<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
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 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 1-7585
THE NEWHALL LAND AND FARMING COMPANY
(a California Limited Partnership)
(Exact name of Registrant as specified in its charter)
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<S> <C>
CALIFORNIA 95-3931727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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23823 Valencia Boulevard, Valencia, California 91355
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (805) 255-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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<S> <C>
Name of each exchange
Title of each class on which registered
----------------------- ---------------------------
Depositary Receipts New York Stock Exchange
Pacific Stock Exchange
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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 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 depositary receipts held by non-affiliates
based upon the closing price of such depositary receipts on the New York Stock
Exchange on February 28, 1995, was $465,130,999.
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THE NEWHALL LAND AND FARMING COMPANY
1994 FORM 10-K
TABLE OF CONTENTS
<TABLE>
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Page
PART I Number
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<S> <C> <C>
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . 12
Part II
Item 5. Market for the Registrant's Depositary Units and Related Security Holder Matters . . . . . . . . 13
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . 14
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . 43
Part III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . 44
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . 66
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . 69
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K . . . . . . . . . . . . . . . . 70
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
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PART I
ITEM 1. BUSINESS
INTRODUCTION
The Newhall Land and Farming Company (a California Limited
Partnership) ("the Company" or "the Partnership") is engaged in the development
of residential, industrial and commercial real estate and in agriculture and is
one of California's largest land resource companies. The interests in the
Company (other than those held by the general partners) are represented by
transferable Depositary Units listed on the New York and Pacific Stock
Exchanges under the ticker symbol NHL. The Company was reorganized from a
corporation to a limited partnership on January 8, 1985. The predecessor
corporation was established in 1883 by the family of Henry Mayo Newhall and the
shares of the corporation were listed on the New York Stock Exchange in 1970.
The Company's primary business is developing master-planned
communities. Since 1965, the Company has been developing the new town of
Valencia on a portion of the Company's landholdings in Los Angeles County. With
nearly 10,000 acres remaining to be developed, Valencia now is the regional
center and focal point for north Los Angeles County and is home to more than
32,000 residents and 1,000 companies that provide over 25,000 jobs. Regional
centers generate long-term increases in land values with the more intensive
development of industrial and commercial business parks and shopping centers,
along with a broader range of single-family and multi-family homes.
During 1994, the Company started the entitlement process on a new
planned community to be called Newhall Ranch. This new town will be located on
12,000 acres just west of Valencia along Highway 126 and will extend to the
Ventura County line. Plans outline a balanced community designed for 70,000
residents, over 24,000 homes, a golf course and lake, schools and parks.
Valencia and Newhall Ranch together form one of the nation's most valuable
landholdings. They are located on the Company's 37,000 acres, approximately 30
miles north of downtown Los Angeles and within 10 miles of the San Fernando
Valley which has a population of over 1.3 million people. The property is
bisected by Interstate 5, California's principal north-south freeway, and four
major freeways intersect Interstate 5 within ten minutes of Valencia.
In 1993, the Company exercised its first option on approximately 700
acres and purchased 160 acres in Scottsdale, Arizona, for development of
McDowell Mountain Ranch, a new 3,200-acre master-planned community. Options
remain on an additional 1,400 acres and approximately 900 acres of desert
hillside have been dedicated to the City of Scottsdale for open space. The
master plan and zoning for the new community were approved by the Scottsdale
City Council in 1993, allowing development to begin. The master plan calls for
more than 4,000 homes and 70 acres of retail and commercial development. When
completed McDowell Mountain Ranch will be home to nearly 10,000 residents and
include an elementary school, a middle school, a large community park and a
wide range of neighborhood recreation centers and other amenities. During
1994, the Company began developing the first phase of the project and selling
unfinished residential lots. At year end, six home builders were active in this
new planned community.
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ITEM 1. BUSINESS (continued)
Acquisition of the McDowell Mountain Ranch property is part of the
Company's plan to diversify and expand during the 1990s with the development of
planned communities in growing areas of California and other western states.
Prospective parcels must meet certain criteria, including size, proximity to a
major urban center and near-term development potential.
In the late 1980s, the Company adopted the strategy of selling farm
properties with little or no potential for development and redeploying the
proceeds into real estate operations. As of December 31, 1994, more than
22,000 acres of non-strategic farm land have been sold. The Company continues
to market for sale its remaining 9,440 acres at the Merced Ranch. The Company
intends to retain and continue agricultural operations on the 16,000-acre
Newhall Orchard in Ventura County; the 38,800-acre Suey Ranch, where
development will be considered in the future; and the 14,000-acre New Columbia
Ranch which is being retained for its substantial surface and underground water
supplies.
For information on damage to the Company's properties from the
earthquake which struck the San Fernando Valley on January 17, 1994, see the
"Earthquake Damage" section of Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Financial information concerning the Company's business segments
appears in Note 11 of the Notes to Consolidated Financial Statements in this
Annual Report. At December 31, 1994, the Company employed 225 persons
including 11 classified as seasonal/temporary.
COMPETITION
The sale and leasing of industrial, residential and commercial real
estate is highly competitive, with competition from numerous and varied
sources. The degree of competition is affected by such factors as the supply
of real estate available comparable to that sold and leased by the Company and
the level of demand for such real estate. In turn, the level of demand is
affected by interest rates and general economic conditions. The Company is not
dependent upon any one customer for a significant portion of its revenues.
GOVERNMENTAL REGULATION AND ENVIRONMENT
The governmental review process through which landholdings must go
before real estate projects are approved and can be built by the Company is
referred to as the entitlement process. This process has become increasingly
complex and projects often require several years to pass through the
requirements of various governmental agencies.
In developing its projects, the Company must obtain the approval of
numerous governmental authorities regulating such matters as permitted land
uses, levels of population, density and traffic, and the provision of utility
services such as electricity, water and waste disposal. In addition, the
Company is also subject to a variety of federal, state and local laws and
regulations concerning protection of health and the environment. This
governmental regulation affects the types of projects which can be pursued by
the Company
2
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ITEM 1. BUSINESS (continued)
and increases the cost of development and ownership. The Company devotes
substantial financial and managerial resources to complying with these
requirements and dealing with this process. To varying degrees, certain
permits and approvals will be required to complete the developments currently
being undertaken, or planned, by the Company. In addition, the continued
effectiveness of permits already granted is subject to factors such as changes
in policies, rules and regulations and their interpretation and application.
The ability of the Company to obtain necessary approvals and permits for its
projects can be beyond the Company's control and could restrict or prevent
development of otherwise desirable properties. (See also Item 1 - Community
Development)
APPRAISAL OF REAL PROPERTY ASSETS
The Company obtains annual appraisals of substantially all of its real
property assets and engaged the independent firm of Buss-Shelger Associates,
MAI real estate appraisers, to perform the appraisals as of December 31, 1994.
The assets appraised by Buss-Shelger had an aggregate net book value of
$244,796,000 at December 31, 1994 and did not include oil and gas assets, water
supply systems, cash and cash equivalents and certain other assets.
For the purpose of the appraisals, market value was defined as the
most probable price in terms of money which a property should bring in a
competitive and open market under all conditions requisite to a fair sale, the
buyer and seller each acting prudently, knowledgeably and assuming the price is
not affected by undue stimulus. A significant portion of the appraised real
property assets is located on the Company's 37,000 acres, 30 miles north of
downtown Los Angeles and currently is undeveloped. The appraised value of
undeveloped assets reflects the discount or developer's profit necessary to
provide a third-party buyer with the incentive to purchase and undertake the
risks inherent in the development process.
The Company believes that its strategy of selling entitled and
primarily finished parcels on which the development process is substantially
complete, or retaining land for development of building improvements, has
enabled the Company to realize the fullest value from its various assets. The
Company intends to continue the development of Valencia and the surrounding
area, and plans to do so more aggressively as market conditions improve.
Entitlements and the continuing development of Valencia enhance the
appraised value of the Company's land assets. Although raw land increases in
value as development opportunities arise, the most significant increases occur
when necessary land use entitlements, including zoning and mapping approvals,
are obtained from city and county governments. The appraised values of the
Company's land and income-producing properties in the Valencia master-planned
community have increased from $222 million in 1984, the first year independent
property appraisals were obtained, to $766 million in 1994, despite declines in
recent years.
On a per unit basis, the Company's net appraised value has increased
from $11.74 to $21.86 over the same 11-year period. A summary of appraised
values of properties owned for each of the last six years as of December 31
follows (the appraisals were performed by independent appraisers except as
noted):
3
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ITEM 1. BUSINESS (continued)
<TABLE>
<CAPTION>
APPRAISED VALUES 1994 1993 1992
---------------------------- ----------------- -----------------
Percent Percent Percent
$ in millions, except per unit Acres Amount Change Amount Change Amount Change
------- ------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Valencia and nearby properties 8,540 $486 3 % $472 (4)% $493 (8)%
Income-producing real estate 810 280 3 273 5 260 16
------- ------ --- ------ --- ------ ---
Total Valencia area properties 9,350 766 3 745 (1) 753 (1)
Other community development
properties including Newhall
Ranch and McDowell
Mountain Ranch 67,510 118 20 98 15 85 (5)
Agricultural properties 23,440 35 (27) 48 (14) 56 (29)
not included above
Mortgage and other debt (146) (16) (174) 32 (132) 67
at book carrying value
All other, net, not
independently appraised 31 (45) 56 19 47 114
------- ------ --- ------ --- ------ ---
Net appraised value 100,300 $804 4 % $773 (4)% $809 (7)%
======= ====== === ====== === ====== ===
Number of partnership units
outstanding ( 000's ) 36,761 -- 36,757 -- 36,760 --
====== === ====== === ====== ===
Net appraised value
per partnership unit $21.86 4 % $21.04 (4)% $22.01 (7)%
====== === ====== === ====== ===
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<CAPTION>
APPRAISED VALUES 1991 1990 1989
----------------- ----------------- -----------------
Percent Percent Percent
$ in millions, except per unit Amount Change Amount Change Amount Change
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Valencia and nearby properties $535 (8)% $582 (8)% $630 21 %
Income-producing real estate 225 11 202 (7) 217 15
------ -- ------ --- ------ ---
Total Valencia area properties 760 (3) 784 (7) 847 19
Other community development
properties including Newhall
Ranch and McDowell
Mountain Ranch 89 (1) 90 6 85 6
Agricultural properties 79 (2) 81 (8) 88 2
not included above
Mortgage and other debt (79) 32 (60) 94 (31) (48)
at book carrying value
All other, net, not
independently appraised 22 (39) 36 (69) 115 (19)
------ --- ------ --- ------ ---
Net appraised value $871 (6)% $931 (16)% $1,104 15 %
====== === ====== === ====== ===
Number of partnership units
outstanding (000's) 36,755 -- 36,755 (5)% 38,707 (2)%
====== === ====== === ====== ===
Net appraised value
per partnership unit $23.70 (6)% $25.33 (11)% $28.52 18 %
====== === ====== === ====== ===
</TABLE>
Appraised values are judgments. Land and property appraisals are an
estimated value based on the sale of comparably located and zoned real
estate or on the present value of income anticipated from commercial
properties There is no assurance that the appraised value of property
would be received if any of the assets were sold. Certain
reclassifications within categories have been made to prior periods'
amounts to conform to the 1994 presentation; however, prior periods'
amounts have not been restated to reflect land sale activity.
4
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ITEM 1. BUSINESS (continued)
REAL ESTATE
The Company is developing the community of Valencia in Los Angeles
County, California and McDowell Mountain Ranch in Scottsdale, Arizona.
Valencia's development is based on a master plan with residential and
industrial developments forming the basic community structure supported by
shopping centers, schools, colleges, hospital and medical facilities, golf
courses, professional offices and a range of recreational amenities. A system
of landscaped and lighted pedestrian walkways, known as paseos, provide most
residents with access to schools, retail, parks and recreation centers avoiding
automobile traffic.
The Company now is applying its expertise to the development of McDowell
Mountain Ranch, a planned community approved for 4,000 homes and 70 acres of
retail and commercial development in the City of Scottsdale, Arizona. Unique
environmental features, natural habitat and washes have been incorporated in
the planning process. Neighborhood paseo walkways will connect with a
community recreation center, and an extensive wilderness and equestrian trail
system being developed by the city.
The Company also develops and operates a growing portfolio of commercial
properties and provides building-ready sites for sale to industrial and
commercial developers and users.
RESIDENTIAL DEVELOPMENT AND LAND SALES
VALENCIA
In 1993, the Company initiated a program to engage quality national
and regional builders to construct and sell single and multi-family homes in
Valencia through joint ventures with the Company. This development program is
designed to augment the Company's merchant builder lot sale program and is
expected to provide the Company with additional profit participation and
accelerate residential development with emphasis being placed on more
affordable housing markets.
The Company's strategy of increasing the pace of development through
sales of residential lots to merchant builders and homes through joint ventures
contributed to eleven new, more affordable home models in three projects being
added to the product line of homes offered by merchant builders and
joint-venture partners in Valencia in 1994. Valencia now offers homes that
range from the low $100,000s to the mid $300,000s and, at the end of 1994, ten
single and multi-family projects by eight home builders were active in
Valencia. Additional new models catering to the demand for housing below
$200,000 are planned by merchant builders and joint-venture partners in 1995.
At the end of 1994, the Company's joint-venture partners had 34 homes in
escrow.
In 1994, 271 lots were sold to merchant builders of which 176 were
purchased by Beazer Homes for the first homes in Valencia NorthPark, the
Company's newest residential neighborhood. Beazer opened models in August on 83
lots purchased from the Company in the second quarter and, as a result of the
project's success, purchased an additional 93 lots in the fourth quarter and
now is in escrow with 36 additional lots scheduled to close in 1995.
5
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ITEM 1. BUSINESS (continued)
The Company's first joint venture with EPAC Communities, Inc. for 65
single-family homes in Valencia Northbridge was expanded to a total of 79
homes. During 1994, 41 homes closed escrow in this project. Closings are
planned to start in 1995 at Montana Townhomes, a 138- unit project in Valencia
Northbridge and the Company's second joint-venture with EPAC Communities, Inc.
The CourtHome Collection, a 128-home joint venture with RGC, an
innovative Orange County-based builder, which features the most affordable
detached homes offered in Valencia in many years, closed escrow on 5 homes in
1994. Another joint venture planned for 1995 is a 102-townhome project in
Valencia Northbridge with prices starting in the low $100,000s.
MCDOWELL MOUNTAIN RANCH
The master plan and zoning for this 4,000-home planned community in
Scottsdale, Arizona were approved by the Scottsdale City Council in 1993 and,
in 1994, a total of 709 unfinished lots were sold to merchant builders. The
builders include Coventry Homes, a division of Del Webb Corporation; Ryland
Homes; Kaufman & Broad; The Presley Companies; Woodside Homes and Camelot
Homes. Together, these merchant builders will offer homes ranging in price
from $130,000 to $420,000. Initial model openings by merchant builders are
scheduled for the spring of 1995.
The first lot sales are part of approximately 1,400 homes planned on
the initial 680 acres of the project now under development. Construction is
underway on the community recreation center, paseo system and information
center for the new community. At December 31, 1994, 68 additional unimproved
lots were in escrow with closings scheduled in 1995.
INDUSTRIAL DEVELOPMENT AND LAND SALES
The Company develops the infrastructure and provides building-ready
sites to developers and users. Valencia's location just 30 minutes from
downtown Los Angeles on Interstate 5, California's major north-south freeway,
provides an attractive environment for industrial, commercial, service,
distribution and entertainment businesses. The Company's first business park,
Valencia Industrial Center, is home to over 500 companies and employs more than
14,000 people and, at the end of 1994, the vacancy rate in this center was 6.5
percent, an historic low. At December 31, 1994, the Company had over 850 acres
of entitled industrial and commercial land, primarily in the Company's new
business park, Valencia Commerce Center. With no competitive large land
parcels available in Los Angeles County, these entitlements place the Company
in a favorable position as the economy and real estate markets improve.
As a result of continued weakness in Southern California's industrial
and office market, the Company has recorded no industrial or office land sales
since 1992. However, six commercial parcels totaling 12 acres closed escrow in
1994 and included a 2.7-acre parcel for a Saturn dealership; 1.25 acres to a
Cadillac, Oldsmobile and GMC truck dealer;
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ITEM 1. BUSINESS (continued)
a 1.89-acre parcel for retail outlets including Blockbuster Music, Kinko's and
The Men's Wearhouse; and a 4.2-acre parcel for a Barnes & Noble Bookstore with
Starbucks Coffee, two restaurants and other retail outlets. At December 31,
1994, four parcels totaling 11.3 acres were in escrow with closings scheduled
for 1995. Subsequent to year-end, a 1.2-acre industrial parcel closed escrow.
The ability to close the remaining commercial escrows will be dependent upon
market conditions.
Future industrial land sales will be concentrated in the 1,600-acre
Valencia Commerce Center and expansion of the nearly completed Valencia
Industrial Center. With Los Angeles County's northward expansion into the
Santa Clarita Valley and beyond, the U.S. Postal Service chose Valencia
Commerce Center for its new distribution center, which will bring 1,800 jobs to
Valencia. For information on build-to-suit industrial buildings in Valencia
Commerce Center, see the Commercial Real Estate Development section.
COMMUNITY DEVELOPMENT
The Company continues to focus financial and management resources on
planning and entitlements in order to ensure an adequate supply of entitled
land as the California economy and real estate markets improve. In 1994, the
Company began the entitlement process for the largest residential project ever
submitted in the history of Los Angeles County. This new town, to be called
Newhall Ranch, encompasses 12,000 acres located west of Valencia along Highway
126 and extends to the Ventura County Line. The entitlement process for
Newhall Ranch is continuing, and technical environmental studies are being
prepared for the Environmental Impact Report.
At December 31, 1994, the Company had approximately 4,100 residential
units approved in the Valencia area. Significant land development and
infrastructure improvements remain to be completed before the Company can
deliver the majority of these approved lots for sale. The Company is committed
to continuing its entitlement efforts in the future. For additional discussion
of community development and the entitlement process, see Item 1 - Governmental
Regulation and Environment.
COMMERCIAL REAL ESTATE DEVELOPMENT
The Company develops and operates commercial properties in the
Valencia area for the production of income. The Company's growing and
diversified commercial portfolio is expected to continue to provide a
relatively stable source of income and cash flow throughout economic cycles as
well as appreciation in property values.
All income properties experienced high occupancy rates in 1994,
including Valencia Town Center, the Company's regional shopping mall, where The
Disney Store and Eddie Bauer, a national sportswear clothing chain, opened
bringing the center to 95% occupancy. The center continues to attract shoppers
from throughout north Los Angeles County, the San Fernando Valley, and east
Ventura County. Occupancy rates at year-end ranged from 94% to 100% at the
Company's three neighborhood shopping centers and averaged above 98% at the
Company's three apartment complexes despite rental increases averaging 3%.
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ITEM 1. BUSINESS (continued)
Two build-to-suit facilities were completed in 1994. ITT Corporation
consolidated two divisions located in Los Angeles by moving more than 400
employees into a 199,000-square-foot facility, the first build-to-suit project
in Valencia Commerce Center. An offer for sale of the building was under
consideration at December 31,1994. A 7,000-square-foot facility for Trader
Joe's, a popular specialty food retailer, opened in September. Negotiations
for additional build-to-suit facilities are in progress with other companies.
During 1995, the Company plans to start seven new income properties
in Valencia valued at over $160 million including land already owned. The
largest of these projects is Valencia Marketplace, a 760,000-square-foot,
high-volume retail complex. A lawsuit, filed by local environmental groups
following approval by the Los Angeles County Board of Supervisors in July,
1994, was dismissed on March 9, 1995. Pending a 60-day appeal period,
construction could start later this year with opening in late 1996 or early
1997.
