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CalAtlantic Group, Inc. Reports 2017 Third Quarter Results

ARLINGTON, Va., Nov. 8, 2017 /PRNewswire/ -- CalAtlantic Group, Inc. (NYSE: CAA) today announced results for the third quarter ended September 30, 2017.

"We are pleased to report third-quarter earnings which, after excluding delivery delays from the recent hurricanes and the impact of the Weyerhauser I-joint issue, reflect operating progress and a platform that is well-positioned for 2018," said Larry Nicholson, President and Chief Executive Officer of CalAtlantic Group, Inc. "As announced last week, we are merging our company with Lennar Corporation. We have great confidence that this merger will create a larger and even stronger company. Both management teams have already begun planning, with the initial focus on construction cost savings, systems conversions and financial services opportunities. As we begin integration planning, the cooperative spirit I see has been great."

2017 CalAtlantic Third Quarter Highlights and Comparisons to 2016 Third Quarter

  • Net new orders of 3,416, down 3%; Dollar value of net new orders up 6%
  • 574 average active selling communities, up 1%
  • 3,380 new home deliveries, down 8%
  • Average selling price of $448 thousand, down 1%
  • Home sale revenues of $1.5 billion, down 9%
  • Gross margin from home sales of 20.0%, compared to 22.5%
  • SG&A rate from home sales of 11.1%, compared to 10.3%
  • Operating margin from home sales of $134.3 million, or 8.9%, compared to $203.6 million, or 12.2%
  • Net income of $93.4 million, or $0.75 per diluted share, vs. net income of $132.3 million, or $0.97 per diluted share
  • $488.5 million of land purchases and development costs, compared to $387.1 million

Impact of Hurricanes and Weyerhauser I-Joist Issue on Third Quarter Results

During the 2017 third quarter, our operations were negatively impacted by three non-recurring events: Hurricane Harvey, impacting our Texas operations; Hurricane Irma, primarily impacting our Florida operations; and the Weyerhauser I-joist issue, impacting our Colorado, Minnesota and Philadelphia operations. These events collectively reduced our 2017 third quarter orders by an estimated 265 units, reduced our 2017 third quarter deliveries by approximately 240 units, and reduced our home sale revenues by approximately $100 million ($1,515.2 million as reported compared to $1,615.2 million on a pro forma basis).

Orders. Net new orders for the 2017 third quarter were down 3% from the 2016 third quarter, to 3,416 homes, with the dollar value of these orders up 6%. The Company's monthly sales absorption rate was 2.0 per community for the 2017 third quarter, down 5% compared to the 2016 third quarter and down 19% from the 2017 second quarter. The Company's cancellation rate for the 2017 third quarter was 15%, down compared to 16% for the 2016 third quarter and up slightly from 14% for the 2017 second quarter. The Company's incentives on orders was 4.5% for the 2017 third quarter, down approximately 130 basis points compared to the 2016 third quarter, and up 10 basis points compared to the 2017 second quarter. Orders for the month ended October 31, 2017 were 1,094, up 13% over the prior year period.

Backlog. The dollar value of homes in backlog increased 12% to $3.7 billion, or 7,570 homes, compared to $3.3 billion, or 7,307 homes, for the 2016 third quarter, and increased 4% compared to $3.6 billion, or 7,534 homes, for the 2017 second quarter. The increase in year-over-year backlog value was driven by the 8% increase in the average home price in our backlog, to $490 thousand and a 4% increase in units in backlog. As of September 30, 2017, the average gross margin of the 7,570 total homes in backlog was 20.6%, down 20 basis points compared to the total homes in backlog as of June 30, 2017.

Revenue. Revenues from home sales for the 2017 third quarter decreased 9% to $1.5 billion, as compared to the 2016 third quarter, resulting from an 8% decrease in deliveries and a 1% decrease in the Company's average home price to $448 thousand. The decrease in average home price was primarily driven by a 13% decrease in the West region, attributable to a shift in product mix. Excluding the impact of the hurricanes and the Weyerhauser I-joist issue, revenues from home sales for the 2017 third quarter decreased 3% ($1.6 billion on a pro forma basis compared to $1.7 billion for the 2016 third quarter).

