tph-10q_20160331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2016

or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 1-35796

 

TRI Pointe Group, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

61-1763235

(State or other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

19540 Jamboree Road, Suite 300

Irvine, California 92612

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (949) 438-1400

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

x

Accelerated filer

¨

 

 

 

 

Non-accelerated filer

¨  (Do not check if a smaller reporting company)

Smaller reporting company

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Registrant’s shares of common stock outstanding at April 22, 2016: 162,048,087

 

 

 

 


EXPLANATORY NOTE

As used in this Quarterly Report on Form 10-Q (including the consolidated financial statements and condensed notes thereto in this report), unless the context otherwise requires:

 

·

“Closing Date” refers to July 7, 2014;

 

·

“Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

 

·

“GAAP” refers to U.S. generally accepted accounting principles;

 

·

“Merger” refers to the merger of a wholly owned subsidiary of TRI Pointe with and into WRECO, with WRECO surviving the merger and becoming a wholly owned subsidiary of TRI Pointe;

 

·

“SEC” refers to the United States Securities and Exchange Commission;

 

·

“Securities Act” refers to the Securities Act of 1933, as amended;

 

·

“Transaction Agreement” refers to the agreement dated as of November 3, 2013 by and among Weyerhaeuser, TRI Pointe, WRECO, and a wholly owned subsidiary of TRI Pointe;

 

·

“TRI Pointe Homes” refers to TRI Pointe Homes, Inc., a Delaware corporation;

 

·

“TRI Pointe Group” refers to TRI Pointe Group, Inc., a Delaware corporation;

 

·

“Weyerhaeuser” refers to Weyerhaeuser Company, a Washington corporation and the former parent of WRECO; and

 

·

“WRECO” refers to Weyerhaeuser Real Estate Company, a Washington corporation, which following the Closing Date was renamed “TRI Pointe Holdings, Inc.”

Additionally, references to “TRI Pointe”, “the Company”, “we”, “us” or “our” in this Quarterly Report on Form 10-Q (including the consolidated financial statements and condensed notes thereto in this report) have the following meanings, unless the context otherwise requires:

 

·

For periods prior to July 7, 2015: TRI Pointe Homes and its subsidiaries; and

 

·

For periods from and after July 7, 2015: TRI Pointe Group and its subsidiaries.

 

 

 


TRI POINTE GROUP, INC.

FORM 10-Q

INDEX

March 31, 2016

 

 

 

Page
Number

PART I.  FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements for TRI Pointe Group, Inc.

3

 

 

 

 

Consolidated Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015

3

 

 

 

 

Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, 2016 and 2015

4

 

 

 

 

Consolidated Statements of Equity for the Year Ended December 31, 2015 and the Three Months Ended March 31, 2016 (unaudited)

5

 

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015 (unaudited)

6

 

 

 

 

Condensed Notes to Consolidated Financial Statements (unaudited)

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

 

 

 

Item 4.

Controls and Procedures

45

 

Part II.  OTHER INFORMATION

 

 

 

Item 1.

Legal Proceedings

46

 

 

 

Item 1A.

Risk Factors

46

 

 

 

Item2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

 

 

 

Item 6.

Exhibits

47

 

 

 

SIGNATURES

49

 

 

 

 

- 2 -


PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

TRI POINTE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

144,019

 

 

$

214,485

 

Receivables

 

 

32,688

 

 

 

43,710

 

Real estate inventories

 

 

2,705,251

 

 

 

2,519,273

 

Investments in unconsolidated entities

 

 

17,494

 

 

 

18,999

 

Goodwill and other intangible assets, net

 

 

161,895

 

 

 

162,029

 

Deferred tax assets, net

 

 

126,812

 

 

 

130,657

 

Other assets

 

 

45,918

 

 

 

48,918

 

Total assets

 

$

3,234,077

 

 

$

3,138,071

 

Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

67,601

 

 

$

64,840

 

Accrued expenses and other liabilities

 

 

201,302

 

 

 

216,263

 

Unsecured revolving credit facility

 

 

374,392

 

 

