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Apr 27, 2017

AV Homes Reports Results for First Quarter 2017

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First Quarter 2017 Highlights - as compared to the prior year first quarter (unless otherwise noted)

  • Earnings per share increased to $0.11 from $0.04, on net income of $2.4 million
  • Total revenue increased 25% to $155.5 million
  • Homebuilding revenue increased 23% to $148.7 million
  • Homes delivered increased by 8% to 462 units
  • Average selling price for homes delivered increased 14% to $322,000 per home

SCOTTSDALE, Ariz., April 27, 2017 (GLOBE NEWSWIRE) -- AV Homes, Inc. (Nasdaq:AVHI), a developer and builder of residential communities in Florida, the Carolinas and Arizona, today announced results for its first quarter ended March 31, 2017.  Total revenue for the first quarter of 2017 increased 25% to $155.5 million from $124.1 million in the first quarter of 2016.  Net income and diluted earnings per share increased to $2.4 million and $0.11 per share, respectively, compared to net income of $0.8 million and $0.04 per share in the first quarter of 2016.

"With a 25% increase in revenue over the prior year period and strong profit generated in the first quarter, AV Homes continues to effectively execute against our focused growth strategy in driving shareholder value," said Roger A. Cregg, President and Chief Executive Officer.  "Having successfully completed the acquisition of Savvy Homes on April 3, we have further enhanced our position in one of the most attractive U.S. growth markets." Mr. Cregg continued, "Our balance sheet strength and ample liquidity further enables us to be properly positioned to capitalize on profitable growth opportunities in 2017 and beyond."

The increase in total revenue was driven by volume increases at existing communities and higher average selling prices.  During the first quarter of 2017, the Company delivered 462 homes, an 8% increase from the 428 homes delivered during the first quarter of 2016, and the average unit price per closing improved 14% to approximately $322,000 from approximately $283,000 in the first quarter of 2016 due to price increases and improvements in the mix of homes sold.

Homebuilding gross margin was 17.4% in the first quarter of 2017 compared to 18.3% in the first quarter of 2016 with improvements in the Arizona margin being more than offset by a decline in the Florida and Carolinas gross margins.  Homebuilding gross margin is inclusive of the impact associated with the expensing of previously capitalized interest of 3.0% and 2.6% in the 2017 and 2016 periods, respectively.
           
Total SG&A expense as a percent of homebuilding revenue improved to 15.0% in the first quarter of 2017 from 16.8% in the first quarter of 2016.  Homebuilding SG&A expense as a percentage of homebuilding revenue was 11.9% in the first quarter of 2017 compared to 13.4% in the first quarter of 2016.  The improvement was primarily due to the increased scale of the business in the Carolinas and Arizona, which allows us to leverage our cost base.  Corporate general and administrative expenses as a percentage of homebuilding revenue improved to 3.1% in the first quarter of 2017 from 3.4% 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 March 31, 2017 decreased 2.6% to 664 units, compared to 682 units during the same period in 2016.  The decrease in housing contracts was primarily attributable to the decrease in selling communities to 55 from 60, partially offset by higher absorption at existing communities.  The average sales price on contracts signed in the first quarter of 2017 increased 4.9% to approximately $323,000 from approximately $308,000 in the first quarter of 2016.  The aggregate dollar value of the contracts signed during the first quarter increased 2.3% to $214.8 million, compared to $209.9 million during the same period one year ago.  The backlog value of homes under contract but not yet closed as of March 31, 2017 decreased 8.9% to $305.1 million on 905 units, compared to $334.8 million on 1,053 units as of March 31, 2016.

