Brookfield Homes Corporation
NYSE : BHS

Brookfield Homes Corporation

February 01, 2007 16:00 ET

Brookfield Homes Reports 2006 Results

FAIRFAX, VIRGINIA--(CCNMatthews - Feb. 1, 2007) - Brookfield Homes Corporation (NYSE:BHS) -

Investors, analysts and other interested parties can access Brookfield Homes' Supplemental Information Package on Brookfield Homes' website under the Investor Relations/Financial Reports section at www.brookfieldhomes.com. Brookfield Homes' year end investor conference call can be accessed by teleconference on February 1, 2007 at 5:00 pm (Eastern Time) at 1-888-825-9691, toll free in North America. The archived teleconference may be accessed by dialing 1-800-558-5253 (Reservation: 21319037), toll free in North America through March 1, 2007. Alternatively, the conference call can be accessed by Webcast on Brookfield Homes' website at www.brookfieldhomes.com.

Brookfield Homes Corporation (NYSE:BHS) today announced financial results for the year ended December 31, 2006:

- Net income for 2006 totaled $148 million, a decrease of $71 million when compared to 2005, and 2006 earnings per share totaled $5.45, compared to $7.04 in 2005. These decreases are primarily related to fewer home and lot closings, and a decrease in housing gross margins to 26% in 2006 from 30% in 2005. The decline was partially offset by a decrease in selling, general and administrative expense, related primarily to the mark-to-market adjustment of the stock compensation obligation. Net income in 2006 includes write-downs of $10 million ($6 million after tax) related to finished lots acquired in 2005 and lot options on unentitled land that expired.

- Net income for the three months ended December 31, 2006 was $58 million, a decrease of $72 million when compared to the same period in 2005. The decrease is primarily related to fewer home and lot closings and a decrease in housing gross margins to 24% for the three months ended December 31, 2006 from 31% for the same period in 2005.

- Fourth Quarter and Year Ended 2006 Financial and Operating Highlights



Results of Operations Three Months Ended Years Ended
Dec. 31 Dec. 31
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(Millions, except per share
amounts) 2006 2005 2006 2005
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Home closings (units) 477 640 1,159 1,582
Lot sales (units) 218 802 834 1,242
Housing revenue $ 309 $ 440 $ 784 $ 1,074
Housing gross margin $ 74 $ 138 $ 206 $ 324
Total revenue $ 337 $ 559 $ 888 $ 1,231
Total gross margin $ 85 $ 211 $ 261 $ 416
Selling, general and
administrative expense $ 31 $ 21 $ 66 $ 90
Contribution from lot sales to
net income $ 5 $ 37 $ 26 $ 45
Net income $ 58 $ 130 $ 148 $ 219
Earnings per share - diluted $ 2.19 $ 4.36 $ 5.45 $ 7.04
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- Housing revenue totaled $784 million, compared to $1,074 million in 2005. The decrease in housing revenue is primarily due to 423 fewer home closings during 2006 when compared to 2005.

- Cash flow from operating activities was $26 million in 2006, and during the three years ended December 31, 2006, the company generated a total of $250 million of operating cash flow.

Recent Developments and Operating Highlights

- Home and Lot Closings: In 2006, Brookfield Homes closed 1,159 homes and 834 lots for a total of 1,993 home and lot closings. This compares to a total of 2,824 home and lot closings in 2005. Brookfield Homes' backlog as of the end of January 2007 was approximately 30% of the estimated 1,150 to 1,250 home closings for 2007. The company is also targeting the sale of 1,000 lots in 2007.

- Lots Owned and Controlled: The company's lots owned or controlled at December 31, 2006 total 27,616, a decrease of 6% from inventory levels at the end of 2005. Direct ownership of 12,719 lots provides strong visibility on Brookfield Homes' future cash flows, and the 14,897 lots under option are controlled with the objective of adding value through land entitlements. While housing gross margins have decreased in 2006, they continue to exceed the industry average, particularly as a result of the entitlement and development of approximately 70% of the lots on which the company delivered homes.

- Lot Management: While 2006 was a challenging year for the homebuilding industry, the company maintained its focus on its core strategies of proactively managing its capital and creating value through the entitlement of land. Specifically in 2006, the company entitled approximately 5,000 lots, creating value and providing visibility on future cash flows. In addition, while the company let certain options expire, Brookfield Homes also acquired control, primarily through options, of strategically placed lots in high growth regions of approximately 1,500 lots.

- A summary of lots, owned or controlled under option, by region, follows:



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Northern Southland/ San Diego/ Washington
California Los Angeles Riverside D.C. Area Other Total
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Geographic
diversifi-
cation of
lots 35% 11% 28% 25% 1% 100%
2006 home
closings
(units) 107 326 288 375 63 1,159
2006 lot
closings
(units) 50 357 365 62 - 834
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Lot supply
Owned 1,245 1,057 6,216 4,051 150 12,719
Optioned 8,564 1,964 1,500 2,869 - 14,897
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Total 9,809 3,021 7,716 6,920 150 27,616
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- Strengthened Balance Sheet - In 2006, the net debt to capitalization ratio improved to 55% from 61% in 2005, and during the year, Brookfield Homes returned a further $49 million to shareholders through the purchase of 964,200 shares and common dividends.

