Market Overview

Taylor Morrison Reports First Quarter Revenue of $645 Million and Earnings per Share of $0.21

Share:

- Net income from continuing operations grew 23% and earnings per share grew 24% after adjusting for the gain on the currency hedge associated with the Monarch divestiture in the prior year's quarter

- Net income for the quarter was $26 million with earnings per share of $0.21

- Average community count increased 36% from the prior year quarter to 310 average communities

- Home closings revenue was $629 million, a 27% increase from the prior year quarter

- GAAP home closings gross margin, inclusive of capitalized interest, was 18.2%, which represents a 30 basis point increase from Q1 2015

SCOTTSDALE, Ariz., May 4, 2016 /PRNewswire/ -- Taylor Morrison Home Corporation (NYSE: TMHC) today reported first quarter total revenue of $645 million, net income of $26 million and earnings per share of $0.21.

"I am very pleased with our first quarter results, and am proud that we met or exceeded every point of our quarterly guidance –– most notably with higher than expected closings and improved margins," said Sheryl Palmer, President and CEO of Taylor Morrison. "We continue to believe that the underlying market conditions for our industry are sound and that we are well positioned to take advantage of these fundamentals, allowing us to be consistent in our strategy and in the execution of our ongoing plans as we look towards the rest of the year. Our second quarter is starting off strong with April sales increasing approximately 23% compared to the same month last year, which positions us well as we move through the spring selling season."

1st Quarter 2016 Key Business Highlights

  • Average community count increased 36% from the prior year quarter to 310 average communities
  • Net sales orders increased 6% from the prior year quarter to 1,828
  • Home closings increased 31% from the prior year quarter to 1,391
  • Backlog of homes under contract at the end of the quarter was 3,432 units, with a sales value of $1.6 billion
  • Average price of homes closed was $452,000
  • Average monthly absorption pace per community was 2.0 for the quarter
  • Mortgage operations reported gross profit of $3.1 million on revenue of $9.6 million
  • SG&A as a percent of home closings revenue was 12.3% for the quarter and remains on track to deliver the full year guidance of around 10%
  • Net homebuilding debt to capitalization ratio of 44.1%

Quarterly Financial Comparison*











($ millions)













Q1 2016



Q1 2015



Q1 2016 vs. Q1 2015

Total Revenue

$645



$509



26.7%

Home Closings Revenue

$629



$494



27.3%

Home Closings Gross Margin

$115



$88



30.7%



18.2%



17.9%



30 bps increase

Adjusted Home Closings Gross Margin

$131



$105



24.8%



20.8%



21.2%



(40) bps

SG&A

$77



$57



35.1%

% of Home Closings Revenue

12.3%



11.5%



80 bps increase



 *Excludes discontinued operations in Q1 2015.

The Company ended the quarter with homebuilding inventories of $3.3 billion and 4,388 homes in inventory, compared to 3,490 homes at the end of the prior year quarter.  Homes in inventory at the end of the quarter consisted of 2,585 sold units, 458 model homes and 1,345 inventory units, of which 410 were finished.  The Company owned or controlled approximately 45,000 lots at March 31, 2016.

Second Quarter and Full Year 2016 Business Outlook

Second Quarter 2016:

  • Average community count – expected to be generally flat sequentially to Q1 2016
  • Home closings – year-over-year growth of between 10% to 15%
  • GAAP home closings gross margin, including capitalized interest – expected to be in the mid 17% range

Full Year 2016:

  • Average community count – expected to be between 310 to 320
  • Home closings – year-over-year growth of between 10% to 15%
  • GAAP home closings gross margin, including capitalized interest – expected to be in the low-to-mid 18% range
  • SG&A – expected to be around 10%
  • Income from unconsolidated joint ventures – expected to be between $10 million and $15 million
  • Land and development spend – expected to be at or just below $1 billion
  • Effective tax rate – expected to be between 33% and 35%

Earnings Webcast

A public webcast to discuss the first 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 42294438. 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 Trusted TM 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).



Taylor Morrison Home Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts, unaudited)





Three Months Ended
March 31,



2016



2015

Home closings revenue, net

$

629,088



$

493,592

Land closings revenue

6,602



8,188

Mortgage operations revenue

9,639



7,635

Total revenues

645,329



509,415

Cost of home closings

514,532



405,104

Cost of land closings

5,632



4,666

Mortgage operations expenses

6,524



5,062

Total cost of revenues

526,688



414,832

Gross margin

118,641



94,583

Sales, commissions and other marketing costs

47,841



36,220

General and administrative expenses

29,424



20,704

Equity in income of unconsolidated entities

(782)



(303)

Interest income, net

(87)



(50)

Other expense, net

3,254



5,771

Gain on foreign currency forward



(29,983)

Income from continuing operations before income taxes

38,991



62,224

Income tax provision

12,887



22,042

Net income from continuing operations

26,104



40,182

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

26,104



96,844

Net income attributable to non-controlling interests - joint ventures

(184)



(368)

Net income before non-controlling interests - Principal Equityholders

25,920



96,476

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

(19,107)



(29,133)

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



(41,381)

Net income available to Taylor Morrison Home Corporation

$

6,813



$

25,962

Earnings per common share - basic:







Income from continuing operations

$

0.21



$

0.33

Income from discontinued operations - net of tax

$



$

0.46

Net income available to Taylor Morrison Home Corporation

$

0.21



$

0.79

Earnings per common share - diluted:







Income from continuing operations

$

0.21



$

0.33

Income from discontinued operations - net of tax

$



$

0.46

Net income available to Taylor Morrison Home Corporation

$

0.21



$

0.79

Weighted average number of shares of common stock:







Basic

31,923



33,067

Diluted

121,267



122,355

 

Taylor Morrison Home Corporation

Condensed Consolidated Balance Sheets

(In thousands)

 



March 31,
2016



December 31,
2015



(Unaudited)





Assets







Cash and cash equivalents

$

141,124



$

126,188

Restricted cash

1,280



1,280

Real estate inventory:







Owned inventory

3,295,803



3,118,866

Real estate not owned under option agreements

995



7,921

Total real estate inventory

3,296,798



3,126,787

Land deposits

31,193



34,113

Mortgage loans held for sale

109,174



201,733

Prepaid expenses and other assets, net

88,326



75,295

Other receivables, net

126,406



120,729

Investments in unconsolidated entities

144,278



128,448

Deferred tax assets, net

233,749



233,488

Property and equipment, net

7,483



7,387

Intangible assets, net

3,983



4,248

Goodwill

66,198



57,698

Total assets

$

4,249,992



$

4,117,394

Liabilities







Accounts payable

$

154,897



$

151,861

Accrued expenses and other liabilities

178,598



191,452

Income taxes payable

8,944



37,792

Customer deposits

123,273



92,319

Senior notes, net

1,235,733



1,235,157

Loans payable and other borrowings

154,243



134,824

Revolving credit facility borrowings, net

305,326



109,947

Mortgage warehouse borrowings

91,996



183,444

Liabilities attributable to real estate not owned under option agreements

995



7,921

Total liabilities

$

2,254,005



$

2,144,717

Stockholders' Equity







Total stockholders' equity

1,995,987



1,972,677

Total liabilities and stockholders' equity

$

4,249,992



$

4,117,394

 

 

Homes Closed:

Three Months Ended March 31,



2016



2015

(Dollars in thousands)

Homes



Value



Homes



Value

East

486



$

177,722



281



$

117,518

Central

405



193,898



411



180,048

West

500



257,468



371



196,026

Total

1,391



$

629,088



1,063



$

493,592

 

Net Sales Orders:

Three Months Ended March 31,



2016



2015

(Dollars in thousands)

Homes



Value



Homes



Value

East

714



$

277,614



467



$

187,884

Central

431



197,650



575



252,580

West

683



362,469



687



331,033

Total

1,828



$

837,733



1,729



$

771,497

 

Sales Order Backlog:

As of March 31,



2016



2015

(Dollars in thousands)

Homes



Value



Homes



Value

East

1,166



$

495,026



743



$

340,615

Central

1,056



531,871



1,316



635,421

West

1,210



621,590



859



441,092

Total

3,432



$

1,648,487



2,918



$

1,417,128

 

Average Active Selling Communities:

Three Months Ended March 31,



2016



2015

East

118



74

Central

113



92

West

79



62

Total

310



228

 

Average Selling Price of Homes Closed:

Three Months Ended March 31,

(Dollars in thousands)

2016



2015

East

$

366



$

418

Central

479



438

West

515



528

Total

$

452



$

464

 

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 adjusted net income, our net income from continuing operations 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 net income is a non-GAAP financial measure calculated based on net income from continuing operations, excluding gain on foreign currency forward.  Adjusted EBITDA is a non-GAAP financial measure that measures performance by adjusting net income from continuing operations to exclude interest, income taxes, depreciation and amortization, non-cash compensation expense and gain on foreign currency forward. 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 net income is useful to investors 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.  We believe adjusted EBITDA provides useful information to investors regarding our results of operations for similar reasons 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. 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 March 31,

(Dollars in thousands)

2016



2015

Home closings revenue

$

629,088



$

493,592

Cost of home closings

514,532



405,104

Home closings gross margin

114,556



88,488

Capitalized interest amortization

16,430



16,027

Adjusted home closings gross margin

$

130,986



$

104,515

Home closings gross margin as a percentage of home closings revenue

18.2%



17.9%

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

20.8%



21.2%

 

Adjusted EBITDA Reconciliation

 



Three Months Ended March 31,

(Dollars in thousands)

2016



2015

Net income from continuing operations

$

26,104



$

40,182

Interest income, net

(87)



(50)

Amortization of capitalized interest

16,430



16,027

Income tax provision

12,887



22,042

Depreciation and amortization

1,078



1,026

EBITDA

$

56,412



$

79,227

Gain on foreign currency forward



(29,983)

Non-cash compensation expense

2,720



1,558

Adjusted EBITDA

$

59,132



$

50,802

 

Adjusted Net Income Reconciliation



Three Months Ended
March 31,

(Dollars in thousands, except per share data)

2016



2015

Net income from continuing operations

$

26,104



$

40,182

Net income attributable to non-controlling interests — joint ventures

(184)



(368)

Net income before non-controlling interests — Principal Equityholders

25,920



39,814

Gain on foreign currency forward, net of tax



(18,668)

Adjusted net income before non-controlling interests — Principal Equityholders

$

25,920



$

21,146









Adjusted earnings per share, diluted

$

0.21



$

0.17

 

Net Homebuilding Debt to Capitalization Ratio Reconciliation



(Dollars in thousands)

As of
March 31, 2016



Total debt

$

1,787,299



Unamortized debt issuance costs

18,940



Less mortgage warehouse borrowings

91,996



Total homebuilding debt

$

1,714,243



Less cash and cash equivalents

141,124



Net homebuilding debt

$

1,573,119



Total equity

1,995,987



Total capitalization

$

3,569,106









Net homebuilding debt to capitalization ratio

44.1%



 

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SOURCE Taylor Morrison Home Corporation

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