SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
| x | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2006
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-23270
| A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
DOMINION HOMES, INC.
RETIREMENT PLAN AND TRUST
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
DOMINION HOMES, INC.
4900 TUTTLE CROSSING BLVD.
DUBLIN, OH 43016-5555
Dominion Homes, Inc.
Retirement Plan and Trust
Financial Statements
December 31, 2006 and 2005
Dominion Homes, Inc. Retirement Plan and Trust
December 31, 2006 and 2005
Index
| Page(s) | ||
| 1 | ||
Financial Statements | ||
| 2 | ||
| 3 | ||
| 4-11 | ||
Supplemental Schedule* | ||
Schedule H, Line 4i – Schedule of Assets (Held at End of Year) | 12 | |
| * | Other schedules required by Section 2520.103-10 of the Department of Labor’s Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of
Dominion Homes, Inc. Retirement Plan and Trust
We have audited the accompanying statements of net assets available for benefits of Dominion Homes, Inc. Retirement Plan and Trust (the “Plan”) as of December 31, 2006 and 2005, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2006 and 2005, and the changes in net assets available for benefits for the years then ended in conformity with U.S. generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental schedule of assets (held at end of year) is presented for the purpose of additional analysis and is not a required part of the basic financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
/s/ McCurdy & Associates, Inc.
Columbus, Ohio
June 21, 2007
1
Dominion Homes, Inc. Retirement Plan and Trust
Statements of Net Assets Available for Benefits
December 31, 2006 and 2005
| 2006 | 2005 | |||||
Assets | ||||||
Investments, at fair value | $ | 14,472,086 | $ | 16,228,869 | ||
Participants’ loans | 275,660 | 387,251 | ||||
Employer contributions receivable | 11,810 | 11,172 | ||||
Employee contributions receivable | — | 787 | ||||
Total assets | 14,759,556 | 16,628,079 | ||||
Liabilities | ||||||
Accrued expenses | 19,775 | 12,500 | ||||
Total liabilities | 19,775 | 12,500 | ||||
Net assets available for benefits at fair value | 14,739,781 | 16,615,579 | ||||
Adjustment from fair value to contract value for fully benefit-responsive investment contracts | 29,857 | 33,294 | ||||
Net assets available for benefits at contract value | $ | 14,769,638 | $ | 16,648,873 | ||
The accompanying notes are an integral part of these financial statements.
2
Dominion Homes, Inc. Retirement Plan and Trust
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2006 and 2005
| 2006 | 2005 | |||||||
Additions | ||||||||
Employee contributions | $ | 1,383,076 | $ | 1,826,576 | ||||
Employer contributions | 861,971 | 1,091,370 | ||||||
Net appreciation (depreciation) in the fair value of investments | 692,573 | (643,283 | ) | |||||
Interest and dividend income | 274,566 | 157,143 | ||||||
Total additions | 3,212,186 | 2,431,806 | ||||||
Deductions | ||||||||
Participant benefits | 5,044,331 | 2,031,008 | ||||||
Administrative expenses | 47,090 | 35,380 | ||||||
Total deductions | 5,091,421 | 2,066,388 | ||||||
Net additions (deductions) | (1,879,235 | ) | 365,418 | |||||
Net assets available for benefits, beginning of year | 16,648,873 | 16,283,455 | ||||||
Net assets available for benefits, end of year | $ | 14,769,638 | $ | 16,648,873 | ||||
The accompanying notes are an integral part of these financial statements.
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Dominion Homes, Inc. Retirement Plan and Trust
December 31, 2006 and 2005
Notes to Financial Statements
| 1. | Description of the Plan |
Dominion Homes, Inc. (the “Employer”) established Dominion Homes, Inc. Retirement Plan and Trust (the “Plan”) effective July 1, 1985. The Plan is a defined contribution plan designed to comply with Sections 401(a) and (k) of the Internal Revenue Code (“IRC”). The following is a brief description of the Plan. Participants should refer to the plan document for a complete explanation of the Plan’s provisions.
The Plan covers substantially all employees, except those for whom retirement benefits have been the subject of good faith collective bargaining, leased employees, outside consultants or independent contractors. Full-time employees are eligible to participate in the Plan on the first day of a calendar quarter following at least 30 days of service. Part-time employees are eligible to participate in the Plan on the first day of a calendar quarter after the 12-month period beginning on the date of hire, or any anniversary thereof, in which such person is credited with at least 1,000 hours of service.
