<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, 1996
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, 1996 Commission file number 1-7585
THE NEWHALL LAND AND FARMING COMPANY
(A CALIFORNIA LIMITED PARTNERSHIP)
(Exact name of Registrant as specified in its charter)
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)
(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
In thousands, except per unit March 31
- ----------------------------- -----------------------------
1996 1995
--------- ---------
<S> <C> <C>
REVENUES
Real estate
Residential home and land sales
Valencia $9,898 $7,944
McDowell Mountain Ranch 5,531 2,201
Industrial and other sales 2,136 5,411
Commercial operations 8,309 8,833
--------- ---------
25,874 24,389
--------- ---------
Agriculture
Operations 707 653
Ranch sales 6,145 - -
--------- ---------
6,852 653
--------- ---------
Total revenues $32,726 $25,042
========= =========
Contribution to income
Real estate
Residential home and land sales
Valencia $520 $140
McDowell Mountain Ranch 1,602 284
Industrial and other sales 399 1,712
Community development (2,427) (1,817)
Commercial operations 4,083 4,306
--------- ---------
4,177 4,625
--------- ---------
Agriculture
Operations 762 408
Ranch sales 5,872 - -
--------- ---------
6,634 408
--------- ---------
Operating income 10,811 5,033
General and administrative expense (2,200) (2,050)
Interest and other, net (2,380) (2,597)
--------- ---------
Net income $6,231 $386
========= =========
Net income per unit $0.17 $0.01
========= =========
Number of units used in computing per
unit amounts 35,908 36,514
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 1996 1995
- -------------------------- ------------ ------------
Unaudited
<S> <C> <C>
ASSETS
Cash and cash equivalents $4,364 $4,285
Accounts and notes receivable 22,611 25,156
Land under development 93,637 88,457
Land held for future development 32,371 32,459
Property and equipment, net 197,759 186,697
Other assets and deferred charges 13,618 12,699
------------ ------------
$364,360 $349,753
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $14,367 $11,285
Accrued expenses 32,778 32,999
Deferred revenues 3,843 4,041
Mortgage and other debt 163,618 152,302
Advances and contributions from developers for
utility construction 17,771 17,811
Other liabilities 18,801 18,459
------------ ------------
Total liabilities 251,178 236,897
Partners' capital
35,466,394 units outstanding, excluding 1,305,749
units in treasury, at March 31, 1996 and
35,910,243 units outstanding, excluding 861,900 units
in treasury, at December 31, 1995 113,182 112,856
------------ ------------
$364,360 $349,753
============ ============
</TABLE>
<PAGE> 4
Part I. Financial Information 4.
Item 1 - Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
In thousands March 31
- ----------------------------------------------------------- --------------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $6,231 $386
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,891 1,937
Increase in land development inventories (5,180) (4,566)
Decrease in accounts and notes receivable 2,545 2,443
Increase (decrease) in accounts payable, accrued expenses
and deferred revenues 2,663 (1,085)
Cost of property sold 264 10
Other adjustments, net (425) (848)
--------- ---------
Net cash provided (used) by operating activities 7,989 (1,723)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (13,129) (1,519)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid (3,589) (3,676)
Increase in mortgage and other debt 11,316 12,687
(Decrease) increase in advances and contributions from
developers for utility construction (40) 1,722
Purchase of partnership units (2,468) (8,547)
--------- ---------
Net cash provided by financing activities 5,219 2,186
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 79 (1,056)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,285 7,656
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,364 $6,600
========= ==========
</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, 1996 and 1995 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 25
through 31 of the December 31, 1995 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:
o 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.
o Agricultural crops are on an annual cycle and income is recognized upon
harvest. Most major crops are harvested during the fall and winter.
o 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
<TABLE>
<CAPTION>
(In $000) March 31, December 31,
1996 1995
------------ -----------
Valencia (Unaudited)
<S> <C> <C>
Residential land development $ 5,307 $ 1,848
Industrial and commercial land development 43,562 43,256
Homes completed or under construction
with venture partners 27,092 25,302
McDowell Mountain Ranch land development 15,830 17,824
Agriculture 1,846 227
-------- -------
Total land under development $ 93,637 $88,457
======== =======
</TABLE>
- -------------------------------------------------------------------------------
Note 3. Details for Earnings per Unit Calculation
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------------------
(Unaudited) 1996 1995
----------- -------------- ---------------
<S> <C> <C>
Average number of units outstanding during the period 35,752,138 36,501,001
Net units issuable in connection with dilutive options based
upon use of the treasury stock method 156,233 13,303
---------- ----------
Average number of primary units 35,908,371 36,514,304
========== ==========
</TABLE>
<PAGE> 6
6.
