<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 September 30, 1998
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 September 30, 1998 Commission file number 1-7585
THE NEWHALL LAND AND FARMING COMPANY
(A CALIFORNIA LIMITED PARTNERSHIP)
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
California 95-3931727
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23823 Valencia Boulevard, Valencia, CA 91355
(Address of principal executive offices) (Zip Code)
</TABLE>
(805) 255-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
<PAGE> 2
Part I. Financial Information 2.
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Unaudited Three Months Ended Nine months Ended
In thousands, except per unit September 30 September 30
----------------------------------------------------------------------------------- -------------------------
1998 1997 1998 1997
-------------------------- -------------------------
<S> <C> <C> <C> <C>
REVENUES
Real estate
Residential home and land sales $ 19,261 $ 38,478 $ 63,377 $ 56,867
Industrial and commercial sales 42,549 13,743 145,471 38,754
Commercial operations
Income-producing properties 8,788 8,510 28,264 24,342
Valencia Water Company 3,391 3,581 7,326 8,408
-------------------------- -------------------------
73,989 64,312 244,438 128,371
-------------------------- -------------------------
Agriculture
Operations 3,005 2,929 5,294 5,700
Ranch sales 1,067 62 1,390 17,962
-------------------------- -------------------------
4,072 2,991 6,684 23,662
-------------------------- -------------------------
Total revenues $ 78,061 $ 67,303 $251,122 $152,033
========================== =========================
CONTRIBUTION TO INCOME
Real estate
Residential home and land sales $ 5,054 $ 12,963 $ 23,799 $ 13,712
Industrial and commercial sales 13,748 1,116 44,221 15,018
Community development (2,625) (2,130) (6,856) (7,101)
Commercial operations
Income-producing properties 4,010 3,786 14,571 11,717
Valencia Water Company 1,003 1,080 1,734 2,330
-------------------------- -------------------------
21,190 16,815 77,469 35,676
-------------------------- -------------------------
Agriculture
Operations (1,371) 379 (516) 1,508
Ranch sales 775 45 1,098 16,995
-------------------------- -------------------------
(596) 424 582 18,503
-------------------------- -------------------------
Operating income 20,594 17,239 78,051 54,179
General and administrative expense (3,187) (2,088) (9,590) (6,219)
Expense from unit ownership plans - (350) (400) (580)
Interest and other, net (1,116) (2,262) (5,772) (7,137)
-------------------------- -------------------------
Net income $ 16,291 $ 12,539 $ 62,289 $ 40,243
========================== =========================
Net income per unit $ 0.48 $ 0.36 $ 1.81 $ 1.17
========================== =========================
Net income per unit - diluted $ 0.47 $ 0.36 $ 1.79 $ 1.16
========================== =========================
Number of units used in computing per unit amounts:
Net income per unit 33,998 34,464 34,357 34,523
Net income per unit - diluted 34,382 34,809 34,781 34,758
Cash distributions per unit:
Regular $ 0.10 $ 0.10 $ 0.30 $ 0.30
Special 0.12 0.08
</TABLE>
<PAGE> 3
Part I. Financial Information 3.
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
In thousands 1998 1997
- ---------------------------------------------------------------- ------------------- -----------------
Unaudited
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,589 $ 2,770
Accounts and notes receivable 29,550 19,027
Land under development 40,253 53,875
Land held for future development 30,678 32,551
Income-producing properties, net 237,050 227,203
Property and equipment, net 56,414 54,876
Other assets and deferred charges 13,579 13,630
------------------- -----------------
$ 411,113 $ 403,932
=================== =================
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 32,069 $ 18,529
Accrued expenses 43,779 39,635
Deferred revenues 17,170 3,152
Mortgage and other debt 117,424 156,946
Advances and contributions from developers for
utility construction 23,832 18,845
Other liabilities 21,551 21,548
------------------- -----------------
Total liabilities 255,825 258,655
Partners' capital
33,071 units outstanding, excluding 3,701 units in treasury, at September 30,
1998 and 34,527 units outstanding, excluding 2,245 units in treasury,
at December 31, 1997 155,288 145,277
------------------- -----------------
$ 411,113 $ 403,932
=================== =================
</TABLE>
<PAGE> 4
Part I. Financial Information 4.
Item 1. Financial Statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Unaudited
Nine months Ended
In thousands September 30
- ------------------------------------------------------------------------- -------------------------------------------
1998 1997
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 62,289 $ 40,243
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 7,370 7,154
Increase in land under development (52,081) (47,045)
Cost of sales and other inventory changes 65,703 50,589
(Increase) decrease in accounts and notes receivable (10,523) 7,538
Increase in accounts payable, accrued expenses
and deferred revenues 31,702 11,682
Cost of property sold 67,478 14,707
Other adjustments, net 25 567
------------------ ------------------
Net cash provided by operating activities 171,963 85,435
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Development of income-producing properties (78,148) (50,791)
Purchase of property and equipment (5,985) (4,092)
Investment in joint venture (198) (499)
------------------ ------------------
Net cash used in investing activities (84,331) (55,382)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid (14,509) (13,135)
Decrease in mortgage and other debt (39,522) (14,429)
Increase in advances and contributions from
developers for utility construction 4,987 241
Purchase of partnership units (38,770) (5,746)
Other, net 1,001 3,559
------------------ ------------------
Net cash used in financing activities (86,813) (29,510)
------------------ ------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 819 543
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,770 2,412
------------------ ------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,589 $ 2,955
================== ==================
</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 balances and
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 and nine months ended September 30, 1998 and 1997 have
been made. Certain reclassifications have been made to prior periods' amounts to
conform to the current period 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
32 of the December 31, 1997 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 Real estate 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) September 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
Residential land development $ 257 $ 3,700
Industrial and commercial land development 25,505 38,190
Homes completed or under construction
with venture partners 12,930 11,799
Agriculture 1,561 186
-------- --------
Total land under development $ 40,253 $ 53,875
======== ========
</TABLE>
- --------------------------------------------------------------------------------
Note 3. Amounts per Partnership Unit
<TABLE>
<CAPTION>
Unaudited
Income Units Per Unit
(in 000's except per unit) (numerator) (denominator)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
For three months ended September 30, 1998
NET INCOME PER UNIT
Net income available to unitholders $ 16,291 33,998 $ .48
EFFECT OF DILUTIVE SECURITIES
Unit options - 384 (.01)
--------------------------------------------------------------------------------------------------------------
Net income per unit - diluted $ 16,291 34,382 $ .47
--------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
Part I. Financial Information 6.
