Attached files

file filename
8-K - 8-K - Taylor Morrison Home Corpd268462d8k.htm

Exhibit 99.1

 

LOGO

News Release

 

 

CONTACT: Investor Relations

Taylor Morrison Home Corporation

(480) 734-2060

investor@taylormorrison.com

Taylor Morrison Reports Third Quarter Revenue of $853 Million and Earnings per Share of $0.49

SCOTTSDALE, Ariz., Nov. 2, 2016 — Taylor Morrison Home Corporation (NYSE:TMHC) today reported third quarter total revenue of $853 million, net income of $58 million and earnings per share of $0.49.

Third Quarter Highlights:

 

    Net sales orders were 1,950, a 19% increase from the prior year quarter

 

    Average active community count increased 12% from the prior year quarter to 309

 

    Total revenue was $853 million, a 7% increase from the prior year quarter

 

    GAAP home closings gross margin, inclusive of capitalized interest, was 18.9%, up 50 basis points from prior year quarter

 

    Earnings before tax as a percent of revenue was 10.6%, a 200 basis points increase from prior year quarter

 

    Net income for the quarter was $58 million, a 28% increase from prior year, with earnings per share of $0.49

“We’re extremely pleased with the organization’s strong performance in the third quarter,” said Sheryl Palmer, President and CEO of Taylor Morrison. “Most notably, our net sales orders increased 19% from the prior year quarter to 1,950, which is on top of last year’s same quarter year-over-year sales growth of 18%. We are also quite pleased with our October sales performance up about 23% year-over-year. Our home closings gross margin was 50 basis points higher than the prior year quarter coming in at 18.9%.”

“The housing recovery continues at its measured pace in an upward trajectory. Our belief in this recovery remains intact, despite any external factors that may produce short-term choppiness in individual markets. We continue to take a longer-term view when evaluating the industry and believe that this approach keeps us focused on the right things that will produce the long-term results we expect. Taylor Morrison is well positioned to mature with the cycle and drive efficiencies from our strategic foundation.”

Backlog of homes under contract at the end of the quarter was 3,855 units, a growth of 8% from the prior year. Homes in backlog had a sales value of $1.9 billion, or a growth of 14% from the prior year. Homebuilding gross margin, including capitalized interest, was 18.9% compared to 18.4% in the third quarter of last year. The year-over-year increase was driven by the West and East regions, with some offset coming from the Central region. The improvement was driven by both mix and rate coupled with lower capitalized interest per unit as compared to the prior year. Land closings revenue generated over $19 million in margin primarily from the sale of long-term held assets.


LOGO

 

SG&A as a percentage of homebuilding revenue was 10.9% for the quarter, which was impacted by both a shift of closings into Q4 and a pull forward of some 2017 investment into the business. “Now that we’re nearing completion of the integration of our new markets, we’re shifting our focus towards optimizing our operating model in order to maximize the benefit from the Company’s significant growth since the IPO in 2013,” stated Ms. Palmer. “We believe the investments we’re making in our people, processes, and tools will lead to accretive returns in the coming quarters.”

Earnings before tax as a percent of revenue was 10.6% for the quarter, representing an increase of 200 basis points from the prior year’s quarter. Net income was $58 million and earnings per share was $0.49, representing a 28% and 32% increase from last year’s quarter, respectively.

The Company ended the quarter with $161 million in cash and a net homebuilding debt to capitalization ratio of 41.0%.

Homebuilding inventories were $3.3 billion at the end of the quarter with 4,747 homes in inventory, compared to 4,525 homes at the end of the prior year quarter. Homes in inventory at the end of the quarter consisted of 3,078 sold units, 442 model homes and 1,227 inventory units, of which 228 were finished. The Company owned or controlled approximately 39,000 lots at September 30, 2016.

During the third quarter, the Company repurchased Class A common stock for $3.8 million, or an average price of about $15.50 per share. At September 30, 2016, the Company had $56.4 million remaining under its existing share repurchase program.


