Document
false0001580670 0001580670 2019-11-05 2019-11-05


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of report (date of earliest event reported): November 5, 2019
LGI HOMES, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
001-36126
 
46-3088013
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification Number)
 
1450 Lake Robbins Drive,
Suite 430,
The Woodlands,
Texas
 
77380
(Address of principal executive offices)
 
(Zip Code)
(281) 362-8998
(Registrant’s Telephone Number, Including Area Code)

N/A
(Former Name or Former Address, if Changed Since Last Report)

 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol(s)
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
LGIH
 
NASDAQ Global Select Market
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company





If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 





Item 2.02
Results of Operations and Financial Condition.
On November 5, 2019, LGI Homes, Inc. (the “Company”) issued a press release announcing its financial results for the three months and nine months ended September 30, 2019. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
None of the information furnished in this Item 2.02 and the accompanying exhibit will be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor will it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended.
Item 7.01
Regulation FD Disclosure.
The information set forth in Item 2.02 above and in Exhibit 99.1 to this Current Report on Form 8-K is incorporated herein by reference.
None of the information furnished in this Item 7.01 will be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor will it be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended.
Item 9.01
Financial Statements and Exhibits.
            
(d)
Exhibits.
 
 
99.1
104
Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Dated: November 5, 2019
 
 
LGI HOMES, INC.
 
 
 
 
By:
/s/ Eric Lipar
 
 
Eric Lipar
 
 
Chief Executive Officer and Chairman of the Board



Exhibit


EXHIBIT 99.1
LGI Homes, Inc. Reports Third Quarter and YTD 2019 Results and Updates 2019 Guidance
THE WOODLANDS, Texas, November 5, 2019 (GLOBE NEWSWIRE) - LGI Homes, Inc. (Nasdaq:LGIH) today announced results for the third quarter 2019 and the nine months ended September 30, 2019.
Third Quarter 2019 Results and Comparisons to Third Quarter 2018
Net Income of $49.3 million, or $2.15 Basic EPS and $1.93 Diluted EPS
Net Income Before Income Taxes increased 32.1% to $64.7 million
Home Sales Revenues increased 27.0% to $483.1 million
Home Closings increased 25.1% to 2,003
Average Home Sales Price increased 1.5% to $241,179
Gross Margin as a Percentage of Homes Sales Revenues was 24.1%
Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales Revenues was 26.3%
Active Selling Communities at September 30, 2019 increased 27.2% to 103
48,803 Total Owned and Controlled Lots at September 30, 2019
Please see “Non-GAAP Measures” for a reconciliation of Adjusted Gross Margin (a non-GAAP measure) to Gross Margin, the most directly comparable GAAP measure.
Nine Months Ended September 30, 2019 Results and Comparisons to Nine Months Ended September 30, 2018
Net Income of $113.7 million, or $4.97 Basic EPS and $4.49 Diluted EPS
Net Income Before Income Taxes increased 2.8% to $147.0 million
Home Sales Revenues increased 14.2% to $1.2 billion
Home Closings increased 11.1% to 5,175
Average Home Sales Price increased 2.8% to $238,165
Gross Margin as a Percentage of Homes Sales Revenues was 23.9%
Adjusted Gross Margin (non-GAAP) as a Percentage of Home Sales Revenues was 26.0%
Please see “Non-GAAP Measures” for a reconciliation of Adjusted Gross Margin (a non-GAAP measure) to Gross Margin, the most directly comparable GAAP measure.
Management Comments
“We are proud to announce another record setting quarter at LGI Homes,” stated Eric Lipar, the Company's Chief Executive Officer and Chairman of the Board. “In addition, to a record setting 2,003 home closings, the quarter was also highlighted by record setting results across home sales revenues, average home sales price, community count and net income.”
“This has been a phenomenal year so far and our results have been outstanding. Through the first nine months of the year we closed 5,175 homes generating over $1.2 billion in home sales revenue. This momentum has carried through to the fourth quarter and in the month of October we saw continued demand for affordable homes and a positive response to lower interest rates.”
“With a solid start to the fourth quarter, we believe we are well positioned to finish the year strong and are optimistic about what the future holds. Therefore, we are updating our guidance for the remainder of 2019. For the full year 2019, we now anticipate closing between 7,100 and 7,600 homes, we believe average home sales price will be between





