Form 8-K AV Homes, Inc. For: Feb 26

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): February 26, 2015

 

 

AV Homes, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		001-07395		23-1739078
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

 

8601 N. Scottsdale Rd. Suite 225 Scottsdale, Arizona		85253
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (480) 214-7400

Not Applicable

Former name or former address, if changed since last report

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02

Results of Operations and Financial Condition.

On February 26, 2015, AV Homes, Inc. (the “Company”) issued a press release announcing its results for the quarter and year ended December 31, 2014. A copy of the press release is furnished herewith as Exhibit 99.1 and is incorporated herein by reference.

The information furnished pursuant to this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 9.01

Financial Statements and Exhibits.

 

(d)

Exhibits

 

Exhibit No.		Description
99.1		Press Release dated February 26, 2015.

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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 hereunto duly authorized.

 

				AV Homes, Inc.
Date: February 26, 2015				By:		/s/ Roger A. Cregg
				Name:		Roger A. Cregg
				Title:		President and Chief Executive Officer (Principal Executive Officer)

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Exhibit Index

 

Exhibit No.		Description
99.1		Press Release dated February 26, 2015.

Exhibit 99.1

AV Homes Reports Results for Fourth Quarter 2014

Fourth Quarter 2014 Highlights—as compared to the prior year fourth quarter (unless otherwise noted)

 

•

Total revenue increased 100% to $104.0 million

 

•

Homebuilding revenue increased 123% to $100.6 million

 

•

Net income was $1.6 million, or $0.07 per share, compared to $1.8 million, or $0.08

 

•

Closings increased 123% to 382 units

 

•

Net new order value increased 142% to $58.7 million on a 131% increase in units

 

•

Backlog value increased 115% to $85.8 million on 331 units

 

•

Selling communities increased to 27 from seven and communities with closings increased to 24 from seven

Scottsdale, AZ (February 26, 2015) – AV Homes, Inc. (Nasdaq: AVHI) (“AV Homes” or the “Company”), a developer and builder of active adult and primary residential communities in Florida, Arizona and North Carolina, today announced results for its fourth quarter and full year ended December 31, 2014. AV Homes reported net income attributable to common stockholders of $1.6 million, or $0.07 per share, in the fourth quarter of 2014, compared to $1.8 million, or $0.08 per share, in the fourth quarter of 2013. Total revenue for the fourth quarter of 2014 increased 100% to $104.0 million from $52.0 million in the fourth quarter of 2013.

Roger A. Cregg, President and Chief Executive Officer, commented, “We are pleased with our results for the fourth quarter and full year 2014, as we continue to improve our operating performance highlighted by an increase in the fourth quarter compared to last year of 123% in homes delivered, a 142% increase in net new orders on an increase of 131% in units, 123% growth in homebuilding revenue and posting a profit for the fourth quarter of 2014.”

Mr. Cregg added, “We continue to support our long-term growth strategy, increasing our selling communities with net new orders in the fourth quarter to 27 from seven in the prior year and increasing our communities with closings to 24 compared to seven in the prior year. Our current owned land portfolio is now in excess of 45 communities, and we look forward to their contribution to our selling and closing efforts into 2015.”

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Mr. Cregg continued, “For the full year 2014 we increased homes delivered by 98%, increased net new orders 115% in units, generated 103% growth in homebuilding revenue, and leveraged our overheads in division SG&A to 14.1% from 17.0% and corporate G&A to 6.6% from 13.9%. We ended 2014 with a strong financial position and adequate liquidity to support further growth opportunities going into the 2015 selling season.”

The increase in total revenue for the fourth quarter of 2014 compared to the prior year period included a 123% increase in homebuilding revenue to $100.6 million. The increase in homebuilding revenue was driven by: (i) volume increases due to a greater number of communities with closings, primarily from the acquisition of Royal Oak Homes, (ii) higher absorption at the Company’s existing active adult communities, and (iii) a higher average unit price per closing. During the fourth quarter of 2014, the Company closed 382 homes, a 123% increase from the 171 homes closed during the fourth quarter of 2013, and the average unit price per closing rose 3.9% to approximately $257,000 from approximately $247,000 in the fourth quarter of 2013. In addition, the Company recorded $3.4 million of land sales and other revenue in the fourth quarter of 2014, primarily from the sale of excess property in Florida that the Company had classified as held for sale, compared to $6.8 million in the fourth quarter of 2013.

