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AV Homes, Inc. Announces Third Quarter Results

AV Homes, Inc. Logo

SCOTTSDALE, Ariz., Nov. 6, 2013 (GLOBE NEWSWIRE) -- AV Homes, Inc. (Nasdaq:AVHI), a developer and builder of active adult and conventional home communities in Arizona, Florida and North Carolina, today announced results for its third quarter ended September 30, 2013. AV Homes reported third quarter revenue of $35.0 million, a 22% increase from $28.7 million in the third quarter of 2012. Net loss to stockholders for the third quarter of 2013 improved to $1.9 million, from a loss of $11.6 million in the third quarter of 2012.

For loss per share calculation purposes, net loss attributable to common stockholders in the third quarter of 2013 was $13.8 million, or $0.86 per share, which includes a reduction of $11.9 million, or $0.74 per share, for deemed dividends related to the recognition of a beneficial conversion feature embedded in the convertible preferred stock issued in connection with the $135 million investment made by TPG in June. This non-cash item was recorded in accordance with ASC 470-20 and has no net impact on total stockholders' equity or book value. This compares to a net loss attributable to common stockholders of $11.6 million, or $0.92 per share, in the third quarter of 2012.

President and Chief Executive Officer Roger A. Cregg said the Company continues to generate momentum on its strategy to increase revenues, improve gross margins, leverage its overhead expense and expand its geographic footprint. "Despite the slower market conditions the industry experienced in the third quarter as a result of the higher mortgage rates, increasing home prices and the political uncertainty in Washington, our order rates improved over the prior year on fewer community counts," Cregg said.

The increase in revenue for the third quarter of 2013 compared to the prior year period was driven by strong volume increases and improved pricing. During the third quarter of 2013, the Company closed on 147 homes, a 79% increase from the 82 homes closed during the third quarter of 2012. The dollar value of the closings reported in the third quarter of 2013 increased 83% to $31.9 million, from $17.4 million during the third quarter of 2012 as the average unit price per closing rose to $217,000 from $212,000 in the third quarter of 2012.

The number of new housing contracts signed, net of cancellations, during the three months ended September 30, 2013 increased 5% to 104 units, compared to 99 units during the same period in 2012. The dollar value of the contracts signed during the third quarter increased 6% to $26.2 million, compared to $24.6 million during the same period one year ago. The backlog of homes under contract but not yet closed at September 30, 2013 increased 17% to 233 units, representing a dollar volume of $58.2 million, compared to 200 units with a dollar volume of $48.5 million at September 30, 2012.

During the three months ended September 30, 2013, the Company reported $0.7 million in revenue from the sale of commercial, industrial and other land, which generated $0.6 million in operating income to the Company compared to $8.7 million in revenue and $0.4 million in operating income during the third quarter of 2012.

During the third quarter 2013, the Company recorded two non-recurring items. The Company changed its plans to sell certain assets in Florida resulting in a reclassification of the assets from held for sale to land held and used. Accordingly, a $0.9 million credit was recorded to reverse the previous impairment charge. Secondly, the Company made a correction to the amount of interest that was capitalized, resulting in an additional $1.6 million of capitalized interest recorded in the third quarter 2013 that related to prior quarters in 2013.

Results for the Nine Months ended September 30, 2013

For the nine-month period ended September 30, 2013, the Company reported a net loss to common stockholders of $11.3 million, on revenues of $89.7 million, compared to a net loss to common stockholders of $31.4 million, on revenues of $74.3 million for the nine months ended September 30, 2012.

For loss per share calculation purposes, the 2013 year to date net loss attributable to common stockholders was $23.2 million, or $1.67 per share, which includes the reduction of $11.9 million, or $0.85 per share, for deemed dividends related to the recognition of a beneficial conversion embedded in the convertible preferred stock issued in connection with the $135 million investment made by TPG in June. This compares to a loss attributable to common shareholders of $31.4 million, or $2.50 per share, in the third quarter 2012.

During the nine months ended September 30, 2013, the Company reported 310 home closings, a 52% increase from the 204 homes closed during the first nine months of 2012, and a corresponding increase in the dollar volume of closings during the nine months of 2013 to $71.8 million, a 58% increase from $45.5 million in the same period of 2012. For the nine month period ended September 30, 2013, the average unit price per closing increased 4% to $232,000, from $223,000 as reported for the same period one year ago.

