Taylor Morrison Reports Second Quarter 2013 Financial Results
Taylor Morrison Reports Second Quarter 2013 Financial Results
- Home closings revenue increased 62% while home closings increased 52%
- Backlog value increased by 55% while backlog units increased by 35%
- U.S. net sales orders increased 33% and U.S. backlog revenue increased 119%
- Home closings gross margin dollars increased 71%
"We are delighted to report improvement in virtually all key operational metrics, adding to more than three years of profitability. The results we're releasing today continue to reflect a reward for years of diligence in managing the business during the downturn," said Sheryl Palmer, President and CEO. "The quality of our locations and our land development capability drives the strength of our backlog, home revenue and margin growth. Our team's conscientious implementation of our strategy and superior execution has allowed us to capitalize on the improvement in the housing market in the first half of 2013."
Net sales orders increased 26% to 1,596 in the second quarter of 2013 as compared to 1,267 in the second quarter of last year. Net sales orders in the Company's U.S. operations increased 33% in the second quarter of 2013, partially offset by a 9% sales order decline in its Canadian operations during the same period. During the quarter, community count increased by 45 % to 172. The Company's overall monthly absorption pace was 3.1 net sales orders per community in the second quarter of 2013 compared to 3.6 for the second quarter of 2012. During the quarter, the Company intentionally limited releases and sales pace in order to manage its growing backlog, production and overall customer expectations while maximizing profitability and efficient use of land assets.
The Company's sales order backlog value increased 55% to $1.6 billion at June 30, 2013 from $1.0 billion at June 30, 2012, as backlog units increased 35% to 4,127 homes at June 30, 2013 compared with 3,053 homes at June 30, 2012. The second quarter 2013 cancellation rate, representing cancelled sales orders divided by gross sales orders, was 12.4 % in the second quarter of 2013, compared to 12.8 % in the second quarter of 2012.
Home closings revenue totaled $496 million in the second quarter of 2013, benefiting from a 52% increase in homes closed, from 883 in the 2012 quarter to 1,341 during the 2013 quarter. Adjusted home closings gross margin in the second quarter of 2013, which is adjusted to exclude capitalized interest, improved 120 basis points to 22.8% as compared to the second quarter of 2012. Home closings gross margin in the second quarter of 2013 improved to 20.5%, compared to 19.4% in the second quarter of 2012. Home closings gross margin dollars increased 71% to $102 million.
The Company's mortgage company, Taylor Morrison Home Funding ("TMHF") and title operations reported a gross margin of $3.1 million for the quarter. The mortgage capture rate for TMHF for the quarter was 80%.
Selling, general and administrative expenses were $60.2 million or 12.1% of home closings revenue for the 2013 second quarter compared to $28.6 million or 9.4% of home closings revenue for the second quarter of 2012. Equity in income of unconsolidated entities, which represents the Company's investments in home building joint ventures, was $8.5 million in the second quarter of 2013 as compared to $4.6 million in the second quarter of 2012. During the second quarter, Taylor Morrison in coordination with the Company's former parent company reached a settlement with the IRS resulting in a $79.6 million expense and a substantially offsetting tax benefit.
As adjusted, to exclude certain one-time charges relating to its recent initial public offering ("IPO") and the IRS settlement, the Company had earnings per share of $0.27 for the second quarter of 2013. Adjusted net income, which eliminates the effect of one-time charges and the IRS settlement, was $32.9 million for the second quarter of 2013. These adjustments include a $10 million loss on the early extinguishment of debt related to the redemption of a portion of the Company's existing 7.75% senior notes due 2020 in connection with the IPO, $30 million for the termination of the management agreement with the Company's principal equityholders in connection with the IPO and an $80 million non-cash charge associated with the reorganization of the Company's equity structure immediately prior to the IPO. For the quarter, the Company had GAAP net earnings per share of $0.16 and GAAP net income of $5.3 million, available to Class A common stockholders.
The Company ended the second quarter of 2013 with $436.2 million of cash, including $15.0 million of restricted cash. Homebuilding inventories at the end of the 2013 second quarter totaled $2.1 billion, an increase of 87% from $1.1 billion in June 30, 2012. The Company owned or controlled approximately 45,000 lots at June 30, 2013 compared with approximately 32,000 lots at June 30, 2012.
