<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended March 31, 1995 Commission file number 1-7585
THE NEWHALL LAND AND FARMING COMPANY
(a California Limited Partnership)
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
California 95-3931727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23823 Valencia Boulevard, Valencia, CA 91355
(Address of principal executive offices) (Zip Code)
</TABLE>
(805) 255-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___
<PAGE> 2
Part I. Financial Information 2.
Item 1 - Financial Statements
CONSOLIDATED STATEMENTS OF INCOME
Unaudited
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
In thousands, except per unit 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Real estate
Residential home and land sales $10,145 $ 4,681
Industrial and other sales 5,411 953
Commercial operations 8,833 7,682
----------------------
24,389 13,316
Agriculture
Operations 653 1,650
----------------------
Total revenues $25,042 $14,966
======================
Contribution to income
Real estate
Residential home and land sales $ 424 $ 968
Industrial and other sales 1,712 (201)
Community development (1,817) (1,035)
Commercial operations 4,306 3,498
----------------------
4,625 3,230
Agriculture
Operations 408 1,145
Earthquake damage -- (3,700)
----------------------
Operating income 5,033 675
General and administrative expense (2,050) (1,834)
Interest and other, net (2,597) (2,481)
----------------------
Net income (loss) $ 386 $(3,640)
======================
Net income (loss) per unit $ 0.01 $ (0.10)
======================
Number of units used in computing per unit amounts 36,514 36,757
Cash distributions per unit $ 0.10 $ 0.10
</TABLE>
<PAGE> 3
Part I. Financial Information 3.
Item 1 - Financial Statements
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
In thousands, except units 1995 1994
- -------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $6,600 $7,656
Accounts and notes receivable 16,096 18,539
Land under development 91,989 87,423
Land held for future development 34,103 34,103
Property and equipment, net 184,255 184,683
Other assets and deferred charges 12,570 11,388
----------------------------
$345,613 $343,792
============================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $14,283 $14,877
Accrued expenses 34,096 34,419
Deferred revenues 5,058 5,226
Mortgage and other debt 158,678 145,991
Advances and contributions from
developers for utility construction 15,199 13,477
Other liabilities 17,624 17,445
----------------------------
Total liabilities 244,938 231,435
Partners' capital
36,167,905 units outstanding, excluding 600,000 units
in treasury, at March 31, 1995 and 36,760,606 units
outstanding at December 31, 1994 100,675 112,357
----------------------------
$345,613 $343,792
============================
</TABLE>
<PAGE> 4
Part I. Financial Information 4.
Item 1 - Financial Statements
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Unaudited Three months ended
March 31,
--------------------
In thousands 1995 1994
- ----------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $386 ($3,640)
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 1,937 1,835
Increase in land under development (4,566) (7,173)
Decrease (increase) in accounts and notes receivable 2,443 (4,473)
(Decrease) increase in accounts payable, accrued
expenses and deferred revenues (1,085) 5,214
Cost of property sold 10 71
Other adjustments, net (1,086) 1,452
---------------------
Net cash used by operating activities (1,961) (6,714)
---------------------
Cash flows from investing activities:
Purchase of property and equipment (1,519) (4,506)
Investment in joint venture 83 7
---------------------
Net cash used by investing activities (1,436) (4,499)
---------------------
Cash flows from financing activities:
Distributions paid (3,676) (3,676)
Increase (decrease) in mortgage and other debt 12,687 (690)
Purchase of partnership units (8,547) --
Other, net 1,877 (68)
---------------------
Net cash provided (used) by financing activities 2,341 (4,434)
---------------------
Net decrease in cash and cash equivalents (1,056) (15,647)
Cash and cash equivalents, beginning of period 7,656 39,636
---------------------
Cash and cash equivalents, end of period $6,600 $23,989
=====================
</TABLE>
<PAGE> 5
Part I. Financial Information 5.
Item 1 - Financial Statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Accounting Policies
The consolidated financial statements include the accounts of The Newhall Land
and Farming Company and its subsidiaries, all of which are wholly-owned,
(collectively, "the Company"). All significant intercompany transactions are
eliminated.
The Company's unaudited interim financial statements have been prepared
substantially in conformity with generally accepted accounting principles used
in the preparation of the Company's annual financial statements. In the opinion
of the Company, all adjustments necessary for a fair statement of the results
of operations for the three months ended March 31, 1995 and 1994 have been
made. Certain reclassifications have been made to prior periods' amounts to
conform to the current year presentation.
The interim statements are condensed and do not include some of the information
necessary for a more complete understanding of the financial data. Accordingly,
your attention is directed to the footnote disclosures found on pages 21
through 26 of the December 31, 1994 Annual Report to Partners and particularly
to Note 2 which includes a summary of significant accounting policies.