$235,000 and $240,000, and we believe basic EPS will be in the range of $7.00 to $7.60 for the full year 2019. This guidance assumes that general economic conditions, including interest rates and mortgage availability for the remainder of the year, are similar to the third quarter of 2019,” Lipar concluded.
2019 Third Quarter Results
Home closings during the third quarter of 2019 totaled 2,003, an increase of 25.1%, up from 1,601 home closings during the third quarter of 2018. The increase in homes closed was largely due to geographic expansion in the Company’s West reportable segment and by deepening their presence within certain markets in the Company’s Northwest, Southeast, and Central reportable segments during the third quarter of 2019 as compared to the third quarter of 2018.
At the end of the third quarter, active selling communities increased to 103, up from 81 communities at the end of the third quarter of 2018.
Home sales revenues for the third quarter of 2019 were $483.1 million, an increase of $102.7 million, or 27.0%, over the third quarter of 2018. The increase in home sales revenues is primarily due to the increase in home closings and an increase in the average home sales price during the third quarter of 2019.
The average home sales price for the third quarter of 2019 was $241,179, an increase of $3,597, or 1.5%, over the third quarter of 2018. This increase in average home sales price was primarily due to changes in product mix, higher price points in new markets and a favorable pricing environment.
Gross margin as a percentage of home sales revenues for the third quarter of 2019 was 24.1% as compared to 25.6% for the third quarter of 2018. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the third quarter of 2019 was 26.3% as compared to 27.4% for the third quarter of 2018. This decrease in gross margin as a percentage of home sales revenues is primarily due to higher lot costs and higher capitalized interest costs recognized for the third quarter of 2019 as compared to the third quarter of 2018. Please see “Non-GAAP Measures” for a reconciliation of adjusted gross margin (non-GAAP) to gross margin, the most comparable GAAP measure.
Net income of $49.3 million, or $2.15 per basic share and $1.93 per diluted share, for the third quarter of 2019 increased $11.6 million, or 30.8%, from $37.7 million, or $1.66 per basic share and $1.52 per diluted share, for the third quarter of 2018. The increase in net income is primarily attributed to operating leverage realized from the increase in home sales revenues and higher average home sales price, partially offset by lower gross margin percentage and higher capitalized interest costs recognized during the third quarter of 2019 as compared to the third quarter of 2018.
Results for the Nine Months Ended September 30, 2019
Home closings for the nine months ended September 30, 2019 increased 11.1% to 5,175 from 4,660 during the nine months ended September 30, 2018. The increase in home closings was largely due to increased home closings in the Company’s West, Central and Southeast reportable segments, partially offset by decreased home closings in the Company’s Northwest and Florida reportable segments.
Home sales revenues for the nine months ended September 30, 2019 increased 14.2% to $1.2 billion compared to the nine months ended September 30, 2018. The increase in home sales revenues is primarily due to the increase in the number of homes closed and an increase in the average home sales price.
The average home sales price was $238,165 for the nine months ended September 30, 2019, an increase of $6,568, or 2.8%, over the nine months ended September 30, 2018. This increase in the average home sales price was primarily due to changes in product mix, higher price points in certain new markets and increases in sales prices in existing communities.
Gross margin as a percentage of home sales revenues for the nine months ended September 30, 2019 was 23.9% as compared to 25.6% for the nine months ended September 30, 2018. Adjusted gross margin (non-GAAP) as a percentage of home sales revenues for the nine months ended September 30, 2019 was 26.0% as compared to 27.3% for the nine months ended September 30, 2018. These decreases are primarily due to a combination of higher construction costs, construction overhead, lot costs, capitalized interest, and to lesser degree purchase accounting, partially offset by higher average home sales price. Please see “Non-GAAP Measures” for a reconciliation of adjusted gross margin (non-GAAP) to gross margin, the most comparable GAAP measure.





