Exhibit 99.1
Shea Homes Reports Third Quarter 2012 Results
Walnut, Calif., October 31, 2012
Shea Homes, one of America’s largest private homebuilders, today reported results for the third quarter ended September 30, 2012.
Three Months Ended 9/30/12 Highlights, Commentary and Comparisons to Three Months Ended 9/30/11
| | • | | Net income attributable to Shea Homes was $8.3 million compared to $2.1 million, due primarily to a $7.5 million improvement in gross margin and an $8.8 million gain on sale of investments, offset by a $6.0 million increase in SG&A expense and a $3.6 million increase in income tax expense. |
| | • | | Home sales were 530 compared to 288, an 84% increase. Active selling communities averaged 63 and 79 in the third quarter of 2012 and 2011, respectively. |
| | • | | Home sales per community were 8.4 homes, or 2.8 per month, in 2012 compared to 3.6 homes, or 1.2 per month, in 2011, a 133% increase. |
| | • | | Cancellation rate was 13% compared to 27%. |
| | • | | Backlog units at September 30, 2012 were 1,204 compared to 682 at September 30, 2011, a 77% increase. |
| | • | | Backlog sales value was $507.2 million at September 30, 2012 compared to $295.1 million at September 30, 2011, a 72% increase. |
| | • | | The average selling price in backlog was $421,000 at September 30, 2012 compared to $433,000 at September 30, 2011, a 3% decrease. |
| | • | | Total revenues were $146.4 million compared to $157.3 million, a 7% decrease. |
| | • | | House revenues were $132.2 million* compared to $152.7 million*, a 13% decrease due to a reduction in new house deliveries and a lower average selling price. |
| | • | | Homes closed were 328 compared to 351, a 7% decrease. Despite a 55% increase in sales year to date, the decrease in deliveries resulted from longer cycle times (sale to close) and reduced levels of speculative inventory compared to last year. |
| | • | | Average selling price of homes closed was $403,000 compared to $435,000, a 7% decrease primarily attributable to a shift to lower-priced homes in our Southern California and San Diego segments, partially offset by price increases in several communities in our Northern California segment and a shift to higher-priced homes in our Mountain West segment. |
| | • | | Total gross margin was 21.3% compared to 15.0%, a 630 basis points (bp’s) increase. There were no inventory impairments in 2012 or 2011. |
| | • | | House gross margin was 18.7%* compared to 17.3%*, a 140 bp’s increase primarily attributable to price increases in our Northern California segment and increased margins on land sales in our Mountain West segment. |
| | • | | SG&A expense was $26.3 million (18.0% of revenues) compared to $20.3 million (12.9% of revenues), the increase primarily attributable to higher legal expenses associated with our completed contract method tax court case and increased incentive compensation costs, offset by lower model home amortization costs and direct selling expenses from decreased closings. |
| | • | | Interest incurred was $16.8 million compared to $16.7 million in 2011, while interest expense was $4.6 million versus $4.3 million, a 6% increase resulting from a lower level of qualified inventory. |
| | • | | Other income, net was $8.8 million compared to $0.6 million and attributable to an $8.8 million gain on the sale of investments in 2012. |
| | • | | Adjusted EBITDA was $19.7 million* versus $19.0 million* last year. |
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| | • | | Cash, restricted cash and investments at September 30, 2012 was $233.3 million compared to $314.5 million at December 31, 2011 (see Condensed Consolidated Statements of Cash Flows on page 6). |
Bert Selva, President and CEO, stated: “We are pleased to see positive order activity continue into the third quarter, a period which normally experiences a seasonal slowdown. The continued order improvements were experienced across all of our markets and resulted in a backlog level nearly twice that of the prior year third quarter. This spike in backlog should position the Company for a solid fourth quarter and finish to 2012.”
