Current report Shea Homes Limited Partnership

8-K - Current report

Published: 2012-05-07 20:14:15
Submitted: 2012-05-08
Period Ending In: 2012-05-07
d342390d8k.htm FORM 8-K


> ENT> 8-K 1 d342390d8k.htm FORM 8-K

Form 8-K

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 


FORM 8-K

 

 


Current Report

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 7, 2012 

 

 


SHEA HOMES LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

 

 


 

CALIFORNIA   333-177328   95-4240219

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

655 Brea Canyon Road, Walnut, California 91789

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (909) 594-9500

Not Applicable

(Former name or former address, if changed since last report):

 

 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02 Results of Operations and Financial Condition

On May 7, 2012, Shea Homes Limited Partnership issued a press release announcing its results of operations for the three months ended March 31, 2012. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein.

The information contained in this Item 2.02 and in the accompanying Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Shea Homes Limited Partnership under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act.

 

Item 9.01. Financial Statements and Exhibits

The information contained in this Item 9.01 and in the accompanying Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of Shea Homes Limited Partnership under the Securities Act or the Exchange Act.

(d) Exhibits

 

    

Exhibit Number

  

Description

  99.1    Press Release dated May 7, 2012


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

SHEA HOMES LIMITED PARTNERSHIP
By:  

/s/ Bruce J. Varker

Name:   Bruce J. Varker
Title:   Chief Financial Officer

Date: May 7, 2012


Exhibit Index

 

Exhibit Number

  

Description

99.1    Press Release dated May 7, 2012
d342390dex991.htm PRESS RELEASE


ENT> EX-99.1 2 d342390dex991.htm PRESS RELEASE

Press Release

Exhibit 99.1

 

LOGO

Shea Homes Reports First Quarter 2012 Results

Walnut, Calif., May 7, 2012

Shea Homes, one of America’s largest private homebuilders, recently reported results for the first quarter ended March 31, 2012.

Three Months Ended 3/31/12 Highlights, Commentary and Comparisons to Three Months Ended 3/31/11

 

 

Total revenues were $105.6 million compared to $74.1 million, a 43% increase.

 

Gross margin was 19.5% compared to 14.3%, a 36% increase.

 

Homes closed were 238 compared to 182, a 31% increase.

 

House revenues were $100.9 million* compared to $71.2 million*, a 42% increase.

 

Average selling price of homes closed was $424,000 compared to $391,000, an 8% increase and primarily attributable to price increases in several communities in our Southern California, Northern California and South West segments and product mix weighted to higher-priced homes in our Southern California, San Diego and Mountain West segments.

 

House gross margin was 20.7%* compared to 18.1%*, a 14% increase and primarily attributable to price increases in several communities in our Northern California and South West segments and product mix weighted to higher-margin homes.

 

SG&A expense was $17.6 million compared to $16.4 million and primarily attributable to higher direct selling costs associated with higher house revenues. As a percentage of revenue, SG&A expense was 16.7% compared to 22.2% in 2011.

 

Net loss attributable to Shea Homes was $0.4 million compared to $8.3 million. This decrease was primarily attributable to a $10.0 million increase in homebuilding gross margin.

 

Interest incurred was $16.7 million compared to $19.7 million and, for the quarter, primarily attributable to a lower effective interest rate associated with our $750.0 million senior secured notes issued in May 2011 (8.9%) compared to our previously outstanding indebtedness (11.3%) which was restructured in November 2010 and included higher yield subordinated debt, loan restructuring fees and amortization of loan discounts.

 

Cash, restricted cash and investments at March 31, 2012 was $326.6 million compared to $314.5 million at December 31, 2011.

 

Home sales were 499 compared to 346, a 44% increase. Active Selling Communities (ASC’s) averaged 71 and 77 in the first quarter of 2012 and 2011, respectively.

 
¡
 
 

Home sales per community were 7.0 homes or 2.3 per month this year compared to 4.5 homes or 1.5 per month last year, a 56% increase.