For the nine-month period ended September 30, 2013, the Company reported 358 new housing contracts signed, net of cancellations, a 17% increase over the 306 contracts signed during the nine months ended September 30, 2012. The dollar value of the contracts signed during the first nine months of 2013 increased 19% to $86.1 million as compared to $72.4 million in the same period of 2012.

For the nine-month period ended September 30, 2013, the Company reported revenue from the sale of commercial, industrial and other land of $9.6 million, generating $4.2 million in operating income, compared to $20.8 million of revenue and $5.2 million of operating income in the same period during 2012.

The Company will hold a conference call and webcast on Thursday, November 7, 2013 to discuss its third quarter financial results. The conference call will begin at 8:30 a.m. EST. The conference call can be accessed live over the telephone by dialing (877) 643-7158 or for international callers by dialing (914) 495-8565; please dial-in 10 minutes before the start of the call. A replay will be available on November 7, 2013 at 11:30 a.m. and can be accessed by dialing (855) 859-2056 or for international callers by dialing (404) 537-3406; the conference ID is 94193835. The replay will be available until November 14, 2013. In order to access the live webcast, please go to the Investors section of AV Homes' website at www.avhomesinc.com and click on the webcast link that will be made available. A replay will be available shortly after the original webcast.

AV Homes, Inc. is engaged in homebuilding, community development and land sales in Florida, Arizona and North Carolina. Its principal operations are conducted near Orlando, Florida, Phoenix, Arizona and Raleigh, North Carolina markets. The Company builds communities that serve active adults 55 years and older and people of all ages. AV Homes common shares trade on NASDAQ under the symbol AVHI.

This news release, the conference call and the webcast contain "forward-looking statements" within the meaning of the U.S. federal securities laws, which statements may include information regarding the plans, intentions, expectations, future financial performance, or future operating performance of AV Homes, Inc. Forward-looking statements are based on the expectations, estimates, or projections of management as of the date of this news release, the conference call and the webcast. Although our management believes these expectations, estimates, or projections to be reasonable as of the date of this news release, the conference call and the webcast, forward-looking statements are inherently subject to significant business risks, economic and competitive uncertainties, or other contingencies which could cause our actual results or performance to differ materially from what may be expressed or implied in the forward-looking statements. Important factors that could cause our actual results or performance to differ materially from our forward-looking statements include those set forth in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2012, our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2013 and June 30, 2013 and in our other filings with the Securities and Exchange Commission, which filings are available on www.sec.gov. AV Homes disclaims any intention or obligation to update or revise any forward-looking statements to reflect subsequent events and circumstances, except to the extent required by applicable law.