Gross Margin. The Company achieved gross margin from homes sales of 20.0% for the 2017 third quarter. The Company's 2017 gross margin was negatively impacted by a shift in product mix and an increase in direct construction costs per home.

SG&A Expenses. Selling, general and administrative expenses for the 2017 third quarter were $168.4 million, or 11.1%, as compared to $170.8 million, or 10.3%, for the 2016 third quarter. Isolating G&A from selling expenses, G&A expenses increased as a percentage of home sale revenues to 5.6% for the 2017 third quarter compared to 5.2% for the prior year period, primarily as a result of a decrease in home sale revenues, driven by the effects of the hurricanes and the Weyerhaeuser I-joist issue. Selling expenses increased as a percentage of home sale revenues to 5.5% for the 2017 third quarter compared to 5.1% for the prior year period as we continue to experience higher co-broker participation, driving an approximately 20 basis point increase compared to the prior year period. In addition, internal commissions for the 2017 third quarter were up approximately 10 basis points compared to the prior year period, driven by a timing related increase due to a large order/delivery imbalance, primarily in the West region where our orders exceeded our deliveries by 16%.

Land. During the 2017 third quarter, the Company spent $488.5 million on land purchases and development costs, compared to $387.1 million for the 2016 third quarter. The Company purchased $304.7 million of land, consisting of 4,043 homesites, of which 17% (based on homesites) is located in the North region, 40% in the Southeast region, 20% in the Southwest region, and 23% in the West region. As of September 30, 2017, the Company owned or controlled 67,961 homesites, of which 47,868 were owned and actively selling or under development, 15,676 were controlled or under option, and the remaining 4,417 homesites were held for future development or for sale.

Liquidity. The Company ended the quarter with $418.5 million of available liquidity, including $83.3 million of unrestricted homebuilding cash and $335.2 million available to borrow under its $750 million revolving credit facility. The Company's homebuilding debt to book capitalization as of September 30, 2017 and 2016 was 46.9% and 46.4%, respectively, and adjusted net homebuilding debt to adjusted book capitalization was 46.1%* and 44.9%*, respectively. In addition, the Company's homebuilding debt to adjusted homebuilding EBITDA for the LTM period ending September 30, 2017 and 2016 was 4.2x* and 3.7x*, respectively.

Entry Into Merger Agreement with Lennar Corporation

On October 30, 2017, the Company announced that it entered into a definitive merger agreement with Lennar Corporation ("Lennar") pursuant to which each share of CalAtlantic stock will be exchanged for 0.885 shares of Lennar Class A common stock. CalAtlantic's stockholders will also have the option to elect to exchange all or a portion of their shares for cash in the amount of $48.26 per share, subject to a maximum cash amount of approximately $1.2 billion. This business combination will create the nation's largest homebuilder. The transaction, which is subject to the satisfaction or waiver of certain customary conditions, including the approval of the merger by the Company's stockholders and the stockholders of Lennar, is expected to close in the first calendar quarter of 2018.

Cancelation of Earnings Conference Call

As a result of the Company's entry into a definitive merger agreement with Lennar, the Company has cancelled the conference call and webcast to discuss its results for the 2017 third quarter that had previously been scheduled for Thursday, November 9th at 4:30 p.m. Eastern time.

About CalAtlantic Group, Inc.

CalAtlantic Group, Inc. (NYSE: CAA), one of the nation's largest and most respected homebuilders, offers well-crafted homes in thoughtfully designed communities that meet the desires of customers across the homebuilding spectrum, from entry level to luxury, in 43 Metropolitan Statistical Areas spanning 19 states. With a trusted reputation for quality craftsmanship, an outstanding customer experience and exceptional architectural design earned over its 50 year history, CalAtlantic Group, Inc. utilizes its over five decades of land acquisition, development and homebuilding expertise to acquire and build desirable communities in locations that meet the high expectations of the company's homebuyers. We invite you to learn more about us by visiting www.calatlantichomes.com.

