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EXCEL - IDEA: XBRL DOCUMENT - HOMEFED CORPFinancial_Report.xls
EX-32.2 - ERIH N. RUHE EXHIBIT 32.2 - HOMEFED CORPruheexhibit322.htm
EX-31.2 - ERIN N. RUHE EXHIBIT 31.2 - HOMEFED CORPruheexhibit312.htm
EX-31.1 - PAUL J. BORDEN EXHIBIT 31.1 - HOMEFED CORPbordenexhibit311.htm
EX-32.1 - PAUL J. BORDEN EXHIBIT 32.1 - HOMEFED CORPbordenexhibit321.htm





SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
__________

FORM 10-Q
 
 
[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2012
 
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
(State or other jurisdiction of
33-0304982
(I.R.S. Employer
incorporation or organization)
 
Identification Number)
1903 Wright Place, Suite 220, Carlsbad, California
(Address of principal executive offices)
92008
(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
 
 
           YES       X                                              NO           _____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  o
 
Accelerated filer  x
Non-accelerated filer    o
(Do not check if a smaller reporting company)
Smaller reporting company  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
                                                                            YES  ______                                       NO                X                           

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 November 5, 2012, there were 7,879,500 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
           
September 30, 2012 and December 31, 2011
           
(Dollars in thousands, except par value)
           
             
   
September 30,
   
December 31,
 
   
2012
   
2011
 
   
(Unaudited)
       
             
ASSETS
           
Real estate
  $ 113,174     $ 92,626  
Cash and cash equivalents
    18,025       40,820  
Investments available for sale (amortized cost of  $39,090 and $43,296)
    39,094       43,297  
Accounts receivable, deposits and other assets
    7,430       1,158  
Net deferred tax asset
    10,518       10,852  
                 
TOTAL
  $ 188,241     $ 188,753  
                 
LIABILITIES
               
Accounts payable and accrued liabilities
  $ 4,478     $ 3,120  
Non-refundable option payments
    10       350  
Liability for environmental remediation
    8,130       8,972  
Deferred revenue
    373       -  
Income taxes payable
    -       1,727  
Other liabilities
    138       155  
                 
      13,129       14,324  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
EQUITY
               
Common stock, $.01 par value; 25,000,000 shares authorized;
               
   7,879,500 shares outstanding, after deducting 395,409 shares held in treasury
    79       79  
Additional paid-in capital
    376,461       376,332  
Accumulated other comprehensive income
    3       1  
Accumulated deficit
    (218,468 )     (218,706 )
Total HomeFed Corporation common shareholders' equity
    158,075       157,706  
Noncontrolling interest
    17,037       16,723  
Total equity
    175,112       174,429  
                 
TOTAL
  $ 188,241     $ 188,753  
                 
                 
                 
 
 
See notes to interim consolidated financial statements.

 
2

 
 
 


HOMEFED CORPORATION AND SUBSIDIARIES
       
Consolidated Statements of Operations
                   
For the three and nine month periods ended September 30, 2012 and 2011
 
(In thousands, except per share amounts)
                   
(Unaudited)
                       
                         
   
For the Three Month
   
For the Nine Month
 
   
Period Ended September 30,
   
Period Ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
REVENUES
                       
Sales of real estate
  $ 3,971     $ 2,333     $ 7,321     $ 9,753  
Farming revenues
    4,962       4,733       4,962       4,733  
Rental income
    130       132       384       346  
Co-op marketing and advertising fees
    75       48       293       128  
      9,138       7,246       12,960       14,960  
                                 
EXPENSES
                               
Cost of sales
    2,632       831       3,264       4,850  
General and administrative expenses
    2,058       1,823       5,909       6,025  
Farming expenses
    991       935       2,618       2,493  
Administrative services fees to Leucadia National Corporation
    45       45       135       135  
      5,726       3,634       11,926       13,503  
                                 
Income from operations
    3,412       3,612       1,034       1,457  
                                 
Interest and other income
    30       52       82       345  
                                 
Income before income taxes and noncontrolling interest
    3,442       3,664       1,116       1,802  
Income tax provision
    (1,476 )     (1,579 )     (564 )     (836 )
                                 
