- Delivered Net Income of $0.16 Per
Share, Including $0.09 of Net One-time Expenses -
- Revenue from Homebuilding Operations
Increased 27.8% to $89.8 million -
- Net New Home Orders Grew 14.4% to 247
-
- Homes in Backlog Grew 34.4% to 387 homes
with a value of $157.2 million -
- Repurchased $1.0 million of Class A Common
Stock since June 2016 -
UCP, Inc. (NYSE:UCP) today announced its results of operations
for the three months ended September 30, 2016.
Third Quarter 2016 Highlights Compared to Third Quarter
2015
- Net income was $3.1 million, including
$2.0 million of net one-time expenses
- Total consolidated revenue grew 27.2%
to $93.7 million
- Revenue from homebuilding operations
increased 27.8% to $89.8 million
- Selling, general and administrative
expense as a percentage of total revenue improved to 10.1%,
including 260bp benefit from a reduction in contingent
consideration, compared to 13.9%
- Net new home orders grew 14.4% to
247
- Backlog on a dollar basis increased
30.1% to $157.2 million
Dustin Bogue, President and Chief Executive Officer of UCP,
stated, “We delivered another consecutive quarter of profitability
representing strong revenue momentum, continued discipline which
equates to improved core operating margins and the ongoing
transformation of our business to improve returns on equity. We
were especially pleased to produce $0.16 of earnings per share
while recording a $0.09 net charge related to our Citizens Homes
acquisition (“Citizens Acquisition”). In the West, we are
capitalizing on sustained demand for our high-quality communities.
In the Southeast, we are recovering from weather-related
construction delays, with our Southeast backlog up 65% on a dollar
basis compared to the prior year period. As we look to the fourth
quarter 2016, we are on track to accomplish our full year goals and
confident in the positive steps we are taking to further improve
our profitability and returns into 2017."
Third Quarter 2016 Operating Results
Net income was $3.1 million, compared to $3.8 million in the
prior year period. Net income attributable to shareholders of UCP
was $1.3 million, or $0.16 per share, compared to net income
attributable to shareholders of UCP of $1.6 million, or $0.21 per
share, in the prior year period. Net income in the third quarter
2016 included an impairment charge to goodwill related to the
Citizens Acquisition of approximately $4.2 million. Net income in
the third quarter 2016 also included a benefit from the reduction
in carrying value of the contingent consideration relating to the
Citizens Acquisition by $2.4 million to approximately $0.3 million.
The net result of these adjustments was approximately $1.8 million
of increased expense, representing $0.09 per share of net income
attributable to shareholders of UCP, for the three months ended
September 30, 2016.
Revenue from homebuilding operations grew 27.8% to $89.8
million, compared to $70.3 million for the prior year period. The
improvement was driven by a 29.6% increase in the average selling
price for home sales to approximately $451,000, compared to
approximately $348,000 during the prior year period. The increase
in average selling price was a result of a greater mix of homes
delivered from the West along with core price gains. The number of
homes delivered decreased slightly to 199, compared to 202 during
the prior year period, mainly attributable to weather-related
construction delays in the Southeast.
Homebuilding gross margin percentage was 18.5%, compared to
18.9% in the prior year period. Adjusted homebuilding gross margin
percentage was 21.0%, compared to 21.1% in the prior year period,
due primarily to an unfavorable mix impact in connection with the
closing out of the Company’s two remaining communities in
Bakersfield, California. Consolidated gross margin percentage was
17.8%, compared to 19.0% in the prior year period, in part due to
the sale of previously impaired land in Bakersfield,
California.
Sales and marketing expense was $4.9 million, compared to $4.7
million in the prior year period. As a percentage of total revenue,
sales and marketing expense decreased to 5.2%, compared to 6.4% in
the prior year period, due to significant cost controls as well as
higher overall revenues.