Another of the 1995 projects is a 200,000-square-foot
office/manufacturing building for Remo, Inc., an international manufacturer of
percussion products. The $10.5 million, build-to-suit facility will be located
on 10.5 acres in Valencia Commerce Center, the Company's newest business park.
Remo, one of the world's largest drum manufacturers, will move its 38-year old
company from North Hollywood to Valencia, bringing 300 jobs to the community.
The state-of-the-art building is expected to be completed by March, 1996. Remo
will join the U.S. Postal Service regional distribution facility and ITT
Corporation in the new business park which is located immediately west of
Interstate 5 and north of Highway 126.
Additional future plans include community shopping centers, apartment
projects, restaurants, commercial recreational facilities, office buildings and
hotels. The timing for development of future projects will be dictated by
market conditions. On January 26, 1995, the Company disclosed that it is
considering offers for sale of its Bouquet Shopping Center which was built in
1985 and consists of approximately 150,000 square feet on 12.3 acres. The sale
is in line with the Company's strategy of selectively selling more mature
income properties as additional projects are developed. If completed on the
terms contained in the offers, the sale would contribute approximately
$10 to $12 million to earnings. No assurances can be given that a sale will
be completed on the terms contained in the offers or that a sale will be
completed at all.
For a description of the commercial properties, see Item 2 -
Properties.
NATURAL RESOURCES DIVISION
The Natural Resources division includes Valencia Water Company, a
wholly-owned subsidiary that supplies water to Valencia and some adjacent
developments, and the Energy operation which grants leases, seismic options and
similar rights to others on the Company's properties while ensuring that oil
and gas activities do not interfere with development plans.
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ITEM 1. BUSINESS (continued)
Valencia Water Company is a regulated public utility serving over
15,100 metered customers in the Valencia area. The water supply for the
service area is obtained from wells owned by Valencia Water Company and by
purchases from the California State Water Project. In 1994, almost 55% of
Valencia Water Company's water was supplied through ground sources, compared
with approximately 50% in 1993. Significant progress was made in 1994 with
regard to resolving one of California's long standing water disputes over the
protection of the San Francisco Bay - Sacramento/San Joaquin Delta. This is an
important first step in providing the State's urban areas with a reliable water
supply.
The Energy operations consist primarily of royalty interests in oil
and gas assets on the Company's ranches. The Company has royalty interests in
209 oil wells and 16 gas wells located on the Newhall and Meridian Ranches.
The Company will retain a 50% royalty interest until June 30, 2000 in wells on
the Meridian Ranch which was sold in 1994.
AGRICULTURE
The Company's agricultural operations consist primarily of farming
operations. Approximately 65,000 acres of ranch land at the Suey and Newhall
Ranches not suitable for cultivation are leased out for cattle grazing. In
line with the Company's strategy of selling farm properties with little or no
potential for development and redeploying the proceeds into real estate
operations, the 5,370-acre Meridian Ranch was sold in 1994.
The Company will retain the Newhall Ranch where development is
continuing, the Suey Ranch where development will be considered in the future
and the New Columbia Ranch where there exists substantial surface and
underground water supplies. The Company plans to continue to market for sale
its remaining 9,440 acres of non-strategic farm land at the Merced Ranch.
FARMING
Large scale, highly mechanized farming operations are conducted on
four of the Company's ranches. Labor intensive crops are generally grown by
tenants to whom land is leased on both cash and percentage-of-crop terms. Of
the Company's land devoted to farming, over 70% is leased to others.
Approximately one-third of the Company's farm crop is marketed through
agricultural cooperatives. The remainder, such as tomatoes, carrots, grapes,
alfalfa and wheat, is marketed directly by the Company.
The Company's ranches supply most of their water through underground
sources and are not dependent on state or federal water projects. The Company
continues to improve conservation practices to minimize the cost of irrigation
and the amount of water used.
The principal agricultural properties include the Merced and New
Columbia Ranches in the San Joaquin Valley, the Newhall Ranch in Los Angeles
and Ventura Counties and the Suey Ranch in Santa Barbara and San Luis Obispo
Counties. During the calendar year 1994, over 20 different crops were raised
by the Company and its tenants.
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ITEM 1. BUSINESS (continued)
The following table shows the approximate planted acreage of significant crops
during 1994:
<TABLE>
<CAPTION>
Crop Acreage Crop Acreage Crop Acreage
- ---- ------- ---- ------- ---- -------
<S> <C> <C> <C> <C> <C>
Alfalfa 3,218 Corn 443 Oranges 841
Almonds 145 Cotton 8,174 Rice 417
Avocados 107 Grapefruit 58 Safflower 1,769
Barley 1,879 Grapes 678 Sugar Beets 133
Beans 822 Lemons 447 Sudan Grass 200
Carrots 647 Melons 998 Tomatoes 3,000
Christmas Trees 42 Oats 540 Vegetables 1,719
Wheat 4,294
</TABLE>
ITEM 2. PROPERTIES
LAND
Listed below is the location and acreage of properties owned by the Company at
December 31, 1994:
<TABLE>
<CAPTION>
Ranch State County Acreage
----- ----- ------ -------
<S> <C> <C> <C>
Cowell California Contra Costa 110
Merced California Merced 9,440
New Columbia California Madera 14,000
Suey California Santa Barbara/San Luis
Obispo 38,800
Newhall California Los Angeles/Ventura 37,380
-------
99,730
McDowell Mountain Arizona Maricopa 570(1)
-------
100,300
=======
</TABLE>
(1) An additional 1,430 acres are under long-term option.
PLANTS AND BUILDINGS
Agriculture - Various buildings located on four farming operations in
California and office and maintenance buildings located in Dixon, California.
10
<PAGE> 13
ITEM 2. PROPERTIES (continued)
Commercial Real Estate - Listed below is the location, square footage and
anchor tenants of commercial properties owned by the Company at December 31,
1994. Other commercial properties not shown in the table include various
commercial, industrial and restaurant buildings. The commercial properties are
leased to 196 tenants, not including apartment complexes.
<TABLE>
<CAPTION>
Gross
Retail Centers Date Open Sq. Ft. Anchor Tenants
- ---------------------- --------- ------- -------------------------------
<S> <C> <C> <C>
Valencia Town Center 1992 790,000 Robinsons-May, JC Penney, Sears
Castaic Village 1992 91,800 Ralphs, PayLess Drugstores
River Oaks 1987 273,500 Mervyn's, Target
Bouquet Center 1985 149,760 Hughes, Sav-on Drugs
Office & Mixed Date Open/ Gross
Use Projects Acquired Sq. Ft. Major Tenants
- ---------------------- ---------- ------- -------------------------------
City Center
Office Building 1991 44,760 Bank of America
Orchard Plaza 1989 17,400 Newhall School District
Valley Business Center 1987 56,800
Headquarters Building 1978 59,300
Build-to-Suit Gross
Facilities Date Open Sq. Ft. Tenants
- ---------------------- --------- ------- -------------------------------
Industrial building 1994 199,000 ITT Corporation
Retail store 1994 7,000 Trader Joe's
Apartment Complexes # of Units
- ---------------------- ----------
Portofino 1989 216
Northglen 1988 234
Stonecreek 1985 208
</TABLE>
Valencia Water Company - 14 distribution reservoirs, 14 booster pumping
stations, approximately 200 miles of pipeline and other utility facilities.
All of the commercial real estate properties and the properties of
Valencia Water Company are located in and around Valencia, California and are
owned by the Company. A $60 million mortgage is secured by the Portofino,
Northglen and Stonecreek apartment complexes, River Oaks and Bouquet community
shopping centers, and the Company's headquarters building. An $11 million
financing is secured by the water utility plant of Valencia Water Company. For
additional information concerning encumbrances against Company properties,
refer to Note 8 of the Notes to Consolidated Financial Statements in this
Annual Report.
For a discussion of the impact of the January 17, 1994 earthquake on
the Company's properties, see the "Earthquake Damage" section of Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
11
<PAGE> 14
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in litigation and various claims, including
those arising from its ordinary conduct of business. Management is of the
opinion that the ultimate liability from this litigation will not materially
affect the Company's consolidated financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
<PAGE> 15
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S DEPOSITARY UNITS AND RELATED SECURITY
HOLDER MATTERS
MARKET PRICE AND DISTRIBUTION DATA
<TABLE>
<CAPTION>
Market Price Distributions
------------------------------ ------------------------
Years ended December 31, Years ended December 31,
------------------------------ ------------------------
1994 1993 1994 1993
---- ---- ---- ----
Per unit High Low High Low
- ------------------------ -------- -------- -------- -------
<S> C> <C> <C> <C> <C> <C>
First quarter $17-1/4 $13-3/8 $17-1/2 $13-1/2 $.10 $.10
Second quarter 16-3/8 14 17-1/4 13-5/8 .10 .10
Third quarter 15-1/4 14-1/8 15-3/8 13-5/8 .10 .10
Fourth quarter 15 12 16 14 .10 .10
---- ----
Total distributions $.40 $.40
==== =====
Year's high and low 17-1/4 12 17-1/2 13-1/2
1994 1993
------- ----
December 31 closing price $12-1/8 $16
</TABLE>
The Company's partnership units are traded on the New York and Pacific Stock
Exchanges under the ticker symbol NHL and, at December 31, 1994, the Company
had approximately 1,760 unitholders of record. The Company has paid
uninterrupted quarterly cash distributions since 1936. 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.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------------------------
In thousands, except per unit 1994 1993 1992 1991 1990
- ----------------------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues $134,268 $105,452 $128,182 $150,762 $192,886
Operating income 34,607 28,538 31,636 43,232 48,487
Net income 15,574 12,797 17,211 30,085 38,378
------------------------------------------------------------
Per partnership unit:
Net income $.42 $.35 $.47 $.82 $1.02
Distributions .40 .40 .60 .80 .80
Partners' capital 3.06 3.03 3.08 3.20 3.18
Appraised value (unaudited) 21.86 21.04 22.01 23.70 25.33
-------------------------------------------------------------
Total assets $343,792 $359,898 $323,082 $280,575 $265,406
Total debt and other long-term
obligations 176,913 207,571 160,458 106,271 86,206
Partners' capital 112,357 111,279 113,049 117,785 116,947
Average units utilized in computing
net income per unit 36,789 36,790 36,796 36,831 37,543
-------------------------------------------------------------
</TABLE>
13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Years ended December 31, 1994, 1993 and 1992
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $7.7 million at December
31, 1994, a decrease of $32.0 million for the year. The decrease was primarily
due to retiring a $40 million loan obtained for construction of Valencia Town
Center. There were no borrowings outstanding at December 31, 1994 against a new
$40 million mortgage credit facility for Valencia Town Center or the Company's
unsecured lines of credit which increased $12 million in 1994 to a total of $81
million. At December 31, 1994, over $125 million in cash and credit was
available to fund future operations. At year-end there was no debt against raw
land or land under development in Valencia.
Cash flow in 1994 was adequate to cover the year's quarterly
distributions of 10 cents per partnership unit, fund the Company's on-going
development projects and end 1994 with no short-term borrowings. The Company
believes it has adequate sources of cash from operations and available credit
to finance future operations as well as take advantage of new development
opportunities.
There are no material commitments for capital expenditures other than
in the ordinary course of business. The Company plans to start seven new
commercial projects in 1995, valued at over $160 million including land already
owned. Approximately $28 million is expected to be invested in these projects
in 1995.
In 1995, the Board of Directors approved the repurchase of up to
600,000 of the Company's units depending on market conditions. Also, the
Company is actively searching for additional large landholdings with
development potential in California or other western states. At December 31,
1994, several properties were under review.
OPERATING ACTIVITIES: Cash provided from operating activities during 1994
totaled $20.9 million and included sales of 1,026 residential lots and homes in
Valencia and at McDowell Mountain Ranch, the 5,370-acre Meridian Ranch and 12
commercial acres in Valencia. These sales provided the Company with $75.7
million in cash and notes totaling $9 million. In addition, $11 million was
collected in 1994 from prior year land sales. The Company accepted $8.9 million
and collected $22.2 million in notes receivable in 1993. For 1992, the Company
accepted $29 million and collected $10.7 million in notes receivable.
The increase in inventories for 1994 was due to land development and
infrastructure to support pending and future land sales and residential
construction costs for the Company's joint venture projects. These expenditures
totaled $66.6 million for 1994, including approximately $13.4 million related
to McDowell Mountain Ranch, the majority of which has been funded by
improvement district bonds sponsored by the City of Scottsdale. Total inventory
expenditures were partially offset during 1994 by real estate sales in Valencia
and McDowell Mountain Ranch. Deferred revenues of $650,000 were recognized in
1994 from land sales in prior years. At December 31, 1994, $5.2 million in
deferred
14
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
revenues remained to be recognized in future periods as the Company completes
required site development, landscaping and amenities. In 1993, $11.2 million in
deferred revenues were recognized from land sales in prior years and, at the
end of 1993, $1.8 million remained to be recognized. In 1992, the Company
recognized $8.0 million in deferred revenues and $11.6 million remained to be
recognized at the end of that year. Recognition of deferred revenues has no
impact on the Company's cash position.
INVESTING ACTIVITIES: Capital expenditures totaled $11.9 million in 1994. This
includes $5.1 million of construction costs for a 199,000-square-foot
build-to-suit facility for ITT Corporation in Valencia Commerce Center and a
7,000-square-foot build-to-suit facility for Trader Joe's, a specialty food
retailer. Also included are expenditures for various commercial tenant
improvements and water utility construction costs.
In 1993, capital expenditures totaled $9.5 million and included $4.6
million of construction costs for Castaic Village, a 130,000-square-foot
neighborhood shopping center north of Valencia. Other capital expenditures
included water utility construction, land preparation for the ITT building and
various improvements to commercial properties.
Capital expenditures during 1992 totaled $60 million, of which
construction costs and infrastructure improvements for Valencia Town Center,
the Company's regional shopping center, amounted to $50.4 million. Other
capital expenditures in 1992 included $3.8 million for the first phase of
Castaic Village and the purchase of the 433-acre Isola Ranch for $2.7 million.
FINANCING ACTIVITIES: In each of 1994 and 1993, the Company paid four
quarterly cash distributions totaling $14.7 million, or 40 cents per
partnership unit per year. In July 1992, the Board of Directors reduced the
quarterly cash distribution to 10 cents from 20 cents per unit. The declaration
of distributions is reviewed by the Board of Directors on a quarterly basis,
and the amount is determined after consideration of the Company's earnings,
cash requirements, financial condition and prospects.
In July 1994, following approval by the California Public Utilities
Commission, Valencia Water Company finalized an $11 million long-term financing
with a major insurance company. Also in 1994, Valencia Town Center's $40
million construction loan was prepaid without penalty and replaced with a $40
million revolving mortgage credit facility. There were no borrowings against
this credit facility at December 31, 1994.
During 1994, the Company commenced infrastructure development
activities at its McDowell Mountain Ranch, a portion of which is being funded
through approximately $17 million of improvement district bonds. As of December
31, 1994, $11.4 million of the $17 million had been expended to construct these
improvements of which $6.4 million remained as project debt after retirement of
bonds for lots sold. In addition, $11.9 million in community facilities
district bonds were placed by the City of Scottsdale to construct certain
public improvements within McDowell Mountain Ranch. Although these bonds are
not reflected as project debt, the Company is obligated to pay an ad valorem
property tax for these improvements until parcels are sold.
15
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
RESULTS OF OPERATIONS
Revenues and earnings improved in 1994, ending four years of decline.
The 22% increase in net income came despite a 1994 charge of $3.7 million, or
10 cents per partnership unit, for earthquake damage not covered by insurance.
The earnings increase came primarily from the sale of 1,026
residential lots and homes, of which 709 lots were at McDowell Mountain Ranch,
the Company's newest planned community in Scottsdale, Arizona and the sale of
farm land with no development potential which contributed $9.2 million to
operating income.
A five-year summary of revenues and operating income for each of the
Company's major business segments is listed below.
FIVE YEAR SUMMARY
<TABLE>
<CAPTION>
In thousands Years ended December 31,
-------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
REVENUES
Real estate
Residential home and
land sales $58,006 $31,499 $60,088 $41,778 $117,327
Industrial and other sales 11,667 15,811 3,342 57,283 13,866
Commercial operations 36,385 32,469 25,487 22,460 22,104
Agriculture
Operations 16,410 15,761 17,605 25,391 30,589
Ranch sales 11,800 9,912 21,660 3,850 9,000
-------- -------- -------- -------- --------
TOTAL REVENUES $134,268 $105,452 $128,182 $150,762 $192,886
======== ======== ======== ======== ========
OPERATING INCOME
Real estate
Residential home and
land sales $11,206 $8,116 $9,536 $6,767 $25,339
Industrial and other sales 5,048 4,422 761 24,624 8,024
Community development (6,679) (6,126) (7,759) (6,150) (6,126)
Commercial operations 15,879 14,518 11,700 10,926 10,228
Agriculture
Operations 3,626 2,438 2,905 4,238 4,996
Ranch sales 9,227 5,170 14,493 2,827 6,026
Earthquake damage (3,700) -- -- -- --
-------- -------- -------- -------- --------
TOTAL OPERATING INCOME $34,607 $28,538 $31,636 $43,232 $48,487
======== ======== ======== ======== ========
</TABLE>
16
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
RESIDENTIAL HOME AND LAND SALES
VALENCIA: The Company continues to benefit from its strategy of selling
residential lots to merchant builders and homes through joint ventures. At the
end of 1994, ten single and multi-family products were being offered in
Valencia by eight home builders. Results for 1994 include sales of 271 lots to
merchant builders which contributed $21.1 million to revenues and $4.2 million
to income under percentage of completion accounting and 46 escrow closings from
joint ventures which contributed $14.9 million to revenues and $2.5 million to
income.
In 1992, the Company lowered its lot prices to remain competitive. As
a result, profit margins in the past three years have been reduced. The Company
continues to focus on ways to improve margins and maximize per acre income
through the introduction of higher-density residential products in Valencia
NorthPark and the creation of strategic homebuilding joint ventures.
A total of 62 residential lots were sold to merchant builders in 1993
and 399 lots in 1992. Lot sales in 1993 and 1992 contributed $4.6 million and
$32.7 million to revenues and $541,000 and $3.7 million to income,
respectively, under percentage of completion accounting. Also included in 1993
results were 21 home closings from the Company's first joint venture which
generated revenues of $6.7 million and income of $1.0 million plus the sale of
220 acres at the Cowell Ranch in northern California for $6.0 million which
contributed $5.3 million to income.
Transition from the Company's own home construction operations was
completed in 1993 when 30 homes closed escrow compared with 88 in 1992.
No deferred revenues or income were recognized in 1994 from prior
residential lot sales under percentage of completion accounting. This compares
with deferred revenues of $6.9 million and $6.1 million and income of $1.2
million and $5.5 million recognized in 1993 and 1992, respectively.
The Company does not expect any profit participation income related to
recent lot sales because of the more competitive market and lower margins being
realized by home building companies. Cash received from prior residential land
sale profit participation agreements added $100,000 to revenues and income in
1993 and $733,000 in 1992.
MERCHANT BUILDER PROGRAM: At the end of 1994, six major home builders were
active in Valencia with seven different residential products on finished lots
purchased from the Company. Home sales continue to increase as the variety of
homes offered appeal to a broad spectrum of buyers.
Merchant builders closed escrow on 193 homes in 1994. During 1993,
merchant builders closed escrow on 137 homes. These builders had 56 homes in
escrow at December 31, 1994.
17
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Although the Company does not participate directly in the profits
generated from escrow closings by merchant builders, the absorption of these
previously sold lots is key to the Company's future success in selling
additional lots. For example, Beazer Homes opened models in Valencia NorthPark
in August on lots purchased from the Company in the second quarter of 1994.
Within two months Beazer was selling its second phase of homes and, because of
such success, purchased an additional 93 lots in the fourth quarter and is now
in escrow with 36 additional lots scheduled to close in 1995.
