Tri Pointe Homes (TPH) 8-K Tri Pointe Group, Inc. Reports 2015 Third Quarter Results

Exhibit 99.1

TRI POINTE GROUP, INC. REPORTS 2015 THIRD QUARTER RESULTS

-Reports Net Income of $50.2 Million, or $0.31 per Diluted Share for the Quarter-

-New Home Orders up 24% and New Home Deliveries up 35% for the Quarter-

-Homebuilding Gross Margin increase to 21.0% for the Quarter-

-Selling, General and Administrative Expenses decrease to 8.8% of Home Sales Revenue for the Quarter-

Irvine, California, November 6, 2015 /Business Wire/ – TRI Pointe Group, Inc. (NYSE: TPH) today announced results for the third quarter ended September 30, 2015.

On July 7, 2014, TRI Pointe consummated the merger with Weyerhaeuser Real Estate Company (“WRECO”).  The merger was accounted for as a “reverse acquisition” of TRI Pointe by WRECO.  As a result, legacy TRI Pointe’s financial results are only included in the combined company’s financial statements from the closing date forward and are not reflected in the combined company’s historical financial statements.  Accordingly, legacy TRI Pointe’s financial results are not included in the Generally Accepted Accounting Principles (“GAAP”) results for the periods prior to July 7, 2014 included in this press release.  

Results and Operational Data for Third Quarter 2015 and Comparisons to Third Quarter 2014

· Net income available to common shareholders was $50.2 million, or $0.31 per diluted share compared to $11.0 million, or $0.07 per diluted share

· New home orders increased to 996 compared to 803, an increase of 24%

· Active selling communities averaged 120.8 compared to 107.0

o New home orders per average selling community were 8.2 orders (2.7 monthly) compared to 7.5 orders (2.5 monthly), an increase of 10%

o Cancellation rate decreased to 16% compared to 18%

· Backlog units of 1,856 homes with a dollar value increase of 28%, to approximately $1.1 billion

o Average sales price in backlog of $598,000

· Home sales revenue of $642.4 million, an increase of 36%  

o New homes deliveries of 1,138, up 35%

o Average sales price of homes delivered of $564,000

· Homebuilding gross margin percentage of 21.0%

o Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 23.1%*

· SG&A expense as a percentage of homes sales revenue improved to 8.8% compared to 10.5%

· Ratios of debt and net debt to capital of 44.1% and 42.2%*, respectively, as of September 30 2015

· Cash of $97.0 million and availability under unsecured revolving credit facility of $192.4 million

* See “Reconciliation of Non-GAAP Financial Measures”

“TRI Pointe Group delivered another strong quarter marked by year-over-year growth in revenues, net income and orders”, commented Chief Executive Officer Doug Bauer.  “In addition, the Company’s third quarter results met or exceeded our guidance for new home deliveries, homebuilding gross margins and community openings.  These achievements are a reflection of TRI Pointe Group’s success in combining and integrating the six homebuilding brands, and the strength of the deeply experienced operating teams in each of their local markets.”

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GAAP Third quarter 2015 operating results

Net income available to common shareholders was $50.2 million, or $0.31 per diluted share in the third quarter of 2015, compared to net income of $11.0 million, or $0.07 per diluted share for the third quarter of 2014.  The improvement in net income available to common shareholders was primarily driven by an increase of $48.4 million in home sales gross margin due to higher home sales revenue resulting from a 35% increase in new home deliveries in addition to a savings of $21.7 million related to restructuring and transaction related expenses incurred in the prior year.  This was offset by current year increases in the Company’s provision for income taxes of $22.0 million and higher SG&A costs of $7.5 million.

Home sales revenue increased $170.6 million to $642.4 million for the third quarter of 2015, as compared to $471.8 million for the same period in 2014.  The increase was attributable to a 35% increase in new home deliveries to 1,138 and a 1% increase in the Company's average sales price of homes delivered to $564,000.  New home deliveries increased at all six of our reporting segments with the highest increase at TRI Pointe Homes, which was up 140 units, or 89% compared to the prior year, while delivering at an average sales price of $752,000.

