Summary of HOMEFED CORP – Yahoo! Finance
Form 10-K for HOMEFED CORP
Item 7. 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 consolidated financial statements, related footnote disclosures and “Cautionary Statements for Forward-Looking Information,” which appear elsewhere in this Report.
Liquidity and Capital Resources
The Company used net cash for operating activities of $8,950,000, $27,850,000 and $27,950,000 for the years ended December 31, 2009, 2008 and 2007, respectively, principally for real estate improvement expenditures at the San Elijo Hills project and for the payment of general and administrative expenses and federal and state income tax payments. The Company’s ability to generate positive cash flows from operating activities is dependent upon the amount and timing of real estate sales, principally at the San Elijo Hills project. Sales at the San Elijo Hills project have declined significantly since 2005, principally due to the weak residential housing market, and there has been only one residential lot sale transaction since June 2006. Information about the remaining real estate to be sold at the San Elijo Hills project is provided below. Because of the nature of its real estate projects, the Company does not expect operating cash flows will be consistent from year to year.
Throughout most of the period that the Company has been developing the San Elijo Hills project, the Company’s sales efforts have greatly benefited from a strong regional and national residential housing market. However, 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 has negatively affected sales and profits. The slowdown in residential sales has been exacerbated during the past three years 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 not kept pace with the early years of the project’s development; based on information obtained from homebuilders and other public sources, the Company estimates that total home sales (both new and re-sales) at the San Elijo Hills project were approximately 229 in 2009 as compared to 860 in 2004.
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