Fourth Quarter 2016 Highlights - as compared to the prior year fourth quarter (unless otherwise noted)
  • Earnings per share increased 5% to $0.68, on net income of $17.1 million
  • Total revenue increased 16% to $261.7 million
  • Homebuilding revenue increased 17% to $256.4 million
  • Homes delivered increased by 11% to 808 units
  • Average selling price for homes delivered increased 6% to $317,000 per home
  • Communities with deliveries increased to 61 from 57 and selling communities decreased to 58 from 62

SCOTTSDALE, Ariz., Feb. 23, 2017 (GLOBE NEWSWIRE) -- AV Homes, Inc. (Nasdaq:AVHI), a developer and builder of residential communities in Florida, the Carolinas and Arizona, today announced results for its fourth quarter and year ended December 31, 2016.  Total revenue for the fourth quarter of 2016 increased 16% to $261.7 million from $225.7 million in the fourth quarter of 2015.  Net income and diluted earnings per share increased to $17.1 million and $0.68 per share, respectively, compared to net income of $15.9 million and $0.65 per share in the fourth quarter of 2015.

"We are very pleased with our strong fourth quarter of 2016 results and the completion of a solid year of operating performance," said Roger A. Cregg, President and Chief Executive Officer.   "With increases in homes delivered, and homebuilding revenue, and improved operating leverage, we generated over $17 million of net income for the fourth quarter and exceeded our goals within our financial outlook for the full year."  Cregg continued, "The full year of 2016 was highlighted with increases in homebuilding revenue of 53% and net income of 203%.  We head into 2017 with a solid balance sheet, positioning the company to take advantage of new community investments and potential acquisition opportunities to continue our long-term profitable growth strategy."

The increase in total revenue was driven by volume increases due to a greater number of communities with deliveries and higher average selling prices due to price increases and improvements in the mix of homes sold.  During the fourth quarter of 2016, the Company delivered 808 homes, an 11% increase from the 731 homes delivered during the fourth quarter of 2015, and the average unit price per closing improved 6% to approximately $317,000 from approximately $299,000 in the fourth quarter of 2015. 

Homebuilding gross margin was 17.6% in the fourth quarter of 2016 compared to 19.2% in the fourth quarter of 2015 with declines in Arizona and the Carolinas more than offsetting gross margin improvements in Florida.  Homebuilding gross margin is inclusive of the impact associated with the expensing of previously capitalized interest of 2.6% and 2.3% in the 2016 and 2015 periods, respectively.

Total SG&A expense as a percent of homebuilding revenue improved to 11.1% in the fourth quarter of 2016 from 12.4% in the fourth quarter of 2015.  Homebuilding SG&A expense as a percentage of homebuilding revenue was 9.5% in the fourth quarter of 2016 compared to 10.0% in the fourth quarter of 2015.  The improvement was primarily due to the increased scale of the business in each of our divisions, which allows us to leverage our cost base.  Corporate general and administrative expenses as a percentage of homebuilding revenue improved to 1.7% in the fourth quarter of 2016 from 2.4% in the same period a year ago primarily driven by the continued achievement of favorable cost leverage by effectively managing costs while growing the revenue of the business.

The number of new housing contracts signed, net of cancellations, during the three months ended December 31, 2016 decreased 14.7% to 430, compared to 504 units during the same period in 2015.  The decrease in housing contracts was primarily attributable to the decrease in selling communities to 58 from 62 and the wind down of additional communities expected to sell out in early 2017.  The average sales price on contracts signed in the fourth quarter of 2016 increased 10.1% to approximately $338,000 from approximately $307,000 in the fourth quarter of 2015.  The aggregate dollar value of the contracts signed during the fourth quarter decreased 6.1% to $145.3 million, compared to $154.7 million during the same period one year ago.  The backlog value of homes under contract but not yet closed as of December 31, 2016 decreased 3.2% to $236.2 million on 703 units, compared to $243.9 million on 799 units as of December 31, 2015.

Results for the Year Ended December 31, 2016

Total revenue for the year ended December 31, 2016 increased 51% to $779.3 million from $517.8 million for the year ended December 31, 2015 and pre-tax income increased over 200% to $37.6 million from $12.4 million over the prior year period.  Net income and diluted earnings per share increased to $147.1 million and $5.66 per share, respectively, compared to net income of $12.0 million and $0.54 per share for the year ended December 31, 2015.  The net income and per share earnings for 2016 includes the favorable impact of the reversal of the valuation allowance on our deferred tax assets in the amount of $124.5 million, or $4.70 per share.

