<PAGE>
As filed with the Securities and Exchange Commission on October 31, 2000
Registration Number 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TEJON RANCH CO.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 77-0196136
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
</TABLE>
4436 Lebec Road
Lebec, California 93243
Telephone (661) 248-3000
(Address, including zip code and telephone number, including area code, of
Registrant's principal executive offices)
Robert A. Stine
President and Chief Executive Officer
Tejon Ranch Co.
4436 Lebec Road
Lebec, California 93243
Telephone: (661) 248-3000
(Address, including zip code and telephone number, including area code, of
agent for service)
Copies to:
<TABLE>
<S> <C>
Dennis Mullins, Esq. Roy J. Schmidt, Esq.
Tejon Ranch Co. Gibson, Dunn & Crutcher LLP
P.O. Box 1000 333 South Grand Avenue
4436 Lebec Road Los Angeles, California 90071
Lebec, California 93243 Telephone: (213) 229-7160
Telephone: (661) 248-3000 Fax: (213) 229-6160
Fax: (661) 248-3100
</TABLE>
Approximate date of commencement of proposed sale to public: As soon as
practicable after this registration statement become effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of class of
securities to be Proposed maximum aggregate
registered offering price (2) Amount of registration fee
------------------------------------------------------------------------------
<S> <C> <C>
Subscription
Rights(1)............. $ 0 $ 0
------------------------------------------------------------------------------
Common Stock, par value
$0.01 per share....... $30,000,000 $7,920
------------------------------------------------------------------------------
------------------------------------------------------------------------------
</TABLE>
(1) Evidencing the rights to subscribe for shares of Common Stock. Pursuant to
Rule 457(g), no separate registration fee is required for the rights since
they are being registered in the same registration statement as the Common
Stock underlying the rights.
(2) Consists of shares to be issued upon exercise of the rights and estimated
solely for the purpose of calculating the registration fee. The
registration fee has been calculated in accordance with Rule 457(o) under
the Securities Act.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
Subject to completion dated October 31, 2000
Preliminary Prospectus
[BRAND]
shares
TEJON RANCH CO.
Common Stock
$ per share
We are distributing to stockholders of record at the close of business on
November , 2000 transferable subscription rights to purchase additional
shares of our common stock at a price of $ per share. Stockholders will be
entitled to a right to purchase shares for each share of common stock
held on the record date.
If you exercise all of the rights distributed to you, you will also be
entitled to purchase additional shares not purchased by other stockholders
pursuant to the over-subscription rights described in this prospectus. We will
not issue fractional shares and will round all of the subscription rights up to
the nearest whole share.
The shares of common stock to be issued upon exercise of the rights will be
listed on the New York Stock Exchange. The last reported sales price of our
common stock on the New York Stock Exchange on November was $ . The
rights being distributed to stockholders are expected to trade on the New York
Stock Exchange, but we cannot assure you that a market for the rights will
develop.
The subscription rights will expire at 5:00 p.m., New York City time, on
December , 2000 unless we extend the expiration date. In no event, however,
will we extend the expiration date beyond December 31, 2000. If we elect to
extend the term of the rights, we will issue a press release to that effect no
later than the first day that the New York Stock Exchange is open for trading
following the most recently announced expiration date. The exercise of the
rights is irrevocable once made, and no interest will be paid to you on the
purchase price if you exercise your rights.
We have entered into an agreement with Third Avenue Trust (acting on behalf
of Third Avenue Value Fund, Third Avenue Small-Cap Value Fund and Third Avenue
Real Estate Value Fund), which together own approximately 26% of our
outstanding shares, and with a private investment fund managed by Carl Marks
Management Company, L.P., which owns approximately 4% of our outstanding
shares, to purchase additional shares at the same price to the extent that the
gross proceeds from the rights offering are less than $30,000,000. These
purchasers have also agreed to exercise their subscription rights, but not
their oversubscription rights. See "The Rights Offering."
Investing in our securities involves significant risks. See "Risk Factors"
beginning on page 8.
Neither the Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved of these securities or determined that
this prospectus is complete or accurate. Any representation to the contrary is
a criminal offense.
<TABLE>
<CAPTION>
Per
share Total
------- -----------
<S> <C> <C>
Offering price............................................. $ $30,000,000
Underwriting discounts and commissions..................... $ 0 $ 0
Proceeds, before expenses.................................. $ $30,000,000
</TABLE>
The date of this prospectus is , 2000.
<PAGE>
Forward-Looking Statements
Some of the information in this prospectus or incorporated herein by
reference contains forward-looking statements, including statements relating to
the future development of our property, the future operations of our jointly-
owned travel plaza and our industrial park, future developments in prices in
the cattle industry, the possible sale of our cattle business, the availability
of water for our agricultural operations and our present and future real estate
developments, potential losses as a result of pending environmental proceedings
and market value risks associated with investment and risk management
activities with respect to our inventory, accounts receivable and outstanding
indebtedness. These forward-looking statements are based on assumptions,
including assumptions of future events, which involve factors beyond our
control. These factors include the weather, market and economic forces and,
with respect to development of our land, the availability of financing and the
ability to obtain various governmental entitlements. It is likely that some of
the assumptions will prove to be incorrect for reasons which include those set
forth under "Risk Factors." The actual results will vary from those projected
or implied in the forward-looking statements, and the variances may be
material.
----------------
You should only rely on information contained in this prospectus. We have
not authorized anyone to provide you with information different than that
contained in this prospectus. We are offering to sell and seeking offers to buy
shares of our common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus regardless of the time of delivery of this
prospectus or any sale of our common stock.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 8
Use of Proceeds...................... 15
Price Range of Common Stock.......... 16
Dividend Policy...................... 16
Capitalization....................... 17
Selected Consolidated Financial
Data................................ 18
Business............................. 20
Management........................... 29
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Rights Offering...................... 32
Certain Federal Income Tax
Considerations...................... 38
Principal Stockholders............... 40
Description of Capital Stock......... 43
Shares Eligible for Future Sale...... 45
Legal Matters........................ 46
Experts.............................. 46
Where You Can Find More Information.. 46
</TABLE>
As used in this prospectus, the term "we," "us" and "our company" mean Tejon
Ranch Co. and its subsidiaries.
"Tejon Ranch" and "Grapevine Center" are registered trademarks of ours.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
It is not complete and it does not contain all of the information that you
should consider before deciding whether to exercise your Rights. You should
read the entire prospectus carefully, and you should consider the information
set forth under "Risk Factors."
Some of the information in this prospectus contains forward-looking
statements. You should carefully consider the information regarding forward-
looking statements on page 2 of this prospectus under the heading "Forward-
Looking Statements."
OUR BUSINESS
We are a diversified, growth oriented land development and agribusiness
company whose purpose is to increase the value of our real estate and resource
holdings and maximize our market value for our stockholders. Our prime asset is
approximately 270,000 acres of contiguous, largely undeveloped land which, at
its most southerly border, is 60 miles north of Los Angeles, and at its most
northerly border is 15 miles east of Bakersfield. We believe that our land
holdings offer attractive development opportunities. We also have significant,
existing commercial real estate developments along Interstate 5 (a major,
north-south federal highway in California that runs through our land), and we
have significant livestock, farming and mineral extraction operations.
NEW STRATEGIC PLAN
Over the last four years we have been implementing a new strategic plan that
sets out a broad strategy for enhancing stockholder value. Specifically, the
plan has focused on planning and development of our largest and most valuable
asset, our 270,000-acre land holding, as well as growing our other core
businesses.
In implementing the new strategic plan, we have:
. increased revenues from operations over the last three years,
. purchased a feedlot in Texas to further enhance and expand livestock
operations,
. increased the cattle herd by over 20,000 head in order to expand market
opportunities,
. sold $6 million of non-strategic real estate assets, using the proceeds
to purchase commercial and industrial buildings for current and future
revenue sources,
. developed the first phase of the 351-acre Tejon Industrial Complex, with
the first occupant being the 51-acre Petro Travel Plaza that opened for
business in 1999 and the first purchaser being IKEA, an international
home furnishings retailer, which intends to develop a regional warehouse
having 850,000 or more square feet at the Complex,
. signed an agreement with an affiliate of Enron North America Corp. for
the development of a power plant by the Enron affiliate on our land,
. signed a joint venture agreement with three well-known home builders for
the creation of a 6,500-acre master-planned community on our land in Los
Angeles County which we call "Rolling Meadows,"
. began trading on the New York Stock Exchange on July 28, 1999, and
. purchased an almond hulling and processing plant to enhance and expand
our farming operations.
1
<PAGE>
More recently we have decided to focus our primary efforts and resources on
real estate development instead of trying to grow all of our businesses at the
same time. In addition to our Tejon Industrial Complex and Rolling Meadows
residential projects, we are engaged in the detailed planning of a master-
planned mountain community encompassing mountain homes, a high quality golf
resort, a commercial component and substantial open space. We call this project
"Tejon Mountain Village." Although the size of this development has not yet
been decided upon, it will involve several thousand acres and the development
of sites for several thousand homes ranging from less than one-half acre to
more than twenty acres. In September 2000 we decided to proceed with obtaining
governmental approvals for this project.
We also propose to expand the Tejon Industrial Complex by 500 acres, and we
are in discussions for the joint venture development of a 600,000 square foot
facility on approximately 30 acres in the Tejon Industrial Complex. Our
undertaking construction of these residential and industrial projects is
subject to a number of contingencies and uncertainties, and we cannot assure
you that the developments will occur or that they will be successful.
In order to provide additional working capital for our real estate
development activities, we have begun to explore, on a preliminary basis, the
possibility of selling our livestock operations, including a lease to the
purchaser of a significant portion of our land to be used for grazing purposes.
The potential lease would not affect any real estate development opportunities.
No decisions have been made with respect to such a sale. Because of the
preliminary stage we are in, we cannot assure you that any such sale will take
place, nor can we predict the amount of the purchase price.
At June 30, 2000 the Livestock Division accounted for over $36 million in
book value of our identifiable assets representing approximately 38% of the
book value of our total assets. The book value of the Livestock Division assets
is not necessarily indicative of their fair market value. For the fiscal years
ended December 31, 1999, 1998 and 1997, the Livestock Division accounted for
approximately 73%, 65% and 60%, respectively, of our total revenues and
approximately 47%, 4% and 22%, respectively, of our income before taxes after
allocation of interest expense. The contemplated sale of the livestock
operations would include substantially all of the assets of the Livestock
Division. While the sale of the livestock operations probably would provide
significant working capital, it would also result in a loss of significant
revenues and income even after taking into account the revenue stream from the
grazing lease that would be entered into in connection with the sale.
We are a Delaware corporation incorporated in 1987 to acquire by merger all
of the stock of a California corporation organized in 1936, which is still the
entity through which our business is operated.
HOW TO CONTACT US
Our principal executive offices are located at 4436 Lebec Road, Lebec,
California 93243, and our telephone number is (661) 248-3000.
2
<PAGE>
The Rights Offering
Securities Offered.................. Rights to purchase
shares of common stock at a subscription
price of $ per share and the
common stock issuable upon the exercise
of the rights.
Shares Outstanding/Authorized....... As of the record date of November ,
2000, we had 12,712,236 shares of common
stock issued and outstanding. After the
rights offering and the exercise of these
rights by the rights holders, we will
have a minimum of shares
outstanding. We have 30,000,000 shares of
common stock authorized for issuance.
Grant of Basic Subscription All stockholders of record as of November
Rights.............................. , 2000 will be granted a transferable
right to purchase shares of our
common stock at $ per share for every
share of common stock held by them as of
that date. We will not issue fractional
shares. We will round all of the
subscription rights upward to the nearest
whole share.
Grant of Over-subscription Rights... Holders of subscription rights who fully
exercise their basic subscription rights
will also have over-subscription rights
to purchase any shares remaining
available for purchase after the exercise
by other rights holders of their basic
subscription rights, except that the
principal stockholders named below under
the heading "Principal Stockholders'
Standby Agreement" have agreed not to
exercise their over-subscription rights.
If the number of unsubscribed shares is
insufficient to permit the exercise of
all of the over-subscription rights,
over-subscription shares will be
allocated pro-rata, based on the number
of basic subscription rights exercised by
each person seeking to oversubscribe as
of the expiration date of the offering.
Holders of rights must elect to exercise
their over-subscription rights during the
subscription period in the manner set
forth in the subscription documents
provided with this prospectus. The
exercise of over-subscription rights may
not be revoked by a rights holder.
Subscription Period................. The rights offering will remain open for
a 21-day period from November , 2000 to
December , 2000, unless that period is
extended by us, in our sole discretion,
for a period not extending beyond
December 31, 2000. If you wish to
exercise your subscription rights, you
must return the completed
3
<PAGE>
subscription documents along with the
payment, as instructed in the
subscription documents, to the
Subscription Agent, ChaseMellon
Shareholder Services, L.L.C., no later
than 5:00 p.m., New York City time, on
December , 2000, unless the
subscription period is extended by us as
described above. The addresses for return
of the subscription documents are set
forth in the subscription documents and
also in this prospectus under the heading
"Rights Offering--How to Exercise Your
Rights." If we elect to extend the term
of the subscription rights, we will issue
a press release to that effect no later
than the first day on which the New York
Stock Exchange is open for trading
following the most recently announced
expiration date for the subscription
rights. If we extend the term of the
subscription rights by more than
14 calendar days, we will, in addition,
cause written notice of the extension to
be promptly sent to all stockholders of
record who are entitled to receive
subscription rights.
Transferability of Rights........... The subscription rights are transferable,
and it is anticipated that they will
trade on the New York Stock Exchange and
may be purchased or sold through brokers
in the same manner as our common stock
until the close of business on the last
trading day prior to the end of the
subscription period, that trading day
being December , 2000 unless we extend
the date. We cannot assure you, however,
that any market for the subscription
rights will develop or, if a market does
develop, that the market will remain
available throughout the period in which
the subscription rights may be exercised.
The subscription rights can also be
transferred in whole or in part by
endorsing the subscription warrant
evidencing the rights in accordance with
the instructions accompanying this
prospectus and delivering it to the
Subscription Agent, ChaseMellon
Shareholder Services, L.L.C. The
subscription rights may also be sold in
whole or in part through the Subscription
Agent. The Subscription Agent will
endeavor to sell the subscription rights
if the rights holder has so requested and
has delivered to the Subscription Agent a
subscription warrant evidencing the
subscription rights with instructions for
sale properly executed at or prior to
11:00 a.m., New York City time, on
December , 2000. We cannot assure you
that the Subscription Agent will be able
to sell your rights, and we cannot
provide you any assurances about the
price that the Subscription Agent may be
able to obtain for the subscription
rights.
4
<PAGE>
Principal Stockholders' Standby We have entered into an agreement with
Agreement........................... Third Avenue Trust (acting on behalf of
Third Avenue Value Fund, Third Avenue
Small-Cap Value Fund and Third Avenue
Real Estate Value Fund) and with a
private investment fund managed by Carl
Marks Management Company, L.P. to
purchase additional shares at the same
price to the extent that the gross
proceeds of the rights offering are less
than $30,000,000. Their obligations are
subject to satisfaction of certain
conditions, including the condition that
there be no material adverse change in
the business, prospects, financial
position, stockholder's equity or results
of operations of our company except to
the extent such changes result from
changes in general economic conditions.
These purchasers have also agreed to
exercise the basic subscription rights
distributed to them as rights holders but
they will not exercise their over-
subscription rights.
As of the record date for the
distribution of the subscription rights,
Third Avenue Trust (on behalf of the
mutual funds referred to above) owned
approximately 26% of our outstanding
shares, and an investment fund managed by
Carl Marks Management Company, L.P. owned
approximately 4% of our outstanding
shares. Martin J. Whitman, one of our
directors, is the Chairman of the Board
and Chief Executive Officer of Third
Avenue Trust and of EQSF Advisers, Inc.,
Third Avenue Trust's investment advisor.
Robert C. Ruocco, also one of our
directors, is a general partner of Carl
Marks Management Company, L.P.
Procedure for Exercising Rights..... The basic subscription rights and the
over-subscription rights may be exercised
by properly completing the subscription
warrant accompanying this prospectus and
forwarding it with payment of the
subscription price for each share
subscribed for to the Subscription Agent,
ChaseMellon Shareholder Services, L.L.C.,
who must receive the payment and the
subscription warrant prior to the
expiration of the subscription period,
which is December , 2000 unless we
elect to extend it. Alternatively a
rights holder can use the guaranteed
delivery procedures described in this
prospectus under the heading "The Rights
Offering--How to Exercise Your Rights."
