Dominion Homes Reports Financial Results for the First Quarter of 2007

  
    
  
  
    
      Dominion Homes, Inc. (NASDAQ:DHOM) today announced financial results for 
      the three months ended March 31, 2007. Highlights for the first quarter 
      of 2007 compared to the first quarter of 2006 included:
    
    
      
        Revenues of $33.8 million, from the delivery of 165 homes, versus 
        revenues of $61.8 million, from the delivery of 315 homes;
      
      
        Loss from operations of $6.0 million compared to $5.7 million;
      
      
        A net loss of $11.5 million, or $1.41 per diluted share, versus a net 
        loss of $5.1 million, or $0.63 per diluted share;
      
      
        Land sales of $7.8 million at a gain of $16,000 compared to no land 
        sales.
      
    
    
      The first quarter of 2007 results reflect a continuing slow down, both 
      nationally and locally, in new home sales. The combination of fewer 
      deliveries and a decline in gross margin from 14.7% for the first 
      quarter of 2006 to 8.0% for the first quarter of 2007 resulted in a 
      gross profit decline of $6.4 million. The lower gross margin percentage 
      reflects sales discounts that were 1.9% higher as a percentage of gross 
      revenue than the first quarter of 2006 due to increased price 
      competition. Non-cash charges related to land impairments reduced gross 
      profit by 4.4% during the first quarter of 2007.
    
    
      Corporate cost-savings initiatives and head count reductions of $6.1 
      million partially offset the decline in gross profit. In the first 
      quarter of 2007, the Company reduced selling, general and administrative 
      expenses by 40.9% to $8.7 million compared to $14.8 million in the first 
      quarter of 2006. The result is better alignment of the operating cost 
      structure with current the sales pace.
    
    
      “While our first quarter loss was expected, we 
      are not satisfied with the results,” said 
      Douglas G. Borror, Chief Executive Officer. “The 
      housing market has not yet rebounded from its three-year decline. 
      However, we have made appropriate adjustments to address this challenge 
      by reducing land acquisition and expenses. We have a sound capital 
      structure in place to carry on our fine home building tradition and when 
      our markets recover we will be ready to take advantage of that recovery.”
    
    
      Founded in 1952, Dominion Homes offers exceptional homes for every 
      lifestyle, taste and budget. The Company uses high-quality materials and 
      construction methods that exceed industry building practices. With 
      headquarters in Dublin, Ohio, Dominion Homes has communities in 
      Columbus, Ohio and Greater Louisville and Lexington, Kentucky. Dominion 
      has six different home collections -- Tradition, Celebration, 
      Independence, Founders, Metropolitan and Grand Reserve - offering many 
      different floor plans, elevations, features and options. The Company 
      believes that building homes goes beyond structure; it is about customer 
      experience, or as Dominion Homes says it: It's Your Home. For more 
      information visit www.dominionhomes.com.
    
    
      First Quarter of 2007
    
    
      Revenues
    
    
      Revenues for the first quarter of 2007 were $33.8 million, from the 
      delivery of 165 homes, compared to $61.8 million, from the delivery of 
      315 homes, for the first quarter of 2006. Although the Company delivered 
      150 fewer homes, the average price of homes delivered for the first 
      quarter of 2007 increased to $204,400 compared to $193,800 for the first 
      quarter of 2006.
    
    
      Net Loss
    
    
      The net loss for the first quarter of 2007 was $11.5 million, or $1.41 
      per diluted share, compared to a net loss of $5.1 million or $0.63 per 
      diluted share for the first quarter of 2006. The primary factors that 
      increased the net loss on a year over year basis were an additional $3.1 
      million of interest expense and a $2.9 million tax benefit recorded in 
      2006 with no corresponding benefit in 2007. The loss from operations in 
      the first quarter of 2007 was $6.0 million compared to an operating loss 
      of $5.7 million for the first quarter of 2006.
    
