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AV Homes Reports Results for Third Quarter 2016

Third Quarter 2016 Highlights - as compared to the prior year third quarter (unless otherwise noted)

  • Earnings per share increased 96% to $0.49, on net income of $11.9 million
  • Total revenue increased 34% to $205.4 million
  • Homebuilding revenue increased 34% to $201.8 million
  • Homes delivered increased by 23% to 635 units
  • Average selling price for homes delivered increased 8.5% to $318,000 per home
  • Net new order value increased 13% to $185.4 million on a 3% increase in units
  • Backlog value increased 13% to $347.1 million on 1,081 units
  • Selling communities increased to 63 from 60 and communities with deliveries increased to 60 from 51
  • Full year 2016 pre-tax income outlook increased to a range of $30 million to $32 million

SCOTTSDALE, Ariz., Oct. 27, 2016 (GLOBE NEWSWIRE) -- AV Homes, Inc. (Nasdaq:AVHI), a developer and builder of residential communities in Florida, Arizona and the Carolinas, today announced results for its third quarter ended September 30, 2016. Total revenue for the third quarter of 2016 increased 34% to $205.4 million from $153.8 million in the third quarter of 2015. Net income and diluted earnings per share increased to $11.9 million and $0.49 per share, respectively, compared to net income of $5.5 million and $0.25 per share in the third quarter of 2015.

“We had another very good quarter highlighted by strong increases in revenue and a 116% increase in net income,” said Roger A. Cregg, President and Chief Executive Officer. “Homes delivered in the third quarter increased 23% over the prior year period and revenue improved by 34%. Our gross margins improved 80 basis points sequentially compared to the second quarter, and we improved our overhead leverage by 270 basis points compared to the third quarter of last year. With our year to date results and a backlog sales value for the quarter of $347 million, we are confident in achieving our improved 2016 financial outlook.”

The increase in total revenue was driven by volume increases due to a greater number of communities with deliveries in each of our existing markets, and higher average selling prices due to price increases and improvements in the mix of homes sold. During the third quarter of 2016, the Company delivered 635 homes, a 23% increase from the 515 homes delivered during the third quarter of 2015, and the average unit price per closing improved 8.5% to approximately $318,000 from approximately $293,000 in the third quarter of 2015.

Homebuilding gross margin was 18.8% in the third quarter of 2016 compared to 19.9% in the third quarter of 2015. Homebuilding gross margin is inclusive of the impact associated with the expensing of previously capitalized interest of 2.7% and 1.9% in the 2016 and 2015 periods, respectively. On a sequential basis, homebuilding gross margins improved 80 basis points compared to the second quarter of 2016.

Total SG&A expense as a percent of homebuilding revenue improved to 12.6% in the third quarter of 2016 from 15.3% in the third quarter of 2015. Homebuilding SG&A expense as a percentage of homebuilding revenue was 10.8% in the third quarter of 2016 compared to 12.8% in the third quarter of 2015. The improvement was primarily due to the increased scale of the business in each of our divisions, which allows us to leverage the cost base. Corporate general and administrative expenses as a percentage of homebuilding revenue improved to 1.8% in the third quarter of 2016 from 2.5% in the same period a year ago primarily driven by the continued achievement of favorable cost leverage by effectively managing costs while growing the revenue of the business.

The number of new housing contracts signed, net of cancellations, during the three months ended September 30, 2016 increased 3% to 572, compared to 555 units during the same period in 2015. The increase in housing contracts was primarily attributable to the increase in selling communities to 63 from 60. The average sales price on contracts signed in the third quarter of 2016 increased 9.8% to approximately $324,000 from approximately $295,000 in the third quarter of 2015. The aggregate dollar value of the contracts signed during the third quarter increased 13% to $185.4 million, compared to $164.0 million during the same period one year ago. The backlog value of homes under contract but not yet closed as of September 30, 2016 increased 13% to $347.1 million on 1,081 units, compared to $307.5 million on 1,026 units as of September 30, 2015.

Improved 2016 Outlook

The Company affirmed its previously issued outlook for the full year 2016 and upwardly revised the following items:

  • Closings are expected to increase to approximately 2,400, an improvement from the previous range of 2,300 to 2,400 units;
  • Interest expense is expected to be approximately $4 million after capitalization, an improvement from the previous $5 million; and
  • Pre-tax income is expected to increase to approximately $30 million to $32 million, an improvement from the previous range of $28 million to $30 million.

The Company will hold a conference call and webcast on Friday, October 28, 2016 to discuss its third quarter financial results. The conference call will begin at 8:30 a.m. EDT. 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 October 28, 2016 beginning at 11:30 a.m. EDT and can be accessed by dialing (855) 859-2056 or for international callers by dialing (404) 537-3406; the conference ID is 99271067. The telephonic replay will be available until November 4, 2016. The webcast, which can be accessed by going to the Investor Relations section of AV Homes’ website at www.avhomesinc.com, is accompanied by an Investor Presentation. A replay of the original webcast will be available shortly after the call.