Any rights holder sending subscription
warrants by mail is urged to use insured,
registered mail.
Funds paid by uncertified personal checks
may take at least five business days to
clear and such checks must
5
<PAGE>
clear before the expiration of the
subscription period in order for the
required payment to have been made.
Accordingly, if any rights holder wishes
to pay the subscription price by means of
an uncertified personal check, the rights
holder is urged to make payment
sufficiently in advance of the expiration
of the subscription period to ensure that
the payment is received and clears before
that time. Rights holders are also urged
to consider any alternative payment by
means of certified or cashier's check,
money order or wire transfer of funds.
Once a rights holder has exercised the
basic subscription rights and any over-
subscription rights, that exercise of
rights may not be revoked. Rights not
exercised prior to the expiration of the
subscription period will no longer be
exercisable.
Use of Proceeds..................... The net proceeds from the rights offering
are expected to be approximately $29.6
million after subtracting the expenses of
the offering. The purpose of the offering
is to provide additional working capital
to enable us to pursue opportunities to
develop our real estate, including the
Tejon Industrial Complex and the Tejon
Mountain Village.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
---------------------------------------------------------- ----------------------
1999 1998 1997 1996 1995 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands of dollars, except share and per share (unaudited)
amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Income
Data:
Total revenues.......... $ 55,916 $ 48,088 $ 38,229 $ 18,960 $ 19,554 $ 25,303 $ 17,875
Total costs and
expenses............... (54,011) (43,466) (33,706) (16,152) (18,831) (26,571) (18,206)
Income (loss) before
income taxes........... 1,905 4,622 4,523 2,808 723 (1,268) (331)
Net income (loss)....... 1,181 3,139 3,032 1,685 434 (786) (206)
Net income (loss) per
common share:
Basic.................. $ 0.09 $ 0.25 $ 0.24 $ 0.13 $ 0.03 $ (0.06) $ (0.02)
Diluted................ $ 0.09 $ 0.25 $ 0.24 $ 0.13 $ 0.03 $ (0.06) $ (0.02)
Shares used in computing
net income (loss) per
common share:
Basic.................. 12,697,179 12,691,253 12,683,497 12,682,244 12,682,244 12,706,236 12,691,253
Diluted................ 12,796,485 12,752,697 12,796,729 12,683,760 12,684,105 12,706,236 12,691,253
Pro Forma Data:
Net income (loss)....... $ 1,181 $ (786)
Net income (loss) per
common share:
Basic..................
Diluted................
Shares used in computing
net income (loss) per
common share:
Basic..................
Diluted................
</TABLE>
The following consolidated balance sheet data has been adjusted to give
effect to the receipt of the estimated net proceeds from the sale of
shares of our common stock in the rights offering at an offering price of
$ per share, after deduction of the estimated expenses of the offering.
See "Use of Proceeds" and "Capitalization."
<TABLE>
<CAPTION>
June 30, 2000
-------------------
Pro Forma
Actual As Adjusted
------- -----------
Consolidated Balance Sheet Data: (unaudited)
<S> <C> <C>
Cash and cash equivalents................................... $ 520 $ 30,120
Marketable securities....................................... 10,247 10,247
Working capital............................................. 21,881 51,481
Total assets................................................ 95,596 125,196
Long term debt, less current portion........................ 24,331 24,331
Stockholders' equity........................................ 42,559 72,159
</TABLE>
--------
See Notes to "Selected Consolidated Financial Data".
7
<PAGE>
RISK FACTORS
You should carefully consider the risks described below together with all
the other information included in or incorporated by reference into this
prospectus before exercising your subscription rights. The risks and
uncertainties described below are not the only ones facing our company. If any
of the following risks actually occurs, our business, financial condition,
results of operations or future prospects could be materially adversely
affected. In that case the trading price of our common stock could decline, and
you may lose all or part of your investment.
Our new strategy, focused on more aggressive development of our land, involves
higher risk than our existing businesses and could result in significant
operating losses.
Cyclical Industry. The real estate development industry is cyclical and is
significantly affected by changes in general and local economic conditions,
including:
. employment levels;
. availability of financing;
. interest rates;
. consumer confidence; and
. demand for the developed product, whether residential or industrial.
The process of development of a project begins, and financial and other
resources are committed, long before the project comes to market, which could
occur at a time when the real estate market is depressed. It is also possible
in a rural area like ours that no market for the project will develop as
projected.
Higher interest rates generally impact the real estate industry by making it
harder for buyers to qualify for financing, and that can lead to a decrease in
the demand for residential, commercial or industrial sites. Any decrease in
demand will negatively impact our proposed developments. Any downturn in the
economy or consumer confidence can also be expected to result in reduced
housing demand and slower industrial development, which would negatively impact
the demand for land in our development projects.
Government Regulation. In planning and developing our land we are subject to
various local, state, and federal statutes, ordinances, rules and regulations
concerning zoning, infrastructure design, and construction guidelines. These
requirements can possibly include restrictive zoning and density provisions
that limit the number of homes that can be built within the boundaries of a
particular area, which may impact the financial returns from a given project.
In addition, we are subject to statutes and regulations concerning the
protection of the environment. Environmental laws that apply to a given site
can vary greatly according to the site's location, condition, present and
former uses of the site, and the presence or absence of sensitive elements like
wetlands and endangered species. Environmental laws and conditions may result
in delays, cause us to incur costs for compliance, mitigation and processing
additional permits and possibly restrict development activities in certain
regions or areas of our land. In addition, many states, cities and counties
have in the past approved various "slow growth" measures. If that were to occur
in our region, our future real estate development activities could be
significantly adversely affected.
Real Estate Inventory Risk. Our three principal real estate projects, the
Tejon Industrial Complex, Rolling Meadows and Tejon Mountain Village, all
involve obtaining governmental entitlements and improving lots for sale to
developers or, in the case of Tejon Industrial Complex, end users. The value of
these lots can fluctuate significantly as a result of changing economic and
market conditions. Carrying costs of the lots can be very significant, and we
may be in the position of having to sell the inventory of lots at a loss.
Geographic Concentration. All of our developable land is in California. Any
adverse change in the economic climate of California, or our region of that
state, could adversely affect our real estate development activities.
Ultimately our ability to sell or lease lots may decline as a result of weak
economic conditions.
8
<PAGE>
Other Risks. We may also encounter other difficulties in developing our
land, including:
. natural risks, such as geological and soils problems, earthquakes, heavy
rains and flooding and heavy winds;
. shortages of qualified tradespeople;
. reliance on local contractors, who may be inadequately capitalized;
. shortages of materials; and
. increases in the cost of certain materials.
Our proposed new real estate development will require additional financing. It
is uncertain whether the required financing will be available and, if so,
whether it will be available on favorable terms.
At June 30, 2000 we had working capital of approximately $21.9 million
which, together with the net proceeds of the offering, will not be adequate to
support significant new real estate projects. While we expect to collaborate
with third parties in future developments on terms where they take most or all
of the risk with respect to providing financing, we expect to face financing
requirements related to our participation. Moreover, the allocation of profits
from any future development can be expected to reflect the degree of risk taken
by the participants, and if we want to participate at a level beyond what would
be appropriate just for making the land available, we will have to bear some of
the cost and risk. This offering is our first effort to obtain equity financing
for at least the last 25 years. Because so much of the value of our company
relates to our 270,000 acres of undeveloped land, which is inherently difficult
to value, the availability of additional financing through the equity markets
is highly uncertain. The difficulty of valuing our land also adversely affects
our ability to obtain significant debt financing. Our inability to obtain
additional financing may force us to delay, scale back or eliminate some or all
of our real estate development activities, which would have a material adverse
effect on our business and could affect the price of our common stock.
We are dependent upon collaboration with third parties for success in several
of our existing real estate activities, and we expect that also to be true for
future real estate development projects. If those parties fail to perform
effectively, our business could be materially adversely affected.
We have formed a limited liability company with three well-known residential
development companies for a 6,500-acre master-planned community which we call
Rolling Meadows. We are considering proposals to joint venture the development
of industrial buildings which have not been pre-leased to users in the Tejon
Industrial Complex, our new industrial park. Also we expect to work with
residential developers and resort operators in connection with the master-
planned, mountain community which we call Tejon Mountain Village. We cannot
assure you that the efforts of these third parties will be successful or that,
as to future projects, we will be able to enter into the necessary
collaborative arrangements to proceed with those projects.
We have also entered into transactions with third parties who control
development and operation of the existing and contemplated projects. We have
granted an option to lease land to an affiliate of Enron North America Corp.
for the development of an electric power plant. If the Enron affiliate cannot
obtain all needed governmental approvals or sufficient financing, the power
plant is not successfully built within the time frame and budget parameters
contemplated or the market for sale of the power from the contemplated power
plant changes adversely, our anticipated income from this project could be
adversely affected. We have also formed a limited liability company with a
national travel plaza operator, which operates a 51-acre center along
Interstate 5 providing truck and auto servicing facilities, a restaurant and
other services for travelers. We have a number of leases in which our revenue
depends upon the operations of the tenant, including a large cement
manufacturing plant, two aggregate quarries and several oil and gas leases. We
cannot assure you that the efforts of the third parties who control these
operations will be successful.
9
<PAGE>
The sale of our livestock operations, which is presently under consideration,
would result in the loss of a very significant source of revenues and income
for our business.
Because of our need for additional working capital, we are considering the
sale of our livestock operations. For the years ended December 31, 1999, 1998
and 1997, the Livestock Division accounted for approximately 73%, 65% and 60%,
respectively, of our total revenues and approximately 47%, 4% and 22%,
respectively, of our income before taxes and after allocation of interest
expense. The contemplated sale of the livestock operations would include
substantially all the assets of the Livestock Division. While the sale of the
livestock operations would probably provide significant working capital and the
income from the short term investment of those funds would offset to some
degree the loss of revenue and income, as the working capital is used for other
purposes the amount of this offset would be reduced. Any revenues and income
from the long-term investment of the working capital might not be realized
until years later, if at all. Also, the real estate, cattle, farming and
mineral extraction businesses are cyclical. In the past our presence in all of
these areas has stabilized our results of operations to some degree because the
up and down cycles of the various industries involved do not necessarily occur
at the same time. A sale of the livestock operations would reduce the extent of
this stabilizing effect.
The results of operations in all of our businesses fluctuate widely from year
to year, making it difficult for us to achieve consistent growth in revenues
and income from year to year and to accurately project future results.
Consequently our results may disappoint the expectations of the equity markets
and the price of our stock could be materially adversely affected.
To date the results of our Real Estate Division have fluctuated
significantly because of the timing and episodic nature of large sale and other
revenue-producing transactions we have engaged in. The results of the Livestock
and Farming Divisions also fluctuate significantly because of market
conditions, weather and other factors. Even our revenues and income from
mineral extraction depend on the status of the economy, particularly the
revenue from our cement plant lease, which depends on production and therefore
the demand for cement. We also carry significant inventory and accounts
receivable related to our farming products which are subject to the risk of
reduced prices for the products. If participants in the equity markets have
difficulty projecting our future results or we are unable to meet any
projections set, the price of our stock (and therefore our ability to obtain
equity financing on favorable terms, if at all) may be adversely affected.
A significant portion of our revenues have historically resulted from sales of
commodity agricultural products, and the revenues from these products have
fluctuated widely.
Beef cattle and the farming products we produce (wine grapes, almonds,
pistachios, and walnuts) are essentially commodities, and they are usually sold
to one or a limited number of large purchasers at commodity prices established
by the market. The prices at which these products have been sold have varied
widely as a result of supply and demand changes in the general market, and
production levels have also varied significantly due to factors such as
weather, cultivation practices and crop production cycles. This condition is
exacerbated by there being a limited number of bulk buyers for those crops,
such as wine grapes, pistachios and walnuts, where we do not have any control
over the processing or distribution of our crops. The contract for sale of our
entire wine grape crop expires after the sale of this year's crop and, while
discussions are ongoing, we have not entered into another contract. We believe
that there is an imbalance between the supply of wine grapes and the demand as
the result of so many new plantings coming into production. We cannot assure
you that we will find buyers for all or a significant portion of our wine grape
production or that any contracts entered into will be profitable. The loss of
purchasers for our wine grapes would significantly adversely affect our
business.
10
<PAGE>
Our farming activities are dependent to a significant degree on delivery of
water from the California State Water Project, and some of our anticipated
future real estate developments will also depend on the availability of this
water. Any significant reduction or any interruption in the supply of the
water, whether as a result of diversion of water for environmental purposes at
the Sacramento-San Joaquin River Delta, drought, or any damage to the
California Aqueduct or related facilities, could materially adversely affect
our business.
While the water we have contracted to receive from the California State
Water Project is sufficient to meet our current and anticipated needs, we
cannot count on the Project providing our full contract entitlement. The
Project is unreliable because some of the facilities needed to meet all
contract entitlements have not been constructed, periodic droughts reduce the
amount of water available in a given year and the federal government has
limited diversion of water from the Sacramento-San Joaquin River Delta in order
to provide water for endangered species living there. The state and federal
governments recently adopted an agreement that promises to stabilize water
deliveries at specified levels, but we cannot assure you that the agreement
will survive pending and perhaps future court challenges or will continue to be
honored by the federal government. While average deliveries from the Project
over the last six years were 98% of the contracted amounts, those years fall
within a periodic wet cycle, and we expect the water supply to be adversely
affected by all of the factors noted above in future years. Based on historical
records of water availability, we do not expect to have material problems with
our water supply. However, if Project deliveries drop to less than 30-50% of
our entitlement for a sustained period of several years, then the agricultural
water district that provides water for our crops may not be able to deliver a
100% supply to us and we will have to rely on our ground water sources,
mountain stream run-off, water transfers from another local water district and
water banking assets. However, as we develop our real estate for residential,
commercial and industrial uses there will be less water available for
agriculture from the other local water district. Most of our water costs are
fixed and do not fluctuate with the volume of water delivered from the Project.
This means that reduced water supplies could adversely affect our crop earnings
without any reduction in the high fixed cost for the water not delivered.
Local governments in California are now required by law to satisfy
themselves as to the availability of an adequate water supply before approving
any significant real estate development. This standard will not permit
development of new residential, commercial or industrial projects which,
together with existing uses, utilize 100% of our Project entitlement without
providing for a reliable backup water supply. We believe that we have adequate
primary and backup water supplies for our Tejon Industrial Complex, Rolling
Meadows and Tejon Mountain Village developments. The Project is regarded as a
backup water supply for the Tejon Industrial Complex, with local groundwater
being the primary source. Project water is the primary source for both of the
residential developments. The supply for Tejon Mountain Village is already
under contract, and we have been informed that the supply for Rolling Meadows
is obtainable from the local water agency from its excess supplies. Both
residential developments also have substantial backup water supplies, with
Tejon Mountain Village supplies supplemented by water banked in local storage
facilities and Rolling Meadows supplies supplemented by local groundwater.
However, we cannot assure you that local governmental authorities will agree
with us and that some or all of these projects will not be reduced in size
based on water supply issues.
In September 2000 the California Court of Appeals ruled that the
environmental impact report performed in connection with certain 1995 contract
amendments relating to the State Water Project failed to consider the impact of
reduced water deliveries resulting from the failure to complete construction of
portions of the Project and from limited precipitation in a particular year.
The Court of Appeals ordered the trial court to retain jurisdiction until a new
environmental impact report is certified. The certification of a new
environmental impact report, which is expected to take more than a year, or
further decisions resulting from the Court of Appeals' ruling could adversely
affect the amount of water available to us from the Project. The Court of
Appeals also reversed the trial court's dismissal of a claim challenging the
validity of the transfer of certain water storage facilities by a state agency
to local governmental entities. Although this decision is expected to be
appealed, if upheld, the ruling will permit the proceedings on this issue to go
forward in the trial court and places in question the rights that our local
water district and we have in local water storage facilities.
11
<PAGE>
Our crops are subject to a variety of risks, including weather, overproduction,
water availability, diseases and pests, including Pierce's Disease, which has
destroyed vineyards in parts of Southern California.
