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Taylor Morrison Reports Fourth Quarter Revenue of $1.2 Billion and Earnings per Share of $0.63

SCOTTSDALE, Ariz., Jan. 30, 2017 /PRNewswire/ -- Taylor Morrison Home Corporation (NYSE:TMHC) today reported fourth quarter total revenue of $1.2 billion, net income of $76 million and earnings per share of $0.63, or $0.65 as adjusted.

Fourth Quarter 2016 Highlights:

  • Net sales orders were 1,701, an 18% increase from the prior year quarter
  • Home closings were 2,425, a 17% increase from the prior year quarter
  • Total revenue was $1.2 billion, a 23% increase from the prior year quarter
  • GAAP home closings gross margin, inclusive of capitalized interest, was 17.8%
  • Net income from continuing operations for the quarter was $76 million with earnings per share of $0.63, an increase of nearly 19% from the prior year quarter

Full Year 2016 Highlights:

  • Net sales orders were 7,504, a 12% increase from the prior year
  • Home closings were 7,369, a 17% increase from the prior year
  • Total revenue was $3.6 billion, a 19% increase from the prior year
  • GAAP home closings gross margin, inclusive of capitalized interest, was 18.2%
  • Net income from continuing operations for the year was $207 million with earnings per share of $1.69, an increase of 22% from the prior year

"I am pleased with our organization's performance both for the fourth quarter and the full year," said Sheryl Palmer, President and CEO of Taylor Morrison.  "Our team members demonstrated great commitment to our strategic priorities while keeping our customers' needs at the forefront."  This was proven with the recent announcement of the Company being named America's Most Trusted® Homebuilder, according to Lifestory Research, for the second year in a row.  "At Taylor Morrison, we believe that relationships and trust are the foundation of our success and I am so proud of our team for this well-deserved recognition and achievement." 

For the full year 2016, the Company was able to deliver strong results both operationally and financially. "We finished the year with higher than expected closings, resulting in a 22% increase year-over-year in earnings per share from continuing operations. We closed 7,369 homes, which represented a nearly 17% increase year-over-year, well above the top range of our guidance as we were able to bring forward and close homes that were originally expected to be completed in January 2017," said Sheryl Palmer. "Net sales orders totaled 7,504 for the year, which represented a 12% increase over the prior year.  Closings and net sales orders growth are on top of double-digit growth from the previous year, bringing our two-year growth rate for both metrics to over 30%. Community count was up more than 19% year-over-year to an average of 309 communities.  This brings our two -year growth rate to 50%."

"2016 brings an end to two years of planned transformation for Taylor Morrison.  Looking forward, we believe we are positioned extremely well to mature with the cycle and drive efficiencies from our strategic foundation as we strive to reach our full potential," said Sheryl Palmer.  "We anticipate numerous benefits from these recent investments to flow through our business and ultimately our financials in 2017 with enhanced scale in certain markets, increased qualified traffic, higher conversion and absorption rates of about 2.3, cycle-time reductions and gains in strategic procurement.  This will drive improved EBT dollars and earnings per share year-over-year, while delivering ROE accretion in 2017 and beyond.  January 2017 is off to a strong start, with a monthly absorption rate expected to be about 20% higher year-over-year."

"The 2016 home closings gross margin was 18.3% as adjusted for a $3.5 million impairment charge taken during the fourth quarter, which was isolated to three assets in our Chicago market," said Dave Cone, Executive Vice President and Chief Financial Officer.  "Looking to 2017, we anticipate a rising labor cost environment and a higher land basis which will be more than offset by the selling down of our aged completed spec inventory and purchase accounting, leading to accretive home closings gross margin year-over-year in the low to mid 18% range." 

The Company ended the quarter with $300 million in cash and a net homebuilding debt to capitalization ratio of 33.7%.  Our share buy-back program is a tool within our capital allocation strategy that we have used periodically when prices were compelling.  In 2016, the Company re-purchased roughly 1.9 million shares at a cost basis of $14.87.    

Homebuilding inventories were $3.0 billion at the end of 2016, including 3,920 homes in inventory, compared to 3,851 homes in inventory at the end of the prior year.  Homes in inventory at the end of the quarter consisted of 2,322 sold units, 412 model homes and 1,186 inventory units, of which 238 were finished.  The Company owned or controlled approximately 38,300 lots at December 31, 2016, representing 5.2 years of supply and is focused on securing land for 2019 and beyond.



