BENSALEM, Pa., Feb. 1 /PRNewswire-FirstCall/ -- Orleans Homebuilders, Inc. (AMEX:OHB) is a residential homebuilder with operations in Southeastern Pennsylvania; Central and Southern New Jersey; Orange County, New York; Charlotte, Raleigh and Greensboro, North Carolina; Richmond and Tidewater, Virginia; Chicago, Illinois; and Orlando, Florida. The Company's Charlotte, North Carolina operations also include adjacent counties in South Carolina.
Financial Highlights for the Three Months Ended December 31, 2007:
-- Fiscal year 2008 second quarter residential property revenue decreased
6% to $144.5 million (323 homes) compared to $153.2 million (377 homes)
for the prior year period. The average selling price for homes
delivered in the fiscal 2008 second quarter was $447,000 compared to
$406,000 in the prior year period. -- Fiscal year 2008 second quarter new orders decreased 25% to $114.7
million (284 homes) compared to $152.4 million (367 homes) for the
prior year period. The beginning balance of total speculative home
inventory in progress but available for sale, decreased by
approximately 234 units, or 46%, to approximately 275 units at October
1, 2007, compared to the opening balance for the prior year's quarter
of approximately 509 units at October 1, 2006. -- The backlog at December 31, 2007 increased 4% to $301.3 million (610
homes) compared to $289.9 million (591 homes) at December 31, 2006. At December 31, 2007, 88% of this backlog was in the Company's northern
and southern regions, compared with 80% in those regions at
December 31, 2006. The average selling price for homes in backlog at
December 31, 2007 was $494,000 compared to $490,000 as of December 31,
2006. -- The Company experienced a cancellation rate of approximately 26% for
the three months ended December 31, 2007, which is an increase from 24%
for the three months ended December 31, 2006. This increase was
primarily driven by increases in the cancellation rates in the
Company's midwestern and Florida regions. -- During the fiscal year 2008 second quarter, the Company closed nine
land sales, disposing of approximately 1,400 lots within five states
prior to its December 31st taxation year end. The land disposed of
generally consists of raw land and partially and fully developed lots,
except in its Arizona market, where the disposition also included all
of the Company's work-in-process. Approximately 94% of the lots
disposed of were in Florida, Illinois and Arizona. The sale of lots in
Arizona represented substantially all of the Company's assets in this
region. The Company separately executed option agreements to buy back
approximately 350 lots in two communities in different states, for a
net decrease in its owned and controlled lot count of approximately
1,050 lots. These separate option agreements generally provide the
Company with the option, but not the obligation, to purchase lots on an
individual basis through periodic lot option acquisition schedules. -- The land sales generated aggregate cash proceeds of approximately $32.9
million. The Company currently anticipates receiving approximately $25
million of federal income tax refunds directly or indirectly as a
result of these transactions before its fiscal year ended June 30,
2008. -- The Company owned or controlled approximately 8,500 building lots at
December 31, 2007, which includes approximately 2,550 building lots
controlled though contracts and options. At December 31, 2006, the
Company owned or controlled approximately 13,150 building lots, of
which approximately 4,550 were controlled through contracts and
options. This represents a 35% decrease in total owned and controlled
lots, and a 31% decrease in owned lots. As of December 31, 2007,
approximately 88% of the Company's owned lots are in its northern and
southern regions, while approximately 7% of the owned lots are in its
midwestern region and approximately 5% of the owned lots are in its
Florida region. -- Fiscal year 2008 second quarter loss from continuing operations was
$38.6 million ($2.09 per diluted share), including charges related to
inventory impairments, land sale impairments, write-offs of abandoned
projects and other pre-acquisition costs and severance charges of $36.6
million, net of tax, compared to a loss from continuing operations of
$7.0 million ($0.38 per diluted share) for the prior year period,
including charges related to inventory impairments, write-offs of
abandoned projects and other pre-acquisition costs and severance
charges of $9.8 million, net of tax. Excluding charges for inventory
impairments, land sale impairments, write-offs of abandoned projects
and other pre-acquisition costs and severance charges, fiscal year 2008
second quarter adjusted loss from continuing operations was
$2.0 million ($0.11 per diluted share) compared to fiscal year 2007
second quarter adjusted income from continuing operations of $2.8
million ($0.15 per diluted share) (1). -- Excluding charges for inventory impairments, land sale impairments,
write-offs of abandoned projects and other pre-acquisition costs, stock
option expense and severance expense, fiscal year 2008 second quarter
adjusted EBITDA(2) decreased to $3.2 million compared to $9.8 million
for the prior year period.
