TRI Pointe Group, Inc. Reports 2017 Third Quarter Results

October 25, 2017

-New Home Orders up 36% Year-Over-Year on a 9% Increase in Average Selling Communities-
-Backlog Dollar Value up 56% on a 32% increase in Backlog Units-
-Reports Net Income Available to Common Stockholders of $72.3 Million, or $0.48 per Diluted Share-
-Reports $68.2 Million of Land and Lot Revenue and $56.2 Million in Land and Lot Gross Margin-

IRVINE, Calif., Oct. 25, 2017 (GLOBE NEWSWIRE) -- TRI Pointe Group, Inc. (the "Company") (NYSE:TPH) today announced results for the third quarter ended September 30, 2017.

Results and Operational Data for Third Quarter 2017 and Comparisons to Third Quarter 2016

  • Net income available to common stockholders was $72.3 million, or $0.48 per diluted share, compared to $34.8 million, or $0.22 per diluted share
  • New home orders of 1,268 compared to 932, an increase of 36%
  • Active selling communities averaged 129.8 compared to 119.0, an increase of 9%
    • New home orders per average selling community were 9.8 orders (3.3 monthly) compared to 7.8 orders (2.6 monthly)
    • Cancellation rate of 15% compared to 17%, a decrease of 200 basis points
  • Backlog units at quarter end of 2,265 homes compared to 1,711, an increase of 32%
    • Dollar value of backlog at quarter end of $1.5 billion compared to $950.2 million, an increase of 56%
    • Average sales price in backlog at quarter end of $654,000 compared to $555,000, an increase of 18%
  • Home sales revenue of $648.6 million compared to $578.7 million, an increase of 12%
    • New home deliveries of 1,111 homes compared to 1,019 homes, an increase of 9%
    • Average sales price of homes delivered of $584,000 compared to $568,000, an increase of 3%
  • Homebuilding gross margin percentage of 19.5% compared to 20.1%, a decrease of 60 basis points
    • Excluding interest and impairments and lot option abandonments, adjusted homebuilding gross margin percentage was 22.0%*
  • Land and lot sales revenue of $68.2 million compared to $2.5 million
    • Land and lot sales gross margin percentage of 82.4% compared to 31.6%
    • Third quarter 2017 results include the sale of a parcel consisting of 69 homebuilding lots located in the Pacific Highlands Ranch community in San Diego, California, representing $66.8 million in land and lot sales revenue and $56.1 million in land and lot gross margin
  • SG&A expense as a percentage of homes sales revenue of 10.2% compared to 10.9%, a decrease of 70 basis points
  • Ratios of debt-to-capital and net debt-to-net capital of 47.5% and 45.0%*, respectively, as of September 30, 2017
  • Repurchased 975,700 shares of common stock at a weighted average price per share of $12.83 for an aggregate dollar amount of $12,519,904 in the three months ended September 30, 2017
  • Ended third quarter of 2017 with total liquidity of $554.6 million, including cash of $162.4 million and $392.2 million of availability under the Company's unsecured revolving credit facility

* See "Reconciliation of Non-GAAP Financial Measures"

“I am very pleased with our results this quarter,” said TRI Pointe Group Chief Executive Officer Doug Bauer.  “We had a 36% increase in new home orders on a year-over-year basis, driven primarily by a 9% increase in average selling communities and a 27% increase in our monthly absorption rate.  We believe this order growth is a strong indicator of the strength in the housing market and the quality of our home offerings.  The positive trends we saw for the quarter were broad-based, with our operations in California continuing to produce excellent results and operations in our other markets making improvements with respect to order growth and/or profitability.  These trends, coupled with the significant increase to our quarter-ending backlog, put us in a great position to end the year on a high note and carry that momentum into 2018.”

Third Quarter 2017 Operating Results

Net income available to common stockholders was $72.3 million, or $0.48 per diluted share in the third quarter of 2017, compared to net income available to common stockholders of $34.8 million, or $0.22 per diluted share for the third quarter of 2016.  The increase in net income available to common stockholders was primarily due to an increase in land and lot sales gross margin of $55.4 million due primarily to the sale of a parcel consisting of 69 homebuilding lots located in the Pacific Highlands Ranch community in San Diego, California.

