Highlights include: * Net income of $45.7 million, a 90% increase *
Homebuilding revenues of $615.8 million, a 24% increase * Record
homes in backlog of 7,460 (including joint ventures), a 35%
increase * Increases 2005 net income guidance to $185 million from
$170 million * Issues 2006 net income guidance of $285 million *
Announced the completion of Transeastern Homes acquisition
HOLLYWOOD, Fla., August 2 /PRNewswire-FirstCall/ -- Technical
Olympic USA, Inc. (NYSE:TOA) today released financial results for
the three and six months ended June 30, 2005. Net income for the
second quarter of 2005 increased 90% to $45.7 million (or $0.79 per
diluted share) from $24.1 million (or $0.42 per diluted share) for
the quarter ended June 30, 2004. Homebuilding revenues for the
second quarter of 2005 were a record $615.8 million, a 24% increase
over the $498.3 million of homebuilding revenues in the second
quarter of 2004 due to increases in both the number and average
sales price of homes delivered. The number of homes delivered
increased 32% to 2,215 (including unconsolidated joint ventures)
from 1,684 in the second quarter of 2004. The Company's average
selling price on homes delivered increased 5% to $289,000 in the
second quarter of 2005, from $275,000 in the second quarter of
2004. The Company's gross profit margin as a percentage of home
sales increased 390 basis points in the second quarter of 2005 to
23.0% from 19.1% in the second quarter of 2004. The Company's net
profit margin as a percentage of home sales improved 270 basis
points in the second quarter of 2005 to 7.9% from 5.2% in the
second quarter of 2004. "We are pleased with our second quarter
results and proud of the progress we have made since we
successfully completed the integration of our predecessor
companies," said Antonio B. Mon, President and Chief Executive
Officer of TOUSA. "With the integration behind us, we are now able
to focus on the strategic growth of our top and bottom lines. We
are capitalizing on the strong fundamentals in our more robust
markets and focusing on improving the operations in markets where
conditions are not as strong." Previously, the Company announced a
35% increase in homes in backlog to a record 7,460 homes (including
unconsolidated joint ventures) in the second quarter of 2005, from
5,531 homes in the second quarter of 2004. The Company's sales
value of homes in backlog increased 37% to $2.1 billion (excluding
unconsolidated joint ventures) in the second quarter of 2005, from
$1.5 billion in the second quarter of 2004. The sales value of
homes in backlog for unconsolidated joint ventures at June 30, 2005
was $0.4 billion. The Company's income from joint ventures was $8.1
million in the second quarter of 2005. The joint ventures delivered
203 homes and generated $68.6 million in revenues in the second
quarter of 2005. For The Six Months Ended June 30, 2005 Net income
for the first six months of 2005 increased 71% to $72.1 million (or
$1.24 per diluted share) from $42.2 million (or $0.74 per diluted
share) for the six months ended June 30, 2004. Homebuilding
revenues for the six months ended June 30, 2005 were $1.1 billion,
a 25% increase over the $0.9 billion of homebuilding revenues in
the first six months of 2004 due to increases in both the number
and average sales price of homes delivered. The number of homes
delivered in the first six months of 2005 increased 32% to 4,223
(including unconsolidated joint ventures) from 3,201 in the first
six months of 2004. The Company's average selling price on homes
delivered increased 4% to $282,000 in the first six months of 2005
from $272,000 in the first six months of 2004. The Company's gross
profit margin as a percentage of home sales increased 360 basis
points in the six months ended June 30, 2005 to 22.4%, from 18.8%
in the six months ended June 30, 2004. The Company's net profit
margin as a percentage of home sales improved 170 basis points in
the first six months of 2005 to 6.6%, from 4.9% in the first six
months of 2004. Earnings Guidance The Company is raising its 2005
annual net income guidance to $185 million (or $3.01 per diluted
share) from $170 million (or $2.88 per diluted share), based on
61.5 million fully diluted shares outstanding. This represents a
net income increase of 55% over the $120 million of net income
reported in 2004. This earnings guidance is based upon the delivery
of approximately 10,500 homes (including approximately 2,100 to
2,400 homes from unconsolidated joint ventures). Consolidated
revenues for 2005 are expected to approximate $2.4 billion based
upon an anticipated average delivery price of $290,000.