Net income of $113.7 million, or $4.97 per basic share and $4.49 per diluted share, for the nine months ended September 30, 2019 increased $1.1 million, or 1.0%, from $112.6 million for the nine months ended September 30, 2018. This increase is primarily due to an increase in homes closed, average home sales price and other income, net of loss on debt extinguishment offset by lower gross margin percentage during the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018.
Outlook
Subject to the caveats in the Forward-Looking Statements section of this press release, the Company updates its prior 2019 guidance. The Company now believes it will have between 105 and 115 active selling communities at the end of 2019, close between 7,100 and 7,600 homes in 2019, and generate basic EPS between $7.00 and $7.60 per share during 2019. In addition, the Company believes 2019 gross margin as a percentage of home sales revenues will be in the range of 23.5% and 24.5% and 2019 adjusted gross margin (non-GAAP) as a percentage of home sales revenues will be in the range of 26.0% and 27.0% with capitalized interest accounting for substantially all of the difference between gross margin and adjusted gross margin. The Company also believes that the average home sales price in 2019 will be between $235,000 and $240,000. This outlook assumes that general economic conditions, including interest rates and mortgage availability, in the remainder of 2019 are similar to those experienced in the third quarter of 2019 and that average home sales price, construction costs, availability of land, land development costs and overall absorption rates in the remainder of 2019 are consistent with the Company’s recent experience.
Earnings Conference Call
The Company will host a conference call via live webcast for investors and other interested parties beginning at 12:30 p.m. Eastern Time on Tuesday, November 5, 2019 (the “Earnings Call”). The Earnings Call will be hosted by Eric Lipar, Chief Executive Officer and Chairman of the Board, and Charles Merdian, Chief Financial Officer.
Participants may access the live webcast by visiting the Investor Relations section of the Company’s website at www.LGIHomes.com. The Earnings Call can also be accessed by dialing (855) 433-0929, or (970) 315-0256 for international participants.
An archive of the webcast will be available on the Company’s website for approximately 12 months. A replay of the Earnings Call will also be available later that day by calling (855) 859-2056, or (404) 537-3406, using conference id “5244016”. This replay will be available until November 12, 2019.
About LGI Homes, Inc.
Headquartered in The Woodlands, Texas, LGI Homes, Inc. engages in the design, construction and sale of homes in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada and West Virginia. Recently recognized as the 10th largest residential builder in America, based on units closed, the Company has a notable legacy of more than 16 years of homebuilding operations, over which time it has closed more than 34,000 homes. For more information about the Company and its new home developments, please visit the Company’s website at www.LGIHomes.com.





Forward-Looking Statements
Any statements made in this press release or on the Earnings Call that are not statements of historical fact, including statements about the Company’s beliefs and expectations, are forward-looking statements within the meaning of the federal securities laws, and should be evaluated as such. Forward-looking statements include information concerning projected 2019 home closings, year-end selling communities, basic earnings per share, gross margin as a percentage of home sales revenues, adjusted gross margin as a percentage of home sales revenue, and average home sales price, as well as market conditions and possible or assumed future results of operations, including descriptions of the Company’s business plan and strategies. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should,” “will” or, in each case, their negative, or other variations or comparable terminology. For more information concerning factors that could cause actual results to differ materially from those contained in the forward-looking statements please refer to the “Risk Factors” section in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, including the “Cautionary Statement about Forward-Looking Statements” subsection within the “Risk Factors” section, and subsequent filings by the Company with the Securities and Exchange Commission. The Company bases these forward-looking statements or projections on its current expectations, plans and assumptions that it has made in light of its experience in the industry, as well as its perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances and at such time. As you read and consider this press release or listen to the Earnings Call, you should understand that these statements are not guarantees of future performance or results. The forward-looking statements and projections are subject to and involve risks, uncertainties and assumptions and you should not place undue reliance on these forward-looking statements or projections. Although the Company believes that these forward-looking statements and projections are based on reasonable assumptions at the time they are made, you should be aware that many factors could affect the Company’s actual results to differ materially from those expressed in the forward-looking statements and projections. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. If the Company does update one or more forward-looking statements, there should be no inference that it will make additional updates with respect to those or other forward-looking statements.






