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TRI Pointe Group, Inc. Reports 2016 Fourth Quarter and Full Year Results

-New Home Orders up 21% for the Quarter- 
-Reports Net Income Available to Common Stockholders of $57.9 Million, or $0.36 per Diluted Share- 
-Home Sales Revenue of $770.7 Million for the Quarter-  
-Homebuilding Gross Margin of 20.0% for the Quarter-

IRVINE, Calif., Feb. 22, 2017 (GLOBE NEWSWIRE) -- TRI Pointe Group, Inc. (the "Company") (NYSE:TPH) today announced results for the fourth quarter ended December 31, 2016 and full year 2016.

Results and Operational Data for Fourth Quarter 2016 and Comparisons to Fourth Quarter 2015

  • Net income available to common stockholders was $57.9 million, or $0.36 per diluted share, compared to $85.1 million, or $0.52 per diluted share
  • New home orders of 909 compared to 753, an increase of 21%
  • Active selling communities averaged 122.8 compared to 112.8, an increase of 9%
    -  New home orders per average selling community increased by 10% to 7.4 orders (2.5 monthly) compared to 6.7 orders (2.2 monthly)
    -  Cancellation rate of 20% compared to 21%, a decrease of 100 basis points
  • Backlog units at quarter end of 1,193 homes compared to 1,156, an increase of 3%
    -  Dollar value of backlog at quarter end of $661.1 million compared to $697.3 million, a decrease of 5%
    -  Average sales price in backlog at quarter end of $554,000 compared to $603,000, a decrease of 8%
  • Home sales revenue of $770.7 million compared to $847.4 million, a decrease of 9%
    -  New home deliveries of 1,427 homes compared to 1,453 homes, a decrease of 2%
    -  Average sales price of homes delivered of $540,000 compared to $583,000, a decrease of 7%
  • Homebuilding gross margin percentage of 20.0% compared to 22.2%, a decrease of 220 basis points
    -  Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 22.2%*
  • SG&A expense as a percentage of homes sales revenue of 9.2% compared to 8.4%, an increase of 80 basis points
  • Ratios of debt-to-capital and net debt-to-capital of 43.0% and 39.1%*, respectively, as of December 31, 2016
  • Repurchased 1,455,332 shares of common stock at an average price of $11.66 for an aggregate dollar amount of $17.0 million in the three months ended December 31, 2016
  • Ended fourth quarter of  2016 with cash of $208.7 million and $420.7 million of availability under the Company's unsecured revolving credit facility 

/EIN News/ --    *  See "Reconciliation of Non-GAAP Financial Measures"

Results and Operational Data for Full Year 2016 and Comparisons to Full Year 2015

  • Net income available to common stockholders was $195.2 million, or $1.21  per diluted share, compared to $205.5 million, or $1.27 per diluted share
  • New home orders of 4,248 compared to 4,181, an increase of 2%
  • Active selling communities averaged 118.3 compared to 115.9, an increase of 2%
    -  New home orders per average selling community were 35.9 orders (3.0 monthly) compared to 36.1 orders (3.0 monthly)
    -  Cancellation rate of 15% compared to 16%, a decrease of 100 basis points
  • Home sales revenue of $2.329 billion compared to $2.291 billion, an increase of 2%
    -  New home deliveries of 4,211 homes compared to 4,057 homes, an increase of 4%
    -  Average sales price of homes delivered of $553,000 compared to $565,000, a decrease of 2%
  • Homebuilding gross margin percentage of 21.2% compared to 21.1%, an increase of 10 basis points
    -  Excluding interest, impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 23.4%*
  • SG&A expense as a percentage of homes sales revenue of 10.8% compared to 10.2%, an increase of 60 basis points
  • Repurchased 3,560,853 shares of common stock at an average price of $11.82 for an aggregate dollar amount of $42.1 million in the full year ended December 31, 2016

  *  See "Reconciliation of Non-GAAP Financial Measures"

“I am extremely pleased with how we ended 2016,” said TRI Pointe Group CEO Doug Bauer.  “Fourth quarter net orders grew 21% as compared to the prior year period, thanks to a 10% increase in the monthly absorption rate and a 9% rise in average community count.  Order trends remained strong in our core California markets during the quarter, while many of our markets outside of California experienced an increase in absorption rate.  We believe that this is a testament to the relative strength of our markets and the quality of our communities and new home offerings.  With a 19% increase in active selling communities at the start of 2017 as compared to the beginning of 2016, TRI Pointe Group is in a great position to achieve its goals for 2017 and beyond.”