AV Homes, Inc. is engaged in homebuilding and community development in Florida, Arizona and the Carolinas. Its principal operations are conducted in the greater Orlando, Jacksonville, Phoenix, Charlotte and Raleigh markets. The Company builds communities that serve both active adults (55 years and older) as well as people of all ages. AV Homes common shares trade on NASDAQ under the symbol AVHI. For more information, visit www.avhomesinc.com.

This news release, the conference call, webcast and other related items contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements, involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the cyclical nature of the homebuilding industry and its dependence on broader economic conditions; availability and suitability of undeveloped land and improved lots; ability to develop communities within expected timeframes; increases in interest rates and availability of mortgage financing; our ability to access sufficient capital; our ability to generate sufficient cash to service our indebtedness and potential need for additional financing; terms of our financing documents that may restrict our operations and corporate actions; fluctuations in interest rates; our ability to purchase outstanding notes upon certain fundamental changes; our ability to obtain letters of credit and surety bonds; cancellations of home sale orders; competition for home buyers, properties, financing, raw materials and skilled labor; declines in home prices in our primary regions; inflation affecting homebuilding costs or deflation affecting declines in spending and borrowing levels; the prices and supply of building materials and skilled labor; the availability and skill of subcontractors; elimination or reduction of tax benefits associated with home ownership; warranty and construction defect claims; health and safety incidents in homebuilding activities; the seasonal nature of our business; impacts of weather conditions and natural disasters; resource shortages and rate fluctuations; value and costs related to our land and lot inventory; overall market supply and demand for new homes; our ability to recover our costs in the event of reduced home sales; conflicts of interest involving our largest stockholder; contractual restrictions under a stockholders agreement with our largest stockholder; dependence on our senior management; effect of our expansion efforts on our cash flows and profitability; effects of government regulation of development and homebuilding projects; raising healthcare costs; development liabilities that may impose payment obligations on us; our ability to utilize our deferred income tax asset; costs of environmental compliance; impact of environmental changes; dependence on digital technologies and potential interruptions; future sales or dilution of our equity; impairment of intangible assets; and other factors described in our most recent Annual Report on Form 10-K for and our other filings with the Securities and Exchange Commission, which filings are available on www.sec.gov. Forward-looking statements are based on the expectations, estimates, or projections of management as of the date of this news release, the conference call, the Investor Presentation and the webcast. 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 Balance Sheets
(in thousands)
September 30, December 31,
2016 2015
Assets (unaudited)
Cash and cash equivalents $ 16,289 $ 46,898
Restricted cash 1,139 26,948
Land and other inventories 630,909 582,531
Receivables 8,248 7,178
Property and equipment, net 34,223 34,973
Investments in unconsolidated entities 1,177 1,172
Prepaid expenses and other assets 13,033 17,144
Deferred tax assets, net 110,501
Goodwill 19,285 19,295
Total assets $ 834,804 $ 736,139
Liabilities and Stockholders' Equity
Liabilities
Accounts payable $ 37,060 $ 33,606
Accrued and other liabilities 29,389 38,826
Customer deposits 12,223 8,629
Estimated development liability 32,257 32,551
Senior notes, net 290,258 320,846
Total liabilities 401,187 434,458
Stockholders' equity
Common stock, par value $1 per share 22,692 22,444
Additional paid-in capital 401,358 399,719
Accumulated earnings (deficit) 12,586 (117,463)
436,636 304,700
Treasury stock (3,019) (3,019)
Total stockholders’ equity 433,617 301,681
Total liabilities and stockholders' equity $ 834,804 $ 736,139


AV HOMES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Revenues
Homebuilding $ 201,821 $151,130 $ 507,659 $ 280,381
Amenity and other 3,315 2,691 8,834 8,195
Land sales 291 6 1,120 3,470
Total revenues 205,427 153,827 517,613 292,046
Expenses
Homebuilding cost of revenues 163,911 121,089 414,290 228,911
Amenity and other 3,101 2,221 8,057 7,034
Land sales 295 2 685 385
Total real estate expenses 167,307 123,312 423,032 236,330
Selling, general and administrative expenses 25,484 23,191 71,639 52,492
Interest income and other (36) (1) (325)
Interest expense 701 1,840 2,853 7,503
Income (loss) before income taxes 11,935 5,520 20,090 (3,954)
Income tax expense (benefit) 38 (109,959)
Net income (loss) and comprehensive income (loss) $ 11,897 $ 5,520 $ 130,049 $ (3,954)
Basic income (loss) per share $ 0.53 $ 0.25 $ 5.81 $ (0.18)
Diluted income (loss) per share $ 0.49 $ 0.25 $ 5.02 $ (0.18)

Note: Selling, general and administrative expenses related to homebuilding previously included in Homebuilding expenses have been combined with corporate general and administrative expenses and reclassified into a separate new line item called "Selling, general and administrative expenses" to enhance the visibility to our core homebuilding operations and conform with standard industry presentation. For the three and nine months ended September 30, 2015, selling, general and administrative costs of $19.4 million and $40.7 million, respectively, were previously presented in Homebuilding expenses are now included in Selling, general and administrative expenses.

