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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number : 1-7183
TEJON RANCH CO.
(Exact name of Registrant as specified in its Charter)
Delaware 77-0196136
(State or other jurisdiction (IRS Employer Identification of
incorporation or organization) Number)
P.O. Box 1000, Lebec, California 93243
(Address of principal executive office)
Registrant's telephone number, including area code: (805) 327-8481
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Common Stock American Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days. Yes x No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is
not contained herein, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of Registrant's Common Stock, $.50 par
value per share, held by persons other than those who may be deemed to
be affiliates of Registrant on March 7, 1995 was $80,785,894 based on
the closing price on that date on the American Stock Exchange.
The number of Registrant's outstanding shares of Common Stock on
March 7, 1995 was 12,682,244 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the Annual Meeting of
Stockholders to be held on May 8, 1995, relating to the directors and
executive officers of Registrant are incorporated by reference into
Part III.
Total Pages - 83
Exhibit Index - Page 60
PART I
Item 1. Business
Registrant owns approximately 270,000 contiguous acres of land
located in Kern and Los Angeles counties in the State of California on
which it is engaged principally in production and sale of beef cattle,
farming, and leasing of land for oil, gas and mineral production and
commercial purposes. Registrant is also engaged in planning the
future uses of its lands. In addition, Registrant is engaged in
rendering farm management services, which involves property other than
the 270,000 acres referred to above.
The following table shows the revenues, operating profits and
identifiable assets of each of Registrant's industry segments for the
last three years:
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
(Amounts in thousands of dollars)
1994 1993 1992
Revenues (1)
Livestock $ 5,531 $ 5,221 $ 5,516
Farming 6,880 9,459 5,615
Oil and Minerals 1,296 1,358 1,211
Commercial and Land Use 1,736 1,840 1,946
Segment Revenues 15,443 17,878 14,288
Interest Income 1,439 1,591 2,275
Total Revenues $ 16,882 $ 19,469 $ 16,563
Operating Profits
Livestock $ 364 $ 510 $ 314
Farming 1,925 4,211 980
Oil and Minerals 1,208 1,239 1,152
Commercial and Land Use (100) (304) 534
Segment Profits (2) 3,397 5,656 2,980
Interest Income 1,439 1,591 2,275
Corporate Expense (2,212) (2,233) (2,106)
Interest Expense (287) (424) (651)
Operating Profits $ 2,337 $ 4,590 $ 2,498
Identifiable Segment
Assets (3)
Livestock $ 5,310 $ 4,364 $ 4,565
Farming 7,347 8,000 6,944
Oil and Minerals 179 187 163
Commercial and Land Use 2,226 1,699 1,684
Corporate 29,858 32,861 32,373
Total Assets $ 44,920 $ 47,111 $ 45,729
(1) Intersegment sales were insignificant.
(2) Segment Profits are revenues less operating expenses,
excluding interest 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.
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Livestock Operations
Registrant conducts a beef cattle range operation upon those
portions of its ranch which are not devoted to farming, commercial or
other purposes. This range operation depends primarily upon forage
from natural vegetation. 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 the use of stocker cattle (cattle purchased at
light weights for growing on available range forage before being
resold). At December 31, 1994, Registrant's cattle herd numbered
approximately 13,272 of which approximately 6,047 head were stockers
and the remainder were in the breeding herd. At December 31, 1993,
Registrant's cattle herd numbered approximately 11,976 of which
approximately 5,043 head were stockers. Registrant's range cattle are
sold primarily to stocker and feedlot operators. As market conditions
and ranch forage conditions warrant, Registrant may, from time to
time, feed some of its cattle in commercial feedlots prior to sale of
such cattle to packing houses. Registrant sells a few cattle directly
to packing houses and to other range operators. As to the sale of
cattle, Registrant is in direct competition with other commercial
cattle operations throughout the United States. The prices received
for Registrant's cattle are primarily dependent upon the commodity
market's perception of supply and demand at the time cattle are sold.
In an attempt to reduce the market risks of its livestock activities,
Registrant sometimes hedges future sales of cattle in the futures and
options markets or obtains fixed prices for future delivery through
contracts with cattle buyers, feedlots, or packing houses. Registrant
also operates a horse breeding program consisting of the breeding of
quality bloodline quarter horses, the sale of horses, and the boarding
and training of horses.
Forage production in 1994 proved disappointing due to less than
normal rainfall. Registrant had to reduce forecasted stocker cattle
purchases as a result of the loss in carrying capacity of Registrant's
pastures. This hurt total income for 1994, as Registrant had fewer
feeder cattle to sell in late spring of 1994. The beneficial side to
this reduction in early year stocker numbers was the ability to
provide plenty of forage for Registrant's commercial cow herd. Heavy
winter rains in early 1995 should allow the Registrant to increase
stocker cattle numbers during 1995 and wean an excellent calf crop.
Registrant continues to focus on improving the efficiency of its
livestock operations in an increasingly competitive marketplace. The
quarter horse program will continue to direct its efforts to the
improvement of Registrant's select band of breeding mares and the
hosting of competitive horse events to enhance the revenues of that
operation. A new membership program in conjunction with the horse
shows will help maximize the usage of the horse facility and expose
Registrant's lands to a broader portion of the community.
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The much anticipated correction downward in the national cattle
market occurred in late spring of 1994. Seven years of relatively
good cattle prices resulted in the inevitable return to cattle over-
production. Total meat supplies of all types in 1994 surged to record
levels, and with the cyclical increase in beef production cattle,
prices fell by $14 per hundred weight. The cyclical nature of the
cattle industry is well documented. Should this cycle resemble those
of the past, there could be three to four years of low returns for the
cow/calf sector of the cattle business. The stocker cattle side of
Registrant's cattle business might actually benefit from lower prices.
Stocker cattle margins can actually increase during this phase of a
cattle cycle because the basic input cost (the purchase price of
calves) drops considerably. This is one reason Registrant leased
additional pasture for the 1995 season. By obtaining more "early
country", which is lower elevation pasture that produces grass early
in California's growing season, Registrant can take advantage of its
surplus of high elevation summer pasture.
United States beef exports to Mexico are important. The
devaluation of the peso has reduced Mexico's ability to purchase U.S.
beef. Since Mexico is the United States' third largest foreign
customer for beef, continued disruption in exports can only add to
pressure on cattle prices in the United States. Registrant will have
to manage its cattle operations carefully during the next three to
four years of depressed cattle prices in order to remain profitable.
Regulatory requirements at all governmental levels related to
endangered species and air and water quality continue to raise the
costs of operating a range cattle operation. Ensuring compliance with
various rules and testing requirements will require not only more
staff time but also the use of outside advisors and testing
facilities.
Farming Operations
In the San Joaquin Valley, Registrant farms permanent crops
including the following acreage: wine grapes - 1,136, almonds - 884,
pistachios - 430 and walnuts - 295. During 1992, work began on a new
farming development involving 620 acres in the San Joaquin Valley,
which was completed during the spring of 1994. The new acreage
includes 320 acres of almonds and 300 acres of pistachios. Almond
trees were planted on 160 acres during 1993, and another 160 acres
were planted in early 1994 with some production expected in 1995 and
1996. The 300 acres of pistachio trees were also planted in early
1994 with the first full crop year expected in 1999. Registrant's
objective in planting new trees is to offset the normal yield decline
as its older plantings reach productive maturity. As certain of
Registrant's permanent crops age to the point of declining yields,
Registrant will evaluate the advisability of replanting such crops, or
replacing them with different crops, depending upon market conditions.
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Registrant sells its farm commodities to several customers or
handlers. As a producer of these commodities, Registrant is in direct
competition with other producers within the United States and
throughout the world. Prices received by Registrant for its
commodities are determined by total industry production and demand
levels. Registrant attempts to improve price margins by producing
high quality crops through cultural practices and by obtaining better
prices through marketing arrangements with handlers. In 1994, almonds
produced were sold to three domestic customers or handlers, with one
of the handlers receiving approximately 67% of the crop. Typically,
these almond handlers process growers' almonds and sell the nuts to
large commercial buyers, such as cereal and candy manufacturers.
The California almond industry is subject to a federal marketing
order which empowers the Secretary of Agriculture to set the
percentage of almonds during any crop year which can be sold and the
percentage of those to be held in reserve in order to assist in the
orderly marketing of the crop. During 1993 and 1992 the saleable
percentage was set at 100% of the total almond crop. For 1994, due to
a record crop within California, a 10% reserve has been set by the
Secretary of Agriculture. It is anticipated that this 10% reserve
will be released for sale at some point in 1995.
In 1994, Registrant's pistachios were sold to one customer.
Registrant's 1994 walnuts were sold to two customers, one of which
received approximately 90% of the crop. During 1994 all winegrapes
were sold to one winery.
For Registrant's's farming operations, 1994 was an above average
year although revenues were below the very exceptional 1993. During
1994, good weather prevailed contributing to generally higher yields
than 1993, but revenues were substantially lower due primarily to
back-to-back record yields for California in almonds, pistachios, and
walnuts, which substantially lowered market prices for those crops.
Although the drought returned to California in 1994, the 60%
supply allocation from the State Water Project provided the Registrant
with enough water to allow Registrant to properly plan the timing of
water usage and, when combined with other cultural practices and
favorable weather conditions, helped to produce near record yields in
the crops produced. Grape yields increased when compared to 1993
production, and 1993 was one of the best production years within the
last five years. Prices for grapes sold by Registrant were at very
good levels but slightly less than in 1993. Almond prices were down
from 1993 by 40%. Walnut production was slightly above it's 6 year
average, however, prices were at a 5 year low. Registrant's pistachio
trees, which were in the "off" production year of their alternate
bearing cycle in 1993, produced a crop substantially above that of the
normal "off" year, as did the rest of the State, putting some pressure
on prices. For 1994 the Registrant's crop was a record while the
state produced a normal "on" year crop. However, the combined
production of 1993 and 1994 continued to put pressure on prices.
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Overall, during 1994, crop revenues were somewhat higher than
expected, although significantly less than crop revenues for 1993.
See "Management's Discussion and Analysis of Financial Statements and
Results of Operations." Almond, walnut and pistachio demand has been
g o o d during late 1994 and early 1995. Currently, industry
expectations are that statewide nut crops will be smaller than past
years and it is anticipated that 1995 crop prices will be generally up
from 1994 price levels. 1995 Grape prices are expected to be about
the same as 1994 due to an increased supply of grapes used for juice
and sugar concentrate, for which the majority of Registrant's grapes
are used. Registrant has a contract with a winery which provides a
minimum price for it's grape shipments. All of Registrant's crop
markets are particularly sensitive to the size of each year's world
crop. Large crops in California and abroad can rapidly depress
prices.
Water conditions for early 1995 are very favorable due to above
normal winter precipitation. In early 1995, the State Water Project
has announced a one hundred percent (100%) water allocation for it's
contractors.
See discussion of water contract entitlements and long-term
outlook for water supply under Part I, Item 2, "Properties-Farmland".
Farm Management Services. Tejon Farming Company ("TFC"), a
wholly-owned subsidiary of Registrant, manages the farming operations
o f Laval Farms Limited Partnership ("Laval"), formerly Tejon
Agricultural Partners, under a Farm Management Agreement with Laval,
which is terminable on 30-days' notice by Laval. (See "Laval Farms
Limited Partnership," below.)
Laval Farms Limited Partnership. Laval is a limited partnership
formed in 1972 to develop and farm certain land in Kern County,
California. Laval Farms Corporation, formerly Tejon Agricultural
Corporation and still a wholly-owned subsidiary of Registrant, is the
general partner of the partnership. Due to significant losses in the
partnership, Registrant wrote off its investment in the partnership in
1976 and provided for all commitments at that time.
In 1992 Registrant entered into an Agreement with John Hancock
Mutual Life Insurance Company ("John Hancock"), Laval's sole limited
partner and secured lender, for an orderly sale of Laval's farmland
and eventual dissolution of the partnership. Under the Agreement
approximately 13,000 acres of farmland located in the southern San
Joaquin Valley and owned by Laval have been divided into smaller
farming parcels and are being sold. John Hancock is continuing to
provide Laval with a working capital crop line of credit during the
sale of Laval lands. As of March 8, 1995, all of the crop lands have
been sold with the exception of the headquarters parcel which is
approximately 188 acres.
- 8 -
No land or assets owned by Registrant have been involved in the
sales, and Registrant has not received any of the proceeds of the
sales program. In connection with the Agreement, however, Registrant
obtained an option to purchase approximately 900 acres of Laval land
around Registrant's commercial operations at the Laval Road/Interstate
5 interchange in the southern San Joaquin Valley. Registrant
exercised the option and purchased the acreage during February 1995 at
a price of $1.5 million. The 900 acres includes approximately 300
acres of rubired wine grapes.
At this time, Laval is continuing to utilize Registrant's farm
management services. However, as the sale program proceeds, the
contract to manage the Laval lands will be reduced and ultimately
terminated. Currently, Registrant is receiving a $10,000 per month
fee for managing the remaining acreage. Registrant has certain costs
associated with earning this fee such that the impact of the loss of
the fee on revenues should not be material to net earnings.
Due to the Laval sales program, Registrant reorganized the
farming of its permanent crops. Registrant determined that its own
acreage will be farmed utilizing some Registrant-owned equipment and
Registrant's employees as farm unit managers, but much of the farm
cultural efforts will be provided by outside contractors. The future
financial impact of this change in farm operations is not expected to
result in significantly different costs from prior years.
During 1993 and prior years Laval provided equipment and direct
labor to Registrant in connection with planting, development, and
maintenance of permanent crops on Registrant's lands. Amounts paid by
Registrant for such services were approximately $1,786,000 in 1993,
and $1,696,000 in 1992. No amounts were paid or accrued by Registrant
during 1994.
Oil and Minerals
Registrant leases certain portions of its land to oil companies
for the exploration for, and production of, oil and gas, but does not
itself engage in any such exploratory or extractive activities.
As of December 31, 1994, approximately 9,645 acres were committed
to producing oil and gas leases from which the operators produced an
average of approximately 1,049 barrels of oil per day during 1994.
Approximately 1,592 acres were also held under exploratory leases.
Registrant's share of production based upon its average royalty rate
during the last three years has been 131, 157, and 89 barrels of oil
per day for 1994, 1993, and 1992, respectively. Approximately 200
producing oil wells were located on the leased land as of December 31,
1994. An additional 184 wells were shut-in and non-productive. Shut-
in wells occur as oil revenues received by the operators lag behind
the cost of keeping the wells in production. Extreme price volatility
in the oil market has been a disincentive to exploratory leasing and
drilling on Registrant's lands as well as elsewhere. Although no new
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wells were drilled on Registrant's lands in 1994, one lessee has
announced that a gas well will be drilled on Registrant mineral lands
in early 1995. Other lessees are planning "infill" drilling programs
on Registrant's existing producing lands during 1995.
The continuing economic difficulties in the petroleum industry
have caused larger companies to attempt to divest economically
marginal oil and gas properties. Such interests are typically sold to
small independent oil companies which can operate the leases with
lower overhead costs. This trend has occurred and is likely to
continue with respect to Registrant's oil and gas holdings. Of
particular concern to Registrant is the need to assure proper
abandonment of non-producing wells and restoration of the land surface
upon lease termination. In such instances, Registrant attempts to
require the larger company to guarantee performance of key lease
terms by the acquiring independent oil company.
Presently one of these independent operators is in default under
certain agreements related to Registrant's mineral properties. The
d e f aults include failure to pursue certain field development
activities and other responsibilities with regards to oil field
operations. As is typical for these arrangements, the major oil
company who sold the lease to the independent operator is responsible
for the performance of these obligations.