Financial Highlights for the Six Months Ended December 31, 2007:
-- Fiscal year 2008 year-to-date residential property revenue decreased
16% to $263.8 million (586 homes) compared to $314.9 million (740
homes) for the prior year period. The average selling price for homes
delivered in fiscal year 2008 year-to-date was $450,000 compared to
$426,000 in the prior year. -- Fiscal year 2008 year-to-date new orders decreased 8% to $247.3 million
(587 homes) compared with $270.1 million (616 homes) for the prior year
period. -- The Company experienced a cancellation rate of approximately 24% for
the six months ended December 31, 2007, which is down from 27% for the
six months ended December 31, 2006. -- Fiscal year 2008 year-to-date loss from continuing operations was $40.4
million ($2.18 per diluted share), including charges related to
inventory impairments, land sale impairments, write-offs of abandoned
projects and other pre-acquisition costs and severance charges of $37.2
million, net of tax, compared to loss from continuing operations of
$3.0 million ($0.16 per diluted share) for the prior year period,
including charges related to inventory impairments, write-offs of
abandoned projects and other pre-acquisition costs and severance
charges of $12.8 million, net of tax. Excluding charges for inventory
impairments, land sale impairments, write-offs of abandoned projects
and other pre-acquisition costs and severance charges, fiscal year 2008
year-to-date adjusted loss from continuing operations was $3.1 million
($0.17 per diluted share) compared to fiscal year 2007 year-to-date
adjusted income from continuing operations of $9.8 million ($0.53 per
diluted share) (1). -- Excluding charges for inventory impairments, land sale impairments,
write-offs of abandoned projects and other pre-acquisition costs, stock
option expense and severance expense, fiscal year 2008 year-to-date
adjusted EBITDA(2) decreased to $7.4 million compared to $25.7 million
for the prior year period. Impairment of Inventory, Impairment on Land to be Sold and the Write-off of Abandoned Projects and Other Pre-Acquisition Costs: As a result of various factors, including a decrease in anticipated absorption rates at various communities, slower than anticipated pace of new orders, increased uncertainty with respect to the overall mortgage market, increased mortgage underwriting standards, an increase in sales incentives and decreased homebuyer demand due to lower consumer confidence in the overall housing market, the Company recorded a pre-tax charge in the fiscal year 2008 second quarter related to inventory impairments on inventory held at December 31, 2007, and additional pre-tax charges for aggregate impairments prior to the closings of each of the nine individual property dispositions in the second quarter described below.
-- For the fiscal year 2008 second quarter, the Company recorded inventory
impairments of $22.9 million on a pre-tax basis ($13.9 million net of
tax), which consisted of impairments on 17 communities each held at
December 31, 2007, across each of the Company's four regions. For the
fiscal year 2007 second quarter, the Company recognized $6.7 million
for inventory impairments ($4.0 million net of tax). -- For the fiscal year 2008 year-to-date, the Company recorded inventory
impairments of $23.6 million on a pre-tax basis ($14.3 million net of
tax). These amounts consisted of impairments on 18 communities, across
each of the Company's four regions. For the fiscal year 2007 year-to-
date, the Company recognized $9.9 million for inventory impairments
($6.0 million net of tax). -- Prior to the completion of each of the nine individual property
dispositions described above, the Company recorded pre-tax charges for
impairments related to inventory disposed of as part of the property
dispositions in the fiscal 2008 second quarter. In the aggregate, the
impairments were $57.3 million ($34.6 million net of tax). As the
recorded impairments reduced the book value of each of the nine
individual assets to approximately the sales price of the asset, the
Company did not record any gain or loss as a result of these
dispositions. Included within the $57.3 million is an impairment
charge of $20.3 million ($12.5 million net of tax) related to the sale
of its only land position, and the exit of its operation in its western
region. This impairment charge related to its western region is
included in loss from discontinued operations.
