- Diluted EPS of $0.12 per Share -
- Total Revenues Increased 139% to $109
million -
- New Home Orders up 60% -
- Backlog Dollar Value up 104% to $278
million -
The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2016 second quarter.
Second Quarter 2016 Highlights Compared to Second Quarter
2015
- Earnings of $0.12 per diluted share vs.
$0.03 per diluted share
- Total revenues of $108.9 million vs.
$45.6 million, up 139%
- Home sales revenue of $78.8 million, an
increase of 311%
- Backlog dollar value up 104% to $278.0
million
- Community count up 50% to 12 vs. 8
“The New Home Company continued to make progress in the second
quarter of 2016,” said New Home Company Chief Executive Officer
Larry Webb. “We quadrupled our earnings per share as compared to
the second quarter of 2015, continued to grow our community count
with the opening of our much anticipated Crystal Cove communities,
and ended the period with an estimated backlog value of $278
million, the highest in our Company’s history. We also continue to
leverage our stellar reputation, relationships and expertise in
each of our markets to capitalize on opportunities that will
further our growth objectives and generate solid returns for our
shareholders. In short, we believe the pieces are in place to
deliver strong results in the back half of the year. I am very
optimistic about the future of The New Home Company.”
Second Quarter 2016 Operating Results
Total revenues for the 2016 second quarter were $108.9 million,
compared to $45.6 million in the prior year period. Net income
attributable to the Company was $2.5 million, or $0.12 per diluted
share, compared to net income of $0.4 million, or $0.03 per diluted
share, in the prior year period. The year-over-year improvement in
net income was primarily attributable to a 139% increase in total
revenues, a 1,880 basis point reduction in selling, general and
administrative (“SG&A”) expenses as a percentage of home sales
revenue, and a $0.7 million increase in joint venture income.
Wholly Owned Projects
Home sales revenue for the 2016 second quarter was $78.8
million, compared to $19.2 million in the prior year period. The
increase in home sales revenue was driven primarily by a 258%
increase in deliveries that was due to a shift to more wholly owned
communities and a 15% increase in average selling price to $1.8
million.
Homebuilding gross margin percentage was 12.0%, compared to
13.6% in the prior year period. Adjusted homebuilding gross margin
percentage, which excludes interest in cost of home sales, was
13.3%*, compared to 14.2%* in the prior year period. The
year-over-year decrease in gross margin percentage was due to a mix
shift in deliveries. Based on the homes currently in backlog, we
anticipate that our gross margin percentage will improve in the
back-half of the year as compared to the 2016 second quarter.
Our SG&A expense ratio as a percentage of home sales revenue
was 13.8% versus 32.6% in the prior year period. The improvement in
this expense ratio was largely attributable to a 311% increase in
home sales revenue, which was driven by the significant increase in
new home deliveries resulting from the growth in our wholly owned
operations.
New home orders were up 60% to 64 homes, compared to 40 homes in
the prior year period. The Company's monthly sales absorption pace
was consistent with the prior year period at 1.9 sales per average
selling community. The Company increased its selling communities by
50%, ending the quarter with 12 communities, compared to eight as
of the end of the prior year quarter. The dollar value of the
Company's wholly owned backlog at the end of the 2016 second
quarter was up 104% year-over-year to $278.0 million and totaled
125 homes, compared to $136.6 million and 65 homes in the prior
year period. The average selling price of homes in backlog was $2.2
million, up 6% over the prior year.
Fee Building Projects
Fee building revenue for the 2016 second quarter increased 14%
to $30.0 million due primarily to an increase in fee building
construction activity. Fee building gross margin was $1.7 million,
or 5.7%, compared to $1.2 million, or 4.6%, in the prior year
period.
Unconsolidated Joint Ventures
(JVs)
The Company’s share of joint venture income for the 2016 second
quarter was $3.9 million, compared to $3.3 million in the prior
year period. The increase in joint venture income was driven by a
20% increase in JV total revenues, a 480 basis point improvement in
homebuilding gross margins, and a benefit related to the close-out
of a Southern California joint venture.