Net income
    1,966       2,085       552       966  
Net income (loss) attributable to the noncontrolling interest
    (62 )     206       314       429  
                                 
Net income attributable to HomeFed Corporation common shareholders
  $ 2,028     $ 1,879     $ 238     $ 537  
                                 
                                 
Basic and diluted earnings per common share attributable to HomeFed Corporation common shareholders
  $ 0.26     $ 0.24     $ 0.03     $ 0.07  
                                 
                                 
                                 
                                 
                   
 
 
See notes to interim consolidated financial statements.

 
3

 





HOMEFED CORPORATION AND SUBSIDIARIES
                   
Consolidated Statements of Comprehensive Income (Loss)
             
For the periods ended September 30, 2012 and 2011
                   
(In thousands)
                       
(Unaudited)
                       
                         
   
For the Three Month
   
For the Nine Month
 
   
Period Ended September 30,
   
Period Ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
                         
Net income
  $ 1,966     $ 2,085     $ 552     $ 966  
Other comprehensive income (loss):
                               
Net unrealized holding gains (losses) on investments arising during the period, net of taxes of $0, $(2), $1 and $(2)
    2       (4 )     2       (3 )
                                 
Net change in unrealized holding gains (losses) on investments, net of taxes of $0, $(2), $1 and $(2)
    2       (4 )     2       (3 )
                                 
Other comprehensive income (loss), net of income taxes
    2       (4 )     2       (3 )
                                 
Comprehensive income
    1,968       2,081       554       963  
                                 
Comprensive (income) loss attributable to the noncontrolling interest
    62       (206 )     (314 )     (429 )
                                 
Comprehensive income attributable to HomeFed Corporation common shareholders
  $ 2,030     $ 1,875     $ 240     $ 534  
                                 
                           
 
 
 
See notes to interim consolidated financial statements.

 
4

 



HOMEFED CORPORATION AND SUBSIDIARIES
                                     
Consolidated Statements of Changes in Equity
                                         
For the nine month periods ended September 30, 2012 and 2011
                               
(In thousands, except par value)
                                         
(Unaudited)
                                         
                                           
   
HomeFed Corporation Common Shareholders
               
   
Common
         
Accumulated
                         
   
Stock
   
Additional
   
Other
                         
   
$.01 Par
   
Paid-In
   
Comprehensive
   
  Accumulated
   
Noncontrolling
       
   
Value
   
Capital
   
Income
   
Deficit
   
Subtotal
   
Interest
   
Total
 
                                           
                                           
                                           
                                           
Balance, January 1, 2011
  $ 79     $ 376,110     $ 3     $ (223,197 )   $ 152,995     $ 15,117     $ 168,112  
                                                         
Net income
                            537       537       429       966  
Other comprehensive loss, net of taxes
                    (3 )             (3 )             (3 )
Share-based compensation expense
            169                       169               169  
                                                         
Balance, September 30, 2011
  $ 79     $ 376,279     $ -     $ (222,660 )   $ 153,698     $ 15,546     $ 169,244  
                                                         
Balance, January 1, 2012
  $ 79     $ 376,332     $ 1     $ (218,706 )   $ 157,706     $ 16,723     $ 174,429  
                                                         
Net income
                            238       238       314       552  
Other comprehensive income, net of taxes
              2               2               2  
Share-based compensation expense
            129                       129               129  
                                                         
Balance, September 30, 2012
  $ 79     $ 376,461     $ 3     $ (218,468 )   $ 158,075     $ 17,037     $ 175,112  
                                                         
                                           
 
 
 
See notes to interim consolidated financial statements.

