TRI Pointe Group, Inc. Irvine (NYSE:TPH) on Wednesday morning reported net income of $32.7 million, or $0.21 per diluted share, for the second quarter of 2017 ended June 30. Analysts were expecting a profit of $0.20 per share.
The gain compared to net income of $73.9 million, or $0.46 per diluted share, for the second quarter of 2016. TRIPointe said the decrease in net income was primarily driven by two land transactions in the second quarter of 2016 representing $61.6 million in land and lot sales revenue and $52.7 million in land and lot gross margin, with no comparable transactions in the current year period.
Home sales revenue increased $11.9 million, or 2%, to $568.8 million for the quarter, compared to $556.9 million for the second quarter of 2016. The increase was primarily attributable to an 8% increase in new home deliveries to 1,071, offset by a 5% decrease in average selling price of homes delivered to $531,000 compared to $560,000 in the second quarter of 2016.
New home orders increased 15% to 1,445 homes, up 1,258 homes for the same period in 2016. Average selling communities increased 6% to 126.8 for the second quarter of 2017 compared to 119.5 for the second quarter of 2016. The company’s overall absorption rate per average selling community for the second quarter of 2017 was 11.4 orders (3.8 monthly) compared to 10.5 orders (3.5 monthly) during the second quarter of 2016.
The company ended the quarter with 2,108 homes in backlog, up 17%, representing approximately $1.3 billion in dollar value, up 31%. The average sales price of homes in backlog as of June 30, 2017 increased $64,000, or 11%, to $635,000 compared to $571,000 at June 30, 2016.
Home building gross margin percentage for the second quarter of 2017 decreased to 20.1% compared to 22.3% for the second quarter of 2016; however, it increased 130 basis points sequentially from the first quarter of 2017. Excluding interest and impairments and lot option abandonments in cost of home sales, adjusted home building gross margin percentage was 22.5% for the second quarter of 2017 compared to 24.4% for the second quarter of 2016. The decrease in home building gross margin percentage was largely due to the mix of homes delivered, in particular a lower share of homes delivered from long-dated California communities, which produce gross margins above the company average.
Selling, general and administrative expense for the second quarter of 2017 increased to 11.6% of home sales revenue as compared to 11.3% for the second quarter of 2016 due to the incremental general and administrative costs.
At quarter’s end, ratios of debt-to-capital and net debt-to-net capital were 47.6% and 45.8%. During the quarter, TRIPointe successfully issued $300 million aggregate principal amount of 5.25% Senior Notes due 2027,
extended existing unsecured revolving credit facility maturity date by two years to May 18, 2021 and decreased total commitments from $625 million to $600 million.
The company ended the quarter with cash of $114.9 million and $442.2 million of availability under the unsecured revolving credit facility.
These results are a testament to the overall health of the housing market, TRI Pointe’s strong market positioning and our ongoing commitment to operational excellence,” said TRI Pointe Group Chief Executive Officer Doug Bauer. Added Group Chief Operating Officer Tom Mitchell: “We have placed an added emphasis on creating living spaces that appeal to two of the biggest buyer segments in the marketplace – millennials and active adults – and our strong performance this quarter is a direct result of these efforts.
