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**UNITED STATES****SECURITIES AND EXCHANGECOMMISSION****Washington, D.C. 20549**

**FORM 10 - Q**
| **ý** | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|----------------------------------------------------------------------------------------------|

**For the quarterly period ended June 30,2001**

or
| **o** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|-----------------------------------------------------------------------------------------------|

 

**For the transition period from__________to________**

**Commission file number 1-8885**

**THE NEWHALL LAND AND FARMING COMPANY****(a California Limited Partnership)**(Exact name ofRegistrant as specified in its charter)

| **California**                                                  | **95-3931727**                        |
|-----------------------------------------------------------------|---------------------------------------|
| (State  or other jurisdiction of incorporation or organization) | (I.R.S.  Employer Identification No.) |

 

| **23823 Valencia Boulevard,  Valencia, CA** | **91355**   |
|---------------------------------------------|-------------|
| (Address  of principal executive offices)   | (Zip  Code) |

 

| **(661) 255-4000**                                    |
|-------------------------------------------------------|
| (Registrant's  telephone number, including area code) |

Indicate by check mark whether the Registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the Registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes ýNoo

AtJune 30, 2001, 24,769,575 partnership units were outstanding

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Part I. Financial InformationItem1.  Financial Statements

**Condensed Consolidated Statementsof Income***(Unaudited)*

| *(in thousands except per unit)*                    | Three Months Ended  June 30, |   | Six Months Ended  June 30, |   |
|-----------------------------------------------------|-----------------------------------|--------|---------------------------------|--------|
|                                                |                                   |   |                                 |   |
|                                                | 2001                              |   | 2000                            |   | 2001 |   | 2000 |   |
|                                                |                                   |   |                                 |   |  |   |  |   |
| **Revenues**                                        |                              |   |                            |   |   |   |   |   |
|                                                |                              |   |                            |   |   |   |   |   |
| Real estate                                         |                              |   |                            |   |   |   |   |   |
|                                                | Residential home and land  sales  | $      | 73                              |   | $ | 10,568 |   | $ | 179 |   | $ | 18,956 |   |
|                                                | Industrial and commercial  sales  | 89,337 |                            | 25,748 |   | 97,712 |   | 28,333 |   |
|                                                | Commercial operations             |   |                            |   |   |   |   |   |   |
|                                                | Income-producing properties       | 11,088 |                            | 14,627 |   | 21,977 |   | 28,954 |   |
|                                                | Valencia Water Company            | 3,076  |                            | 2,982  |   | 5,532 |   | 5,393 |   |
|                                                |                              |        |                            |        |   |  |   |  |   |
|                                                | 103,574                           |   | 53,925                          |   | 125,400 |   | 81,636 |   |
|                                                |                                   |   |                                 |   |  |   |  |   |
| Agriculture Operations                              | 1,603                             |   | 1,394                           |   | 2,311 |   | 2,047 |   |
|                                                |                                   |   |                                 |   |  |   |  |   |
|                                                | Total revenues                    | $      | 105,177                         |   | $ | 55,319 |   | $ | 127,711 |   | $ | 83,683 |   |
|                                                |                                   |   |                                 |   |  |   |  |   |
| **Contribution to income**                          |                              |   |                            |   |   |   |   |   |
|                                                |                              |   |                            |   |   |   |   |   |
| Real estate                                         |                              |   |                            |   |   |   |   |   |
|                                                | Residential home and land  sales  | $      | (1,032                          | )      | $ | 3,570 |   | $ | (1,763 | ) | $ | 6,348 |   |
|                                                | Industrial and commercial  sales  | 82,794 |                            | 4,670  |   | 84,918 |   | 4,869 |   |
|                                                | Community development             | (4,147 | )                               | (2,417 | ) | (5,763 | ) | (4,437 | ) |
|                                                | Commercial operations             |   |                            |   |   |   |   |   |   |
|                                                | Income-producing properties       | 3,150  |                            | 6,150  |   | 7,401 |   | 13,047 |   |
|                                                | Valencia Water Company            | 528    |                            | 640    |   | 1,012 |   | 1,239 |   |
|                                                |                              |        |                            |        |   |  |   |  |   |
|                                                | 81,293                            |   | 12,613                          |   | 85,805 |   | 21,066 |   |
|                                                |                                   |   |                                 |   |  |   |  |   |
| Agriculture Operations                              | 207                               |   | 310                             |   | 600 |   | 717 |   |
|                                                |                                   |   |                                 |   |  |   |  |   |
| Operating income                                    | 81,500                            |   | 12,923                          |   | 86,405 |   | 21,783 |   |
|                                                |                              |   |                            |   |   |   |   |   |
| General and administrative expense                  | (4,120                            | )      | (2,280                          | )      | (6,365 | ) | (4,523 | ) |
| Interest and other, net                             | (2,043                            | )      | (4,295                          | )      | (3,664 | ) | (7,715 | ) |
|                                                |                                   |   |                                 |   |  |   |  |   |
| Net income                                          | $                                 | 75,337 |                            | $      | 6,348 |   | $ | 76,376 |   | $ | 9,545 |   |
|                                                |                                   |   |                                 |   |  |   |  |   |
| Net income per unit                                 | $                                 | 2.94   |                            | $      | 0.23 |   | $ | 2.94 |   | $ | 0.34 |   |
|                                                |                                   |   |                                 |   |  |   |  |   |
| Net income per unit - diluted                       | $                                 | 2.91   |                            | $      | 0.22 |   | $ | 2.91 |   | $ | 0.33 |   |
|                                                |                                   |   |                                 |   |  |   |  |   |
| Number of units used in computing per unit amounts: |                              |   |                            |   |   |   |   |   |
|                                                | Net income per unit               | 25,588 |                            | 27,925 |   | 25,990 |   | 28,435 |   |
|                                                | Net income per unit - diluted     | 25,875 |                            | 28,289 |   | 26,256 |   | 28,799 |   |
|                                                |                              |   |                            |   |   |   |   |   |
| Cash distributions per unit:                        |                              |   |                            |   |   |   |   |   |
|                                                | Regular                           | $      | 0.10                            |   | $ | 0.10 |   | $ | 0.20 |   | $ | 0.20 |   |
|                                                | Special                           |   |                            |   |   | 0.10 |   | 0.35 |   |
|                                                     |                                   |        |                                 |        |  |  |  |  |  |  |  |  |  |  |