Item 1. Financial Statements
Note 3. Amounts per Partnership Unit (continued)
<TABLE>
<S> <C> <C> <C>
For three months ended September 30, 1997
NET INCOME PER UNIT
Net income available to unitholders $ 12,539 34,464 $ 0.36
EFFECT OF DILUTIVE SECURITIES
Unit options - 345 -
--------------------------------------------------------------------------------------------------------------
Net income per unit - diluted $ 12,539 34,809 $ 0.36
--------------------------------------------------------------------------------------------------------------
For nine months ended September 30, 1998
NET INCOME PER UNIT
Net income available to unitholders $ 62,289 34,357 $ 1.81
EFFECT OF DILUTIVE SECURITIES
Unit options - 424 (0.02)
--------------------------------------------------------------------------------------------------------------
Net income per unit - diluted $ 62,289 34,781 $ 1.79
--------------------------------------------------------------------------------------------------------------
For nine months ended September 30, 1997
NET INCOME PER UNIT
Net income available to unitholders $ 40,243 34,523 $ 1.17
EFFECT OF DILUTIVE SECURITIES
Unit options - 235 (0.01)
--------------------------------------------------------------------------------------------------------------
Net income per unit - diluted $ 40,243 34,758 $ 1.16
--------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
Part I. Financial Information 7.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
RESULTS OF OPERATIONS
Comparison of Third Quarter and Nine months of 1998 to Third Quarter and Nine
months of 1997
<TABLE>
<CAPTION>
Third Quarter Nine months
----------------------------------- -------------------------------------
Increase Increase
Unaudited (Decrease) (Decrease)
-----------------------------------------------------------------------------
Amount % Amount %
------------------ -------------- ----------------- ----------------
<S> <C> <C> <C> <C>
REVENUES
Real Estate
Residential home and land sales $ (19,217) -50% $ 6,510 11%
Industrial and commercial sales 28,806 210% 106,717 275%
Commercial operations
Income-producing properties 278 3% 3,922 16%
Valencia Water Company (190) -5% (1,082) -13%
----------------------------------- -------------------------------------
9,677 15% 116,067 90%
Agriculture
Operations 76 3% (406) -7%
Ranch sales 1621% (16,572) -92%
1,005
------------------ -------------- ----------------- ----------------
Total revenues $ 10,758 16% $ 99,089 65%
================== ============== ================= ================
CONTRIBUTION TO INCOME
Real Estate
Residential home and land sales $ (7,909) -61% $ 10,087 74%
Industrial and commercial sales 12,632 1132% 29,203 194%
Community development (495) -23% 245 3%
Commercial operations
Income-producing properties 224 6% 2,854 24%
Valencia Water Company (77) -7% (596) -26%
----------------------------------- -------------------------------------
4,375 26% 41,793 117%
Agriculture
Operations (1,750) -462% (2,024) -134%
Ranch sales 730 1622% (15,897) -94%
------------------ -------------- ----------------- ----------------
Operating income 3,355 19% 23,872 44%
General and administrative expense (1,099) -53% (3,371) -54%
Expense from unit ownership plans 350 100% 180 31%
Interest and other, net 1,146 51% 1,365 19%
------------------ -------------- ----------------- ----------------
Net income $ 3,752 30% $ 22,046 55%
================== ============== ================= ================
Net income per unit $ 0.12 33% $ 0.64 55%
================== ============== ================= ================
Net income per unit - diluted $ 0.11 31% $ 0.63 54%
================== ============== ================= ================
Number of units used in computing
per unit amounts:
Net income per unit (466) -1% (166) 0%
================== ============== ================= ================
Net income per unit - diluted (427) -1% 23 0%
================== ============== ================= ================
</TABLE>
<PAGE> 8
Part I. Financial Information 8.
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 and nine months
are attributable to the following:
For the 1998 third quarter, revenues totaled $78.1 million and net income
totaled $16.3 million compared to revenues for the 1997 third quarter of $67.3
million and net income of $12.5 million. For the nine months ended September 30,
1998, revenues totaled $251.1 million and net income totaled $62.3 million. This
compares with revenues of $152.0 million and net income of $40.2 million for the
nine months ended September 30, 1997. These increases in revenues and net income
during the third quarter of 1998 compared to the same period in 1997 were due
primarily to substantial increases in industrial and commercial sales and a
stable earnings contribution from the Company's income portfolio, offset in part
by reduced levels of residential lot sales. Industrial and commercial sales
during the third quarter of 1998 included escrow closings on five industrial
properties and two commercial properties. These results, along with the sale of
Valencia Marketplace in the second quarter, have caused the revenues and net
income per unit for the first nine months of 1998 to exceed any full year
results in the Company's history.
RESIDENTIAL HOME AND LAND SALES
The Company generates revenues and income from Valencia residential projects by
selling residential lots to merchant builders and home sales through joint
ventures. Revenues and income are recorded by the Company on residential lot
sales when title is transferred to the merchant builder, who, in turn, builds
homes for sale. The Company also participates in home construction on lots it
owns by establishing joint ventures with builders who have created innovative
new home designs, targeting niche markets unmet by other merchant builders. In
the joint-venture program, the Company records its portion of revenues and
income upon close of escrow to the homebuyer. The Company's participation in
joint ventures enables it to generate increased income as it receives a portion
of the homebuilding profits in return for sharing in the risk of homebuilding,
and in some cases, financing the construction costs. In a strong real estate
market, the Company's strategy is to increase residential absorption by
concentrating on lot sales to merchant builders with less emphasis on
homebuilding joint ventures. As a result, in the current market, joint venture
home closings will be lower compared to prior periods.
During the 1998 third quarter, 132 new home sales were recorded in Valencia by
merchant builders and the Company's joint ventures. This is below 1997 third
quarter sales of 206 homes and 1998 second quarter sales of 160 homes due to
temporary supply constraints in Valencia's new-home inventory. The number of
housing product lines that will be actively selling in Valencia in 1999 will
more than double from eight at the end of the 1998 third quarter. For both the
1998 and 1997 third quarters, Valencia captured a 40% share of all new homes
sales in the Santa Clarita Valley.
Merchant Builder Program
In the 1998 third quarter, the sale of 168 lots for high-density housing closed
escrow contributing $6.2 million to revenues and $3.8 million to income. This
sale brings total residential lot sales for the first nine months of 1998 to
1,108 which added $40.8 million to revenues and $23.7 million to income. The
Company does not anticipate any additional residential lot sales in the fourth
quarter, nor are any residential lots currently in escrow.
In the third quarter of 1997, residential lot sales in Valencia totaled 617
which added $27.3 million to revenues and $13.1 million to income. The largest
transaction was the sale of 366 entitled, unimproved lots to Taylor Woodrow for
$17 million contributing $10.1 million to income. In addition, escrow closed on
251 improved residential lots to three merchant builders contributing $10.3
million to revenues and $3.0 million to income under percentage of completion
accounting. The 1997 nine-month period also included the sale of 94 residential
lots which added $4.0 million to revenues and $1.2 million to income. At
September 30, 1997, 43 residential lots were in escrow.
Negotiations are currently underway with several merchant builders on the
Company's next major project, Bridgeport (formerly referred to as Lago de
Valencia), an approximately 700-home "lifestyle village" surrounding a lake.
Grading of the 14-acre lake has started, with lot sales expected to begin in
mid-1999. Other projects now being prepared for sale next year include 450 lots
west of Valencia High School called Decoro South, 120 lots in the South River
area, and the balance of the Company's Hasley Hills project just north of
Valencia totaling 290 lots.
<PAGE> 9
Part I. Financial Information 9.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Joint Venture Program
During the 1998 third quarter, a total of 57 joint-venture homes in three
projects closed escrow contributing $13.1 million to revenues and $1.4 million
to income. At September 30, 1998, a total of 26 joint-venture homes were in
escrow and an additional 53 homes were reserved, 47 of which were Cheyenne
townhomes, the Company's 166-home joint venture with EPAC Communities, Inc. The
remainder are at Avignon, a joint venture with EPAC for 76 luxury townhomes.
Nouvelle, a joint venture with Warmington Homes for 72 single-family homes, is
sold out with only 2 homes remaining to close escrow. All escrow closings are
subject to market and other conditions
A total of 90 joint-venture homes closed escrow during the 1998 nine-month
period contributing $20.3 million to revenues and $2.2 million to income. With
the Company's emphasis on lot sales to merchant builders, joint-venture home
sales in 1998 will represent a smaller portion of total home sales compared to
prior periods.
In the 1997 third quarter, the Company's joint-venture homebuilding projects
closed escrow on 51 homes contributing $11.2 million to revenues and $1.0
million to income. The 1997 nine-month period included 111 joint-venture home
closings in six projects for $24.4 million adding $2.6 million to income.
INDUSTRIAL AND COMMERCIAL SALES
In the 1998 third quarter, escrow closed on five parcels totaling 59.1
industrial acres, including a building on 1.2 acres constructed as part of the
Company's build-to-suit/lease program. These escrow closings contributed $33.7
million to third quarter revenues and $11.9 million to income. The largest sale
during the quarter was for $20.4 million consisting of a 36.5-acre parcel for a
700,000-square-foot office complex to be developed on this parcel at the
intersection of Interstate 5 and Highway 126. This is one of several parcels
being sold for office development in Valencia's business parks and is
significant because the Company believes that these types of projects tend to
bring higher prices and more employment on a per-acre basis.