General and administrative expense was $4.6 million, compared to
$5.5 million in the prior year period. General and administrative
expense in the third quarter 2016 included the $2.4 million benefit
from the reduction in carrying value of the contingent
consideration obligation relating to the Citizens Acquisition. As a
percentage of total revenue, general and administrative expense was
4.9%, down from 7.5% for the prior year period. Excluding the
benefits from the reduction in contingent consideration recorded in
both the third quarter of 2016 and 2015, general and administrative
expense as a percentage of revenue for the third quarter 2016 would
have been 7.5% as compared to 8.6% in the prior year period.
Net new home orders increased 14.4% to 247, compared to 216 the
prior year period. Net new home orders in the West grew 19.3% to
161, compared to the prior year period helped by stronger market
demand. Net new home orders in the Southeast grew 6.2% to 86,
compared to the prior year period, primarily reflecting a community
opening in Nashville, Tennessee. Unit backlog at the end of the
quarter was up 34.4% to 387, compared to 288 at the end of the
prior year period. The backlog on a dollar basis increased 30.1% to
$157.2 million, compared to $120.8 million at the end of prior year
period.
Total lots owned and controlled were 5,484, compared to 5,878 at
December 31, 2015 as the Company continues to prudently manage its
inventory and strive to expand its return on equity and assets.
Stock Repurchase Program
In June 2016, the Company’s board of directors authorized a
stock repurchase program, under which the Company may repurchase up
to $5.0 million of its Class A common stock through June 1, 2018.
As of September 30, 2016, the Company repurchased 123,636
shares of Class A common stock for approximately $1.0 million under
this stock repurchase program.
Webcast and Conference Call
The Company will host a conference call for investors and other
interested parties on Monday, October 31, 2016 at 12:00 p.m.
Eastern Time, 9:00 a.m. Pacific Time. Interested parties can listen
to the call live on the Internet and locate accompanying
presentation slides through the Investor Relations section of the
Company’s website at www.unioncommunityllc.com.
Listeners are advised to log on to the website at least 15
minutes prior to the call to download and / or install any
necessary audio software. The conference call can also be accessed
by dialing 1-877-407-3982 for domestic participants or
1-201-493-6780 for international participants. Participants should
ask for the UCP Second Quarter 2016 Earnings Conference Call. Those
dialing in should do so at least ten minutes prior to the start of
the conference call. A replay of the conference call will be
available through November 30, 2016, by dialing 1-877-870-5176 for
domestic participants or 1-858-384-5517 for international
participants and entering the pass code 13646894. An archive of the
webcast will be available on the Company’s website for a limited
time.
About UCP, Inc.
UCP is a leading homebuilder and land developer with expertise
in residential land acquisition, development and entitlement, as
well as home design, construction and sales. UCP operates in the
States of California, Washington, North Carolina, South Carolina
and Tennessee. UCP designs and builds high-quality, sustainable
single-family homes for a variety of lifestyles and budgets through
its wholly-owned subsidiary, Benchmark Communities, LLC. The
Benchmark Communities brand is recognized by homebuyers for its
high-quality construction and craftsmanship, cutting-edge home
design and customer-centric service and warranty programs.
Forward-Looking Statements
This press release contains forward-looking statements. You
should not place undue reliance on those statements because they
are subject to numerous uncertainties and factors relating to the
Company's operations and business environment, all of which are
difficult to predict and many of which are beyond the Company's
control. Forward-looking statements include information concerning
the Company's possible or assumed future results of operations,
including descriptions of the Company's business strategy. These
statements often include words such as "may," “might,” "will,"
"should," “expects,” “plans,” "anticipates," “believes,”
“estimates,” “predicts,” “potential,” “project,” “goal” "intend,"
or “continue,” or similar expressions. These statements are based
on assumptions that the Company has made in light of its experience
in the industry as well as its perceptions of historical trends,
current conditions, expected future developments and other factors
it believes are appropriate under the circumstances. Although the
Company believes that these forward-looking statements are based on
reasonable assumptions, it can give no assurance they will prove to
be correct. Therefore, you should be aware that many factors could
affect the Company's actual financial results or results of
operations and could cause actual results to differ materially from
those in the forward-looking statements.
