TRI Pointe Homes, Inc. Reports 2013 Second Quarter Results
TRI Pointe Homes, Inc. Reports 2013 Second Quarter Results
-Company Raises Delivery and Revenue Guidance for 2013-
-Establishes 2013 Diluted EPS Range of $0.40 to $0.42-
-Increased Lots Owned and Controlled to Over 2,650-
-Secures New $125 Million Revolving Credit Facility-
2013 Second Quarter Highlights and Comparisons to the 2012 Second Quarter
- Net income was $2.1 million, or $0.07 per diluted share compared to a net loss of $(1.3) million, or $(0.09) per diluted share
- New home orders increased to 131 compared to 38
- Active selling communities averaged 6.8 compared to 4.6
- New home orders per average selling community were 19.3 orders (6.42 monthly) compared to 8.3 orders (2.75 monthly)
- Cancellation rate improved to 6% compared to 12%
- Backlog of 183 homes with a dollar value of $107.8 million
- Average sales price in backlog of $589,000
- Home sales revenue was $47.5 million compared to $7.7 million
- New homes delivered increased to 91 compared to 19
- Average sales price of homes delivered grew 28% to $522,000
- Homebuilding gross margin percentage improved to 19.3% from 12.0%
- Acquired 591 lots valued at $61.3 million and controlled an additional 469 lots
- Cash, cash equivalents and marketable securities were $77.4 million compared to $19.8 million as of December 31, 2012
- Ratio of debt to capital improved to 16.9% compared to 27.8% as of December 31, 2012
Douglas F. Bauer, Chief Executive Officer stated, "We are beginning to capitalize on the benefits of the imbedded growth in our homebuilding activities as a result of our strategic land acquisitions and the planned rollout of new communities. Although we increased our home prices, which reflects the significant underlying strength in our core markets, it did not slow absorption. We were raising prices to regulate the pace of sales and enhance our margins. Nonetheless, our monthly absorption rate increased to 6.4 new home orders per average selling community during the quarter. As a result, we ended the quarter with a record high backlog reflecting higher pricing that should continue to expand our gross margins and position the Company for a strong finish to the year."
Mr. Bauer continued, "While sales are robust in our active communities, the Company continued to execute on its land strategy. At the time of our IPO, the Company had 1,550 lots owned or controlled. We have now grown land inventory of lots owned or controlled to over 2,650 or an increase of 70%."
Second quarter 2013 operating results
Net income was $2.1 million, or $0.07 per diluted share in the second quarter of 2013, compared to a net loss of $(1.3) million, or $(0.09) per diluted share for the second quarter of 2012, primarily driven by a $8.2 million increase in homebuilding gross margin due to higher home sales revenue and increased homebuilding gross margin percentages, offset by an increase in SG&A expense of $3.6 million and an increase in the tax provision of $1.5 million.
Total revenue was $51.1 million in the 2013 second quarter compared to $7.8 million for the same period in 2012. Home sales revenue increased $39.7 million to $47.5 million for the 2013 second quarter, as compared to $7.7 million for the same period in 2012, primarily attributable to a significant increase in new homes delivered to 91 and a growth in the Company's average sales price of homes delivered to $522,000. The increase in the average sales price of homes delivered was primarily attributable to a change in product mix including deliveries in Northern California projects which have higher average sales prices. Furthermore, the growth in new home deliveries was due to an increase in the average number of selling communities to 6.8 for the 2013 second quarter as compared to 4.6 for the same period in 2012.
New home orders increased to 131 homes for the 2013 second quarter, the highest amount of quarterly orders since the Company began acquiring land in 2010. The Company's overall absorption rate for the three months ended June 30, 2013 per average selling community increased to 19.3 orders (6.42 monthly), compared to 8.3 orders (2.75 monthly) during the same period in 2012. The improved order trends for the 2013 second quarter resulted in an increase in the number of homes in backlog to 183, representing approximately $107.8 million in home sales revenue. The average sales price of homes in backlog decreased $72,000, or 11%, to $589,000 compared to June 30, 2012. The decrease was due to the relative low number of units in backlog in the prior year period of 34, which included 9 units from Northern California with an average sales price of $1.4 million. We expect that for the balance of 2013, our average sales price will continue to vary on a quarterly basis due to the mix of units and the timing of our new communities.
