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Tri Pointe Homes, Inc. - Quarter Report: 2015 June (Form 10-Q)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 1-35796

 

TRI Pointe Group, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

61-1763235

(State or other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

19540 Jamboree Road, Suite 300

Irvine, California 92612

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (949) 438-1400

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

¨

Accelerated filer

x

 

 

 

 

Non-accelerated filer

¨  (Do not check if a smaller reporting company)

Smaller reporting company

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Registrant’s shares of common stock outstanding at August 1, 2015: 161,737,684

 

 

 


NOTE REGARDING THIS QUARTERLY REPORT

On July 7, 2015, TRI Pointe Homes, Inc., a Delaware corporation (“TRI Pointe Homes”), reorganized its corporate structure (the “Reorganization”) whereby TRI Pointe Homes became a direct, wholly owned subsidiary of TRI Pointe Group, Inc., a Delaware corporation (“TRI Pointe Group”).  As a result of the reorganization, each share of common stock, par value $0.01 per share, of TRI Pointe Homes (“Homes Common Stock”) was cancelled and converted automatically into the right to receive one validly issued, fully paid and non-assessable share of common stock, par value $0.01 per share, of TRI Pointe Group (“Group Common Stock”), each share having the same designations, rights, powers and preferences, and the qualifications, limitations and restrictions thereof as the shares of Homes Common Stock being so converted.  TRI Pointe Group, as the successor issuer to TRI Pointe Homes (pursuant to Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), began making filings under the Securities Act of 1933, as amended, and the Exchange Act on July 7, 2015.

In connection with the Reorganization, TRI Pointe Group (i) became a co-issuer of TRI Pointe Homes' 4.375% Senior Notes due 2019 and TRI Pointe Homes' 5.875% Senior Notes due 2024; and (ii) replaced TRI Pointe Homes as the borrower under TRI Pointe Homes' existing unsecured revolving credit facility.

The business, executive officers and directors of TRI Pointe Group, and the rights and limitations of the holders of Group Common Stock immediately following the Reorganization were identical to the business, executive officers and directors of TRI Pointe Homes, and the rights and limitations of holders of Homes Common Stock immediately prior to the Reorganization.

References to “TRI Pointe”, “ the Company”, “we”, “us”, or “our” in this Quarterly Report on Form 10-Q (including in the  consolidated financial statements and condensed notes thereto in this report) have the following meanings, unless the context otherwise requires:

·

For periods prior to July 7, 2015: TRI Pointe Homes and its subsidiaries

·

For periods from and after July 7, 2015: TRI Pointe Group and its subsidiaries

 

 

 


 

TRI POINTE GROUP, INC.

FORM 10-Q

INDEX

June 30, 2015

 

 

 

Page
Number

PART I.  FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements for TRI Pointe Homes, Inc.

3

 

 

 

 

Consolidated Balance Sheets as of June 30, 2015 (unaudited) and December 31, 2014

3

 

 

 

 

Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2015 and 2014)

4

 

 

 

 

Consolidated Statements of Equity for the Year Ended December 31, 2014 and the Six Months Ended June 30, 2015 (unaudited)

5

 

 

 

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014 (unaudited)

6

 

 

 

 

Condensed Notes to Consolidated Financial Statements (unaudited)

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

48

 

 

 

Item 4.

Controls and Procedures

48

 

Part II.  OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

49

 

 

 

Item 1A.

Risk Factors

49

 

 

 

Item 6.

Exhibits

50

 

 

 

SIGNATURES

52

 

 

 

 

 

 

 

- 2 -


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TRI POINTE HOMES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

121,907

 

 

$

170,629

 

Receivables

 

 

34,189

 

 

 

20,118

 

Real estate inventories

 

 

2,535,753

 

 

 

2,280,183

 

Investments in unconsolidated entities

 

 

17,325

 

 

 

16,805

 

Goodwill and other intangible assets, net

 

 

162,296

 

 

 

162,563

 

Deferred tax assets

 

 

148,367

 

 

 

157,821

 

Other assets

 

 

87,350

 

 

 

105,405

 

Total assets

 

$

3,107,187

 

 

$

2,913,524

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

51,009

 

 

$

68,860

 

Accrued expenses and other liabilities

 

 

205,422

 

 

 

210,009

 

Unsecured revolving credit facility

 

 

399,392

 

 

 

260,000

 

Seller financed loans

 

 

12,390

 

 

 

14,677

 

Senior notes

 

 

888,267

 

 

 

887,502

 

Total liabilities

 

 

1,556,480

 

 

 

1,441,048

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 50,000,000 shares authorized;

   no shares issued and outstanding as of June 30, 2015 and December 31, 2014,

   respectively

 

 

 

 

 

 

Common stock, $0.01 par value, 500,000,000 shares authorized; 161,737,684 and

   161,355,490 shares issued and outstanding at June 30, 2015 and

   December 31, 2014, respectively

 

 

1,617

 

 

 

1,614

 

Additional paid-in capital

 

 

910,520

 

 

 

906,159

 

Retained earnings

 

 

616,634

 

 

 

546,407

 

Total stockholders' equity

 

 

1,528,771

 

 

 

1,454,180

 

Noncontrolling interests

 

 

21,936

 

 

 

18,296

 

Total equity

 

 

1,550,707

 

 

 

1,472,476

 

Total liabilities and equity

 

$

3,107,187

 

 

$

2,913,524

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

 

- 3 -


 

TRI POINTE HOMES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home sales

 

$

427,238

 

 

$

309,609

 

 

$

801,503

 

 

$

551,511

 

Land and lot sales

 

 

67,490

 

 

 

27,512

 

 

 

69,490

 

 

 

30,899

 

Other operations

 

 

789

 

 

 

5,442

 

 

 

1,782

 

 

 

8,285

 

 

 

 

495,517

 

 

 

342,563

 

 

 

872,775

 

 

 

590,695

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of home sales

 

 

341,742

 

 

 

242,709

 

 

 

641,648

 

 

 

433,977

 

Cost of land and lot sales

 

 

11,564

 

 

 

24,765

 

 

 

13,873

 

 

 

27,928

 

Other operations

 

 

592

 

 

 

567

 

 

 

1,154

 

 

 

2,199

 

Sales and marketing

 

 

25,634

 

 

 

23,798

 

 

 

48,920

 

 

 

44,703

 

General and administrative

 

 

28,299

 

 

 

18,184

 

 

 

56,478

 

 

 

36,189

 

Restructuring charges

 

 

498

 

 

 

520

 

 

 

720

 

 

 

2,178

 

Total expenses

 

 

408,329

 

 

 

310,543

 

 

 

762,793

 

 

 

547,174

 

Income from operations

 

 

87,188

 

 

 

32,020

 

 

 

109,982

 

 

 

43,521

 

Equity in loss of unconsolidated entities

 

 

(155

)

 

 

(69

)

 

 

(81

)

 

 

(137

)

Transaction expenses

 

 

 

 

 

(448

)

 

 

 

 

 

(506

)

Other income (loss), net

 

 

(31

)

 

 

(1,476

)

 

 

225

 

 

 

(741

)

Income before taxes

 

 

87,002

 

 

 

30,027

 

 

 

110,126

 

 

 

42,137

 

Provision for income taxes

 

 

(30,240

)

 

 

(5,802

)

 

 

(38,067

)

 

 

(10,331

)

Net income

 

 

56,762

 

 

 

24,225

 

 

 

72,059

 

 

 

31,806

 

Less: net income attributable to noncontrolling interests

 

 

(1,832

)

 

 

 

 

 

(1,832

)

 

 

 

Net income available to common stockholders

 

$

54,930

 

 

$

24,225

 

 

$

70,227

 

 

$

31,806

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

 

$

0.19

 

 

$

0.43

 

 

$

0.25

 

Diluted

 

$

0.34

 

 

$

0.19

 

 

$

0.43

 

 

$

0.25

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

161,686,570

 

 

 

129,700,000

 

 

 

161,589,310

 

 

 

129,700,000

 

Diluted

 

 

162,308,099

 

 

 

129,700,000

 

 

 

162,265,155

 

 

 

129,700,000

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

 

- 4 -


 

TRI POINTE HOMES, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(in thousands, except share amounts)

 

 

 

Number of

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Common

 

 

Common

 

 

Paid-in

 

 

Retained

 

 

Stockholders'

 

 

Noncontrolling

 

 

Total

 

 

 

Shares (Note 1)

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance at December 31, 2013

 

 

129,700,000

 

 

$

1,297

 

 

$

333,589

 

 

$

462,210

 

 

$

797,096

 

 

$

28,421

 

 

$

825,517

 

Net income

 

 

 

 

 

 

 

 

 

 

 

84,197

 

 

 

84,197

 

 

 

 

 

 

84,197

 

Capital contribution by Weyerhaeuser, net

 

 

 

 

 

 

 

 

63,355

 

 

 

 

 

 

63,355

 

 

 

 

 

 

63,355

 

Common shares issued in connection

   with the Merger (Note 2)

 

 

31,632,533

 

 

 

317

 

 

 

498,656

 

 

 

 

 

 

498,973

 

 

 

 

 

 

498,973

 

Shares issued under share-based awards

 

 

22,957

 

 

 

 

 

 

176

 

 

 

 

 

 

176

 

 

 

 

 

 

176

 

Excess tax benefit of share-based awards, net

 

 

 

 

 

 

 

 

1,757

 

 

 

 

 

 

1,757

 

 

 

 

 

 

1,757

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

8,626

 

 

 

 

 

 

8,626

 

 

 

 

 

 

8,626

 

Distributions to noncontrolling interests, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,248

)

 

 

(17,248

)

Net effect of consolidations, de-

   consolidations and other transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,123

 

 

 

7,123

 

Balance at December 31, 2014

 

 

161,355,490

 

 

 

1,614

 

 

 

906,159

 

 

 

546,407

 

 

 

1,454,180

 

 

 

18,296

 

 

 

1,472,476

 

Net income

 

 

 

 

 

 

 

 

 

 

 

70,227

 

 

 

70,227

 

 

 

1,832

 

 

 

72,059

 

Shares issued under share-based awards

 

 

382,194

 

 

 

3

 

 

 

657

 

 

 

 

 

 

660

 

 

 

 

 

 

660

 

Excess tax benefit of share-based awards, net

 

 

 

 

 

 

 

 

352

 

 

 

 

 

 

352

 

 

 

 

 

 

352

 

Minimum tax withholding paid on behalf of

    employees for restricted stock units

 

 

 

 

 

 

 

 

(2,190

)

 

 

 

 

 

(2,190

)

 

 

 

 

 

(2,190

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,542

 

 

 

 

 

 

5,542

 

 

 

 

 

 

5,542

 

Distributions to noncontrolling interests, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,121

)

 

 

(2,121

)

Net effect of consolidations, de-

   consolidations and other transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,929

 

 

 

3,929

 

Balance at June 30, 2015

 

 

161,737,684

 

 

$

1,617

 

 

$

910,520

 

 

$

616,634

 

 

$

1,528,771

 

 

$

21,936

 

 

$

1,550,707

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

 

- 5 -


 

TRI POINTE HOMES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

72,059

 

 

$

31,806

 

Adjustments to reconcile net income to net cash (used in)

   provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

3,171

 

 

 

6,230

 

Equity in loss of unconsolidated entities, net

 

 

81

 

 

 

137

 

Deferred income taxes, net

 

 

9,454

 

 

 

120,822

 

Amortization of stock-based compensation

 

 

5,542

 

 

 

2,703

 

Charges for impairments and lot option abandonments

 

 

1,538

 

 

 

572

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Real estate inventories

 

 

(255,416

)

 

 

(88,352

)

Receivables

 

 

(14,071

)

 

 

23,578

 

Other assets

 

 

23,483

 

 

 

7,347

 

Accounts payable

 

 

(17,851

)

 

 

34,570

 

Pension and other postretirement benefits

 

 

 

 

 

1,624

 

Accrued expenses and other liabilities

 

 

(5,085

)

 

 

(34,888

)

Other operating cash flows

 

 

 

 

 

(1,574

)

Net cash (used in) provided by operating activities

 

 

(177,095

)

 

 

104,575

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(613

)

 

 

(4,256

)

Proceeds from sale of property and equipment

 

 

 

 

 

7

 

Investments in unconsolidated entities

 

 

(1,257

)

 

 

236

 

Net cash used in investing activities

 

 

(1,870

)

 

 

(4,013

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings from debt

 

 

140,000

 

 

 

 

Repayment of debt

 

 

(2,895

)

 

 

(25,508

)

Debt issuance costs

 

 

(2,688

)

 

 

 

Proceeds from issuance of senior notes

 

 

 

 

 

886,698

 

Change in book overdrafts

 

 

 

 

 

(5,534

)

Distributions to Weyerhaeuser

 

 

 

 

 

(8,606

)

Net repayments of debt held by variable interest entities

 

 

(875

)

 

 

3,145

 

Contributions from noncontrolling interests

 

 

2,034

 

 

 

1,385

 

Distributions to noncontrolling interests

 

 

(4,155

)

 

 

(9,334

)

Proceeds from issuance of common stock under share-based awards

 

 

660

 

 

 

 

Excess tax benefits of share-based awards

 

 

352

 

 

 

1,572

 

Minimum tax withholding paid on behalf of employees for restricted stock units

 

 

(2,190

)

 

 

 

Net cash provided by financing activities

 

 

130,243

 

 

 

843,818

 

Net (decrease) increase in cash and cash equivalents

 

 

(48,722

)

 

 

944,380

 

Cash and cash equivalents - beginning of period

 

 

170,629

 

 

 

4,510

 

Cash and cash equivalents - end of period

 

$

121,907

 

 

$

948,890

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

- 6 -


 

TRI POINTE HOMES, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

 

1.

Organization, Basis of Presentation and Summary of Significant Accounting Policies

Organization

The Company is engaged in the design, construction and sale of innovative 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.  

On July 7, 2015, TRI Pointe Homes, Inc., a Delaware corporation, (“TRI Pointe Homes”) reorganized its corporate structure (the “Reorganization”) whereby TRI Pointe Homes became a direct, wholly owned subsidiary of TRI Pointe Group, Inc., a Delaware corporation (“TRI Pointe Group”).  See “Note Regarding This Quarterly Report” for information concerning the reorganization effected on July 7, 2015.

Basis of Presentation

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as described in “Reverse Acquisition” below, as well as other entities in which the Company has a controlling interest and variable interest entities (“VIE”) in which the Company is the primary beneficiary.  The noncontrolling interests as of June 30, 2015 and December 31, 2014 represent the outside owners’ interests in the Company’s consolidated entities and the net equity of the VIE owners.  All significant intercompany accounts have been eliminated upon consolidation.  Certain prior period amounts have been reclassified to conform to current period presentation.  Subsequent events have been evaluated through the date the financial statements were issued.  In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included.

The Company has historically experienced, and expects to continue to experience, variability in quarterly results. The results of operations for the three or six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the full year.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014.

Because the accompanying notes to consolidated financial statements are condensed, they should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10‑K for the year ended December 31, 2014.  

Reverse Acquisition

On July 7, 2014 (the “Closing Date”), TRI Pointe consummated the previously announced merger (the “Merger”) of our wholly owned subsidiary, Topaz Acquisition, Inc. (“Merger Sub”), with and into Weyerhaeuser Real Estate Company (“WRECO”), with WRECO surviving the Merger and becoming our wholly owned subsidiary, as contemplated by the Transaction Agreement, dated as of November 3, 2013 (the “Transaction Agreement”), by and among us, Weyerhaeuser Company (“Weyerhaeuser”), WRECO and Merger Sub. The Merger is accounted for in accordance with ASC Topic 805, Business Combinations (“ASC 805”). For accounting purposes, the Merger is treated as a “reverse acquisition” and WRECO is considered the accounting acquirer. Accordingly, WRECO is reflected as the predecessor and acquirer and therefore the accompanying consolidated financial statements reflect the historical consolidated financial statements of WRECO for all periods presented and do not include the historical financial statements of TRI Pointe prior to the Closing Date. Subsequent to the Closing Date, the consolidated financial statements reflect the results of the combined company.

 

- 7 -


 

See Note 2, Merger with Weyerhaeuser Real Estate Company, for further information on the Merger. In the Merger, each issued and outstanding WRECO common share was converted into 1.297 shares of TRI Pointe common stock. The historical issued and outstanding WRECO common shares (100,000,000 common shares for all periods presented prior to the Merger) have been recast (as 129,700,000 common shares of the Company for all periods prior to the Merger) in all periods presented to reflect this conversion.

Use of Estimates

Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from our estimates.

Recently Issued Accounting Standards

In April 2014, the FASB issued amendments to Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The update requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations. The amendments also expand the disclosure requirements for discontinued operations and add new disclosures for individually significant dispositions that do not qualify as discontinued operations. We adopted ASU 2014-08 on January 1, 2015 and the adoption had no impact on our current or prior year financial statements.

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue-recognition requirements in ASC Topic 605, Revenue Recognition, most industry-specific guidance throughout the industry topics of the accounting standards codification, and some cost guidance related to construction-type and production-type contracts. On July 9, 2015, the FASB voted to defer the effective date of ASU No. 2014-09 by one year and is now effective for public entities for the annual periods ending after December 15, 2017, and for annual and interim periods thereafter.  Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. We are currently evaluating the approach for implementation and the potential impact of adopting this guidance on our consolidated financial statements.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (“ASU 2014-15”), Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable) and provide related disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. We believe the adoption of this guidance will not have a material effect on our consolidated financial statements.

In February 2015, the FASB issued Accounting Standards Update No. 2015-02, (“ASU 2015-02”), Consolidation (Topic 810): Amendments to the Consolidation Analysis.   ASU 2015-02 changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. ASU 2015-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We believe the adoption of ASU 2015-02 will not have a material effect on our consolidated financial statements.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, (“ASU 2015-03”), Interest - Imputation of Interest (Subtopic 835-30).  ASU 2015-03 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The Company plans to early adopt this guidance at the beginning of the fourth quarter of 2015.  Had the Company early adopted ASU 2015-03, the impact for the period ended June 30, 2015 on our consolidated balance sheet would have been a balance sheet reclassification of deferred loan costs currently included in Other Assets resulting in a decrease to Other Assets of $24.7 million, a decrease to Senior Notes of $22.1 million and a decrease to unsecured revolving credit facility of $2.6 million. The impact for the period ended December 31, 2014, would have been a decrease to Other Assets of $23.7 million and a decrease to Senior Notes of $23.7 million.

 

- 8 -


 

Reclassifications

Certain amounts in our consolidated financial statements for prior years have been reclassified to conform to the current period presentation.

 

 

2.

Merger with Weyerhaeuser Real Estate Company

In the Merger, TRI Pointe issued 129,700,000 shares of TRI Pointe common stock to the former holders of WRECO common shares, together with cash in lieu of any fractional shares. On the Closing Date, WRECO became a wholly owned subsidiary of TRI Pointe. Immediately following the consummation of the Merger, the ownership of TRI Pointe common stock on a fully diluted basis was as follows: (i) the WRECO common shares held by former Weyerhaeuser shareholders were converted into the right to receive, in the aggregate, 79.6% of the then outstanding TRI Pointe common stock, (ii) the TRI Pointe common stock outstanding immediately prior to the consummation of the Merger represented 19.4% of the then outstanding TRI Pointe common stock, and (iii) the outstanding equity awards of WRECO and TRI Pointe employees represented the remaining 1.0% of the then outstanding TRI Pointe common stock. On the Closing Date, the former direct parent entity of WRECO paid TRI Pointe $31.5 million in cash in accordance with the Transaction Agreement.  Following the Merger, WRECO changed its name to TRI Pointe Holdings, Inc.

Assumption of Senior Notes

On the Closing Date, TRI Pointe assumed WRECO’s obligations as issuer of $450 million aggregate principal amount of its 4.375% Senior Notes due 2019 (the “2019 Notes”) and $450 million aggregate principal amount of its 5.875% Senior Notes due 2024 (the “2024 Notes” and together with the 2019 Notes, the “Senior Notes”). Additionally, WRECO and certain of its subsidiaries (collectively, the “Guarantors”) entered into supplemental indentures pursuant to which they guaranteed TRI Pointe’s obligations with respect to the Senior Notes. The Guarantors also entered into a joinder agreement to the Purchase Agreement, dated as of June 4, 2014, among WRECO, TRI Pointe, and the initial purchasers of the Senior Notes (collectively, the “Initial Purchasers”), pursuant to which the Guarantors became parties to the Purchase Agreement. Additionally, TRI Pointe and the Guarantors entered into joinder agreements to the Registration Rights Agreements, dated as of June 13, 2014, among WRECO and the Initial Purchasers with respect to the Senior Notes, pursuant to which TRI Pointe and the Guarantors were joined as parties to the Registration Rights Agreements.

The net proceeds of $861.3 million from the offering of the Senior Notes were deposited into two separate escrow accounts following the closing of the offering on June 13, 2014. Upon release of the escrowed funds on the Closing Date and prior to the consummation of the Merger, WRECO paid $743.7 million in cash to its former direct parent, which cash was retained by Weyerhaeuser and its subsidiaries (other than WRECO and its subsidiaries). The payment consisted of the $739.0 million Payment Amount (as defined in the Transaction Agreement) as well as $4.7 million in payment of all unpaid interest on the debt payable to Weyerhaeuser that accrued from November 3, 2013 to the Closing Date. The remaining $117.6 million of proceeds was retained by TRI Pointe.

 

- 9 -


 

Fair Value of Assets Acquired and Liabilities Assumed

The following table summarizes the calculation of the fair value of the total consideration transferred and the provisional amounts recognized as of the Closing Date (in thousands, except shares and closing stock price):

 

Calculation of consideration transferred

 

 

 

 

TRI Pointe shares outstanding

 

 

31,632,533

 

TRI Pointe closing stock price on July 7, 2014

 

$

15.85

 

Consideration attributable to common stock

 

$

501,376

 

Consideration attributable to TRI Pointe share-based
equity awards

 

 

1,072

 

Total consideration transferred

 

$

502,448

 

Assets acquired and liabilities assumed

 

 

 

 

Cash and cash equivalents

 

$

53,800

 

Accounts receivable

 

 

654

 

Real estate inventories

 

 

539,677

 

Intangible asset

 

 

17,300

 

Goodwill

 

 

139,304

 

Other assets

 

 

28,060

 

Total assets acquired

 

 

778,795

 

Accounts payable

 

 

26,105

 

Accrued expenses and other liabilities

 

 

23,114

 

Notes payable and other borrowings

 

 

227,128

 

Total liabilities assumed

 

 

276,347

 

Total net assets acquired

 

$

502,448

 

 

Cash and cash equivalents, accounts receivable, other assets, accounts payable, accrued payroll liabilities, and accrued expenses and other liabilities were generally stated at historical carrying values given the short-term nature of these assets and liabilities. Notes payable and other borrowings are stated at carrying value due to the limited amount of time since the notes payable and other borrowings were entered into prior to the Closing Date.

The Company determined the fair value of real estate inventories on a community-by-community basis primarily using a combination of market-comparable land transactions, land residual analysis and discounted cash flow models. The estimated fair value is significantly impacted by estimates related to expected average selling prices, sales pace, cancellation rates and construction and overhead costs. Such estimates must be made for each individual community and may vary significantly between communities.

