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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2005 Commission File Number: 001  31524 BROOKFIELD HOMES CORPORATION  Delaware
    
    37-1446709(State or Other Jurisdiction of
Incorporation or Organization)
    
    (I.R.S. EmployerIdentification No.)12865 Pointe Del MarSuite 200Del Mar, California
    
    92014(Address of Principal Executive Offices)
    
    (Zip Code)
 (858) 481-8500  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes
    
    þ
    
    No
    
    o
 Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes
    
    þ
    
    No
    
    o
 As of April 30, 2005, the registrant had outstanding 30,852,732 shares of its common stock,
$0.01 par value per share.




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INDEX BROOKFIELD HOMES CORPORATION PART I.
    
    
    FINANCIAL INFORMATION
    
    PAGEItem 1.
    
    Financial StatementsConsolidated Balance Sheets  March 31, 2005 and
December 31, 2004
    
    
    1Consolidated Statements of Income  Three Months Ended
March 31, 2005 and 2004
    
    
    2Consolidated Statements of Cash Flows  Three Months Ended
March 31, 2005 and 2004
    
    
    3Notes to the Consolidated Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    8Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    13Item 4.
    
    Controls and Procedures
    
    
    13PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    14Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    14Item 3.
    
    Defaults Upon Senior Securities
    
    
    14Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    14Item 5.
    
    Other Information
    
    
    14Item 6.
    
    Exhibits
    
    
    14SIGNATURES
    
    
    
    
    15EXHIBITSEX-31.1EX-31.2EX-32.1




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PART I.     FINANCIAL INFORMATION 
 Item 1.     Financial Statements BROOKFIELD HOMES CORPORATION 
 CONSOLIDATED BALANCE SHEETS (all dollar amounts are in thousands of U.S. dollars) (Unaudited)March 31,
    
    
    December 31,Note
    
    
    2005
    
    
    2004AssetsHousing and land inventory
    
    
    2
    
    
    $
    787,775
    
    
    $
    679,930Investments in housing and land joint ventures
    
    
    3
    
    
    
    49,647
    
    
    
    59,810Consolidated land inventory not owned
    
    
    2
    
    
    
    42,131
    
    
    
    47,240Receivables and other assets
    
    
    
    
    
    
    29,799
    
    
    
    73,986Cash and cash equivalents
    
    
    4
    
    
    
    124,666
    
    
    
    186,731Deferred income taxes
    
    
    
    
    
    
    34,516
    
    
    
    33,924$
    1,068,534
    
    
    $
    1,081,621Liabilities and EquityProject specific and other financings
    
    
    
    
    
    $
    529,898
    
    
    $
    512,098Accounts payable and other liabilities
    
    
    
    
    
    
    209,128
    
    
    
    256,985Minority interest
    
    
    2
    
    
    
    65,404
    
    
    
    66,422Preferred
stock  10,000,000 shares authorized, no shares issued
    
    
    
    
    
    
    
    
    
    
    Common stock and additional paid-in capital  65,000,000 shares
authorized, 30,860,932 shares issued and outstanding with par
value of $309, excluding 1,212,849 treasury shares with a cost of
$24,508 (December 31, 2004  30,889,632 shares issued and
outstanding with par value of $309, excluding 1,184,149 treasury
shares with a cost of $23,552)
    
    
    
    
    
    
    119,290
    
    
    
    120,246Retained earnings
    
    
    
    
    
    
    144,814
    
    
    
    125,870$
    1,068,534
    
    
    $
    1,081,621
 See accompanying notes to financial statements 1




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BROOKFIELD HOMES CORPORATION 
 CONSOLIDATED STATEMENTS OF INCOME (all dollar amounts are in thousands of U.S. dollars, except per share amounts) (Unaudited)Three Months EndedMarch 31,Revenue
    
    Note
    
    
    2005
    
    
    2004Housing
    
    
    
    
    
    $
    143,083
    
    
    $
    138,958Land and other revenues
    
    
    
    
    
    
    9,072
    
    
    
    4,231152,155
    
    
    
    143,189Direct Cost of Sales
    
    
    2
    
    
    
    (103,978
    )
    
    
    (110,051
    )48,177
    
    
    
    33,138Equity in earnings from housing and land joint ventures
    
    
    3
    
    
    
    7,312
    
    
    
    851Selling, general and administrative expense
    
    
    
    
    
    
    (21,224
    )
    
    
    (16,171
    )Minority interest
    
    
    
    
    
    
    (3,209
    )
    
    
    (2,146
    )Net Income Before Taxes
    
    
    
    
    
    
    31,056
    
    
    
    15,672Income tax expense
    
    
    
    
    
    
    (12,112
    )
    
    
    (5,955
    )Net Income
    
    
    
    
    
    $
    18,944
    
    
    $
    9,717Earnings Per ShareBasic
    
    
    1
    
    
    $
    0.61
    
    
    $
    0.31Diluted
    
    
    1
    
    
    $
    0.60
    
    
    $
    0.31Weighted Average Common Shares Outstanding(in thousands)Basic
    
    
    1
    
    
    