During the first nine months of 1998, the Company closed escrow on a record 78.4
acres of industrial land, including four buildings constructed as part of its
build-to-suit/lease program. These sales added $49.1 million to revenues and
$13.8 million to income. In the first three quarters of 1998, more than one
million square feet of space had been absorbed in Valencia's industrial
properties, exceeding the amount for all of 1997. The Company's remaining unsold
industrial land inventory is approximately 545 acres, which will support about
10 million square feet of building space. Additional industrial acreage is
planned for the adjacent Newhall Ranch project.
Also, during the 1998 third quarter, a 12.6-acre restricted-use site for a
senior apartment project closed escrow for $1.8 million. In addition, the
Company completed the sale of its remaining industrial building in Valencia
Industrial Center consisting of a 29,000-square-foot building on 2.1 acres for
$1.5 million. These two sales added $1.3 million to 1998 third quarter income.
Results for the 1998 nine-month period also includes the sale of three small
commercial parcels totaling 4.6 acres for $1.5 million adding $433,000 to
income. Following the close of the third quarter, the Company's
56,800-square-foot Valley Business Center on approximately 15 acres closed
escrow. This sale will contribute $7.3 million to revenues and $1.5 million to
income in the fourth quarter.
As previously reported, the 1998 second quarter sale of Valencia Marketplace is
expected to generate future revenues and income in excess of the amounts
recognized upon the close of escrow under percentage of completion accounting.
Under this accounting method, revenues and income of $5.5 million and $2.1
million, respectively, were recorded in the third quarter.
During the 1997 third quarter, three parcels in Valencia Commerce Center
totaling 13.5 acres closed escrow which added $5.9 million to revenues and $1.1
million to income. Also in the 1997 third quarter, a 135,220-square-foot
build-to-suit on 6.3 acres closed escrow for $7.9 million contributing $1.1
million to income.
Results for the 1997 nine-month period also included sales of a 5.2-acre
industrial parcel and 3.5 commercial acres which combined contributed $4.5
million to revenues and $2.5 million to income. Also included in the 1997
nine-month results are the sale of StoneCreek, a 208-unit apartment complex, for
$18.3 million adding $12.9 million to income and the sale of Orchard Plaza, a
17,400-square-foot office building, for $2.2 million adding $618,000 to income.
<PAGE> 10
Part I. Financial Information 10.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
At September 30, 1998, four sales of industrial land totaling 36.8 acres were in
escrow for $16.0 million with closings scheduled before the end of 1998, and
another 5.2-acre parcel with a 110,000 square foot build-to-suit was in escrow
for $8.1 million with closing expected in 1999. Also in escrow is the Company's
remaining property in Contra Costa County consisting of approximately 85 acres
for $10.5 million with escrow expected to close in the first half of 1999. All
escrow closings are subject to market and other conditions. At September 30,
1997, eight parcels totaling 12.2 industrial acres, 33.5 commercial acres and
two build-to-suits in Valencia Commerce Center were in escrow for an aggregate
of $18.9 million. Subsequently, escrows for 15.2 commercial acres were
cancelled.
COMMUNITY DEVELOPMENT
The Company's community development activities are focused on securing the
necessary governmental land use approvals as well as an intensified strategic
marketing program to support the build-out of Valencia by 2005 and begin the
development of Newhall Ranch, the next new town to be developed on the Company's
12,000 acres west of Valencia. The Company's ability to achieve its goals and
increase the pace of development is contingent upon obtaining the necessary
entitlements or governmental approvals.
The Company has reached agreements with all school districts covering Newhall
Ranch, as well as future development in Westridge and Valencia. The Los Angeles
County Board of Supervisors reviewed the Specific Plan and zoning changes for
Newhall Ranch, along with the Environmental Impact Report. Changes were
suggested regarding land use pertaining to the environment and the Company is
addressing those issues, which are scheduled for review by the Board of
Supervisors. The October 27, 1998 meeting has been deferred in order to resolve
the last remaining issues. A specific date has not been set for the continued
hearing. Final approval for the approximately 22,000-home planned community is
projected for early 1999.
Hearings were held this summer before the Los Angeles County Regional Planning
Commission on the Environmental Impact Report for the Westridge Golf Course
Community. The project received approval from the Planning Commission on
November 2, 1998 and is expected to go before the Los Angeles County Board of
Supervisors in early 1999.
Community development expenses increased 23% from the prior year three-month
period primarily due to expenses relating to evaluation of development
opportunities outside of Valencia. The impact of these expenditures was offset
in the nine-month comparisons due to higher entitlement expenditures in the
prior year relating to final approvals for several projects in Valencia. The
Company will continue to focus on obtaining residential entitlements to meet the
accelerated pace of development to support forecasted demand. Community
development expenses in 1998 are expected to be approximately the same as in
1997.
INCOME-PRODUCING PROPERTIES
The Company's income-producing property portfolio is a relatively stable source
of earnings and cash flow that also provides debt capacity to grow the Company
and working capital for continuing operations. For the third quarter of 1998,
revenues from this commercial portfolio increased 3% and income increased 6%
and, for the nine-month period, revenues increased 16% and income increased 24%.
High occupancy rates and favorable rents throughout the portfolio more than
offset the second quarter sale of Valencia Marketplace and contributed to the
increases from the corresponding prior year periods.
In Valencia Town Center along Town Center Drive, the Company's 244-room Hyatt
Valencia Hotel and Santa Clarita Conference Center opened in August and the
six-story building for Princess Cruises will be ready for occupancy in November.
The 194,000 square feet of retail space along Town Center Drive is currently 71%
pre-leased, with approximately 54,000 square feet expected to be open for the
holiday shopping season.
The 130,000-square-foot entertainment complex which will include an IMAX 3-D
Theatre, 11 additional movie screens and a Borders bookstore, is under
construction with completion scheduled for mid-1999. The complex also will
include new restaurants and other retail space.
<PAGE> 11
Part I. Financial Information 11.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The three apartment complexes in the income portfolio have occupancy rates above
97% and, during the past 12 months, rents for new tenants have increased
approximately 20%. To meet growing demand, eight additional apartment projects
totaling more than 2,500 units are planned during the build-out of Valencia. The
first project, Montecito, a 210-unit apartment complex in Valencia Town Center
adjacent to Valencia Country Club, is under construction with units expected to
be available in the spring of 1999.
Valencia Town Center shopping mall space and the Company's neighborhood shopping
centers continue to show strong results. Remodeling at River Oaks will be
completed this fall and is expected to have a positive impact on re-leasing
space in the center. Construction is on schedule for the 16,700-square-foot
Rite-Aid drug store and 5,600 square feet of additional retail space at
NorthPark Village Square, the Company's latest neighborhood shopping center.
Plaza del Rancho, a 53,000-square-foot, mixed-use project in Valencia Industrial
Center that opened last summer, is 90% leased. The portfolio's office building
next to Company headquarters is fully leased, and the three-story office
building in Valencia Town Center is 79% leased.
When current projects under construction in Valencia Town Center are complete,
about $12 to $13 million in incremental net operating income annually is
expected to be generated as the projects reach stabilization, more than
offsetting the loss of income from strategic asset sales such as Valencia
Marketplace. The Company's investment in the continued expansion of the
portfolio will exceed $100 million in 1998.
Income from the commercial portfolio for the full year of 1998 is expected to
increase approximately 15% over 1997 due to the completion of several new
commercial properties in 1998, along with high occupancy rates and increased
rents from existing portfolio projects.
VALENCIA WATER COMPANY
Valencia Water Company is a regulated public utility and a wholly-owned
subsidiary of the Company serving over 19,000 metered customers in the Valencia
area. Reduced demand due to heavy rainfall during the winter and spring resulted
in lower revenues and income for the 1998 third quarter and nine months from
Valencia Water Company. Revenues declined 5% and income declined 7% for the 1998
third quarter. For the 1998 nine-month period, revenues and income declined 13%
and 26%, respectively. By year-end the declines are expected to be partially
offset by increased demand due to increases in the water utility's customer
base.
