0001193125-13-313175.txt : 20130801 0001193125-13-313175.hdr.sgml : 20130801 20130731191107 ACCESSION NUMBER: 0001193125-13-313175 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20130731 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20130801 DATE AS OF CHANGE: 20130731 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Shea Homes Limited Partnership CENTRAL INDEX KEY: 0001531744 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 954240219 STATE OF INCORPORATION: CA FISCAL YEAR END: 1211 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-177328 FILM NUMBER: 131000464 BUSINESS ADDRESS: STREET 1: 655 BREA CANYON ROAD CITY: WALNUT STATE: CA ZIP: 91789 BUSINESS PHONE: 909-594-9500 MAIL ADDRESS: STREET 1: 655 BREA CANYON ROAD CITY: WALNUT STATE: CA ZIP: 91789 8-K 1 d575395d8k.htm FORM 8-K FORM 8-K

 

 

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

Current Report

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 31, 2013

 

 

SHEA HOMES LIMITED PARTNERSHIP

(Exact name of registrant as specified in its charter)

 

 

 

CALIFORNIA   333-177328   95-4240219

(State or other jurisdiction

of incorporation)

  

(Commission

File Number)

  

(IRS Employer

Identification No.)

655 Brea Canyon Road, Walnut, California 91789

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (909) 594-9500

Not Applicable

(Former name or former address, if changed since last report):

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02 Results of Operations and Financial Condition

On July 31, 2013, Shea Homes Limited Partnership issued a press release announcing its results of operations for the six months ended June 30, 2013. A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein.

The information contained in this Item 2.02 and in the accompanying Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Shea Homes Limited Partnership under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act.

 

Item 9.01. Financial Statements and Exhibits

The information contained in this Item 9.01 and in the accompanying Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of Shea Homes Limited Partnership under the Securities Act or the Exchange Act.

(d) Exhibits

 

Exhibit
Number

   

Description

99.1    Press Release dated July 31, 2013

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

SHEA HOMES LIMITED PARTNERSHIP
By:  

/s/ Andrew H. Parnes

Name:   Andrew H. Parnes
Title:   Chief Financial Officer

Date: July 31, 2013

Exhibit Index

 

Exhibit
Number

   

Description

99.1    Press Release dated July 31, 2013
 EX-99.1 2 d575395dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO

Shea Homes Reports Second Quarter 2013 Results

Walnut, Calif., July 31, 2013

Shea Homes, one of America’s largest private homebuilders, today reported results for the second quarter ended June 30, 2013.

Three Months Ended 6/30/13 Highlights and Comparisons to Three Months Ended 6/30/12

 

  •  

Net income (loss) attributable to Shea Homes was $19.5 million for the 2013 second quarter compared to $(12.1) million

 

  •  

Home sales orders were 514 compared to 587, a 12% decrease

 

  •  

Active selling communities averaged 54 and 63 in the second quarter of 2013 and 2012, respectively

 

  •  

Home sales per community were 9.5 homes, or 3.2 per month, for the 2013 second quarter compared to 9.3 homes, or 3.1 per month, in 2012, a 2% increase

 

  •  

Cancellation rate was 12% compared to 14%

 

  •  

Backlog units at June 30, 2013 were 1,182 compared to 1,002 at June 30, 2012, an 18% increase

 

  •  

Backlog sales value was $564.3 million at June 30, 2013 compared to $392.5 million at June 30, 2012, a 44% increase

 

  •  

The average selling price in backlog was $477,000 at June 30, 2013 compared to $392,000 at June 30, 2012, a 22% increase

 

  •  

Total revenues were $217.3 million compared to $132.5 million, a 64% increase

 

  •  

House revenues were $212.4 million* compared to $127.1 million*, a 67% increase

 

  •  

Homes closed were 460 compared to 307, a 50% increase

 

  •  

Average selling price of homes closed was $462,000 compared to $414,000, a 12% increase

