CalAtlantic Group, Inc. - FORM 8-K - EX-99.1 - PRESS RELEASE ANNOUNCING RESULTS OF OPERATIONS - July 27, 2017

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Exhibit 99.1
 
 
 
 
News Release

CalAtlantic Group, Inc. Reports 2017 Second Quarter Results

ARLINGTON, VIRGINIA, July 27, 2017.  CalAtlantic Group, Inc. (NYSE: CAA) today announced results for the second quarter ended June 30, 2017.

"The second quarter was a productive one for the Company", said Larry Nicholson, President and Chief Executive Officer of CalAtlantic Group, Inc.  "In addition to our solid operating results, I am pleased with the significant progress we made with our growth initiative, expanding into the robust Seattle and Salt Lake City markets.  Our entry into these strong "top 20" markets offer us great growth and earnings opportunities going forward in sustainable, long-term markets."

2017 CalAtlantic Second Quarter Highlights and Comparisons to 2016 Second Quarter

·
Net new orders of 4,078, up 4%; Dollar value of net new orders up 7%
·
557 average active selling communities, down 2%
·
3,653 new home deliveries, up 5%
·
Average selling price of $444 thousand, down 1%
·
Home sale revenues of $1.6 billion, up 4%
·
Gross margin from home sales of 20.0%, compared to 21.9%
·
SG&A rate from home sales of 10.7%, compared to 10.6%
·
Operating margin from home sales of $149.4 million, or 9.2%, compared to $175.2 million, or 11.2%
·
Net income of $99.0 million, or $0.75 per diluted share, vs. net income of $112.8 million, or $0.83 per diluted share
·
$406.1 million of land purchases and development costs, compared to $394.8 million

Orders.  Net new orders for the 2017 second quarter were up 4% from the 2016 second quarter, to 4,078 homes, with the dollar value of these orders up 7%.  The Company's monthly sales absorption rate was 2.4 per community for the 2017 second quarter, up 6% compared to the 2016 second quarter and down 4% from the 2017 first quarter.  The Company's cancellation rate for the 2017 second quarter was 14%, down compared to 15% for the 2016 second quarter and up slightly from 13% for the 2017 first quarter.

Backlog.  The dollar value of homes in backlog increased 4% to $3.6 billion, or 7,534 homes, compared to $3.4 billion, or 7,456, homes, for the 2016 second quarter, and increased 9% compared to $3.3 billion, or 7,109 homes, for the 2017 first quarter.  The increase in year-over-year backlog value was driven by the 3% increase in the average home price in our backlog, to $473 thousand and a 1% increase in units in backlog.  As of June 30, 2017, the average gross margin of the 7,534 total homes in backlog was 20.8%, up 40 basis points compared to the total homes in backlog as of March 31, 2017.

Revenue.  Revenues from home sales for the 2017 second quarter increased 4% to $1.6 billion, as compared to the 2016 second quarter, resulting from a 5% increase in deliveries, partially offset by a 1% decrease in the Company's average home price to $444 thousand.  The decrease in average home price was primarily driven by a 5% decrease in the West region, attributable to a shift in product mix.


Gross Margin.  The Company achieved gross margin from homes sales of 20.0% for the 2017 second quarter.  The Company's 2017 gross margin was negatively impacted by a shift in product mix and an increase in direct construction costs per home.
 
SG&A Expenses. Selling, general and administrative expenses for the 2017 second quarter were $174.0 million, or 10.7%, as compared to $165.7 million, or 10.6%, for the 2016 second quarter.  This 10 basis point increase was primarily the result of an increase in co-broker commissions. 

Land.  During the 2017 second quarter, the Company spent $406.1 million on land purchases and development costs, compared to $394.8 million for the 2016 second quarter. The Company purchased $262.4 million of land, consisting of 3,576 homesites, of which 33% (based on homesites) is located in the North region, 24% in the Southeast region, 11% in the Southwest region, and 32% in the West region.  As of June 30, 2017, the Company owned or controlled 67,622 homesites, of which 46,788 were owned and actively selling or under development, 16,502 were controlled or under option, and the remaining 4,332 homesites were held for future development or for sale.

