- Diluted EPS of $0.27 per Share -
- Total Revenues Increased 105% to $178
million -
- Backlog Dollar Value up 37% to $290
million -
The New Home Company Inc. (NYSE: NWHM) today announced results
for the 2016 third quarter.
Third Quarter 2016 Highlights Compared to Third Quarter
2015
- Net income up 25% to $5.5 million, or
$0.27 per diluted share vs. $4.4 million, or $0.27 per diluted
share
- Total revenues of $177.9 million vs.
$87.0 million, up 105%
- Home sales revenue of $125.1 million,
an increase of 116%
- Net new home orders up 5%
- Backlog dollar value up 37% to $290.2
million
- Community count up 30% to 13 vs.
10
“The New Home Company delivered solid top and bottom line growth
in the third quarter of 2016, while laying the foundation for
future success by focusing more of our resources on wholly owned
operations,” said New Home Company Chief Executive Officer Larry
Webb. “We have seen encouraging trends in some of our newer
communities, most notably along the Newport Coast, where order
activity and pricing at our Crystal Cove communities have exceeded
our expectations." Mr. Webb continued, "As we had previously
stated, our earnings for 2016 would be heavily weighted to the back
half of the year. Given our performance this quarter and the size
of our backlog at the end of the period, we believe that this will
indeed be the case. The New Home Company has earned a reputation
with both consumers and land sellers for delivering a superior home
buying experience, and I'm confident that this reputation will
carry us to greater success in the future.”
Third Quarter 2016 Operating Results
Total revenues for the 2016 third quarter were $177.9 million,
compared to $87.0 million in the prior year period. Net income
attributable to the Company was $5.5 million, or $0.27 per diluted
share, compared to net income of $4.4 million, or $0.27 per diluted
share, in the prior year period. The year-over-year increase in net
income was primarily attributable to a 105% increase in total
revenues, a 480 basis point reduction in selling, general and
administrative (“SG&A”) expenses as a percentage of home sales
revenue, which was partially offset by a $3.6 million reduction in
joint venture income. The increase in revenues and improvement in
our SG&A leverage is consistent with the shift in focus to our
wholly owned operations.
Wholly Owned Projects
Home sales revenue for the 2016 third quarter was $125.1
million, compared to $57.9 million in the prior year period. The
increase in home sales revenue was driven primarily by a 100%
increase in deliveries and an 8% increase in average selling price
to $2.1 million.
Homebuilding gross margin percentage was 15.5%, compared to
15.8% in the prior year period, and was up 350 basis points as
compared to the 2016 second quarter. The change in gross margin as
compared to the prior year was due to a change in mix and was
partially offset by a 90 basis point benefit from a warranty
accrual adjustment made during the 2016 third quarter. The
sequential increase in gross margin was also impacted by mix,
including higher gross margins from our Fiano community in Newport
Coast, CA and the third quarter warranty adjustment. Adjusted
homebuilding gross margin percentage, which excludes interest in
cost of home sales, was flat with the prior year period at
16.5%*.
Our SG&A expense ratio as a percentage of home sales revenue
was 10.0% versus 14.8% in the prior year period. The 480 basis
point improvement in the SG&A ratio was largely attributable to
a 116% increase in home sales revenue, which was driven by the
significant increase in new home deliveries resulting from the
growth in our wholly owned operations.
New home orders were up 5% to 64 homes, compared to 61 homes in
the prior year period. The Company's monthly sales absorption pace
was 1.7 sales per average selling community as compared to 2.3 in
the prior year period. The Company increased its selling
communities by 30%, ending the quarter with 13 communities,
compared to 10 as of the end of the prior year quarter.
The dollar value of the Company's wholly owned backlog at the
end of the 2016 third quarter was up 37% year-over-year to $290.2
million and totaled 129 homes, compared to $211.6 million and 96
homes in the prior year period. The average selling price of homes
in backlog was $2.2 million, which was relatively consistent with
prior year.
