Current report Shea Homes Limited Partnership

8-K - Current report

Published: 2014-11-05 17:07:00
Submitted: 2014-11-05
Period Ending In: 2014-11-05
d814363d8k.htm FORM 8-K


> ENT> 8-K 1 d814363d8k.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): November 5, 2014

 

 


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 November 5, 2014, Shea Homes Limited Partnership issued a press release announcing its results of operations for the nine months ended September 30, 2014. 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 November 5, 2014


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: November 5, 2014


Exhibit Index

 

Exhibit Number

  

Description

99.1    Press Release dated November 5, 2014
d814363dex991.htm EX-99.1


ENT> EX-99.1 2 d814363dex991.htm EX-99.1

EX-99.1

Exhibit 99.1

 

LOGO

Shea Homes Reports Third Quarter 2014 Results

Walnut, California, November 5, 2014

Shea Homes, one of America’s largest private homebuilders, today reported results for the third quarter ended September 30, 2014.

Three Months Ended September 30, 2014 Highlights and Comparisons to Three Months Ended September 30, 2013

 

    Net income attributable to Shea Homes was $33.7 million compared to $25.8 million, a 31% increase

 

    Home sales orders were 460 compared to 434, a 6% increase

 

    Active selling communities averaged 66 compared to 61

 

    Home sales per community were 7.0, or 2.3 per month, compared to 7.1, or 2.4 per month, a 1% decrease

 

    Cancellation rate was 17.6% compared to 16.7%

 

    Backlog units were 1,198 compared to 1,124, a 7% increase

 

    Backlog sales value was $703.0 million compared to $563.5 million, a 25% increase

 

    Average selling price in backlog was $587,000 compared to $501,000, a 17% increase

 

    Total revenues were $284.5 million compared to $238.3 million, a 19% increase

 

    House revenues were $279.0 million* compared to $234.9 million*, a 19% increase

 

    Homes closed were 482 compared to 493, a 2% decrease

 

    Average selling price of homes closed was $579,000 compared to $477,000, a 21% increase

 

    Gross margin was 23.9% compared to 23.4%

 

    House gross margin was 24.3%* compared to 23.8%*

 

    SG&A expenses were $31.9 million (11.2% of revenues) compared to $28.4 million (11.9% of revenues)

 

    Income tax expense was $6.1 million compared to $1.3 million

 

    Adjusted EBITDA was $54.2 million* compared to $43.6 million*

 

    Cash and restricted cash at September 30, 2014 were $139.8 million compared to $145.4 million at September 30, 2013

Nine Months Ended September 30, 2014 Highlights and Comparisons to Nine Months Ended September 30, 2013

 

    Net income attributable to Shea Homes was $73.8 million compared to $52.2 million, a 41% increase

 

    Home sales orders were 1,618 compared to 1,467, a 10% increase

 

    Active selling communities averaged 63 compared to 57

 

    Home sales per community were 25.7, or 2.9 per month, for both periods

 

    Cancellation rate was 14.9% compared to 13.9%

 

    Total revenues were $720.7 million compared to $590.6 million, a 22% increase

 

    House revenues were $707.9 million* compared to $578.8 million*, a 22% increase

 

    Homes closed were 1,270 compared to 1,255, a 1% increase

 

    Average selling price of homes closed was $557,000 compared to $461,000, a 21% increase

 

    Gross margin was 24.0% compared to 23.0%

 

    House gross margin was 24.3%* compared to 23.2%*

 

    SG&A expenses were $89.8 million (12.5% of revenues) compared to $77.4 million (13.1% of revenues)

 

    Income tax expense was $16.6 million compared to $1.7 million

 

    Adjusted EBITDA was $135.7 million* compared to $100.3 million*

 

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

 

