News Release

CalAtlantic Group, Inc. Reports 2016 Third Quarter Results

On October 1, 2015, Standard Pacific Corp. completed its merger transaction with The Ryland Group, Inc., with Standard Pacific continuing as the surviving corporation and changing its name to CalAtlantic Group, Inc.  Because the closing of the merger occurred in the 2015 fourth quarter, the highlights and comparisons below and the other financial information included in this earnings release includes only stand-alone data for predecessor Standard Pacific for the three and nine months ended September 30, 2015.  To aid analysts and other investors with year-over-year comparability for the entire merged business, we also are providing limited pro forma information, which combines the stand-alone Standard Pacific and Ryland financial and operating data for the three and nine months ended September 30, 2015.  Limited historical Ryland operating data is also presented in the tables beginning on page 15 for informational purposes.

IRVINE, CALIFORNIA, October 26, 2016.  CalAtlantic Group, Inc. (NYSE: CAA) today announced results for the third quarter ended September 30, 2016.

Larry Nicholson, President and Chief Executive Officer of CalAtlantic Group, Inc. commented, "We continue to execute our business at a high level.  With orders growth of 9%, revenue from home sales growth of 26%, and earnings per share growth of 64%, I am pleased with the result of our total team effort."

2016 third quarter results are for the combined company and include merger costs. The 2015 third quarter includes only the stand-alone results of Standard Pacific and includes merger related costs.

·	Net new orders of 3,531, up 166%; Dollar value of net new orders up 98%

·	566 average active selling communities, up 163%

·	3,680 new home deliveries, up 216%

·	Average selling price of $452 thousand, down 16%

·	Home sale revenues of $1.7 billion, up 166%

·	Gross margin from home sales of 22.5%, compared to 25.3%

·	SG&A rate from home sales of 10.3%, compared to 11.7%

·	Operating margin from home sales of $203.6 million, or 12.2%, compared to $85.4 million, or 13.6%

·	Net income of $132.3 million, or $0.97 per diluted share, vs. net income of $47.2 million, or $0.59 per diluted share (2016 third quarter results include the impact of $3.9 million of merger costs, compared to $11.2 million for the 2015 third quarter)

·	$387.1 million of land purchases and development costs, compared to $262.2 million

·	Repurchased 1.1 million shares during the quarter at an average price of $34.12 and a total expenditure of $37.6 million

To aid analysts and other investors with year-over-year comparability for the entire merged business, we provide the below pro forma information.  This pro forma information is a combination of stand-alone third quarter 2015 Standard Pacific and Ryland financial and operating data compared to actual 2016 CalAtlantic third quarter results.  Such pro forma data was not prepared to comply with Regulation S-X of the SEC Rules and Regulations.

·	Net new orders of 3,531, up 9%; Dollar value of net new orders up 8%

·	566 average active selling communities, flat

·	3,680 new home deliveries, up 15%

·	Average selling price of $452 thousand, up 10%

 

·	Home sale revenues of $1.7 billion, up 26%

·	Pretax income of $210.7 million vs. $143.9 million* (2016 third quarter results include the impact of $3.9 million of merger costs, compared to $11.2 million for the 2015 third quarter)

·	$387.1 million of land purchases and development costs, compared to $432.8 million

Orders.  Net new orders for the 2016 third quarter were up 9% from the pro forma 2015 third quarter, to 3,531 homes, with the dollar value of these orders up 8%.  The Company's monthly sales absorption rate was 2.1 per community for the 2016 third quarter, up 9% from the pro forma 2015 third quarter and down 10% from the 2016 second quarter, approximately half the decline associated with normal seasonal patterns.  The Company's cancellation rate for the 2016 third quarter was 16%, down compared to 20% for the pro forma 2015 third quarter and slightly up from 15% for the 2016 second quarter.

Backlog.  The dollar value of homes in backlog increased 10% to $3.3 billion, or 7,307 homes, compared to $3.0 billion, or 6,707 homes, for the pro forma 2015 third quarter, and decreased 3% compared to $3.4 billion, or 7,456 homes, for the 2016 second quarter.  The increase in pro forma year-over-year backlog value was driven primarily by the 9% increase in the Company's monthly sales absorption rate.  As of September 30, 2016, the average gross margin of the 7,307 total homes in backlog was 21.4%.  For the 4,306 homes scheduled to close in the fourth quarter of 2016, the gross margin in backlog as of such date was 21.2%.