Quarterly Financial Comparison

($ thousands)



Q4 2016


Q4 2015


Q4 2016 vs. Q4 2015

Total Revenue


$1,196,967


$970,144


23.4%

Home Closings Revenue


$1,154,367


$934,798


23.5%

Home Closings Gross Margin


$205,352


$170,667


20.3%


17.8%


18.3%


50 bps decrease

Adjusted Home Closings Gross Margin


$239,644


$195,227


22.8%


20.8%


20.9%


10 bps decrease

SG&A

% of Home Closings Revenue


$105,385


$87,013


21.1%


9.1%


9.3%


20 bps decrease


Annual Financial Comparison

($ thousands)



2016


2015


2016 vs. 2015

Total Revenue


$3,550,029


$2,976,820


19.3%

Home Closings Revenue


$3,425,521


$2,889,968


18.5%

Home Closings Gross Margin


$623,782


$531,145


17.4%


18.2%


18.4%


20 bps decrease

Adjusted Home Closings Gross Margin


$718,106


$614,308


16.9%


21.0%


21.3%


30 bps decrease

SG&A

% of Home Closings Revenue


$361,763


$293,911


23.1%


10.6%


10.2%


40 bps increase

 

First Quarter and Full Year 2017 Business Outlook

First Quarter 2017:

  • Average active community count is expected to be generally flat sequentially from the fourth quarter 2016
  • Home closings are expected to be between 1,500 to 1,600
  • GAAP home closings gross margin, inclusive of capitalized interest, is expected to be about 18%

Full Year 2017:

  • Average active community count is expected to be generally flat relative to 2016
  • Monthly absorption pace is expected to be about 2.3
  • Home closings are expected to be between 7,500 and 8,000
  • GAAP home closings gross margin, inclusive of capitalized interest, is expected to be accretive to 2016 and be in the low to mid 18% range
  • SG&A as a percentage of homebuilding revenue is expected to leverage year-over-year and be in the low to mid 10% range
  • Income from unconsolidated joint ventures is expected to be between $10 million and $12 million
  • Land and development spend is expected to be approximately $1 billion
  • Effective tax rate expected to be between 34% and 35%

About Taylor Morrison

Taylor Morrison Home Corporation (NYSE:TMHC) is a leading national homebuilder and developer that has been recognized as the 2016 and 2017 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; slowdowns or severe downturns in the housing market; homebuyers' ability to obtain suitable financing; shortages in, disruptions of and cost of labor; our ability to obtain additional performance, payment and completion surety bonds and letters of credit; higher cancellation rates; competition in our industry; any increase in unemployment or underemployment; increases in taxes, government fees or interest rates; inflation or deflation; the seasonality of our business; 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 ability to sell mortgages we originate and claims on loans sold to third parties; 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; and risks related to our structure and organization. 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 Consolidated Statements of Operations

(In thousands, except per share amounts, unaudited)




Three Months Ended
December 31,


Twelve Months Ended
December 31,



2016


2015


2016


2015

Home closings revenue, net


$

1,154,367



$

934,798



$

3,425,521



$

2,889,968


Land closings revenue


19,596



21,059



64,553



43,770


Mortgage operations revenue


23,004



14,287



59,955



43,082


Total revenues


1,196,967



970,144



3,550,029



2,976,820


Cost of home closings


949,015



764,131



2,801,739



2,358,823


Cost of land closings


15,415



11,397



35,912



24,546


Mortgage operations expenses


9,505



7,415



32,099



25,536


Total cost of revenues


973,935



782,943



2,869,750



2,408,905


Gross margin


223,032



187,201



680,279



567,915


Sales, commissions and other marketing costs


74,256



61,950



239,556



198,676


General and administrative expenses


31,129



25,063



122,207



95,235


Equity in income of unconsolidated entities


(2,719)



(352)



(7,453)



(1,759)


Interest income, net


(35)



(26)



(184)



(192)


Other expense, net


3,345



9



11,947



11,634


Loss on extinguishment of debt








33,317


Gain on foreign currency forward








(29,983)


Income from continuing operations before income taxes


117,056



100,557



314,206



260,987


Income tax provision


40,945



35,568



107,643



90,001


Net income from continuing operations


76,111



64,989



206,563



170,986


Discontinued operations:









Transaction expenses from discontinued operations








(9,043)


Gain on sale of discontinued operations








80,205


Income tax expense from discontinued operations




1,397





(13,103)


Net income from discontinued operations




1,397





58,059


Net income before allocation to non-controlling interests


76,111



66,386



206,563



229,045


Net income attributable to non-controlling interests - joint ventures


(438)



(254)



(1,294)



(1,681)


Net income before non-controlling interests - Principal Equityholders


75,673



66,132



205,269



227,364


Net income from continuing operations attributable to non-controlling interests - Principal Equityholders


(56,392)



(47,440)



(152,653)



(123,909)


Net income from discontinued operations attributable to non-controlling interests - Principal Equityholders




(1,025)





(42,406)


