Tejon Ranch Co.
Annual Report 2008

Plain-text annual report

Tejon Ranch Company 2008 Annual Report  2008 A n nual Re p ort 2008 A n nual Re p ort page 3 Our Vi si on for the Future Tejon Ranch Company is a diversified real estate development and agribusiness company committed to responsibly using its land and resources to meet the housing, employment and lifestyle needs of Californians and to create value for its shareholders. The Company’s Vision is guided by the Ranch’s historic core values of conservation and good stewardship. pa ge 2 Tejon Ran ch C om pany 2008 A n nual Re p ort 2008 A n nual Re p ort page 3 page 3 Robert A. Stine, President & CEO, with California Governor Arnold Schwarzenegger To Our Val ued S hareh old ers It is the first thing you come to when you open the pages of our Annual Report. It is prominently displayed in our lobby and in numerous locations throughout our office. As I sit here at my desk today, all I have to do is glance over to the wall on my right to be reminded of its words: Tejon Ranch Company is a diversified real estate development and agribusiness company committed to responsibly using its land and resources to meet the housing, employment and lifestyle needs of Californians and to create value for its shareholders. The Company’s Vision is guided by the Ranch’s historic core values of conservation and good stewardship. -miss ion stat eme nt of t ej on ra nc h co. Tejon Ranch Company’s Mission Statement is more than just words found in an annual report or on a plaque on the wall. It’s what guides us and gives us purpose and direction. In a very real sense, our mission statement contains our marching orders and our code of conduct. But are the goals set forth in our mission statement truly attainable? For at first glance, some elements of our mission statement appear to be in conflict. How can we use our land to create homes and economic opportunity for Californians and protect the environment at the same time? Can we create value for our shareholders while adhering to our core values of conservation and good stewardship? Is it truly possible to “Provide for Califor- nia’s Future” and “Preserve California’s Legacy” at the same time? I believe the answer is a resounding yes! We can accomplish every goal our mission statement outlines while being the Company described in our Vision. Conservation value and shareholder value are not mutually exclusive; they are inclusive. It’s this conviction that motivated us to spend nearly two years in negotiations with the country’s most respected and influential environmental organizations, negotiations that led to the historic Tejon Ranch Conservation and Land Use Agreement we announced last year. pa ge 4 Tejon Ranch Com pa ny 2008 A n nual Re p ort page 3 Original oil painting of late Fall on Winters Ridge The Agreement with Audubon California, Endangered Habitats League, Natural Resources Defense Council, Planning and Conservation League and the Sierra Club, will result in the permanent conservation of a significant portion of our landholdings while guaranteeing that the signatory environmental organizations will not oppose our development plans. While the full Agreement has been filed with the Securities and Exchange Commission and is available for every shareholder to read, let me take some time to provide you with some background on the Agreement, summarize its key provisions, and explain why I agree with Michael H. Winer, Portfolio Manager for Third Avenue Management LLC, the Company’s largest shareholder, and member of the Tejon Ranch Co. Board of Directors, who said: “Without a doubt, this agreement is good for the Company and its shareholders as it’s the key to unlocking the value of Tejon Ranch. By removing the potential obstacles that have plagued similar development efforts in California, we’ll be able to move ahead with the entitlement processes on our current development projects in a much more timely fashion.” Additionally, I believe the Agreement is not only critical to unlocking and enhancing the value of our land, both its preservation and economic value; it will also be instrumental in enhancing the value of the Company itself. Ag ree me nt Backg rou nd Fo r over ten years, we have been focusing on three master planned communities on the western-most portions of the Ranch. The first, which is entitled and currently being developed, is Tejon Industrial Complex (TIC), a 1,450-acre commercial/industrial busi- ness park community spanning both sides of Interstate 5 near the junction with California Highway 99. Moving south, Tejon Mountain Village (TMV) is