Homebuilding gross margin, which excludes commissions, improved 60 basis points sequentially from the third quarter to 18.3% in the fourth quarter of 2014 and decreased from 20.1% in the fourth quarter of 2013. The decline in gross margin year over year was primarily due to the significant number of new communities coming on-line in 2014 with lower initial margins than the fewer well-established communities in the prior year.

Homebuilding SG&A expense, which includes commissions, as a percentage of homebuilding revenue improved significantly to 12.3% in the fourth quarter of 2014 compared to 15.7% in the fourth quarter of 2013. The decrease was driven by leveraging our fixed costs while growing the revenue base, partially offset by additional costs incurred by new communities that are selling homes but not yet generating revenue from closings. Additionally, corporate general and administrative expenses as a percentage of homebuilding revenue significantly improved to 3.8% in the fourth quarter of 2014 from 9.6% in the same period a year ago. The improvement in the corporate G&A margin continues to demonstrate the favorable cost leverage the Company is achieving in prudently managing its costs while growing the revenue of the business.

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The number of new housing contracts signed, net of cancellations, during the three months ended December 31, 2014 increased 138 units to 243, compared to 105 units during the same period in 2013. The increase in housing contracts was primarily attributable to the increase in selling communities from seven to 27. The average sales price on contracts signed in the fourth quarter of 2014 increased 4.6% to $242,000 from $231,000 in the fourth quarter of 2013. The aggregate dollar value of the contracts signed during the fourth quarter increased 142% to $58.7 million, compared to $24.2 million during the same period one year ago. The backlog value of homes under contract but not yet closed at December 31, 2014 increased 115% to $85.8 million on 331 units, compared to $39.9 million on 167 units at December 31, 2013.

Results for the Year ended December 31, 2014

For the year ended December 31, 2014, the Company reported a net loss to common stockholders of $1.9 million, or $0.09 per share, on revenues of $285.9 million. This compares to a net loss to common stockholders of $21.4 million, or $1.34 per share, on revenues of $141.5 million for the year ended December 31, 2013. The net loss to common stockholders in 2013 includes a non-cash charge of $11.9 million, or $0.75 per share, for deemed dividends related to the recognition of a beneficial conversion feature embedded in the convertible preferred stock issued in the second quarter of 2013 and converted to common stock in the third quarter of 2013.

Total revenue for the year ended December 31, 2014 increased 102% to $285.9 million compared to the prior year, including a 103% increase in total homebuilding revenue to $253.3 million, and a $16.3 million increase in land sales. The increase in homebuilding revenue was driven by strong volume increases and improved selling prices. During 2014, the Company reported 953 home closings, a 98% increase from the 481 homes closed during 2013, and the average unit price per closing increased 7% to approximately $255,000, from approximately $238,000 one year ago.

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For the year ended December 31, 2014, the Company reported 994 new housing contracts signed, net of cancellations, a 115% increase over the 463 contracts signed during 2013. The dollar value of the contracts signed during 2014 increased 131% to $254.7 million as compared to $110.4 million in 2013.

2015 Outlook

The Company issued the following expectations for its financial performance in 2015:

 

•

Communities with closings are expected to increase almost 50% from 27 in 2014 to approximately 40 in 2015

 

•

Closings are expected to increase approximately 68% from 953 units in 2014 to approximately 1,600 units in 2015

 

•

Average Selling Price (ASP) on homes closed is expect to increase approximately 6.5% to approximately $272,000 in 2015

 

•

Homebuilding Gross Margins are expected to be approximately 17% in 2015 compared to 18.2% in 2014

 

•

Division SG&A is expected to improve to approximately 11.5% of homebuilding revenue in 2015, from 14.1% in 2014

 

•

Corporate G&A is expected to improve to approximately 3% of homebuilding revenue in 2015, from 6.6% in 2014

 

•

Land Sales are expected to generate approximately $6 million of revenue and approximately $4 million of profit in 2015

 

•

Interest expense is expected to be approximately $10 million, after capitalization in 2015

 

•

Net income is expected to be approximately $4 million in 2015 compared to a loss of $2 million in 2014

“We believe the fundamentals that support the new home market continue to improve, with low interest rates, improvements in employment levels, wage growth and consumer confidence, all suggesting the industry is poised for increased sales activity in 2015,” commented Mr. Cregg. “Our outlook for 2015 reflects improving operating performance consistent with our growth strategy that capitalizes on our growth in selling and closing communities to deliver increased revenues in addition to leveraging our overhead cost structure. We believe we are well positioned on the path to improve the profitability and returns of our business.”