Home sales revenue increased $70.0 million, or 12%, to $648.6 million for the third quarter of 2017, as compared to $578.7 million for the third quarter of 2016.  The increase was primarily attributable to a 9% increase in new home deliveries to 1,111, and a 3% increase in the average sales price of homes delivered to $584,000, compared to $568,000 in the third quarter of 2016.

New home orders increased 36% to 1,268 homes for the third quarter of 2017, as compared to 932 homes for the same period in 2016.  Average selling communities increased 9% to 129.8 for the third quarter of 2017 compared to 119.0 for the third quarter of 2016.  The Company’s overall absorption rate per average selling community increased 27% for the third quarter of 2017 to 9.8 orders (3.3 monthly) compared to 7.8 orders (2.6 monthly) during the third quarter of 2016.  

The Company ended the quarter with 2,265 homes in backlog, representing approximately $1.5 billion. The average sales price of homes in backlog as of September 30, 2017 increased $99,000, or 18%, to $654,000, compared to $555,000 as of September 30, 2016.  

Homebuilding gross margin percentage for the third quarter of 2017 decreased to 19.5%, compared to 20.1% for the third quarter of 2016.  Excluding interest and impairments and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 22.0%* for the third quarter of 2017, compared to 22.7%* for the third quarter of 2016.  The decrease in homebuilding gross margin percentage was largely due to the mix of homes delivered and increased labor and material cost.

Selling, general and administrative ("SG&A") expense for the third quarter of 2017 decreased to 10.2% of home sales revenue as compared to 10.9% for the third quarter of 2016 primarily due to increased leverage as a result of a 12% increase in home sales revenue. 

“Our homebuilding teams did an excellent job of executing this quarter, as we once again met or exceeded our quarterly guidance for deliveries, average sales prices and homebuilding gross margin,” said TRI Pointe Group President and Chief Operating Officer Tom Mitchell.  “In addition, we continue to be encouraged by the quality of our land pipeline and the improvement in both our operations and product.  I would especially like to thank and applaud our team in Houston for displaying such dedication, perseverance and compassion for the community in the wake of Hurricane Harvey and its aftermath.  Our team members really came together to help one another and to make sure our communities were safe and back open for business.”

* See “Reconciliation of Non-GAAP Financial Measures”

Outlook

For the fourth quarter of 2017, the Company expects to open 14 new communities, and close out of 10, resulting in 131 active selling communities as of December 31, 2017.  In addition, the Company anticipates delivering approximately 75% to 80% of its 2,265 units in backlog as of September 30, 2017 at an average sales price of $630,000 to $640,000.  The Company anticipates its homebuilding gross margin percentage to be in a range of 21.0% to 22.0% for the fourth quarter resulting in a range of 20.0% to 21.0% for the full year.  Finally, the Company expects its SG&A expense as a percentage of home sales revenue to be in the range of 7.6% to 7.8% for the fourth quarter and 10.2% to 10.4% for the full year.

Earnings Conference Call

The Company will host a conference call via live webcast for investors and other interested parties beginning at 10:00 a.m. Eastern Time on Wednesday, October 25, 2017.  The call will be hosted by Doug Bauer, Chief Executive Officer, Tom Mitchell, President and Chief Operating Officer and Mike Grubbs, Chief Financial Officer.

Interested parties can listen to the call live and view the related presentation slides on the internet through the Investor Relations section of the Company’s website at www.TRIPointeGroup.com. Listeners should go to the website at least fifteen minutes prior to the call to download and install any necessary audio software.  The call can also be accessed by dialing 1-877-407-3982 for domestic participants or 1-201-493-6780 for international participants.  Participants should ask for the TRI Pointe Group Third Quarter 2017 Earnings Conference Call.  Those dialing in should do so at least ten minutes prior to the start.  The replay of the call will be available for two weeks following the call.  To access the replay, the domestic dial-in number is 1-844-512-2921, the international dial-in number is 1-412-317-6671, and the reference code is #13671772.  An archive of the webcast will be available on the Company’s website for a limited time.

