UCP, Inc. Reports Second Quarter 2013 Results

UCP, Inc. Reports Second Quarter 2013 Results

- Delivers Revenue of $27.7 Million - Backlog of 78 Homes Valued at $26.7 Million -
- Completes IPO in July 2013, Raises Gross Proceeds of $116.3 Million -


SAN JOSE, Calif.--(BUSINESS WIRE)-- UCP, Inc. (NYS: UCP) today announced its results of operations for the three months ended June 30, 2013.

Second Quarter 2013 Highlights and Comparisons to the Second Quarter 2012

Total consolidated revenue increased to $27.7 million from $1.4 million year over year
Homebuilding revenue of $20.9 million
Homebuilding gross margin of 21.2%, adjusted gross margin of 22.6%
Home deliveries of 57 units with average selling price of approximately $367,000
New home orders of 59 units
Cancellation rate of 4.8%
Nine active selling communities at quarter end
Land development revenue of $6.8 million from 54 lots
Land development gross margin of 24.6%, adjusted gross margin of 24.8%
Lots owned and controlled at end of quarter of 5,845
Debt to capital ratio of 23.4% and net debt to capital ratio of 22.4% at the end of the quarter

"UCP's success during the past quarter has been the result of our team's experience, our opportunistic land purchases during the housing downturn, and our ability to build differentiated communities and homes primarily in the robust markets of Northern California and Washington State." stated Dustin Bogue President and Chief Executive Officer of UCP.

Mr. Bogue continued, "Despite the recent rise in interest rates, we continue to see strong traffic and new home orders in our communities due to favorable community locations and expanding demand. As we move ahead, we will continue to acquire land, open new communities, and leverage our cost base through higher selling prices."

Second quarter 2013 operating results

UCP's net loss decreased to $1.1 million in the second quarter of 2013 compared to $2.2 million for the second quarter of 2012, primarily driven by an increase in revenue that was partly offset by a lower gross margin and higher SG&A, and included approximately $0.9 million of non-recurring IPO related costs.

Total revenue was $27.7 million in the second quarter of 2013 compared to $1.4 million for the second quarter a year ago. Homebuilding revenue for the second quarter of 2013 increased to $20.9 million from $1.4 million in the second quarter of 2012. The Company delivered 57 homes from an average of seven communities during the second quarter, compared to six homes delivered from an average of two communities in the prior year second quarter. The average sales price of homes delivered increased 53.6% year over year to $367,000 for the second quarter, primarily attributable a higher mix of deliveries in communities with higher average selling prices. Land Development revenue was $6.8 million from 54 lots sold during the second quarter of 2013.

New home orders increased to 59 homes for the second quarter of 2013, compared to three homes in the second quarter, a year ago. The increase in orders was a result of a higher number of communities and an increase in monthly orders per community. Homes in backlog increased to 78 homes with a dollar value of $26.7 million at the end of the second quarter of 2013, compared to four homes with a dollar value of $1.0 million at the end of second quarter in the prior year.

The Company's homebuilding gross margin decreased to 21.2% for the second quarter compared to 26.3% for the prior year period, primarily due to increased cost of sales. Excluding capitalized interest and abandonment charges, homebuilding adjusted gross margin decreased to 22.6% for the quarter from 27.6% in the prior year quarter. Land development gross margin was 24.6% and adjusted gross margin for land development was 24.8% for the second quarter.

SG&A expense for the second quarter was $7.4 million compared to $2.6 million for the second quarter, a year ago. The difference included a $1.9 million increase in sales and marketing expenses to support a higher number of deliveries and actively selling communities. Additionally, general and administrative expenses increased by $2.9 million largely as a result of a higher headcount and the non-recurring costs related to the Company's IPO. As a percent of total revenue, SG&A expense excluding non-recurring costs was 23.5% for the second quarter 2013, compared to 182.9% for the second quarter of 2012.

During the second quarter, UCP increased its owned and controlled lots by 108 and 676, respectively. As of June 30, 2013, the Company owned 4,363 lots and controlled 1,482 lots for an aggregate of 5,845 lots. During the six months ended June 30, 2013, total lots owned and controlled, net of home and lots sales, increased by 929 lots, as compared to the year-end on December 31, 2012. The Company ended the quarter with nine actively selling communities.

The net debt to total capital ratio increased to 22.4% at June 30, 2013.

Initial Public Offering

In July 2013, the Company completed its IPO, raising gross proceeds of approximately $116.3 million and net proceeds of $105.6 million after underwriting discounts and offering expenses. Proceeds of the offering are intended for land acquisitions, land development, home construction and other general corporate purposes.

Webcast and Conference Call

The Company will host a webcast and conference call on Tuesday, September 3, 2013 at 5:00 p.m. Eastern time (2:00 p.m. Pacific). To participate in the call, please dial 877-705-6003 (Domestic) or +1 201-493-6725 (International). The live webcast will be available at www.unioncommunityllc.com under the Investors section. A replay of the conference call will be available through September 17, 2013, by dialing 877-870-5176 (domestic) or +1 858-384-5517 (international) and entering the pass code 419578.

About UCP, Inc.

UCP, Inc. is a homebuilder and land developer, with significant land acquisition and entitlement expertise, in growth markets in Northern California and with a growing presence in attractive markets in the Puget Sound area of Washington State.

