TRI Pointe Group, Inc. Reports 2017 Fourth Quarter and Full Year Results and Announces New Stock Repurchase Program

  • New Home Orders up 17% and New Home Deliveries up 23% for the Quarter
  • Backlog Dollar Value up 56% on a 32% Increase in Backlog Units
  • Home Sales Revenue of $1.1 Billion, up 46% for the Quarter
  • Homebuilding Gross Margin of 21.7% for the Quarter
  • Authorizes New Stock Repurchase Program of $100 Million

IRVINE, Calif., Feb. 20, 2018 (GLOBE NEWSWIRE) -- TRI Pointe Group, Inc. (the "Company") (NYSE:TPH) today announced results for the fourth quarter ended December 31, 2017 and full year 2017. The Company also announced that its Board of Directors has approved a new stock repurchase program authorizing the repurchase of up to $100 million of Company common stock through March 31, 2019 (the “Repurchase Program”).

Results and Operational Data for Fourth Quarter 2017 and Comparisons to Fourth Quarter 2016

  • Net income available to common stockholders was $74.0 million, or $0.49 per diluted share, compared to $57.9 million, or $0.36 per diluted share. In the fourth quarter 2017, the Company recorded a $22.0 million tax charge related to the re-measurement of the Company’s net deferred tax assets as a result of the recently enacted Tax Cuts and Jobs Act, as well as a pretax charge of $13.2 million related to the impairment of an investment in an unconsolidated entity. Excluding these items, adjusted net income available to common stockholders was $107.4 million, or $0.70 per diluted share.* No similar adjustments existed in the fourth quarter of 2016.
  • New home orders of 1,063 compared to 909, an increase of 17%
  • Active selling communities averaged 127.5 compared to 122.8, an increase of 4%
    • New home orders per average selling community increased by 13% to 8.3 orders (2.8 monthly) compared to 7.4 orders (2.5 monthly)
    • Cancellation rate of 17% compared to 20%, a decrease of 300 basis points
  • Backlog units at quarter end of 1,571 homes compared to 1,193, an increase of 32%
    • Dollar value of backlog at quarter end of $1.0 billion compared to $661.1 million, an increase of 56%
    • Average sales price in backlog at quarter end of $657,000 compared to $554,000, an increase of 19%
  • Home sales revenue of $1.1 billion compared to $770.7 million, an increase of 46%
    • New home deliveries of 1,757 homes compared to 1,427 homes, an increase of 23%
    • Average sales price of homes delivered of $639,000 compared to $540,000, an increase of 18%
  • Homebuilding gross margin percentage of 21.7% compared to 20.0%, an increase of 170 basis points
    • Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 24.2%*
  • SG&A expense as a percentage of homes sales revenue of 7.2% compared to 9.2%, a decrease of 200 basis points
  • Ratios of debt-to-capital and net debt-to-net capital of 43.3% and 38.1%*, respectively, as of December 31, 2017
  • Ended fourth quarter of 2017 with total liquidity of 875.2 million, including cash of $282.9 million and $592.3 million of availability under the Company's unsecured revolving credit facility

    * See "Reconciliation of Non-GAAP Financial Measures"

Results and Operational Data for Full Year 2017 and Comparisons to Full Year 2016