About TRI Pointe Group, Inc.

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

Forward-Looking Statements

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

Investor Relations Contact:

Chris Martin, TRI Pointe Group
Drew Mackintosh, Mackintosh Investor Relations
InvestorRelations@TRIPointeGroup.com, 949-478-8696

Media Contact:
Carol Ruiz, cruiz@newgroundco.com, 310-437-0045

 

KEY OPERATIONS AND FINANCIAL DATA
(dollars in thousands)
(unaudited)
 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 Change 2017 2016 Change
Operating Data:           
Home sales revenue$648,638  $     578,653  $69,985  $   1,609,458  $   1,558,633  $50,825 
Homebuilding gross margin$126,720  $116,330  $10,390  $314,895  $339,073  $     (24,178)
Homebuilding gross margin %19.5% 20.1% (0.6)% 19.6% 21.8% (2.2)%
Adjusted homebuilding gross margin %*22.0% 22.7% (0.7)% 22.0% 24.0% (2.0)%
Land and lot sales revenue$68,218  $2,535  $65,683  $69,661  $70,204  $(543)
Land and lot gross margin$56,217  $801  $55,416  $56,362  $53,231  $3,131 
Land and lot gross margin %82.4% 31.6% 50.8% 80.9% 75.8% 5.1%
SG&A expense$66,135  $63,130  $3,005  $193,502  $180,914  $12,588 
SG&A expense as a % of home sales revenue   10.2% 10.9% (0.7)% 12.0% 11.6% 0.4%
Net income available to common stockholders$72,264  $34,834  $37,430  $113,171  $137,310  $(24,139)
Adjusted EBITDA*$139,550  $74,215  $65,335  $237,755  $262,945  $(25,190)
Interest incurred$22,865  $18,601  $4,264  $61,669  $50,030  $11,639 
Interest in cost of home sales$15,623  $14,385  $1,238  $38,448  $34,653  $3,795 
            
Other Data:           
Net new home orders1,268  932  336  4,012  3,339  673 
New homes delivered1,111  1,019  92  2,940  2,784  156 
Average selling price of homes delivered$584  $568  $16  $547  $560  $(13)
Average selling communities129.8  119.0  10.8  127.4  117.0  10.4 
Selling communities at end of period127  123  4   N/A   N/A   N/A 
Cancellation rate15% 17% (2)% 15% 14% 1%
Backlog (estimated dollar value)$   1,482,265  $950,171  $      532,094       
Backlog (homes)2,265  1,711  554       
Average selling price in backlog$654  $555  $99       
            
       September 30, December 31,  
       2017 2016 Change
Balance Sheet Data:           
Cash and cash equivalents      $162,396  $208,657  $(46,261)
Real estate inventories      $3,303,421  $2,910,627  $392,794 
Lots owned or controlled      27,892  28,309  (417)
Homes under construction (1)      2,599  1,605  994 
Homes completed, unsold      243  405  (162)
Debt      $1,669,558  $1,382,033  $287,525 
Stockholders' equity      $1,842,429  $1,829,447  $12,982 
Book capitalization      $3,511,987  $3,211,480  $300,507 
Ratio of debt-to-capital      47.5% 43.0% 4.5%
Ratio of net debt-to-net capital*      45.0% 39.1% 5.9%
               

__________
(1) Homes under construction included 64 and 65 models at September 30, 2017 and December 31, 2016, respectively.
* See “Reconciliation of Non-GAAP Financial Measures”

 

CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
 
 September 30, December 31,
 2017 2016
Assets(unaudited)  
Cash and cash equivalents$162,396  $208,657 
Receivables84,583  82,500 
Real estate inventories3,303,421  2,910,627 
Investments in unconsolidated entities17,616  17,546 
Goodwill and other intangible assets, net161,094  161,495 
Deferred tax assets, net108,664  123,223 
Other assets58,292  60,592 
Total assets$3,896,066  $3,564,640 
    
Liabilities   
Accounts payable$64,038  $70,252 
Accrued expenses and other liabilities316,487  263,845 
Unsecured revolving credit facility200,000  200,000 
Seller financed loans  13,726 
Senior notes1,469,558  1,168,307 
Total liabilities2,050,083  1,716,130 
    