 

**Condensed Consolidated BalanceSheets***(in thousands)*

|                                   | June 30, 2001                                                                                  |    | December 31, 2000 |    |
|----------------------------------------|-----------------------------------------------------------------------------------------------------|---------|------------------------|---------|
|                                   |                                                                                                     |    |                        |    |
|                                   | *(Unaudited)*                                                                                       |    |                   |    |
| **ASSETS**                             |                                                                                                |    |                   |    |
|                                   |                                                                                                |    |                   |    |
|                                   | Cash and cash equivalents                                                                           | $       | 5,488                  |    | $ | 3,717 |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Accounts and notes receivable                                                                       | 6,755   |                   | 17,154  |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Land under development                                                                              | 74,056  |                   | 63,155  |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Land held for future  development                                                                   | 21,575  |                   | 22,419  |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Income-producing properties  held for sale, net                                                     | 8,642   |                   | 12,720  |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Income-producing properties,  net                                                                   | 150,182 |                   | 147,785 |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Property and equipment, net                                                                         | 71,291  |                   | 67,631  |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Investment in joint venture                                                                         | 716     |                   | 591     |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Other assets and deferred  charges                                                                  | 16,696  |                   | 16,536  |   |
|                                   |                                                                                                     |    |                        |    |
|                                   | $                                                                                                   | 355,401 |                   | $       | 351,708 |   |
|                                   |                                                                                                     |    |                        |    |
|                                   |                                                                                                |    |                   |    |
| **LIABILITIES AND PARTNERS'  CAPITAL** |                                                                                                |    |                   |    |
|                                   |                                                                                                |    |                   |    |
|                                   | Accounts payable                                                                                    | $       | 28,003                 |    | $ | 28,267 |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Accrued expenses                                                                                    | 57,662  |                   | 68,932  |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Deferred revenues                                                                                   | 2,282   |                   | 3,137   |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Mortgage and other debt                                                                             | 70,364  |                   | 74,557  |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Advances and contributions  from developers for utility construction                                | 33,460  |                   | 32,166  |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | Other liabilities                                                                                   | 25,157  |                   | 25,445  |   |
|                                   |                                                                                                     |    |                        |    |
|                                   | Total liabilities                                                                                   | 216,928 |                   | 232,504 |   |
|                                   |                                                                                                |    |                   |    |
|                                   | Partners' capital                                                                                   |    |                   |    |   |
|                                   |                                                                                                |    |                   |    |   |
|                                   | 24,770 units outstanding,  excluding 12,003 units in treasury (cost-$291,308), at June 30, 2001 and |    |              |    |     |
|                                   | 26,590 units outstanding,  excluding 10,182 units in treasury (cost-$242,098), at December 31, 2000 | 138,473 |              | 119,204 |     |
|                                   |                                                                                                     |    |                        |    |
|                                   | $                                                                                                   | 355,401 |                   | $       | 351,708 |   |
|                                   |                                                                                                     |    |                        |    |
|                                        |                                                                                                     |         |                        |         |  |  |  |  |

 
**Condensed Consolidated Statementsof Cash Flow***(Unaudited)*
*(in thousands)*Six Months Ended  June 30,    2001 2000    **CASH FLOWS FROM OPERATING  ACTIVITIES:**          Net income$76,376 $9,545       Adjustments to reconcile net  income to net cash provided by operating activities:          Depreciation and amortization5,865 4,968  Increase in land under development(26,645)(34,640) Cost of sales and other  inventory changes6,577 17,775  Decrease in accounts and notes  receivable10,399 25,223  Decrease in accounts payable,  accrued expenses and deferred revenues(3,222)(3,269) Cost of property sold1,235 14,669  Other adjustments, net(112)(915)    Net cash provided by operating  activities70,473 33,356         **CASH FLOWS FROM INVESTING  ACTIVITIES:**          Development of  income-producing properties(3,179)(13,075) Purchase of property and  equipment(5,472)(5,320) Investment in joint venture(125)(388)    Net cash used in investing  activities(8,776)(18,783)   **CASH FLOWS FROM FINANCING  ACTIVITIES:**          Distributions paid(7,817)(15,818) (Decrease) increase in  mortgage and other debt(4,193)68,133  Increase in advances and  contributions from developers for utility construction1,294 4,755  Purchase of partnership units(52,064)(71,767) Issuance of partnership units2,854 1,383      Net cash used in financing  activities(59,926)(13,314)        **Net increase in cash and cash  equivalents**1,771 1,259      **Cash and cash equivalents,  beginning of period**3,717 1,624     **Cash and cash equivalents, end  of period**$5,488 $2,883    
Notesto Condensed Consolidated Financial Statements

Note1. Accounting Policies

The consolidated financial statements include the accounts of TheNewhall Land and Farming Company and its subsidiaries, all of which arewholly-owned (collectively, "the Company"). All significantintercompany balances and transactions are eliminated.

The Company's unaudited interim financialstatements have been prepared in conformity with generally accepted accountingprinciples used in the preparation of the Company's annual financialstatements. In the opinion of the Company, all adjustments necessary for a fairstatement of the results of operations for the three and six months ended June30, 2001 and 2000 have been made. The interim statements are condensed and donot include some of the information necessary for a more complete understandingof the financial data. Accordingly, your attention is directed to the footnotedisclosures found on pages 26 through 38 of the December 31, 2000 Annual Reportto Partners and particularly to Note 2 therein which includes a summary ofsignificant accounting policies. Certain reclassifications have been made to prior periods’ amounts toconform to the current period presentation.