 
5

 



 


HOMEFED CORPORATION AND SUBSIDIARIES
           
Consolidated Statements of Cash Flows
           
For the nine month periods ended September 30, 2012 and 2011
           
(In thousands)
           
(Unaudited)
           
             
   
2012
   
2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 552     $ 966  
Adjustments to reconcile net income to net cash used for
               
   operating activities:
               
Provision for deferred income taxes
    333       959  
Share-based compensation expense
    129       169  
Depreciation and amortization of property, equipment and leasehold
               
improvements
    185       183  
Accretion of discount on investments available for sale
    (28 )     (41 )
Changes in operating assets and liabilities:
               
Real estate
    (3,279 )     29  
Accounts receivable, deposits and other assets
    (6,339 )     (4,913 )
Non-refundable option payments
    (340 )     1,350  
Accounts payable and accrued liabilities
    1,358       (998 )
Liability for environmental remediation
    (842 )     (535 )
Income taxes receivable/payable
    (1,769 )     (2,209 )
Deferred revenue
    373       -  
Other liabilities
    (17 )     (98 )
Net cash used for operating activities
    (9,684 )     (5,138 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Acquisition of real estate
    (17,345 )     (11,000 )
Purchases of investments (other than short-term)
    (64,166 )     (70,174 )
Proceeds from maturities of investments available for sale
    68,400       65,200  
Net cash used for investing activities
    (13,111 )     (15,974 )
                 
Net decrease in cash and cash equivalents
    (22,795 )     (21,112 )
                 
Cash and cash equivalents, beginning of period
    40,820       43,788  
                 
Cash and cash equivalents, end of period
  $ 18,025     $ 22,676  
                 
Supplemental disclosures of cash flow information:
               
Cash paid for income taxes
  $ 2,000     $ 2,200  
                 
                 
 
 
See notes to interim consolidated financial statements.

 
6

 


HOMEFED CORPORATION AND SUBSIDIARIES
Notes to Interim Consolidated Financial Statements

1.      Significant Accounting Policies

The unaudited interim consolidated financial statements, which reflect all adjustments (consisting of normal recurring items or items discussed herein) that management believes necessary to fairly state 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, 2011, which are included in the Company’s Annual Report filed on Form 10-K for such year (the “2011 10-K”).  Results of operations for interim periods are not necessarily indicative of annual results of operations.  The consolidated balance sheet at December 31, 2011 was extracted from the audited annual consolidated financial statements and does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements.

Effective January 1, 2012, the Company adopted new Financial Accounting Standards Board (“FASB”) guidance with respect to the improvement of the comparability of fair value measurements presented and disclosed in financial statements issued in accordance with GAAP and International Financial Reporting Standards.  The amendment includes requirements for measuring fair value and for disclosing information about fair value measurements, but does not require additional fair value measurements and is not intended to establish valuation standards or affect valuation practices outside of financial reporting.  The guidance did not have any impact on the Company’s consolidated financial statements.

Effective January 1, 2012, the Company adopted new FASB guidance on the presentation of comprehensive income.  This amendment eliminated the previous option to report other comprehensive income and its components in the statement of changes in equity; instead, it requires the presentation of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  This amendment was applied retrospectively.  Adoption of this amendment changed the presentation of the Company’s consolidated financial statements but did not have any impact on its consolidated financial position, results of operations or cash flows.

Effective January 1, 2012, the Company adopted new FASB guidance with respect to the simplification of how entities test for goodwill impairment. This amendment permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The guidance did not have any impact on the Company’s consolidated financial statements.

Certain amounts for prior periods have been reclassified to be consistent with the 2012 presentation.

2.
Income Taxes

The Company does not have any amounts in its consolidated balance sheet for unrecognized tax benefits related to uncertain tax positions at September 30, 2012.  The statute of limitations with respect to the Company’s federal income tax returns has expired for all years through 2008 and with respect to California state income tax returns has expired for all years through 2007.

