2016 fourth quarter and full year...

2016 Fourth Quarter and Full Year ResultsMaracay Homes – Pardee Homes – Quadrant Homes – Trendmaker Homes – TRI Pointe Homes – Winchester Homes

Forward Looking Statement

Various statements contained in this presentation, including those that express a belief, expectation or intention, as well asthose that are not statements of historical fact, are forward-looking statements. These forward-looking statements may includeprojections and estimates concerning the timing and success of specific projects and our future production, land and lot sales, operational and financial results, financial condition, prospects, and capital spending. Our forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “intend,” “anticipate,” “potential,” “plan,” “goal,” “target,” “guidance,” “outlook,” “will,” or other words that convey future events or outcomes. The forward-looking statements in this presentation speak only as of the date of this presentation, and we disclaim any obligation to update these statements unless required by law, and we caution you not to rely on them unduly. These forward-looking statements are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. The following factors, among others, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements: the effect 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; levels of competition; the successful execution of our internal performance plans, including restructuring and cost reduction initiatives; global economic conditions; raw material prices; oil and other energy prices; the effect of weather, including the continuing drought in California; the risk of loss from earthquakes, volcanoes, fires, floods, droughts, windstorms, hurricanes, pest infestations and other natural disasters; transportation costs; federal and state tax policies; the effect of land use, environment and other governmental 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 customers’ confidential information or other forms of cyber-attack; our relationship, and actual and potential conflicts of interest, with Starwood Capital Group or its affiliates; and additional factors discussed under the sections captioned “Risk Factors” included in our annual and quarterly reports filed with the Securities and Exchange Commission. The foregoing list is not exhaustive. New risk factors may emerge from time to time and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. This presentation includes certain non-GAAP financial metrics, including adjusted homebuilding gross margin and net debt-to-capital. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP. Please refer to the Supplemental Data and Reconciliation section of this presentation for a reconciliation of the non-GAAP financial measures included in this presentation to the most directly comparable financial measures prepared in accordance with GAAP. Winchester is a registered trademark and is used with permission.

Management Team

3

Michael GrubbsChief Financial Officer

• Over 25 years of real estate and homebuilding experience

• Former SVP / CFO of William Lyon Homes

Douglas BauerChief Executive Officer


• Former President and COO of William Lyon Homes

Thomas Mitchell President & COO


• Former EVP and Southern California Regional President at William Lyon Homes

Working together for over 25 years, TRI Pointe senior management has significant experience running a large, geographically diverse, growth-oriented public homebuilder. Deep managerial talent at each operating division with key local relationships supports dynamic tailored growth strategies.

A Family of Regional Homebuilders

A Family of Regional Homebuilders

2016 Orders: 4,248 2016 Deliveries: 4,211

2016 Home Sales (“HS”) Revenue: $2,329,336 2016 Average Sales Price (“ASP”): $553

Lots Owned or Controlled: 28,309

Market: Greater Puget Sound Area2016 Orders: 341 2016 Deliveries: 3832016 HS Revenue: $207,057 2016 ASP: $541Lots Owned or Controlled: 1,582

Markets: Los Angeles/Ventura, Inland Empire, San Diego, Las Vegas2016 Orders: 1,206 2016 Deliveries: 1,2202016 HS Revenue: $668,835 2016 ASP: $548Lots Owned or Controlled: 16,912

Markets: Orange County, Los Angeles, San Diego, San Francisco Bay Area, Denver2016 Orders: 1,097 2016 Deliveries: 1,0892016 HS Revenue: $723,186 2016 ASP: $664Lots Owned or Controlled: 3,479

Markets: Phoenix, Tucson2016 Orders: 670 2016 Deliveries: 6252016 HS Revenue: $255,253 2016 ASP: $408Lots Owned or Controlled: 2,053

Markets: Houston, Austin2016 Orders: 501 2016 Deliveries: 4742016 HS Revenue: $239,7342016 ASP: $506Lots Owned or Controlled: 1,999

Markets: Washington DC2016 Orders: 4332016 Deliveries: 4202016 HS Revenue: $235,271 2016 ASP: $560Lots Owned or Controlled: 2,284

Data as of December 31, 2016Note: Dollars in thousands

2016 Fourth Quarter and Full Year Highlights

2016 Fourth Quarter Highlights

• Absorption rate of 2.5 new home orders per community per month

• New home deliveries down 2% to 1,427 with an average sales price of $540K

• Home sales revenue down 9% to $771MM

• Homebuilding gross margin of 20.0%

• Adj. homebuilding gross margin of 22.2% (1)

