Form 8-K New Home Co Inc. For: Feb 26

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February 26, 2016 6:40 AM EST


 
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, 2016
 
 
 
 
 
The New Home Company Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
Delaware
 
001-36283
 
27-0560089
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer Identification No.)
 
 
85 Enterprise, Suite 450, Aliso Viejo, California
 
92656
(Address of principal executive offices)
 
(Zip Code)
 
 
 
 
 
 
 
(949) 382-7800
 
 
Registrant’s telephone number, including area code
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:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 




Item 2.02
Results of Operations and Financial Condition.
On February 26, 2016, The New Home Company Inc., a Delaware corporation (the “Company”), announced in a press release its financial results for the fourth quarter and year ended December 31, 2015. A copy of the Company’s press release announcing these financial results is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information furnished pursuant to this Item 2.02, including the exhibits attached hereto, shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Exchange Act. In addition, the press release furnished as an exhibit to this report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Item 7.01
Regulation FD Disclosure.
On February 26, 2016, the Company announced that it will discuss its results for its fourth quarter and fiscal 2015 during a conference call on Friday, February 26, 2016, at 1:00 p.m. Eastern Time.
The information in this Report (including Exhibit 99.1) is furnished pursuant to Item 7.01 and shall not be deemed "filed" for purposes of the Act or otherwise subject to the liabilities of the Act. The information in this Report will not be deemed an admission as to the materiality of any information required to be disclosed solely to satisfy the requirements of Regulation FD. As detailed in the press release attached hereto as Exhibit 99.1, a replay of this call will be available to all those who cannot listen to the live broadcast. The press release referenced in Item 2.02 of this Current Report on Form 8-K is incorporated herein by reference and also includes information concerning the Company's initial guidance for the full year 2016.


Item 9.01
Financial Statements and Exhibits.
 
(d)
Exhibits

 
 
 
99.1
 
 
Press Release dated February 26, 2016
 
 
 
 
 
 
 
 







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

 
 
 
 
 
 
 
Date: February 26, 2016
 
 
 
 
 
 
 
 
 
 
 
The New Home Company Inc.
 
 
 
 
 
 
 
 
By
 
/s/ John M. Stephens
 
 
 
 
 
 
  John M. Stephens,
  Chief Financial Officer and Secretary






INDEX OF EXHIBITS
 

 
 
 
Exhibit No.
 
Description of Document
 
 
99.1
 
Press Release dated February 26, 2016
 
 
 
 
 
 





THE NEW HOME COMPANY REPORTS 2015 FOURTH QUARTER AND FULL YEAR RESULTS

- Net Income of $21.7 million or $1.28 per Share for the Full Year -
- Net Income of $12.2 million or $0.69 per Share for the Fourth Quarter -
- Total Revenues Increased 167% to $194.6 million for the Fourth Quarter -
- New Home Orders up 153% for the Fourth Quarter -
- Backlog Dollar Value Increased 92% to $166.6 million -

Aliso Viejo, California, February 26, 2016. The New Home Company Inc. (NYSE: NWHM) today announced results for the fourth quarter and year ended December 31, 2015.

Fourth Quarter 2015 Highlights Compared to Fourth Quarter 2014
•
Net income of $12.2 million, or $0.69 per diluted share vs. $5.3 million, or $0.32 per diluted share
•
Total revenues of $194.6 million, up 167% from $73.0 million
•
Homebuilding gross margin of 15.1%, up 190 bps from 13.2%
•
Average selling price up 15% to $1.9 million from $1.7 million
•
SG&A as a percentage of home sale revenues of 7.6% vs. 16.2%, an 860 basis point improvement
•
Backlog dollar value of $166.6 million, up 92%
•
Wholly-owned community count of 10, up 150%

Full year 2015 Highlights Compared to Full Year 2014
•
Net income of $21.7 million, or $1.28 per diluted share vs. $4.8 million, or $0.30 per diluted share
•
Pretax income of $33.9 million vs. $5.0 million, up 578%
•
Total revenue of $430.1 million vs. $149.7 million, up 187%
•
Income from joint ventures of $13.8 million vs. $8.4 million, a 63% increase

Larry Webb, the Company’s Chief Executive Officer commented, “I am very pleased with our performance in the 2015 fourth quarter as our Wholly Owned, Fee Building and Joint Venture businesses each contributed nicely to the bottom line. I am particularly excited about our wholly owned business, which increased revenues in the quarter by 345% year over year, thanks to a 285% increase in deliveries and a 15% increase in average selling prices. This sharp increase in revenues allowed us to better leverage our SG&A costs and generate higher profits.”