 
7

 


3.
Earnings Per Common Share

Basic and diluted earnings per share amounts were calculated by dividing net earnings by the weighted average number of common shares outstanding. The numerators and denominators used to calculate basic and diluted earnings per share for the three and nine month periods ended September 30, 2012 and 2011 are as follows (in thousands):

   
For the three months
   
For the nine months
 
   
ended September 30,
   
ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
Numerator – net income attributable to
   HomeFed Corporation common shareholders
  $ 2,028     $ 1,879     $ 238     $ 537  
                                 
Denominator for basic and diluted earnings per share– weighted average shares
    7,880       7,880       7,880       7,880  

Options to purchase 96,500 and 97,833 weighted average shares of common stock for the three and nine month periods ended September 30, 2012, respectively, were outstanding but were not included in the computation of diluted earnings per share primarily because the options’ exercise price was greater than the average market prices of the common shares for their respective periods.  Options to purchase 104,500 weighted average shares of common stock were outstanding for the three and nine month periods ended September 30, 2011, but were not included in the computation of diluted earnings per share primarily because the options’ exercise price was greater than the average market prices of the common shares for their respective periods.

4.
Related Party Transactions

Pursuant to an administrative services agreement, Leucadia National Corporation (“Leucadia”) provides administrative and accounting services, including providing the services of the Company’s Secretary.  Administrative services fee expenses were $45,000 and $135,000 for each of the three and nine month periods ended September 30, 2012 and 2011, respectively.  The administrative services agreement automatically renews for successive annual periods unless terminated in accordance with its terms.  The Company subleases office space to Leucadia under a sublease agreement until February 2013.  Amounts reflected in other income pursuant to this agreement were $3,000 for each of the three month periods ended September 30, 2012 and 2011, and $9,000 for each of the nine month periods ended September 30, 2012 and 2011.

5.
Interest and Other Income

Interest and other income includes interest income of $20,000 and $40,000 for the three month periods ended September 30, 2012 and 2011, respectively, and $60,000 and $170,000 for the nine month periods ended September 30, 2012 and 2011, respectively.

6.
Financial Instruments

The Company’s material financial instruments include cash and cash equivalents and investments classified as available for sale; investments classified as available for sale are the only assets or liabilities that are measured at fair value on a recurring basis.  All of the Company’s investments mature in one year or less.  The par value, amortized cost, gross unrealized gains and losses and estimated fair value of investments classified as available for sale as of September 30, 2012 and December 31, 2011 are as follows (in thousands):


 
8

 





                           
Fair Value Measurements Using
       
                           
Quoted Prices in
Active Markets
   
Significant
Other
       
   
Par
   
Amortized
   
Gross
Unrealized
   
Gross
Unrealized
   
for
Identical Assets
   
Observable
Inputs
   
Total
Fair Value
 
   
Value
   
Cost
   
Gains
   
Losses
   
(Level 1)
   
(Level 2)
   
Measurements
 
                                           
 September 30, 2012
                                         
  U.S. Treasury securities
  $ 39,100     $ 39,090     $ 4     $ -     $ 39,094     $ -     $ 39,094  
                                                         
 December 31, 2011
                                                       
  U.S. Treasury securities
  $ 43,300     $ 43,296     $ 1     $ -     $ 43,297     $ -     $ 43,297  

As of September 30, 2012, the Company did not have any assets or liabilities measured at fair value on a nonrecurring basis.

For cash and cash equivalents, the carrying amounts of such financial instruments approximate their fair values.

The Company does not invest in any derivatives or engage in any hedging activities.

7.  
Real Estate Activity

In February 2012, the Company acquired approximately 450 acres of land in Virginia Beach, Virginia for cash consideration of $17,350,000 including closing costs.  The Ashville Park project is entitled for 451 single family lots; at acquisition 91 lots were finished and available for sale.  During the third quarter of 2012, the Company sold 31 lots for net cash consideration of $4,350,000.  In October 2012, the Company sold 22 lots for net cash consideration of $3,400,000.  Since the Company is obligated to complete certain improvements to the property sold, 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.

In March 2012, the Company sold 18 single family lots at San Elijo Hills to a homebuilder for aggregate cash proceeds of $3,350,000, pursuant to which it had previously received a non-refundable option payment of $350,000 in 2011, and recognized a gain of $2,700,000.