AV HOMES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the nine and three months ended September 30, 2013 and 2012
(unaudited)
(Dollars in thousands except per share amounts)
Nine Months Three Months
2013 2012 2013 2012
Revenues
Real estate revenues
Homebuilding $ 79,420 $ 52,645 $ 34,167 $ 19,673
Commercial and industrial and other land sales 9,556 20,753 674 8,696
Other real estate 496 367 57 157
Total real estate revenues 89,472 73,765 34,898 28,526
Interest income 130 95 96 32
Other 73 468 5 94
Total revenues 89,675 74,328 34,999 28,652
Expenses
Real estate expenses
Homebuilding 78,515 60,119 32,725 21,456
Commercial and industrial and other land sales 5,352 15,592 95 8,142
Other real estate 2,654 3,344 1,255 102
Total real estate expenses 86,521 79,055 34,075 29,700
Impairment charges (reversal of impairment charges) (925) 7,364 (970) 3,784
Loss on extinguishment of debt 1,144 1,144
General and administrative expenses 11,882 10,296 3,885 3,633
Interest expense 2,515 6,256 (1,020) 1,903
Total expenses 99,993 104,115 35,970 40,164
Loss from unconsolidated entities (84) (117) (7) (38)
Loss before income taxes (10,402) (29,904) (978) (11,550)
Income tax (expense) benefit
Net loss and comprehensive loss (10,402) (29,904) (978) (11,550)
Net income (loss) attributable to non-controlling interests in consolidated entities 899 1,475 899 33
Net loss and comprehensive loss attributable to AV Homes stockholders $ (11,301) $ (31,379) $ (1,877) $ (11,583)
Reconciliation of net loss to loss attributable to common stockholders
Net loss $ (11,301) $ (31,379) $ (1,877) $ (11,583)
Deemed dividend related to beneficial conversion feature of convertible preferred stock (see Note A and Note J for additional information) (11,894) (11,894)
Loss attributable to AV Homes common stockholders $ (23,195) $ (31,379) $ (13,771) $ (11,583)
Basic and Diluted Loss Per Share $ (1.67) $ (2.50) $ (0.86) $ (0.92)
AV HOMES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended September 30, 2013 and 2012
(unaudited)
(Dollars in thousands)
Nine Months
2013 2012
OPERATING ACTIVITIES
Net loss (including net gain or loss attributable to non-controlling interests) $ (10,402) $ (29,904)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,064 3,522
Amortization of stock-based compensation 976 1,113
Impairment of land and other inventories (925) 7,364
Loss on extinguishment of debt 1,144
Loss from unconsolidated entities 84 117
Loss from disposal of assets 22
Changes in operating assets and liabilities:
Restricted cash 334 2,788
Receivables, net 406 340
Income tax receivable 1,293
Land and other inventories (32,071) (6,194)
Assets held for sale (1,228) 8,028
Prepaid expenses and other assets 744 (1,116)
Accounts payable, estimated development liability, and accrued and other liabilities 5,298 (814)
Customer deposits and deferred revenues 2,310 188
NET CASH USED IN OPERATING ACTIVITIES (31,095) (13,424)
INVESTING ACTIVITIES
Investment in property and equipment (856) (3,466)
Return of capital from unconsolidated entities 13
Investment in unconsolidated entities (99) (98)
NET CASH USED IN INVESTING ACTIVITIES (955) (3,551)
FINANCING ACTIVITIES
Issuance of common shares 35,805
Issuance of preferred shares 92,042
Debt issuance costs (1,683)
Contributions from consolidated joint venture partner 596 294
Distributions to consolidated joint venture partner (7) (1,785)
Payment of withholding taxes related to restricted stock and units withheld (34) (445)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 128,402 (3,619)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 96,352 (20,594)
Cash and cash equivalents at beginning of period 79,815 124,316
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 176,167 $ 103,722
Non-cash transaction:
Transfer from assets held for sale to land and other inventories and property and equipment $ 6,341
Beneficial conversion feature (deemed dividend) $ 11,894
Common stock issued for conversion of preferred stock $ 92,976
AV HOMES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Dollars in thousands except per share amounts)
September 30, 2013 December 31, 2012
Assets (unaudited)
Cash and cash equivalents $ 176,167 $ 79,815
Restricted cash 4,348 4,682
Land and other inventories 204,040 171,044
Receivables, net 6,324 6,730
Income tax receivable 1,293
Property and equipment, net 38,431 36,661
Investments in and notes receivable from unconsolidated entities 1,235 1,220
Prepaid expenses and other assets 10,033 10,777
Assets held for sale 23,877 25,649
Total Assets $ 464,455 $ 337,871
Liabilities and Equity
Liabilities
Accounts payable $ 8,927 $ 4,656
Accrued and other liabilities 13,738 12,978
Customer deposits and deferred revenues 4,295 1,985
Estimated development liability for sold land 33,241 32,974
Notes payable 105,402 105,402
Total Liabilities $ 165,603 $ 157,995
Contingent convertible cumulative redeemable preferred stock
Equity
Common Stock, par value $1 per share
Authorized: 50,000,000 shares
Issued: 22,112,813 shares at September 30, 2013
12,938,157 shares at December 31, 2012 22,113 12,938
Additional paid-in capital 393,871 262,363
Retained (deficit) earnings (129,305) (106,110)
286,679 169,191
Treasury stock: at cost, 110,874 shares at September 30, 2013 and December 31, 2012 (3,019) (3,019)
Total AV Homes stockholders' equity 283,660 166,172
Non-controlling interests 15,192 13,704
Total Equity 298,852 179,876
Total Liabilities and Equity $ 464,455 $ 337,871

The following table provides a comparison of certain financial data related to our operations for the nine and three months ended September 30, 2013 and 2012:

Nine Months Three Months
2013 2012 2013 2012
Operating income (loss):
Active adult communities
Revenues
Homebuilding $ 35,910 $ 24,072 $ 17,304 $ 7,732
Amenity 5,349 5,200 1,988 1,644
Expenses
Homebuilding 30,160 25,467 14,214 10,741
Homebuilding selling, general and administrative 6,380 9,439 1,838 2,838
Amenity 6,177 5,426 2,070 1,599
Segment operating income (loss) (1,458) (11,060) 1,170 (5,802)
Primary residential
Revenues
Homebuilding 36,330 21,533 14,658 9,672
Amenity 1,831 1,840 217 625
Expenses
Homebuilding 30,747 20,995 13,029 10,158
Homebuilding selling, general and administrative 3,198 3,295 1,063 1,015
Amenity 1,923 536 (1,168)
Segment operating income (loss) 2,293 (917) 247 292
Commercial and industrial and other land sales
Revenues 9,556 20,753 674 8,696
Expenses 5,352 15,592 95 8,248
Segment operating income 4,204 5,161 579 448
Other operations
Revenues 496 367 58 157
Expenses 303 212 119 70
Segment operating income (loss) 193 155 (61) 87
Operating income (loss) 5,232 (6,661) 1,935 (4,975)
Unallocated income (expenses):
Interest income 130 95 96 32
Equity loss from unconsolidated entities (84) (117) (7) (38)
Loss on extinguishment of debt (1,144) (1,144)
Net (gain)/loss attributable to non-controlling interests (899) (1,475) (899) (33)
Corporate general and administrative expenses (11,882) (10,296) (3,885) (3,633)
Interest expense (2,515) (6,256) 1,020 (1,903)
Other real estate expenses, net (2,241) (2,664) (1,095) 125
(Impairment) reversal of impairment charge of land developed or held for future development 958 (2,861) 958 (14)
Loss before income taxes (11,301) (31,379) (1,877) (11,583)
Income tax benefit
Net loss attributable to AV Homes $ (11,301) $ (31,379) $ (1,877) $ (11,583)

Data from closings for the active adult and primary residential homebuilding segments for the nine and three months ended September 30, 2013 and 2012 is summarized as follows:

For the nine months ended September 30,
Number of
Units


Revenues
Average
Price Per
Unit
2013
Active adult communities 149 $ 35,705 $ 240
Primary residential 161 36,127 $ 224
Total 310 $ 71,832 $ 232
2012
Active adult communities 100 $ 24,021 $ 240
Primary residential 104 21,497 $ 207
Total 204 $ 45,518 $ 223
For the three months ended September 30,
Number of
Units


Revenues
Average
Price Per
Unit
2013
Active adult communities 76 $ 17,257 $ 227
Primary residential 71 14,634 $ 206
Total 147 $ 31,891 $ 217
2012
Active adult communities 34 $ 7,731 $ 227
Primary residential 48 9,674 $ 202
Total 82 $ 17,405 $ 212

Data from contracts signed for the active adult and primary residential homebuilding segments for the nine and three months ended September 30, 2013 and 2012 is summarized as follows:

For the nine months ended September 30, Gross
Number
of Contracts
Signed



Cancellations
Contracts
Signed,
Net of
Cancellations


Dollar
Value

Average
Price Per
Unit
2013
Active adult communities 292 (39) 253 $ 60,353 $ 239
Primary residential 173 (68) 105 25,769 $ 245
Total 465 (107) 358 $ 86,122 $ 241
2012
Active adult communities 169 (46) 123 $ 30,880 $ 251
Primary residential 215 (32) 183 41,551 $ 227
Total 384 (78) 306 $ 72,431 $ 237
For the three months ended September 30,
2013
Active adult communities 93 (14) 79 $ 19,670 $ 249
Primary residential 49 (24) 25 6,536 $ 261
Total 142 (38) 104 $ 26,206 $ 252
2012
Active adult communities 48 (9) 39 $ 9,973 $ 256
Primary residential 68 (8) 60 14,659 $ 244
Total 116 (17) 99 $ 24,632 $ 249

Backlog for the active adult and primary residential homebuilding segments as of September 30, 2013 and 2012 is summarized as follows:


Number of
Units

Dollar
Volume
Average
Price
Per Unit
As of September 30,
2013
Active adult communities 167 $ 41,401 $ 248
Primary residential 66 16,837 $ 255
Total 233 $ 58,238 $ 250
2012
Active adult communities 68 $ 18,578 $ 273
Primary residential 132 29,903 $ 227
Total 200 $ 48,481 $ 242

CONTACT: Investor Contact: Mike Burnett 480-214-7408 m.burnett@avhomesinc.com

Source:AV Homes, Inc.