Mr. Webb added, “We continue to invest in the business, and the equity capital we raised during the fourth quarter will go a long way towards supporting future growth. We have many exciting new communities opening in 2016, and we’ve identified additional land opportunities that fit nicely into our existing footprint. In short, we believe we are in a great position to build on the momentum we generated in 2015 and scale our business profitably.”

Fourth Quarter 2015 Operating Results

Total revenues for the 2015 fourth quarter were up 167% to $194.6 million, compared to $73.0 million in the prior year period. Net income attributable to the Company was $12.2 million, or $0.69 per diluted share, compared to $5.3 million, or $0.32 per diluted share, in the year earlier period. The improvement in net income was primarily due to an increase in total revenues, a 190 basis point improvement in gross margin from home sales and an 860 basis point improvement in SG&A expenses as a percentage of home sale revenues.


1


Wholly Owned Projects

Home sales revenue for the 2015 fourth quarter was $146.9 million, compared to $33.2 million in the prior year period. The growth in home sales revenue was driven by a 285% increase in deliveries and a 15% increase in the average selling price of homes delivered to $1.9 million compared to $1.7 million in the prior year period. The increase in average selling price was primarily due to a product mix shift to higher-priced coastal Southern California communities, including the initial deliveries from the Company's new Fiano community located in Newport Coast (Newport Beach, CA).

Homebuilding gross margin percentage improved 190 basis points to 15.1%, compared to 13.2% in the prior year period. Adjusted homebuilding gross margin percentage, which excludes interest in cost of home sales, was 16.2%*, compared to 14.5%* in the prior year period. The year-over-year increase in gross margin percentage was due primarily to a larger proportion of deliveries generated from our higher-priced Newport Coast, Irvine and Lafayette communities and, to a lesser extent, the initial deliveries from our two new communities in the Cannery masterplan in Davis, CA. Sequentially, the Company's homebuilding gross margin percentage improved 130 basis points from the 2015 third quarter primarily due to the initial deliveries from our Fiano community, and our Sage and Heirloom communities in Davis, CA.

Selling, general and administrative ("SG&A") expenses were $11.2 million, compared to $5.4 million in the prior year period. The increase in SG&A expenses resulted from higher selling and marketing expenses due to a 342% increase in home sales revenue and increased G&A to support our growth. As a percentage of home sales revenue, SG&A was 7.6% versus 16.2% in the prior year period, an 860 basis point decline. The improvement in the year-over-year SG&A rate was driven by stronger operating leverage from higher home sales revenue.

New home orders were up 153% to 48 homes, compared to 19 homes in the prior year period. The Company's monthly sales absorption pace was 1.6 sales per average selling community, flat with the prior year period. The Company more than doubled its active selling communities to 10 communities at the end of the 2015 fourth quarter, compared to four as of the end of the prior year quarter. The dollar value of the Company's wholly-owned backlog at the end of the 2015 fourth quarter was up 92% year-over-year to $166.6 million and totaled 67 homes in backlog compared to 41 homes in the prior year period.

Fee Building Projects

Fee building revenue for the 2015 fourth quarter increased 20% to $47.7 million due to an increase in fee building construction activity. Fee building gross margin was $4.1 million, compared to $2.6 million in the prior year period. The increase in fee building gross margin was primarily attributable to an increase in fee building activities and better G&A leverage.

Unconsolidated Joint Ventures (JVs)

The Company’s share of joint venture income for the 2015 fourth quarter was $4.6 million, compared to $7.4 million in the prior year period. The decrease in the Company's share of joint venture income was driven largely by a decrease in land sales revenue and land sales gross margins. The following sets forth supplemental information about the Company’s JVs. Such information is not included in the Company’s financial data for GAAP purposes.

