Current report Shea Homes Limited Partnership

8-K - Current report

Published: 2013-07-31 19:11:07
Submitted: 2013-08-01
Period Ending In: 2013-07-31
d575395d8k.htm FORM 8-K


> ENT> 8-K 1 d575395d8k.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): July 31, 2013

 

 


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 July 31, 2013, Shea Homes Limited Partnership issued a press release announcing its results of operations for the six months ended June 30, 2013. 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 July 31, 2013


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/ Andrew H. Parnes

Name:   Andrew H. Parnes
Title:   Chief Financial Officer

Date: July 31, 2013


Exhibit Index

 

Exhibit
Number

  

Description

99.1    Press Release dated July 31, 2013
d575395dex991.htm EX-99.1


ENT> EX-99.1 2 d575395dex991.htm EX-99.1

EX-99.1

Exhibit 99.1

 

LOGO

Shea Homes Reports Second Quarter 2013 Results

Walnut, Calif., July 31, 2013

Shea Homes, one of America’s largest private homebuilders, today reported results for the second quarter ended June 30, 2013.

Three Months Ended 6/30/13 Highlights and Comparisons to Three Months Ended 6/30/12

 

 
 

Net income (loss) attributable to Shea Homes was $19.5 million for the 2013 second quarter compared to $(12.1) million

 

 
 

Home sales orders were 514 compared to 587, a 12% decrease

 

 
 

Active selling communities averaged 54 and 63 in the second quarter of 2013 and 2012, respectively

 

 
 

Home sales per community were 9.5 homes, or 3.2 per month, for the 2013 second quarter compared to 9.3 homes, or 3.1 per month, in 2012, a 2% increase

 

 
 

Cancellation rate was 12% compared to 14%

 

 
 

Backlog units at June 30, 2013 were 1,182 compared to 1,002 at June 30, 2012, an 18% increase

 

 
 

Backlog sales value was $564.3 million at June 30, 2013 compared to $392.5 million at June 30, 2012, a 44% increase

 

 
 

The average selling price in backlog was $477,000 at June 30, 2013 compared to $392,000 at June 30, 2012, a 22% increase

 

 
 

Total revenues were $217.3 million compared to $132.5 million, a 64% increase

 

 
 

House revenues were $212.4 million* compared to $127.1 million*, a 67% increase

 

 
 

Homes closed were 460 compared to 307, a 50% increase

 

 
 

Average selling price of homes closed was $462,000 compared to $414,000, a 12% increase

 

 
 

Gross margin was 22.3% compared to 18.5%

 

 
 

House gross margin was 22.5%* compared to 19.5%*

 

 
 

SG&A expense was $26.9 million (12.4% of revenues) compared to $21.8 million (16.4% of revenues)

 

 
 

Adjusted EBITDA was $38.0 million* compared to $23.3 million*

 

 
 

Cash and restricted cash at June 30, 2013 were $160.3 million compared to $292.8 million at December 31, 2012

Six Months Ended 6/30/13 Highlights and Comparisons to Six Months Ended 6/30/12

 

 
 

Net income (loss) attributable to Shea Homes was $26.4 million for the 2013 six months compared to $(12.5) million

 

 
 

Home sales orders were 1,033 compared to 1,086, a 5% decrease

 

 
 

Active selling communities averaged 56 and 67 for the six months of 2013 and 2012, respectively

 

 
 

Home sales per community were 18.4 homes, or 3.1 per month, in the first six months of 2013 compared to 16.2 homes, or 2.7 per month, in the first six months of 2012, a 14% increase

 

 
 

Cancellation rate was 13% compared to 14%

 

 
 

Total revenues were $352.3 million compared to $238.1 million, a 48% increase

 

 
 

House revenues were $343.9 million* compared to $228.0 million*, a 51% increase

 

 
 

Homes closed were 762 compared to 545, a 40% increase

 

 
 

Average selling price of homes closed was $451,000 compared to $418,000, an 8% increase

 

 
 

Gross margin was 22.7% compared to 18.9%

 