JOINT VENTURE PROGRAM: In addition to the sale of entitled residential lots to
merchant builders, the Company is continuing its strategy of increasing the
pace and profitability of residential development in Valencia through joint
ventures. Under the terms of these joint ventures, the Company recognizes its
portion of revenues and income as homes close escrow to homebuyers. Generally,
these sales provide the Company with increased income as it participates in the
builder profit. The Company expects to generate an increasing proportion of its
revenues and income from joint ventures in 1995.
The Company's first joint venture with EPAC Communities, Inc. expanded
from 65 homes in 1993 to a total of 79 homes. During 1994, 41 homes closed
escrow in this project and 5 homes closed escrow in RGC's CourtHome Collection,
a 128-home project in Valencia NorthPark. The CourtHome Collection is the most
affordable detached home project offered in Valencia in many years. These
single-family homes are clustered around a common courtyard and range in price
from $139,000 to $169,000. In 1993, the EPAC Traditions project recorded 21
home closings.
Two additional joint ventures are planned to start generating revenues
and income for the Company in 1995. Four models, priced from $130,000 to
$160,000, opened in September at Montana Townhomes, a 138-unit project in
Valencia Northbridge, the Company's second joint venture with EPAC Communities,
Inc. Another joint-venture project is planned for 102 townhomes in Valencia
Northbridge. Models featuring three floorplans are expected to open in 1995
with prices starting in the low $100,000s.
MCDOWELL MOUNTAIN RANCH: This first community by the Company outside of
California has attracted considerable interest by merchant builders. As land
development and infrastructure development continues at this 4,000-home planned
community in Scottsdale, Arizona, escrow closed on 604 unimproved residential
lots during the fourth quarter of 1994. Sales of these lots to merchant
builders contributed $18.4 million to revenues and $6.6 million to income under
percentage of completion accounting. Results for 1994 also include the sale of
a 79-acre bulk parcel for 105 unimproved lots outside the planned community
which contributed $3.6 million to revenues and $1.7 million to income. At
December 31, 1994, 68 additional unimproved lots were in escrow with closing
scheduled in 1995.
Construction also started in 1994 on the community recreation center,
paseo system and information center. Initial model openings by merchant
builders are scheduled in the spring of 1995. Builders will offer homes ranging
in price from $130,000 to $420,000, giving homebuyers a wide range of options.
18
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Residential lot sales during 1994 are part of approximately 1,400
homes planned on the first 680 acres of the project now under development. When
the 3,200-acre community is completed, it will be home to nearly 10,000 people
and include 70 acres of commercial development, an elementary school, a middle
school and a large community park.
In acquiring the land for development of McDowell Mountain Ranch, the
seller provided financing at favorable terms to the Company. In addition, much
of the infrastructure is being financed through improvement district and
community facilities bonds sponsored by the City of Scottsdale at favorable
interest rates, and is non-recourse to Newhall Land.
INDUSTRIAL AND OTHER SALES
As a result of continued weakness in Southern California's industrial
and office market, the Company has recorded no industrial or office land sales
since 1992. However, six commercial parcels totaling 12 acres closed escrow in
1994, including a 2.7-acre parcel for a Saturn dealership and a 1.25-acre
parcel to Parkway Motors -- a major Cadillac, Oldsmobile and GMC truck dealer
- -- for expansion of its truck operations. The sale to the Saturn dealership
expands Valencia Auto Center across Valencia Boulevard and increases the Center
to 16 dealerships selling 27 makes of vehicles.
A 1.89-acre parcel was sold across from Valencia Town Center for
retail outlets including Blockbuster Music, Kinko's and The Men's Wearhouse.
Additionally, a 4.2-acre commercial parcel sold on Valencia Boulevard for a
Barnes & Noble book store with a Starbucks Coffee, two restaurants and other
retail outlets. The six 1994 sales contributed $10.9 million to revenues and
$6.8 million to income. Deferred revenues of $650,000 and income of $180,000
were recognized in 1994 from a prior land sale.
In 1993, seven parcels totaling 29.9 acres contributed $10.9 million
to revenues and $5.2 million to income. In addition, $4.3 million in revenues
and $2.3 million in income was recognized under percentage of completion
accounting from prior land sales, including the final income recognition on the
62.4-acre U.S. Postal Service site. In 1992, two sales of commercial land
totaling 4.5 acres closed escrow and contributed $1.3 million to revenues and
$940,000 to income under percentage of completion accounting. Also, $2.0
million in revenues and $1.6 million in income was recognized in 1992 under
percentage of completion accounting from the 1990 sale to the U.S. Postal
Service and the 1991 sale of a 5-acre parcel to Kaiser Permanente.
At December 31, 1994, industrial and commercial land inventories
totaled approximately 850 entitled acres. Final plans for these acres are
subject to review by government agencies before development can proceed, but
these entitlements, and the fact that few competitive large land parcels are
available in Los Angeles County, place the Company in a favorable position as
the economy and real estate markets improve. At December 31, 1994, four parcels
totaling 11.3 acres were in escrow for $6.3 million with closings scheduled for
1995. The ability to close these escrows will be dependent upon market
conditions.
19
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
COMMUNITY DEVELOPMENT
In June 1994, the Company submitted an application to Los Angeles
County for a new 12,000-acre planned community. This new town, to be called
Newhall Ranch, will be located west of Valencia along Highway 126 and will
extend to the Ventura County line.
Plans outline a balanced community designed for 70,000 residents with
more than 24,000 homes, a golf course and lake, schools, parks, an extensive
trail system, and over 5,000 acres of natural open space. The new community
also will include a 200-acre business park and several retail centers to create
significant job opportunities. The Santa Clara River, which runs through the
project, will be preserved in a natural state.
The entitlement process for Newhall Ranch is continuing, and technical
environmental studies are being prepared for the Environmental Impact Report.
At December 31, 1994, the Company had approximately 4,100 residential
units approved in the Valencia area. Significant land development work and
infrastructure improvements remain to be completed before the Company can
deliver the majority of approved lots for sale.
In 1992, the Company received final approval from the Los Angeles
County Board of Supervisors for the 1,800-home Westridge Golf Course Community.
However, following approval, two environmental groups filed a lawsuit
challenging the County's approval and subsequently the court rescinded the
entitlements previously granted. At December 31, 1994, the County was nearing
completion of the Environmental Impact Report addressing the court-mandated
inadequacies. This report is expected to be reviewed by the court and released
to the public in 1995. If approved, the Company could reinstate the
entitlements and begin to develop the community by early 1996 and generate
sales in 1997.
Expenses associated with Community Development activities totaled $6.7
million in 1994, a 9% increase over 1993, principally relating to the newest
planned community, Newhall Ranch. In 1993, Community Development expenses
totaled $6.1 million, a 21% decrease from 1992, primarily as a result of the
Company's success in obtaining entitlements during 1992 and prior years.
Expenses in 1992 totaled $7.8 million. The Company is committed to continuing
its entitlement efforts in the future.
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 Company's income portfolio contributed $13.8 million to
income in 1994, an increase of 16% over 1993. A 19% decrease in 1994 results
from the Natural Resources division reduced the overall increase in 1994
commercial operating income to 9%.
20
<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
The income property portfolio benefited from a strong performance from
Valencia Town Center, the Company's regional shopping mall. Opening of The
Disney Store, Eddie Bauer and other mall shops resulted in mall tenant
occupancy of 95% at the end of 1994. For 1994, contribution to income from
Valencia Town Center was $3.6 million before debt service of $2.2 million, but
after depreciation of $2.8 million. This result was a 25% improvement over
1993. Retail sales per square foot were up 20% for the year.
All income properties experienced high occupancy rates. Valencia
Hilton Garden Inn, a 152-room joint venture hotel, recorded an exceptional
occupancy rate of 92% compared with just under 80% in 1993. At Castaic Village,
the Company's newest neighborhood shopping center, constructed space is 94%
leased. Occupancy at Bouquet Center and River Oaks neighborhood shopping
centers is 99% and 100%, respectively, the same as at the end of 1993. The
Company's three apartment complexes had occupancy rates above 98%, even with
rent increases averaging 3%. At the end of 1993 and 1992, vacancies in the
apartment complexes averaged 4%. The Company's office buildings also enjoy
high occupancy rates.
The commercial portfolio continues to expand as Trader Joe's, a
popular specialty food retailer, opened in September 1994. The
7,000-square-foot facility is a build-to-suit under a long-term lease agreement
with the Company. In October, ITT Corporation began the consolidation of two
divisions by moving more than 400 employees into the Company's first
build-to-suit facility in Valencia Commerce Center. An offer for sale of the
building was under consideration at December 31, 1994. Negotiations for
additional build-to-suit facilities are in progress with other companies.
Valencia Marketplace, a high-volume retail complex, was approved by
the Los Angeles County Board of Supervisors in July 1994. Subsequently, local
environmental groups filed a lawsuit challenging the County's approval, and
construction will be delayed on this 760,000-square-foot project.
A 12-month drought recovery surcharge, approved by the California
Public Utilities Commission (CPUC) for Valencia Water Company, expired in May
1994, contributing to decreases in the Natural Resources division's revenues
and income for the year compared with 1993 results. A 30% rate increase by the
CPUC was approved effective January 1, 1995, and should contribute to an
increase in revenues and income for the year. In the energy operation, natural
gas prices were level but oil prices were down, also contributing to the
decline.
AGRICULTURAL OPERATIONS
Revenues from agricultural operations increased 4% and income
increased 49% primarily as a result of excellent yields and prices for
avocados, grapes and certain row crops. Also, contributing to the increase in
income are expense reductions from streamlined administrative functions and
transition to leasing grazing land to livestock operators.
21
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
In 1993, sales of farm land, partially offset by improved citrus
prices and higher prices and yields for grapes, resulted in net decreases of
10% in revenues and 16% in income from the prior year. In 1992, agricultural
earnings decreased by 32% from the prior year due to the sale of farm
properties and a sharp decline in the price of oranges and lemons.
Agricultural operations will continue to provide returns from the
16,000-acre Newhall Orchard in Ventura County and the 39,000-acre Suey Ranch
where development will be considered in the future. The New Columbia Ranch,
which is being retained for its substantial surface and underground water
supplies, will continue to be leased to tenants and contribute to income.
RANCH SALES
Sale of the 5,370-acre Meridian Ranch for $11.8 million contributed
$9.2 million to 1994 income. In 1993, sale of a total of 3,900 acres of farm
land at the Capay/Wheatland, Merced and Meridian ranches contributed $9.9
million to revenues and $5.2 million to income. The sale of 6,750 acres of farm
land at the Wilson, Merced and Meridian ranches contributed $21.7 million to
revenues and $14.5 million to income in 1992.
The Company continues to market for sale its remaining 9,440 acres at
the Merced Ranch. At December 31, 1994, no agricultural parcels were in escrow.
EARTHQUAKE DAMAGE
Following the earthquake which struck the San Fernando Valley on
January 17, 1994, a $3.7 million charge was taken for damages to the Company's
properties not covered by insurance. This does not include estimated damages of
$3.5 million incurred by Valencia Water Company to its tanks and distribution
system. The majority of these costs are expected to be recovered over time
through rates approved by the CPUC for 1995, and from insurance proceeds. In
1994, the CPUC approved a $785,000 disaster recovery surcharge for emergency
repairs.
GENERAL AND ADMINISTRATIVE EXPENSE
The primary reason for an increase of 13% in total general and
administrative expenses in 1994 is reduced expense recoveries for tax
accounting fees billed to outside partnerships. Reductions in staff and
overhead expenditures resulted in a 3% decrease in 1993 from the prior year and
a 5% decrease in 1992 from 1991.
UNIT OWNERSHIP PLANS
In 1994, a $151,000 expense was recorded for amortization of lapsed
return rights in connection with restricted units issued in 1988 and 1989. An
expense of $250,000 in 1993 and an expense recovery of $900,000 in 1992 were
recorded for fluctuations in the market price of partnership units in
connection with appreciation rights of the Company's outstanding non-qualified
options.
22
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
INTEREST AND OTHER
Increases in interest expense from prior years are attributable to a
$30-million unsecured loan obtained from a major insurance company in December
1993, and rate increases on variable rate project financing. Also contributing
to the increase is a reduction in interest income due to collection of notes
receivable partially offset by income from additional cash available for
investment.
The increase in interest expense in 1993 was due to a construction
loan and community facilities bonds for Valencia Town Center, and a ranch
mortgage obtained in December 1992. Interest income recognized on notes
receivable from land sales reduced the overall increase to 5%. The increase in
interest expense in 1992 was due to construction financing for the regional
mall after completion of the project in September 1992, short-term borrowings
during the year and bank financing for the Company's wholly-owned water
utility. Also, interest income was decreased by the repayment of land sale
notes.
INFLATION AND RELATED FACTORS
The Company's business, like most others, is affected by general
economic conditions and is impacted significantly by conditions in its real
estate markets. Also, fluctuations in interest rates and the availability of
financing to land purchasers have an important impact on Company performance.
The Company believes it is well positioned against any effects of
inflation. Historically, during periods of inflation, the Company has been able
to increase selling prices of properties to offset rising costs of land
development and construction.
However, in the past few years, there has been a decline in land
values in California from the recession and sales prices of Company properties
have shown decreases while costs have remained relatively constant. The
commercial income portfolio is protected substantially from inflation since
percentage rent clauses in the Company's leases tend to adjust rental receipts
for inflation, while the underlying value of commercial properties over the
long-term has tended to rise.
23
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS INCLUDED IN ITEM 8:
Independent Auditors' Report
Consolidated Statements of Income for the years ended
December 31, 1994, 1993 and 1992
Consolidated Balance Sheets at
December 31, 1994 and 1993
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992
Consolidated Statements of Changes in Partners' Capital
for the years ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
24
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Newhall Management Corporation and Partners of The
Newhall Land and Farming Company:
We have audited the accompanying consolidated balance sheets of The Newhall
Land and Farming Company and subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, changes in partners' capital,
and cash flows for each of the years in the three-year period ended December
31, 1994. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Newhall Land
and Farming Company and subsidiaries as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles.
Los Angeles, California /s/ KPMG Peat Marwick LLP
January 18, 1995
25
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------
In thousands, except per unit 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Revenues
Real estate
Residential home and land sales $58,006 $31,499 $60,088
Industrial and other sales 11,667 15,811 3,342
Commercial operations 36,385 32,469 25,487
Agriculture
Operations 16,410 15,761 17,605
Ranch sales 11,800 9,912 21,660
------- ------- -------
TOTAL REVENUES 134,268 105,452 128,182
------- ------- -------
OPERATING EXPENSES
Real estate
Residential home and land sales 46,800 23,383 50,552
Industrial and other sales 6,619 11,389 2,581
Community development 6,679 6,126 7,759
Commercial operations 20,506 17,951 13,787
Agriculture
Operations 12,784 13,323 14,700
Ranch sales 2,573 4,742 7,167
Earthquake damage 3,700 -- --
------- ------- -------
99,661 76,914 96,546
------- ------- -------
OPERATING INCOME 34,607 28,538 31,636
General and administrative expense (8,427) (7,460) (7,706)
(Expense) recovery from unit ownership plans (151) (250) 900
Interest and other, net (10,455) (8,031) (7,619)
------- ------- -------
NET INCOME $15,574 $12,797 $17,211
======= ======= =======
NET INCOME PER UNIT $.42 $.35 $.47
======= ======= =======
</TABLE>
See notes to consolidated financial statements
26
<PAGE> 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------
In thousands, except units 1994 1993
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents $7,656 $39,636
Accounts and notes receivable 18,539 19,508
Land under development 87,423 73,078
Land held for future development 34,103 34,563
Property and equipment, net 184,683 182,332
Other assets and deferred charges 11,388 10,781
-------- --------
$343,792 $359,898
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $14,877 $12,419
Accrued expenses 34,419 26,794
Deferred revenues 5,226 1,835
Mortgage and other debt 145,991 174,157
Advances and contributions from
developers for utility construction 13,477 12,067
Other liabilities 17,445 21,347
-------- --------
Total liabilities 231,435 248,619
Commitments and contingencies (Note 10)
Partners' capital
36,760,606 units outstanding at December 31, 1994 and
36,756,530 units outstanding at December 31, 1993 112,357 111,279
-------- --------
$343,792 $359,898
======== ========
</TABLE>
See notes to consolidated financial statements
27
<PAGE> 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
-----------------------------
In thousands 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $15,574 $12,797 $17,211
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,690 7,329 6,471
(Increase) decrease in land under development (14,345) (22,951) 17,642
Decrease (increase) in accounts and notes receivable 969 12,796 (9,396)
Increase (decrease) in accounts payable, accrued
expenses and deferred revenues 13,474 (8,527) (6,897)
Cost of property sold 1,846 7,131 7,156
Other adjustments, net (4,293) 2,071 (1,387)
------- ------- -------
Net cash provided by operating activities 20,915 10,646 30,800
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (11,887) (9,457) (60,023)
Investment in joint venture 244 289 193
------- ------- -------
Net cash used by investing activities (11,643) (9,168) (59,830)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid (14,704) (14,704) (22,055)
Increase in mortgage and other debt 17,389 54,948 53,345
Decrease in mortgage and other debt (45,555) (12,640) (52)
Increase (decrease) in advances and contributions
from developers for utility construction 1,410 (375) 267
Other, net 208 137 108
------- ------- -------
Net cash (used) provided by financing activities (41,252) 27,366 31,613
------- ------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (31,980) 28,844 2,583
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 39,636 10,792 8,209
------- ------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $7,656 $39,636 $10,792
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid (net of amount capitalized) $9,385 $8,722 $6,397
</TABLE>
See notes to consolidated financial statements
28
<PAGE> 31
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
Number Partners'
In thousands of Units Capital
-------- ---------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1991 36,755 $117,785
Net income for year ended December 31, 1992 17,211
Distributions (22,055)
Other activity, net 5 108
------ --------
BALANCE AT DECEMBER 31, 1992 36,760 113,049
Net income for year ended December 31, 1993 12,797
Distributions (14,704)
Other activity, net (3) 137
------ --------
BALANCE AT DECEMBER 31, 1993 36,757 111,279
Net income for year ended December 31, 1994 15,574
Distributions (14,704)
Other activity, net 4 208
------ --------
BALANCE AT DECEMBER 31, 1994 36,761 $112,357
====== ========
</TABLE>
See notes to consolidated financial statements
29
<PAGE> 32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994
NOTE 1. ORGANIZATION
The Newhall Land and Farming Company, a California Limited Partnership
("the Company" or "the Partnership"), was reorganized from a corporation to a
limited partnership on January 8, 1985.
The general partners of the Company are Newhall Management Limited
Partnership, the Managing General Partner, and Newhall General Partnership. Two
executive officers and the Managing General Partner are the general partners of
Newhall General Partnership.
NOTE 2. INDUSTRY SEGMENTS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company operates in two reportable industry segments: Real Estate
- -- community development including residential land sales and home building,
commercial and industrial land sales, and development and operation of
commercial property; Agriculture -- primarily farming. Information as to
identifiable assets, capital expenditures and depreciation for these segments
is summarized in Note 11. Significant accounting policies related to the
Company's segments are:
REAL ESTATE/RESIDENTIAL HOME SALES: The Company's income from Residential Home
Sales comes from sales of completed single and multi-family homes to homebuyers
through joint ventures and limited partnerships. The Company increases its
inventories of homes completed or under construction with venture partners as
it funds its portion of the venture obligation and records its portion of
revenues and income as the venture closes escrow on sales to homebuyers.
REAL ESTATE/LAND SALES: Sales are recorded at the time escrow is closed
provided that: (1) there has been a minimum down payment, ranging from 20% to
25% depending upon the type of property sold, (2) the buyer has met adequate
continuing investment criteria, and (3) the Company, as the seller, has no
continuing involvement in the property. Where the Company has an obligation to
complete certain future development, revenue is deferred in the ratio of the
cost of development to be completed to the total cost of the property being
sold under percentage of completion accounting.