Total revenue of the JVs was $155.1 million and net income was $25.9 million, compared to $183.2 million and $33.6 million in the prior year period, respectively. Home sales revenue of the JVs was $135.2 million, compared to $136.3 million in the prior year period.

Homebuilding gross margin percentage generated by the JVs increased slightly to 23.5%, compared to 23.1% in the prior year period.

As of December 31, 2015, the JVs had eight actively selling communities, consistent with eight at the end of the prior year period. New home orders from JVs for the 2015 fourth quarter decreased 46% to 31 as compared to the prior year period of 57 homes. The decline in JV orders was the result of a lower monthly sales absorption rate, which was largely the result of having fewer available homes to sell within the actively selling JV communities. The dollar value of homes in backlog from unconsolidated JVs at the end of the 2015 fourth quarter was up 3% to $117.9 million from 109 homes, compared to $115.0 million from 75 homes in the prior year period. In addition, the dollar value backlog of JV lots at the end of the 2015 fourth quarter was approximately $33.5 million versus $89.1 million in the year earlier period.


2


Full Year 2015 Operating Results
Total revenues for the year ended December 31, 2015 were up 187% to $430.1 million, compared to $149.7 million in the prior year. Net income attributable to the Company for the full year 2015 was $21.7 million, or $1.28 per diluted share, compared to $4.8 million, or $0.30 per diluted share, in the year earlier period. The improvement in net income was primarily due to an increase in total revenues, a $5.3 million increase in joint venture income and a 1,740 basis point improvement in SG&A expenses as a percentage of home sale revenues. The reduction in our SG&A rate to 10.4% from 27.8% was driven by stronger operating leverage resulting from a 400% increase in home sales revenue to $280.2 million. The increase in home sales revenue was due to a 179% increase in new home deliveries and a 79% increase in our average selling price to $1.9 million.

Balance Sheet and Liquidity

During December 2015, the Company completed a follow-on equity offering of 4,025,000 shares of common stock for $47.3 million in net proceeds to the Company after underwriting and other expenses. In addition, the Company exercised the accordion under its senior unsecured revolving credit facility during the quarter increasing the total commitment under the facility from $175 million to $200 million. As of December 31, 2015, the Company had $45.9 million of cash and cash equivalents, $127.1 million in available loan commitments and $83.1 million of total debt outstanding. The Company ended the 2015 fourth quarter with a net debt-to-capital ratio of 14.3%*.

Guidance

The Company is providing initial guidance for the full year 2016 as follows:

•
Wholly Owned revenues of $450 - $500 million
•
Fee Building revenues of $100 - $120 million
•
Income from unconsolidated joint ventures of $10 - $12 million
•
Wholly Owned active year-end community count of 14, an increase of 40%

Conference Call Details

The Company will host a conference call and webcast for investors and other interested parties beginning at 1:00 p.m. Eastern Time on Friday, February 26, 2016 to review fourth quarter results, discuss recent events and conduct a question-and-answer period. The conference call will be available in the Investors section of the Company’s website at www.NWHM.com. To listen to the broadcast live, go to the site approximately 15 minutes prior to the scheduled start time in order to register, download and install any necessary audio software. To participate in the telephone conference call, dial 1-877-407-0789 (domestic) or 1-201-689-8562 (international) at least five minutes prior to the start time. Replays of the conference call will be available through March 26, 2016 and can be accessed by dialing 1-877-870-5176 (domestic) or 1-858-384-5517 (international) and entering the pass code 13628719.

About The New Home Company

NWHM is a new generation homebuilder focused on the design, construction and sale of innovative and consumer-driven homes in major metropolitan areas within select growth markets in California and Arizona, including coastal Southern California, the San Francisco Bay area, metro Sacramento and the greater Phoenix area. The Company is headquartered in Aliso Viejo, California. For more information about the Company and its new home developments, please visit the Company's website at www.NWHM.com.













* Adjusted homebuilding gross margin percentage and net debt-to-capital ratio are non-GAAP measures. A reconciliation of the appropriate GAAP measure to each of these measures is included in the accompanying financial data. See "Reconciliation of Non-GAAP Financial Measures."