Liquidity.  The Company ended the quarter with $823.1 million of available liquidity, including $167.8 million of unrestricted homebuilding cash and $655.3 million available to borrow under its $750 million revolving credit facility. The Company's homebuilding debt to book capitalization as of June 30, 2017 and 2016 was 47.0% and 47.9%, respectively, and adjusted net homebuilding debt to adjusted book capitalization was 45.7%* and 45.9%*, respectively.  In addition, the Company's homebuilding debt to adjusted homebuilding EBITDA for the LTM period ending June 30, 2017 and 2016 was 3.8x* and 4.4x*, respectively.

Share Repurchases.  During the 2017 second quarter, the Company repurchased 4.4 million shares at an average price of $33.90 for a total spend of approximately $150.0 million.  As of the end of the quarter, the Company had $217.4 million remaining under its 2016 share repurchase authorization.

Debt Refinancing Activities.  On April 4, 2017 the Company issued $125 million of 5.875% senior notes due November 2024 and $100 million of 5.25% senior notes due June 2026.  On their May 15, 2017 maturity date, the Company repaid in full its $230 million 8.4% senior notes.  On June 9, 2017 the Company issued $350 million of 5.0% senior notes due June 2027.  On June 8, 2017 the Company issued a "Notice to Repurchase at Holder's Option" and a "Notice of Redemption" to the holders of its 1.25% convertible senior notes due 2032.  The Company intends to repurchase the entire $253 million principal balance of the 1.25% convertible notes on August 7, 2017, unless such notes are earlier repurchased or converted.  If the $253 million of convertible notes are repurchased as planned, the fully diluted share count of the Company will be reduced by approximately 6.3 million shares.

Earnings Conference Call

A conference call to discuss the Company's 2017 second quarter results will be held at 10:00 a.m. Eastern time July 28, 2017.  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 (888) 283-6901 (domestic) or (719) 325-2412 (international); Passcode: 2625889. 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: 2625889.

About CalAtlantic Group, Inc.

CalAtlantic Group, Inc. (NYSE: CAA), one of the nation's largest and most respected homebuilders, offers well-crafted homes in thoughtfully designed communities that meet the desires of customers across the homebuilding spectrum, from entry level to luxury, in 43 Metropolitan Statistical Areas spanning 19 states.  With a trusted reputation for quality craftsmanship, an outstanding customer experience and exceptional architectural design earned over its 50 year history, CalAtlantic Group, Inc. utilizes its over five decades of land

2
acquisition, development and homebuilding expertise to acquire and build desirable communities in locations that meet the high expectations of the company's homebuyers.  We invite you to learn more about us by visiting www.calatlantichomes.com.
 
This news release and the referenced earnings conference call contain forward-looking statements.  These statements include but are not limited to new home orders; deliveries; backlog; absorption rates; cancellation rates; average home price; revenue; profitability; cash flow; liquidity; gross margin; operating margin; product mix; land supply; our liquidity; our ability to execute our business; our positioning, growth and earnings opportunities arising from our entry into the Seattle and Utah markets; the amount and timing of share repurchases; and the planned repurchase of the Company's convertible notes due 2032 and the resulting approximately 6.3 million share reduction in the Company's fully diluted share count.  Forward-looking statements are based on our current expectations or beliefs regarding future events or circumstances, and you should not place undue reliance on these statements.  Such statements involve known and unknown risks, uncertainties, assumptions and other factors many of which are out of the Company's control and difficult to forecast that may cause actual results to differ materially from those that may be described or implied.  Such factors include but are not limited to:  local and general economic and market conditions, including consumer confidence, employment rates, interest rates, the cost and availability of mortgage financing, and stock market, home and land valuations; the impact on economic conditions, terrorist attacks or the outbreak or escalation of armed conflict involving the United States; the cost and availability of suitable undeveloped land, building materials and labor; the cost and availability of construction financing and corporate debt and equity capital; our significant amount of debt and the impact of restrictive covenants in our debt agreements; our ability to repay our debt as it comes due; changes in our credit rating or outlook; the demand for and affordability of single-family homes; the supply of housing for sale; cancellations of purchase contracts by homebuyers; the cyclical and competitive nature of the Company's business; governmental regulation, including the impact of "slow growth" or similar initiatives; delays in the land entitlement process, development, construction, or the opening of new home communities; adverse weather conditions and natural disasters; environmental matters; risks relating to the Company's financial services operations; future business decisions and the Company's ability to successfully implement the Company's operational and other strategies; litigation and warranty claims; and other risks discussed in the Company's filings with the Securities and Exchange Commission, including in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and subsequent Quarterly Reports on Form 10-Q.  The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements.  The Company nonetheless reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release.  No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

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

*Please see "Reconciliation of Non-GAAP Financial Measures" beginning on page 9.

