Brookfield Homes Corporation
NYSE : BHS

Brookfield Homes Corporation

February 16, 2011 16:44 ET

Brookfield Homes Reports 2010 Year End Results

FAIRFAX, VIRGINIA--(Marketwire - Feb. 16, 2011) - Brookfield Homes Corporation (NYSE:BHS) -

Investors, analysts and other interested parties can access Brookfield Homes Corporation's Supplemental Information Package on the company's website under the Investor Relations/Financial Reports section at www.brookfieldhomes.com.

Brookfield Homes Corporation ("Brookfield Homes") (NYSE:BHS) today announced net new orders and financial results for the quarter and year ended December 31, 2010:

    Three Months Ended Dec. 31     Years Ended Dec. 31  
  Unit Activity 2010   2009     2010   2009  
  Home closings 186   268     575   703  
  Net new home orders 101   129     473   756  
  Active selling communities (end of period) 19   25     19   25  
  Backlog of homes (units at end of period) 85   187     85   187  
  Average home selling price $ 499,000   $ 505,000     $ 511,000   $ 488,000  
  Lot sales to homebuilders 155   235     370   469  
  Unit information includes unconsolidated entities 
  • The overall average selling price remained stable for the fourth quarter ended December 31, 2010, compared to the same period in 2009, while home closings decreased by 31% over the same period. In addition, the overall cancellation rate was 21% for the year ended December 31, 2010, compared to 19% in 2009.

  • Net new orders for the fourth quarter ended December 31, 2010 were 101 units from 19 selling communities, compared to 129 units from 25 selling communities for the same quarter in 2009. 

  Results of Operations Three Months Ended Dec. 31     Years Ended Dec. 31  
  (Millions, except per share amounts) 2010   2009     2010   2009  
  Housing revenue $ 92   $ 134     $ 292   $ 340  
  Total revenue 123   145     339   376  
  Impairments and write-offs   6         37  
  Gross margin 18   (12 )   55   (2 )
  Net income/(loss) attributable to Brookfield Homes Corporation 5   (17 )   4   (28 )
  Loss per common share – diluted* $ –   $ (0.81 )   $ (0.54 ) $ (1.54 )
  Diluted loss per share is after preferred dividends
 
  • Revenue for the year ended December 31, 2010 totaled $339 million, compared to $376 million for the year ended December 31, 2009. The decrease in revenue is a result of fewer homes closed in 2010. Land sales to other homebuilders contributed $47 million to revenues in 2010.

  • The company did not record any impairments for the year ended December 31, 2010, compared to $37 million during the year ended December 31, 2009. The 2009 impairments related to housing and land inventory and write-offs of option deposits, and impairments on investments in unconsolidated entities.

  • Net income attributable to Brookfield Homes Corporation for the year ended December 31, 2010 was $4 million or a diluted loss of $0.54 per share after preferred share dividends, compared to a net loss of $28 million or a diluted loss of $1.54 per share for the year ended December 31, 2009.

  • Cash flow from operating activities was $89 million for the year ended December 31, 2010, compared to $137 million for the year ended December 31, 2009. A portion of this cash flow was utilized to reduce the company's debt, and as a result debt to total capitalization at December 31, 2010 was 39%, an improvement from 42% at December 31, 2009, and 71% at December 31, 2008.

Operating Highlights and Recent Developments

  • The company has exceeded its goal to entitle a total of 1,500 lots during the two year period ended December 31, 2010 –1,061 lots were entitled in 2009, and 671 lots were entitled during 2010.

  • Brookfield Homes currently sells from 19 active communities compared to 25 at December 31, 2009.

  • At December 31, 2010, the company owned or controlled 26,817 lots, an increase of 2,572 lots from December 31, 2009.

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

    Housing & Land   Unconsolidated Entities Total Lots Total Lots  
  (Lots) Owned* Options   Owned Options 12/31/2010 12/31/2009  
  Northern California 3,273 4,950   8,223 6,951  
  Southland/Los Angeles 880 320   775 2,759 4,734 3,262  
  San Diego/Riverside 8,709   52 8,761 8,853  
  Washington D.C. Area 2,497 1,165   1,184 4,846 4,916  
  Corporate and Other 196  —   57 253 263  
  Total December 31, 2010 15,555 6,435   2,068 2,759 26,817    
  Entitled Lots 11,308 1,165   2,014 1,395 15,882 14,454  
  Unentitled Lots 4,247 5,270   54 1,364 10,935 9,791  
    15,555 6,435   2,068 2,759 26,817 24,245  
  Total December 31, 2009 14,233 6,279   1,746 1,987   24,245  
  * Includes consolidated options

Outlook

The outlook for the California and Washington, DC area markets in 2011, while cautiously optimistic heading into the traditional spring selling season, is tempered by the impact of continued economic weakness, high unemployment and foreclosures. The company anticipates that the majority of foreclosures or distress inventories in our market areas will be absorbed by the end of 2011, which in turn will result in higher demand for new homes. In addition, there is a very limited supply of finished lots, and Brookfield is strategically well positioned to benefit from increased demand.

