ranch Operations. Don received his bachelor of science degree from Cal Poly San Luis Obispo. Over the past ten years he has been elected and served on the California and National Board of Directors for the National Wild Turkey Federation, and is a current member of several wildlife conservation organizations, including the Rocky Mountain Elk Foundation, Mule Deer Foundation and the Safari Club International. In 1998 he was presented with the Al Taucher Hunting Heritage Award in recognition of his outstanding contributions to the promotion of California’s rich hunting heritage. re spo ns ibilit es: As Vice President of Ranch Operations, Don is primarily responsible for overseeing the use and condition of the Ranch’s rangeland, and the flora and fauna that inhabit it. This includes the maintenance of all roads, water systems, fences and livestock and hunting facilities. Additionally, Don is responsible for the Wildlife Management division and works to ensure that the wildlife population on the Ranch stays healthy and in balance. As a member of the Conservation team, the Ranch Operations division works diligently to make sure that all ranch resources are used responsibly in order to create the maximum attainable value of the resources for future conservative uses. CONSERVATION TEAM “We conserve the things we value, and the condition of Tejon Ranch today is testament to the high regard we have always had for our land.” —Donald N. Geivet R3_2433_interior_final_v1.indd 12-13 R3_2433_interior_final_v1.indd 12-13 4/15/08 1:04:46 AM 4/15/08 1:04:46 AM pa g e 1 4 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 15 E. Andrew Daymude De nn is Atk in son Vi c e P r e s i d e n t , P l a n n i n g a n d E n t i t l e m e n t s biog raphy: Andrew Daymude joined Tejon Ranch nearly a decade ago. Andrew is a graduate of the University of Georgia School of Environmental Design where he earned a Bachelor of Landscape Architecture and Environmental Design. He is a registered landscape architect and is a member of the American Society of Landscape Architects, the American Planning Association, and a Regent of the California Architectural Foundation. Andrew has practiced in Hawaii and California, and has been blessed with many opportunities to touch majestic landscapes. responsibilities: As an “architect of the land,” his mission is to be mindful of the creator’s original handiwork and to comprehend all the natural, biological, scientifi c, economic, and political infl uences on any palette he encounters. With that mission in mind, Andrew is responsible for the environmental analysis and long range land planning for the Ranch. He coordinates the various conservation and community initiatives to ensure that the Tejon Ranch Vision is realized. He leads our team in the planning, design, and regulatory compliance related to future conservation areas, including Biological Mitigation Banks and Habitat Conservation Plans. He is the primary point of contact for various resource agencies, including the U.S. Fish and Wildlife Service and the California Department of Fish and Game. He is also working with the U.S. Forest Service and Pacifi c Crest Trail Association to realign a 37-mile portion of the 2,650-mile Pacifi c Crest Trail from its current location on the Antelope Valley fl oor to the picturesque highlands of the Ranch. CONSERVATION TEAM “Our Vision is simple, yet rich and complex. It continues our legacy of stewardship, our rich agricultural and ranching heritage, our commitment to supplying employment and housing opportunities to meet the imminent demands of California, all the while preserving the very best portions of the Ranch.” —E. Andrew Daymude R3_2433_interior_final_v1.indd 14-15 R3_2433_interior_final_v1.indd 14-15 4/15/08 1:04:49 AM 4/15/08 1:04:49 AM pa g e 1 6 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 17 Leah D. Metzger D i r e c t o r o f G e o g r a p h i c I n f o r m a t i o n S y s t e m s biog raphy: Leah Metzger has directed Tejon Ranch’s GIS department since 1999. Geographic Information Systems (GIS) are computer-based methods of recording, analyzing, combining, and