a resort-oriented commu- nity located in the heart of the Ranch’s high-country, but easily accessible from Interstate 5. The total planning area for TMV is approximately 26,400 acres, of which more than 2i,000 – in excess of 80 percent – will remain as undisturbed open space. The specific plan filed with the County of Kern calls for up to 3,450 dwelling units along with complementary pa ge 6 Tejon Ranch Com pa ny 2008 A n nual Re p ort 2008 A n nual Re p ort page 3 page 7 Tejon Ranch Co. President & CEO Robert A. Stine presents framed photo of Tejon Ranch wildflowers to Gov. Arnold Schwarzenegger. A large crowd gathered for the May 8, 2008 announcement of the Tejon Ranch Conservation and Land Use Agreement. lodging, recreational and commercial facilities and other resort amenities. Our third master We’ve always understood opposition by a coalition of well-funded groups would be a very planned community, Centennial, is a 12,000-acre sustainable new town located in Los formidable obstacle, resulting in the potential for multiple lawsuits and extended politi- Angeles County, at the confluence of Interstate 5 and Highway 138 in the Antelope Valley. cal campaigns aimed at blocking the required agency approvals. While confident that we As designed, Centennial will encompass 23,000 housing units; commercial, industrial and would eventually prevail, as we did with TIC, the cost in terms of the delay in the devel- retail space, and a wide array of community amenities. Each of our residential and resort opment of these communities would be very significant. communities will be built in phases, with development expected to take place over a 20 to 30 year time frame. We’ve also identified approximately 16,000 acres at the base of the Grapevine where development could one day occur, but we haven’t developed any specific plans beyond TIC, TMV and Centennial. At the same time, many environmental groups recognized that opposing development on Tejon Ranch project-by-project was also fraught with uncertainty and most likely would not result in the large-scale conservation of the Ranch that they were seeking. So, approxi- mately two years ago, we began negotiating with prominent environmental groups to devise Few wo uld argue that obtaining the right to develop in California is amongst the most a Ranch-wide agreement to allow for development of certain portions of the Ranch while challenging anywhere. Successful development of Centennial and TMV will require com- providing assurances that a large portion of the Ranch would be preserved in open space. pletion of several public agency environmental review and approval processes, including local approval from the respective County Boards of Supervisors, and additional discretionary Ag reement’s Key Provisions May 8, 2008 was a historic day at Tejon Ranch. Joined by California Governor Arnold permits and approvals from regional, state and/or federal agencies with jurisdiction over the Schwarzenegger and a host of key state regulatory officials, Tejon Ranch Company, Audu- natural resource concerns such as protected species and water quality. Most of the permits or authorizations issued by these agencies, as well as the initial local approval, are subject to public comment processes and third-party administrative appeal and/or litigation risks. As noted above, the process for gaining development entitlements in California is com- plex, time-consuming and expensive. Additionally, as the largest contiguous private bon California, Endangered Habitats League, National Resources Defense Council, Plan- ning and Conservation League and Sierra Club jointly unveiled the Tejon Ranch Conserva- tion and Land Use Agreement, an agreement which allows for both the right to develop and the assurances of long term land preservation. The Agreement provides that these signatory environmental organizations will not oppose landholding under single ownership in California, development on Tejon Ranch has been any of the required local, state and/or federal approvals and permits required to develop a very controversial issue for many prominent, influential local, state and national environ- mental organizations. For many years, a number of these groups have actively opposed Centennial, Tejon Mountain Village, TIC or any future development project at the base of the Grapevine. On our part, Tejon Ranch Company has committed to a phased land the Ranch’s development plans. You’ll recall that TIC received its final approvals in 2007, conservation program over the next several decades. Through a combination of conserva- but only after several