The Company's homebuilding gross margin percentage for the 2013 second quarter increased to 19.3% compared to 12.0% for the same period in 2012. This increase compared to the same period in 2012 was primarily due to the delivery unit mix from new projects which achieved higher homebuilding gross margins in the 2013 period. Excluding interest in cost of home sales, adjusted homebuilding gross margin percentage was 20.3%* for the 2013 second quarter versus 12.9%* for the same period in 2012.
SG&A expense for the 2013 second quarter was $5.9 million (12.4% of home sales revenue) compared to $2.3 million (29.3% of home sales revenue) for the same period in 2012. The increase was attributable to a $994,000 increase in sales and marketing expenses related to the planned growth in the number of active selling communities and the number of homes delivered. In addition, general and administrative expenses increased $2.6 million primarily due to an increase in compensation related expenses due to an increase in our office headcount and other costs incurred to support our growth.
The Company purchased 591 lots valued at $61.3 million during the 2013 second quarter, all of which were located in Northern California. Furthermore, an additional 469 lots were contracted or controlled during the second quarter, 232 of which were located in Southern California, 32 in Northern California and 205 in Colorado. As of June 30, 2013, the Company owned or controlled 2,682 lots, of which 1,529 are owned and actively selling or under development and 1,153 are controlled under land option contracts, purchase contracts, or non-binding letters of intent. Of the 2,682 lots owned and controlled, 1,087 are in Southern California, 1,086 in Northern California and 509 in Colorado.
* See "Reconciliation of Non-GAAP Financial Measures"
Thomas J. Mitchell, President and Chief Operating Officer of TRI Pointe Homes, noted, "The Company continues to experience strong traffic and buyer demand in all product segments and markets despite the recent rise in interest rates. In late June, we were proud to open our first community in Colorado with exciting new product that was very well received by strong consumer demand. Additionally, in July we opened two new selling communities within master planned communities in Orange County, California with a combined average sales price of $862,000. Both communities opened with phase sell-outs and continued to be strong for the month of July. For the month of July, we had 63 new home orders from 8 active selling communities."
Mr. Mitchell continued, "We are also excited about our new revolving credit facility the Company entered into in July with US Bank. The secured three year revolving credit facility, with a maximum loan commitment of $125 million, will provide an effective cost of capital used to fund our growing land acquisition, development and construction activity."
In addition to the two communities opened in July, the Company expects to open three more selling communities offset by final net new home orders at three selling communities for the balance of 2013, resulting in nine active selling communities at the end of 2013. Due to the better than expected pace of new home orders in the second quarter, the Company expects to deliver approximately 45% of its 183 units in backlog as of June 30, 2013 during the third quarter of 2013. Based on the continued strength of new home order absorption rates and the growth in backlog combined with the increased confidence from the success of the new community openings, the Company is raising its guidance for 2013 deliveries to between 370 and 380 units from between 350 and 360 units. In addition, with increased pricing achieved at all of its communities which have contributed to improving homebuilding gross margins, the Company is providing an update to revenue guidance and establishing diluted earnings per share guidance. For the full year 2013, the Company is projecting home sales revenue in the range of $215 to $220 million resulting in projected diluted earnings per share in the range of $0.40 to $0.42, with the majority of earnings expected to be delivered in the fourth quarter.
Earnings Conference Call
The Company will host a conference call via live webcast for investors and other interested parties beginning at 10:00 a.m. Eastern Time on Tuesday, August 13, 2013. The call will be hosted by, Doug Bauer, Chief Executive Officer, Tom Mitchell, Chief Operating Officer and Mike Grubbs, Chief Financial Officer.
Participants may access the live webcast by visiting the Company's investor relations website at www.TRIPointeHomes.com. The call can also be accessed by dialing (877) 407-3982, or (201) 493-6780 for international participants.
The replay of the call will be available from approximately 1:00 p.m. Eastern Time on August 13, 2013 through midnight Eastern Time on August 27, 2013. To access the replay, the domestic dial-in number is (877) 870-5176, the international dial-in number is (858) 384-5517, and the passcode is 417236. The archive of the webcast will be available on the Company's Web site for a limited time.
About TRI Pointe Homes, Inc.
