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) August 7, 2014

 

TRI Pointe Homes, Inc.
(Exact name of registrant as specified in its charter)

 
					
Delaware	 	1-35796	 	27-3201111	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	

19520 Jamboree Road, Suite 200, Irvine, California	 	92612	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code (949) 478-8600
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))	

 

Item 2.02	Results of Operations and Financial Condition.	
On August 7, 2014, TRI Pointe Homes, Inc., a Delaware corporation (the “ Company ”), announced in a press release its financial results for the quarter ended June 30, 2014. 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, except as expressly set forth in such filing. 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 9.01	Financial Statements and Exhibits	
 
 	(d)	Exhibits	

		
99.1	  	Press Release dated August 7, 2014	
 
2

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: August 7, 2014

TRI Pointe Homes, Inc.	
		
By	 	/s/ Michael D. Grubbs	
	 	Michael D. Grubbs,
Chief Financial Officer and Treasurer	
 
3

INDEX OF EXHIBITS

Exhibit No.	  	Description of Document	
		
99.1	  	Press Release dated August 7, 2014	
 
4

Exhibit 99.1

TRI POINTE HOMES, INC. REPORTS 2014 SECOND QUARTER RESULTS
-Net Income Increases to $0.19 per Diluted Share-
-Successfully Completes $2.8 billion Merger with WRECO in July 2014-
-Provides Preliminary 2015 Guidance of $1.25 to $1.40 per Diluted Share-
Irvine, California, August 7, 2014 /Business Wire/ – TRI Pointe Homes, Inc. (NYSE: TPH) today announced results for the second quarter ended June 30, 2014.
On July 7, 2014, TRI Pointe consummated the merger with Weyerhaeuser’s homebuilding subsidiary, Weyerhaeuser Real Estate Company (“WRECO”). The transaction at closing was valued at approximately $2.8 billion and positions TRI Pointe as one of the top 10 largest public homebuilders in the country by equity market capitalization. As a result of the merger, TRI Pointe’s lot inventory has increased to approximately 31,000 owned or controlled lots with more than 19,000 of those lots in entitlement-constrained California.
2014 Second Quarter Highlights and Comparisons to the 2013 Second Quarter
 
 	•	 	Net income was $6.1 million, or $0.19 per diluted share compared to net income of $2.1 million, or $0.07 per diluted share	
 
 	•	 	Diluted earnings per share was $0.20* for the 2014 second quarter excluding expenses associated with the WRECO transaction	
 
 	•	 	New home orders increased to 190 compared to 131	
 
 	•	 	Active selling communities averaged 12.3 compared to 6.8	
 
 	•	 	New home orders per average selling community were 15.4 orders (5.15 monthly) compared to 19.3 orders (6.42 monthly)	
 
 	•	 	Cancellation rate increased to 9% compared to 6%	
 
 	•	 	Backlog increased 54% to 282 homes with a dollar value increase of 115%, to $231.7 million	
 
 	•	 	Average sales price in backlog increased 40% to $822,000	
 
 	•	 	Home sales revenue of $87.3 million, an increase of 84%	
 
 	•	 	New homes deliveries of 103, up 13%	
 
 	•	 	Average sales price of homes delivered grew 62% to $848,000	
 
 	•	 	Homebuilding gross margin percentage of 23.7%, an increase of 440 basis points	
 
 	•	 	Acquired 198 lots valued at $36.4 million	
 
 	•	 	Ratio of debt to capital of 40.5% at June 30, 2014	
 
*	See “Reconciliation of Non-GAAP Financial Measures” beginning on page 11	
“TRI Pointe delivered another consecutive quarter that represents solid execution and improved performance across almost all of our key metrics including net income per share which was nearly three times the prior year quarter,” commented, Douglas F. Bauer, Chief Executive Officer. “Our business continues to outperform and we are extremely energized by the opportunity to align our legacy
 
