BENSALEM, Pa., May 12 /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 March 31, 2008:
-- Fiscal year 2008 third quarter residential property revenue decreased
15% to $109.0 million (243 homes) compared to $128.9 million (304
homes) for the prior year period. The average selling price for homes
delivered in the fiscal 2008 third quarter was $449,000 compared to
$424,000 in the prior year period. -- Fiscal year 2008 third quarter new orders decreased 40% to
$121.2 million (266 homes) compared to $201.1 million (437 homes) for
the prior year period. The beginning balance of total speculative home
inventory in progress, but available for sale, decreased by
approximately 121 units, or 33%, to approximately 248 units at
January 1, 2008, compared to the opening balance for the prior year's
quarter of approximately 369 units at January 1, 2007. -- The backlog at March 31, 2008 decreased 13% to $313.5 million (633
homes) compared to $362.1 million (724 homes) at March 31, 2007. At
March 31, 2008, 88% of this backlog was in the Company's northern and
southern regions, compared with 83% in those regions at March 31, 2007. The average selling price for homes in backlog at March 31, 2008 was
$495,000 compared to $500,000 as of March 31, 2007. -- The Company experienced a cancellation rate of approximately 31% for
the three months ended March 31, 2008, which is an increase from 20%
for the three months ended March 31, 2007. This increase was driven by
increases in all of the Company's regions, with the largest increase
occurring in the Florida region. -- The Company owned or controlled approximately 8,242 building lots at
March 31, 2008, which includes approximately 2,443 building lots
controlled through contracts and options. At March 31, 2007, the
Company owned or controlled approximately 11,850 building lots, of
which approximately 3,520 were controlled through contracts and
options. This represents a 30% decrease in both total owned and
controlled lots, and owned lots. As of March 31, 2008, approximately
51% of the Company's owned lots are in its northern region,
approximately 37% in its southern region, approximately 7% are in its
midwestern region and approximately 5% in its Florida region. -- Fiscal year 2008 third quarter GAAP loss from continuing operations was
$55.7 million ($3.01 per diluted share) as compared to a GAAP loss from
continuing operations of $42.7 million ($2.31 per diluted share) for
the prior year period. On a non-GAAP adjusted basis, the fiscal year
2008 third quarter loss from continuing operations was $2.9 million
($0.16 per diluted share) compared to fiscal year 2007 third quarter
loss from continuing operations of $5.7 million ($0.31 per diluted
share). The GAAP net loss for the three months ended March 31, 2008
included the establishment of a full deferred tax asset valuation
allowance in the amount of $43.5 million. Please refer to the section
included herein under the heading "Reconciliation of Non-GAAP Financial
Measures" for a discussion of the Company's use of non-GAAP adjusted
financial information (1). -- Fiscal year 2008 third quarter non-GAAP adjusted EBITDA increased to
$3.9 million compared to $(4.6) million for the prior year period. Financial Highlights for the Nine Months Ended March 31, 2008:
-- Fiscal year 2008 year-to-date residential property revenue decreased
16% to $372.9 million (829 homes) compared to $443.8 million (1,044
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
$425,000 in the prior year. -- Fiscal year 2008 year-to-date new orders decreased 22% to
$368.4 million (853 homes) compared with $471.2 million (1,053 homes)
for the prior year period. -- The Company experienced a cancellation rate of approximately 26% for
the nine months ended March 31, 2008, which is up from 24% for the nine
months ended March 31, 2007. -- Fiscal year 2008 year-to-date GAAP loss from continuing operations was
$96.0 million ($5.19 per diluted share) as compared to a GAAP loss from
continuing operations of $45.7 million ($2.48 per diluted share) for
the prior year period. On a non-GAAP adjusted basis, the fiscal year
2008 year-to-date loss from continuing operations was $5.1 million
($0.27 per diluted share) compared to fiscal year 2007 year-to-date
income from continuing operations of $4.3 million ($0.23 per diluted
share). The GAAP net loss for the nine months ended March 31, 2008
included a pre-tax charge for the write-off of real estate held for
development and sale in the amount of $75.5 million ($46.6 million
after tax) as well as the establishment of a deferred tax asset
valuation allowance in the amount of $43.5 million. Please refer to
the section included herein under the heading "Reconciliation of
Non-GAAP Financial Measures" for a discussion of the Company's use of
non-GAAP adjusted financial information (1). -- Fiscal year 2008 year-to-date non-GAAP adjusted EBITDA decreased to
$11.2 million compared to $21.1 million for the prior year period. Establishment of Deferred Tax Asset Valuation Allowance:
During the three and nine months ended March 31, 2008, the Company established a deferred tax asset valuation allowance in the full amount of $43.5 million. The full valuation allowance was established due to the lack of objectively verifiable evidence regarding the realization of these assets in the foreseeable future. Our analysis of the need for a valuation allowance recognizes that we have incurred a cumulative loss and also considered the continued difficult current market conditions, as well as losses and impairment charges incurred on certain properties, including the nine asset sales that took place during December 2007, which led to the impairments of certain real estate held for development or sale.