displaying geographic information such as ownership, property boundary, tax parcels, roadways, hydrology, habitat types, soil and geology types, or any other feature that can be mapped on the ground. Leah joined Tejon following six years as GIS Coordinator for Paramount Farming Company. She also assisted in the coordination and implementation of the geographic information management system developed during the design and construction phase of the Kern Water Bank Authority’s 25,000-acre groundwater recharge facility. Leah has served on a number of professional organizations, including terms as president and vice president of the Central California Chapter of the Urban and Regional Information Systems Association (URISA). re spo nsi bilities: As Director of the GIS department, Leah’s primary role as part of the Conservation team is to manage and provide information related to the databases of numerous elements, such as wildlife movement corridors, wildlife habitat, vegetative communities, terrain, multi-specie flora and fauna, archeological surveys and water resources, to name a few. This is especially useful in management planning and land-use decisions, enabling members of the team to record physical conditions on the ground and track their change over time. GIS is a valuable tool which provides Tejon Ranch the ability to analyze and understand the geographical relationship between various resources, whether physical or geo-political, allowing management to make informed decisions regarding conservation policy and its impact to the Ranch. CONSERVATION TEAM “Working as a team in our conservation planning efforts, we are helping Tejon Ranch make the best possible decisions for the Company, its land, and the environment.” —Leah D. Metzger R3_2433_interior_final_v1.indd 16-17 R3_2433_interior_final_v1.indd 16-17 4/15/08 1:04:57 AM 4/15/08 1:04:57 AM pa g e 1 8 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 19 Water Team Water is the new gold of the 21st Century, especially in California. Its continued availability is crucial for California homeowners, businesses, industries and agriculture. Tejon Ranch is no exception. Having a long-term reliable source and supply of water is critical to the Ranch’s future. Fortunately, through a combination of location, geography, geology, and good planning, the Ranch is in an excellent position when it comes to water. Springs and creeks dot our nearly 270,000 acres. The California Aqueduct channels through the middle of the Ranch and we have long held rights to water from the State Water Project. Underground aquifers on the Ranch have proven ideal for water banking. Last year we stored nearly 6,600 acre feet of water in our newly established Tejon Ranch Water Bank, which is located in the Antelope Valley portion of the Ranch near Centennial. Several other areas of the Ranch may also be conducive to water banking. We certainly don’t take our strong position for granted. We operate under the philosophy that one can never have enough water. Our Water team is responsible for securing, storing and supplying sufficient water resources to meet the needs of our ranching, farming and real estate operations. From negotiating the purchase of water supplies from outside interests and agencies, to managing the storage and distribution of water throughout the Ranch, as well as maintaining water systems, perfecting water rights and ensuring regulatory compliance, our Water team plays a vital role in both the day-to-day and future operations of the Ranch. R3_2433_interior_final_v1.indd 18-19 R3_2433_interior_final_v1.indd 18-19 4/15/08 1:05:06 AM 4/15/08 1:05:06 AM pa g e 2 0 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 21 Dennis Atkinson De nn is J. At kinson Vi c e P r e s i d e n t o f A g r i c u l t u r e biog raphy: Dennis Atkinson has been employed by Tejon Ranch for more than 30 years. A graduate of Cal Poly San Luis Obispo, he is actively involved in agricultural organizations statewide. He is a past regional director of the State Farm Bureau, past president of the Kern County Farm Bureau, sits on the boards of the Glassy Wing Sharpshooter