REAL ESTATE/DEVELOPMENT AND OPERATION OF COMMERCIAL PROPERTIES: The Company
owns and leases apartments, commercial and industrial buildings, shopping
centers and land to tenants. Except for apartments and a hotel, rents are
typically based on the greater of a percentage of the lessee's gross revenues
or a minimum rent. Most lease agreements require that the lessee pay all taxes,
maintenance, insurance and certain other operating expenses applicable to
leased properties. Apartments are rented on a six-month lease and continue on a
month-to-month basis thereafter.
30
<PAGE> 33
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
Valencia Water Company (a California corporation), a wholly-owned
subsidiary, is a public water utility subject to regulation by the California
Public Utilities Commission. Water utility revenues include amounts billed
monthly to customers and an estimated amount of unbilled revenues. Income taxes
accounted for under the provisions of SFAS No. 109 are included in operating
expenses. In addition to income, funds advanced or contributed by developers to
the utility are subject to federal and state income taxes. Accordingly,
deferred income taxes are reflected in the consolidated financial statements.
REAL ESTATE/COMMUNITY DEVELOPMENT: Preliminary planning and entitlement costs
are charged to expense when incurred. After tentative map approval,
expenditures for map recordation are charged to the identified project.
AGRICULTURE/OPERATIONS: Revenue is recognized as crops are delivered to farm
cooperatives and other purchasers. Crops delivered to farm cooperatives are
marketed throughout the year after harvest. At the time of delivery, the
Company estimates the proceeds to be received from the cooperatives and records
these amounts as unbilled receivables. During the year following harvest, the
Company records any adjustments of such estimated amounts arising from changing
market conditions. Net income for the years ended December 31, 1994, 1993, and
1992 increased approximately $1,013,000, $1,075,000, and $1,177,000,
respectively, as a result of such adjustments.
Costs incurred during the development stage of orchard and vineyard
crops (ranging from three to ten years) are capitalized and amortized over the
productive life of the trees or vines. Farming costs which cannot be readily
identified with a specific harvested crop or other revenue producing activity
are expensed as incurred.
Farming inventories include crops in process and harvested crops and
are valued at the lower of cost or market, determined on the first-in,
first-out method.
AGRICULTURE/RANCH SALES: Sales of non-developable farm land occur irregularly
and are recognized upon close of escrow provided the criteria as described for
real estate land sales are met.
OTHER GENERAL ACCOUNTING POLICIES ARE:
BASIS OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are wholly-owned.
All significant intercompany transactions are eliminated. Certain
reclassifications have been made to prior periods' amounts to conform to the
current year presentation.
JOINT VENTURE: The Company uses the equity method to account for an investment
in a joint venture with Hilton Inns, Inc. which is less than 50% controlled.
CASH AND CASH EQUIVALENTS: The Company considers all highly liquid investments
with original maturity dates of 90 days or less to be cash equivalents.
31
<PAGE> 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
PROPERTY AND EQUIPMENT: Property is stated at cost, less proceeds from sales
of easements and rights of way. Depreciation of property and equipment is
provided on a straight-line basis over the estimated useful lives of the
various assets without regard to salvage value. Lives used for calculating
depreciation are as follows: buildings -- 25 to 40 years; equipment -- 3 to 10
years; water supply systems, orchards and other -- 5 to 75 years.
ENVIRONMENTAL MATTERS: Environmental clean-up costs are charged to expense or
established reserves and are not capitalized. Generally, reserves are recorded
for environmental clean-up costs when remediation efforts are probable and can
be reasonably estimated. To date, environmental clean-up costs have not been
material.
INCOME TAXES: The Company, as a partnership, is not a taxable entity;
accordingly, no provision for income taxes has been made in the consolidated
financial statements. Partners are taxed on their allocable share of the
Company's earnings. Partners' distributive share of the income, gain, loss,
deduction and credit of the Company is reportable on their income tax returns.
The Revenue Act of 1987 contained provisions which, in some cases,
taxes publicly traded partnerships as corporations. Since the Company was in
existence on December 17, 1987, it will continue to be treated as a partnership
for the 1987 through 1997 taxable years; and, subject to certain qualification
requirements, will continue to be treated as a partnership indefinitely
thereafter.
AMOUNTS PER PARTNERSHIP UNIT: Net income per unit is computed by dividing net
income by the weighted average number of units and common unit equivalents
(dilutive options) outstanding during the year. The number of units for the
computation was 36,789,000, 36,790,000, and 36,796,000, for the years ended
December 31, 1994, 1993, and 1992, respectively.
NOTE 3. FEDERAL INCOME TAX RESULTS OF THE PARTNERSHIP
The Partnership has elected under Section 754 of the Internal Revenue
Code to adjust the basis of property upon the purchase of units by investors.
For investors who purchase units, this election provides for the reflection of
the investor's price of the units in the tax basis of the Partnership's
properties. The excess of the purchase price over the monetary assets and
liabilities is allocated to real estate assets and results in a new basis which
is used to calculate operating expenses for tax purposes.
At December 31, 1994, the net tax basis of the Company's assets and
liabilities exceeded the Company's financial statement basis of its assets and
liabilities by $204,695,000. This excess amount does not reflect the step-up in
asset basis allocated to individual partners upon purchase of units subsequent
to the formation of the Partnership.
32
<PAGE> 35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
The Partnership's tax returns for the past four years are subject to
examination by federal and state taxing authorities. Because many types of
transactions are susceptible to varying interpretations under federal and state
income tax laws and regulations, the tax basis amounts may be subject to change
at a later date upon final determination by the taxing authorities.
NOTE 4. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of the Company's financial instruments are
as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------
1994 1993
------------------------ ----------------------
In thousands Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Notes receivable from land sales $13,723 $13,723 $13,866 $13,866
Mortgage and other debt 145,991 145,991 174,157 174,157
Advances from developers
for utility construction 8,874 2,149 8,353 2,007
------- ------- ------- -------
</TABLE>
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:
CASH AND CASH EQUIVALENTS
The carrying amounts approximate the fair values of these instruments
due to their short-term nature.
NOTES RECEIVABLE FROM LAND SALES
The carrying amounts of notes receivable approximate fair value.
Generally, these notes have maturities of less than one year from close of
escrow and, if applicable, the carrying amount reflects imputed interest to
reduce the note receivable to its present value.
MORTGAGE AND OTHER DEBT
The carrying amount of the Company's debt reflects fair value based on
current interest rates available to the Company for comparable debt. See Note 8
for interest rates on outstanding debt.
ADVANCES FROM DEVELOPERS FOR UTILITY CONSTRUCTION
Generally, advances are refundable to the developer without interest
at the rate of 2.5% per year over 40 years. The fair value is estimated as the
discounted value (12%) of the future cash flows to be paid on the advances.
33
<PAGE> 36
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTE 5. COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS
<TABLE>
<CAPTION>
In thousands December 31,
----------------------------------------
1994 1993
--------------- ---------------
<S> <C> <C>
ACCOUNTS AND NOTES RECEIVABLE
Trade receivables, less allowance for doubtful
accounts of $1,087 and $320, respectively $2,366 $1,898
Unbilled accounts receivable
Agricultural products 1,521 2,168
Other 274 691
Notes receivable from land sales 13,723 13,866
Other 655 885
------- -------
$18,539 $19,508
======= =======
LAND UNDER DEVELOPMENT
Residential $29,195 $34,164
Industrial and commercial 41,781 35,092
Homes completed or under construction
with venture partners 16,215 3,381
Other 232 441
------- -------
$87,423 $73,078
======= =======
PROPERTY AND EQUIPMENT
Land $46,343 $42,896
Buildings 101,373 96,932
Equipment 12,526 13,176
Water supply systems, orchards and other 67,001 65,639
Construction in progress 13,649 15,748
-------- --------
240,892 234,391
Accumulated depreciation (56,209) (52,059)
-------- --------
$184,683 $182,332
======== ========
OTHER ASSETS AND DEFERRED CHARGES
Prepaid expenses $1,391 $909
Investment in joint venture 717 961
Unamortized loan commitment fees 1,148 1,395
Deferred charges and assets of Valencia Water Co. 5,232 4,158
Other 2,900 3,358
------- -------
$11,388 $10,781
======= =======
ACCRUED EXPENSES
Deferred compensation $3,636 $3,557
Operating and other accruals 6,310 5,066
Project accruals 21,248 15,950
Other 3,225 2,221
------- -------
$34,419 $26,794
======= =======
</TABLE>
34
<PAGE> 37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
<TABLE>
<CAPTION>
In thousands December 31,
-----------------------------------------
1994 1993
---------------- ---------------
<S> <C> <C>
OTHER LIABILITIES
Warranty and other reserves $7,078 $10,573
Deferred taxes of Valencia Water Company 5,002 4,779
Other 5,365 5,995
------- -------
$17,445 $21,347
======= =======
</TABLE>
NOTE 6. COMMERCIAL LEASING OPERATIONS
A summary of the historical cost of properties held for lease, which
are included in property and equipment, follows:
<TABLE>
<CAPTION>
In thousands December 31,
-----------------------------------------
1994 1993
------------- ---------------
<S> <C> <C>
Land $40,051 $ 36,379
Buildings 97,591 93,765
Other 12,942 13,378
-------- --------
150,584 143,522
Accumulated depreciation (24,660) (19,661)
-------- --------
$125,924 $123,861
======== ========
</TABLE>
Minimum lease payments to be received under non-cancellable operating
leases as of December 31, 1994 are as follows:
<TABLE>
<S> <C>
In thousands
1995 $ 13,671
1996 12,988
1997 12,824
1998 12,335
1999 11,690
Thereafter 74,431
--------
$137,939*
========
</TABLE>
* This amount does not include contingent rentals which may be received under
certain leases based on lessee sales or apartment rentals. Contingent and
apartment rentals received for the years ended December 31, 1994, 1993, and
1992 were (in thousands) $8,836, $8,119, and $10,927, respectively.
35
<PAGE> 38
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTE 7. LINES OF CREDIT
No borrowings were outstanding against lines of credit at December 31,
1994 or 1993. At December 31, 1994, the Company had available lines of credit
totaling $81 million. Revolving lines of credit for general corporate purposes
include a $30 million line with Wells Fargo Bank, a $20 million line with
Societe Generale, a $4 million line with Bank of America and a $10 million line
with Bank One, Arizona. In addition, the Company has a $15 million revolving
credit facility with Morgan Guaranty Trust Company of New York which is
restricted to financing development costs of various types of commercial
projects in Valencia and a $2 million line of credit with Wells Fargo Bank
which is restricted to use by Valencia Water Company for working capital needs.
Commitment fees range from .125% to .5% per annum of the unused portion.
Letters of credit outstanding against available lines of credit
totaled $5.5 million and $4.2 million, respectively, at December 31, 1994 and
1993.
NOTE 8. MORTGAGE AND OTHER DEBT
<TABLE>
<CAPTION>
In thousands December 31,
Interest ---------------------
Rates 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Prudential (portfolio mortgage) 8.995% $60,000 $60,000
Prudential (ranch mortgage) 8.45% 11,520 11,760
Pacific Mutual (Valencia Water Company) 8.0% 11,000 --
Bank of America (commercial mortgage) 7.95% 3,388 3,414
Metropolitan (unsecured notes) 6.9% 30,000 30,000
Bank of America (Valencia Town Center) Variable -- 40,000
Community facilities bonds (Valencia Town Center) 4.5-7.5% 15,224 15,534
Land acquisition notes (McDowell Mountain Ranch) 8-8.75% 8,470 13,449
Improvement district bonds (McDowell Mountain Ranch) 5.4% 6,389 --
-------- --------
$145,991 $174,157
======== ========
</TABLE>
The $60 million financing from Prudential is secured by six of the
Company's commercial properties. The terms of the note require monthly payments
of interest only through February, 1995 and monthly principal and interest
payments of $501,000 thereafter until maturity on March 1, 1999 when a
principal balance of approximately $57 million is due.
In December 1992, the Company obtained a non-recourse mortgage
financing from Prudential for $12 million secured by the 14,000-acre New
Columbia Ranch property. The terms of the note call for interest payments on
each May 1 and November 1 and annual principal payments of $240,000 until
maturity on November 1, 2003.
In July 1994, Valencia Water Company finalized an $11 million
financing with Pacific Mutual. The terms of the financing call for semi-annual
interest payments with the principal payable in full at maturity on June 1,
2009. The loan is not guaranteed by the Company.
The commercial mortgage was obtained from Bank of America in January,
1991 in conjunction with the purchase of a 50,000-square-foot office building
in the vicinity of Valencia Town Center. A $1.6 million principal repayment was
made on September 1, 1993
36
<PAGE> 39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
in return for a 2.05% rate reduction. The revised terms call for monthly
principal and interest payments of $26,000 and a balloon payment of
approximately $3.1 million at maturity on February 1, 2001.
In December 1993, the Company completed a $30 million seven-year
unsecured financing. The terms of the notes call for interest payments payable
semi-annually and principal payments in equal annual installments commencing
upon the third anniversary of the notes.
In November 1994, the Company prepaid without penalty the $40 million
construction loan obtained from Bank of America for Valencia Town Center. In
December 1994, a $40 million revolving mortgage credit facility secured by
Valencia Town Center was obtained jointly from Wells Fargo Bank and Morgan
Guaranty Trust Company. The terms of the credit facility call for a commitment
fee of .125% per annum of the unused portion. Borrowings bear interest at LIBOR
plus 1.5% or Wells Fargo's prime rate, at the election of the Company. There
were no borrowings outstanding against the facility as of December 31, 1994.
In October 1992, tax-exempt community facilities bonds were issued to
finance a portion of the costs of certain public infrastructure improvements
located within or in the vicinity of Valencia Town Center, the Company's
regional shopping mall which opened in September 1992. The bonds will be
repaid over 20 years from special taxes levied on the mall property.
The McDowell Mountain Ranch land acquisition notes include an 8.75%
mortgage payable in annual principal and interest installments of $201,000
until maturity on March 3, 2018 and an 8% note payable in semi-annual
installments commencing November 30, 1994 until maturity on May 31, 1998. The
8% note calls for additional principal paydown as parcels are sold.
In March 1994, the City of Scottsdale placed over $17 million of
improvement district bonds for construction of infrastructure improvements at
McDowell Mountain Ranch. As of December 31, 1994, $11.4 million had been
expended of the $17 million available to construct these improvements. A
proportionate share of the bonds are repaid as parcels are sold to merchant
builders and at December 31, 1994, $6.4 million is reflected as project debt.
In addition, $11.9 million in community facilities district bonds were placed
by the City of Scottsdale to construct certain public improvements within
McDowell Mountain Ranch. Although these bonds are not reflected as project
debt, the Company is obligated to pay an ad valorem property tax for these
improvements until parcels are sold.
Annual maturities of long-term debt are approximately (in thousands)
$1,177 in 1995, $9,826 in 1996, $11,625 in 1997, $11,755 in 1998, $65,502 in
1999, and $46,106 thereafter.
CAPITALIZED INTEREST AND INTEREST INCOME: During 1994, 1993, and 1992, total
interest expense incurred amounted to (in thousands) $12,750, $10,348 and
$7,555, net of $1,830, $535 and $1,100 which was capitalized, respectively.
Interest income from investments and notes receivable totaled (in thousands)
$2,822 in 1994, $2,988 in 1993 and $567 in 1992.
37
<PAGE> 40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTE 9. EMPLOYEE BENEFIT PLANS
INCENTIVE COMPENSATION PLAN: Under the terms of the Company's Executive
Incentive Plan, the Board of Directors may authorize incentive compensation
awards to key management personnel of up to five percent of each year's income.
The Board of Directors authorized awards of $662,000, $307,000 and $455,000 for
the years ended December 31, 1994, 1993, and 1992, respectively.
OPTION AND APPRECIATION RIGHTS PLAN: Under the terms of the Company's Option,
Appreciation Rights and Restricted Units Plan, non-qualified options or
restricted units may be granted at the market price at date of grant. The plan
also allows for the granting of tandem appreciation rights or bonus
appreciation rights in connection with non-qualified options, which entitle the
holder to receive cash or partnership units, or a combination thereof, at a
value equal to the excess of the fair market value on the date of exercise over
the option price. The following non-qualified options, all without appreciation
rights, were granted: 1994 -- 171,300; 1993 -- 226,200; 1992 -- 123,800. A
total of 400 restricted unit rights were granted in 1994 under the Company's
Management Unit Ownership Program. No restricted units were granted in 1993 or
1992.
No expense or recovery was recorded in 1994 for fluctuations in the
market price of partnership units in connection with appreciation rights on
outstanding non-qualified options. In 1993, an expense of $250,000 was recorded
and, in 1992, and expense recovery of $900,000 was recorded.
A summary of changes under the plans follows:
<TABLE>
<CAPTION>
Option Price
-------------------------------------------------
Total (in
Units Per Unit thousands)
--------- ------------------- ----------
<S> <C> <C> <C>
Outstanding at
December 31, 1992 851,850 $12.625 to $32.1875 $17,019
Granted 226,200 $14.625 3,308
Cancelled (93,700) $14.625 to $32.1875 (2,095)
--------- -------
Outstanding at
December 31, 1993 984,350 18,232
Granted 171,700 $14.75 to $14.875 2,552
Cancelled (25,050) $14.625 to $32.1875 (462)
--------- -------
Outstanding at
December 31, 1994 1,131,000 $20,322
========= =======
</TABLE>
At December 31, 1994, 580,975 options were exercisable and no options
were available for future grants. On January 18, 1995, the Board of Directors
adopted a new option program and approved repurchase of up to 600,000
depositary units for issuance under the program.
38
<PAGE> 41
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
RETIREMENT PLANS: The Retirement Plan is Company funded and is qualified under
ERISA. Generally, all employees of the Company and subsidiaries of the Company
are eligible to participate in the Retirement Plan after one year of employment
and attainment of age 21. Participants' benefits are calculated as 40.5% of the
highest average annual earnings up to Social Security covered compensation,
plus 60% of average annual earnings in excess of covered compensation, reduced
pro rata for years of service less than 30.
The Company's contribution to the Retirement Plan is determined by
consulting actuaries on the basis of customary actuarial considerations,
including total covered payroll of participants, benefits paid, earnings and
appreciation in the Retirement Plan funds.
The Board of Directors has adopted a Pension Restoration Plan,
pursuant to which the Company will pay any difference between the maximum
amount payable under ERISA and the amount otherwise payable under the Plan.
The Company's funding policy is to contribute no more than the maximum
tax-deductible amount. Plan assets are invested primarily in equity and fixed
income funds.
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations were 8.5 and 5 percent in 1994, 7 and 5 percent
in 1993, and 8 and 6 percent in 1992, respectively. The expected long-term rate
of return on assets was 9 percent for each of the three years.
The Company also has a Supplemental Executive Retirement Plan and a
Retirement Plan for Directors. The additional pension cost for these plans was
$298,000 in 1994, $184,000 in 1993, and $208,000 in 1992.