Page 1


For the 2014 third quarter, new home sales orders were 460 compared to 434 in the 2013 third quarter, a 6% increase, primarily due to an increase in active selling communities in our Southern California and San Diego segments, which were partially offset by a decrease in active selling communities in our Northern California and Mountain West segments. For the 2014 third quarter, home sales per community were 2.3 per month compared to 2.4 per month in the 2013 third quarter, a 1% decrease, which was primarily attributable to a slower sales pace in our South West segment, and in particular, Arizona. At September 30, 2014, our backlog was 1,198 homes compared to 1,124 at September 30, 2013, a 7% increase driven in large part by the higher level of sales during the third quarter. For the 2014 third quarter, the Company’s cancellation rate was 17.6% compared to 16.7% in the 2013 third quarter.

For the 2014 third quarter, net income attributable to Shea Homes was $33.7 million compared to $25.8 million in the 2013 third quarter, primarily due to a $12.0 million increase in gross margin (from higher revenues and an improved gross margin percentage), a $2.2 million improvement in our reinsurance transaction results, and a $0.9 million increase in income from unconsolidated joint ventures. These improvements were partially offset by a $3.5 million increase in selling, general and administrative expense and a $4.8 million increase in income tax expense.

For the 2014 third quarter, total revenues were $284.5 million compared to $238.3 million in the 2013 third quarter, a 19% increase, and house revenues were $279.0 million* for the 2014 third quarter compared to $234.9 million* in the 2013 third quarter, a 19% increase. The increase in house revenues was primarily due to a 21% increase in average selling price to $579,000, a result of general home price increases in most of our segments, and a greater percentage of deliveries from our Southern California segment, which delivers more expensive homes, which were partially offset by a 2% decrease in homes closed from 493 homes in the 2013 third quarter compared to 482 homes in the 2014 third quarter.

For the 2014 third quarter, total gross margin was 23.9% compared to 23.4% in the 2013 third quarter, a 50 basis point (bp) increase, and house gross margin was 24.3%* for the 2014 third quarter compared to 23.8%* in the 2013 third quarter, a 50 bp increase. For both of the 2014 and 2013 third quarters, house gross margin excluding interest was 30.1%*.

For the 2014 third quarter, SG&A expenses were $31.9 million (11.2% of revenues) compared to $28.4 million (11.9% of revenues) in the 2013 third quarter. The $3.5 million increase was primarily due to higher volume related costs, such as advertising and model costs, and higher compensation expense. However, our SG&A rate was lower as we continue to leverage our fixed overhead costs over a larger revenue base.

For the 2014 third quarter, interest incurred was $17.1 million compared to $16.8 million in the 2013 third quarter, while interest expense for the 2014 third quarter was $0.2 million versus $0.1 million in the 2013 third quarter.

For the 2014 third quarter, net operating cash flows were $53.0 million compared to $(16.3) million in the 2013 third quarter. This improvement in operating cash flow was primarily due to lower land acquisition and land development spending, and increased cash receipts from home closings, partially offset by increased house construction costs. For the 2014 third quarter, land acquisition and land development costs were $57.8 million compared to $85.5 million in the 2013 third quarter; and cash receipts from home closings were $279.6 million for the 2014 third quarter compared to $234.9 million in the 2013 third quarter.

For the nine months ended September 30, 2014, net income attributable to Shea Homes was $73.8 million compared to $52.2 million in the nine months ended September 30, 2013, primarily due to a $37.2 million increase in gross margin (from higher revenues and an improved gross margin percentage), a $4.5 million decrease in interest expense, a $4.6 million improvement in our reinsurance transaction results, and a $2.9 million increase in income from unconsolidated joint ventures. These improvements were partially offset by a $12.4 million increase in SG&A expense and a $14.9 million increase in income tax expense.