• SG&A expense increased 80 basis points to 9.2% of home sales revenue compared to 8.4%

• Net income available to common stockholders of $57.9MM, or $0.36 per diluted share vs. $85.1MM or $0.52 per diluted share

• Repurchased 1,455,332 shares for $17.0MM at an average price of $11.66 per share

6(1) See “Reconciliation of Non-GAAP Measures” in the appendix of this presentation(2) Backlog (units) figures are as of December 31, 2016 and 2015, respectively

Metric 4Q 2016 4Q 2015 % Change

Orders 909 753 21%

Deliveries 1,427 1,453 -2%

ASP of Deliveries ($000s) $540 $583 -7%

Backlog (units) (2) 1,193 1,156 3%

Home Sales Revenue ($mm) $771 $847 -9%

HB Gross Margin 20.0% 22.2% -220 bps

Land and Lot Sales Revenue ($mm) $2.1 $26.9 -92%

Land and Lot Sales Profit ($mm) $1.7 $9.2 -82%

SG&A Expense (% of sales) 9.2% 8.4% +80 bps

EPS (Diluted) $0.36 $0.52 -30.8%

2016 Full Year Highlights

• Absorption rate of 3.0 new home orders per community per month

• New home deliveries up 4% to 4,211 with an average sales price of $553K

• Home sales revenue up 2% to $2,329MM

• Homebuilding gross margin of 21.2%

• Adj. homebuilding gross margin of 23.4% (1)

• Land and lot sales revenue of $72MM generating $55MM in profit

• SG&A expense increased 60 basis points to 10.8% of home sales revenue compared to 10.2%

• Net income available to common stockholders of $195.2MM, or $1.21 per diluted share vs. $205.5MM or $1.27 per diluted share

• Repurchased 3,560,853 shares for $42.1MM at an average price of $11.82 per share

7(1) See “Reconciliation of Non-GAAP Measures” in the appendix of this presentation(2) Backlog (units) figures are as of December 31, 2016 and 2015, respectively

Metric 2016 2015 % Change

Orders 4,248 4,181 2%

Deliveries 4,211 4,057 4%

ASP of Deliveries ($000s) $553 $565 -2%

Backlog (units) (2) 1,193 1,156 3%

Home Sales Revenue ($mm) $2,329 $2,291 2%

HB Gross Margin 21.2% 21.1% 10 bps

Land and Lot Sales Revenue ($mm) $72 $101 -29%

Land and Lot Sales Profit ($mm) $55 $66 -17%

SG&A Expense (% of sales) 10.8% 10.2% -60 bps

EPS (Diluted) $1.21 $1.27 -4.7%

Arizona14%

California33%

Maryland6%

Nevada9%

Colorado4%

Texas25%

Virginia3%

Washington6%

Active Selling Communities and Absorption Rate

8

104

124

3.0 3.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

25

50

75

100

125

150

2015 2016

Communities Absorption Rate

Active Selling Communities and Absorption RateAs of and for the years ended December 31, 2015 and 2016

Active Selling Communities by StateAs of December 31, 2016

Opened 10 new communities and closed 9 in 4Q16

Incr

eas

e 1

9%

YO

Y

Arizona15%

California30%

Maryland6%

Nevada9%

Colorado4%

Texas24%

Virginia5%

Washington7%

Average Selling Communities and Absorption Rate

9

99

116 118

134

2.5

3.0 3.0 3.1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

25

50

75

100

125

150

2014 2015 2016 2017P

Communities Absorption Rate

Incr

eas

e 2

% Y

OY

Incr

eas

e 1

4%

YO

Y

Average Selling Communities and Absorption RateAs of and for the years ended December 31, 2014 through 2016 and 2017 projections

Average Selling Communities by StateFor the year ended December 31, 2016

Opened 63 new communities and closed 43 in 2016Expect to open over 60 new communities in 2017

Incr

eas

e 1

7%

YO

Y

See Forward Looking Statement disclosure on page 2 of the presentation

Arizona16%

California39%

Maryland8%

Nevada11%

Colorado3%

Texas13%

Virginia3%

Washington7%

New Home Orders – Q4 2016 Results

10

753

909

0

100

200

300

400

500

600

700

800

900

1,000

2015 2016

Incr

eas

e 2

1%

YO

Y

Fourth Quarter - New Home OrdersFor the quarters ended December 31, 2015 and 2016

