Market Overview

Taylor Morrison Reports Second Quarter Revenue of $854 Million and Earnings per Share of $0.37

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SCOTTSDALE, Ariz., Aug. 3, 2016 /PRNewswire/ -- Taylor Morrison Home Corporation (NYSE: TMHC) today reported second quarter total revenue of $854 million, net income of $46 million and earnings per share of $0.37.

Taylor Morrison

Second Quarter Highlights:

  • Average active community count increased 29% from the prior year quarter to 315
  • Home closings revenue was $830 million, a 22% increase from the prior year quarter
  • GAAP home closings gross margin, inclusive of capitalized interest, was 18.1%
  • Net income for the quarter was $46 million with earnings per share of $0.37

"We delivered a strong second quarter and first half of 2016 and are proud of the organization's performance," said Sheryl Palmer, President and CEO of Taylor Morrison.  "Our average active community count grew 29% and home closings increased 23% year-over-year.  Home closings gross margin exceeded our expectations at 18.1%, with more than 16% growth in gross margin dollars.

"We stand firm in our belief that the homebuilding industry is in the midst of a sustained and measured recovery, and that the sector – and more notably Taylor Morrison – is well positioned for continued growth and efficiency through the ongoing maturation of the cycle."

Net sales orders increased 8% from the prior year quarter to 2,025.  Backlog of homes under contract at the end of the quarter was 3,642 units, with a sales value of $1.8 billion.  "Considering the 22% growth in sales during the second quarter of last year, we are pleased with our sales growth of 8% for the current quarter which results in a two-year growth rate of more than 30% for the Company.  Our third quarter is starting off strong with July sales increasing approximately 30% compared to the same month last year, representing the largest monthly year-over-year increase in 2016," stated Ms. Palmer.

Homebuilding gross margin, including capitalized interest, was 18.1% compared to 18.9% in the second quarter of last year.  Although the rate was slightly better than we expected, the year-over-year decline was driven by mix and higher land residuals, partially offset by lower capitalized interest, which declined to 2.7% of home closings revenue from 3.0%.  Construction costs were neutral to the overall margin rate.

Mortgage operations contributed gross profit of $5.3 million on revenue of $13.5 million.  GAAP net income from continuing operations grew 138% from the same quarter last year to $45 million.  When adjusted for a $33 million loss on extinguishment of debt in the second quarter of 2015, net income grew 14% for the second quarter of 2016.

SG&A as a percentage of homebuilding revenue was 11% for the quarter.  "We've experienced a significant transformation and tremendous growth, both organically and through expansion into new markets, over the last 12 months," stated Ms. Palmer.  "As we absorb this growth, we have made some necessary investments to prepare the Company for the future. Core to all of this is people, processes and tools.  We believe this will position us for the long-term, enabling us to drive consistent further growth at attractive profitability levels."

The Company ended the quarter with $132 million in cash.  Net homebuilding debt to capitalization ratio was 42.4%, which represents our expected peak level for the year.

Homebuilding inventories were $3.2 billion at the end of the quarter with 4,607 homes in inventory, compared to 4,206 homes at the end of the prior year quarter.  Homes in inventory at the end of the quarter consisted of 2,810 sold units, 457 model homes and 1,340 inventory units, of which 283 were finished.  The Company continues to maintain four to five inventory units per community at various stages of construction.  In an effort to increase the efficiency of the balance sheet, the Company has targeted finished inventory at about 1.0 per community, down from the historical average of 1.0 to 1.5 per community.  At the end of the quarter, finished inventory units were 0.9 per community compared to 1.2 per community in the same quarter last year.  The Company owned or controlled approximately 43,000 lots at June 30, 2016.

During the second quarter, the Company repurchased more than 1.3 million of its Class A shares for $19.7 million, or an average price of $14.72 per share.  At June 30, 2016, the Company had $10.3 million remaining under its existing share repurchase authorization.

Quarterly Financial Comparison*







($ thousands)









Q2 2016


Q2 2015


Q2 2016 vs. Q2 2015

Total Revenue


$854,316


$700,973


21.9%

Home Closings Revenue


$829,882


$682,387


21.6%

Home Closings Gross Margin


$150,197


$128,735


16.7%


18.1%


18.9%


(80) bps

Adjusted Home Closings Gross Margin


$172,297


$149,425


15.3%


20.8%


21.9%


(110) bps

SG&A


$90,892


$71,226


27.6%

% of Home Closings Revenue


11.0%


10.4%


60 bps increase

 *Excludes discontinued operations in Q2 2015.