Revenue.  Revenues from home sales for the 2016 third quarter increased 26%, to $1.7 billion, as compared to the pro forma 2015 third quarter, resulting from a 15% increase on a pro forma basis in new home deliveries and a 10% increase on a pro forma basis in the Company's average home price to $452 thousand.  The increase in average home price was primarily attributable to product mix and general price increases within select markets.

Gross Margin.  The Company achieved gross margin from homes sales of 22.5% for the 2016 third quarter.  Excluding 270 bps of capitalized interest amortized to cost of home sales, our pre-interest gross margin was 25.2%*.  Our 2016 gross margin was negatively impacted by a shift in product mix, a competitive pricing environment, and an increase in direct construction costs per home.

SG&A Expenses. Selling, general and administrative expenses for the 2016 third quarter were $170.8 million, or 10.3%, as compared to $73.3 million, or 11.7%, for the 2015 third quarter.  This 140 basis point improvement was primarily the result of a 166% increase in home sale revenues and the operating leverage associated with the increase in revenue and the synergies gained in connection with the merger. 

Land.  During the 2016 third quarter, the Company spent $387.1 million on land purchases and development costs, compared to $432.8 million for the pro forma 2015 third quarter. The Company purchased $227.6 million of land, consisting of 3,798 homesites, of which 20% (based on homesites) is located in the North region, 37% in the Southeast region, 33% in the Southwest region, and 10% in the West region.  As of September 30, 2016, the Company owned or controlled 67,964 homesites, of which 46,119 were owned and actively selling or under development, 16,579 were controlled or under option, and the remaining 5,266 homesites were held for future development or for sale.

Liquidity.  The Company ended the quarter with $675.1 million of available liquidity, including $184.0 million of unrestricted homebuilding cash and $491.1 million available to borrow under its $750 million revolving credit facility. The Company's homebuilding debt to book capitalization as of September 30, 2016 and 2015 was 46.4% and 56.8%, respectively, and adjusted net homebuilding debt to adjusted book capitalization was 44.9%* and 55.4%*, respectively.  In addition, the Company's homebuilding debt to adjusted homebuilding EBITDA for the LTM period ending September 30, 2016 and 2015 was 3.7x* and 4.7x*, respectively.

Share Repurchase.  During the third quarter, the Company repurchased 1.1 million shares of its common stock at an average price of $34.12 and a total third quarter spend of $37.6 million.  This brings the year-to-date

 

repurchases for the nine months ended September 30, 2016 to 4.3 million shares at an average price of $31.99 and a total year-to-date spend of $137.5 million.

 

Earnings Conference Call

A conference call to discuss the Company's 2016 third quarter results will be held at 11:00 a.m. Eastern time October 27, 2016.  The call will be broadcast live over the Internet and can be accessed through the Company's website at http://investors.calatlantichomes.com.  The call will also be accessible via telephone by dialing (800) 723-6604 (domestic) or (785) 830-7977 (international); Passcode: 3619958. The audio transmission with the slide presentation will be available on our website for replay within 2 to 3 hours following the live broadcast, and can be accessed by dialing (888) 203-1112 (domestic) or (719) 457-0820 (international); Passcode: 3619958.

About CalAtlantic Group, Inc.

CalAtlantic Group, Inc. (NYSE: CAA), a combination of Standard Pacific Corp. and Ryland Group, Inc., two of the nation's largest and most respected homebuilders, offers well-crafted homes in thoughtfully designed communities that meet the desires of customers across the homebuilding spectrum, from entry level to luxury, in 41 Metropolitan Statistical Areas spanning 17 states.  With a trusted reputation for quality craftsmanship, an outstanding customer experience and exceptional architectural design earned over its 50 year history, CalAtlantic Group, Inc. utilizes its over five decades of land acquisition, development and homebuilding expertise to acquire and build desirable communities in locations that meet the high expectations of the company's homebuyers.  We invite you to learn more about us by visiting www.calatlantichomes.com.

