WCI Communities, Inc. (NYSE: WCIC), Bonita Springs, Fla., which has entered into a definitive merger agreement with Lennar Corp. (NYSE:LEN), announced results for the third quarter ended September 30, 2016. Per-share profit was $0.33; analysts were expecting $0.28.
Highlights compared to the same quarter last year include:
- Deliveries of 345, up 33.7%
- Home building revenues of $156.6 million, up 30.0%
- Net income attributable to common shareholders of $8.8 million including merger expenses of $7.7 million
- Adjusted EBITDA of $26.6 million, up 25.7%
- Earnings per diluted share of $0.33 including merger expenses of $0.18 per diluted share
- Gross margin from homes delivered of 26.2%
- Adjusted gross margin from homes delivered of 28.6%
- Debt to capital of 33.7%
- Net debt to net capitalization of 26.4%
- Selling, general and administrative expenses as a percent of home building revenues improved by 50 basis points
- Average selling price per new order of $414,000, down 8.0%
- Average selling price per new order, excluding high-rise tower new orders, up 4.2%
- Contract value of new orders of $96.4 million, down 22.8%
- New orders of 233, down 15.9%
- Backlog contract value of $246.7 million, down 17.9%
- Backlog units totaling 474, down 26.6%
- Land portfolio totals 14,011 owned or controlled home sites
The company delivered 345 homes in the third quarter of 2016, an increase of 87 units, or 33.7%, from the prior year quarter. The average selling price per home delivered during the quarter ended September 30, 2016 was $454,000, a decrease of 1.7%, compared to $462,000 in the third quarter of 2015.
The company generated total revenues of $186.2 million for the quarter ended September 30, 2016, an increase of $36.0 million, or 24.0%, compared to $150.2 million in the third quarter of 2015. Compared to the prior year quarter, Home building revenues grew 30.0%, Real Estate Services revenues were effectively flat, and Amenities revenues decreased by 4.3%.
Selling, general and administrative expenses as a percentage of home building revenues were 12.8%, an improvement of 50 basis points from the prior year period. Merger expenses related to the previously announced merger agreement with Lennar Corporation totaled $7.7 million in the third quarter of 2016.
For the quarter ended September 30, 2016, net income attributable to common shareholders was $8.8 million, or $0.33 per diluted share, including merger related expenses of $7.7 million, or $0.18 per diluted share. The prior year period net income attributable to common shareholders was $10.2 million, or $0.38 per diluted share.
Home building gross margin percentage was 26.2% in the third quarter of 2016, representing a decline of 70 basis points as compared to the third quarter of 2015. Adjusted gross margin from homes delivered, a non-GAAP financial measure, was 28.6% in the quarter ended September 30, 2016, representing a 90 basis point decrease from the prior year quarter. The decline was primarily attributable to a shift in delivery mix as the percentage of deliveries from communities owned as of September 2009 declined from 62% in the prior year quarter to 42% in the third quarter of 2016.
New orders during the third quarter of 2016 decreased 15.9% to 233, and the average selling price per new order decreased by 8.0% to $414,000 as compared to the third quarter of 2015. The contract value of new orders was $96.4 million for the third quarter of 2016, a decrease of $28.4 million from the prior year quarter.
As of September 30, 2016, the backlog contract value was $246.7 million, a decrease of $53.8 million from the prior year. The average selling price of backlog units was $520,000, an increase of 11.8% from the prior year.
On September 22, 2016, WCI Communities and Lennar Corporation entered into a definitive merger agreement under which Lennar will acquire all the outstanding shares of WCI Communities. The merger consideration for each WCI share will be $11.75 in cash and a fraction of a share of Lennar Class A common stock with a value of $11.75. Lennar has the option of varying the portions of the $23.50 per share merger consideration that will be cash and Lennar stock, including paying the entire merger consideration in cash. The transaction has been approved by both companies’ Board of Directors.
