SEC Filing | Tejon Ranch Co.

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Prospectus

Filed Pursuant to Rule 424(b)(1)
Registration No. 333-49024

1,578,947 shares

TEJON RANCH CO.

Common Stock

$19.00 per share

We are distributing to stockholders of record at the close of business on
December 11, 2000 transferable subscription rights to purchase additional
shares of our common stock at a price of $19.00 per share. Stockholders will be
entitled to a right to purchase 0.123 share 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 December 8, 2000 was $22.99. 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
January 8, 2001 unless we extend the expiration date. In no event, however,
will we extend the expiration date beyond January 31, 2001. 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.

Per
share Total
------ -----------

Offering price.............................................. $19.00 $30,000,000
Underwriting discounts and commissions...................... $ 0 $ 0
Proceeds, before expenses................................... $19.00 $30,000,000

The date of this prospectus is December 11, 2000.

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, future prices
and yields for our crops, 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

Page
----

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........................... 30

Page
----

Rights Offering...................... 33
Certain Federal Income Tax
Considerations...................... 39
Principal Stockholders............... 41
Description of Capital Stock......... 44
Shares Eligible for Future Sale...... 46
Legal Matters........................ 47
Experts.............................. 47
Where You Can Find More Information.. 47

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.

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 two companies affiliated with Enron North
America Corp. for the development of a power plant by the Enron
affiliates 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 the Rolling Meadows
residential project, we are engaged in the constraints and feasibility analyses
and phase I planning of a master-planned mountain community. We envision that
the major components of any proposed project would include mountain homes, a
high quality golf resort, a commercial component and substantial open space. We
call this concept "Tejon Mountain Village." Although the size and exact
location of this development concept have not yet been decided upon, it could
involve several thousand acres. While we have not defined the products to be
offered, they could include sites for several thousand homes in a rural,
mountain environment. In September 2000 we decided to commit the resources
necessary to refine our concept, develop detailed plans, prove up the project's
feasibility, and if all goes well apply for governmental approvals for this
proposal.

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 the sale of our livestock
operations. In November 2000, we entered into a nonbinding memorandum of
understanding with a company owned by one of our officers to sell approximately
1,000 cows, 50 bulls and certain personal property for a purchase price of
approximately $800,000 and to lease approximately 55,000 acres of our land to
the purchaser for grazing purposes. This sale, if it is completed, would
involve approximately 22% of our breeding herd and approximately 3% of the
total amount of our cattle. We expect to continue to explore the sale of the
balance of our livestock operations to one or more purchasers, and we expect
that any such sale would also involve leasing of additional acreage for grazing
purposes. None of the grazing leases would affect any real estate development
opportunities. Because of the preliminary stage we are in, we cannot assure you
that any of these sales will take place, nor can we predict the amount of
additional working capital that will be provided from the sales.

At September 30, 2000 the Livestock Division accounted for over $34 million
in book value of our identifiable assets representing approximately 35% 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 and
after allocation of interest expense. The contemplated sales 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.

The Rights Offering

Securities Offered.................. Rights to purchase 1,578,947 shares of
common stock at a subscription price of
$19.00 per share and the common stock
issuable upon the exercise of the rights.

Shares Outstanding/Authorized....... As of the record date of December 11,
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 at least 14,291,183 shares
outstanding. We have 30,000,000 shares of
common stock authorized for issuance.

Grant of Basic Subscription Rights.. All stockholders of record as of December
11, 2000 will be granted a transferable
right to purchase 0.123 share of our
common stock at $19.00 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.
Any remaining shares will then be
allocated among holders who over-
subscribed for more than their pro rata
portion of the over-subscription shares
in the same manner until all over-
subscription shares have been allocated.

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 is expected to be
open for a 21-day period from December
13, 2000 (the expected mailing date of
the offering materials) to January 8,
2001 unless that period is extended by
us, in our sole discretion, for a period
not extending beyond January 31, 2001. If
you wish to exercise your subscription
rights, you must return the completed
subscription documents along with the
payment, as instructed in the
subscription documents, to the
Subscription Agent, Mellon Bank, N.A.,
c/o ChaseMellon Shareholder Services,
L.L.C., no later than 5:00 p.m., New York
City time, on January 8, 2001, 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 January 5, 2001 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, Mellon Bank, N.A.,
c/o 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 January 3, 2001. 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.

Principal Stockholders' Standby
Agreement........................... 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 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,
Mellon Bank, N.A., c/o 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 January 8,
2001 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 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.

Partial Exercise or Transfer of
Rights.............................. In the event of an exercise or transfer
of less than all of your rights, the
Subscription Agent will not issue a new
subscription warrant for the rights not
exercised or transferred unless it
receives the properly endorsed
subscription warrant on or before 1:00
p.m. on the fifth day prior to the
expiration of the subscription period
which is January 3, 2001. No new
subscription warrants will be issued with
respect to subscription warrants received
after that time and date. Accordingly, if
a rights holder exercises or transfers
less than all of his or her subscription
rights and submits the subscription
warrant after that time and date, he or
she will lose the power to exercise or
transfer the remaining rights.