###

(Note: Tables Follow)
 
 
 
 
 
 
 
3
 
KEY STATISTICS AND FINANCIAL DATA1
 
     
As of or For the Three Months Ended
     
June 30,
  
June 30,
  
Percentage
  
March 31,
  
Percentage
     
2017
  
2016
  
or % Change
  
2017
  
or % Change
Select Operating Data
(Dollars in thousands)
                             
Deliveries
  
 3,653
    
 3,484
  
5%
    
 3,012
  
21%
Average selling price
$
 444
  
$
 447
  
(1%)
  
$
 444
  
   ―  
Home sale revenues
$
 1,620,614
  
$
 1,558,701
  
4%
  
$
 1,337,699
  
21%
Gross margin % (including land sales)
  
20.0%
    
21.6%
  
(1.6%)
    
20.5%
  
(0.5%)
Gross margin % from home sales
  
20.0%
    
21.9%
  
(1.9%)
    
20.5%
  
(0.5%)
Adjusted gross margin % from home sales (excluding purchase
                    
 
accounting adjustments included in cost of home sales)*
20.0%
    
22.2%
  
(2.2%)
    
20.5%
  
(0.5%)
Adjusted gross margin % from home sales (excluding purchase
                    
 
accounting adjustments and interest amortized to cost of
                      
 
home sales)*
  
23.2%
    
24.8%
  
(1.6%)
    
23.5%
  
(0.3%)
Incentive and stock-based compensation expense
$
 16,401
  
$
 17,275
  
(5%)
  
$
 14,925
  
10%
Selling expenses
$
 87,867
  
$
 81,396
  
8%
  
$
 73,592
  
19%
G&A expenses (excluding incentive and stock-based
                        
 
compensation expenses)
$
 69,729
  
$
 67,023
  
4%
  
$
 67,759
  
3%
SG&A expenses
$
 173,997
  
$
 165,694
  
5%
  
$
 156,276
  
11%
SG&A % from home sales
  
10.7%
    
10.6%
  
0.1%
    
11.7%
  
(1.0%)
Operating margin from home sales
$
 149,368
  
$
 175,214
  
(15%)
  
$
 118,568
  
26%
Operating margin % from home sales
  
9.2%
    
11.2%
  
(2.0%)
    
8.9%
  
0.3%
Adjusted operating margin from home sales*
$
 149,368
  
$
 181,072
  
(18%)
  
$
 118,568
  
26%
Adjusted operating margin % from home sales*
  
9.2%
    
11.6%
  
(2.4%)
    
8.9%
  
0.3%
Net new orders
  
 4,078
    
 3,921
  
4%
    
 4,304
  
(5%)
Net new orders (dollar value)
$
 1,874,782
  
$
 1,749,217
  
7%
  
$
 1,915,601
  
(2%)
Average active selling communities
  
 557
    
 567
  
(2%)
    
 562
  
(1%)
Monthly sales absorption rate per community
  
 2.44
    
 2.31
  
6%
    
 2.55
  
(4%)
Cancellation rate
  
14%
    
15%
  
(1%)
    
13%
  
1%
Gross cancellations
  
 677
    
 711
  
(5%)
    
 650
  
4%
Backlog (homes)
  
 7,534
    
 7,456
  
1%
    
 7,109
  
6%
Backlog (dollar value)
$
 3,561,471
  
$
 3,428,713
  
4%
  
$
 3,259,168
  
9%
                             
Land purchases (incl. seller financing)
$
 262,411
  
$
 237,925
  
10%
  
$
 165,269
  
59%
Adjusted Homebuilding EBITDA*
$
 220,500
  
$
 243,048
  
(9%)
  
$
 178,864
  
23%
Adjusted Homebuilding EBITDA Margin %*
  
13.6%
    
15.4%
  
(1.8%)
    
13.4%
  
0.2%
Homebuilding interest incurred
$
 52,168
  
$
 55,610
  
(6%)
  
$
 51,705
  
1%
Homebuilding interest capitalized to inventories owned
$
 51,338
  
$
 54,564
  
(6%)
  
$
 50,875
  
1%
Homebuilding interest capitalized to investments in JVs
$
 830
  
$
 1,046
  
(21%)
  