Fee Building Projects
Fee building revenue for the 2016 third quarter increased 81% to
$52.8 million due primarily to an increase in fee building
construction activity. Fee building gross margin was $1.9 million,
or 3.7%, compared to $2.1 million, or 7.1%, in the prior year
period. The reduction in fee building gross margin percentage was
largely due to a decrease in management fees received from joint
ventures from $1.5 million during the 2016 third quarter compared
to $3.3 million in the prior year period. The decrease in
management fees from JVs was primarily the result of fewer
deliveries from JV communities.
Unconsolidated Joint Ventures
(JVs)
The Company’s share of joint venture income for the 2016 third
quarter was $0.5 million, compared to $4.1 million in the prior
year period. The decrease in joint venture income was largely
driven by a 70% reduction in total JV revenues, which was primarily
the result of a 68% decrease in JV deliveries and a 43% reduction
in the average selling price of homes delivered.
The following sets forth supplemental information about the
Company’s JVs. Such information is not included in the Company’s
financial data for GAAP purposes but is provided for informational
purposes.
Total revenue of the JVs was $34.5 million and net income was
$2.4 million, compared to $115.4 million and $20.9 million in the
prior year period, respectively. Home sales revenue of the JVs was
$19.7 million, compared to $106.5 million in the prior year period.
Homebuilding gross margin percentage generated by the JVs during
the quarter increased to 26.3%, compared to 24.8% in the prior year
period.
At the end of the 2016 third quarter, the JVs had eight selling
communities, down from 11 at the end of the prior year period. As a
result of the 27% decline in JV selling communities, new home
orders from JVs for the 2016 third quarter decreased 39% to 35
homes as compared to 57 homes in the prior year period. In
addition, the dollar value of homes in backlog from unconsolidated
JVs at the end of the 2016 third quarter was down 59% to $85.3
million from 88 homes, compared to $205.6 million from 173 homes in
the prior year period.
Balance Sheet and Liquidity
As of September 30, 2016, the Company had real estate
inventories totaling $383.4 million, of which $260.9 million
represented work-in-process and completed homes (including models),
$76.2 million in land and land under development, and $46.2 million
in land deposits and pre-acquisition costs. The Company owned or
controlled 1,584 lots through its wholly owned operations
(excluding fee building and joint venture lots), of which 958 lots
were controlled or under option. As of September 30, 2016, the
Company had $74.3 million in liquidity, which consisted of $44.3
million in cash and cash equivalents and $30.1 million in
availability under its revolving credit facility. The Company ended
the 2016 third quarter with $233.9 million in total outstanding
debt, a debt-to-capital ratio of 50.4% and a net debt-to-capital
ratio of 45.1%*.
Guidance
The Company updated its full year guidance for 2016 as
follows:
- Home sales revenue of $470 - $500
million
- Fee building revenue of $160 - $180
million
- Income from unconsolidated joint
ventures of $7 - $8 million
- Wholly owned active year-end community
count of 13
- Joint venture active year-end community
count of 9
Conference Call Details
The Company will host a conference call and webcast for
investors and other interested parties beginning at 12:00 p.m.
Eastern Time on Friday, November 4, 2016 to review third quarter
results, discuss recent events and conduct a question-and-answer
period. The conference call will be available in the Investors
section of the Company’s website at www.NWHM.com. To listen to the
broadcast live, go to the site approximately 15 minutes prior to
the scheduled start time in order to register, download and install
any necessary audio software. To participate in the telephone
conference call, dial 1-877-407-0789 (domestic) or 1-201-689-8562
(international) at least five minutes prior to the start time.
Replays of the conference call will be available through December
4, 2016 and can be accessed by dialing 1-844-512-2921 (domestic) or
1-412-317-6671 (international) and entering the pass code
13646621.
About The New Home Company
NWHM is a new generation homebuilder focused on the design,
construction and sale of innovative and consumer-driven homes in
major metropolitan areas within select growth markets in California
and Arizona, including coastal Southern California, the San
Francisco Bay area, metro Sacramento and the greater Phoenix area.