As of November 5, 2012, the Company has entered into an agreement to sell an aggregate of 54 single family residential lots at the San Elijo Hills project to a homebuilder for aggregate cash proceeds of $17,550,000, for which it has received a non-refundable option deposit of $1,750,000 in October 2012.  The option payment is non-refundable if the Company fulfills its obligations under the agreement, and will be applied to reduce the amount due from the purchaser at closing.  Although this agreement is binding on the purchaser, should the Company fulfill its obligations under the agreement within the specified timeframes and the purchaser decides not to close, the Company’s recourse will be primarily limited to retaining the option payment.

8.  
Stock Options

On July 9, 2012, options to purchase an aggregate of 6,000 shares of common stock were granted to the members of the Board of Directors under the Company’s 1999 Stock Incentive Plan at an exercise price of $22.35 per share.

9.  
Subsequent Event

In October 2012, the Company purchased 52 single family lots at the San Elijo Hills project that had been sold to a homebuilder in 2005 and 2006 for $31,200,000.  Included on six of the lots are finished model homes that will require some renovation prior to being sold. The lots were purchased for cash consideration of $12,200,000; in addition, the lots are encumbered by a municipal bond financing of approximately $2,750,000, funds that were used by the prior owner for infrastructure.  The Company has not as yet determined whether it will retain the financing or repay it.  The Company had previously deposited $1,200,000 into escrow for this transaction, which was classified with other assets at September 30, 2012.


 
9

 
 
 


Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Interim Operations.

Liquidity and Capital Resources

For the nine month periods ended September 30, 2012 and 2011, net cash was used for operating activities, principally for real estate project expenditures, general and administrative expenses, farming expenses at the Rampage property and estimated federal and state tax payments.  The Company’s principal sources of funds are proceeds from the sale of real estate, fee income from the San Elijo Hills project, dividends and tax sharing payments from its subsidiaries, farming income related to grape sales at the Rampage property, borrowings from or repayment of advances by its subsidiaries and cash and cash equivalents and investments.  As of September 30, 2012, the Company had aggregate cash, cash equivalents and investments of $57,100,000 to meet its current liquidity needs and for future investment opportunities.

As of September 30, 2012, the remaining land at the San Elijo Hills project to be developed and sold or leased consisted of the following (including real estate under contract for sale):


Single family lots
    266  
Multi-family units
    11  
Square footage of commercial space
    37,800  

In October 2012, the Company purchased 52 single family lots at the San Elijo Hills project that had been sold to a homebuilder in 2005 and 2006 for $31,200,000.  Included on six of the lots are finished model homes that will require some renovation prior to being sold. The lots were purchased for cash consideration of $12,200,000; in addition, the lots are encumbered by a municipal bond financing of approximately $2,750,000, funds that were used by the prior owner for infrastructure.  The Company has not as yet determined whether it will retain the financing or repay it.  The Company had previously deposited $1,200,000 into escrow for this transaction, which was classified with other assets at September 30, 2012.

In March 2012, the Company sold 18 single family lots at San Elijo Hills to a homebuilder for aggregate cash proceeds of $3,350,000, pursuant to which it had previously received a non-refundable option payment of $350,000 in 2011, and recognized a gain of $2,700,000.  These lots were originally zoned and designated for multi-family residential development, but the buyer was able to obtain approval from the City to convert the designation to single family lots.

As of November 5, 2012, the Company has entered into an agreement to sell an aggregate of 54 single family residential lots at the San Elijo Hills project to a homebuilder for aggregate cash proceeds of $17,550,000, for which it has received a non-refundable option deposit of $1,750,000 in October 2012.  The option payment is non-refundable if the Company fulfills its obligations under the agreement, and will be applied to reduce the amount due from the purchaser at closing.  Although this agreement is binding on the purchaser, should the Company fulfill its obligations under the agreement within the specified timeframes and the purchaser decides not to close, the Company’s recourse will be primarily limited to retaining the option payment.