    
      Gross Profit
    
    
      Gross profit for the first quarter of 2007 was $2.7 million, or 8.0% 
      compared to $9.1 million, or 14.7%, for the first quarter of 2006. The 
      reduction in gross profit is attributable to 150 fewer homes delivered 
      and a 6.7% decline in the gross profit margin. Gross profit was impacted 
      by larger sales discounts during the first quarter of 2007, which 
      increased to 6.8% of gross revenues from 4.9% of gross revenues from the 
      prior year period. Gross profit was also impacted by non-cash charges 
      for impairment of real estate inventories of $1.5 million and $550,000 
      for the first quarter of 2007 and 2006, respectively.
    
    
      Selling, General and Administrative 
      Expenses
    
    
      Selling, general and administrative expenses for the first quarter of 
      2007 declined $6.1 million to $8.7 million, compared to $14.8 million 
      for the first quarter of 2006. This 40.9% decrease reflects 
      corporate-wide headcount reductions and cost savings initiatives that 
      have resulted in better alignment of our operating cost structure with 
      the current sales pace.
    
    
      Sales
    
    
      The Company sold 218 homes, with a sales value of $43.5 million, during 
      the first quarter of 2007 compared to 475 homes, with a sales value of 
      $89.3 million, during the same period the previous year. The average 
      home sale price for the first quarter of 2007 was $199,500 compared to 
      $188,000 for the first quarter of 2006. Backlog at March 31, 2007 was 
      319 sales contracts, with a sales value of $64.9 million, compared to 
      590 sales contracts, with a sales value of $118.2 million at March 31, 
      2006. The average sales price of homes in backlog at March 31, 2007 was 
      $203,500 compared to $200,300 at March 31, 2006. The Company had 51 
      active sales communities at March 31, 2007 compared to 55 at March 31, 
      2006.
    
    
      Financial Position
    
    
      The Company sold land totaling $7.8 million during the first quarter of 
      2007 at a net gain of $16,000 as part of a continuing effort to 
      significantly reduce its investment in real estate inventories. Total 
      land inventory at March 31, 2007 included 13,850 estimated lots compared 
      to 17,311 estimated lots at March 31, 2006. The Company also reduced the 
      outstanding borrowings on its revolving credit facility and Term A loan 
      by approximately $14.4 million during the first quarter of 2007.
    
    
      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 the local or national homebuilding industry, 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, 2006. All forward-looking statements made in this press 
      release are based on information presently available to the management 
      of the Company. 
    
    
      
        
          
            FINANCIAL HIGHLIGHTS
          
        
      
      
        
        
        
        
        
           
        
      
      
        
          
            Consolidated Statements of Operations
          
        
      
      
        
          
            (Unaudited)
          
        
      
      
        
          
            (In thousands, except share and per share amounts)
          
        
      
      
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          Three Months Ended
        
      
      
        
        
        
        
        
          March 31,
        
      
      
        
        
        
        
        
          2007
        
        
        
        
          2006
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Revenues
        
        
        
        
          $ 33,798 
        
        
        
        
          $ 61,785 
        
      
      
        
          Cost of real estate sold
        
        
        
        
          31,092 
        
        
        
        
          52,711 
        
      
      
        
          Gross profit
        
        
        
        
          2,706 
        
        
        
        
          9,074 
        
      
      
        
          Selling, general and administrative
        
        
        
        
          8,728 
        
        
        
        
          14,773 
        
      
      
        
          Loss from operations
        
        
        
        
          (6,022)
        
        
        
        
          (5,699)
        
      
      
        
          Interest expense
        
        
        
        
          5,430 
        
        
        
        
          2,308 
        
      
      
        
          Loss before income taxes
        
        
        
        
          (11,452)
        
        
        
        
          (8,007)
        
      
      
        
          Provision (benefit) for income taxes
        
        
        
        
          6 
        
        
        
        
          (2,899)
        
      
      
        
          Net loss
        
        
        
        
          $ (11,458)
        
        
        
        
          $ (5,108)
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Earnings per share
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          $ (1.41)
        
        
        
        
          $ (0.63)
        
      
      
        
          Diluted
        
        
        
        
          $ (1.41)
        
        
        
        
          $ (0.63)
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Weighted average shares outstanding
        
        
        
        
        
        
        
        
        
      
      
        
          Basic
        
        
        
        
          8,153,393 
        
        
        
