News Column

Taylor Morrison Reports Second Quarter Revenue of $657.8 Million, Net Income of $55.5 Million and an EBT Margin of 12.1%

August 5, 2014

  • Diluted earnings per share of $0.45 on net income of $55.5 million, representing an increase of 170.9% of the prior year quarter’s net income as reported, and an increase of 69.4% as adjusted for certain transaction costs and tax indemnity in 2013
  • Home closings revenue increased 29.8% to $643.6 million
  • Consolidated and U.S. net sales increased 7.1% and 9.4%, respectively
  • Consolidated and U.S. average selling price of homes closed increased 21.0% to $448,000 and 18.7% to $452,000, respectively


    SCOTTSDALE, Ariz.--(BUSINESS WIRE)-- Taylor Morrison Home Corporation (NYSE:TMHC) today reported second quarter revenue of $657.8 million, net income of $55.5 million and earnings per share of $0.45.

    “We had another solid quarter and continue to recognize the benefits from executing on our long-term strategy, which provides us some resilience as the markets continue to normalize,” said Taylor Morrison President and CEO Sheryl Palmer. “We believe our strategy is the right one to profitably grow our business long-term. We continue to maintain the approach of choosing profit over volume, as we believe our land positions in core locations are highly desirable. Additionally, we continue to focus on progressive and relevant consumer targeting while protecting our efficient cost structure that provides us the flexibility and resiliency to respond to expected market ebbs and flows through a cycle.”

    2nd Quarter 2014 Key Business Highlights

  • Community count increased 24.5% to 214 average communities from 172 year-over-year driven by a 29.9% increase in our U.S. operations
  • Consolidated net sales orders increased 7.1% year-over-year to 1,709. Net sales orders in the U.S. increased 9.4% while sales in Canada fell 9.8% due to fewer communities open for sale
  • Overall monthly absorption pace was 2.7, flat sequentially quarter-over-quarter and down from 3.1 in the prior year quarter
  • The average selling price for homes sold in the quarter increased 16.8% year-over-year
  • U.S. backlog increased 4.0% in units and 25.9% in value while Canadian backlog decreased 34.9% in units and 30.1% in value due to a wholly-owned high rise closing in the latter half of 2013
  • Consolidated backlog of homes under contract was 3,761 units with a sales value of $1.7 billion as of June 30, 2014, representing a 8.9% decrease in units and a 10.2% increase in value over the prior year quarter
  • Cancellations as a percentage of gross sales orders was 12.0%, an improvement from 12.4% in the prior year quarter
  • Consolidated home closings increased 7.2% to 1,438. Home closings in our U.S. operations increased 12.2% while closings in our Canadian operations decreased 22.4%
  • Consolidated average selling price of homes closed increased 21.0% to $448,000 in the quarter. Average selling price of homes closed in the U.S. increased 18.7% to $452,000 while homes in Canada increased 33.9% to $408,000
  • Mortgage operations reported gross profit of $3.5 million on revenue of $8.2 million

    Quarterly Financial Comparison

    ($ millions)                  
          Q2 2014     Q2 2013     Q2 2014 vs. Q2 2013
                       
    Total Revenue     $657.8     $508.9     29.3%
    Home Closings Revenue     $643.6     $496.0     29.8%
    Adjusted Home Closings Gross Margin     $152.1$113.3 34.2%
          23.6%     22.8%     80 bps
    Total Home Closings Gross Margin $135.0$101.8 32.6%
          21.0%     20.5%     50 bps
    SG&A $64.3$60.2 6.8%
          10.0%     12.1%     210 bps improvement
    Equity in Income of Unconsolidated Entities     $8.1     $8.5     (4.2)%
     


    We ended the second quarter of 2014 with $300.8 million of cash, not including $18.0 million of restricted cash. Homebuilding inventories at the end of the 2014 second quarter totaled $2.7 billion. We owned or controlled approximately 44,200 lots at June 30, 2014.

    Full Year 2014 Business Outlook

  • Average community count – expected to be approximately 210 – representing a 27% increase in the U.S. and a net decrease of two communities in Canada
  • Home closings – expected to be between 6,700 and 7,000 units
  • Home closings margins – expected to be down 50 bps relative to 2013, due to a shift in mix although average margin dollars per unit are expected to increase
  • SG&A – continued leverage and expected to be under 10% as a percentage of homebuilding revenue
  • Income from unconsolidated joint ventures – expected to be between $21 million and $23 million

    Third Quarter 2014 Business Outlook

  • Average community count – expected to be consistent with Q2 2014 at 214 average active communities
  • Home closings – expected to be between 1,650 and 1,750 units
  • Income from unconsolidated joint ventures – expected to be between $10 million and $12 million

    Earnings Webcast

    A public webcast to discuss second quarter 2014 earnings will be held at 4:30 p.m. Eastern Time on Tuesday, August 5, 2014 on our investor relations website at investors.taylormorrison.com. A webcast replay will also be available on the site later today.

