TRI POINTE HOMES, INC.
CAUTIONARY NOTE CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). These forward-looking statements are based on our current intentions,
beliefs, expectations and predictions for the future, and you should not place
undue reliance on these statements. These statements use forward-looking
terminology, are based on various assumptions made by us, and may not be
accurate because of risks and uncertainties surrounding the assumptions that are
made.
Factors listed in this section-as well as other factors not included-may cause
actual results to differ significantly from the forward-looking statements
included in this Quarterly Report on Form 10-Q. There is no guarantee that any
of the events anticipated by the forward-looking statements in this Quarterly
Report on Form 10-Q will occur, or if any of the events occurs, there is no
guarantee what effect it will have on our operations, financial condition, or
share price.
We undertake no, and hereby disclaim any, obligation to update or revise any
forward-looking statements, unless required by law. However, we reserve the
right to make such updates or revisions from time to time by press release,
periodic report, or other method of public disclosure without the need for
specific reference to this Quarterly Report on Form 10-Q. No such update or
revision shall be deemed to indicate that other statements not addressed by such
update or revision remain correct or create an obligation to provide any other
updates or revisions.
Forward-Looking Statements
Forward-looking statements that are included in this Quarterly Report on Form
10-Q are generally accompanied by words such as "anticipate," "believe,"
"could," "estimate," "expect," "future," "goal," "intend," "likely," "may,"
"might," "plan," "potential," "predict," "project," "should," "target," "will,"
"would," or other words that convey the uncertainty of future events or
outcomes. These forward-looking statements may include, but are not limited to,
statements regarding our strategy, projections and estimates concerning the
timing and success of specific projects and our future production, land and lot
sales, the outcome of legal proceedings, the anticipated impact of natural
disasters or contagious diseases on our operations, operational and financial
results, including our estimates for growth, financial condition, sales prices,
prospects and capital spending.
Risks, Uncertainties and Assumptions
The major risks and uncertainties-and assumptions that are made-that affect our
business and may cause actual results to differ from these forward-looking
statements include, but are not limited to:
•the effects of the ongoing novel coronavirus ("COVID-19") pandemic, which are
highly uncertain and subject to rapid change, cannot be predicted and will
depend upon future developments, including the severity and duration of the
outbreak, the duration of existing and future social distancing and
shelter-in-place orders, further mitigation strategies taken by applicable
government authorities, the availability and efficacy of a vaccine, adequate
testing and treatments and the prevalence of widespread immunity to COVID-19;
•the effects of general economic conditions, including employment rates, housing
starts, interest rate levels, availability of financing for home mortgages and
strength of the U.S. dollar;
•market demand for our products, which is related to the strength of the various
U.S. business segments and U.S. and international economic conditions;
•the availability of desirable and reasonably priced land and our ability to
control, purchase, hold and develop such parcels;
•access to adequate capital on acceptable terms;
•geographic concentration of our operations, particularly within California ;
•levels of competition;
•the successful execution of our internal performance plans, including
restructuring and cost reduction initiatives;
•raw material and labor prices and availability;
•oil and other energy prices;
•the effects of U.S. trade policies, including the imposition of tariffs and
duties on homebuilding products and retaliatory measures taken by other
countries;
•the effects of weather, including the re-occurrence of drought conditions in
California ;
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•the risk of loss from earthquakes, volcanoes, fires, floods, droughts,
windstorms, hurricanes, pest infestations and other natural disasters, and the
risk of delays, reduced consumer demand, and shortages and price increases in
labor or materials associated with such natural disasters;
•the risk of loss from acts of war, terrorism, civil unrest or outbreaks of
contagious diseases, such as COVID-19;
•transportation costs;
•federal and state tax policies;
•the effects of land use, environment and other governmental laws and
regulations;
•legal proceedings or disputes and the adequacy of reserves;
•risks relating to any unforeseen changes to or effects on liabilities, future
capital expenditures, revenues, expenses, earnings, synergies, indebtedness,
financial condition, losses and future prospects;
•changes in accounting principles;
•risks related to unauthorized access to our computer systems, theft of our
homebuyers' confidential information or other forms of cyber-attack; and
•other factors described in "Risk Factors" included in our Annual Report on Form
10-K for the year ended December 31, 2019 and in other filings we make with the
Securities and Exchange Commission ("SEC").
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and related condensed notes thereto contained
elsewhere in this Quarterly Report on Form 10-Q. The information contained in
this Quarterly Report on Form 10-Q is not a complete description of our business
or the risks associated with an investment in our securities. We urge investors
to review and consider carefully the various disclosures made by us in this
report and in our other reports filed with the SEC , including our Annual Report
on Form 10-K for the year ended December 31, 2019 and subsequent reports on Form
8-K, which discuss our business in greater detail. The section entitled "Risk
Factors" set forth in Item 1A of our Annual Report on Form 10-K, and similar
disclosures in our other SEC filings, discuss some of the important risk factors
that may affect our business, results of operations and financial condition.
Investors should carefully consider those risks, in addition to the information
in this report and in our other filings with the SEC , before deciding to invest
in, or maintain an investment in, our common stock.
Overview
Our second quarter 2020 results reflect a sharp rebound from the
COVID-19-related economic uncertainty and reduced demand environment we
experienced towards the end of the first quarter and through the beginning of
the second quarter. In May, as state and local governments began relaxing
restrictions related to COVID-19 and economic conditions in our local markets
regained strength, new home demand began to steadily improve. This demand
continued to increase in June, which resulted in particularly strong new home
orders for the month, which increased approximately 28% as compared to June
2019 . We believe this demand environment was aided by favorable housing market
fundamentals, including low interest rates and a relatively constrained supply
of homes in many of our markets. Additionally, we believe our results for the
most recent quarter reflect the effects of fiscal and monetary stimulus
programs, a degree of pent-up demand among consumers, as well as evolving
consumer preferences as it relates to new home characteristics in light of the
COVID-19 pandemic and the degree to which many individuals are working from
home. Notwithstanding our positive results during the second quarter 2020 and
the strong demand we continue to experience in July, the COVID-19 pandemic has
impacted, and we expect that it will continue to impact, our business and
operations due to the high level of uncertainty that still exists as to future
developments, including the duration of the outbreak. With several states (and
local authorities within those states) re-imposing restrictions as a result of
recent increases in new COVID-19 cases and an historically high unemployment
rate, we remain cautious as we enter the back half of 2020.
Highlights of the quarter include an increase in homebuilding gross margin
percentage to 21.6% and a reduction in selling, general and administrative
expense as a percentage of home sales revenue to 10.8%. These improvements,
along with a slight increase in average sales price of homes delivered to
$624,000 , helped us achieve net income of $56.5 million , representing a 115%
increase compared to the prior-year period. Despite a substantially reduced
sales pace in April due to COVID-19, we ended the quarter with a monthly
absorption rate of 3.1, resulting in 1,332 net new home orders, down 11% from
the prior-year period. As of the end of the quarter, we had 2,558 units in
backlog, representing $1.7 billion in backlog dollar value, up 16% and 17% from
the prior-year period, respectively. In addition, we ended the quarter with
total liquidity of $1.0 billion , including cash and cash equivalents of $474.5
million and $559.4 million of availability under our Credit Facility.
Our results for the three months ended June 30, 2020 are not indicative of
trends that we expect to persist as uncertainty caused by COVID-19 and
government responses to the pandemic have impacted, and will continue to impact,
our business and operations.
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Impact of COVID-19 and Business Outlook
On March 11, 2020 , the World Health Organization declared the outbreak of
COVID-19 a global pandemic, and on March 13, 2020 , the United States issued a
proclamation declaring a national emergency concerning COVID-19. As a result of
the pandemic, a number of states and local governments issued shelter-in-place
orders or guidance for individuals not engaged in essential activities to remain
at home other than for essential needs. While our TRI Pointe Homes-Bay Area and
Quadrant Homes divisions were prohibited from engaging in residential
construction activities in the Bay Area in California and Seattle, Washington ,
respectively, for several weeks beginning in late March 2020 , residential
homebuilding operations are currently designated as an essential business
activity and remain exempt from the application of "stay-at-home" orders in all
of our markets. However, there can be no assurance that our homebuilding
operations will continue to remain exempt in all of our markets.
In response to the COVID-19 pandemic and measures taken by applicable
governmental authorities, in mid-March 2020 , we implemented new operating
measures relating to our sales, construction and other operations, including
protocols relating to social distancing, enhanced sanitation, monitoring of
symptoms related to COVID-19 and other processes. Under these measures, we
encouraged employees at our corporate and division offices whose duties could be
performed from home to work remotely; our new home galleries and design studios
transitioned to virtual appointments or appointment-only with pre-screened
individuals, as permitted by law; we instituted social distancing, hygiene and
sanitation guidelines in accordance with recommended protocols throughout the
organization (including in our new home sales galleries and design studios, and
with respect to trade partners and their employees on our jobsites); and we
postponed non-essential customer care service and warranty requests. As of the
date of this report, as permitted by applicable government orders or guidelines,
we have transitioned substantially all of our employees back to our corporate
and division offices (in many cases, using staggered or flexible schedules to
limit the number of individuals in our offices on a given day), have resumed
non-essential customer care service and warranty requests in substantially all
of our markets, and are no longer appointment-only in many of our new home
galleries. Our field-based team members continue to report to their assigned
communities in all jurisdictions where homebuilding has been deemed an essential
activity or is otherwise permitted by applicable government authorities. We have
also encouraged our employees to use our virtual working and communication
platforms in lieu of holding in-person meetings whenever possible.
The COVID-19 outbreak and the measures taken by governmental authorities to
delay and contain its spread have resulted in substantial adverse effects on the
United States economy and could result in a severe and/or prolonged economic
recession. The ongoing impact of COVID-19 on the United States economy and our
business and operations is unknown, as the velocity of this economic slowdown
and the subsequent job losses are unprecedented. While demand for new homes has
rebounded substantially over the last couple months, given the dynamic nature of
the situation, recent increases in new COVID-19 cases in many states and the
re-imposition by local and state governments throughout the U.S. of restrictive
measures, we cannot estimate the duration and severity of the impact of COVID-19
on the homebuilding industry or whether the current demand environment will
persist. To the extent we experience further negative impacts, however, we
anticipate that such impacts may include reduced consumer confidence,
difficulties in obtaining financing for potential homebuyers, shortages of or
increased costs associated with obtaining building materials, increased
unemployment levels, declining wage growth and fluctuating interest rates. The
uncertainty surrounding the containment of this virus, in the form of testing,
vaccination and/or treatments, is a key unknown, and the ultimate strategy
adopted to address the pandemic, if any, will substantially impact the form of
any resulting economic recovery. Similarly, the extent of the impact of COVID-19
on our liquidity and operational and financial performance will depend on, among
other things, existing and future federal, state and local restrictions
regarding virus containment, as we believe these factors are highly correlated
with consumer strength as it relates to employment and economic well-being.
