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Apr 26, 2018

AV Homes Reports Results for First Quarter 2018

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Reaffirms Full Year 2018 Outlook

First Quarter 2018 Highlights - as compared to the prior year first quarter (unless otherwise noted)

  • Net new order value increased 13% to $242.0 million on a 10% increase in units
  • Backlog increased 18% to 1,064 units with a value of $350.9 million
  • Average selling price for homes delivered increased 3% to $331,000 per home
  • Homes delivered decreased by 5% to 438 units
  • Homebuilding revenue decreased 2% to $145.1 million
  • Loss per share of $0.10, compares to earnings per share of $0.11
  • Communities with deliveries increased to 64 from 57 and selling communities increased to 73 from 55

SCOTTSDALE, Ariz., April 26, 2018 (GLOBE NEWSWIRE) -- AV Homes, Inc. (Nasdaq:AVHI), a developer and builder of residential communities in Florida, the Carolinas, Arizona and Texas, today announced results for its first quarter ended March 31, 2018.  Total revenue for the first quarter of 2018 decreased 2% to $152.0 million from $155.5 million in the first quarter of 2017.  The net loss of $2.3 million, or $0.10 per share in the first quarter of 2018 compares to net income of $2.4 million and diluted earnings per share of $0.11 for the first quarter 2017. 

Roger A. Cregg, President and Chief Executive Officer, commented, "We are pleased with our first quarter operating performance as average selling prices increased 3%, net new orders increased 10% and backlog increased 18%. Our gross margins for the quarter, adjusted for the Dallas acquisition purchase accounting, have improved sequentially over the past several quarters and we remain in a strong liquidity position."

Mr. Cregg continued, "We are excited about the opportunities in our business for 2018, as evidenced by the reaffirmation of our guidance for the year. Overall, our outlook continues to remain positive, supported by a favorable macroeconomic and housing environment."

The decrease in total revenue was driven by lower unit volume, partially offset by higher average selling prices due to price increases.  During the first quarter of 2018, the Company delivered 438 homes, compared to 462 homes delivered during the first quarter of 2017, and the average unit price per closing improved 3% to approximately $331,000 from approximately $322,000 in the first quarter of 2017. 

Homebuilding gross margin was 16.7% in the first quarter of 2018, including a 20 basis point negative impact from the purchase accounting for Oakdale-Hampton Homes, compared to 17.4% in the first quarter of 2017 with margin improvements in Florida and Arizona being more than offset by lower margins in the Carolinas.

Total SG&A expense as a percent of homebuilding revenue was 17.6% in the first quarter of 2018 compared to 15.0% in the first quarter of 2017.  Homebuilding SG&A expense as a percentage of homebuilding revenue was 14.3% in the first quarter of 2018, compared to 11.9% in the first quarter of 2017.  Corporate general and administrative expenses as a percentage of homebuilding revenue was 3.3% in the first quarter of 2018 compared to 3.1% in the same period a year ago.

Interest expense increased to $3.4 million in the first quarter of 2018 compared to $837,000 in the first quarter of 2017 due to the $200 million of incremental debt issued in June 2017 in connection with the refinancing which increased the company's liquidity, reduced its interest cost and extended its debt maturities. The company had cash and cash equivalents of $175 million at March 31, 2018 and was undrawn on its $155 million senior secured credit facility.

The number of new housing contracts signed, net of cancellations, during the three months ended March 31, 2018 increased 10.1% to 731, compared to 664 units during the same period in 2017.  The increase in housing contracts was primarily attributable to the increase in selling communities to 73 from 55 and better absorption rates in Florida and Arizona.  The average sales price on contracts signed in the first quarter of 2018 increased 2.5% to approximately $331,000 from approximately $323,000 in the first quarter of 2017.  The aggregate dollar value of the contracts signed during the first quarter increased 12.7% to $242.0 million, compared to $214.8 million during the same period one year ago.  The backlog value of homes under contract but not yet closed as of March 31, 2018 increased to $350.9 million on 1,064 units, compared to $305.1 million on 905 units as of March 31, 2017.