Net income available to Taylor Morrison Home Corporation


$

19,281



$

17,667



$

52,616



$

61,049


Earnings per common share - basic:









Income from continuing operations


$

0.63



$

0.53



$

1.69



$

1.38


Income from discontinued operations - net of tax


$



$

0.01



$



$

0.47


Net income available to Taylor Morrison Home Corporation


$

0.63



$

0.54



$

1.69



$

1.85


Earnings per common share - diluted:









Income from continuing operations


$

0.63



$

0.53



$

1.69



$

1.38


Income from discontinued operations - net of tax


$



$

0.01



$



$

0.47


Net income available to Taylor Morrison Home Corporation


$

0.63



$

0.54



$

1.69



$

1.85


Weighted average number of shares of common stock:









Basic


30,442



32,986



31,084



33,063


Diluted


120,392



122,298



120,832



122,384


 


Taylor Morrison Home Corporation

Condensed Consolidated Balance Sheets

(In thousands)




December 31,
2016


December 31,
2015



(Unaudited)



Assets





Cash and cash equivalents


$

300,179



$

126,188


Restricted cash


1,633



1,280


Real estate inventory:





Owned inventory


3,010,967



3,118,866


Real estate not owned under option agreements


6,252



7,921


Total real estate inventory


3,017,219



3,126,787


Land deposits


37,233



34,113


Mortgage loans held for sale


233,184



201,733


Hedging assets


2,291




Prepaid expenses and other assets, net


73,425



80,348


Other receivables, net


115,246



120,729


Investments in unconsolidated entities


157,909



128,448


Deferred tax assets, net


206,634



233,488


Property and equipment, net


6,586



7,387


Intangible assets, net


3,189



4,248


Goodwill


66,198



57,698


Total assets


$

4,220,926



$

4,122,447


Liabilities





Accounts payable


$

136,636



$

151,861


Accrued expenses and other liabilities


209,202



191,452


Income taxes payable


10,528



37,792


Customer deposits


111,573



92,319


Senior notes, net


1,237,484



1,235,157


Loans payable and other borrowings


150,485



134,824


Revolving credit facility borrowings, net




115,000


Mortgage warehouse borrowings


198,564



183,444


Liabilities attributable to real estate not owned under option agreements


6,252



7,921


Total liabilities


$

2,060,724



$

2,149,770


Stockholders' Equity





Total stockholders' equity


2,160,202



1,972,677


Total liabilities and stockholders' equity


$

4,220,926



$

4,122,447


 

Homes Closed:


Three Months Ended December 31,



2016


2015

(Dollars in thousands)


Homes


Value


Homes


Value

East


984



$

380,297



749



$

290,761


Central


636



306,866



654



297,249


West


805



467,204



665



346,788


Total


2,425



$

1,154,367



2,068



$

934,798


 

Net Sales Orders:


Three Months Ended December 31,



2016


2015

(Dollars in thousands)


Homes


Value


Homes


Value

East


729



$

287,766



526



$

208,458


Central


429



199,854



392



183,344


West


543



308,099



522



279,133


Total


1,701



$

795,719



1,440



$

670,935


 

Homes Closed:


Twelve Months Ended December 31,



2016


2015

(Dollars in thousands)


Homes


Value


Homes


Value

East


2,795



$

1,077,241



2,065



$

809,324


Central


2,050



974,841



2,140



990,925


West


2,524



1,373,439



2,106



1,089,719


Total


7,369



$

3,425,521



6,311



$

2,889,968


 

Net Sales Orders:


Twelve Months Ended December 31,



2016


2015

(Dollars in thousands)


Homes


Value


Homes


Value

East


3,039



$

1,175,440



2,124



$

794,356


Central


1,837



848,389



2,018



912,623


West


2,628



1,457,923



2,539



1,262,101


Total


7,504



$

3,481,752



6,681



$

2,969,080


 

Sales Order Backlog:


As of December 31,



2016


2015

(Dollars in thousands)


Homes


Value


Homes


Value

East


1,183



$

508,101



875



$

358,978


Central


817



419,359



1,030



519,251


West


1,131



604,450



1,027



514,744


Total


3,131



$

1,531,910



2,932



$

1,392,973


 

Average Active Selling Communities:


Three Months Ended
December 31,


Twelve Months Ended
December 31,



2016


2015


2016


2015

East


119



102



122



91


Central


107



106



109



98


West


73



78



78



70


Total


299



286



309



259


 

Average Selling Price of Homes Closed:


Three Months Ended
December 31,


Twelve Months Ended
December 31,

(Dollars in thousands)


2016


2015


2016


2015

East


$

386



$

388



$

385



$

392


Central


482



455



476



463


West


580



521



544



517


Total


$

476



$

452



$

465



$

458


 