The pro forma results presented above are not necessarily indicative of how the Company would have performed if Ryland and Standard Pacific were combined for the first nine months of 2015 and are not necessarily indicative of the combined Company's future performance. This news release and the referenced earnings conference call contain forward-looking statements.  These statements include but are not limited to statements regarding the integration of the operations of Standard Pacific and Ryland, the future success of those combined operations; new home orders; deliveries; backlog; absorption rates; cancellation rates; average home price; revenue; profitability; cash flow; liquidity; gross margin; operating margin; product mix; land supply; our liquidity; our ability to execute our business; and the amount and timing of share repurchases.  Forward-looking statements are based on our current expectations or beliefs regarding future events or circumstances, and you should not place undue reliance on these statements.  Such statements involve known and unknown risks, uncertainties, assumptions and other factors many of which are out of the Company's control and difficult to forecast that may cause actual results to differ materially from those that may be described or implied.  Such factors include but are not limited to:  local and general economic and market conditions, including consumer confidence, employment rates, interest rates, the cost and availability of mortgage financing, and stock market, home and land valuations; the impact on economic conditions, terrorist attacks or the outbreak or escalation of armed conflict involving the United States; the cost and availability of suitable undeveloped land, building materials and labor; the cost and availability of construction financing and corporate debt and equity capital; our significant amount of debt and the impact of restrictive covenants in our debt agreements; our ability to repay our debt as it comes due; changes in our credit rating or outlook; the demand for and affordability of single-family homes; the supply of housing for sale; cancellations of purchase contracts by homebuyers; the cyclical and competitive nature of the Company's business; governmental regulation, including the impact of "slow growth" or similar initiatives; delays in the land entitlement process, development, construction, or the opening of new home communities; adverse weather conditions and natural disasters; environmental matters; risks relating to the Company's mortgage banking operations; future business decisions and the Company's ability to successfully implement the Company's operational and other strategies; litigation and warranty claims; and other risks discussed in the Company's filings with the Securities and Exchange Commission, including in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2015 and subsequent Quarterly Reports on Form 10-Q.  The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements.  The Company nonetheless reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release.  No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

Contact:

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

*Please see "Reconciliation of Non-GAAP Financial Measures" beginning on page 12.

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The table set forth below reconciles the Company's pretax income to adjusted pretax income, excluding extraordinary purchase accounting adjustments and merger and other one-time transaction related costs.  We believe these measures are useful to management and investors as they provide perspective on the underlying operating performance of the business excluding these charges and provide comparability with the Company's peer group.

 

			Three Months Ended
			September 30, 2016			June 30, 2016
			(Dollars in thousands)
Pretax income			$	210,746		$	179,617
Add:
	Purchase accounting adjustments included in cost of home sales			―			5,858
	Merger and other one-time transaction related costs			3,937			5,005
Adjusted pretax income			$	214,683		$	190,480

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

 

			Three Months Ended									LTM Ended September 30,
			September 30, 2016			September 30, 2015			June 30, 2016			2016			2015
			(Dollars in thousands)
Net income			$	132,348		$	47,177		$	112,760		$	395,298		$	200,624
	Provision for income taxes			78,398			31,117			66,857			236,446			120,070
	Homebuilding interest amortized to cost of sales			44,751			33,323			41,830			163,820			131,878
	Homebuilding depreciation and amortization			15,735			7,368			15,381			61,827			30,691
EBITDA				271,232			118,985			236,828			857,391			483,263
Add:
	Amortization of stock-based compensation			3,704			3,536			3,726			18,220			9,353
	Cash distributions of income from unconsolidated joint ventures			―			―			―			2,688			592
	Purchase accounting adjustments included in cost of home sales			―			―			5,858			82,705			―
	Merger and other one-time costs			3,937			11,216			5,005			58,635			16,888
Less:
	Income (loss) from unconsolidated joint ventures			1,231			121			223			4,990			(707)
	Income from financial services subsidiaries			9,807			2,847			8,146			34,955			9,345
Adjusted Homebuilding EBITDA			$	267,835		$	130,769		$	243,048		$	979,694		$	501,458
Homebuilding revenues			$	1,670,958		$	652,190		$	1,578,362		$	6,109,314		$	2,575,744
Adjusted Homebuilding EBITDA Margin %				16.0%			20.1%			15.4%			16.0%			19.5%