 

Third Quarter and Full Year 2016 Business Outlook

Third Quarter 2016:

  • Average community count – expected to be flat sequentially to the second quarter of 2016
  • Home closings – expected to be between 1,700 and 1,800
  • GAAP home closings gross margin, including capitalized interest – expected to be about 18%

Full Year 2016:

  • Average community count – expected to be between 310 and 320
  • Home closings – year-over-year growth expected to be between 10% and 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% of homebuilding revenue
  • 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 second 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 42891726. 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).


Taylor Morrison Home Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts, unaudited)



Three Months Ended
June 30,


Six Months Ended
June 30,



2016


2015


2016


2015

Home closings revenue, net


$

829,882



$

682,387



$

1,458,969



$

1,175,980


Land closings revenue


10,936



8,743



17,540



16,931


Mortgage operations revenue


13,498



9,843



23,136



17,478


Total revenues


854,316



700,973



1,499,645



1,210,389


Cost of home closings


679,685



553,652



1,194,217



958,757


Cost of land closings


6,686



4,566



12,318



9,232


Mortgage operations expenses


8,193



6,096



14,717



11,158


Total cost of revenues


694,564



564,314



1,221,252



979,147


Gross margin


159,752



136,659



278,393



231,242


Sales, commissions and other marketing costs


59,182



47,022



107,023



83,242


General and administrative expenses


31,710



24,204



61,134



44,908


Equity in income of unconsolidated entities


(2,305)



(1,225)



(3,087)



(1,527)


Interest income, net


(15)



(82)



(102)



(132)


Other expense, net


3,412



3,463



6,666



9,232


Loss on extinguishment of debt




33,317





33,317


Gain on foreign currency forward








(29,983)


Income from continuing operations before income taxes


67,768



29,960



106,759



92,185


Income tax provision


22,104



9,939



34,991



31,981


Net income from continuing operations


45,664



20,021



71,768



60,204


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


45,664



20,021



71,768



116,866


Net income attributable to non-controlling interests - joint ventures


(296)



(920)



(480)



(1,289)


Net income before non-controlling interests - Principal Equityholders


45,368



19,101



71,288



115,577


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


(33,683)



(14,024)



(52,790)



(43,157)


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








(41,381)


Net income available to Taylor Morrison Home Corporation


$

11,685



$

5,077



$

18,498



$

31,039


Earnings per common share - basic:









Income from continuing operations


$

0.37



$

0.15



$

0.58



$

0.48


Income from discontinued operations - net of tax


$



$



$



$

0.46


Net income available to Taylor Morrison Home Corporation


$

0.37



$

0.15



$

0.58



$

0.94


Earnings per common share - diluted:









Income from continuing operations


$

0.37



$

0.15



$

0.58



$

0.48


Income from discontinued operations - net of tax


$



$



$



$

0.46


Net income available to Taylor Morrison Home Corporation


$

0.37



$

0.15



$

0.58



$

0.94


Weighted average number of shares of common stock:









Basic


31,574



33,076



31,742



33,071


Diluted


121,052



122,409



121,217



122,382


 


Taylor Morrison Home Corporation
Condensed Consolidated Balance Sheets
(In thousands)

 



June 30,
2016


December 31,
2015



(Unaudited)



Assets





Cash and cash equivalents


$

131,879



$

126,188


Restricted cash


1,300



1,280


Real estate inventory:





Owned inventory


3,242,308



3,118,866


Real estate not owned under option agreements


612



7,921


Total real estate inventory


3,242,920



3,126,787


Land deposits


38,615



34,113


Mortgage loans held for sale


145,963



201,733


Prepaid expenses and other assets, net


83,294



75,295


Other receivables, net


126,566



120,729


Investments in unconsolidated entities


149,844



128,448


Deferred tax assets, net


234,457



233,488


Property and equipment, net


6,334



7,387


Intangible assets, net


3,718



4,248


Goodwill


66,198



57,698


Total assets


$

4,231,088



$

4,117,394


Liabilities





Accounts payable


$

151,083



$

151,861


Accrued expenses and other liabilities


175,284



191,452


Income taxes payable


15,608



37,792


Customer deposits


139,830



92,319


Senior notes, net


1,236,332



1,235,157


Loans payable and other borrowings


158,244



134,824


Revolving credit facility borrowings, net


210,705



109,947


Mortgage warehouse borrowings


118,099



183,444


Liabilities attributable to real estate not owned under option agreements


612



7,921


Total liabilities


$

2,205,797



$

2,144,717


Stockholders' Equity





Total stockholders' equity


2,025,291



1,972,677


Total liabilities and stockholders' equity


$

4,231,088



$

4,117,394



 

