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Section 1: 8-K (8-K)

Document


 
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 14, 2019
 
 
 
 
396760451_image1a01a01a12.jpg 
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý

 





Item 2.02
Results of Operations and Financial Condition.
On February 15, 2019, The New Home Company Inc. (the “Company”), announced in a press release its financial results for the three and twelve month periods ended December 31, 2018. 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 deemed 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 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers.


Thomas Redwitz, age 64, has notified the Board of Directors of The New Home Company Inc. (the “Company”) of his retirement and resignation from his position as Chief Investment Officer, effective March 1, 2019 (the “Effective Date”). In connection with Mr. Redwitz’s retirement and the termination of his employment with the Company as of the Effective Date, subject to his entry into a separation agreement and general release of claims with the Company (the “Separation Agreement”), Mr. Redwitz will receive a cash severance payment of $1,100,000, payable in a single cash lump sum, as well as company-paid continued healthcare coverage to the earlier of (i) the twelve-month anniversary of March 1, 2019 or (ii) the date that Mr. Redwitz obtains substantially similar health care coverage. Under the Separation Agreement, Mr. Redwitz will forfeit any Company equity awards, to the extent unvested as of the Effective Date.

Mr. Redwitz and the Company also entered into a consulting agreement (the “Consulting Agreement”) pursuant to which Mr. Redwitz will serve as a consultant to the Company for an initial one-year term commencing on the Effective Date, subject to continuation by the mutual agreement of Mr. Redwitz and the Company. Under the Consulting Agreement, Mr. Redwitz will receive the following payments and benefits: (i) a monthly consulting fee of $10,000, (ii) each outstanding vested Company stock option held by Mr. Redwitz as of the Effective Date (each, a “Pre-Consulting Stock Option”) will remain outstanding and exercisable in accordance with its terms (based on Mr. Redwitz’s continued provision of consulting services thereafter rather than continued employment) and (iii) reimbursement for reasonable business expenses incurred in connection with the provision of consulting services in accordance with Company policy.

In the event that the Consulting Agreement and Mr. Redwitz’s consulting services are terminated by the Company without cause after the three-month anniversary of the Effective Date, then, subject to his timely execution and non-revocation of a general release of claims, Mr. Redwitz will receive a payment of $10,000 payable in a single lump sum payable on the 30th day following the termination date. In addition, if the Consulting Agreement and Mr. Redwitz’s consulting services are terminated by either party for any reason (other than by the Company for cause), including at the end of the initial one-year term due to the Company’s decision not to renew the agreement, then each remaining Pre-Consulting Stock Option will remain exercisable for three months following the termination date (but in no event beyond the maximum term of the option).

Each of the Separation Agreement and the Consulting Agreement also requires Mr. Redwitz’s continued compliance with restrictive covenants and the Company’s continued compliance with indemnification and insurance obligations each included in Mr. Redwitz’s employment agreement.

The GDR Group is an information technology services consulting firm that provides the Company with support for its IT Helpdesk, onsite support services, remote systems administration, network infrastructure design and implementation and network security services. In 2018, the Company and its unconsolidated joint ventures paid the GDR Group approximately $745,000. One of GDR Group’s principals, Randy Redwitz, is the brother of Thomas Redwitz. Mr. Redwitz receives no direct or indirect compensation from the GDR Group for the services it provides to the Company. We believe the terms of the services provided by the GDR Group are no less favorable to us than those that would be available to us in a comparable transaction in arms-length dealings with an unrelated third party. Other than the foregoing, which relationship was disclosed in our 2018 proxy statement, as of February 15, 2019, there are no additional (i) family relationships between Mr. Redwitz and any other director or executive officer of the Company, or with any person selected to become an officer or a director of the Company or (ii) related party transactions with Mr. Redwitz requiring disclosure pursuant to Item 404 of Regulation S-K.






Item 7.01
Regulation FD Disclosure.
In the Company's press release attached hereto as Exhibit 99.1, the Company announced that it will discuss its results for the three and twelve month periods ended December 31, 2018, recent events and the Company's quarterly guidance for 2019 during a conference call on Friday, February 15, 2019 at 11:00 a.m. Eastern Time. 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. Item 2.02 of this Current Report on Form 8-K is incorporated herein by reference.
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 Exchange Act or otherwise subject to the liabilities of the Exchange 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.

Item 9.01
Financial Statements and Exhibits.
 
(d)
Exhibits

99.1
 
 
 
 
 
 
 








SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
Date: February 15, 2019
 
 
 
 
 
 
 
 
 
 
 
The New Home Company Inc.
 
 
 
 
 
 
 
 
By
 
/s/ John M. Stephens
 
 
 
 
 
 
  John M. Stephens,
  Chief Financial Officer






INDEX OF EXHIBITS
 

 
 
 
Exhibit No.
 
Description of Document
 
 
 
99.1
 
 
 
 
 
 
 



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


396760451_image5a01a01a39.jpg

THE NEW HOME COMPANY REPORTS 2018 FOURTH QUARTER AND FULL YEAR RESULTS

2018 Fourth Quarter Financial Results
- Diluted EPS of $(0.80) per share -
- Adjusted EPS of $0.28*, excluding inventory and joint venture impairment charges -
- Backlog units up 25%, dollar value up 28% -
- Deliveries up 35% -
- Ending community count up 18% -
 

Aliso Viejo, California, February 15, 2019. The New Home Company Inc. (NYSE: NWHM) today announced results for the 2018 fourth quarter and full year.