Fourth Quarter 2016 Operating Results

Net income available to common stockholders was $57.9 million, or $0.36 per diluted share in the fourth quarter of 2016, compared to net income available to common stockholders of $85.1 million, or $0.52 per diluted share for the fourth quarter of 2015.  The decrease in net income available to common stockholders was primarily driven by lower home sales revenue and a $33.9 million decrease in homebuilding gross margin, resulting in a 220 basis point decrease in homebuilding gross margin percentage.

Home sales revenue decreased $76.7 million, or 9%, to $770.7 million for the fourth quarter of 2016, as compared to $847.4 million for the fourth quarter of 2015.  The decrease was primarily attributable to a 2% decrease in new home deliveries to 1,427, and a 7% decrease in average selling price of homes delivered to $540,000 compared to $583,000 in the fourth quarter of 2015. 

New home orders increased 21% to 909 homes for the fourth quarter of 2016, as compared to 753 homes for the same period in 2015.  Average selling communities was 122.8 for the fourth quarter of 2016 compared to 112.8 for the fourth quarter of 2015.  The Company’s overall absorption rate per average selling community for the fourth quarter of 2016 was 7.4 orders (2.5 monthly) compared to 6.7 orders (2.2 monthly) during the fourth quarter of 2015.  

The Company ended the quarter with 1,193 homes in backlog, representing approximately $661.1 million. The average selling price of homes in backlog as of December 31, 2016 decreased $49,000, or 8%, to $554,000 compared to $603,000 at December 31, 2015.  

Homebuilding gross margin percentage for the fourth quarter of 2016 decreased to 20.0% compared to 22.2% for the fourth quarter of 2015.  Excluding interest and impairments and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 22.2%* for the fourth quarter of 2016 compared to 24.2%* for the fourth quarter of 2015.  The decrease in homebuilding gross margin percentage was largely due to the mix of homes delivered during the quarter, with 58 fewer homes delivered from California which have gross margins above the Company average.   

Selling, general and administrative ("SG&A") expense for the fourth quarter of 2016 increased to 9.2% of home sales revenue as compared to 8.4% for the fourth quarter of 2015 due to decreased leverage as a result of the 9% decrease in home sales revenue.  

“TRI Pointe Group continues to strive for operational excellence in our current business while investing in the future, most notably with the continued development of our longer-dated California assets,” said TRI Pointe Group COO Tom Mitchell.  “These assets will provide us with a great runway of lots in land constrained California for years to come and will be a key contributor to our success moving forward.  We are extremely optimistic about the potential of these assets, as well as the prospects for all of our brands as we head into 2017.”

* See “Reconciliation of Non-GAAP Financial Measures”

Outlook

For the full year 2017, the Company is reiterating its guidance from their investor day this past November.  The Company expects to grow average selling communities by 10% compared to the prior year and deliver between 4,500 and 4,800 homes at an average sales price of $570,000.  The Company expects its homebuilding gross margin for the full year 2017 to be in the range of 20% to 21%, with quarterly fluctuations based on the mix of California deliveries, and expects its SG&A expense ratio to be in the range of 10.2% to 10.4% of home sales revenue.  In addition, the Company anticipates gross profit from land and lot sales of approximately $45 million, most of which is expected to close in the third quarter of 2017.

Earnings Conference Call

The Company will host a conference call via live webcast for investors and other interested parties beginning at 10:00 a.m. Eastern Time on Wednesday, February 22, 2017.  The call will be hosted by Doug Bauer, Chief Executive Officer, Tom Mitchell, President and Chief Operating Officer and Mike Grubbs, Chief Financial Officer.