Interim financial information for the Company has substantial limitations as an
indicator for the calendar year because:
. Land sales occur irregularly and are recognized at the close of escrow
or on the percentage of completion basis if the Company has an
obligation to complete certain future improvements and provided profit
recognition criteria are met.
. Agricultural crops are on an annual cycle and income is recognized
upon harvest. Most major crops are harvested during the fall and
winter.
. Sales of non-developable farm land occur irregularly and are
recognized upon close of escrow provided profit recognition criteria
are met.
Note 2. Details of Land Under Development
(In $000)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
----------- ------------
(Unaudited)
<S> <C> <C>
Residential $32,977 $29,195
Industrial and commercial 40,698 41,781
Homes completed or under construction
with venture partners 16,246 16,215
Other 2,068 232
------- -------
Total land under development $91,989 $87,423
======= =======
</TABLE>
<PAGE> 6
Part I. Financial Information 6.
Item 1 - Financial Statements
Note 3. Details for Earnings per Unit Calculation
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
--------------------------------
March 31, March 31,
1995 1994
---------- ----------
<S> <C> <C>
Average number of units outstanding
during the period 36,501,001 36,756,530
Net units issuable in connection with
dilutive options based upon use of the
treasury stock method 13,303 --
---------- ----------
Average number of primary units 36,514,304 36,756,530
========== ==========
</TABLE>
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
Liquidity and Capital Resources
At March 31, 1995, the Company had cash and cash equivalents totaling $6.6
million. There were no borrowings outstanding against unsecured lines of credit
totaling $81 million and $11 million was outstanding against a $40 million
revolving mortgage credit facility secured by Valencia Town Center. Letters of
credit outstanding against lines of credit totaled $4.0 million at the end of
the 1995 first quarter.
There are no material commitments for capital expenditures other than in the
ordinary course of business. The Company plans to start seven new projects in
1995 valued at $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. However, an appeal was filed on May 3, 1995, which the Company
feels is without merit, and the project may be delayed up to an additional nine
months. Another major project is a 200,000-square-foot build-to-suit
office/manufacturing building on 10.5 acres in Valencia Commerce Center for
Remo, Inc., an international manufacturer of percussion products. Also
included in the seven projects is SkyCrest, a 264-unit apartment complex, the
first apartments constructed by the Company since 1989. Additional projects
include a neighborhood shopping center, an office building, an automotive
service center and a 35,000-square-foot office/lab build-to-suit for a local
hospital. Approximately $28 million is expected to be invested in these
projects in 1995.
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. The Company is actively searching for additional
large landholdings with development potential in California or other western
states. Several properties were under review at March 31, 1995.
Operating Activities
In the 1995 first quarter, sales of 9.9 commercial/industrial acres and 44
joint venture home closings in Valencia plus the sale of 40 unfinished
residential lots at McDowell Mountain Ranch, provided the Company with $11.5
million in cash and $3.4 million in notes. In addition, a $3.7 million note
from a prior year land sale was collected in the first quarter of 1995.
Inventory expenditures during the 1995 first quarter totaled $16.2 million and
were primarily for land development and infrastructure to support pending and
future land sales as well as residential construction costs for the Company's
joint venture projects.
<PAGE> 7
Part I. Financial Information 7.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Investing Activities
Capital expenditures during the period totaling $1.5 million were primarily for
water utility construction and agricultural equipment.
Financing Activities
A 10-cent per unit quarterly distribution totaling $3.7 million was paid on
March 13, 1995. 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, financial condition and prospects.
In December 1994, the Company obtained a $40 million revolving mortgage credit
facility secured by Valencia Town Center. At March 31, 1995, borrowings
outstanding against this credit facility totaled $11 million with an average
interest rate of 7.45%.
A repurchase program for 600,000 of the Company's units announced in January
1995, was completed during the quarter. The 600,000 units were purchased for
approximately $8.6 million, or an average of $14.25 per unit.
