Exhibit 99.1
Shea Homes Reports Fourth Quarter and Full Year 2013 Results
Walnut, California, February 21, 2014
Shea Homes, one of America’s largest private homebuilders, today reported results for the fourth quarter and year ended December 31, 2013.
Three Months Ended 12/31/13 Highlights and Comparisons to Three Months Ended 12/31/12
| | • | | Net income attributable to Shea Homes was $73.8 million compared to $33.2 million, a 122% increase |
| | • | | Home sales orders were 361 compared to 407, an 11% decrease |
| | • | | Active selling communities averaged 60 compared to 63 |
| | • | | Home sales per community were 6.0, or 2.0 per month, compared to 6.5, or 2.2 per month, an 8% decrease |
| | • | | Cancellation rate was 21% compared to 20% |
| | • | | Backlog units were 849 compared to 911, a 7% decrease |
| | • | | Backlog sales value was $466.6 million compared to $413.2 million, a 13% increase |
| | • | | The average selling price in backlog was $550,000 compared to $454,000, a 21% increase |
| | • | | Total revenues were $340.0 million compared to $295.7 million, a 15% increase |
| | • | | House revenues were $315.5 million* compared to $284.8 million*, an 11% increase |
| | • | | Homes closed were 636 compared to 700, a 9% decrease |
| | • | | Average selling price of homes closed was $496,000 compared to $407,000, a 22% increase |
| | • | | Gross margin was 25.1% compared to 22.1% |
| | • | | House gross margin was 23.4%* compared to 20.9%* |
| | • | | SG&A expenses were $27.0 million (7.9% of revenues) compared to $23.9 million (8.1% of revenues) |
| | • | | Income tax benefit was $15.8 million compared to $0.3 million which, for the fourth quarter 2013, included $15.6 million attributable to the reversal of the deferred tax valuation allowance |
| | • | | Adjusted EBITDA was $83.8 million* compared to $72.9 million* |
| | • | | Cash and restricted cash at December 31, 2013 were $207.4 million compared to $292.8 million at December 31, 2012 |
Year Ended 12/31/13 Highlights and Comparisons to Year Ended 12/31/12
| | • | | Net income attributable to Shea Homes was $125.9 million compared to $29.0 million, a 334% increase |
| | • | | Home sales orders were 1,828 compared to 2,023, a 10% decrease |
| | • | | Active selling communities averaged 58 compared to 65 |
| | • | | Home sales per community were 31.5, or 2.6 per month, compared to 31.1, or 2.6 per month |
| | • | | Cancellation rate remained at 15% |
| | • | | Total revenues were $930.6 million compared to $680.1 million, a 37% increase |
| | • | | House revenues were $894.3 million* compared to $645.0 million*, a 39% increase |
| | • | | Homes closed were 1,890 compared to 1,573, a 20% increase |
| | • | | Average selling price of homes closed was $473,000 compared to $410,000, a 15% increase |
| | • | | Gross margin was 23.8% compared to 20.8% |
| | • | | House gross margin was 23.2%* compared to 20.2%* |
| | • | | SG&A expenses were $104.4 million (11.2% of revenues) compared to $89.5 million (13.2% of revenues) |
| | • | | Income tax benefit (provision) was $14.1 million compared to $(0.6) million which, for 2013, included $15.6 million attributable to the reversal of the deferred tax valuation allowance |
| | • | | Adjusted EBITDA was $184.2 million* compared to $131.2 million* |
| * | See “Reconciliation of Non-GAAP Financial Measures” beginning on page 9 |
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“We are very pleased with our performance in 2013. Revenues, gross margins and, most importantly, net income, were up significantly year over year for the fourth quarter and year. In addition to the strong housing market in the first half of 2013, we continued to focus on maximizing housing margins and minimizing overhead expenses,” said Bert Selva, President and CEO of Shea Homes.
“Looking ahead to 2014, we believe the fundamentals that drive housing demand appear favorable and we are excited about the new year as we enter the spring selling season. For the year, we plan to open 32 new communities compared to 21 last year. In addition, we remain focused on acquiring new land positions in our core markets.”
