SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-K/A
(AMENDMENT NO. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 2006
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
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(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
1903 WRIGHT PLACE
SUITE 220
CARLSBAD, CALIFORNIA 92008
(760) 918-8200
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act: NONE.
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [_] No [x]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [_] No [x]
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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [x].
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large Accelerated Filer[_] Accelerated Filer[X] Non-Accelerated Filer[_]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [_] No [x]
Based on the average bid and asked prices of the Registrant's Common Stock as
published by the OTC Bulletin Board Service as of June 30, 2006, the aggregate
market value of the Registrant's Common Stock held by non-affiliates was
approximately $285,968,000 on that date.
As of February 16, 2007, there were 8,273,834 outstanding shares of the
Registrant's Common Stock, par value $.01 per share.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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2
EXPLANATORY NOTE
This report on Form 10-K/A amends and restates in its entirety Part III
of the Annual Report of HomeFed Corporation (the "Company") for the fiscal year
ended December 31, 2006.
3
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As of April 17, 2007, the directors and executive officers of the
Company, their ages, the positions held by them and the periods during which
they have served in such positions are as follows:
- ------------------------- ------ ---------------------- ------------------------
Name Age Position with the Office Held Since
Company
- ------------------------- ------ ---------------------- ------------------------
Patrick D. Bienvenue 52 Director August 1998
- ------------------------- ------ ---------------------- ------------------------
Paul J. Borden 58 Director and May 1998
President
- ------------------------- ------ ---------------------- ------------------------
Timothy M. Considine 66 Director January 1992
- ------------------------- ------ ---------------------- ------------------------
Ian M. Cumming 66 Director May 1999
- ------------------------- ------ ---------------------- ------------------------
Michael A. Lobatz 58 Director February 1995
- ------------------------- ------ ---------------------- ------------------------
Curt R. Noland 50 Vice President October 1998
- ------------------------- ------ ---------------------- ------------------------
Erin N. Ruhe 41 Vice President, Vice President since
Treasurer and April 2000, Treasurer
Controller since March 2004,
Controller since
January 1999
- ------------------------- ------ ---------------------- ------------------------
Joseph S. Steinberg 63 Director, Chairman Director since 1998,
of the Board Chairman of the Board
since 1999
- ------------------------- ------ ---------------------- ------------------------
The officers serve at the pleasure of the Board of Directors of the
Company.
The recent business experience of our directors and executive officers
is summarized as follows:
Patrick D. Bienvenue. Mr. Bienvenue has served as director of the
Company since August 1998. Since January 1996, Mr. Bienvenue has served in a
variety of executive capacities with real estate related subsidiaries of
Leucadia.
Paul J. Borden. Mr. Borden has served as a director and President of the
Company since May 1998. Mr. Borden had been a Vice President of Leucadia
National Corporation ("Leucadia") from August 1988 through October 2000,
responsible for overseeing many of Leucadia's real estate investments.
Timothy M. Considine. Mr. Considine has served as a director of the
Company since January 1992, serving as Chairman of the Board from 1992 to
December 1999. Mr. Considine is employed on a part-time basis by Considine and
Considine, an accounting firm in San Diego, California, where he was a partner
from 1965 to 2002.
Ian M. Cumming. Mr. Cumming has served as a director of the Company
since May 1999. Mr. Cumming has been a director and Chairman of the Board of
Leucadia since June 1978 and a director and Chairman of the Board of The FINOVA
Group Inc., a middle market lender in which Leucadia has an indirect 25% equity
interest, since August 2001. Mr. Cumming has also been a director of Skywest,
Inc., a Utah-based regional air carrier, since June 1986. Mr. Cumming is also a
member of the Board of Managers of Premier Entertainment Biloxi, LLC, the owner
of the Hard Rock Hotel &Casino in Biloxi, Mississippi, in which Leucadia owns
all of the preferred equity and 46% of the common equity. Mr. Cumming is also an
alternate director of Fortescue Metals Group Ltd, an Australian public company
that is engaged in the mining of iron ore, in which Leucadia has a 9.9% equity
interest.
Michael A. Lobatz. Dr. Lobatz has served as a director of the Company
since February 1995. Dr. Lobatz has been a practicing physician in San Diego,
California since 1981.
Curt R. Noland. Mr. Noland has served as Vice President of the Company
since October 1998. He has worked in the land development industry in San Diego
County as a design consultant, merchant builder and a master developer since the
1980s. From November 1997 until joining the Company, Mr. Noland was employed by
the prior development manager of San Elijo Hills and served as Director of
4
Development for San Elijo Hills. Prior to November 1997, Mr. Noland was employed
for eight years by Aviara Land Associates, LP, a 1,000 acre master-planned
resort community in Carlsbad, California. He is also a licensed civil engineer
and real estate broker.
Erin N. Ruhe. Ms. Ruhe has served as Vice President of the Company since
April 2000, Treasurer since March 2004 and has been employed by the Company as
Controller since January 1999. Previously, Ms. Ruhe was Vice President since
December 1995 and Controller since November 1994 of HSD Venture, a real estate
subsidiary of Leucadia.
Joseph S. Steinberg. Mr. Steinberg has served as a director of the
Company since August 1998 and as Chairman of the Board since December 1999. Mr.
Steinberg has been President of Leucadia since January 1979 and a director of
Leucadia since December 1978. In addition, he has served as director of Jordan
Industries Inc., a public company that owns and manages manufacturing companies,
of which approximately 10.1% of the common stock is beneficially owned by
Leucadia since June 1998 and FINOVA since August 2001. Mr. Steinberg is also a
member of the Board of Managers of Premier Entertainment Biloxi and a director
of Fortescue.
AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Directors has a standing Audit Committee. The Board of
Directors has adopted a charter for the Audit Committee that was filed with the
Company's proxy statement for its 2005 Annual Meeting of Stockholders. The Audit
Committee consists of Mr. Considine (Chairman) and Dr. Lobatz. The Board of
Directors has determined that Mr. Considine is qualified as an audit committee
financial expert within the meaning of regulations of the Securities and
Exchange Commission.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
executive officers and directors, and persons who beneficially own more than 10%
of a registered class of our equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Based solely
upon a review of the copies of the forms furnished to us and written
representations from our executive officers, directors and greater than 10%
beneficial shareholders, we believe that during the year ended December 31,
2006, all persons subject to the reporting requirements of Section 16(a) filed
the required reports on a timely basis.
CODE OF BUSINESS PRACTICE
We have a Code of Business Practice, which is applicable to all of our
directors, officers and employees, and includes a Code of Practice applicable to
our principal executive officers and senior financial officers. Both the Code of
Business Practice and the Code of Practice are available without charge upon
request. Requests should be addressed to Corporate Secretary, HomeFed
Corporation, 1903 Wright Place, Suite 220, Carlsbad, California 92008. We intend
to file with the Securities and Exchange Commission amendments to or waivers
from our Code of Practice applicable to our principal executive officers and
senior financial officers.
5
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION & ANALYSIS
INTRODUCTION
In March 2005, the Board of Directors appointed a compensation committee
consisting of Joseph S. Steinberg. Prior to that time, the Board of Directors
delegated to our President, in consultation with certain directors, the
authority to determine the compensation to be paid to our executive officers who
are Company employees, while the Board of Directors awarded stock options. The
Compensation Committee now determines and approves the compensation of the
executive officers of the Company, including those named in the Summary
Compensation Table (the "Named Executive Officers").
COMPENSATION OBJECTIVES AND PHILOSOPHY
Our compensation philosophy is based upon rewarding current and past
contributions, performance and dedication and providing incentives for superior
long-term performance. We believe that there should be a strong link between pay
and performance of both the Company and the individual. Accordingly, a large
percentage of annual compensation consists of discretionary bonus compensation.
This ensures that compensation paid to an executive reflects the individual's
specific contributions to our success, the level and degree of complexity
involved in his/her contributions to the Company and the Company's overall
performance. We believe our compensation package aligns the interests of
executive officers with those of our stockholders.
The Company believes that our current compensation program fits within
our overall compensation philosophy of providing a straight-forward compensation
package and strikes the appropriate balance between short and long-term
performance objectives.
SETTING EXECUTIVE COMPENSATION
In determining compensation for our Named Executive Officers, the
Compensation Committee does not rely on any specific formula, benchmarking or
pre-determined targets. The Compensation Committee focuses primarily on its
subjective determination of the performance of the individual executive officer,
as well as on the performance of the Company.
In considering executive compensation, the Compensation Committee takes
into account an executive officer's responsibilities, as well as the services
rendered by the executive officer to the Company.
ELEMENTS OF COMPENSATION
Our compensation package for executive officers consists of three basic
elements: (1) base salary; (2) annual bonus compensation; and (3) long-term
incentives in the form of stock options granted pursuant to our 1999 stock
incentive plan.
Other elements of compensation include medical and life insurance
benefits available to employees generally. Additionally, certain perquisites may
be available to executive officers that are not available to other employees
generally.
Each element of compensation serves a different purpose. Salary and
bonus payments are designed mainly to reward current and past performance, while
stock options are designed to provide incentive for strong long-term future
performance and are directly linked to stockholders' interests because the value
of the awards will increase or decrease based upon the future price of our
common stock.
None of our executive officers is a party to an employment agreement
with the Company.
BASE SALARY
Base salary is consistent with the executive's office and level of
responsibility, with annual salary increases which generally amount to a small
percentage of the executive's prior base salary, primarily reflecting cost of
living increases.
6
SHORT TERM INCENTIVES - ANNUAL BONUS COMPENSATION
Annual bonus compensation of executive officers is determined by the
Compensation Committee based on its subjective assessment of an executive's
performance and the Company's performance. Bonuses can vary widely from year to
year, reflecting the varying levels of real estate sales in any given year, the
progress made on obtaining entitlements for land development on land owned by
the Company and on the degree of success in finding, analyzing and purchasing
new real estate development opportunities.
Additionally, in 2006 all employees of the Company (but not all
subsidiaries) received a discretionary year-end bonus equal to approximately 3%
of base salary.
LONG TERM INCENTIVES - STOCK OPTIONS
By means of our 1999 stock incentive plan, we seek to retain the
services of persons now holding key positions and to secure the services of
persons capable of filling such positions.
Options Awarded to Executive Officers
Occasionally, stock options may be awarded which, under the terms of our
1999 stock incentive plan, permit the executive officer or other employee to
purchase shares of our common stock at not less than the fair market value of
the shares of common sock at the date of grant. The extent to which the employee
realizes any gain is, therefore, directly related to increases in the price of
our common stock and, therefore, stockholder value, during the period of the
option. In certain circumstances, options having an exercise price below the
fair market value of our common stock on the date of grant may be issued
(although none have been granted to date). Options granted to executive officers
generally become exercisable at the rate of 20% per year, commencing one year
after the date of grant. The number of stock options awarded to an executive
officer is generally not based on any specific formula, but rather on a
subjective assessment of the executive's performance and the Company's
performance. Options are priced at the closing price on the date of grant and
are not granted to precede the announcement of favorable information. Besides
the options granted to Paul J. Borden by virtue of the automatic grant to
directors, as discussed below, the last time that options were granted to
executive officers was in 2000.