Fourth Quarter 2018 Financial Results
Net loss of $16.2 million, or $(0.80) per diluted share, including $30.0 million of pretax inventory and joint venture impairment charges
Adjusted net income of $5.6 million*, or $0.28* per diluted share, compared to $14.2 million*, or $0.67* per diluted share, for the 2017 fourth quarter
Total revenue of $229.7 million; home sales revenue of $187.3 million
Deliveries up 35% to 187
Backlog increased 25% to 191 units with total dollar value of $207.1 million
Ending community count up 18%
Repurchased 379,505 shares of common stock, or 2% of outstanding shares for $2.8 million

Full Year 2018 Financial Results
Total revenue of $667.6 million; home sales revenue of $504.0 million
Net loss of $14.2 million, or $(0.69) per diluted share, including $30.0 million of pretax inventory and joint venture impairment charges
Adjusted net income of $7.6 million*, or $0.37* per diluted share, compared to $21.7 million*, or $1.03* per diluted share, for 2017
Deliveries up 46% to 498 for the full year
Net new home orders up 30%
Repurchased 1,003,116 shares of common stock, or 5% of outstanding shares for $8.5 million

The Company reported a net loss of $16.2 million, or $(0.80) per diluted share for the 2018 fourth quarter. Adjusted net income for the period was $5.6 million*, or $0.28* per diluted share, after excluding $10.0 million in pretax inventory impairment charges and $20.0 million of pretax joint venture impairment charges. The Company's net income for the 2017 fourth quarter was $10.5 million, or $0.50 per diluted share. Adjusted net income for the 2017 period was $14.2 million*, or $0.67* per diluted share, and excluded $3.2 million in income tax charges related to the revaluation of deferred tax assets and $0.9 million in pretax inventory impairment charges.

“In 2018, we took another step forward in implementing our strategy to reach more buyers through more affordably priced communities as evidenced by a 46% increase in deliveries compared to 2017 and a 38% reduction in the average selling price of homes delivered,” said Larry Webb, Chairman and Chief Executive Officer of The New Home Company. "However, the fourth quarter of 2018 proved to be a challenge as potential buyers in our markets exercised a high degree of caution during what is already a seasonally slow period, which resulted in a slower absorption rate. In addition, we experienced some construction delays at a few communities, most notably at our

1



multifamily condominium community in Playa Vista, which negatively impacted our fourth quarter revenues. While we continue to have confidence in the fundamental drivers of our business and strategy, we acknowledge the operational challenges a slowing housing market poses and have adjusted our outlook accordingly.”

Mr. Webb continued, “As a result of this revised outlook, we took impairment charges at two higher-priced communities in Southern California and one land development joint venture in Northern California. We believe these actions were necessary in light of the current demand environment and should allow us to turn through these communities at a more accelerated rate, redeploy capital within our existing or new markets and generate cash flow more quickly.”
Mr. Webb concluded. “We continue to be positive about the long-term outlook for our markets and our company, and we are taking steps to right-size our business and fortify our balance sheet. We anticipate that these initiatives will lead to a leaner cost structure, reduce debt leverage over time and improve shareholder returns."

Fourth Quarter 2018 Operating Results

Total revenues for the 2018 fourth quarter were $229.7 million, compared to $324.1 million in the prior year period. Net loss attributable to the Company was $16.2 million, or $(0.80) per diluted share, compared to net income of $10.5 million, or $0.50 per diluted share, in the prior year period. The year-over-year decrease in net income was primarily attributable to a $29.1 million increase in inventory and joint venture impairments, a 33% decrease in home sales revenue, a 770 basis point decline in home sales gross margin percentage (270 basis point decline before impairments*) and a 150 basis point increase in selling, general and administrative costs as a percentage of home sales revenue. These decreases were partially offset by a tax benefit for the 2018 fourth quarter.

Wholly Owned Projects

Home sales revenue for the 2018 fourth quarter decreased 33% to $187.3 million, compared to $279.9 million in the prior year period. The decrease in home sales revenue was driven largely by a 50% decline in average selling price to $1.0 million, which was partially offset by a 35% increase in deliveries. Home sales revenue was also negatively impacted by the delayed closing of several homes in backlog that were scheduled to be delivered in the period. The decrease in average selling price was most notable in Southern California where over half of our deliveries were from more-affordable communities with base pricing of $750,000 or below. In addition, the 2017 fourth quarter average selling price was heavily influenced by deliveries from two Crystal Cove luxury communities in Newport Coast, CA where average selling prices exceeded $6.0 million.

Gross margin from home sales for the 2018 fourth quarter was 8.1% and included $10.0 million in inventory impairment charges related to two higher-priced communities in Southern California. Homes sales gross margin for the 2017 fourth quarter was 15.8% and included inventory impairment charges of $0.9 million. Excluding inventory impairments, our home sales gross margin was 13.5%* for the 2018 fourth quarter as compared to 16.2%* in the prior year period. The 270 basis point decline was primarily due to higher interest costs included in cost of home sales, and to a lesser extent, a product mix shift and slightly higher incentives. Additionally, the 2017 fourth quarter also benefited from an $0.8 million warranty reserve adjustment. Adjusted homebuilding gross margin for the 2018 fourth quarter, which excludes interest in cost of home sales and impairments, was 17.7%* compared to 18.0%* in the year ago period.

Our SG&A expense ratio as a percentage of home sales revenue for the 2018 fourth quarter was 9.9% versus 8.4% in the prior year period. The 150 basis point increase in the SG&A rate was primarily due to lower home sales revenue, higher co-broker commissions, and higher sales personnel and advertising costs associated with increased community count. Partially offsetting these year-over-year increases was decreased capitalized selling and marketing cost amortization due to the closeout of higher-end, luxury communities. G&A costs for the 2018 fourth quarter were also lower as compared to the prior year period primarily due to lower compensation-related expenses.

Net new home orders for the 2018 fourth quarter decreased 36% to 69 homes due to a slower monthly sales pace. We believe buyer hesitancy stemming from higher interest rates and affordability concerns impacted 2018 fourth quarter

2



demand with the monthly sales absorption rate dropping to 1.2 sales per community compared to 2.3 for the year ago period. The Company's active selling community count was up 18% as of the end of the 2018 fourth quarter to 20 communities.