$
 830
  
   ―  
Interest amortized to cost of sales (incl. cost of land sales)
$
 52,347
  
$
 41,830
  
25%
  
$
 39,428
  
33%


     
As of
     
June 30,
  
December 31,
  
Percentage
     
2017
  
2016
  
or % Change
Select Balance Sheet Data
(Dollars in thousands, except per share amounts)
                   
Homebuilding cash (including restricted cash)
$
 200,200
  
$
 219,407
  
(9%)
Inventories owned
$
 6,654,990
  
$
 6,438,792
  
3%
Goodwill
$
 985,185
  
$
 970,185
  
2%
Homesites owned and controlled
  
 67,622
    
 65,424
  
3%
Homes under construction
  
 7,775
    
 5,792
  
34%
Completed specs
  
 986
    
 1,255
  
(21%)
Homebuilding debt
$
 3,762,273
  
$
 3,419,787
  
10%
Stockholders' equity
$
 4,235,706
  
$
 4,207,586
  
1%
Stockholders' equity per share
$
 38.44
  
$
 36.77
  
5%
Total consolidated debt to book capitalization
  
48.0%
    
46.6%
  
1.4%
Adjusted net homebuilding debt to total adjusted
              
 
book capitalization*
  
45.7%
    
43.2%
  
2.5%


1All statistical numbers exclude unconsolidated joint ventures unless noted otherwise.
*Please see "Reconciliation of Non-GAAP Financial Measures" beginning on page 9.
4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
     
Three Months Ended June 30,
    
Six Months Ended June 30,
  
   
2017
    
2016
    
2017
    
2016
  
     
(Dollars in thousands, except per share amounts)
  
     
(Unaudited)
  
Homebuilding:
                        
Home sale revenues
  
$
1,620,614
    
$
1,558,701
    
$
2,958,313
    
$
2,737,866
  
Land sale revenues
    
500
      
19,661
      
500
      
26,179
  
Total revenues
    
1,621,114
      
1,578,362
      
2,958,813
      
2,764,045
  
Cost of home sales
    
(1,297,249
)
    
(1,217,793
)
    
(2,360,104
)
    
(2,149,921
)
Cost of land sales
    
(7
)
    
(19,212
)
    
(7
)
    
(25,579
)
Total cost of sales
    
(1,297,256
)
    
(1,237,005
)
    
(2,360,111
)
    
(2,175,500
)
Gross margin
    
323,858
      
341,357
      
598,702
      
588,545
  
Gross margin %
    
20.0
%
    
21.6
%
    
20.2
%
    
21.3
%
Selling, general and administrative expenses
    
(173,997
)
    
(165,694
)
    
(330,273
)
    
(302,395
)
Income (loss) from unconsolidated joint ventures
    
446
      
223
      
4,334
      
1,412
  
Other income (expense)
    
(2,675
)
    
(4,415
)
    
(2,844
)
    
(7,823
)
Homebuilding pretax income
    
147,632
      
171,471
      
269,919
      
279,739
  
Financial Services:
                                
Revenues
    
20,277
      
20,539
      
40,233
      
38,091
  
Expenses
    
(11,661
)
    
(12,393
)
    
(24,036
)
    
(23,009
)
Financial services pretax income
    
8,616
      
8,146
      
16,197
      
15,082
  
Income before taxes
    
156,248
      
179,617
      
286,116
      
294,821
  
Provision for income taxes
    
(57,254
)
    
(66,857
)
    
(104,502
)
    
(109,400
)
Net income
    
98,994
      
112,760
      
181,614
      
185,421
  
  Less: Net income allocated to unvested restricted stock
    
(408
)
    
(251
)
    
(705
)
    
(350
)
Net income available to common stockholders
  
$
98,586
    
$
112,509
    
$
180,909
    
$
185,071
  
                                 
Income Per Common Share:
                                
Basic
  
$
0.87
    
$
0.95
    
$
1.59
    
$
1.55
  
Diluted
  
$
0.75
    
$
0.83
    
$
1.38
    
$
1.36
  
                                 
Weighted Average Common Shares Outstanding:
                                
Basic
    
113,689,435
      
118,419,937
      
114,086,136
      
119,617,438
  
Diluted
    
131,636,412
      
136,088,146
      
132,079,976
      
137,277,899
  
                                 
Cash Dividends Declared Per Common Share
  
$
0.04
    
$
0.04
    
$
0.08
    
$
0.08
  

5
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   
June 30,
    
December 31,
  
   
2017
    
2016
  
   
(Dollars in thousands)
  