New home orders increased 24% to 996 homes for the third quarter of 2015, as compared to 803 homes for the same period in 2014.  Average active selling communities increased to 120.8 as compared to 107.0 for the same period in the prior year, mainly due to TRI Pointe Homes which increased average active selling communities by 12.3 in the current year. The Company’s overall quarterly absorption rate per average selling community for the three months ended September 30 2015 increased 10% to 8.2 orders (2.7 monthly) compared to 7.5 orders (2.5 monthly) during the same period in 2014.  

The Company ended the quarter with 1,856 homes in backlog, representing approximately $1.1 billion in future home sales revenue. The average sales price of homes in backlog as of September 30, 2015 decreased $6,000, or 1%, to $598,000 compared to $604,000 at September 30 2014.  

Homebuilding gross margin percentage for the third quarter of 2015 increased to 21.0% compared to 18.3% for the same period in 2014 and increased sequentially from 20.0% during the second quarter of 2015.  Excluding interest and impairments and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 23.1%* for the third quarter of 2015 versus 20.0%* for the same period in 2014.  

Selling, general and administrative expense for the third quarter of 2015 improved to 8.8% of home sales revenue as compared to 10.5% for the same period in 2014.  The decrease in the selling, general and administrative expense ratio was primarily attributable to increased home sales revenue.  

“While California continues to be the main driver of earnings for our Company, each of the TRI Pointe brands continues to make solid contributions to the bottom line”, said Tom Mitchell, TRI Pointe Group’s President and Chief Operating Officer.  “We are extremely pleased with the level of execution demonstrated by each of our brands.”

* See “Reconciliation of Non-GAAP Financial Measures”

Outlook

For the fourth quarter of 2015, the Company anticipates delivering approximately 75% - 80% of its 1,856 units in backlog as of September 30, 2015.  The Company anticipates expanding homebuilding gross margin for the fourth quarter sequentially from the third quarter and ending with a full year 2015 homebuilding gross margin of approximately 21%.  Finally, the Company is reiterating its full year 2015 outlook for earnings per diluted share to a range of $1.15 to $1.30.

Earnings Conference Call

The Company will host a conference call via live webcast for investors and other interested parties beginning at 10:00 a.m. Eastern Time on Friday, November 6, 2015.  The call will be hosted by Doug Bauer, Chief Executive Officer, Tom Mitchell, Chief Operating Officer and Mike Grubbs, Chief Financial Officer.

Interested parties can listen to the call live on the internet through the Investor Relations section of the Company’s website at www.TRIPointeGroup.com. Listeners should go to the website at least 15 minutes prior to the call to download and install any necessary audio software.  The call can also be accessed by dialing 1-877-407-3982 for domestic participants or 1-201-493-6780 for international participants. Participants should ask for the TRI Pointe Group Third Quarter 2015 Earnings Conference Call. Those dialing in should do so at least ten minutes prior to the start. The replay of the call will be available for two weeks following the call.  

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To access the replay, the domestic dial-in number is 1-877-870-5176, the international dial-in number is 1-858-384-5517, and the pass code is 13614256.  An archive of the webcast will be available on the Company’s website for a limited time.

About TRI Pointe Group, Inc.

Headquartered in Irvine, California, TRI Pointe Group, Inc. (NYSE: TPH) is one of the top ten largest public homebuilders by equity market capitalization in the United States. The company designs, constructs and sells premium single-family homes through its portfolio of six quality brands across eight states, included Maracay Homes in Arizona; Pardee Homes in California and Nevada; Quadrant Homes in Washington; Trendmaker Homes in Texas; TRI Pointe Homes in California and Colorado; and Winchester Homes in Maryland and Virginia. Additional information is available at www.tripointegroup.com.