For the nine months ended September 30, 2014, net operating cash flows were $(68.1) million compared to $(124.4) million in the nine months ended September 30, 2013. This decrease in cash used in operating activities was primarily due to increased cash receipts from home closings, partially offset by increased land acquisitions, land development and house construction costs. For the nine months ended September 30, 2014, land acquisition and land development spending was $274.3 million compared to $241.6 million in the nine months ended September 30, 2013; and cash receipts from home closings were $708.8 million for the nine months ended September 30, 2014 compared to $578.8 million in the nine months ended September 30, 2013.

 

Page 2


In January 2014, we acquired property from a related party under common control for $4.4 million cash, assumption of a $1.3 million net liability and estimated future revenue participation payments of $19.6 million. The $25.3 million of consideration was recorded as an equity distribution to our owners and, accordingly, resulted in a reduction in our total equity.

Earnings Conference Call

A conference call to discuss the Company’s 2014 third quarter results will be held at 1:00 p.m., Eastern time, November 6, 2014. The call will be broadcast live over the internet and can be accessed through the Company’s website at http://www.sheahomes.com/investor. The call will also be accessible by dialing (877) 474-9506 (domestic) or (857) 244-7559 (international); Passcode 15665368. The audio transmission with the slide presentation will be available on our website for replay 2 to 3 hours following the live broadcast. A replay of the presentation will be available by the end of the day and for 31 days thereafter.

About Shea Homes Limited Partnership

Shea Homes is one of the largest private homebuilders in the nation. Since its founding in 1968, Shea Homes has closed over 93,000 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 the strength or weakness of the housing market, 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 are difficult to forecast and 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 demand; 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 September 30,      At or For the Nine Months Ended September 30,  
     2014     2013     Change      2014     2013     Change  
     (unaudited)     (unaudited)            (unaudited)     (unaudited)        

Operating Data:

             

Revenues

   $ 284,489      $ 238,309        19%       $ 720,687      $ 590,579        22%   

Gross margin %

     23.9     23.4     50 bp’s         24.0     23.0     100 bp’s   

Homebuilding revenues (a) *

   $ 284,370      $ 238,079        19%       $ 720,225      $ 589,892        22%   

Homebuilding gross margin % (a) *

     23.8     23.4     40 bp’s         24.0     22.9     110 bp’s   

House revenues *

   $ 279,044      $ 234,938        19%       $ 707,898      $ 578,817        22%   

House gross margin*

   $ 67,757      $ 55,905        21%       $ 171,891      $ 134,063        28%   

House gross margin % *

     24.3     23.8     50 bp’s         24.3     23.2     110 bp’s   

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

     30.1     30.1     —           30.5     30.0     50 bp’s   

SG&A expenses

   $ 31,915      $ 28,388        12%       $ 89,793      $ 77,425        16%   

SG&A % of total revenues

     11.2     11.9     (70) bp’s         12.5     13.1     (60) bp’s   

Net income attributable to Shea Homes

   $ 33,749      $ 25,824        31%       $ 73,754      $ 52,196        41%   

Adjusted EBITDA (b) *

   $ 54,153      $ 43,632        24%       $ 135,677      $ 100,341        35%   

Interest incurred

   $ 17,112      $ 16,780        2%       $ 51,092      $ 50,322        2%   

Interest capitalized to inventory

   $ 16,068      $ 15,925        1%       $ 48,091      $ 43,874        10%   

Interest capitalized to investments in joint ventures

   $ 884      $ 710        25%       $ 2,565      $ 1,473        74%   

Interest expense

   $ 160      $ 145        10%       $ 436      $ 4,975        -91%   

Interest in cost of sales (c)

   $ 17,228      $ 15,110        14%       $ 45,136      $ 40,014        13%   

Other Data (d):

             

Home sales orders (units)

     460        434        6%         1,618        1,467        10%   

Homes closed (units)

     482        493        -2%         1,270        1,255        1%   

Average selling price

   $ 579      $ 477        21%       $ 557      $ 461        21%   

Average active selling communities

     66        61        8%         63        57        11%   

Home sales orders per community

     7.0        7.1        -1%         25.7        25.7        0%   

Cancellation rate

     17.6     16.7        14.9     13.9  

Backlog at end of period (units)