Options Awarded to Directors
Under the terms of our 1999 stock incentive plan, each director is
automatically granted options to purchase 1,000 shares on the date on which the
annual meeting of our stockholders is held each year. As stated above, options
are priced at the closing price on the date of grant.
In July 2006, pursuant to this automatic grant, Paul J. Borden was
granted options to purchase 1,000 shares of our common stock with an exercise
price of $65.50 per share, which become exercisable at the rate of 25% per year,
commencing one year after the date of grant.
OTHER BENEFITS; EXECUTIVE PERQUISITES
Medical and life insurance benefits and matching contributions to our
401(k) plan are available to employees generally.
Mr. Borden maintains his primary residence in New Jersey. We reimburse
him for costs of maintaining a temporary residence in California, airfare to and
from his primary residence and transportation costs including the personal use
of a Company car while in California. Such reimbursements are considered to be
taxable compensation reportable by Mr. Borden under federal income tax rules,
which results in a net cash cost to him, even though he does not gain any
incremental financial benefit from these reimbursements. As a result, beginning
in 2005, the Board of Directors (without Mr. Borden's participation) agreed to
pay Mr. Borden additional compensation which, after taxes, will provide him with
sufficient funds to pay the taxes due on the expense amounts reimbursed by us.
In 2006, we paid Mr. Borden $46,952 with respect to additional taxable
compensation reported by Mr. Borden for reimbursements made during 2006.
Mr. Noland receives the use of a Company owned car and certain related
benefits.
No other Named Executive Officers receive perquisites.
7
STOCK OWNERSHIP REQUIREMENTS
We do not have a formal stock ownership requirement.
COMPENSATION OF NAMED EXECUTIVE OFFICERS
On January 9, 2007, the Compensation Committee approved annual salary
increases (effective January 1, 2007) and discretionary 2006 cash bonuses for
each of the Named Executive Officers.
ACCOUNTING AND TAX MATTERS
Effective January 1, 2006, the Company adopted Statement of Financial
Accounting Standards No. 123R, "Share-Based Payment" ("SFAS 123R"), using the
modified prospective method. SFAS 123R requires that the cost of all share-based
payments to employees, including grants of employee stock options, be recognized
in the financial statements based on their fair values. The cost is recognized
as an expense over the vesting period of the award. Prior to adoption of SFAS
123R, no compensation cost was recognized in the statements of operations for
the Company's share-based compensation plans, although the Company disclosed
certain pro forma amounts as required. SFAS 123R has not had a material impact
on the Company's consolidated financial statements.
Under the provisions of Section 162(m) of the Internal Revenue Code of
1986, we would not be able to deduct compensation to our executive officers
whose compensation is required to be disclosed for such year in excess of $1
million per year unless such compensation was within the definition of
"performance-based compensation" or meets certain other criteria. To qualify as
"performance-based compensation," in addition to certain other requirements,
compensation generally must be based on achieving certain pre-established
objective performance criteria. The Board of Directors believes that
compensation at such levels is not likely to be a recurring event and that it is
in our interest to retain maximum flexibility in our compensation programs to
enable us to appropriately reward, retain and attract the executive talent
necessary to the Company's success. The Board recognizes that in appropriate
circumstances compensation that is not deductible under Section 162(m) may be
warranted and could be paid in the Board of Directors' discretion.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Mr. Steinberg. Mr. Steinberg was
not an officer or employee of the Company during 2006 nor was he formerly an
officer of the Company. As discussed under "Related Person Transactions" Mr.
Steinberg's brother is a partner in a law firm to which the Company paid
approximately $240,000 in 2006 for legal services rendered to the Company.
COMPENSATION COMMITTEE REPORT
I have reviewed and discussed with the Company's management the above
Compensation Discussion and Analysis ("CD&A"). Based upon my review and
discussions, I have recommended to the Board of Directors that the CD&A be
included in this Form 10-K/A.
COMPENSATION COMMITTEE
Joseph S. Steinberg
8
SUMMARY COMPENSATION TABLE
- ----------------------- ----- ------------ ----------- ------------ ----------------- ---------
Name and Principal Year Salary Bonus Option All Other Total
Position Awards(2) Compensation(3)
- ----------------------- ----- ------------ ----------- ------------ ----------------- ---------
Paul J. Borden, 2006 $262,732(1) $307,162 $12,169 $119,288(4) $701,351
President
- ----------------------- ----- ------------ ----------- ------------ ----------------- ---------
Curt R. Noland, 2006 $154,492 $254,635 -- $16,970(5) $426,097
Vice President
- ----------------------- ----- ------------ ----------- ------------ ----------------- ---------
Erin N. 2006 $125,008 $253,750 -- $8,800 $387,558
Ruhe,
Vice President,
Treasurer and
Controller
- ----------------------- ----- ------------ ----------- ------------ ----------------- ---------
(1) Includes director fees to Mr. Borden from the Company of $24,000 in 2006.
