<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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
For Quarter Ended March 31, 1994 Commission file number 1-7585
THE NEWHALL LAND AND FARMING COMPANY
(a California Limited Partnership)
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
California 95-3931727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23823 Valencia Boulevard, Valencia, CA 91355
(Address of principal executive offices) (Zip Code)
</TABLE>
(805) 255-4000
(Registrant's telephone number, including area code)
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
--- ---
<PAGE> 2
Part I. Financial Information 2.
- -------------------------------
Item 1 - Financial Statements
- -------------------------------
Consolidated Statements of Income
<TABLE>
<CAPTION>
Unaudited Three months ended
March 31,
-------------------
In thousands, except per unit 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Real estate
Residential home and land sales $4,681 $4,116
Industrial and other sales 953 2,384
Commercial operations 7,921 7,082
------------------
13,555 13,582
------------------
Agriculture
Operations 1,411 587
Ranch sales -- 1,220
------------------
1,411 1,807
------------------
TOTAL REVENUES $14,966 $15,389
==================
CONTRIBUTION TO INCOME
Real estate
Residential home and land sales $968 $555
Industrial and other sales (231) 144
Community development (1,005) (1,370)
Commercial operations 3,685 3,423
------------------
3,417 2,752
------------------
Agriculture
Operations 958 224
Ranch sales -- 972
------------------
958 1,196
------------------
Earthquake damage (3,700) --
------------------
OPERATING INCOME 675 3,948
General and administrative expense (1,834) (1,741)
Interest and other, net (2,481) (1,843)
------------------
NET INCOME (LOSS) ($3,640) $364
==================
NET INCOME (LOSS) PER UNIT ($.10) $.01
==================
Number of units used in computing per unit amounts 36,757 36,785
Cash distributions per unit $.10 $.10
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 3
3.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
In thousands, except units 1994 1993
- -----------------------------------------------------------------------------------
Unaudited
<S> <C> <C>
ASSETS
Cash and cash equivalents $23,989 $39,636
Accounts and notes receivable 23,981 19,508
Land under development 80,251 73,078
Land held for future development 34,103 34,563
Property and equipment, net 184,932 182,332
Other assets and deferred charges 11,029 10,781
----------------------
$358,285 $359,898
======================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $12,928 $12,419
Accrued expenses 30,539 26,794
Deferred revenues 2,795 1,835
Mortgage and other debt 173,467 174,157
Advances and contributions from
developers for utility construction 11,939 12,067
Other liabilities 22,594 21,347
----------------------
Total liabilities 254,262 248,619
Partners' capital
36,756,530 units outstanding at March 31, 1994
and December 31, 1993 104,023 111,279
----------------------
$358,285 $359,898
======================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 4
4.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited Three months ended
March 31,
-------------------
In thousands 1994 1993
- --------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ($3,640) $364
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 1,835 2,024
Increase in land under development (7,173) (6,073)
(Increase) decrease in accounts and notes receivable (4,473) 428
Increase (decrease) in accounts payable, accrued expenses
and deferred revenues 5,214 (3,496)
Cost of property sold 71 508
Other adjustments, net 1,452 (258)
-------------------
Net cash used by operating activities (6,714) (6,503)
-------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (4,506) (1,984)
Investment in joint venture 7 288
-------------------
Net cash used by investing activities (4,499) (1,696)
-------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid (3,676) (3,676)
(Decrease) increase in mortgage and other debt (690) 12,154
Other, net (68) (183)
-------------------
Net cash (used) provided by financing activities (4,434) 8,295
-------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (15,647) 96
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 39,636 10,792
-------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $23,989 $10,888
===================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5.
Note 1. Accounting Policies
- ----------------------------
The consolidated financial statements include the accounts of The Newhall Land
and Farming Company and its subsidiaries, all of which are wholly-owned,
(collectively, "the Company"). All significant intercompany transactions are
eliminated.
The Company's unaudited interim financial statements have been prepared
substantially in conformity with generally accepted accounting principles used
in the preparation of the Company's annual financial statements. In the
opinion of the Company, all adjustments necessary for a fair statement of the
results of operations for the three months ended March 31, 1994 and 1993 have
been made. Certain reclassifications have been made to prior periods' amounts
to conform to the current year presentation.
The interim statements are condensed and do not include some of the information
necessary for a more complete understanding of the financial data.
Accordingly, your attention is directed to the footnote disclosures found on
pages 20 through 26 of the December 31, 1993 Annual Report to Partners and
particularly to Note 2 which includes a summary of significant accounting
policies.