  • Net income available to common stockholders was $187.2 million, or $1.21 per diluted share, compared to $195.2 million, or $1.21 per diluted share. Adjusted net income available to common stockholders was $220.6 million, or $1.42 per diluted share, after excluding the $22.0 million tax charge related to the re-measurement of the Company’s net deferred tax assets and the $13.2 million pretax charge related to the impairment of an investment in an unconsolidated entity.* No similar adjustments existed in 2016.
  • New home orders of 5,075 compared to 4,248, an increase of 19%
  • Active selling communities averaged 127.5 compared to 118.3, an increase of 8%
    • New home orders per average selling community increased by 11% to 39.8 orders (3.3 monthly) compared to 35.9 orders (3.0 monthly)
    • Cancellation rate of 15% in both full year periods
  • Home sales revenue of $2.7 billion compared to $2.3 billion, an increase of 17%
    • New home deliveries of 4,697 homes compared to 4,211 homes, an increase of 12%
    • Average sales price of homes delivered of $582,000 compared to $553,000, an increase of 5%
  • Homebuilding gross margin percentage of 20.5% compared to 21.2%, a decrease of 70 basis points
    • Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 22.9%*
  • SG&A expense as a percentage of homes sales revenue of 10.1% compared to 10.8%, a decrease of 70 basis points
  • Repurchased 8,994,705 shares of common stock at an average price of $12.48 for an aggregate dollar amount of $112.2 million in the full year ended December 31, 2017

    * See "Reconciliation of Non-GAAP Financial Measures"

“We ended 2017 on a very strong note,” said TRI Pointe Group CEO Doug Bauer. “Fourth quarter home sales revenue grew 46% year-over-year, thanks to a 23% increase in new home deliveries and an 18% rise in average selling price. We also posted solid year-over-year operating margin expansion, as both homebuilding gross margins and SG&A as a percentage of revenue improved during the quarter, culminating in an 81% increase in pretax income. New home orders during the quarter also surpassed last year’s comparable quarter total, as our average sales pace per community was a healthy 2.8 homes per community per month compared to 2.5 in the same period last year.”

“For the full year 2017, we posted double digit gains in new home orders of 19%, home sales revenue of 17% and pretax income of 13%, and we ended the year with a backlog dollar value 56% higher than the prior year,” said Mr. Bauer. These results are a testament to the ongoing strength of our homebuilding markets, the quality of our land positions and the value created by our unique operating strategy.”

Fourth Quarter 2017 Operating Results

Net income available to common stockholders was $74.0 million, or $0.49 per diluted share, for the fourth quarter of 2017, compared to net income available to common stockholders of $57.9 million, or $0.36 per diluted share, for the fourth quarter of 2016. The increase in net income available to common stockholders was primarily driven by higher home sales revenue and homebuilding gross margin, partially offset by a $22.0 million tax charge related to the re-measurement of the Company’s net deferred tax assets and a pretax charge of $13.2 million related to the impairment of an investment in an unconsolidated entity. Excluding these items, adjusted net income available to common stockholders was $107.4 million or $0.70 per diluted share.* No similar adjustments existed in the fourth quarter of 2016.

Home sales revenue increased $352.1 million, or 46%, to $1.1 billion for the fourth quarter of 2017, as compared to $770.7 million for the fourth quarter of 2016. The increase was primarily attributable to a 23% increase in new home deliveries to 1,757, and an 18% increase in average selling price of homes delivered to $639,000 compared to $540,000 in the fourth quarter of 2016.

New home orders increased 17% to 1,063 homes for the fourth quarter of 2017, as compared to 909 homes for the same period in 2016. Average selling communities was 127.5 for the fourth quarter of 2017 compared to 122.8 for the fourth quarter of 2016. New home orders per average selling community for the fourth quarter of 2017 was 8.3 orders (2.8 monthly) compared to 7.4 orders (2.5 monthly) during the fourth quarter of 2016.

The Company ended the quarter with 1,571 homes in backlog, representing approximately $1.0 billion. The average selling price of homes in backlog as of December 31, 2017 increased $103,000, or 19%, to $657,000 compared to $554,000 at December 31, 2016.

Homebuilding gross margin percentage for the fourth quarter of 2017 increased to 21.7% compared to 20.0% for the fourth quarter of 2016. Excluding interest, impairments and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 24.2% for the fourth quarter of 2017 compared to 22.2% for the fourth quarter of 2016.* The increase in homebuilding gross margin percentage was largely due to the mix of homes delivered during the quarter, with 225 more homes delivered from our California assets, which have gross margins above the Company average.