Board, the Kern Ag Foundation, and is on an advisory board for the University of California, Riverside. Dennis is also involved in a number of water agencies. He’s president of the Tejon Castac Water Agency, vice president of the Wheeler Ridge Water Agency and is a member of the Kern County Water Bank Authority board of directors. responsibilities: As head of Tejon Ranch Company’s agricultural operations, Dennis is responsible for all water related issues in our farming division. But with more than three decades at the Ranch, and three decades dealing with water policy, Dennis brings to the Water team a wealth of knowledge and experience regarding local, regional and statewide water matters. He understands the acquisition and distribution of water resources, and importantly, the relationships between various water agencies in California. He knows the big picture, the process and the players. “Providing for California’s Future is something we take very seriously. The Ranch has always been forward thinking, willing to take a long range view, looking ahead 30 to 40 years. We’ve found that what is good for California’s future is also good for the future of the Company.” —Dennis J. Atkinson Water Team R3_2433_interior_final_v1.indd 20-21 R3_2433_interior_final_v1.indd 20-21 4/15/08 1:05:11 AM 4/15/08 1:05:11 AM pa g e 2 2 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 23 Babalola A. Makinde-Odusola D i r e c t o r o f Wa t e r R e s o u r c e s biog raphy: Babs Makinde joined Tejon Ranch in the summer of 2007 from the City of Riverside, where he was a Senior Engineer in its Public Utilities Department. He is a licensed Civil Engineer and a Diplomate, American Academy of Water Resource Engineers. Babs’ water management experience in California has been at both the local and state levels, and he’s experienced in negotiating and protecting water rights and providing a long-term strategic vision for infrastructure. Babs is a member of the American Water Works Association and the National Groundwater Association. responsibilities: With a background in both urban and rural water management, Babs’ role on the Water team is to provide professional engineering expertise regarding the Ranch’s various water issues. He oversees operation of the Tejon Ranch Water Bank and serves as the point of contact for the Ranch’s involvement with state and local water agencies, including the California Department of Water Resources and the Tejon Castac Water District. “Tejon Ranch is more than just a ranch. It’s the most important link between southern and northern California for water, energy, communications and other vital infrastructure.” —Babalola A. Makinde-Odusola Water Team R3_2433_interior_final_v1.indd 22-23 R3_2433_interior_final_v1.indd 22-23 4/15/08 1:05:19 AM 4/15/08 1:05:19 AM pa g e 2 4 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 25 Dennis Atkinson Te r i A . Bjor n Vi c e P r e s i d e n t & G e n e r a l C o u n s e l biog raphy: Teri A. Bjorn has been Tejon Ranch Company’s General Counsel since January 2007. She brings to the position nearly 30 years of legal experience, with a specialization in transactional real estate and land use law. Her background and experience have given her a keen understanding of the essential component of water for any beneficial use on the land, from farming to real estate development. Teri earned both bachelor’s and master’s degrees in French language and literature from the University of Iowa and received her law degree from George Washington University in Washington, DC. Teri is a member of the American Bar Association, the California and Oregon Bar Associations, the Kern County Bar Association, and the Kern County Women Lawyers Association. responsibilities: As the attorney member of the Water team at Tejon Ranch, Teri oversees the legal assessment of the Ranch’s water supplies and needs for existing and planned activities, including the negotiation and closing of water asset purchases, and the protection of those assets. In addition to providing legal guidance on water issues, she also contributes business and government relations advice in an