    30,865
    
    
    
    30,881Diluted
    
    
    1
    
    
    
    31,517
    
    
    
    31,423
 See accompanying notes to financial statements 2




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BROOKFIELD HOMES CORPORATION 
 CONSOLIDATED STATEMENTS OF CASH FLOWS (all dollar amounts are in thousands of U.S. dollars) UnauditedThree Months EndedMarch 31,2005
    
    
    2004Cash Flows from Operating ActivitiesNet income
    
    $
    18,944
    
    
    $
    9,717Adjustments to reconcile net income to net cash used in operating activities:Distribution of joint venture earnings in excess of equity income
    
    
    29
    
    
    
    Minority interest
    
    
    3,209
    
    
    
    2,146Deferred income taxes
    
    
    (592
    )
    
    
    3,403Changes in operating assets and liabilities:Decrease in receivables and other assets
    
    
    44,187
    
    
    
    16,133Increase in housing and land inventory
    
    
    (109,338
    )
    
    
    (67,241
    )(Decrease)/increase in accounts payable and other
    
    
    (40,165
    )
    
    
    8,011Net cash used in operating activities
    
    
    (83,726
    )
    
    
    (27,831
    )Cash Flows From Investing ActivitiesNet recovery from housing and land joint ventures
    
    
    10,134
    
    
    
    3,044Net cash provided by investing activities
    
    
    10,134
    
    
    
    3,044Cash Flows From Financing ActivitiesNet borrowings under revolving project specific and other financings
    
    
    17,800
    
    
    
    30,263Net distributions to minority interest
    
    
    (5,317
    )
    
    
    (3,023
    )Repurchase of common shares
    
    
    (956
    )
    
    
    Net cash provided by financing activities
    
    
    11,527
    
    
    
    27,240(Decrease)/increase in cash and cash equivalents
    
    
    (62,065
    )
    
    
    2,453Cash and cash equivalents at beginning of period
    
    
    186,731
    
    
    
    218,606Cash and cash equivalents at end of period
    
    $
    124,666
    
    
    $
    221,059Supplemental Cash Flow InformationInterest paid
    
    $
    5,771
    
    
    $
    4,420Income taxes paid
    
    $
    39,411
    
    
    $
    7,010(Decrease)/increase in consolidated land inventory not owned
    
    $
    (6,602
    )
    
    $
    6,385
 See accompanying notes to financial statements 3




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BROOKFIELD HOMES CORPORATION 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in $U.S. thousands except per share amounts)  Note 1.
    Significant Accounting Policies (a)     Basis of Presentation Brookfield Homes Corporation (the Company or Brookfield Homes) was incorporated on August 28,
2002 as a wholly-owned subsidiary of Brookfield Properties Corporation (Brookfield Properties) to
acquire as of October 1, 2002 all of the California and Washington D.C. area homebuilding and land
development operations (the Land and Housing Operations) of Brookfield Properties pursuant to a
reorganization of its business (the Spin-off). On January 6, 2003, Brookfield Properties
completed the Spin-off by distributing all of the issued and outstanding common stock it owned in
the Company to its common stockholders. Brookfield Homes began trading as a separate company on
the New York Stock Exchange on January 7, 2003. The consolidated financial statements include the accounts of Brookfield Homes and its subsidiaries
and investments in joint ventures and variable interests in which the Company is the primary
beneficiary. The accompanying unaudited consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States for interim financial information.
Since they do not include all of the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements, they should be read in
conjunction with the Companys consolidated financial statements and footnotes thereto included in
the Companys annual report on Form 10-K for the year ended December 31, 2004. In the opinion of
management, all adjustments necessary for fair presentation of the accompanying consolidated
financial statements have been made. The Company historically has experienced, and expects to continue to experience, variability in
quarterly results. The consolidated statements of income for the three months ended March 31, 2005
are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying notes. Actual results could
differ from those estimates. (b)     Earnings Per Share Earnings per share is computed in accordance with the Statement of Financial Accounting Standards
(SFAS) 128. Basic earnings per share is calculated by dividing net income by the average number
of common shares outstanding for the period. Diluted earnings per share is calculated by dividing
net income by the average number of common shares outstanding including all dilutive potentially
issuable shares under various stock option plans. Basic and diluted earnings per share for the three months ended March 31, 2005 and 2004 were
calculated as follows (in thousands except per share amounts): Three Months EndedMarch 31,2005
    
    
    2004Numerator:Net income
    
    $
    18,944
    
    
    $
    9,717Denominator:Basic average shares outstanding
    
    
    30,865
    
    
    
    30,881Net effect of stock options assumed to be exercised
    
    
    652
    
    
    
    542Diluted average shares outstanding
    
    
    31,517
    
    
    