Agriculture is subject to a variety of risks. Various diseases, pests and
certain weather conditions can materially and adversely affect the quality and
quantity of the crops we grow, thereby materially and adversely affecting the
productivity and profitability of our business. Overproduction of particular
crops in the industry can signficantly adversely affect the prices we receive,
and water availability can significantly affect our costs. To date, our
vineyards have not been infected with Pierce's Disease, a disease that destroys
grapevines and for which there is no known cure. Recently, a new carrier of
Pierce's Disease, the Glassy Winged Sharpshooter, has infected vineyards in
Southern California. If this pest migrates to our vineyards, it could greatly
increase the incidence of Pierce's Disease and materially and adversely affect
our future grape production.
All of our businesses are affected by substantial competition, and our new
strategy to aggressively develop our land is affected by the fact that there is
a substantial amount of other undeveloped land in our region, much of which is
closer to the population center of Los Angeles than our land.
Competition in our Livestock and Farming Divisions and in our mineral
extraction activities is principally based upon, and reflected in, the prices
received for these commodities, although we are beginning to compete in the
sale of our livestock based on quality. Competition in the Real Estate Division
is based on several factors, including location of the property, regional
demand trends, construction of products meeting demand and marketing of
products when demand must be induced. We compete with the owners of an
extensive amount of undeveloped land in our region which is closer to
population centers than ours is. Many of our competitors have substantially
greater financial resources than we do and therefore may be able to compete
more effectively than we can.
Portions of our land are subject to liens securing the payment of amortized
costs of water and other infrastructure, portions of which are payable by third
parties. Any default in these obligations could result in foreclosure and
potentially loss of the land.
Approximately 1,762 acres of our land in and around the new Tejon Industrial
Complex are subject to a lien securing repayment of $17,000,000 in bonds,
approximately 5,496 acres of our farmland are subject to liens securing
repayment of water district bonds issued to finance water delivery facilities
and as many as 20,000 to 30,000 additional acres of our land secure payment of
contingent assessments and reassessments by the water district. While the water
district has not experienced financial difficulties to date, we expect to pass
the debt service for the Tejon Industrial Complex bonds on to tenants and
purchasers, and we have not been adversely affected by any default relating to
the water district bonds, assessments or reassessments since the liens were
imposed over 29 years ago. Nonetheless, to the extent we are unable to sell or
lease land in the Tejon Industrial Complex to third party users, we will have
to pay the debt service on the bonds ourselves. While the water district has
not experienced financial difficulties to date, we cannot assure you that
future events will not result in defaults and foreclosure of the water
district's bonds or assessment liens.
We are contingently responsible for the investigation and remediation of
significant contamination caused by a tenant and a former tenant operating a
cement plant on our land, and we could incur substantial losses if these
parties fail to perform their obligations under orders issued by a regional
pollution control agency.
The contamination includes several former landfills containing industrial
waste, a storage area for drums that contained lubricants and solvents, a
former underground storage tank for waste oil and solvents, a groundwater plume
of chlorinated hydrocarbons and a soil and groundwater plume of diesel fuel
which leaked from a pipeline. The plume of chlorinated hydrocarbons has
migrated off the leased premises and has leaked into a local creek, and the
plume of diesel fuel has migrated beneath the cement plant. Because the waste
in some or all of the sites has contaminated groundwater, the California
Regional Water Quality Control Board for the Lahontan Region has issued
investigation and cleanup orders with respect to all of the sites. These orders
12
<PAGE>
generally require the tenant and former tenant to investigate and clean up soil
and groundwater contamination in the vicinity of the sites. Although we did not
deposit any of the contaminants, the orders state that, as the landowner, we
will be responsible for complying with the orders if the tenant and former
tenant fail to perform the necessary work. Cleanup and abatement orders have
also been issued with respect to the massive cement kiln dust piles on the
leased property for which we also have contingent responsibility.
Civil fines for violations of an order of the Water Board can be as high as
$10,000 per day for each day the violation occurs and as high as $15,000 per
day for each day a discharge of pollutants and a violation of an order occurs.
Growth of our businesses, particularly growth resulting from increased real
estate development activities, may place substantial demands on our personnel,
resulting in a material adverse effect on our business.
We have limited management and administrative resources. Our success depends
to a significant extent upon the efforts and abilities of our executive
officers and senior managers and our ability to attract additional executives
and managers. If we are successful in implementing our strategy, we may
experience a period of rapid growth and expansion which could place significant
additional demands on our management and administrative resources. We have no
employment agreements with our executive officers or senior managers other than
agreements with executive officers to pay certain severance benefits.
Competition for qualified personnel is intense, and we may be at a disadvantage
because of the rural location of our corporate headquarters. Our management
team's failure to manage this growth or its inability to attract and retain
highly qualified executive and managerial personnel could have a material
adverse effect on our business.
The price of our stock may decline substantially if we fail to perform in
accordance with our business plan or if there are changes or volatility in the
stock market generally or for companies in our industry.
The price of our stock can be expected to fluctuate significantly,
particularly as we proceed with our aggressive development plans and if we
experience down cycles in our other businesses. Changes or volatility in the
stock market generally or changes in the market's valuation of real estate
companies could also result in lower stock prices.
Several large stockholders are in a position to exert influence over the
direction and policies of our company, which could adversely affect the
interests of other stockholders.
As of September 30, 2000, Third Avenue Trust (on behalf of three mutual
funds) owned approximately 26% of our outstanding shares, Ardell Investment
Company and M.H. Sherman Company (which have common ownership) together owned
approximately 17% of our outstanding shares and private investment funds
managed by Carl Marks Management Company, L.P. and one of its affiliates own
approximately 6% of our outstanding shares. Martin J. Whitman, Dan T. Daniels,
Craig Cadwalader and Robert C. Ruocco, who are affiliated with one or more of
these stockholders, are members of our Board of Directors. As a result these
stockholders may be able to significantly affect important decisions regarding
our business as well as prevent corporate transactions, such as mergers,
consolidations or a sale of substantially all of our assets, which might be
favorable from our standpoint or that of other stockholders.
Our Certificate of Incorporation and Bylaws include provisions which could
inhibit a change in control and prevent a stockholder from receiving a
favorable price for his or her shares.
Our Board of Directors is divided into three classes of directors with
staggered three-year terms. Directors can be removed only for cause by a vote
of a majority of the stockholders, and stockholders cannot call special
meetings of stockholders or act by written consent. In addition certain
business combinations involving a "Related Person" are subject to special
voting or fairness requirements. "Related Person" is defined to include any
person, entity or group who, together with the person's "affiliates" and
"associates" (as defined) beneficially own more than 5% of our outstanding
shares. Certain stockholders who beneficially own more than
13
<PAGE>
5% at the time the provisions were adopted are excluded. These provisions are
intended to prevent or make more difficult a business combination not approved
by the members of the Board of Directors who are unaffiliated with the Related
Person. We also have authorized a class of preferred stock which can be issued
with the approval of the Board of Directors having rights, preferences and
privileges that could make it more difficult for a party to acquire our
company. The effect of these provisions of our Certificate of Incorporation and
Bylaws could be to delay or prevent a transaction in which stockholders could
dispose of their shares at a favorable price.
If you exercise your subscription rights, you may be unable to sell any shares
you purchase until the rights offering has expired.
The exercise price for the subscription rights has been determined by a
pricing committee of our Board of Directors and represents a discount to the
market price of our common stock on the date the exercise price was determined.
However, there can be no assurance that the market price of our common stock
will not decline during or after the offering or that you will be able to sell
shares of common stock purchased in the offering at a price equal to or greater
than the exercise price. Stock certificates will be delivered within two
business days after the subscription agent receives a properly exercised
subscription warrant and full payment of the subscription price, but persons
who exercise their subscription right may not be able to sell the shares they
purchase in the offering until the stock certificates are delivered. You will
not receive any interest on the funds delivered to the subscription agent when
you exercise the subscription rights.
14
<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of shares of common stock in the rights
offering at the offering price of $ per share are estimated to be
approximately $29.6 million after deduction of estimated expenses payable by us
in connection with the offering. The purpose of the rights offering is to
provide additional capital to enable us to pursue opportunities to develop our
real estate, including the Tejon Industrial Complex and the Tejon Mountain
Village.
We estimate that approximately $15-20 million of the net proceeds will be
used to further develop the Tejon Industrial Complex, including completing
infrastructure projects such as roads, sewers and utilities, to grade pads and
to perform entitlement work. We plan to use approximately $10 million of the
net proceeds in development of the Tejon Mountain Village, including obtaining
entitlements, landscaping and some infrastructure. These figures are estimates,
subject to substantial uncertainty, and may change as development at the Tejon
Industrial Complex and the Tejon Mountain Village progresses.
If our bank credit facility is renewed or replaced when it expires in June
2001 or prior to that date, we expect to use all or a portion of the net
proceeds to reduce the outstanding balance under our revolving lines of credit
pending our re-borrowing the funds to pay the costs of our real estate
developments, as described above. We may also invest portions of the net
proceeds temporarily in short term, investment grade, interest-bearing
securities or guaranteed obligations of the U.S. Government.
15
<PAGE>
PRICE RANGE OF COMMON STOCK
Our common stock trades on the New York Stock Exchange under the symbol
"TRC". The following table sets forth for the periods indicated the high and
low sales prices per share of common stock on the American Stock Exchange
through July 27, 1999 and on the New York Stock Exchange after that date:
<TABLE>
<CAPTION>
High Low
--------- ---------
<S> <C> <C>
Fiscal year ended December 31, 1998
First Quarter............................................. $32 3/4 $22 7/16
Second Quarter............................................ $31 1/8 $24 3/4
Third Quarter............................................. $26 3/8 $19 1/2
Fourth Quarter............................................ $25 1/2 $18 1/4
Fiscal year ended December 31, 1999
First Quarter............................................. $22 5/8 $16 1/2
Second Quarter............................................ $31 1/8 $16 1/8
Third Quarter............................................. $33 3/4 $24
Fourth Quarter............................................ $29 5/8 $19 13/16
Fiscal year ended December 31, 2000
First Quarter............................................. $28 $21
Second Quarter............................................ $24 5/16 $20 1/2
Third Quarter............................................. $29 13/16 $21 7/8
Fourth Quarter (through November , 2000)............... $ $
</TABLE>
On November , 2000, the last reported sales price of our common stock on
the New York Stock Exchange was $ per share. As of November , 2000,
there were approximately record owners of our common stock.
DIVIDEND POLICY
For more than the last five years, we have paid a cash dividend of $.05 per
share on our common stock each year. However, in May 2000 the Board of
Directors decided to discontinue payment of dividends in order to conserve cash
for the operations of the Company. Any future determination to pay dividends
will be made in the discretion of the Board of Directors and will depend on a
number of factors, including our future earnings, capital requirements,
financial condition, future prospects and other factors as the Board of
Directors may deem relevant.
16
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 2000 our actual capitalization
and the capitalization on a pro forma as adjusted basis to reflect the receipt
of the estimated net proceeds from the sale of shares in the rights
offering at the offering price of $ . The table does not reflect
810,797 shares of common stock issuable upon exercise of outstanding stock
options with a weighted average exercise price of $20.90 per share.
<TABLE>
<CAPTION>
As of June 30, 2000
--------------------
Pro Forma
Actual As Adjusted
------- -----------
<S> <C> <C>
Long-term debt, less current portion....................... $24,331 $24,331
Stockholders' equity
Common stock............................................. 6,354
Additional paid-in capital............................... 589
Deferred compensation.................................... (129) (129)
Retained earnings........................................ 35,915 35,915
Accumulated other comprehensive income................... (170) (170)
------- -------
Total stockholders' equity............................. 42,559 72,159
------- -------
Total capitalization................................... $66,890 $96,490
======= =======
</TABLE>
--------
See Notes to "Selected Consolidated Financial Data".
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data, which
should be read in conjunction with our consolidated financial statements and
notes thereto and with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" which are incorporated by reference. The
selected consolidated financial data for each of the years in the five-year
period ended December 31, 1999 was derived from our consolidated financial
statements which have been audited by Ernst & Young LLP, our independent
auditors. The selected consolidated financial data for the six months ended
June 30, 2000 and June 30, 1999 have been derived from our unaudited
consolidated financial statements. In the opinion of management, the unaudited
consolidated financial statements have been prepared on the same basis as the
audited consolidated financial statements and include all adjustments,
consisting of normal recurring adjustments, necessary for fair presentation of
the consolidated financial position and the consolidated results of operations
as of such dates and for such periods. Results for the six months ended June
30, 2000 are not necessarily indicative of the results to be expected for the
entire year or the quarters following in 2000.
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30
--------------------------------------------------------------- ----------------------
1999 1998 1997 1996 1995 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands of dollars, except share and per share (unaudited)
amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statements of Income
Data:
Revenues(1):
Real estate............ $ 7,268(2) $ 6,966(3) $ 4,888(4) $ 2,820 $ 2,566 $ 2,398 $ 4,028
Livestock.............. 40,576 31,450 23,009 5,725 7,641 22,188 13,233
Farming................ 7,433 8,671 9,173 9,107 7,973 405 283
Interest income........ 639 1,001 1,159 1,308 1,374 312 331
---------- ---------- ---------- ---------- ---------- ---------- ----------
55,916 48,088 38,229 18,960 19,554 25,303 17,875
Costs and expenses(1):
Real estate............ 4,846 2,938 2,714 2,505 2,637 2,434 2,680
Livestock.............. 38,819 30,480 21,353 5,113 7,550 20,306 12,917
Farming................ 6,285 6,402 6,546 5,973 6,162(5) 1,039 700
Corporate expenses..... 3,198 2,581 2,346 2,266 2,046 1,509 1,488
Interest expense....... 863 1,065 747 295 436 1,283 421
---------- ---------- ---------- ---------- ---------- ---------- ----------
54,011 43,466 33,706 16,152 18,831 26,571 18,206
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 1,905 4,622 4,523 2,808 723 (1,268) (331)
Income taxes provision
(benefit).............. 724 1,613 1,491 1,123 289 (482) (125)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
cumulative effect of a
change in an accounting
principle.............. 1,181 3,009 3,032 1,685 434 (786) (206)
Cumulative effect of a
change in an accounting
principle (net of taxes
of $70,000)............ -- 130 -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ 1,181 $ 3,139 $ 3,032 $ 1,685 $ 434 $ (786) $ (206)
========== ========== ========== ========== ========== ========== ==========
Net income (loss) per
common share:
Basic.................. $ 0.09 $ 0.25 $ 0.24 $ 0.13 $ 0.03 $ (0.06) $ (0.02)
========== ========== ========== ========== ========== ========== ==========
Diluted................ $ 0.09 $ 0.25 $ 0.24 $ 0.13 $ 0.03 $ (0.06) $ (0.02)
========== ========== ========== ========== ========== ========== ==========
Shares used in computing
net income (loss)
per common share:
Basic.................. 12,697,179 12,691,253 12,683,497 12,682,244 12,682,244 12,706,236 12,691,253
Diluted................ 12,796,485 12,752,697 12,796,729 12,683,760 12,684,105 12,706,236 12,691,253
Pro Forma Data(6)(7):
Net income (loss)....... $ 1,181 $ (786)
Net income (loss) per
common share:
Basic..................
Diluted................
Shares used in computing
net income (loss)
per common share:
Basic..................
Diluted................
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
As of December 31, June 30, 2000
--------------------------------------- --------------------
Pro Forma as
1999 1998 1997 1996 1995 Actual Adjusted (8)
------- ------- ------- ------- ------- ------- ------------
(in thousands) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash and cash
equivalents............ $ 423 $ 743 $ 976 $ 693 $ 44 $ 520 $ 30,120
Marketable securities... 9,942 13,294 17,189 20,127 20,257 10,247 10,247
Working capital......... 16,278 19,768 24,518 24,686 24,784 21,881 51,481
Total assets............ 91,519 73,014 63,693 47,369 45,203 95,596 125,196
Long term debt, less
current portion........ 20,606 1,875 3,925 1,800 1,800 24,331 24,331
Stockholders' equity.... 43,160 42,705 40,488 37,732 36,969 42,559 72,159
</TABLE>
--------
(1) Certain amounts derived from our audited consolidated financial statements
for the years prior to December 31, 1999 have been reclassified to conform
to their presentation during the year ended December 31, 1999.
