-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VGI+qy62ULG+SXAlwkb56uFXVxg3WT44+5f1CBD89F4+cfoaFHIIMM7dED2xRmer cPNGiSwWM/FlQdbohGnLAg== 0000950150-95-000668.txt : 19951118 0000950150-95-000668.hdr.sgml : 19951118 ACCESSION NUMBER: 0000950150-95-000668 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951109 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEWHALL LAND & FARMING CO /CA/ CENTRAL INDEX KEY: 0000751976 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 953931727 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08885 FILM NUMBER: 95588471 BUSINESS ADDRESS: STREET 1: 23823 VALENCIA BLVD CITY: VALENCIA STATE: CA ZIP: 91355 BUSINESS PHONE: 8052554000 MAIL ADDRESS: STREET 2: 23823 VALENCIA BLVD CITY: VALENCIA STATE: CA ZIP: 91355 10-Q 1 FORM 10-Q 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, 1995 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to For Quarter Ended September 30, 1995 Commission file number 1-7585 THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership) (Exact name of Registrant as specified in its charter) 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 --- --- 2 Part I. Financial Information 2. Item 1. Financial Statements Consolidated Statements of Income Unaudited
Three Months Ended Nine Months Ended September 30 September 30 -------------------- ---------------------- In thousands except per unit 1995 1994 1995 1994 - --------------------------------------------------------------------------------------------------------- REVENUES Real estate Residential home and land sales $12,255 $ 3,742 $ 33,569 $25,277 Industrial and other sales 10,459 5,368 35,602 6,430 Commercial operations 10,103 9,088 28,446 25,283 ------- ------- -------- ------- 32,817 18,198 97,617 56,990 ------- ------- -------- ------- Agriculture Operations 2,999 5,202 5,720 9,861 Ranch sales 7,428 - 7,428 11,800 ------- ------- -------- ------- 10,427 5,202 13,148 21,661 ------- ------- -------- ------- Total revenues $43,244 $23,400 $110,765 $78,651 ======= ======= ======== ======= CONTRIBUTION TO INCOME Real estate Residential home and land sales $778 ($571) $ 2,144 $ 2,494 Industrial and other sales 2,138 2,680 15,834 2,537 Community development (1,761) (1,796) (3,896) (4,830) Commercial operations 4,474 3,931 13,494 11,345 ------- ------- -------- ------- 5,629 4,244 27,576 11,546 ------- ------- -------- ------- Agriculture Operations 546 1,557 1,345 3,633 Ranch sales 4,629 - 4,629 9,227 ------- ------- -------- ------- 5,175 1,557 5,974 12,860 ------- ------- -------- ------- Earthquake damage - - - (3,700) ------- ------- -------- ------- Operating income 10,804 5,801 33,550 20,706 General and administrative expense (1,965) (2,233) (6,670) (6,202) Interest and other, net (2,586) (2,662) (8,093) (7,835) ------- ------- -------- ------- Net income $ 6,253 $ 906 $ 18,787 $ 6,669 ======= ======= ======== ======= Net income per unit $0.18 $0.02 $0.52 $0.18 ======= ======= ======== ======= Number of units used in computing per unit amounts 36,176 36,781 36,281 36,793 Cash distributions per unit $.10 $.10 $.30 $.30
3 Part I. Financial Information 3. Item 1. Financial Statements Consolidated Balance Sheets
September 30, December 31, In thousands, except units 1995 1994 - ------------------------------------------------------------------------------------ Unaudited ASSETS Cash and cash equivalents $ 5,419 $ 7,656 Accounts and notes receivable 16,730 18,539 Land under development 101,572 87,423 Land held for future development 34,739 34,103 Property and equipment, net 182,671 184,683 Other assets and deferred charges 11,686 11,388 -------- -------- $352,817 $343,792 ======== ======== LIABILITIES AND PARTNERS' CAPITAL Accounts payable $ 13,659 $ 14,877 Accrued expenses 32,857 34,419 Deferred revenues 2,892 5,226 Mortgage and other debt 157,324 145,991 Advances and contributions from developers for utility construction 15,826 13,477 Other liabilities 18,350 17,445 -------- -------- Total liabilities 240,908 231,435 Partners' capital 36,172,143 units outstanding, excluding 600,000 units in treasury, at September 30, 1995 and 36,760,606 units outstanding at December 31, 1994 111,909 112,357 -------- -------- $352,817 $343,792 ======== ========
4 Part I. Financial Information 4. Item 1. Financial Statements Consolidated Statements of Cash Flows Unaudited
Nine Months Ended September 30 ------------------------ In thousands 1995 1994 - ------------------------------------------------------------------------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 18,787 $ 6,669 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,674 5,525 Increase in land development inventories (20,460) (21,056) Decrease (increase) in accounts and notes receivable 1,809 (818) (Decrease) increase in accounts payable, accrued expenses and deferred revenues (5,114) 7,892 Cost of property sold 12,657 1,466 Other adjustments, net 829 (406) -------- -------- Net cash provided (used) by operating activities 14,182 (728) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (10,644) (10,108) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Distributions paid (10,910) (11,027) Increase in mortgage and other debt 26,243 19,739 Decrease in mortgage and other debt (14,910) (1,403) Increase in advances and contributions from developers for utility construction 2,349 983 Purchase of partnership units (8,547) -------- -------- Net cash (used) provided by financing activities (5,775) 8,292 -------- -------- NET DECREASE IN CASH AND CASH EQUIVALENTS (2,237) (2,544) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,656 39,636 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,419 $ 37,092 ======== ========
