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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 2004
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 Number)
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
------- ------
Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act).
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 April 30, 2004, there
were 8,257,959 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, 2004 and December 31, 2003
(Dollars in thousands, except par value)
March 31, December 31,
2004 2003
----------- -----------
(Unaudited)
ASSETS
Real estate $ 34,497 $ 37,612
Cash and cash equivalents 49,744 43,503
Restricted cash 3,952 4,609
Investments-available for sale (aggregate cost of $62,248 and $88,503) 62,249 88,519
Deposits and other assets 1,200 995
Deferred income taxes 36,448 41,772
----------- -----------
TOTAL $ 188,090 $ 217,010
=========== ===========
LIABILITIES
Note payable to Leucadia Financial Corporation $ -- $ 24,716
Notes payable to trust deed holders 12,747 13,580
Deferred revenue 48,880 53,491
Accounts payable and accrued liabilities 6,826 10,985
Liability for environmental remediation 10,412 10,785
Income taxes payable 6,846 503
Other liabilities 4,420 13,509
----------- -----------
Total liabilities 90,131 127,569
----------- -----------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 7,203 13,111
----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 25,000,000 shares authorized;
8,257,959 and 8,155,159 shares outstanding 83 82
Additional paid-in capital 381,176 380,545
Deferred compensation pursuant to stock incentive plans (3) (4)
Accumulated other comprehensive income 1 9
Accumulated deficit (290,501) (304,302)
----------- -----------
Total stockholders' equity 90,756 76,330
----------- -----------
TOTAL $ 188,090 $ 217,010
=========== ===========
See notes to interim consolidated financial statements.
2
HOMEFED CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the three month periods ended March 31, 2004 and 2003
(In thousands, except per share amounts)
(Unaudited)
2004 2003
---- ----
REVENUES
Sales of real estate $ 43,406 $ 7,016
Co-op marketing and advertising fees 186 380
--------- ---------
43,592 7,396
--------- ---------
EXPENSES
Cost of sales 9,654 2,340
Interest expense 715 649
General and administrative expenses 2,468 1,812
Administrative services fees to Leucadia Financial Corporation 30 30
--------- ---------
12,867 4,831
--------- ---------
Income from operations 30,725 2,565
Other income (expense) (1,108) 406
--------- ---------
Income before income taxes and minority interest 29,617 2,971
Income tax provision (12,245) (1,252)
--------- ---------
Income before minority interest 17,372 1,719
Minority interest (3,571) (474)
--------- ---------
Net income $ 13,801 $ 1,245
========= =========
Basic income per common share $ 1.68 $ 0.15
========= =========
Diluted income per common share $ 1.67 $ 0.15
========= =========
See notes to interim consolidated financial statements.
3
HOMEFED CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
For the three month periods ended March 31, 2004 and 2003
(Dollars in thousands, except par value)
(Unaudited)
Deferred
Common Compensation Accumulated
Stock Additional Pursuant to Other Total
$.01 Par Paid-In Stock Incentive Comprehensive Accumulated Stockholders'
Value Capital Plans Income Deficit Equity
------- ---------- --------------- -------------- ------------- -----------
Balance, January 1, 2003 $ 82 $ 380,364 $ (418) $ -- $ (378,378) $ 1,650
Comprehensive income:
Net income 1,245 1,245
---------
Amortization of restricted stock grants 11 11
Amortization related to stock options 156 156
Change in value of performance-based
stock options (90) 90 --
----- ---------- ------ --------- ----------- ---------
Balance, March 31, 2003 $ 82 $ 380,274 $ (161) $ -- $ (377,133) $ 3,062
===== ========== ====== ========= =========== =========
Balance, January 1, 2004 $ 82 $ 380,545 $ (4) $ 9 $ (304,302) $ 76,330
Comprehensive income:
Net change in unrealized gain
(loss) on investments (8) (8)
Net income 13,801 13,801
---------
Comprehensive income 13,793
---------
Amortization related to stock options 1 1
Exercise of options to purchase
common shares 1 631 632
----- ---------- ------ --------- ----------- ---------
Balance, March 31, 2004 $ 83 $ 381,176 $ (3) $ 1 $ (290,501) $ 90,756
===== ========== ====== ========= =========== =========
See notes to interim consolidated financial statements.