 
¡
 
 

Cancellation rate was 15% compared to 19%.

 

Backlog units at March 31, 2012 were 722 compared to 572 at March 31, 2011, a 26% increase.

 
¡
 
 

Backlog sales value was $283.9 million at March 31, 2012 compared to $244.4 million at March 31, 2011, a 16% increase.

 
¡
 
 

Backlog average selling price was $393,000 at March 31, 2012 compared to $427,000 at March 31, 2011, an 8% decrease.

 

page 1


Bert Selva, President and CEO, stated: “We experienced strong first quarter results in 2012 compared to 2011, including a 44% increase in new home orders and a 56% increase in new home orders per community. In addition, house closings and revenues were up 31% and 42%, respectively, and house gross margins improved 260 basis points to 20.7%.”

“We are well positioned to take advantage of the housing market recovery. We have $313 million in cash and investments and continue to invest in profitable land opportunities in desirable locations to supplement the favorable land positions we hold today. For the second year in a row, Shea Homes was honored as one of 50 top consumer brands in the country to be named a JD Power “Customer Service Champion”. We believe this will further differentiate our brand in the homebuilding industry while driving lower selling costs from increased referrals.”

Redemption of Interest in Consolidated Joint Venture

In March 2012, Shea Homes Limited Partnership’s (“SHLP”) entire 58% interest in Shea Colorado, LLC (“SCLLC”), a consolidated joint venture with Shea Properties II, LLC, was redeemed by SCLLC. The consideration received by SHLP was a distribution of cash, a secured note receivable, inventory and certain liabilities. Prior to the redemption, these distributed assets were not part of the collateral that secures our notes. The estimated fair value of the assets received by SHLP, following the redemption and now included among the collateral securing our notes, was $30.8 million (unaudited). As a related party transaction among entities under common control, the consideration received by SHLP was recorded at its net book value of $24.0 million. As a result of this redemption, SCLLC is excluded from SHLP’s consolidated financial statements effective March 31, 2012, which resulted in a net reduction of $39.8 million in net assets and a corresponding reduction in total equity, of which $11.6 million was attributable to SHLP and $28.2 million to non-controlling interests.

Bert Selva stated: “As intended, this redemption transfers residential assets to Shea Homes in a fair and equitable manner while strengthening the collateral securing our notes.”

 

*
See “Reconciliation of Non-GAAP Financial Measures” beginning on page 9.

 

page 2


About Shea Homes

Shea Homes is one of the largest private homebuilders in the nation. Since its founding in 1968, Shea Homes has closed in excess of 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, visit www.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 that are based on the beliefs of, as well as assumptions made by, and information currently available to, our management. When used in this document, 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. 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: Bruce Varker, CFO @ 909-594-9500 or bruce.varker@sheahomes.com

 

page 3


KEY OPERATIONAL AND FINANCIAL DATA

(dollars in thousands)

 

 
  
At or For the Three Months Ended March 31,
 
 
  
2012
 
 
2011
 
 
%

Change
 
 
  
(unaudited)
 
 
(unaudited)
 
 
 
 

Operating Data:

  
 
 

Revenues

  
$
105,603
  
 
$
74,059
  
 
 
43

Gross margin %

  
 
19.5
 
 
14.3
 
 
36

Homebuilding revenues
(a) 
*

  
$
105,360
  
 
$
73,802
  
 
 
43

Homebuilding gross margin %
(a) 
*

  
 
19.3
 
 
14.0
 
 
37

House revenues *

  
$
100,905
  
 
$
71,168
  
 
 
42

House gross margin % *

  
 
20.7
 
 
18.1
 
 
14

Adjusted house gross margin % excluding interest in cost of sales *

  
 
28.3
 
 
26.2
 
 
8

Inventory impairment

  
$
  
 
$
618
  
 
 