    31,423Basic earnings per share
    
    $
    0.61
    
    
    $
    0.31Diluted earnings per share
    
    $
    0.60
    
    
    $
    0.31
 4




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BROOKFIELD HOMES CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in $U.S. thousands except per share amounts) (c)     Recent Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 123(R),
Share-Based Payment.SFAS No. 123(R) establishes
accounting standards for transactions in which a company exchanges its equity instruments for goods
or services. In particular, this Statement would require companies to record compensation expense
for all share-based payments, such as employee stock options, at fair market value. This Statement is
effective as of the beginning of the first interim or annual reporting period of the next fiscal year that
begins after June 15, 2005. The Company is currently reviewing the effect of this Statement on its consolidated
financial statements. In December 2003, the FASB issued revised Interpretation 46 (FIN 46R), Consolidation of Variable
Interest Entities (VIEs), an Interpretation of Accounting Research Bulletin 51, Consolidated Financial
Statements, and replaces the previous version of FASB Interpretation 46 issued in January 2003
(FIN 46). This interpretation applied immediately to variable interest entities created after
January 31, 2003. A company that holds a variable interest in a VIE it acquired before February 1,
2003 shall apply the provision of this interpretation no later than the first fiscal year or
interim period ending after March 15, 2004 unless those entities are considered to be special
purpose entities in which the application is to be no later than the end of the first reporting period
that ends after December 15, 2003. This interpretation may be applied prospectively with a cumulative-effect
adjustment as of the date on which it is first applied or by restating previously issued financial
statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated.
The Company applied the provision of this new pronouncement effective January 1, 2003 but did not restate any
previously issued financial statements. The decision whether to consolidate a VIE begins with establishing that a VIE exists. A
VIE exists when either the total equity investment at risk is not sufficient to permit the entity
to finance its activities by itself, or the equity investor lack one of three characteristics
associated with owning a controlling financial interest. Those characteristics are the direct or indirect ability to make
decisions about the entitys activities through voting rights or similar rights, the obligation to
absorb the expected losses of an entity, and the right to receive the expected residual returns.
The entity with the majority of the expected losses or expected residual return is considered to be
the primary beneficiary of the entity and is required to consolidate such entity. The Company has
determined they are the primary beneficiary of certain VIEs which are presented in these financial
statements under Consolidated land inventory not owned with the interest of others included in
Minority interest. See Notes 2 and 3 for further discussion on the consolidation of land option
contracts and joint ventures. (d)     Reclassification Certain prior period amounts in the consolidated financial statements have been reclassified to
conform with the March 31, 2005 presentation. In particular, reclassifications have been made to
equity in earnings from housing and land joint ventures (now shown as a component of operating
income separately from revenue) and to interest expense (now included as a component of Direct Cost
of Sales).  Note 2.
    Housing and Land Inventory Housing and land inventory includes homes completed and under construction, model homes, developed
land and land under and held for development which will be used in the Companys homebuilding
operations or sold as building lots to other homebuilders. The following summarizes the components
of housing and land inventory: March 31,
    
    
    December 31,2005
    
    
    2004Housing inventory
    
    $
    419,913
    
    
    $
    244,041Model homes
    
    
    27,359
    
    
    
    19,179Land and land under development
    
    
    340,503
    
    
    
    416,710$
    787,775
    
    
    $
    679,930
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BROOKFIELD HOMES CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in $U.S. thousands except per share amounts) The Company capitalizes interest which is expensed as housing units and building lots are sold.
For the three months ended March 31, 2005 and 2004 interest incurred and capitalized by the Company
was $5.8 million and $4.4 million, respectively. Capitalized interest expensed for the same periods
was $3.1 million and $3.9 million, respectively. Capitalized costs are expensed as costs of sales on a specific identification basis or on a
relative value in proportion to anticipated revenue. Included in direct costs of sales is $101.6
million of costs related to housing revenue (March 31, 2004  $108.2 million) and $2.4 million of
costs related to land sales and other revenues (March 31, 2004  $1.8 million). In the ordinary course of business, the Company has entered into a number of option contracts to
acquire lots in the future in accordance with specific terms and conditions of such agreements.
Under these option contracts, the Company will fund deposits to secure the right to purchase land
or lots at a future point in time. The Company has evaluated its option contracts and determined
that for those entities considered to be VIEs, it is the primary beneficiary on options for 354
lots with aggregate exercise prices of $42.1 million (December 31, 2004  375 lots with an exercise
price of $47.2 million), which are required to be consolidated. In these cases, the only asset
recorded is the Companys exercise price for the option to purchase, with an increase in minority
interest of $36.2 million (December 31, 2004  $42.8 million) for the assumed third party
investment in the VIE. Where the land sellers are not required to provide the Company with
financial information related to the VIE, certain assumptions by the Company were required in its
assessment as to whether or not it is the primary beneficiary. Housing and land inventory includes non-refundable deposits and other costs totaling $49.6 million
(December 31, 2004  $36.0 million) in connection with options that are not required to be
consolidated under the provisions of FIN 46R. The total exercise price of these options is $649.4
million (December 31, 2004  $627.7 million) including the non-refundable deposits identified
above. The number of lots for which the Company has obtained an option to purchase, excluding those
already consolidated, and their respective dates of expiry and their exercise price are as follows: TotalNumber of
    
