SCOTTSDALE, Ariz., Aug. 1, 2018 /PRNewswire/ — Taylor Morrison Home Corporation (NYSE: TMHC) today reported second quarter total revenue of $981 million and home closings gross margin, inclusive of capitalized interest, of 18.0 percent leading to diluted earnings per share of $0.52.

Taylor Morrison (PRNewsFoto/Taylor Morrison) (PRNewsfoto/Taylor Morrison)

Second Quarter 2018 Highlights:

  • Sales per outlet were 2.6
  • Net sales orders were 2,342
  • Home closings were 1,992
  • Total revenue was $981 million
  • Home closings gross margin, inclusive of capitalized interest, was 18.0 percent
  • Net income was $59 million with diluted earnings per share of $0.52

«Our teams across the country once again delivered a solid quarter meeting or exceeding all points of our guidance,» said Chairman and CEO, Sheryl Palmer.  «We closed 1,992 homes, nearly a 7 percent increase over the prior year and above our guidance range of 1,800-1,900.  Our home closings gross margin was 18 percent, in line with guidance, and especially encouraging knowing we didn’t sacrifice margin for the additional closings.»

For the second quarter, net sales orders were 2,342 with an average community count of 297.  The Company ended the quarter with 4,742 units in backlog, a year-over-year increase of 7 percent, with a sales value of more than $2.4 billion

«Since the AV announcement, our legal, finance and operations teams have been busy working through the standard protocol and required steps to bring this deal to the finish line.  In anticipation, we intend to reposition a number of our communities to better synergize products,» said Palmer.  «As a result of the repositioning, there will be a short-term reduction in average community count for the third and fourth quarter.  That, combined with the early closeouts of some communities due to better than expected sales has led us to adjust our community guidance.»

«It’s an exciting time to be in homebuilding, and an even more exciting time to be a part of the Taylor Morrison family,» added Palmer.  «We have a number of items in front of us that can drive both short-term and long-term benefits for our company and we’re at the right spot in the cycle to maximize those benefits.  Overall, I’m encouraged by the health of our industry and the economy.»

«Our earnings before income taxes were $79 million, or 8.1 percent of revenue while home closings gross margin, inclusive of capitalized interest, was 18 percent and in-line with our expectations,» said Dave Cone, Executive Vice President and Chief Financial Officer.  «We experienced a differentiated geographic and product mix during the quarter and anticipate home closings gross margin to sequentially increase in the third quarter and second half of the year as the geographic and product mix reverts to be more in line with what we experienced in the first quarter.»

Homebuilding inventories were $3.2 billion at the end of the quarter, including 5,599 homes in inventory, compared to 5,188 homes in inventory at the end of the prior year quarter.  Homes in inventory at the end of the quarter consisted of 3,612 sold units, 364 model homes and 1,623 inventory units, of which 192 were finished. 

«During the second quarter we announced an increase to our corporate revolving credit facility of $100 million to $600 million as a way to create increased flexibility to execute on our capital allocation philosophy,» said Cone.  The Company finished the quarter with $321 million in cash and a net homebuilding debt to capitalization ratio of 32.1 percent.  As of June 30, 2018, Taylor Morrison owned or controlled approximately 40,000 lots, representing 5.0 years of supply, and is focused on securing land for 2020 and beyond. 

«On top of our second quarter successes, I’m equally excited about welcoming two extremely talented individuals to our board,» said Palmer.  The Company recently announced the appointment of veteran New York Times executive Denise Warren and former Banana Republic Global President Andrea (Andi) Owen to its Board of Directors.  «Each of them brings a diverse skill set and a fresh perspective to our organization.  Two of our goals in our director search were to find candidates that could bring a new expertise in reaching customers in the digital age and that could help frame homebuilding as the ultimate retail experience, with knowledge in catering to the younger cohort as that segment continues to grow.  We hit a home run on both counts with these two proven leaders.»

Quarterly Financial Comparison

($ thousands)

Q2 2018

Q2 2017

Q2 2018 vs. Q2 2017

Total Revenue

$980,828

$908,494

8.0%

Home Closings Revenue

$956,565

$889,096

7.6%

Home Closings Gross Margin

$172,044

$164,591

4.5%

18.0%

18.5%

50 bps decrease

SG&A

$100,065

$95,410

4.9%

% of Home Closings Revenue

10.5%

10.7%

20 bps leverage

Third Quarter and Full Year 2018 Business Outlook for Taylor Morrison Only

Third Quarter 2018:

  • Average active community count is expected to be between 270 and 275
  • Home closings are expected to be between 2,050 to 2,150
  • Home closings margin, inclusive of capitalized interest, is expected to be in the mid-to-high 18 percent range

Full Year 2018:

  • Average active community count is expected to be between 280 and 285
  • Monthly absorption pace is expected to be between 2.4 to 2.5 per outlet on average
  • Home closings are expected to be between 8,400 and 8,800
  • Home closings gross margin, inclusive of capitalized interest, is expected to be accretive to 2017 and be in the mid to high 18 percent range
  • SG&A as a percentage of homebuilding revenue is expected to be in the low 10 percent range
  • Income from unconsolidated joint ventures is expected to be between $8 million and $10 million
  • Land and development spend is expected to be approximately $1.1 billion
  • Effective tax rate is expected to be between 24 and 26 percent
  • Diluted share count is expected to be about 114 million

Earnings Webcast

A public webcast to discuss the second quarter 2018 earnings will be held later today at 8:30 a.m. Eastern time. The participant dial-in is 1 (855) 470-8731 and the passcode is 8879629. 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, 2017 and 2018 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.

Forward-Looking Statements

Some of the statements in this communication are forward-looking statements (or forward-looking information) within the meaning of applicable U.S. securities laws. These include statements using the words «believe,» «target,» «outlook,» «may,» «will,» «should,» «could,» «estimate,» «continue,» «expect,» «intend,» plan,» «predict,» «potential,» «project,» «intend,» «estimate,» «aim,» «on track,» «target,» «opportunity,» «tentative,» «positioning,» «designed,» «create,» «seek,» «would,» «upside,» «increases,» «goal,» «guidance» and «anticipate,» and similar statements (including where the word «could,» «may,» or «would» is used rather than the word «will») and the negative of such words and phrases, which do not describe the present or provide information about the past. There is no guarantee that the expected events or expected results will actually occur. Such statements reflect the current views of management of Taylor Morrison and are subject to a number of risks and uncertainties. These statements are based on many assumptions and factors, including general economic and market conditions, industry conditions, operational and other factors. Any changes in these assumptions or other factors could cause actual results to differ materially from current expectations. All forward-looking statements attributable to Taylor Morrison, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements set forth in this paragraph. Undue reliance should not be placed on such statements. In addition, material risks that could cause actual results to differ from forward-looking statements 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; increases in interest rates, taxes or government fees; impacts from the recently enacted tax reform legislation; shortages in, disruptions of and cost of labor; competition in our industry; any increase in unemployment or underemployment; 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 compliance with environmental laws; 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; risks related to our structure and organization; the inherent uncertainty associated with financial or other projections; the integration of Taylor Morrison and AV Homes and the ability to recognize the anticipated benefits from the combination of Taylor Morrison and AV Homes; the risk associated with AV Homes’ ability to obtain the shareholder approval required to consummate the merger and the timing of the closing of the merger, including the risk that the conditions to the transaction are not satisfied on a timely basis or at all and the failure of the transaction to close for any other reason; the outcome of any legal proceedings that may be instituted against the parties and others related to the merger agreement; unanticipated difficulties or expenditures relating to the transaction, the response of business partners and retention as a result of the announcement and pendency of the transaction; risks relating to the value of the Taylor Morrison common stock to be issued in connection with the transaction; the anticipated size of the markets and continued demand for Taylor Morrison’s and AV Homes’ homes and the impact of competitive responses to the announcement of the transaction; access to available financing on a timely basis and on reasonable terms, including the refinancing of Taylor Morrison and AV Homes debt to fund the cash portion of the consideration in connection with the transaction. Additional risks are described under the heading «Risk Factors» in Taylor Morrison’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the U.S. Securities and Exchange Commission (the «SEC») on February 21, 2018 and in AV Homes’ Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 23, 2018. Forward-looking statements speak only as of the date they are made. Except as required by law, neither Taylor Morrison nor AV Homes has any intention or obligation to update or to publicly announce the results of any revisions to any of the forward-looking statements to reflect actual results, future events or developments, changes in assumptions or changes in other factors affecting the forward-looking statements.

Important Additional Information and Where to Find it

This communication is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction, nor shall there be any sale, issuance or transfer of securities in any jurisdiction in contravention of applicable law.  In connection with the proposed transaction between Taylor Morrison and AV Homes, Taylor Morrison has filed with the U.S. Securities and Exchange Commission a registration statement on Form S-4 that includes a preliminary Proxy Statement of AV Homes that also constitutes a preliminary Prospectus of Taylor Morrison (the «Proxy Statement/Prospectus»). AV Homes plans to mail to its shareholders the definitive Proxy Statement/Prospectus in connection with the transaction. INVESTORS AND SECURITY HOLDERS OF AV HOMES ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED WITH THE SEC CAREFULLY WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT TAYLOR MORRISON, AV HOMES, THE TRANSACTION AND RELATED MATTERS. Investors and security holders may obtain free copies of the Proxy Statement/Prospectus (when available) and other documents filed with the SEC by Taylor Morrison and AV Homes through the website maintained by the SEC at www.sec.gov.  In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Taylor Morrison in the Investor Relations section of Taylor Morrison’s website at http://investors.taylormorrison.com or by contacting Taylor Morrison’s Investor Relations at [email protected] or by calling (480) 734-2060, and may obtain free copies of the documents filed with the SEC by AV Homes in the Investor Relations section of AV Homes’ website at http://investors.avhomesinc.com or by contacting AV Homes’ Investor Relations at [email protected] or by calling (480) 214-7408.