New Home Orders by StateFor the quarter ended December31, 2016

Arizona16%

California40%

Maryland7%

Nevada11%

Colorado3%

Texas12%

Virginia3%

Washington8%

New Home Orders – FY 2014 through FY 2016

11

2,947

4,1814,248

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2014 2015 2016

Incr

eas

e 2

% Y

OY

New Home OrdersFor the years ended December 31, 2014 through 2016

New Home Orders by StateFor the year ended December 31, 2016

Incr

eas

e 4

2%

YO

Y

Arizona17%

California36%

Maryland9%

Nevada6%

Colorado6%

Texas13%

Virginia3%

Washington10%

Backlog – Units and Dollar Value

12

Backlog – Units and Dollar ValueAs of December 31, 2015 and 2016 (dollars in thousands)

Backlog Dollar Value by StateAs of December 31, 2016

1,1561,193

0

200

400

600

800

1,000

1,200

Units

$697,334 $661,146

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$ Value

2015

2016

$603K $540KAverage Sales Price

in Backlog

Incr

eas

e 3

% Y

OY

De

cre

ase

5%

YO

Y

Arizona21%

California34%

Maryland8%

Nevada8%

Colorado5%

Texas14%

Virginia2%

Washington8%

Backlog Units – FY 2014 through FY 2016

13

1,032

1,1561,193

0

500

1,000

1,500

2014 2015 2016

Incr

eas

e 3

% Y

OY

Backlog UnitsFor the years ended December 31, 2014 through 2016

Backlog Units by StateFor the year ended December 31, 2016

Incr

eas

e 1

2%

YO

Y

$633K $603K $554KAverage Sales Price of Backlog Units

Arizona16%

California42%

Maryland6%

Nevada11%

Colorado3%

Texas10%

Virginia5%

Washington7%

New Home Deliveries – Q4 2016 Results

14

New Home Deliveries by StateFor the quarter ended December 31, 2016

New Home DeliveriesAs of and for the quarters ended December 31, 2015 and 2016

1,453 1,427

0

200

400

600

800

1,000

1,200

1,400

1,600

2015 2016

78% 83%Backlog Conversion Ratio

De

cre

ase

2%

YO

Y

Arizona15%

California40%

Maryland6%

Nevada11%

Colorado4%

Texas11%

Virginia4%

Washington9%

New Home Deliveries – FY 2014 through FY 2016

15

New Home Deliveries by StateFor the year ended December 31, 2016

New Home DeliveriesFor the years ended December 31, 2014 through 2016 and 2017 projections

3,100

4,0574,211

4,500

4,800

0

1,000

2,000

3,000

4,000

5,000

2014 2015 2016 2017P

Incr

eas

e 1

0%

YO

Y a

t m

idp

oin

t o

f th

e r

ange

Incr

eas

e 4

% Y

OY

Incr

eas

e 3

1%

YO

YGuidance Range of Deliveries


Arizona12%

California47%

Maryland7%

Nevada9%

Colorado3%

Texas9%

Virginia5%

Washington8%

Home Sales Revenue – Q4 2016 Results

16

$847,409

$770,703

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

2015 2016

Home Sales RevenueFor the quarters ended December 31, 2015 and 2016 (dollars in thousands)

Home Sales Revenue by StateFor the quarter ended December 31, 2016

$583K $540KAverage Sales Price of Deliveries

De

cre

ase

9%

YO

Y

Arizona11%

California48%

Maryland6%

Nevada8%

Colorado4%

Texas10%

Virginia4%

Washington9%

Home Sales Revenue – FY 2014 through FY 2016

17

$1,646

$2,291 $2,329 $2,565

$2,736

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

2014 2015 2016 2017P

Incr

eas

e 1

4%

YO

Y a

t m

idp

oin

t o

f th

e r

ange

Home Sales RevenueFor the years ended December 31, 2014 through 2016 and 2017 projections(dollars in thousands)