This news release contains certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, and may qualify for the safe harbor provided for in Section 21E of the Securities Exchange Act of 1934, as amended. These statements include but are not limited to new home orders; deliveries; backlog; absorption rates; cancellation rates; average home price; revenue; profitability; cash flow; liquidity; gross margin; operating margin; product mix; land supply; our liquidity; the estimated impact on the Company from the hurricanes and Weyerhauser I-Joist issue; statements about the benefits of the proposed merger of the Company with Lennar, the expected timing for completing the proposed merger, the Company's and Lennar's objectives, plans and strategies and any other statements about future expectations, beliefs, goals, plans or prospects of the Company or Lennar, including after completion of the proposed merger. Any statements that are not statements of historical fact (including statements containing the words "expects," "intends," "anticipates," "estimates," "predicts," "believes," "should," "potential," "may," "forecast," objective," "plan," or "targets" and other similar expressions) are intended to identify forward-looking statements. Forward-looking statements are based on our current expectations or beliefs regarding future events or circumstances, and you should not place undue reliance on these statements. Such statements involve known and unknown risks, uncertainties, assumptions and other factors many of which are out of the Company's control and difficult to forecast that may cause actual results to differ materially from those that may be described or implied. Such factors include but are not limited to: local and general economic and market conditions, including consumer confidence, employment rates, interest rates, the cost and availability of mortgage financing, and stock market, home and land valuations; the impact on economic conditions, terrorist attacks or the outbreak or escalation of armed conflict involving the United States; the cost and availability of suitable undeveloped land, building materials and labor; the cost and availability of construction financing and corporate debt and equity capital; our significant amount of debt and the impact of restrictive covenants in our debt agreements; our ability to repay our debt as it comes due; changes in our credit rating or outlook; the demand for and affordability of single-family homes; the supply of housing for sale; cancellations of purchase contracts by homebuyers; the cyclical and competitive nature of the Company's business; governmental regulation, including the impact of "slow growth" or similar initiatives; delays in the land entitlement process, development, construction, or the opening of new home communities; adverse weather conditions and natural disasters; environmental matters; risks relating to the Company's financial services operations; future business decisions and the Company's ability to successfully implement the Company's operational and other strategies; litigation and warranty claims; the risk that the proposed merger with Lennar may not be completed in a timely manner or at all; the risk that the Company or Lennar may be unable to obtain stockholder approval as required for consummation of the proposed merger; the risk that conditions to the closing of the proposed merger may not be satisfied or waived; the transaction may involve unexpected costs, liabilities or delays; the Company's business may suffer as a result of the uncertainty surrounding the transaction; the costs and outcome of any legal proceeding relating to the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the ability of Lennar to recognize synergies and other benefits of the transaction; risks that the transaction disrupts current plans and operations of the Company; potential difficulties faced by the Company in employee recruitment and retention as a result of the transaction; the effect of the announcement or pendency of the transactions contemplated by the merger agreement on the Company's ability to maintain relationships with its customers, suppliers and others with whom it does business; risks related to diverting management's attention from the Company's ongoing business operations; other risks to consummation of the transaction; and other risks discussed in the Company's filings with the Securities and Exchange Commission, including in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and subsequent Quarterly Reports on Form 10-Q. The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements. The Company nonetheless reserves 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.

No Offer of Solicitation.

This communication is for informational purposes only and shall not constitute an offer to purchase, nor a solicitation of an offer to sell, subscribe for or the solicitation of an offer to buy any securities or the solicitation of any vote or approval in connection with the proposed transaction or otherwise, nor shall there be any solicitation, offer, sale, issuance or transfer of securities in any jurisdiction in which such solicitation, offer, sale, issuance or transfer would be unlawful. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

Additional Information about the Proposed Transaction and Where to Find It.