 

  •  

Gross margin was 22.3% compared to 18.5%

 

  •  

House gross margin was 22.5%* compared to 19.5%*

 

  •  

SG&A expense was $26.9 million (12.4% of revenues) compared to $21.8 million (16.4% of revenues)

 

  •  

Adjusted EBITDA was $38.0 million* compared to $23.3 million*

 

  •  

Cash and restricted cash at June 30, 2013 were $160.3 million compared to $292.8 million at December 31, 2012

Six Months Ended 6/30/13 Highlights and Comparisons to Six Months Ended 6/30/12

 

  •  

Net income (loss) attributable to Shea Homes was $26.4 million for the 2013 six months compared to $(12.5) million

 

  •  

Home sales orders were 1,033 compared to 1,086, a 5% decrease

 

  •  

Active selling communities averaged 56 and 67 for the six months of 2013 and 2012, respectively

 

  •  

Home sales per community were 18.4 homes, or 3.1 per month, in the first six months of 2013 compared to 16.2 homes, or 2.7 per month, in the first six months of 2012, a 14% increase

 

  •  

Cancellation rate was 13% compared to 14%

 

  •  

Total revenues were $352.3 million compared to $238.1 million, a 48% increase

 

  •  

House revenues were $343.9 million* compared to $228.0 million*, a 51% increase

 

  •  

Homes closed were 762 compared to 545, a 40% increase

 

  •  

Average selling price of homes closed was $451,000 compared to $418,000, an 8% increase

 

  •  

Gross margin was 22.7% compared to 18.9%

 

Page 1

  •  

House gross margin was 22.7%* compared to 20.1%*

 

  •  

SG&A expense was $49.0 million (13.9% of revenues) compared to $39.4 million (16.5% of revenues)

 

  •  

Adjusted EBITDA was $56.7 million* compared to $37.6 million*

 

* See “Reconciliation of Non-GAAP Financial Measures” beginning on page 9

“Our strong second quarter results reflect our well-positioned lot supply in some of the nation’s most vibrant housing markets,” said Bert Selva, President and CEO of Shea Homes. “Our closings, revenue, backlog and margins increased considerably from last year. Although new orders were down this quarter as a result of a lower community count, they outpaced our internal expectations and were consistent with our focus on maximizing profitability. We have favorable land positions in supply-constrained markets and we will continue to capitalize on our pricing power. Additionally, we expanded our geographic footprint to now include Houston, one of the largest and fastest-growing housing markets in the country.”

“We will continue our disciplined approach to managing our business, including land acquisitions, optimizing gross margins and controlling overhead costs. Our margins and SG&A expense rates have been among the best in the industry and we will continue to focus our efforts on improving these areas.”

New home sales orders decreased 12% year over year for the 2013 second quarter, the result of a 14% lower number of active selling communities. We had a lower community count year over year in all of our regions except the Mountain West segment. Despite lower sales orders, home sales per community for the 2013 second quarter were 3.2 per month compared to 3.1 per month for 2012 and units in backlog at the end of the June 2013 were 18% higher compared to June 2012.

For the 2013 second quarter, net income (loss) attributable to Shea Homes was $19.5 million compared to $(12.1) million in 2012, primarily due to a $23.9 million improvement in gross margin (from higher revenues and higher gross margin percentages), a $4.5 million decrease in interest expense and a $7.4 million reduction in the gain (loss) on our reinsurance transaction (actuarial adjustment decreased from $(8.2) million in 2012 to $(0.8) million in 2013). These improvements were partially offset by a $2.5 million increase in general and administrative expenses and a $2.6 million increase in selling expenses.