Page 1


 
 

House gross margin was 22.7%* compared to 20.1%*

 

 
 

SG&A expense was $49.0 million (13.9% of revenues) compared to $39.4 million (16.5% of revenues)

 

 
 

Adjusted EBITDA was $56.7 million* compared to $37.6 million*

 

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

“Our strong second quarter results reflect our well-positioned lot supply in some of the nation’s most vibrant housing markets,” said Bert Selva, President and CEO of Shea Homes. “Our closings, revenue, backlog and margins increased considerably from last year. Although new orders were down this quarter as a result of a lower community count, they outpaced our internal expectations and were consistent with our focus on maximizing profitability. We have favorable land positions in supply-constrained markets and we will continue to capitalize on our pricing power. Additionally, we expanded our geographic footprint to now include Houston, one of the largest and fastest-growing housing markets in the country.”

“We will continue our disciplined approach to managing our business, including land acquisitions, optimizing gross margins and controlling overhead costs. Our margins and SG&A expense rates have been among the best in the industry and we will continue to focus our efforts on improving these areas.”

New home sales orders decreased 12% year over year for the 2013 second quarter, the result of a 14% lower number of active selling communities. We had a lower community count year over year in all of our regions except the Mountain West segment. Despite lower sales orders, home sales per community for the 2013 second quarter were 3.2 per month compared to 3.1 per month for 2012 and units in backlog at the end of the June 2013 were 18% higher compared to June 2012.

For the 2013 second quarter, net income (loss) attributable to Shea Homes was $19.5 million compared to $(12.1) million in 2012, primarily due to a $23.9 million improvement in gross margin (from higher revenues and higher gross margin percentages), a $4.5 million decrease in interest expense and a $7.4 million reduction in the gain (loss) on our reinsurance transaction (actuarial adjustment decreased from $(8.2) million in 2012 to $(0.8) million in 2013). These improvements were partially offset by a $2.5 million increase in general and administrative expenses and a $2.6 million increase in selling expenses.

For the 2013 second quarter, total revenues were $217.3 million compared to $132.5 million in 2012, a 64% increase, and house revenues for the 2013 second quarter were $212.4 million* compared to $127.1 million* in 2012, a 67% increase. The increase in house revenues was primarily due to a 50% increase in home closings to 460 and a 12% increase in average selling price to $462,000. Home closings increased year over year in all segments and was driven primarily as a result of a 98% higher backlog at the beginning of 2013 versus the beginning of 2012. The increase in the average selling price of homes closed was primarily due to price increases in all of our segments, which was partially offset by a shift to lower-priced homes closed in our San Diego and Northern California segments.

Total gross margin for the 2013 second quarter was 22.3% compared to 18.5% in 2012, a 380 basis point (bp) increase, and house gross margin for the 2013 second quarter was 22.5%* compared to 19.5%* in 2012, a 300 bp increase. The increase in house gross margin percentage reflected the increase in home prices in each of our markets, partially offset by higher labor and material costs.

SG&A expense for the 2013 second quarter was $26.9 million (12.4% of revenues) compared to $21.8 million (16.4% of revenues) in 2012. As a percentage of revenue, the decrease was the result of leveraging our G&A expenses over a higher level of revenues. The nominal increase was primarily attributable to higher volume related costs and higher compensation expenses.

Interest incurred for the 2013 second quarter was $16.8 million compared to $16.7 million in 2012, while interest expense for the 2013 second quarter was $1.4 million versus $5.9 million in 2012. The 76% decrease in interest expense for the 2013 second quarter was due to a higher level of qualified inventory for interest capitalization.

 

Page 2


Net operating cash flows for the 2013 second quarter were $(80.2) million compared to $(43.4) million in 2012. The decrease was primarily due to increased land acquisitions, land development and construction costs, partially offset by increased cash receipts from home closings. Land acquisitions and land development costs for the 2013 second quarter were $143.5 million compared to $37.1 million in 2012. House construction costs for the 2013 second quarter were $99.3 million compared to $65.2 million in 2012. Cash receipts from homes closed for the 2013 second quarter were $212.4 million compared to $127.1 million in 2012.