Participants direct their employer and participant contributions into any of the 21 available investment fund options. These options include:
| • | Dominion Homes, Inc. Common Shares (Dominion Homes, Inc. Stock Fund) |
| • | Principal Stable Value Fund |
| • | Fidelity Advisor Mortgage Securities (T) Fund |
| • | Principal Bond and Mortgage Separate Account |
| • | Principal Large Cap Stock Index Separate Account |
| • | American Funds Growth Fund of America (R3) Fund |
| • | Principal Partners Large-Cap Value Separate Account |
| • | Principal Mid-Cap Stock Index Separate Account |
| • | Principal Partners Mid-Cap Growth Separate Account |
| • | American Century Equity Income (Adv) Fund |
| • | Principal Small Cap Stock Index Separate Account |
| • | Fidelity Advisor Small-Cap (T) Fund |
| • | Principal Partners Small-Cap Value II Separate Account |
| • | Principal Diversified International Separate Account |
• | Russell LifePoints® Growth Strategy Separate Account |
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Dominion Homes, Inc. Retirement Plan and Trust
December 31, 2006 and 2005
Notes to Financial Statements
• | Russell LifePoints® Balanced Strategy Separate Account |
• | Russell LifePoints® Conservative Strategy Separate Account |
• | Russell LifePoints® Moderate Strategy Separate Account |
• | Russell LifePoints® Equity Growth Strategy Separate Account |
| • | Principal U.S. Property Separate Account |
| • | American Funds New Perspective (R3) Fund |
Participants may change their investment options on a daily basis except for investments in Dominion Homes, Inc. Stock Fund, which are subject to restrictions set forth in the Dominion Homes, Inc. stock Trading Policy. Effective on and after January 1, 2007, the Dominion Homes, Inc. Stock Fund is closed to new contributions or investment transfers. Participants are not permitted to transfer any portion of their account or direct new contributions to the Dominion Homes, Inc. Stock Fund. However, participants may transfer amounts out of the Dominion Homes, Inc. Stock Fund to any other investment fund option.
A participant in the Plan may enter into a salary reduction agreement with the Employer, authorizing the Employer to withhold a certain dollar amount or certain percentage of such participant’s compensation and to contribute such amount to the Plan on their behalf. If a participant desires to increase the total amount withheld for a plan year, such participant may authorize the Employer to withhold a supplemental amount up to 100% of their compensation payable as a bonus. In no event may the sum of the amounts withheld under the Salary Reduction Agreement plus the supplemental withholding in any calendar year exceed the maximum allowable ($15,000 in 2006). However, for participants who reached the age of 50, an additional catch up contribution of $5,000 was allowed during 2006. In accordance with Section 401(k) of the IRC, all amounts withheld from a participant’s compensation in accordance with this section and contributed to their salary reduction account are not to be included in the gross income of the participant for federal income tax purposes and are deemed, for tax purposes, to be an Employer contribution to the Plan.
The Employer is required to make matching contributions to the Plan from its current or accumulated profits, if any, equal to 100% of the first 3% of salary reduction contributions made by participants and 50% of the next 2% of salary reduction contributions, subject to the limitations as published from time to time by the Internal Revenue Service. In no event may the sum of the amounts credited to a participant’s salary reduction account and matching contribution account in any plan year exceed the lesser of 100% of the participant’s compensation for the plan year or $44,000.
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Dominion Homes, Inc. Retirement Plan and Trust
December 31, 2006 and 2005
Notes to Financial Statements
A participant’s interest in their salary reduction account, rollover account, and matching contribution account shall be fully vested and nonforfeitable at all times.
Participants may borrow from their participant accounts a minimum of $1,000 up to a maximum amount equal to the lesser of 50% of their vested account balance or $50,000. Loan terms are not to exceed five years, or up to 15 years for purchase of a primary residence, with the interest rate based on the rates available for similar loans from commercial lending institutions. The loans are collateralized by an assignment, pledge, or other security interest in the participant’s vested account balance. Repayment of a loan is required to be made through payroll deductions on an aftertax basis in level payments of principal and interest.