AGRICULTURAL OPERATIONS
Income from agriculture, including the Company's energy operations, for the 1998
third quarter and nine-month periods was below year earlier levels. The primary
contributor to the decreases was a $1.9 million non-cash, write-off of mineral
rights associated with previously sold ranch land based on an independent
valuation performed during in the current year quarter. Additionally, lower oil
and gas prices negatively impacted results for both the third quarter and first
nine months of 1998.
RANCH SALES
In the 1998 third quarter, a 970-acre parcel of the Merced Ranch closed escrow
for $1.1 million, contributing $775,000 to income. The sale is part of the
Company's strategy of selling farm land not suitable for development. No other
sales of farm land have taken place in 1998. Results for the nine-month period
includes $323,000 recognized from the 1996 sale of 539 acres of row crop land at
the Suey Ranch. The Company continues to market three remaining parcels,
containing an aggregate of 2,970 acres, at Merced Ranch which are being leased
while awaiting sale.
The sale of a small remaining parcel in northern California was completed during
the 1997 third quarter for $62,000 adding $45,000 to income. Results for the
1997 nine-month period also includes the sale of 1,674 acres of vineyard and
undeveloped land at the 38,000-acre Suey Ranch for $17.9 million adding $17.0
million to income.
<PAGE> 12
Part I. Financial Information 12.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expenses increased 53% and 54%, respectively, for the
third quarter and nine months of 1998. The increases were primarily due to
consulting fees relating to expanded marketing programs and improved business
conditions, and non-capitalized expenses in connection with replacement and
upgrading of the Company's accounting system and Year 2000 repairs. General and
administrative expenses are expected to be lower in 1999.
EXPENSE FROM UNIT OWNERSHIP PLANS
In the 1998 first quarter, an expense of $400,000 was recorded in connection
with appreciation rights on outstanding, non-qualified options granted prior to
1992 due to increases in the market price of partnership units. No expense was
recorded in the second or third quarters of 1998. Results for the 1997 three-
and nine-month periods included option appreciation expense of $350,000 and
$580,000, respectively.
INTEREST AND OTHER, NET
Reduction in debt due to receipt of $111 million cash upon the sale of Valencia
Marketplace in June 1998 and an increase in interest capitalized to portfolio
projects contributed to decreases of 51% for the three-month period and 19% for
the nine-month period in Interest and Other, net, compared to comparable 1997
periods. Interest income from increased cash available for investment was offset
by a reduction in interest income due to collection of notes from prior land
sales for both the three and nine-month periods.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had cash and cash equivalents of $3.6 million
and $162.4 million in available lines of credit and a revolving mortgage
facility to fund development activities. The Company believes it has adequate
sources of cash from operations and debt capacity, including lines of credit, to
finance future operations and take advantage of new development opportunities.
At September 30, 1998, there was no debt against raw land or land under
development inventories.
On August 14, 1998, the Board of Directors authorized the repurchase of one
million units and, on September 9, 1998, the Board of Directors authorized an
additional one million units for repurchase. In addition, the Company had
181,385 units authorized for repurchase from a prior repurchase program. During
the quarter, the Company repurchased a total of 1,497,489 units for $38.8
million leaving a balance of 683,896 units authorized. The unit repurchases are
being made because management and the Board of Directors believe that the
current market price of the Company's partnership units does not reflect the
Company's current performance and outlook. The Company intends to continue
buying units into 1999 depending upon market conditions. Changes to the
Company's business plan for next year are being evaluated in order to expand the
current repurchase program, including accelerating certain land sales, reducing
capital spending, and evaluating the sale of more non-strategic assets,
including ranches. The goal is to add about 2 million more units to the current
program in 1999, assuming the business plan for the coming year is met.
There are no material commitments for capital expenditures other than the
Company's plans in the ordinary course of business to develop its portfolio of
income-producing properties. The Company expects to invest over $100 million in
its commercial portfolio in 1998. For additional information on income-producing
properties under development see the Investing Activities section.
<PAGE> 13
Part I. Financial Information 13.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
OPERATING ACTIVITIES
Net cash provided by operating activities for the nine months ended September
30, 1998 totaled $172.0 million and included the sale of Valencia Marketplace
for $111 million cash. Also, sales of 1,198 residential lots and homes, 78.4
acres of industrial land including four industrial buildings, 17.2 acres of
commercial land and a 29,000-square-foot building on 2.1 acres in Valencia
Industrial Center combined provided $105.3 million cash and $15.3 million in
notes. In addition, notes totaling $3.3 million from land sales in prior years
were collected during the period.
Expenditures for land under development inventories and home construction
totaled $52.1 million during the first nine months of 1998, which was more than
offset by $65.7 million of cost of sales relief. Inventory expenditures were
related to land preparation and infrastructure to ready land for development or
sale and home construction advances for the Company's homebuilding partnerships.
The Company's net investment in homebuilding partnerships totaled $12.9 million
at September 30, 1998.
INVESTING ACTIVITIES
Expenditures for development of income-producing properties in Valencia totaled
$78.1 million for the nine months ended September 30, 1998. Major expenditures
included $25.3 million for the Hyatt Valencia Hotel and Conference Center; $8.6
million for a six-story office building to be occupied by Princess Cruises; $4.1
million for a 210-unit apartment complex in Valencia Town Center; $3.9 million
for industrial buildings under the build-to-suit/lease program; and $21.6
million for various retail/office/ entertainment projects in Valencia Town
Center including parking structures. Also included is $10.7 million for Valencia
Marketplace which was sold in June 1998. The Company is obligated to complete
the construction and leasing of the center and the sale is being recognized
under percentage of completion accounting. Property and equipment expenditures
were primarily related to water utility construction costs.
FINANCING ACTIVITIES
Distributions totaling $14.5 million have been paid as of September 30, 1998
consisting of three quarterly distributions of $.10 per unit and a special
distribution of $.12 per unit. The declaration of distributions, and the amount
declared, are determined by the Board of Directors on a quarterly basis taking
into account the Company's earnings, financial condition and prospects. The next
quarterly distribution will be considered by the Board of Directors on November
18, 1998.
Upon sale of Valencia Marketplace on June 5, 1998 for $111 million cash, the
Company paid off all outstanding borrowings against unsecured lines of credit
and a revolving mortgage facility. At September 30, 1998, $6.1 million was
outstanding against unsecured lines of credit and $10 million was outstanding
against a revolving mortgage facility. By the end of 1998, the Company expects
total debt to be above the 1997 year-end level of $48.1 million. A total of
1,497,489 partnership units have been repurchased for an aggregate of $38.8
million during the nine months ended September 30, 1998.
YEAR 2000 ISSUE
The Year 2000 issue concerns the possibility that computer programs with
date-sensitive software may recognize a date using "00" as the year 1900, rather
than as the year 2000, because the programs were written using two digits rather
than four to define the applicable year. This could result in a system failure
or miscalculations causing disruptions of operations such as, among others, a
temporary inability to process transactions or engage in similar normal business
activities.
Readiness: The Company's Year 2000 remediation efforts are progressing
appropriately. At the end of 1997, a Year 2000 Task Force was formed to
coordinate Company-wide efforts to be Year 2000 compliant. To date, the Company
has inventoried its internal systems as well as identified systems and
applications outside of the Company that may include imbedded computer
technology that could be impacted by the Year 2000 Issue.
<PAGE> 14
Part I. Financial Information 14.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
As a result of the Company's comprehensive review of its internal systems in
1997, and for other strategic reasons, the Company is in the process of
replacing its computerized accounting system. This is scheduled to be completed
by the end of 1998, except for payroll and human resources functionality which
the Company projects will be completed by April, 1999. The Company is dependent
upon this accounting system replacement to conduct its day-to-day business
operations and to manage its real estate projects. The Company has made
significant progress in modifying existing software to be retained to be Year
2000 compliant. Completion of these system changes is planned for the first
quarter of 1999, which will allow adequate time for testing.
Significant vendors, consultants, suppliers and governmental agencies
(collectively, "business partners") were sent a questionnaire on their Year 2000
compliance efforts. Nearly 75% have responded to this request. The Company is in
the process of completing selected site visits before the end of 1998 to assess
the Year 2000 compliance efforts of these business partners.