Selling, general and administrative ("SG&A") expense for the fourth quarter of 2017 decreased to 7.2% of home sales revenue as compared to 9.2% for the fourth quarter of 2016 due to increased leverage as a result of the 46% increase in home sales revenue.

“We continue to be at the forefront of homebuilding innovation, both in terms of community planning and new home design,” said TRI Pointe Group COO Tom Mitchell. “We strive to create a unique home buying experience for our customers, one that takes into account the distinct aesthetic of our local markets and the lifestyle wants and needs of each buyer segment. We believe that this emphasis on design and innovation played a key role in our strong financial performance in 2017. We are in the process of rolling out several communities with new home concepts that we expect will appeal to two of the largest home buying segments - Active Adults and Millennials - and we are excited about their prospects.”

* See “Reconciliation of Non-GAAP Financial Measures”

Outlook

For the full year 2018, the Company expects to grow average selling communities by 5% compared to 2017 and deliver between 5,100 and 5,400 homes at an average sales price of approximately $610,000. The Company expects its homebuilding gross margin percentage for the full year 2018 to be in the range of 20.5% to 21.5% and expects its SG&A expense as a percentage of home sales revenue to be in the range of 9.9% to 10.3%. Finally, the Company expects its effective tax rate to be in the range of 25% to 26%.

For the first quarter of 2018, the Company expects to open 8 new communities and close out of 11 communities, resulting in 127 active selling communities as of March 31, 2018. In addition, the Company anticipates delivering approximately 55% of its 1,571 homes in backlog as of December 31, 2017 at an average sales price of $630,000 to $640,000. The Company anticipates its homebuilding gross margin percentage to be in a range of 21.5% to 22.5% for the first quarter of 2018. Finally, the Company expects its SG&A expense as a percentage of home sales revenue to be in the range of 13.0% to 13.5% for the first quarter of 2018.

Stock Repurchase Program

On February 16, 2018, our Board of Directors cancelled the share repurchase program approved in 2017, which had approximately $37.8 million remaining in authorized repurchases, and approved the Repurchase Program, which authorizes the repurchase of up to $100 million of Company common stock through March 31, 2019. Purchases of common stock pursuant to the Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. We are not obligated under the Repurchase Program to repurchase any specific number or dollar amount of shares of common stock, and we may modify, suspend or discontinue the Repurchase Program at any time. Our management will determine the timing and amount of any repurchases in its discretion based on a variety of factors, such as the market price of our common stock, corporate requirements, general market economic conditions and legal requirements.

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, February 20, 2018. The call will be hosted by Doug Bauer, Chief Executive Officer, Tom Mitchell, President and Chief Operating Officer and Mike Grubbs, Chief Financial Officer.

Interested parties can listen to the call live on the internet through the Investor Relations section of the Company’s website at www.TRIPointeGroup.com. Listeners should go to the website at least fifteen minutes prior to the call to download and install any necessary audio software. The call can also be accessed by dialing 1-877-407-3982 for domestic participants or 1-201-493-6780 for international participants. Participants should ask for the TRI Pointe Group Fourth Quarter 2017 Earnings Conference Call. Those dialing in should do so at least ten minutes prior to the start. The replay of the call will be available for two weeks following the call. To access the replay, the domestic dial-in number is 1-844-512-2921, the international dial-in number is 1-412-317-6671, and the reference code is #13675667. An archive of the webcast will be available on the Company’s website for a limited time.

About TRI Pointe Group, Inc.

Headquartered in Irvine, California, TRI Pointe Group, Inc. (NYSE:TPH) is among the largest public homebuilders in the United States. The company designs, constructs and sells premium single-family homes through its portfolio of six quality brands across eight states, including Maracay Homes® in Arizona; Pardee Homes® in California and Nevada; Quadrant Homes® in Washington; Trendmaker® Homes in Texas; TRI Pointe Homes® in California and Colorado; and Winchester® Homes in Maryland and Virginia. Additional information is available at www.TRIPointeGroup.com. Winchester is a registered trademark and is used with permission.

