Third Quarter 2016 Highlights - as compared to the prior year third quarter (unless otherwise noted)
- Earnings per share increased 96% to $0.49, on net income of $11.9 million
- Total revenue increased 34% to $205.4 million
- Homebuilding revenue increased 34% to $201.8 million
- Homes delivered increased by 23% to 635 units
- Average selling price for homes delivered increased 8.5% to $318,000 per home
- Net new order value increased 13% to $185.4 million on a 3% increase in units
- Backlog value increased 13% to $347.1 million on 1,081 units
- Selling communities increased to 63 from 60 and communities with deliveries increased to 60 from 51
- Full year 2016 pre-tax income outlook increased to a range of $30 million to $32 million
SCOTTSDALE, Ariz., Oct. 27, 2016 (GLOBE NEWSWIRE) -- AV Homes, Inc. (Nasdaq:AVHI), a developer and builder of residential communities in Florida, Arizona and the Carolinas, today announced results for its third quarter ended September 30, 2016. Total revenue for the third quarter of 2016 increased 34% to $205.4 million from $153.8 million in the third quarter of 2015. Net income and diluted earnings per share increased to $11.9 million and $0.49 per share, respectively, compared to net income of $5.5 million and $0.25 per share in the third quarter of 2015.
“We had another very good quarter highlighted by strong increases in revenue and a 116% increase in net income,” said Roger A. Cregg, President and Chief Executive Officer. “Homes delivered in the third quarter increased 23% over the prior year period and revenue improved by 34%. Our gross margins improved 80 basis points sequentially compared to the second quarter, and we improved our overhead leverage by 270 basis points compared to the third quarter of last year. With our year to date results and a backlog sales value for the quarter of $347 million, we are confident in achieving our improved 2016 financial outlook.”
The increase in total revenue was driven by volume increases due to a greater number of communities with deliveries in each of our existing markets, and higher average selling prices due to price increases and improvements in the mix of homes sold. During the third quarter of 2016, the Company delivered 635 homes, a 23% increase from the 515 homes delivered during the third quarter of 2015, and the average unit price per closing improved 8.5% to approximately $318,000 from approximately $293,000 in the third quarter of 2015.
Homebuilding gross margin was 18.8% in the third quarter of 2016 compared to 19.9% in the third quarter of 2015. Homebuilding gross margin is inclusive of the impact associated with the expensing of previously capitalized interest of 2.7% and 1.9% in the 2016 and 2015 periods, respectively. On a sequential basis, homebuilding gross margins improved 80 basis points compared to the second quarter of 2016.
Total SG&A expense as a percent of homebuilding revenue improved to 12.6% in the third quarter of 2016 from 15.3% in the third quarter of 2015. Homebuilding SG&A expense as a percentage of homebuilding revenue was 10.8% in the third quarter of 2016 compared to 12.8% in the third quarter of 2015. The improvement was primarily due to the increased scale of the business in each of our divisions, which allows us to leverage the cost base. Corporate general and administrative expenses as a percentage of homebuilding revenue improved to 1.8% in the third quarter of 2016 from 2.5% in the same period a year ago primarily driven by the continued achievement of favorable cost leverage by effectively managing costs while growing the revenue of the business.
The number of new housing contracts signed, net of cancellations, during the three months ended September 30, 2016 increased 3% to 572, compared to 555 units during the same period in 2015. The increase in housing contracts was primarily attributable to the increase in selling communities to 63 from 60. The average sales price on contracts signed in the third quarter of 2016 increased 9.8% to approximately $324,000 from approximately $295,000 in the third quarter of 2015. The aggregate dollar value of the contracts signed during the third quarter increased 13% to $185.4 million, compared to $164.0 million during the same period one year ago. The backlog value of homes under contract but not yet closed as of September 30, 2016 increased 13% to $347.1 million on 1,081 units, compared to $307.5 million on 1,026 units as of September 30, 2015.
Improved 2016 Outlook
The Company affirmed its previously issued outlook for the full year 2016 and upwardly revised the following items:
- Closings are expected to increase to approximately 2,400, an improvement from the previous range of 2,300 to 2,400 units;
- Interest expense is expected to be approximately $4 million after capitalization, an improvement from the previous $5 million; and
- Pre-tax income is expected to increase to approximately $30 million to $32 million, an improvement from the previous range of $28 million to $30 million.