For the 2013 fourth quarter, new home sales orders were 361 compared to 407 in 2012, an 11% decrease, primarily due to the impact of higher mortgage interest rates in the second half of 2013 and the temporary federal government shutdown early in the fourth quarter, combined with slightly lower active selling communities in our East segment. Home sales per community for the 2013 fourth quarter were 2.0 per month compared to 2.2 per month in the 2012 fourth quarter, an 8% decrease. For the year ended December 31, 2013, the Company opened 21 new communities compared to 15 in 2012. At December 31, 2013, backlog was 849 compared to 911 at December 31, 2012, a 7% decrease.
For the 2013 fourth quarter, net income attributable to Shea Homes was $73.8 million compared to $33.2 million in 2012, primarily due to a $19.9 million increase in gross margin (from higher revenues, including land sales, and higher gross margins), a $3.0 million decrease in interest expense, a $5.3 million improvement in our reinsurance transaction results, and a $15.5 million increase in income tax benefit, primarily attributable to the reversal of the deferred tax valuation allowance. These increases were partially offset by a $3.1 million increase in selling, general and administrative expenses.
For the 2013 fourth quarter, total revenues were $340.0 million compared to $295.7 million in 2012, a 15% increase, and house revenues were $315.5 million* compared to $284.8 million* in 2012, an 11% increase. The increase in house revenues was primarily due to a 22% increase in average selling price to $496,000, a result of general home price increases in all of our regions, and the delivery of more expensive homes, primarily in Southern California.
For the 2013 fourth quarter, total gross margin was 25.1% compared to 22.1% in 2012, a 300 basis point (bp) increase, and house gross margin was 23.4%* compared to 20.9%* in 2012, a 250 bp increase, which reflected general home price increases in all of our regions, partially offset by higher labor and material costs. For the 2013 fourth quarter, house gross margin excluding interest was 29.6%* compared to 28.5%* in 2012.
For the 2013 fourth quarter, SG&A expenses were $27.0 million (7.9% of revenues) compared to $23.9 million (8.1% of revenues) in 2012. The $3.1 million increase was primarily due to higher volume related costs and higher compensation expense.
For the 2013 and 2012 fourth quarter, interest incurred was $16.7 million, while interest expense for the 2013 fourth quarter was $0.1 million versus $3.1 million in 2012, a 97% decrease which was due to higher qualified inventory used for interest capitalization.
For the 2013 fourth quarter, net operating cash flows were $78.6 million compared to $80.6 million in 2012. This decrease was primarily due to increased land acquisition, land development and house construction costs, partially offset by increased cash receipts from home closings. For the 2013 fourth quarter, land acquisition and land development costs were $92.6 million compared to $57.8 million in 2012; house construction costs were $111.8 million compared to $109.2 million in 2012; and cash receipts from home closings were $315.5 million compared to $284.8 million in 2012.
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For the year ended December 31, 2013, net income attributable to Shea Homes was $125.9 million compared to $29.0 million in 2012, primarily due to a 37% increase in revenues and a 300 bp higher gross margin percentage. In addition to a $14.8 million decrease in interest expense (due to higher qualified inventory), there was a $14.0 million improvement in our reinsurance transaction results, and a $15.6 million reversal of the deferred tax valuation allowance. These increases were partially offset by a $14.9 million increase in SG&A, primarily due to higher volume related costs and compensation expenses. For 2013, as a percentage of revenue, SG&A was 11.2% compared to 13.2% for 2012. The decrease as a percentage of revenue was the result of leveraging our fixed G&A expenses over higher revenues.
For the year ended December 31, 2013, net operating cash flows were $(45.9) million compared to $(6.2) million in 2012. The larger deficit was primarily due to increased land acquisition, land development and house construction costs, partially offset by increased cash receipts from home closings. For the year ended December 31, 2013, land acquisition ($204.6 million) and land development costs were $341.3 million compared to $215.9 million in 2012; house construction costs were $467.4 million compared to $348.3 million in 2012; and cash receipts from home closings were $894.3 million compared to $645.0 million in 2012.
In connection with our November 2013 receipt of the consent to amend the Indenture to allow us to replace our $75.0 million letter of credit facility with a future $125.0 million revolving credit facility, in January 2014, J.F. Shea Co., Inc. (“JFSCI”), a related party, made an $8.4 million payment, including accrued interest, on its note payable to the Company. As a result of applying this payment to future installments, JFSCI is not required to make its next installment payment until November 2016.