3


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, our ability to execute our strategic growth objectives, revenues, income, earnings per share and capital spending. Our forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “intend,” “anticipate,” “potential,” “plan,” “goal,” “will,” “guidance,” or other words that convey the uncertainty of future events or outcomes. The forward-looking statements in this press release speak only as of the date of this release, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they 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: economic changes either nationally or in the markets in which we operate, including declines in employment, volatility of mortgage interest rates and inflation; a downturn in the homebuilding industry; continued volatility and uncertainty in the credit markets and broader financial markets; our future operating results and financial condition; our business operations; changes in our business and investment strategy; availability of land to acquire and our ability to acquire such land on favorable terms or at all; availability, terms and deployment of capital; continued or increased disruption in the availability of mortgage financing or the number of foreclosures in the market; shortages of or increased prices for labor, land or raw materials used in housing construction; delays in land development, home construction or home sales resulting from adverse weather conditions or other events outside our control; the cost and availability of insurance and surety bonds; changes in, or the failure or inability to comply with, governmental laws and regulations; the timing of receipt of regulatory approvals and the opening of projects; the cyclical and competitive nature of our business, litigation and warranty claims; our leverage and debt service obligations; availability of qualified personnel and our ability to retain our key personnel; and additional factors discussed under the sections captioned “Risk Factors” included in our annual report and other reports filed with the Securities and Exchange Commission. The Company assumes no, and hereby disclaims any, obligation to update any of the foregoing or any other forward-looking statements. The Company nonetheless reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this press release. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

Contact:
Investor Relations | Drew Mackintosh | 949-382-7838 | [email protected]

4



KEY OPERATIONS AND FINANCIAL DATA
(Dollars in thousands)
(Unaudited)
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
Change
 
2015
 
2014
 
Change
Operating Data:
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
194,626

 
$
72,985

 
$
121,641

 
$
430,099

 
$
149,657

 
$
280,442

Home sales revenue
$
146,894

 
$
33,240

 
$
113,654

 
$
280,209

 
$
56,094

 
$
224,115

Homebuilding gross margin
$
22,228

 
$
4,401

 
$
17,827

 
$
40,179

 
$
8,434

 
$
31,745

Homebuilding gross margin %
15.1
%
 
13.2
%
 
1.9
%
 
14.3
%
 
15.0
%
 
(0.7
)%
Adjusted homebuilding gross margin %**
16.2
%
 
14.5
%
 
1.7
%
 
15.2
%
 
16.0
%
 
(0.8
)%
Fee building revenue (1)
$
47,732

 
$
39,745

 
$
7,987

 
$
149,890

 
$
93,563

 
$
56,327

Fee building gross margin
$
4,069

 
$
2,553

 
$
1,516

 
$
10,213

 
$
4,506

 
$
5,707

Fee building gross margin %
8.5
%
 
6.4
%
 
2.1
%
 
6.8
%
 
4.8
%
 
2.0
 %
Equity in net income of unconsolidated joint ventures
$
4,586

 
$
7,448

 
$
(2,862
)
 
$
13,767

 
$
8,443

 
$
5,324

Net income attributable to The New Home Company Inc.
$
12,226

 
$
5,319

 
$
6,907

 
$
21,688

 
$
4,787

 
$
16,901

Interest incurred and capitalized to inventory
$
1,427

 
$
778

 
$
649

 
$
4,722

 
$
1,857

 
$
2,865

Interest in cost of home sales
$
1,635

 
$
414

 
$
1,221

 
$
2,511

 
$
532

 
$
1,979

Other Data:
 
 
 
 
 
 
 
 
 
 
 
New home orders
48

 
19

 
29

 
174

 
79

 
95

New homes delivered
77

 
20

 
57

 
148

 
53

 
95

Average selling price of homes delivered
$
1,908

 
$
1,662

 
$
246

 
$
1,893

 
$
1,058

 
$
835

Average selling communities
10.0

 
4.0

 
6.0

 
7.2

 
3.4

 
3.8

Selling communities at end of period
 
10

 
4

 
6

Backlog (est. dollar value)
 
$
166,567

 
$
86,711

 
$
79,856

Backlog (homes)
 
