AV Homes, Inc.
Feb 23, 2017

AV Homes Reports Results for Fourth Quarter and Full Year 2016

Fourth Quarter 2016 Highlights - as compared to the prior year fourth quarter (unless otherwise noted)

SCOTTSDALE, Ariz., Feb. 23, 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 fourth quarter and year ended December 31, 2016.  Total revenue for the fourth quarter of 2016 increased 16% to $261.7 million from $225.7 million in the fourth quarter of 2015.  Net income and diluted earnings per share increased to $17.1 million and $0.68 per share, respectively, compared to net income of $15.9 million and $0.65 per share in the fourth quarter of 2015.

"We are very pleased with our strong fourth quarter of 2016 results and the completion of a solid year of operating performance," said Roger A. Cregg, President and Chief Executive Officer.   "With increases in homes delivered, and homebuilding revenue, and improved operating leverage, we generated over $17 million of net income for the fourth quarter and exceeded our goals within our financial outlook for the full year."  Cregg continued, "The full year of 2016 was highlighted with increases in homebuilding revenue of 53% and net income of 203%.  We head into 2017 with a solid balance sheet, positioning the company to take advantage of new community investments and potential acquisition opportunities to continue our long-term profitable growth strategy."

The increase in total revenue was driven by volume increases due to a greater number of communities with deliveries and higher average selling prices due to price increases and improvements in the mix of homes sold.  During the fourth quarter of 2016, the Company delivered 808 homes, an 11% increase from the 731 homes delivered during the fourth quarter of 2015, and the average unit price per closing improved 6% to approximately $317,000 from approximately $299,000 in the fourth quarter of 2015. 

Homebuilding gross margin was 17.6% in the fourth quarter of 2016 compared to 19.2% in the fourth quarter of 2015 with declines in Arizona and the Carolinas more than offsetting gross margin improvements in Florida.  Homebuilding gross margin is inclusive of the impact associated with the expensing of previously capitalized interest of 2.6% and 2.3% in the 2016 and 2015 periods, respectively.

Total SG&A expense as a percent of homebuilding revenue improved to 11.1% in the fourth quarter of 2016 from 12.4% in the fourth quarter of 2015.  Homebuilding SG&A expense as a percentage of homebuilding revenue was 9.5% in the fourth quarter of 2016 compared to 10.0% in the fourth 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 our cost base.  Corporate general and administrative expenses as a percentage of homebuilding revenue improved to 1.7% in the fourth quarter of 2016 from 2.4% 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 December 31, 2016 decreased 14.7% to 430, compared to 504 units during the same period in 2015.  The decrease in housing contracts was primarily attributable to the decrease in selling communities to 58 from 62 and the wind down of additional communities expected to sell out in early 2017.  The average sales price on contracts signed in the fourth quarter of 2016 increased 10.1% to approximately $338,000 from approximately $307,000 in the fourth quarter of 2015.  The aggregate dollar value of the contracts signed during the fourth quarter decreased 6.1% to $145.3 million, compared to $154.7 million during the same period one year ago.  The backlog value of homes under contract but not yet closed as of December 31, 2016 decreased 3.2% to $236.2 million on 703 units, compared to $243.9 million on 799 units as of December 31, 2015.

Results for the Year Ended December 31, 2016

Total revenue for the year ended December 31, 2016 increased 51% to $779.3 million from $517.8 million for the year ended December 31, 2015 and pre-tax income increased over 200% to $37.6 million from $12.4 million over the prior year period.  Net income and diluted earnings per share increased to $147.1 million and $5.66 per share, respectively, compared to net income of $12.0 million and $0.54 per share for the year ended December 31, 2015.  The net income and per share earnings for 2016 includes the favorable impact of the reversal of the valuation allowance on our deferred tax assets in the amount of $124.5 million, or $4.70 per share.