About Shea Homes Limited Partnership
Shea Homes is one of the largest private homebuilders in the nation. Since its founding in 1968, Shea Homes has closed over 91,000 homes. Shea Homes builds homes with quality craftsmanship and designs that 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 the fundamentals that drive housing market demand appear favorable and new community openings for 2014, which 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,” “anticipate,” “appear” 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 Annual Report on Form 10-K and 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 @ 909-594-0954 orandy.parnes@sheahomes.com
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KEY OPERATIONAL AND FINANCIAL DATA
(dollars in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | At or For the Three Months Ended December 31, | | | At or For the Year Ended December 31, | |
| | | 2013 | | | 2012 | | | Change | | | 2013 | | | 2012 | | | Change | |
| | | (unaudited) | | | (unaudited) | | | | | | (unaudited) | | | (unaudited) | | | | |
Operating Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Revenues | | $ | 340,031 | | | $ | 295,655 | | | | 15 | % | | $ | 930,610 | | | $ | 680,147 | | | | 37 | % |
Gross margin % | | | 25.1 | % | | | 22.1 | % | | | 300 | bp’s | | | 23.8 | % | | | 20.8 | % | | | 300 | bp’s |
Homebuilding revenues (a) * | | $ | 339,806 | | | $ | 295,408 | | | | 15 | % | | $ | 929,697 | | | $ | 679,162 | | | | 37 | % |
Homebuilding gross margin % (a) * | | | 25.1 | % | | | 22.1 | % | | | 300 | bp’s | | | 23.7 | % | | | 20.7 | % | | | 300 | bp’s |
House revenues * | | $ | 315,488 | | | $ | 284,766 | | | | 11 | % | | $ | 894,305 | | | $ | 645,000 | | | | 39 | % |
House gross margin* | | $ | 73,765 | | | $ | 59,579 | | | | 24 | % | | $ | 207,828 | | | $ | 130,093 | | | | 60 | % |
House gross margin % * | | | 23.4 | % | | | 20.9 | % | | | 250 | bp’s | | | 23.2 | % | | | 20.2 | % | | | 300 | bp’s |
Adjusted house gross margin % excluding interest in cost of sales * | | | 29.6 | % | | | 28.5 | % | | | 110 | bp’s | | | 29.9 | % | | | 27.6 | % | | | 230 | bp’s |
SG&A expenses | | $ | 26,993 | | | $ | 23,863 | | | | 13 | % | | $ | 104,418 | | | $ | 89,535 | | | | 17 | % |
SG&A % of total revenues | | | 7.9 | % | | | 8.1 | % | | | (20 | ) bp’s | | | 11.2 | % | | | 13.2 | % | | | (200 | ) bp’s |
Net income attributable to Shea Homes | | $ | 73,751 | | | $ | 33,220 | | | | 122 | % | | $ | 125,947 | | | $ | 29,038 | | | | 334 | % |
Adjusted EBITDA(b) * | | $ | 83,828 | | | $ | 72,935 | | | | 15 | % | | $ | 184,169 | | | $ | 131,201 | | | | 40 | % |
Interest incurred | | $ | 16,725 | | | $ | 16,769 | | | | 0 | % | | $ | 67,048 | | | $ | 66,857 | | | | 0 | % |
Interest capitalized to inventory | | $ | 15,825 | | | $ | 13,440 | | | | 18 | % | | $ | 59,699 | | | $ | 46,146 | | | | 29 | % |
Interest capitalized to investments in joint ventures | | $ | 805 | | | $ | 245 | | | | 229 | % | | $ | 2,278 | | | $ | 849 | | | | 168 | % |
Interest expense | | $ | 96 | | | $ | 3,084 | | | | -97 | % | | $ | 5,071 | | | $ | 19,862 | | | | -74 | % |
Interest in cost of sales (c) | | $ | 20,434 | | | $ | 24,418 | | | | -16 | % | | $ | 60,448 | | | $ | 54,733 | | | | 10 | % |
| | | | | | |
Other Data(d): | | | | | | | | | | | | | | | | | | | | | | | | |
Home sales orders (units) | | | 361 | | | | 407 | | | | -11 | % | | | 1,828 | | | | 2,023 | | | | -10 | % |
Homes closed (units) | | | 636 | | | | 700 | | | | -9 | % | | | 1,890 | | | | 1,573 | | | | 20 | % |
Average selling price | | $ | 496 | | | $ | 407 | | | | 22 | % | | $ | 473 | | | $ | 410 | | | | 15 | % |
Average active selling communities | | | 60 | | | | 63 | | | | -5 | % | | | 58 | | | | 65 | | | | -11 | % |
Home sales orders per community | | | 6.0 | | | | 6.5 | | | | -8 | % | | | 31.5 | | | | 31.1 | | | | 1 | % |
Cancellation rate | | | 21 | % | | | 20 | % | | | | | | | 15 | % | | | 15 | % | | | | |
