Taylor Morrison Reports Third Quarter 2013 Financial Results

Taylor Morrison Home Corporation (the “Company” or “Taylor Morrison”) (NYSE: TMHC) announced today financial results for the third quarter ended September 30, 2013. Earnings per share were $0.43 on net income for the quarter of $53.1 million. This compared to net income of $42.6 million for the third quarter of 2012.

“We are pleased to share our third quarter 2013 results, which demonstrate the continued success of our strategy and execution of our operations. As the homebuilding industry recovery continues to evolve, I believe it’s important to highlight our approach and reiterate how well-positioned for the future I believe we are,” said Sheryl Palmer, President and CEO. “Our strategy continues to be built for the long-term and the results we’re releasing today exhibit how our research-based approach to underwriting and consumer segmentation, as well as our land development expertise and efficient cost structure, have continued to serve us well into the recovery.”

Net sales orders in the Company’s U.S. operations increased 12% in the third quarter of 2013 with a continued focus on higher priced homes for move-up buyers. Net sales orders in the Company’s Canadian operations declined by 33% as high-rise inventory available for sale was limited due to the timing of wholly-owned high-rise tower launches in the third quarter of last year. Net sales orders on a Company-wide basis increased 3.2% to 1,163 in the third quarter of 2013, as compared to 1,127 in the third quarter of last year. During the quarter, average community count increased by 41% to 174. The Company’s overall monthly absorption pace was 2.2 net sales orders per community in the third quarter of 2013 compared to 3.1 for the third quarter of 2012.

The sales order backlog value in the U.S. increased 76% to $1.1 billion at September 30, 2013 from $626.3 million at September 30, 2012 and 48% in units to 2,580 homes at September 30, 2013 as compared to 1,747 at September 30, 2012. The Company’s consolidated sales order backlog value increased 28% to approximately $1.5 billion at September 30, 2013 from $1.2 billion at September 30, 2012, as backlog units increased 12% to 3,684 homes at September 30, 2013 compared with 3,302 homes at September 30, 2012. The third quarter 2013 cancellation rate, representing cancelled sales orders divided by gross sales orders, was 15%, as compared to 13.4% in the third quarter of 2012.

Home closings revenue totaled $622.1 million in the third quarter of 2013, benefiting from an 83% increase in homes closed, from 878 in the 2012 quarter to 1,606 during the 2013 quarter. Average home closing price increased 12% to $387,000, while average home closing price in the U.S. increased 24% to nearly $400,000 year-over-year. Adjusted home closings gross margin in the third quarter of 2013, which excludes capitalized interest, was 23.8%, an improvement of 95 basis points from the second quarter of 2013. Adjusted home closings gross margin declined 50 basis points as compared to the third quarter of 2012. Home closings gross margin dollars increased 97% to $132.4 million in the 2013 third quarter as compared to the prior year quarter. Home closings gross margin in the third quarter of 2013 declined to 21.3%, compared to 22.2% in the third quarter of 2012.

The Company’s mortgage company, Taylor Morrison Home Funding (“TMHF”) reported a gross margin of $3.4 million on mortgage operations revenue of $7.8 million for the quarter. The mortgage capture rate for TMHF was 79% year-to-date.

Selling, general and administrative expenses were $59.0 million, or 9.5% of home closings revenue for the 2013 third quarter compared to $32.3 million, or 10.7% of home closings revenue for the third quarter of 2012. Equity in net income of unconsolidated entities, which represents the Company’s investments in homebuilding joint ventures, was $9.4 million in the third quarter of 2013 as compared to $3.7 million in the third quarter of 2012.

The Company ended the third quarter of 2013 with $374.3 million of cash, including $18.9 million of restricted cash. Our net debt to capital ratio was 40.9% at the end of the quarter and we had no borrowings under our $400 million unsecured revolving credit facility. Homebuilding inventories at the end of the 2013 third quarter totaled $2.3 billion, an increase of 78% from $1.3 billion at September 30, 2012. The Company owned or controlled more than 45,000 lots at September 30, 2013 compared with approximately 35,000 lots at September 30, 2012.

“For all of 2013, we anticipate our closings to increase by approximately 50% and gross margins to be accretive from 2012. SG&A, as a percentage of homebuilding revenue, is anticipated to be consistent with last year and income from unconsolidated joint ventures is expected to be between $33 million and $35 million. As a reminder, our full year results will include $198 million of one-time charges related to our initial public offering, early extinguishment of debt and the tax indemnification charge,” said Dave Cone, Vice President and Chief Financial Officer. “For the fourth quarter of this year, we anticipate closings to increase by 25% to 30 % year-over-year, while community count should be up 45% to 50%. Income from unconsolidated joint ventures is anticipated to be between $12 million and $14 million, reflecting the closings in two Joint Venture towers.”