Nine Months Ended 9/30/12 Highlights, Commentary and Comparisons to Nine Months Ended 9/30/11
| | • | | Net loss attributable to Shea Homes was $4.2 million compared to $107.3 million, due primarily to an $88.3 million loss on debt extinguishment in May 2011. In 2012, we saw a $31.9 million improvement in gross margin and an $8.8 million gain on sale of investments, offset by a $7.2 million loss on actuarial adjustment (see below), a $4.1 million increase in interest expense, a $9.5 million increase in SG&A expense and a $4.8 million increase in income tax expense. |
| | • | | Home sales were 1,616 compared to 1,044, a 55% increase. Active selling communities averaged 66 and 78 in 2012 and 2011, respectively. |
| | • | | Home sales per community were 24.5 homes, or 2.7 per month, in 2012 compared to 13.4 homes, or 1.5 per month, in 2011, an 83% increase. |
| | • | | Cancellation rate was 14% compared to 21%. |
| | • | | Total revenues were $384.5 million compared to $346.3 million, an 11% increase. |
| | • | | House revenues were $360.2 million* compared to $335.0 million*, an 8% increase due to an increase in new home deliveries. |
| | • | | Homes closed were 873 compared to 806, an 8% increase. The increase in deliveries is less than the increase in year to date sales due to larger cycle times (sales to close) compared to last year. |
| | • | | Average selling price of homes closed was $413,000 compared to $416,000, a 1% decrease primarily attributable to a shift to lower-priced homes in our Southern California and San Diego segments, partially offset by price increases in several communities in our Northern California segment and a shift to higher-priced homes in our Mountain West segment. |
| | • | | Total gross margin was 19.8% compared to 12.8%, a 700 bp’s increase. There were no inventory impairments in 2012 compared to $10.3 million in 2011. |
| | • | | House gross margin was 19.6%* compared to 17.5%*, a 210 bp’s increase primarily attributable to price increases in our Northern California segment and increased margins on land sales in our Mountain West segment. |
| | • | | SG&A expense was $65.7 million (17.1% of revenues) compared to $56.2 million (16.2% of revenues), the increase primarily attributable to higher direct selling costs associated with increased house revenues, higher legal expenses associated with our completed contract method tax court case and increased incentive compensation costs, offset by lower model home amortization costs. |
| | • | | Interest incurred was $50.1 million compared to $53.9 million and primarily attributable to a lower effective interest rate (8.9%) associated with our $750.0 million senior secured notes issued in May 2011 compared to our previously outstanding indebtedness (10.0%). Interest expense was $16.8 million compared to $12.6 million, a 33% increase resulting from a lower level of qualified inventory. |
| | • | | Other income, net was $2.7 million compared to $3.1 million. In 2012, other income consisted of an $8.8 million gain on sale of investments, partially offset by a $7.2 million loss on an actuarial adjustment to our loss reserves on completed operations policies that were reinsured in 2009. |
| | • | | Adjusted EBITDA was $49.0 million* versus $34.9 million*. |
| | • | | As a result of the Shea Colorado LLC transaction previously disclosed on our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, filed with the SEC on May 11, 2012, total equity decreased $39.8 million, of which $11.6 million was attributable to SHLP and $28.2 million to non-controlling interests. |
| * | See “Reconciliation of Non-GAAP Financial Measures” beginning on page 9. |
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About Shea Homes
Shea Homes is one of the largest private homebuilders in the nation. Since its founding in 1968, Shea Homes has delivered more than 88,000 homes. Shea Homes builds homes with quality craftsmanship and designs that best fit varied lifestyles and budgets. Over the past several years, Shea Homes has been recognized as a leader in customer satisfaction with a reputation for design, quality and service. For more about Shea Homes and its communities, visitwww.sheahomes.com.
The preceding summary of the financial results of Shea Homes Limited Partnership and its subsidiaries does not purport to be complete and is qualified in its entirety by reference to the consolidated financial statements of Shea Homes Limited Partnership and its subsidiaries, available on our website at:http://www.sheahomes.com/investor
This news release contains forward-looking statements and information relating to Shea Homes Limited Partnership and its subsidiaries, such as new home orders, deliveries and expected fourth quarter results, that are based on the beliefs of, as well as assumptions made by, and information currently available to, our management. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and “project” and similar expressions, as they relate to Shea Homes Limited Partnership and its subsidiaries are intended to identify forward-looking statements. These statements reflect our management’s current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Further, certain forward-looking statements are based upon assumptions of future events that may not prove to be accurate. Such statements involve known and unknown risks, uncertainties, assumptions and other factors many of which are out of Shea Homes Limited Partnership’s and its subsidiaries’ control and difficult to forecast that may cause actual results to differ materially from those that may be described or implied. Such factors include but are not limited to: changes in employment levels; changes in the availability of financing for homebuyers; changes in interest rates; changes in consumer confidence; changes in levels of new and existing homes for sale; changes in demographic trends; changes in housing demands; changes in home prices; elimination or reduction of the tax benefits associated with owning a home; litigation risks associated with home warranty and construction defect and other claims; and various other factors, both referenced and not referenced above, and included in the Company’s filings with the Securities and Exchange Commission, including the Company’s Quarterly Reports on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements may vary materially from those described as anticipated, believed, estimated, expected, intended, planned or projected. Except as required by law, Shea Homes Limited Partnership and its subsidiaries neither intend nor assume any obligation to revise or update these forward-looking statements, which speak only as of their dates. Shea Homes Limited Partnership and its subsidiaries nonetheless reserve the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.