<PAGE> 8
Part I. Financial Information 8.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
RESULTS OF OPERATIONS
Comparison of First Quarter 1995 to First Quarter 1994
(Unaudited)
The amounts of increase or decrease from the prior year first quarter
are as follows (in 000, except per unit):
<TABLE>
<CAPTION>
Increase/(Decrease)
------------------------
Revenues Three Months
------------------------
Real Estate Amount %
-------- -------
<S> <C> <C>
Residential home and land sales $ 5,464 117%
Industrial and other sales 4,458 468
Commercial operations 1,151 15
Agriculture
Operations (997) (60)
------- ---
$10,076 67%
======= ===
Contribution to income
Real Estate
Residential home and land sales $ (544) (56)%
Industrial and other sales 1,913 952
Community development (782) (76)
Commercial operations 808 23
Agriculture
Operations (737) (64)
Earthquake damage 3,700 100
------- ---
Operating income 4,358 646
General and administrative expense (216) (12)
Interest and other, net (116) (5)
------- ---
Net income $ 4,026 111%
Per unit: ======= ===
Net income per unit $ .11 110%
======= ===
Number of units used in computing
per unit amounts (243) (1)%
======= ===
</TABLE>
<PAGE> 9
Part I. Financial Information 9.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The increases and decreases in revenues and income for the three months are
attributable to the following:
RESIDENTIAL HOME AND LAND SALES
An increase of 41 joint venture escrow closings in Valencia in the current year
first quarter is the primary contributor to a 117% increase in revenues from
home and residential land sales. Joint venture revenues are based upon the home
sale price, rather than the land value. Although these joint venture
partnerships enabled the Company to increase its absorption and profit per
acre, the absence of a high margin, bulk land sale, as was recorded in the
first quarter of 1994, resulted in lower operating margins. This factor
combined with increased first quarter 1995 expenses, primarily for ad valorem
property taxes and initial marketing expenses at McDowell Mountain Ranch,
resulted in a 56% decrease in contribution to income from the comparable period
last year.
VALENCIA
Merchant Builder Program
There were no residential lot sales completed in the 1995 or 1994 first
quarter. At March 31, 1995, a total of 36 lots were in escrow with closings
expected later this year. The ability to close these escrows will be dependent
upon market conditions. The Company is negotiating with builders for the sale
of additional lots in 1995.
In the first quarter of 1995, merchant builders in Valencia closed escrow on 52
homes on lots previously sold by the Company, compared to 31 escrow closings in
the prior year quarter. 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.
Joint Venture Program
The Company is increasing its absorption and profit per acre from its strategy
of participating in homebuilding in Valencia through joint ventures. Through
these development partnerships, the Company recognizes homebuilding revenues
and costs upon the close of escrow to homebuyers. In the first quarter of 1995,
the Company's joint venture partners closed escrow on 44 homes compared to 3
closings in the prior year quarter. As a result, revenues increased $6.9
million and contribution to income increased $766,000 from the year earlier
quarter.
The 1995 closings included the initial 29 homes at Montana, a 138-townhome
project with EPAC Communities, Inc. which is currently the fastest selling
project in Valencia. The remaining closings were in EPAC's Traditions project,
which has been expanded to a total of 100 single-family homes, and RGC's
CourtHome Collection, an affordable single-family project with homes clustered
around a common courtyard. The Company expects to establish additional
joint-venture arrangements for residential projects in Valencia.
McDOWELL MOUNTAIN RANCH
Land development and infrastructure as well as construction on the community
recreation center, paseo system and information center continues at this first
community by the Company outside California. The sale of 40 lots in the 1995
first quarter combined with deferred revenues recognized on prior year lot
sales, resulted in revenues of $2.2 million and contribution to income of
$818,000. Results for the first quarter of 1994 included 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.
Merchant builders are operating temporary sales offices and constructing model
homes for the 604 lots purchased from the Company in the fourth quarter of
1994. Over 130 homes were reserved or under contract in these merchant builder
projects as of April 20, 1995. The Company continues to negotiate additional
parcel sales, with closings expected later this year. The ability to close
these escrows will be dependent upon market conditions.
<PAGE> 10
Part I. Financial Information 10.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
INDUSTRIAL AND OTHER SALES
Escrow closings on 8.8 commercial acres and a 1.1-acre industrial parcel in
Valencia Industrial Center for $5.6 million contributed $2.2 million to income
in the 1995 first quarter. The parcel in Valencia Industrial Center was the
first sale of industrial land in over three years. In the 1994 first quarter, a
1.25-acre parcel in Valencia Auto Center contributed $925,000 to revenues and
$620,000 to income.
At March 31, 1995, two small commercial parcels and a 5.7-acre site for the
expansion of a film studio in Valencia Industrial Center were in escrow with
closings expected later this year subject to market conditions.
COMMUNITY DEVELOPMENT
An increase of $782,000 in Community Development expenses from the comparable
prior year period is primarily due to entitlement expenses associated with
Newhall Ranch, a new 12,000-acre planned community which will be located west
of Valencia and extend to the Ventura County line. Also contributing to the
increase are current year expenses associated with an intensified strategic
marketing program in Valencia.
COMMERCIAL OPERATIONS
Commercial operations include the Company's portfolio of income-producing
properties and Valencia Water Company, a wholly-owned public water utility.
Revenues and income from the Company's energy operations, previously reported
as part of Commercial Operations, are being reported with Agricultural
Operations beginning with this quarter. Prior periods' amounts have been
reclassified to conform to the current year presentation.