Unconsolidated joint ventures are expected to generate revenues of
$750 million to $800 million in 2005. The Company's pretax earnings
from management fees and joint venture income are expected to be
$50 million to $60 million. The Company is raising its 2005 EBITDA
guidance to $360 million from a range of $335 million to $340
million and anticipates its net profit margin as a percentage of
home sales for 2005 will increase by 200 basis points over that
realized in 2004. The Company anticipates 285 active communities,
including those in the Transeastern joint venture, at the end of
2005. "Based on our strong results to date, record backlog,
improving homebuilding net margin and anticipated gains from
periodic land sales, we are increasing our 2005 earnings guidance,"
said Mr. Mon. The Company is also announcing 2006 net income
guidance of $285 million (or $4.42 per diluted share), based on an
average of 64.5 million fully diluted shares outstanding. This
earnings guidance includes the results of the Transeastern joint
venture and anticipated gains from periodic land sales, and is
based upon the delivery of approximately 15,500 homes (including
6,000 to 6,700 from unconsolidated joint ventures). Consolidated
revenues from home sales are expected to approximate $2.8 billion
based upon an anticipated average delivery price of $308,000.
Unconsolidated joint ventures are expected to generate revenues of
$1.7 billion to $2.0 billion in 2006. The Company's pretax earnings
from management fees and joint venture income are expected to be
$110 million to $130 million. The Company expects 2006 EBITDA of
$530 million and anticipates its net profit margin as a percentage
of home sales for 2006 will improve 100 basis points over 2005. We
anticipate approximately 300 active communities at the end of 2006.
"We expect to continue to strengthen our operations and further
penetrate our current markets in 2006. Thus, we believe we can
achieve the $285 million in net income for 2006, which represents a
54% increase over our 2005 expectations," said Mr. Mon. The Company
will hold a conference call and web cast on Wednesday, August 3,
2005 at 11:00 a.m. Eastern Time to discuss the second quarter and
six months financial results for 2005. Please dial (800) 811-0667
(domestic) or (913) 981-4901 (international) and use the pass code
3140580. Participants must dial in 5 to 10 minutes prior to the
scheduled start time for registration. If you are unable to
participate on the call, a replay will be available starting at
2:00 p.m. Eastern Time on August 3 and will run through 12:00 a.m.
Eastern Time on August 17. The replay telephone numbers are (888)
203-1112 (domestic) and (719) 457-0820 (international) and the code
is 3140580. Website address: http://www.tousa.com/ Technical
Olympic USA, Inc. ("TOUSA") is a leading homebuilder in the United
States, operating in 16 metropolitan markets located in four major
geographic regions: Florida, the Mid-Atlantic, Texas, and the West.
TOUSA designs, builds, and markets high-quality detached
single-family residences, town homes, and condominiums to a diverse
group of homebuyers, such as "first- time" homebuyers, "move-up"
homebuyers, homebuyers who are relocating to a new city or state,
buyers of second or vacation homes, active-adult homebuyers, and
homebuyers with grown children who want a smaller home
("empty-nesters"). It also provides financial services to its
homebuyers and to others through its subsidiaries, Preferred Home
Mortgage Company and Universal Land Title, Inc. For more
information on TOUSA, please visit our website at
http://www.tousa.com/ . This press release may contain
forward-looking statements, including the Company's expectations
regarding (i) our revenue, earnings, and operating growth and
continued improvement in our net profit margin as a percentage of
home sales, (ii) our expectations regarding gains from periodic
land sales, (iii) our 2005 and 2006 financial and operating
guidance, including 2005 and 2006 results to be achieved by our
joint ventures. The Company wishes to caution readers that certain
important factors may have affected and could in the future affect
the Company's actual results and could cause the Company's actual
results for subsequent periods to differ materially from those
expressed in any forward-looking statement made by or on behalf of
the Company. With respect to these forward-looking statements,