Contact: Andrew Parnes, CFO @ 909-594-9500 orandy.parnes@sheahomes.com
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KEY OPERATIONAL AND FINANCIAL DATA
(dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | At or For the Three Months Ended September 30, | | | At or For the Nine Months ended September 30, | |
| | | 2012 | | | 2011 | | | Change | | | 2012 | | | 2011 | | | Change | |
| | | (unaudited) | | | (unaudited) | | | | | | (unaudited) | | | (unaudited) | | | | |
Operating Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | $ | 146,421 | | | $ | 157,300 | | | | -7 | % | | $ | 384,492 | | | $ | 346,293 | | | | 11 | % |
Gross margin % | | | 21.3 | % | | | 15.0 | % | | | 630bp’s | | | | 19.8 | % | | | 12.8 | % | | | 700bp’s | |
Homebuilding revenues (a) * | | $ | 146,174 | | | $ | 156,974 | | | | -7 | % | | $ | 383,754 | | | $ | 345,442 | | | | 11 | % |
Homebuilding gross margin % (a) * | | | 21.2 | % | | | 14.9 | % | | | 630bp’s | | | | 19.7 | % | | | 12.6 | % | | | 710bp’s | |
House revenues * | | $ | 132,220 | | | $ | 152,658 | | | | -13 | % | | $ | 360,238 | | | $ | 334,975 | | | | 8 | % |
House gross margin % * | | | 18.7 | % | | | 17.3 | % | | | 140bp’s | | | | 19.6 | % | | | 17.5 | % | | | 210bp’s | |
Adjusted house gross margin % excluding interest in cost of sales * | | | 26.0 | % | | | 25.5 | % | | | 50bp’s | | | | 26.9 | % | | | 25.4 | % | | | 150bp’s | |
Inventory impairments | | $ | — | | | $ | — | | | | — | | | $ | — | | | $ | 10,302 | | | | -100 | % |
SG&A expense | | $ | 26,297 | | | $ | 20,277 | | | | 30 | % | | $ | 65,672 | | | $ | 56,153 | | | | 17 | % |
SG&A % of total revenue | | | 18.0 | % | | | 12.9 | % | | | 510bp’s | | | | 17.1 | % | | | 16.2 | % | | | 90bp’s | |
Net income (loss) attributable to Shea Homes | | $ | 8,330 | | | $ | 2,098 | | | | 297 | % | | $ | (4,182 | ) | | $ | (107,296 | ) | | | -96 | % |
Adjusted EBITDA(b) * | | $ | 19,672 | | | $ | 19,007 | | | | 3 | % | | $ | 48,997 | | | $ | 34,947 | | | | 40 | % |
Interest incurred | | $ | 16,768 | | | $ | 16,661 | | | | 1 | % | | $ | 50,088 | | | $ | 53,905 | | | | -7 | % |
Interest capitalized to inventory | | $ | 11,961 | | | $ | 12,031 | | | | -1 | % | | $ | 32,706 | | | $ | 40,164 | | | | -19 | % |
Interest capitalized to investments in joint ventures | | $ | 226 | | | $ | 320 | | | | -29 | % | | $ | 604 | | | $ | 1,105 | | | | -45 | % |
Interest expense | | $ | 4,581 | | | $ | 4,310 | | | | 6 | % | | $ | 16,778 | | | $ | 12,636 | | | | 33 | % |
Interest in cost of sales (c) | | $ | 12,457 | | | $ | 12,864 | | | | -3 | % | | $ | 30,315 | | | $ | 27,014 | | | | 12 | % |
| | | | | | |
Other Data(d): | | | | | | | | | | | | | | | | | | | | | | | | |
Home sales orders (units) | | | 530 | | | | 288 | | | | 84 | % | | | 1,616 | | | | 1,044 | | | | 55 | % |
Homes closed (units) | | | 328 | | | | 351 | | | | -7 | % | | | 873 | | | | 806 | | | | 8 | % |
Average selling price | | $ | 403 | | | $ | 435 | | | | -7 | % | | $ | 413 | | | $ | 416 | | | | -1 | % |
Average active selling communities | | | 63 | | | | 79 | | | | -20 | % | | | 66 | | | | 78 | | | | -15 | % |
Home sales orders per community | | | 8.4 | | | | 3.6 | | | | 133 | % | | | 24.5 | | | | 13.4 | | | | 83 | % |
Cancellation rate | | | 13 | % | | | 27 | % | | | | | | | 14 | % | | | 21 | % | | | | |
Backlog at end of period (units) | | | 1,204 | | | | 682 | | | | 77 | % | | | | | | | | | | | | |
Backlog at end of period (estimated sales value) | | $ | 507,226 | | | $ | 295,065 | | | | 72 | % | | | | | | | | | | | | |
Lots owned or controlled (units) | | | 18,244 | | | | 18,289 | | | | 0 | % | | | | | | | | | | | | |
Homes under construction (units)(e) | | | 1,055 | | | | 791 | | | | 33 | % | | | | | | | | | | | | |
| (a) | Homebuilding revenue and gross margin include house, land and other homebuilding activities. |