 

299,392

 

Seller financed loans

 

 

 

 

 

2,434

 

Senior notes, net

 

 

869,939

 

 

 

868,679

 

Total liabilities

 

 

1,513,234

 

 

 

1,451,608

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares

   issued and outstanding as of March 31, 2016 and December 31, 2015,

   respectively

 

 

 

 

 

 

Common stock, $0.01 par value, 500,000,000 shares authorized;

   162,007,850 and 161,813,750 shares issued and outstanding at

   March 31, 2016 and December 31, 2015, respectively

 

 

1,620

 

 

 

1,618

 

Additional paid-in capital

 

 

912,719

 

 

 

911,197

 

Retained earnings

 

 

780,418

 

 

 

751,868

 

Total stockholders’ equity

 

 

1,694,757

 

 

 

1,664,683

 

Noncontrolling interests

 

 

26,086

 

 

 

21,780

 

Total equity

 

 

1,720,843

 

 

 

1,686,463

 

Total liabilities and equity

 

$

3,234,077

 

 

$

3,138,071

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

 

- 3 -


TRI POINTE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Homebuilding:

 

 

 

 

 

 

 

 

Home sales revenue

 

$

423,055

 

 

$

374,265

 

Land and lot sales revenue

 

 

355

 

 

 

2,000

 

Other operations

 

 

580

 

 

 

993

 

Total revenues

 

 

423,990

 

 

 

377,258

 

Cost of home sales

 

 

324,499

 

 

 

299,907

 

Cost of land and lot sales

 

 

779

 

 

 

2,308

 

Other operations

 

 

566

 

 

 

562

 

Sales and marketing

 

 

26,321

 

 

 

23,286

 

General and administrative

 

 

28,396

 

 

 

28,153

 

Restructuring charges

 

 

135

 

 

 

222

 

Homebuilding income from operations

 

 

43,294

 

 

 

22,820

 

Equity in (loss) income of unconsolidated entities

 

 

(14

)

 

 

107

 

Other income, net

 

 

115

 

 

 

256

 

Homebuilding income before taxes

 

 

43,395

 

 

 

23,183

 

Financial Services:

 

 

 

 

 

 

 

 

Revenues

 

 

148

 

 

 

 

Expenses

 

 

58

 

 

 

26

 

Equity in income (loss) of unconsolidated entities

 

 

715

 

 

 

(33

)

Financial services income (loss) from operations before taxes

 

 

805

 

 

 

(59

)

Income before taxes

 

 

44,200

 

 

 

23,124

 

Provision for income taxes

 

 

(15,490

)

 

 

(7,827

)

Net income

 

 

28,710

 

 

 

15,297

 

Net income attributable to noncontrolling interests

 

 

(160

)

 

 

 

Net income available to common stockholders

 

$

28,550

 

 

$

15,297

 

Earnings per share

 

 

 

 

 

 

 

 

Basic

 

$

0.18

 

 

$

0.09

 

Diluted

 

$

0.18

 

 

$

0.09

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

Basic

 

 

161,895,640

 

 

 

161,490,970

 

Diluted

 

 

162,192,610

 

 

 

162,807,376

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

 

- 4 -


TRI POINTE GROUP, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited)

(in thousands, except share amounts)

 

 

 

Number of

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

Shares of Common

 

 

Common

 

 

Paid-in

 

 

Retained

 

 

Stockholders'

 

 

Noncontrolling

 

 

Total

 

 

 

Stock (Note 1)

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

Equity

 

 

Interests

 

 

Equity

 

Balance at December 31, 2014

 

 

161,355,490

 

 

$

1,614

 

 

$

906,159

 

 

$

546,407

 

 

$

1,454,180

 

 

$

18,296

 

 

$

1,472,476

 

Net income

 

 

 

 

 

 

 

 

 

 

 

205,461

 

 

 

205,461

 

 

 

1,720

 

 

 

207,181

 

Adjustment to capital contribution by

   Weyerhaeuser, net

 

 

 

 

 

 

 

 

(6,747

)

 

 