Part I. Financial Information
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
Comparison of First Quarter 1996 to First Quarter 1995
Unaudited
The amounts of increase or decrease in revenues and income from the prior year
first quarter are as follows (in 000s, except per unit):
<TABLE>
<CAPTION>
Increase (Decrease)
----------- --------
Amount %
<S> <C> <C>
REVENUES
Real Estate
Residential home and land sales
Valencia $ 1,954 25%
McDowell Mountain Ranch 3,330 151%
Industrial and other sales (3,275) -61%
Commercial operations (524) -6%
----------- --------
1,485 6%
Agriculture
Operations 54 8%
Ranch sales 6,145 N/A
----------- --------
Total revenues $ 7,684 31%
=========== ========
CONTRIBUTION TO INCOME
Real Estate
Residential home and land sales
Valencia $ 380 271%
McDowell Mountain Ranch 1,318 464%
Industrial and other sales (1,313) -77%
Community development (610) -34%
Commercial operations (223) -5%
----------- --------
(448) -10%
Agriculture
Operations 354 87%
Ranch sales 5,872 N/A
----------- --------
Operating income 5,778 115%
General and administrative expense (150) -7%
Interest and other, net 217 8%
----------- --------
Net income $ 5,845 1514%
=========== ========
Net income per unit $0.16 1600%
=========== ========
Number of units used in computing
per unit amounts (606) -2%
=========== ========
</TABLE>
<PAGE> 7
Part I. Financial Information 7.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
The increases and decreases in revenues and income for the three months are
attributable to the following:
RESIDENTIAL HOME AND LAND SALES
VALENCIA
Merchant Builder Program
There were no residential lot sales completed in the 1996 or 1995 first
quarters. In the 1996 first quarter, deferred revenues totaling $1.0 million
and income of $207,000 were recognized from prior residential lot sales under
percentage of completion accounting. No deferred revenues or income were
recognized in the prior year quarter. At March 31, 1996, two residential
parcels totaling 143 lots were in escrow for approximately $10 million. In
addition, 491 unimproved lots are in escrow in Castaic, a community north of
Valencia. These escrows are expected to close later this year subject to
market conditions.
Joint Venture Program
Escrow closings from joint ventures totaled 49 in the 1996 first quarter
contributing $8.9 million to revenues and $983,000 to income. In the first
quarter of 1995, 44 escrow closings contributed $7.9 million to revenues and
$915,000 to income. Gross profit margins of 11% and product mix between single
and multi-family homes were approximately the same as in the prior year quarter.
At the end of the 1996 quarter, six joint-venture homebuilding projects in
Valencia had 47 homes in escrow versus 31 homes in escrow at the end of the
1995 first quarter. A seventh joint-venture project consisting of executive
single-family homes is scheduled to open in May. At March 31, 1996, the
Company's homebuilding partnerships had 94 homes under construction and 58
completed, unsold homes available for sale which were included in residential
land under development inventories.
McDOWELL MOUNTAIN RANCH
In the first quarter of 1996, escrow closed on 219 residential lots which
contributed $5.5 million to revenues and $2.1 million to income. 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.
On April 17, 1996, the Company completed the sale of the McDowell Mountain
Ranch project. The sale will contribute $44 million to revenues and $24
million to income in the second quarter. Revenues on the sale consist of a
combination of cash, assumption of project debt and the recognition of
previously deferred revenues on land sales.
INDUSTRIAL AND OTHER SALES
Escrow closed on a 2.7-acre commercial parcel in the 1996 first quarter which
contributed $1.7 million to revenues and $861,000 to income. Deferred revenues
of $449,000 and income of $234,000 also were recognized during the quarter from
prior year sales. In the 1995 first quarter, escrow closings on 8.8 commercial
acres and a 1.1-acre industrial parcel for $5.6 million contributed $2.2
million to income.
At March 31, 1996, an industrial parcel totaling 5.7 acres was in escrow for
$1.9 million. This parcel which entered escrow in March, 1995 is expected to
close later this year subject to market conditions.
COMMUNITY DEVELOPMENT
The Company's community development activities are focused on securing
necessary entitlements for its Valencia area and Newhall Ranch properties.
