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Tri Pointe Homes, Inc. Reports 2020 Fourth Quarter and Full Year Results

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TRI Pointe Group Inc.
·28 min read
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Fourth Quarter Highlights

-Diluted Earnings Per Share of $0.92-
-Homebuilding Gross Margin Percentage of 23.2%-
-Net New Home Orders up 14% Year-Over-Year-
-Backlog Dollar Value of $1.9 Billion, up 69% Year-Over-Year-

INCLINE VILLAGE, Nev., Feb. 18, 2021 (GLOBE NEWSWIRE) -- Tri Pointe Homes, Inc. (the “Company”) (NYSE: TPH) today announced results for the fourth quarter ended December 31, 2020 and full year 2020.

“Tri Pointe Homes finished the year on a strong note in the fourth quarter of 2020, highlighted by year-over-year order growth of 14% on a 38% improvement in order pace, homebuilding gross margin expansion of 130 basis points to 23.2% and a unit backlog increase of 69% as compared to last year,” said Tri Pointe Homes Chief Executive Officer Doug Bauer. “These results are reflective of a housing market that continues to exhibit strong momentum and our operational focus that seeks to capitalize on these trends.”

Mr. Bauer continued, “Tri Pointe enters 2021 on a solid foundation, with $1.2 billion in total liquidity, $621 million in cash, a debt-to-capital ratio of 37.6% and a net-debt-to-net capital ratio of 24.4%*. We believe this financial strength puts us in an excellent position to continue expanding our operations with an eye towards generating strong stockholder returns. Our main focus remains on this as we move forward and anticipate continued headway in 2021.”

Mr. Bauer concluded, “Given the current market dynamics, it is clear that there is a critical long-term need for additional housing supply in this country. Existing home inventory remains at historically low levels while demand is being driven by, among other things, powerful demographic forces and changes to how we live as a result of the COVID-19 pandemic. We believe these positive tailwinds will remain in place for the foreseeable future, providing our industry and our company with a very bright outlook.”

Results and Operational Data for Fourth Quarter 2020 and Comparisons to Fourth Quarter 2019

  • Net income was $115.1 million, or $0.92 per diluted share, compared to $118.0 million, or $0.85 per diluted share

  • Home sales revenue for the quarter was $1.0 billion, a decrease of 8%

    ° New home deliveries of 1,633 homes compared to 1,795 homes, a decrease of 9%

    ° Average sales price of homes delivered of $640,000 compared to $634,000, an increase of 1%

  • Homebuilding gross margin percentage was 23.2% compared to 21.9%, an increase of 130 basis points

    ° Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 26.3%*

  • Selling, general and administrative (“SG&A”) expense as a percentage of homes sales revenue of 9.9% compared to 9.2%, an increase of 70 basis points

  • Net new home orders of 1,409 compared to 1,235, an increase of 14%

  • Active selling communities averaged 117.5 compared to 142.8, a decrease of 18%

    ° Net new home orders per average selling community increased by 38% to 12.0 orders (4.0 monthly) compared to 8.6 orders (2.9 monthly)

    ° Cancellation rate of 10% compared to 14%

  • Backlog units at quarter end of 2,964 homes compared to 1,752, an increase of 69%

    ° Dollar value of backlog at quarter end of $1.9 billion compared to $1.1 billion, an increase of 69%

    ° Average sales price in backlog at quarter end remained flat at $647,000 compared to $648,000

  • Ratios of debt-to-capital and net debt-to-net capital of 37.6% and 24.4%*, respectively, as of December 31, 2020

  • Repurchased 4,962,823 shares of common stock at an average price of $17.53 for an aggregate dollar amount of $87.0 million in the three months ended December 31, 2020

  • Ended fourth quarter of 2020 with total liquidity of $1.2 billion, including cash of $621.3 million and $535.9 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 2020 and Comparisons to Full Year 2019

  • Net income available to was $282.2 million, or $2.17 per diluted share, compared to $207.2 million, or $1.47 per diluted share

  • Home sales revenue of $3.2 billion compared to $3.1 billion, an increase of 5%

    ° New home deliveries of 5,123 homes compared to 4,921 homes, an increase of 4%

    ° Average sales price of homes delivered of $631,000 compared to $624,000, an increase of 1%

  • Homebuilding gross margin percentage of 22.0% compared to 19.8%, an increase of 220 basis points

    ° Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 25.0%*

  • SG&A expense as a percentage of homes sales revenue of 10.8% compared to 11.5%, a decrease of 70 basis points

  • Net new home orders of 6,335 compared to 5,338, an increase of 19%

  • Active selling communities averaged 133.2 compared to 145.7, a decrease of 9%

    ° Net new home orders per average selling community increased by 29% to 47.6 orders (4.0 monthly) compared to 36.6 orders (3.1 monthly)

    ° Cancellation rate of 13% compared to 15%, a decrease of 200 basis points

  • Repurchased 15,163,477 shares of common stock at an average price of $16.53 for an aggregate dollar amount of $250.7 million in the full year ended December 31, 2020

    * See “Reconciliation of Non-GAAP Financial Measures”

“2020 was a challenging year and I would like to thank the Tri Pointe Homes team for their commitment, tenacity, and ingenuity in making this a record year for our company,” said Tri Pointe Homes President and Chief Operating Officer Tom Mitchell. “Our success was driven by a combination of positive industry factors, well-located communities and innovative new home designs. The accelerated demand allowed us to increase prices at a majority of our communities and stay ahead of the cost pressures we are experiencing as an industry. I am very excited about the successful implementation of our one unified brand – Tri Pointe Homes. With an increased emphasis on affordability and the growth of our early-stage divisions I am very optimistic that 2021 will be another strong year for our company.”

Outlook

There remains uncertainty regarding COVID-19 and future developments, including the duration and severity of the outbreak, as well as the related short-term and long-term impacts on the economy. The following outlook is based on the Company’s backlog as of December 31, 2020, current market dynamics and management’s estimates. Actual results could differ due to, among other things, the effects of the COVID-19 pandemic.

For the first quarter of 2021, the Company anticipates delivering between 1,100 and 1,200 homes at an average sales price between $625,000 and $635,000. The Company expects its homebuilding gross margin percentage to be in the range of 21.5% to 22.5% for the first quarter of 2021 and anticipates its SG&A expense as a percentage of home sales revenue will be in the range of 12.0% to 12.5%. Lastly, the Company expects its effective tax rate for the first quarter of 2021 to be approximately 25%.

For the full year, the Company expects to open approximately 70 new communities and end the year with between 125 and 135 active selling communities. In addition, the Company anticipates delivering between 5,700 and 6,000 homes at an average sales price between $600,000 and $610,000. The Company expects homebuilding gross margin percentage to be in the range of 21.0% to 22.0% for the full year and anticipates its SG&A expense as a percentage of homes sales revenue will be in the range of 10.0% to 10.5%. Finally, the Company expects its effective tax rate for the full year to be approximately 25%.

Earnings Conference Call

The Company will host a conference call via live webcast for investors and other interested parties beginning at 7:00 a.m. Pacific Time (10:00 a.m. Eastern Time) on Thursday, February 18, 2021. The call will be hosted by Doug Bauer, Chief Executive Officer, Tom Mitchell, President and Chief Operating Officer and Glenn Keeler, Chief Financial Officer.

Interested parties can listen to the call live and view the related presentation slides on the internet through the Events & Presentations heading in the Investors section of the Company’s website at TriPointeHomes.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 toll free at (877) 407-3982, or (201) 493-6780 for international participants. Participants should ask for the Tri Pointe Homes Fourth Quarter 2020 Earnings Conference Call. Those dialing in should do so at least ten minutes prior to the start of the call. A replay of the call will be available for two weeks following the call toll free at (844) 512-2921, or (412) 317-6671 for international participants, using the reference number 13714650. An archive of the webcast will also be available on the Company’s website for a limited time.

About Tri Pointe Homes, Inc.

One of the largest homebuilders in the U.S., Tri Pointe Homes® (NYSE: TPH) is a publicly traded company and a recognized leader in customer experience, innovative design, and environmentally responsible business practices. The company builds premium homes and communities in 10 states, with deep ties to the communities it serves—some for as long as a century. Tri Pointe Homes combines the financial resources, technology platforms and proven leadership of a national organization with the regional insights, longstanding community connections and agility of empowered local teams. Tri Pointe has won multiple Builder of the Year awards, most recently in 2019, and made Fortune magazine’s 2017 100 Fastest-Growing Companies list. The company was also named one of the Best Places to Work by the Orange County Business Journal for four consecutive years. For more information, please visit TriPointeHomes.com.