Any forward-looking statement made by the Company herein, or
elsewhere, speaks only as of the date on which it was made. New
risks and uncertainties come up from time to time, and it is
impossible for the Company to predict these events or how they may
affect it. The Company has no obligation to update any
forward-looking statements after the date hereof, except as
required by federal securities laws.
Homebuilding adjusted gross margin, land development adjusted
gross margin and net debt to capital are non-GAAP financial
measures. A reconciliation to the most comparable U.S. GAAP
financial measures is presented in Appendix A hereto.
UCP, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited) (In thousands, except shares and
per share data)
September 30, December 31, 2016
2015 Assets Cash and cash equivalents $ 27,586 $
39,829 Restricted cash 900 900 Real estate inventories 381,703
360,989 Fixed assets, net 966 1,314 Intangible assets, net 122 236
Goodwill
-
4,223 Receivables 4,512 1,317 Other assets 6,403 5,889
Total assets $ 422,192 $ 414,697
Liabilities and equity Accounts payable $ 21,714 $ 14,882
Accrued liabilities 22,719 24,616 Customer deposits 2,502 1,825
Notes payable, net 83,663 82,486 Senior notes, net 74,122
73,480
Total liabilities 204,720 197,289
Commitments and contingencies (Note 11)
Equity Preferred stock, par value $0.01 per share,
50,000,000 authorized, no shares issued and outstanding as of
September 30, 2016; no shares issued and outstanding as of December
31, 2015
-
-
Class A common stock, $0.01 par value; 500,000,000 authorized,
8,034,831 issued and 7,911,195 outstanding as of September 30,
2016; 8,014,434 issued and outstanding as of December 31, 2015 80
80 Class B common stock, $0.01 par value; 1,000,000 authorized, 100
issued and outstanding as of September 30, 2016; 100 issued and
outstanding as of December 31, 2015
-
-
Additional paid-in capital 96,892 94,683 Treasury stock at cost;
123,636 shares as of September 30, 2016; none as of December 31,
2015 (1,000 )
-
Accumulated deficit (2,476 ) (4,563 ) Total UCP, Inc. stockholders’
equity 93,496 90,200 Noncontrolling interest 123,976
127,208 Total equity 217,472 217,408
Total liabilities and equity $ 422,192 $ 414,697
UCP, INC. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME OR
LOSS (Unaudited) (In thousands, except shares and per
share data) Three Months Ended September 30,
Nine months ended September 30, 2016
2015 2016 2015 REVENUE:
Homebuilding $ 89,840 $ 70,284 $ 239,480 $ 163,705 Land development
3,900 1,116 5,322 3,156 Other revenue
-
2,272
-
5,060 Total revenue: 93,740 73,672
244,802 171,921
COSTS AND EXPENSES:
Cost of sales - homebuilding 72,984 57,006 195,561 134,744 Cost of
sales - land development 3,834 716 4,519 2,264 Cost of sales -
other revenue
-
1,958
-
4,363 Impairment on real estate 192
-
2,589
-
Total cost of sales 77,010 59,680 202,669
141,371 Gross margin - homebuilding 16,856 13,278
43,919 28,961 Gross margin - land development 66 400 803 892 Gross
margin - other revenue
-
314 0 697 Gross margin - impairment on real estate (192 )
-
(2,589 )
-
Sales and marketing 4,853 4,692 13,595 13,246 General and
administrative 4,592 5,539 19,101 19,311
Goodwill impairment 4,223
-
4,223
-
Total costs and expenses 90,678 69,911 239,588
173,928 Income (loss) from operations 3,062 3,761
5,214 (2,007 ) Other income, net 204 45 253
177 Net income (loss) before income taxes $ 3,266 $ 3,806 $