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operations together with the recent addition of WRECO’s five premier home building brands for a combined 31,000 well located lots, to drive both revenue and earnings growth in the coming years. As one of the largest homebuilders in the country, our proven strategy combined with our focused geographic footprint that includes an established presence in California along with five other major regions in the country, will enable us to extract value from some of the best land and housing locations within these markets in the coming years.”
Second quarter 2014 operating results
Net income was $6.1 million, or $0.19 per diluted share in the second quarter of 2014, compared to net income of $2.1 million, or $0.07 per diluted share for the second quarter of 2013. The improvement in net income was primarily driven by an $11.5 million increase in homebuilding gross margin due to higher home sales revenue and increased homebuilding gross margin percentages, offset by an increase in SG&A expense of $3.9 million and an increase in the Company’s provision for income taxes of $2.8 million. Net income for the second quarter of 2014 was impacted by $607,000 of expenses associated with the WRECO transaction. Excluding the WRECO transaction expenses, net of tax, net income would have been $6.5 million*, or $0.20* per diluted share.
Home sales revenue increased $39.9 million to $87.3 million for the second quarter of 2014, as compared to $47.5 million for the same period in 2013, primarily attributable to an increase in new homes delivered to 103 and a 62% increase in the Company’s average sales price of homes delivered to $848,000. The growth in new home deliveries was due to higher backlog at the start of the quarter compared to the same period in the prior year as a result of an increase in communities and in net new home orders. The improvement in the average sales price of homes delivered reflects increased pricing and a change in product mix to more move-up product at our communities compared to the prior year.
New home orders increased to 190 homes for the second quarter of 2014, as compared to 131 homes for the same period in 2013. The Company’s overall absorption rate per average selling community for the three months ended June 30, 2014 was 15.4 orders (5.15 monthly), compared to 19.3 orders (6.42 monthly) during the same period in 2013 and 13.8 orders (4.60 monthly) during the three months ended March 31, 2014. The growth in new home orders for the second quarter of 2014 resulted in an expansion in the number of homes in backlog to 282, representing approximately $231.7 million in home sales revenue.
The average sales price of homes in backlog as of June 30, 2014 increased $233,000, or 40%, to $822,000 compared to $589,000 at June 30, 2013. The increase in average sales price of homes in backlog was primarily the result of a change in product mix consisting of more “move-up” product at our communities compared to the same period in the prior year. The Company anticipates that the average sales price will continue to vary from quarter to quarter due to the mix of products and the timing of our new communities.
Homebuilding gross margin percentage for the second quarter of 2014 increased 440 basis points to 23.7% compared to 19.3% for the same period in 2013. This increase was primarily due to price increases and the delivery unit mix from new projects which are achieving higher homebuilding gross margins. Excluding interest in cost of home sales, adjusted homebuilding gross margin percentage was 24.3%* for the second quarter of 2014 versus 20.3%* for the same period in 2014.
 
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SG&A expense for the second quarter of 2014 was $9.8 million (11.2% of home sales revenue) compared to $5.9 million (12.4% of home sales revenue) for the same period in 2013. This increase was attributable to an additional $1.1 million in sales and marketing expenses related to the 81% growth in the number of active selling communities and the 13% increase in the number of homes delivered. In addition, general and administrative expenses were $6.9 million, an increase of $2.8 million primarily due to compensation related expenses and professional fees to support the Company’s continued growth. General and administrative office headcount increased 57% to 85 employees as of June 30, 2014, compared to 54 as of June 30, 2013.
During the second quarter of 2014, the Company purchased 198 lots valued at $36.4 million, 112 of which were located in Southern California, 40 in Northern California and 46 in Colorado. As of June 30, 2014, the Company owned or controlled 3,828 lots, of which 2,604 are owned and actively selling or under development and 1,224 are controlled under land option contracts or purchase contracts. Of the 3,828 lots owned and controlled, 1,713 are in Southern California, 1,437 in Northern California and 678 in Colorado.
Thomas J. Mitchell, President and Chief Operating Officer, said, “We are extremely proud of the TRI Pointe team and results they have produced since our IPO in January of 2013. Since that time they have met or exceeded the goals established for all business metrics. Most importantly we continue to introduce progressive new product in great locations and deliver high quality homes through an exceptional buying experience with very high customer satisfaction. We are looking forward to the integration of the five new WRECO homebuilding brands and to optimizing the operations of each of the companies to produce similar results relative to growth and profits.”
* See “Reconciliation of Non-GAAP Financial Measures” beginning on page 11
WRECO Transaction
The merger with WRECO was accounted for in accordance with ASC 805, “Business Combinations.” For accounting purposes, the merger was treated as a “reverse acquisition” and WRECO was considered the accounting acquirer. Accordingly, WRECO will be reflected as the predecessor and acquirer in the Company’s financial statements for periods ending after June 30, 2014. The financial statements will reflect the historical financial statements of WRECO, except for the legal capital which will reflect TRI Pointe’s legal capital (common stock).
For the three months ending September 30, 2014, the three months ending December 31, 2014 and the full year ending 2014, the Company is expecting weighted average shares, without considering the dilutive impact of outstanding equity awards, to be approximately 158.9 million shares, 161.3 million shares and 145.0 million shares, respectively.
The Company’s third quarter results will be negatively impacted by approximately $35 to $40 million of the $46 million of non-recurring expenses related to advisory, legal, accounting, financing, transition and other related transaction expenses as previously outlined in the Company’s previous filings with the SEC. In addition, the Company anticipates a negative impact to gross margin related to the purchase accounting adjustments required on legacy TRI Pointe real estate inventory which will be marked up to fair value. This will result in an increase to costs of sales for the balance of 2014 and beyond. While the final purchase accounting is in progress, based on the pro forma financial statements as of March 31, 2014 filed on TRI Pointe’s Registration Statement on Form S-4 (declared effective on May 22, 2014), the estimated impact to cost of sales was approximately $23 million for the full year 2014.
2014 Outlook
TRI Pointe as a combined company, including WRECO, is establishing guidance for the six month period of July 1, 2014 through December 31, 2014. During that period, the Company is expecting to deliver between 2,000 to 2,100 homes which will generate home sales revenue in the range of $1.1 to $1.2 billion, representing a combined average sales price of approximately $550,000. For the remaining six months of 2014, the Company expects to open 25 new communities, offset by final net new home orders at 16 communities, resulting in 123 active selling communities as of December 31, 2014. During the third quarter, the Company anticipates delivering approximately 55% of its combined 1,473 units in backlog as of June 30, 2014.
The Company is also providing a preliminary 2015 earnings per diluted share range of $1.25 to $1.40.
Earnings Conference Call
The Company will host a conference call via live webcast for investors and other interested parties beginning at 10:00 a.m. Eastern Time on Thursday, August 7, 2014. The call will be hosted by, Doug Bauer, Chief Executive Officer, Tom Mitchell, Chief Operating Officer and Mike Grubbs, Chief Financial Officer.
Interested parties can listen to the call live on the internet through the Investor Relations section of the Company’s website at www.TRIPointeHomes.com . Listeners should go to the website at least 15 minutes prior to the call to download and install any necessary audio software. The call can also be accessed by dialing 1-877-407-3982 for domestic participants or 1-201-493-6780 for international participants. Participants should ask for the TRI Pointe Homes Second Quarter 2014 Earnings Conference Call. Those dialing in should do so at least ten minutes prior to the start. The replay of the call will be available from approximately 1:00 p.m. Eastern Time on August 7, 2014 through 11:59 p.m. Eastern Time on August 21, 2014. To access the replay, the domestic dial-in number is 1-877-870-5176, the international dial-in number is 1-858-384-5517, and the pass code is 13586156. An archive of the webcast will be available on the Company’s website for a limited time.
 