Commitments and contingencies   
    
Equity   
Stockholders' Equity:   
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no
  shares issued and outstanding as of September 30, 2017 and 
  December 31, 2016, respectively
   
Common stock, $0.01 par value, 500,000,000 shares authorized;
  150,429,021 and 158,626,229 shares issued and outstanding at
  September 30, 2017 and December 31, 2016, respectively
1,504  1,586 
Additional paid-in capital780,715  880,822 
Retained earnings1,060,210  947,039 
Total stockholders' equity1,842,429  1,829,447 
Noncontrolling interests3,554  19,063 
Total equity1,845,983  1,848,510 
Total liabilities and equity$3,896,066  $3,564,640 
        


CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Homebuilding:       
Home sales revenue$648,638  $578,653  $1,609,458  $1,558,633 
Land and lot sales revenue68,218  2,535  69,661  70,204 
Other operations revenue584  606  1,752  1,790 
Total revenues717,440  581,794  1,680,871  1,630,627 
Cost of home sales521,918  462,323  1,294,563  1,219,560 
Cost of land and lot sales12,001  1,734  13,299  16,973 
Other operations expense575  575  1,726  1,724 
Sales and marketing33,179  31,852  92,209  90,621 
General and administrative32,956  31,278  101,293  90,293 
Homebuilding income from operations116,811  54,032  177,781  211,456 
Equity in (loss) income of unconsolidated entities  (20) 1,646  181 
Other income, net26  21  147  287 
Homebuilding income before income taxes116,837  54,033  179,574  211,924 
Financial Services:       
Revenues295  235  881  762 
Expenses82  72  233  183 
Equity in income of unconsolidated entities1,351  1,247  2,911  3,246 
Financial services income before income taxes1,564  1,410  3,559  3,825 
Income before income taxes118,401  55,443  183,133  215,749 
Provision for income taxes(46,112) (20,298) (69,824) (77,701)
Net income72,289  35,145  113,309  138,048 
Net income attributable to noncontrolling interests(25) (311) (138) (738)
Net income available to common stockholders$72,264  $34,834  $113,171  $137,310 
Earnings per share       
Basic$0.48  $0.22  $0.73  $0.85 
Diluted$0.48  $0.22  $0.73  $0.85 
Weighted average shares outstanding       
Basic151,214,744  160,614,055  155,238,206  161,456,520 
Diluted152,129,825  161,267,509  155,936,076  161,916,352 
            

 

 

MARKET DATA BY REPORTING SEGMENT & STATE
(dollars in thousands)
(unaudited)
 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 New
Homes
Delivered
 Average
Sales
Price
 New
Homes
Delivered
 Average
Sales
Price
 New
Homes
Delivered
 Average
Sales
Price
 New
Homes
Delivered
 Average
Sales
Price
New Homes Delivered:               
Maracay Homes164  $477  165  $412  447  $459  400  $403 
Pardee Homes328  502  302  623  896  478  828  587 
Quadrant Homes79  686  90  531  206  649  287  515 
Trendmaker Homes104  504  121  516  343  493  335  506 
TRI Pointe Homes332  720  260  645  783  669  678  667 
Winchester Homes104  579  81  550  265  561  256  554 
Total1,111  $584  1,019  $568  2,940  $547  2,784  $560 
                
                
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 New
Homes
Delivered
 Average
Sales
Price
 New
Homes
Delivered
 Average
Sales
Price
 New
Homes
Delivered
 Average
Sales
Price
 New
Homes
Delivered
 Average
Sales
Price
New Homes Delivered:               
California535  $640  412  $716  1,272  $603  1,093  $707 
Colorado30  591  30  526  97  593  118  505 
Maryland77  562  55  510  192  534  169  504 
Virginia27  625  26  634  73  633  87  650 
Arizona164  477  165  412  447  459  400  403 
Nevada95  458  120  377  310  414  295  360 
Texas104  504  121  516  343  493  335  506 
Washington79  686  90  531  206  649  287  515 
Total1,111  $584  1,019  $568  2,940  $547  2,784  $560 
                            