5,467 $ (1,830 ) Provision for income taxes (124 )
-
(271 )
-
Net income (loss) $ 3,142 $ 3,806 $ 5,196
$ (1,830 ) Net income (loss) attributable to noncontrolling
interest $ 1,857 $ 2,167 $ 3,109 $ (961 ) Net income (loss)
attributable to UCP, Inc. 1,285 1,639 2,087 (869 ) Other
comprehensive income (loss), net of tax
-
-
-
-
Comprehensive income (loss) $ 3,142 $ 3,806 $
5,196 $ (1,830 ) Comprehensive income (loss) attributable to
noncontrolling interest $ 1,857 $ 2,167 $ 3,109
$ (961 ) Comprehensive income (loss) attributable to UCP,
Inc. $ 1,285 $ 1,639 $ 2,087 $ (869 )
Earnings (loss) per share of Class A common stock: Basic $ 0.16
$ 0.21 $ 0.26 $ (0.11 ) Diluted $ 0.16
$ 0.20 $ 0.26 $ (0.11 ) Weighted average
shares of Class A common stock: Basic 7,948,268 7,995,934
7,993,371 7,950,700 Diluted 7,986,416
8,017,768 8,043,830 7,950,700
UCP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (Unaudited) (In thousands) Nine
months ended September 30, 2016 2015
Operating activities Net income (loss) $ 5,196 $ (1,830 )
Adjustments to reconcile net income (loss) to net cash used in
operating activities: Stock-based compensation 743 1,572
Abandonment charges 505 146 Impairment on real estate inventories
2,589
-
Depreciation and amortization 492 463 Goodwill impairment 4,223
-
Fair value adjustment of contingent consideration (2,400 ) (818 )
Changes in operating assets and liabilities: Real estate
inventories (23,067 ) (60,715 ) Receivables (3,195 ) 307 Other
assets (411 ) (2,389 ) Accounts payable 6,832 14,732 Accrued
liabilities 302 (4,360 ) Customer deposits 677 1,125 Income taxes
payable 202
-
Net cash used in operating activities (7,312 ) (51,767 )
Investing activities Purchases of fixed assets (117 ) (311 )
Net cash used in investing activities (117 ) (311 )
Financing
activities Distribution to noncontrolling interest (4,830 )
(981 ) Proceeds from notes payable 106,663 112,595 Repayment of
notes payable (105,488 ) (77,895 ) Debt issuance costs (114 ) (698
) Repurchase of common stock (1,000 )
-
Withholding taxes paid for vested RSUs (45 ) (370 ) Net cash (used
by) provided by financing activities (4,814 ) 32,651 Net
decrease in cash and cash equivalents (12,243 ) (19,427 ) Cash and
cash equivalents – beginning of period 39,829 42,033
Cash and cash equivalents – end of period $ 27,586 $ 22,606
Non-cash investing and financing activity
Exercise of land purchase options acquired with acquisition of
business $ 74 $ 160 Issuance of Class A common stock for vested
restricted stock units $ 189 $ 680
Supplemental cash flow
information Income taxes paid $ 69 $
-
Appendix A
Select Operating
Data by Region
Three months ended September 30, Nine
months ended September 30, %
% 2016 2015 Change 2016
2015 Change Revenue from Homebuilding Operations
(in thousands) West $ 79,500 $ 51,464 54.5 % $ 204,273 $
120,438 69.6 % Southeast $ 10,340 $ 18,820 (45.1 )% $
35,207 $ 43,267 (18.6 )% Total $ 89,840 $ 70,284 27.8
% $ 239,480 $ 163,705 46.3 %
Homes Delivered West 155
120 29.2 % 413 283 45.9 % Southeast 44 82 (46.3 )%
150 195 (23.1 )% Total 199 202 (1.5 )% 563 478 17.8 %
Average Selling Price for Home Sales (in thousands)
West $ 513 $ 429 19.6 % $ 495 $ 426 16.2 % Southeast $ 235 $
230 2.2 % $ 235 $ 222 5.9 % Total $ 451 $ 348
29.6 % $ 425 $ 342 24.3 %
Net New Home Orders West
161 135 19.3 % 502 430 16.7 % Southeast 86 81 6.2 %