For the 2013 six months, net income (loss) attributable to Shea Homes was $26.4 million compared to $(12.5) million, primarily due to a 48% increase in revenues and a 380 bp higher gross margin percentage. In addition, interest expense decreased $7.4 million (due to a higher level of qualified inventory) and the gain (loss) on our reinsurance transaction decreased from $(7.3) million in 2012 to $(0.2) million in 2013 due to a 2012 actuarial adjustment to our loss reserves on completed operations policies that were reinsured in 2009. These improvements were partially offset by a $9.7 million increase in SG&A, primarily attributable to higher volume related costs and compensation expenses. As a percentage of revenue, SG&A for the 2013 six months was 13.9% compared to 16.5% for the 2012 six months. As a percentage of revenue, the decrease was the result of leveraging our G&A over higher revenues.

Net operating cash flows for the 2013 six months were $(108.2) million compared to $(33.7) million in 2012. The decrease was primarily due to increased land acquisitions, land development and construction costs, partially offset by increased cash receipts from home closings. Land acquisitions and land development costs for the 2013 six months were $188.3 million compared to $60.8 million in 2012. House construction costs for the 2013 six months were $176.0 million compared to $103.0 million in 2012. Cash receipts from homes closed for the 2013 second quarter were $343.9 million compared to $228.0 million in 2012.

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 more than 90,000 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, 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, such as improving housing market conditions, the strength of our housing markets, our well positioned lot supply, our future operating strategy, our ability to optimize house gross margins, and our ability to control overhead cost, 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 or andy.parnes@sheahomes.com

 

Page 3


KEY OPERATIONAL AND FINANCIAL DATA

(dollars in thousands)

 

 
  
At or For the Three Months Ended June 30,
 
 
At or For the Six Months ended June 30,
 
 
  
2013
 
 
2012
 
 
Change
 
 
2013
 
 
2012
 
 
Change
 
 
  
(unaudited)
 
 
(unaudited)
 
 
 
 
 
(unaudited)
 
 
(unaudited)
 
 
 
 

Operating Data:

  
 
 
 
 
 

Revenues

  
$
217,310
  
 
$
132,468
  
 
 
64
 
$
352,270
  
 
$
238,071
  
 
 
48

Gross margin %

  
 
22.3
 
 
18.5
 
 
380
 bp’s 
 
 
22.7
 
 
18.9
 
 
380
 bp’s 

Homebuilding revenues
(a) 
*

  
$
216,974
  
 
$
132,218
  
 
 
64
 
$
351,813
  
 
$
237,578
  
 
 
48

Homebuilding gross margin %
(a) 
*

  
 
22.2
 
 
18.3
 
 
390
 bp’s 
 
 
22.6
 
 
18.8
 
 
380
 bp’s 

House revenues *

  
$
212,392
  
 
$
127,108
  
 
 
67
 
$
343,878
  
 
$
228,016
  
 
 
51

House gross margin

  
$
47,818
  
 
$
24,841
  
 
 
92
 
$
78,156
  
 
$
45,774
  
 
 
71

House gross margin % *

  
 
22.5
 
 
19.5
 
 
300
 bp’s 
 
 
22.7
 
 
20.1
 
 
260
 bp’s 

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

  
 
29.7
 
 
26.6
 
 
310
 bp’s 
 
 
29.9
 
 
27.4
 
 
250
 bp’s 

SG&A expense

  
$
26,926
  
 
$
21,772
  
 
 
24
 
$
49,037
  
 
$
39,375
  
 
 
25

SG&A % of total revenue

  
 
12.4
 
 
16.4
 
 
(400
) bp’s 
 
 
13.9
 
 
16.5
 
 
(260
) bp’s 

Net income (loss) attributable to Shea Homes

  
$
19,534
  
 
$
(12,101
 
 
—  
  
 
$
26,372
  
 
$
(12,512
 
 
—  
  

Adjusted EBITDA
(b) 
*

  
$
38,031
  
 
$
23,340
  
 
 