The fair value of the acquired intangible asset was determined based on a valuation performed by an independent valuation specialist. The $17.3 million intangible asset is related to the TRI Pointe Homes trade name which is deemed to have an indefinite useful life.

Goodwill is primarily attributed to expected synergies from combining WRECO’s and TRI Pointe’s existing businesses, including, but not limited to, expected cost synergies from overhead savings resulting from streamlining certain redundant corporate functions, improved operating efficiencies, including provision of certain corporate level administrative and support functions at a lower cost than was historically allocated to WRECO for such services by its former direct parent, and growth of ancillary operations in various markets as permitted under applicable law, including a mortgage business, a title company and other ancillary operations. The Company also anticipates opportunities for growth through expanded geographic and customer segment diversity and the ability to leverage additional brands.  The acquired goodwill is not deductible for income tax purposes.

The Company completed its business combination accounting during the first quarter of 2015.

 

- 10 -


 

Supplemental Pro Forma Information (Unaudited)

The following represents unaudited pro forma operating results as if the acquisition had been completed as of January 1, 2014 (in thousands, except per share amounts):

 

 

 

 

 

Three Months Ended

June 30, 2014

 

 

Six Months Ended

June 30, 2014

 

Total revenues

 

 

 

$

429,899

 

 

$

750,843

 

Net income

 

 

 

$

32,200

 

 

$

44,514

 

Earnings per share – basic

 

 

 

$

0.20

 

 

$

0.28

 

Earnings per share – diluted

 

 

 

$

0.20

 

 

$

0.27

 

 

The unaudited pro forma operating results have been determined after adjusting the operating results of TRI Pointe to reflect the purchase accounting and other acquisition adjustments including interest expense associated with the debt used to fund a portion of the Merger. The unaudited pro forma results do not reflect any cost savings, operating synergies or other enhancements that we may achieve as a result of the Merger or the costs necessary to integrate the operations to achieve these cost savings and synergies. Accordingly, the unaudited pro forma amounts are for comparative purposes only and may not necessarily reflect the results of operations had the Merger been completed at the beginning of the period or be indicative of the results we will achieve in the future.

 

 

3.

Restructuring

In connection with the Merger, the Company initiated a restructuring plan to reduce duplicate corporate and divisional overhead costs and expenses. In addition, WRECO previously recognized restructuring expenses related to general cost reduction initiatives. Restructuring costs were comprised of the following (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Employee-related costs

 

$

23

 

 

$

60

 

 

$

135

 

 

$

1,307

 

Lease termination costs

 

 

475

 

 

 

460

 

 

 

585

 

 

 

871

 

Total

 

$

498

 

 

$

520

 

 

$

720

 

 

$

2,178

 

 

Lease termination costs for the three and six months ended June 30, 2015, and 2014, respectively, relate to contract terminations as a result of general cost reduction initiatives.

Changes in employee-related restructuring reserves were as follows (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Accrued employee-related costs, beginning of period

 

$

533

 

 

$

 

 

$

3,844

 

 

$

4,336

 

Current year charges

 

 

23

 

 

 

60

 

 

 

135

 

 

 

1,307

 

Payments

 

 

(447

)

 

 

(60

)

 

 

(3,870

)

 

 

(5,643

)

Accrued employee-related costs, end of period

 

$

109

 

 

$

 

 

$

109

 

 

$

 

 

Changes in lease termination related restructuring reserves were as follows (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Accrued lease termination costs, beginning of period

 

$

926

 

 

$

2,758

 

 

$

1,394

 

 

$

3,506

 

Current year charges

 

 

475

 

 

 

460

 

 

 

585

 

 

 

871

 

Payments

 

 

(757

)

 

 

(764

)

 

 

(1,335

)

 

 

(1,923

)

Accrued lease termination costs, end of period

 

$

644

 

 

$

2,454

 

 

$

644

 

 

$

2,454

 

 

Employee and lease termination restructuring reserves are included in accrued expenses and other liabilities on our consolidated balance sheets.

 

 

 

- 11 -


 

4.

Segment Information

Our operations consist of six homebuilding companies that acquire and develop land and construct and sell single-family homes.  In accordance with ASC Topic 280, Segment Reporting, in determining the most appropriate reportable segments, we considered similar economic and other characteristics, including product types, average selling prices, gross profits, production processes, suppliers, subcontractors, regulatory environments, land acquisition results, and underlying demand and supply.  Based on our aggregation analysis, we have not exercised any aggregation of our operating segments, which are represented by the following six reportable segments: Maracay, consisting of operations in Arizona; Pardee, consisting of operations in California and Nevada; Quadrant, consisting of operations in Washington; Trendmaker, consisting of operations in Texas; TRI Pointe, consisting of operations in California and Colorado; and Winchester, consisting of operations in Maryland and Virginia.

Corporate is a non-operating segment that develops and implements company-wide strategic initiatives and provides support to our homebuilding reporting segments by centralizing certain administrative functions, such as marketing, legal, accounting, treasury, insurance and risk management, information technology and human resources, to benefit from economies of scale. Our Corporate non-operating segment also includes general and administrative expenses related to operating our corporate headquarters. A portion of the expenses incurred by Corporate is allocated to the homebuilding reporting segments.

The reportable segments follow the same accounting policies as our consolidated financial statements described in Note 1. Operational results of each reportable segment are not necessarily indicative of the results that would have been achieved had the reportable segment been an independent, stand-alone entity during the periods presented.

Total revenues and income before taxes for each of our reportable segments were as follows (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Total revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maracay

 

$

33,574

 

 

$

35,045

 

 

$

66,051

 

 

$

70,275

 

Pardee

 

 

166,064

 

 

 

145,247

 

 

 

251,723

 

 

 

217,709

 

Quadrant

 

 

38,896

 

 

 

31,785

 

 

 

84,525

 

 

 

64,039

 

Trendmaker

 

 

65,982

 

 

 

67,756

 

 

 

122,191

 

 

 

129,156

 

TRI Pointe

 

 

130,735

 

 

 

 

 

 

237,592

 

 

 

 

Winchester

 

 

60,266

 

 

 

62,730

 

 

 

110,693

 

 

 

109,516

 

Total

 

$

495,517

 

 

$

342,563

 

 

$

872,775

 

 

$

590,695

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maracay

 

$

1,068

 

 

$

2,387

 

 

$

2,108

 

 

$

6,010

 

Pardee

 

 

67,734

 

 

 

18,656

 

 

 

81,292

 

 

 

25,793

 

Quadrant

 

 

766

 

 

 

5,459

 

 

 

2,347

 

 

 

6,240

 

Trendmaker

 

 

6,040

 

 

 

7,825

 

 

 

10,400

 

 

 

14,202

 

TRI Pointe

 

 

14,564

 

 

 

 

 

 

25,695

 

 

 

 

Winchester

 

 

5,957

 

 

 

6,868

 

 

 

6,338

 

 

 

11,037

 

Corporate

 

 

(9,127

)

 

 

(11,168

)

 

 

(18,054

)

 

 

(21,145

)

Total

 

$

87,002

 

 

$

30,027

 

 

$

110,126

 

 

$

42,137

 

 

 

- 12 -


 

Total real estate inventories and total assets for each of our reportable segments, as of the date indicated, were as follows (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Real estate inventories

 

 

 

 

 

 

 

 

Maracay

 

$

189,036

 

 

$

153,577

 

Pardee

 

 

999,972

 

 

 

924,362

 

Quadrant

 

 

170,506

 

 

 

153,493

 

Trendmaker

 

 

196,015

 

 

 

176,696

 

TRI Pointe

 

 

696,811

 

 

 

613,666

 

Winchester

 

 

283,413

 

 

 

258,389

 

Total

 

$

2,535,753

 

 

$

2,280,183

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

 

 

 

Maracay

 

$

201,628

 

 

$

170,932

 

Pardee

 

 

1,067,332

 

 

 

1,000,489

 

Quadrant

 

 

181,502

 

 

 

167,796

 

Trendmaker

 

 

218,531

 

 

 

195,829

 

TRI Pointe

 

 

867,043

 

 

 

781,301

 

Winchester

 

 

311,004

 

 

 

281,547

 

Corporate

 

 

260,147

 

 

 

315,630

 

Total

 

$

3,107,187

 

 

$

2,913,524

 

 

 

5.

Earnings Per Share

The following table sets forth the components used in the computation of basic and diluted earnings per share (in thousands, except share and per share amounts):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to

     common stockholders

 

$

54,930

 

 

$

24,225

 

 

$

70,227

 

 

$

31,806

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted-average

     shares outstanding

 

 

161,686,570

 

 

 

129,700,000

 

 

 

161,589,310

 

 

 

129,700,000

 

Effect of dilutive shares:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock options and

    unvested restricted

    stock units

 

 

621,529

 

 

 

 

 

 

675,845

 

 

 

 

Diluted weighted-average

     shares outstanding

 

 

162,308,099

 

 

 

129,700,000

 

 

 

162,265,155

 

 

 

129,700,000

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

 

$

0.19

 

 

$

0.43

 

 

$

0.25

 

Diluted

 

$

0.34

 

 

$

0.19

 

 

$

0.43

 

 

$

0.25

 

Antidilutive unvested restricted

   stock units and stock options not

   included in diluted earnings per

   share

 

 

2,343,905

 

 

 

 

 

 

2,563,137

 

 

 

 

 

 

 

- 13 -


 

6.

Receivables

Receivables consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Escrow proceeds and other accounts receivable, net

 

$

23,363

 

 

$

9,771

 

Warranty insurance receivable (Note 15)

 

 

10,526

 

 

 

10,047

 

Notes and contracts receivable

 

 

300

 

 

 

300

 

Total receivables

 

$

34,189

 

 

$

20,118

 

 

 

7.

Real Estate Inventories

Real estate inventories consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Real estate inventories owned:

 

 

 

 

 

 

 

 

Homes completed or under construction

 

$

726,553

 

 

$

461,712

 

Land under development

 

 

1,349,956

 

 

 

1,391,303

 

Land held for future development

 

 

256,865

 

 

 

245,673

 

Model homes

 

 

128,839

 

 

 

103,270

 

Total real estate inventories owned

 

 

2,462,213

 

 

 

2,201,958

 

Real estate inventories not owned:

 

 

 

 

 

 

 

 

Land purchase and land option deposits

 

 

36,976

 

 

 

44,155

 

Consolidated inventory held by VIEs

 

 

36,564

 

 

 

34,070

 

Total real estate inventories not owned

 

 

73,540

 

 

 

78,225

 

Total real estate inventories

 

$

2,535,753

 

 

$

2,280,183

 

 

Homes completed or under construction is comprised of costs associated with homes in various stages of construction and includes direct construction and related land acquisition and land development costs. Land under development primarily consists of land acquisition and land development costs, which include capitalized interest and real estate taxes, associated with land undergoing improvement activity. Land held for future development principally reflects land acquisition and land development costs related to land where development activity has not yet begun or has been suspended, but is expected to occur in the future.

Real estate inventories not owned represents deposits related to land purchase and land option agreements as well as consolidated inventory held by variable interest entities. For further details, see Note 9, Variable Interest Entities.

During the quarter ended June 30, 2015 the Company sold a 15.72 acre employment center located in the Pacific Highlands Ranch community in the San Diego, California division of our Pardee Homes reporting segment.  The land sold under this sale was classified as land under development and represented $53.0 million of land and lot sales revenue in the consolidated statement of operations for the quarter. 

Interest incurred, capitalized and expensed were as follows (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Interest incurred

 

$

15,149

 

 

$

6,551

 

 

$

30,325

 

 

$

10,589

 

Interest capitalized

 

 

(15,149

)

 

 

(4,339

)

 

 

(30,325

)

 

 

(8,148

)

Interest expensed

 

$

 

 

$

2,212

 

 

$

 

 

$

2,441

 

Capitalized interest in beginning inventory

 

$

132,872

 

 

$

137,979

 

 

$

124,461

 

 

$

138,233

 

Interest capitalized as a cost of inventory

 

 

15,149

 

 

 

4,339

 

 

 

30,325

 

 

 

8,148

 

Interest previously capitalized as a cost of

     inventory, included in cost of sales

 

 

(7,915

)

 

 

(28,553

)

 

 

(14,680

)

 

 

(32,616

)

Capitalized interest in ending inventory

 

$

140,106

 

 

$

113,765

 

 

$

140,106

 

 

$

113,765

 

 

 

- 14 -


 

Interest is capitalized to real estate inventory during development and other qualifying activities. Interest that is capitalized to real estate inventory is included in cost of home sales as related units are delivered.  Interest that is expensed as incurred is included in other income (expense).

Real estate inventory impairments and land and lot option abandonments

Real estate inventory impairments and land option abandonments consisted of the following (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Real estate inventory impairments

 

$

878

 

 

$

42

 

 

$

1,044

 

 

$

52

 

Land and lot option abandonments and pre-

    acquisition costs

 

 

300

 

 

 

62

 

 

 

494

 

 

 

520

 

Total

 

$

1,178

 

 

$

104

 

 

$

1,538

 

 

$

572

 

 

Impairments of homebuilding assets and related charges relate primarily to projects or communities held for development. Within a community that is held for development, there may be individual homes or parcels of land that are currently held for sale. Impairment charges recognized as a result of adjusting individual held-for-sale assets within a community to estimated fair value less cost to sell are also included in the total impairment charges above.  Charges for inventory impairments are expensed to cost of sales.

In addition to owning land and residential lots, we also have option agreements to purchase land and lots at a future date. We have option deposits and capitalized pre-acquisition costs associated with the optioned land and lots. When the economics of a project no longer support acquisition of the land or lots under option, we may elect not to move forward with the acquisition. Option deposits and capitalized pre-acquisition costs associated with the assets under option may be forfeited at that time. Charges for such forfeitures are expensed to cost of sales.

 

 

8.

Investments in Unconsolidated Entities

As of June 30, 2015, we held equity investments in six active real estate partnerships or limited liability companies. Our participation in these entities may be as a developer, a builder, or an investment partner. Our ownership percentage varies from 7% to 55%, depending on the investment, with no controlling interest held in any of these investments.

Investments Held

Our cumulative investment in entities accounted for on the equity method, including our share of earnings and losses, consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Limited partnership and limited liability company interests

 

$

13,961

 

 

$

13,710

 

General partnership interests

 

 

3,364

 

 

 

3,095

 

Total

 

$

17,325

 

 

$

16,805

 

 

Unconsolidated Financial Information

Aggregated assets, liabilities and operating results of the entities we account for as equity-method investments are provided below. Because our ownership interest in these entities varies, a direct relationship does not exist between the information presented below and the amounts that are reflected on our consolidated balance sheets as our investment in unconsolidated entities or on our consolidated statement of operations as equity in loss of unconsolidated entities.

 

- 15 -


 

Assets and liabilities of unconsolidated entities (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Assets

 

 

 

 

 

 

 

 

Cash

 

$

14,374

 

 

$

17,154

 

Receivables

 

 

9,550

 

 

 

9,550

 

Real estate inventories

 

 

89,801

 

 

 

95,500

 

Other assets

 

 

814

 

 

 

620

 

Total assets

 

$

114,539

 

 

$

122,824

 

Liabilities and equity

 

 

 

 

 

 

 

 

Accounts payable and other liabilities

 

$

11,706

 

 

$

10,914

 

Company's equity

 

 

17,325

 

 

 

16,805

 

Outside interests' equity

 

 

85,508

 

 

 

95,105

 

Total liabilities and equity

 

$

114,539

 

 

$

122,824

 

 

Results of operations from unconsolidated entities (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net sales

 

$

1,377

 

 

$

336

 

 

$

1,453

 

 

$

407

 

Other operating expense

 

 

(1,805

)

 

$

(1,146

)

 

 

(2,541

)

 

 

(2,157

)

Other income

 

 

5

 

 

$

12

 

 

 

7

 

 

 

14

 

Net loss

 

$

(423

)

 

$

(798

)

 

$

(1,081

)

 

$

(1,736

)

Company's equity in loss of

    unconsolidated entities

 

$

(155

)

 

$

(69

)

 

$

(81

)

 

$

(137

)

 

 

9.

Variable Interest Entities

In the ordinary course of business, we enter into land option agreements in order to procure land and residential lots for future development and the construction of homes. The use of such land option agreements generally allows us to reduce the risks associated with direct land ownership and development, and reduces our capital and financial commitments. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. Such deposits are recorded as land purchase and land option deposits under real estate inventories not owned in the accompanying consolidated balance sheets.

We analyze each of our land option agreements and other similar contracts under the provisions of ASC 810 Consolidation to determine whether the land seller is a VIE and, if so, whether we are the primary beneficiary. Although we do not have legal title to the underlying land, if we are determined to be the primary beneficiary of the VIE, we will consolidate the VIE in our financial statements and reflect its assets as real estate inventory not owned included in our real estate inventories, its liabilities as debt (nonrecourse) held by VIEs in accrued expenses and other liabilities and the net equity of the VIE owners as noncontrolling interests on our consolidated balance sheets. In determining whether we are the primary beneficiary, we consider, among other things, whether we have the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. Such activities would include, among other things, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE.

Creditors of the entities with which we have land option agreements have no recourse against us. The maximum exposure to loss under our land option agreements is limited to non-refundable option deposits and any capitalized pre-acquisition costs. In some cases, we have also contracted to complete development work at a fixed cost on behalf of the land owner and budget shortfalls and savings will be borne by us.

 

- 16 -


 

The following provides a summary of our interests in land option agreements (in thousands):

 

 

 

June 30, 2015

 

 

December 31, 2014

 

 

 

 

 

 

 

Remaining

 

 

Consolidated

 

 

 

 

 

 

Remaining

 

 

Consolidated

 

 

 

 

 

 

 

Purchase

 

 

Inventory

 

 

 

 

 

 

Purchase

 

 

Inventory

 

 

 

Deposits

 

 

Price

 

 

Held by VIEs

 

 

Deposits

 

 

Price

 

 

Held by VIEs

 

Consolidated VIEs

 

$

7,359

 

 

$

36,038

 

 

$

36,564

 

 

$

8,071

 

 

$

43,432

 

 

$

34,070

 

Unconsolidated VIEs

 

 

7,760

 

 

 

72,298

 

 

N/A

 

 

 

13,309

 

 

 

129,637

 

 

N/A

 

Other land option agreements

 

 

29,216

 

 

 

283,969

 

 

N/A

 

 

 

30,846

 

 

 

284,819

 

 

N/A

 

Total

 

$

44,335

 

 

$

392,305

 

 

$

36,564

 

 

$

52,226

 

 

$

457,888

 

 

$

34,070

 

 

Unconsolidated VIEs represent land option agreements that were not consolidated because we were not the primary beneficiary. Other land option agreements were not considered VIEs.

In addition to the deposits presented in the table above, our exposure to loss related to our land option contracts consisted of capitalized pre-acquisition costs of $4.9 million and $5.3 million as of June 30, 2015 and December 31, 2014, respectively. These pre-acquisition costs were included in real estate inventories as land under development on our consolidated balance sheets.

 

 

10.

Goodwill and Other Intangible Assets

In connection with the Merger, $139.3 million of goodwill has been recorded as of June 30, 2015.  For further details on the goodwill, see Note 2, Merger with Weyerhaeuser Real Estate Company.

We have two intangible assets recorded as of June 30, 2015, including an existing trade name from the acquisition of Maracay in 2006 which has a 20 year useful life and a new trade name, TRI Pointe Homes, resulting from the Merger which has an indefinite useful life. For further details on the TRI Pointe Homes trade name see Note 2, Merger with Weyerhaeuser Real Estate Company.

Goodwill and other intangible assets consisted of the following (in thousands):

 

 

 

June 30, 2015

 

 

December 31, 2014

 

 

 

Gross

 

 

 

 

 

 

Net

 

 

Gross

 

 

 

 

 

 

Net

 

 

 

Carrying

 

 

Accumulated

 

 

Carrying

 

 

Carrying

 

 

Accumulated

 

 

Carrying

 

 

 

Amount

 

 

Amortization

 

 

Amount

 

 

Amount

 

 

Amortization

 

 

Amount

 

Goodwill

 

$

139,303

 

 

$

 

 

$

139,303

 

 

$

139,304

 

 

$

 

 

$

139,304

 

Trade names

 

 

27,979

 

 

 

(4,986

)

 

 

22,993

 

 

 

27,979

 

 

 

(4,720

)

 

 

23,259

 

Total

 

$

167,282

 

 

$

(4,986

)

 

$

162,296

 

 

$

167,283

 

 

$

(4,720

)

 

$

162,563

 

The remaining useful life of our amortizing intangible asset related to the Maracay trade name was 10.7 and 11.2 years as of June 30, 2015 and December 31, 2014, respectively. Amortization expense related to this intangible asset was $133,000 for each of the three month periods ended June 30, 2015 and 2014, respectively and was $266,000 for each of the six month periods ended June 30, 2015 and 2014, respectively.  Amortization of this intangible asset was charged to sales and marketing expense.  Our $17.3 million indefinite life intangible asset related to the TRI Pointe Homes trade name is not amortizing.

Expected amortization of our intangible asset related to Maracay for the remainder of 2015, the next four years and thereafter is (in thousands):

 

Remainder of 2015

 

$

268

 

2016

 

 

534

 

2017

 

 

534

 

2018

 

 

534

 

2019

 

 

534

 

Thereafter

 

 

3,289

 

Total

 

$

5,693

 

 

 

 

- 17 -


 

11.

Other Assets

Other assets consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Prepaid expenses

 

$

22,758

 

 

$

29,111

 

Refundable fees and other deposits

 

 

16,557

 

 

 

15,581

 

Development rights, held for future use or sale

 

 

6,447

 

 

 

7,409

 

Deferred loan costs

 

 

24,669

 

 

 

23,686

 

Operating properties and equipment, net

 

 

10,511

 

 

 

11,719

 

Income tax receivable

 

 

 

 

 

10,713

 

Other

 

 

6,408

 

 

 

7,186

 

Total

 

$

87,350

 

 

$

105,405

 

 

 

12.

Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Accrued payroll and related costs

 

$

16,437

 

 

$

24,717

 

Warranty reserves (Note 15)

 

 

35,375

 

 

 

33,270

 

Estimated cost for completion of real estate inventories

 

 

54,771

 

 

 

54,437

 

Customer deposits

 

 

20,101

 

 

 

14,229

 

Debt (nonrecourse) held by VIEs (Note 9)

 

 

8,337

 

 

 

9,512

 

Income tax liability to Weyerhaeuser (Note 18)

 

 

15,894

 

 

 

15,659

 

Accrued income taxes payable

 

 

3,883

 

 

 

 

Liability for uncertain tax positions (Note 17)

 

 

16,095

 

 

 

13,797

 

Accrued interest

 

 

2,632

 

 

 

3,059

 

Accrued insurance expense

 

 

4,199

 

 

 

9,180

 

Other

 

 

27,698

 

 

 

32,149

 

Total

 

$

205,422

 

 

$

210,009

 

 

 

13.