The dollar value of the Company's wholly owned backlog at the end of the 2018 fourth quarter was $207.1 million and totaled 191 homes compared to $162.3 million and 153 homes in the prior year period. The increase in backlog dollar value resulted primarily from the 25% increase in homes in backlog, and to a lesser extent, a 2% higher average selling price.

Fee Building Projects

Fee building revenue for the 2018 fourth quarter was $42.4 million, compared to $44.2 million in the prior year period. Management fees from joint ventures and construction management fees from third parties increased to $1.6 million for the 2018 fourth quarter as compared to $1.2 million for the 2017 fourth quarter. We generated $1.1 million in fee building gross margin for the 2018 fourth quarter versus $1.0 million in the prior year period. The higher fee building margin was largely the result of increased construction management fees from third parties, partially offset by a $0.3 million decrease in management fees from joint ventures.

Unconsolidated Joint Ventures (JVs)

The Company’s share of joint venture loss for the 2018 fourth quarter was $19.9 million, down from $0.3 million of income in the prior year period. Included in the Company's loss was a $20.0 million impairment charge related to our investment in a land development joint venture in Northern California. The impairment was primarily the result of lower anticipated land sales revenue as well as our decision to not incorporate a potential homebuilding component within the existing land development joint venture at this time. The following sets forth supplemental information about the Company’s joint ventures. Such information is not included in the Company’s financial data for GAAP purposes but is provided for informational purposes.

Joint venture net loss totaled $28.3 million, compared to net income of $0.6 million in the prior year period. Joint venture home sales revenue for the 2018 fourth quarter totaled $52.8 million, compared to $38.1 million in the prior year period, while joint venture land sales revenue totaled $7.5 million for the 2018 fourth quarter, compared to $1.7 million in the prior year period.

At the end of both the 2018 and 2017 fourth quarters, our joint ventures had seven actively selling communities. Net new home orders from joint ventures for the 2018 fourth quarter decreased 32% to 23 homes. The dollar value of homes in backlog from joint ventures at the end of the 2018 fourth quarter was $66.9 million from 76 homes compared to $66.6 million from 80 homes at the end of the 2017 fourth quarter.

Income Taxes

The Company's effective tax rate was 27.8%, or 27.5%* before discrete items, as compared to 51.7%, or 37.8%* before discrete items, in the 2017 fourth quarter. The effective tax rate for the 2017 fourth quarter was impacted by a deferred tax asset charge, included in discrete items, related to Federal tax rate cuts from 2017's Tax Cuts and Jobs Act. The rate cuts were the primary driver of the year-over-year decrease in the Company's effective tax rate before discrete items, partially offset by the loss of certain tax benefits from production activities that were eliminated as a result of tax reform.

Full Year 2018 Operating Results

For the full year 2018, the Company reported a net loss of $14.2 million, or $(0.69) per diluted share. Adjusted net income for the year was $7.6 million*, or $0.37* per diluted share, after excluding $10.0 million in pretax inventory impairment charges and $20.0 million of pretax joint venture impairment charges. The Company's net income for 2017 was $17.2 million, or $0.82 per diluted share. Adjusted net income for 2017 was $21.7 million*, or $1.03*

3



per diluted share, and excluded $3.2 million in income tax charges related to the revaluation of deferred tax assets and $2.2 million in pretax inventory impairment charges.

Total revenues for the year ended December 31, 2018 were $667.6 million compared to $751.2 million for the prior year. Homebuilding revenue declined to $504.0 million primarily from a 38% decrease in the average selling price of homes due to a strategic shift to more affordably priced homes in 2018, partially offset by a 46% increase in the number of homes delivered during the year. The year-over-year decrease in net income was primarily attributable to a $27.8 million increase in inventory and joint venture impairment charges, a 380 basis point decline in home sales margin (220 basis point decline before impairments*), an 11% decrease in total revenues, and a 180 basis point increase in selling, general and administrative expenses as a percentage of home sales revenue. These items were partially offset by the income tax benefit for 2018.
 
Balance Sheet and Liquidity

As of December 31, 2018, the Company had real estate inventories totaling $566.3 million and owned or controlled 2,812 lots through its wholly owned operations (excluding fee building and joint venture lots), of which 1,145 lots, or 41%, were controlled through option contracts. The Company ended the 2018 fourth quarter with $42.3 million in cash and cash equivalents and $387.6 million in debt, of which $67.5 million was outstanding under its $200 million revolving credit facility. As of December 31, 2018, the Company had a debt-to-capital ratio of 61.8% and a net debt-to-capital ratio of 59.0%*.

Stock Repurchase

During the 2018 fourth quarter, the Company repurchased 379,505 shares of common stock for approximately $2.8 million under its previously announced stock repurchase plan. For the full year 2018, the Company repurchased and retired 1,003,116 shares totaling $8.5 million, leaving a remaining authorization of $6.5 million as of December 31, 2018.

Guidance

The Company's current estimate for the 2019 first quarter is as follows:
Home sales revenue of $80 - $90 million
Fee building revenue of $20 - $25 million
Home sales gross margin of 12.6% - 13.0%

Conference Call Details

The Company will host a conference call and webcast for investors and other interested parties beginning at 11:00 a.m. Eastern Time on Friday, February 15, 2019 to review fourth quarter and full year results, discuss recent events and results, and discuss the Company's quarterly guidance for 2019. We will also 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 15, 2019 and can be accessed by dialing 1-844-512-2921 (domestic) or 1-412-317-6671 (international) and entering the pass code 13686678.