For the 2013 second quarter, total revenues were $217.3 million compared to $132.5 million in 2012, a 64% increase, and house revenues for the 2013 second quarter were $212.4 million* compared to $127.1 million* in 2012, a 67% increase. The increase in house revenues was primarily due to a 50% increase in home closings to 460 and a 12% increase in average selling price to $462,000. Home closings increased year over year in all segments and was driven primarily as a result of a 98% higher backlog at the beginning of 2013 versus the beginning of 2012. The increase in the average selling price of homes closed was primarily due to price increases in all of our segments, which was partially offset by a shift to lower-priced homes closed in our San Diego and Northern California segments.

Total gross margin for the 2013 second quarter was 22.3% compared to 18.5% in 2012, a 380 basis point (bp) increase, and house gross margin for the 2013 second quarter was 22.5%* compared to 19.5%* in 2012, a 300 bp increase. The increase in house gross margin percentage reflected the increase in home prices in each of our markets, partially offset by higher labor and material costs.

SG&A expense for the 2013 second quarter was $26.9 million (12.4% of revenues) compared to $21.8 million (16.4% of revenues) in 2012. As a percentage of revenue, the decrease was the result of leveraging our G&A expenses over a higher level of revenues. The nominal increase was primarily attributable to higher volume related costs and higher compensation expenses.

Interest incurred for the 2013 second quarter was $16.8 million compared to $16.7 million in 2012, while interest expense for the 2013 second quarter was $1.4 million versus $5.9 million in 2012. The 76% decrease in interest expense for the 2013 second quarter was due to a higher level of qualified inventory for interest capitalization.

 

Page 2

Net operating cash flows for the 2013 second quarter were $(80.2) million compared to $(43.4) million in 2012. The decrease was primarily due to increased land acquisitions, land development and construction costs, partially offset by increased cash receipts from home closings. Land acquisitions and land development costs for the 2013 second quarter were $143.5 million compared to $37.1 million in 2012. House construction costs for the 2013 second quarter were $99.3 million compared to $65.2 million in 2012. Cash receipts from homes closed for the 2013 second quarter were $212.4 million compared to $127.1 million in 2012.

For the 2013 six months, net income (loss) attributable to Shea Homes was $26.4 million compared to $(12.5) million, primarily due to a 48% increase in revenues and a 380 bp higher gross margin percentage. In addition, interest expense decreased $7.4 million (due to a higher level of qualified inventory) and the gain (loss) on our reinsurance transaction decreased from $(7.3) million in 2012 to $(0.2) million in 2013 due to a 2012 actuarial adjustment to our loss reserves on completed operations policies that were reinsured in 2009. These improvements were partially offset by a $9.7 million increase in SG&A, primarily attributable to higher volume related costs and compensation expenses. As a percentage of revenue, SG&A for the 2013 six months was 13.9% compared to 16.5% for the 2012 six months. As a percentage of revenue, the decrease was the result of leveraging our G&A over higher revenues.

Net operating cash flows for the 2013 six months were $(108.2) million compared to $(33.7) million in 2012. The decrease was primarily due to increased land acquisitions, land development and construction costs, partially offset by increased cash receipts from home closings. Land acquisitions and land development costs for the 2013 six months were $188.3 million compared to $60.8 million in 2012. House construction costs for the 2013 six months were $176.0 million compared to $103.0 million in 2012. Cash receipts from homes closed for the 2013 second quarter were $343.9 million compared to $228.0 million in 2012.

About Shea Homes Limited Partnership

Shea Homes is one of the largest private homebuilders in the nation. Since its founding in 1968, Shea Homes has closed more than 90,000 homes. Shea Homes builds homes with quality craftsmanship and designs that fit varied lifestyles and budgets. Over the past several years, Shea Homes has been recognized as a leader in customer satisfaction with a reputation for design, quality and service. For more about Shea Homes and its communities, visit www.sheahomes.com.

The preceding summary of the financial results of Shea Homes Limited Partnership and its subsidiaries does not purport to be complete and is qualified in its entirety by reference to the consolidated financial statements of Shea Homes Limited Partnership and its subsidiaries, available on our website at: http://www.sheahomes.com/investor.