LOGO

 

Quarterly Financial Comparison

($ thousands)

      
     Q3 2016     Q3 2015     Q3 2016 vs. Q3 2015  

Total Revenue

   $ 853,417      $ 796,288        7.2

Home Closings Revenue

   $ 812,185      $ 779,190        4.2

Home Closings Gross Margin

   $ 153,678      $ 143,255        7.3
     18.9     18.4     50 bps increase   

Adjusted Home Closings Gross Margin

   $ 175,180      $ 165,141        6.1
     21.6     21.2     40 bps increase   

SG&A

   $ 88,221      $ 78,746        12.0

% of Home Closings Revenue

     10.9     10.1     80 bps increase   

Full Year 2016 Business Outlook

 

    Average community count is expected to be about 310

 

    Monthly absorption pace is expected to be between 2.0 and 2.2

 

    Home closings are expected to be between 7,100 and 7,300

 

    GAAP home closings gross margin, inclusive of capitalized interest, is expected to be in the low to mid 18% range

 

    SG&A as a % of homebuilding revenue is expected to be in the mid 10% range

 

    Income from unconsolidated joint ventures is expected to be between $7 million and $8 million

 

    Land and development spend is expected to be approximately $800 million

 

    Effective tax rate – expected to be between 34% and 35%


LOGO

 

Earnings Webcast

A public webcast to discuss the third quarter 2016 earnings will be held later today at 8:30 a.m. Eastern time. The participant dial-in is 1(888)771-4371 and the confirmation number is 43541634. More information can be found on the Company’s investor relations website at investors.taylormorrison.com. A webcast replay will also be available on the site later today and will be available for one year from the date of the original earnings call.

About Taylor Morrison

Taylor Morrison Home Corporation (NYSE:TMHC) is a leading national homebuilder and developer that was recently recognized as America’s Most TrustedTM Home Builder for 2016 by Lifestory Research. Based in Scottsdale, Arizona we operate under two well-established brands, Taylor Morrison and Darling Homes. We serve a wide array of consumer groups from coast to coast, including first-time, move-up, luxury, and 55 plus buyers. In Texas, Darling Homes builds communities with a focus on individuality and custom detail while delivering on the Taylor Morrison standard of excellence.

For more information about Taylor Morrison and Darling Homes please visit www.taylormorrison.com or www.darlinghomes.com.

Forward-Looking Statements

This earnings summary includes “forward-looking statements.” These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words “believe,” “expect,” “intend,” “estimate,” “anticipate,” “project,” “may,” “can,” “could,” “might,” “will” and similar expressions identify forward-looking statements, including statements related to expected operating and performing results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future.

Such risks, uncertainties and other factors include, among other things: changes in general and local economic conditions; slowdowns or severe downturns in the housing market; homebuyers’ ability to obtain suitable financing; shortages in, disruptions of and cost of labor; our ability to obtain additional performance, payment and completion surety bonds and letters of credit; higher cancellation rates; competition in our industry; any increase in unemployment or underemployment; increases in taxes, government fees or interest rates; inflation or deflation; the seasonality of our business; significant home warranty and construction defect claims; our reliance on subcontractors; failure to manage land acquisitions, inventory and development and construction processes; availability of land and lots; decreases in the market value of our land inventory; new or changes in government regulations and legal challenges; our ability to sell mortgages we originate and claims on loans sold to third parties; the loss of any of our important commercial relationships; our ability to use deferred tax assets; raw materials and building supply shortages and price fluctuations; our concentration of significant operations in certain geographic areas; risks associated with our unconsolidated joint venture arrangements; information technology failures and data security breaches; costs to engage in and the success of future growth or expansion of our operations or acquisitions or disposals of businesses; costs associated with our defined benefit and defined contribution pension schemes; damages associated with any major health and safety incident; our ownership, leasing or occupation of land and the use of hazardous materials; material losses in excess of insurance limits; existing or future litigation, arbitration or other claims; negative publicity or poor relations with the residents of our communities; failure to recruit, retain and develop highly skilled, competent people; utility and resource shortages or rate fluctuations; constriction of the capital markets; risks related to our debt and the agreements governing such debt; our ability to access the capital markets; and risks related to our structure and organization. We undertake no duty to update any forward-looking statement, whether as a result of new information, future events or changes in our expectations, except as required by applicable law. In addition, other such risks and uncertainties may be found in Taylor Morrison Home Corporation’s Form 10-K filed with the Securities and Exchange Commission (SEC).