* Adjusted net income, Adjusted EPS, homebuilding (home sales) gross margin before impairments, adjusted homebuilding gross margin (or homebuilding gross margin excluding interest in cost of home sales and impairments), effective tax rate before discrete items 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.”


4



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 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.

Forward-Looking Statements

Various statements contained in this press release, including those that express a belief, anticipation, 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 our revenues, community counts and openings, the timing and success of specific projects, our ability to execute our strategic growth objectives, gross margins, other projected results, income, earnings per share, joint ventures and capital spending. Our forward-looking statements are generally accompanied by words such as “estimate,” “should,” “project,” “predict,” “believe,” “expect,” “intend,” “anticipate,” “potential,” “plan,” “goal,” “will,” “guidance,” “target,” “forecast,” 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; changes in sales conditions, including home prices, in the markets where we build homes; our significant amount of debt and the impact of restrictive covenants in our debt agreements; our ability to repay our debt as it comes due; changes in our credit rating or outlook; volatility and uncertainty in the credit markets and broader financial markets; our business and investment strategy including our plans to sell more affordably priced homes; availability of land to acquire and our ability to acquire such land on favorable terms or at all; our liquidity and availability, terms and deployment of capital; changes in margin; write-downs; shortages of or increased prices for labor, land or raw materials used in housing construction; adverse weather conditions and natural disasters (including wild fires and mudslides); issues concerning our joint venture partnerships; the cost and availability of insurance and surety bonds; governmental regulation, including the impact of "slow growth" or similar initiatives; 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; delays in the land entitlement process, development, construction, or the opening of new home communities; litigation and warranty claims; the degree and nature of competition; the impact of recent accounting standards; 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 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 | investorrelations@nwhm.com


5



CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
 
(Dollars in thousands, except per share amounts)
Revenues:
 
 
 
 
 
 
 
Home sales
$
187,258

 
$
279,885

 
$
504,029

 
$
560,842

Fee building, including management fees from unconsolidated joint ventures of $874, $1,190, $3,385 and $4,945, respectively
42,408

 
44,217

 
163,537

 
190,324

 
229,666

 
324,102

 
667,566

 
751,166

Cost of Sales:
 
 
 
 
 
 
 
Home sales
162,034

 
234,668

 
436,530

 
473,213

Home sales impairments
10,000

 
900

 
10,000

 
2,200

Fee building
41,275

 
43,194

 
159,136

 
184,827

 
213,309

 
278,762

 
605,666

 
660,240

Gross Margin:
 
 
 
 
 
 
 
Home sales
15,224

 
44,317

 
57,499

 
85,429

Fee building
1,133

 
1,023

 
4,401

 
5,497

 
16,357

 
45,340

 
61,900

 
90,926

 
 
 
 
 
 
 
 
Selling and marketing expenses
(10,754
)
 
(14,465
)
 
(36,065
)
 
(32,702
)
General and administrative expenses
(7,784
)
 
(9,180
)
 
(25,966
)
 
(26,330
)
Equity in net income (loss) of unconsolidated joint ventures
(19,902
)
 
260

 
(19,653
)
 
866

Other income (expense), net
(293
)
 
(263
)
 
(521
)
 
(229
)
Pretax income (loss)
(22,376
)
 
21,692

 
(20,305
)
 
32,531

(Provision) benefit for income taxes
6,226

 
(11,222
)
 
6,075

 
(15,390
)
Net income (loss)
(16,150
)
 
10,470

 
(14,230
)
 
17,141

Net loss attributable to non-controlling interest

 
1

 
14

 
11

Net income (loss) attributable to The New Home Company Inc.
$
(16,150
)
 
$
10,471

 
$
(14,216
)
 
$
17,152

 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to The New Home Company Inc.:
 
 
 
 
 
 
 
Basic
$
(0.80
)
 
$
0.50

 
$
(0.69
)
 
$
0.82

Diluted
$
(0.80
)
 
$
0.50

 
$
(0.69
)
 
$
0.82

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
20,247,406

 
20,876,766

 
20,703,967

 
20,849,736

Diluted
20,247,406

 
21,145,065

 
20,703,967

 
20,995,498



6



CONSOLIDATED BALANCE SHEETS

 
December 31,
 
December 31,
 
2018
 
2017
 
(Dollars in thousands, except per share amounts)
 
(Unaudited)
 
 
Assets
 
 
 
Cash and cash equivalents
$
42,273

 
$
123,546

Restricted cash
269

 
424

Contracts and accounts receivable
18,265

 
23,224

Due from affiliates
1,218

 
1,060

Real estate inventories
566,290

 
416,143

Investment in and advances to unconsolidated joint ventures
34,330

 
55,824

Other assets
33,452

 
24,291

Total assets
$
696,097

 
$
644,512

 
 
 
 
Liabilities and equity
 
 
 
Accounts payable
$
39,391

 
$
23,722

Accrued expenses and other liabilities
29,028

 
38,054

Unsecured revolving credit facility
67,500

 

Senior notes, net
320,148

 
318,656

Total liabilities
456,067

 
380,432

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, 20,058,904 and 20,876,837, shares issued and outstanding as of December 31, 2018 and December 31, 2017, respectively
201

 
209

Additional paid-in capital
193,132

 
199,474

Retained earnings
46,621

 
64,307

Total stockholders' equity
239,954

 
263,990

Non-controlling interest in subsidiary
76

 
90

Total equity
240,030

 
264,080

Total liabilities and equity
$
696,097

 
$
644,512




7



CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Year Ended
 
December 31,
 
2018

2017
 
(Dollars in thousands)
Operating activities:
 
 
 
Net income (loss)
$
(14,230
)
 
$
17,141

Adjustments to reconcile net income (loss) to net cash used in operating activities:
 
 
 
Deferred taxes
(7,620
)
 