The increase in total revenue was driven by volume increases due to a greater number of communities with deliveries due to organic and acquisition-related growth, and higher average selling prices due to price increases and improvements in the mix of homes sold.  During the year ended December 31, 2016, the Company delivered 2,465 homes, a 40.9% increase from the 1,750 homes delivered during the year ended December 31, 2015, and the average unit price per closing improved 9% to approximately $310,000 from approximately $285,000 for the year ended December 31, 2015

Homebuilding gross margin was 18.1% in 2016 compared to 18.7% in 2015.  Homebuilding gross margin is inclusive of the impact associated with the expensing of previously capitalized interest of 2.7% and 2.2% in the 2016 and 2015 periods, respectively. 

Total SG&A expense as a percent of homebuilding revenue improved to 13.1% for the year ended December 31, 2016 from 16.0% in 2015.  Homebuilding SG&A expense as a percentage of homebuilding revenue was 11.0% for the year ended December 31, 2016 compared to 12.6% in 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 2.1% for the year ended December 31, 2016 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 year ended December 31, 2016 increased 16.4% to 2,369, compared to 2,035 units during the same period in 2015.  The increase in housing contracts was primarily attributable to increases in the Carolinas segment.  The average sales price on contracts signed during the year ended December 31, 2016 increased 10.0% to approximately $318,000 from approximately $289,000 in 2015.  The aggregate dollar value of the contracts signed during 2016 increased 28.0% to $753.9 million, compared to $589.0 million during the same period one year ago.

2017 Outlook

The Company issued the following expectations for its financial performance in 2017:

The Company will hold a conference call and webcast on Friday, February 24, 2017 to discuss its fourth quarter and full year financial results.  The conference call will begin at 8:30 a.m. EST.  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 February 24, 2017 beginning at 11:30 a.m. EST and can be accessed by dialing (855) 859-2056 or for international callers by dialing (404) 537-3406; the conference ID is 70283814. The telephonic replay will be available until March 1, 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; 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; our ability to successfully integrate acquired businesses; 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
Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except per share data)
               
  Three Months Ending Twelve Months Ending 
  December 31, December 31, 
  2016  2015 2016  2015  
Revenues             
Homebuilding $256,382  $218,534 $764,041  $498,915  
Amenity and other  2,864   4,190  11,698   12,385  
Land sales  2,446   2,996  3,566   6,466  
Total revenues  261,692   225,720  779,305   517,766  
              
Expenses             
Homebuilding cost of revenues  211,181   176,627  625,471   405,538  
Amenity and other  3,091   3,668  11,148   10,702  
Land sales  545   438  1,230   823  
Total real estate expenses  214,817   180,733   637,849   417,063  
Selling, general and administrative expenses  28,580   27,094  100,219   79,586  
Interest income and other  (15)  17  (16)  (308) 
Interest expense  814   1,536  3,667   9,039  
Total expenses  244,196   209,380  741,719   505,380  
               
Income before income taxes  17,496   16,340  37,586   12,386  
Income tax expense (benefit)  438   436  (109,521)  436  
Net income and comprehensive income $17,058  $15,904 $147,107  $11,950  
               
Basic earnings per share $0.77  $0.72 $6.58  $0.54  
Basic weighted average shares outstanding  22,175   22,021  22,346   22,010  
              
Diluted earnings per share $0.68  $0.65 $5.66  $0.54  
Diluted weighted average shares outstanding   26,356   27,717  26,509   22,130  

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 twelve months ended December 31, 2015, selling, general and administrative costs of $22.0 million and $62.7 million, respectively, were previously presented in homebuilding expenses are now included in selling, general and administrative expenses. 

AV HOMES, INC. AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
(in thousands)
        
  December 31,  December 31,  
  2016  2015  
Assets      
Cash and cash equivalents $67,792  $46,898  
Restricted cash  1,231   26,948  
Land and other inventories  584,408   582,531  
Receivables  10,827   7,178  
Property and equipment, net  33,680    34,973  
Investments in unconsolidated entities  1,172   1,172  
Prepaid expenses and other assets  11,581   17,144  
Deferred tax assets, net  110,257     
Goodwill  19,285   19,295  
Total assets $840,233  $736,139  
        