The Company will hold a conference call and webcast on Friday, October 28, 2016 to discuss its third quarter financial results. The conference call will begin at 8:30 a.m. EDT. The conference call can be accessed live over the telephone by dialing (877) 643-7158 or for international callers by dialing (914) 495-8565; please dial-in 10 minutes before the start of the call. A replay will be available on October 28, 2016 beginning at 11:30 a.m. EDT and can be accessed by dialing (855) 859-2056 or for international callers by dialing (404) 537-3406; the conference ID is 99271067. The telephonic replay will be available until November 4, 2016. The webcast, which can be accessed by going to the Investor Relations section of AV Homes’ website at www.avhomesinc.com, is accompanied by an Investor Presentation. A replay of the original webcast will be available shortly after the call.
AV Homes, Inc. is engaged in homebuilding and community development in Florida, Arizona and the Carolinas. Its principal operations are conducted in the greater Orlando, Jacksonville, Phoenix, Charlotte and Raleigh markets. The Company builds communities that serve both active adults (55 years and older) as well as people of all ages. AV Homes common shares trade on NASDAQ under the symbol AVHI. For more information, visit www.avhomesinc.com.
This news release, the conference call, webcast and other related items contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements, involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the cyclical nature of the homebuilding industry and its dependence on broader economic conditions; availability and suitability of undeveloped land and improved lots; ability to develop communities within expected timeframes; increases in interest rates and availability of mortgage financing; our ability to access sufficient capital; our ability to generate sufficient cash to service our indebtedness and potential need for additional financing; terms of our financing documents that may restrict our operations and corporate actions; fluctuations in interest rates; our ability to purchase outstanding notes upon certain fundamental changes; our ability to obtain letters of credit and surety bonds; cancellations of home sale orders; competition for home buyers, properties, financing, raw materials and skilled labor; declines in home prices in our primary regions; inflation affecting homebuilding costs or deflation affecting declines in spending and borrowing levels; the prices and supply of building materials and skilled labor; the availability and skill of subcontractors; elimination or reduction of tax benefits associated with home ownership; warranty and construction defect claims; health and safety incidents in homebuilding activities; the seasonal nature of our business; impacts of weather conditions and natural disasters; resource shortages and rate fluctuations; value and costs related to our land and lot inventory; overall market supply and demand for new homes; our ability to recover our costs in the event of reduced home sales; conflicts of interest involving our largest stockholder; contractual restrictions under a stockholders agreement with our largest stockholder; dependence on our senior management; effect of our expansion efforts on our cash flows and profitability; effects of government regulation of development and homebuilding projects; raising healthcare costs; development liabilities that may impose payment obligations on us; our ability to utilize our deferred income tax asset; costs of environmental compliance; impact of environmental changes; dependence on digital technologies and potential interruptions; future sales or dilution of our equity; impairment of intangible assets; and other factors described in our most recent Annual Report on Form 10-K for and our other filings with the Securities and Exchange Commission, which filings are available on www.sec.gov. Forward-looking statements are based on the expectations, estimates, or projections of management as of the date of this news release, the conference call, the Investor Presentation and the webcast. AV Homes disclaims any intention or obligation to update or revise any forward-looking statements to reflect subsequent events and circumstances, except to the extent required by applicable law.