Costs: The Company estimates the total cost of its compliance efforts in
connection with the Year 2000 Issue will be approximately $400,000 and will be
expensed as incurred. As of September 30, 1998, $95,000 had been expensed for
this project. The majority of the expenditures in the future is expected to be
for third party computer analysts to complete the modification and testing of
existing software for Year 2000 compliance. In addition, the cost of the new
accounting system is approximately $1 million and is being capitalized and
amortized over its useful life.
The cost of the Year 2000 Issue and the estimated completion dates are based on
management's best estimates, which were derived utilizing assumptions of future
events, including the continued availability of certain resources, third-party
modification plans and other factors. There can be no guarantee that these
estimates will prove accurate and actual results could differ from those
estimated.
Risks: The Company believes the worst-case scenario for the Year 2000 Issue
would be for the Company or a significant number of its business partners to
fail to successfully complete their respective Year 2000 remediation efforts by
December 31, 1999. Under this scenario, the Company's operations would most
likely be disrupted which would result in a material adverse effect on its
business, operating results and financial condition.
Contingency Plans: The Company has in place a contingency plan in the event the
accounting system replacement cannot be accomplished in the specified timeframe.
This includes, among other things, retrofitting its existing accounting software
to be Year 2000 compliant. The Company expects also to develop by June 1999
contingency plans for business partners that do not indicate Year 2000
compliance. There can be no assurance that any contingency plans developed by
the Company will prevent any service interruption on the part of one or more of
the Company's business partners or that any such service interruption would not
have a material adverse effect upon the Company's business, operating results or
financial condition. A failure of the accounting systems of a significant number
of the Company's customers or business partners, or any of their financial
institutions or lenders, would likely have a material adverse effect on the
Company's business, operating results and financial condition.
INFLATION, RISKS AND RELATED FACTORS AFFECTING FORWARD-LOOKING INFORMATION
This report and other published reports contain forward-looking statements
regarding the status of proposed or pending sales and rental activity, future
planned development, plus the long-term growth goals of the Company. These
forward-looking statements made in this report are based on present trends the
Company is experiencing in residential, industrial and commercial markets. Also,
the Company's success in obtaining entitlements, governmental and environmental
regulations, timing of escrow closings, expansion of its income portfolio and
marketplace acceptance of its business strategies are among the factors that
could affect results. The following risks and related factors, among others,
should be taken into consideration in evaluating the future prospects for the
Company. Actual results may materially differ from those predicted.
Sales of Real Estate: The majority of the Company's revenues are generated by
its real estate operations. The ability of the Company to consummate sales of
real estate is dependent on various factors, including but not limited to
availability of financing to the buyer, regulatory and legal issues and
successful completion of the buyer's due diligence. The fact that a real estate
transaction has entered escrow does not necessarily mean that the
<PAGE> 15
Part I. Financial Information 15.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
transaction will ultimately close. Therefore, the timing of sales may differ
from that anticipated by the Company. The inability to close sales as
anticipated could adversely impact the recognition of revenue in any specific
period.
Economic Conditions: Real estate development is significantly impacted by
general and local economic conditions which are beyond the control of the
Company. The Company's real estate operations are concentrated in Southern
California. The regional economy is profoundly affected by the entertainment,
technology and certain other segments, which have been known to affect the
region's demographics. Consequently, all sectors of real estate development for
the Company tend to be cyclical. While the economy of Southern California has
shown improvements recently, there can be no assurances that present trends will
continue.
Interest Rates and Financing: Fluctuations in interest rates and the
availability of financing have an important impact on the Company's performance.
Sales of the Company's projects could be adversely impacted by the inability of
buyers to obtain adequate financing. Further, the Company's real estate
development activities are dependent on the availability of adequate sources of
capital. Certain of the Company's credit facilities bear interest at variable
rates and would be negatively impacted by increasing interest rates.
Competition: The sale and leasing of residential, industrial and commercial real
estate is highly competitive, with competition coming from numerous and varied
sources. The degree of competition is affected by such factors as the supply of
real estate available which is comparable to that sold and leased by the Company
and the level of demand for such real estate. While the Company recently has
continued to increase its market share at both the local and the county level,
new competition is expected to deliver competing projects in the future that
could reverse this trend.
Geographic Concentration: The Company's real estate development activities are
focused on its 20,000 acres in Los Angeles County, 30 miles north of Los
Angeles. The Company's entire commercial income portfolio is located in the
Valencia area. Therefore, any factors affecting that concentrated area, such as
changes in the housing market or environmental factors, including seismic
activity, which cannot be predicted with certainty, could affect future results.
Government Regulation and Entitlement Risks: In developing its projects, the
Company must obtain the approval of numerous governmental authorities regulating
such matters as permitted land uses, density and traffic, and the providing of
utility services such as electricity, water and waste disposal. In addition, the
Company is subject to a variety of federal, state and local laws and regulations
concerning protection of health and the environment. This government regulation
affects the types of projects which can be pursued by the Company and increases
the cost of development and ownership. The Company devotes substantial financial
and managerial resources to complying with these requirements. To varying
degrees, certain permits and approvals will be required to complete the
developments currently being undertaken, or planned by the Company. Furthermore,
the timing, cost and scope of planned projects may be subject to legal
challenges, particularly large projects with regional impacts. 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 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 new properties. The Company's results of
operations in any period will be affected by the amount of entitled properties
the Company has in inventory.
Inflation: The Company believes it is well positioned against the 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. Recently, land values have been increasing at a
faster rate than costs. However, there are no assurances that this trend will
continue. A portion of the commercial income portfolio is protected 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 has tended to rise over the long term.
<PAGE> 16
16.
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):
10(a) Amendment No. 3 to The Newhall Land and Farming Company
Retirement Plan dated July 15, 1998
10(b) Amendment No. 2 to The Newhall Land and Farming Company Savings Plan
dated July 15, 1998
10(c) The Newhall Land and Farming Company Pension Restoration Plan (as
amended through July 15, 1998)
10(d) The Newhall Land and Farming Company Employee Savings Restoration Plan
As Amended Effective January 1, 1999
27 Financial Data Schedule
(b) No report was filed on Form 8-K in the third quarter ended September 30,
1998.
<PAGE> 17
17.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE NEWHALL LAND AND FARMING COMPANY
(a California Limited Partnership)
Registrant
By Newhall Management Limited Partnership,
Managing General Partner
By Newhall Management Corporation,
Managing General Partner
Date: November 9, 1998 By /s/ THOMAS L. LEE
--------------------------
Thomas L. Lee, Chairman and
Chief Executive Officer of
Newhall Management Corporation
(Principal Executive Officer)
Date: November 9, 1998 By /s/ STUART R. MORK
--------------------------
Stuart R. Mork, Senior Vice President
and Chief Financial Officer of
Newhall Management Corporation
(Principal Financial Officer)
Date: November 9, 1998 By /s/ DONALD L. KIMBALL
--------------------------
Donald L. Kimball, Vice President -
Finance and Controller of
Newhall Management Corporation
(Principal Accounting Officer)
<PAGE> 1
Exhibit 10(a)
AMENDMENT NO.3
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: Effective July 15, 1998, the third sentence of Section
1.01 is amended to read in full as follows:
"Notwithstanding the preceding sentence, determining (i)
whether the present value of a Participant's accrued benefit
exceeds $3,500 ($5,000, effective July 15,1998) 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%)."
SECOND: Effective January 1, 1989, the first two paragraphs of
Section 1.10 (the lead-in paragraph and subsection (a)) are amended to read in
full as follows:
"1. 10. Compensation shall mean, the compensation reportable
for Federal Income Tax purposes, including severance
payments, that is or would have been paid to an
Employee if such Employee had not made (i) a salary
deferral election under The Newhall Land and Farming
Company Employee Savings Plan, (ii) an election under
any plan described in Section 125 of the Code or (iii)
an election to defer the receipt of salary or bonus
(whether payable in cash or employer securities) under
a nonqualified deferral arrangement; provided that,
effective for terminations of employment on and after
December 1, 1993, Compensation does not include
severance pay. If an amount is included in Compensation
at the time of deferral pursuant to the previous
sentence, no amount attributable to the amount so
deferred will be included in Compensation at the time
the deferred amount is actually paid.
