SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[ ] 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 1-10153
HOMEFED CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 33-0304982
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1903 Wright Place, Suite 220, Carlsbad, California 92008
(Address of principal executive offices) (Zip Code)
(760) 918-8200
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. On May 9, 2001, there were
56,807,826 outstanding shares of the Registrant's Common Stock, par value $.01
per share.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
HOMEFED CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 2001 and December 31, 2000
(Dollars in thousands, except par value)
March 31, December 31,
2001 2000
------------ ---------
(Unaudited)
ASSETS
Land and real estate held for development and sale $ 23,217 $ 22,979
Cash and cash equivalents 423 1,631
Deposits and other assets 241 208
---------- ---------
TOTAL $ 23,881 $ 24,818
========== =========
LIABILITIES
Note payable to Leucadia Financial Corporation $ 21,718 $ 21,474
Credit agreement with Leucadia Financial Corporation 500 -
Recreation center liability - 41
Accounts payable and accrued liabilities 1,153 1,516
---------- ---------
Total liabilities 23,371 23,031
---------- ---------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 12,458 12,208
---------- ---------
STOCKHOLDERS' DEFICIT
Common Stock, $.01 par value;
100,000,000 shares authorized;
56,807,826 shares outstanding 568 568
Additional paid-in capital 355,287 355,277
Deferred compensation pursuant to stock incentive plans (324) (351)
Accumulated deficit (367,479) (365,915)
---------- ---------
Total stockholders' deficit (11,948) (10,421)
---------- ---------
TOTAL $ 23,881 $ 24,818
========== =========
See notes to interim consolidated financial statements.
2
HOMEFED CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the three months ended March 31, 2001 and 2000
(In thousands, except per share amounts)
(Unaudited)
2001 2000
------- --------
REVENUES
Fee income from San Elijo Hills $ 168 $ 878
------- -------
EXPENSES
Interest expense relating to Leucadia Financial Corporation 635 614
General and administrative expenses 998 881
Management fees to Leucadia Financial Corporation 31 74
------- -------
1,664 1,569
------- -------
Loss from operations (1,496) (691)
Other income, net 187 75
------- -------
Loss before income taxes and minority interest (1,309) (616)
Income tax expense (5) (9)
------- -------
Loss before minority interest (1,314) (625)
Minority interest (250) (250)
------- -------
Net loss $(1,564) $ (875)
======= =======
Basic loss per common share $ (0.03) $ (0.02)
======= =======
Diluted loss per common share $ (0.03) $ (0.02)
======= =======
See notes to interim consolidated financial statements.
3
HOMEFED CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Deficit
For the three months ended March 31, 2001 and 2000
(Dollars in thousands, except par value)
(Unaudited)
Deferred
Common Compensation
Stock Additional Pursuant to Total
$.01 Par Paid-In Stock Incentive Accumulated Stockholders'
Value Capital Plans Deficit Deficit
--------- ----------- ---------------- ------------- ---------------
Balance, January 1, 2000 $566 $354,833 $(362,506) $(7,107)
Issuance of 250,000 shares of
Common Stock related to restricted
stock grants 2 186 $(188) -
Amortization of restricted stock grants 4 4
Net loss (875) (875)
---- -------- ----- -------- -------
Balance, March 31, 2000 $568 $355,019 $(184) $(363,381) $ (7,978)
==== ======== ===== ========= =======
Balance, January 1, 2001 $568 $355,277 $(351) $(365,915) $(10,421)
Amortization of restricted stock grants 15 15
Amortization related to stock options 22 22
Change in value of 1,000,000 stock options 10 (10) -
Net loss (1,564) (1,564)
---- -------- ------ --------- --------
Balance, March 31, 2001 $568 $355,287 $(324) $(367,479) $(11,948)
==== ======== ====== ========= ========
See notes to interim consolidated financial statements.
4
HOMEFED CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the three months ended March 31, 2001 and 2000
(In thousands)
(Unaudited)
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,564) $ (875)
Adjustments to reconcile net loss to net cash used for operating activities:
Minority interest 250 250
Amortization of deferred compensation pursuant to stock incentive plans 37 4
Amortization of debt discount on note payable to Leucadia Financial Corporation 244 219
Changes in operating assets and liabilities:
Land and real estate held for development and sale (238) (91)
Deposits and other assets (33) 35
Recreation center liability (41) (465)
Accounts payable and accrued liabilities (363) (380)
Decrease in restricted cash -- 453
------- -------
Net cash used for operating activities (1,708) (850)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit agreement with Leucadia Financial Corporation 500 --
------- -------
Net cash provided by financing activities 500 --
------- -------
Net decrease in cash and cash equivalents (1,208) (850)
Cash and cash equivalents, beginning of period 1,631 2,795
------- -------
Cash and cash equivalents, end of period $ 423 $ 1,945
======= =======
Supplemental disclosures of cash flow information:
Cash paid for interest (net of amounts capitalized) $ 391 $ 395
Cash paid for income taxes $ 4 $ 3
See notes to interim consolidated financial statements.