 

MARKET DATA BY REPORTING SEGMENT & STATE, continued
(unaudited)
 
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 Net New
Home
Orders
 Average
Selling
Communities
 Net New
Home
Orders
 Average
Selling
Communities
 Net New
Home
Orders
 Average
Selling
Communities
 Net New
Home
Orders
 Average
Selling
Communities
Net New Home Orders:               
Maracay Homes158  13.5  134  17.8  504  15.3  526  18.1 
Pardee Homes421  30.8  283  22.5  1,282  29.3  936  22.8 
Quadrant Homes84  8.3  49  7.3  311  7.6  274  8.5 
Trendmaker Homes113  29.3  130  29.0  393  30.9  385  26.8 
TRI Pointe Homes378  34.7  239  28.7  1,144  31.9  883  27.3 
Winchester Homes114  13.2  97  13.7  378  12.4  335  13.5 
Total1,268  129.8  932  119.0  4,012  127.4  3,339  117.0 
                
                
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
 Net New
Home
Orders
 Average
Selling
Communities
 Net New
Home
Orders
 Average
Selling
Communities
 Net New
Home
Orders
 Average
Selling
Communities
 Net New
Home
Orders
 Average
Selling
Communities
Net New Home Orders:               
California632  45.2  380  35.0  1,885  43.1  1,333  34.3 
Colorado40  8.0  31  5.0  144  6.5  107  4.8 
Maryland81  10.0  72  7.2  265  9.0  214  6.7 
Virginia33  3.2  25  6.5  113  3.4  121  6.8 
Arizona158  13.5  134  17.8  504  15.3  526  18.1 
Nevada127  12.3  111  11.2  397  11.6  379  11.0 
Texas113  29.3  130  29.0  393  30.9  385  26.8 
Washington84  8.3  49  7.3  311  7.6  274  8.5 
Total1,268  129.8  932  119.0  4,012  127.4  3,339  117.0 
                        

 

MARKET DATA BY REPORTING SEGMENT & STATE, continued
(dollars in thousands)
(unaudited)
 
 As of September 30, 2017 As of September 30, 2016
 Backlog
Units
 Backlog
Dollar
Value
 Average
Sales
Price
 Backlog
Units
 Backlog
Dollar
Value
 Average
Sales
Price
Backlog:           
Maracay Homes305  $154,324  $506  329  $144,127  $438 
Pardee Homes646  436,376  676  382  182,263  477 
Quadrant Homes206  160,202  778  130  83,467  642 
Trendmaker Homes213  107,968  507  186  98,874  532 
TRI Pointe Homes659  481,537  731  495  319,823  646 
Winchester Homes236  141,858  601  189  121,617  643 
Total2,265  $1,482,265  $654  1,711  $950,171  $555 
            
            
 As of September 30, 2017 As of September 30, 2016
 Backlog
Units
 Backlog
Dollar
Value
 Average
Sales
Price
 Backlog
Units
 Backlog
Dollar
Value
 Average
Sales
Price
Backlog:           
California1,015  $750,947  $740  641  $387,125  $604 
Colorado106  65,563  619  73  42,809  586 
Maryland175  98,920  565  122  75,444  618 
Virginia61  42,937  704  67  46,172  689 
Arizona305  154,324  506  329  144,127  438 
Nevada184  101,404  551  163  72,153  443 
Texas213  107,968  507  186  98,874  532 
Washington206  160,202  778  130  83,467  642 
Total2,265  $1,482,265  $654  1,711  $950,171  $555 
                      

 

MARKET DATA BY REPORTING SEGMENT & STATE, continued
(unaudited)
 
 September 30, December 31,
 2017 2016
Lots Owned or Controlled:   
Maracay Homes2,606  2,053 
Pardee Homes15,655  16,912 
Quadrant Homes1,685  1,582 
Trendmaker Homes1,856  1,999 
TRI Pointe Homes3,784  3,479 
Winchester Homes2,306  2,284 
Total27,892  28,309 
    