    
    ExerciseYear of Expiry
    
    Lots
    
    
    Price2005
    
    
    948
    
    
    $
    81,3722006
    
    
    5,204
    
    
    
    207,1022007
    
    
    3,276
    
    
    
    133,503Thereafter
    
    
    7,248
    
    
    
    227,40916,676
    
    
    $
    649,386
  Note 3.
    Investments in Housing and Land Joint Ventures The Company participates in a number of joint ventures in which it has less than a controlling
interest. Summarized condensed financial information on a combined 100% basis of the joint ventures
is as follows: March 31,
    
    
    December 31,2005
    
    
    2004AssetsHousing and land inventory
    
    $
    331,905
    
    
    $
    345,939Other assets
    
    
    47,017
    
    
    
    54,510$
    378,922
    
    
    $
    400,449Liabilities and EquityAccounts payable and other liabilities
    
    $
    18,769
    
    
    $
    46,313Project specific financings
    
    
    266,758
    
    
    
    277,568Investment and advancesBrookfield Homes
    
    
    49,647
    
    
    
    59,810Others
    
    
    43,748
    
    
    
    16,758$
    378,922
    
    
    $
    400,449
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BROOKFIELD HOMES CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts in $U.S. thousands except per share amounts) Three Months EndedMarch 312005
    
    
    2004Revenue and ExpensesRevenue
    
    $
    44,349
    
    
    $
    19,678Expenses
    
    
    (28,803
    )
    
    
    (17,805
    )Net income
    
    $
    15,546
    
    
    $
    1,873Companys share of net income
    
    $
    7,312
    
    
    $
    851
 In reporting the Companys share of net income, all inter-company profits or losses from
housing and land joint ventures are eliminated on lots purchased by the Company. Joint ventures in which the Company has a non-controlling interest are accounted for using the
equity method. In addition, the Company has performed an evaluation of its existing joint venture
relationships by applying the provisions of FIN 46R. The Company has determined that for those
entities in which this interpretation applies, none of these joint ventures were considered to be a
VIE requiring consolidation pursuant to the requirement of FIN 46R. The Company and/or its joint venture partners have provided varying levels of guarantees of debt in
its joint ventures. At March 31, 2005, the Company had recourse guarantees of $4.1 million and
limited maintenance guarantees of $74.8 million with respect to debt in its joint ventures.  Note 4.
    Commitments, Contingent Liabilities and Other (a) The Company had demand deposits included in cash and cash equivalents of $75.0 million at March
31, 2005 (December 31, 2004  $125.0 million) with a financial subsidiary of the Companys largest
stockholder, Brascan Corporation. (b) The Company is party to various legal actions arising in the ordinary course of business.
Management believes that none of these actions, either individually or in the aggregate, will have
a material adverse effect on the financial condition or results of operations of the Company. (c) When selling a home, the Companys subsidiaries provide customers with a limited warranty. The
Company estimates the costs that may be incurred under each limited warranty and records a
liability in the amount of such costs at the time the revenue associated with the sale of each home
is recognized. In addition, the Company has insurance in place where its subsidiaries are subject
to the respective warranty statutes in the State where the Company conducts business which range up
to ten years for latent construction defects. Factors that affect the Companys warranty liability
include the number of homes sold, historical and anticipated rates of warranty claims, and cost per
claim. The Company periodically assesses the adequacy of its recorded warranty liabilities and
adjusts the amounts as necessary. The following table reflects the changes in the Companys
warranty liability for the three months ended March 31, 2005: 2005Balance, January 1, 2005
    
    $
    18,202Payments made during the period
    
    
    (716
    )Warranties issued during the period
    
    
    1,198Balance, March 31, 2005
    
    $
    18,684
 (d) The Company entered into an interest rate swap contract during the third quarter of
2004 which effectively fixes $60.0 million of the Companys variable rate debt at 5.89% until the
contract expires in 2009. At March 31, 2005, the fair market value of the contract was $1.4
million. 7