Forward-Looking Statements

Various statements contained in this presentation, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements.  These forward-looking statements may include projections and estimates concerning the timing and success of specific projects, our ability to achieve the anticipated benefits of the Weyerhaeuser Real Estate Company (WRECO) transaction and our future production, operational and financial results, financial condition, prospects, and capital spending.  Our forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “estimate,” “goal,” “expect,” “intend,” “project,” “potential,” “plan,” “predict,”  “will,” or other words that convey future events or outcomes.  The forward-looking statements in this presentation speak only as of the date of this presentation, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly.  These forward-looking statements are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control.  The following factors, among others, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements: the effect of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar; market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions; levels of competition; the successful execution of our internal performance plans, including restructuring and cost reduction initiatives; global economic conditions; raw material prices; oil and other energy prices; the effect of weather, including the continuing drought in California; the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters; transportation costs; federal and state tax policies; the effect of land use, environment and other governmental regulations; legal proceedings; risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, synergies, indebtedness, financial condition, losses and future prospects; the risk that disruptions from the WRECO transaction will harm our business; our ability to achieve the benefits of the WRECO transaction in the estimated amount and the anticipated timeframe, if at all; our ability to integrate WRECO successfully and to achieve the anticipated synergies therefrom; changes in accounting principles; risks related to unauthorized access to our computer systems, theft of our customers’ confidential information or other forms of cyber-attack; our relationship, and actual and potential conflicts of interest, with Starwood Capital Group or its affiliates; and additional factors discussed under the sections captioned “Risk Factors” included in our annual and quarterly reports filed with the Securities and Exchange Commission (“SEC”).  The foregoing list is not exhaustive.  New risk factors may emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business.

Investor Relations Contact:

Chris Martin, TRI Pointe Group

Drew Mackintosh, Mackintosh Investor Relations

InvestorRelations@TRIPointeGroup.com, 949-478-8696

Media Contact:

Carol Ruiz, cruiz@newgroundco.com, 310-437-0045

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KEY OPERATIONS AND FINANCIAL DATA

(dollars in thousands)

(unaudited)

	Three Months Ended									Nine Months Ended
	September 30,									September 30,
		2015			2014		Change				2015			2014		Change
Operating Data:
Home sales	$	642,352		$	471,801		$	170,551		$	1,443,855		$	1,023,312		$	420,543
Homebuilding gross margin	$	134,809		$	86,401		$	48,408		$	294,664		$	203,935		$	90,729
Homebuilding gross margin %		21.0	%		18.3	%		2.7	%		20.4	%		19.9	%		0.5	%
Adjusted homebuilding gross margin %*		23.1	%		20.0	%		3.0	%		22.4	%		21.6	%		0.8	%
Land and lot gross margin	$	1,425		$	3,233		$	(1,808	)	$	57,042		$	6,204		$	50,838
Land and lot gross margin %		29.2	%		58.3	%		(29.0	)%		76.7	%		17.0	%		59.7	%
SG&A expense	$	56,821		$	49,344		$	7,477		$	162,219		$	130,236		$	31,983
SG&A expense as a % of home sales		8.8	%		10.5	%		(1.7	)%		11.2	%		12.7	%		(1.5	)%
Net income available to common    shareholders	$	50,162		$	10,965		$	39,197		$	120,389		$	42,771		$	77,618
Adjusted EBITDA*	$	99,135		$	57,433		$	41,702		$	233,079		$	146,816		$	86,263
Interest incurred	$	15,454		$	15,129		$	325		$	45,779		$	25,718		$	20,061
Interest expense, net of interest    capitalized	$	—		$	290		$	(290	)	$	—		$	2,731		$	(2,731	)
Interest in cost of home sales	$	13,189		$	7,702		$	5,487		$	27,540		$	16,342		$	11,198
Other Data:
Net new home orders		996			803			193			3,428			2,233			1,195
New homes delivered		1,138			842			296			2,604			1,978			626
Average selling price of homes delivered	$	564		$	560		$	4		$	554		$	517		$	37
Average selling communities (QTD)		120.8			107.0			13.8		N/A			N/A			N/A
Average selling communities (YTD)	N/A			N/A			N/A				117.4			98.5			18.9
Selling communities at end of period		118			106			12		N/A			N/A			N/A
Cancellation rate		16	%		18	%		(2	)%		14	%		16	%		(2	)%
Backlog (estimated dollar value)	$	1,109,867		$	870,365		$	239,502
Backlog (homes)		1,856			1,440			416
Average selling price in backlog	$	598		$	604		$	(6	)
										September 30,			December31,
											2015			2014		Change
Balance Sheet Data:
Cash and cash equivalents										$	96,993		$	170,629		$	(73,636	)
Real estate inventories										$	2,576,402		$	2,280,183		$	296,219
Lots owned or controlled											28,240			29,718			(1,478	)
Homes under construction (1)											2,789			1,887			902
Debt										$	1,245,621		$	1,162,179		$	83,442
Stockholder equity										$	1,576,176		$	1,454,180		$	121,996
Book capitalization										$	2,821,797		$	2,616,359		$	205,438
Ratio of debt-to-capital											44.1	%		44.4	%		(0.3	)%
Ratio of net debt-to-capital*											42.2	%		40.5	%		1.6	%