67

 
41

 
26

Average selling price in backlog
 
$
2,486

 
$
2,115

 
$
371

Lots owned and controlled (2)
 
6,064

 
5,926

 
138

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
December 31,
 
 
Balance Sheet Data:
 
 
 
 
 
 
2015
 
2014
 
Change
Cash, cash equivalents and restricted cash
 
$
46,254

 
$
44,340

 
$
1,914

Real estate inventories
 
$
209,918

 
$
163,564

 
$
46,354

Notes payable, including unsecured revolving credit facility
 
$
83,082

 
$
113,751

 
$
(30,669
)
Equity, exclusive of noncontrolling interest
 
$
220,775

 
$
148,084

 
$
72,691

Book capitalization
 
$
303,857

 
$
261,835

 
$
42,022

Ratio of debt-to-capital
 
27.3
%
 
43.4
%
 
(16.1
)%
Ratio of net debt-to-capital **
 
14.3
%
 
31.9
%
 
(17.6
)%

(1) Fee building revenue includes management fees from unconsolidated joint ventures of $4.1 million and $4.1 million for the fourth quarter ended December 31, 2015 and 2014, respectively, and $12.4 million and $9.6 million for the year ended December 31, 2015 and 2014, respectively.
(2) Includes lots owned and controlled through joint ventures and fee building agreements.
** See "Reconciliation of Non-GAAP Financial Measures" beginning on page 10.

5



KEY OPERATIONS AND FINANCIAL DATA - UNCONSOLIDATED JOINT VENTURES
(Dollars in thousands)
(Unaudited)
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
Change
 
2015
 
2014
 
Change
Operating Data:
 
 
 
 
 
 
 
 
 
 
 
Home sales revenue
$
135,191

 
$
136,331

 
$
(1,140
)
 
$
335,515

 
$
224,498

 
$
111,017

Homebuilding gross margin
$
31,742

 
$
31,519

 
$
223

 
$
76,537

 
$
50,196

 
$
26,341

Homebuilding gross margin %
23.5
%
 
23.1
%
 
0.4
 %
 
22.8
%
 
22.4
%
 
0.4
 %
Adj homebuilding gross margin %**
24.5
%
 
24.5
%
 
—
 %
 
24.0
%
 
23.6
%
 
0.4
 %
Land sales revenue
$
19,911

 
$
46,888

 
$
(26,977
)
 
$
74,366

 
$
46,888

 
$
27,478

Land gross margin
$
2,557

 
$
11,922

 
$
(9,365
)
 
$
15,613

 
$
11,922

 
$
3,691

Land gross margin %
12.8
%
 
25.4
%
 
(12.6
)%
 
21.0
%
 
25.4
%
 
(4.4
)%
Adj land gross margin %**
12.9
%
 
25.8
%
 
(12.9
)%
 
21.0
%
 
25.8
%
 
(4.8
)%
Net income
$
25,885

 
$
33,611

 
$
(7,726
)
 
$
65,194

 
$
41,174

 
$
24,020

Interest in cost of home sales
$
1,362

 
$
1,877

 
$
(515
)
 
$
4,016

 
$
2,885

 
$
1,131

Interest in cost of land sales
$
13

 
$
173

 
$
(160
)
 
$
38

 
$
173

 
$
(135
)
Other Data:
 
 
 
 
 
 
 
 
 
 
 
New home orders
31

 
57

 
(26
)
 
299

 
288

 
11

New homes delivered
95

 
129

 
(34
)
 
265

 
275

 
(10
)
Average selling price of homes delivered
$
1,423

 
$
1,057

 
$
366

 
$
1,266

 
$
816

 
$
450

Average selling communities
10.3

 
10.3

 
—

 
9.6

 
8.5

 
1.1

Selling communities at end of period
 
8

 
8

 
—

Backlog homes (est. dollar value)
 
$
117,936

 
$
114,988

 
$
2,948

Backlog (homes)
 
109

 
75

 
34

Average selling price in backlog (homes)
 
$
1,082

 
$
1,533

 
$
(451
)
Backlog lots (est. dollar value)
 