LOGO

 

Taylor Morrison Home Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts, unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2016     2015     2016     2015  

Home closings revenue, net

   $ 812,185      $ 779,190      $ 2,271,154      $ 1,955,170   

Land closings revenue

     27,418        5,782        44,957        22,712   

Mortgage operations revenue

     13,814        11,316        36,951        28,794   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     853,417        796,288        2,353,062        2,006,676   

Cost of home closings

     658,507        635,935        1,852,724        1,594,691   

Cost of land closings

     8,179        3,919        20,497        13,152   

Mortgage operations expenses

     7,877        6,962        22,594        18,120   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     674,563        646,816        1,895,815        1,625,963   

Gross margin

     178,854        149,472        457,247        380,713   

Sales, commissions and other marketing costs

     58,277        53,482        165,300        136,724   

General and administrative expenses

     29,944        25,264        91,078        70,171   

Equity in (income)/loss of unconsolidated entities

     (1,646     120        (4,734     (1,408

Interest income, net

     (47     (33     (149     (165

Other expense, net

     1,935        2,393        8,602        11,625   

Loss on extinguishment of debt

     —          —          —          33,317   

Gain on foreign currency forward

     —          —          —          (29,983
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     90,391        68,246        197,150        160,432   

Income tax provision

     31,707        22,452        66,698        54,434   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

     58,684        45,794        130,452        105,998   

Discontinued operations:

        

Transaction expenses from discontinued operations

     —          —          —          (9,043

Gain on sale of discontinued operations

     —          —          —          80,205   

Income tax expense from discontinued operations

     —          —          —          (14,500
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income from discontinued operations

     —          —          —          56,662   

Net income before allocation to non-controlling interests

     58,684        45,794        130,452        162,660   

Net income attributable to non-controlling interests – joint ventures

     (376     (138     (856     (1,427
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income before non-controlling interests – Principal Equityholders

     58,308        45,656        129,596        161,233   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations attributable to non-controlling interests – Principal Equityholders

     (43,471     (33,312     (96,261     (76,470

Net income from discontinued operations attributable to non-controlling interests – Principal Equityholders

     —          —          —          (41,381
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to Taylor Morrison Home Corporation

   $ 14,837      $ 12,344      $ 33,335      $ 43,382   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share – basic:

        

Income from continuing operations

   $ 0.49      $ 0.37      $ 1.07      $ 0.85   

Income from discontinued operations – net of tax

   $ —        $ —        $ —        $ 0.46   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to Taylor Morrison Home Corporation

   $ 0.49      $ 0.37      $ 1.07      $ 1.31   

Earnings per common share – diluted:

        

Income from continuing operations

   $ 0.49      $ 0.37      $ 1.07      $ 0.85   

Income from discontinued operations – net of tax

   $ —        $ —        $ —        $ 0.46   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to Taylor Morrison Home Corporation

   $ 0.49      $ 0.37      $ 1.07      $ 1.31   

Weighted average number of shares of common stock:

        

Basic

     30,427        33,122        31,300        33,088   

Diluted

     120,103        122,458        120,870        122,412   


LOGO

 

Taylor Morrison Home Corporation

Condensed Consolidated Balance Sheets

(In thousands)

 

     September 30,
2016
     December 31,
2015
 
     (Unaudited)         

Assets

     

Cash and cash equivalents

   $ 160,519       $ 126,188   

Restricted cash

     1,320         1,280   

Real estate inventory:

     

Owned inventory

     3,286,685         3,118,866   

Real estate not owned under option agreements

     612         7,921   
  

 

 

    

 

 

 

Total real estate inventory

     3,287,297         3,126,787   

Land deposits

     35,091         34,113   

Mortgage loans held for sale

     118,997         201,733   

Prepaid expenses and other assets, net

     75,111         75,295   

Other receivables, net

     129,165         120,729   

Investments in unconsolidated entities

     151,606         128,448   

Deferred tax assets, net

     234,457         233,488   

Property and equipment, net

     6,320         7,387   

Intangible assets, net

     3,454         4,248   

Goodwill

     66,198         57,698   
  

 