ASSETS
  
(Unaudited)
        
Homebuilding:
            
Cash and equivalents
  
$
167,833
    
$
191,086
  
Restricted cash    
32,367
      
28,321
  
Inventories:                
   Owned
    
6,654,990
      
6,438,792
  
   Not owned    
86,618
      
66,267
  
Investments in unconsolidated joint ventures
    
125,768
      
127,127
  
Deferred income taxes, net
    
312,471
      
330,378
  
Goodwill    
985,185
      
970,185
  
Other assets    
233,785
      
204,489
  
Total Homebuilding Assets
    
8,599,017
      
8,356,645
  
Financial Services:
                
Cash and equivalents
    
47,861
      
17,041
  
Restricted cash    
21,375
      
21,710
  
Mortgage loans held for sale, net
    
155,180
      
262,058
  
Mortgage loans held for investment, net
    
25,613
      
24,924
  
Other assets    
17,750
      
26,666
  
Total Financial Services Assets
    
267,779
      
352,399
  
Total Assets
  
$
8,866,796
    
$
8,709,044
  
                 
LIABILITIES AND EQUITY
                
Homebuilding:
                
Accounts payable
  
$
146,383
    
$
211,780
  
Accrued liabilities    
542,568
      
599,905
  
Secured project debt and other notes payable
    
27,041
      
27,579
  
Senior notes payable
    
3,735,232
      
3,392,208
  
Total Homebuilding Liabilities
    
4,451,224
      
4,231,472
  
Financial Services:
                
Accounts payable and other liabilities
    
19,374
      
22,559
  
Mortgage credit facility
    
149,828
      
247,427
  
Total Financial Services Liabilities
    
169,202
      
269,986
  
Total Liabilities
    
4,620,426
      
4,501,458
  
Equity:
                
Stockholders' Equity:
                
Preferred stock
    
―
      
―
  
Common stock
    
1,102
      
1,144
  
Additional paid-in capital
    
3,060,402
      
3,204,835
  
Accumulated earnings
    
1,174,374
      
1,001,779
  
Accumulated other comprehensive income (loss), net of tax
    
(172
)
    
(172
)
   Total Stockholders' Equity
    
4,235,706
      
4,207,586
  
Noncontrolling Interest
    
10,664
      
―
  
Total Equity
    
4,246,370
      
4,207,586
  
Total Liabilities and Equity
  
$
8,866,796
    
$
8,709,044
  


INVENTORIES

   
June 30,
    
December 31,
  
   
2017
    
2016
  
   
(Dollars in thousands)
  
 
  
(Unaudited)
        
Inventories Owned:            
     Land and land under development
  
$
3,156,378
    
$
3,627,740
  
     Homes completed and under construction
    
3,041,557
      
2,304,109
  
     Model homes
    
457,055
      
506,943
  
        Total inventories owned
  
$
6,654,990
    
$
6,438,792
  
                 
Inventories Owned by Segment:
                
     North
  
$
930,156
    
$
851,972
  
     Southeast
    
1,998,997
      
1,896,552
  
     Southwest
    
1,438,224
      
1,421,669
  
     West
    
2,287,613
      
2,268,599
  
        Total inventories owned
  
$
6,654,990
    
$
6,438,792
  
6

REGIONAL OPERATING DATA
 
         
Three Months Ended June 30,
         
2017
  
2016
  
% Change
         
Homes
  
ASP
  
Homes
  
ASP
  
Homes
  
ASP
         
(Dollars in thousands)
New homes delivered:
                                    
 
North
    
 914
  
$
 362
    
 711
  
$
 339
    
29%
    
7%
 
Southeast
    
 1,075
    
 399
    
 983
    
 392
    
9%
    
2%
 
Southwest
    
 907
    
 448
    
 1,003
    
 432
    
(10%)
    
4%
West
  
 
 757
  
 
 600
  
 
 787
  
 
 634
  
 
(4%)
  
 
(5%)
     
Consolidated total
  
 
 3,653
  
$
 444
  
 
 3,484
  
$
 447
  
 
5%
  
 
(1%)

 
         
Six Months Ended June 30,
         
2017
  
2016
  
% Change
         
Homes
  
ASP
  
Homes
  
ASP
  
Homes
  
ASP
         
(Dollars in thousands)
New homes delivered:
                                    