In connection with the proposed merger, Lennar will file with the Securities and Exchange Commission (the "SEC") a registration statement on Form S-4 (the "Registration Statement"), in which a joint proxy statement of the Company and Lennar will be included that also constitutes a prospectus (the "Joint Proxy Statement/Prospectus"). Investors and stockholders are urged to read the Registration Statement and the Joint Proxy Statement/Prospectus regarding the proposed merger and the related transactions, when it becomes available and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they will contain important information about the Company, Lennar and the proposed merger. You will be able to obtain a free copy of the Joint Proxy Statement/Prospectus, as well as other filings containing information about the Company and Lennar at the SEC's website (www.sec.gov). You will also be able to obtain these documents, free of charge, from the Company at www.CalAtlantic.com under the link "Investors" and then under the heading "Financials" and the subheading "SEC Filings" and from Lennar at www.Lennar.com under the tab "Investors" and then under the heading "Financials."

Participants in the Solicitation.

The Company, Lennar, their respective directors, executive officers, other members of management and employees may be deemed to be participants in the solicitation of proxies from the Company's and Lennar's stockholders in connection with the proposed transaction under the rules of the SEC. Information about the directors and executive officers of the Company and their ownership of Company stock is set forth in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2016, which was filed with the SEC on February 28, 2017 and its proxy statement for its 2017 annual meeting of stockholders, which was filed with the SEC on March 31, 2017. Information regarding Lennar's directors and executive officers is contained in Lennar's annual report on Form 10-K for the fiscal year ended November 30, 2016, which was filed with the SEC on January 20, 2017, and its proxy statement for its 2017 annual general meeting of stockholders, which was filed with the SEC on March 7, 2017. These documents can be obtained free of charge from the sources indicated above. Certain directors, executive officers, other members of management and employees of the Company and Lennar may have direct or indirect interest in the transaction due to securities holdings, vesting of equity awards and rights to severance payments. Additional information regarding the participants in the solicitation of the Company and Lennar stockholders will be included in the Joint Proxy Statement.

Contact:
Jeff McCall, EVP & CFO (240) 532-3888, jeff.mccall@calatl.com

*Please see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.

(Note: Tables Follow)

KEY STATISTICS AND FINANCIAL DATA1





As of or For the Three Months Ended




September 30,


September 30,


Percentage


June 30,


Percentage




2017


2016


or % Change


2017


or % Change

Select Operating Data

(Dollars in thousands)
















Deliveries


3,380



3,680


(8%)



3,653


(7%)

Average selling price

$

448


$

452


(1%)


$

444


1%

Home sale revenues

$

1,515,167


$

1,665,030


(9%)


$

1,620,614


(7%)

Gross margin % (including land sales)


20.0%



22.4%


(2.4%)



20.0%


Gross margin % from home sales


20.0%



22.5%


(2.5%)



20.0%


Adjusted gross margin % from home sales (excluding interest amortized to cost of home sales)*


23.2%



25.2%


(2.0%)



23.2%


Incentive and stock-based compensation expense

$

15,347


$

18,594


(17%)


$

16,401


(6%)

Selling expenses

$

82,781


$

84,723


(2%)


$

87,867


(6%)

G&A expenses (excluding incentive and stock-based compensation expenses)

$

70,301


$

67,498


4%


$

69,729


1%

SG&A expenses

$

168,429


$

170,815


(1%)


$

173,997


(3%)

SG&A % from home sales


11.1%



10.3%


0.8%



10.7%


0.4%

Operating margin from home sales

$

134,270


$

203,587


(34%)


$

149,368


(10%)

Operating margin % from home sales


8.9%



12.2%


(3.3%)



9.2%


(0.3%)

Net new orders


3,416



3,531


(3%)



4,078


(16%)

Net new orders (dollar value)

$

1,618,238


$

1,520,358


6%


$

1,874,782


(14%)

Average active selling communities


574



566


1%



557


3%

Monthly sales absorption rate per community


1.98



2.08


(5%)



2.44


(19%)

Cancellation rate


15%



16%


(1%)



14%


1%

Gross cancellations


617



679


(9%)



677


(9%)

Backlog (homes)


7,570



7,307


4%



7,534


0%

Backlog (dollar value)

$

3,708,701


$

3,314,883


12%


$

3,561,471


4%
















Land purchases (incl. seller financing)

