- Earnings Grew Significantly to $0.14 Per
Share of Class A Common Stock -
- Revenue from Homebuilding Operations
Increased 37.8% to $94.0 million -
- Net New Home Orders Grew 20.0% to 270
-
- Signed Agreement in April 2017 to Merge
with Century Communities, Inc. to Create a Leading U.S.
Homebuilding Platform with Approximately 25,000 Lots in 10 States
-
UCP, Inc. (“UCP” or the “Company”) (NYSE:UCP) today announced
its results of operations for the three months ended March 31,
2017.
Selected First Quarter 2017 Metrics Compared to First Quarter
2016
- Earnings increased to $0.14 per share
of Class A common stock
- Revenue from homebuilding operations
increased 37.8% to $94.0 million
- Homes delivered increased 35.3% to
226
- Homebuilding gross margin was 18.3%,
compared to 17.6%, and adjusted homebuilding gross margin was
21.0%, compared to 19.9%
- Net new home orders increased 20.0% to
270 units
- Selling, general and administrative
expense as a percentage of total revenue improved to 14.4%,
compared to 16.6%
- Backlog on a dollar basis increased
29.6% to $176.6 million
Dustin Bogue, President and Chief Executive Officer of UCP,
stated, “2017 is off to a strong start with very positive results
across nearly all metrics, including a significant rise in earnings
to $0.14 per share of Class A common stock. The continuation of
strong momentum in our markets and the expanded reach of our
Benchmark brand was evident with first quarter home deliveries
growing 35.3% and homes in backlog up 32.2% compared to the prior
period. We are especially pleased to report an improvement in
homebuilding gross margin, in part driven by our careful balancing
of price and pace, along with ongoing efforts to tightly manage
construction costs. Our previously announced sales training and
marketing initiatives are progressing according to plan, as we stay
disciplined on overall SG&A spend to continue producing
favorable leverage on higher revenues. We remain committed to
striving for operational excellence in all facets of our business
to capitalize on strong housing fundamentals in our key
markets.”
First Quarter 2017 Operating Results
Net income increased to $3.5 million, compared to $0.2 million
in the prior year period. Net income attributable to stockholders
of UCP was $1.1 million, or $0.14 per share of Class A common
stock, compared to net income attributable to stockholders of UCP
of $0.1 million, or $0.01 per share of Class A common stock, in the
prior year period.
Homebuilding revenue increased 37.8% to $94.0 million, compared
to $68.2 million in the prior year period. The improvement was
driven by a 35.3% increase in homes delivered to 226, compared to
167 in the prior year period, led by increased deliveries of 40.0%
in the West. The average selling price of a home increased 1.7% to
approximately $416,000, compared to the prior year period, driven
by an 18.6% increase in the Southeast.
Homebuilding gross margin percentage was 18.3%, compared to
17.6% in the prior year period. Adjusted homebuilding gross margin
percentage was 21.0%, compared to 19.9% in the prior year period.
Consolidated gross margin percentage was 18.3%, compared to 16.9%
in the prior year period.
Sales and marketing expense was $5.1 million, compared to $4.1
million in the prior year period. As a percentage of total revenue,
sales and marketing expense decreased to 5.4%, compared to 6.0% in
the prior year period, due to cost controls as well as higher
overall revenues.
General and administrative expense was $8.5 million, compared to
$7.3 million in the prior year period. As a percentage of total
revenue, general and administrative expense was 9.0%, down from
10.7% in the prior year period. As a percentage of total revenue,
selling, general and administrative expense was 14.4% compared to
16.6% for the prior year, driven by higher revenue and continued
focus on operational initiatives.
Net new home orders increased 20.0% to 270, compared to 225 in
the prior year period, led by a 25.0% increase in net new home
orders in the West. Net new home orders in the Southeast grew 2.0%
to 50, compared to the prior year period. The average number of
selling communities was 27 compared to 28 in the prior year period.
