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Taylor Morrison Reports Third Quarter Closings of 2,115, an increase of 15% over the prior year, and Earnings per Share of $0.83

10/31/18

SCOTTSDALE, Ariz., Oct. 31, 2018 /PRNewswire/ -- Taylor Morrison Home Corporation (NYSE: TMHC) today reported third quarter total revenue of $1,036 million and home closings gross margin, inclusive of capitalized interest, of 18.9 percent leading to diluted earnings per share of $0.83.

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

Third Quarter 2018 Highlights:

  • Net income was $94 million with diluted earnings per share of $0.83
  • Home closings were 2,115, a 15% increase over the prior year quarter
  • Total revenue was $1,036 million, a 14% increase over the prior year quarter
  • Sales per outlet were 2.2, a 10% increase over the prior year quarter
  • Net sales orders were 1,822, a 3% increase over the prior year quarter
  • Home closings gross margin, inclusive of capitalized interest, was 18.9 percent, a sequential improvement of 90 basis points from the second quarter of 2018

"I'm pleased to share that once again we have delivered or exceeded on all points of our guidance—a direct reflection of our teams' effort and focus on driving shareholder value," said Chairman and CEO, Sheryl Palmer.

For the third quarter, net sales orders were 1,822 with an average community count of 275.  The Company ended the quarter with 4,449 units in backlog with a sales value of more than $2.3 billion

"On Oct. 2, we announced the closing of the AV Homes acquisition, the timing consistent with what we shared in early June when we made our initial announcement with the intent to acquire," added Palmer.  "We're very pleased with the purchase at book value and believe it to be the right strategic transaction, at the right price and time. From that initial announcement through today, all parties involved have worked at an accelerated pace to assure that we would be in the best position for a successful integration. Today, the integration is further along than I would have imagined by this point and I'm delighted with our progress."

Palmer also added, "The sales environment has been getting a lot of coverage this earnings cycle as the industry has seen moderation in sales paces. We believe there are differing factors at play including an adjustment period as buyers assess the interest rate and affordability environment. Looking at the macro data—including the underbuilding of single-family homes and a healthy U.S. economy—at this time, we believe this break in momentum is likely a pause in the extended cycle."

"Our earnings before income taxes were $101 million, or 9.7 percent of revenue.  Home closings gross margin, inclusive of capitalized interest, was 18.9 percent, representing a 30 basis point increase from the third quarter of 2017 and a 90 basis point increase from the second quarter of 2018," said Dave Cone, Executive Vice President and Chief Financial Officer. "Income taxes were $6 million for the quarter, representing an effective tax rate of 6.4 percent. This was driven by a number of one-time tax reductions including accelerated deductions following an inventory analysis, a favorable conclusion of a state tax audit and utilization of foreign tax credits relating to the deemed repatriation of foreign earnings mandated by tax reform."

Homebuilding inventories were $3.3 billion at the end of the quarter, including 5,478 homes in inventory, compared to 5,282 homes in inventory at the end of the prior year quarter.  Homes in inventory at the end of the quarter consisted of 3,478 sold units, 381 model homes and 1,619 inventory units, of which 247 were finished. 

The Company finished the quarter with $383 million in cash, total debt of $1.46 billion and a net homebuilding debt to capitalization ratio of 30.4 percent.  The Company purchased approximately 3 million of its shares for $48 million since the close of the AV Homes transaction in early October 2018.  The remaining balance on the share repurchase authorization is $48 million, which expires at the end of this year.  As of September 30, 2018, Taylor Morrison owned or controlled approximately 42,000 lots, representing 5.0 years of supply, and is focused on securing land for 2020 and beyond. 

Earlier this month, the Company announced a corporate structure reorganization related to the dual class share structure and final repatriated proceeds from the sale of our Monarch business in Canada.   The latter will result in two fourth quarter expenses for a total of about $36 million; $20 million will be in the other expense line and is a non-cash event and the other approximately $16 million charge will be in the tax expense line which is factored into the effective tax rate guidance and it is a cash event.  As a result of this reorganization, the Company will reduce future tax expense.   