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 effects of the ongoing COVID-19 pandemic, which are highly uncertain and subject to rapid change, cannot be predicted and will depend upon future developments, including the emergence and spread of new strains or variants of COVID-19, the severity and the duration of the outbreak, the duration of existing and future social distancing and shelter-in-place orders, further mitigation strategies taken by applicable government authorities, the availability and acceptance of effective vaccines, adequate testing and treatments and the prevalence of widespread immunity to COVID-19; the impacts on our supply chain, the health of our employees, service providers and trade partners, and the reactions of U.S. and global markets and their effects on consumer confidence and spending; the effects 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; the availability of desirable and reasonably priced land and our ability to control, purchase, hold and develop such parcels; access to adequate capital on acceptable terms; geographic concentration of our operations, particularly within California; levels of competition; the successful execution of our internal performance plans, including restructuring and cost reduction initiatives; raw material and labor prices and availability; oil and other energy prices; the effects of U.S. trade policies, including the imposition of tariffs and duties on homebuilding products and retaliatory measures taken by other countries; the effects 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; the risk of loss from acts of war, terrorism, civil unrest or outbreaks of contagious diseases, such as COVID-19; transportation costs; federal and state tax policies; the effects of land use, environment and other governmental laws and 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 homebuyers’ 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:

Drew Mackintosh, Mackintosh Investor Relations

Carol Ruiz, cruiz@newgroundco.com, 310-437-0045

InvestorRelations@TriPointeHomes.com, 949-478-8696

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

Three Months Ended December 31,

Year Ended December 31,

2020

2019

Change

% Change

2020

2019

Change

% Change

Operating Data:

Home sales revenue

$

1,045,020

$

1,138,265

$

(93,245

)

(8

)%

$

3,232,836

$

3,069,375

$

163,461

5

%

Homebuilding gross margin

$

242,002

$

249,404

$

(7,402

)

(3

)%

$

712,046

$

606,667

$

105,379

17

%

Homebuilding gross margin %

23.2

%

21.9

%

1.3

%

22.0

%

19.8

%

2.2

%

Adjusted homebuilding gross margin %*

26.3

%

26.2

%

0.1

%

25.0

%

23.2

%

1.8

%

SG&A expense

$

103,155

$

104,219

$

(1,064

)

(1

)%

$

349,414

$

352,309

$

(2,895

)

(1

)%

SG&A expense as a % of home sales revenue

9.9

%

9.2

%

0.7

%

10.8

%

11.5

%

(0.7

)%

Net income

$

115,114

$

117,993

$

(2,879

)

(2

)%

$

282,207

$

207,187

$

75,020

36

%

Adjusted EBITDA*

$

203,396

$

213,528

$

(10,132

)

(5

)%

$

532,915

$

420,899

$

112,016

27

%

Interest incurred

$

20,450

$

21,951

$

(1,501

)

(7

)%

$

83,120

$

89,691

$

(6,571

)

(7

)%

Interest in cost of home sales

$

31,013

$

30,065

$

948

3

%

$

93,131

$

81,567

$

11,564

14

%

Other Data:

Net new home orders

1,409

1,235

174

14

%

6,335

5,338

997

19

%

New homes delivered

1,633

1,795

(162

)

(9

)%

5,123

4,921

202

4

%

Average selling price of homes delivered

$

640

$

634

$

6

1

%

$

631

$

624

$

7

1

%

Cancellation rate

10

%

14

%

(4

)%

13

%

15

%

(2

)%

Average selling communities

117.5

142.8

(25.3

)

(18

)%

133.2

145.7

(12.5

)

(9

)%

Selling communities at end of period

112

137

(25

)

(18

)%

Backlog (estimated dollar value)

$

1,916,664

$

1,136,163

$

780,501

69

%

Backlog (homes)

2,964

1,752

1,212

69

%

Average selling price in backlog

$

647

$

648

$

(1

)

0

%

December 31,
2020

December 31,
2019

Change

Balance Sheet Data:

Cash and cash equivalents

$

621,295

$

329,011

$

292,284

Real estate inventories

$

2,910,142

$

3,065,436

$

(155,294

)

Lots owned or controlled

35,641

30,029

5,612

Homes under construction (1)