The increase in total revenue was driven by volume increases due to a greater number of communities with deliveries due to organic and acquisition-related growth, and higher average selling prices due to price increases and improvements in the mix of homes sold.  During the year ended December 31, 2016, the Company delivered 2,465 homes, a 40.9% increase from the 1,750 homes delivered during the year ended December 31, 2015, and the average unit price per closing improved 9% to approximately $310,000 from approximately $285,000 for the year ended December 31, 2015. 

Homebuilding gross margin was 18.1% in 2016 compared to 18.7% in 2015.  Homebuilding gross margin is inclusive of the impact associated with the expensing of previously capitalized interest of 2.7% and 2.2% in the 2016 and 2015 periods, respectively. 

Total SG&A expense as a percent of homebuilding revenue improved to 13.1% for the year ended December 31, 2016 from 16.0% in 2015.  Homebuilding SG&A expense as a percentage of homebuilding revenue was 11.0% for the year ended December 31, 2016 compared to 12.6% in 2015.  The improvement was primarily due to the increased scale of the business in each of our divisions, which allows us to leverage the cost base.  Corporate general and administrative expenses as a percentage of homebuilding revenue improved to 2.1% for the year ended December 31, 2016 from 3.4% in the same period a year ago primarily driven by the continued achievement of favorable cost leverage by effectively managing costs while growing the revenue of the business.

The number of new housing contracts signed, net of cancellations, during the year ended December 31, 2016 increased 16.4% to 2,369, compared to 2,035 units during the same period in 2015.  The increase in housing contracts was primarily attributable to increases in the Carolinas segment.  The average sales price on contracts signed during the year ended December 31, 2016 increased 10.0% to approximately $318,000 from approximately $289,000 in 2015.  The aggregate dollar value of the contracts signed during 2016 increased 28.0% to $753.9 million, compared to $589.0 million during the same period one year ago.

2017 Outlook

The Company issued the following expectations for its financial performance in 2017:
  • Communities with closings at year end are expected to be approximately 50 to 55;
  • Closings are expected to be approximately 2,225 units;
  • Average Selling Price (ASP) on homes closed is expected to increase to approximately $333,000;
  • Homebuilding Gross Margin is expected to be approximately 18%, inclusive of approximately 2.8% of previously capitalized interest;
  • Homebuilding SG&A is expected to improve to approximately 10.7% of homebuilding revenue;
  • Corporate G&A is expected to be approximately 2.5% of homebuilding revenue;
  • Interest expense and land sale profit are expected to be similar to 2016 amounts;
  • Pre-tax income is expected to be approximately $36 million; and
  • Effective tax rate is expected to be approximately 38.5%, with minimal cash taxes paid due to the Company's NOL position.

The Company will hold a conference call and webcast on Friday, February 24, 2017 to discuss its fourth quarter and full year financial results.  The conference call will begin at 8:30 a.m. EST.  The conference call can be accessed live over the telephone by dialing (877) 643-7158 or for international callers by dialing (914) 495-8565; please dial-in 10 minutes before the start of the call. A replay will be available on February 24, 2017 beginning at 11:30 a.m. EST and can be accessed by dialing (855) 859-2056 or for international callers by dialing (404) 537-3406; the conference ID is 70283814. The telephonic replay will be available until March 1, 2017. The webcast, which can be accessed by going to the Investor Relations section of AV Homes' website at www.avhomesinc.com, is accompanied by an Investor Presentation.  A replay of the original webcast will be available shortly after the call.

AV Homes, Inc. is engaged in homebuilding and community development in Florida, the Carolinas and Arizona. Its principal operations are conducted in the greater Orlando, Jacksonville, Phoenix, Charlotte and Raleigh markets. The Company builds communities that serve both active adults (55 years and older) as well as people of all ages. AV Homes common shares trade on NASDAQ under the symbol AVHI. For more information, visit www.avhomesinc.com.