Senior Notes, Unsecured Revolving Credit Facility and Seller Financed Loans

Senior Notes

Senior Notes consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

4.375% Senior Notes due June 15, 2019, net of discount

 

$

445,955

 

 

$

445,501

 

5.875% Senior Notes due June 15, 2024, net of discount

 

 

442,312

 

 

 

442,001

 

Total

 

$

888,267

 

 

$

887,502

 

 

As discussed in Note 2, Merger with Weyerhaeuser Real Estate Company, on the Closing Date, TRI Pointe assumed WRECO’s obligations as issuer of the Senior Notes. The 2019 Notes were issued at 98.89% of their aggregate principal amount and the 2024 Notes were issued at 98.15% of their aggregate principal amount. The net proceeds of $861.3 million, after debt issuance costs and discounts, from the offering were deposited into two separate escrow accounts following the closing of the offering on June 13, 2014.

The 2019 Notes and the 2024 Notes mature on June 15, 2019 and June 15, 2024, respectively. Interest is payable semiannually in arrears on June 15 and December 15. As of June 30, 2015, no principal has been paid on the Senior Notes, and there was $22.1 million of capitalized debt financing costs, included in other assets on our consolidated balance sheet, related to the Senior Notes that will amortize over the lives of the Senior Notes. Accrued interest related to the Senior Notes was $1.9 million as of June 30, 2015.

 

- 18 -


 

Unsecured Revolving Credit Facility

Unsecured revolving credit facility consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Unsecured revolving credit facility

 

$

399,392

 

 

$

260,000

 

In May 2015, the Company amended its unsecured credit revolving credit facility (the “Credit Facility”) from $425 million to $550 million.  The Credit Facility matures on July 1, 2018, and contains a sublimit of $75 million for letters of credit. The Company may borrow under the Credit Facility in the ordinary course of business to fund its operations, including its land development and homebuilding activities. Borrowings under the Credit Facility will be governed by, among other things, a borrowing base. Interest rates on borrowings under the Credit Facility will be based on either a daily Eurocurrency base rate or a Eurocurrency rate, in either case, plus a spread ranging from 1.45% to 2.20%, depending on the Company’s leverage ratio. As of June 30, 2015, the outstanding balance under the Credit Facility was $399.4 million with an interest rate of 2.14% per annum and $141.1 million of availability after considering the borrowing base provisions and outstanding letters of credit.  As of June 30, 2015 there was $2.6 million of capitalized debt financing costs, included in other assets on our consolidated balance sheet, related to the Credit Facility that will amortize over the life of the Credit Facility, maturing on July 1, 2018.  Accrued interest related to the Credit Facility was $685,000 as of June 30, 2015.

At June 30, 2015 we had outstanding letters of credit of $9.5 million.  These letters of credit were issued to secure various financial obligations.  We believe it is not probable that any outstanding letters of credit will be drawn upon.

Seller Financed Loans

Seller financed loans consisted of the following (in thousands):

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Seller financed loans

 

$

12,390

 

 

$

14,677

 

As of June 30, 2015, the Company had $12.4 million outstanding related to seller financed loans to acquire lots for the construction of homes.  Principal and interest payments on these loans are due at various maturity dates, including at the time individual homes associated with the acquired land are delivered.  As of June 30, 2015, the seller financed loans accrue interest at a weighted average rate of 6.97% per annum, with interest calculated on a daily basis. Any remaining unpaid balance on these loans is due in May 2016. Accrued interest on these loans were $25,000 as of June 30, 2015.

Interest Incurred

During the three month periods ended June 30, 2015 and 2014, the Company incurred interest of $15.1 million and $6.6 million, respectively, related to all notes payable, Senior Notes and debt payable to Weyerhaeuser outstanding during the period. Of the interest incurred, $15.1 million and $4.3 million was capitalized to inventory for the six-month period ended June 30, 2015 and 2014, respectively. Included in interest incurred was amortization of deferred financing and Senior Note discount costs of $1.3 million for the three month period ended June 30, 2015 with no deferred financing cost in the same prior year period. During the six month periods ended June 30, 2015 and 2014, the Company incurred interest of $30.3 million and $10.6 million, respectively, related to all notes payable, Senior Notes and debt payable to Weyerhaeuser outstanding during the period.   Of the interest incurred, $30.3 million and $8.1 million was capitalized to inventory for the period ended June 30, 2015 and 2014, respectively.  Included in interest incurred was amortization of deferred financing and Senior Note discount costs of $2.5 million for the six month period ended June 30, 2015 with no deferred financing cost in the same prior year period.  Accrued interest related to all outstanding debt at June 30, 2015 and December 31, 2014 was $2.6 million and $3.1 million, respectively.  

Covenant Requirements

The Senior Notes contain covenants that restrict our ability to, among other things, create liens or other encumbrances, enter into sale and leaseback transactions, or merge or sell all or substantially all of our assets. These limitations are subject to a number of qualifications and exceptions.

Under the Credit Facility, the Company is required to comply with certain financial covenants, including but not limited to (i) a minimum consolidated tangible net worth; (ii) a maximum total leverage ratio; and (iii) a minimum interest coverage ratio.

 

- 19 -


 

The Company was in compliance with all applicable financial covenants as of June 30, 2015 and December 31, 2014.

 

 

14.

Fair Value Disclosures

Fair Value Measurements

ASC Topic 820, Fair Value Measurements and Disclosures, defines “fair value” as the price that would be received for selling an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date and requires assets and liabilities carried at fair value to be classified and disclosed in the following three categories:

·

Level 1—Quoted prices for identical instruments in active markets

·

Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are inactive; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets at measurement date

·

Level 3—Valuations derived from techniques where one or more significant inputs or significant value drivers are unobservable in active markets at measurement date

Fair Value of Financial Instruments

A summary of assets and liabilities at June 30, 2015 and December 31, 2014, related to our financial instruments, measured at fair value on a recurring basis, is set forth below (in thousands):

 

 

 

 

 

June 30, 2015

 

 

December 31, 2014

 

 

 

Hierarchy

 

Book Value

 

 

Fair Value

 

 

Book Value

 

 

Fair Value

 

Receivables (1)

 

Level 3

 

$

34,189

 

 

$

34,189

 

 

$

20,118

 

 

$

20,118

 

Senior Notes (2)

 

Level 2

 

 

888,267

 

 

 

879,750

 

 

 

887,502

 

 

 

896,625

 

Unsecured revolving credit facility (3)

 

Level 3

 

 

399,392

 

 

 

399,392

 

 

 

260,000

 

 

 

260,000

 

Seller financed loans (4)

 

Level 3

 

 

12,390

 

 

 

12,390

 

 

 

14,677

 

 

 

14,677

 

 

At June 30, 2015 and December 31, 2014, the carrying value of cash and cash equivalents approximated fair value.

(1)

The estimated fair value of our receivables was based on the discounted value of the expected future cash flows using current rates for similar receivables. The book value of our receivables equaled the fair value as of June 30, 2015 and December 31, 2014 due to the short-term nature of the remaining receivables.

(2)

The estimated fair value of our Senior Notes at June 30, 2015 and December 31, 2014 is based on quoted market prices.

(3)

We believe that the carrying value of our Credit Facility approximates fair value based on the short term nature of the current market rate amended on May 18, 2015.

(4)

We believe that the carrying value of our Seller financed loans approximates fair value based on a two year treasury curve analysis.

Fair Value of Nonfinancial Assets

Nonfinancial assets include items such as real estate inventories and long-lived assets that are measured at fair value on a nonrecurring basis when events and circumstances indicate the carrying value is not recoverable. The following table presents impairment charges and the remaining net fair value for nonfinancial assets that were measured during the periods presented (in thousands):

 

 

 

 

 

Six Months Ended

 

 

Year Ended

 

 

 

 

 

June 30, 2015

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

Fair Value

 

 

 

 

 

 

Fair Value

 

 

 

 

 

Impairment

 

 

Net of

 

 

Impairment

 

 

Net of

 

 

 

Hierarchy

 

Charge

 

 

Impairment

 

 

Charge

 

 

Impairment

 

Real estate inventories

 

Level 3

 

$

1,044

 

 

$

15,348

 

 

$

931

 

 

$

20,329

 

 

 

 

- 20 -


 

15.

Commitments and Contingencies

Legal Matters

Lawsuits, claims and proceedings have been and may be instituted or asserted against us in the normal course of business, including actions brought on behalf of various classes of claimants. We are also subject to local, state and federal laws and regulations related to land development activities, house construction standards, sales practices, employment practices and environmental protection. As a result, we are subject to periodic examinations or inquiry by agencies administering these laws and regulations.

We record a reserve for potential legal claims and regulatory matters when they are probable of occurring and a potential loss is reasonably estimable. We accrue for these matters based on facts and circumstances specific to each matter and revise these estimates when necessary.

In view of the inherent difficulty of predicting outcomes of legal claims and related contingencies, we generally cannot predict their ultimate resolution, related timing or eventual loss. Accordingly, it is possible that the ultimate outcome of any matter, if in excess of a related accrual or if no accrual was made, could be material to our financial statements.

Warranty

Warranty reserves are accrued as home deliveries occur. Our warranty reserves on homes delivered will vary based on product type and geographic area and also depending on state and local laws. The warranty reserve is included in accrued expenses and other liabilities on our consolidated balance sheets and represents expected future costs based on our historical experience over previous years. Estimated warranty costs are charged to cost of home sales in the period in which the related home sales revenue is recognized.

We maintain general liability insurance designed to protect us against a portion of our risk of loss from construction-related claims. We also generally require our subcontractors and design professionals to indemnify us for liabilities arising from their work, subject to various limitations. However, such indemnity is significantly limited with respect to certain subcontractors that are added to our general liability insurance policy. Included in our warranty reserve accrual are allowances to cover our estimated costs of self-insured retentions and deductible amounts under these policies and estimated costs for claims that may not be covered by applicable insurance or indemnities.  Estimation of these accruals include consideration of our claims history, including current claims and estimates of claims incurred but not yet reported.  In addition, we record expected recoveries from insurance carriers when proceeds are probable and estimable.  Outstanding warranty insurance receivables were $10.5 million and $10.0 million as of June 30, 2015 and December 31, 2014, respectively. Warranty insurance receivables are recorded in receivables on the accompanying consolidated balance sheet.

There can be no assurance that the terms and limitations of the limited warranty will be effective against claims made by homebuyers, that we will be able to renew our insurance coverage or renew it at reasonable rates, that we will not be liable for damages, cost of repairs, and/or the expense of litigation surrounding possible construction defects, soil subsidence or building related claims or that claims will not arise out of uninsurable events or circumstances not covered by insurance and not subject to effective indemnification agreements with certain subcontractors.

Warranty reserves consisted of the following (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Warranty reserves, beginning of period

 

$

33,965

 

 

$

24,378

 

 

$

33,270

 

 

$

24,450

 

Warranty reserves accrued

 

 

3,354

 

 

 

2,153

 

 

 

6,226

 

 

 

3,764

 

Adjustments to pre-existing reserves

 

 

999

 

 

 

232

 

 

 

1,300

 

 

 

1,018

 

Warranty expenditures

 

 

(2,943

)

 

 

(2,439

)

 

 

(5,421

)

 

 

(4,908

)

Warranty reserves, end of period

 

$

35,375

 

 

$

24,324

 

 

$

35,375

 

 

$

24,324

 

 

Performance Bonds

We obtain surety bonds in the normal course of business to ensure completion of certain infrastructure improvements of our projects. As of June 30, 2015 and December 31, 2014, the Company had outstanding surety bonds totaling $407.9 million and $355.2 million, respectively. The beneficiaries of the bonds are various municipalities.

 

 

 

- 21 -


 

16.

Stock-Based Compensation

2013 Long-Term Incentive Plan

The Company’s stock compensation plan, the 2013 Long-Term Incentive Plan (the “2013 Incentive Plan”), was adopted by TRI Pointe in January 2013 and amended with the approval of our stockholders in 2014. The 2013 Incentive Plan provides for the grant of equity-based awards, including options to purchase shares of common stock, stock appreciation rights, common stock, restricted stock, restricted stock units and performance awards. The 2013 Incentive Plan will automatically expire on the tenth anniversary of its effective date. Our board of directors may terminate or amend the 2013 Incentive Plan at any time, subject to any requirement of stockholder approval required by applicable law, rule or regulation.

As amended, the number of shares of our common stock that may be issued under the 2013 Incentive Plan is 11,727,833 shares. To the extent that shares of our common stock subject to an outstanding option, stock appreciation right, stock award or performance award granted under the 2013 Incentive Plan are not issued or delivered by reason of the expiration, termination, cancellation or forfeiture of such award or the settlement of such award in cash, then such shares of our common stock generally shall again be available under the 2013 Incentive Plan. As of June 30, 2015 there were 9,525,870 shares available for future grant under the 2013 Incentive Plan.

Converted Awards

Under the Transaction Agreement, each outstanding Weyerhaeuser equity award held by an employee of WRECO was converted into a similar equity award with TRI Pointe, based on the final exchange ratio of 2.1107 (the “Exchange Ratio”), rounded down to the nearest whole number of shares of common stock. The Company filed a registration statement on Form S-8 (Registration No. 333-197461) on July 16, 2014 to register 4,105,953 shares related to these equity awards. The converted awards have the same terms and conditions as the Weyerhaeuser equity awards except that all performance share units were surrendered in exchange for time-vesting restricted stock units without any performance-based vesting conditions or requirements and the exercise price of each converted stock option is equal to the original exercise price divided by the Exchange Ratio. There will be no future grants under the WRECO equity incentive plans.  Refer to Note 2, Merger with Weyerhaeuser Real Estate Company, for additional information on the Merger.

The following table presents compensation expense recognized related to all stock-based awards (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Total stock-based compensation

 

$

3,161

 

 

$

1,410

 

 

$

5,542

 

 

$

2,703

 

 

As of June 30, 2015, total unrecognized stock-based compensation related to all stock-based awards was $22.4 million and the weighted average term over which the expense was expected to be recognized was 1.94 years.

Summary of Stock Option Activity

The following table presents a summary of stock option awards for the six months ended June 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

Aggregate

 

 

 

 

 

 

 

Exercise

 

 

Remaining

 

 

Intrinsic

 

 

 

 

 

 

 

Price

 

 

Contractual

 

 

Value

 

 

 

Options

 

 

Per Share

 

 

Life

 

 

(in thousands)

 

Options outstanding at December 31, 2014

 

 

3,467,086

 

 

$

13.05

 

 

 

6.0

 

 

$

7,642

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(91,880

)

 

 

10.63

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(11,303

)

 

 

8.39

 

 

 

 

 

 

 

 

 

Options outstanding at June 30, 2015

 

 

3,363,903

 

 

 

13.12

 

 

 

5.6

 

 

 

7,349

 

Options exercisable at June 30, 2015

 

 

2,872,860

 

 

 

12.41

 

 

 

4.9

 

 

 

8,309

 

 

 

- 22 -


 

Summary of Restricted Stock Unit Activity

The following table presents a summary of restricted stock units (“RSUs”) for the six months ended June 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

Aggregate

 

 

 

Restricted

 

 

Grant Date

 

 

Intrinsic

 

 

 

Stock

 

 

Fair Value

 

 

Value

 

 

 

Units

 

 

Per Share

 

 

(in thousands)

 

Nonvested RSUs at December 31, 2014

 

 

900,547

 

 

$

15.62

 

 

$

13,461

 

Granted

 

 

1,511,491

 

 

 

11.46

 

 

 

17,315

 

Vested

 

 

(453,685

)

 

 

13.85

 

 

 

 

 

Forfeited

 

 

(10,193

)

 

 

13.58

 

 

 

 

 

Nonvested RSUs at June 30, 2015

 

 

1,948,160

 

 

 

12.20

 

 

 

29,807

 

 

On March 5, 2015, the Company granted an aggregate of 440,800 restricted stock units to employees and officers. The restricted stock units granted vest annually on the anniversary of the grant date over a three year period.  The fair value of each restricted stock award granted on March 5, 2015 was measured using a price of $14.97 per share, which was the closing stock price on the date of grant.  Each award will be expensed on a straight-line basis over the vesting period.

On March 9, 2015, the Company granted 411,804, 384,351, and 274,536 performance-based RSUs to the Company’s Chief Executive Officer, President, and Chief Financial Officer, respectively, with 1/3 of the performance-based RSU amounts being allocated to each of the three following separate performance goals: total shareholder return (compared to a group of similarly sized homebuilders); earnings per share; and stock price. The performance-based restricted stock units granted will vest in each case, if at all, based on the percentage of attainment of the applicable performance goal. The performance periods for the performance-based RSUs with vesting based on total shareholder return and earnings per share are January 1, 2015 to December 31, 2017. The performance period for the performance-based RSUs with vesting based on stock price is January 1, 2016 to December 31, 2017. The fair value of the performance-based RSUs related to the total shareholder return and stock price performance goals was determined to be $7.55 and $7.90 per share, respectively, based on a Monte Carlo simulation. The fair value of the performance-based RSUs related to the earnings per share goal was measured using a price of $14.57 per share, which was the closing stock price on the date of grant. Each grant will be expensed on a straight-line basis over the expected vesting period.   

As restricted stock units vest, a portion of the shares awarded is generally withheld to cover employee taxes. As a result, the number of restricted stock units vested and the number of shares of TRI Pointe common stock issued will differ.

 

 

17.

Income Taxes

The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statements and tax bases of assets and liabilities using enacted tax rates for the years in which taxes are expected to be paid or recovered.  Each quarter we assess our deferred tax asset to determine whether all or any portion of the asset is more likely than not unrealizable under ASC 740.  We are required to establish a valuation allowance for any portion of the asset we conclude is more likely than not to be unrealizable.  Our assessment considers, among other things, the nature, frequency and severity of our current and cumulative losses, forecasts of our future taxable income, the duration of statutory carryforward periods and tax planning alternatives.

We had net deferred tax assets of $148.4 million and $157.8 million as of June 30, 2015 and December 31, 2014, respectively.  We had a valuation allowance related to those net deferred tax assets of $4.6 million and $6.2 million as of June 30, 2015 and December 31, 2014, respectively.  The Company will continue to evaluate both positive and negative evidence in determining the need for a valuation allowance against its deferred tax assets. Changes in positive and negative evidence, including differences between the Company's future operating results and the estimates utilized in the determination of the valuation allowance, could result in changes in the Company's estimate of the valuation allowance against its deferred tax assets. The accounting for deferred taxes is based upon estimates of future results. Differences between the anticipated and actual outcomes of these future results could have a material impact on the Company's consolidated results of operations or financial position. Also, changes in existing federal and state tax laws and tax rates could affect future tax results and the valuation allowance against the Company's deferred tax assets.

 

- 23 -


 

Our provision for income taxes totaled $30.2 million and $5.8 million for the three months ended June 30, 2015 and 2014, respectively.  Our provision for income taxes totaled $38.1 million and $10.3 million for the six months ended June 30, 2015 and 2014, respectively.  The Company classifies any interest and penalties related to income taxes assessed by jurisdiction as part of income tax expense.  The Company had $16.1 million and $13.8 million of liabilities for uncertain tax positions recorded as of June 30, 2015 and December 31, 2014, respectively.  The Company has not been assessed interest or penalties by any major tax jurisdictions related to prior years. 

 

 

18.

Related Party Transactions

Prior to the Merger, WRECO was a wholly owned subsidiary of Weyerhaeuser.  Weyerhaeuser provided certain services including payroll processing and related employee benefits, other corporate services such as corporate governance, cash management and other treasury services, administrative services such as government relations, tax, internal audit, legal, accounting, human resources and equity-based compensation plan administration, lease of office space, aviation services and insurance coverage. WRECO was allocated a portion of Weyerhaeuser corporate general and administrative costs on either a proportional cost or usage basis.

Weyerhaeuser-allocated corporate general and administrative expenses were as follows (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

 

2014

 

Weyerhaeuser-allocated costs

 

$

 

 

$

5,188

 

 

$

 

 

$

10,735

 

 

These expenses are not indicative of the actual level of expense WRECO would have incurred if it had operated as an independent company or of expenses expected to be incurred in the future after the Closing Date.

TRI Pointe has certain liabilities with Weyerhaeuser related to a tax sharing agreement.   As of June 30, 2015 and December 31, 2014, we had an income tax liability to Weyerhaeuser of $15.9 million and $15.7 million, respectively, which is recorded in accrued expenses and other liabilities on the accompanying balance sheet.

In January of 2015, TRI Pointe acquired 46 lots located in Castle Rock, Colorado, for a purchase price of approximately $2.8 million from an entity managed by an affiliate of the Starwood Capital Group. This acquisition was approved by TRI Pointe independent directors.

 

 

19.

Supplemental Disclosure to Consolidated Statements of Cash Flow

The following are supplemental disclosures to the consolidated statements of cash flows (in thousands):

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2015

 

 

2014

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest, net of amounts capitalized

 

$

 

 

$

97

 

Income taxes

 

$

11,354

 

 

$

14,962

 

Supplemental disclosures of noncash activities:

 

 

 

 

 

 

 

 

Amortization of senior note discount

 

$

765

 

 

$

 

Effect of net consolidation and de-consolidation of

   variable interest entities:

 

 

 

 

 

 

 

 

Increase in consolidated real estate

   inventory not owned

 

$

3,629

 

 

$

28,208

 

Increase in accrued expenses and other liabilities

 

$

300

 

 

$

 

Increase in noncontrolling interests

 

$

(3,929

)

 

$

(28,208

)

 

 

 

- 24 -


 

20.

Supplemental Guarantor Information

On the Closing Date, the Company assumed WRECO’s obligations as issuer of the Senior Notes.  Additionally, all of TRI Pointe’s wholly owned subsidiaries that are guarantors of the Company’s unsecured $550 million revolving credit facility, including WRECO and certain of its wholly owned subsidiaries, entered into supplemental indentures pursuant to which they jointly and severally guaranteed TRI Pointe’s obligations with respect to the Senior Notes.

Presented below are the condensed consolidating balance sheets at June 30, 2015 and December 31, 2014, condensed consolidating statements of operations for the three and six months ended June 30, 2015 and cash flows for the six month period ended June 30, 2015.  TRI Pointe’s non-guarantor subsidiaries represent less than 3% on an individual and aggregate basis of consolidated total assets, total revenues, income from operations before taxes and cash flow from operating activities.  Therefore, the non-guarantor subsidiaries’ information is not separately presented in the tables below.

As discussed in Note 1, the Merger was treated as a “reverse acquisition” with WRECO being considered the accounting acquirer.  Accordingly, the financial statements reflect the historical results of WRECO for all periods and do not include the historical financial information of TRI Pointe prior to the Closing Date.  Subsequent to the Closing Date, the consolidated financial statements reflect the results of the combined company.  As a result, we have not included condensed consolidating statements of operations for the three or six months ended June 30, 2014 or cash flows for the six months ended June 30, 2014 because those results are of WRECO and are already included on the face of the consolidated financial statements.  In addition, there is no financial information for TRI Pointe, issuer of the Senior Notes, in the periods prior to the Closing Date.  

Condensed Consolidating Balance Sheet (in thousands):

 

 

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

TRI Pointe

 

 

Guarantor

 

 

Consolidating

 

 

TRI Pointe

 

 

 

Homes, Inc.

 

 

Subsidiaries

 

 

Adjustments

 

 

Homes, Inc.