(1,073
)
Noncash deferred tax asset charge

 
3,190

Amortization of stock-based compensation
3,090

 
2,803

Distributions of earnings from unconsolidated joint ventures
715

 
1,588

Inventory impairments
10,000

 
2,200

Abandoned project costs
206

 
383

Equity in net income (loss) of unconsolidated joint ventures
19,653

 
(866
)
Deferred profit from unconsolidated joint ventures
136

 
821

Depreciation and amortization
6,631

 
449

Net changes in operating assets and liabilities:
 
 
 
Contracts and accounts receivable
4,959

 
4,670

Due from affiliates
(242
)
 
18

Real estate inventories
(157,705
)
 
(114,930
)
Other assets
(11,642
)
 
(5,255
)
Accounts payable
15,669

 
(9,546
)
Accrued expenses and other liabilities
(9,305
)
 
7,544

Net cash used in operating activities
(139,685
)
 
(90,863
)
Investing activities:
 
 
 
Purchases of property and equipment
(246
)
 
(195
)
Cash assumed from joint venture at consolidation

 
995

Contributions and advances to unconsolidated joint ventures
(15,066
)
 
(27,479
)
Distributions of capital and repayment of advances from unconsolidated joint ventures
15,436

 
15,577

Interest collected on advances to unconsolidated joint ventures
178

 
552

Net cash provided by (used in) investing activities
302

 
(10,550
)
Financing activities:
 
 
 
Borrowings from credit facility
150,000

 
88,000

Repayments of credit facility
(82,500
)
 
(206,000
)
Proceeds from senior notes

 
324,465

Repayments of other notes payable

 
(4,110
)
Payment of debt issuance costs

 
(7,565
)
Repurchases of common stock
(8,563
)
 

Tax withholding paid on behalf of employees for stock awards
(982
)
 
(590
)
Proceeds from exercise of stock options

 
102

Net cash provided by financing activities
57,955

 
194,302

Net (decrease) increase in cash, cash equivalents and restricted cash
(81,428
)
 
92,889

Cash, cash equivalents and restricted cash – beginning of period
123,970

 
31,081

Cash, cash equivalents and restricted cash – end of period
$
42,542

 
$
123,970



8



KEY FINANCIAL AND OPERATING DATA
(Dollars in thousands)
(Unaudited)
New Home Deliveries:
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31,
 
2018
 
2017
 
% Change
 
Homes
 
Dollar Value
 
Average Price
 
Homes
 
Dollar Value
 
Average Price
 
Homes
 
Dollar Value
 
Average Price
Southern California
102

 
$
113,283

 
$
1,111

 
86

 
$
242,955

 
$
2,825

 
19
%
 
(53
)%
 
(61
)%
Northern California
85

 
73,975

 
870

 
53

 
36,930

 
697

 
60
%
 
100
 %
 
25
 %
Total
187

 
$
187,258

 
$
1,001

 
139

 
$
279,885

 
$
2,014

 
35
%
 
(33
)%
 
(50
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31,
 
2018
 
2017
 
% Change
 
Homes
 
Dollar Value
 
Average Price
 
Homes
 
Dollar Value
 
Average Price
 
Homes
 
Dollar Value
 
Average Price
Southern California
282

 
$
317,373

 
$
1,125

 
174

 
$
433,651

 
$
2,492

 
62
%
 
(27
)%
 
(55
)%
Northern California
216

 
186,656

 
864

 
167

 
127,191

 
762

 
29
%
 
47
 %
 
13
 %
Total
498

 
$
504,029

 
$
1,012

 
341

 
$
560,842

 
$
1,645

 
46
%
 
(10
)%
 
(38
)%
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2018

2017
 
% Change
 
2018
 
2017
 
% Change
Net New Home Orders:
 
 
 
 
 
 
 
 
 
 
Southern California
53

 
54

 
(2
)%
 
301

 
197

 
53
 %
Northern California
13

 
53

 
(75
)%
 
202

 
215

 
(6
)%
Arizona
3

 

 
NA

 
33

 

 
NA

 
69

 
107

 
(36
)%
 
536

 
412

 
30
 %
 
 
 
 
 
 
 
 
 
 
 
 
Selling Communities at End of Period:
 
 
 
 
Southern California
 
 
 
 
 
 
13

 
10

 
30
 %
Northern California
 
 
 
 
 
 
5

 
7

 
(29
)%
Arizona
 
 
 
 
 
 
2

 

 
NA

 
 
 
 
 
 
 
20

 
17

 
18
 %
 
 
 
 
 
 
 
 
 
 
 
 
Average Selling Communities:
 
 
 
 
 
 
 
 
 
 
 
Southern California
13

 
9

 
44
 %
 
12

 
7

 
71
 %
Northern California
5

 
7

 
(29
)%
 
6

 
6

 
 %
Arizona
2

 

 
NA

 
2

 

 
NA

 
20

 
16

 
25
 %
 
20

 
13

 
54
 %
 
 
 
 
 
 
 
 
 
 
 
 
Monthly Sales Absorption Rate per Community (1):
 
 
 
 


 
 
 
 
 


Southern California
1.4

 
2.1

 
(33
)%
 
2.2

 
2.3

 
(4
)%
Northern California
0.9

 
2.5

 
(64
)%
 
2.7

 
3.1

 
(13
)%
Arizona
0.5

 
NA

 
NA

 
1.7

 
NA

 
NA

Total
1.2

 
2.3

 
(48
)%
 
2.3

 
2.7

 
(15
)%
Backlog:
As of December 31,
 
2018
 
2017
 
% Change
 
Homes
 
Dollar Value
 
Average Price
 
Homes
 
Dollar Value
 
Average Price
 
Homes
 
Dollar Value
 
Average Price
Southern California
90

 
$
111,024

 
$
1,234

 
71

 
$
93,955

 
$
1,323

 
27
 %
 
18
 %
 
(7
)%
Northern California
68

 
59,847

 
880

 
82

 
68,295

 
833

 
(17
)%
 
(12
)%
 
6
 %
Arizona
33

 
36,200

 
1,097

 

 

 

 
NA

 
NA

 
NA

Total
191

 
$
207,071

 
$
1,084

 
153

 
$
162,250

 
$
1,060

 
25
 %
 
28
 %
 
2
 %

(1) Monthly sales absorption represents the number of net new home orders divided by the number of average selling communities for the period.