The following sets forth supplemental information about the
Company’s JVs. Such information is not included in the Company’s
financial data for GAAP purposes but is provided for informational
purposes.
Total revenue of the JVs was $70.1 million and net income was
$10.2 million, compared to $58.2 million and $7.6 million in the
prior year period, respectively. Home sales revenue of the JVs was
$47.7 million, compared to $42.6 million in the prior year period.
Homebuilding gross margin percentage generated by the JVs during
the quarter increased to 25.6%, compared to 20.8% in the prior year
period.
At the end of the 2016 second quarter, the JVs had three selling
communities, down from 10 at the end of the prior year period. As a
result of the 70% decline in JV selling communities, new home
orders from JVs for the 2016 second quarter decreased 71% to 30
homes as compared to 103 homes in the prior year period. In
addition, the dollar value of homes in backlog from unconsolidated
JVs at the end of the 2016 second quarter was down 70% to $72.0
million from 76 homes, compared to $238.3 million from 187 homes in
the prior year period. We expect to open seven new homebuilding JV
communities by the end of 2016, five of which will be in the
McKinley Village master plan in Central Sacramento.
Balance Sheet and Liquidity
As of June 30, 2016, the Company had real estate inventories
totaling $403.4 million, of which $306.2 million represented
work-in-process and completed homes (including models), $60.8
million in land and land under development, and $36.4 million in
land deposits and pre-acquisition costs. The Company owned or
controlled 1,485 lots through its wholly owned operations
(excluding fee building and joint venture lots), of which 1,010
lots were controlled or under option. As of June 30, 2016, the
Company had $50.9 million in liquidity, which consisted of $29.8
million in cash and cash equivalents and $21.1 million in
availability under its revolving credit facility. The Company ended
the 2016 second quarter with $242.9 million in total outstanding
debt, with a debt-to-capital ratio of 52.1% and a net
debt-to-capital ratio of 48.7%*.
Guidance
The Company updated its full year guidance for 2016 as
follows:
- Home sales revenue of $450 - $500
million
- Fee building revenue of $130 - $150
million
- Income from unconsolidated joint
ventures of $10 - $11 million
- Wholly owned active year-end community
count of 13
- Joint venture active year-end community
count of 9
Conference Call Details
The Company will host a conference call and webcast for
investors and other interested parties beginning at 12:00 p.m.
Eastern Time on Friday, July 29, 2016 to review second quarter
results, discuss recent events and conduct a question-and-answer
period. The conference call will be available in the Investors
section of the Company’s website at www.NWHM.com. To listen to the
broadcast live, go to the site approximately 15 minutes prior to
the scheduled start time in order to register, download and install
any necessary audio software. To participate in the telephone
conference call, dial 1-877-407-0789 (domestic) or 1-201-689-8562
(international) at least five minutes prior to the start time.
Replays of the conference call will be available through August 29,
2016 and can be accessed by dialing 1-877-870-5176 (domestic) or
1-858-384-5517 (international) and entering the pass code
13640872.
About The New Home Company
NWHM is a new generation homebuilder focused on the design,
construction and sale of innovative and consumer-driven homes in
major metropolitan areas within select growth markets in California
and Arizona, including coastal Southern California, the San
Francisco Bay area, metro Sacramento and the greater Phoenix area.
The Company is headquartered in Aliso Viejo, California. For more
information about the Company and its new home developments, please
visit the Company's website at www.NWHM.com.
* Adjusted homebuilding gross margin percentage and net
debt-to-capital ratio are non-GAAP measures. A reconciliation of
the appropriate GAAP measure to each of these measures is included
in the accompanying financial data. See "Reconciliation of Non-GAAP
Financial Measures."
