The New Home Company Inc. (NYSE: NWHM) (the “Company”) announced
today that its Board of Directors (the “Board”) has adopted a tax
benefit preservation plan (the “Plan”) to help preserve the value
of its net operating losses and other tax attributes. As of March
31, 2020, the Company had approximately $85.7 million of gross
deferred tax assets, which are valued on a tax-effected basis at
approximately $16.6 million. The Company's gross deferred tax
assets consist of tax attributes including at least $42.7 million
of cumulative state net operating losses, $3.0 million of energy
tax credits, and $25.8 million of basis differences in joint
venture investments and inventories that may be carried forward and
can be utilized in certain circumstances to reduce future taxable
income. While we believe a portion of the deferred tax assets may
be eligible to be carried back to offset U.S. federal income taxes
due to the tax law changes arising from the Coronavirus Aid,
Relief, and Economic Security (CARES) Act, our ability to carry
back such net operating losses is dependent on several factors,
including the timing of when such tax assets become deductible.
The Plan was adopted to protect an important asset of the
Company that may have meaningful value to all stockholders of the
Company. These tax benefits can include the offset of tax liability
arising from future taxable earnings or gains. The value of these
tax benefits would be substantially limited if the Company were to
experience an “ownership change” as defined under Section 382 of
the Internal Revenue Code, as amended (the “Code”). In general, an
ownership change would occur if stockholders that own (or are
deemed to own) at least five percent or more of the outstanding
common stock of the Company increased their cumulative ownership in
the Company by more than 50 percentage points over their lowest
ownership percentage within a rolling three-year lookback period
starting January 1, 2018.
In light of the recent market volatility as a result of the
COVID-19 pandemic and the measures taken to limit its spread, and
its acute impacts on our trading price and volatility, the Board
believes that the Plan reduces the likelihood that changes in the
Company’s investor base would limit future use of its tax benefits,
which would significantly impair the value of the benefits to all
stockholders. The Company believes that no ownership change as
defined in Section 382 has occurred as of the date of this press
release.
The Board adopted the Plan after considering, among other
matters, the estimated value of the tax benefits, the potential for
diminution upon an ownership change and the risk of an ownership
change occurring.
As part of the plan, the Board declared a dividend of one
preferred stock purchase right, which are referred to as “rights,”
for each outstanding share of the Company’s common stock. The
dividend will be payable to holders of record as of the close of
business on May 20, 2020. Any shares of the Company’s common stock
issued after the record date will be issued together with the
rights.
The rights will be exercisable if a person or group, without the
approval of the Company’s Board, acquires, or obtains the right to
acquire, beneficial ownership of 4.95 percent or more of the
Company’s common stock. The rights also will be exercisable if a
person or group that already beneficially owns 4.95 percent or more
of the Company’s common stock, without Board approval, acquires
additional shares (other than as a result of a dividend or a stock
split). Existing stockholders of the Company that, as of May 8,
2020 beneficially own in excess of 4.95 percent of the common stock
will be “grandfathered in” at their current ownership level. If the
rights become exercisable, all holders of rights, other than the
person or group triggering the rights, will be entitled to purchase
the Company’s common stock at a 50 percent discount. Rights held by
the person or group triggering the rights will become void and will
not be exercisable.
Beneficial ownership of shares is calculated under the plan in
accordance with the applicable rules of Section 382 of the Code.
The calculations are complex, and stockholders should contact the
Company if they have any questions regarding their ownership.
The Board has established procedures by which it will consider
requests by stockholders to exempt certain acquisitions of the
Company’s common stock from the plan if the Board determines that
doing so would not limit or impair the availability of the tax
benefits or is otherwise in the best interests of the Company.
The rights will expire on May 7, 2021. The rights may also
expire on an earlier date upon the occurrence of certain events,
including a determination by the Board that the plan is no longer
needed to preserve the tax benefits because of legislative changes
or if the Board determines that the tax benefits have been fully
used or are no longer available under Section 382 or that an
ownership change would not materially impair or limit the tax
benefits. Once the tax attributes have been fully used, the Board
intends to terminate the plan. The rights may also be redeemed,
exchanged or terminated prior to their expiration. If the Board
determines it is appropriate to extend the Plan, the Board intends
to submit any such extension to a vote of the stockholders at the
Company’s 2021 annual meeting of the stockholders.
The distribution of the rights is not taxable to stockholders.
The rights will initially trade together with the Company’s common
stock and the Board may terminate the plan or redeem the rights
prior to the time the rights are triggered. Further details about
the plan will be contained in a Form 8-K to be filed with the
Securities and Exchange Commission by the Company.
About The New Home Company Inc.
The New Home Company 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.
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 our
revenues, community counts and openings, the timing and success of
specific projects, our ability to execute our strategic growth
objectives, gross margins, other projected results, income,
earnings per share, joint ventures and capital spending. Our
forward-looking statements are generally accompanied by words such
as “estimate,” “should,” “project,” “predict,” “believe,” “expect,”
“intend,” “anticipate,” “potential,” “plan,” “goal,” “will,”
“guidance,” “target,” “forecast,” “indicate,” 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: the impacts of the COVID-19 pandemic
and the measures taken to limit its spread, the pace of recovery
when the COVID-19 pandemic subsides; existing or future changes in
ownership of our common stock; changes in applicable laws or
interpretations of those laws; 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; 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; volatility and
uncertainty in the credit markets and broader financial markets;
our business and investment strategy including our plans to sell
more affordably priced homes; 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;
changes in margin; write-downs and impairments; shortages of or
increased prices for labor, land or raw materials used in housing
construction; adverse weather conditions and natural disasters
(including wild fires and mudslides); our concentration in
California; issues concerning our joint venture partnerships; the
cost and availability of insurance and surety bonds; governmental
regulation, including the impact of “slow growth” or similar
initiatives; 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; delays in the
land entitlement process, development, construction, or the opening
of new home communities; litigation and warranty claims; the degree
and nature of competition; the impact of recent accounting
standards; a cybersecurity or business interruption event;
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.
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version on businesswire.com: https://www.businesswire.com/news/home/20200508005105/en/
Investor Relations Contact: Drew Mackintosh, Investor
Relations 949-382-7838 investorrelations@nwhm.com
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