The total write-offs of abandoned projects and other pre-acquisition costs for the fiscal year 2008 second quarter were $0.5 million on a pre-tax basis ($0.3 million net of tax) compared to $8.1 million on a pre-tax basis ($4.9 million net of tax) for the fiscal year 2007 second quarter. The total write- offs of abandoned projects and other pre-acquisition costs for the fiscal year 2008 year-to-date were $0.9 million on a pre-tax basis ($0.5 million net of tax) compared to $9.4 million on a pre-tax basis ($5.7 million net of tax) for the fiscal year 2007 year-to-date.
Outlook The unfavorable market conditions in the housing industry have continued to negatively impact the Company's closings, new order activity, absorption and pricing. Excess new and resale home inventory remains in numerous markets, which has contributed to the difficulties buyers face in selling their existing homes. Demand has slowed due to decreased consumer confidence in the housing market; increased uncertainty in the overall mortgage and mortgage insurance markets; tightened underwriting standards in the mortgage industry; increased foreclosures; and stress in the financial markets and in general consumer credit. The Company also has observed increased nationwide discounting, particularly by some of the largest companies in our industry. While the two recent actions by the Federal Reserve Bank to decrease the target Federal Funds Rate were positive for the macro market, we believe that these challenges will remain in the homebuilding industry at least in the near term. Further, economic conditions will likely be weak in the near term. The Company believes that unfavorable market conditions may continue to have a negative impact on new orders and new order pricing, thereby further reducing revenues, gross margins and net income. The Company is responding to these unfavorable market conditions by attempting to maintain absorption levels through the use of sales incentives; reevaluating its individual land holdings; reducing its land expenditures; and emphasizing cost reductions to adjust for lower levels of production. Further decreases in demand for our homes may require the Company to further increase the use of sales incentives. The Company also continues to evaluate its owned and controlled lot positions and other assets.
Orleans Homebuilders will hold its quarterly conference call to discuss fiscal year results to date on Friday, February 1, 2008, at 10:00 a.m. Eastern Time. This call is being web cast by CCBN and can be accessed at Orleans Homebuilders' web site at http://www.orleanshomes.com/ by clicking on the heading "Investor Relations". The webcast is also being distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at http://www.earnings.com/ or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents (http://www.streetevents.com/).
A replay of the conference call will be available later that day on the Company's website at http://www.orleanshomes.com/. A copy of this press release, including the Company's results of operations for the three months ended December 31, 2007 to be discussed during the conference call, is available at the Company's website, http://www.orleanshomes.com/, under the heading "Investor Relations".
About Orleans Homebuilders, Inc.
Orleans Homebuilders, Inc. develops, builds and markets high-quality single-family homes, townhouses and condominiums. The Company serves a broad customer base including luxury, move-up, empty nester, active adult, and first-time homebuyers. The Company currently operates in the following eleven distinct markets: Southeastern Pennsylvania; Central and Southern New Jersey; Orange County, New York; Charlotte, Raleigh and Greensboro, North Carolina; Richmond and Tidewater, Virginia; Chicago, Illinois; and Orlando, Florida. The Company's Charlotte, North Carolina operations also include adjacent counties in South Carolina. To learn more about Orleans Homebuilders, please visit http://www.orleanshomes.com/.