LGI HOMES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)

 
 
September 30,
 
December 31,
 
 
2019
 
2018
ASSETS
 
 
 
 
Cash and cash equivalents
 
$
37,030

 
$
46,624

Accounts receivable
 
45,431

 
42,836

Real estate inventory
 
1,480,629

 
1,228,256

Pre-acquisition costs and deposits
 
40,137

 
45,752

Property and equipment, net
 
1,631

 
1,432

Other assets
 
16,528

 
15,765

Deferred tax assets, net
 
2,789

 
2,790

Goodwill and intangible assets, net
 
12,018

 
12,018

Total assets
 
$
1,636,193

 
$
1,395,473

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Accounts payable
 
$
29,004

 
$
9,241

Accrued expenses and other liabilities
 
78,778

 
76,555

Notes payable
 
751,364

 
653,734

Total liabilities
 
859,146

 
739,530

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
EQUITY
 
 
 
 
Common stock, par value $0.01, 250,000,000 shares authorized, 23,988,956 shares issued and 22,949,956 shares outstanding as of September 30, 2019 and 23,746,385 shares issued and 22,707,385 shares outstanding as of December 31, 2018
 
240

 
237

Additional paid-in capital
 
249,351

 
241,988

Retained earnings
 
545,512

 
431,774

Treasury stock, at cost, 1,039,000 shares
 
(18,056
)
 
(18,056
)
Total equity
 
777,047

 
655,943

Total liabilities and equity
 
$
1,636,193

 
$
1,395,473









LGI HOMES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Home sales revenues
 
$
483,081

 
$
380,369

 
$
1,232,505

 
$
1,079,240

 
 
 
 
 
 
 
 
 
Cost of sales
 
366,431

 
283,035

 
938,240

 
802,882

Selling expenses
 
33,485

 
27,890

 
94,166

 
80,140

General and administrative
 
19,140

 
17,794

 
56,558

 
51,536

   Operating income
 
64,025

 
51,650

 
143,541

 
144,682

Loss on extinguishment of debt
 

 
3,058

 
169

 
3,599

Other income, net
 
(707
)
 
(399
)
 
(3,589
)
 
(1,806
)
Net income before income taxes
 
64,732

 
48,991

 
146,961

 
142,889

Income tax provision
 
15,383

 
11,268

 
33,223

 
30,256

Net income
 
$
49,349

 
$
37,723

 
$
113,738

 
$
112,633

Earnings per share:
 
 
 
 
 
 
 
 
Basic
 
$
2.15

 
$
1.66

 
$
4.97

 
$
5.07

Diluted
 
$
1.93

 
$
1.52

 
$
4.49

 
$
4.57

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
22,939,907

 
22,658,457

 
22,870,948

 
22,236,018

Diluted
 
25,521,946

 
24,896,569

 
25,329,461

 
24,642,882








Non-GAAP Measures

In addition to the results reported in accordance with U.S. GAAP, the Company has provided information in this press release relating to adjusted gross margin.
Adjusted gross margin is a non-GAAP financial measure used by management as a supplemental measure in evaluating operating performance. The Company defines adjusted gross margin as gross margin less capitalized interest and adjustments resulting from the application of purchase accounting included in the cost of sales. Management believes this information is useful because it isolates the impact that capitalized interest and purchase accounting adjustments have on gross margin. However, because adjusted gross margin information excludes capitalized interest and purchase accounting adjustments, which have real economic effects and could impact results, the utility of adjusted gross margin information as a measure of operating performance may be limited. In addition, other companies may not calculate adjusted gross margin information in the same manner that the Company does. Accordingly, adjusted gross margin information should be considered only as a supplement to gross margin information as a measure of performance.
The following table reconciles adjusted gross margin to gross margin, which is the GAAP financial measure that the Company believes to be most directly comparable (dollars in thousands):
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2019
 