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

67,329

 

 

$

54,578

 

 

$

 

 

$

121,907

 

Receivables

 

 

12,721

 

 

 

21,468

 

 

 

 

 

 

34,189

 

Intercompany receivables

 

 

851,310

 

 

 

 

 

 

(851,310

)

 

 

 

Real estate inventories

 

 

696,810

 

 

 

1,838,943

 

 

 

 

 

 

2,535,753

 

Investments in unconsolidated entities

 

 

 

 

 

17,325

 

 

 

 

 

 

 

17,325

 

Goodwill and other intangible assets, net

 

 

162,296

 

 

 

 

 

 

 

 

 

162,296

 

Investments in subsidiaries

 

 

1,007,550

 

 

 

 

 

 

(1,007,550

)

 

 

 

Deferred tax assets

 

 

23,630

 

 

 

124,737

 

 

 

 

 

 

148,367

 

Other assets

 

 

38,948

 

 

 

48,402

 

 

 

 

 

 

87,350

 

Total Assets

 

$

2,860,594

 

 

$

2,105,453

 

 

$

(1,858,860

)

 

$

3,107,187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,449

 

 

$

46,560

 

 

$

 

 

$

51,009

 

Intercompany payables

 

 

 

 

 

851,310

 

 

 

(851,310

)

 

 

 

Accrued expenses and other liabilities

 

 

27,725

 

 

 

177,697

 

 

 

 

 

 

205,422

 

Unsecured revolving credit facility

 

 

399,392

 

 

 

 

 

 

 

 

 

399,392

 

Seller financed loans

 

 

11,990

 

 

 

400

 

 

 

 

 

 

12,390

 

Senior notes

 

 

888,267

 

 

 

 

 

 

 

 

 

888,267

 

Total Liabilities

 

 

1,331,823

 

 

 

1,075,967

 

 

 

(851,310

)

 

 

1,556,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity

 

 

1,528,771

 

 

 

1,007,550

 

 

 

(1,007,550

)

 

 

1,528,771

 

Noncontrolling interests

 

 

 

 

 

21,936

 

 

 

 

 

 

21,936

 

Total Equity

 

 

1,528,771

 

 

 

1,029,486

 

 

 

(1,007,550

)

 

 

1,550,707

 

Total Liabilities and Equity

 

$

2,860,594

 

 

$

2,105,453

 

 

$

(1,858,860

)

 

$

3,107,187

 

 

 

- 25 -


 

20.

Supplemental Guarantor Information (continued)

Condensed Consolidating Balance Sheet (in thousands):

 

 

 

December 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

TRI Pointe

 

 

Guarantor

 

 

Consolidating

 

 

TRI Pointe

 

 

 

Homes, Inc.

 

 

Subsidiaries

 

 

Adjustments

 

 

Homes, Inc.

 

 

 

(unaudited)

 

 

(unaudited)

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

105,888

 

 

$

64,741

 

 

$

 

 

$

170,629

 

Receivables

 

 

5,050

 

 

 

15,068

 

 

 

 

 

 

20,118

 

Intercompany receivables

 

 

797,480

 

 

 

 

 

 

(797,480

)

 

 

 

Real estate inventories

 

 

613,665

 

 

 

1,666,518

 

 

 

 

 

 

2,280,183

 

Investments in unconsolidated entities

 

 

 

 

 

16,805

 

 

 

 

 

 

16,805

 

Goodwill and other intangible assets, net

 

 

156,603

 

 

 

5,960

 

 

 

 

 

 

162,563

 

Investments in subsidiaries

 

 

941,397

 

 

 

 

 

 

(941,397

)

 

 

 

Deferred tax assets

 

 

23,630

 

 

 

134,191

 

 

 

 

 

 

157,821

 

Other assets

 

 

55,199

 

 

 

50,206

 

 

 

 

 

 

105,405

 

Total Assets

 

$

2,698,912

 

 

$

1,953,489

 

 

$

(1,738,877

)

 

$

2,913,524

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

25,800

 

 

$

43,060

 

 

$

 

 

$

68,860

 

Intercompany payables

 

 

 

 

 

797,480

 

 

 

(797,480

)

 

 

 

Accrued expenses and other liabilities

 

 

57,353

 

 

 

152,656

 

 

 

 

 

 

210,009

 

Unsecured revolving credit facility

 

 

260,000

 

 

 

 

 

 

 

 

 

260,000

 

Seller financed loans

 

 

14,077

 

 

 

600

 

 

 

 

 

 

14,677

 

Senior notes

 

 

887,502

 

 

 

 

 

 

 

 

 

887,502

 

Total Liabilities

 

 

1,244,732

 

 

 

993,796

 

 

 

(797,480

)

 

 

1,441,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity

 

 

1,454,180

 

 

 

941,397

 

 

 

(941,397

)

 

 

1,454,180

 

Noncontrolling interests

 

 

 

 

 

18,296

 

 

 

 

 

 

18,296

 

Total Equity

 

 

1,454,180

 

 

 

959,693

 

 

 

(941,397

)

 

 

1,472,476

 

Total Liabilities and Equity

 

$

2,698,912

 

 

$

1,953,489

 

 

$

(1,738,877

)

 

$

2,913,524

 

 

 

- 26 -


 

20.

Supplemental Guarantor Information (continued)

Condensed Consolidating Statement of Operations (in thousands - unaudited):

 

 

 

Three Months Ended June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

TRI Pointe

 

 

Guarantor

 

 

Consolidating

 

 

TRI Pointe

 

 

 

Homes, Inc.

 

 

Subsidiaries

 

 

Adjustments

 

 

Homes, Inc.

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home sales

 

$

130,552

 

 

$

296,686

 

 

$

 

 

$

427,238

 

Land and lot sales

 

 

 

 

 

67,490

 

 

 

 

 

 

67,490

 

Other operations

 

 

 

 

 

789

 

 

 

 

 

 

789

 

Total revenues

 

 

130,552

 

 

 

364,965

 

 

 

 

 

 

495,517

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of home sales

 

 

106,365

 

 

 

235,377

 

 

 

 

 

 

341,742

 

Cost of land and lot sales

 

 

 

 

 

11,564

 

 

 

 

 

 

11,564

 

Other operations

 

 

 

 

 

592

 

 

 

 

 

 

592

 

Sales and marketing

 

 

5,447

 

 

 

20,187

 

 

 

 

 

 

25,634

 

General and administrative

 

 

13,260

 

 

 

15,039

 

 

 

 

 

 

28,299

 

Restructuring charges

 

 

(86

)

 

 

584

 

 

 

 

 

 

498

 

Total expenses

 

 

124,986

 

 

 

283,343

 

 

 

 

 

 

408,329

 

Income from operations

 

 

5,566

 

 

 

81,622

 

 

 

 

 

 

87,188

 

Equity in loss of unconsolidated entities

 

 

 

 

 

(155

)

 

 

 

 

 

(155

)

Other income, net

 

 

(151

)

 

 

120

 

 

 

 

 

 

(31

)

Income before taxes

 

 

5,415

 

 

 

81,587

 

 

 

 

 

 

87,002

 

Provision for income taxes

 

 

(2,388

)

 

 

(27,852

)

 

 

 

 

 

(30,240

)

Equity of net income of subsidiaries

 

 

51,903

 

 

 

 

 

 

(51,903

)

 

 

 

Net income

 

 

54,930

 

 

 

53,735

 

 

 

(51,903

)

 

 

56,762

 

Less: net income attributable to noncontrolling interests

 

 

 

 

 

(1,832

)

 

 

 

 

 

(1,832

)

Net income available to common stockholders

 

$

54,930

 

 

$

51,903

 

 

$

(51,903

)

 

$

54,930

 

 

 

- 27 -


 

20.

Supplemental Guarantor Information (continued)

Condensed Consolidating Statement of Operations (in thousands - unaudited):

 

 

 

Six Months Ended June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

TRI Pointe

 

 

Guarantor

 

 

Consolidating

 

 

TRI Pointe

 

 

 

Homes, Inc.

 

 

Subsidiaries

 

 

Adjustments

 

 

Homes, Inc.

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home sales

 

$

237,410

 

 

$

564,093

 

 

$

 

 

$

801,503

 

Land and lot sales

 

 

 

 

 

69,490

 

 

 

 

 

 

69,490

 

Other operations

 

 

 

 

 

1,782

 

 

 

 

 

 

1,782

 

Total revenues

 

 

237,410

 

 

 

635,365

 

 

 

 

 

 

872,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of home sales

 

 

193,346

 

 

 

448,302

 

 

 

 

 

 

641,648

 

Cost of land and lot sales

 

 

 

 

 

13,873

 

 

 

 

 

 

13,873

 

Other operations

 

 

 

 

 

1,154

 

 

 

 

 

 

1,154

 

Sales and marketing

 

 

10,428

 

 

 

38,492

 

 

 

 

 

 

48,920

 

General and administrative

 

 

25,932

 

 

 

30,546

 

 

 

 

 

 

56,478

 

Restructuring charges

 

 

(86

)

 

 

806

 

 

 

 

 

 

720

 

Total expenses

 

 

229,620

 

 

 

533,173

 

 

 

 

 

 

762,793

 

Income from operations

 

 

7,790

 

 

 

102,192

 

 

 

 

 

 

109,982

 

Equity in loss of unconsolidated entities

 

 

 

 

 

(81

)

 

 

 

 

 

(81

)

Other income, net

 

 

(112

)

 

 

337

 

 

 

 

 

 

225

 

Income before taxes

 

 

7,678

 

 

 

102,448

 

 

 

 

 

 

110,126

 

Provision for income taxes

 

 

(3,215

)

 

 

(34,852

)

 

 

 

 

 

(38,067

)

Equity of net income of subsidiaries

 

 

65,764

 

 

 

 

 

 

(65,764

)

 

 

 

Net income

 

 

70,227

 

 

 

67,596

 

 

 

(65,764

)

 

 

72,059

 

Less: net income attributable to noncontrolling interests

 

 

 

 

 

(1,832

)

 

 

 

 

 

(1,832

)

Net income available to common stockholders

 

$

70,227

 

 

$

65,764

 

 

$

(65,764

)

 

$

70,227

 

 

 

- 28 -


 

20.

Supplemental Guarantor Information (continued)

Condensed Consolidating Statement of Cash Flows (in thousands - unaudited):

 

 

 

Six Months Ended June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated

 

 

 

TRI Pointe

 

 

Guarantor

 

 

Consolidating

 

 

TRI Pointe

 

 

 

Homes, Inc.

 

 

Subsidiaries

 

 

Adjustments

 

 

Homes, Inc.

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

$

(113,102

)

 

$

(63,993

)

 

$

 

 

$

(177,095

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(427

)

 

 

(186

)

 

 

 

 

 

(613

)

Investments in unconsolidated entities

 

 

 

 

 

(1,257

)

 

 

 

 

 

(1,257

)

Intercompany

 

 

(58,117

)

 

 

 

 

 

58,117

 

 

 

 

Net cash used in investing activities

 

 

(58,544

)

 

 

(1,443

)

 

 

58,117

 

 

 

(1,870

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings from debt

 

 

140,000

 

 

 

 

 

 

 

 

 

140,000

 

Repayment of debt

 

 

(2,695

)

 

 

(200

)

 

 

 

 

 

(2,895

)

Debt issuance costs

 

 

(2,688

)

 

 

 

 

 

 

 

 

(2,688

)

Net repayments of debt held by variable interest entities

 

 

 

 

 

(875

)

 

 

 

 

 

(875

)

Contributions from noncontrolling interests

 

 

 

 

 

2,034

 

 

 

 

 

 

2,034

 

Distributions to noncontrolling interests

 

 

 

 

 

(4,155

)

 

 

 

 

 

(4,155

)

Proceeds from issuance of common stock under share-based awards

 

 

660

 

 

 

 

 

 

 

 

 

660

 

Excess tax benefits of share-based awards

 

 

 

 

 

352

 

 

 

 

 

 

352

 

Minimum tax withholding paid on behalf of employees for restricted stock units

 

 

(2,190

)

 

 

 

 

 

 

 

 

(2,190

)

Intercompany

 

 

 

 

 

58,117

 

 

 

(58,117

)

 

 

 

Net cash provided by financing activities

 

 

133,087

 

 

 

55,273

 

 

 

(58,117

)

 

 

130,243

 

Net decrease in cash and cash equivalents

 

 

(38,559

)

 

 

(10,163

)

 

 

 

 

 

(48,722

)

Cash and cash equivalents - beginning of period

 

 

105,888

 

 

 

64,741

 

 

 

 

 

 

170,629

 

Cash and cash equivalents - end of period

 

$

67,329

 

 

$

54,578

 

 

$

 

 

$

121,907

 

 

 

 

- 29 -


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains certain statements relating to future events of our intentions, beliefs, expectations, predictions for the future and other matters that are “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended.

These statements:

·

use forward-looking terminology;

·

are based on various assumptions made by TRI Pointe; and

·

may not prove to be accurate because of risks and uncertainties surrounding the assumptions that are made.

Factors listed in this section – as well as other factors not included – may cause actual results to differ significantly from the forward-looking statements included in this Quarterly Report on Form 10-Q. There is no guarantee that any of the events anticipated by the forward-looking statements in this Quarterly Report on Form 10-Q will occur, or if any of the events occurs, there is no guarantee of what effect it will have on our operations or financial condition.

We will not update the forward-looking statements contained in this Quarterly Report on Form 10-Q, unless otherwise required by law.

Forward-Looking Statements

These forward-looking statements are generally accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “will,” “would,” or other words that convey the uncertainty of future events or outcomes, including, without limitation, our transaction with Weyerhaeuser Real Estate Company (WRECO). These forward-looking statements include, but are not limited to, statements regarding expected benefits of the WRECO transaction, integration plans and expected synergies therefrom, and our anticipated future financial and operating performance and results, including our estimates for growth.

Forward-looking statements are based on a number of factors, including the expected effect of:

·

the economy;

·

laws and regulations;

·

adverse litigation outcome and the adequacy of reserves;

·

changes in accounting principles;

·

projected benefit payments; and

·

projected tax rates and credits.

Risks, Uncertainties and Assumptions

The major risks and uncertainties – and assumptions that are made – that affect our business and may cause actual results to differ from these forward-looking statements include, but are not limited to:

·

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;

 

- 30 -


 

·

energy prices;

·

the effect of weather, including the continuing drought 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;

·

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;

·

the risk that disruptions from the transaction with WRECO will harm our business;

·

our ability to achieve the benefits of the transaction with WRECO in the estimated amount and the anticipated timeframe, if at all;

·

our ability to integrate WRECO successfully and to achieve the anticipated synergies therefrom;

·

change in accounting principles;

·

risks related to unauthorized access to our computer systems, theft of our customer’s confidential information or other forms of cyber-attack; and

·

other factors described in “Risk Factors.”

The following discussion and analysis should be read in conjunction with our  consolidated financial statements and related condensed notes thereto contained elsewhere in this report. The information contained in this Quarterly Report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our securities. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2014, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, and subsequent reports on Form 8-K, which discuss our business in greater detail. The section entitled “Risk Factors” set forth in Item 1A of our Annual Report on Form 10-K, and similar disclosures in our other SEC filings, discuss some of the important risk factors that may affect our business, results of operations and financial condition. You should carefully consider those risks, in addition to the information in this report and in our other filings with the SEC, before deciding to invest in, or maintain your investment in, our common stock.

Reverse Acquisition and Formation of TRI Pointe Group, Inc.

On July 7, 2014 (the “Closing Date”), TRI Pointe Homes, Inc. consummated the previously announced merger (the “Merger”) of our wholly owned subsidiary, Topaz Acquisition, Inc. (“Merger Sub”), with and into Weyerhaeuser Real Estate Company (“WRECO”), with WRECO surviving the Merger and becoming our wholly owned subsidiary, as contemplated by the Transaction Agreement, dated as of November 3, 2013 (the “Transaction Agreement”), by and among us, Weyerhaeuser Company (“Weyerhaeuser”), the Company, WRECO and Merger Sub. The Merger is accounted for in accordance with ASC Topic 805, Business Combinations (“ASC 805”). For accounting purposes, the Merger is treated as a “reverse acquisition” and WRECO is considered the accounting acquirer. Accordingly, WRECO is reflected as the predecessor and acquirer and therefore the accompanying consolidated financial statements reflect the historical consolidated financial statements of WRECO for all periods presented and do not include the historical financial statements of TRI Pointe prior to the Closing Date. Subsequent to the Closing Date, the consolidated financial statements reflect the results of the combined company.

For further information on the Merger, see Note 2, Merger with Weyerhaeuser Real Estate Company, of the condensed notes to the unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.  In the Merger, each issued and outstanding WRECO common share was converted into 1.297 shares of TRI Pointe common stock. The historical issued and outstanding WRECO common shares (100,000,000 common shares for all periods presented prior to the Merger) have been recast as 129,700,000 common shares of the Company for all periods prior to the Merger) in all periods presented to reflect this conversion.

On July 7, 2015, TRI Pointe Homes, Inc., a Delaware corporation (“TRI Pointe Homes”), reorganized its corporate structure (the “Reorganization”) whereby TRI Pointe Homes became a direct, wholly owned subsidiary of TRI Pointe Group, Inc., a Delaware corporation (“TRI Pointe Group”).  Please see "Note Regarding this Quarterly Report" above regarding the reorganization of our corporate structure on July 7, 2015.

 

- 31 -


 

Consolidated Financial Data (in thousands, except per share amounts):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

 

2015

 

 

 

2014

 

 

 

2015

 

 

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home sales

 

$

427,238

 

 

$

309,609

 

 

$

801,503

 

 

$

551,511

 

Land and lot sales

 

 

67,490

 

 

 

27,512

 

 

 

69,490

 

 

 

30,899

 

Other operations

 

 

789

 

 

 

5,442

 

 

 

1,782

 

 

 

8,285

 

Total revenues

 

 

495,517

 

 

 

342,563

 

 

 

872,775

 

 

 

590,695

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of home sales

 

 

341,742

 

 

 

242,709

 

 

 

641,648

 

 

 

433,977

 

Cost of land and lot sales

 

 

11,564

 

 

 

24,765

 

 

 

13,873

 

 

 

27,928

 

Other operations

 

 

592

 

 

 

567

 

 

 

1,154

 

 

 

2,199

 

Sales and marketing

 

 

25,634

 

 

 

23,798

 

 

 

48,920

 

 

 

44,703

 

General and administrative

 

 

28,299

 

 

 

18,184

 

 

 

56,478

 

 

 

36,189

 

Restructuring charges

 

 

498

 

 

 

520

 

 

 

720

 

 

 

2,178

 

Total expenses

 

 

408,329

 

 

 

310,543

 

 

 

762,793

 

 

 

547,174

 

Income from operations

 

 

87,188

 

 

 

32,020

 

 

 

109,982

 

 

 

43,521

 

Equity in loss of unconsolidated entities

 

 

(155

)

 

 

(69

)

 

 

(81

)

 

 

(137

)

Transaction expenses

 

 

 

 

 

(448

)

 

 

 

 

 

(506

)

Other income (expense), net

 

 

(31

)

 

 

(1,476

)

 

 

225

 

 

 

(741

)

Income before taxes

 

 

87,002

 

 

 

30,027

 

 

 

110,126

 

 

 

42,137

 

Provision for income taxes

 

 

(30,240

)

 

 

(5,802

)

 

 

(38,067

)

 

 

(10,331

)

Net income

 

 

56,762

 

 

 

24,225

 

 

 

72,059

 

 

 

31,806

 

Less: net income attributable to

     noncontrolling interests

 

 

(1,832

)

 

 

 

 

 

(1,832

)

 

 

 

Net income available to common stockholders

 

$

54,930

 

 

$

24,225

 

 

$

70,227

 

 

$

31,806

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.34

 

 

$

0.19

 

 

$

0.43

 

 

$

0.25

 

Diluted

 

$

0.34

 

 

$

0.19

 

 

$

0.43

 

 

$

0.25

 

 

Three Months Ended June 30, 2015 Compared to Three Months Ended June 30, 2014

Net New Home Orders, Average Selling Communities and Monthly Absorption Rates by Segment

 

 

 

Three Months Ended June 30, 2015

 

 

Three Months Ended June 30, 2014

 

 

Percentage Change

 

 

 

Net New

 

 

Average

 

 

Monthly

 

 

Net New

 

 

Average

 

 

Monthly

 

 

Net New

 

 

Average

 

 

Monthly

 

 

 

Home

 

 

Selling

 

 

Absorption

 

 

Home

 

 

Selling

 

 

Absorption

 

 

Home

 

 

Selling

 

 

Absorption

 

 

 

Orders

 

 

Communities

 

 

Rates

 

 

Orders

 

 

Communities

 

 

Rates

 

 

Orders

 

 

Communities

 

 

Rates

 

Maracay

 

 

184

 

 

 

18.0

 

 

 

3.4

 

 

 

120

 

 

 

17.0

 

 

 

2.4

 

 

 

53

%

 

 

6

%

 

 

45

%

Pardee

 

 

355

 

 

 

23.5

 

 

 

5.0

 

 

 

284

 

 

 

20.0

 

 

 

4.7

 

 

 

25

%

 

 

18

%

 

 

6

%

Quadrant

 

 

116

 

 

 

10.8

 

 

 

3.6

 

 

 

106

 

 

 

14.0

 

 

 

2.5

 

 

 

9

%

 

 

(23

)%

 

 

43

%

Trendmaker

 

 

124

 

 

 

26.5

 

 

 

1.6

 

 

 

166

 

 

 

24.5

 

 

 

2.3

 

 

 

(25

)%

 

 

8

%

 

 

(31

)%

TRI Pointe

 

 

365

 

 

 

26.5

 

 

 

4.6

 

 

 

 

 

 

 

 

 

 

 

N/A

 

 

N/A

 

 

N/A

 

Winchester

 

 

94

 

 

 

14.3

 

 

 

2.2

 

 

 

87

 

 

 

22.0

 

 

 

1.3

 

 

 

8

%

 

 

(35

)%

 

 

67

%

Total

 

 

1,238

 

 

 

119.5

 

 

 

3.5

 

 

 

763

 

 

 

97.5

 

 

 

2.6

 

 

 

62

%

 

 

23

%

 

 

32

%

 

Net new home orders for the three months ended June 30, 2015 increased 62% to 1,238, compared to 763 during the prior year period.  Our overall absorption rate for the three months ended June 30, 2015 was 10.4 per average selling community (3.5 monthly), compared to 7.8 per average selling community (2.6 monthly) during the prior year period.  The increase in net new home orders, average selling communities and monthly absorption rate was primarily the result of the addition of TRI Pointe, which had 365 orders, 26.5 average selling communities and a monthly absorption rate of 4.6 per average selling community in the three months ended June 30, 2015 with no comparable amounts in the prior year period.  In addition, the increase in net new home orders was positively impacted by an increase in our monthly absorption rate in all of our segments compared to the prior year period except for Trendmaker, which experienced a decrease as a result of a slowdown in the premium housing market in Houston driven by inclement weather during the period and by the uncertainty around oil prices.  