Home Sales Revenue by StateFor the year ended December 31, 2016

$531K $565K $553K $570KAverage Sales Price of Deliveries

Incr

eas

e 2

% Y

OY

Incr

eas

e 3

9%

YO

Y

Guidance Range of

Home Sales Revenue


SG&A Expenses, Income before Taxes and Net Income – Q4 2016 Results

18

$71,605 $70,937

$37,259 $37,282$34,346 $33,655

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

2015 2016

SG&A

S&M

G&A

Selling General and Administrative ExpensesFor the quarters ended December 31, 2015 and 2016 (dollars in thousands)

8.4% 9.2%SG&A as a % of Home Sales Revenue

De

cre

ase

1%

YO

Y

$131,344

$86,478$85,072

$57,861

$0.52

$0.36

$0.00

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

2015 2016

Inc Before Taxes Net Income EPS

Income before Taxes, Net Income available to Common Stockholders and EPS (Diluted)For the quarters ended December 31, 2015 and 2016 (dollars in thousands except EPS)

De

cre

ase

32

% Y

OY

De

cre

ase

34

% Y

OY

19

$185,958

$233,713

$251,093

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

2014 2015 2016 2017

Selling, General and Administrative ExpensesFor the years ended December 31, 2014 through 2016 (dollars in thousands)

11.3% 10.2% 10.8% 10.2%-10.4%SG&A as a % of Home Sales Revenue

Incr

eas

e 7

% Y

OY

Incr

eas

e 2

6%

YO

Y

2017 GuidanceProject SG&A Expense Ratio

of 10.2% to 10.4% of Home Sales Revenue

$127,964

$319,260$302,227

$84,197

$205,461$195,171

$0.58

$1.27$1.21

-$0.10

$0.10

$0.30

$0.50

$0.70

$0.90

$1.10

$1.30

$1.50

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

2014 2015 2016

Inc Before Taxes Net Income EPS

Income before Taxes, Net Income available to Common Stockholders and EPS (Diluted)For the full years ended December 31, 2014 through 2016 (dollars in thousands except EPS)

SG&A Expenses, Income before Taxes and Net Income – FY 2014 through FY 2016

Incr

eas

e 1

44

% Y

OY

Incr

eas

e 1

49

% Y

OY

De

cre

ase

5%

YO

Y

De

cre

ase

5%

YO

Y


Orders, Deliveries and Absorption Rate year over year comparisons for the Fourth Quarter and Full Year 2016 by Segment

(Includes breakout by state for Pardee Homes and TRI Pointe Homes brands)

83

144

173

225

1.8

2.7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

50

100

150

200

250

4Q15 4Q16Orders Deliveries Absorption

Orders, Deliveries and Absorption RateFor the quarters ended December 31, 2015 and 2016

4Q15 4Q16$399K $417KAverage Sales Price of Deliveries

21

Orders, Deliveries and Absorption RateFor the years ended December 31, 2015 and 2016

