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8-K - 8-K - Taylor Morrison Home Corpd485138d8k.htm
LOGO    Exhibit 99.1

News Release

CONTACT: Investor Relations

Taylor Morrison Home Corporation

(480) 734-2060

investor@taylormorrison.com

Taylor Morrison Reports Third Quarter Earnings per Share of $0.45, Year-over-year Growth in Closings and Net Income

of $54 million

SCOTTSDALE, Ariz., Nov. 1, 2017 — Taylor Morrison Home Corporation (NYSE:TMHC) today reported third quarter total revenue of $908 million, net income of $54 million and diluted earnings per share of $0.45.

Third Quarter 2017 Highlights:

 

  Home closings were 1,842, a 6% increase from the prior year quarter

 

  Total revenue was $908 million, a 6% increase from the prior year quarter

 

  GAAP home closings gross margin, inclusive of capitalized interest, was 18.6%

 

  Net income for the quarter was $54 million with diluted earnings per share of $0.45

 

  Backlog units at the end of the quarter were 4,359 with a sales value of $2.1 billion, a 13% increase from the prior year quarter

“The third quarter presented unique challenges with Hurricanes Harvey and Irma,” said Sheryl Palmer, Chairman and CEO of Taylor Morrison. “Despite the storms, I’m pleased with our organization’s resilience and collective efforts to close another quarter of sequential growth in key operating metrics, and am happy to share that our annual closings guidance remains within our stated range.”

“Through the end of September, we’ve sold 6,562 homes, a 13 percent increase compared to the same period last year, and our sales pace year-to-date is 2.5, almost a 20 percent increase compared to the same period in 2016,” added Palmer. “That represents our highest sales growth rate over three quarters since 2013.”

As a result of the hurricanes, approximately 40 percent of the Company’s communities were closed for a minimum of 5-7 days and experienced three to four weeks of delays in deliveries and production.

“The impact from the hurricanes reduced our number of closings in the third quarter by about 130, equating to roughly four cents of EPS,” said Dave Cone, Executive Vice President and Chief Financial Officer. “However, this won’t be a permanent shift in our production schedule as we plan to absorb these closings into our business in the next couple of quarters.”


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“Home closings gross margin, inclusive of capitalized interest, was 18.6 percent, and grew sequentially versus the second quarter,” added Cone. “We estimate a loss of 10 basis points of margin from the delayed closings, but continue to believe the full-year home closings margin will be accretive year-over-year.”

“Our industry is faced with all kinds of uncontrollable events and disruption from economic and housing market fluctuations, mortgage regulatory changes, and natural disasters,” said Palmer. “Taylor Morrison’s ability to be nimble and responsive to absorb these occurrences while continuing to deliver on our commitments to our customers, employees and shareholders, is what we believe sets us apart from the pack.”

The Company ended the quarter with $265 million in cash and a net homebuilding debt to capitalization ratio of 33.1 percent.

Land sales for the third quarter were about $4 million, a decrease of $23 million from the third quarter 2016. The company sold certain long-term strategic assets in 2016 as the tax holding period expired allowing for favorable monetization.

Homebuilding inventories were $3.2 billion at the end of the quarter, including 5,282 homes in inventory, compared to 4,747 homes in inventory at the end of the prior year quarter. Homes in inventory at the end of the quarter consisted of 3,537 sold units, 401 model homes and 1,344 inventory units, of which 249 were finished. The Company owned or controlled approximately 40,000 lots at September 30, 2017, representing 5.1 years of supply and is focused on securing land for 2019 and beyond.

Quarterly Financial Comparison

 

($ thousands)                     
     Q3 2017      Q3 2016      Q3 2017 vs. Q3 2016  

Total Revenue

   $ 908,027      $ 853,417        6.4%  

Home Closings Revenue

   $ 886,249      $ 812,185        9.1%  

Home Closings Gross Margin

   $ 164,612      $ 153,678        7.1%  
     18.6%        18.9%        30 bps decrease  

SG&A

   $ 94,850      $ 88,221        7.5%  

% of Home Closings Revenue

     10.7%        10.9%        20 bps leverage  


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Full Year 2017 Business Outlook

Full Year 2017:

 

  Average active community count is expected to be about 300

 

  Monthly absorption pace is expected to be at least 2.3 per outlet on average

 

  Home closings remains unchanged but on the lower end of the range at 7,850

 

  GAAP home closings gross margin, inclusive of capitalized interest, is expected to be accretive to 2016 and be in the mid 18% range

 

  SG&A as a percentage of homebuilding revenue is expected to leverage year-over-year and be in the low-to-mid 10% range

 

  Income from unconsolidated joint ventures is expected to be about $10 million

 

  Land and development spend is expected to be approximately $1 billion

 

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

Operating Division Realignment Within Our Segments

As of March 31, 2017 we realigned our homebuilding operating divisions within our existing segments based on geographic location and management’s long-term strategic plans. As a result, historical periods in the segment information have been reclassified to align to these changes.