 

 

 

(6,747

)

 

 

 

 

 

(6,747

)

Shares issued under share-based

   awards

 

 

458,260

 

 

 

4

 

 

 

1,612

 

 

 

 

 

 

1,616

 

 

 

 

 

 

1,616

 

Excess tax benefit of share-based

   awards, net

 

 

 

 

 

 

 

 

428

 

 

 

 

 

 

428

 

 

 

 

 

 

428

 

Minimum tax withholding paid on

   behalf of employees for restricted

   stock units

 

 

 

 

 

 

 

 

(2,190

)

 

 

 

 

 

(2,190

)

 

 

 

 

 

(2,190

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

11,935

 

 

 

 

 

 

11,935

 

 

 

 

 

 

11,935

 

Distributions to noncontrolling

   interests, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,833

)

 

 

(3,833

)

Net effect of consolidations,

   de-consolidations and other

   transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,597

 

 

 

5,597

 

Balance at December 31, 2015

 

 

161,813,750

 

 

 

1,618

 

 

 

911,197

 

 

 

751,868

 

 

 

1,664,683

 

 

 

21,780

 

 

 

1,686,463

 

Net income

 

 

 

 

 

 

 

 

 

 

 

28,550

 

 

 

28,550

 

 

 

160

 

 

 

28,710

 

Shares issued under share-based

   awards

 

 

194,100

 

 

 

2

 

 

 

4

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

Minimum tax withholding paid on

   behalf of employees for restricted

   stock units

 

 

 

 

 

 

 

 

(1,087

)

 

 

 

 

 

(1,087

)

 

 

 

 

 

(1,087

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

2,605

 

 

 

 

 

 

2,605

 

 

 

 

 

 

2,605

 

Distributions to noncontrolling

   interests, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,719

)

 

 

(1,719

)

Net effect of consolidations,

   de-consolidations and other

   transactions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,865

 

 

 

5,865

 

Balance at March 31, 2016

 

 

162,007,850

 

 

$

1,620

 

 

$

912,719

 

 

$

780,418

 

 

$

1,694,757

 

 

$

26,086

 

 

$

1,720,843

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

 

- 5 -


TRI POINTE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net income

 

$

28,710

 

 

$

15,297

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,792

 

 

 

1,481

 

Equity in income of unconsolidated entities, net

 

 

(701

)

 

 

(74

)

Deferred income taxes, net

 

 

3,845

 

 

 

2,018

 

Amortization of stock-based compensation

 

 

2,605

 

 

 

2,381

 

Charges for impairments and lot option abandonments

 

 

182

 

 

 

360

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Real estate inventories

 

 

(180,540

)

 

 

(127,304

)

Receivables

 

 

11,141

 

 

 

(2,894

)

Other assets

 

 

2,871

 

 

 

6,963

 

Accounts payable

 

 

2,761

 

 

 

(7,865

)

Accrued expenses and other liabilities

 

 

(14,828

)

 

 

1,323

 

Returns on investments in unconsolidated entities, net

 

 

2,486

 

 

 

 

Net cash used in operating activities

 

 

(139,676

)

 

 

(108,314

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(411

)

 

 

(378

)

Investments in unconsolidated entities

 

 

(13

)

 

 

(978

)

Net cash used in investing activities

 

 

(424

)

 

 

(1,356

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Borrowings from debt

 

 

75,000

 

 

 

50,000

 

Repayment of debt

 

 

(2,434

)

 

 

(2,535

)

Net repayments of debt held by variable interest entities

 

 

(132

)

 

 

(742

)

Contributions from noncontrolling interests

 

 

808

 

 

 

873

 

Distributions to noncontrolling interests

 

 

(2,527

)

 

 

(726

)

Proceeds from issuance of common stock under share-based awards

 

 

6

 

 

 

263

 

Excess tax benefits of share-based awards

 

 

 

 

 

308

 

Minimum tax withholding paid on behalf of employees for share-based awards

 

 

(1,087

)

 

 

(1,827

)

Net cash provided by financing activities

 

 

69,634

 

 

 

45,614

 

Net decrease in cash and cash equivalents

 

 

(70,466

)

 

 

(64,056

)

Cash and cash equivalents - beginning of period

 

 

214,485

 

 

 

170,629

 

Cash and cash equivalents - end of period

 

$

144,019

 

 

$

106,573

 

 

See accompanying condensed notes to the unaudited consolidated financial statements.