Forward-Looking Statements

This press release contains forward-looking statements. You should not place undue reliance on those statements because they are subject to numerous uncertainties and factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the Company's control. Forward-looking statements include information concerning the Company's possible or assumed future results of operations, including descriptions of the Company's business strategy. These statements often include words such as "may," "will," "should," "believe," "expect," "anticipate," "intend," "plan," "estimate" or similar expressions. These statements are based on assumptions that the Company has made in light of its experience in the industry as well as its perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Although the Company believes that these forward-looking statements are based on reasonable assumptions, it can give no assurance they will prove to be correct. Therefore, you should be aware that many factors could affect the Company's actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements.

Any forward-looking statement made by the Company herein, or elsewhere, speaks only as of the date on which it was made. New risks and uncertainties come up from time to time, and it is impossible for the Company to predict these events or how they may affect it. The Company has no obligation to update any forward-looking statements after the date hereof, except as required by federal securities laws.

Non-GAAP Financial Measures

Homebuilding adjusted gross margin, land development adjusted gross margin and net debt to capital are non-U.S. GAAP financial measures. A reconciliation to the most comparable U.S. GAAP financial measures is presented in Appendix A hereto.

UCP, LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

June 30,

December 31,

2013

2012

Assets:

Cash and cash equivalents

$

1,788

$

10,324

Real estate inventories

147,836

125,367

Fixed assets, net

860

680

Receivables

243

243

Other assets

2,960

920

Total assets

$

153,687

$

137,534

Liabilities and member's equity:

Accounts payable and accrued liabilities

$

11,662

$

6,107

Debt

33,259

29,112

Total liabilities

44,921

35,219

Member's equity

108,766

102,315

Total liabilities and member's equity

$

153,687

$

137,534

UCP, LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME OR LOSS

(Unaudited)

(In thousands)

Three Months

Three Months

Six Months

Six Months

Ended

Ended

Ended

Ended

June 30,

June 30,

June 30,

June 30,

2013

2012

2013

2012

REVENUE:

Homebuilding

$

20,907

$

1,435

$

25,240

$

2,968

Land development

68,15

14,285

2,002

Total revenue

27,722

1,435

39,525

4,970

COSTS AND EXPENSES:

Cost of sales - homebuilding

16,482

1,057

19,942

2,119

Cost of sales - land development

5,136

9

9,716

1,358

Sales and marketing

2,099

238

3,231

459

General and administrative

5,326

2,386

8,806

4,594

Total costs and expenses

29,043

3,690

41,695

8,530

Loss from operations

(1,321

)

(2,255

)

(2,170

)

(3,560

)

Other income (expense), net

224

93

263

301

Net loss

(1,097

)

(2,162

)

(1,907

)

(3,259

)

Other comprehensive income (loss), net of tax

Comprehensive loss

$

(1,097

)

$

(2,162

)

$

(1,907

)

$

$ (3,259

)

UCP, LLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Six Months Ended June 30,

2013

2012

Operating activities:

Net loss

$

(1,907

)

$

(3,259

)

Adjustments to reconcile net loss to net cash used in operating activities:

Abandonment of real estate inventories

12

68

Depreciation

113

66

Changes in operating assets and liabilities:

Real estate inventories

(17,790

)

(15,812

)

Receivables

5

Other assets

(2,040

)

405

Accounts payable and accrued liabilities

5,555

2,168

Net cash used in operating activities

(16,057

)

(16,359

)

Investing activities:

Purchases of fixed assets

(293

)

(408

)

Net cash used in investing activities

(293

)

(408

)

Financing activities:

Cash contributions from member

33,956

19,879

Repayments of member contributions

(25,598

)

(1,817

)

Proceeds from debt

10,011

1,001

Repayment of debt

(10,555

)

(2,789

)

Net cash provided by financing activities

7,814

16,274

Net decrease in cash and cash equivalents

(8,536

)

(493

)

Cash and cash equivalents - beginning of period

10,324

2,276

Cash and cash equivalents - end of period

$

1,788

$

1,783

Supplemental disclosure of cash flow information:

Debt incurred to acquire real estate inventories

$

4,691

$

360

Accrued offering cost

$

1,678

$

Appendix A

Reconciliation of GAAP and Non-GAAP Measures

A) Gross Margin and Adjusted Gross Margin

Three Months Ended June 30,

Six Months Ended June 30,

2013

%

2012

%

2013

%

2012

%

(Dollars in thousands)

Consolidated Adjusted Gross Margin

Sales

$

27,722

100.0

%

$

1,435

100.0

%

$

39,525

100.0

%

$

4,970

100.0

%

Cost of Sales

21,618

78.0

%

1,066

74.3

%

29,658

75.0

%

3,477

70.0

%

Gross Margin

6,104

22.0

%

369

25.7

%

9,867

25.0

%

1,493

30.0

%

Add: interest in cost of sales

301

1.1

%

18

1.3

%

365

0.9

%

74

1.5

%

Add: impairment and abandonment charges

3

%

9

0.6

%

12

%

68

1.4

%

Adjusted Gross Margin(1)

$

6,408

23.1

%

$

396

27.6

%

$

10,244

25.9

%

$

1,635

32.9

%

Consolidated Gross margin percentage

22.0

%

25.7

%

25.0

%

30.0