9




Lots Owned and Controlled:
 
 
 
 
 
 
As of December 31,
 
 
 
 
 
 
 
2018

2017
 
% Change
Lots Owned
 
 
 
 
 
 
 
 
 
 
 
Southern California
 
 
 
 
 
 
626

 
563

 
11
 %
Northern California
 
 
 
 
 
 
742

 
318

 
133
 %
Arizona
 
 
 
 
 
 
299

 
65

 
360
 %
Total
 
 
 
 
 
 
1,667


946

 
76
 %
Lots Controlled (1)
 
 
 
 
 
 
 
 
 
 
 
Southern California
 
 
 
 
 
 
205

 
278

 
(26
)%
Northern California
 
 
 
 
 
 
451

 
1,031

 
(56
)%
Arizona
 
 
 
 
 
 
489

 
497

 
(2
)%
Total
 
 

 
 
 
1,145

 
1,806

 
(37
)%
Lots Owned and Controlled - Wholly Owned
 
 
 
 
 
 
2,812

 
2,752

 
2
 %
Fee Building (2)
 
 
 
 
 
 
806

 
920

 
(12
)%
Total Lots Owned and Controlled
 
 
 
 
 
 
3,618

 
3,672

 
(1
)%
 
(1) Includes lots that we control under purchase and sale agreements or option agreements subject to customary conditions and have not yet closed. There can be no assurance that such acquisitions will occur.
(2) Lots owned by third party property owners for which we perform construction services.
Other Financial Data:
Three Months Ended 
 December 31,
 
Year Ended 
 December 31,
 
2018
 
2017
 
2018
 
2017
Interest incurred
$
7,779

 
$
6,761

 
$
28,377

 
$
21,978

Adjusted EBITDA(1)
$
19,565

 
$
28,632

 
$
39,898

 
$
50,145

Adjusted EBITDA margin percentage (1)
8.5
%
 
8.8
%
 
6.0
%
 
6.7
%
 
 
 
 
 
 
 
 
 
 
 
 
 
LTM(2) Ended December 31,
 
 
 
 
 
2018
 
2017
 
 
 
 
 
 
 
 
Interest incurred
 
 
 
 
$
28,377

 
$
21,978

Adjusted EBITDA(1)
 
 
 
 
$
39,898

 
$
50,145

Adjusted EBITDA margin percentage (1)
 
 
 
 
6.0
%
 
6.7
%
Ratio of Adjusted EBITDA to total interest incurred(1)
 
 
 
 
1.4
x
 
2.3x

 
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
 
 
 
 
2018
 
2017
Ratio of debt-to-capital
 
 
 
 
61.8
%
 
54.7
%
Ratio of net debt-to-capital(1)
 
 
 
 
59.0
%
 
42.4
%
Ratio of debt to LTM(2) Adjusted EBITDA(1)
 
 
 
 
9.7x

 
6.4
x
Ratio of net debt to LTM(2) Adjusted EBITDA(1)
 
 
 
 
8.6x

 
3.9x

Ratio of cash and inventory to debt
 
 
 
 
1.6x

 
1.7
x
 
(1)
Adjusted EBITDA, Adjusted EBITDA margin percentage, ratio of Adjusted EBITDA to total interest incurred, ratio of net debt-to-capital, ratio of debt to LTM Adjusted EBITDA and ratio of net debt to LTM Adjusted EBITDA are non-GAAP measures. Please see "Reconciliation of Non-GAAP Financial Measures" for a reconciliation of each of these measures to the appropriate GAAP measure.
(2)
"LTM" indicates amounts for the trailing 12 months.















10






KEY FINANCIAL AND OPERATING DATA - UNCONSOLIDATED JOINT VENTURES
(Dollars in thousands)
(Unaudited)
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
Financial Data - Unconsolidated Joint Ventures:
 
 
 
 
 
 
 
 
 
 
 
Home sales revenue
$
52,811

 
$
38,069

 
39
 %
 
$
138,892

 
$
142,697

 
(3
)%
Land sales revenue
7,453

 
1,698

 
339
 %
 
42,731

 
4,750

 
800
 %
Total revenue
$
60,264

 
$
39,767

 
52
 %
 
$
181,623

 
$
147,447

 
23
 %
Net income (loss)
$
(28,253
)
 
$
563

 
NM

 
$
(27,904
)
 
$
(529
)
 
NM

 
 
 
 
 
 
 
 
 
 
 
 
Operating Data - Unconsolidated Joint Ventures:
 
 
 
 
 
 
 
 
 
 
 
New home orders
23

 
34

 
(32
)%
 
142

 
170

 
(16
)%
New homes delivered
54

 
34

 
59
 %
 
146

 
149

 
(2
)%
Average selling price of homes delivered
$
978

 
$
1,120

 
(13
)%
 
$
951

 
$
958

 
(1
)%
 
 
 
 
 
 
 
 
 
 
 
 
Selling communities at end of period
 
7

 
7

 
 %
Backlog homes (dollar value)
 
$
66,892

 
$
66,636

 
 %
Backlog (homes)
 
76

 
80

 
(5
)%
Average sales price of backlog
 
$
880

 
$
833

 
6
 %
 
 
 
 
 
 
 
 
 
 
 
 
Homebuilding lots owned and controlled
 
211

 
341

 
(38
)%
Land development lots owned and controlled
 
1,879

 
2,323

 
(19
)%
Total lots owned and controlled
 
 
 
 
 
 
2,090

 
2,664

 
(22
)%


11



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 table reconciles net income (loss) attributable to the Company to the non-GAAP measure of adjusted net income attributable to the Company (net income before home sales and joint venture impairment and noncash deferred tax asset charges) and earnings (loss) per share and earnings (loss) per diluted share attributable to the Company to the non-GAAP measures of adjusted earnings per share and adjusted diluted earnings per share attributable to the Company (earnings per share before home sales and joint venture impairment and noncash deferred tax asset charges). We believe removing the impact of impairments and deferred tax asset adjustments is relevant to provide investors with an understanding of the impact these noncash items had on earnings.
 