Benefits under the Plan are generally payable upon the earliest occurrence of a participant’s death, disability or retirement at or after attainment of normal retirement age. On termination of service due to death, disability or retirement, a participant or beneficiary may elect to receive either a lump-sum amount equal to the value of the participant’s vested interest in their account, or in equal monthly, quarterly, semiannual or annual installments over a period not to exceed ten years. For termination of service due to other reasons, a participant may receive the value of the vested interest in their account as a lump-sum distribution. Notwithstanding the foregoing, a participant’s salary reduction account may also be distributed in the event of certain financial hardships or attainment of age 55.
The Employer reserves the right at any time to amend or terminate this plan or to suspend contributions thereto, provided that no such amendment, termination or suspension shall have the effect of giving the Employer any right or interest, or of revoking or diminishing the rights and interests of any participant in the funds then held by the trustee.
| 2. | Accounting Policies |
The following is a summary of significant accounting policies followed in the preparation of the financial statements. The policies conform to accounting principles generally accepted in the United States of America.
As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the FSP), investment contracts held by a defined-
6
Dominion Homes, Inc. Retirement Plan and Trust
December 31, 2006 and 2005
Notes to Financial Statements
contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Plan invests in investment contracts through a collective trust, the Principal Stable Value Fund. As required by the FSP, the Statements of Net Assets Available for Benefits present the fair value of the investment in this collective trust as well as the adjustment of the investment in this collective trust from fair value to contract value relating to the investment contracts. The Statements of Changes in Net Assets Available for Benefits are prepared on a contract value basis.
Investment Valuation and Income Recognition
The Plan’s investments that are traded on a national exchange are stated at fair value, which are measured from quoted market prices as of the last business day of the plan year. Certain investments are not currently traded in a public market and are carried at estimated fair value as determined by the investment advisor after giving consideration to pertinent information, including discounted future cash flows of mortgages and private placement bonds, estimated market values of real estate properties and results of independent appraisals, and other factors. The Plan’s interest in the collective trust, the Principal Stable Value Fund, is valued based on information reported by the investment advisor using the audited financial statements of this collective trust at year-end. Because of the inherent uncertainty of valuations, however, those estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material.
At December 31, 2006 and 2005, the statements of net assets available for benefits include investments valued at approximately $9,959,379 and $12,366,346, respectively, for which their fair values have been estimated by the investment advisor in the absence of readily ascertainable market values.
In the statements of changes in net assets available for benefits, the Plan presents the net appreciation (depreciation) in the fair value of its investments, which consists of the net realized gains or losses and the net unrealized appreciation or depreciation on those investments.
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Dominion Homes, Inc. Retirement Plan and Trust
December 31, 2006 and 2005
Notes to Financial Statements
Security transactions are reflected on a settlement date basis, which is not materially different from a trade date basis. Dividends are recorded on the ex-dividend date. Interest is recorded on the accrual basis.
Administrative Expenses
Administrative expenses, including audit fees and third party administrator fees, are paid by the trustee from the net assets of the Plan. Approximately $47,100 and $35,400 in administrative expenses were incurred for the years ended December 31, 2006 and 2005, respectively. Certain administrative and support functions, including accounting and human resource services, performed by the Employer are not charged to the Plan.
Use of Estimates
The preparation of the Plan’s financial statements in conformity with accounting principles generally accepted in the United States of America requires the plan administrator to make estimates and assumptions that affect the reported amounts of net assets available for benefits at the date of the financial statements and the changes in the net assets available for benefits during the reporting period and, when applicable, disclosures of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Risks and Uncertainties
The Plan provides for various investment options in any combination of stocks, mutual funds, and other investment securities. Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits.