 

 

 

- 6 -


TRI POINTE GROUP, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1.

Organization, Basis of Presentation and Summary of Significant Accounting Policies

Organization

TRI Pointe Group is engaged in the design, construction and sale of innovative single-family attached and detached 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.

Formation of TRI Pointe Group

On July 7, 2015, TRI Pointe Homes reorganized its corporate structure (the “Reorganization”) whereby TRI Pointe Homes became a direct, wholly owned subsidiary of TRI Pointe Group.  As a result of the Reorganization, each share of common stock, par value $0.01 per share, of TRI Pointe Homes (“Homes Common Stock”) was cancelled and converted automatically into the right to receive one validly issued, fully paid and non-assessable share of common stock, par value $0.01 per share, of TRI Pointe Group (“Group Common Stock”), each share having the same designations, rights, powers and preferences, and the qualifications, limitations and restrictions thereof as the shares of Homes Common Stock being so converted.  TRI Pointe Group, as the successor issuer to TRI Pointe Homes (pursuant to Rule 12g-3(a) under the Exchange Act), began making filings under the Securities Act and the Exchange Act on July 7, 2015.

In connection with the Reorganization, TRI Pointe Group (i) became a co-issuer of TRI Pointe Homes’ 4.375% Senior Notes due 2019 (the “2019 Notes”) and TRI Pointe Homes’ 5.875% Senior Notes due 2024 (the “2024 Notes” and together with the 2019 Notes, the “Senior Notes”); and (ii) replaced TRI Pointe Homes as the borrower under TRI Pointe Homes’ existing unsecured revolving credit facility.

Basis of Presentation

The accompanying financial statements have been prepared in accordance with GAAP, as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as described in “Reverse Acquisition” below, as well as other entities in which the Company has a controlling interest and variable interest entities (“VIEs”) in which the Company is the primary beneficiary.  The noncontrolling interests as of March 31, 2016 and December 31, 2015 represent the outside owners’ interests in the Company’s consolidated entities and the net equity of the VIE owners.  All significant intercompany accounts have been eliminated upon consolidation.  In the opinion of management, all adjustments consisting of normal recurring adjustments, necessary for a fair presentation with respect to interim financial statements, have been included.

Reverse Acquisition

On the Closing Date, TRI Pointe consummated the Merger with WRECO, with WRECO becoming a wholly owned subsidiary of TRI Pointe. The Merger is accounted for in accordance with ASC Topic 805, Business Combinations. For accounting purposes, the Merger is treated as a “reverse acquisition” and WRECO is considered the accounting acquirer.

Use of Estimates

Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from our estimates.

Reclassifications

Certain amounts in our consolidated financial statements for prior years have been reclassified to conform to the current period presentation.

 

- 7 -


Recently Issued Accounting Standards

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue-recognition requirements in ASC Topic 605, Revenue Recognition, most industry-specific guidance throughout the industry topics of the accounting standards codification, and some cost guidance related to construction-type and production-type contracts. On July 9, 2015, the FASB voted to defer the effective date of ASU No. 2014-09 by one year and it is now effective for public entities for the annual periods ending after December 15, 2017, and for annual and interim periods thereafter.  Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09.  Early adoption is permitted, but can be no earlier than the original public entity effective date of fiscal years, and the interim periods within those years, beginning after December 15, 2016.  We are currently evaluating the approach for implementation and the potential impact of adopting this guidance on our consolidated financial statements.

In August 2014, the FASB issued Accounting Standards Update No. 2014-15 (“ASU 2014-15”), Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable) and provide related disclosures. ASU 2014-15 is effective for the annual period ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. We believe the adoption of this guidance will not have a material effect on our consolidated financial statements.