39
<PAGE> 42
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
The following table sets forth the plans' funded status and amounts
recognized in the Company's financial statements for the Retirement and the
Pension Restoration Plans:
<TABLE>
<CAPTION>
In thousands December 31,
----------------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits of $10,779,
$13,567, and $11,339, respectively $(11,101) $(13,834) $(11,524)
======== ======== ========
Projected benefit obligation for
service rendered to date $(12,725) $(16,962) $(15,447)
Plan assets at fair value 14,146 16,327 15,344
-------- -------- --------
Plan assets in excess of (less
than)projected benefit obligations 1,421 (635) (103)
Unrealized net gain from past
experience different from that
assumed and effects of changes
in assumptions (3,912) (1,827) (1,873)
Unrecognized prior service costs 770 831 892
Unrecognized net asset being
recognized over 15 years (205) (239) (273)
-------- -------- --------
Accrued pension cost $(1,926) $(1,870) $(1,357)
======== ======== ========
Net pension cost includes the following components:
Service cost-benefits earned
during the period $668 $645 $774
Interest cost on projected
benefit obligation 1,157 1,196 1,224
Actual return on plan assets (131) (1,856) (972)
Net amortization and deferral (1,284) 529 (309)
-------- -------- --------
Net periodic pension cost 410 514 717
Settlement gain (88) -- --
-------- -------- --------
Total $322 $514 $717
======== ======== ========
</TABLE>
40
<PAGE> 43
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
EMPLOYEE SAVINGS PLAN: The Company has an Employee Savings Plan which is
available to all eligible employees. Certain employee contributions may be
supplemented by Company contributions. Company contributions approximated
$252,000 in 1994, $245,000 during 1993 and $298,000 during 1992.
DEFERRED CASH BONUS PLAN: In February 1991, the Compensation Committee of the
Board of Directors awarded deferred bonuses payable January 15, 1999. The
amount to be paid is based upon the relative percentage return on the market
value of the Company's depositary units compared to the percentage return on
the Standard and Poor's 500 Index over a nine-year period. No deferred cash
bonuses were earned in 1994, 1993, or 1992 and accordingly, no expense was
recorded.
OTHER BENEFITS: The Company does not provide postretirement or postemployment
benefits other than those plans described above and, as such, there is no
unrecorded obligation to be recognized under SFAS Nos. 106 and 112.
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation and various claims, including
those arising from its ordinary conduct of business. Management is of the
opinion that the ultimate liability from this litigation will not materially
affect the Company's consolidated financial condition. The Company believes it
has acquired adequate insurance to protect itself against any future material
property and casualty losses.
In the ordinary course of business, and as part of the entitlement and
development process, the Company is required to provide performance bonds to
the County of Los Angeles and the City of Santa Clarita to assure completion of
certain public facilities. At December 31, 1994, the Company had performance
bonds outstanding totaling approximately $125 million.
As a significant landowner, developer and holder of commercial
properties, there exists the possibility that environmental contamination
conditions may exist that would require the Company to take corrective action.
The amount of such future latent cost cannot be determined. However, the
Company believes such costs will not materially affect the Company's
consolidated financial condition.
41
<PAGE> 44
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTE 11. INDUSTRY SEGMENT INFORMATION
In thousands
<TABLE>
<CAPTION>
December 31,
IDENTIFIABLE ASSETS ----------------------------------
(at historical cost) 1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Real Estate
Residential $55,046 $46,993 $45,469
Industrial 88,976 84,467 78,723
Commercial 171,805 164,736 162,567
Agriculture 17,896 21,515 24,094
Administration 10,069 42,187 12,229
-------- -------- --------
$343,792 $359,898 $323,082
======== ======== ========
CAPITAL EXPENDITURES
Years ended December 31,
---------------------------------
1994 1993 1992
------- ------ -------
Real Estate
Residential $85 $26 $ --
Industrial 366 2,277 4,147
Commercial 10,719 6,747 51,564
Agriculture 650 263 4,108
Administration 67 144 204
------- ------ -------
$11,887 $9,457 $60,023
======= ====== =======
Years ended December 31,
DEPRECIATION AND --------------------------------
AMORTIZATION 1994 1993 1992
------ ------ ------
Real Estate
Residential $42 $10 $61
Industrial 38 47 44
Commercial 6,678 6,202 5,001
Agriculture 714 870 1,184
Administration 218 200 181
------ ------ ------
$7,690 $7,329 $6,471
====== ====== ======
</TABLE>
42
<PAGE> 45
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)
NOTE 12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data for
1994 and 1993:
<TABLE>
<CAPTION>
Quarter
In thousands, ---------------------------------------------
except per unit First Second Third Fourth
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues
1994 $14,966 $40,285 $23,400 $55,617
1993 15,389 21,025 20,046 48,992
Operating income
1994 675* 14,230 5,801 13,901
1993 3,948 5,023 5,581 13,986
Net income
1994 (3,640)* 9,403 906 8,905
1993 364 1,004 1,834 9,595
Net income per unit
1994 $(.10)* $.26 $.02 $.24
1993 .01 .03 .05 .26
</TABLE>
* Includes a charge of $3.7 million, or $.10 per unit, for earthquake damage
not covered by insurance.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
43
<PAGE> 46
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant was reorganized from a corporation to a California
limited partnership on January 8, 1985. The general partners of the
Partnership are Newhall Management Limited Partnership (the Managing General
Partner) and Newhall General Partnership. Two executive officers and the
Managing General Partner are the general partners of Newhall General
Partnership. Newhall Management Corporation and Newhall General Partnership
are the general partners of the Managing General Partner.
The Managing General Partner, Newhall Management Limited Partnership,
has exclusive management and control of the affairs of the Partnership and
shares in Partnership income and losses on the basis of the number of
Partnership units owned by it. The Managing General Partner of Newhall
Management Limited Partnership, Newhall Management Corporation, will make all
decisions and take all action deemed by it necessary or appropriate to conduct
the business and affairs of Newhall Management Limited Partnership and,
therefore, of the Partnership.
The duties and responsibilities of directors are carried out by the
Board of Directors of the Managing General Partner of the Managing General
Partner, Newhall Management Corporation. Each voting shareholder of Newhall
Management Corporation is also a director of Newhall Management Corporation and
only voting shareholders may be directors of that corporation. Every voting
shareholder and director has a number of votes in all matters equal to the
number of votes of every other voting shareholder and director. Upon ceasing
to be a director, a shareholder may be a nonvoting shareholder for a period of
time prior to the repurchase of his or her shares by the Corporation. See
further discussion of the shareholders' agreement and voting trust agreement
below.
The shareholder-directors of Newhall Management Corporation
("Corporation") are as follows:
Thomas L. Lee, age 52, was appointed Chairman and Chief Executive
Officer of the Corporation upon its formation in November, 1990 and of the
former Managing General Partner in 1989. He served as President and Chief
Executive Officer of the former Managing General Partner from 1987 to 1989, and
as President and Chief Operating Officer from 1985 to 1987. Mr. Lee joined the
predecessor corporation in 1970 and has served in various executive capacities.
Mr. Lee was elected as a director in 1985. He is a director of First
Interstate Bancorp, First Interstate Bank of California, CalMat, Inc. and the
Los Angeles Area Chamber of Commerce.
James F. Dickason, age 72, was elected as a director of the
Corporation upon its formation in November, 1990 and of the former Managing
General Partner upon its formation in 1985. He currently serves as Chairman of
the Executive Committee. Mr. Dickason served as a director of the predecessor
corporation from 1963 to 1985, as Chairman of the Board of Directors and Chief
Executive Officer of the former Managing General Partner from 1985 to 1987 and
held the same position with the predecessor corporation from 1979 to 1985.
44
<PAGE> 47
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
Mr. Dickason also served as President of the predecessor corporation from 1971
until 1985. He was the managing partner of Newhall Resources' managing general
partner and the managing partner of Newhall Investment Properties' managing
general partner from 1983 until their liquidation in 1989 and 1988,
respectively. He is also a director of the Automobile Club of Southern
California and the California Museum of Science and Industry. Mr. Dickason is
a Trustee of the Southwest Museum.
George C. Dillon, age 72, has served as a director of the Corporation,
the former Managing General Partner and the predecessor corporation,
respectively, since 1973. He was Chairman of the Board of Directors of
Manville Corporation from 1986 until 1990 and Chairman of the Executive
Committee from 1990 to 1991. Previously he was Chairman and Chief Executive
Officer of Butler Manufacturing Company, where he had served in various
executive capacities since 1951. Mr. Dillon is a director of Phelps-Dodge
Corporation and Astec Industries, Inc.
Thomas V. McKernan, Jr., age 50, was elected a director of the
Corporation in September, 1994. Mr. McKernan has been President and Chief
Executive Officer since 1991, Executive Vice President from 1990 to 1991 and
Vice President and Chief Financial Officer from 1985 to 1990, of the Automobile
Club of Southern California. He is a director of the American Automobile
Association, California Chamber of Commerce, Los Angeles Area Chamber of
Commerce, Orthopedic Hospital, The Employers Group, Payden & Rygel, Ramore
Girls School, Urban League and American Red Cross.
Paul A. Miller, age 70, has served as a director of the Corporation,
the former Managing General Partner and the predecessor corporation,
respectively, since 1979. Mr. Miller is Chairman of the Executive Committee
and a director of Pacific Enterprises, a holding company for Southern
California Gas Company. He is a director of Wells Fargo Bank N.A. and Wells
Fargo & Company and a Trustee of Mutual Life Insurance Company of New York and
the University of Southern California. Mr. Miller is also a director of the
Los Angeles World Affairs Council, and is a member of the Executive Committee
of the California Business Round Table.
Henry K. Newhall, age 56, has served as a director of the Corporation,
the former Managing General Partner and the predecessor corporation,
respectively, since 1982. Dr. Newhall is General Manager, Technology, Oronite
Additives Division of Chevron Chemical Company. He has served in various
managerial and consulting positions with Chevron since 1971.
Jane Newhall, age 81, has served as a director of the Corporation, the
former Managing General Partner and the predecessor corporation, respectively,
since 1960. Miss Newhall, a private investor, is a director of the Henry Mayo
Newhall Foundation and a member of the Foundation Board of Donaldina Cameron
House. She is a Trustee of Mills College, the San Francisco Theological
Seminary, the University Mound Ladies' Home and the Graduate Theological Union.
45
<PAGE> 48
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
Peter T. Pope, age 60, was elected a director of the Corporation in
1992. Mr. Pope has been Chairman, President and Chief Executive Officer since
1990 and Chairman and Chief Executive Officer since 1971 of Pope & Talbot, Inc.
He is a director of Pope Resources, the American Paper Institute, Oregon Health
Science Foundation and The Arlington Club.
Carl E. Reichardt, age 63, has served as a director of the
Corporation, the former Managing General Partner and the predecessor
corporation, respectively, since 1980. Mr. Reichardt was Chairman of the Board
of Directors of Wells Fargo & Company and Wells Fargo Bank, N.A., from 1983
until December, 1994. He is a director of Wells Fargo & Company, Wells Fargo
Bank, N.A., Ford Motor Company, Columbia/HCA Healthcare Corporation, Pacific
Gas & Electric Company, The Irvine Company and ConAgra, Inc.
Thomas C. Sutton, age 52, was elected a director of the Corporation in
November, 1991. He has been Chairman of the Board and Chief Executive Officer
since 1990, President and a director from 1987 to 1990 and Executive Vice
President from 1984 to 1987 of Pacific Mutual Life Insurance Company. Mr.
Sutton is a director of the Association of California Life Insurance Companies
and the Health Insurance Association of America. He is a trustee of the
Committee for Economic Development.
Lawrence R. Tollenaere, age 72, has served as a director of the
Corporation, the former Managing General Partner and the predecessor
corporation, respectively, since 1972. Mr. Tollenaere was Chairman of the
Board of Directors until 1994, and Chief Executive Officer and President of
Ameron, Inc. until 1993. He is Chairman of Gifford-Hill-American, Inc., and
Tamco. He is a director of Pacific Mutual Life Insurance Company, The Parsons
Corporation and The National Association of Manufacturers. He is past
president and a director of The California Club and an honorary board member of
The Employers Group. Mr. Tollenaere is a Trustee of the Huntington Library,
Art Collections and Botanical Gardens, a fellow of the Society for the
Advancement of Management, Emeritus Fellow of Claremount University, Governor
of Iowa State University and Honorary Director of the Beavers.
Edwin Newhall Woods, age 77, is a rancher and has served as a director
of the Corporation, the former Managing General Partner and the predecessor
corporation, respectively, since 1950.
Ezra K. Zilkha, age 69, has served as a director of the Corporation,
the former Managing General Partner and the predecessor corporation,
respectively, since 1977. Since 1956, Mr. Zilkha has been President of Zilkha
& Sons, Inc., a private investment company, and from 1993, President of 3555
Investment Holding Company, an investment holding company. From 1979 to 1988,
he was president of Zilkha Corporation, a consulting company and from 1984 to
1990 and from 1991 to 1993 he was Chairman of Union Holdings, Inc., an
industrial holding company. He is a director of CIGNA Corporation, Cambridge
Associates, Chicago Milwaukee Corporation, and Milwaukee Land Company. Mr.
Zilkha is Trustee Emeritus of Wesleyan University and a Trustee of the
Brookings Institution, Lycee Francais de New York and the French
Institute/Alliance Francaise. He is also Chairman of the Board of The
International Center for the Disabled.
46
<PAGE> 49
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
Peter McBean, age 84, was elected Director Emeritus upon his
retirement from the Board of Directors in July of 1994. He is a rancher and
had served as a director of the Corporation, the former Managing General
Partner and the predecessor corporation, respectively, since 1940. He is being
paid director's retirement benefits of $28,000 a year. As Director Emeritus he
is entitled to attend meetings of the Board of Directors, at which he does not
vote and receives no meeting fee.
Each of the shareholder-directors may be contacted at the principal
executive offices of the Partnership and is a citizen of the United States.
Jane Newhall and Edwin Newhall Woods are first cousins.
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires Newhall Management Corporation and its officers and directors, the
general partners, and persons who own more than ten percent of the Company's
partnership units, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and the New York Stock Exchange. The
Company assists officers, directors and ten-percent unitholders to file their
Section 16(a) reports and retains a copy of the forms filed. Written
representations that all required reports have been filed are obtained at the
end of each year. Based upon this information, the Company believes that,
during the year ended December 31, 1994, all such filing requirements were
complied with.
The Board of Directors manages and controls the overall business and
affairs of the Corporation, of the Managing General Partner, and of the
Partnership. The members of the Board of Directors are elected by the
shareholder-directors of the Corporation, unless there is a vacancy on the
Board in which case the remaining board members may fill the vacancy, without
the approval of the limited partners and with each shareholder-director of the
Corporation having an equal number of votes. Because the shareholders and
directors are the same persons, it is expected that the shareholders will
re-elect themselves to serve as directors.
It is the current policy of the Corporation that all directors of the
Corporation, except for the initial directors of the former Managing General
Partner and Mr. Lee, will retire at age 70. If a new director is elected, he
or she is required to become a shareholder by purchasing the number of shares
determined by the Board of Directors.
The Limited Partnership Agreement ("the Partnership Agreement") of the
Partnership requires the General Partners to own at least one percent (1%) of
the total number of Partnership units outstanding at all times. In order to
meet this 1% requirement, the shareholder-directors had originally contributed
Partnership units as capital to the former Managing General Partner. The
determination as to how many Partnership units each shareholder-director would
contribute was based upon the shareholdings of the shareholder-director in the
predecessor corporation and his or her ability to contribute such Partnership
units in order that the General Partners would own at least 1% of the total
number of Partnership units outstanding at all times.
47
<PAGE> 50
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
Messrs. Henry Newhall, Woods, and Zilkha each effectively has
contributed to the Managing General Partner a total of 72,000 Partnership
units. Mr. McBean and Ms. Newhall each effectively has contributed to the
Managing General Partner a total of 71,650 Partnership units. Messrs. Dillon,
Lee, Miller, Reichardt, Tollenaere, Pope, Sutton and McKernan each effectively
has contributed to the Managing General Partner a total of 2,000 Partnership
units. Mr. Dickason effectively has contributed 1,650 Partnership units. The
Partnership units contributed to the Managing General Partner total 376,950 or
1.0% of the total number of partnership units outstanding.
It should be noted that a shareholder-director will receive the same
distributions from the Partnership with regard to his or her Partnership units
regardless of whether such Partnership units are represented by limited
partner interests in Newhall Management Limited Partnership or by general
partner interests in Newhall Management Limited Partnership (which in turn are
represented by common stock in the Corporation). All Partnership
distributions and allocations to the Managing General Partner with respect to
the Partnership units held by such Partner will be passed on to each limited
partner of the Managing General Partner or shareholder-director of the
Corporation as distributions in proportion to the actual number of units or
shares beneficially owned by such limited partner or shareholder-director, as
the case may be.
The shareholder-directors of the Corporation and the Corporation are
parties to a shareholders' agreement and a voting trust agreement. These
agreements provided for the transfer of all the shares of Newhall Management
Corporation to a voting trust, held in the name of the Trustee. The Secretary
of Newhall Management Corporation serves as Trustee. In all matters the
Trustee will vote all the shares in accordance with the direction of a majority
of the shareholder-directors, with each shareholder-director having one vote on
each matter (irrespective of the actual number of shares beneficially owned by
such person).
The shareholders' agreement and the bylaws of the Corporation restrict
the ability of a shareholder-director to transfer ownership of shares of the
Corporation. Certain events such as failure to own at least one limited
partner unit in Newhall Management Limited Partnership, failure to consent to a
Subchapter S election under the Internal Revenue Code, failure to re-execute
the trust agreement, ceasing to serve as a director, failure of a
shareholder-director's spouse to sign any required consent, a material breach
by a shareholder-director of the shareholders' agreement or voting trust
agreement, a levy upon the shares of a shareholder, or a purported transfer of
shares to someone other than a new or existing director upon approval of the
Board of Directors, are considered to be repurchase events. Upon such a
repurchase event, the shareholder must immediately resign as a director and the
shareholder will lose voting rights under the voting trust agreement. Upon the
occurrence of a repurchase event, a shareholder's shares will be repurchased by
the Corporation or the Corporation may direct their purchase by a successor
director. The Corporation has agreed to repurchase for cash equal to the
market value of the Partnership units representing such shares (or provide for
the purchase of) all shares of a shareholder-director subject to a repurchase
event within one year of the repurchase event and to use its best efforts to
effect such repurchase (purchase) as soon as possible after the repurchase
event. There can be no assurance that the Corporation will be able to find a
replacement for a departing shareholder-director who will purchase shares.
48
<PAGE> 51
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
The shareholders' agreement expires if Newhall Management Corporation
ceases to serve as the Managing General Partner of the Managing General Partner
of the Partnership, or Newhall Management Limited Partnership ceases to be the
Managing General Partner of the Partnership, if all parties to the
shareholders' agreement consent to its termination, or with respect to any
individual shareholder, upon the repurchase of all the shareholder's shares.
The term of the voting trust is limited by laws to 10 years, but a
party to the voting trust will be deemed to have resigned as a director of the
Corporation and will have to sell his shares, subject to repurchase by the
Corporation, unless, at the times provided in the voting trust agreement, the
party re-executes and renews the voting trust for the purpose of keeping it
continually in effect. The voting trust agreement terminates if Newhall
Management Corporation ceases to serve as a general partner of the Managing
General Partner of the Partnership, or Newhall Management Limited Partnership
ceases to be the Managing General Partner of the Partnership, or with respect
to any individual shareholder if a shareholder no longer owns any shares.
The shareholder-directors, as limited partners, are also parties to
the limited partnership agreement of Newhall Management Limited Partnership.
At the present time, they are the only limited partners of Newhall Management
Limited Partnership. The limited partnership agreement has restrictions on
transfer similar to the shareholders' agreement and provides for repurchase of
the limited partnership units of a limited partner upon the occurrence of
repurchase events which are similar to those of the shareholders' agreement,
including the cessation of being a director by a limited partner in the case of
a limited partner who is a director.
Upon the occurrence of a repurchase event, Newhall Management Limited
Partnership would have one full year to transfer Partnership units representing
the limited partner's interest to the limited partner. A limited partner could
not compel the return of Partnership units for at least one year from the date
a limited partner chooses to obtain return of Partnership units. Even then,
Newhall Management Limited Partnership cannot, and cannot be compelled to,
distribute Partnership units to the limited partner if Newhall Management
Limited Partnership would thereafter own less than 1% of the Partnership's
Partnership units.