$

304,689


$

227,596


34%


$

262,411


16%

Adjusted Homebuilding EBITDA*

$

205,852


$

267,835


(23%)


$

220,500


(7%)

Adjusted Homebuilding EBITDA Margin %*


13.6%



16.0%


(2.4%)



13.6%


0.0%

Homebuilding interest incurred

$

52,972


$

56,872


(7%)


$

52,168


2%

Homebuilding interest capitalized to inventories owned

$

52,158


$

55,761


(6%)


$

51,338


2%

Homebuilding interest capitalized to investments in JVs

$

814


$

1,111


(27%)


$

830


(2%)

Interest amortized to cost of sales (incl. cost of land sales)

$

48,912


$

44,751


9%


$

52,347


(7%)



















As of




September 30,


December 31,


Percentage




2017


2016


or % Change

Select Balance Sheet Data

(Dollars in thousands, except per share amounts)











Homebuilding cash (including restricted cash)

$

112,930


$

219,407


(49%)

Inventories owned

$

6,946,766


$

6,438,792


8%

Goodwill

$

985,185


$

970,185


2%

Homesites owned and controlled


67,961



65,424


4%

Homes under construction


8,119



5,792


40%

Completed specs


1,059



1,255


(16%)

Homebuilding debt

$

3,822,138


$

3,419,787


12%

Stockholders' equity

$

4,329,211


$

4,207,586


3%

Stockholders' equity per share

$

39.28


$

36.77


7%

Total consolidated debt to book capitalization


47.9%



46.6%


1.3%

Adjusted net homebuilding debt to total adjusted book capitalization*


46.1%



43.2%


2.9%

1All statistical numbers exclude unconsolidated joint ventures unless noted otherwise.

*Please see "Reconciliation of Non-GAAP Financial Measures" at the end of this release.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS






Three Months Ended
September 30,


Nine Months Ended
September 30,





2017


2016


2017


2016





(Dollars in thousands, except per share amounts)





(Unaudited)

Homebuilding:













Home sale revenues

$

1,515,167


$

1,665,030


$

4,473,480


$

4,402,896


Land sale revenues


676



5,928



1,176



32,107



Total revenues


1,515,843



1,670,958



4,474,656



4,435,003


Cost of home sales


(1,212,468)



(1,290,628)



(3,572,572)



(3,440,549)


Cost of land sales


(240)



(5,638)



(247)



(31,217)



Total cost of sales


(1,212,708)



(1,296,266)



(3,572,819)



(3,471,766)




Gross margin


303,135



374,692



901,837



963,237




Gross margin %


20.0%



22.4%



20.2%



21.7%


Selling, general and administrative expenses


(168,429)



(170,815)



(498,702)



(473,210)


Income (loss) from unconsolidated joint ventures


5,426



1,231



9,760



2,643


Other income (expense)


(1,238)



(4,169)



(4,082)



(11,992)




Homebuilding pretax income


138,894



200,939



408,813



480,678

Financial Services:













Revenues


20,161



21,433



60,394



59,524


Expenses


(12,883)



(11,626)



(36,919)



(34,635)




Financial services pretax income


7,278



9,807



23,475



24,889

Income before taxes


146,172



210,746



432,288



505,567

Provision for income taxes


(52,820)



(78,398)



(157,322)



(187,798)

Net income


93,352



132,348



274,966



317,769

Less: Net income allocated to unvested restricted stock


(400)



(294)



(1,104)



(635)

Net income available to common stockholders

$

92,952


$

132,054


$

273,862


$

317,134
















Income Per Common Share:













Basic


$

0.84


$

1.12


$

2.43


$

2.66


Diluted

$

0.75


$

0.97


$

2.14


$

2.34
















Weighted Average Common Shares Outstanding:













Basic



110,205,460



118,338,891



112,778,362



119,188,145


Diluted


124,449,912



136,077,415



129,521,479



136,888,927
















Cash Dividends Declared Per Common Share

$

0.04


$

0.04


$

0.12


$

0.12

CONDENSED CONSOLIDATED BALANCE SHEETS








September 30,


December 31,







2017


2016







(Dollars in thousands)