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 and the nine months ended September 30, 1995 and 1994 have been made. Certain reclassifications have been made to prior periods' amounts to conform to the current year presentation. The interim statements are condensed and do not include some of the information necessary for a more complete understanding of the financial data. Accordingly, your attention is directed to the footnote disclosures found on pages 21 through 26 of the December 31, 1994 Annual Report to Partners and particularly to Note 2 which includes a summary of significant accounting policies. Interim financial information for the Company has substantial limitations as an indicator for the calendar year because: 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 income properties and non-developable farm land occur irregularly and are recognized upon close of escrow provided profit recognition criteria are met. Note 2. Details of Land Under Development (In $000)
September 30, December 31, 1995 1994 ------------- ------------ (Unaudited) Residential $ 27,694 $29,195 Industrial and commercial 43,356 41,781 Homes completed or under construction with venture partners 27,907 16,215 Other 2,615 232 -------- ------- Total land under development $101,572 $87,423 ======== =======
6 Part I. Financial Information 6. Item 1. Financial Statements Note 3. Details for Earnings per Unit Calculation
(Unaudited) Three months ended Nine months ended ------------------------------------ -------------------------------- September 30, September 30, September 30, September 30, 1995 1994 1995 1994 ------------- ------------- ------------- ------------- Average number of units outstanding during the period 36,170,831 36,756,713 36,278,706 36,756,592 Net units issuable in connection with dilutive options based upon use of the treasury stock method 4,702 23,994 2,495 36,195 ---------- ---------- ---------- ---------- Average number of primary units 36,175,533 36,780,707 36,281,201 36,792,787 ========== ========== ========== ==========
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations FINANCIAL CONDITION Liquidity and Capital Resources At September 30, 1995, the Company had cash and cash equivalents totaling $5.4 million. Through the first nine months of 1995, the Company had borrowed $19.5 million against a $40 million revolving mortgage facility secured by Valencia Town Center primarily for working capital needs, investment in income properties and a unit repurchase program completed in January, 1995. There were no borrowings outstanding against unsecured lines of credit totaling $81 million and letters of credit against lines of credit totaled $6.9 million at the end of the 1995 nine-month period. On October 31, 1995, a $40 million line of credit for Valencia Marketplace was finalized with Wells Fargo Bank, bringing total lines of credit to $121 million. There are no material commitments for capital expenditures other than in the ordinary course of business. By the end of 1995, eight new projects which are expected to be valued at $170 million upon completion, including land already owned, will be under development in Valencia. Grading has started on Valencia Marketplace, a 760,000-square-foot retail complex and the largest of these projects, with opening expected in time for the 1996 Christmas shopping season. The center is currently 62% pre-leased. The Los Angeles County Regional Planning Commission approved an amended map for Valencia Marketplace which is still under appeal by a local environment group. Other projects in various stages of land preparation and construction are three new industrial buildings in Valencia Commerce Center totaling 344,000 square feet -- an inventory building for lease and two build-to-suit projects. The largest of the build-to-suits is a 216,000-square-foot office/manufacturing facility for Remo, Inc., one of the world's largest manufacturers of percussion instruments. Additional projects include a 57,000-square-foot office building in Valencia Town Center, a 264-unit apartment complex and a neighborhood shopping center, both in Valencia NorthPark, and an automotive service center. The Company expects to invest approximately $118 million in these projects in 1995 and 1996, the majority of which will be funded from lines of credit and project-specific financings. The Company believes it has adequate sources of cash from operations and available credit to finance future operations and projects in progress as well as take advantage of new development opportunities. 