including those described above, these factors include (i) events
which would impede the ability of the Company and/or its joint
ventures to open new communities and/or deliver homes within
anticipated timeframes and/or within anticipated budgets, such as
unexpected delays in construction and development schedules,
including those due to governmental regulations or approvals, or
shortages in or increased costs of materials or subcontractor
labor, (ii) events or changes in factors that may impact the
ability, or willingness, of customers to enter into or close on new
home purchases, such as increases in interest or unemployment rates
or a decline in consumer confidence or the demand for, or the
prices of, housing, (iii) the impact of the Company's decision to
intentionally phase sales rates to match production rates in
certain high demand markets, (iv) the impact of other events over
which the Company has little or no control, such as weather
conditions or terrorist activities or attacks, (v) the terms of,
and our ability to realize the expected benefits from, our joint
ventures, and (vi) the internal need, and external demand, for land
within our portfolio. This press release is qualified in its
entirety by the cautionary statements and risk factor disclosure
contained in the Company's Securities and Exchange Commission
filings, including the Company's report on Form 10-K for the year
ended December 31, 2004, filed with the Commission on March 11,
2005. TECHNICAL OLYMPIC USA, INC. AND SUBSIDIARIES CONSOLIDATED
STATEMENTS OF INCOME (Dollars in millions, except share and per
share amounts) (Unaudited) Three Months Ended Six Months Ended June
30, June 30, 2005 2004 2005 2004 HOMEBUILDING: Revenues: Home sales
$582.1 $462.5 1,094.5 $869.3 Land sales 33.7 35.8 54.9 53.9 615.8
498.3 1,149.4 923.2 Cost of sales: Home sales 448.2 374.0 849.2
705.6 Land sales 29.9 28.5 46.7 41.2 478.1 402.5 895.9 746.8 Gross
profit 137.7 95.8 253.5 176.4 Selling, general and administrative
expenses 77.1 59.4 156.5 115.7 (Income) from joint ventures, net
(8.1) -- (10.7) -- Other (income) expense, net (2.3) 0.7 (4.2)
(0.5) Homebuilding pretax income 71.0 35.7 111.9 61.2 FINANCIAL
SERVICES: Revenues 11.4 9.4 21.4 18.2 Expenses 9.0 6.9 17.7 12.5
Financial Services pretax 5.7 income 2.4 2.5 3.7 5.7 Income before
provision for income taxes 73.4 38.2 115.6 66.9 Provision for
income taxes 27.7 14.1 43.5 24.7 Net income $45.7 $24.1 $72.1 $42.2
EARNINGS PER COMMON SHARE: Basic $0.82 $0.43 $1.29 $0.75 Diluted
$0.79 $0.42 $1.24 $0.74 WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING: Basic 56,083,450 56,060,228 56,078,578 56,053,078
Diluted 58,189,548 57,195,224 58,157,052 57,053,943 CASH DIVIDENDS
PER SHARE $0.015 $0.012 $0.027 $0.012 TECHNICAL OLYMPIC USA, INC.
AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in millions, except shares and par value) June 30,
December 31, 2005 2004 (Unaudited) ASSETS HOMEBUILDING: Cash and
cash equivalents: Unrestricted $73.3 $217.6 Restricted 2.9 8.0
Inventory: Deposits 186.1 132.8 Homesites and land under
development 492.2 341.2 Residences completed and under construction
736.4 671.0 Inventory not owned 103.6 136.2 1,518.3 1,281.2
Property and equipment, net 25.9 26.7 Investments in unconsolidated
joint ventures 82.4 66.6 Advances to unconsolidated joint ventures
15.4 -- Other assets 87.0 71.1 Goodwill 110.7 110.7 1,915.9 1,781.9
FINANCIAL SERVICES: Cash and cash equivalents: Unrestricted 4.2
50.9 Restricted 70.0 69.1 Mortgage loans held for sale 60.9 75.8
Other assets 12.6 9.8 147.7 205.6 Total assets $2,063.6 $1,987.5
LIABILITIES AND STOCKHOLDERS' EQUITY HOMEBUILDING: Accounts payable
and other liabilities $200.3 $188.9 Customer deposits 90.8 69.1
Obligations for inventory not owned 103.6 136.2 Notes payable 811.5
811.4 1,206.2 1,205.6 FINANCIAL SERVICES: Accounts payable and
other liabilities 71.7 70.2 Bank borrowings 49.4 49.0 121.1 119.2
Total liabilities 1,327.3 1,324.8 Stockholders' equity: Preferred
stock -- $0.01 par value; 3,000,000 shares authorized; none issued
or outstanding -- -- Common stock -- $0.01 par value; 97,000,000
shares authorized and 56,093,602 and 56,070,510 shares issued and
outstanding at June 30, 2005, and December 31, 2004, respectively
0.6 0.6 Additional paid-in capital 393.3 388.3 Unearned
compensation (11.0) (9.0) Retained earnings 353.4 282.8 Total