Newhall Ranch, a new planned community, will be located on the Company's 12,000
acres west of Valencia and extend to the Ventura County line. A 34% increase
in community development expenses from the comparable prior year period is
primarily due to the Company's efforts to accelerate the entitlement process in
Valencia to meet its growth goals. Future plans include an additional 14,000
homes and
<PAGE> 8
Part I. Financial Information 8.
Item 2 - Management s Discussion and Analysis of Financial Condition and
Results of Operations
1,100 acres of commercial/industrial development. Development will be planned
in distinct lifestyle villages offering a variety of living environments, such
as golf courses and lake communities.
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 income property portfolio each decreased by 10%
principally due to the 1995 sale of Bouquet Shopping Center and the ITT
build-to-suit facility. At the end of the 1996 first quarter, occupancy rates
at the Company's neighborhood shopping centers, River Oaks and Castaic Village,
remained high at 99% and 94% respectively. Valencia Town Center shopping mall
is experiencing some turnover in tenants with occupancy at 92%. However, based
on current leasing activity, occupancy is expected to improve this fall.
Vacancy rates at the Company's three apartment complexes averaged 2% at the end
of the quarter. Commercial financial results for all of 1996 are expected to
be slightly lower than 1995 as most of the new projects that started
construction in 1995 will not begin to generate meaningful revenues and income
until 1997.
A general rate increase approved by the California Public Utilities Commission
effective January, 1996 contributed to higher revenues and income from Valencia
Water Company compared to the prior year. Operating expenses were
approximately the same as the 1995 period.
AGRICULTURAL OPERATIONS
Revenues and income from agricultural operations, including the Company's
energy division, were approximately the same as the prior year first quarter.
Contributing to an increase in income from the prior year period is reversal of
a $400,000 contingency associated with previously sold farm land.
RANCH SALES
In March, 1996, the Company completed the sale of 539 acres of valuable row
crop land on its 38,800-acre Suey Ranch for $6.5 million. The sale contributed
$5.9 million to 1996 first quarter income. No sale of farm land was completed
in the prior year first quarter.
GENERAL AND ADMINISTRATIVE EXPENSE
A 7% increase in general and administrative expenses is due to timing of
accrued incentive compensation based on the Company's increased earnings
relative to the 1995 first quarter.
INTEREST AND OTHER, NET
A principal reduction on a mortgage financing in conjunction with the 1995 sale
of Bouquet Shopping Center contributed to an 8% decrease from the comparable
prior year period. Also contributing to the decrease is additional capitalized
interest related to ten new income-producing projects under development in
Valencia.
FINANCIAL CONDITION
Liquidity and Capital Resources
At March 31, 1996, the Company had cash and cash equivalents of $4.4 million
with borrowings totaling $27.9 million. Borrowings included $5.0 million
against a $40 million revolving mortgage facility secured by Valencia Town
Center and $22.9 million against unsecured lines of credit totaling $121
million. The $11.9 million increase in borrowings from December 31, 1995,
principally is due to expenditures for ten commercial projects in Valencia
which are in various stages of development.
<PAGE> 9
Part I. Financial Information 9.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
In December, 1995, the Board of Directors approved a repurchase program of up
to 1.5 million of the Company's partnership units. In the first quarter of
1996, a total of 452,500 units were purchased or committed for $7.7 million of
which 307,500 units for $5.2 million remained to be paid at the end of the
quarter. The Company expects to repurchase additional units with a portion of
the proceeds from the sale of McDowell Mountain Ranch which closed escrow on
April 17, 1996 for $26 million cash plus assumption of debt. As of May 3,
1996, a total of 1,024,600 units for $17.0 million, or an average price of
$16.59 per unit, had been purchased or committed under the program.
There are no material commitments for capital expenditures other than the
Company's plans in the ordinary course of business to expand its portfolio of
income-producing properties. At March 31, 1996, ten new commercial projects
were in various stages of development and several new projects are planned to
be started in 1996. Approximately $90 million is expected to be invested in
these projects in 1996. A portion of the estimated construction costs for
these projects is expected to be provided from a combination of available lines
of credit and project financings.