Interim financial information for the Company has substantial limitations as an
indicator for the calendar year because:
. Land sales occur irregularly and are recognized at the close of escrow
or on the percentage of completion basis if the Company has an
obligation to complete certain future improvements and provided profit
recognition criteria are met.
. Agricultural crops are on an annual cycle and income is recognized
upon harvest. Most major crops are harvested during the fall and
winter.
. Sales of non-developable farm land occur irregularly and are
recognized upon close of escrow provided profit recognition criteria
are met.
<PAGE> 6
6.
Note 2. Details of Land Under Development
- ------------------------------------------
<TABLE>
<CAPTION>
(In $000) March 31, December 31,
1994 1993
----------- -----------
(Unaudited)
<S> <C> <C>
Residential $33,017 $34,164
Industrial and commercial 38,699 35,092
Homes completed or under construction 6,413 3,381
Other 2,122 441
------- -------
Total land under development $80,251 $73,078
======= =======
</TABLE>
Note 3. Details for Earnings per Unit Calculation
- --------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
1994 1993
----------- -----------
<S> <C> <C>
Average number of units outstanding
during the period 36,756,530 36,756,530
Net units issuable in connection with
dilutive options based upon use of the
treasury stock method - 28,488
---------- ----------
Average number of primary units 36,756,530 36,785,018
========== ==========
</TABLE>
Part I. Financial Information
- ------------------------------
Item 2 - Management's Discussion and Analysis of Financial Condition and
- ------------------------------------------------------------------------
Results of Operations
- ---------------------
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents totaling $24.0 million at March 31,
1994. The Company's strong cash position is primarily due to the proceeds of a
$30 million seven-year unsecured loan obtained from a major insurance company
in December, 1993. At March 31, 1994, there were no borrowings outstanding
against available lines of credit totaling $69 million. Letters of credit
outstanding against lines of credit totaled $4.6 million at the end of the 1994
first quarter.
The Company believes its operations and available credit are sufficient to
provide the cash required to finance working capital needs and enable it to
take advantage of new development opportunities. There are no material
commitments for capital expenditures other than in the ordinary
<PAGE> 7
7.
course of business.
The following discussion relates to principal items shown on the Consolidated
Statement of Cash Flows:
Operating Activities
- --------------------
Inventory expenditures for land development and infrastructure to support
pending and future land sales, plus agricultural crop costs, are the primary
contributors to a $6.7 million use of cash from operations for the 1994 first
quarter. A 79-acre sale of a bulk parcel just outside the McDowell Mountain
Ranch planned community in Scottsdale, Arizona was completed during the quarter
with a cash down payment and a $2.9 million note receivable.
A $3.7 million charge was recorded in the first quarter for earthquake damage
not covered by insurance. Appoximately $700,000 had been expended as of March
31, 1994 for earthquake related repairs. For additional discussion of
earthquake damage, refer to the "Earthquake Damage" section of Item 2 in this
Quarterly Report.
Investing Activities
- --------------------
Capital expenditures during the period totaled $4.5 million and included
construction costs for a 175,000-square-foot build-to-suit for ITT Corporation,
various commercial tenant improvements and water utility construction.
Financing Activities
- --------------------
A quarterly distribution totaling $3.7 million, or 10 cents per unit, was paid
on March 14, 1994. The declaration of distributions is reviewed by the Board
of Directors on a quarterly basis. The declaration of any distribution, and
the amount declared, is determined by the Board of Directors, taking into
account the Company's earnings, cash requirements, financial condition and
prospects. The next quarterly distribution will be considered at the May 18,
1994 meeting of the Board of Directors.
Upon receipt of the proceeds of a $30 million unsecured loan in December, 1993,
the Company advanced $10.5 million to its wholly-owned water utility subsidiary
and all outstanding advances against the subsidiary's revolving-to-term credit
line were retired. The utility expects to replace this revolving credit line
with a long-term financing during the second quarter of 1994, subject to
approval by the California Public Utilities Commission.
OUTLOOK
- -------
As reported to unitholders at the annual information meeting on March 16, 1994,
the California economy is in the early stages of recovery and it is believed
that 1993 represented the low point in the economic cycle for the Company.
Higher revenues and operating earnings from on-going operations are expected in
1994, with the major contribution to earnings
<PAGE> 8
8.
coming in the fourth quarter when initial lot sales in the Scottsdale project
and the sale of additional agricultural land are expected to be recorded.