    
 September 30, December 31,
 2017 2016
Lots Owned or Controlled:   
California16,403  17,245 
Colorado817  918 
Maryland1,661  1,779 
Virginia645  505 
Arizona2,606  2,053 
Nevada2,219  2,228 
Texas1,856  1,999 
Washington1,685  1,582 
Total27,892  28,309 
    
    
 September 30, December 31,
 2017 2016
Lots by Ownership Type:   
Lots owned24,803  25,283 
Lots controlled (1)3,089  3,026 
Total27,892  28,309 
      

__________
(1) As of September 30, 2017 and December 31, 2016, lots controlled included lots that were under land option contracts or purchase contracts.

 

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited)

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

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

 Three Months Ended September 30,
 2017 % 2016 %
 (dollars in thousands)
Home sales revenue$648,638  100.0% $578,653  100.0%
Cost of home sales521,918  80.5% 462,323  79.9%
Homebuilding gross margin126,720  19.5% 116,330  20.1%
Add: interest in cost of home sales15,623  2.4% 14,385  2.5%
Add: impairments and lot option abandonments374  0.1% 389  0.1%
Adjusted homebuilding gross margin$142,717  22.0% $131,104  22.7%
Homebuilding gross margin percentage19.5%   20.1%  
Adjusted homebuilding gross margin percentage22.0%   22.7%  
          

 

 Nine Months Ended September 30,
 2017 % 2016 %
 (dollars in thousands)
Home sales revenue$1,609,458  100.0% $1,558,633  100.0%
Cost of home sales1,294,563  80.4% 1,219,560  78.2%
Homebuilding gross margin314,895  19.6% 339,073  21.8%
Add: interest in cost of home sales38,448  2.4% 34,653  2.2%
Add: impairments and lot option abandonments1,169  0.1% 678  0.0%
Adjusted homebuilding gross margin$354,512  22.0% $374,404  24.0%
Homebuilding gross margin percentage19.6%   21.8%  
Adjusted homebuilding gross margin percentage22.0%   24.0%  
          

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

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

 September 30, 2017 December 31, 2016
Unsecured revolving credit facility$200,000  $200,000 
Seller financed loans  13,726 
Senior notes1,469,558  1,168,307 
Total debt1,669,558  1,382,033 
Stockholders’ equity1,842,429  1,829,447 
Total capital$3,511,987  $3,211,480 
Ratio of debt-to-capital(1)47.5% 43.0%
    
Total debt$1,669,558  $1,382,033 
Less: Cash and cash equivalents(162,396) (208,657)
Net debt1,507,162  1,173,376 
Stockholders’ equity1,842,429  1,829,447 
Net capital$3,349,591  $3,002,823 
Ratio of net debt-to-net capital(2)45.0% 39.1%
      

__________
(1) The ratio of debt-to-capital is computed as the quotient obtained by dividing debt by the sum of debt plus equity.
(2) The ratio of net debt-to-net capital is computed as the quotient obtained by dividing net debt (which is debt less cash and cash equivalents) by the sum of net debt plus equity.

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

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

    Three Months Ended September 30,        Nine Months Ended September 30,   
 2017 2016 2017 2016
 (in thousands)
Net income available to common stockholders$72,264  $34,834  $113,171  $137,310 
Interest expense:       
Interest incurred22,865  18,601  61,669  50,030 
Interest capitalized(22,865) (18,601) (61,669) (50,030)
Amortization of interest in cost of sales15,899  14,415  38,771  34,808 
Provision for income taxes46,112  20,298  69,824  77,701 
Depreciation and amortization867  866  2,567  2,322 
Amortization of stock-based compensation       3,887  3,285  11,631  9,648 
EBITDA139,029  73,698  235,964  261,789 
Impairments and lot abandonments374  389  1,203  678 
Restructuring charges147  128  588  478 
Adjusted EBITDA$139,550  $74,215  $237,755  $262,945 
                

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Source: TRI Pointe Group Inc.
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19540 Jamboree Road, Suite 300, Irvine, CA 92612 | 949-438-1400 |info@TriPointeGroup.com

2015 Builder of the year and 2014 Developer of the year.