Participants in the Merger Solicitation

Taylor Morrison, AV Homes and certain of their respective directors, executive officers and employees may be considered participants in the solicitation of proxies in connection with the proposed transaction.  Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the shareholders of AV Homes in connection with the transaction, including a description of their respective direct or indirect interests, by security holdings or otherwise, is included in the Proxy Statement/Prospectus described above.  Additional information regarding Taylor Morrison’s directors and executive officers is also included in Taylor Morrison’s proxy statement for its 2018 Annual Meeting of Shareholders, which was filed with the SEC on April 17, 2018, or its Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 21, 2018, and information regarding AV Homes’ directors and executive officers is also included in AV Homes’ proxy statement for its 2018 Annual Meeting of Stockholders, which was filed with the SEC on April 18, 2018, or its Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on February 23, 2018.  These documents are available free of charge as described above.

CONTACT: Investor Relations
Taylor Morrison Home Corporation
(480) 734-2060
[email protected]

 

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,

2018

2017

2018

2017

Home closings revenue, net

$

956,565

$

889,096

$

1,689,524

$

1,640,581

Land closings revenue

7,997

3,764

13,165

7,120

Financial services revenue

16,266

15,634

30,472

29,883

Total revenues

980,828

908,494

1,733,161

1,677,584

Cost of home closings

784,521

724,505

1,379,427

1,340,800

Cost of land closings

6,444

2,467

10,725

4,867

Financial services expenses

11,152

10,102

21,196

18,804

Total cost of revenues

802,117

737,074

1,411,348

1,364,471

Gross margin

178,711

171,420

321,813

313,113

Sales, commissions and other marketing costs

64,604

61,516

118,302

117,133

General and administrative expenses

35,461

33,894

68,778

67,022

Equity in income of unconsolidated entities

(4,017)

(3,071)

(7,263)

(4,156)

Interest income, net

(276)

(89)

(619)

(179)

Other expense, net

3,654

764

4,092

413

Income before income taxes

79,285

78,406

138,523

132,880

Income tax provision

19,993

22,476

31,699

41,349

Net income before allocation to non-controlling interests

59,292

55,930

106,824

91,531

Net income attributable to non-controlling interests – joint ventures

(140)

(207)

(269)

(198)

Net income before non-controlling interests

59,152

55,723

106,555

91,333

Net income attributable to non-controlling interests

(474)

(28,322)

(3,133)

(54,164)

Net income available to Taylor Morrison Home Corporation

$

58,678

$

27,401

$

103,422

$

37,169

Earnings per common share

Basic

$

0.53

$

0.46

$

0.94

$

0.76

Diluted

$

0.52

$

0.46

$

0.93

$

0.76

Weighted average number of shares of common stock:

Basic

111,347

58,977

110,508

48,822

Diluted

113,482

121,061

115,400

120,895

 

Taylor Morrison Home Corporation

Condensed Consolidated Balance Sheets

(In thousands)

June 30,
2018

December 31,
2017

(Unaudited)

Assets

Cash and cash equivalents

$

320,102

$

573,925

Restricted cash

1,319

1,578

Total cash, cash equivalents, and restricted cash

321,421

575,503

Owned inventory

3,194,241

2,956,709

Real estate not owned under option agreements

1,462

2,527

Total real estate inventory

3,195,703

2,959,236

Land deposits

40,514

49,768

Mortgage loans held for sale

99,606

187,038

Hedging assets

2,888

1,584

Prepaid expenses and other assets, net

52,029

72,334

Other receivables, net

94,320

94,488

Investments in unconsolidated entities

189,733

192,364

Deferred tax assets, net

117,892

118,138

Property and equipment, net

38,916

7,112

Intangible assets, net

1,601

2,130

Goodwill

66,198

66,198

Total assets

$

4,220,821

$

4,325,893

Liabilities

Accounts payable

$

160,051

$

140,165

Accrued expenses and other liabilities

167,315

201,540

Income taxes payable

14,454

4,525

Customer deposits

191,893

132,529

Senior notes, net

1,240,938

1,239,787

Loans payable and other borrowings

136,508

139,453

Revolving credit facility borrowings

Mortgage warehouse borrowings

49,818

118,822

Liabilities attributable to real estate not owned under option agreements

1,462

2,527

Total liabilities

$

1,962,439

$

1,979,348

Stockholders’ Equity

Total stockholders’ equity

2,258,382

2,346,545

Total liabilities and stockholders’ equity

$

4,220,821

$

4,325,893

 