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Item 2.
    Managements Discussion and Analysis of Financial Condition and Results of Operations This discussion includes forward-looking statements that reflect our current views with
respect to future events and financial performance and that involve risks and uncertainties. Our
actual results, performance or achievements could differ materially from those anticipated in the
forward-looking statements as a result of certain factors including risks discussed in
Managements Discussion and Analysis of Financial
Condition and Results of Operations 
Forward-Looking Statements elsewhere in this report and in our Annual Report on Form 10-K for the
year ended December 31, 2004. Overview We design, construct and market single-family and multi-family homes primarily to move-up and
luxury homebuyers and develop land for sale to other homebuilders. Our operations are currently
focused primarily in five markets: San Francisco Bay Area; Southland / Los Angeles; San Diego /
Riverside; Sacramento; and the Washington D.C. Area. Our goal is to maximize the total return on
our common stockholders equity. The 29,748 lots that we control, 12,718 of which we own directly or through joint ventures, provide
a strong foundation for our future homebuilding business and visibility on our future cash flow and
earnings. The lots we own directly or through joint ventures represent approximately a seven year
lot supply, based on 2005 planned home closings. Homebuilding is our primary source of revenue and has represented approximately 90% of our total
revenue since 2000. We believe our operations are positioned to close between 1,700 and 2,000 homes
per year. Operating in markets with higher price points and catering to move-up and luxury buyers,
our average sales price as of March 31, 2005 of $645,000 was well in excess of the national average
sales price of approximately $273,000. We also sell serviced and unserviced lots to other
homebuilders generally on an opportunistic basis where we can redeploy capital to an asset
providing higher returns or reduce risk in a market. In addition to our housing and land inventory and investments in housing and land joint ventures,
which together comprised 82% of our total assets as of March 31, 2005, we had $125 million in cash
and cash equivalents and $64 million in other assets. Other assets consist of homebuyer receivables
of $16 million, deferred taxes of $34 million, and mortgages and other receivables of $14 million.
Homebuyer receivables consist primarily of proceeds due from homebuyers on the closing of homes. Since 2000, our revenues and net income have grown at compounded annual growth rates of 17% and
50%, respectively. Over this period, we generated over $450 million in operating cash flow that was
used mainly to return cash to shareholders. At the same time, we believe we have positioned our
business for future growth through the selective optioning or acquisition of a significant number
of large projects and our overall level of lots controlled. Our recent growth is primarily the
result of strong economic fundamentals in the markets in which we operate, our success in acquiring
strategic parcels of land and in controlling costs at all levels of our operation. Critical Accounting Policies and Estimates There have been no significant changes to our critical accounting policies and estimates during the
three months ended March 31, 2005 compared to those disclosed in Item 7, Managements Discussion
and Analysis of Financial Condition and Results of Operations included in the Companys annual
report on Form 10-K for the year ended December 31, 2004. Three Months EndedResults of Operations
    
    March 31,Selected Financial Information ($ millions)
    
    2005
    
    
    2004Revenue:Housing
    
    $
    143
    
    
    $
    139Land and other revenues
    
    
    9
    
    
    
    4Total revenues(1)
    
    
    152
    
    
    
    143Direct cost of sales(1)
    
    
    (104
    )
    
    
    (110
    )Gross margin (1)
    
    
    48
    
    
    
    33Equity in earnings from housing and land joint ventures
    
    
    7
    
    
    
    1Selling, general and administrative expense
    
    
    (21
    )
    
    
    (16
    )Operating income
    
    
    34
    
    
    
    18Minority interest
    
    
    (3
    )
    
    
    (2
    )Net income before taxes
    
    
    31
    
    
    
    16Income tax expense
    
    
    (12
    )
    
    
    (6
    )Net income
    
    $
    19
    
    
    $
    10
 8




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##### Table of Contents



Three Months EndedMarch 31,2005
    
    
    2004Selected
Operating DataHome closings (units):San Francisco Bay Area
    
    
    34
    
    
    
    54Southland / Los Angeles
    
    
    24
    
    
    
    58San Diego / Riverside
    
    
    83
    
    
    
    51Washington D.C. Area
    
    
    81
    
    
    
    81Total
    
    
    222
    
    
    
    244Average selling price:San Francisco Bay Area
    
    $
    844,000
    
    
    $
    743,000Southland / Los Angeles
    
    
    1,113,000
    
    
    
    731,000San Diego / Riverside
    
    
    586,000
    
    
    
    304,000Washington D.C. Area
    
    
    484,000
    
    
    
    506,000Average
    
    $
    645,000
    
    
    $
    570,000Net new orders (units): (2)San Francisco Bay Area
    
    
    63
    
    
    
    131Southland / Los Angeles
    
    
    94
    
    
    
    140San Diego / Riverside
    
    
    159
    
    
    
    161Washington D.C. Area
    
    
    201
    
    
    
    135Total
    
    
    517
    
    
    
    567Backlog (units at end of period): (3)San Francisco Bay Area
    
    
    83
    
    
    
    190Southland / Los Angeles
    
    
    156
    
    
    
    267San Diego / Riverside
    
    
    357
    
    
    
    224Washington D.C. Area
    
    
    315
    
    
    
    291Total
    
    
    911
    
    
    
    972Lots Controlled:Lots owned:San Francisco Bay Area
    
    
    1,368
    
    
    
    1,874Southland / Los Angeles
    
    
    614
    
    
    
    421San Diego / Riverside
    
    
    6,435
    
    
    
    6,215Sacramento
    
    
    310
    
    
    
    310Washington D.C. Area
    
    
    3,991
    
    
    
    2,58012,718
    
    
    
    11,400Lots under option
    
    
    17,030
    
    
    
    11,483Total
    
    
    29,748
    
    
    
    22,883
    (1)
    
    To conform to the current periods presentation, for the three months ended March 31, 2004,
revenue excludes equity in earnings from housing and land joint ventures and gross margin
excludes equity in earnings from housing and land joint ventures and includes interest
expense.(2)
    