Interested parties can listen to the call live on the internet through the Investor Relations section of the Company’s website at www.TRIPointeGroup.com. Listeners should go to the website at least fifteen minutes prior to the call to download and install any necessary audio software.  The call can also be accessed by dialing 1-877-407-3982 for domestic participants or 1-201-493-6780 for international participants.  Participants should ask for the TRI Pointe Group Fourth Quarter 2016 Earnings Conference Call.  Those dialing in should do so at least ten minutes prior to the start.  The replay of the call will be available for two weeks following the call.  To access the replay, the domestic dial-in number is 1-844-512-2921, the international dial-in number is 1-412-317-6671, and the reference code is #13653357.  An archive of the webcast will be available on the Company’s website for a limited time.

About TRI Pointe Group, Inc.
Headquartered in Irvine, California, TRI Pointe Group, Inc. (NYSE:TPH) is one of the top ten largest public homebuilders by equity market capitalization in the United States. The company designs, constructs and sells premium single-family homes through its portfolio of six quality brands across eight states, including Maracay Homes in Arizona; Pardee Homes in California and Nevada; Quadrant Homes in Washington; Trendmaker Homes in Texas; TRI Pointe Homes in California and Colorado; and Winchester Homes in Maryland and Virginia.  Additional information is available at www.TRIPointeGroup.com.  “Winchester” is a registered trademark and is used with permission.

Forward-Looking Statements

Various statements contained in this press release, including those that express a belief, 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 the timing and success of specific projects and our future production, land and lot sales, operational and financial results, financial condition, prospects, and capital spending.  Our forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “estimate,” “goal,” “guidance,” “expect,” “intend,” “outlook,” “project,” “potential,” “plan,” “predict,” “target,” “will,” or other words that convey future events or outcomes.  The forward-looking statements in this press release speak only as of the date of this press release, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly.  These forward-looking statements 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 effect of general economic conditions, including employment rates, housing starts, interest rate levels, availability of financing for home mortgages and strength of the U.S. dollar; market demand for our products, which is related to the strength of the various U.S. business segments and U.S. and international economic conditions; levels of competition; the successful execution of our internal performance plans, including restructuring and cost reduction initiatives; global economic conditions; raw material prices; oil and other energy prices; the effect of weather, including the re-occurrence of drought conditions in California; the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters; transportation costs; federal and state tax policies; the effect of land use, environment and other governmental regulations; legal proceedings and disputes; risks relating to any unforeseen changes to or effects on liabilities, future capital expenditures, revenues, expenses, earnings, synergies, indebtedness, financial condition, losses and future prospects; changes in accounting principles; risks related to unauthorized access to our computer systems, theft of our customers’ confidential information or other forms of cyber-attack; our relationship, and actual and potential conflicts of interest, with Starwood Capital Group or its affiliates; and additional factors discussed under the sections captioned “Risk Factors” included in our annual and quarterly reports filed with the Securities and Exchange Commission.  The foregoing list is not exhaustive.  New risk factors may emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business.

Investor Relations Contact: Media Contact:
   
Chris Martin, TRI Pointe Group Carol Ruiz, cruiz@newgroundco.com, 310-437-0045
Drew Mackintosh, Mackintosh Investor Relations  
InvestorRelations@TRIPointeGroup.com, 949-478-8696  



KEY OPERATIONS AND FINANCIAL DATA
(dollars in thousands)
(unaudited)
       
  Three Months Ended December 31,   Year Ended December 31,
  2016   2015   Change   2016   2015   Change
Operating Data:                      
Home sales revenue $ 770,703     $ 847,409     $ (76,706 )   $ 2,329,336     $ 2,291,264     $ 38,072  
Homebuilding gross margin $ 153,936     $ 187,824     $ (33,888 )   $ 493,009     $ 482,488     $ 10,521  
Homebuilding gross margin % 20.0 %   22.2 %   (2.2 )%   21.2 %   21.1 %   0.1 %
Adjusted homebuilding gross margin %* 22.2 %   24.2 %   (2.0 )%   23.4 %   23.1 %   0.3 %
Land and lot sales revenue $ 2,068     $ 26,918     $ (24,850 )   $ 72,272     $ 101,284     $ (29,012 )
Land and lot gross margin $ 1,674     $ 9,153     $ (7,479 )   $ 54,905     $ 66,195     $ (11,290 )
Land and lot gross margin % 80.9 %   34.0 %   46.9 %   76.0 %   65.4 %   10.6 %
SG&A expense $ 70,937     $ 71,605     $ (668 )   $ 251,373     $ 233,713     $ 17,660  
SG&A expense as a % of home sales revenue 9.2 %   8.4 %   0.8 %   10.8 %   10.2 %   0.6 %
Net income available to common stockholders $ 57,861     $ 85,072     $ (27,211 )   $ 195,171     $ 205,461     $ (10,290 )
Adjusted EBITDA* $ 107,425     $ 155,196     $ (47,771 )   $ 370,371     $ 388,121     $ (17,750 )
Interest incurred $ 18,276     $ 15,185     $ 3,091     $ 68,306     $ 60,964     $ 7,342  
Interest in cost of home sales $ 16,458     $ 16,759     $ (301 )   $ 51,111     $ 44,299     $ 6,812  
                       