| AV HOMES, INC. AND SUBSIDIARIES | |||||||||||
| Consolidated Balance Sheets | |||||||||||
| (in thousands) | |||||||||||
| September 30, | December 31, | ||||||||||
| 2016 | 2015 | ||||||||||
| Assets | (unaudited) | ||||||||||
| Cash and cash equivalents | $ | 16,289 | $ | 46,898 | |||||||
| Restricted cash | 1,139 | 26,948 | |||||||||
| Land and other inventories | 630,909 | 582,531 | |||||||||
| Receivables | 8,248 | 7,178 | |||||||||
| Property and equipment, net | 34,223 | 34,973 | |||||||||
| Investments in unconsolidated entities | 1,177 | 1,172 | |||||||||
| Prepaid expenses and other assets | 13,033 | 17,144 | |||||||||
| Deferred tax assets, net | 110,501 | — | |||||||||
| Goodwill | 19,285 | 19,295 | |||||||||
| Total assets | $ | 834,804 | $ | 736,139 | |||||||
| Liabilities and Stockholders' Equity | |||||||||||
| Liabilities | |||||||||||
| Accounts payable | $ | 37,060 | $ | 33,606 | |||||||
| Accrued and other liabilities | 29,389 | 38,826 | |||||||||
| Customer deposits | 12,223 | 8,629 | |||||||||
| Estimated development liability | 32,257 | 32,551 | |||||||||
| Senior notes, net | 290,258 | 320,846 | |||||||||
| Total liabilities | 401,187 | 434,458 | |||||||||
| Stockholders' equity | |||||||||||
| Common stock, par value $1 per share | 22,692 | 22,444 | |||||||||
| Additional paid-in capital | 401,358 | 399,719 | |||||||||
| Accumulated earnings (deficit) | 12,586 | (117,463 | ) | ||||||||
| 436,636 | 304,700 | ||||||||||
| Treasury stock | (3,019 | ) | (3,019 | ) | |||||||
| Total stockholders’ equity | 433,617 | 301,681 | |||||||||
| Total liabilities and stockholders' equity | $ | 834,804 | $ | 736,139 | |||||||
| AV HOMES, INC. AND SUBSIDIARIES | |||||||||||||||
| Consolidated Statements of Operations and Comprehensive Income (Loss) | |||||||||||||||
| (in thousands, except per share data) | |||||||||||||||
| (unaudited) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||
| Revenues | |||||||||||||||
| Homebuilding | $ | 201,821 | $ | 151,130 | $ | 507,659 | $ | 280,381 | |||||||
| Amenity and other | 3,315 | 2,691 | 8,834 | 8,195 | |||||||||||
| Land sales | 291 | 6 | 1,120 | 3,470 | |||||||||||
| Total revenues | 205,427 | 153,827 | 517,613 | 292,046 | |||||||||||
| Expenses | |||||||||||||||
| Homebuilding cost of revenues | 163,911 | 121,089 | 414,290 | 228,911 | |||||||||||
| Amenity and other | 3,101 | 2,221 | 8,057 | 7,034 | |||||||||||
| Land sales | 295 | 2 | 685 | 385 | |||||||||||
| Total real estate expenses | 167,307 | 123,312 | 423,032 | 236,330 | |||||||||||
| Selling, general and administrative expenses | 25,484 | 23,191 | 71,639 | 52,492 | |||||||||||
| Interest income and other | — | (36 | ) | (1 | ) | (325 | ) | ||||||||
| Interest expense | 701 | 1,840 | 2,853 | 7,503 | |||||||||||
| Income (loss) before income taxes | 11,935 | 5,520 | 20,090 | (3,954 | ) | ||||||||||
| Income tax expense (benefit) | 38 | — | (109,959 | ) | — | ||||||||||
| Net income (loss) and comprehensive income (loss) | $ | 11,897 | $ | 5,520 | $ | 130,049 | $ | (3,954 | ) | ||||||
| Basic income (loss) per share | $ | 0.53 | $ | 0.25 | $ | 5.81 | $ | (0.18 | ) | ||||||
| Diluted income (loss) per share | $ | 0.49 | $ | 0.25 | $ | 5.02 | $ | (0.18 | ) | ||||||
Note: Selling, general and administrative expenses related to homebuilding previously included in Homebuilding expenses have been combined with corporate general and administrative expenses and reclassified into a separate new line item called "Selling, general and administrative expenses" to enhance the visibility to our core homebuilding operations and conform with standard industry presentation. For the three and nine months ended September 30, 2015, selling, general and administrative costs of $19.4 million and $40.7 million, respectively, were previously presented in Homebuilding expenses are now included in Selling, general and administrative expenses.