This news release, the conference call, webcast and other related items contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.  Such forward looking statements, which include references to our outlook for 2017, involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the cyclical nature of the homebuilding industry and its dependence on broader economic conditions; availability and suitability of undeveloped land and improved lots; our ability to develop communities within expected timeframes; increases in interest rates and availability of mortgage financing; our ability to access sufficient capital; our ability to generate sufficient cash to service our indebtedness and potential need for additional financing; terms of our financing documents that may restrict our operations and corporate actions; fluctuations in interest rates; our ability to purchase outstanding notes upon certain fundamental changes; our ability to obtain letters of credit and surety bonds; cancellations of home sale orders; competition for home buyers, properties, financing, raw materials and skilled labor; declines in home prices in our primary regions; inflation affecting homebuilding costs or deflation affecting declines in spending and borrowing levels; the prices and supply of building materials and skilled labor; the availability and skill of subcontractors; our ability to successfully integrate acquired businesses; elimination or reduction of tax benefits associated with home ownership; warranty and construction defect claims; health and safety incidents in homebuilding activities; the seasonal nature of our business; impacts of weather conditions and natural disasters; resource shortages and rate fluctuations; value and costs related to our land and lot inventory; overall market supply and demand for new homes; our ability to recover our costs in the event of reduced home sales; conflicts of interest involving our largest stockholder; contractual restrictions under a stockholders agreement with our largest stockholder; dependence on our senior management; effect of our expansion efforts on our cash flows and profitability; effects of government regulation of development and homebuilding projects; raising healthcare costs; development liabilities that may impose payment obligations on us; our ability to utilize our deferred income tax asset; costs of environmental compliance; impact of environmental changes; dependence on digital technologies and potential interruptions; future sales or dilution of our equity; impairment of intangible assets; and other factors described in our most recent Annual Report on Form 10-K for and our other filings with the Securities and Exchange Commission, which filings are available on www.sec.gov.  Forward-looking statements are based on the expectations, estimates, or projections of management as of the date of this news release, the conference call, the Investor Presentation and the webcast. AV Homes disclaims any intention or obligation to update or revise any forward-looking statements to reflect subsequent events and circumstances, except to the extent required by applicable law.  
AV HOMES, INC. AND SUBSIDIARIES Unaudited Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except per share data)
                           
    Three Months Ending   Twelve Months Ending  
    December 31,   December 31,  
    2016     2015   2016     2015    
Revenues                          
Homebuilding   $ 256,382     $ 218,534   $ 764,041     $ 498,915    
Amenity and other     2,864       4,190     11,698       12,385    
Land sales     2,446       2,996     3,566       6,466    
Total revenues     261,692       225,720     779,305       517,766    
                           
Expenses                          
Homebuilding cost of revenues     211,181       176,627     625,471       405,538    
Amenity and other     3,091       3,668     11,148       10,702    
Land sales     545       438     1,230       823    
Total real estate expenses     214,817       180,733     637,849       417,063    
Selling, general and administrative expenses     28,580       27,094     100,219       79,586    
Interest income and other     (15 )     17     (16 )     (308 )  
Interest expense     814       1,536     3,667       9,039    
Total expenses     244,196       209,380     741,719       505,380    
                           
Income before income taxes     17,496       16,340     37,586       12,386    
Income tax expense (benefit)     438       436     (109,521 )     436    
Net income and comprehensive income   $ 17,058     $ 15,904   $ 147,107     $ 11,950    
                           
Basic earnings per share   $ 0.77     $ 0.72   $ 6.58     $ 0.54    
Basic weighted average shares outstanding     22,175       22,021     22,346       22,010    
                           
Diluted earnings per share   $ 0.68     $ 0.65   $ 5.66     $ 0.54    
Diluted weighted average shares outstanding     26,356       27,717     26,509       22,130    

Note: Selling, general and administrative expenses related to homebuilding previously included in homebuilding expenses have been combined with corporate general and administrative expenses and reclassified into a separate new line item called "Selling, general and administrative expenses" to enhance the visibility to our core homebuilding operations and conform with standard industry presentation. For the three and twelve months ended December 31, 2015, selling, general and administrative costs of $22.0 million and $62.7 million, respectively, were previously presented in homebuilding expenses are now included in selling, general and administrative expenses. 
AV HOMES, INC. AND SUBSIDIARIES Unaudited Consolidated Balance Sheets (in thousands)
               
    December 31,   December 31,  
    2016     2015    
Assets            
Cash and cash equivalents   $ 67,792     $ 46,898    
Restricted cash     1,231       26,948    
Land and other inventories     584,408       582,531    
Receivables     10,827       7,178    
Property and equipment, net     33,680       34,973    
Investments in unconsolidated entities     1,172       1,172    
Prepaid expenses and other assets     11,581       17,144    
Deferred tax assets, net     110,257          
Goodwill     19,285       19,295    
Total assets   $ 840,233     $ 736,139    
               