Combination with BPO Residential

On October 5, 2010, Brookfield Properties Corporation ("Brookfield Office Properties") and Brookfield Homes announced that they had entered into a definitive agreement to combine Brookfield Homes and the North American residential land and housing division of Brookfield Office Properties ("BPO Residential") into Brookfield Residential Properties Inc. ("Brookfield Residential"). 

Completion of the transaction is subject to regulatory approval in the United States and Canada, the approval of the holders of a majority of the outstanding Brookfield Homes' common stock and other customary closing conditions. Brookfield Homes' stockholders of record on February 21, 2011 will be entitled to vote at the Brookfield Homes' stockholders meeting scheduled for March 25, 2011. Brookfield Asset Management Inc. beneficially owns, through Brookfield Residential, sufficient shares to approve the transaction and has agreed to vote in favor of the transaction at the Brookfield Homes' stockholders meeting.

Brookfield Residential has filed a registration statement on Form F-4 with the U.S. Securities and Exchange Commission ("SEC"), which was most recently amended on February 10, 2011 and which includes a proxy statement/prospectus and other relevant documents concerning the proposed transaction. Shareholders of Brookfield Homes are urged to read the proxy statement/prospectus and any amendments thereto, and any other relevant documents filed with the SEC because they will contain important information relating to Brookfield Homes, BPO Residential and the proposed transaction. The document can be obtained free of charge at the website maintained by the SEC at www.sec.gov. In addition, you may obtain documents filed with the SEC by Brookfield Homes, including periodic reports and current reports, free of charge by requesting them in writing from Brookfield Homes, 8500 Executive Park Avenue, Suite 300, Fairfax, Virginia 22031, Attention: Linda Northwood, or by telephone at (858) 481-2567; e-mail: investorrelations@brookfieldhomes.com

The respective directors and executive officers of Brookfield Homes, Brookfield Office Properties and Brookfield Residential and other persons may be deemed to be participants in the solicitation of proxies in connection with the proposed transaction. Information regarding Brookfield Homes' directors and executive officers is available in its proxy statement filed with the SEC on February 26, 2010. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, are included in the proxy statement/prospectus and other relevant materials filed with the SEC in connection with the transaction.

Brookfield Homes Corporation

Brookfield Homes Corporation is a land developer and homebuilder. We entitle and develop land for our own communities and sell lots to third parties. We also design, construct and market single-family and multi-family homes primarily to move-up homebuyers. Our portfolio includes over 26,000 lots owned and controlled in the California and Washington D.C. Area markets.

This news release shall not constitute an offer to sell or the solicitation of an offer to buy any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities referenced herein have not been registered under the United States Securities Act of 1933, as amended, or any state securities laws, and may not be offered or sold within the United States absent registration or an applicable exemption from the registration requirements of such Act or laws.

Note: Certain statements in this press release that are not historical facts, including, without limitation, information concerning the potential combination with BPO Residential, and the benefits thereof, information concerning possible or assumed future results of operations of the company, the company's 2011 outlook, and those statements preceded by, followed by, or that include the words "believe," "planned," "anticipate," "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. There can be no assurance that the proposed transaction will be consummated or that the anticipated benefits will be realized. The proposed transaction is subject to various regulatory approvals and the fulfillment of certain conditions, and there can be no assurance that such approvals will be obtained and/or such conditions will be met. Factors that could cause actual results to differ materially from those set forward in the forward-looking statements include, but are not limited to: failure to obtain required regulatory and shareholder approvals; failure to realize anticipated benefits of the merger; 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  
  Consolidated Statements of Operations  
     