This news release contains forward-looking statements and information relating to Shea Homes Limited Partnership and its subsidiaries, such as improving housing market conditions, the strength of our housing markets, our well positioned lot supply, our future operating strategy, our ability to optimize house gross margins, and our ability to control overhead cost, which are based on the beliefs of, as well as assumptions made by, and information currently available to, our management. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “anticipate,” “appear” and “project” and similar expressions, as they relate to Shea Homes Limited Partnership and its subsidiaries are intended to identify forward-looking statements. These statements reflect our management’s current views with respect to future events, are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Further, certain forward-looking statements are based upon assumptions of future events that may not prove to be accurate. Such statements involve known and unknown risks, uncertainties, assumptions and other factors many of which are out of Shea Homes Limited Partnership’s and its subsidiaries’ 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: changes in employment levels; changes in the availability of financing for homebuyers; changes in interest rates; changes in consumer confidence; changes in levels of new and existing homes for sale; changes in demographic trends; changes in housing demands; changes in home prices; elimination or reduction of the tax benefits associated with owning a home; litigation risks associated with home warranty and construction defect and other claims; and various other factors, both referenced and not referenced above, and included in the Company’s filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results, performance or achievements may vary materially from those described as anticipated, believed, estimated, expected, intended, planned or projected. Except as required by law, Shea Homes Limited Partnership and its subsidiaries neither intend nor assume any obligation to revise or update these forward-looking statements, which speak only as of their dates. Shea Homes Limited Partnership and its subsidiaries nonetheless reserve 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.

Contact: Andrew Parnes, CFO @ 909-594-0954 or andy.parnes@sheahomes.com

 

Page 3

KEY OPERATIONAL AND FINANCIAL DATA

(dollars in thousands)

 

     At or For the Three Months Ended June 30,     At or For the Six Months ended June 30,  
     2013     2012     Change     2013     2012     Change  
     (unaudited)     (unaudited)           (unaudited)     (unaudited)        

Operating Data:

             

Revenues

    $ 217,310      $ 132,468        64 %    $ 352,270      $ 238,071        48 % 

Gross margin %

      22.3 %      18.5 %      380  bp’s      22.7 %      18.9 %      380  bp’s 

Homebuilding revenues (a) *

    $ 216,974      $ 132,218        64 %    $ 351,813      $ 237,578        48 % 

Homebuilding gross margin % (a) *

      22.2 %      18.3 %      390  bp’s      22.6 %      18.8 %      380  bp’s 

House revenues *

    $ 212,392      $ 127,108        67 %    $ 343,878      $ 228,016        51 % 

House gross margin

    $ 47,818      $ 24,841        92 %    $ 78,156      $ 45,774        71 % 

House gross margin % *

      22.5 %      19.5 %      300  bp’s      22.7 %      20.1 %      260  bp’s 

Adjusted house gross margin % excluding interest in cost of sales *

      29.7 %      26.6 %      310  bp’s      29.9 %      27.4 %      250  bp’s 

SG&A expense

    $ 26,926      $ 21,772        24 %    $ 49,037      $ 39,375        25 % 

SG&A % of total revenue

      12.4 %      16.4 %      (400 ) bp’s      13.9 %      16.5 %      (260 ) bp’s 

Net income (loss) attributable to Shea Homes

    $ 19,534      $ (12,101 )      —        $ 26,372      $ (12,512 )      —     

Adjusted EBITDA (b) *

    $ 38,031      $ 23,340        63 %    $ 56,709      $ 37,558        51 % 

Interest incurred

    $ 16,774      $ 16,660        1 %    $ 33,542      $ 33,320        1 % 

Interest capitalized to inventory

    $ 14,871      $ 10,550        41 %    $ 27,949      $ 20,745        35 % 

Interest capitalized to investments in joint ventures

    $ 506      $ 201        152 %    $ 763      $ 378        102 % 

Interest expense

    $ 1,397      $ 5,909        (76 )%    $ 4,830      $ 12,197        (60 )% 

Interest in cost of sales (c)