 
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
2018
 
2017
 
(Dollars in thousands, except per share amounts)
Net income (loss) attributable to The New Home Company Inc.
$
(16,150
)
 
$
10,471

 
$
(14,216
)
 
$
17,152

Home sales and joint venture impairments (tax effected)
21,750

 
560

 
21,810

 
1,366

Noncash deferred tax asset charge

 
3,190

 

 
3,190

Adjusted net income attributable to The New Home Company Inc.
$
5,600

 
$
14,221

 
$
7,594

 
$
21,708

 
 
 
 
 
 
 
 
Earnings (loss) per share attributable to The New Home Company Inc.:
 
 
 
 
 
 
 
Basic
$
(0.80
)
 
$
0.50

 
$
(0.69
)
 
$
0.82

Diluted
$
(0.80
)
 
$
0.50

 
$
(0.69
)
 
$
0.82

 
 
 
 
 
 
 
 
Adjusted earnings per share attributable to The New Home Company Inc.:
 
 
 
 
 
 
 
Basic
$
0.28

 
$
0.68

 
$
0.37

 
$
1.04

Diluted
$
0.28

 
$
0.67

 
$
0.37

 
$
1.03

 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
20,247,406

 
20,876,766

 
20,703,967

 
20,849,736

Diluted
20,326,250

 
21,145,065

 
20,804,859

 
20,995,498

 
 
 
 
 
 
 
 
Home sales and joint venture impairments
$
30,000

 
$
900

 
$
30,000

 
$
2,200

Effective tax rate for The New Home Company Inc. before discrete items(1)
27.5
%
 
37.8
%
 
27.3
%
 
37.9
%
Tax benefit from home sales and joint venture impairments
$
(8,250
)
 
$
(340
)
 
$
(8,190
)
 
$
(834
)
Home sales and joint venture impairments (tax effected)

$
21,750

 
$
560

 
$
21,810

 
$
1,366

 
 
 
 
 
 
 
 
Loss per share attributable to The New Home Company Inc. related to home sales and joint venture impairments:
 
 
 
 
 
 
 
Basic
$1.07
 
$0.03
 
$1.05
 
$0.07
Diluted
$1.07
 
$0.03
 
$1.05
 
$0.07
(1) Refer to table below for reconciliation of the effective tax rate before discrete items.

12



RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(Unaudited)

The following table reconciles homebuilding gross margin percentage as reported and prepared in accordance with GAAP to the non-GAAP measures, homebuilding gross margin excluding interest in cost of home sales and adjusted homebuilding gross margin. We believe this information is meaningful, as it isolates the impact home sales impairments and leverage have on homebuilding 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,
 
2018
 
%
 
2017
 
%
 
2018
 
%
 
2017
 
%
 
(Dollars in thousands)
Home sales revenue
$
187,258

 
100.0
%
 
$
279,885

 
100.0
%
 
$
504,029

 
100.0
%
 
$
560,842

 
100.0
%
Cost of home sales
172,034

 
91.9
%
 
235,568

 
84.2
%
 
446,530

 
88.6
%
 
475,413

 
84.8
%
Homebuilding gross margin
15,224

 
8.1
%
 
44,317

 
15.8
%
 
57,499

 
11.4
%
 
85,429

 
15.2
%
Add: Homes sales impairments
10,000

 
5.4
%
 
900

 
0.3
%
 
10,000

 
2.0
%
 
2,200

 
0.4
%
Homebuilding gross margin before impairments
25,224

 
13.5
%
 
45,217

 
16.2
%
 
67,499

 
13.4
%
 
87,629

 
15.6
%
Add: Interest in cost of home sales
7,868

 
4.2
%
 
5,302

 
1.8
%
 
18,678

 
3.7
%
 
11,021

 
2.0
%
Adjusted homebuilding gross margin
$
33,092

 
17.7
%
 
$
50,519

 
18.0
%
 
$
86,177

 
17.1
%
 
$
98,650

 
17.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The following table reconciles the Company’s effective tax rate calculated in accordance with GAAP to the non-GAAP measure, effective tax rate before discrete items. The Tax Cuts and Jobs Act enacted in December 2017 cut Federal corporate income tax rates effective for 2018, and we believe removing the impact of the discrete items is relevant to provide investors with an understanding of the impact the tax cuts had on earnings.

 
Three Months Ended December 31,
 
Year Ended December 31,
 
2018
 
2017
 
2018

2017
 
(Dollars in thousands)
Effective tax rate for The New Home Company Inc.:
 
 
 
 
 
 
 
Pretax income (loss)
$
(22,376
)
 
$
21,692

 
$
(20,305
)
 
$
32,531

(Provision) benefit for income taxes
$
6,226

 
$
(11,222
)
 
$
6,075

 
$
(15,390
)
Effective tax rate (1)
27.8
%
 
51.7
%
 
29.9
%
 
47.3
%
 
 
 
 
 
 
 
 
Effective tax rate for The New Home Company Inc. before discrete items:
 
 
 
 

 
 
(Provision) benefit for income taxes
$
6,226

 
$
(11,222
)
 
$
6,075

 
$
(15,390
)
Adjustment for discrete items
(69
)
 
3,029

 
(523
)
 
3,068

(Provision) benefit for income taxes before discrete items
$
6,157

 
$
(8,193
)
 
$
5,552

 
$
(12,322
)
Effective tax rate for The New Home Company Inc. before discrete items(1)
27.5
%
 
37.8
%
 
27.3
%
 
37.9
%
(1) Effective tax rate is computed by dividing the (provision) benefit for income taxes by pretax income (loss).