-100

SG&A expense

  
$
17,603
  
 
$
16,441
  
 
 
7

SG&A % of total revenue

  
 
16.7
 
 
22.2
 
 
-25

Net loss attributable to Shea Homes

  
$
(411
 
$
(8,289
 
 
-95

Adjusted EBITDA
(b) 
*

  
$
14,559
  
 
$
3,530
  
 
 
312

Interest incurred

  
$
16,661
  
 
$
19,662
  
 
 
-15

Interest capitalized to inventory

  
$
10,195
  
 
$
15,271
  
 
 
-33

Interest expense

  
$
6,288
  
 
$
3,951
  
 
 
59

Interest in cost of sales
(c)

  
$
7,784
  
 
$
5,808
  
 
 
34

Other Data
(d) :

  
 
 

Home sales orders (units)

  
 
499
  
 
 
346
  
 
 
44

Homes closed (units)

  
 
238
  
 
 
182
  
 
 
31

Average selling price

  
$
424
  
 
$
391
  
 
 
8

Average active selling communities

  
 
71
  
 
 
77
  
 
 
-8

Home sales orders per community

  
 
7.0
  
 
 
4.5
  
 
 
56

Cancellation rate

  
 
15
 
 
19
 
 
-21

Backlog at end of period (units)

  
 
722
  
 
 
572
  
 
 
26

Backlog at end of period (sales value)

  
$
283,899
  
 
$
244,390
  
 
 
16

Lots owned or controlled (units)

  
 
17,803
  
 
 
16,528
  
 
 
8

Homes under construction (units)
(e)

  
 
591
  
 
 
569
  
 
 
4

 

(a)
Homebuilding revenue and gross margin include house, land and other homebuilding activities.
(b)
EBITDA is adjusted for non-recurring items of (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 marketable securities and other than temporary impairments on marketable securities, 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.

 

 
  
March 31,
2012
 
  
December 31,
2011
 
  
%
Change
 
 
  
(unaudited)
 
  
 
 
  
 
 

Balance Sheet Data:

  
  
  

Cash and cash equivalents, restricted cash and investments

  
$
326,598
  
  
$
314,512
  
  
 
4

Inventory and investments in joint ventures

  
 
788,292
  
  
 
801,680
  
  
 
-2

Total assets

  
 
1,292,700
  
  
 
1,328,116
  
  
 
-3

Notes payable

  
 
751,374
  
  
 
752,056
  
  
 
0

Total equity

  
 
290,831
  
  
 
328,003
  
  
 
-11

 

page 4


CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 
  
March 31,
2012
 
  
December 31,
2011
 
 
  
(unaudited)
 
  
 
 

Assets

  
  

Cash and cash equivalents

  
$
278,338
  
  
$
268,366
  

Restricted cash

  
 
13,886
  
  
 
13,718
  

Investments

  
 
34,374
  
  
 
32,428
  

Accounts and other receivables, net

  
 
112,267
  
  
 
120,689
  

Receivables from related parties, net

  
 
35,337
  
  
 
60,223
  

Inventory

  
 
770,734
  
  
 
783,810
  

Investments in joint ventures

  
 
17,558
  
  
 
17,870
  

Other assets, net

  
 
30,206
  
  
 
31,012
  
  

 

 

    

 

 

 

Total assets

  
$
1,292,700
  
  
$
1,328,116
  
  

 

 

    

 

 

 

Liabilities and equity

  
  

Liabilities:

  
  

Notes payable

  
$
751,374
  
  
$
752,056
  

Other liabilities

  
 
250,495
  
  
 
248,057
  
  

 

 

    

 

 

 

Total liabilities

  
 
1,001,869
  
  
 
1,000,113
  

Total equity

  
 
290,831
  
  
 
328,003
  
  

 

 

    

 

 

 

Total liabilities and equity

  
$
1,292,700
  
  
$
1,328,116
  
  

 

 

    

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

 

 
  
Three Months Ended

March 31,
 
 
  