     1,198        1,124        7%          

Backlog at end of period (est. sales value)

   $ 703,046      $ 563,513        25%          

Backlog at end of period (est. average selling price)

   $ 587      $ 501        17%          

Lots owned or controlled (units)

     19,216        18,992        1%          

Homes under construction (units) (e)

     1,253        1,122        12%          

 

(a) Homebuilding revenue and gross margin include house, land and other homebuilding activities.
(b) See page 10 for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income.
(c) As previously capitalized to house and land.
(d) Represents consolidated activity only; excludes unconsolidated joint ventures.
(e) Homes under construction includes completed homes.
* See “Reconciliation of Non-GAAP Financial Measures” beginning on page 9.

 

Page 4


CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

     September 30,      December 31,  
     2014      2013  
     (unaudited)      (audited)  

Assets

     

Cash and cash equivalents

   $ 139,282       $ 206,205   

Restricted cash

     494         1,189   

Accounts and other receivables, net

     145,957         147,499   

Receivables from related parties, net

     23,152         32,350   

Inventory

     1,178,108         1,013,272   

Investments in unconsolidated joint ventures

     58,436         47,748   

Other assets, net

     58,216         57,070   
  

 

 

    

 

 

 

Total assets

  
$ 1,603,645   
  
$ 1,505,333   
  

 

 

    

 

 

 

Liabilities and equity

  
  

Liabilities:

  
  

Notes payable

  
$ 761,740   
  
$ 751,708   

Other liabilities

  
  346,701   
  
  308,168   
  

 

 

    

 

 

 

Total liabilities

  
  1,108,441   
  
  1,059,876   

Total equity

  
  495,204   
  
  445,457   
  

 

 

    

 

 

 

Total liabilities and equity

  
$ 1,603,645   
  
$ 1,505,333   
  

 

 

    

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2014     2013     2014     2013  
     (unaudited)     (unaudited)     (unaudited)     (unaudited)  

Revenues

   $ 284,489      $ 238,309      $ 720,687      $ 590,579   

Cost of sales

     (216,595     (182,461     (547,663     (454,769
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross margin

  
  67,894   
 
  55,848   
 
  173,024   
 
  135,810   

Selling, general and administrative expenses

  
  (31,915
 
  (28,388
 
  (89,793
 
  (77,425

Interest expense

  
  (160
 
  (145
 
  (436
 
  (4,975

Other income, net

  
  3,965   
 
  (208
 
  7,489   
 
  486   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

  
  39,784   
 
  27,107   
 
  90,284   
 
  53,896   

Income tax expense

  
  (6,053
 
  (1,281
 
  (16,555
 
  (1,701
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  
  33,731   
 
  25,826   
 
  73,729   
 
  52,195   

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

  
  18   
 
  (2
 
  25   
 
  1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Shea Homes

  
$ 33,749   
 
$ 25,824   
 
$ 73,754   
 
$ 52,196   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 5


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

 

     Three Months Ended     Nine Months Ended  
     September 30,     September 30,  
     2014     2013     2014     2013  
     (unaudited)     (unaudited)     (unaudited)     (unaudited)  

Operating activities

        

Net income

   $ 33,731      $ 25,826      $ 73,729      $ 52,195   

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

        

Gain on reinsurance transaction

     (4,001     (1,758     (6,175     (1,599

Depreciation and amortization expense

     3,253        2,748        8,088        7,312   

Distribution of earnings from unconsolidated joint ventures

     4,125        —          9,425        6,000   

Other operating activities, net

     (1,172     (99     (4,671     (718

Changes in operating assets and liabilities:

        

Inventory

     (14,192     (54,022     (169,983     (212,623

Payables and other liabilities

     25,055        7,937        20,433        17,726   

Other operating assets

     6,228        3,085        1,032        7,258   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