IPO and Recent Financing Activities
On April 12, 2013, the Company completed its IPO, in which 28,572,000 shares of the Company's Class A common stock were sold at $22.00 per share for total gross proceeds of $628.6 million. In connection with the IPO, the underwriters exercised their over-allotment option of 4,285,800 shares at $22.00 per share for additional gross proceeds of $94.3 million. Approximately $204.2 million of the proceeds from the IPO were used to redeem $189.6 million of the Company's 7.75% senior notes due 2020, at a price equal to 103.875% of their principal amount, plus accrued and unpaid interest. The remaining IPO proceeds, together with cash on hand were used to purchase equity interests in the Company's operating partnership from the Company's principal equityholders and to pay IPO-related fees.
Concurrent with the IPO, the Company's principal operating subsidiaries entered into a new $400 million unsecured revolving credit facility, maturing in April 2017, replacing an existing $225 million secured revolving credit facility. In addition, the Company's principal operating subsidiaries issued $550 million aggregate principal amount of 5.25% senior notes due 2021, the proceeds of which are being used for general corporate purposes.
Earnings Conference Call
A conference call to discuss the Company's second quarter 2013 earnings will be held at 4:30 p.m. Eastern Time on Tuesday, August 13, 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 (888) 843-7419 or (630) 652-3042 and entering 3517 2684# as the confirmation number.
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 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 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 (NYS: 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.
|Taylor Morrison Home Corporation|
|Consolidated Statements of Operations|
|(Amounts in thousands except per share data, unaudited)|
|Three Months Ended||Six Months Ended|
|Home closing revenue||$||496,033||$||305,419||$||862,802||$||526,322|
|Land closing revenue||5,616||7,410||14,470||22,650|
|Mortgage operations revenue||7,216||5,318||13,105||8,601|
|Cost of home closings||394,203||246,031||683,035||428,139|
|Cost of land closings||5,653||7,472||13,297||18,963|
|Mortgage operations expenses||4,069||2,772||7,559||4,801|
|Total cost of revenues||403,925||256,275||703,891||451,903|
|Operating gross margin||104,940||61,872||186,486||105,670|
|Sales, commissions and other marketing costs||34,267||18,361||60,209||33,137|
|General and administrative expenses||25,905||10,206||46,249||27,839|
|Equity in net income of unconsolidated entities||(8,466||)||(4,608||)||(11,624||)||(7,788||)|
|Loss on extinguishment of debt||10,141||7,853||10,141||(1,601||)|
|Interest income, net||700||(1,538||)||214||7,853|
|Indemnification and transaction expense||189,635||13,906||187,925||12,270|
|Other (income) expense, net||541||(968||)||1,282||(757||)|
|Income (loss) before income taxes||(147,783||)||18,660||(107,910||)||34,717|
|Income tax benefit||(69,496||)||(10,174||)||(53,961||)||(4,676||)|
|Income (loss) before loss (income) attributable to noncontrolling interests||(78,287||)||28,834||(53,949||)||39,393|
|Loss (income) attributable to noncontrolling interests||83,614||24||59,276||(238||)|
|Income per common share:|
|Weighted average number of shares of common stock:|
|Taylor Morrison Home Corporation|
|Condensed Consolidated Balance Sheets|
|(Amounts in thousands, unaudited)|
|June 30,||December 30,|
|Cash and cash equivalents||$||421,147||$||300,602|
|Real estate inventory||2,102,604||1,633,050|
|Tax indemnification receivable||28,682||107,638|
|Prepaid expenses and other assets, net||110,779||101,499|
|Other receivables, net||61,044||48,951|
|Investment in unconsolidated entities||82,230||74,465|
|Deferred tax assets, net||274,172||274,757|
|Property and equipment, net||5,839||6,423|
|Intangible assets, net||22,278||17,954|
Liabilities and equity
|Accrued expenses and other liabilities||184,973||213,414|
|Income taxes payable||37,858||111,513|
|Loans payable and other borrowings||313,287||215,968|
|Revolving credit facility borrowings||-||50,000|
|Total liabilities and equity||$||3,255,251||$||2,756,814|
|Homes Closed:||Three months ended||Three months ended||Six months ended||Six months ended|
|(dollars in thousands)|
|Unconsolidated joint ventures||115||36,271||102||28,971||142||45,198||140||40,741|