Earnings Conference Call

A conference call to discuss the Company’s third quarter 2013 earnings will be held at 4:30 p.m. Eastern Time on Tuesday, November 12, 2013. The call will be broadcast live on the Internet and can be accessed through the Company’s website at www.taylormorrison.com. If you are unable to participate in the conference call, the call will be archived at www.taylormorrison.com for one year. A replay of the conference call will also be available later today by calling 1 (888) 843-7419 or 1 (630) 652-3042 and entering 3587 3702 as the confirmation number.

Forward-Looking Statements

This earnings release 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 Taylor Morrison operates; the availability and cost of land and other raw materials used by Taylor Morrison in its home building 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 Taylor Morrison’s 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 Taylor Morrison’s 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. Taylor Morrison undertakes no duty to update any forward-looking statement, whether as a result of new information, future events or changes in Taylor Morrison’s expectations. In addition, other such risks and uncertainties may be found in Taylor Morrison Home Corporation’s Registration Statement on Form S-1 and subsequent reports filed with the Securities and Exchange Commission under the heading “Risk Factors.”

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 a variety of consumers from move-up to 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.

       
Taylor Morrison Home Corporation
Consolidated Statements of Operations
(In thousands, except per share data, unaudited)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Home closings revenue $ 622,126 $ 302,899 $ 1,484,928 $ 829,221
Land closings revenue 4,524 13,452 18,994 36,102
Mortgage operations revenue   7,791   5,104   20,896   13,705
Total revenues 634,441 321,455 1,524,818 879,028
 
Cost of home closings 489,713 235,517 1,172,748 663,656
Cost of land closings 6,120 8,918 19,417 27,881
Mortgage operations expenses   4,385   2,866   11,945   7,667
Total cost of revenues 500,218 247,301 1,204,110 699,204
 
Gross margin 134,223 74,154 320,708 179,824
 
Sales, commissions and other marketing costs 37,029 19,093 97,238 52,230
General and administrative expenses 21,944 13,252 68,193 41,091
Equity in income of unconsolidated entities (9,425) (3,709) (21,049) (11,497)
Interest (income) expense, net (1,332) 1,601 (1,119)
Loss on extinguishment of debt 10,141 7,853
Other (income) expense, net 1,304 (898) 2,588 (1,655)
Indemnification and transaction expenses   396   793   188,320   13,063
Income (loss) before income taxes 84,307 44,022 (23,604) 78,739
Income tax (benefit) provision   31,675   1,586   (22,287)   (3,090)

Income (loss) before noncontrolling interests, net of tax
52,632 42,436 (1,317) 81,829
Income (loss) attributable to noncontrolling interests - joint ventures   (471)   (166)   (286)   72
Net income (loss) 53,103 42,602 (1,031) 81,757
Income (loss) attributable to noncontrolling interests - Principal Equityholders   38,840   -   (20,621)   -
Net income available to Taylor Morrison Home Corporation $ 14,263 $ 42,602 $ 19,590 $ 81,757
 
Income per common share:
Basic $0.43 $0.60
Diluted $0.43 $0.60
Weighted average number of shares of common stock:
Basic 32,858 32,832
Diluted 122,317 122,317
   
Taylor Morrison Home Corporation
Condensed Consolidated Balance Sheets
(In thousands)
 
As of As of
September 30, December 31,
2013 2012

Assets
(unaudited)
Cash and cash equivalents $ 355,415 $ 300,602
Restricted cash 18,893 13,683
Real estate inventory 2,268,630 1,605,968
Land deposits 35,736 28,724
Loans receivable 41,507 48,579
Mortgages receivable 45,235 84,963
Tax indemnification receivable 29,104 107,638
Prepaid expenses and other assets, net 101,905 102,952
Other receivables, net 102,178 48,951
Investment in unconsolidated entities 89,256 74,465
Deferred tax assets, net 270,858 274,757
Property and equipment, net 6,724 6,423
Intangible assets, net 14,778 18,757
Goodwill   21,594   21,594
Total assets 3,401,813 2,738,056
 