$
33,534

 
$
89,103

 
$
(55,569
)
Lots owned and controlled
 
3,324

 
3,892

 
(568
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
December 31,
 
 
Balance Sheet Data:
 
 
 
 
 
 
2015
 
2014
 
Change
Cash, cash equivalents and restricted cash
 
$
66,215

 
$
60,018

 
$
6,197

Real estate inventories
 
$
415,730

 
$
459,770

 
$
(44,040
)
Notes payable
 
$
94,890

 
$
87,994

 
$
6,896

The Company's equity
 
$
60,572

 
$
60,564

 
$
8

Other partners' equity
 
$
272,642

 
$
320,451

 
$
(47,809
)
Book capitalization
 
$
428,104

 
$
469,009

 
$
(40,905
)
  
** See "Reconciliation of Non-GAAP Financial Measures" beginning on page 10.


6



CONSOLIDATED BALANCE SHEETS

 
December 31,
 
December 31,
 
2015
 
2014
 
(Dollars in thousands, except per share amounts)
 
(Unaudited)
 
 
Assets
 
 
 
Cash and cash equivalents
$
45,874

 
$
44,058

Restricted cash
380

 
283

Contracts and accounts receivable
23,960

 
13,164

Due from affiliates
979

 
2,662

Real estate inventories
209,918

 
163,564

Investment in unconsolidated joint ventures
60,572

 
60,564

Other assets
9,587

 
7,663

Total assets
$
351,270

 
$
291,958

 
 
 
 
Liabilities and equity
 
 
 
Accounts payable
$
26,371

 
$
16,581

Accrued expenses and other liabilities
19,827

 
11,200

Due to affiliates
293

 
—

Unsecured revolving credit facility
74,924

 
100,474

Other notes payable
8,158

 
13,277

Total liabilities
129,573

 
141,532

Equity:
 
 
 
Stockholders' equity:
 
 
 
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares outstanding
—

 
—

Common stock, $0.01 par value, 500,000,000 shares authorized, 20,543,130 and 16,448,750, shares issued and outstanding as of December 31, 2015 and December 31, 2014, respectively
205

 
164

Additional paid-in capital
194,437

 
143,475

Retained earnings
26,133

 
4,445

Total The New Home Company Inc. stockholders' equity
220,775

 
148,084

Noncontrolling interest in subsidiary
922

 
2,342

Total equity
221,697

 
150,426

Total liabilities and equity
$
351,270

 
$
291,958




7



CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three months ended December 31,
 
Year Ended December 31,
 
2015
 
2014
 
2015
 
2014
 
(Dollars in thousands, except per share amounts)
Revenues:
 
 
 
 
 
 
 
Home sales
$
146,894

 
$
33,240

 
$
280,209

 
$
56,094

Fee building, including management fees from unconsolidated joint ventures of $4,071, $4,058, $12,426 and $9,582, respectively
47,732

 
39,745

 
149,890

 
93,563

 
194,626

 
72,985

 
430,099

 
149,657

Expenses:
 
 
 
 
 
 
 
Cost of homes sales
124,666

 
28,839

 
240,030

 
47,660

Cost of fee building
43,663

 
37,192

 
139,677

 
89,057

Selling and marketing
4,029

 
978

 
8,943

 
3,166

General and administrative
7,200

 
4,392

 
20,278

 
12,420

 
179,558

 
71,401

 
408,928

 
152,303

Equity in net income of unconsolidated joint ventures
4,586

 
7,448

 
13,767

 
8,443

Guaranty fee income
—

 
—

 
—

 
19

Other expense, net
(183
)
 
(680
)
 
(1,027
)
 
(813
)
Income before taxes
19,471

 
8,352

 
33,911

 
5,003

Provision for taxes
(7,258
)
 
(2,822
)
 
(12,533
)
 
(246
)
Net income
12,213

 
5,530

 
21,378

 
4,757

Net loss (income) attributable to noncontrolling interest
13

 
(210
)
 
310

 
30

Net income attributable to The New Home Company Inc.
$
12,226

 
$
5,320

 
$
21,688

 
$
4,787

 
 
 
 
 
 
 
 
Earnings per share attributable to The New Home Company Inc.
 
