Dominion Homes, Inc. (NASDAQ:DHOM) today announced financial
results for the three and twelve months ended December 31, 2005.
Highlights for the twelve months ended December 31, 2005 compared
to the twelve months ended December 31, 2004 include: -- Revenues
of $415.7 million, from the delivery of 2,146 homes, versus
revenues of $542.0 million, from the delivery of 2,837 homes; --
Net income of $5.3 million, or $0.65 per diluted share, versus net
income of $20.2 million, or $2.47 per diluted share; -- Sales of
1,944 homes, with a sales value of $370.6 million, versus sales of
2,450 homes, with a sales value of $460.3 million; and -- Backlog
of 430 sales contracts, with an aggregate sales value of $89.7
million, versus backlog of 632 sales contracts, with an aggregate
sales value of $127.5 million. The Company's year-end backlog for
2005 was the lowest in several years and reflects a slowdown in
home sales that began during the second quarter of 2004 and
continued throughout 2005. The Company's land position, which had
grown in response to sales levels that were achieved in 2002 and
2003, became disproportionate to the lower demand for its homes
experienced during 2004 and 2005. As a result, the Company began to
aggressively reduce its land position during 2005. The Company sold
land with a cost of $16.6 million, including $15.9 million during
the three months ended December 31, 2005. In addition, the Company
wrote-off or reserved approximately $6.5 million of land costs,
including $3.5 million during the three months ended December 31,
2005. These write-offs and reserves primarily related to deposits
and due diligence expenses for land the Company decided not to
purchase. The Company's Chief Executive Officer, Douglas G. Borror,
commented "We continue to focus on improving our sales, lowering
our overhead expenses and bringing our investment in undeveloped
land and developed lots in line with current sales levels. We are
offering selective discounts on our homes to improve sales that are
expected to reduce our gross margin for the year. Due to our low
backlog at the end of 2005 and the anticipated reduction in our
gross margin, we do not expect to be profitable for the first
quarter of 2006. We are positioned to remain a leading homebuilder
in our markets and will continue to introduce new products and
communities." The Company will host an analyst conference call at
10:00 a.m. Eastern Time on February 28, 2006 to discuss 2005
results and other developments in the business. The analyst call
will be webcast in listen-only mode via Dominion Homes' website,
www.dominionhomes.com. For those who can not listen to the live
webcast, an archived replay will be available at
www.dominionhomes.com beginning at approximately 11:30 a.m. Eastern
Time on February 28, 2006, and continuing for approximately 90
days. Interested parties may listen in by accessing the Company's
website, selecting "About Dominion Homes" and then selecting
"Investor Relations." Dominion Homes offers a variety of homes,
which are differentiated by size, price, standard features and
available options. The Company's "The Best of Everything(R)"
philosophy focuses on providing its customers with unsurpassed
products, quality, and customer service. Additional information
about the Company and its homes is located on its website.
Additional Financial Highlights Overview In the second quarter of
2004 the Company began to experience a drop-off in home sales in
each of its markets that continued throughout 2005. This decline is
reflective of a general downturn in the Midwest, and more
specifically the Central Ohio market, which experienced a 21%
decline in new home sales from 2004 to 2005. In response to this
decline in demand, the Company has focused on improving sales,
better managing overhead expenses and reducing land inventories.
Twelve months ended December 31, 2005 Revenues During 2005 the
Company delivered 2,146 homes with revenues of $415.7 million,
compared to 2,837 homes with revenues of $542.0 million during
2004. The average price of homes delivered during 2005 increased to
$191,300 from $188,100 for 2004. Net Income Net income for 2005 was
$5.3 million, or $0.65 per diluted share, compared to net income of
$20.2 million, or $2.47 per diluted share, for 2004. The decline in
net income from 2004 to 2005 reflects lower unit sales and a
decline in the gross profit margin from 22.1% in 2004 to 20.2% in
2005. Gross Profit Gross profit for 2005 was $84.0 million compared
to $119.6 million for 2004, due primarily to the lower number of
closings in 2005. Cost of real estate sold for 2005 includes
reserves and write-offs of costs and deposits for land the Company
decided not to purchase of approximately $6.5 million and gains on
land sales of $1.9 million. Cost of real estate sold for 2004
includes similar reserves and write-offs of costs and deposits for
land the Company decided not to purchase of approximately $4.8
million. The decline in 2005 gross profit as a percent of sales
primarily reflects higher sales discounts offered by the Company
and increased land and building costs during 2005. Selling, General
and Administrative Expense Selling, general and administrative
expense for 2005 declined to $64.5 million from $77.9 million for
2004. The reduction in overhead expenses was due primarily to a
reduction in headcount, stricter cost controls and lower sales and
incentive compensation expenses as a result of decreased home
deliveries and net income. Interest Expense and Provision for
Income Taxes Interest expense for 2005 increased to $12.1 million
from $8.2 million for 2004 due to increased borrowings for
investment in real estate and higher interest rates. Income tax
expense for 2005 decreased to $2.1 million from $13.3 million for
2004. The annual effective tax rate decreased to 28.7% for 2005
from 39.6% for 2004 primarily due to a reduction of estimated tax
liabilities for prior years resulting from favorable tax audit
settlements and statutory tax law changes in Ohio and Kentucky.