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HOMEFED CORPORATION AND SUBSIDIARIES
Notes To Interim Consolidated Financial Statements
1. The unaudited interim consolidated financial statements, which reflect all
adjustments (consisting only of normal recurring items) that management
believes are necessary to present fairly the results of interim operations
should be read in conjunction with the Notes to Consolidated Financial
Statements (including the Summary of Significant Accounting Policies)
included in the Company's audited consolidated financial statements for the
year ended December 31, 2000 which are included in the Company's Annual
Report filed on Form 10-K, as amended by Form 10-K/A, for such year (the
"2000 10-K"). Results of operations for interim periods are not necessarily
indicative of annual results of operations. The consolidated balance sheet
at December 31, 2000 was extracted from the Company's audited annual
consolidated financial statements and does not include all disclosures
required by generally accepted accounting principles for annual financial
statements.
2. The note payable to Leucadia Financial Corporation ("LFC") has a principal
amount of $26,462,000 and matures on December 31, 2004. Interest on the
note of approximately $391,000 and $395,000 was expensed and paid during
the three month periods ending March 31, 2001 and 2000, respectively.
Additionally, approximately $244,000 and $219,000 of debt discount on the
note was amortized as interest expense during the three month periods ended
March 31, 2001 and 2000, respectively.
3. In March 2001, the Company entered into a $3,000,000 line of credit
agreement with LFC. Loans outstanding under this line of credit bear
interest at 10% per annum. The line of credit matures in one year unless
renewed. As of March 31, 2001, $500,000 was outstanding under this
facility.
4. Basic and diluted loss per share of Common Stock was calculated by dividing
the net loss by the weighted average shares of Common Stock outstanding.
The number of shares used to calculate basic and diluted loss per Common
Share was 56,807,826 and 56,623,760 for the three month periods ended March
31, 2001 and 2000, respectively. The calculation of diluted loss per share
does not include common stock equivalents of 1,186,000 and 180,000 for the
three month periods ended March 31, 2001 and 2000, respectively, which are
antidilutive.
5. Pursuant to administrative services agreements, LFC provides administrative
services to the Company, including providing the services of one of the
Company's executive officers. Administrative fees paid to LFC were $31,000
and $74,000 for the three month periods ended March 31, 2001 and 2000,
respectively. This agreement will continue until December 31, 2001, unless
extended in writing by mutual agreement.
The Company's corporate office is in part of an office building subleased
from LFC's parent, Leucadia National Corporation ("Leucadia"), for a
monthly amount equal to its share of Leucadia's cost for such space and
furniture. In connection with these rentals, the Company expensed $58,000
and $47,000, respectively, for the three month periods ended March 31, 2001
and 2000, respectively.
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Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Interim Operations.
The following should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations contained in the
Company's 2000 10-K.
LIQUIDITY AND CAPITAL RESOURCES
For the three month periods ended March 31, 2001 and 2000, net cash was used for
operations, principally to fund interest and general and administrative
expenses. The Company's principal sources of funds are fee income earned from
the San Elijo Hills project, proceeds from the sale of real estate, its line of
credit from LFC and dividends or borrowings from its subsidiaries.
The Company expects that its cash on hand, together with the sources described
above will be sufficient to meet its cash flow needs for the foreseeable future.
If, at any time in the future, the Company's cash flow is insufficient to meet
its then current cash requirements, the Company could accelerate its
subsidiaries' sale of real estate projects held for development or seek to
borrow funds. However, because all of the Company's assets are pledged to LFC to
collateralize its $26,462,000 borrowing from LFC, it may be unable to obtain
financing at favorable rates from sources other than LFC.
In March 2001, the Company entered into a $3,000,000 line of credit agreement
with LFC. Loans outstanding under this line of credit bear interest at 10% per
annum. The line of credit matures in one year unless renewed. As of March 31,
2001, $500,000 was outstanding under this facility.
Under a development agreement, the Company is responsible for the overall
management of the San Elijo Hills project, including arranging financing,
coordinating marketing and sales, and acting as construction manager. The
development agreement provides that the Company will receive certain fees in
connection with the project. These fees consist of marketing, field overhead and
management service fees. These fees are based on a fixed percentage of gross
revenues of the project, less certain expenses allocated to the project, and are
expected to cover the Company's cost of providing services under the development
agreement. The Company also receives co-op marketing and advertising fees, which
are paid at the time builders sell homes, are generally based upon a fixed
percentage of the homes' selling price and are recorded as revenue when the home
is sold. During the three month period ended March 31, 2001, the Company earned
$168,000 for such fees, of which $105,000 was received. The development
agreement also provides for a success fee to the Company out of the project's
net cash flow, if any, as described below, up to a maximum amount. Whether the
success fee, if it is earned, will be paid to the Company prior to the
conclusion of the project will be at the discretion of the project owner.
