Background Information:
On December 17, 2004, Comstock, as part of its consolidation of operations
in connection with its IPO, merged its Washington, DC and Raleigh, North
Carolina operations together. Because the merger of Comstock's Raleigh
operation was treated as an acquisition for accounting purposes, the results
from Comstock's Raleigh operation prior to December 17, 2004 are not included
in the Company's year-end financial statements. This resulted in the
exclusion of approximately $19 million (unaudited) of revenue from
homebuilding generated in Raleigh.
For the calendar year 2004, Comstock operated as a taxable entity only
from December 17 to December 31. Comstock will operate as a taxable entity
for the full calendar year 2005.
On December 17, 2004, Comstock sold 3,960,000 shares of Class A common
stock to the public as part of its initial public offering. Post closing, the
Company had 11,026,667 shares issued and outstanding. On December 28, 2004,
the underwriters for the offering exercised their over-allotment option to
purchase an additional 594,000 shares. The Company then had 11,620,667 shares
outstanding. Based on the number of days that Comstock was public during
2004, the weighted average outstanding shares for the year ended December 31,
2004 were 7,346,618 (basic) and 7,350,685 (diluted). The weighted average
outstanding shares for the three months ended December 31, 2004 were 8,167,109
(basic) and 8,183,379 (diluted).
As a result of permitting delays in one of the Company's key sub-markets,
the Company experienced an unbalanced delivery of units in 2003 with more than
60 percent of its settlements occurring in the fourth quarter. This resulted
in an exaggerated basis in the fourth quarter of 2003 for purposes of quarter
over quarter comparisons. This phenomenon, which is not uncommon and is
relatively unpredictable, is likely to occur again in 2005. The Company has
factored this into its guidance outlined below.
Full Year Results: The Company generated record results in 2004. The
contract value of new orders for the year ended December 31, 2004 was $241.0
million on 665 new orders as compared to $81.3 million on 258 new orders for
the year ended December 31, 2003, a 196 percent increase in the value of the
new orders and a 158 percent increase in new home orders. Total revenue
increased 73 percent, from $55.5 million in 2003 to $96.0 million in 2004,
with $87.0 million of revenue from homebuilding in 2004 as compared to $49.1
in 2003. The Company delivered 263 new homes at an average price of $328,000
in 2004 versus 162 new homes at an average price of $303,000 in 2003.
Operating income grew 150 percent, from $8.1 million for 2003 to $20.1 million
for 2004, due to a significant increase in operating margin from 14.5 percent
to 20.9 percent. Net income after tax increased 141 percent from $5.9 million
in 2003 to $14.3 million in 2004. On a proforma basis, including its Raleigh
operation, the Company delivered 328 new homes in 2004 for combined revenue
from homebuilding of $105.2 million (unaudited).
Fourth Quarter Results: The contract value of new orders for the fourth
quarter of 2004 was $60.4 million on 131 new orders as compared to $17.2
million on 50 new orders for the fourth quarter of 2003, a 358 percent
increase in the value of the new orders and a 162 percent increase in new
orders. Total revenue for the three months ended December 31, 2004 was $21.5
million with $19.4 million of revenue from homebuilding, as compared to total
revenue of $32.3 million for the fourth quarter of 2003 with $29.8 million of
revenue from homebuilding. The reason for the decrease in revenue as noted
above was that revenue for the fourth quarter of 2003 was unusually
disproportionate to the balance of the year as a result of permitting delays
in one of the Company's sub-markets. The Company delivered 55 new homes at an
average price of $352,000 in the fourth quarter of 2004 versus 98 new homes at
an average price of $304,000 in the fourth quarter of 2003. Operating income
for the fourth quarter of 2004 was $4.9 million, or 23 percent of sales,
compared to $5.5 million, or 17 percent of sales, in the same quarter of 2003.
Net income after tax for the quarter decreased from $4.1 million in the fourth
quarter of 2003 to $3.7 million in fourth quarter of 2004.
Per Share Results: Both basic and fully diluted earnings for the twelve
months ended December 31, 2004, was $1.95 per share based on a weighted
average shares outstanding of 7.4 million shares for 2004. Both basic and
fully diluted earnings for the three months ended December 31, 2004, were
$0.45 per share based on a weighted average shares outstanding of 8.2 million
for the fourth quarter of 2004. Both basic and diluted earnings for the year
ended December 31, 2003 were $0.84 per share based on 7.1 shares outstanding,
adjusted for the offering.