(2) Includes revenue of $1,750,000 ($1,085,000 net of tax or $.09 per share)
from a fiber optic easement sale.
(3) Includes revenue of $4,250,000 ($2,569,000 net of tax, or $0.20 per share)
from the sale of land to Northrop Grumman Corp. This land was previously
leased to Northrop.
(4) Includes revenue of $2,050,000 ($1,353,000 net of tax, or $.11 per share)
from a pipeline company for the sale of easement rights.
(5) Net income for 1995 was unfavorably impacted by the recordation of a
$400,000 charge ($240,000 net of tax, or $.02 per share) due to almond
trees destroyed by 1995 winter storms.
(6) Pro forma net income for the year ended December 31, 1999 is the same as
historical net income. We estimate that the net income would have been
$911,000, net of taxes, greater had the proceeds from the offering been
invested in cash and cash equivalent securities during the year ended
December 31, 1999. The pro forma net loss for the six months ended June 30,
2000 is the same as the historical net loss. We estimate that the net loss
would have been $524,000, net of taxes, less had the proceeds from the
offering been invested in cash and cash equivalent investments during the
six months ended June 30, 2000.
(7) Pro forma information gives effect, as of the beginning of each period, to
the sale of shares of common stock upon the exercise of rights in this
offering as of the beginning of the year ended December 31, 1999 and to the
sale of shares of common stock upon the exercise of rights in this
offering as of the beginning of the six months ended June 30, 2000.
(8) Reflects our receipt of estimated net proceeds of $29.6 million from the
sale of shares of common stock upon the exercise of rights in this
offering at the offering price of $ per share, net of estimated offering
expenses, as of June 30, 2000. See "Use of Proceeds".
19
<PAGE>
BUSINESS
We are a diversified, growth oriented land development and agribusiness
company whose purpose is to increase the value of our real estate and resource
holdings and maximize our market value for our stockholders. Our prime asset is
approximately 270,000 acres of contiguous, largely undeveloped land which, at
its most southerly border, is 60 miles north of Los Angeles, and at its most
northerly border is 15 miles east of Bakersfield. We believe that our land
holdings offer attractive development opportunities. We also have significant,
existing commercial real estate developments along Interstate 5 (a major,
north-south federal highway in California that runs through our land), and we
have significant livestock, farming and mineral extraction operations.
New Strategic Plan
Over the last four years we have been implementing a new strategic plan that
sets out a broad strategy for enhancing stockholder value. Specifically, the
plan has focused on planning and development of our largest and most valuable
asset, our 270,000-acre land holding, as well as growing our other core
businesses.
In implementing the new strategic plan, we have:
. increased revenues from operations over the last three years,
. purchased a feedlot in Texas to further enhance and expand livestock
operations,
. increased the cattle herd by over 20,000 head in order to expand market
opportunities,
. sold $6 million of non-strategic real estate assets, using the proceeds
to purchase commercial and industrial buildings for current and future
revenue sources,
. developed the first phase of the 351-acre Tejon Industrial Complex, with
the first occupant being the 51-acre Petro Travel Plaza that opened for
business in 1999 and the first purchaser being IKEA, an international
home furnishings retailer, which intends to develop a regional warehouse
having 850,000 or more square feet at the Complex,
. signed an agreement with an affiliate of Enron North America Corp. for
the development of a power plant by the Enron affiliate on our land,
. signed a joint venture agreement with three well-known home builders for
the creation of a 6,500-acre master-planned community on our land in Los
Angeles County which we call "Rolling Meadows,"
. began trading on the New York Stock Exchange on July 28, 1999, and
. purchased an almond hulling and processing plant to enhance and expand
our farming operations.
More recently we have decided to focus our primary efforts and resources on
real estate development instead of trying to grow all of our businesses at the
same time. In addition to our Tejon Industrial Complex and Rolling Meadows
residential projects, we are engaged in the detailed planning of a master-
planned mountain community encompassing mountain homes, a high quality golf
resort, a commercial component and substantial open space. We call this project
"Tejon Mountain Village." Although the size of this development has not yet
been decided upon, it will involve several thousand acres and the development
of sites for several thousand homes ranging from less than one-half acre to
more than twenty acres. In September 2000 we decided to proceed with obtaining
governmental approvals for this project.
We also propose to expand the Tejon Industrial Complex by 500 acres, and we
are in discussions for the joint venture development of a 600,000 square foot
facility on approximately 30 acres in the Tejon Industrial Complex. Our
undertaking construction of these residential and industrial projects is
subject to a number of contingencies and uncertainties, and we cannot assure
you that the developments will occur or that they will be successful.
20
<PAGE>
In order to provide additional working capital for our real estate
development activities, we have begun to explore, on a preliminary basis, the
possibility of selling our livestock operations, including a lease to the
purchaser of a significant portion of our land to be used for grazing purposes.
The potential lease would not affect any real estate development opportunities.
No decisions have been made with respect to such a sale. Because of the
preliminary stage we are in, we cannot assure you that any such sale will take
place, nor can we predict the amount of the purchase price.
At June 30, 2000 the Livestock Division accounted for over $36 million in
book value of our identifiable assets representing approximately 38% of the
book value of our total assets. The book value of the Livestock Division assets
is not necessarily indicative of their fair market value. For the fiscal years
ended December 31, 1999, 1998 and 1997, the Livestock Division accounted for
approximately 73%, 65% and 60%, respectively, of our total revenues and
approximately 47%, 4% and 22%, respectively, of our income before taxes after
allocation of interest expense. The contemplated sale of our livestock
operations would include substantially all the assets of the Livestock
Division. While the sale of the livestock operations probably would provide
significant working capital, it would also result in a loss of significant
revenues and income even after taking into account the revenue stream from the
grazing lease that would be entered into in connection with the sale.
Property
Our 270,000 acres include portions of the San Joaquin Valley, foothills,
portions of the Tehachapi Mountains and portions of the western end of the
Antelope Valley. A number of key transportation and utility facilities cross
our land, including Interstate 5, California Highways 58, 138 and 223, the
California Aqueduct (which brings water from Northern California), and various
transmission lines for electricity, oil, natural gas and communication systems.
Approximately 250,000 acres of our land is located in Kern County,
California. The Kern County General Plan for this land contemplates continued
commercial, resource utilization, farming, grazing and other agricultural uses,
as well as certain new developments and uses, including residential and
recreational facilities. While the County General Plan is intended to provide
general guidelines for land use and development, it is subject to amendment to
accommodate changing circumstances and needs. In addition to the General Plan,
much of our land will require specific zoning and site plan approvals prior to
actual development. We have not yet made specific proposals to the County to
implement any part of our proposed land use concepts, except at the Laval Road
Interchange on Interstate 5.
The remainder of our land, approximately 20,000 acres, is in Los Angeles
County. This area is accessible from Interstate 5 via Highway 138. Los Angeles
County has adopted general plan policies which contemplate future limited
residential development of portions of this land, subject to further
assessments of environmental and infrastructure constraints. In March 2000, we
formed a limited liability company with three major Southern California
homebuilders to pursue a master planned community on our Los Angeles County
land. See "Business--Real Estate Operations."
Portions of our land consist of mountainous terrain, and much of the land is
not presently served by developed roads or by utility or water lines. Any
significant development of the land would involve the construction of roads,
utilities and other expensive infrastructure and would have to be done in a
manner which accommodates a number of environmental concerns, including
endangered species and wetlands issues, that may limit development of portions
of the land or result in substantial delays in getting governmental approval.
21
<PAGE>
Industry Segment Information
The following table shows the revenues, operating profits and identifiable
assets of each of our industry segments for the last three years and six months
ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>
Six Months
Years Ended December 31 Ended June 30
------------------------- ----------------
1999 1998 1997 2000 1999
------- ------- ------- ------- -------
(in thousands) (unaudited)
<S> <C> <C> <C> <C> <C>
Revenues(1)
Real Estate...................... $ 7,268 $ 6,966 $ 4,888 $ 2,398 $ 4,028
Livestock........................ 40,576 31,450 23,009 22,188 13,233
Farming.......................... 7,433 8,671 9,173 405 283
------- ------- ------- ------- -------
Segment Revenues................. 55,277 47,087 37,070 24,991 17,544
Interest Income.................. 639 1,001 1,159 312 331
------- ------- ------- ------- -------
Total Revenues................. $55,916 $48,088 $38,229 $25,303 $17,875
======= ======= ======= ======= =======
Segment Profits and Income (Loss)
Before Income Taxes(1)
Real Estate...................... $ 2,422 $ 4,028 $ 2,174 $ (36) $ 1,348
Livestock........................ 1,757 970 1,656 1,882 316
Farming.......................... 1,148 2,269 2,627 (634) (417)
------- ------- ------- ------- -------
Segment Profits(2)............... 5,327 7,267 6,457 1,212 1,247
Interest Income.................. 639 1,001 1,159 312 331
Corporate Expense................ (3,198) (2,581) (2,346) (1,509) (1,488)
Interest Expense................. (863) (1,065) (747) (1,283) (421)
------- ------- ------- ------- -------
Income (Loss) Before Income
Taxes......................... $ 1,905 $ 4,622 $ 4,523 $(1,268) $ (331)
======= ======= ======= ======= =======
Identifiable Assets by
Segment(1)(3)
Real Estate...................... $30,924 $ 9,110 $ 6,269 $25,283 $25,143
Livestock........................ 28,712 30,055 24,242 35,904 30,941
Farming.......................... 13,574 12,890 10,176 17,357 13,330
Corporate........................ 18,309 20,959 23,006 17,052 17,805
------- ------- ------- ------- -------
Total Assets................... $91,519 $73,014 $63,693 $95,596 $87,219
======= ======= ======= ======= =======
</TABLE>
--------
(1) Certain industry segment information presented for the years ended prior to
December 31, 1999 have been reclassified to conform to their presentation
for the year ended December 31, 1999.
(2) Segment Profits are revenues less operating expenses, excluding interest
income and expense and corporate expenses.
(3) Identifiable Assets by segment include both assets directly identified with
those operations and an allocable share of jointly-used assets. Corporate
assets consist primarily of cash and cash equivalents, refundable and
deferred income taxes and buildings and improvements.
Real Estate Operations
Our 270,000-acre land holding offers significant real estate development
opportunities. Our land is characterized by diverse topography and scenic
vistas and is conveniently served by three inter-regional highways. Interstate
5, one of the nation's most heavily traveled freeways, brings approximately
60,000 vehicles a day through our land, which includes 16 miles of Interstate 5
frontage and the commercial land surrounding four interchanges. The strategic
plan for real estate focuses on development opportunities along the Interstate
5 corridor as well as laying the necessary groundwork for moving forward with
potential destination uses, including residential and resort projects.
22
<PAGE>
During 1999 development activity was principally focused on the 351-acre
Tejon Industrial Complex at the Interstate 5/Laval Road interchange. The
activity at the industrial complex included the completion of infrastructure
construction for the first phase of the complex as well as infrastructure
construction for Petro Travel Plaza, a traveler-oriented development with
restaurant, truck stop and gas station facilities located on approximately 51
acres in the complex. We organized a limited liability company with Petro
Stopping Centers, L.P. for the project. The transaction is structured so that
we were not required to contribute any capital other than the land and up to
$1.4 million in off-site improvements, and we receive 60% of the profits and
cash flow after debt service. The term of the joint venture is 35 years,
subject to mutual buy-out rights commencing in 2002. Petro Travel Plaza opened
at the end of June, 1999 and has seen increasing sales and traffic through the
site since then (except for expected declines in February, March and September
due to seasonality).
Interest in developing industrial, warehouse, and distribution facilities on
the remaining 300 acres in the Tejon Industrial Complex is being expressed by
developers and end users. We have begun marketing building sites at the
industrial complex to these groups. In September 2000 we closed the sale of the
first building site, 80 acres purchased by IKEA, an international home
furnishings retailer, and we are engaged in discussions for the joint venture
development of the 600,000 square foot building on 30 acres mentioned above. We
will be in direct competition for customers with other industrial sites in
Central and Southern California, including the inland empire region of Southern
California.
In March 2000, we formed a limited liability company with three well-known
homebuilders (Lewis Investment Company, LLC, Pardee Construction Company and
Standard Pacific Corp.), to develop a master-planned community initially of
4,000 acres on our land in Los Angeles County that we call Rolling Meadows.
Under the terms of the agreement we are to contribute the land and $500,000 for
feasibility studies and the developers are to invest a matching amount of funds
up to an aggregate of $15.0 million to perform planning and feasibility work
and to prepare applications for entitlements for the project, which they hope
to file with Los Angeles County in early 2001. The parties have agreed in
principle to increase the size of the project to 6,500 acres, which means that
we would contribute another 2,500 acres and their cash contributions would
increase to $27.5 million. No binding agreements have been entered into for
this expansion of the project, however. If and when the entitlements have been
obtained, we expect the limited liability company to make the required
infrastructure improvements and to sell the lots to developers for the
construction of homes. The three development companies participating in the
project have the right to purchase up to 60% of the lots. We are entitled to
receive 50% of the profits and cash flow, if any, from the development, which
is not expected to be completed for several years.
In April 1999 we entered into an agreement with two companies affiliated
with Enron Corporation, which we call collectively "Enron." Under this
agreement, Enron has an option to lease from us approximately 31 acres of
undeveloped land at the southern end of the San Joaquin Valley for the
construction and operation of a power plant having an anticipated capacity of
750 megawatts of electricity. The project would be powered by natural gas
turbines and would be subject to extensive environmental requirements. The
transaction is subject to a number of contingencies, and Enron has the right to
terminate the arrangement unilaterally at any time before the lease becomes
effective.
Under the arrangement we received $1,450,000 in 1999 and an additional
$1,900,000 through September 30, 2000. If the arrangement is not terminated by
Enron, we are entitled to receive $100,000 monthly until rental under the lease
commences or the payments reach an agreed maximum amount, although such
payments could be significantly higher and could be paid earlier under certain
circumstances. If Enron exercises its right to terminate the arrangement, we
would be entitled to retain the payments made to the date of termination, but
Enron would have no obligation to make any further payments. Payments under the
lease, which include both rent and compensation for significant easement rights
over other parts of our land, would be $2,600,000 per year (subject to certain
adjustments which could be material), would commence when the plant becomes
operational or earlier under certain circumstances and would be subject to
escalation based upon changes in a designated consumer price index. We would
also be entitled to receive additional rent after commercial operation of the
plant begins, based upon production output at the plant and energy prices. The
term of the lease would be 25 years from the
23
<PAGE>
date the plant becomes operational (or earlier under certain circumstances),
and Enron would have three five-year options to extend the term.
In addition to the Petro Travel Plaza facility, we lease to various tenants
land which is used for a full-service truck stop facility, a truck wash, four
auto service stations with convenience stores, four full-service restaurants,
five fast-food operations, a motel, two antique shops, and a United States
Postal Service facility. In addition, several microwave repeater locations,
radio and cellular transmitter sites, and fiber optic cable routes are also
leased. In the commercial sales and leasing area, we are in direct competition
with other landowners which have highway interchange locations along Interstate
5 and State Route 99 in the southern San Joaquin Valley and the Tehachapi
Mountains.
We lease certain portions of our land to oil companies for the exploration
for, and production of, oil and gas but do not ourselves engage in any such
exploratory or extractive activities.
As of December 31, 1999, approximately 9,645 acres were committed to
producing oil and gas leases from which the operators produced an average of
approximately 142,000 barrels of oil, 54,682 MCF of dry gas, and 3,000 gallons
of wet gas per day during 1999. Our share of production based upon the average
royalty rate during the last three years has been 49, 32, and 49 barrels of oil
per day for 1999, 1998, and 1997, respectively. Approximately 405 producing oil
wells were located on the leased land as of December 31, 1999. No new wells
have been drilled on our land in recent years.
Estimates of oil and gas reserves on our properties are unknown to us. We do
not make such estimates, and our lessees do not make information concerning
reserves available to us.
We have approximately 2,440 acres under lease to National Cement Company of
California, Inc., which we call "National," for the purpose of manufacturing
portland cement from limestone deposits found on the leased acreage. National
owns and operates on the property a cement manufacturing plant having an
original design capacity of approximately 600,000 tons of cement per year. The
manufacturing plant is currently under construction to increase production
capacity to 1,000,000 tons. The amount of payment that we receive under the
lease is based upon shipments from the cement plant. The term of this lease
expires in 2006, but National has remaining options to extend the term for two
additional successive increments of 20 years each and one final increment of 19
years. Significant proceedings under environmental laws relating to the cement
plant are in process, see "Business--Legal Proceedings."
