CalAtlantic Group, Inc. Reports 2016 First Quarter Results
On October 1, 2015, Standard Pacific Corp. ("Standard Pacific") completed its merger transaction with The Ryland Group, Inc. ("Ryland"), with Standard Pacific continuing as the surviving corporation and changing its name to CalAtlantic Group, Inc. ("CalAtlantic"). Because the closing of the merger occurred after the 2015 first quarter, the highlights and comparisons below and the other financial information included in this earnings release includes only stand-alone data for predecessor Standard Pacific for the three months ended March 31, 2015, as required by Generally Accepted Accounting Principles (GAAP). To aid analysts and other investors with year-over-year comparability for the entire merged business, we also are providing limited pro forma information, which combines the stand-alone Standard Pacific and Ryland financial and operating data for the three months ended March 31, 2015. Limited historical Ryland operating data is also presented in the tables beginning on page 15 for informational purposes.
IRVINE, CALIFORNIA, May 5, 2016. CalAtlantic Group, Inc. (NYSE: CAA) today announced results for the first quarter ended March 31, 2016.
Larry Nicholson, President and Chief Executive Officer of CalAtlantic Group, Inc. commented, "I am pleased with our first quarter results and the solid start to 2016. With home sale revenues up 22% and adjusted pretax income up 48%*, compared to the pro forma prior year period, we are laying the foundation for what I believe will be a strong year for CalAtlantic."
2016 CalAtlantic First Quarter Highlights and Comparisons to 2015 First Quarter
2016 first quarter results are for the combined company and include merger and other one-time costs and the impact of purchase accounting. 2015 first quarter represents the stand-alone results of Standard Pacific, as required by GAAP.
| · | Net new orders of 4,135, up 163%; Dollar value of net new orders up 117% |
| · | 571 average active selling communities, up 188% |
| · | 2,727 new home deliveries, up 181% |
| · | Average selling price of $432 thousand, down 10% |
| · | Home sale revenues of $1.2 billion, up 152% |
| · | Gross margin from home sales of 21.0%, compared to 24.2% |
| o | Adjusted gross margin from home sales of 22.0%* compared to 24.2% (adjusted 2016 first quarter margin excludes $12.7 million of purchase accounting impact related to the merger) |
| · | SG&A rate from home sales of 11.6%, compared to 14.1% |
| · | Operating margin from home sales of $110.3 million, or 9.4%, compared to $47.5 million, or 10.1% |
| o | Adjusted operating margin from home sales of $123.0 million*, or 10.4%* |
| · | Net income of $72.7 million, or $0.52 per diluted share, vs. net income of $31.6 million, or $0.40 per diluted share (2016 first quarter results include the impact of $4.8 million of merger and other one-time costs and $12.7 million of purchase accounting adjustments) |
| o | Adjusted net income of $83.7 million*, or $0.60 per diluted share* |
| · | $371.6 million of land purchases and development costs, compared to $160.1 million |
2016 CalAtlantic First Quarter Highlights and Comparisons to Pro Forma 2015 CalAtlantic First Quarter
To aid analysts and other investors with year-over-year comparability for the entire merged business, we provide the below pro forma information. This pro forma information is a combination of stand-alone first quarter 2015 Standard Pacific and Ryland financial and operating data, as if the merger closed on January 1, 2015, compared to actual 2016 CalAtlantic first quarter results. Such pro forma data was not prepared to comply with Regulation S-X of the SEC Rules and Regulations.
| · | Net new orders of 4,135, up 4%; Dollar value of net new orders up 9% |
| · | 571 average active selling communities, up 5% |
| · | 2,727 new home deliveries, up 12% |
| · | Average selling price of $432 thousand, up 9% |
| · | Home sale revenues of $1.2 billion, up 22% |
| · | Pretax income of $115.2 million vs. $89.8 million* (2016 first quarter results include the impact of $4.8 million of merger and other one-time costs and $12.7 million of purchase accounting adjustments) |
| o | Adjusted pretax income of $132.7 million*, up 48% |
| · | $371.6 million of land purchases and development costs, compared to $344.9 million |
Orders. Net new orders for the 2016 first quarter were up 4% from the pro forma 2015 first quarter, to 4,135 homes, with the dollar value of these orders up 9%, and the Company's monthly sales absorption rate was 2.4 per community for the 2016 first quarter, flat from the pro forma 2015 first quarter and up 55% from the 2015 fourth quarter, consistent with normal seasonal patterns. The Company's cancellation rate for the 2016 first quarter was 12%, down 200 basis points compared to the pro forma 2015 first quarter and down from 22% for the 2015 fourth quarter.
Backlog. The dollar value of homes in backlog increased 27% to $3.2 billion, or 7,019 homes, compared to $2.5 billion, or 5,853 homes, for the pro forma 2015 first quarter, and increased 25% compared to $2.6 billion, or 5,611 homes, for the 2015 fourth quarter. The increase in pro forma year-over-year backlog value was driven primarily by our continued growth in community count and the corresponding increase in orders and a 6% increase in the average selling price of the homes in backlog on a pro forma basis, reflecting the product mix shift to more move-up and luxury homes and continued pricing power in many of our markets.
Revenue. Revenues from home sales for the 2016 first quarter increased 22%, to $1.2 billion, as compared to the pro forma 2015 first quarter, resulting from a 12% increase on a pro forma basis in new home deliveries and a 9% increase on a pro forma basis in the Company's average home price to $432 thousand. The increase in average home price was primarily attributable to a shift to more move-up product and general price increases within a majority of the Company's markets.