The Company is headquartered in Aliso Viejo, California. For more
information about the Company and its new home developments, please
visit the Company's website at www.NWHM.com.
* Adjusted homebuilding gross margin percentage and net
debt-to-capital ratio are non-GAAP measures. A reconciliation of
the appropriate GAAP measure to each of these measures is included
in the accompanying financial data. See "Reconciliation of Non-GAAP
Financial Measures."
Forward-Looking Statements
Various statements contained in this press release, including
those that express a belief, anticipation, 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, community counts and
openings and our future production, our ability to execute our
strategic growth objectives, gross margins, revenues, projected
results, income, earnings per share and capital spending. Our
forward-looking statements are generally accompanied by words such
as “estimate,” “project,” “predict,” “believe,” “expect,” “intend,”
“anticipate,” “potential,” “plan,” “goal,” “will,” “guidance,” or
other words that convey the uncertainty of future events or
outcomes. The forward-looking statements in this press release
speak only as of the date of this release, and we disclaim any
obligation to update these statements unless required by law, and
we caution you not to rely on them unduly. We have based these
forward-looking statements on our current expectations and
assumptions about future events. While our management considers
these expectations and assumptions to be reasonable, they 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: economic changes either
nationally or in the markets in which we operate, including
declines in employment, volatility of mortgage interest rates and
inflation; a downturn in the homebuilding industry; changes in
sales conditions, including home prices, in the markets where we
build homes, volatility and uncertainty in the credit markets and
broader financial markets; our business and investment strategy;
availability of land to acquire and our ability to acquire such
land on favorable terms or at all; our liquidity and availability,
terms and deployment of capital; shortages of or increased prices
for labor, land or raw materials used in housing construction;
delays in land development or home construction resulting from
adverse weather conditions or other events outside our control;
issues concerning our joint venture partnerships; the cost and
availability of insurance and surety bonds; changes in, or the
failure or inability to comply with, governmental laws and
regulations; the timing of receipt of regulatory approvals and the
opening of projects; the degree and nature of competition; our
leverage and debt service obligations; the impact of recent
accounting standards; restrictive covenants relating to our
operations in our current of future financing arrangements;
availability of qualified personnel and our ability to retain our
key personnel; and additional factors discussed under the sections
captioned “Risk Factors” included in our annual report and other
reports filed with the Securities and Exchange Commission. The
Company reserves the right to make such updates from time to time
by press release, periodic report or other method of public
disclosure without the need for specific reference to this press
release. No such update shall be deemed to indicate that other
statements not addressed by such update remain correct or create an
obligation to provide any other updates.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
2016 2015 2016 2015
(Dollars in thousands, except per share amounts)
Revenues:
Home sales $ 125,142 $ 57,878 $ 246,281 $ 133,315 Fee building,
including management fees from unconsolidated joint ventures of
$1,539, $3,255, $6,251 and $8,356, respectively 52,761
29,099 125,726 102,158 177,903 86,977
372,007 235,473
Expenses: Cost of homes
sales 105,799 48,741 211,859 112,747 Cost of fee building 50,832
27,028 120,063 96,014 Selling and marketing 6,055 3,442 14,577
7,531 General and administrative 6,468 5,105 17,476
13,078 169,154 84,316 363,975