 

    

 

 

 

Total assets

   $ 4,269,535       $ 4,117,394   
  

 

 

    

 

 

 

Liabilities

     

Accounts payable

   $ 145,944       $ 151,861   

Accrued expenses and other liabilities

     193,763         191,452   

Income taxes payable

     26,673         37,792   

Customer deposits

     137,561         92,319   

Senior notes, net

     1,236,908         1,235,157   

Loans payable and other borrowings

     142,786         134,824   

Revolving credit facility borrowings, net

     211,084         109,947   

Mortgage warehouse borrowings

     91,166         183,444   

Liabilities attributable to real estate not owned under option agreements

     612         7,921   
  

 

 

    

 

 

 

Total liabilities

   $ 2,186,497       $ 2,144,717   
  

 

 

    

 

 

 

Stockholders’ Equity

     

Total stockholders’ equity

     2,083,038         1,972,677   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 4,269,535       $ 4,117,394   
  

 

 

    

 

 

 


LOGO

 

 

Homes Closed:    Three Months Ended September 30,  
     2016      2015  
(Dollars in thousands)    Homes      Value      Homes      Value  

East

     651       $ 263,442         570       $ 219,198   

Central

     492         235,335         530         254,045   

West

     594         313,408         600         305,947   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,737       $ 812,185         1,700       $ 779,190   
  

 

 

    

 

 

    

 

 

    

 

 

 
Net Sales Orders:    Three Months Ended September 30,  
     2016      2015  
(Dollars in thousands)    Homes      Value      Homes      Value  

East

     776       $ 294,472         558       $ 197,329   

Central

     484         225,882         458         205,277   

West

     690         398,261         619         306,149   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,950       $ 918,615         1,635       $ 708,755   
  

 

 

    

 

 

    

 

 

    

 

 

 
Homes Closed:    Nine Months Ended September 30,  
     2016      2015  
(Dollars in thousands)    Homes      Value      Homes      Value  

East

     1,811       $ 696,944         1,316       $ 518,563   

Central

     1,414         667,975         1,486         693,676   

West

     1,719         906,235         1,441         742,931   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,944       $ 2,271,154         4,243       $ 1,955,170   
  

 

 

    

 

 

    

 

 

    

 

 

 
Net Sales Orders:    Nine Months Ended September 30,  
     2016      2015  
(Dollars in thousands)    Homes      Value      Homes      Value  

East

     2,310       $ 887,673         1,598       $ 585,898   

Central

     1,408         648,535         1,626         729,278   

West

     2,085         1,149,824         2,017         982,968   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     5,803       $ 2,686,032         5,241       $ 2,298,144   
  

 

 

    

 

 

    

 

 

    

 

 

 
Sales Order Backlog:    As of September 30,  
     2016      2015  
(Dollars in thousands)    Homes      Value      Homes      Value  

East

     1,438       $ 592,031         1,098       $ 435,961   

Central

     1,024         517,972         1,292         622,368   

West

     1,393         761,874         1,170         581,268   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     3,855       $ 1,871,877         3,560       $ 1,639,597   
  

 

 

    

 

 

    

 

 

    

 

 

 
Average Active Selling Communities:    Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2016      2015      2016      2015  

East

     125         102         124         100   

Central

     108         100         110         96   

West

     76         74         78         72   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     309         276         312         268   
  

 

 

    

 

 

    

 

 

    

 

 

 


LOGO

 

 

Average Selling Price of Homes Closed:    Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
(Dollars in thousands)    2016      2015      2016      2015  

East

   $ 405       $ 385       $ 385       $ 394   

Central

     478         479         472         467   

West

     528         510         527         516   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 468       $ 458       $ 459       $ 461   
  

 

 

    

 

 

    

 

 

    

 

 

 


LOGO

 