The following discussion relates to principal items on the Consolidated
Statement of Cash Flows:
Operating Activities
Net cash provided by operating activities in the first quarter of 1996 totaled
$8.0 million and included sales of 49 homes in Valencia under the Company's
joint venture homebuilding program, 219 lots in McDowell Mountain Ranch, sale
of a 2.7-acre commercial parcel in Valencia and 539 acres of row crop land at
the Suey Ranch. Combined, these sales provided the Company with $21.0 million
in cash and $1.8 million in notes. In addition, notes totaling $2.5 million
from land sales in prior years were collected during the quarter.
Land under development inventory expenditures totaled $17.9 million and were
offset by real estate sales activity in Valencia and McDowell Mountain Ranch,
bringing the Company's net inventory investment to $5.2 million for the
quarter. In Valencia, inventory expenditures were primarily related to land
development and infrastructure for expansion of Valencia NorthPark and home
construction advances for the Company's joint-venture homebuilding program.
The Company's net homebuilding investment increased by $2 million during the
first quarter of 1996 to a total of $27 million in seven joint venture
projects.
Investing Activities
Expenditures for property and equipment totaled $13.1 million and were
primarily related to ten income-producing projects under development in
Valencia and water utility construction costs. The properties under
development consist of Valencia Marketplace, a 750,000-square-foot retail
complex which was 71% preleased at the end of the 1996 first quarter; a
build-to-lease and two build-to-suit industrial buildings in Valencia Commerce
Center totaling 344,000 square feet; a 57,000-square-foot office building and
the 50,000-square-foot Spectrum health club facility in Valencia Town Center; a
264-unit apartment complex and a neighborhood shopping center in Valencia
NorthPark; a 51,000-square-foot retail/light industrial complex in Valencia
Industrial Center; and an automotive service center which opened in April. The
Company plans to start several additional income-producing projects in 1996
including land development for a 203-room full service hotel with a
20,000-square-foot conference center and an entertainment-related mixed use
project both in Valencia Town Center.
Financing Activities
A 10-cent per unit quarterly distribution totaling $3.6 million was paid on
March 11, 1996. The declaration of distributions is reviewed by the Board of
Directors on a quarterly basis. The declaration of any distribution, and the
amount declared, is determined by the Board of Directors taking into account
the Company's earnings, financial condition and prospects. The next quarterly
distribution will be considered by the Board of Directors on May 15, 1996.
At March 31, 1996, borrowings against a revolving mortgage facility and
unsecured lines of credit totaled $27.9 million. This represents an
$11.9 million increase from December 31,1995 primarily for costs associated
with ten income-producing projects under development.
<PAGE> 10
Part I. Financial Information 10.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
A total of 452,500 units were purchased or committed for $7.7 million during
the first quarter of 1996 under a repurchase program of up to 1.5 million units
which was approved by the Board of Directors in December, 1995. At March 31,
1996, a total of 145,000 of these units for $2.5 million had been paid and
307,500 units for $5.2 million remained to be paid.
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,
1996
<PAGE> 11
11.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE NEWHALL LAND AND FARMING COMPANY
(a California Limited Partnership)
----------------------------------
Registrant
By Newhall Management Limited Partnership,
Managing General Partner
By Newhall Management Corporation,
Managing General Partner
<TABLE>
<S> <C>
Date: May 3, 1996 By / S / THOMAS L. LEE
--------------------------------------------------------
Thomas L. Lee, Chairman and Chief Executive Officer of
Newhall Management Corporation
(Principal Executive Officer)
Date: May 3, 1996 By / S / STUART R. MORK
--------------------------------------------------------
Stuart R. Mork, Senior Vice President
and Chief Financial Officer of
Newhall Management Corporation
(Principal Financial Officer)
Date: May 3, 1996 By / S / DONALD L. KIMBALL
--------------------------------------------------------
Donald L. Kimball, Vice President - Controller of
Newhall Management Corporation
(Principal Accounting Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,364
<SECURITIES> 0
<RECEIVABLES> 22,611
<ALLOWANCES> 724
<INVENTORY> 93,637
<CURRENT-ASSETS> 0
<PP&E> 290,606
<DEPRECIATION> 60,476
<TOTAL-ASSETS> 364,360
<CURRENT-LIABILITIES> 0
<BONDS> 163,618
0
0
<COMMON> 0
<OTHER-SE> 113,182
<TOTAL-LIABILITY-AND-EQUITY> 364,360
<SALES> 24,417
<TOTAL-REVENUES> 32,726
<CGS> 15,262
<TOTAL-COSTS> 26,495
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,380
<INCOME-PRETAX> 6,231
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,231
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,231
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