The limited partners, as limited partners, have no voting rights
except as expressly set forth in the limited partnership agreement or granted
pursuant to law. Such voting privileges include matters such as (i) electing
general partners in specified instances, (ii) amending the limited partnership
agreement, (iii) dissolving the limited partnership, (iv) electing a general
partner to serve as the Managing General Partner, and (v) removing a general
partner. Items (ii) and (iii) require the separate concurrence of the Managing
General Partner.
Persons other than directors of Newhall Management Corporation may
serve as limited partners of Newhall Management Limited Partnership and Newhall
Management Corporation has the authority pursuant to the limited partnership
agreement to cause additional units to be issued. The partnership agreement
provides limited instances in which a general partner shall cease to be a
general partner.
49
<PAGE> 52
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
Newhall Management Limited Partnership will dissolve (i) when a
general partner ceases to be a general partner (other than by removal) unless
there is at least one other general partner or all partners agree in writing to
continue the business of the partnership and to admit one or more general
partners, (ii) if Newhall Management Limited Partnership becomes insolvent,
(iii) upon the disposition of substantially all assets of Newhall Management
Limited Partnership, (iv) 90 days after an affirmative vote of the limited
partners to dissolve pursuant to the partnership agreement, or (v) upon the
occurrence of any event which makes it unlawful for the business of Newhall
Management Limited Partnership to be continued.
Newhall General Partnership, a California general partnership, is a
general partner for the purposes of continuing the business of the Partnership
and serving as an interim Managing General Partner if Newhall Management
Limited Partnership or its successor ceases to serve as Managing General
Partner. So long as Newhall Management Limited Partnership or its successor
remains as Managing General Partner, Newhall General Partnership will have no
right to take part in the management and control of the affairs of the
Partnership.
The general partners of Newhall General Partnership are Newhall
Management Limited Partnership, the chief executive officer of Newhall
Management Corporation and another officer or director of Newhall Management
Corporation selected from time to time by the board of directors of Newhall
Management Corporation. Thomas L. Lee is the chief executive officer of
Newhall Management Corporation and, therefore, is a general partner of Newhall
General Partnership.
Gary M. Cusumano, President and Chief Operating Officer of Newhall
Management Corporation, has been selected by the board of directors of Newhall
Management Corporation to be a general partner of Newhall General Partnership.
For as long as Newhall Management Limited Partnership serves as a general
partner of the Partnership, Newhall Management Limited Partnership shall serve
as a general partner of Newhall General Partnership and the individual general
partners of Newhall General Partnership shall be the chief executive officer of
Newhall Management Corporation and another officer or director selected by the
board of directors of Newhall Management Corporation.
The managing partner of Newhall General Partnership is the chief
executive officer of Newhall Management Corporation and shall have management
and control of the ordinary course of day to day business of Newhall General
Partnership. Matters outside the ordinary course of the day to day business of
Newhall General Partnership shall be decided by a majority vote of the partners
except that a unanimous vote will be required to, among other things, admit a
new partner (other than the chief executive officer or other officer or
director of Newhall Management Corporation).
After giving effect to 2-for-1 unit splits on December 20, 1985 and
January 29, 1990, each of the partners of Newhall General Partnership have
contributed twenty Partnership units to Newhall General Partnership. No
additional capital contributions are required. The income, losses and
distributions allocated to Newhall General Partnership with respect to the
units will be allocated among the partners of Newhall General Partnership in
the ratio of the units contributed by each of them.
50
<PAGE> 53
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)
The ability of a partner to withdraw from Newhall General Partnership
or to transfer an interest in Newhall General Partnership is limited by the
partnership agreement of Newhall General Partnership. Individual partners of
Newhall General Partnership may not withdraw except upon appointment of a
successor by the board of directors of Newhall Management Corporation. In
addition, an individual general partner may not transfer his interest in
Newhall General Partnership except with the written consent of Newhall
Management Limited Partnership. Newhall Management Limited Partnership, as a
general partner of Newhall General Partnership, may not withdraw unless: (i) it
no longer serves as a general partner of the Partnership; (ii) Newhall General
Partnership no longer serves as a general partner of the Partnership; or (iii)
Newhall General Partnership dissolves and its business is not continued.
If Newhall Management Limited Partnership no longer serves as a
general partner of the Partnership, simultaneously, it will stop serving as a
general partner of Newhall General Partnership. Any individual general partner
of Newhall General Partnership who is serving as a general partner by virtue of
holding an office or position with Newhall Management Corporation, will stop
serving as a general partner of Newhall General Partnership if either (i)
Newhall Management Limited Partnership is replaced as a general partner of the
Partnership, or (ii) Newhall Management Limited Partnership is no longer a
general partner of Newhall General Partnership and individual partners are
designated pursuant to the partnership agreement.
Newhall General Partnership will dissolve when the Partnership is
dissolved, liquidated and wound up and any trust or other entity formed for the
purpose of liquidating or winding up the Partnership is liquidated and wound
up. Newhall General Partnership will dissolve earlier upon: (i) the
distribution of substantially all of its property; (ii) the unanimous agreement
of its partners; (iii) ceasing to serve as a general partner of the
Partnership; or (iv) the occurrence of an event which would make it unlawful to
conduct its business.
The Partnership Agreement requires the Partnership to pay all of the
costs and expenses incurred or accrued by the general partners in connection
with the business and affairs of the Partnership as the Managing General
Partner in its sole discretion authorizes or approves from time to time. These
costs and expenses include overhead and operating expenses, officer, employee,
director and general partner compensation and other employee benefits paid by
the general partners. Such compensation and benefits may be determined and
changed from time to time without the approval of the limited partners.
51
<PAGE> 54
EXECUTIVE OFFICERS OF THE MANAGING GENERAL PARTNER
<TABLE>
<CAPTION>
Date of
Age Office
------- --------
<S> <C> <C>
Thomas L. Lee 52
Chairman and Chief Executive Officer 07/89
Gary M. Cusumano 51
President and Chief Operating Officer 07/89
Thomas E. Dierckman 46
Senior Vice President - Valencia Division 09/94
Senior Vice President - Real Estate Operations 07/90
Senior Vice President - Residential Real Estate 07/88
James M. Harter 48
Senior Vice President - Newhall Ranch Division 09/94
Senior Vice President - Community Development 08/92
Project Director - Rancon Financial Group 12/90
Vice President and Project Manager / Director of 07/86
Forward Planning - The Baldwin Company
Stuart R. Mork 42
Vice President and Chief Financial Officer 01/95
Vice President - Finance 01/94
Vice President - Finance and Treasurer 07/92
Treasurer 10/87
John R. Frye 50
Vice President - Agriculture 09/85
Gloria A. Glenn 53
Vice President - Planning 07/90
Senior Vice President - Planning, Valencia Company 09/87
Donald L. Kimball 37
Vice President - Controller 07/94
Controller 04/90
Director of Internal Audit 06/86
Margaret M. Lauffer 35
Vice President - Corporate Communications 07/94
Vice President - Community Relations, Valencia Company 01/93
Assistant Vice President - Community Relations, Valencia Company 10/91
Director - Community Relations 05/89
</TABLE>
52
<PAGE> 55
EXECUTIVE OFFICERS OF THE MANAGING GENERAL PARTNER (Continued)
<TABLE>
<CAPTION>
Date of
Age Office
------- --------
<S> <C> <C>
Thomas H. Almas 60
Secretary 07/92
Assistant Secretary and Assistant Treasurer 10/87
Robert A. Mayhew 34
Treasurer 01/94
Assistant Treasurer 09/92
Vice President - Real Estate Industries Group, 01/89
Security Pacific National Bank
Carrie T. Kokenda 30
Director of Internal Audit 11/93
Audit Manager, Price Waterhouse 04/93
Audit Senior Accountant, Price Waterhouse 04/90
Staff Accountant, Price Waterhouse 09/87
</TABLE>
The officers serve at the pleasure of the Board of Directors.
53
<PAGE> 56
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth information as to each of the five
highest paid Executive Officers and their compensation for services rendered to
the Company and its subsidiaries:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------ ---------------------------------
Awards Payouts
----------------------- -------
Other Restricted Number of All
Annual Stock Securities Other
Name and Bonus Comp. Awards Underlying LTIP Comp.
Principal Position Year Salary (1) (2) (3) Options/SARs Payouts (4)
- -------------------------- ---- -------- ------- ------- ---------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas L. Lee 1994 $322,000 $77,280 $60,200 0 28,200 $0 $25,957
Chairman and 1993 305,000 0 57,275 0 30,000 0 22,361
Chief Executive Officer 1992 305,000 50,000 57,995 0 20,000 0 25,503
Gary M. Cusumano 1994 264,000 63,840 33,500 0 22,500 0 21,826
President and 1993 252,000 0 31,570 0 24,000 0 17,913
Chief Operating Officer 1992 252,000 40,000 30,375 0 15,000 0 20,754
Robert D. Wilke (5) 1994 211,000 48,952 0 0 6,000 0 17,613
Vice Chairman and 1993 200,000 30,000 0 0 18,000 0 10,575
Chief Financial Officer 1992 200,000 35,000 0 0 12,000 0 16,809
Thomas E. Dierckman 1994 198,000 32,000 3,520 0 10,000 0 10,574
Senior Vice President 1993 190,000 20,000 950 0 16,000 0 9,705
1992 190,000 28,000 730 0 10,000 0 9,474
James M. Harter (6) 1994 140,000 22,400 0 0 9,000 0 2,730
Senior Vice President 1993 120,000 14,000 0 0 10,000 0 692
1992 46,150 1,000 0 0 0 0 0
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents bonus accrued during the current calendar year based on earnings
for such period and paid in the subsequent calendar year.
(2) Includes general partner fees paid to Messrs. Lee and Cusumano as general
partners of Newhall General Partnership of $29,000 each, director fees paid
of $30,000 to Mr. Lee as a director of Newhall Management Corporation and
$2,500 to Mr. Cusumano and Mr. Dierckman as directors of a wholly-owned
subsidiary.
(3) The number and value of restricted unit holdings at December 31, 1994 were
as follows: 4,000 units valued at $48,500 for Mr. Lee; 3,000 units valued
at $36,375 for Mr. Cusumano; 2,400 units valued at $29,100 for Mr. Wilke;
and 1,200 units valued at $14,550 for Mr. Dierckman.
Restricted units are granted subject to a return right which permits the
Company to reacquire all or a portion of the restricted units for no
consideration if the grantee terminates employment with the Company. The
return right lapses as to twenty-five percent of the granted restricted
units after expiration of each two-year period from the date of grant. The
lapsing of the return right is accelerated as to an additional twenty-five
percent if two-year Company performance goals as set by the Compensation
Committee are met.
(4) Totals include the following: (1) Company matching contributions to the
Employee Savings Plan and Savings Restoration Plan, (2) excess life
insurance premiums, and (3) long-term disability insurance premiums for
Messrs. Lee and Cusumano in 1994, 1993 and 1992, and Mr. Wilke in 1992.
(5) Retired on December 31, 1994.
(6) Hired August 17, 1992.
54
<PAGE> 57
ITEM 11. EXECUTIVE COMPENSATION (continued)
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Value of
Options as of
Individual Grants Grant Date as
------------------------------------------------------- Potential Realizable Value Computed by
Number of % of Total at Assumed Annual Rates the Modified
Securities Options/SARs Exercise of Stock Price Appreciation Black-Scholes
Underlying Granted To Or Base for Option Term (2) Options
Options/SARs Employees in Price Expiration --------------------------- Valuation
Name Granted(1) Fiscal Year ($/Sh) Date 5% 10% Model(3)
------------------- ------------ ------------ --------- ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas L. Lee 19,000 $14.875 7-19-04 $177,745 $450,395 $103,037
9,200 $14.750 1-19-04 85,376 216,292 49,892
------- ----------- ---------- --------
28,200 16% 263,121 666,687 152,929
------- ----------- ---------- --------
Gary M. Cusumano 15,000 $14.875 7-19-04 140,325 355,575 81,345
7,500 $14.750 1-19-04 69,600 176,325 40,672
------- ----------- ---------- --------
22,500 13% 209,925 531,900 122,017
------- ----------- ---------- --------
Robert D. Wilke(4) 6,000 8% $14.875 12-31-97 6,810 13,830 N/A
Thomas E. Dierckman 10,000 7% $14.875 7-19-04 93,550 237,050 54,230
James M. Harter 9,000 5% $14.875 7-19-04 84,195 213,345 48,807
------- -- ---------- ---------- --------
Total 126,400 44% $1,130,647 $2,861,399 $652,929
======= == ========== ========== ========
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Non-qualified options without appreciation rights granted at 100% of fair
market value on the date of grant. Options are exercisable twenty-five
percent at the end of each of the first four years following date of grant
and expire ten years after date of grant. In the event of any change of
control of the Company, as defined, then each option will immediately become
fully exercisable as of the date of the change of control.
(2) 5% compound growth results in final unit price of $24.23 for options
expiring 7/19/04 and $24.03 for options expiring 1/19/04
10% compound growth results in final unit price of $38.58 for options
expiring 7/19/04 and $38.26 for options expiring 1/19/04
(3) The modified Black-Scholes Options Valuation Model modifies the
Black-Scholes formula to include the impact of distributions and to allow
option exercise prior to maturity. The 10-year distribution yield of 3.10%
was used in the modified model.
(4) Retired on December 31, 1994 - Options will remain exercisable until
December 31, 1997.
55
<PAGE> 58
ITEM 11. EXECUTIVE COMPENSATION (continued)
AGGREGATED OPTIONS / SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION / SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options/SARs In-the-Money Options/SARs
Acquired at Fiscal Year-End at Fiscal Year-End (1)
On Value ------------------------- -------------------------
Exercise Realized Un- Un-
Name ( # ) ( $000 ) Exercisable Exercisable Exercisable Exercisable
------------------- -------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Lee --- --- 146,738 91,212 $0 $0
Gary M. Cusumano --- --- 112,938 70,812 0 0
Robert D. Wilke(2) --- --- 103,125 38,875 0 0
Thomas E. Dierckman --- --- 56,625 46,875 0 0
James M. Harter --- --- 2,500 16,500 0 0
------- ------ ---------- ---------- ---------- ----------
Total 0 $0 421,926 264,274 $0 $0
======= ====== ========== ========== ========== ==========
---------------------------------------------------------------------------------------------------
</TABLE>
(1) Based on the difference in the unit price of $12.125 at December 31,
1994 and the exercise price of the underlying options.
(2) Retired on December 31, 1994
56
<PAGE> 59
ITEM 11. EXECUTIVE COMPENSATION (continued)
EMPLOYEE BENEFIT PLANS
The following are descriptions of the principal employee benefit plans
of the Company.
RETIREMENT PLANS
Under the Retirement Plan, participants' benefits are calculated as
40.5% of the average annual compensation of the highest five calendar years of
the preceding ten years up to Social Security covered compensation, plus 60% of
the average annual compensation in excess of covered compensation, reduced pro
rata for years of service less than 30. Under the Pension Restoration Plan,
the Company will pay any difference between the ERISA and Internal Revenue Code
maximum amount payable under the Retirement Plan and the amount otherwise
payable, including amounts restricted by the compensation limit.
Credited years of service as of December 31, 1994 (to the nearest
whole year) and average annual compensation for the highest five years of the
last ten years are as follows: 24 years and $450,000 for Mr. Lee, 25 years and
$375,000 for Mr. Cusumano, 18 years and $280,000 for Mr. Wilke, 12 years and
$240,000 for Mr. Dierckman, and 2 years and $130,000 for Mr. Harter.
The following table reflects the estimated annual benefits paid as a
single life annuity upon retirement at age 65 under the Retirement Plan and
Pension Restoration Plan at various assumed compensation ranges and credited
years of service:
<TABLE>
<CAPTION>
Years of Service
---------------------------------------------------------------
Compensation 10 20 30 40
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
$125,000 $ 24,000 $ 47,000 $ 71,000 $ 71,000
200,000 39,000 77,000 116,000 116,000
275,000 54,000 107,000 161,000 161,000
350,000 69,000 137,000 206,000 206,000
425,000 84,000 167,000 251,000 251,000
450,000 89,000 177,000 266,000 266,000
500,000 99,000 197,000 296,000 296,000
550,000 109,000 217,000 326,000 326,000
</TABLE>
The Board of Directors has adopted a Supplemental Executive Retirement
Plan pursuant to which the Company will pay benefits to specified employees so
that such employees' maximum normal retirement benefit under the Retirement
Plan and the Pension Restoration Plan will be earned during a period of 20
rather than 30 years of credited service. As of December 31, 1994, Robert D.
Wilke and a former officer of the Company were the only participants in the
plan.
57
<PAGE> 60
ITEM 11. EXECUTIVE COMPENSATION (continued)
RETIREMENT PLANS (Continued)
The following table reflects the estimated annual benefits under the
Supplemental Executive Retirement Plan upon retirement at age 65 at various
assumed compensation ranges and credited years of service:
<TABLE>
<CAPTION>
Years of Service
---------------------------------------------------------------
Compensation 10 20 30 40
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
$125,000 $12,000 $24,000 $ 0 $ 0
200,000 19,000 38,000 0 0
275,000 27,000 54,000 0 0
350,000 34,000 68,000 0 0
425,000 40,000 83,000 0 0
</TABLE>
CHANGE IN CONTROL SEVERANCE PROGRAM
The Partnership entered into severance agreements in March 1988 with
two current executive officers, Thomas L. Lee and Gary M. Cusumano, under
which each such officer is entitled to certain benefits in the event of a
"change of control." Under the provisions of the severance agreements, a
"change of control" is deemed to have occurred where (i) any "person" (other
than a trustee or similar person holding securities under an employee benefit
plan of the Partnership, or an entity owned by the Unitholders in substantially
the same proportions as their ownership of units) becomes the beneficial owner
of 25% or more of the total voting power represented by the Partnership's then
outstanding voting securities, (ii) Newhall Management Corporation is removed
as Managing General Partner of the Managing General Partner, or (iii) the
holders of the voting securities of the Partnership approve a merger or
consolidation of the Partnership with any other entity, other than a merger or
consolidation which would result in the voting securities of the Partnership
outstanding immediately prior thereto continuing to represent (either by
remaining standing or by being converted into voting securities of the
surviving entity) at least 75% of the total voting power represented by the
voting securities of the Partnership or such surviving entity outstanding
immediately after such merger or consolidation, or (iv) a plan of complete
liquidation of the Partnership is adopted or the holders of the voting
securities of the Partnership approve an agreement for the sale or disposition
by the Partnership (in one transaction or a series of transactions) of all or
substantially all the Partnership's assets. Entitlement to benefits arises if,
within two years following a change in control, the officer's employment is
terminated or if he elects to terminate his employment following action by the
Partnership which results in (i) a reduction in salary or other benefits, (ii)
change in location of employment (iii) a change in position, duties,
responsibilities or status inconsistent with the officer's prior position or a
reduction in responsibilities, duties, or offices as in effect immediately
before the change in control, or (iv) the failure of the Partnership to obtain
express assumption by any successor of the Partnership's obligations under the
severance agreement.