years of litigation with various environmental groups. We’ve always tion easements dedicated as we receive development approvals, and designated project open believed that obtaining development entitlements for Centennial and Tejon Mountain Vil- space areas, we will permanently protect approximately 178,000 acres of very important lage would be more controversial than TIC, especially considering that TIC is located in environmentally sensitive open space. During the first three years of the Agreement, the en- an area of the Ranch that is less environmentally sensitive. vironmental organizations will have options to acquire conservation easements covering five pa ge 8 Tejon Ran ch C om pany 2008 A n nual Re p ort page 9 Original oil painting of foothills rising from the floor of the San Joaquin Valley pa ge 10 Tejon Ranch C om pany 2008 A n nual Re p ort 2008 A n nual Re p ort page 3 page 11 Gov. Schwarzenegger and Tejon Ranch President & CEO, Robert A. Stine Robert A. Stine, President & CEO, announcing the agreement Tejon Ranch Co. had reached with five major environmental organizations additional parcels of land comprising approximately 62,000 acres. The price for each parcel Land, of course, has intrinsic value, especially in California where a myriad of regulations, will be determined by a state appraisal process. If the environmental organizations exercise restrictions and a penchant for litigation make it extremely difficult to transform raw land all five options, combined with the 178,000 acres permanently set aside, a total of 240,000 into entitled land. Land, like Tejon Ranch, located in the path of growth, in close proxim- acres of Tejon Ranch would be permanently conserved. If the groups are unable to exercise ity to a major metropolitan area, is even more valuable. the options, we will retain the parcels for future development. However, those future devel- opments would be subject to the entitlement process in place at the time of project initia- tion and the environmental organizations would not be prohibited from opposing them. U nde r the ag reement, we will also be able to continue with our historic revenue- producing activities on the conserved lands in accordance with a management plan Beyond its location, the physical characteristics of the Ranch add to its worth. There are few places in California more striking and beautiful than Tejon Ranch. The Ranch is 422 square miles of mountain peaks, fertile valleys, deep canyons and golden hillsides covered with oaks. It’s a magnificent natural landscape where we believe families will desire to make their home as they share in our legacy of stewardship. To help you experience the beauty of the jointly developed with the Tejon Ranch Conservancy described below. Cattle grazing, Ranch, inside the back cover we’ve enclosed a DVD that includes much of Tejon’s spectacular game management and filming will continue to be permitted uses throughout the Ranch scenery. It also explains our vision for how we plan to stay true to our mission statement to and oil and gas extraction, farming and sand and gravel mining will be permitted within build shareholder value while still preserving the conservation value of Tejon Ranch. existing areas and defined expansion areas. The Agreement also establishes the independent Tejon Ranch Conservancy. Guided by a board of directors, a third of whom represent Tejon Ranch, a third the environmental organizations, with the final third being independent directors jointly appointed, the Con- servancy’s mission is to preserve, enhance and restore the conservation lands. The Conser- vancy will also establish and manage a public access program. We are advancing the initial In 2009, we will reach an important milestone in our entitlement efforts for Centennial and Tejon Mountain Village, with the expected release of Environmental Impact Reports and the commencement of County level public hearings. The agreement by major environ- mental organizations not to oppose these master planned communities removes a potential impediment to the achievement of our objectives. Unfortunately, there’s no guarantee an environmental group, not a party to the Agreement, won’t provide some opposition. But funding for the Conservancy until sales generated from Centennial and TMV are sufficient such opposition would not be in the best interests of long term conservation. Much of the to cover ongoing costs. Perpetual funding for the Conservancy and reimbursement of our 178,000 acres of conservation land called for in the Agreement will be dedicated in phases advances will come from a conservation