Use of Non-GAAP Financial Information (1) Pursuant to the requirements of Regulation G, we have provided a reconciliation of adjusted net income and adjusted earnings per share, which are non-GAAP financial measures, to net income and earnings per share, the most directly comparable GAAP financial measures. Adjusted net income and adjusted earnings per share represents income from continuing operations and earnings per share from continuing operations excluding the effects of charges for inventory impairments, land sale impairments, the write-off of abandoned projects and other pre-acquisition costs, impairment of goodwill and severance charges. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excluded amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet, or statement of cash flows of the issuer; or includes amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States of America. The Company believes these adjusted financial results are useful to both management and investors in the analysis of the Company's financial performance when comparing it to prior periods and that they provide investors with an important perspective on the current underlying operating performance of the business by isolating the impact of non-recurring and non-cash charges related to inventory impairments, the write-off of abandoned projects and other pre-acquisition costs and impairment of goodwill.
Reconciliation of net loss and earnings per Three Three
share to net (loss) income and earnings per Months Months
share excluding charges for inventory Ended Ended
impairments, write-off of abandoned projects 12/31/2007 12/31/2006
and other pre-acquisitions costs, severance (in thousands,
except per share amounts)
charges and impairment of goodwill: Reported net loss and earnings per share:
Reported net loss $(51,385) $(7,524) Reported net loss per common share $(2.78) $(0.41) Adjusted net loss and earnings per share:
Reported net loss $(51,385) $(7,524)
Reported loss from discontinued operations, net of
tax (12,778) (495)
Reported loss from continuing operations, net of
tax (38,607) (7,029)
After tax charges for inventory impairments, land
sale impairments write-off of abandoned projects
and other pre-acquisition costs and
severance charges $(36,563) $(9,848) Adjusted net (loss) income, excluding discontinued
operations, charges for inventory impairments,
land sale impairments, write-off of abandoned
projects and other pre-acquisition costs and
severance charges $(2,044) $2,819 Adjusted diluted net (loss) income per common
share, excluding discontinued operations charges
for inventory impairments, land sale impairments,
write-off of abandoned projects and other
pre-acquisition costs and severance charges $(0.11) $0.15
Basic shares outstanding 18,502 18,476
Common stock equivalents - 121 Diluted shares outstanding 18,502 18,597 Common stock equivalents are anti-dilutive for the three months ended 12/31/2007 and 12/31/2006.
Reconciliation of net loss and earnings per Six Six
share to net (loss) income and earnings per Months Months
share excluding charges for inventory Ended Ended
impairments, write-off of abandoned projects 12/31/2007 12/31/2006
and other pre-acquisitions costs, severance (in thousands,
charges and impairment of goodwill: except per share amounts)
Reported net loss and earnings per share:
Reported net loss $(53,440) $(3,625) Reported net loss per common share $(2.89) $(0.20) Adjusted net loss and earnings per share:
Reported net loss $(53,440) $(3,625)
Reported loss from discontinued operations, net of
tax (13,070) (638)
Reported loss from continuing operations, net of
tax (40,370) (2,987)
After tax charges for inventory impairments, land
sale impairments write-off of abandoned projects
and other pre-acquisition costs and severance
charges $(37,235) $(12,785) Adjusted net (loss) income, excluding discontinued
operations, charges for inventory impairments,
land sale impairments, write-off of abandoned
projects and other pre-acquisition costs and
severance charges $(3,135) $9,798 Adjusted diluted net (loss) income per common
share, excluding discontinued operations charges
for inventory impairments, land sale impairments,
write-off of abandoned projects and other
pre-acquisition costs and severance charges $(0.17) $0.53
Basic shares outstanding 18,502 18,419
Common stock equivalents - 216 Diluted shares outstanding 18,502 18,635 Common stock equivalents are anti-dilutive for the six months ended 12/31/2007 and 12/31/2006.