Quarterly Financial Comparison

           

($ thousands)

           
   

Q3 2018

 

Q3 2017

 

Q3 2018 vs. Q3 2017

Total Revenue

 

$1,036,379

 

$908,027

 

14.1

%

Home Closings Revenue

 

$1,014,168

 

$886,249

 

14.4

%

Home Closings Gross Margin

 

$191,218

 

$164,612

 

16.2

%

 

18.9

%

 

18.6

%

 

30 bps increase

SG&A

% of Home Closings Revenue

 

$100,520

 

$94,850

 

6.0

%

 

9.9

%

 

10.7

%

 

80 bps leverage

Fourth Quarter and Full Year 2018 Business Outlook Including AV Homes

Fourth Quarter 2018:

  • Average active community count is expected to be approximately 330
  • Home closings are expected to be about 3,125
  • Home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be in the mid 16 percent range
  • SG&A as a percentage of homebuilding revenue is expected to be in the low to mid 9 percent range
  • Effective tax rate, inclusive of one time charges, is expected to be between 42 and 44 percent
  • Effective tax rate, excluding one time charges, is expected to be between 23 and 25 percent
  • Diluted share count is expected to be about 119 million

Full Year 2018:

  • Average active community count is expected to be approximately 300
  • Average monthly absorption pace is expected to be about 2.4 per outlet
  • Home closings are expected to be about 8,800
  • Home closings gross margin, inclusive of capitalized interest and purchase accounting, is expected to be in the high 17 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 approximately $12 million
  • Land and development spend is expected to be approximately $1.1 billion
  • Effective tax rate, inclusive of one time charges, is expected to be between 22 and 24 percent
  • Diluted share count is expected to be about 115 million

Earnings Webcast

A public webcast to discuss the third 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 5098754. 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

This earnings summary includes "forward-looking statements." These statements are subject to a number of risks, uncertainties and other factors that could cause our actual results, performance, prospects or opportunities, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or implied by, these statements. You can identify these statements by the fact that they do not relate to matters of a strictly factual or historical nature and generally discuss or relate to forecasts, estimates or other expectations regarding future events. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "may," "can," "could," "might," "will" and similar expressions identify forward-looking statements, including statements related to expected operating and performing results, planned transactions, planned objectives of management, future developments or conditions in the industries in which we participate and other trends, developments and uncertainties that may affect our business in the future.

Such risks, uncertainties and other factors include, among other things: changes in general and local economic conditions (including as a result of recent extreme weather conditions); slowdowns or severe downturns in the housing market; homebuyers' ability to obtain suitable financing; 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; and risks related to 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. In addition, other such risks and uncertainties may be found in our most recent annual report on Form 10-K filed with the Securities and Exchange Commission (SEC) as such factors may be updated from time to time in our periodic filings with the SEC. We undertake no duty to update any forward-looking statement, whether as a result of new information, future events or changes in our expectations, except as required by applicable law.

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

Taylor Morrison Home Corporation

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts, unaudited)

 
   

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

   

2018

 

2017

 

2018

 

2017

Home closings revenue, net

 

$

1,014,168

   

$

886,249

   

$

2,703,692

   

$

2,526,830

 

Land closings revenue

 

5,170

   

4,299

   

18,335

   

11,419

 

Financial services revenue

 

17,041

   

17,479

   

47,513

   

47,362

 

Total revenues

 

1,036,379

   

908,027

   

2,769,540

   

2,585,611

 

Cost of home closings

 

822,950

   

721,637

   

2,202,377

   

2,062,437

 

Cost of land closings

 

3,979

   

3,002

   

14,704

   

7,869

 

Financial services expenses

 

10,451

   

12,070

   

31,647

   

30,874

 

Total cost of revenues

 

837,380

   

736,709

   

2,248,728

   

2,101,180

 

Gross margin

 

198,999

   

171,318

   

520,812

   

484,431

 

Sales, commissions and other marketing costs

 

67,504

   

61,476

   

185,806

   

178,609

 

General and administrative expenses

 

33,016

   

33,374

   

101,795

   

100,396

 

Equity in income of unconsolidated entities

 

(2,514)

   

(2,787)

   

(9,777)

   

(6,943)

 

Interest income, net

 

(670)

   

(135)

   

(1,289)

   

(314)

 

Other expense, net

 

798

   

415

   

4,889

   

828

 

Income before income taxes

 

100,865

   

78,975

   

239,388

   

211,855

 

Income tax provision

 

6,424

   

24,282

   

38,123

   

65,631

 

Net income before allocation to non-controlling interests

 

94,441

   

54,693

   

201,265

   

146,224

 

Net income attributable to non-controlling interests - joint ventures

 

(159)

   

(427)

   

(428)

   

(625)

 

Net income before non-controlling interests

 

94,282

   

54,266

   

200,837

   

145,599

 

Net income attributable to non-controlling interests

 

(714)

   

(21,390)

   

(4,391)

   

(76,810)

 

Net income available to Taylor Morrison Home Corporation

 

$

93,568

   

$

32,876

   

$

196,446

   

$

68,789

 

Earnings per common share

               

Basic

 

$

0.84

   

$

0.45

   

$

1.75

   

$

1.21

 

Diluted

 

$

0.83

   

$

0.45

   

$

1.73

   

$

1.21

 

Weighted average number of shares of common stock:

               

Basic

 

111,396

   

72,471

   

112,449

   

56,791

 

Diluted

 

113,440

   

121,183

   

116,378

   