Forward-Looking Statements

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, but are not limited to, statements regarding our strategy, projections and estimates concerning the timing and success of specific projects and our future production, land and lot sales, operational and financial results, including our estimates for growth, financial condition, sales prices, prospects, and capital spending. Forward-looking statements that are included in this press release are generally accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “future,” “goal,” “guidance,” “intend,” “likely,” “may,” “might,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “strategy,” “target,” “will,” “would,” or other words that convey future events or outcomes. The forward-looking statements in this press release speak only as of the date of this press release, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. These forward-looking statements 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: the effect of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar; market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions; levels of competition; the successful execution of our internal performance plans, including any restructuring and cost reduction initiatives; global economic conditions; raw material prices; oil and other energy prices; the effect of weather, including the re-occurrence of drought conditions in California; the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters, and the risk of delays, reduced consumer demand, and shortages and price increases in labor or materials associated with such natural disasters; transportation costs; federal and state tax policies; the effect of land use, environment and other governmental regulations; legal proceedings or disputes and the adequacy of reserves; risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, synergies, indebtedness, financial condition, losses and future prospects; changes in accounting principles; risks related to unauthorized access to our computer systems, theft of our customers’ confidential information or other forms of cyber-attack; and additional factors discussed under the sections captioned “Risk Factors” included in our annual and quarterly reports filed with the Securities and Exchange Commission. The foregoing list is not exhaustive. New risk factors may emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business.

Investor Relations Contact: Media Contact:
Chris Martin, TRI Pointe Group Carol Ruiz, cruiz@newgroundco.com, 310-437-0045
Drew Mackintosh, Mackintosh Investor Relations
InvestorRelations@TRIPointeGroup.com, 949-478-8696



KEY OPERATIONS AND FINANCIAL DATA
(dollars in thousands)
(unaudited)

Three Months Ended December 31, Year Ended December 31,
2017 2016 Change 2017 2016 Change
Operating Data:
Home sales revenue$1,122,841 $770,703 $352,138 $2,732,299 $2,329,336 $402,963
Homebuilding gross margin$244,153 $153,936 $90,217 $559,048 $493,009 $66,039
Homebuilding gross margin %21.7% 20.0% 1.7% 20.5% 21.2% (0.7)%
Adjusted homebuilding gross margin %*24.2% 22.2% 2.0% 22.9% 23.4% (0.5)%
Land and lot sales revenue$4,608 $2,068 $2,540 $74,269 $72,272 $1,997
Land and lot gross margin$3,019 $1,674 $1,345 $59,381 $54,905 $4,476
Land and lot gross margin %65.5% 80.9% (15.4)% 80.0% 76.0% 4.0%
SG&A expense$81,328 $71,108 $10,220 $274,830 $252,022 $22,808
SG&A expense as a % of home sales revenue7.2% 9.2% (2.0)% 10.1% 10.8% (0.7)%
Net income available to common
stockholders
$74,020 $57,861 $16,159 $187,191 $195,171 $(7,980)
Adjusted net income available to common
stockholders*
$107,403 $57,861 $49,542 $220,574 $195,171 $25,403
Adjusted EBITDA*$202,178 $107,425 $94,753 $439,932 $370,371 $69,561
Interest incurred$22,595 $18,276 $4,319 $84,264 $68,306 $15,958
Interest in cost of home sales$26,387 $16,458 $9,929 $64,835 $51,111 $13,724
Other Data:
Net new home orders1,063 909 154 5,075 4,248 827
New homes delivered1,757 1,427 330 4,697 4,211 486
Average selling price of homes delivered$639 $540 $99 $582 $553 $29
Average selling communities127.5 122.8 4.7 127.5 118.3 9.2
Selling communities at end of period130 124 6 N/A
N/A
N/A
Cancellation rate17% 20% (3)% 15% 15% 0%
Backlog (estimated dollar value)$1,032,775 $661,146 $371,629
Backlog (homes)1,571 1,193 378
Average selling price in backlog$657 $554 $103
December 31,
2017
December 31,
2016
Change
Balance Sheet Data:
Cash and cash equivalents$282,914 $208,657 $74,257
Real estate inventories$3,105,553 $2,910,627 $194,926
Lots owned or controlled27,312 28,309 (997)
Homes under construction (1)1,941 1,605 336
Homes completed, unsold269 405 (136)
Debt$1,471,302 $1,382,033 $89,269
Stockholders' equity$1,929,722 $1,829,447 $100,275
Book capitalization$3,401,024 $3,211,480 $189,544
Ratio of debt-to-capital43.3% 43.0% 0.3%
Ratio of net debt-to-net-capital*38.1% 39.1% (1.0)%

