<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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
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(Exact name of registrant as specified in its charter)
Delaware 33-0304982
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
529 East South Temple, Salt Lake City, Utah 84102
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(Address of principal executive offices) (Zip Code)
(801) 521-1066
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
Yes [X] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. On May 12, 1997,
there were 10,000,000 outstanding shares of the Registrant's Common Stock, par
value $.01 per share.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HomeFed Corporation and Subsidiaries
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
(Dollars in thousands, except par value)
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<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Land and real estate held for development $ 13,373 $ 13,528
Cash and cash equivalents 1,678 1,809
Restricted cash 1,083 1,085
Investments 72 71
Deposits and other assets 588 598
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TOTAL $ 16,794 $ 17,091
============== ==============
LIABILITIES
Notes payable to Leucadia Financial Corporation $ 24,584 $ 23,877
Accounts payable and accrued liabilities 256 376
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Total liabilities 24,840 24,253
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STOCKHOLDERS' DEFICIT
Common Stock, $.01 par value;
100,000,000 shares authorized;
10,000,000 shares outstanding 100 100
Additional paid-in capital 339,904 339,904
Accumulated deficit (348,050) (347,166)
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Total stockholders' deficit (8,046) (7,162)
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TOTAL $ 16,794 $ 17,091
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</TABLE>
See notes to interim consolidated financial statements.
2
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HomeFed Corporation and Subsidiaries
Consolidated Statements of Operations
For the three months ended March 31, 1997 and 1996
(Dollars in thousands, except per share amounts)
(Unaudited)
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<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Sales of residential properties $ 260 $ 1,347
Cost of sales 265 1,367
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Gross loss (5) (20)
Interest expense relating to Leucadia
Financial Corporation 707 760
Other interest expense - 3
General and administrative expenses 169 284
Management fees to Leucadia Financial
Corporation 29 38
---------- ----------
Loss from operations (910) (1,105)
Other income - net 37 55
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Loss before income taxes (873) (1,050)
Income tax expense (11) (29)
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Net loss $ (884) $ (1,079)
========== ==========
Primary loss per common share: $ (0.09) $ (0.11)
========== ==========
Fully diluted loss per common share: $ (0.09) $ (0.11)
========== ==========
</TABLE>
See notes to interim consolidated financial statements.
3
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HomeFed Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders' Deficit
For the three months ended March 31, 1997 and 1996
(Dollars in thousands)
(Unaudited)
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<TABLE>
<CAPTION>
Common
Stock Additional Total
$.01 Par Paid-In Accumulated Stockholders'
Value Capital Deficit Deficit
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996 $ 100 $ 339,904 $ (340,869) $ (865)
Net loss (1,079) (1,079)
------------- ------------- ------------- -------------
Balance, March 31, 1996 $ 100 $ 339,904 $ (341,948) $ (1,944)
============= ============= ============= =============
Balance, January 1, 1997 $ 100 $ 339,904 $ (347,166) $ (7,162)
Net loss (884) (884)
------------- ------------- ------------- -------------
Balance, March 31, 1997 $ 100 $ 339,904 $ (348,050) $ (8,046)
============= ============= ============= =============
</TABLE>
See notes to interim consolidated financial statements.
4
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HomeFed Corporation and Subsidiaries
Consolidated Statements of Cash Flows
For the three months ended March 31, 1997 and 1996
(Dollars in thousands)
(Unaudited)
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<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (884) $ (1,079)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Accrued interest added to notes payable to
Leucadia Financial Corporation 707 746
Changes in operating assets and liabilities:
Land and real estate held for development 155 485
Deposits and other assets 10 61
Accounts payable and accrued liabilities (120) (85)
Decrease in restricted cash 2 7
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Net cash provided by (used in) operating activities (130) 135
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CASH FLOWS FROM INVESTING ACTIVITIES
Increase in investments (1) -
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Net cash used in investing activities (1) -
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CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to notes payable to Leucadia Financial
Corporation - 632
Repayments of notes payable to Leucadia Financial
Corporation - (1,280)
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Net cash used in financing activities - (648)
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Net decrease in cash (131) (513)
Cash and cash equivalents, beginning of period 1,809 2,373
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Cash and cash equivalents, end of period $ 1,678 $ 1,860
========== ==========
</TABLE>
See notes to interim consolidated financial statements.
