With a marked improvement in earnings performance, both sequentially and year over year, for Brookfield Homes Corp., it was a shame that few analysts were on the line for the company's 2Q2009 earnings call on Wednesday afternoon. The company ended the quarter nearly at breakeven, with a net loss of roughly $0.4 million, or $0.12 per share, compared to a loss of nearly $11 million during the same period the year before. Backing out net loss attributable to noncontrolling interest and other interests in consolidated subsidiaries, the company had positive earnings of roughly $0.2 million.
But significant profitability improvement wasn't the only financial pyrotechnics to be had for the quarter. The company got a much-needed shot in the arm by the completion of a $250 million rights offering during the quarter. This coupled with $16 million of operating cash flow generated during the quarter allowed the company to repay $53 million in project-specific debt while reducing its total debt-to-capitalization ratio from a whopping 71% at the end of the previous quarter ended March 31 to 47%.
Moreover, the company has plans to continue to strengthen its balance sheet by generating more cash. The company's current cash level is roughly $0.5 million. However, management estimates it will generate $90 million in operating cash flow in 2009 from both land and home sales. During the company's earnings call, CEO Ian Cockwell said the cash could be used to reduce debt but it also could be used to fund new land opportunities. What it won't be used for is special dividend disbursements or the buy back of company stock, he said.
"We are comfortable with our 47% net debt-to-capitalization. Whether we'll be reducing it further, it'll depend on place and time, what we're financing and what we're not financing," he said.
Cockwell went on to say that the company is moving forward with the entitlement of some of its optioned lots with the goal to entitle 1,500 lots during 2009 and 2010, which will provide good cash flow as the company develops, entitles, and sells off lots to merchant builders.
The recent boost to the company's balance sheet has given management the confidence to begin making strategic land grabs. The company acquired 1,412 lots in the San Diego/Riverside area for $12 million in a foreclosure sale. The acquisition comes hot on the heels of a similar purchase of 1,800 lots for $17 million during 1Q2009. At quarter end, the company had a total of 27,052 lots on its books, with roughly 11,000 under option, 14,000 owned, and 2,000 controlled through joint ventures.
Operationally, the company saw some improvement as well, although total revenues fell to $95 million from $120 million a year ago. Housing revenues in particular suffered, sliding from $115 million a year ago to $82 million during the quarter, thanks to significant reductions in average selling price. At quarter end, the company had an average selling price of $486,000, compared to $548,000 a year ago.
New orders were up 12% year over year to 266 units and backlog increased from 287 units a year ago to 310 units during the quarter. However, closings slumped 21.8% year over year to 169 units.
Margins, on the other hand, improved from -2% during 2Q2008 to 5% at the end of 2Q2009.