stockholders' equity 736.3 662.7 Total liabilities and
stockholders' equity $2,063.6 $1,987.5 Selected Homebuilding
Operating Data The following tables set forth certain operating and
financial data for our homebuilding operations in our four major
geographic regions, Florida, the Mid-Atlantic, Texas and the West
(dollars in millions, except average price in thousands): Three
Months Ended June 30, Six Months Ended June 30, 2005 2004 2005 2004
Deliveries: Homes $ Homes $ Homes $ Homes $ Florida 760 $223.3 556
$147.2 1,517 $436.2 1,100 $288.7 Mid- Atlantic 155 64.3 115 43.4
277 111.3 235 88.6 Texas 454 110.2 470 120.1 847 204.3 889 221.2
West 643 184.3 541 151.8 1,238 342.7 975 270.8 Consolidated total
2,012 582.1 1,682 462.5 3,879 1,094.5 3,199 869.3 From unconsoli-
dated joint ventures 203 65.1 2 0.6 344 103.4 2 0.6 Total 2,215
$647.2 1,684 $463.1 4,223 $1,197.9 3,201 $869.9 Three Months Ended
June 30, Six Months Ended June 30, 2005 2004 2005 2004 Net Sales
Orders(1): Homes $ Homes $ Homes $ Homes $ Florida 776 $261.3 971
$289.1 1,482 $514.9 2,056 $589.1 Mid- Atlantic 205 89.5 250 110.3
396 173.4 512 220.9 Texas 735 190.7 453 116.3 1,424 356.5 988 253.5
West 983 310.0 971 267.2 1,818 584.6 1,818 454.0 Consolidated total
2,699 851.5 2,645 782.9 5,120 1,629.4 5,374 1,517.5 From unconsoli-
dated joint ventures 486 179.4 138 42.7 800 282.1 230 70.2 Total
3,185 $1,030.9 2,783 $825.6 5,920 $1,911.5 5,604 $1,587.7 (1) Net
of cancellations June 30, 2005 June 30, 2004 Average Average Sales
Homes $ Price Homes $ Price Backlog: Florida 2,861 $977.5 $342
2,502 $724.2 $290 Mid- Atlantic 465 204.0 $439 501 220.0 $439 Texas
1,120 289.6 $259 593 155.6 $262 West 1,889 630.8 $334 1,707 438.0
$257 Consolidated total 6,335 2,101.9 $332 5,303 1,537.8 $290 From
unconsoli- dated joint ventures 1,125 389.1 $346 228 69.6 $305
Total 7,460 $2,491.0 $334 5,531 $1,607.4 $291 Three Months Ended
June 30, Six Months Ended June 30, 2005 2004 2005 2004 Average
Deliv- Sales Deliv- Sales Deliv- Sales Deliv- Sales Price: eries
Orders eries Orders eries Orders eries Orders Florida $294 $337
$265 $298 $288 $347 $262 $287 Mid- Atlantic $415 $437 $378 $441
$402 $438 $377 $432 Texas $243 $259 $256 $257 $241 $250 $249 $257
West $287 $315 $281 $275 $277 $322 $278 $250 Consolidated total
$289 $316 $275 $296 $282 $318 $272 $282 From unconsoli- dated joint
ventures $321 $369 $309 $309 $301 $353 $309 $305 Total $292 $324
$275 $297 $284 $323 $272 $283 Non-GAAP Financial Information EBITDA
Three Months Ended Six Months Ended June 30, June 30, 2005 2004
2005 2004 Net income $45.7 $24.1 $72.1 $42.2 Add: income taxes 27.7
14.1 43.5 24.7 Add: interest in cost of sales 17.7 12.8 32.4 23.5
Add: depreciation and amortization expense 3.2 3.1 6.3 6.4 EBITDA
(1) $94.3 $54.1 $154.3 $96.8 (1) EBITDA for the full year 2005 and
2006 will be calculated the same way. EBITDA is the sum of net
income before: (a) income taxes, (b) amortization of capitalized
interest in cost of sales, (c) Homebuilding interest expense and
(d) depreciation and amortization. We have included information
concerning EBITDA because we believe that it is an indication of
the profitability of our core operations and reflects the changes
in our operating results. We do not use EBITDA as a measure of our
liquidity because we do not believe it is a meaningful indication
of our cash flow. EBITDA is not required by accounting principles
generally accepted in the United States (GAAP), and other companies
may calculate EBITDA differently. EBITDA should not be considered
as an alternative to operating income or to cash flows from
operating activities (as determined in accordance with GAAP) and
should not be construed as an indication of our operating
performance or a measure of our liquidity. Our non-GAAP measure has
certain material limitations as follows: * It does not include
interest expense. Because we have borrowed money in order to
finance our operations, interest expense is a necessary element of
our costs and ability to generate revenue. Therefore any measure
that excludes interest expense has material limitations; * It does
not include depreciation and amortization expense. Because we use
capital assets, depreciation and amortization expense is a
necessary element of our costs and ability to generate revenue.
Therefore any measure that excludes depreciation and amortization
expense has material limitations; and * It does not include taxes.