Debt Reduction and Credit Facility Waiver
-- On May 9, 2008, the Company received a limited waiver (the "waiver
letter") to its Amended and Restated Credit Agreement. The waiver
letter temporarily waives certain covenants generally through and
including September 15, 2008 and it replaces them with modified
covenants which generally exclude the effects of recording the
valuation allowance. Absent the deferred tax asset valuation allowance
of $43.5 million, the Company would have been in compliance with all of
its financial covenants for the fiscal quarter ended March 31, 2008. As a result of this deferred tax asset valuation allowance in the
current fiscal quarter, absent the executed waiver letter, the Company
would have been in violation of its minimum tangible net worth, maximum
leverage, and maximum land to adjusted net worth covenants. The waiver
letter waives these covenant defaults from the fiscal quarter ending
March 31, 2008 through and including September 15, 2008, unless another
event of default occurs or the Company fails to meet the revised
minimum tangible net worth and leverage ratios set forth in the waiver
letter for the Amended and Restated Credit Agreement. -- During the third quarter of fiscal 2008, Orleans reduced its
outstanding bank debt by $13.0 million. As of March 31, 2008, over the
past five quarters (since January 1, 2007), Orleans has reduced its
outstanding bank debt by approximately $106.0 million. The reduction
in bank debt is primarily the result of our operations, including land
sale transactions and income tax refunds. Outlook
The unfavorable market conditions in the housing industry have continued to negatively impact the Company's closings, new order activity, absorption, pricing and cancellations. Excess new and resale home inventory remains in numerous markets, which has contributed to the continued difficulties buyers face in selling their existing homes. Demand remains slow due to decreased consumer confidence in the housing market and increased economic uncertainty; 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 continues to observe nationwide discounting, particularly by some of the largest companies in our industry. While the actions by the Federal Reserve Bank to decrease the target Federal Funds Rate and increases in liquidity to the capital markets were both 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, new order pricing and cancellations, 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; continuing to operate with reduced housing inventory levels 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.
Jeffrey P. Orleans, Chairman of the Board and Chief Executive Officer, stated, "Orleans has a proud 90-year building history and we have been through difficult periods before. I am confident that our current game plan will ensure our continued success. We are generally focused in markets that have been more stable than the national averages. We have made significant progress in reducing debt, maintaining acceptable liquidity and streamlining our operations. We have seen some improvement in sales traffic, but third quarter orders have been slower year-over-year, and it is certainly too early to forecast any real immediate rebound." Garry P. Herdler, Executive Vice President and Chief Financial Officer, added, "Although we expect the difficult homebuilding market to continue, we have made good progress on our stated objectives. We will remain focused on our liquidity/cash flow, capital structure, balance sheet/portfolio review and cost structure. We have significantly reduced our debt levels since January 1, 2007, while we have also significantly improved both our cash position and net borrowing base availability over this time. We have significantly reduced our total lot count and spec inventory levels. We have also successfully refocused our portfolio, with approximately 88% of our lots now in our primary Northern and Southern markets. Our portfolio optimization plan yielded aggregate cash proceeds and federal tax refunds already received of approximately $69 million." Orleans Homebuilders will hold its quarterly conference call to discuss fiscal year results to date on Monday, May 12, 2008, at 10:00 a.m. Eastern Daylight 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 March 31, 2008 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, severance charges and
tax valuation allowances. 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, impairment of goodwill and tax
valuation allowances. Orleans Homebuilders, Inc
Reconciliation of Net Loss to Adjusted Net Loss
(in thousands, except per share amounts)
(Unaudited) Three Three
Months Months
Ended Ended
3/31/2008 3/31/2007
Reported net loss $(55,745) $(51,895)
=============================
Reported net loss per common share $(3.01) $(2.81)
=============================
Adjusted net loss and earnings per share:
Reported net loss $(55,745) $(51,895)
Reported loss from discontinued operations,
net of tax (80) (9,201)
-----------------------------
Reported loss from continuing operations,
net of tax (55,665) (42,694)
One time charges
Asset impairments 15,267 33,603
Goodwill impairments - 16,334
Write-off of abandoned projects 69 10,657
Tax impact of one time charges (6,104) (23,606)
Deferred tax asset valuation allowance 43,544 -
-----------------------------
Adjusted net loss $(2,889) $(5,706)
=============================
Adjusted diluted net loss per common share $(0.16) $(0.31)
=============================
Basic shares outstanding 18,520 18,491
Common stock equivalents - -
-----------------------------
Diluted shares outstanding 18,520 18,491
============================= Common stock equivalents are anti-dilutive for the three months ended 3/31/2008 and 3/31/2007.