    Net new orders for any period represent the aggregate of all homes ordered by customers, net of
cancellations for consolidated projects.(3)
    
    Backlog represents the number of new homes subject to pending sales contracts for consolidated
projects. Three Months Ended March 31, 2005 Compared with Three Months Ended March 31, 2004 Net Income Net income for the three months ended March 31, 2005 was $19 million an increase of $9 million over
the three months ended March 31, 2004. Our increase in net income for the three months ended March
31, 2005 was primarily attributable to increased housing margins as a result of continued strong
market conditions in all our markets. Results of Operations Housing revenues were $143 million for the three months ended March 31, 2005, an increase of $4
million over the three months ended March 31, 2004. The increase in housing revenue for the three
months ended March 31, 2005 was due primarily to a 13% increase in our average selling price to
$645,000, partially offset by a decrease in the number of homes closed. The increase in our
average selling price is a result of house price appreciation in all our markets and product mix
when compared to the three months ended March 31, 2004, however it is consistent with our average 9




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##### Table of Contents



selling price for the full year 2004. Home closings declined in the San Francisco Bay Area and
Southland/Los Angeles as a result of a short term decline in active selling communities. The gross margin on housing revenues for the three months ended March 31, 2005 was $41 million or
29.0% compared with $31 million or 22.1% for the same period in 2004. The increase in the gross
margin percentage is due to continued strong market conditions in all our markets and a higher
concentration of home closings in San Diego / Riverside where our margins are the highest. Land and other revenues totaled $9 million for the three months ended March 31, 2005, an increase
of $5 million over the same period in 2004. The increase was primarily due to an increase in the number of lots sold
and an increase in interest and other revenue. Our land revenues may vary significantly from period
to period due to the timing and the nature of land sales as they generally occur on an
opportunistic basis. The gross margin on land and other revenues for the three months ended March 31, 2005 was $7
million compared with $2 million for the same period in 2004. Equity in earnings from housing and land joint ventures for the three months ended March 31, 2005
was $7 million, an increase of $6 million over the same period in 2004. The increase was primarily
attributable to the bulk sale of 41 lots in Southern California held in a joint venture, which
contributed earnings of $5 million. Other Expenses Selling, general and administrative expense was $21 million for the three months ended March 31,
2005 compared with $16 million for the same period in 2004. The increase of $5 million was
primarily a result of an increase in stock compensation expense of $2 million over the same period
in 2004. Sales Activity Our net new orders for the three months ended March 31, 2005 totaled 517 units, a decrease of 50
units compared to the same period in 2004. The decrease in net new orders resulted from fewer homes
available for sale in both our San Francisco Bay Area and Southland / Los Angeles markets, and
partially offset by an increase in sales in the Washington D.C. Area. Liquidity and Capital Resources Financial Position Our total assets as of March 31, 2005 were $1,069 million, a decrease of $13 million compared to
December 31, 2004. The decrease is due primarily to a decrease in receivables and other assets and
cash and cash equivalents offset by an increase in housing and land inventory. The increase in our
housing and land inventory is due mainly to the acquisition of 300 lots for approximately $47
million and ongoing construction and development on homes in backlog. Our total debt as of March 31, 2005 was $530 million, an increase of $18 million compared to
December 31, 2004. Total debt as of March 31, 2005 consisted mainly of project specific financings
which represent construction and development loans that are repaid from home and lot sales
proceeds. As new homes are constructed, further loan facilities are arranged on a rolling basis.
Our major project specific lenders are Bank of America, Housing Capital Corporation and Wells
Fargo. Other debt comprises deferred compensation on which interest is paid at prime and loans
outstanding relating to mortgages we originated which are repaid when the underlying mortgages are
sold to permanent lenders. As of March 31, 2005, the average interest rate on our debt was 5.9%
with maturities as follows: Maturities($ millions)
    
    2005
    
    
    2006
    
    
    2007
    
    
    Post 2007
    
    
    TotalSan Francisco Bay Area
    
    $
    70
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    70Southland/Los Angeles
    
    
    46
    
    
    
    33
    
    
    
    
    
    
    
    
    
    
    
    79San Diego/Riverside
    
    
    130
    
    
    
    96
    
    
    
    11
    
    
    
    
    
    
    
    237Washington D.C. Area
    
    
    43
    
    
    
    15
    
    
    
    42
    
    
    
    21
    
    
    
    121Other
    
    
    4
    
    
    
    10
    
    
    
    6
    
    
    
    3
    
    
    
    23Total
    
    $
    293
    
    
    $
    154
    
    
    $
    59
    
    
    $
    24
    
    
    $
    530
 10




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##### Table of Contents



Cash Flow Our principal uses of working capital include purchases of land, land development and home
construction. Cash flows for each of our communities depend upon the applicable stage of the
development cycle and can differ substantially from reported earnings. Early stages of development
require significant cash outlays for land acquisitions, site approvals and entitlements,
construction of model homes, roads, certain utilities and other amenities and general landscaping.
Because these costs are capitalized, income reported for financial statement purposes during such
early stages may significantly exceed cash flow. Later, cash flow can significantly exceed earnings
reported for financial statement purposes, as cost of sales includes charges for substantial
amounts of previously expended costs. A summary of lots owned and their stage of development at
March 31, 2005 compared with the same period last year follows: 2005
    