 

- 32 -


 

Backlog Units, Dollar Value and Average Sales Price by Segment (dollars in thousands)

 

 

 

As of June 30, 2015

 

 

As of June 30, 2014

 

 

Percentage Change

 

 

 

 

 

 

 

Backlog

 

 

Average

 

 

 

 

 

 

Backlog

 

 

Average

 

 

 

 

 

 

Backlog

 

 

Average

 

 

 

Backlog

 

 

Dollar

 

 

Sales

 

 

Backlog

 

 

Dollar

 

 

Sales

 

 

Backlog

 

 

Dollar

 

 

Sales

 

 

 

Units

 

 

Value

 

 

Price

 

 

Units

 

 

Value

 

 

Price

 

 

Units

 

 

Value

 

 

Price

 

Maracay

 

 

274

 

 

$

106,347

 

 

$

388

 

 

 

149

 

 

$

61,255

 

 

$

411

 

 

 

84

%

 

 

74

%

 

 

(6

)%

Pardee

 

 

471

 

 

 

296,298

 

 

 

629

 

 

 

428

 

 

 

238,276

 

 

 

557

 

 

 

10

%

 

 

24

%

 

 

13

%

Quadrant

 

 

199

 

 

 

87,233

 

 

 

438

 

 

 

155

 

 

 

77,671

 

 

 

501

 

 

 

28

%

 

 

12

%

 

 

(13

)%

Trendmaker

 

 

243

 

 

 

128,645

 

 

 

529

 

 

 

262

 

 

 

136,115

 

 

 

520

 

 

 

(7

)%

 

 

(5

)%

 

 

2

%

TRI Pointe

 

 

631

 

 

 

449,080

 

 

 

712

 

 

 

 

 

 

 

 

 

 

 

N/A

 

 

N/A

 

 

N/A

 

Winchester

 

 

180

 

 

 

132,244

 

 

 

735

 

 

 

197

 

 

 

156,908

 

 

 

796

 

 

 

(9

)%

 

 

(16

)%

 

 

(8

)%

Total

 

 

1,998

 

 

$

1,199,847

 

 

$

601

 

 

 

1,191

 

 

$

670,225

 

 

$

563

 

 

 

68

%

 

 

79

%

 

 

7

%

 

Backlog units reflects the number of homes, net of actual cancellations experienced during the period, for which we have entered into sales contracts with customers but for which we have not yet delivered the homes. Homes in backlog are generally delivered within three to nine months, although we may experience cancellations of sales contracts prior to delivery. Our cancellation rate of buyers who contracted to buy a home but did not close escrow (as a percentage of overall orders) was 16% for the three months ended June 30, 2015 and June 30, 2014, respectively. The dollar value of backlog was $1.2 billion as of June 30, 2015, an increase of $529.6 million, or 79%, compared to $670.2 million as of June 30, 2014.  This increase is due to an increase in the number of homes in backlog of 807, or 68%, to 1,998 homes as of June 30, 2015 from 1,191 homes as of June 30, 2014, in addition to an increase in the average sales price of homes in backlog of $38,000, or 7%, to $601,000 as of June 30, 2015 compared to $563,000 as of June 30, 2014.  The increase in the number of homes in backlog and the average sales price of homes in backlog was mainly the result of the addition of TRI Pointe, which had 631 homes in backlog and an average sales price in backlog of $712,000 as of June 30, 2015.  In addition to the increases associated with TRI Pointe in the current year period, backlog units and backlog dollar value increased at three of our reporting segments existing in the prior year period, with the exception of Trendmaker and Winchester.  

New Homes Delivered, Homes Sales Revenue and Average Sales Price by Segment (dollars in thousands)

 

 

 

Three Months Ended June 30, 2015

 

 

Three Months Ended June 30, 2014

 

 

Percentage Change

 

 

 

New

 

 

Home

 

 

Average

 

 

New

 

 

Home

 

 

Average

 

 

New

 

 

Home

 

 

Average

 

 

 

Homes

 

 

Sales

 

 

Sales

 

 

Homes

 

 

Sales

 

 

Sales

 

 

Homes

 

 

Sales

 

 

Sales

 

 

 

Delivered

 

 

Revenue

 

 

Price

 

 

Delivered

 

 

Revenue

 

 

Price

 

 

Delivered

 

 

Revenue

 

 

Price

 

Maracay

 

 

91

 

 

$

33,574

 

 

$

369

 

 

 

93

 

 

$

35,045

 

 

$

377

 

 

 

(2

)%

 

 

(4

)%

 

 

(2

)%

Pardee

 

 

242

 

 

 

110,231

 

 

 

456

 

 

 

246

 

 

 

118,905

 

 

 

483

 

 

 

(2

)%

 

 

(7

)%

 

 

(6

)%

Quadrant

 

 

87

 

 

 

35,689

 

 

 

410

 

 

 

67

 

 

 

25,180

 

 

 

376

 

 

 

30

%

 

 

42

%

 

 

9

%

Trendmaker

 

 

123

 

 

 

64,652

 

 

 

526

 

 

 

139

 

 

 

67,756

 

 

 

487

 

 

 

(12

)%

 

 

(5

)%

 

 

8

%

TRI Pointe

 

 

174

 

 

 

130,553

 

 

 

750

 

 

 

 

 

 

 

 

 

 

 

N/A

 

 

N/A

 

 

N/A

 

Winchester

 

 

81

 

 

 

52,539

 

 

 

649

 

 

 

83

 

 

 

62,723

 

 

 

756

 

 

 

(2

)%

 

 

(16

)%

 

 

(14

)%

Total

 

 

798

 

 

$

427,238

 

 

$

535

 

 

 

628

 

 

$

309,609

 

 

$

493

 

 

 

27

%

 

 

38

%

 

 

9

%

 

Home sales revenue increased $117.6 million, or 38%, to $427.2 million for the three months ended June 30, 2015 from $309.6 million for the prior year period. The increase was comprised of: (i) $91.0 million related to an increase in average sales price of $42,000 per home to $535,000 for the three months ended June 30, 2015 from $493,000 in the prior year period; and (ii) $26.6 million due to a 27% increase in homes delivered to 798 for the three months ended June 30, 2015 from 628 in the prior year period. The increase in the average sales price and new home deliveries was primarily attributable to the addition of TRI Pointe, which had an average selling price of homes delivered of $750,000 and 174 deliveries with no comparable amounts in the prior year period.

 

- 33 -


 

Homebuilding Gross Margins (dollars in thousands)

 

 

 

Three Months Ended June 30,

 

 

 

2015

 

 

%

 

 

2014

 

 

%

 

Home sales

 

$

427,238

 

 

 

100.0

%

 

$

309,609

 

 

 

100.0

%

Cost of home sales

 

 

341,742

 

 

 

80.0

%

 

 

242,709

 

 

 

78.4

%

Homebuilding gross margin

 

 

85,496

 

 

 

20.0

%

 

 

66,900

 

 

 

21.6

%

Add:  interest in cost of home sales

 

 

7,640

 

 

 

1.8

%

 

 

5,340

 

 

 

1.7

%

Add:  impairments and lot option abandonments

 

 

882

 

 

 

0.2

%

 

 

(22

)

 

 

0.0

%

Adjusted homebuilding gross margin(1)

 

$

94,018

 

 

 

22.0

%

 

$

72,218

 

 

 

23.3

%

Homebuilding gross margin percentage

 

 

20.0

%

 

 

 

 

 

 

21.6

%

 

 

 

 

Adjusted homebuilding gross margin percentage(1)

 

 

22.0

%

 

 

 

 

 

 

23.3

%

 

 

 

 

(1)

Non-GAAP financial measure (as discussed below).

Our homebuilding gross margin percentage decreased to 20.0% for the three months ended June 30, 2015 as compared to 21.6% for the prior year period. The decrease was primarily due to increases in land, labor and material costs outpacing home price appreciation. Excluding interest and impairment and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 22.0% for the three months ended June 30, 2015, compared to 23.3% for the prior year period. The decrease in the adjusted homebuilding gross margin was consistent with the change in non-adjusted homebuilding gross margin.

Adjusted homebuilding gross margin is a non-GAAP financial measure. We believe this information is meaningful as it isolates the impact that leverage and noncash charges have on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion. See the table above reconciling this non-GAAP financial measure to homebuilding gross margin, the nearest GAAP equivalent.

Land and Lot Gross Margins (dollars in thousands)

 

 

 

Three Months Ended June 30,

 

 

 

2015

 

 

%

 

 

2014

 

 

%

 

Land and lot sales

 

$

67,490

 

 

 

100.0

%

 

$

27,512

 

 

 

100.0

%

Cost of land and lot sales

 

 

11,564

 

 

 

17.1

%

 

 

24,765

 

 

 

90.0

%

Land and lot gross margin

 

$

55,926

 

 

 

82.9

%

 

$

2,747

 

 

 

10.0

%

Our land and lot gross margin percentage increased to 82.9% for the three months ended June 30, 2015 as compared to 10.0% for the prior year period. The increases in land and lot sales revenue and gross margin percentage were mainly due to the sale of a 15.72 acre employment center located in the Pacific Highlands Ranch community in the San Diego, California division of our Pardee Homes reporting segment.  The sale was completed in June of 2015 for $53 million in cash.  The transaction included significant gross margins due to the low land basis of the Pacific Highlands Ranch community which was acquired in 1981.  

Sales and Marketing, General and Administrative Expense (dollars in thousands)

 

 

 

Three Months Ended

 

 

As a Percentage of

 

 

 

June 30,

 

 

Home Sales Revenue

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Sales and marketing

 

$

25,634

 

 

$

23,798

 

 

 

6.0

%

 

 

7.7

%

General and administrative (G&A)

 

 

28,299

 

 

 

18,184

 

 

 

6.6

%

 

 

5.9

%

Total sales and marketing and G&A

 

$

53,933

 

 

$

41,982

 

 

 

12.6

%

 

 

13.6

%

Sales and marketing expense as a percentage of home sales revenue decreased to 6.0% for the three months ended June 30, 2015 from 7.7% for the three months ended June 30, 2014 mainly due to the addition of TRI Pointe Homes which has a lower sales and marketing expense as a percentage of home sales revenue due to a strong sales absorption pace driving higher deliveries and higher average sales prices for homes delivered during the period.  The 7.6% increase in sales and marketing expense was related primarily to the addition of TRI Pointe Homes for the three month period ended June 30, 2015, representing $5.2 million of sales and marketing expenses, with no comparable amounts in the prior year period.  This amount was offset by decreases in all but one of the existing segments for the three months ending June 30, 2015 compared to the same prior year period.

 

- 34 -


 

General and administrative expense increased by $10.1 million to $28.3 million for the three month period ended June 30, 2015 from $18.2 million for the three month period ended June 30, 2014.   General and administrative expenses were 6.6% of home sales revenue for the three months ended June 30, 2015 compared to 5.9% of home sales revenue for the same period in the prior year.  The increase in general and administrative expenses as a percentage of home sales revenue is due primarily to employee related costs with the addition of TRI Pointe Homes and the cost of being a standalone public company with no comparable amounts in the prior year period.

Total sales and marketing and G&A (“SG&A”) expense increased $11.9 million, or 28.3%, to $53.9 million for the three months ended June 30, 2015 from $42.0 million in the prior year period due primarily to the addition of TRI Pointe Homes in the current year, but improved to 12.6% of home sales revenue from 13.6% for the three months ended June 30, 2015 and 2014, respectively.

Restructuring Charges

Restructuring charges decreased to $498,000 for the three months ended June 30, 2015 compared to $520,000 in the same period in the prior year.  The decrease was mainly due to higher employee-related restructuring costs in 2014, largely related to retention, severance and related costs in connection with the Merger.  

Interest

Interest, which was incurred principally to finance land acquisitions, land development and home construction, totaled $15.1 million and $6.6 million for the three months ended June 30, 2015 and 2014, respectively.  The capitalized portion of interest incurred was $15.1 million and $4.3 million for the three months ended June 30, 2015 and 2014, respectively.  The increase in interest incurred during the three months ended June 30, 2015 as compared to the prior year period was primarily attributable to an increase in our outstanding debt and higher interest rates as a result of the issuance of the Senior Notes in connection with the Merger as well as funding the overall growth of the Company.

Income Tax

For the three months ended June 30, 2015, we recorded a tax provision of $30.2 million based on an effective tax rate of 34.8%.  For the three months ended June 30, 2014, we recorded a tax provision of $5.8 million based on an effective tax rate of 19.3%. The increase in our effective rate was due to a non-recurring tax benefit recorded during the second quarter 2014 related the establishment of a $5.8 million deferred tax asset for our tax over book basis in our shares of WRI stock.  This non-recurring tax benefit reduced our effective rate for the three months ended June 30, 2014 by 19.3%.  Without the non-recurring tax benefit our effective rate for the three months ended June 30, 2014 would have been 38.6%, which is comparable to our effective rate for the three months ended June 30, 2015.

 

Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014

Net New Home Orders, Average Selling Communities and Monthly Absorption Rates by Segment

 

 

 

Six Months Ended June 30, 2015

 

 

Six Months Ended June 30, 2014

 

 

Percentage Change

 

 

 

Net New

 

 

Average

 

 

Monthly

 

 

Net New

 

 

Average

 

 

Monthly

 

 

Net New

 

 

Average

 

 

Monthly

 

 

 

Home

 

 

Selling

 

 

Absorption

 

 

Home

 

 

Selling

 

 

Absorption

 

 

Home

 

 

Selling

 

 

Absorption

 

 

 

Orders

 

 

Communities

 

 

Rates

 

 

Orders

 

 

Communities

 

 

Rates

 

 

Orders

 

 

Communities

 

 

Rates

 

Maracay

 

 

345

 

 

 

17.4

 

 

 

3.3

 

 

 

225

 

 

 

16.0

 

 

 

2.3

 

 

 

53

%

 

 

9

%

 

 

41

%

Pardee

 

 

663

 

 

 

22.0

 

 

 

5.0

 

 

 

529

 

 

 

19.7

 

 

 

4.5

 

 

 

25

%

 

 

12

%

 

 

12

%

Quadrant

 

 

266

 

 

 

10.4

 

 

 

4.3

 

 

 

204

 

 

 

13.3

 

 

 

2.6

 

 

 

30

%

 

 

(22

)%

 

 

67

%

Trendmaker

 

 

256

 

 

 

26.4

 

 

 

1.6

 

 

 

309

 

 

 

23.1

 

 

 

2.2

 

 

 

(17

)%

 

 

14

%

 

 

(28

)%

TRI Pointe

 

 

701

 

 

 

26.3

 

 

 

4.4

 

 

 

 

 

 

 

 

 

 

 

N/A

 

 

N/A

 

 

N/A

 

Winchester

 

 

201

 

 

 

13.6

 

 

 

2.5

 

 

 

163

 

 

 

21.9

 

 

 

1.2

 

 

 

23

%

 

 

(38

)%

 

 

99

%

Total

 

 

2,432

 

 

 

116.1

 

 

 

3.5

 

 

 

1,430

 

 

 

94.0

 

 

 

2.5

 

 

 

70

%

 

 

24

%

 

 

38

%

 

 

- 35 -


 

Net new home orders for the six months ended June 30, 2015 increased 70% to 2,432, compared to 1,430 during the prior year period.  Our overall absorption rate for the six months ended June 30, 2015 was 20.9 per average selling community (3.5 monthly), compared to 15.2 per average selling community (2.5 monthly) during the prior year period.  The increase in net new home orders, average selling communities and monthly absorption rate was primarily due to the addition of TRI Pointe, which had 701 orders, 26.3 average selling communities and a monthly absorption rate of 4.4 per average selling community in the six month period ended June 30, 2015 with no comparable amounts in the prior year period.   In addition, the increase in net new home orders was due to an increase in our monthly absorption rate in all of our reporting segments, except for Trendmaker which experienced a decrease as a result of a slowdown in the premium housing market in Houston driven by inclement weather during the period and by the uncertainty around oil prices.  

New Homes Delivered, Homes Sales Revenue and Average Sales Price by Segment (dollars in thousands)

 

 

 

Six Months Ended June 30, 2015

 

 

Six Months Ended June 30, 2014

 

 

Percentage Change

 

 

 

New

 

 

Home

 

 

Average

 

 

New

 

 

Home

 

 

Average

 

 

New

 

 

Home

 

 

Average

 

 

 

Homes

 

 

Sales

 

 

Sales

 

 

Homes

 

 

Sales

 

 

Sales

 

 

Homes

 

 

Sales

 

 

Sales

 

 

 

Delivered

 

 

Revenue

 

 

Price

 

 

Delivered

 

 

Revenue

 

 

Price

 

 

Delivered

 

 

Revenue

 

 

Price

 

Maracay

 

 

176

 

 

$

66,051

 

 

$

375

 

 

 

192

 

 

$

70,275

 

 

$

366

 

 

 

(8

)%

 

 

(6

)%

 

 

3

%

Pardee

 

 

410

 

 

 

195,889

 

 

 

478

 

 

 

381

 

 

 

186,302

 

 

 

489

 

 

 

8

%

 

 

5

%

 

 

(2

)%

Quadrant

 

 

180

 

 

 

79,025

 

 

 

439

 

 

 

145

 

 

 

56,269

 

 

 

388

 

 

 

24

%

 

 

40

%

 

 

13

%

Trendmaker

 

 

231

 

 

 

120,860

 

 

 

523

 

 

 

269

 

 

 

129,156

 

 

 

480

 

 

 

(14

)%

 

 

(6

)%

 

 

9

%

TRI Pointe

 

 

313

 

 

 

237,411

 

 

 

759

 

 

 

 

 

 

 

 

 

 

 

N/A

 

 

N/A

 

 

N/A

 

Winchester

 

 

156

 

 

 

102,267

 

 

 

656

 

 

 

149

 

 

 

109,509

 

 

 

735

 

 

 

5

%

 

 

(7

)%

 

 

(11

)%

Total

 

 

1,466

 

 

$

801,503

 

 

$

547

 

 

 

1,136

 

 

$

551,511

 

 

$

485

 

 

 

29

%

 

 

45

%

 

 

13

%

 

Home sales revenue increased $250.0 million, or 45%, to $801.5 million for the six months ended June 30, 2015 from $551.5 million for the prior year period. The increase was comprised of: (i) $180.4 million related to an increase in average sales price of $62,000 per home to $547,000 for the six months ended June 30, 2015 from $485,000 in the prior year period; and (ii) $69.6 million due to a 29% increase in homes delivered to 1,466 for the six months ended June 30, 2015 from 1,136 in the prior year period. The increase in the average sales price and new home deliveries was primarily attributable to the addition of TRI Pointe with no comparable amounts in the prior year period. In addition, the average sales price of homes delivered increased at all but two of our reporting segments due to a change in product mix with a shift to a more move-up product in certain markets and price increases in certain markets.  The average sales price at Winchester and Pardee declined for the six months ended June 30, 2015 compared to the same prior year period primarily due to a change in product mix.  

Homebuilding Gross Margins (dollars in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

%

 

 

2014

 

 

%

 

Home sales

 

$

801,503

 

 

 

100.0

%

 

$

551,511

 

 

 

100.0

%

Cost of home sales

 

 

641,648

 

 

 

80.1

%

 

 

433,977

 

 

 

78.7

%

Homebuilding gross margin

 

 

159,855

 

 

 

19.9

%

 

 

117,534

 

 

 

21.3

%

Add:  interest in cost of home sales

 

 

14,351

 

 

 

1.8

%

 

 

8,640

 

 

 

1.6

%

Add:  impairments and lot option abandonments

 

 

1,227

 

 

 

0.2

%

 

 

407

 

 

 

0.1

%

Adjusted homebuilding gross margin(1)

 

$

175,433

 

 

 

21.9

%

 

$

126,581

 

 

 

23.0

%

Homebuilding gross margin percentage

 

 

19.9

%

 

 

 

 

 

 

21.3

%

 

 

 

 

Adjusted homebuilding gross margin percentage(1)

 

 

21.9

%

 

 

 

 

 

 

23.0

%

 

 

 

 

(1)

Non-GAAP financial measure (as discussed below).

Our homebuilding gross margin percentage decreased to 19.9% for the six months ended June 30, 2015 as compared to 21.3% for the prior year period. The decrease was primarily due to increases in land, labor and material costs outpacing home price appreciation. Excluding interest and impairment and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 21.9% for the six months ended June 30, 2015, compared to 23.0% for the prior year period. The decrease in the adjusted homebuilding gross margin was consistent with the change in non-adjusted homebuilding gross margin.

 

- 36 -


 

Adjusted homebuilding gross margin is a non-GAAP financial measure. We believe this information is meaningful as it isolates the impact that leverage and noncash charges have on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion. See the table above reconciling this non-GAAP financial measure to homebuilding gross margin, the nearest GAAP equivalent.

Land and Lot Gross Margins (dollars in thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2015

 

 

%

 

 

2014

 

 

%

 

Land and lot sales

 

$

69,490

 

 

 

100.0

%

 

$

30,899

 

 

 

100.0

%

Cost of land and lot sales

 

 

13,873

 

 

 

20.0

%

 

 

27,928

 

 

 

90.4

%

Land and lot gross margin

 

$

55,617

 

 

 

80.0

%

 

$

2,971

 

 

 

9.6

%

Our land and lot gross margin percentage increased to 80.0% for the six months ended June 30, 2015 as compared to 9.6% for the prior year period. The increases in land and lot sales revenue and gross margin percentage were mainly due to the sale of a 15.72 acre employment center located in the Pacific Highlands Ranch community in the San Diego, California division of our Pardee Homes reporting segment.  The sale was completed in June of 2015 for $53 million in cash.  The transaction included significant gross margins due to the low land basis of the Pacific Highlands Ranch community which was acquired in 1981.  

Sales and Marketing, General and Administrative Expense (dollars in thousands)

 

 

 

Six Months Ended

 

 

As a Percentage of

 

 

 

June 30,

 

 

Home Sales Revenue

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Sales and marketing

 

$

48,920

 

 

$

44,703

 

 

 

6.1

%

 

 

8.1

%

General and administrative (G&A)

 

 

56,478

 

 

 

36,189

 

 

 

7.0

%

 

 

6.6

%

Total sales and marketing and G&A

 

$

105,398

 

 

$

80,892

 

 

 

13.2

%

 

 

14.7

%

 

Sales and marketing expense decreased to 6.1% of home sales revenue for the six months ended June 30, 2015 from 8.1% for the six months ended June 30, 2014 mainly due to the addition of TRI Pointe Homes which has a lower sales and marketing expense as a percentage of home sales revenue due to a strong sales absorption pace driving higher deliveries and higher average sales prices for homes delivered during the period.  The 9.4% increase in sales and marketing expense was related primarily to the addition of TRI Pointe Homes for the six month period ended June 30, 2015, representing $10.0 million of sales and marketing expenses, with no comparable amounts in the prior year period.  This amount was offset by decreases in each of the existing segments for the six months ending June 30, 2015 compared to the same prior year period.

General and administrative expense increased by $20.3 million to $56.5 million for the six month period ended June 30, 2015 from $36.2 million for the six month period ended June 30, 2014.   General and administrative expenses were 7.0% of home sales revenue for the six months ended June 30, 2015 compared to 6.6% of home sales revenue for the same period in the prior year.  The slight increase in general and administrative expenses as a percentage of home sales revenue is due primarily to employee related costs with the addition of TRI Pointe Homes and the cost of being a standalone public company with no comparable amounts in the prior year period.

Total sales and marketing and G&A (“SG&A”) expense increased $24.5 million, or 30.3%, to $105.4 million for the six months ended June 30, 2015 from $80.9 million in the prior year period due primarily to the addition of TRI Pointe Homes in the current year, but improved to 13.2% of home sales revenue from 14.7% for the six months ended June 30, 2015 and 2014, respectively.

Restructuring Charges

Restructuring charges decreased to $720,000 for the six months ended June 30, 2015 compared to $2.2 million in the same period in the prior year.  The decrease was mainly due to higher employee-related restructuring costs in 2014 related to retention, severance and related costs in connection with the Merger.  