120,991

 

 

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

 
   

September 30,
2018

 

December 31,
2017

   

(Unaudited)

   

Assets

       

Cash and cash equivalents

 

$

382,054

   

$

573,925

 

Restricted cash

 

1,319

   

1,578

 

Total cash, cash equivalents, and restricted cash

 

383,373

   

575,503

 

Owned inventory

 

3,255,300

   

2,956,709

 

Real estate not owned

 

13,811

   

2,527

 

        Total real estate inventory

 

3,269,111

   

2,959,236

 

Land deposits

 

47,855

   

49,768

 

Mortgage loans held for sale

 

83,751

   

187,038

 

Hedging assets

 

2,329

   

1,584

 

Prepaid expenses and other assets, net

 

56,828

   

72,334

 

Other receivables, net

 

98,048

   

94,488

 

Investments in unconsolidated entities

 

179,249

   

192,364

 

Deferred tax assets, net

 

105,356

   

118,138

 

Property and equipment, net

 

38,258

   

7,112

 

Intangible assets, net

 

1,337

   

2,130

 

Goodwill

 

66,198

   

66,198

 

Total assets

 

$

4,331,693

   

$

4,325,893

 

Liabilities

       

Accounts payable

 

$

124,731

   

$

140,165

 

Accrued expenses and other liabilities

 

188,681

   

201,540

 

Income taxes payable

 

   

4,525

 

Customer deposits

 

189,116

   

132,529

 

Senior notes, net

 

1,241,514

   

1,239,787

 

Loans payable and other borrowings

 

160,173

   

139,453

 

Revolving credit facility borrowings

 

   

 

Mortgage warehouse borrowings

 

54,457

   

118,822

 

Liabilities attributable to real estate not owned

 

13,811

   

2,527

 

Total liabilities

 

$

1,972,483

   

$

1,979,348

 

Stockholders' Equity

       

Total stockholders' equity

 

2,359,210

   

2,346,545

 

Total liabilities and stockholders' equity

 

$

4,331,693

   

$

4,325,893

 

 

 

Homes Closed and Home Closings Revenue, Net

     
   

Three Months Ended September 30,

   

Homes Closed

 

Home Closings Revenue, Net

 

Average Selling Price

(Dollars in thousands)

 

2018

 

2017

 

Change

 

2018

 

2017

 

Change

 

2018

 

2017

 

Change

East

 

953

 

776

 

22.8

%

 

$

392,767

   

$

311,526

   

26.1

%

 

$

412

 

$

401

 

2.7

%

Central

 

594

 

531

 

11.9

   

272,980

   

253,556

   

7.7

   

460

 

478

 

(3.8)

 

West

 

568

 

535

 

6.2

   

348,421

   

321,167

   

8.5

   

613

 

600

 

2.2

 

Total

 

2,115

 

1,842

 

14.8

%

 

$

1,014,168

   

$

886,249

   

14.4

%

 

$

480

 

$

481

 

(0.2)

%

 

   

Nine Months Ended September 30,

   

Homes Closed

 

Home Closings Revenue, Net

 

Average Selling Price

(Dollars in thousands)

 

2018

 

2017

 

Change

 

2018

 

2017

 

Change

 

2018

 

2017

 

Change

East

 

2,528

 

2,238

 

13.0

%

 

$

1,033,553

   

$

891,740

   

15.9

%

 

$

409

 

$

398

 

2.8

%

Central

 

1,645

 

1,512

 

8.8

   

780,682

   

723,758

   

7.9

   

475

 

479

 

(0.8)

 

West

 

1,481

 

1,585

 

(6.6)

   

889,457

   

911,332

   

(2.4)

   

601

 

575

 

4.5

 

Total

 

5,654

 

5,335

 

6.0

%

 

$

2,703,692

   

$

2,526,830

   

7.0

%

 

$

478

 

$

474

 

0.8

%

 

Net Sales Orders:

     
   

Three Months Ended September 30,

   

Net Sales Orders

 

Sales Value

 

Average Selling Price

(Dollars in thousands)

 

2018

 

2017

 

Change

 

2018

 

2017

 

Change

 

2018

 

2017

 

Change

East

 

710

 

777

 

(8.6)

%

 

$

289,200

   

$

302,795

   

(4.5)

%

 

$

407

 

$

390

 

4.4

%

Central

 

617

 

521

 

18.4

   

298,111

   

247,084

   

20.7

   

483

 

474

 

1.9

 

West

 

495

 

463

 

6.9

   

306,004

   

300,815

   

1.7

   

618

 

650

 

(4.9)

 

Total

 

1,822

 

1,761

 

3.5

%

 

$

893,315

   

$

850,694

   

5.0

%

 

$

490

 

$

483

 

1.4

%

 

   

Nine Months Ended September 30,

   