Earnings Webcast

A public webcast to discuss the third quarter 2017 earnings will be held later today at 8:30 a.m. Eastern time. The participant dial-in is 1 (855) 470-8731 and the conference ID is 96826434. 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 has been recognized as the 2016 and 2017 America’s Most Trusted® Home Builder 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.


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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 (including as a result of recent extreme weather conditions); slowdowns or severe downturns in the housing market; homebuyers’ ability to obtain suitable financing; shortages in, disruptions of and cost of labor; competition in our industry; any increase in unemployment or underemployment; increases in interest rates, taxes or government fees; inflation or deflation; the seasonality of our business; our ability to obtain additional performance, payment and completion surety bonds and letters of credit; higher cancellation rates; 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; governmental regulation applicable to our mortgage operations and title services business; 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. 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). 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.


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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,
 
     2017     2016     2017     2016  

Home closings revenue, net

   $ 886,249     $ 812,185     $ 2,526,830     $ 2,271,154  

Land closings revenue

     4,299       27,418       11,419       44,957  

Mortgage operations revenue

     17,479       13,814       47,362       36,951  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     908,027       853,417       2,585,611       2,353,062  

Cost of home closings

     721,637       658,507       2,062,437       1,852,724  

Cost of land closings

     3,002       8,179       7,869       20,497  

Mortgage operations expenses

     12,070       7,877       30,874       22,594  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     736,709       674,563       2,101,180       1,895,815  

Gross margin

     171,318       178,854       484,431       457,247  

Sales, commissions and other marketing costs

     61,476       58,277       178,609       165,300  

General and administrative expenses

     33,374       29,944       100,396       91,078  

Equity in income of unconsolidated entities

     (2,787     (1,646     (6,943     (4,734

Interest income, net

     (135     (47     (314     (149

Other expense, net

     415       1,935       828       8,602  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     78,975       90,391       211,855       197,150  

Income tax provision

     24,282       31,707       65,631       66,698  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income before allocation to non-controlling interests

     54,693       58,684       146,224       130,452  

Net income attributable to non-controlling interests - joint ventures

     (427     (376     (625     (856
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income before non-controlling interests - Principal Equityholders

     54,266       58,308       145,599       129,596  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to non-controlling interests - Principal Equityholders

     (21,390     (43,471     (76,810     (96,261
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income available to Taylor Morrison Home Corporation

   $ 32,876     $ 14,837     $ 68,789     $ 33,335  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per common share

        

Basic

   $ 0.45     $ 0.49     $ 1.21     $ 1.07  

Diluted

   $ 0.45     $ 0.49     $ 1.21     $ 1.07  

Weighted average number of shares of common stock:

        

Basic

     72,471       30,427       56,791       31,300  

Diluted

     121,183       120,103       120,991       120,870  


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Taylor Morrison Home Corporation

Condensed Consolidated Balance Sheets

(In thousands)

 

     September 30,
2017
     December 31,
2016
 
     (Unaudited)         

Assets

     

Cash and cash equivalents

   $ 264,862      $ 300,179  

Restricted cash

     1,315        1,633  
  

 

 

    

 

 

 

Total cash, cash equivalents, and restricted cash

     266,177        301,812  

Owned inventory

     3,240,664        3,010,967  

Real estate not owned under option agreements

     3,107        6,252  
  

 

 

    

 

 

 

Total real estate inventory

     3,243,771        3,017,219  

Land deposits

     50,879        37,233  

Mortgage loans held for sale

     107,665        233,184  

Hedging assets

     2,037        2,291  

Prepaid expenses and other assets, net

     72,546        73,425  

Other receivables, net

     98,948        115,246  

Investments in unconsolidated entities

     184,817        157,909  

Deferred tax assets, net

     215,666        206,634  

Property and equipment, net

     6,229        6,586  

Intangible assets, net

     2,395        3,189  

Goodwill

     66,198        66,198  
  

 

 

    

 

 

 

Total assets

   $ 4,317,328      $ 4,220,926  
  

 

 

    

 

 

 

Liabilities

     

Accounts payable

   $ 146,263      $ 136,636  

Accrued expenses and other liabilities

     190,384        209,202  

Income taxes payable

     15,019        10,528  

Customer deposits

     185,604        111,573  

Senior notes, net

     1,239,211        1,237,484  

Loans payable and other borrowings

     161,798        150,485  

Revolving credit facility borrowings

     —          —    

Mortgage warehouse borrowings

     61,292        198,564  

Liabilities attributable to real estate not owned under option agreements

     3,107        6,252  
  

 

 

    

 

 

 

Total liabilities

   $ 2,002,678      $ 2,060,724  
  

 