Livestock Operations
We conduct a beef cattle operation upon those portions of our land which are
not devoted to farming, commercial real estate operations or other purposes.
The beef cattle activities include both commercial cow-calf operations (the
maintenance of a cattle herd whose offspring are used to replenish the herd,
with excess numbers being sold commercially) and grazing of stocker cattle
(cattle purchased at light weights for growing on available range forage before
being resold). At June 30, 2000, our cattle herd numbered approximately 39,000
head of which approximately 31,000 head were stockers and the remainder were in
the breeding herd. Our cattle are either sold to stocker and feedlot operators
or fed at our own feedlot in Texas and then sold to packers. We are considering
selling our livestock operations. See "Business--New Strategic Plan."
As to the sale of cattle, we are in direct competition with other commercial
cattle operations throughout the United States. The prices received for our
cattle are primarily dependent upon the perception of supply and demand at the
time cattle are sold. In an attempt to reduce the market risks of our livestock
activities, we usually hedge future sales of cattle in the futures and options
markets or obtain fixed prices for future delivery through contracts with
cattle buyers, feedlots, or packing houses. We purchased our own feedlot in
Texas in 1997 in order to further vertically integrate our beef operations. At
the feedlot we feed cattle for outside customers as well as our own cattle
prior to sale to packers. The feedlot is in direct competition for customers
with feedlots in west Texas and Kansas. We compete primarily on the basis of
price and the quality of service offered to our customers.
24
<PAGE>
During the last few years, a number of companies in the cattle industry
began to explore in depth various forms of strategic alliances within the
production, feeding and meat-packing segments of the cattle business. We
believe there will be dramatic shifts in the form of cattle marketing in the
United States. To be successful in the cattle industry in the future we believe
that the producers of beef must become more consumer-oriented. To achieve this
goal we began a program in 1997 to vertically integrate our cattle operations.
We believe that vertical integration will allow us to control the quality of
the product through the production process to the end users. To vertically
integrate, we must control the feeding of cattle and create strategic alliances
with other producers to supply beef products to end users. To begin the process
of vertical integration within the beef industry, we purchased the feedlot in
Texas and entered into a strategic alliance known as Ranchers Renaissance with
several other cattle producers to sell high quality, source-verified beef to
end users such as restaurants and grocery stores. The strategic alliance with
other cattle producers has grown to a size that will support a source-verified
branded beef product. The Ranchers Renaissance strategic alliance plans to
introduce a branded beef product in a large chain of supermarkets on the east
coast during the first quarter of 2001. A branded product will provide us with
additional returns on cattle placed into the program because we are able to
obtain higher prices for higher quality beef. In 1999 and 1998 Excel Beef Co.,
which purchases our cattle as part of the Ranchers Renaissance program,
accounted for 39% and 22%, respectively, of our total revenues.
Farming Operations
In the San Joaquin Valley, we farm permanent crops including the following
acreage: wine grapes--1,555, almonds--1,985, pistachios--738 and walnuts--295.
Included in these acreage figures are 300 acres of almonds which were planted
in 1998 and 300 acres of almonds which were planted early in 1999. These new
almond developments are expected to have their first harvestable crops in 2001
and 2002. Our objective in planting new trees is to offset the normal yield
decline as our older plantings reach productive maturity and to improve
revenues from farming operations in future years. As certain of our permanent
plantings age to the point of declining yields, we will evaluate the
advisability of replanting those crops or replacing them with different
plantings, depending upon market conditions. We also lease approximately 1,000
acres to third parties for the farming of row crops.
We sell our farm commodities to several commercial buyers. As a producer of
these commodities, we are in direct competition with other producers within the
United States and throughout the world. Prices received by us for our
commodities are determined by total industry production and demand levels. We
attempt to improve price margins by producing high quality crops through
cultural practices and by obtaining better prices through marketing
arrangements with handlers. In order to control the quality of our almonds
through the processing phase and to reduce future processing costs, in May 2000
we formed a joint venture with D. Billings Family Trust, a significant San
Joaquin Valley farming company, to own and operate an almond hulling, shelling
and processing plant purchased by us in January 2000. The purchase price was
$2,700,000. We are entitled to two-thirds of the profits and cash flow after
debt service. In addition to using the almond processing plant to process our
crop and that of our co-venturer, we also hull, shell and process almonds for
outside growers.
In 1999 our almonds were primarily sold to two domestic commercial buyers,
with one of the buyers receiving approximately 52% of the crop. Since we now
process our own almonds, we have considerably more flexibility over the timing
and nature of our sales. We do not believe that we would be adversely affected
by the loss of either of these two buyers because of the size of the almond
market, the large number of other buyers that would be available to us and the
fact that the prices for these commodities do not vary based on the identity of
the buyer.
The California almond industry is subject to a federal marketing order which
empowers the California Secretary of Agriculture to set the percentage of
almonds which can be sold during any crop year and the percentage of almonds to
be held in reserve in order to assist in the orderly marketing of the crop.
During 1999, the State of California had a record almond crop that led the
Almond Board of California, an industry group, to request an almond marketing
reserve that was approved by the Secretary of Agriculture. The
25
<PAGE>
marketing reserve had allowed us to sell only 77% of the 1999 crop until late
in the spring of 2000, when the marketing order was lifted and we were able to
sell the remaining 23% during the third quarter of 2000. Historically,
marketing orders have been lifted in the following year after the crop for that
year is determined. During 1998 and 1997 the saleable percentage was set at
100%.
In 1999, the majority of our pistachios were sold to one customer, and our
walnuts were sold to two customers, each receiving approximately 50% of the
crop. During 1999 the majority of wine grapes were sold to one winery, Golden
State Vintners which accounted for 15% of our total revenues in 1997 but less
than 10% in 1998 and 1999. Our contract with Golden State Vintners expires with
the purchase of this year's crop, and, while discussions are ongoing, we have
not entered into another contract. We believe that there is an imbalance
between the supply of wine grapes and the demand as the result of so many new
plantings coming into production. We cannot assure you that we will find buyers
for all or any significant portion of our wine grape production or that any
contracts entered into will be profitable. The loss of purchasers for our wine
grapes would materially affect our business.
Water Rights
Existing long-term contracts with the Wheeler Ridge-Maricopa Water Storage
District, which we call the "Wheeler Ridge Water District," provide for water
deliveries from the California State Water Project to portions of our land in
the San Joaquin Valley. The terms of these contracts extend to 2035. Under the
contracts we are entitled to annual water for 5,496 acres of land, which is
more than is required for our present farming operations. The long-term water
supply picture in the state is uncertain, however, not only due to recurring
droughts, but also because of existing and likely additional restrictions
placed on water exported from the Sacramento-San Joaquin River Delta. The
impact of these restrictions could adversely affect our business. See "Risk
Factors."
The years 1995 through 1999 were excellent water years with 100% of our
water entitlement being available from the State Water Project. While the year
2000 Project allocation was only 90%, the Wheeler Ridge Water District was able
to supply us with 100% of our contract entitlement. In addition, in each of
these years, there was sufficient runoff from local mountain streams to allow
us to capture this water in reservoirs and utilize it to offset some of the
higher priced State Water Project water. Both the Wheeler Ridge Water District
and we are able to bank (percolate into underground aquifers) some of our
excess supplies for future use. The Wheeler Ridge Water District expects to be
able to deliver our entire contract water entitlement in any year that the
State Water Project deliveries exceed 30-50% by drawing on its ground water
wells and water banking assets. Based on historical records of water
availability, we do not believe we have material problems with our water
supply. However, if State Water Project deliveries are less than 30-50% of our
entitlement for a sustained period of several years, then the Wheeler Ridge
Water District may not be able to deliver 100% of our entitlement and we will
have to rely on our own ground water sources, mountain stream runoff, water
transfers from the Tejon-Castac Water District and water banking assets. Water
from these sources may be more expensive because of pumping costs and transfer
costs. Also, as we develop our real estate for residential, commercial and
industrial uses, there will be less water available for agriculture from the
Tejon-Castac Water District.
The water contracts with the Wheeler Ridge Water District require annual
payments related to the fixed costs of the California State Water Project and
the Wheeler Ridge Water District, whether or not water is used or available.
The contracts also establish a lien on benefited land. Payments made under
these contracts by us for the three years ended December 31, 1997, 1998 and
1999 were $1,215,000, $1,200,000, and $1,300,000 respectively.
Land benefiting from the Wheeler Ridge Water District is subject to
contingent assessment liens that are senior in priority to any mortgages on the
property. The liens secure bonds issued by the Water District to finance
construction of water distribution facilities. Lien enforcement of assessments
and contracts can involve foreclosure of the liens and the resulting loss of
the land subject to the liens. The Water District will impose
26
<PAGE>
contingent assessments (over and above our normal costs for water entitlement)
only if the District's revenues from water contracts and other regular revenue
sources are not sufficient to meet its obligations. Lien assessments are levied
by the District based on estimated benefits to each parcel of land from the
water project serving the land. Approximately 5,496 acres of our land are
presently subject to such contingent liens totaling approximately $792,000.
Since commencement of operations in 1971, the District has had sufficient
revenues from water contract payments and other service charges to cover its
obligations without calls on assessment liens and has advised that it does not
presently anticipate the need to make any calls on assessment liens.
Under California law, lands located in a water storage district may be
reassessed at the request of the district board of directors or at the request
of 10% or more of the district landholders. As a result of any reassessment,
which is based upon relative benefits from district facilities to each land
parcel, the lien assessments may be redistributed and may increase or decrease
for any particular parcel. Additional projects undertaken by the water
district, if any, which might result in new assessment liens must be approved
by landowners of more than one-half of the land (based on valuation) in the
district.
In addition to our agricultural contract water entitlements, we have an
additional entitlement to obtain from the California State Water Project
sufficient water to service a substantial amount of future residential and/or
commercial development in Kern County. The Tejon-Castac Water District, a local
water district serving only our land and land we have sold in the Tejon
Industrial Complex, has 5,278 acre feet of State Water Project entitlement, or
enough to supply over 10,000 average families assuming 100% delivery. In
addition, Tejon-Castac has nearly 15,000 acre feet of water stored in Kern
County water banks. Both the entitlement and the banked water are the subject
of long-term water supply contracts extending to 2035 between Tejon-Castac and
our company. Tejon-Castac would be the principal water supply for any
significant residential and recreational development in Tejon Mountain Village,
and is regarded as a backup supply for the Tejon Industrial Complex.
The water agency serving the Los Angeles County portion of our land, the
Antelope Valley-East Kern Water Agency, has significant surplus entitlement
and, although no assurance has been given, it has indicated that it would be
able to provide the water needed for a major development of the kind being
planned on that portion of our land.
Portions of our property also have available groundwater that would be
sufficient to support low density residential development in Tejon Mountain
Village, supply significant commercial development in the Interstate 5 corridor
and provide a significant back-up supply for development in Los Angeles County.
Historic State Water Project restrictions on the right to use agricultural
water entitlement for municipal and industrial purposes were removed in 1995.
For this purpose "municipal" use includes residential use. Therefore, although
only 2,000 of Tejon-Castac's 5,278 acre feet of entitlement are labeled for
municipal use, there is no practical restriction on its ability to deliver that
water to residential or industrial developments. However, for political and
regulatory reasons, it is unlikely that we would be able to direct any of our
Wheeler Ridge Water District agricultural entitlement to municipal or
industrial uses.
Legal Proceedings
We lease land to National Cement Company of California, Inc., which we refer
to as "National," for the purpose of manufacturing Portland cement from
limestone deposits found on the leased acreage. See "Business--Real Estate
Operations." A number of contaminated sites have been discovered on the land
leased to National, including several former landfills containing industrial
waste, a former storage area for drums that contained lubricants and solvents,
a former underground storage tank for waste oil and solvents, an underground
plume of chlorinated hydrocarbons and an underground plume of diesel fuel which
leaked from a pipeline.
The contamination of some of these sites is significant. The plume of
chlorinated hydrocarbons has migrated off the leased premises and has leaked
into a local creek, and the plume of diesel fuel has migrated
27
<PAGE>
beneath the cement plant. Because the waste in some or all of the sites has
contaminated groundwater, the California Regional Water Quality Control Board
for the Lahontan Region has issued cleanup and abatement orders requiring
investigation, containment and/or cleanup at all of the sites. These orders
generally require National and Lafarge Corporation, which we call "Lafarge" and
which is the predecessor in interest to National under the existing lease, to
investigate and clean up soil and groundwater contamination in the vicinity of
the sites. Although we did not deposit any of the contaminants, the orders
state that, as the landowner, we will be responsible for complying with the
orders if National and Lafarge fail to perform the necessary work.
A cleanup and abatement order and waste discharge requirements have also
been issued with respect to the massive cement kiln dust piles on the leased
property naming National as the primarily responsible party and Lafarge and us
as the secondary responsible parties if National does not comply with the
orders. The orders require certain investigation and stabilization activities
but do not require removal or disposal of the kiln dust piles.
Civil fines for violations of an order of the Water Board can be as high as
$10,000 per day for each day the violation occurs and as high as $15,000 per
day for each day a discharge of pollutants and a violation of the order occurs.
Lafarge has undertaken the investigation and some remediation at the
contaminated sites and has completed some of the work. National has undertaken
the required work on the cement kiln dust piles. Under the cement plant lease
National has agreed to indemnify us against costs and liabilities arising out
of the use of the leased premises since it became the tenant in November 1987,
and Lafarge has agreed to indemnify us for the period prior to that date.
National's obligation is guaranteed by its parent, National Cement Company,
Inc. Although no assurances can be given, we believe that National, its parent
and Lafarge have sufficient resources to satisfy any reasonably likely
indemnity obligations and, as a result, we will not incur any material loss as
a result of the contamination.
Employees
At August 31, 2000, we had 136 employees, including nine in permanent part-
time positions. Of our current employees, 22 are engaged in our real estate
operations, 65 in our livestock operations, 34 in our farming operations and 15
in management and administration. We are not subject to any collective
bargaining agreement, and we believe that our relationships with our employees
are good.
28
<PAGE>
MANAGEMENT
The following table sets forth information as to our executive officers and
directors:
<TABLE>
<CAPTION>
Held
Name Offices Since Age
---- ------- ----- ---
<S> <C> <C> <C>
Executive Officers
Robert A. Stine.................... President and Chief 1996 53
Executive Officer, Director
Matthew J. Echeverria.............. Senior Vice President, 1987 50
Livestock and Ranch Operations
Douglas M. Ford.................... Senior Vice President, 1999 54
Real Estate
Allen E. Lyda...................... Vice President, 1990 43
Chief Financial Officer,
Treasurer, and Assistant Secretary
Dennis Mullins..................... Vice President, 1993 48
General Counsel
and Secretary
Dennis J. Atkinson................. Vice President, Agriculture 1998 49
</TABLE>
<TABLE>
<S> <C> <C>
Directors
Otis Booth, Jr......................................................... 1970 77
Craig Cadwalader....................................................... 1994 60
Dan T. Daniels......................................................... 1982 58
Rayburn S. Dezember.................................................... 1990 69
John L. Goolsby........................................................ 1999 58
Norman Metcalfe........................................................ 1998 57
George G. C. Parker.................................................... 1999 61
Robert C. Ruocco....................................................... 1997 42
Kent G. Snyder......................................................... 1998 63
Geoffrey L. Stack...................................................... 1998 57
Martin J. Whitman...................................................... 1997 76
</TABLE>
Messrs. Daniels, Dezember, Stine and Whitman are members of the Executive
Committee of the Board of Directors. Messrs. Booth, Cadwalader, Daniels,
Parker, Snyder and Stack are members of the Audit Committee of the Board.
Messrs. Daniels, Dezember, Metcalfe and Ruocco are members of the Compensation
Committee of the Board. Messrs. Daniels, Goolsby, Metcalfe, Stack and Stine are
members of the Real Estate Committee of the Board.