578

670

480

625

2.93.1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

100

200

300

400

500

600

700

FY15 FY16Orders Deliveries Absorption

FY15 FY16$387K $408KAverage Sales Price of Deliveries

Incr

eas

e 3

0%

YO

Y

Incr

eas

e 7

3%

YO

Y

Incr

eas

e 3

0%

YO

Y

Incr

eas

e 1

6%

YO

Y

9499

136

165

2.9 2.9

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0

20

40

60

80

100

120

140

160

180



Nevada

22



394

478

374

4603.2

3.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

100

200

300

400

500

600



Incr

eas

e 2

1%

YO

Y

Incr

eas

e 5

% Y

OY

Incr

eas

e 2

3%

YO

Y

Incr

eas

e 2

1%

YO

Y

138

171

270

2273.5

3.9

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

50

100

150

200

250

300



23



792728

756 760

5.24.8

0.0

1.0

2.0

3.0

4.0

5.0

6.0

0

100

200

300

400

500

600

700

800

900


FY15 FY16$620K $646K

Average Sales Price of Deliveries

California

Incr

eas

e 2

3%

YO

Y

De

cre

ase

16

% Y

OY

De

cre

ase

8%

YO

Y

Incr

eas

e 1

% Y

OY

88

67

114

96

2.8

3.4

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

20

40

60

80

100

120



24



441

341

4113833.4

3.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

50

100

150

200

250

300

350

400

450

500



De

cre

ase

24

% Y

OY

De

cre

ase

16

% Y

OY

De

cre

ase

23

% Y

OY

De

cre

ase

7%

YO

Y

76

116

145139

1.11.3

0.0

0.5

1.0

1.5

2.0

0

20

40

60

80

100

120

140

160



25


457

501539

474

1.5 1.5

0.0

0.5

1.0

1.5

2.0

2.5

0

100

200

300

400

500

600




Incr

eas

e 5

3%

YO

Y

De

cre

ase

4%

YO

Y

Incr

eas

e 1

0%

YO

Y

De

cre

ase

12

% Y

OY

2528

65

42

1.5

2.1

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

10

20

30

40

50

60

70

4Q15 4Q16

Orders Deliveries Absorption


26



193

135

193

1602.6

2.4

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

20

40

60

80

100

120

140

160

180

200


FY15 FY16$496K $524K

Average Sales Price of Deliveries

Colorado

Inc

12

% Y

OY

De

c 3

5%

YO

Y

De

cre

ase

30

% Y

OY

De

cre

ase

17

% Y

OY

147

186

384 369

2.3

2.6

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

50

100

150

200

250

300

350

400

450



27


914962

867929

3.7 3.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0

200

400

600

800

1,000

1,200




California

Inc

27

% Y

OY

De

c 4

% Y

OY

Incr

eas

e 7

% Y

OY

Incr

eas

e 5

% Y

OY

102 98

166164

2.5 2.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

20

40

60

80

100

120

140

160

180



28


412433437

420

2.5

2.7

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0

50

100

150

200

250

300

350

400

450

500




De

cre

ase

4%

YO

Y

De

cre

ase

4%

YO

Y

Incr

eas

e 5

% Y

OY

De

cre

ase

1%

YO

Y

2017 Outlook

Full Year 2017 Update and Outlook

30

• Expect to grow average selling communities by 10% for the full year

• Anticipate delivering between 4,500 and 4,800 homes at an average sales price of $570,000

• Anticipate generating $45 million of gross profit from land and lot sales, most of which is expected to close in the third quarter of 2017

• Anticipate homebuilding gross margins for the full year in a range of 20% to 21%

• Anticipate SG&A expense ratio for the full year to be in a range of 10.2% to 10.4% of home sales revenue


Land Supply

Orders by Month

Debt

Significant Land Supply to Fuel Growth

Combined Lot Position

Market Owned Controlled Total Lots % Owned Inventory Dollars LTM DeliveriesImplied Years of Supply (1)

California 16,835 410 17,245 98% $1,617,972 1,689 10.2

Colorado 621 297 918 68% $98,615 160 5.7

Washington, D.C. (2) 1,788 496 2,284 78% $282,545 420 5.4

Arizona 1,667 386 2,053 81% $228,965 625 3.3

Nevada 1,658 570 2,228 74% $250,109 460 4.8

Texas 1,687 312 1,999 84% $211,035 474 4.2

Washington 1,027 555 1,582 65% $221,386 383 4.1

Total 25,283 3,026 28,309 89% $2,910,627 4,211 6.7

As of December 31, 2016

California61%

Colorado3%

Washington, D.C. (2)8%

Arizona7%

Nevada8%

Texas7%

Washington6%

Total Lots

(1) Based on last twelve months’ deliveries as of December 31, 2016(2) Includes lots in the greater Washington D.C. area.

California56%

Colorado3%

Washington, D.C. (2)10%

Arizona8%

Nevada9%

Texas7%

Washington8%

Inventory Dollars

32

. Note: Dollars in thousands

New Home Orders – Historical by Month

33

324

415

455

410

457

371355

367

274

318

227208

322

409418

477

425

356

280

306

346 345

297

267

377

0

50

100

150

200

250

300

350

400

450

500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2015

2016

2017

2017 - 3.03

2016 - 2.98 3.57 3.45 3.89 3.60 3.06 2.41 2.59 2.84 2.83 2.43 2.16

2015 - 2.96 3.67 3.91 3.47 3.82 3.05 2.91 3.02 2.29 2.72 1.98 1.92

Absorption Rate = Orders per Month per Community

January 2017

Orders up 17% YOY

4Q16 Orders up 21% YOY

Selected Balance Sheet Metrics

34

$450

$300

$450

$0

$100

$200

$300

$400

$500

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

4.375% Senior Notes 4.875% Senior Notes 5.875% Senior Notes

• During the fourth quarter, the Company had zero net borrowings under its $625 million unsecured revolving credit facility.

