March 28, 2007
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549-0303
Attention: Kevin Woody
Branch Chief
Re: HomeFed Corporation.
Form 10-K for the fiscal year ended December 31, 2006
File No.: 1-10153
Dear Mr. Woody:
Reference is made to your letter of March 21, 2007 (the "March 21 Letter"). On
behalf of HomeFed Corporation ("HomeFed" or the "Company"), set forth below is
each numbered paragraph of the March 21 Letter followed by the response of
HomeFed to each comment contained in the March 21 Letter. The number of each
response corresponds to the number of the comment in your letter.
Form 10-K for the fiscal year ended December 31, 2006
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Item 1. Business
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Current Development Projects, page 3
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1. You have disclosed projected sales revenues and projected gross profits
for the San Elijo Hills Project. As you have indicated in your disclosures,
market conditions have changed significantly from those conditions under which
you have
Kevin Woody
March 28, 2007
Page 2
sold the majority of your land under this project. Please disclose your basis
for and the limitations on your projections. Refer to Item 10 of Regulation S-K.
The Company believes that the discussion in Item 1 provides a
reasonable basis for its projections and their limitations, when considered in
combination with the additional disclosures (which are cross-referenced)
contained in the discussion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Critical Accounting Estimates,"
contained in Item 7 of the Company's Form 10-K for the fiscal year ended
December 31, 2006 (the "2006 10-K"). The disclosures in Item 1 include a
disclosure of the current market conditions, the Company's rejection of
homebuilders' requests for modifications and concessions to their purchase
agreements, and the Company's intention to be patient and wait for the market to
improve before marketing its remaining inventory for sale. The discussion in
Item 1 also points out that the Company's estimates are subject to change based
upon a number of factors outside the control of the Company. The projected sales
and gross profits disclosed in Item 1 for the San Elijo Hills project represent
amounts specific to the San Elijo Hills project that are included in the
Company's consolidated income projection, which is discussed in more detail in
Item 7 of the 2006 10-K, including an identification of various factors
considered. If the Company refers to or discusses projections in future filings
with the Commission, it will include with all of such disclosures the basis for
and limitation on its projections wherever such disclosures are stated in such
filings, rather than providing a cross-reference.
Financial Statements
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Consolidated Statements of Cash Flows, page F-6
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2. During the year ended December 31, 2006, we note that dividends were paid
on common stock despite that net cash was not provided by operating activities.
Please discuss the source(s) of these dividends, within the Liquidity and
Capital Resources section of your Management's Discussion and Analysis of
Financial Condition and Results of Operations, as dividends paid in excess of
net cash provided by operating activities raise concerns about the
sustainability of dividends into the future.
The dividend paid in April 2006 totaled $4,100,000 and was disclosed
in the Liquidity and Capital Resources section of the Management's Discussion
and Analysis of Financial Condition and Results of Operations in HomeFed's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2006 (the "First
Quarter 10-Q"), and in HomeFed's 2006 10-K. The Company does not pay a regular
cash dividend, has never disclosed an intention to pay or sustain a regular cash
dividend, and any dividends paid are determined at the discretion of the board
of directors.
Kevin Woody
March 28, 2007
Page 3
At December 31, 2006, March 31, 2006, and December 31, 2005, the
Company had consolidated cash and cash equivalents and marketable securities
aggregating $131,000,000, $174,600,000 and $196,900,000, respectively, to meet
the Company's then current needs and for future investment opportunities. Each
of these amounts was disclosed in the Liquidity and Capital Resources sections
of the respective quarterly or annual reports filed with the Commission. The
cash and cash equivalent component was used to pay the dividend in April 2006.
Additional disclosure concerning the Company's available sources of liquidity
are also made in the fourth paragraph of the Liquidity and Capital Resources
section of the 2006 10-K and in the second paragraph of the Liquidity and
Capital Resources section contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 2005. Given the foregoing, the Company believes
that there is sufficient disclosure to determine the source of the dividend
payment, and also believes that the amount of the payment is not material to the
Company's available sources of liquidity. However, to further clarify the
Company's policy with respect to dividends, if the Company pays a dividend in
the future it will disclose in its filings with the Commission the amount of the
dividend, the balance sheet account from which the funds were sourced, and that
the payment of any future dividend will be subject to the discretion of the
board of directors of the Company.
Exhibits 31.1 and 31.2
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3. We note that you made a modification to the exact form of the required
certification by deleting the language "(the registrant's fourth fiscal quarter
in the case of an annual report)" in paragraph 4(d). Please discontinue the use
of the modifications in future filings as certifications required under the
Exchange Act Rules 13a-14(a) and 15d-14(a) must be in the exact form set forth
in Item 601(b)(31) of Regulation S-K.
The Company will comply with this comment in future filings.
* * * *
In connection with our filings and in response to the March 21 Letter, HomeFed
acknowledges and agrees that:
o HomeFed is responsible for the adequacy and accuracy of the disclosure in
its filings;
o Staff comments or changes to disclosure in response to staff comments do
not foreclose the Commission from taking any action with respect to the
filings; and
Kevin Woody
March 28, 2007
Page 4
o HomeFed may not assert staff comments as a defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
If you have any further questions or desire any additional information please
contact the undersigned at (760) 602-3776.
Very truly yours,
/s/ Erin Ruhe
Erin Ruhe
Treasurer & Controller
cc: Howard Efron, Staff Accountant