As of the date of this report, we continue to build and sell homes in all of our
markets, and net new orders and traffic in our sales offices have increased
significantly as compared to the beginning of the second quarter.
Notwithstanding, the new protocols we implemented in response to the COVID-19
outbreak and the measures taken by governmental authorities to contain its
spread continue to affect our business and operations as of the date of this
report, in many regards, including by requiring a substantial investment of time
and resources by our management and organization and causing other material
disruptions to our normal operations.
As noted above, as of June 30, 2020 , we had total liquidity of $1.0 billion . We
have implemented a strategy to maximize operating cash flows and maintain our
existing liquidity by reducing or deferring cash expenditures as much as
possible,
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including negotiating with land sellers and developers to extend the closing
date of land acquisitions and lot take-downs, as well as postponing land
development activities for certain communities.
Consolidated Financial Data (in thousands, except per share amounts):
Six Months Ended June
Three Months Ended June 30, 30,
2020 2019 2020 2019
Homebuilding:
Home sales revenue $ 766,942
220 5,183 220 6,212
Other operations revenue 648 637 1,266 1,235
Total revenues 767,810 697,958 1,363,266 1,192,288
Cost of home sales 601,434 574,684 1,074,316 996,220
Cost of land and lot sales 374 5,562 576 7,057
Other operations expense 624 627 1,248 1,217
Sales and marketing 45,194 47,065 87,831 86,054
General and administrative 37,554 36,854 77,391 75,451
Restructuring charges 5,549 - 5,549 -
Homebuilding income from operations 77,081 33,166 116,355 26,289
Equity in loss of unconsolidated entities (25) (26) (39) (51)
Other (expense) income, net (6,328) 153 (5,955) 6,394
Homebuilding income before income taxes 70,728 33,293 110,361 32,632
Financial Services:
Revenues 2,296 756 3,890 1,058
Expenses 1,285 627 2,364 948
Equity in income of unconsolidated entities 2,932 1,972 4,488 2,747
Financial services income before income taxes 3,943 2,101 6,014 2,857
Income before income taxes 74,671 35,394 116,375 35,489
Provision for income taxes (18,143) (9,132) (27,964) (9,156)
Net income $ 56,528 Earnings per share Basic$ 0.43 $ 0.18 $ 0.67 $ 0.19 Diluted$ 0.43 $ 0.18 $ 0.67 $ 0.18 Three Months EndedJune 30, 2020 Compared to Three Months EndedJune 30, 2019 Net New Home Orders , Average Selling Communities and Monthly Absorption Rates by Segment Three Months EndedJune 30, 2020 Three Months EndedJune 30, 2019 Percentage ChangeNet New Average MonthlyNet New Average MonthlyNet New Average Monthly Home Selling Absorption Home Selling Absorption Home Selling Absorption Orders Communities Rates Orders Communities Rates Orders Communities Rates Maracay 162 19.0 2.8 253 15.0 5.6 (36) % 27 % (49) %Pardee Homes 423 44.0 3.2 522 44.5 3.9 (19) % (1) % (18) %Quadrant Homes 105 9.5 3.7 67 6.5 3.4 57 % 46 % 7 %Trendmaker Homes 205 29.8 2.3 247 37.5 2.2 (17) % (21) % 4 %TRI Pointe Homes 327 30.3 3.6 294 28.5 3.4 11 % 6 % 5 %Winchester Homes 110 11.7 3.1 108 14.0 2.6 2 % (16) % 22 % Total 1,332 144.3 3.1 1,491 146.0 3.4 (11) % (1) % (10) % - 37 -
-------------------------------------------------------------------------------- Net new home orders for the three months endedJune 30, 2020 decreased by 159 orders, or 11%, to 1,332, compared to 1,491 during the prior-year period. The decrease in net new home orders was due primarily to a 10% decrease in monthly absorption rates. New home order demand was severely impacted during the month of April, though began to slowly and steadily improve in May, followed by exceptionally strong demand in June. We believe this order demand volatility during the quarter can be attributed to the impacts of COVID-19 pandemic. As our results for the three months endedJune 30, 2020 have been impacted by the COVID-19 pandemic, they may not be indicative of results going forward. Maracay reported a 36% decrease in net new home orders driven by a 49% decrease in monthly absorption rate offset by a 27% increase in average selling communities. While the monthly absorption rate was 2.8 for the quarter, Maracay experienced extreme demand volatility during the quarter, with a substantially slow pace in April before increasing to a more robust pace in June, during which we achieved a monthly absorption rate of 4.7.Pardee Homes reported a 19% decrease in net new home orders driven by an 18% decrease in monthly absorption rates and a 1% decrease in average selling communities. The decrease in monthly absorption rate was due to the extreme market slowdown we experienced during April as a result of COVID-19. The absorption rates in the Inland Empire,Los Angeles ,San Diego andLas Vegas all improved significantly during May and June as restrictions related to COVID-19 were reduced. Net new home orders increased 57% atQuadrant Homes due to a 46% increase in average selling communities and a 7% increase in monthly absorption rate as compared to the prior-year period. Despite experiencing slow demand in the month of April due to COVID-19, market conditions improved significantly during the second half of the current-year period, as evidenced by a monthly absorption rate of 3.7 for the quarter. In addition, two of our new community openings were particularly well-received by the market, which resulted in an increased sales pace.Trendmaker Homes' net new home orders decreased 17% due to a 21% decrease in average selling communities offset by a 4% increase in monthly absorption rate. Despite being impacted by COVID-19 and the volatility in the oil market, ourHouston division achieved a monthly absorption rate of 2.1 for the current quarter, which represents a decrease of 0.2 as compared to the prior-year period. Our sales pace in both ourAustin andDallas-Fort Worth markets improved on a year-over-year basis, despite noticeable slowdown in both markets during April resulting from COVID-19.TRI Pointe Homes' net new home orders increased 11% due to a 6% increase in average selling communities and a 5% increase in the monthly absorption rate. The increase inTRI Pointe Homes' monthly absorption rate was driven by stronger market conditions in both ourBay Area andColorado markets compared to the prior-year period.Winchester Homes reported a 2% increase in net new home orders as a result of a 22% increase in monthly absorption rate offset by a 16% decrease in average selling communities. The increase inWinchester Homes' monthly absorption rate was due to strong order demand and more favorable overall market conditions compared to the prior-year period. Backlog Units, Dollar Value and Average Sales Price by Segment (dollars in thousands) As ofJune 30, 2020 As ofJune 30, 2019 Percentage Change Backlog Average Backlog Average Backlog Average Backlog Dollar Sales Backlog Dollar Sales Backlog Dollar Sales Units Value Price Units Value Price Units Value Price
Maracay 427$ 255,916 $ 599 385$ 211,935 $ 550 11 % 21 % 9 % Pardee Homes 739 494,785 670 790 602,054 762 (6) % (18) % (12) %Quadrant Homes 228 213,093 935 77 65,968 857 196 % 223 % 9 %
Trendmaker Homes 321 146,650 457 399 195,871 491 (20) % (25) % (7) % TRI Pointe Homes 552 383,826 695 384 252,708 658 44 % 52 % 6 % Winchester Homes 291 184,798 635 173 110,012 636 68 % 68 % - % Total 2,558$ 1,679,068 $ 656 2,208$ 1,438,548 $ 652 16 % 17 % 1 % Backlog units reflect the number of homes, net of actual cancellations experienced during the period, for which we have entered into a sales contract with a homebuyer but for which we have not yet delivered the home. Homes in backlog are generally delivered within three to nine months, although we may experience cancellations of sales contracts prior to delivery. Our cancellation rate of homebuyerswho contracted to buy a home but cancelled prior to delivery of the home (as a percentage of overall orders) was 21% and 16% during the three-month periods endedJune 30, 2020 and 2019, respectively. The dollar value of backlog was$1.7 billion as ofJune 30, 2020 , an increase of$240.5 million , or 17%, compared to$1.4 billion as ofJune 30, 2019 . This increase was due to an increase in backlog units of 350, or 16%, to 2,558 as ofJune 30, 2020 , compared to 2,208 as ofJune 30, 2019 , and a 1% increase in the average sales price of homes in backlog to$656,000 as ofJune 30, 2020 , compared to$652,000 as ofJune 30, 2019 . Maracay's backlog dollar value increased 21% compared to the prior-year period due to an 11% increase in backlog units and a 9% increase in average sales price. The increase in backlog units is due to the strong market conditions inArizona - 38 - -------------------------------------------------------------------------------- for most of the current-year period and the success of recently opened communities. In addition, we opened the current-year period with a higher number of backlog units, which resulted in higher carryforward of opening backlog units in the current-year period compared to the prior-year period, which had been impacted by the housing slowdown in late 2018.Pardee Homes' backlog dollar value decreased 18% due to a decrease in backlog average sales price of 12% and a decrease in backlog units of 6%. The decrease in backlog units is largely due to the decrease in net new home orders we experienced during the quarter, particularly in the month of April due to uncertainty surrounding COVID-19.Quadrant Homes' backlog dollar value increased 223% as a result of a 196% increase in backlog units and a 9% increase in average sales price. The increase in backlog units was a result of starting the current-year period with an increase in backlog units, which further increased due to the 57% increase in net new home orders during the period, as market conditions inSeattle remained strong for most of the quarter despite COVID-19.Trendmaker Homes' backlog dollar value decreased 25% due primarily to a 20% decrease in backlog units. The decrease in backlog units resulted primarily from a 21% decrease in average selling communities for the quarter.TRI Pointe Homes' backlog dollar value increased 52% mainly due to a 44% increase in backlog units. The increase in backlog units