        
          8,094,705 
        
      
      
        
          Diluted
        
        
        
        
          8,153,393 
        
        
        
        
          8,094,705 
        
      
    
    
      
        
           
        
      
      
        
          
            Consolidated Balance Sheets
          
        
      
      
        
          
            (In thousands)
          
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          March 31,
        
        
        
        
          December 31,
        
      
      
        
        
        
        
        
          2007
        
        
        
        
          2006
        
      
      
        
        
        
        
        
          (unaudited)
        
        
           
        
        
           
        
      
      
        
          Assets
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Cash and cash equivalents
        
        
        
        
          $ 1,155 
        
        
        
        
          $ 3,032 
        
      
      
        
          Restricted cash
        
        
        
        
          6,778 
        
        
        
        
          6,762 
        
      
      
        
          Accounts receivable
        
        
        
        
          1,962 
        
        
        
        
          2,329 
        
      
      
        
          Real estate inventories
        
        
        
        
          352,096 
        
        
        
        
          371,086 
        
      
      
        
          Prepaid expenses and other
        
        
        
        
          7,164 
        
        
        
        
          16,484 
        
      
      
        
          Net property and equipment
        
        
        
        
          4,020 
        
        
        
        
          4,523 
        
      
      
        
          Total assets
        
        
        
        
          $ 373,175 
        
        
        
        
          $ 404,216 
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Liabilities and Shareholders' Equity
          
        
        
        
        
        
        
        
        
        
      
      
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Revolving line of credit and term notes
        
        
        
        
          $ 188,350 
        
        
        
        
          $ 201,579 
        
      
      
        
          Seller financed debt and capital lease liability
        
        
        
        
          8,678 
        
        
        
        
          8,746 
        
      
      
        
          Other liabilities
        
        
        
        
          19,402 
        
        
        
        
          25,427 
        
      
      
        
          Total liabilities
        
        
        
        
          216,430 
        
        
        
        
          235,752 
        
      
      
        
          Shareholders’ equity
        
        
        
        
          156,745 
        
        
        
        
          168,464 
        
      
      
        
          Total liabilities and shareholders’ equity
        
        
        
        
          $ 373,175 
        
        
        
        
          $ 404,216 
        
      
    
    
      
        
           
        
      
      
        
          
            Estimated Land Inventory
          
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
        
        
        
        
          Finished
        
        
        
        
          Lots Under
        
        
        
        
          Unimproved Land
        
        
        
        
          Total
        
      
      
        
          Land Inventory
        
        
        
        
          Lots
        
        
        
        
          Development
        
        
        
        
          Estimated Lots
        
        
        
        
          Estimated Lots
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          Owned by the Company:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Central Ohio
        
        
        
        
          1,687 
        
        
        
        
          713 
        
        
        
        
          8,435 
        
        
        
        
          10,835 
        
      
      
        
          Kentucky
        
        
        
        
          231 
        
        
        
        
          398 
        
        
        
        
          887 
        
        
        
        
          1,516 
        
      
      
        
          Controlled by the Company:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Central Ohio
        
        
        
        
          - 
        
        
        
        
          - 
        
        
        
        
          267 
        
        
        
        
          267 
        
      
      
        
          Kentucky
        
        
        
        
          - 
        
        
        
        
          - 
        
        
        
        
          - 
        
        
        
        
          - 
        
      
      
        
          Held for sale:
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
      
      
        
          Central Ohio
        
        
        
        
          - 
        
        
        
        
          201 
        
        
        
        
          958 
        
        
        
        
          1,159 
        
      
      
        
          Kentucky
        
        
        
        
          - 
        
        
        
        
          73 
        
        
        
        
          - 
        
        
        
        
          73 
        
      
      
        
          
            Total Land Inventory as of March 31, 2007
          
        
        
        
        
          1,918 
        
        
        
        
          1,385 
        
        
        
        
          10,547 
        
        
        
        
          13,850 
        
      
      
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        
           
        
      
      
        
          
            Total Land Inventory as of December 31, 2006
          
        
        
        
        
          2,084 
        
        
        
        
          1,364 
        
        
        
        
          11,417 
        
        
        
        
          14,865