Estimates of oil and gas reserves on Registrant's properties are
unknown to Registrant. Registrant does not make such estimates and
does not file reports as to reserve estimates with governmental
agencies. Registrant's lessees do not make information concerning
reserves available to Registrant.
Registrant has approximately 2,440 acres under lease to National
Cement Company of California, Inc. ("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 a design capacity of 600,000 tons of cement
per year. The amount of payment which Registrant receives under the
lease is based upon shipments from the cement plant. The term of this
lease expires in 2007, 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. For information as to proceedings
under environmental laws relating to the cement plant see Item 1 -
"Legal Proceedings".
National is currently involved in a $2 million project to
modernize part of its cement plant grinding mill. National has also
filed permits with the county to substantially modernize the kiln and
make it more efficient at a cost of approximately $15,000,000.
Registrant has been told by National officials that National will
proceed with such a modernization program if the permits to continue
burning supplemental fuels are ultimately denied. See Item 1 - "Legal
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Proceedings" for a discussion of issues regarding the supplemental
fuels burning permit.
Approximately 433 acres of Registrant's land are leased to owners
and operators of sand and gravel screening and rock crushing plants
under three leases with rental payments based on the amount of sand
and gravel removed and sold.
Registrant is optimistic about 1995 given the improved general
business conditions and the takeover of one of the Registrant's
aggregate sites by a new operator. This particular site had been
operated under bankruptcy protection by the original lessee. After
considerable legal activity and expense, Registrant was able to
consummate a lease with the new operator on more favorable terms. The
new lessee is an experienced and substantial construction company
which, over time, could substantially increase output from the sand
and gravel deposit and increase Registrant's royalties.
In 1990 Registrant negotiated a new lease with a major sand and
gravel producer which was expected to result in the reactivation of
Registrant's dormant 205-acre aggregate deposit in the Antelope
Valley. As of March 8, 1995, actual plant start-up at this site had
not occurred due to market conditions and lessee has notified
Registrant of its intent not to extend the lease an additional five
years.
Timber Management and Hunting Programs
Significant areas of the foothills and mountainous portions of
Registrant's land have a large variety of native trees and other
vegetation growing thereon, including oak, pine, fir and cedar.
During 1993 only oak trees were subject to a timber management and
harvesting program for firewood production. During 1994, the firewood
p r o duction program was phased out due to declining returns.
Registrant also operates a hunting program in close cooperation with
the California Department of Fish and Game.
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Commercial and Land Use
Registrant leases to various tenants lands which are used for a
full-service truckstop facility, a truck wash, three service stations,
five restaurants, an automotive repair garage, a United States Postal
Service facility, a small office building, and several microwave
repeater locations and radio transmitter and relay sites.
T h e Commercial and Land Use Division continues to focus
substantial attention on additional development along the Interstate 5
corridor. The land planning process during 1994 identified the
Interstate 5 corridor as an area of focus in near term planning and
entitlement activities. (See Part I, Item 2, "Properties-Land Use
Planning".) A major component of the land planning process calls for
c o m m e rcial improvements and re-landscaping of the Grapevine
Interchange. This program began during 1994 and continued into 1995
and will result in substantial capital expenditures at the site. In
addition, Registrant has identified several brokerage firms to assist
in the marketing of sites at the Grapevine Interchange.
Commercial activity at the Grapevine Interchange is expected to
increase during 1995 due to the completion of the Unocal gas station.
At the Laval Road Interchange, an existing tenant has indicated an
interest in expansion with new motel and restaurant uses possible.
W i t hin the commercial leasing area, Registrant is in direct
competition with other landowners who have highway interchange
locations along Interstate 5 within California.
In early 1994 Registrant's highway businesses were affected by
the significant reduction in traffic caused when Interstate 5 to and
from Los Angeles was temporarily closed due to the Northridge
earthquake. Traffic on Interstate 5 fully recovered by midyear and is
currently operating at full capacity with steady incremental growth in
traffic volume projected.
Customers
During 1994 and 1993 the following customers accounted for more
than 10% of Registrant's consolidated revenues, Golden State Vintners,
a purchaser of grapes (13% in each of 1994 and 1993), and E.A. Miller
Cattle Co., a purchaser of cattle, (22% in 1994 and 13% in 1993). No
customer, or group of customers under common control, accounted for
more than 10% of Registrant's consolidated revenues during 1992.
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Employees
At December 31, 1994, Registrant had 51 full-time employees.
Executive Officers of Registrant
The following table shows, as to each executive officer of
Registrant, the offices held as of March 7, 1995, the period they have
been held, and their age. All of such officers serve at the pleasure
of the board of directors. On March 16, 1995 Registrant announced
that Jack Hunt, President and Chief Executive Officer of Registrant,
resigned in order to take a similar position at King Ranch in Texas.
King Ranch is a privately owned company with extensive ranching and
farming operations. Mr. Hunt's successor has not been selected.
Name Offices Held Since Age
Jack Hunt President 1986 50
John A. Wood Vice President 1978 57
Matt J. Echeverria Vice President 1987 44
Dennis Mullins Vice President, 1993 42
Secretary and
General Counsel
Allen E. Lyda Vice President, 1990 37
Finance, Treasurer
Charles J. Berling Vice President 1995 51
David Dmohowski Vice President 1991 47
A description of present and prior positions with Registrant, and
business experience for the past five years is given below.
Mr. Hunt served Registrant as Vice President from 1983 to 1986,
when he was elected President.
Mr. Wood has served Registrant as Vice President since 1978.
Mr. Echeverria served as Manager of Cattle Operations from 1982
to 1987, when he was elected Vice President, Livestock.
Mr. Mullins has been employed by Registrant since 1993, serving
as Vice President, Public Affairs, Secretary and General Counsel.
From January 1992 to January 1993 he served as General Counsel of the
United States General Services Administration in Washington, D.C.
From 1985 to January 1992, Mr. Mullins was an attorney with the firm
of Jones, Day, Reavis & Pogue in Los Angeles.
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Mr. Lyda has been employed by Registrant since 1990, serving as
Vice President, Finance and Treasurer. From 1986 to 1990, he served
as Senior Vice President and Controller of American National Bank in
Bakersfield.
Mr. Berling has been employed by Registrant since January 1995,
serving as Vice President, Real Estate. From January 1991 to November
1994 he served as a Principal and Partner of BetaWest, Inc. From
August 1985 to November 1994 he served as Vice President, Portfolio
Development for BetaWest Properties, Inc. Both BetaWest Inc. and Beta
West Properties, Inc., are engaged in real estate development.
Mr. Dmohowski has been employed by Registrant since January 1991,
serving as Vice President, Land Planning. From 1979 through 1990, he
held a number of positions with The Irvine Company of Newport Beach,
California in the areas of land development, government relations and
entitlement, the most recent position held there being Vice President,
Entitlement for the Irvine Pacific
division.
Item 2. Properties
Registrant owns approximately 270,000 acres of contiguous land
located approximately 60 miles north of Los Angeles and approximately
15 miles east of Bakersfield. The land is undeveloped, except for
certain limited farming and commercial uses. Included in the land are
portions of the San Joaquin Valley, foothills, portions of the
Tehachapi Mountains and portions of the western end of the Antelope
Valley. It is traversed by a number of key transportation and utility
facilities, including Interstate 5 (the major north-south federal
highway in California), U.S. Highway 58, California Highways 138 and
223, the California Aqueduct, the Southern Pacific-Santa Fe Railway
Line and various transmission lines for electricity, oil, natural gas
and communication systems.
For information as to Registrant's livestock, farming, oil and
minerals and commercial land use operations on the land, see Part I,
Item 1 - "Livestock Operations," "Farming Operations," "Oil and
Minerals," and "Commercial Land Use."
Land Use Planning
Registrant has continued to engage in planning activities related
to future uses of its lands. During 1993 Registrant initiated
planning programs intended to guide decision making relating to future
development on the Ranch with special focus on the important
I n t erstate 5 corridor and potential development opportunities
available to the Ranch in the next 20 to 25 years. This planning
effort was completed in early 1994. Registrant has filed a General
Plan Amendment covering approximately 2,600 acres located around its
existing truckstop lease just south of the Interstate 5 and Highway 99
junction. This General Plan Amendment includes a mix of proposed
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commercial and light industrial uses. At present, however, Registrant
has not filed a specific plan with any governmental jurisdiction for
any additional substantial commercial or residential development of
the property. The timing of any extensive development of Registrant's
property and its nature and extent are expected to be dependent upon
market demand, the availability of adequate development capital and
the obtaining of appropriate governmental permits and approvals.
A major development project on land adjoining Registrant's land
received preliminary approval from Kern County in October 1992.
Called the San Emidio New Town, this project encompasses approximately
9,500 acres and at buildout would contain approximately 20,000
residential units and approximately 600 acres of commercial and
industrial development. While construction is projected to occur over
a 35 year period, the actual date of the start of construction is not
k n o w n due to market uncertainties and additional regulatory
requirements. This project has been inactive since 1992. Registrant
anticipates future negotiations with the San Emidio project developer
regarding vehicle rights-of-way and freeway interchange improvements
affecting Registrant's land.
Approximately 250,000 acres of Registrant's land is located in
Kern County, California. The Kern County General Plan for this land
contemplates continued commercial, resource utilization, farming,
grazing and agricultural uses, as well as certain new developments and
uses, including housing 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.
Registrant has not yet made specific proposals to the County to
implement any part of its proposed land use concept, except at the
Grapevine and Laval Road Interchanges on Interstate 5. Registrant has
been evaluating the potential for a resort or guest ranch concept and
for a large residential ranch estates project in the mountain portions
of the Ranch accessible from Interstate 5. Further refinements to
this preliminary planning concept and a more careful analysis of
market conditions and the regulatory environment will need to be
completed before requests for Kern County approvals can be considered.
Registrant is evaluating the environmental and regulatory factors that
might affect its ability to secure value-enhancing entitlements for
potential land development. The results of this evaluation will help
Registrant in formulating long-range entitlement strategies.
The remainder of Registrant's land, approximately 20,000 acres,
is in Los Angeles County. This area of the ranch is accessible from
Interstate 5 via Highway 138 and lies 30 miles west of the Antelope
Valley communities of Palmdale and Lancaster. 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. No
specific land proposals have been made by Registrant to the County.
- 15 -
Registrant is actively monitoring regional planning issues and
continues to develop its liaison with Los Angeles County government
and other regulatory agencies needed to preserve future development
opportunities.
In addition to its agricultural contract water entitlements,
Registrant has an entitlement to obtain from the California State
Water Project sufficient water to service a limited amount of future
residential development and has indicated to the Kern County Water
Agency an interest in obtaining additional entitlements. This action
was taken in an effort to assure the availability of the water in the
future and not because of any immediate plans for the development of
Registrant's property. It is uncertain whether or when any such
additional water rights will be obtained. Portions of the property
also have available ground water sufficient to support low density
development. Registrant may in the future convert portions of its
agricultural water entitlement from agricultural use to municipal and
industrial use in order to serve future development on its lands.
Such a conversion would likely be in conjunction with programs to
enhance Registrant's groundwater resources.
Portions of Registrant's property consist of mountainous terrain,
and much of the property is not presently served by developed roads or
by utility or water lines. Any significant development of the
property would involve the construction of roads, utilities and other
expensive infrastructure and have to be done in a manner which
accommodates a number of environmental concerns, including endangered
species issues, that may limit development of portions of the
property.
Due to the property's location and its undeveloped state, from
time-to-time unsolicited proposals are made for governmental or quasi-
public uses of portions of the property or neighboring lands by
entities, some of which may have the right of eminent domain. For the
most part Registrant opposes such uses, because to the extent that any
such proposals may be implemented through the use of the power of
eminent domain or otherwise, the flexibility to develop some of
Registrant's other lands could be correspondingly limited. Registrant
i s c urrently in negotiations with a company concerning the
construction of a major oil pipeline over the Ranch. This proposed
pipeline would follow an alignment of other oil pipelines which are
along the Interstate 5 corridor. Registrant's lands are also being
evaluated as a possible alignment for a high speed rail system between
Los Angeles and San Francisco.
Farmland
Although changing crop market conditions and the cost and
availability of irrigation water bear on the economic feasibility of
farming on Registrant's lands, portions of the land located in the San
Joaquin Valley are suitable for farming a wide variety of tree, vine
and row crops.
- 16 -
Existing long-term contracts with the Wheeler Ridge-Maricopa
Water Storage District ("District") provide for water deliveries from
the California State Water Project ("Project") to certain farmland in
the San Joaquin Valley belonging to Registrant. 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 exports from the Sacramento-San Joaquin River
Delta ("Delta") to protect allegedly endangered species and improve
water quality in the Delta. Existing U.S. Fish & Wildlife Service
("FWS") regulations restrict the export of water south of the Delta.
Additional restrictions on water exports are related to the proposed
listing of the Sacramento splittail (a fish), as an endangered species
and the proposed designation of critical habitat for the Delta smelt.
Also, reserving water flowing into the Delta for environmental
purposes (which water would otherwise flow into the San Francisco Bay
and be unavailable for beneficial use) has been required by the U.S.
Environmental Protection Agency in order to keep salinity levels in
the Delta below certain levels. The impact of these regulations could
be severe during drought years when the supply of water for all uses
is limited. Pursuant to an interim three-year agreement among the
federal agencies, the concerned state agencies, environmental groups,
and water users, a maximum of 1.1 million acre feet of water has been
reserved for such environmental uses that would otherwise be available
for beneficial use by state and federal water project participants.
Since Registrant's water entitlements substantially exceed its
permanent crops' needs, the 100% allocation made by the Project to the
Kern County Water Agency, of which the District is a sub-unit, should
be more than sufficient for Registrant's 1995 crops. Longer term,
however, year-to-year uncertainty of the water supply and potentially
higher costs for water may jeopardize the financial viability of the
District by forcing marginal operators out of business and shifting a
greater portion of the financial burden imposed by long term fixed
costs upon the remaining growers. High water costs prevent farmers
from raising annual crops. Farmers also may be unable to obtain
conventional financing for the higher value permanent crops because of
the unpredictability of a water supply to nourish the trees and vines.
Registrant's contracts with the District, as of December 31,
1994, provide for annual water entitlements to approximately 6,153
acres of Registrant's lands. Existing District water delivery
facilities are capable of delivering the contract water entitlement
amounts to all of that acreage. The water contracts require annual
payments related to the Project and District fixed costs, whether or
not water is used or available. Payments made under these contracts
in 1994 by Registrant totaled approximately $985,000.
Lands benefiting from the District are subject to contingent
assessment liens under the California Water Storage District Law.
These liens are senior in priority to any mortgages on the property.
The liens secure District bonds issued to finance construction of
- 17 -
w a t er distribution facilities. Lien enforcement can involve
foreclosure on the lands subject to the liens. These liens will be
enforced only if District revenues from water contracts and other
r e g ular revenue sources are not sufficient to meet District
obligations. Lien assessments are levied on the basis of estimated
benefits to each parcel of land from the District water project
serving the land. Lands belonging to Registrant are presently subject
to such contingent liens totaling approximately $892,000. 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 the
District has advised Registrant that it does not 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 project facilities to each land parcel, the lien assessments
may be redistributed and may increase or decrease for any particular
parcel. Additional projects, 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 as well as by the California Department of
Water Resources.
Item 3. Legal Proceedings
As explained above in the discussion under Part I, Item 1 - "Oil
and Minerals", Registrant leases land to National Cement Company of
California, Inc. ("National") for the purpose of manufacturing
portland cement from limestone deposits found on the leased acreage.
N a tional and its subtenant, Systech Environmental Corporation,
("Systech"), have been denied new permits to continue burning
supplemental fuels in the cement plant located on the land leased from
Registrant. In July 1994 the Environmental Appeals Board of the U.S.