Unit backlog at the end of the quarter was up 32.2% to 406,
compared to 307 at the end of the prior year period. The backlog on
a dollar basis increased 29.6% to $176.6 million, compared to
$136.2 million at the end of prior year period.
Total lots owned and controlled were 8,049, compared to 6,638 at
December 31, 2016 attributable to an increase in controlled
lots in the three Southeast markets and Pacific Northwest market as
the Company continues to prudently manage inventory and gain
greater operating expense leverage in these rapidly growing
divisions while striving 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 March 31, 2017, the Company repurchased 146,346 shares
of Class A common stock for approximately $1.2 million under this
stock repurchase program. For the three months ended March 31,
2017, the Company had no stock repurchases.
Merger Agreement
On April 11, 2017, UCP and Century Communities, Inc. (“Century”)
(NYSE: CCS), a leading homebuilder of single-family homes,
townhomes and flats in select U.S. markets, jointly announced the
execution of a definitive merger agreement pursuant to which the
companies would merge and create a combined company with an equity
market capitalization of over $700 million and an enterprise value
of over $1.3 billion. The combined company will operate in 10
states, 17 markets and 117 communities with approximately 25,000
total lots.
In the merger, each outstanding share of UCP Class A common
stock will be converted into the right to receive $5.32 in cash and
0.2309 of a newly issued share of Century common stock. UCP's
stockholders will own, on a pro forma basis, approximately 16.4% of
the combined company. The transaction is expected to close by the
end of the third quarter of 2017, subject to customary closing
conditions, including the adoption of the merger agreement by UCP's
stockholders.
Dustin Bogue, Chief Executive Officer of UCP, commented, "We
look forward to combining our business with Century. The
significantly increased scale of our combined platform provides a
geographically diverse portfolio with essentially no overlap and a
very attractive opportunity for UCP stockholders to participate in
the earnings growth, value accretion and enhanced prospects of a
leading homebuilder for many years to come."
Webcast and Conference Call
As a result of the Company’s pending merger with Century, the
Company does not plan to host a conference call or webcast in
connection with its results for the first quarter of 2017.
About UCP, Inc.
UCP is a 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, constructs and sells high-quality,
single-family homes 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 pending merger with Century and 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 pending
merger with Century and 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. For a description of factors
that may cause the Company’s actual results or performance to
differ from its forward-looking statements, please review the
information under the heading “Risk Factors” included in the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2016, as amended by amendment No. 1 thereto and
other documents filed by the Company with the Securities and
Exchange Commission. In addition, with respect to forward-looking
statements relating to the proposed merger with Century, important
factors that could cause actual results to differ materially from
those suggested by the forward-looking statements include, but are
not limited to: the occurrence of any event, change or other
circumstances that could give rise to the termination of the merger
agreement; the risk that the necessary stockholder approvals may
not be obtained; the risk that the necessary regulatory approvals
may not be obtained or may be obtained subject to conditions that
are not anticipated; the risk that the proposed merger will not be
consummated in a timely manner; risks that any of the closing
conditions to the proposed merger may not be satisfied or may not
be satisfied in a timely manner; risks related to disruption of
management time from ongoing business operations due to the
proposed merger; the risk that Century is unable to retain its
investment grade rating; failure to realize the benefits expected
from the proposed merger; the risk that the cost savings and any
other synergies from the merger may not be fully realized or may
take longer to realize than expected; the future cash requirements
of the combined company; general worldwide economic uncertainties;
failure to promptly and effectively integrate the merger; and the
effect of the announcement of the proposed merger on the ability of
Century and UCP to retain customers and retain and hire key
personnel, maintain relationships with suppliers, on their
operating results and businesses generally.
Homebuilding adjusted gross margin and land development adjusted
gross margin are non-GAAP financial measures. A reconciliation to
the most comparable U.S. GAAP financial measure is presented in
Appendix A hereto.