Backlog at end of period (units) | | | 849 | | | | 911 | | | | -7 | % | | | | | | | | | | | | |
Backlog at end of period (estimated sales value) | | $ | 466,638 | | | $ | 413,196 | | | | 13 | % | | | | | | | | | | | | |
Lots owned or controlled (units) | | | 18,930 | | | | 17,910 | | | | 6 | % | | | | | | | | | | | | |
Homes under construction (units) (e) | | | 843 | | | | 826 | | | | 2 | % | | | | | | | | | | | | |
| (a) | Homebuilding revenue and gross margin include house, land and other homebuilding activities. |
| (b) | See page 10 for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income. |
| (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. |
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CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| | | | | | | | |
| | | December 31,
2013 | | | December 31,
2012 | |
| | | (unaudited) | | | | |
Assets | | | | | | | | |
Cash and cash equivalents | | $ | 206,205 | | | $ | 279,756 | |
Restricted cash | | | 1,189 | | | | 13,031 | |
Accounts and other receivables, net | | | 147,499 | | | | 141,289 | |
Receivables from related parties, net | | | 32,350 | | | | 34,028 | |
Inventory | | | 1,013,272 | | | | 837,653 | |
Investments in joint ventures | | | 47,748 | | | | 28,653 | |
Other assets, net | | | 57,070 | | | | 39,127 | |
| | | | | | | | |
Total assets | | $ | 1,505,333 | | | $ | 1,373,537 | |
| | | | | | | | |
Liabilities and equity | | | | | | | | |
Liabilities: | | | | | | | | |
Notes payable | | $ | 751,708 | | | $ | 758,209 | |
Other liabilities | | | 308,168 | | | | 296,081 | |
| | | | | | | | |
Total liabilities | | | 1,059,876 | | | | 1,054,290 | |
Total equity | | | 445,457 | | | | 319,247 | |
| | | | | | | | |
Total liabilities and equity | | $ | 1,505,333 | | | $ | 1,373,537 | |
| | | | | | | | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Year Ended | |
| | | December 31, | | | December 31, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| | | (unaudited) | | | (unaudited) | | | (unaudited) | | | (unaudited) | |
Revenues | | $ | 340,031 | | | $ | 295,655 | | | $ | 930,610 | | | $ | 680,147 | |
Cost of sales | | | (254,643 | ) | | | (230,196 | ) | | | (709,412 | ) | | | (538,434 | ) |
| | | | | | | | | | | | | | | | |
Gross margin | | | 85,388 | | | | 65,459 | | | | 221,198 | | | | 141,713 | |
| | | | |
Selling, general and administrative expenses | | | (26,993 | ) | | | (23,863 | ) | | | (104,418 | ) | | | (89,535 | ) |
Interest expense | | | (96 | ) | | | (3,084 | ) | | | (5,071 | ) | | | (19,862 | ) |
Other income (expense), net | | | (357 | ) | | | (5,597 | ) | | | 129 | | | | (2,516 | ) |
| | | | | | | | | | | | | | | | |
Income before income taxes | | | 57,942 | | | | 32,915 | | | | 111,838 | | | | 29,800 | |
| | | | |
Income tax benefit (expense) | | | 15,802 | | | | 287 | | | | 14,101 | | | | (616 | ) |
| | | | | | | | | | | | | | | | |
Net income | | | 73,744 | | | | 33,202 | | | | 125,939 | | | | 29,184 | |
Less: Net loss (income) attributable to non-controlling interests | | | 7 | | | | 18 | | | | 8 | | | | (146 | ) |
| | | | | | | | | | | | | | | | |
Net income attributable to Shea Homes | | $ | 73,751 | | | $ | 33,220 | | | $ | 125,947 | | | $ | 29,038 | |
| | | | | | | | | | | | | | | | |
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | | Year Ended | |
| | | December 31, | | | December 31, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| | | (unaudited) | | | (unaudited) | | | (unaudited) | | | (unaudited) | |
Operating activities | | | | | | | | | | | | | | | | |
Net income | | $ | 73,744 | | | $ | 33,202 | | | $ | 125,939 | | | $ | 29,184 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | | | | | | | | | | | | | |
(Gain) loss on reinsurance transaction | | | (412 | ) | | | 4,845 | | | | (2,011 | ) | | | 12,013 | |
Depreciation and amortization expense | | | 3,296 | | | | 3,383 | | | | 10,608 | | | | 8,638 | |