Environmental Protection Agency denied the petitions of National and
Systech for a review of that denial. National and Systech have
appealed the ruling in federal court and have been permitted to
continue burning hazardous waste as fuel at the cement plant pending a
final decision on the appeal.
The permits were denied because of the failure to comply with
regulations of the U.S. Environmental Protection Agency that require
t h e owner of a hazardous waste disposal facility to sign a
certification stating that the application for a permit was prepared
under its direction or supervision and that the information in the
application is, to the knowledge of the owner of the facility, true,
accurate and complete. The U.S. Environmental Protection Agency
considers the owner of the leased land upon which a facility is
located to be the owner of the facility. Registrant was unable to
sign this certification because it believed that the statements in the
- 18 -
certification were untrue. The opinion of the U.S. Environmental
Protection Agency Environmental Appeals Board denying the petitions of
National and Systech stated that owners of land underlying hazardous
waste facilities could sign the required certification and add
supplementary language describing the extent of the land owner's
involvement in reviewing the permit application. In August 1994 and
again in January 1995, Registrant signed two different forms of such a
certification with supplemental language at the request of National.
The U.S. Environmental Protection Agency nonetheless declined to
withdraw its denial of the permit application of National and Systech.
Prior to Registrant's signing the certification with the supplemental
language, National had asserted that Registrant has a duty to sign the
required certification and that any loss of the permits would cause it
great monetary damage. The extent of any damages National may suffer
as a result of the permit denials is not known to Registrant.
Registrant believes that it had no duty to sign the certification
because doing so would constitute the making of false statements which
would be a violation of law.
On October 9, 1990, the California Regional Water Quality Control
Board for the Lahontan Region ("Regional Board") issued Cleanup and
Abatement Order No. 6-90-59 requiring National, LaFarge Corporation
(the parent company of the previous operator) and Registrant to clean
up and abate ground water contamination in the vicinity of the plant
site caused by pollutants being discharged from an old industrial
waste landfill on the leased premises. Although Registrant did not
deposit any materials in the landfill, the order states that
Registrant, as the landowner, is ultimately responsible for complying
with the order if LaFarge and National fail to perform the necessary
work. LaFarge submitted a final closure plan for the cleanup of the
landfill, and in August 1994 the plan was approved by the Regional
Board subject to certain provisions. Civil fines for violations of a
cleanup and abatement order 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. The
indemnification obligation under the lease with Registrant described
below, includes claims of this kind.
In 1991, the Regional Board adopted Waste Discharge Requirements
concerning future kiln dust disposal and the existing kiln dust piles
stored on the leased premises. The order names National and
Registrant as "dischargers" and states that Registrant is responsible
for ensuring compliance with the Waste Discharge Requirements if
National fails to do so. Persons who violate waste discharge
requirements are also subject to civil liabilities imposed by either
the Regional Board or the superior court. The indemnification
obligations under the lease with Registrant, described below, include
claims of this kind. The U.S. Environmental Protection Agency
recently proposed to regulate all kiln dust nationwide as a hazardous
waste, but under special low risk rules. The proposed rules will
mostly involve careful groundwater monitoring and possibly covering
dust piles so they do not blow in the wind. Measures of this type are
- 19 -
already being taken by National on the cement plant site. Kiln dust
from cement plants using supplemental fuels will not be treated any
differently. The cement industry will probably oppose the proposed
rules for kiln dust.
In addition, in August 1994 the Regional Board issued orders
naming LaFarge and National as primarily responsible parties with
respect to two additional sites on the leased premises alleged to have
been contaminated with hazardous waste. One of those sites is alleged
to be a storage area for drums containing lubricants and grease and
the other is alleged to be an underground plume of chlorinated
hydrocarbons. The orders direct LaFarge and National in effect to
determine the extent of the contamination, to determine the source of
the chlorinated hydrocarbon plume, to develop a clean-up plan for each
site to be approved by the Regional Board and to perform the work
contemplated by the approved clean-up plans. Registrant has also been
named in the orders with respect to the two additional sites and is
directed to provide access to LaFarge and National to the extent it
has the right to do so and to investigate, characterize, and clean up
the sites if LaFarge and National fail to do so. Registrant has
appealed these orders regarding Registrant's secondary liability,
which appeal is pending before the State Water Resources Control Board
and is expected to be held in abeyance until it is determined whether
LaFarge and National comply with the Regional Board's orders.
Under the lease between Registrant and National, the tenant is
obligated to indemnify Registrant for costs and liabilities arising
directly or indirectly out of the use of the leased premises by the
tenant. All obligations under this indemnity provision arising after
the assignment of the lease to National (which occurred in August
1987) were assumed by National, and LaFarge has liability for all
o b ligations under the indemnity provisions arising before the
assignment. National's obligation is guaranteed by its parent,
National Cement Company, Inc. Registrant believes that all of the
matters described above in this Item 3 are included within the scope
of the National and LaFarge indemnity obligations. National and
LaFarge have reached an agreement in principle to share cleanup
responsibilities.
To date Registrant is not aware of any failure by LaFarge and
National to comply with the orders of the Regional Board and
Registrant has not been called upon to become involved in any of the
investigative, characterization or clean-up activities. Registrant
believes that LaFarge and National have sufficient resources to
perform any reasonably possible or reasonably likely obligations
relating to these matters. Publicly available financial information
with respect to LaFarge indicates that it had a net worth of
approximately $835 million as of September 30, 1994. National is a
subsidiary of a large French company, and so far as the Company is
aware, no separate financial statements are publicly available with
respect to it. However, Registrant has held discussions with National
which indicate sufficient resources are available to satisfy any
- 20 -
reasonably likely obligations relating to the above matters. Due to
the fact that LaFarge and National appear to have been complying with
the Regional Board orders and appear to have the financial strength to
c o ntinue to do so and also to perform their indemnification
obligations to Registrant, Registrant believes that a material effect
on its financial condition or results of operations due to the
potential environmental liabilities described above is remote at this
time. If, however, National and LaFarge do not fulfill their
indemnification responsibilities and Registrant is required to perform
the landfill, kiln dust, drum storage area, and underground plume
remedial work mandated by the regulatory agencies, the amount of any
such expenditure by Registrant could be material.
Item 4. Submission of Matters to a Vote of Security Holders
None.
- 21 -
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
Registrant's Common Stock is traded on the American Stock
Exchange. The following table shows the high and low sale prices for
Registrant's Common Stock on the American Stock Exchange for each
period during the last two years, as reported by the American Stock
Exchange.
1994 1993
Quarter High Low High Low
First 15-1/4 13-5/8 18-5/8 16
Second 14-5/8 13-5/8 21 16-1/8
Third 15-1/2 13 16-5/8 13-3/8
Fourth 14-1/2 11-1/2 17-1/4 13-3/4
As of March 7, 1995, there were 828 owners of record of
Registrant's Common Stock.
Registrant paid cash dividends of $.05 per share in each of the
years 1994 and 1993. Two and one-half cents per share was paid in
June and December of each year.
- 22 -
Item 6. Selected Financial Data.
Years Ended December 31
(In thousands of dollars, except
per share amounts)
1994 1993 1992 1991 1990
Operating Revenues,
Including Interest
Income $16,882 $19,469(1) $16,563 $15,220 $15,232
Net Income 1,527 2,972(1) 1,499 1,484 1,957
Total Assets 44,920 47,111 45,729 45,341 45,052
Long-term Debt 1,950 3,550 5,150 6,854 7,083
Income Per Share .12 .23(1) .12 .12 .15
Cash Dividends
Declared and Paid
Per Share .05 .05 .05 .05 .05
(1) Net income from continuing operations was enhanced by
the recognition of a $1,054,000 ($632,000 after tax or
$.05 per share) refund from a local water district.
(See Note 10 to the Audited Consolidated Financial
Statements.)
- 23 -
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
As reflected in the accompanying financial statements, net
income was $1,527,000 in 1994, $2,972,000 in 1993 and $1,499,000
in 1992.
Net income for 1994 decreased when compared to 1993 net
income due to lower operating profits within the Livestock and
Farming divisions as well as the favorable impact in 1993 of a
$1,054,000 refund from a water district ($632,000 after tax).
The decrease in 1994 operating profits was partially offset by an
improvement in operations within the Commercial and Land Use
Division. Reduced interest income also affected 1994 results.
Net income for 1993 increased when compared to 1992 net
income due to improved operating profits within the Livestock,
Farming, and Oil and Minerals Divisions as well as the water
district refund. The increases in 1993 operating profits were
p a rtially offset by reduced operating profits within the
Commercial and Land Use Division. Also substantially reduced
interest income affected 1993 results. Changes in revenues and
expenses of Registrant's industry segments for the years 1994 and
1993 are summarized below.
Livestock. Livestock operating profits of $364,000 in 1994 were
$146,000, or 29% less than 1993 operating profits. This decrease
in operating profits is due primarily to an increase in the cost
of sales of cattle ($393,000) and to lower prices on cattle sold.
In addition, revenues from the quarter horse program decreased
$106,000 due to a decrease in sales revenues and horse event
revenues. These unfavorable variances were partially offset by
an increase in revenues from cattle sales ($368,000). The
increase in cost of sales and cattle sales revenue is due to an
increase in the number of cattle sold during 1994. During 1994,
8,474 head of cattle were sold compared to 7,734 head of cattle
during 1993. Cost of sales expense also increased due to a
longer than normal carrying time on a portion of the cattle sold
during 1994, which increased the inventory cost of the cattle.
During 1994 an additional 550 head of cattle were scheduled to be
sold but were held over until 1995 so that the cattle could have
additional weight gains. The carry over of cattle into 1995 was
necessary due to the below normal precipitation during 1994.
However, due to numerous rain storms during the first three
months of 1995, it is expected there will be adequate forage for
Registrant's cattle herd in the coming year. For the years 1995
and 1996 Registrant is concerned that cattle prices will stay
flat or decrease due to higher cattle inventories in the United
States and also to competing products. Any decrease in price
will lower revenues on the sale of cattle. To limit price risk
- 24 -
Registrant may use the commodity futures markets to hedge cattle
prices.
Livestock operating profits of $510,000 in 1993 increased
$196,000, or 62%, when compared to 1992 operating profits. This
improvement in operating profit was due to a decrease in the cost
of cattle sold and also to an increase in revenues within the
quarter horse program ($126,000 increase over 1992 revenues due
to increased training fees and sales of horses). These favorable
variances were partially offset by a reduction in revenues from
cattle sales. The decrease in cattle sales revenue as well as
the lower cost of sales is due primarily to a decrease in the
number of cattle sold in 1993. During 1993, 7,734 head of cattle
were sold compared to 8,478 head of cattle during 1992. Cost of
sales expense also decreased because lower weight stocker cattle
were purchased during the year and grazed on Registrant's lands
and also due to reduced feed lot costs. The decrease in the
number of cattle sold was the result of Registrant's decision to
retain heifer calves in order to continue rebuilding the cattle
breeding herd, which was reduced to very low levels during
California's extended drought from 1988 - 1992.
See Part I, Item 1 -"Business-Livestock Operations" for a further
discussion of Registrant's livestock operations for 1994 and
future expectations.
Farming. Farming Division operating profits of $1,925,000 in 1994
were $2,286,000, or 54% less than 1993 operating profits. The
decrease in operating profits was due to lower aggregate crop
proceeds of $1,325.000 during 1994, the recognition of the gain
of $1,054,000 related to water refunds during 1993, referred to
above, and increased fixed water costs during 1994. In addition,
1993 revenues included $294,000 of favorable pricing adjustments
related to the 1992 crop which was approximately $200,000 greater
than 1993 crop adjustments recognized in 1994. These unfavorable
variances were partially offset by reductions in cultural and
Farming Division costs of $437,000 during 1994. The decrease in
farming expense was due to very favorable farming weather during
the spring and summer which allowed Registrant to change pest,
fertilizer, and irrigation programs.
There were numerous changes in individual crop revenues when
comparing 1994 and 1993 results. For 1994, grape revenues fell
$389,000 due to lower prices. Registrant sold all of its grapes
to one winery under the second year of a three-year contract.
Had Registrant not contracted for the sale of its grapes in
advance, revenues from its grapes would have been even less, due
to the down market for generic white grapes. Walnut revenues
decreased $555,000 due to substantially lower prices and to lower
production. Pistachio revenues increased $312,000 due to 1994
being the "on" production year in the alternate year bearing
cycle. Almond revenues decreased $693,000 due primarily to lower
- 25 -
p r ices. The decrease in almond revenues would have been
approximately $200,000 less if the California Almond Board had
not required a 10% withhold of 1994 production. It is
anticipated that this withheld production will be released at
some point in 1995 and revenue will be recorded at that time.
During January 1995, a portion of Registrant's farming operations
suffered damages as a result of high winds that were associated
with a series of winter storms. Nearly all of the loss occurred
in Registrant's producing almond orchards. Approximately 200
acres of trees were uprooted by a combination of high winds and
saturated soil conditions due to heavy rainfall. The lost trees
represent 23% of Registrant's mature, almond producing orchards.
As a result of the storm damage, Registrant will record a loss,
net of tax, of approximately $240,000 during the first quarter of
1995. Registrant estimates that the lost trees accounted for
approximately 3% of Registrant's 1994 total revenues. Registrant
incurred only minimal damage to its 620 acres of newly planted
almonds and pistachios and its other mature orchards and
vineyards. At this time Registrant has begun to replant the
damaged acreage with almond trees. The loss of mature trees will
affect future revenues until the replanted crops begin full
production which could take three to five years. The loss of
trees along with expectations of a smaller nut crop may
significantly lower 1995 revenues. For a further discussion of
the 1994 farming year and future expectations refer to Part I,
Item 1 - "Business - Farming Operations".
Farming operating profits of $4,211,000 in 1993 were $3,231,000,
or 330%, greater than 1992 operating profits. This increase is
the result of higher aggregate crop proceeds of $2,974,000, the
recognition of a gain of $1,054,000 which is related to water
district refunds, and lower 1993 fixed water costs of $357,000
due to water surplus sales and credits received from the water
district. These favorable variances were partially offset by an
increase of approximately $800,000 in cultural and harvest costs
because of increases in crop production and changes to pest
control and fertilization programs. Revenues in 1992 included
$534,000 of favorable pricing adjustments related to the 1991
crop which was $240,000 greater than the 1992 crop adjustments
recognized in 1993. The gain of $1,054,000 from a water refund
in 1993 is the result of The Wheeler Ridge-Maricopa Water Storage
District having prevailed in a lawsuit against other water
districts in Kern County, California, in a proceeding involving
the over-allocation and payment of state fixed water charges.
Changes in individual crop revenues in 1993 compared to 1992 were
s i gnificant. Grape revenues increased $1,327,000 due to
increases in production as well as prices. Almond revenues
increased $1,423,000 due primarily to a 56% increase in price.
Walnut revenues increased $496,000 due to increased production
and prices. Pistachio revenues fell approximately $272,000 due
- 26 -
to lower production. Pistachio volumes decreased because 1993
was the "off" production year in the alternate year bearing
cycle.
For a further discussion of future water concerns refer to Part
I, Item 2 - "Properties - Farmland".
Oil and Minerals. Oil and Mineral operating profits of
$1,208,000 in 1994 were $31,000, or 3% below 1993 profits. The
decrease in operating profits was due to lower oil and gas
royalties ($165,000) which were partially offset by increased
cement royalties ($96,000) and increased land lease income. Oil
and mineral royalties declined due to lower prices and to the
receipt of adjustments related to the sharing of gas processing
and transportation costs. Within California, oil prices are
further depressed because of federal regulations that prohibit
the export of California and Alaska crude oil, thereby forcing
producers to refine their product in California. Cement
r o y a lties increased due to improving prices and higher
production. Production increased due to additional construction
activity within Los Angeles which was related to the 1994
earthquake.