These reductions were somewhat offset by estimated additional state
tax reserves related to previously filed tax returns. Sales The
Company sold 1,944 homes during 2005, representing a sales value of
$370.6 million, compared to 2,450 homes sold during 2004,
representing a sales value of $460.3 million. The average home sale
price for 2005 was $190,600 compared to $187,900 for 2004. The
Company's backlog on December 31, 2005 was 430 sales contracts,
with an aggregate sales value of $89.7 million, compared to a
backlog on December 31, 2004 of 632 sales contracts, with an
aggregate sales value of $127.5 million. The average sales value of
homes in backlog at December 31, 2005 was $208,500 compared to
$201,800 at December 31, 2004. The Company had 64 active
communities during the fourth quarter of 2005 compared to 60 during
the fourth quarter of 2004. Three months ended December 31, 2005
Revenues During the three months ended December 31, 2005 the
Company delivered 571 homes with revenues of $111.5 million,
compared to 605 homes with revenues of $115.5 million, for the same
period of the previous year. The average price of homes delivered
during the three months ended December 31, 2005 was $193,000
compared to $186,900 for the three months ended December 31, 2004.
Net Income Net income for the three months ended December 31, 2005
was $991,000, or $0.12 per diluted share, compared to net income of
$1.0 million, or $0.12 per diluted share, for the three months
ended December 31, 2004. Gross Profit Gross profit for the three
months ended December 31, 2005 was $19.4 million compared to $22.4
million for the three months ended December 31, 2004. Selling,
General and Administrative Expense Selling, general and
administrative expense for the three months ended December 31, 2005
declined by $3.1 million to $15.1 million from $18.2 million for
the three months ended December 31, 2004. Interest Expense and
Provision for Income Taxes Interest expense for the three months
ended December 31, 2005 increased to $3.3 million from $2.1 million
for the three months ended December 31, 2004 primarily due to
increased borrowings for investment in real estate and higher
interest rates. Income tax expense for the three months ended
December 31, 2005 decreased to $34,000 from $1.2 million for the
three months ended December 31, 2004. The Company recorded lower
than expected tax expense during the three months ended December
31, 2005 primarily as a result of lower income and the recognition
of the impact of statutory tax law changes in Ohio and Kentucky.
Sales The Company sold 230 homes during the three months ended
December 31, 2005, representing a sales value of $44.9 million,
compared to 392 homes sold during the three months ended December
31, 2004, representing a sales value of $75.0 million. The average
home sale price for the three months ended December 31, 2005 was
$195,300 compared to $191,400 for the three months ended 2004.
Certain statements in this news release are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements involve known and unknown
risks, uncertainties and other factors that may cause actual
results to differ materially. Such risks, uncertainties and other
factors include, but are not limited to, weather conditions,
changes in general economic conditions, fluctuations in interest
rates, increases in raw materials and labor costs, levels of
competition, costs and outcome of legal and regulatory proceedings
and other factors described in the Company's Annual Report and Form
10-K for the year ended December 31, 2004. All forward-looking
statements made in this press release are based on information
presently available to the management of the Company. The Company
assumes no obligation to update any forward-looking statements. -0-
*T FINANCIAL HIGHLIGHTS (Unaudited) (In thousands, except share and
per share amounts) Consolidated Statements of Operations Three
Months Ended Twelve Months Ended December 31, December 31, 2005
2004 2005 2004 ----------- ----------- ------------ -----------
Revenues $111,520 $115,494 $415,700 $541,970 Cost of real estate
sold 92,104 93,095 331,684 422,327 ----------- -----------
------------ ----------- Gross profit 19,416 22,399 84,016 119,643
Selling, general and administrative 15,124 18,167 64,475 77,936
----------- ----------- ------------ ----------- Income from
operations 4,292 4,232 19,541 41,707 Interest expense 3,267 2,056
12,068 8,236 ----------- ----------- ------------ -----------
Income before income taxes 1,025 2,176 7,473 33,471 Provision for
income taxes 34 1,153 2,147 13,269 ----------- -----------
------------ ----------- Net income $991 $1,023 $5,326 $20,202
=========== =========== ============ =========== Earnings per share
Basic $0.12 $0.13 $0.66 $2.53 =========== =========== ============
=========== Diluted $0.12 $0.12 $0.65 $2.47 =========== ===========
============ =========== Weighted average shares outstanding Basic
8,087,433 8,029,690 8,065,586 7,993,369 =========== ===========
============ =========== Diluted 8,185,794 8,203,802 8,201,694
8,188,304 =========== =========== ============ ===========
FINANCIAL HIGHLIGHTS (Unaudited) (In thousands) Consolidated
Balance Sheets December 31, December 31, 2005 2004 ------------
------------ ASSETS Cash and cash equivalents $3,554 $6,710
Accounts receivable 4,889 4,521 Real estate inventories 426,275
416,519 Prepaid expenses and other 8,792 6,503 Deferred income
taxes 1,485 2,685 Net property and equipment 6,562 7,542
------------ ------------ Total assets $451,557 $444,480
============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Note
payable, banks $205,240 $194,378 Term debt 9,300 5,819 Other
liabilities 41,484 55,386 ------------ ------------ Total
liabilities 256,024 255,583 Shareholders' equity 195,533 188,897
------------ ------------ Total liabilities and shareholders'
equity $451,557 $444,480 ============ ============ Land Inventory
as of December 31, 2005 Unimproved Finished Lots Under Land Total
Land Inventory Lots Development Estimated Lots Estimated Lots
----------------- -------- ----------- ---------------
--------------- Owned by the Company: Central Ohio 1,861 1,106
10,064 13,031 Kentucky 421 440 1,044 1,905 Controlled by the
Company: Central Ohio 24 - 2,485 2,509 Kentucky - - 200 200 Held
for sale: Central Ohio - - 239 239 Kentucky - 46 48 94 --------
----------- --------------- --------------- 2,306 1,592 14,080
17,978 ======== =========== =============== =============== *T
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