⁽¹⁾ Homes under construction includes completed homes

* See “Reconciliation of Non-GAAP Financial Measures”

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CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

	September 30,		December 31,
	2015		2014
Assets	(unaudited)
Cash and cash equivalents	$	96,993	$	170,629
Receivables		32,921		20,118
Real estate inventories		2,576,402		2,280,183
Investments in unconsolidated entities		17,340		16,805
Goodwill and other intangible assets, net		162,162		162,563
Deferred tax assets		141,479		157,821
Other assets		84,516		105,405
Total assets	$	3,111,813	$	2,913,524
Liabilities
Accounts payable	$	67,747	$	68,860
Accrued expenses and other liabilities		210,707		210,009
Unsecured revolving credit facility		349,392		260,000
Seller financed loans		7,572		14,677
Senior notes		888,657		887,502
Total liabilities		1,524,075		1,441,048
Commitments and contingencies
Equity
Stockholders' Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized;    no shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively		—		—
Common stock, $0.01 par value, 500,000,000 shares authorized;    161,813,750 and 161,355,490 shares issued and outstanding    at September 30, 2015 and December 31, 2014, respectively		1,618		1,614
Additional paid-in capital		907,762		906,159
Retained earnings		666,796		546,407
Total stockholders' equity		1,576,176		1,454,180
Noncontrolling interests		11,562		18,296
Total equity		1,587,738		1,472,476
Total liabilities and equity	$	3,111,813	$	2,913,524

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CONSOLIDATED STATEMENT OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Revenues:
Home sales	$	642,352		$	471,801		$	1,443,855		$	1,023,312
Land and lot sales		4,876			5,550			74,366			36,449
Other operations		913			569			2,695			8,854
Total revenues		648,141			477,920			1,520,916			1,068,615
Expenses:
Cost of home sales		507,543			385,400			1,149,191			819,377
Cost of land and lot sales		3,451			2,317			17,324			30,245
Other operations		570			556			1,724			2,755
Sales and marketing		30,038			28,393			78,958			73,096
General and administrative		26,783			20,951			83,261			57,140
Restructuring charges		2,010			7,024			2,730			9,202
Total expenses		570,395			444,641			1,333,188			991,815
Income from operations		77,746			33,279			187,728			76,800
Equity in loss of unconsolidated entities		(3	)		(82	)		(84	)		(219	)
Transaction expenses		—			(16,710	)		—			(17,216	)
Other income (loss), net		47			499			272			(242	)
Income before income taxes		77,790			16,986			187,916			59,123
Provision for income taxes		(28,021	)		(6,021	)		(66,088	)		(16,352	)
Net income		49,769			10,965			121,828			42,771
Net (income) loss attributable to noncontrolling interests		393			—			(1,439	)		—
Net income available to common shareholders	$	50,162		$	10,965		$	120,389		$	42,771
Earnings per share
Basic	$	0.31		$	0.07		$	0.74		$	0.31
Diluted	$	0.31		$	0.07		$	0.74		$	0.31
Weighted average shares outstanding
Basic		161,772,893			158,931,450			161,651,177			139,550,891
Diluted		162,366,744			159,158,706			162,299,282			140,213,655

