AV Homes, Inc.
Oct 26, 2017

AV Homes Reports Results for Third Quarter 2017

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

SCOTTSDALE, Ariz., Oct. 26, 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 third quarter ended September 30, 2017.  Total revenue for the third quarter of 2017 increased slightly to $205.7 million, from $205.4 million in the third quarter of 2016.  Net loss and diluted loss per share was $1.5 million and $0.07 per share, respectively, which included a pre-tax charge of $6.9 million ($4.2 million after-tax, or $0.19 per share) related to redemption costs for the remainder of the Company's 8.50% Senior Notes that were refinanced with new 6.625% Senior Notes.  Net income and diluted income per share for the third quarter 2016 was $11.9 million and $0.49 per share, respectively, and included only a nominal income tax provision due to the reversal of the valuation allowance of the deferred tax assets in 2016. 

Roger A. Cregg, President and Chief Executive Officer, commented, "We continue to remain on target to achieve our full year 2017 performance targets, as evidenced by the reaffirmation of our guidance again this quarter, despite the interruption by hurricane Irma in our Florida markets."  Mr. Cregg continued, "We remain focused on sourcing new land opportunities for communities to provide future growth and performance in the operations.  Over the last three quarters, we approved, or have under contract, more than 3,000 lots, as we picked up the pace of activity in all of our current markets.  Overall, our outlook continues to remains positive, supported by a favorable macroeconomic and housing environment."

Homebuilding revenue remained comparable to the prior year third quarter with the 4.4% increase in the average selling price offsetting a 4.3% decrease in units primarily due to lower community counts in Florida and Arizona.  During the third quarter of 2017, the Company delivered 608 homes, compared to 635 homes delivered during the third quarter of 2016, and the average unit price per closing improved to approximately $332,000 from approximately $318,000 in the third quarter of 2016 due to price increases and improvements in the mix of homes sold.

Homebuilding gross margin was 16.4% in the third quarter of 2017 compared to 18.8% in the third quarter of 2016 with comparable margins year over year in the Arizona market being more than offset by gross margin declines in the Florida and Carolina markets.  Homebuilding gross margin is inclusive of the impact associated with the expensing of previously capitalized interest of 2.6% and 2.7% in the 2017 and 2016 periods, respectively.
           
Total SG&A expense as a percent of homebuilding revenue was 13.4% in the third quarter of 2017 compared to 12.6% in the third quarter of 2016.  Homebuilding SG&A expense as a percentage of homebuilding revenue was 11.1% in the third quarter of 2017 compared to 10.8% in the third quarter of 2016.  Corporate general and administrative expenses as a percentage of homebuilding revenue were 2.3% in the third quarter of 2017 compared to 1.8% in the same period a year ago. 

The number of new housing contracts signed, net of cancellations, during the three months ended September 30, 2017 was 551 units, compared to 572 units during the same period in 2016.  The average sales price on contracts signed in the third quarter of 2017 increased 1.9% to approximately $330,000 from approximately $324,000 in the third quarter of 2016.  The aggregate dollar value of the contracts signed during the third quarter was $182.0 million, compared to $185.4 million during the same period one year ago.  The backlog value of homes under contract but not yet closed as of September 30, 2017 decreased 4.0% to $333.2 million on 1,013 units, compared to $347.1 million on 1,081 units as of September 30, 2016.

The Company will hold a conference call and webcast on Friday, October 27, 2017 to discuss its third 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 October 27, 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 98676473. The telephonic replay will be available until November 3, 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.

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  Nine Months Ended  
  September 30,  September 30,  
  2017  2016 2017  2016  
Revenues              
Homebuilding $201,724  $201,821 $547,268  $507,659  
Amenity and other  3,875   3,315  12,637   8,834  
Land sales   140   291  2,576   1,120  
Total revenues  205,739   205,427  562,481   517,613  
              
Expenses             
Homebuilding cost of revenue  168,555    163,911  454,020   414,290  
Amenity and other  3,167   3,101  11,063   8,057  
Land sales  124   295  1,286   685  
Total real estate expenses  171,846   167,307  466,369   423,032  
Selling, general and administrative expenses  27,085   25,484  76,470    71,639  
Interest income and other  (407)    (665)  (1) 
Interest expense  2,625   701  7,147   2,853  
Loss on extinguishment of debt  6,939     9,872     
Total expenses   208,088   193,492  559,193   497,523  
              