8
Dominion Homes, Inc. Retirement Plan and Trust
December 31, 2006 and 2005
Notes to Financial Statements
| 3. | Investments |
The following are investments that represent five percent or more of the Plan’s net assets available for benefits at December 31, 2006 and 2005:
Investments | 2006 Fair Value | 2005 Fair Value | ||||
American Funds Growth Fund of America (R3) Fund | $ | 1,908,685 | $ | — | ||
Principal Stable Value Fund | 1,881,077 | 1,784,174 | ||||
Principal Large Cap Stock Index Separate Account | 1,425,636 | 1,412,709 | ||||
Principal Partners Large-Cap Value Separate Account | 1,373,348 | 1,672,599 | ||||
American Funds New Perspective (R3) Fund | 1,197,084 | 1,145,127 | ||||
Russell LifePoints® Balanced Strategy Separate Account | 987,377 | 994,928 | ||||
Principal Partners Mid-Cap Growth Separate Account | 856,149 | 1,099,307 | ||||
Principal Diversified International Separate Account | 768,469 | — | ||||
Principal Partners Large-Cap Growth I Separate Account | — | 1,776,532 | ||||
Dominion Homes, Inc. Common Shares | — | 1,392,617 | ||||
During the years ended December 31, 2006 and 2005, the Plan’s investments (including gains and losses on investments purchased and sold, as well as held during the period) appreciated (depreciated) in value as follows:
| 2006 | 2005 | |||||||
Pooled separate accounts – not traded in a public market | $ | 1,197,827 | $ | 759,951 | ||||
Common/collective trust – not traded in a public market | 70,772 | 52,609 | ||||||
Mutual funds – traded in a public market | 100,941 | 95,014 | ||||||
Dominion Homes, Inc. Common Shares | (676,967 | ) | (1,550,857 | ) | ||||
Total net appreciation (depreciation) | $ | 692,573 | $ | (643,283 | ) | |||
| 4. | Tax Status |
The Plan has been designed to meet the requirements of Sections 401(a), 401(k) and 501(a) of the IRC, as amended by the Employee Retirement Income Security Act of 1974 (“ERISA”). The Plan has been granted favorable determination of tax-exempt status under Section 501(a).
The Plan obtained its latest determination letter as of January 21, 2002, in which the Internal Revenue Service (“IRS”) stated that the Plan, as then designed, was in compliance with the applicable requirements of the IRC. The Plan has been amended since receiving the determination letter. However, the plan administrator and the Plan’s tax counsel believe that the Plan is
9
Dominion Homes, Inc. Retirement Plan and Trust
December 31, 2006 and 2005
Notes to Financial Statements
currently designed and being operated in compliance with the applicable requirements of the IRC. Therefore, no provision for income taxes has been included in the Plan’s financial statements.
| 5. | Transactions With Parties-In-Interest |
The Plan held, at fair value, $558,988 and $1,392,617 of Dominion Homes, Inc. common shares at December 31, 2006 and 2005, respectively. The Plan purchased 13,455 and 38,025 shares of Dominion Homes, Inc. common shares at a cost of $111,290 and $513,638 in 2006 and 2005, respectively. The Plan sold 38,472 and 9,075 shares of Dominion Homes, Inc. common shares for $267,952 and $142,954 in 2006 and 2005, respectively.
Certain Plan investments are units of common/collective trusts and separate accounts managed by Principal Global Investors, an affiliate of The Principal Life Insurance Company which is indirect subsidiary of The Principal Financial Group. The Delaware Charter Guarantee & Trust Company is the Plan’s Trustee and conducts business under the trade name of Principal Trust Company, which is a member of The Principal Financial Group. Therefore, these transactions with Principal Global Investors qualify as party-in-interest transactions. Fees incurred by the Plan to the Principal Life Insurance Company for contract administration services amounted to $10,965 and $5,149 for the Plan years ended December 31, 2006 and 2005, respectively. Also, during 2006 and 2005 loan expenses of $4,098 and $3,873, respectively, were charged to the Plan by the Trustee.
| 6. | Reconciliation of Financial Statements to Form 5500 |
The following is a reconciliation of net assets available for benefits per the financial statements at December 31, 2006 to Form 5500:
Net assets available for benefits per the financial statements at contract value | $ | 14,769,638 | ||
Adjustment from contract value to fair value for fully benefit-responsive investment contracts | (29,857 | ) | ||
Net assets available for benefits per Form 5500 at fair value | $ | 14,739,781 | ||
10
Dominion Homes, Inc. Retirement Plan and Trust
December 31, 2006 and 2005
Notes to Financial Statements
The following is a reconciliation of total additions per the financial statements for the year ended December 31, 2006, to Form 5500:
Total additions per the financial statements | $ | 3,212,186 | ||
Less: Adjustment from contact value to fair value for fully benefit-responsive investment contracts | (29,857 | ) | ||
Total additions per Form 5500 | $ | 3,182,329 | ||
The adjustment from contract value to fair value for fully benefit-responsive investment contracts is recorded on the 2006 Form 5500 but not recorded in the statement of changes in net assets available for benefits.