Interim financial information for the Company has substantiallimitations as an indicator for the calendar year because:
•Land sales occur  irregularly and are recognized at the close of escrow or on the percentage of  completion basis if the Company has an obligation to complete certain future  improvements and provided profit recognition criteria are met.•Sales of income properties  and non-developable farmland occur irregularly and are recognized upon close  of escrow provided profit recognition criteria are met.
Note2. Details of Land Under Development
(In $000)June 30,  2001 December  31,  2000    Valencia     Residential development$41,137 $25,154  Industrial and commercial land development31,359 37,689 Agriculture1,560 312     Total land under development$74,056 $63,155    
Note 3. Details forEarnings per Unit Calculation
 Income Units Per  Unit (In  000's except per unit)(numerator) (denominator)       For  three months ended June 30, 2001      Net  income per unit       Net  income available to unitholders$75,337 25,588 $2.94 Effect  of dilutive securities       Unit options- 287 (.03)    Net  income per unit - diluted$75,337 25,875 $2.91     
 
 Income Units Per Unit (In  000's except per unit)(numerator) (denominator)       For  three months ended June 30, 2000      Net  income per unit       Net  income available to unitholders$6,348 27,925 $.23 Effect  of dilutive securities       Unit  options- 364 (.01)     Net  income per unit - diluted$6,348 28,289 $.22            For  six months ended June 30, 2001      Net  income per unit       Net  income available to unitholders$76,376 25,990 $2.94 Effect  of dilutive securities       Unit  options- 266 (.03)     Net  income per unit - diluted$76,376 26,256 $2.91            For  six months ended June 30, 2000      Net  income per unit       Net  income available to unitholders$9,545 28,435 $.34 Effect  of dilutive securities       Unit  options- 364 (.01)     Net  income per unit - diluted$9,545 28,799 $.33     
 

Note4. Details of Income-Producing Properties, Income Producing Properties Held forSale and Property and Equipment
 June 30, December  31, (In $000s)2001 2000    Income-producing properties     Land$37,377 $34,822  Buildings137,601 106,916  Other4,529 10,468  Properties under development4,775 25,780     184,282 177,986  Accumulated depreciation(34,100)(30,201)    $150,182 $147,785         Income-producing properties held for sale     Office$11,684 $8,503  Other- 7,311      11,684 15,814  Accumulated depreciation(3,042)(3,094)     $8,642 $12,720    
 
 June 30, December  31, (In $000s)2001 1999    Property and equipment     Land$3,759 $3,759  Buildings5,974 5,974  Equipment9,776 9,470  Water supply systems, orchards and other86,331 81,620  Construction in progress5,530 5,545      111,370 106,368 Accumulated depreciation(40,079)(38,737)   $71,291 $67,631    
Note 5.  Business Segment ReportingThe following table provides financial information regarding revenues fromexternal customers, income and total assets for the Company's business segmentsand also provides a reconciliation to the Company's consolidated totals:
 *Three months ended June 30, 2001*  **  Contribution (In  $000s)Revenues to Income Assets     Real  Estate       Residential$73 $(789)$35,156  Industrial and  commercial89,337 83,416 45,527  Community development– (3,560)15,450  Income-producing  properties11,088 3,256 167,142  Valencia  Water Company3,076 697 70,086 Agriculture1,603 301 7,693 Central  administration– (2,416)14,347      $105,177 80,905 355,401 Interest and other,  net– (2,043)– All other– (3,525)–      $105,177 $75,337 $355,401     
 
 *Three months ended June 30, 2000*  **    Contribution   (In  $000s)Revenues to Income Assets     Real  Estate       Residential$10,568 $3,602 $30,237  Industrial and  commercial25,748 4,726 92,440  Community development– (2,372)11,851  Income-producing  properties14,627 6,160 280,271  Valencia  Water Company2,982 654 64,414 Agriculture1,394 317 7,505 Central  administration– (2,094)11,632      $55,319 10,993 498,350 Interest and other,  net– (4,295)– All other– (350)–      $55,319 $6,348 $498,350     
* *
 *Six months ended June 30, 2001*  **    Contribution   (In  $000s)Revenues to Income Assets     Real  Estate       Residential$179 $(1,515)$35,156  Industrial and  commercial97,712 85,552 45,527  Community development– (5,153)15,450  Income-producing  properties21,977 7,509 167,142  Valencia  Water Company5,532 1,184 70,086 Agriculture2,311 697 7,693 Central  administration– (4,634)14,347      $127,711 83,640 355,401 Interest and other,  net– (3,664)– All other– (3,600)–      $127,711 $76,376 $355,401     
 
 *Six months ended June 30, 2000*  **    Contribution   (In  $000s)Revenues to Income Assets     Real  Estate       Residential$18,956 $6,398 $30,237  Industrial and  commercial28,333 4,957 92,440  Community development– (4,366)11,851  Income-producing  properties28,954 13,063 280,271  Valencia  Water Company5,393 1,261 64,414 Agriculture2,047 728 7,505 Central  administration– (4,231)11,632      $83,683 17,810 498,350 Interest and other,  net– (7,715)– All other– (550)–      $83,683 $9,545 $498,350     
 

Item 2.  Management's Discussion and Analysis ofFinancial Condition and Results of Operations.

**Results of Operations**

Comparison of Second Quarter and Six Months of 2001 to  Second Quarter and Six Months of 2000*Unaudited*

The amounts of increase or decrease in revenuesand income from the prior year second quarter and six months are as follows (in000s, except per unit):
 Second Quarter Six Months     Increase (Decrease) Increase (Decrease)    Amount % Amount %      **Revenues**         Real Estate         Residential home and land  sales$(10,495)-99%$(18,777)-99% Industrial and commercial  sales63,589 247%69,379 245% Commercial operations         Income-producing properties(3,539)-24%(6,977)-24% Valencia Water Company94 3%139 3%       49,649 92%43,764 54% Agriculture         Operations209 15%264 13%     Total revenues$49,858 90%$44,028 53%     **Contribution to Income**         Real Estate         Residential home and land  sales$(4,602)-129%$(8,111)-128% Industrial and commercial  sales78,124 1673%80,049 1644% Community development(1,730)-72%(1,326)-30% Commercial operations         Income-producing properties(3,000)-49%(5,646)-43% Valencia Water Company(112)-18%(227)-18%      68,680 545%64,739 307% Agriculture         Operations(103)-33%(117)-16%      Operating income68,577 531%64,622 297%          General and administrative  expense(1,840)-81%(1,842)-41% Interest and other, net2,252 52%4,051 53%     Net income$68,989 1087%$66,831 700%     Net income per unit$2.71 1178%$2.60 765%     Net income per unit - diluted$2.69 1223%$2.58 782%     Number of units used in computing per unit amounts:        Net income per unit(2,337)-8%(2,445)-9%     Net income per unit - diluted(2,414)-9%(2,543)-9%     
The increasesand decreases in revenues and income for the three and six months areattributable to the following:

For the threemonths ended June 30, 2001, revenues totaled $105.2 million and net incometotaled $75.3 million compared to revenues for the 2000 second quarter of $55.3million and net income of $6.3 million. Revenues for the six months ended June 30, 2001 totaled $127.7 millionand net income totaled $76.4 million compared to the same 2000 period whenrevenues totaled $83.7 million and net income $9.5 million.

The primarycontributors to the 2001 second quarter and six-month results were the sales ofthe Company’s Chiquita Canyon Landfill, its option to purchase approximately1,800 acres in Broomfield, Colorado and a 7.9-acre commercial parcel for 341apartments with 10,000-square-feet of ground floor retail.  Combined, these sales added $88.1 million torevenues and $84.6 million to income.

The majorcontributors to the 2000 second quarter results were the sale of two incomeproperties as part of the Company’s strategic plan to finance its repurchaseprogram.  These two properties, CastaicShopping Center and Plaza del Rancho, contributed $18.8 million to revenues and$3.7 million to income.  Alsocontributing to the 2000 second quarter results were the sales of the last 78lots in the Bridgeport community and an 11.2-acre site for a Lowe’s HomeImprovement Warehouse.  These two salescombined added $11.1 million to revenues and $4.7 million to income underpercentage of completion accounting. The 2000 six-month period also included the first quarter sale of 130residential lots which added $4.4 million to revenues and $1.9 million toincome under percentage of completion accounting.

At June 30,2001, two commercial properties in the asset program were in escrow for a totalof $6.9 million and are expected to close in the 2001 third quarter.  About 15 acres of industrial land and 22acres of commercial land were in escrow at June 30, 2001 for approximately $26million, closings for which are expected to occur during the second half of theyear.  In addition, the Company isplanning to sell approximately 650 improved lots on about 97 net acres inValencia Westridge.  An additional 300lots on 40 net acres in the Company’s Altavista community may be sold in thefourth quarter of 2001, depending on results and timing of the Public UtilitiesCommission’s (PUC) decision discussed in the Residential Home and Land Salessection.  The ability to complete salesin 2001 will be dependent upon a variety of factors including, but not limitedto, identification of suitable buyers, agreement with the buyers on definitiveterms, successful completion of due diligence work by buyers, availability offinancing to suitable buyers, market and other conditions.  Due to the anticipated escrow closing dateson many of these sales, earnings in the 2001 third quarter are projected to benominal, or a loss could be reported.

**Residential Home and Land Sales**

No residential lots were sold during the2001 second quarter or six-month period and no residential lots were in escrowat June 30, 2001.  The Company has 4,195residential lots and apartment units being delayed by the PUC decision tocombine its review of Valencia Water Company’s request to expand its servicearea together with the water company’s water management plan.  The total includes 1,650 lots and apartmentsthat the City of Santa Clarita annexed in December 2000 and 2,545 lots andapartments in the Company’s West Creek Community approved in January 2001 bythe Los Angeles County Board of Supervisors. The Company expects the PUC’s decision later this year.  An adverse decision likely would delay thesale of these lots and apartments.

Opponents to the Los Angeles County Boardof Supervisors’ approval of the West Creek Community have filed a CaliforniaEnvironmental Quality Act (CEQA) lawsuit. A trial date of October 31, 2001 has been set by the court.  As with prior CEQA lawsuits, the results ofthese types of legal challenges are difficult to predict.  An adverse decision will likely delay thedevelopment of the community beyond the delay created by the PUC processpreviously mentioned.

New home sales in the Valencia area continuedstrong as merchant builders sold 448 homes on lots previously purchased fromthe Company for the six months ended June 30, 2001, compared to 154 homes forthe prior year six-month period.  AtJune 30, 2001, merchant builders had 369 homes in escrow, compared to 132 atJune 30, 2000.  While the Company doesnot participate directly in profits generated from escrow closings by merchantbuilders, the sale of these previously sold lots to homebuyers is key to theCompany’s future success in selling additional lots.In the quarter endedJune 30, 2000, the last 78 lots closed escrow in Bridgeport, the Company’s lakecommunity, adding $7.0 million to revenues and $3.2 million to income underpercentage of completion accounting.  Inaddition, revenues of $3.4 million and income of $1.4 million wererecognized  from previous lot sales inBridgeport under percentage of completion accounting.  The 2000 six-month period also included the sale of 130 lots inBridgeport which added $4.4 million to revenues and $1.9 million to income aswell as revenues of $3.9 million and income of $1.8 million from prior lotsales all accounted for under percentage of completion.**Industrial andCommercial Sales**
Industrial Land SalesNo industrial land sales closed escrow inthe quarter ended June 30, 2001. Results for the six months ended June 30, 2001 included the sale of a9.5-acre industrial parcel which contributed $4.7 million to revenues and $1.3million to income.  At June 30, 2001, a15-acre industrial parcel was in escrow for $7.3 million.  All escrow closings are subject to marketand other conditions beyond the control of the Company.

At June 30,2001, the combined vacancy rate in both Valencia Industrial Center and ValenciaCommerce Center was 6.5%, compared to 3.9% at the end of June 30, 2000.  Demand for industrial land appears to beslowing as evidenced by higher vacancy rates in Valencia industrial propertiesconstructed by third-party developers and lower sales and leasing of newindustrial space by both third-party developers and the Company.   For the six months ended June 30, 2001,sales and leasing of new industrial space totaled 155,747 square feet comparedto 271,247 square feet for the same period in 2000. The Company hasapproximately 360 acres of entitled industrial land remaining.  Planning continues on 500 acres west of I-5surrounding Six Flags Magic Mountain for mixed-use development.