Liabilities and Stockholders' Equity        
        
Liabilities       
Accounts payable $37,387  $33,606  
Accrued and other liabilities  34,298   38,826  
Customer deposits  9,979   8,629  
Estimated development liability  32,102   32,551  
Senior debt, net  275,660   320,846  
Total liabilities  389,426   434,458  
        
Stockholders' equity       
Common stock, par value $1 per share  22,624   22,444  
Authorized: 50,000,000 shares       
Issued: 22,623,506 shares as of December 31, 2016       
    22,444,028 shares as of December 31, 2015       
Additional paid-in capital  401,558   399,719  
Retained earnings (deficit)  29,644   (117,463) 
   453,826   304,700  
Treasury stock, at cost, 110,874 shares as of December 31, 2016, and 2015, respectively  (3,019)  (3,019) 
Total stockholders' equity   450,807   301,681  
Total liabilities and stockholders' equity $840,233  $736,139  

 

AV HOMES, INC. AND SUBSIDIARIES
Unaudited Supplemental Information
(in thousands)
               
The following table represents interest incurred, interest capitalized, and interest expense for the three and twelve months ended December 31, 2016 and 2015:
              
  Three Months Ending Twelve Months Ending 
   December 31, December 31, 
  2016  2015  2016  2015  
Interest incurred $6,272  $7,205  $26,145  $28,207  
Interest capitalized  (5,458)  (5,669)  (22,478)  (19,168) 
Interest expense $814  $1,536  $3,667  $9,039  


The following table represents depreciation and amortization expense and the amortization of previously capitalized interest for the three and twelve months ended December 31, 2016 and 2015: 
               
  Three Months Ending Twelve Months Ending 
  December 31, December 31, 
  2016 2015 2016 2015 
Depreciation and amortization (1) $907 $908 $3,499 $3,693 
Amortization of previously capitalized interest  6,753  5,113  20,766  11,041 
               
(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 and twelve months ended December 31, 2016 and 2015:
              
  Three Months Ending Twelve Months Ending 
  December 31, December 31, 
  2016 2015 2016 2015 
Numerator:             
Basic net income $17,058 $15,904 $147,107 $11,950 
Effect of dilutive securities  742  2,077  2,969   
Diluted net income $17,800 $17,981 $150,076 $11,950 
              
Denominator:             
Basic weighted average shares outstanding  22,175  22,021  22,346  22,010 
Effect of dilutive securities  4,181  5,696  4,163  120 
Diluted weighted average shares outstanding  26,356  27,717  26,509  22,130 
              
Basic earnings per share $0.77 $0.72 $6.58 $0.54 
Diluted earnings per share $0.68 $0.65 $5.66 $0.54 


The following table provides a comparison of certain financial data related to our operations for the three and twelve months ended December 31, 2016 and 2015 (in thousands):
              
  Three Months Ending Twelve Months Ending 
  December 31, December 31, 
  2016  2015  2016  2015  
Operating income:             
Florida             
Revenues:             
Homebuilding $121,796  $114,776   $373,383  $300,260  
Amenity and other  2,864   4,190   11,698   12,385  
Land sales  2,446   2,996    3,116   6,466  
Total revenues  127,106   121,962   388,197   319,111  
Expenses:             
Homebuilding cost of revenues  95,327   89,968   291,372   239,001  
Homebuilding selling, general and administrative  12,739   12,328   46,113   38,500   
Amenity and other  3,084   3,649   11,062   10,587  
Land sales  545   438   770   823   
Segment operating income $15,411  $15,579  $38,880  $30,200  
              
Carolinas             
Revenues:             
Homebuilding $86,732  $64,576  $238,549  $114,277  
Land sales        265     
Total revenues   86,732   64,576   238,814   114,277  
Expenses:             
Homebuilding cost of revenues  74,775   54,058   205,348   95,232  
Homebuilding selling, general and administrative  7,282    5,487   22,807   12,205  
Land sales        289     
Segment operating income $ 4,675  $5,031  $10,370  $6,840  
              