As more fully discussed in the 2011 10-K, residential property sales volume, prices and new building starts have declined significantly in many U.S. markets, including California and the greater San Diego region, which have negatively affected sales and profits at the San Elijo Hills project.  The slowdown in residential sales has been exacerbated by the turmoil in the mortgage lending and credit markets, which has resulted in stricter lending standards and reduced liquidity for prospective home buyers.  Sales of new homes and re-sales of existing homes have declined substantially from the early years of the project’s development.

 
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Recent homebuilder interest and sales activity at the San Elijo Hills project are encouraging; however, it is too soon to determine if the long slump in the housing market is coming to an end, or when the Company will be able to sell its remaining inventory.  The Company believes that by exercising patience and waiting for market conditions to improve it can best maximize shareholder value with its remaining residential lot inventory.  On an ongoing basis the Company evaluates the local real estate market and economic conditions in general, and updates its expectations of future market conditions as it continues to assess the best time to market its remaining residential lot inventory for sale.  Although development has been completed on all of the remaining residential single family lots at the San Elijo Hills project to the same degree as lots previously sold, the Company has recently determined to further develop some of the remaining lots at the project to enhance sales value.  Additional development work will include the extension of sewer, water, storm drain, road and curb improvements from the neighborhood boundary to individual lots.  The Company has not determined whether all of the remaining lots will be further developed.

In February 2012, the Company acquired approximately 450 acres of land in Virginia Beach, Virginia for cash consideration of $17,350,000 including closing costs.  The Ashville Park project is entitled for 451 single family lots; at acquisition 91 lots were finished and available for sale.  During the third quarter of 2012, the Company sold 31 lots for net cash consideration of $4,350,000.  In October 2012, the Company sold 22 lots for net cash consideration of $3,400,000.  Since the Company is obligated to complete certain improvements to the property sold, 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.

 
 
Results of Operations

Real Estate Sales Activity

San Elijo Hills Project:

There were no sales of real estate during the three month period ended September 30, 2012. During the three month period ended September 30, 2011 and the nine months ended September 30, 2012 and 2011, the Company closed on sales of real estate and recognized revenues as follows:


   
For the three month
   
For the nine month
 
   
period ended
   
periods ended
 
   
September 30, 2011
   
September 30, 2012
   
September 30, 2011
 
                   
Single family units
    -       18       32  
Multi-family units
    -       -       -  
Residential condominium units
    1       -       2  
Commercial lot sales- planned square feet
    11,200       -       11,200  
Sales price
  $ 2,350,000     $ 3,350,000     $ 9,750,000  

During the three month period ended September 30, 2011, cost of sales of real estate aggregated $850,000, and during the nine month periods ended September 30, 2012 and 2011, cost of sales of real estate aggregated $650,000 and $4,850,000, respectively.

Otay Ranch Project:

There was no real estate sales activity at the Otay Ranch project during the three and nine months ended September 30, 2012 and 2011.  As discussed in the 2011 10-K, the Company continues to evaluate how to maximize the value of this investment while pursuing land sales and processing further entitlements on portions of its property.  The Otay Ranch project is in the early stages of development; as a result, the Company does not expect any sales activity in the near future.

 
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Ashville Park Project:

During the three and nine month periods ended September 30, 2012, the Company closed on sales of real estate and recognized revenues as follows:

Single family units
    31  
Sales price, net of closing costs
  $ 4,350,000  
Revenues recognized on closing date
  $ 3,950,000  

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.
 
 
During the three and nine month periods ended September 30, 2012, cost of sales of real estate aggregated $2,600,000.  Cost of sales is recognized in the same proportion to the amount of revenue recognized under the percentage of completion method of accounting.
 
 
Other Results of Operations Activity

Farming revenues increased by $200,000 during the three and nine month periods ended September 30, 2012 as compared to the same periods in 2011 as a result of higher yields.

Rental income increased by $40,000 during the nine month period ended September 30, 2012 as compared to the same period in 2011 due to the addition of two retail tenants.

The Company recorded co-op marketing and advertising fees of $70,000 and $50,000 for the three month periods ended September 30, 2012 and 2011, respectively, and $290,000 and $130,000 for the nine month periods ended September 30, 2012 and 2011, 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.  These fees provide the Company with funds to conduct its marketing activities.