TRI Pointe Homes, Inc (NYS: TPH) is engaged in the design, construction and sale of innovative single-family homes in planned communities in major metropolitan areas located throughout Southern and Northern California and, more recently, Colorado. The Company is headquartered in Irvine, California. For more information about the Company and its new home developments please visit the Company's website at www.TRIPointeHomes.com.
Various statements contained in this press release, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. Our forward-looking statements are generally accompanied by words such as "estimate," "project," "predict," "believe," "expect," "intend," "anticipate," "potential," "plan," "goal," "will," or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this press release speak only as of the date of this release, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. The following factors, among others, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements: economic changes either nationally or in the markets in which we operate, including declines in employment, volatility of mortgage interest rates and inflation; a downturn in the homebuilding industry; continued volatility and uncertainty in the credit markets and broader financial markets; our future operating results and financial condition; our business operations; changes in our business and investment strategy; availability of land to acquire and our ability to acquire such land on favorable terms or at all; availability, terms and deployment of capital; continued or increased disruption in the availability of mortgage financing or the number of foreclosures in the market; shortages of or increased prices for labor, land or raw materials used in housing construction; delays in land development or home construction resulting from adverse weather conditions or other events outside our control; the cost and availability of insurance and surety bonds; changes in, or the failure or inability to comply with, governmental laws and regulations; the timing of receipt of regulatory approvals and the opening of projects; the degree and nature of our competition; our leverage and debt service obligations; our relationship, and actual and potential conflicts of interest, with Starwood Capital Group; availability of qualified personnel and our ability to retain our key personnel; and additional factors discussed under the sections captioned "Risk Factors" included in our annual and quarterly reports filed with the Securities and Exchange Commission.
|KEY OPERATIONS AND FINANCIAL DATA|
(dollars in thousands)
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|Homebuilding gross margin||$||9,139||$||929||$||8,210||$||13,547||$||1,445||$||12,102|
|Homebuilding gross margin %||19.3||%||12.0||%||7.3||%||19.0||%||11.7||%||7.3||%|
Adjusted homebuilding gross margin %*
|SG&A expense as a % of home sales||12.4||%||29.3||%||(16.9||)%||14.8||%||32.0||%||(17.2||)%|
|Net income (loss)||$||2,075||$||(1,317||)||$||3,392||$||2,345||$||(2,460||)||$||4,805|
Interest incurred and capitalized to inventory
|Interest in cost of home sales||$||502||$||69||$||433||$||758||$||126||$||632|
|Net new home orders||131||38||245||%||254||56||354||%|
|New homes delivered||91||19||379||%||139||30||363||%|
|Average selling price of homes delivered||$||522||$||407||28||%||$||513||$||411||25||%|
|Average selling communities||6.8||4.6||2.2||6.8||4.1||2.7|
|Selling communities at end of period||7||4||3||7||4||3|
|Backlog (estimated dollar value)||$||107,759||$||22,478||379||%|
|Average selling price in backlog||$||589||$||661||(11||)%|
|Balance Sheet Data:|
|Cash, cash equivalents and marketable securities||$||77,374||$||19,824||$||57,550|
|Real estate inventories||$||301,831||$||194,083||$||107,748|
|Lots owned and controlled||2,682||1,550||73||%|
|Homes under construction(1)||229||91||152||%|
|Ratio of debt-to-capital||16.9||%||27.8||%||(10.9||)%|
|Ratio of net debt-to-capital *||N/A||20.1||%||N/A|
(1) Homes under construction includes completed homes
*See "Reconciliation of Non-GAAP Financial Measures"
|CONSOLIDATED BALANCE SHEETS|
(in thousands, except share amounts)
|June 30,||December 31,|
|Cash and cash equivalents||$||37,537||$||19,824|
|Real estate inventories||301,831||194,083|
|Contracts and accounts receivable||1,448||548|
|Liabilities and Stockholders' Equity|
|Accounts payable and accrued liabilities||$||12,834||$||10,995|
|Preferred stock, $0.01 par value, 50,000,000 shares authorized,|
|no shares outstanding||-||-|
|Common stock, $0.01 par value, 500,000,000 shares authorized,|
|31,597,907 shares issued and outstanding as of June 30, 2013||316||-|
|Additional paid-in capital||309,351||-|
|Accumulated other comprehensive income||(182||)||-|
|Total Stockholders' equity||307,568||-|
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