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MARKET DATA BY REPORTING SEGMENT & STATE

(dollars in thousands)

(unaudited)

	Three Months Ended September 30,								Nine Months Ended September 30,
	2015				2014				2015				2014
	Homes		Avg. Selling		Homes		Avg. Selling		Homes		Avg. Selling		Homes		Avg. Selling
	Delivered		Price		Delivered		Price		Delivered		Price		Delivered		Price
New Homes Delivered:
Maracay Homes		131	$	386		94	$	397		307	$	380		286	$	376
Pardee Homes		314		543		277		468		724		506		658		480
Quadrant Homes		117		406		74		437		297		426		219		405
Trendmaker Homes		163		495		135		516		394		512		404		492
TRI Pointe Homes		298		752		158		781		611		756		158		781
Winchester Homes		115		599		104		763		271		631		253		747
Total		1,138	$	564		842	$	560		2,604	$	554		1,978	$	517
	Three Months Ended September 30,								Nine Months Ended September 30,
	2015				2014				2015				2014
	Homes		Avg. Selling		Homes		Avg. Selling		Homes		Avg. Selling		Homes		Avg. Selling
	Delivered		Price		Delivered		Price		Delivered		Price		Delivered		Price
New Homes Delivered:
California		462	$	720		350	$	635		969	$	700		633	$	590
Colorado		51		512		15		429		128		488		15		429
Maryland		58		483		42		556		120		528		114		624
Virginia		57		716		62		904		151		714		139		847
Arizona		131		386		94		397		307		380		286		376
Nevada		99		361		70		348		238		368		168		354
Texas		163		495		135		516		394		512		404		492
Washington		117		406		74		437		297		426		219		405
Total		1,138	$	564		842	$	560		2,604	$	554		1,978	$	517

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MARKET DATA BY REPORTING SEGMENT & STATE, continued

(unaudited)

	Three Months Ended September 30,								Nine Months Ended September 30,
	2015				2014				2015				2014
	New		Average		New		Average		New		Average		New		Average
	Home		Selling		Home		Selling		Home		Selling		Home		Selling
	Orders		Communities		Orders		Communities		Orders		Communities		Orders		Communities
Net New Home Orders:
Maracay Homes		150		17.2		88		17.3		495		17.3		313		16.4
Pardee Homes		291		25.0		264		21.3		954		22.8		793		20.3
Quadrant Homes		87		11.8		82		12.3		353		10.8		286		12.8
Trendmaker Homes		125		25.0		127		24.8		381		26.0		436		23.5
TRI Pointe Homes		234		28.3		152		16.0		935		27.0		152		6.4
Winchester Homes		109		13.5		90		15.3		310		13.5		253		19.1
Total		996		120.8		803		107.0		3,428		117.4		2,233		98.5
	Three Months Ended September 30,								Nine Months Ended September 30,
	2015				2014				2015				2014
	New		Average		New		Average		New		Average		New		Average
	Home		Selling		Home		Selling		Home		Selling		Home		Selling
	Orders		Communities		Orders		Communities		Orders		Communities		Orders		Communities
Net New Home Orders:
California		392		35.5		292		26.3		1,421		33.2		686		18.3
Colorado		34		6.0		31		3.0		168		6.4		31		1.2
Maryland		71		6.0		48		6.3		165		5.8		117		8.2
Virginia		38		7.5		42		9.0		145		7.7		136		10.9
Arizona		150		17.2		88		17.3		495		17.3		313		16.4
Nevada		99		11.8		93		8.0		300		10.2		228		7.2
Texas		125		25.0		127		24.8		381		26.0		436		23.5
Washington		87		11.8		82		12.3		353		10.8		286		12.8
Total		996		120.8		803		107.0		3,428		117.4		2,233		98.5