    Three Months Ended
December 31
    Years Ended
December 31
 
  (thousands, except per share amounts) (unaudited) 2010   2009     2010   2009  
                     
  Revenue                  
    Housing $ 92,346   $ 133,811     $ 292,095   $ 339,625  
    Land 30,591   11,346     46,771   36,355  
  Total revenue 122,937   145,157     338,866   375,980  
  Direct cost of sales                  
    Housing (77,284 ) (111,836 )   (243,301 ) (294,493 )
    Land (28,032 ) (38,507 )   (40,686 ) (59,308 )
    Impairment of housing and land inventory and
 write-off of option deposits
  (6,225 )     (23,963 )
    17,621   (11,411 )   54,879   (1,784 )
  Selling, general and administrative expense (16,893 ) (15,561 )   (55,585 ) (52,339 )
  Equity / (loss) in earnings from unconsolidated entities 93   (262 )   (192 ) 1,331  
  Impairment of investments in unconsolidated entities   (109 )     (12,995 )
  Other income 7,286   3,276     8,055   13,191  
  Income / (loss) before income taxes 8,107   (24,067 )   7,157   (52,596 )
  Income tax (expense) / recovery (3,450 ) 7,761     (3,706 ) 20,134  
  Net income / (loss) $ 4,657   $ (16,306 )   $ 3,451   $ (32,462 )
  Net (loss) / income attributable to non-controlling
interest & other interests in consolidated subsidiaries
(198 ) 371     (976 ) (4,753 )
  Net income / (loss) attributable to Brookfield Homes Corporation $ 4,855   $ (16,677 )   $ 4,427   $ (27,709 )
                     
  Loss per common share                  
    Basic and diluted $ —   $ (0.81 )   $ (0.54 ) $ (1.54 )
                     
  Weighted average common shares outstanding                  
    Basic and diluted 29,665   27,039     29,087   26,838  
                     
     
   Brookfield Homes Corporation    
   Condensed Consolidated Balance Sheets   
     
      As at   
  (thousands, except per share amounts) (unaudited)   December 31, 2010 December 31, 2009  
           
  Assets        
  Housing and land inventory   $ 801,409 $ 835,263  
  Investments in unconsolidated entities   124,369 92,477  
  Receivables and other assets   24,826 61,744  
  Restricted cash   7,366 7,485  
  Deferred income taxes   32,631 40,112  
      $ 990,601 $ 1,037,081  
           
  Liabilities and Equity        
  Project specific and other financings   $ 331,794 $ 381,567  
  Accounts payable and other liabilities   135,264 122,190  
  Total liabilities   467,058 503,757  
  Other interests in consolidated subsidiaries   42,461 47,011  
  Total equity   481,082 486,313  
      $ 990,601 $ 1,037,081  
           
  Debt to equity capitalization   39% 42%  
           
  Book value per share, as converted and diluted   $ 7.36 $ 7.58  

 

     
  Brookfield Homes Corporation  
  Consolidated Statements of Cash Flows  
     
    Three Months Ended
December 31
    Years Ended
December 31
 
  (thousands) (unaudited) 2010   2009     2010   2009  
                     
  Cash flows from / (used in) operating activities                  
  Net income / (loss) $ 4,657   $ (16,306 )   $ 3,451   $ (32,462 )
  Adjustments to reconcile net income / (loss) to net cash
from operating activities:
                 
    (Undistributed) / distributed income from
unconsolidated entities
(102 ) 271     204   (1,091 )
    Deferred income taxes 6,444   28,882     7,481   19,326  
    Impairment of housing and land inventory and
write-off of option deposits
  6,225       23,963  
    Impairment of investments in unconsolidated entities   109       12,995  
    Stock option compensation costs 363   207     1,105   675  
  Other changes in operating assets and liabilities:                  
    (Increase) / decrease in receivables and other assets (5,812 ) (31,330 )   36,918   27,439  
    Decrease in housing and land inventory 52,603   73,381     31,915   90,648  
    (Decrease) / increase in accounts payable and other liabilities (3,506 ) 7,181     7,473   (4,303 )
  Net cash provided by operating activities 54,647   68,620     88,547   137,190  
                     
  Cash flows from / (used in) investing activities                  
  Net investments in unconsolidated entities 4,992   1,985     (35,421 ) (1,863 )
  Restricted cash (15 ) (2 )   119   (7,485 )
  Net cash provided by / (used in) investing activities 4,977   1,983     (35,302 ) (9,348 )
                     
  Cash flows from / (used in) financing activities                  
  Net repayments under project specific and other financings (60,266 ) (71,737 )   (49,773 ) (376,233 )
  Net contributions / (distributions) from non-controlling interest 715   1,134     (3,492 ) 2,137  
  Preferred stock issuance, net of issuance costs         249,688  
  Preferred stock dividends paid in cash (73 )     (73 ) (3,500 )
  Exercise of stock options       93   66  
  Net cash used in financing activities (59,624 ) (70,603 )   (53,245 ) (127,842 )
                     
  Decrease in cash and cash equivalents          
  Cash and cash equivalents at beginning of period          
  Cash and cash equivalents at end of period $ —   $ —     $ —   $ —  
                     
  Supplemental cash flow information                  
  Interest paid $ 8,117   $ 8,777     $ 31,042   $ 36,484  
  Income taxes recovered $ —   $ 2,263     $ 42,766   $ 63,286  
                     

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