Important Additional Information and Where to Find It
In connection with the offering and sale of shares of Century
common stock in the merger, Century will file with the SEC a
Registration Statement on Form S-4 (the “Registration Statement”),
which will include a prospectus with respect to the shares to be
issued in the merger and a preliminary and definitive proxy
statement for the stockholders of UCP (the “Proxy Statement”),
which UCP will mail to its stockholders. The definitive
Registration Statement and the Proxy Statement will contain
important information about the merger and related matters. WE URGE
INVESTORS AND STOCKHOLDERS TO CAREFULLY READ THE REGISTRATION
STATEMENT AND THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
FILED WITH THE SEC AND ANY AMENDMENTS OR SUPPLEMENTS TO THOSE
DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN
IMPORTANT INFORMATION ABOUT CENTURY, UCP AND THE PROPOSED MERGER.
Investors and stockholders will be able to obtain copies of the
Registration Statement, Proxy Statement and other documents (when
they become available) filed with the SEC by Century and UCP free
of charge at the SEC’s website, www.sec.gov. In addition, copies
will be available free of charge by accessing Century’s website at
www.centurycommunities.com by clicking on the “Investors” link,
then clicking on “Financial Information” and then clicking on the
“SEC Filings” link or by accessing the Investor Relations section
of UCP’s website at www.unioncommunityllc.com.
No Offer or Solicitation
The information in this communication is for informational
purposes only and is neither an offer to purchase, nor a
solicitation of an offer to sell, subscribe for or buy any
securities or the solicitation of any vote or approval in any
jurisdiction pursuant to or in connection with the merger or
otherwise, nor shall there be any sale, issuance or transfer of
securities in any jurisdiction in contravention of applicable law.
No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act and otherwise in accordance with applicable law.
Participants in the Merger Solicitation
UCP, PICO Holdings, Inc., UCP’s majority stockholder (“PICO”)
(NASDAQ: PICO), Century, and their respective directors and certain
of their respective executive officers and employees may be deemed
to be participants in the solicitation of proxies from the
stockholders of UCP in respect of the proposed merger contemplated
by the Proxy Statement. Information about UCP’s directors and
executive officers is set forth in Amendment No. 1 to the Company’s
Annual Report on Form 10-K/A for the fiscal year ended December 31,
2016, which was filed with the SEC on April 28, 2017, information
about PICO’s directors and executive officers is set forth in its
definitive proxy statement for its 2017 Annual Meeting of
Stockholders, which was filed with the SEC on March 21, 2017, and
information about Century’s directors and executive officers is set
forth in its definitive proxy statement for its 2017 Annual Meeting
of Stockholders, which was filed with the SEC on March 29, 2017, in
each case, together with any subsequent current reports on Form 8-K
filed pursuant to Item 5.02, as applicable to UCP, PICO and
Century. These documents are available free of charge from the
sources indicated above, from UCP at the Investor Relations section
of its website (http://www.unioncommunityllc.com), from PICO’s
website (http://investors.picoholdings.com) and from Century’s
website (http://www.centurycommunities.com).