 
North
    
 1,597
  
$
 354
    
 1,272
  
$
 336
    
26%
    
5%
 
Southeast
    
 1,956
    
 399
    
 1,696
    
 391
    
15%
    
2%
 
Southwest
    
 1,693
    
 439
    
 1,857
    
 418
    
(9%)
    
5%
 
West
  
 
 1,419
  
 
 613
  
 
 1,386
  
 
 629
  
 
2%
  
 
(3%)
     
Consolidated total
  
 
 6,665
  
$
 444
  
 
 6,211
  
$
 441
  
 
7%
  
 
1%

 
         
Three Months Ended June 30,
         
2017
  
2016
  
% Change
         
Homes
  
ASP
  
Homes
  
ASP
  
Homes
  
ASP
         
(Dollars in thousands)
Net new orders:
                                    
 
North
    
 923
  
$
 355
    
 933
  
$
 331
    
(1%)
    
7%
 
Southeast
    
 1,252
    
 402
    
 1,112
    
 377
    
13%
    
7%
 
Southwest
    
 940
    
 445
    
 945
    
 431
    
(1%)
    
3%
 
West
  
 
 963
  
 
 649
  
 
 931
  
 
 659
  
 
3%
  
 
(2%)
     
Consolidated total
  
 
 4,078
  
$
 460
  
 
 3,921
  
$
 446
  
 
4%
  
 
3%

 
         
Six Months Ended June 30,
         
2017
  
2016
  
% Change
         
Homes
  
ASP
  
Homes
  
ASP
  
Homes
  
ASP
         
(Dollars in thousands)
Net new orders:
                                    
 
North
    
 1,979
  
$
 349
    
 1,824
  
$
 331
    
8%
    
5%
 
Southeast
    
 2,535
    
 394
    
 2,313
    
 374
    
10%
    
5%
 
Southwest
    
 1,927
    
 445
    
 2,076
    
 429
    
(7%)
    
4%
 
West
  
 
 1,941
  
 
 640
  
 
 1,843
  
 
 645
  
 
5%
  
 
(1%)
     
Consolidated total
  
 
 8,382
  
$
 452
  
 
 8,056
  
$
 440
  
 
4%
  
 
3%

 
         
Three Months Ended June 30,
  
Six Months Ended June 30,
         
2017
  
2016
  
% Change
  
2017
  
2016
  
% Change
Average number of selling communities
                        
  during the period:
                        
 
North
  
138
  
126
  
10%
  
139
  
121
  
15%
 
Southeast
  
 181
  
 179
  
1%
  
 184
  
 180
  
2%
 
Southwest
  
 156
  
 169
  
(8%)
  
 155
  
 172
  
(10%)
 
West
  
 82
  
 93
  
(12%)
  
 82
  
 94
  
(13%)
     
Consolidated total
  
 557
  
 567
  
(2%)
  
 560
  
 567
  
(1%)









7
REGIONAL OPERATING DATA (Continued)
 
         
At June 30,
         
2017
  
2016
  
% Change
         
Homes
  
Dollar
 Value
  
Homes
  
Dollar
 Value
  
Homes
  
Dollar
 Value
         
(Dollars in thousands)
Backlog:
                                    
 
North
    
 1,680
  
$
 603,968
    
 1,555
  
$
 524,001
    
8%
    
15%
 
Southeast
    
 2,372
    
 1,018,178
    
 2,238
    
 923,385
    
6%
    
10%
 
Southwest
    
 1,848
    
 896,335
    
 2,121
    
 970,020
    
(13%)
    
(8%)
 
West
  
 
 1,634
  
 
 1,042,990
  
 
 1,542
  
 
 1,011,307
  
 
6%
  
 
3%
     
Consolidated total
  
 
 7,534
  
$
 3,561,471
  
 
 7,456
  
$
 3,428,713
  
 
1%
  
 
4%

 
         
At June 30,
         
2017
  
2016
  
% Change
Homesites owned and controlled:
            
 
North
  
 14,759
  
 15,636
  
(6%)
 
Southeast
  
 23,402
  
 23,033
  
2%
 
Southwest
  
13,982
  
 15,006
  
(7%)
 
West
  
 15,479
  
 14,066
  
10%
   
Total (including joint ventures)
  
 67,622
  
 67,741
  
(0%)
                   