13



RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (continued)
(Unaudited)

Adjusted EBITDA, Adjusted EBITDA margin percentage, the ratio of Adjusted EBITDA to total interest incurred, the ratio of debt to Adjusted EBITDA, and the ratio of net debt to Adjusted EBITDA are non-GAAP measures. Adjusted EBITDA means net income (loss) (plus cash distributions of income from unconsolidated joint ventures) before (a) income taxes, (b) interest expense, (c) amortization of previously capitalized interest included in cost of sales and equity in net income (loss) of unconsolidated joint ventures, (d) noncash impairment charges and abandoned project costs, (e) depreciation and amortization, (f) amortization of stock-based compensation and (g) income (loss) from unconsolidated joint ventures. Adjusted EBITDA margin percentage is calculated by dividing Adjusted EBITDA by total revenue for a given period. The ratio of Adjusted EBITDA to total interest incurred is calculated by dividing Adjusted EBITDA by total interest incurred for a given period. The ratio of debt to Adjusted EBITDA is calculated by dividing debt at the period end by Adjusted EBITDA for a given period. The ratio of net debt to Adjusted EBITDA is calculated by dividing debt at the period end less cash, cash equivalents and restricted cash by Adjusted EBITDA for a given period. Other companies may calculate Adjusted EBITDA differently. Management believes that Adjusted EBITDA assists investors in understanding and comparing the operating characteristics of homebuilding activities by eliminating many of the differences in companies' respective capitalization, interest costs, tax position and level of impairments. Due to the significance of the GAAP components excluded, Adjusted EBITDA should not be considered in isolation or as an alternative to net income (loss), cash flows from operations or any other performance measure prescribed by GAAP. A reconciliation of net income (loss) to Adjusted EBITDA, and the calculations of Adjusted EBITDA margin percentage, the ratio of Adjusted EBITDA to total interest incurred, the ratio of debt to Adjusted EBITDA, and the ratio of net debt to Adjusted EBITDA are provided in the following table.

 
Three Months Ended
 
LTM(1) Ended
 
December 31,
 
December 31,
 
2018
 
2017
 
2018
 
2017
 
(Dollars in thousands)
Net income (loss)
$
(16,150
)
 
$
10,470

 
$
(14,230
)
 
$
17,141

Add:
 
 
 
 
 
 
 
Interest amortized to cost of sales and equity in net income (loss) of unconsolidated joint ventures
9,016

 
5,333

 
19,908

 
11,057

(Benefit) provision for income taxes
(6,226
)
 
11,222

 
(6,075
)
 
15,390

Depreciation and amortization
2,134

 
105

 
6,631

 
449

Amortization of stock-based compensation
764

 
717

 
3,090

 
2,803

Cash distributions of income from unconsolidated joint ventures

 

 
715

 
1,588

Noncash inventory impairments and abandonments
10,125

 
1,045

 
10,206

 
2,583

Less:
 
 
 
 
 
 
 
Equity in net (income) loss of unconsolidated joint ventures
19,902

 
(260
)
 
19,653

 
(866
)
Adjusted EBITDA
$
19,565

 
$
28,632

 
$
39,898

 
$
50,145

Total Revenue
$
229,666

 
$
324,102

 
$
667,566

 
$
751,166

Adjusted EBITDA margin percentage
8.5
%
 
8.8
%
 
6.0
%
 
6.7
%
Interest incurred
$
7,779

 
$
6,761

 
$
28,377

 
$
21,978

Ratio of Adjusted EBITDA to total interest incurred
 
 
 
 
1.4
x
 
2.3
x
Total debt at period end
 
 
 
 
$
387,648

 
$
318,656

Ratio of debt to Adjusted EBITDA
 
 
 
 
9.7
x
 
6.4
x
Total net debt at period end
 
 
 
 
$
345,106

 
$
194,686

Ratio of net debt to Adjusted EBITDA
 
 
 
 
8.6
x
 
3.9
x
Total cash and inventory
 
 
 
 
$
608,563

 
$
539,689

Ratio of cash and inventory to debt
 
 
 
 
1.6x

 
1.7
x
(1) "LTM" indicates amounts for the trailing 12 months.



14



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,
 
2018
 
2017
 
(Dollars in thousands)
Total debt, net
$
387,648

 
$
318,656

Equity, exclusive of non-controlling interest
239,954

 
263,990

Total capital
$
627,602

 
$
582,646

Ratio of debt-to-capital(1)
61.8
%

54.7
%
 
 
 
 
Total debt, net
$
387,648

 
$
318,656

Less: cash, cash equivalents and restricted cash
42,542

 
123,970

Net debt
345,106

 
194,686

Equity, exclusive of non-controlling interest
239,954

 
263,990

Total capital
$
585,060

 
$
458,676

Ratio of net debt-to-capital(2)
59.0
%
 
42.4
%
 
(1)
The ratio of debt-to-capital is computed as the quotient obtained by dividing total debt, net by total capital (the sum of total debt, net plus equity), exclusive of non-controlling interest.  

(2)
The ratio of net debt-to-capital is computed as the quotient obtained by dividing net debt (which is total debt, net less cash, cash equivalents and restricted cash to the extent necessary to reduce the debt balance to zero) by total capital, exclusive of non-controlling 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 debt, 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.

 






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