(a) Compensation does not include that
portion of compensation imputed for
tax purposes as a result of fringe
benefits (including any gain upon
the exercise of options to acquire
employer securities or the sale of
securities acquired thereunder, the
vesting of restricted employer
securities or other gains from
equity compensation other
1.
<PAGE> 2
than employer securities that are
payable (or would be payable absent
a deferral election by the
Participant) as an annual bonus) and
other similar forms of compensation
as determined in accordance with
nondiscriminatory rules adopted by
the Committee."
THIRD: Effective January 1, 1997, the third paragraph of
Section 1.10(b) is hereby amended to read in full as follows:
"The remainder of this paragraph applies before January 1,
1997, but not thereafter: In determining the above limits, to
the extent required by law, the family aggregation rules of
Code Section 414(q)(6), as in effect before January 1, 1997,
apply, except that the term "family" includes only the spouse
of the Participant and any lineal descendants of the
Participant who have not attained age 19 before the close of
the Plan Year. To the extent required by applicable
Regulations, if the limitation is reached for a family group,
then the limitation amount will be prorated among each member
of the family group in the proportion that each family member's
compensation bears to the total compensation of the family
group."
FOURTH: Effective July 15,1998, the first sentence of Section
7.05(a) is amended to read in full as follows:
"Notwithstanding Sections 7.01 through 7.04, if the Actuarial
Equivalent of a Participant's accrued vested benefits is less
than or equal to $1,750 ($3,500 after December 31, 1984 and
before July 15, 1998 with respect to Participants having at
least one Hour of Service or one hour of paid leave on or after
August 23, 1984; and $5,000 on and after July 15, 1998 with
respect to all Participants), the Committee may direct that
such Participant be paid the Actuarial Equivalent of such
benefits in one lump sum."
FIFTH: Effective January 1, 1997, Section 7.07(c) is hereby
amended to read in full as follows:
"(c) Minimum Distributions. Notwithstanding the preceding
subsection, for Plan years beginning after December
31, 1988, distributions will be made in accordance
with the following:
(1) Regulations under Code Section
401(a)(9), and the incidental death
benefit requirements in Code Section
401 (a)(9)(G);
2.
<PAGE> 3
(2) Distribution of a Participant's
benefits under the Plan shall
commence no later than April 1 of
the calendar year following the
later of: (i) the calendar year in
which the Participant attains age 70
1/2 or, if the Participant attains
age 70 1/2 after December 31, 1999,
and is not, with respect to the Plan
Year ending in the calendar year in
which he attains age 70 1/2, a Five
Percent Owner, (ii) the calendar
year in which the Participant
retires.
(3) If, pursuant to Section 7.07(c)(2)
above, distribution of a
Participant's benefit begins later
than April 1 of the calendar year
following the calendar year in which
the Participant attains age 70 1/2,
the Participant's retirement benefit
at such time thereafter as benefits
begin shall be equal to the
Actuarial Equivalent of the
retirement benefit that would have
been payable to such Participant
beginning on the later of such April
1 or January 1, 1997, plus the
Actuarial Equivalent of any benefits
accrued after that date."
SIXTH: Except as modified by this Amendment, all the terms and
provisions of the Plan (as previously amended) shall continue in full force and
effect.
IN WITNESS WHEREOF, 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, has caused this
3.
<PAGE> 4
Amendment No.3 to be executed on behalf of such partnership by its duly
authorized officer this 15th day of July, 1998.
THE NEWHALL LAND AND FARMING
COMPANY (A CALIFORNIA LIMITED
PARTNERSHIP)
BY: NEWHALL MANAGEMENT LIMITED
PARTNERSHIP
MANAGING GENERAL PARTNER
BY: NEWHALL MANAGEMENT CORPORATION
MANAGING GENERAL PARTNER
By:
----------------------------
Thomas H. Almas
SECRETARY
4.
<PAGE> 1
Exhibit 10(b)
AMENDMENT NO 2
TO
THE NEWHALL LAND AND FARMING COMPANY EMPLOYEE SAVINGS PLAN
The Newhall Land and Farming Company Employee Savings Plan, as
restated in its entirety effective January 1,1989, and subsequently amended, is
hereby further amended as follows:
FIRST: That portion of Section 11.01 consisting of the lead-in
paragraph and subsections (a) through (b) is amended, effective January 1, 1998,
to read in full as follows:
"11.01 General. Upon the termination of employment of a
Participant, except by death:
(a) If the Participant's Vested Value does not
exceed $3,500 ($5,000 on and after July 15,
1998), such Vested Value shall be distributed
to such Participant in a lump sum within 60
days following the Accounting Date which
coincides with or next follows his termination
of employment.
(b) If such Participant's Vested Value. exceeds
$3,500 ($5,000 on and after July 15, 1998), the
Committee shall distribute such Vested Value in
a lump sum upon such Participant's attainment of
age 65 or, if later, within 60 days following
the Accounting Date which coincides with or next
follows his termination of employment."
SECOND: Section 11.04 is hereby amended effective January 1,
1997 to read in full as follows:
"11.04 Required Distributions to Certain Participants.
(a) Effective January 1, 1985, distributions will
be made in accordance with the Regulations
under Section 401 (a) (9), including the
minimum distribution incidental benefit
requirement of Section 401(a)(9)(G) of the
Code.
(b) Notwithstanding Section 11.01 or any
Participant's consent, distribution shall
occur no later than April 1 of the calendar
year following the later of: (i) the
calendar year in which the Participant
attains age 70 1/2 or, if the Participant
attains age 70 1/2 after December 31, 1999,
and is not, with respect to the Plan Year
ending in the calendar year in which he
attains age 70 1/2, a Five Percent Owner,
(ii) the calendar year in which the
Participant retires; provided, however, that:
(1) Any Participant who has not at any
time been a Five Percent Owner and
who has attained age 70 1/2 before
January 1, 1988 may elect to defer
distribution of his benefits until
his actual retirement, and
<PAGE> 2
(2) Any Participant who attains age 70
1/2 during 1988 shall be treated for
purposes of this Section as having
attained age 70 1/2 in 1989."
THIRD: Except as modified by this Amendment, all the terms
and provisions of the Plan (as previously amended) shall continue in full force
and effect.
IN WITNESS WHEREOF, 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, has caused this Amendment No. I to be executed on behalf of such
partnership by its duly authorized officer this 15th day of July, 1998.
THE NEWHALL LAND AND FARMING COMPANY
(A CALIFORNIA LIMITED PARTNERSHIP)
BY: NEWHALL MANAGEMENT LIMITED
PARTNERSHIP
MANAGING GENERAL PARTNER
BY: NEWHALL MANAGEMENT CORPORATION
MANAGING GENERAL PARTNER
By:
------------------------------
Thomas H. Almas
SECRETARY
<PAGE> 1
Exhibit 10(c)
THE NEWHALL LAND AND FARMING COMPANY
PENSION RESTORATION PLAN
(As Amended Through July 15 l998)
1. Purpose. The purpose of The Newhall Land and Farming
Company Pension Restoration Plan (the "Plan") is to provide retirement income
benefits for those Participants in The Newhall Land and Farming Company
Retirement Plan (the "Retirement Plan") whose benefits are limited by Section
401(a)(17) or Section 415 of the Internal Revenue Code of 1986 (the "Code") or
by the failure of the Retirement Plan to include certain specified compensation
for benefit calculation purposes.
2. Participants. An employee of The Newhall Land and
Farming Company, (a California limited partnership), (the "Company") shall be
eligible to participate in this Plan to the extent that benefits would become
payable and the Company determines that such employee qualifies as a member of a
select group of management or highly compensated employees.
3. Amount and Form of Benefit Payment.
(a) The amount of benefits payable to a
Participant in this Plan, or to his or her beneficiary, shall be that portion of
his or her retirement income not paid from the Retirement Plan because (i) the
Participant's benefits payable under the Retirement Plan are reduced on account
of the limitations set forth in Sections 401(a)( 17) and 415 of the Code and/or
(ii) the definition of Compensation under the Retirement Plan does not include
amounts received by the Participant as general partner income from Newhall
General Partnership or as fees for serving as a director of any subsidiary of
the Company.