ASSETS

(Unaudited)




Homebuilding:







Cash and equivalents

$

83,310


$

191,086


Restricted cash



29,620



28,321


Inventories:










Owned




6,946,766



6,438,792



Not owned



91,944



66,267


Investments in unconsolidated joint ventures


130,692



127,127


Deferred income taxes, net


307,251



330,378


Goodwill




985,185



970,185


Other assets




235,135



204,489




Total Homebuilding Assets


8,809,903



8,356,645

Financial Services:







Cash and equivalents


46,357



17,041


Restricted cash



21,205



21,710


Mortgage loans held for sale, net


160,068



262,058


Mortgage loans held for investment, net


25,510



24,924


Other assets




15,991



26,666




Total Financial Services Assets


269,131



352,399





Total Assets

$

9,079,034


$

8,709,044












LIABILITIES AND EQUITY






Homebuilding:







Accounts payable


$

177,752


$

211,780


Accrued liabilities



562,424



599,905


Revolving credit facility


295,600




Secured project debt and other notes payable


43,150



27,579


Senior notes payable


3,483,388



3,392,208




Total Homebuilding Liabilities


4,562,314



4,231,472

Financial Services:







Accounts payable and other liabilities


20,831



22,559


Mortgage credit facility


152,786



247,427




Total Financial Services Liabilities


173,617



269,986





Total Liabilities


4,735,931



4,501,458

Equity:







Stockholders' Equity:








Preferred stock






Common stock


1,102



1,144



Additional paid-in capital


3,064,963



3,204,835



Accumulated earnings


1,263,318



1,001,779



Accumulated other comprehensive income (loss), net of tax


(172)



(172)



Total Stockholders' Equity


4,329,211



4,207,586


Noncontrolling Interest


13,892






Total Equity


4,343,103



4,207,586





Total Liabilities and Equity

$

9,079,034


$

8,709,044












INVENTORIES




September 30,


December 31,



2017


2016



(Dollars in thousands)

Inventories Owned:


(Unaudited)








Land and land under development


$ 2,886,731


$ 3,627,740

Homes completed and under construction


3,624,417


2,304,109

Model homes


435,618


506,943

Total inventories owned


$ 6,946,766


$ 6,438,792






Inventories Owned by Segment:










North


$ 984,186


$ 851,972

Southeast


2,034,307


1,896,552

Southwest


1,489,941


1,421,669

West


2,438,332


2,268,599

Total inventories owned


$ 6,946,766


$ 6,438,792






REGIONAL OPERATING DATA







Three Months Ended September 30,






2017


2016


% Change






Homes


ASP


Homes


ASP


Homes


ASP






(Dollars in thousands)

New homes delivered:




















North



792


$

357



848


$

332



(7%)



8%


Southeast



1,025



417



1,052



380



(3%)



10%


Southwest



792



450



894



435



(11%)



3%


West



771



582



886



671



(13%)



(13%)



Consolidated total



3,380


$

448



3,680


$

452



(8%)



(1%)


















































Nine Months Ended September 30,






2017


2016


% Change






Homes


ASP


Homes


ASP


Homes


ASP






(Dollars in thousands)

New homes delivered:




















North



2,389


$

355



2,120


$

335



13%



6%


Southeast



2,981



405



2,748



387



8%



5%


Southwest



2,485



442



2,751



424



(10%)



4%


West



2,190



602



2,272



645



(4%)



(7%)



Consolidated total



10,045


$

445



9,891


$

445



2%




















































Three Months Ended September 30,






2017


2016


% Change






Homes


ASP


Homes


ASP


Homes


ASP






(Dollars in thousands)

Net new orders:




















North



768


$

358



823


$

337



(7%)



6%


Southeast



1,015



405



1,071



375



(5%)



8%


Southwest



735



450



831



428



(12%)



5%


West



898



669



806



603



11%



11%



Consolidated total



3,416


$

473



3,531


$

431



(3%)