- Declared Dividend - The company declared a semi-annual dividend of $0.20 per common share payable on June 29, 2007 to stockholders of record on June 15, 2007.

Outlook

"Last year we anticipated a cyclical slowdown for residential homebuilders, and we expect this will continue into 2007. Although our home and lot sales declined, we believe our proactive management strategy ensures we remain well positioned to generate strong operating margins and create shareholder value. In summary, we have a significant and attractive land inventory, the majority of which was owned or controlled prior to 2004 through land options. During the year, we continued to meet our objectives to add value having entitled almost 5,000 lots we control," concluded Ian Cockwell, Brookfield Homes' President and Chief Executive Officer.

Brookfield Homes Corporation

Brookfield Homes Corporation is a residential homebuilder and land developer, building homes and developing land in master-planned communities and infill locations. We design, construct and market single-family and multi-family homes primarily to move-up and luxury homebuyers. We also entitle and develop land for our own communities and sell lots to other homebuilders. Our portfolio includes 28,000 lots owned and controlled in the Northern California; Southland / Los Angeles; San Diego / Riverside; and Washington D.C. Area markets. For more information, visit the Brookfield Homes website at www.brookfieldhomes.com.

Note: Certain statements in this press release that are not historical facts, including information concerning possible or assumed future results of operations of the company, expected home closings, deliveries and lot sales (and the timing thereof), the company's future outlook and growth plans, and those statements preceded by, followed by, or that include the words "believe", "planned", "should", "goals", "expected", "potential," "estimate," "targeted," "scheduled" or similar expressions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Undue reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results to differ materially from the anticipated future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forward in the forward-looking statements include, but are not limited to: changes in general economic, real estate and other conditions; mortgage rate changes; availability of suitable undeveloped land at acceptable prices; adverse legislation or regulation; ability to obtain necessary permits and approvals for the development of our land; availability of labor or materials or increases in their costs; ability to develop and market our master-planned communities successfully; confidence levels of consumers; ability to raise capital on favorable terms; adverse weather conditions and natural disasters; relations with the residents of our communities; risks associated with increased insurance costs or unavailability of adequate coverage and ability to obtain surety bonds; competitive conditions in the homebuilding industry, including product and pricing pressures; and additional risks and uncertainties referred to in our Form 10-K and other SEC filings, many of which are beyond our control. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.



Brookfield Homes Corporation
Condensed Balance Sheets

As at December 31
------------------------------------
(thousands) 2006 2005 2004
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Assets

Housing and land inventory $ 1,075,192 $ 912,617 $ 679,930

Investments in housing and land joint
ventures 90,325 53,260 59,810

Consolidated land inventory not owned 59,381 22,100 47,240

Receivables and other assets 37,031 94,081 73,986

Cash and cash equivalents 86,809 198,411 186,731

Deferred income taxes 52,715 49,417 33,924
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$ 1,401,453 $ 1,329,886 $ 1,081,621
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Liabilities and Stockholders' Equity

Project specific and other financings $ 657,909 $ 691,410 $ 512,098

Accounts payable and other liabilities 280,083 320,787 256,985

Minority interest 92,055 53,040 66,422

Stockholders' equity 371,406 264,649 246,116
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$ 1,401,453 $ 1,329,886 $ 1,081,621
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Brookfield Homes Corporation
Consolidated Statements of Income

Three Months Ended Years Ended
December 31 December 31
------------------------- ---------------------
(thousands, except per
share amounts) 2006 2005 2006 2005
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Revenue

Housing $ 308,632 $ 440,589 $ 784,162 $ 1,074,155

Land and other revenues 27,612 118,169 103,626 156,897
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Total revenue 336,244 558,758 887,788 1,231,052

Direct cost of sales (251,351) (348,569) (626,858) (815,423)
---------------------------------------------------------------------------
84,893 210,189 260,930 415,629

Equity in earnings from
housing and land joint
ventures 45,410 39,835 58,284 65,084

Selling, general and
administrative
expense (31,326) (19,799) (65,990) (89,693)

Minority interest (9,237) (20,621) (18,378) (36,498)
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Net income before taxes 89,740 209,604 234,846 354,522

Income tax expense (30,917) (79,985) (86,492) (135,782)
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Net income $ 58,823 $ 129,619 $ 148,354 $ 218,740
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Weighted average shares
outstanding

Basic 26,555 29,208 26,874 30,497

Diluted 26,907 29,743 27,243 31,071

Earnings per share

Basic $ 2.22 $ 4.44 $ 5.52 $ 7.17

Diluted $ 2.19 $ 4.36 $ 5.45 $ 7.04
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