    
    2004Housing units and model homes
    
    
    926
    
    
    
    966Lots ready for house construction
    
    
    721
    
    
    
    920Graded lots and lots commenced grading
    
    
    1,351
    
    
    
    1,802Undeveloped land
    
    
    9,720
    
    
    
    7,71212,718
    
    
    
    11,400
 Cash used in our operating activities during the three months ended March 31, 2005 was $84
million compared with $28 million for the same period in 2004. The increase in cash used was
primarily a result of an increase in lots purchased and a decrease in accounts payable and other,
partially offset by a decrease in receivables and other assets. Cash provided by our investing activities in joint ventures for the three months ended March 31,
2005 was $10 million, compared with $3 million for the same period in 2004. The increase in cash
flow is primarily due to the bulk sale of 41 lots in Southern California. Cash provided by our financing activities for the three months ended March 31, 2005 was $12 million
compared with $27 million for the same period in 2004. Contractual Obligations and Other Commitments We generally fund the development of our communities through the use of project specific
financings. As of March 31, 2005, we had available project specific debt lines of $214 million that
were available to complete land development and construction activities. A total of $447 million of our project specific and other financings mature prior to the end of
2006. The high level of maturities in 2005 and 2006 is due to our expected project completions over
this period. Although the level of our maturing debt is high, we expect to generate cash flow from
our assets in 2005 and 2006 to repay these obligations. Our net debt to total capitalization ratio
as of March 31, 2005, which is defined as total interest-bearing debt less cash divided by total
interest-bearing debt less cash plus stockholders equity and minority interest, was 55% compared
to 51% at December 31, 2004. For a description of the specific risks facing us if, for any reason,
we are unable to meet these obligations, refer to the section of our Annual Report on Form 10-K for
the year ended December 31, 2004 entitled Risk Factors  Our Debt and Leverage Could Adversely
Affect our Financial Condition. During the third quarter of 2004, we entered into an interest rate swap contract which effectively
fixes $60 million of our variable rate debt at 5.89% until the contract expires in 2009. As of March 31, 2005, the fair
market value of the contract was $1.4 million. Off-Balance Sheet Arrangements In the ordinary course of business, we use lot option contracts and joint ventures to acquire
control of land to mitigate the risk of declining land values. Option contracts for the purchase of land permit us to control
lots for an extended period of time, until options expire and/or we are ready to construct homes or
sell the land. This reduces our financial risk associated with land holdings. As of March 31, 2005, we had $56 million of primarily
non-refundable option deposits and advanced costs. The total exercise price of these options is
$692 million. Pursuant to FIN 46R, as defined in Note 1 to our consolidated financial statements included elsewhere in this Form 10-Q, we have
consolidated $42 million of these option contracts. Please see Note 2 to our consolidated financial statements included elsewhere in this Form 10-Q for
additional information on our lot options. 11




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##### Table of Contents



We also control 3,944 lots through joint ventures, formed to own housing and land assets with joint
venture partners. As of March 31, 2005, our investment in housing and land joint ventures was $50
million. We have provided varying levels of guarantees of debt in our joint ventures. As of March
31, 2005, we had recourse guarantees of $4 million and limited maintenance guarantees of $75
million with respect to debt in our joint ventures. We obtain letters of credit, performance bonds and other bonds to support our obligations with
respect to the development of our projects. The amount of these obligations outstanding at any time
varies in accordance with our development activities. If these letters of credit or bonds are drawn
upon, we will be obligated to reimburse the issuer of the letter of credit or bonds. As of March
31, 2005, we had for these purposes $23 million in letters of credit outstanding and $302 million
in performance bonds for these purposes. The cost to complete related to our letters of credit and
performance bonds are $19 million and $151 million, respectively. We do not believe that any of
these letters of credit or bonds are likely to be drawn upon. Forward-Looking Statements This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the
United States federal securities laws. The words may, believe, will, anticipate, expect,
estimate, project, future, and other expressions which are predictions of or indicate future
events and trends and which do not relate to historical matters identify forward-looking
statements. The forward-looking statements in this quarterly report on Form 10-Q include, among
others, statements with respect to:  

expected home closings and project completions and the timing thereof;

expected lot supply;

estimates of revenues and cash flows;

the visibility on our future cash flow and earnings;

sources of future growth;

the effect of interest rate changes on our cash flows;

the effect on our business of existing lawsuits; and

whether or not our letters of credit or performance bonds will be drawn upon. 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;

ability to obtain surety bonds;

competitive conditions in the homebuilding industry, including product and
pricing pressures; and

additional risks and uncertainties, many of which are beyond our control,
referred to in our Form 10-K for the year ended December 31, 2004 and our other
SEC filings. We undertake no obligation to publicly update any forward-looking statements unless required by
law, whether as a result of new information, future events or otherwise. However, any further
disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be
consulted. 12