resulted primarily from a strong demand environment in bothCalifornia andColorado during the quarter.Winchester Homes' backlog dollar value increased 68% due to a 68% increase in backlog units. The increase in backlog units is a result of a 27% increase in net new home orders for the six months endedJune 30, 2020 , in addition to a significantly higher unit backlog to start the current-year period compared to the prior-year period. New Homes Delivered, Homes Sales Revenue and Average Sales Price by Segment (dollars in thousands) Three Months EndedJune 30, 2020 Three Months EndedJune 30, 2019 Percentage Change New Home Average New Home Average New Home Average Homes Sales Sales Homes Sales Sales Homes Sales Sales Delivered Revenue Price Delivered Revenue Price Delivered Revenue Price Maracay 165$ 86,674 $ 525 106$ 55,653 $ 525 56 % 56 % - %Pardee Homes 362 242,282 669 325 194,700 599 11 % 24 % 12 %Quadrant Homes 40 36,649 916 67 70,429 1,051 (40) % (48) % (13) %Trendmaker Homes 254 121,257 477 250 117,010 468 2 % 4 % 2 %TRI Pointe Homes 292 206,474 707 281 192,752 686 4 % 7 % 3 %Winchester Homes 116 73,606 635 96 61,594 642 21 % 20 % (1) % Total 1,229$ 766,942 $ 624 1,125$ 692,138 $ 615 9 % 11 % 1 % Home sales revenue increased$74.8 million , or 11%, to$766.9 million for the three months endedJune 30, 2020 . The increase was comprised of (i)$64.0 million related to an increase of 104 new homes delivered in the three months endedJune 30, 2020 compared to the prior-year period, and (ii)$10.8 million related to an increase of$9,000 in average sales price of homes delivered in the three months endedJune 30, 2020 compared to the prior-year period. Maracay home sales revenue increased 56% due to a 56% increase in new homes delivered during the current-year period. The increase in new homes delivered is due to a 119% increase in backlog units to start the current-year period compared to the prior-year period.Pardee Homes' home sales revenue increased 24% due to a 12% increase in average sales price and an 11% increase in new homes delivered. The increase in average sales price was due to a product mix shift that included a greater proportion of deliveries from our higher-pricedCalifornia assets in the current-year period, particularly from ourSan Diego market.Quadrant Homes' home sales revenue decreased 48% due to a 40% decrease in new homes delivered and a 13% decrease in average sales price. The decrease in new homes delivered was due to timing and the impact of COVID-19-related construction delays.Trendmaker Homes' home sales revenue increased 4% due to a 2% increase in new homes delivered and a 2% increase in average sales price.TRI Pointe Homes' home sales revenue increased 7% due primarily to a 4% increase in new homes delivered and a 3% increase in average sales price. The increase in new homes delivered was driven by the timing of deliveries. Home sales revenue increased atWinchester Homes by 20% due to a 21% increase in new homes delivered. The increase in new homes delivered was due to a higher number of backlog units at the start of the current-year period compared to the prior-year period. - 39 - --------------------------------------------------------------------------------
Homebuilding Gross Margins (dollars in thousands)
Three Months Ended
2020 % 2019 %
Home sales revenue $ 766,942 100.0 % $ 692,138 100.0 %
Cost of home sales 601,434 78.4 % 574,684 83.0 %
Homebuilding gross margin 165,508 21.6 % 117,454 17.0 %
Add: interest in cost of home sales 21,801 2.8 % 18,071 2.6 %
Add: impairments and lot option abandonments 1,380 0.2 % 288 0.0 %
Adjusted homebuilding gross margin(1) $ 188,689 24.6 % $ 135,813 19.6 %
Homebuilding gross margin percentage 21.6 % 17.0 %
Adjusted homebuilding gross margin percentage(1) 24.6 % 19.6 %
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(1)Non-GAAP financial measure (as discussed below). Our homebuilding gross margin percentage increased to 21.6% for the three months endedJune 30, 2020 as compared to 17.0% for the prior-year period. The increase in gross margin percentage was due to a decrease in incentives as compared to the prior-year period, during which we experienced weaker pricing trends, in addition to higher current-year period revenue from some of our long-datedCalifornia assets, which produce gross margins above the Company average. Excluding interest and impairment and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 24.6% for the three months endedJune 30, 2020 , compared to 19.6% for the prior-year period. Adjusted homebuilding gross margin is a non-GAAP financial measure. We believe this information is meaningful as it isolates the impact that leverage and noncash charges have on homebuilding gross margin and permits investors to make better comparisons with our competitors,who adjust gross margins in a similar fashion. Because adjusted homebuilding gross margin is not calculated in accordance with GAAP, it may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP. See the table above reconciling this non-GAAP financial measure to homebuilding gross margin, the most directly comparable GAAP measure. Sales and Marketing, General and Administrative Expense (dollars in thousands) As a Percentage of Three Months Ended June 30, Home Sales Revenue 2020 2019 2020 2019 Sales and marketing$ 45,194 $ 47,065 5.9 % 6.8 % General and administrative (G&A) 37,554 36,854 4.9 % 5.3 % Total sales and marketing and G&A$ 82,748 $ 83,919 10.8 % 12.1 % Total sales and marketing and general and administrative ("SG&A") as a percentage of home sales revenue decreased to 10.8% for the three months endedJune 30, 2020 , compared to 12.1% in the prior-year period. Total SG&A expense decreased$1.2 million to$82.7 million for the three months endedJune 30, 2020 from$83.9 million in the prior-year period. Sales and marketing expense as a percentage of home sales revenue decreased to 5.9% for the three months endedJune 30, 2020 , compared to 6.8% for the prior-year period. The decrease was due primarily to lower advertising expense and higher leverage on the fixed components of sales and marketing expense as a result of the 11% increase in homebuilding revenue compared to the prior-year period. In addition, we realized some cost savings related to the workforce reduction plan implemented inMay 2020 . Sales and marketing expense decreased to$45.2 million for the three months endedJune 30, 2020 compared to$47.1 million in the prior-year period due primarily to the decrease in advertising expense. General and administrative ("G&A") expense as a percentage of home sales revenue decreased to 4.9% of home sales revenue for the three months endedJune 30, 2020 compared to 5.3% for the prior-year period largely due to higher leverage on our G&A expense as a result of the 11% increase in homebuilding revenue compared to the prior-year period. In addition, G&A expense was favorably impacted by the realization of cost savings related to our workforce reduction plan implemented in May - 40 - -------------------------------------------------------------------------------- 2020. G&A expense increased to$37.6 million for the three months endedJune 30, 2020 compared to$36.9 million for the prior-year period. Restructuring Charges InMay 2020 , due to the existing and anticipated future impact of the COVID-19 pandemic on our business, we implemented a workforce reduction plan. As a result of the workforce reduction plan, we incurred$5.5 million of pre-tax restructuring charges consisting of severance and related costs, substantially all of which had been paid as ofJune 30, 2020 . We believe that our restructuring activities are substantially complete as ofJune 30, 2020 . However, until market conditions stabilize, we may incur additional restructuring charges. We expect that this workforce reduction will decrease our overhead expenses by approximately$33 million on an annualized basis. Other Income (Expense), Net Other income (expense), net for the three months endedJune 30, 2020 included a$6.9 million loss in connection with the early extinguishment of a portion of our 4.875% Senior Notes due 2021 (the "2021 Notes"). InJune 2020 , we commenced and settled a cash tender offer for any and all of our then outstanding$300 million principal amount of 2021 Notes as part of a plan to refinance our long-term debt due in 2021 with longer maturity financing. Upon expiration of the tender offer inJune 2020 ,$216.3 million , or 72% of the outstanding principal amount, of the 2021 Notes were validly tendered and accepted for purchase. Interest Interest, which we incurred principally to finance land acquisitions, land development and home construction, totaled$21.8 million and$22.0 million for the three months endedJune 30, 2020 and 2019, respectively. All interest incurred in both periods was capitalized. Income Tax For the three months endedJune 30, 2020 , we recorded a tax provision of$18.1 million based on an effective tax rate of 24.3%. For the three months endedJune 30, 2019 , we recorded a tax provision of$9.1 million based on an effective tax rate of 25.8%. The increase in provision for income taxes is due to a$39.3 million increase in income before income taxes to$74.7 million for the three months endedJune 30, 2020 , compared to$35.4 million for the prior-year period. During the three months endedJune 30, 2020 ,California enacted tax legislation that approved the suspension ofCalifornia net operating loss deductions for tax years 2020, 2021 and 2022. The suspension ofCalifornia net operating loss deductions did not have an impact on our tax provision for the three months endedJune 30, 2020 . Financial Services Segment Income before income taxes from our financial services operations increased to$3.9 million for the three months endedJune 30, 2020 compared to$2.1 million for the prior-year period. This increase is due to higher home sales volume in the three months endedJune 30, 2020 compared to the prior-year period, resulting in a corresponding increase in financial services captured in the current year. We experienced higher financial services profit in all three areas of our financial services segment, represented by mortgage financing, title and escrow services, and property and casualty insurance operations. - 41 - -------------------------------------------------------------------------------- Six Months EndedJune 30, 2020 Compared to Six Months EndedJune 30, 2019 Net New Home Orders , Average Selling Communities and Monthly Absorption Rates by Segment Six Months EndedJune 30, 2020 Six Months EndedJune 30, 2019 Percentage ChangeNet New Average MonthlyNet New Average MonthlyNet New Average Monthly Home Selling Absorption Home Selling Absorption Home Selling Absorption Orders Communities Rates Orders Communities Rates Orders Communities Rates Maracay 402 16.9 4.0 414 13.4 5.1 (3) % 26 % (22) %Pardee Homes 898 43.0 3.5 955 44.4 3.6 (6) % (3) % (3) %Quadrant Homes 231 8.3 4.6 142 6.9 3.4 63 % 20 % 35 %Trendmaker Homes 439 30.1 2.4 490 38.6 2.1 (10) % (22) % 14 %TRI Pointe Homes 741 31.4 3.9 589 29.6 3.3 26 % 6 % 18 %Winchester Homes 282 12.7 3.7 222 14.1 2.6 27 % (10) % 42 % Total 2,993 142.4 3.5 2,812 147.0 3.2 6 % (3) % 9 % Net new home orders for the six months endedJune 30, 2020 increased by 181 orders, or 6%, to 2,993, compared to 2,812 during the prior-year period. The increase in net new home orders was due to a 9% increase in monthly absorption rates, offset by a 3% decrease in average selling communities. New home order demand was exceptionally strong through January and February of 2020, followed by a significant decline in March and April, a slow and steady improvement in May and exceptionally strong demand in June. This unusual volatility was due to the COVID-19 pandemic and the measures taken to contain its spread, as well as the impacts on consumers and the overall economy. As our results for the six months endedJune 30, 2020 have been impacted by the COVID-19 pandemic, they may not be indicative of results going forward. Maracay reported a 3% decrease in net new home orders driven by a 22% decrease in monthly absorption rates, offset by a 26% increase in average selling communities. The decrease in Maracay's monthly absorption rate to 4.0 for the six months endedJune 30, 2020 was due to the impact of COVID-19 and the slower market conditions experienced through March and April. Despite this impact, our monthly absorption rate of 4.0 for the current year demonstrates strong demand for Maracay's new community openings during the current-year period as well as strong market fundamentals inArizona throughout most of the quarter.Pardee Homes reported a 6% decrease in net new home orders driven by a 3% decrease in monthly absorption rates and a 3% decrease in average selling communities. The decrease in monthly absorption rate was due to the impact of COVID-19, as net new home order activity slowed considerably during parts of March, April and May. Net new home orders increased 63% atQuadrant Homes due to a 35% increase in monthly absorption rate and a 20% increase in average selling communities during the current-year period as compared to the prior-year period. The increase in monthly absorption rate to 4.6 was due to an exceptionally strong demand environment in January and February of the current-year period, as well as a significant improvement in market conditions during the latter half of May and into June, notwithstanding reduced demand in the month of April due to COVID-19. In addition, two of our new community openings were particularly well-received by the market, which resulted in an increased sales pace.Trendmaker Homes' net new home orders decreased 10% due to a 22% decrease in average selling communities offset by a 14% increase in monthly absorption rate. Though we experienced stronger monthly absorption rates at each of ourHouston ,Austin andDallas-Fort Worth markets in the current-year period, COVID-19 and the volatility in the oil market negatively impacted our sales pace in the current-year period, particularly in March and April.TRI Pointe Homes' net new home orders increased 26% due to an 18% increase in the monthly absorption rate and a 6% increase in average selling communities. The increase inTRI Pointe Homes' monthly absorption rate was driven by stronger market conditions in both ourBay Area andColorado markets compared to the prior-year period.Winchester Homes reported a 27% increase in net new home orders as a result of a 42% increase in monthly absorption rate offset by a 10% decrease in average selling communities. The increase inWinchester Homes' monthly absorption rate was due to strong order demand and more favorable overall market conditions compared to the prior-year period. - 42 - -------------------------------------------------------------------------------- New Homes Delivered, Homes Sales Revenue and Average Sales Price by Segment (dollars in thousands) Six Months EndedJune 30, 2020 Six Months EndedJune 30, 2019 Percentage ChangeNew Home AverageNew Home AverageNew Home Average Homes Sales Sales Homes Sales Sales Homes Sales Sales Delivered Revenue Price Delivered Revenue Price Delivered Revenue Price Maracay 305$ 158,426 $ 519 180$ 95,214 $ 529 69 % 66 % (2) %Pardee Homes 619 420,684 680 567 329,562 581 9 % 28 % 17 %Quadrant Homes 92 80,106 871 111 113,702 1,024 (17) % (30) % (15) %Trendmaker Homes 463 217,377 469 404 187,130 463 15 % 16 % 1 %TRI Pointe Homes 518 365,143 705 523 364,543 697 (1) % - % 1 %Winchester Homes 190 120,044 632 154 94,690 615 23 % 27 % 3 % Total 2,187$ 1,361,780 $ 623 1,939$ 1,184,841 $ 611 13 % 15 % 2 % Home sales revenue increased$176.9 million , or 15%, to$1.4 billion for the six months endedJune 30, 2020 . The increase was comprised of (i)$151.5 million related to an increase of 248 new homes delivered in the six months endedJune 30, 2020 compared to the prior-year period, and (ii)$25.4 million related to an increase of$12,000 in average sales price of homes delivered in the six months endedJune 30, 2020 compared to the prior-year period. Maracay home sales revenue increased 66% due to an 69% increase in new homes delivered during the current-year period. The increase in new homes delivered is due to a 119% increase in backlog units to start the current-year period compared to the prior-year period.Pardee Homes' home sales revenue increased 28% due to a 17% increase in average sales price and a 9% increase in new homes delivered. The increase in average sales price was due to a product mix shift that included a greater proportion of deliveries from our higher-pricedCalifornia assets in the current-year period, particularly from ourSan Diego market.Quadrant Homes' home sales revenue decreased 30% due to a 17% decrease in new homes delivered and a 15% decrease in average sales price. The decrease in new homes delivered was due to timing and the impact of COVID-19-related construction delays.Trendmaker Homes' home sales revenue increased 16% due to a 15% increase in new homes delivered. The increase in new homes delivered was due to the timing of deliveries.TRI Pointe Homes' home sales revenue was flat, as we achieved consistent new homes delivered and average sales price. Home sales revenue increased atWinchester Homes by 27% due to a 23% increase in new homes delivered and a 3% increase in average sales price. The increase in new homes delivered was due to a higher number of backlog units at the start of the current-year period compared to the prior-year period. Homebuilding Gross Margins (dollars in thousands)
Six Months Ended
2020 % 2019 %
Home sales revenue $ 1,361,780 100.0 % $ 1,184,841 100.0 %
Cost of home sales 1,074,316 78.9 % 996,220 84.1 %
Homebuilding gross margin 287,464 21.1 % 188,621 15.9 %
Add: interest in cost of home sales 38,623 2.8 % 32,262 2.7 %
Add: impairments and lot option abandonments 1,729 0.1 % 5,490 0.5 %
Adjusted homebuilding gross margin(1) $ 327,816 24.1 % $ 226,373 19.1 %
Homebuilding gross margin percentage 21.1 % 15.9 %
Adjusted homebuilding gross margin percentage(1) 24.1 % 19.1 %
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(1)Non-GAAP financial measure (as discussed below). Our homebuilding gross margin percentage increased to 21.1% for the six months endedJune 30, 2020 as compared to 15.9% for the prior-year period. The increase in gross margin percentage was due to a decrease in incentives as compared to the prior-year period, during which we delivered homes impacted by the weaker pricing trends experienced in the second half of 2018. In addition, we benefited from the favorable impact of higher current-year period revenue from some of our long-datedCalifornia assets, which produce gross margins above the Company average. Excluding interest and impairment and lot option abandonments in cost of home sales, adjusted homebuilding gross margin percentage was 24.1% for the six months endedJune 30, 2020 , compared to 19.1% for the prior-year period. - 43 - -------------------------------------------------------------------------------- Adjusted homebuilding gross margin is a non-GAAP financial measure. We believe this information is meaningful as it isolates the impact that leverage and noncash charges have on homebuilding gross margin and permits investors to make better comparisons with our competitors,who adjust gross margins in a similar fashion. Because adjusted homebuilding gross margin is not calculated in accordance with GAAP, it may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP. See the table above reconciling this non-GAAP financial measure to homebuilding gross margin, the most directly comparable GAAP measure. Sales and Marketing, General and Administrative Expense (dollars in thousands) As a Percentage of Six Months Ended June 30, Home Sales Revenue 2020 2019 2020 2019 Sales and marketing$ 87,831 $ 86,054 6.4 % 7.3 % General and administrative (G&A) 77,391 75,451 5.7 % 6.4 % Total sales and marketing and G&A$ 165,222 $ 161,505 12.1 % 13.6 % Total SG&A as a percentage of home sales revenue decreased to 12.1% for the six months endedJune 30, 2020 , compared to 13.6% in the prior-year period. Total SG&A expense increased$3.7 million to$165.2 million for the six months endedJune 30, 2020 from$161.5 million in the prior-year period. Sales and marketing expense as a percentage of home sales revenue decreased to 6.4% for the six months endedJune 30, 2020 , compared to 7.3% for the prior-year period. The decrease was due primarily to higher leverage on the fixed components of sales and marketing expense as a result of the 15% increase in homebuilding