Mr. Stine has been employed by us since May 1996, serving as President and
Chief Executive Officer and as a Director. Mr. Stine served as the Chief
Executive Officer of The Collins Development Company, a real estate development
company, from 1986 to April 1995. Mr. Stine is a director of First Community
Bancorp, a bank holding company, and The Bakersfield Californian, a newspaper
company.
Mr. Echeverria has served as Vice President since 1987 and was elected
Senior Vice President in 1995. He also served as acting Chief Executive Officer
from May 1995 to May 1, 1996.
29
<PAGE>
Mr. Ford has been employed by us since December 1998 serving as Senior Vice
President, Real Estate. Mr. Ford served as Vice President of Alper Development
Inc., a real estate development company, from 1993 through 1998.
Mr. Lyda has been employed by us since 1990, serving as Vice President,
Finance and Treasurer. He was elected Assistant Secretary in 1995 and Chief
Financial Officer in 1999.
Mr. Mullins has been employed by us since 1993, serving as Vice President,
General Counsel and Secretary.
Mr. Atkinson has been employed by us since July 1998, serving as Vice
President, Agriculture. From 1995 to 1998, he was a farm manager with Wilson
Ag, an agricultural company in Kern County. Prior to that he was a farm manager
with Tejon Farming Company, a subsidiary of our company.
Mr. Booth has been engaged in managing private investments and ranching for
more than the last five years, and he is a Director of Clipper Fund, Inc., a
mutual fund company.
Mr. Daniels has been President and a Director of M. H. Sherman Company, a
manager of private investments, for more than the last five years.
Mr. Cadwalader has been President, Chief Operating Officer and a Director of
Ardell Marina, Inc., a yacht brokerage business affiliated with M. H. Sherman
Company, for more than the last five years, and he is a Director of M. H.
Sherman Company.
Mr. Dezember has been managing his private investments for more than the
last five years. He is a Director of Bolthouse Farms, Inc., a Kern County
farming company, and The Bakersfield Californian, a newspaper company.
Mr. Goolsby served as President and Chief Executive Officer of The Howard
Hughes Corporation, a real estate development company, from 1990 until his
retirement in July 1998. He is also a Director of AmericaWest Holdings
Corporation, an airline.
Mr. Metcalfe served as Vice Chairman and Chief Financial Officer of The
Irvine Company, a real estate development company, from March 1993 to December
1996. He presently manages real estate and other investments and is a Director
of Sierra Cities.com.
Mr. Parker has been Dean Witter Professor of Finance and Associate Dean for
Academic Affairs of the Graduate School of Business of Stanford University for
more than the last five years. He is also a Director of Continental Airlines,
Inc., an airline, and Dresdner/RCM Mutual Funds and Metamarkets.com Mutual
Funds, both mutual fund companies.
Mr. Ruocco has been General Partner of Carl Marks Management Company, L.P.,
an investment management company, for more than the last five years. He is also
a Director of Sport & Health Company, L.C., Seaman Furniture Company, Inc. and
Anchor Glass Container Corporation.
Mr. Snyder has been an attorney at law engaged in private practice for more
than the last five years. He is also a Director of First Fidelity Investment &
Loan, a thrift and loan association.
Mr. Stack has been Managing Director of SARES-REGIS Group, a real estate
development and management company, for more than the last five years, and he
is a Director of Arral & Partners, a private investment company.
Since March 1990, Mr. Whitman has been the Chairman of the Board, Chief
Executive Officer and a Trustee (and, from January 1991 to May 1998, the
President) of Third Avenue Trust, an open-end management
30
<PAGE>
investment company registered under the Investment Company Act of 1940 and
containing multiple investment series, and its predecessor, Third Avenue Value
Fund, Inc. (together with its predecessor, "Third Avenue Trust"). During that
time Mr. Whitman has also held the same positions (including President until
February 1998) at EQSF Advisers, Inc., Third Avenue Trust's investment adviser.
Since July 1999, Mr. Whitman has been Chairman of the Board, Chief Executive
Officer and a Trustee of Third Avenue Variable Series Trust, an open-end
management investment company registered under the Investment Company Act of
1940. Mr. Whitman was a Managing Director of Whitman Heffernan Rhein & Co.,
Inc., an investment and financial advisory firm which he co-founded in 1987 and
which ceased operations in December 1996. Mr. Whitman has been a Director and
Chairman of the Board since August 1990 and Chief Executive Officer since
August 1997 of Danielson Holding Corporation, an insurance holding company.
From March 1993 through February 1996, Mr. Whitman served as a director of
Herman's Sporting Goods, Inc., a retail sporting goods chain, which filed
a voluntary petition under Chapter 11 of the United States Bankruptcy Code in
April 1996. Since 1974, Mr. Whitman has been the President and controlling
stockholder of M.J. Whitman & Co., Inc. (now known as Martin J. Whitman & Co.,
Inc.). Since January 1995, Mr. Whitman has served as the Chairman and Chief
Executive Officer (and, until June 1995, as President) of M.J. Whitman, Inc., a
registered broker-dealer. Also since January 1995, Mr. Whitman has served as
the Chairman and Chief Executive Officer of M.J. Whitman Holding Corp., the
parent of M.J. Whitman, Inc., and other affiliates. Mr. Whitman is an Adjunct
Professor of Finance and Economics at Columbia University Graduate School of
Business, having been a Distinguished Faculty Fellow in Finance at the Yale
University School of Management from 1993 through 1999.
31
<PAGE>
RIGHTS OFFERING
The Rights Offering
We are offering shares of our common stock to our stockholders of
record as of November , 2000 at $ per share in this rights offering. We
have not engaged an underwriter or financial advisor in connection with this
rights offering. We intend to distribute on November , 2000 the rights
subscription certificates, related subscription documents and copies of this
prospectus to our stockholders on the record date.
Our employees, officers and directors may solicit responses from
stockholders receiving rights to purchase, but these persons will not receive
any commissions or compensation for their services other than their normal
employment or director compensation.
Purpose of the Rights Offering
Completion of this rights offering will enable us to raise approximately
$29.6 million, after deducting the estimated costs of the offering. The primary
purpose of the rights offering is to provide additional working capital to
enable us to pursue opportunities to develop our real estate.
Description of the Rights Offering
We are granting to our stockholders of record as of the close of business on
November , 2000 transferable basic subscription rights to purchase shares
of our newly issued common stock, at a price of $ per share, for each share
held of record on November , 2000.
If all stockholders fully exercise their subscription rights, including
applicable over-subscription rights, we will issue an aggregate of
approximately shares. We will not issue fractional shares. We will round
basic subscription and over-subscription rights up to the next whole share. If
you do not participate in the rights offering you will experience ownership
dilution. Holders of subscription rights may purchase all or part of the shares
to which they are entitled. Our officers and directors, in their capacity as
stockholders, will have the same rights to purchase shares in the rights
offering as other stockholders.
Third Avenue Trust (acting on behalf of Third Avenue Value Fund, Third
Avenue Small-Cap Value Fund and Third Avenue Real Estate Value Fund) and a
private investment fund managed by Carl Marks Investment Management Company
L.P. have agreed to exercise at least their basic subscription rights, not
exercise their over-subscription rights, and purchase any shares not subscribed
for in the rights offering at the same price per share offered to the
stockholders. To the extent that the voting power of our directors, executive
officers or large stockholders or their affiliates increases as a result of the
rights offering, it will be more difficult for the remaining stockholders to
replace or remove the directors and executive officers.
Rights holders cannot revoke their subscriptions once submitted.
Over-Subscription Rights
Holders of rights who fully exercise their basic subscription rights will
have over-subscription rights, subject to the availability of shares following
exercise of the basic subscription rights, except that the principal
stockholders named below under "Commitment to Purchase Unsubscribed Shares"
have agreed not to exercise their over-subscription rights. The over-
subscription rights entitle such rights holder to purchase, also at $ per
share, the shares remaining available, if any, after exercise of the basic
subscription rights by the other rights holders. In the event that more than
the available number of shares are subscribed for in connection with the
exercise of over-subscription rights, shares will be allocated pro-rata, based
on the number of shares subscribed for by each over-subscribing rights holder
pursuant to the basic subscription rights. Rights holders must elect to
exercise their over-subscription rights during the subscription period in the
manner set forth in the subscription documents provided with this prospectus.
32
<PAGE>
How to Exercise Your Rights
Rights holders may subscribe to purchase shares by completing and signing
the subscription warrant which accompanies this prospectus and mailing or
delivering it to ChaseMellon Shareholder Services, L.L.C., the Subscription
Agent at the appropriate address in the table below, together with the required
payment set forth in the instructions regarding use of the subscription
warrant. You should carefully read and follow those instructions. To be
accepted, the Subscription Agent must receive either the subscription warrant
or the notice of guaranteed delivery described below before the expiration of
the subscription period.
Rights holders must pay the full subscription price when they return the
subscription warrant or notice of guaranteed delivery. In order to exercise
their over-subscription rights, they must exercise in full their basic rights
and indicate on the subscription warrant the amount of the over-subscription
rights the holder wishes to exercise. The holder's commitment to subscribe for
over-subscription rights is irrevocable. After the expiration of the
subscription period, we will do such pro-rations as may be necessary to the
over-subscription requests and return to over-subscribing rights holders any
funds due them as a result of such pro-ration, without interest.
You should make checks payable to: Chase Mellon Shareholder Services,
L.L.C., as Subscription Agent for Tejon Ranch Co. You should mail or deliver
checks and completed rights subscription certificates to the Subscription Agent
at:
<TABLE>
<CAPTION>
If by mail: If by hand If by Overnight Courier
<S> <C> <C>
ChaseMellon Shareholder ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C. Services, L.L.C.
P.O. Box 3301 120 Broadway, 13th Floor 85 Challenger Road--Mail Drop
Hackensack, NJ 07606 New York, NY 10271 Reorg
Attn: Reorganization Attn: Reorganization Ridgefield Park, NJ 07660
Department Department Attn: Reorganization
Department
</TABLE>
The Subscription Agent's facsimile number is (201) 296-4293. The telephone
number for confirmation of receipt of facsimiles is (201) 496-4860.
Any rights holder who has not submitted a properly completed subscription
certificate (or notice of guaranteed delivery) along with payment for at least
the basic subscription price to the Subscription Agent by 5:00 p.m., New York
City time, on December , 2000, unless such subscription period is extended
by us, shall forfeit all rights to subscribe in the rights offering.
Funds paid by uncertified personal checks may take at least five business
days to clear and such checks must clear before the expiration of the
subscription period and the deadline for paying for over-subscription shares in
order for the required payment to have been made. Accordingly, if any rights
holder wishes to pay the subscription price by means of an uncertified personal
check, the rights holder is urged to make payment sufficiently in advance of
the expiration of the subscription period to ensure that the payment is
received and clears before that time. Rights holders are also urged to
consider, any alternative payment by means of certified or cashier's check,
money order or wire transfer of funds.
If a rights holder wishes to exercise his or her subscription rights, but
there is not sufficient time to deliver the subscription certificate before the
time the rights expire, the holder may exercise the rights by delivering
payment in full along with the notice of guaranteed delivery form included as
part of the subscription documents sent with this prospectus.
Acceptance of Subscriptions
We are entitled to resolve all questions concerning the timeliness,
validity, form and eligibility of any exercise of basic or over-subscription
rights. Our determination of these questions will be final and binding. In
33
<PAGE>
our sole discretion, we may waive any defect or irregularity, or permit a
defect or irregularity to be corrected within such time as we may determine, or
reject the purported exercise of any right because of any defect or
irregularity.
Subscription warrants will not be considered received or accepted until all
irregularities have been waived or cured within such time as we determine in
our sole discretion. Neither we nor the Subscription Agent has any duty to give
notification of any defect or irregularity in connection with the submission of
subscription warrants or any other required document. Neither we nor the
Subscription Agent will incur any liability for failure to give such
notification.
We reserve the right to reject any exercise of basic or over-subscription
rights if the exercise does not fully comply with the terms of the rights
offering or is not in proper form or if the exercise of rights would be
unlawful.
Transferability of Rights
The subscription rights are transferable, and it is anticipated that they
will trade on the New York Stock Exchange and may be purchased or sold through
brokers in the same manner as our common stock until the close of business on
the last trading day prior to the end of the subscription period, which is
December , 2000 unless we extend the date. We cannot assure you, however,
that any market for the subscription rights will develop or, if a market does
develop, that the market will remain available throughout the period in which
the subscription rights may be exercised.
The rights evidenced by a single subscription warrant may be transferred in
whole by endorsing the subscription warrant for transfer in accordance with the
accompanying instructions. A portion of the subscription rights evidenced by a
single subscription warrant (but not rights to purchase fractional shares) may
be transferred by delivering to the Subscription Agent, a subscription warrant
properly endorsed for transfer, with instructions to register that portion of
the subscription rights indicated therein in the name of the transferee and to
issue a new subscription warrant to the transferee evidencing the transferred
rights. In that event a new subscription warrant evidencing the balance of the
rights will be issued to the rights holder, or if the holder so instructs, to
an additional transferee, or will be sold by the Subscription Agent in the
manner described below upon appropriate instruction from the holder.
The rights evidenced by a subscription warrant may also be sold, in whole or
in part, through the Subscription Agent by delivering to the Subscription Agent
the subscription warrant properly executed for sale by the Subscription Agent.
If only a portion of the basic subscription rights evidenced by a single
subscription warrant is to be sold by the Subscription Agent, that subscription
warrant must be accompanied by instructions setting forth the action to be
taken with respect to the rights that are not to be sold. Orders to sell rights
must be received by the Subscription Agent at or prior to 11:00 New York City
time, on December , 2000. Promptly following the expiration of the
subscription period, which is December , 2000 unless we extend it, the
Subscription Agent will send to you a check for the net proceeds from the sale
of any rights sold on your behalf. If the rights can be sold, the sale will be
deemed to have been effected at the weighted average price of all rights sold
by the Subscription Agent at the request of all rights holders, less the pro
rata portion of any applicable brokerage commissions, taxes and other expenses.
We cannot assure that the Subscription Agent will be able to sell any or all
rights, and we cannot provide any assurance about the price that the
Subscription Agent may be able to obtain for the subscription rights. The
Subscription Agent's obligation to execute orders is subject to its ability to
find buyers. If less than all sales orders received by the Subscription Agent
can be filled, sales proceeds will be pro rated among those requesting such
sales based upon the number of subscription rights each such person has
requested that the Subscription Agent sell (regardless of when during the
period ending December , 2000 such requests are received by the
Subscription Agent). If the subscription rights cannot be sold by the
Subscription Agent by 5:00 p.m. New York City time on December , 2000, they
will be returned promptly by mail to you.
34
<PAGE>
If a rights holder wishes to transfer all or a portion of the subscription
rights (but not rights to purchase fractional shares), he or she should allow a
sufficient amount of time prior to the expiration of the subscription period
(which is December , 2000 unless we extend it) for each of the following:
. the transfer instructions to be received and processed by the
Subscription Agent,
. new subscription warrants to be issued and transmitted, and
. the subscription rights evidenced by the new subscription warrants to be
exercised or sold by the recipients.
That amount of time could range from two to ten business days, depending upon
the method by which delivery of the subscription warrants and payment is made
and the number of transactions which the rights holder instructs the
Subscription Agent to effect. Neither we nor the Subscription Agent will have
any liability to any rights holder or stockholder if a subscription warrant,
other required document or payment is not received in time for exercise or sale
prior to the expiration of the subscription period.
A new subscription warrant will be issued to you upon the partial exercise
or sale of your subscription rights only if the Subscription Agent receives a
properly endorsed subscription warrant not later than 5:00 p.m. New York City
time on the fifth day prior to expiration of the subscription period, which is
December , 2000 unless we extend it. No new subscription warrants will be
issued with respect to subscription warrants submitted after that time and
date. Accordingly, after that time and date if a rights holder exercises or
sells less than all of his or her subscription rights, the holder will lose the
power to sell or exercise the remaining rights. Unless the holder makes other
arrangements with the Subscription Agent, a new subscription warrant issued
after 5:00 p.m., New York City time, on the fifth business day before the date
the subscription period expires will be held for pickup by the holder at the
Subscription Agent's hand delivery address set forth in the table above under
the heading "How to Exercise Your Rights." All deliveries of newly issued
subscription rights will be at the risk of the submitting holder.