Because the payment of taxes is a necessary element of our
operations, any measure that excludes tax expense has material
limitations. We compensate for these limitations by using EBITDA as
only one of several comparative tools, together with GAAP
measurements, to assist in the evaluation of our operating results.
A reconciliation of EBITDA to net income, the most directly
comparable GAAP performance measure, is provided above (dollars in
millions). Supplemental Information We generate revenues from our
homebuilding operations ("Homebuilding") and financial services
operations ("Financial Services"), which comprise our operating
segments. Through our Homebuilding operations we design, build and
market high-quality detached single-family residences, town homes
and condominiums in 16 metropolitan markets located in four major
geographic regions: Florida, the Mid-Atlantic, Texas and the West.
Florida Mid-Atlantic Texas West Jacksonville Baltimore/Southern
Austin Central Orlando Pennsylvania Dallas/Ft. Colorado Southeast
Delaware Worth Las Vegas Florida Nashville Houston Phoenix
Southwest Northern Virginia San Antonio Florida Tampa/St.
Petersburg We build homes for inventory and on a pre-sold basis. At
June 30, 2005, we had 5,138 homes completed or under construction
(including unconsolidated joint ventures), of which approximately
15% were unsold. At June 30, 2005, we had 128 completed unsold
homes in our inventory (including unconsolidated joint ventures),
of which approximately 19% had been completed for more than 90
days. Our completed unsold homes have decreased by 37% from 203 at
December 31, 2004; however, they are up slightly from 106 at March
31, 2005. At June 30, 2005, our completed unsold homes in inventory
represent less than 3% of the total homes completed or under
construction (and average less than one per active community) as
compared to 5% at December 31, 2004. We are actively working to
reduce our finished speculative home inventory to reduce carrying
costs and to increase our available capital. We were actively
selling homes in 228 communities (including 20 through our
unconsolidated joint ventures) and 253 communities at June 30, 2005
and 2004, respectively. The decline in active communities is due to
delays associated with bringing new communities on line and the
completion of sales activities in other communities. For the three
months ended June 30, 2005, total revenues increased 24%, net
income increased 90%, net sales orders (including unconsolidated
joint ventures) increased 14% and home deliveries (including
unconsolidated joint ventures) increased 32% as compared to the
same period in the prior year. For the six months ended June 30,
2005, total revenues increased 24%, net income increased 71%, net
sales orders (including unconsolidated joint ventures) increased 6%
and home deliveries (including unconsolidated joint ventures)
increased 32% as compared to the same period in the prior year.
Sales value in backlog at June 30, 2005 as compared to June 30,
2004 increased by 37% to $2.1 billion. Our joint ventures had an
additional $0.4 billion in sales backlog at June 30, 2005. Our home
cancellation rate was approximately 14% for both the three and six
months ended June 30, 2005. Our percentage of converting backlog
units at the beginning of the quarter to deliveries during the
quarter was 34%, which is consistent with the first quarter of
2005. We anticipate that this conversion rate will begin to improve
in the last half of the year as a result of our efforts to reduce
our sales to delivery timeline. We continue to be impacted by labor
and supply shortages and increases in the cost of materials caused
by the Florida hurricanes in 2004 and 2005 and expect them to
continue for some time. We have entered into, and expect to expand
our use of, joint ventures that acquire and develop land for our
Homebuilding operations and/or joint ventures that additionally
build and market homes. The majority of these joint ventures are
not consolidated. At June 30, 2005, our investment in these
unconsolidated joint ventures was $82.4 million, and we had made
short-term advances of $15.4 million to these joint ventures. In
addition, we seek to use option contracts to acquire land whenever
feasible. Option contracts allow us to control significant homesite
positions with minimal capital investment and substantially reduce
the risks associated with land ownership and development. At June
30, 2005, we controlled approximately 74,000 homesites (including
unconsolidated joint ventures) of which 81% were controlled through
various option arrangements. Three Months Ended June 30, 2005
Compared to Three Months Ended June 30, 2004 Total revenues
increased 24% to $627.2 million for the three months ended June 30,
2005, from $507.7 million for the three months ended June 30, 2004.
This increase is attributable to an increase in Homebuilding
revenues of 24%, and an increase in Financial Services revenues of
21%. Income before provision for income taxes increased by 92% to
$73.4 million for the three months ended June 30, 2005, from $38.2
million for the comparable period in 2004. This increase is
attributable to an increase in Homebuilding pretax income to $71.0
million for the three months ended June 30, 2005, from $35.7
million for the three months ended June 30, 2004. Our effective tax
rate was 37.8% and 37.0% for the three months ended June 30, 2005
and 2004, respectively. This increase was due to increases in
income in states with higher tax rates. As a result of the above,
net income increased to $45.7 million (or $0.79 per diluted share)
for the three months ended June 30, 2005 from $24.1 million (or
$0.42 per diluted share) for the three months ended June 30, 2004.