    $ 15,393      $ 10,074        53 %    $ 24,904      $ 17,858        39 % 

Other Data (d):

             

Home sales orders (units)

      514        587        (12 )%      1,033        1,086        (5 )% 

Homes closed (units)

      460        307        50 %      762        545        40 % 

Average selling price

    $ 462      $ 414        12 %    $ 451      $ 418        8 % 

Average active selling communities

      54        63        (14 )%      56        67        (16 )% 

Home sales orders per community

      9.5        9.3        2 %      18.4        16.2        14 % 

Cancellation rate

      12 %      14 %        13 %      14 %   

Backlog at end of period (units)

      1,182        1,002        18 %       

Backlog at end of period (estimated sales value)

    $ 564,252      $ 392,463        44 %       

Lots owned or controlled (units)

      19,302        17,573        10 %       

Homes under construction (units) (e)

      1,043        858        22 %       

 

(a) Homebuilding revenue and gross margin include house, land and other homebuilding activities.
(b) See page 10 for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss).
(c) As previously capitalized to house and land.
(d) Represents consolidated activity only; excludes unconsolidated joint ventures.
(e) Homes under construction includes completed homes.
* See “Reconciliation of Non-GAAP Financial Measures” beginning on page 9.

 

Page 4

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     June 30,
2013		      December 31,
2012		  
     (unaudited)         

Assets

      

Cash and cash equivalents

    $ 157,997       $ 279,756   

Restricted cash

      2,334         13,031   

Accounts and other receivables, net

      146,018         141,289   

Receivables from related parties, net

      34,484         34,028   

Inventory

      994,103         837,653   

Investments in joint ventures

      39,400         28,653   

Other assets, net

      37,221         39,127   
  

 

 

     

 

 

  

Total assets

    $ 1,411,557       $ 1,373,537   
  

 

 

     

 

 

  

Liabilities and equity

      

Liabilities:

      

Notes payable

    $ 759,740       $ 758,209   

Other liabilities

      305,964         296,081   
  

 

 

     

 

 

  

Total liabilities

      1,065,704         1,054,290   

Total equity

      345,853         319,247   
  

 

 

     

 

 

  

Total liabilities and equity

    $ 1,411,557       $ 1,373,537   
  

 

 

     

 

 

  

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2013     2012     2013     2012  
     (unaudited)     (unaudited)     (unaudited)     (unaudited)  

Revenues

    $ 217,310      $ 132,468      $ 352,270      $ 238,071   

Cost of sales

      (168,884 )      (107,978 )      (272,308 )      (193,013 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross margin

      48,426        24,490        79,962        45,058   

Selling, general and administrative expenses

      (26,926 )      (21,772 )      (49,037 )      (39,375 ) 

Interest expense

      (1,397 )      (5,909 )      (4,830 )      (12,197 ) 

Other income (expense), net

      (92 )      (8,081 )      694        (5,708 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Income (loss) before income taxes

      20,011        (11,272 )      26,789        (12,222 ) 

Income tax expense

      (479 )      (848 )      (420 )      (96 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss)

      19,532        (12,120 )      26,369        (12,318 ) 

Less: Net loss (income) attributable to non-controlling interests

      2        19        3        (194 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net income (loss) attributable to Shea Homes

    $ 19,534      $ (12,101 )    $ 26,372      $ (12,512 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

 

Page 5

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2013     2012     2013     2012  
     (unaudited)     (unaudited)     (unaudited)     (unaudited)  

Operating activities

         

Net income (loss)

    $ 19,532      $ (12,120 )    $ 26,369      $ (12,318 ) 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

         