10%




























Nine Months Ended September 30,






2017


2016


% Change






Homes


ASP


Homes


ASP


Homes


ASP






(Dollars in thousands)

Net new orders:




















North



2,747


$

352



2,647


$

333



4%



6%


Southeast



3,550



397



3,384



374



5%



6%


Southwest



2,662



446



2,907



429



(8%)



4%


West



2,839



649



2,649



632



7%



3%



Consolidated total



11,798


$

458



11,587


$

437



2%



5%





























Three Months Ended September 30,



Nine Months Ended September 30,







2017



2016



% Change



2017



2016



% Change

Average number of selling communities



















during the period:




















North



150



134



12%



143



125



14%


Southeast



184



182



1%



183



180



2%


Southwest



158



165



(4%)



156



170



(8%)


West



82



85



(4%)



83



91



(9%)



Consolidated total



574



566



1%



565



566



(0%)




























At September 30,






2017


2016


% Change






Homes


Dollar
Value


Homes


Dollar
Value


Homes


Dollar
Value






(Dollars in thousands)

Backlog:




















North



1,656


$

603,952



1,530


$

523,882



8%



15%


Southeast



2,362



1,018,389



2,257



934,797



5%



9%


Southwest



1,791



877,533



2,058



945,052



(13%)



(7%)


West



1,761



1,208,827



1,462



911,152



20%



33%



Consolidated total



7,570


$

3,708,701



7,307


$

3,314,883



4%



12%




























At September 30,






2017


2016


% Change

Homesites owned and controlled:








North


14,172


15,966


(11%)


Southeast


23,591


22,993


3%


Southwest


14,560


15,113


(4%)


West



15,638


13,892


13%



Total (including joint ventures)


67,961


67,964


(0%)












Homesites owned


52,285


51,385


2%


Homesites optioned or subject to contract


14,544


15,209


(4%)


Joint venture homesites


1,132


1,370


(17%)



Total (including joint ventures)


67,961


67,964


(0%)





















Homesites owned:








Raw lots


11,309


10,013


13%


Homesites under development


12,825


10,980


17%


Finished homesites


12,908


15,071


(14%)


Under construction or completed homes


10,826


10,055


8%


Held for future development/for sale


4,417


5,266


(16%)



Total


52,285


51,385


2%











RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Each of the below measures are non-GAAP financial measures and other companies may calculate such non-GAAP measures differently. Due to the significance of the GAAP components excluded, such measures should not be considered in isolation or as an alternative to operating performance measures prescribed by GAAP.

The table set forth below reconciles the Company's gross margin percentage from home sales to adjusted gross margin percentage from home sales, excluding interest amortized to cost of home sales. We believe these measures are useful to management and investors as they provide perspective on the underlying operating performance of the business excluding these charges and provide comparability with the Company's peer group.


Three Months Ended


September 30,
2017


Gross
Margin %


September 30,
2016


Gross
Margin %


June 30,
2017


Gross
Margin %


(Dollars in thousands)
















Home sale revenues

$

1,515,167




$

1,665,030




$

1,620,614



Less: Cost of home sales


(1,212,468)





(1,290,628)





(1,297,249)



Gross margin from home sales


302,699


20.0%



374,402


22.5%



323,365


20.0%

Add: Capitalized interest included in cost of home sales


48,912


3.2%



44,636


2.7%



52,347


3.2%

Adjusted gross margin from home sales, excluding interest amortized to cost of home sales

$

351,611


23.2%


$

419,038


25.2%


$

375,712


23.2%
















The table set forth below reconciles the Company's total consolidated debt to adjusted net homebuilding debt and provides the Company's total consolidated debt to book capitalization and adjusted net homebuilding debt to total adjusted book capitalization ratios. In addition, the table set forth below calculates homebuilding debt to adjusted homebuilding EBITDA. We believe these ratios are useful to management and investors as a measure of the Company's ability to obtain financing. For purposes of the ratio of adjusted net homebuilding debt to total adjusted book capitalization, total adjusted book capitalization is adjusted net homebuilding debt plus stockholders' equity. Adjusted net homebuilding debt excludes indebtedness of the Company's financial services subsidiary and additionally reflects the offset of cash and equivalents.