Arizona             
Revenues:             
Homebuilding $47,854  $39,182  $152,109  $84,378  
Land sales        185     
Total revenues  47,854   39,182    152,294   84,378  
Expenses:             
Homebuilding cost of revenues  41,079   32,601   128,751   71,305  
Homebuilding selling, general and administrative  4,221   4,135   14,994   11,981  
Amenity and other  7   19   86   115  
Land sales        171     
Segment operating income $2,547  $2,427  $8,292  $977  
              
Operating income $22,633  $23,037  $57,542  $38,017  
              
Unallocated income (expenses):              
Interest income and other  15   (17)  16   308  
Corporate general and administrative expenses  (4,338)  (5,144)  (16,305)   (16,900) 
Interest expense  (814)  (1,536)  (3,667)  (9,039) 
Income before income taxes  17,496   16,340   37,586   12,386  
Income tax expense (benefit)  438   436   (109,521)  436  
Net income $17,058  $ 15,904  $147,107  $11,950   


Data from closings for the Florida, Carolinas and Arizona segments for the three and twelve months ended December 31, 2016 and 2015 is summarized as follows (dollars in thousands):
          
        Average 
  Number    Price 
Three Months Ended December 31 , of Units Revenues Per Unit 
2016         
Florida 428 $121,796 $285 
Carolinas 233  86,732  372 
Arizona 147  47,854  326 
Total 808 $256,382  317 
           
2015         
Florida 420 $114,777 $273 
Carolinas  183  64,575  353 
Arizona 128  39,182  306 
Total 731 $218,534  299 

 

          
       Average 
  Number    Price 
Twelve Months Ended December 31,  of Units  Revenues Per Unit 
2016          
Florida 1,332 $373,383 $280 
Carolinas 646  238,549  369 
Arizona 487  152,109  312 
Total 2,465 $764,041  310 
           
2015         
Florida 1,124 $300,260 $267 
Carolinas 328  114,277  348 
Arizona 298  84,378  283 
Total 1,750 $498,915  285 


Data from contracts signed for the Florida, Carolinas and Arizona segments for the three and twelve months ended December 31, 2016 and 2015 is summarized as follows (dollars in thousands):
              
  Gross          
  Number   Contracts    Average 
  of Contracts   Signed, Net of  Dollar Price Per 
Three Months Ended December 31, Signed Cancellations Cancellations Value Unit 
2016             
Florida 266  (52) 214 $61,834 $289 
Carolinas 171 (21) 150  60,712  405 
Arizona 94 (28) 66  22,730   344 
Total 531 (101) 430 $145,276  338 
              
2015             
Florida 366 (66) 300 $83,679 $279 
Carolinas 122 (16) 106  39,216  370 
Arizona 130 (32) 98  31,815  325 
Total 618 (114) 504 $154,710  307 


              
  Gross          
  Number   Contracts    Average 
  of Contracts   Signed, Net of  Dollar Price Per 
Twelve Months Ended December 31, Signed  Cancellations Cancellations Value Unit 
2016             
Florida 1,511  (253) 1,258 $356,247 $283 
Carolinas 762 (74) 688  261,539  380 
Arizona 559 (136) 423  136,157  322 
Total 2,832 (463) 2,369 $753,943  318 
               
2015             
Florida 1,509 (242) 1,267 $344,171 $272 
Carolinas 331 (42) 289  102,851   356 
Arizona 590 (111) 479  142,004  296 
Total 2,430 (395) 2,035 $589,026  289 


Backlog for the Florida, Carolinas and Arizona segments as of December 31, 2016 and 2015 is summarized as follows (dollars in thousands):
          
       Average 
  Number Dollar  Price 
As of December 31,  of Units  Volume Per Unit 
2016         
Florida 342 $100,184 $293 
Carolinas 192  79,325  413 
Arizona 169  56,731  336 
Total 703 $236,240  336 
          
2015         
Florida 416 $116,061 $279 
Carolinas 150  56,427  376 
Arizona 233  71,459  307 
Total 799 $243,947  305 


Investor Contact:



Mike Burnett

EVP, Chief Financial Officer

480-214-7408

m.burnett@avhomesinc.com

Primary Logo

Source: AV Homes, Inc.

News Provided by Acquire Media