Loss on reinsurance transaction

      159        7,367        159        7,367   

Depreciation and amortization expense

      2,805        1,509        4,564        3,321   

Distribution of earnings from joint venture

      6,000        1,000        6,000        1,000   

Gain on sale of available-for-sale investments

      —          1        (10 )      (22 ) 

Other operating activities, net

      (336 )      (222 )      (609 )      (762 ) 

Changes in operating assets and liabilities:

         

Inventory

      (113,858 )      (24,634 )      (158,601 )      (28,542 ) 

Payables and other liabilities

      6,910        (2,797 )      9,789        1,239   

Other operating assets

      (1,415 )      (13,499 )      4,173        (4,987 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net cash used in operating activities

      (80,203 )      (43,395 )      (108,166 )      (33,704 ) 

Investing activities

         

Proceeds from sale of investments

      9        5,009        3,078        5,212   

Net proceeds from promissory notes from related parties

      46        1,951        431        1,843   

Other investing activities, net

      (12,822 )      (513 )      (16,350 )      (960 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net cash provided by (used in) investing activities

      (12,767 )      6,447        (12,841 )      6,095   

Financing activities

         

Net decrease in notes payable

      (511 )      (452 )      (752 )      (1,053 ) 

Contributions from owners

      —          —          —          1,746   

Other financing activities, net

      —          (1 )      —          (513 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Net cash provided by (used in) financing activities

      (511 )      (453 )      (752 )      180   
  

 

 

    

 

 

    

 

 

    

 

 

  

Net increase (decrease) in cash and cash equivalents

      (93,481 )      (37,401 )      (121,759 )      (27,429 ) 

Cash and cash equivalents at beginning of period

      251,478        278,338        279,756        268,366   
  

 

 

    

 

 

    

 

 

    

 

 

  

Cash and cash equivalents at end of period

    $ 157,997      $ 240,937      $ 157,997      $ 240,937   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

Page 6

SEGMENT OPERATING DATA

(dollars in thousands)

(unaudited)

 

                                                                                                       
    Three Months Ended June 30,     Six Months Ended June 30,  
    2013     2012     2013     2012  
    Homes
Closed		     Avg. Selling
Price		     Homes
Closed		     Avg. Selling
Price		     Homes
Closed		     Avg. Selling
Price		     Homes
Closed		     Avg. Selling
Price		  

Homes closed:

                

Southern California

     80      $ 702        64      $ 470        131      $ 718        111      $ 481   

San Diego

     68        461        19        533        91        450        46        527   

Northern California

     116        459        58        521        177        456        115        488   

Mountain West

     78        457        64        444        131        435        102        451   

South West

     109        312        95        280        217        311        160        287   

Other

     9        218        7        226        15        235        11        217   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consolidated

     460      $ 462        307      $ 414        762      $ 451        545      $ 418   

Unconsolidated joint ventures

     51        317        37        298        78        325        57        302   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

     511      $ 447        344      $ 402        840      $ 440        602      $ 407   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    Three Months Ended June 30,     Six Months Ended June 30,  
    2013     2012     2013     2012  
    Home
Sales
Orders		     Avg. Active
Selling
Communities		     Home
Sales
Orders		     Avg. Active
Selling
Communities		     Home
Sales
Orders		     Avg. Active
Selling
Communities		     Home
Sales
Orders		     Avg. Active
Selling
Communities		  

Home sales orders:

                

Southern California

     50        5        88        7        104        5        158        8   

San Diego

     74        6        57        9        165        7        110        10   

Northern California

     101        13        115        15        221        13        236        16   

Mountain West

     122        15        121        13        234        15        210        13   

South West

     163        14        194        16        303        15        348        17   

Other

     4        1        12        3        6        1        24        3   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total consolidated

     514        54        587        63        1,033        56        1,086        67   

Unconsolidated joint ventures

     65        13        63        10        111        12        106        11   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

     579        67        650        73        1,144        68        1,192        78   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