(b) Benefits under this Plan shall commence
within thirty (30) days of the later of a Participant's attainment of age
fifty-five (55) or termination of employment with the Company.
(c) Employees who were Participants as of the
effective date of this restatement shall receive their benefits in the Account
Balance Installment Method. All other eligible employees shall elect the form of
payment in which their benefits are to be paid within thirty (30) days of Plan
participation. Participants may elect to receive payment of benefits under this
Plan in one of the following forms:
(1) Single Life Annuity. A monthly
payment of retirement benefits to the Participant during his lifetime and ending
with the date of his death.
(2) Joint and Survivor Annuity. A
monthly payment of retirement benefits to the Participant during his lifetime
and ending with the date of his death, with provision for the continuance of
retirement benefits to the Participant's spouse during the
1.
<PAGE> 2
lifetime of such spouse in an amount equal to fifty percent (50%) of the monthly
benefit paid to the Participant prior to his death.
(3) Account Balance Installment Method.
Effective January 1, 1997, an annual payment (paid in monthly installments) in
an amount equal to the greater of the amount that would have been paid under a
single life annuity (or a joint survivor annuity if married at the time benefits
commence) and an amount equal to a single life annuity (or a joint survivor
annuity if married at the time of the redetermination) equal to his account
balance and life expectancy (or joint lives, if married) as of the end of the
previous calendar year; provided that a Participant and his or her beneficiary
shall never receive a payment in excess of his account balance and payments
shall cease when his account balance equals zero. In the event of the death of
Participant after installment payments under this Section have begun, but prior
to completion of such payments, the full amount of such unpaid benefits shall
continue to be paid to his or her beneficiary (or to his or her estate if he or
she fails to designate a beneficiary) in the form and amount of the previously
established installments. Moreover, if the beneficiary (or a contingent
beneficiary, if applicable) dies prior to the completion of payment of benefits
due from the Plan, the full amount of such unpaid benefits shall be distributed
to the estate of such beneficiary. Unless otherwise designated, the spouse of a
married Participant shall be his or her beneficiary.
(4) Notwithstanding the preceding, if
the lump sum present value of a Participant's retirement benefit determined as
of the end of the calendar year immediately prior to commencement of benefits
does not exceed $10,000, the entire amount shall be distributed in a lump sum
cash payment.
4. Accounts.
(a) A separate account shall be maintained with
respect to each Participant whose benefits are determined under the Account
Balance Installment Method, (as defined above). A Participant's initial account
balance shall be equal to the lump sum present value of his retirement benefit
determined as of the end of the calendar year immediately prior to commencement
of benefits, and thereafter shall be credited with earnings equal to the rate of
return earned on the assets in the Participant accounts under The Newhall Land
and Farming Company Employee Savings Plan (the "Savings Plan") other than the
assets invested in the Newhall Fund and reduced by distributions made in the
calendar year. The accounts of Participants who no longer retain amounts under
the Savings Plan shall continue to be credited with earnings as if invested in
the Savings Plan and shall have the opportunity to direct their investment under
the Plan as if they continued to participate in the Savings Plan.
(b) Subject to subsection (a), a general account
as provided by the Trust Agreement shall be established and maintained for
payment of benefits determined under a form of benefit other than the Account
Balance Installment Method.
5. Amendment and Termination. This Plan may be amended
or terminated at any time by action of the Board at its sole discretion. Members
of the Board who are Participants are precluded from voting on any action to
terminate this Plan. No amendment shall operate to reduce Participants' benefits
accrued to the date of such amendment. Upon
2.
<PAGE> 3
termination of this Plan, the rights of all affected Participants in benefits
accrued to the date of termination shall be nonforfeitable. Notwithstanding
Section 3, the Board may determine that such nonforfeitable accrued benefits
shall be paid to all Participants as soon as practicable.
6. Vesting. A Participant in this Plan shall become
vested in his benefits on the same basis as they would have vested under the
Retirement Plan.
7. General.
(a) Nothing contained herein shall confer on any
Participant the right to be retained in the service of the Company, nor shall it
interfere with the right of the Company to discharge or otherwise deal with
Participants without regard to the existence of this Plan. No interest in the
Plan may be assigned or encumbered by the Participant or his or her beneficiary,
nor shall such interest be subject to any creditor's claim or to legal process.
(b) No amount payable to or in respect of any
Participant under this Plan shall be subject in any manner to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge
or encumbrance of any kind, and any attempt to do so will be void. Such amounts
shall in no manner be liable for or subject to the debts or liabilities of
Participants or their beneficiaries. A Participant's or beneficiary's rights to
receive payments under this Plan are merely those of an unsecured general
creditor of the Company and its affiliate corporations. Such rights constitute a
mere promise by the Company and its affiliate corporations to make payments to
Participants and their beneficiaries in the future. It is the intention of all
of the parties to this agreement that the
3.
<PAGE> 4
Plan be unfunded for federal tax purposes and for purposes of Title I of the
Employee Retirement Income Security Act of 1974, as amended.
IN WITNESS WHEREOF, The Newhall Land and Farming Company, (a
California Limited Partnership), has caused this restatement of The Newhall Land
and Farming Company Pension Restoration Plan to be executed effective as of July
15,1998.
THE NEWHALL LAND AND FARMING
COMPANY (A CALIFORNIA LIMITED
PARTNERSHIP)
By: Newhall Management Limited Partnership,
Managing General Partner
By: Newhall Management Corporation,
Managing General Partner
By:
----------------------------------
Name: Thomas H. Almas
Title: Secretary
4.
<PAGE> 1
Exhibit 10(d)
THE NEWHALL LAND AND FARMING COMPANY
EMPLOYEE SAVINGS RESTORATION PLAN
As Amended Effective January 1, 1999)
1. Purpose. The purpose of this Newhall Land and Farming
Company Employee Savings Restoration Plan (the "Plan") is to permit certain
eligible employees of The Newhall Land and Farming Company (a California Limited
Partnership) ("Company") defer a portion of their compensation.
2. Eligibility. Any Participant of The Newhall Land and
Farming Company Employee Savings Plan (the "Savings Plan"), shall be eligible
to participate in this Plan if the Company notifies such Participant of his
eligibility to participate.
3. Participation.
(a) Each Plan Year (the period from any January
1st to the following December 31st) individuals eligible to participate in the
Plan pursuant to Section 2 may irrevocably elect to defer receipt of a specified
percentage of their earnings that will be attributable to services to be
rendered in the Plan Year immediately following the Plan Year in which such
election is made. For purposes of this plan "earnings" shall be Earnings as
defined in the Savings Plan, but increased by the amount of (i) any salary or
bonus deferred (whether in the form of cash or employer securities) under a
non-qualified deferral plan and (ii) any amounts payable to a Participant as
general partner income from Newhall General Partnership or as fees for serving
as a director of any subsidiary of the Company, but reduced by (A) that portion
of compensation imputed for tax purposes as a result of fringe benefits
(including any gain upon the exercise of options to acquire employer securities
or the sale of securities acquired thereunder, the vesting of restricted
employer securities or other gains from equity compensation other than employer
securities that are payable (or would be payable absent a deferral election by
the Participant) as an annual bonus) or other similar amounts as determined by
the Company, (B) deferred compensation at the time of payment if attributable to
amounts that were taken into account at the time of deferral.
(b) Individuals who first become eligible to
participate in the Plan during the Plan Year pursuant to Section 2 may
irrevocably elect to defer receipt of a specified percentage of their earnings
(as defined above) that will be attributable to services to be rendered between
becoming eligible to participate and the end of the Plan Year. An individual's
deferral election shall provide for deferral of a "specified percentage" of a
Participant's earnings and/or a specified dollar amount (not in excess of the
percentage and dollar limits specified in the Savings Plan), which deferral
shall be made to the Savings Plan to the extent permissible thereunder or to
this Plan to the extent that such deferral cannot be made to the Savings Plan
because of (I) the annual dollar limitation of section 402(g) of the Code of
1986 (the" Code"), (II) the nondiscrimination requirements of section 401(k)(3)
of the Code (applied on an estimated basis), (III) the annual compensation limit
of Section 401 (a)( 17) of the Code, or (IV) the difference in the definition of
earnings under this Plan and the definition of Earnings under the Savings Plan.