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MARKET DATA BY REPORTING SEGMENT & STATE, continued

(dollars in thousands)

(unaudited)

	As of September 30, 2015						As of September 30, 2014
			Backlog		Average				Backlog		Average
	Backlog		Dollar		Selling		Backlog		Dollar		Selling
	Units		Value		Price		Units		Value		Price
Backlog:
Maracay Homes		293	$	118,164	$	403		143	$	57,202	$	400
Pardee Homes		448		296,477		662		415		222,929		537
Quadrant Homes		169		79,955		473		163		78,317		480
Trendmaker Homes		205		108,250		528		254		131,611		518
TRI Pointe Homes		567		388,336		685		282		240,872		854
Winchester Homes		174		118,685		682		183		139,434		762
Total		1,856	$	1,109,867	$	598		1,440	$	870,365	$	604
	As of September 30, 2015						As of September 30, 2014
			Backlog		Average				Backlog		Average
	Backlog		Dollar		Selling		Backlog		Dollar		Selling
	Units		Value		Price		Units		Value		Price
Backlog:
California		770	$	577,053	$	749		523	$	393,876	$	753
Colorado		124		62,445		504		51		22,657		444
Maryland		98		59,200		604		72		46,001		639
Virginia		76		59,485		783		111		93,433		842
Arizona		293		118,164		403		143		57,202		400
Nevada		121		45,315		375		123		47,269		384
Texas		205		108,250		528		254		131,611		518
Washington		169		79,955		473		163		78,316		480
Total		1,856	$	1,109,867	$	598		1,440	$	870,365	$	604

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MARKET DATA BY REPORTING SEGMENT & STATE, continued

	September 30,		December31,
	2015		2014
Lots Owned or Controlled:	(unaudited)
Maracay Homes		1,798		1,985
Pardee Homes		17,075		17,639
Quadrant Homes		1,422		1,544
Trendmaker Homes		1,976		2,073
TRI Pointe Homes		3,393		3,726
Winchester Homes		2,576		2,751
Total		28,240		29,718
	September 30,		December31,
	2015		2014
Lots Owned or Controlled:	(unaudited)
California		17,939		18,842
Colorado		607		639
Maryland		1,883		2,048
Virginia		693		703
Arizona		1,798		1,985
Nevada		1,922		1,884
Texas		1,976		2,073
Washington		1,422		1,544
Total		28,240		29,718
	September 30,		December31,
	2015		2014
Lots by Ownership Type:	(unaudited)
Lots owned		25,484		25,535
Lots controlled (1)		2,756		4,183
Total		28,240		29,718

⁽¹⁾ As of September 30, 2015 and December 31, 2014, lots controlled included lots that were under land option contracts or purchase contracts.

Page 10

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(unaudited)

In this earnings release, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating the Company’s operating performance and financing structure. 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 Generally Accepted Accounting Principles (“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 homebuilding gross margin percentage, as reported and prepared in accordance with GAAP, to the non-GAAP measure adjusted homebuilding gross margin percentage. We believe this information is meaningful as it isolates the impact that leverage has on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion.