Oil and Mineral Division operating profits of $1,239,000 in 1993
were $87,000, or 8%, greater than 1992 operating profits.
Increased royalties from oil and gas ($37,000) and sand/rock
aggregate ($75,000) along with increased land lease rentals
accounted for the majority of the increase in operating profits.
Partially offsetting these increases was an increase in legal
fees which were related to the lease with National Cement
Company. Oil and gas royalties increased due primarily to
increases in production which included payments received in 1993
related to 1992 production. This increase in oil and gas
production was partially offset by the decline in oil prices that
occurred during the fourth quarter of 1993. Sand/rock aggregate
royalties increased due to increased road construction within
Kern County.
Commercial and Land Use. The Commercial and Land Use Division
had an operating loss of $100,000 in 1994 which compares to an
operating loss of $304,000 in 1993. The improvement over 1993
was due to a reduction in professional service fees ($234,000)
related to the Registrant's long-term land planning efforts. The
expense was below 1993 due to the timing of planning projects.
Registrant will continue to have substantial expense related to
future land planning activities (see Part I, Item 2 "Properties -
Land Planning" for further discussion of 1994 and future planning
activities). Commercial rents and right-of-way rents were
comparable to 1993 even though percentage rents were below
expectations due to low traffic on Interstate 5 during January
and February because of the January 1994 earthquake in Los
Angeles. See Part I, Item 1, "Business - Commercial and Land
- 27 -
Use" for a discussion of 1994 commercial lease activities.
An operating loss of $304,000 in 1993 compares to 1992 operating
profits of $534,000 for the Commercial and Land Use Division.
Approximately $741,000 of the change in operating profits is
attributable to an increase in professional service fees related
to the Registrant's very active long-term land planning efforts.
In addition to the professional service fees, firewood operating
profits fell approximately $100,000 due to reduced sales and the
write-off of equipment due to the decision to discontinue this
operation. Commercial and right-of-way rental income increased
slightly during 1993 to partially offset the above variances.
Interest. Interest income of $1,439,000 declined $152,000, or
10% when compared to 1993 interest income. The decrease is due
to fewer gains on the sale of securities and to lower average
outstanding balances of marketable securities. Investment funds
have declined due to additional principal payments on long-term
debt and to capital expenditures.
Interest income of $1,591,000 was $684,000, or 30%, less than
1992 interest income. The decrease from 1992 is due to lower
reinvestment interest rates and lower average investable funds
due primarily to principal prepayments on long-term debt.
I n terest expense in 1994, 1993 and 1992 was principally
a t t r ibutable to interest on borrowings used to finance
Registrant's 758 acre almond and 897 acre wine grape developments
which were developed in 1981. Interest expense has been
declining due to principal prepayments in 1994, 1993 and 1992.
Corporate Expenses. Corporate expenses for 1994 decreased
$21,000, or 1% when compared to 1993 expenses. The decrease was
primarily attributable to lower professional service fees and
legal fees.
Corporate expenses for 1993 increased $127,000, or 6%, in 1993
when compared to 1992. The increase was primarily attributable
to higher legal fees ($100,000). Legal fees increased due to
water rights issues and expenses associated with a lessee
regarding litigation discovery requests.
Inflation. Inflation can have a major impact on Registrant's
operations.
The farming operations are most affected by escalating costs
and unpredictable revenues due to an oversupply of certain crops
and very high irrigation water costs. High fixed water costs
related to Registrant's farm lands continues to adversely affect
earnings.
- 28 -
Prices received by Registrant for many of its products are
dependent upon prevailing market conditions and commodity prices.
Therefore, it is difficult for Registrant to accurately predict
revenue, just as it cannot pass on cost increases caused by
general inflation, except to the extent reflected in market
conditions and commodity prices.
Impact of Accounting Change. In January 1994, Registrant adopted
Statement of Financial Accounting Standard (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
SFAS No. 115 requires that an enterprise classify all debt
securities as either held-to-maturity, trading, or available-for-
sale. In addition, if an enterprise has classified its
securities as either trading or available-for-sale it must adjust
securities to fair value at each reporting date.
R e gistrant invests in debt securities, consisting of
treasuries, government agencies, corporate notes, and mortgage
backed securities. Registrant has elected to classify its
securities as available-for-sale. As of December 31, 1994 the
cumulative unrealized fair value adjustment to stockholders'
equity is an unrealized loss of $372,000, net of a tax benefit of
$192,000.
In January 1993 Registrant adopted Statement of Financial
Accounting Standard No. 109, Accounting for Income Taxes. SFAS
No. 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in the Registrant's financial statements or tax
returns. The adjustments to the financial statements to adopt
SFAS No. 109 were immaterial.
Financial Condition. Registrant's cash, cash equivalents and
short-term investments totaled approximately $23,786,000 at
December 31, 1994, a decrease of 12% from the corresponding
amount at the end of 1993. Working capital at the end of 1994
was $26,786,000, which is 8% less than a year earlier. Working
capital decreased during the year due to capital expenditures,
the prepayment of long-term debt, and the payment of dividends.
Registrant has a revolving line of credit of $2,000,000 that as
of December 31, 1994 was unused. As of December 31, 1994,
Registrant had an outstanding short-term loan with an investment
banking company. The loan was in the amount of $907,000, with a
maturity date of January 16, 1995 and an interest rate of 6.5%.
This loan was used as a short-term cash management vehicle.
The principal uses of cash and cash equivalents during 1994,
1993, and 1992 consisted of capital expenditures, payments of
long-term debt and the payment of dividends.
- 29 -
The accurate forecasting of cash flows by Registrant is made
more difficult due to the fact that commodity markets set the
prices for the majority of Registrant's products and the fact
that the cost of water changes significantly from year-to-year as
a result of changes in its availability. Registrant, based on
its past experience, believes it will have adequate cash flows
over the next twelve months to fund internal operations.
During 1995 $2,888,000 has been budgeted for capital
expenditures, which includes new equipment and improvements to
existing facilities. The capital budget also includes $1,500,000
to purchase 900 acres of land, which includes 300 acres of
grapes, a transaction which closed in February 1995. (See Part
I, Item 1 - "Business-Farming").
Registrant has traditionally funded its growth and capital
additions from internally generated funds. Management believes
that the combination of short-term investments, excess borrowing
c a pacity, and capital presently available to it will be
sufficient for its near term operations.
Item 8. Financial Statements and Supplementary Data.
The response to this Item is submitted in a separate section
of this Report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not applicable.
- 30 -
PART III
Item 10. Directors and Executive Officers of the Registrant.
I n f o r mation as to the directors of Registrant is
incorporated by reference from the definitive proxy statement to
b e filed by Registrant with the Securities and Exchange
C o m m ission with respect to its 1995 Annual Meeting of
Stockholders. Information as to the Executive Officers of
Registrant is set forth in Part I, Item 1 under "Executive
Officers of Registrant."
Item 11. Executive Compensation.
Information required by this Item is incorporated by
reference from the definitive proxy statement to be filed by
Registrant with
the Securities and Exchange Commission with respect to its 1995
Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Information required by this Item is incorporated by
reference from the definitive proxy statement to be filed by
Registrant with the Securities and Exchange Commission with
respect to its 1995 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions.
Information required by this Item is incorporated by
reference from the definitive proxy statement to be filed by
Registrant with the Securities and Exchange Commission with
respect to its 1995 Annual Meeting of Stockholders.
- 31 -
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.
(a) Documents filed as part of this report: Page
Number
1. Consolidated Financial Statements:
1.1 Report of Independent Auditors 37
1.2 Consolidated Statements of Financial
Position - December 31, 1994 and 1993 38
1.3 Consolidated Statements of Income -
Years Ended December 31, 1994, 1993
and 1992 40
1.4 Consolidated Statements of Stockholders'
Equity - Three Years Ended
December 31, 1994 41
1.5 Consolidated Statements of Cash Flows -
Years Ended December 31, 1994, 1993
and 1992 42
1.6 Notes to Consolidated Financial
Statements 43
2. Supplemental Financial Statement Schedules:
NONE
3. Exhibits:
3.1 Restated Certificate of Incorporation *
3.2 By-Laws *
10.1 Water Service Contract with Wheeler
Ridge-Maricopa Water Storage District
(without exhibits), amendments originally
filed under Item 11 to Registrant's
Annual Report on Form 10K. 61
10.2 Tejon Ranch Co. Stock Option Agreement 72
10.3 Lease Agreement for Mr. San Olen 80
22 List of subsidiaries of Registrant 82
27 Financial Data Schedule (Edgar) 83
- 32 -
(b) Report on Form 8-K filed during the last quarter of the
period covered by this report:
None.
* This document, filed with Securities Exchange
Commission in Washington D.C. (file Number 1-7183)
under Item 14 to Registrant's Annual Report on Form 10-
K for year ended December 31, 1987, is incorporated
herein by reference.
(d) Financial Statement Schedules -- The response to this
portion of Item 14 is submitted as a separate section
of this report.
- 33 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TEJON RANCH CO.
DATED: March , 1995 BY
Jack Hunt, President
DATED: March , 1995 BY
Allen E. Lyda
Vice President, Finance &
Treasurer
(Principal Financial and
Accounting Officer)
- 34 -
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the date indicated.
Name Capacity Date
Director March , 1995
Otis Booth, Jr.
Director March , 1995
Craig Cadwalader
Director March , 1995
Dan T. Daniels
Director March , 1995
Rayburn S. Dezember
Director March , 1995
Robert F. Erburu
Director March , 1995
Clayton W. Frye, Jr.
Director March , 1995
Donald Haskell
Director March , 1995
Jack Hunt
Director March , 1995
Raymond L. Watson
Director March , 1995
Phillip L. Williams
- 35 -
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2),(c) and (d)
List of Financial Statements and Financial Statement Schedules
Financial Statements
Certain Exhibits
Year Ended December 31, 1994
Tejon Ranch Co.
Lebec, California
- 36 -
Form 10-K - Item 14(a)(1) and (2)
Tejon Ranch Co. and Subsidiaries
Index to Financial Statements and Financial Statement Schedules
ITEM 14(a)(1) - FINANCIAL STATEMENTS
The following consolidated financial statements of Tejon Ranch
Co. and subsidiaries are included in Item 8:
Page
Report of Independent Auditors 37
Consolidated Statements of Financial Position -
December 31, 1994 and 1993 38
Consolidated Statements of Income -
Years Ended December 31, 1994, 1993 and 1992 40
Consolidated Statements of Stockholders' Equity -
Three Years Ended December 31, 1994 41
Consolidated Statements of Cash Flows -
Years Ended December 31, 1994, 1993 and 1992 42
Notes to Consolidated Financial Statements 43
ITEMS 14(a)(2) - FINANCIAL STATEMENT SCHEDULES
All schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission
a r e not required under the related instructions or are
inapplicable, and therefore have been omitted.
- 37 -
Report of Independent Auditors
Stockholders and Board of Directors
Tejon Ranch Co.
We have audited the consolidated financial statements of Tejon
Ranch Co. and subsidiaries listed in the accompanying index to
financial statements and financial statement schedules (Item
14(a)(1)). These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
I n our opinion, the financial statements listed in the
a c c ompanying index to financial statements and financial
statement schedules (Item 14(a)(1)) present fairly, in all
material respects, the consolidated financial position of Tejon
Ranch Co. and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Note 3 to the financial statements, in 1994 the
C o m pany changed its method of accounting for marketable
securities.
ERNST & YOUNG LLP
Los Angeles, California
February 17, 1995
- 38 -
Tejon Ranch Co. and Subsidiaries
Consolidated Statements of Financial Position
December 31
1994 1993
Assets
Current assets:
Cash and cash equivalents $ 68,000$ 247,000
Marketable securities 23,718,000 26,834,000
Accounts receivable 2,125,000 3,105,000
Inventories 3,128,000 2,860,000
Prepaid expenses and other
current assets 1,223,000 868,000
Total current assets 30,262,000 33,914,000
Property and equipment, net 13,284,000 11,995,000
Other assets:
Breeding herd, net of depreciation
of $116,000 in 1994 and $198,000
in 1993 907,000 778,000
Other assets 467,000 424,000
1,374,000 1,202,000
Total assets $44,920,000 $47,111,000
See accompanying notes.
- 39 -
December 31
1994 1993
Liabilities and Stockholders' equity
Current liabilities:
Trade accounts payable $ 1,061,000 $1,024,000
Other accrued liabilities 465,000 502,000
Current deferred income 287,000 325,000
Income taxes payable 556,000 1,633,000
Short-term note 907,000 1,000,000
Current portion of long-term debt 200,000 200,000
Total current liabilities 3,476,000 4,684,000
Long-term debt, less current portion 1,950,000 3,550,000
Deferred credits:
Deferred income taxes 2,736,000 2,611,000
Deferred gains on assets sold --- 29,000
2,736,000 2,640,000
Commitments and contingencies
Stockholders' equity:
Common Stock, $.50 par value per
Authorized shares - 30,000,000
Issued and outstanding shares - 6,341,000 6,341,000
Additional paid-in capital 387,000 387,000
Unrealized gains (losses) on
available-for-sale securities,
net of tax benefit (372,000) ---
Retained earnings 30,402,000 29,509,000
Total stockholders' equity 36,758,000 36,237,000
Total liabilities and stockholders'
equity $44,920,000 $47,111,000
See accompanying notes
- 40 -
Tejon Ranch Co. and Subsidiaries
Consolidated Statements of Income
Year Ended December 31
1994 1993 1992
Revenues:
Livestock $ 5,531,000 $ 5,221,000 $ 5,516,000
Farming 6,880,000 9,459,000 5,615,000
Oil and minerals 1,296,000 1,358,000 1,211,000
Commercial and land use 1,736,000 1,840,000 1,946,000
Interest income 1,439,000 1,591,000 2,275,000
16,882,000 19,469,000 16,563,000
Costs and expenses:
Livestock 5,167,000 4,711,000 5,202,000
Farming 4,955,000 5,248,000 4,635,000
Oil and minerals 88,000 119,000 59,000
Commercial and land use 1,836,000 2,144,000 1,412,000
Corporate expenses 2,212,000 2,233,000 2,106,000
Interest expense 287,000 424,000 651,000
14,545,000 14,879,000 14,065,000
Income before income
taxes 2,337,000 4,590,000 2,498,000
Income taxes 810,000 1,618,000 999,000
Net income $ 1,527,000 $ 2,972,000 $ 1,499,000
Net income per share $.12 $.23 $.12
See accompanying notes.
- 41 -
Tejon Ranch Co. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Three years ended December 31, 1994
Additional Unrealized
Common Paid-In Gains Retained
Stock Capital (Losses) Earnings Total
Balance
January 1, $6,341,000 $387,000 $ ---$26,306,000 $33,034,000
1992
Net income --- --- --- 1,499,000 1,499,000
Cash
dividends
paid -
$.05 per
share --- --- --- (634,000) (634,000)
Balance
December 31,
1992 6,341,000 387,000 --- 27,171,000 33,899,000
Net income --- --- --- 2,972,000 2,972,000
Cash
dividends
paid -
$.05 per
share --- --- --- (634,000) (634,000)
Balance
December 31,
1993 6,341,000 387,000 --- 29,509,000 36,237,000
Adjustment to
beginning
balance for
change in
accounting
method, net
of taxes of
$62,000 --- --- 122,000 --- 122,000
Net Income --- --- --- 1,527,000 1,527,000
Cash
dividends
paid-
$.05 per
share --- --- --- (634,000) (634,000)
- 42 -
Change in
unrealized
gains
(losses)
on
available-
for-sale
securi-
ties, net
of a tax
benefit of
$254,000 --- --- (494,000) --- (494,000)
Balance
December 31,
1994 $6,341,000 $387,000 $(372,000)$30,402,000 $36,758,000
See accompanying notes.