Forward-Looking Statements
Various statements contained in this press release, including
those that express a belief, anticipation, expectation or
intention, as well as those that are not statements of historical
fact, are forward-looking statements. These forward-looking
statements may include projections and estimates concerning the
timing and success of specific projects, community counts and
openings and our future production, our ability to execute our
strategic growth objectives, gross margins, revenues, projected
results, income, earnings per share and capital spending. Our
forward-looking statements are generally accompanied by words such
as “estimate,” “project,” “predict,” “believe,” “expect,” “intend,”
“anticipate,” “potential,” “plan,” “goal,” “will,” “guidance,” or
other words that convey the uncertainty of future events or
outcomes. The forward-looking statements in this press release
speak only as of the date of this release, and we disclaim any
obligation to update these statements unless required by law, and
we caution you not to rely on them unduly. We have based these
forward-looking statements on our current expectations and
assumptions about future events. While our management considers
these expectations and assumptions to be reasonable, they 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: economic changes either
nationally or in the markets in which we operate, including
declines in employment, volatility of mortgage interest rates and
inflation; a downturn in the homebuilding industry; changes in
sales conditions, including home prices, in the markets where we
build homes, volatility and uncertainty in the credit markets and
broader financial markets; our business and investment strategy;
availability of land to acquire and our ability to acquire such
land on favorable terms or at all; our liquidity and availability,
terms and deployment of capital; shortages of or increased prices
for labor, land or raw materials used in housing construction;
delays in land development or home construction resulting from
adverse weather conditions or other events outside our control;
issues concerning our joint venture partnerships; the cost and
availability of insurance and surety bonds; changes in, or the
failure or inability to comply with, governmental laws and
regulations; the timing of receipt of regulatory approvals and the
opening of projects; the degree and nature of competition; our
leverage and debt service obligations; the impact of recent
accounting standards; restrictive covenants relating to our
operations in our current of future financing arrangements;
availability of qualified personnel and our ability to retain our
key personnel; and additional factors discussed under the sections
captioned “Risk Factors” included in our annual report and other
reports filed with the Securities and Exchange Commission. The
Company 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.
KEY OPERATIONS AND FINANCIAL
DATA
(Dollars in thousands)
(Unaudited)
Three Months Ended June 30, Six Months Ended June
30, 2016 2015 Change
2016 2015 Change Operating Data:
Total revenues $ 108,864 $ 45,631 $ 63,233 $ 194,104 $ 148,496 $
45,608 Home sales revenue $ 78,836 $ 19,202 $ 59,634 $ 121,139 $
75,437 $ 45,702 Homebuilding gross margin $ 9,446 $ 2,604 $ 6,842 $
15,079 $ 11,431 $ 3,648 Homebuilding gross margin % 12.0 % 13.6 %
(1.6 )% 12.4 % 15.2 % (2.8 )% Adjusted homebuilding gross margin
%** 13.3 % 14.2 % (0.9 )% 13.9 % 15.8 % (1.9 )% Fee building
revenue (1) $ 30,028 $ 26,429 $ 3,599 $ 72,965 $ 73,059 $ (94 ) Fee
building gross margin $ 1,711 $ 1,220 $ 491 $ 3,734 $ 4,073 $ (339
) Fee building gross margin % 5.7 % 4.6 % 1.1 % 5.1 % 5.6 % (0.5 )%
Equity in net income of unconsolidated joint ventures $ 3,947 $
3,256 $ 691 $ 3,940 $ 5,124 $ (1,184 ) Net income attributable to
The New Home Company Inc. $ 2,509 $ 449 $ 2,060 $ 1,695 $ 5,018 $
(3,323 ) Interest incurred and capitalized to inventory $ 1,689 $
1,048 $ 641 $ 2,970 $ 1,926 $ 1,044 Interest in cost of home sales
$ 1,063 $ 121 $ 942 $ 1,711 $ 480 $ 1,231
Other Data: New
home orders 64 40 24 120 65 55 New homes delivered 43 12 31 71 41
30 Average selling price of homes delivered $ 1,833 $ 1,600 $ 233 $
1,706 $ 1,840 $ (134 ) Selling communities at end of period 12 8 4
Backlog (est. dollar value) $ 278,000 $ 136,600 $ 141,400 Backlog
(homes) 125 65 60 Average selling price of homes in backlog $ 2,224
$ 2,102 $ 122 Lots owned and controlled: Wholly owned 1,485 1,046
439 Fee building 1,001 1,511 (510 ) Joint ventures 3,122
3,502 (380 ) 5,608
6,059 (451 )
June 30,
December 31, Balance Sheet Data: 2016
2015 Change Cash, cash equivalents and restricted
cash $ 30,688 $ 46,254 $ (15,566 ) Real estate inventories $
403,378 $ 209,918 $ 193,460 Notes payable, including unsecured
revolving credit facility $ 242,924 $ 83,082 $ 159,842 Equity,
exclusive of noncontrolling interest $ 223,468 $ 220,775 $ 2,693
Book capitalization $ 466,392 $ 303,857 $ 162,535 Ratio of
debt-to-capital 52.1 % 27.3 % 24.8 % Ratio of net debt-to-capital**
48.7 % 14.3 % 34.4 %
(1)
Fee building revenue includes management
fees from unconsolidated joint ventures.