Other Data:                      
Net new home orders 909     753     156     4,248     4,181     67  
New homes delivered 1,427     1,453     (26 )   4,211     4,057     154  
Average selling price of homes delivered $ 540     $ 583     $ (43 )   $ 553     $ 565     $ (12 )
Average selling communities 122.8     112.8     10.0     118.3     115.9     2.4  
Selling communities at end of period 124     104     20     N/A       N/A       N/A    
Cancellation rate 20 %   21 %   (1 )%   15 %   16 %   (1 )%
Backlog (estimated dollar value) $ 661,146     $ 697,334     $ (36,188 )            
Backlog (homes) 1,193     1,156     37              
Average selling price in backlog $ 554     $ 603     $ (49 )            
                       
  December 31,
 2016
  December 31,
 2015
  Change            
Balance Sheet Data:                      
Cash and cash equivalents $ 208,657     $ 214,485     $ (5,828 )            
Real estate inventories $ 2,910,627     $ 2,519,273     $ 391,354              
Lots owned or controlled 28,309     27,602     707              
Homes under construction (1) 1,605     1,531     74              
Homes completed, unsold 405     351     54              
Debt $ 1,382,033     $ 1,170,505     $ 211,528              
Stockholders' equity $ 1,829,447     $ 1,664,683     $ 164,764              
Book capitalization $ 3,211,480     $ 2,835,188     $ 376,292              
Ratio of debt-to-capital 43.0 %   41.3 %   1.7 %            
Ratio of net debt-to-capital* 39.1 %   36.5 %   2.6 %            
                                                                             
                           
(1)  Homes under construction included 65 and 69 models at December 31, 2016 and December 31, 2015, respectively.
*      See “Reconciliation of Non-GAAP Financial Measures”



CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 
  December 31,
 2016
  December 31,
 2015
Assets (unaudited)    
Cash and cash equivalents $ 208,657     $ 214,485  
Receivables 82,500     43,710  
Real estate inventories 2,910,627     2,519,273  
Investments in unconsolidated entities 17,546     18,999  
Goodwill and other intangible assets, net 161,495     162,029  
Deferred tax assets, net 123,223     130,657  
Other assets 60,592     48,918  
Total assets $ 3,564,640     $ 3,138,071  
       
Liabilities      
Accounts payable $ 70,252     $ 64,840  
Accrued expenses and other liabilities 263,845     216,263  
Unsecured revolving credit facility 200,000     299,392  
Seller financed loans 13,726     2,434  
Senior notes 1,168,307     868,679  
Total liabilities 1,716,130     1,451,608  
       
Commitments and contingencies      
       
Equity      
Stockholders' Equity:      
Preferred stock, $0.01 par value, 50,000,000 shares authorized; shares issued and outstanding as of December 31, 2016 and December 31, 2015, respectively      
Common stock, $0.01 par value, 500,000,000 shares authorized; 158,626,229 and 161,813,750 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively 1,586     1,618  
Additional paid-in capital 880,822     911,197  
Retained earnings 947,039     751,868  
Total stockholders' equity 1,829,447     1,664,683  
Noncontrolling interests 19,063     21,780  
Total equity 1,848,510     1,686,463  
Total liabilities and equity $ 3,564,640     $ 3,138,071  



CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
       
  Three Months Ended December 31,   Year Ended December 31,
  2016   2015   2016   2015
Homebuilding:              
Home sales revenue $ 770,703     $ 847,409     $ 2,329,336     $ 2,291,264  
Land and lot sales revenue 2,068     26,918     72,272     101,284  
Other operations revenue 524     5,388     2,314     7,601  
Total revenues 773,295     879,715     2,403,922     2,400,149  
Cost of home sales 616,767     659,585     1,836,327     1,808,776  
Cost of land and lot sales 394     17,765     17,367     35,089  
Other operations expense 523     2,656     2,247     4,360  
Sales and marketing 37,282     37,259     127,903     116,217  
General and administrative 33,655     34,346     123,470     117,496  
Restructuring charges 171     599     649     3,329  
Homebuilding income from operations 84,503     127,505     295,959     314,882  
Equity in (loss) income of unconsolidated entities (2 )   1,542     179     1,460  
Other income, net 25     586     312     858  
Homebuilding income before income taxes 84,526     129,633     296,450     317,200  
Financial Services:              
Revenues 458     528     1,220     1,010  
Expenses 70     50     253     181  
Equity in income of unconsolidated entities 1,564     1,233     4,810     1,231  
Financial services income before income taxes 1,952     1,711     5,777     2,060  
Income before income taxes 86,478     131,344     302,227     319,260  
Provision for income taxes (28,393 )   (45,991 )   (106,094 )   (112,079 )
Net income 58,085     85,353     196,133     207,181  
Net income attributable to noncontrolling interests (224 )   (281 )   (962 )   (1,720 )
Net income available to common stockholders $ 57,861     $ 85,072     $ 195,171     $ 205,461  
Earnings per share              
Basic $ 0.36     $ 0.53     $ 1.21     $ 1.27  
Diluted $ 0.36     $ 0.52     $ 1.21     $ 1.27  
Weighted average shares outstanding              
Basic 159,082,568     161,813,750     160,859,782     161,692,152  
Diluted 159,789,940     162,379,826     161,381,499     162,319,758  



MARKET DATA BY REPORTING SEGMENT & STATE
(dollars in thousands)
(unaudited)
       
  Three Months Ended December 31,   Year Ended December 31,
  2016   2015   2016   2015
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
New Homes Delivered:                              
Maracay Homes 225     $ 417     173     $ 399     625     $ 408     480     $ 387  
Pardee Homes 392     467     406     591     1,220     548     1,130     536  
Quadrant Homes 96     616     114     475     383     541     411     440  
Trendmaker Homes 139     506     145     511     474     506     539     511  
TRI Pointe Homes 411     658     449     696     1,089     664     1,060     730  
Winchester Homes 164     570     166     590     420     560     437     616  
Total 1,427     $ 540     1,453     $ 583     4,211     $ 553     4,057     $ 565  
                               
                               
  Three Months Ended December 31,   Year Ended December 31,
  2016   2015   2016   2015
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
  New
Homes
Delivered
  Average
Sales
Price
New Homes Delivered:                              
California 596     $ 601     654     $ 717     1,689     $ 669     1,623     $ 707  
Colorado 42     579     65     512     160     524     193     496  
Maryland 96     544     89     467     265     518     209     502  
Virginia 68     608     77     732     155     631     228     720  
Arizona 225     417     173     399     625     408     480     387  
Nevada 165     433     136     368     460     386     374     368  
Texas 139     506     145     511     474     506     539     511  
Washington 96     616     114     475     383     541     411     440  
Total 1,427     $ 540     1,453     $ 583     4,211     $ 553     4,057     $ 565  


MARKET DATA BY REPORTING SEGMENT & STATE, continued
(unaudited)
       
  Three Months Ended December 31,   Year Ended December 31,
  2016   2015   2016   2015
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
Net New Home Orders:                              
Maracay Homes 144     18.0     83     15.0     670     18.0     578     16.6  
Pardee Homes 270     26.0     232     24.0     1,206     23.6     1,186     23.1  
Quadrant Homes 67     6.5     88     10.5     341     8.0     441     10.7  
Trendmaker Homes 116     30.8     76     22.3     501     27.8     457     25.1  
TRI Pointe Homes 214     28.5     172     27.5     1,097     27.6     1,107     26.9  
Winchester Homes 98     13.0     102     13.5     433     13.3     412     13.5  
Total 909     122.8     753     112.8     4,248     118.3     4,181     115.9  
                               