Homes Closed:

Three Months Ended June 30,

2018

2017

(Dollars in thousands)

Homes

Value

Homes

Value

East

875

$

356,351

780

$

317,113

Central

617

294,236

557

266,738

West

500

305,978

526

305,245

Total

1,992

$

956,565

1,863

$

889,096

Net Sales Orders:

Three Months Ended June 30,

2018

2017

(Dollars in thousands)

Homes

Value

Homes

Value

East

894

$

390,007

1,096

$

418,001

Central

832

393,236

677

328,658

West

616

396,123

603

357,319

Total

2,342

$

1,179,366

2,376

$

1,103,978

Homes Closed:

Six Months Ended June 30,

2018

2017

(Dollars in thousands)

Homes

Value

Homes

Value

East

1,575

$

640,787

1,462

$

580,214

Central

1,051

507,701

981

470,203

West

913

541,036

1,050

590,164

Total

3,539

$

1,689,524

3,493

$

1,640,581

Net Sales Orders:

Six Months Ended June 30,

2018

2017

(Dollars in thousands)

Homes

Value

Homes

Value

East

1,894

$

806,809

2,146

$

830,044

Central

1,587

766,742

1,305

617,713

West

1,304

822,759

1,350

787,846

Total

4,785

$

2,396,310

4,801

$

2,235,603

Sales Order Backlog:

As of June 30,

2018

2017

(Dollars in thousands)

Homes

Value

Homes

Value

East

1,832

$

825,231

1,905

$

772,244

Central

1,587

778,782

1,282

655,956

West

1,323

820,175

1,254

712,816

Total

4,742

$

2,424,188

4,441

$

2,141,016

 

Average Active Selling Communities:

Three Months Ended
June 30,

Six Months Ended
June 30,

2018

2017

2018

2017

East

121

127

123

126

Central

124

117

119

117

West

52

50

50

54

Total

297

294

292

297

Average Selling Price of Homes Closed:

Three Months Ended
June 30,

Six Months Ended
June 30,

(Dollars in thousands)

2018

2017

2018

2017

East

$

407

$

407

$

407

$

397

Central

477

479

483

479

West

612

580

593

562

Total

$

480

$

477

$

477

$

470

 

Reconciliation of Non-GAAP Financial Measures

The following tables set forth reconciliations of: (i) EBITDA and adjusted EBITDA to net income before allocation to non-controlling interests and (ii) 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 is a non-GAAP financial measure 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).

Management uses these non-GAAP financial measures to evaluate our performance on a consolidated basis, as well as the performance of our regions, and to set targets for performance-based compensation.  We also use the ratio of net homebuilding debt to total capitalization as an indicator of overall leverage and to evaluate our performance against other companies in the homebuilding industry.  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 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.  Because we use the ratio of net homebuilding debt to total capitalization to evaluate our performance against other companies in the homebuilding industry, we believe this measure is also relevant and useful to investors for that reason.

These non-GAAP financial measures and should be considered in addition to, rather than as a substitute for, the comparable U.S. GAAP financial measures of our operating performance or liquidity. Although other companies in the homebuilding industry may report similar information, their definitions may differ. We urge investors to understand the methods used by other companies to calculate similarly-titled non-GAAP financial measures before comparing their measures to ours.

Adjusted EBITDA Reconciliation

Three Months Ended June 30,

(Dollars in thousands)

2018

2017

Net income before allocation to non-controlling interests

$

59,292

$

55,930

Interest income, net

(276)

(89)

Amortization of capitalized interest

19,770

23,280

Income tax provision

19,993

22,476

Depreciation and amortization

993

1,026

EBITDA

$

99,772

$

102,623

Non-cash compensation expense

2,746

3,839

Adjusted EBITDA

$

102,518

$

106,462

 

Net Homebuilding Debt to Capitalization Ratio Reconciliation

(Dollars in thousands)

As of
June 30, 2018

Total debt

$

1,427,264

Unamortized debt issuance costs

9,062

Less mortgage warehouse borrowings

49,818

Total homebuilding debt

$

1,386,508

Less cash and cash equivalents

320,102

Net homebuilding debt

$

1,066,406

Total equity

2,258,382

Total capitalization

$

3,324,788

Net homebuilding debt to capitalization ratio

32.1%

 

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SOURCE Taylor Morrison