7 Part I. Financial Information 7. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The following discussion relates to principal items on the Consolidated Statement of Cash Flow for the nine months ended September 30, 1995: Operating Activities Sales of 165 residential lots, 128 joint venture home closings, 18 commercial/industrial acres and the ITT build-to-suit facility on 10 acres in Valencia Commerce Center provided the Company with $46.2 million in cash and $5.8 million in notes. The sale of six parcels totaling 5,501 acres at the Merced Ranch was completed in September, 1995 for $1.8 million cash and a $5.6 million note due September, 2000. Land sale notes from current year sales totaling $4.6 million and a $3.7 million note from a prior year land sale have been collected in the 1995 nine-month period. In June, 1995, sale of the Bouquet Shopping Center was completed for $17.9 million cash. See the Financing Activities section for discussion of mortgage debt reduction in conjunction with this sale. Inventory expenditures during the nine-month period totaling $57.3 million were primarily for land development and infrastructure to support pending and future land sales as well as residential construction costs relating to five joint venture projects in Valencia. The expenditures included $8.9 million relating to McDowell Mountain Ranch, the majority of which has been funded by improvement district bonds. Deferred revenues of $3.7 million have been recognized in the current year from prior year land sales and $2.9 million remains to be recognized in future periods as the Company completes required site development, landscape and amenity work. Recognition of deferred revenues has no impact on the Company's cash position. Investing Activities Capital expenditures totaling $10.6 million for the nine months ended September 30, 1995 were primarily for new projects in Valencia as discussed in the Liquidity and Capital Resources section and water utility construction. Financing Activities Three quarterly distributions totaling $10.9 million, or $.30 per unit, have been paid year-to-date. The declaration of distributions is reviewed by the Board of Directors on a quarterly basis. The declaration of any distribution, and the amounts 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 at its November meeting. In December 1994, the Company obtained a $40 million revolving mortgage credit facility secured by Valencia Town Center and at September 30, 1995, borrowings outstanding against this facility totaled $19.5 million with an average interest rate of 7.35%. A $13.3 million principal reduction was paid on a mortgage financing secured by six of the Company's commercial properties in conjunction with the sale of the Bouquet Shopping Center in June, 1995. 8 Part I. Financial Information 8. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) As of September 30, 1995, $15.8 million had been expended of $17 million of improvement district bonds for infrastructure improvements at McDowell Mountain Ranch. After retirement for lots sold, $11.1 million remained as project debt at the end of the period. A repurchase program for 600,000 of the Company's units announced in January, 1995 was completed in March, 1995. The 600,000 units were purchased for approximately $8.5 million or an average unit price of $14.25 per unit. 9 Part I. Financial Information 9. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) RESULTS OF OPERATIONS Comparison of Third Quarter and Nine Months 1995 to Third Quarter and Nine Months 1994 (unaudited) The amounts of increase or decrease in revenues and income from the prior year periods are as follows (in $000's, except per unit):
Increase/(Decrease) Increase/(Decrease) ------------------------- ------------------------ Three Months Nine Months ------------------------- ------------------------ Amount % Amount % ------- ----- ------- ----- REVENUES Real estate Residential home and land sales $ 8,513 227% $ 8,292 33% Industrial and other sales 5,091 95% 29,172 454% Commercial operations 1,015 11% 3,163 13% Agriculture Operations (2,203) (42)% (4,141) (42)% Ranch sales 7,428 100% (4,372) (37)% ----------------------- ----------------------- $19,844 85% $32,114 41% ======================= ======================= CONTRIBUTION TO INCOME Real estate Residential home and land sales $ 1,349 236% $ (350) (14)% Industrial and other sales (542) (20)% 13,297 524% Community development 35 2% 934 19% Commercial operations 543 14% 2,149 19% Agriculture Operations (1,011) (65)% (2,288) (63)% Ranch sales 4,629 100% (4,598) (50)% Earthquake damage - - 3,700 100% ----------------------- ----------------------- Operating income 5,003 86% 12,844 62% General & administrative expense 268 12% (468) (8)% Interest and other, net 76 3% (258) (3)% ----------------------- ----------------------- Net income $ 5,347 590% $12,118 182% ======================= ======================= Net income per unit $0.16 800% $0.34 189% ======================= ======================= Number of units used in computing per unit amounts (605) (2)% (512) (1)% ======================= =======================