 
 
 
 
 
 
Basic
$
0.70

 
$
0.32

 
$
1.29

 
$
0.30

Diluted
$
0.69

 
$
0.32

 
$
1.28

 
$
0.30

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
17,545,333

 
16,448,750

 
16,767,513

 
15,927,917

Diluted
17,790,082

 
16,543,620

 
16,941,088

 
15,969,199



8



CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Year Ended
 
December 31,
 
2015

2014
 
(Dollars in thousands)
Operating activities:
 
 
 
Net income
$
21,378

 
$
4,757

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Deferred taxes
(1,675
)
 
(5,819
)
Amortization of equity based compensation
3,884

 
2,322

Excess tax benefits from stock-based compensation
(97
)
 
—

Distributions of earnings from unconsolidated joint ventures
18,477

 
6,040

Equity in net income of unconsolidated joint ventures
(13,767
)
 
(8,443
)
Deferred profit from unconsolidated joint ventures
(1,603
)
 
—

Depreciation and amortization
473

 
381

Abandoned project costs
635

 
754

Other
—

 
—

Net changes in operating assets and liabilities:
 
 
 
Restricted cash
(97
)
 
(153
)
Contracts and accounts receivable
(10,796
)
 
(5,986
)
Due from affiliates
1,683

 
(2,104
)
Real estate inventories
(69,289
)
 
(119,605
)
Other assets
(304
)
 
3,388

Accounts payable
9,790

 
7,893

Accrued expenses and other liabilities
8,712

 
4,349

Due to affiliates
293

 
—

Net cash used in operating activities
(32,303
)
 
(112,226
)
Investing activities:
 
 
 
Purchases of property and equipment
(418
)
 
(883
)
Contributions to unconsolidated joint ventures
(15,028
)
 
(34,610
)
Distributions of capital from unconsolidated joint ventures
32,026

 
10,609

Net cash provided by (used in) investing activities
16,580

 
(24,884
)
Financing activities:
 
 
 
Net proceeds from issuance of common stock
47,253

 
87,800

Repurchase of common stock
—

 
(11,989
)
Cash distributions to noncontrolling interest in subsidiary
(2,411
)
 
(52
)
Borrowings from credit facility and other notes payable
103,002

 
111,636

Repayments of credit facility and other notes payable
(130,171
)
 
(15,768
)
Minimum tax withholding paid on behalf of employees for stock awards
(248
)
 
—

Excess tax benefits from stock-based compensation
97

 
—

Proceeds from exercise of stock options
17

 
—

Net cash provided by financing activities
17,539

 
171,627

Net increase in cash and cash equivalents
1,816

 
34,517

Cash and cash equivalents – beginning of year
44,058

 
9,541

Cash and cash equivalents – end of year
$
45,874

 
$
44,058

Supplemental disclosures of cash flow information
 
 
 
Interest paid, net of amounts capitalized
$
—

 
$
—

Income taxes paid
$
11,261

 
$
1,470

Supplemental disclosures of non-cash transactions
 
 
 
Purchase of real estate with note payable to land seller
$
—

 
$
17,000

Purchase of real estate with notes payable to affiliate
$
747

 
$
—

Contribution of real estate to unconsolidated joint ventures
$
18,828

 
$
1,890

Contribution of real estate from noncontrolling interest in subsidiary
$
1,301

 
$
1,252

Deductible transaction costs and additional contribution of deferred tax assets from IPO
$
—

 
$
808


9



RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)

In this earnings release, we utilize certain 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 and land gross margin percentage, as reported and prepared in accordance with GAAP, to the non-GAAP measure adjusted homebuilding and land gross margin percentage. We believe this information is meaningful, as it isolates the impact leverage has on homebuilding and land gross margin and provides investors better comparisons with our competitors, who adjust gross margins in a similar fashion.
 
