TRI Pointe Homes, Inc. Reports 2014 Fourth Quarter and Full Year Results

-Reports Net Income of $41.4 Million, or $0.26 per Diluted Share for the Fourth Quarter-

-New Home Orders up 37% and 17% on an Adjusted Basis for the Fourth Quarter-

-SG&A Expenses as a Percentage of Home Sales Revenue improves to 8.9% for the Fourth Quarter-

-New Home Orders up 92% and 59% on an Adjusted Basis through February 2015-

Irvine, California, March 3, 2015  – TRI Pointe Homes, Inc. (NYSE: TPH) today announced results for the fourth quarter and full year ended December 31, 2014.

On July 7, 2014, TRI Pointe consummated the previously announced merger with Weyerhaeuser Real Estate Company (“WRECO”).  Before the merger, WRECO was an indirect wholly-owned subsidiary of Weyerhaeuser Company engaged in homebuilding and related activities through five operating subsidiaries.  The merger was accounted for as a “reverse acquisition” of TRI Pointe by WRECO.  As a result, legacy TRI Pointe’s financial results are only included in the combined company’s financial statements from the closing date forward and are not reflected in the combined company’s historical financial statements, except for legacy TRI Pointe’s common stock.  Accordingly, legacy TRI Pointe’s financial results are not included in the Generally Accepted Accounting Principles (“GAAP”) results for any periods prior to the closing.

The Company has appended Supplemental Combined Company Information to this press release to provide supplemental financial and operational information of the combined company that is “Adjusted” to include legacy TRI Pointe’s standalone operations for the relevant periods prior to the merger.

GAAP Results and Operational Data for Fourth Quarter 2014 and Comparisons to Fourth Quarter 2013

  • Income from continuing operations was $41.4 million, or $0.26 per diluted share compared to a loss from continuing operations of $(179.6) million, or $(1.38) per diluted share
  • New home orders increased to 714 compared to 521, an increase of 37%
  • Active selling communities averaged 105.6 compared to 90.1
    • New home orders per average selling community were 6.8 orders (2.25 monthly) compared to 5.8 orders (1.93 monthly)
    • Cancellation rate decreased to 17% compared to 21%
  • Backlog units of 1,032 homes with a dollar value increase of 29%, to $653.1 million
    • Average sales price in backlog increased 12% to $633,000
  • Home sales revenue of $623.0 million, an increase of 31%
    • New homes deliveries of 1,122, up 5%
    • Average sales price of homes delivered grew 26% to $555,000
  • Homebuilding gross margin percentage of 19.9%
    • Excluding noncash purchase accounting adjustments and interest, our adjusted homebuilding gross margin percentage was 22.7%*

SG&A expense as a percentage of homes sales revenue improved to 8.9% compared to 9.8%

  • Ratio of net debt to capital of 40.6% at December 31, 2014 improved from 51.0% at December 31, 2013*
  • Cash of $170.6 million and availability under unsecured revolving credit facility of $153 million

GAAP Results and Operational Data for Full Year 2014 and Comparisons to Full Year 2013

  • Income from continuing operations was $84.2 million, or $0.58 per diluted share compared to a loss from continuing operations of $(151.3) million, or $(1.17) per diluted share
  • New home orders decreased to 2,947 compared to 3,055
  • Home sales revenue of $1.6 billion, an increase of 35%
    • New homes deliveries of 3,100, up 5%
    • Average sales price of homes delivered grew 28% to $531,000
  • Homebuilding gross margin percentage of 19.9%
    • Excluding noncash purchase accounting adjustments and interest, our adjusted homebuilding gross margin percentage was 22.8%*

SG&A expense as a percentage of homes sales revenue improved to 11.3% compared to 13.9%

* See “Reconciliation of Non-GAAP Financial Measures”

“We are pleased with the progress we made in the fourth quarter and full year 2014”, commented Douglas F. Bauer, TRI Pointe’s Chief Executive Officer.  “Over the last year, TRI Pointe has transformed itself from a regional builder with limited size and scope to a more diversified company with a portfolio of six homebuilding brands building in ten of the best markets in the country.  The integration of the WRECO homebuilders is complete, and now we are extremely excited about building a market leading culture that will be recognized for market share and for being a top performer.  With our Company’s collective goals now in alignment, we can focus our attention on the spring selling season and work towards unlocking the full potential of our combined company.  Those efforts are off to a good start so far this year, as net orders for January and February were up 59% compared to the combined orders of legacy TRI Pointe and the WRECO homebuilders for the same two months last year.”