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The Company will hold a conference call and webcast on Friday, February 27, 2015 to discuss its fourth quarter and full year financial results. The conference call will begin at 8:30 a.m. EST. The conference call can be accessed live over the telephone by dialing (877) 643-7158 or for international callers by dialing (914) 495-8565; please dial-in 10 minutes before the start of the call. A replay will be available on February 27, 2015 at 11:30 a.m. and can be accessed by dialing (855) 859-2056 or for international callers by dialing (404) 537-3406; the conference ID is 84543601. The replay will be available until March 6, 2015. In order to access the live webcast, please go to the Investor Relations section of AV Homes’ website at www.avhomesinc.com and click on the webcast link that will be made available. A replay will be available shortly after the original webcast.

AV Homes, Inc. is engaged in homebuilding and community development in Florida, Arizona and North Carolina. Its principal operations are conducted in the greater Orlando, Jacksonville, Phoenix, Charlotte and Raleigh markets. The Company builds communities that serve both active adults (55 years and older) as well as people of all ages. AV Homes common shares trade on NASDAQ under the symbol AVHI. For more information, visit www.avhomesinc.com.

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This news release, the conference call, webcast and other related items contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements, which include our outlook for 2015, involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the cyclical nature of the homebuilding industry and its dependence on broader economic conditions; competition for home buyers, properties, financing, raw materials and skilled labor; overall market supply and demand for new homes; conflicts of interest involving our largest stockholder; contractual restrictions under a stockholders agreement with our largest stockholder; our ability to access sufficient capital; our ability to generate sufficient cash to service our indebtedness and potential need for additional financing; terms of our financing documents that may restrict our operations and corporate actions; fluctuations in interest rates; our ability to purchase outstanding notes upon certain fundamental changes; contingent liabilities that may affect our liquidity; development liabilities that may impose payment obligations on us; the availability of mortgage financing for home buyers; increased regulation of the mortgage industry; changes in federal lending programs and other regulations; cancellations of home sale orders; declines in home prices in our primary regions; inflation affecting homebuilding costs; the prices and supply of building materials and skilled labor; elimination or reduction of tax benefits associated with home ownership; warrant and construction defect claims; health and safety incidents in homebuilding activities; availability and suitability of undeveloped land and improved lots; ability to develop communities within expected timeframes; the seasonal nature of our business; impacts of weather conditions and natural disasters; resource shortages and rate fluctuations; value and costs related to our land and lot inventory; our ability to recover our costs in the event of reduced home sales; dependence on our senior management; effect of our expansion efforts on our cash flows and profitability; effects of government regulation of development and homebuilding projects; raising healthcare costs; our ability to realize our deferred income tax asset; costs of environmental compliance; impact of environmental changes; dependence on digital technologies and potential interruptions; and potential dilution related to future financing activities, all as described in “Risk Factors” in our most recent Annual Report on Form 10-K for and our other filings with the Securities and Exchange Commission, which filings are available on www.sec.gov. Forward-looking statements are based on the expectations, estimates, or projections of management as of the date of this news release, the conference call and the webcast. AV Homes disclaims any intention or obligation to update or revise any forward-looking statements to reflect subsequent events and circumstances, except to the extent required by applicable law.