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About TRI Pointe Homes, Inc.
Headquartered in Irvine, California, TRI Pointe Homes, Inc. (NYSE: TPH) is one of the top 10 largest public homebuilders by equity market capitalization in the United States. The company designs, constructs and sells innovative single-family homes and condominiums through its portfolio of six quality brands, which include Maracay Homes of Arizona; Pardee Homes of California and Nevada; Quadrant Homes of Washington; Trendmaker Homes of Texas; TRI Pointe Homes of California and Colorado; and Winchester Homes of Washington DC and Virginia. Additional information is available at www.tripointehomes.com .
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 the WRECO transaction and our future production, revenues, income 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,” or other words that convey future events or outcomes. The forward-looking statements in this press release speak only as of the date of this 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 or home construction 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 degree and nature of our competition; our leverage and debt service obligations; our relationship, and actual and potential conflicts of interest, with Starwood Capital Group; availability of qualified personnel and our ability to retain our key personnel; our ability to integrate WRECO successfully; and additional factors discussed under the sections captioned “Risk Factors” included in our annual and quarterly reports filed with the Securities and Exchange Commission (“SEC”).
 
Page 4

 
Investor Relations Contact:
Brad Cohen, InvestorRelations@TRIPointeHomes.com , 949-478-8696
Media Contact:
Carol Ruiz, cruiz@newgroundco.com , 310-437-0045
 
Page 5

 
KEY OPERATIONS AND FINANCIAL DATA
(dollars in thousands)
(unaudited)