Income (loss) before income taxes  (2,349)  11,935  3,288   20,090  
Income tax expense (benefit)   (872)   38   1,679    (109,959) 
Net income (loss) and comprehensive income (loss)  $ (1,477)  $ 11,897 $ 1,609  $ 130,049  
              
Basic earnings (loss) per share $ (0.07) $ 0.53 $ 0.07  $ 5.81  
Basic weighted average shares outstanding   22,504    22,416   22,487    22,403  
              
Diluted earnings (loss) per share $ (0.07) $ 0.49 $ 0.07  $ 5.02  
Diluted weighted average shares outstanding   22,504    26,654   22,674    26,606  
 
 


AV HOMES, INC. AND SUBSIDIARIES
Unaudited Consolidated Balance Sheets
(in thousands)
 
  September 30,  December 31,  
  2017  2016  
Assets  (unaudited)    
Cash and cash equivalents $169,332  $67,792  
Restricted cash  1,182   1,231  
Receivables  8,016   10,827  
Land and other inventories  679,895   584,408  
Property and equipment, net  33,209   33,680  
Prepaid expenses and other assets  12,664   12,753  
Deferred tax assets, net  108,734   110,257  
Goodwill  30,003   19,285  
Total assets $1,043,035  $840,233  
        
Liabilities and Stockholders' Equity       
        
Liabilities       
Accounts payable $37,223  $37,387  
Accrued and other liabilities   32,639   34,298  
Customer deposits  14,894   9,979  
Estimated development liability  31,700   32,102  
Senior debt, net  471,644   275,660  
Total liabilities  588,100   389,426  
        
Stockholders' equity       
Common stock, par value $1 per share  22,567   22,624  
Additional paid-in capital  404,187   401,558  
Retained earnings  31,200   29,644  
   457,954   453,826  
Treasury stock  (3,019 )  (3,019) 
Total stockholders' equity  454,935   450,807  
Total liabilities and stockholders' equity $1,043,035  $840,233  
 
 

The following table provides a comparison of certain financial data related to our operations for the three and nine months ended September 30, 2017 and 2016 (in thousands):

  Three Months Ended  Nine Months Ended  
  September 30,   September 30,  
  2017  2016  2017  2016  
Operating income:             
Florida             
Revenues:             
Homebuilding $81,796  $96,943  $231,395  $251,587  
Amenity and other   3,875   3,315   12,637    8,834  
Land sales  30    26   1,499   670  
Total revenues  85,701   100,284   245,531    261,091  
Expenses:              
Homebuilding cost of revenue  64,739   74,872   183,373   196,045  
Homebuilding selling, general and administrative  9,837   12,189   28,241    33,374  
Amenity and other  3,145   3,075   11,000   7,978  
Land sales  14   6   210   225  
Segment operating income $7,966  $10,142  $22,707  $23,469  
              
Carolinas             
Revenues:             
Homebuilding $84,893  $62,864  $214,255  $151,817   
Land sales  110   265   892   265  
Total revenues  85,003   63,129   215,147   152,082  
Expenses:             
Homebuilding cost of revenue  74,376   53,803   184,557   130,573  
Homebuilding selling, general and administrative  8,791   5,744   22,954   15,525   
Land sales  110   289   896   289  
Segment operating income $1,726  $3,293  $6,740  $5,695  
              
Arizona             
Revenues:             
Homebuilding $35,035  $42,014  $101,618  $104,255  
Land sales        185   185  
Total revenues  35,035   42,014    101,803   104,440  
Expenses:             
Homebuilding cost of revenue  29,440   35,236   86,090   87,672  
Homebuilding selling, general and administrative  3,797   3,854   10,950   10,773  
Amenity and other  22   26   63   79  
Land sales        180   171  
Segment operating income $1,776  $2,898  $4,520  $5,745  
              
Operating income $11,468  $16,333  $33,967  $34,909  
              
Unallocated income (expenses):             
Interest income and other  407      665   1  
Corporate general and administrative expenses  (4,660)  (3,697)  (14,325)  (11,967) 
Loss on extinguishment of debt  (6,939)     (9,872)    
Interest expense  (2,625)  (701)  (7,147)  (2,853) 
Income (loss) before income taxes  (2,349)  11,935   3,288   20,090  
Income tax expense (benefit)  (872)  38    1,679   (109,959) 
Net income (loss) $(1,477) $11,897  $1,609  $130,049  
 
 

Data from closings for the Florida, Carolinas and Arizona segments for the three and nine months ended September 30, 2017 and 2016 is summarized as follows (dollars in thousands):