- 43 -
Tejon Ranch Co. and Subsidiaries
Consolidated Statements of Cash Flows
Year ended December 31
1994 1993 1992
Operating activities
Net income $ 1,527,000 $ 2,972,000 $ 1,499,000
Items not affecting cash:
Depreciation and amortization 906,000 916,000 821,000
Deferred income taxes (23,000) (330,000) (317,000)
Recognition of deferred gains
on assets sold (29,000) (29,000) (29,000)
Gains on sales of investments (52,000) (71,000) (201,000)
Current deferred income (38,000) (990,000) 1,315,000
Changes in certain current assets
and current liabilities:
Accounts receivable 980,000 615,000 154,000
Inventories (268,000) (357,000) 39,000
Prepaid expenses and other
current assets (15,000) 63,000 (19,000)
Short-term debt (93,000) 850,000 150,000
Trade accounts payable and
accrued liabilities --- 136,000 (212,000)
Income taxes payable (1,077,000) 811,000 346,000
Net cash provided by operating 1,818,000 3,356,000 3,546,000
Investing activities
Maturities of marketable 14,224,000 20,586,000 26,159,000
Funds invested in marketable
securities (11,620,000) (20,120,000) (25,912,000)
Net change in breeding herd (194,000) (73,000) 31,000
Property and equipment (2,179,000) (1,441,000) (1,285,000)
Net book value of property and
equipment disposals 49,000 13,000 ---
Other (43,000) 138,000 (174,000)
Net cash provided by (used in)
investing activities 237,000 ( 897,000) (1,181,000)
Financing activities
Repayments of long-term debt (1,600,000) (1,600,000) (1,730,000)
Cash dividends paid (634,000) (634,000) (634,000)
Net cash used in financing
activities (2,234,000) (2,234,000) (2,364,000)
- 44 -
Increase (decrease) in cash and
cash equivalents (179,000) 225,000 1,000
Cash and cash equivalents at
beginning of 247,000 22,000 21,000
Cash and cash equivalents at end
of year $ 68,000 $ 247,000 $ 22,000
See accompanying notes.
- 45 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements
December 31 1994
1. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the
C o m p a ny and its wholly-owned subsidiaries. All intercompany
transactions have been eliminated in consolidation.
Cash Equivalents
The Company considers all highly liquid investments, with a maturity of
three months or less when purchased, to be cash equivalents. The
carrying amount for cash equivalents approximates fair value.
Marketable Securities
T h e Company considers those investments not qualifying as cash
equivalents, but which are readily marketable, to be marketable
securities. The Company classifies all marketable securities as
available-for-sale, which are stated at fair value with the unrealized
gains (losses), net of tax, reported in a separate component of
stockholders' equity.
Credit Risk
The Company grants credit to customers, principally large cattle
purchasers, co-ops, wineries, nut marketing companies, and lessees of
Company facilities, all of which are located in California. The Company
p e rforms periodic credit evaluations of its customers financial
condition and generally does not require collateral.
During 1994 and 1993 the following customers accounted for more than 10%
of the Company's consolidated revenues, Golden State Vintners (13% in
1994 and 1993) and E.A. Miller Cattle Company (22% in 1994 and 13% in
1993). No customer or group of customers under common control accounted
for more than 10% of Company's consolidated revenues in 1992.
- 46 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. Summary of Significant Accounting Policies (continued)
Farm Inventories
Costs of bringing crops to harvest are capitalized when incurred. Such
costs are expensed when the crops are sold. Farm inventories held for
sale are valued at the lower of cost (first-in, first-out method) or
market.
Cattle Inventories and Breeding Herd
Cattle raised on the Ranch are stated at the accumulated cost of
developing such animals for sale or transfer to a productive function
and purchased cattle are stated at cost plus development costs. All
cattle held for sale are valued at the lower of cost (first-in, first-
out method) or market and are included in the caption inventories.
Purchased bulls and cows, included in the breeding herd and used for
breeding, are depreciated using the straight-line method over five to
seven years.
Commodity Derivatives Used to Hedge Price Fluctuations
The Company enters into cattle futures and option contracts to hedge its
exposure to price fluctuations on its stocker cattle. The goal of the
Company is to protect or create a future price for its cattle that will
provide a profit once the cattle are sold and all costs are deducted.
Payments received and paid related to outstanding options contracts are
deferred in prepaid expenses and other current assets and were
approximately $50,000 at December 31, 1994. Realized gains, losses, and
costs associated with closed contracts are included in cattle inventory
and recognized in cost of sales expense at the time the hedged cattle
are sold.
Property and Equipment
Property and equipment accounts are stated on the basis of cost, except
for land acquired upon organization in 1936 which is stated on the basis
(presumed to be at cost) carried by the Company's predecessor.
Depreciation is computed using the straight-line method over the
estimated useful lives of the various assets. Oil, gas and mineral
reserves have not been appraised, as no value has been assigned to them.
- 47 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Vineyards and Orchards
Costs of planting and developing vineyards and orchards are capitalized
until the crops become commercially productive. Interest costs and
depreciation of irrigation systems and trellis installations during the
development stage are also capitalized. Revenue from crops earned
during the development stage are credited against development costs.
Depreciation commences when the crops become commercially productive.
At the time crops are harvested, delivered to buyers and revenues are
e s t i matable, revenues and related costs are recognized, which
traditionally occurs in the fourth quarter. Orchard revenues are based
upon estimated selling prices, whereas vineyard revenues are recognized
at the contracted selling price. Actual final orchard crop selling
prices are not determined for several months following the close of the
Company's fiscal year. Adjustments for differences between original
estimates and actual revenues received are recorded during the period in
which such amounts become known. The net effect of these adjustments
increased farming revenue by $97,000 in 1994, $294,000 in 1993, and
$534,000 in 1992.
The California Almond Board has the authority to require producers of
almonds to withhold a portion of their annual production from the
marketplace. At December 31, 1994, the California Almond Board required
the Company to hold back 10% of almond production which amounted to
163,000 pounds. The almond withhold was due to the record almond
production within California during 1994. It is anticipated that the
reserved almonds will be released during 1995 at which time the revenue
from the sale of these almonds will be recognized. At December 31, 1993
and 1992, no such withholding was mandated.
Net Income Per Share
Net income per share is based upon the weighted average number of shares
of common stock and common stock equivalents outstanding during the year
(12,682,244 in 1994 and 1993, and 12,682,709 in 1992). Fully diluted
earnings per share are the same as primary earnings per share.
In March 1992, the Company's Board of Directors adopted the 1992 Stock
Option Plan providing for the granting of options to purchase a maximum
of 230,000 shares of the Company's common stock to employees, advisors,
and consultants of the Company. Since the adoption of the Plan, the
Company has granted options to purchase 116,000 shares at a price equal
to fair market value at date of grant. Stock options granted have been
treated as common stock equivalents per the treasury method when such
amounts would be dilutive.
- 48 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Environmental
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations and which do not contribute
to current or future revenue generation are expensed. Liabilities are
recorded when environmental assessments and/or remedial efforts are
probable and the costs can be reasonably estimated. Generally, the
timing of these accruals coincides with the completion of a feasibility
study or the Company's commitment to a formal plan of action. No
liabilities for environmental costs have been recorded at December 31,
1994, 1993 or 1992.
Reclassifications
Certain amounts in the 1993 balance sheet have been reclassified, in
order to be consistent with the 1994 presentation.
2. Laval Farms Limited Partnership
The Laval Farms Limited Partnership (Laval), formerly Tejon Agricultural
Partners, is a limited partnership, formed in 1972, to develop and farm
land in Kern County, California. Laval Farms Corporation, formerly
Tejon Agricultural Corporation , a wholly-owned subsidiary of Tejon
Ranchcorp, is the general partner of the partnership.
Due to significant losses in the partnership, the Company wrote-off its
investment in the partnership in 1976 and provided for all commitments
at that time.
The Company entered into an Agreement with John Hancock Mutual Life
Insurance Company, Laval's sole limited partner and secured lender
during 1993, for an orderly sale of Laval's farmland and the eventual
dissolution of the partnership. Under the Agreement, approximately
13,000 acres of farmland located in the southern San Joaquin Valley, and
owned by Laval have been divided into smaller farming parcels and are
being sold. As of February 17, 1995, all of the farmland had been sold,
with the only unsold property being the Laval headquarters which equals
188 acres.
Tejon Farming Company (TFC), a wholly-owned subsidiary of the Company,
performs services for Laval under a farm management agreement, which is
terminable on 30 days' notice by Laval. TFC was paid $240,000 in each
of the three years ended December 31, 1994 under the management
agreement. In addition, for years 1993 and 1992 Laval provided
equipment and direct labor to the Company in connection with planting,
development and maintenance of permanent crops on Company-owned lands.
- 49 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. Laval Farms Limited Partnership (continued)
Amounts paid by the Company for such services were approximately
$1,786,000 in 1993, and $1,696,000 in 1992. No amounts were paid or
accrued by the Company during 1994.
3. Marketable Securities
In January 1994, the Company adopted Statement of Financial Accounting
Standard (SFAS) No. 115, Accounting for Certain Investments in Debt and
Equity Securities. SFAS No. 115 requires that an enterprise classify
all debt securities as either held-to-maturity, trading, or available-
for-sale. The Company has elected to classify its securities as
available-for-sale and therefore, is required to adjust securities to
fair value at each reporting date.
The following is a summary of available-for-sale securities at December
31:
1994 1993
Estimated Estimated
Fair Fair
Cost Value Cost Value
Marketable securities:
U.S. Treasury and
agency notes $18,837,000 $18,409,000$21,595,000 $21,720,000
Corporate notes 5,445,000 5,309,000 5,239,000 5,299,000
$24,282,000 $23,718,000$26,834,000 $27,019,000
As of December 31, 1994, the cumulative fair value adjustment to
stockholders' equity is an unrealized loss of $372,000, net of a tax
beneft of $192,000. The Company's gross unrealized holding gains equals
$76,000, while gross unrealized holding losses equals $640,000. On
December 31, 1994, the average maturity of U.S. Treasury and agency
securities was 2.3 years and corporate notes was 1.5 years. Currently,
the Company has no securities with a weighted average life of greater
than five years. During 1994, the Company recognized gains of $52,000
on the sale of $2.4 million of securities, carried at historical cost
adjusted for amortization and accretion.
Market value equals quoted market price, if available. If a quoted
market price is not available, market value is estimated using quoted
market prices for similar securities. The Company's investments in
Corporate notes are with companies with a credit rating of A or better.
- 50 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. Inventories
Inventories at December 31, 1994 and 1993 consist principally of cattle
held for sale.
5. Property and Equipment
Property and equipment consists of the following at December 31:
1994 1993
Land and land improvements $ 3,255,000 $ 3,255,000
Buildings and improvements 6,519,000 5,631,000
Machinery, water pipelines,
furniture and fixtures and
other equipment 4,120,000 3,755,000
Vineyards and orchards 12,579,000 11,931,000
26,473,000 24,572,000
Less allowance for depreciation (13,189,000) (12,577,000)
$13,284,000 $11,995,000
6. Line of Credit and Long-Term Debt
The Company may borrow up to $2,000,000 on a short-term unsecured
revolving line of credit at interest rates approximating the bank's
prime rates (8.50% at December 31, 1994). Generally, the arrangement is
reaffirmed annually, but may be withdrawn at any time after expiration.
At December 31, 1994, there was no outstanding debt under the line of
credit agreement.
At December 31, 1994, the Company had an outstanding short-term
borrowing with an investment banking company. The short-term borrowing
was in the amount of $907,000, with a maturity of January 16, 1995, and
an interest rate of 6.5%.
Long-term debt consists of the following at December 31:
1994 1993
Note payable to an insurance company $2,150,000 $3,750,000
Less current portion (200,000) (200,000)
$1,950,000 $3,550,000
- 51 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. Line of Credit and Long-Term Debt (continued)
The note payable to an insurance company provides for interest at 10%
per annum, payable annually, on amounts outstanding. Principal is
payable in annual installments of $200,000, with the remaining balance
due August 1, 2000. The maximum principal payment which can be made
each year without prepayment penalties is 20% of the original note or
$1,600,000 per year. During 1994 and 1993 the maximum payment was made.
Amounts borrowed under the agreement are secured by a first deed of
trust on 1,750 acres of land improved with vineyards and orchards having
a historical cost of $8,333,000.
Interest paid approximated interest expense incurred for each of the
three years in the period ended December 31, 1994.
Maturities of long-term debt at December 31, 1994 are $200,000 per year
for years 1995-1999 and $1,150,000 in the year 2000.
7. Common Stock and Stock Option Information
In March 1992, the Board of Directors adopted the 1992 Stock Option Plan
providing for the granting of options to purchase a maximum of 230,000
shares of the Company's common stock to employees, advisors, and
consultants of the Company. The 1992 Stock Option Plan was approved by
the stockholders at the 1992 Annual Meeting. The 1992 Stock Option Plan
provides for the grant of options to purchase common stock at 100% of
the fair market value as of the date of grant. The compensation
committee of the board of directors administers the plan. There are
116,000 options granted under the 1992 stock option plan with 96,000
options at a grant price of $20 per share and 20,000 options at a grant
price of $15 per share.
Currently no options granted are exercisable. Options reserved for
future granting totalled 114,000 at December 31, 1994.
- 52 -
Tejon Ranch Co. and Subsidiaries
Notes To Consolidated Financial Statements (continued)
8. Income Taxes
In January 1993, the Company adopted SFAS No. 109, Accounting for Income
Taxes. SFAS No. 109 is an asset and liability approach that requires
the recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the
Company's financial statements or tax returns.
The provision for income taxes consists of the following at December 31:
1994 1993 1992
Federal:
Current $ 627,000 $1,531,000 $1,048,000
Deferred (12,000) (220,000) (290,000)
615,000 1,311,000 758,000
State:
Current 205,000 417,000 268,000
Deferred (10,000) (110,000) (27,000)
195,000 307,000 241,000
$ 810,000 $1,618,000 $ 999,000
The reasons for the difference between total income tax expense and the
amount computed by applying the statutory Federal income tax rate (34%)
to income before taxes are as follows at December 31:
1994 1993 1992
Income tax at the statutory
rate $ 795,000 $1,561,000 $ 849,000
State income taxes, net of
Federal benefit 129,000 272,000 143,000
Other, net (114,000) (215,000) 7,000
$ 810,000 $1,618,000 $ 999,000
- 53 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Income Taxes (continued)
Deferred income taxes result from temporary differences in the financial
and tax bases of assets and liabilities. The net current deferred asset
is included with prepaid expenses and other assets on the statement of
financial position. Significant components of the Company's deferred
tax liabilities and assets are as follows at December 31:
Deferred tax assets: 1994 1993
Unrealized gain (loss) on
available-for-sale securities $ 192,000 $ ---
Accrued expense 125,000 33,000
Prepaid revenues 98,000 123,000
Other 121,000 40,000
Total deferred tax asset 536,000 196,000
Deferred tax liabilities:
Depreciation and amortization 1,498,000 1,122,000
Involuntary conversion-land 412,000 1,211,000
Other 826,000 278,000
Total deferred tax liabilities 2,736,000 2,611,000
Net deferred tax liabilities $2,200,000 $2,415,000
Deferred income taxes resulted from the effects of the following for the
year ended December 31, 1992:
Involuntary conversions $(201,000)
Vineyard and orchard costs deducted
for tax purposes less than
financial statement depreciation
expense (43,000)
Depreciation - other (65,000)
State tax deductions on the Federal
return, net (18,000)
Other, net 10,000
$(317,000)
- 54 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. Income Taxes (continued)
The Company made net payments of income taxes of $2,004,000, $958,000,
and $969,000 during 1994, 1993 and 1992, respectively.