(2) This column represents the expense recorded in 2006 for the fair value of
stock options granted to Mr. Borden in 2006 and prior years, all in
accordance with SFAS 123R. Pursuant to SEC rules, the amounts shown exclude
the impact of estimated forfeitures related to service-based vesting
conditions. For information on the valuation assumptions with respect to the
2006 grant refer to Note 7 to our consolidated financial statements
contained in our Form 10-K for the fiscal year ended December 31, 2006. For
information on the valuation assumptions with respect to grants made prior
to 2006, refer to the note on Stock Incentive Plans in the Company's
financial statements in the Form 10-K for the respective fiscal year.
(3) Certain items included in this column (including personal use of company
cars) are currently taxable to the Named Executive Officer. The amount of
taxable income for the individual is determined pursuant to Internal Revenue
Service rules which may differ from the amounts reflected in this column.
(4) Consists of non-cash compensation of $27,048 for maintaining a temporary
residence in California and $25,013 for airfare to and from his primary
residence in New Jersey. This column also includes transportation and the
personal use of a Company car while in California and related expenses, as
well as contributions made by the Company to a defined contribution 401(k)
plan on behalf of Mr. Borden, none of which exceeded the greater of $25,000
or 10% of the total amount of these benefits for Mr. Borden. Also includes
$46,952 in additional cash compensation which, after taxes, will provide him
with sufficient funds to pay the taxes due on the expense amounts reimbursed
by us.
(5) Consists of non-cash compensation for use of a Company car and related
expenses and contributions made by the Company to a defined contribution
401(k) plan on behalf of Mr. Noland, none of which exceeded the greater of
$25,000 or 10% of the total amount of these benefits for Mr. Noland.
9
GRANTS OF PLAN-BASED AWARDS IN 2006
This table provides information about equity awards granted to the named
executives in 2006 under our 1999 Stock Option Plan. As discussed in the CD&A,
in 2006 Mr. Borden was granted options pursuant to the automatic grant to
directors under the 1999 stock incentive plan.
- -------------------------------------------------------------------------------
Name Grant All Other Exercise Grant
Date Option or Base Date
Awards: Price of Fair
Number of Option Value of
Securities Awards Stock
Underlying (2) and
Options Option
(1) Awards
(3)
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Paul J. Borden, President 7/18/06 1,000 $65.50 $23,827
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(1) This column shows the number of common shares issuable under options granted
in 2006. The options vest and become exercisable in four equal installments
beginning on July 18, 2007.
(2) This column shows the exercise price for the stock options granted, which
was the closing price of the Company's common stock on the date of grant,
July 18, 2006.
(3) This column shows the fair value of any stock options granted to the Named
Executive Officer in 2006. The fair value was determined in accordance with
SFAS 123R on the grant date, and is being recognized as an expense over the
vesting period.
10
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
This table provides information on the holdings of option awards by the Named
Executive Officers at December 31, 2006. This table includes exercisable and
unexercisable options. The options vest and become exercisable in five equal
annual installments, commencing one year from the grant date. For additional
information about the option awards, see the description of our 1999 stock
incentive plan in the CD&A.
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Option Awards
- --------------------------------------------------------------------------------
Name Grant Date Number of Securities Option Option
Underlying Unexercised Exercise Expiration
Options Price Date
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Exercisable Unexercisable
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Paul J. Borden, 7/10/02 100 -- $9.50 7/10/07
President
7/9/03 75 25 $27.40 7/9/08
8/24/04 500 500 $44.50 8/24/09
7/12/05 250 750 $65.19 7/12/10
7/18/06 -- 1,000 $65.50 7/18/11
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OPTION EXERCISES AND STOCK VESTED IN FISCAL 2006
This table provides information for the Named Executive Officers with respect to
stock options exercised during 2006, including the number of shares acquired
upon exercise and the value realized, each before payment of any applicable
withholding taxes.
--------------------------------------------------------------
Option Awards
--------------------------------------------------------------
Name Number of Value
Shares Realized
Acquired on Exercise
on Exercise
--------------------------------------------------------------
Paul J. Borden, President (1) 2,600 $141,520
--------------------------------------------------------------
Erin N. Ruhe, Controller, 2,500 $136,250
Vice President and Treasurer
(2)
--------------------------------------------------------------
(1) Mr. Borden exercised 2,500 stock options on March 2, 2006 with an exercise
price of $7.50 per share and a market price of $62.00 per share and 100
stock options on March 2, 2006 with an exercise price of $9.30 and a market
price of $62.00.
(2) Ms. Ruhe exercised 2,500 stock options on March 2, 2006 with an exercise
price of $7.50 per share and a market price of $62.00 per share.
11
DIRECTOR COMPENSATION
In 2006, each director received a retainer of $24,000 for serving on the
Board of Directors. In addition, Mr. Considine was paid $26,000 for serving as
Chairman of the Audit Committee, and Dr. Lobatz was paid $17,000 for serving on
the Audit Committee. In addition, under the terms of our 1999 Stock Incentive
Plan, each director is automatically granted options to purchase 1,000 shares on
the date on which the annual meeting of our stockholders is held each year. The
purchase price of the shares covered by such options is the fair market value of
such shares on the date of grant. These options become exercisable at the rate
of 25% per year commencing one year after the date of grant. As a result of this
provision, options to purchase 1,000 shares of Common Stock at an exercise price
of $65.50 per share were awarded to each of Messrs. Bienvenue, Considine,
Cumming, Lobatz and Steinberg on July 18, 2006. The Company reimburses directors
for reasonable travel expenses incurred in attending board and committee
meetings.