5
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HOMEFED CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies. The unaudited
interim consolidated financial statements, which reflect all
adjustments (consisting only of normal recurring items) that
management believes necessary to present fairly 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
audited consolidated financial statements for HomeFed
Corporation ("HomeFed" or the "Company") for the year ended
December 31, 1996 which are included in the Company's Annual
Report on Form 10-K for such year (the "1996 10-K"). Results
of operations for interim periods are not necessarily
indicative of annual results of operations. The consolidated
balance sheet at December 31, 1996 was extracted from the
Company's audited consolidated financial statements in the 1996
10-K, and does not include all disclosures required by
generally accepted accounting principles for annual financial
statements.
Certain amounts for prior periods have been reclassified to be
consistent with the 1997 presentation.
2. Chapter 11 Bankruptcy and Plan of Reorganization. On July 3,
1995, the Company emerged from Chapter 11 Bankruptcy
protection pursuant to its court approved plan of
reorganization (the "Plan"). The Plan was principally
funded by a $20,000,000 convertible note (the "Convertible
Note") issued to Leucadia Financial Corporation ("LFC"),
an indirect wholly-owned subsidiary of Leucadia National
Corporation, and by LFC's purchase of 2,700,000 newly
issued $.01 par value common shares ("Common Stock") of
the Company for $810,000.
As part of the Plan, the Company settled pending litigation
with the Resolution Trust Company (the "RTC") in its capacity
as receiver and conservator of HomeFed Bank, F.S.B. ("HomeFed
Bank"), a former subsidiary of the Company. Under the RTC
settlement, the Company paid the RTC $3,100,000 and the Company
received a receivership certificate from the RTC. The
receivership certificate was redeemed by the RTC for $1,402,000
which was paid to the Company. In addition, the RTC settlement
provides that the Company is entitled to receive $850,000 from
any tax refunds received by the RTC relating to HomeFed Bank
for years prior to 1992. The Company has not recorded an asset
related to such tax refunds and no assurances can be given that
any such tax refunds will actually be received.
Also under the Plan, general unsecured creditors, principally
the holders of the Company's convertible subordinated
debentures, received a pro rata share of (i) $16,900,000, (ii)
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the Company's rights to the RTC tax refund relating to HomeFed
Bank and the $1,402,000 receivership certificate proceeds,
(iii) 1,500,000 shares of Common Stock valued by the Bankruptcy
Court at $.30 per share, and (iv) an interest in the litigation
trust described below.
The Plan also provided for the issuance of 5,800,000 new shares
of Common Stock to the pre-effective date stockholders of the
Company and the old shares of common stock (approximately
21,484,000 shares) were canceled. As a result of shares
received as a general unsecured creditor and shares purchased
as described above, LFC owns approximately 41.2% of the
Company's Common Stock, without giving effect to the Common
Stock that LFC may acquire in the future pursuant to the terms
of the Convertible Note.
The Company's Restated Certificate of Incorporation contains
certain transfer restrictions with respect to the Company's
stock. Generally, such provisions restrict a person's ability
to accumulate 5% or more of the Company's Common Stock, as well
as the ability of a 5% stockholder to acquire additional shares
of Common Stock, in each case, after giving effect to numerous
rules of attribution, aggregation and calculation. In addition,
pursuant to the Plan, the Company is prohibited from issuing
additional shares of stock until July 3, 1999. The Company's
Restated Certificate of Incorporation further prohibits the
Company from issuing or redeeming any shares of stock as long
as the Convertible Note is outstanding. None of the foregoing
restrictions will prevent LFC's exchange of the Convertible
Note for Common Stock.
Certain pending claims are being prosecuted by a litigation
trust created for the benefit of the Company's creditors under
the Plan. Pursuant to the Plan, the Company loaned $250,000 to
the trust in order to pay litigation costs. The loan was
repaid with interest in 1996. The Company will not otherwise
receive any benefits from the litigation trust.
3. Earnings Per Share. Primary loss per share of Common Stock for
all periods presented was calculated by dividing net loss
by the 10,000,000 shares of Common Stock issued on July 3,
1995.