Distribution of earnings from joint venture | | | 1,100 | | | | — | | | | 7,100 | | | | 1,400 | |
Gain on sale of available-for-sale investments | | | — | | | | (4 | ) | | | (15 | ) | | | (8,806 | ) |
Other operating activities, net | | | (471 | ) | | | (289 | ) | | | (1,174 | ) | | | (1,227 | ) |
Changes in operating assets and liabilities: | | | | | | | | | | | | | | | | |
Inventory | | | 27,027 | | | | 46,127 | | | | (185,596 | ) | | | (68,733 | ) |
Payables and other liabilities | | | (3,495 | ) | | | 2,567 | | | | 14,231 | | | | 38,323 | |
Other operating assets | | | (22,238 | ) | | | (9,185 | ) | | | (14,980 | ) | | | (16,983 | ) |
| | | | | | | | | | | | | | | | |
Net cash provided by (used in) operating activities | | | 78,551 | | | | 80,646 | | | | (45,898 | ) | | | (6,191 | ) |
| | | | |
Investing activities | | | | | | | | | | | | | | | | |
Proceeds from sale of investments | | | 2 | | | | 2,593 | | | | 3,165 | | | | 26,547 | |
Net proceeds from promissory notes from related parties | | | 298 | | | | 56 | | | | 3,335 | | | | 1,987 | |
Investments in unconsolidated joint ventures, net | | | (4,988 | ) | | | (10,179 | ) | | | (21,304 | ) | | | (11,646 | ) |
Other investing activities, net | | | (1,969 | ) | | | (464 | ) | | | (1,969 | ) | | | (464 | ) |
| | | | | | | | | | | | | | | | |
Net cash provided by (used in) investing activities | | | (6,657 | ) | | | (7,994 | ) | | | (16,773 | ) | | | 16,424 | |
| | | | |
Financing activities | | | | | | | | | | | | | | | | |
Net decrease in notes payable | | | (8,887 | ) | | | (888 | ) | | | (10,880 | ) | | | (2,429 | ) |
Contributions from owners | | | — | | | | — | | | | — | | | | 1,746 | |
Other financing activities, net | | | — | | | | 2,352 | | | | — | | | | 1,840 | |
| | | | | | | | | | | | | | | | |
Net cash provided by (used in) financing activities | | | (8,887 | ) | | | 1,464 | | | | (10,880 | ) | | | 1,157 | |
| | | | | | | | | | | | | | | | |
Net increase (decrease) in cash and cash equivalents | | | 63,007 | | | | 74,116 | | | | (73,551 | ) | | | 11,390 | |
Cash and cash equivalents at beginning of period | | | 143,198 | | | | 205,640 | | | | 279,756 | | | | 268,366 | |
| | | | | | | | | | | | | | | | |
Cash and cash equivalents at end of period | | $ | 206,205 | | | $ | 279,756 | | | $ | 206,205 | | | $ | 279,756 | |
| | | | | | | | | | | | | | | | |
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SEGMENT OPERATING DATA
(dollars in thousands)
(unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | | Year Ended December 31, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| | | Homes
Closed | | | Avg. Selling
Price | | | Homes
Closed | | | Avg. Selling
Price | | | Homes
Closed | | | Avg. Selling
Price | | | Homes
Closed | | | Avg. Selling
Price | |
Homes closed: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Southern California | | | 92 | | | $ | 775 | | | | 81 | | | $ | 566 | | | | 271 | | | $ | 757 | | | | 249 | | | $ | 523 | |
San Diego | | | 80 | | | | 550 | | | | 123 | | | | 410 | | | | 256 | | | | 490 | | | | 194 | | | | 441 | |
Northern California | | | 141 | | | | 575 | | | | 153 | | | | 472 | | | | 456 | | | | 510 | | | | 323 | | | | 487 | |
Mountain West | | | 143 | | | | 448 | | | | 124 | | | | 447 | | | | 372 | | | | 444 | | | | 284 | | | | 446 | |
South West | | | 178 | | | | 305 | | | | 207 | | | | 279 | | | | 510 | | | | 312 | | | | 492 | | | | 280 | |
East | | | 2 | | | | 374 | | | | 12 | | | | 253 | | | | 25 | | | | 262 | | | | 31 | | | | 231 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consolidated | | | 636 | | | $ | 496 | | | | 700 | | | $ | 407 | | | | 1,890 | | | $ | 473 | | | | 1,573 | | | $ | 410 | |