_____________________________________
(1) Homes under construction included 60 and 65 models at December 31, 2017 and December 31, 2016, respectively.
* See “Reconciliation of Non-GAAP Financial Measures”


CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

December 31,
2017
December 31,
2016
Assets(unaudited)
Cash and cash equivalents$282,914 $208,657
Receivables125,600 82,500
Real estate inventories3,105,553 2,910,627
Investments in unconsolidated entities5,870 17,546
Goodwill and other intangible assets, net160,961 161,495
Deferred tax assets, net76,413 123,223
Other assets48,070 60,592
Total assets$3,805,381 $3,564,640
Liabilities
Accounts payable$72,870 $70,252
Accrued expenses and other liabilities330,882 263,845
Unsecured revolving credit facility 200,000
Seller financed loans 13,726
Senior notes1,471,302 1,168,307
Total liabilities1,875,054 1,716,130
Commitments and contingencies
Equity
Stockholders' Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no
shares issued and outstanding as of December 31, 2017 and
December 31, 2016, respectively
Common stock, $0.01 par value, 500,000,000 shares authorized;
151,162,999 and 158,626,229 shares issued and outstanding at
December 31, 2017 and December 31, 2016, respectively
1,512 1,586
Additional paid-in capital793,980 880,822
Retained earnings1,134,230 947,039
Total stockholders' equity1,929,722 1,829,447
Noncontrolling interests605 19,063
Total equity1,930,327 1,848,510
Total liabilities and equity$3,805,381 $3,564,640


CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)

Three Months Ended December 31, Year Ended December 31,
2017 2016 2017 2016
Homebuilding:
Home sales revenue$1,122,841 $770,703 $2,732,299 $2,329,336
Land and lot sales revenue4,608 2,068 74,269 72,272
Other operations revenue581 524 2,333 2,314
Total revenues1,128,030 773,295 2,808,901 2,403,922
Cost of home sales878,688 616,767 2,173,251 1,836,327
Cost of land and lot sales1,589 394 14,888 17,367
Other operations expense572 523 2,298 2,247
Sales and marketing44,857 37,282 137,066 127,903
General and administrative36,471 33,826 137,764 124,119
Homebuilding income from operations165,853 84,503 343,634 295,959
Equity in (loss) income of unconsolidated entities(13,079) (2) (11,433) 179
Other income, net4 25 151 312
Homebuilding income before income taxes152,778 84,526 332,352 296,450
Financial Services:
Revenues490 458 1,371 1,220
Expenses98 70 331 253
Equity in income of unconsolidated entities3,515 1,564 6,426 4,810
Financial services income before income taxes3,907 1,952 7,466 5,777
Income before income taxes156,685 86,478 339,818 302,227
Provision for income taxes(82,443) (28,393) (152,267) (106,094)
Net income74,242 58,085 187,551 196,133
Net income attributable to noncontrolling interests(222) (224) (360) (962)
Net income available to common stockholders$74,020 $57,861 $187,191 $195,171
Earnings per share
Basic$0.49 $0.36 $1.21 $1.21
Diluted$0.49 $0.36 $1.21 $1.21
Weighted average shares outstanding
Basic150,859,014 159,082,568 154,134,411 160,859,782
Diluted152,568,093 159,789,940 155,085,366 161,381,499