229,370 Equity in net income of unconsolidated joint
ventures 488 4,056 4,428 9,180 Other expense, net (195 ) (123 )
(590 ) (843 ) Income before income taxes 9,042 6,594 11,870 14,440
Provision for income taxes (3,465 ) (2,249 ) (4,718 ) (5,275 ) Net
income 5,577 4,345 7,152 9,165 Net (income) loss attributable to
noncontrolling interest (30 ) 99 90 297 Net
income attributable to The New Home Company Inc. $ 5,547 $
4,444 $ 7,242 $ 9,462 Earnings per
share attributable to The New Home Company Inc. Basic $ 0.27 $ 0.27
$ 0.35 $ 0.57 Diluted $ 0.27 $ 0.27 $ 0.35 $ 0.57 Weighted average
shares outstanding: Basic 20,711,952 16,516,546 20,675,233
16,507,736 Diluted 20,797,731 16,733,805 20,764,480 16,660,673
CONSOLIDATED BALANCE SHEETS
September 30, December
31, 2016 2015
(Dollars in thousands, except per
shareamounts)
(Unaudited)
Assets Cash and cash equivalents $ 44,254 $
45,874 Restricted cash 970 380 Contracts and accounts receivable
21,379 23,960 Due from affiliates 842 979 Real estate inventories
383,392 200,636 Investment in unconsolidated joint ventures 42,489
60,572 Other assets 23,497 18,869 Total assets $ 516,823
$ 351,270
Liabilities and equity Accounts
payable $ 38,850 $ 26,371 Accrued expenses and other liabilities
14,067 19,827 Due to affiliates — 293 Unsecured revolving credit
facility 229,924 74,924 Other notes payable 4,000 8,158
Total liabilities 286,841 129,573 Equity: Stockholders'
equity: Preferred stock, $0.01 par value, 50,000,000 shares
authorized, no shares outstanding — — Common stock, $0.01 par
value, 500,000,000 shares authorized, 20,711,952 and 20,543,130,
shares issued and outstanding as of September 30, 2016 and December
31, 2015, respectively 207 205 Additional paid-in capital 196,293
194,437 Retained earnings 33,375 26,133 Total The New Home
Company Inc. stockholders' equity 229,875 220,775 Noncontrolling
interest in subsidiary 107 922 Total equity 229,982
221,697 Total liabilities and equity $ 516,823 $ 351,270
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(Unaudited)
Nine Months Ended September 30,
2016 2015 (Dollars in thousands)
Operating
activities: Net income $ 7,152 $ 9,165 Adjustments to reconcile
net income to net cash used in operating activities: Deferred taxes
1,181 (4,439 ) Amortization of equity based compensation 2,602
2,725 Tax valuation adjustment from stock-based compensation 97 —
Distributions of earnings from unconsolidated joint ventures 1,931
10,514 Equity in net income of unconsolidated joint ventures (4,428
) (9,180 ) Deferred profit from unconsolidated joint ventures 541
(1,448 ) Depreciation 381 349 Abandoned project costs 498 551 Net
changes in operating assets and liabilities: Restricted cash 11 146
Contracts and accounts receivable 2,717 2,080 Due from affiliates
91 1,873 Real estate inventories (159,778 ) (100,809 ) Other assets
(4,894 ) 1,050 Accounts payable 11,927 7,665 Accrued expenses and
other liabilities (6,430 ) (3,206 ) Due to affiliates (293 ) —
Net cash used in operating activities (146,694 ) (82,964 )
Investing activities: Purchases of property and equipment
(379 ) (289 ) Cash assumed from joint venture at consolidation
2,009 — Contributions to unconsolidated joint ventures (7,707 )
(7,967 ) Distributions of capital from unconsolidated joint
ventures 13,977 25,682 Net cash provided by investing
activities 7,900 17,426
Financing activities:
Borrowings from credit facility 193,000 87,504 Repayments of credit
facility (38,000 ) (29,581 ) Borrowings from other notes payable
343 — Repayments of other notes payable (15,636 ) — Payment of debt
issuance costs (1,064 ) — Cash distributions to noncontrolling
interest in subsidiary (725 ) (822 ) Minimum tax withholding paid
on behalf of employees for stock awards (647 ) (248 ) Tax valuation
adjustment from stock-based compensation (97 ) — Net cash
provided by financing activities 137,174 56,853 Net
decrease in cash and cash equivalents (1,620 ) (8,685 ) Cash and
cash equivalents – beginning of period 45,874 44,058
Cash and cash equivalents – end of period $ 44,254 $ 35,373
KEY OPERATIONS AND FINANCIAL
DATA
(Unaudited)
New Home Deliveries: Three Months Ended