revenue compared to the prior-year period. In addition, we realized some cost savings related to the workforce reduction plan implemented inMay 2020 . Sales and marketing expense increased to$87.8 million for the six months endedJune 30, 2020 compared to$86.1 million in the prior-year period due primarily to higher variable commission costs associated with higher home sales revenue. G&A expense as a percentage of home sales revenue decreased to 5.7% of home sales revenue for the six months endedJune 30, 2020 compared to 6.4% for the prior-year period largely due to higher leverage on our G&A expense as a result of the 15% increase in homebuilding revenue compared to the prior-year period. In addition, G&A expense was favorably impacted by the realization of cost savings related to our workforce reduction plan implemented inMay 2020 . G&A expense increased to$77.4 million for the six months endedJune 30, 2020 compared to$75.5 million for the prior-year period. Interest Interest, which we incurred principally to finance land acquisitions, land development and home construction, totaled$42.6 million and$45.3 million for the six months endedJune 30, 2020 and 2019, respectively. All interest incurred in both periods was capitalized. Income Tax For the six months endedJune 30, 2020 , we recorded a tax provision of$28.0 million based on an effective tax rate of 24.0%. For the six months endedJune 30, 2019 , we recorded a tax provision of$9.2 million based on an effective tax rate of 25.8%. The increase in provision for income taxes is due to a$80.9 million increase in income before income taxes to$116.4 million for the six months endedJune 30, 2020 , compared to$35.5 million for the prior-year period. Financial Services Segment Income before income taxes from our financial services operations increased to$6.0 million for the six months endedJune 30, 2020 compared to$2.9 million for the prior-year period. This increase is due to higher home sales volume in the six months endedJune 30, 2020 compared to the prior-year period, resulting in a corresponding increase in financial services captured in the current year. We experienced higher financial services profit in all three areas of our financial services segment, represented by mortgage financing, title and escrow services, and property and casualty insurance operations. - 44 - -------------------------------------------------------------------------------- Lots Owned or Controlled by Segment Excluded from owned and controlled lots are those related to Note 6, Investments in Unconsolidated Entities, to the accompanying condensed notes to unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q. The table below summarizes our lots owned or controlled by segment as of the dates presented: Increase June 30, (Decrease) 2020 2019 Amount % Lots Owned Maracay 2,070 2,234 (164) (7) % Pardee Homes 12,622 13,649 (1,027) (8) % Quadrant Homes 1,010 853 157 18 % Trendmaker Homes 2,672 1,924 748 39 % TRI Pointe Homes 2,497 2,759 (262) (9) % Winchester Homes 878 1,211 (333) (27) % Total 21,749 22,630 (881) (4) % Lots Controlled(1) Maracay 1,420 1,377 43 3 % Pardee Homes 328 755 (427) (57) % Quadrant Homes - 589 (589) (100) % Trendmaker Homes 1,541 778 763 98 % TRI Pointe Homes 3,872 1,646 2,226 135 % Winchester Homes 890 342 548 160 % Total 8,051 5,487 2,564 47 % Total Lots Owned or Controlled(1) 29,800 28,117 1,683
6 %
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(1)As of
Liquidity and Capital Resources Overview Our principal uses of capital for the six months endedJune 30, 2020 were operating expenses, land purchases, land development and home construction. We used funds generated by our operations to meet our short-term working capital requirements. We monitor financing requirements to evaluate potential financing sources, including bank credit facilities and note offerings. InMarch 2020 , we borrowed a total of$500 million under our revolving credit facility to, in part, safeguard our balance sheet as the credit and banking market showed signs of distress in the wake of the COVID-19 outbreak. InJune 2020 , we determined that any concerns regarding near term access to liquidity had sufficiently receded and, as a result, we repaid all outstanding amounts under our revolving credit facility. While the current economic environment resulting from the COVID-19 pandemic is unprecedented, and the ultimate effects of COVID-19 and the related restrictions imposed on businesses and individuals across the world remain unknown, we continue to monitor the credit markets as we remain focused on generating positive margins in our homebuilding operations. While acquiring desirable land positions is critical to our long-term growth initiatives, under the current conditions we are focused on maintaining a strong balance sheet while maximizing flexibility as to future land spend. As ofJune 30, 2020 , we had total liquidity of$1.0 billion , including cash and cash equivalents of$474.5 million and$559.4 million of availability under our Credit Facility, as described below, after considering the borrowing base provisions and outstanding letters of credit. Our board of directors will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, the estimated market value of our assets and the availability of particular assets, and our Company as a whole, to generate cash flow to cover the expected debt service. - 45 - -------------------------------------------------------------------------------- Senior Notes InJune 2020 ,TRI Pointe Group issued$350 million aggregate principal amount of 5.700% Senior Notes due 2028 (the "2028 Notes") at 100.00% of their aggregate principal amount. Net proceeds of this issuance were$345.2 million , after debt issuance costs and discounts. The 2028 Notes mature onJune 15, 2028 and interest is paid semiannually in arrears onJune 15 andDecember 15 . InJune 2017 ,TRI Pointe Group issued$300 million aggregate principal amount of 5.250% Senior Notes due 2027 (the "2027 Notes") at 100.00% of their aggregate principal amount. Net proceeds of this issuance were$296.3 million , after debt issuance costs and discounts. The 2027 Notes mature onJune 1, 2027 and interest is paid semiannually in arrears onJune 1 andDecember 1 . InMay 2016 ,TRI Pointe Group issued$300 million aggregate principal amount of 2021 Notes at 99.44% of their aggregate principal amount. Net proceeds of this issuance were$293.9 million , after debt issuance costs and discounts. The 2021 Notes mature onJuly 1, 2021 and interest is paid semiannually in arrears onJanuary 1 andJuly 1 . OnJune 3, 2020 , the Company commenced a cash tender offer for any and all of the outstanding 2021 Notes at a price of$1,025 per$1,000 principal amount of 2021 Notes tendered before the expiration of the tender offer. The principal amount of 2021 Notes tendered was$216.3 million , or 72% of the outstanding principal amount, after which$83.7 million principal amount of 2021 Notes remained outstanding as ofJune 30, 2020 . The remaining outstanding principal amount of$83.7 million was fully paid inJuly 2020 in connection with the redemption of the remaining 2021 Notes.TRI Pointe Group and its wholly owned subsidiaryTRI Pointe Homes, Inc. ("TRI Pointe Homes ") are co-issuers of the$450 million aggregate principal amount 5.875% Senior Notes due 2024 (the "2024 Notes"). The 2024 Notes were issued at 98.15% of their aggregate principal amount. The net proceeds from the offering of the 2024 Notes was$429.0 million , after debt issuance costs and discounts. The 2024 Notes mature onJune 15, 2024 , with interest payable semiannually in arrears onJune 15 andDecember 15 . Our outstanding senior notes (the "Senior Notes") contain covenants that restrict our ability to, among other things, create liens or other encumbrances, enter into sale and leaseback transactions, or merge or sell all or substantially all of our assets. These limitations are subject to a number of qualifications and exceptions. As ofJune 30, 2020 , we were in compliance with the covenants required by our Senior Notes. Loans Payable OnMarch 29, 2019 , we entered into a Second Amended and Restated Credit Agreement (the "Credit Agreement"), which amended and restated our Amended and Restated Credit Agreement, dated as ofJuly 7, 2015 . The Credit Facility (as defined below), which matures onMarch 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, which allowed us to draw the full$250 million from the Term Facility inJune 2019 in connection with the maturity of the 4.375% Senior Notes that matured onJune 15, 2019 . We may increase the Credit Facility to not more than$1 billion in the aggregate, at our request, upon satisfaction of specified conditions. The Revolving Facility contains a sublimit of$75 million for letters of credit. We may borrow under the Revolving Facility in the ordinary course of business to repay senior notes and fund our operations, including our 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 our 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 ofJune 30, 2020 , we had no outstanding debt under the Revolving Facility and there was$559.4 million of availability after considering the borrowing base provisions and outstanding letters of credit. As ofJune 30, 2020 , we had$250 million outstanding debt under the Term Facility with an interest rate of 1.52%. As ofJune 30, 2020 , there were$3.7 million of capitalized debt financing costs, included in other assets on our consolidated balance sheet, related to the Credit Facility that will amortize over the remaining term of the Credit Facility. Accrued interest, including loan commitment fees, related to the Credit Facility was$488,000 and$1.2 million as ofJune 30, 2020 andDecember 31, 2019 , respectively. AtJune 30, 2020 andDecember 31, 2019 , we had outstanding letters of credit of$40.6 million and$32.6 million , respectively. These letters of credit were issued to secure various financial obligations. We believe it is not probable that any outstanding letters of credit will be drawn upon. - 46 - -------------------------------------------------------------------------------- Under the Credit Facility, we are required to comply with certain financial covenants, including, but not limited to, those set forth in the table below (dollars in thousands): Covenant Actual at Requirement at June 30, June 30, Financial Covenants 2020 2020 Consolidated Tangible Net Worth$ 2,016,173 $ 1,497,799 (Not less than$1.35 billion plus 50% of net income and