Benefits payable under the agreements consist of (i) payment in a
single lump sum equal to continuation of monthly payments of base salary for
three years, (ii) payment in a single lump sum of three times the average bonus
payments for the two fiscal years
58
<PAGE> 61
ITEM 11. EXECUTIVE COMPENSATION (continued)
CHANGE IN CONTROL SEVERANCE PROGRAM (Continued)
preceding the change in control, (iii) continuation of participation in
insurance and certain other fringe benefits for three years, (iv) immediate
vesting of deferred compensation or nonqualified retirement benefits and
options and related appreciation rights, (v) immediate lapse of any Partnership
rights to the return or repurchase of Units granted pursuant to Units Rights,
(vi) a retirement benefit equivalent to the additional benefits that would have
accrued under Partnership retirement plans if employment had continued for two
years, and (vii) reduction of required service for full retirement benefits
from 30 years to 20 years through a non-qualified arrangement. Benefits
payable under the agreements are instead of any severance pay benefits under
the Partnership's general severance pay policy. The agreements are not
contingent upon the officers actively seeking other employment, but provide for
some offset of benefits if other employment (other than self-employment) is
obtained. For each month of employment (other than self-employment) during the
three years following termination of employment with the Partnership, the
officer must return to the Partnership the lesser of 1/36 of the salary
continuation payment or the compensation received from the new employer for
that month. In addition, to the extent the new employer provides the officer
with comparable medical, dental, disability or life insurance coverage, such
benefits under the severance agreements will terminate.
RETIREMENT PLAN FOR DIRECTORS
Directors who cease to be directors after at least five years of
service on the Board of Directors, will be eligible for retirement benefits
under a Retirement Plan for Directors. This Plan covers service only as an
outside director. A director who retires as an employee of the Company but
continues on the Board is eligible for benefits under this Plan if he or she
serves on the Board for at least five years after retirement as an employee.
Under the Plan, each eligible director is entitled to an annual retirement
benefit equal to the greater of $28,000 or the annual retainer on the date of
retirement. Quarterly benefit payments will commence after a director ceases
to be a director (but not before age 65) and continue for a period equal to the
length of the director's service as an outside director or until death,
whichever occurs first. Retired directors are entitled to continue to
participate in the Partnership matching gift program for amounts up to five
thousand dollars per annum for five years after retirement.
COMPENSATION OF THE DIRECTORS
The Partnership Agreement provides that the compensation of the
general partners and their partners, directors, officers and employees shall be
determined by the Managing General Partner. Both the compensation committee
and the nominating committee of the Board of Directors of Newhall Management
Corporation, the Managing General Partner of Newhall Management Limited
Partnership, have been granted authority by the Board of Directors to determine
certain compensation issues. Members of the Board receive an annual retainer
fee of $24,000 for serving on the Board and a fee of $1,000 for attending each
meeting of the Board or committee of which they are a member. Committee chair-
59
<PAGE> 62
ITEM 11. EXECUTIVE COMPENSATION (continued)
COMPENSATION OF THE DIRECTORS (continued)
persons receive a fee of $500 in addition to the regular meeting fee for each
meeting they conduct. Members of the Board of Directors will also receive
reimbursement for travel and other expenses related to attendance at meetings
of the Board of Directors and of the committees. In addition, the Partnership
Agreement requires the Partnership to reimburse the Managing General Partner
for any federal or California income taxes imposed upon the Managing General
Partner or its Managing General Partner as a result of its activities as
Managing General Partner. Under the terms of the 1995 Option/Award plan
adopted by the Board of Directors on January 18, 1995, each non-employee Board
member ("Independent Director") may elect to have all or any portion of the
annual retainer fee paid in depositary units instead of cash.
The 1995 Option/Award Plan also provides each Independent Director
serving on the Board on January 18, 1995, and each newly elected or appointed
Independent Director, with a nonstatutory option (Automatic Option) to purchase
1,500 depositary units. On the third Wednesday of July of each year that
occurs after January 18, 1995, each continuing Independent Director will
automatically receive an Automatic Option to purchase 500 depositary units.
Each Automatic Option vests immediately and has a term of 10 years. Generally,
the Independent Director may exercise his or her option for a period of 3
months after termination of service as an Independent Director for any reason
other than death or "retirement," 12 months after the date of death and 36
months after the date of "retirement." "Retirement" means the first day the
Independent Director ceases to serve as an Independent Director after serving
as an Independent Director for at least five years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company currently maintains a $30 million unsecured revolving
credit facility, and a subsidiary of the Company has a $2 million revolving
credit line with Wells Fargo Bank, N.A. (the "Bank"). In addition, in
December, 1994, a $40 million revolving mortgage credit facility was finalized
jointly with Wells Fargo Bank and Morgan Guaranty Trust of New York. There
were no borrowings outstanding against these credit lines at December 31, 1994.
Certain of the Company's employee benefit plans have invested approximately $13
million in funds managed by the Bank and the Bank has extended approximately $3
million in letters of credit to the Company. The Bank is the principal
subsidiary of Wells Fargo & Company. Carl E. Reichardt, former Chairman of the
Board of the Bank and Wells Fargo & Company, is a director of the Managing
General Partner of the Managing General Partner. In addition, a director of
the Managing General Partner of the Managing General Partner, Paul A. Miller,
is also a director of the Bank and Wells Fargo & Company.
In June 1994 Valencia Water Company, a wholly-owned subsidiary of the
Company, borrowed $11 million from Pacific Mutual Life Insurance Company. In
addition, the Company has acquired two life insurance policies for its two
senior officers with face amounts of approximately $1.5 million each from
Pacific Mutual. Mr. Thomas C. Sutton, a director of the Company, is Chairman
of the Board and Chief Executive Officer of Pacific Mutual Life Insurance
Company. All of the foregoing transactions are at rates and terms comparable
to those of similar transactions with unrelated parties. Mr. Lawrence R.
Tollenaere, a director of the Company, is also a director of Pacific Mutual
Life Insurance Company.
60
<PAGE> 63
ITEM 11. EXECUTIVE COMPENSATION (continued)
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF NEWHALL MANAGEMENT CORPORATION
COMPENSATION COMMITTEE CHARTER
The Compensation Committee determines or approves compensation of all
executive officers of the Company and reviews management development issues.
It has regularly scheduled meetings two times a year, and meets at other times
as appropriate. During 1994 the committee met four (4) times.
SENIOR MANAGEMENT COMPENSATION PHILOSOPHY
The Company believes its success is greatly influenced by the caliber
of its employees. The Company's compensation program for senior management is
designed to attract, recruit and retain a highly skilled, professional and
dedicated work force. In this regard, Newhall Land's senior management
compensation program consists of:
. Base salary compensation tied to prevailing real estate industry
compensation practices.
. Annual merit and incentive pay compensation (bonuses) primarily related
to the Company's performance for the previous fiscal year.
. Long-term incentive compensation in the form of unit options and
restricted units directly tied to increasing unitholder value. As it is
directly related to corporate performance, this component of compensation
can be highly volatile.
The Company's objective is for the base salary, annual incentive
compensation and long-term incentive compensation of senior management over
time to approximate the median levels for an industry comparison group
consisting primarily of real estate companies with which the Company competes
for executive talent. From year-to-year, however, relative compensation levels
may vary due largely to variances in individual company performance. It should
be pointed out that the companies with which the Company competes for executive
talent are not the same as those in the Wilshire Real Estate Securities Index
shown in the performance graph. In addition, for individual managers, there is
also a subjective element relating to his or her success in meeting individual
performance goals determined at the beginning of each year. These goals are
for the business segment he or she manages including personal goals for
increasing unitholder values through profitability and, most importantly, the
value of the Company's landholdings.
BASE SALARY COMPENSATION
The base salary for each executive officer is determined on the basis
of internal comparability considerations and base salary levels in effect for
comparable positions at the Company's principal competitors for executive
talent. External salary data provided to the Committee by an independent
compensation consulting firm indicate that these salaries for 1994 were
generally at or below the median level for such companies. Salaries are
reviewed on an annual basis, and adjustments to each executive officer's base
salary, if any, are made based upon individual performance and salaries paid by
the Company's competitors after giving effect to varying job responsibilities.
61
<PAGE> 64
ITEM 11. EXECUTIVE COMPENSATION (continued)
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF NEWHALL MANAGEMENT CORPORATION (continued)
ANNUAL MERIT AND INCENTIVE COMPENSATION (BONUSES)
Annual cash bonuses under the Company's Executive Incentive Plan are
earned by each executive officer on the basis of the Company's earnings,
division performance and/or the attainment of individual goals in the previous
fiscal year. Target earnings projections for the Company and each division
from the Company's business plan and individual goals are developed at the
beginning of the year. Target bonuses are determined as percentages of base
salaries for each management group and are generally set to produce bonuses
comparable to other real estate companies over a period of time. The bonuses
earned are then calculated at the end of the year using the target percentages,
increased or decreased by multiples which give effect to the earnings achieved
and individual goals accomplished. The multiple results in the bonus
percentages attributable to company and division earnings being increased at
twice the percentages by which actual earnings exceed targeted earnings and
reduced at three times the percentages by which actual earnings are less than
targeted earnings. There are no bonuses for these components of the formula if
earnings are less than 75% of target. The aggregate amount of such incentive
bonuses may not exceed 5% of the Company's net income before deducting the
incentive awards. The 1994 bonuses continue to be at or below industry levels.
The target bonuses (except for Mr. Lee's bonus) are recommended by the
Company's Chief Executive Officer, Mr. Lee, and approved by the Compensation
Committee and the Board of Directors.
The total of the cash bonuses paid for 1994 was $662,000 (or 4.1% of
1994 income before bonuses), versus $307,000 in 1993 (2.3% of income before
bonuses), or a 115.6% increase from 1993 to 1994. This increase reflects the
Company's increased earnings from 1993 to 1994 and the fact that Messrs. Lee
and Cusumano did not receive cash bonuses in 1993. In lieu of cash bonuses,
Mr. Lee was awarded options for 9,200 units and Mr. Cusumano was awarded
options for 7,500 units for 1993. The increase in bonuses for 1994 recognizes
the improved earnings in 1994 over 1993 of 21.7%, the expansion of the
Company's merchant builder program in Valencia, the successful recovery from
the Northridge earthquake, expansion of the portfolio of income producing
properties, the continuing progress of the Company's expansion into the Arizona
market, and the successful restructuring of the Company's operating groups into
more autonomous, profit-oriented divisions.
LONG-TERM INCENTIVE COMPENSATION
The equity component of compensation is designed to encourage growth
in unitholder value and includes unit options, appreciation rights and
restricted units under the Company's 1995 Option/Award Plan. Awards are
generally made at mid-year to key management personnel who are in positions to
make substantial contributions to the long-term success of the Company. These
unit awards mature and are expected to grow in value over time and for that
reason represent compensation which is attributable to service over a period of
up to ten years. This focuses attention on managing the Company from the
perspective of an owner with an equity stake in the business.
62
<PAGE> 65
ITEM 11. EXECUTIVE COMPENSATION (continued)
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF NEWHALL MANAGEMENT CORPORATION (continued)
There were no appreciation rights or restricted units granted during
the year. The size of the unit options granted to each executive officer is
based on the aggregate exercise price. Generally it is set at a multiple of
salary which the Committee deems appropriate in order to create a meaningful
opportunity for ownership based upon the individual's current position with the
Company. The unit options granted also take into account comparable awards to
individuals in similar positions in the industry, as reflected in external
surveys and as reported to the Committee by an independent compensation
consultant, and the individual's potential for future responsibility and
promotion over the option term. The value of the unit options granted during
1994 were at or below those of the Company's competitors in the independent
consultant's survey.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Lee's salary was last increased in January 1994 by $17,000 to
$322,000 per annum, the first increase since February 1990, and he was paid a
cash bonus for 1994 of $77,280. His annual salary and bonus have declined from
a high of $540,000 for 1990 to $399,280 in 1994 due to reduced incentive
compensation. The increase in Mr. Lee's base salary during 1994 was in
recognition of his performance and to maintain appropriate relationships with
other salaries and compensation packages within the Company and the industry.
Mr. Lee's bonus for 1994 of $77,280 was calculated by applying a
multiple of 120% to his target bonus of 20% of his salary. The target bonus
percentage was established at the beginning of the year as described earlier
and was based entirely upon Company earnings. The multiple gives effect to the
amount by which the Company's earnings exceeded target earnings. Mr. Lee
received 9,200 unit options at the then market price of $14.75 in lieu of a
cash bonus for 1993.
Long-term incentive compensation of 19,000 Unit options was granted to
Mr. Lee in July, 1994, a reduction of 11,000, or 36.6%, from the 1993 grant of
30,000 options. While presenting an opportunity for him to add to his equity
stake in the Company, the value of the 19,000 unit options granted to Mr. Lee
was less than the median of the long-term incentive compensation of his peers
in the industry group. As noted above, Mr. Lee was also granted 9,200 options
in January 1994 in lieu of a 1993 cash bonus for a total of 28,200 options
during 1994. The long-term benefits of the unit options are expected to be
realized over the next ten years during which Mr. Lee's emphasis on earnings,
land entitlements, investments in income producing properties, geographic
diversification and strategic planning are expected to yield benefits for the
Company's investors.
SECTION 162 LIMIT
Section 162(m) of the Internal Revenue Code ("Section 162") limits
federal income tax deductions for compensation paid to the Chief Executive
Officer and the four other most
63
<PAGE> 66
ITEM 11. EXECUTIVE COMPENSATION (continued)
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
OF NEWHALL MANAGEMENT CORPORATION
highly compensated officers of a public company to $1 million per year, but
contains an exception for performance-based compensation that satisfies certain
conditions. The Internal Revenue Service has indicated that it is studying
whether Section 162 applies to publicly traded limited partnerships such as the
Company.
The Company believes that unit options granted to its executives will
qualify for the performance based-compensation exception to the deduction
limit. Because it is unlikely that other compensation to any Company executive
would exceed the deduction limit in the near future and final regulations have
not been issued under Section 162(m), the Committee has not yet considered
whether it will seek to qualify compensation other than options for the
performance-based exception or will prohibit the payment of compensation that
would exceed the deduction limit.
COMPENSATION COMMITTEE MEMBERS
The Compensation Committee of the Board of Directors of Newhall
Management Corporation is comprised of the following five directors:
George C. Dillon (Chairman)
James F. Dickason
Peter T. Pope
Carl E. Reichardt
Lawrence R. Tollenaere
64
<PAGE> 67
ITEM 11. EXECUTIVE COMPENSATION (continued)
The Newhall Land and Farming Company
Stock Performance Analysis (5-year Total Return*)
<TABLE>
<CAPTION>
5-year
Total
Total Annual Return 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NHL 91.816% 4.038% -3.097% 93.370% 9.499% -44.98% 25.50% -23.16% 15.32% -22.05% -52.31%
S&P 500 31.770% 18.680% 5.250% 16.550% 31.660% -3.19% 30.53% 7.65% 10.06% 1.31% 51.68%
WRESI 53.020% 21.540% -9.650% 34.720% 1.770% -48.53% 13.25% -9.80% 19.46% -5.60% -40.72%
Value of $100
invested 12/31/84 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
NHL 191.816 199.5616 193.3816 373.9418 409.4637 225.2827 282.7368 217.2575 250.5317 195.2895
S&P 500 131.77 156.3846 164.5948 191.8353 252.5703 244.5133 319.1632 343.5792 378.1433 383.097
WRESI 153.02 185.9805 168.0334 226.3746 230.3814 118.5773 134.2888 121.1285 144.7001 136.5969
</TABLE>
The 10-year graph assumes $100 invested on December 31, 1984 in The Newhall
Land and Farming Company, S&P 500 Index and the Wilshire Real Estate Securities
Index (Real Estate Operating Companies only).
The 5-Year Total Return assumes $100 invested on December 31, 1989.
* Total Return includes reinvestment of dividends.
** Wilshire Real Estate Securities Index (consists of the following real estate
operating companies: American Real Estate Partnership, Arbor Property Trust,
Catellus Development Corporation, Forest City Enterprises, Inc. , John Q.
Hammons Hotels, Host Marriott Corporation, La Quinta Motor Inns, National
Realty L.P., The Newhall Land and Farming Company, Rouse Company).
65
<PAGE> 68
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
DIRECTORS AND OFFICERS
The following table sets forth the number of units beneficially owned
by each director of Newhall Management Corporation, each of the Company's five
highest paid executives and all directors and officers as a group as of
December 31, 1994.
<TABLE>
<CAPTION>
Amount and Nature Percent
Name of Beneficial Ownership of Class
- ---------------------- ----------------------- --------
<S> <C> <C>
Gary M. Cusumano 236,538 (2) 0.6%
James F. Dickason 41,170 (1) (3) 0.1
Thomas E. Dierckman 64,941 (4) 0.2
George C. Dillon 5,600 (1) (5) *
James M. Harter 3,151 (6) *
Thomas L. Lee 236,054 (1) (7) 0.6
Thomas V. McKernan, Jr. 2,000 (1) (8) *
Paul A. Miller 2,400 (1) *
Henry K. Newhall 1,042,868 (1) (8) 2.8
Jane Newhall 1,071,650 (1) 2.9
Peter T. Pope 3,000 (1) *
Carl E. Reichardt 7,000 (1) (9) *
Thomas C. Sutton 2,000 (1) *
Lawrence R. Tollenaere 24,000 (1) *
Robert D. Wilke 141,525 (10) 0.4
Edwin Newhall Woods 774,354 (1) (11) 2.1
Ezra K. Zilkha 1,172,600 (1) (12) 3.2
All directors and officers 4,958,859 13.5%
as a group
</TABLE>
* Represents less than 0.1% of the securities outstanding.
(1) Includes 72,000 units each for Messrs. Henry K. Newhall, Woods and
Zilkha, 71,650 units for Miss Jane Newhall, 2,000 units each for
Messrs. Dillon, McKernan, Miller, Pope, Reichardt, Sutton and
Tollenaere and 1650 units for Mr. Dickason which are held by the
Managing General Partner. Includes 2,000 units held by the Managing
General Partner and 20 units contributed to Newhall General
Partnership in the case of Mr. Lee. Of the total of 376,950 units
held by the Managing General Partner beneficially for the directors,
including 71,650 held for Mr. McBean, Director Emeritus, 20 units have
been contributed to Newhall General Partnership, and of those 20
units, 10 units have been contributed back to the Managing General
Partner by Newhall General Partnership. See Item 10 of this Annual
Report on Form 10-K for information on a shareholders' agreement,
voting trust agreement, and limited partnership agreement relating to
these units.
(2) Includes 112,938 units which Mr. Cusumano has the right to acquire and
3,000 restricted units which may be returned to the Partnership under
certain circumstances pursuant to the Company's Option, Appreciation
Rights and Restricted Units Plan.
66
<PAGE> 69
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(Continued)
DIRECTORS AND OFFICERS (Continued)
(3) The Partnership is advised that Mr. Dickason has sole voting and
investment power as to 39,520 units held by a trust for which he is a
trustee.
(4) Includes 56,625 units which Mr. Dierckman has the right to acquire and
1,200 restricted units which may be returned to the Partnership under
certain circumstances pursuant to the Company's Option, Appreciation
Rights and Restricted Units Plan and 1,862 held by the Company's
Employee Savings Plan.
(5) Includes 3,600 units owned by Mr. Dillon's wife.
(6) Includes 2,500 units which Mr. Harter has the right to acquire
pursuant to the Company's Option, Appreciation Rights and Restricted
Units Plan and 374 units held by the Company's Employee Savings Plan.
(7) Includes 146,738 units which Mr. Lee has the right to acquire and
4,000 restricted units which may be returned to the Partnership under
certain circumstances pursuant to the Company's Option, Appreciation
Rights and Restricted Units Plan.
(8) The Partnership is advised that Henry K. Newhall has sole voting and
investment power as to 80,928 held by trusts for which he is the
trustee and beneficiary. Voting and investment power is shared with
Peter McBean and others as to 889,940 units held by certain trusts.
(9) Mr. Reichardt has sole voting and investment power as to 3,000 units
held by trusts for which he is the trustee.
(10) Includes 103,125 units which Mr. Wilke has the right to acquire and
2,400 restricted units which may be returned to the Partnership under
certain circumstances pursuant to the Company's Option, Appreciation
Rights and Restricted Units Plan.