    About Taylor Morrison

    Headquartered in Scottsdale, Arizona, Taylor Morrison Home Corporation (NYSE:TMHC) operates in the U.S. under the Taylor Morrison and Darling Homes brands and in Canada under the Monarch brand. Taylor Morrison is a builder and developer of single-family detached and attached homes, serving a wide array of customers including first-time, move-up, luxury and active adult customers. Taylor Morrison divisions operate in Arizona, California, Colorado, Florida and Texas. Darling Homes serves move-up and luxury homebuyers in Texas. Monarch, Canada’s oldest homebuilder, builds homes for first-time and move-up buyers in Toronto and Ottawa as well as high rise condominiums in Toronto.

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

    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: interest rate changes and the availability of mortgage financing; continued volatility in the debt and equity markets; competition within the industries in which we operate; the availability and cost of land and other raw materials used by us in our homebuilding operations; the impact of any changes to our strategy in responding to continuing adverse conditions in the industry, including any changes regarding our land positions; the availability and cost of insurance covering risks associated with our businesses; shortages and the cost of labor; weather related slowdowns; slow growth initiatives and/or local building moratoria; governmental regulation directed at or affecting the housing market, the homebuilding industry or construction activities; uncertainty in the mortgage lending industry, including revisions to underwriting standards and repurchase requirements associated with the sale of mortgage loans; the interpretation of or changes to tax, labor and environmental laws; economic changes nationally or in our local markets, including inflation, deflation, changes in consumer confidence and preferences and the state of the market for homes in general; legal or regulatory proceedings or claims; required accounting changes; terrorist acts and other acts of war; and other factors of national, regional and global scale, including those of a political, economic, business and competitive nature. 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 and Consolidated Statements of Operations
    (In thousands, except per share amounts, unaudited)
     
    Three Months Ended June 30,Six Months Ended June 30,
    2014201320142013
    Home closings revenue $ 643,640 $ 496,033 $ 1,144,479 $ 862,802
    Land closings revenue 5,974 5,616 18,073 14,470
    Mortgage operations revenue     8,175       7,216       14,437       13,105  
    Total revenues 657,789 508,865 1,176,989 890,377
     
    Cost of home closings 508,644 394,203 902,300 683,035
    Cost of land closings 4,744 5,653 13,457 13,297
    Mortgage operations expenses     4,648       4,069       8,584       7,559  
    Total cost of revenues 518,036 403,925 924,341 703,891
     
    Gross margin 139,753 104,940 252,648 186,486
     
    Sales, commissions and other marketing costs 41,951 34,267 77,117 60,209
    General and administrative expenses 22,330 25,905 44,702 46,249
    Equity in income of unconsolidated entities (8,112 ) (8,466 ) (10,741 ) (11,624 )
    Interest (income) expense , net (24 ) 700 425 214
    Other expense, net 4,036 541 7,271 1,282
    Loss on extinguishment of debt - 10,141 - 10,141
    Indemnification and transaction (income) expense     (74 )     189,635       (163 )     187,925  
    Income (loss) before income taxes 79,646 (147,783 ) 134,037 (107,910 )
    Income tax provision (benefit)     24,147       (69,496 )     37,242       (53,961 )
    Net income (loss) 55,499 (78,287 ) 96,795 (53,949 )
    Net income attributable to non-controlling interests - joint ventures     (222 )     (106 )     (339 )     (185 )
    Net income (loss) before non-controlling interests - Principal Equityholders 55,277 (78,393 ) 96,456 (54,134 )
    Net (income) loss attributable to non-controlling interests - Principal Equityholders   (40,461 )     83,720       (70,708 )     59,461  
    Net income available to Taylor Morrison Home Corporation $   14,816   $   5,327   $   25,748   $   5,327  
     
    Earnings per common share:
    Basic $ 0.45 $ 0.16 $ 0.78 $ 0.16
    Diluted $ 0.45 $ 0.16 $ 0.78 $ 0.16
    Weighted average number of shares of common stock:
    Basic 32,875 32,806 32,866 32,806
    Diluted 122,354 122,327 122,349 122,327
       
    Taylor Morrison Home Corporation
    Condensed and Consolidated Balance Sheets
    (In thousands)
    June 30,December 31,
    20142013