9. Operating Leases
The Company is lessor of certain property pursuant to various commercial
lease agreements having terms ranging up to 30 years. The cost and
accumulated depreciation of buildings and improvements subject to such
leases was $1,642,000 and $866,000, respectively, at December 31, 1994.
Income from commercial rents, included in commercial and land use
revenue was $905,000 in 1994 and $871,000 in 1993 and 1992. Future
minimum rental income on noncancelable operating leases as of December
31, 1994 is: $949,000 in 1995, $873,000 in 1996, $880,000 in 1997,
$799,000 in 1998, $781,000 in 1999, and $6,453,000 for years thereafter.
10. Commitments and Contingencies
A total of 6,200 acres of the Company's land is subject to water
contracts requiring minimum future annual payments for as long as the
Company owns such land. The estimated minimum payments for 1995 are
$1,110,000, whether water is available or is used. Minimum payments
made under these contracts were approximately $985,000 in 1994, $767,000
in 1993, and $1,098,000 in 1992. Approximately 4,600 acres of these
lands are subject to contingent assessments of approximately $892,000 to
service water district bonded indebtedness, if water district revenues
are insufficient to cover bond interest and redemptions when due.
The Wheeler Ridge-Maricopa Water District prevailed in a lawsuit against
other water districts in Kern County, California, in a proceeding
involving the over-allocation and payment of state fixed water charges.
As a result of this ruling, landowners served by the water district
received, in 1992, certain refunds for 1986-1989 water charges. The
$1,054,000 received in March 1992 had been classified as current
deferred income pending the outcome of the appeals process. During
October 1993, the appeals process was successfully resolved in favor of
the water district. This favorable outcome allowed the Company to
recognize the gain of $1,054,000 ($632,000 after tax, or $.05 per share)
included in farming revenues in 1993.
- 55 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
10. Commitments and Contingencies (continued)
The Company leases land to National Cement Company of California, Inc.
(National) for the purpose of manufacturing portland cement from
limestone deposits on the leased acreage. National, LaFarge Corporation
(the parent company of the previous operator) and the Company have been
ordered to cleanup and abate an old industrial waste landfill site on
the leased premises. Under the lease agreements with National and
LaFarge, both companies are required to indemnify the Company for any
costs and liabilities incurred in connection with the cleanup order.
Due to the financial strength of National and LaFarge, the Company
believes that a material effect on its financial condition is remote at
this time.
11. Retirement Plan
The Company has a retirement plan which covers substantially all
employees. The benefits are based on years of service and the
employee's highest compensation for 60 consecutive months of service out
of the last 120 months of service. Contributions are intended to
provide for benefits attributable to service both to date and expected
to be provided in the future. The Company funds the plan in accordance
with the Employee Retirement Income Security Act of 1974 (ERISA).
The following accumulated benefit information is as of December 31:
1994 1993
Accumulated actuarial present value of benefit
obligation, including vested benefits of
$1,755,000 in 1994 and $1,729,000 in 1993 $1,788,000 $1,759,000
Projected benefit obligation for service
rendered to date $2,144,000 $2,148,000
Plan assets at fair value 1,578,000 1,567,000
Projected benefit obligation in excess
of Plan assets (566,000) (581,000)
Items not yet recognized in earnings:
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions 1,168,000 1,216,000
Unrecognized net transition asset being
amortized over approximately 17 years (178,000) (198,000)
Prepaid pension cost included in other assets $ 424,000 $ 437,000
- 56 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. Retirement Plan (continued)
Plan assets consist of equity, debt, and short-term money market
investment funds. The weighted-average discount rate and rate of
increase in future compensation levels used in determining the actuarial
present value of projected benefits obligation was 6.5% in 1994 and
1993. The expected long-term rate of return on plan assets was 8.0% in
1994 and 1993.
Total pension and retirement expense was as follows for each of the
years ended December 31:
1994 1993 1992
Cost components:
Service cost-benefits
earned during the period $ (88,000) $ (85,000) $ (96,000)
Interest cost on projected
benefit obligation (126,000) (124,000) (139,000)
Actual return on plan
assets (87,000) 140,000 (22,000)
Net amortization and
deferral 173,000 (41,000) 182,000
Total net periodic pension
cost $(128,000) $(110,000) $ (75,000)
- 57 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Business Segments
The Company operates principally in four industries: livestock, farming,
oil and minerals, and commercial and land use. The livestock segment
includes the production and sale of beef cattle. The farming segment
involves those operations related to permanent crops and the supervision
of farming activities for Laval (see Note 2). The oil and minerals and
the commercial and land use operations collect rents and royalties from
lessees of Company-owned properties.
Information pertaining to the Company's business segments follows for
each of the years ended December 31:
1994 1993 1992
Segment profits:
Livestock $ 364,000 $ 510,000 $ 314,000
Farming 1,925,000 4,211,000 980,000
Oil and minerals 1,208,000 1,239,000 1,152,000
Commercial and land use (100,000) 534,000
(304,000)
Segment profits 3,397,000 5,656,000 2,980,000
Interest income 1,439,000 1,591,000 2,275,000
Corporate expenses (2,212,000) (2,233,000) (2,106,000)
Interest expense (287,000) (424,000) (651,000)
Operating profit $ 2,337,000 $ 4,590,000 $ 2,498,000
- 58 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
12. Business Segments (continued)
Depreciation
Identifiable and Capital
Assets Amortization Expenditures
1994
Livestock 5,310,000 276,000 336,000
Farming 7,347,000 395,000 993,000
Oil and minerals 179,000 3,000 ---
Commercial and land use 2,226,000 132,000 801,000
Corporate 29,858,000 100,000 49,000
Total 44,920,000 906,000 2,179,000
1993
Livestock 4,364,000 242,000 203,000
Farming 8,000,000 381,000 873,000
Oil and minerals 187,000 5,000 ---
Commercial and land use 1,699,000 190,000 320,000
Corporate 32,861,000 98,000 45,000
Total 47,111,000 916,000 1,441,000
1992
Livestock 4,565,000 217,000 222,000
Farming 6,944,000 377,000 372,000
Oil and minerals 163,000 5,000 ---
Commercial and land use 1,684,000 122,000 652,000
Corporate 32,373,000 100,000 39,000
Total 45,729,000 821,000 1,285,000
Intersegment sales are not significant. Segment profits are total
revenues less operating expenses, excluding interest and corporate
expenses. Identifiable assets by segment include both assets directly
identified with those operations and an allocable share of jointly used
a s s ets. Corporate assets consist primarily of cash and cash
equivalents, refundable and deferred income taxes, land and buildings.
Land is valued at cost for acquisitions since 1936. Land acquired in
1936, upon organization of the Company, is stated on the basis (presumed
to be at cost) carried by the Company's predecessor.
- 59 -
Tejon Ranch Co. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
13. Unaudited Quarterly Operating Results
The following is a tabulation of unaudited quarterly operating results
for the years indicated (in thousands of dollars, except per share
amounts):
Segment Net Earnings
Total Profit Income (Loss)
Revenue(1) (Loss) (Loss) Per Share
1994
First quarter $1,383 $ (246) $ (267) $(.02)
Second quarter 5,200 996 441 .03
Third quarter 1,827 --- (153) (.01)
Fourth quarter 8,472 2,647 1,506 .12
$16,882 $3,397 $1,527 $.12
1993
First quarter $ 1,523 $ (116) $ 44 $.00
Second quarter 5,295 1,125 543 .04
Third quarter 1,844 62 (139) (.01)
Fourth quarter 10,807(2) 4,585(2) 2,524(2) .20(2)
$19,469 $5,656 $2,972 $.23
(1) Includes interest income.
(2) Includes recognition of a $1,054,000 ($632,000 after tax, or $.05
per share) refund from a local water district.
14. Subsequent Event
During January 1995, a portion of Registrant's farming operations
suffered damages as a result of high winds that were associated with a
series of winter storms. Nearly all of the loss occurred in
Registrant's producing almond orchards. Approximately 200 acres of
trees were uprooted by a combination of high winds and saturated soil
conditions due to heavy rainfall. The lost trees represent 23% of
Registrant's mature, almond producing orchards. As a result of the
s t orm damage, Registrant will record a charge net of tax, of
approximately $240,000 against earnings of the first quarter of 1995.
- 60 -
EXHIBIT INDEX
3. Exhibits:
3.1 Restated Certificate of Incorporation *
3.2 By-Laws *
10.1 Water Service Contract with Wheeler Ridge-Maricopa
Water Storage District (without exhibits), amendments
originally filed under Item 11 to Registrant's Annual
Report on Form 10K 61
10.2 Tejon Ranch Co. Stock Option Agreement 72
10.3 Lease agreement for Mr. San Olen 80
22 List of subsidiaries of Registrant 82
27 Financial Data Schedule (Edgar) 83
(b) Report on Form 8-K filed during the last quarter of the period
covered by this report:
None.
(c) Exhibits
* This document, filed with the Securities Exchange Commission
in Washington D.C. (file number 1-7183) under Item 14 to
Registrant's Annual Report on Form 10-K for year ended
December 31, 1987, is incorporated herein by reference.
(d) Financial Statement Schedules -- The response to this portion
of Item 14 is submitted as a separate section of this report.
- 61 -
RECORDING REQUESTED BY
WHEELER RIDGE-MARICOPA
WATER STORAGE DISTRICT
Post Office Box 9429
Bakersfield, CA 93389
WHEN RECORDED MAIL TO
WHEELER RIDGE-MARICOPA
WATER STORAGE DISTRICT
Post Office Box 9429
Bakersfield, CA 93389
WHEELER RIDGE-MARICOPA WATER STORAGE DISTRICT
CONTRACT AMENDMENT
CHANGE IN DESIGN CRITERIA,
CLASS OF SERVICE AND DATE OF INITIATION OF SERVICE
CONTRACT NO. 124
THIS AGREEMENT is entered into on the date hereafter set forth by and
between WHEELER RIDGE-MARICOPA WATER STORAGE DISTRICT, a California
Water Storage District, hereafter called "District" and TEJON RANCH
COMPANY, a California Corporation, hereafter called "Tejon."
R E C I T A L S
1. Tejon and District have executed a Water Service Contract entitled
"Contract Between Weeler Ridge-Maricopa Water Storage District
and Tejon Ranch Company for Agricultural Water Service dated
January 12, 1970, and recorded January 20, 1970, in Book 4358, Page
858 of Official Records of Kern County.
2. Said Contract provides among other things, for the construction of
Distribution System facilities by District to serve lands of Tejon
as described therein, said facilities to be constructed in
accordance with design criteria for the class of service set forth
in the Contract.
3. Tejon has requested that for the lands designated in said contract
as being in the Sl982 category of service, the following changes be
made:
a. The design criteria with respect to location of turnouts,
system capability for delivery of water, and delivery head be
modified.
- 62 -
b. Water Service be initiated to a portion of the above described
area in 1980.
4. District has determined that the changes are consistent with the
District's adopted project and that the cost of facilities to be
constructed as a result of said request will be of no more cost
than the facilities which would be required to provide service as
set forth in the contract, and hence will have no detrimental
effects on other landowners within the District's Surface Water
Service Area provided the conditions hereinafter set forth in this
Agreement prevail.
A G R E E M E N T
NOW THEREFORE, it is agreed by the parties hereto as follows:
1. The parties hereto hereby amend said Water Service Contract by
substituting Exhibit "A" hereto, Sheets 1 through 5 for the
following sheets of Exhibit "A" of said Contract: 198 through 201;
218 through 225; 238 through 241; 246 through 253; 258 through 261;
278 through 281. The purpose of this amendment is to define the
class of service of said lands, identify the locations of the
turnouts, set forth the maximum rate of deliveries, provide for
change in time of initiation of service and for special conditions
for prorate in time of shortage. The lands described on Exhibit
"A" hereto are in accordance with the Parcel Map No. 3338 Recorded
January 17, 1977, in Book 17 of Maps at Page 78.
2. Design criteria to be used for the system to be constructed will be
in accordance with the District's adopted design criteria except as
the same is mended in the following particulars:
a. Turnouts will be located at other than the high point of the
parcel of land served thereby and at the approximate location
described in Exhibit "A" hereto.
b. The design will provide for a system capable of delivering
seven (7) gallons per minute per acre to all lands described
in Exhibit "A" hereto.
c. There will be no minimum delivery head established at the
turnouts.
d. Standard District metering assemblies will be utilized. Ten
(10) inch meters will be installed at Turnouts 13B-1, 13B-2,
13B-3, 13B-4, 13B-5, 13B-6, 13B-7 and 13B-8. Eight (8) inch
meters will be installed at Turnouts 13B-10 and 13B-ll. Six
(6) inch meters will be installed at Turnouts 13B-9, 13B-12
and 13B-13.
- 63 -
3. For the purposes of computing Contract Water Charges, all lands
described on Sheet 1 of Exhibit "A" attached hereto and all lands
described on Sheet 4 of Exhibit "A" hereto will each be considered
in separate categories of service from other lands within the
Surface Water Service area of the District.
4. Nothing in this agreement is intended to increase or decrease
either the total number of acres included in said contract or the
total contract amount of water included therein except for a
deduction in area totaling 2.26 acres and 7 acre-feet caused by
minor variations in land area between those shown in the contract
and those set forth in the Parcel Map.
5. Tejon Ranch Company accepts all risks of timing of construction.
The District has the right to abandon the project if it is
determined unreasonable from a timing standpoint for reasons
i n c l uding State's refusal to approve siphon turn-outs or
unavailability of equipment.
6. The Construction works to serve the lands described its Exhibit "A"
hereto are to be funded through a combination of remaining bond
funds and District's general fund at an interest rate based on
earnings of the District's general fund for the portion so funded,
and with full power of the District Board to refund the project at
any time to repay the general fund advance up to the whole thereof.
7. The lands described in Exhibit "A" hereof prior to 1982 shall not
be included in any prorate of water for contract lands during
periods of shortage; provided, in such event the District shall
relieve said lands of charges arising under the Water Service
Contract except for bond debt service which shall be deterred
prorata for not to exceed five (5) years for any year the system is
not utilized; the operating reserve fund which shall be paid during
years of system use; and the special service charges which shall be
paid on a current basis. In 1982 and thereafter, said lands shall
have the same priority for water service as any other lands in the
Surface Water Service area of the District.
Date of Execution:
March 14, 1979
APPROVED AS TO FORM:
WHEELER RIDGE-MARICOPA WATER
STORAGE DISTRICT
YOUNG, WOOLDRIDGE, PAULDEN
AND SELF
By:
By: JERRY L. CAPPELLO, President
A.C. PAULDEN
- 64 -
Date: By:
WILLIAM E. MOORE, JR., SECRETARY
WATER USER:
TEJON RANCH COMPANY
By:
By:
- 65 -
RECORDING REQUESTED BY
WHEELER RIDGE-MARICOPA
WATER STORAGE DISTRICT
Post Office Box 9429
Bakersfield, CA 93389
WHEN RECORDED MAIL TO
WHEELER RIDGE-MARICOPA
WATER STORAGE DISTRICT
Post Office Box 9429
Bakersfield, CA 93389
WHEELER RIDGE-MARICOPA WATER STORAGE DISTRICT
CONTRACT AMENDMENT
CHANGE IN DESIGN CRITERIA,
CLASS OF SERVICE AND DATE OF INITIATION OF SERVICE
CONTRACT NO. 124
THIS AGREEMENT is entered into on the date hereinafter set forth by and
between WHEELER RIDGE-MARICOPA WATER STORAGE DISTRICT, a California
water storage district, hereinafter called "District", and TEJON RANCH
COMPANY, a California corporation, hereinafter called "Tejon".