Liabilities and Stockholders' Equity              
               
Liabilities              
Accounts payable   $ 37,387     $ 33,606    
Accrued and other liabilities     34,298       38,826    
Customer deposits     9,979       8,629    
Estimated development liability     32,102       32,551    
Senior debt, net     275,660       320,846    
Total liabilities     389,426       434,458    
               
Stockholders' equity              
Common stock, par value $1 per share     22,624       22,444    
Authorized: 50,000,000 shares              
Issued: 22,623,506 shares as of December 31, 2016              
    22,444,028 shares as of December 31, 2015              
Additional paid-in capital     401,558       399,719    
Retained earnings (deficit)     29,644       (117,463 )  
      453,826       304,700    
Treasury stock, at cost, 110,874 shares as of December 31, 2016, and 2015, respectively     (3,019 )     (3,019 )  
Total stockholders' equity     450,807       301,681    
Total liabilities and stockholders' equity   $ 840,233     $ 736,139    

 
AV HOMES, INC. AND SUBSIDIARIES Unaudited Supplemental Information (in thousands)
                           
The following table represents interest incurred, interest capitalized, and interest expense for the three and twelve months ended December 31, 2016 and 2015:
                           
    Three Months Ending   Twelve Months Ending  
    December 31,   December 31,  
    2016     2015     2016     2015    
Interest incurred   $ 6,272     $ 7,205     $ 26,145     $ 28,207    
Interest capitalized     (5,458 )     (5,669 )     (22,478 )     (19,168 )  
Interest expense   $ 814     $ 1,536     $ 3,667     $ 9,039    

The following table represents depreciation and amortization expense and the amortization of previously capitalized interest for the three and twelve months ended December 31, 2016 and 2015:  
                           
    Three Months Ending   Twelve Months Ending  
    December 31,   December 31,  
    2016   2015   2016   2015  
Depreciation and amortization (1)   $ 907   $ 908   $ 3,499   $ 3,693  
Amortization of previously capitalized interest     6,753     5,113     20,766     11,041  
                           
(1) Depreciation and amortization does not include the amortization of debt issuance costs, which is recorded in interest expense.

The following table represents a reconciliation of the net income and weighted average shares outstanding for the calculation of basic and diluted earnings per share for the three and twelve months ended December 31, 2016 and 2015:
                           
    Three Months Ending   Twelve Months Ending  
    December 31,   December 31,  
    2016   2015   2016   2015  
Numerator:                          
Basic net income   $ 17,058   $ 15,904   $ 147,107   $ 11,950  
Effect of dilutive securities     742     2,077     2,969      
Diluted net income   $ 17,800   $ 17,981   $ 150,076   $ 11,950  
                           
Denominator:                          
Basic weighted average shares outstanding     22,175     22,021     22,346     22,010  
Effect of dilutive securities     4,181     5,696     4,163     120  
Diluted weighted average shares outstanding     26,356     27,717     26,509     22,130  
                           
Basic earnings per share   $ 0.77   $ 0.72   $ 6.58   $ 0.54  
Diluted earnings per share   $ 0.68   $ 0.65   $ 5.66   $ 0.54  

The following table provides a comparison of certain financial data related to our operations for the three and twelve months ended December 31, 2016 and 2015 (in thousands):
                           
    Three Months Ending   Twelve Months Ending  
    December 31,   December 31,  
    2016     2015     2016     2015    
Operating income:                          
Florida                          
Revenues:                          
Homebuilding   $ 121,796     $ 114,776     $ 373,383     $ 300,260    
Amenity and other     2,864       4,190       11,698       12,385    
Land sales     2,446       2,996       3,116       6,466    
Total revenues     127,106       121,962       388,197       319,111    
Expenses:                          
Homebuilding cost of revenues     95,327       89,968       291,372       239,001    
Homebuilding selling, general and administrative     12,739       12,328       46,113       38,500    
Amenity and other     3,084       3,649       11,062       10,587    
Land sales     545       438       770       823    
Segment operating income   $ 15,411     $ 15,579     $ 38,880     $ 30,200    
                           
Carolinas                          
Revenues:                          
Homebuilding   $ 86,732     $ 64,576     $ 238,549     $ 114,277    
Land sales                 265          
Total revenues     86,732       64,576       238,814       114,277    
Expenses:                          
Homebuilding cost of revenues     74,775       54,058       205,348       95,232    
Homebuilding selling, general and administrative     7,282       5,487       22,807       12,205    
Land sales                 289          
Segment operating income   $ 4,675     $ 5,031     $ 10,370     $ 6,840    
                           