                                                   
     At June 30,  
     2013      2012  
     Backlog
Units		      Backlog
Sales
Value		      Backlog
Units		      Backlog
Sales
Value		  

Backlog:

            

Southern California

      96       $ 84,130         106       $ 58,862   

San Diego

      181         87,566         103         41,266   

Northern California

      285         152,498         226         104,810   

Mountain West

      315         144,441         203         89,167   

South West

      298         93,290         340         92,717   

Other

      7         2,327         24         5,641   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total consolidated

      1,182       $ 564,252         1,002       $ 392,463   

Unconsolidated joint ventures

      117         37,958         83         26,947   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total

      1,299       $ 602,210         1,085       $ 419,410   
  

 

 

     

 

 

     

 

 

     

 

 

  

 

Page 7

SEGMENT OPERATING DATA (continued)

(unaudited)

 

     At June 30,  
     2013      2012  

Lots owned or controlled:

      

Southern California

      2,030         1,133   

San Diego

      699         713   

Northern California

      3,099         3,963   

Mountain West

      10,180         9,900   

South West

      3,284         1,819   

Other

      10         45   
  

 

 

     

 

 

  

Total consolidated

      19,302         17,573   

Unconsolidated joint ventures

      3,745         1,919   
  

 

 

     

 

 

  

Total

      23,047         19,492   
  

 

 

     

 

 

  

Lots by ownership type:

      

Owned for homebuilding

      6,413         6,247   

Owned and held for sale

      3,269         3,506   

Optioned or subject to contract for homebuilding

      6,586         4,786   

Optioned or subject to contract held for sale

      3,034         3,034   

Joint venture

      3,745         1,919   
  

 

 

     

 

 

  

Total

      23,047         19,492   
  

 

 

     

 

 

  

 

Page 8

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

(in thousands)

(unaudited)

In this earnings release, we utilize certain financial measures that, in each case, are not recognized under GAAP. We present these measures because we believe they and similar measures are useful to investors in evaluating a company’s operating performance and financing structure and, in certain cases, because they could be used to determine compliance with contractual covenants or as one measure of the Company’s ability to service debt and obtain financing. 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 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 table reconciles revenues, cost of sales and gross margins, as reported and prepared in accordance with GAAP, to the non-GAAP measures house revenues, house cost of sales, house gross margin and house gross margin percentage, which exclude land sales, impairment charges and other transactions, and to adjusted house revenues, adjusted house cost of sales, adjusted house gross margin and adjusted house gross margin percentage, which add back interest in cost of sales.

 

    Three Months Ended June 30, 2013     Three Months Ended June 30, 2012  
    Revenue     Cost of
Sales		     Gross
Margin $		     Gross
Margin %		     Revenue     Cost of
Sales		     Gross
Margin $		     Gross
Margin %		  

Total

   $ 217,310      $ (168,884 )    $ 48,426        22.3 %    $ 132,468      $ (107,978 )    $ 24,490        18.5 % 

Less: Other

     (336 )        (336 )        (250 )        (250 )   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Homebuilding

     216,974        (168,884 )      48,090        22.2 %      132,218        (107,978 )      24,240        18.3 % 

Less: Land

     (4,213 )      2,743        (1,470 )      34.9 %      (4,738 )      4,757        19        (0.4 )% 

Less: Impairment

     —          —          —            —          —          —       

Less: Other homebuilding

     (369 )      1,567        1,198          (372 )      954        582     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

House

   $ 212,392      $ (164,574 )    $ 47,818        22.5 %    $ 127,108      $ (102,267 )    $ 24,841        19.5 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Add: Interest in house cost of sales (a)

       15,249        15,249            9,007        9,007     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted house excluding interest in cost of sales

   $ 212,392      $ (149,325 )    $ 63,067        29.7 %    $ 127,108      $ (93,260 )    $ 33,848        26.6 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    Six Months Ended June 30, 2013     Six Months Ended June 30, 2012  
    Revenue     Cost of
Sales		     Gross
Margin $		     Gross
Margin %		     Revenue     Cost of
Sales		     Gross
Margin $		     Gross
Margin %		  

