CalAtlantic Group, Inc., Arlington, Va. (NYSE: CAA) after market close Thursday reported net income of $82.6 million, or $0.62 per diluted share for the first quarter ended March 31, 2017. The gain compares to income of $72.7 million, or $0.52 per diluted share in the prior-year quarter. Analysts were expecting a profit of $0.55 per share.
Revenue from home sales for the 2017 first quarter increased 13%, to $1.3 billion, as deliveries rose 10% to 3,012 and a 3% increase in the home price to $444,000. The increase in average home price was primarily attributable to product mix and general price increases within select markets.
Net new orders for the 2017 first quarter were up 4% from the 2016 first quarter, to 4,304 homes, with the dollar value of these orders up 7%. The company’s monthly sales absorption rate was 2.6 per community for the 2017 first quarter, up 6% compared to the 2016 first quarter and up 56% from the 2016 fourth quarter, consistent with normal seasonal patterns. The company’s cancellation rate for the 2017 first quarter was 13%, up compared to 12% for the 2016 first quarter and down from 20% for the 2016 fourth quarter.
The dollar value of homes in backlog increased 1% to $3.3 billion, or 7,109 homes, compared to $3.2 billion, or 7,019 homes, for the 2016 first quarter, and increased 22% compared to $2.7 billion, or 5,817 homes, for the 2016 fourth quarter. The increase in year-over-year backlog value was driven primarily by the 6% increase in the Company’s monthly sales absorption rate. As of March 31, 2017, the average gross margin of the 7,109 total homes in backlog was 20.4%.
The gross margin from homes sales was 20.5% and was negatively impacted by a shift in community mix, a competitive pricing environment, and an increase in direct construction costs per home. Selling, general and administrative expenses for the 2016 first quarter were $156.3 million, or 11.7%, as compared to $136.7 million, or 11.6%, for the 2016 first quarter. This 10 basis point increase was primarily the result of an increase in co-broker commissions.
During the quarter, the company spent $294.2 million on land purchases and development costs, compared to $371.6 million for the 2016 first quarter. CAA purchased $165.3 million of land, consisting of 3,075 home sites, of which 34% (based on home sites) is located in the North region, 36% in the Southeast region, 25% in the Southwest region, and 5% in the West region. As of March 31, 2017, the company owned or controlled 64,903 home sites, of which 46,392 were owned and actively selling or under development, 13,905 were controlled or under option, and the remaining 4,606 home sites were held for future development or for sale.
CAA ended the quarter with $787.4 million of available liquidity, including $143.9 million of unrestricted home building cash and $643.5 million available to borrow under its $750 million revolving credit facility. The Company’s home building debt to book capitalization as of March 31, 2017 and 2016 was 44.4% and 48.2%, respectively, and adjusted net home building debt to adjusted book capitalization was 43.1% and 46.8%, respectively.
Larry Nicholson, President and Chief Executive Officer of CalAtlantic Group, Inc., commented, “We saw order growth accelerate through the quarter and we remain well positioned for a strong finish to the spring selling season.”