4
HOMEFED CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flow
For the three month periods ended March 31, 2004 and 2003
(In thousands)
(Unaudited)
2004 2003
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13,801 $ 1,245
Adjustments to reconcile net income to net cash provided by (used for)
operating activities:
Minority interest 3,571 474
Provision for deferred income taxes 5,330 920
Net securities gains (5) --
Amortization of deferred compensation pursuant to stock incentive plans 1 167
Loss on prepayment of Leucadia Financial Corporation note 1,470 --
Amortization of debt discount on note payable to Leucadia Financial Corporation 276 257
Other amortization related to investments (135) --
Changes in operating assets and liabilities:
Real estate 3,505 (7,887)
Deposits and other assets (205) (231)
Notes payable to trust deed holders (60) --
Deferred revenue (4,611) (6,696)
Accounts payable and accrued liabilities (4,159) 247
Liability for environmental remediation (373) (61)
Income taxes payable 6,343 175
Other liabilities (9,089) 5,551
-------- --------
Net cash provided by (used for) operating activities 15,660 (5,839)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (other than short-term) (30,440) --
Proceeds from maturities of investments 9,900 --
Proceeds from sales of investments 46,936 --
Decrease in restricted cash 657 --
-------- --------
Net cash provided by investing activities 27,053 --
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment of Leucadia Financial Corporation note (26,462) --
Principal payments to trust deed holders (1,163) --
Exercise of options to purchase common shares 632 --
Contribution from (distribution to) minority interest (9,479) 43
-------- --------
Net cash provided by (used for) financing activities (36,472) 43
-------- --------
Net increase (decrease) in cash and cash equivalents 6,241 (5,796)
Cash and cash equivalents, beginning of period 43,503 33,601
-------- --------
Cash and cash equivalents, end of period $ 49,744 $ 27,805
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest (net of amounts capitalized) $ 410 $ 392
Cash paid for income taxes $ 597 $ 128
Non cash financing activities:
Contribution of real estate from minority interest $ -- $ 244
See notes to interim consolidated financial statements.
5
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, 2003 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
"2003 10-K"). Results of operations for interim periods are not necessarily
indicative of annual results of operations. The consolidated balance sheet
at December 31, 2003 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.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), establishes a fair value method for
accounting for stock-based compensation plans, either through recognition
in the statements of operations or disclosure. As permitted, the Company
applies APB Opinion No. 25 and related Interpretations in accounting for
its plans. Accordingly, no compensation cost has been recognized in the
statements of operations related to employees and directors under its stock
compensation plans. Had compensation cost for the Company's fixed stock
options been recorded in the statements of operations consistent with the
provisions of SFAS 123, the Company's net income and income per share would
not have been materially different from that reported.
Certain amounts for prior periods have been reclassified to be consistent
with the 2004 presentation.
2. In March 2004, the Company prepaid in full its note payable to Leucadia
Financial Corporation ("LFC"), a subsidiary of Leucadia National
Corporation ("Leucadia"), in the amount of $26,462,000. As of the date of
prepayment, the Company expensed the remaining unamortized discount on the
note in the amount of $1,470,000, which is included in the caption "Other
income (expense)" in the consolidated statements of operations. Interest on
the note of $373,000 and $392,000 was expensed and paid during the three
month periods ended March 31, 2004 and 2003, respectively. Additionally,
$276,000 and $257,000 of debt discount on the note was amortized as
interest expense during the three month periods ended March 31, 2004 and
2003, respectively.
3. The Company has a $10,000,000 line of credit agreement with LFC that has a
maturity date of February 28, 2007. Loans outstanding under this line of
credit bear interest at 10% per annum. At March 31, 2004, no amounts were
outstanding under this facility.
4. Basic and diluted income per share of common stock was calculated by
dividing the net income by the weighted average shares of common stock
outstanding, and for diluted income per share, the incremental weighted
average number of shares issuable upon exercise of outstanding options for
the periods they were outstanding. The number of shares used to calculate
basic income per common share was 8,217,893 and 8,155,084 for the three
month periods ended March 31, 2004 and 2003, respectively. The number of
shares used to calculate diluted income per share was 8,272,409 and
8,220,950 for the three month periods ended March 31, 2004 and 2003,
respectively.
5. Pursuant to the administrative services agreement, LFC provides
administrative services, including providing the services of one of the
Company's officers to the Company through December 31, 2004. Administrative
fees paid to LFC were $30,000 for the three month periods ended March 31,
2004 and 2003. A subsidiary of the Company sublets a portion of its office
space to Leucadia, for which it receives monthly rental fees in the amount
equal to Leucadia's pro rata share of the Company's cost. The rental fee is
approximately $6,000 per month.