In February 2015, the FASB issued Accounting Standards Update No. 2015-02, (“ASU 2015-02”), Consolidation (Topic 810): Amendments to the Consolidation Analysis.   ASU 2015-02 changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. ASU 2015-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015.  We adopted ASU 2015-02 on January 1, 2016 and the adoption had no impact on our current or prior year financial statements.

In November 2015, the FASB issued Accounting Standards Update No. 2015-17, (“ASU 2015-17”), Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires deferred tax liabilities and assets be classified as noncurrent in a classified statement of position.  ASU 2015-17 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017.  The adoption of ASU 2015-17 is not expected to have a material effect on our consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, (“ASU 2016-02”), Leases (Topic 842): Leases, which requires an entity to recognize assets and liabilities on the balance sheet for the rights and obligations created by leased assets and provide additional disclosures. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and, at that time, we will adopt the new standard using a modified retrospective approach. We are currently evaluating the impact that the adoption of ASU 2016-02 may have on our consolidated financial statements and disclosures.

In March 2016, the FASB issued Accounting Standards Update No. 2016-09, (“ASU 2016-09”), Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.  ASU 2016-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. We are currently evaluating the impact that the adoption of ASU 2016-09 may have on our consolidated financial statements and disclosures.

 

 

2.

Restructuring

Restructuring charges were comprised of the following (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Employee-related charges

 

$

13

 

 

$

112

 

Lease termination charges

 

 

122

 

 

 

110

 

Total

 

$

135

 

 

$

222

 

 

 

- 8 -


Employee-related charges of $13,000 and $112,000 for the three months ended March 31, 2016 and 2015, respectively, relate to severance-related expenses for employees terminated during the period.  Lease termination charges of $122,000 and $110,000 for the three months ended March 31, 2016, and 2015, respectively, relate to the adjustment of restructuring reserves related to the estimate of sublease income.

Changes in employee-related restructuring reserves were as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Accrued employee-related charges, beginning of period

 

$

220

 

 

$

3,844

 

Current year charges

 

 

13

 

 

 

112

 

Payments

 

 

(159

)

 

 

(3,423

)

Accrued employee-related charges, end of period

 

$

74

 

 

$

533

 

 

Changes in lease termination related restructuring reserves were as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Accrued lease termination charges, beginning of period

 

$

767

 

 

$

1,394

 

Current year charges

 

 

122

 

 

 

110

 

Payments

 

 

(312

)

 

 

(578

)

Accrued lease termination charges, end of period

 

$

577

 

 

$

926

 

 

Employee and lease termination restructuring reserves are included in accrued expenses and other liabilities on our consolidated balance sheets.

 

 

3.

Segment Information

We operate two principal businesses: homebuilding and financial services.

Our homebuilding operations consist of six homebuilding companies that acquire and develop land and construct and sell single-family detached and attached homes. In accordance with ASC Topic 280, Segment Reporting, in determining the most appropriate reportable segments, we considered similar economic and other characteristics, including product types, average selling prices, gross profits, production processes, suppliers, subcontractors, regulatory environments, land acquisition results, and underlying demand and supply. Based upon the above factors, our homebuilding operations are comprised of the following six reportable segments: Maracay Homes, consisting of operations in Arizona; Pardee Homes, consisting of operations in California and Nevada; Quadrant Homes, consisting of operations in Washington; Trendmaker Homes, consisting of operations in Texas; TRI Pointe Homes, consisting of operations in California and Colorado; and Winchester Homes, consisting of operations in Maryland and Virginia.

Our financial services operation (“TRI Pointe Solutions”) is a reportable segment and is comprised of mortgage financing operations (“TRI Pointe Connect”) and title services operations (“TRI Pointe Assurance”).  While our homebuyers may obtain financing from any mortgage provider of their choice, TRI Pointe Connect, which was formed as a joint venture with an established mortgage lender, can act as a preferred mortgage broker to our homebuyers in all of the markets in which we operate, providing mortgage financing that helps facilitate the sale and closing process as well as generate additional fee income for us.  TRI Pointe Assurance provides title examinations for our homebuyers in our Trendmaker Homes and Winchester Homes brands.  TRI Pointe Assurance is a wholly owned subsidiary of TRI Pointe and acts as a title agency for First American Title Insurance Company.  We commenced our financial services operation in the fourth quarter of 2014.