UCP, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except shares and per
share data)
March 31, 2017
December 31, 2016 Assets Cash and cash
equivalents $ 34,270 $ 40,931 Restricted cash
1,547 1,547 Total cash, cash equivalents and
restricted cash 35,817 42,478 Real estate inventories 389,379
373,207 Fixed assets, net 855 883 Intangible assets, net 82 101
Receivables 3,677 5,628 Deferred tax assets, net 5,227 5,482 Other
assets 7,081 6,327
Total
assets $ 442,118 $ 434,106
Liabilities and equity Accounts payable $ 16,533 $
18,435 Accrued liabilities 30,998 25,342 Customer deposits 4,526
2,449 Notes payable, net 87,001 86,658 Senior notes, net
74,550 74,336
Total liabilities
213,608 207,220
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 March 31, 2017; no shares
issued and outstanding as of December 31, 2016
— —
Class A common stock, $0.01 par value;
500,000,000 authorized, 8,104,660 issued and
7,958,314 outstanding as of March 31, 2017;
8,042,834 issued and 7,896,488 outstanding as
of December 31, 2016
81 80
Class B common stock, $0.01 par value;
1,000,000 authorized, 100 issued and outstanding as ofMarch 31,
2017; 100 issued and outstanding as of December 31, 2016
— — Additional paid-in capital 97,532 97,123
Treasury stock at cost; 146,346 shares as
of March 31, 2017; 146,346 as of December 31, 2016
(1,250 ) (1,250 ) Accumulated earnings 5,821
4,675 Total UCP, Inc. stockholders’ equity 102,184
100,628 Noncontrolling interest 126,326
126,258
Total equity 228,510
226,886
Total liabilities and equity
$ 442,118 $ 434,106
UCP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME OR LOSS
(Unaudited)
(In thousands, except shares and per
share data)
Three Months Ended March 31,
2017 2016 REVENUE:
Homebuilding $ 94,002 $ 68,225 Land development
496 — Total revenue:
94,498 68,225
COSTS AND EXPENSES: Cost
of sales - homebuilding 76,653 56,206 Cost of sales - land
development 475 461 Impairment on real estate
102 — Total cost of sales 77,230
56,667 Gross margin - homebuilding 17,349 12,019
Gross margin - land development 21 (461 ) Gross margin - impairment
on real estate (102 ) — Total gross
margin 17,268 11,558 Sales and
marketing 5,149 4,076 General and administrative
8,502 7,275 Total expenses
13,651 11,351 Income from operations 3,617 207
Other income, net 460 28 Net
income before income taxes $ 4,077 $ 235 Provision for income taxes
(621 ) (5 ) Net income $
3,456 $ 230 Net income attributable to noncontrolling
interest $ 2,310 $ 134 Net income attributable to UCP, Inc. 1,146
96 Other comprehensive income, net of tax —
— Comprehensive income $ 3,456
$ 230 Comprehensive income attributable to
noncontrolling interest $ 2,310 $ 134
Comprehensive income attributable to UCP, Inc.
$ 1,146 $ 96 Earnings per share of
Class A common stock: Basic $ 0.14 $
0.01 Diluted $ 0.14 $ 0.01
Weighted average shares of Class A common stock:
Basic 7,950,723 8,021,747
Diluted 8,102,962 8,022,601
UCP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(In thousands)
Three months ended March 31,
2017 2016 Operating
activities Net income $ 3,456 $ 230 Adjustments to reconcile
net income to net cash used in operating activities: Stock-based
compensation 417 185 Excess income tax benefit from stock based
awards (61 ) — Abandonment charges 102 419 Impairment on real
estate inventories 102 — Depreciation and amortization 143 156 Fair
value adjustment of contingent consideration — 8 Deferred income
taxes, net 255 — Changes in operating assets and liabilities: Real
estate inventories (15,348 ) (10,839 ) Receivables 1,951 (71 )
Other assets (740 ) 1,104 Accounts payable (1,902 ) (2,697 )
Accrued liabilities 5,229 (1,230 ) Customer deposits 2,077 454
Income taxes payable 427 (64 ) Net cash
used in operating activities (3,892 ) (12,345
)
Investing activities Purchases of fixed assets