 

- 37 -


 

Interest

Interest, which was incurred principally to finance land acquisitions, land development and home construction, totaled $30.3 million and $10.6 million for the six months ended June 30, 2015 and 2014, respectively.  The capitalized portion of interest incurred was $30.3 million and $8.1 million for the six months ended June 30, 2015 and 2014, respectively.  The increase in interest incurred during the six months ended June 30, 2015 as compared to the prior year period was primarily attributable to an increase in our outstanding debt and higher interest rates as a result of the issuance of the Senior Notes in connection with the Merger.

Income Tax

For the six months ended June 30, 2015, we recorded a tax provision of $38.1 million based on an effective tax rate of 34.6%.  For the six months ended June 30, 2014, we recorded a tax provision of $10.3 million based on an effective tax rate of 24.5%. The increase in our effective rate was due to a non-recurring tax benefit recorded during the second quarter 2014 related the establishment of a $5.8 million deferred tax asset for our tax over book basis in our shares of WRI stock.  This non-recurring tax benefit reduced our effective rate for the six months ended June 30, 2014 by 13.7%.  Without the non-recurring tax benefit our effective rate for the six months ended June 30, 2014 would have been 38.2% which is comparable to our effective rate for the six months ended June 30, 2015.

Lots Owned or Controlled by Segment

Excluded from owned and controlled lots are those related to Note 8, Investments in Unconsolidated Entities.  The table below summarizes our lots owned or controlled by segment as of the dates presented:

 

 

 

 

 

 

 

 

 

 

 

Increase

 

 

 

June 30,

 

 

(Decrease)

 

 

 

 

2015

 

 

 

2014

 

 

Amount

 

 

%

 

Lots Owned

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maracay

 

 

1,485

 

 

 

1,289

 

 

 

196

 

 

 

15

%

Pardee

 

 

17,022

 

 

 

17,633

 

 

 

(611

)

 

 

(3

)%

Quadrant

 

 

995

 

 

 

1,025

 

 

 

(30

)

 

 

(3

)%

Trendmaker

 

 

837

 

 

 

673

 

 

 

164

 

 

 

24

%

TRI Pointe

 

 

2,920

 

 

 

 

 

 

2,920

 

 

N/A

 

Winchester

 

 

2,284

 

 

 

2,066

 

 

 

218

 

 

 

11

%

Total

 

 

25,543

 

 

 

22,686

 

 

 

2,857

 

 

 

13

%

Lots Controlled(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maracay

 

 

327

 

 

 

783

 

 

 

(456

)

 

 

(58

)%

Pardee

 

 

173

 

 

 

680

 

 

 

(507

)

 

 

(75

)%

Quadrant

 

 

421

 

 

 

485

 

 

 

(64

)

 

 

(13

)%

Trendmaker

 

 

1,274

 

 

 

1,371

 

 

 

(97

)

 

 

(7

)%

TRI Pointe

 

 

735

 

 

 

 

 

 

735

 

 

N/A

 

Winchester

 

 

448

 

 

 

977

 

 

 

(529

)

 

 

(54

)%

Total

 

 

3,378

 

 

 

4,296

 

 

 

(918

)

 

 

(21

)%

Total Lots Owned or Controlled(1)

 

 

28,921

 

 

 

26,982

 

 

 

1,939

 

 

 

7

%

 

(1)

As of June 30, 2015 and 2014, lots controlled included lots that were under land option contracts or purchase contracts.

 

Liquidity and Capital Resources

Overview

Our principal uses of capital for the three and six months ended June 30, 2015 were operating expenses, land purchases, land development and home construction. We used funds generated by our operations and available borrowings to meet our short-term working capital requirements. We remain focused on generating positive margins in our homebuilding operations and acquiring desirable land positions in order to maintain a strong balance sheet and keep us poised for growth. As of June 30, 2015, we had $121.9 million of cash and cash equivalents. We believe we have sufficient cash and sources of financing for at least the next twelve months.

 

- 38 -


 

Our board of directors will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the ability of particular assets, and our company as a whole, to generate cash flow to cover the expected debt service. Our charter does not contain a limitation on the amount of debt we may incur and our board of directors may change our target debt levels at any time without the approval of our stockholders.

Assumption of Senior Notes

On the Closing Date, TRI Pointe assumed WRECO’s obligations as issuer of $450 million aggregate principal amount of its 4.375% Senior Notes due 2019 (“2019 Notes”) and $450 million aggregate principal amount of its 5.875% Senior Notes due 2024 (“2024 Notes” and together with the 2019 Notes, the “Senior Notes”). The 2019 Notes were issued at 98.89% of their aggregate principal amount and the 2024 Notes were issued at 98.15% of their aggregate principal amount. The net proceeds of $861.3 million, after debt issuance costs and discounts, from the offering were deposited into two separate escrow accounts following the closing of the offering on June 13, 2014. Upon release of the escrowed funds on the Closing Date, and prior to the consummation of the Merger, WRECO paid $743.7 million in cash to the former direct parent entity of WRECO, which cash was retained by Weyerhaeuser and its subsidiaries (other than WRECO and its subsidiaries). The payment consisted of the $739 million Payment Amount (as defined in the Transaction Agreement) as well as $4.7 million in payment of all unpaid interest on the debt payable to Weyerhaeuser that accrued from November 3, 2013 to the Closing Date. The remaining $117.6 million of proceeds was retained by TRI Pointe and used for general corporate purposes.

The 2019 Notes and 2024 Notes mature on June 15, 2019 and June 15, 2024, respectively. Interest is payable semiannually in arrears on June 15 and December 15.  As of June 30, 2015, no principal has been paid on the Senior Notes, and there was $22.1 million of capitalized debt financing costs related to the Senior Notes, included in other assets on our consolidated balance sheet. These costs will amortize over the respective lives of the Senior Notes.

Unsecured Revolving Credit Facility

In May 2015, the Company amended its unsecured revolving credit facility (the “Credit Facility”) from $425 million to $550 million.  The Credit Facility matures on July 1, 2018, and contains a sublimit of $75 million for letters of credit. The Company may borrow under the Credit Facility in the ordinary course of business to fund its operations, including its land development and homebuilding activities. Borrowings under the Credit Facility will be governed by, among other things, a borrowing base. The Credit Facility contains customary affirmative and negative covenants, including financial covenants relating to consolidated tangible net worth, leverage, and liquidity or interest coverage. Interest rates on borrowings will be based on either a daily Eurocurrency base rate or a Eurocurrency rate, in either case, plus a spread ranging from 1.45% to 2.20% depending on the Company’s leverage ratio.

As of June 30, 2015 the outstanding balance under the Credit Facility was $399.4 million with an interest rate 2.14% per annum and $141.1 million of availability after considering the borrowing base provisions and outstanding letters of credit.  At June 30, 2015 we had outstanding letters of credit of $9.5 million.  These letters of credit were issued to secure various financial obligations.  We believe it is not probable that any outstanding letters of credit will be drawn upon.

Seller Financed Loan

As of June 30, 2015, the Company had $12.4 million outstanding related to seller financed loans to acquire lots for the construction of homes.  Principal and interest payments on these loans are due at various maturity dates, including at the time individual homes associated with the acquired land are delivered.  As of June 30, 2015, the seller financed loans will accrue interest at a weighted average rate of 6.97% per annum, with interest calculated on a daily basis. Any remaining unpaid balance on these loans is due in May 2016.

 

- 39 -


 

Covenant Compliance

Under our Credit Facility, we are required to comply with certain financial covenants, including, but not limited to, those set forth in the table below (dollars in thousands):

 

 

 

 

 

 

 

Covenant

 

 

 

Actual at

 

 

Requirement at

 

 

 

June 30,

 

 

June 30,

 

Financial Covenants

 

2015

 

 

2015

 

Consolidated Tangible Net Worth

 

$

1,366,475

 

 

$

903,350

 

(Not less than $875.9 million plus 50% of net income and

   50% of the net proceeds from equity offerings after

   March 31, 2015)

 

 

 

 

 

 

 

 

Leverage Test

 

 

47

%

 

<55%

 

(Not to exceed 55%)

 

 

 

 

 

 

 

 

Interest Coverage Test

 

 

4.72

 

 

>1.5

 

(Not less than 1.5:1.0)

 

 

 

 

 

 

 

 

 

As of June 30, 2015 we were in compliance with all of these financial covenants.

Leverage Ratios

We believe that our leverage ratios provide useful information to the users of our financial statements regarding our financial position and cash and debt management. The ratio of debt-to-capital and the ratio of net debt-to-capital are calculated as follows (dollars in thousands):  

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

Unsecured revolving credit facility

 

$

399,392

 

 

$

260,000

 

Seller financed loans

 

 

12,390

 

 

 

14,677

 

Senior Notes

 

 

888,267

 

 

 

887,502

 

Total debt

 

 

1,300,049

 

 

 

1,162,179

 

Stockholders' equity

 

 

1,528,771

 

 

 

1,454,180

 

Total capital

 

$

2,828,820

 

 

$

2,616,359

 

Ratio of debt-to-capital(1)

 

 

46.0

%

 

 

44.4

%

 

 

 

 

 

 

 

 

 

Total debt

 

$

1,300,049

 

 

$

1,162,179

 

Less: Cash and cash equivalents

 

 

(121,907

)

 

 

(170,629

)

Net debt

 

 

1,178,142

 

 

 

991,550

 

Stockholders' equity

 

 

1,528,771

 

 

 

1,454,180

 

Total capital

 

$

2,706,913

 

 

$

2,445,730

 

Ratio of net debt-to-capital(2)

 

 

43.5

%

 

 

40.5

%

 

(1)

The ratio of debt-to-capital is computed as the quotient obtained by dividing debt by the sum of total debt plus equity.

(2)

The ratio of net debt-to-capital is a non-GAAP measure and 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. 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. See the table above reconciling this non-GAAP financial measure to the ratio of debt-to-capital.

 

- 40 -


 

Cash Flows—Six Months Ended June 30, 2015 Compared to Six Months Ended June 30, 2014

For the six months ended June 30, 2015 as compared to the six months ended June 30, 2014, the comparison of cash flows is as follows:

·

Net cash used in operating activities increased by $281.7 million to $177.1 million for the six months ended June 30, 2015 from $104.6 million provided from operating activities for the six months ended June 30, 2014. The change was primarily comprised of (i) an increase in real estate inventories of $255.4 million in 2015 compared to an increase of $88.4 million in 2014 and (ii) a decrease in deferred income taxes of $9.5 million in 2015 compared to $120.8 million in 2014.  Other offsetting activity included changes in accounts payable and accrued expenses, receivables and net income.

·

Net cash used in investing activities was $1.9 million for the six months ended June 30, 2015 compared to $4.0 million of cash used for the same prior year period. Cash used by investing activities for the six months ended June 30, 2015 was primarily related to investments in unconsolidated entities, while the same prior year period was primarily due to purchases of property and equipment.

·

Net cash provided by financing activities decreased to $130.2 million for the six months ending June 30, 2015 from $843.8 million for the same period in the prior year. The change was primarily a result of the Senior Notes issued in the second quarter of 2014.

As of June 30, 2015, our cash and cash equivalents balance was $121.9 million.

Off-Balance Sheet Arrangements and Contractual Obligations

In the ordinary course of business, we enter into land option contracts in order to procure lots for the construction of our homes.  We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots.  These purchase contracts typically require a cash deposit and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property and development entitlements.  We also utilize option contracts with land sellers as a method of acquiring land in staged takedowns, to help us manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources.  Option contracts generally require a non-refundable deposit for the right to acquire lots over a specified period of time at pre-determined prices.  We generally have the right, at our discretion, to terminate our obligations under both purchase contracts and option contracts by forfeiting our cash deposit with no further financial responsibility to the land seller.  As of June 30, 2015, we had $44.3 million of cash deposits, the majority of which are non-refundable, pertaining to land option contracts and purchase contracts with an aggregate remaining purchase price of $392.3 million (net of deposits).

Our utilization of land option contracts is dependent on, among other things, the availability of land sellers willing to enter into option takedown arrangements, the availability of capital to finance the development of optioned lots, general housing market conditions, and local market dynamics.  Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions.

As of June 30, 2015, we had $141.1 million of availability under our Credit Facility after considering the borrowing base provisions and outstanding letters of credit.

Inflation

Our operations can be adversely impacted by inflation, primarily from higher land, financing, labor, material and construction costs.  In addition, inflation can lead to higher mortgage rates, which can significantly affect the affordability of mortgage financing to homebuyers.  While we attempt to pass on cost increases to customers through increased prices, when weak housing market conditions exist, we are often unable to offset cost increases with higher selling prices.

Seasonality

Historically, the homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements.  We typically experience the highest new home order activity in spring and summer, although this activity is also highly dependent on the number of active selling communities, timing of new community openings and other market factors.  Since it typically takes four to six months to construct a new home, we deliver more homes in the second half of the year as spring and summer home orders convert to home deliveries.  Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of cash receipts from home deliveries occur during the second half of the year.  We expect this seasonal pattern to continue over the long-term, although it may be affected by volatility in the homebuilding industry.

 

- 41 -


 

 

 

Description of Projects and Communities under Development

The following table presents project information relating to each of our markets as of June 30, 2015 and includes information on current projects under development where we are building and selling homes.

Maracay

 

 

 

 

 

 

 

 

 

Cumulative

 

 

 

 

 

 

 

 

 

 

Homes Delivered

 

 

 

 

 

 

 

 

 

 

 

 

Homes

 

 

Lots

 

 

 

 

 

 

for the Six

 

 

 

 

 

 

Year of

 

Total

 

 

Delivered as of

 

 

Owned as of

 

 

Backlog as of

 

 

Months Ended

 

 

Sales Price

 

 

 

First

 

Number of

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

Range

 

County, Project, City

 

Delivery(1)

 

Lots(2)

 

 

2015

 

 

2015(3)

 

 

2015(4)(5)

 

 

2015

 

 

(in thousands)(6)

 

Phoenix, Arizona

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Town of Buckeye:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Verrado Tilden

 

2012

 

 

102

 

 

 

85

 

 

 

17

 

 

 

5

 

 

 

12

 

 

$239 - $304

 

Verrado Palisades

 

2015

 

 

63

 

 

 

7

 

 

 

56

 

 

 

7

 

 

 

7

 

 

$305 - $378

 

Verrado Victory

 

2015

 

 

98

 

 

 

2

 

 

 

96

 

 

 

15

 

 

 

2

 

 

$368 - $375

 

City of Chandler:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Artesian Ranch

 

2013

 

 

90

 

 

 

42

 

 

 

48

 

 

 

19

 

 

 

12

 

 

$331 - $387

 

Vaquero Ranch

 

2013

 

 

74

 

 

 

45

 

 

 

29

 

 

 

19

 

 

 

7

 

 

$298 - $373

 

Maracay at Layton Lakes

 

2015

 

 

47

 

 

 

 

 

 

47

 

 

 

11

 

 

 

 

 

$469 - $509

 

Sendera Place

 

2015

 

 

22

 

 

 

2

 

 

 

20

 

 

 

10

 

 

 

2

 

 

$260 - $307

 

Town of Gilbert:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arch Crossing at Bridges of Gilbert

 

2014

 

 

67

 

 

 

34

 

 

 

33

 

 

 

18

 

 

 

13

 

 

$278 - $336

 

Trestle Place at Bridges of Gilbert

 

2014

 

 

73

 

 

 

44

 

 

 

29

 

 

 

13

 

 

 

16

 

 

$334 - $413

 

Artisan at Morrison Ranch

 

2016

 

 

105

 

 

 

 

 

 

105

 

 

 

 

 

 

 

 

$278 - $338

 

Marquis at Morrison Ranch

 

2016

 

 

66

 

 

 

 

 

 

66

 

 

 

 

 

 

 

 

$355 - $424

 

City of Goodyear:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Calderra at Palm Valley

 

2013

 

 

81

 

 

 

64

 

 

 

17

 

 

 

14

 

 

 

8

 

 

$275 - $352

 

Los Vientos at Palm Valley

 

2013

 

 

57

 

 

 

57

 

 

 

 

 

 

 

 

 

5

 

 

Closed

 

City of Mesa:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kinetic Point at Eastmark

 

2013

 

 

80

 

 

 

43

 

 

 

37

 

 

 

16

 

 

 

14

 

 

$260 - $340

 

Lumiere Garden at Eastmark

 

2013

 

 

85

 

 

 

43

 

 

 

42

 

 

 

16

 

 

 

8

 

 

$313 - $383

 

Town of Peoria:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Reserve at Plaza del Rio

 

2013

 

 

162

 

 

 

66

 

 

 

96

 

 

 

21

 

 

 

16

 

 

$211 - $253

 

Maracay at Northlands

 

2014

 

 

36

 

 

 

18

 

 

 

18

 

 

 

16

 

 

 

10

 

 

$314 - $395

 

Meadows - 5500's

 

2016

 

 

81

 

 

 

 

 

 

81

 

 

 

 

 

 

 

 

$355 - $437

 

Meadows - 6500's

 

2016

 

 

56

 

 

 

 

 

 

56

 

 

 

 

 

 

 

 

$417 - $486

 

Meadows - Oversized

 

2016

 

 

37

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

$417 - $486

 

Town of Queen Creek:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Montelena

 

2012

 

 

59

 

 

 

57

 

 

 

2

 

 

 

1

 

 

 

5

 

 

$375 - $447

 

The Preserve at Hastings Farms

 

2014

 

 

89

 

 

 

24

 

 

 

65

 

 

 

19

 

 

 

9

 

 

$280 - $364

 

Villagio

 

2013

 

 

135

 

 

 

72

 

 

 

63

 

 

 

21

 

 

 

12

 

 

$279 - $337

 

Phoenix, Arizona Total

 

 

 

 

1,765

 

 

 

705

 

 

 

1,060

 

 

 

241

 

 

 

158

 

 

 

 

Tucson, Arizona

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marana:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tortolita Vistas

 

2014

 

 

37

 

 

 

14

 

 

 

23

 

 

 

10

 

 

 

5

 

 

$449 - $506

 

Oro Valley:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Pinnacle - Center Pointe Vistoso

 

2016

 

 

70

 

 

 

 

 

 

70

 

 

 

 

 

 

 

 

$395 - $439

 

Summit (South) - Center Pointe Vistoso

 

2016

 

 

87

 

 

 

 

 

 

87

 

 

 

 

 

 

 

 

$349 - $382

 

The Cove - Center Pointe Vistoso

 

2016

 

 

83

 

 

 

 

 

 

83

 

 

 

 

 

 

 

 

$295 - $359

 

Desert Crest - Center Pointe Vistoso

 

2016

 

 

103

 

 

 

 

 

 

103

 

 

 

 

 

 

 

 

$232 - $285

 

Tucson:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deseo at Sabino Canyon

 

2014

 

 

39

 

 

 

27

 

 

 

12

 

 

 

5

 

 

 

5

 

 

$419 - $505

 

Rancho del Cobre

 

2014

 

 

68

 

 

 

21

 

 

 

47

 

 

 

18

 

 

 

8

 

 

$399 - $470

 

Tucson, Arizona Total

 

 

 

 

487

 

 

 

62

 

 

 

425

 

 

 

33

 

 

 

18

 

 

 

 

Maracay Total

 

 

 

 

2,252

 

 

 

767

 

 

 

1,485

 

 

 

274

 

 

 

176

 

 

 

 

 

 

 

 

 

- 42 -


 

Pardee

 

 

 

 

 

 

 

 

 

Cumulative

 

 

 

 

 

 

 

 

 

 

Homes Delivered

 

 

 

 

 

 

 

 

 

 

 

 

Homes

 

 

Lots

 

 

 

 

 

 

for the Six

 

 

 

 

 

 

Year of

 

Total

 

 

Delivered as of

 

 

Owned as of

 

 

Backlog as of

 

 

Months Ended

 

 

Sales Price

 

 

 

First

 

Number of

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

Range

 

County, Project

 

Delivery(1)

 

Lots(2)

 

 

2015

 

 

2015(3)

 

 

2015(4)(5)

 

 

2015

 

 

(in thousands)(6)

 

California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Diego County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alta Del Mar Homes

 

2013

 

 

117

 

 

 

49

 

 

 

68

 

 

 

31

 

 

 

11

 

 

$1,800 - $2,300

 

Sorrento Heights Prestige Collection

 

2014

 

 

20

 

 

 

20

 

 

 

 

 

 

 

 

 

2

 

 

$890 - $950

 

Watermark

 

2013

 

 

160

 

 

 

90

 

 

 

70

 

 

 

42

 

 

 

27

 

 

$1,155 - $1,300

 

Canterra

 

2015

 

 

89

 

 

 

 

 

 

89

 

 

 

7

 

 

 

 

 

$720 - $740

 

Casabella

 

2015

 

 

122

 

 

 

 

 

 

122

 

 

 

13

 

 

 

 

 

$825 - $855

 

Verana

 

2015

 

 

78

 

 

 

 

 

 

78

 

 

 

21

 

 

 

 

 

$975 - $1,040

 

Pacific Highlands Ranch Future

 

TBD

 

 

963

 

 

 

 

 

 

963

 

 

 

 

 

 

 

 

TBD

 

Olive Hill Estate

 

2015

 

 

37

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

$638 - $750

 

Castlerock

 

TBD

 

 

415

 

 

 

 

 

 

415

 

 

 

 

 

 

 

 

$473 - $708

 

Meadowood

 

TBD

 

 

844

 

 

 

 

 

 

844

 

 

 

 

 

 

 

 

$290 - $590

 

Sea View Terrace

 

2015

 

 

40

 

 

 

24

 

 

 

16

 

 

 

15

 

 

 

23

 

 

$308 - $340

 

Parkview Condos

 

2016

 

 

73

 

 

 

 

 

 

73

 

 

 

 

 

 

 

 

$345 - $370

 

Ocean View HillsFuture

 

TBD

 

 

1,020

 

 

 

 

 

 

1,020

 

 

 

 

 

 

 

 

TBD

 

South Otay Mesa

 

TBD

 

 

893

 

 

 

 

 

 

893

 

 

 

 

 

 

 

 

$185 - $530

 

Alta Del Mar Custom Lots

 

2013

 

 

29

 

 

 

26

 

 

 

3

 

 

 

 

 

 

 

 

$895 - $1,950

 

Los Angeles County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LivingSmart at Fair Oaks Ranch

 

2011

 

 

124

 

 

 

124

 

 

 

 

 

 

 

 

 

1

 

 

$483 - $509

 

Golden Valley

 

TBD

 

 

498

 

 

 

 

 

 

498

 

 

 

 

 

 

 

 

$499 - $807

 

Skyline Ranch

 

TBD

 

 

1,260

 

 

 

 

 

 

1,260

 

 

 

 

 

 

 

 

$510 - $640

 

Ventura County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LivingSmart at Moorpark Highlands, Moorpark

 

2013

 

 

133

 

 

 

117

 

 

 

16

 

 

 

12

 

 

 

33

 

 

$587 - $616

 

Riverside County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hillside

 

2012

 

 

182

 

 

 

182

 

 

 

 

 

 

 

 

 

2

 

 

$284 - $301

 

Meadow Ridge

 

2013

 

 

142

 

 

 

79

 

 

 

63

 

 

 

21

 