Mr. Bauer continued, “To better reflect the new size and scope of our organization, we are pleased to announce the rebranding of the Company to TRI Pointe Group.  The rebrand to TRI Pointe Group not only signifies a new name, but also a new national company comprised of 6 premium regional homebuilders.  We plan to reorganize our corporate structure with a new holding company parent to be named TRI Pointe Group.  We expect to complete the reorganization in the second quarter of 2015.  The TRI Pointe Group stock ticker will remain “TPH”.  The TRI Pointe Homes brand will continue its homebuilding operations in California and Colorado as a wholly owned subsidiary of the TRI Pointe Group.”

GAAP Fourth quarter 2014 operating results

Income from continuing operations was $41.4 million, or $0.26 per diluted share in the fourth quarter of 2014, compared to a loss from continuing operations of $(179.6) million, or $(1.38) per diluted share for the fourth quarter of 2013.  Results for the fourth quarter in 2013 include a $343.3 million impairment and lot abandonment charge for Coyote Springs, a large master planned community north of Las Vegas, Nevada.  Under the terms of the WRECO transaction, certain assets and liabilities of WRECO and its subsidiaries were excluded from the transaction and retained by Weyerhaeuser, including assets and liabilities relating to Coyote Springs.  Income from continuing operations for the fourth quarter of 2014 was impacted by $6.3 million of expenses related to noncash purchase accounting adjustments, restructuring charges and other expenses related to the merger.  Excluding these items, net of tax, income from continuing operations would have been $45.2 million*, or $0.28* per diluted share.

Home sales revenue increased $149.1 million to $623.0 million for the fourth quarter of 2014, as compared to $473.8 million for the same period in 2013.  The increase was attributable to the addition of legacy TRI Pointe’s operations at the closing date of the merger and a 26% increase in the Company’s average sales price of homes delivered to $555,000.  The increase in the average sales price was primarily attributable to the addition of legacy TRI Pointe which had an average sales price of homes delivered of $816,000 for the quarter ended December 31, 2014, with no comparable amounts in the prior year period, as well as increases in most of our other reporting segments due to a shift in mix as well as price appreciation in certain markets.

New home orders increased to 714 homes for the fourth quarter of 2014, as compared to 521 homes for the same period in 2013.  In addition, average active selling communities increased to 105.6 as compared to 90.1 for the same period in the prior year, mainly due to the addition of legacy TRI Pointe. The Company’s overall absorption rate per average selling community for the three months ended December 31, 2014 was 6.8 orders (2.25 monthly) compared to 5.8 orders (1.93 monthly) during the same period in 2013.

The Company ended the year with 1,032 homes in backlog, representing approximately $653.1 million in future home sales revenue. The average sales price of homes in backlog as of December 31, 2014 increased $68,000, or 12%, to $633,000 compared to $565,000 at December 31, 2013.  The increase in average sales price of homes in backlog was primarily attributable to the addition of legacy TRI Pointe which had an average sales price of homes in backlog of $793,000 as of December 31, 2014, as well as increases in all of our other reporting segments.

Homebuilding gross margin percentage for the fourth quarter of 2014 decreased to 19.9% compared to 23.0% for the same period in 2013, but is up sequentially from 18.3% in the prior quarter.  This decrease was partially due to a $4.3 million or a 70 basis point noncash purchase accounting adjustment as result of the merger.  Excluding interest in cost of home sales and the noncash purchase accounting adjustments, adjusted homebuilding gross margin percentage was 22.7%* for the fourth quarter of 2014 versus 25.0%* for the same period in 2013.