Results of Operations
---------------------
Comparison of First Quarter 1994 to First Quarter 1993
- ------------------------------------------------------
(Unaudited)
- -----------
The amounts of increase or decrease from the prior year first quarter
are as follows (in 000, except per unit):
<TABLE>
<CAPTION>
Increase / (Decrease)
---------------------
Revenues Three Months
---------------------
Real Estate Amount %
------ -------
<S> <C> <C>
Residential home and land sales $565 14 %
Industrial and other sales (1,431) (60)
Commercial operations 839 12
Agriculture
Operations 824 140
Ranch sales (1,220) (100)
------- ------
($423) (3)%
======= ======
Contribution to income
Real Estate
Residential home and land sales $413 74 %
Industrial and other sales (375) (260)
Community development 365 27
Commercial operations 262 8
Agriculture
Operations 734 328
Ranch sales (972) (100)
Earthquake damage (3,700) (100)
------- ------
Operating income (3,273) (83)
General and administrative expense (93) (5)
Interest and other, net (638) (35)
------- ------
Net income ($4,004) (1,100)%
======= ======
Per unit:
Net income per unit ($.11) (1,100)%
======= ======
Number of units used in computing
per unit amounts (28) -- %
======= ======
</TABLE>
The increases and decreases in revenues and contribution to income for the
three months are attributable to the following:
RESIDENTIAL HOME AND LAND SALES
Valencia
- --------
Transition from the Company's own home construction operations to the sale of
ready-to-build lots to merchant builders was completed in 1993. The current
year first quarter results include three escrow closings from the Company's
first residential joint venture for 65 homes in Valencia Northbridge
contributing $1.1 million to revenues and $149,000
<PAGE> 9
9.
to income. The Company expects to establish additional joint-venture
arrangements with other builders for projects that emphasize more affordable
single and multi-family homes.
In the first quarter of 1993, 12 escrow closings from the Company's own home
building operations added $2.7 million to revenues and $414,000 to income.
There were no residential land sales completed in the 1993 first quarter. The
prior year quarter also included recognition of previously deferred revenues of
$1.3 million and income of $520,000 related to the sale of residential lots in
prior years. Cash received from prior residential lot sale profit
participation agreements contributed $100,000 to revenues and income in the
prior year first quarter.
For the first quarter of 1994, builders in the Company's Valencia Northbridge
development experienced increases in both home closings and homes under
contract compared with the year earlier period. At the end of the quarter, 94
homes were in escrow by merchant builders, compared with 55 homes in escrow at
December 31, 1993.
The sale of 83 lots by the Company to Beazer Homes in NorthPark, the Company's
next major development consisting of 1,700 homes in the North River area,
closed escrow in April, 1994 and will be reflected in second quarter revenues
and income. Beazer Homes joins Pardee, a division of Weyerhaeuser; M.J. Brock,
a division of Ryland Homes; Warmington Homes and Bramalea in building homes in
Valencia. Other lot sales are in escrow with closings scheduled for later this
year. The closings of these transactions is subject to financing conditions
and other significant contingencies, and therefore may not take place as
planned.
McDowell Mountain Ranch
- -----------------------
Construction has started on the infrastructure for this 4,000-home planned
community in Scottsdale, Arizona after the placement of $17 million of
improvement district bonds sponsored by the City of Scottsdale. During the
first quarter of 1994, a 79-acre bulk parcel outside the planned community was
sold which contributed $1.7 million to income. Merchant builders continue to
express strong interest and several hundred ready-to-build lots are expected to
close escrow later this year.
INDUSTRIAL AND OTHER SALES
- --------------------------
During the 1994 first quarter, a 1.25-acre parcel in Valencia Auto Center
contributed $925,000 to revenues and $620,000 to income. The parcel was
purchased by Parkway Motors, a major Cadillac, Oldsmobile and GMC truck dealer,
for expansion of its truck operations. An expansion of Valencia Auto Center is
planned as a result of its tremendous success.
The prior year first quarter included the sale of a 2-acre parcel which
contributed $524,000 to revenues and $254,000 to income. In addition, in the
prior year quarter, deferred revenues of $1.7 million and income of $476,000
were recognized from sales in prior years under percentage of completion
accounting.
With lower vacancy rates in Valencia and demand for space increasing, the
Company is negotiating with several major companies for future land
<PAGE> 10
10.
sales and build-to-suit opportunities. At March 31, 1994, four commercial
parcels totaling eight acres were in escrow with closings scheduled for later
this year. The closing of these transactions is subject to financing
conditions and other significant contingencies, and therefore may not take
place as planned.
