Dominion Homes, Inc. (NASDAQ:DHOM) today announced financial
results for the three months ended June 30, 2006. Highlights for
the second quarter of 2006 compared to the second quarter of 2005
included: -- A net loss of $5.9 million, or $0.73 per diluted
share, versus net income of $2.5 million, or $0.31 per diluted
share; -- Revenues of $75.8 million, from the delivery of 398 homes
versus revenues of $105.2 million, from the delivery of 548 homes;
-- Sales of 356 homes, with a sales value of $66.2 million, versus
sales of 655 homes, with a sales value of $123.1 million; -- A
backlog of 548 sales contracts, with an aggregate sales value of
$109.5 million, versus 887 sales contracts, with a sales value of
$177.1 million at June 30, 2005; -- Selling, general and
administrative expenses of $13.5 million versus $17.2 million; and
-- The current quarter results include a pretax, non-cash charge of
$2.1 million primarily related to write-offs of land deposits and
pre-acquisition costs and a $456,000 gain on the sale of land. The
second quarter 2006 net loss was expected based on the low number
of sales contracts in backlog at the beginning of the period
combined with the delivery of homes with less gross profit due to
increased sales discounts and increased land and construction
costs. Douglas G. Borror, Chief Executive Officer, commented,
"While we are disappointed with reporting a loss for this quarter,
we also recognize that overall home sales conditions remain
challenging in our markets. New building permits declined 27% in
Columbus, 39% in Louisville and 20% in Lexington during the first
six months of 2006. We did, however, make significant progress in
reducing our land development and acquisition costs and lowering
our selling, general and administrative expenses during the second
quarter and will continue to manage these areas." The Company will
host a conference call on Friday, August 4, 2006 at 10:00 a.m.
Eastern Time to discuss these results and other developments in the
business. The analyst conference call will be webcast
simultaneously in listen-only mode via the Company's website
www.dominionhomes.com. For those who cannot listen to the live
webcast, an archived replay will be available at
www.dominionhomes.com beginning on August 5, 2006 and continuing
for approximately 60 days. Interested parties may listen in by
accessing the Company's website, and selecting "Investors."
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" 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. Second Quarter of 2006 Net Loss. The
Company recognized a net loss for the second quarter of 2006 of
$5.9 million, or $0.73 per diluted share, compared to net income of
$2.5 million, or $0.31 per diluted share for the second quarter of
2005. The loss in the second quarter of 2006 is principally a
result of fewer closings and a decline in the Company's gross
profit margin. Revenues. Revenues for the second quarter of 2006
were $75.8 million from the delivery of 398 homes, compared to
$105.2 million from the delivery of 548 homes during the same
period the previous year. The average delivery price of homes
during the second quarter of 2006 was approximately $188,900
compared to $189,600 during the second quarter of 2005. There were
no model home sale/lease backs during the second quarter of 2006.
Second quarter 2005 revenues include the sale of 20 model homes,
with a sales value of $3.2 million, which the Company immediately
leased back for use as sales models. Gross Profit. Gross profit for
the second quarter of 2006 declined to $7.5 million compared to
$22.4 million for the second quarter of 2005, principally due to
the delivery of 150 fewer homes and an 11.4% decrease in gross
profit margin. Included in cost of sales for the second quarter of
2006 is a $2.1 million write-off primarily related to deposits and
pre-acquisition costs incurred for land the Company decided not to
purchase and a $456,000 gain from the sale of land. Included in
cost of sales for the second quarter of 2005 is a similar write-off
of $1.4 million and an $824,000 gain from the sale of land. These
transactions reduced the second quarter 2006 and 2005 gross profit
margin by 2.2% and 0.5%, respectively. Selling, General and
Administrative Expense. Selling, general and administrative expense
for the second quarter of 2006 decreased to $13.5 million from
$17.2 million for the second quarter of 2005. Second quarter 2006
expenses include the separation costs associated with a reduction
in the Company's workforce that was implemented in May of 2006 and
the benefit of lower expenses related to commissions, bonuses and
other performance based compensation programs. The cost savings
programs implemented during the second quarter of 2006 are expected
to reduce the level of selling, general and administrative expense
by an additional 10% during the third and fourth quarters of 2006.
The Company is continuing to reduce its cost structure in response
to changing market conditions and projected sales levels and
expects to generate further cost savings during the second half of
2006. Sales The Company sold 356 homes, with a sales value of $66.2
million, during the second quarter of 2006 compared to 655 homes,
with a sales value of $123.1 million, sold during the same period
the previous year. The average home sale price for the second
quarter of 2006 was $186,000 compared to $187,900 for the second
quarter of 2005. Backlog at June 30, 2006 was 548 sales contracts
with an average sale price of $200,000 compared to 887 sales
contracts with an average sale price of $199,700 at June 30, 2005.
Active Sales Communities The Company had 55 active sales
communities at June 30, 2006 compared to 61 at June 30, 2005.