1. Tejon and District have executed a Water Service Contract entitled
"Contract between Wheeler Ridge-Maricopa Water Storage District and
Tejon Ranch Company for Agricultural Water Service" dated January
12, 1970, and recorded January 20, 1970, in Book 4358, Page 858 of
Official Records of Kern County.
2. Said Contract provides among other things, for the construction of
Distribution System facilities by District to serve lands of Tejon
as described therein, said facilities to be constructed in
accordance with design criteria for the class of service set forth
in the Contract.
3. Tejon had requested that for the lands designated in said contract
as being in the S1982 category of service, the following changes be
made:
a. The design criteria with respect to location of turnouts,
system capability for delivery of water and delivery head be
modified.
- 66 -
b. Water service be initiated to a portion of the above described
area in 1980.
4. Said Contract was amended to reflect those items mentioned above by
Contract amendment entitled "Change in Design Criteria, Class of
Service and Date of Initiation of Service" dated March 14, 1979,
and recorded March 20, 1979, in Book 5183, Page 1742 of Official
Records of Kern County.
5. Tejon has now requested that water service to the remaining portion
of the lands included in the above-mentioned contract amendment be
initiated in 1981, and has requested certain additional changes
with respect to location of turnouts and turnout service areas.
6. District has determined that the changes are consistent with the
District's adopted project and that the cost of facilities to be
constructed as a result of said request will be of no more cost
than the facilities which would be required to provide srvice as
set forth in the contract, and hence will have no detrimental
effects on other landowners within the District's Surface Water
Service Area provided the conditions hereinafter set forth in this
agreement prevail.
A G R E E M E N T
1. The parties hereto hereby further amend said Water Service Contract
by substituting Exhibit "A" hereto, Sheets 1 through 6, for Exhibit
"A" of Amendment dated March 14, 1979. The purpose of this
amendment is to futher define the class of service of said lands,
identify the locations of the turnouts, set forth the maximum rate
of deliveries, provide for change in time of initiation of service,
and for special conditions for prorate in time of shortage. The
lands described on Exhibit "A" hereto are in accordance with the
Parcel Map No. 3338 recorded January
2. Design criteria to be used for the system to be constructed will be
in accordance with the District's adopted design criteria except as
the same is amended in the following particulars:
a. Turnouts will be located at other than the high point of the
parcel of land served thereby and at the approximate locations
described in Exhibit "A" hereto.
b. The design will provide for a system capable of deliveries
seven (7) gallons per minute per acre to all lands described
in Exhibit "A" hereto.
c. There will be no minimum delivery head established at the
turnouts.
- 67 -
d. Standard District metering assemblies will be utilized. Meter
sizes will be as shown on Exhibit "A" hereto.
3. For the purposes of computing Contract Water Charges, all lands
described on Sheets 1 and 4 of Exhibit "A" attached hereto will be
considered as a single category of service but as a separate
category of service from other lands within the Surface Water
Service Area of the District.
4. Nothing in this agreement is intended to increase or decrease
either the total number of acres included in said contract or the
total contract amount of water included therein.
5. Tejon Ranch Company accepts all risks of timing of construction.
The District has the right to abandon the project, either in whole
or in part, if it is determined unreasonable from a timing
standpoint for reasons including State's refusal to approve siphon
turnouts or unavailability of equipment.
6. The construction works to serve the lands described in Exhibit "A"
hereto are to be funded through a combination of remaining bond
funds and District's general fund at an interest rate based on
earnings of the District's general fund for the portion so funded,
and with full power of the District Board to refund the project at
any time to repay the general fund advance up to the whole thereof.
7. The lands described in Exhibit A" hereof prior to 1982 shall not be
included in any prorate of water for contract lands during periods
of shortage; provided, in such event the District shall relieve
said lands of charges arising under the Water Service Contract
except for bond debt service which shall be deferred prorata for
not to exceed five (5) years for any year the system is not
utilized; the operating reserve fund which shall be paid during
years of system use; and the special service charges which shall be
paid on a current basis. In 1982 and thereafter, said lands shall
have the same priority for water service as any other lands in the
Surface Water Service Area of the District.
8. This contract amendment supersedes the contract amendment dated
March 14, 1979, recorded March 20, 1979, in Book 5183 at Page 1742
of Official Records of Kern County mentioned in the fourth recital
hereto. The terms conditions of the contract mentioned in recital
one hereof shall remain in full force and effect except as the same
may be expressly amended by Paragraphs one through seven of this
Agreement.
Date of Execution:
March 14, 1979
APPROVED AS TO FORM:
- 68 -
WHEELER RIDGE-MARICOPA WATER
STORAGE DISTRICT
YOUNG, WOOLDRIDGE, PAULDEN
AND SELF
By:
By: JERRY L. CAPPELLO, President
A.C. PAULDEN
Date: By:
WILLIAM E. MOORE, JR., SECRETARY
WATER USER:
TEJON RANCH COMPANY
By:
By:
- 69 -
Recording Requested by:
WHEELER RIDGE-MARICOPA
WATER STORAGE DISTRICT, a California
water storage district, as
Official Business
When Recorded Mail to:
WHEELER RIDGE-MARICOPA
WATER STORAGE DISTRICT
Post Office Box 9429
Bakersfield, CA 93389
RECORD AS A LIEN ON REAL PROPERTY
WHEELER RIDGE-MARICOPA WATER STORAGE DISTRICT ASSUMPTION
AGREEMENT AND CONSENT TO TRANSFER OF INTEREST OF WATER
USER RESULTING FROM TRANSFER OF REAL PROPERTY SUBJECT TO A
CONTRACT FOR AGRICULTURAL WATER SERVICE (CONTRACT NO. 124D)
THIS AGREEMENT is entered into on the date hereinafter set forth,
between WHEELER RIDGE-MARICOPA WATER STORAGE DISTRICT, a California
water storage district, hereinafter called "District", and TEJON RANCH
COMPANY, a California Corporation, hereinafter called "Water User".
R E C I T A L S
1. Description: The real property mentioned herein is that certain
real property located in the unincorporated area of Kern County,
California, described in Exhibit "A" hereto, which exhibit is
incorporated herein by this reference.
2. Water Service Contract: The Contract affected hereby and
incorporated herein by this reference is identified by the
following particulars: Dated January 20, 1970, recorded January 20,
1970, in Book 4358, Pages 858 et seq., of Official Records of Kern
County, California; as modified by Agreement dated January 12, 1971
and recorded February 16, 1971, in Book 4487, Page 426, et seq., as
amended by Contract Amendment dated May 12, 1976, and recorded in
Book 4955, Page 1964, et seq., by and between District and Tejon
Ranch Company, a California corporation.
3. Interest Acquired Subject to Water Service Contract: By
instrument dated January 11, 1980, recorded January 14, 1980 , at
- 70 -
the Office of the County Recorder of Kern County, California, in
Book 5257, Page 2356 , Water User acquired an interest in the real
property described herein which is subject to the terms and
provisions of said Water Service Contract and amendments.
4. Representations: Each party hereto is fully informed as to all
the terms and provisions of said Contract and amendments; to the
extent and nature of the obligations presently due and to become
due by reason thereof; all current Rules and Regulations of the
District to which said Contract and amendments are subject and all
things and matters on file with the District and/or of public
record regarding the performance of said Contract.
5. Purpose: The parties wish to declare the effect or such transfer
of interest and to provide written consent of the District to the
assignment of the rights and obligations resulting therefrom
6. As used herein slngular includes plural and masculine gender
includes the feminine.
ASSUMPTION AGREEMMENT AND CONSENT TO ASSIGNMENT
1. Water User herein acknowledges that his interest in the real
property described in Exhibit "A" hereto is subject to a lien
created by said Contract and amendments, in accordance with the
particulars mentioned in Exhibit A hereto and does expressly grant
to District a lien against said real property to the same extent
and effect as though Water User owned said real property at the
time of execution of said Contract and amendments and had executed
said Con-tract and amendments as a Water User at the outset.
2. Water User herein does hereby assume and agrees to perform all the
obligations of Water User as set forth in said Contract and
amendments to the same extent and effect as though Water User had
executed said Contract and amendments as a Water User on the
effective date thereof in accordance with the par ticulars
mentioned in Exhibit "A" hereto.
3. District accepts said assignment resulting from the transfer of
interest in the real property herein referred to and does
acknowledge that it is obligated to said real property and Water
User hereby to the same extent and manner as it was under sard
Contract and amendments prior to the date hereof. The parties
hereto acknowledge that nothing in this instrument is to be
interpreted as waiving any of the rights of the District under said
Water Service Contract or any interest it now has under its
existing lien rights in said real property and further acknowledge
t h a t District is not to be bound by any understanding,
representation or agreement, other than a written agreement to
- 71 -
which the District has given its written consent, between Water
User herein and any of its predecessors in interest in the real
p r o perty affected hereby regarding the performance of the
obligations under said Water Service Con-tract and amendments,
including but not limited to, any such matters regarding payment
for current obligations arising from said Contract and amendments.
4. It is expressly understood that by the execution hereof District
makes no representation that the obligations due District by reason
of said Contract are current and/or any other representation,
either express or implied, other than those which are expressly set
forth herein.
DATED:
WHEELER RIDGE-MARICOPA
WATER STORAGE DISTRICT
By
President
By
Secretary
Approved as to form on
YOUNG, WOOLDRIDGE, PAULDEN AND SELF
By
Attorneys for District
WATER USER:
TEJON RANCH CO.
By:
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EXHIBIT 10.2
TEJON RANCH CO.
STOCK OPTION AGREEMENT
Pursuant to the
1992 EMPLOYEE STOCK INCENTIVE PLAN
This Incentive Stock Option Agreement ("Agreement") is made
and entered into as of the Date of Grant indicated below by and between
Tejon Ranch Co., a Delaware corporation (the "Company"), and the person
named below as Optionee.
WHEREAS, Optionee is an employee, officer or director of the
Company and/or one or more of its subsidiaries; and
WHEREAS, pursuant to the Company's 1992 Employee Stock
Incentive Plan (the "1992 Plan"), the Compensation Committee of the
Board of Directors of the Company administering the 1992 Plan (the
"Committee") has approved the grant to Optionee of an option to purchase
shares of the Common Stock, par value $.50 per share, of the Company
(the "Common Stock"), on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and
the covenants set forth herein, the parties hereto hereby agree as
follows:
1. Grant of Option; Certain Terms and Conditions. The
Company hereby grants to Optionee, and Optionee hereby accepts, as of
the Date of Grant indicated below, an option (the "Option") to purchase
the number of shares of Common Stock indicated below (the "Option
Shares") at the Exercise Price per share indicated below, which Exercise
Price shall not be less than the Fair Market Value (as defined below) of
the Option Shares on the Date of Grant. The Option shall not be
exercisable until on or after the Vesting Date indicated below, except
as otherwise provided in Section 3. The Option shall expire at
5:00 p.m., Los Angeles, California time, on the Expiration Date
indicated below and shall be subject to all of the terms and conditions
set forth in this Agreement.
Optionee:
Date of Grant:
Number of shares purchasable:
Exercise Price per share:
Expiration Date:
Vesting Date:
- 73 -
2. Incentive Stock Option; Internal Revenue Code
Requirements. The Option is intended to qualify as an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code")
except to the extent that the aggregate Fair Market Value (determined as
of the Date of Grant) of the shares of Common Stock with respect to
which the Option is exercisable for the first time by Optionee during
any calendar year (under the 1992 Plan and all other stock option plans
of the Company and its subsidiaries) exceeds $100,000. Such excess
shares are intended to be treated as shares issued pursuant to an Option
that is not an incentive stock option described in Section 422 of the
Code, in accordance with Section 422(d) of the Code. The number of such
excess shares as to which this option is not intended to be treated as
an incentive option is -0-.
The "Fair Market Value" of a share of Common Stock or
other security on any day shall be equal to the last sale price, regular
way, per share or unit of such other security on such day or, in case no
such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities
listed or admitted to trading on the American Stock Exchange or, if the
shares of Common Stock or such other security are not listed or admitted
to trading on the American Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares
of Common Stock or such other security are listed or admitted to trading
or, if the shares of Common Stock or such other securities are not
listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market as reported by the
National Association of Securities Dealers, Inc. Automated Quotations
System or such other system then in use or, if on any such date the
shares of Common Stock or such other security are not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in shares of
Common Stock or such other security selected by the Board of Directors.
3. Acceleration and Termination of Option.
(a) Termination of Employment.
(i) Definition of Termination. In the
event that Optionee shall cease to be an employee of the Company or any
of its subsidiaries voluntarily or involuntarily or for any reason
whatever, such event is referred to in this Agreement as a "Termination"
of Optionee's "Employment."
(ii) Normal Termination. If Optionee's
Employment is Terminated for any reason other than those enumerated in
Section 3(a)(iii), then the Option shall terminate three (3) months from
the date of such Termination of Employment but in no event later than
the Expiration Date. During such three month period, the Option shall
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be exercisable only if the date of Termination of Employment is after
the ninth anniversary of the Date of Grant.
(iii) Death or Permanent Disability. In
the event of a Termination of Optionee's Employment by reason of the
death of Permanent Disability (as hereinafter defined) of Optionee,
then:
(1) the Option shall terminate on the
first anniversary of the date of such Termination of
Employment or the Expiration Date, whichever is earlier,
and
(2) if the Option has not become
exercisable the Option shall be exercisable during the one-year
or shorter period referred to in (1) above by Optionee or, in
the event of death or a Permanent Disability involving the
appointment of a guardian, custodian or other similar personal
representative, the person or persons to whom Optionee's rights
under the Option shall have passed by will or by the applicable
laws of descent or distribution or as a result of any such
appointment, but
(A) only if the Optionee had
completed one full year of employment with the
Company after the Date of Grant and prior to the date
of Termination of Employment, and
(B) only as to that portion of the
number of shares subject to the Option equal to the
number of full years of employment completed during
the period referred to in (A) above divided by 10.
"Permanent Disability" shall mean the inability to engage
in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months. The Optionee
shall not be deemed to have a Permanent Disability unless proof of the
existence thereof shall have been furnished to the Committee in such
form and manner, and at such times, as the Committee may require. Any
determination by the Committee that Optionee does or does not have a
Permanent Disability shall be final and binding upon the Company and
Optionee.
(b) Death or Permanent Disability Following
Termination of Employment. Notwithstanding anything to the contrary in
this Agreement, if Optionee shall die or suffer a Permanent Disability
at any time after the Termination of his or her Employment and prior to
the Expiration Date, then to the extent that the Option was exercisable
on the date of such death or Permanent Disability the Option shall
terminate on the earlier of the Expiration Date or the first anniversary
of the date of such death.
- 75 -
(c) Acceleration of Option Upon a Change of Control.
The Option shall become fully exercisable with respect to all Option
Shares in the event of a Change of Control. A "Change of Control" shall
mean the first to occur of the following events:
(i) a reorganization, merger or
consolidation of the Company, the issuance or transfer of
securities of the Company in one transaction or series of
related transactions or any other transaction or series of
related transactions in each case if and only if as a result of
the transaction or transactions persons other than the
shareholders immediately prior to such transaction or
transactions shall own 80% or more of the voting securities of
the Company or its successor after the transaction;
(ii) the sale or transfer by the
Company of all or substantially all of its property and assets in a
single transaction or series of related transactions; or
(iii) the dissolution or
liquidation of the Company.
(d) Discretionary Acceleration. The Committee, in
its sole discretion, may accelerate the exercisability of the Option for
any reason, including without limitation in the event of death or
disablement of Optionee or termination of employment of Optionee by the
Company other than for cause.
(e) Other Events Causing Termination of Option.