    Assets

    (unaudited)
    Cash and cash equivalents $ 300,821 $ 389,181
    Restricted cash 18,037 24,814
    Real estate inventory:
    Owned inventory 2,713,802 2,243,744
    Real estate not owned under option agreements   15,623   18,595
    Total real estate inventory 2,729,425 2,262,339
    Land deposits 46,514 43,739
    Loans receivable 48,028 33,395
    Mortgages receivable 77,010 95,718
    Tax indemnification receivable 5,534 5,216
    Prepaid expenses and other assets, net 117,569 98,870
    Other receivables, net 87,717 56,213
    Investments in unconsolidated entities 187,505 139,550
    Deferred tax assets, net 252,193 244,920
    Property and equipment, net 7,721 7,515
    Intangible assets, net 11,827 13,713
    Goodwill   23,375   23,375
    Total assets $ 3,913,276 $ 3,438,558
     

    Liabilities

    Accounts payable $ 153,389 $ 121,865
    Accrued expenses and other liabilities 192,184 214,500
    Income taxes payable 28,492 47,540
    Customer deposits 120,337 94,670
    Mortgage borrowings 49,282 74,892
    Loans payable and other borrowings 282,090 282,098
    Liabilities attributable to consolidated option agreements 15,623 18,595
    Revolving credit facility 40,000 -
    Senior notes   1,389,169   1,039,497
    Total liabilities $ 2,270,566 $ 1,893,657
     

    Stockholders' Equity

    Total stockholders' equity   1,642,710   1,544,901
    Total liabilities and stockholders' equity $ 3,913,276 $ 3,438,558
                       
     
    Homes Closed:Three Months Ended June 30,Homes Closed:Six Months Ended June 30,
    2014201320142013
    (Dollars in thousands)Homes   Value   Homes   Value(Dollars in thousands)Homes   Value   Homes   Value
    East 829 $ 344,122 729 $ 271,189 East 1,501 $ 608,456 1,273 $ 462,568
    West   460     238,737     420     166,345 West 843     429,698   783     296,041
    Subtotal U.S.1,289$582,8591,149437,534Subtotal U.S.2,344$1,038,1542,056$758,609
    Canada   149     60,781     192     58,499 Canada 254     106,325   297     104,193
    Subtotal1,438$643,6401,341496,033Subtotal2,598$1,144,4792,353$862,802
    Unconsolidated joint ventures   56     22,718     115     36,271 Unconsolidated joint ventures 63     26,739   142     45,198
    Total1,494$666,3581,456$532,304Total2,661$1,171,2182,495$908,000
     
     
    Net Sales Orders:Three Months Ended June 30,Net Sales Orders:Six Months Ended June 30,
    2014201320142013
    (Dollars in thousands)Homes   Value   Homes   Value(Dollars in thousands)Homes   Value   Homes   Value
    East 1,008 $ 415,090 910 $ 332,377 East 1,930 $ 796,310 1,920 $ 698,334
    West   527     298,717     493     218,188 West 1,119     611,825   1,032     447,035
    Subtotal U.S.1,535$713,8071,403$550,565Subtotal U.S.3,049$1,408,1352,952$1,145,369
    Canada   174     83,434     193     86,612 Canada 322     148,055   325     147,273
    Subtotal1,709$797,2411,596$637,177Subtotal3,371$1,556,1903,277$1,292,642
    Unconsolidated joint ventures   5     2,067     15     6,065 Unconsolidated joint ventures 15     5,576   30     12,912
    Total1,714$799,3081,611$643,242Total3,386$1,561,7663,307$1,305,554
     
     
    Sales Order Backlog:As of June 30,
    20142013
    (Dollars in thousands)Homes   Value   Homes   Value
    East 1,973 $ 901,758 1,849 $ 730,461
    West   898     521,862     911     399,904
    Subtotal U.S.2,871$1,423,6202,760$1,130,365
    Canada   890     308,831     1,367     442,036
    Subtotal3,761$1,732,4514,127$1,572,401
    Unconsolidated joint ventures   499     179,959     795     269,499
    Total4,260$1,912,4104,922$1,841,900
     
     
    Average Active Selling Communities:Three Months EndedSix Months Ended
    June 30,June 30,
    2014   20132014   2013
    East 148.0 121.8 142.2 121.3
    West   55.0     34.5     52.9     33.0
    Subtotal U.S.203.0156.3195.1154.3
    Canada   11.2     15.8     12.8     15.3
    Subtotal214.2172.1207.9169.6
    Unconsolidated joint ventures   3.0     4.0     3.0     4.3
    Total217.2176.1210.9173.9
     
     
     
    Average Selling Price of Homes Closed:Three Months EndedSix Months Ended
    June 30,June 30,
    (In thousands)2014   2013   2014   2013
    East $ 415 $ 372 $ 405 $ 363
    West 519 396 510 378
    Subtotal U.S.$452$381$443$369
    Canada 408 305 419 351
    Subtotal$448$370$441$367
    Unconsolidated joint ventures 406 315 424 318
    Total$446$366$440$364
     


    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 as well as between net income and adjusted net income. Adjusted home closings gross margin is a non-GAAP financial measure calculated based on gross margins, excluding impairments and capitalized interest amortization. Management uses adjusted home closings gross margins to evaluate our performance on a consolidated basis as well as the performance of our regions. Adjusted net income is a non-GAAP financial measure calculated based on net income, excluding various charges associated with the early extinguishment of debt, charges related to the reversal of an indemnification receivable and various charges associated with our initial public offering (including charges related to equity compensation, the pre-IPO reorganization and the termination of a management services agreement). 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.