Arizona                          
Revenues:                          
Homebuilding   $ 47,854     $ 39,182     $ 152,109     $ 84,378    
Land sales                 185          
Total revenues     47,854       39,182       152,294       84,378    
Expenses:                          
Homebuilding cost of revenues     41,079       32,601       128,751       71,305    
Homebuilding selling, general and administrative     4,221       4,135       14,994       11,981    
Amenity and other     7       19       86       115    
Land sales                 171          
Segment operating income   $ 2,547     $ 2,427     $ 8,292     $ 977    
                           
Operating income   $ 22,633     $ 23,037     $ 57,542     $ 38,017    
                           
Unallocated income (expenses):                          
Interest income and other     15       (17 )     16       308    
Corporate general and administrative expenses     (4,338 )     (5,144 )     (16,305 )     (16,900 )  
Interest expense     (814 )     (1,536 )     (3,667 )     (9,039 )  
Income before income taxes     17,496       16,340       37,586       12,386    
Income tax expense (benefit)     438       436       (109,521 )     436    
Net income   $ 17,058     $ 15,904     $ 147,107     $ 11,950    

Data from closings for the Florida, Carolinas and Arizona segments for the three and twelve months ended December 31, 2016 and 2015 is summarized as follows (dollars in thousands):
                   
              Average  
    Number         Price  
Three Months Ended December 31,   of Units   Revenues   Per Unit  
2016                  
Florida   428   $ 121,796   $ 285  
Carolinas   233     86,732     372  
Arizona   147     47,854     326  
Total   808   $ 256,382     317  
                   
2015                  
Florida   420   $ 114,777   $ 273  
Carolinas   183     64,575     353  
Arizona   128     39,182     306  
Total   731   $ 218,534     299  

 
                   
              Average  
    Number         Price  
Twelve Months Ended December 31,    of Units    Revenues   Per Unit  
2016                  
Florida   1,332   $ 373,383   $ 280  
Carolinas   646     238,549     369  
Arizona   487     152,109     312  
Total   2,465   $ 764,041     310  
                   
2015                  
Florida   1,124   $ 300,260   $ 267  
Carolinas   328     114,277     348  
Arizona   298     84,378     283  
Total   1,750   $ 498,915     285  

Data from contracts signed for the Florida, Carolinas and Arizona segments for the three and twelve months ended December 31, 2016 and 2015 is summarized as follows (dollars in thousands):
                           
    Gross                    
    Number       Contracts         Average  
    of Contracts       Signed, Net of    Dollar   Price Per  
Three Months Ended December 31,   Signed   Cancellations   Cancellations   Value   Unit  
2016                          
Florida   266   (52 )   214   $ 61,834   $ 289  
Carolinas   171   (21 )   150     60,712     405  
Arizona   94   (28 )   66     22,730     344  
Total   531   (101 )   430   $ 145,276     338  
                           
2015                          
Florida   366   (66 )   300   $ 83,679   $ 279  
Carolinas   122   (16 )   106     39,216     370  
Arizona   130   (32 )   98     31,815     325  
Total   618   (114 )   504   $ 154,710     307  

                           
    Gross                    
    Number       Contracts         Average  
    of Contracts       Signed, Net of    Dollar   Price Per  
Twelve Months Ended December 31,   Signed   Cancellations   Cancellations   Value   Unit  
2016                          
Florida   1,511   (253 )   1,258   $ 356,247   $ 283  
Carolinas   762   (74 )   688     261,539     380  
Arizona   559   (136 )   423     136,157     322  
Total   2,832   (463 )   2,369   $ 753,943     318  
                           
2015                          
Florida   1,509   (242 )   1,267   $ 344,171   $ 272  
Carolinas   331   (42 )   289     102,851     356  
Arizona   590   (111 )   479     142,004     296  
Total   2,430   (395 )   2,035   $ 589,026     289  

Backlog for the Florida, Carolinas and Arizona segments as of December 31, 2016 and 2015 is summarized as follows (dollars in thousands):
                   
              Average  
    Number   Dollar    Price  
As of December 31,   of Units   Volume   Per Unit  
2016                  
Florida   342   $ 100,184   $ 293  
Carolinas   192     79,325     413  
Arizona   169     56,731     336  
Total   703   $ 236,240     336  
                   
2015                  
Florida   416   $ 116,061   $ 279  
Carolinas   150     56,427     376  
Arizona   233     71,459     307  
Total   799   $ 243,947     305  

Investor Contact: 	Mike BurnettEVP, Chief Financial Officer480-214-7408m.burnett@avhomesinc.com

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