 
Homesites owned
  
 51,120
  
 50,947
  
0%
 
Homesites optioned or subject to contract
  
 15,042
  
 15,412
  
(2%)
 
Joint venture homesites
  
 1,460
  
 1,382
  
6%
   
Total (including joint ventures)
  
 67,622
  
 67,741
  
(0%)
                   
Homesites owned:
            
 
Raw lots
  
9,860
  
8,325
  
18%
 
Homesites under development
  
13,694
  
12,344
  
11%
 
Finished homesites
  
12,761
  
14,296
  
(11%)
 
Under construction or completed homes
  
 10,473
  
 10,015
  
5%
 
Held for future development/for sale
  
4,332
  
5,967
  
(27%)
   
Total
  
 51,120
  
 50,947
  
0%



8

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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

The table set forth below reconciles the Company's gross margin percentage from home sales to adjusted gross margin percentage from home sales, excluding extraordinary purchase accounting adjustments related to the merger and interest amortized to cost of home sales.  The table set forth below also calculates adjusted operating margin percentage from home sales, excluding extraordinary purchase accounting adjustments related to the merger.  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
 
June 30,
 2017
  
Gross
 Margin %
  
June 30,
 2016
  
Gross
 Margin %
  
March 31,
 2017
  
Gross
 Margin %
 
(Dollars in thousands)
                             
Home sale revenues
$
 1,620,614
      
$
 1,558,701
      
$
 1,337,699
    
Less: Cost of home sales
 
 (1,297,249)
      
 
 (1,217,793)
      
 
 (1,062,855)
    
Gross margin from home sales
  
 323,365
  
20.0%
    
 340,908
  
21.9%
    
 274,844
  
20.5%
Add: Purchase accounting adjustments included
                            
   in cost of home sales
 
   ― 
 
n/a
  
 
 5,858
  
0.3%
  
 
   ― 
 
n/a
Adjusted gross margin from home sales, excluding purchase
                        
  accounting adjustments included in cost of home sales
 
 323,365
  
20.0%
  
 
 346,766
  
22.2%
  
 
 274,844
  
20.5%
Add: Capitalized interest included in cost
                            
  of home sales
 
 52,347
  
3.2%
  
 
 40,528
  
2.6%
  
 
 39,428
  
3.0%
Adjusted gross margin from home sales, excluding
                            
  purchase accounting adjustments and interest
                            
  amortized to cost of home sales
$
 375,712
  
23.2%
  
$
 387,294
  
24.8%
  
$
 314,272
  
23.5%
                             
                             
Adjusted gross margin from home sales, excluding purchase
                        
  accounting adjustments included in cost of home sales
$
 323,365
  
20.0%
  
$
 346,766
  
22.2%
  
$
 274,844
  
20.5%
Less: Selling, general and administrative expenses
 
 (173,997)
  
(10.7%)
  
 
 (165,694)
  
(10.6%)
  
 
 (156,276)
  
(11.7%)
Adjusted operating margin from home sales, excluding
                            
  purchase accounting adjustments
$
 149,368
  
9.2%
  
$
 181,072
  
11.6%
  
$
 118,568
  
8.9%
 
The table set forth below reconciles the Company's total consolidated debt to adjusted net homebuilding debt and provides the Company's total consolidated debt to book capitalization and adjusted net homebuilding debt to total adjusted book capitalization ratios.  In addition, the table set forth below calculates homebuilding debt to adjusted homebuilding EBITDA.  We believe these ratios are useful to management and investors as a measure of the Company's ability to obtain financing.  For purposes of the ratio of adjusted net homebuilding debt to total adjusted book capitalization, total adjusted book capitalization is adjusted net homebuilding debt plus stockholders' equity.  Adjusted net homebuilding debt excludes indebtedness of the Company's financial services subsidiary and additionally reflects the offset of cash and equivalents.
 