| (b) | Adjusted EBITDA is net income (loss) adjusted for certain items customary to the homebuilding industry, such as: (1) professional fees related to debt issuance costs, modifications and waivers, (2) loss on debt extinguishment, (3) deposit write-offs and impairment losses on real estate assets, investments in joint ventures and non-controlling interest, (4) realized (gains) losses on sales of investments and other than temporary impairments on investments, and (5) restructuring costs, primarily severance. Other companies may calculate Adjusted EBITDA differently. Adjusted EBITDA information, as presented, is useful as a measure of the ability to service debt and obtain financing; however, it is not a U.S. generally accepted accounting principle (“GAAP”) financial measure and should not be considered in isolation or as an alternative to operating performance or other liquidity measures prescribed by GAAP. |
| (c) | As previously capitalized to house and land. |
| (d) | Represents consolidated activity only; excludes unconsolidated joint ventures. |
| (e) | Homes under construction includes completed homes. |
| * | See “Reconciliation of Non-GAAP Financial Measures” beginning on page 9. |
| | | | | | | | | | | | |
| | | September 30,
2012 | | | December 31,
2011 | | | %
Change | |
| | | (unaudited) | | | | | | | |
Balance Sheet Data: | | | | | | | | | | | | |
Cash and cash equivalents, restricted cash and investments | | $ | 233,297 | | | $ | 314,512 | | | | -26 | % |
Inventory | | | 886,695 | | | | 783,810 | | | | 13 | % |
Investments in joint ventures | | | 18,272 | | | | 17,870 | | | | 2 | % |
Total assets | | | 1,330,391 | | | | 1,328,116 | | | | 0 | % |
Notes payable | | | 758,682 | | | | 752,056 | | | | 1 | % |
Total equity | | | 283,240 | | | | 328,003 | | | | -14 | % |
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CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| | | | | | | | |
| | | September 30
2012 | | | December 31,
2011 | |
| | | (unaudited) | | | | |
Assets | | | | | | | | |
Cash and cash equivalents | | $ | 205,640 | | | $ | 268,366 | |
Restricted cash | | | 13,733 | | | | 13,718 | |
Investments | | | 13,924 | | | | 32,428 | |
Accounts and other receivables, net | | | 128,211 | | | | 120,689 | |
Receivables from related parties, net | | | 33,447 | | | | 60,223 | |
Inventory | | | 886,695 | | | | 783,810 | |
Investments in joint ventures | | | 18,272 | | | | 17,870 | |
Other assets, net | | | 30,469 | | | | 31,012 | |
| | | | | | | | |
Total assets | | $ | 1,330,391 | | | $ | 1,328,116 | |
| | | | | | | | |
| | |
Liabilities and equity | | | | | | | | |
Liabilities: | | | | | | | | |
Notes payable | | $ | 758,682 | | | $ | 752,056 | |
Other liabilities | | | 288,469 | | | | 248,057 | |
| | | | | | | | |
Total liabilities | | | 1,047,151 | | | | 1,000,113 | |
Total equity | | | 283,240 | | | | 328,003 | |
| | | | | | | | |
Total liabilities and equity | | $ | 1,330,391 | | | $ | 1,328,116 | |
| | | | | | | | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | (unaudited) | | | (unaudited) | | | (unaudited) | | | (unaudited) | |
Revenues | | $ | 146,421 | | | $ | 157,300 | | | $ | 384,492 | | | $ | 346,293 | |
Cost of sales | | | (115,225 | ) | | | (133,645 | ) | | | (308,238 | ) | | | (301,947 | ) |
| | | | | | | | | | | | | | | | |
Gross margin | | | 31,196 | | | | 23,655 | | | | 76,254 | | | | 44,346 | |
| | | | |
Selling, general and administrative expenses | | | (26,297 | ) | | | (20,277 | ) | | | (65,672 | ) | | | (56,153 | ) |
Loss on debt extinguishment | | | — | | | | — | | | | — | | | | (88,384 | ) |
Interest expense | | | (4,581 | ) | | | (4,310 | ) | | | (16,778 | ) | | | (12,636 | ) |
Other income, net | | | 8,789 | | | | 443 | | | | 3,081 | | | | 2,365 | |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 9,107 | | | | (489 | ) | | | (3,115 | ) | | | (110,462 | ) |