Six Months Ended June 30, 2005 Compared to Six Months Ended June
30, 2004 Total revenues increased 24% to $1,170.8 million for the
six months ended June 30, 2005, from $941.4 million for the six
months ended June 30, 2004. This increase is attributable to an
increase in Homebuilding revenues of 25%, and an increase in
Financial Services revenues of 18%. Income before provision for
income taxes increased by 73% to $115.6 million for the six months
ended June 30, 2005, from $66.9 million for the comparable period
in 2004. This increase is attributable to an increase in
Homebuilding pretax income to $111.9 million for the six months
ended June 30, 2005, from $61.2 million for the six months ended
June 30, 2004. This was partially offset by a decline in Financial
Services pretax income to $3.7 million for the six months ended
June 30, 2005 from $5.7 million for the six months ended June 30,
2004. Our effective tax rate was 37.7% and 37.0% for the six months
ended June 30, 2005 and 2004, respectively. This increase was due
to increases in income in states with higher tax rates. As a result
of the above, net income increased to $72.1 million (or $1.24 per
diluted share) for the six months ended June 30, 2005 from $42.2
million (or $0.74 per diluted share) for the six months ended June
30, 2004. Results of Operations Three Months Ended June 30, 2005
Compared to Three Months Ended June 30, 2004 Homebuilding revenues
increased 24% to $615.8 million for the three months ended June 30,
2005, from $498.3 million for the three months ended June 30, 2004.
This increase is due primarily to an increase in revenues from home
sales to $582.1 million for the three months ended June 30, 2005,
from $462.5 million for the comparable period in 2004. The 26%
increase in revenue from home sales was due to (1) a 20% increase
in home deliveries to 2,012 from 1,682 for the three months ended
June 30, 2005 and 2004, respectively, and (2) a 5% increase in the
average selling price on homes delivered to $289,000 from $275,000
in the comparable period of the prior year. A significant component
of this increase was the 52% increase in revenues from home sales
in our Florida region for the three months ended June 30, 2005, as
compared to the same period in 2004. This increase was due to a 37%
increase in home deliveries and an 11% increase in the average
selling price of such homes. In addition to revenue from home
sales, we generated $33.7 million in revenue from land sales for
the three months ended June 30, 2005, as compared to $35.8 million
for the three months ended June 30, 2004. As part of our land
inventory management strategy, we regularly review our land
portfolio. As a result of these reviews, we will seek to sell land
when we have changed our strategy for a certain property and/or we
have determined that the potential profit realizable from a sale of
a property outweighs the economics of developing a community. Land
sales are incidental to our residential homebuilding operations and
are expected to continue in the future, but may fluctuate
significantly from period to period. Our Homebuilding gross profit
increased 44% to $137.7 million for the three months ended June 30,
2005, from $95.8 million for the three months ended June 30, 2004.
This increase is primarily due to an increase in revenue from home
sales and an improved gross margin on home sales. Our gross margin
on home sales increased to 23.0% for the three months ended June
30, 2005, from 19.1% for the three months ended June 30, 2004. This
increase from period to period is primarily due to the phasing of
sales to maximize revenues and improve margins and improved control
over costs, such as the re-engineering of existing products to
reduce costs of construction, and the reduction of carrying costs
on inventory through improved control over the number of unsold
homes completed or under construction, particularly in our Texas
and West regions. For the three months ended June 30, 2005, we
generated gross profit on land sales of $3.8 million, as compared
to $7.3 million for the comparable period in 2004. SG&A
expenses increased to $77.1 million for the three months ended June
30, 2005, from $59.4 million for the three months ended June 30,
2004. SG&A expenses as a percentage of revenues from home sales
for the three months ended June 30, 2005 increased to 13.2%, as
compared to 12.8% for the three months ended June 30, 2004. The 40
basis point increase in SG&A expenses as a percentage of home
sales revenues is partially due to an increase in compensation
expense resulting from increased head count to support our joint
venture activities. For the three months ended June 30, 2005, the
income associated with these activities is $8.1 million, including
management fees of $5.6 million, which is shown separately as
income from joint ventures in our consolidated statement of income.