 	  	Three Months Ended	 	 	Six Months Ended	 	
 	  	June 30,	 	 	June 30,	 	
 	  	2014	 	 	2013	 	 	Change	 	 	2014	 	 	2013	 	 	Change	 	
Operating Data:	  				 				 				 				 				 				
Home sales	  	$	87,336	  	 	$	47,457	  	 	$	39,879	  	 	$	160,148	  	 	$	71,314	  	 	$	88,834	  	
Homebuilding gross margin	  	$	20,681	  	 	$	9,139	  	 	$	11,542	  	 	$	37,061	  	 	$	13,547	  	 	$	23,514	  	
Homebuilding gross margin %	  	 	23.7	% 	 	 	19.3	% 	 	 	4.4	% 	 	 	23.1	% 	 	 	19.0	% 	 	 	4.1	% 	
Adjusted homebuilding gross margin % *	  	 	24.3	% 	 	 	20.3	% 	 	 	4.0	% 	 	 	23.8	% 	 	 	20.1	% 	 	 	3.7	% 	
SG&A expense	  	$	9,761	  	 	$	5,899	  	 	$	3,862	  	 	$	18,139	  	 	$	10,542	  	 	$	7,597	  	
SG&A expense as a % of home sales	  	 	11.2	% 	 	 	12.4	% 	 	 	(1.2	)% 	 	 	11.4	% 	 	 	14.8	% 	 	 	(3.4	)% 	
Net income	  	$	6,124	  	 	$	2,075	  	 	$	4,049	  	 	$	10,422	  	 	$	2,345	  	 	$	8,077	  	
EBITDA *	  	$	11,968	  	 	$	4,783	  	 	$	7,185	  	 	$	20,472	  	 	$	5,714	  	 	$	14,758	  	
Interest incurred and capitalized to inventory	  	$	2,068	  	 	$	579	  	 	$	1,489	  	 	$	3,304	  	 	$	1,313	  	 	$	1,991	  	
Interest expense, net of interest capitalized	  	$	—  	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	 	$	—  	  	
Interest in cost of home sales	  	$	557	  	 	$	502	  	 	$	55	  	 	$	979	  	 	$	758	  	 	$	221	  	
Other Data:	  				 				 				 				 				 				
Net new home orders	  	 	190	  	 	 	131	  	 	 	45	% 	 	 	328	  	 	 	254	  	 	 	29	% 	
New homes delivered	  	 	103	  	 	 	91	  	 	 	13	% 	 	 	195	  	 	 	139	  	 	 	40	% 	
Average selling price of homes delivered	  	$	848	  	 	$	522	  	 	 	62	% 	 	$	821	  	 	$	513	  	 	 	60	% 	
Average selling communities	  	 	12.3	  	 	 	6.8	  	 	 	5.5	  	 	 	11.3	  	 	 	6.8	  	 	 	4.5	  	
Selling communities at end of period	  	 	14	  	 	 	7	  	 	 	7	  	 	 	14	  	 	 	7	  	 	 	7	  	
Cancellation rate	  	 	9	% 	 	 	6	% 	 	 	3	% 	 	 	9	% 	 	 	7	% 	 	 	2	% 	
Backlog (estimated dollar value)	  	$	231,726	  	 	$	107,759	  	 	 	115	% 	 				 				 				
Backlog (homes)	  	 	282	  	 	 	183	  	 	 	54	% 	 				 				 				
Average selling price in backlog	  	$	822	  	 	$	589	  	 	 	40	% 	 				 				 				

 	  	June 30,
2014	 	 	December 31,
2013	 	 	Change	 	
Balance Sheet Data:	  				 				 				
Cash and cash equivalents	  	$	26,120	  	 	$	35,261	  	 	$	(9,141	) 	
Real estate inventories	  	$	542,037	  	 	$	455,642	  	 	$	86,395	  	
Lots owned and controlled	  	 	3,828	  	 	 	3,466	  	 	 	10	% 	
Homes under construction (1)	  	 	423	  	 	 	185	  	 	 	129	% 	
Notes payable	  	$	227,128	  	 	$	138,112	  	 	$	89,016	  	
Equity	  	$	333,953	  	 	$	322,306	  	 	$	11,647	  	
Book capitalization	  	$	561,081	  	 	$	460,418	  	 	$	100,663	  	
Ratio of debt-to-capital	  	 	40.5	% 	 	 	30.0	% 	 	 	10.5	% 	
Ratio of net debt-to-capital *	  	 	37.6	% 	 	 	24.2	% 	 	 	13.4	% 	
 
(1)	Homes under construction includes completed homes	
*	See “Reconciliation of Non-GAAP Financial Measures” beginning on page 11	
 
Page 6

 
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

 	  	June 30,
2014	 	  	December 31,
2013	 	
 	  	(unaudited)	 	  	 	 	
Assets	  				  				
Cash and cash equivalents	  	$	26,120	  	  	$	35,261	  	
Real estate inventories	  	 	542,037	  	  	 	455,642	  	
Contracts and accounts receivable	  	 	3,965	  	  	 	1,697	  	
Deferred tax assets	  	 	4,611	  	  	 	4,611	  	
Other assets	  	 	24,454	  	  	 	8,824	  	
	  	 	 	 	  	 	 	 	
Total Assets	  	$	601,187	  	  	$	506,035	  	
	  	 	 	 	  	 	 	 	
Liabilities and Stockholders’ Equity	  				  				
Accounts payable	  	$	20,640	  	  	$	23,397	  	
Accrued liabilities	  	 	19,466	  	  	 	22,220	  	
Notes payable	  	 	227,128	  	  	 	138,112	  	
	  	 	 	 	  	 	 	 	
Total Liabilities	  	 	267,234	  	  	 	183,729	  	
	  	 	 	 	  	 	 	 	
Stockholders’ Equity:	  				  				
Preferred stock, $0.01 par value, 50,000,000 shares authorized; no shares outstanding as of June 30, 2014 and December 31, 2013, respectively	  	 	—  	  	  	 	—  	  	
Common stock, $0.01 par value, 500,000,000 shares authorized; 31,632,533 and 31,597,907 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively	  	 	316	  	  	 	316	  	
Additional paid-in capital	  	 	312,103	  	  	 	310,878	  	
Retained earnings	  	 	21,534	  	  	 	11,112	  	
	  	 	 	 	  	 	 	 	