199 246 (19.1 )% Total 247 216 14.4 % 701 676 3.7 %
Average Selling Communities West 18 19 (5.3 )% 18 17
5.9 % Southeast 11 9 22.2 % 10 10
-
% Total 29 28 3.6 % 28 27 3.7 %
Backlog Units West
274 208 31.7 % Southeast 113 80 41.3 % Total 387 288
34.4 %
Backlog Dollar Basis (in thousands) West $
126,755 $ 102,395 23.8 % Southeast $ 30,421 $ 18,439
65.0 % Total $ 157,176 $ 120,834 30.1 %
Owned Lots
West 3,495 4,153 (15.8 )% Southeast 866 941 (8.0 )%
Total 4,361 5,094 (14.4 )%
Controlled Lots West 303
415 (27.0 )% Southeast 820 728 12.6 % Total 1,123
1,143 (1.7 )%
Appendix B
Reconciliation of
GAAP and Non-GAAP Measures
Gross Margin and Adjusted Gross Margin
Three Months Ended September 30, 2016 %
2015 % ($ in thousands)
Consolidated
Gross Margin & Adjusted Gross Margin Revenue $ 93,740 100.0
% $ 73,672 100.0 % Cost of Sales 77,010 82.2 % 59,680
81.0 % Gross Margin 16,730 17.8 % 13,992 19.0 % Add: interest in
cost of sales 2,214 2.4 % 1,443 2.0 % Add: impairment and
abandonment charges 223 0.2 % 144 0.2 % Adjusted
Gross Margin(1) $ 19,167 20.4 % $ 15,579 21.1 %
Consolidated Gross margin percentage 17.8 % 19.0 % Consolidated
Adjusted gross margin percentage(1) 20.4 % 21.1 %
Homebuilding Gross Margin & Adjusted Gross Margin
Homebuilding revenue $ 89,840 100.0 % $ 70,284 100.0 % Cost of home
sales 73,176 81.5 % 57,006 81.1 % Homebuilding gross
margin 16,664 18.5 % 13,278 18.9 % Add: interest in cost of home
sales 1,990 2.2 % 1,443 2.1 % Add: impairment and abandonment
charges 192 0.2 % 119 0.2 % Adjusted homebuilding
gross margin(1) $ 18,846 21.0 % $ 14,840 21.1 %
Homebuilding gross margin percentage 18.5 % 18.9 % Adjusted
homebuilding gross margin percentage(1) 21.0 % 21.1 %
Land Development Gross Margin & Adjusted Gross Margin
Land development revenue $ 3,900 100.0 % $ 1,116 100.0 % Cost of
land development 3,834 98.3 % 716 64.2 % Land
development gross margin 66 1.7 % 400 35.8 % Add: interest in cost
of land development 224 5.7 %
-
-
% Add: Impairment and abandonment charges 31 0.8 % 25
2.2 % Adjusted land development gross margin(1) $ 321 8.2 %
$ 425 38.1 % Land development gross margin percentage 1.7 %
35.8 % Adjusted land development gross margin percentage(1) 8.2 %
38.1 %
Other Revenue Gross and Adjusted Margin
Revenue $
-
-
% $ 2,272 100.0 % Cost of revenue
-
-
% 1,958 86.2 % Other revenue gross and adjusted margin $
-
-
% $ 314 13.8 % Other revenue gross and adjusted margin
percentage
-
% 13.8 %
Nine months ended September 30,
2016 % 2015 % ($
in thousands)
Consolidated Gross Margin & Adjusted Gross
Margin Revenue $ 244,802 100.0 % $ 171,921 100.0 % Cost of
Sales 202,669 82.8 % 141,371 82.2 % Gross Margin
42,133 17.2 % 30,550 17.8 % Add: interest in cost of sales 5,689
2.3 % 3,416 2.0 % Add: impairment and abandonment charges 3,094
1.3 % 146 0.1 % Adjusted Gross Margin(1) $ 50,916
20.8 % $ 34,112 19.8 % Consolidated Gross margin
percentage 17.2 % 17.8 % Consolidated Adjusted gross margin
percentage(1) 20.8 % 19.8 %
Homebuilding Gross Margin
& Adjusted Gross Margin Homebuilding revenue $ 239,480
100.0 % $ 163,705 100.0 % Cost of home sales 196,019 81.9 %
134,744 82.3 % Homebuilding gross margin 43,461 18.1 %
28,961 17.7 % Add: interest in cost of home sales 5,319 2.2 % 3,367
2.1 % Add: impairment and abandonment charges 458 0.2 %
-
-
% Adjusted homebuilding gross margin(1) $ 49,238 20.6 % $
32,328 19.7 % Homebuilding gross margin percentage 18.1 %