6
Notes to Interim Consolidated Financial Statements, continued
6. Certain of the Company's lot purchase agreements with home builders include
provisions that entitle the Company to a share of the profits realized by
the home builders upon their sale of the homes, after certain thresholds
are achieved. The actual amount which could be received by the Company is
generally based on a formula and other specified criteria contained in the
lot purchase agreements, and is generally not payable and cannot be
determined with reasonable certainty until the builder has completed the
sale of a substantial portion of the homes covered by the lot purchase
agreement. The Company's policy is to accrue revenue earned pursuant to
these agreements when amounts are payable pursuant to the lot purchase
agreements. The Company accrued $300,000 under these agreements for the
three month period ended March 31, 2003.
7. In May 2004, the Company agreed to extend the lease covering its corporate
office space for an additional five years to February 2010. The annual
minimum rent is slightly less than the Company's current rate per square
foot; however, the agreement provides for rent escalation charges over the
extended term.
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Interim Operations.
Liquidity and Capital Resources
For the three month period ended March 31, 2004, net cash was provided by
operating activities, principally resulting from sales of real estate at the San
Elijo Hills project. For the three month period ended March 31, 2003, net cash
was used for operating activities, principally to pay interest and general and
administrative expenses and for real estate improvements. The Company's
principal sources of funds are proceeds from the sale of real estate, its
$10,000,000 line of credit with LFC, fee income from the San Elijo Hills
project, dividends and tax sharing payments from its subsidiaries and borrowings
from or repayment of advances by its subsidiaries. As of March 31, 2004, the
Company had aggregate cash, cash equivalents and investments of $112,000,000 to
meet its liquidity needs.
The Company currently has a $10,000,000 line of credit agreement with LFC, which
has a maturity date of February 28, 2007. Loans outstanding under this line of
credit bear interest at 10% per annum. As of March 31, 2004, no amounts were
outstanding under this facility.
In January 2004, a dividend of $50,000,000 was paid by the Company's subsidiary
that owns the San Elijo Hills project, of which $9,500,000 was paid to the
minority interests in the San Elijo Hills project, and the balance was retained
by the Company. In March 2004, the Company prepaid its $26,462,000 borrowing
from LFC in full, using its available cash.
During the three months ended March 31, 2004, the Company closed on the sales of
two neighborhoods in the San Elijo Hills project consisting of 94 single family
lots and 45 multi-family units for aggregate sales proceeds of $33,000,000, net
of closing costs. The sales proceeds included $3,100,000 of non-refundable
options payments that the Company had received previously in 2003. The Company
has deferred recognition of $10,700,000 of revenue from these sales since it is
required to complete certain improvements under the purchase agreements.
As of March 31, 2004, the aggregate balance of deferred revenue for all real
estate sales was $48,900,000, including amounts related to the 2004 sales. The
Company estimates that it will spend approximately $14,300,000 to complete the
required improvements, including costs related to common areas. The Company will
recognize revenues previously deferred and the related cost of sales in its
statements of operations as the improvements are completed under the percentage
of completion method of accounting. The Company currently estimates that it will
substantially complete the required improvements during 2004.
The remaining land at the San Elijo Hills project to be developed and sold or
leased consists of the following:
Single family lots to be developed and sold 736
Multi-family units 42
Very low income apartment units 70
School sites 2
Square footage of commercial space 135,000
The Company currently plans to develop and sell the residential sites during
2004 and 2005, after which the remaining activity at the San Elijo Hills project
will be primarily concentrated on the commercial sites. These estimates of
future property available for sale and the timing of the sales are derived from
the current plans for the project, and could change based upon the actions of
the project's home builders or regulatory agencies.
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Interim Operations, continued.
Results of Operations
Real Estate Sales Activity
San Elijo Hills Project:
------------------------
For the three month periods ended March 31, 2004 and 2003, the Company recorded
revenues from sales of real estate of approximately $37,600,000 and $7,000,000,
respectively. For the three month period ended March 31, 2004, the Company
closed on the sale of two neighborhoods, consisting of 94 single family lots and
45 multi-family units for an aggregate purchase price of $33,000,000, net of
closing costs. For the three month period ended 2003, no sales of real estate
closed. As discussed above, a portion of the revenue from sales of real estate
is deferred, and is recognized as revenues upon the completion of the required
improvements to the property, including costs related to common areas, under the
percentage of completion method of accounting. Included in revenues are
previously deferred amounts of $15,300,000 and $6,700,000 for the three month
periods ended March 31, 2004 and 2003, respectively, which were recognized upon
completion of certain required improvements.
Revenues from sales of real estate also include amounts received pursuant to
profit sharing agreements with home builders of $300,000 for the three month
period ended March 31, 2003.
During the three month periods ended March 31, 2004 and 2003, cost of sales of
real estate aggregated $8,700,000 and $2,300,000, respectively. Cost of sales is
recognized in the same proportion to the amount of revenue recognized under the
percentage of completion method of accounting.