Revenues and contribution to income from the Company's portfolio of
income-producing properties increased by 16% and 31%, respectively. Higher
occupancy rates at Valencia Town Center, the Company's regional shopping mall,
as well as at the Company's neighborhood shopping centers contributed to the
increases. Also contributing to the higher results, are lower vacancy rates and
rent increases averaging 3% at the Company's three apartment complexes.
Additionally, the first quarter of 1995 included revenues and income from the
build-to-suit for ITT Corporation in Valencia Commerce Center, which was
completed in the fourth quarter of 1994, and the build-to-suit for Trader
Joe's, a specialty food retailer, which opened in September 1994. An offer for
sale of the ITT building was under consideration at March 31, 1995.
As announced in January 1995, the Company is considering the sale of 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. No assurances can be given that a sale will be
completed.
Decreases from the prior year period in revenues and income from Valencia Water
Company are due to a drought recovery surcharge which expired in May 1994 and
higher operating expenses. The decreases are partially offset by a general
rate increase effective January 1, 1995 and a $785,000 disaster recovery
surcharge beginning October 1, 1994 for a 22-month period which were approved
by the California Public Utilities Commission.
AGRICULTURAL OPERATIONS
Revenues and contribution to income from agricultural operations decreased 60%
and 64% respectively from the prior year first quarter as a result of an early
harvest of avocados with favorable prices and yields in the prior year period.
An early lease termination payment in the current year period by the Company's
energy division also contributed to the decrease in income.
RANCH SALES
No sales of farm land were completed in the current or prior year first
quarter. The Company continues to market for sale its remaining 9,440 acres at
the Merced Ranch. At March 31, 1995, no agricultural parcels were in escrow.
<PAGE> 11
Part I. Financial Information 11.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
EARTHQUAKE DAMAGE
In the first quarter of 1994, a $3.7 million charge was taken for damages not
covered by insurance from the January 17, 1994 earthquake.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses increased 12% from the comparable prior
year period primarily due to reduced recoveries for tax accounting fees billed
to outside partnerships, increased professional services fees in conjunction
with an S-8 filing and timing of other consulting services. The Company expects
general and administrative expenses for the year to be approximately the same
as in 1994.
INTEREST AND OTHER, NET
An $11 million financing for Valencia Water Company completed in July 1994 and
improvement district bonds for construction of infrastructure improvements at
McDowell Mountain Ranch contributed to an increase in interest expense from the
prior year first quarter. The increase in interest expense was partially offset
by repayment of a $40 million construction loan for Valencia Town Center in the
fourth quarter of 1994 which was replaced with a $40 million revolving mortgage
facility against which $11 million was outstanding at the end of the 1995 first
quarter.
OUTLOOK
Second quarter results are anticipated to be similar to the first quarter
followed by earnings gains in the last half of 1995. Earnings in 1995 are
expected to be higher than the 42 cents per unit earned in 1994 due to the
Company's strategic marketing efforts, combined with a reviving Southern
California economy.
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits (listed by numbers corresponding to the Exhibit Table of Item
601 in Regulation S-K):
27 Financial Data Schedule
(b) No report was filed on Form 8-K in the first quarter ended March 31,
1995.
<PAGE> 12
SIGNATURES 12.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE NEWHALL LAND AND FARMING COMPANY
(a California Limited Partnership)
Registrant
By Newhall Management Limited Partnership,
Managing General Partner
By Newhall Management Corporation,
Managing General Partner
Date: May 5, 1995 By /s/ THOMAS L. LEE
--------------------------------------------
Thomas L. Lee, Chairman
and Chief Executive Officer of
Newhall Management Corporation
(Principal Executive Officer)
Date: May 5, 1995 By /s/ STUART R. MORK
--------------------------------------------
Stuart R. Mork, Vice President and
Chief Financial Officer of
Newhall Management Corporation
(Principal Financial Officer)
Date: May 5, 1995 By /s/ DONALD L. KIMBALL
--------------------------------------------
Donald L. Kimball, Vice President -
Controller of Newhall Management Corporation
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 6,600
<SECURITIES> 0
<RECEIVABLES> 16,096
<ALLOWANCES> 1,158
<INVENTORY> 91,989
<CURRENT-ASSETS> 0
<PP&E> 241,955
<DEPRECIATION> 57,700
<TOTAL-ASSETS> 345,613
<CURRENT-LIABILITIES> 0
<BONDS> 158,678
<COMMON> 0
0
0
<OTHER-SE> 100,675
<TOTAL-LIABILITY-AND-EQUITY> 345,613
<SALES> 25,042
<TOTAL-REVENUES> 25,042
<CGS> 20,009
<TOTAL-COSTS> 24,656
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,597
<INCOME-PRETAX> 386
<INCOME-TAX> 0
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<NET-INCOME> 386
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