All commissions, fees, and other expenses (including brokerage commissions
and transfer taxes), incurred in connection with the purchase, sale or exercise
of subscription rights will be for the account of the transferor of the rights
and none of those commissions, fees or expenses will be paid by the Company or
the Subscription Agent.
Any subscription rights not exercised by a holder prior to the expiration of
the subscription period will expire and will no longer be exercisable. The
subscription period expires at 5:00 p.m., New York City time, on December ,
2000 unless we extend the period.
Procedures for DTC Participants
It is anticipated that the subscription rights will be eligible for transfer
through the facilities of The Depository Trust Corporation, which is commonly
known as the "DTC." Also, exercise of the basic subscription rights may be
effected through the DTC, but not the over-subscription rights. A holder of
basic subscription rights exercised through DTC may exercise the over-
subscription rights in respect of the basic rights exercised by properly
executing and delivering to the Subscription Agent, at or prior to the
expiration of the subscription period, a DTC Participant Over-Subscription
Exercise Form and a Nominee Holder Certification, together with payment of the
appropriate subscription price for the number of shares for which the over-
subscription privilege is to be exercised. Copies of the DTC Participant Over-
subscription Exercise Form may be obtained from the Subscription Agent by
calling (212) .
Delivery of Share Certificates
As soon as practicable and after receipt of funds by the Subscription Agent
from the exercise of the basic subscription rights, the Subscription Agent will
mail certificates for shares to stockholders whose subscription have been
accepted. Certificates representing over-subscription shares shall be delivered
as soon as practicable
35
<PAGE>
after the expiration of the subscription period so that we may make such pro-
rations as may be necessary in the event the over-subscription requests exceed
the number of remaining available shares in the rights offering.
Escrow of Funds
The Subscription Agent will deposit all subscription funds received in a
non-interest bearing escrow account at the Chase Manhattan Bank entitled
, as escrow agent for Tejon Ranch Co.
Further Information
Requests for further information and questions regarding the rights offering
should be directed to Allen Lyda, in writing at Tejon Ranch Co., 4436 Lebec
Road, Lebec, California 93243, or by telephone at (661) 248-3000.
Commitment to Purchase Unsubscribed Shares
We have entered into an agreement with Third Avenue Trust (acting on behalf
of Third Avenue Value Fund, Third Avenue Small-Cap Value Fund and Third Avenue
Real Estate Value Fund) and a private investment fund managed by Carl Marks
Management Company, L.P. to purchase additional shares at the same price to the
extent that the gross proceeds from the rights offering are less than
$30,000,000. Their obligation is subject to satisfaction of certain conditions,
including the condition that there be no material adverse change in the
business, prospects, financial position, stockholder's equity or results of
operations except to the extent such changes result from changes in general
economic conditions. These purchasers have also committed to us to exercise the
basic subscription rights distributed to them as right holders, but they will
not exercise their over-subscription rights. The Company has agreed to register
the shares purchased by these purchasers under the Securities Act of 1933 for
resale by them, to qualify or register the shares under applicable blue sky
laws and to pay the expenses of registration and any blue sky qualification or
registration.
As of the record date for the distribution of the subscription rights, Third
Avenue Trust (on behalf of Third Avenue Value Fund, Third Avenue Small-Cap
Value Fund and Third Avenue Real Estate Value Fund) owned approximately 26% of
our outstanding shares, and the investment fund managed by Carl Marks
Management Company, L.P. owned approximately 4% of our outstanding shares. The
investment fund managed by Carl Marks Management Company, L.P. has the right to
assign all or a portion of its rights and obligations to purchase the
additional shares to another affiliated investment entity reasonably acceptable
to us. Martin J. Whitman, one of our directors, is the Chairman of the Board
and Chief Executive Officer of Third Avenue Trust, which contains Third Avenue
Value Fund, Third Avenue Small-Cap Value Fund and Third Avenue Real Estate
Value Fund as investment series. Robert C. Ruocco, also one of our directors,
is a general partner of Carl Marks Management Company, L.P. We have agreed to
reimburse these purchasers for their reasonable out-of-pocket expenses in
connection with the purchase agreement and the transaction contemplated thereby
up to a maximum of $125,000.
Approval of Rights Offering
A Special Committee of the Board of Directors of the Company approved the
rights offering at a meeting held on October 24, 2000. The Special Committee
consisted of all of the directors other than Martin J. Whitman and Robert C.
Ruocco, each of whom is affiliated with entities who have agreed to purchase
all shares not subscribed for in the rights offering. The Special Committee had
previously been designated by the Board of Directors to explore the possibility
of a rights offering at a meeting of the full Board held on September 12, 2000.
Determination of Subscription Price
The subscription price was determined by four members of the Special
Committee of the Board of Directors who were designated as the Pricing
Committee by the full Board. The members of the Pricing Committee are Rayburn
S. Dezember (Chairman), Norman Metcalfe, George G.C. Parker and Robert A.
Stine.
36
<PAGE>
The price represents a discount to the market price of a share of common stock
on the date that the subscription price was determined. Factors considered by
the Pricing Committee pursuant to the direction of the Special Committee
included the strategic alternatives to our company for raising capital, the
market price of the common stock before and after the announcement of the
rights offering, the business prospects of our company and the general
condition of the securities market. We cannot assure you that the market price
for our common stock during the rights offering will be equal to or above the
subscription price or that a subscribing owner of rights will be able to sell
the shares of common stock purchased in the rights offering at a price equal to
or greater than the subscription price.
Foreign and Certain Other Stockholders
We will not mail subscription warrants to rights holders whose addresses are
outside the United States and Canada or who have an APO or FPO address.
Instead, the Subscription Agent will hold those subscription warrants for the
rights holders' accounts. To exercise their subscription rights, these rights
holders must notify the Subscription Agent prior to 11:00 a.m., New York City
time, on November , 2000. At such time, unless the Subscription Agent has
received contrary instructions, the rights represented thereby will be sold if
the Subscription Agent is able to find a purchaser. Any such sales will be
deemed to be effected at the weighted average sale price of all subscription
rights sold by the Subscription Agent. If the subscription rights can be sold,
the Subscription Agent will mail to such rights holders a check for the
proceeds from the sale of any rights, less a pro rata portion of any applicable
brokerage commissions, taxes and other expenses. The proceeds, if any,
resulting from sales of rights of rights holders whose addresses are not known
by the Subscription Agent or to whom delivery cannot be made will be held in a
non-interest bearing account. Any amount remaining unclaimed on December ,
2002 will be turned over to us.
37
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
We have summarized below material United States income tax consequences of
the rights offering to the holders of our common stock upon the distribution of
the subscription rights (which for the purposes of this tax discussion includes
over-subscription rights) and to the holders of the subscription rights upon
their exercise.
The summary is based on the Internal Revenue Code of 1986, as amended (which
we refer to as the "Code"), the Treasury regulations promulgated thereunder,
judicial authority and current administrative rules and practice, all of which
are subject to change on a prospective or retroactive basis. The tax
consequences of the rights offering under state, local and foreign law are not
discussed. Moreover, special considerations not described in this summary may
apply to certain taxpayers or certain types of taxpayers, such as financial
institutions, broker-dealers, nominee holders of our stock, life insurance
companies, tax-exempt organizations and foreign taxpayers. The discussion is
limited to those who have held the common stock, and will hold the rights and
any shares acquired upon the exercise of the rights, as capital assets
(generally, property held for investment) within the meaning of Section 1221 of
the Code.
WE URGE STOCKHOLDERS TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
PARTICULAR FEDERAL INCOME OR OTHER TAX CONSEQUENCES TO THEM OF THE RIGHTS
OFFERING, AS WELL AS THE TAX CONSEQUENCES UNDER STATE, LOCAL AND FOREIGN LAW
AND THE POSSIBLE EFFECTS OF CHANGES IN TAX LAWS.
Issuance of Rights
You will not recognize taxable income for federal income tax purposes upon
distribution of the rights.
Stockholder Basis and Holding Period of the Rights
Except as provided in the following sentence, the basis of the subscription
rights you receive as a distribution with respect to your common stock will be
zero. If, however, either (i) the fair market value of the subscription rights
on the date of issuance is 15% or more of the fair market value (on the date of
issuance of the rights) of the common stock with respect to which they are
received or (ii) you properly elect, in your federal income tax return for the
taxable year in which the subscription rights are received, to allocate part of
your basis in your common stock to the subscription rights, then upon exercise
or transfer of the rights, your basis in the common stock will be allocated
between the common stock and the rights in proportion to the fair market values
of each on the date the rights are issued.
Your holding period with respect to the subscription rights received as a
distribution on your common stock will include your holding period for the
common stock with respect to which the rights were distributed.
In the case of a purchaser of subscription rights, who we will call a
"Purchaser," the tax basis of the purchased rights will be equal to the
purchase price paid for the rights, and the holding period for the rights will
commence on the day following the date of the purchase.
Transfer of the Rights
If you or a Purchaser sell the subscription rights received in the rights
offering prior to exercise, you or the Purchaser will recognize gain or loss
equal to the difference between the sale proceeds and the basis (if any) in the
rights sold. The gain or loss will be capital gain or loss if gain or loss from
a sale of the common stock held by the seller would be characterized as capital
gain or loss at the time of the sale. Any gain or loss recognized on a sale of
rights by a Purchaser will be capital gain or loss if the common stock would be
a capital asset in the hands of the Purchaser.
38
<PAGE>
Lapse of the Rights
If you allow subscription rights received to lapse, no gain or loss will be
recognized and no adjustment will be made to the basis of the common stock, if
any, owned by the holder of the lapsed rights.
Purchasers of the subscription rights will recognize a loss equal to their
tax basis in the rights, if the rights expire unexercised. Any loss recognized
on the expiration of the rights acquired by a Purchaser will be a capital loss
if the common stock would be a capital asset in the hands of the Purchaser.
Exercise of the Rights; Basis and Holding Period of the Common Stock
Neither you nor a Purchaser will recognize any gain or loss upon the
exercise of rights. The basis of the shares acquired through exercise of the
rights will be equal to the sum of the subscription price paid for the shares
acquired through exercise of the rights and the holder's basis in the rights
(if any).
The holding period for the shares acquired through exercise of the rights
will begin on the date the rights are exercised.
Sale of Shares
The sale of shares acquired through the exercise of the rights will result
in the recognition of gain or loss to the seller in an amount equal to the
difference between the amount realized and the seller's basis in the shares. If
the seller holds the shares as a capital asset, gain or loss on the sale of the
shares will be long-term or short-term capital gain or loss, depending on
whether the shares have been held for more than one year.
Information Reporting and Backup Withholding
Under the backup withholding rules of the Code, holders of rights may be
subject to backup withholding at the rate of 31% with respect to payments made
pursuant to the rights offering unless the holder:
. is a corporation or comes within certain other exempt categories and,
when required, demonstrates this fact, or
. provides a correct taxpayer identification number (or social security
number) and certifies under penalty of perjury that the taxpayer
identification number is correct and the holder is not subject to backup
withholding because of a failure to report all dividends and interest
income.
Any amount withheld under these rules will be credited against the holder's
federal income tax liability. We may require holders to establish exemption
from backup withholding or to make arrangements satisfactory to us with respect
to the payment of backup withholding.
39
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our stock as of September 30, 2000 by each person known by us to
own beneficially more than 5% of the common stock, each of our directors, each
of the five most highly compensated executive officers and all directors and
executive officers as a group. There were 12,712,236 shares of common stock
outstanding on September 30, 2000. The information with respect to shares
beneficially owned after the rights offering is calculated as if the rights
offering were completed on September 30, 2000, all stockholders exercised their
basic subscription rights but not their over-subscription rights and there were
no unsubscribed shares purchased by the standby purchasers.
<TABLE>
<CAPTION>
Amount and Shares Beneficially
Nature of Owned After Offering
Name and Address of Beneficial Percent of -------------------------
Stockholder Ownership(1) Class Number Percent
------------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Ardell Investment
Company................ 1,055,828(2) 8.31%
P.O. Box 1715
Newport Beach, CA 92659
M.H. Sherman Company.... 1,140,630(2) 8.97%
P.O. Box 1715
Newport Beach, CA 92659
EQSF Advisers, Inc...... 3,284,608(3) 25.84% (4) (4)
767 Third Avenue
New York, NY 10017
Carl Marks Management
Company, L.P. ......... 756,000(5) 5.95% (6) (6)
135 East 57th Street
New York, NY 10022
State of Wisconsin
Investment Board....... 999,600(7) 7.86%
P.O. Box 7842
Madison, WI 53707
Directors
Otis Booth, Jr.......... 6,243(8) (*)
Craig Cadwalader........ 2,222,530(9) 17.48%
Dan T. Daniels.......... 2,226,388(10) 17.51%
Rayburn S. Dezember..... 6,243(11) (*)
John L. Goolsby......... 3,648(11) (*)
Norman Metcalfe......... 4,222(8) (*)
George G.C. Parker...... 500(11) (*)
Robert C. Ruocco........ 761,243(12) 5.99% (6) (6)
Kent G. Snyder.......... 2,363(8) (*)
Geoffrey L. Stack....... 3,157(13) (*)
Robert A. Stine......... 76,175(14) (*)
Martin J. Whitman....... 3,284,608(15) 25.84% (4) (4)
Executive Officers
Matthew J. Echeverria... 13,947(16) (*)
Douglas M. Ford......... 647(16) (*)
Allen E. Lyda........... 16,588(16) (*)
Dennis Mullins.......... 11,310(16) (*)
All executive officers
and directors as a
group (17 persons)..... 6,417,282 49.98%
</TABLE>
--------
(*) Less than 1%.
(1) In each case, the named stockholder has the sole voting and investment
power as to the indicated shares, except as set forth in the footnotes
below.
40
<PAGE>
(2) Does not include 26,072 shares (0.21% of the number of shares outstanding)
owned of record and beneficially by the Sherman Foundation, a non-profit
public charity, three of the trustees of which are directors of Ardell
Investment Company and M.H. Sherman Company, those being Messrs. Donald
Haskell, who retired on September 30, 1998 as Chairman of the Board of
Directors of our company, and Craig Cadwalader and Dan T. Daniels,
directors of our company. Mr. Haskell is President of the Sherman
Foundation, is President and a director of Ardell Investment Company, is
Chairman of the Board and a director of M.H. Sherman Company, and has the
power to vote a majority of the shares of Ardell Investment Company and
M.H. Sherman Company. Mr. Haskell also owns personally 51,100 shares of
the Company. Mr. Haskell disclaims beneficial ownership of the shares
owned by the Sherman Foundation for all other purposes.
(3) Includes 3,045,508 shares owned beneficially and of record by Third Avenue
Value Fund, 200,000 shares owned beneficially and of record by Third
Avenue Small-Cap Value Fund, and 39,100 shares owned of record and
beneficially by Third Avenue Real Estate Value Fund. EQSF Advisers, Inc.
has sole voting and investment power with respect to these shares.
(4) If Third Avenue Trust (on behalf of Third Avenue Value Fund, Third Avenue
Small-Cap Value Fund and/or Third Avenue Real Estate Value Fund) purchases
additional shares as a standby purchaser, the number of shares
beneficially owned and percentage of outstanding shares after the offering
will be correspondingly higher.
(5) Includes 521,000 shares owned beneficially and of record by Carl Marks
Strategic Investments, L.P., 185,000 shares owned beneficially and of
record by Carl Marks Strategic Investments II, L.P., and 50,000 shares
owned beneficially and of record by Uranus Fund Ltd. Carl Marks Management
Company, L.P. has sole voting and investment power with respect to the
shares owned by Carl Marks Strategic Investments, L.P. and Carl Marks
Strategic Investments II, L.P. Carl Marks Offshore Management, Inc., which
is under common control with Carl Marks Management Company, L.P., has sole
voting and investment power with respect to the shares owned by Uranus
Fund Ltd.
(6) If one or more private investment funds managed by Carl Marks Management
Company, L.P. purchase additional shares as standby purchasers, the number
of shares beneficially owned and percentage of outstanding shares after
the offering will be correspondingly higher.
(7) Based upon information provided by the stockholder on a Schedule 13G dated
February 10, 2000, and filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
(8) Includes shares underlying options that are currently exercisable as
follows: Mr. Booth 5,243 shares, Mr. Metcalfe 2,622 shares, and Mr. Snyder
2,363 shares.