Fully diluted loss per share of Common Stock was calculated as
described above and, for the periods ended March 31, 1997 and
1996, conversion of the Convertible Note was not assumed since
the effect of such assumed conversion would have been to
decrease loss per share. The number of shares used to
calculate fully diluted loss per share was 10,000,000 for each
of the three-month periods ended March 31, 1997 and 1996.
4. Related Party Transactions. Notes payable consist primarily of
the Convertible Note issued to LFC and a note issued to
LFC as part of LFC's agreement to provide construction
financing to the Company, as described below. The
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Convertible Note bears interest at 12% per annum payable
quarterly; however, interest is only paid if the Company
has sufficient funds available, as determined pursuant to
the provisions of the loan agreement. Unpaid interest is
added to the principal balance each quarter. Interest
accrued during the period ended March 31, 1997 of $707,000
was not paid and was added to the principal balance as of
March 31, 1997.
The construction financing bears interest based on the prime
rate, and any unpaid interest is added to the principal balance
at the end of each month. Payments of principal and interest on
the loans are payable on demand, and if payments are not made
upon demand, the applicable interest rate is increased by 3%
per annum. A payment equal to 110% of the construction cost of
the property being released is required in order to release
property from the construction financing lien. No amounts were
outstanding under the construction financing as of March 31,
1997.
Pursuant to an Administrative Services Agreement dated March 1,
1996 (the "Administrative Services Agreement"), LFC has agreed
to provide administrative services to the Company for an annual
fee of $141,000, payable in monthly installments, through March
1, 1997. After March 1, 1997, the Administrative Services
Agreement provides that LFC and the Company will negotiate in
good faith to determine the compensation to be paid to LFC
under the Administrative Services Agreement for subsequent
periods. The Company and LFC have agreed that the fee to be
paid to LFC for the period from March 1, 1997 through March 1,
1998 will be $68,274. Although this fee is lower than the fee
paid in the prior year, the Company will now pay certain
expenses previously paid by LFC. The Administrative Services
Agreement will terminate on March 1, 1999; provided, however,
that LFC may terminate the Administrative Services Agreement
prior to March 1, 1999, upon 30 days' written notice, if the
Company and LFC are unable to reach an agreement regarding the
compensation to be paid to LFC for any period. Fees paid by
the Company to LFC totaled $29,000 for the three-month period
ended March 31, 1997.
8
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The purpose of this section is to discuss and analyze the
Company's consolidated financial condition, liquidity and capital
resources and results of operations. This analysis should be read
in conjunction with the Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the
Company's 1996 10-K.
General
The Company is a holding company primarily engaged in the
investment in and development of residential real estate projects
in Northern California, through its wholly-owned subsidiaries
HomeFed Communities, Inc. and HomeFed Resources Corporation. The
Company's subsidiaries enter into contracts with local builders and
developers to provide construction, marketing and management
services.
Liquidity and Capital Resources
For the three-month period ended March 31, 1997, net cash was
used by operating activities, principally to fund general and
administrative expenses. For the three-month period ended March
31, 1996, net cash was provided by operating activities,
principally from sales of real estate. The Company is a holding
company whose principal source of funds is dividends or borrowings
from its subsidiaries. As a result, the Company is dependent upon
the cash flow, if any, from the real estate development projects of
its subsidiaries in order to pay its expenses. The Company expects
such cash flows will be sufficient to cover overhead expenses and,
pending receipt of funds from the sale of certain lots to The
Forecast Group (Registered Trade Name), L.P. ("The Forecast Group"),
as described below, the Company expects cash flows may also be sufficient
to permit debt service payments on the Convertible Note beginning in 1997.
As more fully described in the 1996 10-K, no principal payments are
due on the Convertible Note until September 1998 and accrued
interest is only required to be paid under certain conditions. Any
unpaid interest is added to the principal balance of the note on a
quarterly basis.