This increase was partially offset by a decrease of $1.2 million in
stock-based compensation expense. For the three months ended June
30, 2005 and 2004, we recognized income of $0.5 million and expense
of $0.7 million, respectively, due to the variable accounting
treatment of certain stock-based awards which include
performance-based accelerated vesting criteria and certain other
common stock purchase rights. Our net profit margin is calculated
by dividing net income by home sales revenues. Our net profit
margin increased to 7.9% from 5.2% due to improved gross margins
and joint venture revenues. Net Sales Orders and Backlog Units
(including joint ventures) For the three months ended June 30,
2005, net sales orders increased by 14% as compared to the same
period in 2004, due to an increase in sales in our Texas and West
Regions, which were partially offset by decreases in our Florida
and Mid-Atlantic regions from the deliberate phasing of sales to
improve gross margins. For the three months ended June 30, 2005,
the sales value of these new orders increased by 25% over the three
months ended June 30, 2004, due to an increase in the average net
sales price to $324,000 from $297,000 over these same periods. We
had 7,460 homes in backlog, as of June 30, 2005, as compared to
5,531 homes in backlog as of June 30, 2004. Backlog Sales Value
(excluding joint ventures) The sales value of backlog increased 37%
to $2.1 billion at June 30, 2005, from $1.5 billion at June 30,
2004, while the average selling price of homes in backlog increased
to $332,000 from $290,000 from period to period. The increase in
the average selling price of homes in backlog was primarily due to
our ability to increase prices in markets with strong housing
demand as well as our continued efforts to phase sales, especially
in our Florida and Mid- Atlantic regions, to maximize gross
margins. Financial Services Financial Services revenues increased
to $11.4 million for the three months ended June 30, 2005, from
$9.4 million for the three months ended June 30, 2004. This 21%
increase is due primarily to an increase in the number of closings
at our title and mortgage operations offset by reduced gains in
selling mortgages in the secondary market caused by a shift toward
more adjustable rate mortgage loans and market reductions in the
interest rate margin. For the three months ended June 30, 2005, our
mix of mortgage originations was 41% adjustable rate mortgages (of
which approximately 77% were interest only) and 59% fixed rate
mortgages, which is a shift from the comparable period in the prior
year of 35% adjustable rate mortgages and 65% fixed rate mortgages.
The average FICO score of our homebuyers during the three months
ended June 30, 2005 was 729, and the average loan to value ratio on
first mortgages was 77%. For the three months ended June 30, 2005,
approximately 11% of our homebuyers paid in cash as compared to 12%
during the three months ended June 30, 2004. Our mortgage
operations capture ratio for non-cash homebuyers increased to 61%
for the three months ended June 30, 2005 from 58% for the three
months ended June 30, 2004. The number of closings at our mortgage
operations increased to 1,204 for the three months ended June 30,
2005, from 1,141 for the three months ended June 30, 2004. Our
title operations capture ratio decreased to 87% of our homebuyers
for the three months ended June 30, 2005, from 98% for the
comparable period in 2004 due to an organizational change in our
Phoenix operations causing a loss of closings for the period.
However, the number of closings at our title operations increased
to 5,938 for the three months ended June 30, 2005, from 5,339 for
the same period in 2004. Non-affiliated customers accounted for
approximately 75% of our title company revenues for the three
months ended June 30, 2005. Financial Services expenses increased
to $9.0 million for the three months ended June 30, 2005, from $6.9
million for the three months ended June 30, 2004. This 30% increase
is a result of higher staff levels to support anticipated increased
loan activity. Six Months Ended June 30, 2005 Compared to Six
Months Ended June 30, 2004 Homebuilding revenues increased 25% to
$1,149.4 million for the six months ended June 30, 2005, from
$923.2 million for the six months ended June 30, 2004. This
increase is due primarily to an increase in revenues from home
sales to $1,094.5 million for the six months ended June 30, 2005,
from $869.3 million for the comparable period in 2004. The 26%
increase in revenue from home sales was due to (1) a 21% increase
in home deliveries to 3,879 from 3,199 for the six months ended
June 30, 2005 and 2004, respectively, and (2) a 4% increase in the
average selling price on homes delivered to $282,000 from $272,000
in the comparable period of the prior year. A significant component
of this increase was the 51% increase in revenues from home sales
in our Florida region for the six months ended June 30, 2005 as
compared to the same period in 2004. This increase was due to a 38%
increase in home deliveries and a 10% increase in the average
selling price of such homes. In addition to revenue from home
sales, we generated revenue from land sales of $54.9 million for
the six months ended June 30, 2005, as compared to $53.9 million
for the six months ended June 30, 2004. As discussed above, our
land sales were a result of our regular review of our land
portfolio. Our Homebuilding gross profit increased 44% to $253.5
million for the six months ended June 30, 2005, from $176.4 million
for the six months ended June 30, 2004. This increase is primarily
due to an increase in revenue from home sales and an improved gross
margin on home sales. Our gross margin on home sales increased to
22.4% for the six months ended June 30, 2005, from 18.8% for the
six months ended June 30, 2004. This increase from period to period
is primarily due to the phasing of sales to maximize revenues and
improve margins and improved control over costs, such as the
re-engineering of existing products to reduce costs of
construction; and the reduction of carrying costs on inventory
through improved control over the number of unsold homes completed
or under construction, particularly in our Texas and West regions.