September 30, 2016 2015 %
Change Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
(Dollars in thousands) Southern California 36 $ 105,789 $ 2,939 15
$ 40,354 $ 2,690 140 % 162 % 9 % Northern California 24
19,353 806 15 17,524 1,168 60 %
10 % (31 )% Total 60 $ 125,142 $ 2,086 30
$ 57,878 $ 1,929 100 % 116 % 8 %
Nine Months Ended September 30, 2016 2015 %
Change Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
(Dollars in thousands) Southern California 67 $ 189,996 $ 2,836 42
$ 106,049 $ 2,525 60 % 79 % 12 % Northern California 64
56,285 879 29 27,266 940 121 %
106 % (6 )% Total 131 $ 246,281 $ 1,880 71
$ 133,315 $ 1,878 85 % 85 % — %
Net New Home Orders: Three Months Ended September
30, Nine Months Ended September 30, 2016
2015 % Change 2016
2015 % Change Southern California 39 32 22 %
105 68 54 % Northern California 25 29 (14 )% 79 58
36 % 64 61 5 % 184 126 46 %
Active Communities: September 30, 2016
2015 % Change Southern California 8 4 100 % Northern
California 5 6 (17 )% 13 10 30 %
KEY OPERATIONS AND FINANCIAL DATA
(continued)
(Unaudited)
Backlog:
September 30, 2016 2015
% Change Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
Homes
DollarValue
AveragePrice
(Dollars in thousands) Southern California 92 $ 262,224 $ 2,850 59
$ 172,380 $ 2,922 56 % 52 % (2 )% Northern California 37
27,971 756 37 39,260 1,061 — %
(29 )% (29 )% Total 129 $ 290,195 $ 2,250 96
$ 211,640 $ 2,205 34 % 37 % 2 %
September 30, 2016
2015 % Change Lots Owned
Southern California 287 135 113 % Northern California 339
292 16 % Total 626 427 47 %
Lots
Controlled (1) Southern California 693 569 22 % Northern
California 265 80 231 % Total 958 649
48 %
Lots Owned and Controlled - Wholly Owned 1,584 1,076 47
% Fee Building (2) 981 1,498 (35 )%
Total Lots
Owned and Controlled 2,565 2,574 — %
(1)
Includes lots that we control under
purchase and sale agreements or option agreements subject to
customary conditions and have not yet closed. There can
be no assurance that such acquisitions will occur.
(2)
Subject to agreements with property
owners.
KEY OPERATIONS AND FINANCIAL DATA -
UNCONSOLIDATED JOINT VENTURES
(Dollars in thousands)
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30, 2016
2015 % Change 2016 2015
% Change Operating Data: Home sales revenue $
19,659 $ 106,485 (82 )% $ 105,558 $ 200,325 (47 )% Homebuilding
gross margin $ 5,161 $ 26,408 (80 )% $ 25,899 $ 44,797 (42 )%
Homebuilding gross margin % 26.3 % 24.8 % NA 24.5 % 22.4 % NA
Adjusted homebuilding gross margin %** 27.7 % 25.8 % NA 26.0 % 23.7
% NA Land sales revenue $ 14,805 $ 8,885 67 % $ 40,967 $ 54,455 (25
)% Net income $ 2,417 $ 20,906 (88 )% $ 16,378 $ 39,310 (58 )%
Interest in cost of home sales $ 287 $ 1,091 (74 )% $ 1,499 $ 2,654
(44 )%
Other Data: New home orders 35 57 (39 )% 111
268 (59 )% New homes delivered 23 71 (68 )% 123 170 (28 )% Average
selling price of homes delivered $ 855 $ 1,500 (43 )% $ 858 $ 1,178
(27 )% Selling communities at end of period 8 11 (27 )%
Backlog homes (dollar value) $ 85,317 $ 205,604 (59 )% Backlog
(homes) 88 173 (49 )% Average sales price of backlog $ 970 $ 1,188
(18 )% Backlog lots (dollar value) (1) $ 5,416 $ 51,662 (90 )%
September 30, 2016
2015 % Change Lots Owned and
Controlled: Homebuilding Lots owned 589 776 (24 )% Lots
controlled (2) 72 68 6 % Homebuilding Total 661 844
(22 )%
Land Development Lots owned 2,180 2,420 (10 )% Lots
controlled (2) 235 235 — % Land Development Total
2,415 2,655 (9 )% Total 3,076 3,499 (12
)% (1) Amounts include $0 and $18.1 million of
backlog dollar value related to purchase contracts between an
unconsolidated joint venture and the Company as of September 30,
2016 and 2015, respectively. (2) Consists of lots that are under
purchase and sale agreements. ** See "Reconciliation of
Non-GAAP Financial Measures" beginning on page 11.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES(Unaudited)
In this earnings release, we utilize certain 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 leverage has on homebuilding gross margin and provides
investors better comparisons with our competitors, who adjust gross
margins in a similar fashion.