Original Full Year 2018 Outlook Reaffirmed

  • Communities with closings are expected to be approximately 75;
  • Closings are expected to increase 20% to approximately 3,000 units;
  • Average Selling Price (ASP) on homes closed is expected to increase 3% to approximately $340,000;
  • Homebuilding gross margin is expected to increase 100 bps to approximately 18%, inclusive of approximately 2.8% of previously capitalized interest cost and excluding any effect of purchase accounting;
  • SG&A is expected to improve 10 bps to approximately 12.8% of homebuilding revenue;
  • Interest expense is expected to be approximately $8 million;
  • Income from mortgage company joint venture is expected to be approximately $1 million;
  • Pre-tax income of approximately $48 million;
  • Effective tax rate is expected to be approximately 25%, with minimal cash taxes paid due to the NOL position;
  • Net income is expected to improve to approximately $36 million;
  • Adjusted EBITDA is expected to increase 30% to approximately $90 million .

The Company will hold a conference call and webcast on Friday, April 27, 2018 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 27, 2018 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 3774929. The telephonic replay will be available until May 4, 2018. 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, Arizona and Texas. Its principal operations are conducted in the greater Orlando, Jacksonville , Charlotte, Raleigh, Phoenix and Dallas-Fort Worth 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 of results 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; the impact of the Tax Cuts and Jobs Act on homebuyer demand; elimination or reduction of tax benefits associated with home ownership; the prices and supply of building materials; the availability and skill of subcontractors; our ability to successfully integrate acquired businesses; effect of our expansion efforts on our cash flows and profitability; 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; 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; 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.

Investor Contact:       

Mike Burnett
EVP, Chief Financial Officer
480-214-7408
m.burnett@avhomesinc.com  

       
AV HOMES, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)
       
  Three Months Ended
  March 31,
  2018 2017
Revenues      
Homebuilding $145,145  $148,660 
Amenity and other  4,818   4,637 
Land sales  2,045   2,251 
Total revenues  152,008   155,548 
       
Expenses      
Homebuilding cost of revenue  120,977   122,865 
Amenity and other  5,244    4,330 
Land sales  231   982 
Total real estate expenses  126,452   128,177 
Selling, general and administrative expenses  25,515   22,371 
Interest income and other  (269)  (5)
Interest expense  3,391    837 
Total expenses  155,089   151,380 
       
Income (loss) before income taxes  (3,081)  4,168 
Income tax expense (benefit)  (738)  1,729 
Net income (loss)  $(2,343) $2,439 
       
Basic earnings (loss) per share $(0.10) $0.11 
Basic weighted average shares outstanding  22,570   22,471 
       
Diluted earnings (loss) per share $(0.10) $0.11 
Diluted weighted average shares outstanding  22,570   22,718 
         

 

       
AV HOMES, INC. AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
(in thousands)
       
  March 31,  December 31,
  2018
 2017
Assets (unaudited)   
Cash and cash equivalents $175,187  $240,990 
Restricted cash  1,329   1,165 
Receivables  7,827   13,702 
Land and other inventories  668,557   603,851 
Property and equipment, net  37,786   32,664 
Prepaid expenses and other assets  16,798   17,117 
Deferred tax assets, net  71,116   70,365 
Goodwill  38,903   30,290 
Total assets $1,017,503  $ 1,010,144 
       
Liabilities and Stockholders' Equity      
       
Liabilities      
Accounts payable $39,299  $35,810 
Accrued and other liabilities  33,055   29,193 
Customer deposits  12,609   9,507 
Estimated development liability  31,446   31,556 
Senior debt, net  472,597   472,108 
Total liabilities  589,006   578,174 
       
Stockholders' Equity      
Common stock, par value $1 per share  22,459   22,475 
Additional paid-in capital  405,507    404,859 
Retained earnings  3,550   7,655 
   431,516   434,989 
Treasury stock  (3,019)  (3,019)
Total stockholders' equity  428,497   431,970 
Total liabilities and stockholders' equity $1,017,503  $1,010,144 
         

 

       
AV HOMES, INC. AND SUBSIDIARIES
Unaudited Supplemental Information
(in thousands)
       
The following table represents a reconciliation of the net income (loss) and weighted average shares outstanding for the calculation of basic and diluted earnings (loss) per share for the three months ended March 31, 2018 and 2017:
       
  Three Months Ended
  March 31,
  2018 2017
Numerator:       
Basic net income (loss) $(2,343) $2,439 
Effect of dilutive securities      
Diluted net income (loss) $(2,343) $2,439 
       
Denominator:      
Basic weighted average shares outstanding  22,570   22,471 
Effect of dilutive securities     247 
Diluted weighted average shares outstanding  22,570   22,718 
       
Basic earnings (loss) per share $(0.10) $0.11 
Diluted earnings (loss) per share $(0.10) $0.11 
       
       
The following table represents interest incurred, interest capitalized, and interest expense for the three months ended March 31, 2018 and 2017:
       
  Three Months Ended
  March 31,
  2018 2017
Interest incurred $8,518  $6,205 
Interest capitalized  (5,127)  (5,368)
Interest expense $3,391  $837 
       
       
The following table represents depreciation and amortization expense and the amortization of previously capitalized interest for the three months ended March 31, 2018 and 2017:
       
  Three Months Ended
  March 31,
  2018 2017
Depreciation and amortization (1) $1,375  $881 
Amortization of previously capitalized interest  3,801   4,485 
       
(1) Depreciation and amortization does not include the amortization of debt issuance costs, which is recorded in interest expense.