2018
 
2019
 
2018
Home sales revenues
 
$
483,081

 
$
380,369

 
$
1,232,505

 
$
1,079,240

Cost of sales
 
366,431

 
283,035

 
938,240

 
802,882

Gross margin
 
116,650

 
97,334

 
294,265

 
276,358

Capitalized interest charged to cost of sales
 
9,511

 
6,185

 
23,894

 
17,085

Purchase accounting adjustments (1)
 
671

 
850

 
2,257

 
847

Adjusted gross margin
 
$
126,832

 
$
104,369

 
$
320,416

 
$
294,290

Gross margin % (2)
 
24.1
%
 
25.6
%
 
23.9
%
 
25.6
%
Adjusted gross margin % (2)
 
26.3
%
 
27.4
%
 
26.0
%
 
27.3
%

(1)
Adjustments result from the application of purchase accounting for acquisitions and represent the amount of the fair value step-up adjustments included in cost of sales for real estate inventory sold after the acquisition dates.
(2)
Calculated as a percentage of home sales revenues.

Home Sales Revenues, Home Closings, Average Home Sales Price (ASP), Average Community Count and Average Monthly Absorption Rates by Reportable Segment
(Revenues in thousands, unaudited)

 
 
Three Months Ended September 30, 2019
 
 
Revenues
 
Home Closings
 
ASP
 
Average Community Count
 
Average
Monthly
Absorption Rate
Central
 
$
193,860

 
876

 
$
221,301

 
34.0

 
8.6

Northwest
 
92,242

 
254

 
363,157

 
14.0

 
6.0

Southeast
 
91,452

 
420

 
217,743

 
26.3

 
5.3

Florida
 
44,084

 
213

 
206,967

 
14.0

 
5.1

West
 
61,443

 
240

 
256,013

 
13.0

 
6.2

Total
 
$
483,081

 
2,003

 
$
241,179

 
101.3

 
6.6







 
 
Three Months Ended September 30, 2018
 
 
Revenues
 
Home Closings
 
ASP
 
Average Community Count
 
Average
Monthly
Absorption Rate
Central
 
$
151,673

 
698

 
$
217,297

 
31.3

 
7.4

Northwest
 
72,485

 
195

 
371,718

 
10.3

 
6.3

Southeast
 
73,507

 
352

 
208,827

 
19.7

 
6.0

Florida
 
38,750

 
183

 
211,749

 
10.7

 
5.7

West
 
43,954

 
173

 
254,069

 
10.0

 
5.8

Total
 
$
380,369

 
1,601

 
$
237,582

 
82.0

 
6.5


 
 
Nine Months Ended September 30, 2019
 
 
Revenues
 
Home Closings
 
ASP
 
Average Community Count
 
Average
Monthly
Absorption Rate
Central
 
$
507,951

 
2,342

 
$
216,888

 
33.1

 
7.9

Northwest
 
207,492

 
567

 
365,947

 
12.0

 
5.3

Southeast
 
221,686

 
1,010

 
219,491

 
23.1

 
4.9

Florida
 
121,183

 
589

 
205,744

 
12.2

 
5.4

West
 
174,193

 
667

 
261,159

 
12.4

 
6.0

Total
 
$
1,232,505

 
5,175

 
$
238,165

 
92.8

 
6.2


 
 
Nine Months Ended September 30, 2018
 
 
Revenues
 
Home Closings
 
ASP
 
Average Community Count
 
Average Monthly
Absorption Rate
Central
 
$
441,138

 
2,072

 
$
212,904

 
30.5

 
7.5

Northwest
 
214,891

 
589

 
364,840

 
10.0

 
6.5

Southeast
 
178,984

 
879

 
203,622

 
17.9

 
5.5

Florida
 
136,211

 
649

 
209,878

 
11.2

 
6.4

West
 
108,016

 
471

 
229,333

 
9.4

 
5.6

Total
 
$
1,079,240

 
4,660

 
$
231,597

 
79.0

 
6.6



CONTACT:     Investor Relations:
        Caitlin Stiles, (281) 210-2619
        InvestorRelations@LGIHomes.com