Three months ended September 30,
Nine months ended September 30, 2016 %
2015 % 2016 %
2015 % (Dollars in thousands)
Homebuilding Home sales revenue $ 125,142 100.0 % $ 57,878
100.0 % $ 246,281 100.0 % $ 133,315 100.0 % Cost of home sales
105,799 84.5 % 48,741 84.2 % 211,859 86.0 %
112,747 84.6 % Homebuilding gross margin 19,343 15.5 % 9,137
15.8 % 34,422 14.0 % 20,568 15.4 % Add: Interest in cost of home
sales 1,306 1.0 % 396 0.7 % 3,017 1.2 % 876
0.7 % Adjusted homebuilding gross margin $ 20,649
16.5 % $ 9,533 16.5 % $ 37,439 15.2 % $ 21,444
16.1 %
Unconsolidated Joint Ventures - Homebuilding
Home sales revenue $ 19,659 100.0 % $ 106,485 100.0 % $ 105,558
100.0 % $ 200,325 100.0 % Cost of home sales 14,498 73.7 %
80,077 75.2 % 79,659 75.5 % 155,528 77.6 %
Homebuilding gross margin 5,161 26.3 % 26,408 24.8 % 25,899 24.5 %
44,797 22.4 % Add: Interest in cost of home sales 287 1.4 %
1,091 1.0 % 1,499 1.5 % 2,654 1.3 % Adjusted
homebuilding gross margin $ 5,448 27.7 % $ 27,499
25.8 % $ 27,398 26.0 % $ 47,451 23.7 %
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.
September 30, December 31, 2016
2015 (Dollars in thousands) Notes payable, including
unsecured revolving credit facility $ 233,924 $ 83,082 Equity,
exclusive of noncontrolling interest 229,875 220,775
Total capital $ 463,799 $ 303,857 Ratio of
debt-to-capital (1) 50.4 % 27.3 % Notes payable, including
unsecured revolving credit facility $ 233,924 $ 83,082 Less: cash,
cash equivalents and restricted cash 45,224 46,254
Net debt 188,700 36,828 Equity, exclusive of noncontrolling
interest 229,875 220,775 Total capital $ 418,575
$ 257,603 Ratio of net debt-to-capital (2) 45.1 %
14.3 % (1) The ratio of debt-to-capital is computed
as the quotient obtained by dividing notes payable by the sum of
total notes payable (including unsecured revolving credit facility)
plus equity, exclusive of noncontrolling interest. (2) The ratio of
net debt-to-capital is computed as the quotient obtained by
dividing net debt (which is notes payable (including unsecured
revolving credit facility) less cash to the extent necessary to
reduce the debt balance to zero) by total capital, exclusive of
noncontrolling interest. The most directly comparable GAAP
financial measure is the ratio of debt-to-capital. We believe the
ratio of net debt-to-capital is a relevant financial measure for
investors to understand the leverage employed in our operations and
as an indicator of our ability to obtain financing. We believe that
by deducting our cash from our notes payable, we provide a measure
of our indebtedness that takes into account our cash liquidity. We
believe this provides useful information as the ratio of
debt-to-capital does not take into account our liquidity and we
believe that the ratio net of cash provides supplemental
information by which our financial position may be considered.