MARKET DATA BY REPORTING SEGMENT & STATE
(dollars in thousands)
(unaudited)

Three Months Ended December 31, Year Ended December 31,
2017 2016 2017 2016
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
New Homes Delivered:
Maracay Homes181 $507 225 $417 628 $473 625 $408
Pardee Homes535 613 392 467 1,431 529 1,220 548
Quadrant Homes146 765 96 616 352 697 383 541
Trendmaker Homes163 496 139 506 506 494 474 506
TRI Pointe Homes530 761 411 658 1,313 706 1,089 664
Winchester Homes202 532 164 570 467 549 420 560
Total1,757 $639 1,427 $540 4,697 $582 4,211 $553
Three Months Ended December 31, Year Ended December 31,
2017 2016 2017 2016
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
New
Homes
Delivered
Average
Sales
Price
New Homes Delivered:
California821 $726 596 $601 2,093 $651 1,689 $669
Colorado75 600 42 579 172 596 160 524
Maryland154 507 96 544 346 522 265 518
Virginia48 613 68 608 121 625 155 631
Arizona181 507 225 417 628 473 625 408
Nevada169 531 165 433 479 456 460 386
Texas163 496 139 506 506 494 474 506
Washington146 765 96 616 352 697 383 541
Total1,757 $639 1,427 $540 4,697 $582 4,211 $553

MARKET DATA BY REPORTING SEGMENT & STATE, continued
(unaudited)

Three Months Ended December 31, Year Ended December 31,
2017 2016 2017 2016
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Net New Home Orders:
Maracay Homes93 12.7 144 18.0 597 14.8 670 18.0
Pardee Homes298 31.3 270 26.0 1,580 29.9 1,206 23.6
Quadrant Homes84 7.8 67 6.5 395 7.5 341 8.0
Trendmaker Homes123 28.5 116 30.8 516 30.4 501 27.8
TRI Pointe Homes348 32.7 214 28.5 1,492 32.0 1,097 27.6
Winchester Homes117 14.5 98 13.0 495 12.9 433 13.3
Total1,063 127.5 909 122.8 5,075 127.5 4,248 118.3
Three Months Ended December 31, Year Ended December 31,
2017 2016 2017 2016
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Net New
Home
Orders
Average
Selling
Communities
Net New Home Orders:
California472 42.8 357 38.8 2,357 43.0 1,690 35.4
Colorado69 7.5 28 4.5 213 6.7 135 4.8
Maryland92 10.5 76 8.0 357 9.4 290 7.0
Virginia25 4.0 22 5.0 138 3.5 143 6.3
Arizona93 12.7 144 18.0 597 14.8 670 18.0
Nevada105 13.7 99 11.2 502 12.2 478 11.0
Texas123 28.5 116 30.8 516 30.4 501 27.8
Washington84 7.8 67 6.5 395 7.5 341 8.0
Total1,063 127.5 909 122.8 5,075 127.5 4,248 118.3

MARKET DATA BY REPORTING SEGMENT & STATE, continued
(dollars in thousands)
(unaudited)

As of December 31, 2017 As of December 31, 2016
Backlog
Units
Backlog
Dollar
Value
Average
Sales
Price
Backlog
Units
Backlog
Dollar
Value
Average
Sales
Price
Backlog:
Maracay Homes 217 $106,061 $489 248 $114,203 $460
Pardee Homes409 299,083 731 260 134,128 516
Quadrant Homes144 107,714 748 101 68,461 678
Trendmaker Homes173 93,974 543 163 85,579 525
TRI Pointe Homes477 331,562 695 298 180,012 604
Winchester Homes151 94,381 625 123 78,763 640
Total1,571 $1,032,775 $657 1,193 $661,146 $554
As of December 31, 2017 As of December 31, 2016
Backlog
Units
Backlog
Dollar
Value
Average
Sales
Price
Backlog
Units
Backlog
Dollar
Value
Average
Sales
Price
Backlog:
California666 $496,626 $746 402 $237,748 $591
Colorado100 60,253 603 59 35,764 606
Maryland113 64,942 575 102 60,904 597
Virginia38 29,439 775 21 17,859 850
Arizona217 106,061 489 248 114,203 460
Nevada120 73,766 615 97 40,628 419
Texas173 93,974 543 163 85,579 525
Washington144 107,714 748 101 68,461 678
Total1,571 $1,032,775 $657 1,193 $661,146 $554