COMMUNITY DEVELOPMENT
- ---------------------
A 27% reduction in community development expenses from the comparable prior
year period is primarily due to initial planning and entitlement expenses
incurred in the prior year relating to the McDowell Mountain Ranch in
Scottsdale, Arizona. The master plan and zoning for this new planned comunity
were approved in March, 1993 by the Scottsdale City Council for development of
over 4,000 homes and 70 acres of commercial property.
COMMERCIAL OPERATIONS
- ---------------------
Commercial operations include the Company's portfolio of income-producing
properties and the Natural Resources division, consisting of Valencia Water
Company, a wholly-owned public water utility, and the Company's energy
operations.
The primary contributor to increases in revenues and income from commercial
operations is a drought recovery surcharge approved by the California Public
Utilities Commission for Valencia Water Company. The surcharge covers a
12-month period which began in May, 1993.
Results from the Company's portfolio of income-producing properties were
approximately even with the prior year period. At Valencia Town Center, our
regional shopping mall, Eddie Bauer, a national sportswear clothing chain,
opened in the first quarter, and The Disney Store is expected to open later
this year. At Castaic Village, the Company's newest neighborhood shopping
center, over 90% of the space built to date is leased. The Company's two
office buildings are nearly 100% leased and apartment complexes reported higher
operating income for the first quarter compared to last year, with vacancy
rates averaging only 5%.
A 175,000-square-foot build-to-suit for ITT Corporation will be completed this
summer. ITT will join the U.S. Postal Service regional mail processing
facility in the Company's Valencia Commerce Center. An additional long-term
lease has been executed to construct a 7,000-square-foot retail store for
Trader Joe's, a popular specialty food retailer.
AGRICULTURAL OPERATIONS
- -----------------------
Increases in revenues and income from agricultural operations from the prior
year's first quarter results are primarily due to an early harvest of avocados
with favorable prices and yields.
RANCH SALES
- -----------
<PAGE> 11
11.
In the 1993 first quarter, a total of 1,990 acres at the Merced and Meridian
Ranches were sold contributing $1.2 million to revenues and $972,000 to income.
No farm land was sold in the current year first quarter.
The Company plans to market for sale its remaining 14,840 acres of
non-strategic farm land during 1994. At March 31, 1994, no agricultural
parcels were in escrow.
EARTHQUAKE DAMAGE
- -----------------
As a result of the earthquake which struck the San Fernando Valley on January
17, 1994, a $3.7 million charge was taken in the first quarter for damages to
the Company's properties not covered by insurance. This does not include
damages incurred by Valencia Water Company, the Company's wholly-owned public
water utility. While Valencia Water Company is liable for deductible amounts
on three storage tanks which were lost and damages to underground water
facilities which are not insurable, it is expected that those costs will be
recovered through rate adjustments.
GENERAL AND ADMINISTRATIVE EXPENSE
- ----------------------------------
Reduced expense recoveries for tax accounting fees billed to outside
partnerships and costs associated with an additional board of directors meeting
due to the January 17, 1994 earthquake contributed to a 5% increase in general
and administrative expenses from the comparable prior year period.
INTEREST AND OTHER, NET
- -----------------------
Increased interest expense in the current year period is attributable to a $30
million unsecured loan obtained from a major insurance company in December,
1993. Also, contributing to the increase in Interest and Other, net is a
reduction in interest income from notes receivable which were collected in the
prior year partially offset by income from additional cash available for
investment.
Part II. Other Information
- --------------------------
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(b) The following report was filed on Form 8-K in the first quarter ended
March 31, 1994:
<TABLE>
<CAPTION>
Financial
Statements
Date Item Reported Filed
------------ ------------------------------------- ----------
<S> <C> <C>
None
</TABLE>
<PAGE> 12
12.
SIGNATURES
Pursuant to the requirements 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.
THE NEWHALL LAND AND FARMING COMPANY
(a California Limited Partnership)
------------------------------------
Registrant
By Newhall Management Limited Partnership,
Managing General Partner
By Newhall Management Corporation,
Managing General Partner
Date: May 06, 1994 By / S / THOMAS L. LEE
----------------------------------------
Thomas L. Lee, Chairman
and Chief Executive Officer of
Newhall Management Corporation
(Principal Executive Officer)
Date: May 06, 1994 By / S / ROBERT D. WILKE
----------------------------------------
Robert D. Wilke, Vice Chairman and
Chief Financial Officer of
Newhall Management Corporation
(Principal Financial Officer)
Date: May 06, 1994 By / S / DONALD L. KIMBALL
----------------------------------------
Donald L. Kimball, Controller of
Newhall Management Corporation
(Principal Accounting Officer)