Otay Ranch Project:
-------------------
As more fully described in the 2003 10-K, in January 2004 the City of Chula
Vista acquired 439 acres of mitigation land from Otay Land Company by eminent
domain proceedings for aggregate proceeds of approximately $5,800,000,
substantially all of which had been received as of December 31, 2003. The
Company recognized a pre-tax gain of approximately $4,800,000 on this
transaction during the first quarter of 2004. There was no other real estate
sales activity at the Otay Ranch project during the first quarter of 2004, and
no sale activity at all during the first quarter of 2003.
Other Results of Operations Activity
The Company recorded co-op marketing and advertising fees of $186,000 and
$380,000 for the three month periods ended March 31, 2004 and 2003,
respectively. The Company records these fees when the San Elijo Hills project
builders sell homes, and are generally based upon a fixed percentage of the
homes' selling price.
Interest expense reflects the interest due on indebtedness to LFC of $373,000
and $392,000 for the three month periods ended March 31, 2004 and 2003,
respectively. Interest expense also includes amortization of debt discount
related to the previously outstanding indebtedness to LFC of $276,000 and
$257,000 for the three month periods ended March 31, 2004 and 2003,
respectively. As described above, the note payable to LFC was fully repaid in
March 2004, and as such these related interest charges will not be incurred in
future periods. In addition, interest expense for 2004 includes $66,000 related
to the Rampage vineyard project as described in the 2003 10-K.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Interim Operations, continued.
General and administrative expenses increased during the three month period
ended March 31, 2004 as compared to the same period in 2003, primarily due to
greater expenses related to legal and professional fees, marketing and property
tax expenses. The increase in legal and professional fees principally reflects
costs related to the investigation of acquisition opportunities and costs
associated with the Otay Ranch project, including costs incurred in connection
with the acquisition of certain Otay Ranch land by the City of Chula Vista as
discussed above. Marketing expenses are higher as a result of promotional
expenses related to the next phase of residential lots to be sold at the San
Elijo Hills project. The increase in property tax expense relates to the Rampage
vineyard project, which was purchased in November 2003. General and
administrative expenses also reflect a decrease, as compared to the same period
in 2003, in compensation expenses related to performance options which fully
vested in April 2003.
Other income (expense) for the three month period ended March 31, 2004 includes
$1,470,000 for the remaining unamortized discount on the LFC note which was
expensed upon repayment of the note. Investment income in 2004 increased by
$240,000 as compared to the prior period primarily due to greater interest
income resulting from a larger amount of invested assets. Other income (expense)
for the 2003 period includes cash received to settle a dispute with one of the
Company's vendors.
The increase in minority interest expense for the three month period ended March
31, 2004 as compared to the same period in 2003 primarily relates to minority
interest in CDS Holding Corporation.
The Company's effective income tax rate in 2004 and 2003 is higher than the
federal statutory rate due to California state income taxes and state franchise
taxes.
Cautionary Statement for Forward-Looking Information
Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Interim Operations may contain forward-looking
statements. Such statements may relate, but are not limited, to projections of
revenues, income or loss, plans for growth and future operations, competition
and regulation as well as assumptions relating to the foregoing. Such
forward-looking statements are made pursuant to the safe-harbor provisions of
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are inherently subject to risks and uncertainties,
many of which cannot be predicted or quantified. When used in this 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.
In addition to risks set forth in the Company's other public filings with the
Securities and Exchange Commission, the following important factors could cause
actual results to differ materially from any results projected, forecasted,
estimated or budgeted:
o Changes in prevailing interest rate levels, including mortgage rates. Any
significant increase in the prevailing low mortgage interest rate
environment could reduce consumer demand for housing.
o Changes in domestic laws and government regulations or requirements and in
implementation and/or enforcement of governmental rules and regulations.
The Company's plans for its development projects require numerous
governmental approvals, licenses, permits and agreements, which must be
obtained before development and construction may commence. The approval
process can be delayed by withdrawals or modifications of preliminary
approvals, by litigation and appeals challenging development rights and by
changes in prevailing local circumstances or applicable laws that may
require additional approvals.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Interim Operations, continued.
o Changes in real estate pricing environments. Any significant decrease in
the prevailing price of real estate in the geographic areas in which the
Company owns, develops and sells real estate may adversely affect the
Company's results of operations.
o Regional or general increases in cost of living. Any significant increases
in the prevailing prices of goods and services that result in increased
costs of living, particularly in the regions in which the Company is
currently developing properties, may adversely affect consumer demand for
housing.
o Demographic and economic changes in the United States generally and
California in particular. The Company's operations are sensitive to
demographic and economic changes. Any economic downturn in the United
States in general, and California in particular, may adversely affect
consumer demand for housing by limiting the ability of people to save for
down payments and purchase homes. In addition, if the current trend of
population increases in California were not to continue, demand for real
estate in California may not be as robust as current levels indicate.
o Increases in real estate taxes and other local government fees. Any such
increases may make it more expensive to own the properties that the Company
is currently developing, which would increase the carrying costs to the
Company of owning the properties and decrease consumer demand for them.
o Significant competition from other real estate developers and homebuilders.