MARKET DATA BY REPORTING SEGMENT & STATE, continued
(unaudited)

December 31,
2017
December 31,
2016
Lots Owned or Controlled(1):
Maracay Homes2,519 2,053
Pardee Homes15,144 16,912
Quadrant Homes1,726 1,582
Trendmaker Homes1,855 1,999
TRI Pointe Homes3,964 3,479
Winchester Homes2,104 2,284
Total27,312 28,309
December 31,
2017
December 31,
2016
Lots Owned or Controlled(1):
California16,292 17,245
Colorado742 918
Maryland1,507 1,779
Virginia597 505
Arizona2,519 2,053
Nevada2,074 2,228
Texas1,855 1,999
Washington1,726 1,582
Total27,312 28,309
December 31,
2017
December 31,
2016
Lots by Ownership Type:
Lots owned23,940 25,283
Lots controlled (1)3,372 3,026
Total27,312 28,309

__________
(1) As of December 31, 2017 and December 31, 2016, lots controlled included lots that were under land option contracts or purchase contracts.


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited)

In this press release, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating the Company’s operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

The following tables reconcile homebuilding gross margin percentage, as reported and prepared in accordance with GAAP, to the non-GAAP financial measure adjusted homebuilding gross margin percentage. We believe this information is meaningful as it isolates the impact that leverage and non-cash impairments and lot option abandonments have on homebuilding gross margin and permits investors to make better comparisons with our competitors, who may adjust gross margins in a similar fashion.

Three Months Ended December 31,
2017 % 2016 %
(dollars in thousands)
Home sales revenue$1,122,841 100.0% $770,703 100.0%
Cost of home sales878,688 78.3% 616,767 80.0%
Homebuilding gross margin244,153 21.7% 153,936 20.0%
Add: interest in cost of home sales26,387 2.4% 16,458 2.1%
Add: impairments and lot option abandonments 851 0.1% 792 0.1%
Adjusted homebuilding gross margin$271,391 24.2% $171,186 22.2%
Homebuilding gross margin percentage21.7% 20.0%
Adjusted homebuilding gross margin percentage24.2% 22.2%


Year Ended December 31,
2017 % 2016 %
(dollars in thousands)
Home sales revenue$2,732,299 100.0% $2,329,336 100.0%
Cost of home sales2,173,251 79.5% 1,836,327 78.8%
Homebuilding gross margin559,048 20.5% 493,009 21.2%
Add: interest in cost of home sales64,835 2.4% 51,111 2.2%
Add: impairments and lot option abandonments 2,020 0.1% 1,470 0.1%
Adjusted homebuilding gross margin$625,903 22.9% $545,590 23.4%
Homebuilding gross margin percentage20.5% 21.2%
Adjusted homebuilding gross margin percentage22.9% 23.4%

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)

The following table reconciles the Company’s ratio of debt-to-capital to the non-GAAP ratio of net debt-to-net capital. We believe that the ratio of net debt-to-net capital is a relevant financial measure for management and investors to understand the leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.