(2) Reconciliation of Adjusted EBITDA to net income (loss)
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended 12/31/2007 12/31/2006 12/31/2007 12/31/2006
(in thousands)
Adjusted EBITDA $3,194 $9,773 $7,357 $25,722
Inventory impairment 22,916 6,650 23,628 9,850
Land sale impairments 36,632 - 36,632 -
Write-off of abandoned
projects and other
pre-acquisition costs 462 8,087 862 9,608
Severance charges 500 1,525 500 1,866
Stock option expense 600 450 1,159 906
EBITDA (57,916) (6,939) (55,424) 3,492
Income tax (benefit) expense (24,688) (4,515) (24,529) (1,981)
Interest 5,114 4,293 8,923 7,800
Depreciation and amortization 265 312 552 660
Loss from continuing
operations, net of tax (38,607) (7,029) (40,370) (2,987)
Loss from discontinued
operations, net of tax (12,778) (495) (13,070) (638)
Net loss $(51,385) $(7,524) $(53,440) $(3,625)
Pursuant to the requirements of Regulation G, we have provided a reconciliation of Adjusted EBITDA, a non-GAAP financial measure, to the most directly comparable GAAP financial measure. Adjusted EBITDA represents earnings from continuing operations before inventory impairments, land sale impairments, write-off of abandoned projects and other pre-acquisition costs, impairment of goodwill, stock option expense, severance charges, interest expense, previously capitalized interest amortized to residential properties cost of sales, income taxes, depreciation, amortization, and extraordinary items. For purposes of Regulation G, a non-GAAP financial measure is a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that excluded amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet, or statement of cash flows of the issuer; or includes amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States of America. The Company believes Adjusted EBITDA provides a meaningful measure of operating performance.
Forward-Looking Statements Certain information included herein and in other Company statements, reports and SEC filings is forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements concerning anticipated earnings per share, revenues, sales, operating results, financial resources, pace of sales, industry outlook, economic conditions, future impairment charges, future tax valuation allowance, anticipated tax refunds, anticipated debt repayment, anticipated use of proceeds from transactions, reductions in land expenditures, the Company's ability to meet its internal financial objectives including debt reduction objectives, the impact of recent transactions on the Company's liquidity, capital structure and finances, and the Company's response to market conditions. Such forward-looking information involves important risks and uncertainties that could significantly affect actual results and cause them to differ materially from expectations expressed herein and in other Company statements, reports and SEC filings. For example, there can be no assurance that the Company will be able to adjust successfully to current market conditions. These risks and uncertainties include local, regional and national economic conditions, the effects of governmental regulation, the competitive environment in which the Company operates, fluctuations in interest rates, changes in home prices, the availability and cost of land for future growth, the availability of capital, the availability and cost of labor and materials, our dependence on certain key employees and weather conditions. Additional information concerning factors the Company believes could cause its actual results to differ materially from expected results is contained in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2007 filed with the SEC.