2012
 
 
2011
 
 
  
(unaudited)
 
 
(unaudited)
 

Revenues

  
$
105,603
  
 
$
74,059
  

Cost of sales

  
 
(85,035
 
 
(63,446
  

 

 

   

 

 

 

Gross margin

  
 
20,568
  
 
 
10,613
  

Selling, general and administrative expenses

  
 
(17,603
 
 
(16,441

Interest and other expense, net

  
 
(3,915
 
 
(2,713
  

 

 

   

 

 

 

Loss before income taxes

  
 
(950
 
 
(8,541

Income tax benefit

  
 
752
  
 
 
341
  
  

 

 

   

 

 

 

Net loss

  
 
(198
 
 
(8,200

Less: Net income attributable to non-controlling interests

  
 
(213
 
 
(89
  

 

 

   

 

 

 

Net loss attributable to Shea Homes

  
$
(411
 
$
(8,289
  

 

 

   

 

 

 

 

page 5


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 
  
Three Months Ended

March 31,
 
 
  
2012
 
 
2011
 
 
  
(unaudited)
 
 
(unaudited)
 

Operating activities

  
 

Net loss

  
$
(198
 
$
(8,200

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

  
 

Depreciation and amortization expense

  
 
1,812
  
 
 
1,547
  

Impairment of inventory

  
 
  
 
 
618
  

Other operating activities, net

  
 
233
  
 
 
(186

Changes in operating assets and liabilities:

  
 

Inventory

  
 
(3,908
 
 
(30,576

Payables and other liabilities

  
 
3,240
  
 
 
(2,032

Other operating assets

  
 
8,581
  
 
 
659
  
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

  
 
9,760
  
 
 
(38,170

Investing activities

  
 

Proceeds from sale of available-for-sale investments

  
 
203
  
 
 
294
  

Net (increase) decrease in promissory notes from related parties

  
 
(108
 
 
11,327
  

Other investing activities, net

  
 
(516
 
 
(686
  

 

 

   

 

 

 

Net cash (used in) provided by investing activities

  
 
(421
 
 
10,935
  

Financing activities

  
 

Net decrease in debt

  
 
(601
 
 
(21,287

Amortization of notes payable discount

  
 
  
 
 
3,797
  

Other financing activities, net

  
 
1,234
  
 
 
1,278
  
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

  
 
633
  
 
 
(16,212
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

  
 
9,972
  
 
 
(43,447

Cash and cash equivalents at beginning of period

  
 
268,366
  
 
 
166,874
  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

  
$
278,338
  
 
$
123,427
  
  

 

 

   

 

 

 

 

page 6


SEGMENT OPERATING DATA

(dollars in thousands)

(unaudited)

 

 
  
Three Months Ended March 31,
 
 
  
2012
 
  
2011
 
 
  
Homes

Closed
 
  
Avg. Selling

Price
 
  
Homes
Closed
 
  
Avg. Selling
Price
 

Homes closed:

  
  
  
  

Southern California

  
 
47
  
  
$
496
  
  
 
39
  
  
$
507
  

San Diego

  
 
27
  
  
 
522
  
  
 
11
  
  
 
519
  

Northern California

  
 
57
  
  
 
453
  
  
 
34
  
  
 
465
  

Mountain West

  
 
38
  
  
 
462
  
  
 
27
  
  
 
400
  

South West

  
 
65
  
  
 
297
  
  
 
67
  
  
 
268
  

Other

  
 
4
  
  
 
201
  
  
 
4
  
  
 
273
  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consolidated

  
 
238
  
  
$
424
  
  
 
182
  
  
$
391
  

Unconsolidated joint ventures

  
 
20
  
  
 
310
  
  
 
20
  
  
 
338
  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

  
 
258
  
  
$
415
  
  
 
202
  
  
$
386
  
  

 

 

    

 

 

    

 

 

    

 

 

 
 