Results forthe second quarter and six-month period of 2000 include two industrial parcelstotaling 4.2 acres which closed escrow for $2.3 million and contributed $0.7million to income.  At June 30, 2000, atotal of 41.6 acres was in escrow for $21.1 million.

Commercial Land SalesA 7.9-acre commercial parcel for a 341-unit apartment community with10,000-square-feet of ground floor retail space in Valencia Town Center closedescrow in the second quarter of 2001 contributing $10.1 million to revenues and$7.7 million to income.    At June 30,2001, five commercial parcels totaling 22 acres were in escrow forapproximately $19 million which includes a 9.6-acre parcel for a 208-unitapartment complex in the Altavista community and a 10.9-acre commercial parceladjacent to the Valencia Westridge Golf Course Community.  All escrow closings are subject to marketand other conditions beyond the control of the Company.

One commercialparcel totaling 11.2 acres closed escrow for $6.4 million and contributed $1.5million to income for the 2000 second quarter and six-month period underpercentage of completion accounting.  ALowe’s Home Improvement Warehouse will be constructed on the site.  At June 30, 2000, eight parcels totaling42.7 acres were in escrow for approximately $28 million.

Income Property andOther SalesIn the 2001 second quarter, the Company sold its Chiquita Canyon Landfill tothe landfill’s current operator, Republic Services of California, for $65million. The sale of the landfill settled the existing litigation between theCompany and Republic.  In addition, inthe 2001 second quarter, the Company sold its option to purchase approximately1,800 acres in Broomfield, Colorado for $13 million. The landfill sale andBroomfield option sale contributed $64 million and $12.9 million to income,respectively.

At the end of the 2001 second quarter,the Bank of America building and a small office building were in escrow forapproximately $6.9 million with closings expected in the third quarter.  In the 2001 first quarter, a35,310-square-foot building in Valencia Commerce Center was added to the assetsale program that is expected to be sold later this year.  The Company is no longer marketing for salethe Spectrum Club building, which was originally included in the Company’sasset sale program announced in 1999.During the 2000 first quarter, escrow closed on the first two retail propertiesin the Company’s asset sales program, Castaic Shopping Center and Plaza delRancho, adding $18.8 million to revenues and $3.7 million to income.  The sales were part of the Company’s plan tosell approximately one-half of its income portfolio to finance a unitrepurchase program.
For additional information on thecompleted and current unit repurchase programs, refer to the Liquidity andCapital Resources section of this discussion.

**Community Development**

Increases of72% for the three-month period and 30% for the six-month period in communitydevelopment expenses compared to the same 2000 periods are primarily due tohigher administrative expenses and entitlement expenses relating to Valenciaresidential, commercial and industrial properties.  Community development expenses for the year are expected toincrease about 30% from the 2000 level with the continued focus onentitlements, planning and community marketing to complete the projectedsellout of Valencia residential land by 2005 and begin the development ofNewhall Ranch.

On June 20,2001, the first public review meeting was held by the Los Angeles CountyRegional Planning Commission on the six issues in the Newhall Ranch project’sEnvironmental Impact Report that were identified in June 2000 by a Kern CountySuperior Court judge as requiring additional analysis.  A second public hearing occurred on July 16,2001 and additional hearings are scheduled for August 27, 2001 and September17, 2001.  Based on the current scheduleof meetings of the Los Angeles County Planning Commission, the Company does notexpect the six issues to be considered by the Board of Supervisors before thefourth quarter of 2001, which is expected to delay the Superior Court’s reviewof the issues until the spring of 2002 and will delay commencement ofdevelopment until 2004.  The length oftime that the public hearings and judicial process will take is difficult topredict, and circumstances beyond the Company’s control could further delayresolution of the issues.  In addition,an adverse decision by the County or Court and/or additional legal action couldfurther delay the start of development. If the judge rules in the Company’s favor, processing of the necessarydocumentation for tentative maps can begin for the first two villages inNewhall Ranch – River Village and Mesas East.

**Income-Producing Properties**

For the 2001second quarter, revenues and income decreased 24% and 49%, respectively, and,for the 2001 six-month period, revenues and income decreased 24% and 43%, respectively,from the same prior year periods primarily due to the prior sale of incomeproperties.  The percentage decline inincome for both periods was nearly twice the decline in revenues for the sameperiod.  This was primarily due to thesale of income properties and the recording of depreciation expense onproperties that were classified as held for sale and reclassified as held forinvestment as of June 30, 2001.

Income for thecurrent and prior year second quarters include the effects of the cessation ofdepreciation on Properties Held for Sale and Sold Properties of $120,000 and$1,327,000, respectively and for the current and prior six-month periods of$275,000 and $2,981,000, respectively.  These amounts include depreciation expense suspended on Valencia TownCenter regional mall and Entertainment Center, and Spectrum Club because theywere held for sale as of June 30, 2000. When these properties were reclassified as held for investment in the2000 fourth quarter for the mall and entertainment center, and in the 2001second quarter for Spectrum Club building, depreciation expense was recorded inamounts equal to the suspended depreciation during the entire period theproperties were held for sale.

Retainedproperties produced higher net operating income in both the second quarter andsix-month periods in 2001 versus the same periods in 2000 as shown on the chartbelow.  Increases in both periodsprimarily were due to higher occupancy levels at Valencia Town Center regionalmall and the Entertainment Center, which resulted in higher total rents.  In addition, both Hyatt Valencia Hotel andHilton Garden Inn reported improved occupancy levels and the Hyatt achievedincreased average room rates, which also contributed to higher net operatingincome.  Net operating income for 2001from the Company’s income portfolio, not including assets held for sale, isexpected to be approximately $21 million.