This table sets forth compensation paid to the non-employee directors
during 2006.
----------------------------------------------------------------------
Name Fees Earned or Option Total
Paid in Awards (3)
Cash (2)
(1)
----------------------------------------------------------------------
Patrick D. Bienvenue $24,000 $12,169 $36,196
----------------------------------------------------------------------
Timothy M. Considine $50,000 $12,169 $62,199
----------------------------------------------------------------------
Ian M. Cumming $24,000 $12,169 $36,196
----------------------------------------------------------------------
Michael A. Lobatz $41,000 $12,169 $53,196
----------------------------------------------------------------------
Joseph S. Steinberg $24,000 $12,169 $36,196
----------------------------------------------------------------------
(1) This column reports the amount of cash compensation earned in 2006 for Board
and committee service.
(2) This column represents the expense recorded in 2006 for the fair value of
options granted to directors in 2006 and in prior years, in accordance with SFAS
123R. Pursuant to SEC rules, the amounts shown exclude the impact of estimated
forfeitures related to service-based vesting conditions. For information on the
valuation assumptions with respect to the 2006 grant refer to Note 7 to our
consolidated financial statements contained in our Form 10-K for the year ended
December 31, 2006. For information on the valuation assumptions with respect to
grants made prior to 2006, refer to the note on Stock Incentive Plans in the
Company's financial statements in the Form 10-K for the respective fiscal year.
(3) This table does not include disclosure for any perquisites and other
personal benefits for any non-employee director because such amounts did not
exceed $10,000 in the aggregate per director. Such perquisites and other
personal benefits consisted of expenses incurred in connection with attendance
at board and committee meetings, principally travel, lodging, meals and other
incidental expenses for spouses/guests accompanying directors to Company related
events.
12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
PRESENT BENEFICIAL OWNERSHIP
Set forth below is certain information as of April 17, 2007, with
respect to the beneficial ownership determined in accordance with Rule 13d-3
under the Securities and Exchange Act of 1934, as amended, of our common stock
by (1) each person, who, to our knowledge, is the beneficial owner of more than
5% of our outstanding common stock, which is our only class of voting
securities, (2) each director and nominee for director, (3) each of the
executive officers named in the Summary Compensation Table under "Executive
Compensation," (4) the trust for the benefit of Mr. Steinberg's children and
private charitable foundations established by Mr. Cumming and Mr. Steinberg and
(5) all of our executive officers and directors as a group. Unless otherwise
stated, the business address of each person listed is c/o HomeFed Corporation,
1903 Wright Place, Suite 220, Carlsbad, California 92008.
Number of Shares
Name and Address and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
Leucadia National Corporation (a).......... 2,474,226 29.9%
Beck, Mack & Oliver LLC (b) ............... 528,728 6.4%
Patrick D. Bienvenue....................... 2,125 (c) *
Paul J. Borden............................. 7,703 (c) *
Timothy M. Considine....................... 2,625 (d) *
Ian M. Cumming............................. 609,284 (e)(f) 7.4%
Michael A. Lobatz.......................... 2,025 (c) *
Curt R. Noland............................. 5,000 *
Erin N. Ruhe............................... 5,000 *
Joseph S. Steinberg........................ 742,745 (f)(g) 9.0%
The Steinberg Children Trust............... 27,532 (h) .3%
Cumming Foundation......................... 172,330 (i) 2.1%
The Joseph S. and Diane H. Steinberg
1992 Charitable Trust................. 42,381 (j) .5%
All Directors and executive officers
as a group (8 persons).................. 1,376,507 (k) 16.6%
- -------------------
* Less than .1%.
(a) The business address of this beneficial owner is 315 Park Avenue South, New
York, New York 10010.
(b) The business address of the beneficial owner is 360 Madison Avenue, New
York, New York 10017. Based upon a Schedule 13G dated February 6, 2007,
filed by Beck, Mack & Oliver LLC ("BMO") and discussions with BMO, the
securities reported in BMO's Schedule 13G are beneficially owned by separate
managed account holders which, pursuant to individual advisory contracts,
are advised by BMO. Such advisory contracts grant to BMO all investment and
voting power over the securities owned by such advisory clients. Beneficial
ownership of these common shares, including all rights to distributions in
respect thereof and the proceeds of a sale or disposition, is held by the
separate, unrelated account holders, and BMO disclaims beneficial ownership
of such common shares.
(c) Includes 925 shares that may be acquired upon the exercise of currently
exercisable stock options.
(d) Includes 500 shares held by the Seeseeanoh Inc. Retirement Plan. Mr.
Considine and his wife are the sole owners of Seeseeanoh, a real estate
company in San Diego, California. Also includes (i) 1,325 shares held by The
Considine Family 1981 Trust, of which Mr. Considine and his wife are
trustees and (ii) 800 shares that may be acquired upon exercise of currently
exercisable stock options.
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(e) Includes (i) 9,530 shares (.1%) beneficially owned by Mr. Cumming's wife
(directly and through trusts for the benefit of Mr. Cumming's children of
which Mr. Cumming's wife is trustee) as to which Mr. Cumming may be deemed
to be the beneficial owner, (ii) 60,000 shares (.7%) held by a corporation
which is 50% owned by Mr. Cumming and 50% owned by Mr. Cumming's wife and
(iii) 925 shares that may be acquired upon the exercise of currently
exercisable stock options. Does not include 2,474,226 shares held by
Leucadia which Mr. Cumming may be deemed to beneficially own as a result of
his beneficial ownership of Leucadia common shares.