arena that’s becoming more and more politicized. “Combining the knowledge, experience and expertise of a land attorney, and agricultural and urban water experts, Tejon Ranch’s Water team is ensuring that the best decisions are being made for the Company, and for the water community as a whole.” —Teri A. Bjor n Water Team R3_2433_interior_final_v1.indd 24-25 R3_2433_interior_final_v1.indd 24-25 4/15/08 1:05:27 AM 4/15/08 1:05:27 AM pa g e 2 6 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 27 Real Estate Team Tejon Ranch’s Vision for the future calls for the use of a small portion of our land to create high-quality, environmentally sensitive communities. Each community that’s part of the plan is different, but together, they provide great variety and meet a broad range of needs while providing a wealth of opportunities. The industrial/commercial nature of Tejon Industrial Complex is geared toward job creation. Centennial’s wide mix of housing and employment opportunities will address the huge and persistent shortage of housing in Southern California while providing people an opportunity to work close to home. Tejon Mountain Village promises to be a world class destination and will set new standards for developing environmentally sensitive communities in beautiful natural areas. The Ranch’s real estate efforts will not only provide homes, jobs, recreational and economic opportunities for current and future generations of Californians, they will also help build value in the Company. The challenge for our Real Estate team is to execute that Vision. Even though that effort may be challenging, our team is certainly up to the task. Each of the communities are different in size, scale and approach; and are also at different points in the development process. Two of them – Centennial and Tejon Mountain Village – are in the fi nal planning and environmental review stage. At Tejon Industrial Complex, we’re actively marketing and building. Centennial and Tejon Mountain Village are being developed solely through partnerships. Tejon Industrial Complex includes a mix of partnerships, direct land sales and leases. All of this diversity requires our Real Estate team to possess a wide variety of skill sets, expertise and experience. Team members may be involved in planning or participating in the political process. Some are making deals or are making sure that the deals make sense fi nancially. Others are overseeing construction, ensuring that everything is built to Tejon Ranch standards. Working together, we’re moving forward. R3_2433_interior_final_v1.indd 26-27 R3_2433_interior_final_v1.indd 26-27 4/15/08 1:05:43 AM 4/15/08 1:05:43 AM pa g e 2 8 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 29 Kathleen J. Perkinson Vi c e P r e s i d e n t o f C o m m u n i t y D e v e l o p m e n t biog raphy: Kathy Perkinson joined Tejon Ranch in July 2007, bringing with her more than 20 years experience in the planning and development of master planned communities in California and Texas. She previously served as Managing Director for the Miller Family Companies, the master developer of Dos Vientos Ranch in Thousand Oaks, California; as General Manager of Wood Ranch in Simi Valley, California and Vice President Finance for Richland Interests, a Hines affiliate; and as Vice President and Senior Controller of Sugarland Properties Incorporated, the developer of First Colony in Sugar Land, Texas. Kathy earned her BS in Accountancy from the University of Illinois and is a Certified Public Accountant. She is a member of a number of professional organizations and is Chair of the Urban Land Institute Community Development Council. re spo nsi bilities: Centennial and Tejon Mountain Village are being developed in partnership with several major home building and real estate development companies. As such, it is important for Tejon Ranch to have someone serve as its primary representative in these partnerships, bringing leadership and experience to the project teams while also representing the Company’s interests. Kathy Perkinson has that important responsibility. The primary goal behind Centennial and Tejon