Total Stockholders’ Equity	  	 	333,953	  	  	 	322,306	  	
	  	 	 	 	  	 	 	 	
Total Liabilities and Stockholders’ Equity	  	$	601,187	  	  	$	506,035	  	

Page 7

 
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(dollars in thousands, except per share amounts)

 	  	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	  	2014	 	 	2013	 	 	2014	 	 	2013	 	
Revenues:	  				 				 				 				
Home sales	  	$	87,336	  	 	$	47,457	  	 	$	160,148	  	 	$	71,314	  	
Fee building	  	 	—  	  	 	 	3,630	  	 	 	—  	  	 	 	7,661	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	  	 	87,336	  	 	 	51,087	  	 	 	160,148	  	 	 	78,975	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Expenses:	  				 				 				 				
Cost of home sales	  	 	66,655	  	 	 	38,318	  	 	 	123,087	  	 	 	57,767	  	
Fee building	  	 	—  	  	 	 	3,395	  	 	 	—  	  	 	 	7,020	  	
Sales and marketing	  	 	2,886	  	 	 	1,791	  	 	 	5,372	  	 	 	3,121	  	
General and administrative	  	 	6,875	  	 	 	4,108	  	 	 	12,767	  	 	 	7,421	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total expenses	  	 	76,416	  	 	 	47,612	  	 	 	141,226	  	 	 	75,329	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income from operations	  	 	10,920	  	 	 	3,475	  	 	 	18,922	  	 	 	3,646	  	
Transaction expenses	  	 	(607	) 	 	 	—  	  	 	 	(1,155	) 	 	 	—  	  	
Other income (expense), net	  	 	58	  	 	 	89	  	 	 	49	  	 	 	261	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before income taxes	  	 	10,371	  	 	 	3,564	  	 	 	17,816	  	 	 	3,907	  	
Provision for income taxes	  	 	(4,247	) 	 	 	(1,489	) 	 	 	(7,394	) 	 	 	(1,562	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	  	$	6,124	  	 	$	2,075	  	 	$	10,422	  	 	$	2,345	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Earnings per share	  				 				 				 				
Basic	  	$	0.19	  	 	$	0.07	  	 	$	0.33	  	 	$	0.08	  	
Diluted	  	$	0.19	  	 	$	0.07	  	 	$	0.33	  	 	$	0.08	  	
Weighted average number of shares	  				 				 				 				
Basic	  	 	31,632,533	  	 	 	31,597,907	  	 	 	31,622,956	  	 	 	29,940,448	  	
Diluted	  	 	31,750,938	  	 	 	31,614,646	  	 	 	31,697,057	  	 	 	29,953,625	  	
 
Page 8

 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

 	  	Three Months Ended
June 30,	 	 	Six Months Ended
June 30,	 	
 	  	2014	 	 	2013	 	 	2014	 	 	2013	 	
Cash flows from operating activities	  				 				 				 				
Net income	  	$	6,124	  	 	$	2,075	  	 	$	10,422	  	 	$	2,345	  	
Adjustments to reconcile net income to net cash used in operating activities:	  				 				 				 				
Depreciation and amortization	  	 	78	  	 	 	179	  	 	 	149	  	 	 	224	  	
Amortization of stock-based compensation	  	 	962	  	 	 	517	  	 	 	1,528	  	 	 	844	  	
Gain on sale of marketable securities	  	 	—  	  	 	 	21	  	 	 	—  	  	 	 	(19	) 	
Changes in operating assets and liabilities:	  				 				 				 				
Real estate inventories	  	 	(57,554	) 	 	 	(56,669	) 	 	 	(86,395	) 	 	 	(107,748	) 	
Contracts and accounts receivable	  	 	(2,110	) 	 	 	(172	) 	 	 	(2,268	) 	 	 	(900	) 	
Other assets	  	 	(4,368	) 	 	 	(366	) 	 	 	(11,084	) 	 	 	821	  	
Accounts payable	  	 	4,634	  	 	 	(3,219	) 	 	 	(2,757	) 	 	 	(603	) 	
Accrued liabilities	  	 	705	  	 	 	2,456	  	 	 	(2,754	) 	 	 	2,442	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in operating activities	  	 	(51,529	) 	 	 	(55,178	) 	 	 	(93,159	) 	 	 	(102,594	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities	  				 				 				 				
Purchases of furniture and equipment	  	 	(145	) 	 	 	(161	) 	 	 	(248	) 	 	 	(290	) 	
Purchases of marketable securities	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(125,000	) 	
Sales of marketable securities	  				 	 	20,000	  	 	 	—  	  	 	 	85,000	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) investing activities	  	 	(145	) 	 	 	19,839	  	 	 	(248	) 	 	 	(40,290	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities	  				 				 				 				
Borrowings from notes payable	  	 	325,518	  	 	 	29,275	  	 	 	431,189	  	 	 	53,850	  	
Repayments of notes payable	  	 	(275,323	) 	 	 	(27,614	) 	 	 	(342,173	) 	 	 	(48,661	) 	
Loan orignitation fees	  	 	(4,447	) 	 	 	—  	  	 	 	(4,447	) 	 	 	—  	  	
Minimum tax withholding paid on behalf of employees for stock awards	  	 	—  	  	 	 	—  	  	 	 	(303	) 	 	 	—  	  	
Net proceeds from issuance of common stock	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	155,408	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by financing activities	  	 	45,748	  	 	 	1,661	  	 	 	84,266	  	 	 	160,597	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	  	 	(5,926	) 	 	 	(33,678	) 	 	 	(9,141	) 	 	 	17,713	  	
Cash and cash equivalents – beginning of period	  	 	32,046	  	 	 	71,215	  	 	 	35,261	  	 	 	19,824	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents – end of period	  	$	26,120	  	 	$	37,537	  	 	$	26,120	  	 	$	37,537	  	