63
 
$
56,709
  
 
$
37,558
  
 
 
51

Interest incurred

  
$
16,774
  
 
$
16,660
  
 
 
1
 
$
33,542
  
 
$
33,320
  
 
 
1

Interest capitalized to inventory

  
$
14,871
  
 
$
10,550
  
 
 
41
 
$
27,949
  
 
$
20,745
  
 
 
35

Interest capitalized to investments in joint ventures

  
$
506
  
 
$
201
  
 
 
152
 
$
763
  
 
$
378
  
 
 
102

Interest expense

  
$
1,397
  
 
$
5,909
  
 
 
(76
)% 
 
$
4,830
  
 
$
12,197
  
 
 
(60
)% 

Interest in cost of sales
(c)

  
$
15,393
  
 
$
10,074
  
 
 
53
 
$
24,904
  
 
$
17,858
  
 
 
39

Other Data
(d)
:

  
 
 
 
 
 

Home sales orders (units)

  
 
514
  
 
 
587
  
 
 
(12
)% 
 
 
1,033
  
 
 
1,086
  
 
 
(5
)% 

Homes closed (units)

  
 
460
  
 
 
307
  
 
 
50
 
 
762
  
 
 
545
  
 
 
40

Average selling price

  
$
462
  
 
$
414
  
 
 
12
 
$
451
  
 
$
418
  
 
 
8

Average active selling communities

  
 
54
  
 
 
63
  
 
 
(14
)% 
 
 
56
  
 
 
67
  
 
 
(16
)% 

Home sales orders per community

  
 
9.5
  
 
 
9.3
  
 
 
2
 
 
18.4
  
 
 
16.2
  
 
 
14

Cancellation rate

  
 
12
 
 
14
 
 
 
13
 
 
14
 

Backlog at end of period (units)

  
 
1,182
  
 
 
1,002
  
 
 
18
 
 
 

Backlog at end of period (estimated sales value)

  
$
564,252
  
 
$
392,463
  
 
 
44
 
 
 

Lots owned or controlled (units)

  
 
19,302
  
 
 
17,573
  
 
 
10
 
 
 

Homes under construction (units)
(e)

  
 
1,043
  
 
 
858
  
 
 
22
 
 
 

 

(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 (loss).
(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.

 

Page 4


CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 
  
June 30,
2013
 
  
December 31,
2012
 
 
  
(unaudited)
 
  
 
 

Assets

  
  

Cash and cash equivalents

  
$
157,997
  
  
$
279,756
  

Restricted cash

  
 
2,334
  
  
 
13,031
  

Accounts and other receivables, net

  
 
146,018
  
  
 
141,289
  

Receivables from related parties, net

  
 
34,484
  
  
 
34,028
  

Inventory

  
 
994,103
  
  
 
837,653
  

Investments in joint ventures

  
 
39,400
  
  
 
28,653
  

Other assets, net

  
 
37,221
  
  
 
39,127
  
  

 

 

    

 

 

 

Total assets

  
$
1,411,557
  
  
$
1,373,537
  
  

 

 

    

 

 

 

Liabilities and equity

  
  

Liabilities:

  
  

Notes payable

  
$
759,740
  
  
$
758,209
  

Other liabilities

  
 
305,964
  
  
 
296,081
  
  

 

 

    

 

 

 

Total liabilities

  
 
1,065,704
  
  
 
1,054,290
  

Total equity

  
 
345,853
  
  
 
319,247
  
  

 

 

    

 

 

 

Total liabilities and equity

  
$
1,411,557
  
  
$
1,373,537
  
  

 

 

    

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

 

 
  
Three Months Ended
 
 
Six Months Ended
 
 
  
June 30,
 
 
June 30,
 
 
  
2013
 
 
2012
 
 
2013
 
 
2012
 
 
  
(unaudited)
 
 
(unaudited)
 
 
(unaudited)
 