50% of the net proceeds from equity offerings after
December 31, 2018 ) Leverage Test 32.4 % ?55% (Not to exceed 55%) Interest Coverage Test 6.0 ?1.5 (Not less than 1.5:1.0) In addition, the Credit Facility limits the aggregate number of single family dwellings (where construction has commenced) owned by the Company or any guarantor that are not presold or model units to no more than the greater of (i) 50% of the number of housing unit closings (as defined) during the preceding 12 months; or (ii) 100% of the number of housing unit closings during the preceding 6 months. However, a failure to comply with this "Spec Unit Inventory Test" will not be an event of default or default, but will be excluded from the borrowing base as of the last day of the quarter in which the non-compliance occurs. The Credit Facility further requires that at least 97.0% of consolidated tangible net worth must be attributable to the Company and its guarantor subsidiaries, subject to certain grace periods. As ofJune 30, 2020 , we were in compliance with all of these financial covenants. Stock Repurchase Program OnFebruary 13, 2020 , our board of directors discontinued and cancelled our 2019 Repurchase Program and approved our 2020 Repurchase Program, authorizing the repurchase of shares of common stock with an aggregate value of up to$200 million throughMarch 31, 2021 . Purchases of common stock pursuant to the 2020 Repurchase Program may be made in open market transactions effected through a broker-dealer at prevailing market prices, in block trades, or by other means in accordance with federal securities laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 under the Exchange Act. We are not obligated under the 2020 Repurchase Program to repurchase any specific number or dollar amount of shares of common stock, and we may modify, suspend or discontinue the 2020 Repurchase Program at any time. Our management will determine the timing and amount of repurchase in its discretion based on a variety of factors, such as the market price of our common stock, corporate requirements, general market economic conditions and legal requirements. During the three months endedJune 30, 2020 , we did not repurchase any shares under the 2020 Repurchase Program. For the six months endedJune 30, 2020 , we repurchased and retired an aggregate of 6,558,323 shares of our common stock at an average price of$15.55 under the 2019 Repurchase Program and 2020 Repurchase Program for a total of$102.0 million . Leverage Ratios We believe that our leverage ratios provide useful information to the users of our financial statements regarding our financial position and cash and debt management. The ratio of debt-to-capital and the ratio of net debt-to-net capital are calculated as follows (dollars in thousands): - 47 - --------------------------------------------------------------------------------
June 30, 2020 December 31, 2019
Loans Payable $ 250,000 $ 250,000
Senior Notes 1,166,189 1,033,985
Total debt 1,416,189 1,283,985
Stockholders' equity 2,175,799 2,186,530
Total capital $ 3,591,988 $ 3,470,515
Ratio of debt-to-capital(1) 39.4 % 37.0 %
Total debt $ 1,416,189 $ 1,283,985
Less: Cash and cash equivalents (474,545) (329,011)
Net debt 941,644 954,974
Stockholders' equity 2,175,799 2,186,530
Net capital $ 3,117,443 $ 3,141,504
Ratio of net debt-to-net capital(2) 30.2 % 30.4 %
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(1)The ratio of debt-to-capital is computed as the quotient obtained by dividing total debt by the sum of total debt plus stockholders' equity. (2)The ratio of net debt-to-net capital is a non-GAAP financial measure and is computed as the quotient obtained by dividing net debt (which is total debt less cash and cash equivalents) by the sum of net debt plus stockholders' equity. The most directly comparable GAAP financial measure is the ratio of debt-to-capital. We believe the ratio of net debt-to-net capital is a relevant financial measure for investors to understand the leverage employed in our operations and as an indicator of our ability to obtain financing. See the table above reconciling this non-GAAP financial measure to the ratio of debt-to-capital. Because the ratio of net debt-to-net capital is not calculated in accordance with GAAP, it may not be comparable to other similarly titled measures of other companies and should not be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP. Cash Flows-Six Months EndedJune 30, 2020 Compared to Six Months EndedJune 30, 2019 For the six months endedJune 30, 2020 as compared to the six months endedJune 30, 2019 : •Net cash provided by operating activities increased by$270.2 million to$166.2 million for the six months endedJune 30, 2020 , from net cash used of$103.9 million for the six months endedJune 30, 2019 . The change was comprised of offsetting activity, including (i) a decrease in cash used for real estate inventory purchases of$104.6 million , (ii) an increase in net income to$88.4 million for the six months endedJune 30, 2020 compared to$26.3 million in the prior-year period, (iii) a decrease in cash used for accrued expenses and other liabilities of$75.2 million to$5.8 million in the six months endedJune 30, 2020 compared to$81.0 million in the prior-year period, (iv) offset by changes in other assets, receivables, accounts payable, deferred income taxes and returns on investments in unconsolidated entities. •Net cash used in investing activities was$37.7 million for the six months endedJune 30, 2020 , compared to$13.8 million for the prior-year period. The increase in cash used in investing activities was due mainly to an increase in investments in unconsolidated entities. •Net cash provided by financing activities was$17.0 million for the six months endedJune 30, 2020 , compared to net cash provided by financing activities of$11.6 million for the prior-year period. Net cash provided by financing activities in the current-year period was comprised of the issuance of$350 million principal amount of 2028 Notes, of which we used approximately$216 million to purchase a portion of our 2021 Notes pursuant to a tender offer, resulting in a net borrowing of approximately$134 million . This activity was offset by$102.0 million of cash used for share repurchases for the current-year period, compared to no similar cash transactions for the prior-year period. Off-Balance Sheet Arrangements and Contractual Obligations In the ordinary course of business, we enter into purchase contracts in order to procure lots for the construction of our homes. We are subject to customary obligations associated with entering into contracts for the purchase of land and improved lots. These purchase contracts typically require a cash deposit and the purchase of properties under these contracts is generally contingent upon satisfaction of certain requirements by the sellers, including obtaining applicable property and development entitlements. We also utilize option contracts with land sellers and land banking arrangements as a method of acquiring land in - 48 - -------------------------------------------------------------------------------- staged takedowns, to help us manage the financial and market risk associated with land holdings, and to reduce the use of funds from our corporate financing sources. These option contracts and land banking arrangements generally require a non-refundable deposit for the right to acquire land and lots over a specified period of time at pre-determined prices. We generally have the right, at our discretion, to terminate our obligations under both purchase contracts and option contracts by forfeiting our cash deposit with no further financial responsibility to the land seller. In some cases, however, we may be contractually obligated to complete development work even if we terminate the option to procure land or lots. As ofJune 30, 2020 , we had$81.7 million of cash deposits, the majority of which are non-refundable, pertaining to land and lot option contracts and purchase contracts with an aggregate remaining purchase price of$816.2 million (net of deposits). See Note 7, Variable Interest Entities, to the accompanying condensed notes to unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q. Our utilization of land and lot option contracts and land banking arrangements is dependent on, among other things, the availability of land sellers or land banking firms willing to enter into such arrangements, the availability of capital to finance the development of optioned land and lots, general housing market conditions, and local market dynamics. Options may be more difficult to procure from land sellers in strong housing markets and are more prevalent in certain geographic regions. Inflation Our operations can be adversely impacted by inflation, primarily from higher land, financing, labor, material and construction costs. In addition, inflation can lead to higher mortgage rates, which can significantly affect the affordability of mortgage financing to homebuyers. While we attempt to pass on cost increases to customers through increased prices, when weak housing market conditions exist, we are often unable to offset cost increases with higher selling prices. Seasonality Historically, the homebuilding industry experiences seasonal fluctuations in quarterly operating results and capital requirements. We typically experience the highest new home order activity during the first and second quarters of our fiscal year, although this activity is also highly dependent on the number of active selling communities, timing of new community openings and other market factors. Since it typically takes three to nine months to construct a new home, the number of homes delivered and associated home sales revenue typically increases in the third and fourth quarters of our fiscal year as new home orders sold earlier in the year convert to home deliveries. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters of our fiscal year, and the majority of cash receipts from home deliveries occur during the second half of the year. We expect this seasonal pattern to continue over the long-term, although it may be affected by volatility in the homebuilding industry and the impacts of the COVID-19 pandemic.