September 30,
2017


June 30,
2017


December 31,
2016


September 30,
2016




(Dollars in thousands)















Total consolidated debt

$

3,974,924


$

3,912,101


$

3,667,214


$

3,742,627

Less:














Financial services indebtedness


(152,786)



(149,828)



(247,427)



(161,898)


Homebuilding cash, including restricted cash


(112,930)



(200,200)



(219,407)



(213,829)

Adjusted net homebuilding debt


3,709,208



3,562,073



3,200,380



3,366,900

Stockholders' equity


4,329,211



4,235,706



4,207,586



4,134,435

Total adjusted book capitalization

$

8,038,419


$

7,797,779


$

7,407,966


$

7,501,335















Total consolidated debt to book capitalization


47.9%



48.0%



46.6%



47.5%















Adjusted net homebuilding debt to total adjusted book capitalization


46.1%



45.7%



43.2%



44.9%





























Homebuilding debt

$

3,822,138


$

3,762,273


$

3,419,787


$

3,580,729

LTM adjusted homebuilding EBITDA

$

919,286


$

981,269


$

996,183


$

979,694















Homebuilding debt to adjusted homebuilding EBITDA


4.2x



3.8x



3.4x



3.7x





























The table set forth below calculates EBITDA and Adjusted Homebuilding EBITDA. Adjusted Homebuilding EBITDA means net income (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) homebuilding interest expense, (c) expensing of previously capitalized interest included in cost of sales, (d) impairment charges, (e) (gain) loss on early extinguishment of debt, (f) homebuilding depreciation and amortization, including amortization of capitalized model costs, (g) amortization of stock-based compensation, (h) income (loss) from unconsolidated joint ventures, (i) income (loss) from financial services subsidiaries, (j) extraordinary purchase accounting adjustments and (k) merger and other one-time transaction related costs. Other companies may calculate Adjusted Homebuilding EBITDA (or similarly titled measures) differently. We believe Adjusted Homebuilding EBITDA information is useful to management and investors as it provides perspective on the underlying performance of the business. Adjusted Homebuilding EBITDA is a non-GAAP financial measure and due to the significance of the GAAP components excluded, should not be considered in isolation or as an alternative to net income, cash flow from operations or any other operating or liquidity performance measure prescribed by GAAP.




Three Months Ended


LTM Ended September 30,




September 30,
2017


September 30,
2016


June 30,
2017


2017


2016




(Dollars in thousands)


















Net income

$

93,352


$

132,348


$

98,994


$

441,927


$

395,298


Provision for income taxes


52,820



78,398



57,254



237,910



236,446


Homebuilding interest amortized to cost of sales


48,912



44,751



52,347



195,425



163,820


Homebuilding depreciation and amortization


14,101



15,735



14,915



60,116



61,827

EBITDA


209,185



271,232



223,510



935,378



857,391

Add:
















Amortization of stock-based compensation


5,066



3,704



4,922



20,860



18,220


Cash distributions of income from unconsolidated joint ventures


3,970





193



7,465



2,688


Purchase accounting adjustments included in cost of home sales










82,705


Merger and other one-time transaction related costs


335



3,937



937



4,957



58,635

Less:

















Income from unconsolidated joint ventures


5,426



1,231



446



11,174



4,990


Income from financial services subsidiaries


7,278



9,807



8,616



38,200



34,955

Adjusted Homebuilding EBITDA

$

205,852


$

267,835


$

220,500


$

919,286


$

979,694


















Homebuilding revenues

$

1,515,843


$

1,670,958


$

1,621,114


$

6,427,693


$

6,109,314


















Adjusted Homebuilding EBITDA Margin %


13.6%



16.0%



13.6%



14.3%



16.0%


















View original content:http://www.prnewswire.com/news-releases/calatlantic-group-inc-reports-2017-third-quarter-results-300552219.html

SOURCE CalAtlantic Group, Inc.