Mountain Village is to develop high-quality, environmentally sensitive communities that will meet the housing, employment and lifestyle needs of Californians, while providing significant economic returns to the Company and its shareholders. From the planning and entitlement process, all the way through construction, sales and marketing, it is Kathy’s job to see this goal accomplished. Real Estate Team “It is exciting to contribute to the leadership of an organization whose core values exemplify responsible land planning by providing opportunities for current and future generations to live, work and recreate amid the natural beauty and heritage of Tejon Ranch.” —Kathleen J. Perkinson R3_2433_interior_final_v1.indd 28-29 R3_2433_interior_final_v1.indd 28-29 4/15/08 1:05:48 AM 4/15/08 1:05:48 AM pa g e 3 0 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 31 Bar ry G . Hibbard Vi c e P r e s i d e n t o f C o m m e r c i a l & I n d u s t r i a l D e v e l o p m e n t biog raphy: Now starting his tenth year at Tejon Ranch Company, Barry Hibbard oversees the development, sales and leasing for the 1,450-acre Tejon Industrial Complex (TIC). During that time he has sold, leased or developed 208 acres with 2.9 million square feet of industrial properties, and 87,000 square feet of freeway commercial/retail properties. Barry is a graduate of Michigan State University, where he earned a bachelor of science in finance, and California State University, Bakersfield, where he earned an MBA. He is an active member of National Association of Industrial and Office Properties (NAIOP) and the Council of Supply Chain Management Professionals (CSCMP). re spo ns ibilit ies: While Centennial and Tejon Mountain Village are in their final planning stages, Tejon Industrial Complex is entitled and growing. Leading TIC’s marketing and development effort makes Barry the Company’s primary sales person. He is responsible for determining how our commercial and industrial land can meet the needs of a growing California; identifying market opportunities; developing the product; telling the world that the product is available; and attracting world class companies to TIC, thereby creating core jobs in the community. Barry also interfaces with our two partners at TIC; Rockefeller Group Development Corporation and TA/Petro. As the Company’s first entitled development, TIC is projecting Tejon Ranch Company’s values of quality, stewardship and vision, to the local, state and national real estate communities. Real Estate Team “I see a unique, quiet confi dence and excitement in everyone working for Tejon Ranch. We are privileged to be a part of history and to be working for a purpose much larger than ourselves.” —Bar ry G. Hibbard R3_2433_interior_final_v1.indd 30-31 R3_2433_interior_final_v1.indd 30-31 4/15/08 1:06:05 AM 4/15/08 1:06:05 AM pa g e 3 2 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 33 H ugh F. McMahon IV Vi c e P r e s i d e n t o f F i n a n c e De nn is Atk in son biog raphy: Hugh McMahon began his career with Tejon Ranch Company in 2001. Prior to joining the Ranch, he was Director of Finance for Castle and Cooke’s mainland operations headquartered in Bakersfield, California. Hugh graduated with a bachelor of arts in economics from California State University, Fresno, and received an MBA from California State University, Bakersfield. He is also a graduate of Stanford University’s Financial Management Program, and Harvard University’s Real Estate Management Program. re spo ns ibilit ies: Hugh’s role on the Real Estate team is to engage in a relentless pursuit of value for the Company. His primary area of responsibility is to engage in the necessary financial analysis, project costing, and valuation modeling to make sure our real estate deals and developments make financial sense – for the Company and for shareholders. Hugh also works with our business partners to analyze deal structures and with lending institutions to obtain bank financing. Tejon Ranch is the largest contiguous piece of private property in California and as such, it contains a myriad of land leases, facility leases, and