LFC has agreed to provide up to an aggregate of $15,000,000 of
construction financing to certain of the Company's subsidiaries and
their affiliates while the Convertible Note is outstanding. The
construction financing is collateralized by certain assets of the
Company's subsidiaries or their affiliates, including real estate
under development. To facilitate the sale of property to home
buyers, LFC has agreed to release property from the construction
financing lien when it receives 110% of the assigned cost of
construction as a payment towards the outstanding loan. The
construction financing bears interest based upon the prime rate,
and any unpaid interest is added to the principal balance at the
end of each month. As of March 31, 1997, there was no outstanding
balance on the construction financing. The Company believes that
9
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the construction financing provided by LFC will be adequate to
complete its current development plans. Any additional financing
required from a lender other than LFC cannot be collateralized by
any of the Company's assets without LFC's consent. Accordingly,
the Company may be unable to obtain additional financing from
sources other than LFC.
On October 3, 1996, the Company entered into agreements with
The Forecast Group pursuant to which the Company agreed to sell a
total of 124 improved lots at the Paradise Valley project to The
Forecast Group for a total purchase price of $5,316,000. The sale
of 62 lots covered by the agreements closed on October 31, 1996 and
the Company received $2,670,000, less closing costs. The Company
applied all of the proceeds from the foregoing sales to reduce the
outstanding balance of the construction financing provided by LFC.
The sales of the remaining lots were originally scheduled to close
on May 1, 1997 and September 1, 1997; however, the Company agreed
to extend the May 1, 1997 closing date to May 28, 1997 for a
nonrefundable payment of $8,000. Subject to certain conditions, the
Company expects the sales of the remaining lots to close on May 28,
1997 and September 1, 1997, at which times the Company expects to
receive $1,010,000 and $1,636,000, respectively, less closing
costs. The Company has also granted options to The Forecast Group
to purchase 156 additional lots from the Company for a total
purchase price of $5,781,950. The option with respect to 81 of
these lots will become exercisable following the sale expected to
close on May 28, 1997, and the option with respect to the remaining
lots will become exercisable following the sale expected to close
on September 1, 1997, each as described above. The options expire
on May 1, 1998. It is uncertain whether the options will be
exercised; however, if such options are exercised, the Company
expects to use the proceeds from the sale of the lots covered by
such options for future real estate development, debt service
payments on the Convertible Note and for working capital needs.
Results of Operations
Sales of residential properties decreased in the 1997
period as compared to the 1996 period due to reduced sales of
trade home inventory. One new home was sold in each period presented.
Additionally, in the 1996 period, seven trade homes were sold. One new
home remained in inventory at March 31, 1997.
The decrease of cost of sales in the 1997 period as compared to
the 1996 period reflects the reduced level of sales. Gross profit
percentages reflect the mix of homes sold.
Interest expense for the 1997 and 1996 periods reflects the
interest due on the Convertible Note to LFC of approximately
$707,000 and $634,000, respectively, which was not paid and was
added to the principal balance of the note as stipulated under the
note agreement. Interest expense for the 1996 period also includes
interest due on the construction financing loan of $126,000
relating to substantially completed homes in inventory. An
additional $12,000 of interest on the construction financing loan
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relating to homes under construction was capitalized for the 1996
period. No interest expense was incurred on the construction
financing for the 1997 period.
Income tax expense for all periods presented principally
relates to state franchise taxes. The Company has not recorded
federal income tax benefits for its operating losses due to the
uncertainty of sufficient future taxable income which is required
in order to record such tax benefits.
11
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this report.
27 Financial Data Schedule
(b) No report on Form 8-K was filed during the quarter for
which this report is filed.
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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
/S/ Corinne A. Maki
-----------------------------------
CORINNE A. MAKI, Treasurer
(Authorized Signatory and
Principal Financial and
Accounting Officer)
Date: May 13, 1997
13
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INDEX TO EXHIBITS
Exhibits
27 Financial Data Schedule.
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
financial statements contained in the body of the accompanying Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,678
<SECURITIES> 72
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,794
<CURRENT-LIABILITIES> 0
<BONDS> 24,584
0
0
<COMMON> 100
<OTHER-SE> (8,146)
<TOTAL-LIABILITY-AND-EQUITY> 16,794
<SALES> 260
<TOTAL-REVENUES> 297
<CGS> 265
<TOTAL-COSTS> 265
<OTHER-EXPENSES> 198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 707
<INCOME-PRETAX> (873)
<INCOME-TAX> 11
<INCOME-CONTINUING> (884)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (884)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