(f) Messrs. Cumming and Steinberg have an oral agreement pursuant to which they
will consult with each other as to the election of a mutually acceptable
Board of Directors of the Company. The business address for Messrs. Cumming
and Steinberg is c/o Leucadia National Corporation, 315 Park Avenue South,
New York, New York 10010.
(g) Includes (i) 3,676 shares (less than .1%) beneficially owned by Mr.
Steinberg's wife and daughter as to which Mr. Steinberg may be deemed to be
the beneficial owner, (ii) 61,793 shares (.7%) owned by trusts for the
benefit of Mr. Steinberg's children and (iii) 925 shares that may be
acquired upon the exercise of currently exercisable stock options. Does not
include 2,474,226 shares held by Leucadia which Mr. Steinberg may be deemed
to beneficially own as a result of his beneficial ownership of Leucadia
common shares.
(h) Mr. Steinberg disclaims beneficial ownership of all of our common stock held
by this trust.
(i) Mr. Cumming is a trustee and President of the foundation and disclaims
beneficial ownership of our common stock held by the foundation.
(j) Mr. Steinberg and his wife are trustees of the trust. Mr. Steinberg
disclaims beneficial ownership of our common stock held by the trust.
(k) Includes 5,425 shares that may be acquired upon the exercise of currently
exercisable stock options.
As of April 17, 2007, Cede & Co. held of record 4,820,554 shares of our
common stock (approximately 58.3% of our total common stock outstanding). Cede &
Co. held such shares as a nominee for broker-dealer members of The Depository
Trust Company, which conducts clearing and settlement operations for securities
transactions involving its members.
As described in our Form 10-K for the fiscal year ended December 31,
2006, our common stock are subject to transfer restrictions that are designed to
reduce the possibility that certain changes in ownership could result in
limitations on the use of our tax attributes. Our certificate of incorporation
contains provisions that generally restrict the ability of a person or entity
from acquiring ownership (including through attribution under the tax law) of 5%
or more of our common shares and the ability of persons or entities now owning
5% or more of our common shares from acquiring additional common shares.
Stockholders (and prospective stockholders) are advised that, under the tax law
rules incorporated in these provisions, the acquisition of even a single share
of common stock may be proscribed under our certificate of incorporation, given
(among other things) the tax law ownership attribution rules as well as the tax
law rules applicable to acquisitions made in coordination with or in concert
with others. The restriction will remain until the earliest of (a) December 31,
2010, (b) the repeal of Section 382 of the Internal Revenue Code (or any
comparable successor provision) and (c) the beginning of our taxable year to
which these tax attributes may no longer be carried forward. The restriction may
be waived by our Board of Directors. Stockholders are advised to carefully
monitor their ownership of our common stock and consult their own legal advisors
and/or us to determine whether their ownership of our common shares approaches
the proscribed level. Based upon discussions with BMO, we believe that the
beneficial ownership (determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934) by BMO of our common stock as reflected in the
table above is not in violation of the transfer restrictions contained in our
certificate of incorporation.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
POLICIES AND PROCEDURES WITH RESPECT TO TRANSACTIONS WITH RELATED PERSONS
The Board has adopted a policy for the review, approval and ratification
of transactions that involve "related persons" and potential conflicts of
interest (the "Related Person Transaction Policy").
The Related Person Transaction Policy applies to each director and
executive officer of the Company, any nominee for election as a director of the
Company, any security holder who is known to own of record or beneficially more
than five percent of any class of the Company's voting securities, any immediate
family member of any of the foregoing persons, and any corporation, firm,
association or their entity in which one or more directors of the Company are
directors or officers, or have a substantial financial interest (each a "Related
Person").
Under the Related Person Transaction Policy, a Related Person
Transaction is defined as a transaction or arrangement involving a Related
Person in which the Company is a participant or that would require disclosure in
the Company's filings with the SEC as a transaction with a Related Person.
Under the Related Person Transaction Policy, Related Persons must
disclose to the Audit Committee any potential Related Person Transactions and
must disclose all material facts with respect to such interest. All Related
Person Transactions will be reviewed by the Audit Committee and, in its
discretion, approved or ratified. In determining whether to approve or ratify a
Related Person Transaction the Audit Committee will consider the relevant facts
and circumstances of the Related Person Transaction, which may include factors
such as the relationship of the Related Person with the Company, the materiality
or significance of the transaction to the Company and the Related Person, the
business purpose and reasonableness of the transaction, whether the transaction
is comparable to a transaction that could be available to the Company on an
arms-length basis, and the impact of the transaction on the Company business and
operation.
RELATED PERSON TRANSACTIONS
The Company is required to obtain infrastructure improvement bonds
primarily for the benefit of the City of San Marcos prior to the beginning of
lot construction work and warranty bonds upon completion of such improvements in
the San Elijo Hills project. These bonds provide funds primarily to the City in
the event the Company is unable or unwilling to complete certain infrastructure
improvements in the San Elijo Hills project. Leucadia has obtained these bonds
on behalf of the subsidiaries through which the San Elijo Hills project is
owned, both before and after the Company's October 2002 acquisition of the San
Elijo Hills project. Those subsidiaries are responsible for paying all third
party fees related to obtaining the bonds. Should the City or others draw on the
bonds for any reason, one of these subsidiaries would be obligated to reimburse
Leucadia for the amount drawn. As of December 31, 2006, the amount of
outstanding bonds was approximately $18,300,000.