(11) The Partnership is advised that Mr. Woods has sole voting and
investment power as to 335,846 of these units owned by him and sole
voting and investment power as to 312,208 of these units held of
record by a trust under which he is the trustee. Also included are
54,300 units owned by Mr. Woods' wife as to which he disclaims any
beneficial ownership.
(12) Includes 230,600 units held by Zilkha & Sons, Inc. for which the
Partnership is advised that Mr. Zilkha has sole voting and investment
power and 30,000 units held by Mr. Zilkha's wife for which he
disclaims beneficial ownership.
Except as indicated otherwise in the above notes, the specified
persons possess sole voting and investment power as to the indicated number of
units to the best knowledge of the Company.
67
<PAGE> 70
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(continued)
DIRECTORS AND OFFICERS (Continued)
Certain provisions of the Partnership's Limited Partnership Agreement
require the affirmative vote of holders of at least 75% of the Partnership's
voting power to approve (i) the removal of any general partner or the election
of any general partner as the Partnership's managing general partner; or (ii)
certain business combinations and other specified transactions ("Business
Combinations") with, or proposed by or on behalf of, persons beneficially
owning 10% or more of the Partnership's voting power, unless such Business
Combination is either approved by a majority of the present directors of
Newhall Management Corporation (or by directors who are nominated by them) or
certain price and procedural requirements are satisfied.
CERTAIN UNITHOLDERS
The following table sets forth the names and addresses and
unitholdings of the only persons known to the Partnership to be beneficial
owners of more than five percent of the outstanding units of the Partnership as
of December 31, 1994. Except as otherwise indicated, such unitholders have
sole voting and investment power to the best knowledge of the Partnership.
<TABLE>
<CAPTION>
Amount Percent
Name and Address Beneficially Owned Of Class
- ----------------------------- ------------------ ---------
<S> <C> <C>
State Farm Mutual Automobile 3,500,758 9.5%
Insurance Company
One State Farm Plaza
Bloomington, Illinois 61710
State of Wisconsin 2,121,260 5.8%
Investment Board
P. O. Box 7842
Madison, Wisconsin 53707
Peter McBean 1,961,324(1) 5.3%
100 California Street
San Francisco, California 94111
</TABLE>
(1) See footnote (1) under Directors and Officers.
To the best knowledge of the management of the Company, no other
person owned beneficially more than five percent of the outstanding units of
the Company on that date. With respect to the above information, the Company
has relied upon Schedule 13G filings and information received from such
persons.
68
<PAGE> 71
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company expects to complete two transactions in 1995 with a
partnership, one of whose partners is the son of Robert D. Wilke, who retired
as Vice Chairman and Chief Financial Officer on December 31, 1994. The first
transaction is to sell approximately one acre of land for use as a car wash for
$1.1 million and the second is to lease 2,074 square feet of retail space at
approximately $7,000 per month for 20 years with a 5-year option for use as an
auto service center. The terms of the transactions are at or above prevailing
terms for similar transactions.
For additional related party information see Compensation Committee Interlocks
and Insider Participation in Item 11 - Executive Compensation.
69
<PAGE> 72
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed with this report:
1. Financial Statements - The Consolidated Financial Statements of the
Company: Consolidated Statements of Income for the years ended
December 31, 1994, December 31, 1993 and December 31, 1992,
Consolidated Balance Sheets as of December 31, 1994 and December 31,
1993, Consolidated Statements of Cash Flows for the years ended
December 31, 1994, December 31, 1993 and December 31, 1992,
Consolidated Statements of Changes in Partners' Capital for the years
ended December 31, 1994, December 31, 1993 and December 31, 1992, and
Notes to Consolidated Financial Statements.
2. Exhibits (listed by numbers corresponding to the Exhibit Table of Item
601 in Regulation S-K):
<TABLE>
<S> <C> <C>
3(a) The Newhall Land and Farming Company (a California Limited Partnership) Limited Partnership Agreement incorporated
by reference to Exhibit 3(e) to Registrant's Registration Statement on Form S-14 filed August 24, 1984.
(b) First Amendment to Limited Partnership Agreement of The Newhall Land and Farming Company (a California Limited
Partnership) incorporated by reference to Exhibit 3(b) of the Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
4 Depositary Receipt for Units of Interest, The Newhall Land and Farming Company (a California Limited Partnership)
incorporated by reference to Exhibit 4 of the Company's Annual Report on Form 10-K for the year ended December 31,
1990.
* 10(a) Option, Appreciation Rights and Restricted Units Plan (First Amendment and Restatement) of The Newhall Land and
Farming Company (a California Limited Partnership) incorporated by reference to Exhibit 10(a) of the Company's
Annual Report on Form 10-K for the year ended December 31, 1993.
* (b) Newhall Executive Incentive Plan incorporated by reference to Exhibit 10(f) to Registrant's Registration Statement
on Form S-14 filed August 24, 1984.
* (c) The Newhall Land and Farming Company Employee Savings Plan incorporated by reference to the Company's Registration
Statement on Form S-8 dated May 24, 1994.
* (d) The Newhall Land and Farming Company Retirement Plan Restatement, Amendments No. 1 through 5, incorporated by
reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993.
</TABLE>
70
<PAGE> 73
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(continued)
<TABLE>
<S> <C> <C>
* (e) Form of Severance Agreements incorporated by reference to Exhibit 10(e) of the Company's Annual Report on Form
10-K for the year ended December 31, 1993.
(f) Newhall Management Corporation Retirement Plan for Directors (Revised January 16, 1991) incorporated by reference
to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.
* (g) The Newhall Land and Farming Company Supplemental Executive Retirement Plan (Restated effective January 15, 1992)
incorporated by reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
* (h) The Newhall Land and Farming Company Senior Management Survivor Income Plan incorporated by reference the
Company's Annual Report on Form 10-K for the year ended December 31, 1993.
(i) Form of Indemnification Agreement between the Partnership and its General Partners and the general partners,
partners, shareholders, officers and directors of its General Partners, or of the Managing General Partner of the
Managing General Partner, as amended, incorporated by reference to Exhibit 28(g) to the Company's report on Form
8-K filed December 11, 1990.
(j) Tax Payment and Tax Benefit Reimbursement Agreement incorporated by reference to Exhibit 28(f) to the Company's
report on Form 8-K filed December 11, 1990.
* (k) The Newhall Land and Farming Company Deferred Cash Bonus Plan incorporated by reference to Exhibit 10(l) of the
Company's Annual Report on Form 10-K for the year ended December 31, 1990.
* (l) Form of award issued under The Newhall Land and Farming Company Deferred Cash Bonus Plan incorporated by reference
to Exhibit 10(m) of the Company's Annual Report on Form 10-K for the year ended December 31, 1990.
* (m) The Newhall Land and Farming Company Employee Savings Restoration Plan (As restated effective January 15, 1992)
incorporated by reference to Exhibit 10(n) to the Company's Annual Report on Form 10-K for the year ended December
31, 1991.
* (n) The Newhall Land and Farming Company Pension Restoration Plan (As restated effective January 15, 1992)
incorporated by reference to Exhibit 10(o) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1991.
</TABLE>
71
<PAGE> 74
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(continued)
<TABLE>
<S> <C> <C>
(o) Trust Agreement dated January 15, 1992 between the Partnership and Newhall Management Corporation incorporated by
reference to Exhibit 10(p)to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.
(p) The Newhall Land and Farming Company Employee Unit Purchase Plan incorporated by reference to the Company's
Registration Statement on Form S-8 dated May 24, 1994.
* (q) The Newhall Land and Farming Company 1995 Option/Award Plan incorporated by reference to the Company's
Registration Statement on Form S-8 dated March 22, 1995.
* (r) Amendment No. 1 to The Newhall Land and Farming Company Retirement Plan.
* (s) Memorandum of Understanding Between The Newhall Land and Farming Company and Robert D. Wilke.
11 Computation of earnings per unit.
21 Subsidiaries of the Registrant.
27 Financial Data Schedule
99(a) Articles of Incorporation of Newhall Management Corporation, as amended, incorporated by reference to Exhibit
28(b) to the Company's report on Form 8-K filed December 11, 1990.
(b) Bylaws of Newhall Management Corporation incorporated by reference to Exhibit 28(c) to the Company's report on
Form 8-K filed December 11, 1990, and Amendment Number 1 dated July 17, 1991 incorporated by reference to Exhibit
28(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.
(c) Shareholders' Agreement between Newhall Management Corporation, its shareholders and the Newhall Management
Corporation Voting Trust incorporated by reference to Exhibit 28(d) to the Company's report on Form 8-K filed
December 11, 1990, and Amendment to Shareholders' Agreement dated as of November 20, 1991 incorporated by
reference to Exhibit 28(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991.
(d) Voting Trust Agreement between Newhall Management Corporation, the Trustee, and the individual shareholders of
Newhall Management Corporation incorporated by reference to Exhibit 28(e) to the Company's report on Form 8-K
filed December 11, 1990.
</TABLE>
72
<PAGE> 75
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(continued)
<TABLE>
<S> <C>
(e) Partnership Agreement of Newhall General Partnership incorporated by reference to Exhibit 28(e) to Registrant's
Registration Statement on Form S-14 filed August 24, 1984, and the Certificate of Amendment of Partnership
Agreement of Newhall General Partnership, dated November 14, 1990 incorporated by reference to Exhibit 28(e) of
the Company's Annual Report on Form 10-K for the year ended December 31, 1990.
(f) Limited Partnership Agreement of Newhall Management Limited Partnership, incorporated by reference to Exhibit
28(a) to the Company's report on Form 8-K filed December 11, 1990.
</TABLE>
* The items marked above constitute Executive Compensation Plans and
Arrangements.
(b) There was no current report on Form 8-K filed with respect to the quarter
ended December 31, 1994.
73
<PAGE> 76
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.
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: March 15, 1995 By / S / THOMAS L. LEE
---------------------------------------
Thomas L. Lee
Chairman and Chief Executive Officer
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 dates indicated.
Date: March 15, 1995 By / S / THOMAS L. LEE
---------------------------------------
Thomas L. Lee, Chairman
and Chief Executive Officer of
Newhall Management Corporation
(Principal Executive Officer)
Date: March 15, 1995 By / S / STUART R. MORK
---------------------------------------
Stuart R. Mork
Vice President and Chief Financial
Officer
Newhall Management Corporation
(Principal Financial Officer)
Date: March 15, 1995 By / S / DONALD L. KIMBALL
---------------------------------------
Donald L. Kimball, Vice President -
Controller
Newhall Management Corporation
(Principal Accounting Officer)
74
<PAGE> 77
Directors of Newhall Management Corporation:
Date: March 15, 1995 By / S / James F. Dickason
---------------------------------------
James F. Dickason
Date: March 15, 1995 By / S / George C. Dillon
---------------------------------------
George C. Dillon
Date: March 15, 1995 By / S / Thomas L. Lee
---------------------------------------
Thomas L. Lee
Date: March 15, 1995 By / S / Thomas V. McKernan, Jr.
---------------------------------------
Thomas V. McKernan, Jr.
Date: March 15, 1995 By / S / Paul A. Miller
---------------------------------------
Paul A. Miller
Date: March 15, 1995 By / S / Henry K. Newhall
---------------------------------------
Henry K. Newhall
Date: March 15, 1995 By / S / Jane Newhall
---------------------------------------
Jane Newhall
Date: March 15, 1995 By / S / Peter T. Pope
---------------------------------------
Peter T. Pope
Date: March 15, 1995 By / S / Carl E. Reichardt
---------------------------------------
Carl E. Reichardt
Date: March 15, 1995 By / S / Thomas C. Sutton
---------------------------------------
Thomas C. Sutton
Date: March 15, 1995 By / S / Lawrence R. Tollenaere
---------------------------------------
Lawrence R. Tollenaere
Date: March 15, 1995 By / S / Edwin Newhall Woods
---------------------------------------
Edwin Newhall Woods
Date: March 15, 1995 By / S / Ezra K. Zilkha
---------------------------------------
Ezra K. Zilkha
75
<PAGE> 78
THE NEWHALL LAND AND FARMING COMPANY
INDEX TO EXHIBITS
Item 14 (a) 3
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -------------
<S> <C>
10(r) Amendment No. 1 to The Newhall Land and Farming Company Retirement Plan
10(s) Memorandum of Understanding Between The Newhall Land and Farming Company and Robert D. Wilke.
11 Computation of earnings per unit
21 Subsidiaries of the Registrant
23 Independent Auditors' Consent
27 Financial Data Schedule
</TABLE>
76
<PAGE> 1
Exhibit 10(r)
AMENDMENT NO. 1
TO THE NEWHALL LAND AND FARMING COMPANY RETIREMENT PLAN
The Newhall Land and Farming Company Retirement Plan, as restated in
its entirety effective January 1, 1989, and subsequently amended, is hereby
further amended as follows:
FIRST: Section 1.1 is amended in its entirety, effective March 1,
1995, to read as follows:
1.1 "Actuarial Equivalent" shall mean the determination of a
benefit having the same value as the benefit under the Plan
which it replaces. Determination of a Participant's vested
accrued benefit for purposes other than a lump sum payment
shall be based on an interest rate of six percent (6%) and
mortality specified in Table 18-a of the Society of Actuaries
1983 Exposure Draft on Development of the 1983 Group Annuity
Mortality Table; mortality rates used for individual
Participants shall be based on Table 18-a rates for
individuals one year younger. Notwithstanding the preceding
sentence, determining (i) whether the present value of a
Participant's accrued benefit exceeds $3,500 for purposes of
Section 7.05 and (ii) the amount of a lump sum benefit shall
be based on an interest rate that is the lesser of either the
Applicable Interest rate or nine percent (9%).
(a) For purposes of this section, Applicable
Interest Rate means, with respect to a
Participant or Beneficiary, the interest rate
or rates which would be used, as of the first
day of the month before the date of
distribution, by the Pension Benefit Guaranty
Corporation for purposes of determining the
present value of such Participant's or
Beneficiary's benefits under the Plan if the
Plan had terminated on the first day of the
Plan Year with insufficient assets to provide
benefits guaranteed by the Pension Benefit
Guaranty Corporation on that date.
(b) Notwithstanding any other provision of the
Plan to the contrary, the present value of
the vested accrued lump sum retirement
benefit due an Employee who became a
Participant prior to March 1, 1995 shall not
be less than the present value of such
Participant's vested accrued benefit as of
February 28, 1995 utilizing an interest rate
that is equal to the lesser of the interest
rate or rates which would be used, as of the
first day of the Plan Year, by the Pension
Benefit Guaranty Corporation for purposes of
determining the present value of such
Participant's or Beneficiary's benefits under
the Plan if the Plan had terminated on the
first day of the Plan Year with insufficient
assets to provide benefits guaranteed by the
pension Benefit Guaranty Corporation on that
date or nine percent (9%).
<PAGE> 2
SECOND: Except as modified by the Amendment, all the terms and
provision of the Plan (as previously amended) shall continue in full force and
effect.
IN WITNESS WHEREOF, Newhall Management Corporation, a California
Corporation, Managing General Partner of the Managing General Partner of The
Newhall Land and Farming Company, a California Limited Partnership, has caused
this Amendment No. 1 to The Newhall Land and Farming Company Retirement Plan
(restated effective January 1, 1989) to be executed on its behalf by its duly
authorized officer on this 18th day of January, 1995.
NEWHALL MANAGEMENT CORPORATION
Managing General Partner of Newhall
Management Limited Partnership, Managing
General Partner of The Newhall Land and
Farming Company, a California Limited
Partnership.
BY: /s/ David E. Peterson
-------------------------------------
ITS: Assistant Secretary
-------------------------------------
<PAGE> 1
Exhibit 10(s)
Memorandum of Understanding Between
The Newhall Land and Farming Company
and Robert D. Wilke
1. Robert D. Wilke to retire at December 31, 1994. He is entitled to all
benefits of early retirement which are:
a. Pension benefits calculated as of December 31, 1994.
b. Continuing health plan benefits until age 65 (available to all
early retirees with 10 years of service and at least 62 years
of age).
c. 12 months (36 months if approved by the Committee) to exercise
stock options unless they should expire earlier by the terms
of the option.
d. $2,500 of life insurance.
2. Upon early retirement, Robert D. Wilke forfeits the following:
a. Salary and titles.
b. Group life insurance.
c. Disability insurance.
d. Future accrual of pension benefits.
e. 2,400 units of restricted stock.
f. Company car.
g. Any and all other perks or benefits.
3. Robert D. Wilke is to receive a usual bonus in January, 1995 for 1994
performance, although there will be no ability to put money into the
Company's savings plan or receive the Company's matching contribution.
<PAGE> 2
Robert D. Wilke can provide valuable services to Newhall, particularly
as to transition of a new CFO, potential mergers and acquisitions and other
projects identified by the Chairman.
Therefore, for a period of seven months, Robert D. Wilke will:
a. Provide consulting services equivalent to about 60% of normal
work week.
b. Limit other consulting work so as to not interfere with this
assignment.
c. Do nothing that can be construed as a conflict of interest.
d. Receive no other benefits or perks but will be reimbursed for
reasonable out-of-pocket expenses.
e. Be provided work space, telephone, office supplies, etc.
f. Receive a consulting fee of $10,000 each month for a total of
$70,000.
/ S / Gary M. Cusumano / S / Robert D. Wilke
- ------------------------------------ ------------------------------------
The Newhall Land and Farming Company Robert D. Wilke
January 12, 1995 January 11, 1995
- ------------------------------------ ------------------------------------
Date Date
<PAGE> 1
Exhibit 11
THE NEWHALL LAND AND FARMING COMPANY
COMPUTATION OF EARNINGS PER UNIT
(in thousands, except per unit)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
Partnership Units 1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Average number of units
outstanding during the period 36,757 36,757 36,760
Net units issuable in connection with
dilutive options based upon use
of the treasury stock method 32 33 36
------- ------- -------
Average number of primary units 36,789 36,790 36,795
======= ======= =======
Net income $15,574 $12,797 $17,211
======= ======= =======
Net income per unit $0.42 $0.35 $0.47
======= ======= =======
</TABLE>
<PAGE> 1
EXHIBIT 21
THE NEWHALL LAND AND FARMING COMPANY
SUBSIDIARIES
The following subsidiaries are included in the Registrant's December 31, 1994
consolidated financial statements:
Newhall Depositary Company
(a California corporation)
Valencia Water Company
(a California corporation)
McDowell Mountain Ranch
Limited Partnership
(an Arizona limited partnership)
Valencia Town Center Associates
Limited Partnership
(a California limited partnership)
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Newhall Management Corporation
and Partners of The Newhall Land and Farming Company:
We consent to the incorporation by reference in the Registration Statement
on Form S-8 dated March 22, 1995 of our reports dated January 18, 1995 related
to the consolidated balance sheets of The Newhall Land and Farming Company and
Subsidiaries as of December 31, 1994 and 1993 and the related consolidated
statements of income, partners' capital and cash flows for each of the years
in the three-year period ended December 31, 1994, which reports appear in the
December 31, 1994 annual report on Form 10-K of The Newhall Land and Farming
Company.
Los Angeles, California /s/ KPMG PEAT MARWICK LLP
March 23, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 7,656
<SECURITIES> 0
<RECEIVABLES> 18,539
<ALLOWANCES> 1,087
<INVENTORY> 87,423
<CURRENT-ASSETS> 0
<PP&E> 274,995
<DEPRECIATION> 56,209
<TOTAL-ASSETS> 343,792
<CURRENT-LIABILITIES> 0
<BONDS> 145,991
<COMMON> 0
0
0
<OTHER-SE> 112,357
<TOTAL-LIABILITY-AND-EQUITY> 343,792
<SALES> 134,268
<TOTAL-REVENUES> 134,268
<CGS> 95,961
<TOTAL-COSTS> 118,694
<OTHER-EXPENSES> 3,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,455
<INCOME-PRETAX> 15,574
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,574
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
</TABLE>