Page 9

 
MARKET DATA
(dollars in thousands)
(unaudited)

 	  	Three Months Ended June 30,	 	  	Six Months Ended June 30,	 	
 	  	2014	 	  	 	 	  	2013	 	  	 	 	  	2014	 	  	 	 	  	2013	 	  	 	 	
 	  	Homes
Delivered	 	  	Avg. Selling
Price	 	  	Homes
Delivered	 	  	Avg. Selling
Price	 	  	Homes
Delivered	 	  	Avg. Selling
Price	 	  	Homes
Delivered	 	  	Avg. Selling
Price	 	
New Homes Delivered:	  				  				  				  				  				  				  				  				
Southern California	  	 	55	  	  	$	762	  	  	 	66	  	  	$	410	  	  	 	120	  	  	$	808	  	  	 	109	  	  	$	400	  	
Northern California	  	 	38	  	  	 	1,096	  	  	 	25	  	  	 	816	  	  	 	55	  	  	 	1,011	  	  	 	30	  	  	 	922	  	
Colorado	  	 	10	  	  	 	377	  	  	 	—  	  	  	 	—  	  	  	 	20	  	  	 	379	  	  	 	—  	  	  	 	—  	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	 	103	  	  	$	848	  	  	 	91	  	  	$	522	  	  	 	195	  	  	$	821	  	  	 	139	  	  	$	513	  	

																																	
 	  	Three Months Ended June 30,	 	  	Six Months Ended June 30,	 	
 	  	2014	 	  	 	 	  	2013	 	  	 	 	  	2014	 	  	 	 	  	2013	 	  	 	 	
 	  	New
Home
Orders	 	  	Average
Selling
Communities	 	  	New
Home
Orders	 	  	Average
Selling
Communities	 	  	New
Home
Orders	 	  	Average
Selling
Communities	 	  	New
Home
Orders	 	  	Average
Selling
Communities	 	
Net New Home Orders:	  				  				  				  				  				  				  				  				
Southern California	  	 	119	  	  	 	7.5	  	  	 	87	  	  	 	3.5	  	  	 	208	  	  	 	7.5	  	  	 	179	  	  	 	4.1	  	
Northern California	  	 	47	  	  	 	3.0	  	  	 	42	  	  	 	3.0	  	  	 	80	  	  	 	2.4	  	  	 	73	  	  	 	2.6	  	
Colorado	  	 	24	  	  	 	1.8	  	  	 	2	  	  	 	0.3	  	  	 	40	  	  	 	1.4	  	  	 	2	  	  	 	0.1	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	 	190	  	  	 	12.3	  	  	 	131	  	  	 	6.8	  	  	 	328	  	  	 	11.3	  	  	 	254	  	  	 	6.8	  	

																									
 	  	June 30, 2014	 	  	June 30, 2013	 	
 	  	Backlog
Units	 	  	Backlog
Dollar
Value	 	  	Average
Selling
Price	 	  	Backlog
Units	 	  	Backlog
Dollar
Value	 	  	Average
Selling
Price	 	
Backlog:	  				  				  				  				  				  				
Southern California	  	 	186	  	  	$	158,548	  	  	$	852	  	  	 	123	  	  	$	57,280	  	  	$	466	  	
Northern California	  	 	61	  	  	 	58,807	  	  	 	964	  	  	 	58	  	  	 	49,757	  	  	 	858	  	
Colorado	  	 	35	  	  	 	14,371	  	  	 	411	  	  	 	2	  	  	 	722	  	  	 	361	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Total	  	 	282	  	  	$	231,726	  	  	$	822	  	  	 	183	  	  	$	107,759	  	  	$	589	  	