                               
  Three Months Ended December 31,   Year Ended December 31,
  2016   2015   2016   2015
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
  Net New
Home
Orders
  Average
Selling
Communities
Net New Home Orders:                              
California 357     38.8     285     34.9     1,690     35.4     1,706     33.5  
Colorado 28     4.5     25     5.8     135     4.8     193     6.2  
Maryland 76     8.0     68     6.5     290     7.0     233     6.0  
Virginia 22     5.0     34     7.0     143     6.3     179     7.5  
Arizona 144     18.0     83     15.0     670     18.0     578     16.6  
Nevada 99     11.2     94     10.8     478     11.0     394     10.3  
Texas 116     30.8     76     22.3     501     27.8     457     25.1  
Washington 67     6.5     88     10.5     341     8.0     441     10.7  
Total 909     122.8     753     112.8     4,248     118.3     4,181     115.9  


MARKET DATA BY REPORTING SEGMENT & STATE, continued
(dollars in thousands)
(unaudited)
       
  As of December 31, 2016   As of December 31, 2015
  Backlog
Units
  Backlog
Dollar
Value
  Average
Sales
Price
  Backlog
Units
  Backlog
Dollar
Value
  Average
Sales
Price
Backlog:                      
Maracay Homes 248     $ 114,203     $ 460     203     $ 82,171     $ 405  
Pardee Homes 260     134,128     516     274     200,588     732  
Quadrant Homes 101     68,461     678     143     72,249     505  
Trendmaker Homes 163     85,579     525     136     72,604     534  
TRI Pointe Homes 298     180,012     604     290     192,097     662  
Winchester Homes 123     78,763     640     110     77,625     706  
Total 1,193     $ 661,146     $ 554     1,156     $ 697,334     $ 603  
                       
                       
  As of December 31, 2016   As of December 31, 2015
  Backlog
Units
  Backlog
Dollar
Value
  Average
Sales
Price
  Backlog
Units
  Backlog
Dollar
Value
  Average
Sales
Price
Backlog:                      
California 402     $ 237,748     $ 591     401     $ 321,753     $ 802  
Colorado 59     35,764     606     84     41,026     488  
Maryland 102     60,904     597     77     49,760     646  
Virginia 21     17,859     850     33     27,865     844  
Arizona 248     114,203     460     203     82,171     405  
Nevada 97     40,628     419     79     29,906     379  
Texas 163     85,579     525     136     72,604     534  
Washington 101     68,461     678     143     72,249     505  
Total 1,193     $ 661,146     $ 554     1,156     $ 697,334     $ 603  


MARKET DATA BY REPORTING SEGMENT & STATE, continued
(unaudited)
       
  December 31,
 2016
  December 31,
 2015
Lots Owned or Controlled(1):      
Maracay Homes 2,053     1,811  
Pardee Homes 16,912     16,679  
Quadrant Homes 1,582     1,274  
Trendmaker Homes 1,999     1,858  
TRI Pointe Homes 3,479     3,628  
Winchester Homes 2,284     2,352  
Total 28,309     27,602  
       
       
  December 31,
 2016
  December 31,
 2015
Lots Owned or Controlled(1):      
California 17,245     17,527  
Colorado 918     876  
Maryland 1,779     1,716  
Virginia 505     636  
Arizona 2,053     1,811  
Nevada 2,228     1,904  
Texas 1,999     1,858  
Washington 1,582     1,274  
Total 28,309     27,602  
       
       
  December 31,
 2016
  December 31,
 2015
Lots by Ownership Type:      
Lots owned 25,283     24,733  
Lots controlled (1) 3,026     2,869  
Total 28,309     27,602  
                                     
(1)  As of December 31, 2016 and December 31, 2015, lots controlled included lots that were under land option contracts or purchase contracts.


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited)

In this press release, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating the Company’s operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.

The following tables reconcile homebuilding gross margin percentage, as reported and prepared in accordance with GAAP, to the non-GAAP measure adjusted homebuilding gross margin percentage. We believe this information is meaningful as it isolates the impact that leverage has on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion.