strategic easements for various uses, including commercial and industrial real estate, power generation and transmission, telecommunications, and oil and mineral extraction. Managing this diverse portfolio of leases is also Hugh’s responsibility. Real Estate Team “I am a developer by trade and a naturalist by heart. These two disciplines are not mutually exclusive, and must come together if we are to address the challenges posed by California’s growing population while minimizing the impact of that growth. I am proud to work for a company whose vision is guided by this principle.” —Hugh F. McMahon IV R3_2433_interior_final_v1.indd 32-33 R3_2433_interior_final_v1.indd 32-33 4/15/08 1:06:14 AM 4/15/08 1:06:14 AM pa g e 3 4 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 3 5 Fina n cia l Review Su mmary R3_2433_interior_final_v1.indd 34-35 R3_2433_interior_final_v1.indd 34-35 4/15/08 1:06:25 AM 4/15/08 1:06:25 AM pa g e 3 6 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 37 Consolidated Balance Sheets Consolidated Statements of Operations ($ in thousands) ASSETS Current assets: Cash and cash equivalents Marketable securities Accounts receivable Inventories Prepaid expenses and other current assets Total current assets Property and equipment, net Investments in unconsolidated joint ventures Other assets Total assets LIABIL ITIES AND S TOCKH OL DER S’ EQ UITY Current liabilities: Trade accounts payable Other accrued liabilities Deferred income Income taxes payable Current portion of long-term debt Total current liabilities Long-term debt, less current portion Long-term deferred gains Other liabilities Pension liability Stockholders’ equity Common stock, $.50 par value per share: Authorized shares - 30,000,000 Issued and outstanding shares - 16,899,982 in 2007 and 16,776,049 in 2006 Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity 2007 December 31 2006 $ $ $ 9,454 67,559 9,352 4,129 9,059 99,553 50,357 24,464 1,129 175,503 1,511 656 572 1,359 28 4,126 389 1,688 2,954 1,292 8,450 118,370 (2,071) 40,305 165,054 175,503 $ $ 4,662 73,404 7,835 2,578 7,481 95,960 $ $ 45,657 16,628 872 159,117 1,553 658 1,309 - 27 3,547 417 1,688 2,656 1,779 8,388 110,558 (2,888) 32,972 149,0301 159,117 $ ($ in thousands, except per share amounts) REVENUES Real estate - commercial/industrial Farming Total revenues Costs and expenses: Real estate - commercial/industrial Real estate - resort/residential Farming Corporate expenses Total expenses Operating loss OTHER INCOME (EXPENSE) Investment income Other Interest expense Total other income Income (loss) from continuing operations before equity in earnings of unconsolidated joint ventures Equity in earnings of unconsolidated joint ventures, net Income (loss) from operations before income tax provision (benefi t) Income tax provision (benefi t) Net income (loss) Net income (loss) per share, basic Net income (loss) per share, diluted 2007 16940 $ 15,404 32,344 12,427 3,512 10,432 8,547 34,918 (2,574) 3,509 55 (70) 3,494 920 10,580 11,500 4,167 $ $ $ 7,333 0.43 0.42 Year Ended December 31 2005 2006 $ 16,010 12,412 28,422 $ 13,063 13,297 26,360 11,231 3,408 9,324 13,173 37,136 (8,714) 2,975 119 (70) 3,024 (5,690) 1,247 (4,443) (1,714) $ (2,729) $ $ (0.16) (0.16) 9,271 2,496 7,514 7,881 27,162 (802) 2,565 384 (70) 2,879 2,077 423 2,500 954 1,546 0.09 0.09 $ $ $ R3_2433_interior_final_v1.indd 36-37 R3_2433_interior_final_v1.indd 36-37 4/15/08 1:06:30 AM 4/15/08 1:06:30 AM pa g e 3 8 2 0 0 7 A n n u a l R e p o r t Tejo n Ranch Com pa ny page 39 Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows ($ in thousands, except shares outstanding) Balance, December 31, 2004 Net income Changes in unrealized losses on available-for-sale securities, net of taxes of $553 Benefi t plan adjustments, net of taxes of $497 Equity in other comprehensive income of unconsolidated joint venture, net of taxes of $61 Comprehensive income Additional cost related to private placement Exercise of stock options and related tax benefi t of $989 Restricted stock issuance Stock compensation Balance, December 31,2005 Net income (loss) Changes in unrealized losses on available-for-sale