The following table provides a comparison of certain financial data related to our operations for the three and nine months ended September 30, 2016 and 2015 (in thousands):
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||||
| Operating income: | ||||||||||||||||||||
| Florida | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Homebuilding | $ | 96,943 | $ | 86,892 | $ | 251,587 | $ | 185,484 | ||||||||||||
| Amenity and other | 3,315 | 2,691 | 8,834 | 8,195 | ||||||||||||||||
| Land sales | 26 | 6 | 670 | 3,470 | ||||||||||||||||
| Total revenues | 100,284 | 89,589 | 261,091 | 197,149 | ||||||||||||||||
| Expenses: | ||||||||||||||||||||
| Homebuilding cost of revenues | 74,872 | 68,409 | 196,045 | 149,033 | ||||||||||||||||
| Homebuilding selling, general and administrative | 12,189 | 11,419 | 33,374 | 26,172 | ||||||||||||||||
| Amenity and other | 3,075 | 2,199 | 7,978 | 6,938 | ||||||||||||||||
| Land sales | 6 | 2 | 225 | 385 | ||||||||||||||||
| Segment operating income | $ | 10,142 | $ | 7,560 | $ | 23,469 | $ | 14,621 | ||||||||||||
| Arizona | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Homebuilding | $ | 42,014 | $ | 20,012 | $ | 104,255 | $ | 45,196 | ||||||||||||
| Land sales | — | — | 185 | — | ||||||||||||||||
| Total revenues | 42,014 | 20,012 | 104,440 | 45,196 | ||||||||||||||||
| Expenses: | ||||||||||||||||||||
| Homebuilding cost of revenues | 35,236 | 16,497 | 87,672 | 38,704 | ||||||||||||||||
| Homebuilding selling, general and administrative | 3,854 | 3,009 | 10,773 | 7,846 | ||||||||||||||||
| Amenity and other | 26 | 22 | 79 | 96 | ||||||||||||||||
| Land sales | — | — | 171 | — | ||||||||||||||||
| Segment operating income (loss) | $ | 2,898 | $ | 484 | $ | 5,745 | $ | (1,450 | ) | |||||||||||
| Carolinas | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Homebuilding | $ | 62,864 | $ | 44,226 | $ | 151,817 | $ | 49,701 | ||||||||||||
| Land sales | 265 | — | 265 | — | ||||||||||||||||
| Total revenues | 63,129 | 44,226 | 152,082 | 49,701 | ||||||||||||||||
| Expenses: | ||||||||||||||||||||
| Homebuilding cost of revenues | 53,803 | 36,182 | 130,573 | 41,174 | ||||||||||||||||
| Homebuilding selling, general and administrative | 5,744 | 4,944 | 15,525 | 6,718 | ||||||||||||||||
| Land sales | 289 | — | 289 | — | ||||||||||||||||
| Segment operating income | $ | 3,293 | $ | 3,100 | $ | 5,695 | $ | 1,809 | ||||||||||||
| Operating income | $ | 16,333 | $ | 11,144 | $ | 34,909 | $ | 14,980 | ||||||||||||
| Unallocated income (expenses): | ||||||||||||||||||||
| Interest income and other | — | 36 | 1 | 325 | ||||||||||||||||
| Corporate general and administrative expenses | (3,697 | ) | (3,820 | ) | (11,967 | ) | (11,756 | ) | ||||||||||||
| Interest expense | (701 | ) | (1,840 | ) | (2,853 | ) | (7,503 | ) | ||||||||||||
| Income (loss) before income taxes | 11,935 | 5,520 | 20,090 | (3,954 | ) | |||||||||||||||
| Income tax expense (benefit) | 38 | — | (109,959 | ) | — | |||||||||||||||
| Net income (loss) | $ | 11,897 | $ | 5,520 | $ | 130,049 | $ | (3,954 | ) | |||||||||||
Data from closings for the Florida, Arizona and the Carolinas segments for the three and nine months ended September 30, 2016 and 2015 is summarized as follows (dollars in thousands):
| Average | |||||||||
| Number | Price | ||||||||
| For the three months ended September 30, | of Units | Revenues | Per Unit | ||||||