| | | | |
Income tax (expense) benefit | | | (807 | ) | | | 2,851 | | | | (903 | ) | | | 3,868 | |
| | | | | | | | | | | | | | | | |
Net income (loss) | | | 8,300 | | | | 2,362 | | | | (4,018 | ) | | | (106,594 | ) |
Less: Net loss (income) attributable to non-controlling interests | | | 30 | | | | (264 | ) | | | (164 | ) | | | (702 | ) |
| | | | | | | | | | | | | | | | |
Net income (loss) attributable to Shea Homes | | $ | 8,330 | | | $ | 2,098 | | | $ | (4,182 | ) | | $ | (107,296 | ) |
| | | | | | | | | | | | | | | | |
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | (unaudited) | | | (unaudited) | | | (unaudited) | | | (unaudited) | |
Operating activities | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 8,300 | | | $ | 2,362 | | | $ | (4,018 | ) | | $ | (106,594 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | | | | | | | | | | | | | | | | |
Loss on debt extinguishment | | | — | | | | — | | | | — | | | | 88,384 | |
Depreciation and amortization expense | | | 1,934 | | | | 2,724 | | | | 5,255 | | | | 7,213 | |
Inventory impairment | | | — | | | | — | | | | — | | | | 10,302 | |
Gain on sale of available-for-sale investments | | | (8,780 | ) | | | (130 | ) | | | (8,802 | ) | | | (539 | ) |
Other operating activities, net | | | 224 | | | | 530 | | | | 462 | | | | 881 | |
Changes in operating assets and liabilities: | | | | | | | | | | | | | | | | |
Inventory | | | (86,318 | ) | | | 12,071 | | | | (114,860 | ) | | | (36,153 | ) |
Payables and other liabilities | | | 34,318 | | | | 12,817 | | | | 42,924 | | | | 28,804 | |
Other operating assets | | | (2,857 | ) | | | (15,282 | ) | | | (7,770 | ) | | | (21,714 | ) |
| | | | | | | | | | | | | | | | |
Net cash provided by (used in) operating activities | | | (53,179 | ) | | | 15,092 | | | | (86,809 | ) | | | (29,416 | ) |
| | | | |
Investing activities | | | | | | | | | | | | | | | | |
Proceeds from sale of investments | | | 18,742 | | | | 285 | | | | 23,954 | | | | 1,180 | |
Net proceeds from promissory notes from related parties | | | 88 | | | | 6,115 | | | | 1,931 | | | | 107,856 | |
Other investing activities, net | | | (461 | ) | | | 10,565 | | | | (1,495 | ) | | | 1,768 | |
| | | | | | | | | | | | | | | | |
Net cash provided by investing activities | | | 18,369 | | | | 16,965 | | | | 24,390 | | | | 110,804 | |
| | | | |
Financing activities | | | | | | | | | | | | | | | | |
Net decrease in debt | | | (488 | ) | | | (523 | ) | | | (1,541 | ) | | | (51,806 | ) |
Amortization of notes payable discount | | | — | | | | — | | | | — | | | | 7,366 | |
Other financing activities, net | | | 1 | | | | 1,386 | | | | 1,234 | | | | 5,214 | |
| | | | | | | | | | | | | | | | |
Net cash provided by (used in) financing activities | | | (487 | ) | | | 863 | | | | (307 | ) | | | (39,226 | ) |
| | | | | | | | | | | | | | | | |
| | | | |
Net increase (decrease) in cash and cash equivalents | | | (35,297 | ) | | | 32,920 | | | | (62,726 | ) | | | 42,162 | |
Cash and cash equivalents at beginning of period | | | 240,937 | | | | 176,116 | | | | 268,366 | | | | 166,874 | |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 205,640 | | | $ | 209,036 | | | $ | 205,640 | | | $ | 209,036 | |
| | | | | | | | | | | | | | | | |
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SEGMENT OPERATING DATA
(dollars in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | Homes
Closed | | | Avg. Selling
Price | | | Homes
Closed | | | Avg. Selling
Price | | | Homes
Closed | | | Avg. Selling
Price | | | Homes
Closed | | | Avg. Selling
Price | |
Homes closed: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Southern California | | | 57 | | | $ | 546 | | | | 89 | | | $ | 620 | | | | 168 | | | $ | 503 | | | | 191 | | | $ | 528 | |