10 Part I. Financial Information 10. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The increases and decreases in revenues and income for the three months and nine months are attributable to the following: RESIDENTIAL HOME AND LAND SALES The sale of 106 residential lots at McDowell Mountain Ranch and an increase in home closings from the Company's joint ventures in Valencia resulted in a 227% increase in revenues and a 236% increase in income from the 1994 third quarter. These factors are also the primary contributors to a 33% increase in revenues for the nine-month period. Increased marketing expenses at McDowell Mountain Ranch and the absence of a high-margin, bulk land sale contributed to a decrease in income of $350,000, or 14%, from the nine-month comparable period. VALENCIA Merchant Builder Program No residential lot sales to merchant builders closed escrow in the current or prior year third quarter. At September 30, 1995, the Company had approximately 300 single and multi-family residential lots in escrow, with closings scheduled for later this year. Subsequently, an escrow for the sale of 62 lots was canceled. The sale of 19 lots in NorthPark to Beazer Homes contributed $1.5 million to revenues and $568,000 to income for the 1995 nine-month period. The prior year nine-month period included the sale of 83 lots to Beazer Homes in NorthPark and the sale of 95 lots to Del Webb Homes in Northbridge. These sales contributed $13.1 million to revenues and $2.5 million to income under percentage of completion accounting. Recognition of deferred revenues and income in 1995 from residential lots sold in prior years totaled $561,000 and $66,000 in the third quarter and $1.6 million and $204,000 in the nine-month period, respectively. No deferred revenues or income from prior year sales were recognized in the 1994 comparable periods. In the third quarter of 1995, merchant builders in Valencia closed escrow on 54 homes on lots previously sold by the Company compared to 50 escrow closings in the prior year third quarter. For the nine-month period, escrow closings by merchant builders totaled 167 in the current year compared to 129 in the prior year. Although the Company does not participate directly in the profits generated from escrow closings by merchant builders, the absorption of these previously sold lots is key to the Company's future success in selling future residential lots. The master-planned community of Valencia continues to outperform the Santa Clarita Valley in home sale activity and, according to an independent research group, new homes in Valencia captured 55% of the market in the Santa Clarita Valley for the third quarter, a record high for the community. In addition, Valencia new home sales during the last four quarters were the best in five years. 11 Part I. Financial Information 11. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Joint Venture Program The Company is increasing its absorption and profit per acre from its strategy of participating in homebuilding in Valencia through joint ventures. Through these development partnerships, the Company recognizes homebuilding revenues and costs upon close of escrow to homebuyers. The Company recognized $8.5 million in revenues and $1.0 million in income in the third quarter of 1995 from 42 escrow closings in three joint-venture projects - Montana, CourtHomes and Traditions. In the 1995 nine-month period, these three joint ventures generated $23.8 million in revenues and $2.9 million in income for the Company from a total of 147 escrow closings. The prior year third quarter included 10 escrow closings from the Traditions project generating $3.4 million in revenues and $475,000 in income. Results for the 1994 nine-months included $8.5 million in revenues and $1.2 million in income from 25 closings in the Traditions project. The Company expects to establish additional joint-venture arrangements for residential projects in Valencia and has completed agreements for three more joint ventures, bringing total projects in the joint-venture program to six: * Rose Arbor, consisting of 102 condominiums, opened at the end of September and is offering the most affordable homes in Valencia at prices ranging from $102,500 to $127,500. This is the Company's second joint venture with RGC. * Models at Avalon Homes opened in August and will consist of 60 single-family homes in Valencia Northbridge. This joint venture is with EPAC Communities, Inc. and follows the success of the first two EPAC projects - Montana and Traditions. * A sixth joint-venture agreement has been finalized for 44 single-family homes. This project with Braemar Homes will close out the remaining Valencia Northbridge development. At September 30, 1995, a total of 54 homes in the Company's joint-venture projects were in escrow with closings scheduled for the fourth quarter and 12 completed, unsold homes were included in the Company's residential land under