Effective June 30, 2006, the Company began reporting its number of
active sales communities by geographic location rather than by
series of homes. This change was implemented due to the development
of a limited number of master planned communities that contain as
many as five different series of homes. In most cases these master
planned communities are in a single geographic location and are
usually promoted using a similar, common community name. This
change reduced the number of active sales communities reported at
June 30, 2005 to 61 from 63. First Six Months of 2006 Net Loss. The
Company recognized a net loss for the first six months of 2006 of
$9.9 million, or $1.22 per diluted share, compared to net income of
$3.2 million, or $0.39 per diluted share, for the same period in
2005. Revenues. Revenues for the first six months of 2006 were
$137.6 million from the delivery of 713 homes, compared to $197.8
million from the delivery of 1,026 homes during the same period the
previous year. The average delivery price of homes during the first
half of 2006 was approximately $191,100 compared to $190,500 during
the first half of 2005. Gross Profit. Gross profit for the first
six months of 2006 declined to $16.6 million compared to $41.1
million for the first six months of 2005, principally due to the
delivery of 313 fewer homes and an 8.7% decrease in gross profit
margin. Included in cost of sales for the first half of 2006 is a
$2.7 million write-off primarily related to deposits and
pre-acquisition costs incurred for land that the Company decided
not to purchase and a $456,000 gain from the sale of land. Included
in cost of sales for the first half of 2005 is a similar write-off
of $2.4 million and an $824,000 gain from the sale of land. These
transactions impacted the first half 2006 gross profit margin by
1.6% and the first half 2005 gross profit margin by 0.8%. Selling,
General and Administrative Expense. Selling, general and
administrative expense for the first six months of 2006 decreased
to $28.2 million from $33.3 million for the first six months of
2005. First half 2006 expenses include separation costs associated
with of a reduction in the Company's workforce that was implemented
in May of 2006 and the benefit of lower expenses related to
commissions, bonuses and other performance based compensation
programs. Sales. The Company sold 831 homes, with a sales value of
$155.5 million, during the first six months of 2006 compared to
1,281 homes, with a sales value of $243.9 million, during the first
six months of 2005. The average home sale price for the first half
of 2006 was $187,100 compared to $190,400 for the first half of
2005. Gain on Sale of Investment in Centennial Home Mortgage, LLC
On March 31, 2006 the Company, Dominion Homes Financial Services,
Ltd, Wells Fargo Bank N.A. and its wholly owned subsidiary Wells
Fargo Ventures, Inc. formed a new joint venture, Centennial Home
Mortgage, LLC, which operates as a full service mortgage bank. The
Company recognized a gain of approximately $1.8 million in exchange
for a 50.1% interest in the joint venture sold to Wells Fargo. The
Company continues to own the remaining 49.9%. The joint venture
utilizes Wells Fargo's underwriting expertise, quality control
practices, software systems, operating policies and training
programs. The Company is in the process of exiting the operations
of Dominion Homes Financial Services, Ltd and expects to complete
the processing of the current pipeline of loan activity by the end
of the third quarter of 2006. In July 2006 the Company received
notices from the U. S. Department of Housing and Urban Development
indicating that it had completed its review of Dominion Homes
Financial Services operations with no material adverse findings.
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, changes in national or
local economic conditions, changes in federal lending programs,
fluctuations in interest rates, increases in raw materials and
labor costs, levels of competition and other factors described in
the Company's Annual Report on Form 10-K for the year ended
December 31, 2005. 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 Six Months
Ended June 30, June 30, 2006 2005 2006 2005 ---------- ----------
---------- ---------- Revenues $75,835 $105,207 $137,620 $197,850
Cost of real estate sold 68,310 82,830 121,021 156,779 ----------
---------- ---------- ---------- Gross profit 7,525 22,377 16,599
41,071 Selling, general and administrative 13,467 17,244 28,240
33,292 ---------- ---------- ---------- ---------- Income (loss)
from operations (5,942) 5,133 (11,641) 7,779 Gain on sale of
investment in Centennial Home Mortgage, LLC - - 1,800 - Interest
expense (2,568) (1,873) (4,876) (3,564) ---------- ----------
---------- ---------- Income (loss) before income taxes (8,510)
3,260 (14,717) 4,215 Provision for income taxes (2,583) 741 (4,844)
1,054 ---------- ---------- ---------- ---------- Net income (loss)
$(5,927) $2,519 $(9,873) $3,161 ========== ========== ==========
========== Earnings per share (loss) Basic $(0.73) $0.31 $(1.22)
$0.39 ========== ========== ========== ========== Diluted $(0.73)
$0.31 $(1.22) $0.39 ========== ========== ========== ==========
Weighted average shares outstanding Basic 8,114,174 8,054,648
8,104,494 8,049,844 ========== ========== ========== ==========
Diluted 8,114,174 8,203,815 8,104,494 8,206,933 ==========
========== ========== ========== Consolidated Balance Sheets (In
thousands) June 30, December 31, 2006 2005 (unaudited)
----------------------- Assets Cash and cash equivalents $705
$3,554 Accounts receivable 3,234 4,889 Real estate inventories
405,652 426,275 Prepaid expenses and other 14,499 8,792 Deferred
income taxes 1,044 1,485 Net property and equipment 5,556 6,562
---------- ------------ Total assets $430,690 $451,557 ==========
============ Liabilities and Shareholders' Equity Note payable,
banks $207,628 $205,240 Term debt 9,300 9,300 Other liabilities
27,690 41,484 ---------- ------------ Total liabilities 244,618
256,024 ---------- ------------ Shareholders' equity 186,072
195,533 ---------- ------------ Total liabilities and shareholders'
equity $430,690 $451,557 ========== ============ Lot Inventory as
of June 30, 2006 Unimproved Finished Lots Under Land Total Land
Inventory Lots Development Estimated Lots Estimated Lots
------------------- -------- ----------- --------------
-------------- Owned by the Company: Central Ohio 1,776 976 9,936
12,688 Kentucky 285 390 955 1,630 Controlled by the Company:
Central Ohio - - 1,494 1,494 Kentucky - - - - Held for sale:
Central Ohio - 40 558 598 Kentucky - 46 137 183
-------------------------------------------------- Total Land
Inventory 2,061 1,452 13,080 16,593 ======== ===========
============== ============== *T
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