Orleans Homebuilders, Inc
Reconciliation of Net Loss to Adjusted Net (Loss) Income
(in thousands, except per share amounts)
(Unaudited) Nine Nine
Months Months
Ended Ended
3/31/2008 3/31/2007 Reported net loss $(109,185) $(55,520)
=============================
Reported net loss per common share $(5.90) $(3.01)
=============================
Adjusted net loss and earnings per share:
Reported net loss $(109,185) $(55,520)
Reported loss from discontinued operations,
net of tax (13,150) (9,839)
-----------------------------
Reported loss from continuing operations,
net of tax (96,035) (45,681)
One time charges:
Asset impairments 38,896 43,453
Land sales impairments 36,556 -
Goodwill impairments - 16,334
Write-off of abandoned projects 931 20,202
Severance Charges 500 1,866
Tax impact of one time charges (29,446) (31,886)
Deferred tax asset valuation allowance 43,544 -
-----------------------------
Adjusted net (loss) income $(5,054) $4,288
=============================
Adjusted diluted net (loss) income per
common share $(0.27) $0.23
=============================
Basic shares outstanding 18,508 18,443
Common stock equivalents - 182
-----------------------------
Diluted shares outstanding 18,508 18,625
=============================
Common stock equivalents are anti-dilutive for the nine months ended 3/31/2008.
Orleans Homebuilders, Inc
Reconciliation of Adjusted EBITDA to Net Loss
(in thousands)
(Unaudited) Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
3/31/2008 3/31/2007 3/31/2008 3/31/2007 Adjusted EBITDA $3,937 $(4,579) $11,155 $21,073
Asset impairments 15,267 33,603 38,896 43,453
Land sale impairments - - 36,556 -
Goodwill impairments - 16,334 - 16,334
Write-off of abandoned
projects and other
pre-acquisition costs 69 10,657 931 20,202
Severance charges - - 500 1,866
Share-based compensation 644 488 1,739 1,394
-------------------------------------------
EBITDA (12,043) (65,661) (67,467) (62,176)
Income tax (benefit) expense 35,541 (27,263) 11,012 (29,244)
Interest in cost of sales 7,817 3,997 16,740 11,796
Depreciation and amortization 264 299 816 953
-------------------------------------------
Loss from continuing
operations, net of tax (55,665) (42,694) (96,035) (45,681)
Loss from discontinued
operations, net of tax (80) (9,201) (13,150) (9,839)
-------------------------------------------
Net loss $(55,745) $(51,895) $(109,185) $(55,520)
-------------------------------------------
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 Nine Months Ended
March 31, March 31,
2008 2007 2008 2007
-------- -------- -------- --------
Earned revenues
Residential properties $109,018 $128,886 $372,865 $443,830
Land sales and other income 4,276 17,108 18,248 24,394
-------- -------- -------- --------
113,294 145,994 391,113 468,224
-------- -------- -------- --------
Costs and expenses
Residential properties 110,908 149,123 361,286 415,763
Land sales and other expense 3,201 17,134 52,678 22,250
Selling, general and
administrative 19,309 33,360 62,172 88,802
Impairment of goodwill - 16,334 - 16,334
Interest, net - - - -
-------- -------- -------- --------
133,418 215,951 476,136 543,149
-------- -------- -------- -------- Loss from continuing
operations before income taxes (20,124) (69,957) (85,023) (74,925)
Income tax expense (benefit) 35,541 (27,263) 11,012 (29,244)
-------- -------- -------- -------- Loss from continuing operations (55,665) (42,694) (96,035) (45,681) -------- -------- -------- --------
Loss from discontinued
operations, net of taxes (80) (9,201) (13,150) (9,839)
-------- -------- -------- --------
Net loss $(55,745) $(51,895) $(109,185) $(55,520)