Reconciliation of Non-GAAP Financial Measures

The following tables set forth a reconciliation between our home closings gross margin and our adjusted home closings gross margin, our net income from continuing operations and EBITDA and adjusted EBITDA and a reconciliation of our net homebuilding debt to total capitalization ratio. Adjusted home closings gross margin is a non-GAAP financial measure calculated based on home closings gross margin, excluding impairments, if any, and capitalized interest amortization. Adjusted EBITDA is a non-GAAP financial measure that measures performance by adjusting net income from continuing operations to exclude interest amortized to cost of sales and interest income (net), income taxes, depreciation and amortization, non-cash compensation expense and loss on extinguishment of debt, if any. Net homebuilding debt to capitalization, which we calculate by dividing (i) total debt, less unamortized debt issuance costs and mortgage warehouse borrowings, net of unrestricted cash and cash equivalents, by (ii) total capitalization (the sum of net homebuilding debt and total stockholders’ equity), is a non-GAAP financial measure. Management uses these non-GAAP financial measures to evaluate our performance on a consolidated basis as well as the performance of our regions. We use the ratio of net homebuilding debt to total capitalization as an indicator of overall leverage. In the future we may include additional adjustments in the above described non-GAAP financial measures, to the extent we deem them appropriate and useful to management and investors.

We believe adjusted home closings gross margin is useful to investors because it allows investors to evaluate the performance of our homebuilding operations without the often varying effects of interest costs capitalized. We believe adjusted EBITDA provides useful information to investors regarding our results of operations because it allows investors to evaluate our performance without the effects of various items we do not believe are characteristic of our ongoing operations or performance and also because it assists both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted EBITDA provides an indicator of general economic performance that is not affected by fluctuations in interest rates or effective tax rates, levels of depreciation or amortization, or non-recurring items. We use the ratio of net homebuilding debt to total capitalization to evaluate our performance against other companies in the homebuilding industry and believe it is also relevant and useful to investors for that reason.

These measures are considered non-GAAP financial measures and should be considered in addition to, rather than as a substitute for, the comparable U.S. GAAP financial measures as a measure of our operating performance or liquidity. Although other companies in the homebuilding industry report similar information, the methods used may differ. We urge investors to understand the methods used by other companies in the homebuilding industry to calculate net income, gross margins and total debt to capitalization and any adjustments to such amounts before comparing our measures to those of such other companies.

Adjusted Home Closings Gross Margin Reconciliation — Continuing Operations

 

     Three Months Ended
September 30,
 
(Dollars in thousands)    2016     2015  

Home closings revenue

   $ 812,185      $ 779,190   

Cost of home closings

     658,507        635,935   
  

 

 

   

 

 

 

Home closings gross margin

     153,678        143,255   

Capitalized interest amortization

     21,502        21,886   
  

 

 

   

 

 

 

Adjusted home closings gross margin

   $ 175,180      $ 165,141   
  

 

 

   

 

 

 

Home closings gross margin as a percentage of home closings revenue

     18.9     18.4

Adjusted home closings gross margin as a percentage of home closings revenue

     21.6     21.2


LOGO

 

Adjusted EBITDA Reconciliation

 

     Three Months Ended
September 30,
 
(Dollars in thousands)    2016     2015  

Net income from continuing operations

   $ 58,308      $ 45,656   

Interest income, net

     (47     (33

Amortization of capitalized interest

     21,502        21,886   

Income tax provision

     31,707        22,452   

Depreciation and amortization

     1,026        1,075   
  

 

 

   

 

 

 

EBITDA

   $ 112,496      $ 91,036   

Non-cash compensation expense

     3,042        2,127   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 115,538      $ 93,163   
  

 

 

   

 

 

 

Net Homebuilding Debt to Capitalization Ratio Reconciliation

 

(Dollars in thousands)    As of
September 30, 2016
 

Total debt

   $ 1,681,944   

Unamortized debt issuance costs

     17,008   

Less mortgage warehouse borrowings

     91,166   
  

 

 

 

Total homebuilding debt

   $ 1,607,786   

Less cash and cash equivalents

     160,519   
  

 

 

 

Net homebuilding debt

   $ 1,447,267   

Total equity

     2,083,038   
  

 

 

 

Total capitalization

   $ 3,530,305   
  

 

 

 
  

Net homebuilding debt to capitalization ratio

     41.0