  
  53,027   
 
  (16,283
 
  (68,122
 
  (124,449

Investing activities

  
 
 
 

Proceeds from sale of investments

  
  70   
 
  85   
 
  174   
 
  3,163   

Net collections on promissory notes from related parties

  
  1,126   
 
  2,606   
 
  9,215   
 
  3,037   

Distributions from (investments in) unconsolidated joint ventures, net

  
  2,552   
 
  (466
 
  (2,426
 
  (16,316

Other investing activities, net

  
  —     
 
  500   
 
  —     
 
  —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) investing activities

  
  3,748   
 
  2,725   
 
  6,963   
 
  (10,116

Financing activities

  
 
 
 

Net decrease in notes payable

  
  (916
 
  (1,241
 
  (2,339
 
  (1,993

Contributions from owners

  
  —     
 
  —     
 
  945   
 
  —     

Distributions to owners

  
  —     
 
  —     
 
  (4,385
 
  —     

Other financing activities, net

  
  15   
 
  —     
 
  15   
 
  —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

  
  (901
 
  (1,241
 
  (5,764
 
  (1,993
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

  
  55,874   
 
  (14,799
 
  (66,923
 
  (136,558

Cash and cash equivalents at beginning of period

  
  83,408   
 
  157,997   
 
  206,205   
 
  279,756   
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  
$ 139,282   
 
$ 143,198   
 
$ 139,282   
 
$ 143,198   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 6


SEGMENT OPERATING DATA

(dollars in thousands)

(unaudited)

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2014      2013      2014      2013  
     Homes
Closed
     Avg. Selling
Price
     Homes
Closed
     Avg. Selling
Price
     Homes
Closed
     Avg. Selling
Price
     Homes
Closed
     Avg. Selling
Price
 

Homes closed:

                       

Southern California

     146       $ 818         48       $ 830         311       $ 841         179       $ 748   

San Diego

     49         537         85         477         137         523         176         463   

Northern California

     86         676         138         513         252         640         315         481   

Mountain West

     83         440         98         450         200         459         229         442   

South West

     118         327         116         322         370         329         333         315   

East

     —           —           8         285         —           —           23         252   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consolidated

  
  482   
  
$ 579   
  
  493   
  
$ 477   
  
  1,270   
  
$ 557   
  
  1,255   
  
$ 461   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Southern California

  
  15   
  
$ 380   
  
  —     
  
$ —     
  
  65   
  
$ 378   
  
  36   
  
$ 280   

Northern California

  
  12   
  
  532   
  
  3   
  
  572   
  
  34   
  
  518   
  
  12   
  
  552   

Mountain West

  
  28   
  
  354   
  
  21   
  
  346   
  
  51   
  
  385   
  
  34   
  
  371   

East

  
  15   
  
  281   
  
  18   
  
  261   
  
  46   
  
  275   
  
  38   
  
  256   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total unconsolidated joint ventures

  
  70   
  
$ 375   
  
  42   
  
$ 326   
  
  196   
  
$ 380   
  
  120   
  
$ 325   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

  
  552   
  
$ 553   
  
  535   
  
$ 465   
  
  1,466   
  
$ 534   
  
  1,375   
  
$ 449   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2014      2013      2014      2013  
     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

     101         11         107         7         407         10         211         5   

San Diego

     60         10         33         7         211         9         198         7   

Northern California

     82         13         84         14         301         14         305         13   

Mountain West

     102         13         72         15         340         12         306         15   

South West

     111         17         135         17         342         17         438         16   

East

     4         2         3         1         17         1         9         1   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consolidated