11
Dominion Homes, Inc. Retirement Plan and Trust
EIN: 31-1393233 Plan Number: 002
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
Year Ended December 31, 2006
| (A) | (B) | (C) | (D) | (E) | |||||
Identity of Issuer, Borrower, Lessor, or Similar Party | Description of Investment | Shares/Units | Fair Value | ||||||
* | Principal Life Insurance Company | Principal Bond and Mortgage Separate Account | 588 | $ | 408,022 | ||||
* | Principal Life Insurance Company | Principal Large Cap Stock Index Separate Account | 28,168 | 1,425,636 | |||||
* | Principal Life Insurance Company | Principal Partners Large Cap Value Separate Account | 83,609 | 1,373,348 | |||||
* | Principal Life Insurance Company | Principal U.S. Property Separate Account | 909 | 518,565 | |||||
* | Principal Life Insurance Company | Russell LifePoints® Balanced Strategy Separate Account | 61,217 | 987,377 | |||||
* | Principal Life Insurance Company | Russell LifePoints ® Conservative Strategy Separate Account | 974 | 14,215 | |||||
* | Principal Life Insurance Company | Russell LifePoints ® Equity Growth Strategy Separate Account | 3,811 | 60,277 | |||||
* | Principal Life Insurance Company | Russell LifePoints ® Growth Strategy Separate Account | 43,274 | 685,322 | |||||
* | Principal Life Insurance Company | Russell LifePoints ® Moderate Strategy Separate Account | 3,738 | 57,053 | |||||
* | Principal Life Insurance Company | Principal Mid-Cap Stock Index Separate Account | 16,383 | 336,836 | |||||
* | Principal Life Insurance Company | Principal Partners Mid-Cap Growth Separate Account | 66,003 | 856,149 | |||||
* | Principal Life Insurance Company | Principal Partners Small-Cap Value II Separate Account | 6,180 | 92,095 | |||||
* | Principal Life Insurance Company | Principal Small-Cap Stock Index Separate Account | 22,069 | 494,938 | |||||
* | Principal Life Insurance Company | Principal Diversified International Separate Account | 13,227 | 768,469 | |||||
| Union Bond & Trust Company | Principal Stable Value Fund | 120,513 | 1,881,077 | ||||||
| Fidelity Investments | Fidelity Advisor Mortgage Securities (T) Fund | 9,109 | 100,650 | ||||||
| American Century Investments | American Century Equity Income (Adv) Fund | 47,308 | 406,372 | ||||||
| American Funds Service Company | American Funds Growth Fund of America (R3) Fund | 58,819 | 1,908,685 | ||||||
| Fidelity Investments | Fidelity Advisor Small Cap (T) Fund | 15,399 | 340,928 | ||||||
| American Funds Service Company | American Funds New Perspective (R3) Fund | 38,160 | 1,197,084 | ||||||
* | Dominion Homes, Inc. | Common Shares | 105,869 | 558,988 | |||||
Total Investments | $ | 14,472,086 | |||||||
* | Participant Loans | Participant Loans (4.75%-10.25%) with maturity dates ranging from 2007 to 2016 | $ | 275,660 | |||||
* | Denotes a party-in-interest transaction. | ||||||||
The accompanying notes are an integral part of this schedule.
12
SIGNATURES
THE PLAN. Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on the Plan’s behalf by the undersigned hereunto duly authorized.
Date: June 29, 2007 | Dominion Homes, Inc. Retirement Plan and Trust | |||
/s/ Terry E. George | ||||
| Terry E. George | ||||
| Co-Trustee | ||||
13
DOMINION HOMES, INC. RETIREMENT PLAN AND TRUST
ANNUAL REPORT ON FORM 11-K FOR FISCAL YEAR ENDED DECEMBER 31, 2006
INDEX TO EXHIBITS
| Exhibit No. | Description | Page No. | ||
| 1 | Consent of Independent Registered Public Accounting Firm | Page 15 |
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