 

 

23

 

 

$340 - $440

 

Amberleaf

 

2014

 

 

131

 

 

 

45

 

 

 

86

 

 

 

29

 

 

 

24

 

 

$295 - $338

 

Meadow Glen

 

2014

 

 

140

 

 

 

63

 

 

 

77

 

 

 

21

 

 

 

21

 

 

$321 - $380

 

Summerfield

 

2015

 

 

85

 

 

 

5

 

 

 

80

 

 

 

37

 

 

 

5

 

 

$283 - $304

 

Canyon Hills Future

 

TBD

 

 

581

 

 

 

 

 

 

581

 

 

 

 

 

 

 

 

TBD

 

Christensen

 

2016

 

 

74

 

 

 

 

 

 

74

 

 

 

 

 

 

 

 

$338 - $437

 

LivingSmart Tournament Hills

 

2010

 

 

235

 

 

 

235

 

 

 

 

 

 

 

 

 

2

 

 

$261 - $334

 

Lakeside

 

2012

 

 

167

 

 

 

167

 

 

 

 

 

 

 

 

 

19

 

 

$260 - $282

 

Tournament Hills Future

 

TBD

 

 

268

 

 

 

 

 

 

268

 

 

 

 

 

 

 

 

TBD

 

LivingSmart Sundance

 

2013

 

 

152

 

 

 

136

 

 

 

16

 

 

 

6

 

 

 

26

 

 

$280 - $332

 

LivingSmart Estrella

 

2013

 

 

127

 

 

 

127

 

 

 

 

 

 

 

 

 

6

 

 

$214 - $237

 

Woodmont

 

2014

 

 

84

 

 

 

36

 

 

 

48

 

 

 

23

 

 

 

25

 

 

$307 - $371

 

Cielo

 

2015

 

 

92

 

 

 

21

 

 

 

71

 

 

 

43

 

 

 

21

 

 

$220 - $242

 

Northstar

 

2015

 

 

80

 

 

 

 

 

 

80

 

 

 

10

 

 

 

 

 

$270 - $310

 

Skycrest

 

2015

 

 

82

 

 

 

 

 

 

82

 

 

 

19

 

 

 

 

 

$311 - $350

 

Sundance Future

 

TBD

 

 

1,689

 

 

 

 

 

 

1,689

 

 

 

 

 

 

 

 

TBD

 

Banning

 

TBD

 

 

4,318

 

 

 

 

 

 

4,318

 

 

 

 

 

 

 

 

TBD

 

Sacramento County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Natomas

 

TBD

 

 

120

 

 

 

 

 

 

120

 

 

 

 

 

 

 

 

TBD

 

San Joaquin County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bear Creek

 

TBD

 

 

1,252

 

 

 

 

 

 

1,252

 

 

 

 

 

 

 

 

TBD

 

California Total

 

 

 

 

16,916

 

 

 

1,546

 

 

 

15,370

 

 

 

350

 

 

 

271

 

 

 

 

Nevada

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clark County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LivingSmart at Eldorado Ridge

 

2012

 

 

179

 

 

 

136

 

 

 

43

 

 

 

17

 

 

 

13

 

 

$255 - $306

 

LivingSmart at Eldorado Heights

 

2013

 

 

133

 

 

 

101

 

 

 

32

 

 

 

16

 

 

 

15

 

 

$302 - $392

 

LivingSmart Sandstone

 

2013

 

 

145

 

 

 

60

 

 

 

85

 

 

 

11

 

 

 

17

 

 

$216 - $246

 

Ridgeview

 

2015

 

 

4

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

$227 - $283

 

North Peak

 

2015

 

 

150

 

 

 

 

 

 

150

 

 

 

2

 

 

 

 

 

$284 - $337

 

Castle Rock

 

2015

 

 

150

 

 

 

 

 

 

150

 

 

 

1

 

 

 

 

 

$354 - $420

 

Eldorado Future

 

TBD

 

 

145

 

 

 

 

 

 

145

 

 

 

 

 

 

 

 

TBD

 

Horizon Terrace

 

2014

 

 

165

 

 

 

40

 

 

 

125

 

 

 

9

 

 

 

12

 

 

$400 - $455

 

Solano

 

2014

 

 

132

 

 

 

29

 

 

 

103

 

 

 

15

 

 

 

24

 

 

$289 - $312

 

Alterra

 

2014

 

 

106

 

 

 

15

 

 

 

91

 

 

 

5

 

 

 

15

 

 

$438 - $505

 

Bella Verdi

 

2015

 

 

106

 

 

 

 

 

 

106

 

 

 

9

 

 

 

 

 

$375 - $420

 

Milennial

 

TBD

 

 

2

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

TBD

 

Escala

 

2016

 

 

78

 

 

 

 

 

 

78

 

 

 

 

 

 

 

 

$545 - $591

 

POD 5-1 Future

 

TBD

 

 

215

 

 

 

 

 

 

215

 

 

 

 

 

 

 

 

TBD

 

Durango Ranch

 

2012

 

 

153

 

 

 

125

 

 

 

28

 

 

 

14

 

 

 

16

 

 

$460 - $536

 

Durango Trail

 

2014

 

 

77

 

 

 

52

 

 

 

25

 

 

 

15

 

 

 

11

 

 

$373 - $399

 

Meridian

 

2016

 

 

78

 

 

 

 

 

 

48

 

 

 

 

 

 

 

 

$455 - $530

 

LivingSmart at Providence

 

2012

 

 

106

 

 

 

106

 

 

 

 

 

 

 

 

 

1

 

 

$260 - $323

 

Encanto

 

2015

 

 

129

 

 

 

 

 

 

129

 

 

 

 

 

 

 

 

$406 - $468

 

Summerglen

 

2014

 

 

140

 

 

 

47

 

 

 

93

 

 

 

7

 

 

 

15

 

 

$292 - $298

 

Nevada Total

 

 

 

 

2,393

 

 

 

711

 

 

 

1,652

 

 

 

121

 

 

 

139

 

 

 

 

Pardee Total

 

 

 

 

19,309

 

 

 

2,257

 

 

 

17,022

 

 

 

471

 

 

 

410

 

 

 

 

 

 

- 43 -


 

Quadrant

 

 

 

 

 

 

 

 

 

Cumulative

 

 

 

 

 

 

 

 

 

 

Homes Delivered

 

 

 

 

 

 

 

 

 

 

 

 

Homes

 

 

Lots

 

 

 

 

 

 

for the Six

 

 

 

 

 

 

Year of

 

Total

 

 

Delivered as of

 

 

Owned as of

 

 

Backlog as of

 

 

Months Ended

 

 

Sales Price

 

 

 

First

 

Number of

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

Range

 

County, Project, City

 

Delivery(1)

 

Lots(2)

 

 

2015

 

 

2015(3)

 

 

2015(4)(5)

 

 

2015

 

 

(in thousands)(6)

 

Washington

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Skagit County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Skagit Highlands, Mt Vernon

 

2005

 

 

423

 

 

 

376

 

 

 

47

 

 

 

27

 

 

 

16

 

 

$229 - $322

 

Skagit Clearwater Court, Mt Vernon

 

2016

 

 

11

 

 

 

 

 

 

11

 

 

 

 

 

 

 

 

$287 - $307

 

Skagit Surplus Pod E, Mt Vernon

 

TBD

 

 

4

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

TBD

 

Snohomish County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kings Corner 1&2, Mill Creek

 

2014

 

 

116

 

 

 

64

 

 

 

52

 

 

 

29

 

 

 

20

 

 

$441 - $503

 

Filbert Glen, Bothell

 

2015

 

 

16

 

 

 

4

 

 

 

12

 

 

 

10

 

 

 

4

 

 

$650

 

King's Corner 3, Mill Creek

 

2016

 

 

29

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

$306 - $370

 

Evergreen Heights, Monroe

 

2016

 

 

71

 

 

 

 

 

 

71

 

 

 

 

 

 

 

 

$360 - $407

 

King County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Woodland, Woodinville

 

2014

 

 

23

 

 

 

21

 

 

 

2

 

 

 

2

 

 

 

12

 

 

$571 - $576

 

Garrison Glen, Kent

 

2014

 

 

30

 

 

 

16

 

 

 

14

 

 

 

11

 

 

 

11

 

 

$430

 

Sonata Hill, Auburn

 

2014

 

 

71

 

 

 

17

 

 

 

54

 

 

 

19

 

 

 

10

 

 

$346 - $394

 

The Gardens at Eastlake, Sammamish

 

2015

 

 

8

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

$810 - $900

 

Heathers Ridge, Kirkland

 

2015

 

 

41

 

 

 

 

 

 

41

 

 

 

17

 

 

 

 

 

$800 - $920

 

Hedgewood, Redmond

 

2015

 

 

11

 

 

 

 

 

 

11

 

 

 

2

 

 

 

 

 

$800 - $980

 

Grasslawn Estates, Redmond

 

2015

 

 

4

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

$930 - $985

 

Vintner's Place, Kirkland

 

2016

 

 

35

 

 

 

 

 

 

35

 

 

 

 

 

 

 

 

$610 - $780

 

Hedgewood East, Redmond

 

2016

 

 

15

 

 

 

 

 

 

15

 

 

 

 

 

 

 

 

$730 - $810

 

Trailside, Redmond

 

2016

 

 

9

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

$686 - $735

 

Copperwood, Renton

 

2016

 

 

46

 

 

 

 

 

 

46

 

 

 

 

 

 

 

 

$520 - $626

 

Parkwood Terrace, Woodinville

 

2016

 

 

15

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

$629 - $694

 

Inglewood Landing, Sammamish

 

2017

 

 

21

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

$880 - $962

 

Heathers Ridge South, Redmond

 

2017

 

 

8

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

$590 - $890

 

Cedar Landing, North Bend

 

2017

 

 

111

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

$500 - $650

 

Palm Creek, Bothell

 

2017

 

 

41

 

 

 

 

 

 

36

 

 

 

 

 

 

 

 

$845 - $905

 

42nd Avenue Townhomes, Seattle

 

TBD

 

 

40

 

 

 

 

 

 

40

 

 

 

 

 

 

 

 

TBD

 

Pearl & Delores, Seattle

 

TBD

 

 

12

 

 

 

 

 

 

12

 

 

 

 

 

 

 

 

TBD

 

Pierce County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Harbor Hill S-9, Gig Harbor

 

2014

 

 

40

 

 

 

24

 

 

 

16

 

 

 

11

 

 

 

13

 

 

$376 - $444

 

Harbor Hill S-8, Gig Harbor

 

2015

 

 

33

 

 

 

 

 

 

33

 

 

 

6

 

 

 

 

 

$376 - $444

 

Chambers Ridge, Tacoma

 

2014

 

 

24

 

 

 

9

 

 

 

15

 

 

 

7

 

 

 

8

 

 

$480 - $525

 

Tehaleh, Bonney Lake

 

2013

 

 

85

 

 

 

73

 

 

 

12

 

 

 

7

 

 

 

18

 

 

$345 - $356

 

The Enclave at Harbor Hill, Gig Harbor

 

2015

 

 

33

 

 

 

 

 

 

33

 

 

 

1

 

 

 

 

 

$540 - $590

 

Thurston County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Campus Fairways, Lacey

 

2015

 

 

79

 

 

 

3

 

 

 

36

 

 

 

8

 

 

 

3

 

 

$365 - $425

 

Kitsap County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

McCormick Meadows, Poulsbo

 

2012

 

 

167

 

 

 

93

 

 

 

74

 

 

 

20

 

 

 

18

 

 

$276 - $353

 

Vinland Pointe, Poulsbo

 

2013

 

 

90

 

 

 

56

 

 

 

34

 

 

 

22

 

 

 

21

 

 

$334 - $357

 

Mountain Aire, Poulsbo

 

2016

 

 

145

 

 

 

 

 

 

145

 

 

 

 

 

 

 

 

$310 - $373

 

Closed Communities

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26

 

 

N/A

 

Washington Total

 

 

 

 

1,907

 

 

 

756

 

 

 

995

 

 

 

199

 

 

 

180

 

 

 

 

Quadrant Total

 

 

 

 

1,907

 

 

 

756

 

 

 

995

 

 

 

199

 

 

 

180

 

 

 

 

 

 

- 44 -


 

Trendmaker

 

 

 

 

 

 

 

 

 

Cumulative

 

 

 

 

 

 

 

 

 

 

Homes Delivered

 

 

 

 

 

 

 

 

 

 

 

 

Homes

 

 

Lots

 

 

 

 

 

 

for the Six

 

 

 

 

 

 

Year of

 

Total

 

 

Delivered as of

 

 

Owned as of

 

 

Backlog as of

 

 

Months Ended

 

 

Sales Price

 

 

 

First

 

Number of

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

Range

 

County, Project, City

 

Delivery(1)

 

Lots(2)

 

 

2015

 

 

2015(3)

 

 

2015(4)(5)

 

 

2015

 

 

(in thousands)(6)

 

Texas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brazoria County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sedona Lakes, Pearland

 

2014

 

 

20

 

 

 

8

 

 

 

12

 

 

 

3

 

 

 

8

 

 

$452 - $506

 

Southern Trails, Pearland

 

2014

 

 

36

 

 

 

23

 

 

 

13

 

 

 

8

 

 

 

11

 

 

$490 - $609

 

Fort Bend County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cross Creek Ranch 60', Fulshear

 

2013

 

 

54

 

 

 

44

 

 

 

10

 

 

 

4

 

 

 

12

 

 

$379 - $447

 

Cross Creek Ranch 65', Fulshear

 

2013

 

 

45

 

 

 

26

 

 

 

19

 

 

 

4

 

 

 

7

 

 

$432 - $488

 

Cross Creek Ranch 70', Fulshear

 

2013

 

 

73

 

 

 

37

 

 

 

36

 

 

 

4

 

 

 

3

 

 

$497 - $567

 

Cross Creek Ranch 80', Fulshear

 

2013

 

 

90

 

 

 

57

 

 

 

33

 

 

 

6

 

 

 

7

 

 

$541 - $662

 

Cross Creek Ranch 90', Fulshear

 

2013

 

 

34

 

 

 

22

 

 

 

12

 

 

 

1

 

 

 

7

 

 

$627 - $755

 

Villas at Cross Creek Ranch, Fulshear

 

2013

 

 

106

 

 

 

83

 

 

 

23

 

 

 

10

 

 

 

16

 

 

$454 - $555

 

Cinco Ranch, Katy

 

2012

 

 

100

 

 

 

81

 

 

 

19

 

 

 

5

 

 

 

12

 

 

$349 - $420

 

Harvest Green 75', Richmond

 

2015

 

 

1

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

$450 - $475

 

Sienna Plantation 80', Missouri City

 

2013

 

 

57

 

 

 

41

 

 

 

16

 

 

 

6

 

 

 

13

 

 

$542 - $650

 

Sienna Plantation 85', Missouri City

 

2015

 

 

1

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

$600

 

Lakes of Bella Terra, Richmond

 

2013

 

 

108

 

 

 

73

 

 

 

35

 

 

 

5

 

 

 

11

 

 

$465 - $569

 

Villas at Aliana, Richmond

 

2013

 

 

71

 

 

 

44

 

 

 

27

 

 

 

8

 

 

 

7

 

 

$437 - $503

 

Riverstone 55', Sugar Land

 

2013

 

 

80

 

 

 

51

 

 

 

29

 

 

 

6

 

 

 

4

 

 

$397 - $460

 

Riverstone 80', Sugar Land

 

2013

 

 

49

 

 

 

38

 

 

 

11

 

 

 

11

 

 

 

11

 

 

$559 - $710

 

Riverstone 100', Sugar Land

 

2015

 

 

5

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

$990 - $1,051

 

Riverstone Avanti at Avalon, Sugar Land

 

2015

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

$1,203 - $1,232

 

The Townhomes at Imperial Sugar, Sugar Land

 

2015

 

 

27

 

 

 

5

 

 

 

22

 

 

 

4

 

 

 

5

 

 

$384 - $530

 

Galveston County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Harborwalk, Hitchcock

 

2014

 

 

13

 

 

 

4

 

 

 

9

 

 

 

4

 

 

 

2

 

 

$587 - $645

 

Harris County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fairfield, Cypress

 

2010

 

 

70

 

 

 

43

 

 

 

27

 

 

 

8

 

 

 

11

 

 

$474 - $573

 

Lakes of Fairhaven, Cypress

 

2008

 

 

263

 

 

 

235

 

 

 

28

 

 

 

20

 

 

 

16

 

 

$410 - $668

 

Towne Lake Living Views, Cypress

 

2013

 

 

52

 

 

 

21

 

 

 

31

 

 

 

5

 

 

 

7

 

 

$445 - $540

 

Calumet Townhomes, Houston

 

2015

 

 

4

 

 

 

1

 

 

 

3

 

 

 

2

 

 

 

1

 

 

$637

 

The Groves, Humble

 

2015

 

 

17

 

 

 

1

 

 

 

16

 

 

 

10

 

 

 

1

 

 

$454 - $505

 

Clear Lake, Houston

 

2015

 

 

185

 

 

 

 

 

 

185

 

 

 

24

 

 

 

 

 

$447 - $664

 

Montgomery County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Barton Woods, Conroe

 

2013

 

 

75

 

 

 

43

 

 

 

32

 

 

 

5

 

 

 

8

 

 

$401 - $601

 

Villas at Oakhurst, Porter

 

2013

 

 

54

 

 

 

41

 

 

 

13

 

 

 

6

 

 

 

10

 

 

$375 - $458

 

Woodtrace, Woodtrace

 

2015

 

 

25

 

 

 

5

 

 

 

20

 

 

 

3

 

 

 

4

 

 

$485 - $536

 

Bender's Landing Estates, Spring

 

2014

 

 

105

 

 

 

18

 

 

 

87

 

 

 

1

 

 

 

16

 

 

$478 - $629

 

Creekside Park, The Woodlands

 

2015

 

 

6

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

Waller County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cane Island, Katy

 

2015

 

 

8

 

 

 

 

 

 

8

 

 

 

2

 

 

 

 

 

$560 - $647

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Avanti Custom Homes

 

2007

 

 

123

 

 

 

99

 

 

 

24

 

 

 

29

 

 

 

11

 

 

$416 - $643

 

Texas Casual Cottages - Round Top

 

2010

 

 

85

 

 

 

68

 

 

 

17

 

 

 

27

 

 

 

7

 

 

$203 - $443

 

Texas Casual Cottages - Hill Country

 

2012

 

 

46

 

 

 

39

 

 

 

7

 

 

 

11

 

 

 

3

 

 

$217 - $498

 

Texas Total

 

 

 

 

2,088

 

 

 

1,251

 

 

 

837

 

 

 

243

 

 

 

231

 

 

 

 

Trendmaker Total

 

 

 

 

2,088

 

 

 

1,251

 

 

 

837

 

 

 

243

 

 

 

231

 

 

 

 

 

 

- 45 -


 

TRI Pointe

 

 

 

 

 

 

 

 

 

Cumulative

 

 

 

 

 

 

 

 

 

 

Homes Delivered

 

 

 

 

 

 

 

 

 

 

 

 

Homes

 

 

Lots

 

 

 

 

 

 

for the Six

 

 

 

 

 

 

Year of

 

Total

 

 

Delivered as of

 

 

Owned as of

 

 

Backlog as of

 

 

Months Ended

 

 

Sales Price

 

 

 

First

 

Number of

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

Range

 

County, Project, City

 

Delivery(1)

 

Lots(2)

 

 

2015

 

 

2015(3)

 

 

2015(4)(5)

 

 

2015

 

 

(in thousands)(6)

 

Southern California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Orange County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rancho Mission Viejo

 

2013

 

 

105

 

 

 

94

 

 

 

11

 

 

 

11

 

 

 

13

 

 

$669 - $715

 

Truewind, Huntington Beach

 

2014

 

 

49

 

 

 

21

 

 

 

28

 

 

 

22

 

 

 

12

 

 

$1,065 - $1,180

 

Arcadia, Irvine

 

2013

 

 

61

 

 

 

46

 

 

 

 

 

 

 

 

 

1

 

 

$1,189 - $1,420

 

Arcadia II, Irvine

 

2014

 

 

66

 

 

 

22

 

 

 

21

 

 

 

27

 

 

 

11

 

 

$1,189 - $1,271

 

Fairwind, Huntington Beach

 

2015

 

 

80

 

 

 

 

 

 

80

 

 

 

55

 

 

 

 

 

$822 - $1,012

 

Cariz, Irvine

 

2014

 

 

112

 

 

 

32

 

 

 

80

 

 

 

62

 

 

 

13

 

 

$507 - $617

 

Messina, Irvine

 

2014

 

 

59

 

 

 

25

 

 

 

11

 

 

 

9

 

 

 

17

 

 

$1,515 - $1,630

 

Aria-Rancho Mission Viejo

 

2016

 

 

87

 

 

 

 

 

 

87

 

 

 

 

 

 

 

 

$630 - $667

 

Auberine-Rancho Mission Viejo

 

2016

 

 

66

 

 

 

 

 

 

66

 

 

 

 

 

 

 

 

$1,005 - $1,115

 

San Diego County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Altana, San Diego

 

2013

 

 

45

 

 

 

45

 

 

 

 

 

 

 

 

 

1

 

 

$630 - $728

 

Riverside County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Topazridge, Riverside

 

2012

 

 

68

 

 

 

63

 

 

 

5

 

 

 

 

 

 

 

 

$464 - $530

 

Topazridge II, Riverside

 

2014

 

 

49

 

 

 

29

 

 

 

20

 

 

 

9

 

 

 

6

 

 

$459 - $515

 

Alegre, Temecula

 

2014

 

 

96

 

 

 

43

 

 

 

53

 

 

 

30

 

 

 

24

 

 

$287 - $323

 

Aldea, Temecula

 

2014

 

 

90

 

 

 

41

 

 

 

49

 

 

 

22

 

 

 

18

 

 

$262 - $298

 

Kite Ridge, Riverside

 

2014

 

 

87

 

 

 

7

 

 

 

80

 

 

 

3

 

 

 

7

 

 

$435 - $460

 

Sycamore Creek PA 7, Riverside

 

2015

 

 

87

 

 

 

 

 

 

87

 

 

 

 

 

 

 

 

$369 - $400

 

Terrassa Cluster, Corona

 

2015

 

 

94

 

 

 

 

 

 

94

 

 

 

 

 

 

 

 

$425 - $475

 

Terrassa, Corona

 

2015

 

 

52

 

 

 

 

 

 

52

 

 

 

 

 

 

 

 

$485 - $535

 

Los Angeles County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Avenswood, Azusa

 

2013

 

 

66

 

 

 

66

 

 

 

 

 

 

 

 

 

12

 

 

$673 - $738

 

Woodson, Playa Vista

 

2014

 

 

66

 

 

 

62

 

 

 

4

 

 

 

4

 

 

 

22

 

 

$1,260 - $1,370

 

Grayson, Santa Clarita

 

2015

 

 

119

 

 

 

 

 

 

119

 

 

 

 

 

 

 

 

$517 - $550

 

San Bernardino County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sedona at Parkside, Ontario

 

2015

 

 

152

 

 

 

 

 

 

152

 

 

 

6

 

 

 

 

 

$355 - $390

 

Kensington at Park Place, Ontario

 

2015

 

 

67

 

 

 

3

 

 

 

64

 

 

 