To determine "net cash flow" for purposes of calculating the success fee, all
cash expenditures of the project will be deducted from total revenues of the
project. Examples of "expenditures" for these purposes include land development
costs, current period operating costs, and indebtedness, either collateralized
by the project (a maximum of $28,170,000 at March 31, 2001, which includes
interest), or owed by the project's owner to Leucadia ($51,099,000 at March 31,
2001) (collectively, "Indebtedness"). As a success fee, the Company is entitled
to receive payments out of net cash flow, if any, up to the aggregate amount of
the Indebtedness. The balance of the net cash flow, if any, will be paid to the
Company and the project owner in equal amounts. However, the amount of the
success fee cannot be more than 68% of net cash flow minus the amount of
Indebtedness. The Company believes that any success fee that it may receive will
be its principal source of revenue earned through its participation in the San
Elijo Hills project pursuant to the development agreement. There can be no
assurance, however, that the Company will receive any success fee at all for
this project.
As of March 31, 2001, the Company owed $26,462,000 principal amount to LFC. This
amount is payable on December 31, 2004 and bears interest at 6% per year. This
obligation is reflected in the consolidated balance sheet, net of discount, at
$21,718,000 as of March 31, 2001. During the three months ended March 31, 2001,
the Company paid LFC interest of $391,000.
7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Interim Operations, (continued).
RESULTS OF OPERATIONS
During the first quarter of 2001 and 2000, the Company recorded $168,000 and
$878,000, respectively of fee income from the San Elijo Hills project. The
decrease in 2001 relates to decreased sales of lots, partially offset by co-op
marketing and advertising fees, all related to the San Elijo Hills project.
Interest expense primarily reflects the interest due on indebtedness to LFC
($391,000 and $395,000 for the three month periods ended March 31, 2001 and
2000, respectively) and $244,000 and $219,000 for amortization of debt discount
related to the indebtedness due to LFC for the three month periods ended March
31, 2001 and 2000, respectively.
General and administrative expenses (primarily salaries in 2001 and marketing
costs in 2000) increased in 2001 as compared to 2000 due to increased salaries
expense.
Income tax expense for all periods presented principally relates to state
franchise taxes. The Company has not recognized income tax benefits for its
operating losses due to the uncertainty of sufficient future taxable income
which is required in order to record such tax benefits.
CAUTIONARY STATEMENT FOR FORWARD-LOOKING INFORMATION
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Interim Operations may contain forward-looking
statements. Such forward-looking statements are made pursuant to the safe-
harbor provisions of the Private Securities Litigation Reform Act of 1995. Such
statements may relate, but are not limited, to projections of revenues, income
or loss, capital expenditures, plans for growth and future operations,
competition and regulation as well as assumptions relating to the foregoing.
Forward-looking statements are inherently subject to risks and uncertainties,
many of which cannot be predicted or quantified. When used in Management's
Discussion and Analysis of Financial Condition and Results of Interim
Operations, the words "estimates", "expects", "anticipates", "believes",
"plans", "intends" and variations of such words and similar expressions are
intended to identify forward-looking statements that involve risks and
uncertainties. Future events and actual results could differ materially from
those set forth in, contemplated by or underlying the forward-looking
statements. The factors that could cause actual results to differ materially
from time to time in the Company's public filings, including changes in general
economic and market conditions, changes in domestic laws and government
regulations or requirements, changes in real estate pricing environments,
regional or general changes in asset valuation, demographic and economic changes
in the United States generally and California in particular, increases in real
estate taxes and other local government fees, significant competition from other
real estate developers and homebuilders, decreased consumer spending for
housing, delays in construction schedules and cost overruns, availability and
cost of land, materials and labor, increased development costs many of which the
Company would not be able to control, damage to properties or condemnation of
properties, the occurrence of significant natural disasters, imposition of
limitations on the Company's ability to develop its properties resulting from
developments in or new applications of environmental laws and regulations, the
inability to insure certain risks economically, the adequacy of loss reserves,
changes in prevailing interest rate levels, including mortgage rates, increased
interest costs as a result of a delay in project completion requiring the
financing to remain outstanding for a longer than projected period of time, the
availability of reliable energy sources and consumer confidence in the
dependability of such energy sources, and changes in the composition of the
Company's assets and liabilities through acquisitions or divestitures. Undue
reliance should not be placed on these forward-looking statements, which are
applicable only as of the date hereof. The Company undertakes no obligation to
revise or update these forward-looking statements to reflect events or
circumstances that arise after the date of this Report or to reflect the
occurrence of unanticipated events.
8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
9
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.
HOMEFED CORPORATION
(Registrant)
By: /s/ Erin N. Ruhe
----------------------------------------
Erin N. Ruhe, Vice President & Controller
(Principal Accounting Officer)
Date: May 14, 2001
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