									
 	  	June 30,
2014	 	  	December 31,
2013	 	
Lots Owned and Controlled: (1)	  				  				
Southern California	  	 	1,713	  	  	 	1,746	  	
Northern California	  	 	1,437	  	  	 	1,139	  	
Colorado	  	 	678	  	  	 	581	  	
	  	 	 	 	  	 	 	 	
Total	  	 	3,828	  	  	 	3,466	  	

Lots by Ownership Type:	  				  				
Lots owned	  	 	2,604	  	  	 	2,282	  	
Lots controlled (1)	  	 	1,224	  	  	 	1,184	  	
	  	 	 	 	  	 	 	 	
Total	  	 	3,828	  	  	 	3,466	  	

(1)	Lots controlled includes lots that are under land option contracts and purchase contracts.	
 
Page 10

 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited)
In this earnings release, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating the company’s operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated in accordance with Generally Accepted Accounting Principles (“GAAP”), they may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP.
The following table reconciles homebuilding gross margin percentage, as reported and prepared in accordance with GAAP, to the non-GAAP measure adjusted homebuilding gross margin percentage. We believe this information is meaningful as it isolates the impact that leverage has on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion.

 	  	Three Months Ended
June 30,	 	
 	  	2014	 	 	%	 	 	2013	 	 	%	 	
 	  	(dollars in thousands)	 	
Home sales	  	$	87,336	  	 	 	100.0	% 	 	$	47,457	  	 	 	100.0	% 	
Cost of home sales	  	 	66,655	  	 	 	76.3	% 	 	 	38,318	  	 	 	80.7	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Homebuilding gross margin	  	 	20,681	  	 	 	23.7	% 	 	 	9,139	  	 	 	19.3	% 	
Add: interest in cost of home sales	  	 	557	  	 	 	0.6	% 	 	 	502	  	 	 	1.0	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted homebuilding gross margin	  	$	21,238	  	 	 	24.3	% 	 	$	9,641	  	 	 	20.3	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Homebuilding gross margin percentage	  	 	23.7	% 	 				 	 	19.3	% 	 				
	  	 	 	 	 				 	 	 	 	 				
Adjusted homebuilding gross margin percentage	  	 	24.3	% 	 				 	 	20.3	% 	 				

																	
 	  	Six Months Ended
June 30,	 	
 	  	2014	 	 	%	 	 	2013	 	 	%	 	
 	  	(dollars in thousands)	 	
Home sales	  	$	160,148	  	 	 	100.0	% 	 	$	71,314	  	 	 	100.0	% 	
Cost of home sales	  	 	123,087	  	 	 	76.9	% 	 	 	57,767	  	 	 	81.0	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Homebuilding gross margin	  	 	37,061	  	 	 	23.1	% 	 	 	13,547	  	 	 	19.0	% 	
Add: interest in cost of home sales	  	 	979	  	 	 	0.7	% 	 	 	758	  	 	 	1.1	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted homebuilding gross margin	  	$	38,040	  	 	 	23.8	% 	 	$	14,305	  	 	 	20.1	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Homebuilding gross margin percentage	  	 	23.1	% 	 				 	 	19.0	% 	 				
	  	 	 	 	 				 	 	 	 	 				
Adjusted homebuilding gross margin percentage	  	 	23.8	% 	 				 	 	20.1	% 	 				

Page 11

 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)
The following table reconciles the Company’s ratio of debt-to-capital to the 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.

 	  	June 30,
2014	 	 	December 31,
2013	 	
 	  	(dollars in thousands)	 	
Debt	  	$	227,128	  	 	$	138,112	  	
Equity	  	 	333,953	  	 	 	322,306	  	
	  	 	 	 	 	 	 	 	
Total capital	  	$	561,081	  	 	$	460,418	  	
	  	 	 	 	 	 	 	 	
Ratio of debt-to-capital (1)	  	 	40.5	% 	 	 	30.0	% 	
	  	 	 	 	 	 	 	 	
Debt	  	$	227,128	  	 	$	138,112	  	
Less: cash and cash equivalents	  	 	(26,120	) 	 	 	(35,261	) 	
	  	 	 	 	 	 	 	 	
Net debt	  	 	201,008	  	 	 	102,851	  	
Equity	  	 	333,953	  	 	 	322,306	  	
	  	 	 	 	 	 	 	 	
Total capital	  	$	534,961	  	 	$	425,157	  	
	  	 	 	 	 	 	 	 	
Ratio of net debt-to-capital (2)	  	 	37.6	% 	 	 	24.2	% 	

(1)	The ratio of debt-to-capital is computed as the quotient obtained by dividing debt by the sum of debt plus equity.	
(2)	The ratio of net debt-to-capital is computed as the quotient obtained by dividing net debt (which is debt less cash and cash equivalents) by the sum of net debt plus equity. The most directly comparable GAAP financial measure is the ratio of debt-to-capital.	
 