3,044

2,269

775

Homes completed, unsold

68

343

(275

)

Total debt, net

$

1,343,001

$

1,283,985

$

59,016

Stockholders' equity

$

2,232,537

$

2,186,530

$

46,007

Book capitalization

$

3,575,538

$

3,470,515

$

105,023

Ratio of debt-to-capital

37.6

%

37.0

%

0.6

%

Ratio of net debt-to-net-capital*

24.4

%

30.4

%

(6.0

)%

_____________________________________
(1) Homes under construction included 86 and 78 models at December 31, 2020 and December 31, 2019, respectively.
* See “Reconciliation of Non-GAAP Financial Measures”


CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

December 31,
2020

December 31,
2019

Assets

(unaudited)

Cash and cash equivalents

$

621,295

$

329,011

Receivables

63,551

69,276

Real estate inventories

2,910,142

3,065,436

Investments in unconsolidated entities

75,056

11,745

Goodwill and other intangible assets, net

158,529

159,893

Deferred tax assets, net

47,525

49,904

Other assets

145,882

173,425

Total assets

$

4,021,980

$

3,858,690

Liabilities

Accounts payable

$

79,690

$

66,120

Accrued expenses and other liabilities

366,740

322,043

Loans payable

258,979

250,000

Senior notes

1,084,022

1,033,985

Total liabilities

1,789,431

1,672,148

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, 2020 and December 31, 2019, respectively

Common stock, $0.01 par value, 500,000,000 shares authorized;121,882,778 and 136,149,633 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively

1,219

1,361

Additional paid-in capital

345,137

581,195

Retained earnings

1,886,181

1,603,974

Total stockholders' equity

2,232,537

2,186,530

Noncontrolling interests

12

12

Total equity

2,232,549

2,186,542

Total liabilities and equity

$

4,021,980

$

3,858,690

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

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

Homebuilding:

Home sales revenue

$

1,045,020

$

1,138,265

$

3,232,836

$

3,069,375

Land and lot sales revenue

12,470

357

15,932

7,176

Other operations revenue

642

617

2,542

2,470

Total revenues

1,058,132

1,139,239

3,251,310

3,079,021

Cost of home sales

803,018

888,861

2,520,790

2,462,708

Cost of land and lot sales

2,653

159

6,443

7,711

Other operations expense

624

608

2,496

2,434

Sales and marketing

50,565

61,260

183,110

195,148

General and administrative

52,590

42,959

166,304

157,161

Restructuring charges

58

5,661

Homebuilding income from operations

148,624

145,392

366,506

253,859

Equity in income (loss) of unconsolidated entities

95

(19

)

162

(52

)

Other income (expense), net

97

138

(8,978

)

6,857

Homebuilding income before income taxes

148,816

145,511

357,690

260,664

Financial Services:

Revenues

2,695

2,035

9,137

3,994

Expenses

1,417

1,122

5,115

2,887

Equity in income of unconsolidated entities

3,904

4,455

11,665

9,316

Financial services income before income taxes

5,182

5,368

15,687

10,423

Income before income taxes

153,998

150,879

373,377

271,087

Provision for income taxes

(38,884

)

(32,886

)

(91,170

)

(63,900

)

Net income

$

115,114

$

117,993

$

282,207

$

207,187

Earnings per share

Basic

$

0.93

$

0.85

$

2.18

$

1.47

Diluted

$

0.92

$

0.85

$

2.17

$

1.47

Weighted average shares outstanding

Basic

123,944,552

138,245,130

129,368,964

140,851,444

Diluted

124,815,177

139,219,179

129,951,161

141,394,227

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

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

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

189

$

601

212

$

503

664

$

553

530

$

515

Pardee Homes

626

634

647

696

1,613

662

1,675

658

Quadrant Homes

116

973

90

853

286

928

257

933

Trendmaker Homes

212

441

254

459

910

459

882

461

Tri Pointe Homes

343

707

414

671

1,153

703

1,163

685

Winchester Homes

147

582

178

621

497

613

414

609

Total

1,633

$

640

1,795

$

634

5,123

$

631

4,921

$

624

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

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:

Arizona

189

$

601

212

$

503

664

$

553

530

$

515

California

700

687

821

725

2,010

721

2,051

713

Colorado

53

597

63

569

219

594

278

565

Maryland

108

523

117

489

336

553

289

491

Nevada

204

602

177

548

525

561

509

550

North Carolina

7

363

7

363

South Carolina

5

325

5

325

Texas

212

441

254

459

910

459

882

461

Virginia

39

747

61

875

161

739

125

880

Washington

116

973

90

853

286

928

257

933

Total

1,633

$

640

1,795

$

634

5,123

$

631

4,921

$

624

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

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

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

167

15.8

138

14.0

813

16.9

709

13.8

Pardee Homes

391

36.5

354

41.8

1,985

40.1

1,733

43.5

Quadrant Homes

27

5.5

90

6.5

336

7.5

300

6.8

Trendmaker Homes

306

26.0

232

34.7

1,063

29.0

914

37.1

Tri Pointe Homes

364

23.7

292

31.3

1,527

28.1

1,174

30.0

Winchester Homes

154

10.0

129

14.5

611

11.6

508

14.5

Total

1,409

117.5

1,235

142.8

6,335

133.2

5,338

145.7

Three Months Ended December 31,

Year Ended December 31,

2020

2019

2020

2019

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:

Arizona

167

15.8

138

14.0

813

16.9

709

13.8

California

559

40.0

488

53.8

2,716

48.5

2,147

53.7

Colorado

64

4.8

47

5.8

245

4.3

234

6.2

Maryland

86

6.5

90

10.5

420

8.2

345

10.2

Nevada

111

13.7

111

13.5

524

14.8

526

13.5

North Carolina

19

0.7

19

0.2

South Carolina

2

1.0

8

0.3

Texas

306

26.0

232

34.7

1,063

29.0

914

37.1

Virginia

68

3.5

39

4.0

191

3.5

163

4.4

Washington

27

5.5

90

6.5

336

7.5

300

6.8

Total

1,409

117.5

1,235

142.8

6,335

133.2

5,338

145.7

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

As of December 31, 2020

As of December 31, 2019

Backlog
Units

Backlog
Dollar
Value

Average
Sales
Price

Backlog
Units

Backlog
Dollar
Value

Average
Sales
Price

Backlog:

Maracay

479

$

324,410

$

677

330

$

180,954

$

548

Pardee Homes

832

574,613

691

460

336,837

732

Quadrant Homes

139

139,435

1,003

89

79,789

897

Trendmaker Homes

498

232,323

467

345

169,946

493

Tri Pointe Homes

703

453,665

645

329

234,189

712

Winchester Homes

313

192,218

614

199

134,448

676

Total

2,964

$

1,916,664

$

647

1,752

$

1,136,163

$

648

As of December 31, 2020

As of December 31, 2019

Backlog
Units

Backlog
Dollar
Value

Average
Sales
Price

Backlog
Units

Backlog
Dollar
Value

Average
Sales
Price

Backlog:

Arizona

479

$

324,410

$

677

$

330

$

180,954

$

548

California

1,258

855,261

680

552

437,926

793

Colorado

126

71,940

571

100

58,060

581

Maryland

201

113,828

566

117

68,954

589

Nevada

136

95,963

706

137

75,040

548

North Carolina

12

4,274

356

South Carolina

3

840

280

Texas

498

232,323

467

345

169,946

493

Virginia

112

78,390

700

82

65,494

799

Washington

139

139,435

1,003

89

79,789

897

Total

2,964

$

1,916,664

$

647

1,752

$

1,136,163

$

648

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

December 31,
2020

December 31,
2019

Lots Owned or Controlled(1):

Maracay

4,128

3,730

Pardee Homes

13,840

13,267

Quadrant Homes

964

1,103

Trendmaker Homes

6,985

4,034

Tri Pointe Homes

7,833

6,170

Winchester Homes

1,891

1,725

Total

35,641

30,029

December 31,
2020

December 31,
2019

Lots Owned or Controlled(1):

Arizona

4,128

3,730

California

15,040

14,677

Colorado

1,080

1,033

Maryland

892

1,140

Nevada

2,639

2,026

North Carolina

2,808

1,590

South Carolina

106

111

Texas

6,985

4,034

Virginia

999

585

Washington

964

1,103

Total

35,641

30,029

December 31,
2020

December 31,
2019

Lots by Ownership Type:

Lots owned

22,620

22,845

Lots controlled (1)