Homes Closed:


Three Months Ended June 30,



2016


2015

(Dollars in thousands)


Homes


Value


Homes


Value

East


674



$

255,781



465



$

181,848


Central


517



238,743



545



259,581


West


625



335,358



470



240,958


Total


1,816



$

829,882



1,480



$

682,387


 

Net Sales Orders:


Three Months Ended June 30,



2016


2015

(Dollars in thousands)


Homes


Value


Homes


Value

East


820



$

315,587



573



$

200,684


Central


493



225,004



593



271,422


West


712



389,093



711



345,786


Total


2,025



$

929,684



1,877



$

817,892


 

Homes Closed:


Six Months Ended June 30,



2016


2015

(Dollars in thousands)


Homes


Value


Homes


Value

East


1,160



$

433,503



746



$

299,366


Central


922



432,640



956



439,630


West


1,125



592,826



841



436,984


Total


3,207



$

1,458,969



2,543



$

1,175,980


 

Net Sales Orders:


Six Months Ended June 30,



2016


2015

(Dollars in thousands)


Homes


Value


Homes


Value

East


1,534



$

593,202



1,040



$

388,569


Central


924



422,654



1,168



524,001


West


1,395



751,563



1,398



676,819


Total


3,853



$

1,767,419



3,606



$

1,589,389


 

Sales Order Backlog:


As of June 30,



2016


2015

(Dollars in thousands)


Homes


Value


Homes


Value

East


1,313



$

559,195



992



$

404,228


Central


1,032



525,028



1,364



663,069


West


1,297



674,454



1,100



562,835


Total


3,642



$

1,758,677



3,456



$

1,630,132


 

Average Active Selling Communities:


Three Months Ended June 30,


Six Months Ended
June 30,



2016


2015


2016


2015

East


126



87



121



81


Central


110



93



112



93


West


79



65



80



64


Total


315



245



313



238


 

Average Selling Price of Homes Closed:


Three Months Ended
June 30,


Six Months Ended
June 30,

(Dollars in thousands)


2016


2015


2016


2015

East


$

379



$

391



$

374



$

401


Central


462



476



469



460


West


537



513



527



520


Total


$

457



$

461



$

455



$

462


 

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 loss on extinguishment of debt.  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. 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 June 30,

(Dollars in thousands)


2016


2015

Home closings revenue


$

829,882



$

682,387


Cost of home closings


679,685



553,652


Home closings gross margin


150,197



128,735


Capitalized interest amortization


22,100



20,690


Adjusted home closings gross margin


$

172,297



$

149,425


Home closings gross margin as a percentage of home closings revenue


18.1%



18.9%


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


20.8%



21.9%


 

Adjusted EBITDA Reconciliation






Three Months Ended June 30,

(Dollars in thousands)


2016


2015

Net income from continuing operations


$

45,664



$

20,021


Interest income, net


(15)



(82)


Amortization of capitalized interest


22,100



20,690


Income tax provision


22,104



9,939


Depreciation and amortization


896



1,045


EBITDA


$

90,749



$

51,613


Early extinguishment of debt




33,317


Non-cash compensation expense


3,197



2,039


Adjusted EBITDA


$

93,946



$

86,969


 

Adjusted Net Income Reconciliation






Three Months Ended
June 30,

(Dollars in thousands, except per share data)


2016


2015

Net income from continuing operations


$

45,664



$

20,021


Net income attributable to non-controlling interests — joint ventures


(296)



(920)


Net income before non-controlling interests — Principal Equityholders


45,368



19,101


Loss on extinguishment of debt



33,317


Tax benefit on loss on extinguishment of debt




(12,572)


Adjusted net income before non-controlling interests — Principal Equityholders


$

45,368



$

39,846







Adjusted earnings per share, diluted


$

0.37



$

0.33


 

Net Homebuilding Debt to Capitalization Ratio Reconciliation



(Dollars in thousands)

As of
June 30, 2016

Total debt

$

1,723,380


Unamortized debt issuance costs

17,963


Less mortgage warehouse borrowings

118,099


Total homebuilding debt

$

1,623,244


Less cash and cash equivalents

131,879


Net homebuilding debt

$

1,491,365


Total equity

2,025,291


Total capitalization

$

3,516,656




Net homebuilding debt to capitalization ratio

42.4%


 

CONTACT: Investor Relations
Taylor Morrison Home Corporation
(480) 734-2060
investor@taylormorrison.com

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SOURCE Taylor Morrison

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