| 2016 | |||||||||
| Florida | 340 | $ | 96,943 | $ | 285 | ||||
| Arizona | 129 | 42,014 | 326 | ||||||
| Carolinas | 166 | 62,864 | 379 | ||||||
| Total | 635 | $ | 201,821 | 318 | |||||
| 2015 | |||||||||
| Florida | 317 | $ | 86,892 | $ | 274 | ||||
| Arizona | 71 | 20,012 | 282 | ||||||
| Carolinas | 127 | 44,226 | 348 | ||||||
| Total | 515 | $ | 151,130 | 293 | |||||
| Average | |||||||||
| Number | Price | ||||||||
| For the nine months ended September 30, | of Units | Revenues | Per Unit | ||||||
| 2016 | |||||||||
| Florida | 904 | $ | 251,587 | $ | 278 | ||||
| Arizona | 340 | 104,255 | 307 | ||||||
| Carolinas | 413 | 151,817 | 368 | ||||||
| Total | 1,657 | $ | 507,659 | 306 | |||||
| 2015 | |||||||||
| Florida | 704 | $ | 185,483 | $ | 263 | ||||
| Arizona | 170 | 45,196 | 266 | ||||||
| Carolinas | 145 | 49,702 | 343 | ||||||
| Total | 1,019 | $ | 280,381 | 275 | |||||
Data from contracts signed for the Florida, Arizona and the Carolinas segments for the three and nine months ended September 30, 2016 and 2015 is summarized as follows (dollars in thousands):
| Gross | |||||||||||||||
| Number | Contracts | Average | |||||||||||||
| of Contracts | Signed, Net of | Dollar | Price Per | ||||||||||||
| For the three months ended September 30, | Signed | Cancellations | Cancellations | Value | Unit | ||||||||||
| 2016 | |||||||||||||||
| Florida | 373 | (68 | ) | 305 | $ | 89,076 | $ | 292 | |||||||
| Arizona | 125 | (29 | ) | 96 | 31,896 | 332 | |||||||||
| Carolinas | 191 | (20 | ) | 171 | 64,457 | 377 | |||||||||
| Total | 689 | (117 | ) | 572 | $ | 185,429 | 324 | ||||||||
| 2015 | |||||||||||||||
| Florida | 335 | (57 | ) | 278 | $ | 75,308 | $ | 271 | |||||||
| Arizona | 173 | (31 | ) | 142 | 40,425 | 285 | |||||||||
| Carolinas | 152 | (17 | ) | 135 | 48,229 | 357 | |||||||||
| Total | 660 | (105 | ) | 555 | $ | 163,962 | 295 | ||||||||
| Gross | |||||||||||||||
| Number | Contracts | Average | |||||||||||||
| of Contracts | Signed, Net of | Dollar | Price Per | ||||||||||||
| For the nine months ended September 30, | Signed | Cancellations | Cancellations | Value | Unit | ||||||||||
| 2016 | |||||||||||||||
| Florida | 1,245 | (201 | ) | 1,044 | $ | 294,413 | $ | 282 | |||||||
| Arizona | 465 | (108 | ) | 357 | 113,427 | 318 | |||||||||
| Carolinas | 591 | (53 | ) | 538 | 200,827 | 373 | |||||||||
| Total | 2,301 | (362 | ) | 1,939 | $ | 608,667 | 314 | ||||||||
| 2015 | |||||||||||||||
| Florida | 1,143 | (176 | ) | 967 | $ | 260,492 | $ | 269 | |||||||
| Arizona | 460 | (79 | ) | 381 | 110,189 | 289 | |||||||||
| Carolinas | 209 | (26 | ) | 183 | 63,635 | 348 | |||||||||
| Total | 1,812 | (281 | ) | 1,531 | $ | 434,316 | 284 | ||||||||
Backlog for the Florida, Arizona and the Carolinas segments as of September 30, 2016 and 2015 is summarized as follows (dollars in thousands):
| Average | |||||||||
| Number | Dollar | Price | |||||||
| As of September 30, | of Units | Volume | Per Unit | ||||||
| 2016 | |||||||||
| Florida | 556 | $ | 160,007 | $ | 288 | ||||
| Arizona | 250 | 81,834 | 327 | ||||||
| Carolinas | 275 | 105,302 | 383 | ||||||
| Total | 1,081 | $ | 347,143 | 321 | |||||
| 2015 | |||||||||
| Florida | 536 | $ | 147,085 | $ | 274 | ||||
| Arizona | 263 | 78,799 | 300 | ||||||
| Carolinas | 227 | 81,635 | 360 | ||||||
| Total | 1,026 | $ | 307,519 | 300 | |||||