The term “Corporate” refers to a non-operating segment that develops and implements company-wide strategic initiatives and provides support to our homebuilding reporting segments by centralizing certain administrative functions, such as marketing, legal, accounting, treasury, insurance, internal audit and risk management, information technology and human resources, to benefit from economies of scale. Our Corporate non-operating segment also includes general and administrative expenses related to operating our corporate headquarters. A portion of the expenses incurred by Corporate is allocated to the homebuilding reporting segments.

The reportable segments follow the same accounting policies as our consolidated financial statements described in Note 1, Organization, Basis of Presentation and Summary of Significant Accounting Policies. Operational results of each reportable segment are not necessarily indicative of the results that would have been achieved had the reportable segment been an independent, stand-alone entity during the periods presented.

 

 

- 9 -


Total revenues and income before taxes for each of our reportable segments were as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Revenues

 

 

 

 

 

 

 

 

Maracay Homes

 

$

45,437

 

 

$

32,477

 

Pardee Homes

 

 

118,933

 

 

 

85,658

 

Quadrant Homes

 

 

46,058

 

 

 

45,629

 

Trendmaker Homes

 

 

43,786

 

 

 

56,208

 

TRI Pointe Homes

 

 

131,957

 

 

 

106,858

 

Winchester Homes

 

 

37,819

 

 

 

50,428

 

Total homebuilding revenues

 

 

423,990

 

 

 

377,258

 

Financial services

 

 

148

 

 

 

 

Total

 

$

424,138

 

 

$

377,258

 

 

 

 

 

 

 

 

 

 

Income (loss) before taxes

 

 

 

 

 

 

 

 

Maracay Homes

 

$

2,636

 

 

$

1,040

 

Pardee Homes

 

 

32,131

 

 

 

13,559

 

Quadrant Homes

 

 

3,696

 

 

 

1,580

 

Trendmaker Homes

 

 

2,058

 

 

 

4,360

 

TRI Pointe Homes

 

 

10,715

 

 

 

11,132

 

Winchester Homes

 

 

661

 

 

 

381

 

Corporate

 

 

(8,502

)

 

 

(8,869

)

Total homebuilding income before taxes

 

 

43,395

 

 

 

23,183

 

Financial services

 

 

805

 

 

 

(59

)

Total

 

$

44,200

 

 

$

23,124

 

 

Total real estate inventories and total assets for each of our reportable segments, as of the date indicated, were as follows (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Real estate inventories

 

 

 

 

 

 

 

 

Maracay Homes

 

$

211,362

 

 

$

206,912

 

Pardee Homes

 

 

1,066,086

 

 

 

1,011,982

 

Quadrant Homes

 

 

209,707

 

 

 

190,038

 

Trendmaker Homes

 

 

214,290

 

 

 

199,398

 

TRI Pointe Homes

 

 

742,753

 

 

 

659,130

 

Winchester Homes

 

 

261,053

 

 

 

251,813

 

Total

 

$

2,705,251

 

 

$

2,519,273

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

 

 

 

Maracay Homes

 

$

241,762

 

 

$

227,857

 

Pardee Homes

 

 

1,139,330

 

 

 

1,089,586

 

Quadrant Homes

 

 

231,436

 

 

 

202,024

 

Trendmaker Homes

 

 

227,791

 

 

 

213,562

 

TRI Pointe Homes

 

 

907,366

 

 

 

832,423

 

Winchester Homes

 

 

289,890

 

 

 

278,374

 

Corporate

 

 

193,688

 

 

 

292,169

 

Total homebuilding assets

 

 

3,231,263

 

 

 

3,135,995

 

Financial services

 

 

2,814

 

 

 

2,076

 

Total

 

$

3,234,077

 

 

$

3,138,071

 

 

 

 

- 10 -


4.