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.

Subscription Agent and Information
Agent............................... Mellon Bank, N.A. will be the
subscription agent and ChaseMellon
Shareholder Services, L.L.C. will be the
information agent in connection with the
rights offering.

SUMMARY CONSOLIDATED FINANCIAL DATA

Nine Months Ended
Year Ended December 31, September 30,
---------------------------------------------------------- ----------------------
1999 1998 1997 1996 1995 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands of dollars, except share and per share (unaudited)
amounts)

Statements of Income
Data:
Total revenues.......... $ 55,916 $ 48,088 $ 38,229 $ 18,960 $ 19,554 $ 44,981 $ 33,345
Total costs and
expenses............... (54,011) (43,466) (33,706) (16,152) (18,831) (46,202) (32,375)
Income (loss) before
income taxes........... 1,905 4,622 4,523 2,808 723 (1,221) 970
Net income (loss)....... 1,181 3,139 3,032 1,685 434 (757) 600
Net income (loss) per
common share:
Basic.................. $ 0.09 $ 0.25 $ 0.24 $ 0.13 $ 0.03 $ (0.06) $ 0.05
Diluted................ $ 0.09 $ 0.25 $ 0.24 $ 0.13 $ 0.03 $ (0.06) $ 0.05
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 12,712,236 12,694,515
Diluted................ 12,796,485 12,752,697 12,796,729 12,683,760 12,684,105 12,712,236 12,790,386

Pro Forma Data:
Net income (loss)....... $ 1,181 $ (757)
Net income (loss) per
common share:
Basic.................. $ 0.08 $ (0.05)
Diluted................ $ 0.08 $ (0.05)
Shares used in computing
net income (loss) per
common share:
Basic.................. 14,276,126 14,291,183
Diluted................ 14,375,432 14,291,183

The following consolidated balance sheet data has been adjusted to give
effect to the receipt of the estimated net proceeds from the sale of 1,578,947
shares of our common stock in the rights offering at an offering price of
$19.00 per share, after deduction of the estimated expenses of the offering.
See "Use of Proceeds" and "Capitalization."

September 30, 2000
-------------------
Pro Forma
Actual As Adjusted
------- -----------
Consolidated Balance Sheet Data: (unaudited)

Cash and cash equivalents................................... $ 245 $ 29,845
Marketable securities....................................... 10,648 10,648
Working capital............................................. 20,906 50,506
Total assets................................................ 96,038 125,638
Long term debt, less current portion........................ 23,119 23,119
Stockholders' equity........................................ 42,857 72,457

- --------
See Notes to "Selected Consolidated Financial Data".

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 the Tejon Mountain Village
concept, 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.

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 September 30, 2000 we had working capital of approximately $20.9 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 potential
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.

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 and we have already entered into a nonbinding
memorandum of understanding to sell a portion of those assets. 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.

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. A supply sufficient for significant development at
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 able to be
supplemented by water banked in Kern County 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.

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.

The strategy we have pursued in recent years to more aggressively grow our core
businesses has resulted in a substantial increase in the amount of our
indebtedness and therefore greater risk in owning our stock.

Our long term debt increased from approximately $1.9 million at December 31,
1998 to approximately $23 million at September 30, 2000. We also had
approximately $3 million in short term debt outstanding at September 30, 2000
that is being used to finance real estate development activities, as opposed to
providing the short term working capital needs of our farming and cattle
operations. We also expect to incur additional indebtedness in connection with
our real estate development activities. Of the long term debt outstanding at
September 30, 2000, approximately $5 million relates to our livestock
operations and is expected to be paid off if and when we sell all or
substantially all of the assets of those operations. While we believe that we
will be able to pay all of our outstanding debt as it becomes due, the increase
in the level of debt increases the risk of our business.

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
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 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 at a profit and your ability to sell may be delayed by the time
required to deliver the stock certificates.

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 are expected to 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.

USE OF PROCEEDS

Our net proceeds from the sale of 1,578,947 shares of common stock in the
rights offering at the offering price of $19.00 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 invest up to approximately $10 million
of the net proceeds in the Tejon Mountain Village, including constraints and
feasibility analyses, early phase and detailed planning, and preparing
applications for entitlements. These figures are estimates, are subject to
substantial uncertainty and may change as development at the Tejon Industrial
Complex and planning of the Tejon Mountain Village progress.

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.

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:

High Low
--------- ---------

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 December 8, 2000)................. $25.75 $21.40

On December 8, 2000, the last reported sales price of our common stock on
the New York Stock Exchange was $22.99 per share. As of December 7, 2000, there
were approximately 638 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.

CAPITALIZATION

The following table sets forth as of September 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 1,578,947
shares in the rights offering at the offering price of $19.00. 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.