development inventories. It is anticipated that about one-half home sales in Valencia over the next few years will be through the Company's joint-venture program. MC DOWELL MOUNTAIN RANCH In the 1995 third quarter, escrows closed on 106 residential lots at the Company's planned community in Scottsdale, Arizona contributing $3.2 million to revenues and $1.1 million to income. No residential lot sales were recorded in the 1994 third quarter. For the 1995 nine-month period, sales of 146 residential lots added $4.5 million to revenues and $1.6 million to income. In addition, finalization of a merchant builder lot premium participation combined with deferred revenues recognized added $1.0 million to income. Results for the 1994 nine-month period included the sale of a high margin, 79-acre bulk parcel for 105 unimproved lots outside 12 Part I. Financial Information 12. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) the planned community which contributed $3.6 million to revenues and $1.7 million to income. Expenses in 1995 compared to 1994 increased $387,000 for the third quarter and $1.2 million for the nine months primarily for ad valorem property taxes and marketing expenses. Nine merchant builders are now active in the community and, as of September 30, 1995, a total of 855 residential lots have been sold since the Company began marketing residential lots for sale at McDowell Mountain Ranch in 1994, including a bulk parcel for 105 unimproved lots outside the planned community. The Company closed escrow on an additional 368 lots for multi-family homes in October and almost 300 lots are in escrow to merchant builders with closings anticipated in the fourth quarter. The ability to close these sales will be dependent upon market conditions. INDUSTRIAL AND OTHER SALES During the 1995 third quarter, the Company completed the sale of the ITT build-to-suit on 10 acres in Valencia Commerce Center and two small commercial parcels. These sales, combined with deferred income recognition from sales in prior quarters, added $10.5 million to revenues and $2.7 million to income. Results for the 1995 nine-month period also include the sale of Bouquet Shopping Center for $17.9 million adding $11.0 million to income and escrow closings on 15.9 commercial acres and a 1.1-acre industrial parcel which combined generated $7.2 million in revenues and $3.7 million in income. The prior year third quarter results included sales of three commercial parcels totaling 5.6 acres for $5.4 million contributing $3.3 million to income. In addition to the sale of a 1.3-acre commercial parcel for $925,000 contributing $624,000 to income, the 1994 nine-month period also included a $393,000 non-refundable deposit which was forfeited and taken into income. Vacancy rates in Valencia Industrial Center continue to decline and, at 4.7%, are well below the Los Angeles area rate of 9.7% at the end of September. These factors have contributed to greater interest in industrial acreage and the Company's build-to-suit program and increases in the absorption of industrial property is expected over the next few years. At September 30, 1995, one industrial and two commercial parcels were in escrow with closings scheduled for later this year subject to market conditions. COMMUNITY DEVELOPMENT The Company is focusing its community development activities 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. Expenses in the current quarter are approximately the same as the prior year quarter. The 1995 nine-month period benefited from an expense recovery associated with a lawsuit settlement with expenses increasing 14% from the comparable prior year period. For the year 1995, community development expenses are expected to increase compared to 1994 due to an intensified strategic marketing program to support the Company's plans for more rapid development of its remaining properties in Valencia. This activity, combined with the expense recovery, is expected to result in total community development expenses in 1995 comparable to 1994. 13 Part I. Financial Information 13. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) COMMERCIAL OPERATIONS Commercial operations include the Company's portfolio of income-producing properties and Valencia Water Company, a wholly-owned public water utility. Revenues and income from the Company's energy operations, previously reported as part of Commercial Operations, are being reported with Agricultural Operations. Prior periods' amounts have been reclassified to conform to the current year presentation. Revenues and income from the Company's portfolio of income-producing properties were substantially the same in the current year third quarter as in the prior year. For the third quarter comparisons, higher occupancy and percentage rents at Valencia Town Center, the Company's regional shopping mall, offset decreases in revenues and income due to sale of the Bouquet Shopping Center in June, 1995. For the nine-month period, revenues and income increased respectively by 8% and 15% from the prior year even with the sale of the Bouquet