San Diego | | | 25 | | | | 432 | | | | 32 | | | | 555 | | | | 71 | | | | 494 | | | | 69 | | | | 545 | |
Northern California | | | 55 | | | | 527 | | | | 52 | | | | 491 | | | | 170 | | | | 500 | | | | 139 | | | | 486 | |
Mountain West | | | 58 | | | | 438 | | | | 57 | | | | 391 | | | | 160 | | | | 446 | | | | 130 | | | | 418 | |
South West | | | 125 | | | | 274 | | | | 115 | | | | 266 | | | | 285 | | | | 281 | | | | 262 | | | | 271 | |
Other | | | 8 | | | | 215 | | | | 6 | | | | 212 | | | | 19 | | | | 216 | | | | 15 | | | | 235 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consolidated | | | 328 | | | $ | 403 | | | | 351 | | | $ | 435 | | | | 873 | | | $ | 413 | | | | 806 | | | $ | 416 | |
Unconsolidated joint ventures | | | 35 | | | | 322 | | | | 31 | | | | 313 | | | | 92 | | | | 310 | | | | 80 | | | | 309 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 363 | | | $ | 395 | | | | 382 | | | $ | 425 | | | | 965 | | | $ | 403 | | | | 886 | | | $ | 406 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | Home
Sales
Orders | | | Avg. Active
Selling
Communities | | | Home
Sales
Orders | | | Avg. Active
Selling
Communities | | | Home
Sales
Orders | | | Avg. Active
Selling
Communities | | | Home
Sales
Orders | | | Avg. Active
Selling
Communities | |
Home sales orders: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Southern California | | | 89 | | | | 7 | | | | 52 | | | | 14 | | | | 247 | | | | 8 | | | | 219 | | | | 13 | |
San Diego | | | 71 | | | | 8 | | | | 48 | | | | 11 | | | | 181 | | | | 9 | | | | 137 | | | | 10 | |
Northern California | | | 140 | | | | 16 | | | | 55 | | | | 16 | | | | 376 | | | | 16 | | | | 159 | | | | 14 | |
Mountain West | | | 106 | | | | 13 | | | | 50 | | | | 13 | | | | 316 | | | | 13 | | | | 188 | | | | 13 | |
South West | | | 119 | | | | 16 | | | | 74 | | | | 22 | | | | 467 | | | | 17 | | | | 316 | | | | 25 | |
Other | | | 5 | | | | 3 | | | | 9 | | | | 3 | | | | 29 | | | | 3 | | | | 25 | | | | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consolidated | | | 530 | | | | 63 | | | | 288 | | | | 79 | | | | 1,616 | | | | 66 | | | | 1,044 | | | | 78 | |
Unconsolidated joint ventures | | | 45 | | | | 10 | | | | 24 | | | | 14 | | | | 151 | | | | 11 | | | | 87 | | | | 14 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 575 | | | | 73 | | | | 312 | | | | 93 | | | | 1,767 | | | | 77 | | | | 1,131 | | | | 92 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | At September 30, | |
| | | 2012 | | | 2011 | |
| | | Backlog
Units | | | Backlog
Sales
Value | | | Backlog
Units | | | Backlog
Sales
Value | |
Backlog: | | | | | | | | | | | | | | | | |
Southern California | | | 138 | | | $ | 84,216 | | | | 119 | | | $ | 63,725 | |
San Diego | | | 149 | | | | 61,243 | | | | 110 | | | | 54,382 | |
Northern California | | | 311 | | | | 140,399 | | | | 119 | | | | 60,888 | |
Mountain West | | | 251 | | | | 117,832 | | | | 117 | | | | 56,057 | |
South West | | | 334 | | | | 98,239 | | | | 201 | | | | 56,792 | |
Other | | | 21 | | | | 5,297 | | | | 16 | | | | 3,221 | |
| | | | | | | | | | | | | | | | |
Total consolidated | | | 1,204 | | | $ | 507,226 | | | | 682 | | | $ | 295,065 | |
Unconsolidated joint ventures | | | 93 | | | | 29,998 | | | | 29 | | | | 10,423 | |
| | | | | | | | | | | | | | | | |
Total | | | 1,297 | | | $ | 537,224 | | | | 711 | | | $ | 305,488 | |
| | | | | | | | | | | | | | | | |
Page7
SEGMENT OPERATING DATA (continued)
(unaudited)
| | | | | | | | |
| | | At September 30, | |
| | | 2012 | | | 2011 | |
Lots owned or controlled: | | | | | | | | |
Southern California | | | 1,048 | | | | 1,367 | |
San Diego | | | 887 | | | | 877 | |
Northern California | | | 3,924 | | | | 4,337 | |
Mountain West | | | 10,265 | | | | 10,020 | |
South West | | | 2,083 | | | | 1,620 | |
Other | | | 37 | | | | 68 | |