Net Sales Orders

 

Sales Value

 

Average Selling Price

(Dollars in thousands)

 

2018

 

2017

 

Change

 

2018

 

2017

 

Change

 

2018

 

2017

 

Change

East

 

2,604

 

2,923

 

(10.9)

%

 

$

1,096,008

   

$

1,132,839

   

(3.3)

%

 

$

421

 

$

388

 

8.5

%

Central

 

2,204

 

1,826

 

20.7

   

1,064,852

   

864,797

   

23.1

   

483

 

474

 

1.9

 

West

 

1,799

 

1,813

 

(0.8)

   

1,128,763

   

1,088,661

   

3.7

   

627

 

600

 

4.5

 

Total

 

6,607

 

6,562

 

0.7

%

 

$

3,289,623

   

$

3,086,297

   

6.6

%

 

$

498

 

$

470

 

6.0

%

 

Sales Order Backlog:

     
   

As of September 30,

   

Sold Homes in Backlog

 

Sales Value

 

Average Selling Price

(Dollars in thousands)

 

2018

 

2017

 

Change

 

2018

 

2017

 

Change

 

2018

 

2017

 

Change

East

 

1,589

 

1,905

 

(16.6)

%

 

$

754,666

   

$

774,001

   

(2.5)

%

 

$

475

 

$

406

 

17.0

%

Central

 

1,610

 

1,272

 

26.6

   

814,173

   

653,415

   

24.6

   

506

 

514

 

(1.6)

 

West

 

1,250

 

1,182

 

5.8

   

771,135

   

697,790

   

10.5

   

617

 

590

 

4.6

 

Total

 

4,449

 

4,359

 

2.1

%

 

$

2,339,974

   

$

2,125,206

   

10.1

%

 

$

526

 

$

488

 

7.8

%

 

Average Active Selling Communities:

         
   

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

   

2018

 

2017

 

Change

 

2018

 

2017

 

Change

East

 

109

 

130

 

(16.2)

%

 

119

 

127

 

(6.3)

%

Central

 

118

 

118

 

   

119

 

118

 

0.8

 

West

 

48

 

45

 

6.7

   

50

 

51

 

(2.0)

 

Total

 

275

 

293

 

(6.1)

%

 

288

 

296

 

(2.7)

%

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, (ii) adjusted income tax and (iii) 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.  Adjusted income tax is a non-GAAP financial measure that measures our income tax liabilities by adjusting income taxes payable to exclude a number of one-time tax reductions including an acceleration of tax deductions following an inventory analysis, a favorable conclusion of a state tax audit centered on NOL's and benefit due to a repatriation of foreign earnings and utilization of foreign tax credits.  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.  We believe adjusted income tax provides useful information to investors because it allows investors to evaluate our income tax liabilities without the effects of various items we do not believe are characteristic of our ongoing income tax exposure and because it assists both investors and management in analyzing and benchmarking the value of our business. 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 September 30,

(Dollars in thousands)

 

2018

 

2017

Net income before allocation to non-controlling interests

 

$

94,441

 

$

54,693

Interest income, net

 

(670)

 

(135)

Amortization of capitalized interest

 

21,345

 

21,789

Income tax provision

 

6,424

 

24,282

Depreciation and amortization

 

985

 

896

EBITDA

 

$

122,525

 

$

101,525

Non-cash compensation expense

 

3,591

 

3,377

Adjusted EBITDA

 

$

126,116

 

$

104,902

 

Adjusted Income Tax Provision Reconciliation

   

Three Months Ended
September 30,

(Dollars in thousands)

 

2018

 

2017

Income tax provision

 

$

6,424

   

$

24,282

 

Acceleration of tax deductions related to inventory

 

$

8,075

   

$

 

Settlement of state tax audit

 

$

7,875

   

$

 

Utilization of foreign tax credits related to the repatriation of foreign earnings

 

$

3,220

   

$

 

Adjusted income tax provision

 

$

25,594

   

$

24,282

 
         

Adjusted effective tax rate

 

25.4

%

 

30.7

%

 

Net Homebuilding Debt to Capitalization Ratio Reconciliation

(Dollars in thousands)

As of
September 30,
2018

Total debt

$

1,456,144

 

Unamortized debt issuance costs

8,486

 

Less mortgage warehouse borrowings

54,457

 

Total homebuilding debt

$

1,410,173

 

Less cash and cash equivalents

382,054

 

Net homebuilding debt

$

1,028,119

 

Total equity

2,359,210

 

Total capitalization

$

3,387,329

 
   

Net homebuilding debt to capitalization ratio

30.4

%

 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/taylor-morrison-reports-third-quarter-closings-of-2-115--an-increase-of-15-over-the-prior-year-and-earnings-per-share-of-0-83--300741015.html

SOURCE Taylor Morrison