Three months ended December 31,
 
Year Ended December 31,
 
2015
 
%
 
2014
 
%
 
2015
 
%
 
2014
 
%
 
(Dollars in thousands)
Homebuilding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales revenue
$
146,894

 
100.0
%
 
$
33,240

 
100.0
%
 
$
280,209

 
100.0
%
 
$
56,094

 
100.0
%
Cost of home sales
124,666

 
84.9
%
 
28,839

 
86.8
%
 
240,030

 
85.7
%
 
47,660

 
85.0
%
Homebuilding gross margin
22,228

 
15.1
%
 
4,401

 
13.2
%
 
40,179

 
14.3
%
 
8,434

 
15.0
%
Add: Interest in cost of home sales
1,635

 
1.1
%
 
414

 
1.3
%
 
2,511

 
0.9
%
 
532

 
1.0
%
Adjusted homebuilding gross margin
$
23,863

 
16.2
%
 
$
4,815

 
14.5
%
 
$
42,690

 
15.2
%
 
$
8,966

 
16.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Joint Ventures - Homebuilding
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Home sales revenue
$
135,191

 
100.0
%
 
$
136,331

 
100.0
%
 
$
335,515

 
100.0
%
 
$
224,498

 
100.0
%
Cost of home sales
103,449

 
76.5
%
 
104,812

 
76.9
%
 
258,978

 
77.2
%
 
174,302

 
77.6
%
Homebuilding gross margin
31,742

 
23.5
%
 
31,519

 
23.1
%
 
76,537

 
22.8
%
 
50,196

 
22.4
%
Add: Interest in cost of home sales
1,362

 
1.0
%
 
1,877

 
1.4
%
 
4,016

 
1.2
%
 
2,885

 
1.2
%
Adjusted homebuilding gross margin
$
33,104

 
24.5
%
 
$
33,396

 
24.5
%
 
$
80,553

 
24.0
%
 
$
53,081

 
23.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unconsolidated Joint Ventures - Land
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Land sales revenue
$
19,911

 
100.0
%
 
$
46,888

 
100.0
%
 
$
74,366

 
100.0
%
 
$
46,888

 
100.0
%
Cost of land sales
17,353

 
87.2
%
 
34,966

 
74.6
%
 
58,753

 
79.0
%
 
34,966

 
74.6
%
Land gross margin
2,558

 
12.8
%
 
11,922

 
25.4
%
 
15,613

 
21.0
%
 
11,922

 
25.4
%
Add: Interest in cost of land sales
13

 
0.1
%
 
173

 
0.4
%
 
38

 
—
%
 
173

 
0.4
%
Adjusted land gross margin
$
2,571

 
12.9
%
 
$
12,095

 
25.8
%
 
$
15,651

 
21.0
%
 
$
12,095

 
25.8
%


10



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-capital. We believe that the ratio of net debt-to-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.
 
December 31,
 
December 31,
 
2015
 
2014
 
(Dollars in thousands)
Notes payable, including unsecured revolving credit facility
$
83,082

 
$
113,751

Equity, exclusive of noncontrolling interest
220,775

 
148,084

Total capital
$
303,857

 
$
261,835

Ratio of debt-to-capital (1)
27.3
%
 
43.4
%
 
 
 
 
Notes payable, including unsecured revolving credit facility
$
83,082

 
$
113,751

Less: cash, cash equivalents and restricted cash
46,254

 
44,340

Net debt
36,828

 
69,411

Equity, exclusive of noncontrolling interest
220,775

 
148,084

Total capital
$
257,603

 
$
217,495

Ratio of net debt-to-capital (2)
14.3
%
 
31.9
%
 
(1)
The ratio of debt-to-capital is computed as the quotient obtained by dividing notes payable by the sum of total notes payable plus equity, exclusive of noncontrolling interest.  

(2)
The ratio of net debt-to-capital is computed as the quotient obtained by dividing net debt (which is notes payable less cash to the extent necessary to reduce the debt balance to zero) by total capital, exclusive of noncontrolling interest. 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 believe that by deducting our cash from our notes payable, we provide a measure of our indebtedness that takes into account our cash liquidity. We believe this provides useful information as the ratio of debt-to-capital does not take into account our liquidity and we believe that the ratio net of cash provides supplemental information by which our financial position may be considered. Investors may also find this to be helpful when comparing our leverage to the leverage of our competitors that present similar information. See the table above reconciling this non-GAAP financial measure to the ratio of debt-to-capital.  



11

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