The Company will hold a conference call and webcast on Friday, April 28, 2017 to discuss its first 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 April 28, 2017 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 6873028. The telephonic replay will be available until May 5, 2017. 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, the Carolinas and Arizona. 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, which include references to our outlook for 2017, 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; our ability to develop communities within expected timeframes; increases in interest rates and availability of mortgage financing; the prices and supply of building materials; the availability and skill of subcontractors; competition for home buyers, properties, financing, raw materials and skilled labor; our ability to access sufficient capital; our ability to generate sufficient cash to service our indebtedness; terms of our financing documents that may restrict our operations and corporate actions; fluctuations in interest rates; our current level of indebtedness and potential need for additional financing; 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; the geographic concentration of our operations; inflation affecting homebuilding costs or deflation affecting declines in spending and borrowing levels; our ability to successfully integrate acquired businesses and recognize anticipated benefits; 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; development liabilities that may impose payment obligations on us; our ability to utilize our deferred income tax asset; impact of environmental changes and governmental actions in response to environmental changes; dependence on digital technologies and related cyber risks; 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 
Unaudited Consolidated Statements of Operations and Comprehensive Income 
(in thousands, except per share data) 
   
  Three Months Ended  
  March 31,  
   2017  2016  
Revenues       
Homebuilding $148,660  $121,233  
Amenity and other  4,637   2,782  
Land sales  2,251   75  
Total revenues  155,548   124,090  
        
Expenses       
Homebuilding cost of revenues  122,865   98,997  
Amenity and other  4,330   2,586  
Land sales  982   16  
Total real estate expenses  128,177   101,599  
Selling, general and administrative expenses  22,371   20,384  
Interest income and other  (5)  (24) 
Interest expense  837   1,272  
Total expenses  151,380   123,231  
        
Income before income taxes  4,168   859  
Income tax expense  1,729   68  
Net income and comprehensive income  $2,439  $791  
        
Basic earnings per share $0.11  $0.04  
Basic weighted average shares outstanding  22,471    22,390  
        
Diluted earnings per share $0.11  $0.04  
Diluted weighted average shares outstanding  22,718   22,626  
          

 

AV HOMES, INC. AND SUBSIDIARIES 
Unaudited Consolidated Balance Sheets 
(in thousands) 
  
  March 31,  December 31,  
  2017  2016  
Assets      
Cash and cash equivalents $58,595  $67,792  
Restricted cash  1,546   1,231  
Receivables  6,237   10,827  
Land and other inventories  599,169   584,408   
Property and equipment, net  33,655   33,680  
Investments in unconsolidated entities  1,186   1,172  
Prepaid expenses and other assets  9,607   11,581  
Deferred tax assets, net  108,592    110,257  
Goodwill  19,285   19,285  
Total assets $837,872  $840,233  
        
Liabilities and Stockholders' Equity       
        
Liabilities       
Accounts payable $39,034  $37,387  
Accrued and other liabilities  23,863   34,298  
Customer deposits  13,042   9,979  
Estimated development liability  32,014   32,102  
Senior debt, net   276,062   275,660  
Total liabilities  384,015   389,426  
        
Stockholders' equity       
Common stock, par value $1 per share  22,553   22,624  
Additional paid-in capital  402,293   401,558  
Retained earnings  32,030    29,644  
   456,876   453,826  
Treasury stock  (3,019)  (3,019) 
Total stockholders' equity  453,857   450,807  
Total liabilities and stockholders' equity $837,872  $840,233  
          

 

AV HOMES, INC. AND SUBSIDIARIES 
Unaudited Supplemental Information 
(in thousands) 
  
The following table represents interest incurred, interest capitalized, and interest expense for the three months ended March 31, 2017 and 2016: 
  
  Three Months Ended 
  March 31, 
  2017  2016  
Interest incurred $ 6,205  $ 6,853  
Interest capitalized   (5,368)   (5,581) 
Interest expense $ 837  $ 1,272  
          

 

The following table represents depreciation and amortization expense and the amortization of previously capitalized interest for the three months ended March 31, 2017 and 2016: 
        
  Three Months Ended 
  March 31, 
  2017 2016 
Depreciation and amortization (1) $881 $851 
Amortization of previously capitalized interest  4,485   3,126 
        
(1) Depreciation and amortization does not include the amortization of debt issuance costs, which is recorded in interest expense. 