**
See "Reconciliation of Non-GAAP Financial
Measures" beginning on page 10.
KEY OPERATIONS AND FINANCIAL
DATA - UNCONSOLIDATED JOINT VENTURES
(Dollars in thousands)
(Unaudited)
Three Months Ended June 30, Six Months Ended June
30, 2016 2015 Change
2016 2015 Change Operating Data:
Home sales revenue $ 47,698 $ 42,601 $ 5,097 $ 85,899 $ 93,840 $
(7,941 ) Homebuilding gross margin $ 12,191 $ 8,856 $ 3,335 $
19,113 $ 18,388 $ 725 Homebuilding gross margin % 25.6 % 20.8 % 4.8
% 22.3 % 19.6 % 2.7 % Adj homebuilding gross margin %** 27.0 % 22.5
% 4.5 % 23.7 % 21.3 % 2.4 % Land sales revenue $ 22,406 $ 15,585 $
6,821 $ 26,162 $ 45,570 $ (19,408 ) Net income $ 10,195 $ 7,637 $
2,558 $ 12,336 $ 18,403 $ (6,067 ) Interest in cost of home sales $
677 $ 744 $ (67 ) $ 1,212 $ 1,563 $ (351 )
Other Data: New
home orders 30 103 (73 ) 76 211 (135 ) New homes delivered 55 45 10
100 99 1 Average selling price of homes delivered $ 867 $ 947 $ (80
) $ 859 $ 948 $ (89 ) Selling communities at end of period 3 10 (7
) Backlog homes (est. dollar value) $ 71,970 $ 238,309 $ (166,339 )
Backlog (homes) 76 187 (111 ) Average selling price of homes in
backlog $ 947 $ 1,274 $ (327 ) Backlog lots (est. dollar value)***
$ 18,988 $ 45,662 $ (26,674 ) Lots owned and controlled:
Homebuilding 610 847 (237 ) Land development 2,512
2,655 (143 ) 3,122 3,502
(380 )
June 30, December 31,
Balance Sheet Data: 2016 2015 Change
Cash, cash equivalents and restricted cash $ 60,703 $ 66,215 $
(5,512 ) Real estate inventories $ 399,945 $ 415,730 $ (15,785 )
Notes payable $ 111,541 $ 94,890 $ 16,651 The New Home Company's
equity $ 47,353 $ 60,572 $ (13,219 ) Other partners' equity $
264,151 $ 272,642 $ (8,491 ) Book capitalization $ 423,045 $
428,104 $ (5,059 ) Ratio of debt-to-capital 26.4 % 22.2 % 4.2 %
** See "Reconciliation of Non-GAAP Financial
Measures" beginning on page 10. *** Amounts include $4.3 million
and $18.1 million of backlog dollar value related to purchase
contracts between an unconsolidated joint venture and the Company
as of June 30, 2016 and 2015, respectively.
CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2016 2015
(Dollars in thousands, except per share amounts) (Unaudited)
Assets Cash and cash equivalents $ 29,811 $ 45,874
Restricted cash 877 380 Contracts and accounts receivable 14,932
23,960 Due from affiliates 845 979 Real estate inventories 403,378
209,918 Investment in unconsolidated joint ventures 47,353 60,572
Other assets 10,773 9,587 Total assets $ 507,969 $
351,270
Liabilities and equity Accounts payable $
30,660 $ 26,371 Accrued expenses and other liabilities 10,786
19,827 Due to affiliates 54 293 Unsecured revolving credit facility
238,924 74,924 Other notes payable 4,000 8,158 Total
liabilities 284,424 129,573 Equity: Stockholders'
equity: Preferred stock, $0.01 par value, 50,000,000 shares
authorized, no shares outstanding — — Common stock, $0.01 par
value, 500,000,000 shares authorized, 20,711,952 and 20,543,130,
shares issued and outstanding as of June 30, 2016 and December 31,
2015, respectively 207 205 Additional paid-in capital 195,433
194,437 Retained earnings 27,828 26,133 Total The New
Home Company Inc. stockholders' equity 223,468 220,775
Noncontrolling interest in subsidiary 77 922 Total
equity 223,545 221,697 Total liabilities and equity $
507,969 $ 351,270
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30, Six months ended June
30, 2016 2015 2016
2015 (Dollars in thousands, except per share amounts)
Revenues: Home sales $ 78,836 $ 19,202 $ 121,139 $ 75,437
Fee building, including management fees from unconsolidated joint
ventures of $2,537, $2,133, $4,712 and $5,101, respectively
30,028 26,429 72,965
73,059 108,864 45,631
194,104 148,496
Expenses: Cost of homes
sales 69,390 16,598 106,060 64,006 Cost of fee building 28,317
25,209 69,231 68,986 Selling and marketing 5,046 1,939 8,522 4,089
General and administrative 5,833 4,313
11,008 7,973 108,586
48,059 194,821 145,054
Equity in net income of unconsolidated joint ventures 3,947 3,256
3,940 5,124 Other expense, net (286 ) (413 )
(395 ) (721 ) Income before income taxes 3,939 415 2,828
7,845 Provision for income taxes (1,495 ) (140 )
(1,253 ) (3,025 ) Net income 2,444 275 1,575 4,820
Net loss attributable to noncontrolling interest 65
174 120 198 Net income
attributable to The New Home Company Inc. $ 2,509 $ 449
$ 1,695 $ 5,018 Earnings per share
attributable to The New Home Company Inc. Basic $ 0.12 $ 0.03 $
0.08 $ 0.30 Diluted $ 0.12 $ 0.03 $ 0.08 $ 0.30 Weighted average
shares outstanding: Basic 20,709,139 16,516,546 20,654,998
16,502,578 Diluted 20,760,186 16,672,649 20,745,802 16,623,663
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, 2016
2015 (Dollars in thousands)
Operating activities: Net
income $ 1,575 $ 4,820 Adjustments to reconcile net income to net
cash used in operating activities: Deferred taxes (27 ) (5,841 )
Amortization of equity based compensation 1,742 1,235 Tax valuation
adjustment from stock-based compensation 97 — Distributions of
earnings from unconsolidated joint ventures 1,095 7,452 Equity in
net (income) loss of unconsolidated joint ventures (3,940 ) (5,124
) Deferred profit from unconsolidated joint ventures 332 (1,435 )
Depreciation and amortization 251 232 Abandoned project costs 329
443 Net changes in operating assets and liabilities: Restricted
cash 104 148 Contracts and accounts receivable 9,164 6,016 Due from
affiliates 88 2,172 Real estate inventories (170,246 ) (103,750 )
Other assets (50 ) 4,076 Accounts payable 3,737 4,094 Accrued
expenses and other liabilities (9,711 ) (4,704 ) Due to affiliates
(239 ) — Net cash used in operating activities
(165,699 ) (90,166 )
Investing activities:
Purchases of property and equipment (296 ) (238 ) Cash assumed from
joint venture at consolidation 2,009 — Contributions to
unconsolidated joint ventures (5,656 ) (4,712 ) Distributions of
capital from unconsolidated joint ventures 7,405
24,806 Net cash provided by investing activities
3,462 19,856
Financing
activities: Borrowings from credit facility 175,000 74,450
Repayments of credit facility (11,000 ) (10,000 ) Borrowings from
other notes payable 343 1,799 Repayments of other notes payable
(15,636 ) (2,517 ) Payment of debt issuance costs (1,064 ) — Cash
distributions to noncontrolling interest in subsidiary (725 ) (822
) Minimum tax withholding paid on behalf of employees for stock
awards (647 ) — Tax valuation adjustment from stock-based
compensation (97 ) — Net cash provided by
financing activities 146,174 62,910 Net
increase (decrease) in cash and cash equivalents (16,063 ) (7,400 )
Cash and cash equivalents – beginning of period 45,874
44,058 Cash and cash equivalents – end of
period $ 29,811 $ 36,658
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES(Unaudited)
In this earnings release, we utilize certain 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 measure adjusted homebuilding gross margin percentage.