17.7 % Adjusted homebuilding gross margin percentage(1) 20.6 % 19.7
%
Land Development Gross Margin & Adjusted Gross
Margin Land development revenue $ 5,322 100.0 % $ 3,156 100.0 %
Cost of land development 6,650 125.0 % 2,264 71.7 %
Land development gross margin (1,328 ) (25.0 )% 892 28.3 % Add:
interest in cost of land development 370 7.0 % 49 1.6 % Add:
Impairment and abandonment charges 2,636 49.5 % 146
4.6 % Adjusted land development gross margin(1) $ 1,678 31.5
% $ 1,087 34.4 % Land development gross margin percentage
(25.0 )% 28.3 % Adjusted land development gross margin
percentage(1) 31.5 % 34.4 %
Other Revenue Gross and
Adjusted Margin Revenue $
-
-
% $ 5,060 100.0 % Cost of revenue
-
-
% 4,363 86.2 % Other revenue gross and adjusted margin $
-
-
% $ 697 13.8 % Other revenue gross and adjusted margin
percentage
-
% 13.8 %
* Percentages may not add due to rounding.
(1) Adjusted gross margin, adjusted homebuilding gross
margin and adjusted land development gross margin are non-GAAP
financial measures. These metrics have been adjusted to add back
capitalized interest, and impairment and abandonment charges. We
use adjusted gross margin information as a supplemental measure
when evaluating our operating performance. We believe this
information is meaningful, because it isolates the impact that
leverage and non-cash impairment and abandonment charges have on
gross margin. However, because adjusted gross margin information
excludes interest expense and impairment and abandonment charges,
all of which have real economic effects and could materially impact
our results, the utility of adjusted gross margin information as a
measure of our operating performance is limited. In addition, other
companies may not calculate adjusted gross margin information in
the same manner that we do. Accordingly, adjusted gross margin
information should be considered only as a supplement to gross
margin information as a measure of our performance. The table above
provides a reconciliation of adjusted gross margin numbers to the
most comparable GAAP financial measure.
Debt-to-Capital Ratio and Net
Debt-to-Capital Ratio
As of September 30, 2016 As of December 31,
2015 Debt $ 157,785 $ 155,966 Equity 217,472 217,408
Total capital $ 375,257 $ 373,374 Ratio of debt-to-capital
42.0 % 41.8 % Debt $ 157,785 $ 155,966 Net cash and cash
equivalents $ 28,486 $ 40,729 Less: restricted cash and minimum
liquidity requirement 15,900 15,900 Unrestricted cash
and cash equivalents $ 12,586 $ 24,829
Net debt $ 145,199 $ 131,137 Equity 217,472 217,408
Total adjusted capital $ 362,671 $ 348,545 Ratio of net
debt-to-capital (1) 40.0 % 37.6 % (1) The ratio of
net debt-to-capital is computed as the quotient obtained by
dividing net debt (which is debt less cash and cash equivalents,
including restricted cash balance requirements) by the sum of net
debt plus stockholders’ and member's 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.
We reconcile this non-GAAP financial measure to the ratio of
debt-to-capital in the table above. The Company’s calculation of
net debt-to-capital ratio might not be comparable with other
issuers or issuers in other industries.
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Investor Relations:408-207-9499 Ext. 476Investorrelations@unioncommunityllc.comorMedia:Phil
Denning/Jason ChudobaPhil.denning@icrinc.com /
Jason.chudoba@icrinc.com
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