13,021

7,184

Total

35,641

30,029

__________
(1) As of December 31, 2020 and December 31, 2019, 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,

2020

%

2019

%

(dollars in thousands)

Home sales revenue

$

1,045,020

100.0

%

$

1,138,265

100.0

%

Cost of home sales

803,018

76.8

%

888,861

78.1

%

Homebuilding gross margin

242,002

23.2

%

249,404

21.9

%

Add: interest in cost of home sales

31,013

3.0

%

30,065

2.6

%

Add: impairments and lot option abandonments

1,960

0.2

%

18,356

1.6

%

Adjusted homebuilding gross margin

$

274,975

26.3

%

$

297,825

26.1

%

Homebuilding gross margin percentage

23.2

%

21.9

%

Adjusted homebuilding gross margin percentage

26.3

%

26.2

%


Year Ended December 31,

2020

%

2019

%

(dollars in thousands)

Home sales revenue

$

3,232,836

100.0

%

$

3,069,375

100.0

%

Cost of home sales

2,520,790

78.0

%

2,462,708

80.2

%

Homebuilding gross margin

712,046

22.0

%

606,667

19.8

%

Add: interest in cost of home sales

93,131

2.9

%

81,567

2.7

%

Add: impairments and lot option abandonments

4,004

0.1

%

24,875

0.8

%

Adjusted homebuilding gross margin

$

809,181

25.0

%

$

713,109

23.2

%

Homebuilding gross margin percentage

22.0

%

19.8

%

Adjusted homebuilding gross margin percentage

25.0

%

23.2

%

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, 2020

December 31, 2019

Loans payable

$

258,979

$

250,000

Senior notes

1,084,022

1,033,985

Total debt

1,343,001

1,283,985

Stockholders’ equity

2,232,537

2,186,530

Total capital

$

3,575,538

$

3,470,515

Ratio of debt-to-capital(1)

37.6

%

37.0

%

Total debt

$

1,343,001

$

1,283,985

Less: Cash and cash equivalents

(621,295

)

(329,011

)

Net debt

721,706

954,974

Stockholders’ equity

2,232,537

2,186,530

Net capital

$

2,954,243

$

3,141,504

Ratio of net debt-to-net capital(2)

24.4

%

30.4

%

__________
(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 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) early loan termination costs 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,

2020

2019

2020

2019

(in thousands)

Net income available to common stockholders

$

115,114

$

117,993

$

282,207

$

207,187

Interest expense:

Interest incurred

20,450

21,951

83,120

89,691

Interest capitalized

(20,450

)

(21,951

)

(83,120

)

(89,691

)

Amortization of interest in cost of sales

31,082

30,061

93,248

81,735

Provision for income taxes

38,884

32,886

91,170

63,900

Depreciation and amortization

10,301

10,040

29,497

28,396

EBITDA

195,381

190,980

496,122

381,218

Amortization of stock-based compensation

5,997

4,192

16,885

14,806

Real estate inventory impairments and lot option abandonments

1,960

18,356

4,004

24,875

Early loan termination costs

10,243

Restructuring charges

58

5,661

Adjusted EBITDA

$

203,396

$

213,528

$

532,915

$

420,899

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 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, 2020

Year Ended December 31, 2020

As Reported

Adjustments

Adjusted

As Reported

Adjustments

Adjusted

(in thousands, except per share amounts)

Income before income taxes

$

153,998

$

58

$

154,056

$

373,377

$

15,904

$

389,281

Provision for income taxes

(38,884

)

(15

)

(38,899

)

(91,170

)

(3,881

)

(95,051

)

Net income

$

115,114

$

43

$

115,157

$

282,207

$

12,023

$

294,230

Earnings per share

Diluted

$

0.92

$

0.92

$

2.17

$

2.26

Weighted average shares outstanding

Diluted

124,815

124,815

129,951

129,951

Effective tax rate

25.2

%

25.2

%

24.4

%

24.4

%

_________
(1) Includes (i) a $10.2 million charge for the year ended December 31, 2020 related to the early extinguishment of a portion of our 4.875% Senior Notes due 2021, which is included in other income (expense), net on our consolidated statements of operations, and (ii) $58,000 and $5.7 million charges for the three months and full year ended December 31, 2020, respectively, related to restructuring charges stemming from a workforce reduction plan.
(2) Includes a tax adjustment to reflect the higher pretax earnings associated with the aforementioned adjustments.