$ in thousands 12/31/2016 12/31/2015

Cash and cash equivalents $ 208,657 $ 214,485

Real estate inventories $ 2,910,627 $ 2,519,273

Total Debt $ 1,382,033 $ 1,170,505

Total Stockholders' equity $ 1,829,447 $ 1,664,683

Debt-to-capitalNet debt-to-capital(1)

43.0%39.1%

41.3%36.5%

Selected Balance Sheet Metrics

Senior Note Debt Maturities (in millions)

(1) See “Reconciliation of Non-GAAP Measures” in the appendix of this presentation

Supplemental Data and Reconciliation

Reconciliation of Non-GAAP Financial Measures(unaudited)

36

In this presentation, we utilize certain financial measures that are non-GAAP financial measures as defined by the Securities and Exchange Commission. We present these measures because we believe they and similar measures are useful to management and investors in evaluating the Company’s operating performance and financing structure. We also believe these measures facilitate the comparison of our operating performance and financing structure with other companies in our industry. Because these measures are not calculated inaccordance with Generally Accepted Accounting Principles (“GAAP”), they 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.

The following tables reconcile homebuilding gross margin percentage, as reported and prepared in accordance with GAAP, to the non-GAAP measure adjusted homebuilding gross margin percentage. We believe this information is meaningful as it isolates the impact that leverage has on homebuilding gross margin and permits investors to make better comparisons with our competitors, who adjust gross margins in a similar fashion.

Three Months Ended December 31,

2016 % 2015 %

(dollars in thousands)

Home sales revenue $ 770,703 100.0 % $ 847,409 100.0 %

Cost of home sales 616,767 80.0 % 659,585 77.8 %

Homebuilding gross margin 153,936 20.0 % 187,824 22.2 %

Add: interest in cost of home sales 16,458 2.1 % 16,759 2.0 %

Add: impairments and lot option abandonments 792 0.1 % 92 0.0 %

Adjusted homebuilding gross margin $ 171,186 22.2 % $ 204,675 24.2 %

Homebuilding gross margin percentage 20.0 % 22.2 %

Adjusted homebuilding gross margin percentage 22.2 % 24.2 %

Reconciliation of Non-GAAP Financial Measures(unaudited)

37

Year Ended December 31,

2016 % 2015 %

(dollars in thousands)

Home sales revenue $ 2,329,336 100.0 % $ 2,291,264 100.0 %

Cost of home sales 1,836,327 78.8 % 1,808,776 78.9 %

Homebuilding gross margin 493,009 21.2 % 482,488 21.1 %

Add: interest in cost of home sales 51,111 2.2 % 44,299 1.9 %

Add: impairments and lot option abandonments 1,470 0.1 % 1,685 0.1 %

Adjusted homebuilding gross margin $ 545,590 23.4 % $ 528,472 23.1 %

Homebuilding gross margin percentage 21.2 % 21.1 %

Adjusted homebuilding gross margin percentage 23.4 % 23.1 %

Reconciliation of Non-GAAP Financial Measures (cont’d)(unaudited)

38

The following table reconciles the Company’s ratio of debt-to-capital to the ratio of net debt-to-capital. We believe that the ratio of net debt-to-capital is a relevant financial measure for management and investors to understand the leverage employed in our operations and as an indicator of the Company’s ability to obtain financing.

December 31, 2016 December 31, 2015

Unsecured revolving credit facility $ 200,000 $ 299,392

Seller financed loans 13,726 2,434

Senior notes 1,168,307 868,679

Total debt 1,382,033 1,170,505

Stockholders’ equity 1,829,447 1,664,683

Total capital $ 3,211,480 $ 2,835,188

Ratio of debt-to-capital(1) 43.0 % 41.3 %

Total debt $ 1,382,033 $ 1,170,505

Less: Cash and cash equivalents (208,657 ) (214,485 )

Net debt 1,173,376 956,020

Stockholders’ equity 1,829,447 1,664,683

Total capital $ 3,002,823 $ 2,620,703

Ratio of net debt-to-capital(2) 39.1 % 36.5 %

__________ (1) The ratio of debt-to-capital is computed as the quotient obtained by dividing debt by the sum of debt plus equity.

(2) The ratio of net debt-to-capital is computed as the quotient obtained by dividing net debt (which is debt less cash and

cash equivalents) by the sum of net debt plus equity.

2016 fourth quarter and full year...

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