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##### Table of Contents



Item 3.
    Quantitative and Qualitative Disclosures About Market Risk Exchange Rates We conduct business in U.S. dollars only, so we are not exposed to currency risks. Interest Rates We are exposed to financial risks that arise from the fluctuations in interest rates. Our interest
bearing assets and liabilities are mainly at floating rates, so we would be negatively affected, on
balance, if interest rates increase. In addition, we have an interest rate swap contract which
effectively frees $60 million of our variable rate debt at 5.89%. Based on our debt levels as of
March 31, 2005, a 1% change up or down in interest rates would have either a positive or negative
effect of approximately $5 million on our cash flows. 
  Item 4.
    Controls and Procedures Evaluation of Disclosure Controls and Procedures. As of the end of our fiscal quarter ended
March 31, 2005, an evaluation of the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the United States Securities Exchange Act of 1934
(the Exchange Act)) was carried out under the supervision of our Chief Executive Officer (CEO)
and Chief Financial Officer (CFO). Based upon that evaluation, the CEO and CFO have concluded
that as of the end of such fiscal quarter our disclosure controls and procedures are effective (i)
to ensure that information required to be disclosed by us in reports that we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission rules and forms and (ii) to ensure that information
required to be disclosed in the reports that we file or submit under the Exchange Act is
accumulated and communicated to our management, including our chief executive officer and chief
financial officer, to allow timely decisions regarding required disclosure. It should be noted that while our management, including the CEO and CFO, believe our disclosure
controls and procedures provide a reasonable level of assurance that such controls and procedures
are effective, they do not expect that our disclosure controls and procedures or internal controls
will prevent all error and all fraud. A control system, no matter how well conceived or operated,
can provide only reasonable, not absolute, assurance that the objectives of the control system are
met. There was no change in our internal control over financial reporting during the quarter ended March 31, 2005, that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting. 13




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##### Table of Contents



PART II.     OTHER INFORMATION 
  Item 1.
    Legal Proceedings We are party to various legal actions arising in the ordinary course of our business. We
believe that none of these actions, either individually or in the aggregate will have a material
adverse effect on our financial condition or results of operations. 
  Item 2.
    Unregistered Sales of Equity Securities and Use of Proceeds In February, 2003, our Board of Directors approved and announced our share repurchase program
which allows us to repurchase up to $40 million of our outstanding common shares. In February 2005,
our Board of Directors approved and announced an increase of $19 million in the share repurchase program. This program does not
have an expiration date. MaximumTotal Number
    
    
    Approximateof Shares
    
    
    Dollar ValuePurchased as
    
    
    of Shares thatPart of Publicly
    
    
    May Yet beTotal Number
    
    
    
    
    
    
    Announced
    
    
    Purchasedof Shares
    
    
    Average Price
    
    
    Plans or
    
    
    Under the PlansPeriod
    
    Purchased
    
    
    Paid Per Share
    
    
    Programs
    
    
    or ProgramsJanuary 1, 2005 to January 31, 2005 (1)
    
    
    28,700
    
    
    $
    33.29
    
    
    
    28,700
    
    
    $
    15,412,614February 1, 2005 to February 28, 2005 (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    35,000,000March 1, 2005 to March 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    35,000,000Total
    
    
    28,700
    
    
    $
    33.29
    
    
    
    28,700
    
    
    $
    35,000,000
  (1)
    
    All shares were purchased pursuant to the publicly announced plan in
open-market transactions.(2)
    
    In February, our board of directors approved an increase in the share repurchase
program to an aggregate of $35 million. 
  Item 3.
    Defaults Upon Senior Securities None. 
  Item 4.
    Submission of Matters to a Vote of Security Holders None. 
  Item 5.
    Other Information None. 
  Item 6.
    Exhibits (a)     Exhibits. 31.1
    
    Rule 13a-14(a) certification by Ian G. Cockwell, President and Chief Executive Officer.31.2
    
    Rule 13a-14(a) certification by Paul G. Kerrigan, Executive Vice President, Chief Financial
Officer and Treasurer.32.1
    
    Section 1350 certification of the Chief Executive Officer and Chief Financial Officer.
 14




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized, on this 10th day of May, 2005. BROOKFIELD HOMES CORPORATIONBy:
    /s/ PAUL G. KERRIGANPaul G. KerriganExecutive Vice President, Chief Financial Officer
and Treasurer 15




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##### Table of Contents



EXHIBIT INDEX Exhibit
    
    Description31.1
    
    Rule 13a-14(a) certification by Ian G. Cockwell, President and Chief Executive Officer.31.2
    
    Rule 13a-14(a) certification by Paul G. Kerrigan, Executive Vice President, Chief
Financial Officer and Treasurer.32.1
    
    Section 1350 certification of the Chief Executive Officer and Chief Financial Officer.
 16