The following table represents a reconciliation of the net income and weighted average shares outstanding for the calculation of basic and diluted earnings per share for the three months ended March 31, 2017 and 2016: 
  
   Three Months Ended 
  March 31, 
  2017 2016 
Numerator:       
Basic net income $2,439 $791 
Effect of dilutive securities     
Diluted net income $2,439 $791 
        
Denominator:       
Basic weighted average shares outstanding  22,471  22,390 
Effect of dilutive securities  247  236 
Diluted weighted average shares outstanding  22,718  22,626 
        
Basic earnings per share $0.11 $0.04 
Diluted earnings per share $0.11 $0.04 
        


The following table provides a comparison of certain financial data related to our operations for the three months ended March 31, 2017 and 2016 (in thousands): 
  
  Three Months Ended  
  March 31,  
  2017   2016  
Operating income:       
Florida       
Revenues:       
Homebuilding $70,487  $66,047  
Amenity and other  4,637   2,782  
Land sales  1,469   75  
Total revenues  76,593   68,904  
Expenses:       
Homebuilding cost of revenues  55,994   51,917  
Homebuilding selling, general and administrative  9,298   9,208  
Amenity and other  4,307   2,554  
Land sales  196   16  
Segment operating income $6,798  $5,209  
        
Carolinas       
Revenues:       
Homebuilding $46,845  $33,512  
Land sales  782     
Total revenues  47,627   33,512  
Expenses:       
Homebuilding cost of revenues  40,133   28,534  
Homebuilding selling, general and administrative  5,023   4,047  
Land sales  786     
Segment operating income $1,685  $931  
        
Arizona       
Revenues:       
Homebuilding $31,328  $21,674  
Total revenues  31,328   21,674  
Expenses:       
Homebuilding cost of revenues  26,738   18,546  
Homebuilding selling, general and administrative  3,371   3,042  
Amenity and other  23   32  
Segment operating income $ 1,196  $54  
        
Operating income $9,679  $6,194  
        
Unallocated income (expenses):       
Interest income and other  5   24  
Corporate general and administrative expenses  (4,679)  (4,087) 
Interest expense   (837)  (1,272) 
Income before income taxes  4,168    859  
Income tax expense  1,729   68  
Net income $2,439  $791  
          


Data from closings for the Florida, Carolinas and Arizona segments for the three months ended March 31, 2017 and 2016 is summarized as follows (dollars in thousands):  
  
       Average 
  Number    Price 
For the three months ended March 31,   of Units  Revenues Per Unit 
2017         
Florida 247 $70,487 $285 
Carolinas 122  46,845  384 
Arizona 93  31,328  337 
Total 462 $148,660  322 
          
2016         
Florida 251 $66,047 $263 
Carolinas 96  33,512   349 
Arizona 81  21,674  268 
Total 428 $121,233  283 
          


Data from contracts signed for the Florida, Carolinas and Arizona segments for the three months ended March 31, 2017 and 2016 is summarized as follows (dollars in thousands):  
  
  Gross           
  Number    Contracts    Average 
  of Contracts   Signed, Net of  Dollar Price Per 
For the three months ended March 31 ,  Signed Cancellations Cancellations Value Unit 
2017              
Florida 402 (39) 363 $105,046 $289 
Carolinas 205 (20) 185  70,315   380 
Arizona 141 (25) 116  39,425  340 
Total 748 (84) 664 $214,786  323 
              
2016             
Florida 444 (64) 380 $105,695 $278 
Carolinas 187 (13) 174  64,927  373 
Arizona 169 (41) 128  39,315  307 
Total 800 (118) 682 $209,937  308 
               


Backlog for the Florida, Carolinas and Arizona segments as of March 31, 2017 and 2016 is summarized as follows (dollars in thousands): 
  
       Average 
  Number Dollar   Price 
As of March 31,  of Units Volume Per Unit 
2017         
Florida 458 $135,832 $297 
Carolinas 255  103,761  407 
Arizona 192  65,549  341 
Total 905 $305,142  337 
          
2016          
Florida 545 $156,464 $287 
Carolinas 228  88,177  387 
Arizona 280  90,170  322 
Total 1,053 $334,811   318 
          


Investor Contact:       



Mike Burnett

EVP, Chief Financial Officer

480-214-7408

m.burnett@avhomesinc.com

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Source: AV Homes, Inc.

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