       Average 
   Number    Price 
For the three months ended September 30,  of Units  Revenues Per Unit 
2017          
Florida 279 $81,796 $293 
Carolinas 227  84,893  374 
Arizona 102  35,035  343 
Total 608 $201,724  332 
          
2016         
Florida 340 $96,943 $285 
Carolinas 166  62,864  379 
Arizona 129  42,014  326 
Total 635 $201,821  318 
 


       Average 
  Number    Price 
For the nine months ended September 30,   of Units  Revenues Per Unit 
2017         
Florida 794 $231,395 $291 
Carolinas 569  214,255  377 
Arizona 302  101,618  336 
Total 1,665 $547,268  329 
          
2016         
Florida 904 $251,587 $278 
Carolinas 413  151,817  368 
Arizona 340  104,255  307 
Total 1,657 $507,659  306  
 
 

Data from contracts signed for the Florida, Carolinas and Arizona segments for the three and nine months ended September 30, 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 September 30,  Signed Cancellations Cancellations  Value Unit 
2017             
Florida 271 (25) 246 $73,070 $297 
Carolinas 225 (32) 193  69,357  359 
Arizona 132 (20) 112  39,607  354 
Total 628 (77) 551 $182,034  330 
              
2016             
Florida 373 (68) 305 $89,076 $292 
Carolinas 191 (20) 171  64,457  377 
Arizona 125 (29) 96  31,896  332 
Total 689 (117) 572 $185,429  324 
 


  Gross          
   Number   Contracts    Average 
  of Contracts   Signed, Net of  Dollar Price Per 
For the nine months ended September 30,  Signed Cancellations Cancellations Value Unit 
2017             
Florida 1,078 (100) 978 $286,905 $293 
Carolinas 666 (81) 585  216,440  370 
Arizona 414 (71) 343  117,173  342 
Total 2,158 (252) 1,906 $620,518  326 
              
2016             
Florida 1,245  (201) 1,044 $294,413 $282 
Carolinas 591 (53) 538  200,827  373 
Arizona 465 (108) 357  113,427  318 
Total 2,301 (362) 1,939 $608,667  314 
 
 

Backlog for the Florida, Carolinas and Arizona segments as of September 30, 2017 and 2016 is summarized as follows (dollars in thousands): 

 
       Average 
  Number Dollar  Price 
As of September 30,  of Units Volume Per Unit 
2017          
Florida 526 $157,054 $299 
Carolinas 277  103,152  372 
Arizona 210  72,967  347 
Total 1,013 $333,173  329 
          
2016         
Florida 556 $160,007 $288 
Carolinas 275  105,302  383 
Arizona 250  81,834  327 
Total 1,081 $347,143  321 
 


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 nine months ended September 30, 2017 and 2016:

  Three Months Ended Nine Months Ended 
  September 30, September 30, 
  2017  2016  2017  2016  
Interest incurred $ 8,523  $ 6,483  $ 24,046  $ 19,873  
Interest capitalized   (5,898)   (5,782)   (16,899)   (17,020) 
Interest expense  $ 2,625  $ 701  $ 7,147  $ 2,853  
 

The following table represents depreciation and amortization expense and the amortization of previously capitalized interest for the three and nine months ended September 30, 2017 and 2016:

  Three Months Ended Nine Months Ended 
  September 30,  September 30, 
  2017 2016 2017 2016 
Depreciation and amortization (1) $ 1,055 $ 910 $ 2,971 $ 2,592 
Amortization of previously capitalized interest   5,344   5,492   15,274   14,013 

(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 (loss) and weighted average shares outstanding for the calculation of basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2017 and 2016:

  Three Months Ended  Nine Months Ended 
  September 30, September 30, 
  2017  2016 2017 2016 
Numerator:             
Basic net income (loss) $(1,477) $11,897 $1,609 $130,049 
Effect of dilutive securities     1,201    3,600 
Diluted net income (loss) $(1,477) $13,098 $1,609 $133,649 
              
Denominator:             
Basic weighted average shares outstanding  22,504   22,416  22,487  22,403 
Effect of dilutive securities     4,238  187  4,203 
Diluted weighted average shares outstanding  22,504    26,654  22,674  26,606 
              
Basic earnings (loss) per share $(0.07) $0.53 $0.07 $5.81 
Diluted earnings (loss) per share $(0.07) $0.49 $0.07 $5.02 

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Source: AV Homes, Inc.

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