Total

   $ 352,270      $ (272,308 )    $ 79,962        22.7 %    $ 238,071      $ (193,013 )    $ 45,058        18.9 % 

Less: Other

     (457 )        (457 )        (493 )        (493 )   
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Homebuilding

     351,813        (272,308 )      79,505        22.6 %      237,578        (193,013 )      44,565        18.8 % 

Less: Land

     (7,141 )      3,254        (3,887 )      54.4 %      (8,701 )      6,506        (2,195 )      25.2 % 

Less: Impairment

     —          —          —            —          —          —       

Less: Other homebuilding

     (794 )      3,332        2,538          (861 )      4,265        3,404     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

House

   $ 343,878      $ (265,722 )    $ 78,156        22.7 %    $ 228,016      $ (182,242 )    $ 45,774        20.1 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Add: Interest in house cost of sales (a)

       24,714        24,714            16,661        16,661     
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted house excluding interest in cost of sales

   $ 343,878      $ (241,008 )    $ 102,870        29.9 %    $ 228,016      $ (165,581 )    $ 62,435        27.4 % 
 

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

 

(a) Interest incurred is generally capitalized to inventory, then expensed in cost of sales as related units close.

 

Page 9

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)

(in thousands)

(unaudited)

 

The following table calculates the non-GAAP measures of EBITDA and Adjusted EBITDA and reconciles those amounts to net income as reported and prepared in accordance with GAAP. Adjusted EBITDA means net income (loss) (plus cash distributions of income from consolidated and unconsolidated joint ventures and non-guarantor subsidiaries) before (a) income taxes, (b) interest expense, (c) expensing of previously capitalized interest included in costs of sales and in equity in income (loss) from joint ventures, (d) impairment charges and project write-offs and abandonments, (e) loss on debt extinguishment, (f) depreciation and amortization, (g) realized gain on sale of investments, (h) income (loss) from joint ventures and non-guarantor subsidiaries, (i) deferred (gain) loss recognition from the amortization of deferred gain resulting from a series of novation and reinsurance transactions entered into by Partners Insurance Company, a wholly-owned subsidiary (“PIC Transaction”), and (j) gain on sale of investment in joint ventures. Other companies may calculate Adjusted EBITDA (or similarly titled measures) differently.

 

     Three Months Ended June 30,     Six Months Ended June 30,  
     2013     2012     2013     2012  

Net income (loss)

    $ 19,532      $ (12,120 )    $ 26,369      $ (12,318 ) 

Adjustments:

         

Income tax expense (benefit)

      479        848        420        96   

Depreciation and amortization expense

      2,805        1,509        4,564        3,321   

Interest in cost of sales

      15,393        10,074        24,904        17,858   

Interest in equity in income (loss) from joint ventures

      328        201        585        378   

Interest expense

      1,397        5,909        4,830        12,197   
  

 

 

    

 

 

    

 

 

    

 

 

  

EBITDA

      39,934        6,421        61,672        21,532   

Adjustments:

         

Project write-offs and abandonments

      81        179        193        431   

Realized gain on sale of investments

      —          —          (10 )      (22 ) 

Deferred loss (gain) recognition from PIC Transaction

      807        8,163        159        7,367   

Loss (income) from joint ventures and non-guarantor subsidiaries

      (3,158 )      8,399        (5,673 )      7,595   

Distributions of earnings from joint ventures and non-guarantor subsidiaries

      367        175        367        638   

Other

      —          3        1        17   
  

 

 

    

 

 

    

 

 

    

 

 

  

Adjusted EBITDA

    $ 38,031      $ 23,340      $ 56,709      $ 37,558   
  

 

 

    

 

 

    

 

 

    

 

 

  

 

Page 10

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