Selling, general and administrative expense for the fourth quarter of 2014 improved to 8.9% of home sales revenue as compared to 9.8% for the same period in 2013.  The decrease in the selling, general and administrative expense ratio was primarily attributable to higher leverage from increased home sales revenue due to the addition of legacy TRI Pointe and the increase in average sales price of homes delivered from all but one of our reporting segments, along with cost savings achieved by the reduction of duplicate corporate and divisional overhead costs and expenses.

Thomas J. Mitchell, President and Chief Operating Officer, said, “After another quarter of successful integration and transition, we now have a dynamic platform to grow our business and capitalize on our unique land position and improving market conditions.  While each of our homebuilding brands will continue to maintain their own unique identities, they now operate under a shared operating strategy that will maximize the returns of our stockholders.  We believe that the combination of this operating strategy and our strong local management teams will yield significant benefits that go beyond the operational leverage we’ve already realized.

The following Non-GAAP and adjusted operational information is “Adjusted” to include legacy TRI Pointe’s operations for all periods prior to the merger.  No other adjustments have been made to this information, which is purely informational and does not purport to be indicative of what would have happened had the merger occurred as of the beginning of the period presented, nor is it indicative of results that may occur in the future, nor does it include any synergies of the combined company.  Please refer to the Reconciliation of Non-GAAP Financial Measures and Supplemental Combined Company Information appended to this press release.

Non-GAAP and Adjusted Operational Information for Fourth Quarter 2014 and Comparisons to Fourth Quarter 2013

  • Non-GAAP diluted earnings per share was $0.28* for the fourth quarter excluding expenses related to noncash purchase accounting adjustments, restructuring expenses and transaction expenses related to the merger
  • New home orders increased to 714 compared to 609, an increase of 17%
  • Active selling communities averaged 105.6 compared to 98.4
    • New home orders per average selling community were 6.8 orders (2.25 monthly) compared to 6.2 orders (2.06 monthly)
    • Cancellation rate decreased to 17% compared to 20%
  • Backlog units of 1,032 homes with a dollar value of $653.1 million
    • Average sales price in backlog increased 7% to $633,000
  • Home sales revenue of $623.0 million, an increase of 5%
    • New homes deliveries of 1,122, down 9%
    • Average sales price of homes delivered grew 16% to $555,000

Non-GAAP and Adjusted Operational Information for Full Year 2014 and Comparisons to Full Year 2013

  • Non-GAAP diluted earnings per share was $0.79* for the full year excluding expenses related to noncash purchase accounting adjustments, restructuring expenses and transaction expenses related to the merger
  • New home orders decreased to 3,283 compared to 3,532
  • Home sales revenue of $1.8 billion, an increase of 23%
    • New homes deliveries of 3,297, down 1%
    • Average sales price of homes delivered grew 25% to $548,000

* See “Reconciliation of Non-GAAP Financial Measures”

Outlook

For the first quarter of 2015, the Company anticipates delivering approximately 55% to 60% of its 1,032 units in backlog as of December 31, 2014.  In addition, the Company expects to open 15 new communities, and close out of six, resulting in 117 active selling communities as of March 31, 2015.

For the full year 2015, the Company expects to grow communities by 15-20% and increase new home deliveries by 25% over the 2014 combined deliveries of legacy TRI Pointe and the WRECO homebuilders.  However, the Company began the year with lower margins in backlog than previously anticipated due to softer home sales in the fourth quarter.  The lower margins, combined with a more conservative outlook regarding the timing of certain land sales and the uncertainty of the Houston market, has resulted in the Company adjusting its 2015 outlook for earnings per diluted share to a range of $1.15 to $1.30 from the previous 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 Tuesday, March 3, 2015.  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.TRIPointeGroup.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 Fourth Quarter and Full Year 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 March 3, 2015 through 11:59 p.m. Eastern Time on November 17, 2015.  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 13600025.  An archive of the webcast will be available on the Company’s website for a limited time.

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

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