On an unaudited proforma basis as if the Company had been taxable for the
entire year at a 38 percent effective tax rate the basic and diluted earnings
for the twelve months ended December 31, 2004 would be $1.19 per share based
on a weighted average shares outstanding of 7.4 million shares for 2004.
Under the same assumption, the basic and diluted earnings for the three months
ended December 31, 2004 would be $0.26 per share based on a weighted average
8.2 million shares outstanding.
On an unaudited proforma basis as if the Company's earnings had been
taxable for the entire year at a 38 percent effective tax rate, the basic
earnings for the twelve months ended December 31, 2004 would be $0.75 per
share based on total outstanding shares at December 31, 2004 of 11.6 million
shares. Under the same assumption, the basic earnings for the three months
ended December 31, 2004 would be $0.18 per share based on total outstanding
shares at December 31, 2004 of 11.6 million shares.
Please see the table setting forth unaudited proforma net income and
proforma net income per common share accompanying the attached financial
results for further information on this proforma data.
Balance Sheet at December 31, 2004: The Company's year-end balance sheet
reflected dramatic growth as a result of the public offering. Total assets at
year-end increased $214.3 million to $304.6 million from $90.2 million at
year-end 2003 with increases between years resulting from accumulation in land
position and an increase in cash on hand. As compared to December 31, 2003,
real estate held for development and sale increased $39.1 million primarily as
a result of the acquisition of Comstock Service Corp. (Comstock's Raleigh
operation) and the acquisition of new inventory; Inventory not owned -
Variable Interest Entities increased $119 million resulting from consolidation
of the value of five (5) land contracts for which we had $4 million of non-
refundable deposits posted in the aggregate; and cash increased $57.9 million
as a result of the Company's IPO. The Company ended 2004 with a backlog of 453
ordered but undelivered homes valued at $174.6 million as compared to 113
units valued at $36.4 million at December 31, 2003. This represents a 301
percent increase in homes and a 380 percent increase in contract value.
Operating Achievements: The Company realized several significant
operating achievements in 2004, among them:
* The Eclipse at Potomac Yard, the Company's first multi-family high-rise
condominium project was introduced to the market with great success,
with 309 unit sales valued at $117.4 million;
* The Company accelerated its land acquisition effort as evidenced by
'Real estate held for development and sale' of $104 million and
'Inventory not owned -- Variable Interest Entities' of $118 million at
December 31, 2004;
* The Company ended 2004 with approximately 4,000 lots under its direct
control with a market value well in excess of its historical carrying
cost;
* In connection with its IPO, the Company successfully negotiated the
purchase of the interests of certain of its minority interest members.
Guidance For the Quarter and Year Ahead: During the Company's investor
conference call scheduled for tomorrow, the expectations for the quarter and
year ahead will be discussed. In summary, the Company believes that its core
market of Greater Washington will continue to be characterized by significant
demand for new housing due to the region's growth and that in 2005 demand for
new homes will be greater than the anticipated supply. As a result, not only
does the Company expects to be able to increase the number of units it sells
and settles, it expects that the average sales price and average revenue per
home of its various models should increase.
The Company expects that revenues for the first quarter of 2005, ending
March 31, 2005, will be between $28 million - $29 million, with net income
after tax of between $2.5 million - $2.7 million. This equates to an
estimated range of between $0.20 - $0.23 per share on a fully diluted basis.
The Company expects that total revenue for the year ending December 31,
2005 will be between $250 million - $260 million with an estimated earnings
range of between $2.15 - $2.20 per share (diluted) on an estimated 11.9
million shares.
Based on the lot inventory currently under the Company's control and the
significant percentage of its backlog at December 31, 2004 that is projected
to settle beyond 2005, the Company currently estimates that it will deliver
revenue in 2006 that represents a 50 - 60 percent increase over 2005.