	Three Months Ended September 30,
	2015			%			2014			%
	(dollars in thousands)
Home sales	$	642,352			100.0	%	$	471,801			100.0	%
Cost of home sales		507,543			79.0	%		385,400			81.7	%
Homebuilding gross margin		134,809			21.0	%		86,401			18.3	%
Add:  interest in cost of home sales		13,189			2.1	%		7,702			1.6	%
Add:  impairments and lot option abandonments		366			0.1	%		490			0.1	%
Adjusted homebuilding gross margin	$	148,364			23.1	%	$	94,593			20.0	%
Homebuilding gross margin percentage		21.0	%					18.3	%
Adjusted homebuilding gross margin percentage		23.1	%					20.0	%
	Nine Months Ended September 30,
	2015			%			2014			%
	(dollars in thousands)
Home sales	$	1,443,855			100.0	%	$	1,023,312			100.0	%
Cost of home sales		1,149,191			79.6	%		819,377			80.1	%
Homebuilding gross margin		294,664			20.4	%		203,935			19.9	%
Add:  interest in cost of home sales		27,540			1.9	%		16,342			1.6	%
Add:  impairments and lot option abandonments		1,593			0.1	%		897			0.1	%
Adjusted homebuilding gross margin	$	323,797			22.4	%	$	221,174			21.6	%
Homebuilding gross margin percentage		20.4	%					19.9	%
Adjusted homebuilding gross margin percentage		22.4	%					21.6	%

Page 11

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)

(unaudited)

The following table reconciles the Company’s ratio of debt-to-capital to the ratio of net debt-to-capital. We believe that the ratio of net debt-to-capital is a relevant financial measure for management and investors to understand the leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.

	September 30,			December 31,
	2015			2014
	(dollars in thousands)
Unsecured revolving credit facility	$	349,392		$	260,000
Seller financed loans		7,572			14,677
Senior Notes		888,657			887,502
Total debt		1,245,621			1,162,179
Stockholders' equity		1,576,176			1,454,180
Total capital	$	2,821,797		$	2,616,359
Ratio of debt-to-capital(1)		44.1	%		44.4	%
Total debt	$	1,245,621		$	1,162,179
Less: Cash and cash equivalents		(96,993	)		(170,629	)
Net debt		1,148,628			991,550
Stockholders' equity		1,576,176			1,454,180
Total capital	$	2,724,804		$	2,445,730
Ratio of net debt-to-capital(2)		42.2	%		40.5	%

⁽¹⁾ The ratio of debt-to-capital is computed as the quotient obtained by dividing debt by the sum of debt plus equity.

⁽²⁾ The ratio of net debt-to-capital is computed as the quotient obtained by dividing net debt (which is debt less cash and cash equivalents) by the sum of net debt plus equity. The most directly comparable GAAP financial measure is the ratio of debt-to-capital.

Page 12

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)

(unaudited)

The following table calculates the non-GAAP measures of EBITDA and Adjusted EBITDA and reconciles those amounts to net income (loss), as reported and prepared in accordance with GAAP. EBITDA means net income (loss) before (a) interest expense, (b) income taxes, (c) depreciation and amortization, (d) expensing of previously capitalized interest included in costs of home sales and (e) amortization of stock-based compensation. Adjusted EBITDA means EBITDA before (f) restructuring expenses (g) impairment and lot option abandonments and (h) transaction related expenses. Other companies may calculate EBITDA and Adjusted EBITDA (or similarly titled measures) differently. We believe EBITDA and Adjusted EBITDA are useful measures of the Company’s ability to service debt and obtain financing.

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
		2015			2014			2015			2014
	(in thousands)
Net income available to common shareholders	$	50,162		$	10,965		$	120,389		$	42,771
Interest expense:
Interest incurred		15,454			15,129			45,779			25,718
Interest capitalized		(15,454	)		(14,839	)		(45,779	)		(22,987	)
Amortization of interest in cost of sales		13,339			7,835			28,019			40,451
Provision for income taxes		28,021			6,021			66,088			16,352
Depreciation and amortization		2,244			4,489			5,414			10,719
Amortization of stock-based compensation		2,994			3,547			8,536			6,250
EBITDA		96,760			33,147			228,446			119,274
Restructuring charges		2,010			7,024			2,730			9,202
Impairments and lot abandonments		365			552			1,903			1,124
Transaction expenses		—			16,710			—			17,216
Adjusted EBITDA	$	99,135		$	57,433		$	233,079		$	146,816

Page 13