securities, net of taxes of $104 Adjustment to initially apply FASB 158, net of taxes of $33 SERP liability adjustment, net of taxes of $84 Equity in other comprehensive income of unconsolidated joint venture, net of taxes of $5 Comprehensive income Exercise of stock options and related tax benefi t of $1,329 Restricted stock issuance Stock compensation Charitable contribution of stock Balance, December 31,2006 Net income Changes in unrealized losses on available-for-sale securities, net of taxes of $457 Benefi t plan adjustments, net of taxes of $44 SERP liability adjustment, net of taxes of $79 Equity in other comprehensive income of unconsolidated joint venture, net of taxes of $41 Comprehensive income Exercise of stock options and related tax benefi t of $343 Restricted stock issuance Stock compensation Balance, December 31, 2007 Common Stock Shares Outstanding 16,386,499 Additional Accumulated Other Paid-In Comprehensive Loss Capital $ (1,643) $ 91,388 Common Stock $ 8,193 Retained Earnings $ 34,155 Total $ 132,093 - 1,546 1,546 - - - - - - - - - - - - - - (737) (665) 80 (6) - - - - - 114,602 6,411 - 16,507,512 58 3 - 8,254 3,439 279 2,741 97,841 - - - (2,965) - - - 35,701 - - - - - 171,017 22,277 70,507 4,736 16,776,049 - - - - - - - - - - 85 12 35 2 8,388 - - - - - - - - - - 5,380 542 6,597 198 110,558 - - - - - - (2,729) 139 43 (111) 6 - - - - (2,888) - 692 67 120 (62) - - - - - - - - 32,972 7,333 - - - - (737) (665) 80 224 (6) - 3,497 282 2,741 138,831 (2,729) 139 43 (111) 6 (2,652) 5,465 554 6,632 200 149,030 7,333 692 67 120 (62) 8,150 101,539 22,394 - 16,899,982 51 11 - $ 8,450 2,436 (11) 5,387 $ 118,370 - - - $ (2,071) - - - $ 40,305 2,487 - 5,387 $ 165,054 ($ in thousands) OPER ATING ACTIVITIES Net income (loss) Items not affecting cash: Depreciation and amortization Deferred income taxes Tax benefi t from exercise of stock options Gain from sale of real estate Non-cash straight line rent income Non-cash expense of retirement plans Gain (loss) on sales of assets Equity in (earnings) of unconsolidated joint ventures, net Distribution of earnings from joint ventures Non-cash issuances of stock and stock compensation expense Excess tax benefi t from stock-based compensation Charitable contribution of stock Changes in certain current assets and current liabilities: Accounts receivable Inventories Prepaid expenses and other current assets Trade accounts payable and other accrued liabilities Current deferred income Income taxes payable Net cash provided by operating activities of continuing operations INVESTING ACTIVITIES Maturities of marketable securities Funds invested in marketable securities Reimbursement proceeds from community facilities district Proceeds from sale of real estate Distribution of equity from joint ventures Property and equipment disposals Property and equipment expenditures Investment in unconsolidated joint ventures Other Net cash used in investing activities of continuing operations FINANCING ACTIVITIES Payments on short-term debt Borrowing of short-term debt Repayment of long-term debt Additional cost relating to private placement Excess tax benefi t from stock-based compensation Exercise of stock options Net cash provided by fi nancing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year SUPPLEMENTAL CASH F LOW INFORMAT ION Interest paid (net of amounts capitalized) Taxes paid (net of refunds) 2007 Year Ended December 31 2005 2006 $ 7,333 $ (2,729) $ 1,546 2,410 (976) - (712) (562) 586 25 (10,580) 8,016 5,387 (343) - (1,802) (1.571) (338) (44) (25) 1,359 8,163 28,697 (21,944) 2,981 - 1,182 33 (9,887) (6,455) (438) (5.831) - - (27) - 343 2,144 2,460 4,792 4,662 $ 9,454 $ $ 70 2,813 2,176 (1,677) - (804) (735) 974 (29) (1,247) 1,200 7,186 (1,329) 200 895 (495) (193) (115) (12) (1,076) 2,190 14,910 (26,378) 3,524 2,667 14,735 41 (11,789) (126) (664) (3,080) (5,400) 5,400 (27) - 1,329 4,136 5,438 4,548 114 4,662 70 1,039 $ $ $ 2,264 (1,007) 989 (571) (945) 329 5 (423) - 3,023 - 691 (747) (19) 462 136 593 6,326 6,440 (12,188) - 742 1,298 46 (11,128) (374) (219) (15,383) - - (23) (6) - 2,508 2,479 (6,578) 6,692 114 70 376 $ $ $ R3_2433_interior_final_v1.indd 38-39 R3_2433_interior_final_v1.indd 38-39 4/15/08 1:06:30 AM 4/15/08 1:06:30 AM pa g e 4 0 2 0 0 7 A n n u a l R e p o r t Performance Graph The following graph is a comparison of cumulative total shareowner returns for the Company, the Dow Jones Equity Market Index, and the Dow Jones Real Estate Index for the period shown. comparison of five year cumulative total returns 280.00 240.00 200.00 s r a l l o d 160.00 120.00 80.00 40.00 Directors and Executive Offi cers Board of Directors Kent G. Snyder Chairman of the Board, Tejon Ranch Company; Real Estate Attorney John L. Goolsby Private Investments and Real Estate Barbara Grimm-Marshall Co-owner Grimmway Farms Norman Metcalfe Real Estate and Investments George G.C. Parker Dean Witter Distinguished Professor of Finance, Stanford Business School Robert C. Ruocco Principal, Carl Marks Management Company, L.P., Investment Management Geoffrey L. Stack Managing Director, SARES-REGIS Group, Real Estate Development and Management Robert A. Stine President and Chief Executive Offi cer, Tejon Ranch Company Michael H. Winer Portfolio Manager, Third Avenue Management LLC, Investment Management Executive Offi cers Robert A. Stine President and Chief Executive Offi cer Joseph E. Drew Senior Vice President – Real Estate Allen E. Lyda Vice President, Chief Financial Offi cer, Treasurer and Assistant Secretary Teri A. Bjorn Vice President, General Counsel and Secretary Dennis J. Atkinson Vice President – Agriculture Common Stock Information Quarter First Second Third Fourth high $ 56.95 50.89 47.72 44.51 2007 low $ 45.37 44.19 37.70 35.80 high $ 49.74 49.43 44.78 57.09 2006 low $ 39.71 38.43 37.55 41.10 0.00 12.31.02 12.31.03 12.31.04 12.31.05 12.31.06 12.31.07 As of February 26, 2008, there were 442 owners of record of our Common Stock. tejon ranch dj equity mkt dj real estate - Assumes $100 invested on December 31, 2002 - Total return assumes reinvestment of dividends - Fiscal year ending December 31 tejon ranch dj equity mkt dj real estate 2003 38.08% 30.75% 36.90% 2004 -0.51% 12.01% 31.22% 2005 -2.16% 6.32% 9.64% 2006 39.88% 15.57% 35.50% 2007 -26.84% 6.01% -18.15% The stock price performance depicted in the above graph is not necessarily indicative of future price performance. The Performance Graph will not be deemed to be incorporated by reference in any fi ling by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except that the Company specifi cally incorporates the Performance Graph by reference. The Dow Jones Real Estate Index, for the most part, includes companies which have revenues substantially greater than those of the Company. The Company is unaware of any industry or line-of-business index that is more nearly comparable. Corporate Directory Corporate Offi ce Tejon Ranch Company Post Offi ce Box 1000 4436 Lebec Road Lebec, California 93243 Telephone: (661) 248-3000 Securities Listing Tejon Ranch Company Common Stock is listed on the New York Stock Exchange under the ticker symbol: TRC Stock Transfer Agent and Registrar Mellon Investor Services LLC 85 Challenger Road Ridgefi eld Park, New Jersey 07660 Auditors Ernst & Young LLP Form 10-K A copy of this report and the Company’s Annual Report to the Securities and Exchange Commission on Form 10-k, without exhibits, will be provided without charge to any stockholder submitting a written request to the Corporate Secretary: Tejon Ranch Company Post Offi ce Box 1000 4436 Lebec Road Lebec, California 93243 All aerial imagery used by permission of DigitalGlobe, Inc. Copyright 2006-2008 - All Rights Reserved. For information on similar aerial imagery, contact Richard Schulman (858) 581-6682 or resourcestrategies@usa.net. R3_2433_interior_final_v1.indd 40-41 R3_2433_interior_final_v1.indd 40-41 R2_2433_covermech_final_v1.indd 2 4/15/08 2:50:00 AM 4/15/08 2:50:00 AM 4/15/08 2:44:19 AM Te j o n R a n c h C o m p a n y 2 0 0 7 A n n u a l R e p o r t T e j o n R a n c h C o m p a n y 2 0 0 7 A n n u a l R e p o r t R2_2433_covermech_final_v1.indd 1 R2_2433_covermech_final_v1.indd 1 4/15/08 1:20:00 AM 4/15/08 1:20:00 AM 

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