Notwithstanding anything to the contrary in this Agreement, the Option
shall terminate in the event of the occurrence of an event referred to
in clause (ii) or (iii) of paragraph (c) above or a merger or
consolidation referred to in clause (i) of paragraph (c) above (a
"Terminating Event") (even if such Terminating Event occurs after an
event referred to in clause (i) of said paragraph (c) above which is not
a Terminating Event) unless the terms of any such transaction
constituting the Terminating Event otherwise provide. Such termination
shall occur on the 30th day following any such Terminating Event (or
such later date as the Board of Directors or the Committee shall
determine) unless the Board of Directors or the Committee (i) sets an
earlier date which is at least ten days prior to the occurrence of the
Terminating Event, (ii) notifies the Optionee in writing at least ten
days before the occurrence of the Terminating Event of the setting of
such date and (iii) accelerates the exercisability of the Option to the
extent it would otherwise be exercisable for any part of the thirty day
period after such event pursuant to Section 1 or pursuant to paragraph
(c) above so that, to such extent, the Option could be exercised for a
period of at least ten days prior to the occurrence of the Terminating
Event. In such event where the requirements of clauses (i), (ii) and
(iii) of the preceding sentence are met, the Option shall expire
immediately upon the occurrence of the Terminating Event.
- 76 -
4. Adjustments. In the event that the outstanding
securities of the class then subject to the Option are increased,
decreased or exchanged for or converted into cash, property and/or a
different number or kind of securities, or cash, property and/or
securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, reclassification, dividend (other than a cash dividend
paid out of earned surplus) or other distribution, stock split, reverse
stock split or the like, or in the event that substantially all of the
property and assets of the Company are sold, then, the Committee shall
make appropriate and proportionate adjustments in the number and type of
shares or other securities or cash or other property that may thereafter
be acquired upon the exercise of the Option; provided, however, that any
such adjustments in the Option shall be made without changing the
aggregate Exercise Price of the then unexercised portion of the Option.
5. Exercise. The Option shall be exercisable during
Optionee's lifetime only by Optionee or by his or her guardian or legal
representative, and after Optionee's death only by the person or entity
entitled to do so under Optionee's last will and testament or applicable
intestate law. The Option may only be exercised by the delivery to the
Company of a written notice of such exercise pursuant to the notice
procedures set forth in Section 7 hereof, which notice shall specify the
number of Option Shares to be purchased (the "Purchased Shares") and the
aggregate Exercise Price for such shares (the "Exercise Notice"),
together with payment in full of such aggregate Exercise Price as
follows:
(a) by the delivery to the Company of a certificate
or certificates representing shares of Common Stock, duly endorsed or
accompanied by a duly executed stock power, which delivery effectively
transfers to the Company good and valid title to such shares, free and
clear of any pledge, commitment, lien, claim or other encumbrance (such
shares to be valued on the basis of the aggregate Fair Market Value
thereof on the date of such exercise), provided that the Company is not
then prohibited from purchasing or acquiring such shares of Common
Stock; and/or
(b) by reducing the number of shares of Common Stock
to be issued and delivered to Optionee upon such exercise (such
reduction to be valued on the basis of the aggregate Fair Market Value
(determined on the date of such exercise) of the additional shares of
Common Stock that would otherwise have been issued and delivered upon
such exercise), provided that the Company is not then prohibited from
purchasing or acquiring such shares of Common Stock.
The balance of the Exercise Price not paid by an exchange
of shares pursuant to (a) or (b) above shall be paid in cash or by a
cashier's or certified bank check payable to the Company.
The Optionee will be obligated to pay the Exercise Price
in the manner contemplated by (a) and/or (b) above and will be permitted
- 77 -
to pay the Exercise Price in cash only to the extent that it cannot be
paid in the manner provided in (a) and (b) above. Notwithstanding the
foregoing, the Optionee shall be obligated to pay the Exercise Price in
the manner contemplated by (a) above only to the extent that he or she
owns shares of Common Stock beneficially, has the power to dispose of
those shares and such disposition contemplated by (a) above would not
constitute a "disqualifying disposition" of shares resulting in a loss
of the special tax treatment afforded incentive stock options.
6. Payment of Withholding Taxes.
(a) If the Company is obligated to withhold an
amount on account of any federal, state or local tax imposed as a result
of the exercise of the Option, including, without limitation, any
federal, state or other income tax, or any F.I.C.A., state disability
insurance tax or other employment tax, then Optionee shall, concurrently
with such exercise, pay such amount (the "Withholding Liability") to the
Company in cash or by a cashier's or certified bank check payable to the
Company; provided, however, that, in the discretion of the Committee,
the Optionee may, pursuant to an irrevocable election of Optionee (a
"Withholding Election") made on or prior to the date of such exercise,
instead pay all or any part of the Withholding Liability in the
following manner:
(i) by the delivery to the Company
of a certificate or certificates representing shares of Common Stock,
duly endorsed or accompanied by a duly executed stock powers, which
delivery effectively transfers to the Company good and valid title to
such shares, free and clear of any pledge, commitment, lien, claim or
other encumbrance (such shares to be valued on the basis of the
aggregate Fair Market Value thereof on the date of such exercise),
provided that the Company is not then prohibited from purchasing or
acquiring such shares of Common Stock; and/or
(ii) by reducing the number of
shares of Common Stock to be issued and delivered to Optionee upon such
exercise (such reduction to be valued on the basis of the aggregate Fair
Market Value (determined on the date of such exercise) of the additional
shares of Common Stock that would otherwise have been issued and
delivered upon such exercise), provided that the Company is not then
prohibited from purchasing or acquiring such shares of Common Stock.
(b) The Committee shall have sole discretion to
approve or disapprove any Withholding Election and may adopt such rules
and regulations as are consistent with and necessary to implement the
foregoing. The Committee may permit Optionee to make a Withholding
Election to pay withholding taxes in excess of the minimum amount
required by law, provided that the amount of withholding taxes so paid
does not exceed the estimated total federal, state and local tax
liability of Optionee attributable to such exercise.
- 78 -
7. Notices. Any notice given to the Company shall be
addressed to the Company at P.O. Box 1000, Lebec, California 93243,
Attention: President, or at such other address as the Company may
hereinafter designate in writing to Optionee. Any notice given to
Optionee shall be sent to the address set forth below Optionee's
signature hereto, or at such other address as Optionee may hereafter
designate in writing to the Company. Any such notice shall be deemed
duly given when delivered personally or five days after mailing by
prepaid certified or registered mail return receipt requested.
8. Stock Exchange Requirements; Applicable Laws.
Notwithstanding anything to the contrary in this Agreement, no shares of
stock issuable upon exercise of the Option, and no certificate
representing all or any part of such shares, shall be purchased, issued
or delivered if (a) such shares have not been admitted to listing upon
official notice of issuance on each stock exchange upon which shares of
that class are then listed or (b) in the opinion of counsel to the
Company, such issuance or delivery would cause the Company to be in
violation of or to incur liability under any federal, state or other
securities law, or any requirement of any stock exchange listing
agreement to which the Company is a party, or any other requirement of
law or of any administrative or regulatory body having jurisdiction over
the Company.
9. Restrictions on Transferability.
(a) Neither the Option nor any interest therein may
be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise
transferred in any manner other than by will or the laws of descent and
distribution.
(b) By accepting the Option, the Optionee for
himself or herself and his or her transferees by will or the laws of
descent and distribution, represent and agree that all shares of Common
Stock purchased upon exercise of the Option will be acquired for
investment and not with a view to the distribution thereof unless they
have been registered under the Securities Act of 1933, and will
otherwise be acquired, held and disposed of and held in accordance with
the restrictions of said Act and the rules and regulations of the
Securities and Exchange Commission thereunder, that the Company may
instruct its transfer agent to restrict further transfer of said shares
in its records except upon receipt of satisfactory evidence that such
restrictions have been satisfied, that upon each exercise of any portion
of the Option, the certificates evidencing the purchased shares shall
bear an appropriate legend on the face thereof evidencing such
restrictions, and that the person entitled to exercise the same shall
furnish evidence satisfactory to the Company (including a written and
signed representation) to the effect that the shares are being acquired
subject to such restrictions.
10. 1992 Plan. The Option is granted pursuant to the
1992 Plan, as in effect on the Date of Grant, and is subject to all the
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terms and conditions of the 1992 Plan, as the same may be amended from
time to time; provided, however, that no such amendment shall deprive
Optionee, without his or her consent, of the Option or of any of
Optionee's rights under this Agreement. The interpretation and
construction by the Committee of the 1992 Plan, this Agreement, the
Option and such rules and regulations as may be adopted by the
Committee for the purpose of administering the 1992 Plan shall be final
and binding upon Optionee. Until the Option shall expire, terminate or
be exercised in full, the Company shall, upon written request therefor,
send a copy of the 1992 Plan, in its then-current form, to Optionee or
any other person or entity then entitled to exercise the Option.
11. Stockholder Rights. No person or entity shall be
entitled to vote, receive dividends or be deemed for any purpose the
holder of any Option Shares until the Option shall have been duly
exercised to purchase such Option Shares in accordance with the
provisions of this Agreement and the Option Shares have been issued.
12. Employment Rights. No provision of this Agreement or
of the Option granted hereunder shall (a) confer upon Optionee any right
to continue in the employ of the Company or any of its subsidiaries,
(b) affect the right of the Company and each of its subsidiaries to
terminate the employment of Optionee, with or without cause, or
(c) confer upon Optionee any right to participate in any employee
welfare or benefit plan or other program of the Company or any of its
subsidiaries other than the 1992 Plan. The Optionee hereby acknowledges
and agrees that the Company and each of its subsidiaries may terminate
the employment of Optionee at any time and for any reason, or for no
reason, unless Optionee and the Company or such subsidiary are parties
to a written employment agreement that expressly provides otherwise.
13. Governing Law. This Agreement and the Option granted
hereunder shall be governed by and construed and enforced in accordance
with the laws of the State of Delaware.
IN WITNESS WHEREOF, the Company and Optionee have duly
executed this Agreement as of the Date of Grant.
TEJON RANCH CO. OPTIONEE
By:
Jack Hunt Signature
President
Mailing Address
City, State and Zip Code
Social Security Number
- 80 -
EXHIBIT 10.3
LEASE AGREEMENT FOR MR. SAN OLEN
Donald Haskell ("Haskell") leases to Tejon Ranchcorp, a
California corporation ("Tejon"), and Tejon leases from Haskell, the
horse known as Mr. San Olen, on the terms stated below.
1. Lease Term. The initial
term of this lease shall be from December 1, 1993, through December 31,
1995. Tejon is granted the option to extend the term of this lease for
two (2) periods of three (3) years each. Tejon may exercise such
options by delivering notice to Haskell by November 30 of the year in
which the lease term would otherwise expire.
2. Rent. The rent during the
initial and option terms shall be Five Thousand Dollars ($5,000) per
year, payable on or before January 15 of each year. December 1993 shall
be rent-free. If a succeeding lease is desired by the parties, the
rental will be renegotiated at that time.
3. Insurance. Tejon shall
purchase and maintain at all times during the lease term an insurance
policy with terms standard in the horse breeding industry insuring
against the death of or injury to Mr. San Olen. Haskell shall reimburse
Tejon on demand for one-half of the cost of such policy. The initial
policy amount shall be Thirty Five Thousand Dollars ($35,000); this
amount shall be adjusted annually around December of each year, as the
parties shall reasonably agree, to reflect any increase or decrease in
the value of Mr. San Olen based on the performance of his foals.
Haskell shall be named as loss payee of this policy and shall own all
insurance proceeds. Haskell agrees that his sole remedy in the event of
the death of or injury to Mr. San Olen is limited to recovery of the
insurance proceeds from the policy described above, provided that such
policy is currently paid and in conformance with this paragraph, and
waives any right to recover any other or additional sums against Tejon.
4. Duty of Care. Tejon shall
care for Mr. San Olen in the same manner as it would for any horse of
his caliber. In particular, when stabled at Tejon Ranch, Tejon shall
keep Mr. San Olen in a stall and exercise him regularly on a hot-walker
and/or ride him.
5. Use. Tejon plans that Mr.
San Olen will be used as follows: he will stand at stud at the Oswood
Stallion Station from approximately February 1 to July 1 of each year
and will return to Tejon Ranch on or about July 1 of each year, all
commencing in 1994; he will idle from July through January while he is
at Tejon Ranch; he will not be shown; Tejon will decide which of its
mares and outside mares will breed with him and will pay all costs
associated with doing so; and Tejon will pay any advertising and
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promotional costs and any incentive payments to horse shows that Tejon
elects to incur. Tejon may change this plan of using Mr. San Olen with
Haskell's consent, which shall not be unreasonably withheld.
6. Governing Law. This lease
shall be governed by and construed in accordance with the laws of the
State of California.
This lease is executed as of November 15, 1993.
______________________________
Donald Haskell
Tejon Ranchcorp,
a California corporation
By:___________________________
Matt Echeverria,
Vice President
- 82 -
EXHIBIT 22
(22) Subsidiaries of Registrant
A. Registrant: Tejon Ranch Co.
B. Subsidiaries of Registrant
a. Tejon Ranchcorp (100% of whose Common Stock is owned by
Registrant);
b. Laval Farms Corporation, formerly Tejon Agricultural
Corporation (100% of whose Common Stock is owned by Tejon
Ranchcorp);
c. Tejon Farming Company (100% of whose Common Stock is owned by
Tejon Ranchcorp);
d. Tejon Marketing Company; (100% of whose Common Stock is owned
by Tejon Ranchcorp);
e. Tejon Ranch Feedlot, In. (100% of whose Common Stock is owned
by Tejon Ranchcorp);
f. White Wolf Corporation (100% of whose Common Stock is owned
by Tejon Ranchcorp);
g. Tejon Development Company; (100% of whose Common Stock is
owned by Tejon Ranchcorp).
C. Each of the aforesaid subsidiaries is included in Registrant's
Consolidated Financial Statement set forth in answer to Item 14(a)(1)
hereof.
D. Each of the aforesaid subsidiaries was organized and
incorporated under the laws of the State of California.
E. Each of the aforesaid subsidiaries does business under its name,
as shown. Tejon Ranchcorp also does business under the names Tejon
Ranch, Fireside Oak Co. and Grapevine Center.
In addition to the foregoing, Laval Farms Limited Partnership,
formerly Tejon Agricultural Partners, a California limited partnership,
may be deemed to be a "subsidiary" of Registrant within the meaning of
the Rules under the Securities Exchange Act of 1934 by reason of the
fact that the sole general partner of said partnership is Laval Farms
Corporation, a wholly-owned subsidiary of Registrant.
- 83 -
EXHIBIT 27
Financial Data Schedule
(amounts in thousands)
This schedule contains summary financial information extracted from the
balance sheet, income statement, and footnotes and is qualified in its
entirety by reference to such financial statements.
Period-Type 12 mos.
Fiscal-Year-End December 31, 1994
Period-Start January 1, 1994
Period-End December 31, 1994
Cash 68
Securities 23,718
Receivables 2,125
Allowances 0
Inventory 3,128
Current Assets 30,262
PP&E 26,473
Depreciation (13,189)
Total Assets 44,920
Current Liabilities 3,476
Bonds 0
Common 6,341
Preferred Mandatory 0
Preferred 0
Other SE 30,417
Total Liability and Equity 44,920
Sales 16,882
Total Revenues 16,882
CGS 12,046
Total Costs 12,046
Other Expenses 2,212
Loss Provision 0
Interest Expense 287
Income Pretax 2,337
Income Tax 810
Income Continuing 1,527
Discontinued 0
Extraordinary 0
Changes 0
Net Income 1,527
EPS Primary .12
EPS Diluted .12
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