    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 and gross margins and any adjustments to such amounts before comparing our measures to those of such other companies.

       
    Adjusted Gross Margin Reconciliation
    Three Months Ended June 30,
    (Dollars in thousands)20142013
    Home closings revenues $ 643,640 $ 496,033
    Cost of home closings   508,644     394,203  
    Home closings gross margin 134,996 101,830
    Add:
    Capitalized interest amortization   17,063     11,477  
    Adjusted home closings gross margin $ 152,059   $ 113,307  
    Home closings gross margin as a percentage of home closings revenue 21.0 % 20.5 %
    Adjusted home closings gross margin as a percentage of home closings revenue 23.6 % 22.8 %
     
    Six Months Ended June 30,
    (Dollars in thousands)20142013
    Home closings revenues $ 1,144,479 $ 862,802
    Cost of home closings   902,300     683,035  
    Home closings gross margin 242,179 179,767
    Add:
    Capitalized interest amortization   28,121     19,343  
    Adjusted home closings gross margin $ 270,300   $ 199,110  
    Home closings gross margin as a percentage of home closings revenue 21.2 % 20.8 %
    Adjusted home closings gross margin as a percentage of home closings revenue 23.6 % 23.1 %
       
    Adjusted Net Income, non-GAAP reconciliation
     
    Three Months Ended
    June 30,
    20142013
    Home closings revenue $ 643,640 $ 496,033
    Land closings revenue 5,974 5,616
    Mortgage operations revenue   8,175     7,216  
    Total revenues 657,789 508,865
     
    Cost of home closings 508,644 394,203
    Cost of land closings 4,744 5,653
    Mortgage operations expenses   4,648     4,069  
    Total cost of revenues   518,036     403,925  
     
    Gross margin 139,753 104,940
     
    Sales, commissions and other marketing costs 41,951 34,267
    General and administrative expenses 22,330 25,905
    Equity in income of unconsolidated entities (8,112 ) (8,466 )
    Interest (income) expense, net (24 ) 700
    Other expense, net 4,036 541
    Loss on extinguishment of debt - 10,141
    Indemnification and transaction (income) expense   (74 )   189,635  
    Income (loss) before income taxes 79,646 (147,783 )
    Income tax provision (benefit)   24,147     (69,496 )
    Net income (loss) 55,499 (78,287 )
    Net income attributable to non-controlling interests - joint ventures   (222 )   (106 )
    Net income (loss) before non-controlling interests - Principal Equityholders 55,277 (78,393 )
    Net (income) loss attributable to non-controlling interests - Principal Equityholders   (40,461 )   83,720  
    Net income available to Taylor Morrison Home Corporation $ 14,816   $ 5,327  
     

    Adjusted Net Income available to Taylor Morrison Home Corporation:

    Net income available to Taylor Morrison Home Corporation $ 14,816 $ 5,327
    Early extinguishment of debt - 10,141
    Tax effect of early extinguishment of debt - (3,666 )
    Indemnification receivable and income tax payable reversal - 5,432
    Adjusted loss attributable to Principal Equityholders   -     (8,704 )
    Adjusted net income available to Taylor Morrison Home Corporation $ 14,816   $ 8,530  
     
    Net income (loss) attributable to Principal Equity holders
    Pre IPO (income) attributable solely to Principal Equityholders $ 40,461 $ (83,720 )
    Pre IPO charge related to equity compensation charge from reorganization - 80,189
    Pre IPO charge related to termination of management services agreement - 29,848
    Tax effect on pre IPO charge related to termination of management services agreement - (10,790 )
    Adjusted net income attributable to Principal Equityholders related to post IPO adjustments   -     8,704  
    Adjusted net income attributable to Principal Equityholders $ 40,461   $ 24,231  
     
    Adjusted diluted net income $ 55,277   $ 32,761  
     

    Adjusted earnings per common share:

    Earnings per share, basic $ 0.45 $ 0.16
    Adjusted earnings per share, basic $ 0.45 $ 0.26
    Earnings per share, diluted $ 0.45 $ 0.16
    Adjusted earnings per share, diluted $ 0.45 $ 0.27
    Weighted average number of shares of common stock:
    Basic number of shares of common stock 32,875 32,806
    Diluted number of shares of common stock 122,354 122,327





    Taylor Morrison Home Corporation

    Investor Relations

    Erin Willis, (480) 734-2060

    investor@taylormorrison.com

    Source: Taylor Morrison Home Corporation


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