December 31, 2017 December 31, 2016
Unsecured revolving credit facility $ $200,000
Seller financed loans 13,726
Senior notes1,471,302 1,168,307
Total debt1,471,302 1,382,033
Stockholders’ equity1,929,722 1,829,447
Total capital$3,401,024 $3,211,480
Ratio of debt-to-capital(1) 43.3% 43.0%
Total debt$1,471,302 $1,382,033
Less: Cash and cash equivalents (282,914) (208,657)
Net debt1,188,388 1,173,376
Stockholders’ equity1,929,722 1,829,447
Net capital$3,118,110 $3,002,823
Ratio of net debt-to-net capital(2)38.1% 39.1%

__________
(1) The ratio of debt-to-capital is computed as the quotient obtained by dividing debt by the sum of debt plus equity.
(2) The ratio of net debt-to-net capital is computed as the quotient obtained by dividing net debt (which is debt less cash and cash equivalents) by the sum of net debt plus equity.


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)

The following table contains information about our operating results reflecting certain adjustments to income before income taxes, (provision) benefit for income taxes, net income, net income available to common stockholders and earnings per share (diluted). We believe reflecting these adjustments is useful to investors in understanding our recurring operations by eliminating the varying effects of certain non-routine events, and may be helpful in comparing the Company to other homebuilders to the extent they provide similar information.

Three Months Ended December 31, 2017 Year Ended December 31, 2017
As Reported Adjustments Adjusted As Reported Adjustments Adjusted
(in thousands, except per share amounts)
Income before income taxes156,685 13,182 (1)169,867 339,818 13,182 (1)353,000
(Provision) benefit for income taxes(82,443) 20,201 (2)(62,242) (152,267) 20,201 (2)(132,066)
Net income74,242 33,383 107,625 187,551 33,383 220,934
Net income attributable to noncontrolling interests(222) (222) (360) (360)
Net income available to common stockholders$74,020 $33,383 $107,403 $187,191 $33,383 $220,574
Earnings per share
Diluted$0.49 $0.70 $1.21 $1.42
Weighted average shares outstanding
Diluted152,568 152,568 155,085 155,085
Effective tax rate52.6% 36.6% 44.8% 37.4%

__________
(1) Includes a charge related to the impairment of an investment in an unconsolidated entity.
(2) Includes a tax charge related to the re-measurement of the Company’s net deferred tax assets as a result of the Tax Cuts and Jobs Act enacted in the fourth quarter of 2017, net of the impact of the charge related to the impairment of an investment in an unconsolidated entity.


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)

The following table calculates the non-GAAP financial measures of EBITDA and Adjusted EBITDA and reconciles those amounts to net income, as reported and prepared in accordance with GAAP. EBITDA means net income before (a) interest expense, (b) expensing of previously capitalized interest included in costs of home sales, (c) income taxes and (d) depreciation and amortization. Adjusted EBITDA means EBITDA before (e) amortization of stock-based compensation, (f) real estate inventory impairments and lot option abandonments, (g) impairments of investments in unconsolidated entities and (h) restructuring charges. Other companies may calculate EBITDA and Adjusted EBITDA (or similarly titled measures) differently. We believe EBITDA and Adjusted EBITDA are useful measures of the Company’s ability to service debt and obtain financing.

Three Months Ended December 31, Year Ended December 31,
2017 2016 2017 2016
(in thousands)
Net income available to common stockholders$74,020 $57,861 $187,191 $195,171
Interest expense:
Interest incurred22,595 18,276 84,264 68,306
Interest capitalized(22,595) (18,276) (84,264) (68,306)
Amortization of interest in cost of sales26,474 16,480 65,245 51,288
Provision for income taxes82,443 28,393 152,267 106,094
Depreciation and amortization934 764 3,500 3,087
EBITDA183,871 103,498 408,203 355,640
Amortization of stock-based compensation4,275 2,964 15,906 12,612
Real estate inventory impairments and land option abandonments850 792 2,053 1,470
Impairments of investments in unconsolidated entities13,182 13,182
Restructuring charges 171 588 649
Adjusted EBITDA$202,178 $107,425 $439,932 $370,371


Source:TRI Pointe Group Inc.