Unconsolidated joint ventures | | | 82 | | | | 349 | | | | 57 | | | | 297 | | | | 202 | | | | 335 | | | | 149 | | | | 305 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 718 | | | $ | 479 | | | | 757 | | | $ | 399 | | | | 2,092 | | | $ | 460 | | | | 1,722 | | | $ | 401 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | Three Months Ended December 31, | | | Year Ended December 31, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| | | 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 | | | 97 | | | | 8 | | | | 66 | | | | 7 | | | | 308 | | | | 6 | | | | 313 | | | | 8 | |
San Diego | | | 51 | | | | 7 | | | | 81 | | | | 8 | | | | 249 | | | | 7 | | | | 262 | | | | 9 | |
Northern California | | | 54 | | | | 14 | | | | 83 | | | | 14 | | | | 359 | | | | 13 | | | | 459 | | | | 14 | |
Mountain West | | | 61 | | | | 14 | | | | 85 | | | | 14 | | | | 367 | | | | 15 | | | | 401 | | | | 14 | |
South West | | | 98 | | | | 17 | | | | 85 | | | | 17 | | | | 536 | | | | 16 | | | | 552 | | | | 17 | |
East | | | — | | | | — | | | | 7 | | | | 3 | | | | 9 | | | | 1 | | | | 36 | | | | 3 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total consolidated | | | 361 | | | | 60 | | | | 407 | | | | 63 | | | | 1,828 | | | | 58 | | | | 2,023 | | | | 65 | |
Unconsolidated joint ventures | | | 52 | | | | 14 | | | | 48 | | | | 10 | | | | 240 | | | | 13 | | | | 199 | | | | 11 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | | | 413 | | | | 74 | | | | 455 | | | | 73 | | | | 2,068 | | | | 71 | | | | 2,222 | | | | 76 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | December 31, | |
| | | 2013 | | | 2012 | |
| | | Backlog
Units | | | Backlog
Sales
Value | | | Backlog
Units | | | Backlog
Sales
Value | |
Backlog: | | | | | | | | | | | | | | | | |
Southern California | | | 160 | | | $ | 139,059 | | | | 123 | | | $ | 87,675 | |
San Diego | | | 100 | | | | 50,223 | | | | 107 | | | | 47,580 | |
Northern California | | | 144 | | | | 94,605 | | | | 241 | | | | 107,497 | |
Mountain West | | | 207 | | | | 100,186 | | | | 212 | | | | 98,733 | |
South West | | | 238 | | | | 82,565 | | | | 212 | | | | 67,519 | |
East | | | — | | | | — | | | | 16 | | | | 4,192 | |
| | | | | | | | | | | | | | | | |
Total consolidated | | | 849 | | | $ | 466,638 | | | | 911 | | | $ | 413,196 | |
Unconsolidated joint ventures | | | 122 | | | | 45,805 | | | | 84 | | | | 25,724 | |
| | | | | | | | | | | | | | | | |
Total | | | 971 | | | $ | 512,443 | | | | 995 | | | $ | 438,920 | |
| | | | | | | | | | | | | | | | |
Page7
SEGMENT OPERATING DATA (continued)
(unaudited)
| | | | | | | | |
| | | December 31, | |
| | | 2013 | | | 2012 | |
Lots owned or controlled: | | | | | | | | |
Southern California | | | 1,890 | | | | 1,989 | |
San Diego | | | 640 | | | | 764 | |
Northern California | | | 3,731 | | | | 3,182 | |
Mountain West | | | 9,841 | | | | 10,074 | |
South West | | | 2,063 | | | | 1,876 | |
East | | | 765 | | | | 25 | |
| | | | | | | | |
Total consolidated | | | 18,930 | | | | 17,910 | |
Unconsolidated joint ventures | | | 4,455 | | | | 3,874 | |
| | | | | | | | |
Total | | | 23,385 | | | | 21,784 | |
| | | | | | | | |
Lots by ownership type: | | | | | | | | |
Owned for homebuilding | | | 6,277 | | | | 6,448 | |
Owned and held for sale | | | 3,313 | | | | 3,382 | |
Optioned or subject to contract for homebuilding | | | 6,306 | | | | 5,046 | |
Optioned or subject to contract held for sale | | | 3,034 | | | | 3,034 | |
Joint venture | | | 4,455 | | | | 3,874 | |
| | | | | | | | |
Total | | | 23,385 | | | | 21,784 | |
| | | | | | | | |
Page8
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in thousands)
(unaudited)
In this earnings release, we utilize certain financial measures that, in each case, are not recognized under GAAP. We present these measures because 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 or as one measure of the Company’s ability to service debt and obtain financing. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. 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 in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.