 
(unaudited)
 

Revenues

  
$
217,310
  
 
$
132,468
  
 
$
352,270
  
 
$
238,071
  

Cost of sales

  
 
(168,884
 
 
(107,978
 
 
(272,308
 
 
(193,013
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

  
 
48,426
  
 
 
24,490
  
 
 
79,962
  
 
 
45,058
  

Selling, general and administrative expenses

  
 
(26,926
 
 
(21,772
 
 
(49,037
 
 
(39,375

Interest expense

  
 
(1,397
 
 
(5,909
 
 
(4,830
 
 
(12,197

Other income (expense), net

  
 
(92
 
 
(8,081
 
 
694
  
 
 
(5,708
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  
 
20,011
  
 
 
(11,272
 
 
26,789
  
 
 
(12,222

Income tax expense

  
 
(479
 
 
(848
 
 
(420
 
 
(96
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  
 
19,532
  
 
 
(12,120
 
 
26,369
  
 
 
(12,318

Less: Net loss (income) attributable to non-controlling interests

  
 
2
  
 
 
19
  
 
 
3
  
 
 
(194
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Shea Homes

  
$
19,534
  
 
$
(12,101
 
$
26,372
  
 
$
(12,512
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 5


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 
  
Three Months Ended
 
 
Six Months Ended
 
 
  
June 30,
 
 
June 30,
 
 
  
2013
 
 
2012
 
 
2013
 
 
2012
 
 
  
(unaudited)
 
 
(unaudited)
 
 
(unaudited)
 
 
(unaudited)
 

Operating activities

  
 
 
 

Net income (loss)

  
$
19,532
  
 
$
(12,120
 
$
26,369
  
 
$
(12,318

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

  
 
 
 

Loss on reinsurance transaction

  
 
159
  
 
 
7,367
  
 
 
159
  
 
 
7,367
  

Depreciation and amortization expense

  
 
2,805
  
 
 
1,509
  
 
 
4,564
  
 
 
3,321
  

Distribution of earnings from joint venture

  
 
6,000
  
 
 
1,000
  
 
 
6,000
  
 
 
1,000
  

Gain on sale of available-for-sale investments

  
 
—  
  
 
 
1
  
 
 
(10
 
 
(22

Other operating activities, net

  
 
(336
 
 
(222
 
 
(609
 
 
(762

Changes in operating assets and liabilities:

  
 
 
 

Inventory

  
 
(113,858
 
 
(24,634
 
 
(158,601
 
 
(28,542

Payables and other liabilities

  
 
6,910
  
 
 
(2,797
 
 
9,789
  
 
 
1,239
  

Other operating assets

  
 
(1,415
 
 
(13,499
 
 
4,173
  
 
 
(4,987
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in operating activities

  
 
(80,203
 
 
(43,395
 
 
(108,166
 
 
(33,704

Investing activities

  
 
 
 

Proceeds from sale of investments

  
 
9
  
 
 
5,009
  
 
 
3,078
  
 
 
5,212
  

Net proceeds from promissory notes from related parties

  
 
46
  
 
 
1,951
  
 
 
431
  
 
 
1,843
  

Other investing activities, net

  
 
(12,822
 
 
(513
 
 
(16,350
 
 
(960
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

  
 
(12,767
 
 
6,447
  
 
 
(12,841
 
 
6,095
  

Financing activities

  
 
 
 

Net decrease in notes payable

  
 
(511
 
 
(452
 
 
(752
 
 
(1,053

Contributions from owners

  
 
—  
  
 
 
—  
  
 
 
—  
  
 
 
1,746
  

Other financing activities, net

  
 
—  
  
 
 
(1
 
 
—  
  
 
 
(513
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

  
 
(511
 
 
(453
 
 
(752
 
 
180
  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

  
 
(93,481
 
 
(37,401
 
 
(121,759
 
 
(27,429

Cash and cash equivalents at beginning of period

  
 
251,478
  
 
 
278,338
  
 
 
279,756
  
 
 