**Income-producing Properties**
***(Dollars in thousands)***    Net Operating IncomeThree Months Ended  June 30, Six Months Ended  June 30,  2001 2000 2001 2000      Retained Properties1$5,750 $4,692 $11,277 $9,366 Properties Held for  Sale2152 262 408 490 Sold Properties3100 3,192 1,024 7,171               Net Operating Income46,002 8,146 12,709 17,027 Admin/Depreciation(2,852)(1,996)(5,308)(3,980)     Total Contribution to  Income$3,150 $6,150 $7,401 $13,047     1Includes  NorthPark Village Square and River Oaks shopping centers, Valencia Town  Center regional mall and entertainment center, retail along Town Center  Drive, Hyatt Valencia and Valencia Hilton hotels, restaurants, leases, etc.2Includes  Bank of America building, a 35,310 sq. ft. building in Valencia Commerce  Center and a small office building.3Includes  Castaic Shopping Center, Plaza del Rancho, a 3-story office building, three  office buildings for Princess Cruises, and four apartment complexes sold in  2000, and the Chiquita Canyon Landfill sold in 2001.4Before  depreciation.  Maintenance expensed as  incurred.
Occupancy rates at the Company’s various income propertieswere as follows  at June 30, 2001 and2000:
**Occupancy Rates*:**June 30, 2001June 30, 2000 Valencia  Town Center Mall**94%93%Entertainment  Center***96%90%Valencia  Town Center Master Lease****56%N/ATown  Center Plaza100%75%NorthPark/River  Oaks Shopping Centers100%100%Hotels77%69%*Includes  signed lease space and leases to short-term tenants.**Includes  334,470 sq. ft. of leasable retail space and 8,400 sq. ft. of office space.***Includes  126,050 sq. ft. of leasable space.****Includes  50,000 sq. ft. of retail space from a 12-1/2 year lease-back agreement that  was part of the sale of four office buildings along Town Center Drive that  closed in early December 2000.
EdwardsTheaters Circuit, Inc., which filed for Chapter 11 bankruptcy in 2000, hasaffirmed the lease for its 10-screen theater in Valencia Entertainment Centerand has announced that the Valencia IMAX theater will be converted to showmainstream movies. All rents have been paid when due for this location.  Edwards rejected the lease for the original10-screen theater located in Valencia Town Center regional shopping mall effectiveas of June 25, 2001.  The Company isevaluating its alternatives for the 39,246 square feet of space. In July 2001,the Company submitted a claim for $2.0 million to the bankruptcy court forunpaid rent and charges through July 2001 and lost rent for the remaining leaseterm as limited by bankruptcy law. Resolution is expected from the bankruptcy court by the end of thisyear.**Valencia Water Company**
Valencia WaterCompany is a regulated utility and a wholly-owned subsidiary of the Companyserving over 22,000 metered connections. Revenues for the three- and six-month periods ended June 30, 2001 wereup slightly from the same periods in 2000. Income declined 18% for the same three- and six-month periods, primarilydue to higher administrative costs and expenses relating to various legalproceedings in which Valencia Water Company is involved.

**Agricultural Operations**

Revenues fromagriculture operations, including the Company’s energy operations, for thethree and six months ended June 30, 2001, were 15% and 13% higher,respectively, than the same periods in 2000 primarily due to strong oilprices.  The increases in oil priceswere offset by fluctuations in crop prices and higher administrative expensesresulting in decreases in income of 33% and 16% for the three and six monthsended June 30, 2001, respectively, compared to the same periods in 2000.

**General and Administrative Expense**

Increases in general and administrativeexpenses of 81% for the three-month period and 41% for the six-months period fromthe prior year same periods are primarily for expenses related to the increaseddifference between the exercise price of unit appreciation rights on employeenon-qualified options and the market price of partnership units, and higherincentive compensation expense accrued based on the timing of land and assetsales.  All oustanding appreciationrights expired in July 2001.  For all of2001, general and administrative expenses are expected to decrease about 15%from 2000 levels.

**Interest and Other**

Interest andother expense for the 2001 three-month and six month periods decreased 52% and53%, respectively, from the comparable prior year periods.  Interest expense in the 2000 three-andsix-month periods was greater than the 2001 periods primarily due to thecompany's strategy in 2000 of utilizing existing debt capacity to fund unitrepurchases until the sale of income properties were completed later thatyear.  Interest expense in 2001 for thetotal year is expected to be substantially lower than in the previous year dueto lower anticipated borrowings outstanding compared to 2000.

**Financial Condition**

**Liquidity and Capital Resources**At June 30,2001, the Company had cash and cash equivalents of $5.5 million and $166.5million available under bank lines, net of $17.5 million in letters ofcredit.  Borrowings outstanding totaled$10.0 million against a revolving mortgage facility.  No debt was outstanding against unsecured lines of credit. Inaddition, the Company had fixed rate debt totaling $60.4 million.  The Company believes it has adequate sourcesof cash from operations and debt capacity to finance future operations on botha short- and long-term basis and, combined with anticipated land and propertysales, to fund its unit repurchases. The Company ended the 2001 second quarter with a conservative debt toincome portfolio ratio of 26% which provides adequate debt capacity to fundoperations and complete the current repurchase program. At June 30, 2001, therewas no debt secured by raw land or land under development inventories inValencia.In May 2001, the Company completed the repurchase program authorized by theBoard of Directors in September 1999 of up to 6,384,446 units (including884,446 units under a previous authorization), equal to approximately 20% ofthe then outstanding units. The total cost of the unit repurchases under the1999 authorization was $167.3 million. A total of 1,484,944 units from this authorization were repurchased in2001 for $38.6 million.  Also in May2001, the Company‘s Board of Directors authorized a new unit repurchase programof up to 2,520,000 units, or 10% of the then outstanding units.  As of June 30, 2001 a total of 470,146 unitshad been repurchased under the new program for a total cost of $13.5 million.The Company repurchases partnership units from time to time at prevailingprices through open market or unsolicited negotiated transactions, depending onmarket conditions, and will be funded from cash flow generated from normalbusiness operations.  Numerous factorscould affect the Company’s ability to complete the repurchase programincluding, but not limited to, changing market conditions, rising interestrates, challenges to governmental approvals, and finding suitable buyers forcertain properties.
At June 30,2001, there were no material commitments for capital expenditures other thanapproximately $7.5 million for the completion of two office buildings that weresold in December 2000.  In addition,over $40 million is expected to be invested in major roads and freewayimprovements in 2001 to enable the Company to continue its land sales programfor Valencia.