       
The following table provides a comparison of certain financial data related to our operations for the three months ended March 31, 2018 and 2017 (in thousands):
       
  Three Months Ended
  March 31,
   2018  2017 
Operating income:      
Florida       
Revenues:      
Homebuilding $ 58,103  $70,487 
Amenity and other  4,818   4,637 
Land sales  2,045   1,469 
Total revenues  64,966   76,593 
Expenses:      
Homebuilding cost of revenue  45,077    55,994 
Homebuilding selling, general and administrative  9,102   9,298 
Amenity and other  5,222   4,307 
Land sales  231   196 
Segment operating income $5,334   $6,798 
       
Carolinas      
Revenues:      
Homebuilding $53,904  $46,845 
Land sales     782 
Total revenues  53,904    47,627 
Expenses:      
Homebuilding cost of revenue  48,163   40,133 
Homebuilding selling, general and administrative  6,957   5,023 
Land sales     786 
Segment operating income (loss) $(1,216) $1,685 
        
Arizona      
Revenues:      
Homebuilding $25,246  $31,328 
Total revenue  25,246   31,328 
Expenses:      
Homebuilding cost of revenue  21,134    26,738 
Homebuilding selling, general and administrative  3,125   3,371 
Amenity and other  22   23 
Segment operating income $965  $1,196 
        
Texas      
Revenues:      
Homebuilding $7,892  $ 
Total revenue  7,892    
Expenses:      
Homebuilding cost of revenue  6,603    
Homebuilding selling, general and administrative  1,587    
Segment operating loss $(298) $ 
       
Operating income $4,785  $9,679 
       
Unallocated income (expenses):      
Interest income and other  269   5 
Corporate general and administrative expenses  (4,744)  (4,679)
Interest expense  (3,391)  (837)
Income (loss) before income taxes  (3,081)  4,168 
Income tax expense (benefit)  (738)  1,729 
Net income (loss) $(2,343) $2,439 
          
         

Data from closings for the Florida, Carolinas, Arizona and Texas segments for the three months ended March 31, 2018 and 2017 is summarized as follows (dollars in thousands): 

         
       Average
  Number
    Price
For the three months ended March 31,   of Units 
  Revenues
 Per Unit
2018        
Florida 197 $58,103 $295
Carolinas 145  53,904   372
Arizona 70  25,246  361
Texas 26  7,892  304
Total 438 $145,145  331
         
2017        
Florida 247 $70,487 $285
Carolinas 122  46,845  384
Arizona 93  31,328  337
Texas     
Total 462 $148,660  322
         
         

Data from contracts signed for the Florida, Carolinas, Arizona and Texas segments for the three months ended March 31, 2018 and 2017 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
2018            
Florida  355  (31)  324 $ 92,718  $ 286
Carolinas  266  (34)  232   89,851   387
Arizona  169  (22)  147    47,712   325
Texas  59  (31)  28   11,747   420
Total  849  (118 )  731 $ 242,028   331
             
2017            
Florida  402  (39)  363 $  105,046 $ 289
Carolinas  205  (20)  185    70,315   380
Arizona  141  (25)  116    39,425   340
Texas  —  —   —   —   —
Total  748  (84)  664 $ 214,786   323
              
              

Backlog for the Florida, Carolinas, Arizona and Texas segments as of March 31, 2018 and 2017 is summarized as follows (dollars in thousands): 

         
        Average
  Number Dollar   Price
As of March 31,  of Units Volume  Per Unit
2018        
Florida 499 $146,872 $294
Carolinas 289  110,655  383
Arizona 227  74,701  329
Texas 49  18,675  381
Total 1,064 $350,903  330
         
2017        
Florida 458 $135,832 $297
Carolinas 255  103,761  407
Arizona 192  65,549  341
Texas     
Total 905 $305,142   337

 

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Source: AV Homes, Inc.

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