Description of Projects and Communities Under Development
The following table presents project information relating to each of our markets
as of
- 49 -
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Maracay
Cumulative Homes
Homes Delivered
Year of Total Delivered Lots Backlog as of for the Six Sales Price
First Number of as of Owned as of June 30, Months Ended Range
County, Project, City Delivery(1) Lots(2) June 30, 2020 June 30, 2020(3) 2020(4)(5) June 30, 2020 (in thousands)(6)
Phoenix, Arizona
City of Buckeye:
Arroyo Seco 2020 44 - 44 20 - $414 - $478
City of Chandler:
Mission Estates 2019 26 21 5 5 9 $537 - $598
Windermere Ranch 2019 91 39 52 34 19 $532 - $572
Canopy North 2020 129 - 12 - - $471 - $540
Canopy South 2020 112 - 11 - - $556 - $578
City of Gilbert:
Lakes At Annecy 2019 216 66 150 47 30 $289 - $363
Annecy P3 2021 251 - 251 - - $259 - $331
Lakeview Trails 2019 92 64 28 20 23 $570 - $655
Lakeview Trails II 2021 68 - 68 6 - $570 - $655
Copper Bend 2020 38 9 29 21 9 $492 - $511
Avocet at Waterston 2020 115 - 115 24 - $526 - $611
Brighton at Waterston 2020 88 - 88 24 - $632 - $676
Domaine at Waterston 2020 128 - 128 18 - $774 - $819
City of Goodyear:
Villages at Rio Paseo 2018 117 101 16 7 40 $204 - $234
Cottages at Rio Paseo 2018 93 84 9 4 3 $243 - $264
Sedella 2021 75 - 75 - - $441 - $521
City of Mesa:
Cadence 2021 127 - 127 - - $312 - $345
City of Peoria:
Legacy at The Meadows 2017 74 68 6 - - $425 - $451
Estates at The Meadows 2017 272 191 81 22 29 $530 - $616
Enclave at The Meadows 2018 126 98 28 21 28 $417 - $512
Deseo 2019 94 23 71 34 17 $528 - $622
City of Phoenix:
Loma @ Avance 2019 124 47 77 17 25 $400 - $459
Ranger @ Avance 2019 145 28 117 33 26 $439 - $511
Piedmont @ Avance 2019 99 21 78 16 19 $515 - $530
Alta @ Avance 2020 26 5 21 9 5 $630 - $659
Town of Queen Creek
Madera 50's 2022 105 - 105 - - $330 - $410
Madera 60's 2022 70 - 70 - - $391 - $453
Madera 75's 2022 91 - 91 - - $463 - $510
Pathfinder South At Spur
Cross 2020 53 - 53 29 - $494 - $514
Pathfinder North At Spur
Cross 2020 65 1 64 16 1 $575 - $589
Closed Communities N/A - - - - 20
Phoenix, Arizona Total 3,154 866 2,070 427 303
Tucson, Arizona
Closed Communities N/A - - - - 2
Tucson, Arizona Total - - - - 2
Maracay Total 3,154 866 2,070 427 305
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Pardee Homes Cumulative Homes Homes Lots Delivered Year of Total Delivered Owned as of Backlog as of for the Six Sales Price First Number of as of June 30, June 30, Months Ended Range County, Project, City Delivery(1) Lots(2) June 30, 2020 2020(3) 2020(4)(5) June 30, 2020 (in thousands)(6)California San Diego County: Sendero 2019 112 80 32 20 19$1,470 -$1,600 Vista Santa Fe 2019 44 30 14 13 12$1,910 -$2,010 Terraza 2019 81 70 11 11 24$1,360 -$1,430 Carmel 2019 105 62 43 12 15$1,530 -$1,640 Vista Del Mar 2019 79 46 33 12 13$1,670 -$1,800 Highlands 2021 52 - 52 - -$1,640 -$1,930 Sendero Collection 2021 76 - 76 - -$1,350 -$1,400 Pacific Highlands Ranch Future 2021 42 - 42 - - TBD Lake Ridge 2018 129 95 34 12 18$790 -$865 Veraz 2018 111 74 37 13 28$425 -$500 Solmar 2019 74 37 37 9 28$390 -$485 Solmar Sur 2021 108 - 108 - -$390 -$485 Marea 2020 143 - 143 - -$365 -$435 PA61 Townhomes 2021 170 - 170 - - TBD Meadowood TBD 844 - 844 - -$390 -$630 South Otay Mesa TBD 893 - 893 - - TBD Los Angeles County: Cresta 2018 67 42 25 11 8$830 -$890 Verano 2017 95 65 30 10 10$550 -$650 Arista 2017 143 101 42 10 10$740 -$800 Lyra 2019 141 53 88 27 20$650 -$720 Sola 2019 189 79 110 39 18$560 -$610 Luna 2020 114 - 114 19 -$615 -$660 Strata 2021 292 - 292 - -$550 -$670 Skyline Ranch Future TBD 334 - 334 - - TBD Riverside County: Canyon Hills Future 70 x 115 TBD 125 - 125 - - TBD Westlake 2020 163 - 163 26 -$310 -$325 Daybreak 2017 159 140 19 16 17$360 -$385 Abrio 2018 113 89 24 16 19$415 -$450 Cascade 2017 194 169 25 21 11$335 -$360 Beacon 2018 106 83 23 17 12$510 -$560 Alisio 2019 84 69 15 14 18$300 -$335 Elan 2019 96 18 78 17 6$390 -$425 Mira 2019 95 13 82 9 3$365 -$395 Avid 2019 68 21 47 4 4$340 -$365 Vita 2019 115 32 83 11 4$315 -$340 Sundance Future Active Adult TBD 330 - 330 - - TBD Avena 2018 84 66 18 10 14$455 -$485 Braeburn 2018 82 65 17 13 20$415 -$450 Overland atSpencer's Crossing 2021 85 - 85 - -$485 -$515 Canvas 2018 89 85 4 4 27$405 -$430 Kadence 2018 85 64 21 15 15$420 -$435 Newpark 2018 93 56 37 17 14$445 -$490 Easton 2018 92 46 46 16 12$480 -$530 Compass at Audie Murphy Ranch 2021 52 - 52 - -$450 -$510 Tournament Hills Future TBD 268 - 268 - - TBD Terramor 2022 75 - 75 - - TBD Arroyo 2020 110 - 110 38 -$305 -$350 Cienega 2020 106 - 106 41 -$310 -$345 - 51 -
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Centerstone 2021 120 - 120 - -$320 -$335 Landmark 2021 130 - 130 - -$340 -$365 Horizon 2021 130 - 130 - -$395 -$420 Atwell Future TBD 3,742 - 3,742 - - TBDSan Joaquin County : Bear Creek TBD 1,252 - 1,252 - - TBD Closed Communities N/A - - - - 11 California Total 12,681 1,850 10,831 523 430 Nevada Clark County: Tera Luna 2018 116 39 77 7 10$560 -$670 Linea 2018 123 121 2 2 13$370 -$410 Strada 2.0 2019 62 17 45 29 12$460 -$550 Strada III 2021 30 - 30 - - Arden 2020 79 - 79 7 -$390 -$430 Capri 2020 114 - 114 13 -$302 -$328 Arden 2.0 2022 154 - 154 - -$370 -$400 Capri 2.0 2022 214 - 214 - -$300 -$325 Pebble Estate Future TBD 8 - 8 - - TBD Evolve 2019 74 48 26 12 23$305 -$335 Midnight Ridge 2020 104 9 95 26 9$525 -$645 Axis 2017 52 53 - - 3$860 -$1,125 Axis at the Canyons 2019 26 15 10 4 3$800 -$920 Cobalt 2017 107 86 21 4 12$380 -$460 Onyx 2018 88 65 23 19 13$470 -$510 Pivot 2017 88 87 1 - 1$405 -$470 Nova Ridge 2017 78 74 4 - 5$670 -$850 Nova Ridge at the Cliffs 2019 30 7 23 6 4$670 -$850 Corterra 2018 53 44 9 3 10$455 -$545 Highline 2020 59 1 58 8 1$470 -$570 Indogo 2018 202 101 101 15 24$300 -$370 Larimar 2018 106 49 57 8 18$355 -$420 Blackstone 2018 105 60 45 10 11$410 -$510 35 x 90 Product TBD 140 - 140 - - TBD Cirrus 2019 54 20 34 15 13$370 -$410 Sandalwood 2020 116 - 116 28 -$740 -$910 Silverado Entry-Level 2021 96 - 96 - -$400 -$450 Silverado Move-Up 2021 93 - 93 - -$440 -$485 Silverado Courtyard Townhome 2021 116 - 116 - -$300 -$320 Closed Communities N/A - - - - 4 Nevada Total 2,687 896 1,791 216 189 Pardee Total 15,368 2,746 12,622 739 619 - 52 -
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Quadrant Homes Cumulative Homes Homes Lots Delivered Year of Total Delivered Owned as of Backlog as of for the Six Sales Price First Number of as of June 30, June 30, Months Ended Range County, Project, City Delivery(1) Lots(2) June 30, 2020 2020(3) 2020(4)(5) June 30, 2020 (in thousands)(6)
Snohomish County : Grove North, Bothell 2019 43 21 22 22 10$780 -$910 Trailside at Meadowdale Beach, Edmonds 2021 38 - 38 - -$735 -$785 Cypress, Lynnwood 2021 42 - 42 - -$535 -$655 King County: Vareze, Kirkland 2020 82 14 68 28 14$720 -$895 Cedar Landing , North Bend 2019 138 35 103 47 11$780 -$920 Monarch Ridge, Sammamish 2019 59 20 39 34 7$1,000 -$1,285 Overlook at Summit Park, Maple Valley 2019 126 43 83 30 14$595 -$765 Aurea, Sammamish 2019 41 21 20 15 12$675 -$821 Aldea, Newcastle 2019 129 52 77 18 14$685 -$838 Lario, Bellevue 2020 46 7 39 25 7$905 -$1,197 Lakeview Crest, Renton 2020 17 - 17 1 -$1,400 -$1,875 Eagles Glen, Sammamish 2020 10 - 10 5 -$1,150 -$1,525 Willows 124, Redmond 2023 173 - 173 - -$745 -$930 Finn Meadows, Kirkland 2020 10 2 8 3 2$1,050 -$1,245 Woodlands Reserve, Kirkland 2022 37 - 37 - -$945 -$1,350 Hazelwood Gardens, Newcastle 2021 15 - 15 - -$1,180 -$1,340 Kitsap County: Blue Heron, Poulsbo 2022 85 - 85 - -$536 -$706 McCormick Villages, Port Orchard 2021 88 - 88 - -$470 -$525 Poulsbo Meadows, Poulsbo 2021 46 - 46 - -$515 -$551
Closed Communities N/A - - - - 1 N/A
Washington Total 1,225 215 1,010 228 92
Quadrant Total 1,225 215 1,010 228 92
- 53 ---------------------------------------------------------------------------------Trendmaker Homes Cumulative Homes Homes Lots Delivered Year of Total Delivered Owned as of Backlog as of for the Six Sales Price First Number of as ofJune 30 ,June 30 , Months Ended Range County, Project, City Delivery(1) Lots(2)June 30, 2020 2020(3) 2020(4)(5)June 30, 2020 (in thousands)(6)Texas Brazoria County: RiseMeridiana 2016 47 46 1 - 3$348 -$369 Fort Bend County : CrossCreek Ranch 60',Fulshear 2013 48 26 22 3 14$431 -$567 Cross Creek Ranch 65',Fulshear 2013 89 66 23 4 7$463 -$677 Cross Creek Ranch 70',Fulshear 2013 107 87 20 9 16$525 -$663 Cross Creek Ranch 80',Fulshear 2013 71 67 4 3 18$664 -$785 Cross Creek Ranch 90',Fulshear 2013 49 36 13 8 2$700 -$816 Fulshear Run 1/2 Acre,Richmond 2016 145 54 91 - 4$646 Harvest Green 75',Richmond 2015 63 52 11 6 9$454 -$581 Sienna Plantation 80',Missouri City TBD 25 - 25 1 -$573 -$640 Sienna Plantation 85',Missouri City 2015 54 45 9 2 9$589 -$636 Grayson Woods 60' 2019 37 8 29 10 7$434 -$438 Grayson Woods 70' 2019 26 10 16 10 8$502 -$577 Katy Gaston TBD 129 - 129 - - TBD Harris County: TheGroves ,Humble 2015 117 99 18 5 10$315 -$371 Lakes of Creekside 80' 2016 17 15 2 - 6$475 -$611 Lakes of Creekside 65' TBD 18 - 18 - -$400 -$450 Balmoral 50' 2019 46 11 35 3 4$255 -$337 Bridgeland '80, Cypress 2015 141 120 21 8 12$621 -$705 Bridgeland 70' 2018 41 32 9 3 15$498 -$583 Villas at Bridgeland 50' 2018 48 20 28 2 4$350 -$405 Falls atDry Creek 2019 20 9 11 4 6$530 -$685 Grant-Cyp-Rosehill TBD 428 - 428 - - TBDHidden Arbor , Cypress (Land) TBD 156 129 27 2 -$365 -$465 Clear Lake ,Houston (Land) 2015 772 661 111 28 65$439 -$707 Northgrove, Tomball TBD 25 7 18 - - TBDThe Woodlands ,Creekside Park 2015 131 128 3 1 11$450 -$459 Montgomery County :Grand Central Park TBD 17 - 17 - -$299 -$340 Rodriguez TBD 342 - 342 - - TBDRoyal Brook , Porter 2019 26 7 19 4 4$349 -$450 Waller County : LakeHouse 2019 351 68 283 27 37$269 -$619 Williamson County : Crystal Falls - Lots for Sale 2016 29 25 4 - - TBDRancho Sienna 60' 2016 51 41 10 3 8$380 -$500 Highlands atMayfield Ranch 50' 2019 63 42 21 23 12$303 -$420 Highlands atMayfield Ranch 60' 2019 46 24 22 18 10$351 -$485 Meyer Ranch TBD 10 - 10 3 -$300 -$485 Rancho Sienna 50' 2019 54 15 39 9 7$300 -$439 Palmera Ridge 2019 49 30 19 15 14$291 -$360 Hays County : 6 Creeks 50' Section 1 & 2 2020 35 12 23 10 12$269 -$352 6 Creeks 60' Section 1 & 2 2020 15 4 11 5 4$309 -$375 Travis County : Lakes Edge 80' 2018 14 13 1 1 3$797 Turner's Crossing (Land) TBD 324 - 324 - - TBDWilliamson County : Cressman Tract (Land) TBD 85 - 85 - - TBD - 54 -