Shopping Center in June and the ITT build-to-suit facility in August. Increases from higher occupancy rates were reflected in all segments of the portfolio - retail, office and apartments. Also contributing to the increases are higher percentage rents at Valencia Town Center, the Company's regional shopping mall, and River Oak Shopping Center as well as rent increases averaging 3% at the Company's three apartment complexes. Increases in revenues and income from Valencia Water Company for the three and nine-month periods are primarily attributable to a general rate increase effective January 1, 1995 and a $785,000 disaster recovery surcharge beginning October 1, 1994 for a 22-month period which were approved by the Public Utilities Commission. This contributed to increases in revenues and income from commercial operations of 11% and 14% for the third quarter and 13% and 19% for the nine-month period. AGRICULTURAL OPERATIONS Reduced activity because of previously sold farmland contributed to decreases in revenues and income from agricultural operations from the prior year three and nine-month periods. Also impacting the comparisons are a prior year harvest of avocados with favorable prices and yields, an early harvest of lemons and a lease termination payment in the current year by the Company's energy operations. RANCH SALES Sale of 5,501 acres at the Merced Ranch in September, 1995 for $7.4 million contributed $4.6 million to income. The remaining parcels at the Merced Ranch, totaling 3,940 acres, are under a 2-year lease and option to purchase agreement with the purchaser. The sale of the 5,370-acre Meridian Ranch for $11.8 million contributed $9.2 million to income in the 1994 nine-month period. EARTHQUAKE DAMAGE A $3.7 million charge for damages not covered by insurance from the January 17, 1994 earthquake is included in the 1994 nine-month results. 14 Part I. Financial Information 14. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) GENERAL AND ADMINISTRATIVE EXPENSE Timing of expenditures for professional services fees and a reduction in a liability insurance premium contributed to a 12% decrease in general and administrative expenses from the prior year third quarter. However, these decreases were more than offset in the nine-month period by reduced recoveries for tax accounting and transfer agent fees billed to outside partnerships, timing of other consulting services and accrued incentive compensation based on the Company's increased earnings, resulting in a 8% increase in the 1995 nine-month period compared to last year. INTEREST AND OTHER, NET A principal reduction on a mortgage financing in conjunction with the sale of Bouquet Shopping Center in June, 1995 and principal paydowns on a land acquisition note as parcels are sold at McDowell Mountain Ranch are the main contributors to a 3% decrease from the prior year third quarter. A 3% increase for the nine-month period is due to interest expense on an $11 million financing for Valencia Water Company in July 1994 partially offset by reduced interest expense for principal reductions on financings mentioned above. OUTLOOK The Company has established 5-year average annual earnings growth targets of more than 30% and expects to exceed that goal for the full year ending December 31, 1995. This assumes present business trends continue for the balance of the year and planned property and joint venture home sales are completed. These goals are based on current operating trends the Company is experiencing and improving economic conditions. Achievement of these goals also depends on the success of intensified strategies related to government approvals of development plans (entitlements), the rate of land sales (absorption) and financial contribution from commercial income properties both from increasing rents and sales of properties. As always, the Company's ability to close sales in escrow as well as to complete the sale of additional properties currently being marketed, is subject to future market and other conditions beyond the control of the Company. 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 third quarter ended September 30, 1995. 15 15. 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 3, 1995 By /S/ THOMAS L. LEE ----------------------------------- Thomas L. Lee, Chairman and Chief Executive Officer of Newhall Management Corporation (Principal Executive Officer) Date: November 3, 1995 By /S/ STUART R. MORK ----------------------------------- Stuart R. Mork, Vice President and Chief Financial Officer of Newhall Management Corporation (Principal Financial Officer) Date: November 3, 1995 By /S/ DONALD L. KIMBALL ----------------------------------- Donald L. Kimball, Vice President - Controller of Newhall Management Corporation (Principal Accounting Officer) EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1995 SEP-30-1995 5,419 0 16,730 1,335 101,572 0 275,608 (58,198) 352,817 0 157,324 0 0 0 111,909 352,817 110,765 110,765 77,215 91,978 0 0 8,093 18,787 0 18,787 0 0 0 18,787 0.52 0.52
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