  
  460   
  
  66   
  
  434   
  
  61   
  
  1,618   
  
  63   
  
  1,467   
  
  57   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Southern California

  
  21   
  
  4   
  
  22   
  
  2   
  
  96   
  
  4   
  
  35   
  
  2   

Northern California

  
  11   
  
  4   
  
  11   
  
  4   
  
  40   
  
  4   
  
  33   
  
  3   

Mountain West

  
  38   
  
  5   
  
  25   
  
  5   
  
  78   
  
  5   
  
  59   
  
  5   

East

  
  33   
  
  3   
  
  19   
  
  2   
  
  99   
  
  3   
  
  61   
  
  2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total unconsolidated joint ventures

  
  103   
  
  16   
  
  77   
  
  13   
  
  313   
  
  16   
  
  188   
  
  12   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

  
  563   
  
  82   
  
  511   
  
  74   
  
  1,931   
  
  79   
  
  1,655   
  
  69   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

Page 7


SEGMENT OPERATING DATA (continued)

(unaudited)

 

     September 30,  
     2014      2013  
     Backlog
Units
     Estimated
Backlog Sales
Value
     Estimated
Avg. Selling

Price
     Backlog
Units
     Estimated
Backlog Sales
Value
     Estimated
Avg. Selling

Price
 

Backlog:

                 

Southern California

     256       $ 199,871       $ 781         155       $ 120,173       $ 775   

San Diego

     174         114,712         659         129         67,494         523   

Northern California

     193         140,058         726         231         139,286         603   

Mountain West

     347         173,741         501         289         133,650         462   

South West

     211         67,918         322         318         102,163         321   

East

     17         6,746         397         2         747         374   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total consolidated

  
  1,198   
  
$ 703,046   
  
$ 587   
  
  1,124   
  
$ 563,513   
  
$ 501   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Southern California

  
  57   
  
$ 27,197   
  
$ 477   
  
  26   
  
$ 9,077   
  
$ 349   

Northern California

  
  29   
  
  16,340   
  
  563   
  
  31   
  
  16,430   
  
  530   

Mountain West

  
  50   
  
  21,221   
  
  424   
  
  36   
  
  14,258   
  
  396   

East

  
  103   
  
  31,398   
  
  305   
  
  59   
  
  16,271   
  
  276   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total unconsolidated joint ventures

  
  239   
  
$ 96,156   
  
$ 402   
  
  152   
  
$ 56,036   
  
$ 369   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

  
  1,437   
  
$ 799,202   
  
$ 556   
  
  1,276   
  
$ 619,549   
  
$ 486   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     September 30,  
     2014      2013  

Lots owned or controlled:

     

Southern California

     1,799         1,982   

San Diego

     572         687   

Northern California

     4,046         3,239   

Mountain West

     9,731         10,075   

South West

     2,303         2,242   

East

     765         767   
  

 

 

    

 

 

 

Total consolidated

  
  19,216   
  
  18,992   

Unconsolidated joint ventures

  
  4,963   
  
  4,733   
  

 

 

    

 

 

 

Total

  
  24,179   
  
  23,725   
  

 

 

    

 

 

 

Lots by ownership type:

  
  

Owned for homebuilding

  
  6,481   
  
  6,581   

Owned and held for sale

  
  3,442   
  
  3,435   

Optioned or subject to contract for homebuilding

  
  6,259   
  
  5,942   

Optioned or subject to contract held for sale

  
  3,034   
  
  3,034   

Joint venture

  
  4,963   
  
  4,733   
  

 

 

    

 

 

 

Total

  
  24,179   
  
  23,725   
  

 

 

    

 

 

 

 

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 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 September 30, 2014     Three Months Ended September 30, 2013  
     Revenue     Cost of
Sales
    Gross
Margin $
    Gross
Margin %
    Revenue     Cost of
Sales
    Gross
Margin $
    Gross
Margin %
 

Total

   $ 284,489      $ (216,595   $ 67,894        23.9   $ 238,309      $ (182,461   $ 55,848        23.4

Less: Other

     (119     —          (119     —          (230     —          (230     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Homebuilding