  
Three Months Ended March 31,
 
  
2012
 
  
2011
 
 
  
Home
Sales
Orders
 
  
Avg. Active

Selling
Communities
 
  
Home

Sales
Orders
 
  
Avg. Active
Selling
Communities
 

Home sales orders:

  
  
  
  

Southern California

  
 
70
  
  
 
10
  
  
 
80
  
  
 
12
  

San Diego

  
 
53
  
  
 
11
  
  
 
40
  
  
 
10
  

Northern California

  
 
121
  
  
 
15
  
  
 
42
  
  
 
12
  

Mountain West

  
 
89
  
  
 
13
  
  
 
58
  
  
 
13
  

South West

  
 
154
  
  
 
19
  
  
 
120
  
  
 
27
  

Other

  
 
12
  
  
 
3
  
  
 
6
  
  
 
3
  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consolidated

  
 
499
  
  
 
71
  
  
 
346
  
  
 
77
  

Unconsolidated joint ventures

  
 
43
  
  
 
12
  
  
 
39
  
  
 
13
  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

  
 
542
  
  
 
83
  
  
 
385
  
  
 
90
  
  

 

 

    

 

 

    

 

 

    

 

 

 
 
  
At March 31,
 
 
  
2012
 
  
2011
 
 
  
Backlog

Units
 
  
Backlog

Sales

Value
 
  
Backlog
Units
 
  
Backlog
Sales

Value
 

Backlog:

  
  
  
  

Southern California

  
 
82
  
  
$
38,831
  
  
 
118
  
  
$
65,469
  

San Diego

  
 
65
  
  
 
27,037
  
  
 
71
  
  
 
36,697
  

Northern California

  
 
169
  
  
 
85,626
  
  
 
84
  
  
 
43,483
  

Mountain West

  
 
146
  
  
 
63,873
  
  
 
91
  
  
 
42,631
  

South West

  
 
241
  
  
 
64,259
  
  
 
200
  
  
 
54,422
  

Other

  
 
19
  
  
 
4,273
  
  
 
8
  
  
 
1,688
  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consolidated

  
 
722
  
  
$
283,899
  
  
 
572
  
  
$
244,390
  

Unconsolidated joint ventures

  
 
57
  
  
 
17,917
  
  
 
41
  
  
 
12,154
  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

  
 
779
  
  
$
301,816
  
  
 
613
  
  
$
256,544
  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

page 7


SEGMENT OPERATING DATA (continued)

(unaudited)

 

 
  
At March 31,
 
 
  
2012
 
  
2011
 

Lots owned or controlled:

  
  

Southern California

  
 
1,197
  
  
 
1,375
  

San Diego

  
 
752
  
  
 
866
  

Northern California

  
 
3,968
  
  
 
3,409
  

Mountain West

  
 
9,988
  
  
 
9,062
  

South West

  
 
1,846
  
  
 
1,737
  

Other

  
 
52
  
  
 
79
  
  

 

 

    

 

 

 

Total consolidated

  
 
17,803
  
  
 
16,528
  

Unconsolidated joint ventures

  
 
1,956
  
  
 
7,708
  
  

 

 

    

 

 

 

Total

  
 
19,759
  
  
 
24,236
  
  

 

 

    

 

 

 

Lots by ownership type:

  
  

Lots owned

  
 
9,977
  
  
 
9,246
  

Lots optioned or subject to contract

  
 
7,826
  
  
 
7,282
  

Joint venture lots

  
 
1,956
  
  
 
7,708
  
  

 

 

    

 

 

 

Total

  
 
19,759
  
  
 
24,236
  
  

 

 

    

 

 

 

 

page 8


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 widely used as a means of evaluating a company’s operating performance and financing structure and, in certain cases, because those measures could be used to determine compliance with contractual covenants. These measures are useful because they eliminate from our operating results the impact of certain non-recurring income and expense items, which may facilitate comparability. They may not be comparable to other similarly titled measures of other companies and are not measurements under GAAP, nor should they 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 March 31, 2012
 