Investor Contact:

Mike Burnett

EVP, Chief Financial Officer

480-214-7408

[email protected]

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AV HOMES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Dollars in thousands, except per share amounts)

 

		Three Months Ended December 31								Twelve Months Ended December 31
		2014				2013				2014				2013
Revenues
Real estate revenues
Homebuilding and amenity		$	100,646			$	45,231			$	253,258			$	124,651
Land sales			3,428				6,747				32,596				16,303
Other real estate			(114	)			32				59				528
Total real estate revenues			103,960				52,010				285,913				141,482
Expenses
Real estate expenses
Homebuilding and amenity			94,650				43,238				243,065				121,753
Land sales			1,093				2,759				22,003				8,111
Other real estate			265				796				1,133				3,450
Total real estate expenses			96,008				46,793				266,201				133,314
Impairment charges, net			—				677				—				(248	)
General and administrative expenses			3,677				4,093				15,941				15,975
Interest income and other			(189	)			(2,015	)			(447	)			(2,218	)
Interest expense			2,853				315				5,805				2,830
Total expenses			102,349				49,863				287,500				149,653
Equity in earnings (loss) from unconsolidated entities			(6	)			(17	)			(16	)			(101	)
Income (Loss) before income taxes			1,605				2,130				(1,603	)			(8,272	)
Income tax (expense) benefit			—				—				—				—
Net income (loss) and comprehensive loss			1,605				2,130				(1,603	)			(8,272	)
Net income attributable to non-controlling interests in consolidated entities			—				306				329				1,205
Net income (loss) and comprehensive loss attributable to AV Homes stockholders		$	1,605			$	1,824			$	(1,932	)		$	(9,477	)
Reconciliation of net income (loss) to loss attributable to common stockholders:
Net income (loss)		$	1,605			$	1,824			$	(1,932	)		$	(9,477	)
Deemed dividend related to beneficial conversion feature of convertible preferred stock			—				—				—				(11,894	)
Income (Loss) attributable to AV Homes common stockholders		$	1,605			$	1,824			$	(1,932	)		$	(21,371	)
Basic and Diluted Income (Loss) Per Share		$	0.07			$	0.08			$	(0.09	)		$	(1.34	)

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AV HOMES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Dollars in thousands, except share and per share amounts)

 

		December 31, 2014				December 31, 2013
Assets
Cash and cash equivalents		$	180,334			$	144,727
Restricted cash			16,447				3,956
Land and other inventories			383,184				240,078
Receivables			2,906				3,893
Property and equipment, net			36,922				37,844
Investments in unconsolidated entities			17,991				1,230
Prepaid expenses and other assets			20,980				11,138
Assets held for sale			4,051				23,862
Goodwill			6,071				—
Total Assets		$	668,886			$	466,728
Liabilities and Stockholders’ Equity
Liabilities
Accounts payable		$	16,087			$	9,757
Accrued and other liabilities			28,134				14,280
Customer deposits and deferred revenues			4,966				2,323
Estimated development liability			33,003				33,232
Notes payable			299,956				105,402
Total Liabilities		$	382,146			$	164,994
Contingent convertible cumulative redeemable preferred stock			—				—
Stockholders’ Equity
Common Stock, par value $1 per share
Authorized: 50,000,000 shares
Issued:         22,182,972 shares outstanding at December 31, 2014   22,097,252 shares outstanding at December 31, 2013		$	22,183			$	22,097
Additional paid-in capital			396,989				394,504
Retained deficit			(129,413	)			(127,481	)
			289,759				289,120
Treasury stock: at cost, 110,874 shares at December 31, 2014 and December 31, 2013			(3,019	)			(3,019	)
Total AV Homes stockholders’ equity			286,740				286,101
Non-controlling interests			—				15,633
Total Stockholders’ Equity		$	286,740			$	301,734
Total Liabilities and Stockholders’ Equity		$	668,886			$	466,728

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The following table provides a comparison of certain financial data related to our operations for three months and year ended December 31, 2014 and 2013 (dollars in thousands):

 