For the six months ended June 30, 2005, we generated gross profit
on land sales of $8.2 million, as compared to $12.7 million for the
comparable period in 2004. SG&A expenses increased to $156.5
million for the six months ended June 30, 2005, from $115.7 million
for the six months ended June 30, 2004. SG&A expenses as a
percentage of revenues from home sales for the six months ended
June 30, 2005 increased to 14.3%, as compared to 13.3% for the six
months ended June 30, 2004. The 100 basis point increase in
SG&A expenses as a percentage of home sales revenues is
partially due to an increase in compensation expense resulting from
increased head count to support our joint venture activities. For
the six months ended June 30, 2005, the income associated with
these activities is $10.7 million, including management fees of
$6.9 million, which is shown separately as income from joint
ventures in the consolidated statement of income. Also contributing
to the increase in SG&A expenses is an increase of $2.8 million
in stock-based compensation expense. For the six months ended June
30, 2005 and 2004, we recognized a compensation charge of $4.5
million and $1.7 million, respectively, due to the variable
accounting treatment of certain stock-based awards which include
performance-based accelerated vesting criteria and certain other
common stock purchase rights. Our net profit margin is calculated
by dividing net income by home sales revenues. Our net profit
margin increased to 6.6% from 4.9% due to improved gross margins
and joint venture revenues. Net Sales Orders (including joint
ventures) For the six months ended June 30, 2005, net sales orders
increased by 6% as compared to the same period in 2004, due to an
increase in sales in our Texas and West Regions, which were
partially offset by decreases in our Florida and Mid-Atlantic
regions from the deliberate phasing of sales to improve gross
margins. For the six months ended June 30, 2005, the sales value of
these new orders increased by 20% over the six months ended June
30, 2004, due to an increase in the average net sales price to
$323,000 from $283,000 over these same periods. Financial Services
Financial Services revenues increased to $21.4 million for the six
months ended June 30, 2005, from $18.2 million for the six months
ended June 30, 2004. This 18% increase is due primarily to an
increase in the number of closings at our title and mortgage
operations offset by reduced gains in selling mortgages in the
secondary market caused by a shift toward more adjustable rate
mortgage loans and market reductions in the interest rate margin.
For the six months ended June 30, 2005, our mix of mortgage
originations was 41% adjustable rate mortgages (of which
approximately 73% were interest only) and 59% fixed rate mortgages,
which is a shift from the comparable period in the prior year of
33% adjustable rate mortgages and 67% fixed rate mortgages. The
average FICO score of our homebuyers during the six months ended
June 30, 2005 was 730, and the average loan to value ratio on first
mortgages was 77%. For the six months ended June 30, 2005,
approximately 10% of our homebuyers paid in cash as compared to 13%
during the six months ended June 30, 2004. Our mortgage operations
capture ratio for non-cash homebuyers remained stable at 61% for
the six months ended June 30, 2005 and 2004. The number of closings
at our mortgage operations increased to 2,294 for the six months
ended June 30, 2005, from 2,190 for the six months ended June 30,
2004. Our title operations capture ratio decreased to 84% of our
homebuyers for the six months ended June 30, 2005, from 95% for the
comparable period in 2004, due to an organizational change in our
Phoenix operations causing a loss of closings for the period.
However, the number of closings at our title operations increased
to 10,538 for the six months ended June 30, 2005, from 9,712 for
the same period in 2004. Non-affiliated customers accounted for
approximately 76% of our title company revenues for the six months
ended June 30, 2005. Financial Services expenses increased to $17.7
million for the six months ended June 30, 2005, from $12.5 million
for the six months ended June 30, 2004. This 42% increase is a
result of higher staff levels to support anticipated increased loan
activity. DATASOURCE: Technical Olympic USA, Inc. CONTACT: David J.
Keller, Chief Financial Officer, +1-800-542-4008, or , or Hunter
Blankenbaker, Director of Corporate Communications,
+1-954-965-6606, or , both of Technical Olympic USA, Inc. Web site:
http://www.tousa.com/
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