     
June 30,
 2017
  
March 31,
 2017
  
December 31,
 2016
  
June 30,
 2016
     
(Dollars in thousands)
                           
Total consolidated debt
$
 3,912,101
  
$
 3,572,368
  
$
 3,667,214
  
$
 3,890,212
Less:
                      
 
Financial services indebtedness
  
 (149,828)
    
 (154,467)
    
 (247,427)
    
 (174,514)
 
Homebuilding cash, including restricted cash
  
 (200,200)
    
 (174,187)
    
 (219,407)
    
 (286,840)
Adjusted net homebuilding debt
 
 3,562,073
  
 
 3,243,714
  
 
 3,200,380
  
 
 3,428,858
Stockholders' equity
 
 4,235,706
  
 
 4,287,373
  
 
 4,207,586
  
 
 4,039,955
Total adjusted book capitalization
$
 7,797,779
  
$
 7,531,087
  
$
 7,407,966
  
$
 7,468,813
Total consolidated debt to book capitalization
 
48.0%
  
 
45.5%
  
 
46.6%
  
 
49.1%
Adjusted net homebuilding debt to total adjusted book capitalization
 
45.7%
  
 
43.1%
  
 
43.2%
  
 
45.9%
Homebuilding debt
$
 3,762,273
  
$
 3,417,901
  
$
 3,419,787
  
$
 3,715,698
LTM adjusted homebuilding EBITDA
$
 981,269
  
$
 1,003,817
  
$
 996,183
  
$
 842,628
Homebuilding debt to adjusted homebuilding EBITDA
 
3.8x
  
 
3.4x
  
 
3.4x
  
 
4.4x

9

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (Continued)
 
The table set forth below calculates EBITDA and Adjusted Homebuilding EBITDA.  Adjusted Homebuilding EBITDA means net income (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) homebuilding interest expense, (c) expensing of previously capitalized interest included in cost of sales, (d) impairment charges, (e) (gain) loss on early extinguishment of debt, (f) homebuilding depreciation and amortization, including amortization of capitalized model costs, (g) amortization of stock-based compensation, (h) income (loss) from unconsolidated joint ventures, (i) income (loss) from financial services subsidiaries, (j) extraordinary purchase accounting adjustments and (k) merger and other one-time transaction related costs.  Other companies may calculate Adjusted Homebuilding EBITDA (or similarly titled measures) differently.  We believe Adjusted Homebuilding EBITDA information is useful to management and investors as it provides perspective on the underlying performance of the business.  Adjusted Homebuilding EBITDA is a non-GAAP financial measure and due to the significance of the GAAP components excluded, should not be considered in isolation or as an alternative to net income, cash flow from operations or any other operating or liquidity performance measure prescribed by GAAP.
 
     
Three Months Ended
  
LTM Ended June 30,
     
June 30,
 2017
  
June 30,
 2016
  
March 31,
 2017
  
2017
  
2016
     
(Dollars in thousands)
                                 
Net income
$
 98,994
  
$
 112,760
  
$
 82,620
  
$
 480,923
  
$
 310,127
 
Provision for income taxes
  
 57,254
    
 66,857
    
 47,248
    
 263,488
    
 189,165
 
Homebuilding interest amortized to cost of sales
  
 52,347
    
 41,830
    
 39,428
    
 191,264
    
 152,392
 
Homebuilding depreciation and amortization
  
 14,915
    
 15,381
    
 12,676
    
 61,750
    
 53,460
EBITDA
  
 223,510
    
 236,828
    
 181,972
    
 997,425
    
 705,144
Add:
                            
 
Amortization of stock-based compensation
  
 4,922
    
 3,726
    
 4,294
    
 19,498
    
 18,052
 
Cash distributions of income from unconsolidated joint ventures
  
 193
    
         ― 
   
 3,081
    
 3,495
    
 2,688
 
Purchase accounting adjustments included in cost of home sales
  
         ― 
   
 5,858
    
         ― 
   
         ― 
   
 82,705
 
Merger and other one-time transaction related costs
  
 937
    
 5,005
    
 986
    
 8,559
    
 65,914
Less:
                            
 
Income from unconsolidated joint ventures
  
 446
    
 223
    
 3,888
    
 6,979
    
 3,880
 
Income from financial services subsidiaries
 
 8,616
  
 
 8,146
  
 
 7,581
  
 
 40,729
  
 
 27,995
Adjusted Homebuilding EBITDA
$
 220,500
  
$
 243,048
  
$
 178,864
  
$
 981,269
  
$
 842,628
Homebuilding revenues
$
 1,621,114
  
$
 1,578,362
  
$
 1,337,699
  
$
 6,582,808
  
$
 5,090,546
Adjusted Homebuilding EBITDA Margin %
 
13.6%
  
 
15.4%
  
 
13.4%
  
 
14.9%
  
 
16.6%

 
 
 
 

 

10
 

CalAtlantic Group, Inc. Reports