268,366
  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  
$
157,997
  
 
$
240,937
  
 
$
157,997
  
 
$
240,937
  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 6


SEGMENT OPERATING DATA

(dollars in thousands)

(unaudited)

 

            
            
            
            
            
            
            
            
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
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

 
 
80
  
 
$
702
  
 
 
64
  
 
$
470
  
 
 
131
  
 
$
718
  
 
 
111
  
 
$
481
  

San Diego

 
 
68
  
 
 
461
  
 
 
19
  
 
 
533
  
 
 
91
  
 
 
450
  
 
 
46
  
 
 
527
  

Northern California

 
 
116
  
 
 
459
  
 
 
58
  
 
 
521
  
 
 
177
  
 
 
456
  
 
 
115
  
 
 
488
  

Mountain West

 
 
78
  
 
 
457
  
 
 
64
  
 
 
444
  
 
 
131
  
 
 
435
  
 
 
102
  
 
 
451
  

South West

 
 
109
  
 
 
312
  
 
 
95
  
 
 
280
  
 
 
217
  
 
 
311
  
 
 
160
  
 
 
287
  

Other

 
 
9
  
 
 
218
  
 
 
7
  
 
 
226
  
 
 
15
  
 
 
235
  
 
 
11
  
 
 
217
  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consolidated

 
 
460
  
 
$
462
  
 
 
307
  
 
$
414
  
 
 
762
  
 
$
451
  
 
 
545
  
 
$
418
  

Unconsolidated joint ventures

 
 
51
  
 
 
317
  
 
 
37
  
 
 
298
  
 
 
78
  
 
 
325
  
 
 
57
  
 
 
302
  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

 
 
511
  
 
$
447
  
 
 
344
  
 
$
402
  
 
 
840
  
 
$
440
  
 
 
602
  
 
$
407
  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
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

 
 
50
  
 
 
5
  
 
 
88
  
 
 
7
  
 
 
104
  
 
 
5
  
 
 
158
  
 
 
8
  

San Diego

 
 
74
  
 
 
6
  
 
 
57
  
 
 
9
  
 
 
165
  
 
 
7
  
 
 
110
  
 
 
10
  

Northern California

 
 
101
  
 
 
13
  
 
 
115
  
 
 
15
  
 
 
221
  
 
 
13
  
 
 
236
  
 
 
16
  

Mountain West

 
 
122
  
 
 
15
  
 
 
121
  
 
 
13
  
 
 
234
  
 
 
15
  
 
 
210
  
 
 
13
  

South West

 
 
163
  
 
 
14
  
 
 
194
  
 
 
16
  
 
 
303
  
 
 
15
  
 
 
348
  
 
 
17
  

Other

 
 
4
  
 
 
1
  
 
 
12
  
 
 
3
  
 
 
6
  
 
 
1
  
 
 
24
  
 
 
3
  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total consolidated

 
 
514
  
 
 
54
  
 
 
587
  
 
 
63
  
 
 
1,033
  
 
 
56
  
 
 
1,086
  
 
 
67
  

Unconsolidated joint ventures

 
 
65
  
 
 
13
  
 
 
63
  
 
 
10
  
 
 
111
  
 
 
12
  
 
 
106
  
 
 
11
  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

 
 
579
  
 
 
67
  
 
 
650
  
 
 
73
  
 
 
1,144
  
 
 
68
  
 
 
1,192
  
 
 
78
  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

            
            
            
            
 
  
At June 30,
 
 
  
2013
 
  
2012
 
 
  
Backlog
Units
 
  
Backlog
Sales
Value
 
  
Backlog
Units
 
  
Backlog
Sales
Value
 

Backlog:

  
  
  
  

Southern California

  
 
96
  
  
$
84,130
  
  
 
106
  
  
$
58,862
  

San Diego

  
 
181
  
  
 
87,566
  
  
 
103
  
  
 
41,266
  

Northern California

  
 
285
  
  
 
152,498
  
  
 
226
  
  
 
104,810
  

Mountain West

  
 