Gross Margin. Excluding the impact of purchasing accounting, the Company achieved adjusted gross margin from home sales of 22.0%* for the 2016 first quarter. Unadjusted, the gross margin from homes sales was 21.0%. The unadjusted first quarter gross margin was adversely impacted by the required fair value adjustment to homes in backlog, specs and models under construction acquired from Ryland in the merger, of which $12.7 million was recognized as an increase to cost of sales during the quarter.
SG&A Expenses. Selling, general and administrative expenses for the 2016 first quarter were $136.7 million, or 11.6%, as compared to $66.1 million, or 14.1%, for the 2015 first quarter. This 250 basis point improvement was primarily the result of a 152% increase in home sale revenues and the operating leverage gained in connection with the merger.
Land. During the 2016 first quarter, the Company spent $371.6 million on land purchases and development costs, compared to $344.9 million for the pro forma 2015 first quarter. The Company purchased $215.4 million of land, consisting of 2,902 homesites, of which 24% (based on homesites) is located in the North region, 15% in the Southeast region, 21% in the Southwest region, and 40% in the West region. As of March 31, 2016, the Company owned or controlled 68,892 homesites, of which 45,729 were owned and actively selling or under development, 17,075 were controlled or under option, and the remaining 6,088 homesites were held for future development or for sale.
Liquidity. The Company ended the quarter with $542.5 million of available liquidity, including $169.5 million of unrestricted homebuilding cash and $373.0 million available to borrow under its $750 million revolving credit facility. The Company's homebuilding debt to book capitalization as of March 31, 2016 and 2015 was 48.2% and 56.0%, respectively, and adjusted net homebuilding debt to adjusted book capitalization was 46.8%* and
54.6%*, respectively. In addition, the Company's homebuilding debt to adjusted homebuilding EBITDA for the LTM period ending March 31, 2016 and 2015 was 5.0x* and 4.4x*, respectively.
Earnings Conference Call
A conference call to discuss the Company's 2016 first quarter results will be held at 12:00 p.m. Eastern time May 6, 2016. The call will be broadcast live over the Internet and can be accessed through the Company's website at http://investors.calatlantichomes.com. The call will also be accessible via telephone by dialing (877) 604-9674 (domestic) or (719) 325-4778 (international); Passcode: 4605965. The audio transmission with the slide presentation will be available on our website for replay within 2 to 3 hours following the live broadcast, and can be accessed by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international); Passcode: 4605965.
About CalAtlantic Group, Inc.
CalAtlantic Group, Inc. (NYSE: CAA), a combination of Standard Pacific Corp. and Ryland Group, Inc., two of the nation's largest and most respected homebuilders, offers well-crafted homes in thoughtfully designed communities that meet the desires of customers across the homebuilding spectrum, from entry level to luxury, in 41 Metropolitan Statistical Areas spanning 17 states. With a trusted reputation for quality craftsmanship, an outstanding customer experience and exceptional architectural design earned over its 50 year history, CalAtlantic Group, Inc. utilizes its over five decades of land acquisition, development and homebuilding expertise to acquire and build desirable communities in locations that meet the high expectations of the company's homebuyers. We invite you to learn more about us by visiting www.calatlantichomes.com.
The pro forma results presented above are not necessarily indicative of how the Company would have performed if Ryland and Standard Pacific were combined for and the first quarter of 2015 and are not necessarily indicative of the combined Company's future performance. This news release and the referenced earnings conference call contain forward-looking statements. These statements include but are not limited to statements regarding the integration of the operations of Standard Pacific and Ryland, the future success of those combined operations; new home orders; deliveries; backlog; absorption rates; cancellation rates; average home price; revenue; profitability; cash flow; liquidity; gross margin; operating margin; product mix; land supply; and our liquidity. Forward-looking statements are based on our current expectations or beliefs regarding future events or circumstances, and you should not place undue reliance on these statements. Such statements involve known and unknown risks, uncertainties, assumptions and other factors many of which are out of the Company's 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: local and general economic and market conditions, including consumer confidence, employment rates, interest rates, the cost and availability of mortgage financing, and stock market, home and land valuations; the impact on economic conditions, terrorist attacks or the outbreak or escalation of armed conflict involving the United States; the cost and availability of suitable undeveloped land, building materials and labor; the cost and availability of construction financing and corporate debt and equity capital; our significant amount of debt and the impact of restrictive covenants in our debt agreements; our ability to repay our debt as it comes due; changes in our credit rating or outlook; the demand for and affordability of single-family homes; the supply of housing for sale; cancellations of purchase contracts by homebuyers; the cyclical and competitive nature of the Company's business; governmental regulation, including the impact of "slow growth" or similar initiatives; delays in the land entitlement process, development, construction, or the opening of new home communities; adverse weather conditions and natural disasters; environmental matters; risks relating to the Company's mortgage banking operations; future business decisions and the Company's ability to successfully implement the Company's operational and other strategies; litigation and warranty claims; and other risks discussed in the Company's filings with the Securities and Exchange Commission, including in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2015 and subsequent Quarterly Reports on Form 10-Q. The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements. The Company nonetheless reserves 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.
*Please see "Reconciliation of Non-GAAP Financial Measures" beginning on page 12.
*Please see "Reconciliation of Non-GAAP Financial Measures" beginning on page 12.
During the 2015 third quarter, in connection with the transition planning related to the merger, the Company began evaluating the business and allocating resources based on the post-merger homebuilding operating segments of CalAtlantic. The Company's homebuilding operating segments are grouped into four reportable segments: North (Baltimore, Chicago, Delaware, Indianapolis, Metro Washington, D.C., Minneapolis/St. Paul, New Jersey, Northern Virginia, Philadelphia and Atlanta); Southeast (Florida and the Carolinas); Southwest (Texas, Colorado and Nevada) and West (California and Arizona). All prior periods have been restated to conform to CalAtlantic's new presentation.