| | | | | | | | |
Total consolidated | | | 18,244 | | | | 18,289 | |
Unconsolidated joint ventures | | | 1,884 | | | | 6,076 | |
| | | | | | | | |
Total | | | 20,128 | | | | 24,365 | |
| | | | | | | | |
| | |
Lots by ownership type: | | | | | | | | |
Lots owned | | | 10,254 | | | | 10,141 | |
Lots optioned or subject to contract | | | 7,990 | | | | 8,148 | |
Joint venture lots | | | 1,884 | | | | 6,076 | |
| | | | | | | | |
Total | | | 20,128 | | | | 24,365 | |
| | | | | | | | |
Page8
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands)
(unaudited)
In this earnings release, we utilize certain financial measures and ratios, including Adjusted EBITDA, that in each case are not recognized under GAAP. These measures are presented as we believe they and similar measures are useful to investors in evaluating a company’s operating performance and financing structure and, in certain cases, because they could be used to determine compliance with contractual covenants. We believe these measures also facilitate the comparison of our operating performance and financing structure with other companies in our industry. However, because these measures are not calculated in accordance with GAAP, they may not be comparable to other similarly titled measures of other companies and should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP.
The following reconciles revenues, cost of sales and gross margins, as reported, to adjusted revenues, cost of sales and gross margins, which excludes impairment charges, interest in cost of sales, land sales and other transactions:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, 2012 | | | Three Months Ended September 30, 2011 | |
| | | Revenue | | | Cost of
Sales | | | Gross
Margin $ | | | Gross
Margin % | | | Revenue | | | Cost of
Sales | | | Gross
Margin $ | | | Gross
Margin % | |
Total | | $ | 146,421 | | | $ | (115,225 | ) | | $ | 31,196 | | | | 21.3 | % | | $ | 157,300 | | | $ | (133,645 | ) | | $ | 23,655 | | | | 15.0 | % |
Less: Other | | | (247 | ) | | | | | | | (247 | ) | | | | | | | (326 | ) | | | | | | | (326 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Homebuilding | | | 146,174 | | | | (115,225 | ) | | | 30,949 | | | | 21.2 | % | | | 156,974 | | | | (133,645 | ) | | | 23,329 | | | | 14.9 | % |
Less: Land | | | (13,071 | ) | | | 6,425 | | | | (6,646 | ) | | | 50.8 | % | | | (2,956 | ) | | | 2,678 | | | | (278 | ) | | | 9.4 | % |
Less: Impairment | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | — | | | | | |
Less: Other homebuilding | | | (883 | ) | | | 1,323 | | | | 440 | | | | | | | | (1,360 | ) | | | 4,666 | | | | 3,306 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
House | | $ | 132,220 | | | $ | (107,477 | ) | | $ | 24,743 | | | | 18.7 | % | | $ | 152,658 | | | $ | (126,301 | ) | | $ | 26,357 | | | | 17.3 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Add: Interest in house cost of sales(a) | | | | | | | 9,594 | | | | 9,594 | | | | | | | | | | | | 12,616 | | | | 12,616 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted house excluding interest in cost of sales | | $ | 132,220 | | | $ | (97,883 | ) | | $ | 34,337 | | | | 26.0 | % | | $ | 152,658 | | | $ | (113,685 | ) | | $ | 38,973 | | | | 25.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | Nine Months Ended September 30, 2012 | | | Nine Months Ended September 30, 2011 | |
| | | Revenue | | | Cost of
Sales | | | Gross
Margin $ | | | Gross
Margin % | | | Revenue | | | Cost of
Sales | | | Gross
Margin $ | | | Gross
Margin % | |
Total | | $ | 384,492 | | | $ | (308,238 | ) | | $ | 76,254 | | | | 19.8 | % | | $ | 346,293 | | | $ | (301,947 | ) | | $ | 44,346 | | | | 12.8 | % |