There are numerous residential real estate developers and development
projects operating in the same geographic area in which the Company
operates. Many of the Company's competitors may have advantages over the
Company, including greater financial resources and/or access to cheaper
capital.
o Decreased consumer spending for housing. Any decrease in consumer spending
for housing may directly affect the Company's results of operations.
o Delays in construction schedules and cost overruns. Any material delays
could adversely affect the Company's ability to complete its projects,
significantly increasing the costs of doing so, including interests costs,
or drive potential customers to purchase competitors' products. Cost
overruns, if material, could have a direct adverse impact on the Company's
results of operations.
o Availability and cost of land, materials and labor and increased
development costs, many of which the Company would not be able to control.
The Company's current and future development projects require the Company
to purchase significant amounts of land, materials and labor. If the costs
of these items increase, it will increase the costs to the Company of
completing its projects; if the Company is not able to recoup these
increased costs, its results of operations could be adversely affected.
o Damage to or condemnation of properties and occurrence of significant
natural disasters and fires. Damage to or condemnation of any of the
Company's properties, whether by natural disasters and fires or otherwise,
may either delay or preclude the Company's ability to develop and sell its
properties, or affect the price at which it may sell such properties.
o Imposition of limitations on the Company's ability to develop its
properties resulting from environmental laws and regulations and
developments in or new applications thereof. The residential real estate
development industry is subject to increasing environmental, building,
construction, zoning and real estate regulations that are imposed by
various federal, state and local authorities. Environmental laws may cause
the Company to incur additional costs, and adversely affect its ability to
complete its projects in a timely and profitable manner.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Interim Operations, continued.
o The inability to insure certain risks economically. The Company cannot be
certain that it will be able to insure certain risks economically.
o The availability of adequate water resources and reliable energy source in
the areas where the Company owns real estate projects. Any shortage of
reliable water and energy resources and drop in consumer confidence in the
dependability of such resources in areas where the Company owns land may
adversely affect the values of properties owned by the Company and curtail
development projects.
o Changes in the composition of the Company's assets and liabilities through
acquisitions or divestitures. The Company may make future acquisitions or
divestitures of assets. Any change in the composition of the Company's
assets and liabilities as a result thereof could significantly affect the
financial position of the Company and the risks that it faces.
o The actual cost of environmental liabilities concerning land owned in San
Diego County, California exceeding the amount reserved for such matter. The
actual cost of remediation of undeveloped land owned by a subsidiary could
exceed the amount reserved for such matter.
o The Company's ability to generate sufficient taxable income to fully
realize the deferred tax asset, net of the valuation allowance. The Company
and certain of its subsidiaries have NOLs and other tax attributes, but may
not be able to generate sufficient taxable income to fully realize the
deferred tax assets.
o The impact of inflation. The Company, as well as the real estate
development and homebuilding industry in general, may be adversely affected
by inflation, primarily because of either reduced rates of savings by
consumers during periods of low inflation or higher land and construction
costs during periods of high inflation.
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 Management's Discussion and
Analysis of Financial Condition and Results of Interim Operations or to reflect
the occurrence of unanticipated events.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Information required under this Item is contained in Item 7A of the Company's
Annual Report on Form 10-K for the year ended December 31, 2003, and is
incorporated by reference herein.
Item 4. Controls and Procedures.
(a) The Company's management evaluated, with the participation of the Company's
principal executive and principal financial officers, the effectiveness of
the Company's disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), as of March 31, 2004. Based on their
evaluation, the Company's principal executive and principal financial
officers concluded that the Company's disclosure controls and procedures
were effective as of March 31, 2004.
(b) There has been no change in the Company's internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) that occurred during the Company's fiscal quarter ended March 31,
2004, that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
31.1 Certification of President pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Vice President and Controller 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.
b) Reports on Form 8-K.
None.
13
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)
Date: May 5, 2004 By: /s/ Erin N. Ruhe
-----------------------
Erin N. Ruhe
Vice President, Treasurer
and Controller
(Principal Accounting Officer)
14
EXHIBIT INDEX
Exhibit Number Description
31.1 Certification of President pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Vice President and Controller 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.
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