As of September 30,
2000
--------------------
Pro Forma
Actual As Adjusted
------- -----------

Long-term debt, less current portion....................... $23,119 $23,119
Stockholders' equity
Common stock............................................. 6,357 7,146
Additional paid-in capital............................... 682 29,493
Deferred compensation.................................... (86) (86)
Retained earnings........................................ 35,944 35,944
Accumulated other comprehensive income................... (40) (40)
------- -------
Total stockholders' equity............................. 42,857 72,457
------- -------
Total capitalization................................... $65,976 $95,576
======= =======

- --------
See Notes to "Selected Consolidated Financial Data".

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 nine months ended
September 30, 2000 and September 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 nine months ended
September 30, 2000 are not necessarily indicative of the results to be expected
for the entire year or the quarters following in 2000.

Nine Months Ended
Year Ended December 31, September 30
--------------------------------------------------------------- ----------------------
1999 1998 1997 1996 1995 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(in thousands of dollars, except share and per share (unaudited)
amounts)

Statements of Income
Data:
Revenues(1):
Real estate............ $ 7,268(2) $ 6,966(3) $ 4,888(4) $ 2,820 $ 2,566 $ 6,928 $ 5,349
Livestock.............. 40,576 31,450 23,009 5,725 7,641 34,674 22,737
Farming................ 7,433 8,671 9,173 9,107 7,973 2,908 4,778
Interest income........ 639 1,001 1,159 1,308 1,374 471 481
---------- ---------- ---------- ---------- ---------- ---------- ----------
55,916 48,088 38,229 18,960 19,554 44,981 33,345
Costs and expenses(1):
Real estate............ 4,846 2,938 2,714 2,505 2,637 5,511 3,858
Livestock.............. 38,819 30,480 21,353 5,113 7,550 32,580 21,572
Farming................ 6,285 6,402 6,546 5,973 6,162(5) 3,486 3,390
Corporate expenses..... 3,198 2,581 2,346 2,266 2,046 2,366 2,646
Interest expense....... 863 1,065 747 295 436 2,259 909
---------- ---------- ---------- ---------- ---------- ---------- ----------
54,011 43,466 33,706 16,152 18,831 46,202 32,375
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes........... 1,905 4,622 4,523 2,808 723 (1,221) 970
Income taxes provision
(benefit).............. 724 1,613 1,491 1,123 289 (464) 370
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
cumulative effect of a
change in an accounting
principle.............. 1,181 3,009 3,032 1,685 434 (757) 600
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 $ (757) $ 600
========== ========== ========== ========== ========== ========== ==========
Net income (loss) per
common share:
Basic.................. $ 0.09 $ 0.25 $ 0.24 $ 0.13 $ 0.03 $ (0.06) $ 0.05
========== ========== ========== ========== ========== ========== ==========
Diluted................ $ 0.09 $ 0.25 $ 0.24 $ 0.13 $ 0.03 $ (0.06) $ 0.05
========== ========== ========== ========== ========== ========== ==========
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 12,712,236 12,694,515
Diluted................ 12,796,485 12,752,697 12,796,729 12,683,760 12,684,105 12,712,236 12,790,386
Pro Forma Data(6)(7):
Net income (loss)....... $ 1,181 $ (757)
Net income (loss) per
common share:
Basic.................. $ 0.08 $ (0.05)
Diluted................ $ 0.08 $ (0.05)
Shares used in computing
net income (loss)
per common share:
Basic.................. 14,276,126 14,291,183
Diluted................ 14,375,432 14,291,183

As of December 31, September 30, 2000
--------------------------------------- --------------------
Pro Forma as
1999 1998 1997 1996 1995 Actual Adjusted (8)
------- ------- ------- ------- ------- ------- ------------
(in thousands) (unaudited)

Consolidated Balance
Sheet Data:
Cash and cash
equivalents............ $ 423 $ 743 $ 976 $ 693 $ 44 $ 245 $ 29,845
Marketable securities... 9,942 13,294 17,189 20,127 20,257 10,648 10,648
Working capital......... 16,278 19,768 24,518 24,686 24,784 20,906 50,506
Total assets............ 91,519 73,014 63,693 47,369 45,203 96,038 125,638
Long term debt, less
current portion........ 20,606 1,875 3,925 1,800 1,800 23,119 23,119
Stockholders' equity.... 43,160 42,705 40,488 37,732 36,969 42,857 72,457

- --------
(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 nine months ended
September 30, 2000 is the same as the historical net loss. We estimate that
the net loss would have been $791,000, net of taxes, less had the proceeds
from the offering been invested in cash and cash equivalent investments
during the nine months ended September 30, 2000.

(7) Pro forma information gives effect, as of the beginning of each period, to
the sale of 1,578,947 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 1,578,947 shares of common stock upon the exercise of rights
in this offering as of the beginning of the nine months ended September 30,
2000.

(8) Reflects our receipt of estimated net proceeds of $29.6 million from the
sale of 1,578,947 shares of common stock upon the exercise of rights in
this offering at the offering price of $19.00 per share, net of estimated
offering expenses, as of September 30, 2000. See "Use of Proceeds".

BUSINESS

New Strategic Plan