  Three Months Ended December 31,
  2016   %   2015   %
  (dollars in thousands)
Home sales revenue $ 770,703     100.0 %   $ 847,409     100.0 %
Cost of home sales 616,767     80.0 %   659,585     77.8 %
Homebuilding gross margin 153,936     20.0 %   187,824     22.2 %
Add: interest in cost of home sales 16,458     2.1 %   16,759     2.0 %
Add: impairments and lot option abandonments 792     0.1 %   92     0.0 %
Adjusted homebuilding gross margin $ 171,186     22.2 %   $ 204,675     24.2 %
Homebuilding gross margin percentage 20.0 %       22.2 %      
Adjusted homebuilding gross margin percentage 22.2 %                       24.2 %    


  Year Ended December 31,
  2016   %   2015   %
  (dollars in thousands)
Home sales revenue $ 2,329,336     100.0 %   $ 2,291,264     100.0 %
Cost of home sales 1,836,327     78.8 %   1,808,776     78.9 %
Homebuilding gross margin 493,009     21.2 %   482,488     21.1 %
Add: interest in cost of home sales 51,111     2.2 %   44,299     1.9 %
Add: impairments and lot option abandonments 1,470     0.1 %   1,685     0.1 %
Adjusted homebuilding gross margin $ 545,590     23.4 %   $ 528,472     23.1 %
Homebuilding gross margin percentage 21.2 %       21.1 %    
Adjusted homebuilding gross margin percentage 23.4 %       23.1 %    

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)

The following table reconciles the Company’s ratio of debt-to-capital to the non-GAAP ratio of net debt-to-capital. We believe that the ratio of net debt-to-capital is a relevant financial measure for management and investors to understand the leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.

  December 31, 2016   December 31, 2015
Unsecured revolving credit facility $ 200,000     $ 299,392  
Seller financed loans 13,726     2,434  
Senior notes 1,168,307     868,679  
Total debt 1,382,033     1,170,505  
Stockholders’ equity 1,829,447     1,664,683  
Total capital $ 3,211,480     $ 2,835,188  
Ratio of debt-to-capital(1) 43.0 %   41.3 %
       
Total debt $ 1,382,033     $ 1,170,505  
Less: Cash and cash equivalents (208,657 )   (214,485 )
Net debt 1,173,376     956,020  
Stockholders’ equity 1,829,447     1,664,683  
Total capital $ 3,002,823     $ 2,620,703  
Ratio of net debt-to-capital(2) 39.1 %   36.5 %
                                     
(1)  The ratio of debt-to-capital is computed as the quotient obtained by dividing debt by the sum of debt plus equity.
(2)  The ratio of net debt-to-capital is computed as the quotient obtained by dividing net debt (which is debt less cash and cash equivalents) by the sum of net debt plus equity.
 


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)

(unaudited)

The following table calculates the non-GAAP measures of EBITDA and Adjusted EBITDA and reconciles those amounts to net income, as reported and prepared in accordance with GAAP.  EBITDA means net income before (a) interest expense, (b) income taxes, (c) depreciation and amortization, (d) expensing of previously capitalized interest included in costs of home sales and (e) amortization of stock-based compensation. Adjusted EBITDA means EBITDA before (f) impairment and lot option abandonments and (g) restructuring charges. Other companies may calculate EBITDA and Adjusted EBITDA (or similarly titled measures) differently. We believe EBITDA and Adjusted EBITDA are useful measures of the Company’s ability to service debt and obtain financing.

  Three Months Ended December 31,   Year Ended December 31,
  2016   2015   2016   2015
  (in thousands)
Net income available to common stockholders $ 57,861     $ 85,072     $ 195,171     $ 205,461  
Interest expense:              
Interest incurred 18,276     15,185     68,306     60,964  
Interest capitalized (18,276 )   (15,185 )   (68,306 )   (60,964 )
Amortization of interest in cost of sales 16,480     17,095     51,288     45,114  
Provision for income taxes 28,393     45,991     106,094     112,079  
Depreciation and amortization 764     2,859     3,087     8,273  
Amortization of stock-based compensation 2,964     3,399     12,612     11,935  
EBITDA 106,462     154,416     368,252     382,862  
Impairments and lot abandonments 792     181     1,470     1,930  
Restructuring charges 171     599     649     3,329  
Adjusted EBITDA $ 107,425     $ 155,196     $ 370,371     $ 388,121  

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