The following table reconciles revenues, cost of sales and gross margins, as reported and prepared in accordance with GAAP, to the non-GAAP measures house revenues, house cost of sales, house gross margin and house gross margin percentage, which exclude land sales, impairment charges and other transactions, and to adjusted house revenues, adjusted house cost of sales, adjusted house gross margin and adjusted house gross margin percentage, which add back interest in cost of sales.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, 2013 | | | Three Months Ended December 31, 2012 | |
| | | Revenue | | | Cost of
Sales | | | Gross
Margin $ | | | Gross
Margin % | | | Revenue | | | Cost of
Sales | | | Gross
Margin $ | | | Gross
Margin % | |
Total | | $ | 340,031 | | | $ | (254,643 | ) | | $ | 85,388 | | | | 25.1 | % | | $ | 295,655 | | | $ | (230,196 | ) | | $ | 65,459 | | | | 22.1 | % |
Less: Other | | | (225 | ) | | | | | | | (225 | ) | | | | | | | (247 | ) | | | | | | | (247 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Homebuilding | | | 339,806 | | | | (254,643 | ) | | | 85,163 | | | | 25.1 | % | | | 295,408 | | | | (230,196 | ) | | | 65,212 | | | | 22.1 | % |
Less: Land | | | (21,572 | ) | | | 12,201 | | | | (9,371 | ) | | | 43.4 | % | | | (10,810 | ) | | | 5,866 | | | | (4,944 | ) | | | 45.7 | % |
Less: Other homebuilding | | | (2,746 | ) | | | 719 | | | | (2,027 | ) | | | | | | | 168 | | | | (857 | ) | | | (689 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
House | | $ | 315,488 | | | $ | (241,723 | ) | | $ | 73,765 | | | | 23.4 | % | | $ | 284,766 | | | $ | (225,187 | ) | | $ | 59,579 | | | | 20.9 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Add: Interest in house cost of sales(a) | | | | | | | 19,695 | | | | 19,695 | | | | | | | | | | | | 21,515 | | | | 21,515 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted house excluding interest in cost of sales | | $ | 315,488 | | | $ | (222,028 | ) | | $ | 93,460 | | | | 29.6 | % | | $ | 284,766 | | | $ | (203,672 | ) | | $ | 81,094 | | | | 28.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
| | | Year Ended December 31, 2013 | | | Year Ended December 31, 2012 | |
| | | Revenue | | | Cost of
Sales | | | Gross
Margin $ | | | Gross
Margin % | | | Revenue | | | Cost of
Sales | | | Gross
Margin $ | | | Gross
Margin % | |
Total | | $ | 930,610 | | | $ | (709,412 | ) | | $ | 221,198 | | | | 23.8 | % | | $ | 680,147 | | | $ | (538,434 | ) | | $ | 141,713 | | | | 20.8 | % |
Less: Other | | | (913 | ) | | | | | | | (913 | ) | | | | | | | (985 | ) | | | | | | | (985 | ) | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Homebuilding | | | 929,697 | | | | (709,412 | ) | | | 220,285 | | | | 23.7 | % | | | 679,162 | | | | (538,434 | ) | | | 140,728 | | | | 20.7 | % |
Less: Land | | | (31,462 | ) | | | 17,726 | | | | (13,736 | ) | | | 43.7 | % | | | (32,583 | ) | | | 18,797 | | | | (13,786 | ) | | | 42.3 | % |
Less: Other homebuilding | | | (3,930 | ) | | | 5,209 | | | | 1,279 | | | | | | | | (1,579 | ) | | | 4,730 | | | | 3,151 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