315
  
  
 
144,441
  
  
 
203
  
  
 
89,167
  

South West

  
 
298
  
  
 
93,290
  
  
 
340
  
  
 
92,717
  

Other

  
 
7
  
  
 
2,327
  
  
 
24
  
  
 
5,641
  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total consolidated

  
 
1,182
  
  
$
564,252
  
  
 
1,002
  
  
$
392,463
  

Unconsolidated joint ventures

  
 
117
  
  
 
37,958
  
  
 
83
  
  
 
26,947
  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

  
 
1,299
  
  
$
602,210
  
  
 
1,085
  
  
$
419,410
  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Page 7


SEGMENT OPERATING DATA (continued)

(unaudited)

 

 
  
At June 30,
 
 
  
2013
 
  
2012
 

Lots owned or controlled:

  
  

Southern California

  
 
2,030
  
  
 
1,133
  

San Diego

  
 
699
  
  
 
713
  

Northern California

  
 
3,099
  
  
 
3,963
  

Mountain West

  
 
10,180
  
  
 
9,900
  

South West

  
 
3,284
  
  
 
1,819
  

Other

  
 
10
  
  
 
45
  
  

 

 

    

 

 

 

Total consolidated

  
 
19,302
  
  
 
17,573
  

Unconsolidated joint ventures

  
 
3,745
  
  
 
1,919
  
  

 

 

    

 

 

 

Total

  
 
23,047
  
  
 
19,492
  
  

 

 

    

 

 

 

Lots by ownership type:

  
  

Owned for homebuilding

  
 
6,413
  
  
 
6,247
  

Owned and held for sale

  
 
3,269
  
  
 
3,506
  

Optioned or subject to contract for homebuilding

  
 
6,586
  
  
 
4,786
  

Optioned or subject to contract held for sale

  
 
3,034
  
  
 
3,034
  

Joint venture

  
 
3,745
  
  
 
1,919
  
  

 

 

    

 

 

 

Total

  
 
23,047
  
  
 
19,492
  
  

 

 

    

 

 

 

 

Page 8


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 June 30, 2013
 
 
Three Months Ended June 30, 2012
 
 
 
Revenue
 
 
Cost of

Sales
 
 
Gross

Margin $
 
 
Gross

Margin %
 
 
Revenue
 
 
Cost of

Sales
 
 
Gross

Margin $
 
 
Gross

Margin %
 

Total

 
$
217,310
  
 
$
(168,884
 
$
48,426
  
 
 
22.3
 
$
132,468
  
 
$
(107,978
 
$
24,490
  
 
 
18.5

Less: Other

 
 
(336
 
 
 
(336
 
 
 
(250
 
 
 
(250
 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Homebuilding

 
 
216,974
  
 
 
(168,884
 
 
48,090
  
 
 
22.2
 
 
132,218
  
 
 
(107,978
 
 
24,240
  
 
 
18.3

Less: Land

 
 
(4,213
 
 
2,743
  
 
 
(1,470
 
 
34.9
 
 
(4,738
 
 
4,757
  
 
 
19
  
 
 
(0.4
)% 

Less: Impairment

 
 
—  
  
 
 
—  
  
 
 
—  
  
 
 
 
—  
  
 
 
—  
  
 
 
—  
  
 

Less: Other homebuilding

 
 
(369
 
 
1,567
  
 
 
1,198
  
 
 
 
(372
 
 
954
  
 
 
582
  
 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

House

 
$
212,392
  
 
$
(164,574
 
$
47,818
  
 
 
22.5
 
$
127,108
  
 
$
(102,267
 
$
24,841
  
 
 
19.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Add: Interest in house cost of sales
(a)

 
 
 
15,249
  
 
 
15,249
  
 
 
 
 
9,007
  
 
 
9,007
  
 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted house excluding interest in cost of sales

 
$
212,392
  
 
$
(149,325
 
$
63,067
  
 
 
29.7
 
$
127,108
  
 
$
(93,260
 
$
33,848
  
 
 