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, our net income from continuing operations and EBITDA and adjusted EBITDA, our net income from continuing operations to our adjusted net income from continuing operations, our earnings per share and adjusted earnings per share, and a reconciliation of our net homebuilding debt to total capitalization ratio.  Adjusted home closings gross margin is a non-GAAP financial measure calculated based on home closings gross margin, excluding impairments, if any, and, separately excluding both impairments, if any, and capitalized interest amortization.  Adjusted EBITDA is a non-GAAP financial measure that measures performance by adjusting net income from continuing operations 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 net income from continuing operations is a non-GAAP financial that measures performance by adjusting net income from continuing operations to exclude impairments (if any) net of tax benefit.  Adjusted earnings per share is a non-GAAP financial measure that measures performance by adjusting to exclude impairments (if any) net of tax benefit. Net homebuilding debt to capitalization, which 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), is a non-GAAP financial measure.  Management uses these non-GAAP financial measures to evaluate our performance on a consolidated basis as well as the performance of our regions.  We use the ratio of net homebuilding debt to total capitalization as an indicator of overall leverage.  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 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 EBITDA, adjusted net income from continuing operations, and adjusted earnings per share each provide useful information to investors regarding our results of operations because each 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 also because each assists both investors and management in analyzing and benchmarking the performance and value of our business.  Adjusted EBITDA 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 use the ratio of net homebuilding debt to total capitalization to evaluate our performance against other companies in the homebuilding industry and believe it is also relevant and useful to investors for that reason.

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 or liquidity. 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, gross margins and total debt to capitalization and any adjustments to such amounts before comparing our measures to those of such other companies.

Home Closings Gross Margin Reconciliation — Continuing Operations




Three Months Ended
December 31,


Twelve Months Ended
December 31,

(Dollars in thousands)


2016


2015


2016


2015

Home closings revenue


$

1,154,367



$

934,798



$

3,425,521



$

2,889,968


Cost of home closings


949,015



764,131



2,801,739



2,358,823


Home closings gross margin


205,352



170,667



623,782



531,145


Impairment charge


3,473





3,473




Home closings gross margin, adjusted for impairment


208,825



170,667



627,255



531,145


Capitalized interest amortization


30,819



24,560



90,851



83,163


Adjusted home closings gross margin


$

239,644



$

195,227



$

718,106



$

614,308


Home closings gross margin as a percentage of home
closings revenue


17.8%



18.3%



18.2%



18.4%


Home closings gross margin, adjusted for impairment
as a percentage of home closings revenue


18.1%



18.3%



18.3%



18.4%


Adjusted home closings gross margin as a percentage
of home closings revenue


20.8%



20.9%



21.0%



21.3%


 

Adjusted EBITDA Reconciliation




Three Months Ended December 31,

(Dollars in thousands)


2016


2015

Net income from continuing operations


$

76,111



$

64,989


Interest income, net


(35)



(26)


Amortization of capitalized interest


30,819



24,560


Income tax provision


40,945



35,568


Depreciation and amortization


972



1,180


EBITDA


$

148,812



$

126,271


Non-cash compensation expense


1,954



2,169


Adjusted EBITDA


$

150,766



$

128,440


 

Adjusted Earnings Per Share Reconciliation



Three Months Ended
December 31,


Twelve Months Ended
December 31,

(Dollars in thousands, except per share data)

2016


2015


2016


2015

Net income from continuing operations available to TMHC - basic

$

19,281



$

17,667



$

52,616



$

61,049


Impairment charge, net of tax benefit

585





585




Adjusted net income from continuing operations available to TMHC - basic

$

19,866



$

17,667



$

53,201



$

61,049










Net income from continuing operations attributable to non-controlling interest – Principal Equityholders

56,392



47,440



152,653



123,909


Impairment charge, net of tax benefit

1,708





1,708




Adjusted net income from continuing operations attributable to non-controlling interest - Principal Equityholders

$

58,100



$

47,440



$

154,361



$

123,909










Adjusted earnings per common share — basic:

$

0.65



$

0.53



$

1.71



$

1.38


Adjusted earnings per common share — diluted:

$

0.65



$

0.53



$

1.71



$

1.38


 

Net Homebuilding Debt to Capitalization Ratio Reconciliation

(Dollars in thousands)

As of
December 31,
2016

Total debt

$

1,586,533


Unamortized debt issuance costs

12,516


Less mortgage warehouse borrowings

198,564


Total homebuilding debt

$

1,400,485


Less cash and cash equivalents

300,179


Net homebuilding debt

$

1,100,306


Total equity

2,160,202


Total capitalization

$

3,260,508




Net homebuilding debt to capitalization ratio

33.7%


 

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

 

SOURCE Taylor Morrison Home Corporation


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