 
Three Months Ended March 31, 2011
 
 
  
Revenue
 
 
Cost of
Sales
 
 
Gross
Margin $
 
 
Gross
Margin %
 
 
Revenue
 
 
Cost of
Sales
 
 
Gross
Margin $
 
 
Gross
Margin %
 

Total

  
$
105,603
  
 
$
(85,035
 
$
20,568
  
 
 
19.5
 
$
74,059
  
 
$
(63,446
 
$
10,613
  
 
 
14.3

Less: Other

  
 
(243
 
 
 
(243
 
 
 
(257
 
 
 
(257
 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Homebuilding

  
 
105,360
  
 
 
(85,035
 
 
20,325
  
 
 
19.3
 
 
73,802
  
 
 
(63,446
 
 
10,356
  
 
 
14.0

Less: Land

  
 
(3,963
 
 
1,749
  
 
 
(2,214
 
 
55.9
 
 
(1,873
 
 
1,552
  
 
 
(321
 
 
17.1

Less: Impairment

  
 
  
 
 
  
 
 
  
 
 
 
  
 
 
618
  
 
 
618
  
 

Less: Other homebuilding

  
 
(492
 
 
3,310
  
 
 
2,818
  
 
 
 
(761
 
 
2,977
  
 
 
2,216
  
 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

House

  
$
100,905
  
 
$
(79,976
 
$
20,929
  
 
 
20.7
 
$
71,168
  
 
$
(58,299
 
$
12,869
  
 
 
18.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Add: Interest in house cost of sales
(a)

  
 
 
7,654
  
 
 
7,654
  
 
 
 
 
5,808
  
 
 
5,808
  
 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted house excluding interest in cost of sales

  
$
100,905
  
 
$
(72,322
 
$
28,583
  
 
 
28.3
 
$
71,168
  
 
$
(52,491
 
$
18,677
  
 
 
26.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)
Interest incurred is generally capitalized to inventory, then expensed in cost of sales as related units close.

 

page 9


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)

(in thousands)

(unaudited)

The following reconciles net loss to adjusted EBITDA:

 

 
  
Three Months Ended March 31,
 
 
  
2012
 
 
2011
 

Net loss

  
$
(198
 
$
(8,200

Adjustments:

  
 

Income tax benefit

  
 
(752
 
 
(341

Depreciation and amortization expense

  
 
1,812
  
 
 
1,547
  

Interest in cost of sales
(a)

  
 
7,784
  
 
 
5,808
  

Interest in equity in income (loss) from joint ventures
(b)

  
 
177
  
 
 
243
  

Interest expense
(c)

  
 
6,288
  
 
 
3,951
  

Impairment
(d)

  
 
  
 
 
618
  

Project write-offs and abandonments
(e)

  
 
252
  
 
 
20
  

Realized gain on marketable securities
(f)

  
 
(22
 
 
(139

Restructuring costs
(g)

  
 
14
  
 
 
154
  

Deferred gain recognition from PIC Transaction
(h)

  
 
(796
 
 
(131
  

 

 

   

 

 

 

Adjusted EBITDA

  
$
14,559
  
 
$
3,530
  
  

 

 

   

 

 

 

 

(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 do not exceed debt.
(d)
Impairment losses on real estate assets held and used in operations and investments in joint ventures.
(e)
Includes non-refundable deposits and costs associated with preparatory due diligence for land acquisitions subsequently abandoned.
(f)
Includes other than temporary gains on sale of marketable securities.
(g)
Costs of our restructuring plan, implemented in 2007 and continuing into 2012, comprised primarily of severance.
(h)
Amortization of deferred gain resulting from a series of novation and reinsurance transactions ("PIC Transaction") entered into by Partners Insurance Company ("PIC"), an indirect, wholly-owned subsidiary.

 

page 10

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