We believe this information is meaningful, as it isolates the
impact leverage has on homebuilding gross margin and provides
investors better comparisons with our competitors, who adjust gross
margins in a similar fashion.
Three months ended June 30,
Six months ended June 30, 2016 %
2015 % 2016 %
2015 % (Dollars in thousands)
Homebuilding Home sales revenue $ 78,836 100.0 % $ 19,202
100.0 % $ 121,139 100.0 % $ 75,437 100.0 % Cost of home sales
69,390 88.0 % 16,598 86.4 % 106,060 87.6 %
64,006 84.8 % Homebuilding gross margin 9,446 12.0 % 2,604
13.6 % 15,079 12.4 % 11,431 15.2 % Add: Interest in cost of home
sales 1,063 1.3 % 121 0.6 % 1,711 1.5 %
480 0.6 % Adjusted homebuilding gross margin $ 10,509 13.3 % $
2,725 14.2 % $ 16,790 13.9 % $ 11,911 15.8 %
Unconsolidated Joint Ventures - Homebuilding Home sales
revenue $ 47,698 100.0 % $ 42,601 100.0 % $ 85,899 100.0 % $ 93,840
100.0 % Cost of home sales 35,507 74.4 % 33,745 79.2
% 66,786 77.7 % 75,452 80.4 % Homebuilding gross
margin 12,191 25.6 % 8,856 20.8 % 19,113 22.3 % 18,388 19.6 % Add:
Interest in cost of home sales 677 1.4 % 744 1.7 %
1,212 1.4 % 1,563 1.7 % Adjusted homebuilding gross
margin $ 12,868 27.0 % $ 9,600 22.5 % $ 20,325 23.7 % $ 19,951 21.3
%
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-capital. We
believe that the ratio of net debt-to-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.
June 30, December 31,
2016 2015 (Dollars in thousands) Notes payable,
including unsecured revolving credit facility $ 242,924 $ 83,082
Equity, exclusive of noncontrolling interest 223,468
220,775 Total capital $ 466,392 $ 303,857
Ratio of debt-to-capital (1) 52.1 % 27.3 %
Notes payable, including unsecured revolving credit facility
$ 242,924 $ 83,082 Less: cash, cash equivalents and restricted cash
30,688 46,254 Net debt 212,236 36,828
Equity, exclusive of noncontrolling interest 223,468
220,775 Total capital $ 435,704 $ 257,603
Ratio of net debt-to-capital (2) 48.7 % 14.3 %
(1) The ratio of debt-to-capital is computed as the
quotient obtained by dividing notes payable by the sum of total
notes payable (including unsecured revolving credit facility) plus
equity, exclusive of noncontrolling interest. (2) The ratio
of net debt-to-capital is computed as the quotient obtained by
dividing net debt (which is notes payable (including unsecured
revolving credit facility) less cash to the extent necessary to
reduce the debt balance to zero) by total capital, exclusive of
noncontrolling interest. The most directly comparable GAAP
financial measure is the ratio of debt-to-capital. We believe the
ratio of net debt-to-capital is a relevant financial measure for
investors to understand the leverage employed in our operations and
as an indicator of our ability to obtain financing. We believe that
by deducting our cash from our notes payable, we provide a measure
of our indebtedness that takes into account our cash liquidity. We
believe this provides useful information as the ratio of
debt-to-capital does not take into account our liquidity and we
believe that the ratio net of cash provides supplemental
information by which our financial position may be considered.