Specified percentage means the percentage
1.
<PAGE> 2
(not less than 1% and no more than 6% of earnings) by which Participants elect
to have the Company reduce Earnings and make contribution to the Savings Plan.
4. In-Service Withdrawals. A Participant may be permitted to
withdraw up to one hundred percent of (100%) of his or her vested benefits under
the Plan, provided and only if the Participant furnishes the Board with
satisfactory proof that the withdrawal is for an unanticipated emergency that
was caused by an event beyond the control of the Participant or his or her
beneficiary and that would result in severe financial hardship if the withdrawal
is not permitted. In judging whether the payment of an expense satisfies the
above requirements, the Board shall take into consideration the financial
resources available to the Participant to meet the expense as reflected in a
written statement furnished by the Participant in support of the request.
In-service withdrawals shall be limited to the amount necessary to satisfy an
emergency.
5. Accounts.
a. With respect to each Participant, any
Company participating in the Savings Plan ("Participating Company") which is his
or her employer shall reduce his or her earnings in each pay period in
accordance with his or her deferral election and, to the extent that such
amounts cannot be deferred into the Savings Plan because of (i) the annual
dollar limitation of Section 402(g) of the Code, (ii) the annual compensation
limitation of Section 401(a)(17) of the Code, (iii) the nondiscrimination
requirements of Section 401(k)(3) of the Code (applied on an estimated basis) or
(iv) the difference between the definition of earnings under this Plan and the
definition of Earnings under the Savings Plan, shall credit such amounts to his
or her Basic Employer Contribution Account under this Plan as of the last day of
such pay period.
b. To the extent that a Participant's deferrals
do not exceed 6% of his or her earnings and are credited to his or her Basic
Employer Contribution Account (rather than the Savings Plan) for a Plan Year,
the Participating Company which is his or her employer shall credit a matching
contribution (computed under the terms of the Savings Plan, but with respect to
earnings as defined herein) to his or her Matching Employer Contribution Account
under this Plan with respect to the amount so credited to his Basic Employer
Account (and which, when added to the amount deferred to the Savings Plan does
not exceed 6% of his earnings). The matching contribution shall be credited as
of the last day of the Plan Year.
c. Each Participant's Basic Employer
Contribution Account and Matching Employer Contribution Account under this Plan
(together his "Accounts") shall be credited with earnings equal to the rate of
return on the assets in the Participant accounts under the Savings Plan other
than the assets invested in the Newhall Fund. The Accounts of Participants who
no longer retain amounts under the Savings Plan shall continue to be credited
with earnings as if invested in the Savings Plan and shall have the opportunity
to direct their investment under the Plan as if they continued to participate in
the Savings Plan.
6. Vesting. Participants' vesting in their Basic
Employer Contribution Accounts and Matching Employer Contribution Accounts under
this Plan shall be subject to
2.
<PAGE> 3
the vesting provisions applicable to their Basic Employer Contribution Accounts
and Matching Employer Contribution Accounts, respectively, under the Savings
Plan.
7. Amount and Form of Benefit Payment.
(a) Benefits under this Plan shall commence
within thirty (30) days following the end of the Plan Year in which a
Participant terminates employment with a Participating Company. The
Participating Company which is the Participant's employer shall pay from its
general assets, the entire amount to the Participant's credit under such
Participant's Accounts in the Plan in installments consisting of approximately
equal annual installments over a term of ten (10) years. Earnings on the
undistributed amounts shall continue to be credited as provided in Section 5(c).
A Participant shall never receive a payment in excess his account balance and
payments shall cease when his account balance equals zero.
(b) Notwithstanding the preceding, if the credit
under the Participant's Accounts does not exceed $25,000 the Participating
Company which is such Participant's employer shall pay within thirty (30) days
following the end of the Plan Year in which a Participant terminates employment
with a Participating Company, from its general assets the entire amount to such
Participant's credit under such Participant's Accounts in the Plan.
(c) In the event of a Participant's death prior
to distribution of all benefits under this Plan, the Participating Company which
was the Participant's employer shall pay within thirty (30) days the balance of
the Participant's Accounts to the Participant's beneficiary in the form of a
single a lump sum payment. A married Participant's spouse shall be a
Participant's beneficiary unless the spouse has given written consent, witnesses
by a notary, to designation of another beneficiary. If a beneficiary dies prior
to distribution of the portion of a Participant's Account to which the
beneficiary was entitled or if a Participant is unmarried and dies without
naming a beneficiary, the funds held in the Participant's Accounts will be
distributed, to the Participant's estate in the form of a single lump sum
payment.
8. Amendment and Termination. This Plan may be amended
or terminated at any time by action of the board of directors of the Corporation
at its sole discretion without prior notice to any person. Members of the Board
who are Participants are precluded from voting on any action to terminate this
Plan. No amendment shall operate to reduce Participants' benefits accrued to the
date of such amendment. Upon termination of this Plan, the rights of all
affected Participants in benefits accrued to the date of termination shall be
nonforfeitable. Notwithstanding Section 8, the Board may determine that such
nonforfeitable accrued benefits shall be paid to all Participants as soon as
practicable.
9. General.
a. Nothing contained herein shall confer on any
Participant the right to be retained in the service of any Affiliated Company,
nor shall it interfere with the right of each Affiliated Company to discharge or
otherwise deal with Participants without regard to the existence of this Plan.
3.
<PAGE> 4
b. No amount payable to or in respect of any
Participant under this Plan shall be subject in any manner to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge
or encumbrance of any kind, and any attempt to do so will be void. Such amounts
shall in no manner be liable for or subject to the debts or liabilities of
Participants or their beneficiaries. A Participant's or beneficiary's rights to
receive payments under this Plan are merely those of an unsecured general
creditor of the Company and its affiliate corporations. Such rights constitute a
mere promise by the Company and its affiliate corporations to make payments to
Participants and their beneficiaries in the future. It is the intention of all
of the parties to this agreement that the Plan be unfunded for federal tax
purposes and for purposes of Title I of the Employee Retirement Income Security
Act of 1974, as amended.
c. This Plan constitutes an unfunded plan of
deferred compensation described in section 401 (a)( 1) of ERISA. The rights
conferred on any individual by virtue of his participation in this Plan shall be
limited to the right to receive, at the time specified herein, an amount equal
to the vested portion of his Accounts. With respect to such rights, a
Participant shall have the status of an unsecured general creditor of the
Participating Company which is his employer.
d. The Plan shall be interpreted in accordance
with the reporting and disclosure requirements of ERISA and, to the extent not
preempted, with California law.
IN WITNESS WHEREOF, The Newhall Land and Farming Company, (a
California limited partnership), has caused this amendment and restatement of
The Newhall Land and Farming Company Employee Savings Restoration Plan to be
executed effective as of July 15th, l998.
THE NEWHALL LAND AND FARMING
COMPANY (A CALIFORNIA LIMITED
PARTNERSHIP)
By: Newhall Management Limited
Partnership,
Managing General Partner
By: Newhall Management Corporation,
Managing General Partner
By:
---------------------------
Name: Thomas H. Almas
Title: Secretary
4.
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,589
<SECURITIES> 0
<RECEIVABLES> 29,550
<ALLOWANCES> 1,019
<INVENTORY> 40,253
<CURRENT-ASSETS> 0
<PP&E> 398,634
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<TOTAL-ASSETS> 411,113
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0
0
<COMMON> 0
<OTHER-SE> 155,288
<TOTAL-LIABILITY-AND-EQUITY> 411,113
<SALES> 215,532
<TOTAL-REVENUES> 251,122
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<OTHER-EXPENSES> 0
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