BASIS OF PRESENTATION

The summarized information of Tejon Ranch Co. and its subsidiaries, (the Company, Tejon, we, us and our), furnished pursuant to the instructions to Part I of Form 10-Q is unaudited and reflects all adjustments which are, in the opinion of the Company’s management, necessary for a fair statement of the results for the interim period. All such adjustments are of a normal recurring nature. We have evaluated subsequent events through the date of issuance of our consolidated financial statements.

The periods ending June 30, 2015 and 2014 include the consolidation of Centennial Founders, LLC’s statement of operations within the resort /residential real estate development segment and statements of cash flows. The Company’s June 30, 2015 and December 31, 2014 balance sheets and statements of changes in equity and noncontrolling interests are presented on a consolidated basis including the consolidation of Centennial Founders, LLC.

The Company has identified four reportable segments: commercial/industrial real estate development; resort/residential real estate development; mineral resources; and farming. Information for the Company’s reported segments is presented in its consolidated statements of operations. The Company’s reporting segments follow the same accounting policies used for the Company’s consolidated financial statements. Management evaluates a segment’s performance based upon a number of factors including pretax results.

The results of the period reported herein are not indicative of the results to be expected for the full year due to the seasonal nature of the Company’s agricultural activities and timing of real estate sales and leasing activities. Historically, the Company’s largest percentages of farming revenues are recognized during the third and fourth quarters of the fiscal year.

Reclassifications

Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on results of operations, and are as follows:

Mineral Resources

In 2014, the Company expanded its water operations to not only manage water infrastructure and water assets but to also sell water on an annual basis to third parties. We continued these sales during the first and second quarters of 2015 and 2014. We determined during the third quarter of 2014 that water assets activity fit most appropriately with our other resource assets and will now be included in the mineral resources segment. As a result of this, the Company has reclassified prior year amortization associated with the purchase of water contracts from corporate expenses into mineral resources expenses on the consolidated statements of operations to conform to the current year presentation. The amortization amount reclassified for the three months ended June 30, 2014 was $676,000. The Company has also reclassified, for the three- and six-months ended June 30, 2014, water sales of $312,000 and $7,703,000, respectively, into mineral resources revenues and mineral resources expenses of $135,000 and $4,524,000, respectively, related to cost of water sales on the unaudited consolidated statements of operations from other income.

Farming

During the fourth quarter of 2014, the Company determined that hay crop sales related to farming activities which were previously recorded as revenues in the resort/residential segment, fit most appropriately with our farming segment. As a result, the Company has reclassified prior period hay crop sales and related cost of sales into the farming revenue and farming expenses, respectively, on the unaudited consolidated statements of operations to conform to the current year presentation. The hay crop sales reclassified for the three months ended June 30, 2014 was $138,000 and the related cost of sales was $191,000.

The hay crop sales reclassified for the six months ended June 30, 2014 was $404,000 and the related cost of sales was $422,000.

Real Estate, Real Estate Development, and Property & Equipment

In the first quarter of 2015, the Company concluded that it was appropriate to classify its real estate held for development and its income producing real estate as real estate development and real estate and improvements - held for lease, net, respectively, on the Company’s consolidated financial statements. Previously, such balances had been classified within property and equipment, net. This change in the classification has no effect on previously reported consolidated statement of operations for any period. This change better reflects the current use of our real estate development assets.

Our commercial/industrial segment generates operating income from operating leases with various types of tenants. As a of result of this consideration, we determined during the first quarter of 2015 that these real estate properties fit most appropriately as real estate and improvements - held for lease, net on the unaudited consolidated financial statements.

As a Company, we are also involved in land entitlement and land development processes. Based on our consideration, we determined during the first quarter of 2015 that these activities fit most appropriately as real estate development on the unaudited consolidated financial statements.

Based on our considerations for bifurcating the real estate and real estate development activities on the unaudited consolidated financial statements as described above, the Company will present property and equipment activities separately on the unaudited consolidated financial statements. Amounts previously reported as property and equipment at December 31, 2014 have been classified as follows:



($ in thousands)	As Originally Reported		As Currently Reported
Real estate and improvements - held for lease, net	$	—	$	20,226
Real estate developments	$	—	$	219,654
Property and equipment, net	$	282,974	$	43,094
	$	282,974	$	282,974

For further information and a summary of significant accounting policies, refer to the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.