Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. TRI Pointe Group, Inc. (1561680) 10-Q published on Apr 25, 2019 at 4:23 pm
Reporting Period: Mar 30, 2019
On March 29, 2019, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), which amended and restated the Company’s Amended and Restated Credit Agreement, dated as of July 7, 2015. The Credit Facility (as defined below), which matures on March 29, 2023, consists of a $600 million revolving credit facility (the “Revolving Facility”) and a $250 million term loan facility (the “Term Facility” and together with the Revolving Facility, the “Credit Facility”). The Term Facility includes a 90 day delayed draw provision. The Company plans to draw $250 million from the Term Facility in June of 2019 in connection with the maturity of the 2019 Notes. The Company may increase the Credit Facility to not more than $1 billion in the aggregate, at its request, upon satisfaction of specified conditions. The Revolving Facility contains a sublimit of $75 million for letters of credit. The Company may borrow under the Revolving Facility in the ordinary course of business to fund its operations, including its land acquisition, land development and homebuilding activities. Borrowings under the Revolving Facility will be governed by, among other things, a borrowing base. Interest rates on borrowings under the Revolving Facility will be based on either a daily Eurocurrency base rate or a Eurocurrency rate, in either case, plus a spread ranging from 1.25% to 2.00%, depending on the Company’s leverage ratio. Interest rates on borrowings under the Term Facility will be based on either a daily Eurocurrency base rate or a Eurocurrency rate, in either case, plus a spread ranging from 1.10% to 1.85%, depending on the Company’s leverage ratio.
As of March 31, 2019, we had no outstanding debt under the Credit Facility and $818.8 million of availability after considering the borrowing base provisions and outstanding letters of credit. As of March 31, 2019, there was $5.3 million of capitalized debt financing costs, included in other assets on our consolidated balance sheet, related to the Credit Facility that
Under ASC 842 we recognize a right-of-use lease asset and a lease liability for contracts deemed to contain a lease at the inception of the contract. Our lease population is fully comprised of operating leases, which are now recorded at the net present value of future lease obligations existing at each balance sheet date. At the inception of a lease, or if a lease is subsequently modified, we determine whether the lease is an operating or financing lease. Key estimates involved with ASC 842 include the discount rate used to measure our future lease obligations and the lease term, where considerations include renewal options and intent to renew. Lease right-of-use assets are included in other assets and lease liabilities are included in accrued expenses and other liabilities on our consolidated balance sheet.
We are encouraged by the economic conditions experienced in the first quarter of 2019, which resulted in a steady monthly increase in net new home orders during the quarter. We attribute this positive trend to a growing U.S. economy, aided by lower interest rates, strong unemployment metrics, and stable core inflation projected to persist through the remainder of 2019. We feel our industry has favorable long term trends due to favorable demand characteristics from both the millennial and baby boomer demographics that are buffeted by the constraints of supply, labor and the regulatory environment. We expect fiscal and monetary policy to remain favorable to our industry throughout the remainder of 2019. However, the global economy appears to be showing signs of a slowdown that could negatively impact the U.S. economy, and uncertainty in the market can act as a significant headwind to our industry. We remain optimistic as the spring selling season has moved into the second quarter.
Maracay reported a 5% increase in net new home orders driven by an 18% increase in monthly absorption rate offset by an 11% decrease in average selling communities. The increase in Maracay’s monthly absorption rate to 4.5 for the three months ended March 31, 2019 was driven by strong demand for Maracay’s new community openings during the quarter as well as continued strong market fundamentals. The decrease in average selling communities from the prior-year period was due to the timing of community openings and closings. Pardee Homes reported an 8% decrease in net new home orders driven by a 33% decrease in monthly absorption rate, offset by a 37% increase in average selling communities. Pardee Homes’ monthly absorption rate remained strong at 3.2 homes per community per month, but decreased from a robust 4.9 in the prior-year period. The increase in average selling communities was a result of increased community count in the Los Angeles, Inland Empire and San Diego markets. Net new home orders decreased 31% at Quadrant Homes due to a 32% decrease in monthly absorption rate during the current-year period as compared to the prior-year period. Quadrant Homes’ monthly absorption rate of 3.5 for the three months ended March 31, 2019 was consistent with seasonal expectations but represented a decrease compared to the substantially strong absorptions in the prior-year period. Trendmaker Homes’ net new home orders increased 57% due to a 32% increase in average selling communities and a 19% increase in monthly absorption rate. The increase in average selling communities was largely the result of the acquisition of a Dallas–Fort Worth-based homebuilder in the fourth quarter of 2018. During the three months ended March 31, 2019, Trendmaker Homes’ reported 85 net new home orders from 13.8 average selling communities in Dallas–Fort Worth. The increase in Trendmaker Homes’ monthly absorption rate was due to both the addition of our Dallas–Fort Worth operations as well as a slight improvement in the monthly absorption rate in Houston. TRI Pointe Homes’ net new home orders decreased 36% due to a 29% decrease in its monthly absorption rate and a 9% decrease in average selling communities. The decrease in TRI Pointe Homes’ monthly absorption rate was due both to the unfavorable comparison to the strong demand in the prior-year period discussed above and lower overall demand due to rising interest rates and affordability concerns in certain higher priced Northern and Southern California communities. Winchester Homes reported a 23% decrease in net new home orders as a result of a 27% decrease in our monthly absorption rate, offset by a 5% increase in average selling communities. The decrease in Winchester Homes’ monthly absorption rate was due to slower overall market conditions.
Maracay’s backlog dollar value increased 13% compared to the prior-year period largely due to a 16% increase in average sales price. The increase in average sales price was due to product mix and increasing prices due to favorable overall market conditions. Pardee Homes’ backlog dollar value increased 16% due to an increase in average sales price of 19%. The increase in average sales price is due to a higher priced mix of homes in backlog in both the San Diego and Las Vegas markets. Quadrant Homes’ backlog dollar value decreased 45% as a result of a 54% decrease in backlog units offset by a 20% increase in average sales price. The decrease in backlog units was a result of the decrease in net new home orders resulting from generally slower year over year market conditions in the Seattle area. The increase in average sales price was related to an increase in the number of homes in backlog from the core Seattle markets of King and Snohomish counties, which tend to have higher price points. Trendmaker Homes’ backlog dollar value increased 46% primarily due to an 65% increase in backlog units. The increase in backlog units resulted primarily from our expansion into Dallas–Fort Worth where we had 167 homes in backlog as of March 31, 2019. TRI Pointe Homes’ backlog dollar value decreased 48% due to a 44% decrease in backlog units and a 6% decrease in average sales price. The decrease in backlog units was due to a decrease in net new home orders in Northern and Southern California as a result of lower demand compared to the prior-year period. Winchester Homes’ backlog dollar value decreased 19% due to a 23% decrease in backlog units offset by a 6% increase in average sales price. The decrease in backlog units is a result of the 23% decrease in net new home orders for the three months ended March 31, 2019 as well as the reduced number of units in backlog as of the beginning of the current-year period as compared to the prior-year period.