House | | $ | 894,305 | | | $ | (686,477 | ) | | $ | 207,828 | | | | 23.2 | % | | $ | 645,000 | | | $ | (514,907 | ) | | $ | 130,093 | | | | 20.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Add: Interest in house cost of sales(a) | | | | | | | 59,142 | | | | 59,142 | | | | | | | | | | | | 47,770 | | | | 47,770 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Adjusted house excluding interest in cost of sales | | $ | 894,305 | | | $ | (627,335 | ) | | $ | 266,970 | | | | 29.9 | % | | $ | 645,000 | | | $ | (467,137 | ) | | $ | 177,863 | | | | 27.6 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (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 table calculates the non-GAAP measures of EBITDA and Adjusted EBITDA and reconciles those amounts to net income as reported and prepared in accordance with GAAP. Adjusted EBITDA means net income (plus cash distributions of income from consolidated and unconsolidated joint ventures and non-guarantor subsidiaries) before (a) income taxes, (b) interest expense, (c) expensing of previously capitalized interest included in costs of sales and in equity in income (loss) from joint ventures, (d) impairment charges and project write-offs and abandonments, (e) loss on debt extinguishment, (f) depreciation and amortization, (g) realized gain on sale of investments, (h) income (loss) from joint ventures and non-guarantor subsidiaries, (i) deferred (gain) loss recognition from the amortization of deferred gain resulting from a series of novation and reinsurance transactions entered into by Partners Insurance Company, a wholly-owned subsidiary (“PIC Transaction”), and (j) gain on sale of investment in joint ventures. Other companies may calculate Adjusted EBITDA (or similarly titled measures) differently.
| | | | | | | | | | | | | | | | |
| | | Three Months Ended December 31, | | | Year Ended December 31, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Net income | | $ | 73,744 | | | $ | 33,202 | | | $ | 125,939 | | | $ | 29,184 | |
Adjustments: | | | | | | | | | | | | | | | | |
Income tax (benefit) expense | | | (15,802 | ) | | | (287 | ) | | | (14,101 | ) | | | 616 | |
Depreciation and amortization expense | | | 3,296 | | | | 3,383 | | | | 10,608 | | | | 8,638 | |
Interest in cost of sales | | | 20,434 | | | | 24,418 | | | | 60,448 | | | | 54,733 | |
Interest in equity in income (loss) from joint ventures | | | 360 | | | | 245 | | | | 1,189 | | | | 849 | |
Interest expense | | | 96 | | | | 3,084 | | | | 5,071 | | | | 19,862 | |
| | | | | | | | | | | | | | | | |
EBITDA | | | 82,128 | | | | 64,045 | | | | 189,154 | | | | 113,882 | |
| | | | |
Adjustments: | | | | | | | | | | | | | | | | |
Project write-offs and abandonments | | | 854 | | | | 1,266 | | | | 1,436 | | | | 2,039 | |
Realized gain on sale of investments | | | — | | | | (4 | ) | | | (15 | ) | | | (8,806 | ) |
Deferred loss (gain) recognition from PIC Transaction | | | (412 | ) | | | 4,845 | | | | (2,011 | ) | | | 12,013 | |
Loss (income) from joint ventures and non-guarantor subsidiaries | | | 1,255 | | | | 2,774 | | | | (4,766 | ) | | | 11,366 | |
Distributions of earnings from joint ventures and non-guarantor subsidiaries | | | — | | | | — | | | | 366 | | | | 678 | |
Other | | | 3 | | | | 9 | | | | 5 | | | | 29 | |
| | | | | | | | | | | | | | | | |
Adjusted EBITDA | | $ | 83,828 | | | $ | 72,935 | | | $ | 184,169 | | | $ | 131,201 | |
| | | | | | | | | | | | | | | | |
Page10