2

 

 

 

3

 

 

$521 - $544

 

St. James at Park Place, Ontario

 

2015

 

 

57

 

 

 

6

 

 

 

51

 

 

 

7

 

 

 

6

 

 

$448 - $479

 

Ventura County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Westerlies, Oxnard

 

2015

 

 

116

 

 

 

 

 

 

116

 

 

 

 

 

 

 

 

$331 - $504

 

Southern California Total

 

 

 

 

1,996

 

 

 

605

 

 

 

1,330

 

 

 

269

 

 

 

166

 

 

 

 

Northern California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contra Costa County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Berkshire at Barrington, Brentwood

 

2014

 

 

89

 

 

 

32

 

 

 

57

 

 

 

27

 

 

 

15

 

 

$506 -$553

 

Hawthorne at Barrington, Brentwood

 

2014

 

 

105

 

 

 

29

 

 

 

76

 

 

 

26

 

 

 

10

 

 

$549 - $605

 

Marquette at Barrington, Brentwood

 

2015

 

 

90

 

 

 

 

 

 

90

 

 

 

14

 

 

 

 

 

$480 - $700

 

Wynstone at Barrington, Brentwood

 

2016

 

 

92

 

 

 

 

 

 

92

 

 

 

 

 

 

 

 

$498 - $525

 

Penrose at Barrington, Brentwood

 

2016

 

 

34

 

 

 

 

 

 

34

 

 

 

 

 

 

 

 

$498 - $515

 

Santa Clara County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Avellino, Mountain View

 

2013

 

 

63

 

 

 

59

 

 

 

4

 

 

 

4

 

 

 

4

 

 

$1,205 - $1,498

 

Cobblestone, Milpitas

 

2015

 

 

32

 

 

 

 

 

 

32

 

 

 

17

 

 

 

 

 

$960 - $1,163

 

San Mateo County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canterbury, San Mateo

 

2014

 

 

76

 

 

 

53

 

 

 

23

 

 

 

23

 

 

 

27

 

 

$940 - $1,230

 

Solano County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redstone, Vacaville

 

2015

 

 

141

 

 

 

3

 

 

 

138

 

 

 

18

 

 

 

3

 

 

$455 - $527

 

San Joaquin County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ventana, Tracy

 

2015

 

 

93

 

 

 

6

 

 

 

87

 

 

 

10

 

 

 

6

 

 

$438 - $540

 

Sundance, Mountain House

 

2015

 

 

113

 

 

 

 

 

 

113

 

 

 

8

 

 

 

 

 

$550 - $615

 

Alameda County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cadence, Alameda Landing

 

2015

 

 

91

 

 

 

5

 

 

 

62

 

 

 

27

 

 

 

5

 

 

$1,057 - $1,234

 

Linear, Alameda Landing

 

2015

 

 

106

 

 

 

 

 

 

73

 

 

 

47

 

 

 

 

 

$685 - $915

 

Symmetry, Alameda Landing

 

2016

 

 

56

 

 

 

 

 

 

56

 

 

 

 

 

 

 

 

$775 - $875

 

Commercial, Alameda Landing

 

 

 

 

2

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

$620

 

Parasol, Fremont

 

2016

 

 

39

 

 

 

 

 

 

39

 

 

 

 

 

 

 

 

$605 - $815

 

Blackstone at the Cannery, Hayward

 

2016

 

 

105

 

 

 

 

 

 

105

 

 

 

 

 

 

 

 

$515 - $585

 

Blackstone at the Cannery, Hayward

 

2016

 

 

52

 

 

 

 

 

 

52

 

 

 

 

 

 

 

 

$620 - $670

 

Northern California Total

 

 

 

 

1,379

 

 

 

187

 

 

 

1,134

 

 

 

221

 

 

 

70

 

 

 

 

California Total

 

 

 

 

3,375

 

 

 

792

 

 

 

2,464

 

 

 

490

 

 

 

236

 

 

 

 

Colorado

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Douglas County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Terrain 4000 Series, Castle Rock

 

2013

 

 

149

 

 

 

82

 

 

 

67

 

 

 

26

 

 

 

26

 

 

$326 - $379

 

Terrain 3500 Series, Castle Rock

 

2015

 

 

67

 

 

 

11

 

 

 

56

 

 

 

28

 

 

 

11

 

 

$307 - $330

 

Jefferson County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leyden Rock 4000 Series, Arvada

 

2014

 

 

51

 

 

 

22

 

 

 

29

 

 

 

25

 

 

 

17

 

 

$385 - $441

 

Leyden Rock 5000 Series, Arvada

 

2015

 

 

67

 

 

 

7

 

 

 

60

 

 

 

30

 

 

 

7

 

 

$444 - $499

 

Candelas, Arvada

 

2015

 

 

76

 

 

 

3

 

 

 

73

 

 

 

5

 

 

 

3

 

 

$560 - $620

 

Denver County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Platt Park North, Denver

 

2014

 

 

29

 

 

 

13

 

 

 

16

 

 

 

16

 

 

 

9

 

 

$611 - $615

 

Larimer County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Centerra 5000 Series, Loveland

 

2015

 

 

150

 

 

 

4

 

 

 

40

 

 

 

11

 

 

 

4

 

 

$390 - $422

 

Arapahoe County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Whispering Pines, Aurora

 

2015

 

 

115

 

 

 

 

 

 

115

 

 

 

 

 

 

 

 

$518 - $588

 

Colorado Total

 

 

 

 

704

 

 

 

142

 

 

 

456

 

 

 

141

 

 

 

77

 

 

 

 

TRI Pointe Total

 

 

 

 

4,079

 

 

 

934

 

 

 

2,920

 

 

 

631

 

 

 

313

 

 

 

 

 

 

- 46 -


 

Winchester

 

 

 

 

 

 

 

 

 

Cumulative

 

 

 

 

 

 

 

 

 

 

Homes Delivered

 

 

 

 

 

 

 

 

 

 

 

 

Homes

 

 

Lots

 

 

 

 

 

 

for the Six

 

 

 

 

 

 

Year of

 

Total

 

 

Delivered as of

 

 

Owned as of

 

 

Backlog as of

 

 

Months Ended

 

 

Sales Price

 

 

 

First

 

Number of

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

June 30,

 

 

Range

 

County, Project, City

 

Delivery(1)

 

Lots(2)

 

 

2015

 

 

2015(3)

 

 

2015(4)(5)

 

 

2015

 

 

(in thousands)(6)

 

Maryland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Anne Arundel County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hawthornes Grant, Arnold

 

2014

 

 

15

 

 

 

15

 

 

 

 

 

 

 

 

 

3

 

 

Sold Out

 

Hawthornes Grant Lots For Sale

 

N/A

 

 

 

 

 

 

 

 

26

 

 

 

 

 

 

 

 

N/A

 

Watson's Glen, Millersville

 

2015

 

 

103

 

 

 

 

 

 

103

 

 

 

1

 

 

 

 

 

Closed

 

Frederick County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Landsdale, Monrovia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Landsdale Village SFD

 

2015

 

 

222

 

 

 

 

 

 

222

 

 

 

13

 

 

 

 

 

$495 - $635

 

Landsdale Everson Townhomes

 

2015

 

 

100

 

 

 

 

 

 

100

 

 

 

 

 

 

 

 

$350 - $375

 

Landsdale TND Neo Everson SFD

 

2015

 

 

77

 

 

 

 

 

 

77

 

 

 

 

 

 

 

 

$465 - $595

 

Howard County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Walnut Creek, Ellicott City

 

2014

 

 

16

 

 

 

12

 

 

 

4

 

 

 

7

 

 

 

3

 

 

$990 - $1,293

 

Montgomery County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cabin Branch, Clarksburg

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cabin Branch SFD

 

2014

 

 

359

 

 

 

32

 

 

 

327

 

 

 

14

 

 

 

16

 

 

$480 - $719

 

Cabin Branch Boulevard Townhomes

 

2016

 

 

61

 

 

 

 

 

 

61

 

 

 

 

 

 

 

 

TBD

 

Cabin Branch Everson Townhomes

 

2014

 

 

567

 

 

 

36

 

 

 

531

 

 

 

10

 

 

 

15

 

 

$375 - $390

 

Preserve at Stoney Spring-Lots for Sale

 

N/A

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

N/A

 

Preserve at Rock Creek, Rockville

 

2012

 

 

68

 

 

 

46

 

 

 

22

 

 

 

15

 

 

 

 

 

$685 - $964

 

Poplar Run, Silver Spring

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Poplar Run Everson Townhomes

 

2013

 

 

136

 

 

 

71

 

 

 

65

 

 

 

10

 

 

 

2

 

 

$390 - $435

 

Poplar Run SFD

 

2010

 

 

297

 

 

 

188

 

 

 

109

 

 

 

15

 

 

 

23

 

 

$562 - $717

 

Poplar Run Lots for Sale

 

N/A

 

 

 

 

 

 

 

 

97

 

 

 

 

 

 

 

 

N/A

 

Potomac Highlands, Potomac

 

2016

 

 

23

 

 

 

 

 

 

23

 

 

 

 

 

 

 

 

TBD

 

Glenmont MetroCenter, Silver Spring

 

2016

 

 

89

 

 

 

 

 

 

89

 

 

 

 

 

 

 

 

TBD

 

Maryland Total

 

 

 

 

2,133

 

 

 

400

 

 

 

1,862

 

 

 

85

 

 

 

62

 

 

 

 

Virginia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chesterfield County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Founders Bridge, Midlothian

 

2014

 

 

3

 

 

 

2

 

 

 

1

 

 

 

1

 

 

 

2

 

 

Sold Out

 

Fairfax County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reserve at Waples Mill, Oakton

 

2013

 

 

28

 

 

 

20

 

 

 

8

 

 

 

3

 

 

 

3

 

 

$1,380 - $1,555

 

Stuart Mill & Timber Lake, Oakton

 

2014

 

 

19

 

 

 

3

 

 

 

16

 

 

 

2

 

 

 

1

 

 

$1,363 - $1,675

 

Henrico County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stable Hill, Glen Allen

 

2013

 

 

49

 

 

 

45

 

 

 

4

 

 

 

3

 

 

 

9

 

 

$517 - $620

 

Prince William County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Villages of Piedmont, Haymarket

 

2015

 

 

168

 

 

 

3

 

 

 

165

 

 

 

5

 

 

 

3

 

 

$370 - $422

 

Loudoun County:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brambleton, Ashburn

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

English Manor Townhomes

 

2014

 

 

28

 

 

 

14

 

 

 

14

 

 

 

7

 

 

 

7

 

 

$492 - $532

 

Glenmere at Brambleton SFD

 

2014

 

 

63

 

 

 

34

 

 

 

29

 

 

 

28

 

 

 

12

 

 

$590 - $723

 

Glenmere at Brambleton Townhomes

 

2014

 

 

73

 

 

 

50

 

 

 

23

 

 

 

9

 

 

 

22

 

 

$458 - $462

 

West Park at Brambleton

 

2013

 

 

45

 

 

 

44

 

 

 

1

 

 

 

1

 

 

 

9

 

 

$720 - $811

 

One Loudoun, Ashburn

 

2012

 

 

111

 

 

 

96

 

 

 

15

 

 

 

10

 

 

 

14

 

 

$675 - $710

 

Vistas at Lansdowne, Lansdowne

 

2015

 

 

120

 

 

 

3

 

 

 

117

 

 

 

13

 

 

 

3

 

 

$569 - $618

 

Willowsford Grant, Leesburg

 

2013

 

 

36

 

 

 

31

 

 

 

5

 

 

 

4

 

 

 

4

 

 

$925 - $930

 

Willowsford Greens, Aldie

 

2014

 

 

38

 

 

 

14

 

 

 

24

 

 

 

9

 

 

 

5

 

 

$750 - $840

 

Virginia Total

 

 

 

 

781

 

 

 

359

 

 

 

422

 

 

 

95

 

 

 

94

 

 

 

 

Winchester Total

 

 

 

 

2,914

 

 

 

759

 

 

 

2,284

 

 

 

180

 

 

 

156

 

 

 

 

Combined Company Total

 

 

 

 

32,549

 

 

 

6,724

 

 

 

25,543

 

 

 

1,998

 

 

 

1,466

 

 

 

 

 

(1)

Year of first delivery for future periods is based upon management’s estimates and is subject to change.

(2)

The number of homes to be built at completion is subject to change, and there can be no assurance that we will build these homes.

(3)

Owned lots as of June 30, 2015 include owned lots in backlog as of June 30, 2015.

(4)

Backlog consists of homes under sales contracts that had not yet been delivered, and there can be no assurance that delivery of sold homes will occur.

(5)

Of the total homes subject to pending sales contracts that have not been delivered as of June 30, 2015, 1,382 homes are under construction, 233 homes have completed construction, and 383 homes have not started construction.

(6)

Sales price range reflects base price only and excludes any lot premium, buyer incentives and buyer-selected options, which may vary from project to project. Sales prices for homes required to be sold pursuant to affordable housing requirements are excluded from sales price range. Sales prices reflect current pricing and might not be indicative of past or future pricing.

 

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Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based on our unaudited condensed consolidated financial statements contained elsewhere in this report, which have been prepared in accordance with GAAP. Our notes to the unaudited condensed consolidated financial statement contained elsewhere in this report and the audited financial statements contained in our Form 10-K for the year ended December 31, 2014 describe the significant accounting policies essential to our unaudited condensed consolidated financial statements. Preparation of our financial statements requires estimate, judgements and assumptions. We believe that the estimates, judgements and assumptions that we have used are appropriate and correct based on information available at the time they were made. These estimates, judgements and assumptions can affect our reported assets and liabilities as of the date of the financial statements, as well as the reported revenues and expenses during the period presented. If there are material difference between these estimates, judgements and assumptions and actual facts, our financial statements may be affected.

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require our judgement in its application. There are areas in which our judgement in selecting among available alternatives would not produce a materially different result, but there are some areas in which our judgment in selecting among available alternatives would produce a materially different result. See the notes to the unaudited condensed consolidated financial statements that contain additional information regarding our accounting policies and other disclosures.

Recently Issued Accounting Standards

See Note 1 to the accompanying condensed notes to consolidated financial statements included in this Quarterly Report on Form 10-Q.

Related Party Transactions

See Note 18 to the accompanying condensed notes to consolidated financial statements included in this Quarterly Report on Form 10-Q.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks related to fluctuations in interest rates on our outstanding variable rate debt.  In addition, our operations are interest rate sensitive as higher mortgage interest rates could negatively affect housing demand.  We did not utilize swaps, forward or option contracts on interest rates or commodities, or other types of derivative financial instruments as of or during the three or six months ended June 30, 2015. We have not entered into and currently do not hold derivatives for trading or speculative purposes. Many of the statements contained in this section are forward looking and should be read in conjunction with our disclosures under the heading “Cautionary Note Concerning Forward-Looking Statements.”

Item 4.

Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, has reviewed and evaluated the effectiveness of our disclosure controls and procedures, as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e), as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based on such evaluation, management has concluded that our disclosure controls and procedures were effective as of the Evaluation Date. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching our desired disclosure control objectives.

During the fiscal quarter covered by this Quarterly Report on Form 10-Q, there has not been any change in our internal control over financial reporting that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

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PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

Various claims and actions that we consider normal to our business have been asserted and are pending against us. See Note 15, Commitments and Contingencies, of the condensed notes to the unaudited financial statements included in Part I, Item 1 of this Quarterly Report on Form 10‑Q.  

Item 1A.

Risk Factors

The following supplements and updates the risk factors in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2014.  If any of the risks discussed below or in our Annual Report on Form 10-K occur, our business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected, in which case the trading price of our common stock could decline significantly and you could lose all or a part of your investment.  Some statements in this Quarterly Report on Form 10-Q, including statements in the following risk factors, constitute forward-looking statements.  Please refer to Part I, Item 2 of this Quarterly Report on Form 10-Q entitled “Cautionary Note Concerning Forward-Looking Statements.”

Risks Related to Our Business

Laws and regulations governing the residential mortgage and title insurance industries could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.

We recently established a joint venture to provide mortgage related services to homebuyers and a wholly owned title agency.  The residential mortgage lending and title insurance industries are each heavily regulated.  Changes to existing laws or regulations or adoption of new laws or regulations could require us to incur significant compliance costs.  A material failure to comply with any of these laws or regulations could result in the loss or suspension of required licenses or other approvals, the imposition of monetary penalties, and restitution awards or other relief.  In addition, we could be subject to individual or class action litigation alleging violations of these laws and regulations.  Any of these could result in substantial costs and we could incur judgments or enter into settlements of claims that could have a material adverse effect on our business.  Any of these outcomes could materially and adversely affect our business, financial condition and results of operations.

Deliveries of homes may be delayed as a result of lender compliance with a new rule governing the content and timing of mortgage loan disclosures to borrowers.

The Consumer Financial Protection Bureau (CFPB) has adopted a new rule governing the content and timing of mortgage loan disclosures to borrowers.  This new rule, commonly known as TILA-RESPA Integrated Disclosures or TRID, is currently expected to take effect on October 1, 2015.  Lender compliance with TRID could result in delays in loan closings and the delivery of homes.

 

 

 

 

 

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Item 6.

Exhibits

 

Exhibit
Number

Exhibit Description

 

 

    2.1

Transaction Agreement, dated as of November 3, 2013, among TRI Pointe Homes, Inc., Weyerhaeuser Company, Weyerhaeuser Real Estate Company, and Topaz Acquisition, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S-4 (filed Mar. 28, 2014))

 

 

    2.2

Agreement and Plan of Merger to Form Holding Company, dated as of July 7, 2015, by and among TRI Pointe Homes, Inc., TRI Pointe Group, Inc. and TPG Merger, Inc. (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K (filed July 7, 2015))

 

 

    3.1

Amended and Restated Certificate of Incorporation of TRI Pointe Group, Inc. (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K (filed July 7, 2015))

 

 

    3.2

Amended and Restated Bylaws of TRI Pointe Group, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (filed July 7, 2015))

 

 

    4.1

Specimen Common Stock Certificate of TRI Pointe Group, Inc. (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed Dec. July 7,, 2015))

 

 

    4.2

Investor Rights Agreement, dated as of January 30, 2013, by and among TRI Pointe Homes, Inc., VIII/TPC Holdings, L.L.C., BMG Homes, Inc., The Bauer Revocable Trust U/D/T Dated December 31, 2003, Grubbs Family Trust Dated June 22, 2012, The Mitchell Family Trust U/D/T Dated February 8, 2000, Douglas J. Bauer, Thomas J. Mitchell and Michael D. Grubbs. (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-4 (filed Jan. 9, 2014))

 

 

    4.3

First Amendment to Investor Rights Agreement, dated as of November 3, 2013, by and among TRI Pointe Homes, Inc., VIII/TPC Holdings, L.L.C., BMG Homes, Inc., The Bauer Revocable Trust U/D/T Dated December 31, 2003, Grubbs Family Trust Dated June 22, 2012, The Mitchell Family Trust U/D/T Dated February 8, 2000, Douglas F. Bauer, Thomas J. Mitchell and Michael D. Grubbs (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K (filed Nov. 4, 2013))

 

 

    4.4

Registration Rights Agreement, dated as of January 30, 2013, among TRI Pointe Homes, Inc., VIII/TPC Holdings, L.L.C., and certain TRI Pointe Homes, Inc. stockholders (incorporated by reference to Exhibit 4.4 to the Company’s Registration Statement on Form S-4 (filed Jan. 9, 2014))

  

 

    4.5

Indenture, dated as of June 13, 2014, by and among Weyerhaeuser Real Estate Company and U.S. Bank National Association, as trustee (including form of 4.375% Senior Note due 2019) (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed June 19, 2014))

 

 

    4.6

First Supplemental Indenture, dated as of July 7, 2014, among TRI Pointe Homes, Inc., Weyerhaeuser Real Estate Company and U.S. Bank National Association, as trustee, relating to the 4.375% Senior Notes due 2019 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (filed July 7, 2014))

 

 

    4.7

Second Supplemental Indenture, dated as of July 7, 2014, among the guarantors party thereto and U.S. Bank National Association, as trustee, relating to the 4.375% Senior Notes due 2019 (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K (filed July 7, 2014))

 

 

    4.8

Indenture, dated as of June 13, 2014, by and among Weyerhaeuser Real Estate Company and U.S. Bank National Association, as trustee (including form of 5.875% Senior Note due 2024) (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed June 19, 2014))

 

 

    4.9

First Supplemental Indenture, dated as of July 7, 2014, among TRI Pointe Homes, Inc., Weyerhaeuser Real Estate Company and U.S. Bank National Association, as trustee, relating to the 5.875% Senior Notes due 2024 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (filed July 7, 2014))

 

 

    4.10

Second Supplemental Indenture, dated as of July 7, 2014, among the guarantors party thereto and U.S. Bank National Association, as trustee, relating to the 5.875% Senior Notes due 2024 (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K (filed July 7, 2014))

 

 

 

- 50 -


 

    4. 11

Second Amendment to Investor Rights Agreement, dated as of July 7, 2015, among TRI Pointe Group, Inc., TRI Pointe Homes, Inc. VIII/TPC Holdings, L.L.C., BMG Homes, Inc., The Bauer Revocable Trust U/D/T Dated December 31, 2003, Grubbs Family Trust Dated June 22, 2012, The Mitchell Family Trust U/D/T Dated February 8, 2000, Douglas F. Bauer, Thomas J. Mitchell and Michael D. Grubbs (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K (filed July 7, 2015))

 

 

    4. 12

Third Supplemental Indenture, dated as of July 7, 2015, among TRI Point Group, Inc., TRI Pointe Homes, Inc. and U.S. Bank National Association, as trustee, relating to the 4.375% Senior Notes due 2019 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K (filed July 7, 2015))

 

 

    4. 13

Third Supplemental Indenture, dated as of July 7, 2015, among TRI Point Group, Inc., TRI Pointe Homes, Inc. and U.S. Bank National Association, as trustee, relating to the 5.875% Senior Notes due 2024 (incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K (filed July 7, 2015))

 

 

    4.14

Amended and Restated Credit Agreement, dated as of July 7, 2015, among TRI Point Group, Inc., U.S. Bank National Association and the lenders party thereto (incorporated by reference to Exhibit 4.4 to the Company's Current Report on Form 8-K (filed July 7, 2015))

 

 

    31.1

Chief Executive Officer Section 302 Certification of the Sarbanes-Oxley Act of 2002

 

 

    31.2

Chief Financial Officer Section 302 Certification of the Sarbanes-Oxley Act of 2002

 

 

    32.1

Chief Executive Officer Section 906 Certification of the Sarbanes-Oxley Act of 2002

 

 

    32.2

Chief Financial Officer Section 906 Certification of the Sarbanes-Oxley Act of 2002

 

 

    101

The following materials from TRI Pointe Homes, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statement of Cash Flows, and (v) Condensed Notes to Consolidated Financial Statement.

 

 

 

 

- 51 -


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

TRI Pointe Group, Inc.

 

 

 

 

 

 

By:

/s/ Douglas F. Bauer

 

 

 

Douglas F. Bauer

 

 

 

Chief Executive Officer

 

 

 

 

 

 

By:

/s/ Michael D. Grubbs

 

 

 

Michael D. Grubbs

 

 

 

Chief Financial Officer

Date: August 10, 2015

 

 

- 52 -