     284,370        (216,595     67,775        23.8     238,079        (182,461     55,618        23.4

Less: Land

     (3,892     2,929        (963     24.7     (2,750     2,271        (479     17.4

Less: Other homebuilding

     (1,434     2,379        945        —          (391     1,157        766        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

House

   $ 279,044      $ (211,287   $ 67,757        24.3   $ 234,938      $ (179,033   $ 55,905        23.8
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Add: Interest in house cost of sales (a)

     —          16,256        16,256        —          —          14,733        14,733        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted house excluding interest in cost of sales

   $ 279,044      $ (195,031   $ 84,013        30.1   $ 234,938      $ (164,300   $ 70,638        30.1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     Nine Months Ended September 30, 2014     Nine Months Ended September 30, 2013  
     Revenue     Cost of
Sales
    Gross
Margin $
    Gross
Margin %
    Revenue     Cost of
Sales
    Gross
Margin $
    Gross
Margin %
 

Total

   $ 720,687      $ (547,663   $ 173,024        24.0   $ 590,579      $ (454,769   $ 135,810        23.0

Less: Other

     (462     —          (462     —          (687     —          (687     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Homebuilding

     720,225        (547,663     172,562        24.0     589,892        (454,769     135,123        22.9

Less: Land

     (8,831     6,272        (2,559     29.0     (9,891     5,525        (4,366     44.1

Less: Other homebuilding

     (3,496     5,384        1,888        —          (1,184     4,490        3,306        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

House

   $ 707,898      $ (536,007   $ 171,891        24.3   $ 578,817      $ (444,754   $ 134,063        23.2
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Add: Interest in house cost of sales (a)

     —          43,678        43,678        —          —          39,447        39,447        —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted house excluding interest in cost of sales

   $ 707,898      $ (492,329   $ 215,569        30.5   $ 578,817      $ (405,307   $ 173,510        30.0
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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, plus distributions of earnings from joint ventures and non-guarantor subsidiaries, before (a) income taxes, (b) depreciation and amortization, (c) expensing of previously capitalized interest included in costs of sales and in equity in income (loss) from joint ventures, (d) interest expense, (e) impairment charges and project write-offs and abandonments, (f) realized gain on sale of investments, (g) deferred gain 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 (h) income (loss) from joint ventures and non-guarantor subsidiaries. Other companies may calculate Adjusted EBITDA (or similarly titled measures) differently.

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2014     2013     2014     2013  

Net income

   $ 33,731      $ 25,826      $ 73,729      $ 52,195   

Adjustments:

        

Income tax expense (benefit)

     6,053        1,281        16,555        1,701   

Depreciation and amortization expense

     3,253        2,748        8,088        7,312   

Interest in cost of sales

     17,228        15,110        45,136        40,014   

Interest in equity in income (loss) from joint ventures

     106        244        497        829   

Interest expense

     160        145        436        4,975   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

  
  60,531   
 
  45,354   
 
  144,441   
 
  107,026   

Adjustments:

  
 
 
 

Project write-offs and abandonments

  
  192   
 
  389   
 
  662   
 
  582   

Realized gain on sale of investments

  
  —     
 
  (5
 
  —     
 
  (15

Deferred gain recognition from PIC Transaction

  
  (4,001
 
  (1,757
 
  (6,175
 
  (1,598

Income from joint ventures and non-guarantor subsidiaries

  
  (3,384
 
  (349
 
  (8,561
 
  (6,022

Distributions of earnings from joint ventures and non-guarantor subsidiaries

  
  811   
 
  —     
 
  5,293   
 
  367   

Other

  
  4   
 
  —     
 
  17   
 
  1   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

  
$ 54,153   
 
$ 43,632   
 
$ 135,677   
 
$ 100,341   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

Page 10

Additional Files
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0001193125-14-398747.txt   Complete submission text file   338673

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SEC CFR Title 17 of the Code of Federal Regulations.