fee equal to 0.25% of the sales price of certain residential sales and resales. Un lo cking Valu e Befo re explaining why we believe the Agreement is the key to unlocking the value as entitlement approvals are received. If there’s a delay in receiving entitlements and the permits we need to start building, the dedication of significant portions of the conserva- tion land would also be delayed. Also, the major funding mechanism for the Tejon Ranch Conservancy and its conservation work will be fees derived from the sale and resale of cer- of Tejon Ranch, I’d like to take a little time explaining why Tejon Ranch – and specifically tain residential properties in Centennial and TMV. This ensures that on-going conserva- the area we plan to develop - is so valuable to begin with. tion will benefit from vibrant, successful and growing master planned communities. pa ge 12 Tejon Ran ch C om pany 2008 A n nual Re p ort page 13 Original oil painting of springtime view from Martinez Ridge pa ge 1 4 Tejon Ranch C om pany 2008 A n nual Re p ort page 3 Original oil painting of Beartrap Canyon E nhanc ing Valu e Th e Te jon Ranch Conservation and Land U se Ag reem ent not only is the key to unlocking the value of Tejon Ranch, we believe it will also be instrumental in raising the value of the land we plan to develop and enhancing the overall value of the Company. Home buyers place a premium on land connected to significant open space areas. They know that being surrounded by land which won’t be developed and will be maintained in its natural state, with limited access by others, only serves to make their property more valuable. The Agreement also provides us with an opportunity to monetize, in the near term, poten- tial long-term value associated with the possible purchase of conservation easements related to the five future planning areas. We believe bringing forward this value will enhance the overall value of the Company. The Agreement is further evidence of Tejon Ranch’s brand as a conservation minded company. We’ve taken many steps to care for our land for more than 150 years and this Agreement demonstrates that our core values of conservation and good stewardship will continue to guide our future. These values apply to not only what and how we conserve, but also to what and how we build. Our future communities have been planned with lead- ing edge sustainable design features and will employ stringent green building standards. S pe aking of our brand, we continue our efforts to expand our brand identity and attributes in ways to realize both the development and non-development potential of the Tejon Ranch brand. We want the Tejon Ranch brand to be known for a commitment to quality, a connection to California’s legacy, a land stewardship ethic and having a vision for the future. Preserving and enhancing our brand will greatly support our marketing efforts for Centennial and Tejon Mountain Village. It goes without saying that 2008 was an extraordinarily difficult year for our economy and for real estate in particular. But we are firmly convinced that our industry will turn around as it always has in the past. Whenever that happens, we want to be prepared with fully pa ge 16 Tejon Ran ch C om pany Conservation and Land Use Plan Conservation and Land Use Plan 1 223 223 Bakersfield National Cemetery Bakersfield National Cemetery 1 58 58 conserved lands conserved lands Conservation Areas Conservation Areas 240,000 acres 240,000 acres developed lands entitled, permitted and planned communities. The Tejon Ranch Conservation and Land Use Agreement is critical to our ability to be prepared. By maximizing conservation and minimizing the prospects of extended litigation over our development plans, it puts your Company in a position to accomplish all the goals set forth in our mission statement, espe- cially the goal of building shareholder value. Wh en you think of things considered by our culture to be valuable, the diamond is often at the top of the list. But what is a diamond and what makes it valuable? A diamond is simply a piece of carbon that has been exposed to extreme pressure for a long period of time. It’s a process that only occurs in certain places on the planet. But even at this point, while rare, the diamond hasn’t realized its true worth. Only when it’s purposefully cut and shaped does a diamond achieve its maximum value. In many ways, Tejon Ranch is much like a diamond in raw form. There are few landscapes like it in the world and it certainly has been exposed to great pressure. But like the diamond, its greatest value will be realized when it has