Page 12

 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)
The following table calculates the non-GAAP measures of EBITDA and reconciles those amounts to net income (loss), as reported and prepared in accordance with GAAP. EBITDA means net income (loss) before (a) interest expense, (b) income taxes, (c) depreciation and amortization, (d) expensing of previously capitalized interest included in costs of home sales and (e) amortization of stock-based compensation. Other companies may calculate EBITDA (or similarly titled measures) differently. We believe EBITDA information is useful as one measure of the Company’s ability to service debt and obtain financing.

 	  	Three Months Ended	 	 	Six Months Ended	 	
 	  	June 30,	 	 	June 30,	 	
 	  	2014	 	 	2013	 	 	2014	 	 	2013	 	
 	  	(in thousands)	 	 	(in thousands)	 	
Net income	  	$	6,124	  	 	$	2,075	  	 	$	10,422	  	 	$	2,345	  	
Interest expense:	  				 				 				 				
Interest incurred	  	 	2,068	  	 	 	579	  	 	 	3,304	  	 	 	1,313	  	
Interest capitalized	  	 	(2,068	) 	 	 	(579	) 	 	 	(3,304	) 	 	 	(1,313	) 	
Amortization of interest in cost of home sales	  	 	557	  	 	 	502	  	 	 	979	  	 	 	758	  	
Provision for income taxes	  	 	4,247	  	 	 	1,489	  	 	 	7,394	  	 	 	1,562	  	
Depreciation and amortization	  	 	78	  	 	 	179	  	 	 	149	  	 	 	224	  	
Gain on sale of marketable securities	  	 	—  	  	 	 	21	  	 	 	—  	  	 	 	(19	) 	
Amortization of stock-based compensation	  	 	962	  	 	 	517	  	 	 	1,528	  	 	 	844	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA	  	$	11,968	  	 	$	4,783	  	 	$	20,472	  	 	$	5,714	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The following table reconciles net cash used in operating activities, as reported and prepared in accordance with GAAP, to EBITDA:

 	  	Three Months Ended	 	 	Six Months Ended	 	
 	  	June 30,	 	 	June 30,	 	
 	  	2014	 	 	2013	 	 	2014	 	 	2013	 	
 	  	(in thousands)	 	 	(in thousands)	 	
Net cash used in operating activities	  	$	(51,529	) 	 	$	(55,178	) 	 	$	(93,159	) 	 	$	(102,594	) 	
Amortization of interest in cost of home sales	  	 	557	  	 	 	502	  	 	 	979	  	 	 	758	  	
Provision for income taxes	  	 	4,247	  	 	 	1,489	  	 	 	7,394	  	 	 	1,562	  	
Changes in operating assets and liabilities:	  				 				 				 				
Real estate inventories	  	 	57,554	  	 	 	56,669	  	 	 	86,395	  	 	 	107,748	  	
Contracts and accounts receivable	  	 	2,110	  	 	 	172	  	 	 	2,268	  	 	 	900	  	
Other assets	  	 	4,368	  	 	 	366	  	 	 	11,084	  	 	 	(821	) 	
Accounts payable	  	 	(4,634	) 	 	 	3,219	  	 	 	2,757	  	 	 	603	  	
Accrued liabilities	  	 	(705	) 	 	 	(2,456	) 	 	 	2,754	  	 	 	(2,442	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA	  	$	11,968	  	 	$	4,783	  	 	$	20,472	  	 	$	5,714	  	

Page 13

 
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(unaudited)
The following table reconciles net income and diluted earnings per share, as reported and prepared in accordance with GAAP, to the non-GAAP measure of net income and diluted earnings per share excluding expenses associated with the WRECO transaction. We believe that this non-GAAP measure provides useful information to investors regarding our performance because it excludes transaction expenses that do not relate to our core operations.
(in thousands, except per share amounts)

 	  	Three Months Ended	 	  	Six Months Ended	 	
 	  	June 30, 2014	 	  	June 30, 2014	 	
 	  	Net Income	 	  	Diluted EPS	 	  	Net Income	 	  	Diluted EPS	 	
Amount including transaction expenses (GAAP measure)	  	$	6,124	  	  	$	0.19	  	  	$	10,422	  	  	$	0.33	  	
Transaction expenses, net of tax	  	 	358	  	  	 	0.01	  	  	 	676	  	  	 	0.02	  	
	  	 	 	 	  	 	 	 	  	 	 	 	  	 	 	 	
Amount excluding transaction expenses (non-GAAP measure)	  	$	6,482	  	  	$	0.20	  	  	$	11,098	  	  	$	0.35	  	

Page 14