The following table provides a comparison of certain financial data related to our operations for the three and nine months ended September 30, 2016 and 2015 (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
Operating income:
Florida
Revenues:
Homebuilding $ 96,943 $ 86,892 $ 251,587 $ 185,484
Amenity and other 3,315 2,691 8,834 8,195
Land sales 26 6 670 3,470
Total revenues 100,284 89,589 261,091 197,149
Expenses:
Homebuilding cost of revenues 74,872 68,409 196,045 149,033
Homebuilding selling, general and administrative 12,189 11,419 33,374 26,172
Amenity and other 3,075 2,199 7,978 6,938
Land sales 6 2 225 385
Segment operating income $ 10,142 $ 7,560 $ 23,469 $ 14,621
Arizona
Revenues:
Homebuilding $ 42,014 $ 20,012 $ 104,255 $ 45,196
Land sales 185
Total revenues 42,014 20,012 104,440 45,196
Expenses:
Homebuilding cost of revenues 35,236 16,497 87,672 38,704
Homebuilding selling, general and administrative 3,854 3,009 10,773 7,846
Amenity and other 26 22 79 96
Land sales 171
Segment operating income (loss) $ 2,898 $ 484 $ 5,745 $ (1,450)
Carolinas
Revenues:
Homebuilding $ 62,864 $ 44,226 $ 151,817 $ 49,701
Land sales 265 265
Total revenues 63,129 44,226 152,082 49,701
Expenses:
Homebuilding cost of revenues 53,803 36,182 130,573 41,174
Homebuilding selling, general and administrative 5,744 4,944 15,525 6,718
Land sales 289 289
Segment operating income $ 3,293 $ 3,100 $ 5,695 $ 1,809
Operating income $ 16,333 $ 11,144 $ 34,909 $ 14,980
Unallocated income (expenses):
Interest income and other 36 1 325
Corporate general and administrative expenses (3,697) (3,820) (11,967) (11,756)
Interest expense (701) (1,840) (2,853) (7,503)
Income (loss) before income taxes 11,935 5,520 20,090 (3,954)
Income tax expense (benefit) 38 (109,959)
Net income (loss) $ 11,897 $ 5,520 $ 130,049 $ (3,954)

Data from closings for the Florida, Arizona and the Carolinas segments for the three and nine months ended September 30, 2016 and 2015 is summarized as follows (dollars in thousands):

Average
Number Price
For the three months ended September 30, of Units Revenues Per Unit
2016
Florida 340 $ 96,943 $ 285
Arizona 129 42,014 326
Carolinas 166 62,864 379
Total 635 $ 201,821 318
2015
Florida 317 $ 86,892 $ 274
Arizona 71 20,012 282
Carolinas 127 44,226 348
Total 515 $ 151,130 293


Average
Number Price
For the nine months ended September 30, of Units Revenues Per Unit
2016
Florida 904 $ 251,587 $ 278
Arizona 340 104,255 307
Carolinas 413 151,817 368
Total 1,657 $ 507,659 306
2015
Florida 704 $ 185,483 $ 263
Arizona 170 45,196 266
Carolinas 145 49,702 343
Total 1,019 $ 280,381 275

Data from contracts signed for the Florida, Arizona and the Carolinas segments for the three and nine months ended September 30, 2016 and 2015 is summarized as follows (dollars in thousands):

Gross
Number Contracts Average
of Contracts Signed, Net of Dollar Price Per
For the three months ended September 30, Signed Cancellations Cancellations Value Unit
2016
Florida 373 (68) 305 $ 89,076 $ 292
Arizona 125 (29) 96 31,896 332
Carolinas 191 (20) 171 64,457 377
Total 689 (117) 572 $ 185,429 324
2015
Florida 335 (57) 278 $ 75,308 $ 271
Arizona 173 (31) 142 40,425 285
Carolinas 152 (17) 135 48,229 357
Total 660 (105) 555 $ 163,962 295


Gross
Number Contracts Average
of Contracts Signed, Net of Dollar Price Per
For the nine months ended September 30, Signed Cancellations Cancellations Value Unit
2016
Florida 1,245 (201) 1,044 $ 294,413 $ 282
Arizona 465 (108) 357 113,427 318
Carolinas 591 (53) 538 200,827 373
Total 2,301 (362) 1,939 $ 608,667 314
2015
Florida 1,143 (176) 967 $ 260,492 $ 269
Arizona 460 (79) 381 110,189 289
Carolinas 209 (26) 183 63,635 348
Total 1,812 (281) 1,531 $ 434,316 284

Backlog for the Florida, Arizona and the Carolinas segments as of September 30, 2016 and 2015 is summarized as follows (dollars in thousands):

Average
Number Dollar Price
As of September 30, of Units Volume Per Unit
2016
Florida 556 $ 160,007 $ 288
Arizona 250 81,834 327
Carolinas 275 105,302 383
Total 1,081 $ 347,143 321
2015
Florida 536 $ 147,085 $ 274
Arizona 263 78,799 300
Carolinas 227 81,635 360
Total 1,026 $ 307,519 300

Investor Contact: Mike Burnett EVP, Chief Financial Officer 480-214-7408 m.burnett@avhomesinc.com

Source:AV Homes, Inc.