been planned, shaped and cut. 99 5 99 5 Tejon Industrial Complex Tejon Industrial Complex That’s been our mission for more than a decade as we endeavor to responsibly use this remarkable expanse of land and great brand to create the greatest long term value for our shareholders, for our communities and for the people of the State of California. Thank you for your patience and trust as we polish this gem known as Tejon Ranch. Ro bert A. Stine President and Chief Executive Officer 2 2 Pacific Crest Trail Pacific Crest Trail 4 3 4 3 4 4 Centennial Centennial 1 2 3 4 138 5 138 Tejon Mountain Village Tejon Mountain Village 5 5 5 5 developed lands Development Areas Development Areas 27,500 acres 27,500 acres National Cement 2,500 acres National Cement 2,500 acres Conservation Easements to be Purchased Conservation Easements to be Purchased Area 1 1 Area 2 2 Area 3 3 Area 4 4 Area 5 5 total Area 1 Area 2 Area 3 Area 4 Area 5 total acres 15,500 26,700 7,200 11,000 1,600 62,000 acres 15,500 26,700 7,200 11,000 1,600 62,000 pa ge 18 Tejon Ran ch C om pany 2008 A n nual Re p ort page 19 Consolidated Balance Sheets ($ in thousands) AS SET S Current assets: Cash and cash equivalents Marketable securities Accounts receivable Inventories Prepaid expenses and other current assets Deferred tax assets Total current assets Property and equipment, net Investments in unconsolidated joint ventures Long-term water assets Long-term deferred tax assets Other assets Total assets LI AB ILITIES AnD STOCKhOLD ER S’ Eq U ITY Current liabilities: Trade accounts payable Other accrued liabilities Deferred income Income taxes payable Short-term line of credit Current portion of long-term debt Total current liabilities Long-term debt, less current portion Long-term deferred gains Other liabilities Pension liability Commitments and contingencies Stockholders’ equity Common stock, $.50 par value per share: Authorized shares - 30,000,000 Issued and outstanding shares - 16,986,770 in 2008 and 16,899,982 in 2007 Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity 2008 December 31 2007 $ $ $ 3,032 52,007 8,281 2,007 4,525 1,138 70,990 65,255 32,333 13,345 4,235 914 187,072 2,824 659 760 - 2,750 30 7,023 358 1,688 3,174 1,523 8,493 123,193 (2,797) 44,417 173,306 187,072 $ $ 9,454 67,559 9,352 2,258 3,996 548 93,167 50,357 24,464 2,121 4,515 879 $ 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 Consolidated Statements of Operations ($ 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 income (loss) OThER InCOME (ExPEnSE) Investment income Other Interest expense Total other income Income (loss) from 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 (benefit) Income tax provision (benefit) Net income (loss) Net income (loss) per share, basic Net income (loss) per share, diluted 2008 $ 27,234 12,887 40,121 13,846 4,563 11,692 8,539 38,640 1,481 2,169 349 (70) 2,448 3,929 2,227 6,156 2,044 4,112 0.24 0.23 $ $ $ Year Ended December 31 2006 2007 $ 16,940 15,404 32,344 $ 16,010 12,412 28,422 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 $ $ $ 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) pa ge 2 0 Tejon Ran ch C om pany 2008 A n nual Re p ort page 21 Consolidated Statements of Stockholders’ Equity Consolidated Statements of Cash Flows ($ in thousands, except share information) Balance, December 31, 2005 Net income 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 loss Exercise of stock options and related tax benefit 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 Benefit 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 benefit of $343 Restricted stock issuance Stock compensation Balance, December 31, 2007 Net income Changes in unrealized losses on available-for-sale securities, net of taxes of $506 Benefit plan adjustments, net of taxes of $77 SERP liability adjustment, net of taxes of $109 Equity in other comprehensive income of unconsolidated joint venture, net of taxes of $37 Comprehensive income Exercise of stock options and related tax benefit of $227 Restricted stock issuance Stock compensation Balance, December 31, 2008 Common Stock Shares Outstanding 16,507,512 Additional Accumulated Other Paid-In Comprehensive Loss Capital $ (2,965) $ 97,841 Common Stock $ 8,254 Retained Earnings $ 35,701 Total $ 138,831 - (2,729) (2,729) - - - - - 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 - - - - - 139 43 (111) 6 - - - - (2,888) - 692 67 120 (62) - - - - - - - - 32,972 7,333 - - - - 101,539 22,394 - 16,899,982 51 11 - 8,450 - - - - - - - - - - 2,436 (11) 5,387 118,370 - - - - (2,071) - - - 40,305 - 4,112 - - - - (765) (154) 165 28 - - - - 