(9) Includes 1,055,828 shares owned by Ardell Investment Company, 1,140,630
shares owned by M.H. Sherman Company, and 26,072 shares owned by Sherman
Foundation. Mr. Cadwalader is a director of Ardell Investment Company and
M.H. Sherman Company and a trustee of Sherman Foundation. Mr. Cadwalader
disclaims beneficial ownership as to all of the shares owned by said
entities for all other purposes.
(10) Includes 1,055,828 shares owned by Ardell Investment Company, 1,140,630
shares owned by M.H. Sherman Company, and 26,072 shares owned by Sherman
Foundation. Mr. Daniels is Vice President, Treasurer and a director of
Ardell Investment Company, President and a director of M.H. Sherman
Company, and Vice President, Secretary and a trustee of Sherman
Foundation. Mr. Daniels disclaims beneficial ownership as to all of the
shares owned by said entities for all other purposes. Also includes 3,858
shares underlying options that are currently exercisable.
(11) The shares owned by each of Messrs. Dezember, Goolsby and Parker are held
by a family trust concerning which the director and his spouse share
voting and investment power. Includes shares underlying options that are
currently exercisable as follows: Mr. Dezember 5,243 shares, and
Mr. Goolsby 2,648 shares.
(12) Includes 521,000 shares owned beneficially and of record by Carl Marks
Strategic Investments, L.P., 185,000 shares owned beneficially and of
record by Carl Marks Strategic Investments II, L.P., and
41
<PAGE>
50,000 shares owned beneficially and of record by Uranus Fund Ltd. Mr.
Ruocco is a General Partner of Carl Marks Management Company, L.P. and a
Vice President of Carl Marks Offshore Management, Inc., and shares voting
and investment power for both entities. Includes 5,243 shares respecting
options that are currently exercisable.
(13) The shares owned by Mr. Stack are held as community property; he and his
spouse share voting and investment power with respect to their shares.
Includes 3,113 shares underlying options that are currently exercisable.
(14) The shares owned by Mr. Stine are held by a family trust concerning which
he and his spouse share voting and investment power. Includes 70,000
shares underlying options that are currently exercisable, and
5,175 restricted shares, which the Company has the right to buy back at a
nominal price if certain contingencies occur.
(15) Includes 3,045,508 shares owned beneficially and of record by Third
Avenue Value Fund, 200,000 shares owned beneficially and of record by
Third Avenue Small-Cap Value Fund, and 39,100 shares owned beneficially
and of record by Third Avenue Real Estate Value Fund. Mr. Whitman is
Chairman of the Board and CEO of Third Avenue Trust, which contains Third
Avenue Value Fund, Third Avenue Small-Cap Value Fund and Third Avenue
Real Estate Value Fund as investment series, and of EQSF Advisers, Inc.,
Third Avenue Trust's investment advisor, and has the power to vote a
majority of the shares of EQSF Advisers, Inc. Mr. Whitman disclaims
beneficial ownership of the shares owned by said entities for all other
purposes.
(16) The unrestricted shares owned by Mr. Echeverria are held as community
property; he and his spouse share voting and investment power with
respect to their shares. The totals for Messrs. Echeverria, Ford, Lyda
and Mullins include (a) shares underlying options that are currently
exercisable as follows: Mr. Echeverria 13,000 shares, Mr. Lyda 14,000
shares and Mr. Mullins 11,310 shares, and (b) restricted shares, which
the Company has a right to buy back at a nominal price if certain
contingencies occur, as follows: Mr. Echeverria 647 shares, Mr. Ford 647
shares, and Mr. Lyda 2,588 shares.
42
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 5,000,000 shares of preferred
stock, of which no shares are outstanding, and 30,000,000 shares of common
stock, of which 12,712,236 shares were outstanding on September 30, 2000.
Common Stock
The holders of common stock vote cumulatively when electing directors and
are entitled to one vote per share on all other matters. The Board of Directors
presently consists of three classes of directors based on when their terms
expire. Each class is elected every three years to a three-year term. Because
only a portion of the total number of directors is elected each year, a greater
number of shares is required to ensure the ability to elect a specific number
of directors using cumulative voting than would be required if the entire Board
were elected each year.
Holders of common stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. In the event of liquidation, dissolution or winding up of our company
holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities and satisfaction of any preferential rights of the
holders of the preferred stock. Holders of common stock have no preemptive,
subscription or conversion rights. There are no redemption or sinking fund
provisions, and there is no liability for further calls or assessments by the
Company.
Preferred Stock
The Board has the authority to issue 5,000,000 shares of preferred stock in
one or more series with dividend rights, conversion rights, voting rights,
redemption terms, liquidation preferences and other rights or preferences that
could be senior to those of holders of common stock. There are no shares of
preferred stock outstanding.
Anti-Takeover Provisions
Our Certificate of Incorporation and Bylaws include a number of provisions
that may have the effect of discouraging persons from pursuing non-negotiated
takeover attempts. These provisions include:
. a classified Board;
. a requirement that directors may only be removed for cause and only by
an affirmative vote of the holders of a majority of the Company's voting
stock; and
. the elimination of the ability of stockholders to call special meetings
and to act without a meeting.
Subject to the exceptions set forth below, certain business combinations
involving a "Related Person" require the approval of the holders of at least
80% of the outstanding shares entitled to vote generally in the election of
directors (which we refer to as "voting shares") and the approval of the
holders of a majority of the voting shares not owned beneficially by the
Related Person. The 80% voting requirement does not apply if:
. the terms of the business combination meet certain fairness standards
set forth in our Certificate of Incorporation,
. the business combination is approved by the holders of a majority of the
voting shares not owned beneficially by the Related Person, and
. all other affirmative voting requirements imposed by applicable law or
our Certificate of Incorporation are met.
Alternatively, the business combination can be approved by a majority of the
Continuing Directors and such other vote as may be required by law or by our
Certificate of Incorporation.
43
<PAGE>
"Related Person" means any person, entity or group that beneficially owns
five percent or more of the outstanding voting stock (subject to certain
exceptions) and affiliates and associates of any such person, entity or group.
"Continuing Director" means, as to any Related Person:
. a member of the Board of Directors who was a director of our company's
predecessor prior to June 9, 1987 or thereafter became a director of our
company prior to the time the Related Person became a Related Person,
and
. any successor of such a director who is recommended by a majority of
such directors then on the Board.
However, to be a Continuing Director as to any Related Person, the director
must not be the Related Person or an affiliate of the Related Person.
Transfer Agent and Registrar
The Transfer Agent and Registrar of our common stock, and the Subscription
Agent for the rights offering, is ChaseMellon Shareholders Services, L.L.C., 85
Challenger Road, Ridgefield Park, New Jersey 07660.
44
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The market price of our common stock could drop due to sales of a large
number of shares of our common stock or the perception that such sales could
occur. These factors could also make it more difficult to raise funds through
future offerings of common stock.
After this offering, shares of common stock will be outstanding and
810,797 shares of common stock will be issuable upon the exercise of
outstanding options. See "Capitalization". All of the shares to be sold in this
offering will be freely tradable without further registration under the
Securities Act of 1933, except for any shares held by "affiliates" of our
company as defined in Rule 144 under the Securities Act. Shares held by
affiliates can be sold in compliance with Rule 144.
In general, under Rule 144 as currently in effect, any person who is an
affiliate (or certain persons whose shares are aggregated with an affiliate),
is entitled to sell, within any three-month period, a number of shares that
does not exceed the greater of:
. 1% of the number of then-outstanding shares of common stock, and
. the average weekly trading volume in the common stock during the four
calendar weeks immediately preceding the date on which the notice of
such sale on Form 144 is filed with the Securities and Exchange
Commission.
Sales under Rule 144 are also subject to certain provisions relating to notice
and manner of sale and the availability of current public information about our
company. A person (and persons whose shares are aggregated with such a person)
who has not been an affiliate of the Company at any time during the 90 days
immediately preceding a sale would be entitled to sell such shares under Rule
144(k) without regard to the volume limitation and other conditions described
above. The foregoing summary of Rule 144 is not intended to be a complete
description.
45
<PAGE>
LEGAL MATTERS
Gibson, Dunn & Crutcher, LLP, Los Angeles, California, will pass on certain
legal matters with respect to the authorization and issuance of our common
stock being registered.
EXPERTS
Our consolidated financial statements as of December 31, 1999 and 1998 and
for each of the years in the three-year period ended December 31, 1999 have
been included and incorporated by reference herein and in the registration
statement in reliance upon the report of Ernst & Young LLP, independent
certified public accountants, included and incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You can inspect and
copy the Registration Statement on Form S-3 of which this prospectus is a part
(File No. 333- ), as well as reports, proxy statements and other
information filed by us, at the public reference facilities maintained by the
Securities and Exchange Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the Securities
and Exchange Commission: 7 World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. You can obtain copies of this material from the Public
Reference Room of the Securities and Exchange Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. You can call the Securities
and Exchange Commission at 1-800-733-0330 for information regarding the
operations of its Public Reference Room. The Securities and Exchange Commission
also maintains a World Wide Web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants like our company that file electronically.
The Securities and Exchange Commission allows this Prospectus to
"incorporate by reference" other information that we file with the Commission,
which means that we can disclose important information to you by referring to
those documents. The information incorporated by reference is an important part
of this prospectus, and information that we file later with the Securities and
Exchange Commission will automatically update and replace this information. We
incorporate by reference the documents listed below:
1. Our Annual Report on Form 10-K for the year ended December 31, 1999,
including information incorporated by reference from our Proxy Statement in
connection with our 2000 Annual Meeting of Stockholders;
2. Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000
and June 30, 2000.
3. The description of our common stock contained in our Registration
Statement on Form 8-A dated May 27, 1999 filed with the Securities and Exchange
Commission, including any amendments or reports filed for purposes of updating
the description.
All other reports and documents filed by us after the date of this
prospectus with the Securities and Exchange Commission under sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 prior to the
termination of this offering are also incorporated by reference in this
prospectus and are considered to be part of this prospectus from the date those
documents are filed.
If you make a request for this information in writing or by telephone, we
will provide you, without charge, a copy of any or all of the information
incorporated by reference in the registration statement of which this
prospectus is a part. Requests for this information should be submitted in
writing to: Tejon Ranch Co., P.O. Box 1000, 4436 Lebec Road, Lebec, California
93243, Attn: Corporate Secretary. You can also contact us through our World
Wide Web site at http://www.tejonranch.com.
46
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shares
[Logo/Name]
Common Stock
----------------
PROSPECTUS
----------------
, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following are the actual and estimated expenses incurred in connection
with the registration and sale of the shares. The Registrant will pay all of
these expenses.
<TABLE>
<CAPTION>
Item Amount
---- --------
<S> <C>
SEC registration fee............................................ $ 7,920
Listing fee..................................................... 16,170
Printing fees and expenses...................................... 25,000*
Legal fees and expenses......................................... 140,000*
Accountants' fees and expenses.................................. 35,000*
Blue sky fees and expenses...................................... 5,000*
Miscellaneous................................................... 210,000*
--------
Total......................................................... $439,090*
========
</TABLE>
--------
* Estimated
Item 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of Delaware empowers a
corporation to indemnify any person who was or is a part or is threatened to be
made a part to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as director, officer,
employee or agent of another corporation or enterprise. Depending on the
character of the proceeding, a corporation may indemnify against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit or
proceeding if the person identified acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interest of the
corporation and, with respect to any criminal action or proceeding, had no
cause to believe his or her conduct was unlawful. In the case of an action by
or in the right of the corporation, no indemnification may be made in respect
to any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his or her duty
to the corporation unless and only to the extent that a Court of Chancery or
the court in which such action or suit was brought shall determine that despite
the adjudication of liability such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper. Section 145
further provides that to the extent that a director or officer of a corporation
has been successful in the defense of any action, suit or proceeding referred
to above or in the defense of any claim, issue or matter herein, he or she
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
The Certificate of Incorporation of the Registrant provides, in effect,
that, to the fullest extent permitted by Delaware General Corporation Law, the
Registrant shall indemnify any person who was or is a party or is threatened to
be made a party to any action, suit or proceeding of the type described above
by reason of the fact that he or she is a director, officer, employee or agent
of the Registrant.
The Registrant's Certificate of Incorporation relieves its directors from
monetary damages to the Registrant or its stockholders for breach of such
director's fiduciary duty as a director to the full extent permitted by the
Delaware General Corporation Law. Under Section 102(7) of the Delaware General
Corporation Law a corporation may relieve its directors from personal liability
to such corporation or its stockholders for monetary damages for any breach of
their fiduciary duty as directors except (i) for a breach of the duty of
loyalty, (ii) for failure to act in good faith, (iii) for intentional
misconduct or knowing violation of law, (iv) for willful or
II-1
<PAGE>
negligent violations of certain provisions in the Delaware General Corporation
Law imposing certain requirements with respect to stock purchases, redemptions
and dividends or (v) for any transaction from which the director derived an
improper personal benefit.
Item 16. Exhibits.
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.1 Form of Subscription Warrant
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to legality of securities
being registered
10.1 Standby Agreement among the Company, Third Avenue Trust and Carl Marks
Strategic Investments, L.P.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
24 Power of Attorney (included on the signature page hereof)
99.1 Form of Instructions as to use of Subscription Warrants
99.2 Form of Notice of Guaranteed Delivery for Subscription Warrants
99.3 Form of Letter to Common Stockholders who are record holders
99.4 Form of Letter to Common Stockholders who are beneficial holders
99.5 Form of Notice of Record Date
99.6 Form of Letter to banks and brokers
</TABLE>
Item 17. Undertakings.
The Registrant hereby undertakes that, for purchases of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnifications is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted form the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or Rule 479(h) under the Securities Act of 1933
shall be deemed to be part of this registration statement as of the
time it was declared effective; and
(2) For the purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
II-2
<PAGE>
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
The Registrant hereby undertakes:
(1) To file, during any period in which offers and sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low
or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lebec, State of California, on October 31, 2000.
TEJON RANCH CO.
/s/ Robert A. Stine
By: _________________________________
Robert A. Stine
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Robert A. Stine, Dennis Mullins and Allen
E. Lyda, and each of them, as his attorney in fact and agent, with full power
of substitution, for him in any and all capacities, to sign any and all
amendments to this Registration Statement (including post-effective amendments
or any abbreviated registration statement and any amendments thereto filed
pursuant to Rule 462(b) increasing the number of securities for which
registration is sought), and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them or their substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on October 31, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Robert A. Stine President and Chief
____________________________________ Executive Officer
Robert A. Stine (Principal Executive
Officer), Director
/s/ Allen E. Lyda Vice President, Chief
____________________________________ Financial Officer,
Allen E. Lyda Treasurer and Assistant
Secretary (Principal
Financial and Accounting
Officer)
/s/ Otis Booth, Jr. Director
____________________________________
Otis Booth, Jr.
/s/ Craig Cadwalader Director
____________________________________
Craig Cadwalader
/s/ Dan T. Daniels Director
____________________________________
Dan T. Daniels
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Rayburn S. Dezember Chairman of the Board of
____________________________________ Directors, Director
Rayburn S. Dezember
/s/ John L. Goolsby Director
____________________________________
John L. Goolsby
/s/ Norman Metcalfe Director
____________________________________
Norman Metcalfe
/s/ George G. C. Parker Director
____________________________________
George G. C. Parker
/s/ Robert C. Ruocco Director
____________________________________
Robert C. Ruocco
/s/ Kent G. Snyder Director
____________________________________
Kent G. Snyder
/s/ Geoffrey L. Stack Director
____________________________________
Geoffrey L. Stack
/s/ Martin J. Whitman Director
____________________________________
Martin J. Whitman
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.1 Form of Subscription Warrant
5.1 Opinion of Gibson, Dunn & Crutcher LLP as to legality of securities
being registered
10.1 Standby Agreement among the Company, Third Avenue Trust and Carl Marks
Strategic Investments, L.P.
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
24 Power of Attorney (included on the signature page hereof)
99.1 Form of Instructions as to use of Subscription Warrants
99.2 Form of Notice of Guaranteed Delivery for Subscription Warrants
99.3 Form of Letter to Common Stockholders who are record holders
99.4 Form of Letter to Common Stockholders who are beneficial holders
99.5 Form of Notice of Record Date
99.6 Form of Letter to banks and brokers
</TABLE>