Less: Other | | | (738 | ) | | | | | | | (738 | ) | | | | | | | (851 | ) | | | | | | | (851 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Homebuilding | | | 383,754 | | | | (308,238 | ) | | | 75,516 | | | | 19.7 | % | | | 345,442 | | | | (301,947 | ) | | | 43,495 | | | | 12.6 | % |
Less: Land | | | (21,773 | ) | | | 12,931 | | | | (8,842 | ) | | | 40.6 | % | | | (6,986 | ) | | | 5,828 | | | | (1,158 | ) | | | 16.6 | % |
Less: Impairment | | | — | | | | — | | | | — | | | | | | | | — | | | | 10,302 | | | | 10,302 | | | | | |
Less: Other homebuilding | | | (1,743 | ) | | | 5,588 | | | | 3,845 | | | | | | | | (3,481 | ) | | | 9,497 | | | | 6,016 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
House | | $ | 360,238 | | | $ | (289,719 | ) | | $ | 70,519 | | | | 19.6 | % | | $ | 334,975 | | | $ | (276,320 | ) | | $ | 58,655 | | | | 17.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Add: Interest in house cost of sales(a) | | | | | | | 26,255 | | | | 26,255 | | | | | | | | | | | | 26,384 | | | | 26,384 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted house excluding interest in cost of sales | | $ | 360,238 | | | $ | (263,464 | ) | | $ | 96,774 | | | | 26.9 | % | | $ | 334,975 | | | $ | (249,936 | ) | | $ | 85,039 | | | | 25.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (a) | Interest incurred is generally capitalized to inventory, then expensed in cost of sales as related units close. |
Page9
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(in thousands)
(unaudited)
The following reconciles net income (loss) to Adjusted EBITDA:
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
Net income (loss) | | $ | 8,300 | | | $ | 2,362 | | | $ | (4,018 | ) | | $ | (106,594 | ) |
Adjustments: | | | | | | | | | | | | | | | | |
Income tax expense (benefit) | | | 807 | | | | (2,851 | ) | | | 903 | | | | (3,868 | ) |
Depreciation and amortization expense | | | 1,934 | | | | 2,724 | | | | 5,255 | | | | 7,213 | |
Interest in cost of sales(a) | | | 12,457 | | | | 12,864 | | | | 30,315 | | | | 27,014 | |
Interest in equity in income (loss) from joint ventures(b) | | | 226 | | | | 214 | | | | 604 | | | | 669 | |
Interest expense(c) | | | 4,581 | | | | 4,310 | | | | 16,778 | | | | 12,636 | |
Loss on debt extinguishment(d) | | | — | | | | — | | | | — | | | | 88,384 | |
Impairment(e) | | | — | | | | — | | | | — | | | | 10,302 | |
Project write-offs and abandonments(f) | | | 342 | | | | 128 | | | | 773 | | | | 210 | |
Realized gain on sale of investments(g) | | | (8,780 | ) | | | (130 | ) | | | (8,802 | ) | | | (539 | ) |
Deferred loss (gain) recognition from PIC Transaction (h) | | | (199 | ) | | | (713 | ) | | | 7,168 | | | | (133 | ) |
Other | | | 4 | | | | 99 | | | | 21 | | | | (347 | ) |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 19,672 | | | $ | 19,007 | | | $ | 48,997 | | | $ | 34,947 | |
| | | | | | | | | | | | | | | | |
| (a) | Interest incurred is generally capitalized to inventory, then expensed in cost of sales as related units close. |
| (b) | Interest incurred is generally capitalized to investment in joint ventures, then expensed in equity in income (loss) from joint ventures as related units close. |
| (c) | Interest is expensed to the extent assets qualifying for interest capitalization are less than debt. |
| (d) | Loss on debt extinguishment in connection with payoff of previously outstanding indebtedness in May 2011. |
| (e) | Impairment losses on real estate assets held and used in operations and investment in joint ventures. |
| (f) | Includes non-refundable deposits and costs associated with preparatory due diligence for land acquisitions subsequently abandoned. |
| (g) | Includes other than temporary gains on sale of investments. |
| (h) | Amortization of deferred gain resulting from a series of novation and reinsurance transactions (“PIC Transaction”) entered into by Partners Insurance Company (“PIC”), a wholly-owned subsidiary. |
Page10