*The following discussion relates to principal items inthe Consolidated Statements of Cash Flow*:

**Operating Activities**Net cash used byoperating activities totaled $70.5 million for the first six months of2001.  Cash generated from operatingactivities included the sale of 21.5 industrial/commercial acres; the incomeproperty portfolio; sale of the Chiquita Canyon Landfill; the sale of an optionon 1800 acres in Broomfield, Colorado; and the collection of a $9.4 millionland sale note, which combined generated a total of $105.9 million. Cash usedby operating activities included primarily $26.6 million of expenditures forland under development inventories mostly related to land preparation andinfrastructure improvements to ready land for sale. Additional uses of cashincluded the Company’s general and administrative expenses and interestexpense.

**Investing Activities**Expenditures fordevelopment of income-producing properties totaled $3.2 million and wereprimarily for two office buildings that were sold in December 2000.  Purchase of property and equipment wasprimarily for water utility construction.

**Financing Activities**Quarterlydistributions totaling $7.8 million have been paid year-to-date consisting oftwo quarterly distributions of $.10 per unit each and a $.10 per unit specialdistribution.  An additional $.10 perunit distribution was declared on July 18, 2001 payable September 10, 2001 tounitholders of record August 3, 2001.  The Company’s policy is to provide sufficient distributions, includingspecial distributions, to pay the taxes associated with Company earnings. Thedeclaration of distributions, and the amount declared, are determined by theBoard of Directors on a quarterly basis taking into account the Company’searnings, financial condition and prospects.

For thesix-month period ended June 30, 2001, a total of 1,955,090 units wererepurchased for $52.1 million, or  anaverage price of $26.63 per unit.

**New Accounting Pronouncements**

In June 2001,The Financial Accounting Standards Board issued two new pronouncements:Statement of Financial Accounting Standards No. 141 (SFAS No. 141), *Business Combinations,* effective forbusiness combinations initiated after June 30, 2001, and Statement of FinancialAccounting Standards No. 142 (SFAS No. 142), *Goodwilland Other Intangible Assets,*effective for fiscal years beginningafter December 15, 2001.  Thesepronouncements are not expected to have a material impact on the Company’sfinancial position or results of operations.

**Inflation, Risks And Related Factors AffectingForward-Looking Information**Except for historical matters, the matters discussed in this report areforward-looking statements that involve risks and uncertainties.  We have tried, wherever practical, toidentify these forward-looking statements by using words like “anticipate,”believe,” “estimate,” “project,” “expect,” and similar expressions.  Forward-looking statements include, but arenot limited to, statements about plans; opportunities; negotiations; market andeconomic conditions; development, construction, and sales activities; andavailability of financing.

We caution you not to place unduereliance on these forward-looking statements, which reflect our current beliefsand are based on information currently available to us.  We do not undertake any obligation topublicly revise these forward-looking statements to reflect future events orchanges in circumstances.

These forward-looking statements aresubject to risks and uncertainties that could cause our actual results,performance, or achievements to differ from those expressed in or implied bythese statements.  In particular, amongthe factors that could cause actual results to differ materially are:*Sales of Real Estate: The majority of the Company’s revenues isgenerated by its real estate operations. The ability of the Company toconsummate sales of real estate is dependent on various factors including, butnot limited to, availability of financing to the buyer, agreement with buyerson definitive terms, regulatory and legal issues and successful completion ofthe buyer’s due diligence. The fact that a real estate transaction has enteredescrow does not necessarily mean that the transaction ultimately will close.Therefore, the timing of sales may differ from that anticipated by the Company.The inability to close sales as anticipated could adversely impact therecognition of revenue in any specific period.
*Economic Conditions:*Real estate development is significantly impacted by general and local economicconditions, which are beyond the control of the Company. The Company’s realestate operations are concentrated in Southern California. The regional economyis profoundly affected by the entertainment, technology, defense and certainother segments. Consequently, all sectors of real estate development for theCompany tend to be cyclical. While the economy of Southern California continuesto be strong, there can be no assurances that present trends will continue.

*Inflation*:The Company believes it is well positioned against the effects of inflation.Historically, during periods of inflation, the Company has been able toincrease selling prices of properties to offset rising costs of landdevelopment and construction. Recently, land values have been increasing at afaster rate than costs. However, there are no assurances that this trend willcontinue. A portion of the commercial income portfolio is protected frominflation since percentage rent clauses and Consumer Price Index increases inthe Company’s leases tend to adjust rental receipts for inflation, while theunderlying value of commercial properties has tended to rise over the longterm.

*Interest Rates and Financing*:Fluctuations in interest rates and the availability of financing have animportant impact on the Company’s performance. Sales of the Company’sproperties could be adversely impacted by the inability of buyers to obtainadequate financing. Further, the Company’s real estate development activitiesare dependent on the availability of adequate sources of capital. Certain ofthe Company’s credit facilities bear interest at variable rates and would benegatively impacted by increasing interest rates.

*Competition*:The sale and leasing of residential, industrial and commercial real estate ishighly competitive, with competition coming from numerous and varied sources.The degree of competition is affected by such factors as the supply of realestate available which is comparable to that sold and leased by the Company andthe level of demand for such real estate. Currently, the residential market inthe Santa Clarita Valley, including Valencia, is strong and has been capturingan increasing portion of Los Angeles County’s new home sales.  However, there is no assurance that thistrend will continue.  The industrialmarket in Valencia is experiencing declining demand and rising vacancy rates asthe national economy shows signs of slowing and concerns linger overCalifornia’s power crisis.  In addition,local competition has intensified as local business parks have opened or are inthe planning stages.

*Geographic Concentration*:The Company’s real estate development activities are focused on the 19,400acres that it owns in Los Angeles County. The Company’s entire commercialincome portfolio is located in the Valencia area. Therefore, any factorsaffecting that concentrated area, such as changes in the housing market,economic conditions and environmental factors, which cannot be predicted withcertainty, could affect future results.