Investors may also find this to be helpful when comparing our
leverage to the leverage of our competitors that present similar
information. See the table above reconciling this non-GAAP
financial measure to the ratio of debt-to-capital.
SCHEDULE OF QUARTERLY AMORTIZATION OF
CAPITALIZABLE MODEL SET-UP SELLING AND MARKETING EXPENSES, GROSS
MARGINS AND SG&A EXPENSES(Unaudited)
Effective January 1, 2016, the Company started amortizing
certain capitalizable selling and marketing ("S&M") costs to
selling and marketing expenses versus cost of home sales. We
believe that the revised presentation and classification of these
capitalizable model set-up S&M costs as a selling and marketing
expense is more comparable with how other homebuilders reflect such
costs in their gross margin and SG&A percentage metrics. We
also believe this presentation is more useful to management and
investors in evaluating our performance. The table below provides a
quarterly summary of 2015 S&M costs reclassified to conform
with the current year presentation and the resulting change in
gross margin, as well as the impact on the Company's SG&A
expense ratio as a percentage of home sales revenue.
Period
Gross Margin asPreviously
Reported
CapitalizedS&MReclassification
Gross Margin as Revised
Basis PointsChange
inGM% (1)
(Dollars in thousands)
$
%
$
$
%
%
Q1 2015 7,956 14.1 % 871 8,827 15.7 % 160 bps
Q2 2015
2,006 10.4 % 598 2,604 13.6 % 320 bps
Q3 2015 7,989 13.8 %
1,148 9,137 15.8 % 200 bps
Q4 2015 22,228 15.1 % 2,181
24,409 16.6 % 150 bps
2015 Total 40,179 14.3 % 4,798 44,977
16.1 % 180 bps
Period
S&M Expenses asPreviously
Reported($ and % of Homes SalesRevenue)
CapitalizedS&MReclassification
S&M Expenses ($ and %of
Homes Sales Revenue)as Revised
Basis PointsChange in
S&Mexpenses as %of Home SalesRevenue
(1)
(Dollars in thousands)
$
%
$
$
%
%
Q1 2015 1,279 2.3 % 871 2,150 3.8 % 150 bps
Q2 2015
1,341 7.0 % 598 1,939 10.1 % 310 bps
Q3 2015 2,294 4.0 %
1,148 3,442 5.9 % 190 bps
Q4 2015 4,029 2.7 % 2,181 6,210
4.2 % 150 bps
2015 Total 8,943 3.2 % 4,798 13,741 4.9 % 170
bps
Period
SG&A Expenses asPreviously
Reported($ and % of Homes SalesRevenue)
CapitalizedS&MReclassification
SG&A Expenses ($ and %of
Homes Sales Revenue)as Revised
Basis PointsChange
inSG&A expensesas % of HomeSales
Revenue (1)
(Dollars in thousands)
$
%
$
$
%
%
Q1 2015 4,939 8.8% 871 5,810 10.3% 150 bps
Q2 2015
5,654 29.5% 598 6,252 32.6% 310 bps
Q3 2015 7,399 12.8%
1,148 8,547 14.8% 200 bps
Q4 2015 11,229 7.6% 2,181 13,410
9.1% 150 bps
2015 Total 29,221 10.4% 4,798 34,019 12.1% 170
bps (1) Some quarterly amounts do not
tie across the categories presented due to rounding differences.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161104005214/en/
New Home CompanyDrew Mackintosh, 949-382-7838Investor
Relationsinvestorrelations@nwhm.com
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