		Three Months Ended December 31								Twelve Months Ended December 31
		2014				2013				2014				2013
Operating income (loss):
Active adult communities
Revenues
Homebuilding		$	46,570			$	33,452			$	124,372			$	69,362
Amenity			2,084				1,878				7,960				7,227
Total revenue		$	48,654			$	35,330			$	132,332			$	76,589
Expenses
Homebuilding			37,218				26,666				98,992				55,543
Homebuilding selling, general and administrative			5,433				4,942				17,097				12,605
Amenity			2,039				1,836				7,887				8,013
Segment operating income (loss)		$	3,964			$	1,886			$	8,356			$	428
Primary residential
Revenues
Homebuilding		$	51,446			$	9,281			$	118,799			$	45,611
Amenity			546				620				2,127				2,451
Total revenue		$	51,992			$	9,901			$	120,926			$	48,062
Expenses
Homebuilding			42,901				7,493				99,892				36,255
Homebuilding selling, general and administrative			6,627				1,747				17,264				6,930
Amenity			427				517				1,932				2,440
Segment operating income (loss)		$	2,037			$	144			$	1,838			$	2,437
Commercial and industrial and other land sales
Revenues		$	3,428			$	6,747			$	32,596				16,303
Expenses			1,093				2,759				22,003				8,111
Segment operating income		$	2,335			$	3,988			$	10,953			$	8,192
Other operations
Revenues		$	(114	)		$	32			$	59			$	528
Expenses			10				243				58				546
Segment operating income (loss)		$	(124	)		$	(211	)		$	1			$	(18	)
Operating income (loss)			8,212				5,807				20,788				11,039
Unallocated income (expenses):
Interest income and other		$	189			$	2,015			$	447			$	2,218
Equity loss from unconsolidated entities			(6	)			(17	)			(16	)			(101	)
Corporate general and administrative expenses			(3,677	)			(4,093	)			(15,941	)			(15,975	)
Interest expense			(2,853	)			(315	)			(5,805	)			(2,380	)
Other real estate expenses, net			(260	)			(590	)			(1,076	)			(2,904	)
(Impairment) reversal of impairment charge of land developed or held for future development			—				(677	)			—				281
Income (loss )before income taxes		$	1,605			$	2,130			$	(1,603	)			(8,272	)
Income tax benefit			—				—				—				—
Net (income) loss attributable to non-controlling interests			—				(306	)			(329	)			(1,205	)
Net income (loss) attributable to AV Homes		$	1,605			$	1,824			$	(1,932	)		$	(9,477	)

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Data from closings for the active adult and primary residential homebuilding segments for three months and year ended December 31, 2014 and 2013 is summarized as follows (dollars in thousands):

 

For the three months ended December 31,		Number of Units				Revenues				Average Price Per Unit
2014
Active adult communities			174			$	46,570			$	268
Primary residential			208				51,446			$	247
Total			382			$	98,016			$	257
2013
Active adult communities			132			$	33,193			$	251
Primary residential			39				9,019			$	231
Total			171			$	42,212			$	247

 

For the year ended December 31,		Number of Units				Revenues				Average Price Per Unit
2014
Active adult communities			477			$	124,372			$	261
Primary residential			476				118,799			$	250
Total			953			$	243,171			$	255
2013
Active adult communities			281			$	69,103			$	246
Primary residential			200				45,349			$	227
Total			481			$	114,452			$	238

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Data from contracts signed for the active adult and primary residential homebuilding segments for three months and year ended December 31, 2014 and 2013 is summarized as follows (dollars in thousands):

 

For the three months ended December 31,		Gross Number of Contracts Signed				Cancellations				Contracts Signed, Net of Cancellations				Dollar Value				Average Price Per Unit
2014
Active adult communities			88				(9	)			79			$	21,202			$	268
Primary residential			217				(53	)			164				37,500			$	229
Total			305				(62	)			243			$	58,702			$	242
2013
Active adult communities			106				(14	)			92			$	21,359			$	232
Primary residential			19				(6	)			13				2,885			$	222
Total			125				(20	)			105			$	24,244			$	231
For the year ended December 31,
2014
Active adult communities			486				(52	)			434			$	114,671			$	264
Primary residential			672				(112	)			560				140,056			$	250
Total			1,158				(164	)			994			$	254,727			$	256
2013
Active adult communities			398				(53	)			345			$	81,712			$	237
Primary residential			192				(74	)			118				28,654			$	243
Total			590				(127	)			463			$	110,366			$	238

Backlog for the active adult and primary residential homebuilding segments as of December 31, 2014 and 2013 is summarized as follows (dollars in thousands):

 

As of December 31,		Number of Units				Dollar Volume				Average Price Per Unit
2014
Active adult communities			84			$	22,757			$	271
Primary residential			247				62,996			$	255
Total			331			$	85,753			$	259
2013
Active adult communities			127			$	29,362			$	231
Primary residential			40				10,500			$	263
Total			167			$	39,862			$	239

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