======== ======== ======== ======== Basic / diluted loss per share
Continuing Operations $(3.01) $(2.31) $(5.19) $(2.48)
Discontinued Operations $(0.00) $(0.50) $(0.71) $(0.53)
-------- -------- -------- --------
Net Loss $(3.01) $(2.81) $(5.90) $(3.01) Basic / diluted weighted
average shares outstanding 18,520 18,491 18,508 18,443
======== ======== ======== ======== Orleans Homebuilders, Inc
Summary of Deliveries by Region
(Dollars in thousands)
(Unaudited) Three Months Ended Nine Months Ended
March 31, March 31,
2008 2007 2008 2007
-------- -------- -------- --------
DELIVERIES
Northern Region
Homes 102 93 325 289
Dollars $49,761 $43,263 $157,811 $138,585
Average Sales Price $488 $465 $486 $480 Southern region
Homes 104 112 331 396
Dollars $47,715 $55,652 $157,915 $190,879
Average Sales Price $459 $497 $477 $482 Midwestern region
Homes 17 38 79 140
Dollars $6,501 $15,289 $35,062 $59,101
Average Sales Price $382 $402 $444 $422 Florida region
Homes 20 61 94 219
Dollars $5,041 $14,682 $22,077 $55,265
Average Sales Price $252 $241 $235 $252 Total
Homes 243 304 829 1,044
Dollars $109,018 $128,886 $372,865 $443,830
Average Sales Price $449 $424 $450 $425 Orleans Homebuilders, Inc
Summary of New Orders by Region
(Dollars in thousands)
(Unaudited) Three Months Ended Nine Months Ended
March 31, March 31,
2008 2007 2008 2007
-------- -------- -------- --------
NEW ORDERS
Northern Region
Homes 100 152 322 363
Dollars $48,478 $77,209 $147,950 $180,268
Average Sales Price $485 $508 $459 $497 Southern region
Homes 127 179 367 394
Dollars $59,124 $91,856 $167,889 $197,523
Average Sales Price $466 $513 $457 $501 Midwestern region
Homes 34 38 107 143
Dollars $12,704 $17,892 $39,672 $64,047
Average Sales Price $374 $471 $371 $448 Florida region
Homes 5 68 57 153
Dollars $864 $14,153 $12,922 $29,410
Average Sales Price $173 $208 $227 $192 Total
Homes 266 437 853 1,053
Dollars $121,170 $201,110 $368,433 $471,248
Average Sales Price $456 $460 $432 $448 Orleans Homebuilders, Inc
Summary of Backlog by Region
(Dollars in thousands)
(Unaudited) At March 31,
BACKLOG 2008 2007
-------- --------
Northern Region
Homes 252 268
Dollars $134,774 $142,206
Average Sales Price $535 $531 Southern region
Homes 279 300
Dollars $140,502 $160,288
Average Sales Price $504 $534 Midwestern region
Homes 83 84
Dollars $32,542 $42,284
Average Sales Price $392 $503 Florida region
Homes 19 72
Dollars $5,663 $17,316
Average Sales Price $298 $241 Total
Homes 633 724
Dollars $313,481 $362,094
Average Sales Price $495 $500 Orleans Homebuilders, Inc
Selected Balance Sheet Data
(in thousands)
(Unaudited) March 31, June 30,
2008 2007
-------- -------- Cash and cash equivalents $39,067 $19,991
Restricted cash - due from title company 9,256 25,483
Residential properties 253,366 228,146
Land and improvements 380,892 511,872
Inventory not owned - VIE 46,198 47,214
Inventory not owned - Other Financial
Interests 12,565 -
Deferred tax asset - 23,480
Land deposits and costs of future developments 10,413 13,102
Total assets 791,456 910,944
Obligations related to inventory not
owned - VIE 37,507 38,914
Obligations related to inventory not
owned - Other Financial Interests 12,565 -
Mortgage obligations secured by real estate 406,132 469,123
Subordinated notes 105,000 105,000
Other notes payable 734 787
Shareholders' equity 115,316 224,534
DATASOURCE: Orleans Homebuilders, Inc.
CONTACT: Garry P. Herdler, Executive Vice President & Chief Financial Officer, Orleans Homebuilders, Inc., +1-215-245-7500 Web site: http://www.orleanshomes.com/
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