*Exposureto Natural Occurrences:*The Company’s realestate development and sales activities may be affected by natural occurrencessuch as earthquakes and weather conditions that may impact progress of infrastructureconstruction and land development, and the pace of sales.*Government Regulation and Entitlement Risks: In developing itsprojects, the Company must obtain the approval of numerous governmentalauthorities regulating such matters as permitted land uses, density andtraffic, and the provision of utility services such as electricity, water andwaste 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 pursuedby the Company and increases the cost of development and ownership. The Companydevotes substantial financial and managerial resources to comply with theserequirements. To varying degrees, certain permits and approvals will berequired to complete the developments currently being undertaken or planned bythe Company. Furthermore, the timing, cost and scope of planned projects may besubject to legal challenges, particularly large projects with regional impacts.(See following “Litigation” discussion.) In addition, the continuedeffectiveness of permits already granted is subject to factors such as changesin policies, rules and regulations and their interpretation and application.The ability to obtain necessary approvals and permits for its projects can bebeyond the Company’s control and could restrict or prevent development ofotherwise desirable new properties. The Company’s results of operations in anyperiod will be affected by the amount of entitled properties the Company has ininventory.
*Litigation*: The land use approval processes the Company mustfollow to ultimately develop its projects have become increasingly complex.Moreover, the statutes, regulations and ordinances governing the approvalprocesses provide third parties the opportunity to challenge the proposed plansand approvals. As a result, the prospect of, and actual, third-party challengesto planned real estate developments have provided additional uncertainties inreal estate development planning and entitlements. Third-party challenges inthe form of litigation will, by its nature, adversely affect the length of timerequired to obtain the necessary approvals. In addition, adverse decisionsarising from any litigation increase the costs and may adversely affect thedesign, scope, plans and profitability of a project.

Item 3.  Quantitative and Qualitative Disclosures aboutMarket Risk.

The Company is exposed to market riskprimarily due to fluctuations in interest rates.  The Company utilizes both fixed rate and variable rate debt.  At June 30, 2001, the Company had $10.0million of variable debt outstanding with an interest rate of 5.25% and $60.3million of fixed rate debt with interest rates ranging from 7.33% to 8.45%.

The table below presents principal cashflows and related weighted average interest rates of the Company's long-termfixed rate and variable rate debt at of June 30, 2001 by expected maturitydates:
 Expected Maturity Date              Fair *(In $000s)*2001 2002 2003 2004 2005 Thereafter Total Value                           Mortgage and  Other Debt                 Fixed Rate  Debt$1,167 $1,479 $10,968 $1,512 $1,655 $43,583 $60,364 $60,364  Weighted  Average Interest Rate7.59%7.55%8.32%7.35%7.37%7.55%7.68%                                     Variable  Rate Debt (1)  $10,000         $10,000 $10,000  Weighted  Average Interest Rate  5.25%        5.25%                    (1)The  Company has a $50 million revolving mortgage facility which bears interest at  LIBOR plus 1.25% against which no borrowings were outstanding at June 30,  2001.  The Company also has unsecured  lines of credit consisting of a $130 million line and a $10 million line on  which the interest rate is LIBOR plus 1.25% - 1.45% and a $2 million line on  which the rate is LIBOR plus 1.35%, against which borrowings of $10.0  million, 0 and 0 were outstanding, respectively, at June 30, 2001.  The amounts set forth in the table above  assume that the outstanding amounts under variable rate credit facilities  will be repaid at the facilities’ respective maturity dates.  Management believes that these lines will  be renewed at maturity.
There is inherent rollover risk forborrowings as they mature and are renewed at current market rates. The extentof this risk is not quantifiable or predictable because of the variability offuture interest rates and the Company's future financing requirements. TheCompany manages its interest rate risk by maintaining a conservative ratio offixed rate, long-term debt to total debt in order to maintain variable rateexposure at an acceptable level and by taking advantage of favorable marketconditions for long-term debt.  Inaddition, the Company’s guideline for total debt is not to exceed 60% of theappraised value of the income portfolio.Part II .  Other Information
Item 1.  Legal Proceedings.

Please refer to “Residential Home andLand Sales” and “Community Development” under Part I, Item 2. – “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”.

Item 6. Exhibits andReports on Form 8-K(a)         Exhibits(listed by numbers corresponding to the Exhibit Table of Item 601 in RegulationS-K):
10  (a)Amendment  No. 5 to The Newhall Land and Farming Company Retirement Plan (Restatement  Effective January 1, 1989)  10  (b)Amendment  No. 4 to The Newhall Land and Farming Company Employee Savings Plan
(b)        Thefollowing reports on Form 8-K were filed in the second quarter ended June 30,2001.
Item  ReportedDate  of ReportA  news release issued by the Company on June 21, 2001 announcing the sale of  its Chiquita Canyon Landfill for $65 million cash.June 21, 2001  
SIGNATURES

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

THENEWHALL LAND AND FARMING COMPANY (a California Limited Partnership) Registrant

ByNewhall Management Limited Partnership, Managing General Partner

ByNewhall Management Corporation, Managing General Partner
Date: August 2, 2001By/ S / GARY M. CUSUMANO      Gary M. Cusumano, President and Chief  Executive Officer   of Newhall Management Corporation  (Principal Executive Officer)     Date: August 2, 2001By/ S / STUART R. MORK      Stuart R. Mork,   Senior Vice President and Chief Financial Officer   of Newhall Management Corporation   (Principal Financial Officer)         Date: August 2, 2001By/ S / DONALD L. KIMBALL      Donald L. Kimball,   Vice President - Finance and Controller   of Newhall Management Corporation   (Principal Accounting Officer)     
 

THE NEWHALL LAND AND FARMING COMPANY

INDEX TO EXHIBITS

ExhibitNumber             Description
10  (a)Amendment  No. 5 to The Newhall Land and Farming Company Retirement Plan (Restatement  Effective January 1, 1989)  10  (b)Amendment  No. 4 to The Newhall Land and Farming Company Employee Savings Plan
 **