139 43 (111) 6 (2,652) - 5,465 554 6,632 200 149,030 7,333 692 67 120 (62) 8,150 2,487 - 5,387 165,054 4,112 (765) (154) 165 28 3,386 56,064 30,724 - 16,986,770 28 15 - $ 8,493 1,425 (15) 3,413 123,193 $ - - - $ (2,797) - - - $ 44,417 1,453 - 3,413 $ 173,306 ($ in thousands) OPERATIng A CTIVITIES Net income (loss) Items not affecting cash: Depreciation and amortization Deferred income taxes Gain from sale of real estate Non-cash straight line rent income Non-cash expense of retirement plans (Gain) loss on sales of assets/investments Fair market value adjustments Equity in (earnings) losses of unconsolidated joint ventures, net Non-cash issuances of stock and stock compensation expense Excess tax benefit from stock-based compensation Charitable contribution of stock Distribution of earnings from joint ventures Changes in certain current assets and current liabilities: Accounts receivable Inventories Prepaid expenses and deferred taxes Trade accounts payable and other accrued liabilities Deferred income Income taxes payable Net cash provided by operating activities InVESTIng A CTIVITIES 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 Investments in long-term water assets Investment in unconsolidated joint ventures Other Net cash used in investing activities FIn AnCIng A CTIVITIES Payments on short-term debt Borrowing of short-term debt Repayment of long-term debt Excess tax benefit from stock-based compensation Exercise of stock options Net cash provided by financing 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 FLOW InFO RMATIOn Interest paid (net of amounts capitalized) Taxes paid (net of refunds) 2008 Year Ended December 31 2006 2007 $ 4,112 $ 7,333 $ (2,729) 2,885 (314) (6,219) (151) 791 225 304 (2,227) 3,413 (227) - - 1,071 215 91 1,290 188 (1,134) 4,313 42,438 (28,904) - 7,376 55 36 (20,402) (11,376) (3,828) (304) (14,909) (5,000) 7,750 (29) 227 1,226 4,174 (6,422) 9,454 3,032 70 3,430 $ $ $ 2,410 (976) (712) (562) 586 25 - (10,580) 5,387 (343) - 8,016 (1,802) 300 (338) (44) (25) 1,359 10,034 28,697 (21,944) 2,981 - 1,182 33 (9,887) (2,121) (6,455) (188) (7,702) - - (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) 7,186 (1,329) 200 1,200 895 (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 $ $ $  2008 A n nual Re p ort Directors and Executive Officers page 23 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 Officer, Tejon Ranch Company Michael H. Winer Portfolio Manager, Third Avenue Management LLC, Investment Management Executive Officers Robert A. Stine President and Chief Executive Officer Dennis J. Atkinson Senior Vice President – Agriculture Teri A. Bjorn Vice President, General Counsel and Secretary Joseph E. Drew Senior Vice President – Real Estate Allen E. Lyda Senior Vice President, Chief Financial Officer and Assistant Secretary Kathleen J. Perkinson Senior Vice President, Natural Resources and Stewardship pa ge 2 2 Tejon Ran ch C om pany 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 0.00 12.31.03 12.31.04 12.31.05 12.31.06 12.31.07 12.31.08 tejon ranch dj equity mkt dj real estate - Assumes $100 invested on December 31, 2003 - Total return assumes reinvestment of dividends - Fiscal year ending December 31 tejon ranch dj equity mkt dj real estate 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% 2008 -39.44% -37.16% -40.07% 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 filing by the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except where the Company specifically 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. pa ge 2 4 Tejon Ran ch C om pany Common Stock Information Quarter First Second Third Fourth As of February 26, 2009, there were 426 owners of record of our Common Stock. high $ 39.72 43.87 38.00 36.58 $ 2008 low 33.71 36.06 30.11 20.83 high $ 56.95 50.89 47.72 44.51 2007 low $ 45.37 44.19 37.70 35.80 Corporate Directory Corporate Office Tejon Ranch Company Post Office 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 Ridgefield 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 Office Box 1000 4436 Lebec Road Lebec, California 93243 Artist Credit: Autumn Overlook by Charles Muench (Cover); Autumn Oaks by Charles Muench; Tejon Foothills by Douglas Oliver; Spring Bloom – Tejon Ranch by Charles Muench; Beartrap Morning by Douglas Oliver DVD Instructions: Load DVD into a DVD player or the DVD drive on your computer. The disc will not play in computers without a DVD drive. Once the DVD loads, press “Play” and the DVD will automatically play. Total running time: 16 minutes 

Continue reading text version or see original annual report in PDF format above