Since 1995, Leucadia has been providing administrative and accounting
services to the Company. Under the current administrative services agreement,
Leucadia provides services to the Company for a monthly fee of $15,000 ($180,000
in the aggregate for all of 2006). Pursuant to this agreement, Leucadia provides
the services of Ms. Corinne A. Maki, the Company's Secretary, in addition to
various administrative functions. Ms. Maki is an officer of subsidiaries of
Leucadia. The term of the administrative services agreement automatically renews
for successive annual periods unless terminated in accordance with its terms.
Leucadia has the right to terminate the agreement by giving the Company not less
than one year's prior notice, in which event the then monthly fee will remain in
effect until the end of the notice period. The Company has the right to
terminate the agreement, without restriction or penalty, upon 30 days prior
written notice to Leucadia. The agreement has not been terminated by either
party.
Mr. Steinberg's brother, Morton M. Steinberg, is a partner in the law
firm DLA Piper, US LLP, an international law firm with offices in twenty four
countries. During 2006, the Company paid approximately $240,000 in aggregate
fees to such firm for legal services rendered to the Company. This amount
represents less than .25% of all fees received by DLA Piper, US LLP in 2006. Mr.
Morton Steinberg has a less than 1% partnership interest in DLA Piper, US LLP.
15
The Audit Committee or the Board has approved or ratified each of the
foregoing.
DIRECTOR INDEPENDENCE
The Board of Directors has determined that Mr. Considine and Dr. Lobatz
are independent, applying the National Association of Securities Dealers'
listing standards for independence.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The Audit Committee has adopted policies and procedures for
pre-approving all audit and non-audit work performed by the Company's
independent auditor, PricewaterhouseCoopers LLP. The Audit Committee has
pre-approved (i) certain general categories of work where no specific
case-by-case approval is necessary ("general pre-approvals") and (ii) categories
of work which require the specific pre-approval of the Audit Committee
("specific pre-approvals"). For additional services or services in an amount
above the annual amount that has been pre-approved, additional authorization
from the Audit Committee is required. The Audit Committee has delegated to the
Committee chair the ability to pre-approve all of these services. Any
pre-approval decisions made by the Committee chair under this delegated
authority will be reported to the full Audit Committee. All requests for
services to be provided by PricewaterhouseCoopers LLP that do not require
specific approval by the Audit Committee must be submitted to the Controller of
the Company, who determines whether such services are in fact within the scope
of those services that have received the general pre-approval of the Audit
Committee. The Controller reports to the Audit Committee periodically.
In accordance with the SEC's definitions and rules, Audit Fees are fees
paid to PricewaterhouseCoopers LLP for professional services for the audit of
the Company's consolidated financial statements included in the Company's Form
10-K, the review of financial statements included in the Company's Form 10-Qs,
services that are normally provided in connection with statutory and regulatory
filings or engagements, assurance and related services that are reasonably
related to the performance of the audit or review of our financial statements
including compliance with regulatory matters, the Sarbanes-Oxley Act, and
consulting with respect to technical accounting and disclosure rules. All such
services were approved by the Audit Committee. Such amounts aggregated $245,500
and $222,000 for the years ended December 31, 2006 and 2005, respectively.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements.
Report of Independent Registered Public Accounting Firm F-1
Consolidated Balance Sheets at December 31, 2006 and 2005 F-3
Consolidated Statements of Operations for the years ended
December 31, 2006, 2005 and 2004 F-4
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 2006, 2005 and 2004 F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 2006, 2005 and 2004 F-6
Notes to Consolidated Financial Statements F-8
(a)(2) Financial Statement Schedules.
Schedules are omitted because they are not required or are not
applicable or the required information is shown in the financial
statements or notes thereto.
(a)(3) Executive Compensation Plans and Arrangements. See item 15(b) below for
a complete list of exhibits to this Report.
1999 Stock Incentive Plan (filed as Annex A to the Company's Proxy
Statement dated November 22, 1999).
Form of Grant Letter for 1999 Stock Incentive Plan (filed as Exhibit
10.26 to the Company's Annual Report on Form 10-K for the year ended
December 31, 2005 (the "2005 10-K")).
See also Item 15(b) below.
(b) Exhibits.
We will furnish any exhibit upon request made to our Corporate
Secretary, 1903 Wright Place, Suite 220, Carlsbad, CA 92008. We charge
$.50 per page to cover expenses of copying and mailing.
3.1 Restated Certificate of Incorporation, as restated July 3, 1995 of the
Company (incorporated by reference to Exhibit 3.1 to the Company's
quarterly report on Form 10-Q for the quarter ended September 30, 1995).
3.2 By-laws of the Company as amended through December 14, 1999
(incorporated by reference to Exhibit 3.2 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1999 (the "1999 10-K")).
3.3 Amendment to Amended and Restated Bylaws of the Company, dated July 10,
2002 (incorporated by reference to Exhibit 3.3 to the Company's
quarterly report on Form 10-Q for the quarter ended September 30, 2002).
3.4 Certificate of Amendment of the Certificate of Incorporation of the
Company, dated July 10, 2002 (incorporated by reference to Exhibit 3.4
to the Company's quarterly report on Form 10-Q for the quarter ended
September 30, 2002).
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3.5 Certificate of Amendment of the Certificate of Incorporation of the
Company, dated July 10, 2003 (incorporated by reference to Exhibit 3.5
to the Company's Annual Report on Form 10-K for the year ended December
31, 2003 (the "2003 10-K")).