Earnings Per Share

The following table sets forth the components used in the computation of basic and diluted earnings per share (in thousands, except share and per share amounts):

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Numerator:

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

28,550

 

 

$

15,297

 

Denominator:

 

 

 

 

 

 

 

 

Basic weighted-average shares outstanding

 

 

161,895,640

 

 

 

161,490,970

 

Effect of dilutive shares:

 

 

 

 

 

 

 

 

Stock options and unvested restricted stock units

 

 

296,970

 

 

 

1,316,406

 

Diluted weighted-average shares outstanding

 

 

162,192,610

 

 

 

162,807,376

 

Earnings per share

 

 

 

 

 

 

 

 

Basic

 

$

0.18

 

 

$

0.09

 

Diluted

 

$

0.18

 

 

$

0.09

 

Antidilutive stock options not included in diluted earnings per

   share

 

 

5,449,790

 

 

 

1,266,863

 

 

 

5.

Receivables

Receivables consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Escrow proceeds and other accounts receivable, net

 

$

22,026

 

 

$

32,917

 

Warranty insurance receivable (Note 14)

 

 

10,362

 

 

 

10,493

 

Notes and contracts receivable

 

 

300

 

 

 

300

 

Total receivables

 

$

32,688

 

 

$

43,710

 

 

 

6.

Real Estate Inventories

Real estate inventories consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2016

 

 

2015

 

Real estate inventories owned:

 

 

 

 

 

 

 

 

Homes completed or under construction

 

$

650,602

 

 

$

575,076

 

Land under development

 

 

1,554,925

 

 

 

1,443,461

 

Land held for future development

 

 

295,428

 

 

 

295,241

 

Model homes

 

 

146,078

 

 

 

140,232

 

Total real estate inventories owned

 

 

2,647,033

 

 

 

2,454,010

 

Real estate inventories not owned:

 

 

 

 

 

 

 

 

Land purchase and land option deposits

 

 

24,278

 

 

 

39,055

 

Consolidated inventory held by VIEs

 

 

33,940

 

 

 

26,208

 

Total real estate inventories not owned

 

 

58,218

 

 

 

65,263

 

Total real estate inventories

 

$

2,705,251

 

 

$

2,519,273

 

 

Homes completed or under construction is comprised of costs associated with homes in various stages of construction and includes direct construction and related land acquisition and land development costs. Land under development primarily consists of land acquisition and land development costs, which include capitalized interest and real estate taxes, associated with land undergoing improvement activity. Land held for future development principally reflects land acquisition and land development costs related to land where development activity has not yet begun or has been suspended, but is expected to occur in the future.

Real estate inventories not owned represents deposits related to land purchase and land option agreements as well as consolidated inventory held by variable interest entities. For further details, see Note 8, Variable Interest Entities.

 

- 11 -


Interest incurred, capitalized and expensed were as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Interest incurred

 

$

15,149

 

 

$

15,176

 

Interest capitalized

 

 

(15,149

)

 

 

(15,176

)

Interest expensed

 

$

 

 

$

 

Capitalized interest in beginning inventory

 

$

140,311

 

 

$

124,461

 

Interest capitalized as a cost of inventory

 

 

15,149

 

 

 

15,176

 

Interest previously capitalized as a cost of inventory,

   included in cost of sales

 

 

(8,830

)

 

 

(6,765

)

Capitalized interest in ending inventory

 

$

146,630

 

 

$

132,872

 

 

Interest is capitalized to real estate inventory during development and other qualifying activities. Interest that is capitalized to real estate inventory is included in cost of home sales as related units are delivered.  Interest that is expensed as incurred is included in other income, net.

Real estate inventory impairments and land and lot option abandonments

Land and lot option abandonments and pre-acquisition charges were as follows (in thousands):

 

 

 

Three Months Ended March 31,

 

 

 

2016

 

 

2015

 

Land and lot option abandonments and pre-acquisition charges

 

 

182

 

 

 

360

 

Total

 

$