Cautionary Statement Regarding Forward-Looking Statements
This release contains "forward-looking" statements that are made pursuant
to the Safe Harbor provisions of the Private Securities Litigation Reform Act
of 1995. Statements that are predictive in nature, that depend upon or refer
to future events or conditions, or that include words such as "may," "will,"
"expects," "projects," "anticipates," "estimates," "believes," "intends,"
"plans," "should," "seeks," and similar expressions, including statements
related to Comstock's expected future financial results and anticipated growth
in the Washington, D.C. housing market, are forward-looking statements.
Forward-looking statements involve known and unknown risks and uncertainties
that may cause actual future results to differ materially from those projected
or contemplated in the forward-looking statements. These risks and
uncertainties include, but are not limited to, economic, market and
competitive conditions affecting Comstock and its operations and products,
risks and uncertainties relating to the market for real estate generally and
in the areas where Comstock has projects, the availability and price of land
suitable for development, materials prices, labor costs, interest rates,
Comstock's ability to service its significant debt obligations, fluctuations
in operating results, anticipated growth strategies, continuing relationships
with affiliates, environmental factors, government regulations, the impact of
adverse weather conditions or natural disasters and acts of war or terrorism.
Additional information concerning these and other important risks and
uncertainties can be found under the heading "Risk Factors" in the prospectus
from Comstock's initial public offering, as filed with the Securities and
Exchange Commission on December 15, 2004. Comstock specifically disclaims any
obligation to update or revise any forward-looking statements, whether as a
result of new information, future developments or otherwise.
About Comstock Homebuilding Companies, Inc.
Comstock is a production homebuilder that develops, builds, and markets
single-family homes, townhouses, and condominiums. The Company currently
operates in the Washington, D.C. and Raleigh, North Carolina markets where it
targets a diverse range of buyers, including first-time, early move-up,
secondary move-up, empty nester move-down and active adult home buyers. For
more information on Comstock, please visit
http://www.comstockhomebuilding.com.
Financial Results of Operations
Three months ended Year ended
COMSTOCK HOMEBUILDING December 31, December 31,
COMPANIES, INC. 2003 2004 2003 2004
Revenues (Unaudited)
Sale of real estate - Homes $29,786 $19,354 $49,081 $87,003
Other revenue 2,562 2,124 6,440 9,042
Total revenue 32,348 21,478 55,521 96,045
Expenses
Cost of sales of real estate 22,160 12,674 36,620 57,339
Cost of sales of other 1,948 1,235 5,136 6,654
Selling, general and
administrative 2,754 2,623 5,712 11,940
Operating income 5,486 4,946 8,053 20,112
Other (income) expense, net 26 625 (44) 908
Income before minority interest
and equity in earnings of real
estate partnerships 5,460 4,321 8,097 19,204
Minority interest 1,390 900 2,297 5,260
Income before equity in
earnings of real estate
partnerships 4,070 3,421 5,800 13,944
Equity in earnings of real
estate partnerships 41 25 139 118
Total pre tax income 4,111 3,446 5,939 14,062
Income Taxes - (241) - (241)
Net Income $4,111 $3,687 $5,939 $14,303
Basic earnings per share 0.58 0.45 0.84 1.95
Basic weighted average shares
outstanding 7,067 8,167 7,067 7,347
Dilutive earnings per share 0.58 0.45 0.84 1.95
Dilutive weighted average
shares outstanding 7,067 8,183 7,067 7,351
Unaudited Proforma Net Income
and Proforma Net Income per Common Share
Three Months and Years Ended December 31, 2003 and 2004
(in thousands, except per share data)
Proforma net income and proforma net
income per common share
Net income $4,111 $3,687 $5,939 $14,303
Income tax expense - (241) - (241)
Income before income tax taxes 4,111 3,446 5,939 14,062
Income tax expense 38% 1,562 1,310 2,257 5,344
Proforma net income $2,549 $2,137 $3,682 $8,719
Shares - Dilutive weighted average
shares outstanding 7,067 8,183 7,067 7,351
Proforma net income per common
share $0.36 $0.26 $0.52 $1.19
Shares outstanding at December 31,
2004 11,621 11,621 11,621 11,621
Proforma net income per common
share 0.22 0.18 0.32 0.75
SOURCE Comstock Homebuilding Companies, Inc.
CONTACT: Al Black, +1-703-744-7833, or ablack@qorvis.com, for Comstock
Homebuilding Companies, Inc.