 

    

 

 

 

Stockholders’ Equity

     

Total stockholders’ equity

     2,314,650        2,160,202  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 4,317,328      $ 4,220,926  
  

 

 

    

 

 

 


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Homes Closed:    Three Months Ended September 30,  
     2017      2016  
(Dollars in thousands)    Homes      Value      Homes      Value  

East

     776      $ 311,526        677      $ 273,928  

Central

     531        253,556        548        263,852  

West

     535        321,167        512        274,405  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,842      $ 886,249        1,737      $ 812,185  
  

 

 

    

 

 

    

 

 

    

 

 

 
Net Sales Orders:    Three Months Ended September 30,  
     2017      2016  
(Dollars in thousands)    Homes      Value      Homes      Value  

East

     777      $ 302,795        795      $ 302,363  

Central

     521        247,084        550        261,971  

West

     463        300,815        605        354,281  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     1,761      $ 850,694        1,950      $ 918,615  
  

 

 

    

 

 

    

 

 

    

 

 

 
Homes Closed:    Nine Months Ended September 30,  
     2017      2016  
(Dollars in thousands)    Homes      Value      Homes      Value  

East

     2,238      $ 891,740        1,874      $ 722,814  

Central

     1,512        723,758        1,566        748,712  

West

     1,585        911,332        1,504        799,628  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     5,335      $ 2,526,830        4,944      $ 2,271,154  
  

 

 

    

 

 

    

 

 

    

 

 

 
Net Sales Orders:    Nine Months Ended September 30,  
     2017      2016  
(Dollars in thousands)    Homes      Value      Homes      Value  

East

     2,923      $ 1,132,839        2,388      $ 919,861  

Central

     1,826        864,797        1,599        753,454  

West

     1,813        1,088,661        1,816        1,012,717  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     6,562      $ 3,086,297        5,803      $ 2,686,032  
  

 

 

    

 

 

    

 

 

    

 

 

 
Sales Order Backlog:    As of September 30,  
     2017      2016  
(Dollars in thousands)    Homes      Value      Homes      Value  

East

     1,905      $ 774,001        1,478      $ 608,840  

Central

     1,272        653,415        1,202        612,840  

West

     1,182        697,790        1,175        650,197  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     4,359      $ 2,125,206        3,855      $ 1,871,877  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Average Active Selling Communities:    Three Months
Ended
September 30,
     Nine Months
Ended
September 30,
 
     2017      2016      2017      2016  

East

     130        132        127        131  

Central

     118        116        118        118  

West

     45        61        51        63  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     293        309        296        312  
  

 

 

    

 

 

    

 

 

    

 

 

 


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Average Selling Price of Homes Closed:    Three Months
Ended
September 30,
     Nine Months
Ended
September 30,
 
(Dollars in thousands)    2017      2016      2017      2016  

East

   $ 401      $ 405      $ 398      $ 386  

Central

     478        481        479        478  

West

     600        536        575        532  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 481      $ 468      $ 474      $ 459  
  

 

 

    

 

 

    

 

 

    

 

 

 


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Reconciliation of Non-GAAP Financial Measures

The following tables set forth a reconciliation between our net income before allocation to non-controlling interests and EBITDA and adjusted EBITDA, and a reconciliation of our net homebuilding debt to total capitalization ratio. Adjusted EBITDA is a non-GAAP financial measure that measures performance by adjusting net income 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 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 also 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, adjusted EBITDA and total debt to capitalization and any adjustments to such amounts before comparing our measures to those of such other companies.


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Adjusted EBITDA Reconciliation

 

     Three Months Ended
September 30,
 
(Dollars in thousands)    2017     2016  

Net income before allocation to non-controlling interests

   $ 54,693     $ 58,684  

Interest income, net

     (135     (47

Amortization of capitalized interest

     21,789       21,502  

Income tax provision

     24,282       31,707  

Depreciation and amortization

     896       1,026  
  

 

 

   

 

 

 

EBITDA

   $ 101,525     $ 112,821  

Non-cash compensation expense

     3,377       3,042  
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 104,902     $ 115,914  
  

 

 

   

 

 

 

Net Homebuilding Debt to Total Capitalization Ratio Reconciliation

 

(Dollars in thousands)    As of
September 30,
2017
 

Total debt

   $ 1,462,301  

Unamortized debt issuance costs

     10,789  

Less mortgage warehouse borrowings

     61,292  
  

 

 

 

Total homebuilding debt

   $ 1,411,798  

Less unrestricted cash and cash equivalents

     264,862  
  

 

 

 

Net homebuilding debt

   $ 1,146,936  

Total equity

     2,314,650  
  

 

 

 

Total capitalization

   $ 3,461,586  
  

 

 

 

Net homebuilding debt to total capitalization ratio

     33.1%