General and administrative expenses increased during the three month period ended September 30, 2012 as compared to the same period in 2011 primarily due to higher legal and professional fees.  The increase in legal expenses relates to environmental litigation at the Fanita Ranch property that was in process at the date of acquisition.  The increase in professional fees primarily relates to activity at the Ashville Park project.

General and administrative expenses decreased slightly during the nine month period ended September 30, 2012 as compared to the same period in 2011 primarily due to lower legal expenses.  Legal expenses for the nine month period ended September 30, 2012 decreased due to lower legal fees associated with litigation brought by a minority shareholder against one of the Company's subsidiaries related to the San Elijo Hills project.  Legal expenses for the nine month period ended September 30, 2012 includes legal fees regarding the environmental litigation at the Fanita Ranch property that was in process at date of acquisition.  The Company also incurred higher professional and travel expenses related to activity at the Ashville Park project during 2012.

The change in interest and other income for the three and nine month periods ended September 30, 2012 as compared to the same periods in 2011 reflect a moderate decline in interest income due to lower interest rates and less invested assets.  The nine month 2011 period also includes $150,000 of income relating to proceeds received from the settlement of a contract dispute.

The Company’s effective income tax rate is higher than the federal statutory rate due to state income taxes.

 
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Cautionary Statement for Forward-Looking Information

Statements included in this Report may contain forward-looking statements.  Such statements may relate, but are not limited, to projections of revenues, income or loss, development expenditures, 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 Report, 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.

Factors that could cause actual results to differ materially from any results projected, forecasted, estimated or budgeted or may materially and adversely affect the Company’s actual results include but are not limited to the following: the performance of the real estate industry in general; changes in mortgage interest rate levels or changes in consumer lending practices that reduce demand for housing; recent turmoil in the mortgage lending markets; the economic strength of the Southern California region where our business is currently concentrated; changes in domestic laws and government regulations or in the implementation and/or enforcement of government rules and regulations; demographic changes in the United States generally and California in particular that reduce the demand for housing; increases in real estate taxes and other local government fees; significant competition from other real estate developers and homebuilders; delays in construction schedules and cost overruns; increased costs for land, materials and labor; imposition of limitations on our ability to develop our properties resulting from condemnations, environmental laws and regulations and developments in or new applications thereof; earthquakes, fires and other natural disasters where our properties are located; construction defect liability on structures we build or that are built on land that we develop; our ability to insure certain risks economically; shortages of adequate water resources and reliable energy sources in the areas where we own real estate projects; changes in the composition of our assets and liabilities through acquisitions or divestitures; the actual cost of environmental liabilities concerning our land could exceed liabilities recorded; opposition from local community or political groups at our development projects; and our ability to generate sufficient taxable income to fully realize our deferred tax asset.  For additional information see Part I, Item 1A. Risk Factors in the 2011 10-K.

Undue reliance should not be placed on these forward-looking statements, which are applicable only as of the date hereof.  The Company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this Report or to reflect the occurrence of unanticipated events.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

Information required under this Item is contained in Item 7A of the 2011 10-K, and is incorporated by reference herein.

Item 4.  Controls and Procedures.

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 September 30, 2012.  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 September 30, 2012.

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 September 30, 2012, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


 
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PART II – OTHER INFORMATION


Item 6.                      Exhibits.

 
31.1
Certification of President pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 
31.2
Certification of Vice President, Treasurer 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.

 
101
Financial statements from the Quarterly Report on Form 10-Q of HomeFed Corporation for the quarter ended September 30, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.



 
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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  
     (Registrant)  
       
Date:  November 6, 2012
By:
/s/            Erin N. Ruhe  
    Name:      Erin N. Ruhe  
    Title:        Vice President, Treasurer and Controller  
                     (Principal Accounting Officer)  






 
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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, Treasurer 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.

 
101
Financial statements from the Quarterly Report on Form 10-Q of HomeFed Corporation for the quarter ended September 30, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements.


 
 
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