Liabilities
Accounts payable $ 123,301 $ 98,647
Accrued expenses and other liabilities 217,920 213,414
Income taxes payable 67,312 111,513
Customer deposits 111,120 82,038
Mortgage borrowings 31,817 80,360
Loans payable and other borrowings 336,605 215,968
Revolving credit facility borrowings 50,000
Senior notes   1,039,661   681,541
Total liabilities $ 1,927,736 $ 1,533,481
 

Stockholders' equity
Common stock $ 1
Additional paid-in capital 674,026
Retained earnings 18,455 1,231,050
Accumulated other comprehensive income (loss) 2,311 (34,365)
Non controlling Interests - joint ventures 23,257 7,890

Non controlling Interests - Principal Equityholders
  756,027  
Total stockholders' equity   1,474,077   1,204,575
Total liabilities and stockholders' equity $ 3,401,813   2,738,056
               
 
Homes Closed: Three Months Ended Nine Months Ended
September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
(dollars in thousands)                            
Homes   Value   Homes   Value Homes   Value   Homes   Value
East 713 $275,222 366 $114,696 1,986 $737,790 1,072 $334,898
West 485 203,480 323 107,967 1,268 499,521 808 273,501
Canada 408   143,423   189   80,236 705   247,616   502   220,822
Subtotal 1,606 $622,125 878 $302,899 3,959 $1,484,927 2,382 $829,221
Unconsolidated joint ventures 92   25,653   65   27,902 234   70,851   205   68,642
Total 1,698 $647,778 943 $330,801 4,193 $1,555,778 2,587 $897,863
 
 
Net Sales Orders: Three Months Ended Nine Months Ended
September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
(dollars in thousands)                            
Homes   Value   Homes   Value Homes   Value   Homes   Value
East 698 $300,278 542 $181,975 2,618 $998,612 1,613 $525,875
West 320 157,977 368 148,169 1,352 605,012 1,274 448,807
Canada 145   67,750   217   90,152 470   215,023   613   256,174
Subtotal 1,163 $526,005 1,127 $420,296 4,440 $1,818,647 3,500 $1,230,856
Unconsolidated joint ventures 31   11,516   15   3,404 60   24,428   115   24,074
Total 1,194 $537,521 1,142 $423,700 4,500 $1,843,075 3,615 $1,254,930
 
 
Sales Order Backlog: As of As of
September 30, 2013 September 30, 2012
(dollars in thousands)              
Homes   Value   Homes   Value
East 1,834 $750,158 1,008 $362,482
West 746 349,143 739 263,805
Canada 1,104   372,916   1,555   527,957
Subtotal 3,684 $1,472,217 3,302 $1,154,244
Unconsolidated joint ventures 732   251,186   903   317,939
Total 4,416 $1,723,403 4,205 $1,472,183
 
 
Average Active Selling Communities: Three Months Ended Nine Months Ended
September 30, September 30,
             
2013   2012   2013   2012
East 119.3 76.0 120.6 74.2
West 39.6 33.4 35.2 33.6
Canada 14.7   13.3   15.1   14.1
Subtotal 173.6 122.7 170.9 121.9
Unconsolidated joint ventures 4.0   6.0   4.2   6.7
Total 177.6 128.7 175.1 128.6

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. 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. We believe this adjusted gross margin measure is relevant and useful to investors for evaluating our performance. This measures is considered a non-GAAP financial measure and should be considered in addition to, rather than as a substitute for, the comparable U.S. GAAP financial measure as a measure of our operating performance. Although other companies in the home building 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 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 September 30,
(in thousands except percentages) 2013 2012
Home closings revenues $622,126 $302,899
Cost of home closings 489,713 235,517
Home closings gross margin 132,413 67,382
Add:
Capitalized interest amortization 15,570 6,162
Adjusted home closings gross margin 147,983 73,544
Home closings gross margin as a percentage of home closings revenue 21.3% 22.2%
Adjusted home closings gross margin as a percentage of home closings revenue 23.8% 24.3%
 
Nine months ended September 30,
(in thousands except percentages) 2013 2012
Home closings revenues $1,484,928 $829,221
Cost of home closings 1,172,748 663,656
Home closings gross margin 312,180 165,565
Add:
Capitalized interest amortization 34,913 17,926
Adjusted home closings gross margin 347,093 183,491
Home closings gross margin as a percentage of home closings revenue 21.0% 20.0%
Adjusted home closings gross margin as a percentage of home closings revenue 23.4% 22.1%

Copyright Business Wire 2010

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