Investors may also find this to be helpful when comparing our
leverage to the leverage of our competitors that present similar
information. See the table above reconciling this non-GAAP
financial measure to the ratio of debt-to-capital.
SCHEDULE OF QUARTERLY AMORTIZATION OF
CAPITALIZABLE MODEL SET-UP SELLING AND MARKETING EXPENSES, GROSS
MARGINS AND SG&A EXPENSES(Unaudited)
Effective January 1, 2016, the Company started amortizing
certain capitalizable selling and marketing ("S&M") costs to
selling and marketing expenses versus cost of home sales. We
believe that the revised presentation and classification of these
capitalizable model set-up S&M costs as a selling and marketing
expense is more comparable with how other homebuilders reflect such
costs in their gross margin and SG&A percentage metrics. We
also believe this presentation is more useful to management and
investors in evaluating our performance. The table below provides a
quarterly summary of 2015 S&M costs reclassified to conform
with the current year presentation and the resulting change in
gross margin, as well as the impact on the Company's SG&A
expense ratio as a percentage of home sales revenue.
Period
Gross Margin asPreviously
Reported
CapitalizedS&MReclassification
Gross Margin as Revised
Basis PointsChange
inGM% (1)
(Dollars in thousands)
$
%
$
$
%
%
Q1 2015 7,956 14.1 % 871 8,827 15.7 % 160 bps
Q2 2015
2,006 10.4 % 598 2,604 13.6 % 320 bps
Q3 2015 7,989 13.8 %
1,148 9,137 15.8 % 200 bps
Q4 2015 22,228 15.1
% 2,181 24,409 16.6 % 150 bps
2015
Total 40,179 14.3 % 4,798 44,977 16.1 % 180 bps
Period
S&M Expenses asPreviously
Reported($ and % of Homes SalesRevenue)
CapitalizedS&MReclassification
S&M Expenses ($ and %of
Homes Sales Revenue)as Revised
Basis PointsChange in
S&Mexpenses as %of Home SalesRevenue
(1)
(Dollars in thousands)
$
%
$
$
%
%
Q1 2015 1,279 2.3 % 871 2,150 3.8 % 150 bps
Q2 2015
1,341 7.0 % 598 1,939 10.1 % 310 bps
Q3 2015 2,294 4.0 %
1,148 3,442 5.9 % 190 bps
Q4 2015 4,029 2.7 %
2,181 6,210 4.2 % 150 bps
2015
Total 8,943 3.2 % 4,798 13,741 4.9 % 170 bps
Period
SG&A Expenses asPreviously
Reported($ and % of Homes SalesRevenue)
CapitalizedS&MReclassification
SG&A Expenses ($ and %of
Homes Sales Revenue)as Revised
Basis PointsChange
inSG&A expensesas % of HomeSales
Revenue (1)
(Dollars in thousands)
$
%
$
$
%
%
Q1 2015 4,939 8.8 % 871 5,810 10.3 % 150 bps
Q2 2015
5,654 29.5 % 598 6,252 32.6 % 310 bps
Q3 2015 7,399 12.8 %
1,148 8,547 14.8 % 200 bps
Q4 2015 11,229 7.6
% 2,181 13,410 9.1 % 150 bps
2015
Total 29,221 10.4 % 4,798 34,019 12.1 % 170 bps (1)
Some quarterly amounts do not tie across the categories
presented due to rounding differences.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160729005160/en/
The New Home Company Inc.Investor RelationsDrew Mackintosh,
949-382-7838investorrelations@nwhm.com
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