Orleans Homebuilders, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts)
(Unaudited) Three Months Ended Six Months Ended
December 31, December 31,
2007 2006 2007 2006
Earned revenues
Residential properties $144,490 $153,172 $263,847 $314,944
Land sales and other income 10,453 3,956 13,972 7,286
154,943 157,128 277,819 322,230
Costs and expenses
Residential properties 147,425 135,327 250,378 266,640
Land sales and other expense 46,225 2,746 49,477 5,116
Selling, general and
administrative 24,588 30,599 42,863 55,442
Interest, net - - - -
218,238 168,672 342,718 327,198 Loss from continuing operations
before income taxes (63,295) (11,544) (64,899) (4,968)
Income tax benefit (24,688) (4,515) (24,529) (1,981) Loss from continuing operations (38,607) (7,029) (40,370) (2,987) Loss from discontinued
operations, net of taxes (12,778) (495) (13,070) (638) Net loss $(51,385) $(7,524) $(53,440) $(3,625) Basic / diluted loss per share
Continuing Operations $(2.09) $(0.38) $(2.18) $(0.16)
Discontinued Operations $(0.69) $(0.03) $(0.71) $(0.03)
Net Income $(2.78) $(0.41) $(2.89) $(0.20)* Basic / diluted weighted average
shares outstanding 18,502 18,476 18,502 18,419 * does not add due to rounding Orleans Homebuilders, Inc
Summary of Deliveries, New
Orders and Backlog by Region
(Dollars in thousands)
(Unaudited) Three Months Ended Six Months Ended
December 31, December 31,
2007 2006 2007 2006
DELIVERIES
Northern Region
Homes 118 100 223 196
Dollars $57,024 $46,731 $108,050 $95,322
Average Sales Price $483 $467 $485 $486 Southern region
Homes 127 129 227 284
Dollars $61,827 $61,534 $110,200 $135,227
Average Sales Price $487 $477 $485 $476 Midwestern region
Homes 34 54 62 102
Dollars $15,725 $22,501 $28,561 $43,812
Average Sales Price $463 $417 $461 $430 Florida region
Homes 44 94 74 158
Dollars $9,914 $22,406 $17,036 $40,583
Average Sales Price $225 $238 $230 $257 Total
Homes 323 377 586 740
Dollars $144,490 $153,172 $263,847 $314,944
Average Sales Price $447 $406 $450 $426
NEW ORDERS
Northern Region
Homes 109 96 222 211
Dollars $45,890 $47,567 $99,472 $103,059
Average Sales Price $421 $495 $448 $488 Southern region
Homes 119 121 240 215
Dollars $50,183 $57,997 $108,765 $105,667
Average Sales Price $422 $479 $453 $491 Midwestern region
Homes 33 67 73 105
Dollars $13,532 $29,676 $26,968 $46,155
Average Sales Price $410 $443 $369 $440 Florida region
Homes 23 83 52 85
Dollars $5,082 $17,135 $12,058 $15,257
Average Sales Price $221 $206 $232 $179 Total
Homes 284 367 587 616
Dollars $114,687 $152,375 $247,263 $270,138
Average Sales Price $404 $415 $421 $439
At December 31,
BACKLOG 2007 2006
Northern Region
Homes 254 209
Dollars $136,057 $108,260
Average Sales Price $536 $518 Southern region
Homes 256 233
Dollars $129,093 $124,084
Average Sales Price $504 $533 Midwestern region
Homes 66 84
Dollars $26,339 $39,681
Average Sales Price $399 $472 Florida region
Homes 34 65
Dollars $9,840 $17,845
Average Sales Price $289 $275 Total
Homes 610 591
Dollars $301,329 $289,870
Average Sales Price $494 $490 Orleans Homebuilders, Inc
Selected Balance Sheet Data
(in thousands)
(Unaudited)
December 31, June 30,
2007 2007 Cash and cash equivalents $31,766 $19,991
Restricted cash - due from title
company 9,125 25,483
Residential properties 223,250 228,146
Land and improvements 406,507 511,872
Inventory not owned - VIE 51,200 47,214
Inventory not owned - Other
Financial Interests 13,425 -
Deferred tax asset 34,121 23,480
Land deposits and costs of
future developments 9,865 13,102
Total assets 855,740 910,944
Obligations related to inventory
not owned - VIE 41,467 38,914
Obligations related to inventory
not owned - Other Financial
Interests 13,425 -
Mortgage obligations secured by
real estate 419,129 469,123
Subordinated notes 105,000 105,000
Other notes payable 755 787
Shareholders' equity 170,734 224,534
DATASOURCE: Orleans Homebuilders, Inc.
CONTACT: Garry P. Herdler, Executive Vice President & Chief Financial Officer of Orleans Homebuilders, Inc., +1-215-245-7500 Web site: http://www.orleanshomes.com/
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