26.6
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
 
 
Six Months Ended June 30, 2013
 
 
Six Months Ended June 30, 2012
 
 
 
Revenue
 
 
Cost of

Sales
 
 
Gross

Margin $
 
 
Gross

Margin %
 
 
Revenue
 
 
Cost of

Sales
 
 
Gross

Margin $
 
 
Gross

Margin %
 

Total

 
$
352,270
  
 
$
(272,308
 
$
79,962
  
 
 
22.7
 
$
238,071
  
 
$
(193,013
 
$
45,058
  
 
 
18.9

Less: Other

 
 
(457
 
 
 
(457
 
 
 
(493
 
 
 
(493
 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Homebuilding

 
 
351,813
  
 
 
(272,308
 
 
79,505
  
 
 
22.6
 
 
237,578
  
 
 
(193,013
 
 
44,565
  
 
 
18.8

Less: Land

 
 
(7,141
 
 
3,254
  
 
 
(3,887
 
 
54.4
 
 
(8,701
 
 
6,506
  
 
 
(2,195
 
 
25.2

Less: Impairment

 
 
—  
  
 
 
—  
  
 
 
—  
  
 
 
 
—  
  
 
 
—  
  
 
 
—  
  
 

Less: Other homebuilding

 
 
(794
 
 
3,332
  
 
 
2,538
  
 
 
 
(861
 
 
4,265
  
 
 
3,404
  
 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

House

 
$
343,878
  
 
$
(265,722
 
$
78,156
  
 
 
22.7
 
$
228,016
  
 
$
(182,242
 
$
45,774
  
 
 
20.1
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Add: Interest in house cost of sales
(a)

 
 
 
24,714
  
 
 
24,714
  
 
 
 
 
16,661
  
 
 
16,661
  
 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted house excluding interest in cost of sales

 
$
343,878
  
 
$
(241,008
 
$
102,870
  
 
 
29.9
 
$
228,016
  
 
$
(165,581
 
$
62,435
  
 
 
27.4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 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 (loss) (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 June 30,
 
 
Six Months Ended June 30,
 
 
  
2013
 
 
2012
 
 
2013
 
 
2012
 

Net income (loss)

  
$
19,532
  
 
$
(12,120
 
$
26,369
  
 
$
(12,318

Adjustments:

  
 
 
 

Income tax expense (benefit)

  
 
479
  
 
 
848
  
 
 
420
  
 
 
96
  

Depreciation and amortization expense

  
 
2,805
  
 
 
1,509
  
 
 
4,564
  
 
 
3,321
  

Interest in cost of sales

  
 
15,393
  
 
 
10,074
  
 
 
24,904
  
 
 
17,858
  

Interest in equity in income (loss) from joint ventures

  
 
328
  
 
 
201
  
 
 
585
  
 
 
378
  

Interest expense

  
 
1,397
  
 
 
5,909
  
 
 
4,830
  
 
 
12,197
  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

  
 
39,934
  
 
 
6,421
  
 
 
61,672
  
 
 
21,532
  

Adjustments:

  
 
 
 

Project write-offs and abandonments

  
 
81
  
 
 
179
  
 
 
193
  
 
 
431
  

Realized gain on sale of investments

  
 
—  
  
 
 
—  
  
 
 
(10
 
 
(22

Deferred loss (gain) recognition from PIC Transaction

  
 
807
  
 
 
8,163
  
 
 
159
  
 
 
7,367
  

Loss (income) from joint ventures and non-guarantor subsidiaries

  
 
(3,158
 
 
8,399
  
 
 
(5,673
 
 
7,595
  

Distributions of earnings from joint ventures and non-guarantor subsidiaries

  
 
367
  
 
 
175
  
 
 
367
  
 
 
638
  

Other

  
 
—  
  
 
 
3
  
 
 
1
  
 
 
17
  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  
$
38,031
  
 
$
23,340
  
 
$
56,709
  
 
$
37,558
  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 10

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SEC CFR Title 17 of the Code of Federal Regulations.