3.6 Certificate of Amendment of the Certificate of Incorporation of the
Company, dated July 10, 2003 (incorporated by reference to Exhibit 3.6
to the Company's 2003 10-K).
10.1 Development Management Agreement between the Company and Provence Hills
Development Company, LLC, dated as of August 14, 1998 (incorporated by
reference to Exhibit 10.3 to the Company's current report on Form 8-K
dated August 14, 1998).
10.2 Amended and Restated Limited Liability Company Agreement of Otay Land
Company, LLC, dated as of September 20, 1999, between the Company and
Leucadia National Corporation (incorporated by reference to Exhibit
10.16 to the Company's Registration Statement on Form S-2 (No.
333-79901)).
10.3 Administrative Services Agreement, dated as of March 1, 2000, between
Leucadia Financial Corporation ("LFC"), the Company, HomeFed Resources
Corporation and HomeFed Communities, Inc. (incorporated by reference to
Exhibit 10.1 to the Company's quarterly report on Form 10-Q for the
quarter ended June 30, 2000).
10.4 Amendment No. 1 dated as of November 1, 2000 to the Administrative
Services Agreement dated as of March 1, 2000 (incorporated by reference
to Exhibit 10.21 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 (the "2000 10-K")).
10.5 Amendment No. 2 dated as of February 28, 2001 to the Administrative
Services Agreement dated as of March 1, 2000 (incorporated by reference
to Exhibit 10.22 to the Company's 2000 10-K).
10.6 Amendment No. 3 dated as of December 31, 2001 to the Administrative
Services Agreement dated as of March 1, 2000 (incorporated by reference
to Exhibit 10.26 to the Company's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2001).
10.7 Registration Rights Agreement dated as of October 21, 2002, by and
between HomeFed Corporation and Leucadia National Corporation
(incorporated by reference to Exhibit 10.2 to the Company's current
report on Form 8-K dated October 22, 2002).
10.8 Amended and Restated Line Letter dated as of October 9, 2002, by and
between HomeFed Corporation and Leucadia Financial Corporation
(incorporated by reference to Exhibit 10.5 to the Company's current
report on Form 8-K dated October 22, 2002).
10.9 Form of Grant Letter for the 1999 Stock Incentive Plan (incorporated by
reference to Exhibit 10.26 to the Company's 2005 10-K).
10.10 Amendment No. 4 dated as of May 28, 2002 to the Administrative Services
Agreement dated as of March 1, 2000 (incorporated by reference to
Exhibit 10.34 to the Company's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2002 (the "2002 10-K/A")).
10.11 Amendment No. 5 dated as of November 15, 2002 to the Administrative
Services Agreement dated as of March 1, 2000 (incorporated by reference
to Exhibit 10.35 of the 2002 10-K/A).
10.12 Amendment dated as of October 21, 2002 to the Development Management
Agreement dated as of August 14, 1998 (incorporated by reference to
Exhibit 10.36 of the 2002 10-K/A).
10.13 Contribution Agreement between the Company and San Elijo Hills
Development Company, LLC, dated as of October 21, 2002 (incorporated by
reference to Exhibit 10.37 of the 2002 10-K/A).
18
10.14 Agreement and Guaranty, dated as of October 1, 2002, between Leucadia
National Corporation and CDS Holding Corporation (incorporated by
reference to Exhibit 10.38 of the 2002 10-K/A).
10.15 Obligation Agreement, dated as of October 1, 2002, between Leucadia
National Corporation and San Elijo Ranch, Inc. (incorporated by
reference to Exhibit 10.39 of the 2002 10-K/A).
10.16 Tax Allocation Agreement between the Company and its subsidiaries dated
as of November 1, 2002 (incorporated by reference to Exhibit 10.21 to
the Company's 2003 10-K).
10.17 Amendment No. 1 to the First Amended and Restated Development Agreement
and Owner Participation Agreement between the City of San Marcos, the
San Marcos Redevelopment Agency and the San Elijo Hills Development
Company, LLC dated as of February 11, 2004 (incorporated by reference to
Exhibit 10.22 to the Company's 2003 10-K).
10.18 Amendment No. 6 dated as of December 31, 2003 to the Administrative
Services Agreement dated as of March 1, 2000 (incorporated by reference
to Exhibit 10.23 to the Company's 2003 10-K).
10.19 Amendment No. 7 dated as of December 31, 2004 to the Administrative
Services Agreement dated as of March 1, 2000 (incorporated by reference
to Exhibit 10.24 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2004 (the "2004 10-K")).
10.20 1999 Stock Incentive Plan (incorporated by reference to Annex A to the
Company's Proxy Statement dated November 22, 1999).
21 Subsidiaries of the Company (incorporated by reference to Exhibit 21 to
the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2006 (the "2006 10-K")).
23 Consent of PricewaterhouseCoopers LLP with respect to the incorporation
by reference into the Company's Registration Statement on Form S-8 (File
No. 333-97079) (incorporated by reference to Exhibit 23 to the Company's
2006 10-K).
31.1 Certification of Principal Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Principal Financial Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Principal Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*
32.2 Certification of Principal Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*
* Furnished herewith pursuant to Item 601(b) (32) of Regulation S-K.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant duly caused this report to be signed on its behalf by the undersigned
duly authorized.
Date: April 30, 2007 HOMEFED CORPORATION
By /s/ Erin N. Ruhe
---------------------------
Erin N. Ruhe
Vice President, Treasurer and Controller
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