(106 ) (22 ) Net cash used in investing activities
(106 ) (22 )
Financing activities
Distribution to noncontrolling interest (1,909 ) — Proceeds from
notes payable 39,771 35,476 Repayment of notes payable (39,375 )
(33,112 ) Debt issuance costs (871 ) (12 ) Withholding taxes paid
for vested RSUs (279 ) (45 ) Net cash (used
in) provided by financing activities (2,663 )
2,307 Net decrease in cash, cash equivalents and restricted
cash (6,661 ) (10,060 ) Cash, cash equivalents and restricted cash
– beginning of period 42,478 40,729
Cash, cash equivalents and restricted cash – end of period
$ 35,817 $ 30,669
Non-cash investing and financing activity Exercise of land
purchase options acquired with acquisition of business $ 10 $ 6
Issuance of Class A common stock for vested restricted stock units
$ 1,007 $ 113
Supplemental cash flow information
Income taxes paid $ — $ 70
Appendix A
Select Operating
Data by Region
Three months ended March 31,
2017 2016 %
Change Revenue from Homebuilding Operations (in
thousands) West $ 76,969 $ 56,758 35.6 % Southeast $ 17,033
$ 11,467 48.5 % Total $ 94,002 $ 68,225 37.8 %
Homes Delivered West 161 115 40.0 % Southeast 65 52
25.0 % Total 226 167 35.3 %
Average Selling Price
for Home Sales (in thousands) West $ 478 $ 494 (3.2 )%
Southeast $ 262 $ 221 18.6 % Total $ 416 $ 409 1.7 %
Net New Home Orders West 220 176 25.0 % Southeast 50
49 2.0 % Total 270 225 20.0 %
Average
Selling Communities West 18 19 (5.3 )% Southeast 9 9
— % Total 27 28 (3.6 )%
Backlog Units West 316
246 28.5 % Southeast 90 61 47.5 % Total 406 307 32.2
%
Backlog Dollar Basis (in thousands) West $ 150,575
$ 122,026 23.4 % Southeast $ 26,021 $ 14,194 83.3 %
Total $ 176,596 $ 136,220 29.6 %
Owned Lots West
3,052 3,761 (18.9 )% Southeast 1,254 861 45.6 % Total
4,306 4,622 (6.8 )%
Controlled Lots West 1,118 407
174.7 % Southeast 2,625 320 720.3 % Total 3,743 727
414.9 %
Appendix B
Reconciliation of
GAAP and Non-GAAP Measures
Gross Margin and Adjusted Gross
Margin
Three Months Ended March 31,
2017 % 2016
% ($ in thousands)
Consolidated Gross
Margin & Adjusted Gross Margin Revenue $ 94,498 100.0 % $
68,225 100.0 % Cost of Sales 77,230
81.7 % 56,667 83.1 % Gross Margin 17,268 18.3 % 11,558 16.9
% Add: interest in cost of sales 2,361 2.5 % 1,539 2.3 % Add:
impairment and abandonment charges 204
0.2 % 419 0.6 % Adjusted Gross Margin(1)
$ 19,833 21.0 % $ 13,516 19.8 % Consolidated
Gross margin percentage 18.3 % 16.9 %
Consolidated Adjusted gross margin percentage(1)
21.0 % 19.8 %
Homebuilding Gross Margin &
Adjusted Gross Margin Homebuilding revenue $ 94,002 100.0 % $
68,225 100.0 % Cost of home sales 76,755
81.7 % 56,206 82.4 % Homebuilding gross margin 17,247
18.3 % 12,019 17.6 % Add: interest in cost of home sales 2,350 2.5
% 1,539 2.3 % Add: impairment and abandonment charges
102 0.1 % — — % Adjusted homebuilding gross
margin(1) $ 19,699 21.0 % $ 13,558
19.9 % Homebuilding gross margin percentage
18.3 % 17.6 % Adjusted homebuilding gross margin
percentage(1) 21.0 % 19.9 %
Land
Development Gross Margin & Adjusted Gross Margin Land
development revenue $ 496 100.0 % $ — — % Cost of land development
475 95.8 % 461 — % Land
development gross margin 21 4.2 % (461 ) — % Add: interest in cost
of land development 11 2.2 % — — % Add: Impairment and abandonment
charges 102 20.6 % 419 — %
Adjusted land development gross margin(1) $
134 27.0 % $ (42 ) — % Land development gross margin
percentage 4.2 % — % Adjusted land development
gross margin percentage(1) 27.0 % — % *
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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170504006399/en/
UCP, Inc.Investor Relations:Investorrelations@unioncommunityllc.com408-207-9499
Ext. 476orMedia Relations:Matthew
Chudobamatthew.chudoba@icrinc.com
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