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Collin County : Creeks of Legacy, Celina 2020 24 - 24 - -$349 -$379 Miramonte, Frisco 2016 62 60 2 2 8$475 -$560 Retreat atCraig Ranch , McKinney 2012 165 159 6 1 5$375 -$415 Dallas County: Vineyards, Rowlett 2017 40 36 4 3 8$368 -$480 Denton County: Glenview, Frisco 2017 50 42 8 5 10$345 -$485 Paloma Creek, Little Elm 2015 267 187 80 19 10$275 -$390 Parks at Legacy, Prosper 2017 55 39 16 8 7$384 -$495 Valencia, Little Elm 2016 82 63 19 4 6$350 -$444 Villages of Carmel, Denton 2017 96 92 4 2 12$290 -$360 Kaufman County: Gateway Parks, Forney 2020 12 - 12 - -$270 -$355 Rockwall County: Heath Golf and Yacht, Heath 2016 112 88 24 7 14$294 -$490 Woodcreek, Fate 2017 153 102 51 13 14$267 -$330 Tarrant County:Chisholm Trail Ranch , Fort Worth 2017 104 75 29 9 11$270 -$375 Lakes of River Trails, Fort Worth 2011 172 158 14 10 4$317 -$416 Ventana, Benbrook 2017 94 67 27 8 12$318 -$430 Closed Communities N/A - - - - 1 Texas Total 5,849 3,177 2,672 321 463 Trendmaker Homes Total 5,849 3,177 2,672 321 463 - 55 -
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TRI Pointe Homes Cumulative Homes Homes Lots Delivered Year of Total Delivered Owned as of Backlog as of for the Six Sales Price First Number of as of June 30, June 30, Months Ended Range County, Project, City Delivery(1) Lots(2) June 30, 2020 2020(3) 2020(4)(5) June 30, 2020 (in thousands)(6)Southern California Orange County: Varenna at Orchard Hills, Irvine 2016 135 112 23 6 11$1,223 -$1,306 Lyric 2019 70 62 8 5 21$779 -$946 Windbourne 2019 46 20 26 24 14$1,164 -$1,276
Cerise at Canvas 2020 40 2 38 5 2$795 -$823 Violet at Canvas 2020 48 7 41 12 7$545 -$735 Claret at Canvas 2020 48 5 43 16 5$560 -$671 San Diego County : Prism at Weston 2018 142 106 36 32 15$574 -$644 Riverside County: Citron at Bedford 2019 101 70 31 14 24$387 -$398 Cassis at Rancho Soleo 2020 79 - 79 17 -$492 -$507 Cava at Rancho Soleo 2020 63 - 63 13 -$386 -$417 Cerro at Rancho Soleo 2020 103 - 103 14 -$375 -$430 Los Angeles County: Tierno at Aliento 2017 63 49 14 3 -$667 -$710 Tierno II at Aliento 2018 63 47 16 13 16$667 -$701 Paloma at West Creek 2018 155 151 4 4 19$475 -$550 Mystral 2019 78 53 25 25 5$629 -$685 Celestia 2019 72 67 5 5 17$597 -$633 San Bernardino County : Ivy at The Preserve 2019 113 19 94 21 14$355 -$427 Hazel at The Preserve 2020 133 24 109 35 24$360 -$426 Tempo at The Resort 2020 80 - 80 16 -$504 -$565 Closed Communities N/A - - - - 27 Southern California Total 1,632 794 838 280 221 Northern California Contra Costa County: Greyson Place 2019 44 28 16 12 12$835 -$960 Santa Clara County: Madison Gate 2018 65 60 5 5 13$729 -$1,134 Blanc at Glen Loma 2019 49 15 34 28 10$735 -$785 Noir at Glen Loma 2019 64 15 49 14 6$815 -$865 Lotus at Urban Oak 2023 65 - 65 - -$940 -$1,064 Solano County: Bloom atGreen Valley , Fairfield 2018 91 87 4 4 12$557 -$597 Lantana, Fairfield 2019 133 75 58 13 20$483 -$528 One Lake 2021 45 - 45 - - San Joaquin County: Sundance, Mountain House 2015 113 108 5 5 -$668 -$760 Sundance II, Mountain House 2017 138 113 25 25 14$653 -$731 River Islands 2021 24 - 24 7 -$467 -$519 Alameda County:Onyx atJordan Ranch , Dublin 2017 105 93 12 6 13$914 -$966 Apex, Fremont 2018 77 76 1 1 19$734 -$996 Palm, Fremont 2019 31 15 16 8 7$2,250 -$2,392 Ellis at Central Station, Oakland 2020 128 - 128 5 -$740 -$815 Sonoma County: Riverfront Petaluma 2021 5 - 5 - -$740 -$901 Sacramento County: - 56 - -------------------------------------------------------------------------------- Natomas TBD 94 - 94 - -$360 -$412 Mangini - Brookstone 2020 47 15 32 19 15$576 -$655 Mangini - Waterstone 2020 40 12 28 18 12$630 -$733 Placer County: La Madera 2019 102 33 69 12 23$461 -$546 San Francisco County : Cambridge Street (SFA) 2020 54 - 54 - -$1,145 -$1,388 Closed Communities N/A - - - - 2 Northern California Total 1,514 745 769 182 178 California Total 3,146 1,539 1,607 462 399 Colorado Douglas County: Terrain Ravenwood Village (3500) 2018 157 110 47 21 22$390 -$429 Terrain Ravenwood Village (4000) 2018 100 92 8 8 22$415 -$481 Trails at Crowfoot 2021 100 - 100 - - TBD Sterling Ranch Alley 2020 80 - 80 1 - TBD Sterling Ranch TH 2021 46 - 46 - - TBD Canyons 4500 2020 89 1 88 12 1$774 -$974 Terrain Sunstone 2021 74 - 74 - - TBD Jefferson County: Candelas 4020 Series, Arvada 2019 98 72 26 23 26$471 -$531 Crown Point, Westminster 2019 64 57 7 6 26$449 -$491 Candelas TH, Arvada 2022 92 - 92 - - TBD Arapahoe County: Whispering Pines, Aurora 2016 115 108 7 7 13$611 -$681 Adonea 3500, Aurora 2020 71 - 71 12 -$393 -$435 Adams County:Reunion Alley , Commerce City 2021 50 - 50 - - TBD Closed Communities N/A - - - - 9 Colorado Total 1,136 440 696 90 119 North Carolina Wake County: Lakeview Townhomes, Raleigh, NC 2020 23 - 23 - -$335 -$351 Townes at North Salem St., Apex, NC 2021 55 - 55 - -$312 -$339 Mecklenburg County:Mayes Hall , Davidson, NC 2021 50 - 50 - -$335 -$406 North Carolina Total 128 - 128 - - South Carolina York County: Balsam, Rock Hill, SC 2021 53 - 53 - -$279 -$304 Ashburn , York County, SC 2020 13 - 13 - -$258 -$294 South Carolina Total 66 - 66 - - TRI Pointe Total 4,476 1,979 2,497 552 518 - 57 -
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Winchester Homes Cumulative Homes Homes Lots Delivered Year of Total Delivered Owned as of Backlog as of for the Six Sales Price First Number of as of June 30, June 30, Months Ended Range County, Project, City Delivery(1) Lots(2) June 30, 2020 2020(3) 2020(4)(5) June 30, 2020 (in thousands)(6)Maryland Anne Arundel County: TwoRivers Townhomes , Crofton 2017 152 79 73 9 14$454 -$535 Two Rivers Cascades SFD, Crofton 2018 43 35 8 8 10$520 -$590 Watson's Glen, Millersville 2015 103 9 94 20 5$368 -$381 Frederick County: Landsdale, Monrovia Landsdale SFD 2015 222 180 42 20 20$515 -$607 Landsdale Townhomes 2015 100 100 - - 3 Closed Out Landsdale TND Neo SFD 2015 77 66 11 11 7$450 -$483 Montgomery County: Cabin Branch,Clarksburg Cabin Branch SFD 2014 359 252 107 21 15$560 -$775 Cabin Branch Avenue Townhomes 2017 86 86 - - 4 Closed Out Cabin Branch Crossings Townhomes 2019 114 7 107 29 6$422 -$493 Cabin Branch Manor Townhomes 2014 428 367 61 13 16$393 -$464 Preserve at Stoney Spring - Lots for Sale TBD 2 - 2 - - Glenmont MetroCenter, Silver Spring 2016 171 146 25 25 15$460 -$518 Chapman Row, Rockville 2019 61 16 45 22 6$700 -$750 North Quarter , North Bethesda 2020 104 9 95 12 9$620 -$670 Maryland Total 2,022 1,352 670 190 130 Virginia Fairfax County:Stuart Mill ,Oakton - Lots for Sale TBD 5 - 5 - - TBD Westgrove, Fairfax 2018 24 22 2 2 3$1,001 -$1,107 West Oaks Corner, Fairfax 2019 188 41 147 53 15$705 -$830 Bren Pointe SFA, Fairfax 2020 13 - 13 - - TBD Loudoun County: Brambleton, Ashburn Birchwood Bungalows AA 2018 55 43 8 12 10$582 -$639 Birchwood Carriages AA 2019 45 20 25 26 19$537 -$570 Willowsford Grant II, Aldie 2017 55 47 8 8 9$1,000 -$1,255 Closed Communities N/A - - - - 4 Virginia Total 385 173 208 101 60 Winchester Total 2,407 1,525 878 291 190 Combined Company Total 32,479 10,508 21,749 2,558 2,187 __________ (1)Year of first delivery for future periods is based upon management's estimates and is subject to change. (2)The number of homes to be built at completion is subject to change, and there can be no assurance that we will build these homes. (3)Owned lots as ofJune 30, 2020 include owned lots in backlog as ofJune 30, 2020 . (4)Backlog consists of homes under sales contracts that have not yet been delivered, and there can be no assurance that delivery of sold homes will occur. (5)Of the total homes subject to pending sales contracts that have not been delivered as ofJune 30, 2020 , 1,679 homes are under construction, 345 homes have completed construction, and 534 homes have not started construction. (6)Sales price range reflects base price only and excludes any lot premium, buyer incentives and buyer-selected options, which may vary from project to project. Sales prices for homes required to be sold pursuant to affordable housing requirements are excluded from sales price range. Sales prices reflect current pricing and might not be indicative of past or future pricing. - 58 -
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Critical Accounting Policies Our discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, which have been prepared in accordance with GAAP. Our condensed notes to the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q and the audited financial statements included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 describe the significant accounting policies essential to our unaudited condensed consolidated financial statements. The preparation of our financial statements requires our management to make estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions that we have used are appropriate and correct based on information available at the time they were made. These estimates, judgments and assumptions can affect our reported assets and liabilities as of the date of the financial statements, as well as the reported revenues and expenses during the period presented. If there is a material difference between these estimates, judgments and assumptions and actual facts, our financial statements may be affected. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require our judgment in its application. There are areas in which our judgment in selecting among available alternatives would not produce a materially different result, but there are some areas in which our judgment in selecting among available alternatives would produce a materially different result. See the condensed notes to the unaudited consolidated financial statements that contain additional information regarding our accounting policies and other disclosures. There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 . Recently Issued Accounting Standards See Note 1, Organization, Basis of Presentation and Summary of Significant Accounting Policies, to the accompanying condensed notes to unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q.
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